REG - WH Smith PLC - INTERIM RESULTS ANNOUNCEMENT
25/04/2024 07:00
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RNS Number : 9391L WH Smith PLC 25 April 2024
25 April 2024
WH SMITH PLC
The global travel retailer
INTERIM RESULTS ANNOUNCEMENT
FOR THE SIX MONTHS ENDED 29 FEBRUARY 2024
Good first half performance; Group well positioned for peak summer trading
period
and on track to deliver full year expectations
· Total Group revenue up 8% to £926m (2023: £859m)
o Total revenue in Travel up 13%, with Travel UK up 15% year on year; North
America up 13%*; Rest of the World ('ROW') up 24%*
· Headline Group profit before tax and non-underlying items(1) of £46m
(2023: £45m)
o Total Travel trading profit(†1) of £50m (2023: £47m)
o High Street trading profit(†1) of £22m (2023: £24m)
· Headline diluted EPS before non-underlying items(1) up 5% to 24.4p
· Investing for growth with capex in the current financial year
expected to be around £140m
· New store pipeline of over 80 stores(2) won and yet to open in
Travel, including over 50 in North America. Expect to open c.110 stores this
financial year
· Interim dividend of 11.0p per share, reflecting strong trading and
cash generation combined with confidence in future prospects
· Strong balance sheet with leverage(1) now at 1.8x with further
strengthening expected
· Good start to the second half. Trading momentum continues ahead of
peak summer period
Carl Cowling, Group Chief Executive, commented:
"The Group is in its strongest ever position as a global travel retailer. We
have had a good first half and our businesses are well positioned for the peak
summer trading period. Total Travel revenue is up 13%. The Board is today
announcing an interim dividend of 11.0p reflecting current trading and the
significant medium and long term prospects for our global travel business.
"Our Travel divisions are trading well and I am particularly pleased with the
outstanding performance from our UK Travel business which has seen a 19%
increase in trading profit. We continue to make excellent progress in this
division, growing our space and broadening our categories as we transition to
a one-stop-shop for travel essentials.
"In North America, it has been a very active period where we have opened a
further 13 stores. We have also now fully integrated InMotion into our core
airport business. This will allow us to sell tech accessories more effectively
across our North American airport estate and generate operational
efficiencies.
"None of this would be possible without the exceptional efforts of the entire
team and I am extremely grateful for their ongoing commitment and hard work.
"The second half of the financial year has started well, and we are on track
to deliver full year expectations. We are confident that 2024 will be another
year of significant progress for the Group."
* On a constant currency basis
(†) Pre-IFRS 16
(1) Alternative Performance Measure (APM) defined and explained in the
Glossary on page 40
(2) Pipeline as at 29 February 2024
Group financial summary
Headline
IFRS pre-IFRS 16(3)
6 months to 6 months to 6 months to 6 months to Feb 2023
Feb 2024 Feb 2023 Feb 2024
Travel UK trading profit(1) £39m £31m £37m £31m
North America trading profit(1) £14m £16m £14m £14m
Rest of the World ('ROW') trading profit/(loss)(1) £1m £2m £(1)m £2m
Total Travel trading profit(1) £54m £49m £50m £47m
High Street trading profit(1) £27m £32m £22m £24m
Group profit from trading operations(1) £81m £81m £72m £71m
Group profit before tax and non-underlying items(1) £44m £47m £46m £45m
Diluted earnings per share before non-underlying items(1) 22.9p 24.8p 24.4p 23.3p
Non-underlying items(1) £(16)m £(2)m £(14)m £(2)m
Group profit before tax £28m £45m £32m £43m
Basic earnings per share 13.2p 24.6p 15.5p 23.1p
Diluted earnings per share 13.0p 24.1p 15.2p 22.6p
Revenue performance
6 months to Feb 2024 6 months to Feb 2023 % change % change (constant currency)
£m £m
Travel UK 360 314 15% 15%
North America 189 177 7% 13%
Rest of the World 121 102 19% 24%
Total Travel 670 593 13% 15%
High Street 256 266 (4)% (4)%
Group 926 859 8% 9%
(3) The Group adopted IFRS 16 'Leases' with effect from 1 September 2019. The
Group continues to monitor performance and allocate resources based on
pre-IFRS 16 information (applying the principles of IAS 17), and therefore the
results for the periods ended 29 February 2024, 31 August 2023 and 28 February
2023 have been presented on both an IFRS 16 and a pre-IFRS 16 basis.
Measures described as 'Headline' are presented pre-IFRS 16.
For the purposes of narrative commentary on the Group's performance and
financial position, both pre-IFRS 16 and IFRS 16 measures are provided.
Reconciliations from pre-IFRS 16 measures to IFRS 16 measures are provided in
the Glossary on page 40.
ENQUIRIES:
WH Smith PLC
Nicola Hillman Media Relations 01793 563354
Mark Boyle Investor Relations 07879 897687
Brunswick
Tim Danaher 020 7404 5959
WH Smith PLC's Interim Results 2024 are available at whsmithplc.co.uk
(http://www.whsmithplc.co.uk) .
GROUP OVERVIEW
The Group has had a good first half with Total Travel generating Headline
trading profit(1) of £50m (2023: £47m), Headline Group profit before tax and
non-underlying items(1) up 2% to £46m (2023: £45m) and Headline diluted EPS
before non-underlying items(1) up 5% to 24.4p (2023: 23.3p).
We continue to see strong momentum across all our markets as we benefit from
growing passenger numbers. We also see further growth ahead from increasing
our spend per passenger and average transaction value ("ATV"), expanding our
categories, and expanding our space by continuing to win new stores across the
globe utilising our broad suite of brands.
The pace of winning new business in Travel remains strong. Across the UK,
North America and ROW we won 31 stores in the half and now have over 80 stores
won and due to open, of which we expect to open over 55 in the second half of
this financial year. In total, we expect to open c.110 stores this financial
year, and close c.60 as we focus on better quality space.
Travel is well positioned to continue to create value through the structurally
advantaged markets in which it operates and the considerable opportunities to
win and open additional stores. Analysis from the International Air Transport
Association suggests that passenger numbers will grow in low single digits
each year over the medium term.
Our forensic approach to retailing combined with the scalability of our
business internationally provides us with significant opportunities to win and
open new stores and with that to continue to grow revenue, profit, cash
generation, and through operational gearing, grow our EBIT margins.
The transformation of our UK Travel business from a news, books and
convenience retailer to a one-stop-shop for travel essentials is progressing
very well. Our one-stop-shops are delivering good results and we still have
significant scope to further maximise the opportunities that this
transformation provides. By using our forensic approach to retailing, we are
able to consolidate existing categories and introduce new ones such as tech
accessories, food and health and beauty. This transformation is most evident
in our largest stores at London Heathrow, London Gatwick and Birmingham
airports. We see significant opportunities to roll this format out across all
stores and channels. The rollout is well progressed in the UK, while across
our North America and ROW divisions we are only at the very start of this
journey. This format is proving a winning formula not only for customers but
also landlords, and it improves profitability.
We have made substantial progress, supported by the key pillars of our
strategy and our ongoing forensic approach to retailing across each of our
businesses.
These include:
· Space growth:
o Opening new stores;
o Winning new business;
o New, better quality space;
o Extending contracts;
o Developing formats and brands
· ATV growth:
o Space management;
o Refitting stores;
o Range development
· Category development:
o One-stop-shop travel essentials format;
o Internationalising the InMotion brand;
o Improving ranges, e.g. health and beauty, food to go, and tech
· Cost and cash management:
o Flexible rent model;
o Investing for growth (capex in the current financial year expected to be
around £140m);
o Productivity and efficiencies
· Disciplined capital allocation, supporting investment in growth and
shareholder returns
In the first half, Total Travel was approximately 72% of Group revenue and 69%
of Headline Group profit from trading operations(1). Both of these measures
will increase as we continue to grow Travel.
Group revenue
7 weeks to
6 months to Feb 2024 20 April 2024
Total revenue Total revenue at constant currency LFL revenue(1) Total revenue at constant currency
vs 2023 vs 2023(4) vs 2023 vs 2023(4)
Travel UK 15% 15% 13% 9%
North America 7% 13% -% 4%
Rest of the World 19% 24% 12% 17%
Total Travel 13% 15% 10% 9%
High Street(5) (4)% (4)% (2)% (4)%
Group 8% 9% 6% 6%
(4) Constant currency
(5) Includes internet businesses
Total Group revenue at £926m (2023: £859m) was up 8% for the first six
months compared to the prior year.
In Travel, we saw a strong performance across all our markets. Total Travel
revenue for the first half was up 15%(4) and up 10% on a like-for-like(1)
('LFL') basis. This was driven by strong performances in all three Travel
divisions with Total sales in the UK up 15%, North America up 13%(4), and ROW
up 24%(4).
We saw a good performance in High Street throughout the period, with store LFL
revenue up 1% year on year during the important Christmas trading period.
In the 7 week period to 20 April 2024, Total Travel revenue was up 9%(4) with
all three divisions continuing to perform well. As expected, we have seen
lower growth rates in the second half to date as we annualise the strong
recovery in passenger numbers in the second half of 2023. Spend per passenger
remains strong. In North America, the change in growth rate reflects the
timing of the store opening programme.
Group profit
For the six month period to 29 February 2024, Total Travel delivered a
Headline trading profit(1) of £50m (2023: £47m).
In Travel UK, Headline trading profit(1) increased by £6m to £37m. Momentum
is strong and we are seeing good results, with revenue growing ahead of
passenger numbers. In North America, Headline trading profit(1) was £14m in
line with the prior year, reflecting significant investment to support growth
in the period. ROW delivered a Headline trading loss(1) of £1m, reflecting
pre-opening costs and investment in new stores in the half as we continue to
build the business. We expect second half profit in all three divisions to be
up on last year.
High Street delivered a Headline trading profit(1) of £22m (2023: £24m), in
line with expectations.
Headline Group profit from trading operations(1) for the period was £72m
(2023: £71m) with Headline Group profit before tax and non-underlying
items(1) at £46m (2023: £45m).
Group balance sheet
The Group has a strong balance sheet, is highly cash generative and has
substantial liquidity.
The Group has the following cash and committed facilities as at 29 February
2024:
29 February 2024 Maturity
Cash and cash equivalents(6) £44m
Revolving Credit Facility(7) £400m June 2028
Convertible bonds £327m May 2026
(6) Cash and cash equivalents comprises cash on deposit of £27m and cash in
transit of £17m
(7) Draw down of £176m as at 29 February 2024
The Group has a 5 year sustainability-linked revolving credit facility ('RCF')
and a £327m convertible bond with a maturity of 7 May 2026 which has a fixed
coupon of 1.625%.
As at 29 February 2024, Headline net debt(1) was £437m (31 August 2023:
£330m) and the Group has access to c. £251m of liquidity (£27m cash on
deposit and £224m undrawn RCF). Leverage(1) at 29 February 2024 was 1.8x
Headline EBITDA(1) (28 February 2023: 2.0x). We expect to be within our
leverage envelope of between 0.75x and 1.25x Headline EBITDA(1) by the end of
the current financial year.
Group cash flow
The Group generated an operating cash flow(1) of £94m (2023: £90m) in the
half, demonstrating the cash generative nature of the business. Capex was
£65m (2023: £60m) as we continue to invest in new stores, where we get
returns well ahead of our cost of capital. As expected, we had a working
capital outflow of £68m(8) in the first half (2023: £79m). Of this outflow,
most results from the usual working capital cadence in the Group where there
has been a large working capital outflow in the first half due to the
seasonality in the Travel business. As the Travel businesses grows, we will
see greater seasonality in our cash flows. The balance mainly relates to the
investment in new stores. In total, there was a free cash outflow in the half
of £56m (2023: £66m).
For the full year, we expect to generate a free cash inflow, reflecting the
normal working capital cadence of the Group and the substantial level of
operating cash flows(1) generated by the Group during the second half. We
anticipate full year Headline net debt(1) to be in the region of £330m.
Capital allocation policy
The cash generative nature of the Group is complemented by our disciplined
approach to capital allocation. This has been in place for many years and
continues to drive our decision making for utilising our cash:
· First, investing for growth in our existing business and in new
opportunities where rates of return are ahead of the cost of capital. This
financial year, we expect capex of c.£140m. The returns in Travel are good
with ROCE(9) in the UK at 32%, North America at 15% and ROW at 16%.
· Second, paying a dividend, we have a progressive dividend policy with
a target dividend cover, over time, of 2.5x; the Board is declaring an interim
dividend of 11.0p per share
· Third, undertaking attractive value-creating acquisitions in strong
and growing markets;
· And, fourthly, returning surplus cash to shareholders via share buy
backs.
