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Whitbread to cut 6,000 jobs despite raising £1bn and using furlough scheme

“September and October are traditionally a period when business bookings pick-up after the quiet summer period, however at this point it is too early to assess the impact of COVID-19,” the company said

Whitbread PLC -

Whitbread PLC (LON:WTB) plans to cut 6,000 jobs as sales tumbled in the first half, the end of the government's coronavirus job retention scheme approaches and hotel demand is expected to remain depressed by the panedmic for some time.

The Premier Inns hotels and Beefeater restaurants owner said in a statement on Tuesday that axing 18% of its hotel and restaurants staff was “a regrettable but necessary step to ensure that we emerge from the crisis with a lower cost base, a more flexible operating model and a stronger more resilient business”.

READ: Whitbread sees good tourist demand as hotels and restaurants reopen

However, this comes just three months after £1bn of cash was raised in a rights issue by the FTSE 100 group, which also has taken around £70-85mln from the government furlough scheme. 

Although 98% of hotels are now open, UK like-for-like hotel sales plummeted 78.2% in the six months to end-August as lockdowns forced hotels to shut from late March until early July

Total group sales collapsed 74.5% in the second quarter after a 79.4% fall in the first, resulting in a 76.8% fall for the half-year.

UK occupancy levels averaged 51% in August, while UK restaurant performance was boosted by the government’s ‘Eat Out To Help Out’ scheme, though total UK sales in the past month were still down 38.5% year-on-year.

In its small German operation, August occupancy was 54%, while management eyes how best to use its cash to accelerate its pipeline growth in the country.

Trading in the first two weeks of September saw year-on-year total accommodation sales remain ahead of the market, with bookings in tourist destinations said to remain strong and business bookings growing from a low base. 

“September and October are traditionally a period when business bookings pick-up after the quiet summer period, however at this point it is too early to assess the impact of COVID-19 on this traditionally busy booking period,” the company said, noting the increased local and regional lockdowns in the UK and Europe.

Reaction

The shares fell 3% on Tuesday morning to 2,048p, where they are down more than 51% since the start of the year.

Broker Liberum noted that the start of the redundancy consultation process is being instigated ahead of the furlough scheme coming to an end in October.

Analysts at Peel Hunt noted that the cost benefits of such a reduction in its staff headcount had been included in profit sensitivity guidance given by the company earlier in the year.

They added that the sales performance in the first half implies an full-year loss before tax of circa £500mln, compared to a consensus forecast of £482mln.

“Just three months ago Whitbread’s CEO Alison Brittain stated the company was raising a £1bn acquisition war chest and did not need the cash to survive. For many it will be hard not to see this announcement as cynical coronavirus opportunism," said Howard Beckett, assistant general secretary of trade union Unite.
 
“Whitbread readily took taxpayers' money as part of the job retention scheme. The clue is in the name and Whitbread must now uphold its part of the bargain," Beckett added, also calling for urgent government action.

"The hospitality sector was the first to suffer during the lockdown and will be the last to emerge from the restrictions – it is in desperate need of support. 
 
“Unless the government offers sector specific assistance, either by extending furlough or initiating a short time working scheme, we’re going to witness hundreds of thousands of hotel, bar and restaurant jobs disappear over the coming months."

   --Adds share price and comment-- 

Quick facts: Whitbread PLC

Price: 3305 GBX

LSE:WTB
Market: LSE
Market Cap: £66.91 m
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