Amid all the talk of the decline of the Great British Pub, somebody forgot to tell JD Wetherspoon (LSE: JDW).
Whatever the Wether
Its stock is up another 2.7% today after posting a 6.9% rise in like-for-like sales for the 10 weeks to 7 July, with year-to-date total sales up 7.4%. The ‘Spoons’ share price has now climbed 13% over the past year, and an intoxicating 99% over three years.
The £1.53bn FTSE 250 group has opened five new pubs since the start of the financial year, and disposed of nine. The downside is that these were below the value in its balance sheet, and it now expects about £3m of exceptional, non-cash losses this financial year as a result.
It has also spent £71m buying the freeholds of pubs of which it was previously the tenant and bought back £5.4m of the company’s shares. It described its financial position as “sound”, with year-end net debt expected to be about £745m.
Brexit boss
Chairman Tim Martin is a vocal Brexiteer and the vast majority of today’s statement is an argument in favour of what most people call a no-deal EU departure, but he names a “multi-deal” Brexit. I’m leaving the politics of this well alone but the key point for investors is that JD Wetherspoon is prepared, deal or no deal, having made arrangements to replace French Champagne and brandy and German beer with alternatives from the UK, Australia and America.
Inevitably, given share price growth, Wetherspoon’s stock is a little pricey trading at 19.1 times forecast earnings, while it yields less than 1%. However, there’s a strong case for buying a company whose hands-on founder is still at the helm.
Greene is good
It’s fascinating to compare it with the UK’s largest brewer, Greene King (LSE: GNK), which has had a far more mixed time of it, its stock falling 16% over three years.
The GNK share price is up 9% in the last year but has gone flat lately, as recent wet weather conditions hit sales. Hopefully, the current warm spell will reverse that. Full-year revenues grew just 2% to £2.2bn for the year to 28 April, with profit before tax up a similar percentage to £246.9m, excluding exceptional and non-underlying items. Greene King IPA, Old Speckled Hen and Abbot Ale are all personal favourites of mine so I was glad to see their sales rise 6% to £227.6m.
What in the world…
There’s no men’s football World Cup this year to give the group a lift, which worries me given that last year overall profit before tax still slid 13% to £172.8m (despite Gareth Southgate’s England team making it to the semis), due to rising operating and finance costs. The £1.9bn FTSE 250 group is now cutting costs, focusing on labour productivity alongside other efficiencies.
Greene King is way cheaper than Wetherspoon, trading at just 9.6 times forecast earnings, while yielding a meaty 5.4%, nicely covered 1.9 times.
Just the job for thirsty income seekers and the main attraction here, given lowly earnings projections and management warnings that political and consumer uncertainty will weigh on confidence. Royston Wild says you can buy it with a clean conscience, though.
