Shares plunge in pub giant Wetherspoon as growth weakens

webnexttech | Shares plunge in pub giant Wetherspoon as growth weakens

Wetherspoon, which did not recommend an interim dividend, reported a pre-tax profit of £36m for the first half, up from £4.6m, driven by revenue increasing by 8.2% to £991m. The results came as the hospitality industry continues to grapple with the high cost of energy, pay, food and drink, which have undermined margins as consumers face a continuing cost of living crisis. READ MORE: Paisley firm Clark Contracts secures £60m pipeline of work Wetherspoon reiterated its call for “tax equality” between the hospitality and the off-trade, noting that while pubs, clubs, and restaurants pay 20% value-added tax (VAT) on food sales supermarkets “pay nothing”. Recent calls from the hospitality sector for the UK Government to slash VAT to 12.5% at the Budget earlier this month came to nothing. “Supermarkets also pay far less business rates per pint or meal than pubs,” the company said. “It does not make economic sense for the tax system to favour mainly out-of-town supermarkets over mainly high-street pubs. This imbalance is a major factor in town centre and high street dereliction.” The company also re-published a section of its 2023 annual report in which it took issue with the way business rates are calculated in Scotland. Wetherspoon said: “Business rates are supposed to be based on the value of the building, rather than the level of trade of the tenant. This should mean that the rateable value per square foot is approximately the same for comparable pubs in similar locations. However, as a result of the valuation approach adopted by the government assessor in Scotland, Wetherspoon often pays far higher rates per square foot than its competitors.” READ MORE: Bill Costley puts Souter’s Inn near Turnberry up for sale Derren Nathan, head of equity research at stock broker Hargreaves Lansdown, said Wetherspoon’s half-year results “tell a story of an impressive recovery” from the pandemic. However, he noted that the “strong operating profit growth reflects the low-base to which this set of numbers were compared to. At under 7%, margins are still pretty thin and there was little in the statement to help see where an improvement might from.” Wetherspoon has been gradually trimming its estate in recent years. From a peak of 955 in December 2015, the portfolio has been reduced to 814, though the company said it has the potential for about 1,000 pubs in the UK. Wetherspoon said: “In spite of a reduction in the overall number of pubs, sales have continued to increase – total sales are now about one-third higher than in 2015, when the number of pubs peaked, and sales per pub have increased by about 50% since then.” READ MORE: Scottish investment chief Martin Gilbert sees losses widen Mr Nathan said the prospect of the company increasing its estate again was good news. He observed: “The group’s been steadily reducing and optimising its footprint and has a good record of outperforming its peers. A lot of capacity has come out of the market and the hint that there might be potential of about 1,000 pubs compared to a current total of 814 could see the estate start to grow again. That may see the return of dividends kicked further down the road. “Location is key and recent openings include the Stargazer at the old Millennium Dome in Greenwich and the Star Light at Heathrow Airport. Overall, returning the estate to growth could be a welcome development. But there’s only so much you can grow if pub numbers remain static, and for now like-for-like growth has taken a step down. 5.8% isn’t awful but if it stays at this level for the rest of the year the market’s likely to be disappointed.” Wetherspoon said it anticipates a “reasonable outcome” for the full year. Chairman Tim Martin said: “Sales continue to improve. In the last seven weeks, to 17 March 2024, like-for-like sales increased by 5.8%. “The company continues to be concerned about the possibility of further lockdowns and about the efficacy of the government enquiry into the pandemic, which will not be concluded for several years.” He added: “The company currently anticipates a reasonable outcome for the financial year, subject to our future sales performance.” Shares closed down 7.18%, or 57.2p, at 739.3p.

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