JD Wetherspoon is feeling the pinch as costs are set to rise over the financial year, but chairman Tim Martin said the company is cautiously predicting its results will be slightly better than forecast after positive half-year earnings.
In the first half of the year to 15 January, like-for-like sales increased by 3.4 per cent and total sales increased by 1.6 per cent. For the first 12 weeks of the second quarter, like-for-like sales were up 3.2 per cent and total sales up 0.7 per cent.
The operating margin before exceptional items for the half year is expected to be around eight per cent, 1.7 per cent higher than the same period last year.
Wetherspoon has opened two new pubs in its first half with the intention of opening 10 to 15 over the year. So far, it has sold 21 pubs while a "small number" remain on the market or in transaction.
Cost increases flagged by Martin, a vocal Brexit campaigner, include wages increasing by about four per cent, business rates going up by £7m and the apprenticeship levy, which will increase costs by £2m.
Martin said the company intends to increase the level of capital investment in existing pubs to around £60m from £34m in the previous year.
Why it's interesting
The pub company's results are set to be stronger than expected for the first half of the year, so it will be in a good position to face the cost pressures of the remaining six months.
In a comment, the pub's boss got political.
Martin said the majority of economists and politicians "has consistently misunderstood the implications of the euro, its predecessor the exchange rate mechanism and the implications of leaving the EU, over a period of about 30 years." The outspoken Brexiteer has previously slammed Remain voters and hit back at "doom-mongering".
What JD Wetherspoon said
On the topic of the results, Martin said:
In view of these additional costs and our expectation that 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 modestly better-than-expected year-to-date sales, we currently anticipate a slightly improved trading outcome for the current financial year, compared with our expectations at the last update.
The pub company is not out of the woods yet, but is in a strong position to face industry headwinds.