Shares in Premier Inn owner Whitbread (WTB) plunged 12.45% to £24.89 in mid-morning trading after it warned of a 75% drop in revenue, suspended its dividend and asked shareholders for £1bn.

In full year results to 27 February, Whitbread reported a 1.1% rise in statutory revenue to £2.07bn, with statutory profit for the year up 23.2% to £218m.

However in the 11 weeks to 14 May, the hospitality firm warned its total accommodation and food and beverage revenues were down 75% year-on-year, while in the last seven weeks those revenues were down 99%.

The board therefore decided not to declare a final dividend for 2020 and to suspend future dividend payments ‘until the COVID-19 situation is clearer’ and when its existing lender covenant waiver period ends.

The firm also plans to raise cash by way of a one for two fully underwritten rights issue at £15 per share, to raise approximately £1,009m.

Whitbread said it needs the money as it expects cash outflows of around £600m in the next six months, and among other things it would also provide liquidity headroom in case there is a resurgence in coronavirus cases.


AJ Bell investment director Russ Mould said that any shareholders 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.’

He added, ‘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.’


Shore Capital analyst Greg Johnson has questioned the size of Whitbread’s planned fundraising, given its ‘robust’ performance with full year EBITDA of £567m, with net debt of £323m at the end of February.

He said, ‘Again, we struggle with the magnitude of the equity raise and its dilution given the low starting debt position, liquidity and the resultant dilution.’

But he added that Whitbread appears ‘well positioned’ to drive further market share gains in the UK while current crisis could accelerate its expansion plans in Germany, where timing to acquire assets could be ‘fortuitous’.


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Issue Date: 21 May 2020