19th Apr 2007 07:01
WH Smith PLC19 April 2007 19 April 2007 WH SMITH PLC INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 28 FEBRUARY 2007 Further progress in profitability KEY POINTS • Profit before tax and exceptional items up 7% to £59m (2006: £55m). Profits from trading operations are £51m(1) in High Street and £15m(1) in Travel, in line with expectations. • Total Group profit before tax of £59m (2006: £60m including an exceptional gain of £5m). • Total like-for-like (LFL) sales down 6% reflecting our strategy to rebalance the mix of our High Street business towards our core categories and the competitive trading in our markets. In High Street LFL sales are down 8% and in Travel LFL sales are up 4%. • Gross margin has improved by 290 basis points year on year. • Cost savings of £8m delivered ahead of plan. • Strong free cash flow of £66m. • Headline(2) earnings per share of 27.3p (2006: 26.7p) reflecting the increased number of shares as a result of the demerger following the crystallisation of Employee Savings Schemes. • Basic earnings per share of 26.7p (2006: 29.1p) reflecting the increased number of shares as a result of the demerger following the crystallisation of Employee Savings Schemes and in the prior year a £5m exceptional gain related to the settlement of post retirement medical benefits. • Interim dividend of 3.7p, up 19% on a proforma(3) basis following the demerger. • Successfully rolled out 52 WHSmith Travel motorway stores. • Agreement with Post Office Limited to open 70 Post Offices in WHSmith High Street stores. Commenting on the results, Kate Swann, Group Chief Executive said: "We are on track with our plan, delivering another period of strong profitgrowth, with Group profits up 7%. "In the High Street, we successfully continued to deliver our strategy torebuild our authority in our core categories, despite competitive trading in ourmarkets over the Christmas period. Our Travel business continued its strongperformance and completed the rollout of 52 new motorway stores in partnershipwith leading motorway service operators. "We remain cautious about consumer spending in our markets, however we areconfident 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 taxation (2) Profit before tax, exceptional items and IAS 19 pension interest - undiluted (3) Proforma based on two thirds / one third split of year end and interimdividend per the WH Smith PLC Circular dated 7 July 2006 - Ends - Enquiries: WH Smith PLCSarah Heath Media Relations 020 7851 8850Mark Boyle Investor Relations 020 7851 8820 BrunswickTom Buchanan 020 7404 5959Pam Small A summary of WH Smith PLC's Interim Results 2007 will be published in The Timesnewspaper on 20 April 2007. WH Smith PLC's Interim Results 2007 are alsoavailable at www.whsmithplc.com and a copy of the Interim Results 2007 willshortly be available for inspection at the UK Listing Authority, 25 The NorthColonnade, London, E14 5HS. CURRENT TRADING In the 6 weeks to 14 April 2007*, LFL sales were down 5% and gross margin was upon last year. * Due to the difference in the timing of Easter, this year's current tradingperiod is not comparable with last year's current trading period. FINANCIAL REVIEW Group Summary The Group generated a profit before tax and exceptional items of £59m (2006:£55m), an increase of 7% on the prior year. Profit before tax and afterexceptional items was £59m (2006: £60m). Travel profit(1) increased by 15% to£15m. This continued strong performance, with good sales and margin growth, wasdriven by mix changes, improved ranges and successful promotions. High Streetprofit(1) was £51m, in line with our expectations. We continue our strategy to rebalance the mix of our business towards our corecategories and reduce our reliance on entertainment. Entertainment isdisproportionately weighted towards the first half of the year, and consequentlythe profile of profit generation will continue, as expected, to shift towardsthe second half. Reflecting the increased number of shares as a result of the demerger followingthe crystallisation of Employee Savings Schemes, headline earnings per shareincreased to 27.3p (2006: 26.7p) with basic earnings per share of 26.7p (2006:29.1p). Basic earnings per share also reflect the prior year £5m exceptionalgain related to the settlement of post retirement medical benefits. Cash generation was strong due to good working capital control combined withimprovements in headline profit before tax(2). Group free cash flow was £66m(2006: £58m). The increase in net assets to £201m (2006: £143m) reflects