TIDMJDW
RNS Number : 2202M
Wetherspoon (JD) PLC
19 January 2021
THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR RELEASE,
PUBLICATION, DISTRIBUTION OR FORWARDING, IN WHOLE OR IN PART,
DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA,
CANADA, THE REPUBLIC OF SOUTH AFRICA, JAPAN OR ANY OTHER
JURISDICTION IN WHICH SUCH PUBLICATION, RELEASE OR DISTRIBUTION
WOULD BE UNLAWFUL.
FURTHER, THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND
IS NOT AN OFFER OF SECURITIES IN ANY JURISDICTION.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
LEI: 213800CHWARFAAN7UB85
For immediate release
19 January 2021
JD Wetherspoon plc ("the company")
Further Covid -- 19 Update, Equity Placing
Introduction
Following the reopening of pubs in July and August 2020, there
have been numerous changes to the regulations, including two
further 'lockdowns' in England, and separate lockdowns in Wales,
Scotland and Ireland. The company's main priority is to manage the
business during the latest lockdown period, and to prepare for
reopening in due course.
The company's long-term objective remains the same - to run
individually designed and well-maintained pubs offering excellent
products, at reasonable prices.
As in previous recessions, property prices are likely to
decline, presenting opportunities for acquisitions at attractive
prices.
Between FY2009 and FY2019 (inclusive), the company has opened
318 pubs and closed 133. Average gross sales per pub (including
VAT) have increased from GBP30.1k per week in FY2008 to GBP48.0k in
FY2019. Total company sales, as indicated below, increased by
GBP911.3 million between FY2008 and FY2019.
Investec Bank plc ("Investec") is acting as sole bookrunner in
connection with the proposed equity placing.
Current trading
In its recent trading update, the company reported a LFL sales
decrease of 27.6% for the 15 weeks to 8 November 2020. Sales in the
latter part of the quarter, as the hospitality industry has
indicated, were adversely affected by the introduction of changes
to the tier categories, a 10pm curfew, a requirement to order all
food and drink 'at the table', and the mandatory use of face masks
when moving around inside pubs.
All pubs have been closed since 31 December 2020, from which
point the company's sales have been zero.
Safety Measures
Before reopening in July and August, the company spent GBP13.1
million on implementing measures designed to keep its pubs
Covid-secure.
Assessments were carried out to ensure the risk of transmission
of the virus was mitigated in all aspects of the pubs' operation.
There were approximately 50 million customer visits registered
using the 'track and trace' system, and there have been no
incidents of an outbreak among customers, as defined by the health
authorities, reported to the company, at any Wetherspoon pub.
Comprehensive social distancing and hygiene practices were
introduced, including reduced capacity levels, the spacing out of
tables, the installation of a number of floor screens between
tables, the addition of till-surround screens to the bar and
extensive signage.
Employees conducted regular surface cleaning so that all hand
contact points within the pubs were frequently cleaned and
sanitised throughout the day. An average of 10 hand sanitisers were
installed in each pub and all pubs were thoroughly cleaned at the
end of every trading day.
Cost Reductions
The company has reduced costs as much as it reasonably can
during each of the closure periods which have taken place since
last March. Costs have been reduced in the current closure period
approximately as follows;
- Labour costs . Around 37,000 employees, more than 99% of the
workforce, have been furloughed. Furloughed employees are paid 80%
of pre-lockdown pay levels.
The costs of non-furloughed employees, plus the taxes and other
costs of furloughed employees, are GBP0.8 million per week during
the closure period.
There were 37,674 employees on 14 January 2021, compared to
43,741 on the 1 March 2020.
378 employees at the Head Office and airport sites have been
made redundant.
- Repairs and maintenance. Repair costs have been reduced from a
weekly run rate of approximately GBP1.6 million pre-Covid to
approximately GBP0.25 million per week during the closure
period.
- General costs. Expenditure on utilities, head office, the
distribution centre and IT has been reduced from a weekly run rate
of GBP4 million pre-Covid to approximately GBP1.1 million during
the closure period.
- Board salary reductions. During the current closure period,
the chairman and non-executives' pay has been reduced by 50%, and
the CEO's by 25%.
