Increased costs impact JD Wetherspoon profits

11-Mar-2011 - Last updated on 11-Mar-2011 at 15:47 GMT

Increased taxes and overheads have affected JD Wetherspoon's profits

JD Wetherspoon (JDW) has reported an 11 per cent decline in first half pre-tax profit to £32.2m, which it said was due to increased interest charges, following the renewal of its bank facilities in March 2010.

Total sales in the 26 weeks to 23 January 2011 increased by 7.6 per cent to £525.4m, whilst first half like-for-like sales climbed by 2.3 per cent. The company also reported a 1.4 per cent rise in operating profit to £49.6 million.

However, JDW said that its operating margin was 0.6 per cent lower than the same period last year at 9.4 per cent, as a result of “increased costs in a number of areas, including taxes, labour, utilities and bar & food supplies - pressures which are likely to continue into the next financial year”.

Trading across the group in the six weeks to 6th March 2011 continued on a similar trend to the first half of the current financial year, with like-for-like sales up 2.8 per cent and total sales increasing by 7.9 per cent.

Rising costs

Tim Martin, chairman of JDW, said: “In common with most businesses in Britain, the company is faced with rising costs for a wide range of goods and services, combined with a reduction in disposable income for many customers. In addition, pubs are dealing, as indicated above, with a pernicious combination of increasing taxes and regulations.

“In spite of these obstacles, our resilient sales performance and strong cash flow should enable the company to produce a reasonable outcome in the current financial year.”

The group increased its investment in new pubs and in its existing estate during the period, with capital expenditure up to £54.9m against £33.8m in 2010.

JDW opened 14 new pubs during the six months, and closed two, bringing the number of pubs it operates to 787. It hopes to open around 50 pubs in its current financial year.

The group, which this morning announced the appointment of Kirk Davis as its new finance director, said it had made “substantial investments” in refurbishing its existing pubs, with over 300 projects identified for this financial year.

Mark Wingett is associate editor of BigHospitality's sister publication, M&C Report.