The Board has declared an interim dividend of 11.0p per share. This reflects
our strong start to the year, the cash generative nature of the business and
our confidence in the future prospects of the Group. Our intention is to
return, in time, to a cover ratio of around 2.5 times earnings(10), paid on an
interim and final basis on a 1/3:2/3 split. The dividend will be paid on 1
August 2024 to shareholders registered at the close of business on 12 July
2024.
(8) Pre-IFRS 16
(9) Return on capital employed. ROCE is an Alternative Performance Measure
(APM) defined and explained in the Glossary on page 40.
(10) Headline diluted earnings per share, before non-underlying items.
TOTAL TRAVEL
Total Travel revenue for the period was £670m (2023: £593m), up 13% compared
to the previous year, generating a Total Travel Headline trading profit(1) of
£50m (2023: £47m).
Trading profit(1) Headline trading profit/(loss)(1)
(IFRS) (pre-IFRS 16) Revenue
£m 6 months to Feb 2024 6 months to Feb 2023 6 months to Feb 2024 6 months to Feb 2023 6 months to Feb 2024 6 months to Feb 2023
Travel UK 39 31 37 31 360 314
North America 14 16 14 14 189 177
Rest of the World 1 2 (1) 2 121 102
Total Travel 54 49 50 47 670 593
In Travel, our initiatives position us well for continued growth:
· Space growth - Business development and winning new business
Through building and managing relationships with all our landlord partners, we
look to win new space, improve the quality and amount of space, develop new
formats and extend contracts. During the half we opened 53 stores and we have
won 31 additional stores. We now have a store pipeline of over 80 stores,
which are due to open over the next three years. Going forward, we expect to
win, on average, 50-60 stores each year. There are significant space growth
opportunities across all our Travel markets.
· ATV growth and spend per passenger
We aim to grow ATV through our forensic analysis of the return on our space,
cross-category promotions, merchandising, store layouts and store refits. The
transition of many of our units to a one-stop-shop for travel essentials is an
important driver of this growth. During the period, we have continued to focus
on re-engineering our ranges and we continue to see good ATV growth across all
our channels.
· Category development
We do this by developing adjacent product categories relevant for our
customers, such as health and beauty and tech ranges, and expanding existing
categories such as premium food ranges. Throughout the half, we have focused
on identifying further opportunities where we can reposition our traditional
news, books and convenience ('NBC') format to a one-stop-shop travel
essentials format. The results from our one-stop-shop travel essentials format
have been positive for both our customers and our landlords.
· Cost and cash management
We remain focused on cost efficiency and productivity, for example, by
continuing to invest in energy efficient chillers across our stores, and
investing in our supply chain capabilities in North America to more
effectively serve our growing store estate on the East Coast of the US.
TRAVEL UK
Travel UK, our largest division, has delivered a very strong first half
performance and we continue to see good opportunities to grow this division
further.
Total revenue in the period was £360m (2023: £314m) which, together with
improved margins, resulted in a Headline trading profit(1) of £37m (2023:
£31m).
Across all our channels, we continue to focus on our key growth drivers: space
growth, increasing ATV and spend per passenger, driving EBIT margins and
benefitting from the growth in passenger numbers. Momentum is strong and we
are seeing good results, with revenue growing ahead of passenger numbers.
Air passenger numbers are a key growth driver, and they are forecast to grow
in the short and medium term. All our channels in Travel UK have performed
strongly in the period with total revenue growth of 15% versus last year. The
second half has also started strongly with total revenue up 9% versus last
year for the first 7 weeks.
We are investing in our UK store portfolio while also identifying new and
better quality space opportunities across each of our channels. During the
half, we have made good progress opening 5 new stores, including 1 airport, 2
hospitals and 2 rail stores, including a standalone InMotion store at London
Euston Station. We are on track to open a further 10 stores in the second half
of the financial year. We see this annual space growth of around 10 to 15 new
stores in Travel UK extending into the medium term. We closed 3 small and less
well located stores in the half.
Revenue Growth by Channel
6 months to Feb 2024 7 weeks to 20 April 2024
Total revenue LFL revenue(1) Total revenue
vs 2023 vs 2023 vs 2023
Air 14% 14% 8%
Hospitals 16% 14% 15%
Rail 17% 13% 7%
Total Travel UK 15% 13% 9%
Air
Air, which is the biggest channel in Travel UK, delivered a strong performance
with total revenue up 14% and LFL revenue also up 14% on the prior year.
We continually develop our retail formats to better address the changing
requirements of airport landlords and customers. Our one-stop-shop format is a
great example of how we evolve our travel retail formats. It is delivering
good results, improving profitability and generating significant
opportunities. We see plenty of scope to extend this format further in Air.
During the half, we opened our 6,000 sq ft flagship one-stop-shop for travel
essentials store at Birmingham airport. The store is performing well and is
trading ahead of plan.
This store offers a localised design tailored to the requirements of the
landlord and provides passengers with a bespoke customer experience,
encompassing everything you would expect from a WHSmith, as well as a broader
product range, including health and beauty, a tech zone, food and a coffee
offer.
Our one-stop-shop formats have extended categories such as health and beauty,
tech accessories and food to go. We are therefore able to provide time-pressed
customers with all their travel essentials under one roof with a fast and
convenient shopping experience which has resulted in an increase in sales per
square foot, a higher ATV and spend per passenger. This delivers superior
returns with improved margins and attractive economics for our landlords.
Hospitals
The Hospitals channel, our second largest channel in Travel UK by revenue,
continued its very strong growth with total revenue up 16% and LFL revenue up
14% in the half.
During the half, we have focused on further improving our retail proposition
for the specific needs of hospital staff, visitors and patients by providing
an increased range of food, health and beauty products and tech accessories.
We see further significant scope to improve customer conversion.
There are good growth opportunities for us in this channel through increasing
space using our broad suite of brands (WHSmith, Marks & Spencer Simply
Food, Costa Coffee, and our proprietary coffee brands). During the half, we
opened 2 new stores, including our new coffee concept at Sheffield Hallam
Hospital under the District Market Coffee brand. We are excited by the
opportunity to grow our coffee and food offer. We see scope for at least one
of our formats in up to 200 further hospitals.
Rail
Rail is also an attractive market. During the half, we delivered a strong
performance with total revenue up 17% and LFL revenue up 13%.
We continue to invest in new formats and in new opportunities in Rail which
meet landlord and customer needs. This includes improving ranges to increase
spend per passenger and customer conversion and driving ATV growth. For
example, the opening of a new InMotion store at Euston station and widening
our health and beauty ranges across many of our rail stores. We are seeing
very good results.
As at 29 February 2024, Travel UK had 590 stores. Over the next three years,
we expect to win and open an additional 10 to 15 stores each year in Travel
UK, with the majority of the new stores in the Hospitals channel.
NORTH AMERICA
North America is the Group's most exciting opportunity for growth. This
division has become an increasingly significant part of the Group and is now
our second largest division in full year profit terms, after Travel UK.
During the half, we delivered a good performance as passenger numbers in Air
continued to grow. We have increased revenue by 13% on a constant currency
basis, improved gross margins and we continue to invest in our store estate.
Total revenue was £189m (2023: £177m), an increase of 7%. Headline trading
profit(1) was £14m (2023: £14m) reflecting significant investment to support
growth in the period.
Our approach in North America is different to our approach in the UK. Given it
is in a much earlier stage of development, our focus for this division is and
has been centred on winning and opening new stores with a target of building
market share to 20% over the next four years. The new space opportunities are
substantial. Our analysis of the North American market shows that there is a
total of approximately 2,000 news and gift and specialty retail stores across
the top 70 airports, of which we currently operate or have won over 260
stores(11). This demonstrates the scale of opportunity in this market and
gives us confidence in growing our market share.
A key driver of our growth has been our ability to win significant new
tenders. We are currently part of more live tenders than we have ever been
involved in before and we continue to grow the business at pace. We opened a
further 13 stores in the period increasing our market share and improving the
quality of our space. This included opening some significant new stores at
Salt Lake City, Nashville, Boston, La Guardia, Denver, Chicago O'Hare,
Washington Ronald Reagan, Las Vegas and Los Angeles airports. Early results
are good, and customer and landlord feedback has been positive. During the
period, we also closed 11 stores, consistent with our strategy of improving
the quality of our store estate.
We still have a very strong pipeline of new store openings. So far this year,
we have won an additional 7 stores, including stores at Las Vegas and Palm
Springs airports and Rio Las Vegas resort. This takes our new store pipeline
to over 50 stores due to open.
Including the 13 store openings in the first half, we now have 236 stores in
Air (including 120 InMotion stores), 91 stores in Resorts and 2 stores in
Rail.
In addition to winning new and better quality space, we also see significant
scope to improve our existing business through applying the forensic approach
to retailing which has been so successful in the UK to the North American
market.
During the half, we have combined our core MRG airport business with our
InMotion business bringing a number of strategic and operational benefits
which will drive improved returns. These include introducing tech accessories
into our MRG stores and optimising the operational structure of our teams
across the airports in which we operate. We now have one manager per terminal
in airports supporting both the MRG and InMotion stores.
This combination of MRG Air and InMotion will be described as North America
Air and now accounts for approximately 75% of total North America revenue. We
will now report one LFL metric for our North America Air business going
forward and in the first half we saw Air LFL up 2%. Trends in our smaller
Resorts business remain as previously reported.
(11) Including stores won and yet to open
We continuously review our ranges to drive productivity and returns. During
the second half, we will be introducing more drinks chillers into stores
thereby increasing the space for drinks by c.20% for an average store. We have
also invested in furthering our supply chain capabilities on the East Coast
with a new consolidation centre being implemented in New Jersey. This approach
will provide efficiencies by combining all direct deliveries from our
suppliers to New York airports and Atlantic City into one delivery centre,
therefore reducing costs and enabling a single combined delivery direct to our
stores.
While some of this investment has meant that we have seen flat profits in the
first half, these initiatives will be a key driver of growth and put us in a
strong position for the second half. Importantly, they will also support the
longer term sustainable success of the business.
Our North American business is subject to changes in the GBP:USD exchange
rates. A 5 cent move results in a change of £2m to trading profit(1) in the
second half. The first half was negatively impacted by £1m compared to the
prior year due to changes in exchange rates.
Our North American business is trading well with total revenue in the first 7
weeks of the second half up 4%(4) and is well-placed for growth this year and
beyond. The change in the growth rate reflects timing of the new store opening
programme.
REST OF THE WORLD
Total revenue for the half in ROW was up 19% and LFL revenue up 12% on the
prior year. Revenue in the first 7 weeks of the second half was up 17%(4) on
the prior year. Headline trading loss(1) was £1m (2023: profit of £2m)
reflecting pre-opening costs and investment in new stores in the half as we
continue to build the business in this division. We expect profit in the
second half to be up on last year.
Our strategy for this division is clear: to enter key countries, build our
presence from a small base, better understand the market, create efficiencies
(such as our EU distribution hub), and build global supplier relationships,
while at the same time delivering good returns. We are now present in 29
countries and the scalability of the Group's retail formats means there are
significant market share opportunities across multiple territories. We will
continue to use our three operating models of directly run, joint venture and
franchise, in order to maximise value and win new business.
During the half, we opened 35 new stores, including stores in Australia, Spain
and Sweden. We also recently opened our new 2,900 sq ft flagship store at
Budapest Airport, a new market for WHSmith. In the balance of this financial
year, we anticipate opening a further 16 new stores.
We continue to see good opportunities to win new business in the tech
accessories market under our InMotion brand. InMotion is now a globally
recognised brand with interest coming from all over the world. To date, we
have won a total of 13 InMotion stores outside of the UK and North America, of
which 12 are open.
We remain well positioned to benefit from further opportunities as more space
becomes available. We now have 351 stores open and a further 22 won and yet to
open. Of the 351 stores open, 50% are directly-run, 8% are joint venture and
42% are franchise.
Total Travel stores
During the half, we opened 53 stores in Travel. As at 29 February 2024, our
global Travel business operated from 1,270 units (31 August 2023: 1,253
units). As part of our strategy to improve the quality of our space, we closed
36 stores in the period, mostly smaller, less well-located stores. Excluding
franchise units, Travel occupies 1.1m square feet. See page 17 for analysis of
store numbers by region.
No. of stores At 31 Opened Closed At 29
August 2023 February 2024
Travel UK 588 5 (3) 590
North America 327 13 (11) 329
Rest of the World 338 35 (22) 351
Total Travel 1,253 53 (36) 1,270
HIGH STREET
High Street delivered a good performance in the half, in line with
expectations, with Headline trading profit(1) of £22m (2023: £24m) and
revenue of £256m (2023: £266m). We continue to manage the business tightly,
keeping focused on costs and cash generation.
