Investment Column: Ignore the noise and order a round of JD Wetherspoon

Standard life; Solomon Gold

Our view: Buy

Share price: 426p (+4p)

JD Wetherspoon used its first-quarter update yesterday to launch a broadside on how Government policies were hitting pub companies. The operator of 833 pubs said that while its sales, profit and cash flow have been "resilient", the main challenges facing the group in the coming months will be the "continuing cost increases resulting from Government legislation, including the carbon tax, the proposed late-night levy and further increases to excise duty".

Wetherspoon pointed out that it made a post-tax profit of £46.8m in its last financial year, but paid total taxes of more than £453.1m, including VAT of £204.8m and excise duty of £120.2m.

However, while these figures lay bare the challenges facing the country's pub groups, the City was far more focused on the group's most recent sales and comments on margins for the 13 weeks to 23 October. And despite the squeeze on consumer spending, Wetherspoon delivered a resilient 1.1 per cent rise in like-for-like sales, although it is likely to have been helped by the warm autumnal weather.

The first-quarter sales growth was ahead of City expectations, but lower than the 2.1 per cent rise over the year to 24 July. But ahead of sales, we believe the impact of rising costs, including utilities, labour and bar, and food supplies, will have a bigger impact over the next year on the group's crucial operating margin, which slipped by 20 basis points to 9.4 per cent in the quarter. Despite having concerns about its margin, we believe Wetherspoon remains one of the pub sector's most reliable stocks.

Its shares trade on an undemanding forward earnings ratio of 11.7 times and offer a prospective dividend yield of 3.1. While we don't think they are set to boom suddenly over the next year, they look well-placed to continue growing. Therefore, we say ignore the Government bashing, focus on Wetherspoon's sound financials and order a round of its shares.

Standard life

Our view: Hold

Share price: 209.5p (+3.6p)

Corporate pensions are where it's at for Standard Life, which has changed radically since it was a rather pompous, Edinburgh insurer that was the favourite of small financial salesmen. So it is a little worrying that its flagship product – Lifelens – was put on the back burner in the third quarter.

The idea is good, offering employees a single web-based point of access to pensions. The trouble with the idea is that its implementation has proved problematic, with the company struggling to integrate client systems with its own. The third quarter sales figures were also hardly good news, being a way below most analysts' expectations.

In the first nine months it generated £15.5bn of total sales, 10.5 per cent better than the previous year. But analysts had been forecasting £15.9bn and it seems that the third quarter has been the problem.

With those horrid three months frightening everyone, that's no surprise. But the sales of corporate pensions were a blackspot, a worry given their importance. They were up 8 per cent at just over £1bn, but that was 8 per cent lower than forecasts.

In terms of earnings multiples, Standard (at 12.6 times forecast) looks pricey compared with its rivals, although the 1.3 times forecast net tangible assets is more in line and the prospective yield of 6.6 per cent is bettered only by Aviva. We're prepared to give Standard the benefit of the doubt – for now. But if corporate sales don't pick soon, we're out.

Solomon Gold

Our view: Hold

Share price: 13.125p (-2.13p)

The mining group Solomon Gold delivered an upbeat assessment of its prospects at its Fauro project in the Solomon Islands yesterday.

The company, which drills for gold, silver, copper and diamonds on the Solomon Islands and in Australia, said it was pleased with the latest results of the exploration drilling at the key Fauro project. In the release yesterday, the company added that it "was encouraged by the recent results" and that the exploration team "is optimistic of further success".

However, despite yesterday's boost, the group's shares continued their downward slide, falling by a further 13.9 per cent last night. This brings the shares decline for the year to about 60 per cent. Furthermore, in the hit-and-miss world of gold mining, the absence of any hugely encouraging news this year has no doubt taken its toll on the share price.

The announcement of Malcolm Stewart Norris as chief executive on 4 October, to replace the retiring Nicholas Mathers, has given the shares a small lift, but it is too early to tell how things will change under his reign. Mr Norris joins from Intrepid Mines, the Indonesia-focused miner. Although we welcome his appointment, the recent weakness in the shares means that we would wait to see what Mr Norris does before adding to our portfolio.

PROMOTED VIDEO
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film Ridley Scott reveals truth behind casting decisions of Exodus
News
Andy Murray with his girlfriend of nine years, Kim Sears who he has got engaged to
peopleWimbledon champion announces engagement to girlfriend Kim Sears
Arts and Entertainment
Jake Quickenden and Edwina Currie are joining the I'm A Celebrity...Get Me Out Of Here! camp
tv
Arts and Entertainment
Roisin, James and Sanjay in the boardroom
tvReview: This week's failing project manager had to go
Life and Style
Fright night: the board game dates back to at least 1890
life
Life and Style
fashion
News
ebooksNow available in paperback
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Langley James : IT Support; Helpdesk, VMware; Manchester, £18k

£16000 - £18000 per annum: Langley James : IT Support; Helpdesk, VMware; Manch...

h2 Recruit Ltd: Business Development Manager - HRO - £70k+ ote

£35000 - £450000 per annum + £3k car, £70k ote: h2 Recruit Ltd: Do you want to...

Citifocus Ltd: Newly Qualified Accountants - Risk Mgmt

£Attractive Package: Citifocus Ltd: Prestigious financial institution seeks to...

Citifocus Ltd: Operational Risk Analyst

£Negotiable: Citifocus Ltd: Experienced operational risk professional with ban...

Day In a Page

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game
There's a Good Girl exhibition: How female creatives are changing the way women are portrayed in advertising

In pictures: There's a Good Girl exhibition

The new exhibition reveals how female creatives are changing the way women are portrayed in advertising
UK firm Biscuiteers is giving cookies a makeover - from advent calendars to doll's houses

UK firm Biscuiteers is giving cookies a makeover

It worked with cupcakes, doughnuts and macarons so no wonder someone decided to revamp the humble biscuit
Can SkySaga capture the Minecraft magic?

Can SkySaga capture the Minecraft magic?

It's no surprise that the building game born in Sweden in 2009 and now played by millions, has imitators keen to construct their own mega money-spinner
The King's School is way ahead of the pack when it comes to using the latest classroom technology

Staying connected: The King's School

The school in Cambridgeshire is ahead of the pack when it comes to using the latest classroom technology. Richard Garner discovers how teachers and pupils stay connected
Christmas 2014: 23 best women's perfumes

Festively fragrant: the best women's perfumes

Give a loved one a luxe fragrance this year or treat yourself to a sensual pick-me-up
Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

Our partner charities help veterans on the brink – and get them back on their feet
Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

Putin’s far-right ambition

Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

Escape to Moominland

What was the inspiration for Finland's most famous family?
Nightclubbing with Richard Young: The story behind his latest book of celebrity photographs

24-Hour party person

Photographer Richard Young has been snapping celebrities at play for 40 years. As his latest book is released, he reveals that it wasn’t all fun and games
Michelle Obama's school dinners: America’s children have a message for the First Lady

A taste for rebellion

US children have started an online protest against Michelle Obama’s drive for healthy school meals by posting photos of their lunches