Wetherspoon warns on profits

Tough trading conditions and increased red tape, as well as the competition from pubs showing Euro 2004 matches, has prompted the second profit warning in three months from J D Wetherspoon.

The managed pub operator said that pre-tax profits for the financial year ending on July 25 before tax and exceptional items will be "slightly below" current City forecasts.

Having varied its high profile 'no-TV-no-music' policy by installing TVs in several dozen pubs during the tournament, Wetherspoon saw a yo-yo sales effect in pubs showing Euro 2004 matches, which included the Lloyds No 1 outlets.

Sales increased during England games, but overall like-for-like sales fell during the tournament as a whole. Overall trading has been disappointing over the start of the summer, with flat like-for-like sales across the company in the 11 weeks to July 11.

Wetherspoon said it had seen stronger competition from supermarkets and other pubs, and has also seen sales of spirits and cocktails fall after switching to lower strength drinks in line with Portman Group advice.

The company said it expects to pay £4million in increased gas and electricity charges over the next year, adding to the burden "of taxes, licensing and other regulatory issues which are increasing our costs".

It will open 28 pubs across the full year, and has exchanged on five out of 10 pubs earmarked for disposal.

With the opening programme funded from cash flow, Wetherspoon said that "In spite of the current demanding trading environment, the company is confident of its future prospects.

In April, the company said that annual profits would be at the low end of expectations, prompting analysts to reduce full year forecasts for pre-tax profits to around £57 million. That figure in now set to be lowered again by the City.