Wetherspoon earnings rise as Tim Martin goes on another anti-EU tirade

Pub group JD Wetherspoon posted its preliminary half-year results on Friday, reporting a small 3.6% rise in revenue before exceptional items to £830.4m but "remains cautious" about the second half of the year.

The FTSE 250 company said its like-for-like sales were ahead 6.1% year-on-year in the 26 weeks to 28 January, while its profit before tax jumped 20.6% to £62m.

Operating profit was 13.6% higher at £74m.

Wetherspoon said its earnings per share, including shares held in trust, was ahead 35.2% at 45.7p, although free cash flow per share fell 21.3% to 34.8p.

The board held steady on its interim dividend at 4p, precisely in line with the distribution paid a year ago.

After exceptional items, profit before tax was up 36.1% at £54.3m, operating profit rose 13.6% to £74m, and earnings per share were 44.1% higher at 39.2p.

In a typically bizarre, politically charged, anti-EU statement, Wetherspoon chairman Tim Martin chose not to focus on his own company’s numbers, instead claiming that recent comments from economists and food retailers that food prices will rise as a result of Brexit were false.

“This is a fallacy - the EU is a protectionist organisation which imposes high taxes on food, clothing, wine and thousands of other items from non-EU countries - which comprise around 93% of the world's population.

“Like Monty Python's Dennis Moore … the EU ‘….steals from the poor and gives to the rich…’.”

Martin said MPs had the power to eliminate those import taxes in March 2019, thereby reducing prices for the public, comparing it to politicians achieving “the same objective” by repealing the Corn Laws almost two centuries ago.

He said another “frequently repeated” Brexit concern was that the much bigger EU economy would be better able to withstand a “Mexican standoff” than the UK, which he said was also a fallacy, based on the size of his own company.

“For example, Wetherspoon is one of the biggest customers, or possibly the biggest customer, of the excellent Swedish cider-maker Kopparberg.

“If trade barriers were imposed, so as to make Kopparberg uneconomic, then Wetherspoon could switch to UK suppliers or those from elsewhere in the world.”

In that case, Martin claimed, the principal losers in a trade war would be the inhabitants of a small town in Sweden, where Kopparberg is produced, rather than the UK economy.

Kopparberg is currently sold in 35 countries - most of which do not have a Wetherspoon presence.

“The same principle applies to thousands of EU imports including prosecco, Champagne and many wines and spirits - in almost all cases there are suitable, and often excellent, alternatives to EU products available elsewhere.”

Martin appeared to throw economic reason to one side, arguing that the biggest danger for EU producers - whose wine industry has lost huge market share to the new world, in spite of import taxes - was that UK consumers “took umbrage” at what they saw as the overbearing behaviour of EU negotiators, and decided to favour products which originated elsewhere.

He said that, providing the UK government eliminates tariffs, New Zealand wine producers would be able to sell in the UK tariff-free for the first time, apparently placing them on an equal footing with European winemakers.

Martin did not appear to take into account the vast difference in transport costs in citing the competitiveness of New Zealand wine, or the higher price of New Zealand wine in general, due to the smaller industry and the higher cost of production in the country in general.

Finally coming around to the results of his own company, Martin said Wetherspoon anticipated higher costs in the second half of the financial year, in areas including pay, taxes and utilities.

“In view of these additional costs, and our expectation that growth in like-for-like sales will be lower in the next six months, the company remains cautious about the second half of the year.

“Nevertheless, as a result of slightly better-than-expected year-to-date sales, we currently anticipate an unchanged trading outcome for the current financial year.”

Wetherspoon's shares in fell on Friday, losing most of their gains this month as they dropped more than 2% to 1,262p.

Current trading has only moderated slightly despite the poor weather, noted analysts at Canaccord Genuity. "The company strikes a note of caution on H2 citing higher costs and lower anticipated LFL sales. As a consequence it expects the full year outcome to be in line with market expectations."

Numis said the first half EBIT was 6% ahead of its forecast but noted the company caution about the second half of the year.

"We expect a number of cost increases to impact from April, including the National Living Wage (+4.4%), a similar increase in the NMW (+4.7%) and the sugar tax. Our forecasts already assume LFL growth of 4.8% - If the 6w growth continues into H2 this looks reasonable. Nonetheless, factoring in the EBIT outperformance from H1 (+£9m in 6 months vs consensus increase of c.£7m for the full year) would imply consensus upgrades of 1-2%."