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Coronavirus: JD Wetherspoon cancels dividend as business slumps

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·3-min read
Sign for the brand Wetherspoons on 10th January 2020 in London, England, United Kingdom. J D Wetherspoon plc (branded as Wetherspoon, and commonly known as Spoons) is a pub company in the United Kingdom and Ireland. Founded in 1979 by Tim Martin, the company operates nearly 900 pubs, including the chain of Lloyds No. 1 bars, and a growing number of Wetherspoon hotels. (photo by Mike Kemp/In Pictures via Getty Images)
A JD Wetherspoons pub on 10th January 2020 in London, England, United Kingdom. (Mike Kemp/In Pictures via Getty Images)

Pub group JD Wetherspoon (JDW.L) has axed its dividend and told investors it’s impossible to predict how the business will fare, after the government this week told the public not to go to bars and pubs.

JD Wetherspoon said on Friday it would scrap its planned interim dividend, worth £4.2m ($4.86m). Founder and chairman Tim Martin said profits would likely be lower this year but the company couldn’t give any realistic guidance as to where they might land due to the ongoing coronavirus pandemic.

“It is obviously very difficult to predict, in these circumstances, how events will unfold in future weeks and months, but we now anticipate profits being below market expectations, so long as the current health scare continues,” Martin said in a statement.

“As a result of this uncertainty, it is impossible to provide realistic guidance on our performance in the remainder of the financial year.”

Martin said sales of beer and food had been up over 3% in the six weeks to the start of March. However, sales fell by 4.5% last week as fears about coronavirus began to rise and have “declined at a significantly higher rate” since then. It follows a call by prime minister Boris Johnson on Monday not to go to pubs and restaurants in a bid to stop the spread of Covid-19.

Read more: Stocks rise amid investor optimism about stimulus measures

As well as cancelling the dividend, Martin said JD Wetherspoon would reduce most capital expenditure. He said government support schemes and the efforts to conserve cash means the pub group “has sufficient liquidity to maintain operations at a substantially lower level of sales.”

Conservative Party leadership candidate Boris Johnson, left, gestures with Tim Martin, Chairman of JD Wetherspoon, during a visit to Wetherspoons Metropolitan Bar in London, Wednesday July 10, 2019. (Henry Nicholls/Pool Photo via AP)
Boris Johnson, left, gestures with Tim Martin, Chairman of JD Wetherspoon, during a visit to Wetherspoons Metropolitan Bar in London, last year. (Henry Nicholls/Pool via AP)

Greg Johnson, an analyst at Shore Capital, said JD Wetherspoon’s annual operating costs are around £1bn, with £700m coming from staff wages and around £70m down to rent and repair of its pubs.

Johnson estimated Wetherspoon has around £240m of cash on hand to keep the business going, equating to just a few months, but said costs could probably halved meaning “the group realistically has several months of available liquidity.

“A lot depend[s] on the government’s response to support businesses,” Johnson said in a research note on Friday.

The government has already announced a £330bn package of loan guarantees for businesses and Chancellor Rishi Sunak is due to announce a wage support package on Friday.

“As many companies and commentators have noted, the current health crisis places the hospitality industry, in particular, under great pressure,” Martin said.

“Wetherspoon, like our peers, will be working closely with all parties, including employees, banks, landlords and suppliers, in order to emerge from the situation in the best shape.”

Read more: Bank of England cancels stress tests for banks

Earlier in the week, Martin lambasted prime minister Boris Johnson for urging the public to stay away from bars and restaurants in a bid to stop the spread of Covid-19. Martin called the decision a “tactical error” that “delays the inevitable and destroys the tax base at the same time”.

The suspension of dividend and guidance came as JD Wetherspoon reported half-year results. Revenue rose 4.9% to £933m in the 26 weeks to 26 January, while pre-tax profit dropped 13.7% to £42m due to one-off costs.