Final Results - Part Two

Smith WH PLC 14 October 2004 WH Smith PLC Group Profit and Loss Account For the 12 months to 31 August 2004 _____________________________________________________________________________________________ 2004 2003 _____________________________________________________________________________________________ Â£m Note Before Exceptional Total Before Exceptional Total exceptional items & exceptional items & As items & goodwill items & goodwill restated goodwill amortisation goodwill amortisation (note 6) amortisation amortisation As restated (note 6) _____________________________________________________________________________________________ Turnover - Continuing operations 2,520 - 2,520 2,469 - 2,469 - Discontinued operations 314 - 314 451 - 451 _____________________________________________________________________________________________ Group Turnover 1 2,834 - 2,834 2,920 - 2,920 _____________________________________________________________________________________________ Operating profit / (loss) - Continuing operations 51 (93) (42) 99 (20) 79 - Discontinued operations 21 (10) 11 7 (37) (30) _____________________________________________________________________________________________ Group operating profit / (loss) 1,2,3 72 (103) (31) 106 (57) 49 Net loss on sale of discontinued operations 4 - (101) (101) - - - Profit on sale of fixed assets - continuing operations 5 - 2 2 - 6 6 Profit on sale of fixed assets -discontinued operations 5 - - - - 1 1 _____________________________________________________________________________________________ Profit / (loss) on ordinary activities before net finance charges 72 (202) (130) 106 (50) 56 Net finance charges (5) - (5) (4) - (4) _____________________________________________________________________________________________ Profit / (loss) on ordinary activities before taxation 67 (202) (135) 102 (50) 52 Tax on profit / (loss) on ordinary activities 7 (23) 10 (13) (31) 2 (29) _____________________________________________________________________________________________ Profit / (loss) on ordinary activities after taxation for the financial year 44 (192) (148) 71 (48) 23 Dividends 8 (24) - (24) (47) - (47) _____________________________________________________________________________________________ Retained earnings / (losses) 20 (192) (172) 24 (48) (24) _____________________________________________________________________________________________ Basic and diluted (loss)/ earnings per share 9 (60.7)p 9.4p Adjusted earnings per share 9 18.0p 29.1p Dividends per share 8 12.0p 19.0p Fixed charges cover - times 17 1.3x 1.4x Dividend cover - times 8 - 0.5x Dividend cover before exceptional items and goodwill amortisation - times 8 1.5x 1.5x Group Balance Sheet As at 31 August 2004 ____________________________________________________________________________________ Â£m Note 2004 2003 As restated (note 6) ____________________________________________________________________________________ Fixed assets Intangible assets - goodwill 164 228 Tangible fixed assets 237 272 Investments - 1 ____________________________________________________________________________________ Total fixed assets 401 501 ____________________________________________________________________________________ Current assets Stocks 184 257 Debtors due within one year 187 204 Debtors due after more than one year 25 5 Cash at bank and in hand 64 90 ____________________________________________________________________________________ 460 556 Creditors due within one year Debt (17) (20) Other creditors (397) (443) ____________________________________________________________________________________ (414) (463) ____________________________________________________________________________________ Net current assets 46 93 ____________________________________________________________________________________ Total assets less current liabilities 447 594 ____________________________________________________________________________________ Creditors due after more than one year Debt (2) (2) Other creditors (2) - ____________________________________________________________________________________ (4) (2) Provisions for liabilities and charges (38) (27) ____________________________________________________________________________________ Net assets excluding pension liabilities 405 565 Net pension liabilities (149) (156) ____________________________________________________________________________________ Total net assets 256 409 ____________________________________________________________________________________ Capital and reserves Called up share capital 10 139 139 Share premium account 11 93 93 Capital redemption reserve 11 156 156 Revaluation reserve 11 3 4 Other reserve 11 (27) (27) Profit and loss account 11 (110) 40 ____________________________________________________________________________________ Equity shareholders' funds 254 405 Non equity share capital 10 2 2 ____________________________________________________________________________________ Shareholders' funds 256 407 Minority interests - 2 ____________________________________________________________________________________ Total capital employed 256 409 ____________________________________________________________________________________ Approved by the Board of Directors on 14 October 2004. Kate Swann John Warren FCA Chief Executive Finance Director Group Cash Flow Statement For the 12 months to 31 August 2004 _________________________________________________________________________________ Â£m Note 2004 2003 _________________________________________________________________________________ Net cash inflow from operating activities before exceptional operating items 12 61 137 Net cash outflow from exceptional operating items 12 (13) (2) _________________________________________________________________________________ Net cash inflow from operating activities 48 135 Returns on investment and servicing of finance Interest received 1 1 Interest paid (1) (2) Net charge on pension schemes (4) (3) _________________________________________________________________________________ Net cash outflow from returns on investment and servicing of finance (4) (4) Taxation (10) (32) Capital expenditure and financial investment Purchase of tangible fixed assets (49) (47) Proceeds on disposal of tangible fixed assets 5 26 _________________________________________________________________________________ Cash outflow from capital expenditure and financial investment (44) (21) Acquisitions and disposals Proceeds on disposal of subsidiary undertakings 64 - Proceeds on disposal of associated undertakings 1 - Non-operating disposal costs (23) - Net cash in subsidiaries disposed (11) - Acquisitions - cash consideration - (2) Net cash in subsidiaries acquired - 1 _________________________________________________________________________________ Cash inflow / (outflow) from acquisitions and disposals 31 (1) Equity dividends paid (42) (47) _________________________________________________________________________________ Cash (outflow) / inflow before financing (21) 30 _________________________________________________________________________________ Financing Premium on issue of shares - 2 Purchase of shares for employee share schemes - (10) Decrease in debt (3) (32) _________________________________________________________________________________ Cash outflow from financing (3) (40) _________________________________________________________________________________ Decrease in cash (24) (10) _________________________________________________________________________________ Reconciliation of net cash flow to movement in net funds _________________________________________________________________________________ Â£m 2004 2003 _________________________________________________________________________________ Net funds at the start of the year 68 44 Decrease in cash in the year (24) (10) Decrease in debt 3 32 Currency translation differences (2) 2 _________________________________________________________________________________ Net funds at the end of the year 45 68 _________________________________________________________________________________ Group Statement of Total Recognised Gains and Losses For the 12 months to 31 August 2004 _________________________________________________________________________________ Â£m Note 2004 2003 As restated (note 6) _________________________________________________________________________________ (Loss) / profit for the financial year (148) 23 Actuarial loss relating to the pension schemes (15) (77) UK deferred tax attributable to the pension schemes liabilities (3) 21 UK current tax attributable to the additional pension schemes contributions 7 2 Net actuarial loss on post retirement medical benefits - (2) Currency translation differences (7) 4 _________________________________________________________________________________ Total recognised losses for the financial year (166) (29) _________________________________________________________________________________ Prior year adjustment -UITF 38 6 1 _________________________________________________________________________________ Total recognised losses since last annual report (165) _________________________________________________________________________________ Reconciliation of Movements in Group Shareholders' Funds For the 12 months to 31 August 2004 _________________________________________________________________________________ Â£m Note 2004 2003 As restated (note 6) _________________________________________________________________________________ Shareholders' funds at beginning of year as previously stated 433 507 Prior year adjustment for UITF 38 6 (26) (16) _________________________________________________________________________________ Shareholders' funds at beginning of year as restated 407 491 Retained losses (172) (24) Purchase of own shares for employee share scheme - (10) Goodwill previously written off directly to reserves now transferred to profit and loss account for the year on sale of USA Travel Retail business 39 - Premium on issue of shares - 2 Net gains and losses relating to pension schemes (11) (56) Currency translation differences (7) 4 _________________________________________________________________________________ Net reduction to shareholders' funds (151) (84) _________________________________________________________________________________ Shareholders' funds at end of year 256 407 _________________________________________________________________________________ Notes to the Accounts For the 12 months to 31 August 2004 1 Segmental analysis of results (a) Segmental analysis of group turnover ____________________________________________________________________________________ Â£m 2004 2003 As restated ____________________________________________________________________________________ Continuing operations: Retailing (note a) WHSmith High Street 1,145 1,164 UK Travel Retail 301 291 WHSmith Online 7 8 ____________________________________________________________________________________ Total 1,453 1,463 ____________________________________________________________________________________ News Distribution - Total turnover 1,182 1,115 - Internal turnover (115) (109) ____________________________________________________________________________________ Total 1,067 1,006 ____________________________________________________________________________________ ____________________________________________________________________________________ Turnover - continuing operations 2,520 2,469 ____________________________________________________________________________________ Discontinued operations: Retailing USA Travel Retail 49 181 Aspac Retail 132 149 ____________________________________________________________________________________ Total 181 330 ____________________________________________________________________________________ Publishing Business - Total turnover 155 143 - Internal turnover (22) (22) ____________________________________________________________________________________ Total 133 121 ____________________________________________________________________________________ ____________________________________________________________________________________ Turnover - discontinued operations 314 451 ____________________________________________________________________________________ ____________________________________________________________________________________ Group Turnover 2,834 2,920 ____________________________________________________________________________________ a) Like for like sales declined in the UK Retailing business by 1% (consisting of WHSmith High Street; down 2% and UK Travel Retail; up 3%). (b)Segmental analysis of group operating profits _______________________________________________________________________________________ 2004 2003 Base Exceptional Total Base Exceptional Total Â£m business operating operating business operating operating items and profit items and profit goodwill goodwill amortisation amortisation _______________________________________________________________________________________ Continuing operations: Retailing WHSmith High Street 25 (67) (42) 73 (7) 66 UK Travel Retail (note a) 21 (5) 16 19 - 19 WHSmith Online (2) (10) (12) (2) (1) (3) _______________________________________________________________________________________ Total 44 (82) (38) 90 (8) 82 News Distribution 35 - 35 32 - 32 _______________________________________________________________________________________ Trading profit 79 (82) (3) 122 (8) 114 Support functions (15) (11) (26) (14) (12) (26) Pension service costs (note b) (14) - (14) (12) - (12) Internal rents (note c) 1 - 1 3 - 3 _______________________________________________________________________________________ Operating profit / (loss) - continuing operations 51 (93) (42) 99 (20) 79 _______________________________________________________________________________________ Discontinued