Wetherspoon woes

World Cup worries are nothing compared to the impact licensing reform could have on Tim Martin's ambitious roll-out programme.

With the World Cup having dominated everything for the last month, not least the opening line of almost every newspaper feature published, one person glad to see the back of it is Tim Martin.

Because of Wetherspoon's "no TV" policy, the company did not make the most of the extra 44 million pints consumed while football fans filled pubs to watch games beamed from Japan and South Korea.

The Wetherspoon executive chairman was predictably bullish about the impact but his pubs were said to be empty on match days while other houses reported record takings.

According to the British Beer and Pub Association, the industry received a £165m boost in extra sales from the tournament.

Although the World Cup will have registered at the company's Watford base, it is likely to be merely an unfortunate blip.

Tim was dismissive of any great impact. "In 23 years this company has delivered 20 per cent earnings growth each year," he said. "In every other one of those years we have had either a World Cup or a European Championships. Anyone who suggests it will have an effect on our business is just ignorant."

But these are troubling times for the JDW executive chairman. One of the most astute and admired operators in the sector is clearly worried. His share price is lying low and much more significant than the World Cup are Tim Martin's concerns over the proposals for licensing reform to which the Wetherspoon boss is so vehemently opposed.

Tim has certainly made his feelings known. In recent weeks he has launched scathing, personal attacks on those who disagree with him. Hugh Osmond and Giles Thorley of Punch, John Sands of Pubmaster and Ted Tuppen of Enterprise Inns have been described as lazy, arrogant, stupid and lightweight for their views on the issue.

Indeed, he went further. The gospel according to Tim suggests all tenanted pub companies will be out of business within five years.

If things are going well, people tend to generally keep their heads down and get on with running their businesses. Tim Martin's public condemnations do not seem to be the actions of a particularly happy man and the important question is to ask why.

Tim is the champion of his business, the gatekeeper, the custodian, the protector of the Wetherspoon way. Licensing reform could pose a big threat to that business.

The lion's share of Wetherspoon pubs are converted from buildings previously used for other purposes, such as banks or offices, and all require new licences. Under the current system, magistrates make the licensing decisions.

Applying for a licence to sell liquor is a relatively straightforward process. Wetherspoon pubs have always sparked objections from local residents but magistrates are appointed to be unbiased in their decisions. Wetherspoon's all-conquering legal team frequently led by Tim himself, who trained as a barrister, rarely fails to bamboozle magistrates into submission.

Local authorities might not find the lure of big drinking halls, selling cheap booze on the high street, quite as compelling. He faces a much bigger fight to win them over.

If, in principle, a given local authority does not object to a Wetherspoon application, there are still concerns over the time taken to deliberate on the decision before giving the green light.

Local authorities are infamous for being buried in bureaucracy and make magistrates look positively speedy and efficient in comparison. The danger is that the process will become a slow and painstaking one.

Delayed openings, in a growth programme that demands 80 new outlets a year, could have a significant affect on the Wetherspoon roll-out. If so, this will take its toll on the share price.

The company has a staggering property pipeline of over 300 sites but only the next six to nine months' worth of openings are fully licensed. If and when control does pass from magistrates to local authorities, Wetherspoon could be left with a gaping chasm in its roll-out schedule.

If Tim is left with a hole in his openings programme, he will have to do a deal to keep the City happy and to prop up his share price. If so, what does he buy?

Nevertheless, the Wetherspoon boss was dismissive about the impact of the licensing proposals. "It will have zero affect on us," he said. "We virtually always get what we want. We have an unparalleled record when it comes to new licences.

"What this means is that it will take longer and cost more. We will have to apply for licences earlier and get more properties into the process. And instead of it costing £10 a licence it could cost £5,000 to £10,000."

If that is the case, and each licence costs at least £5,000, Wetherspoon will take a £400,000 hit on its annual 80 openings.

Tim's sentiments on cost, endorsed wholeheartedly by Stuart Neame, the Shepherd Neame vice chairman, deserve more credence and the issue is something the government must grip aggressively to ensure the right outcome for the industry. Licensees spending £5,000 on a licence is not going to stack up.

Any company that has dealt with local authorities for Public Entertainment Licences knows it can be a costly and time-consuming process. This cannot be allowed to happen with liquor licences.

Wetherspoon has cut back its expansion plans from 100 pubs to 80 per year. Analysts suggest that the company has clearly struggled to meet its initial demanding plans. "It doesn't make a blind bit of difference whether we grow at 70 or 100 pubs a year," Tim said. "We're going to have 1,500 pubs in 10 years and only a wally or an analyst would do the same number every year."

The point is that the company said it would open 100 each year. Now it says 80.

The Wetherspoon share price has stagnated in recent times and as this article was posted it was lying at a lowly 308.5p. Once again Tim was not particularly bothered and his views were indeed supported by Jeff Collyer, an analyst at Deutsche Bank, who released a buy note last week. He set a target price of 420p and said that with the World Cup a distant memory there was little downside to the stock.

"Run the company well and the share price will take care of itself," was the Wetherspoon supremo's response. "Whatever you do, don't do what the City says, do what is right for the long term prospects of your business."

And here lies the clue to Tim Martin's motive. The custodian of Wetherspoon always does everything in his powers to protect and defend what he has created. In campaigning so vociferously against licensing reform, he is doing what is right for the long term prospects of his business.