WH Smith reinstates dividends for shareholders

WH Smith has reinstated dividends after its annual profit slightly beat market forecasts amid a rebound in demand for travel after pandemic lows.

The retailer, which sells everything from books and sandwiches to Bluetooth headphones, said it would pay a final dividend of 9.1 pa shares after dividends were suspended in 2020 at the height of the pandemic.

The travel industry has seen a strong rebound over the year, leading to longer wait times and chaos at airports and train stations for passengers, although train strikes in Britain have also caused some travel disruption.

WH Smith CEO Carl Cowling said: “While there is economic uncertainty, travel patterns worldwide continue to improve and this, combined with the strength of the Group’s growth opportunities, means we are well positioned for a year of significant progress in 2023.

‘The resumption of the dividend announced today reflects our strong current trading and the confidence of the Board of Directors in the future prospects of the Group.’

The group posted a total pre-tax profit of £61 million for the year to 31 August, down from a loss of £104 million a year ago when Covid restrictions hit the retail chain and its network of sites at travel hubs around the world.

WH Smith said total sales in his travel business reached levels seen before the pandemic hit, with 130 percent of 2019 sales in the second half, or 92 percent on a comparable basis.

The high street branch traded at 82 percent of 2019 levels, or 83 percent on a comparable store basis, in the last six months of the period.

Speaking about its hospital stores, the company said: ‘The hospital channel is an important channel for us and is currently our second largest channel in terms of sales in Travel UK. Throughout the year we have seen a consistent improvement in sales as restrictions eased.”

WH Smith shares rose today, rising 1.98 percent or 25.50p to 1312.50p, after falling more than 18 percent in the past year.

Richard Hunter, Head of Markets at Interactive Investor, said: “WH Smith has returned strongly to earnings, driven by its global travel business that has become the driving force of the company.

At the same time, the group has expressed its confidence in the outlook by reintroducing the dividend. This is a symbolic gesture as the expected yield is below 1 percent, yet draws a line under a period of pandemic uncertainty.’

He added: “As with the industry in general, sentiment remains poor on the retail outlook, especially in light of potentially recessionary times that could have a specific impact on the group in air travel as discretionary consumer spending is limited.

Shares are down about 21 percent in the past year, while the broader FTSE 250 is down 20 percent, although overall direction of travel has improved over the past six months.

“Indeed, unmoved by the more difficult economic backdrop to come, the market consensus that the stock is a strong buy reflects both the group’s performance and its ambitions.”

Russ Mold, investment director at AJ Bell, said: “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 company’s rearview mirror and management is optimistic about the company’s prospects. That sends a very strong signal to the market.

‘Interestingly, the group is also causing a furore with its digital operations. WH Smith is not typically associated with the online channel, but her website sells a wide variety of goods and also has several specialized sites.

Funkypigeon is a profitable seller of greeting cards and also sells the largest line of pens in the world through the Cult Pens website. These initiatives suggest that WH Smith is not the old-fashioned retailer that many people think he is.”