REG - WH Smith PLC - Preliminary Results <Origin Href="QuoteRef">SMWH.L</Origin> - Part 2
15/10/2015 07:00
- Part 2: For the preceding part double click ID:nRSO3077Ca
During the period there was a £2m (2014: £2m) impairment charge for
property, plant and equipment and other intangible assets included in
distribution costs.
2 Includes £1m non-underlying pension past service credit in 2014 which is
excluded from Headline profit before tax. See Note 11.
3 Other income is profit attributable to property and the sale of plant and
equipment.
£m 2015 2014
Cost of inventories recognised as an expense 499 502
Write-down of inventories in the period 3 3
Depreciation and amounts written off property, plant and equipment 32 31
Amortisation and amounts written off intangible assets 6 5
Net operating lease charges
- land and buildings 189 184
- equipment and vehicles 1 1
Other occupancy costs 67 66
Staff costs 189 183
3. Segmental analysis of results
Segmental analysis of results
For management and financial reporting purposes, the Group is organised into
two operating divisions - Travel and High Street. These divisions are the
basis on which the Group reports its IFRS 8 operating segment information.
a) Group revenue
£m 2015 2014
Continuing operations:
Travel 521 477
High Street 657 684
Group revenue 1,178 1,161
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2015
3. Segmental analysis of results (continued)
b) Group results
2015 2014
£m Headline Non- underlying items1 Total Headline Non-underlying items1 Total
Continuing operations:
Travel 80 - 80 73 - 73
High Street 59 - 59 58 - 58
Profit from trading operations 139 - 139 131 - 131
Unallocated costs (15) - (15) (15) - (15)
Group operating profit before non-underlying items 124 - 124 116 - 116
Non-underlying operating items (Note 11) - - - - 1 1
Group operating profit 124 - 124 116 1 117
Finance costs (1) (2) (3) (2) (3) (5)
Income tax expense (20) - (20) (20) - (20)
Profit for the year 103 (2) 101 94 (2) 92
1 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).
Included within Travel revenue and trading profit is International revenue of
£57m (2014: £43m) and International trading profit of £5m (2014: £3m).
c) Balance sheet and other segmental information
2015
£m Travel High Street Continuing operations Discontinued operations Group
Assets
Segment assets 149 265 414 - 414
Unallocated assets - - 42 - 42
Consolidated total assets 149 265 456 - 456
Liabilities
Segment liabilities (77) (159) (236) (3) (239)
Unallocated liabilities - - (70) - (70)
Consolidated total liabilities (77) (159) (306) (3) (309)
Net assets / (liabilities) 72 106 150 (3) 147
Capital additions 21 26 47 - 47
Depreciation and amortisation of non-current assets (13) (23) (36) - (36)
Impairment losses - (2) (2) - (2)
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2015
3. Segmental analysis of results (continued)
c) Balance sheet and other segmental information (continued)
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)
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.
4. Finance costs
£m 2015 2014
Interest payable on bank loans and overdrafts 1 1
Unwinding of discount on provisions - 1
Net interest cost on defined benefit pension liabilities 2 3
3 5
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2015
5. Income tax expense
£m 2015 2014
Tax on profit 32 32
Standard rate of UK corporation tax 20.58% (2014: 22.16%)
Adjustment in respect of prior year UK corporation tax (11) (12)
Total current tax charge 21 20
Deferred tax - current year (1) -
Tax on profit 20 20
Effective tax rate 17% 18%
Reconciliation of the taxation charge
£m 2015 2014
Tax on profit at standard rate of UK corporation tax 20.58% (2014: 22.16%) 25 25
Tax effect of items that are not deductible or not taxable in determining taxable profit 6 7
Adjustment in respect of prior years (11) (12)
Income tax expense 20 20
20
The UK corporation tax rate fell to 20 per cent with effect from 1 April 2015
(previously 21 per cent). Changes to the UK corporation tax rates were
announced in the Chancellor's Budget on 8 July 2015. These include reductions
to the main rate to reduce the rate to 19% from 1 April 2017 and to 18% from 1
April 2020 As the changes had not been substantively enacted at the balance
sheet date their effects are not included in these financial statements.
