REG - WH Smith PLC - Preliminary Results Announcement
14/11/2024 07:00
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RNS Number : 1682M WH Smith PLC 14 November 2024
14 November
2024
WH SMITH PLC
The global travel retailer
PRELIMINARY RESULTS ANNOUNCEMENT
FOR THE YEAR ENDED 31 AUGUST 2024
A strong year with Group profit(1) up 16%
Well positioned for future growth
· Total Group revenue up 7% to £1,918m (2023: £1,793m)
o Total revenue in Travel up 11%, with Travel UK up 12%; North America up
9%*; Rest of the World ('ROW') up 18%*
· Headline Group profit before tax and non-underlying items(1) up 16%
to £166m (2023: £143m)
o Total Travel trading profit(1) of £189m (2023: £164m)
o High Street trading profit(1) of £32m (2023: £32m)
· Headline diluted EPS before non-underlying items(1) up 11% to 89.3p
· Proposed final dividend of 22.6p per share, resulting in full year
dividend of 33.6p per share, up 16% on the prior year and reflecting strong
business performance and confidence in the Group's future prospects
· £50m share buyback announced in September 2024, reflecting strong
ongoing cash flow, receipt of the pension fund buyout cash return and the
strength of our balance sheet
· New store pipeline of over 90 stores(2) won and yet to open in
Travel, including c.60 in North America. Expect to open net c.40 stores this
financial year in Travel
· The new financial year has started well
Carl Cowling, Group Chief Executive, commented:
"The Group has delivered an excellent performance throughout the year,
particularly over the key summer trading period.
"Our Travel divisions are trading well with a particularly strong performance
from our UK Travel business, with trading profit up 20% to £122m. We are
making excellent progress in the UK as we continue to benefit from the rollout
of our one-stop-shop format which is creating significant opportunities to
further grow profitability.
"Our most exciting opportunity for growth is in North America. We are very
pleased to have recently won some significant new airport business, including
wins at Dallas, Denver and Washington Dulles airports, and we are the
preferred bidder for a further 15 stores across two major US airports. Our
store opening programme is on track and we have a new store pipeline of c.60
stores already won.
"In addition to the £50m share buyback announced in September, the Board is
today proposing a final dividend of 22.6p, making a total of 33.6p for the
year reflecting current trading and the significant medium and long term
prospects for our global travel business.
"This set of results would not be possible without the ongoing efforts and
dedication of the entire team across the globe, and I am extremely grateful
for their support.
"The new financial year has started well. While there is some economic
uncertainty, we are confident that 2025 will be another year of good progress
for the Group."
* On a constant currency basis
(1) Alternative Performance Measure (APM) defined and explained in the
Glossary on page 50
(2) Pipeline as at 14 November 2024
Group financial summary:
Headline
IFRS 16 pre-IFRS 16(3)
Aug 2024 Aug 2023 Aug 2024 Aug 2023
Travel UK trading profit(1) £126m £101m £122m £102m
North America ('NA') trading profit(1) £58m £52m £54m £49m
Rest of the World ('ROW') trading profit(1) £18m £13m £13m £13m
Total Travel trading profit(1) £202m £166m £189m £164m
High Street trading profit(1) £39m £43m £32m £32m
Group profit from trading operations(1) £241m £209m £221m £196m
Group profit before tax and non-underlying items(1) £161m £137m £166m £143m
Diluted earnings per share before non-underlying items(1) 86.3p 76.5p 89.3p 80.3p
Non-underlying items(1) £(55)m £(27)m £(57)m £(15)m
Group profit before tax £106m £110m £109m £128m
Basic earnings per share 51.9p 60.8p 53.5p 71.5p
Diluted earnings per share 51.1p 59.8p 52.7p 70.5p
Revenue performance:
Aug 2024 Aug 2023 % change
£m £m
Travel UK 795 709 12%
North America 401 380 6%
Rest of the World 270 235 15%
Total Travel 1,466 1,324 11%
High Street 452 469 (4)%
Group 1,918 1,793 7%
(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 years ended 31 August 2024 and 31 August 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 50. Group revenue was not affected by the adoption of
IFRS 16, and therefore all references to and discussion of revenue are based
on statutory measures.
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 Preliminary Results 2024 are available at whsmithplc.co.uk
(http://www.whsmithplc.co.uk) .
GROUP OVERVIEW
The Group has had another successful year with our Travel business generating
Headline trading profit(1) up 15% to £189m (2023: £164m), Headline Group
profit before tax and non-underlying items(1) up 16% to £166m (2023:
£143m) and Headline diluted EPS before non-underlying items(1) up 11% to
89.3p (2023: 80.3p).
We saw strong momentum across our Travel markets over the peak summer trading
period and this has continued into the new financial year.
We see further growth opportunities from increasing our spend per passenger
and average transaction value ("ATV"), expanding our categories, and
increasing our space by continuing to win new stores across the globe
utilising our broad suite of brands. At the same time, we continue to benefit
from growing passenger numbers.
Travel is well positioned to continue to create value from the growth in
passenger numbers 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.
We have seen a notable increase in tender activity in North America and were
delighted to win stores at Detroit, Chicago O'Hare and Washington Ronald
Reagan airports during the year. More recently, we have won a further 24
stores in Dallas, Denver and Washington Dulles airports, and this includes
preferred bidder status at two major US airports. This brings the total number
of stores won and yet to open in North America to c.60, primarily opening over
the next 2 years. We expect to open c.26 in this financial year, and
anticipate c.10 closures.
Across our Travel divisions, we have a new store pipeline of over 90 stores
won and yet to open of which we expect c.60 to open this financial year. After
closures, we expect to have net openings of c.40 stores this year.
Our forensic approach to retailing combined with the scalability of our
business 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 in the early
stages and it is delivering strong results, driving profitability and
highlighting significant opportunities for the future. By using our forensic
approach to retailing, we are able to consolidate existing categories and
introduce new ones such as food to go, tech accessories, and health and
beauty. This transformation is most evident in our largest stores at London
Heathrow, London Gatwick and Birmingham airports, however it is a highly
scalable format and not only applicable for our larger stores in Air, so we
see plenty of good opportunities for the future. While the rollout has started
in the UK, we also have great potential for this retail format in our North
America and ROW divisions.
North America, the world's largest travel market and with increasing passenger
numbers, is our most exciting growth opportunity where we see excellent
prospects to further grow our airport business. This division will continue to
become an increasingly significant part of the Group and is now our second
largest division in profit terms, after Travel UK.
We have made good progress in the year, supported by the key pillars of our
strategy and our ongoing forensic approach to retailing across each of our
divisions.
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 Improving ranges, for example, 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 £125m);
o Productivity and efficiencies
· Disciplined capital allocation, supporting investment in growth and
shareholder returns
In the year, Travel was over 75% of Group revenue and over 85% of Headline
Group profit from trading operations(1). Both of these measures will increase
as we continue to grow Travel.
Group revenue
Year to 31 August 2024
Total Total constant currency(4) LFL(1)
vs 2023 vs 2023 vs 2023
Travel UK 12% 12% 10%
North America 6% 9% -%
Rest of the World 15% 18% 9%
Total Travel 11% 12% 7%
High Street(5) (4)% (4)% (2)%
Group 7% 8% 5%
Total Group revenue at £1,918m (2023: £1,793m) was up 7% compared to the
prior year.
In Travel, we saw a strong performance with total Travel revenue up 12%(4) and
up 7% on a like-for-like(1) ('LFL') basis. This was driven by a strong
performance from Travel UK up 12% on a total basis, North America up 9% (4),
and ROW up 18% (4). On a LFL basis, Travel UK was up 10%, North America flat,
and ROW up 9%.
Our High Street business performed in line with expectations.
Trading momentum in Travel has continued into the current financial year.
Group profit
Total Travel delivered a Headline trading profit(1) in the year of £189m
(2023: £164m). Travel UK increased significantly by £20m to £122m; North
America increased by £5m to £54m; and ROW was in line with the prior year at
£13m, with second half Headline trading profit(1) up £3m on the prior year.
High Street delivered a Headline trading profit(1) of £32m (2023: £32m), in
line with expectations.
Headline Group profit from trading operations(1) for the year was £221m
(2023: £196m) with Headline Group profit before tax and non-underlying
items(1) up 16% to £166m (2023: £143m).
Group profit before tax, including non-underlying items and on an IFRS 16
basis, was £106m (2023: £110m) in the year.
(4) Constant currency
(5) Includes internet businesses
Group balance sheet
The Group has a strong balance sheet, has highly cash generative trading
operations and has substantial liquidity. The Group has the following cash and
committed facilities as at 31 August 2024:
£m 31 August 2024 Maturity
Cash and cash equivalents(6) 56
Revolving Credit Facility(7) 400 June 2029
Convertible bonds 327 May 2026
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 31 August 2024, Headline net debt(1) was £371m (2023: £330m) and the
Group has access to c.£313m of liquidity. Leverage(1) at the year end was
1.4x Headline EBITDA(1) (2023: 1.4x).
On 10 September 2024, following the buy-out of the defined benefit pension
Trust, the Group received a cash refund of £75m and an investment fund of
£12m which will convert to cash over the next two years. Proforma leverage at
the year end, including these proceeds, would have been c.1.1x, within our
target range of 0.75x to 1.25x.
Group cash flow
The Group generated an operating cash flow(1) of £267m in the year (2023:
£235m) demonstrating the cash generative nature of the business. Capex was
£129m(8) (2023: £122m) as we continued to invest in new stores, where we get
returns well ahead of our cost of capital. As expected, we had a working
capital outflow(9) of £49m in the year (2023: £64m). This mainly relates to
investment in new stores, deferred rent payments in Travel relating to the
pandemic and some timing. This year, we expect a smaller outflow mainly
relating to opening new stores. In total, there was a free cash inflow in the
year of £53m (2023: £20m). This year, we would expect, subject to investment
opportunities, an increase in free cash generation, and net debt to be around
£340m at the end of the year.
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 in our existing business and in new opportunities
where rates of return are ahead of the cost of capital; this year, we expect
capex of c.£125m. The returns in Travel are good with ROCE(10) in the UK at
36%, North America at 16% and ROW at 23%;
· Second, paying a dividend. We have a progressive dividend policy with
a target dividend cover, over time, of 2.5x earnings(11); the Board is
proposing a full year dividend of 33.6p per share taking cover to 2.7x (2023:
2.8x);
· Third, undertaking attractive value-creating acquisitions in strong
and growing markets; and
· Fourth, returning surplus cash to shareholders via share buybacks.
The Board has proposed a final dividend of 22.6p per share in respect of the
financial year ended 31 August 2024, which together with the interim dividend,
gives a full year dividend of 33.6p per share. This reflects the cash
generative nature of the business and our confidence in the future prospects
of the Group. Subject to shareholder approval, the dividend will be paid on 6
February 2025 to shareholders registered at the close of business on 17
January 2025.
In addition, at the Pre-close Trading Update on 11 September 2024, the Group
announced a £50m share buyback which reflects the strong ongoing cash flow,
the receipt of the pension surplus cash return as well as the strength of our
balance sheet with leverage now within the target range. As at 13 November
2024, the Group had purchased 0.4m shares for cancellation for total
consideration of £6m.
( )
(6) Cash and cash equivalents comprises cash on deposit of £30m and cash in
transit of £26m
(7) Draw down of £117m as at 31 August 2024
(8) Excluding capex related to non-underlying items of £2m
(9) Pre-IFRS 16
(10) Return on capital employed. ROCE is an Alternative Performance Measure
(APM) defined and explained in the Glossary on page 50
(11) Headline diluted earnings per share, before non-underlying items
TOTAL TRAVEL
Total Travel revenue was £1,466m (2023: £1,324m), up 11% compared to the
previous year, generating a Total Travel Headline trading profit(1) in the
year of £189m (2023: £164m).
£m Trading profit(1) Headline trading profit(1)
(IFRS 16) (pre-IFRS 16) Revenue
2024 2023 2024 2023 2024 2023
Travel UK 126 101 122 102 795 709
North America 58 52 54 49 401 380
Rest of the World 18 13 13 13 270 235
Total Travel 202 166 189 164 1,466 1,324
In Travel, our initiatives position us well for future 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. We opened 106 stores in the year (38 stores net
of closures). We now have a store pipeline of over 90 stores(2) (c.70 stores
net of expected closures), which are due to open over the next three years.
Going forward, we expect to win, on average, around 50 to 60 stores a year and
close on average c.20 stores as we improve the quality of our space. There are
significant space growth opportunities across all our Travel markets.
· ATV growth
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 our stores to a one-stop-shop for travel essentials is an
important driver of this growth. During the year, we have continued to focus
on re-engineering our ranges and we continue to see good ATV performance
across 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 food. During the year, we launched a new food to go brand,
Smith's Family Kitchen. We have also continued to focus 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 another year of significant
growth and we continue to have good opportunities to grow this division
further.
Total revenue in the year was £795m (2023: £709m) which, together with
improved margins, resulted in a Headline trading profit(1) of £122m (2023:
£102m).
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 during the year with total revenue growth of 12% versus last year. We
have started the new financial year well with all three channels delivering
good growth.
