REG - WH Smith PLC - Interim Results <Origin Href="QuoteRef">SMWH.L</Origin> - Part 2
13/04/2016 07:05
- Part 2: For the preceding part double click ID:nRSM9976Ua
the factors that are likely to
affect its future developments, performance and position are set out in the
Financial Review. The Financial Review describes the Group's financial
position, cash flows and borrowing facilities and also highlights the
principal risks and uncertainties facing the Group. The Annual Report and
Accounts 2015 includes the Group's objectives, policies and processes for
managing its capital; its financial risk management objectives; details of its
financial instruments and hedging activities; and its exposures to credit risk
and liquidity risk.
The directors report that they have reviewed current performance and
forecasts, combined with expenditure commitments, including capital
expenditure, proposed dividends and borrowing facilities. After making
enquiries, the directors have a reasonable expectation that the Group has
adequate financial resources to continue its current operations, including
contractual and commercial commitments for the foreseeable future. For these
reasons, the going concern basis has been adopted in preparing the financial
statements.
The Condensed Interim Financial Statements are unaudited but have been
reviewed by our auditors and were approved by the Board of Directors on 13
April 2016.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2016
2. Segmental analysis of results
For management and financial reporting purposes, the Group is organised into
two operating divisions - High Street and Travel. These divisions are the
basis on which the Group reports its IFRS 8 operating segment information to
the Board (the Chief Operating Decision maker for the Group).
a) Group revenue
6 months to 12 months to
£m 29 Feb 2016(unaudited) 28 Feb 2015(unaudited) 31 Aug 2015(audited)
Travel 263 237 521
High Street 370 374 657
Group revenue 633 611 1,178
1,178
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.
b) Group results
6 months to 12 months to
£m 29 Feb 2016(unaudited) 28 Feb 2015(unaudited) 31 Aug 2015(audited)
Travel 35 32 80
High Street 53 50 59
Profit from trading operations 88 82 139
Unallocated costs (8) (8) (15)
Group operating profit 80 74 124
Finance costs - (2) (3)
Income tax expense (14) (12) (20)
Profit for the period 66 60 101
101
Included within Travel revenue and trading profit is International revenue of
£35m (2015: £25m) and International trading profit of £3m (2015: £2m).
Group profit before finance charges and taxation for the period to 29 February
2016 is stated after the write-down of inventories to net realisable value,
£1m (2015: £1m).
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2016
3. Retirement benefit obligation
WH Smith PLC has operated a number of defined benefit schemes (which are
closed to new entrants and future service accrual) and defined contribution
pension schemes. The main pension arrangements for employees are operated
through a defined benefit scheme, WHSmith Pension Trust, and a defined
contribution scheme, WH Smith Retirement Savings Plan. The most significant
scheme is the defined benefit WHSmith Pension Trust.
The retirement benefit obligations recognised in the balance sheet for the
respective schemes at the relevant reporting dates were:
£m At29 Feb 2016(unaudited) At28 Feb 2015(unaudited) At31 Aug 2015 (audited)
WHSmith Pension Trust (5) (18) (5)
United News Shops Retirement Benefits Scheme (1) (1) (1)
Retirement benefit obligation recognised in the balance sheet (6) (19) (6)
WHSmith Pension Trust
The market value of the assets and the present value of the liabilities in the
scheme at the relevant reporting dates were:
£m At29 Feb 2016(unaudited) At28 Feb 2015(unaudited) At31 Aug 2015 (audited)
Present value of the obligations (915) (1,049) (948)
Fair value of scheme assets 1,134 1,159 1,162
Surplus before consideration of asset ceiling 219 110 214
Amounts not recognised due to effect of asset ceiling (219) (110) (214)
Additional liability recognised due to minimum funding requirements (5) (18) (5)
Retirement benefit obligation recognised in the balance sheet (5) (18) (5)
Total (expense) / income recognised in the Statement of Comprehensive Income
("SOCI"):
6 months to 12 months to
£m 29 Feb 2016(unaudited) 28 Feb 2015(unaudited) 31 Aug 2015(audited)
Total actuarial gain / (loss) before consideration of asset ceiling 31 (118) (18)
(Loss) / return on scheme assets excluding amounts included in net interest cost (31) 67 67
(Loss) / gain resulting from changes in amounts not recognised due to effect of asset ceiling excluding amountsrecognised in net interest cost (1) 48 (52)
Gain resulting from changes in additional liability due to minimum funding requirements excluding amountsrecognised in net interest cost - 38 51
Total actuarial (loss) / gain recognised in other comprehensive income (1) 35 48
In the prior year an additional £1m debit was recognised in the statement of
comprehensive income in relation to actuarial losses in the period on the
United News Shops Retirement Benefits Scheme. For the 6 months ended 29
February 2016 this was £nil.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2016
3. Retirement benefit obligation (continued)
WHSmith Pension Trust (continued)
Movement in net retirement benefit liability during the period:
6 months to 12 months to
£m 29 Feb 2016(unaudited) 28 Feb 2015(unaudited) 31 Aug 2015(audited)
At beginning of period (5) (55) (55)
Current service cost - - -
Net interest cost on the defined benefit liability - (1) (2)
Contributions 1 3 4
Actuarial (losses) / gains on defined benefit pension schemes (1) 35 48
At end of period (5) (18) (5)
The defined benefit pension schemes are closed to further accrual and given
the Liability Driven Investment policy adopted by the WHSmith Pension Trust
Trustees, the present value of the economic benefits of the IAS 19 surplus in
the pension scheme of £219m (2015: £110m) available on a reduction of future
contributions is £nil (2015: £nil). As a result the Group has not recognised
this IAS 19 surplus on the balance sheet. There is an ongoing actuarial
deficit primarily due to the different assumptions and calculation
methodologies on interpretation of IAS 19. We have recognised the schedule of
contributions as a liability of £5m (2015: £18m) in accordance with the
requirements of IFRIC 14.
