REG - WH Smith PLC - PRELIMINARY RESULTS ANNOUNCEMENT <Origin Href="QuoteRef">SMWH.L</Origin> - Part 2
29/10/2014 12:25
- Part 2: For the preceding part double click ID:nRSP4347Ua
Travel 73 - 73 66 - 66
High Street 58 - 58 56 - 56
Profit from trading operations 131 - 131 122 - 122
Unallocated costs (15) - (15) (15) - (15)
Group operating profit before non-underlying items 116 - 116 107 - 107
Non-underlying operating items (Note 11) - 1 1 - - -
Group operating profit 116 1 117 107 - 107
Investment income - - - - - -
Finance costs (2) (3) (5) (1) (3) (4)
Income tax expense (20) - (20) (22) - (22)
Profit for the year 94 (2) 92 84 (3) 81
1 Restated for adoption of IAS 19 Revised. See Note 1.
2 Non-underlying items include the non-cash income statement charge for
pensions and for 31 August 2014 a one off pension past service credit (Note
11).
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2014
3. Segmental analysis of results (continued)
c) Balance sheet and other segmental information
2014
£m Travel High Street Continuing operations Discontinued operations Group
Assets
Segment assets 135 270 405 - 405
Unallocated assets - - 52 - 52
Consolidated total assets 135 270 457 - 457
Liabilities
Segment liabilities (66) (162) (228) (3) (231)
Unallocated liabilities - - (125) - (125)
Consolidated total liabilities (66) (162) (353) (3) (356)
Net assets / (liabilities) 69 108 104 (3) 101
Capital additions 17 16 33 - 33
Depreciation and amortisation of non-current assets (11) (23) (34) - (34)
Impairment losses - (2) (2) - (2)
2013
£m Travel High Street Continuing operations Discontinued operations Group
Assets
Segment assets 126 285 411 - 411
Unallocated assets - - 52 - 52
Consolidated total assets 126 285 463 - 463
Liabilities
Segment liabilities (66) (166) (232) (3) (235)
Unallocated liabilities - - (126) - (126)
Consolidated total liabilities (66) (166) (358) (3) (361)
Net assets / (liabilities) 60 119 105 (3) 102
Capital additions 14 17 31 - 31
Depreciation and amortisation of non-current assets (10) (25) (35) - (35)
Impairment losses (1) (1) (2) - (2)
Segment assets include intangible assets, property, plant and equipment,
inventories and receivables. Segment liabilities comprise operating
liabilities.
Discontinued operations include property provisions relating to reversionary
leases and provisions for discontinued operations (USA Travel).
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2014
4. Finance costs
£m 2014 2013 Restated1
Interest payable on bank loans and overdrafts 1 -
Unwinding of discount on provisions 1 1
Net interest cost on the defined benefit pension liability 3 3
5 4
1 Restated for adoption of IAS 19 Revised. See Note 1.
5. Income tax expense
£m 2014 2013Restated1
Tax on profit from continuing operations 32 37
Standard rate of UK corporation tax 22.16% (2013: 23.58%)
Adjustment in respect of prior year UK corporation tax (12) (15)
Total current tax charge - continuing operations 20 22
Deferred tax - current year - -
Deferred tax - prior year - -
Tax on profit - continuing operations 20 22
Effective tax rate on continuing activities 18% 21%
Tax on Headline profit - continuing operations 20 22
Effective tax rate on Headline profit - continuing activities 18% 21%
Reconciliation of the taxation charge
£m 2014 2013Restated1
Tax on profit from continuing operations at standard rate of UK corporation tax 22.16% (2013: 23.58%) 25 24
Tax effect of items that are not deductible or not taxable in determining taxable profit 7 13
Adjustment in respect of prior years (12) (15)
Tax charge - continuing operations 20 22
22
1 Restated for adoption of IAS 19 Revised. See Note 1.
The UK corporation tax rate fell to 21 per cent with effect from 1 April 2014
(previously 23 per cent). The rate of corporation tax will change from 21 per
cent to 20 per cent with effect from 1 April 2015.
