Whitbread ‘protects’ its liquidity

Premier Inn

Whitbread said that it would continue to protect its liquidity as it anticipated opportunity as a result of the pandemic.

The company has asked its landlords for a 50% rent cut for the next three months, citing "significant" net cash outflow in the past six months.

The group’s net cash position at 31 December was £40.0m compared to £196.4m at the end of the first half. Capital spend was £98.4m in the four months to 31 December. The Group also had cash on deposit of £814.9m and access to a £900.0m undrawn revolving credit facility, and up to £300.0m available under the Government's Covid Corporate Financing Facility (CCFF) scheme

In a trading update, Whitbread said that government Covid-19 restrictions continued to create "very challenging hotel market conditions”, with total UK accommodation sales down 55.2% with occupancy at 49.3%.

Following the updated UK government restrictions announced on 4 January 2021, that only permit essential business and keyworker accommodation, around two-thirds of the company’s hotels remained open.

The group said that improved demand for business travel, and some leisure travel, resulted in the majority of its UK hotels remaining open during the first half of December. Total UK accommodation sales were down 66.4% for the 5 weeks to 31 December 2020 with occupancy at 31.1%.

In Germany, 21 of the 29 operational hotels remained open but under “severe restrictions” and therefore similar to the overall German hotel market, recorded low levels of occupancy. These restrictions have been extended until at least the end of January.

Alison Brittain, CEO, said: “We expect the current travel restrictions in the UK and Germany to remain until at the very least the end of our financial year. With the vaccination programme underway, we look forward to the potential gradual relaxation of restrictions from the Spring, business and leisure confidence returning, and our market recovering over the rest of the year. 

“We are well placed to continue to outperform the increasingly constrained budget branded and independent competitor sets, by leveraging the benefits of our unique operating model. We expect to see increasing opportunities to develop in both the UK and Germany and are pleased to have accelerated our growth in Germany with the recent acquisition of 13 hotels, taking the open and committed pipeline to 68 hotels, a major step on our path to achieving a nation-wide footprint with representation in most major towns and cities.

“We continue to protect our liquidity through the careful management of our cash position, and to take actions to ensure that we exit the crisis as a leaner, stronger and more resilient business. Our strong balance sheet also provides the opportunity to take full advantage of the enhanced structural opportunities that we are already seeing in the market.”

Last month the company looked to a possible rent cut for the 40% of the estate under leases.

Whitbread said: “Since the start of the Covid-19 pandemic, Whitbread has taken decisive action to ensure that our cost base reflects the low levels of demand, with the support of a wide range of stakeholders including shareholders, lenders, colleagues and suppliers. The actions we have taken, combined with the strength of the Premier Inn brand and our leading customer proposition mean that we continue to trade ahead of the market.

“Throughout the pandemic to date, we have paid our rent commitments in full, even when our hotels and restaurants were forced to close. With ongoing Government restrictions expected to result in subdued market demand into the first half of 2021, we are now asking our landlords to support us, as other stakeholders have during the pandemic, through a reduction in rent for the December quarter in recognition of the current environment. The business had arrived at this decision ahead of the most recent government update on Saturday 19 December.”


Insight: When Whitbread raised £1bn in May last year and didn’t immediately deploy it on buying, say, Motel One, it freaked the market right out.

Why would you need to hoard all that cash? What did they know? Fans of the Little House on the Prairie books will recall that before the Long Winter, Pa noticed that the muskrats were building their walls very thick.

Muskrats are Whitbread here, although they clear hope to retain some money for buying say, Motel One when this is all over. Those who do not have walls as thick look on.