17th Apr 2008 07:00
WH Smith PLC17 April 2008 17 April 2008 WH SMITH PLC INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 29 FEBRUARY 2008 Further improvement in profitability and substantial return of cash to shareholders KEY POINTS • Group profit before tax up 8% to £64m (2007: £59m). Profits from trading operations are £50m1 in High Street and £17m1 in Travel. • Group total sales up 2%, with like-for-like (LFL) sales down 2%, reflecting our strategy to rebalance the mix of our High Street business towards our core categories: • Travel total sales up 14%, with LFL sales up 1% (excluding tobacco, LFL sales up 3%) • High Street total sales down 2%, with LFL sales down 3% • Gross margin improved by 70 basis points year on year. • First half High Street cost savings of £4m delivered, in line with plan. • Good progress with return of £90m of cash to shareholders through a special dividend and on market share buyback programme. • Strong free cash flow of £61m. • Underlying2 earnings per share of 26.9p (2007: 25.8p). • Basic earnings per share of 28.3p (2007: 26.7p). • Interim dividend of 4.6p, up 24% on last year. Commenting on the results, Kate Swann, Group Chief Executive said: "We have delivered another period of good profit growth, with Group profits3 up8%. "We have seen further strong performance from Travel with substantial progressin new business development in the hospital, air and motorway channels. In theHigh Street, we successfully continue to deliver our strategy to rebuild ourauthority in our core categories. "The economic environment remains uncertain and, whilst we continue to becautious, we are confident in the outcome for the full year." 1 High Street and Travel profit is stated after directly attributable definedbenefit pension service costs, share-based payment costs and before centralcosts, exceptional items, interest and taxation2 Profit after tax and before exceptional items - diluted3 Profit before tax - Ends - Enquiries: WH Smith PLCSue Barratt Media Relations 020 7851 8850Mark Boyle Investor Relations 020 7851 8820 BrunswickTom Buchanan 020 7404 5959Anna Jones WH Smith PLC's Interim Results 2008 are available at www.whsmithplc.com. A copyof the Interim Results 2008 will shortly be available for inspection at the UKListing Authority, 25 The North Colonnade, London, E14 5HS. CURRENT TRADING In the 6 weeks to 12 April 2008, LFL sales were down 2%. FINANCIAL REVIEW Group Summary The Group generated a profit before tax of £64m (2007: £59m), ahead ofexpectations and an increase of 8% on the prior year. Travel profit1 increased by 13% to £17m. This continued strong performance, withgood sales and margin growth, was driven by mix changes, improved ranges andsuccessful promotions. We have made substantial progress in new businessdevelopment, including the recently announced acquisition of UNS Group Limited,a franchise agreement with RoadChef and an agreement with Alpha Retail UKLimited. High Street profit1 was £50m. We continue our strategy to rebalance the mix ofour business towards our core categories and reduce our reliance onentertainment. Entertainment is disproportionately weighted towards the firsthalf of the year, and consequently the profile of profit generation willcontinue, as expected, to shift towards the second half. Total Group sales were up 2% to £734m (2007: £721m) with LFL sales down 2%.Travel sales grew by 14% to £178m, up 1% on a LFL basis (excluding tobacco, LFLsales were up 3%). This performance was driven by the airport business whichgrew by 3% on a LFL basis. LFL sales in rail were flat in the half year. HighStreet sales were down 2% at £556m and down 3% on a LFL basis. Underlying2 earnings per share increased to 26.9p (2007: 25.8p) with basicearnings per share of 28.3p (2007: 26.7p), reflecting the fact that profitgrowth combined with a lower basic weighted average number of shares more thanoffset the increase in the effective tax rate. We have made good progress on the return of cash to shareholders. An initialreturn equivalent to 33p per share was made on 29 February 2008 by way of aspecial dividend, combined with a share consolidation of 67 new ordinary sharesfor every 74 existing ordinary shares. The remainder is being returned throughan on market share buyback programme, which has been substantially completed. 1 High Street and Travel profit is stated after directly attributable,share-based payment costs and before central costs, exceptional items, interestand taxation2 Profit after tax and before exceptional items - diluted Cash generation in the period has remained strong. Group free cash flow was £61m(2007: £66m). In the period we have spent an additional £3m on capitalexpenditure compared to prior year due to the peak in new opening activities inTravel. In the full year we expect our capital expenditure to be broadly in linewith depreciation. At 29 February 2008, the Group had net assets of £186m (2007: £201m), thedecrease reflects the significant return of cash to shareholders. The Board has declared an interim dividend of 4.6p per share. This is anincrease of 24% on the prior year which, together with the return of cash toshareholders announced on 31 January 2008, reflects the Board's confidence inthe continuing strong cash generative nature of the business. Trading Operations Travel Travel delivered a strong performance with profit1 increasing by 13% to £17m.This was delivered from increased sales combined with improved underlying grossmargin and tight cost control. Underlying gross margin has increased during H1 through good category mixmanagement and further buying improvements, resulting in more sales of highermargin categories such as confectionery, books and drinks. We have increasedaverage transaction value by focusing on mix changes and improved promotionalactivity. We have made substantial progress in business development. We successfullyrenewed 1 contract in air and 7 in rail and completed 12 refits. We have nowopened 25 new units: 17 in air including 5 at Edinburgh airport and 3 atHeathrow Terminal 3, 6 in rail including 4 at St Pancras International, and 2motorway service leaseholds. We closed 4 units in the period. The Travel business now operates from 433 units, including motorway service areafranchise units. Excluding motorway service area franchise units, Travel nowoccupies 0.3m square feet (2007: 0.2m square feet). We recently announced the acquisition of UNS Group Limited comprising 72 retailunits and 8 Caffe Nuovo coffee shops in 62 hospitals as well as a franchiseagreement with RoadChef to open 29 CTN units which will significantly enhanceour coverage of the motorway network. We plan to open 15 franchise units withRoadChef by Autumn 2008 and the remaining 14 by Spring 2009. We have alsoreached an agreement with Alpha Retail UK Limited to acquire 23 units in 11airports. In addition, we have won 8 new units which are due to open later thisyear, including 2 bookstores at Manchester airport, a CTN at London City airportand 5 units at Copenhagen airport. We will run the units in Copenhagen inpartnership with SSP who currently operate the units. High Street High Street delivered profits1 of £50m, as we continued with our strategy torebalance the mix of the business to focus on rebuilding authority in our corecategories, optimising margins, tight cost control and delivering the retailbasics. Gross margin improved, driven by rebalancing the mix of our business, betterbuying terms, improved sourcing and markdown management. 