Whitbread PLC's (LSE:WTB) Budget business rates hit has prompted brisk earnings downgrades from analysts, although both Deutsche Bank and Panmure Liberum keep the faith with 'buy' ratings.
The issue stems from new rateable values outlined by Rachel Reeves last week, which will push its business rate bill up by £40-£50 million in the first year. That scale of increase implies rateable values across the Premier Inn estate have more than doubled.
Deutsche’s Tim Barrett notes that hotels were always in the firing line. Headline data from the Valuation Office shows a 76% jump in rateable values for hotels as part of the latest revaluation, compared with rises of 29% for pubs, 14% for restaurants and 10% for general retailers.
What surprised the market was Whitbread’s disclosure that Premier Inn’s increase is roughly twice the hotel industry average. The group is expected to appeal many assessments and push for further cost savings, but the bank has still cut its profit forecasts.
Deutsche trims its profit forecast for FY27 and FY28 by 6% and 9% respectively and lowers its price target from 3,750p to 3,375p.
Panmure reaches a similar conclusion with slightly sharper numbers. It also assumes a £40-50 million hit to business rates in FY27 and folds that into a higher inflation outlook for the group, now 3.5-4.5% versus 2.0-2.5% for FY26.
On that basis, Panmure cuts its FY27 profit estimate by 11% to £441.4 million, while leaving FY26 untouched. Its price target comes down to 3,440p from 3,700p.
Both brokers stress that the revisions reflect the full economic impact as it stands today.
Panmure describes its forecasts as “fully loaded” for cost headwinds, leaving room for upgrades if trading proves stronger or if Whitbread can claw back more of the rates burden through mitigation.
Supply contraction in the wider hotel industry could also provide some support over time.
The shares fell 11.5% on Friday as investors digested the Budget implications. Even after the downgrades, the analysts argue the reaction looks heavy-handed.
Panmure’s revised target still implies close to 40% upside, while Deutsche’s maintains a clear valuation cushion. For now, the focus is on how many rate assessments Whitbread can challenge successfully and how quickly it can offset the hit through efficiencies.