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Wetherspoon hits out at pub tax burden as sales slow

Last updated: 03:08 05 Nov 2014 EST, First published: 04:08 05 Nov 2014 EST

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UK pub group JD Wetherspoon (LON:JDW) has warned profit margins will fall due to the impact of “stealth taxes” on the pub industry and a slowdown in October sales.

The pub chain now expects operating margins of between 7.2 - 7.8% over the current financial year, compared to 8.3% previously, sending its shares 7% lower.

The comments overshadowed a decent trading performance in the summer. Sales were good in August and September, as the UK enjoyed warmer temperatures, but like-for-like growth decreased in October.

Like-for-like sales overall increased by 6.3% and total sales increased by 11.3% in the thirteen weeks to 26 October.

The group repeated its complaint of unfavourable VAT treatment around pub slot or 'gaming' machines after new rules introduced in 2012 stopped pubs offsetting VAT charged by suppliers.

Tim Martin, chairman, said: “These sorts of tax increase penalise pubs, which are closing in great numbers, yet not supermarkets, which already benefit from a zero VAT rate on food, whereas pubs pay 20%.”

Wetherspoon has opened two new pubs since the start of the financial year and plans to open 30-40 in total the current financial year.

The company added that it has agreed an additional five-year bank facility, increasing its overall facilities to £740mln.

Shares dropped by 50p to 778p in early morning trading.

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