A full actuarial valuation of the scheme is carried out every three years,
with interim reviews in the intervening years. The latest full actuarial
valuation of the Pension Trust was carried out at 31 March 2014 by independent
actuaries using the projected unit credit method. Following this valuation,
the deficit was £24m, and a revised deficit funding schedule of approximately
£3m per annum from 1 October 2014 for the following nine years was agreed with
the Trustee. With effect from 1 September 2015 the Group agreed to pay
certain investment management costs on behalf of the Trustee. The annual
deficit funding agreement is around £1m per annum with effect from 1 September
2015.
During the period, the Group made a contribution of £1m to the WHSmith Pension
Trust (2015: £3m) in accordance with the agreed pension deficit funding
schedule. The Group expects the cash payments for the year ended 31 August
2016, payable to the Trustee, to be £1m, and approximately £3m in total in
relation to the scheme.
The principal long-term assumptions used in the IAS 19 valuation were:
6 months to 12 months to
% 29 Feb 2016(unaudited) 28 Feb 2015(unaudited) 31 Aug 2015(audited)
Rate of increase in pension payments 3.04 3.08 3.22
Rate of increase in deferred pensions 2.00 2.30 2.20
Discount rate 3.75 3.20 3.75
RPI Inflation assumption 3.10 3.20 3.30
CPI Inflation assumption 2.00 2.30 2.20
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2016
4. Finance costs
6 months to 12 months to
£m 29 Feb 2016(unaudited) 28 Feb 2015 (unaudited) 31 Aug 2015 (audited)
Interest payable on bank loans and overdrafts - 1 1
Net interest cost on the defined benefit pension liability - 1 2
- 2 3
5. Income tax expense
6 months to 12 months to
£m 29 Feb 2016(unaudited) 28 Feb 2015(unaudited) 31 Aug 2015(audited)
Tax on profit 18 17 32
Adjustment in respect of prior year UK corporation tax (3) (4) (11)
Total current tax charge 15 13 21
Deferred tax - current year (1) (1) (1)
Tax on profit 14 12 20
Effective tax rate 17% 17% 17%
17%
As expected, during the period we made a £13m repayment to HMRC of a previous
payment on account in respect of a historical commercial structure put in
place in the year ended 31 August 2009. This matter is still subject to final
resolution.
A change to the UK corporation tax rate was announced in the Chancellor's
Budget on 16 March 2016. This included a reduction in the main of corporation
tax to 17% from 1 April 2020 (previously a reduction to 18%). As the change
had not been substantively enacted at the balance sheet date its effects are
not included in these financial statements.
