Wetherspoon feels MGD pain

08/05/2012

JD Wetherspoon reported a mixed picture with its third-quarter trading update earlier this month. Like-for-like sales grew 2 per cent in the 13 weeks to 22 April and the company has opened 29 new pubs since the start of the year. However, the group’s underlying operating margin in the period fell to 8.1 per cent from 9.3 per cent in the first half.

A big part of that margin pressure reflects a growing tax burden for pub operators – as a result of changes introduced at the last budget. As well as excise duty increases, MGD has resulted in an extra £2m a year cost for the group. What’s more, the government’s so called ‘late night levy’ will cost the group another £2m a year, too. Altogether, management estimates that the effect of the three tax hikes in the next financial year will be approximately £11m. Such additional cost pressures have led management to be “slightly more cautious about the potential outcome for the current financial year”.

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