Pub breakfasts put a booster under Wetherspoon profits

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The pub chain JD Wetherspoon said it sees a difficult couple of years ahead as a nationwide smoking ban is imposed, but reported a big jump in annual profits yesterday thanks to hot weather, tight cost control and a push into coffee and breakfasts.

Jim Clarke, the finance director, said the long spell of hot weather in June and July benefited the whole industry. The World Cup also helped, as the company broke with its long-standing policy of not showing sports by installing plasma television screens in half its pubs.

But John Hutson, the chief executive, stressed the company was not turning itself into a sports bar operator, with only about 40 pubs having a Sky subscription, saying the televisions were installed mainly to show the news in the mornings. "You don't find JD Wetherspoon being a home for the Champions League," he said.

The group has taken advantage of last year's licensing changes to open its pubs earlier and offer breakfasts, which it sees as a big untapped market, selling 200,000 a week. Wetherspoon reckons it has 6 per cent of the branded coffee market and sells as much coffee as Caffè Nero across its 657 pubs, about a quarter of Starbucks sales.

Pre-tax profits jumped 24 per cent to £58.4m in the year to 30 July, with turnover rising 5 per cent to £847.5m. However, the 17 pubs in England and Wales that were turned into non-smoking outlets in the first half - before next year's nationwide ban - suffered a 6.5 per cent fall in sales. The company quickly scrapped earlier plans to convert its entire estate to non-smoking in the spring when trials showed those pubs suffering badly.

"People go next door to smoke," Mr Clarke said. "Hopefully we'll get them back next summer when the whole country changes." All new pubs opened by Wetherspoon are non-smoking, and it now has a total of 92 - 14 per cent of the estate.

In Scotland, where a smoking ban began at the end of March, sales slipped 0.3 per cent, driving operating profits down 11 per cent. Beer and liquor sales dropped 3.4 per cent, while income from cigarette and fruit machines plunged 11.3 per cent. The falls were only partly offset by a 7.7 per cent increase in food sales, in particular because food carries a lower profit margin, with higher labour costs.

In the face of soaring energy prices which pushed its utilities bills up by £6.5m, Wetherspoon slashed costs across the organisation. The main focus now is to get through next year's smoking ban, and it has earmarked £25m to spend on marketing and improving its pub offering - by selling exotic beers as well as traditional cask ales. Mr Hutson predicted "a year or two of pain. You can't get away from the fact that it's going to be a difficult transition."

The company is trying to steal a march on rivals by installing a beer cooling system, a refrigerant called Glycol, at a cost of £15m.