Propel Newsletter Archive Page

Wetherspoon reports 5.5% like-for-likes in Quarter One, Tim Martin recovers from burst appendix: JD Wetherspoon has reported 5.5% like-for-like sales growth for the 13-week period up to 28 October 2018, its First Quarter – and total sales by 6.2%. Chairman Tim Martin said: “I am currently recovering from an operation after a burst appendix, so intend working part time from home for several weeks. Many thanks to the fantastic doctors, nurses and staff at the Royal Devon and Exeter hospital. As most people understand, an experienced board, as at Wetherspoon, can be a great advantage. My recent health scare emphasises this point.” Tim Martin added: “I have written a few hundred words below on the advantages of free trade, which greatly outweigh the illusory benefits of a ‘deal’ with the undemocratic EU. Free trade will benefit consumers and the economy, yet few commentators today make the case for it, or appear to understand it. For millennia people have been sought advice from soothsayers like the Oracle at Delphi – or today from Mystic Meg. In business, the world’s greatest investor, Warren Buffett, has warned that: “Forecasts tell you a lot about the forecaster, but nothing about the future.” But some forecasters lack Buffett’s humility and insight. Pro-EU economists like David Smith of the Sunday Times or Paul Johnson of the IFS, full of scare stories about a post-Brexit future, are confident in their powers of prophecy. In reality, I believe the most consistently inaccurate forecasts of the last 40 years have been made by pro-EU economists, bankers, academics, MPs, and organisations like the CBI, City accountants and the Financial Times. The predecessor of the euro, the exchange rate mechanism (ERM), was supported, almost universally, by these individuals and organisations. It was supposed to bring economic stability, but it brought the opposite – record high interest rates, recession, bankruptcies and negative equity. After this débâcle, broadly the same voices were evangelical in support of the euro, even though no currency has survived in history, as Wetherspoon pointed out at the time, without a government to collect taxes and redistribute them throughout the ‘country’. It was predicted that the UK would suffer terribly if it failed to join the euro, but the UK has since greatly outperformed the Eurozone, which has impoverished much of Southern Europe. The pro-EU dogma is the product of an undemocratic ideology, mainly- and surprisingly – promoted by Oxbridge graduates in influential jobs. Even so, a minority of Oxbridge nonconformists, including MPs like Michael Howard and Tony Benn, journalists like Neil Collins, bankers like Mervyn King, business people like Simon Wolfson and academics like Patrick Minford played a big role in defeating their Oxbridge colleagues over the euro. Pro-EU arguments reached a hysterical zenith during the referendum, with the Chancellor George Osborne, the Treasury, most academics, PWC, Deloitte, most PLC directors, the CBI, the FT, the OECD and the IMF supporting the view of an immediate economic downturn in the aftermath of a Leave vote. Unsurprisingly, the opposite happened. About 500,000 jobs have been created since, rather than the loss of 500,000. Mortgage rates have been lower, not higher, the stock market has risen, not fallen, City jobs have increased, not declined-and so on. A curious aspect of the hopelessness of these economic forecasts over 40 years is that the “man on the Clapham omnibus” (ie. the public) understood the issues well, rejecting the euro and the arguments about a downturn post-referendum. Democracy works, partly because elite education can create arrogance and an ‘echo chamber’ of groupthink, which inhibits good judgement. The dominant theme of the Oxbridge ideology today is that the UK will be worse off without a ‘deal’ with the EU. This view has been backed by a dishonest and surreal campaign to persuade the public that food prices will rise without a deal – the opposite of the truth. Unfortunately, a section of the elite wrongly believes the public is gullible and stupid. This ‘deal at any price’ exhortation has been accepted by, I believe, a weak PM with autocratic tendencies, who dislikes genuine debate, and is locked in a tiny ‘echo chamber’ of like-minded people. In fact, ‘no deal’ really means ‘free trade’. On 29 March next year MPs can end EU import taxes on oranges, coffee, wine, bananas, children’s clothes and 12,651 products, thereby reducing shop prices. Many commentators do not understand that the UK can adopt free trade, ending import taxes, without the need for consent or permission from the EU. Today, these taxes are collected by the UK government and sent to Brussels. So enriching the public comes at no cost to the Treasury. The UK can simultaneously regain control of fishing waters and save £39 billion which the desperate Theresa May has offered the EU – even though there is no legal obligation to pay anything (“Brexit: UK could quit without paying…say Lords”, 4 March 2017, The Guardian). Wetherspoon has set an example by swapping EU products like Jägermeister, Courvoisier and German beer for UK or non-EU products of equal or better quality and price. It follows that UK businesses and consumers have the power to reduce EU exports to the UK to zero, or almost zero. Everything that can be bought from within the protectionist EU club can be bought from the 93% of the world outside the EU – if you look hard enough. In a recent interview the former Chancellor George Osborne told Newsnight that “a minority of people were interested in rather esoteric issues of constitutional sovereignty.” In fact, the desire for democracy and self-determination is not ‘esoteric’ (ie. only the concern of a few). North America, Japan, Singapore, India, Ireland and Australia, among many examples, have thrived following the end of what they saw as remote or arbitrary rule. The former prime minister of Australia, Tony Abbott, showing more economic insight than Osborne, has mocked the UK government approach – and succinctly summed up the arguments for free trade in the Spectator magazine. The economic truth is that no deal/free trade will leave the UK better off on the day we leave the EU in March next year. The risk to the future lies in staying linked to the chaotic and undemocratic Brussels regime. As regards Wetherspoon, sales continue to grow strongly, although ‘comparatives’ are now tougher. As has been widely reported, unemployment is at a record low, putting upward pressure on wages. As a result, Wetherspoon is increasing pay of our staff starting from this week. Having had several recent years of record profits, we are not immediately seeking to recoup these increased costs through higher pricing or ‘mitigation’, but will review that during the year. It is difficult to be too precise at this early stage of the current financial year, but we now expect a trading outcome slightly below that achieved in the previous financial year. We will provide further updates on our trading as we progress through the year.”

Prezzo reports near £200m hit from restaurant closures and goodwill impairments: Prezzo has reported an almost £200m writedown after it closed more than 100 restaurants, restructured its debts and its main backer wrote off two-thirds of its investment. The company, which now has 186 rather than 300 restaurants, is majority owned by private equity company TPG, which bought it off the stock market for £304m in 2014. However, a debt-for-equity swap has diluted TPG’s stake and turned five debt providers into shareholders. Papa Topco, the now-dormant former holding company for Prezzo, recorded non-cash asset writedowns and goodwill impairments of £198m in 2017. Karen Jones, the pub entrepreneur brought in as executive chairman after the restaurant closures, said Prezzo was better positioned but that market conditions were still tough. She said: “It’s no longer about expanding. It’s about being better at what we do and building like-for-like growth.” She declined to give specific numbers for current trading, but said the initial results of a new menu and restaurant refurbishments had been encouraging. The company’s results for the year to December 2017, filed at Companies House, refer to the restructuring and the risk that the transformation plan will “take longer than forecast to positively impact trading results”. The statement said that if this proved the case it would reduce capital spending, but noted that internal cash flow forecasts “do not indicate an issue” with a March 2020 test of covenants on its £51m debt facility. “Supply increased rapidly from 2006, but until around two years ago so too did demand,” said Jones. “The ones that will succeed now are those that deliver price, quality and service.” Prezzo’s operating profit fell by 70% to just £6.6m in 2017. That figure did not include £72.2m of exceptional costs, mostly relating to lease impairments. Sales fell 3%.