operations: Retailing USA Travel Retail (5) - (5) (16) (36) (52) Aspac Retail 7 (1) 6 5 (1) 4 _______________________________________________________________________________________ Total 2 (1) 1 (11) (37) (48) Publishing Business 20 (9) 11 19 - 19 Pension service costs (note b) (1) - (1) (1) - (1) _______________________________________________________________________________________ Operating profit / (loss) - discontinued operations 21 (10) 11 7 (37) (30) _______________________________________________________________________________________ _______________________________________________________________________________________ Group operating profit / (loss) 72 (103) (31) 106 (57) 49 _______________________________________________________________________________________ a) UK Travel Retail includes profits of Â£1m (2003; Â£1m) generated in Continental Europe. b) The annual pension service costs in respect of the defined benefit schemes have been allocated between the businesses based on pensionable salaries as follows: WHSmith High Street Â£8m (2003; Â£7m), UK Travel Retail Â£1m (2003; Â£1m), Publishing Â£1m (2003; Â£1m), News Distribution Â£4m (2003; Â£3m) and Support functions Â£1m (2003; Â£1m). In addition to these pension costs, Â£2m of contributions has been charged to the individual businesses in respect of the defined contribution pension scheme. c) The results for the Retailing Businesses are reported after charging an internal arm's length market rent on freehold and long leasehold properties owned by the Group. The internal net income generated of Â£1m (2003; Â£3m) is shown as a separate credit to the profit and loss account and a debit against the respective businesses, giving a nil net effect to the overall Group operating profit before exceptional operating items and goodwill amortisation. d) Exceptional operating items and goodwill amortisation includes goodwill amortisation for the following businesses WHSmith High Street Â£1m (2003; Â£1m); WHSmith Online Â£nil (2003; Â£1m); USA Travel Retail Â£nil (2003; Â£1m) and Aspac Retail Â£1m (2003; Â£1m). e) Exceptional operating items incurred during the year are analysed in Notes 2 and 3. (c) Geographical split _______________________________________________________________________________________ Turnover (Loss) / profit Net assets before taxation ____________________________________________________________________ Â£m 2004 2003 2004 2003 2004 2003 As As restated restated _______________________________________________________________________________________ Continuing operations - UK 2,520 2,469 (45) 81 139 181 _______________________________________________________________________________________ Discontinued operations: UK / Europe 110 99 (42) 16 205 262 USA 49 181 (67) (52) 11 22 Asia / Pacific 155 171 19 7 5 32 _______________________________________________________________________________________ Total discontinued operations 314 451 (90) (29) 221 316 _______________________________________________________________________________________ Net funds 45 68 Net pension liabilities: Continuing operations (132) (143) Discontinued operations (17) (13) _______________________________________________________________________________________ Total Group 2,834 2,920 (135) 52 256 409 _______________________________________________________________________________________ Turnover is disclosed by origin. There is no material difference in turnover by destination. 2 Group operating profit _________________________________________________________________________________________ 2004 2003 Continuing Discontinued Total Continuing Discontinued Total Â£m As As restated As restated restated _________________________________________________________________________________________ Turnover 2,520 314 2,834 2,469 451 2,920 Cost of sales (1,882) (146) (2,028) (1,771) (208) (1,979) _________________________________________________________________________________________ - Pre-exceptional (1,836) (146) (1,982) (1,771) (208) (1,979) - Exceptional (46) - (46) - - - _________________________________________________________________________________________ Gross profit 638 168 806 698 243 941 Distribution costs (531) (99) (630) (489) (186) (675) _________________________________________________________________________________________ - Pre-exceptional (517) (90) (607) (483) (167) (650) - Exceptional (14) (9) (23) (6) (19) (25) _________________________________________________________________________________________ Administrative expenses (149) (58) (207) (130) (87) (217) _________________________________________________________________________________________ - Pre-exceptional and amortisation of goodwill (116) (57) (173) (116) (69) (185) - Exceptional (32) - (32) (12) (16) (28) - Amortisation of goodwill (1) (1) (2) (2) (2) (4) _________________________________________________________________________________________ Group operating (loss) / profit (42) 11 (31) 79 (30) 49 _________________________________________________________________________________________ The exceptional operating items are detailed in Note 3. Group operating profit before exceptional items and goodwill amortisation is stated after charging: _________________________________________________________________________________________ 2004 2003 _________________________________________________________________________________________ Â£m Continuing Discontinued Total Continuing Discontinued Total Depreciation 41 5 46 34 15 49 Net operating lease charges - land and buildings 139 25 164 130 56 186 - equipment and vehicles 13 7 20 13 7 20 Other occupancy costs 49 3 52 42 7 49 Staff costs 278 58 336 266 94 360 Fees payable to Deloitte & Touche, the Company's auditors, included in the profit and loss account relating to audit fees amount to Â£0.4m (2003; Â£0.6m), and non-audit fees of Â£2.0m (2003; Â£0.8m) which comprise audit related regulatory work Â£0.1m (2003; Â£0.1m), further assurance services Â£1.2m (2003; Â£0.1m), tax compliance services Â£0.3m (2003; Â£0.2m), tax advisory services Â£0.4m (2003; Â£0.3m) and other non-audit services Â£nil (2003; Â£0.1m). The majority of the non-audit fees incurred in the year related to corporate advisory costs in respect of the Group reorganisation and the disposal of subsidiaries during the year. 3 Exceptional operating items and goodwill amortisation __________________________________________________________________________________ Â£m 2004 2003 __________________________________________________________________________________ Continuing operations: UK Retailing Operational & Financial Review (note a) - Stock write down 45 - - Impairment of intangible and tangible fixed assets 20 - - Internal restructuring of UK Retailing 12 - - Other items 4 - Corporate advisory costs (note b) 11 - Surplus property provision (note d) - 12 Impairment of fixed assets (note e) - 6 __________________________________________________________________________________ Exceptional