TIDMWTB
RNS Number : 5534N
Whitbread PLC
21 May 2020
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART
IN OR INTO THE UNITED STATES, AUSTRALIA, NEW ZEALAND, UNITED ARAB
EMIRATES, JAPAN, SINGAPORE, SOUTH AFRICA, AND ANY OTHER
JURISDICTION WHERE THE EXTENSION OR AVAILABILITY OF THE RIGHTS
ISSUE (AND ANY OTHER TRANSACTION CONTEMPLATED THEREBY) WOULD BREACH
ANY APPLICABLE LAW OR REGULATION.
NOTHING IN THIS ANNOUNCEMENT SHOULD BE INTERPRETED AS A TERM OR
CONDITION OF THE RIGHTS ISSUE. ANY DECISION TO PURCHASE, SUBSCRIBE
FOR, OTHERWISE ACQUIRE, SELL OR OTHERWISE DISPOSE OF ANY NIL PAID
RIGHTS, FULLY PAID RIGHTS OR NEW ORDINARY SHARES MUST BE MADE ONLY
ON THE BASIS OF THE INFORMATION CONTAINED IN THE PROSPECTUS ONCE
PUBLISHED. COPIES OF THE PROSPECTUS WILL, FOLLOWING PUBLICATION, BE
AVAILABLE FROM THE REGISTERED OFFICE OF THE COMPANY AND ON ITS
WEBSITE AT WWW.WHITBREAD.CO.UK/INVESTORS/.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
FOR IMMEDIATE RELEASE
21 May 2020
WHITBREAD PLC
ANNOUNCEMENT OF RIGHTS ISSUE
1 for 2 fully underwritten rights issue to raise gross proceeds
of approximately GBP1,009 million
Further to the announcement of its results for the financial
year ended 27 February 2020, Whitbread plc ("Whitbread" or the
"Company", and together with its subsidiaries, the "Group"), a
leading operator of hotels and restaurants, today announces that it
proposes to raise gross proceeds of approximately GBP1,009 million
by way of a rights issue (the "Rights Issue").
Highlights
- The purpose of the Rights Issue is to ensure that Whitbread
emerges from the COVID-19 pandemic in the strongest possible
position to take advantage of its long-term structural growth
opportunities and win market share in both the United Kingdom and
Germany.
- Whitbread entered the COVID-19 pandemic with a strong balance
sheet and significant liquidity. Since the onset of the pandemic,
Whitbread has taken decisive action to reduce cash outflows through
a broad range of measures, including reducing discretionary costs,
postponing non-committed development and non-essential maintenance
capital expenditure and utilising the Coronavirus Job Retention
Scheme to provide wage costs for furloughed employees. In addition,
Whitbread has been confirmed as an eligible issuer under the CCFF,
with an issuer limit of GBP600 million. The Group has also obtained
waivers until 2 March 2022 of the existing financial covenants
under its financing and pension arrangements, which have
temporarily been replaced with debt and liquidity covenants.
- The actions Whitbread has taken have ensured its business can
withstand a prolonged period of closures and/or low demand.
However, given Whitbread's high fixed and semi-variable costs, its
balance sheet will be impacted by material cash outflows during the
period when its hotels and restaurants are closed or operating at
low occupancy levels as a result of UK Government measures and/or
social distancing.
- The Rights Issue to raise GBP980 million (net of expenses) is
designed to provide the balance sheet strength necessary to support
continued investment in Whitbread's strategy whilst its
budget-branded and independent competitors are expected to be
weakened by the COVID-19 pandemic. Whitbread believes the Rights
Issue will:
-- Return its balance sheet to a position of strength that will
give it a real competitive advantage.
-- Allow it to invest with confidence and flexibility in its
strategy: opening its committed pipeline in the United Kingdom,
accessing the significant opportunity in Germany and keeping its
offering ahead of the competition.
-- Provide further liquidity headroom in the event of a
resurgence of the COVID-19 pandemic.
- Whitbread's strategy is clear and straightforward: to use
Whitbread's unique vertically-integrated business model to access
the long-term structural growth opportunities in the United Kingdom
and German hotel markets, investing in opening new hotels,
strengthening the customer proposition and creating competitive
advantage, in a market where the Group believes the decline of the
significant independent hotel sector may accelerate in favour of
budget-branded hotels as a result of the COVID-19 pandemic.
- The Board unanimously believes that the Rights Issue is
necessary to, and will, put Whitbread in the best possible position
to deliver this strategy and returns to shareholders over the
long-term.
Background to and reasons for the Rights Issue
Whitbread's strategic priorities remain consistent with its plan
to create sustainable shareholder value over the long-term, through
disciplined execution in three key areas:
- Continuing to grow and innovate Premier Inn in its core UK
market, by leveraging the competitive advantages of the Group's
operating model and capitalising on the enhanced structural
opportunities that are expected to exist post COVID-19
- Focusing on the Group's strengths to grow at scale
internationally, by replicating its success in the United Kingdom
in Germany
- Continuing to build the Group's capability and platform
The Rights Issue is intended, alongside the other actions the
Group has already announced, to ensure that the Group emerges from
the COVID-19 pandemic with a strong balance sheet and in the best
possible position to deliver on its strategy. In particular, the
Board believes the Rights Issue will better position the Group to
be able to invest, as and when appropriate, avoiding constraints
that might otherwise apply in the medium-term. That investment is
expected to help the Group to unlock its long-term structural
growth opportunities in the United Kingdom and Germany, where the
Group has long-term network potential for more than 110,000 and
60,000 rooms, respectively, and to win market share, including from
the significant but declining independent hotel sector, whose
market position may be weakened as a result of the COVID-19
pandemic. The experience of earlier periods of economic
difficulties, such as the 2008 financial crisis, demonstrates the
importance of maintaining a strong balance sheet. The Group
believes this will give it a competitive advantage when seeking
opportunities to acquire new sites and when investing in the
customer propositions required to succeed and that continued
investment in sites and customer propositions will enable Whitbread
to emerge in the best position possible from the COVID-19
pandemic.
The Group has taken proactive steps to mitigate, where possible,
the negative financial and operational impacts of the COVID-19
pandemic. Consequently, capital expenditure will only be incurred
by the Group for essential hotel maintenance, where there is a
contractual obligation to do so and/or a site is significantly
complete and to maintain core IT programmes and infrastructure.
In the first half of the financial year ending 25 February 2021,
the Group expects approximately:
- GBP 80 million of operational cash outflows per month during
the period when its hotels and restaurants are closed or operating
at low Occupancy;
- GBP70 million to GBP85 million of wage cost savings from the
Coronavirus Job Retention Scheme;
- GBP100 million working capital cash outflows from refunding customer deposits; and
- GBP130 million of capital payments, principally for committed
projects, including the refurbishment of hotels acquired as part of
the acquisition of a company with 13 hotels (with an additional six
hotels in the committed pipeline) in Germany from Foremost.
Given the opportunities to invest capital in the United Kingdom
and Germany, the priority for Whitbread's capital structure is to
provide financial flexibility. The Board believes that the optimum
capital structure for the Group's medium and long-term success, is
to maintain balance sheet leverage at a level that is broadly
consistent with investment grade credit metrics. Financial strength
is a source of competitive advantage to the Group, as it allows the
business to take a long-term investment horizon. It also helps
secure sites for new hotels on favourable terms, enables the Group
to access funding to support investment, and ensures a strong
counterparty covenant to lenders, landlords, suppliers and the
Whitbread Group Pension Fund.
