Wetherspoon profits hit by ‘higher than anticipated’ costs: shares lose froth
“Profits in the first half are likely to be lower than the comparable period in the previous financial year” – Sir Tim Martin
Pubs giant JD Wetherspoon is likely to take a hit to profits after costs surged by £45 million in its first half, taking the froth off its share price.
The chain, which runs around 800 pubs across the UK and Ireland, including the likes of the Caley Picture House in Edinburgh and Dunfermline’s Guildhall & Linen Exchange, said it was being hit by higher-than-expected costs in the first 25 weeks of its financial year, including rising bills for wages and business rates.
Profits in the first half are “likely to be lower” year on year, it noted in its trading update, with the annual trading result also set to come in “slightly” below the previous year, if sales continue on the same path.
It comes despite a pick up in like-for-like sales growth over the festive quarter, to 6.1 per cent in the 12 weeks to January 18, up from 4.7 per cent in the previous three months. Over the key Christmas period, comparable sales rose 8.8 per cent in the three weeks to January 4.
Founder and chairman Sir Tim Martin said: “Costs have been higher than anticipated, with energy, wages, repairs and business rates, for example, increasing by £45m in the first 25 weeks. Profits in the first half are likely to be lower than the comparable period in the previous financial year.”
Chris Beauchamp, chief market analyst at IG, said the latest figures had left a “bitter aftertaste”.
He noted: “The initial heady aromas of the opening lines in the statement, which notes the better sales performance for the last six months, are replaced by an unpleasant reference to rising costs, which leave the outlook on decidedly shaky ground.
“The shares have reacted accordingly, having their frothy head lopped off.”
The update comes amid hopes in the pub sector of an imminent support package from the UK government to help lessen the blow from rising business rates.
Pubs are broadly set to face increases to their business rates payments due to higher property valuations in tax calculation following the autumn Budget. The Labour government is now expected to outline more financial support measures for the industry, amid hopes of a similar lifeline north of the Border, where business rates are devolved.
Shares in Wetherspoon were down about 6 per cent in morning trade on Wednesday.
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