WH Smith acquisition should enhance earnings

8th Feb 2011 08:19

Newsagent WH Smith has paid £1.05m to acquire 22 stores and intellectual property from the administrators of south of England-focused British Bookshops and Stationers Limited.British Bookshops and Stationers (BBS) is a retail chain, currently in administration, retailing front list books, stationery, cards and newspapers. It had 51 stores in the south of England prior to the sale of 22 stores to WH Smith.The company went into administration in the middle of January "as a result of cash flow difficulties, coupled with the tough trading climate for retailers and especially booksellers at present," said Simon Appell, a partner at administrators Zolfo Cooper. Broker FinnCap welcomed the acquisition, which it thinks will be earnings enhancing, although the impact in fiscal 2011, which runs to the end of August, is likely to be small."Given the geographic spread of the BBS estate, we would expect the deal to modestly increase Smiths' southern weighting, arguably a small 'positive' given the likely impact of planned government cuts," FinnCap analyst David Stoddart said."This deal is not large enough to affect the share buyback programme. So far, Smith has bought back 4.4m shares at a cost of £21.4m. It is therefore c43% of the way to its target of a £50m buy-back. We see no reason to expect a change to the recent pattern of daily share purchases," Stoddart added.