Premier Inn owner Whitbread has announced its intention to raise £1b through a rights issue to ensure it emerges from the Covid-19 pandemic "with a strong balance sheet and in the best position possible".
Whitbread said the purpose was to return its balance sheet to a position of strength, allow the company to invest with confidence and flexibility, and provide liquidity headroom in the event of a Covid-19 resurgence.
The group said its 2020 financial performance prior to the impact of Covid-19 was in line with expectations. It said it would be able to withstand "many months" of its hotels being closed or at low occupancy and that it is ready to reopen quickly and safely.
It assumed hotels will remain closed or at low occupancy until September 2020. New health and safety procedures have been tested in 39 of the group's 821 properties that have remained open for key workers.
Whitbread reported a strong balance sheet as it entered the 2021 financial year, with cash of £503m and an undrawn revolving credit facility of £950m.
Approximately 27,000 of the group's furloughed staff remain on full pay, with the 20% not covered by the government topped up by the company. Whitbread also said it is continuing to pay suppliers "in a timely manner", including its March rent being paid on time and in full.
For the 2020 financial year the firm's adjusted profit before tax decreased by 8.2% to £358m as a result of weaker UK travel market conditions, particularly in the regions. Brexit uncertainty also led to declines in business and consumer confidence, resulting in lower demand for short-stay domestic travel. Its statutory profit before tax increased 28.4% to £280m.
Alison Brittain (pictured), Whitbread chief executive, said: "Having taken every step we could to ensure that we have the financial capability to withstand the initial period of lockdown, our focus has turned to re-opening and positioning ourselves for a successful recovery.
"Our strong balance sheet has for many years been a source of competitive advantage and has underpinned our long-term success. To enable us to continue to invest with confidence in the compelling structural growth opportunities that we see in the UK and Germany, we are raising £1b through a fully underwritten rights issue. Optimising the balance sheet in this way will enable the business to be in the best possible position to continue investing and taking market share in our fragmented sector when the current situation normalises.
"Whitbread is a strong and much-loved business that has successfully navigated numerous turbulent periods during its proud 278-year history. The combination of the strengths of our people, business model and our brands, alongside a strong balance sheet and the decisive action that we have taken, means that when the Covid-19 situation passes, we will be in a position of strength to continue to increase market share, support our colleagues and guests and create further significant value for shareholders."
Whitbread is the latest firm to fundraise to see it through the coronavirus crisis; foodservice firm Compass completed a successful £2b equity raise earlier this week and CH&Co has also undergone a refinancing and fundraise.