ii view: WH Smith needs plan to overcome difficulties

Full-year results 31 August

Revenue up 5% to £1.55 billion

Adjusted pre-tax profit of £108 million, down from 2024’s restated £114 million

Final dividend of 6p per share

Total dividend for the year of 17.3p per share, down from 33.6p per share last year

Net debt of £874 million, down from £997 million a year earlier

Guidance:

• Expects full-year 2026 adjusted pre-tax profit of between £100 million and £115 million

Interim chief executive Andrew Harrison said:

"It has been a difficult end to the year for the Group. The Board and I are acutely aware that we have much to do to rebuild confidence in WHSmith and deliver stronger returns as we move forward. We are acting at pace progressing our remediation plan and are committed to ensuring that we strengthen our financial controls and governance as we move forward.”

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ii round-up:

WH Smith (LSE:SMWH) is a retailer selling a variety of items including newspapers, books, stationery, technology accessories and food on the go.

A previous sale of the group’s UK high street business now leaves it focused on 1,280 travel location stores at airports, railway stations, motorway service stations and hospitals.

This comprises 1,157 WH Smith branded stores and 123 InMotion branded technology focused stores.

For a round-up of these latest results announced on 19 December, please click here.

ii view:

Started by Henry Walton Smith in 1792, WH Smith is today a constituent of the FTSE 250 index. Food on the go rivals include Marks & Spencer Group (LSE:MKS), Greggs (LSE:GRG) and McDonald's Corp (NYSE:MCD). Stores across the UK totalled 593 as of late August, followed by 362 in North America, and 325 across the rest of the world and including Australia, Ireland and Spain. The group’s online funkypigeon business was also previously sold.

For investors, incorrect accounting practices have triggered a Financial Conduct Authority (FCA) investigation, with potential fines raising uncertainty. Corrective action taken underpins management's forecast for adjusted pre-tax profit of £100-115 million in 2026, below City estimates of around £130 million. Group net debt of £874 million compares to a stock market value of under £800 million. The dividend under the reshaped group has effectively been halved, while early trading post the results saw softer UK like-for-like sales, largely given weaker rail passenger numbers.

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On the upside, the previous sale of the High Street division removes a non-growth business, leaving management fully focused on the Travel location outlets. A review of the underperforming InMotion store portfolio is being made. A new chief executive will likely review and reinvigorate group strategy, while a forecast price/earnings (PE) ratio of around 10 sits comfortably below the three-year average of around 18 times, suggesting better value.

On balance, expected growth in travel and a forward dividend yield of around 4% will likely keep existing investors sitting tight. That said, more cautious investors are likely to await signs of profit recovery before taking an interest.

Positives:

• Product and geographical diversity
• Exposure to expected growth in air travel

Negatives:

• Uncertain economic outlook
• Overseas ops bring currency volatility

The average rating of stock market analysts:

Strong hold