In a trading statement pubs group JD Wetherspoon (JDW) said 97% of its estate was now open and sales had gradually improved, with a rapid acceleration seen more recently aided by the government’s Eat Out To Help Out scheme. The shares put on 1.6% to 989p.
Weatherspoons operates from larger sites than its peers and this along with accommodating landlords and local authorities with regards to utilising more outside spaces has helped to entice loyal customers back into its pubs.
However, despite the stronger recent trends, the company sounded more circumspect about trading once the government scheme ends.
As AJ Bell investment director Russ Mould commented, ‘Sadly, there are growing fears that the hospitality sector will see a sharp downturn in sales activity once the money-off scheme ends on 31 August.
‘Wetherspoons is cautious about the outlook for sales from September onwards, and other hospitality operators have echoed similar thoughts. One could argue that if Wetherspoons is concerned, others should really be worried, as its low-priced menu of food and drink puts it in a strong position to attract cash-strapped consumers’.
LOSSES EXPECTED
For the 44 days to August 16 like-for-like bar and food sales fell 16.9%, and the company expects to report a loss before and after exceptional items for the year ended 26 July 2020. Broker Jefferies has pencilled in an adjusted pre-tax loss of £6 million and a reported loss of £21 million.
The broker believes Wetherspoons is well positioned within the pub sector with a well-located and now largely freehold estate seeing customer traction which will allow it to return to profitability faster than most of its peers.
Having negotiated a waiver of bank covenants for April and July 2020, the company proposes to enter further negotiations with its lenders for the current financial year in due course.
The firm raised £141 million of cash from shareholders and £48.3 million from the government Covid-19 loan scheme in April. Estimated net debt at the last financial year end was £825 million.