thereduction in net retirement obligations and the strong cash generation. The Board has declared an interim dividend of 3.7p per share. This is anincrease of 19% on the prior year proforma(3) dividend of 3.1p reflecting theincreased profit(2) and good cash position of the business. (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 taxation (2) Profit before tax, exceptional items and IAS 19 pension interest (3) Proforma based on two thirds / one third split of year end and interimdividend per the WH Smith PLC Circular dated 7 July 2006 Trading Operations Total Group sales were down 6% to £721m (2006: £771m) with LFL sales down 6%.Profit from trading operations was £66m, as we maintained our focus on improvingprofitability and focused cost control. High Street sales were down 9% at £565m and down 8% on a LFL basis. Travel salesgrew by 4% to £156m, up 4% on a LFL basis driven by the airport business whichgrew by 8% on a LFL basis and which was 4 percentage points ahead of passengergrowth. LFL sales in rail were up 1% in the half year. For the period, High Street profit(1) was £51m (2006: £53m) and Travel profit(1)was £15m (2006: £13m), in line with our expectations. Books LFL sales were flat with gross margin up year on year as we continued tofocus on rebuilding our authority as a popular book specialist and maximisingprofitability. We continued to perform well versus the general high street, forthe fourth successive reporting period. The publishers' release schedule overChristmas contributed to this performance, with a good supply of titles thatappeal to the WHSmith customer, such as celebrity autobiographies. OverChristmas, we took high market share in front list titles such as Peter Kay'sThe Sound of Laughter. Our ongoing programme to develop and improve ranges hasdelivered good results. We have also continued our focus on infrastructure, withinvestments in IT systems to manage the returns process more efficiently, bothfor range and for promotional stock. In Travel, we have introduced new bookpromotions, such as the popular Deal of the Week, and we are also seeing anencouraging performance from our specialist bookstore format. Stationery LFL sales were down 4%. Gross margin was up driven by intra categorymix, sourcing benefits from low cost countries and better markdown management.We continue to focus on improving our ranges in this broad and diverse categorythrough a programme of category reviews, a process which we started this timelast year with Christmas seasonal ranges. The results from these were positive,with sales and margins up in boxed cards, for example. Further category reviewshave now been implemented this spring with initial signs, in areas such as PCconsumables, looking encouraging. News and Impulse LFL sales were up 1% year on year with an improvement in grossmargin. Despite a tough market, particularly for partworks, we broadly heldshare in news and magazines, supported by innovative promotions. We continued togrow our confectionery and snacking ranges by making better use of our space,putting in new ranges and equipment. We are also responding to the popularity ofhealthy snacking options by extending the range of nuts, fruits and smoothies onoffer. In Entertainment, we continued with our strategy to reduce steadily our relianceon entertainment and as we do this, we are optimising profitability.Entertainment LFL sales were down 36% in an extremely competitive market withcontinuing price deflation. Stock continues to be tightly controlled to reflectsales patterns while maintaining availability levels in line with last year. High Street High Street delivered profits(1) of £51m, in line with expectations, as wecontinued with our strategy to rebalance the mix of the business focused onrebuilding authority in our core categories, optimising margins, tight costcontrol and delivering the retail basics. Gross margin improved, driven by rebalancing the mix of our business, low costsourcing, better buying and improved markdown management. High Street delivered £8m of cost savings during the period ahead of plan. Costsavings were delivered from a number of areas of the business includinglogistics, information systems and stores. The High Street business now operates from 545 stores, which occupy 3.0m squarefeet (2006: 3.0m square feet). We opened 3 new stores during the period with onestore closing during the period. As also announced this morning, we have reached an agreement with Post OfficeLimited to open Post Offices within 70 High Street stores. This follows the successful