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16 October 2020

Profits Fall at Wetherspoon

Wetherspoon, the low-cost pub chain popular with students and locals alike, this morning (16th October) reported a financial year disappointing by its usual standards, albeit what might be expected during the COVID-19 crisis.

Year-end revenue was negatively impacted to the tune of 31%, down from £1.82bn to £1.26bn, with like-for-like sales also down 30% as limited capacities restricted the revenue ceiling. Profitability was also severely impacted as the firm grappled with a surge in additional costs owing to investments in table service and PPE, causing the group to swing to a £34.1m pre-tax loss from a £102.5m profit last year.

The short and medium-term uncertainty of the bar and restaurant industry looks to set to remain at heightened levels, with local lockdowns meaning that national chains such as Wetherspoon have to adapt quickly to unforeseen and changing circumstances. Tim Martin, Wetherspoon’s CEO, was as outspoken as ever and produced a scathing review of governmental performance, stating “They have introduced, without consultation, under emergency powers, an ever-changing raft of ill-thought-out regulations - these are extraordinarily difficult for the public and publicans to understand and to implement.” Clearly the firm’s operations have been impacted to a greater extent than locally run, flexible, independent pubs, with the nearly-900 Wetherspoon pubs instead requiring a large and complex supply chain predicated on consistent and reliable order volumes, much of which will have now been thrown into uncertainty.

We would therefore expect to continue to see significant impacts on the firm’s business as it attempts to increase flexibility in the wake of changing governmental guidelines. New local lockdowns which have typically targeted large towns and cities, unfortunately where the majority of Wetherspoon’s pubs are located, are likely to further impact sales well into 2021.

Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
 
Profits Fall at Wetherspoon
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