Books and stationary retailer WH Smith plc (LON:SMWH) posted flat like-for-like revenue in the first half as a sales decline at its high street stores offset growth at stores located in airports and rail stations.
Shares fell 4.33% to 1,746p in morning trading.
Like-for-like revenue at the high street division fell 3% in the six months ended 28 February, against a robust performance the same period a year ago on strong sales of 'Colour Therapy' book titles.
The travel arm, which includes stores at airports and rail stations, delivered a 5% increase in like-for-like sales as the company expanded the business and as passenger numbers improved. WH Smith said it was on track to open about 15 new travel stores in the UK the year.
Group pre-tax profit edged up 4% to £83mln, boosted by tight cost control measures.
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WH Smith expands travel business...
Trading profit in the travel unit rose 11% to £39mln as the number of stores rose to 790 from 768 and the gross margin rose 80 basis points. Internationally WH Smith won 255 new travel units, including at Changi Airport, Singapore and across Europe.
High street trading profit was flat at £53mln, operating from 613 stores, compared to 612 at 31 August. Margins rose 100 basis points and the company achieved £7mln in cost savings. A further £3mln cost savings have been identified for the second half, putting the group on track to meet its target of £10mln for the year.
“Stationery performed particularly well over the Christmas period driven by strong sales from our new seasonal product ranges and Books benefitted from good sales of spoof humour titles,” said chief executive Stephen Clarke.
Dividend raised...
The group lifted its interim dividend 9% to 14.6p as the company sounded a confident outlook. Net debt rose to £12mln from £1mln while free cash flow fell to £44mln from £58mln.
Clarke said while there is macro-economic uncertainty, the group will “continue to focus on profitable growth, cash generation and investing in the business which positions us well in the current year and into the future”.
No suprises, says analyst...
Liberum said there were no suprises in the company's interims and does not see any material chnages to consensus forecasts. The broker said travel like-for-like sales are running ahead of its full year estimates while the High Street's flat performance was expected and against a tough comparitive.
"Net debt has increased on prior year, in part due to timing differences but also increasing working capital requirements as international operations expand," Liberum said.
"Despite this, the group's balance sheet remains healthy and we expect this to continue."
The broker left its 'hold' rating and 1,700p target price unchanged. It added that it likes WH Smith for its strong management team, track record of consistent delivery and high earnings visibility.
"High Street remains stable and cash generative, with good growth opportunities in travel, particularly international."
"Our sticking point over recent times has been valuation. The shares have significantly outperformed the wider retail sector over the last 6 months and year-to-date."
-- Adds share price reaction, broker comment --