UK. WHSmith today issued a trading update amid the COVID-19 crisis, warning of an adverse impact of £100-£130 million on group revenues and £30-40 million on underlying pre-tax profits for the year ended 31 August 2020.
Based on its 2019 figures, this would represent a 7-9% loss in revenues and a potential 16-22% decline in profits, where recent growth has been led by the Travel business.
The company made its assumptions based on a forecast “challenging third quarter and a modest normalisation in the fourth quarter”, with its Travel division set to be hardest hit in the coming months.
WHSmith said: “In Asia Pacific, which accounts for approximately 5% of Travel’s revenue, we have seen a significant impact on the business since February. In addition, over the last two weeks, the group has started to see a material reduction in passenger numbers at airports outside of Asia Pacific in the UK (about 60% of Travel’s revenue), the US (about 25% of Travel revenue) and in Europe.
“For UK Travel, we expect revenue for the six months to be down approximately -15% on expectations which includes airports, our most affected channel, down -35% in March and April. On the same basis, including significant reductions in March and April, second half revenue in the US is expected to be approximately -20% lower than our expectations. The rest of our International business is also expected to be approximately -20% lower.”
The company said it had “a resilient business with a strong balance sheet, substantial cash liquidity and strong cashflow” and expected over time to “benefit from the normalisation and growth of the global travel market”.
For the first half of the year to 29 February, group total revenue was up +7% with like-for-like (LFL) revenue down -1%. Total revenue in Travel was up +19% with LFL revenue up +2%. In High Street, total revenue was down -5% with LFL revenue down -4%.
WHSmith said that it is currently not seeing a significant impact on its High Street business, but recognised that the crisis could result in reduced high street footfall.
The company will provide a further update at its interim results on 22 April.
