13th Apr 2016 10:27
LONDON (Alliance News) - WH Smith PLC delivered higher interim pretax profit on Wednesday as investment in its travel business continued to pay off and cost-cutting and efficiency measures boosted margins in its high street business.
The books, stationary and magazines retailer said pretax profit for the half year to the end of February rose 11% year-on-year to GBP80.0 million from GBP72.0 million. Trading profit for the travel business rose 9.0%, while trading profit for the high street branches increased 6.0%.
The rise in profit for the high street branches came amid cost-cutting and efficiency gains which improved margins for the division, as like-for-like sales came in flat and total sales for the high street stores fell 1.0% in the half. The gross margin for the high street business improved 90 basis points year-on-year in the half.
This contrasted with a strong performance for the travel branches, located in airports, train stations and hospitals, where total sales rose 11% in the half and like-for-like sales grew 5.0%.
Overall, total revenue for WH Smith rose to GBP633.0 million from GBP611.0 million a year earlier in the half, with like-for-like sales for the group rising 2.0%.
WH Smith said it will pay an interim dividend of 13.4 pence per share, up 11% year-on-year.
The company said it remains on track with its cost-cutting plans, with GBP5.0 million in annual costs taken out of the high street business in the first half and another GBP4.0 million expected to be achieved in the second.
"The group has delivered a strong first half with both our Travel and High Street businesses performing well. Looking ahead, we will continue to focus on profitable growth, cash generation and investing in the business to position us well for the future," said Chief Executive Stephen Clarke.
WH Smith said the travel business delivered a good sales performance across key channels, driven by ongoing investments in the business and an improvement in passenger numbers. Airport branches saw like-for-like sales rise 6.0%, with the same growth seen in train station outlets. Sales of WH Smith branches in hospitals, part of the travel group, surged, up 23% in total and 5.0% like-for-like, thanks to the opening of 9 new stores.
WH Smith said it intends to continue investing in the travel business, focused on refurbishing and improving stores, increasing staff in its busiest outlets and by adding new space.
The company has also started trialling a new format and brand called Coffee House in five hospital locations where it operates a WH Smith cafe. Following encouraging initial results, WH Smith said it now intends to convert all 17 of its WH Smith cafes to Coffee House branches.
Further growth of the travel business is expected through international expansion, WH Smith said, with 17 new outlets outside the UK won in the first half, including in Dusseldorf airport in Germany and Alicante airport in Spain. The company also won new units in Melbourne in Australia and now has a total of 217 units open internationally.
The focus for the high street business, meanwhile, remains on growing gross margin by controlling costs, which delivered the rise in trading profit and robust cash generation in the first half, WH Smith said.
Stationery sales were strong in the first half, the company said, particularly new products in its seasonal ranges, and it has continued to get a boost from 'colour therapy', the rapidly-growing trend of colouring books for adults. This trend has even extended, WH Smith said, to new 'extreme dot-to-dot' titles.
WH Smith said it is also making a push to capitalise on its strength in the books for children and young adult categories and has signed a contract to launch a Book Club with Zoella, the vlogger and author.
WH Smith said it made progress in the half with its WH Smith Local franchise initiative, with 105 franchisees now signed up and 60 stores open.
The group has opened 60 Card Market trial stores in the half. WH Smith said sales are building in the trial greeting card stores, but the performance has varied from store to store. Given the additional sales increase which would be needed to justify a full roll-out, WH Smith said no further card openings are planned at present.
WH Smith added it has signed a new commercial deal with Post Office Ltd, the operator of post offices in the UK, to relocate a further 61 Post Office branches to WH Smith high street stores over the next year, either as franchises or run by Post Office under a concession deal. WH Smith already has 107 Post Offices located in its high street stores.
WH Smith shares were down 3.0% to 1,751.50p.
By Sam Unsted; [email protected]; @SamUAtAlliance
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