1 High Street and Travel profit is stated after directly attributable sharebased payment costs and before central costs, exceptional items, interest andtaxation High Street delivered £4m of cost savings during the period, in line with ourcost savings target. Cost savings were delivered from a number of areas of thebusiness including logistics, information systems and stores. We have made good progress with the integration of Post Offices into High Streetstores, with 65 opened to date. The remaining 12 will open by Autumn 2008,bringing the total to 77. In addition, as part of our relationship with PostOffice Limited, we plan to roll out Bureau de Change units to an additional 50High Street stores by Spring 2009. This forms part of our strategy to enhanceour customer offer and use space more effectively in our stores. The High Street business operates from 546 stores which occupy 3.0m square feet(2007: 3.0m square feet). We opened 5 stores in un-served catchments and areencouraged by their performance and closed 3 stores during the period. We alsoreached an agreement with Martin McColl to acquire 7 high street stores,supporting our strategy to move into unserved catchments. Category performance Books LFL sales were up 2% with gross margin up year on year as we continued toimplement our strategy to rebuild our authority as a popular book specialist andmaximise profitability. We achieved further share growth versus the general highstreet. This performance was driven by the early release of major non-fictiontitles, for example Jamie Oliver's Jamie at Home where we performed verystrongly, and high market shares in front list titles such as Russell Brand's MyBooky Wook. We also performed well in Children's books over Christmas with somestrong shares as well as exclusive promotional offers. Execution continued toimprove with better availability and better pricing compliance in this verycompetitive trading season. In Travel, we successfully trialled extended bookcharts and introduced author bays. We continued to see an encouragingperformance from our specialist bookstore format. Stationery LFL sales were flat, reflecting the general stationery market whichcontinues to be soft. Gross margin was up as planned driven by intra categorymix as well as improved seasonal markdown management and increased Far Eastsourcing. The market continues to be mixed: with good growth in some categories,for example, cards and computing, but slower in others such as filing and pens.We continue to focus on core sub categories and the limited market data we haveshows our share continues to be strong. The Christmas seasonal categoriesperformed well this year, with strong performances particularly from wrap,diaries and gifting. We invested in increased customer research this year and,following its success, plan to do more for the Christmas 2008 ranges. Wefinished the Christmas period in a clean stock position. Our Far East sourcingcontinues to progress to plan. News and Impulse LFL sales were down 2% with an improvement in gross margin.Despite a tough market, particularly for monthly magazines and partworks, weheld share, supported by strong promotional activity with key newspapers. InTravel, we are trialling kiosks offering foreign newspapers on demand in StPancras International from April, followed by Heathrow T3. In snacking andconfectionery, we delivered a strong performance driven by better use of space,new ranges and effective promotions. In Entertainment, we continued with our strategy to reduce steadily our relianceon entertainment and as we do this, we are optimising profitability. LFLEntertainment sales were down 15% which was slightly better than ourexpectations, supported by a better performance in multi-media and a strong DVDrelease schedule. Our view of the long-term outlook for the entertainment marketremains unchanged. Gross margin was lower year on year largely reflecting acompetitive market, continuing price deflation and the mix of games consoles. Non-operating activities Net Finance Income These results include net finance income of £3m (2007: net charge of £1m). Taxation In the current year we expect the rate to be around 23%. WH Smith PLC Group Income StatementFor the 6 months to 29 February 2008 __________________________________________________________________________________________________ 6 months to 6 months to 12 months to 29 Feb 2008 28 Feb 2007 31 Aug 2007£m Note Unaudited Unaudited Audited__________________________________________________________________________________________________Continuing operationsRevenue 2 734 721 1,299__________________________________________________________________________________________________Operating profit before exceptional items 2 61 60 67Exceptional items 3 - - 10__________________________________________________________________________________________________Operating profit 61 60 77Investment income 4 3 5Finance costs (1) (4) (6)__________________________________________________________________________________________________Profit before tax 64 59 76Income tax expense 5 (15) (12) (16)__________________________________________________________________________________________________Profit after tax from continuing operations 49 47 60__________________________________________________________________________________________________Profit for the period 49 47 60__________________________________________________________________________________________________ Earnings per share(1)Basic 7 28.3p 26.7p 34.3pDiluted 7 26.9p 25.8p 33.1pNon-GAAP measuresUnderlying earnings per share(2)Basic 7 28.3p 26.7p 30.3pDiluted 7 26.9p 25.8p 29.3pEquity dividends per share(3) 6 4.6p 3.7p 11.8pFixed chargescover 8 1.8x 1.8x 1.4x__________________________________________________________________________________________________ 1 Earnings per share is calculated in accordance with IAS 33 'Earnings per share'. 