Interim Results

Smith WH PLC 21 April 2005 21 April 2005 WH SMITH PLC INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 28 FEBRUARY 2005 KEY POINTS â€¢ Profit before tax: Â£61m (2004: Â£72m loss) â€¢ Profit before tax, goodwill amortisation and exceptional items on continuing operations, up 32% to Â£70m (2004: Â£53m) - High Street Retail up 31% to Â£55m - Travel Retail up 22% to Â£11m - News Distribution up 12% to Â£19m â€¢ Total sales of continuing operations flat at Â£1.4bn - High Street like-for-like (LFL) sales down 3% - Travel LFL sales up 4% - News Distribution LFL sales up 2% â€¢ Cost savings of Â£13m delivered faster than planned; on track to deliver 3-year cost savings of Â£30m as previously announced â€¢ Returned Â£205m to shareholders following the completion of the sale of Hodder Headline for Â£224m* â€¢ Exceptional impairment charge of Â£8m in respect of the disposal of discontinued businesses â€¢ Earnings per share of 23.5p (2004: 34.4p loss per share). Earnings per share before exceptional items and goodwill amortisation up 58% to 28.4p (2004: 18.0p). â€¢ Interim dividend of 4.5p (2004: 4.0p) (* Â£210m in cash and assumption of the Hodder Headline net pension deficit of Â£14m) Commenting on the results, Kate Swann, Group Chief Executive said: 'We have improved profits substantially across the Group in the first half and whilst it is early days and much remains to be done, we are on track in the delivery of our recovery plan. 'In High Street Retail we have improved the business's profitability by being more efficient, increasing product choice, improving availability and store standards. Customer response to these changes has been positive. 'Travel Retail delivered strong sales and profit growth and News Distribution has made steady progress in the first half. 'Trading conditions are tough; however, we remain confident in the outcome for the full year.' - Ends - Enquiries: WH Smith PLC Louise Evans Media Relations 020 7851 8850 Mark Boyle Investor Relations 020 7851 8820 Brunswick Tom Buchanan 020 7404 5959 Pam Small CURRENT TRADING In the seven weeks to 16 April 2005, Retail LFL sales were flat and gross margin was up on last year. News Distribution sales were down 1%. GROUP SUMMARY Operating profit after exceptional operating items and goodwill amortisation was Â£72m (2004: Â£9m loss). Profit before tax after all exceptional items and goodwill amortisation was Â£61m (2004: Â£72m loss). Operating profit before exceptional items and goodwill amortisation on continuing operations increased 33% to Â£73m (2004: Â£55m). After including the pension interest charge of Â£2m (2004: Â£2m) and other interest payable of Â£1m (2004: Â£nil), pre-tax profit before exceptional items and goodwill amortisation from continuing operations was Â£70m (2004: Â£53m). An amount of Â£8m has been charged to the profit and loss account relating to discontinued businesses. Of this amount, Â£7m relates to an impairment review of the loan notes received as deferred consideration in respect of the disposal of the Group's US businesses. The balance relates to closure and exit costs. Adjusted earnings per share were 28.4p, up 58% compared to last year (2004: 18.0p). Earnings per share after exceptional items and goodwill amortisation were 23.5p (2004: 34.4p loss per share). Given the improvement in the Group's trading position, the Board has declared an interim dividend of 4.5p per share (2004: 4.0p per share). The reduction in net assets to Â£66m (2004: Â£359m) mainly reflects the loss on disposal of the Hodder Headline business and the return of cash to shareholders. The balance sheet remains sound with net funds amounting to Â£2m (2004: Â£28m). Free cash inflow amounted to Â£51m compared to an outflow of Â£2m in the prior year, primarily reflecting the poor profit performance last year. BUSINESS RESULTS NB: All divisional profit and loss figures in this section are stated before pension service costs, exceptional items and goodwill amortisation, interest and taxation. High Street Retail numbers incorporate the results of WHSmith Online, which has been integrated. Retail sales were down 2% at Â£816m (2004: Â£834m). Gross margin rose 240 basis points to 40.1% (2004: 37.7%). Retail divisional profits were up 29% to Â£66m (2004: Â£51m). Books sales were down 3%, as we avoided last year's unprofitable promotions, and compensated for by a strong improvement in gross margin. Stationery sales were up by 4%, with gross margin up. News and Express sales were flat, with gross margin also up. Entertainment sales were down 12% on last year, with increased price pressure across all categories. The improvements in gross margin more than compensated for the decline in sales volumes, with gross contribution increasing by Â£12m to Â£327m. Cost inflation, including store occupancy costs, was approximately 4% in the period. This was more than offset by cost savings across all aspects of the business. Total costs were Â£3m lower than last year and divisional profit increased by Â£15m. High Street Retail sales were down 3% at Â£670m (2004: Â£692m) and down 3% on a like for like basis, adjusting for selling space. Travel Retail sales grew by 3% to Â£146m (2004: Â£142m), up 4% on a like for like basis. High Street Retail divisional profits increased to Â£55m (2004: Â£42m). Travel Retail achieved divisional profits of Â£11m (2004: Â£9m). Retail selling space is 3.3m square feet, broadly in line with last year. In the first half of this year, the business has opened one new store and closed seven stores across the UK. News Distribution achieved divisional profits of Â£19m (2004: Â£17m), with total sales of Â£599m (2004: Â£587m). Like for like newspaper sales were up 2% and total magazine sales were also up 2%. Divisional profits grew by Â£2m, through well-controlled costs and further efficiencies from network changes. The OFT has announced its provisional conclusions on newspaper and magazine distribution arrangements. We will be playing a full part in the upcoming consultation process. There is a wide range of possible outcomes and we are preparing for any changes that may result. WH Smith PLC Group Profit and Loss Account For the 6 months to 28 February 2005 -------------------------------------------------------------------------------------------------------------------- 6 months to 28 Feb 2005 6 months to 29 Feb 2004 12 months to 31 Aug 2004 -------------------------------------------------------------------------------------------------------------------- Â£m Note Before Exceptional Total Before Exceptional Total Total exceptional items & exceptional items & items & goodwill items & goodwill goodwill amortisation goodwill amortisation amortisation amortisation -------------------------------------------------------------------------------------------------------------------- Turnover Continuing operations 1,359 - 1,359 1,365 - 1,365 2,520 Discontinued operations 11 - 11 215 - 215 314 -------------------------------------------------------------------------------------------------------------------- Group