Interim Results
WH Smith PLC
19 April 2007
19 April 2007
WH SMITH PLC
INTERIM RESULTS ANNOUNCEMENT
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2007
Further progress in profitability
KEY POINTS
• Profit before tax and exceptional items up 7% to £59m (2006: £55m).
Profits from trading operations are £51m(1) in High Street and £15m(1) in
Travel, in line with expectations.
• Total Group profit before tax of £59m (2006: £60m including an
exceptional gain of £5m).
• Total like-for-like (LFL) sales down 6% reflecting our strategy to
rebalance the mix of our High Street business towards our core categories
and the competitive trading in our markets. In High Street LFL sales are
down 8% and in Travel LFL sales are up 4%.
• Gross margin has improved by 290 basis points year on year.
• Cost savings of £8m delivered ahead of plan.
• Strong free cash flow of £66m.
• Headline(2) earnings per share of 27.3p (2006: 26.7p) reflecting the
increased number of shares as a result of the demerger following the
crystallisation of Employee Savings Schemes.
• Basic earnings per share of 26.7p (2006: 29.1p) reflecting the increased
number of shares as a result of the demerger following the crystallisation
of Employee Savings Schemes and in the prior year a £5m exceptional gain
related to the settlement of post retirement medical benefits.
• Interim dividend of 3.7p, up 19% on a proforma(3) basis following the
demerger.
• Successfully rolled out 52 WHSmith Travel motorway stores.
• Agreement with Post Office Limited to open 70 Post Offices in WHSmith
High Street stores.
Commenting on the results, Kate Swann, Group Chief Executive said:
'We are on track with our plan, delivering another period of strong profit
growth, with Group profits up 7%.
'In the High Street, we successfully continued to deliver our strategy to
rebuild our authority in our core categories, despite competitive trading in our
markets over the Christmas period. Our Travel business continued its strong
performance and completed the rollout of 52 new motorway stores in partnership
with leading motorway service operators.
'We remain cautious about consumer spending in our markets, however we are
confident in the outcome for the full year.'
(1) High Street and Travel profit is stated after directly attributable defined
benefit pension service costs, share based payment costs and before central
costs, exceptional items, interest and taxation
(2) Profit before tax, exceptional items and IAS 19 pension interest - undiluted
(3) Proforma based on two thirds / one third split of year end and interim
dividend per the WH Smith PLC Circular dated 7 July 2006
- Ends -
Enquiries:
WH Smith PLC
Sarah Heath Media Relations 020 7851 8850
Mark Boyle Investor Relations 020 7851 8820
Brunswick
Tom Buchanan 020 7404 5959
Pam Small
A summary of WH Smith PLC's Interim Results 2007 will be published in The Times
newspaper on 20 April 2007. WH Smith PLC's Interim Results 2007 are also
available at www.whsmithplc.com and a copy of the Interim Results 2007 will
shortly be available for inspection at the UK Listing Authority, 25 The North
Colonnade, London, E14 5HS.
CURRENT TRADING
In the 6 weeks to 14 April 2007*, LFL sales were down 5% and gross margin was up
on last year.
* Due to the difference in the timing of Easter, this year's current trading
period is not comparable with last year's current trading period.
FINANCIAL REVIEW
Group Summary
The Group generated a profit before tax and exceptional items of £59m (2006:
£55m), an increase of 7% on the prior year. Profit before tax and after
exceptional items was £59m (2006: £60m). Travel profit(1) increased by 15% to
£15m. This continued strong performance, with good sales and margin growth, was
driven by mix changes, improved ranges and successful promotions. High Street
profit(1) was £51m, in line with our expectations.
We continue our strategy to rebalance the mix of our business towards our core
categories and reduce our reliance on entertainment. Entertainment is
disproportionately weighted towards the first half of the year, and consequently
the profile of profit generation will continue, as expected, to shift towards
the second half.
