JD Wetherspoon PLC (LON:JDW) said it has raised £141mln to boost its liquidity and ride out the closure of its pubs during the coronavirus pandemic.
The FTSE 250 publican said it had raised the cash through the placing and subscription of around 15.7mln new shares at a price of 900p each, a 6% discount to its Wednesday closing price.
READ: Wetherspoon's upgraded to ‘buy’ as Jefferies predicts ‘fast’ return to profitability
Announcing the capital raise after the close yesterday, Wetherspoons said the additional funding will provide “provide sufficient liquidity to deal with very low sales after reopening, helping the company to return to growth as the market normalises”.
In a trading update, also released after yesterday’s close, the company said 99% of its workforce have now been furloughed and that it has secured a £50mln under the UK government’s Coronavirus Large Business Interruption Loan Scheme.
The group also said it expects for its pubs to remain closed until late June, and that initial like-for-like sales will be around 15% below pre-closure levels, recovering slightly each month.
If its estimates are correct, the chain said this will result in a sales decline of around 26% for the year ending July 2020.
However, the additional financial security helped lift the shares 0.9% to 966p in late-morning trading on Thursday.
Broker upgrades to ‘buy’
In a note, analysts at Peel Hunt upgraded Wetherspoons to ‘buy’ from ‘hold’ and cut their target price to 1,200p from 1,550p, forecasting that the extra cash will give the firm enough liquidity under closure to take it into 2021 compared to November under its previous balance.
Analysts also said the publican will be “a long-term winner in the sector” as the coronavirus lockdown drove a lot of its competitors out of business.
“Yesterday, we participated in a conference in which panellists predicted that one-third of London restaurants could go into administration. Against this backdrop, JDW could benefit from a large drop in competition. It could also benefit from any sector intervention (such as extending the Coronavirus Job Retention Scheme under social distancing) even though it can trade on a cash neutral basis at -50% LFL sales”, Peel Hunt said.
“Following the equity fundraising, we believe the risks are shifting to the upside”, they concluded.