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Decisive action on cash flow

Whitbread likely to breach covenants, halts investment

Premier Inn

Premier Inn at Lomondgate: the group is halting expenditure

Hotels group Whitbread today said it is likely to be in technical default of its covenants as a result of the interruption to cash flow, and is in talks with its banks about a waiver.

The company is closing its Premier Inn chains in the UK and Germany and halting expenditure on refurbishment and expansion.

It is in discussions with the UK Government regarding the use of some hotels, in locations near hospitals, to support front-line key workers.

Whitbread said it entered the year with a strong balance sheet and access to significant liquidity. It has “material headroom” on its funding facilities, and will be paying all its rent payments this quarter.

However, it has taken a number of “decisive actions” to reduce cash outflows during this period, including room refurbishment plans, marketing, non-essential training and staff recruitment.

All employees remain on full pay and should be eligible government support.

Repairs and maintenance capital expenditure has been reduced to a minimum, with the business now only incurring costs where there is a legal or health and safety requirement to do so.

All non-committed development capital expenditure has been cancelled. This includes all refurbishments, extensions, freehold builds and acquisitions in the UK and Germany. Capital expenditure will only be incurred where there is a contractual obligation to do so, and / or a site is significantly complete;

The board has decided not to declare a dividend for the full year FY20.

“It is possible that closure of our hotels and restaurants (other than those which will stay open to support key workers), as a result of the Government’s instructions, may amount to a technical event of default under our banking arrangements and certain other financial obligations of the Group,” said the company.

“We are working with all relevant parties to seek waivers wherever this is required or prudent.”

The company said the 12-month business rates relief is expected to save the business c.£120m in FY21, together with the contribution to salary costs of furloughed employees.

“Both these measures will have a material positive impact on cashflow during the year.

“The decisive action being taken, means Whitbread is well-placed as we face into this uncertain period.”



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