WH Smith suffered a huge drop in profit in its half year as the costs of its purchase of US airport retailer In Motion grounded its bottom line.
Group revenue grew eight per cent year on year to £695m for the six months to the end of February as the stationery chain relied on new store openings to boost sales – like-for-likes grew just one per cent.
Meanwhile profit before tax fell 21 per cent to £65m after buying In Motion’s 114 stores for £155m late last year.
Headline group profit before tax fell one per cent to £81m, WH Smith said.
Diluted earnings per share drove down 23 per cent to 46.8p, compared to 60.9p last year.
But the retailer still hiked its interim dividend eight per cent to 17.2p per share, boosted by a £25m share buyback.
Why it’s interesting
While WH Smith took a hit from its October acquisition of In Motion, it believes expanding into those stores is essential to its future health as travel hub stores continue to outperform the high street.
Travel profits rose seven per cent to £44m and revenue was up 18 per cent with a boost from In Motion stores as WH Smith's integration makes good progress, with 425 WH Smith stores now open in airports and train stations.
The retailer predicted strong profit growth in travel to beat second half expectations.
In contrast, WH Smith’s managed high street decline shows no signs of abating.
Stores saw profits fall from £50m last year to £48m while revenue slipped one per cent on a two per cent drop in like-for-like sales.
What WH Smith said
Group chief executive Stephen Clarke said: “The group has delivered a strong performance in the first half of the financial year.
“In travel, we continue to see strong sales growth, up 18 per cent, driven by our ongoing investment and initiatives in our UK business and our growing international businesses.
“The integration of In Motion is progressing well. This acquisition doubles the size of our business outside of the UK where we are now present in 99 airports and 30 countries. We won a further 21 units in the period, including two InMotion units in Australia and Spain, highlighting the potential of this business outside of the US.
“High Street delivered one of our best trading performances in recent years, despite the widely reported challenges facing the UK high street. This has been driven by good growth in seasonal stationery ranges including Christmas cards, wrap, diaries, calendars and our latest fashion and art and craft ranges.
“These results are only possible through the hard work of all of our teams across the business and I am sincerely grateful for everyone's continued support.”
More to follow.