We are investing in our UK store portfolio while also identifying new and
better quality space opportunities across each of our channels. During the
year, we have opened 14 new stores, including 3 at airports, 6 in Hospitals
and 5 in Rail. We see this annual space growth of around 10-15 new stores in
Travel UK extending into the medium term. We closed 8 small and less well
located stores in the year. This year, we expect to open 10 to 15 new stores
in the UK and close c.7 stores.
Revenue growth by key channels
Revenue (% change)
Year to 31 August 2024
Total LFL(1)
vs 2023 vs 2023
Air 11% 11%
Hospitals 14% 12%
Rail 13% 11%
Total Travel UK 12% 10%
Air
Air, which is the biggest channel in Travel UK, delivered a strong performance
with total revenue up 11% and LFL revenue up 11% on the prior year.
The development of our one-stop-shop for travel essentials format in the UK is
delivering strong results, driving profitability, and highlighting significant
opportunities for the future. A good example is our flagship store at
Birmingham Airport which has been trading for 12 months. We are very pleased
with this store's performance and it is now one of our top performing stores
in Travel UK, with revenue increasing by 40% as a result of this new format.
This store has been designed using local landmarks as inspiration for the look
and feel of the store and provides customers with a bespoke customer
experience, encompassing everything you would expect from WHSmith, as well as
a broader and improved product range, including health and beauty, tech, food
to go and coffee. We have also, more recently, opened a Well Pharmacy within
the store completing our blended essentials offer for customers on the move.
By widening our offer and creating a fast, convenient shopping experience,
customers are putting more items in their baskets which in turn increases our
spend per passenger and drives ATV.
This is a highly scalable format and not only applicable for our larger stores
in Air, but also our smaller stores, so we see plenty of good opportunities
for the future.
An example of category development to drive ATV is where we have been focused
on improving our food offer for customers. Food has been a core category for
us for over 10 years, now representing 15% of our revenue in Travel UK and we
expect this to continue to grow. Over the past two to three years, we have
seen a shift to more leisure passengers across Air and Rail. In particular in
Air, we have seen longer dwell times and, as a result, we have worked with our
airport partners to provide an improved food and beverage offer for customers
who are looking for different, convenient, quality food options.
To provide a broader and improved food offer, in June we launched a new food
to go range branded Smith's Family Kitchen ahead of our peak summer trading
period. Smith's Family Kitchen is a new high-quality range of over 30 products
offering a broad array of sandwiches, wraps and salads, including a premium
range. Customer reaction has been positive and sales are ahead of our
expectations.
Hospitals
The hospital channel, our second largest channel in Travel UK by revenue,
continued its very strong growth with total revenue up 14% and LFL revenue up
12% in the year.
Our ongoing success in this channel illustrates our ability to generate
increased profitability from our stores by improving our retail proposition.
For example, tailoring our product offer to the specific requirements of
hospital staff, patients and visitors by providing an increased range of food,
health and beauty and tech accessories.
During the second half of the year and following the success of our Smith's
Family Kitchen food launch, we opened our first café under the Smith's
Kitchen brand at Princess Anne Hospital in Southampton. While it is still
early days, this new format is performing in line with our expectations and
customer feedback has been positive.
We see plenty more opportunities for us to continue to grow in this channel
through our broad suite of brands (WHSmith, Marks & Spencer Simply Food,
Costa Coffee and our proprietary coffee brands). We opened 6 stores during the
year. We currently have 145 stores across over 100 hospitals and we can see
scope for at least one of our formats in up to 200 further hospitals.
Rail
Rail is also an attractive market. During the year, we delivered a strong
performance with total revenue up 13% and LFL revenue up 11%.
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, widening our tech and health and beauty ranges across many of our
stores and, more recently, refurbishing our mainline rail stores at Kings
Cross and Charing Cross stations to provide an improved customer proposition
and experience.
During the year, we opened 5 new rail stores in Ealing Broadway, London
Euston, London Victoria and Milton Keynes stations.
NORTH AMERICA
North America, the world's largest travel market, is our most exciting growth
opportunity where we see excellent prospects for further growth in our airport
business. This division will continue to become an increasingly significant
part of the Group and is now our second largest division in profit terms,
after Travel UK.
During the year, we delivered a good performance with 40 new store openings,
and passenger numbers in Air continued to grow. We have increased revenue by
9%(4) on a constant currency basis, improved gross margins and we continue to
invest in our store estate. Total revenue was £401m (2023: £380m), an
increase of 6%. Headline trading profit(1) was up 10% to £54m (2023: £49m).
Our North American business is subject to changes in the GBP:USD exchange
rates. A 5 cent change in this rate results in a c.£3m movement in annual
Headline trading profit(1).
Our Air business, the largest part of our North American division, combines
our Travel Essentials and InMotion businesses. LFL revenue in Air was up 1%
and total growth on a constant currency basis was up 14%.
Travel Essentials is the largest, fastest growing part of our North American
business and where we are investing the majority of our capital. In Travel
Essentials, we delivered a strong performance with LFL revenue up 7% in the
year. We see further good opportunities to win and open more Travel Essentials
stores in Air, delivering good returns, as we aim to grow our market share to
around 20% by 2028. By 2028, we would expect to be operating around 500 stores
and our overall Air business to be around 85% of the total North American
division which will drive higher growth and profitability.
A key driver of our growth to date has been our ability to win significant new
tenders. We are currently part of a large number of live tenders and we
continue to grow the business at pace.
We opened a further 40 (net of closures, 14) stores in the year increasing our
market share and improving the quality of our space. This included opening new
stores at Denver, Chicago O'Hare and Washington Ronald Reagan airports. Early
results are good, and customer and landlord feedback has been positive. During
the year, we also closed 26 stores, 16 of which were mainly in two hotels
which closed in Las Vegas and consistent with our strategy of improving the
quality of our store estate.
We still have a very strong pipeline of new store openings and our success to
date in winning tenders demonstrates why we remain confident in our ability to
continue to win market share.
We have recently won 24 new airport stores at Dallas, Denver and Washington
Dulles, and we are the preferred bidder at two major US airports. These wins
include two Starbucks stores following a new franchise agreement. This is an
exciting partnership as it opens up plenty more opportunities across North
America as we expand our coffee offer.
We continue to make good progress and, as we build scale, we are also
investing in our supply chain capabilities, for example, on the East Coast to
more effectively serve our growing store estate and this is generating good
efficiencies.
We now have a new store pipeline of c.60 stores due to open primarily over the
next two years and currently we anticipate closing c.15 stores.
Including the 40 store openings in the year, we now have 256 stores in Air
(including 124 InMotion stores), 83 stores in Resorts and 2 stores in Rail.
Revenue growth by key channels
Revenue (% change)
Year to 31 August 2024
Total Total at constant currency(4) vs 2023 LFL(1)
vs 2023 vs 2023
Air 10% 14% 1%
Resorts (11)% (8)% (3)%
Total North America 6% 9% -%
LFL revenue in our Travel Essentials business was up 7% and we see further
opportunities for improvement in revenue and profitability by applying our
retail expertise.
Our approach to growing our Air business in North America is similar to the UK
but it is at a much earlier stage of development.
During the year, we have focused on improving the quality and efficiency of
our estate and driving profitability by applying the retail disciplines from
our UK stores. Using data from stores that have been trading for an extended
period, we are actively analysing our space to enhance our ranges, introduce
new categories and reviewing space allocation. While it takes time to
implement these changes in the US, they are delivering encouraging early
results.
Some of the specific actions we are taking include: increasing the space
allocated to food and drinks across our stores; rolling out chillers to our
key stores; improving presentation at the checkout for impulse purchases; and
we are introducing tech accessories into our Travel Essentials stores.
We are making good progress and there are further opportunities going forward
as we focus on improving the operational performance of this business and
margin enhancement.
The smaller part of our Air business is InMotion. LFL revenue was down 5%.
Since acquisition in 2018, we have doubled the profits and improved margins
significantly by over 500 bps by working closely with our suppliers, reducing
operating costs and fully integrating into our Air business. This integration
was completed in the year with all our stores now run by one operations team.
In addition, we have successfully used the brand to grow our business
overseas.
InMotion has an important role in the Group: it resonates strongly with
customers; it enables us to offer a market leading tech brand to landlords as
part of tenders; to maintain strong global relationships with key brands such
as Apple and Bose; to offer a broader selection of branded tech accessories in
our Travel Essentials stores and; to broaden our higher margin own brand
accessories ranges such as the Good Vibes range which is performing well.
With the lack of innovation in the headphone market, we continue to actively
shift the mix more towards higher margin tech accessories. Given this dynamic,
we don't anticipate any change in sales trends in InMotion in the short-term,
however this should result in improved margin accretion in the longer term.
In the Resorts business, which is centred around Las Vegas, we saw total
revenue on a constant currency basis down 8% reflecting the closure of 16
stores following primarily two hotel closures on the Strip which will also
have an annualisation impact this year. LFL revenue was down 3% in the year,
reflecting a higher mix of conference attendees. We are seeing a similar sales
trend this year which is a little softer than we had anticipated, and we
continue to rebalance the space to reflect the greater mix of conference
visitors.
REST OF THE WORLD
Total revenue in ROW was up 18%(4) on a constant currency basis with LFL
revenue up 9%. Headline trading profit(1) was £13m (2023: £13m) reflecting
pre-opening costs and investment in new stores in the first half. Headline
trading profit(1) was up £3m on the previous year in the second half.
Our approach is clear: to continue to enter new countries using our three
operating models of directly-run, joint venture and franchise, building our
presence and, over time, leveraging our fixed cost base to grow net margins.
We are in a strong position and we continue to make good progress entering new
markets. During the year, we opened 52 new stores, including stores in
Australia, UAE, Hungary and Spain and including acquiring three rail stores in
Ireland. We closed 34 stores, of which 16 were franchised.
In the second half of the year, we opened a new 2,900 sq ft flagship store at
Budapest Airport, a new market for WHSmith. Budapest is a great example of how
we have localised the store design to create bespoke stores and we see further
good opportunities to do this across all markets.
We remain well positioned to benefit from further opportunities as more space
becomes available. We now have 356 stores open and a further c.28 won and yet
to open. Of the 356 stores open, 51% are directly-run, 8% are joint venture
and 41% are franchise. During the current financial year, we expect to open
c.25 stores and close c.3 stores.
Total Travel stores
Year ended 31 August 2024
No. of stores Travel UK North America ROW Total Travel
At 1 September 2023 588 327 338 1,253
Opened 14 40 52 106
Closed (8) (26) (34) (68)
Net openings 6 14 18 38
At 31 August 2024 594 341 356 1,291
Closures:
Relocations / loss-makers (8) (4) (6) (18)
Franchised - - (16) (16)
Resorts - hotel closures - (16) - (16)
Lease expiries - (6) (12) (18)
(8) (26) (34) (68)
During the year, we opened 106 stores in Travel. As at 31 August 2024, our
global Travel business operated from 1,291 stores (2023: 1,253). As part of
our strategy to improve the quality of our space, we closed 68 stores in the
year. Eighteen closures were the result of relocations or removing loss
makers, 16 were mainly in 2 resort hotels which closed down in Las Vegas and,
in our Rest of the World division, 16 were small, franchised stores. We saw an
above average number of closures in the year as we would not expect further
hotels to close in Las Vegas nor such significant rationalisation of the
franchise portfolio. Outside of planned redevelopment, all of these closures
were actioned in line with our strategy. Our focus will remain on opening more
stores and better quality space. As a result, we expect to see further store
closures in the current financial year of c.20 stores and to open a further
c.60 stores.
Excluding franchise stores, Travel occupies 1.2m square feet (2023: 1.1m
square feet). See page 19 for analysis of store numbers by region.
HIGH STREET
During the year, High Street delivered a performance in line with our
expectations with Headline trading profit(1) of £32m (2023: £32m), and
revenue of £452m (2023: £469m). We managed the business tightly, keeping
focused on costs and cash generation. LFL revenue was down 2% on last year.
As we grow Travel, the High Street division will become a smaller part of the
overall Group. This division now accounts for around 15% of full year Group
profit from trading operations(1).
Our strategy for our High Street business is clear and consistent: to manage
our space to maximise returns and maintain a flexible cost structure. 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. We continue to
manage our space in High Street to maximise returns and maintain a flexible
cost structure and it continues to deliver good results.
As part of this space management, we successfully opened 30 Toys "R" Us shop
in shops in the second half of the year and following their success, we are in
the process of opening a further 37 ahead of this Christmas.
Driving efficiencies remains a core part of our strategy and we continue to
focus on all areas of cost in the business. During the year, we have delivered
savings of £16m and we are on track to deliver savings of £26m over the next
3 years, of which £11m are planned in the current financial year. These
savings come from right across the business, including rent savings of 35% at
lease renewal as well as 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, and this leaves us well positioned in the current
environment where rents are falling. The average lease length in our High
Street business, including where we are currently holding over at lease end,
is under 2 years. We only renew a lease where we are confident of delivering
economic value over the life of that lease. We have c.470 leases due for
renewal over the next 3 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 31 August 2024, the High Street business operated from 500 stores (2023:
514) which occupy 2.4m square feet (2023: 2.5m square feet). 14 stores were
closed in the year (2023: 13).
Funkypigeon.com delivered total revenue of £32m (2023: £32m) and Headline
EBITDA(1) of £6m (2023: £5m). We continue to see opportunities to grow
revenue and profit over the medium term. This year will be a year of
investment with higher levels of spend on the platform and brand than in 2024.
