Premier Inn owner to raise £1bn as hotels remain closed

● Sites ready to reopen when given government nod ● Hails ‘resilient’ financial outcome for past full year

Premierinnownerwhitbread has revealed plans to raise £1 billion through a rights issue, as the vast majority of its hotels and all its restaurants remain shut in the face of coronavirus.

The company said it has furloughed around 27,000 staff on full pay during the crisis. It said its UK hotels are “ready to open when the government advises” but added that its internal plans assume that establishments will be closed, or run at low occupancy, until September.

Whitbread said it has tested new operational protocols at 39 Premier Inn sites which have remained open in the UK to provide accommodation to NHS staff.

It said the operating model ensures strict social distancing, significantly enhanced hygiene standards and specific staff training which can be rigorously enforced across its hotels.

The group said it has reopened 16 of its hotels in Germany as the country’s lockdown starts to unwind.

Whitbread told investors that around £80 million of cash per month is expected to flow out of the business while closures continue, with an extra £100m outflow in customer refunds.

However, it said that this would be significantly offset by between £70m and £85m of furlough benefits in the first half of the new year.

The update came as the firm hailed a “resilient” full year to February, despite reporting an 8.2 per cent decline in adjusted pre-tax profits to £358m.

Whitbread’s chief executive officer 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.”

Richard Hunter, head of markets at Interactive Investor, noted: “Since the disposal of Costa Coffee last year, Whitbread has struggled to replicate what had been the source of a constant turbocharge to its revenues, by necessity concentrating its efforts mainly on hotels, and Premier Inn in particular.

“A weaker UK travel market, cost inflation and the costs of start-ups in Germany resulted in a decline of 8.2 per cent in adjusted pre-tax profit, while high fixed costs and revenues which have all but disappeared (in the last seven weeks, revenues from accommodation and food/beverages has fallen 99 per cent) pile on further financial pressure.”