The Group retains significant liquidity with cash of
approximately GBP300 million as at 15 May 2020 and access to the
GBP950 million Revolving Credit Facility of which only GBP50
million is drawn as at the date of this document. The Board
believes this will support its business through the COVID-19
pandemic, having agreed waivers of the existing financial covenants
from the lenders under the Revolving Credit Facility, the holders
of the 2011 US Notes and 2017 US Notes and the Trustee of the
Whitbread Group Pension Fund until 2 March 2022. These covenants
have temporarily been replaced with debt and liquidity covenants as
it was likely that the Group would not have been in compliance with
the existing financial covenants when they were otherwise next due
to be tested on account of a diminished financial performance or
position resulting from the COVID-19 pandemic. The Company has also
secured access to the Bank of England's Covid Corporate Financing
Facility, with an issuer limit of GBP600 million. Under the terms
of the covenant waivers, the Group has agreed that no dividends
will be paid on its Ordinary Shares until the later of 2 March 2022
and the date the Company is in compliance with the original
financial covenants. Accordingly, the Board hopes to return to
paying dividends again following the normalisation of the Group's
financial position and performance.
As at 27 February 2020, the Group's Lease Adjusted Net Debt /
FFO ratio was 2.6x; however, in light of the impact of the COVID-19
pandemic and associated government policy responses on the Group's
business, it is likely that, absent the Rights Issue, the Group's
lease adjusted leverage will be materially elevated for a few
years. Such a position would have limited the Group's financial
flexibility to continue pursuing its strategy through that period,
which the Board does not believe would be in the best interests of
the Group or its Shareholders.
The Rights Issue to raise GBP980 million (net of expenses) is
designed to support bringing the Group's leverage broadly into line
with investment grade credit metrics over the next few years as the
business trading environment normalises. The Board believes that
maintaining a strong balance sheet is critical to the long-term
success of the Group and the delivery of its strategy.
Directors' Intentions
Each Director who is a Shareholder and is who is able to
participate in the Rights Issue has confirmed his or her intention
to take up in full or in part his or her entitlement to subscribe
for New Ordinary Shares under the Rights Issue in respect of his or
her respective holding of Existing Ordinary Shares.
Prospectus
A prospectus (the "Prospectus") setting out full details of the
Rights Issue is expected to be published on Whitbread's website
later today. The preceding summary should be read in conjunction
with the full text of the following announcement, together with the
Prospectus.
Unless the context otherwise requires, words and expressions
defined in the Prospectus shall have the same meanings in this
announcement.
Indicative summary timetable of principal events
Record Date for entitlements under the 19 May 2020
Rights Issue
Provisional Allotment Letters personalised 22 May 2020
and despatched (to Qualifying Non-CREST
Shareholders only)
---------------------
Existing Ordinary Shares marked "ex-rights" 8:00 a.m. on 26 May
by the London Stock Exchange 2020
---------------------
Admission of, and commencement of dealings 8:00 a.m. on 26 May
in, Nil Paid Rights on the London Stock 2020
Exchange; start of subscription period
---------------------
Latest time and date for acceptance, 11:00 a.m. on 9 June
payment in full and registration of 2020
renunciation of Provisional Allotment
Letters
---------------------
Announcement of the results of the Rights By 8:00 a.m. on 10
Issue through a Regulatory Information June 2020
Service
---------------------
Dealings in New Ordinary Shares, fully 8:00 a.m. on 10 June
paid, commence on the London Stock Exchange 2020
---------------------
The Rights Issue is fully underwritten by J.P. Morgan Cazenove
and Morgan Stanley, both of which are acting as Joint Global
Coordinators.
The Rights Issue is being conducted within the parameters of the
authorities conferred upon the Company by Shareholders at its
annual general meeting on 19 June 2019 and, as such, does not
require the approval of Shareholders in a general meeting or
otherwise.
The person responsible for making this announcement on behalf of
Whitbread is Chris Vaughan, General Counsel.
For further information, please contact:
Whitbread plc investorrelations@whitbread.com
J.P. Morgan Cazenove (Joint Sponsor,
Joint Corporate Broker and Joint
Global Coordinator)
Alex Watkins
Virginia Khoo +44 (0) 20 7742 4000
--------------------------------
Morgan Stanley (Joint Sponsor,
Joint Corporate Broker and Joint
Global Coordinator)
Tom Perry
Angus Millar +44 (0) 20 7425 8000
--------------------------------
Tulchan Communications
David Allchurch
Jessica Reid +44 (0) 20 7353 4200
--------------------------------
IMPORTANT NOTICES
This announcement has been issued by and is the sole
responsibility of the Company. The information contained in this
announcement is for background purposes only and does not purport
to be full or complete. No reliance may or should be placed by any
person for any purpose whatsoever on the information contained in
this announcement or on its accuracy or completeness. The
information in this announcement is subject to change.
This announcement is not a prospectus but an advertisement.
Neither this announcement nor anything contained in it shall form
the basis of, or be relied upon in conjunction with, any offer or
commitment whatsoever in any jurisdiction. Investors should not
acquire any Nil Paid Rights, Fully Paid Rights or New Ordinary
Shares referred to in this announcement except on the basis of the
information contained in the Prospectus to be published by the
Company in connection with the Rights Issue.
A copy of the Prospectus will, following publication, be
available from the registered office of the Company and on its
website at www.whitbread.co.uk/investors/. Neither the content of
the Company's website nor any website accessible by hyperlinks on
the Company's website is incorporated in, or forms part of, this
announcement. The Prospectus will provide further details of the
New Ordinary Shares, the Nil Paid Rights and the Fully Paid Rights
being offered pursuant to the Rights Issue.
This announcement does not contain or constitute an offer for
sale or the solicitation of an offer to purchase securities in the
United States. The Nil Paid Rights, the Fully Paid Rights and the
New Ordinary Shares have not been and will not be registered under
the US Securities Act of 1933, as amended (the "Securities Act") or
under any securities laws of any state or other jurisdiction of the
United States and may not be offered, sold, pledged, taken up,
exercised, resold, renounced, transferred or delivered, directly or
indirectly, in or into the United States except pursuant to an
applicable exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and in compliance
with any applicable securities laws of any state or other
jurisdiction of the United States or other jurisdiction. There will
be no public offer of the Nil Paid Rights, the Fully Paid Rights or
the New Ordinary Shares in the United States. Subject to certain
limited exceptions, Provisional Allotment Letters have not been,
and will not be, sent to, and Nil Paid Rights have not been, and
will not be, credited to the CREST account of, any Qualifying
Shareholder with a registered address in or that is known to be
located in the United States, or to holders of the Whitbread's
American depositary shares. None of the New Ordinary Shares, the
Nil Paid Rights, the Fully Paid Rights or the Provisional Allotment
Letters, this announcement or any other document connected with the
Rights Issue has been or will be approved or disapproved by the
United States Securities and Exchange Commission or by the
securities commissions of any state or other jurisdiction of the
United States or any other regulatory authority, nor have any of
the foregoing authorities passed upon or endorsed the merits of the
offering of the New Ordinary Shares, the Nil Paid Rights or the
Fully Paid Rights, or the accuracy or adequacy of the Provisional
Allotment Letters, this announcement or any other document
connected with the Rights Issue. Any representation to the contrary
is a criminal offence in the United States.