ENVIRONMENTAL AND SOCIAL 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 speciality retailers in Morningstar's
Sustainalytics ESG Benchmark and, during the year, we were awarded an ESG
rating of AAA from MSCI. 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.
Our Scope 1 and 2 emissions continue to fall and we reached our target for 30%
of our supply chain emissions to be covered by science-based targets 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 2024 2023 2024 2023
Travel UK trading profit(1) 126 101 122 102
North America trading profit(1) 58 52 54 49
Rest of the World trading profit(1) 18 13 13 13
Total Travel trading profit(1) 202 166 189 164
High Street trading profit(1) 39 43 32 32
Group profit from trading operations(1) 241 209 221 196
Unallocated central costs (28) (27) (28) (27)
Group operating profit before non-underlying items(1) 213 182 193 169
Net finance costs(12) (52) (45) (27) (26)
Group profit before tax and non-underlying items(1) 161 137 166 143
Non-underlying items(1, 12) (55) (26) (56) (13)
Non-underlying items - Finance costs(1) - (1) (1) (2)
Group profit before tax 106 110 109 128
Income tax charge (29) (22) (30) (26)
Profit for the period 77 88 79 102
Attributable to:
Equity holders of the parent 67 79 69 93
Non-controlling interests 10 9 10 9
77 88 79 102
Total Travel Headline trading profit(1) in the year was £189m (2023: £164m)
of which the largest division, Travel UK, generated a Headline trading
profit(1) of £122m (2023: £102m). North America delivered £54m (2023:
£49m), ROW £13m (2023: £13m) and High Street £32m (2023: £32m)
Group generated a Headline profit before tax and non-underlying items(1) of
£166m (2023: £143m).
(12) Excluding non-underlying Finance costs disclosed below
Net finance costs
Headline
IFRS pre-IFRS 16(1)
£m 2024 2023 2024 2023
Interest payable on bank loans and overdrafts 13 12 13 12
Interest on convertible bonds 14 14 14 14
Interest on lease liabilities 25 19 - -
Net finance costs before non-underlying items 52 45 27 26
Headline net finance costs before non-underlying items(1) (pre-IFRS 16) for
the year were £27m (2023: £26m). This includes cash costs of £18m and £8m
relating to the non-cash debt accretion charge from the convertible bond which
has a fixed coupon of 1.625%.
Lease interest of £25m arises on lease liabilities recognised under IFRS 16,
bringing the total net finance costs before non-underlying items on an IFRS 16
basis to £52m (2023: £45m).
Tax
The effective tax rate(1) was 23% (2023: 19%) on the profit for the year,
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 year were £18m
(2023: £13m) after using all possible loss relief. Based on current
legislation, we expect the effective tax rate(1) in the current financial year
to be around 25%.
Earnings per share
Calculation of Headline diluted earnings per share(1)
Headline
pre-IFRS 16(1)
2024 2023
Headline profit before tax(13) (£m) 166 143
Income tax expense(13) (£m) (39) (28)
Headline profit for the year(13) (£m) 127 115
Attributable to non-controlling interests (£m) (10) (9)
Headline profit for the year attributable to equity holders of 117 106
WH Smith PLC(13) (£m)
Weighted average shares in issue (diluted) (no. of shares - millions) 131 132
Headline diluted EPS(13) (p) 89.3p 80.3p
The above measures are calculated on a pre-IFRS 16 basis.
Headline diluted EPS was 89.3p (2023: 80.3p), an increase of 11% on the
previous year.
EPS calculated on an IFRS 16 basis is provided in Note 8 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 50.
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. For the year ended 31 August 2024, the profit attributable to
non-controlling interests was £10m (2023: £9m).
( )
(13) Before non-underlying items
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 year in the Income Statement and Statement of
Comprehensive Income are detailed in the table below.
IFRS Headline
pre-IFRS 16(1)
£m Ref. 2024 2023 2024 2023
Items included in the Income statement
Amortisation of acquired intangible assets (1) (3) (3) (3) (3)
Impairment of non-current assets (2) (30) (19) (23) (4)
Provisions for onerous contracts (3) (6) (3) (11) (5)
Transformation programmes - supply chain and IT (4) (9) - (9) -
Costs associated with pensions (5) (2) (1) (2) (1)
IFRS 16 remeasurement gains (6) 3 - - -
Costs relating to M&A activity and Group legal entity structure (7) (4) - (4) -
Re-platform of whsmith.co.uk and other costs (8) (4) - (4) -
Total non-underlying items recognised in the income statement before finance (55) (26) (56) (13)
costs
Finance costs associated with onerous contracts (3) - - (1) (1)
Finance costs associated with refinancing - (1) - (1)
Total non-underlying items recognised in the income statement (55) (27) (57) (15)
Items included in the Statement of comprehensive income
Remeasurement of the recoverability of the retirement benefit surplus (5) 87 - 87 -
Total non-underlying items including items recognised in the Statement of 32 (27) 30 (15)
comprehensive income
(1) Amortisation of acquired intangible assets
Non-cash amortisation of acquired intangible assets of £3m (2023: £3m)
primarily relate to the MRG and InMotion brands.
(2) Impairment of non-current assets
The Group has carried out an assessment for indicators of impairment of
non-current assets 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, anchored
in the latest Board approved budget and three-year plan, to the carrying value
of the cash-generating unit as at 31 August 2024.
As a result of this exercise, a non-cash charge of £23m (2023: £4m) was
recorded within non-underlying items for impairment of non-current assets on a
pre-IFRS 16 basis, of which £18m (2023: £4m) relates to property, plant and
equipment, £5m (2023: £nil) relates to intangible assets (primarily
software). On an IFRS 16 basis the total impairment charge of £30m (2023:
£19m) comprises £15m property, plant and equipment (2023: £4m), £5m
intangible assets (2023: £nil) and £10m (2023: £15m) right-of-use assets.
Included in the impairment values above are impairments of property, plant and
equipment connected with Board-approved programmes relating to supply chain
and IT transformation, as well as the reconfiguration of the Group's online
operations. Assets have been impaired where their use is planned to be
discontinued as a result of these programmes.
(3) Provisions for onerous contracts
A charge of £11m on a pre-IFRS 16 basis (2023: £5m; IFRS 16 basis £6m;
2023: £3m) has been recognised in the income statement to provide for the
unavoidable costs of continuing to service a number of non-cancellable
supplier and lease contracts where the space is vacant, a contract is
loss-making or currently not planned to be used for ongoing operations. This
provision will be utilised over the next two to four financial years. The
unwinding of the discount on provisions for onerous contracts is treated as an
imputed interest charge, and has been recorded in non-underlying finance
costs.
(4) Transformation programmes
Costs of £9m have been classified as non-underlying in relation to a number
of Board-approved programmes relating to supply chain (£4m) and IT
transformation (£5m) (2023: £nil).
The supply chain transformation programme includes costs related to
outsourcing the Group's distribution centres and core distribution network to
a third party (GXO) and costs of reconfiguration of the Group's UK
distribution centres, in order to generate a more efficient and productive
supply chain to support the performance and growth of the Group's UK
businesses. This project is expected to conclude in 2025, incurring similar
costs as in 2024.
The IT transformation programme includes costs relating to upgrading core IT
infrastructure, data migration and investment in data security, store systems
modernisation and other significant IT projects. These strategic projects will
provide additional stability, longevity and operational benefits. The
implementation will cover several years and we anticipate costs in 2025 to be
similar to 2024.
These multi-year programmes are reported as non-underlying items on the basis
that they are significant in quantum, relate to a Board-approved programme and
to aid comparability from one period to the next.
(5) Costs associated with pensions
Costs of £2m (2023: £1m) have been incurred relating to professional fees
associated with the buyout of WHSmith Pension Trust which was completed in
September 2024 (see Note 16).
This resulted in the recognition of an £87m gain being remeasurement of the
recoverability of the retirement benefit surplus which is included in the
Group's Statement of other comprehensive income.
Subsequent to the completion of the buyout, on 10 September the remaining
surplus in the scheme of £87m was transferred to the Group, comprising cash
of £75m and investments of £12m.
(6) IFRS 16 remeasurement gains
Non-underlying IFRS 16 remeasurement gains result from the derecognition of
lease liabilities on exit from certain locations in which right-of-use assets
were previously impaired.
(7) Costs relating to M&A activity and Group legal entity structure
Costs incurred during the year include c.£2m of professional and legal fees
in relation to a reorganisation of the Group's legal entity structure, c.£1m
relating to acquisition and integration costs of two small acquisitions in
Ireland and Australia, and c.£1m relating to final integration costs of the
North American businesses.
(8) Re-platform of whsmith.co.uk and other costs
Other non-underlying items recognised during the year of £4m include some
restructuring costs, stock write-offs and IT costs in relation to the
reconfiguration of the Group's online operations, and costs associated with
the resolution of a long running dispute.
A tax credit of £9m (2023: £5m) has been recognised in relation to the above
items (£9m pre-IFRS 16 (2023: £2m)).
Cash flow
Free cash flow(1) reconciliation
pre-IFRS 16(1)
£m 2024 2023
Headline Group operating profit before non-underlying items(1) 193 169
Depreciation, amortisation and impairment (pre-IFRS 16)(14) 60 52
Non-cash items 14 14
Operating cash flow(1, 14) 267 235
Capital expenditure(8) (129) (122)
Working capital (pre-IFRS 16)(14) (49) (64)
Net tax paid (18) (13)
Net finance costs paid (pre-IFRS 16)(14) (18) (16)
Free cash flow(1) 53 20
The Group generated an operating cash flow(1) of £267m in the year (2023:
£235m) demonstrating the cash generative nature of the business. Capex was
£129m(8) (2023: £122m) as we continued to invest in new stores, IT and
energy efficient chillers and other store equipment. As expected, we had a
working capital outflow of £49m in the year (2023: outflow of £64m). This
mainly relates to investment in new stores, deferred rent payments in Travel
relating to the pandemic and some timing. Most of the outflow was in the first
half. This year, we expect a much smaller outflow mainly relating to opening
new stores. In total, there was a free cash inflow in the year of £53m (2023:
£20m). This year, we would expect, subject to investment opportunities, an
increase in free cash generation.
Net corporation tax payments in the period were £18m (2023: £13m).
Capex(8) was £129m (2023: £122m) which includes the additional spend from
opening over 100 stores around the world.
£m 2024 2023
New stores and store development 67 58
Refurbished stores 19 20
Systems 15 19
Other 28 25
Total capital expenditure 129 122
(14) Excludes cash flow impact of non-underlying items
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 and Note A8 of the Glossary for the impact of IFRS 16 on
net debt.
As at 31 August 2024, the Group had Headline net debt(1) of £371m comprising
convertible bonds of £310m and net overdrafts of £61m (2023: £330m,
convertible bonds of £301m, £1m of finance lease liabilities and net
overdrafts of £28m).
Headline(1)
pre-IFRS 16
£m 2024 2023
Opening Headline net debt(1) (330) (296)
Free cash flow(1) 53 20
Dividends paid (41) (22)
Non-underlying items(1) (28) (9)
Net purchase of own shares for employee share schemes (12) (8)
Other (13) (15)
Closing Headline net debt(1) (371) (330)
Net overdraft (61) (28)
Convertible bond (310) (301)
Finance leases (pre-IFRS 16) - (1)
Headline net debt(1) (371) (330)
In addition to the free cash flow, the Group had outflows relating to the
dividend of £41m (2023: £22m) being the final dividend from 2023 and the
interim dividend from 2024; £12m (2023: £8m) on own shares for the Group's
share schemes and £28m (2023: £9m) of non-underlying items which mainly
relate to transformation and restructuring projects, pensions, capex incurred
on previously impaired stores and spend relating to prior year property
provisions. Other includes non-cash accretion on the convertible bond, and
payments to non-controlling interests.
On an IFRS 16 basis, net debt was £997m (2023: £895m), which includes an
additional £626m (2023: £565m) of lease liabilities.
Fixed charges cover(1)
pre-IFRS 16(1)
£m 2024 2023
Headline net finance costs before non-underlying items (1) 27 26
Headline net operating lease charges (pre-IFRS 16)(1) (Note A12) 365 326
Total fixed charges 392 352
Headline profit before tax and non-underlying items(1) 166 143
Headline profit before tax, non-underlying items and fixed charges 558 495
Fixed charges cover - times 1.4x 1.4x
Fixed charges, comprising property operating lease charges and net finance
costs, were covered 1.4 times (2023: 1.4 times) by Headline profit before tax,
non-underlying items and fixed charges.
Return on capital employed(1)
ROCE %
2024 2023
Travel UK 36% 32%
North America 16% 17%
Rest of the World 23% 28%
Total Travel 26% 25%
High Street 37% 47%
Group 24% 25%
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 surplus/obligation and net
current and deferred tax balances.
