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Wed 29th Apr 2020 - JD Wetherspoon to raise £141m in share placing, expects to reopen pubs in late-June
JD Wetherspoon to raise £141m in share placing, expects to reopen pubs in late-June: JD Wetherspoon intends to raise £141m through a share placement as it attempts to tackle the economic impact from the coronavirus crisis and related restrictions. The company said it would raise the amount through the issue of up to 15.7 million shares at 900p per share. Based on scenario planning undertaken, the company said the additional capital would provide sufficient liquidity to deal with very low sales after reopening, helping the company to return to growth as the market normalises. Wetherspoon also said it was starting to plan for the reopening of pubs and hotels in or around late-June after the British government ordered their closure in March. It assumed like-for-like sales will be minus 10% for the first month after reopening, increasing by 2% per month, and levelling out at 3%. Sales were up about 5% in the 18 months before closure, and therefore it is assumed initial sales will be about 15% below pre-closure levels, Wetherspoon said. The company expects to be eligible for a loan of up to £50m under the new Coronavirus Large Business Interruption Loan Scheme and will consider making an application in due course. As regards the Covid Corporate Financing Facility, the company has made enquiries, but does not believe it is eligible, since it is not “investment grade”. Wetherspoon has implemented an extensive set of measures to protect profit and cash including halting its opening programme, which is not expected to restart until FY22, from which point the company intends to open about five pubs each year. About 43,000 employees, more than 99% of the workforce, have been furloughed. On average, the company is paying 80% of pre-lockdown pay levels; the cost to the company of additional “top-up” payments is about £600,000 per month. To date, there has been no redundancies, although the company said this would remain under review. The company paid suppliers due at the end of March. The majority, comprising 83% of suppliers, have now been paid in full. Extended payment terms have been agreed with a number of larger suppliers. Chairman Tim Martin, chief executive John Hutson, and each of the non-executive directors have volunteered to take a 50% pay cut. Commercial, legal and personnel director Su Cacioppo has volunteered to take a 42% reduction and finance director Ben Whitley has taken a 38% cut. The majority of rental payments due in March, other than some concessions, have been deferred and the company has agreed extended payment terms with many landlords. Wetherspoon said it would save about £60m as a result of business rates not being payable until March 2021 while repairs and maintenance will reduced from an annualised run rate of £83m to £10m during closure. Overhead expenditure has been reduced from an annualised run rate of £210m to about £35m. Up to the point when pubs closed, £34m had been spent in the second half year on new pubs, freehold reversions and reinvestment and £70m of additional capital expenditure, planned for the rest of the second half of the financial year, has been deferred. Wetherspoon said in general the government and HM Revenue & Customs has been helpful in agreeing delays in payments of tax. Just under £20m of PAYE and VAT payments have been deferred. It is anticipated an additional £40m of PAYE, VAT and fruit machine gaming duty, due after the pub closure, will also be deferred. As previously announced, the interim dividend has been cancelled. As at 22 March 2020, the company had net debt, including bank borrowings and finance leases, but excluding derivatives, of £836m, compared with £804.5m at 26 January 2020. This resulted in leverage of approximately 3.85 net debt/Ebitda, calculated over the previous 12 months. The board believes that no covenants are expected to be breached in the short term, with certain costs being treated as exceptional during the covid-19 pandemic. However, as a precaution, the board requested, and has received, signed covenant waivers for the quarters ending April and July 2020. The company has fully drawn down its revolving credit facility. As at 26 January 2020, the net book value of the property, plant and equipment of the company was £1.45bn, which included £1.05bn of freehold and long leasehold property. The properties have not been revalued since 1999. Wetherspoon said as the duration of the covid‐19 impact was uncertain at this stage, as are its consequences for the financial performance for the full year, it does not intend to issue a trading update on the previously indicated date of 13 May. Martin said, “The covid‐19 outbreak is having a severe impact on the UK pub sector. In these challenging times I would like to thank everyone at the company, its suppliers, landlords, banks and the government for their support and commitment. We've had to take significant action to reduce costs, decisions which have not been taken lightly. We look forward to reopening our pubs and hotels and welcoming back our teams in the near future. As a result of the actions taken, the co-operation of many stakeholders, and the equity placing announced today, we will be well positioned to reopen our pubs and to return to growth, as the market recovers.”


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