(Sharecast News) - Book and stationery retailer WH Smith swung to an annual profit as a rebound in air and rail travel boosted revenues, with that momentum continuing into the new fiscal year.
The company on Thursday posted pre-tax earnings of £63m compared with a loss of £116m a year ago when Covid travel restrictions were in place. Group revenue increased to £1,400m from £886m.
Travel revenue in the 10 week period to November 5 was 148% of 2019 pre-pandemic levels, it said. For the year to August 31 the business made a trading profit of £96m compared with a loss of £44m. High Street stores made £45m, up £9m.
"We have started the year well and, while there is economic uncertainty, travel patterns globally continue to improve and this, combined with the strength of the group's growth opportunities, means that we are well positioned for a year of significant progress in 2023," said chief executive Carl Cowling.
WH Smith also resumed dividends for investors, with a final payout of 9.1p a share. The group hailed a sharp recovery at airport stores in particular over the summer amid a steep increase in holidaymakers travelling internationally as travel markets reopened worldwide.
Across its UK travel division, which also includes hospital sites, sales in July and August jumped to 121% and 126% of 2019 levels, even with disruption at airports and caps to limit the number of passengers travelling.
"Passenger numbers have recovered strongly, albeit with further recovery to go, and we are very well positioned to capitalise on the significant space growth opportunities across each of our markets," the company said.
The group has been buoyed by expansion in the travel sector, having purchased US-based airport technology retailer InMotion in 2018.
It is rolling out 150 new stores across 16 countries, including 70 in North America and across airports such as Los Angeles, Salt Lake City, Brussels, Oslo and Melbourne.
"WH Smith has been spreading its wings across the US, Europe and Australia with great success. 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," said AJ Bell investment director Russ Mould.
"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."
"The return of the dividend will be welcomed by investors, but more importantly it signals that WH Smith has reached a tipping point. Covid appears to be in the rear-view mirror for the business and management is upbeat on the company's prospects. That sends a very strong signal to the market.
Mould also noted that the group's online business was making inroads, with its own-name website selling a wide array of goods alongside 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 added.
Reporting by Frank Prenesti for Sharecast.com
Wh Smith (SMWH)