- Capital Expenditure. In the financial year to date, to 14
January 2021, GBP22.0 million of capital was spent on the
development of a small number of pubs, the completion of a number
of freehold reversions and on IT and maintenance projects, a
substantial reduction compared to previous years. The equivalent
capital expenditure for the same period in FY2020 was GBP127.5
million.
- Dividends. As reported, dividends have been suspended.
Other measures
- Suppliers. The company has paid over 80% of suppliers in full
throughout the pandemic. Deferred payment plans have been agreed
with a number of larger suppliers.
As at 14 January 2021, the company had GBP25.2 million of
deferred payments to suppliers outstanding, reduced from GBP102.7
million when the majority of pubs reopened on 4 July.
- Rents. The company agreed a deferral of rents with
approximately 90% of landlords during the first lockdown. Following
the additional lockdowns announced by the government, the company
has entered further discussions with landlords, with a view to
reaching mutually acceptable deferral agreements. As at 14 January
2021 the company has GBP18.0 million of deferred rental payments
outstanding.
UK Government actions
When pubs closed in March 2020, HM Treasury announced a package
of temporary measures to support public services, people and
businesses through the period of disruption. These include the
Coronavirus Job Retention Scheme ("CJRS"), deferred tax payments,
business rate payment holidays and various grant schemes.
In July 2020 the standard rate of VAT was reduced to 5% for food
and non-alcoholic purchases. The company passed on the benefit of
this reduction to customers across a range of bar and food items.
The company argues that this VAT cut should be permanent and that
it will result in the creation of new jobs, helping high streets
and eventually generating more tax income for the government.
The government announced during the first lockdown that business
rates will not be payable from April 2020 to March 2021, resulting
in a cash saving of approximately GBP60 million for that
period.
The company has agreed with HMRC a deferment of GBP21 million of
taxes, to be repaid in 11 monthly instalments up to the end of
March 2022. The company has made an application for deferment in
respect of an additional GBP28.8 million.
Financing arrangements
On 29 April 2020, the company raised GBP137.7 million of new
funds through a 15% share placing at GBP9 per share.
The company received a loan of GBP48.3 million under the
Coronavirus Large Business Interruption Loan Scheme ("CLBILS"). The
scheme allows eligible companies to apply for a maximum of GBP200
million. The company has made a further application under this
scheme for an additional loan of GBP51.7 million.
As at 14 January 2021 the company had liquidity of GBP139.1
million.
Net debt plus trade and other payables have remained at
approximately the same levels from the year end 2019, as shown in
the table below:
Year End Half Year Year End
2019 2020 2020 14-Jan-21
GBPm GBPm GBPm GBPm
Net Debt 737 805 817 900
Trade and
other
payables 308 315 268 204
Net Debt
+ Trade
and
other
payables 1,045 1,119 1,085 1,104
---------- --------------------------- --------------------------- --------------------------- ---------------------------
The company has received covenant waivers up to and including
the quarters to July 2021. The normal EBITDA-related covenants have
been replaced with a minimum liquidity threshold of GBP75
million.
The Bank of England has said that banks should waive covenant
breaches that stem from the Covid-19 crisis and the company
believes that further waivers should be forthcoming, if
required.
The company has fully drawn down its revolving credit
facility.
As previously stated, it is the company's intention that the
maximum net-debt-to-EBITDA ratio should be around 3.5 times, other
than in the short term.
The ratio has risen, as a result of the temporary closure of
pubs, and the company intends to reduce the level in a timely
manner.
The company has previously stated that debt levels of between 0
and 2 times EBITDA are a sensible long-term benchmark, although
higher levels may be justified at times of very low interest
rates.
Property
As at 14 January 2021, the company had 872 pubs which were able
to trade in the absence of lockdown restrictions. 64.3% of the
company's pubs are freehold. This has increased from 41.3% in
FY2010.
As at 14 January 2021, the net book value of the property, plant
and equipment of the company was approximately GBP1.5 billion,
which included approximately GBP1.1 billion of freehold and long
leasehold property. The properties have not been revalued since
1999.
UK taxes and regulations
In FY2019, before the Covid-19 crisis, Wetherspoon generated
total taxes of GBP764 million, including VAT, excise duty, PAYE,
climate change levy and other taxes.
