JD Wetherspoon has warned that trading conditions are unlikely to improve next year as the pub chain operator reported a decline in adjusted pre-tax profits and margins in its full-year results.
Wetherspoon, known for its cheap drinks and food promotions, said that the increased prices of utilities and bar supplies have combined with consumer reluctance to spend money to create a challenging environment that was set to continue.
“The outlook is very difficult to guess,” said Tim Martin, Wetherspoon’s chairman and founder. “There is well-documented pressure on costs and squeezing consumer incomes so it would be rash to predict at the moment – but we won’t buckle at the knees.”
Wetherspoon said the financial year had seen a slow start, with like-for-like sales growth held back by the riots in August.
The company reported a 5.9 per cent fall in adjusted pre-tax profits to £66.8m for the 52 weeks ended July 24 as operating margins slipped 0.5 percentage points to 9.5 per cent.
“They’re going after the bottom end of the market and having to pass on input inflation to their customers,” said Douglas Jack, an analyst at Numis Securities. “That’s why their margins are going down.”
This adjusted figure excludes one-off exceptional items such as impairment charges and insurance excess payments.
Including these charges, pre-tax profit increased 1.5 per cent to £61.4m compared with the same period a year ago when similar one-off payments cost the company more than twice as much.
Wetherspoon reported a 7.6 per cent increase in revenues to £1.1bn and a 2.1 per cent rise in like-for-like sales. Earnings per share were up 17 per cent to 35.4p on a non-adjusted basis. Net debt increased by £49.3m to £437.7m, mostly due to new pub openings.
The company said it had met its target of adding 50 new pubs over the year and promised a similar number next year. This would bring the total number of sites to 873. Mr Martin had said in the past that the UK could sustain at least 16,000 Wetherspoon pubs.
Shares in the company fell 16p, or 3.8 per cent, to 400p in mid-afternoon trading.
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