JD Wetherspoon has seen sales growth of 4.1% in its current financial year, from 24 July, and has predicted a “slightly improved trading outcome this year”.
The company warned that it remains to be seen if the level of growth continues for the remainder of the year, given the strong like-for-like sales in the last financial year and a very low-inflation environment.
The company this morning released its preliminary results, in which it confirmed revenue up 5.4% to £1.6bn and like-for-like sales growth of 3.4% in the year to 24 July.
Profit before tax (before exceptionals) rose 3.6% to £80.6m, while operating profit fell 2.5% on the same basis.
Like-for-like bar sales increased by 3.3% during the full year (2015: 1.2%), food sales by 3.5% (2015: 7.3%) and slot/fruit machine sales decreased by 2.2% (2015: decreased by 2.8%). Like-for-like room sales at JDW hotels increased by 9.7% (2015: 24.2%) - although the company stressed that hotel sales form less than 1% of total sales.
The company opened 16 pubs during the year, with 41 sold or closed, resulting in a trading estate of 926 pubs at the financial year end.
The average development cost for a new pub (excluding the cost of freeholds) was £2.5m, compared with £2.1m a year ago; two of the pubs included hotel accommodation, which contributed to the increased costs. The full-year depreciation charge was £72.2m (2015: £66.7m).
The group said it currently intends to open about 15-20 pubs in the year ending July 2017.
Chairman Tim Martin revealed that his shareholding had increased from 21.2% to 29.5% over the past 10 years and that the company was considering seeking a rule 9 ‘whitewash’ under the UK City Code on Takeovers and Mergers, allowing further buybacks.
Martin once again raised his concerns over VAT equality and stressed that a cut for hospitality was a “very efficient and sensible method” of generating jobs and economic activity in less affluent areas.
On the fall-out from Brexit, Martin said: “”In the run up to, and the aftermath of, the recent referendum, the overwhelming majority of FTSE 100 companies, the employers’ organisation CBI, the IMF, the OECD, the Treasury, the leaders of all the main political parties and almost all representatives of British universities forecast trouble, often in lurid terms, for the economy, in the event of the Leave vote. For example, claims were made by David Cameron and George Osborne that family income would eventually be reduced by £4,000 per annum, that mortgage interest rates would increase and that house prices would fall - claims which were supported, in terms, by Mark Carney of the Bank of England.
“City voices such as PwC and Goldman Sachs, and the great preponderance of banks and other institutions, also leant weight to this negative view. For example, Paul Johnson of the Institute of Fiscal Studies (The Times 28 June) stated that there was “near-unanimity” among economists in favour of Remain. Rather amazingly, he added: “I take as given that we economists were collectively right about the (bad) economic consequences of leaving the EU.” Johnson then cites this consensus as evidence for the economic truth of the Remain case. This is a strange argument to advance since consensus forecasts from economists, who generally failed to forecast the last recession or the catastrophic flaws of the euro, are almost always delusional. As Warren Buffett has said, forecasts tell you a lot about the forecaster, but not about the future. Economic forecasts from over-confident pundits such as Mr Johnson are an important component of Benjamin Graham’s ‘Mr Market’, the mythical punter who gets everything wrong.
“Just as the combined intellectual weight of the ‘good and great’ could not see through the flaws in the euro, they have, with honourable exceptions, been unable to see that the principle flaw of the EU - an absence of democracy - will almost certainly lead to further economic and political chaos, and to more dire consequences for those who are subject to EU decisions. The overwhelming economic evidence is that successful countries are democracies -
“Mr Johnson and like-minded economists really do need to stick that point in their pipes and smoke it. For all their faults, democracies produce the greatest level of prosperity and freedom. As in the case of the euro, the general public has a much better perception about this overriding factor than the consensus of intellectual opinion. I have written an article on this general subject for Wetherspoon News, which is attached at the end of this statement.
“Now that the gloomy economic forecasts for the immediate aftermath of the referendum have been proven to be false, ‘Scare Story 2’ is that failure to agree on trade deal with the EU will have devastating consequences. This was articulated by fund manager Nicola Horlick this week, who told Radio 4 listeners that leaving the Single Market would relegate the UK from the 5th-biggest economy in the world to the 8th or 9th. In contrast, Wetherspoon’s experience indicates that reaching formal trade deals with reluctant counterparties is impossible - and it is unwise to try.
“For example, I personally agreed on terms with one of our biggest suppliers, a major PLC, for a new seven-year contract about 12 years ago. Although the deal was put in the hands of lawyers, it was never signed or ‘ratified’ during this time, although we traded successfully for the anticipated duration. We subsequently agreed on a deal for a further seven years - and that has not been signed to this day. Indeed, we have traded without interruption with this company for 37 years. In contrast, deals with some suppliers have been rapidly embodied in formal contracts. Over the years, we have agreed on thousands of ‘trade deals’ with big and small suppliers: some are formal contracts, some are ‘hand-shakes’, some are short term, but many last for decades. The commercial reality is that you can lead the horse to water, but you can’t make it drink.
“This is especially true of the EU - an organisation of Byzantine complexity, run by five unelected presidents, with input from numerous other parts of the many-headed Hydra. It has struggled to reach trade deals with most of the world’s major economies, for example, the USA, China and India. The UK is an enormous trading partner of the USA, generating a substantial surplus for us, in spite of the absence of a ‘deal’ and it would be unwise to clamour after a specific formal agreement to replace existing arrangements in these circumstances - the back of the queue is a good place to be. Former Chancellor Nigel Lawson (Financial Times, 3/4 September) and many others advocate leaving the EU and trading afterwards with it on the basis of World Trade Organisation rules. If the EU is keen for a trade deal, we should cooperate, but unelected apparatchiks like President Juncker can’t be controlled - which is one of the main reasons we voted to leave.
“Common sense … suggests that the worst approach for the UK is to insist on the necessity of a ‘deal’ - we don’t need one and the fact that EU countries sell us twice as much as we sell them creates a hugely powerful negotiating position. If WTO tariffs apply, the UK will receive twice as much as it pays. Boris Johnson, David Davis and Liam Fox will achieve far more for the UK by copying Francis Drake and playing bowls in Plymouth, rather than hankering after an EU agreement, although time spent in improving arrangements with Singapore, New Zealand and India, for example, may be well spent.”
