Coronavirus: Premier Inn owner to raise £1bn amid nightmare for hospitality

May 21, 2020

The owner of Premier Inn, Whitbread, is planning to raise £1bn through a rights issue as its brands remain mostly crippled by coronavirus restrictions..

The company, which completed a £2.5bn handout to investors just last summer after the £3.9bn sale of Costa Coffee to Coca-Cola, said it was proposing to offer one new share for every two existing shares to bolster its balance sheet and fund future growth.

Its shares, which have lost half their market value in the year to date amid the crisis facing the wider hospitality sector, were 13% down at the close on Thursday.

Whitbread suspended its dividend and shut all its hotels and restaurants in March due to the COVID-19 outbreak.

It told shareholders on Thursday that the vast majority of its hotels and all its restaurants remained closed, with 27,000 staff furloughed on full pay.

It said it had reopened 16 hotels in Germany and expected most in the UK to remain shut or operate at low occupancy levels until September.

New safety protocols in UK sites that have been open to provide accommodation for NHS workers, Whitbread said, "ensures strict social distancing, significantly enhanced hygiene standards and specific staff training can be rigorously and consistently enforced across the estate".

The company announced the rights issue alongside the publication of its full-year results which showed a boost to profit before tax from the lack of costs associated with the sale of Costa.

It reported a 28% leap to £280m for the 12 months to the end of February though they were 8% down on an adjusted basis as UK hotel occupancy was damaged by weaker consumer confidence.

Whitbread chief executive Alison Brittain, said: "Whitbread delivered a resilient financial performance in the full-year 2020 in line with expectations, against a backdrop of low UK business and consumer confidence which particularly impacted the regional hotel market.

"However, the period after the year-end has been dominated by the impact of the rapidly evolving COVID-19 pandemic.

"In response, the business took rapid and decisive action to protect our teams and our guests, and to secure our business to ensure that we will be in the best possible position to rebound strongly."

Emilie Stevens, equity analyst at Hargreaves Lansdown, said of the fundraising: "They're not the first company to shore up their balance sheet by raising equity capital, but they're one of a few to do it by a rights issue, which means both institutional and retail shareholders can participate.

"Whitbread entered the crisis with its balance sheet in reasonably good shape, partly thanks to the sale of Costa Coffee last year, so today's move highlights just how much pressure the leisure sector is under."

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