JD Wetherspoon calls for VAT equality as annual profit falls

JD Wetherspoon PLC on Friday called for a "sensible rebalancing of taxes" paid by the hospitality industry and supermarkets, as it reported reduced annual profit.

Shares in JD Wetherspoon were up 8.4% at 881.00 pence on Friday morning in London.

The Watford, England-based pub chain said pretax profit before separately disclosed items was £58.6 million, down 28% from £81.4 million a year earlier.

Pretax profit after separately disclosed items was £77.7 million, down 13% from £89.3 million a year earlier.

Separately disclosed items included a £13.0 million fair-value gain on interest-rate swaps, a £7.8 million credit from amortisation of the hedge reserve, a £0.3 million net impairment reversal and £0.4 million of property income, partly offset by £2.4 million of property disposal costs.

Revenue rose 5.2% to £2.24 billion from £2.13 billion. Operating costs increased 6.9% to £2.12 billion from £1.98 billion. Operating profit before separately disclosed items fell to £120.2 million from £146.4 million, with the operating margin narrowing to 5.37% from 6.88%.

Wetherspoon opened eight pubs during the year, while disposing of 15. Wetherspoon said it plans to open approximately 15 pubs in the current financial year.

Wetherspoon declared a final dividend of 8.0 pence per share, unchanged from a year earlier.

Chair Tim Martin said government-led tax and cost increases "weighed heavily on the hospitality industry in recent years".

"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. This has resulted in pubs becoming even more expensive than supermarkets, leading to job losses, closures and high street dereliction," Martin said.

Martin reiterated Wetherspoon's campaign for VAT equality between the hospitality industry and supermarkets. He argued supermarkets pay "virtually no tax", compared with the 20% rate applying to the hospitality industry. He said this has allowed supermarkets to subsidise alcohol and widen the price gap "to the detriment of pubs and restaurants".

"Common sense and economic principle surely indicate that a sensible rebalancing of taxes would generate more jobs and more revenue for the government," Martin added.

Like-for-like sales in the nine weeks to September 27 rose 8.6%, helped by "exceptional weather". Wetherspoon highlighted gains from increasing the number of beer gardens and outside seating areas, which it said had improved sales at pubs where sales had sometimes declined in the past.

Looking ahead, Martin said: "Wetherspoon has made a good start to the financial year, although it is at least partially due to weather, which will inevitably revert to the norm. At this early stage, we continue to anticipate profit before tax and separately disclosed items in line with current market expectations."

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