Reflecting the increased number of shares as a result of the demerger following
the crystallisation of Employee Savings Schemes, headline earnings per share
increased to 27.3p (2006: 26.7p) with basic earnings per share of 26.7p (2006:
29.1p). Basic earnings per share also reflect the prior year £5m exceptional
gain related to the settlement of post retirement medical benefits.
Cash generation was strong due to good working capital control combined with
improvements in headline profit before tax(2). Group free cash flow was £66m
(2006: £58m). The increase in net assets to £201m (2006: £143m) reflects the
reduction in net retirement obligations and the strong cash generation.
The Board has declared an interim dividend of 3.7p per share. This is an
increase of 19% on the prior year proforma(3) dividend of 3.1p reflecting the
increased profit(2) and good cash position of the business.
(1) High Street and Travel profit is stated after directly attributable defined
benefit pension service costs, share based payment costs and before central
costs, exceptional items, interest and taxation
(2) Profit before tax, exceptional items and IAS 19 pension interest
(3) Proforma based on two thirds / one third split of year end and interim
dividend per the WH Smith PLC Circular dated 7 July 2006
Trading Operations
Total Group sales were down 6% to £721m (2006: £771m) with LFL sales down 6%.
Profit from trading operations was £66m, as we maintained our focus on improving
profitability and focused cost control.
High Street sales were down 9% at £565m and down 8% on a LFL basis. Travel sales
grew by 4% to £156m, up 4% on a LFL basis driven by the airport business which
grew by 8% on a LFL basis and which was 4 percentage points ahead of passenger
growth. LFL sales in rail were up 1% in the half year.
For the period, High Street profit(1) was £51m (2006: £53m) and Travel profit(1)
was £15m (2006: £13m), in line with our expectations.
Books LFL sales were flat with gross margin up year on year as we continued to
focus on rebuilding our authority as a popular book specialist and maximising
profitability. We continued to perform well versus the general high street, for
the fourth successive reporting period. The publishers' release schedule over
Christmas contributed to this performance, with a good supply of titles that
appeal to the WHSmith customer, such as celebrity autobiographies. Over
Christmas, we took high market share in front list titles such as Peter Kay's
The Sound of Laughter. Our ongoing programme to develop and improve ranges has
delivered good results. We have also continued our focus on infrastructure, with
investments in IT systems to manage the returns process more efficiently, both
for range and for promotional stock. In Travel, we have introduced new book
promotions, such as the popular Deal of the Week, and we are also seeing an
encouraging performance from our specialist bookstore format.
Stationery LFL sales were down 4%. Gross margin was up driven by intra category
mix, sourcing benefits from low cost countries and better markdown management.
We continue to focus on improving our ranges in this broad and diverse category
through a programme of category reviews, a process which we started this time
last year with Christmas seasonal ranges. The results from these were positive,
with sales and margins up in boxed cards, for example. Further category reviews
have now been implemented this spring with initial signs, in areas such as PC
consumables, looking encouraging.
News and Impulse LFL sales were up 1% year on year with an improvement in gross
margin. Despite a tough market, particularly for partworks, we broadly held
share in news and magazines, supported by innovative promotions. We continued to
grow our confectionery and snacking ranges by making better use of our space,
putting in new ranges and equipment. We are also responding to the popularity of
healthy snacking options by extending the range of nuts, fruits and smoothies on
offer.
In Entertainment, we continued with our strategy to reduce steadily our reliance
on entertainment and as we do this, we are optimising profitability.
Entertainment LFL sales were down 36% in an extremely competitive market with
continuing price deflation. Stock continues to be tightly controlled to reflect
sales patterns while maintaining availability levels in line with last year.
High Street
High Street delivered profits(1) of £51m, in line with expectations, as we
continued with our strategy to rebalance the mix of the business focused on
rebuilding authority in our core categories, optimising margins, tight cost
control and delivering the retail basics.
Gross margin improved, driven by rebalancing the mix of our business, low cost
sourcing, better buying and improved markdown management.
