WH Smith doubles down on US travel with Marshall acquisition

WH Smith PLC (LON:SMWH) agreed to acquire US travel retailer Marshall Retail Group for £312mln, doubling the size of its international segment.

The FTSE 250 high streets, airports and railway stations fixture will raise £155mln through an equity placing and finance the rest with bank loans, with completion scheduled in the first three months of 2020 if shareholders give their approval.

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Peel Hunt, whose rating is ‘buy’, said the deal is “transformative”.

“We continue to be big fans of the story and big fans of the US expansion,” the broker added.

The retailer said it made “a good start” of the current financial year, with the travel segment up 25% and 5% in total revenue and like-for-like (LFL) sales, respectively.

But total group revenue and LFL were up 12% and 1% respectively, impacted by a 4% and 3% fall in high street numbers that are part of the “managed decline” of this part of the business.

Full year result

For the past year to 31 August, group revenue increased 11% to £1.3bn, with 22% growth in travel and a 2% high street dip.

Headline profit before tax was up 7% to £155mln, with statutory PBT up 1% to £135mln.

The dividend was hiked 8% to 58.2p but net debt almost doubled to £180mln due to the £200mln borrowed for the acquisition of InMotion, the group’s previous US purchase from last November.

“While there is uncertainty in the broader economic and political environment, we are pleased with the start to the new financial year in both businesses,” said chief executive Stephen Clarke, who is stepping down at the end of the month after six years at the helm.

Shares were up 6% to 2,222p.

–Adds broker’s comment, shares–

Story by ProactiveInvestors