Pub chain JD Wetherspoon (JDW) reported strong like-for-like revenue growth of 6.8% for the year ended 28 July 2019, but higher costs  squeezed margins, resulting in slightly lower operating profits of £131.9m (£132.3m). The shares traded down 4p to £15.45.

Chief executive and committed brexiteer Tim Martin said, ‘despite continuing political problems, stemming from the transfer of democratic power to a technocratic elite, Wetherspoon continues to perform well. Like-for-like sales for the six weeks to 8 September 2019 were up 5.9%’.

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The company opened five pubs during the year, with nine sold or closed, resulting in a trading estate of 879 pubs at the financial year end.

Cash generated from operations was 1.6% lower at £173.6m, but after spending £54.3m on maintenance compared with £68.9m last year, the company was able to eke out a 3.9% improvement in free cash to £97m.

Net debt increased by £10.8m to £737m which represents a debt to earnings before interest, depreciation and amortisation (EBITDA) of 3.4 times. The company provided estimates for the impact of new accounting standards which explicitly recognise  lease obligations as debts.

The impact increases debt to EBITDA to five times, through adding £617m lease liabilities to the balance sheet.

The dividend was maintained at 12p per share which is covered 5.8 times by earnings per share of 69p.

Broker Shore Capital reckons that the expectation of a flat to modestly ahead guidance implies ‘some modest risk to consensus forecasts.’ The consensus for operating earnings is £137.3m according to Reuters.

The broker views the company’s valuation at 11-times EBITDA as ‘sharply above peers’.

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Issue Date: 13 Sep 2019