Wetherspoon's half-year profits will be hit by a £7m increase in business rates, and a further £2m for the new Apprenticeship levy, chairman Tim Martin says.
The comments come as the pub operator - which owns just under 1000 outlets with sales of £1.5bn - announced an update on current trading, ahead of entering its close period for its interim results for the six months ending 22 January 2017. The announcement is expected on 10 March 2017.
Like-for-like sales for the 12 weeks to 15 January 2017 increased by 3.2% and total sales by 0.7%. For the 25 weeks to 15 January 2017, like-for-like sales increased by 3.4% and total sales increased by 1.6%.
It added it expects the operating margin for the half year ending 22 January 2017 to be around 8%, before exceptional items, 1.7% higher than the same period last year.
Martin said, 'As previously indicated, the company anticipates significantly higher costs in the second half of the financial year. On an annualised basis, these are expected to rise by about 4% for wages, by £7m for business rates and by £2m for the Apprenticeship Levy, in addition to cost increases at around the level of inflation in other areas.
'In view of these additional costs and our expectation that like-for-like sales will be lower in the next six months, the company remains cautious about the second half of the year. Nevertheless, as a result of modestly better-than-expected year-to-date sales, we currently anticipate a slightly improved trading outcome for the current financial year, compared with our expectations at the last update.'
The company has opened two new pubs and sold 21 since the start of the financial year; it has announced it intends to open ten to 15 new sites in the current financial year.
The level of capital investment in existing pubs is also set to increase from £34m in 2015/6 to around £60m in the current year.