WH Smith might have been long associated with the high street but it also has extensive interests in kiosks at railway stations, airports, motorway service stations and hospitals. So much so that, in the current financial year, profits from the retailer’s travel division – the category under which the latter operations are grouped – promise to overtake those from the high street for the first time in the chain’s 200-year history.

Yesterday’s full-year results showed that trend firmly under way: profits from travel were up 14 per cent to £41 million, twice the pace of growth from the high street. A year of vigorous acquisitions and tie-ups promise more of the same: WH Smith has purchased the Leeds-based United News Shops, which brought with it 80 stores and coffee bars in hospitals; another 23 outlets from Alpha Airports; and it has sealed a franchise deal with RoadChef.

The company has also made its first foray overseas since it sold its American and Australian operations more than four years ago – the opening this autumn of six stores at Copenhagen airport, which should provide the template for similar expansion elsewhere. The attractiveness of airports should not be overstated at a time of weakening passenger volumes. But the wider travel business might be considered defensive in catering for a largely captive audience, and having flexible costs – unlike the high street, the rent WH Smith pays for such sites is pegged to its sales.

Elsewhere, the profitability of the high street division continues to benefit from cost-cutting and a switch away from low-margin home entertainment lines – which now account for less than 10 per cent of sales – to higher-margin stationery, books and magazines. Both divisions also remain solidly cash-generative, such that despite its increased acquisition spend and the return of £90 million through a special dividend, WH Smith still has only £10 million of debt and, barring share buybacks, is expected to end the financial year with net cash of £25 million. That strength was evident in yesterday’s 21 per cent rise in the full-year dividend.

A low average spend by its customers – less than £5 a head – should provide a degree of protection in a consumer recession. Meanwhile, a three-year management incentive scheme – only a year of which has elapsed – is a powerful lure for Kate Swann, chief executive, to keep profit growth on track. The short-term prospect of the sale of travel to the likes of Lagardère, of France, may have gone away, but at 345p, or nine times current-year earnings, the shares remain a solid “hold”.

Wood Group

Wood Group may sit in the high-growth oil services sector, but in stock market terms it is no better than a bog-standard engineer. That must be the conclusion from the sharp sell-off in the shares of the Aberdeen group, which have tracked the sharp retreat in crude prices to nearly halve in the space of three months and threaten its place in the FTSE 100. At 277¾p yesterday, Wood’s shares trade at eight times next year’s earnings, much the same as a metal basher.

That seems harsh for a company that is expected to produce earnings growth of 40 per cent this year and 18 per cent next. As yesterday’s trading update reminded, about half of its operating profits are drawn from production work, which is typically insensitive to oil prices. The remainder is drawn from development work, the majority of which is underpinned by long-term capital expenditure commitments. If there is a concern, it relates to the foray last year by Wood into the tar sands business through the purchase of IMV, of Canada, where $80-a-barrel oil makes the economics of extraction much less viable. The consolation is that only 4 per cent of revenues come from this activity.

Wood’s shares, up 10 per cent yesterday, are likely to remain volatile in line with oil prices. But its strong position in the sector, and sound funding make them worth a “hold”.

Booker

Forget the figures; focus instead on the share register. That injunction carries weight in a stock market full of forced sellers, and nowhere more so than at Booker, the refloated cash-and-carry chain. Baugur may no longer be the company’s biggest backer – it sold out in July – but Kaupthing, its compatriot bank that went into receivership yesterday, unfortunately is holding a 22 per cent stake worth £60 million.

It is that overhang that explains why shares in Booker fell by 29 per cent in three days this week. They recovered some of their poise yesterday on first-half results that show Booker performing to plan. Like-for-like sales excluding tobacco rose 4.1 per cent, operating profits were up 27 per cent and net debt fell from £47 million to £29 million. That strengthening of its balance sheet – a far cry from the £361 million debt burden inherited by Charles Wilson, chief executive, when he took over three years ago – means that Booker is paying its first interim dividend. It should also protect the company from the credit insurance problems plaguing its sector.

The broader point is that Mr Wilson’s turnaround efforts are taking effect. Sales are gaining momentum through the conversion of stores to its well-received Extra format and margins are benefiting from a switch to catering supplies and away from cigarettes.

Further, Booker’s price competitiveness should help it to take market share from delivery specialists such as Brake Brothers and 3663 as times get tougher. Even so, at 19p, or less than eight times current-year earnings, potential buyers should stand aside until Kaupthing’s stake has found a home.

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