Wetherspoon beats expectations but eyes tough Q4

Pub chain Wetherspoon beat expectations in third-quarter trading and lifted profit margins on the previous period.

Pub chain Wetherspoon beat expectations in third-quarter trading and lifted profit margins on the previous period.

Like-for-like sales increased 6.3% and total sales 9.3% in the 13 weeks to April 28th, meaning for the year to date that like-for-like sales are up 6.7% and total sales 10.1%.

But due to tough comparatives last year and additional cost pressures, Wetherspoon expects lower like-for-like sales in the final quarter of this financial year.

Furthermore, the fourth quarter will be hit by a full quarter of new government measures, with Machine Gaming Duty and automatic pension enrollment expected to cost a respective £2.0m and £3.0m per year extra.

Operating margins advanced rose 40 basis points to 8.5%, from 8.3% in the first half of the year, after Chairman Tim Martin said in March that the company would have to raise prices in response to rising costs.

The group, which opened its first pub in Colney Hatch Lane in Muswell Hill in 1979, said it expects to open 30 pubs in the current financial year, having opened 16 new sites and sold two so far.

Management warned this rate will slow in the subsequent financial year, with the intention being to open between 20 and 25 pubs.

Broker Numis calculated that the combination of 60% of new sites this year being freeholds and a neutral level of working capital should result in net debt increasing by £26m to £489m.

Analyst Douglas Jack said: "After five years of falling like-for-like profits, 2013 is likely to bring a fall profit before tax and an increase in debt. Despite this, the market appears to have already priced in the benefit of expansion over the next year."

Shares in JD Wetherspoon were up 0.51% at 597p at 09.49.

OH

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