2 Underlying earnings per share excludes exceptional items. 3 Current period dividend per share is the proposed interim dividend. WH Smith PLC Group Balance SheetAs at 29 February 2008_______________________________________________________________________________________ At At At 29 Feb 2008 28 Feb 2007 31 Aug 2007£m Note Unaudited Unaudited Audited_______________________________________________________________________________________Non-current assetsGoodwill 15 15 15Other intangible assets 17 19 20Property, plant and equipment 169 172 176Available for sale investments - 3 -Deferred tax assets 12 23 15Trade and other receivables 4 - 5_______________________________________________________________________________________ 217 232 231_______________________________________________________________________________________ Current assetsInventories 155 154 141Trade and other receivables 72 59 59Available for sale investments 2 - 4Cash and cash equivalents 9 53 86 82_______________________________________________________________________________________ 282 299 286_______________________________________________________________________________________Total assets 499 531 517_______________________________________________________________________________________Current liabilitiesTrade and other payables (235) (211) (217)Current tax liabilities (43) (32) (25)Obligations under finance leases 9 (4) (3) (3)Bank overdrafts and other borrowings 9 - (12) (9)Short-term provisions (5) (5) (6)Derivative financial liabilities - (1) (1)_______________________________________________________________________________________ (287) (264) (261)_______________________________________________________________________________________Non-current liabilitiesRetirement benefit obligation 4 - (34) -Deferred tax liabilities (11) (12) (12)Long-term provisions (4) (6) (4)Obligations under finance leases 9 (4) (6) (6)Other non-current liabilities (7) (8) (7)_______________________________________________________________________________________ (26) (66) (29)_______________________________________________________________________________________Total liabilities (313) (330) (290)_______________________________________________________________________________________Total net assets 186 201 227_______________________________________________________________________________________Total equity 186 201 227_______________________________________________________________________________________ WH Smith PLC Group Balance Sheet (continued)As at 29 February 2008_________________________________________________________________________________ At At At 29 Feb 2008 28 Feb 2007 31 Aug 2007£m Unaudited Unaudited Audited_________________________________________________________________________________Shareholders' equityCalled up share capital 36 37 37ESOP reserve (28) (28) (29)Revaluation reserve 3 3 4Hedging reserve - (1) (1)Translation reserve (2) (2) (2)Capital redemption reserve 1 - -Retained earnings 346 356 383Other reserve (170) (164) (165)_________________________________________________________________________________Total equity 186 201 227_________________________________________________________________________________ WH Smith PLC Group Cash Flow StatementFor the 6 months to 29 February 2008________________________________________________________________________________________________________________________ 6 months to 12 months to 29 Feb 2008 28 Feb 2007 31 Aug 2007£m Note Unaudited Unaudited Audited ________________________________________________________________________________________________________________________Net cash inflows from operating activities 10 70 52 83________________________________________________________________________________________________________________________Investing activitiesInterest received 4 3 5Proceeds on disposal of property, plant and equipment 2 2 2Non-operating disposal costs - (2) (3)Purchase of property, plant and equipment (12) (8) (26)Purchase of intangible assets - (1) (6)________________________________________________________________________________________________________________________Net cash outflows from investing activities (6) (6) (28)________________________________________________________________________________________________________________________Financing activitiesInterest paid - (1) (2)Dividend paid (71) (11) (17)Purchase of own shares (10) - -Purchase of shares to satisfy employee share schemes (2) (11) (12)Repayments of borrowings (9) (1) (4)Repayments of obligations under finance leases (1) (2) (3)Derivative cash movements - - (1)________________________________________________________________________________________________________________________Net cash used in financing activities (93) (26) (39)________________________________________________________________________________________________________________________Net (decrease)/ increase in cash and cash equivalents -continuing operations (29) 20 19Net (decrease)/ increase in cash and cash equivalents -discontinued operations - - (3)________________________________________________________________________________________________________________________Net (decrease)/ increase in cash and cash equivalents in period (29) 20 16________________________________________________________________________________________________________________________Opening net cash and cash equivalents 82 66 66________________________________________________________________________________________________________________________Closing net cash and cash equivalents 53 86 82________________________________________________________________________________________________________________________ Reconciliation of net cash flow to movement in net funds_______________________________________________________________________________________________________________________ 6 months to 12 months to Note 29 Feb 2008 28 Feb 2007 31 Aug 2007£m Unaudited Unaudited Audited_______________________________________________________________________________________________________________________Net funds at beginning of the period 64 42 42(Decrease) / Increase in cash and cash equivalents (29) 20 16Decrease in debt 9 1 