WH Smith Reports Mixed Half-Year Results Amid Travel Growth and High Street Challenges
Why we think this is neutral
The results present a mixed picture for WH Smith. On the positive side, the Travel business is showing strong growth with revenue up 6% and a robust pipeline of new stores. The company has also agreed to sell its High Street business, which could allow for greater focus on the more profitable Travel segment. However, there are several concerning factors to consider. The slight decrease in Headline Group profit before tax, significant decline in High Street trading profit, and increase in net debt suggest some underlying pressures. The company acknowledges increased geopolitical and economic uncertainties, which could impact future performance. While the overall revenue growth of 3% is positive, it's modest, and the decline in High Street revenue by 7% is worrying. The company's statement that they are 'in line with market expectations' suggests limited upside potential in the near term. Balancing these factors, the outlook appears stable but with notable headwinds, leading to a neutral sentiment overall.
Key Points
- Total Group revenue up 3% to £951m
- Travel business revenue increased by 6%
- High Street revenue declined by 7%
- Headline Group profit before tax and non-underlying items slightly down to £45m
- New store pipeline of over 90 stores in Travel business
- Agreed sale of High Street business to Modella Capital
- Headline net debt increased to £454m
- Leverage at 1.7x Headline EBITDA
- Interim dividend of 11.3p per share declared
- Company expects full year results to be in line with market expectations
Summary
WH Smith's interim results for the six months ended 28 February 2025 reveal a complex picture. Total Group revenue increased by 3% to £951m, driven by a strong performance in the Travel business, which saw a 6% revenue increase. However, the High Street segment experienced a 7% decline in revenue. The company's Headline Group profit before tax and non-underlying items slightly decreased to £45m from £46m in the previous year.
The Travel business continues to be the growth engine, with a new store pipeline of over 90 stores and significant contract wins, particularly in North America. The company has also agreed to sell its High Street business, which could allow for greater focus on the more profitable Travel segment.
Despite these positive developments, there are some concerns. The Headline net debt increased to £454m from £371m at the end of August 2024, and leverage rose to 1.7x Headline EBITDA. The company acknowledges increased geopolitical and economic uncertainties but remains confident in its ability to navigate these challenges.
Looking ahead, WH Smith expects to be "in line with market expectations" for the full year. The company's focus on expanding its Travel business, particularly in North America, appears to be a sound strategy given the stronger performance in this segment. However, the economic uncertainties and the transition away from the High Street business present potential risks.