JDW's rise in sales fails to impress City
by The PMA Team
Managed operator JD Wether-spoon has reported a slight improvement in trading during its 12-week second quarter with like-for-like sales up 0.9%.
The sales gains reversed the trend of the first quarter, which saw a 0.3% decline in sales. The improvement in like-for-like sales failed to impress analysts who pointed to stronger results at both Inventive and Urbium over the Christmas period.
One analyst pointed out that JD Wetherspoon had now seen virtually no like-for-like sales growth for the past nine months.
Geof Collyer, of Deutsche Bank, said: "These poor figures relative to group's peers should also be seen in the light of the fact the group has sold 6% of its bottom-end sites in the past two years."
JDW warned that it would sell 15 pubs with an exceptional loss.
Greg Feehely, of Altium Securities, said: "The last tranche of pub disposals averaged a loss over book (pricing) of £355,000 a pub.
"At this level the exceptional provision could be of the order of £5m which is disappointing."
Collyer also claimed that Wetherspoon shares were now the least attractive in the sector.
He said: "JD Wetherspoon faces competitive threats on all sides.
"Any buying (shares) looks to us like a dead cat bounce'. If you think it's a buy, then buy all the other pub stocks instead.
"On a price-to-earnings ratio of 15 times, with earnings per share growth and a yield of 1.7%, it remains the share to avoid in the sector."
JD Wetherspoon said it was on target to open 15 new pubs in the full year six had opened in the first 24 weeks.
Share buy-back put on hold'
The virtual cessation of share buy-backs by JD Wetherspoon in the first 24 weeks of its financial year is an indication that the company has been looking for a major acquisition, an analyst claimed.
JDW has spent £4.14m on buying 1.8 million shares (0.96%) of the equity compared to £49.8m in the last financial year (9% of the equity).
Analyst Greg Feehely said: "It has clearly been holding back watching corporate developments in the sector. Should it choose not to participate, it could spend a further £30m, buying back shares in the current year without debt rising."
