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Solid showing from WH Smith

Another solid performance from WH Smith
April 17, 2015

It was very much business as usual at WH Smith (SMWH) in the first six months of its financial year. Yet again, a strict focus on profitability and cost control ensured earnings rose, despite flat sales and a 2 per cent fall in like-for-like revenues.

IC TIP: Hold at 1381p

The travel division is certainly gaining momentum, helped by rising air passenger numbers. Sales grew 7 per cent, with 3 per cent like-for-like growth, leaving profits 7 per cent higher at £32m. The retailer continued to invest in new outlets and is on track to open 25 in the UK by the end of the financial year. Overseas, the group won a further 15 units, including four at Sydney International Airport.

Things were slower on the high street. Like-for-like sales fell 4 per cent, but the gross margin rose 180 basis points as management maximised returns on every inch of store space through cost-cutting, efficiency measures and by boosting third party income, for example adding further Post Office counters in-store. Consequently, profits grew by 2 per cent to £50m. The group delivered £6m of cost savings, with a further £5m earmarked for the second half. Meanwhile, online card business Funkypigeon.com performed swimmingly over Christmas and Valentine's Day, while newly launched party supplies business Funkyparty.com is said to be meeting expectations.

Investec expects pre-tax profit of £121m for the full year, giving EPS of 87p, up from £114m and 78p in 2013-14.

WH SMITH (SMWH)
ORD PRICE:1,381pMARKET VALUE:£1.6bn
TOUCH:1,380-1,382p12-MONTH HIGH:1,442pLOW: 976p
DIVIDEND YIELD:2.6%PE RATIO:17
NET ASSET VALUE:118p*NET CASH:£16m

Half-year to 28 FebTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20146136946.710.8
20156117251.312.1
% change-+4+10+12

Ex-div: 16 Jul

Payment: 6 Aug

*Includes intangible assets of £59m, or 50p a share