In FY2020, mainly as a result of the lockdown, total taxes paid
to the government declined by GBP327 million to GBP437 million, net
of furlough payments.
In the financial year to 14 January 2021, the company generated
tax revenues of GBP54.3 million, net of furlough payments.
Non-recurring items
Exceptional costs of approximately GBP10.4 million have been
incurred in the first five periods of this financial year. GBP8.2
million relates to redundancy and other exceptional employee costs.
Other costs relate to protective screens, sanitisers, temporary
outside furniture and miscellaneous Covid-19 items.
Outlook
The duration of the current lockdown and ongoing restrictions is
uncertain at this stage. The company's current assumptions are that
its pubs will remain closed until the end of March 2021.
The company considers 'owners' earnings' to be a fair measure of
'cash burn'.
Owners' earnings are calculated as pre-IFRS16 losses before tax,
exceptional items, depreciation and property gains or losses, less
reinvestment in existing properties.
The company estimates that owners' earnings, and therefore cash
burn, are around minus GBP4.1 million per week, while pubs are
closed.
In the absence of a share placing and an additional CLBILS loan,
the company estimates that it has sufficient liquidity to the end
of the current financial year.
The company has traded well during previous recessions in the
course of the last 40 years. Sales increased by GBP911.3 million
between FY2008, the approximate start of the last recession, and
FY2019.
Scenario analysis
The company has created four 'scenarios', which estimate
reopening dates for pubs, their sales performance and costs. A
brief summary of the assumptions and the outcome of these estimates
is presented below. The company notes that there can be no
certainty as to when the pubs will be permitted to reopen, and the
assumed reopening dates used in this announcement are for the
purpose of the scenarios only.
The main assumption in scenario 1A is that the current closure
period will be until the end of March 2021. It is assumed that
like-for-like sales will be minus 50% upon reopening, increasing by
5% per week, and levelling out at minus 15% in mid-May and for the
remainder of the financial year. For FY2022 it is assumed that
sales will match the sales of FY2019, and for subsequent years that
they will rise by 5% per annum.
Like-for-like sales improved by around 5% per week after the
majority of pubs reopened in July 2020, before the 'Eat Out to Help
Out' scheme started. Sales had returned to FY2019 levels by the end
of the Eat Out to Help Out period.
On the basis of these estimates, the financial performance for
2021, 2022 and 2023 could be as follows:
Summary; Scenario
1A
2019a 2020a 2021e 2022e 2023e
------------------------- -------- ------- ------- ------- -------
Total sales (GBPm) 1,819 1,262 879 1,819 1,910
Total sales growth 7% -31% -30% 107% 5%
EBITDA (GBPm) 219 86 13 204 229
PBT (GBPm) 103 -34 -112 81 102
Owners' earnings
(GBPm) 100 14 -65 116 128
Net debt (GBPm) 737 817 969 874 763
------------------------- -------- ------- ------- ------- -------
The figures above are pre IFRS16 and exclude the benefit of
the proposed equity placing.
a = actual; e = estimated.
Scenario 2A represents the company's view of a 'reasonable worst
case' set of assumptions.
The main assumption in scenario 2A is that the current closure
period will be until the end of March 2021. Like-for-like sales
will be minus 50% upon reopening and will stay at that level for
the rest of the financial year. FY2022 sales will then be 10% lower
than those assumed in scenario 1A and FY2023 sales will match the
sales of FY2019.
On the basis of these estimates, the financial performance for
2021, 2022 and 2023 could be as follows:
Summary; Scenario
2A
2019a 2020a 2021e 2022e 2023e
-------------------------- ------- ------- ------- ------- -------
Total sales (GBPm) 1,819 1,262 722 1,637 1,819
Total sales growth 7% -31% -43% 127% 11%
EBITDA (GBPm) 219 86 -33 155 204
PBT (GBPm) 103 -34 -159 32 81
Owners' earnings
(GBPm) 100 14 -111 77 106
Net debt (GBPm) 737 817 1,016 960 870
-------------------------- ------- ------- ------- ------- -------
The figures above are pre IFRS16 and exclude the benefit of
the proposed equity placing.
a = actual; e = estimated.
