JD Wetherspoon reported its profits before tax fell 20% to £22.3m for the six months to 23 January, despite seeing turnover rise 4% to £403.3m.
Despite the fall in profits at the company, Tim Martin, chairman, said JDW still intends to go ahead with its plans to ban smoking throughout its estate by May 2006. Sales at the pub operator's first two non-smoking sites were said by Martin to be "substantially higher than the company average".
Operating profit before exceptionals for the company fell by 11% to £34.4m and earnings per share were down 14% to 7.7p, compared to 9p in 2004. The interim dividend will be up by 10% to 1.46p.
Like-for-like sales increased by 0.3% and the company has identified 16 pubs to dispose of. The sale is expected to leave the company with a £6m capital loss, which has been accounted for in this period as an exceptional item.
The company's capital investment for the period was £20.8m and free cash flow fell by 17% to £36.5m. This was after £8.2m was invested in pubs, £2m was spent on the company's share incentive scheme, and payment of tax and interest.
Martin said the company would now begin to shed costs in head office. "Sales and profits in the last six months have been slower than anticipated. The company continues to review its costs and expects significant savings to be made in the running of pubs and at the head office over the next few months."
Like-for-like sales in February this year fell by 1.9% and overall sales rose by 2.1%. Martin said the company would now adopt a "cautious approach to capital expenditure and expansion", until the current climate of uncertainty surrounding the new licensing laws and smoking comes to an end.
Martin concluded: "In spite of the slow trading conditioning, as a result of our strong cash generation, high level of sales per pub and dedicated team, I remain confident of future prospects."
