ii view: runaway Wetherspoon cautiously optimistic

Up 60% year-to-date, shares in this budget pub group have proved a 2023 winner so far but can it continue? We assess prospects. 

First-half results to 29 January

• Revenue of £916 million, up from £807 million
• Adjusted pre-tax profit of £57 million, up from a loss of £13 million last year
• Net debt of £744 million, down from £920 million
• No interim dividend

Chairman Tim Martin said:

"Having experienced a substantial improvement in sales and profits, compared to our most recent financial year, and with a strengthened balance sheet, compared both to last year and to the pre-pandemic period, the company is cautiously optimistic about further progress in the current financial year and in the years ahead."

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ii round-up:

Founded in 1979, Wetherspoon (J D) (LSE:JDW) today operates 843 pubs with around 50 also offering an attached hotel.

Headquartered in Watford, Hertfordshire, it employs over 35,000 people.

For a round-up of these latest results announced on 24 March, please click here. 

ii view:

Coming to the stock market in 1992, Wetherspoon is known for converting unconventional premises such as former cinemas and banks into pubs. During this latest half year, bar sales accounted for 57% of revenues, food a further 38%, slot and fruit machines 3% and hotels most of the balance of under 2% with two new pubs being opened and 11 sold or closed. Its rivals include owner of the All Bar One brand Mitchells & Butlers (LSE:MAB), Fuller Smith & Turner A (LSE:FSTA) and Marston's (LSE:MARS).  

For investors, the challenging economic backdrop including rising interest rates and an ongoing cost-of-living crisis offer a difficult backdrop for its customers. Costs such as energy, food and wages for both it and rivals have risen, the dividend payment has remained halted since the start of the pandemic, while an estimated price to net asset value of over 2.5 times compares to under 1 at fellow operators Mitchells and Fullers, potentially suggesting better value elsewhere. 

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More favourably, revenues for this latest period, assisted by some product price rises, have exceeded those made in the pre-pandemic 2019 period. A focus on reducing debt remains ongoing, supply or delivery issues have largely disappeared, while competition has reduced following the pandemic given the failure of many smaller operators. 

For now, and while some caution looks sensible, tight consumer budgets should continue to favour Wetherspoon’s value focused consumer offering, meaning shareholders are likely to remain faithful while new investors might add the shares to their watchlist.

Positives: 

• Value customer offering
• Majority freehold properties

Negatives:

• Rising costs
• Uncertain economic outlook

The average rating of stock market analysts:

Strong hold