Balance sheet
Headline(1)
IFRS pre-IFRS 16
£m 2024 2023 2024 2023
Goodwill and other intangible assets 490 505 491 506
Property, plant and equipment 316 270 308 263
Right-of-use assets 505 444 - -
Investments in joint ventures 2 2 2 2
1,313 1,221 801 771
Inventories 217 205 217 205
Payables less receivables (190) (219) (183) (216)
Working capital 27 (14) 34 (11)
Net current and deferred tax asset 33 45 33 45
Provisions (17) (17) (28) (26)
Operating assets 1,356 1,235 840 779
Net debt (997) (895) (371) (330)
Net assets excluding retirement benefit surplus 359 340 469 449
Retirement benefit surplus 87 - 87 -
Total net assets 446 340 556 449
The Group had Headline net assets excluding the retirement benefit surplus of
£469m, £20m higher than last year end reflecting the investment in new store
openings and exchange differences on translation of goodwill. Under IFRS the
Group had net assets before the retirement benefit surplus of £359m (2023:
£340m).
Events after the balance sheet date
As at 13 November 2024, the Company has repurchased 0.4m of its own shares in
the open market as part of the Company's share buyback programme for a
consideration of £6m.
Subsequent to the completion of the buyout of the WHSmith Pension Trust, on 10
September 2024 the remaining surplus in the scheme of £87m was transferred to
the Group, comprising cash of £75m and investments of £12m.
Following the publication of an HMRC newsletter on 24 October 2024, the Group
has become aware of a difference in interpretation of the rules on the
calculation of the tax due between the Trustee and HMRC on the surplus arising
from the buyout of the defined benefit pension scheme. As a result, the Group
could be required to reimburse the Trustee £6m. This has not been recorded as
a liability in the financial statements of the Group as at 31 August 2024.
Total Travel stores by region
No. of stores At 31
August 2024
Travel UK 594
North America
Air 256
Resorts / Rail 85
Total North America 341
Rest of the World
Europe 146
Middle East and India 92
Asia Pacific 118
Total Rest of the World 356
Total Travel 1,291
PRINCIPAL AND EMERGING RISKS AND UNCERTAINTIES
The Board regularly reviews and monitors the risks and uncertainties that
could have a material effect on the Group's financial results. The principal
risks and uncertainties that could lead to a material impact have not
significantly changed from those listed in the Annual Report and Accounts
2023. No new principal risks were identified in the year, however there were
four risks where the potential impact had increased over the year, with the
remaining risks having no change in their overall impact. We have also
recognised that the ongoing global conflicts have created further uncertainty
in the macro economy. A summary of the principal risks has been provided
below:
Risk and change in risk level Impact
Economic, political, competitive and market risks - increased The Group operates in highly competitive markets and in the event of failing
to compete effectively with travel, convenience and other similar product
category retailers, this may affect revenues obtained through our stores.
Failure to keep abreast of market developments, including the use of new
technology, could threaten our competitive position.
Factors such as the economic climate, levels of household disposable income,
seasonality of revenue, changing demographics and customer shopping patterns,
and raw material costs could impact on profit performance.
The Group may also be impacted by political developments both in the UK and
internationally, such as regulatory and tax changes, increasing scrutiny by
competition authorities and other changes in the general condition of retail
and travel markets or impacts from further geopolitical threats or escalation
in global conflict.
Brand and reputation - no change The WHSmith brand is an important asset and failure to protect it from
unfavourable publicity could materially damage its standing and the wider
reputation of the business, adversely affecting revenues.
As the Group continues to expand its convenience offer in travel locations,
introducing a wider range of products, associated risks include compliance
with food hygiene and health and safety procedures, product and service
quality, environmental or ethical sourcing, and associated legislative and
regulatory requirements.
Key suppliers and supply chain management - no change The Group has agreements with key suppliers in the UK, Europe and Asia and
other countries in which it operates. The interruption or loss of supply of
core category products from these suppliers to our stores may affect our
ability to trade.
Quality of supply issues may also impact the Group's reputation and impact our
ability to trade.
Store portfolio - no change The quality and location of the Group's store portfolio are key contributors
to the Group's strategy. Retailing from a portfolio of good quality real
estate in prime retail areas and key travel hubs at commercially reasonable
rates remains critical to the performance of the Group.
Most Travel stores are held under concession agreements, on average for five
to ten years, although there is no guarantee that concessions will be renewed
or that Travel will be able to bid successfully for new contracts. All of
High Street's stores are held under leases, and consequently the Group is
exposed, to the extent that any store becomes unviable as a result of rental
costs.
Business interruption - increased An act of terrorism or war, or an outbreak of a pandemic, could reduce the
number of customers visiting WHSmith outlets, causing a decline in revenue and
profit. In the past, our Travel business has been particularly impacted by
geopolitical events such as major terrorist attacks, which have led to
reductions in customer traffic. Closure of travel routes both planned and
unplanned, such as the disruption caused by natural disasters or
weather-related events, may also have a material effect on business. The Group
operates from three distribution centres and the closure of any one of them
may cause disruption to the business.
In common with most retail businesses, the Group also relies on a number of
important IT systems, where any system performance problems, cyber risks or
other breaches in data security could affect our ability to trade.
Reliance on key personnel - no change The performance of the Group depends on its ability to continue to attract,
motivate and retain key head office and store staff. The retail sector is very
competitive and the Group's personnel are frequently targeted by other
companies for recruitment.
International expansion - increased The Group continues to expand internationally. In each country in which the
Group operates, the Group may be impacted by political or regulatory
developments, or changes in the economic climate or the general condition of
the travel market.
Cyber risk, data security and GDPR compliance - increased The Group is subject to the risk of systems breach or data loss from various
sources including external hackers or the infiltration of computer viruses.
Theft or loss of Company or customer data or potential damage to any systems
from viruses, ransomware or other malware, or non-compliance with data
protection legislation, could result in fines and reputational damage to the
business that could negatively impact our revenue.
Treasury, financial and credit risk management - no change The Group's exposure to and management of capital, liquidity, credit, interest
rate and foreign currency risk are analysed further in Note 21 on page 149 of
the Annual Report and Accounts 2023.
The Group also has credit risk in relation to its trade and other receivables
and sale or return contracts with suppliers.
Environment and Social Sustainability - no change Our investors, customers and colleagues expect us to conduct our business in a
responsible and sustainable way. Climate change is now recognised as a global
emergency. Failure to effectively respond and influence our value chain and
wider stakeholders to decarbonise could damage our reputation and introduce
higher costs. Delivery against our sustainability targets and meeting
regulatory obligations is vital.
We have identified several climate related risks, including;
- Increases in the cost of energy and fuel from carbon pricing and
changing market dynamics;
- Disruption to supply of goods caused by acute and chronic changes in
weather patterns.
Although the impact is limited over our outlook period, these risks are
potentially significant over the longer term.
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
Group Income Statement
For the year ended 31 August 2024
2024 2023
£m Note Before non-underlying items(1) Non-underlying items(2) Total Before non-underlying items(1) Non-underlying items(2) Total
Revenue 2 1,918 - 1,918 1,793 - 1,793
Group operating profit/(loss) 2, 3 213 (55) 158 182 (26) 156
Finance costs 5 (52) - (52) (45) (1) (46)
Profit/(loss) before tax 161 (55) 106 137 (27) 110
Income tax (expense)/credit 6 (38) 9 (29) (27) 5 (22)
Profit/(loss) for the year 123 (46) 77 110 (22) 88
Attributable to equity holders of the parent 113 (46) 67 101 (22) 79
Attributable to non-controlling interests 10 - 10 9 - 9
123 (46) 77 110 (22) 88
Earnings per share
Basic 8 51.9p 60.8p
Diluted 8 51.1p 59.8p
All results relate to continuing operations of the Group.
(1) Alternative performance measure. The Group has defined and explained the
purpose of its alternative performance measures in the Glossary on page 50.
(2) See Note 4 for an analysis of non-underlying items. See Glossary on page
50 for a definition of Alternative Performance Measures.
WH Smith PLC
Group Statement of Comprehensive Income
For the year ended 31 August 2024
£m Note 2024 2023
Profit for the year 77 88
Other comprehensive income/(loss):
Items that will not be reclassified subsequently to the income statement:
Remeasurement of the recoverability of retirement benefit surplus 16 87 -
Actuarial gains on defined benefit pension schemes 16 2 1
89 1
Items that may be reclassified subsequently to the income statement:
Losses on cash flow hedges
- Net fair value losses - (3)
Exchange differences on translation of foreign operations (15) (40)
(15) (43)
Other comprehensive income/(loss) for the year, net of tax 74 (42)
Total comprehensive income for the year 151 46
Attributable to equity holders of the parent 142 39
Attributable to non-controlling interests 9 7
151 46
WH Smith PLC
Group Balance Sheet
As at 31 August 2024
£m Note 2024 2023
Non-current assets
Goodwill 11 426 436
Other intangible assets 11 64 69
Property, plant and equipment 12 316 270
Right-of-use assets 13 505 444
Investments in joint ventures 2 2
Deferred tax assets 33 43
Trade and other receivables 12 9
1,358 1,273
Current assets
Inventories 217 205
Trade and other receivables 150 112
Retirement benefit surplus 16 87 -
Derivative financial assets - 1
Current tax receivable 1 3
Cash and cash equivalents 9 56 56
511 377
Total assets 1,869 1,650
Current liabilities
Trade and other payables (352) (340)
Bank overdrafts and other borrowings 9 (117) (84)
Lease liabilities 14 (125) (116)
Derivative financial liabilities - (1)
Current tax liability (1) (1)
Short-term provisions (4) (1)
(599) (543)
Non-current liabilities
Bank loans and other borrowings 9 (310) (301)
Long-term provisions (13) (16)
Lease liabilities 14 (501) (450)
(824) (767)
Total liabilities (1,423) (1,310)
Total net assets 446 340
Shareholders' equity
Called up share capital 29 29
Share premium 316 316
Capital redemption reserve 13 13
Translation reserve (9) 5
Other reserves (268) (255)
Retained earnings 335 209
Total equity attributable to equity holders of the parent 416 317
Non-controlling interests 30 23
Total equity 446 340
( )
WH Smith PLC
Group Cash Flow Statement
For the year ended 31 August 2024
£m Note 2024 2023
Operating activities
Cash generated from operating activities 10 335 302
Interest paid(1) (42) (35)
Financing arrangement fees - (3)
Income taxes paid (18) (15)
Income taxes refunded - 2
Net cash inflow from operating activities 275 251
Investing activities
Purchase of property, plant and equipment (115) (106)
Purchase of intangible assets (16) (16)
Acquisition of subsidiaries, net of cash acquired 17 (6) -
Net cash outflow from investing activities (137) (122)
Financing activities
Dividends paid (41) (22)
Purchase of own shares for employee share schemes (12) (8)
Distributions to non-controlling interests (6) (6)
Repayment of term loans 9 - (133)
Net drawdown on short term borrowings 9 33 84
Capital repayments of obligations under leases 9 (112) (118)
Net cash outflow from financing activities (138) (203)
Net decrease in cash and cash equivalents in the year - (74)
Opening cash and cash equivalents 56 132
Effect of movements in foreign exchange rates - (2)
Closing cash and cash equivalents 9 56 56
(1) Includes interest payments of £24m on lease liabilities (2023: £19m).
WH Smith PLC
Group Statement of Changes in Equity
For the year ended 31 August 2024
£m Called up share capital and share premium Translation reserves Other reserves Retained earnings Total equity attributable to equity holders of the parent Non-controlling interests Total equity
Capital redemption reserve
Balance at 1 September 2023 345 13 5 (255) 209 317 23 340
Profit for the year - - - - 67 67 10 77
Other comprehensive (loss)/income:
Remeasurement of the recoverability of retirement benefit surplus (Note 16) - - - - 87 87 - 87
Actuarial gains on defined benefit pension schemes (Note 16) - - - - 2 2 - 2
Exchange differences on translation of foreign operations - - (14) - - (14) (1) (15)
Total comprehensive (loss)/income for the year - - (14) - 156 142 9 151
Employee share schemes - - - (13) 12 (1) - (1)
Dividends paid (Note 7) - - - - (41) (41) - (41)
Deferred tax on share-based payments - - - - (1) (1) - (1)
Distributions to non-controlling interest - - - - - - (6) (6)
Non-cash movement on non-controlling interests - - - - - - 4 4
Balance at 31 August 2024 345 13 (9) (268) 335 416 30 446
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 (Note 16) - - - - 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 7) - - - - (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 345 13 5 (255) 209 317 23 340
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
1. Basis of preparation
Whilst the information included in the consolidated financial statements has
been prepared in accordance with UK-adopted International Accounting Standards
in conformity with the requirements of the Companies Act 2006, this
announcement does not itself contain sufficient information to comply with
IFRSs. The financial information in this full year results statement does not
constitute statutory accounts within the meaning of Section 434 of the
Companies Act 2006.
Statutory accounts for the year ending 31 August 2023 have been delivered to
the Registrar of Companies and those for 2024 will be delivered following the
Company's Annual General Meeting. The Annual Report for the year ending 31
August 2024 and this full year results statement were approved by the Board on
14 November 2024. The auditors have reported on the Annual Report for the
years ended on 31 August 2024 and 2023 and neither report was qualified and
neither contained a statement under Section 498(2) or (3) of the Companies Act
2006.
The consolidated financial information for the year ended 31 August 2024 has
been prepared on a consistent basis with the financial accounting policies set
out in the Accounting Policies section of the WH Smith PLC Annual Report and
Accounts 2023 except as described below. The Group has adopted the following
standards and interpretations which became mandatory for the first time during
the year ended 31 August 2024. The Group has considered the below new
standards and amendments and has concluded that they are either not relevant
to the Group or they do not have a significant impact on the Group's
consolidated financial statements.
