Tax rises restrict JDW openings to 50 pubs
By The PMA Team JD Wetherspoon has reduced the number of pub openings planned for this year to 50 compared to 87 just last year as a result of the economic unpredictability created by the Government's recent stealth taxes on business. Chairman Tim Martin claimed the company's profits would have increased by 16% but for NI increases costing £1m and last year's duty increase on alcopops costing £5m. The rises had created an "element of caution about the economy and the Government's tax and regulatory policies". "Pub company directors have been very slow to understand the significance of the duty increases," said Martin. The rise has left pubs further disadvantaged in comparison to supermarkets and the "open border" with France, he claimed. His comments came as the company revealed like-for-like wet sales up just 2.2%, while food sales were 14% ahead of the previous half-year, to push overall sales figures per pub up 4.4% to £25,900 per week. In February, overall like-for-like sales jumped by 4.9%. An indication of the importance of food as a driver of sales came with the news that 1m children's meals will be sold this year with sales of breakfasts, launched last September, expected to hit 2m. Overall food sales now averaged £6,000 a site, getting close to 25% of total sales when machine income, averaging just over £1,500 a week per site (or 6% of overall turnover), is subtracted. The 44 Lloyds No 1 sites have hit a new sales high of more than £30,000 a week on average, which compares to £10,000 a week when the firm bought the original 10 from Wolverhampton & Dudley. The company opened 21 pubs in its first half to bring the total to 629 outlets, with 86% of the investment now being funded by cashflow. New openings this year include 12 to 15 Lloyds No 1 bars. Martin argued that the overall property market was "moving in our favour". Profits before tax were up 3% to £25.6m on turnover up 23% to £350.6m. JD Wetherspoon news in brief
Martin claimed that the total UK pub market was worth £25bn and his company "could have 10% of that eventually". With annual sales expected to be slightly higher than £700m this year, this indicates the company would need to be around three times its current size. Asked how long this would now take with openings currently reduced to 50 a year, he said: "If we're good enough we can open 1,500 pubs. If we're not good enough we might have enough already."
JD Wetherspoon is to open its first pub outside the UK, with a new pub planned for Dublin in December this year. The company has paid £1.8m for the freehold of a former furniture store on Capel Street. A total of £1.5m will be spent converting the basement and ground-floor site.
About half of the company's 629 pubs are currently licensed to open at 10am to serve alcohol. The City of London pubs became licensed last Friday, for example, with Martin "optimistic" that the majority of the estate will be licensed within the next six weeks. Only magistrates in Manchester have so far rejected the company's application to open early.
Martin revealed that all of his pubs were "profitable", turning over at least £13,000 to £14,000 a week. The average freehold development cost hit £1.35m this year, up by about £90,000 or 6% on average compared to the year before. However, the average cost to buy a freehold dropped to £430,000 compared to £500,000 the year before. In addition, the company was now spending £62,000 per pub per year or 5.4% of sales on repairs and capital re-investment, compared to £55,000 last year.
The company's annual insurance bill has increased from £1.5m to £5m a year. The company fixed its insurance rates at a very low level four years ago and this was re-negotiated last July as premiums soared in the wake of the 11 September terrorist attacks.
JD Wetherspoon has 14 sites in the course of construction. This includes 43 with the necessary permissions for development, a further 27 on which terms have been agreed and 120 currently in negotiation.
