ii view: JD Wetherspoon swallows first-half loss

by Keith Bowman from interactive investor |

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2020 has been like no other, but does a tough economic backdrop play into this pub company’s hands? 

First-half results to 24 January

  • Revenue down 54% to £431 million
  • Pre-tax loss of £46 million from a profit of £58 million
  • Net debt flat at £812 million
  • No interim dividend payment

Chief executive Tim Martin said:

" Wetherspoon and its employees, along with the hospitality industry, have worked very hard to comply with ever-changing government guidelines. It is disappointing that so many regulations, implemented at tremendous cost to the nation, appear to have had no real basis in common sense or science - for example, curfews, "substantial meals" with drinks and masks for bathroom visits.

"The future of the industry, and of the UK economy, depends on a consistent set of sensible policies, and the ending of lockdowns and tier systems, which have created economic and social mayhem and colossal debts, with no apparent health benefits."

ii round-up:

Founded in 1979 in North London, Wetherspoon (LSE:JDW) today employs over 37,000 people.

Headquartered in Watford, Hertfordshire, it operates over 850 pubs and around 50 hotels connected to its pub outlets with approximately 1200 rooms. 

For a round-up of these latest results, please click here

ii view:

All pubs have been closed since the end of December 2020. As such, Wetherspoon sales as of that point have been zero. In January, it raised £93.7 million in new equity. The group’s lending terms currently require a minimum liquidity covenant of £75 million. As of 24 January 2021, Wetherspoon had liquidity of £225 million. Its January trading update pointed to a weekly cash burn of £4.1 million while its pubs are closed. The government has now tentatively detailed a plan out of lockdown. A beer garden-only reopening has been scheduled for April, followed by table service only come May, then a hoped-for full reopening in June.

For investors, the outlook remains uncertain. The UK government’s road map out of lockdown is only tentative and negative Covid-19 data could see restriction dates extended. The dividend also remains suspended with net debt of just over £800 million set against a stock market value of £1.66 billion. 

More favourably, a strong UK vaccination programme is underway, with investor support of its January equity fundraising arguably a sign of long-term optimism. Covid constrained incomes and rising unemployment also elevate its value offering, with management recently highlighting a £911 million increase in sales between the full-year 2008, or the approximate start of the last recession, and the full-year 2019. In all, its strong track record and ability to bear down on costs currently sit against an analyst fair value estimate of 1,214p per share.

Positives: 

  • Liquidity of over £200 million
  • Value customer offering

Negatives:

  • Uncertain Covid clouded outlook
  • Suspended dividend payment

The average rating of stock market analysts:

Strong hold

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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