WH Smith H1 Earnings Call Highlights

Key Points

• H1 revenue rose 5% to £748m with headline PBT of £3m and headline EBITDA of £48m, while headline net debt was £496m (rolling 12‑month net debt/EBITDA 2.9x); management guides FY2026 headline PBT of £90–£105m and expects year‑end net debt around £420m.
• Dividend suspended as new Executive Chairman Leo Quinn prioritises stabilising the business, cutting costs and restoring cash/ balance‑sheet strength, with any future surplus cash to be used first to deleverage and potentially for buybacks before dividends.
• Operational disruption from WH Smith’s largest‑ever UK store development programme and refurbishments (notably at Liverpool and Heathrow) weighed on profits, while capex is set around £90m for the year and the group is reshaping its portfolio with further store closures and selective openings as travel (air) now accounts for over 70% of revenue.

WH Smith LON: SMWH executives used the company’s interim results call to highlight steady revenue growth, a sharp reduction in profits amid inflation and disruption from refurbishment work, and a renewed emphasis on cash generation and balance sheet strength following the suspension of the dividend.

New chair outlines priorities: cost, cash, and “steady the ship”

Executive Chairman Leo Quinn, who said he has been in the role for about three weeks, described recent years as highly disruptive for the business. He pointed to the divestment of the High Street business (with remaining “tail” work still ongoing), leadership and board changes, and “accounting issues” in North America that consumed management time.

Quinn said his “number one priority” is to stabilize operations so teams can refocus on execution. He also emphasized that costs were too high and “trending in the wrong direction,” while cash levels were insufficient—setting the stage for the board’s decision to suspend the dividend. “The decision today around suspending the dividend was just a no-brainer,” he said, adding that future surplus cash should be used first to deleverage, then potentially for share buybacks, and only later for reinstating a dividend.

Quinn also noted “green shoots,” including the renewal of about 85% of UK airport concessions for at least five years, though he flagged a “question mark” over the cost of winning those renewals in a more competitive environment.

Half-year results: revenue up 5%, headline PBT at £3 million

Chief Financial Officer Max Izzard said total group revenue for the 26 weeks ended 28 February 2026 rose 5% to £748 million, with like-for-like growth across all divisions. Like-for-like revenue grew 2% for the group. All figures discussed were on a pre-IFRS 16 basis, Izzard said.

Headline profit before tax came in at £3 million, which Izzard said was in line with “company-compiled consensus,” but down year-over-year due largely to inflationary pressures and the expected disruption from the company’s largest-ever UK store development program.

Headline EBITDA in the half was £48 million. Headline net debt ended the period at £496 million, made up of a £325 million convertible bond and £219 million drawn on the revolving credit facility, offset by £48 million in cash. The company reported rolling 12-month headline net debt-to-EBITDA leverage of 2.9x.

Divisional trading: UK pressured by refurb disruption; North America sees “green shoots” in travel essentials

In the UK, like-for-like revenue increased 2%, reflecting refurbishment-related disruption at Liverpool and Heathrow airports, which Izzard said is now complete. UK headline trading profit was £34 million, down year-over-year due to inflation and the disruption.

In North America, like-for-like revenue grew 1%. Within that, travel essentials rose 6%, while InMotion fell 4% and Resorts declined 6%. North America headline trading profit was £2 million, down due to ramp-up costs for a new logistics setup and the annualization of labor cost increases. Izzard also noted the prior half-year had been restated for supplier income and inventory-related items identified at the full-year results.

In the Rest of the World segment, like-for-like revenue rose 6% and total revenue increased 8% on a constant currency basis, but the division posted a £4 million headline trading loss. Izzard attributed the loss to challenging performance in some locations and inflation in staffing and logistics, and said those locations are part of a divisional review.

Across the group, Izzard said air now accounts for more than 70% of total revenue as WH Smith continues to shift its mix.

Cash flow, capex, and portfolio actions

Izzard said free cash flow in the half reflected several moving parts: £48 million of headline EBITDA, £50 million of underlying capital expenditure (including the store development program), and a £54 million working-capital outflow driven by a one-off payables timing impact with a large franchisor partner, new store openings, and seasonality.

Capital expenditure is expected to be around £90 million for the full year, with investment prioritized based on returns. Store development highlights included new flagship Heathrow stores (which Izzard said received “very positive” customer feedback), progress at Orlando Airport with six stores expected to open later in the year, and JFK stores that are progressing but will not open in the current financial year.

In the first half, WH Smith opened 36 stores and closed 41 (net closures of five). Management expects to close or exit another 30–40 stores in the second half and open 10–20, with reductions mainly in North America Resorts and InMotion and openings largely in North America Air.

On non-underlying items, Izzard said the company recognized £28 million in the period (around half non-cash), including IT transformation spending and remediation and regulatory-related costs in North America. He said FY2026 IT transformation costs are expected to be around £7 million, with about £5 million in FY2027 before the current program completes.

Outlook: cautious stance amid Middle East conflict; FY2026 PBT guided at £90–£105 million

In the first seven weeks of the second half, group like-for-like revenue growth was 2%, with the UK flat, North America up 2%, and Rest of World up 5%. Izzard said disrupted flight schedules to the Middle East contributed to softer UK air performance and that weaker consumer confidence and reduced passenger numbers were weighing on the business.

WH Smith took a more cautious outlook due to uncertainty from the conflict in the Middle East. Izzard said the company assumes no immediate improvement in consumer confidence and assumes jet fuel supplies can be maintained. The company guided to full-year FY2026 headline profit before tax (on underlying items) of £90 million to £105 million, and said full-year net debt is expected to be around £420 million.

In Q&A, Izzard said average transaction value in UK Air has been affected by passenger mix changes tied to fewer long-haul flights, using a neck pillow purchase as an example of reduced demand on shorter trips. He also said promotional activity used to demonstrate value—such as meal deals—can pressure margins.

Quinn closed by reiterating the near-term focus on stabilizing the business and prioritizing “cash and cost,” while Izzard emphasized ongoing execution on remediation, portfolio actions, and selective investment where returns are compelling.

About WH Smith LON: SMWH

WH Smith PLC operates as a retailer in the United Kingdom and internationally. It operates in two segments, Travel and High Street. The Travel segment offers news, books, and convenience for travelling customers. It operates stores in airports, hospitals, railway stations, and motorway service areas. The High Street segment sells stationery products, including greeting cards, general stationery, art and craft, and gifting products; news and impulse products, such as newspapers, magazines, confectionery, and drinks; and books.

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