Impact of a longer closure period
Scenarios 1B and 2B show the impact of a closure period lasting
until 3 May 2021. The longer closure period affects the current
financial year (FY2021), but does not affect the performance in
future years - apart from the impact of increased net debt. The
table below summarises the effects of these scenarios in the
current financial year.
Summary of scenarios; differences
to 2021
1B vs 2B vs
1A 2A
---------------------- ------- ------
Total sales (GBPm) -140 -83
Total sales growth -11% -7%
EBITDA (GBPm) -26 -10
PBT (GBPm) -26 -9
Owners' earnings
(GBPm) -25 -9
Net debt (GBPm) 25 8
---------------------- ------- ------
The outcomes demonstrated by the above scenarios are taken from
the company's assessment of the knowledge and information it
currently has available, and reliance must not be placed on any
forward-looking statements - please see the cautionary statement
below.
Equity placing
The company has taken decisive action to preserve cash and
ensure sufficient liquidity.
The company has separately announced today an intention to
conduct a non-pre-emptive placing of new ordinary shares of GBP0.02
each in the capital of the company representing up to 6.95% of the
company's existing issued ordinary share capital (the "equity
placing"). The placing is expected to raise gross proceeds between
GBP92.1m and GBP93.7m.
The equity placing is not being underwritten.
The net proceeds of the equity placing will be used to further
strengthen the company's balance sheet, working capital and
liquidity position during the period of disruption.
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.
In addition, as indicated above, additional capital will
facilitate the acquisition of new properties, which are likely to
be available at favourable prices, as a result of the pandemic. The
company is considering the acquisition of a number of properties in
central London, the freehold reversions of pubs of which it is
currently the tenant, and properties adjacent to successful pubs.
It may be possible to achieve a higher-than-average return on
capital on properties acquired in the next few years, based on the
company's past experience.
The board has concluded that the equity placing is in the best
interests of shareholders; a conclusion endorsed in the course of
recent shareholder consultation.
The placing structure minimises cost and time to completion at
an important time for the company.
Commenting on this announcement, Tim Martin, chairman of
Wetherspoon, 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.
"Very many thanks to everyone at the company, and also to its
shareholders, suppliers, landlords and banks, for their support and
commitment."
This announcement is released by J D Wetherspoon plc and
contains inside information for the purposes of Article
7 of the Market Abuse Regulation (EU) 596/2014 (MAR), and
is disclosed in accordance with the company's obligations
under Article 17 of MAR. J D Wetherspoon plc
John Hutson, Chief Executive Officer
Ben Whitley, Finance Director
(please address all enquiries to Ben Whitley (email: bwhitley@jdwetherspoon.co.uk)
Investec Bank plc - Sole Financial Tel: +44 (0)20 7597 5970
Adviser, Sole Broker, Sole
Global Coordinator & Sole
Bookrunner
Christopher Baird, David Flin, Shalin Bhamra
CAUTIONARY STATEMENT
This COVID -- 19 Update (the "report") has been prepared in
accordance with the Disclosure Guidance and Transparency Rules of
the UK Financial Conduct Authority and is not audited. No
representation or warranty, express or implied, is or will be made
in relation to the accuracy, fairness or completeness of the
information or opinions contained in this report. Statements in
this report reflect the knowledge and information available at the
time of its preparation.
A variety of factors may cause the company's actual results to
differ materially from the forward -- looking statements contained
in this report. Certain statements included or incorporated by
reference within this report constitute "forward-looking
statements" in respect of the company's operations, performance,
prospects and/or financial condition. These forward -- looking
statements may be identified by the use of forward -- looking
terminology, including the terms "believes", "estimates", "plans",
"anticipates, "expects", "intends", "may", "will", or "could" or
words of similar substance or the negative thereof, or by
discussions of strategy, plans, objectives, goals, economic
performance, dividend policy, future events or intentions. By their
nature, forward-looking statements involve a number of risks,
uncertainties and assumptions because they relate to events and
depend on circumstances that may or may not occur in the future or
are beyond the company's control. Actual results or events may and
often do differ materially from those expressed or implied by those
statements. Any forward -- looking statements reflect the company's
current view with respect to future events and are subject to risks
relating to future events and other risks, uncertainties and
assumptions relating to the company's business, results of
operations, financial position, liquidity, prospects, growth and
strategies. Forward -- looking statements speak only as of the date
they are made. The company's actual operating results and financial
condition and the development of the industry in which it operates
may differ materially from the impression created by the forward --
looking statements contained in this announcement. Important
factors that could cause these differences include, but are not
limited to, the ongoing national and international impact of the
COVID-19 pandemic, general economic and business conditions,
industry trends, foreign currency rate fluctuations, competition,
changes in government and other regulation, including in relation
to the environment, health and safety and taxation, labour
relations and work stoppages, changes in political and economic
stability and changes in business strategy or development plans and
other risks.
