JD Wetherspoon has reported a 28 per cent drop in pre-tax profit to £59m for the year to July, with chairman Sir Tim Martin blaming the Labour government's tax policies for what he called "high street dereliction".
Profit falls despite revenue rise
The London-listed pub group posted a five per cent rise in revenue to £2.2bn, broadly in line with analyst expectations, though the profit decline was steeper than anticipated.
Martin pointed to increases in business rates, minimum wages and national insurance contributions (NICs) as the key drivers behind the company's falling profits.
He 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."
Costs surge across the business
Wetherspoon attributed its declining profits to a five per cent surge in costs. The group spent £46m more on wages, £31m more on repairs and £9m more in business rates over the past year.
The company told shareholders that energy costs soared by 77 per cent to £40m last year. Energy expenses and packaging taxes have also "weighed heavily" on hospitality firms in recent years, according to Martin.
The pubco's operating margin narrowed from 6.9 per cent to 5.4 per cent over the past year. Analysts have warned that Wetherspoon's cut-price offering could leave it more exposed to rising taxes and energy costs than some of its higher-margin competitors.
Sales momentum despite challenges
The pub giant reported that sales gathered momentum in recent months, buoyed by "exceptional weather". Like-for-like sales climbed by 8.6 per cent over the last nine weeks.
This upturn has been supported by "substantial progress in recent years in increasing the number of beer gardens and outside seating areas".
Martin maintained that Wetherspoon is outstripping the broader pub sector. The chain's like-for-like sales grew by 7.7 per cent in August, compared to sector-wide growth of just 0.8 per cent, according to NIQ figures.
Call for VAT cut
Martin repeated his calls for John Healey to reduce VAT on hospitality businesses from 20 to 10 per cent.
The pub chain has thrown its weight behind a campaign, spearheaded by celebrity chef Tom Kerridge, which argues that this tax reduction would be the most straightforward means of averting widespread insolvencies and job losses on the high street.
