REG - WH Smith PLC - Findings following the independent Deloitte Review

WH SmithAnnouncement

Today 07:00

For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20251119:nRSS1471Ia&default-theme=true

RNS Number : 1471I  WH Smith PLC  19 November 2025

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

 

WH Smith PLC

 

 19 November 2025

 

 

Findings following the independent Deloitte Review; expectations

for the financial year ended 31 August 2025; and

remediation plan being implemented

 

The following information is indicative and subject to the conclusion of the
full year audit, including the treatment of any prior year adjustments. This
update is not a preliminary statement of annual results and has not,
therefore, been agreed by the Company's auditors.

 

Summary of independent Deloitte Review

·    Independent and comprehensive review undertaken by Deloitte LLP (the
"Deloitte Review") for FY23 to FY25 has been delivered, following announcement
on 21 August 2025.

·    Key findings identified:

o  the accounting treatment for supplier income adopted by the North America
division was not consistent with the Group's stated accounting policy and
consequently was not consistent with the requirements of the relevant
accounting standards;

o  supplier income recognition has been overstated in North America. As a
result of this finding, the Company expects prior year adjustments to be
recorded;

o  the overstatement of supplier income identified in the North America
division is substantially a timing rather than an existence issue, and relates
to the application of accounting standards; and

o  the methodology and conclusion of the Internal Audit review of supplier
income for FY25 across the UK and ROW Travel divisions is appropriate and
supplier income has been appropriately recognised in these divisions.

·    The North America supplier income issue has arisen against a backdrop
of a target-driven performance culture and decentralised divisional structure
combined with a limited level of Group oversight of the finance processes in
North America. The following factors in North America also contributed:

o  weaknesses in the composition of the finance team; and

o  insufficient systems, controls and review procedures for supplier income
across commercial and finance functions.

 

Expectations for the year ended 31 August 2025

The information set out below relates only to the continuing operations of
WHSmith and not the businesses disposed of in the financial year ended 31
August 2025.

In addition, alongside the Deloitte Review, the Company has completed an
extensive year-end review process for the North America division.

Group

Group Headline trading profit(1) for FY25 is expected to be in the range of
£100m-£110m.

(1) Pre-IFRS 16 basis.

North America

In North America, Headline trading profit(1) is expected to be in the range of
£5m-£15m, down from the revised expectation of around £25m announced on 21
August 2025 and previous market expectations of £55m.

The revision from the previous market expectation of £55m includes:

·    A net reduction in supplier income of c.£22m. This comprises a gross
reduction of c.£32m of which c.£20m is deferred to future financial years
and c.£12m has not been delivered due to delays in signing supplier income
contracts and the under delivery of the commercial plan. Supplier income costs
of c.£3m have also been incurred.

·    These costs are offset by a potential c.£13m supplier income
restatement benefit from prior years.

·    Additional one-off costs in the region of £20m relating to
inventory:

o  As part of an extensive year-end review process conducted by the Company,
the accounting treatment for inventory related items, primarily in respect of
inventory shrinkage and aged inventory provisioning, was identified as not
being consistent with the Group's stated accounting policy;

o  Some of the inventory adjustments (around £10m) relate to FY24 which may
require a restatement, subject to completion of the year-end procedure for
FY25 and conclusion of the audit process; and

o  The Group will provide a further update in its preliminary results for the
financial year ended 31 August 2025 ("Preliminary Results").

·    Expected cost savings of c.£5m not delivered in FY25, largely
relating to the delayed restructure of the North America logistics and
distribution network.

Supplier income adjustments on a net basis for the prior years are expected to
be c.£13m for FY24 and c.£5m for FY23. Approximately £5m of supplier income
from these prior years will be recognised in FY26 and beyond.

Travel UK and ROW

Headline trading profit(1) for the UK division is in the region of £130m.
Headline trading profit(1) for the ROW division is in the region of £14m.

Central costs and Financing costs

Central costs are expected to be approximately £25m, reflecting a reduction
in remuneration costs. Financing costs are expected to be approximately £26m,
reflecting the Group's lower net debt position.

Net debt

The Company expects net debt to be in the region of £390m with leverage
expected to be around 2.1x as at 31 August 2025.

Other non-underlying costs

The audit process for FY25 is ongoing and the Group will provide a full update
on non-underlying costs in its Preliminary Results.

Remediation actions

The Group appointed a new CEO for the North America division in June 2025 and
is currently in the process of reviewing the North America leadership team.
The Group has also taken steps to strengthen its Group Finance and Audit and
Risk teams. In addition, it is developing a robust remediation plan which will
be monitored and governed by the Board and appropriately assured. This
includes but is not limited to:

·    North America division adoption of the global supplier income policy,
new governance and controls frameworks and refreshed mandatory training;

·    Group-wide implementation of a new supplier income management system
accelerated to early 2026;

·    Finance Transformation programme approved by the Board to enhance
systems, processes, controls and centralise Group Finance oversight;

·    The Group's intention to engage a third party assurance provider to
support internal audit to review and validate the Group's key financial
controls and processes;

·    Strengthening the Board including additional North America retail
expertise; and

·    A commitment to fostering a culture of integrity, transparency, and
accountability; and empowering teams to speak up and embed responsibility at
every level.

As a result of the review conducted to date, the Group expects to incur fees
of up to £10m within non-underlying costs in FY25. The Group will provide a
further update on future remediation costs in its Preliminary Results.

 

Commenting on today's announcement, Annette Court, Chair of WH Smith PLC said:

"This is an extremely serious matter that has had the Board's full attention,
and we sincerely apologise for the shortcomings identified. While the issues
identified arose in our North America division, we recognise the importance of
strengthening controls, governance and reporting procedures across the Group.

"We have acted swiftly to build a comprehensive remediation plan and will
reinforce the financial discipline and integrity that underpin our business
moving forward.

"It has also been announced today that Carl Cowling has offered his
resignation. Carl will step down as Group CEO and as a Board Director with
immediate effect. We wish Carl every success in the future. The Board has
begun the search to appoint a new CEO.

"Our priority now is to rebuild trust and credibility and to improve the
performance and profitability of our North America division. We are confident
that the actions we have taken and will continue to implement over the months
ahead will ensure a strong foundation for the business going forward."

 

Preliminary results for the financial year ended 31 August 2025

As announced on 29 October 2025, the Company's Preliminary Results are
expected to be published on 16 December 2025.

 

Outlook

A full update on the Group's outlook, including guidance on North America, for
the financial year ending 31 August 2026 will be provided at the Preliminary
Results.

 Enquiries:

 WH Smith PLC
 Nicola Hillman  Media Relations     +44 1793 563354
 Mark Boyle      Investor Relations  +44 7879 897687

 Brunswick       Tim Danaher         +44 20 7404 5959

The person responsible for making this announcement on behalf of the Group is
Ian Houghton (General Counsel and Company Secretary).

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  MSCPKCBDABDKDDD



            Copyright 2019 Regulatory News Service, all rights reserved