Wetherspoon in the market for second-hand pubs
Buying what JD Wetherspoon chief executive John Hutson called "second-hand pubs" is helping the managed pub group slash the cost of new openings by more than a third.
Hutson said more 'distressed' pubs were coming onto the market, and with many offered with nil premiums and the ability to secure lower rents meant the managed pub chain was reducing the cost of opening a new Wetherspoon venue per square foot by 36 per cent.
"We previously didn't bother buying existing pubs because the level of premium being demanded and the cost of refurbishing them didn't make economic sense. This is why we have traditionally gone for revamping existing retail units," he said.
"But in the current market we can get a pub for next to nothing and with all its facilities already in place we just have to spend on upgrading the customer areas," he added.
Wetherspoon opened 21 new pubs in the first half of the current financial year, versus 10 sites unveiled in the same period last year.
It planned to open 35 over the course of the year, split evenly between new sites and second-hand pubs.
Hutson said the group had more or less the same number of sites to buy in its property pipeline, but that it was looking to reduce the cost of development in the current environment.
On the issue of rents, some saw no increase in recent times, although there were some significant increases, depending on the market. Hutson said the group's site on George Street in Edinburgh witnessed a "double digit" rent hike, thanks to the relative health of the local economy.
Meanwhile Wetherspoon's finance director Keith Down said the group was satisfied it could come to an arrangement over its £415m banking facility, which matures in December next year.
"We've got the best part of two years to sort that out, but we are keeping it under close review with our advisers," he added.
Down said the £20m in funding it recently agreed with Abbey Santander was a sign that banks were continuing to be supportive of the Wetherspoon business model.
He also expressed confidence it would pay its US$140m debt this coming September out of existing bank facilities and cash flow.
The Wetherspoon executives were speaking as the group announced overall turnover in the six months to January 25, 2009, up 6.5 per cent, with like-for-like growth coming in a 1.9 per cent.
Like-for-like pub profits fell four per cent, with the finger being pointed at utility costs that were higher compared with the previous year, Down said.