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 2016(unaudited) 28 Feb 2015 (unaudited) 31 Aug 2015 (audited)
Dividends
2014 Final dividend of 24.2p per ordinary share - 28 28
2015 Interim dividend of 12.1p per ordinary share - - 14
2015 Final dividend of 27.3p per ordinary share 31 - -
31 28 42
42
The directors have declared an interim dividend in respect of the period
ending 29 February 2016 of 13.4p per ordinary share, which will absorb an
estimated £15m of shareholders' equity. This will be paid on 4 August 2016 to
shareholders registered at the close of business on 15 July 2016.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2016
7. Earnings per share
a) Earnings
6 months to 12 months to
£m 29 Feb 2016(unaudited) 28 Feb 2015(unaudited) 31 Aug 2015 (audited)
Earnings attributable to shareholders 66 60 101
Adjusted for non-headline items (net of taxation):
Non-cash income statement charge for pensions - 1 2
Headline earnings attributable to shareholders 66 61 103
61
103
b) Weighted average share capital
6 months to 12 months to
Millions 29 Feb 2016(unaudited) 28 Feb 2015 (unaudited) 31 Aug 2015 (audited)
Weighted average ordinary shares in issue 115 118 118
Less weighted average ordinary shares held in ESOP Trust (1) (1) (2)
Weighted average ordinary shares for basic earnings per share 114 117 116
Add weighted average number of ordinary shares under option 1 1 2
Weighted average ordinary shares for diluted earnings per share 115 118 118
118
c) Basic and diluted earnings per share
6 months to 12 months to
Pence 29 Feb 2016(unaudited) 28 Feb 2015 (unaudited) 31 Aug 2015 (audited)
Basic earnings per share 57.9 51.3 87.1
Adjustments for non-headline items - 0.8 1.7
Basic headline earnings per share 57.9 52.1 88.8
Diluted earnings per share 57.4 50.8 85.6
Adjustments for non-headline items - 0.9 1.7
Diluted headline earnings per share 57.4 51.7 87.3
57.4
51.7
87.3
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.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2016
8. Fixed Charges Cover - Non GAAP
6 months to 12 months to
£m 29 Feb 2016(unaudited) 28 Feb 2015 (unaudited) 31 Aug 2015 (audited)
Net finance charges - 2 3
Net operating lease rentals 96 92 190
Total fixed charges 96 94 193
Profit before tax and non-underlying items 80 72 121
Profit before tax, non-underlying items and fixed charges 176 166 314
Fixed charges cover - times 1.8x 1.8x 1.6x
9. Capital Expenditure
In the financial period, there were additions to property, plant and
equipment, including finance leases, of £17m (28 February 2015: £24m) and
additions to intangible assets of £5m (28 February 2015: £3m).
In the financial period, there were disposals of property, plant and equipment
with a cost of £3m and a net book value of £nil (28 February 2015: cost £1m
and net book value £nil). There were no material disposals of intangible
assets during the period (28 February 2015: £nil).
10. Analysis of net debt / funds
Analysis of net debt / funds
Net debt / funds can be analysed as follows:
£m At29 Feb 2016(unaudited) At28 Feb 2015(unaudited) At31 Aug 2015 (audited)
Cash and cash equivalents 34 36 34
Debt
- Revolving credit facility (25) (20) (9)
- Obligations under finance leases (10) (6) (10)
Net (debt) / funds (1) 10 15
15
Movement in net debt / funds:
£m At31 Aug 2015(audited) Cash flow Non Cash Currency translation At29 Feb 2016(unaudited)
Cash and cash equivalents 34 (1) - 1 34
Debt
- Revolving credit facility (9) (16) - - (25)
- Obligations under finance leases (10) (1) 1 - (10)
Net funds / (debt) 15 (18) 1 1 (1)
Cash and cash equivalents comprise cash held by the Group and short-term bank
deposits with an original maturity of three months or less. The carrying
amount of these assets approximates their fair value.
The Group has a £93.3m 5-year committed revolving credit facility. As at 29
February 2016 this Group had drawn down £25m (28 February 2015: £20m) on this
facility. The revolving credit facility is due to mature on 9 June 2019.
During the period the interest rate on the facility was LIBOR plus 90bps.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2016
11. Net cash inflow from operating activities
Net cash inflow from operating activities
6 months to 12 months to
£m 29 Feb 2016(unaudited) 28 Feb 2015 (unaudited) 31 Aug 2015 (audited)
Operating profit from continuing operations 80 74 124
Depreciation and amortisation 19 17 36
Impairment losses (relating to store closures) 2 2 2
Share-based payments 5 3 6
(Increase) / decrease in inventories (4) (1) 3
Decrease in receivables 6 3 2
Decrease in payables (20) (11) -
Adjustment for pension funding (1) (3) (4)
Income taxes paid (22) (10) (23)
Cash spend against provisions - - (1)
Net cash inflow from operating activities 65 74 145
12. Called Up Share Capital
29 Feb 2016 (unaudited) 28 Feb 2015 (unaudited) 31 Aug 2015 (audited)
Number of shares (millions) Nominal value£m Number of shares (millions) Nominal value£m Number of shares (millions) Nominal value£m
Equity
Ordinary shares of 22 6/67p 114 25 117 26 115 25
Total 114 25 117 26 115 25
During the six month period the Company repurchased 1,417,746 (six months to
28 February 2015: 2,091,000) of its own shares in the open market for an
aggregate consideration of £23m (2015: £24m).
