Mitchells eyes investor cash-call as pubs forced to close

Embattled All Bar One owner Mitchells & Butlers has revealed plans for an investor cash-call to boost its battered balance sheet as UK lockdowns have forced the closure of all its sites.

The group said it is “prudent” to consider an equity raise as it burns through up to around £40 million in cash a month before £50 million of quarterly debt payments during lockdown.

The news sent shares down 8%.

Mitchells, which also owns brands including Harvester and Toby Carvery, said it has cash balances of £125 million.

It said no decision has yet been made on the timing or size of an equity capital raise.

Total sales over its first quarter to January 2 crashed 67.1% as tightening coronavirus restrictions hit trading and saw increasing numbers of pubs shut, with all its sites closed from December 30.

Sales fell 30% on a like-for-like basis, when only taking into account periods where stores were able to open.

Mitchells said: “We welcome recent positive news on vaccine approval and rollout but the future facing the hospitality sector remains extremely uncertain.

“It is not possible to estimate with any confidence what restrictions on our ability to trade lie ahead of us and for how long.

“As a result, the directors believe it is prudent to explore an equity capital raise, to give the group increased financial and operational flexibility.”

Mitchells recently axed about 1,300 jobs and closed up to 20 of its pubs and restaurants as the sector has been devastated by the pandemic and measures to control it.

Chief executive Phil Urban called on the Government to provide more direct support for affected businesses.

He said: “The Job Retention Scheme is temporarily protecting some employment but there is a real and pressing need for support for businesses themselves if we are to return to being the vibrant sector and important employers that we were.”

In November, the group’s annual results showed the pandemic sent it crashing to a £123 million loss for the year to September 26 from pre-tax profits of £177 million the previous year.

Analyst James Wheatcroft, at Jefferies, said Mitchells’ plans for an equity raise are “no great surprise given it is one of the few leisure companies not to raise so far”.

“Longer term, with a mainly freehold, well-invested estate, M&B looks well-placed to capture market share from a damaged hospitality sector,” he added.