Wetherspoon's sees profits rise as pub industry struggles
Pub giant JD Wetherspoon announced its profits had risen in a market that has been crippling landlords and other pub companies.
The firm, which has 44 establishments in the West Midlands and has sites earmarked for two more in Redditch and Perry Barr, saw pre-tax profit rise two per cent before exceptional items to £30.8 million, on a revenue of £468 million.
The group has used aggressive price cuts – including dropping the price of some pints to as low as 99p – to stave off the chaos in the pub industry caused by the drop in consumer demand, price competition from supermarkets and the smoking ban.
And it has ambitious expansion plans that could see it open more and more branches even as the recession continues to bite.
Finance director Keith Down said the success of Wetherspoons was about more than just low prices.
He said: “We have got really well-maintained pubs, we try to get as many people as we can to give us atmosphere, and we offer good value. All of those things are as important in the good times as in the bad times.
“I think we are pretty competitive all the time on price. We have got more headlines with the 99p drinks, but this time last year we were doing voucher drops and £2.99 fish and chips – I think it probably just hit the mark in terms of how we attract non-customers.
“Prices are something we are always reviewing. We like to try to offer good value but it’s not all about price.”
He added the company would be taking advantage of the number of disused pubs coming onto the market at lower prices because of the trouble in the industry.
“Rather than invest as much in pubs and investments we are probably paying down our debt more,” he said. “We have always been cash generative, we have always had a lot of cash, and in the past we have been able to use that to invest in more pubs. But what we are doing now is trying to be more efficient in terms of cash.
“But we said we are going to buy 35 pubs this year which is more than last year. The average cost of a pub will go down and There is a certain benefit in taking a pub that’s already been in use.
A recent report by the British Beer & Pub Association found a record number of pubs closing every week in Britain, highlighting the economic pressures facing the industry.
It said a total of 39 pubs were shutting every week, three more than last year which represented a rate 20 times faster than three years ago. This included 19 in suburbs, eight in town centres and the rest in rural areas.
Approximately 44,000 jobs have been lost in the industry in the past couple of years, with the association warning that 59,000 could be axed.
Commenting on the results, Tim Martin, the chairman of J D Wetherspoon, said: “Although the pub industry as a whole is under great pressure from higher taxes and social legislation, as well as a difficult economy, as a result of our strong cashflow, reducing debt and the excellent work of our employees, I remain confident of the company’s future prospects.”
