JD Wetherspoon PLC (LON:JDW) said it has raised £93.7mln through a share placing as it said the recession caused by the economic impacts of the coronavirus (COVID-19) pandemic presented “opportunities for acquisitions at attractive prices”.
On Wednesday, the FTSE 250 publican said it had placed 8.37mln new shares at a price of 1,120p, a 5.3% discount to its closing price on Tuesday.
In a separate announcement outlining its plans for the placing after the close yesterday, Wetherspoon’s said the variations in lockdown restrictions across the UK have “adversely affected” the hospitality industry, with the company’s like-for-like sales for the 15 weeks to 8 November falling 27.6% while from December 31 its entire estate has been shuttered reducing sales to zero.
Looking ahead, the company said it expects its pubs will remain closed until the end of March, with its cash burn estimated at £4.1mln per week. Despite this, Wetherspoon’s said it has “sufficient liquidity” to the end of the current financial year.
Aside from the possible acquisition opportunities, which it said included a number of sites in central London, the group said the funds raised in the recent placing will also be used to strengthen its balance sheet and working capital balance during the period of disruption.
"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”, Wetherspoon’s chairman Tim Martin said in a statement.
“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", he added.
In a note on Wednesday, analysts at Liberum raised their target price for the company to 1,150p from 970p and retained a ‘hold’ rating, saying the additional funds provided “extra comfort” and will “shine a light on the growth opportunities” for survivors in the sector once the pandemic subsides.
However, Liberum added that Wetherspoon’s “high volume/low margin model” could be “challenged by changing consumer trends in the month and years ahead”, and while cost cutting measure did allay some fears they “remain concerned about [the firm’s] seemingly limited pricing power”.
Meanwhile, David Madden at CMC Markets said Wetherspoon’s had “suffered greatly because of the health emergency” and that the latest lockdown across the UK “spells further misery for the group”.
Markets, however, seemed for upbeat on the news of the fundraising, with the shares jumping 2.7% to 1,214p in early deals.