operating items - continuing operations 92 18 __________________________________________________________________________________ Goodwill amortisation 1 2 __________________________________________________________________________________ Exceptional operating items and goodwill amortisation - continuing operations 93 20 __________________________________________________________________________________ Discontinued operations: Publishing unearned author advances provision (note c) 9 - USA Travel Retail impairment (note f) - 35 __________________________________________________________________________________ Exceptional operating items - discontinued operations 9 35 __________________________________________________________________________________ Goodwill amortisation 1 2 __________________________________________________________________________________ Exceptional operating items and goodwill amortisation - discontinued operations 10 37 __________________________________________________________________________________ Group exceptional operating items and goodwill amortisation 103 57 __________________________________________________________________________________ Current year exceptional operating items a) UK Retailing Operational & Financial Review As a result of a detailed review, the carrying value of stock has been written down by Â£45m. This reflects redundant and slow moving items, particularly as a result of the substantial slow down in the sales of certain entertainment product categories. Fixed asset impairments of Â£20m include the recent costs of research work on our concept store and systems development for UK Travel Retail. This impairment charge also covers goodwill and assets in relation to WHSmith Online. The internal restructuring of UK Retailing has led to a material reduction in the number of staff at the London and Swindon locations. The total redundancy and associated costs of this programme were Â£12m. b) Corporate advisory costs In responding to the Permira approach and implementing the consequent change to the Group's structure, the Group incurred exceptional operating costs of Â£11m. c) Publishing unearned author advances provision An exceptional provision of Â£9m was charged in the year to ensure that the balance sheet correctly reflected an up-to-date view of the future sales prospects of backlist titles published in previous years. Prior year exceptional operating items d) Surplus property provision As a result of a sub-tenant default and a deterioration in the London commercial property market in the year to 31 August 2003, a requirement arose to significantly increase the provision for onerous leases. Following a review of the provision, it was increased by Â£12m. e) Impairment of fixed assets In the prior year, WHSmith High Street wrote down surplus fixed assets of Â£6m related to loss making stores and other sundry impaired short life assets. f) Further impairment and write down of USA Travel Retail assets The Group carried out a further review of the carrying value of assets in the USA Travel Retail operations and concluded that an impairment charge of $55m (Â£35m) was required. The tax effect of the exceptional items is disclosed in note 7 to the accounts. 4 Net loss on sale of discontinued operations __________________________________________________________________________________ Â£m 2004 __________________________________________________________________________________ Loss on sale of USA Travel Retail (note a) (62) Profit on sale of Aspac Retail (note a) 10 Provision for loss on sale of Publishing Business (note b) (48) Other (1) __________________________________________________________________________________ Net loss on sale of discontinued operations (101) __________________________________________________________________________________ a) Sale of USA Travel Retail and Aspac Retail Businesses During the year, the Group has disposed of its USA Travel Retail businesses and the Aspac Retail business. A financial summary of the disposals is detailed below. ____________________________________________________________________________________ Â£m USA Travel Aspac Total Retail Retail ____________________________________________________________________________________ Fixed Assets 5 23 28 Stock 15 28 43 Debtors 10 2 12 Cash - 11 11 Creditors (1) (27) (28) ____________________________________________________________________________________ Total assets 29 37 66 Minority interest (1) - (1) ____________________________________________________________________________________ Net assets disposed 28 37 65 ____________________________________________________________________________________ Consideration: Cash 20 44 64 Deferred consideration (see below) 19 6 25 ____________________________________________________________________________________ Total consideration 39 50 89 Net assets disposed (28) (37) (65) Net liabilities retained (28) - (28) Transaction costs (see below) (6) (3) (9) ____________________________________________________________________________________ (Loss) / profit before goodwill previously written off directly to reserves (23) 10 (13) Goodwill previously written off directly to reserves (39) - (39) ____________________________________________________________________________________ (Loss) / profit on sale of discontinued operations (62) 10 (52) ____________________________________________________________________________________ US Travel Retail Deferred consideration of Â£7m in respect of the Hotel business sale to Travel Traders LLC consists of a loan note, which is interest bearing, with a 5 per cent coupon conditional on the trading cash flows of that company. Deferred consideration of Â£12m in respect of the Airport business sale to Hudson Group consists of an interest bearing loan note with a 5 per cent coupon, with interest accruing from the second year. Aspac Retail The profit on the disposal of Aspac Retail is calculated with reference to the draft completion accounts. The deferred consideration of Â£6m is receivable subject to the finalisation of these completion accounts with the purchaser. Other The Group also disposed of associate undertakings Books and More NZ Limited, University Bookshop (Otago) Ltd and University Bookshop Canterbury Limited for a total consideration of Â£1.3m. The total investments disposed and associated costs were Â£1.0m and there was Â£0.3m profit on disposal. On 30 June 2004, the Group completed a trade and assets sale of its Singapore business which resulted in a Â£nil profit on disposal. (b) Provision for loss on sale of Publishing Business On 25 September 2004, the Group completed the disposal of its Publishing Business, Hodder Headline Limited. The business was sold to Hatchette Livre for Â£210m cash and the assumption of the Hodder Headline Limited net pension deficit of Â£14m. A provision of Â£48m has been made for the loss on disposal, of which Â£45m has been shown as an impairment of goodwill and Â£3m is included in accruals for associated disposal costs. The estimated loss on disposal is subject to the preparation and agreement of completion accounts. 