Wetherspoon set to expand as financing secured

Published 11th Mar 2010

Pubs group JD Wetherspoon (JDW.L) unveiled a new 530 million pound debt facility today, giving it the firepower to ramp up expansion as its struggling rivals look to sell assets.

The company, which has 746 pubs across Britain, also cheered investors by resuming dividend payments after reporting a better-than-expected first-half pretax profit.

Wetherspoon has been among the best performing pub companies throughout the recession as cut-price meals such as ham, egg and chips for 2.99 pounds and a pint of Greene King IPA beer for 99 pence, proved attractive to cash-strapped consumers.

Chairman and founder Tim Martin told Reuters the refinancing will enable the company to press ahead with plans to increase new pub openings to a rate of 50 each year for the next 10 years.

"It gives a bit of extra scope if a few pubs come along. There are good sites becoming available. It's a question of doing the best ones and not buying things just because you've got money," Martin said in a telephone interview.

"The rent and freehold prices have come down from their peak by a considerable measure but the question is whether that's come down enough to give you decent returns."

Wetherspoon plans to open another 500 pubs in the next 10 years and analysts see success ahead.

"The company has been winning market share from competitors suffering in the depressed economy and is now preparing to take over more of their pubs," said KBC Peel Hunt's Paul Hickman.

"Wetherspoon has the will and now has the means for another major transformation on the scale of that it achieved in the 1990s."

FOCUS ON VALUE

The company's focus on value has helped it defy the malaise that has hit the rest of the sector as the impact of the recession, above-inflation beer duty hikes and competition from supermarkets combined have kept drinkers at home.

This has led to an average 39 pubs a week closing in Britain, according to the British Beer & Pub Association, although recent updates from pub operators have suggested trading conditions may be improving.

Marston's and Enterprise Inns have reported improved trading while British consumer confidence hit its highest in two years in February.

Chairman Tim Martin, who opened the first Wetherspoon pub in 1979, has been a long-time critic of Prime Minister Gordon Brown and the government's treatment of the pubs industry, and is hoping for a change of government in the forthcoming election.

"I'd prefer to see anyone (other than Brown). If it goes on like it is for pubs, it will be very bad news indeed," he said.

The company said underlying pretax profit rose by 17.5 percent to 36.2 million pounds in the first half to January 24, ahead of a consensus of 35.4 million in a Reuters poll of four analysts.

Wetherspoon's new financing is with a syndicate of 11 banks, comprising a mix of new and current lenders, and is due to expire in March 2014. It replaces the previous 435 million pound facility, which was due to expire in December 2010.

The company said it would pay a regular dividend of 12 pence per share and, in light of the refinancing, reward shareholders with a special dividend of 7 pence per share.

Wetherspoon scrapped dividend payments this time last year pending successful completion of a refinancing.

Martin, who as a 24 percent shareholder will be the biggest beneficiary, said the dividend will give shareholders "an element of compensation" after missing out last year.

Source: ' Reuters '

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