WH Smith today gave a cautiously optimistic forecast for the rest of the year despite falling sales elsewhere on the high street after the 215-year old newspaper and stationary retailer reported profits above expectations and lifted its interim dividend by 24 per cent.

Shares in the company rose 5.25p to 371p in early trading after it revealed pre-tax profits rose by 8 per cent to £64 million for the six months to February 29. City analysts had expected profits between £59 million and £63 million for the period.

While like-for-like sales, which strips out revenue from new stores opened in the reporting period, fell 2 per cent, investors were cheered by WH Smith increasing its profit margin by 0.7 per cent and raising its dividend by 24 per cent to 4.6p. The pay-out adds to WH Smith's plan, announced earlier this year, to return £90 million to shareholders.

A cost-saving plan by the retailer delivered £4 million during the interim after the group tightened up spending on logistics, information systems and on its stores.

Overall sales at the retailer rose 2 per cent to £734 million over the six months.

WH Smith’s travel outlets reported the largest growth in sales, up 1 per cent on a like-for-like basis and 14 per cent overall while profit rose 13 per cent to £17 million, as the retailer builds up its business in airports, motorway stations and hospitals.

In contrast, like-for-like high street sales contracted by 3 per cent, with total revenue down 2 per cent. Earlier this week, the British Retail Consortium reported that high street sales in March had declined by 1.6 per cent.

Despite falling high street sales, Kate Swann, chief executive at WH Smith who stands to gain £5 million under a new incentive scheme at the group, was cautiously optimistic for the rest of the year.

She said: "The economic environment remains uncertain and, whilst we continue to be cautious, we are confident in the outcome for the full year.”

WH Smith is more insulated from economic swings by other retailers because the average spend by customers is relatively low at about £5.

The group has been shifting its business away from entertainment and back to its core categories of newspapers, magazines, books, and stationery. It has also made a substantial move into postal services, taking on the franchises of 70 Crown post offices from Royal Mail. The move, which was controversial with postal unions, means that WH Smith runs post office outlets within its larger stores.

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