(Alliance News) - WH Smith PLC on Thursday unveiled plans to expand further in the US with the purchase of travel retailer Marshall Retail for USD400 million, or around GBP312 million.
The acquisition, announced alongside the books and stationery seller's annual results, will broadly double the size of WH Smith's international travel business, it said, with an annual cost synergy run-rate of USD11 million expected by the third full year following completion.
WH Smith intends to raise GBP155 million, representing 7% of the FTSE 250 company's existing share capital, via an accelerated bookbuild to part fund the deal. The bookbuild is being run by Barclays and JP Morgan.
Marshall Retail operates 170 stores in North America, with 59 of these inside airports. The firm is expected to deliver revenue of USD204 million and earnings before interest, tax, depreciation and amortisation of USD31.5 million in 2019, WH Smith said.
This acquisition comes almost exactly a year after WH Smith announced the purchase of US-based travel retailer InMotion Entertainment for USD198 million.
The integration of InMotion is now complete, WH Smith said on Thursday, and its performance has been ahead of initial expectations. Digital and travel accessories retailer InMotion operates from 116 stores across 43 airports in the US.
Turning to the London-listed firm's annual results, revenue for the year to August 31 rose 11% to GBP1.40 billion from GBP1.26 billion, while pretax profit edged up to GBP135 million from GBP134 million.
Travel total revenue was up 22%, or 8% higher when stripping out InMotion, and 3% higher on a like-for-like basis.
WH Smith's travel operations once again outperformed its high street estate, with the High Street unit reporting revenue down 2% with like-for-like sales also down 2%. However, there was a good gross margin performance in the arm and costs were "tightly controlled".
Travel trading profit rose 14% to GBP117 million, while High Street trading profit was flat at GBP60 million.
On current trading, WH Smith said it has made a "good start" to the new financial year. After the first six weeks, total travel revenue is up 25% with like-for-like sales 5% higher. High Street total revenue is down 4%, and 3% lower on a like-for-like basis. For the group, revenue is up 12% and like-for-like sales 1% higher.
WH Smith's dividend for the year amounted to 58.2 pence, up 8% from 54.1p a year ago, after also an 8% hike in its final dividend.
"While there is uncertainty in the broader economic and political environment, we are pleased with the start to the new financial year in both businesses. Looking ahead, the Group will continue to focus on profitable growth, cash generation and delivering value for shareholders," said WH Smith's outgoing chief executive, Stephen Clarke.
On the acquisition of Marshall, Clarke said it "builds further" on the takeover of InMotion last year and "significantly strengthens" growth prospects in the US, the world's largest travel retail market.
Carl Cowling, managing director of the company's High Street business, will take over the role of CEO at the start of November.
By Lucy Heming; lucyheming@alliancenews.com
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