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WH Smith says 2022 profits to be at lower end of expectations
1st Sep 2021 07:01
(Sharecast News) - WH Smith on Wednesday lifted full year guidance but warned that 2022 profits were expected to be at the lower end of expectations as the travel sector's path of recovery from the Covid pandemic remained uncertain.
The high street and travel newsagent said group sales in the eight weeks to August 28 were 78% of 2019 levels before the pandemic struck. Results for the year to August 31 were forecast to be slightly ahead of expectations.
Travel revenue was 64% at 2019 levels and high street revenue was 84%. Total second half sales were at 65% of those from two years ago.
WH Smith said it still remained confident that revenues would to pre-Covid levels in the next two to three years.
"While there will be a return to good levels of profitability in the year ending August 2022, the trajectory of the recovery in travel remains uncertain," it added. The spread of the Delta variant of Covid and continuing travel restrictions have made it difficult for firms in the travel sector to gauge the pace of the recovery.
"This combined with the previously announced accounting finance charges relating to the successful convertible bond issue on 29 April, means that we currently anticipate the levels of profitability for the year ending August 2022 will be at the lower end of market expectations."
"Although the pace of recovery varies across our markets, we are financially strong and well placed to capitalise on the multiple growth opportunities in our key markets."
Shares in the company fell 5% on the news, but AJ Bell investment director Russ Mould said market forecasts "should have already factored in the bond charges, which suggests some analysts may not be on the ball".
"Indeed, Computacenter yesterday was forced to issue a trading statement saying market forecasts weren't in line with the company's expectations because less than half of the analysts covering the stock had changed their estimates following an update in July. Perhaps they were all in Cornwall jostling for space on the beach."
"WH Smith's travel outlets are fuelled by both domestic and foreign travellers and so it is impossible to judge its earnings potential simply by looking at how many countries are on the UK's green list.
"Under the circumstances, WH Smith still seems to be holding up quite well and in the bigger scheme of things, today's profit setback is not a sign of a business in trouble."
The high street and travel newsagent said group sales in the eight weeks to August 28 were 78% of 2019 levels before the pandemic struck. Results for the year to August 31 were forecast to be slightly ahead of expectations.
Travel revenue was 64% at 2019 levels and high street revenue was 84%. Total second half sales were at 65% of those from two years ago.
WH Smith said it still remained confident that revenues would to pre-Covid levels in the next two to three years.
"While there will be a return to good levels of profitability in the year ending August 2022, the trajectory of the recovery in travel remains uncertain," it added. The spread of the Delta variant of Covid and continuing travel restrictions have made it difficult for firms in the travel sector to gauge the pace of the recovery.
"This combined with the previously announced accounting finance charges relating to the successful convertible bond issue on 29 April, means that we currently anticipate the levels of profitability for the year ending August 2022 will be at the lower end of market expectations."
"Although the pace of recovery varies across our markets, we are financially strong and well placed to capitalise on the multiple growth opportunities in our key markets."
Shares in the company fell 5% on the news, but AJ Bell investment director Russ Mould said market forecasts "should have already factored in the bond charges, which suggests some analysts may not be on the ball".
"Indeed, Computacenter yesterday was forced to issue a trading statement saying market forecasts weren't in line with the company's expectations because less than half of the analysts covering the stock had changed their estimates following an update in July. Perhaps they were all in Cornwall jostling for space on the beach."
"WH Smith's travel outlets are fuelled by both domestic and foreign travellers and so it is impossible to judge its earnings potential simply by looking at how many countries are on the UK's green list.
"Under the circumstances, WH Smith still seems to be holding up quite well and in the bigger scheme of things, today's profit setback is not a sign of a business in trouble."