LONDON -- It's always entertaining to read statements from J.D. Wetherspoon (JDW 0.66%).
Two things typically stand out. First, the excellent financial performance that the company has consistently produced in the 20 years or so since it joined the London market. Second, the broadsides against the government for the high level of taxes the company suffers.
Today's trading update for the three months to the end of April was no exception. Like-for-like sales increased by 6.3%, and total sales by 9.3%. For the first nine months of the year, the figures are slightly better, at 6.7% and 10.1%, respectively.
However, the company warned that growth for the last three months of the year was likely to be lower, although it "continues to aim for a reasonable outcome in the current financial year."
Operating margins look like they will be lower than last year, with the year to date coming in at 8.4% compared to 9% achieved last year. Which brings us to taxes...
Marginal tax relief
Although Wetherspoon did welcome recent abolition of the duty escalator and the reduction in beer duty, it expects to see its taxation costs continue to rise. In particular, it regularly emphasizes the VAT advantage that supermarkets have over pubs with respect to food sales and the "continuing imposition of stealth taxes such as the late-night levy and increased fruit/slot machine taxes."
In fact, it's refreshing to see pretty much identical anti-tax statements in one announcement to the next. Being an efficient operator, Wetherspoon recognizes there's no need to draft new copy each time.
Despite the tax headwinds, Wetherspoon still hopes to add around 30 new pubs to its estate this year and a further 20-25 next year. This would take its total number of pubs above 900.
Still cheap?
The shares have had an excellent run in the last 12 months, having risen some 60%. They added 1% in early trading, standing at 599 pence. That said, they still do not look especially expensive right now on a forward P/E multiple of around 14. The expected dividend yield is less generous, at just 2%.
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