WH Smith has not proved immune to the UK high street’s malaise, reporting a 5 per cent fall in like-for-like first-half sales on Thursday.

However, Kate Swann, chief executive, maintained the company’s balancing act, offsetting falling sales with a rising margin, and pleasing investors with an 18 per cent rise in the interim dividend to 7.2p.

The newsagent, stationery and bookseller chain’s 581 high street stores were hardest hit, reporting like-for-like sales down 6 per cent to £473m.

Sales at WH Smith’s travel arm, which generates more than half of annual profits, shrank 3 per cent to £213m.

Tight control over costs and a move away from low-margin products such as CDs and DVDs helped boost the profit margin by 180 basis points.

“This reinforces the strength of the business model that we’ve built,” said Ms Swann. “It allows us to keep growing even in a tough economic climate.”

She expected the outlook to remain tough. “I can’t see anything that’s going to make it any better [for consumers] but if there is an interest rate rise, clearly that’s going to make things worse.”

December’s heavy snowfall took its toll on sales in the travel division, but this was partially offset by the group’s rent payment system, which is linked to a percentage of sales.

“In both air and rail, passenger numbers are challenging,” Ms Swann said. “With petrol prices rising again, we would expect our motorway numbers to be challenged as well.”

Nevertheless, for the six months to February 28, pre-tax profit rose from £62m to £64m from revenues that fell from £716m to £686m.

WH Smith’s UK travel division is also being expanded from railway and airport locations. More than 200 stores have opened in hospitals and motorway service stations in the past four years, bringing total outlets to 532.

WH Smith has 24 international outlets, including stores in Australia, India and Kuwait, and expects to increase this to 40 in the coming months.

“Expansion in the travel business should be granted a more significant multiple than is implied by the current share price and a demerger is not impossible,” said Jonathan Pritchard, retail analyst at Oriel.

The shares rose 24.3p to 475p.

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