trial of Post Office franchises in 6 High Streetstores. The integration of the Post Offices into our stores was a complexprocess but we managed it well to ensure there was no negative impact on storeperformance. Customers quickly saw the benefits of the move to WHSmith,including the convenient location in the heart of the town's shopping area, themodern and inviting Post Office environment, shorter queues, improved speed ofservice and additional services, such as longer opening hours (including Sundayopening in some stores). This agreement secures the future of Post Office services in 70 towns and thefull range of over 170 Post Office services will be on offer at the new WHSmithconcessions. In addition, there is an excellent fit between these two well-knownhigh street brands and the complementary products and services should furtherenhance our customer offer. The rollout is scheduled for completion in autumn 2008. We do not expect thePost Offices to have a material impact on profits during the current financialyear due to set up costs. Travel Travel delivered a strong performance with profit(1) increasing by 15% to £15m.This was delivered from increased sales combined with improved gross margin andtight cost control. Sales were driven by mix and space changes with furtherrange improvements in areas such as snacking. Gross margin has increased during the year through good category mix managementand further buying improvements, resulting in more sales in higher margincategories such as snacking. We have improved average transaction value byfocusing on mix changes and improved promotional activity. The Travel business now operates from 262 units, including motorway service areafranchise units. Excluding motorway service area franchise units, Traveloccupies 0.2m square feet (2006: 0.2m square feet). (1) High Street and Travel profit is stated after directly attributable definedbenefit pension service costs, share based payment costs and before central costs, exceptional items, interest and taxation We have made good progress on contracts in airports and rail. We successfullyrenewed 2 contracts in airports and 10 in rail. In the six months to 28 February2007, we opened 4 new units: 3 in airports and one in rail. During March andApril, we have opened a further 2 units in airports. The most significant area of expansion during this period has been motorwayservice areas - a new channel for Travel. This brings WHSmith's products andservices direct to motorists for the first time. The new units are an importantaddition to Travel's existing network. We now have 50 CTN* franchise units open at Moto service areas and trials areunderway with Roadchef at Watford Gap and with Welcome Break at Newport Pagnell.In addition, as previously announced, two further leased units are scheduled toopen with Swayfield in 2008. * CTN - confectionery, tobacconist, newsagent Non-operating activities Net Finance Charges These results include finance costs net of investment income of £1m (2006: £5m).The decrease is primarily due to higher investment income and lower financecharges as the Group no longer has a term loan facility. In addition, wereceived a one-off payment of interest income associated with a tax refund ofaround £1.5m during the period. Taxation In the current year we expect the rate to be around 20%, in line with the prioryear tax rate. In addition, as previously announced, during the period wereceived a tax refund of £13m; the bulk of these proceeds have been used topurchase shares to satisfy our share-based employee benefit obligations. Pensions At 28 February 2007, the gross defined benefit pension deficit was £34m (31August 2006: £66m). On 1 September 2006, the Group made a one off cashcontribution to the pension deficit of £25m. In addition the Group is committedto making ongoing pension deficit payments of £10m in the current year and ineach of the subsequent 4 years. On 10 January 2007, the Group announced that, as part of an ongoing detailedreview of the WHSmith Pension Trust ("The Trust"), it had written to employeeswho are members of the Final Salary Section of the Trust, proposing changes totheir pension arrangements which would cease service accruals for activemembers, replacing this with a defined contribution pension benefit. Theconsultation period in respect of the proposed changes to the defined benefitscheme has ended and the Company is proceeding with the implementation of thechanges, effective from 2 April 2007. WH Smith PLC Group Income Statement For the 6 months to 28 February 2007 6 months