Waterstones profit jumps 30% thanks to coffee and gift sales

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Waterstones book store in Birmingham, United Kingdom. Photo: Mike Kemp/In PIctures via Getty Images

Book shop Waterstones saw revenue and profits rise last year, as stationary, gifts, food, and coffee sales boosted the business.

Newly released accounts show Waterstones’s sales rose 1.8% to £392.8m ($510m) in the 12 months to 27 April 2019. Pre-tax profit rose by 33% to £26.5m.

The rise in sales and profits came despite “a period absent of significant bestselling titles.” Waterstones said sales were boosted by “non-book items” like stationary, board games, notebooks and other gifts, as well as food and drink sales at its Cafe W locations.

The highest paid director, who was not named, took home £1.7m in the period.

Waterstones has 277 book shops and cafes across the UK and employs almost 3,200 staff.

The bookseller was snapped up by renown US hedge fund Elliott Advisors in April 2018 for an undisclosed sum. The accounts, filed this week with Companies House, are the first glimpse into how the business has performed under its new owners.

Waterstones book store at Piccadilly Circus, London. Photo: Jeffrey Greenberg/Universal Images Group via Getty Images

Accounts show Elliott led a refinancing of the business, taking out a £165m loan with an interest rate of 6% plus LIBOR and arranging a £25m credit facility.

Elliott Advisors UK makes its money charging for advice and support to Waterstones and other investments. Waterstones’s accounts show the business owed £56.9m in loans and payments due to group companies at the end of the period, up from £39.5m in 2018.

Elliott manages over $40bn of investor funds around the world and is known as an ‘activist’ investors — buying up stakes in businesses and then pressuring management to change strategy or sell-off parts of the business.

READ MORE: Huge pay rise for hedge fund boss who owns Waterstones

However, Waterstones CEO James Daunt said at the time of the acquisition that Elliott had acquired the bookseller as a traditional investment.

Waterstones invested £7m in staff training and improving its shops in the 12 months to 27 April 2019, down from £8.8m in the prior financial year.

Other Elliott investments in Europe include Italian football club AC Milan, Telecom Italia, and British shopping centre operator Hammerson (HMSO.L). Last year Elliott also bought US bookseller Barnes & Noble in a $683m deal.