Whitbread PLC (LSE:WTB) is facing a big hit from the changes to National Insurance and the minimum wage unveiled in the Budget, but Berenberg is still upbeat on the medium-term prospects for the Premium Inn owner.
Due to the impact of the UK budget on costs and to reflect the current trading environment implied by Travelodge’s third-quarter update, the broker has tweaked its price target to £39 from £40.
Even so, it remains a ‘buy’ in the broker’s view based on its accelerating growth plan, steady improvement in Germany and on the cashflow being generated by business.
“As a business that generates more than 90% of its revenues from the UK, Whitbread’s costs will rise due to changes made in the UK budget.
“We estimate all the national insurance changes could increase personnel costs by £25-30 million, with higher wages driving mid- to high-single-digit labour cost inflation.
“Although our model had included some inflation, for 2026 we increase our cost estimates and cut our pre-tax profit forecast by 6%.
“Whitbread does have levers available that could mitigate some of this impact on costs, including bringing forward cost efficiencies, adjusting headcount and pricing increases.
“The effect of the UK budget that we expect for Whitbread is likely to be felt across the entire industry.
“Supply remains tight and we believe could tighten further, supporting RevPAR over the coming years.”
Buy with a 3,900p target is the view. In afternoon trading, the shares were flat at 2,919p.