WH Smith has suspended dividend payments following a slump in profits.
The group’s headline trading profit fell by nearly a third (32%) to £32m in the half-year to 28 February, as UK airport refurbishments and inflation pressures cut into the bottom line.
Profit before tax and non-underlying items fell from £21m to just £3m. The fall has put further pressure on a group rocked last year by an accounting scandal that wiped £40m off its North American division’s profits.
And while total group revenues rose 5% to £748m, the group said it was taking “a more cautious outlook” for the rest of the year, as the Iran war hit passenger numbers and consumer confidence.
As such, it has reduced its full-year pre-tax profit guidance from £100m-£115m to £90m-£105m.
Executive chair Leo Quinn said the retailer’s “immediate focus” was to restore investor confidence and “ensure the right foundations are in place to support profitable growth and long-term value creation”.
“Moving forward, the board and management team will have a relentless focus on driving cash, cost discipline and strengthening the balance sheet. As a first step, the board has taken the prudent decision to suspend the dividend,” Quinn said.
He added: “While the near-term outlook is uncertain, I am confident that, with the right focus and discipline, the business can deliver superior returns for the benefit of our colleagues, partners and shareholders over the longer term.”
RBC analyst Richard Chamberlain said the company had good long-term prospects for international growth, but required “quite extensive portfolio optimisation in the short term” as it rationalised its US offering.
”We think WH Smith needs to rebuild credibility with the market, with scope for the rating to recover if WH Smith can reassure the market that its recent missteps won’t be repeated,” he added.
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