Wetherspoon Reports Profit Growth and Highlights Tax Inequality in Preliminary Results

After SDI, PBT jumped 47.4% to £89.3 million, helped by a £12.7 million non-cash credit from the amortisation of historic hedge reserves. It is worth noting operating profit after SDI was fractionally lower (-0.3%). In short, the underlying trading picture is steady, with the big reported uplift mainly coming from financial hedging accounting rather than pub-level profitability.

Cash flow, dividend and buybacks: signalling confidence

Free cash flow strengthened sharply to £56.7 million (47.4p per share), up from £33.0 million. Management also invested £117.0 million across the estate, including £62.5 million in existing pubs and £24.1 million on new pubs and extensions.

The board proposes a final dividend of 8.0p, making 12.0p for the year – unchanged year-on-year, but with a lower final because an interim of 4.0p has already been paid. Dividend cover is a healthy 4.0 times.

Wetherspoon bought back 10,579,081 shares (8.6% of starting share count) at a cost of £66.8 million, average 631.2p. That supported EPS growth and signals management’s confidence in the outlook and balance sheet.

Estate actions and franchising ramp-up

Three managed pubs opened and nine were sold, generating £8.1 million cash proceeds and a £0.9 million loss on disposal. At year end, 794 managed pubs were trading.

The interesting shift is franchising. Five franchised pubs opened, taking the total to eight, and the company plans roughly 15 franchised openings in the current year, alongside around 15 managed openings. Management says franchised sites are performing “extremely well”. If sustained, this could be a capital-light growth lever.

Costs, debt and interest: what could dent momentum

Cost inflation is the main headwind. Management quantifies three items for the current year:

• Higher national insurance and labour rates: about £60 million per annum.
• Non-commodity energy levies: about £7 million per annum.
• Extended Producer Responsibility (EPR) packaging tax: £2.4 million, up £1.6 million.

Net debt excluding IFRS-16 leases rose to £724.3 million (2024: £660.0 million). On an IFRS-16 basis, which includes lease liabilities under the accounting standard, net debt was £1.13 billion. Total available finance facilities are £938.0 million. The average total cost of debt fell to 6.57% from 7.05%, and interest-rate swaps hedge sizeable portions of borrowings at 4.00% to 4.23% through 2030.

For context, last 12-month EBITDA was £203.3 million and the balance sheet shows a £1.41 billion net book value, with freehold assets not revalued for over 25 years. Helpful ballast, but not a reason to ignore the cost outlook.

Policy and tax: Wetherspoon’s megaphone gets louder

Chairman Tim Martin leans into policy again. The company, its customers and employees generated £837.6 million of UK taxes in the year. The statement reiterates the long-standing argument for VAT and business rates equality between pubs and supermarkets, claiming the current system structurally disadvantages on-trade operators.

Separately, the statement highlights rising energy-related “non-commodity” charges and argues for a fuller public debate on UK energy policy. Whether you agree or not, investors should note the direction of travel: non-trading levies are rising and are material to margins.

Capex priorities and operational quality

Capital was deployed across IT, staff areas, kitchens and environmental systems, aligning with management’s view that future free cash flow will more closely track profit after tax as reinvestment needs run a little higher than pre-2019. Service quality metrics remain a positive: hygiene scores, training and supplier accreditations are all called out, and 276 pubs made CAMRA’s 2026 Good Beer Guide.

Outlook: “reasonable outcome” with the usual Wetherspoon discipline

Management anticipates a “reasonable outcome” for the year, while acknowledging government-led cost increases in energy and employment may influence results. Early FY26 trading is ahead of the market, which helps, but the cost tally is real and quantified.

Investment take: steady progress with clear cost risks

Positives:

• Consistent outperformance vs sector and resilient LFL growth.
• Stronger cash generation and disciplined capital allocation.
• Dividend maintained at 12.0p and sizeable buyback completed.
• Capital-light franchising has momentum.

Watch-outs:

• Material cost headwinds flagged for FY26 – c. £60 million labour and £7 million energy levies, plus higher EPR tax.
• Hotel revenue under pressure after withdrawing from high-commission OTAs.
• Net debt higher year-on-year, albeit with improved interest costs and ample facilities.
• After-SDI operating profit was flat, with the PBT step-up aided by hedge accounting credits.

Bottom line: Wetherspoon is doing the blocking and tackling well – growing sales, protecting margin, and boosting cash flow – while calling out policy costs that could crimp progress. For long-term investors, the mix of operational execution, estate discipline and a push into franchising looks sensible. Just keep a close eye on the cost line this year.