Wetherspoons toasts a further £80m of pub expansion

Wetherspoons toasts a further £80m of pub expansion

Well-known home of the cheap tipple, Wetherspoons (LON:JDW), enjoyed a strong festive period, which was crowned by the announcement that it would be expanding its pub portfolio during 2020.

The company reported like-for-like sales growth of 4.7% during the 12 weeks to the 19th of January alongside sales growth of 4.2%.

This positive financial performance was echoed by Revolution Bars (LON:RBG) which saw its shares jump following its announcement that it had booked a seventh consecutive year of record Christmas sales.

Unfortunately, the same couldn’t be said for City Pub Group PLC (LON:CPC), whose festive performance was “subdued” and anything but cheery. The firm saw its shares dip 8% on the announcement and said they would miss market expectations.

Wetherspoons’ progress, though, was expected and therefore somewhat overshadowed by the news that it had opened 1 pub and sold 5, and planned to open between 10 and 15 additional sites during the course of the financial year.

This is part of the pub’s strategy to spend £80 million on new pubs and pub conversions during the year.

So far this financial year, Wetherspoons has spent £57 million on buying the freehold reversions of 18 pubs of which it was previously the tenant. It expects full-year reversion expenditure to be around £85 million.

Additionally, the company announced it had spent £320 million on reversions since 2014, alongside £516 million on buying back or cancelling 53% of its own shares since 2003.

Wetherspoons court case

Commenting on a high court case involving the pub chain, Chairman Tim Martin stated,

“In an important high court case involving Wetherspoon, the judge said that he would assume written statements by witnesses were true, unless contradicted by barristers in cross-examination.”

“This sensible principle of justice is also implicit in the ‘comply or explain’ provisions of corporate governance guidelines (the ‘code’).”

“Comply or explain must mean that the code envisaged flexibility and did not advocate a ‘one-type-suits-all’ approach.”

“If shareholders say nothing in response to company explanations, which have been made in order to comply with the code, it is reasonable to assume their assent.”

“However, in reality, detailed explanations are ignored by many fund managers and their corporate governance advisers – comply or explain has been corrupted to mean ‘comply or be humiliated in public and voted off the board’ – a risk which most NEDs are understandably reluctant to take.”

“A likely reason for ignoring explanations, in defiance of the code, is that it’s simpler and cheaper to apply arbitrary standards such as the ‘nine-year rule’- rather than engaging with companies and considering their explanations.”

Brexit chat over a pint, anyone?

In his usual fashion, the Wetherspoon Chairman also had to say his piece on Brexit:

“It is disappointing to note that pro-remain organisations like the CBI and the Food and Drink Federation are, even at this late stage, doubling down on ‘project fear’ stories.”

“A dramatic headline on the BBC’s main news website (“Brexit: Price rises warning after chancellor vows EU rules divergence”, 18 January) predicted dire consequences in the event of ‘divergence’ from the EU.”

“The article contained a jobs warning from the CBI, which previously promoted the disastrous exchange rate mechanism and the euro, and a food prices warning from the Food and Drink Federation (FDF).”

“The CBI’s warnings about job losses and recession in the event of a leave vote in 2016 have proved to be mythical – over a million jobs have been created.”

“The FDF’s warnings about food price rises are absurd- the EU is a highly protectionist organisation which imposes tariffs and quotas on about 13,000 non-EU imports including many food and drink products such as bananas, rice, oranges, coffee and wine.”

“Elimination of tariffs will obviously reduce prices.”

“It is high time these organisations took a wise-up pill and supported the democratic decisions of the UK.”

Investor notes

After swinging to a rally, the company’s shares are now down 0.064% or 1.00p, to 1,562.00p per share. Peel Hunt reiterated their ‘Hold’ stance on the stock, their p/e ratio is 20.25 and their dividend yield isn’t generous at 0.51%.