IFRS 17 Insurance contracts
Amendments to IAS 12 Taxation and International tax reform - pillar two model rules
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 Group balance sheet date, the following standards and interpretations,
which have not been applied in these condensed financial statements, were in
issue but not yet effective:
Amendments to IAS 1 Presentation of financial statements on classification of liabilities and
non-current liabilities with covenants
Amendments to IFRS 16 Leases - Lease Liability in a Sale and Leaseback
Amendment to IAS7 and IFRS 7 Supplier finance arrangements
IFRS 18 Presentation and Disclosure in Financial Statements
With the exception of IFRS 18, the adoption of the above standards and
interpretations is not expected to have any material impact on the Group's
financial statements.
IFRS 18 was issued in April 2024 and is effective for periods beginning on or
after 1 January 2027. Early application is permitted and comparatives will
require restatement. The standard will replace IAS 1 Presentation of Financial
Statements. IFRS 18 will not change how items are recognised and measured,
rather it will require changes to the reporting of financial performance.
Specifically classifying income and expenses into three new defined categories
- operating, investing and financing, and two new subtotals 'operating profit
and loss' and 'profit or loss before financing and income tax', as well as
introducing disclosures of management-defined performance measures (MPMs) and
enhancing general requirements on aggregation and disaggregation. The impact
of the standard on the Group is currently being assessed and it is not yet
practicable to quantify the effect of IFRS 18 on these consolidated financial
statements. IFRS 18 will be applicable for the Group's Annual report and
accounts for the year ending 31 August 2028.
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 50 including explanations of how they are
calculated and how they are reconciled to a statutory measure where relevant.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
1. Basis of preparation (continued)
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 are not
considered to be part of the normal operations of the Group. 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.
The Group exercises judgement in determining whether income or expenses are
reported as non-underlying. This assessment includes consideration of the
size, nature or cause of occurrence of the item, as well as consistency with
prior periods. Non-underlying items can include, but are not limited to,
restructuring and transformation costs linked to Board agreed programmes,
costs relating to M&A activity, impairment charges and other property
costs, significant items relating to pension schemes, amortisation of
intangible assets acquired in business combinations, and the related tax
effect of these items. Reversals associated with items previously reported as
non-underlying, such as reversals of impairments and releases of provisions or
liabilities are also reported in non-underlying items.
Further details of the non-underlying items are provided in Note 4.
Items recognised in Other comprehensive income/loss may also be identified as
non-underlying for the purposes of narrative explanation of the Group's
performance, where the Group has determined that they are associated with the
above categories and are judged to have met the Group's definition of
non-underlying.
Going concern
The consolidated financial statements have been prepared on a going concern
basis.
The directors are required to assess whether the Group can continue to operate
for the 12 months from the date of approval of these financial statements.
The Group overview describes the Group's financial position, cash flows and
borrowing facilities and also highlights the principal risks and uncertainties
facing the Group. The Group overview also sets out the Group's business
activities together with the factors that are likely to affect its future
developments, performance and position.
In making the going concern assessment, the directors have undertaken a
rigorous assessment of current performance and forecasts for the 12-month
period to November 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 inflation in labour costs beyond
that included in the base case; 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.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
1. Basis of preparation (continued)
Critical accounting judgements and key sources of estimation uncertainty
The preparation of 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
other non-current assets and inventory valuation.
Critical accounting judgements
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. The Group's definition of
non-underlying items is outlined on page 28.
The classification of items as non-underlying requires management judgement.
The definition of non-underlying items has been applied consistently year on
year. Further details of non-underlying items are provided in Note 4.
Lease accounting
Substantive substitution rights
Judgement is required in determining whether a contract meets the definition
of a lease under IFRS 16. Management has determined that certain retail
concession contracts give the landlord substantive substitution rights because
the contract gives the landlord rights to relocate the retail space occupied
by the Group. In such cases, management has concluded that there is not an
identified asset and therefore such contracts are outside the scope of IFRS
16. For these contracts, the Group recognises the payments as an operating
expense on a straight-line basis over the term of the contract unless another
systematic basis is more representative of the time pattern in which economic
benefits from the underlying contract are consumed.
Determination of lease term
In determining the lease term for contracts that have options to extend or
terminate early at the Group's discretion, management has applied judgement in
determining the likelihood of whether such options will be exercised. This is
based on the length of time remaining before the option is exercisable,
performance of the individual store and the trading forecasts.
Sources of estimation uncertainty
Intangible assets, property, plant and equipment and right-of-use asset
impairment reviews
Property, plant and equipment, right-of-use assets and intangible assets are
reviewed for impairment if events or changes in circumstances indicate that
the carrying amount may not be recoverable. When a review for impairment is
conducted, the recoverable amount of an asset or a cash-generating unit is
determined based on value-in-use calculations prepared on the basis of
management's assumptions and estimates. 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.
The key assumptions in the value-in-use calculations include growth rates of
revenue and the pre-tax discount rate. Value-in-use calculations will assume a
lease is extended where management consider it likely that an extension will
be granted. Further information in respect of the Group's intangible assets,
property, plant and equipment and right-of-use assets is included in Notes 11,
12 and 13 respectively.
Inventory valuation
Inventory is carried at the lower of cost and net realisable value which
requires the estimation of sell through rates, and the eventual sales price of
goods to customers in the future. Any difference between the expected and the
actual sales price achieved will be accounted for in the year in which the
sale is made. A sensitivity analysis has been carried out on the calculation
of inventory provisions. The key assumption driving the stock provision
calculation is forecast revenue.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
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, with the exception of IFRS 16, 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 50 (Note A2).
a) Revenue
£m 2024 2023
Travel UK 795 709
North America 401 380
Rest of the World 270 235
Total Travel 1,466 1,324
High Street 452 469
Group revenue 1,918 1,793
Rest of the World revenue includes revenue from Australia of £83m (2023:
£82m), Ireland £53m (2023: £47m) and Spain £55m (2023: £46m). No other
country has individually material revenue.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
2. Segmental analysis of results (continued)
b) Group results
2024 2023
£m Headline before non-underlying items(1) Headline non-underlying items(1) IFRS 16 Total Headline before non-underlying items(1) Headline IFRS 16 Total
(pre-IFRS 16) (pre-IFRS16) (pre-IFRS 16) non-underlying items(1)
(pre-IFRS16)
Travel UK trading profit/(loss) 122 - 4 126 102 - (1) 101
North America trading profit 54 - 4 58 49 - 3 52
Rest of the World trading profit 13 - 5 18 13 - - 13
Total Travel trading profit 189 - 13 202 164 - 2 166
High Street trading profit 32 - 7 39 32 - 11 43
Group profit from trading operations 221 - 20 241 196 - 13 209
Unallocated central costs (28) - - (28) (27) - - (27)
Group operating profit before non-underlying items 193 - 20 213 169 - 13 182
Non-underlying items (Note 4) - (56) 1 (55) - (13) (13) (26)
Group operating profit/(loss) 193 (56) 21 158 169 (13) - 156
Finance costs (27) - (25) (52) (26) - (19) (45)
Non-underlying finance costs (Note 4) - (1) 1 - - (2) 1 (1)
Profit/(loss) before tax 166 (57) (3) 106 143 (15) (18) 110
Income tax (expense)/credit (39) 9 1 (29) (28) 2 4 (22)
Profit/(loss) for the year 127 (48) (2) 77 115 (13) (14) 88
(1) Presented on a pre-IFRS 16 basis. Alternative Performance Measures are
defined and explained in the Glossary on page 50.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
2. Segmental analysis of results (continued)
c) Other segmental items
2024
Non-current assets(1) Right-of-use assets
£m Capital additions Depreciation and amortisation Impairment Depreciation Impairment
Travel UK 35 (20) - - -
North America 60 (16) - - -
Rest of the World 14 (8) - - -
Total Travel 109 (44) - - -
High Street 22 (15) - - -
Unallocated - (1) - - -
Headline, before non-underlying items (pre-IFRS 16) 131 (60) - - -
Headline non-underlying items (pre-IFRS 16) - (3) (23) - -
Headline, after non-underlying items (pre-IFRS 16) 131 (63) (23) - -
Impact of IFRS 16 - (1) 3 (112) -
Non-underlying items (IFRS 16) - - - - (10)
Group 131 (64) (20) (112) (10)
2023
Non-current assets(1) Right-of-use assets
£m Capital additions Depreciation and amortisation Impairment Depreciation Impairment
Travel UK 30 (17) - - -
North America 47 (13) - - -
Rest of the World 17 (6) - - -
Total Travel 94 (36) - - -
High Street 28 (15) - - -
Unallocated - (2) - - -
Headline, before non-underlying items (pre-IFRS 16) 122 (53) - - -
Headline non-underlying items (pre-IFRS 16) - (3) (4) - -
Headline, after non-underlying items (pre-IFRS 16) 122 (56) (4) - -
Impact of IFRS 16 - - - (104) -
Non-underlying items (IFRS 16)(2) - - - - (15)
Group 122 (56) (4) (104) (15)
(1) Non-current assets including property, plant and equipment and
intangible assets (excluding goodwill), but excluding right-of-use assets.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
3. Group operating profit
2024 2023
£m Before non-underlying items Non-underlying items Total Before non-underlying items Non-underlying items Total
Revenue 1,918 - 1,918 1,793 - 1,793
Cost of sales (706) - (706) (682) - (682)
Gross profit 1,212 - 1,212 1,111 - 1,111
Distribution costs (808) - (808) (746) - (746)
Administrative expenses (198) - (198) (197) - (197)
Other income(1) 7 - 7 14 - 14
Non-underlying items (Note 4) - (55) (55) - (26) (26)
Group operating profit 213 (55) 158 182 (26) 156
( )
(1 ) Other income includes remeasurement of right-of-use assets and other
property related income. Other income in the prior year also includes
insurance recoveries.
£m 2024 2023
Cost of inventories recognised as an expense 706 682
Write-down of inventories in the year(2) 1 3
Depreciation of property, plant and equipment 49 42
Depreciation of right-of-use assets
- land and buildings 110 101
- other 2 3
Amortisation of intangible assets 15 14
Impairment of property, plant and equipment 15 4
Impairment of right-of-use assets 10 15
Impairment of intangibles 5 -
Expenses relating to leasing:
- expense relating to short-term leases 20 22
- expense relating to variable lease payments not included in the measurement 38 29
of the lease liability
Other occupancy costs 44 49
Staff costs 386 367
(2 ) Write-down of inventories in the year are included within the amounts
disclosed as Cost of inventories recognised as an expense, and recognised in
Cost of sales.
( )
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
4. Non-underlying items
Items which are not considered part of the normal operations of the business,
are non-recurring or are considered exceptional because of their size, nature
or incidence, are treated as non-underlying items and disclosed separately.
Further details of the non-underlying items are included in Note 1, and in the
Financial review on page 12.
£m 2024 2023
Amortisation of acquired intangible assets 3 3
Impairment of non-current assets
- property, plant and equipment 15 4
- intangible assets 5 -
- right-of-use assets 10 15
Provisions for onerous contracts 6 3
Transformation programmes - supply chain and IT 9 -
Costs associated with pensions 2 1
IFRS 16 remeasurement gains (3) -
Costs related to M&A activity and Group legal entity structure 4 -
Re-platform of whsmith.co.uk and other costs 4 -
Non-underlying items, included in operating profit 55 26
Finance costs associated with refinancing - 1
Non-underlying items, before tax 55 27
Tax credit on non-underlying items (9) (5)
Non-underlying items, after tax 46 22
Non-underlying items recognised in the year are as follows:
Amortisation of acquired intangible assets
Amortisation of acquired intangible assets primarily relates to the MRG and
InMotion brands (see Note 11).
Impairment of non-current assets
The Group has carried out an assessment for indicators of impairment of
non-current assets 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, anchored in the
latest Board approved budget and three year plan, to the carrying value of the
cash generating unit as at 31 August 2024.
As a result of this exercise, a non-cash charge of £30m (2023: £19m) was
recorded within non-underlying items for impairment of non-current assets, of
which £15m (2023: £4m) relates to property, plant and equipment, £5m (2023:
£nil) relates to intangible assets and £10m (2023: £15m) relates to
right-of-use assets. The impairment recognised on a pre-IFRS 16 basis is
provided in the Glossary on page 50.
Provisions for onerous contracts
A charge of £6m (2023: £3m) has been recognised in the income statement to
provide for the unavoidable costs of continuing to service a number of
non-cancellable supplier and lease contracts where the space is vacant, a
contract is loss-making or currently not planned to be used for ongoing
operations. This provision will be utilised over the next two to four
financial years. The unwinding of the discount on provisions for onerous
contracts is treated as an imputed interest charge, and has been recorded in
non-underlying finance costs.
Transformation programmes
Costs of £9m (Aug 2023: £nil) have been classified as non-underlying in
relation to a number of Board-approved programmes relating to supply chain
(£4m) and IT transformation (£5m).
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
4. Non-underlying items (continued)
Transformation programmes (continued)
The supply chain transformation programme includes costs related to
outsourcing the Group's distribution centres and core distribution network to
a third party (GXO) and costs of reconfiguration of the Group's UK
distribution centres, in order to generate a more efficient and productive
supply chain to support the performance and growth of the Group's UK
businesses. This project will conclude in 2025, incurring similar costs as in
2024.
