WH Smith (SMWH) travel operations gaining altitude

Dividend increase is good news for investors as revenue rises and profit growth is expected.

Article updated: 11 April 2019 11:00am Author: Ian Forrest

  • Strong 18% sales growth from travel shops help offset stagnant high street stores.
  • Acquisition of US group InMotion provides boost from a positive start in the second half of 2019.
  • Trading on a 17x 2020 price/earnings the shares seem fairly valued and are a ‘hold’ for medium risk investors.

Newsagent WH Smith reported interim results today displaying the stark contrast between its high street and travel operations, which are based in train stations and airports. Revenue rose 8% overall but pre-tax profit dipped 1% to £81m. Sales in the high street stores fell 1% while those in the travel shops increased by 18% with strong profit growth expected in the second half of 2019. The recent acquisition of US group InMotion has also given the company a boost, and it also reported a good start to the second half.

There was no significant reaction in early trading with the shares rising just 1%, possibly due to a sense that the results largely reflected what was reported in the January trading update. However, there was plenty of good news for investors including the strong growth in the travel and overseas operations alongside a fairly resilient performance from the high street shops.

Our View on WH Smith - Hold

The 8% increase in the dividend is good news although the shares have outperformed the market over the past year and trading on a 17x 2020 price/earnings they don’t look especially good value. The shares are a ‘hold’ for medium risk investors.
If you're looking to invest in the General Retailers sector and you're not currently a customer of The Share Centre, sign up today. You can also view the full range of General Retailers and their share prices.

All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Ian Forrest portrait photo
Ian Forrest

Investment Research Analyst

Ian’s background in investments, financial journalism and research has seen him advising private investors on equities and helping to manage portfolios. His qualifications include the Certificate in Financial Planning and the Chartered Institute for Securities & Investment’s Investment Advice Diploma.