WH Smith profits fall as US units feel the pinch
WH Smith, the UK news, magazine and book retailer, said that poor results at its international retail and news distribution businesses had depressed annual profits.
The core UK retail chain remained strong with sales up 6 per cent at £1.4bn ($2bn) and profits 13 per cent higher at £89m.
However, a weak magazine market and higher distribution costs knocked Smith’s news distribution business which reported a 32 per cent profits fall. Smith tried to sell the business earlier this year to ABN Amro Capital but the deal fell apart when the group lowered its offer price.
The US retail unit saw full-year profits fall 17 per cent to £10m as the US slowdown hurt hotel occupancy rates and airline passenger numbers.
Smith, whose US operations comprise 180 airport stores and 393 hotel gift stores, said the recent terrorist attacks on New York and Washington had further depressed sales.
Richard Handover, chief executive, said there had been some signs of improvement in recent days with sales down just 10 per cent compared with around 37 per cent after the attacks.
“It’s been enormous the impact,” he said. “The encouraging thing is that we’ve seen a steady trend back up in terms of sales growth since then (September 11).”
Trading at Smith’s 18 UK airport outlets has been only slightly affected, Mr Handover said, adding he was in negotiations to reduce rents on some US airport sites.
The news came as Smith announced pre-tax profits for the year ended August 31 of £114m compared with £140m last time, including an exceptional charge of £16m relating the write-down of the group’s investment in Helicon and Connect2U, its internet businesses. There was also £5m charge resulting from the failed attempt to sell the news distribution unit.
Total sales rose to £2.7bn, from £2.6bn a year earlier.
Hodder Headline, the publishing arm, reported profits up 13 per cent at £18m on sales 10 per cent higher at £128m.
Smith said current trading was strong with like-for-like sales up 9 per cent in UK retailing while news distribution sales were 4 per cent up in the first six weeks. Mr Handover said he remained positive about the prospects for the year ahead.
“Our view is that our business is defensive in these conditions. Historically, we always trade remarkably well during tough economic times.”
Earnings per share were 31.7p down from 40.2p. The final dividend was maintained at 13p for an unchanged yearly total of 19p.
The shares, which have fallen 15 per cent in the past month, were 1p lower at 464p in early London trading.
more from FT.com
Financial Times
