The proposed acquisition of the US Marshall Retail Group indicates that the Travel business here is moving into a much different position with accelerated global aspirations. Sight unseen it also clearly increases the risk profile of the group at a time of a change of senior management. We would imagine that the timing of the deal has been driven by availability and as such is not entirely as WHS would have wanted. This said one of the constraints on the scale of the international part of WHS’s
Companies: WH Smith PLC
Overall WH Smith has confirmed that it expects to achieve market consensus profit estimates for the year to August 2019. While trade numbers are not provided (as last year) this would be improbable without a successful Summer Travel “season” led by airport business. The High Street business which we believe only amounts to less than 20% of overall valuation is of low relevance in this part of the year.
While these results were again in-line with expectation and it is clearly too early to draw on much evidence of the possible future benefits accruing from the InMotion acquisition we have decided to increase our rating from HOLD to BUY and increase our Target Price by 32% from 1900p to 2500p.
Today’s £155m acquisition of the US Airport retailer InMotion represents a major step for WHS. It is the first material acquisition by a management team that has to date grown the travel business organically. It shows that WHS is serious about extending its reach into the US market without having to go fully the organic route. It will in time demonstrate whether management can handle M&A, potentially adding to the optionality here. Clearly there are also risks – US market, buying from PE, existi
20 weeks IMS slightly weaker than expected and commentary less bullish than usual. High valuation may look exposed today.
Prelims ahead of full-year report show sales up 3% and operating profit up 7%
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