JD Wetherspoon boss Tim Martin warns government after profits fall

JD Wetherspoon boss Tim Martin has urged the Government to “refrain” from implementing further tax increases after the pub operator reported a drop in annual profits.

Pre-tax earnings fell by 28 per cent to £58.6 million for the year to 26 July, representing a decline of more than a quarter compared with a year earlier for the business, which manages 792 venues across the UK.

Although sales improved, Wetherspoon told shareholders that these financial gains were completely offset by a 5.3 per cent overall growth in expenses.

This total included a £46 million increase in wage bills following a 4.1 per cent rise in the national minimum wage during the year.

Furthermore, pub repair expenses grew by £31 million, while business rates costs expanded by £9 million to £42.6 million despite relief measures for pub operators.

The hospitality firm reported a 5.2 per cent jump in total sales for the year, with like-for-like sales growth of 4.2 per cent.

The increase was particularly driven by customers buying drinks, with bar sales up 6.1 per cent year-on-year.

Food sales were 1.2 per cent higher for the year, revenues from slot and fruit machines rose 7.4 per cent, and it saw 1.3 per cent growth from its hotel rooms.

More recent trading was buoyed by “exceptional weather”, helping like-for-like sales jump 8.6 per cent in the nine weeks to 27 September.

Wetherspoon said it benefited from “substantial progress” to increase the number of beer gardens and outside seating areas across its pubs.

Tim Martin, chairman of the business, said: “The hospitality industry, as many commentators and companies have noted, has borne the brunt of government-led tax and regulatory cost increases, especially in the last two budgets.

“This has resulted in pubs becoming even more expensive than supermarkets, leading to job losses, closures and high street dereliction.

“It is to be hoped that the powers that be will refrain from any further increases, since pubs and restaurants pay around 40 per cent of their receipts as taxes of one sort or another – and provide immense financial support to the Treasury, as well as social support to the community.”

Angeline Ong, senior analyst at investing platform IG, said: “J D Wetherspoon’s 8.6% sales jump looks like a sunny story, but weather-driven spending fades fast, and the pub chain has beaten sales forecasts all year while missing on profit every single time.

“The real number here is the 28 per cent drop in pretax profit to £58.6 million, proof that cost inflation is still outrunning Wetherspoon’s ability to turn footfall into margin.

“With operating margins this thin, Wetherspoon is the most exposed name in UK hospitality to whatever the Chancellor decides on October 28.

“Tighter business rates or NIC would hit it harder than almost any peer, but genuine rates relief would be the opposite, a disproportionate win. The Budget is the real catalyst for J D, not the weather.”