High Street delivered £8m of cost savings during the period ahead of plan. Cost
savings were delivered from a number of areas of the business including
logistics, information systems and stores.
The High Street business now operates from 545 stores, which occupy 3.0m square
feet (2006: 3.0m square feet). We opened 3 new stores during the period with one
store closing during the period.
As also announced this morning, we have reached an agreement with Post Office
Limited to open Post Offices within 70 High Street stores.
This follows the successful trial of Post Office franchises in 6 High Street
stores. The integration of the Post Offices into our stores was a complex
process but we managed it well to ensure there was no negative impact on store
performance. Customers quickly saw the benefits of the move to WHSmith,
including the convenient location in the heart of the town's shopping area, the
modern and inviting Post Office environment, shorter queues, improved speed of
service and additional services, such as longer opening hours (including Sunday
opening in some stores).
This agreement secures the future of Post Office services in 70 towns and the
full range of over 170 Post Office services will be on offer at the new WHSmith
concessions. In addition, there is an excellent fit between these two well-known
high street brands and the complementary products and services should further
enhance our customer offer.
The rollout is scheduled for completion in autumn 2008. We do not expect the
Post Offices to have a material impact on profits during the current financial
year due to set up costs.
Travel
Travel delivered a strong performance with profit(1) increasing by 15% to £15m.
This was delivered from increased sales combined with improved gross margin and
tight cost control. Sales were driven by mix and space changes with further
range improvements in areas such as snacking.
Gross margin has increased during the year through good category mix management
and further buying improvements, resulting in more sales in higher margin
categories such as snacking. We have improved average transaction value by
focusing on mix changes and improved promotional activity.
The Travel business now operates from 262 units, including motorway service area
franchise units. Excluding motorway service area franchise units, Travel
occupies 0.2m square feet (2006: 0.2m square feet).
(1) High Street and Travel profit is stated after directly attributable defined
benefit pension service costs, share based payment costs and before central
costs, exceptional items, interest and taxation
We have made good progress on contracts in airports and rail. We successfully
renewed 2 contracts in airports and 10 in rail. In the six months to 28 February
2007, we opened 4 new units: 3 in airports and one in rail. During March and
April, we have opened a further 2 units in airports.
The most significant area of expansion during this period has been motorway
service areas - a new channel for Travel. This brings WHSmith's products and
services direct to motorists for the first time. The new units are an important
addition to Travel's existing network.
We now have 50 CTN* franchise units open at Moto service areas and trials are
underway with Roadchef at Watford Gap and with Welcome Break at Newport Pagnell.
In addition, as previously announced, two further leased units are scheduled to
open with Swayfield in 2008.
* CTN - confectionery, tobacconist, newsagent
Non-operating activities
Net Finance Charges
These results include finance costs net of investment income of £1m (2006: £5m).
The decrease is primarily due to higher investment income and lower finance
charges as the Group no longer has a term loan facility. In addition, we
received a one-off payment of interest income associated with a tax refund of
around £1.5m during the period.
Taxation
In the current year we expect the rate to be around 20%, in line with the prior
year tax rate. In addition, as previously announced, during the period we
received a tax refund of £13m; the bulk of these proceeds have been used to
purchase shares to satisfy our share-based employee benefit obligations.
Pensions
At 28 February 2007, the gross defined benefit pension deficit was £34m (31
August 2006: £66m). On 1 September 2006, the Group made a one off cash
contribution to the pension deficit of £25m. In addition the Group is committed
to making ongoing pension deficit payments of £10m in the current year and in
each of the subsequent 4 years.
On 10 January 2007, the Group announced that, as part of an ongoing detailed
review of the WHSmith Pension Trust ('The Trust'), it had written to employees
who are members of the Final Salary Section of the Trust, proposing changes to
their pension arrangements which would cease service accruals for active
members, replacing this with a defined contribution pension benefit. The
consultation period in respect of the proposed changes to the defined benefit
scheme has ended and the Company is proceeding with the implementation of the
changes, effective from 2 April 2007.