The Group provides against known tax exposures, on a reasonable basis, until
we have received formal agreement from the relevant tax authority that an
inquiry into a particular tax return has been closed. Included in the total
tax creditor of £39m is a provision of approximately £13m which relates to a
commercial structure put in place in the year ending 31 August 2009. This
historical structure is the subject of ongoing discussions with HMRC and the
Group has received a payment on account for this £13m which could be repaid to
HMRC prior to the conclusion of this matter.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2014
6. Earnings per share
a) Earnings
£m 2014 2013Restated1
Earnings attributable to shareholders 92 81
Adjusted for non-headline items (net of taxation):
Non-cash income statement charge for pensions 3 3
Operating exceptional items (1) -
Headline earnings attributable to shareholders 94 84
Headline earnings attributable to shareholders
94
84
1 Restated for adoption of IAS 19 Revised. See Note 1.
b) Weighted average share capital
Millions 2014 2013
Weighted average ordinary shares in issue 121 127
Less weighted average ordinary shares held in ESOP Trust (2) (5)
Weighted average ordinary shares for earnings per share 119 122
Add weighted average number of ordinary shares under option 2 5
Weighted average ordinary shares for diluted earnings per share 121 127
127
c) Basic and diluted earnings per share
Pence 2014 2013Restated1
Basic earnings per share 77.3 66.4
Adjustments for non-headline items 1.7 2.5
Basic headline earnings per share 79.0 68.9
Diluted earnings per share 76.0 63.8
Adjustments for non-headline items 1.7 2.3
Diluted headline earnings per share 77.7 66.1
Diluted headline earnings per share
77.7
66.1
1 Restated for adoption of IAS 19 Revised. See Note 1.
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 Financial Statements
For the year ended 31 August 2014
7. Dividends
Amounts paid and recognised as distributions to shareholders in the period are
as follows:
£m 2014 2013
Dividends
Interim dividend of 10.8p per ordinary share (2013: 9.4p per ordinary share) 12 11
Final dividend of 21.3p per ordinary share (2013: 18.6p per ordinary share) 26 23
38 34
34
The proposed dividend of 24.2p per share, amounting to a final dividend of
£28m, is not included as a liability in these financial statements and,
subject to shareholder approval, will be paid on 29 January 2015 to
shareholders on the register at the close of business on 9 January 2015.
8. Analysis of net funds
Analysis of net funds
Movements in net funds can be analysed as follows:
£m 2013 Cash flow 2014
Cash and cash equivalents 31 3 34
Borrowings - (12) (12)
Net cash 31 (9) 22
£m 2012 Cash flow 2013
Cash and cash equivalents 36 (5) 31
Net cash 36 (5) 31
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 in place a five-year committed multi-currency revolving credit
facility of £93.3m with Barclays Bank PLC, HSBC, Lloyds Banking Group and
Santander UK PLC. The revolving credit facility is due to mature on 9 June
2019. The utilisation is interest-bearing at LIBOR plus 90 basis points.
Utilisation at 31 August 2014 was £12m, and the utilisation of the previous
facility as at 31 August 2013 was £nil.
9. Net cash inflow from operating activities
£m 2014 2013
Operating profit from continuing operations 117 107
Depreciation of property, plant and equipment 29 29
Impairment of property, plant and equipment 2 2
Amortisation of intangible assets 5 6
Share-based payments 5 7
Decrease in inventories 4 3
(Increase) / decrease in receivables (2) 4
Decrease in payables (5) (6)
Pension funding (14) (12)
Non-cash pension past service credit (1) -
Income taxes paid (21) (19)
Charge to provisions 1 1
Cash spend against provisions (4) (3)
Net cash inflow from operating activities 116 119
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2014
10. Fixed Charges Cover
£m 2014 2013 Restated1
Net finance charges 5 4
Net operating lease rentals 185 182
Total fixed charges 190 186
Profit before tax and non-underlying items 111 103
Profit before tax, non-underlying items and fixed charges 301 289
Fixed charges cover - times 1.6x 1.6x
1 Restated for adoption of IAS 19 Revised. See Note 1.
11. Retirement benefit obligation
WH Smith PLC has operated a number of defined benefit and defined contribution
pension plans. 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 WHSmith Pension Trust, which is described in Note 11 a) i).
The retirement benefit obligations recognised in the balance sheet for the
respective schemes at the relevant reporting dates were:
£m 2014 2013
WHSmith Pension Trust (55) (62)
United News Shops Retirement Benefits Scheme - -
Retirement benefit obligation recognised in the balance sheet (55) (62)
a) Defined benefit pension schemes
i) The WHSmith Pension Trust
The WHSmith Pension Trust Final Salary Section is a funded final salary
defined benefit scheme; it was closed to defined benefit service accrual on 2
April 2007 and has been closed to new members since 1996. Benefits are based
on service and salary at the date of closure or leaving service, with
increases currently based on CPI inflation in deferment and RPI inflation in
payment.
