WH Smith’s (SMWH) half-year figures through to 29 February are of secondary importance to what was to follow. April revenues in the travel segment plummeted 91 per cent, owing to the mass closure of stores in airports and railway stations. The group's high street outlets fared little better during the month, following on from a £44m trading profit in the period under review.
With normal trading curtailed, the emphasis has switched to cash preservation. The retailer has slashed its monthly cash burn to £25-30m, before furlough savings. With £400m in available liquidity after a £166m share placing conducted last month, JP Morgan analysts believe allows WH Smith to sustain a period of "close to zero income" well into next year.
Capital investment increased by a third to £41m over the quarter. And despite the unprecedented impact on operations, the group has committed to maintaining investment in its new UK and North American flagship stores. Working capital has been allocated to support the growth of its recently acquired US business MRG. However, the timing of the acquisition may come to be seen as unfortunate. Even excluding lease liabilities, WH Smith’s net debt ballooned over the period, with borrowings doubling to £400m after the retailer borrowed £200m to fund the MRG deal.
Peel Hunt forecasts adjusted pre-tax losses of £40.6m and losses per share of 26.7p for the August year-end, before a return to profit in FY2021 with £56.1m and EPS of 35.1p.
| WH SMITH (SMWH) | ||||
| ORD PRICE: | 889p | MARKET VALUE: | £1.16bn | |
| TOUCH: | 884-889p | 12-MONTH HIGH: | 2,660p | LOW: 584p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 10 | |
| NET ASSET VALUE: | 272p* | NET DEBT: | £977m** | |
| Half-year to 29 Feb | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2019 | 695 | 65 | 47.2 | 17.2 |
| 2020 | 747 | 63 | 41.6 | nil |
| % change | +7 | -3 | -12 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £510m, or 390p a share **Includes lease liabilities of £566m | ||||