to 28 Feb 2007 6 months to 28 Feb 2006 12 months Unaudited Unaudited to 31 Aug 2006 Audited£m Note Before Exceptional Total Before Exceptional Total Total exceptional items exceptional items items itemsContinuing operationsRevenue 2 721 - 721 771 - 771 1,340 Operating profit 2,3 60 - 60 60 5 65 53Investment income 3 - 3 1 - 1 2Finance costs (4) - (4) (6) - (6) (11) Profit before tax 59 - 59 55 5 60 44Income tax expense 5 (12) - (12) (8) (2) (10) (12) Profit after tax from 47 - 47 47 3 50 32continuing operations Profit for the period 47 - 47 47 3 50 32 Earnings per share(1)Basic 7 26.7p 29.1p 18.6pDiluted 7 25.8p 28.6p 18.2p Non-GAAP measuresHeadline earnings pershare(2)Basic 7 27.3p 26.7p 25.0pDiluted 7 26.4p 26.3p 24.4p Equity dividends per 3.7pshare(3) Fixed charges cover 8 1.8x 1.7x 1.3x (1) Earnings per share is calculated in accordance with IAS 33 'Earnings perShare'. (2) Headline earnings per share excludes exceptional items and IAS 19 pensioninterest. (3) Dividend per share is the proposed interim dividend. WH Smith PLC Group Balance SheetAs at 28 February 2007 At At At 28 Feb 28 Feb 31 Aug 2007 2006 2006 £m Note Unaudited Unaudited Audited Non-current assetsGoodwill 15 15 15Other intangible assets 14 14 15Property, plant and equipment 172 184 184Available for sale investments 3 - -Deferred tax assets 23 20 29Trade and other receivables 5 5 5 232 238 248 Current assetsInventories 154 159 143Trade and other receivables 59 72 69Derivative financial assets - 1 -Cash and cash equivalents 9 86 63 66 299 295 278 Total assets 531 533 526 Current liabilitiesTrade and other payables (211) (217) (214)Current tax liabilities (32) (21) (20)Obligations under finance leases 9 (3) (4) (3)Bank overdrafts and other borrowings 9 (12) (50) (13)Short-term provisions (5) (7) (4)Derivative financial liabilities (1) - (1) (264) (299) (255) Non-current liabilitiesBank loans and other borrowings 9 - (9) -Retirement benefit obligation 4 (34) (47) (66)Deferred tax liabilities (12) (11) (13)Long-term provisions (6) (7) (8)Obligations under finance leases 9 (6) (9) (8)Other non-current liabilities (8) (8) (8) (66) (91) (103) Total liabilities (330) (390) (358) Total net assets 201 143 168 WH Smith PLC Group Balance Sheet (continued)As at 28 February 2007 Proforma At At At 28 Feb 28 Feb 31 Aug£m 2007 2006 2006 Unaudited Unaudited AuditedShareholders' equityCalled up share capital 37 353 357'B' share reserve - 2 -'C' share reserve - 1 -ESOP reserve (28) (26) (22)Revaluation reserve 3 3 3Hedging reserve (1) - (2)Translation reserve (2) (1) (2)Other reserve (164) (230) (166)Retained earnings 356 41 - Total equity 201 143 168 WH Smith PLC Group Cash Flow StatementFor the 6 months to 28 February 2007 6 months to 12 months 28 Feb 28 Feb to 31 Aug 2007 2006 2006£m Note Unaudited Unaudited Audited Net cash inflows from operating activities 10 52 63 82 Investing activitiesInterest received 3 1 2Proceeds on disposal of property, plant and 2 6 9equipmentProceeds on settlement of loan notes - 11 11Non-operating disposal costs (2) (2) (3)Purchase of property, plant and equipment (8) (9) (24)Purchase of intangible assets (1) (2) (5) Net cash (outflows) / inflows from investing activities (6) 5 (10) Financing activitiesInterest paid (1) (4) (7)Dividend paid (11) (10) (15)(Purchase) / issue of shares to satisfy employee (11) - 4share schemesRepurchase of 'C' shares - - (3)Repayments of borrowings (1) (30) (76)Repayments of obligations under finance leases (2) (2) (4)Derivative cash movements - (1) (1) Movement in balances with Smiths News PLC - 3 57business funding Net cash used in financing activities (26) (44) (45) Net increase in cash and cash equivalents - 20 15 19continuing operationsNet increase in cash and cash equivalents - - 9 8discontinued operations Net increase in cash and cash equivalents in 20 24 27period Opening net cash and cash equivalents 66 39 39 Closing net cash and cash equivalents 86 63 66 Reconciliation of net cash flow to movement in net funds / (debt) Net funds / (debt) at beginning of the period - 42 (58) (58)as reportedIAS 39 - 'B' and 'C' shares classified as - (7) (7)financial liabilitiesIncrease in cash and cash equivalents 20 24 27Decrease in debt 1 30 76Net movement in finance leases 2 2 4 Net funds / (debt) at end of the period 9 65 (9) 42 WH Smith PLC Group Statement of Recognised Income and ExpenseFor the 6 months to 28 February 2007 6 months to 12 months 28 Feb 28 Feb to 31 Aug 2007 2006 2006£m Unaudited Unaudited Audited Exchange differences arising on translation of - (1) (2)foreign operationsLoss