Wetherspoons: Pub group hikes dividend despite cost warning
Pub giant J D Wetherspoon has reported a dip in profits in its half-year results despite an uplift in sales, while chairman Tim Martin warned that rising labour costs and tax disparities are set to hit the pub industry hard.
Its share price fell more than seven per cent in early trades.
Like-for-like sales rose by 4.8 per cent for the 26 weeks to 26 January 2025, with total revenue up 3.9 per cent to £1.03bn.
Profit before tax, excluding exceptional items, fell to £32.9m, down from £36.0m the year before.
Operating profit also declined, 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.
The company also acquired 1.8m shares during the year, 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.
Commenting on the results, chairman Tim Martin said rising costs threaten 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 stressed that labour makes up around 35 per cent of pub sales, compared to just 11 per cent for supermarkets, exacerbating cost inequality.
“Mr Martin, like the entire hospitality sector, is having to grapple with the looming spectre of the massive rise in labour costs,” Julie Palmer, Partner at Begbies Traynor, said.
“Even though… the outcome for the full year looks to be ok, an additional £1,500 in costs per pub every week is grim reading.
“Across the sector, it has to mean that prices will go up and smaller, less resilient operators will suffer even more,” she added.
Despite pressures, Martin said the company expects a “reasonable outcome for the financial year, subject to our future sales performance.”
Wetherspoon expanded its franchising efforts, with five new sites planned in the second half of the year.
Three franchised pubs are already operating at university and holiday park locations.
The company invested £64.6m in capital during the period, with over £40m directed towards existing pubs and IT upgrades.
It also indicated that future free cash flow is likely to align more closely with post-tax profits, due to higher corporation tax and increased reinvestment in existing sites.