Nick Batram at Peel Hunt looks forward to the Q3 update from JD Wetherspoon and the half-year results from Spirit Pub Company. In regards to JDW he says that the question remains the same, “how much margin management is prepared to sacrifice in order to keep the top line moving?”.
In regards to JDW Batram says that a strong top line is expected.
He says: “The group has aggressively been pursuing top-line growth and this should ensure another positive LFL figure for Q3. For the first six weeks of the quarter, LFLs were running at +7.3% and we expect the outcome for the full 13 weeks to be at a similar level.
“LFL benchmarks are not challenging going forward and the top line is unlikely to disappoint. There has been some good news on the cost front with the beer duty escalator, but as ever the question remains - how much margin management is prepared to sacrifice in order to keep the top line moving?”
Batram believes Spirit should be able to weather the storm that a challenging H1 has provided.
He says: “H1 has been challenging for the group with tough like for like comparatives being exacerbated by the poor weather.
“We already know LFL Managed sales rose by 1.4% in H1, while Leased net income declined by 4.2%. From a top line perspective this means the group is behind the curve at the half way point. Despite this we still expect some progress at PBT level with £20-20.5m a realistic target.
“There is little doubt that the weather has had a negative impact but it often exacerbates the weaknesses. Therefore, the emphasis will be on the group to deliver in H2. We believe it can. If it doesn’t, then Spirit’s position as a potential takeover target might just play out.”