As we grow Travel, this division is becoming a smaller part of the overall
Group. The High Street division which now accounts for around 15% of full year
Group profit from trading operations(1), is profitable and highly cash
generative.
Our strategy for our High Street business is clear and consistent - to manage
our space to maximise returns and maintain a flexible cost structure - and the
strategy remains as relevant today as it has ever been and focuses on
delivering robust and sustainable cash flows and profits.
We utilise our space to maximise returns in ways that are sustainable over the
longer-term. We have extensive and detailed space and range elasticity data
for every store which we use to allocate space in categories.
As part of our approach to space management, we will be extending our
partnership with Toys"R"Us in the second half. We have recently signed a new
exclusive agreement to deliver a further 30 store-in-stores by the end of this
financial year. This follows a successful launch last year and will provide
customers in these locations with an improved toys and games offer.
Driving efficiencies remains a core part of that strategy and we continue to
focus on all areas of cost in the business. During the first half, we have
delivered savings of £8m and we are on track to deliver savings of £13m in
the current year. These savings come from right across the business, including
rent savings at lease renewal (on average around 40%) which continue to be a
significant proportion, marketing efficiencies and productivity gains from our
supply chain.
Over the years, we have actively looked to put as much flexibility into our
store leases as we can, which means we are well positioned to respond to
changing market conditions. The average lease length in our High Street
business, including where we are currently holding over at lease end, is under
two years. We only renew a lease where we are confident of delivering economic
value over the life of that lease. We have c.475 leases due for renewal over
the next three years, including over 100 where we are holding over and in
negotiation with the landlord. The store closure process is broadly cash
neutral.
As at 29 February 2024, the High Street business operated from 506 stores (31
August 2023: 514) which occupy 2.5m sq ft (31 August 2023: 2.5m sq ft). 8
stores were closed in the period.
Funkypigeon.com delivered total revenue of £18m (2023: £17m) and Headline
EBITDA(1) of £2m (2023: £1m). We continue to see opportunities to grow the
platform further and grow revenue and profits over the medium-term.
ENVIRONMENTAL, SOCIAL AND CORPORATE GOVERNANCE ('ESG')
We have excellent sustainability credentials and we continue to make good
progress. We know that our customers, colleagues and business partners all
want us to act in a responsible way and that operating sustainably enables
better business performance.
We are one of the top performing specialty retailers in Morningstar's
Sustainalytics ESG Benchmark and, during the half, we were awarded an AA from
MSCI ESG ratings. In addition, we were included, once again, in the Dow Jones
World Sustainability Index and awarded an A rating in CDP's annual climate
leadership survey.
We have set our target to achieve net zero by 2050 and are working with our
supply chain to help reduce emissions across our value chain. Our Scope 1 and
2 emissions continue to fall and more than 25% of our supply chain emissions
are now covered by science-based targets, demonstrating good progress towards
our target of 30% by the end of the year.
We continue to champion children's literacy in partnership with the National
Literacy Trust. Our financial assistance is providing direct early years'
support to families in communities where help is needed.
FINANCIAL REVIEW
Headline
IFRS pre-IFRS 16(1)
£m 6 months to 6 months to 6 months to 6 months to
Feb 2024 Feb 2023 Feb 2024 Feb 2023
Travel UK trading profit(1) 39 31 37 31
North America trading profit(1) 14 16 14 14
Rest of the World trading profit/(loss)(1) 1 2 (1) 2
Total Travel trading profit(1) 54 49 50 47
High Street trading profit(1) 27 32 22 24
Group profit from trading operations(1) 81 81 72 71
Unallocated central costs(1) (13) (13) (13) (13)
Group operating profit before non-underlying items(1) 68 68 59 58
Net finance costs (24) (21) (13) (13)
Group profit before tax and non-underlying items(1) 44 47 46 45
Non-underlying items(1) (16) (2) (14) (2)
Group profit before tax 28 45 32 43
Income tax charge (8) (10) (9) (10)
Profit for the period 20 35 23 33
Attributable to:
Equity holders of the parent 17 32 20 30
Non-controlling interests 3 3 3 3
20 35 23 33
Total Travel Headline trading profit(1) in the period was £50m (2023: £47m)
of which the largest division, Travel UK, generated a Headline trading
profit(1) of £37m (2023: £31m). We expect good profit growth across all
Travel divisions in the second half.
The Group generated a Headline profit before tax and non-underlying items(1)
of £46m (2023: £45m) and, after non-underlying items and IFRS 16, a Group
profit before tax of £28m (2023: £45m).
Net finance costs
Headline
IFRS pre-IFRS 16(1)
£m 6 months to 6 months to 6 months to 6 months to
Feb 2024 Feb 2023 Feb 2024 Feb 2023
Interest payable on bank loans and overdrafts 6 5 6 5
Interest on convertible bonds - cash 3 3 3 3
Interest on convertible bonds - non-cash 4 4 4 4
Unwind of discount on onerous contract provisions - - - 1
Interest on lease liabilities 11 9 - -
Net finance costs before non-underlying items 24 21 13 13
Headline net finance costs for the half were £13m (2023: £13m). This
includes cash costs of £8m and £4m relating to the non-cash debt accretion
charge from the convertible which has a fixed coupon of 1.625%.
Lease interest of £11m (2023: £9m) arises on lease liabilities recognised
under IFRS 16, bringing the total net finance costs under IFRS 16 to £24m
(2023: £21m).
Tax
The effective tax rate(1) was 24% (2023: 23%) on the profit for the half,
reflecting the increase in the UK corporation tax rate from 19% to 25% with
effect from 1 April 2023. Net corporation tax payments in the period were £9m
(2023: £10m) after using all possible loss relief. Based on current
legislation, we expect the effective tax rate(1) in the full year to be around
24%.
Earnings per share
Calculation of Headline earnings per share(1)
Headline
pre-IFRS 16(1)
6 months to 6 months to
Feb 2024 Feb 2023
Headline profit before tax(1, 12) (£m) 46 45
Income tax expense(12) (£m) (11) (11)
Headline profit for the period(12) (£m) 35 34
Attributable to non-controlling interests (£m) (3) (3)
Headline profit for the period attributable to equity holders of 32 31
WH Smith PLC(12) (£m)
Weighted average shares in issue (diluted) (no. of shares - millions) 131 133
Headline diluted EPS(1, 12) (p) 24.4p 23.3p
(12) Before non-underlying items
The above measures are calculated on a pre-IFRS 16 basis.
EPS calculated on an IFRS 16 basis is provided in Note 7 to the financial
statements, and a reconciliation between the IFRS 16 and pre-IFRS 16 earnings
per share is provided in Note A4 to the Glossary on page 45.
The diluted weighted average number of shares in issue used in the calculation
of Headline diluted EPS(1) assumes that the convertible bond is not dilutive
and reflects the number of shares held by the ESOP Trust.
Profit attributable to non-controlling interests primarily represents the
joint venture partner share of profit in relation to airport contracts in the
USA. As at 29 February 2024 the profit attributable to non-controlling
interests was £3m (2023: £3m).
Non-underlying items(1)
Items which are not considered part of the normal operating costs of the
business, are non-recurring and are exceptional because of their size, nature
or incidence, are treated as non-underlying items and disclosed separately.
Non-underlying items in the period are detailed in the table below. These
items mostly do not have a cash impact.
IFRS Headline
pre-IFRS 16(1)
£m Ref 6 months to Feb 2024 6 months to Feb 2023 Year ended Aug 2023 6 months to Feb 2024 6 months to Feb 2023 Year ended Aug 2023
Impairment of non-current assets (1) 9 - 19 6 - 4
Provisions for onerous contracts (2) 2 - 3 2 - 5
Finance costs - discount unwind on provisions for onerous contracts (2) - - - 1 - 1
Finance costs - costs associated with refinancing - - 1 - - 1
Amortisation of acquired intangible assets (3) 2 2 3 2 2 3
Costs associated with pensions (4) 1 - 1 1 - 1
Other (5) 2 - - 2 - -
16 2 27 14 2 15
(1) Impairment of non-current assets
The Group has carried out an assessment for indicators of impairment across
the store and online portfolio.
The impairment review compared the value-in-use of cash-generating units,
based on management's assumptions regarding likely future trading performance,
to the carrying values at 29 February 2024. As a result of this exercise, a
non-cash charge of £6m (Feb 2023: £nil) was recorded for impairment of
non-current assets on a pre-IFRS 16 basis, and £9m (Feb 2023: £nil) on an
IFRS 16 basis which includes an impairment of ROU assets of £3m (Feb 2023:
£nil).
(2) Provisions for onerous contracts
A charge of £2m (Feb 2023: £nil) has been recognised in the income statement
in non-underlying items to provide for the unavoidable costs of continuing to
service a non-cancellable contract. Finance costs relating to the discount
unwind on previously recognised provisions for onerous contracts has also been
recognised in non-underlying items.
(3) Amortisation of acquired intangible assets
Non-cash amortisation of acquired intangible assets of £2m (Feb 2023: £2m)
primarily relate to the MRG and InMotion brands.
(4) Costs associated with pensions
Cost associated with pensions include professional fees associated with the
WHSmith Pension Trust of £1m (Feb 2023: £nil).
(5) Other
Other non-underlying costs include £2m of Board-approved programme costs in
relation to supply chain and IT (Feb 2023: £nil).
A tax credit of £3m (Feb 2023: £1m) has been recognised in relation to the
above items (£2m pre-IFRS 16 (Feb 2023: £1m)).
Cash flow
Free cash flow(1) reconciliation
pre-IFRS 16(1)
£m 6 months to Feb 2024 6 months to Feb 2023
Headline Group operating profit before non-underlying items(1) 59 58
Depreciation, amortisation and impairment (pre-IFRS 16)(13) 29 26
Non-cash items 6 6
Operating cash flow(1, 13) 94 90
Capital expenditure (65) (60)
Working capital (pre-IFRS 16)(13) (68) (79)
Net tax paid (9) (10)
Net finance costs paid (pre-IFRS 16) (8) (7)
Free cash flow (1) (56) (66)
(13) Excludes cash flow impact of non-underlying items
The free cash outflow(1) for the period was £56m (2023: £66m). Operating
cash inflow(1) increased by £4m to £94m demonstrating the cash generative
nature of the Group.
We had a working capital(8) outflow of £68m in the period (2023: £79m). Most
of this outflow results from the usual working capital cadence in the Group,
where there has been a large working capital outflow in the first half, due to
the seasonality in the Travel business. The balance, then, mainly relates to
the investment in new stores.
For the full year, we expect to generate a free cash inflow, reflecting the
normal working capital cadence of the Group and the substantial level of
operating cash flows generated by the Group during the second half.
Net corporation tax payments in the period were £9m (2023: £10m).
Capital expenditure in the half was £65m (2023: £60m) which includes the
spend from opening 53 stores around the world. We anticipate the full year
capex spend to be around £140m which includes the additional spend from
opening over 55 stores in the second half.
£m 6 months to Feb 2024 6 months to Feb 2023
New stores and store development 38 34
Refurbished stores 9 5
Systems 7 12
Other 11 9
Total capital expenditure 65 60
Reconciliation of Headline net debt(1)
Headline net debt(1) is presented on a pre-IFRS 16 basis. See Note 9 of the
Financial statements for net debt on an IFRS 16 basis.
As at 29 February 2024, the Group had Headline net debt(1) of £437m
comprising convertible bonds of £305m and net overdraft of £132m (31 August
2023: £330m, convertible bonds of £301m, £1m of finance lease liabilities
and net overdraft of £28m).
Headline
pre-IFRS 16(1)
6 months to Year ended
£m Feb 2024 Feb 2023 Aug 2023
Opening Headline net debt(1) (330) (296) (296)
Free cash flow(1) (56) (66) 20
Dividends paid (27) (12) (22)
Non-underlying items(1) (6) (1) (9)
Net purchase of own shares for employee share schemes (12) - (8)
Other (6) (3) (15)
Closing Headline net debt(1) (437) (378) (330)
Net (overdraft)/cash (132) 46 (28)
Convertible bond (305) (296) (301)
Term loans (net of fees) - (126) -
Finance leases (pre-IFRS 16) - (2) (1)
Headline net debt(1) (437) (378) (330)
In addition to the free cash outflow of £56m the Group paid the 2023 final
dividend of £27m (2023: £12m) and we spent £12m (2023: £nil) on own shares
for the Group's share schemes. Other includes non-cash accretion on the
convertible bond, and payments to non-controlling interests. The cash spend on
non-underlying items in the first half of 2024 was £6m (2023: £1m) and
mainly related to provisions recorded in prior years including Covid-related
charges.
