WH Smith raises fresh capital, warns on profit as Iran war hits travel spend

By Simone Lobo and Raechel Thankam Job

June 10 (Reuters) - Retailer WH Smith cut its profit forecast for the second time in two months on Wednesday and raised about £106 million ($142 million) in new equity as travel disruption hit its business focused on airports and train stations.

Its shares dropped nearly 20% at one stage to their lowest in nearly 16 years.

The Iran war has hit travel and passenger spending as airlines have been raising ticket prices and cutting capacity, and inflation-wary consumers are reining in spending elsewhere.

WH Smith, which sells everything from books to travel accessories and confectionery, had already suspended its dividend and warned on profits in April.

The retailer said its outlook reflected observed and anticipated declines in passenger numbers and weakening consumer demand. It assumes no near-term improvement in consumer confidence and that jet fuel supplies can be maintained.

COMPANY CLOSING STORES IN TRANSFORMATION PLAN

Like-for-like revenue in its key North America air division fell 2% in the last seven weeks and sales at its UK air business were also impacted.

The company forecast adjusted headline profit before tax of between £75 million and £90 million , compared with a previous expectation of £90-£105 million for the fiscal year ending in August.

The company issued up to 25.05 million new shares, representing about 20% of its existing share capital, at a price of 410 pence per share, a 16.7% discount to Tuesday's close.

The capital increase seeks to reduce its reliance on debt funding to help it execute a transformation plan.

After an accounting issue disclosed last year, WH Smith has been reviewing its business and closing underperforming stores in North America. It expects to take up to £150 million in non-cash impairment charges related to goodwill and store closures.

"We think WH Smith needs to rebuild credibility with the market, with scope for the rating to recover over time if (it) can reassure the market that its recent missteps won't be repeated," said RBC Capital Markets analyst Richard Chamberlain.

($1 = 0.7458 pounds)

(Reporting by Simone Lobo and Raechel Thankam Job in Bengaluru; Editing by Louise Heavens and David Holmes)