turnover 2 1,370 - 1,370 1,580 - 1,580 2,834 -------------------------------------------------------------------------------------------------------------------- Operating profit / (loss) Continuing operations 2,3 73 (1) 72 55 (67) (12) (42) Discontinued operations 2,3 - - - 12 (9) 3 11 -------------------------------------------------------------------------------------------------------------------- Group operating profit /(loss) 73 (1) 72 67 (76) (9) (31) Net loss on sale of discontinued operations 4 - (8) (8) - (61) (61) (101) Profit on sale of fixed assets - continuing operations - - - - - - 2 -------------------------------------------------------------------------------------------------------------------- Profit / (loss) on ordinary activities before net financing charges 73 (9) 64 67 (137) (70) (130) Net financing charges (3) - (3) (2) - (2) (5) -------------------------------------------------------------------------------------------------------------------- Profit / (loss) on ordinary activities before taxation 70 (9) 61 65 (137) (72) (135) Tax on profit / (loss) on ordinary activities 6 (18) - (18) (21) 9 (12) (13) -------------------------------------------------------------------------------------------------------------------- Profit / (loss) on ordinary activities after taxation 52 (9) 43 44 (128) (84) (148) Dividends 7 (150) - (150) (10) - (10) (24) -------------------------------------------------------------------------------------------------------------------- Retained (losses) / earnings (98) (9) (107) 34 (128) (94) (172) -------------------------------------------------------------------------------------------------------------------- Basic and diluted earnings / (loss) per share 8 23.5p (34.4)p (60.7)p Adjusted earnings per share 8 28.4p 18.0p 18.0p Equity dividends per share 7 4.5p 4.0p 12.0p Fixed charges cover - times 9 1.7x 1.5x 1.3x Equity dividend cover - times 5.2x - - Equity dividend cover before exceptional items and goodwill amortisation - times 6.3x 4.5x 1.5x -------------------------------------------------------------------------------------------------------------------- WH Smith PLC Group Balance Sheet As at 28 February 2005 -------------------------------------------------------------------------------- At At At Â£m Note 28 Feb 2005 29 Feb 2004 31 Aug 2004 -------------------------------------------------------------------------------- Fixed assets Intangible assets - goodwill 10 14 220 164 Tangible fixed assets 219 249 237 Investments - 1 - -------------------------------------------------------------------------------- Total fixed assets 233 470 401 -------------------------------------------------------------------------------- Current assets Stocks 181 223 184 Debtors due within one year 122 183 187 Debtors due after more than one year 18 15 25 Current asset investment 5,11 60 - - Cash at bank and in hand 11 35 54 64 -------------------------------------------------------------------------------- 416 475 460 Creditors due within one year Debt 11 (26) (24) (17) Other creditors (356) (396) (397) -------------------------------------------------------------------------------- (382) (420) (414) -------------------------------------------------------------------------------- Net current assets 34 55 46 -------------------------------------------------------------------------------- Total assets less current liabilities 267 525 447 -------------------------------------------------------------------------------- Creditors due after more than one year Debt 11 (67) (2) (2) Other creditors (2) - (2) -------------------------------------------------------------------------------- (69) (2) (4) Provisions for liabilities and charges (31) (26) (38) -------------------------------------------------------------------------------- Net assets excluding pension liabilities 167 497 405 Net pension liabilities 5 (101) (138) (149) -------------------------------------------------------------------------------- Total net assets 66 359 256 -------------------------------------------------------------------------------- Capital and reserves Called up share capital 13 4 139 139 Share premium account 14 15 93 93 Capital redemption reserve 14 218 156 156 Revaluation reserve 14 3 4 3 Other reserve 14 (34) (27) (27) Profit and loss account 14 (293) (9) (110) -------------------------------------------------------------------------------- Equity shareholders' (liabilities) / funds (87) 356 254 Non equity share capital 13 153 2 2 -------------------------------------------------------------------------------- Shareholders' funds 66 358 256 Minority interests - 1 - -------------------------------------------------------------------------------- Total capital employed 66 359 256 -------------------------------------------------------------------------------- WH Smith PLC Group Cash Flow Statement For the 6 months to 28 February 2005 ---------------------------------------------------------------------------------- 6 months to 12 months to Â£m Note 28 Feb 2005 29 Feb 2004 31 Aug 2004 ---------------------------------------------------------------------------------- Net cash (outflow) / inflow from operating activities before exceptional operating items 12 (58) 29 61 Net cash outflow from exceptional operating items 12 (8) (1) (13) ---------------------------------------------------------------------------------- Net cash (outflow) / inflow from operating activities 12 (66) 28 48 ---------------------------------------------------------------------------------- Returns on investment and servicing of finance Interest received 3 1 1 Interest paid (3) (1) (1) Net charge on pension schemes (2) (2) (4) ---------------------------------------------------------------------------------- Net cash outflow from returns on investment and servicing of finance (2) (2) (4) ---------------------------------------------------------------------------------- Taxation (3) (17) (10) ---------------------------------------------------------------------------------- Capital expenditure and financial investment Purchase of tangible fixed assets (10) (24) (49) Proceeds on disposal of tangible fixed assets - - 5 ---------------------------------------------------------------------------------- Cash outflow from capital expenditure and financial investment (10) (24) (44) ---------------------------------------------------------------------------------- Acquisitions and disposals Proceeds on disposal of subsidiary undertakings 215 20 64 Proceeds on disposal of associated undertakings - 1 1 Non-operating disposal costs (9) (12) (23) Net cash in subsidiaries disposed - - (11) ---------------------------------------------------------------------------------- Cash inflow from acquisitions and disposals 206 9 31 ---------------------------------------------------------------------------------- Equity dividends paid (14) (32) (42) ---------------------------------------------------------------------------------- Cash