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 £35m 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 received a payment on account for £13m, which will be repaid to HMRC
during the current financial year, in advance of final resolution of this
matter.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2015
6. Earnings per share
a) Earnings
£m 2015 2014
Earnings attributable to shareholders 101 92
Adjusted for non-headline items (net of taxation):
Non-cash income statement charge for pensions 2 3
Operating exceptional items - (1)
Headline earnings attributable to shareholders 103 94
Headline earnings attributable to shareholders
103
94
b) Weighted average share capital
Millions 2015 2014
Weighted average ordinary shares in issue 118 121
Less weighted average ordinary shares held in ESOP Trust (2) (2)
Weighted average ordinary shares for earnings per share 116 119
Add weighted average number of ordinary shares under option 2 2
Weighted average ordinary shares for diluted earnings per share 118 121
121
c) Basic and diluted earnings per share
Pence 2015 2014
Basic earnings per share 87.1 77.3
Adjustments for non-headline items 1.7 1.7
Basic headline earnings per share 88.8 79.0
Diluted earnings per share 85.6 76.0
Adjustments for non-headline items 1.7 1.7
Diluted headline earnings per share 87.3 77.7
Diluted headline earnings per share
87.3
77.7
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 2015
7. Dividends
Amounts paid and recognised as distributions to shareholders in the period are
as follows:
£m 2015 2014
Dividends
Interim dividend of 12.1p per ordinary share (2014: 10.8p per ordinary share) 14 12
Final dividend of 24.2p per ordinary share (2014: 21.3p per ordinary share) 28 26
42 38
38
The proposed dividend of 27.3p per share, amounting to a final dividend of
£31m, is not included as a liability in these financial statements and,
subject to shareholder approval, will be paid on 4 February 2016 to
shareholders on the register at the close of business on 15 January 2016.
8. Analysis of net funds
Analysis of net funds
Movements in net funds can be analysed as follows:
£m 2014 Cash flow Non cash Currency translation 2015
Cash and cash equivalents 34 1 - (1) 34
Borrowings
- Revolving credit facility (12) 3 - - (9)
- Obligations under finance leases - 1 (11) - (10)
Net funds 22 5 (11) (1) 15
£m 2013 Cash flow Currency translation 2014
Cash and cash equivalents 31 4 (1) 34
Borrowings
- Revolving credit facility - (12) - (12)
Net funds 31 (8) (1) 22
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 2015 was £9m (2014: £12m).
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2015
9. Net cash inflow from operating activities
£m 2015 2014
Operating profit from continuing operations 124 117
Depreciation of property, plant and equipment 30 29
Impairment of property, plant and equipment 2 2
Amortisation of intangible assets 6 5
Share-based payments 6 5
Decrease in inventories 3 4
Decrease / (increase) in receivables 2 (2)
Decrease in payables - (5)
Pension funding (4) (14)
Non-cash pension past service credit - (1)
Income taxes paid (23) (21)
Charge to provisions - 1
Cash spend against provisions (1) (4)
Net cash inflow from operating activities 145 116
10. Fixed Charges Cover
£m 2015 2014
Net finance charges (Note 4) 3 5
Net operating lease rentals (Note 2) 190 185
Total fixed charges 193 190
Profit before tax and non-underlying operating items 121 111
Profit before tax, non-underlying operating items and fixed charges 314 301
Fixed charges cover - times 1.6x 1.6x
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 2015 2014
WHSmith Pension Trust (5) (55)
United News Shops Retirement Benefits Scheme (1) -
Retirement benefit obligation recognised in the balance sheet (6) (55)
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2015
11. Retirement benefit obligation (continued)
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 £1,162m as at 31 August 2015
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. The latest full actuarial valuation
of the Pension Trust was carried out as at 31 March 2014 by independent
actuaries using the projected unit credit method. At 31 March 2014 the deficit
was £24m, and a revised deficit funding schedule of approximately £3m per
annum, with effect from 1 October 2014 for the following nine years, was
agreed with the Trustee. During the year ending 31 August 2015, the Group made
a contribution of £4m to the WHSmith Pension Trust (2014: £14m) in accordance
with the agreed pension deficit funding schedule. The weighted average
duration of the defined benefit obligation is 19 years.
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. The
minimum funding requirement liability recognised on the balance sheet as at 31
August 2015 reflects this revised 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.
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 2015 2014
Present value of the obligations (948) (932)
Fair value of plan assets 1,162 1,087
Surplus before consideration of asset ceiling 214 155
Amounts not recognised due to effect of asset ceiling (214) (155)
Additional liability recognised due to minimum funding requirements (5) (55)
Retirement benefit obligation recognised in the balance sheet (5) (55)
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 £214m (2014: £155m) available on a
reduction of future contributions is £nil (2014: £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.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2015
11. Retirement benefit obligation (continued)
a) Defined benefit pension schemes (continued)
i) The WHSmith Pension Trust (continued)
Amounts recognised in the Financial Statements (continued)
Income Statement
The amounts recognised in the income statement were as follows:
£m 2015 2014
Current service cost - -
Administration expenses - -
Past service credit1 - 1
Net interest cost on the defined benefit liability (2) (3)
(2) (2)
1 The past service credit in the prior year 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.
In the year ended 31 August 2014, 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 in the prior year, 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.
