10th Nov 2022 14:34
(Alliance News) - WH Smith PLC on Thursday boasted a significant surge in annual revenue as its travel arm benefitted from a strong post-pandemic recovery.
For the year that ended on August 31, revenue surged to GBP1.40 billion from GBP886 million the previous year - the highest annual top-line number reported by the firm since 2006.
"WH Smith has long viewed its travel arm as the growth engine for the business and there is now real momentum in this division," said Russ Mould, investment director at AJ Bell
"Operating stores from airports, train stations and roadside service hubs puts WH Smith in a position where it can charge more than the high street or internet for products as it enjoys a captive audience," Mould explained.
WH Smith saw total travel revenue amount to GBP927 million, more than double the GBP401 million achieved the year before.
The strong recovery helped the retailer swing to a pretax profit of GBP63 million in the year, from a loss of GBP116 million a year prior.
For AJ Bell's Russ Mould, WH Smith's travel arm wasn't the only positive for the firm, however.
"The fact its North American business is poised to have bigger profits than its UK high street business shows this is a very different beast to the WH Smith most people know of old," he said.
WH Smith reported trading profit of GBP33 million for its North American business, up sharply from just GBP2 million a year prior. Further, its profit in the Rest of the World swung to a profit of GBP3 million from a loss of GBP17 million.
Richard Hunter, head of markets at interactive investor, said the numbers represented "a shift in fortunes" as the company edges more towards becoming a more global business.
With a pipeline of 150 new stores yet to open across 16 countries and in airports as varied as Los Angeles, Brussels, Oslo and Melbourne, WH Smith's Chief Executive Carl Cowling said the firm was in its "strongest ever position as a global travel retailer."
Mould added that the company was also making waves with its digital operations.
"WH Smith is not typically associated with the online channel, but its website does sell a wide array of goods and it also operates several specialist sites. Funkypigeon is a profitable greeting card seller, while it also sells the widest range of pens in the world via the Cult Pens website. These initiatives would suggest that WH Smith is not the old-fashioned retailer which many people think it is," he said.
Funkypigeon.com delivered revenue of GBP35 million in the year, down from GBP54 million the year prior. WH Smith said this was expected, however, due to a cyber incident at the site in April.
"Yes, it still has those messy shops up and down the UK selling overpriced chocolate oranges and calendars from years ago, but these outlets are cash cows for the business. It's found a formula that brings in the money without having to worry about sprucing up the appearance of the stores," Mould continued.
Shares were up 2.4% at 1,317.50 pence on Thursday afternoon in London, having hit an intraday high of 1,354.00p.
In the year-to-date, however, the stock is down 16%.
"As with the sector generally, sentiment remains sour on prospects for retail, particularly in light of potentially recessionary times, which could have a specific impact for the group in terms of air travel as discretionary consumer spend is crimped," interactive investor's Richard Hunter explained.
Nonetheless, Hunter added, market consensus for the shares remains a "strong buy", reflective of both the company's performance as well as its aspirations.
By Heather Rydings; [email protected]
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