This announcement is for information purposes only and is not
intended to and does not constitute or form part of any offer or
invitation to purchase or subscribe for, or any solicitation to
purchase or subscribe for, Nil Paid Rights, Fully Paid Rights or
New Ordinary Shares or to take up any entitlements to Nil Paid
Rights in any jurisdiction. No offer or invitation to purchase or
subscribe for, or any solicitation to purchase or subscribe for,
Nil Paid Rights, Fully Paid Rights or New Ordinary Shares or to
take up any entitlements to Nil Paid Rights will be made in any
jurisdiction in which such an offer or solicitation is unlawful.
The information contained in this announcement is not for release,
publication or distribution to persons in the United States,
Australia, New Zealand, United Arab Emirates, Japan, Singapore,
South Africa, and any other jurisdiction where the extension or
availability of the Rights Issue (and any other transaction
contemplated thereby) would breach any applicable law or
regulation, and should not be distributed, forwarded to or
transmitted in or into any jurisdiction, where to do so might
constitute a violation of local securities laws or regulations.
The distribution of this announcement into jurisdictions other
than the United Kingdom may be restricted by law, and, therefore,
persons into whose possession this announcement comes should inform
themselves about and observe any such restrictions. Any failure to
comply with any such restrictions may constitute a violation of the
securities laws of such jurisdiction. In particular, subject to
certain exceptions, this announcement, the Prospectus (once
published) and the Provisional Allotment Letters (once printed)
should not be distributed, forwarded to or transmitted in or into
the United States, Australia, New Zealand, United Arab Emirates,
Japan, Singapore or South Africa. Recipients of this announcement
and/or the Prospectus should conduct their own investigation,
evaluation and analysis of the business, data and property
described in this announcement and/or if and when published the
Prospectus.
This announcement does not constitute a recommendation
concerning any investor's options with respect to the Rights Issue.
The price and value of securities can go down as well as up. Past
performance is not a guide to future performance. The contents of
this announcement are not to be construed as legal, business,
financial or tax advice. Each shareholder or prospective investor
should consult his, her or its own legal adviser, business adviser,
financial adviser or tax adviser for legal, financial, business or
tax advice.
NOTICE TO ALL INVESTORS
Morgan Stanley & Co. International plc ("Morgan Stanley") is
authorised by the Prudential Regulation Authority and regulated by
the Prudential Regulation Authority and Financial Conduct
Authority. Morgan Stanley is acting exclusively for Whitbread plc
in relation to the Rights Issue, will not regard any other person
as a client in relation to the Rights Issue and will not be
responsible to anyone other than Whitbread plc for providing the
protections afforded to clients of Morgan Stanley nor for providing
advice to any person in relation to the Rights Issue or any matters
referred to in this announcement. J.P. Morgan Securities plc (which
conducts its UK investment banking business as "J.P. Morgan
Cazenove") is authorised by the Prudential Regulation Authority and
regulated by the Prudential Regulation Authority and Financial
Conduct Authority. J.P. Morgan Cazenove is acting for Whitbread plc
and no other person in connection with the Rights Issue and will
not be responsible to anyone other than Whitbread plc for providing
the protections afforded to clients of J.P. Morgan Cazenove nor for
providing advice to any person in relation to the Rights Issue or
any matters referred to in this announcement. None of Morgan
Stanley or J.P. Morgan Cazenove, nor any of their respective
subsidiaries, branches or affiliates, nor any of their respective
directors, officers or employees owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect,
whether in contract, in tort, under statute or otherwise) to any
person who is not a client of Morgan Stanley or J.P. Morgan
Cazenove in connection with the Rights Issue, this announcement,
any statement contained herein, or otherwise.
INFORMATION TO DISTRIBUTORS
Solely for the purposes of the product governance requirements
contained within: (a) EU Directive 2014/65/EU on markets in
financial instruments, as amended ("MiFID II"); (b) Articles 9 and
10 of Commission Delegated Directive (EU) 2017/593 supplementing
MiFID II; and (c) local implementing measures (together, the "MiFID
II Product Governance Requirements"), and disclaiming all and any
liability, whether arising in tort, contract or otherwise, which
any "manufacturer" (for the purposes of the MiFID II Product
Governance Requirements) may otherwise have with respect thereto,
the Nil Paid Rights, the Fully Paid Rights and the New Ordinary
Shares have been subject to a product approval process, which has
determined that they each are: (i) compatible with an end target
market of retail investors and investors who meet the criteria of
professional clients and eligible counterparties, each as defined
in MiFID II; and (ii) eligible for distribution through all
distribution channels as are permitted by MiFID II (the "Target
Market Assessment").
Notwithstanding the Target Market Assessment, Distributors
should note that: the price of the Nil Paid Rights, the Fully Paid
Rights and/or the New Ordinary Shares may decline and investors
could lose all or part of their investment; the Nil Paid Rights,
the Fully Paid Rights and the New Ordinary Shares offer no
guaranteed income and no capital protection; and an investment in
the Nil Paid Rights, the Fully Paid Rights and/or the New Ordinary
Shares is compatible only with investors who do not need a
guaranteed income or capital protection, who (either alone or in
conjunction with an appropriate financial or other adviser) are
capable of evaluating the merits and risks of such an investment
and who have sufficient resources to be able to bear any losses
that may result therefrom. The Target Market Assessment is without
prejudice to the requirements of any contractual, legal or
regulatory selling restrictions in relation to the offer.
Furthermore, it is noted that, notwithstanding the Target Market
Assessment, the Underwriters will only procure investors who meet
the criteria of professional clients and eligible counterparties.
For the avoidance of doubt, the Target Market Assessment does not
constitute: (a) an assessment of suitability or appropriateness for
the purposes of MiFID II; or (b) a recommendation to any investor
or group of investors to invest in, or purchase, or take any other
action whatsoever with respect to the Nil Paid Rights, the Fully
Paid Rights and/or the New Ordinary Shares. Each distributor is
responsible for undertaking its own target market assessment in
respect of the Nil Paid Rights, the Fully Paid Rights and/or the
New Ordinary Shares and determining appropriate distribution
channels.
FORWARD-LOOKING STATEMENTS
This announcement contains forward-looking statements, including
with respect to financial information, that are based on current
expectations or beliefs, as well as assumptions about future
events. These forward-looking statements can be identified by the
fact that they do not relate only to historical or current facts.
In some cases, forward-looking statements use words such as
"anticipate", "target", "expect", "estimate", "intend", "plan",
"goal", "believe", "will", "may", "should", "would", "could", "is
confident", or other words of similar meaning.
No undue reliance should be placed on any such statements
because they speak only as at the date of this announcement and, by
their very nature, they are subject to known and unknown risks and
uncertainties and can be affected by other factors that could cause
actual results, and the Company's plans and objectives, to differ
materially from those expressed or implied in the forward-looking
statements. No representation or warranty is made that any
forward-looking statement will come to pass. You are advised to
read the Prospectus when published and the information incorporated
by reference therein in their entirety, and, in particular, the
section of the Prospectus headed "Risk Factors", for a further
discussion of the factors that could affect the Group's future
performance and the industry in which it operates. In light of
these risks, uncertainties and assumptions, the events described in
the forward-looking statements, including statements regarding
prospective financial information, in this announcement may not
occur. In addition, even if the Group's actual results of
operations, financial condition and the development of the business
sectors in which it operates are consistent with the
forward-looking statements contained in this document, those
results or developments may not be indicative of results or
developments in subsequent periods. These statements are not fact
and should not be relied upon as being necessarily indicative of
future results, and readers of this announcement are cautioned not
to place undue reliance on the forward-looking statements,
including those regarding prospective financial information.
