Wetherspoons fizzes in first quarter as Martin rails at EU 'hectoring'

As the FTSE 250 group opened one new pub and sold nine, total sales increased 2.3% in the 13 weeks to 23 October and operating margins were an "unusually high" 8.6%, with expectations for the full year that they will normalise at around 7%.

Executive chairman and founder Tim Martin, an unabashed pro-Brexiteer, amid a bitter rant against the "hectoring and bullying" of European Commission president Jean-Claude Juncker who he said, by encouraging European businesses to adopt an intransigent attitude, would threaten business with suppliers, also noted that Wetherspoon's anticipates higher costs in the remainder of the current year from wages, business rates and repairs.

He added that the company also intended to increase the level of capital investment in existing pubs to around £60m in the current financial year versus £34m in the last.

"The company has made a reasonable start in the current year, but any forecasts for the full year are inevitably tentative, with nine months still to go - and the outlook for the current financial year is unchanged."

On relations with Europe, he warned that normal 3-10 year supply arrangements with supplier such as French wine merchants and German brewers could lose out if tariffs are imposed.

Although not averse to hectoring his punters himself, Martin's railing against Merkel, Hollande et al also included a suggestion that vengeful Brits might take tit-for-tat revenge on the pesky Europeans: "The ultimate sanction will be in the hands of UK consumers, should they take offence at the hectoring and bullying approach of Juncker and co. French wine, Champagne and spirits, German beer and Swedish cider, for example, are all at extreme risk."

The company also guided that it will run the net debt/EBITDA ratio around 3.5 times for the foreseeable future.

With sales up 4.1% in the first six weeks but down 2.3% in the remaining five, analysts at Canaccord Genuity noted that the downturn was due to last year's Rugby World Cup.

The trading statement was "much as expected" and with the share price having drifted from its recent peak it "will probably take guidance from the mid-cap UK sell-off rather than anything in today's IMS".

Broker Shore Capital felt the key development in the statement was the operating margin, with was significantly higher than the 6.9% reported in the last fiscal year and ahead of its full year expectations of 7.3%.

"We believe that the direction in operating margin is key to the JD Wetherspoon investment case; with the current price, on our estimates, building in a recovery in the margin towards 9% over the medium term."