inflow / (outflow) before financing 111 (38) (21) ---------------------------------------------------------------------------------- Financing Purchase of own shares for employee share schemes (12) - - Money returned to ESOP Trust after share capital reorganisation 5 - - Non equity dividend (143) - - Repurchase of 'C' shares (62) - - Increase / (decrease) in debt (net of finance costs) 72 4 (3) ---------------------------------------------------------------------------------- Cash (outflow) / inflow from financing (140) 4 (3) ---------------------------------------------------------------------------------- Decrease in cash (29) (34) (24) ---------------------------------------------------------------------------------- Reconciliation of net cash flow to movements in net funds ---------------------------------------------------------------------------------- 6 months to 12 months to Â£m 28 Feb 2005 29 Feb 2004 31 Aug 2004 ---------------------------------------------------------------------------------- Net funds at the start of the period 45 68 68 Decrease in cash in the period (29) (34) (24) Increase in current asset investment (See Note 5) 60 - - (Increase) / decrease in debt (74) (4) 3 Currency translation - (2) (2) differences ---------------------------------------------------------------------------------- Net funds at the end of the period 2 28 45 ---------------------------------------------------------------------------------- WH Smith PLC Group Statement of Total Recognised Gains and Losses For the 6 months to 28 February 2005 -------------------------------------------------------------------------------- 6 months to 12 months to Â£m 28 Feb 2005 29 Feb 2004 31 Aug 2004 -------------------------------------------------------------------------------- Profit / (loss) for the financial period 43 (84) (148) Actuarial (loss) / gain relating to the pension schemes (19) 14 (15) UK deferred tax attributable to pension scheme liabilities (14) (7) (3) UK current tax attributable to the additional pension schemes contributions 18 3 7 Currency translation differences (1) (4) (7) -------------------------------------------------------------------------------- Total recognised gains / (losses) for the period 27 (78) (166) -------------------------------------------------------------------------------- Group Note of Historical Cost Profits and Losses For the 6 months to 28 February 2005 -------------------------------------------------------------------------------- 6 months to 12 months to Â£m 28 Feb 2005 29 Feb 2004 31 Aug 2004 -------------------------------------------------------------------------------- Reported profit / (loss) on ordinary activities before taxation 61 (72) (135) Realisation of property revaluation gains of the previous year - - 1 -------------------------------------------------------------------------------- Historical cost profit / (loss) on ordinary activities before taxation 61 (72) (134) -------------------------------------------------------------------------------- Historical cost loss for the year retained after taxation, minority interests and dividends (107) (94) (171) -------------------------------------------------------------------------------- Reconciliation of Movements in Group Shareholders' Funds For the 6 months to 28 February 2005 -------------------------------------------------------------------------------- 6 months to 12 months to Â£m 28 Feb 2005 29 Feb 2004 31 Aug 2004 -------------------------------------------------------------------------------- Shareholders' funds at beginning of period 256 407 407 -------------------------------------------------------------------------------- Retained losses (107) (94) (172) Repurchase of non-equity share capital (62) - - Purchase of own shares for employee share scheme (12) - - Money returned to ESOP Trust after share capital reorganisation 5 - - Employee share schemes 2 - - Goodwill previously written off directly to reserves now transferred to profit and loss account for the period - 39 39 Net gains and losses relating to pension schemes (15) 10 (11) Currency translation differences (1) (4) (7) -------------------------------------------------------------------------------- Net reduction to shareholders' funds (190) (49) (151) -------------------------------------------------------------------------------- Shareholders' funds at end of period 66 358 256 -------------------------------------------------------------------------------- WH Smith PLC Notes to the Interim Financial Statements For the 6 months to 28 February 2005 1 Basis of preparation The interim announcement for the 6 months to 28 February 2005 has been prepared on the basis of the accounting policies set out in the Company's Annual Report and Financial Statements for the 12 months to 31 August 2004. The financial information contained in this interim announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The financial information for the full preceding year is based on the statutory accounts for the financial year ended 31 August 2004. These statutory accounts have been filed with the Registrar of Companies. The auditors' report on these accounts was unqualified and did not include a statement under Section 237 (2) or (3) of the Companies Act 1985. Adoption of International Financial Accounting Standards ('IFRS') International Financial Reporting Standards ('IFRS') will first apply to the Group for the financial year ended 31 August 2006 with Interim Results to 28 February 2006 also being presented under IFRS. The 2005 results will be restated accordingly. The Group's preparation for the transition to IFRS is continuing in line with the project timetable. The key areas of impact include the accounting for employee benefits and share based payments, certain aspects of property lease accounting, the tax impact of all of the above and the overall presentation of the financial statements. This is not intended to be a complete list of areas. Further differences may arise as a result of the continued detailed assessment and interpretations of IFRS and any pronouncements issued by the International Accounting Standards Board (IASB). 