No statement in this announcement is intended as a profit
forecast, and no statement in this announcement should be
interpreted to mean that underlying operating profit for the
current or future financial years would necessarily be above a
minimum level, or match or exceed the historical published
operating profit or set a minimum level of operating profit.
Neither the Company nor any of Morgan Stanley or J.P. Morgan
Cazenove are under any obligation to update or revise publicly any
forward-looking statement contained within this announcement,
whether as a result of new information, future events or otherwise,
other than in accordance with their legal or regulatory obligations
(including, for the avoidance of doubt, the Prospectus Regulation
Rules, the Listing Rules and Disclosure Guidance and Transparency
Rules).
WHITBREAD PLC
1 for 2 fully underwritten rights issue to raise gross proceeds
of APPROXIMATELY GBP1,009 MILLION
1. Introduction to the Rights Issue
Whitbread announces today that it proposes to raise gross
proceeds of approximately GBP1,009 million through a Rights
Issue.
Pursuant to the Rights Issue, Whitbread is proposing to offer 1
New Ordinary Share to Qualifying Shareholders for every 2 Existing
Ordinary Shares.
The Rights Issue Price of 1,500 pence per New Ordinary Share
represents a discount of 37.4% to the theoretical ex-rights price
of 2,395 pence per Existing Ordinary Share by reference to the
closing price on 20 May 2020 (the last Business Day prior to the
date of this announcement).
The Rights Issue is fully underwritten by J.P. Morgan Cazenove
and Morgan Stanley. Section 10.1 (Underwriting Agreement) of Part
XII (Additional Information) of the Prospectus explains the
underwriting in further detail.
2. Background to the Rights Issue
2.1 Whitbread's strategy and strengths
(A) Strengths
A leading hotel operator with a track record of gaining market
share
The Group is a leading operator of hotels and restaurants, with
more than 800 hotels and more than 400 restaurants in the United
Kingdom and Republic of Ireland as at 27 February 2020. As at the
same date, it also operated six hotels in Germany and ten hotels in
the Middle East. Most of the Group's hotels are branded Premier
Inn. Premier Inn is consistently ranked and voted as the United
Kingdom's favourite hotel according to YouGov, and has delivered
best-in-class operational performance. It has also delivered strong
financial performance over the ten financial years ended 27
February 2020, during which it grew from more than 41,000 rooms to
more than 78,000 rooms in the United Kingdom. The Group is looking
to replicate its success in the United Kingdom in other
international markets and is currently focusing on Germany.
The Group's Occupancy and RevPAR in the United Kingdom have also
grown, increasing from 69.3% and GBP37.99 to 76.3% and GBP46.91,
respectively, over the ten financial years ended 27 February 2020.
Over the same period, the Group's share of the United Kingdom hotel
market increased from 6% to 11%. This demonstrates the Group's
ability to grow its hotel network and market share, whilst also
growing its Occupancy and RevPAR.
A focused and vertically-integrated international business
The Group's unique vertically-integrated business model, which
combines the ownership of freehold and leasehold property, hotel
and restaurant operations, its brands and inventory distribution,
has enabled the Group to grow at a significantly faster pace than
competitors and deliver a consistent, high-quality customer
offering across its entire hotel network. This has, in turn, driven
market-leading brand and customer scores and enabled Premier Inn to
become the United Kingdom's favourite hotel brand according to the
YouGov Hotel Brand Index. By operating the United Kingdom's largest
hotel network and owning all aspects of hotel management
operations, the Group is also able to drive economies of scale.
- Greater network scale
The Group's vertically-integrated business model provides it
with increased control of the network planning and property
development aspects of its hotel operations. This means the Group
can efficiently access locations where it sees opportunities to
expand, which has enabled the Group to almost double its number of
rooms in the United Kingdom since 2010 to become the United
Kingdom's largest hotel network. The Group therefore has more
hotels in locations where its customers want to stay. It is also
able to drive economies of scale by cross-selling across its hotel
network, leveraging operational scale to keep unit costs low and
rationalising management overheads.
- Centralised and integrated distribution and pricing capabilities
The Group sells its hotel rooms to customers principally through
its direct distribution channels, which accounted for 97% of its
accommodation revenue in the financial year ended 27 February 2020.
This enables the Group to communicate directly with its customers
and helps to deliver high Occupancy across a large and growing
hotel network. It also ensures that the Group's gross RevPAR is
almost the same as the net RevPAR achieved and that it can control
its cost of sales, unlike independent hotels or competitor brands
which generally pay high commission rates to third-parties, such as
online travel agents. These low sales costs enable keener pricing
for customers, supporting ongoing sales and network growth.
- Property - a flexible leasehold and freehold model
Unlike the majority of other hotel operators, the Group owned
the freehold or long-term leasehold of the properties where 61% of
its hotel rooms in the United Kingdom were located as at 27
February 2020. The Group believes its willingness to be flexible
with respect to freehold or leasehold acquisition ensures new sites
are in the locations where the Group's customers want to stay and
have an appropriate size and format. In addition, the Group
believes freehold and long-term leasehold ownership provides a
competitive advantage as it gives the Group control over the
development and maintenance of hotels while also allowing the Group
to capture development profits. The value of the Group's freehold
and long-term leasehold properties is also important financially
and provides the Group with good covenant strength, allowing it to
secure more favourable lease and rental terms. Freehold and
long-term leasehold ownership also reduces earnings volatility, as
the Group's fixed lease cost remains low. This resilience helps the
Group maintain the headroom needed to invest in its proposition
even during a downturn in the hotel cycle, ensuring its customer
offering remains consistent over time.
The Group's estate is regularly reviewed for value-enhancing
actions, either through the development and extension of existing
properties, the rationalisation of properties in certain catchment
areas or the realisation of value of fully mature sites through
financing options, primarily through sale and leasebacks, and
recycling capital for further investment.
- In-house food and beverage model
A hot food offering is a core feature of the Group's hotels and
is provided at all Premier Inn properties. More than 90% of the
pubs and restaurants at the Group's hotels are operated by the
Group. A substantial proportion of the Group's customers have in
the past indicated that they consider staying at Premier Inn hotels
in the United Kingdom because of the Group's food and beverage
offering. The Group believes this therefore adds to the brand's
appeal and helps drive increased RevPAR.
- Superior, owned operations
Owning all aspects of hotel management operations gives the
Group greater control over the customer experience, resulting in a
high-quality offering delivered on a consistent basis across its
hotel network. The Group's operating model delivers best-in-class
operational performance, as evidenced by high staff retention
levels relative to the hospitality industry, as well as by the
customer satisfaction scores the Group has historically achieved.
It also gives the Group the flexibility to allocate its resources
efficiently depending on demand.
Track record of growth, value creation and financial
discipline
The Group has a strong track record of value creation, with the
Group's revenue growing by 130% between the financial years ended 4
March 2010 and 1 March 2018 through its development of the Premier
Inn and Costa brands, with Adjusted EBITDA growing by 137% over the
same period. This growth was achieved with an asset base that
expanded from GBP2,245 million in the financial year ended 4 March
2010 to GBP4,037 million in the financial year ended 1 March 2018.