We anticipate full year Headline net debt(1) to be in the region of £330m.
On an IFRS 16 basis, net debt was £1,039m (2023: £978m), which includes an
additional £602m (2023: £600m) of lease liabilities.
Fixed charges cover(1)
pre-IFRS 16(1)
£m 6 months to Feb 2024 6 months to Feb 2023
Headline net finance costs before non-underlying items(1) 13 13
Net operating lease rentals (pre-IFRS 16) (Note A12) 168 151
Total fixed charges 181 164
Headline profit before tax and non-underlying items(1) 46 45
Headline profit before tax, non-underlying items and fixed charges 227 209
Fixed charges cover - times 1.3x 1.3x
Fixed charges, comprising property operating lease charges and net finance
costs, were covered 1.3 times (2023: 1.3 times) by Headline profit before tax,
non-underlying items and fixed charges.
Return on capital employed(1)
ROCE %
Feb 2024 Feb 2023
Travel UK 32% 26%
North America 15% 14%
Rest of the World 16% 24%
Total Travel 23% 21%
High Street 37% 55%
Group 22% 20%
Return on capital employed is calculated as the Headline trading profit(1) as
a percentage of operating capital employed, and is stated on a pre-IFRS 16
basis. Operating capital employed is calculated as the 12-month average net
assets, excluding net debt, retirement benefit obligations and net current and
deferred tax balances.
Balance sheet
Headline
IFRS pre-IFRS 16(1)
£m Feb 2024 Feb 2023 Aug 2023 Feb 2024 Feb 2023 Aug 2023
Goodwill and other intangible assets 505 527 505 506 528 506
Property, plant and equipment 295 245 270 288 237 263
Right-of-use assets 484 483 444 - - -
Investments in joint ventures 2 2 2 2 2 2
1,286 1,257 1,221 796 767 771
Inventories 207 182 205 207 182 205
Payables less receivables (151) (180) (219) (142) (187) (216)
Working capital 56 2 (14) 65 (5) (11)
Net derivative financial asset - 1 - - 1 -
Net current and deferred tax asset 47 55 45 47 55 45
Provisions (18) (14) (17) (26) (26) (26)
Operating assets 1,371 1,301 1,235 882 792 779
Net debt (1,039) (978) (895) (437) (378) (330)
Total net assets 332 323 340 445 414 449
The Group had Headline net assets(1) of £445m, £4m lower than at 31 August
2023 reflecting the investment in new store openings and seasonality of
working capital. Under IFRS the Group had net assets of £332m.
TRADING UPDATE
The Group will issue its next trading update on 5 June 2024.
Total Travel stores by region
No. of stores At 29 February 2024
Travel UK 590
North America
Air 236
Resorts / Rail 93
Total North America 329
Rest of the World
Europe 135
Middle East and India 91
Asia Pacific 125
Total Rest of the World 351
Total Travel 1,270
PRINCIPAL AND EMERGING RISKS AND UNCERTAINTIES
The Group's Annual Report and Accounts 2023, a copy of which is available on
the Group's website at www.whsmithplc.co.uk, sets out the principal and
emerging risks and uncertainties which could impact the Group for the
remainder of the current financial year along with mitigating activities
relevant to each risk (see Annual Report and Accounts 2023 pages 55 to 60).
These include:
· economic, political, competitive and market risks;
· brand and reputation;
· key suppliers and supply chain management;
· store portfolio;
· business interruption;
· reliance on key personnel;
· international expansion;
· cyber risk, data security and GDPR compliance;
· treasury, financial and credit risk management; and
· environment and social sustainability.
This announcement contains inside information which is disclosed in accordance
with the Market Abuse Regulations.
This announcement contains certain forward-looking statements with respect to
the operations, performance and financial condition of the Group. By their
nature, these statements involve uncertainty since future events and
circumstances can cause results to differ from those anticipated. Nothing in
this announcement should be construed as a profit forecast. We undertake no
obligation to update any forward-looking statements whether as a result of new
information, future events or otherwise.
WH Smith PLC
Condensed Group Income Statement
For the 6 months to 29 February 2024
6 months to 29 Feb 2024 6 months to 28 Feb 2023 12 months to 31 Aug 2023
(unaudited) (unaudited) (audited)
£m Note Before non-underlying items(1) Non-underlying items(2) Total Before non-underlying items(1) Non-underlying items(2) Total Before non-underlying items(1) Non-underlying items(2) Total
Revenue 2 926 - 926 859 - 859 1,793 - 1,793
Group operating profit 2 68 (16) 52 68 (2) 66 182 (26) 156
Finance costs 4 (24) - (24) (21) - (21) (45) (1) (46)
Profit before tax 44 (16) 28 47 (2) 45 137 (27) 110
Income tax (expense) / credit 5 (11) 3 (8) (11) 1 (10) (27) 5 (22)
Profit for the period 33 (13) 20 36 (1) 35 110 (22) 88
Attributable to equity holders of the parent 30 (13) 17 33 (1) 32 101 (22) 79
Attributable to non-controlling interests 3 - 3 3 - 3 9 - 9
33 (13) 20 36 (1) 35 110 (22) 88
Earnings per share
Basic 7 13.2p 24.6p 60.8p
Diluted 7 13.0p 24.1p 59.8p
( )
(1) Alternative Performance Measure. The Group has defined and explained the
purpose of its alternative performance measures in the Glossary on page 40.
(2) See Note 3 for an analysis of Non-underlying items. See Glossary on page
40 for definition of alternative performance measures.
WH Smith PLC
Condensed Group Statement of Comprehensive Income
For the 6 months to 29 February 2024
£m Note 6 months to 29 Feb 2024 6 months to 28 Feb 2023 12 months to
(unaudited) (unaudited) 31 Aug 2023
(audited)
Profit for the period 20 35 88
Other comprehensive income:
Items that will not be reclassified subsequently to the income statement:
Actuarial gains on defined benefit pension schemes 1 1 1
1 1 1
Items that may be reclassified subsequently to the income statement:
Losses on cash flow hedges
- Net fair value losses - (2) (3)
Exchange differences on translation of foreign operations 1 (16) (40)
1 (18) (43)
Other comprehensive income / (loss) for the period, net of tax 2 (17) (42)
Total comprehensive income for the period 22 18 46
Attributable to equity holders of the parent 19 15 39
Attributable to non-controlling interests 3 3 7
22 18 46
WH Smith
PLC
Condensed Group Balance Sheet
As at 29 February 2024
At At At
£m 29 Feb 2024 28 Feb 2023 31 Aug 2023
Note (unaudited) (unaudited) (audited)
Non-current assets
Goodwill 8 437 456 436
Other intangible assets 8 68 71 69
Property, plant and equipment 8 295 245 270
Right-of-use assets 8 484 483 444
Investments in joint ventures 2 2 2
Deferred tax assets 41 50 43
Trade and other receivables 9 8 9
1,336 1,315 1,273
Current assets
Inventories 207 182 205
Trade and other receivables 108 90 112
Derivative financial assets - 1 1
Current tax receivable 6 5 3
Cash and cash equivalents 9 44 46 56
365 324 377
Total assets 1,701 1,639 1,650
Current liabilities
Trade and other payables (268) (278) (340)
Bank loans and other borrowings 9 (176) (27) (84)
Lease liabilities 9 (124) (138) (116)
Derivative financial liabilities - - (1)
Current tax liability - - (1)
Short-term provisions (3) - (1)
(571) (443) (543)
Non-current liabilities
Bank loans and other borrowings 9 (305) (395) (301)
Long-term provisions (15) (14) (16)
Lease liabilities 9 (478) (464) (450)
(798) (873) (767)
Total liabilities (1,369) (1,316) (1,310)
Total net assets 332 323 340
Shareholders' equity
Called up share capital 11 29 29 29
Share premium 316 316 316
Capital redemption reserve 13 13 13
Translation reserve 6 27 5
Other reserves (267) (246) (255)
Retained earnings 207 165 209
Total equity attributable to equity holders of the parent 304 304 317
Non-controlling interests 28 19 23
Total equity 332 323 340
WH Smith PLC
Condensed Group Cash Flow Statement
For the 6 months to 29 February 2024
6 months to 12 months to
£m Note 29 Feb 2024 28 Feb 2023 31 Aug 2023
(unaudited) (unaudited)
(audited)
Operating activities
Cash generated from operating activities 10 90 76 302
Interest paid(1) (19) (15) (35)
Financing arrangement fees - - (3)
Income taxes paid (9) (10) (15)
Income taxes refunded - - 2
Net cash inflow from operating activities 62 51 251
Investing activities
Purchase of property, plant and equipment (58) (52) (106)
Purchase of intangible assets (7) (8) (16)
Net cash outflow from investing activities (65) (60) (122)
Financing activities
Dividends paid (Note 6) 6 (27) (12) (22)
Purchase of own shares for employee share schemes (12) - (8)
Distributions to non-controlling interests (3) - (6)
Repayment of term loans 9 - (6) (133)
Net drawdown on short term borrowings 9 92 - 84
Capital repayments of obligations under leases 9 (59) (58) (118)
Net cash outflow from financing activities (9) (76) (203)
Net decrease in cash and cash equivalents in the period (12) (85) (74)
Opening cash and cash equivalents 56 132 132
Effect of movements in foreign exchange rates - (1) (2)
Closing cash and cash equivalents 44 46 56
(1) Includes interest payments of £11m on lease liabilities (28 February
2023: £8m; 31 August 2023: £19m)
WH Smith PLC
Condensed Group Statement of Changes in Equity
For the 6 months to 29 February 2024
£m Called up share capital and share premium Translation reserves Other reserves(1) Retained earnings Total equity attributable to equity holders of the parent Non-controlling interest Total equity
Capital redemption reserve
Balance at 1 September 2023 345 13 5 (255) 209 317 23 340
Profit for the period - - - - 17 17 3 20
Other comprehensive income:
Actuarial gains on defined benefit pension schemes - - - - 1 1 - 1
Exchange differences on translation of foreign operations - - 1 - - 1 - 1
Total comprehensive income for the period - - 1 - 18 19 3 22
Employee share schemes - - - (12) 6 (6) - (6)
Dividend paid (Note 6) - - - - (27) (27) - (27)
Deferred tax on share-based payments - - - - 1 1 - 1
Distributions to non-controlling interest - - - - - - (3) (3)
Non-cash movement on non-controlling interests - - - - - - 5 5
Balance at 29 February 2024 (unaudited) 345 13 6 (267) 207 304 28 332
Balance at 1 September 2022 345 13 43 (244) 138 295 16 311
Profit for the period - - - - 32 32 3 35
Other comprehensive (loss) / income:
Actuarial gains on defined benefit pension schemes - - - - 1 1 - 1
Cash flow hedges - - - (2) - (2) - (2)
Exchange differences on translation of foreign operations - - (16) - - (16) - (16)
Total comprehensive (loss) / income for the period - - (16) (2) 33 15 3 18
Employee share schemes - - - - 5 5 - 5
Deferred tax on share-based payments - - - - 1 1 - 1
Dividend paid (Note 6) - - - - (12) (12) - (12)
Balance at 28 February 2023 (unaudited) 345 13 27 (246) 165 304 19 323
Balance at 1 September 2022 345 13 43 (244) 138 295 16 311
Profit for the year - - - - 79 79 9 88
Other comprehensive (loss) / income:
Cash flow hedges - - - (3) - (3) - (3)
Actuarial gains on defined benefit pension schemes - - - - 1 1 - 1
Exchange differences on translation of foreign operations - - (38) - - (38) (2) (40)
Total comprehensive (loss) / income for the year - - (38) (3) 80 39 7 46
Employee share schemes - - - (8) 12 4 - 4
Dividends paid (Note 6) - - - - (22) (22) - (22)
Deferred tax on share-based payments - - - - 1 1 - 1
Distributions to non-controlling interest - - - - - - (6) (6)
Non-cash movement on non-controlling interests - - - - - - 6 6
Balance at 31 August 2023 (audited) 345 13 5 (255) 209 317 23 340
(1) Other reserve includes Revaluation reserve of £2m (February 2023 and
August 2023: £2m), ESOP reserve of £(27)m (February 2023: £(8)m; August
2023: (£(15)m), convertible bond reserve of £40m (February 2023 and August
2023: £40m), hedging reserve of £nil (February 2023: £1m; August 2023:
£nil) and Other reserves of £(282)m (February 2023: £(281)m; August 2023:
£(282)m). The 'Other' reserve includes reserves created in relation to the
historical capital reorganisation and proforma restatement of £(238)m
(February 2023 and August 2023: £(238)m), the demerger from Smiths News PLC
in 2006 of £69m (February 2023 and August 2023: £69m) and cumulative amounts
relating to employee share schemes of £(113)m (February 2023: £(112)m;
August 2023: £(113)m).