WH Smith PLC
Group Income Statement
For the 6 months to 28 February 2007
6 months to 28 Feb 2007 6 months to 28 Feb 2006 12 months
Unaudited Unaudited to 31 Aug
2006
Audited
£m Note Before Exceptional Total Before Exceptional Total Total
exceptional items exceptional items
items items
Continuing operations
Revenue 2 721 - 721 771 - 771 1,340
Operating profit 2,3 60 - 60 60 5 65 53
Investment income 3 - 3 1 - 1 2
Finance costs (4) - (4) (6) - (6) (11)
Profit before tax 59 - 59 55 5 60 44
Income tax expense 5 (12) - (12) (8) (2) (10) (12)
Profit after tax from 47 - 47 47 3 50 32
continuing operations
Profit for the period 47 - 47 47 3 50 32
Earnings per share(1)
Basic 7 26.7p 29.1p 18.6p
Diluted 7 25.8p 28.6p 18.2p
Non-GAAP measures
Headline earnings per
share(2)
Basic 7 27.3p 26.7p 25.0p
Diluted 7 26.4p 26.3p 24.4p
Equity dividends per 3.7p
share(3)
Fixed charges cover 8 1.8x 1.7x 1.3x
(1) Earnings per share is calculated in accordance with IAS 33 'Earnings per
Share'.
(2) Headline earnings per share excludes exceptional items and IAS 19 pension
interest.
(3) Dividend per share is the proposed interim dividend.
WH Smith PLC
Group Balance Sheet
As at 28 February 2007
At At At
28 Feb 28 Feb 31 Aug
2007 2006 2006
£m Note Unaudited Unaudited Audited
Non-current assets
Goodwill 15 15 15
Other intangible assets 14 14 15
Property, plant and equipment 172 184 184
Available for sale investments 3 - -
Deferred tax assets 23 20 29
Trade and other receivables 5 5 5
232 238 248
Current assets
Inventories 154 159 143
Trade and other receivables 59 72 69
Derivative financial assets - 1 -
Cash and cash equivalents 9 86 63 66
299 295 278
Total assets 531 533 526
Current liabilities
Trade and other payables (211) (217) (214)
Current tax liabilities (32) (21) (20)
Obligations under finance leases 9 (3) (4) (3)
Bank overdrafts and other borrowings 9 (12) (50) (13)
Short-term provisions (5) (7) (4)
Derivative financial liabilities (1) - (1)
(264) (299) (255)
Non-current liabilities
Bank loans and other borrowings 9 - (9) -
Retirement benefit obligation 4 (34) (47) (66)
Deferred tax liabilities (12) (11) (13)
Long-term provisions (6) (7) (8)
Obligations under finance leases 9 (6) (9) (8)
Other non-current liabilities (8) (8) (8)
(66) (91) (103)
Total liabilities (330) (390) (358)
Total net assets 201 143 168
WH Smith PLC
Group Balance Sheet (continued)
As at 28 February 2007
Proforma
At At At
28 Feb 28 Feb 31 Aug
£m 2007 2006 2006
Unaudited Unaudited Audited
Shareholders' equity
Called up share capital 37 353 357
'B' share reserve - 2 -
'C' share reserve - 1 -
ESOP reserve (28) (26) (22)
Revaluation reserve 3 3 3
Hedging reserve (1) - (2)
Translation reserve (2) (1) (2)
Other reserve (164) (230) (166)
Retained earnings 356 41 -
Total equity 201 143 168
WH Smith PLC
Group Cash Flow Statement
For the 6 months to 28 February 2007
6 months to 12 months
28 Feb 28 Feb to 31 Aug
2007 2006 2006
£m Note Unaudited Unaudited Audited
Net cash inflows from operating activities 10 52 63 82
Investing activities
Interest received 3 1 2
Proceeds on disposal of property, plant and 2 6 9
equipment
Proceeds on settlement of loan notes - 11 11
Non-operating disposal costs (2) (2) (3)
Purchase of property, plant and equipment (8) (9) (24)
Purchase of intangible assets (1) (2) (5)
Net cash (outflows) / inflows from investing activities (6) 5 (10)
Financing activities
Interest paid (1) (4) (7)
Dividend paid (11) (10) (15)
(Purchase) / issue of shares to satisfy employee (11) - 4
share schemes
Repurchase of 'C' shares - - (3)
Repayments of borrowings (1) (30) (76)
