Mitchells & Butlers, the UK’s largest listed pub group, is considering raising equity after the country’s third lockdown delivered another blow to the hospitality sector.
The chain, one of the few listed pub companies that has not yet turned to shareholders to raise funds during the pandemic, said it was “prudent” to look at an equity raise because it was unclear how long restrictions would last. It added that no decisions on the size or timing of any fundraising had been taken.
“The one certainty right now is uncertainty and we don’t think its appropriate right now to take chances,” Phil Urban, M&B’s chief executive, told the Financial Times.
All pubs in England will be closed until at least February under the lockdown that was announced on Monday in an attempt to curb a sharp rise in coronavirus infections.
M&B operates 1,700 pubs across the UK under brands including Toby Carvery, Harvester and Nicholson’s.
Since the beginning of the first lockdown in March, UK listed pub and bar groups have raised more than £270m through share placings. But Mr Urban said that without more clarity from the government about whether support such as a business rates relief and a VAT cut would continue, it was “impossible to sit down with stakeholders and make plans about when we can come back”.
The government’s offer of grants of up to £9,000 for hospitality and retail businesses during the current lockdown were “fairly immaterial”, Mr Urban added.
M&B said trading in the three months to January 2, which included the November lockdown in England and the Christmas period, was 67 per cent below 2019 levels. For those pubs that were able to trade, sales were 30 per cent lower than the same period last year.
“The future facing the hospitality sector remains extremely uncertain”, the company said, but insisted that it “can emerge in a strong competitive position once the current restrictions on us are lifted”.
The pub group has about £125m in cash but said it was burning through £35m to £40m a month while pubs were closed and faced a quarterly debt payment of £50m on March 15. It lost about £1bn in sales between March and December last year because of trading restrictions but held net debt flat at about £1.6bn, according to its full-year results.
Jamie Rollo, an analyst at Morgan Stanley, noted that M&B might only have sufficient liquidity to survive until March without additional financing. He added that the current performance was “much worse” than the scenarios outlined in the group’s going concern statement when it published full-year results in November and that it would likely need to raise more than £100m from shareholders.
M&B said an equity raise had the unanimous backing of its board, which includes representatives from its two largest shareholders: businessman and Tottenham Hotspur owner Joe Lewis and Elpida Group, which is backed by two horseracing magnates.