WH Smith's business model may not be the most exciting – offset steadily declining sales of books, magazines and stationery with tight cost control and new store openings across its travel business. But it's one that's proving effective at generating strong cash flow, in turn underpinning steady returns to shareholders in the form of chunky dividend payments and share buy-backs. Since 2007, the group has returned £377m, including £41m in the last half-year.
Despite that, WH Smith's net cash rose by £12m, even though like-for-like sales fell 5 per cent in the half, with both the high street and travel businesses seeing underlying sales slip. But the addition of 18 new UK units in non-high-street locations such as motorway service stations and hospitals and 10 overseas meant total travel sales were up 2 per cent, helping to lift the division's operating profit by 8 per cent to £27m. The group also revealed plans for a further 20 international stores, including eight in India and six in the Middle East. High street profits held steady at £47m, thanks to £8m of cost savings delivered in the period – that was £2m higher than expected and WH Smith said another £3m had been identified for the second half.
Broker Espirito Santo expects full-year pre-tax profits of £98m and EPS of 58p (£93m and 52p in 2011).
WH SMITH (SMWH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 536p | MARKET VALUE: | £715m | |
| TOUCH: | 536-537p | 12-MONTH HIGH: | 568p | LOW: 437p |
| DIVIDEND YIELD: | 4.4% | PE RATIO: | 9 | |
| NET ASSET VALUE*: | 122p | NET CASH: | £53m | |
| Half-year to 29 Feb | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 686 | 64.0 | 35.7 | 7.20 |
| 2012 | 665 | 66.0 | 40.9 | 8.30 |
| % change | -3 | +3 | +15 | +15 |
Ex-div: 13 Jun Payment: 18 Jul *Includes intangible assets of £55m, or 41p a share | ||||