The WHSmith Pension Trust, has assets valued at £1,087m as at 31 August 2014
managed by third party investment managers. In September 2005, the Pension
Trust Trustee adopted a Liability Driven Investment (LDI) policy where the
assets in the investment fund were invested such that they are expected to
alter in value in line with changes in the pension liability caused by changes
in interest and inflation. The LDI structure that is in place has a number of
inflation and interest rate hedges and equity option agreements, with
collateral posted daily to or from the scheme to the relevant counterparty.
The risk of failure of counterparties could expose the scheme to loss. The
scheme's liabilities are also subject to changes in longevity.
A full actuarial valuation of the Scheme is carried out every three years with
interim reviews in the intervening years. As at the balance sheet date on 31
August 2014, the latest full actuarial valuation of the Pension Trust was
carried out as at 31 March 2012 by independent actuaries using the projected
unit credit method. The March 2012 deficit was £75m, and a revised deficit
funding schedule of approximately £13m per annum (subject to indexation) over
the following seven years was agreed with the Trustee. During the year ending
31 August 2014, the Group made a contribution of £14m to the WHSmith Pension
Trust (2013: £12m) in accordance with the agreed pension deficit funding
schedule. The weighted average duration of the defined benefit obligation is
18 years.
Since the balance sheet date the Trustees have completed a full actuarial
valuation of the WHSmith Pension Trust as at 31 March 2014. As at 31 March
2014 the deficit was £24m. A revised deficit funding schedule of
approximately £3m per annum with effect from 1 October 2014, for the following
nine years, has been agreed with the Trustee. The expected pension
contributions for the year ended 31 August 2015 will be approximately £4m to
reflect the higher contribution paid in September 2014 under the previous
schedule of contributions. This valuation has not been reflected in the
minimum funding requirement recognised at the balance sheet date.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2014
11. Retirement benefit obligation (continued)
Retirement benefit obligation (continued)
a) Defined benefit pension schemes (continued)
i) The WHSmith Pension Trust (continued)
Amounts recognised in the Financial Statements
Balance Sheet
The amounts recognised in the balance sheet under IAS 19 in relation to this
plan are as follows:
£m 2014 2013
Present value of the obligations (932) (856)
Fair value of plan assets 1,087 964
Surplus before consideration of asset ceiling 155 108
Amounts not recognised due to effect of asset ceiling (155) (108)
Additional liability recognised due to minimum funding requirements (55) (62)
Retirement benefit obligation recognised in the balance sheet (55) (62)
The pension scheme is closed to further accrual and given the LDI policy
adopted by the Pension Trustee, the present value of the economic benefits of
the IAS 19 surplus in the pension scheme of £155m (2013: £108m) available on a
reduction of future contributions is £nil (2013: £nil). As a result the Group
has not recognised this IAS 19 surplus on the balance sheet. Scheme assets are
stated at their market value at the reporting date.
Income Statement
The amounts recognised in the income statement were as follows:
£m 2014 2013
Current service cost - -
Administration expenses - -
Past service credit1 1 -
Net interest cost on the defined benefit liability (3) (3)
(2) (3)
1 The past service credit is a one-off non-underlying item and has been
excluded from Headline profit before tax.
The charge for the current service cost has been included in administrative
costs. The net interest cost has been included in finance costs (Note 4).
Actuarial gains and losses have been reported in the statement of
comprehensive income.
