£33m wage hike takes bite out of Wetherspoon profits

UK pub chain JD Wetherspoon has reported a drop in pre-tax profits of 19% in the first half, which fell from £62 million in 2018 to £50.3m this year.

JD Wetherspoon chairman Tim Martin

Publishing its preliminary results for the 26 weeks ending 27 January 2019 this morning, revenue was reported to be up by 7.1% to £889.6m, and like-for-like sales rose by 6.3%.

However staffing costs meant that profits before tax ultimately tumbled by 18.9% to £50.2m, while operating profits dropped by 14.2% to £63.5m.

After exceptional items, which totalled £1.6m (2018: £6.8m), profits before tax stood at £48.6m (2018: £54.3m) – a drop of 10.5% – while operating profit reached £63.5m (2018: £74.0m) – a drop of 14.2%.

Most significantly, profits were dragged down by a £33m increase in staffing costs during the period, following a wage hike in November, as well as increasing costs of repairs (+£3.7m), utilities (+£2.5m), interest (+£3.3m) and depreciation (+£2.4m).

During the period, the chain opened two new pubs and closed six, bringing the number open at the period end to 879.

“As previously indicated, costs in the second half of the year will be higher than those of the same period last year,” said Tim Martin, chairman of JD Wetherspoon. “The company anticipates an unchanged trading outcome for the current financial year.”

Martin, a staunch campaigner for the UK leaving the EU, did not directly acknowledge the impact that Brexit could have had on its results, but used the announcement to hit out at those stifling the referendum result.

“The vexed debate about Brexit has continued since the referendum, nearly three years ago,” he said.

“Although the public voted to leave, the majority of ‘the establishment’, including most MPs, most universities, the Bank of England, the CBI and media organisations such as The Times, the Financial Times and The Economist favoured ‘Remain’.

“The result has been a barrage of negative economic forecasts from those quarters, predicting that the UK will go to hell in a handcart without a ‘deal’ with the EU – which will effectively tie the country into EU membership and taxation, yet without representation.

“The doomsters ignore the most powerful nexus in economics, between democracy and prosperity – and the fact that the EU is becoming progressively less democratic, as it pursues an ‘ever-closer union’, for which there is no public consensus.

“Previous referendum results on major constitutional issues have always been respected in the UK, but if parliament votes either for Theresa May’s ‘deal’ (which keeps us in the EU by the back door) or to remain in the EU, the referendum result will not have been respected. This may well have significantly adverse economic consequences, as the country turns in on itself to endure months, or years, of stifling constitutional argument.”