The IT transformation programme includes costs relating to upgrading core IT
infrastructure, data migration and investment in data security, store systems
modernisation and other significant IT projects. These strategic projects will
provide additional stability, longevity and operational benefits. The
implementation will cover several years and we anticipate costs in 2025 to be
similar to 2024.
These multi-year programmes are reported as non-underlying items on the basis
that they are significant in quantum, relate to a Board-approved programme and
to aid comparability from one period to the next.
Costs associated with pensions
Costs of £2m (2023: £1m) have been incurred relating to professional fees
associated with the buy out of the WHSmith Pension Trust. This resulted in the
recognition of an £87m gain being remeasurement of the recoverability of the
retirement benefit surplus which is included in the Group's Statement of other
comprehensive income, in accordance with IAS 19. Subsequent to the completion
of the buyout, on 10 September the remaining surplus in the scheme of £87m
was transferred to the Group, comprising cash of £75m and investments of
£12m.
IFRS 16 remeasurement gains
Gains of £3m have been classified as non-underlying in relation to IFRS 16
remeasurement gains that have resulted from the derecognition of lease
liabilities on exit from certain locations, in which right-of-use assets were
previously impaired.
Cost relating to M&A activity and Group legal entity structure
Costs incurred during the year include c.£2m of professional and legal fees
in relation to a reorganisation of the Group's legal entity structure, and
c.£1m relating to acquisition and integration costs of two small acquisitions
in Ireland and Australia, and c.£1m relating to final integration costs of
the North American businesses.
Re-platform of whsith.co.uk and other costs
Other non-underlying items recognised during the year of £4m include
restructuring costs, stock write-offs and IT costs in relation to the
reconfiguration of the Group's online operations, and costs associated with
the resolution of a long running dispute.
A tax credit of £9m (2023: £5m) has been recognised in relation to
non-underlying items.
Other prior year non-underlying items
Costs associated with refinancing
A charge of £1m was included in non-underlying items in the year ended 31
August 2023 to derecognise the carrying value of unamortised fees in respect
of the extinguished term loan and revolving credit facility.
5. Finance costs
£m 2024 2023
Interest payable on bank loans and overdrafts 13 12
Interest on convertible bonds 14 14
Interest on lease liabilities 25 19
Cost associated with refinancing - 1
52 46
( )
Interest on convertible bonds includes £5m (2023: £5m) accrued coupon and
£8m (2023: £8m) non-cash debt accretion charge and £1m (2023: £1m) fee
amortisation. Costs associated with refinancing in the prior year are included
in non-underlying items (see Note 4).
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
( )
6. Income tax expense
£m 2024 2023
Tax on profit 21 13
Blended standard rate of UK corporation tax 25% (2023: blended rate 21.5%)
Adjustment in respect of prior years - (2)
Total current tax expense 21 11
Deferred tax - current year 22 19
Deferred tax - prior year (5) (3)
Tax on profit before non-underlying items 38 27
Tax on non-underlying items - current tax (1) -
Tax on non-underlying items - deferred tax (8) (5)
Total tax on profit 29 22
Reconciliation of the taxation charge
£m 2024 2023
Tax on profit at blended standard rate of UK corporation tax 25% (2023: 26 24
blended rate 21.5%)
Tax effect of items that are not deductible or not taxable in determining 5 (3)
taxable profit
Derecognition of deferred tax balances 1 7
Differences in overseas tax rates 2 (1)
Adjustment in respect of prior years - current tax - (2)
Adjustment in respect of prior years - deferred tax (5) (3)
Total income tax charge 29 22
The effective tax rate, before non-underlying items, is 23 per cent (2023: 19
per cent).
The UK corporation tax rate is 25 per cent effective from 1 April 2023.
The legislation implementing the Organisation for Economic Co-Operation and
Development's (OECD) proposals for a global minimum corporation tax rate
(Pillar Two) was substantively enacted in the UK on 20 June 2023 and applies
to reporting periods beginning on or after 1 January 2024.
Under the legislation the Group is liable to pay a top-up tax for the
difference between their Global Anti-Base Erosion Rules (GloBE) effective tax
rate per jurisdiction and the 15 per cent minimum rate.
The rules will be applicable to the Group for the year ended 31 August 2025.
The Group has performed an assessment of the Group's potential exposure to
Pillar Two top-up taxes based on the most recent filings, country-by-country
reporting, and the most recent financial information available for the
constituent entities in the Group. Based on this assessment, the Pillar Two
effective tax rates in most of the jurisdictions in which the Group operates
are above 15 per cent or will meet the financial thresholds required to meet
the Transitional Safe Harbour Rules. However, there are a limited number of
jurisdictions where the Transitional Safe Harbour relief does not apply, and
the Pillar Two effective rate is close to 15 per cent. The Group does not
expect a material exposure to Pillar Two taxes in those jurisdictions.
The Group applies the temporary exception from the accounting requirements for
deferred taxes in IAS 12. Accordingly, the Group neither recognises nor
discloses information about deferred taxes in relation to Pillar Two.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
7. Dividends
Amounts paid and recognised as distributions to shareholders in the year are
as follows:
£m 2024 2023
Dividends
Final dividend for the year ended 31 August 2023 of 20.8p per ordinary share 27 -
Interim dividend for the year ended 31 August 2024 of 11.0p per ordinary share 14 -
Final dividend for the year ended 31 August 2022 of 9.1p per ordinary share - 12
Interim dividend for the year ended 31 August 2023 of 8.1p per ordinary share - 10
41 22
The Board has proposed a final dividend of 22.6p per share, amounting to a
final dividend of c.£30m, which is not included as a liability in these
financial statements and, subject to shareholder approval, will be paid on 6
February 2025 to shareholders registered at the close of business on 17
January 2025.
8. Earnings per share
a) Earnings
£m 2024 2023
Profit for the year, attributable to equity holders of the parent 67 79
Non-underlying items, after tax (Note 4) 46 22
Profit for the year before non-underlying items, attributable to equity holders of the parent 113 101
( )
b) Weighted average share capital
Millions 2024 2023
Weighted average ordinary shares in issue 131 130
Less weighted average ordinary shares held in ESOP Trust (2) -
Weighted average shares in issue for earnings per share 129 130
Add weighted average number of ordinary shares under option 2 2
Weighted average ordinary shares for diluted earnings per share 131 132
( )
( )
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
8. Earnings per share (continued)
c) Basic and diluted earnings per share
Pence 2024 2023
Basic earnings per share 51.9 60.8
Adjustment for non-underlying items 35.7 16.9
Basic earnings per share before non-underlying items 87.6 77.7
Diluted earnings per share 51.1 59.8
Adjustment for non-underlying items 35.2 16.7
Diluted earnings per share before non-underlying items 86.3 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 31 August 2024 the convertible bond has no dilutive effect as the
inclusion of these potentially dilutive shares would improve earnings per
share (2023: no dilutive effect).
The calculation of earnings per share on a pre-IFRS 16 basis is provided in
the Glossary on page 50.
9. Analysis of net debt
Movement in net debt can be analysed as follows:
£m Term loans Convertible bonds Revolving credit facility Leases Sub-total Cash and cash equivalents Net debt
Liabilities from financing activities
At 1 September 2023 - (301) (84) (566) (951) 56 (895)
Bond accretion and fee amortisation - (9) - - (9) - (9)
Lease additions, modifications and interest - - - (208) (208) - (208)
Cash movements - - (33) 136 103 - 103
Currency translation - - - 12 12 - 12
At 31 August 2024 - (310) (117) (626) (1,053) 56 (997)
£m Term loans Convertible bonds Revolving credit facility Leases Sub-total Liabilities from financing activities Cash and cash equivalents Net debt
At 1 September 2022 (132) (292) - (577) (1,001) 132 (869)
Bond accretion and fee amortisation (1) (9) - - (10) - (10)
Lease additions, modifications and interest - - - (148) (148) - (148)
Cash movements 133 - (84) 137 186 (74) 112
Currency translation - - - 22 22 (2) 20
At 31 August 2023 - (301) (84) (566) (951) 56 (895)
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
9. Analysis of net debt (continued)
An explanation of Alternative Performance Measures, including Net debt on a
pre-IFRS 16 basis, is provided in the Glossary on page 50.
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 year. Cash movements on leases include
principal repayments of £112m (2023: £118m) and interest paid of £24m
(2023: £19m).
Revolving credit facilities
The Group has a £400m committed revolving credit facility ('RCF'). The first
extension option has been exercised during the year, taking the maturity to 13
June 2029. The RCF has one remaining uncommitted extension option of one year,
which would, subject to lender approval, extend the maturity date to 13 June
2030 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 31 August 2024, the Group has
drawn down £117m on the RCF (2023: £84m).
In the prior year transaction costs of £4m relating to the RCF are amortised
to the Income statement on a straight-line basis.
Term loans
Term loans of £133m were repaid in the prior year.
Convertible bonds
The Group issued £327m guaranteed senior unsecured convertible bonds on 7 May
2021 with a 1.625 per cent 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 per cent above the reference share price
on 28 April 2021 (£17.85). The conversion price at 31 August 2024 was
£24.3104 (2023: £24.7032). 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 was 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
£310m (2023: £301m). The fair value of the convertible bond has been
estimated at £303m (2023: £287m) using a discounted cash flow approach based
on market interest rates. This represents Level 2 fair value measurements as
defined by IFRS 13.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
10. Cash generated from operating activities
£m 2024 2023
Group operating profit 158 156
Depreciation of property, plant and equipment 49 42
Impairment of property, plant and equipment 15 4
Amortisation of intangible assets 15 14
Impairment of intangible assets 5 -
Depreciation of right-of-use assets 112 104
Impairment of right-of-use assets 10 15
Non-cash change in lease liabilities (3) -
Non-cash movement in pensions 1 -
Share-based payments 11 12
Gain on remeasurement of leases (4) (5)
Other non-cash items (incl. foreign exchange) 9 7
Increase in inventories (15) (12)
Increase in receivables (41) (22)
Increase/(decrease) in payables 10 (15)
Movement on provisions (through utilisation or income statement) 3 2
Cash generated from operating activities 335 302
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
11. Intangible assets
£m Goodwill Brands and franchise contracts Tenancy rights Software Total
Cost:
At 1 September 2023 436 46 13 128 623
Additions 6 - - 16 22
Foreign exchange (16) (2) (1) - (19)
At 31 August 2024 426 44 12 144 626
Accumulated amortisation:
At 1 September 2023 - 14 8 96 118
Amortisation charge - 3 - 12 15
Impairment charge - - - 5 5
Foreign exchange - (1) - (1) (2)
At 31 August 2024 - 16 8 112 136
Net book value at 31 August 2024 426 28 4 32 490
Cost:
At 1 September 2022 471 50 13 114 648
Additions - - - 16 16
Foreign exchange (35) (4) - (2) (41)
At 31 August 2023 436 46 13 128 623
Accumulated amortisation:
At 1 September 2022 - 12 8 85 105
Amortisation charge - 3 - 11 14
Foreign exchange - (1) - - (1)
At 31 August 2023 - 14 8 96 118
Net book value at 31 August 2023 436 32 5 32 505
Goodwill of US$58m (£44m) (2023: US$64m / £50m) relating to the acquisition
of the InMotion Entertainment Group of companies in 2018 is expected to be
deductible for tax purposes in the future. Additions to Goodwill in the year
relate to small acquisitions in Ireland and Australia (Note 17).
The carrying value of goodwill is allocated to the segmental businesses as
follows:
£m 2024 2023
Travel UK 262 272
North America 117 122
Rest of the World 32 27
Total Travel 411 421
High Street 15 15
426 436
Included within Tenancy rights are certain assets that are considered to have
an indefinite life of £4m (2023: £4m), representing certain rights under
tenancy agreements, which include the right to renew leases, therefore no
amortisation has been charged. Management has determined that the useful
economic life of these assets is indefinite because the Group can continue to
occupy and trade from certain premises for an indefinite period. These assets
are reviewed annually for indicators of impairment.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
11. Intangible assets (continued)
Impairment of goodwill and intangible assets
The Group tests goodwill for impairment annually or where there is an
indication that goodwill might be impaired. For impairment testing purposes,
goodwill is allocated to groups of CGUs in a manner that is consistent with
our operating segments, as this reflects the lowest level at which goodwill is
monitored. All goodwill has arisen on acquisitions of groups of retail stores.
These acquisitions are then integrated into the Group's operating segments as
appropriate. Acquired brands are considered together with goodwill for
impairment testing purposes, and are therefore considered annually for
impairment.
Goodwill and acquired brands have been tested for impairment by comparing the
carrying amount of each group of CGUs, including goodwill and acquired brands,
with the recoverable amount determined from value-in-use calculations. The
value-in use of each group of CGUs has been calculated using cash flows
derived from the Group's latest Board-approved budget and three year plan,
initially extrapolated to five years. The forecasts reflect knowledge of the
current market, together with the Group's expectations on the future
achievable growth and committed store openings. Cash flows beyond the initial
forecast period are extrapolated using estimated long-term growth rates.
For certain groups of CGUs, additional adjustments to cash flows have been
made during the extrapolation process for an extended period of up to 15 years
before calculating a terminal value. This extended period of time is required
to establish a normalised cash flow base on which a terminal value calculation
can be appropriately calculated. The main reasons for cash flow adjustments
include the need to forecast lease renewals under IFRS 16, and the unwinding
of certain cash flow benefits arising from acquisitions in North America.
