UBS9 Dec 2025 07:17
UBS has stuck to its 'buy' rating on Whitbread PLC (LSE:WTB), arguing that the recent sell-off has gone too far, even as new tax and cost pressures force a meaningful reset of long-term profit expectations.
The Premier Inn owner has been under pressure since the budget last month, which introduced sharply higher business rates for large operators.
The shares have fallen from around £28 beforehand to about £23.63 on Monday and UBS calculates they are now trading less than 15% above their pandemic lows.
The bank says Whitbread’s latest trading commentary was reassuring. UK mid-scale and economy revenue per available room remains positive and forward bookings are ahead of this time last year.
Management also reported a welcome improvement in Germany, where Premier Inn continues to outperform a market that has begun to accelerate again. UBS has left its 2026 forecasts unchanged as a result.
From 2027 onwards, the picture becomes tougher. UBS has cut its UK profit before tax forecast by about £50 million to reflect higher business rates and another £15 million of other cost increases.
That takes its 2027 estimate down to £474 million from £541 million. Earnings per share fall 9% in 2027 and 11% in 2028 on the new numbers.
The bank no longer expects Whitbread to reach its £800 million profit target by 2030 and now sits around 10% below it.
UBS argues that Whitbread will have to respond either by pushing through higher room rates or by rethinking its UK rollout.
Smaller independents are likely to feel the squeeze more acutely, which could help Whitbread pick up market share.
The analysts also see a stronger case for shifting capital towards Germany, where scaling up more quickly could improve returns. Further cost-cutting is expected.
Despite the downgrades, the bank says this is not a moment to capitulate.
It sees the current valuation as attractive, given the long-term structural advantages of the Premier Inn model and the prospect of revised strategic plans early next year.
UBS values Whitbread at £34.85 per share, down from £40.35, but still offering 46% upside from current levels.
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