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2024
1. Basis of preparation, Accounting policies and Approval of Interim Statement
These Condensed Interim Financial Statements for the 6 months ended 29
February 2024 have been prepared in accordance with UK-adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
The interim financial statements do not include all of the notes of the type
normally included in an annual financial report. Accordingly, this report
should be read in conjunction with the Group's Annual Report and Accounts
2023, which has been prepared in accordance with UK-adopted international
accounting standards and the requirements of the Companies Act 2006, and any
public announcements made by WH Smith PLC during the interim reporting period.
The financial information set out in this report does not constitute statutory
accounts within the meaning of section 435 of the Companies Act 2006. The
Annual Report and Accounts 2023 have been filed with the Registrar of
Companies. The auditors' report on those accounts was unqualified, did not
include a reference to any matters to which the auditors drew attention by way
of emphasis without qualifying the report and did not contain statements under
s498(2) or s498(3) of the Companies Act 2006.
The Condensed Interim Financial Statements have been prepared in accordance
with the accounting policies set out in the 2023 Annual Report and Accounts
and it is these accounting policies which are expected to be followed in the
preparation of the full financial statements for the financial year ended 31
August 2024, except as outlined below.
Taxes on income in the interim period are accrued using the tax rate that
would be applicable to the expected total annual profit or loss.
The Group has adopted the following standards and interpretations which became
mandatory for the first time during the current financial year. The adoption
of these standards has had no material impact on the Group.
IFRS 17 Insurance contracts
Amendments to IAS 12 Taxation
Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors
Amendment to IAS 7 and IFRS 7 Supplier finance arrangements
Narrow scope amendments to IAS 1, IAS 8 and IFRS Practice statement 2
At the balance sheet date, the following standards and interpretations, which
have not been applied in these financial statements, were in issue but not yet
effective (and in some cases had not yet been endorsed by the UK):
Amendments to IAS 1 Presentation of financial statements
Amendments to IFRS 16 Leases
The directors anticipate that the adoption of these standards and
interpretations will have no material impact on the Group's financial
statements.
Alternative performance measures (APM's)
The Group has identified certain measures that it believes will assist the
understanding of the performance of the business. These APMs are not defined
or specified under the requirements of IFRS.
The Group believes that these APMs, which are not considered to be a
substitute for, or superior to, IFRS measures, provide stakeholders with
additional useful information on the underlying trends, performance and
position of the Group and are consistent with how business performance is
measured internally. The APMs are not defined by IFRS and therefore may not be
directly comparable with other companies' APMs.
The key APMs that the Group uses include: measures before non-underlying
items, Headline profit before tax, Headline earnings per share, trading
profit, Headline trading profit, Headline Group profit from trading
operations, like-for-like revenue, gross margin, fixed charges cover, Headline
EBITDA, effective tax rate, net debt and Headline net debt, free cash flow,
operating cash flow, return on capital employed and leverage. These APMs are
set out in the Glossary on page 40 including explanations of how they are
calculated and how they are reconciled to a statutory measure where relevant.
Non-underlying items
The Group has chosen to present a measure of profit and earnings per share
which excludes certain items, that are considered non-underlying and
exceptional due to their size, nature or incidence, and are not considered to
be part of the normal operations of the Group. These measures exclude the
financial effect of non-underlying items which are considered exceptional or
occur infrequently such as, inter alia, restructuring and transformation costs
linked to a Board agreed programme, costs relating to business combinations,
impairment charges and other property costs, significant items relating to
pension schemes, and impairment, and the related tax effect of these items. In
addition, these measures exclude the income statement impact of amortisation
of intangible assets acquired in business combinations, which are recognised
separately from goodwill. This amortisation is not considered to be part of
the underlying operating costs of the business and has no associated cash
flows.
The Group believes that the separate disclosure of these items provides
additional useful information to users of the financial statements to enable a
better understanding of the Group's underlying financial performance.
Further details of the non-underlying items are provided in Note 3.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of condensed interim financial statements in conformity with
generally accepted accounting principles requires management to make
judgements, estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities. Actual results could differ from these estimates and any
subsequent changes are accounted for with an effect on income at the time such
updated information becomes available.
The most critical accounting judgements and sources of estimation uncertainty
in determining the financial condition and results of the Group are those
requiring the greatest degree of subjective or complex judgement. These relate
to the classification of items as non-underlying, assessment of lease
substitution rights, determination of the lease term, impairment reviews of
non-current assets and inventory valuation.
The key areas where the judgments, estimates and assumptions applied have a
significant risk of causing a material adjustment to the carrying value of
assets and liabilities are consistent with those applied in the Group's
financial statements for the year ended 31 August 2023, as set out on pages
128 to 130 of those financial statements.
For details of changes to significant estimates for impairment of property,
plant and equipment, intangible assets and right-of-use assets in the current
period, refer to Note 8.
Going concern
The Condensed Interim Financial Statements have been prepared on a going
concern basis.
The directors are required to assess whether the Group can continue to operate
for at least 12 months from the date of approval of these financial
statements.
In making the going concern assessment, the directors have undertaken a
rigorous assessment of current performance and forecasts for the 12-month
period to April 2025, including expenditure commitments, capital expenditure
and available borrowing facilities. The Group's borrowing facilities are
described in the Group Overview on page 5. The covenants on these facilities
are tested half-yearly and are based on fixed charges cover and net
borrowings. The directors have also considered the existence of factors beyond
the going concern period that could indicate that the going concern basis is
not appropriate.
The directors have modelled a base case scenario consistent with the latest
Board approved forecasts, which include management's best estimates of market
conditions and include a number of assumptions including passenger numbers,
sales growth and cost inflation. Under this scenario the Group has significant
liquidity and complies with all covenant tests throughout the assessment
period.
As a result of uncertainty and challenges in the macroeconomic environment,
this base case scenario has been stress-tested by applying severe, but
plausible, downside assumptions of a magnitude and profile in line with
previous experience of economic downturns. These assumptions include
reductions to revenue assumptions, of between 5 and 10 per cent versus the
base case as appropriate by division, additional cost inflation and margin
pressures. Apart from an equal reduction in turnover-based rents in our Travel
businesses, this scenario does not assume a decrease in other variable costs,
and is therefore considered severe. Under this downside scenario the Group
would continue to have significant liquidity headroom on its existing
facilities and complies with all covenant tests throughout the assessment
period.
Based on the above analysis, the directors have concluded that the Group is
able to adequately manage its financing and principal risks, and that the
Group will be able to continue to meet its obligations as they fall due and
operate within the level of its facilities for at least 12 months from the
date of approval of these financial statements.
2. Segmental analysis of results
IFRS 8 requires segment information to be presented on the same basis as that
used by the Chief Operating Decision Maker for assessing performance and
allocating resources. The Group's operating segments are based on the reports
reviewed by the Board of Directors who are collectively considered to be the
chief operating decision maker.
For management and financial reporting purposes, the Group is organised into
two operating divisions which comprise four reportable segments - Travel UK,
North America, Rest of the World within the Travel division, and High Street.
The information presented to the Board is prepared in accordance with the
Group's IFRS accounting policies, on a pre-IFRS 16 basis, and is shown below
as Headline information in Section b). A reconciliation to statutory measures
is provided below in accordance with IFRS 8, and in the Glossary on page 40
(Note A2).
a) Group revenue
( )
6 months to 12 months to
29 Feb 2024 28 Feb 2023 31 Aug 2023
£m (unaudited) (unaudited) (audited)
Travel UK 360 314 709
North America 189 177 380
Rest of the World(1) 121 102 235
Total Travel 670 593 1,324
High Street 256 266 469
Group revenue 926 859 1,793
( )
(1) Rest of the World revenue includes revenue from Australia of £42m (28
February 2023: £40m), Ireland £23m (28 February 2023: £20m) and Spain £22m
(28 February 2023: £18m). No other country has individually material revenue.
Seasonality
Sales in the High Street business are subject to seasonal fluctuations, with
peak demand in the Christmas trading period, which falls in the first half of
the Group's financial year. Sales in the Travel business are also subject to
seasonal fluctuations, with higher demand during peak travel periods
particularly during the summer holiday months, which fall in the second
half.
b) Group results
6 months to 29 Feb 2024 (unaudited) 6 months to 28 Feb 2023 (unaudited)
£m Headline (pre-IFRS 16)(1) Headline non-underlying items (pre-IFRS 16) (1) IFRS 16 Total Headline (pre-IFRS 16)(1) Headline non-underlying items (pre-IFRS 16) (1) IFRS 16 Total
Travel UK trading profit 37 - 2 39 31 - - 31
North America trading profit 14 - - 14 14 - 2 16
Rest of the World trading (loss) / profit (1) - 2 1 2 - - 2
Total Travel trading profit 50 - 4 54 47 - 2 49
High Street trading profit 22 - 5 27 24 - 8 32
Group profit from trading operations 72 - 9 81 71 - 10 81
Unallocated central costs (13) - - (13) (13) - - (13)
Group operating profit before non-underlying items 59 - 9 68 58 - 10 68
Non-underlying items (Note 3) - (13) (3) (16) - (2) - (2)
Group operating profit 59 (13) 6 52 58 (2) 10 66
Finance costs (13) (1) (10) (24) (13) - (8) (21)
Group profit before tax 46 (14) (4) 28 45 (2) 2 45
Income tax (expense) / credit (11) 2 1 (8) (11) 1 - (10)
Profit for the period 35 (12) (3) 20 34 (1) 2 35
(1) Presented on a pre-IFRS 16 basis. Alternative Performance Measures are
defined and explained in the Glossary on page 40.
c) Other segmental items
6 months to 29 Feb 2024 (unaudited)
Non-current assets(1) Right-of-use assets
£m Capital additions Depreciation and amortisation Impairment Depreciation Impairment
Travel UK 21 (9) - - -
North America 26 (8) - - -
Rest of the World 6 (3) - - -
Total Travel 53 (20) - - -
High Street 9 (8) - - -
Unallocated - (1) - - -
Headline, before non-underlying items 62 (29) - - -
Headline non-underlying items (pre-IFRS 16) - (2) (6) - -
Headline, after non-underlying items 62 (31) (6) - -
Impact of IFRS 16 - (1) - (53) -
Non-underlying items (IFRS 16) - - - - (3)
Group 62 (32) (6) (53) (3)
6 months to 28 Feb 2023 (unaudited)
Non-current assets(1) Right-of-use assets
£m Capital additions Depreciation and amortisation Impairment Depreciation Impairment
Travel UK 13 (7) - - (1)
North America 22 (7) - - -
Rest of the World 9 (3) - - -
Total Travel 44 (17) - - (1)
High Street 14 (7) (1) - -
Unallocated - (1) - - -
Headline, before non-underlying items 58 (25) (1) - (1)
Headline non-underlying items (pre-IFRS 16) - (2) - - -
Headline, after non-underlying items 58 (27) (1) - (1)
Impact of IFRS 16 - - - (52) -
Non-underlying items (IFRS 16) - - - - -
Group 58 (27) (1) (52) (1)
(1) Non-current assets including property, plant and equipment and intangible
assets, but excluding right-of-use assets.
3. Non-underlying items
Items which are not considered part of the normal operating costs of the
business are non-recurring and are considered exceptional because of their
size, nature or incidence, are treated as non-underlying items and disclosed
separately. Further details of the definition of the non-underlying items are
included in Note 1. These items mostly do not have a cash impact.
6 months to 12 months to
£m 29 Feb 2024 28 Feb 2023 31 Aug 2023
(audited)
(unaudited) (unaudited)
Amortisation of acquired intangible assets 2 2 3
Impairment of assets
- property, plant and equipment and intangible assets 6 - 4
- right-of-use assets 3 - 15
Provisions for onerous contracts 2 - 3
Costs associated with pensions 1 - 1
Other 2 - -
Non-underlying items, included in operating profit 16 2 26
Finance costs associated with refinancing - - 1
Non-underlying items, before tax 16 2 27
Tax credit on non-underlying items (3) (1) (5)
Non-underlying items, after tax 13 1 22
Amortisation of acquired intangible assets
Non cash amortisation of acquired intangible assets primarily relates to the
MRG and InMotion brands.
