Wetherspoon profits drop 11 per cent as costs and taxes rise

JD Wetherspoon's profits dropped by 11 per cent in the first half and the company is warning of imminent price rises as Britain's pubs struggle with rising commodity costs and "a pernicious combination" of increasing taxes and regulations.

Although the group's revenues rose by 7.6 per cent to £525m, and operating profits were up 1.4 per cent to £50m, pre-tax profits fell from £36m to £32m. Operating margins were squeezed from 10 per cent to 9.4 per cent.

The biggest hit came from higher interest charges, adding around £10m a year to the cost of the 787-strong chain's debts, according to Tim Martin, the Wetherspoon chairman.

But finance costs are just one of a slew of rising costs for Britain's beleaguered pubs, hit by the "pernicious combination" of excise duties, the VAT hike, the smoking ban and changing licensing arrangements, he said.

"Almost everyone and everything is charging more these days," Mr Martin said. "More than 40 per cent of sales go in taxes of one type or another, and that's a heck of a lot of money."

With the cost of commodities from oil to cocoa rising sharply as global economic momentum picks up, prices across Britain's pubs and restaurants are set to rise as much as 5 per cent in the coming months, Mr Martin said.

The pub industry is begging for a break from the annual inflation-plus-2-per-cent rise in excise duty in the Budget to be delivered by the Chancellor of the Exchequer, George Osborne, later this month.

"If taxes go up by the same amount again this year, it will be a 7 per cent rise, on top of all the other cost pressures," Mr Martin said. "It is crazy, especially when we already have the highest excise duty in Europe."

Wetherspoon already pays £10 in tax for every £1 of profit, with each of its pubs paying out £10,000 to the Government every week and around £500,000 each year. "It feels like pushing a boulder up a hill forever," Mr Martin said. "What the Government needs to realise is that it will simply get less money in the end if it keeps whacking taxes up like this."

Despite the tricky economic climate, JD Wetherspoon is still growing its operations. The company added 12 net new pubs in the first six months of the year, and expects to continue to expand in the second half. Over the year as a whole the company expects to open around 50 new pubs. Free cash flow stood at £22.7m – up from £21.3m in the same period of 2010 – after capital investment of £16.6m in existing pubs and £2.9m of share purchases.

But the outlook for the industry as a whole is more sombre. "Unless the Government eases off on pubs and gives the industry a few years to recuperate, there will be even more closures and more villages and suburbs without their own pub," Mr Martin said.

JD Wetherspoon shares closed up nearly 2 per cent at 438p.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
Angel Di Maria is shown the red card
tech
Sport
Roger Federer after his win over Tomas Berdych
sport
Life and Style
News in briefs: big pants in 'Bridget Jones's Diary'
fashionBig knickers are back
Sport
James Milner is set to sign for Liverpool this week despite rival interest from Arsenal
sportReds baulk at Benteke £32.5m release clause
News
The controversial Motor Neurone Disease Association poster, featuring sufferer Michael Smith, has drawn a series of angry complaints
newsThis one has been criticised for its 'threatening tone'
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Guru Careers: Communications Exec / PR Exec

£25 - £30K: Guru Careers: We are seeking a highly-motivated and ambitious Comm...

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

Day In a Page

On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific
In this the person to restore our trust in the banks?

In this the person to restore our trust in the banks?

Dame Colette Bowe - interview
When do the creative juices dry up?

When do the creative juices dry up?

David Lodge thinks he knows
The 'Cher moment' happening across fashion just now

Fashion's Cher moment

Ageing beauty will always be more classy than all that booty
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

Health fears over school cancer jab

Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

'I forgive everyone, but I don't forget'

Fifa president Sepp Blatter issues defiant warning to opponents
Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

Weather warning

Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

High hopes for LSD

Meet the volunteer users helping to see if it cures depression and addiction
German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

Saving Private Brandt

A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral