Wetherspoon boss blames government for profits slide

Tim Martin, chairman of managed pub chain JD Wetherspoon, has slammed government policy for driving down profitability in the pub trade.

Announcing a rise in turnover for the 2008 financial year, but an 11.4 per cent slump in the group's annual pre-tax profits, Wetherspoon chairman Tim Martin said that increases in duty, minimum wage related costs and higher holiday entitlements would cost his business an extra £16m this year.

To hit similar numbers in 2009 to those the group announced today, Martin said like-for-like sales would need to rise by three per cent.

"Energy increases, which clearly have an inflationary effect, receive widespread attention from economists and the media," Martin commented. "It is interesting to note that the effects of government legislation on our business have a far greater impact, and are, therefore, more inflationary than energy increases."

Reporting its first annual figures since the start of the English smoking ban, Wetherspoon's turnover for the 52 weeks to July 27, 2008 rose 2.1 per cent, while the group's operating profit fell 4.3 per cent to £87.2m. Pre-tax profits fell 11.4 per cent to £55m.

Operating margin fell 0.6 percentage points to 9.6 per cent, as the group's sales mix shifted away from bar sales towards more costly food sales.

Like-for-like food sales were up 7.9 per cent, while bar sales, despite recent promotional activity including a high profile cask ale festival, fell 4.3 per cent.

Food sales now represented 29 per cent of total turnover, against 27 per cent last year - and a mere five per cent in 1992, when the company floated on the London Stock Exchange.

Coffee and tea sales rose 6.6 per cent over the course of the year to an average 443,000 cups sold a week.

The group said it opened 23 new pubs in 2008, against 18 in 2007. The company was confident it could open a further 30 sites by the end of the current financial year, and falling property prices and rent review settlements would "clearly create opportunities for investment".

Speaking about current trading, Martin said the five weeks to August 31, 2008 had seen like-for-like sales up 1.1 per cent and total sales by 5.5 per cent, "making this August our busiest ever".

Martin said Wetherspoon expected to see a more price rises relating to energy, food, labour and tax.

"In order to achieve a similar trading performance this year we currently estimate we would need like-for-like sales of around three per cent," he said.

Martin also criticised the media for "glorifying people getting ratted". People were less able to get drunk in the nation's pubs due the stringent licensing regime, he told BBC's Radio Five Live today.

"Pubs are the most regulated environments to drink in and the figures show less alcohol is being consumed in them," he added.