on cash flow hedges - - (2)Actuarial gains / (losses) on defined pension 3 - (24)schemesUK deferred tax attributable to pension scheme (8) (2) 5liabilitiesUK current tax attributable to the additional 3 2 3pension scheme contributions Net income recognised directly in equity (2) (1) (20)Profit for the period 47 50 32 Total recognised income and expense for the period 45 49 12 Total recognised income and expense for the period is fully attributable to theequity holders of the parent company. Reconciliation of Movements in EquityFor the 6 months to 28 February 2007 Hedging and Share Translation Revaluation ESOP Other Retained£m Capital reserve reserve reserve reserve earnings Total Balance at 1 September 2006 357 (4) 3 (22) (166) - 168Total recognised income and - 1 - - - 44 45expense for the periodRecognition of share-based - - - - - 3 3paymentsDividends paid - - - - - (11) (11)Court approved capital (320) - - - - 320 -reductionEmployee share schemes - - - (8) 1 - (7)Transfer to available for - - - 2 1 - 3sale financial investments Balance at 28 February 2007 37 (3) 3 (28) (164) 356 201 WH Smith PLC Notes to the Interim Financial StatementsFor the 6 months to 28 February 2007 1 Basis of preparation The financial information set out in this report does not constitute statutoryaccounts within the meaning of the Companies Act 1985. The Annual Report andAccounts 2006 have been filed with the Registrar of Companies. The auditors'report on these accounts was unqualified and did not contain a statement unders237(2) or s237(3) of the Companies Act 1985. In accordance with the Listing Rules of the Financial Services Authority, theinterim financial statements have been prepared on the basis of the accountingpolicies set out in the Group's Annual Report and Accounts 2006. As permitted,the Group has chosen not to adopt IAS 34 'Interim Financial Statements' inpreparing the interim financial statements and therefore they are not in fullcompliance with International Financial Reporting Standards (IFRS). Thecomparative results for the 6 months ended 28 February 2006 have been extractedfrom the prospectus of New WH Smith PLC. In accordance with the principles of reserve acquisition accounting in IFRS 3'Business Combinations', the accounts of WH Smith PLC have been prepared as ifit had been in existence in its current Group form since 1 September 2004.Further information is set out in the accounting policies in the Group's AnnualReport and Accounts 2006. 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£m 28 Feb 28 Feb to 31 Aug 2007 2006 2006 Continuing operationsHigh Street 565 621 1,021Travel 156 150 319 Group revenue 721 771 1,340 b) Group results 6 months to 12 months£m 28 Feb 28 Feb to 31 Aug 2007 2006 2006 Continuing operationsHigh Street 51 53 42Travel 15 13 31 Trading profit 66 66 73Unallocated costs (6) (6) (13) Group operating profit before exceptional 60 60 60itemsExceptional items (note 3) - 5 (7) Group operating profit 60 65 53Investment income 3 1 2Finance costs (4) (6) (11)Income tax expense (12) (10) (12) Profit for the period 47 50 32 WH Smith PLC Notes to the Interim Financial Statements For the 6 months to 28 February 2007 2 Segmental analysis of results continued c) Geographical split The total Group revenue and operating profits for these periods originate fromthe UK / Europe region. The directors consider this to be one segment. d) Analysis of retailing stores and selling space Number of stores 1 Sept Opened Closed 28 Feb 2006 2007 High Street 543 3 (1) 545Travel 129 3 (1) 131 Total 672 6 (2) 676 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 Opened Closed 28 Feb 2006 2007 Travel 205 4 (1) 208Motorway franchise units - 36 - 36 Total 205 40 (1) 244 Retail selling square feet (000's) 1 Sept Opened Closed Space 28 Feb 2006 changes 2007 High Street 2,999 8 (1) (2) 3,004Travel 219 2 (1) 2 222 Total 3,218 10 (2) - 3,226 3 Exceptional items There were no exceptional items recorded in the period to 28 February 2007. In the prior year, the following results were recorded: a) Settlement of Post Retirement Medical Benefit Scheme In September 2005, members of the post retirement medical benefits scheme were offered the option to be bought out of the scheme, which was accepted by the majority of members. A gain of £5m (before tax) arose from the settlement of this scheme, which has been recognised in the income statement for the period. b) Costs of demerger from Smiths News PLC At 31 August 2006, the Group incurred a £12m exceptional charge in relation to costs associated with the demerger