WH Smith shares jump on buyback plan after pension buy-out frees up cash

WH Smith has announced strong revenue growth, driven by a boost in its airport and train station stores and a £50m share buyback programme.

It also announced a £85m cash benefit as the result of its pension fund buy-out.

Shares in WH Smith rose more than 12 per cent in early trades.

Revenue at the retailer was up seven per cent year over year, driven by growth in travel, which was up 10 per cent.

WH Smith has been focusing on creating a “one-stop shop” for travel essentials, which it said has delivered strong results so far.

High street shops performed in line with expectations, the company said.

During the second half of the year, it opened 30 Toys “R” Us shop-in-shops in stores and planned to open a further 37 Toys “R” Us shop-in-shops ahead of Christmas 2024, taking the total portfolio to 76.

“We remain committed to our capital allocation policy which focuses on four main areas: to invest organically in the business, a commitment to a progressive dividend policy, where appropriate to deliver value accretive acquisitions, and to return any surplus cash to shareholders,” the company said.

WH Smith added that the £50m share buyback announced this morning is part of that policy.

The buyback “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,” chief executive Carl Cowling said.

Having completed the buy-out of its defined benefit pension scheme, WH Smith said it no longer needed to make cash contributions to the scheme and received a cash refund of roughly £75m as well as an investment fund of around £10m. It said the investment fund would convert to cash over the next two years.

Cowling added: “We have ended the financial year in a strong position, delivering a performance in line with our expectations with good growth across our Travel businesses. Our UK division performed particularly well over the peak summer trading period.”

The retailer also launched a new food-to-go cafe venture earlier this year, Smith’s Family Kitchen, capitalising on a recent trend towards convenience.

Julie Palmer, partner at Begbies Traynor, said: “As per usual, it is a tale of two halves at WH Smith. The retailer’s global travel business continues to cruise as it benefits from captive audiences across airports and railway stations. It’s another story in the traditional high street business, which continues to struggle. 

“As the travel division goes from strength to strength, the introduction of Smith’s Family Kitchen appears to be a product of this growth, tapping into growing demand for food and drink in travel locations, and the retailer’s proven track record with meal deals suggests there’s a ready market for its venture into hospitality.

“Nevertheless, amid continued economic uncertainty and shaky consumer confidence, investors will be watching closely to see if the café venture can actually deliver.

“WH Smith is backing itself with the £50m share buyback announced this morning, but with consumer confidence on a knife-edge and a rapidly evolving retail landscape, everyone will be looking to see if WH Smith can really turn the high street business around, in addition to driving growth through its travel business.”