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Fri 9th Sep 2016 - Results: JD Wetherspoon, Greene King, Comptoir Group, Richoux
JD Wetherspoon reports sales up 4.1% since year-end, fires back at ‘Remain’ doomsters: JD Wetherspoon has reported sales rose 5.4% to £1,595.2m in the 52 weeks to 24 July 2016. Like-for-like sales rose 3.4%, while sales since the year-end have increased by 4.1%. Profit before tax increased 3.6% to £80.6m. Chairman Tim Martin said: “I am pleased to report a year of progress for the company, with record sales, profit and earnings per share before exceptional items. The government is actively considering ideas for generating jobs and economic activity, especially in areas outside the affluent south of the country – VAT equality, as the trade organisations BBPA and ALMR have demonstrated – is a very efficient and sensible method of helping to achieve these objectives. Tax equality also accords with the underlying principle of fairness in applying taxes to different businesses. In the run up to, and the aftermath of, the recent referendum, the overwhelming majority of FTSE 100 companies, the employers’ organisation CBI, the IMF, the OECD, the Treasury, the leaders of all the main political parties and almost all representatives of British universities forecast trouble, often in lurid terms, for the economy, in the event of the ‘Leave’ vote. For example, claims were made by David Cameron and George Osborne that family income would eventually be reduced by £4,000 per annum, that mortgage interest rates would increase and house prices would fall – claims which were supported, in terms, by Mark Carney of the Bank of England. City voices such as PwC and Goldman Sachs, and the great preponderance of banks and other institutions, also leant weight to this negative view. For example, Paul Johnson of the Institute of Fiscal Studies (The Times 28 June) stated there was ‘near-unanimity’ among economists in favour of Remain. Rather amazingly, he added: ‘I take as given that we economists were collectively right about the (bad) economic consequences of leaving the EU.’ Johnson then cites this consensus as evidence for the economic truth of the ‘Remain’ case. This is a strange argument to advance since consensus forecasts from economists, who generally failed to forecast the last recession or the catastrophic flaws of the euro, are almost always delusional. As Warren Buffett has said, forecasts tell you a lot about the forecaster but not about the future. Economic forecasts from overconfident pundits such as Mr Johnson are an important component of Benjamin Graham’s ‘Mr Market’, the mythical punter who gets everything wrong. Just as the combined intellectual weight of the ‘good and great’ could not see through the flaws in the euro they have, with honourable exceptions, been unable to see that the principle flaw of the EU – an absence of democracy – will almost certainly lead to further economic and political chaos and to more dire consequences for those who are subject to EU decisions. The overwhelming economic evidence is that successful countries are democracies – Mr Johnson and like-minded economists really do need to stick that point in their pipes and smoke it. For all their faults, democracies produce the greatest level of prosperity and freedom. As in the case of the euro, the general public has a much better perception about this overriding factor than the consensus of intellectual opinion. I have written an article on this general subject for Wetherspoon News. Now that the gloomy economic forecasts for the immediate aftermath of the referendum have been proven to be false, ‘Scare Story 2’ is that failure to agree on a trade deal with the EU will have devastating consequences. This was articulated by fund manager Nicola Horlick this week, who told Radio 4 listeners leaving the Single Market would relegate the UK from the fifth-biggest economy in the world to the eighth or ninth. In contrast, Wetherspoon’s experience indicates that reaching formal trade deals with reluctant counterparties is impossible – and it is unwise to try. For example, I personally agreed on terms with one of our biggest suppliers, a major PLC, for a new seven-year contract about 12 years ago. Although the deal was put in the hands of lawyers, it was never signed or ‘ratified’ during this time, although we traded successfully for the anticipated duration. We subsequently agreed on a deal for a further seven years – and that has not been signed to this day. Indeed, we have traded without interruption with this company for 37 years. In contrast, deals with some suppliers have been rapidly embodied in formal contracts. Over the years, we have agreed on thousands of ‘trade deals’ with big and small suppliers – some are formal contracts, some are ‘handshakes’, some are short-term, but many last for decades. The commercial reality is that you can lead the horse to water, but you can’t make it drink. This is especially true of the EU – an organisation of Byzantine complexity run by five unelected presidents, with input from numerous other parts of the many-headed Hydra. It has struggled to reach trade deals with most of the world’s major economies, for example, the US, China and India. The UK is an enormous trading partner of the US, generating a substantial surplus for us in spite of the absence of a ‘deal’ and it would be unwise to clamour after a specific formal agreement to replace existing arrangements in these circumstances – the back of the queue is a good place to be. Former chancellor Nigel Lawson (Financial Times, 3/4 September) and many others advocate leaving the EU and trading afterwards with it on the basis of World Trade Organisation rules. If the EU is keen for a trade deal, we should co-operate, but unelected apparatchiks like President Juncker can’t be controlled – which is one of the main reasons we voted to leave. Common sense … suggests the worst approach for the UK is to insist on the necessity of a ‘deal’ – we don’t need one and the fact that EU countries sell us twice as much as we sell them creates a hugely powerful negotiating position. If WTO tariffs apply, the UK will receive twice as much as it pays. Boris Johnson, David Davis and Liam Fox will achieve far more for the UK by copying Francis Drake and playing bowls in Plymouth rather than hankering after an EU agreement, although time spent in improving arrangements with Singapore, New Zealand and India, for example, may be well spent. Since the year end, Wetherspoon’s sales have continued to be encouraging and increased by 4.1%. Despite this positive start, it remains to be seen whether this will continue over the remainder of the year, given the strong like-for-like sales in the last financial year and what remains a very low-inflation environment. We will provide updates as we progress through the year, but we currently anticipate a slightly improved trading outcome for the current financial year, compared with our expectations at the pre-close stage.”

