WH Smith warns coronavirus will cut profit by up to £40m

WH Smith warned that the coronavirus outbreak would reduce annual profit by up to £40m as the outbreak took its toll on the company's airport outlets.

The bookseller and stationer said underlying profit for the six months to 29 February would meet expectations but that the COVID-19 virus had a big impact on its business in recent weeks. Second-half revenue will be 15% less than expectations at WH Smith's UK travel business and 20% less than expectations in the US, the company said in an update.

The FTSE 250 company said the coronavirus had not had a major impact on its UK high street business so far but that it could result in reduced footfall at town centre branches. The UK government is reported to be planning greater restrictions to combat the virus on Thursday.

"As a result, the group currently estimates an adverse impact in the financial year ending 31 August 2020 of between £100m and £130m on the group's revenue and between £30m and £40m on underlying group profit before tax," the company said.

In the first half, revenue rose 7%, boosted by a 19% increase at the travel business, which operates at airports and stations. Like-for-like group sales fell 1% as a 4% drop in high street sales more than offset an increase at the travel business.

Since February there has been a "significant impact" on the company's Asian operations, which make up about 5% of travel revenue. In the past two weeks passenger numbers have fallen at airports outside Asia, including in the UK, which makes up about 60% of travel revenue. Heathrow said on Wednesday that passenger numbers fell 5% in February.

Airport revenue at the travel business will fall 35% in March and April, WH Smith said. It based its guidance on a tough third quarter and a "modest normalisation" of business in the fourth quarter. The company said it was taking all actions necessary to cut costs.

"WH Smith is a resilient business with a strong balance sheet, substantial cash liquidity and strong cashflow," the company said. "The group has a strong management team in place and has consistently demonstrated that it can adapt and respond quickly to changing market conditions."