4Net movement in finance leases 1 2 2_______________________________________________________________________________________________________________________Net funds at end of the period 9 45 65 64_______________________________________________________________________________________________________________________ WH Smith PLC Group Statement of Recognised Income and ExpenseFor the 6 months to 29 February 2008_______________________________________________________________________________________________________________________ 6 months to 12 months to 29 Feb 2008 28 Feb 2007 31 Aug 2007 Unaudited Unaudited Audited_______________________________________________________________________________________________________________________Actuarial gains / (losses) on defined pension schemes (Note 4) (5) 3 23UK deferred tax attributable to pension scheme liabilities - (8) (13)UK current tax attributable to the additional pension schemecontributions - 3 5_______________________________________________________________________________________________________________________Net income / (expense) recognised directly in equity (5) (2) 15Profit for the period 49 47 60_______________________________________________________________________________________________________________________Total recognised income and expense for the period 44 45 75_______________________________________________________________________________________________________________________ Total recognised income and expense for the period is fully attributable to theequity holders of the parent company. WH Smith PLC Reconciliation of Movements in EquityFor the 6 months to 29 February 2008________________________________________________________________________________________________________________________ Hedging and Capital Share translation Revaluation redemption ESOP Other Retained £m Capital reserve reserve reserve reserve reserve earnings Total________________________________________________________________________________________________________________________Balance at 1 September 2006 357 (4) 3 - (22) (166) - 168Total recognised income andexpense for the period - 1 - - - - 44 45Recognition of share-basedpayments - - - - - - 3 3Dividends paid - - - - - - (11) (11)Court approved capital reduction (320) - - - - - 320 -Employee share schemes - - - - (8) 1 - (7)Transfer to available for sale financial investments - - - - 2 1 - 3________________________________________________________________________________________________________________________Balance at 28 February 2007 37 (3) 3 - (28) (164) 356 201Total recognised income andexpense for the period - - - - - - 30 30Recognition of share-basedpayments - - - - - - 3 3Dividends paid - - - - - - (6) (6)Employee share schemes - - - - (1) - - (1)Transfer to available for sale financial investments - - 1 - - (1) - -________________________________________________________________________________________________________________________Balance at 1 September 2007 37 (3) 4 - (29) (165) 383 227Total recognised income andexpense for the period - - - - - - 44 44Recognition of share-basedpayments - - - - - - 3 3Dividends paid - - - - - - (71) (71)Mark to market valuation - 1 - - - - - 1Employee share schemes - - - - 1 (5) - (4)Redemption of own shares (1) - - 1 - - (13) (13)Revaluation of available for sale financial investments - - (1) - - - - (1)________________________________________________________________________________________________________________________Balance at 29 February 2008 36 (2) 3 1 (28) (170) 346 186________________________________________________________________________________________________________________________ WH Smith PLC Notes to the Interim Financial StatementsFor the 6 months to 29 February 2008 1 Basis of preparation and Approval of Interim Statement The Interim Financial Statement for the 6 months to 29 February 2008 has beenprepared in accordance with the Disclosure and Transparency Rules of theFinancial Services Authority and with IAS 34, "Interim Financial Reporting" asadopted by the European Union. This report should be read in conjunction withthe Group's Annual Report and Accounts 2007, which have been prepared inaccordance with IFRSs as adopted by the European Union. The accounting policies adopted in the preparation of the interim financialstatements are the same as those set out in the Group's Annual Report andAccounts 2007. The financial information set out in this report does not constitute statutoryaccounts within the meaning of section 240 the Companies Act 1985. The AnnualReport and Accounts 2007 have been filed with the Registrar of Companies. Theauditors' report on these accounts was unqualified and did not contain astatement under s237(2) or s237(3) of the Companies Act 1985. The Interim Financial Statement is unaudited and was approved by the Board ofDirectors on 17 April 2008. 2 Segmental analysis of results For management purposes, the Group is currently organised into two operatingdivisions - High Street and Travel. These divisions are the basis on which theGroup currently reports its primary business segment information. a) Group revenue_________________________________________________________________________________ 6 months to 12 months to£m 29 Feb 2008 28 Feb 2007 31 Aug 2007_________________________________________________________________________________Continuing operationsHigh Street 556 565 961Travel 178 156 338_________________________________________________________________________________Group revenue 734 721 1,299_________________________________________________________________________________ Seasonality Sales in the High Street business are subject to seasonal fluctuations, withpeak demand in the Christmas Trading Period, which falls in the first half ofthe Group's financial year, which accounts for approximately 60% of annual HighStreet sales. b) Geographical split The total Group revenue and operating profits for these periods originate fromwithin Europe, predominantly within the UK. The directors consider this to beone segment. WH Smith PLC Notes to the Interim Financial StatementsFor the 6 months to 29 February 2008 2 Segmental analysis of results continued c) Group results_______________________________________________________________________________________________________________ 6 months to 12 months to£m 29 Feb 2008 28 Feb 2007 31 Aug 2007_______________________________________________________________________________________________________________Continuing operationsHigh Street 