2 Segmental analysis of results a) Segmental analysis of Group turnover -------------------------------------------------------------------------------- 6 months to 12 months to Â£m 28 Feb 2005 29 Feb2004 31 Aug 2004 -------------------------------------------------------------------------------- Continuing operations: Retailing High Street Retail 670 692 1,152 Travel Retail 146 142 301 -------------------------------------------------------------------------------- Total 816 834 1,453 -------------------------------------------------------------------------------- News Distribution Total turnover 599 587 1,182 Internal turnover (56) (56) (115) -------------------------------------------------------------------------------- Total 543 531 1,067 -------------------------------------------------------------------------------- Turnover - continuing operations 1,359 1,365 2,520 -------------------------------------------------------------------------------- Discontinued operations: Retailing USA Travel Retail - 49 49 Aspac Retail - 97 132 -------------------------------------------------------------------------------- Total - 146 181 -------------------------------------------------------------------------------- Publishing Business Total turnover 14 81 155 Internal turnover (3) (12) (22) -------------------------------------------------------------------------------- Total 11 69 133 -------------------------------------------------------------------------------- Turnover - discontinued operations 11 215 314 -------------------------------------------------------------------------------- Group turnover 1,370 1,580 2,834 -------------------------------------------------------------------------------- WH Smith PLC Notes to the Interim Financial Statements For the 6 months to 28 February 2005 2 Segmental analysis of results continued b) Segmental analysis of Group operating profit / (loss) ----------------------------------------------------------------------------------------------------------- 6 months to 28 Feb 2005 6 months to 29 Feb 2004 12 months to 31 Aug 2004 ----------------------------------------------------------------------------------------------------------- Â£m Before goodwill Goodwill Total Before Exceptional Total Total amortisation amortisation exceptional items & items & goodwill goodwill amortisation amortisation ----------------------------------------------------------------------------------------------------------- Continuing operations: Retailing High Street Retail 55 (1) 54 42 (62) (20) (54) Travel Retail 11 - 11 9 (5) 4 16 ----------------------------------------------------------------------------------------------------------- Total 66 (1) 65 51 (67) (16) (38) News Distribution 19 - 19 17 - 17 35 ----------------------------------------------------------------------------------------------------------- Trading profit 85 (1) 84 68 (67) 1 (3) Support functions (8) - (8) (7) - (7) (26) Pension service costs (note a) (5) - (5) (7) - (7) (14) Internal rents (note b) 1 - 1 1 - 1 1 ----------------------------------------------------------------------------------------------------------- Operating profit / (loss) - continuing operations 73 (1) 72 55 (67) (12) (42) ----------------------------------------------------------------------------------------------------------- Discontinued operations: Retailing USA Travel Retail - - - (5) - (5) (5) Aspac Retail - - - 7 - 7 6 ----------------------------------------------------------------------------------------------------------- Total - - - 2 - 2 1 Publishing Business - - - 11 (9) 2 11 Pension service costs (note a) - - - (1) - (1) (1) ----------------------------------------------------------------------------------------------------------- Operating profit / (loss) - discontinued operations - - - 12 (9) 3 11 ----------------------------------------------------------------------------------------------------------- Group operating profit / (loss) 73 (1) 72 67 (76) (9) (31) ----------------------------------------------------------------------------------------------------------- a) The annual pension service costs are attributable to the businesses based on pensionable salaries as follows: High Street Retail Â£2.8m (2004: Â£4.0m), Travel Retail Â£0.4m (2004: Â£0.6m), Publishing Â£nil (2004: Â£0.6m), News Distribution Â£1.2m (2004: Â£1.7m) and Support functions Â£0.4m (2004: Â£0.6m). b) The results for Retailing are reported after an internal arm's length market rent on freehold and long leasehold properties owned and occupied by the Group. The internal income generated of Â£1m (2004: Â£1m) 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. WH Smith PLC Notes to the Interim Financial Statements For the 6 months to 28 February 2005 2 Segmental analysis of results continued c) Geographical split Turnover Profit / (loss) before taxation ----------------------------------------------------------------------------------- 6 months to 12 months to 6 months to 12 months to Â£m 28 Feb 29 Feb 31 Aug 2004 28 Feb 29 Feb 31 Aug 2004 2005 2004 2005 2004 ----------------------------------------------------------------------------------- Continuing operations before exceptional items and goodwill amortisation - UK / Europe 1,359 1,365 2,520 70 53 46 Exceptional items and goodwill amortisation (1) (67) (91) ----------------------------------------------------------------------------------- Continuing operations - UK / Europe 1,359 1,365 2,520 69 (14) (45) ----------------------------------------------------------------------------------- Discontinued operations before exceptional items and goodwill amortisation: UK / Europe 9 57 110 - 9 16 USA - 49 49 - (5) (5) Asia / Pacific 2 109 155 - 8 10 ----------------------------------------------------------------------------------- 11 215 314 - 12 21 ----------------------------------------------------------------------------------- Exceptional items and goodwill (8) (70) (111) amortisation ----------------------------------------------------------------------------------- Discontinued operations 11 215 314 (8) (58) (90) ----------------------------------------------------------------------------------- Total Group 1,370 1,580 2,834 61 (72) (135) ----------------------------------------------------------------------------------- Turnover is disclosed by origin. There is no material difference in turnover by destination. d) Analysis of retailing stores and selling space Number of stores 1 Sept 2004 Opened Closed 28 Feb 2005 -------------------------------------------------------------------------------- High Street Retail 544 - (2) 542 Travel Retail 129 1 (5) 125 -------------------------------------------------------------------------------- Total Retailing Businesses 673 1 (7) 667 -------------------------------------------------------------------------------- Retail selling square feet (000's) 1 Sept 2004 Opened Closed 28 Feb 2005 -------------------------------------------------------------------------------- High Street Retail 3,056 - (7) 3,049 Travel Retail 214 2 (6) 210 -------------------------------------------------------------------------------- Total Retailing Businesses 3,270 2 (13) 3,259 -------------------------------------------------------------------------------- WH Smith PLC Notes to the Interim Financial Statements For the 6 months to 28 February 2005 3 Exceptional operating items No exceptional operating charges have been made in the six months to 28 February 2005. In the prior year the following exceptional operating charges were made: a) An exceptional operating charge of Â£66m was made relating to UK Retailing. Of this amount, Â£45m related to the write-down in the carrying value of stock to reflect redundant and slow moving items, and Â£17m related to fixed asset impairment charges in respect of costs of research work on our concept store, systems development for Travel Retail and to an impairment charge covering goodwill and assets in relation to WHSmith Online. A further Â£4m was written off relating to other items. These charges are included within continuing operations. b) A Â£9m exceptional provision was made in the Publishing Business relating to unearned author advances, which is included within discontinued operations. 