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Fri 13th Sep 2013 - JD Wetherspoon reports slowdown in like-for-like sales
JD Wetherspoon reports like-for-like slowdown: JD Wetherspoon has reported like-for-like sales grew 5.8% in the 52 weeks to 28 July. Like-for-like sales growth reduced to 3.6% in the six weeks to 8 September and were 2.5% up in the most recent fortnight. Sales were up 7% to £1.28bn and profit before tax up 6.3% to £76.9m (before exceptionals). Chairman Tim Martin said: “I am pleased to report another year of progress, with record sales, profit and earnings per share, despite having paid £551.5m in taxes during the year (equivalent to £632,000 per pub) and rewarding staff with £28.6m of bonuses. Our post-tax profit increased by £7.9m, yet our taxes paid increased by £32.2m. It is unsustainable to have far higher taxes for the pub industry than those for supermarkets. Already, 10,000 pubs have closed and many others are suffering, through insufficient investment. In particular, there should be VAT equality for pubs, restaurants and supermarkets. Wetherspoon, along with many other pub and restaurant groups, is supporting Jacques Borel’s VAT Club on Tax Parity Day (Wednesday 25 September) - and we will offer a one-day 7.5% reduction in our prices, to publicise this inequality.” Martin republishes an article he wrote on the company’s property litigation first published by Propel in his report to shareholders.

Exceptional items: Exceptional items before tax totalled £19.8 million (2012: £13.5 million), £0.2 million of which resulted in the expenditure of cash. The exceptional items relate to the impairment of trading pub assets of £15.6 million (2012: £7.8 million), a provision for onerous leases of £3.3 million (2012: £2.2 million) and a loss on the disposal of property, plant and equipment of £1.0 million (2012: £1.1 million). The total provision for impairment and onerous leases is now £47.6 million, compared with the original cost of our assets of £1.58 billion.

On tax issues, Tim Martin said: “As we have pointed out in previous years, we believe that pubs are taxed excessively and that the government would create more jobs and receive higher levels of overall revenue, if it were to create tax parity among supermarkets, pubs and restaurants. Supermarkets pay virtually no VAT in respect of food sales, whereas pubs pay 20% - and this disparity enables supermarkets to subsidise their alcoholic drinks sales to the detriment of pubs and, indeed, restaurants. This serious economic disadvantage has contributed to the closure of many thousands of pubs, and the pub industry has lost approximately 50% of its beer sales to supermarkets since VAT was increased from 8% over 30 years ago. This does not make economic sense for the government, since pubs create far more jobs per meal or per pint than supermarkets, for reasons which are self-evident. They also pay far more taxes per pint or per meal than supermarkets, and this would remain the case even if VAT levels were reduced in pubs. It cannot make sense for any government to perpetuate a tax advantage for supermarkets in this context. A main consequence of the tax disparity between supermarkets and pubs is that pubs in the less-well-off areas of the country suffer most, as do the residents and local authorities in those areas, who are deprived of the facilities and, to an extent, the income from taxes they would otherwise receive. This is because customers in less-well-off areas are more sensitive, as a matter of common sense, to the price differential which is created by the current tax régime. As a result, they inevitably end up using supermarkets more and pubs less. The results are evident to see, with large numbers of pubs closing in less-affluent areas, with undesirable social and economic consequences in the majority of the country. In affluent areas, the price differential between pubs and supermarkets is less acutely felt, although still important for a considerable percentage of those living in these areas.”

On property litigation, Tim Martin said: “As reported in our interim accounts, Wetherspoon agreed on an out-of-court settlement with developer Anthony Lyons, formerly of property leisure agent Davis Coffer Lyons. Wetherspoon has received approximately £1.25 million from Mr Lyons. The payment relates to litigation in which Wetherspoon claimed that Mr Lyons had been an accessory to frauds committed by Wetherspoon’s former retained agent Van de Berg and its directors Christian Braun, George Aldridge and Richard Harvey. Mr Lyons denied the claim - and the litigation was contested. The claim related to properties in Portsmouth, Leytonstone and Newbury. The Portsmouth property was involved in the 2008/9 Van de Berg case itself. In that case, Mr Justice Peter Smith found that Van de Berg, but not Mr Lyons, who was not a party to the case, fraudulently diverted the freehold from Wetherspoon to Moorstown Properties Limited, a company owned by Simon Conway. Moorstown leased the premises to Wetherspoon. Wetherspoon is still a leaseholder of this property - a pub called The Isambard Kingdom Brunel. The properties in Leytonstone and Newbury (the other properties in the case against Mr Lyons) were not pleaded in the 2008/9 Van de Berg case. Leytonstone was leased to Wetherspoon and trades today as The Walnut Tree public house. Newbury was leased to Pelican PLC and became Café Rouge. Before the year end, the company also agreed to settle its final claim in this series of cases and accepted £400,000 from property investor Jason Harris, formerly of First London and now of First Urban Group. Wetherspoon alleged that Harris was an accessory to frauds committed by Van de Berg. Harris contested the claim and has not admitted liability. In the previous year, Wetherspoon also agreed on a settlement with Paul Ferrari, of London estate agent, Ferrari, Dewe & Co, in respect of properties referred to as the ‘Ferrari Five’ by Mr Justice Peter Smith.”

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