Whitbread has announced the launch of a rights issue in efforts to raise £1bn, in order to shore up cash amid the ongoing pandemic.
The hotel group said the move would “enhance” its financial flexibility and “ability to successfully execute our strategy in the UK and Germany”, in order to “drive attractive returns on investment in the long-term”.
News of the fundraiser comes as the group said its full-year performance was “in line with expectations”, with commercial initiatives driving trading in the second-half of its financial year.
It hailed a “resilient” performance in the full-year to February 2020, despite pre-tax profit falling 8.2% to £358m.
Nonetheless, Whitbread reported an “enhanced” liquidity position, and has agreed a range of covenant waivers granted from lenders for 18 months.
It now aims to re-open “quickly and safely” in line with government advice, having had revised operational protocols successfully tested in 39 of its open sites.
Efforts to further shore up cash have included reductions in capital expenditure and discretionary spend, as well as voluntary pay cuts across the board and management teams. The group also made use of UK and German government support packages.
Whitbread added that it has a “strong” balance sheet as it enters its next financial year, with a cash reserve of £503m and an undrawn revolving credit facility of £950m.
Despite this, Whitbread expects cash outflows of approximately £600m in the first half of 2021, including operating cash outflows of £80m per month during periods of closure or low occupancy, a £100m outflow from refunding customer deposits, and capital expenditure outflows of £130m on “committed” projects.
Alison Brittain, Whitbread CEO, said: “Whitbread delivered a resilient financial performance in FY20 in line with expectations, against a backdrop of low UK business and consumer confidence which particularly impacted the regional hotel market.
“The commercial initiatives we implemented during H1 helped drive a particularly strong end to the year, when we were trading ahead of the market and achieving very strong guest scores.”
She added: “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.”