6th Apr 2020 17:38
(Alliance News) - WH Smith PLC said Monday it has secured a new banking facility and its proposing a share placing to institutional investors representing up to 13.7% of its share capital.
WH Smith will also not be declaring an interim dividend for the six months to the end of February.
The retailer said these moves will allow it to deal with the "most challenging" of trading environments whilst ensuring it is well positioned for the eventual normalisation and growth of the global travel market.
Chief Executive Carl Cowling said: "While the group made good progress in the first half of the financial year, the outbreak of Covid-19 has had a significant impact on both our Travel and High Street businesses."
WH Smith has secured a GBP120 million committed banking facility from BNP Paribas, HSBC Bank PLC and Santander UK PLC. It also includes a waiver on the existing bank covenants at August 2020 and February 2021, with a new covenant at February 2021.
The facility is contingent on WH Smith raising equity. The number of shares placed and the pricing of those shares will be determined by the joint bookrunners, Barclays, BNP Paribas, HSBC and JP Morgan Cazenove.
Directors and members of the senior management team of WH Smith, including its chair, chief executive and chief financial officer will be participating alongside the equity placing and intend to contribute GBP535,000.
"WH Smith has consulted with a number of its major shareholders on the rationale for, and the structure of, the placing prior to this announcement. Based on the scenario planning undertaken by WH Smith management, the additional financing arrangements will provide sufficient liquidity to deal with this most challenging of trading environments and enable WH Smith to continue to operate, where possible, through this extraordinary period whilst ensuring the group is well positioned for the eventual normalisation and growth of the global travel market," the retailer said.
WH Smith said it is working on the "pessimistic" view that 95% of its store estate will remain closed, with gradual re-openings.
In March, the company's revenue was down 25% year on year.
However, as a result of the high number of store closures, in the latest week of trading to April 4, revenue was down around 85% year on year. On this basis, in the month of April as a whole, WH Smith expects revenue to be down by about 90%, or GBP114 million, year on year. This will results in operating profit for April falling GBP39 million.
For the remainder of the second half, ending August, WH Smith is guiding for revenue to be down between 80% and 85% year on year.
"Our estimates for operating profit reflect the benefits of extensive management actions that are being taken to reduce costs, described below, and as such would result in a drop-through to operating profit in the second half of approximately 45% of lost revenues for that period," WH Smith added.
The retailer expects a gradual improvement in trading through the rest of 2020.
WH Smith continued: Longer term, the board remains confident in the Group strategy and believes WH Smith is well positioned to benefit from the long-term growth in its key markets."
CEO Cowling said: "We continue to operate about 30% of our UK store portfolio ensuring we keep our stores open in the communities that most need our services at this critical time.
"We are a resilient business and with the new financing arrangements announced today, together with our continued focus on managing cost, we are in a strong position to navigate through this time of uncertainty and are well positioned to benefit from the normalisation and growth of our key markets."
WH Smith is looking to shave GBP200 million off its cash operating costs, about 60%, during the rest of the second half.
For the first half, WH Smiths expects its pretax profit will be in line with market expectations of GBP80 million.
Shares in WH Smith closed 8.3% higher in London on Monday at 1,094.00 pence each.
By Paul McGowan; [email protected]
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