Repayments of obligations under finance leases (2) (2) (4)
Derivative cash movements - (1) (1)
Movement in balances with Smiths News PLC - 3 57
business funding
Net cash used in financing activities (26) (44) (45)
Net increase in cash and cash equivalents - 20 15 19
continuing operations
Net increase in cash and cash equivalents - - 9 8
discontinued operations
Net increase in cash and cash equivalents in 20 24 27
period
Opening net cash and cash equivalents 66 39 39
Closing net cash and cash equivalents 86 63 66
Reconciliation of net cash flow to movement in net funds / (debt)
Net funds / (debt) at beginning of the period - 42 (58) (58)
as reported
IAS 39 - 'B' and 'C' shares classified as - (7) (7)
financial liabilities
Increase in cash and cash equivalents 20 24 27
Decrease in debt 1 30 76
Net movement in finance leases 2 2 4
Net funds / (debt) at end of the period 9 65 (9) 42
WH Smith PLC
Group Statement of Recognised Income and Expense
For the 6 months to 28 February 2007
6 months to 12 months
28 Feb 28 Feb to 31 Aug
2007 2006 2006
£m Unaudited Unaudited Audited
Exchange differences arising on translation of - (1) (2)
foreign operations
Loss on cash flow hedges - - (2)
Actuarial gains / (losses) on defined pension 3 - (24)
schemes
UK deferred tax attributable to pension scheme (8) (2) 5
liabilities
UK current tax attributable to the additional 3 2 3
pension scheme contributions
Net income recognised directly in equity (2) (1) (20)
Profit for the period 47 50 32
Total recognised income and expense for the period 45 49 12
Total recognised income and expense for the period is fully attributable to the
equity holders of the parent company.
Reconciliation of Movements in Equity
For the 6 months to 28 February 2007
Hedging and
Share Translation Revaluation ESOP Other Retained
£m Capital reserve reserve reserve reserve earnings Total
Balance at 1 September 2006 357 (4) 3 (22) (166) - 168
Total recognised income and - 1 - - - 44 45
expense for the period
Recognition of share-based - - - - - 3 3
payments
Dividends paid - - - - - (11) (11)
Court approved capital (320) - - - - 320 -
reduction
Employee share schemes - - - (8) 1 - (7)
Transfer to available for - - - 2 1 - 3
sale financial investments
Balance at 28 February 2007 37 (3) 3 (28) (164) 356 201
WH Smith PLC
Notes to the Interim Financial Statements
For the 6 months to 28 February 2007
1 Basis of preparation
The financial information set out in this report does not constitute statutory
accounts within the meaning of the Companies Act 1985. The Annual Report and
Accounts 2006 have been filed with the Registrar of Companies. The auditors'
report on these accounts was unqualified and did not contain a statement under
s237(2) or s237(3) of the Companies Act 1985.
In accordance with the Listing Rules of the Financial Services Authority, the
interim financial statements have been prepared on the basis of the accounting
policies set out in the Group's Annual Report and Accounts 2006. As permitted,
the Group has chosen not to adopt IAS 34 'Interim Financial Statements' in
preparing the interim financial statements and therefore they are not in full
compliance with International Financial Reporting Standards (IFRS). The
comparative results for the 6 months ended 28 February 2006 have been extracted
from the prospectus of New WH Smith PLC.
In accordance with the principles of reserve acquisition accounting in IFRS 3
'Business Combinations', the accounts of WH Smith PLC have been prepared as if
it had been in existence in its current Group form since 1 September 2004.