Following a change to the trivial commutation limit from £18,000 to £30,000
announced in the 2014 Budget, members of the WHSmith Pension Trust were given
the opportunity to take a trivial commutation payment. The result of this
exercise was the recognition of a past service credit of £1m, as a result of
£6m of liabilities being removed from the Trust compared to £5m of assets paid
out for trivial commutation. This has been disclosed in the Group Income
Statement as a non-underlying one-off item and is excluded from Headline Group
profit before tax.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2014
11. Retirement benefit obligation (continued)
a) Defined benefit pension schemes (continued)
i) The WHSmith Pension Trust (continued)
Statement of Comprehensive Income
Total income / (expense) recognised in the Statement of Comprehensive Income
("SOCI"):
£m 2014 2013Restated1
Actuarial gain / (loss) on defined benefit obligations arising from experience 2 (2)
Actuarial (loss) on defined benefit obligations arising from changes in financial assumptions (80) (71)
Actuarial gain / (loss) on defined benefit obligations arising from changes in demographic assumptions 5 (2)
Total actuarial (loss)/gain before consideration of asset ceiling (73) (75)
Return on plan assets excluding amounts included in net interest cost 100 53
(Loss)/gain resulting from changes in amounts not recognised due to effect of asset ceiling excluding amounts recognised in net interest cost (43) 10
Gain resulting from changes in additional liability due to minimum funding requirements excluding amounts recognised in net interest cost 11 11
Total actuarial loss recognised in other comprehensive income (5) (1)
1 Restated for adoption of IAS 19 Revised. See Note 1.
In the prior year, a £1m credit was recognised in the statement of
comprehensive income in relation to actuarial gains in the year on the United
News Shops Retirement Benefits Scheme. In the current year this is £nil.
Movements in the present value of the defined benefit scheme assets,
obligations and minimum funding requirement in the current year were as
follows:
2014 2013 Restated1
£m Assets Liabilities Effect of asset ceiling and recognition of minimum funding requirement Net defined benefit liability Assets Liabilities Effect of asset ceiling and recognition of minimum funding requirement Net defined benefit liability
At 1 September 964 (856) (170) (62) 889 (776) (183) (70)
Current service cost - - - - - - - -
Interest income / (cost) 43 (38) (8) (3) 37 (32) (8) (3)
Past service credit (6) 7 - 1 - - - -
Actuarial gains / (losses) 100 (73) (32) (5) 53 (75) 21 (1)
Contributions from sponsoring companies 14 - - 14 12 - - 12
Benefits paid (28) 28 - - (27) 27 - -
At 31 August 1,087 (932) (210) (55) 964 (856) (170) (62)
1 Restated for adoption of IAS 19 Revised. See Note 1.
The actual return on scheme assets was a gain of £143m (2013: gain of £90m).
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2014
11. Retirement benefit obligation (continued)
a) Defined benefit pension schemes (continued)
i) The WHSmith Pension Trust (continued)
The principal long-term assumptions used in the IAS 19 valuation were:
% 2014 2013
Rate of increase in pension payments 3.17 3.36
Rate of increase in deferred pensions 2.37 2.59
Discount rate 3.84 4.50
RPI Inflation assumption 3.27 3.49
CPI Inflation assumption 2.37 2.59
2014 2013
Years Male Female Male Female
Life expectancy at age 65
Member currently aged 65 22.1 24.3 22.2 24.5
Member currently aged 45 23.4 25.8 23.6 26.0
Sensitivity to changes in assumptions
Sensitivity information has been derived using scenario analysis from the
actuarial assumptions as at 31 August 2014, while keeping all other
assumptions consistent.
% Effect on liabilities at 31 August 2014
Discount rate + / - 0.1% per annum -18/+19
Inflation assumptions + / - 0.1% per annum +18/-16
Life expectancy + / - 1 year +32/-32
ii) United News Shops Retirement Benefits Scheme
United News Shops Retirement Benefits Scheme is closed to new entrants. The
scheme provides pension benefits for pensioners and deferred members. 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 5 April 2012 by independent actuaries.
Following this valuation, the deficit was £1m.
The valuation of the defined benefit pension scheme used for the IAS 19
disclosures is based on consistent assumptions to those used for valuing the
WHSmith Pension Trust. Scheme assets are stated at their market value at the
relevant reporting date. The deficit funding contributions are immaterial in
the context of these financial statements.
The present value of obligations and fair value of assets are consistent with
their acquisition valuations and are stated below.
£m 2014 2013
Present value of the obligations (6) (5)
Fair value of plan assets 6 5
Retirement benefit obligation recognised in the balance sheet - -
In the prior year a £1m credit was recognised in the statement of
comprehensive income in relation to actuarial gains in the year on the United
News Shops Retirement Benefits Scheme. In the current year this is £nil.
b) Defined contribution pension scheme
The pension cost charged to income for the Group's defined contribution
schemes amounted to £3m for the year ended 31 August 2014 (2013: £3m).
This information is provided by RNS
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