Impairment of property, plant and equipment, intangible assets and
right-of-use assets
The Group has carried out an assessment for indicators of impairment across
the store and online portfolio. Where an indicator of impairment has been
identified, an impairment review has been performed to compare the
value-in-use of cash generating units, based on management's assumptions
regarding likely future trading performance, to the carrying value of the
cash-generating unit as at 29 February 2024. As a result of this exercise, a
non-cash charge of £9m was recorded within non-underlying items for
impairment of non-current assets, of which £4m relates to property, plant and
equipment, £2m to intangible assets (primarily software) and £3m relates to
right-of-use assets.
The impairment recognised on a pre-IFRS 16 basis is provided in the Glossary
on page 40.
Provisions for onerous contracts
A charge of £2m was recognised in the income statement to provide for the
unavoidable costs of continuing to service a non-cancellable contract. This
provision will be utilised over the next two financial years.
Costs associated with pensions
Costs of £1m have been incurred relating to professional fees associated with
the WHSmith Pension Trust.
Other
Other non-underlying costs incurred during the period relate to board-approved
programme costs in relation to supply chain and IT transformation.
4. Finance costs
6 months to 12 months to
£m 29 Feb 2024 28 Feb 2023 31 Aug 2023
(unaudited) (unaudited) (audited)
Interest payable on bank loans and overdrafts 6 5 12
Interest on convertible bonds 7 7 14
Interest on lease liabilities 11 9 19
Costs associated with refinancing - - 1
24 21 46
( )
Interest on convertible bonds includes £3m (28 February 2023: £3m) accrued
coupon and £4m (28 February 2023: £4m) non-cash debt accretion charge.
5. Income tax expense
6 months to 12 months to
£m 29 Feb 2024 28 Feb 2023 31 Aug 2023
(unaudited) (unaudited) (audited)
Tax on profit 5 4 13
Adjustment in respect of prior periods - - (2)
Total current tax expense 5 4 11
Deferred tax - current period 6 7 19
Deferred tax - prior period - - (3)
Tax on profit before non-underlying items 11 11 27
Tax on non-underlying items - deferred tax (3) (1) (5)
Total tax on profit 8 10 22
The effective tax rate, before non-underlying items, was a charge of 24 per
cent (28 February 2023: charge of 23 per cent).
The UK corporation tax rate is 25 per cent. Up to the 1 April 2023 the
corporation tax rate was 19 per cent.
On 20 June 2023, Finance (No.2) Act 2023 was substantively enacted in the UK,
introducing a global minimum effective tax rate of 15%. The legislation
implements a domestic top-up tax and a multinational top-up tax, effective for
accounting periods starting on or after 31 December 2023. This will be
applicable to the Group for the year ending 31 August 2025.
The Group is in the process of assessing its exposure to the above
legislation. Based on the Group's assessment no material top-up tax exposures
have been identified. The Group will continue to assess the impact of the
above legislation on its future financial performance.
The Group has applied the mandatory exemption under IAS 12 to recognising and
disclosing information about deferred tax assets and liabilities related to
top-up income taxes.
6. Dividends
Amounts paid and recognised as distributions to shareholders in the period are
as follows:
6 months to 12 months to
£m 29 Feb 2024 28 Feb 2023 31 Aug 2023
(unaudited) (unaudited) (audited)
Dividends
Final dividend for the year ended 31 August 2023 of 20.8p per ordinary share 27 - -
Final dividend for the year ended 31 August 2022 of 9.1p per ordinary share - 12 12
Interim dividend for the year ended 31 August 2023 of 8.1p per ordinary share - - 10
27 12 22
The directors have declared an interim dividend in respect of the period
ending 29 February 2024 of 11.0p per ordinary share. This will be paid on 1
August 2024 to shareholders registered at the close of business on 12 July
2024.
7. Earnings per share
a) Earnings
6 months to 12 months to
£m 29 Feb 2024 28 Feb 2023 31 Aug 2023
(unaudited) (unaudited) (audited)
Profit for the period attributable to equity holders of the parent 17 32 79
Non-underlying items, after tax (Note 3) 13 1 22
Profit for the period before non-underlying items attributable to equity holders of the parent 30 33 101
( )
b) Weighted average share capital
6 months to 12 months to
Millions 29 Feb 2024 28 Feb 2023 31 Aug 2023
(unaudited) (unaudited) (audited)
Weighted average ordinary shares in issue 131 131 130
Less weighted average ordinary shares held in ESOP Trust (2) (1) -
Weighted average ordinary shares for basic earnings per share 129 130 130
Add weighted average number of ordinary shares under option 2 3 2
Weighted average ordinary shares for diluted earnings per share 131 133 132
( )
c) Basic and diluted earnings per share
6 months to 12 months to
Pence 29 Feb 2024 28 Feb 2023 31 Aug 2023
(unaudited) (unaudited) (audited)
Basic earnings per share 13.2 24.6 60.8
Adjustments for non-underlying items 10.1 0.8 16.9
Basic earnings per share before non-underlying items 23.3 25.4 77.7
Diluted earnings per share 13.0 24.1 59.8
Adjustments for non-underlying items 9.9 0.7 16.7
Diluted earnings per share before non-underlying items 22.9 24.8 76.5
Diluted earnings per share takes into account various share awards and share
options including SAYE schemes, which are expected to vest, and for which a
sum below fair value will be paid.
As at 29 February 2024 the convertible bond has no dilutive effect as the
inclusion of these potentially dilutive shares would improve earnings per
share (28 February 2023 and 31 August 2023: No dilutive effect).
The calculation of EPS on a pre-IFRS 16 basis is provided in the Glossary on
page 40.
( )
8. Non-current assets
During the 6 months to 29 February 2024, there were additions to property,
plant and equipment of £55m (28 February 2023: £50m). There were no material
disposals of tangible assets during the period (28 February 2023: £nil).
During the 6 months to 29 February 2024, there were additions to right-of-use
assets of £100m (28 February 2023: £94m) through signing of new leases and
lease modifications.
Additions to intangible assets totalled £7m (28 February 2023: £8m) in the
period. There were no material disposals of intangible assets during the
period (28 February 2023: £nil).
Goodwill increased by £1m in the period, as a result of movements in exchange
rates (28 February 2023: decrease of £15m, as a result of movements in
exchange rates).
Impairment of property, plant and equipment, right-of-use assets and
intangible assets
For impairment testing purposes, the Group has determined that each store is a
separate CGU or in some cases a group of stores is considered to be a CGU
where the stores do not generate largely independent cash inflows. CGUs are
tested for impairment at the balance sheet date if any indicators of
impairment have been identified. The identified indicators include loss-making
stores, stores earmarked for closure and under-performance of individual
stores versus forecast.
For those CGUs where an indicator of impairment has been identified, property,
plant and equipment and right-of-use assets have been tested for impairment by
comparing the carrying amount of the CGU with its recoverable amount
determined from value-in-use calculations. It was determined that value-in-use
was higher than fair value less costs to sell.
The value-in-use of CGUs is calculated using discounted cash flows derived
from the Group's latest Board-approved forecast and three-year plan, and
reflects historic performance and knowledge of the current market, together
with the Group's views on the future achievable growth for these specific
stores. Cash flows beyond the forecast period are extrapolated using growth
rates and inflation rates appropriate to each store's location. Cash flows
have been included for the remaining lease life for the specific store. These
growth rates do not exceed the long-term growth rate for the Group's retail
businesses in the relevant territory. Where stores have a short remaining
lease life, an extension to the lease has been assumed where management
consider it likely that an extension will be granted. The immediately
quantifiable impacts of climate change and costs expected to be incurred in
connection with our net zero commitments are included within the Group's
budget and three year plan which have been used to support the impairment
reviews, with no material impact on cash flows. The useful economic lives of
store assets are short in the context of climate change scenario models
therefore no medium to long-term effects have been considered. The discount
rate applied to future cash flows was 10.8% (31 August 2023: 13.2%).
Where the value-in-use was less than the carrying value of the CGU, an
impairment of property, plant and equipment and right-of-use assets was
recorded. The Group has recognised an impairment charge of £6m to property,
plant and equipment and intangible assets (28 February 2023: £1m) and £3m to
right-of-use assets (28 February 2023: £1m) as a result of impairment
testing. Impairments of £9m (28 February 2023: £nil) have been presented as
non-underlying items in the current period (see Note 3), and no impairments
(28 February 2023: £2m) have been included in underlying results.
9. Analysis of net debt
Movement in net debt can be analysed as follows:
£m Term loans Convertible bonds Revolving credit facility Leases(1) Sub-total Cash and cash equivalents Net debt
Liabilities from financing activities
At 1 September 2023 - (301) (84) (566) (951) 56 (895)
Other non-cash movements - (4) - (106) (110) - (110)
Other cash movements - - (92) 70 (22) (12) (34)
At 29 February 2024 (unaudited) - (305) (176) (602) (1,083) 44 (1,039)
(1) Other cash movements on Leases include £11m of Interest paid presented
within cash flow from operating activities.
£m Term loans Convertible bonds Revolving credit facility Leases Sub-total Cash and cash equivalents Net debt
Liabilities from financing activities
At 1 September 2022 (132) (292) - (577) (1,001) 132 (869)
Other non-cash movements - (4) - (90) (94) - (94)
Other cash movements 6 - - 58 64 (85) (21)
Currency translation - - - 7 7 (1) 6
At 28 February 2023 (unaudited) (126) (296) - (602) (1,024) 46 (978)
An explanation of Alternative performance measures, including Net debt on a
pre-IFRS 16 basis is provided in the Glossary on page 40.
Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and short-term bank
deposits with an original maturity of three months or less. The carrying
amount of these assets approximates to their fair value.
Lease liabilities
Non-cash movements in lease liabilities mainly relate to new leases,
modifications and remeasurements in the period.
Revolving credit facilities
The Group has a £400m five-year committed revolving credit facility with a
maturity date of 13 June 2028. The facility has two uncommitted extension
options of one year each, which would, subject to lender approval, extend the
tenor to six or seven years if exercised. The RCF is provided by a syndicate
of banks: Barclays Bank PLC, BNP Paribas, Citibank N.A. London Branch, Fifth
Third Bank National Association, HSBC UK Bank PLC, JP Morgan Securities PLC,
PNC Capital Markets LLC, Banco Santander SA London Branch and Skandinaviska
Enskilda Banken AB (PUBL). Utilisation is interest bearing at a margin over
SONIA. As at 29 February 2024, the Group has drawn down £176m on the RCF
(2023: £nil).
Transaction costs of £4m relating to the RCF are amortised to the Income
statement on a straight-line basis.
Convertible bonds
The Group issued £327m guaranteed senior unsecured convertible bonds on 7 May
2021 with a 1.625% per annum coupon payable semi-annually in arrears in equal
instalments. The bonds are convertible into new and/or existing ordinary
shares of WH Smith PLC. The initial conversion price was set at £24.99
representing a premium of 40% above the reference share price on 28 April 2021
(£17.85). If not previously converted, redeemed or purchased and cancelled,
the Bonds will be redeemed at par on 7 May 2026.
The convertible bond is a compound financial instrument, consisting of a
financial liability component and an equity component, representing the value
of the conversion rights. The initial fair value of the liability portion of
the convertible bond was determined using a market interest rate for an
equivalent non-convertible bond at the issue date. The liability is
subsequently recognised on an amortised cost basis using the effective
interest rate method until extinguished on conversion or maturity of the
bonds. The remainder of the proceeds were allocated to the conversion option
and recognised in equity (Other reserves), and not subsequently remeasured. As
a result, £41m of the initial proceeds of £327m was recognised in equity
representing the option component.
Transaction costs of £6m were allocated between the two components and the
element relating to the debt component of £5m is amortised through the
effective interest rate method. The issue costs apportioned to the equity
component of £1m have been deducted from equity.
The carrying value of the convertible bond on the Group's balance sheet is
£305m. The fair value of the convertible bond has been estimated at £296m
using a discounted cash flow approach based on market interest rates. This
represents Level 2 fair value measurements as defined by IFRS 13.
10. Cash generated from operating activities
6 months to 12 months to
£m 29 Feb 2024 28 Feb 2023 31 Aug 2023
(unaudited) (unaudited) (audited)
Group operating profit 52 66 156
Depreciation of property, plant and equipment 26 20 42
Impairment of property, plant and equipment 4 1 4
Amortisation of intangible assets 6 7 14
Impairment of intangible assets 2 - -
Depreciation of right-of-use assets 53 52 104
Impairment of right-of-use assets 3 1 15
Share-based payments 6 5 12
Gains on remeasurement of leases (2) (4) (5)
Other non-cash items (incl. foreign exchange) 1 2 7
(Increase) / decrease in inventories (2) 15 (12)
Decrease / (increase) in receivables 8 (6) (22)
Decrease in payables (69) (83) (15)
Movement on provisions (via utilisation or income statement) 2 - 2
Cash generated from operating activities 90 76 302
11. Called Up Share Capital
29 Feb 2024 28 Feb 2023 31 Aug 2023
(unaudited) (unaudited) (audited)
Number of shares (millions) Nominal value Number of shares (millions) Nominal value Number of shares (millions) Nominal value
£m £m £m
Equity
Ordinary shares of 22 6/67p 131 29 131 29 131 29
Total 131 29 131 29 131 29
The holders of ordinary shares are entitled to receive dividends as declared
from time-to-time and are entitled to one vote per share at the meetings of
the Company.
