- Strong trading over peak season
- Full-year revenue in line
- £50 million share buyback
Global travel retailer WH Smith (SMWH) said strong UK travel demand over the peak summer season had left the group in a strong position, prompting management to announce a surprise £50 million share buyback.
Investors welcomed the update and share buyback, sending shares in the FTSE 250 company up almost 14% to a new 12-month high of £13.97. Gains for the year are now back into positive territory and ahead of the 5.7% return of the mid-cap index.
WHAT DID THE COMPANY SAY?
Chief executive Carl Cowling commented: ‘Our UK division performed particularly well over the peak summer trading period.
‘We are also today announcing the launch of a £50m share buyback, which reflects strong ongoing cash flow, the receipt of the pension fund buyout cash return, as well as the strength of our balance sheet, with leverage now within our target range.’
Group revenue for the financial year to the end of August increased by 7% driven by the travel division where revenue was up 10%. In the UK, the group’s strategy to create a one-stop-shop for travel essentials appears to be delivering strong results.
The firm launched a new food-to-go offer, branded Smiths Family Kitchen, which is said to be performing ahead of expectations. WH Smiths also opened its first own-brand Smith’s Kitchen café at Princess Ann Hospital in Southampton.
The company said trading in North America (up 6%) and the Rest of the World (up 15%) continued to show good momentum amid increased passenger numbers.
PENSION BUY IN / SHARE BUYBACK
The group completed the buy-out of its defined benefit pension scheme during the second half which has resulted in a cash refund of around £75 million and the transfer of an investment fund with a value of circa £10 million which is expected to convert to cash over the next two years.
In line with the company’s capital allocation policy of retuning surplus cash to shareholders, it announced a £50 million share buyback.
The company estimates leverage at the end of August including the pension refund would have been circa 1.1 times, back within its target range of 0.75 times to 1.25 times.
