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Investing.com - Deutsche Bank (ETR:DBKGn) lowered its price target on WH Smith (LON:SMWH) to GBP7.26 from GBP10.30 while maintaining a Hold rating following the discovery of accounting irregularities in the company’s North American operations.
The accounting issue resulted in an overstatement of approximately £30 million in budgeted fiscal year 2025 trading profit, representing more than half of the region’s profit and about 20% of consensus for FY25 group profit before tax.
Deutsche Bank expects a £10 million adverse impact on net debt, despite the irregularity being largely non-cash in nature. The bank forecasts earnings per share downgrades of approximately 20% annually throughout its forecast horizon.
The impact on investor sentiment is amplified by the fact that these issues occurred in WH Smith’s most challenged region, according to Deutsche Bank’s analysis.
Deutsche Bank maintained its Hold rating, noting that a potential rerating would require completion of the auditors’ review into North American operations, greater clarity on returns from expansionary capital expenditure in North America, and resolution of earnings dilution from the company’s recent High Street exit.
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