WH Smith returns to profit as travel resumes

WH Smith (SMWH) returned to profit as pandemic travel restrictions were eased in the period and its units in airports and railway stations benefitted from holidaymakers unleashing pent-up demand for adventure. 

Travel revenues were up by 125 per cent to £338mn and the business delivered a £15mn trading profit as consumers hit the road again. Post-period trading suggests that demand shows little sign of abating despite the cost of living crisis. For the 8 weeks to 23 April, travel revenues were at 114 per cent of pre-pandemic levels, a good sign as we head towards the crucial summer trading period.

The high street business increased profits despite facing new challenges. With its footprint – WH Smith’s has 537 high street stores, and has closed 8 since September – the company is exposed to post-pandemic footfall trends as consumers continue to turn to online ordering. High street revenue was flat against the comparative, coming in at £270mn, but profit was still up by £2mn to £35mn for the half.  

There was also an update on this month’s cyber security attack on Funky Pigeon, WH Smith’s online greeting cards subsidiary. The website is expected to return to normal service shortly (orders cannot currently be placed) and there is no “material impact” expected from the incident. Less encouraging is that Funky Pigeon’s revenue contribution fell by £8mn to £21m and lower revenue and profits are expected for the year.

The shares are trading on a consensus 24 times forward earnings, which certainly looks appealing against the five-year average of 39 times. The direction of travel appears promising, with over 125 new stores in the pipeline. Hold.

Last IC view: Hold, 1,600p, 12 Nov 2021