Leading City analyst Geoff Collyer predicts that managed pub operator JD Wetherspoon will report “almost flat” earnings per share at its full year results next Friday (9 September), with ebita turned around from -1.4% in H1 to +3.2% in H2.
Issuing a Hold recommendation for the company, Collyer, of Deutsche Bank, also predicted a “difficult start” to JD Wetherspoon's current financial year, partly due to the riots.
Collyer pointed out that in its pre-closure update in July, Wetherspoons reported an increase in Q4 like-for-likes of +1.6%, while lfls and total sales at the 50 week stage were +2.2% and +7.5%, driven by +6% more pubs in its estate.
“Ebita margins are expected to be around 50 bps behind last year. Given the improvement in H2 lfls, higher growth in average pubs trading and a slower bps decline in ebita margins vs. H1, we are looking for H2 ebita at +3.2% compared to +1.4% in H1.”
He added: “The benefit of the share buyback programme following the spending spree straight after the interim results in March and a higher base in H2’10 for net interest (i.e. slower growth in financing costs in H2 than H1) should mean almost flat EPS for the year compared to -12% for H1. We are forecasting a flat annual dividend, stripping out last year’s 7p special.”
Collyer said that since July he has “trimmed expectations slightly, taking a more cautious view of 2012”.
Based on flat gross margins in FY2012, he estimates that JDW will need lfl sales growth of 3.4% to cover around £23m of costs for areas such as utilities, carbon tax and minimum wage, “although in reality, there are other cost saving actions that could mitigate some of the headwinds”.
“The timing of the group’s year end - July - means that the current trading period coincides with a riot-affected August, where we expect overall lfls for the industry to be down. As a consequence, we expect the group to have had a difficult start to FY’12.”
