July 15, 2009 / 6:54 AM / 10 years ago

UPDATE 3-Wetherspoon sees FY profit at top end of forecasts

* KBC, Numis, Investec upgrade profit forecasts

* Company says margins better than expected in H2

* 11 weeks to July 12 comparable sales down 0.8 pct

* 50 weeks to July 12 comparable sales up 1.2 pct

* Shares rise as much as 3.6 pct

(Adds broker upgrades; comments by CEO, analyst; shares)

By Matt Scuffham

LONDON, July 15 (Reuters) - British pubs group JD Wetherspoon (JDW.L) said on Wednesday it expected its pretax profit for the year just ending to come in towards the top end of market expectations, after cost cutting improved margins.

Shares in Wetherspoon, which have risen by over 40 pct since the start of the year making it the best performer among pubs stocks, were up 2.1 percent to 438 pence at 0855 GMT, having earlier gained as much as 3.6 percent.

Forecasts for underlying pretax profit in the year ending July 26 had ranged between 51.9 million pounds and 64.2 million pounds, with the consensus at 59 million pounds ($96.69 million), according to a Reuters Estimates poll of 17 analysts.

“I think we’re probably ahead of expectations on where the consensus previously was. We’re towards the top end of market expectations,” Finance Director Keith Down told Reuters.

KBC Peel Hunt analyst Paul Hickman upgraded his 2009 underlying pretax profit forecast by 7 percent to 62.7 million pounds and his 2010 prediction by 10 percent to 67 million.

“Wetherspoon’s ability to grow despite this difficult market is demonstrated by its firm Q4 performance,” he said.

Numis lifted its pretax profit forecasts by 11 percent to 65 million pounds for 2009 and by 13 percent to 70 million in 2010.

Investec raised its forecasts by 2 percent to 64.8 million pounds for 2009 and by 8 percent to 70.6 million for 2010.

Wetherspoon, which has 732 pubs, said operating margins for the second half are anticipated to be at least 10 percent, higher than earlier expectations.

It said costs were lower than anticipated in a number of areas, including energy, labour, and marketing.

“It’s efficiency rather than cost cutting so it should mean a large proportion are relatively permanent,” said Down.

KBC’s Hickman said he is “increasingly confident” that Wetherspoon can maintain its 10 percent operating margin.

“Because Wetherspoon is structured for value, it is not suffering the margin decline faced by competitors in current conditions,” he said.

Britain’s pubs have faced torrid trading conditions over the last two years as a smoking ban, recession, above-inflation tax rises, miserable weather last summer, and cheap booze offers in supermarkets kept drinkers at home.

Down said the company will look to buy pubs from distressed sellers and reaffirmed plans to open 30 new pubs a year.

“We’re seeing the opportunity to pick up pubs without a premium and at lower rents than we’ve paid in the past.”

For the 11 weeks to July 12, Wetherspoon said like-for-like sales decreased by 0.8 percent, reflecting the benefits in the same period last year from a major marketing campaign which offered reductions in bar and food prices.

For the financial year to date, covering the 50 weeks to July 12, like-for-like sales were up 1.2 percent.

“To deliver like-for-like sales growth and margin improvement in one of the toughest years for the pub sector is highly commendable,” said Investec analyst Matthew Gerard.

Wetherspoon’s update will support hopes that the good summer weather, lower mortgage rates, and falling energy bills may provide an upturn in trading for the sector.

Earlier this month, Greene King (GNK.L) posted a smaller-than-expected fall in full-year profit and said recent trade had improved. [ID:nL2553317]

On Tuesday, Young’s (YNGa.L) said it had made a solid start to the current financial year and was trading in line with expectations despite tough economic conditions. [ID:nLE434644] ($1=.6102 Pound) (Editing by Greg Mahlich and Simon Jessop)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below