JD Wetherspoon boozers celebrate Brexit

In an article yesterday I talked about gloating Brexiteers. Hours later, and perhaps the most vocal of all the stockmarket's 'Leave' voters - JD Wetherspoon's mulletted chairman Tim Martin - could not resist a barrel-sized dig at Remainers who'd predicted economic chaos if we decided to exit the EU.

Britain's best-known publican spent most of his 1,100-word chairman's statement to lambast "City voices" like accountants PwC, Goldman Sachs, the Institute of Fiscal Studies, Bank of England governor Mark Carney and widely-respected fund manager Nicola Horlick.

"The overwhelming economic evidence is that successful countries are democracies," writes Martin. "Mr Johnson [Paul Johnson of the Institute of Fiscal Studies and a Remain voter] and like-minded economists really do need to stick that point in their pipes and smoke it."

We're treated to more of Martin's political and economic analysis throughout Friday's results for the 52 weeks ended 24 July. And one can perhaps appreciate his bravado, given the pub chain he set up 1979 and floated in 1992 has just reported better-than-expected record sales and profits.

Revenue rose 5.4% to almost £1.6 billion over the 12 months and sales on a like-for-like basis grew by 3.4%. Operating margin was steady at 6.87%, but a 3.6% increase in pre-tax profit to £80.6 million was impressive, generating earnings per share (EPS) of 48.3p.

We're also told that sales since the year-end are up 4.1% - previous full-year guidance was for "no better than inflation" - and the annual trading outcome should exceed previous forecasts. Panmure Gordon analyst Anna Barnfather expects to upgrade earnings by about 3%.

If true, that would increase estimates for cash profit in 2017 to £187 million, pre-tax profit to £81.6 million and adjusted EPS to 56.1p, predicated on eight new pubs, 2.5% like-for-like sales growth and flat margins.

On those numbers, Wetherspoon shares trade on 17.3 times forward earnings; that's a bit frothy and certainly a premium to historic forward multiples. However, it's clearly a price investors are willing to pay, and the shares rose as much as 6% Friday to 979.5p.

That takes Wetherpoon's post-referendum gains to around 48%, swelling Martin's stake in the business to £325 million, enough to buy 93 million pints. Investors will struggle to turn that kind of profit buying at these levels.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.