5 Profit on sale of fixed assets a) Continuing operations In the current year WHSmith High Street completed the sale and leaseback of 7 freehold properties and sold a further 6 freehold properties. The profit on the sale of these properties was Â£2m. In the prior year, WHSmith High Street completed the sale and leaseback of twenty freehold properties and sold a further four freehold properties. The profit on the sale of these properties was Â£6m. b) Discontinued operations In the prior year Aspac Retail completed the sale and leaseback of three properties in New Zealand. The profit on the sale of these properties was Â£1m. 6 Prior Year Adjustments Urgent Issues Task Force Abstract 38 'Accounting for ESOP Trusts' (UITF 38) has been adopted with effect from 1 September 2003. The adoption of UITF 38 requires that an entity's own shares held in an ESOP Trust are deducted in arriving at shareholders' funds. The impact is set out in (a) and (b) below. The Group has adopted Application Note G 'Revenue Recognition' to Financial Reporting Standard 5 'Substance of Transactions' ('FRS 5 ANG'). The key impacts of this amendment for the Group are set out below. FRS 5 ANG states that turnover excludes the sales value of estimated returns. Accordingly the provision for estimated refunds (previously included in cost of sales), which represents the cumulative estimate that will be returned and refunded after the year end, has now been deducted from turnover. FRS 5 ANG states that turnover should be recorded net of discounts. Accordingly, discounts provided to customers and staff (including loyalty scheme costs) previously shown as deductions against gross margin, have been reclassified as deductions against turnover. Other ancillary income previously deducted from administration costs has now been reclassified as part of turnover. a) Consolidated balance sheet The table below sets out the impact of the adoption of UITF 38 on the balance sheet as at 31 August 2003. ____________________________________________________________________________________ Â£m Investments Other reserve Profit and loss reserve ____________________________________________________________________________________ At 31 August 2003 27 - 39 Adoption of UITF 38 (26) (27) 1 ____________________________________________________________________________________ 31 August 2003 restated 1 (27) 40 ____________________________________________________________________________________ The above restatement has reduced the net assets of the group by Â£26m as at 31 August 2004. There has been no impact on net assets arising from the adoption of FRS 5 ANG. b) Consolidated profit and loss account Under UITF 38, any impairment in the carrying value of shares held in the ESOP Trust is no longer charged to the profit and loss account, and as such, a prior year adjustment of Â£1m in respect of previous years' impairments has been credited directly to the profit and loss reserve. If the previous policy had been continued in the current year, the impact on profit before and after tax for the year ended 31 August 2004 would have been Â£nil. In accordance with the change in accounting policy to adopt FRS 5 ANG, group turnover for the year ended 31 August 2003 has been restated from Â£2,900m to Â£2,920m. There has been no impact on profit before tax or profit after tax in respect of the restatements relating to FRS 5 ANG for the year ended 31 August 2003. If the previous policy had been continued in the current year, the impact on profit before and after tax for the year ended 31 August 2004 would have been Â£nil. 7 Taxation ____________________________________________________________________________________ Â£m 2004 2003 ____________________________________________________________________________________ Tax on profit before exceptional items and goodwill 20 40 amortisation - Standard rate of UK corporation tax 30% (2003; 30%) Adjustment in respect of prior year UK corporation tax (3) (6) Foreign tax 3 1 ____________________________________________________________________________________ Total current tax charge before exceptional items and goodwill amortisation 20 35 ____________________________________________________________________________________ Deferred tax - current year - (4) Deferred tax - prior years 3 - ____________________________________________________________________________________ Tax on profit on ordinary activities before exceptional items and goodwill amortisation 23 31 Tax on exceptional items and goodwill amortisation (10) (2) ____________________________________________________________________________________ Tax on profit on ordinary activities after exceptional items and goodwill amortisation 13 29 ____________________________________________________________________________________ Effective tax rate on continuing activities before exceptional items and goodwill amortisation 30% 30% 8 Dividends ____________________________________________________________________________________ Equity shares 2004 2003 ____________________________________________________________________________________ Interim 4.0p 6.0p Final 8.0p 13.0p ____________________________________________________________________________________ Total dividend per ordinary share 12.0p 19.0p ____________________________________________________________________________________ ____________________________________________________________________________________ Â£m 2004 2003 ____________________________________________________________________________________ Interim 10 15 Final - proposed 14 32 ____________________________________________________________________________________ Total dividend 24 47 ____________________________________________________________________________________ ____________________________________________________________________________________ 2004 2003 ____________________________________________________________________________________ Dividend cover - times - 0.5x Dividend cover before exceptional items and goodwill amortisation - times 1.5x 1.5x ____________________________________________________________________________________ The final dividend will be paid on 28 January 2005 to shareholders registered at the close of business on 31 December 2004. As at 31 August 2004, the Group had 250,559,901 (2003; 250,437,430) ordinary shares in issue. The final dividend for the year ended 31 August 2004 has been calculated on the revised number of shares following the '18 for 25' share consolidation, which occurred on 27 September 2004. 