Further information is set out in the accounting policies in the Group's Annual
Report and Accounts 2006.
2 Segmental analysis of results
For management purposes, the Group is currently organised into two operating
divisions - High Street and Travel. These divisions are the basis on which the
Group currently reports its primary business segment information.
a) Group revenue
6 months to 12 months
£m 28 Feb 28 Feb to 31 Aug
2007 2006 2006
Continuing operations
High Street 565 621 1,021
Travel 156 150 319
Group revenue 721 771 1,340
b) Group results
6 months to 12 months
£m 28 Feb 28 Feb to 31 Aug
2007 2006 2006
Continuing operations
High Street 51 53 42
Travel 15 13 31
Trading profit 66 66 73
Unallocated costs (6) (6) (13)
Group operating profit before exceptional 60 60 60
items
Exceptional items (note 3) - 5 (7)
Group operating profit 60 65 53
Investment income 3 1 2
Finance costs (4) (6) (11)
Income tax expense (12) (10) (12)
Profit for the period 47 50 32
WH Smith PLC
Notes to the Interim Financial Statements
For the 6 months to 28 February 2007
2 Segmental analysis of results continued
c) Geographical split
The total Group revenue and operating profits for these periods originate from
the UK / Europe region. The directors consider this to be one segment.
d) Analysis of retailing stores and selling space
Number of stores
1 Sept Opened Closed 28 Feb
2006 2007
High Street 543 3 (1) 545
Travel 129 3 (1) 131
Total 672 6 (2) 676
A Travel store may consist of multiple units within one location. On an
individual unit basis, Travel stores and the motorway stores (operated under
franchise and not included in the store numbers above) can be analysed as
follows:
Number of Travel units
1 Sept Opened Closed 28 Feb
2006 2007
Travel 205 4 (1) 208
Motorway franchise units - 36 - 36
Total 205 40 (1) 244
Retail selling square feet (000's)
1 Sept Opened Closed Space 28 Feb
2006 changes 2007
High Street 2,999 8 (1) (2) 3,004
Travel 219 2 (1) 2 222
Total 3,218 10 (2) - 3,226
3 Exceptional items
There were no exceptional items recorded in the period to 28 February 2007.
In the prior year, the following results were recorded:
a) Settlement of Post Retirement Medical Benefit Scheme
In September 2005, members of the post retirement medical benefits scheme
were offered the option to be bought out of the scheme, which was accepted
by the majority of members. A gain of £5m (before tax) arose from the
settlement of this scheme, which has been recognised in the income
statement for the period.
b) Costs of demerger from Smiths News PLC
At 31 August 2006, the Group incurred a £12m exceptional charge in relation
to costs associated with the demerger from Smiths News PLC.
WH Smith PLC
Notes to the Interim Financial Statements
For the 6 months to 28 February 2007
4 Retirement benefit obligation
WH Smith PLC has operated a number of defined benefit and defined contribution
pension plans. The main pension arrangements for employees are operated through
a defined benefit scheme, WHSmith Pension Trust, and a defined contribution
scheme, WH Smith Retirement Savings Plan. The most significant is the defined
benefit WHSmith Pension Trust. The scheme is independent of the Company and is
administered by a Trustee. The Trustee of the Pension Trust has extensive powers
over the pension plans' arrangements, including the ability to determine the
levels of contribution.
On the date of demerger, 31 August 2006, the assets and liabilities of the
Pension Trust and the WH Smith Retirement Savings Plan (a defined contribution
plan) were split between the Smiths News business and the Retail business by way
of a 'sectionalisation'. Each section only contains the accounts of members who
are or were employed by the relevant business. There will be no cross-subsidy or
cross-guarantees between the sections of the Pension Trust.
The assets and liabilities of the defined benefit scheme were allocated to the
Smiths News business section and the WHSmith Retail business section in
proportions that reflected the related liabilities of active, deferred,
pensioner and orphan members belonging to the respective Smiths News and Retail
businesses.
