WH Smith reinstates dividends for shareholders

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

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

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

WH Smith boss Carl Cowling, said: ‘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.

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

The group posted headline pre-tax profits of £61million for the year to 31 August, against losses of £104million a year ago, when Covid restrictions hit its retail chain and network of sites based at travel hubs worldwide.

WH Smith said total sales across its travel arm surged past levels seen before the pandemic struck, at 130 per cent of 2019 revenue in the second half, or 92 per cent on a like-for-like basis.

Its high street arm traded at 82 per cent of 2019 levels in the final six months of the period, or 83 per cent on a comparable store basis.

On its hospital shops, the company said: ‘The Hospital channel is an important channel for us and is our second largest channel currently by revenue in Travel UK. During the year, we have seen a consistent improvement in revenue as restrictions eased.’

WH Smith shares rose today and were up 1.98 per cent or 25.50p to 1,312.50p, having fallen over 18 per cent in the past year. 

Richard Hunter, head of markets at Interactive Investor, said: ‘WH Smith has strongly swung back to profit, propelled by its Travel business which is growing globally and has become the driving force of the business.

‘At the same time, the group has signalled its confidence in prospects by reintroducing the dividend. This is a symbolic gesture given that the projected yield is under 1 per cent, but nonetheless draws a line under a period of pandemic uncertainty.’

He added: ‘As with the sector generally, sentiment remains sour on prospects for retail, particularly in light of potentially recessionary times which could have a specific impact for the group in terms of air travel as discretionary consumer spend is crimped. 

‘The shares have fallen by around 21 per cent over the last year, during which time the wider FTSE 250 has dropped 20 per cent, although over the last six months the general direction of travel has improved. 

‘Indeed, unmoved by the tougher economic backdrop to come, the market consensus of the shares as a strong buy is reflective of both the group’s performance as well as its aspirations.’

Russ Mould, 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 rear-view mirror for the business and management is upbeat on the company’s prospects. That sends a very strong signal to the market.

‘Interestingly, the group is also making waves with its digital operations. WH Smith is not typically associated with the online channel, but its website does sell a wide array of goods and it also operates 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.’