9 (Loss) / earnings per share a) (Loss) / earnings per share _________________________________________________________________________________________ 2004 2003 _________________________________________________________________________________________ Â£m Continuing Discontinued Total Continuing Discontinued Total _________________________________________________________________________________________ (Loss) / profit attributable to shareholders (50) (98) (148) 53 (30) 23 Exceptional items net of related tax impact 81 109 190 9 35 44 Amortisation of goodwill 1 1 2 2 2 4 _________________________________________________________________________________________ Adjusted earnings attributable to shareholders 32 12 44 64 7 71 _________________________________________________________________________________________ Adjusted earnings per share is based on (losses) / profits attributable to shareholders before goodwill charges and exceptional items and is presented to show a clearer representation of the results of the business going forward. _________________________________________________________________________________________ 2004 2003 _________________________________________________________________________________________ Â£m Continuing Discontinued Total Continuing Discontinued Total _________________________________________________________________________________________ Basic and diluted (loss) / earnings per share (20.5)p (40.2)p (60.7)p 21.7p (12.3)p 9.4p Exceptional items net of related taxation 33.2p 44.7p 77.9p 3.7p 14.4p 18.1p Amortisation of goodwill 0.4p 0.4p 0.8p 0.8p 0.8p 1.6p _________________________________________________________________________________________ Adjusted earnings per share 13.1p 4.9p 18.0p 26.2p 2.9p 29.1p _________________________________________________________________________________________ In accordance with FRS 14 'Earnings per share', as the Group recorded a loss from continuing operations, the diluted loss per share is the same as the basic, as any potential dilutive shares reduce the loss per share for continuing operations. In the prior year, earnings per share was not diluted by shares under option. a) Weighted average share capital ____________________________________________________________________________________ Millions 2004 2003 ____________________________________________________________________________________ Weighted average shares in issue for earnings per share 244 244 Add weighted average number of ordinary shares under option - - ____________________________________________________________________________________ Weighted average ordinary shares for fully diluted earnings per share 244 244 ____________________________________________________________________________________ The weighted average number of ordinary shares in issue is stated after excluding 6,682,660 (2003; 6,541,345) shares held in the Employee Share Trust. 10 Called up share capital a) Authorised ____________________________________________________________________________________ 2004 2003 Number of Nominal Number of Nominal shares value shares value (millions) Â£m (millions) Â£m ____________________________________________________________________________________ Ordinary shares of 55.55p each 333 185 333 185 'B' shares of 53.75p each 286 153 286 153 ____________________________________________________________________________________ At 31 August 2004 338 338 ____________________________________________________________________________________ (a) Allotted and fully paid ____________________________________________________________________________________ 2004 2003 Number of Nominal Number of Nominal shares Value shares value (millions) Â£m (millions) Â£m ____________________________________________________________________________________ Ordinary shares of 55.55p each 251 139 250 139 'B' shares of 53.75p each 4 2 4 2 ____________________________________________________________________________________ At 31 August 2004 141 141 ____________________________________________________________________________________ The number of shares issued in the year to 31 August 2004 was 127,447 shares (2003; 546,956 shares) ordinary shares with a nominal value of Â£0.1m relating to share options exercised for a cash consideration of Â£0.4m (2003; Â£2m). The 'B' shares are redeemable at their nominal value at the shareholder's option during any year declared by the Group, at the Group's option or on maturity on 31 August 2008. Additionally, 'B' shares have no rights to ordinary dividends or voting. In addition, the Group has 169,072 authorised, allotted and fully paid 5.75% cumulative preference shares in issue, which receive dividends half yearly. At 31 August 2004, the number of options held under employee share schemes was 16.5 million shares (2003; 16.7 million). 11 Reserves ______________________________________________________________________________________ Capital Share redemption Revaluation Other Profit Â£m premium reserve reserve reserve & loss account account ______________________________________________________________________________________ Reserves at 1 September 2003 as previously stated 93 156 4 - 39 Prior year restatement for UITF 38 - - - (27) 1 ______________________________________________________________________________________ Reserves at 1 September 2003 as restated 93 156 4 (27) 40 Loss retained for the year - - - - (172) Profit realised on sale of previously revalued freehold property - - (1) - 1 Goodwill previously written off directly to reserves - - - - 39 Currency translation differences - - - - (7) Current year net pension deficit adjustment - - - - (11) ______________________________________________________________________________________ Reserves at 31 August 2004 93 156 3 (27) (110) ______________________________________________________________________________________ The profit and loss reserve at 31 August 2004 is stated after writing off previously acquired goodwill of Â£19m (2003; Â£58m). The capital redemption reserve was created from the repurchase of ordinary and 'B' shares. The WH Smith Employees' Share Trust 1999 (the 'Trust') holds ordinary shares in WH Smith PLC which may be used to satisfy options granted under the Executive Share Option Scheme 1999 and awards granted under the Deferred Bonus Plan and 2004 L-TIP. The Trustee, which is an independent professional trust company based in Jersey, purchases the shares in the open market with financing provided by the Group as required, on the basis of regular reviews of the anticipated share liabilities of the Group. In accordance with UITF 38, which requires shares held by the Trust to be shown as a deduction in arriving at shareholders' funds, the other reserve comprises 6,682,660 shares (2003; 6,541,345) with a nominal value of Â£3,712,218 (2003; Â£3,633,717) and a market value at 31 August 2004 of approximately Â£20m (2003; Â£23m). Dividends are waived for all ordinary shares held by the Trust. ____________________________________________________________________________________ Â£m 2004 2003 As restated ____________________________________________________________________________________ Profit and loss reserve excluding net pension liabilities 39 196 Amount relating to pension liabilities, net