JD Wetherspoon seeking debt waivers from lenders

Pub chain’s food and drink sales still well below pre-pandemic levels despite lockdown easing

Last modified on Wed 7 Jul 2021 11.01 EDT

JD Wetherspoon is seeking debt waivers from its lenders for the year ahead, with food and drink sales in its pub chain still well below pre-pandemic levels despite recent lockdown easing and the Euro 2021 tournament.

The company, which has all but 10 of its 860 pubs open, said it expected to make a loss for the year to 25 July. This will be only the company’s second annual loss in its history, coming after it slipped £105m into the red in the previous year.

The company said its net debt is expected to be £833m at the end of its current financial year on 26 July. It has negotiated debt covenant waivers up to this date related to profits measures linked to the amount of cash and assets in the business. It said it expected to enter talks over more waivers for the coming financial year.

Between 12 April, when hospitality businesses were allowed to restart serving outdoors, and 16 May, like for like sales were nearly 50% lower than during the same period in 2019.

Sales were also down compared to 2019 between May and early July, despite the full reopening of pubs with some social distancing restrictions.

Trade was down 8% between 17 May and 10 June before the Euro football tournament kicked off. However, the slide worsened to 21% up until last week, as most Wetherspoon pubs are not screening the live international football.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown said: “Although across the sector outside terraces are heaving and revellers are making the most of their new found social freedoms, sales at Wetherspoon are still like a weak pint of beer.

“The company may be rueing its decision to televise only a handful of matches as much of the football fan crowd has clearly gone elsewhere.”

Wetherspoon slumped into a first-half loss in March and has had to make hundreds of employees redundant and raise money to get through the health crisis, which forced its pubs to shut through the key Christmas season last year.

The pub chain, headed by Tim Martin, said it will have to increase the price of its meals by an average 40p when the pandemic-related reduction in the VAT on food sold in hospitality businesses is phased out.

Hot food served in pubs and restaurants typically has a VAT rate of 20%, but the government reduced that to 5% during the pandemic.

“The VAT rise will make the entire hospitality industry less competitive vis a vis powerful supermarkets,” Wetherspoon said.

Despite the problems, Wetherspoon said it plans to open 18 new pubs and upgrade 57 others, and will invest about £750m in similar projects in the next 10 years.

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