On 3 January 2019, the Group completed the disposal of Costa for
GBP3.9 billion, generating a gain on sale of GBP3,390 million, and
contributing to total Shareholder returns over the ten financial
years ended 27 February 2020 of 261%.
The Group also has a strong track record of financial
discipline, as evidenced by its prudent approach to all new capital
projects, the approach taken on the sale of Costa and subsequent
return of value to Shareholders, as well as its disciplined policy
around balance sheet leverage.
(B) Strategy
The Board remains committed to Whitbread's strategy, which is
focused on accessing the long-term structural growth opportunities
in the United Kingdom and German budget-branded hotel markets and
taking market share from the fragmented independent sector by:
- growing and innovating in the core market in the United Kingdom;
- focusing on the Group's strengths to grow internationally; and
- continuing to build the Group's capability and platform.
Growing and innovating in the core market in the United
Kingdom
Although the hotel market in the United Kingdom is extremely
challenging in the short-term in light of the ongoing COVID-19
pandemic, the Group expects to continue its strategy of expanding
its hotel network in the United Kingdom and taking market share
from the independent hotel sector in the medium-term. The Group's
objective is to have more hotels in locations where its customers
want to stay and further increase the benefits of the Group's
network scale. The independent hotel sector still accounts for
approximately half of the market in the United Kingdom as of
September 2019, despite giving up market share to the branded
budget hotel players over the past few years. The Group expects the
COVID-19 pandemic to weaken the independent hotel sector, which may
lead to a contraction in the supply of new hotel rooms, rebalance
the supply and demand dynamic in the hotel market and provide
additional opportunities for the Group to further expand its
network.
The Group's customer strategy is based on continuously
innovating and evolving the customer experience at its core Premier
Inn hotels. Subject to a temporary suspension in light of the
COVID-19 pandemic, the Group intends to continue its core
refurbishment programmes to ensure it retains a high-quality,
reliable stay experience across all of its hotels. This includes
the Group's integrated ground floor offering, featuring open,
integrated ground floor space for check-in, working, relaxing and
dining, which is now the model for all new hotels being built by
the Group. The Group is also enhancing the experience of business
customers, including by developing new Premier Plus rooms, which
aim to provide an even more comfortable stay at great value for
money.
The Group also intends to continue its strategy of expanding its
hotel concepts in the United Kingdom, including the "Hub by Premier
Inn" concept, which provides a high-quality and affordable
experience in inner-city locations and embeds technology throughout
the customer journey, and the "ZIP by Premier Inn" concept, which
provides quality, small and very simple rooms targeted at the
extra-value seeking customer.
Focusing on the Group's strengths to grow internationally
The Group's international growth is currently focused on
Germany, where it aims to leverage the strengths and capabilities
of its business in the United Kingdom to create the number one
budget hotel brand in the structurally-attractive German hotel
market. As of February 2019, the German hotel market comprised
approximately 992,000 hotel rooms, making it more than 30% larger
than that of the United Kingdom. In addition, the German hotel
market is more fragmented than in the United Kingdom, with
independent hotels accounting for about 72% of supply as of
September 2019.
The Group's rate of expansion in Germany materially accelerated
in the last six months, culminating in the completion of the
acquisition from Foremost on 28 February 2020 of a company with 13
open hotels (with an additional six hotels in the committed
pipeline). The Group's open and committed pipeline in Germany now
stands at almost 10,000 rooms across 52 hotels, with plans to grow
the brand to over 24 open hotels in Germany by the end of the
financial year ending 25 February 2021.
The pace of the Group's organic and acquisitive growth in
Germany is expected to slow temporarily in response to the COVID-19
pandemic; however, given the scale and characteristics of the
German hotel market, together with the performance of the Group's
hotels in Germany to date, the Group remains focused on continuing
its expansion in Germany in the medium-term.
Continuing to build the Group's capability and platform
The Group continues to leverage its scale to secure cost
efficiencies, largely offsetting the structural cost pressures in
the hotel market which disproportionately impact independent
hotels. The Group believes that this focus on cost, along with the
Group's property expertise, underpins the quality and competitive
advantage of its hotels.
The Group has made significant investments in its digital, data
and commercial capabilities over the last few years to drive sales
growth and is continuing to enhance these capabilities. This
includes investing in the Group's core trading and online systems,
so that they better respond to changes in demand, in order to
optimise Occupancy and RevPAR.
2.2 The impact of the COVID-19 pandemic and the Group's response
(A) Impact of the COVID-19 pandemic on the Group
The COVID-19 pandemic and associated government policy responses
have had a very significant impact on the hospitality sector and on
the Group's business.
The COVID-19 pandemic has resulted in the UK Government and
other authorities relevant to the Group's operations, including
those in Germany and the Middle East, implementing numerous
measures in an attempt to contain the virus, such as travel bans
and restrictions, curfews, quarantines, lock downs and the
mandatory closure of certain businesses, including those operating
in the hospitality industry. This has led to a very significant
decrease in the demand for travel, hotel stays and dining and has
also resulted in severe economic downturns in a number of
countries.
In line with the UK Government's mandatory closure of all hotels
and restaurants, other than those required to support essential
workers and services combatting the pandemic, more than 95% of the
Group's 821 hotels in the United Kingdom and Republic of Ireland
have been closed from 24 March 2020 and all restaurants have been
closed from 21 March 2020. Most of the Group's hotels in Germany
closed in late March 2020 before opening again in early May, while
its hotels in the Middle East remain open but with significantly
reduced Occupancy.
These conditions have resulted in a very significant decline in
the Group's revenues, profitability and cash flow since 27 February
2020, with revenues reducing to almost zero since late March 2020.
Rates of cancellations for June and July, and current booking
trends, indicate that trading conditions will continue to be
extremely challenging.
These are exceptional circumstances and the Board expects social
distancing restrictions to impact the Group's operations in the
United Kingdom and in Germany for some time. UK Government
guidelines published on 11 May 2020 indicate that businesses in the
hospitality sector (such as food service providers, pubs and
accommodation) will re-open as part of the third step of the UK
Government's COVID-19 recovery strategy. At the time of publishing
its guidance, the UK Government's assumptions were that this step
will be reached no earlier than 4 July 2020. The Group is ready to
open its businesses in the United Kingdom when the government
advises; the Group's internal scenarios are planning for its hotels
and restaurants in the United Kingdom to remain closed or operating
at low Occupancy levels until September 2020. The majority of the
Group's German hotels re-opened on 11 May 2020. Thereafter, the
Group is prudently planning for a gradual recovery scenario through
next year in which trading conditions begin to normalise, while
allowing for the potential risk of further outbreaks of COVID-19
later in the year as restrictions are relaxed. The Group is
well-placed for re-opening its businesses as it is already
successfully operating a number of hotels in the United Kingdom and
Germany under strict social distancing measures with enhanced
hygiene and safety standards. The Group's operating model gives
management full operational control and ensures high and consistent
operational standards, which the Group believes will be an even
more important consideration for consumers going forward, and
positions the Group well compared to smaller, independent operators
and franchised chains that do not have this level of operational
control.