50 51 44Travel 17 15 36_______________________________________________________________________________________________________________Trading profit 67 66 80Unallocated costs (6) (6) (13)_______________________________________________________________________________________________________________Group operating profit before exceptional items 61 60 67Exceptional items (note 3) - - 10_______________________________________________________________________________________________________________Group operating profit 61 60 77Investment income 4 3 5Finance costs (1) (4) (6)Income tax expense (15) (12) (16)_______________________________________________________________________________________________________________Profit for the period 49 47 60_______________________________________________________________________________________________________________ Group operating profit is stated after the write-down of inventories to netrealisable value of £3m (2007: £4m). d) Analysis of retailing stores and selling space Number of stores__________________________________________________________________________________________________________ 1 Sept 2007 Opened Closed 29 Feb 2008__________________________________________________________________________________________________________High Street 544 5 (3) 546Travel 135 8 (2) 141__________________________________________________________________________________________________________Total 679 13 (5) 687__________________________________________________________________________________________________________ A Travel store may consist of multiple units within one location. On anindividual unit basis, Travel stores and the motorway stores (operated underfranchise and not included in the store numbers above) can be analysed asfollows: Number of Travel units__________________________________________________________________________________________________________ 1 Sept 2007 Opened Closed 29 Feb 2008__________________________________________________________________________________________________________Travel 223 19 (4) 238Motorway franchise units 86 - - 86__________________________________________________________________________________________________________Total 309 19 (4) 324__________________________________________________________________________________________________________ Retail selling square feet (000's) 1 Sept 2007 Opened Closed Redeveloped 29 Feb 2008__________________________________________________________________________________________________________High Street 2,997 15 (11) (4) 2,997Travel 239 20 (3) - 256__________________________________________________________________________________________________________Total 3,236 35 (14) (4) 3,253__________________________________________________________________________________________________________ Total Retail selling square feet does not include motorway franchise units. WH Smith PLC Notes to the Interim Financial StatementsFor the 6 months to 29 February 2008 3 Exceptional items There were no exceptional items recorded in the period to 29 February 2008 orthe period to 28 February 2007. In the year ending 31 August 2007 the WHSmithPension Trust was closed to service accrual. This led to a non cash curtailmentgain of £10m. 4 Retirement benefit obligation WH Smith PLC has operated a number of defined benefit and defined contributionpension plans. The main pension arrangements for employees are operated througha defined benefit scheme, WHSmith Pension Trust, and a defined contributionscheme, WH Smith Retirement Savings Plan. The most significant is the definedbenefit WHSmith Pension Trust, which was closed to defined benefit serviceaccrual on 2 April 2007. The WHSmith Pension Trust The valuation of the defined benefit pension scheme used for the IAS 19disclosures is based upon the most recent valuation. The market value of theassets and the present value of the liabilities in the schemes at the relevantreporting dates were:______________________________________________________________________________________________________________ At At At£m 29 Feb 2008 28 Feb 2007 31 Aug 2007______________________________________________________________________________________________________________Present value of the obligations (645) (699) (657)Fair value of plan assets 684 665 657______________________________________________________________________________________________________________Surplus / (deficit) in scheme 39 (34) -Amounts not recognised (39) - -______________________________________________________________________________________________________________Retirement benefit obligation recognised in the balance sheet - (34) -Deferred taxation - 10 -______________________________________________________________________________________________________________Net retirement obligation - (24) -______________________________________________________________________________________________________________ Movement in retirement benefit obligation during the period: ______________________________________________________________________________________________________________ 6 months to 12 months to£m 29 Feb 2008 28 Feb 2007 31 Aug 2007______________________________________________________________________________________________________________At beginning of period - (66) (66)Current service cost - (3) (4)Interest cost - (1) (2)Contributions 5 33 39Curtailment gain - - 10Actuarial gains and losses 34 3 23______________________________________________________________________________________________________________At end of period 39 (34) -______________________________________________________________________________________________________________ On an ongoing funding basis, the defined benefit pension scheme continues tohave an actuarial deficit. As a result, the Group will not recognise the IAS 19surplus on the balance sheet. WH Smith PLC Notes to the Interim Financial StatementsFor the 6 months to 29 February 2008 4 Retirement benefit obligation (continued) Total (income) / expense recognised to Statement of Recognised Income and Expense ("SORIE")______________________________________________________________________________________________________________ 6 months to 12 months to£m 29 Feb 2008 28 Feb 2007 31 Aug 2007______________________________________________________________________________________________________________Actuarial gains 34 3 23Amounts not recognised (39) - -______________________________________________________________________________________________________________Amounts