Mitchells & Butlers, the UK’s largest listed pub group, is considering raising equity after the country’s third lockdown delivered another blow to the sector.
The chain, one of the few listed pub companies not yet to have turned to shareholders to raise funds during the pandemic, said examining an equity increase was “prudent” as it was unclear how long restrictions would last. It added that no decisions on the size or timing of any fundraising had been taken.
All pubs in England are closed until at least February under the lockdown, which Prime Minister Boris Johnson 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.
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’s 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 around £125m in cash but said it was burning through around £35m to £40m per month while pubs were closed and faced a quarterly debt payment of £50m on March 15. The group lost around £1bn in sales between March and December last year because of trading restrictions but had held net debt flat at about £1.6bn, according to its full-year results.
Douglas Jack, an analyst at Peel Hunt, said that if M&B received permission to access a £300m bond liquidity facility, it could survive another three and a half months in full lockdown, adding that it currently had the weakest cash position among the listed operators.
In December, M&B chief executive Phil Urban told the Financial Times that 2020 had been a “heartbreaking” year and criticised the government for not providing greater financial certainty for businesses.
M&B said a capital increase had the unanimous backing of its board, which includes representatives from its two largest shareholders — the businessman and Tottenham Hotspur owner Joe Lewis and Elpida Group, which is backed by two horseracing magnates.