Wetherspoon, the UK pub company, has become the first British hospitality group to tap shareholders for fresh funds twice during the pandemic while it battles to survive lockdown closures.
The group said on Tuesday that it would look to raise around £93 million (€104.5 million) through an accelerated share placing as it faced uncertainty over the length of the current lockdown and the restrictions that pubs would have to trade under once they reopened.
Wetherspoon said it was spending £4.1 million per week while its 872 pubs, which are renowned for their cheap prices, were closed. Since March, the company has reduced its staff headcount by 6,000 to 37,700, it added.
‘Severe impact’
Tim Martin, Wetherspoon's chairman, said the Covid-19 crisis was 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".
It is the second time that Wetherspoon has turned to equity markets to bolster its balance sheet. It raised £137 million through a share placing in April, a month into the first period of lockdown.
The company has also received £48.3 million through the government’s coronavirus loan scheme and said it had applied for a further £51.7m of state-backed funding.
Wetherspoon said that as of January 14th it had £139 million in liquidity while net debt stood at £1.1 billion, and that without further funding it would only survive until the end of its financial year in July.
Sales in the three months to November 8th, just before the UK’s second lockdown started, were down 27 per cent compared with the same period in 2019. Following that lockdown some pubs were able to reopen in a limited fashion under the government’s tier system but since December 31st all of the company’s pubs have been closed.
Cost cutting
In order to save costs, Wetherspoon has suspended its dividend, cut pay for its chairman and non-executives by half and minimised capital spending.
However, it said it also hoped the funds raised would “facilitate the acquisition of new properties, which are likely to be available at favourable prices, as a result of the pandemic” and that it was actively looking at sites in London as well as properties next door to its more successful pubs.
The company outlined four scenarios for future trading. Under its best-case scenario, pubs would open at the end of March with sales 50 per cent below normal levels and increasing by 5 per cent per week. In its worst-case scenario annual sales for 2021 would fall to around £630 million, compared with £1.8 billion in 2019.
- Copyright The Financial Times Limited 2021