Greene King reports managed like-for-likes up 1.7%: Brewer and retailer Greene King has reported managed like-for-likes increased 1.7% in the 18 weeks to 4 September 2016. Its tenanted division, Pub Partners, saw a 4.5% rise in net income after 16 weeks, while its own-brewed volumes declined 0.5% over the same period. The company stated: “In the first 18 weeks of the year, Pub Company delivered like-for-like sales growth of 1.7%, including a strong start to the year as customers enjoyed the European Football Championships and better weather. Growth was driven by our Local Pubs estate. In Pub Partners, like-for-like net income was up 4.5% after 16 weeks, while in Brewing & Brands, own-brewed volume declined 0.5% over the same period. We continued to make strong progress with the integration of Spirit, including the delivery of further planned synergies and over a quarter of our managed pubs now operating with the ‘best of both’ IT system. We also completed 41 brand conversions in the year-to-date, with encouraging sales uplifts. As expected, uncertainty surrounding the UK’s future withdrawal from the European Union has translated into a softening of some economic indicators and a reduction in consumer confidence. While the broader implications remain unclear, a number of recent industry surveys have flagged risks to leisure spend and we are alert to a potentially tougher trading environment ahead. With this in mind, we will continue to focus on delivering great value, service and quality to our customers. Greene King has a track record of success in challenging trading environments and our strong balance sheet and enhanced opportunities following the Spirit acquisition will help limit any potential impact from prolonged uncertainty in the environment. We remain confident of delivering another year of strategic and financial progress.” Greene King also announced the appointment of Gordon Fryett to the board as a non-executive director with effect from 1 December. He will also become a member of the audit, nomination and remuneration committees. Fryett spent his career at Tesco where, prior to his retirement in 2013, he played a leading role in Tesco’s expansion in the UK and overseas, as well as development and management of the group’s property portfolio. He was also chief executive of Tesco Ireland. Greene King chairman Philip Yea said: “I am delighted Gordon has agreed to join our board. His extensive experience of retail and property will undoubtedly add value to our decisions as we develop Greene King over the coming years.” Following the retirement of Ian Durant as a non-executive director at the annual general meeting today (9 September) his appointment in December will return the number of non-executives to five, including the chairman.

Comptoir Group reports first half adjusted Ebitda up 9.2%: Comptoir Group, which operates the Comptoir Libanais and Shawa brands as well as the Levant and Kenza restaurants, has reported sales increased 24.6% to £9.7m for the six months to 30 June 2016 – its maiden results as a listed company. Adjusted Ebitda before highlighted items of £1.0m was up 9.2% (2015: £0.9m). The group’s largest brand, Comptoir Libanais, had revenues of £6.9m (2015: £5.6m), an increase of £1.3m or 23.2%. Other sites in the group delivered revenues of £2.5m (2015: £2.0m), an increase of £0.5m or 25%. The company anticipated it would open eight new sites by the end of 2016, which would be funded from the group’s operating cash flow and the proceeds from the initial public offering following the company’s AIM listing in June. The pipeline for 2017 and even 2018 has already started being developed and includes a number of other sites, the contract for one of which has already been exchanged but is not due to be completed until the second quarter of 2017. After the period end, the group exercised its option to acquire the building occupied by the group’s central production unit. The company is still in negotiations with the current owner of the property in respect of the final acquisition cost, although a ceiling of £1.6m has previously been agreed. Richard Kleiner, non-executive chairman, said: “We are delighted to announce Comptoir Group maiden set of results as a quoted company in respect of the six month period to 30 June 2016. The group’s pipeline for new sites is well developed and we look forward to another period of strong growth in the second half of the year. I would like to thank my fellow directors and the whole of the Comptoir Group team for their efforts over the interim period and for seeing the group through its IPO in June 2016.”

Richoux Group reports pre-tax loss in first half, impairment charges made against three underperforming sites: Richoux Group, operator of Richoux, Dean’s Diner and Villagio restaurants, has reported turnover up 5.7% to £7.08m in the 28-week period ending 10 July 2016. Adjusted Ebitda decreased to £0.28m (2015: £0.79m). The company made a pre-tax loss of 0.58m, compared with a profit of £0.32m the year before. It has 23 restaurants trading and two new Dean’s Diner restaurants and one new Villagio site opened. The company has cash of £3.09m at period end (2015: £4.40m). Philip Shotter, chairman of Richoux Group, said: “In line with a number of other restaurant groups, trading conditions have been difficult during the period as we continue to face the challenge of increased competition at a number of sites as well as increased property and staff costs, the latter due largely to the impact of the living wage. We are pleased to have opened two further Dean’s Diner restaurants and one further Villagio restaurant, although handover of what will be the tenth Dean’s Diner site has been delayed until 2017 due to delays on the part of the developer. A decision has also been made to recognise impairment charges against three sites which are underperforming.”

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