Hotels suffer from lockdown
Whitbread shares plunge on £1bn cash call to cover losses
Hotels are taking a big hit from the lockdown
Premier Inn owner Whitbread’s share price nose-dived after it announced a deeply discounted rights issue to raise £1bn to offset expected losses from the coronavirus lockdown.
Shareholders are being offered one new share at 1,500p for every two they already own. Before today’s announcement, these were trading at 2,843p. At 3pm the shares were 13% or 378p lower at 2466p.
Russ Mould at AJ Bell said: “Anyone taking part in Whitbread’s rights issue will need to assume that life returns to normal in the next few years and that there isn’t an earnings nightmare in the near-term.
“The scale of Whitbread’s fundraise would suggest it isn’t taking any chances, despite already having a fairly decent balance sheet. It seems to be taking the view that it is better to have as much money as possible now in case the pandemic goes on for longer than expected.
“If the world starts to get back on its feet fairly swiftly then Whitbread could be in strong position financially to accelerate its expansion in Germany.”
Whitbread said it expected outflows of £600m, including operating cash outflows of about £80m per month during the period of closure or low occupancy.
The company paid out £100m to refund customer deposits, and there was £130m of capital expenditure on committed projects including the refurbishment of the Germany Foremost hotels acquired this year.
These outflows will also be partially offset by approximately £70m-85m of furlough benefits.