US activist fund Causeway Capital builds major stake in WH Smith
Activist US fund Causeway Capital has amassed a £178m stake in WH Smith as the retail giant tries to get back on its feet post-Covid.
Causeway Capital, which is based in Los Angeles, this month increased its share in WH Smith to 9.05 per cent and is now the retail chain’s largest single shareholder.
WH Smith has been hit hard by the pandemic and the associated sharp decline in domestic and international travel.
Two-thirds of WH Smith’s £177m operating profit pre-Covid was made from its airport and train station shops, which have been left closed for much of the past 18 months.
Causeway Capital’s new equity purchases, first reported by the Sunday Times, will fuel speculation that the fund will want to shake-up the book seller’s boardroom.
Causeway’s portfolio manager Jonathan Eng made waves last month when he called on Rolls Royce’s incoming chair Anita Frew to inject some “fresh thinking” to the board.
The US firm may well make similar calls for WH Smith, with chair Henry Staunton expected to soon leave the role after 11 years.
The UK’s corporate governance code states that chairs should be replaced every nine years, however Staunton used Covid and the associated economic crisis to justify staying longer.
The US firm has been a significant investor in WH Smith since last March and there have reportedly been no demands from Causeway Capital.
A Causeway Capital spokesperson said: “We are firm believers in the strategy and management team of WH Smith, which is why we first invested last March and why we have continued to add to our shareholding. We have confidence in the long term growth potential of the business and are happy to be the company’s largest shareholder.”
The retail chain announced earlier this month that its annual results fell far short of pre-pandemic levels.
In a preview of the group’s annual financials, it revealed that total revenue for the second half of 2021 was at 65 per cent of pre-covid levels, climbing to 71 per cent in the eight weeks leading up to August 31.
WH Smith’s revenue for its UK airport stores in H2 of 2021 reached just 17 per cent of 2019 levels, with the figure jumping to 30 per cent over summer as international travel restrictions eased.
Revenue across WH Smith’s portfolio of travel stores reached just 38 per cent of pre-pandemic levels in H2.