recognised to the SORIE (5) 3 23______________________________________________________________________________________________________________ 5 Income tax expense______________________________________________________________________________________________________________ 6 months to 12 months to£m 29 Feb 2008 28 Feb 2007 31 Aug 2007______________________________________________________________________________________________________________Tax on profit before exceptional items 21 20 23Standard rate of UK corporation tax 30%Adjustment in respect of prior year UK corporation tax (6) (8) (8)______________________________________________________________________________________________________________Total current tax charge before exceptional items 15 12 15Deferred tax - current year - - (2)______________________________________________________________________________________________________________Tax on profit exceptional items 15 12 13Tax on exceptional items - - 3______________________________________________________________________________________________________________Tax on profit after exceptional items 15 12 16______________________________________________________________________________________________________________Effective tax rate - continuing operations 23% 20% 20%______________________________________________________________________________________________________________ 6 Dividends Amounts paid and recognised in equity in the period are as follows: ______________________________________________________________________________________________________________ 6 months to 12 months to£m 29 Feb 2008 28 Feb 2007 31 Aug 2007______________________________________________________________________________________________________________ Interim - - 6Final 14 11 11Special interim dividend 57 - -______________________________________________________________________________________________________________ 71 11 17______________________________________________________________________________________________________________ A special interim dividend of 33p per ordinary share was paid on 29 February2008. The shareholders approved, at an Extraordinary General Meeting on 20February 2008, the consolidation of the share capital of the Company byreplacing every 74 existing ordinary shares with 67 new ordinary shares. In addition, the directors are recommending an interim dividend in respect ofthe period ending 29 February 2008 of 4.6p per ordinary share, which will absorban estimated £7m of shareholders' equity. This will be paid on 13 June 2008 toshareholders registered at the close of business on 23 May 2008. WH Smith PLC Notes to the Interim Financial StatementsFor the 6 months to 29 February 2008 7 Earnings per share a) Earnings______________________________________________________________________________________________________________ 6 months to 12 months to£m 29 Feb 2008 28 Feb 2007 31 Aug 2007______________________________________________________________________________________________________________Underlying earnings attributable to shareholders 49 47 53Exceptional items net of related taxation - - 7______________________________________________________________________________________________________________Profit attributable to shareholders 49 47 60______________________________________________________________________________________________________________ b) Basic earnings per share______________________________________________________________________________________________________________ 6 months to 12 months toPence 29 Feb 2008 28 Feb 2007 31 Aug 2007______________________________________________________________________________________________________________Underlying earnings per share (note i) 28.3 26.7 30.3Exceptional items net of related taxation - - 4.0______________________________________________________________________________________________________________Earnings per share (note ii) 28.3 26.7 34.3______________________________________________________________________________________________________________ (i) Underlying earnings per share has been calculated using profit after tax but before exceptional items.(ii) Basic earnings per share has been calculated using profit after tax and exceptional items. c) Diluted earnings per share______________________________________________________________________________________________________________ 6 months to 12 months toPence 29 Feb 2008 28 Feb 2007 31 Aug 2007______________________________________________________________________________________________________________Underlying earnings per share 26.9 25.8 29.3Exceptional items net of related taxation - - 3.8______________________________________________________________________________________________________________Earnings per share 26.9 25.8 33.1______________________________________________________________________________________________________________ Diluted earnings per share takes into account various share awards and shareoptions including SAYE schemes, which are expected to vest, and for which a sumbelow fair value will be paid. d) Weighted average share capital______________________________________________________________________________________________________________ 6 months to 12 months toMillions 29 Feb 2008 28 Feb 2007 31 Aug 2007______________________________________________________________________________________________________________ Weighted average shares in issue for earnings per share 173 176 175Add weighted average number of ordinary shares under option 9 6 6______________________________________________________________________________________________________________Weighted average ordinary shares for diluted earnings per share 182 182 181______________________________________________________________________________________________________________ No adjustment is required to comparative EPS values as the special dividend of33p per ordinary share and the share consolidation of 67 new ordinary shares forevery 74 existing ordinary shares which occurred in the period, are effectivelya repurchase at fair value. WH Smith PLC Notes to the Interim Financial StatementsFor the 6 months to 29 February 2008 8 Fixed charges cover_____________________________________________________________________________________________________________ 6 months to 12 months to£m 29 Feb 2008 28 Feb 2007 31 Aug 2007______________________________________________________________________________________________________________Net