Whitbread looks to bounce back with reopenings and £1bn rights issue

FTSE 100 listed hotel and restaurant franchise and operator of Premier Inn, Whitbread plc (LON:WTB), announced on Tuesday that it planned to bounce back in style, after the lockdown period which perhaps hit hospitality and hotel sectors the hardest.

The company said that it had already reopened 270 of its UK hotels and 24 of its restaurants, with the majority of its remaining outlets set to reopen during July. It added that all 19 of its hotels were now open in Germany, including the 13 that had been refurbished and rebranded as Premier Inn during the lockdown period.

The company added that it had successfully completed a £1 billion rights issue, which will provide the company with additional funds to weather the transition back to normality, and even expand its existing offerings.

On the rights issue, Chief Executive Alison Brittain stated that it will:

“[…] enable us to maintain our competitive advantage and financial flexibility, as we have both strengthened our balance sheet and secured the business so it can withstand a long period of low revenues.”

With these additional funds and ‘strong’ balance sheet, the company will,

“take advantage of enhanced structural opportunities that we expect to become available in both the UK and Germany. This will mean that we are in a position of strength to continue to invest, increase market share, and over-time create significant value for shareholders”, Brittain stated.

Premier Inn and the pandemic

The company saw quarterly like-for-like sales dip by over 79% year-on-year, which of course reflected the widespread closure of hotels, restaurants and bars across the UK and Germany since March.

With that in mind, however, Whitbread operated 39 hotels for key workers throughout the crisis, and the company stated that these hotels were run in accordance with social distancing practices.

This, the company stated, has positioned it well to abide by new social distancing and hygiene expectations once it returns operations to full scale. The company not only has the experience to execute these procedures during a return to normal life but its new ‘flexible’ booking scheme and ‘unique ownership model’ will also help in the enforcement of safe practices.

Speaking on the reopening of Whitbread destinations, Alison Brittain stated:

“It is still very early days and therefore too early to draw any conclusions from our booking trajectory, especially as there has been volatility in hotel performance in other countries that relaxed controls before the UK. However, in traditional regional tourist destinations, we are seeing good demand for the summer months, whilst the rest of the regions and metropolitan areas, including London, remain subdued.”

Despite a largely optimistic update, the company’s shares dipped 4.59% or 112.00p, to 2,328.00p per share 07/07/20 13:14 BST. This is below the company’s median target price of 2,800.00p per share. Also, it is 43% year-on-year, and far from its level of 4,786.00p towards the latter stages of February.

Whitbread’s p/e ratio is currently 14.64, its dividend yield stands at 1.20%.

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Jamie Gordon
Senior Journalist at the UK Investor Magazine. Also a contributing writer at the Investment Observer, UK Property Journal and UK Startup Magazine. Postgraduate of King's College London with a specialisation in Business Ethics. Interested in Development Economics and David Hume.