Wetherspoons' dividend hike despite profits fall as pub giant warns on costs

Despite a boost in sales, pub behemoth J D Wetherspoon has reported a drop in profits in its half-year results.

Chairman Tim Martin has issued a warning about the potential impact of escalating labour costs and tax disparities on the pub industry, as reported by City AM.

Like-for-like sales saw an increase of 4.8 per cent for the 26 weeks leading up to 26 January 2025, with total revenue rising by 3.9 per cent to £1.03bn.

However, profit before tax, excluding exceptional items, fell to £32.9m, a decrease from £36.0m the previous year.

Operating profit also experienced a decline, coming in at £64.8m compared to £67.7m in 2024.

Earnings per share before separately disclosed items increased to 21.5p, from 20.3p the year prior.

The pub group reinstated its interim dividend, paying out 4.0p per share.

Over the course of the year, the company acquired 1.8m shares at a cost of £11.5m, including "stamp duty and fees, representing an average cost per share of 621p."

On a statutory basis, pre-tax profit jumped 58.2 per cent to £41.3m, driven by a one-off gain on interest rate swaps.

Six pubs were sold during the period, generating £3.9m in cash, while two new locations opened. The group also recognised a £2.2m loss on the disposal of the pubs.

Chairman Tim Martin commented on the results, stating that rising costs pose a threat to the sector's stability.

"Increases in national insurance and labour rates will result in company cost increases of approximately £60m per annum," he said.

He added that this equates to roughly £1,500 per pub, per week.

Martin highlighted that labour accounts for approximately 35% of pub sales, in stark contrast to the mere 11% for supermarkets, which intensifies the disparity in costs.

He expressed concern that the combination of rising staff expenses and elevated VAT rates for pubs, as opposed to supermarkets, "will weigh heavily on the pub industry."

Despite these challenges, Martin remained optimistic about the company's prospects, stating they anticipate a "reasonable outcome for the financial year, subject to our future sales performance."

Wetherspoon has been actively expanding its franchising operations, with plans to open five new locations in the latter half of the year.

Currently, three franchised establishments are successfully running in university and holiday park settings.

The firm has made significant capital investments totalling £64.6m during this period, allocating over £40m to refurbish existing pubs and enhance IT systems.