Accordingly, no assurance can be given that any particular
expectation will be met and reliance shall not be placed on any
forward-looking statement. Additionally, forward-looking statements
regarding past trends or activities shall not be taken as a
representation that such trends or activities will continue in the
future. The information contained in this report is subject to
change without notice and no responsibility or obligation is
accepted to update or revise any forward-looking statement
resulting from new information, future events or otherwise.
In particular, no statement in this report is intended to be a
profit forecast and no statement of a financial metric (including
estimates of EBITDA, profit before tax, free cash flow or net debt)
should be interpreted to mean that any financial metric for the
current or future financial years would necessarily match or exceed
the historical published position of the company. The estimates set
out in the report have been prepared based on numerous assumptions
and forecasts, including those set out in this report, some of
which are outside of the company's influence and/or control, and is
therefore inherently uncertain and there can be no guarantee or
assurance that it will be correct. The estimates have not been
audited, reviewed, verified or subject to any procedures by our
auditors. You should not place undue reliance on them and there can
be no guarantee or assurance that they will be correct.
This report does not constitute or form part of any offer or
invitation to sell, or any solicitation of any offer to purchase or
subscribe for any shares in the company, nor shall it or any part
of it or the fact of its distribution form the basis of, or be
relied on in connection with, any contract or commitment or
investment decisions relating thereto, nor does it constitute a
recommendation regarding the shares of the company or any
invitation or inducement to engage in investment activity under
section 21 of the Financial Services and Markets Act 2000. Past
performance cannot be relied upon as a guide to future performance.
Liability arising from anything in this report shall be governed by
English Law, and neither the company nor any of its affiliates,
advisors or representatives shall have any liability whatsoever (in
negligence or otherwise) for any loss howsoever arising from any
use of this report or its contents or otherwise arising in
connection with this report. Nothing in this report shall exclude
any liability under applicable laws that cannot be excluded in
accordance with such laws.
This announcement has been issued by, and is the sole
responsibility, of the company. No representation or warranty
express or implied, is or will be made as to, or in relation to,
and no responsibility or liability is or will be accepted by
Investec or by any of its affiliates, agents, directors, officers,
employees, advisers or anyone acting on their behalf ("affiliates")
as to or in relation to, the accuracy or completeness of this
announcement or any other written or oral information made
available to or publicly available to any interested party or its
advisers, and any liability therefore is expressly disclaimed.
This announcement is for information only and does not itself
constitute or form part of an offer to sell or issue or the
solicitation of an offer to buy or subscribe for securities
referred to herein in any jurisdiction including, without
limitation, the United States or any restricted territory (as
defined below) or in any jurisdiction where such offer or
solicitation is unlawful.
This announcement, and the information contained herein, is not
for release, publication or distribution, directly or indirectly,
to persons in the United States, Australia, Canada, the Republic of
South Africa or Japan or in any jurisdiction in which such
publication or distribution is unlawful (each a "restricted
territory"). The distribution of this announcement and the placing
and/or the offer or sale of the placing shares in certain
jurisdictions may be restricted by law. No action has been taken by
the company, Investec, any of their respective affiliates or any
person acting on its or their behalf which would permit an offer of
the placing shares or possession or distribution of this
announcement or any other offering or publicity material relating
to such placing shares in any jurisdiction where action for that
purpose is required. Persons distributing any part of this
announcement must satisfy themselves that it is lawful to do
so.
Investec is acting exclusively for the company and no-one else
in connection with the placing and are not, and will not be,
responsible to anyone (including the placees) other than the
company for providing the protections afforded to their clients nor
for providing advice in relation to the placing and/or any other
matter referred to in this announcement.
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END
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January 19, 2021 11:44 ET (16:44 GMT)
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