Wilko has been hit by a combination of ’economic and geopolitical events’ beyond its control

Wilko has suffered a sharp fall in profits citing “severe economic headwinds” exacerbated by the imposition of the national living wage and the Brexit effect.

The value chain’s pre-tax profits fell by 80% in its 2016/17 results, finishing the year at just over £5m, down from £25m in the previous financial year.

EBITDA income was also down, ending up at £48.9m over the 12 months compared with £56.8m in 2015/16. Total turnover stands at £1.51bn, up from £1.46bn last year.

But Wilko’s fall in profits will cause most concern among the company’s shareholders. The retailer said this was in part due to the “higher cost of goods towards the end of the year” exacerbated by a 15% depreciation in sterling compared with the dollar, since the shock EU referendum result.

In its annual report out today, Wilko said all retailers had been hit by a combination of “economic and geopolitical events beyond their control”, including the depreciation of the pound since last year’s Brexit vote, and the increase in the minimum wage introduced by former chancellor George Osborne.

In stores, like-for-like sales growth rose by 1%, with total sales rising by 3.3% across the whole chain, which has been expanded by 19 stores in the past 12 months. Wilko’s board has stepped up an investment programme in its stores in the past year, increasing capital spending from £24m to £41m.