12. Contingent liabilities and capital commitments
£m 29 Feb 2024 28 Feb 2023 31 Aug 2023
(unaudited) (unaudited) (audited)
Bank guarantees and guarantees in respect of contractual arrangements 67 55 61
Bank guarantees are principally in favour of landlords and could be drawn down
on by landlords in the event that the Group does not settle its contractual
obligations under lease or other agreements.
At 29 February 2024, contracts placed for future capital expenditure approved
by the directors but not provided for amounted to £23m (28 February 2023:
£27m).
13. Related Parties
Other than directors' remuneration, there have been no material related party
transactions during the interim period under review.
Statement of Directors' Responsibilities
The directors confirm that these Condensed Interim Financial Statements have
been prepared in accordance with UK adopted International Accounting Standard
34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority and that
the interim management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
• an indication of important events that have occurred
during the first six months and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
• material related-party transactions in the first six
months and any material changes in the related-party transactions described in
the last annual report.
The Directors of WH Smith PLC are listed on the website at
www.whsmithplc.co.uk/about-us/our-board
(http://www.whsmithplc.co.uk/about-us/our-board) .
By order of the Board
Carl Cowling Robert Moorhead
Group Chief Executive Chief Financial Officer and Chief Operating Officer
25 April 2024
Independent review report to WH Smith Plc
Report on the condensed consolidated Interim Financial Statements
Our conclusion
We have reviewed WH Smith PLC's condensed consolidated interim financial
statements (the "interim financial statements") in the Interim Results
Announcement of WH Smith PLC for the 6 month period ended 29 February 2024
(the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Condensed Group Balance Sheet as at 29 February 2024;
· the Condensed Group Income Statement and Condensed Group Statement of
Comprehensive Income for the period then ended;
· the Condensed Group Cash Flow Statement for the period then ended;
· the Condensed Group Statement of Changes in Equity for the period
then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim Results Announcement
of WH Smith PLC have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Interim Results
Announcement and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the interim financial
statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Interim Results Announcement, including the interim financial statements,
is the responsibility of, and has been approved by the directors. The
directors are responsible for preparing the Interim Results Announcement in
accordance with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority. In preparing the Interim
Results Announcement, including the interim financial statements, the
directors are responsible for assessing the group's ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend
to liquidate the group or to cease operations, or have no realistic
alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Interim Results Announcement based on our review. Our
conclusion, including our Conclusions relating to going concern, is based on
procedures that are less extensive than audit procedures, as described in the
Basis for conclusion paragraph of this report. This report, including the
conclusion, has been prepared for and only for the company for the purpose of
complying with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior consent in
writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
25 April 2024
WH Smith PLC
Glossary (unaudited)
Alternative Performance Measures
In reporting financial information, the Group presents alternative performance
measures, "APMs", which are not defined or specified under the requirements of
IFRS.
The Group believes that these APMs, which are not considered to be a
substitute for or superior to IFRS measures, provide stakeholders with
additional useful information on the underlying trends, performance and
position of the Group and are consistent with how business performance is
measured internally. The alternative performance measures are not defined by
IFRS and therefore may not be directly comparable with other companies'
alternative performance measures.
Non-underlying items
The Group has chosen to present a measure of profit and earnings per share
which excludes certain items, that are considered non-underlying and
exceptional due to their size, nature or incidence, and are not considered to
be part of the normal operations of the Group. These measures exclude the
financial effect of non-underlying items which are considered exceptional or
occur infrequently such as, inter alia, restructuring and transformation costs
linked to a Board agreed programme, costs relating to business combinations,
impairment charges and other property costs, significant items relating to
pension schemes, and impairment, and the related tax effect of these items. In
addition, these measures exclude the income statement impact of amortisation
of intangible assets acquired in business combinations, which are recognised
separately from goodwill. This amortisation is not considered to be part of
the underlying operating costs of the business and has no associated cash
flows.
The Group believes that the separate disclosure of these items provides
additional useful information to users of the financial statements to enable a
better understanding of the Group's underlying financial performance.
IFRS 16
The Group adopted IFRS 16 in the year ended 31 August 2020. IFRS 16 superseded
the lease guidance under IAS 17 and the related interpretations. IFRS 16 sets
out the principles for the recognition, measurement, presentation and
disclosure of leases and requires lessees to account for all leases under a
single on-balance sheet model as the distinction between operating and finance
leases is removed. The only exceptions are short-term and low-value leases. At
the commencement date of a lease, a lessee will recognise a lease liability
for the future lease payments and an asset (right-of-use asset) representing
the right to use the underlying asset during the lease term. Lessees are
required to separately recognise the interest expense on the lease liability
and the depreciation expense on the right-of-use asset.
Management has chosen to exclude the effects of IFRS 16 for the purposes of
narrative commentary on the Group's performance and financial position in the
Strategic report. The effect of IFRS 16 on the Group income statement is to
frontload total lease expenses, being higher at the beginning of a lease
contract, and lower towards the end of a contract, and this is further
influenced by timing of renewals and contract wins, and lengths of contracts.
As a result of these complexities, IFRS 16 measures of profit and EBITDA (used
as a proxy for cash generation) do not provide meaningful KPIs or measures for
the purposes of assessing performance, concession quality or for trend
analysis, therefore management continues to use pre-IFRS 16 measures
internally.
The impact of the implementation of IFRS 16 on the Income statement and
Segmental information is provided in Notes A1 and A2 below. There is no impact
on cash flows, although the classification of cash flows has changed, with an
increase in net cash flows from operating activities being offset by a
decrease in net cash flows from financing activities, as set out in Note A9
below. The balance sheet as at 29 February 2024 both including and excluding
the impact of IFRS 16 is shown in Note A10 below.
Leases policies applicable prior to 1 September 2019
Leases are classified as finance leases whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at
their fair value determined at the inception of the lease or, if lower, at the
present value of the minimum lease payments. The corresponding liability to
the lessor is included in the balance sheet as a finance lease obligation.
These assets are depreciated over their expected useful lives on the same
basis as owned assets or, where shorter, over the term of the relevant lease.
Lease payments are apportioned between finance charges and a reduction of the
lease obligations so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are recognised directly in
the income statement.
Rentals payable and receivable under operating leases are charged to the
income statement on a straight-line basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into an operating
lease are also spread on a straight-line basis over the lease term. The Group
has a number of lease arrangements in which the rent payable is contingent on
revenue. Contingent rentals payable, based on store revenues, are accrued in
line with revenues generated.
Definitions and reconciliations
In line with the Guidelines on Alternative Performance Measures issued by the
European Securities and Markets Authority ('ESMA'), we have provided
additional information on the APMs used by the Group below, including full
reconciliations back to the closest equivalent statutory measure.
APM Closest equivalent IFRS measure Reconciling items to IFRS measure Definition and purpose
Income Statement Measures
Headline measures Various See Notes A1-A10 and Note A12 Headline measures exclude the impact of IFRS 16 (applying the principles of
IAS 17). Reconciliations of all Headline measures are provided in Notes A1 to
A10 and Note A12.
Group profit before tax and non-underlying items Group profit before tax See Group income statement and Note A1 Group profit before tax and non-underlying items excludes the impact of
non-underlying items as described below. A reconciliation from Group profit
before tax and non-underlying items to Group profit before tax is provided on
the Group income statement on page 18, and on a Headline (pre-IFRS 16) basis
in Note A1.
Group profit from trading operations and segment trading profit Group operating profit See Note 2 and Note A2 Group profit from trading operations and segment trading profit are stated
after directly attributable share-based payment and pension service charges
and before non-underlying items, unallocated costs, finance costs and income
tax expense.
A reconciliation from the above measures to Group operating profit and Group
profit before tax on an IFRS 16 basis is provided in Note 2 to the Condensed
Interim Financial Statements and on a Headline (pre-IFRS 16) basis in Note
A2.
Non-underlying items None Refer to definition and see Note 3 and Note A6 Items which are not considered part of the normal operating costs of the
business, are non-recurring and considered exceptional because of their size,
nature or incidence, are treated as non-underlying items and disclosed
separately. The Group believes that the separate disclosure of these items
provides additional useful information to users of the financial statements to
enable a better understanding of the Group's underlying financial performance.
An explanation of the nature of the items identified as non-underlying on an
IFRS 16 basis is provided in Note 3 to the Condensed Interim Financial
Statements, and on a Headline (pre-IFRS 16) basis in Note A6.
Earnings per share before non-underlying items Earnings per share Non-underlying items, see Note 7 and Note A4 Profit for the period attributable to the equity holders of the parent before
non-underlying items divided by the weighted average number of ordinary shares
in issue during the interim period. A reconciliation is provided on an IFRS 16
basis in Note 7 and on a Headline (pre-IFRS 16) basis in Note A4.
Headline EBITDA Group operating profit Refer to definition Headline EBITDA is Headline Group operating profit before non-underlying items
adjusted for pre-IFRS 16 depreciation, amortisation and impairment.
Effective tax rate None Non-underlying items see Notes 5, A3 and A6 Total income tax charge / credit excluding the tax impact of non-underlying
items divided by Group Headline profit before tax and non-underlying items.
See Note 5 on an IFRS 16 basis, and Notes A3 and A6 on a pre-IFRS 16 basis.
Fixed charges cover None Refer to definition This performance measure calculates the number of times Headline Profit before
tax covers the total fixed charges included in calculating profit or loss.
Fixed charges included in this measure are net finance charges (excluding
finance charges from IFRS 16 leases) and net operating lease rentals stated on
a pre-IFRS 16 basis. The calculation of this measure is outlined in Note A5.
Gross Gross profit margin Not applicable Where referred to throughout the Condensed Interim Financial Statements, gross
margin is calculated as gross profit divided by revenue.
margin
Like-for-like revenue Movement in revenue per the income statement - Revenue change from non like-for-like stores Like-for-like revenue is the change in revenue from stores that have been open
for at least a year, with a similar selling space at a constant foreign
- FX impact exchange rate. See A11.
APM Closest equivalent IFRS measure Reconciling items to IFRS measure Definition and purpose
Balance Sheet Measures
Headline net debt Net debt Reconciliation of net debt Headline net debt is defined as cash and cash equivalents, less bank
overdrafts and other borrowings and both current and non-current obligations
under finance leases as defined on a pre-IFRS 16 basis. Lease liabilities
recognised as a result of IFRS 16 are excluded from this measure. A
reconciliation of Net debt on an IFRS 16 basis provided in Note A8.
Other measures
Free cash flow Net cash inflow from operating activities See Group Overview Free cash flow is defined as the net cash inflow from operating activities
before the cash flow effect of IFRS 16, non-underlying items and pension
funding, less net capital expenditure. The components of free cash flow are
shown in Note A7 and on page 14, as part of the Group Overview.
Operating cash flow Net cash inflow from operating activities See Group Overview Operating cash flow is defined as Headline profit before tax and
non-underlying items, excluding Headline depreciation, amortisation,
impairment and other non-cash items. The components of Operating cash flow are
shown on page 14, as part of the Group Overview.
Return on capital employed (ROCE) None Not applicable Return on Capital Employed is calculated as the Headline trading profit as a
percentage of operating capital employed, and is stated on a pre-IFRS 16
basis. Operating capital employed is calculated as the 12-month average net
assets, excluding net debt, retirement benefit obligations and net current and
deferred tax balances.
Leverage None Not applicable Leverage is calculated as rolling 12 month Headline EBITDA before non-cash
items (on a pre-IFRS 16 basis) divided by Headline net debt.
