JD Wetherspoon, the high street pub retailer, has this morning revealed like-for-like sales down 2%, the result the company said of last year’s smoking bans in England and Wales.
Unveiling interim results to 27 January, the company said that it believed the bans were to the benefit of the pub trade, and in time customers would adjust, and drinks sales would recover. However in the short term it had put pressure on margins and profits.
In his statement, chairman and founder Tim Martin said: “We believe our performance has been resilient. The half year was a challenging period for the company and for the pub trade generally, since it followed smoking bans in England, Wales and Northern Ireland. As anticipated, the introduction of the bans resulted in a strong growth in food sales but a decline in bar sales, which put pressure on margins and profits.”
Later in the statement Martin said the trends established in the first half – mainly of rising food sales and falling bar sales – would continue in the second half. He said: “We continue to believe that the smoking bans are to the long term advantage of the trade. Bar sales are likely to recover as customers adjust to the new regime, although the exact timing of this is still uncertain.”
Pre-tax profits fell 13.4% to £28.5m on sales marginally up 0.4% to £440.2m. At an operating level, profits were down 4% to £44.4m. Operating margins before interest and tax decreased to 10.1%. Earnings per share was down 11% to 12.9p.
Martin said that the company would seek to minimise significant cost pressures, notably energy prices and raw material costs.
During the six months it opened 10 pubs to take its estate to 681 and planned a further 13 in the second half.
Food sales continued to grow strongly with JDW taking £8,600 (gross) in food sales per pub per week. It estimated that about 60% of its sales of food and drink were now derived from a meal occasion.
Breakfast and coffee sales, a strong area of focus for the company, continued to grow – it now sells 514,000 coffees and teas per week, an increase of 12% on last year.
JDW announced a brace of board appointments – Paul Harbottle, chief operating officer, and Su Cacioppo, personnel and legal director. Harbottle joined the business five years ago as head of distribution before his appointment as COO last year. Cacioppo has been with JDW for 17 years, originally joining as a pub shift manager. She was appointed personnel director in 1999, assumed responsibility for retail services in 2005 and legal in 2006.
The company said it was mindful of the current composition of the board, indicating that it was looking at making additional non-executive appointments.
At the end of January the company’s total net borrowings were up some £30m on July 2007 at £462.5m and total facilities were £522.2m. It had entered in to £400m of long-term fixed-rate swap arrangements with an average interest cost of 5.5%.