finance charges / (income) (3) 1 1Net operating lease rentals 79 73 149______________________________________________________________________________________________________________Total fixed charges 76 74 150Profit before tax and exceptional items 64 59 66______________________________________________________________________________________________________________Profit before tax, exceptional items and fixed charges 140 133 216______________________________________________________________________________________________________________Fixed charges cover - times 1.8x 1.8x 1.4x______________________________________________________________________________________________________________ 9 Analysis of net funds______________________________________________________________________________________________________________ At At At£m 29 Feb 2008 28 Feb 2007 31 Aug 2007______________________________________________________________________________________________________________Cash and cash equivalents 53 86 82Debt- Sterling floating rate - (12) (9)Obligations under finance leases (8) (9) (9)______________________________________________________________________________________________________________Net funds 45 65 64______________________________________________________________________________________________________________ Movements in net funds can be further analysed as follows: ______________________________________________________________________________________________________________ At At£m 29 Feb 2008 Cash flow Non-cash 31 Aug 2007______________________________________________________________________________________________________________Cash and cash equivalents 53 (29) - 82Debt - Sterling floating rate - 9 - (9)Obligations under finance leases (8) 1 - (9)______________________________________________________________________________________________________________Net funds 45 (19) - 64______________________________________________________________________________________________________________ Cash and cash equivalents comprise cash held by the Group and short-term bankdeposits with an original maturity of three months or less. The carrying amountof these assets approximates their fair value. WH Smith PLC Notes to the Interim Financial StatementsFor the 6 months to 29 February 2008 10 Net cash inflow from operating activities______________________________________________________________________________________________________________ 6 months to 12 months to£m 29 Feb 2008 28 Feb 2007 31 Aug 2007______________________________________________________________________________________________________________Operating profit from continuing operations 61 60 77Operating exceptional items - - (10)Adjustment for pension funding (5) (30) (35)Depreciation of property, plant and equipment 16 17 33Profit on sale of property, plant and equipment (1) (2) (2)Impairment of property, plant and equipment 2 2 2Amortisation of intangible assets 3 2 5Impairment of intangible assets - - 1Share-based payments 3 3 6(Increase) / decrease in inventories (14) (11) 2Increase in receivables (4) (2) (6)Increase in payables 14 6 13Income taxes (paid) / received (4) 13 5Cash spend against provisions (1) (1) (2)______________________________________________________________________________________________________________Net cash inflow from operating activities before exceptionalitems 70 57 89Cash outflow relating to exceptional operating item - (5) (6)______________________________________________________________________________________________________________Net cash inflow from operating activities 70 52 83______________________________________________________________________________________________________________ WH Smith PLC Notes to the Interim Financial StatementsFor the 6 months to 29 February 2008 11 Called Up Share Capital a) Authorised___________________________________________________________________________________________________________________ 29 Feb 2008 28 Feb 2007 31 Aug 2007___________________________________________________________________________________________________________________ Number of Nominal Number of Nominal Number Nominal shares value shares value of shares value (millions) £m (millions) £m (millions) £m___________________________________________________________________________________________________________________Equity:Ordinary shares of 20p - - 300 60 300 60Ordinary shares of 22 6/67p 272 60 - - - -___________________________________________________________________________________________________________________Total 272 60 300 60 300 60___________________________________________________________________________________________________________________ b) Allotted and fully paid___________________________________________________________________________________________________________________ 29 Feb 2008 28 Feb 2007 31 Aug 2007___________________________________________________________________________________________________________________ Number of Nominal Number of Nominal Number Nominal shares value shares value of shares value (millions) £m (millions) £m (millions) £m___________________________________________________________________________________________________________________Equity:Ordinary shares of 20p - - 183 37 183 37Ordinary shares of 22 6/67p 162 36 - - - -___________________________________________________________________________________________________________________Total 162 36 183 37 183 37___________________________________________________________________________________________________________________ On 7 September 2006, the Company reduced its authorised share capital throughthe reduction of the nominal value of each ordinary share from £1.95 each to£0.20 each, creating £320m of distributable reserves. On 20 February 2008, shareholders approved at an Extraordinary General Meeting ashare capital consolidation on the basis of 67 new ordinary shares for every 74existing ordinary shares. This provided for all of the authorised ordinaryshares of 20p (whether issued or unissued) to be consolidated into new ordinaryshares of 22 6/67p, which became effective on 22 February 2008. During February 2008, the Company repurchased 692,756 of its own shares preshare consolidation and 2,550,477 post share consolidation in the open marketfor an aggregate consideration of £13m. As at 29 February 2008, £3m of costswere outstanding in relation to shares repurchased during the period. The total number of shares