WH Smith warns of 'north-south' economic split

The books and stationery retailer WH Smith is seeing a "north south divide" at its travel shops, according to its chief executivem Kate Swann, as it delivered a small rise in half year profits to £64m.

The travel division of the group, its stores in rail stations, airports and hospitals, grew operating profits ahead of its high street division over the 26 weeks to 28 February, and Ms Swann said its railway stations and airports in London were the best performers.

She said: "There is probably a bit of a north-south divide, particularly in travel. We are seeing that mainline London stations are faring better than the regions. The big business airports in London are [also] doing better than the regional airports." Ms Swann saw a similar pattern during the recession.

WHSmith's smaller travel business delivered a 9 per cent rise in operating profit to £25m over the half year, while the high streetoperation, which has 583 shops, was flat at £47m.

The City cheered a 18 per cent rise in the group's interim dividend to 7.2p, net cash of £70m at the half-year end and a strong performance on margins.

WHSmith grew its group gross margin by 170 basis points, helped by its continuing move away from entertainment products, such as CDs and DVDs, to stationery and books.

These low-margin entertainment products now account for less than 5 per cent of its business. Over the half year, WHSmith's total sales dropped by 4 per cent to £686m. While on a like-for-like basis, group sales fell by 5 per cent. WHSmith said it had completed £40m of a £50m share buy-back programme unveiled in October.

In fact, Ms Swann said it hadreturned £291m to shareholders in the form of dividends and buy backs since it demerged its wholesale business in 2007. Nevertheless, she took a cautious view of the retail sector's prospects: "Consumer spending is most definitely very challenging."

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