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WH Smith is targeting a return to “meaningful” profit growth and pre-Covid sales levels in its current financial year after suffering a £116m loss due to reduced trade at its growing travel network as a result of the pandemic.

Covid-19 continued to have a significant impact on the group, with revenues down 13% year-on-year from £1bn to £886m – sales were down some 62% on the pre-Covid levels of 2019.

In particular, its travel retail network remained impacted by the government enforced travel restrictions throughout the year.

Travel sales Travel were down 21%, improving from just 39% of 2019 levels in its first quarter to 79% in its fourth quarter as restrictions were eased.

The group said it saw a “consistently robust” performance in High Street throughout the year, despite footfall declines, with the important December trading period at 92% of 2019 and at 88% for the full year.

Headline group loss from trading operations for the year was £20m, down from £43m in the prior year, with headline group loss before tax and non-underlying items at £55m down from £60m in 2020.

This was driven by a second half performance over £110m better than the prior year.

The group loss before tax, after non-underlying items and including IFRS 16, was £116m, cut from £280m lats year.

WH Smith said it had enjoyed a “good start to new financial year” and is well positioned to return to meaningful profit in 2022.

The group is benefitting from improving travel trends, with total travel revenue at 84% of October 2019, and expects it to benefit from growth opportunities with over 100 new stores won and planned to open in over the next three years with 58 in North America.

Its high street business remains placed to continue to generate cash from its portfolio of well-located stores and growing internet businesses.

“Subject to uncertainties in our markets, which continue to be impacted by government actions, we are optimistic that we will be able to achieve 2019 sales levels in the current financial year,” it stated.

CEO Carl Cowling said: “The Group has delivered a good performance in the evolving trading environment. Thanks to the outstanding efforts of all our colleagues across the business, we have continued to adapt successfully to the changing environment and we are now in a strong position to grow our business as our markets continue to recover, returning to meaningful profitability in the current financial year.

“We are a financially strong and resilient Group with significant opportunities to grow. While we continue to plan with caution, the Group is well positioned to capitalise on the recovery in our key markets and take advantage of the many exciting opportunities ahead.”

WH Smith shares have fallen back 0.7% to 1,604p so far this morning.

Morning update

B&M European Value Retail consolidated the gains it made in the early stages of the Covid pandemic, but growth slowed markedly in the first half of its financial year as it lapped 2020’s strong performance.

Total group revenues for the 26 weeks ended 25 September 2021 grew by 1.2% to £2.27bn and by 1.4% on a constant currency basis.

On a two-year basis versus revenues were up 26.8%.

In the B&M UK fascia business, revenues grew by 1.3% to £1.9bn, with growth driven by new store openings – with the annualisation of 43 gross new stores opened last year plus 14 gross new openings in the first half – as overall like-for-like sales fell 5%.

Two-year LFL sales in H1 were +16.8%, representing a significant increase in pre-pandemic store sales densities.

B&M UK revenues also included £24.0m of wholesale revenues (H1 FY21: £20.4m), the majority of which represented sales made to the associate Centz Retail Holdings Limited, a chain of 38 variety goods stores in the Republic of Ireland.

Gross margins at B&M improved 153 bps year-on-year to 37.3% from 35.8%, which was above initial expectations at the start of the year and was driven by the performance of higher margin general merchandise and seasonal categories.

Discount convenience chain Heron Foods generated revenues of £203.1m compared to £216.2m in the same period in 2020, which was “satisfactory” given the elevated comparatives and average transaction values normalising.

In France, revenues increased by 10.6% to £155.4m, which represented a “strong” performance given there were 6 weeks of ‘soft lockdown’ restrictions in force at the start of the financial year.

Group adjusted EBITDA decreased 4.6% to £282.2m, representing an adjusted EBITDA margin of 12.4% and a reduction of just (75) bps year-on-year despite the prior period not having UK business rates charges.

When compared to pre-pandemic levels, group adjusted EBITDA has increased 86.4% with a margin expansion of 398 bps over that two-year period.

The group’s adjusted profit before tax decreased by 6.2% to £238m, while statutory profit before tax increased by 2.4% to £241.4m.

CEO Simon Arora commented: “The Group has performed strongly throughout the first half of our financial year, with customers continuing to be drawn to our value for money offer .

“We have responded decisively to supply chain challenges by leveraging our strong supplier relationships and we have improved in-store execution. As a consequence, we are fully stocked heading into the Golden Quarter, with stores already showcasing our excellent Christmas ranges.

“Although the pathway to a ‘new normal’ remains uncertain and the industry faces a number of supply and inflationary pressures as we enter the second half of the financial year, we are very confident that the B&M Group is well positioned to navigate these and will continue to be successful both in the UK and in France.”

Elsewhere, the producer of premium British Honey and craft spirits products The British Honey Company has announced a “stabilisation” of its business after a number of management changes in October.

Mark Jones has joined the company as interim CEO, below PLC board level and has made an “immediate impact in tightening up our operations and structuring the senior management team to take advantage of sales and growth opportunities”.

In light of recent and extensively reported disruptions to supply chain and logistics across the UK, it said it had seen increased interest in its white label business “where customers wish to work with us so that we can provide a dependable source of product”.

“This is opening up exciting new sales opportunities,” it stated.

The company has overseas opportunities including a partnership with List Distillery in the United States and its sales contacts in China, however its main focus is on our growing domestic operations within the UK.

The Company’s current financial year runs to 31 December 2021 and it continues to expect the full year outturn to be in line with management expectations and to deliver revenues of £8m for the group over full year.

Richard Day, non-executive Chairman, said: “Recent weeks have shown us what a good underlying business with significant growth opportunities and an excellent customer base we have at British Honey. We have an experienced team which we will continue to build, working for the benefit of all our shareholders to generate increasing shareholder value and returns. ”

The FTSE 100 is up another 0.4% to 7,369.4pts so far this morning.

Early risers include Glanbia, up 5.7% to €14.80, McColl’s Retail Group, up 5.6% to 20p and Bakkavor, up 2.4% to 119.8p.

Fallers so far today include B&M European Value Retail, down 6.1% to 604.6p, Virgin Wines, down 2.8% to 175p and Ocado Group, down 1.4% to 1,739.6p. 

 Yesterday in the City

The FTSE rebounded yesterday, rising 0.9% to 7,340.1pts after two days of falls.

Marks & Spencer was the day’s major mover – jumping 16.5% to 226.5p after upgrading its expectations for the year for the second time as its sales and profits leapt ahead of pre-pandemic figures.

Other risers included B&M European Value Retail aheaed of this morning’s interim results, up 3.1% to 643.8p, Tate & Lyle up 2.6% to 685p, Associated British Foods, up 2.5% to 2,058p, FeverTree, up 2.5% to 2,600p, Tesco, up 2.3% to 285p, Greencore up 1.8% to 136p and PZ Cussons, up 1.7% to 212.5p.

The day’s fallers included Just Eat Takeaway, down 3.3% to 5,209p, Bakkavor, down 2.5% to 117p, Kerry Group, down 2.3% to €114.85, Domino’s Pizza, down 2% to 382.6p and THG, down 1.6% to 201.8p.

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