WH Smith profit slumps on weak trading despite revenue growth

Investing.com -- WH Smith (LON:SMWH) on Friday reported a fall in full-year earnings and cut its headline profit forecast to £100-115 million for the year ahead, well below earlier guidance of £182.6 million and analyst expectations near £157 million after weaker trading profit offset revenue gains.

The London-listed travel retailer reported headline group profit before tax and non-underlying items of £108 million for the year ended Aug. 31. 

Headline trading profit fell to £159 million from £170 million a year earlier. Diluted headline earnings per share before non-underlying items declined 28% to 43.4p. 

The company proposed a final dividend of 6.0p per share, taking the full-year dividend to 17.3p. 

Total revenue from continuing operations rose 5% to £1.55 billion, compared with £1.47 billion in the prior year. 

On a constant currency basis, revenue increased 7%. UK revenue increased 5% to £834 million, North America revenue rose 3% to £413 million, and revenue from the rest of the world and other operations increased 10% to £306 million. 

Statutory results reflected £100 million of non-underlying items, including impairments, transformation costs and expenses related to an accounting review in North America. 

The group reported a loss after tax for total operations, driven by those charges and losses from discontinued operations. 

WH Smith completed the sale of its UK High Street business and its Funky Pigeon online card business during the year, with both classified as discontinued operations.

The High Street sale generated an upfront cash payment of £10 million, with additional consideration linked to future cash flows. The Funky Pigeon business was sold to Card Factory PLC for £24m. 

In North America, headline trading profit fell to £15 million from £34 million after the company restated prior-year results to correct the accelerated recognition of supplier income. 

The board said a remediation plan is in place following an independent review by Deloitte. 

The group confirmed the Financial Conduct Authority has commenced an investigation into compliance with UK Listing Principles and disclosure rules related to the matter. 

Net debt on a headline basis increased to £390 million at Aug. 31, from £371 million a year earlier. Leverage was 2.1 times headline EBITDA, compared with 1.9 times in the prior year. Headline EBITDA for the year was £187 million. 

Andrew Harrison, interim group chief executive in a statement said “It has been a difficult end to the year for the Group. The Board and I are acutely aware that we have much to do to rebuild confidence in WHSmith and deliver stronger returns as we move forward.”

He added, “Following the sale of our UK High Street business and Funky Pigeon during the year, we are now a pure-play global travel retailer.” 

The company said like-for-like revenue growth of 3% continued into the first 15 weeks of the new financial year.