Wetherspoon's profits under pressure from higher labour and utility bills
JD Wetherspoon's profits fell in the first half as solid sales growth failed to offset the pub group's growing costs.
Boss Tim Martin warned high tax and labour costs will 'weigh heavily' on the entire pub industry in the months ahead as Wetherspoons posted a 4.3 per cent fall in operating profits to £64.8million for the six months to 26 January.
Wetherspoons saw like-for-like sales growth of 4.8 per cent for the period, but its operating margin fell from 6.8 to 6.3 per cent as higher labour and utility bills added £30.6million to its cost base.
It comes ahead of changes to the minimum wage and national living wage, and an increase to employer national insurance contributions from next month.
These are expected to add a further £60million per year to Wetherspoon's costs – roughly equivalent to £1500 per pub, per week.
Higher labour and utility bills added £30.6million to Wetherspoon's costs in the first half
Share this article
Martin, who has long criticised disparities in the tax and regulatory treatment of pubs and supermarkets, said: 'Since labour costs are around 35 per cent of the pub industry's sales, compared to around 11 per cent for supermarkets, increases of this nature inevitably have a disproportionate impact on pubs, exacerbating the already-wide price differential for customers between the on and off-trade.
'The combination of much higher VAT rates for pubs than supermarkets, combined with increased labour costs will weigh heavily on the pub industry.'
The group's net debt rose to £703.5million from £664.8 million over the period, as its estate fell to 796 pubs.
However, the group wants to return its estate to 1000 sites in the near future.
Wetherspoons, which reintroduced dividend payments after an absence of five years in 2024, also announced a new interim payment.
But JD Wetherspoon shares were down 10 per cent to 537.5p in early trading, having lost more than 30 per cent over the last 12 months.
Richard Hunter, head of markets at Interactive Investor, said: 'There are clearly signs of further progress for Wetherspoon, but a weaker wider market and the moribund outlook for the UK economy have brushed any positives aside.
'Despite any progress which Wetherspoon has been able to engineer, the general level of uncertainty around prospects has weighed heavily on the share price.
'While this unsurprisingly leaves the shares on an undemanding valuation in historic terms, investors are far from being in the mood to celebrate.
'The market consensus of the shares as a strong hold reflects some conviction in Wetherspoon's ability to continue to fight its corner, but is also full of caution as the challenging mix continues with a potential hangover to come.''
DIY INVESTING PLATFORMS
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.
Compare the best investing account for you
