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Stock Watch

Wetherspoon's share price in focus after investors tapped up

Wetherspoon share price: a closed Wetherspoon's pub

The JD Wetherspoon share price is higher this morning after the group raised £93.7m from an equity placing. 

After the close of business yesterday, the pub group announced plans for the financing scheme. It was the second time the firm tapped investors for funds since the start of the pandemic.

Tough times hit Wetherspoon's share price

The Wetherspoons share price hit a record high in December 2019, but in early 2020 it retreated a little. The pandemic derailed any potential further success and as the health emergency set in, the Wetherspoon share price came under pressure.

The shares did subsequently rebound though, as the Wetherspoon share price jumped in early November on the back of the news that a Covid-19 vaccine developed by Pfizer and BioNTech registered a 90% efficacy rate in a trial. Sentiment in equity markets across the board was lifted on the Pfizer-BioNTech story, but pub groups like Wetherspoon recorded some of the biggest gains, as they have arguably the most to gain from economies being reopened.

Pub closures continue to wreak havoc

Times are extremely tough for the group, as all of its pubs have been closed since 31 December. The various restrictions with respect to opening and operating pubs have wreaked havoc with the business, and it has cut costs in a bid to conserve cash. The headcount now stands at 37,674, down 13.8% from 1 March 2020. In totoal, 99% of staff are currently furloughed. Costs during the closed period are £800,000 per week. Repair costs and general expenses have fallen 98% and 72.5% respectively when compared with the pre-pandemic era. The top tier of management has taken pay cuts during the closed period.

For a large portion of 2020, Wetherspoon's pubs were either closed because of lockdowns or else they were operating in restricted environments, where capacity numbers were below that of 2019. The latest restrictions in the UK are severe, and there is chatter they will remain in place until Easter, spelling further misery for the group.

Wetherspoon set to ride out coming months

Wetherspoon assumes that pubs will remain closed until the end of March 2021. On 14 January, the liquidity position stood at £139.1m, so it can ride out the next few months.

In light of the highly uncertain environment, the company has prepared four scenarios. The worst-case assumptions estimates the 2021 pre-tax loss will widen to £159m, from £34m in 2020, but return to a profit of £32m in 2022.          

The first quarter update covered the 15 weeks until 8 November; in that timeframe like-for-like sales fell by 27.6%.

Lately the Wetherspoon share price has been range bound, but the uptrend that has been in place since late October remains in place. If the uptrend continues, it might target the 1,400p area. A move lower might find support at 1,003p, the 100-day moving average.