The key assumptions on which the forecast three-year cash flows of the CGUs
are based include revenue and the pre-tax discount rate. Other assumptions in
the model relate to gross margin, cost inflation and longer-term growth rates:
· The values assigned to each of the revenue, product mix and operating cost
assumptions were determined based on the extrapolation of historical trends
within the Group and external information on expected future trends in the
travel and high street retail sectors.
· The pre-tax discount rates are derived from the Group's weighted average cost
of capital, which has been calculated using the capital asset pricing model,
the inputs of which include a risk-free rate, equity risk premium, Group size
premium and a risk adjustment (beta). Country-specific discount rates were not
considered to be materially different to the Group rate. The pre-tax discount
rate used in the calculations was 10.7 per cent (2023: 13.2 per cent).
· The long-term growth rate assumptions are between 0 per cent and 2 per cent
(2023: 0 per cent and 2 per cent).
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 value-in-use estimates indicated that the recoverable amount of goodwill
exceeded the carrying value for each group of CGUs. As a result, no impairment
has been recognised in respect of the carrying value of goodwill in the year
(2023: £nil).
As disclosed in Note 1, Accounting policies, the forecast cash flows used
within the impairment model are based on assumptions which are sources of
estimation uncertainty and it is possible that significant changes to these
assumptions could lead to an impairment of goodwill and acquired brands. Given
the inherent uncertainties due to challenges in the macroeconomic environment,
management have considered a range of sensitivities on each of the key
assumptions, with other variables held constant. The sensitivities include
applying increases in the discount rate by two per cent and reductions in the
long-term growth rates by two per cent. Under these combined scenarios, the
estimated recoverable amount of goodwill and acquired brands would require an
impairment of £5m.
Furthermore, outputs of the quantitative climate change scenario analysis have
also been taken into consideration in the sensitivity analysis, and has shown
that climate change is not considered to be a key driver in determining the
outcome.
The sensitivity analysis showed that no reasonably possible change in
assumptions would lead to an impairment.
Other intangible assets including Software have been assessed for indicators
of impairment during the year. Impairment to software assets of £5m (2023:
£nil) has been recorded during the year as a result of the Board approved
programmes relating to supply chain and IT transformation, as well as the
reconfiguration of the Group's online operations.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
12. Property, plant and equipment
Land and buildings
£m Freehold Properties Leasehold improvements Fixtures and fittings Equipment and vehicles Total
Cost or valuation:
At 1 September 2023 18 385 254 140 797
Additions - 57 46 12 115
Disposals - (4) (3) - (7)
Foreign exchange - (5) (2) - (7)
At 31 August 2024 18 433 295 152 898
Accumulated depreciation:
At 1 September 2023 10 252 166 99 527
Depreciation charge - 29 10 10 49
Impairment charge - 6 7 2 15
Disposals - (4) (3) - (7)
Foreign exchange - (1) (1) - (2)
At 31 August 2024 10 282 179 111 582
Net book value at 31 August 2024 8 151 116 41 316
Cost or valuation:
At 1 September 2022 18 329 232 127 706
Additions - 63 24 19 106
Reclassifications - - 5 (5) -
Foreign exchange - (7) (7) (1) (15)
At 31 August 2023 18 385 254 140 797
Accumulated depreciation:
At 1 September 2022 10 230 155 92 487
Depreciation charge - 20 15 7 42
Impairment charge - 3 - 1 4
Reclassifications - 1 (1) - -
Foreign exchange - (2) (3) (1) (6)
At 31 August 2023 10 252 166 99 527
Net book value at 31 August 2023 8 133 88 41 270
Impairment of property, plant and equipment
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.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
12. Property, plant and equipment (continued)
Impairment of property, plant and equipment (continued)
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 budget 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 key assumptions on which the forecast three-year cash flows of the CGUs
are based include revenue and the pre-tax discount rate. Other assumptions in
the model relate to gross margin, cost inflation and longer-term growth rates.
In developing these forecasts, management have used available information,
including historical knowledge of the store level cash flows.
The pre-tax discount rates are derived from the Group's weighted average cost
of capital, which has been calculated using the capital asset pricing model,
the inputs of which include the risk-free rate, equity risk premium, Group
size premium and a risk adjustment (beta). Country-specific discount rates
were not considered to be materially different to the Group rate. The pre-tax
discount rate used in the calculations was 10.7 per cent (2023: 13.2 per
cent).
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. These stores were impaired to their recoverable amount of £14m,
which is their carrying value at year end. The Group has recognised an
impairment charge of £15m (2023: £4m) to property, plant and equipment, £5m
impairment to software (2023: £nil) and £10m (2023: £15m) to right-of-use
assets.
Included in the impairment values above are impairments of property, plant and
equipment connected with Board-approved programmes relating to supply chain
and IT transformation, as well as the reconfiguration of the Group's online
operations. Assets have been impaired where their use is planned to be
discontinued as a result of these programmes.
As disclosed in Note 1, Basis of preparation, the forecast cash flows used
within the impairment model are based on assumptions which are sources of
estimation uncertainty and changes to these assumptions could lead to further
impairments to assets. As a result, the Group has applied certain
sensitivities in isolation to demonstrate the impact on the impairment charge
of changes in key assumptions. The sensitivities include applying increases in
the discount rate by two per cent and reductions in expected future cash flows
by two per cent. Under these combined scenarios, the impairment charge for
property, plant and equipment and right-of-use assets would increase by less
than £1m.
The impairment assessment has also been performed on a pre-IFRS 16 basis. See
Glossary on page 50.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
13. Right-of-use assets
£m Land and buildings Equipment Total
At 1 September 2023 440 4 444
Additions 152 - 152
Modifications and remeasurements 48 - 48
Disposals (8) - (8)
Depreciation charge (110) (2) (112)
Impairment charge (10) - (10)
Effect of movements in foreign exchange rates (9) - (9)
Net book value at 31 August 2024 503 2 505
£m Land and buildings Equipment Total
At 1 September 2022 440 6 446
Additions 93 - 93
Modifications and remeasurements 41 1 42
Depreciation charge (101) (3) (104)
Impairment charge (15) - (15)
Effect of movements in foreign exchange rates (18) - (18)
Net book value at 31 August 2023 440 4 444
Impairment of right-of-use assets
Right-of-use assets of £10m (2023: £15m) have been impaired in the year.
This impairment charge has been presented in non-underlying items (see Note
4). The approach to impairment testing is described in detail in Note 12,
Property, plant and equipment along with sensitivity analysis.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
14. Lease liabilities
£m Land and buildings Equipment Total
At 1 September 2023 564 2 566
Additions 148 - 148
Modifications and remeasurements 47 - 47
Disposals (12) - (12)
Interest 25 - 25
Payments (135) (1) (136)
Effect of movements in foreign exchange rates (12) - (12)
At 31 August 2024 625 1 626
£m Land and buildings Equipment Total
At 1 September 2022 574 3 577
Additions 91 - 91
Modifications and remeasurements 39 1 40
Disposals (2) - (2)
Interest 19 - 19
Payments (135) (2) (137)
Effect of movements in foreign exchange rates (22) - (22)
At 31 August 2023 564 2 566
£m 2024 2023
Analysis of total lease liabilities:
Non-current 501 450
Current 125 116
Total 626 566
The Group leases land and buildings for its retail stores, distribution
centres, storage locations and office property. These leases have an average
remaining lease term of 4 years. Some leases include an option to break before
the end of the contract term or an option to renew the lease for an additional
term after the end of the term. Management assess the lease term at inception
based on the facts and circumstances applicable to each property.
Other leases are mainly forklift trucks for the retail stores and distribution
centres, office equipment and vehicles. These leases have an average remaining
lease term of 3 years.
The Group reviews the retail lease portfolio on an ongoing basis, taking into
account retail performance and future trading expectations. The Group may
exercise extension options, negotiate lease extensions or modifications. In
other instances, the Group may exercise break options, negotiate lease
reductions or decide not to negotiate a lease extension at the end of the
lease term. Certain property leases contain rent review terms that require
rent to be adjusted on a periodic basis which may be subject to market rent or
increases in inflation measurements.
Many of the Group's property leases, particularly in Travel locations, also
incur payments based on a percentage of revenue (variable lease payments)
achieved at the location. In line with IFRS 16, variable lease payments which
are not based on an index or rate are not included in the lease liability. See
Note 3 for the expense charged to the Income statement relating to variable
lease payments not included in the measurement of the lease liability.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
14. Lease liabilities (continued)
Details of Income statement charges for leases are set out in Note 3. The
right-of-use asset categories on which depreciation is incurred are presented
in Note 13. Interest expense incurred on lease liabilities is presented in
Note 5.
The total cash outflow for leases in the financial year was £187m (2023:
£181m). This includes cash outflow for short-term leases of £19m (2023:
£19m) and variable lease payments (not included in the measurement of lease
liability) of £32m (2023: £25m).
15. Contingent liabilities and capital commitments
£m 2024 2023
Bank guarantees and guarantees in respect of lease agreements 71 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.
Contracts placed for future capital expenditure approved by the directors but
not provided for in these financial statements amount to £36m (2023: £27m).
£m 2024 2023
Commitments in respect of property, plant and equipment 34 25
Commitments in respect of other intangible assets 2 2
36 27
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
16. Retirement benefit surplus
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.
Following the purchase of a bulk annuity during the year ended 31 August 2022
(the buy in), the Trustee commenced the process to move to buy out and wind up
of the scheme. During the year ended 31 August 2024 the Trustee completed the
activities necessary to move to buy out, with administration transferred to
Standard Life, and commenced formal winding up of the Scheme.
In June 2024, following the member consultation process and the conclusion of
the statutory notification process, the Trustee was advised that it could
legally distribute the remaining pension cash surplus to the sponsoring
employer, and therefore confirmed its intention to return surplus assets,
after associated costs, to the sponsor. As a result, the Group determined that
it has an unconditional right to the surplus asset, and the IAS 19 post-tax
surplus of £87m has been recognised through other comprehensive income in the
year and the IFRIC 14 ceiling eliminated.
The amounts recognised in the Group balance sheet at 31 August 2024 are as
follows:
£m 2024
Present value of the obligations -
Fair value of plan assets 87
Net surplus recognised in the balance sheet 87
At the prior year balance sheet date, 31 August 2023, the Group did not have
an unconditional right to derive economic benefit from any surplus in the
scheme, as the Trustees retained the right to enhance benefits under the Trust
deed, and therefore the present value of the economic benefits of any IAS 19
surplus in the pension scheme available to the Group was £nil. Accordingly,
no balance sheet asset or liability existed at 31 August 2023 in relation to
this scheme.
The amounts recognised in the Statement of other comprehensive income are as
follows:
£m 2024
Reassessment of the recoverability of retirement benefit scheme surplus 87
Actuarial gains on defined benefit pension schemes 2
89
The amounts recognised in the Income statement are as follows:
£m 2024
Administrative expenses (recognised in non-underlying items) 2
Costs of £2m relating to legal and consulting advice, Trustee indemnity
insurance and run-off cover, have been incurred during the year ended 31
August 2024 in relation to the buy out and wind up of the scheme and have been
recognised in the income statement in non-underlying items.
Post balance sheet event
In September 2024, the Trustee transferred the surplus assets to the Group,
comprising cash of £75m and an investment in Permira Credit Solutions III
Fund of £12m following finalisation of the buy-out of the defined benefit
liabilities in the Retail Section of the WHSmith Pension Trust. The transfer
of assets was net of applicable taxes payable by the Trust of taxes owed to
HMRC, which were settled by the Trustee. As agreed with the Trustee, the
return of the surplus preceded the formal winding up steps of the Retail
Section.
The pension surplus of £87m (net of tax and costs) comprises cash of £75m
and investments of £12m.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2024
16. Retirement benefit surplus (continued)
Following the publication of an HMRC newsletter on 24 October 2024, the Group
has become aware of a difference in interpretation of the rules on the
calculation of the tax due between the Trustee and HMRC on the surplus arising
from the buy out of the defined benefit pension scheme. As a result, the Group
could be required to reimburse the Trustee £6m. This has not been recorded as
a liability in the financial statements of the Group as at 31 August 2024.
17. Acquisitions
During the year, the Group completed a small number of acquisitions in Ireland
and Australia for total consideration of £6m. These acquisitions resulted in
the recognition of additions to goodwill of £6m. There were no acquisitions
in the prior year.
18. Events after the balance sheet date
Share buyback programme
On 10 September 2024, the Company announced its intention to return up to
£50m of cash to shareholders through a rolling share buyback programme. As at
13 November 2024, the Company has repurchased 0.4m of its own shares in the
open market as part of the Company's share buyback programme for a
consideration of £6m.
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2024
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 are not
considered to be part of the normal operations of the Group. 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.
The Group exercises judgement in determining whether income or expenses are
reported as non-underlying. This assessment includes consideration of the
size, nature or cause of occurrence of the item, as well as consistency with
prior periods. Non-underlying items can include, but are not limited to,
restructuring and transformation costs linked to Board agreed programmes,
costs relating to M&A activity, impairment charges and other property
costs, significant items relating to pension schemes, amortisation of
intangible assets acquired in business combinations, and the related tax
effect of these items. Reversals associated with items previously reported as
non-underlying, such as reversals of impairments and releases of provisions or
liabilities are also reported in non-underlying items.
