WH Smith has a low average transaction value of about 5pounds in the high street business and

General — June 19, 2010 at 19:09

WH Smith has a low average transaction value of about 5pounds in the high street business and 3.50 pounds in travel, sohas tended to be less impacted by the economic downturn. “In terms of current trading (there’s been) no major changefrom what we reported in the half,” Swann said. The mix of products has been re-balanced towards WH Smith’score categories of stationery, books, newspapers and magazinesand away from entertainment products — CDs, DVDs, computergames and consoles. Swann’s strategy is based on cutting costs and improvinggross margins by focusing on more profitable products, bettersourcing and better control of markdowns, rather than drivingtop line sales. However, the fall in sales was offset by much better grossprofit margins, which were up 170 basis points, and 9 millionpounds of cost savings in the high street business.

Group sales were flat at 731 million pounds, withlike-for-like sales down 5 percent — high street down 6 percentand travel down 1 percent. This compares with analysts’ consensus forecast of about59.5 million pounds and 64 million pounds in the previous year. The group, which trades from 562 high street stores as wellas 464 outlets at airports, train stations, hospitals andmotorway service areas across the UK, made a pretax profit of 61million pounds for the six months to Feb 28. WH Smith ended its first half with net cash of 44 millionpounds and is paying an interim dividend of 5.4 pence. “The PER (price earnings ratio) discount to the sector ofaround 40 percent is unwarranted given the cash generativeproperties of the company and the consistent profit progress,”Investec Securities analysts said in a research note. By 0921 GMT, the stock was up 3.5 pence at 413.5, valuingthe business at about 618 million pounds.

Shares in WH Smith have increased in value by about 12percent over the last three months, but have underperformed theFTSE All Share General Retailers Index .FTASX5370 by about 16percent. Her comments and the dividend increase offset a 5 percentfall in first-half profit, largely due to lower interest incomefollowing a 90 million pounds return of cash to shareholders andacquisitions last year. She told reporters she was comfortable with analysts’forecasts of pretax profit of about 81 million pounds ($118million) for the year to end-August 2009, up from 76 millionpounds in the previous year. “Our markets remain challenging, however we have plannedaccordingly and are confident in the outcome for the full-year,”Chief Executive Kate Swann said. * Comfortable with FY profit forecasts of 81 mln pounds * H1 pretax profit 61 mln pounds, down 5 pct * H1 div 5.4 pence, up 17 pct * Shares up 1 pct by 0921 GMT (Adds detail throughout, CEO, analyst comments, shares) By James Davey LONDON, April 23 (Reuters) – WH Smith (SMWH.L), the Britishnewspaper, books and stationery retailer, underlined itsresilience to the economic downturn with a confident outlook onfull-year profit and 17 percent hike in its interim dividend.

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