J D Wetherspoon Profit Slips as Tax Bill Jumps 9%

LONDON -- The shares of J D Wetherspoon (LSE: JDW  ) have dropped 1.2% as of 10:15 a.m. EDT after the pub group revealed slipping profit and a 274 million pound total tax bill.

Wetherspoon said its 865 pubs had lifted their aggregate sales by 10% to 626 million pounds during the 26 weeks to Jan. 27, with underlying bar sales up 4% and underlying food sales up 13%. However, first-half operating profit fell 2% to 52 million pounds following greater staff costs and higher wholesale beer prices. The interim dividend was held at 4 pence per share.

Tim Martin, chairman of Wetherspoon, said: "The outcome for the first half of the financial year was reasonable, given the pressures on the U.K. consumer. ... As previously stated, the biggest danger to the pub industry is the VAT disparity between supermarkets and pubs and the continuing imposition of stealth taxes, such as the late-night levy, and the increase in fruit/slot machine taxes."

Martin complained about the group's first-half tax bill increasing from 250 million pounds to 274 million pounds, which included VAT of 126 million pounds, alcohol duty of 75 million pounds, and employee taxation of 35 million pounds. He also said Wetherspoon had to pay a further 6 million pounds during the half-year to cover gaming-machine duty, fuel duty, carbon tax, climate change levy, stamp duty, landfill tax, premise licenses, and television licenses.

Looking ahead, Martin was aiming for a "reasonable outcome" for the financial year as a whole. Trading during February and March saw sales improve by 10%.

Based on today's results, Wetherspoon shares trade at 12 times earnings and offer a dividend yield of 2.3%. Of course, whether that valuation, today's results, rising "stealth taxes," and the wider prospects for the pub sector all combine to make Wetherspoon a buy remains your decision.

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