JD Wetherspoon, the UK pub group, today announced full-year pre-tax profit fell by nearly 13 per cent after food and labour costs increased and the smoking ban discouraged some drinkers from going out.

The group announced that like-for-like sales, which exclude turnover from new pubs opened in the period, fell 1.1 per cent, with bar takings down by 4.3 per cent.

In contrast, food sales rose 7.9 per cent but overall pre-tax profit fell from £62 million last year to £54 million for the 12 months to July 27. Full-year sales rose by 2.1 per cent to £907.5 million.

Tim Martin, chairman at JD Wetherspoon, said the pub industry has been "strongly affected" by increases in taxation and regulation in recent years.

The group estimated that rises in excise duty on alcoholic drinks, minimum wage related costs and increased statutory holiday entitlements will amount to £16 million.

"Energy increases, which clearly have an inflationary effect, receive widespread attention from economists and the media. It is interesting to note that the effects of government legislation on our business have a far greater impact, and are, therefore, more inflationary than energy increases," he said.

Earlier this week rival Punch Taverns announced it would be scrapping its final dividend following concerns over the impact of the economic slowdown.

Wetherspoon was more positive on the five weeks to August 31, when like-for-like sales increased by 1.1 per cent and total revenue rose by 5.5 per cent, making August its busiest ever. It will pay a final dividend of 7.6p, bringing the total to 12p, in line with last year.

"Food accounted for 29 per cent of our sales during the year, compared with 27 per cent in the previous year, 17 per cent 11 years ago, and 5 per cent at flotation in 1992," the group said in a statement this morning, highlighting that it had spent heavily in the year on developing its kitchens and garden spaces.

Food sales per pub, per week, for the year were £8,800, up from £8,200 in 2007.

Wetherspoon added that the consequence of the shift in sales towards food was a slight decline in operating margin, from 10.3 per cent in the previous year to 9.6 per cent, resulting from food margins being lower than bar margins and higher labour costs. The company opened 23 pubs during the year, compared with 18 in the previous year, resulting in a total estate of 694 sites.

It said it intends to open around 30 pubs in the year ending July 2009, highlighting the advantage of falling property prices.

Following recent comments from Mr Martin about the behaviour of young people in pubs, he said the company is working closely with a variety of organisations, including local authorities and the police.

"We strongly support Pubwatch, an organisation bringing together licensees and the police, which has been extremely successful in improving standards of behaviour in many town and city centres," he said.

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