Rising costs offset a big jump in sales at JD Wetherspoon as the pub chain continues to rail against its tax disparity with supermarkets.
Revenues for the six months to January 27 were 10% higher at £626.4 million, with like-for-like sales up 6.9%, but Wetherspoon's profits still fell 2.7% to £34.8 million on an underlying basis.
It faced further increases in wage costs, utility bills and bar and food costs, while its total tax bill was £273.5 million, an increase of £23.4 million and representing 43.7% of its sales. Post-tax profits for the group were £25.2 million, up slightly on a year earlier.
Chairman and founder Tim Martin said: "If we were taxed on the same basis as supermarkets, we would have paid £40.7 million less, since supermarkets pay virtually no VAT in respect of food sales."
In light of calls for minimum pricing legislation, he said that if the tax system was used to encourage, rather than discourage, consumption in pubs it would greatly increase the average price per unit of alcohol paid by consumers.
The group, which employs around 30,000 staff, ended the half-year period with 865 pubs and expects to open a total of 30 new pubs over this financial year.
In the six weeks to March 10, like-for-like sales growth accelerated to 7.3%, although it said taxation and other costs were continuing to rise.
Mr Martin added: "The outcome for the first half of the financial year was reasonable, given the pressure on the UK consumer.
"The biggest danger to the pub industry is the VAT disparity between supermarkets and pubs and the continuing imposition of stealth taxes, such as the late-night levy, and the increase in fruit/slot machine taxes."