Premier Inn owner Whitbread taps investors for £1bn
Premier Inn owner Whitbread will tap investors for £1bn to help it weather the coronavirus crisis while its hotels and restaurants are closed.
Whitbread, which also owns Beefeater and pub chain Brewers Fayre, said the rights issue would help strengthen its balance sheet as the firm expects £80m of cash outflows a month while its sites are closed.
Whitbread’s share price dived more than 14 per cent to 2,433p this morning after it said it expects UK hotels to be closed or at low levels of occupancy until September.
However, it said it is ready to reopen as soon as the government advises. Some German hotels opened from 11 May.
The £1bn raise is intended to put the hotel chain in a strong position to continue its expansion plans after the coronavirus crisis, it said.
“The actions Whitbread has taken have ensured its business can withstand a prolonged period of closures and/or low demand,” the company said this morning.
“However, given Whitbread’s high fixed and semi-variable costs, its balance sheet will be impacted by material cash outflows during the period when its hotels and restaurants are closed or operating at low occupancy levels as a result of UK Government measures and/or social distancing.”
Whitbread, which also published its full-year results this morning, said it had cash liquidity of around £300m, and access to a £950m revolving credit facility, of which £50m is drawn down.
The company reported that revenue was up 1.1 per cent in the year to 27 February to £2.07bn.
Adjusted profit before tax dropped 8.2 per cent to £358m, which Whitbread blamed on weak UK travel market conditions and the “start-up” nature of its German operations.
CMC Markets analyst Michael Hewson said: “Market reaction to the rights issue has been predictably negative, with the shares sharply lower, and while no shareholder likes to have to put their hands in their pockets there is a certain logic to be had with the raising of this extra cash.
“With UK holidaymakers unable or unwilling to travel abroad Whitbread has the perfect opportunity to take advantage of a big increase in staycations as a result of the pandemic. This extra cash could be enormously helpful in precipitating that. “
Interactive Investor head of markets Richard Hunter added: “Quite apart from boosting liquidity, the rights issue provides the opportunity for a land grab, as some competitors, especially smaller ones, are unable to cope with the virtually entire removal of income in the shorter term and go to the wall. “