disclosed at 29 February 2008 has been adjusted for544,668 shares contractually purchased by the Company before the period end,which had yet to be returned for cancellation. Since 29 February 2008, the Company has repurchased a further 4,857,714 of itsown shares in the open market as part of the Company's share buy back programme. The holders of ordinary shares are entitled to receive dividends as declaredfrom time-to-time and are entitled to one vote per share at the meetings of theCompany. WH Smith PLC Notes to the Interim Financial StatementsFor the 6 months to 29 February 2008 12 Capital Expenditure and Capital Commitments In the period, there were additions to property, plant and equipment of £12m(2007: £8m), disposals of £1m (2007: £nil) and additions to intangible assets of£nil (2007: £1m). In the financial period, there were impairments to property, plant and equipmentof £2m (2007: £2m) and impairments to intangible assets of £nil (2007: £nil). Capital commitments contracted, but not provided for by the Group, amounted to£4m (2007: £1m). 13 Contingent Liabilities__________________________________________________________________________________________________________________ At At At£m 29 Feb 2008 28 Feb 2007 31 Aug 2007__________________________________________________________________________________________________________________Banks and other loans guaranteed 5 6 5__________________________________________________________________________________________________________________ No amount has been included above for taxation that would arise in the event ofcertain international subsidiaries distributing the balance of their reserves. Other potential liabilities that could crystallise are in respect of previousassignments of leases where the liability could revert to the Group if thelessee defaulted. Pursuant to the terms of the Demerger Agreement with SmithsNews PLC, any such contingent liability, which becomes an actual liability, willbe apportioned between the Group and Smith News PLC in the ratio 65:35 (providedthat the actual liability of Smiths News PLC in any 12 month period does notexceed £5m). The Group's 65 per cent share of these leases has an estimatedfuture rental commitment at 29 February 2008 of £71m (2007: £88m). 14 Related Parties There have been no material changes to the related party transactions during theinterim period under review. 15 Post balance sheet events Since 29 February 2008, the Company has repurchased a further 4,857,714 of itsown shares in the open market as part of the Company's share buy back programme. On 18 March 2008, WH Smith PLC acquired UNS Group Limited for a cashconsideration of £19m and entered into a franchise agreement with RoadChef toopen travel units in all 29 RoadChef motorway service areas. On 17 April 2008,WH Smith PLC announced that it had reached agreement with Alpha Retail UKLimited to acquire 23 units in 11 airports and with Martin McColl to acquire 7high street stores. 16 Principal risks and uncertainties The principal risks and uncertainties which could impact the Group for theremainder of the current financial year are those detailed on page 6, 7 and 11of the Group's Annual Report and Accounts 2007. These include: competition inthe retail industry, poor economic conditions or slowdown, inability to predictaccurately or fulfil customer preference or demand, seasonal fluctuations insales, failure or interruption in product supply, failure or interruption ofinformation technology systems, lack of new store growth opportunities, relianceon the WHSmith brand, disruptions in travel, loss of tenancy contracts andchange of control clauses. A copy of the Group's Annual Report and Accounts 2007is available on the Group's website at www.whsmithplc.co.uk. WH Smith PLC Notes to the Interim Financial StatementsFor the 6 months to 29 February 2008 Statement of Directors' Responsibilities The Directors confirm to the best of their knowledge that this condensed set offinancial statements has been prepared in accordance with IAS 34 as adopted bythe European Union, and that the interim management report herein includes afair review of the information required by DTR 4.2.7 and DTR 4.2.8. The Directors of WH Smith PLC are listed in the WH Smith PLC Annual Report andAccounts 2007. By order of the Board Kate Swann Alan Stewart CA (SA)Group Chief Executive Group Finance Director INDEPENDENT REVIEW REPORT TO WH SMITH PLC We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 29February 2008 which comprises the Group income statement, the Group balancesheet, the Group reconciliation of movements in equity, the Group statement ofrecognised income and expense, the Group cash flow statement and related notes 1to 16. We have read the other information contained in the half-yearly financialreport and considered whether it contains any apparent misstatements or materialinconsistencies with the information in the condensed set of financialstatements. This report is made solely to the company in accordance with InternationalStandard on Review Engagements 2410 issued by the Auditing Practices Board. Ourwork has been undertaken so that we might state to the company those matters weare required to state to them in an independent review report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company, for our review work, for thisreport, or for the conclusions we have formed. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the Disclosure and Transparency Rules of theUnited Kingdoms' Financial Services Authority. As disclosed in note 1, the annual financial statements of the group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of financial statements included in this half-yearly financialreport has been prepared in accordance with International Accounting Standard34, "Interim Financial Reporting," as adopted by the European Union. Our responsibility Our responsibility is to express to the Company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. Scope of Review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity" issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making inquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 29 February 2008 is not prepared, in allmaterial respects, in accordance with International Accounting Standard 34 asadopted by the European Union and the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. Deloitte & Touche LLPChartered AccountantsLondon, UK17 April 2008 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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