The WHSmith Pension Trust
The valuation of the defined benefit pension scheme used for the IAS 19
disclosures is based upon the most recent valuation. Scheme assets are stated at
their market value at the relevant reporting date.
The market value of the assets in the schemes and the present value of the
liabilities in the schemes were:
£m At At At
28 Feb 2007 28 Feb 2006 31 Aug 2006
Continuing operations
Present value of the obligations (699) (696) (674)
Fair value of plan assets 665 649 608
Retirement benefit obligation recognised in the (34) (47) (66)
balance sheet
Deferred taxation 10 14 20
Net retirement obligation (24) (33) (46)
Movement in retirement benefit obligation during the period:
6 months to 12 months to
£m 28 Feb 2007 28 Feb 2006 31 Aug 2006
At beginning of period (66) (53) (53)
Current service cost (3) (3) (6)
Interest cost (1) (1) (3)
Contributions 33 10 20
Actuarial gains and losses 3 - (24)
At end of period (34) (47) (66)
WH Smith PLC
Notes to the Interim Financial Statements
For the 6 months to 28 February 2007
4 Retirement benefit obligation continued
The WHSmith Pension Trust continued
On 10 January 2007, the Company announced proposals to bring the pension
arrangements of members of the WHSmith Pension Trust in line with those of the
WH Smith Retirement Savings Plan. The consultation period in respect of the
proposed changes has ended with the effective date of closure to service accrual
being 2 April 2007. The actuarial impact of these changes on the pension
liabilities, if any, will be reflected as a curtailment in the year end
accounts.
5 Income tax expense
6 months to 12 months to
£m 28 Feb 28 Feb 31 Aug
2007 2006 2006
Current tax - current year 20 8 6
- prior year (8) (10) (7)
Deferred tax - 12 13
Income tax expense for the period 12 10 12
Effective tax rate - continuing operations 20% 15% 20%
Income tax for the period, using the domestic corporation tax rate, is charged
at 30% (28 February 2006: 30% and 31 August 2006: 30%).
6 Dividends
Amounts recognised as distributions to shareholders in the period are as
follows:
6 months to 12 months to
£m 28 Feb 28 Feb 31 Aug
2007 2006 2006
Dividends
Interim - paid - - 5
Final - paid 11 10 10
11 10 15
In addition, the directors are recommending an interim dividend in respect of
the period ending 28 February 2007 of 3.7p per ordinary share, which will absorb
an estimated £7m of shareholders' equity. This will be paid on 14 June 2007 to
shareholders registered at the close of business on 25 May 2007.
WH Smith PLC
Notes to the Interim Financial Statements
For the 6 months to 28 February 2007
7 Earnings per share
a) Earnings
6 months to 12 months to
£m 28 Feb 28 Feb 31 Aug
2007 2006 2006
Headline earnings attributable to shareholders 48 46 43
Pension interest net of related taxation (1) (1) (2)
Exceptional items net of related taxation - 5 (9)
Profit attributable to shareholders 47 50 32
b) Basic earnings per share
6 months to 12 months to
Pence 28 Feb 28 Feb 31 Aug
2007 2006 2006
Headline earnings per share (note a) 27.3 26.7 25.0
Pension interest net of related taxation (0.6) (0.5) (1.2)
Exceptional items net of related taxation - 2.9 (5.2)
Earnings per share (note b) 26.7 29.1 18.6
c) Diluted earnings per share
6 months to 12 months to
Pence 28 Feb 28 Feb 31 Aug
2007 2006 2006
Headline earnings per share 26.4 26.3 24.4
Pension interest net of related taxation (0.6) (0.5) (1.1)
Exceptional items net of related taxation - 2.8 (5.1)
Earnings per share 25.8 28.6 18.2
Diluted earnings per share takes into account various share awards and share
options including SAYE schemes, which are expected to vest, and for which a sum
below fair value will be paid.
d) Weighted average share capital
6 months to 12 months
to
Millions 28 Feb 28 Feb 31 Aug
2007 2006 2006
Weighted average shares in issue for earnings per 176 172 172
share
Add weighted average number of ordinary shares 6 3 4
under option
Weighted average ordinary shares for diluted 182 175 176
earnings per share
(a) Headline earnings per share has been calculated using profit after tax but
before exceptional items and IAS 19 net interest charges on the defined
benefit pension scheme.
