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Wetherspoon's reveals drive to expand further after strong results

PUBS chain JD Wetherspoon, which has 62 hostelries in Scotland, has posted a strong second-quarter like-for-like sales rise of 6.7% but shows no sign easing off its expansion drive after indicating it will continue investing in its business and new pubs at the expense of margins.

The chain is due to open pubs in Stirling and Alloa in the next couple of months as part of a drive to add between 40 and 50 more establishments to its current 900-strong roster in the current financial year.

It has indicated that it could continue expanding at this rate for the next decade.

After publication of the figures for Wetherspoon's performance for the 12 weeks to January 19, investors sent its shares up 20p or 2.53% to 809p.

Wetherspoon's, which also intends to open pubs in Fraserburgh, Broughty Ferry and Cambuslang in the near future, said its investment meant its first-half operating margin would fall 20 basis points to 8.1% and would be between 8.1% and 8.3% for the year. The margin was 8.7% in 2012/13.

The firm, which will open its first pubs in Ireland in 2014, said it was focused on growing turnover and profits rather than margins and will achieve it through opening more new pubs as well as growing sales of food, teas, coffees and wine.

Greg Johnson, analyst at Shore Capital wrote in a note for clients: "Given commentary elsewhere, especially concerning London, we expected a robust performance in Q2 and over Christmas.

"However, the performance to-date is significantly ahead of our expectations for both the period and our full-year assumptions of LFL (like-for-like) growth of c3%. However, the margin performance continues to frustrate."

While he retained his profit forecasts, analysts at Numis cut their 2013/14 profit forecasts by 4% to £77.4m, below a consensus of 80.2 million pounds, according to Reuters data.

"The business is moving forward and whilst there are challenges we see room for positive surprises in the second half," Peel Hunt analyst Nick Batram said in a note.

Wetherspoon's opened its first motorway services pub on Tuesday off the M40 in south-east England, but has insisted that it expects the bulk of sales to come from food not alcohol.

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