Given the considerable uncertainty regarding the duration,
extent and ultimate impact of the COVID-19 pandemic, the Group
cannot estimate with any precision the impact on its prospective
financial performance. The COVID-19 pandemic is expected to result
in a very material loss of revenue for the financial year ending 25
February 2021 and, despite the actions the Group is taking, this is
likely, given the Group's high fixed and semi-variable costs, to
have a material impact on earnings which may result in the Group
not making any profit during the financial year ending 25 February
2021, with the clear possibility that it is materially loss-making
during that period. As the Company previously announced, a 1% fall
in the Group's RevPAR equates to a GBP12 million to GBP15 million
adverse impact on its earnings. This increases to approximately
GBP18 million when taking into account the higher proportion of
fixed costs at lower revenue levels and the impact of the closure
of the Group's restaurants. The various government support
initiatives for businesses in the United Kingdom and Germany
announced during March 2020 are expected to partially mitigate the
impact of the pandemic on the Group, in particular the UK
Government's relief on business rates in the 2020-2021 tax year and
the Coronavirus Job Retention Scheme.
(B) The Group's response to the COVID-19 pandemic
The Group has taken decisive action, focusing on factors within
its control with the aim of navigating the COVID-19 pandemic as
safely as possible and positioning its business as well as possible
for a future normalisation. The Group has taken proactive steps to
mitigate, where possible, the negative financial and operational
impacts of the COVID-19 pandemic, including:
- obtaining a waiver of its existing financial covenants until 2
March 2022 under the Group's financing and pension arrangements,
which have temporarily been replaced with debt and liquidity
covenants;
- cancelling all discretionary expenditure, including room
refurbishment plans, marketing, non-essential training and staff
recruitment;
- placing a significant number of employees on a temporary furlough;
- reducing repairs and maintenance Capital Expenditure to the
minimum level required to comply with legal or health and safety
requirements;
- postponing the majority of non-committed development Capital
Expenditure, including refurbishments, extensions, freehold builds
and acquisitions;
- deciding not to recommend a final dividend for the financial
year ended 27 February 2020; and
- temporarily reducing pay for the Board and senior management.
Consequently, Capital Expenditure will only be incurred by the
Group for essential hotel maintenance, where there is a contractual
obligation to do so and/or a site is significantly complete and to
maintain core IT programmes and infrastructure. In the financial
year ending 25 February 2021, the Group therefore expects its
development Capital Expenditure to be approximately GBP180 million,
with repair and maintenance Capital Expenditure expected to be
approximately GBP70 million.
Alongside the action taken by Whitbread, various government
support initiatives for businesses in the United Kingdom and
Germany announced during March 2020 are expected to further
mitigate the impact of the pandemic on the Group. In
particular:
- t he relief on business rates in the 2020-2021 tax year is
estimated to save the Group approximately GBP120 million; and
- the Coronavirus Job Retention Scheme that currently operates
until the end of July 2020 is providing 80% of the wage costs for
furloughed employees up to GBP2,500 per month, which is estimated
to cover approximately GBP70 million to GBP85 million of the
Group's wage costs in the first half of the financial year ending
25 February 2021. The UK Government recently announced an extension
of the Coronavirus Job Retention Scheme until October 2020, but the
terms of the scheme may be amended from the end of July 2020.
In the first half of the financial year ending 25 February 2021,
the Group expects approximately:
- GBP 80 million of operational cash outflows per month during
the period when its hotels and restaurants are closed or operating
at low Occupancy;
- GBP70 million to GBP85 million of wage cost savings from the
Coronavirus Job Retention Scheme;
- GBP100 million working capital cash outflows from refunding customer deposits; and
- GBP130 million of capital payments, principally for committed
projects, including the refurbishment of hotels acquired as part of
the acquisition of a company with 13 hotels (with an additional six
hotels in the committed pipeline) in Germany from Foremost.
The Group entered the current financial year with a Lease
Adjusted Net Debt / FFO ratio of 2.6x, with Adjusted Net Debt of
GBP332.9 million as at 27 February 2020. The Group retains
significant liquidity with cash of approximately GBP300 million as
at 15 May 2020 and access to the GBP950 million Revolving Credit
Facility of which only GBP50 million is drawn as at the date of
this document.
Given the impact that a diminished financial performance or
position resulting from the COVID-19 pandemic would have on future
financial covenants tests pursuant to the Revolving Credit Facility
and the 2011 US Notes and 2017 US Notes (in particular, those
tested by reference to the Group's financial position and
performance as at August 2020 and/or February 2021) the Group has
negotiated an 18-month waiver of the existing financial covenants
for both the Revolving Credit Facility and the 2011 US Notes and
2017 US Notes, which have temporarily been replaced with debt and
liquidity covenants. The arrangements between the Group and the
Trustee of the Whitbread Group Pension Fund contain the same
leverage financial covenant, in respect of which the Company has
also negotiated an 18-month waiver on similar terms. For further
details on these covenant waivers, see section 10 (Material
Contracts) of Part XII (Additional Information) of the
Prospectus.
2.3 Ensuring a strong balance sheet to support the Group's strategy and investment plans
The Rights Issue is intended, alongside the other actions the
Group has already announced, to ensure that the Group emerges from
the COVID-19 pandemic with a strong balance sheet and in the best
possible position to deliver on its strategy. In particular, the
Board believes the Rights Issue will better position the Group to
be able to invest, as and when appropriate, avoiding constraints
that might otherwise apply in the medium-term. That investment is
expected to help the Group to unlock its long-term structural
growth opportunities in the United Kingdom and Germany and to win
market share, including from the significant but declining
independent hotel sector, whose market position may be weakened as
a result of the COVID-19 pandemic. The experience of earlier
periods of economic difficulties, such as the 2008 financial
crisis, demonstrates the importance of maintaining a strong balance
sheet. The Group believes this will give it a competitive advantage
when seeking opportunities to acquire new sites and when investing
in the customer propositions required to succeed and that continued
investment in sites and customer propositions will enable Whitbread
to emerge in the best position possible from the COVID-19
pandemic.
The Group's investments initiatives include:
- adding new rooms in the United Kingdom through the opening of
new hotels and extensions to existing hotels. Given the size of the
market and level of fragmentation, Whitbread sees potential for
110,000 rooms in the United Kingdom The Group believes that its
competitive position in the United Kingdom may be strengthened as
the impact of the pandemic further weakens the financial position
of its budget-branded and independent competitors;
- continuing to replicate the success of Premier Inn in the
United Kingdom in the structurally attractive German hotel market.
The German hotel market is more than 30% larger than that in the
United Kingdom as at February 2019, with independent hotels
accounting for about 72% of the supply as of September 2019.
Whitbread is targeting accelerated expansion of its German network
to more than 60,000 rooms over the longer-term through organic
investment in freehold and leasehold properties, combined with
further acquisitions. Whitbread is confident that, based on the
operating performance of the early hotels, their current progress
to maturity and the performance of recently acquired hotels, the
German market offers the opportunity to create a leading budget
hotel chain in one of Europe's major economies ; and
- improving the quality of the Group's estate and customer
experience through refurbishments, room upgrades (e.g. Premier Plus
rooms), integrated ground floor concepts and customer product
innovation (e.g. new Premier Inn bed), as well as digital and
technological improvements to enhance the customer experience,
distribution capabilities and support Like-for-like Sales
growth.