from Smiths News PLC. WH Smith PLC Notes to the Interim Financial StatementsFor the 6 months to 28 February 2007 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. The scheme is independent of the Company and isadministered by a Trustee. The Trustee of the Pension Trust has extensive powersover the pension plans' arrangements, including the ability to determine thelevels of contribution. On the date of demerger, 31 August 2006, the assets and liabilities of thePension Trust and the WH Smith Retirement Savings Plan (a defined contributionplan) were split between the Smiths News business and the Retail business by wayof a 'sectionalisation'. Each section only contains the accounts of members whoare or were employed by the relevant business. There will be no cross-subsidy orcross-guarantees between the sections of the Pension Trust. The assets and liabilities of the defined benefit scheme were allocated to theSmiths News business section and the WHSmith Retail business section inproportions that reflected the related liabilities of active, deferred,pensioner and orphan members belonging to the respective Smiths News and Retailbusinesses. The WHSmith Pension Trust The valuation of the defined benefit pension scheme used for the IAS 19disclosures is based upon the most recent valuation. Scheme assets are stated attheir market value at the relevant reporting date. The market value of the assets in the schemes and the present value of theliabilities in the schemes were: £m At At At 28 Feb 2007 28 Feb 2006 31 Aug 2006Continuing operationsPresent value of the obligations (699) (696) (674)Fair value of plan assets 665 649 608 Retirement benefit obligation recognised in the (34) (47) (66)balance sheetDeferred taxation 10 14 20 Net retirement obligation (24) (33) (46) Movement in retirement benefit obligation during the period: 6 months to 12 months to£m 28 Feb 2007 28 Feb 2006 31 Aug 2006 At beginning of period (66) (53) (53)Current service cost (3) (3) (6)Interest cost (1) (1) (3)Contributions 33 10 20Actuarial gains and losses 3 - (24) At end of period (34) (47) (66) WH Smith PLC Notes to the Interim Financial StatementsFor the 6 months to 28 February 2007 4 Retirement benefit obligation continued The WHSmith Pension Trust continued On 10 January 2007, the Company announced proposals to bring the pensionarrangements of members of the WHSmith Pension Trust in line with those of theWH Smith Retirement Savings Plan. The consultation period in respect of theproposed changes has ended with the effective date of closure to service accrualbeing 2 April 2007. The actuarial impact of these changes on the pensionliabilities, if any, will be reflected as a curtailment in the year endaccounts. 5 Income tax expense 6 months to 12 months to£m 28 Feb 28 Feb 31 Aug 2007 2006 2006 Current tax - current year 20 8 6 - prior year (8) (10) (7)Deferred tax - 12 13 Income tax expense for the period 12 10 12 Effective tax rate - continuing operations 20% 15% 20% Income tax for the period, using the domestic corporation tax rate, is chargedat 30% (28 February 2006: 30% and 31 August 2006: 30%). 6 Dividends Amounts recognised as distributions to shareholders in the period are asfollows: 6 months to 12 months to£m 28 Feb 28 Feb 31 Aug 2007 2006 2006 DividendsInterim - paid - - 5Final - paid 11 10 10 11 10 15 In addition, the directors are recommending an interim dividend in respect ofthe period ending 28 February 2007 of 3.7p per ordinary share, which will absorban estimated £7m of shareholders' equity. This will be paid on 14 June 2007 toshareholders registered at the close of business on 25 May 2007. WH Smith PLC Notes to the Interim Financial StatementsFor the 6 months to 28 February 2007 7 Earnings per share a) Earnings 6 months to 12 months to£m 28 Feb 28 Feb 31 Aug 2007 2006 2006 Headline earnings attributable to shareholders 48 46 43Pension interest net of related taxation (1) (1) (2)Exceptional items net of related taxation - 5 (9) Profit attributable to shareholders 47 50 32 b) Basic earnings per share 6 months to 12 months toPence 28 Feb 28 Feb 31 Aug 2007 2006 2006 Headline earnings per share (note a) 27.3 26.7 25.0Pension interest net of related taxation (0.6) (0.5) (1.2)Exceptional items net of related taxation - 2.9 (5.2) Earnings per share (note b) 26.7 29.1 18.6 c) Diluted earnings per share 6 months to 12 months toPence 28 Feb 28 Feb 31 Aug 2007 2006 2006 Headline earnings per share 26.4 26.3 24.4Pension interest net of related taxation (0.6) (0.5) (1.1)Exceptional items net of related taxation - 2.8 (5.1) Earnings per share 25.8 28.6 18.2 Diluted earnings per share takes into account various share awards and 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 28 Feb 28 Feb 31 Aug 2007 2006 2006 Weighted average shares in issue for earnings per 176 172 172shareAdd weighted average number of ordinary shares 6 3 4under optionWeighted average ordinary shares for diluted 182 175 176earnings per share (a) Headline earnings per share has been calculated using profit after tax but before exceptional items and IAS 19 net interest charges on the defined benefit pension scheme. (b) Basic earnings per share has been calculated using profit after tax and exceptional items. WH Smith PLC Notes to the Interim Financial StatementsFor the 6 months to 28 February 2007 8 Fixed charges cover 6 months to 12 months to£m 28 Feb 28 Feb 31 Aug 2007 2006 2006 Net finance charges 1 5 9Net operating lease rentals 73 72 148 Total fixed charges 74 77 157Profit before tax and exceptional items 59 55 51 Profit before tax, exceptional items and fixed 133 132 208charges Fixed charges cover - times 1.8x 1.7x 1.3x 9 Analysis of net funds / (debt) At At At£m 28 Feb 28 Feb 31 Aug 2007 2006 2006 Cash and cash equivalents 86 63 66Debt- Sterling floating rate (12) (30) (13)- Sterling fixed rate - (22) -- 'B' and 'C' shares classified as financial - (7) -liabilitiesObligations under finance leases (9) (13) (11) Net funds / (debt) 65 (9) 42 Movements in net funds can be further analysed as follows: £m At Cash Non-cash At 28 Feb flow 31 Aug 2007 2006 Cash and cash equivalents 86 20 - 66Debt- Sterling floating rate (12) 1 - (13)Obligations under finance leases (9) 2 - (11) Net funds 65 23 - 42 Cash and cash equivalents comprise cash held by the Group and short-term bankdeposits with an original maturity of three months or less. The carrying amountof these assets approximates their fair value. At 28 February 2007 floating rate debt comprises of £12m of unsecured loan notes(redeemable at par on demand up until expiry on 28 February 2008) bearinginterest at a rate of 100 basis points below six month LIBOR. WH Smith PLC Notes to the Interim Financial StatementsFor the 6 months to 28 February 2007 10 Net cash inflow from operating activities 6 months to 12 months to£m 28 Feb 28 Feb 31 Aug 2007 2006 2006 Operating profit from continuing operations 60 65 53Operating exceptional items - (5) 7Adjustment for pension funding (30) (4) (12)Depreciation of property, plant and equipment 17 16 30Profit on sale of property, plant and (2) (2) (5)equipmentImpairment of property, plant and equipment 2 1 3Amortisation of intangible assets 2 2 4Share-based payments 3 3 6(Increase) / decrease in inventories (11) (11) 6(Increase) / decrease in receivables (2) 1 7Increase / (decrease) in payables 6 - (4)Income taxes received / (paid) 13 - (2)Cash spend against provisions (1) (1) (3) Net cash inflow from operating activities before 57 65 90exceptional itemsCash outflow relating to exceptional operating item (5) (2) (8) Net cash inflow from operating activities 52 63 82 11 Approval of Interim Statement The Interim Statement was approved by the Board of Directors on 19 April 2007. INDEPENDENT REVIEW REPORT TO WH SMITH PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 28 February 2007 which comprises the Group IncomeStatement, the Group Balance Sheet, the Group Cash Flow Statement, the GroupStatement of Recognised Income and Expense, the Reconciliation of Movements InEquity and related notes 1 to 11. We have read the other information containedin the interim report and considered whether it contains any apparentmisstatements or material inconsistencies with the financial information. This report is made solely to the Company in accordance with guidance containedin Bulletin 1999/4 issued by the Auditing Practices Board. Our work has beenundertaken so that we might state to the Company those matters we are requiredto state to them in an independent review report and for no other purpose. Tothe fullest extent permitted by law, we do not accept or assume responsibilityto anyone other than the Company, for our review work, for this report, or forthe conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of Group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) 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 thatshould be made to the financial information as presented for the six monthsended 28 February 2007. Deloitte & Touche LLPChartered AccountantsLondon19 April 2007 -------------------------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Wh Smith