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.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2016
13. Contingent liabilities and capital commitments
6 months to 12 months to
£m 29 Feb 2016(unaudited) 28 Feb 2015 (unaudited) 31 Aug 2015 (audited)
Bank and other loans guaranteed 4 5 6
Other potential liabilities that could crystallise are in respect of previous
assignments of leases where the liability could revert to the Group if the
lessee defaulted. Pursuant to the terms of the Demerger Agreement with
Connect Group PLC (formerly Smiths News PLC), any such contingent liability,
which becomes an actual liability, will be apportioned between the Group and
Connect Group PLC in the ratio 65:35 (provided that the actual liability of
Connect Group PLC in any 12 month period does not exceed £5m). The Group's 65
per cent share of these leases has an estimated future rental commitment at 29
February 2016 of £4m (28 February 2015: £5m).
At 29 February 2016, contracts placed for future capital expenditure approved
by the directors but not provided for amounted to £5m (28 February 2015:
£3m).
14. Financial Instruments
IFRS 13 requires disclosure of fair value measurements by level based on the
following measurement hierarchy:
· Level 1 - quoted prices (unadjusted) in active markets for identical
assets or liabilities;
· Level 2 - inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (that is, as
prices) or indirectly (that is, derived from prices); and
· Level 3 - inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs).
All fair value measurements made by the group are in the Level 2 category. The
fair value of forward foreign exchange contracts has been determined using
forward currency exchange rates at the balance sheet date. These have been
provided by the individual banking institutions with whom the contracts are
held. There have been no transfers of assets or liabilities between any levels
of the fair value hierarchy.
There were no material differences between the carrying value of
non-derivative financial assets and financial liabilities and their fair
values at the balance sheet date.
£m 29 Feb 2016 (unaudited) 28 Feb 2015 (unaudited)
Financial assets
Cash flow hedges:
Forward foreign currency contracts 1 1
1 1
15. Related Parties
There have been no material related party transactions during the interim
period under review.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2016
Statement of Directors' Responsibilities
The Directors confirm to the best of their knowledge that this condensed set
of financial statements has been prepared in accordance with IAS 34 "Interim
Financial Reporting" as adopted by the European Union, and that the interim
management report herein includes a fair review of the information required by
DTR 4.2.7R and DTR 4.2.8R.
The Directors of WH Smith PLC are listed on the website at
www.whsmithplc.co.uk/about_whsmith/directors/.
By order of the Board
Stephen Clarke Robert Moorhead
Group Chief Executive Chief Financial Officer and
Chief Operating Officer
13 April 2016
INDEPENDENT REVIEW REPORT TO WH SMITH PLC
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed WH Smith Plc's interim financial statements (the "interim
financial statements") in the interim results announcement of WH Smith Plc for
the 6 month period ended 29 February 2016. 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
International Accounting Standard 34, 'Interim Financial Reporting', as
adopted by the European Union and the Disclosure Rules and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements, which are prepared by WH Smith Plc,
comprise:
· The Condensed Group Balance Sheet as at 29 February 2016;
· 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 Condensed Interim Financial Statements.
The interim financial statements included in the interim results announcement
have been prepared in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and the
Disclosure Rules and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
As disclosed in note 1 to the interim financial statements, the financial
reporting framework that has been applied in the preparation of the full
annual financial statements of the Group is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Interim Results Announcement 6 months to 29 February 2016, 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 and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express to the company a conclusion on the interim
financial statements in the Interim Results Announcement based on our review.
This report, including the conclusion, has been prepared for and only for the
company for the purpose of complying with the Disclosure and Transparency
Rules 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.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. 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 Ireland) 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.
PricewaterhouseCoopers LLP
Chartered Accountants
13 April 2016
London
Notes:
(a) The maintenance and integrity of the WH Smith PLC website is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept
no responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
WH Smith PLC
Appendix
Analysis of retailing stores and selling space
Number of High Street stores1
1 Sept 2015 Opened Closed 29 Feb 2016
Total 615 10 2 (7) 618
618
1 Excludes 60 WH Smith LOCAL franchised stores
2 Includes 10 Cardmarket stores
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 Sept 2015 Opened Closed 29 Feb 2016
Non franchise units 510 21 (9) 522
Joint Venture and Franchise units3 226 10 (1) 235
Total 736 31 (10) 757
757
3 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 Sept 2015 Opened Closed 29 Feb 2016
High Street 2,892 10 2 (47) 2,855
Travel 579 25 (7) 597
Total 3,471 35 (54) 3,452
3,452
Total Retail selling square feet does not include franchise units.
This information is provided by RNS
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