Capital Expenditure totalled GBP587.7 million in the financial
year ended 27 February 2020, including the completion of the
Foremost acquisition as well as GBP153.5 million of maintenance and
product improvement Capital Expenditure, to deliver consistent,
high quality rooms across the Group's estate of hotels in the
United Kingdom which is a key driver of repeat direct business and
like-for-like performance. Total development Capital Expenditure
was GBP434.1 million in the financial year ended 27 February 2020,
which has been predominately invested on expanding the United
Kingdom and German networks. The Group has achieved good returns on
recent investments in the United Kingdom, with the additional
investments made in Germany resulting in the opening of four
additional sites in the financial year ended 27 February 2020
which, until the COVID-19 pandemic, were performing well.
Being well-positioned to continue to invest, as and when
appropriate, is particularly important in light of the Group's
recent actions to reduce cash outflows in the near-term, including
the cancellation of discretionary and uncommitted maintenance and
improvement and growth capital expenditure. Furthermore, the
potential for the Group's budget-branded and independent
competitors to be weakened by the COVID-19 pandemic may result in
opportunities for the Group to invest.
Given the opportunities to invest capital in the United Kingdom
and internationally, the priority for Whitbread's capital structure
is to provide financial flexibility.
The Board believes that the optimum capital structure for the
Group's medium- and long-term success is to maintain a Lease
Adjusted Net Debt / FFO of 3.5x or below, that is broadly
consistent with investment grade credit metrics. The Board believes
it is important to take lease obligations into account alongside
debt in deciding on the appropriate capital structure for the Group
as the carrying value of the Group's property lease liabilities
under IFRS 16 amounted to GBP 2,618.8 million as at 27 February
2020 with an average remaining lease length of 20 years. Financial
strength is a source of competitive advantage to the Group as it
allows the business to take a long-term investment horizon. It also
helps secure sites for new hotels on favourable terms, enables the
Group to access funding to support investment, and ensures a strong
counterparty covenant to suppliers, landlords and the Whitbread
Group Pension Fund.
While the COVID-19 pandemic means the short-term outlook remains
uncertain, the Group is a long-term focused business. The Board
unanimously believes that the Rights Issue is necessary to, and
will, alongside the other actions the Group has already announced,
ensure that the Group emerges from the COVID-19 pandemic with a
strong balance sheet and in the best possible position to deliver
on its strategy. Optimising the balance sheet in this way is
expected to maintain and potentially improve the Group's
competitive strengths and will better position Whitbread to be able
to invest, as and when appropriate, avoiding constraints that might
otherwise apply in the medium-term.
3. Use of Proceeds
The Rights Issue to raise GBP980 million (net of expenses) is
designed to support the delivery of the Group's strategy, as well
as to bring the Group's leverage broadly in line with investment
grade credit metrics within a few years as the business trading
environment normalises.
The funds raised in the Rights Issue are intended to be
initially kept on deposit pending use for investment, when
appropriate, to deliver the Group's strategy to access the
attractive long-term structural growth opportunities in the United
Kingdom and German budget-branded hotel markets.
4. Current trading and outlook
The Group's current trading and outlook are essentially defined
by the COVID-19 pandemic and associated government policy
responses.
The COVID-19 pandemic has resulted in the UK Government and
other authorities relevant to the Group's operations, including
those in Germany and the Middle East, implementing numerous
measures in an attempt to contain the virus, such as travel bans
and restrictions, curfews, quarantines, lock downs and the
mandatory closure of certain businesses, including those operating
in the hospitality industry. This has led to a very significant
decrease in the demand for travel, hotel stays and dining and has
also resulted in severe economic downturns in a number of
countries. As an owner and operator of hotels and restaurants in
the United Kingdom, Republic of Ireland, Germany and the Middle
East, the Group is dependent upon its customers travelling for
business and leisure and choosing to stay in its hotels and eat in
its restaurants. The COVID-19 pandemic and associated government
measures have therefore had a very significant negative effect on
the Group's business.
In line with the UK Government's mandatory closure of all hotels
and restaurants, other than those required to support essential
workers and services combatting the pandemic, more than 95% of the
Group's 821 hotels in the United Kingdom and Republic of Ireland
have been closed from 24 March 2020 and all restaurants have been
closed from 21 March 2020. Most of the Group's hotels in Germany
closed in late March 2020 before opening again in early May, while
its hotels in the Middle East remain open but with significantly
reduced Occupancy. These conditions have resulted in a very
significant decline in the Group's revenues, profitability and cash
flow since 27 February 2020, with revenues reducing to almost zero
since late March 2020. Rates of cancellations for June and July,
and current booking trends, indicate that trading conditions will
continue to be extremely challenging.
The Group is ready to open its businesses in the United Kingdom
when the government advises; the Group's internal scenarios are
planning for its hotels and restaurants in the United Kingdom to
remain closed or operating at low Occupancy levels until September
2020. The majority of the Group's German hotels re-opened on 11 May
2020. Thereafter, the Group is prudently planning for a gradual
recovery scenario through next year in which trading conditions
begin to normalise, while allowing for the potential risk of
further outbreaks of COVID-19 later in the year as restrictions are
relaxed.
The COVID-19 pandemic is expected to result in a very material
loss of revenue for the financial year ending 25 February 2021 and,
despite the actions the Group is taking, this is likely, given the
Group's high fixed and semi-variable costs, to have a material
impact on earnings which may result in the Group not making any
profit during the financial year ending 25 February 2021, with the
clear possibility that it is materially loss-making during that
period. As the Company previously announced, a 1% fall in the
Group's RevPAR equates to a GBP12 million to GBP15 million adverse
impact on its earnings. This increases to approximately GBP18
million when taking into account the higher proportion of fixed
costs at lower revenue levels and the impact of the closure of the
Group's restaurants.
The Group has taken proactive steps to mitigate, where possible,
the negative financial and operational impacts of the COVID-19
pandemic. Consequently, Capital Expenditure will only be incurred
by the Group for essential hotel maintenance, where there is a
contractual obligation to do so and/or a site is significantly
complete and to maintain core IT programmes and infrastructure. In
the financial year ending 25 February 2021, the Group therefore
expects its development Capital Expenditure to be approximately
GBP180 million, with repair and maintenance Capital Expenditure
expected to be approximately GBP70 million.
Alongside the action taken by Whitbread, various government
support initiatives for businesses in the United Kingdom and
Germany announced during March 2020 are expected to further
mitigate the impact of the pandemic on the Group. In
particular:
- the relief on business rates in the 2020-2021 tax year is
estimated to save the Group approximately GBP120 million; and
- the Coronavirus Job Retention Scheme that currently operates
until the end of July 2020 is providing 80% of the wage costs for
furloughed employees up to GBP2,500 per month, which is estimated
to cover approximately GBP70 million to GBP85 million of the
Group's wage costs in the first half of the financial year ending
25 February 2021. The UK Government recently announced an extension
of the Coronavirus Job Retention Scheme until October 2020, but the
terms of the scheme may be amended from the end of July 2020.
In the first half of the financial year ending 25 February 2021,
the Group expects approximately:
- GBP 80 million of operational cash outflows per month during
the period when its hotels and restaurants are closed or operating
at low Occupancy;
- GBP70 million to GBP85 million of wage cost savings from the
Coronavirus Job Retention Scheme;
- GBP100 million working capital cash outflows from refunding customer deposits; and
- GBP130 million of capital payments, principally for committed
projects, including the refurbishment of hotels acquired as part of
the acquisition of a company with 13 hotels (with an additional six
hotels in the committed pipeline) in Germany from Foremost.
