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Record profits for Wetherspoon as Tim Martin urges parliament to reject Chequers deal

“If parliament votes to end tariffs and reject the 'Chequers Deal', consumers and business will benefit additionally by avoiding a cost of £39bn in respect of the EU 'divorce payment' - for which there is no legal obligation”
tim martin
‘Spoons received little benefit from the warm summer of football

JD Wetherspoon PLC (LON:JDW) has posted record annual profits, brushing off any concerns over the state of the UK’s pub and restaurant industry.

Soaring costs coupled with more cautious consumer spending had led to fears that Britain’s food and drink outlets would see a sharp drop-off in performance.

That has certainly been the case for restaurants, with Jamie’s Italian, Prezzo, Byron and others all being forced to pursue controversial rescue plans called company voluntary arrangements (CVAs).

READ: Greene King sales bolstered by World Cup and hot summer

Helped by the hot weather over summer and England’s longer-than-expected run at the World Cup, UK pubs have fared considerably better, with Greene King PLC (LON:GNK), Marston’s plc (LON:MARS) and Mitchells & Butlers PLC (LON:MAB) reporting solid trading of late.

‘Spoons followed suit on Friday, although analysts noted that the smaller beer gardens and lack of TV screens in its pubs meant the warm weather and football actually hampered sales somewhat.

The FTSE 250 group posted a 4.3% rise in pre-tax profits to £107.2mln (2017: £102.8mln) in the 12 months to the end of July, on revenue of £1.69bn (2017: £1.66bn) – a 2.0% year-on-year increase.

Despite the rising costs and some price competition in the sector, Wetherspoon managed to improve its margins which rose to 7.8%, up from 7.7% last year.

Like-for-like sales, which strip out the impact of new or closed stores, climbed 5.0%.

4% LFL sales growth needed

With costs set to rise again in the year ahead, the value pub chain warned that like-for-likes would have to rise by around 4% this time around for it to match last year’s record profits.

“Like-for-like sales in the six weeks to September 9 increased by 5.5%,” said chairman Tim Martin.

“The company has had a reasonable start to the financial year, but taxes, labour and interest costs are expected to be higher than those of last year, so we estimate that like-for-like sales growth of about 4.0% will be required for the company to match last year's record profits.”

In his usual Brexit rant, Martin said parliament should reject the Chequers deal and added there would be a “huge gain” if the UK adopts a similar free trade approach to countries such as Australia and Canada.

He also used his company’s results to tell the government to create tax equality among supermarkets, pubs and restaurants.

Summer slowdown

JD Wetherspoon full-year results were very much on the positive side, but we have seen some impact on the chain from the hot summer weather and the FIFA World Cup,” said analyst Neil Wilson.

“Growth cooled off over the hot summer – full-year sales growth came in at 5% on a like-for-like basis, slower than the 5.2% registered in the nine months to the start of July.

“There was clearly an impact from the hot weather as JDW pubs tend to lack the outdoor spaces customers seek when it’s sunny, while arguably the biggest hit came from not showing the World Cup, which has been noted at past tournaments.

He added: “It is churlish to focus on the final quarter [though] as the results show continued positive momentum over the year and record profits.”

--Updates for analyst comment--

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