A1. Reconciliation of Headline to Statutory Group operating profit and Group
profit before tax
6 months to 29 Feb 2024
pre-IFRS 16 basis IFRS 16 Basis
£m Headline, before non-underlying items Headline non-underlying items Headline IFRS 16 adjustments IFRS 16 adjustments non-underlying items Total
Revenue 926 - 926 - - 926
Cost of sales (370) - (370) - - (370)
Gross profit 556 - 556 - - 556
Distribution costs (398) - (398) 8 - (390)
Administrative expenses (99) - (99) - - (99)
Other income - - - 1 - 1
Non-underlying items - (13) (13) - (3) (16)
Group operating profit 59 (13) 46 9 (3) 52
Finance costs (13) (1) (14) (11) 1 (24)
Profit before tax 46 (14) 32 (2) (2) 28
Income tax (charge) / credit (11) 2 (9) - 1 (8)
Profit for the period 35 (12) 23 (2) (1) 20
Attributable to:
Equity holders of the parent 32 (12) 20 (2) (1) 17
Non-controlling interests 3 - 3 - - 3
35 (12) 23 (2) (1) 20
A1. Reconciliation of Headline to Statutory Group operating profit and Group
profit before tax (cont'd)
6 months to 28 Feb 2023
pre-IFRS 16 basis
IFRS 16 Basis
£m Headline, before non-underlying items Headline non-underlying items Headline IFRS 16 adjustments Total
Revenue 859 - 859 - 859
Cost of sales (341) - (341) - (341)
Gross profit 518 - 518 - 518
Distribution costs (364) - (364) 7 (357)
Administrative expenses (96) - (96) (1) (97)
Other income - - - 4 4
Non-underlying items - (2) (2) - (2)
Group operating profit 58 (2) 56 10 66
Finance costs (13) - (13) (8) (21)
Profit before tax 45 (2) 43 2 45
Income tax (expense) / credit (11) 1 (10) - (10)
Profit for the period 34 (1) 33 2 35
Attributable to:
Equity holders of the parent 31 (1) 30 2 32
Non-controlling interests 3 - 3 - 3
34 (1) 33 2 35
A2. Reconciliation of Headline to Statutory Segmental trading profit/(loss)
and Group profit from trading operations
6 months to 29 Feb 2024
pre-IFRS 16 basis IFRS 16 basis
£m Headline, before non-underlying items Headline non-underlying items Headline IFRS 16 adjustments Total
Travel UK trading profit 37 - 37 2 39
North America trading profit 14 - 14 - 14
Rest of the World trading (loss) / profit (1) - (1) 2 1
Total Travel trading profit 50 - 50 4 54
High Street trading profit 22 - 22 5 27
Group profit from trading operations 72 - 72 9 81
Unallocated central costs (13) - (13) - (13)
Group operating profit before non-underlying items 59 - 59 9 68
Non-underlying items - (13) (13) (3) (16)
Group operating profit 59 (13) 46 6 52
6 months to 28 Feb 2023
pre-IFRS 16 basis IFRS 16 basis
£m Headline, before non-underlying items Headline non-underlying items Headline IFRS 16 adjustments Total
Travel UK trading profit 31 - 31 - 31
North America trading profit 14 - 14 2 16
Rest of the World trading profit 2 - 2 - 2
Total Travel trading profit 47 - 47 2 49
High Street trading profit 24 - 24 8 32
Group profit from trading operations 71 - 71 10 81
Unallocated central costs (13) - (13) - (13)
Group operating profit before non-underlying items 58 - 58 10 68
Non-underlying items - (2) (2) - (2)
Group operating profit 58 (2) 56 10 66
A3. Reconciliation of Headline to Statutory tax expense / (credit)
6 months to 6 months to
29 Feb 2024 28 Feb 2023
£m Headline (pre-IFRS 16) IFRS 16 Total Headline (pre-IFRS 16) IFRS 16 adjustments Total
adjustments
Profit before tax and non-underlying items 46 (2) 44 45 2 47
Tax on profit 5 - 5 4 - 4
Adjustment in respect of prior periods - - - - - -
Total current tax expense 5 - 5 4 - 4
Deferred tax - current period 6 - 6 7 - 7
Deferred tax - prior period - - - - - -
Tax expense on profit before non-underlying items 11 - 11 11 - 11
Tax on non-underlying items (2) (1) (3) (1) - (1)
Total tax expense/(credit) on profit 9 (1) 8 10 - 10
A4. Calculation of Headline and Statutory earnings per share
6 months to 6 months to
29 Feb 2024
28 Feb 2023
millions Basic EPS Diluted EPS Basic EPS Diluted EPS
Weighted average number of shares in issue 129 131 130 133
6 months to 6 months to
29 Feb 2024 28 Feb 2023
Profit for the period attributable to equity holders of the parent Basic EPS Diluted EPS Profit for the period attributable to equity holders of the parent Basic EPS Diluted EPS
£m pence pence £m pence pence
Headline (pre-IFRS-16 basis)
- Before non-underlying items 32 24.8 24.4 31 23.8 23.3
- Non-underlying items (after tax) (12) (9.3) (9.2) (1) (0.7) (0.7)
Total 20 15.5 15.2 30 23.1 22.6
IFRS 16 adjustments
- Before non-underlying items (2) (1.5) (1.5) 2 1.6 1.5
- Non-underlying items (1) (0.8) (0.7) - (0.1) -
Total (3) (2.3) (2.2) 2 1.5 1.5
IFRS 16 basis
- Before non-underlying items 30 23.3 22.9 33 25.4 24.8
- Non-underlying items (after tax) (13) (10.1) (9.9) (1) (0.8) (0.7)
Total 17 13.2 13.0 32 24.6 24.1
A5. Fixed charges cover
£m 6 months to 6 months to
29 Feb 2024 28 Feb 2023
Net finance costs (pre-IFRS 16) 13 13
Net operating lease rentals (pre-IFRS 16) 168 151
Total fixed charges 181 164
Headline profit before tax and non-underlying items 46 45
Headline profit before tax, non-underlying items and fixed charges 227 209
Fixed charges cover - times 1.3x 1.3x
A6. Non-underlying items on pre-IFRS 16 and IFRS 16 bases
6 months to 6 months to
28 Feb 2023
29 Feb 2024
£m Headline (pre-IFRS 16) IFRS 16 Headline IFRS 16
(pre-IFRS 16)
Amortisation of acquired intangible assets 2 2 2 2
Impairment of assets
- property, plant and equipment and intangible assets 6 6 - -
- right-of-use assets - 3 - -
Provisions for onerous contracts 2 2 - -
Costs associated with pensions 1 1 - -
Other 2 2 - -
Non-underlying items, included in operating profit 13 16 2 2
Finance costs associated with onerous contracts 1 - - -
Non-underlying items, before tax 14 16 2 2
Tax credit on non-underlying items (2) (3) (1) (1)
Non-underlying items, after tax 12 13 1 1
A description of non-underlying items on an IFRS 16 basis is provided in Note
3 to the financial statements.
Pre-IFRS 16 non-underlying items are calculated on a consistent basis to IFRS
16 non-underlying items, except for as follows:
- Impairment of Right-of-use assets, which are not recognised on a
pre-IFRS 16 basis.
- Finance costs of £1m have been recorded in non-underlying items
in relation to the unwind of the discount on onerous lease provisions that are
not recognised under IFRS 16.
A tax credit of £3m (2023: £1m) has been recognised in relation to the above
items (£2m pre-IFRS 16 (2023: £1m)).
A7. Free cash flow
£m Note 6 months to 6 months to
29 Feb 2024 28 Feb 2023
Cash generated from operating activities 10 90 76
Interest paid (19) (15)
Income taxes paid (9) (10)
Net cash inflow from operating activities 62 51
Impact of IFRS 16 (Note A9) (58) (57)
Add back:
- Cash impact of non-underlying items 6 1
- Non-cash items (1) (1)
Deduct:
- Purchase of property, plant and equipment (58) (52)
- Purchase of intangible assets (7) (8)
Free cash flow (56) (66)
A8. Headline Net debt
£m Note At At At
29 Feb 2024
28 Feb 2023 31 Aug 2023
Borrowings
- Revolving credit facility (176) - (84)
- Convertible bonds 9 (305) (296) (301)
- Bank loans - (126) -
- Lease liabilities 9 (602) (602) (566)
Liabilities from financing activities (1,083) (1,024) (951)
Cash and cash equivalents 44 46 56
Net debt (IFRS 16) 9 (1,039) (978) (895)
- Add back lease liabilities recognised under IFRS 16(1) 602 600 565
Net debt (pre-IFRS 16) (437) (378) (330)
(1) Excludes lease liabilities previously recognised as finance leases on a
pre-IFRS 16 basis.
A9. Cash flow disclosure impact of IFRS 16
There is no impact on cash flows, although the classification of cash flows
has changed, with an increase in net cash inflows from operating activities
being offset by a decrease in net cash inflows from financing activities.
6 months to 29 Feb 2024 6 months to 28 Feb 2023
£m Headline (pre-IFRS 16) IFRS 16 Headline (pre-IFRS 16) IFRS 16
IFRS 16 Adjustment IFRS 16 Adjustment
Net cash inflow/(outflow) from operating activities 4 58 62 (6) 57 51
Net cash outflow from investing activities (65) - (65) (60) - (60)
Net cash inflow/(outflow) from financing activities 49 (58) (9) (19) (57) (76)
Net decrease in cash in the period (12) - (12) (85) - (85)
A10. Balance sheet impact of IFRS 16
The balance sheet as at 29 February 2024 including and excluding the impact of
IFRS 16 is shown below:
At 29 Feb 2024 At 28 Feb 2023
Headline (pre-IFRS 16) IFRS 16 Headline (pre-IFRS 16) IFRS 16
IFRS 16 Adjustment IFRS 16 Adjustment
£m
Goodwill and other intangible assets 506 (1) 505 528 (1) 527
Property, plant and equipment 288 7 295 237 8 245
Right-of-use assets - 484 484 - 483 483
Investments in joint ventures 2 - 2 2 - 2
796 490 1,286 767 490 1,257
Inventories 207 - 207 182 - 182
Payables less receivables (142) (9) (151) (187) 7 (180)
Working capital 65 (9) 56 (5) 7 2
Derivative financial asset - - - 1 - 1
Net current and deferred tax asset 47 - 47 55 - 55
Provisions (26) 8 (18) (26) 12 (14)
Operating assets employed 882 489 1,371 792 509 1,301
Net debt (437) (602) (1,039) (378) (600) (978)
Total net assets 445 (113) 332 414 (91) 323
A11. Like-for-like revenue reconciliation
The reconciling items between like-for-like revenue change and total revenue
change are shown below:
£m Travel UK Rest of the World Travel Total Group
North America High Street
Like-for-like revenue change 13% -% 12% 10% (2)% 6%
Net space change impact 2% 13% 9% 5% (2)% 3%
Foreign exchange -% (6)% (2)% (2)% -% (1)%
Total revenue change 15% 7% 19% 13% (4)% 8%
A12. Operating lease expense
Amounts recognised in Headline Group operating profit on a pre-IFRS 16 basis
are as follows:
£m 6 months to 29 Feb 2024 6 months to 28 Feb 2023
Net operating lease charges 168 151
For the year ended 31 August 2020, the Group adopted IFRS 16. IFRS 16 requires
lessees to account for all leases under a single on-balance sheet model as the
distinction between operating and finance leases is removed. In order to
provide comparable information, the Group has chosen to present Headline
measures of operating profit and profit before tax, as explained in Note 2
Segmental analysis.
The table above presents the pre-IFRS 16 net operating lease charges, applying
the principles of IAS 17, and Group accounting policies as applicable prior to
1 September 2019, as described in the Glossary on page 40.
The Group leases various properties under non-cancellable operating lease
agreements. The leases have varying terms, escalation clauses and renewal
rights. The Group has a number of lease arrangements in which the rent payable
is contingent on revenue. Contingent rentals payable, based on store revenues,
are accrued in line with revenues generated.
The average remaining lease length across the Group is four years (February
2023: four years).
Rentals payable and receivable under operating leases are charged to the
income statement on a straight-line basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into an operating
lease are also spread on a straight-line basis over the lease term.
A13. Analysis of retail stores and selling space
Number of High Street stores(1)
1 Sep 2023 Opened Closed 29 Feb 2024
Total 514 - (8) 506
Number of Travel units
A Travel store may consist of multiple units within one location. On an
individual unit basis, Travel stores can be analysed as follows:
1 Sep 2023 Opened Closed 29 Feb 2024
Non franchise units 809 21 (17) 813
Joint Venture and Franchise units(1) 444 32 (19) 457
Total 1,253 53 (36) 1,270
(1) Travel units include motorway and international franchise units, and
exclude kiosks in India, and Supanews and Wild Cards and Gifts franchisees in
Australia.
Retail selling square feet ('000s)
1 Sep 2023 Opened Closed 29 Feb 2024
High Street 2.5 - - 2.5
Travel 1.1 - - 1.1
Total 3.6 - - 3.6
Total Retail selling square feet does not include franchise units.
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