Williams de Broe downgraded JD Wetherspoon to "sell" and Arbuthnot strongly reiterated its "sell" recommendation after JD Wetherspoon's disappointing results reported on Friday.
The pub chain is taking a closer look at its cost base after posting interim pre-tax profits down from £20.7m to £14.3m on sales up 4% to £403.3m. A £6m exceptional charge on the proposed disposal of 16 smaller pubs, £2.2m costs relating to a new distribution depot, a rise in utility costs and the minimum wage hit profits.
John Hutson, chief executive predicted "significant" savings over the next few months after a wave of price cuts to key products failed to lift sales as much as hoped and sales deteriorated further in February. Hutson said the government's campaign on binge drinking had deterred people from visiting town centres. Hutson hinted some pub management posts might be cut and that further head office cuts were likely. The company said it was reviewing a "wide range of funding alternatives" but stressed it had no intention of going private and that it had no desire to increase the group's net debt of £327.3m.
Tempus, in The Times, says it could be some time before a recovery comes. It says the decision to make its pubs non-smoking well ahead of a Government ban looks dangerously like a rather costly PR ploy. However, The Daily Telegraph reports that takings at the first two no-smoking pubs, in Exeter and St Albans, had enjoyed sales substantially higher than the company average of just over £28,000 in the first half of the year.
Wetherspoon's findings contradict those of a study by the Centre for Economics and Business Research which found the public smoking ban in Ireland cost £80m in the first seven months and cut bar sales by 7.3%.
All new Wetherspoon pubs will be non-smoking and it will convert 61 others by
the end of May. The rest will follow by May 2006. The shares fell 7.25p to
264.75p.
Financial Times (Money & Business) 05/03/06 page 4, page 19 (Market Weeks UK -
London)
The Times 05/03/06 page 58 (Need to know), page 59 (Results in brief), page 62,
page 71 (Tempus)
The Daily Telegraph 05/03/06 page 28, page 29 (City Comment)
