Wetherspoon's profits hit by cost inflation despite sales growth
The managed operator, which said it plans to open c30 pubs this financial year, saw profit before tax and exceptional items fall 2.7% to £34.8m; after exceptional items they grew 4.9% to £34.8m.
Operating profits declined 2% to £52.1m (post-exceptionals: +3.1% to £52.1m). The operating margin after exceptional items was 8.3% (2012: 8.9%).
"As previously highlighted, there was considerable inflation in costs during the period. The largest increase was £23.4m in taxation, with further increases in labour costs, utilities and bar and food supplies."
Meanwhile, in the six weeks to 10 March 2013, like-for-like sales increased by 7.3%, with total sales increasing by 9.9%.
JDW paid taxes of £273.5m in the half-year, 43.7% of sales, compared with £250.1m, or 43.9% of sales, in the same period last year. Taxes amounted to a multiple of 10.9 times profit after tax, compared with 10.7 times last year.
In the period, JDW opened five new pubs, bringing the number of pubs open at the period’s end to 865.
Wetherspoons highlighted recent schemes to improve different areas of the business, such as introducing a system for faster credit card payments, as well as contactless payment.
JDW said it continued its heavy investment in the business, having spent £22.8m on repairs (2012: £20.1m) and £17.2m on refurbishments and improvements (2012: £18.8m).
"We have continued to make significant investments in training programmes and also paid £13m (2012: £10.9m) in bonuses and free shares to employees, 99% of which was paid to those below board level and 88% paid to those working in our pubs.
"Once again, the company has received a record number of recommendations in CAMRA’s Good Beer Guide. We were also named ‘the nation’s favourite pub brand’ at the Eat Out Magazine Awards, in London, in January 2013. As regards hygiene, the company has received an average score of 4.8 out of 5, in respect of the local-authority-run scheme Scores on the Doors. We believe this to be higher than any other substantial pub company, including well-run competitors."
The company criticised the tax regime, saying: "If we were taxed on the same basis as supermarkets, we would have paid £40.7 million less, since supermarkets pay virtually no VAT in respect of food sales.
"We believe there to be an overwhelmingly strong case for tax parity between pubs and supermarkets, since lower supermarket taxes help them to sell alcoholic drinks at extremely low prices, compared with those of pubs."
Tim Martin, chairman, said: "The outcome for the first half of the financial year was reasonable, given the pressures on the UK consumer.
"As previously stated, the biggest danger to the pub industry, is the VAT disparity between supermarkets and pubs and the continuing imposition of stealth taxes, such as the late-night levy, and the increase in fruit/slot machine taxes.
"Taxation and input costs will continue to rise, but, overall, the company continues to aim for a reasonable outcome in the current financial year."
