(Sharecast News) – Wetherspoons has raised around £93.7m in a placing to help it weather the Covid-19 pandemic and related pub closures.
The company, which announced the placing after the close on Tuesday, said 8.37m shares were placed by Investec at 1,120p each – a 5.3% discount to the closing share price the day before.
This is the pub chain’s second placing since the pandemic hit. In April, it raised £141m.
Wetherspoons said the proceeds will be used to further strengthen the company’s the balance sheet, working capital and liquidity position during the period of disruption from Covid-related closures. The proceeds will also be used to facilitate the acquisition of new properties, which Wetherspoons said are likely to be available at attractive prices due to the pandemic.
“Based on the ‘scenario planning’ undertaken, the additional capital will provide sufficient liquidity to deal with very low sales after reopening, helping the company to return to growth as the market normalises,” it said.
In a trading update released on Tuesday alongside news of the placing, chairman Tim Martin 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.”
At 1030 GMT, the shares were up 5% at 1,242p.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “This time round it’s not just a case of battening down the hatches and waiting for the storm to subside, the company aims to use some of this cash injection, to snap up prime locations from rivals in distress. It’s confident that pent up demand for socialising in pubs and restaurants will see a huge upswing in trade once its venues reopen, as hoped, at the end of March.
“After years of steady growth, the restrictions imposed by the government to limit the spread of infection have wreaked havoc on Wetherspoon’s business model. Maintaining high numbers of customers is key for the company given that many of its venues are large and to keep costs low, it needs to sell high volumes.
“It has a young customer base who have been less fearful of venturing out when restrictions do ease, which does bode well for recovery unless there is another twist in the trajectory of the virus. While queues may form round the blocks for its high street pubs once the latest lockdown finally ends, its airport business is likely to continue to stay depressed with global travel not expected to fully rebound until 2023. JD Wetherspoon may be building a war chest for expansion, but some of that money will inevitably leak away to plug holes elsewhere while the business recovers.’”