of related deferred tax (149) (156) ____________________________________________________________________________________ Profit and loss reserve (110) 40 ____________________________________________________________________________________ 12 Notes to the cash flow statement Reconciliation of operating (loss) / profit to net cash intflow from operating activities ____________________________________________________________________________________ Â£m 2004 2003 ____________________________________________________________________________________ Operating (loss) / profit (31) 49 Adjustment for pension funding (note a) (25) (6) Operating exceptional items 101 53 Depreciation of fixed assets 46 49 Amortisation of goodwill 2 4 (Increase) / decrease in stock (17) 3 Increase in debtors (1) (17) (Decrease) / increase in creditors (9) 6 Cash spend against provisions (5) (4) ____________________________________________________________________________________ Net cash inflow from operating activities before exceptional operating items 61 137 Internal restructuring of UK Retailing (11) - Other items (2) - Lease termination costs - (2) ____________________________________________________________________________________ Cash outflow relating to exceptional operating items (13) (2) ____________________________________________________________________________________ Net cash inflow from operating activities after exceptional operating items 48 135 ____________________________________________________________________________________ a) For the year ended 31 August 2004, Â£44m (2003; Â£22m) cash contributions have been made to the pension schemes. The associated profit and loss charge comprises Â£15m (2003; Â£13m) for operating costs and Â£4m charge(2003; Â£3m charge) for financing. The Group has made an additional contribution of Â£25m over and above the required profit and loss charge (2003; Â£6m additional contribution). 13 Contingent liabilities ____________________________________________________________________________________ Â£m 2004 2003 ____________________________________________________________________________________ Guarantees given in the normal course of business - 6 Bank and other loans guaranteed 20 2 ____________________________________________________________________________________ 20 8 ____________________________________________________________________________________ No amount has been included above for taxation that would arise in the event of certain international subsidiaries distributing the balance of their reserves. Other potential liabilities that could crystallise are in respect of previous assignments of leases where the liability could revert to the Group if the lessee defaulted. These leases have an estimated future cumulative gross rental commitment of approximately Â£201m (2003; Â£238m). 14 Capital commitments Contracts placed for future capital expenditure approved by the directors but not provided for in these financial statements amounts to Â£33m (2003; Â£45m). 15 Transactions with related parties USA Travel Retail - Hotels The CEO of Travel Traders LLC is Sean Anderson who was Chairman of WHSmith Inc, WH Smith PLC's US subsidiary, until September 2003, and he holds a 30% stake in Travel Traders LLC. The total consideration of Â£7m for the USA Travel Retail Hotel Business was satisfied by way of an interest bearing loan note with a 5 per cent coupon, conditional on the trading cash flows of Travel Traders LLC. Additionally, WH Smith Group Holdings (USA) Inc. holds a 15% equity interest in Travel Traders LLC and the Group is providing a loan facility of up to Â£4m to the new company, of which Â£3m is drawn down as at 31 August 2004. 16 Post balance sheet events Completion of Hodder Headline disposal On 25 September 2004 the Group completed the disposal of its publishing business, Hodder Headline. The business was sold to Hachette Livre S.A. for Â£210m in cash and the assumption of the Hodder Headline net pension deficit of Â£14m. A provision has been made for a loss on disposal within these accounts of Â£48m. New financing facilities On 27 July 2004, the Group entered into new committed 3 year borrowing facilities comprising a Â£120m unsecured term loan facility (of which Â£30m was cancelled on 20 September 2004) and a renegotiated Â£150m working capital facility. Both facilities were contingent on the satisfactory completion of the disposal of Hodder Headline. The facilities therefore became available to the Group on 27 September 2004 following the successful completion of this disposal. Capital reorganisation On 27 September 2004, the Group undertook a capital reorganisation whereby existing ordinary shareholders received 18 new ordinary shares and 25 new non-cumulative preference shares of nominal value 85p 'C shares' for every 25 existing ordinary shares (excluding those shares held in the ESOP trust). The new ordinary shares have a nominal value of 2 13/81 p each. This capital reorganisation was effected by a bonus issue of approximately Â£77.7m, using the share premium account to fully pay up undesignated shares of 31p each, which were then allocated to shareholders on the basis of one undesignated share for every existing share held. The existing ordinary shares and undesignated shares were then consolidated and split in order to achieve the issue of new ordinary share capital of a nominal value of Â£4m and C shares of a nominal value of Â£207m. 17 Fixed charges cover ____________________________________________________________________________________ Â£m 2004 2003 ____________________________________________________________________________________ Interest expense 5 4 Operating lease rentals 184 206 Property taxes 37 36 Other property costs 15 13 ____________________________________________________________________________________ Total fixed charges 241 259 Profit before exceptional items, goodwill amortisation and tax 67 102 ____________________________________________________________________________________ Profit before exceptional items, goodwill amortisation, tax and before fixed charges 308 361 ____________________________________________________________________________________ Fixed charges cover 1.3x 1.4x ____________________________________________________________________________________ Fixed charges cover is calculated by dividing profit before exceptional items, goodwill amortisation, tax and fixed charges by total fixed charges. 