As ever, WH Smith’s (SMWH) half-year results are largely binary. Let's start with the travel business - the main engine of growth in recent years - which performed well. Even without the recent acquisition of digital accessory group InMotion, sales across the division were still up 8 per cent over the six months to February 2019 - a slight acceleration on the 7 per cent seen during the first half of the 2018 financial year. Inclusive of InMotion, divisional sales were up 18 per cent.
And altough the InMotion deal led to a sizable jump in group net debt, the transaction has allowed WH Smith to significantly expand its footprint in the US, as well as its digital accessory business in the UK. Broker Peel Hunt reckons turning InMotion into a "truly global technology fascia" could "change the face" of wider group profits and, to that end, has chosen to upgrade current-year forecasts. Analysts there now expect adjusted pre-tax profits of £153m in the year to August 2019, giving EPS of 115p - up from £145m and 108p in FY2018.
On the other side, WH Smith's high street business is still a story of managed decline, although sales appear to be stabilising. In fact, management hailed its "second best sales performance in the past decade" during this six-month period. Revenues may have fallen 1 per cent, but tight cost control led to a £4m saving in the first half, with a further £5m claw-back expectedto be in the second. Much of this is down to savings on store rents as leases expire. The group has managed to cut its bill by an average of 33 per cent, with more than 300 leases due to expire in the next three years.
But despite this strong performance, bosses still warned of "uncertainty in the broader economic and political environment". After all, beyond the vicissitudes of the UK retail environment, the travel business could find itself increasingly exposed to a global economic slowdown, and a potential reduction in passenger travel volumes.
| WH SMITH (SMWH) | ||||
| ORD PRICE: | 2,160p | MARKET VALUE: | £ 2.34bn | |
| TOUCH: | 2,158-2,162p | 12-MONTH HIGH: | 2,186p | LOW: 1,678p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 25 | |
| NET ASSET VALUE: | 172p* | NET DEBT: | 118% | |
| Half-year to 28 Feb | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 643 | 82.0 | 61.5 | 16.0 |
| 2019 | 695 | 65.0 | 47.2 | 17.2 |
| % change | +8 | -21 | -23 | +8 |
| Ex-div: | 11 Jul | |||
| Payment: | 01 Aug | |||
| *Includes intangible assets of £205m, or 189p a share | ||||