Items recognised in Other comprehensive income/loss may also be identified as
non-underlying for the purposes of narrative explanation of the Group's
performance, where the Group has determined that they are associated with the
above categories and are judged to have met the Group's definition of
non-underlying.
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 31 August 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.
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2024
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 & 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 to 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 22, 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 financial
statements and on a Headline (pre-IFRS 16) basis in Note A2.
Non-underlying items None Refer to definition and see Note 4 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 4 to the 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 year 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 financial year. 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.
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2024
APM Closest equivalent IFRS measure Reconciling items to IFRS measure Definition and purpose
Income statement measures (continued)
Effective tax rate None Non-underlying items 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 6 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 Preliminary announcement statement, 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
- Foreign exchange impact exchange rate.
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 Note A7 and 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 16, as part of the Financial review.
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 16, as part of the Financial review.
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 Headline net debt divided by rolling 12 month
Headline EBITDA before non-cash items (on a pre-IFRS 16 basis).
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2024
A1. Reconciliation of Headline to Statutory Group operating profit and Group
profit before tax
2024
pre-IFRS 16 basis IFRS 16 Basis
£m Headline, before non-underlying items (pre-IFRS 16) Headline non-underlying items (pre-IFRS 16) Headline (pre-IFRS 16) IFRS 16 adjustments IFRS 16 Total
adjustments
non-underlying items
Revenue 1,918 - 1,918 - - 1,918
Cost of sales (706) - (706) - - (706)
Gross profit 1,212 - 1,212 - - 1,212
Distribution costs (828) - (828) 20 - (808)
Administrative expenses (197) - (197) (1) - (198)
Other income 6 - 6 1 - 7
Non-underlying items - (56) (56) - 1 (55)
Group operating profit/(loss) 193 (56) 137 20 1 158
Finance costs (27) (1) (28) (25) 1 (52)
Profit/(loss) before tax 166 (57) 109 (5) 2 106
Income tax (charge)/credit (39) 9 (30) 1 - (29)
Profit/(loss) for the year 127 (48) 79 (4) 2 77
Attributable to:
Equity holders of the parent 117 (48) 69 (4) 2 67
Non-controlling interests 10 - 10 - - 10
127 (48) 79 (4) 2 77
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2024
A1. Reconciliation of Headline to Statutory Group operating profit and Group
profit before tax (continued)
2023
pre-IFRS 16 basis IFRS 16 Basis
£m Headline, before non-underlying items (pre-IFRS 16) Headline non-underlying items (pre-IFRS 16) Headline (pre-IFRS 16) IFRS 16 adjustments IFRS 16 Total
adjustments
non-underlying items
Revenue 1,793 - 1,793 - - 1,793
Cost of sales (682) - (682) - - (682)
Gross profit 1,111 - 1,111 - - 1,111
Distribution costs (756) - (756) 10 - (746)
Administrative expenses (196) - (196) (1) - (197)
Other income 10 - 10 4 - 14
Non-underlying items - (13) (13) - (13) (26)
Group operating profit/(loss) 169 (13) 156 13 (13) 156
Finance costs (26) (2) (28) (19) 1 (46)
Profit/(loss) before tax 143 (15) 128 (6) (12) 110
Income tax (charge)/credit (28) 2 (26) 1 3 (22)
Profit/(loss) for the year 115 (13) 102 (5) (9) 88
Attributable to:
Equity holders of the parent 106 (13) 93 (5) (9) 79
Non-controlling interests 9 - 9 - - 9
115 (13) 102 (5) (9) 88
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2024
A2. Reconciliation of Headline to Statutory Segmental trading profit/(loss)
and Group profit from trading operations
2024
pre-IFRS 16 basis IFRS 16 basis
£m Headline, before non-underlying items (pre-IFRS 16) Headline non-underlying items (pre-IFRS 16) Headline (pre-IFRS 16) IFRS 16 adjustments Total
Travel UK trading profit 122 - 122 4 126
North America trading profit 54 - 54 4 58
Rest of the World trading profit 13 - 13 5 18
Total Travel trading profit 189 - 189 13 202
High Street trading profit 32 - 32 7 39
Group profit from trading operations 221 - 221 20 241
Unallocated central costs (28) - (28) - (28)
Group operating profit before non-underlying items 193 - 193 20 213
Non-underlying items - (56) (56) 1 (55)
Group operating profit/(loss) 193 (56) 137 21 158
( )
2023
pre-IFRS 16 basis IFRS 16 basis
£m Headline, before non-underlying items (pre-IFRS 16) Headline non-underlying items (pre-IFRS 16) Headline (pre-IFRS 16) IFRS 16 adjustments Total
Travel UK trading profit/(loss) 102 - 102 (1) 101
North America trading profit 49 - 49 3 52
Rest of the World trading profit 13 - 13 - 13
Total Travel trading profit 164 - 164 2 166
High Street trading profit 32 - 32 11 43
Group profit from trading operations 196 - 196 13 209
Unallocated central costs (27) - (27) - (27)
Group operating profit before non-underlying items 169 - 169 13 182
Non-underlying items - (13) (13) (13) (26)
Group operating profit/(loss) 169 (13) 156 - 156
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2024
A3. Reconciliation of Headline to Statutory tax expense
2024 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 166 (5) 161 143 (6) 137
Tax on profit - Standard rate of UK corporation tax 25% (2023: blended rate of 22 (1) 21 14 (1) 13
21.5%)
Adjustment in respect of prior years - - - (2) - (2)
Total current tax charge/(credit) 22 (1) 21 12 (1) 11
Deferred tax - current year 22 - 22 19 - 19
Deferred tax - prior year (5) - (5) (3) - (3)
Deferred tax - adjustment in respect of change in tax rates - - - - - -
Tax charge/(credit) on Headline profit 39 (1) 38 28 (1) 27
Tax on non-underlying items - current tax (1) - (1) - - -
Tax on non-underlying items - deferred tax (8) - (8) (2) (3) (5)
Total tax charge/(credit) on profit 30 (1) 29 26 (4) 22
A4. Calculation of Headline and Statutory earnings per share
2024 2023
millions Basic EPS Diluted EPS Basic EPS Diluted EPS
Weighted average shares in issue (Note 8) 129 131 130 132
2024 2023
Profit for the year attributable to equity holders of the parent Basic EPS Diluted EPS Profit for the year 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 117 90.7 89.3 106 81.5 80.3
- Non-underlying items (48) (37.2) (36.6) (13) (10.0) (9.8)
Total 69 53.5 52.7 93 71.5 70.5
IFRS 16 adjustments
- Before non-underlying items (4) (3.1) (3.0) (5) (3.8) (3.8)
- Non-underlying items 2 1.5 1.4 (9) (6.9) (6.9)
Total (2) (1.6) (1.6) (14) (10.7) (10.7)
IFRS 16 basis
- Before non-underlying items 113 87.6 86.3 101 77.7 76.5
- Non-underlying items (46) (35.7) (35.2) (22) (16.9) (16.7)
Total 67 51.9 51.1 79 60.8 59.8
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2024
A5. Fixed charges cover
£m Note 2024 2023
Headline net finance costs (pre-IFRS 16) A1 27 26
Net operating lease charges (pre-IFRS 16) A12 365 326
Total fixed charges 392 352
Headline profit before tax and non-underlying items A1 166 143
Headline profit before tax, non-underlying items and fixed charges 558 495
Fixed charges cover - times 1.4x 1.4x
A6. Non-underlying items on pre-IFRS 16 and IFRS 16 bases
2024 2023
£m Headline (pre-IFRS16) IFRS 16 Headline IFRS 16
(pre-IFRS16)
Amortisation of acquired intangible assets 3 3 3 3
Impairment of assets
- property, plant and equipment 18 15 4 4
- intangible assets 5 5 - -
- right-of-use assets - 10 - 15
Provisions for onerous contracts 11 6 5 3
Transformation programmes - supply chain and IT 9 9 - -
Costs associated with pensions 2 2 1 1
IFRS 16 remeasurement gains - (3) - -
Costs relating to M&A activity and Group legal entity structure 4 4 - -
Re-platform of whsmith.co.uk and other costs 4 4 - -
Non-underlying items, included in operating profit 56 55 13 26
Finance costs associated with refinancing - - 1 1
Finance costs associated with onerous contracts 1 - 1 -
Non-underlying items, before tax 57 55 15 27
Tax credit on non-underlying items (9) (9) (2) (5)
Non-underlying items, after tax 48 46 13 22
Non-underlying items on a pre-IFRS 16 basis are calculated on a consistent
basis with IFRS 16, with the exception of the below items.
Impairment of right-of-use assets
On a pre-IFRS 16 basis right-of-use assets are not recognised, therefore the
right-of-use asset impairment of £10m is also not recognised.
Provisions for onerous contracts
A charge of £11m has been recognised on a pre-IFRS 16 basis to provide for
the unavoidable costs of continuing to service certain non-cancellable
supplier and lease contracts where the space is vacant, a contract is
loss-making or currently not planned to be used for ongoing operations. On an
IFRS 16 basis this charge is £6m, as the charge is partially offset by
impairments to right-of-use assets of £10m that are not recognised on a
pre-IFRS 16 basis.
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2024
A6. Non-underlying items on pre-IFRS 16 and IFRS 16 bases (continued)
IFRS 16 remeasurement gains
Gains of £3m have been recognised under IFRS 16 that have resulted from the
derecognition of lease liabilities on exit from certain locations, in which
right-of-use assets were previously impaired. Lease liabilities and
right-of-use assets are not recognised on a pre-IFRS 16 basis, and therefore
these gains do not exist in the Headline measure of non-underlying items.
A tax credit of £9m (2023: £5m) has been recognised in relation to the above
items (£9m pre-IFRS 16 (2023: £2m)).
A7. Free cash flow
£m 2024 2023
Net cash inflow from operating activities 275 251
Cash flow impact of IFRS 16 (Note A9) (111) (116)
Add back:
- Cash impact of non-underlying items 28 9
- Financing arrangement fees - 3
- Other non-cash items (8) (5)
Deduct:
- Purchase of property, plant and equipment (115) (106)
- Purchase of intangible assets (incl. £2m non-underlying capital (16) (16)
expenditure)
Free cash flow 53 20
A8. Headline net debt
The table below shows Headline net debt (pre-IFRS 16). This includes lease
liabilities that were previously presented as finance leases (applying the
principles of IAS 17), and Group accounting policies as applicable prior to 1
September 2019, described in the Glossary on page 50, but excludes additional
lease liabilities recognised on application of IFRS 16.
£m 2024 2023
Borrowings
- Revolving credit facility (117) (84)
- Convertible bonds (310) (301)
- Lease liabilities (Note 14) (626) (566)
Liabilities from financing activities (1,053) (951)
Cash and cash equivalents 56 56
Net debt (IFRS 16) (Note 9) (997) (895)
Add back lease liabilities recognised under IFRS 16(1) 626 565
Headline net debt (pre-IFRS 16) (371) (330)
( )
(1)Excludes lease liabilities previously recognised as finance leases on a
pre-IFRS 16 basis.
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2024
A9. Cash flow disclosure impact of IFRS 16
There is no impact of IFRS 16 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.
2024 2023
£m Headline (pre-IFRS 16) IFRS 16 Headline (pre-IFRS 16) IFRS 16
IFRS 16 Adjustment IFRS 16 Adjustment
Net cash inflows from operating activities 164 111 275 135 116 251
Net cash outflows from investing activities (137) - (137) (122) - (122)
Net cash outflows from financing activities (27) (111) (138) (87) (116) (203)
Net decrease in cash in the period - - - (74) - (74)
A10. Balance sheet impact of IFRS 16
The balance sheet including and excluding the impact of IFRS 16 is shown
below:
2024 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 491 (1) 490 506 (1) 505
Property, plant and equipment 308 8 316 263 7 270
Right-of-use assets - 505 505 - 444 444
Investments in joint ventures 2 - 2 2 - 2
801 512 1,313 771 450 1,221
Inventories 217 - 217 205 - 205
Payables less receivables (183) (7) (190) (216) (3) (219)
Working capital 34 (7) 27 (11) (3) (14)
Net current and deferred tax assets 33 - 33 45 - 45
Provisions (28) 11 (17) (26) 9 (17)
Operating assets employed 840 516 1,356 779 456 1,235
Net debt (371) (626) (997) (330) (565) (895)
Net assets excluding retirement benefit surplus 469 (110) 359 449 (109) 340
Retirement benefit surplus 87 - 87 - - -
Total net assets 556 (110) 446 449 (109) 340
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2024
A11. Like-for-like revenue reconciliation
The reconciling items between like-for-like revenue change and total revenue
change are shown below:
Travel UK North America Rest of the World Travel Total High Street Group
£m
Like-for-like revenue change 10% -% 9% 7% (2)% 5%
Net space impact 2% 9% 9% 5% (2)% 3%
Foreign exchange -% (3)% (3)% (1)% -% (1)%
Total revenue change 12% 6% 15% 11% (4)% 7%
A12. Operating lease expense
Amounts recognised in Headline Group operating profit on a pre-IFRS 16 basis
are as follows:
£m 2024 2023
Net operating lease charges 365 326
In 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 50.
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 4 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.
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