11th Mar 2016 09:53
LONDON (Alliance News) - JD Wetherspoon PLC on Friday reported a fall in profit in the first half of its financial year as its operating margin took a further hit from wage increases, and the pub chain's Chairman Tim Martin expressed his view that the UK should leave the European Union.
Wetherspoons said pretax profit in the 26 weeks ended January 24 edged down to GBP36.6 million from GBP37.5 million, as its operating margin shrank to 6.3% from 7.4% a year before, due to a lower gross margin and higher rates of pay for pub staff.
Wetherspoons' operating margin has been suffering of late, something it blames on increases in employee wages and higher utilities costs. Operating margin in the half-year to January 2014 was 8.2%.
Revenue, however, rose to GBP790.3 million in the recent half from GBP744.4 million a year before, with like-for-like bar and food sales each up by 2.9%.
Since the period end, Wetherspoons said total sales in the six weeks to March 6 increased by 5.7% on a year before, while like-for-like sales grew by 3.7%. Sales comparisons in the second half of the year will be slightly more favourable, the company said, although further wage increases are due in April.
Wetherspoons will pay an interim dividend of 4.0 pence, which is flat year-on-year.
"As a number of pub companies have indicated, the pub and restaurant market is highly competitive, but we are aiming for a reasonable outcome for the financial year," Martin said in a statement.
Martin also expressed his belief that the UK should vote to leave the EU when the referendum is held later this year, arguing that a return of power to the national parliament will "increase the level of democracy and accountability".
Martin said he recognises the benefits the UK has gained due to the migrants entering the country, but that the decisions regarding migration should be taken by each individual country.
In its statement, Wetherspoons also highlighted the "continuing tax disparity" between supermarkets and pubs, an issue the company has raised on numerous occasions and which Martin refers to as "the biggest danger to the pub industry".
The company noted that pubs pay around 20% of their food sales in VAT, while supermarkets pay no VAT, enabling them to subsidise their alcoholic drinks prices. In addition, pubs pay around 15 pence per pint in business rates, while supermarkets only pay about 1.5p to 2p, Wetherspoons said.
"There is a growing realisation among politicians, the media and the public that pubs are overtaxed and that a level tax playing field will create more jobs and taxes for the country," Martin said.
Wetherspoons said it paid GBP333.0 million in taxes in the first half, a 9.4% increase on the GBP304.5 million paid in the first half of the prior year, and about 50% higher than five years ago.
During the period, Wetherspoons opened five new pubs and sold two, bringing the total number of pubs open to 954 at the period end. It plans to open around 15 pubs in the full year and expects to sell some as well.
Shares in Wetherspoons were trading up 0.7% at 696.50 pence on Friday morning.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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