Wetherspoon eyes London expansion after raising £93.7m in new equity

By James McAllister

- Last updated on GMT

Wetherspoon eyes London expansion after raising £93.7m in new equity

Related tags: Wetherspoon, Pub, Coronavirus

JD Wetherspoon has raised £93.7m investment following a share placing to help see it through a predicted period of low sales upon reopening and drive further acquisitions in London.

In a statement to the London Stock Exchange, the pub giant said it is considering the acquisition of a number of properties in central London, the freehold reversions of pubs of which it is currently the tenant, and properties adjacent to successful pubs.

The proceeds of the share placing will also be used to strengthen the company’s balance sheet, working capital and liquidity position during the period of disruption.

With the duration of the current lockdown and ongoing restrictions described as uncertain, Wetherspoon said it had taken decisive action to preserve cash and ensure sufficient liquidity.

The new capital will help deal with anticipated very low sales after reopening, helping the company to return to growth as the market normalises.

In addition the funds will facilitate the acquisition of new properties, which are expected to be available at favourable prices as a result of the pandemic.

Tim Martin, chairman of Wetherspoon, said: “The Covid‐19 outbreak is having a severe impact on the UK pub sector.

"After a number of false starts, the hospitality industry generally anticipates a return to more normal trading patterns in the spring and summer, as a result of the introduction of a mass vaccination programme. The equity placing announced today will help the company, along with the other actions it has taken, to emerge from the pandemic in a strong position.

“Very many thanks to everyone at the company, and also to its shareholders, suppliers, landlords and banks, for their support and commitment.”

In its statement Wetherspoon also provided a detailed Coronavirus update, which include  four ‘scenarios’ that estimate reopening dates for pubs alongside their sales performance and costs.

The main assumption in scenario 1A is that the current closure period will be until the end of March 2021, with an estimated loss before tax of £112m in 2021.

It is assumed that like-for-like sales will be minus 50% upon reopening, increasing by 5% per week, and levelling out at minus 15% in mid-May and for the remainder of the financial year.

For the FY2022 it is assumed that sales will match the sales of FY2019, and for subsequent years that they will rise by 5% per annum.

Scenario 2A represents the company’s view of a ‘reasonable worst case’ set of assumptions, with an estimated loss before tax of £159 in 2021.

The main assumption in scenario 2A is that the current closure period will be until the end of March 2021.

Like-for-like sales will be minus 50% upon reopening and will stay at that level for the rest of the financial year.

FY2022 sales will then be 10% lower than those assumed in scenario 1A and FY2023 sales will match the sales of FY2019. 

The company currently has 37,000 staff, approximately 99% of its workforce, on furlough.

Costs of non-furloughed employees, plus the taxes and other costs of furloughed employees, are £800,000 per week during the closure period.

Staff numbering 378 at the head office and airport sites have been made redundant.

The group has reduced its costs in all areas of the businesses – repairs and maintenance, IT and head office, executive pay, capital expenditure, rents.

It estimates that cash burn is around minus £4.1m per week, while pubs are closed.

On 29 April 2020, Wetherspoon raised £137.7m of new funds through a 15% share placing at £9 per share.

It also received a loan of £48.3m under the Coronavirus Large Business Interruption Loan Scheme (CLBILS), and has made a further application for an additional loan of £51.7m under this scheme.

As at 14 January 2021 it had liquidity of £139.1m.

Related topics: Business

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