(b) Basic earnings per share has been calculated using profit after tax and
exceptional items.
WH Smith PLC
Notes to the Interim Financial Statements
For the 6 months to 28 February 2007
8 Fixed charges cover
6 months to 12 months to
£m 28 Feb 28 Feb 31 Aug
2007 2006 2006
Net finance charges 1 5 9
Net operating lease rentals 73 72 148
Total fixed charges 74 77 157
Profit before tax and exceptional items 59 55 51
Profit before tax, exceptional items and fixed 133 132 208
charges
Fixed charges cover - times 1.8x 1.7x 1.3x
9 Analysis of net funds / (debt)
At At At
£m 28 Feb 28 Feb 31 Aug
2007 2006 2006
Cash and cash equivalents 86 63 66
Debt
- Sterling floating rate (12) (30) (13)
- Sterling fixed rate - (22) -
- 'B' and 'C' shares classified as financial - (7) -
liabilities
Obligations under finance leases (9) (13) (11)
Net funds / (debt) 65 (9) 42
Movements in net funds can be further analysed as follows:
£m At Cash Non-cash At
28 Feb flow 31 Aug
2007 2006
Cash and cash equivalents 86 20 - 66
Debt
- Sterling floating rate (12) 1 - (13)
Obligations under finance leases (9) 2 - (11)
Net funds 65 23 - 42
Cash and cash equivalents comprise cash held by the Group and short-term bank
deposits with an original maturity of three months or less. The carrying amount
of these assets approximates their fair value.
At 28 February 2007 floating rate debt comprises of £12m of unsecured loan notes
(redeemable at par on demand up until expiry on 28 February 2008) bearing
interest at a rate of 100 basis points below six month LIBOR.
WH Smith PLC
Notes to the Interim Financial Statements
For the 6 months to 28 February 2007
10 Net cash inflow from operating activities
6 months to 12 months to
£m 28 Feb 28 Feb 31 Aug
2007 2006 2006
Operating profit from continuing operations 60 65 53
Operating exceptional items - (5) 7
Adjustment for pension funding (30) (4) (12)
Depreciation of property, plant and equipment 17 16 30
Profit on sale of property, plant and (2) (2) (5)
equipment
Impairment of property, plant and equipment 2 1 3
Amortisation of intangible assets 2 2 4
Share-based payments 3 3 6
(Increase) / decrease in inventories (11) (11) 6
(Increase) / decrease in receivables (2) 1 7
Increase / (decrease) in payables 6 - (4)
Income taxes received / (paid) 13 - (2)
Cash spend against provisions (1) (1) (3)
Net cash inflow from operating activities before 57 65 90
exceptional items
Cash outflow relating to exceptional operating item (5) (2) (8)
Net cash inflow from operating activities 52 63 82
11 Approval of Interim Statement
The Interim Statement was approved by the Board of Directors on 19 April 2007.
INDEPENDENT REVIEW REPORT TO WH SMITH PLC
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 28 February 2007 which comprises the Group Income
Statement, the Group Balance Sheet, the Group Cash Flow Statement, the Group
Statement of Recognised Income and Expense, the Reconciliation of Movements In
Equity and related notes 1 to 11. We have read the other information contained
in the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
This report is made solely to the Company in accordance with guidance contained
in Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been
undertaken so that we might state to the Company those matters we are required
to state to them in an independent review report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this report, or for
the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of Group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 28 February 2007.
Deloitte & Touche LLP
Chartered Accountants
London
19 April 2007
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