WH Smith will receive less-than-expected cash from the sale of its UK high street business to Hobbycraft owner Modella Capital, it said today, citing reduced cash flow due to softer trading and a cautious outlook.
Shares of the retailer dropped 8% in early trading following the announcement.
The company completed the sale of its 230-year-old British high street business today, marking a strategic shift to a pure global travel retail business as the UK consumer market struggles with rising costs and economic uncertainty.
Investors had welcomed the sale of the high street business, which offers products and services like the Post Office and Toys "R" Us, as the division had increasingly weighed on overall performance.
However, the revised sale terms, which are now expected to yield gross cash proceeds of up to £40m compared with an earlier forecast of £52m, have raised concern over WH Smith's debt levels.
The company now expects net debt to rise to £425m by the end of August from its previous forecast of £400m.
"We think the lower proceeds and spike in near-term debt will be taken negatively by the market and push out the de-leveraging timeframe post the disposal somewhat," JP Morgan analysts said in a note.
WH Smith, which announced the sale in March, said it began renegotiating sales terms with Modella after determining that the original agreement "was no longer deliverable".
The retailer, with about 1,200 stores in airports - including Dublin Airport - and train stations across 32 countries, said that its travel business was trading in line with market expectations, helped by a seasonal spike in summer travel.
