UPDATE 2-Wetherspoon adds to pub woes with profit decline
(Adds further detail, CEO, analyst comment, shares)
LONDON, Sept 5 (Reuters) - British pubs group JD Wetherspoon (JDW.L) reported a decline in full year profits on Friday, adding to the gloom in the sector following downbeat updates from Punch Taverns (PUB.L) and Greene King (GNK.L) this week.
The group, which has nearly 700 pubs in Britain, reported an 11 percent decline in adjusted pretax profit to 55 million pounds ($97.88 million) in the year to July 27, in line with the consensus forecast according to Reuters Estimates.
Britain's pubs have been hit hard by last year's smoking ban, rising costs, and declining consumer spending, while cheap alcohol offers in supermarkets and the miserable summer weather have further encouraged drinkers to stay at home.
Since the smoking ban came into force on July 1 last year, Wetherspoon has seen strong growth in food sales and a decline in bar sales. Nearly a third of revenues now come from food, with a further third coming from drinks ordered alongside food.
Total sales increased by 2.1 percent to 907.5 million pounds during the year. Like-for-like food sales rose by 7.9 percent but comparable bar sales were down 4.3 percent, resulting in an overall like-for-like sales decline of 1.1 percent.
Chairman and founder Tim Martin said that, in common with many pub and restaurant businesses, the company is expecting a considerable increase in energy, food, labour, and tax costs this year.
In an interview with Reuters, Martin called for beer duty to be held at current levels for the next five years to encourage drinkers back into Britain's beleaguered pubs.
"We've already got the highest excise duty in Europe for beer. I want a moratorium for five years. No more tax increases until we're on a par with other countries," he said.
This year, Martin reckons increases in excise duty on alcoholic drinks, minimum wage related costs, and increased statutory holiday entitlements, will cost Wetherspoon an extra 16 million pounds ($28.1 million).
He said the company will need to achieve a like-for-like sales increase of about 3 percent this year to offset that.
In the five weeks to Aug. 31, like-for-like sales increased by 1.1 percent, and Martin said like-for-like growth may be more achievable now the anniversary of the smoking ban on July 1 has passed.
"It's easier but not guaranteed," he said. "Non-smoking has been quite traumatic for the pub industry. As that effect wears off, people who were used to having a fag in association with a pint will slowly adapt and start coming back to pubs."
Wetherspoon is paying a final dividend of 7.6 pence per share, making an unchanged total dividend of 12 pence per share.
Shares in the company, which have underperformed the FTSE All Share Travel & Leisure Index .FTASX5750 by 12 percent since the start of the year reflecting concerns over the trading outlook, were down 0.8 percent at 259-1/2 pence at 0845 GMT.
Investec Securities analyst Matthew Gerard said the shares offer good value at current levels, but expressed concern that 2009 earnings forecasts may prove too optimistic.
Gerard reiterated a 'hold' recommendation and kept his 2008/9 pretax profit forecast of 53 million pounds unchanged. The consensus is 54.4 million according to Reuters Estimates. (Reporting by Matthew Scuffham; Editing by Quentin Bryar and Sharon Lindores)
