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INSIDE THE CITY

Time to check in to Brittain’s Whitbread

The Sunday Times

It was easy to view the £1bn rights issue announced by the Premier Inn owner Whitbread in May as an emergency measure rushed out in extreme conditions.

Easy, because all the signs pointed towards a bleak future. During the first seven weeks of lockdown, revenues from the FTSE 100 stalwart’s hotels, pubs and restaurants plunged by 99%. The company said it would struggle to make any profit this financial year and put 27,000 workers on furlough.

Yet chief executive Alison Brittain hinted that this rights issue was “a little different” from others being pushed through by desperate company bosses staring into the Covid-19 abyss. Yes, the cash would be used to shore up finances while the hotels were closed, but it would also form a war chest for “future growth and investment” once the recovery kicked in.

Two months on, Brittain looks poised to make good on that promise. Whitbread is reopening its 800 hotels along with 400 restaurants, which are mainly under the Beefeater and Brewers Fayre brands. The shares, although down more than 45% this year, have been steady since April, closing on Friday at £22.90.

Opportunity has also come knocking. Premier Inn’s closest rival, Travelodge, is going through a company voluntary arrangement — a form of insolvency — after a bitter battle with its landlords. It has 588 hotels, all but 75 of which contain a landlord-only break clause, according to the broker Numis. That means the properties can be re-let to another operator without incurring a fee.

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Tim Barrett, head of travel and leisure at Numis, says Premier Inn could increase its market share to 14% from its current 11% by “cherry-picking assets from others”.

Analysts expect heavy investment in marketing and aggressive pricing to lure back uncertain customers. Growth in Germany, where Whitbread has 19 hotels, is seen as a big opportunity.

Domestic demand is returning as travel plans are made, but a second lockdown would be disastrous. Peel Hunt estimates an adjusted loss before tax of £270m for the year ending in February, on sales down 40% at £1.2bn.

Brittain joined four years ago and has proved a strong presence as the company has sold its Costa Coffee division to Coca-Cola for £3.9bn and navigated Brexit and now the coronavirus. Might she be tempted by a bigger job? Her former employer, Lloyds Banking Group, is looking for a new boss after Antonio Horta-Osorio announced his exit. Brittain has insisted she has her “hands full” at Whitbread. While she’s there, it looks in good shape. Buy.

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