Mitchells & Butlers PLC (LON:MAB) said it might need to raise extra cash as it reported a sharp slowdown in sales in its first quarter as lockdowns and restrictions to contain the coronavirus (COVID-19) pandemic forced it to shutter all its pubs since the end of December.
In a trading update for the 14 weeks to January 2, the owner of the All Bar One and Harvester chains said over the period progressively tighter restrictions imposed in the UK and Germany had resulted in an “ever smaller number of sites open” which had significantly reduced sales activity over the key festive trading season.
As a result of the restrictions, Mitchells said across its first quarter total sales were down 67.1% year-on-year or 30.1% on a like-for-like basis.
Looking ahead, the FTSE 250-listed company said the future of the sector “remains extremely uncertain” and that it is “not possible to estimate with any confidence what restrictions on our ability to trade lie ahead”.
As a result, Mitchells said it is “prudent to explore an equity capital raise” to provide it with “financial and operational flexibility”, although no decision has yet been made.
“We are now in a third national lockdown. I am consistently impressed by the resilience and energy of our teams as we repeatedly open and close businesses that we have invested in to make Covid secure and urge the government to better understand the huge impact these restrictions are having on the hospitality sector. 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”, chief executive Phil Urban said in a statement.
“Mitchells & Butlers was a high performing business going into the pandemic and with the support of our main stakeholders I have every confidence that we can emerge in a strong competitive position once the current restrictions on us are lifted”, he added.
In a note on Thursday, analysts at Peel Hunt downgraded the stock to ‘add’ from ‘buy’ and cut their target price to 275p from 300p, saying as a result of the trading update and plans for an equity raise they now expected a “more gradual recovery” in the third quarter.
The broker also said the shares are “unlikely to perform until the equity raise is undertaken”.
Shares in the company slumped 8% to 218.5p in mid-morning deals on Thursday.
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