4 Net loss on sale of discontinued operations a) Provisions for discontinued businesses An amount of Â£8m has been charged to the profit and loss account for the six months to 28 February 2005 relating to the disposal of discontinued businesses. Of this amount, Â£7m relates to an impairment review of the loan notes received as deferred consideration in respect of the disposal of the Group's USA businesses. The balance relates to closure and exit provisions. b) Publishing Business disposal On 25 September 2004, the Group completed the disposal of its Publishing Business, Hodder Headline Limited. A financial summary of the disposal is shown below: -------------------------------------------------------------------------------- Â£m Total -------------------------------------------------------------------------------- Fixed assets 156 Stock 17 Debtors 80 Creditors (30) Net pension liabilities (14) -------------------------------------------------------------------------------- Net assets disposed 209 -------------------------------------------------------------------------------- Cash consideration 210 Cash received in respect of working capital adjustments 5 Net assets disposed (209) Transaction costs and other charges (6) -------------------------------------------------------------------------------- Net result on sale of the Publishing Business recognised in the period - ended 28 February 2005 -------------------------------------------------------------------------------- The Group incurred a Â£5m cash outflow in respect of transaction costs and other charges relating to the Publishing Business disposal. In the period to 29 February 2004 the following exceptional non-operating charges were made: a) The Group disposed of its USA Travel Retail business for a total consideration of Â£39m. A loss of Â£61m was incurred on the sale of this business. b) The Group disposed of its investment in Books and More NZ Limited, University Bookshop (Otago) Ltd and University Bookshop Canterbury Limited for a total consideration of Â£1.3m, generating a profit of Â£0.3m on disposal. WH Smith PLC Notes to the Interim Financial Statements For the 6 months to 28 February 2005 5 Pensions arrangements The Group's pension arrangements for employees are operated through a defined benefit scheme (the WHSmith Pension Trust) and a defined contribution scheme, WHSmith Pension Builder. The most significant scheme remaining in the Group is the defined benefit WHSmith Pension Trust. The assets of the pension plans are held in separate funds administered by Trustees, which are independent of the Group's finances. The Trustees have extensive powers over the plan's arrangements, including the ability to determine the levels of contribution. The market value of the assets in the schemes and the present value of the liabilities in the schemes were: -------------------------------------------------------------------------------- Â£m At At At 28 Feb 2005 29 Feb 2004 31 Aug 2004 -------------------------------------------------------------------------------- Total market value of assets 759 672 678 Present value of scheme liabilities (896) (862) (883) -------------------------------------------------------------------------------- Deficit in the scheme (137) (190) (205) Related deferred tax asset 41 57 61 -------------------------------------------------------------------------------- Net defined benefit scheme liabilities (96) (133) (144) Net retirement medical benefit liabilities (5) (5) (5) -------------------------------------------------------------------------------- Net pension liabilities (101) (138) (149) -------------------------------------------------------------------------------- Under FRS 17 ('Retirement Benefits'), there is only a requirement to revalue scheme assets and liabilities at the financial year end. However, the scheme assets have been valued at market value as at 28 February 2005. The last formal valuation of scheme liabilities was at 31 August 2004. The financial assumptions used in the calculation of the liability as at 31 August 2004 have been applied in the calculation of the actuarial value of the liability in these interim accounts, with the exception of the discount rate. The discount rate used has been reduced from 5.6% in August 2004 to 5.25% in February 2005, and this decrease resulted from a fall in bond yields over this period. The WHSmith Pension Trust scheme was closed to new entrants in September 1995 and under the projected unit method the current service cost would be expected to increase as members approach retirement. Movement in scheme deficit during the period -------------------------------------------------------------------------------- 6 months to 12 months to Â£m 28 Feb 2005 29 Feb 2004 31 Aug 2004 -------------------------------------------------------------------------------- At beginning of period (205) (215) (215) Current service cost (5) (8) (15) Contributions 71 22 44 Interest cost (2) (2) (4) Settlement / loss on curtailment 3 (1) - Disposal of subsidiary pension fund 20 - - Actuarial (loss) / gain (19) 14 (15) -------------------------------------------------------------------------------- Deficit in scheme at end of period (137) (190) (205) -------------------------------------------------------------------------------- On 25 September 2004, the Group completed the disposal of its Publishing Business. The gross and net deficit of the pension fund were Â£20m and Â£14m respectively. In July 2004, the Group announced that following the disposal of the Publishing Business, it would make additional contributions totalling Â£120m to the WHSmith Pension Trust. These have been made through monthly instalments. As at 28 February 2005, the Group had made additional contributions totalling Â£60m. The remaining Â£60m has been paid into an Escrow bank account, which will be released to the WHSmith Pension Trust by 31 August 2005. The Escrow bank account balance has been shown as a current asset investment in the Group's balance sheet. WH Smith PLC Notes to the Interim Financial Statements For the 6 months to 28 February 2005 6 Taxation -------------------------------------------------------------------------------- 6 months to 12 months to Â£m 28 Feb 2005 29 Feb 2004 31 Aug 2004 -------------------------------------------------------------------------------- Tax on profit before exceptional items and goodwill amortisation 19 21 20 - Standard rate of UK corporation tax 30% (2004: 30%) Adjustment in respect of prior year UK corporation tax - - (3) Foreign tax - 2 3 -------------------------------------------------------------------------------- Total current tax charge before exceptional items and goodwill amortisation 19 23 20 Deferred tax - current year (1) - - Deferred tax - prior year - (2) 3 -------------------------------------------------------------------------------- Tax on profit on ordinary activities before exceptional items and goodwill amortisation 18 21 23 Tax on exceptional items and goodwill amortisation - (9) (10) -------------------------------------------------------------------------------- Tax on profit on ordinary activities after exceptional items and goodwill amortisation 18 12 13 -------------------------------------------------------------------------------- Effective tax rate before exceptional items and goodwill amortisation - continuing operations 25% 30% 30% -------------------------------------------------------------------------------- 7 Dividends -------------------------------------------------------------------------------- 6 months to 12 months to 28 Feb 2005 29 Feb 2004 31 Aug 2004 -------------------------------------------------------------------------------- Equity dividends Interim 4.5p 4.0p 4.0p Final 8.0p -------- 12.0p Non equity dividends 'C' share dividend paid on capital reorganisation (see Note 13) 85.0p - - -------------------------------------------------------------------------------- Total 89.5p 4.0p 12.0p -------------------------------------------------------------------------------- Â£m -------------------------------------------------------------------------------- Equity dividends Interim 7 10 10 Final 14 -------- 24 Non equity dividends 'C' share dividend paid on capital reorganisation (see Note 13) 143 - - -------------------------------------------------------------------------------- 150 10 24 -------------------------------------------------------------------------------- The interim dividend will be paid on 23 June 2005 to shareholders registered at the close of business on 27 May 2005. As at 28 February 2005 the Company had 180,522,752 ordinary shares in issue. On 27 October 2004, the Group paid a 'C' share dividend of Â£142,533,945in respect of 167,686,994 'C' shares in issue. All such 'C' shares were subsequently converted to Deferred shares. The Group paid a dividend in respect of all those 'C' shares not repurchased or converted to deferred shares at a rate of 75% of LIBOR, totalling Â£104,441 on 28 February 2005. In addition, the Group paid dividends on the 'B' shares of Â£44,914 on 28 February 2005. WH Smith PLC Notes to the Interim Financial Statements For the 6 months to 28 February 2005 8 Earnings / (loss) per share a) Basic and diluted earnings / (loss) per share -------------------------------------------------------------------------------- 6 months to 12 months to Â£m 28 Feb 29 Feb 31 Aug 2005 2004 2004 -------------------------------------------------------------------------------- Continuing operations: Profit / (loss) attributable to shareholders 51 (22) (50) Exceptional items net of related tax impact - 58 81 Goodwill amortisation 1 1 1 -------------------------------------------------------------------------------- Adjusted earnings attributable to shareholders - continuing operations 52 37 32 -------------------------------------------------------------------------------- Discontinued operations: Loss attributable to shareholders (8) (62) (98) Exceptional items net of related tax impact 8 69 109 Goodwill amortisation - - 1 -------------------------------------------------------------------------------- Adjusted earnings attributable to shareholders - discontinued operations - 7 12 -------------------------------------------------------------------------------- Total adjusted earnings attributable to shareholders 52 44 44 -------------------------------------------------------------------------------- Adjusted earnings per share is based on profits / (losses) attributable to shareholders before goodwill amortisation and exceptional items and is presented to show a clearer representation of the results of the business going forward. -------------------------------------------------------------------------------- 6 months to 12 months to 28 Feb 2005 29 Feb 2004 31 Aug 2004 -------------------------------------------------------------------------------- Continuing operations: Basic and diluted earnings / (loss) per share 27.9p (9.0)p (20.5)p Exceptional items net of related taxation - 23.8p 33.2p Goodwill amortisation 0.5p 0.4p 0.4p -------------------------------------------------------------------------------- Adjusted earnings per share - continuing operations 28.4p 15.2p 13.1p -------------------------------------------------------------------------------- Discontinued operations: Basic and diluted loss per share (4.4)p (25.4)p (40.2)p Exceptional items net of related taxation 4.4p 28.2p 44.7p Goodwill amortisation - - 0.4p -------------------------------------------------------------------------------- Adjusted earnings per share - discontinued operations - 2.8p 4.9p -------------------------------------------------------------------------------- Total basic and diluted earnings / (loss) per share 23.5p (34.4)p (60.7)p -------------------------------------------------------------------------------- Total adjusted earnings per share 28.4p 18.0p 18.0p -------------------------------------------------------------------------------- In accordance with FRS 14 'Earnings per share', as the average share option price was higher than the fair market value of all shares in the current period, earnings per share was not diluted by shares under option. In the prior year, as the Group recorded a loss from continuing operations, the diluted loss per share was the same as the basic, as any potential dilutive shares reduce the loss per share for continuing operations. WH Smith PLC Notes to the Interim Financial Statements For the 6 months to 28 February 2005 8 Earnings / (loss) per share continued b) Weighted average share capital ------------------------------------------------------------------------------------ 6 months to 12 months to Â£m 28 Feb 2005 29 Feb 2004 31 Aug 2004 ------------------------------------------------------------------------------------ Weighted average shares in issue for earnings per share 183 244 244 ------------------------------------------------------------------------------------ Add dilutive weighted average number of - - - ordinary shares under option ------------------------------------------------------------------------------------ Weighted average ordinary shares for fully diluted earnings per share 183 244 244 ------------------------------------------------------------------------------------ The weighted number of ordinary shares in issue is stated after excluding 8,961,515 (2004: 6,682,660) shares held solely for the purpose of satisfying obligations under employee share schemes. 