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WH Smith lifts interim dividend as profits drop after acquisition of InMotion

Peel Hunt reiterated a 'buy' recommendation on WH Smith and raised its target price to 2,550p from 2,500p, saying "there is much to like in today's interims".
WH Smith
Like-for-like revenue rose 1% in the first half

WH Smith PLC (LON:SMWH) raised its interim dividend by 8% even as profits slumped on the back of the costs of buying US airport retailer InMotion.

The stationery and books retailer said statutory profit before tax fell 21% to £65mln in the six months to the end of February after acquiring InMotion’s 114 stores for £155mln late last year.

Revenue edged up 8% to £695mln as 18% growth in sales at its travel division, which includes stores at airports and rail stations, offset a 1% drop at its high street stores.  

READ: WH Smith performs as expected with travel offsetting slow high street decline

Like-for-like revenue rose 1% with travel sales up 3% and high street sales down 2%.

The company raised its dividend to 17.2p per share from 16.0p a year ago.

"While there is uncertainty in the broader economic and political environment, we have made a good start to the second half of the financial year and the increase in the interim dividend by 8% reflects the board's confidence in the outcome for the full year,” said chief executive Stephen Clarke.

InMotion integration 'progressing well'

Clarke said the high street division delivered one of its “best trading performances in recent years” due to growth in seasonal stationery ranges including Christmas cards, wrap, diaries, calendars, and art and craft ranges.

He added that the integration of InMotion is “progressing well”.

“This acquisition doubles the size of our business outside of the UK where we are now present in 99 airports and 30 countries,” he said.

“We won a further 21 units in the period, including two InMotion units in Australia and Spain, highlighting the potential of this business outside of the US.”

Following the acquisition, the group's net debt position stands at £340mln. The company expects full-year non-underlying costs relating to the InMotion acquisition of £11mln.

Peel Hunt keeps 'buy' stance, hikes target price 

Peel Hunt reiterated a 'buy' recommendation and raised its target price to 2,550p from 2,500p. 

"With InMotion starting well in WH Smith's hands and the core Travel business in rude health, there is much to like in today's interims," the broker said.

It added: " This is becoming a really compelling global growth story, something that the shares are only just beginning to reflect."

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WH Smith PLC Timeline

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October 11 2018
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August 30 2018

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