18 Analysis of Retail Stores and Selling Space ________________________________________________________________________________________ Number of stores 1 Sept Opened Closed Disposed 31 Aug 2003 2004 ________________________________________________________________________________________ WHSmith High Street 545 7 (8) - 544 UK Travel Retail (note a) 132 3 (6) - 129 ________________________________________________________________________________________ Total Retailing Businesses - continuing 677 10 (14) - 673 ________________________________________________________________________________________ USA Travel Retail - Hotels 278 - - (278) - USA Travel Retail - Airports 160 7 - (167) - Aspac Retail 204 10 (7) (207) - ________________________________________________________________________________________ Total Retailing Businesses - discontinued 642 17 (7) (652) - ________________________________________________________________________________________ ________________________________________________________________________________________ Total Retailing Businesses 1,319 27 (21) (652) 673 ________________________________________________________________________________________ ________________________________________________________________________________________ Retail selling square feet 1 Sept Opened Closed Disposed 31 Aug (000's) 2003 2004 ________________________________________________________________________________________ WHSmith High Street 3,034 55 (33) - 3,056 UK Travel Retail 212 6 (4) - 214 ________________________________________________________________________________________ Total Retailing Businesses - continuing 3,246 61 (37) - 3,270 ________________________________________________________________________________________ USA Travel Retail - Hotels 286 - - (286) - USA Travel Retail - Airports 154 11 - (165) - Aspac Retail 778 32 (15) (795) - ________________________________________________________________________________________ Total Retailing Businesses - discontinued 1,218 43 (15) (1,246) - ________________________________________________________________________________________ ________________________________________________________________________________________ Total Retailing Businesses 4,464 104 (52) (1,246) 3,270 ________________________________________________________________________________________ (a) UK Travel Retail store numbers have been restated to reflect the number of stores rather than the number of units. 19 Segmental analysis of operating assets employed ________________________________________________________________________________________ ROCE% after ROCE% after capitalised capitalised net net Operating Operating Operating Operating assets Return on leases assets leases as at 31 capital including as at 31 Return on including August employed internal August capital internal 2003 as as rent 2004 employed rent restated restated restated Â£m % % Â£m % % ________________________________________________________________________________________ Continuing operations: WHSmith High Street 189 13% 10% 221 33% 15% UK Travel Retail 25 83% 24% 30 63% 38% WHSmith Online (2) - - 8 - - ________________________________________________________________________________________ UK Retailing 212 21% 12% 259 35% 18% News Distribution (18) - - (14) - - ________________________________________________________________________________________ Continuing trading operations 194 41% 17% 245 50% 22% Freehold property 21 24 Support functions (48) (65) Provisions for liabilities and charges (28) (23) ________________________________________________________________________________________ Operating assets employed - continuing operations 139 37% 14% 181 55% 20% ________________________________________________________________________________________ Discontinued operations: USA Travel Retail 21 26 Aspac Retail - 28 Publishing 210 9% 9% 266 7% 6% Provisions for liabilities and charges (10) (4) __________________________________ ________ Operating assets employed - discontinued operations 221 316 __________________________________ ________ Total operating assets employed 360 497 Net funds 45 68 __________________________________ ________ Net assets excluding pension liabilities 405 565 Net pension liabilities: Continuing operations (132) (143) Discontinued operations (17) (13) __________________________________ ________ Total net assets 256 409 __________________________________ ________ a) Return on Capital Employed is calculated as the operating profit before exceptional items and goodwill amortisation as a percentage of operating capital employed. b) Return on Capital Employed after capitalised net operating leases including internal rent is calculated as the adjusted profit as a percentage of operating assets after capitalising operating leases. Adjusted profit is stated after adding back the annual net rent and charging depreciation on the value of capitalised leases. The value of capitalised operating leases is based on the net present value of future rent commitments. 20 Preparation of the Preliminary Announcement (a) Basis of preparation The preliminary announcement for the 12 months to 31 August 2004 has been prepared on the basis of the accounting policies set out in the Company's Annual Report for the 12 months to 31 August 2003 with the exception of the adoptions of UITF 38 'Accounting for ESOP Trusts' and Application Note G 'Revenue recognition' to Financial Reporting Standard 5 'Substance of Transactions' which have been adopted with effect from 1 September 2003. The prior year results have been adjusted accordingly, as explained in note 6. All other accounting polices have been applied consistently throughout the current and preceding year. The Company has adopted the Format 1 Profit and Loss account headings set out in the Companies Act 1985 in compiling its annual accounts at 31 August this year, as the Directors believe this provides a more appropriate view of the Company's results, following a financial and operational review during the period and consideration of the formats adopted by other retail companies. Prior year figures have been restated on a comparable basis. (b) Preliminary announcement The financial information for the 12 months to 31 August 2004 and 12 months to 31 August 2003 do not comprise statutory accounts for the purpose of Section 240 of the Companies Act 1985 and have been extracted from the Company's accounts for the 12 months to 31 August 2004 and 31 August 2003. The statutory accounts for the 12 months to 31 August 2003 have been filed with the Registrar of Companies and those for the 12 months to 31 August 2004 will be filed following the Company's annual general meeting. The auditors' reports on both those accounts were unqualified and did not include a statement under Section 237 (2) or (3) of the Companies Act 1985. The Annual Report and Accounts will be posted to shareholders in November 2004. This information is provided by RNS The company news service from the London Stock Exchange

Companies

WH Smith (SMWH)

Thursday, 23rd May 2024

COMPANIES COVERED:

HL. QQ. AJB

Another day and another round of takeover talk with Hargreaves Lansdown being eyed by private equity suitors. AJ Bell also advances on upbeat earnings news whilst QinetiQ upgrades its profit guidance, too.

Full Archive

UK 100

Latest directors dealings

4 hours ago Marlowe
5 hours ago Haleon
5 hours ago TUI AG Reg Shs (DI)
5 hours ago Georgia Capital
5 hours ago Weir Group

All directors dealings today