18th Mar 2020 09:29
(Alliance News) - Pub owners Mitchells & Butlers PLC and Marston's PLC on Wednesday both said they believe they have the financial strength to withstand the expected severe downturn in business due to Covid-19.
Shares in Mitchells & Butlers were 5.0% lower on Wednesday in early trade in London at 133.40 pence each, but Marston's shares were 0.8% higher at 22.38p.
Birmingham-based Mitchells & Butlers owns pub and eatery brands such as Harvester, Toby Carvery, and O'Neills. Marston's owns around 1,400 pubs in the UK and also has brewing operations.
The UK government has advised against all visits to pubs and restaurants to try to halt the spread of the virus.
Mitchells & Butlers said recent trading has been "severely impacted" by Covid-19.
Mitchells & Butlers said it is impossible to quantify the full financial impact and all guidance for its current financial year, ending late September 2020, has now been withdrawn. The firm has suspended capital spending and is reducing costs.
"The group currently has a strong balance sheet with material cash resources which should be sufficient to fund obligations through the half year on April 11, and well into the second half," said Mitchells & Butlers.
"The next securitisation restricted payment and covenant test is at the half year. Sufficient headroom has been established such that we believe the group could suffer a significant loss in the remaining four weeks to the test date and still clear covenant levels."
"We are working hard to deliver a performance within these parameters and are encouraged by the measures announced last night by the chancellor, notably business rates relief and access to a credit guarantee facility, which should further underpin our future performance and liquidity," it continued.
Marston's sales in the 24 weeks to March 14 were 1% lower than a year before like-for-like, it said in its own statement on Wednesday.
Recent trading has been hit by Covid-19 but only marginally, Marston's said. However, this situation is not going to last due to the government's advice on visiting pubs.
Like Mitchells & Butlers, Marston's is unable to quantify what the impact will be, but results for its current financial year will be impacted.
The firm started a debt reduction programme in 2019, targeting a GBP200 million cutting of debt by 2023. Marston's is making "good" progress on that target.
On top of that, the company has now started reducing capital expenditure, cutting overheads, and is also suspending rent to some tenants and lessees.
However, if the current Covid-19 situation continues, Marston's does not see a dividend being declared for the half-year period.
"We have appropriate headroom on both our bank and securitised facilities, supported by a 93% freehold estate. As a consequence of this, and the actions we have taken to date, we believe that we have sufficient liquidity to maintain operations at a materially reduced level of business," said Marston's.
"In addition, we are having discussions with our banking group about the provision of covenant waivers for the second half-year, in the event these should be required. Whilst at an early stage, those discussions have been constructive."
Marston's welcomed the UK government's GBP330 billion rescue package announced on Tuesday by Chancellor Rishi Sunak, adding: "Whilst the full details of these proposals have still to be scrutinised, they represent good progress towards the very significant commitment which the hospitality sector requires from the government, and an acknowledgement of the importance of pubs to jobs, the economy, and communities."
By George Collard; [email protected]
Copyright 2020 Alliance News Limited. All Rights Reserved.
Related Shares:
Mitchells & ButlersMarstons