5. Risk factors and further information
Shareholders should consider fully and carefully the risk
factors associated with Whitbread, as set out in the
Prospectus.
Shareholders should read the whole of the Prospectus and not
rely solely on the information set out in this announcement.
6. Dividends and Dividend Policy
As announced by the Company on 24 March 2020, in view of the
impact of the COVID-19 pandemic, the Board has decided not to
recommend a final dividend for the financial year ended 27 February
2020. Given the considerable uncertainty regarding the duration,
extent and ultimate impact of the COVID-19 pandemic, it is not
possible to predict when the Company will once again be able to pay
a dividend to Shareholders. Under the terms of the covenant waivers
granted by its lenders and the Trustee, the Group has also agreed
that no dividends will be paid on its Ordinary Shares until the
later of 2 March 2022 and the date the Company is in compliance
with the original financial covenants. Accordingly, the Board hopes
to return to paying dividends again following the normalisation of
the Grou's financial position and performance.
7. Principal terms and conditions of the Rights Issue
7.1 Overview
Whitbread proposes to raise gross proceeds of approximately
GBP1,009 million (approximately GBP980 million after deduction of
estimated commissions, fees and expenses) by way of the Rights
Issue.
The Board has considered various alternative methods of
optimising the Group's capital structure, including bond and
convertible bond issues, sale and leaseback transactions and
secured asset-backed lending. All of these alternatives would
increase the amount of debt or fixed lease liabilities on the
Group's balance sheet, which the Board does not view as appropriate
at a time when its earnings have reduced substantially and may
continue to be subdued for some time. Accordingly, the Board
concluded that the most appropriate course was to raise equity.
A key consideration has been quantum. In addition to providing
the ability to invest with confidence and flexibility in the
Group's strategy, the Board considered a number of different
scenarios and assumptions and the impact these might have on the
Group's financial position in deciding on the appropriate quantum.
These included the length of the current lockdown, the impact of
ongoing social distancing measures, the strength of any possible
recovery and the likelihood of any further waves of lockdown.
Taking these into consideration, the Board believes that a Rights
Issue to raise gross proceeds of GBP1,009 million provides the
Group with the optimum capital structure to deliver its
strategy.
The Board focused on raising capital in a way that gives
Shareholders generally the opportunity to participate and avoids
their holding being diluted involuntarily. In addition, only a
rights issue structure enables Shareholders who do not wish to put
new money into the Company (and whose holdings will therefore be
diluted) to realise value through the sale of their right to
subscribe for New Ordinary Shares. Full details on Shareholders'
choices in relation to the Rights Issue are set out in more detail
in the Prospectus.
(A) Pricing
The Rights Issue Price represents a 47.2% discount to the
closing price of 2,843 pence on 20 May 2020.
The Rights Issue Price has been set, following discussions with
major Shareholders, at the level which the Board considers
necessary to ensure the success of the Rights Issue, taking into
account the aggregate proceeds to be raised. The Board believes
that the Rights Issue Price, and the discount which it represents,
is appropriate.
(B) Dilution
The Rights Issue will result in 67,277,416 New Ordinary Shares
being issued and the number of Ordinary Shares being increased from
a total of 134,554,833 Ordinary Shares (excluding treasury shares)
to a total of 201,832,249 Ordinary Shares (excluding treasury
shares), representing an increase of 50.0%.
If a Qualifying Shareholder does not (or is not permitted to)
take up any New Ordinary Shares under the Rights Issue, such
Qualifying Shareholder's shareholding in Whitbread will be diluted
by 33.3% as a result of the Rights Issue (assuming no Ordinary
Shares are issued due to the vesting or exercise of any awards
under the Share Plans between the Latest Practicable Date and the
completion of the Rights Issue).
7.2 Key terms
On and subject to, among other things, the terms and conditions
described in Part VII (Terms and Conditions of the Rights Issue) of
the Prospectus, 67,277,416 New Ordinary Shares will be offered by
way of rights at the Rights Issue Price of 1,500 pence per New
Ordinary Share to Qualifying Shareholders on the basis of:
1 New Ordinary Share for every 2 Existing Ordinary Shares
held and registered in their name on the Record Date (and so in
proportion for the number of Existing Ordinary Shares then
held).
Entitlements to New Ordinary Shares under the Rights Issue will
be rounded down to the nearest whole number and fractions of New
Ordinary Shares will not be provisionally allotted to Qualifying
Shareholders. Such fractions will be aggregated and, if possible,
placed and sold in the market for the benefit of Whitbread.
Holdings of Existing Ordinary Shares in certificated and
uncertificated form will be treated as separate holdings for the
purpose of calculating entitlements under the Rights Issue.
The Rights Issue is fully underwritten by the Underwriters on
the terms and conditions of the Underwriting Agreement, details of
which are set out in section 10.1 (Underwriting Agreement) of Part
XII (Additional Information) of the Prospectus.
The Rights Issue is conditional upon (among other things): (i)
the Underwriting Agreement having become unconditional in all
respects (save for the condition relating to Admission of Nil Paid
Rights); and (ii) Admission of Nil Paid Rights becoming effective
by not later than 8.00 a.m. on 26 May 2020 (or such later date as
Whitbread and the Underwriters may agree).
Application has been made to the FCA for the New Ordinary Shares
(nil and fully paid) to be admitted to listing on the premium
listing segment of the Official List and to the London Stock
Exchange for the New Ordinary Shares (nil and fully paid) to be
admitted to trading on its main market for listed securities. It is
expected that Admission of Nil Paid Rights will become effective,
and that dealings in the New Ordinary Shares, nil paid, on the
London Stock Exchange's main market for listed securities will
commence, at 8.00 a.m. on 26 May 2020. It is also expected that
Admission of the New Ordinary Shares (fully paid) will become
effective, and dealings in New Ordinary Shares, fully paid, on the
London Stock Exchange's main market for listed securities will
commence, at 8.00 a.m. on 10 June 2020.
The New Ordinary Shares will, when issued and fully paid, rank
pari passu in all respects with, and will carry the same voting and
dividend rights as, the Existing Ordinary Shares.
Further details of the terms and conditions of the Rights Issue,
including the procedure for acceptance and payment and the
procedure in respect of rights not taken up, are set out in Part VI
(Terms and Conditions of the Rights Issue) of the Prospectus and,
where relevant, the Provisional Allotment Letter.
Overseas Shareholders, including Shareholders resident in the
United States, as well as holders of ADSs, should refer to section
7 (Overseas Shareholders) of Part VII (Terms and Conditions of the
Rights Issue) of the Prospectus for further information regarding
their ability to participate in the Rights Issue. New Ordinary
Shares will be provisionally allotted (nil paid) to all Qualifying
Shareholders, including all Overseas Shareholders. However,
Provisional Allotment Letters will not be sent to, and Nil Paid
Rights will not be credited to CREST accounts of, Excluded
Shareholders (except, however, where the Company and the
Underwriters are satisfied that such action would not result in the
contravention of any registration or other legal or regulatory
requirement in such jurisdiction) and their entitlements to New
Ordinary Shares will be treated as entitlements not taken up in
accordance with the procedures set out in section 5 (Procedure in
respect of rights not taken up (whether certificated or in CREST))
of Part VII (Terms and Conditions of the Rights Issue) of the
Prospectus.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
ARILBLLLBELFBBD
(END) Dow Jones Newswires
May 21, 2020 02:00 ET (06:00 GMT)
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