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WH Smith travels well

The ubiquitous stationery specialist continues to grow its travel and international businesses as high-street sales flag
October 15, 2015

High-street staple WH Smith (SMWH) will continue to focus on growing its travel division after another set of full-year results revealed much stronger trading at the group's outlets in airports, railway stations and hospitals than on the high street. Like-for-like sales in the travel segment rose 4 per cent last year, helping push the division's trading profit up 10 per cent to £80m. That compares with a 3 per cent decline in like-for-like sales on the high street, which - combined with tight cost control - delivered a 2 per cent improvement in trading profit to £59m.

IC TIP: Hold at 1,630p

The high street business will soon be dealt another blow, too: the introduction of George Osborne's new living wage will cost the group an additional £1m this year - two-thirds of it on the high street - rising to between £2m and £3m a year thereafter. The group hopes to offset this through further cost-cutting - a discipline in which it has a formidable track record. Last year management took surplus costs amounting to £11m out of the high street division, and has identified another £11m for this year as part of a £20m three-year savings plan.

Analysts at Peel Hunt expect pre-tax profit of £129m in the current financial year, giving EPS of 95.6p, compared with pre-tax profit of £123m and 87.3p for the year ended August 2015.

WH SMITH (SMWH)
ORD PRICE:1,630pMARKET VALUE:£1.88bn
TOUCH:1,629-1,631p12-MONTH HIGH:1,665pLOW: 977p
DIVIDEND YIELD:2.4%PE RATIO:19
NET ASSET VALUE:128p*NET CASH:£15m

Year to 31 AugTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20111.279352.122.5
20121.2410261.526.9
20131.1910368.930.7
20141.1611277.335.0
20151.1812187.139.4
% change+1+8+13+13

Ex-div: 14 Jan

Payment: 4 Feb

*Includes intangible assets of £59m, or 51p a share