9 Fixed charges cover -------------------------------------------------------------------------------- 6 months to 12 months to Â£m 28 Feb 2005 29 Feb 2004 31 Aug 2004 -------------------------------------------------------------------------------- Interest expense 3 2 5 Operating lease rentals 76 91 184 Property taxes 18 18 37 Other property costs 6 16 15 -------------------------------------------------------------------------------- Total fixed charges 103 127 241 Profit before tax, exceptional items and goodwill amortisation 70 65 67 -------------------------------------------------------------------------------- Profit before tax, exceptional items, goodwill amortisation and fixed charges 173 192 308 -------------------------------------------------------------------------------- Fixed charges cover 1.7x 1.5x 1.3x -------------------------------------------------------------------------------- Fixed charges cover is calculated by dividing profit before exceptional items, goodwill amortisation, tax and fixed charges by total fixed charges. WH Smith PLC Notes to the Interim Financial Statements For the 6 months to 28 February 2005 10 Goodwill -------------------------------------------------------------------------------- Â£m -------------------------------------------------------------------------------- Cost: At 1 September 2004 226 Disposals (195) -------------------------------------------------------------------------------- At 28 February 2005 31 -------------------------------------------------------------------------------- Accumulated Amortisation: At 1 September 2004 62 Amortised in the period 1 Disposals (46) -------------------------------------------------------------------------------- At 28 February 2005 17 -------------------------------------------------------------------------------- Net Book Value -------------------------------------------------------------------------------- At 28 February 2005 14 -------------------------------------------------------------------------------- At 31 August 2004 164 -------------------------------------------------------------------------------- The net book value of goodwill disposed of Â£149m relates to the disposal of the Publishing Business, which was completed on 25 September 2004. 11 Financial assets and liabilities -------------------------------------------------------------------------------- Â£m At At At 28 Feb 2005 29 Feb 2004 31 Aug 2004 -------------------------------------------------------------------------------- Current asset investment (See Note 5) 60 - - Cash at bank and in hand (note a) 35 54 64 Repayable within one year or on demand (26) (24) (17) Repayable after more than one year but within two years (30) - - Repayable after more than two years but within five years (35) - - Repayable in more than five years (2) (2) (2) -------------------------------------------------------------------------------- Net funds 2 28 45 -------------------------------------------------------------------------------- Â£m At Cash flow At 28 Feb 2005 31 Aug 2004 -------------------------------------------------------------------------------- Cash at bank and in hand 35 (29) 64 - Debt (56) (39) (17) - Sterling floating rate (note b & c) (37) (35) (2) - Sterling fixed rate (note b & c) Current asset investment (see Note 5) 60 60 - -------------------------------------------------------------------------------- Net funds 2 (43) 45 -------------------------------------------------------------------------------- WH Smith PLC Notes to the Interim Financial Statements For the 6 months to 28 February 2005 11 Financial assets and liabilities continued a) Cash at bank is primarily held on short-term deposit, bearing interest at a weighted average of 4.71% for the period. b) On 27 July 2004, the Group entered into new committed three-year syndicated borrowing facilities comprising a Â£120m unsecured term loan facility (of which Â£30m was cancelled on 20 September 2004) and a Â£150m working capital facility. Both facilities were contingent on the successful disposal of the Publishing Business and as such became available to the Group on 27 September 2004. c) At 28 February 2005, floating rate debt constitutes (1) Â£30m of unsecured term loan bearing an interest rate of three month LIBOR plus 175 basis points, (2) Â£16m of unsecured loan notes (which are repayable at par on-demand up until expiry on 28 February 2008) which bear an interest rate of 100 basis points below six month LIBOR 2004 and (3) Â£10m of unsecured revolver drawdown bearing an interest rate of daily LIBOR plus 175 basis points. Fixed rate debt constitutes (1) Â£35m of unsecured term loan bearing an interest rate of 6.67% and (2) Â£2m of undated 5.125% unsecured (redeemable at par) loan stock. 12 Reconciliation of operating profit / (loss) to net cash (outflow) / inflow from operating activities -------------------------------------------------------------------------------- 6 months to 12 months to Â£m 28 Feb 2005 29 Feb 2004 31 Aug 2004 -------------------------------------------------------------------------------- Operating profit / (loss) 72 (9) (31) Adjustment for pension funding (note a) (124) (12) (25) Operating exceptional items - 75 101 Depreciation of fixed assets 21 24 46 Amortisation of goodwill 1 1 2 Increase in stock (13) (29) (17) (Increase) / decrease in debtors (20) 7 (1) Increase / (decrease) in creditors 7 (28) (9) Cash spend against provisions (2) - (5) -------------------------------------------------------------------------------- Net cash (outflow) / inflow from operating activities before exceptional operating items (58) 29 61 -------------------------------------------------------------------------------- Cash spend against exceptional provisions - (1) - Internal restructuring of UK Retailing - - (11) Corporate advisory costs (8) - (2) -------------------------------------------------------------------------------- Net cash outflow from exceptional operating items (8) (1) (13) -------------------------------------------------------------------------------- Net cash (outflow) / inflow from operating activities after exceptional operating items (66) 28 48 -------------------------------------------------------------------------------- a) For the period ended 28 February 2005, Â£131m (2004: Â£22m) cash contributions have been made to the pension schemes and an associated Escrow bank account. The associated profit and loss charge comprises Â£5m (2004: Â£8m) for operating costs and a Â£2m charge (2004: Â£2m) for financing. The Group has made total additional contributions of Â£124m (2004: Â£12m) over and above the required profit and loss charge. Â£120m of this amount relates to the additional contribution that the Group announced it would make following the disposal of the Publishing Business, of which Â£60m is held in an Escrow bank account as at 28 February 2005 that will be paid to the defined benefit pension fund by monthly instalments over the next six months (see Note 5). WH Smith PLC Notes to the Interim Financial Statements For the 6 months to 28 February 2005 13 Share Capital a) Authorised -------------------------------------------------------------------------------- Â£m At At At 28 Feb 2005 29 Feb 2004 31 Aug 2004 -------------------------------------------------------------------------------- Equity: Ordinary shares of 2 13/ 81p each 50 - - Ordinary shares of 55.55p each - 185 185 -------------------------------------------------------------------------------- 50 185 185 -------------------------------------------------------------------------------- Non equity: 'B' shares of 53.75p each 153 153 153 'C' shares of 85p each 70 - - Deferred shares of 85p each 143 - - -------------------------------------------------------------------------------- 366 153 153 -------------------------------------------------------------------------------- Total 416 338 338 -------------------------------------------------------------------------------- b) Allotted and fully paid -------------------------------------------------------------------------------- Â£m At At At 28 Feb 2005 29 Feb 2004 31 Aug 2004 -------------------------------------------------------------------------------- Equity: 180m (2004: nil) Ordinary shares of 2 13/ 81p each 4 - - Nil (2004: 251m) Ordinary shares of 55.55p each - 139 139 -------------------------------------------------------------------------------- 4 139 139 -------------------------------------------------------------------------------- Non equity: 4m (2004: 4m) 'B' shares of 53.75p each 2 2 2 10m (2004: nil) 'C' shares of 85p each 8 - - 168m (2004: nil) Deferred shares of 85p each 143 - - -------------------------------------------------------------------------------- 153 2 2 -------------------------------------------------------------------------------- Total 157 141 141 -------------------------------------------------------------------------------- c) Movement in share capital ---------------------------------------------------------------------------------------------------------- Equity Non equity ---------------------------------------------------------------------------------------------------------- Â£m Ordinary shares Ordinary shares 'B' shares of 'C' Shares of Deferred shares Total of 2 13/81p of 55.55p each 53.75p each 85p each of 85p each each At 1 September 2004 - 139 2 - - 141 Capital reorganisation 4 (139) - 213 - 78 Converted - - - (143) 143 - Cancelled - - - (62) - (62) ---------------------------------------------------------------------------------------------------------- At 28 February 2005 4 - 2 8 143 157 ---------------------------------------------------------------------------------------------------------- At 28 February 2005, the number of options held under employee share schemes was 16.0m (2004: 17.6m). The proceeds due to the Company upon exercise of these options would be approximately Â£54m (2004: Â£64m). The 'B' shares are redeemable at their nominal value at the shareholders' option during any specific period declared by the Company or at the Company's option, or at maturity on 31 August 2008. The 'B' shares carry a net non-cumulative dividend set at a rate that is the lower of 75% of LIBOR and 20% per annum. WH Smith PLC Notes to the Interim Financial Statements For the 6 months to 28 February 2005 13 Share capital continued The Group has 169,072 authorised, allotted and fully paid 5.75 per cent cumulative preference shares in issue, which receive dividends half yearly. On 27 September 2004 the Company 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. The new ordinary shares have a nominal value of 2 13/ 81p 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 resulting in the issue of new ordinary share capital of a nominal value of Â£4m and 'C' shares of a nominal value of Â£213m. In accordance with the terms of the capital reorganisation, shareholders could elect to sell 'C' shares to the Company at 85p per share following which all such 'C' shares would be cancelled by the Company or to receive the Initial 'C' share dividend of 85p per 'C' share following which all such 'C' shares would be converted into Deferred shares. On 27 October 2004, as a result of these elections, the Group repurchased 73,182,358 'C' shares for their nominal value of 85p each, a total repurchase amount of Â£62m and paid an initial 'C' share dividend of Â£143m in respect of 167,686,994 'C' shares. The remaining 9,693,148 'C' shares which have not been repurchased or converted are irredeemable, except at the Company's option, and carry a net non-cumulative dividend set at a rate which is the lower of 75% of LIBOR and 20% per annum. 14 Reserves ------------------------------------------------------------------------------------ Share Capital Profit premium redemption Revaluation Other and loss Â£m account reserve reserve reserve Account ------------------------------------------------------------------------------------ At 1 September 2004 93 156 3 (27) (110) Loss retained for the period - - - - (107) Bonus issue (see Note 13) (78) - - - - Employee share schemes - - - - 2 Repurchase of shares (see Note 13) - 62 - - (62) Purchase of own shares for employee share schemes - - - (12) - Money returned to ESOP Trust after share capital reorganisation - - - 5 - Currency translation differences - - - - (1) ------------------------------------------------------------------------------------ Reserves excluding current period pension deficit at 28 February 2005 15 218 3 (34) (278) Current period net pension deficit adjustment - - - - (15) ------------------------------------------------------------------------------------ Reserves at 28 February 2005 15 218 3 (34) (293) ------------------------------------------------------------------------------------ The profit and loss account reserve at 28 February 2005 is stated after previously writing off acquired goodwill of Â£19m (2004: Â£19m). 15 Approval of Interim Statement The Interim Statement was approved by the Board of Directors on 21 April 2005. 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 2005 which comprises the Group profit and loss account, the Group balance sheet, the Group cash flow statement and associated notes, the Group statement of total recognised gains and losses, the Group note of historical cost profits and losses, the Reconciliation of movements in Shareholders' funds and related notes 1 - 15. We have read the other information contained in the Interim Statement 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 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 Statement, 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 Statement in accordance with the Listing Rules of the Financial Services Authority which require that the accounting polices 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 United Kingdom auditing standards 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 2005. Deloitte & Touche LLP Chartered Accountants London 21 April 2005 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

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

All directors dealings today