Wetherspoon toasts festive season

ANOTHER CONFIDENT trading statement yesterday from JD Wetherspoon, the Watford-based pub company, may turn into something like a hostage to fortune.

Wetherspoon's chairman, Tim Martin, probably thought he was taking part in an informal poll of the pub trade's fortunes over the Christmas and the New Year festive season. If so, his competitors were being much less forthcoming, and Wetherspoon's encouraging message sounded out alone.

Fourth-quarter sales apparently grew by between 5 per cent and 10 per cent, which was certainly well ahead of the market average. The upturn compared with a fall of 1 per cent in the third quarter, when Wetherspoon's sales were adversely affected both by the poor summer weather and by a drop in pub attendances during the football World Cup in June, for which Wetherspoon declined to cater by installing TV sets in their pubs. That decision alone cost an estimated pounds 1m in lost profits.

The chairman claims that the recent recovery in sales is mainly due to the chain's emphasis on offering value for money, which makes it less vulnerable to a recession in spending than rival pub chains that charge higher prices to pay for atmosphere and entertainment.

But Mr Martin was unwilling to give a headline figure for sales growth including new openings, and he was even less forthcoming about profits or earnings after servicing the group's substantial debt burden. Analysts scaled down profit forecasts after the last full-year figures, which fell 10 per cent short of expectations at pounds 20.1m. The outlook depends heavily on maintaining sales growth and holding down interest charges.

There was also something of a sense of deja vu about the forecast of investing pounds 100m and opening 80 new pubs this year, bringing the total estate to around 400 by the end of the year. It is an ambitious target for a group likely to be nursing pounds 160m in debt by the end of the year, but it is no more than was forecast last September.

Analysts were reluctant to re-adjust their current forecasts of profits of pounds 25.4m and earnings of 12.2p a share in the current year to 31 July, rising to pounds 31.1m and 14.7p in the millennial year.

The share price, which has virtually halved in line with the sector over the past six months, was also slow to respond. Even at 177p yesterday, up 2p on the day, the shares are trading at 14.5 times the current year's and 12 times future earnings, which is a significant premium to most competitors.

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