Statement of Comprehensive Income
Total income / (expense) recognised in the Statement of Comprehensive Income
("SOCI"):
£m 2015 2014
Actuarial gain on defined benefit obligations arising from experience 15 2
Actuarial loss on defined benefit obligations arising from changes in financial assumptions (21) (80)
Actuarial (loss) / gain on defined benefit obligations arising from changes in demographic assumptions (12) 5
Total actuarial loss before consideration of asset ceiling (18) (73)
Return on plan assets excluding amounts included in net interest cost 67 100
Loss resulting from changes in amounts not recognised due to effect of asset ceiling excluding amounts recognised in net interest cost (52) (43)
Gain resulting from changes in additional liability due to minimum funding requirements excluding amounts recognised in net interest cost 51 11
Total actuarial gain / (loss) recognised in other comprehensive income 48 (5)
In addition, a £1m debit (2014: £nil) was recognised in the statement of
comprehensive income in relation to actuarial losses in the year on the United
News Shops Retirement Benefits Scheme.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2015
11. Retirement benefit obligation (continued)
a) Defined benefit pension schemes (continued)
i) The WHSmith Pension Trust (continued)
Amounts recognised in the Financial Statements (continued)
Movements in the present value of the WHSmith Pension Trust defined benefit
scheme assets, obligations and minimum funding requirement in the current year
were as follows:
2015 2014
£m Assets Liabilities Effect of asset ceiling and recognition of minimum funding liability Net retirement benefit obligation recognised Assets Liabilities Effect of asset ceiling and recognition of minimum funding liability Net retirement benefit obligation recognised
At 1 September 1,087 (932) (210) (55) 964 (856) (170) (62)
Current service cost - - - - - - - -
Interest income / (cost) 41 (35) (8) (2) 43 (38) (8) (3)
Past service credit (1) 1 - - (6) 7 - 1
Actuarial gains / (losses) 67 (18) (1) 48 100 (73) (32) (5)
Contributions from sponsoring companies 4 - - 4 14 - - 14
Benefits paid (36) 36 - - (28) 28 - -
At 31 August 1,162 (948) (219) (5) 1,087 (932) (210) (55)
The actual return on scheme assets was a gain of £108m (2014: gain of £143m).
The principal long-term assumptions used in the IAS 19 valuation were:
% 2015 2014
Rate of increase in pension payments 3.22 3.17
Rate of increase in deferred pensions 2.20 2.37
Discount rate 3.75 3.84
RPI Inflation assumption 3.30 3.27
CPI Inflation assumption 2.20 2.37
2015 2014
Years Male Female Male Female
Life expectancy at age 65
Member currently aged 65 22.4 24.7 22.1 24.3
Member currently aged 45 24.1 26.6 23.4 25.8
Sensitivity to changes in assumptions
Sensitivity information has been derived using scenario analysis from the
actuarial assumptions as at 31 August 2015, while keeping all other
assumptions consistent.
£m Effect on liabilities at 31 August 2015
Discount rate + / - 0.1% per annum -19/+19
Inflation assumptions + / - 0.1% per annum -18/+17
Life expectancy + / - 1 year +30/-30
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2015
11. Retirement benefit obligation (continued)
a) Defined benefit pension schemes (continued)
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 2015 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 2015 2014
Present value of the obligations (6) (6)
Fair value of plan assets 5 6
Retirement benefit obligation recognised in the balance sheet (1) -
A £1m debit (2014: £nil) was recognised in the statement of comprehensive
income in relation to actuarial losses in the year on the United News Shops
Retirement Benefits Scheme.
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 2015 (2014: £3m).
12. Acquisitions
On 24 November 2014, the Group acquired the trade and assets of Supanews, a
business operating in Australia, for a cash consideration of £3m. The
business is a retailer of news, books and convenience products. The fair value
of assets acquired is £3m and has been allocated as follows; £1m intangible
assets (representing the brand asset and franchise agreements), £2m goodwill
(representing expected synergies and future growth potential).
13. Events after the balance sheet date
As at 14 October 2015, the Company has repurchased a further 590,000 of its
own shares in the open market as part of the Company's share buyback
programme.
On 15 October 2015, the Company announced its intention to return up to £50m
of cash to shareholders through a rolling share buyback programme.
This information is provided by RNS
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