TIDMSMWH
RNS Number : 8370M
WH Smith PLC
14 May 2020
14 May 2020
WH SMITH PLC
INTERIM RESULTS ANNOUNCEMENT
For the six months ended 29 February 2020
Good first half performance; significant mitigating actions
implemented following the
Covid-19 outbreak; resilient Group well positioned for the
recovery
Group financial summary:
6 months to 6 months to 6 months to %
Feb 2020 (IFRS*) Feb 2020 Feb 2019 Change (IAS 17)
(IAS 17) (IAS 17)
Travel trading profit** GBP50m GBP49m GBP44m 11%
High Street trading profit** GBP47m GBP44m GBP48m (8)%
Group profit from trading operations** GBP97m GBP93m GBP92m 1%
----------------------------------------- ------------------ ------------ ------------- -----------------
Headline Group profit before tax** GBP80m GBP80m GBP81m (1)%
Headline earnings per share** 56.1p 56.1p 60.6p (7)%
Non-underlying costs** GBP(17)m GBP(17)m GBP(16)m 6%
------------------ ------------ -------------
Group profit before tax GBP63m GBP63m GBP65m (3)%
Basic earnings per share 41.6p 41.6p 47.2p (12)%
Diluted earnings per share 41.2p 41.2p 46.8p (12)%
----------------------------------------- ------------------ ------------ ------------- -----------------
Revenue performance:
Total % LFL** %
GBPm change change
Travel 432 19% 2%
------------- ------ -------- --------
High Street 315 (5)% (4)%
Group 747 7% (1)%
------ --------
* The Group adopted IFRS 16 'Leases' with effect from 1 September
2019 using the modified retrospective approach to transition
and has accordingly not restated prior periods. The results
for the six months ended 29 February 2020 are not directly
comparable with those reported in the prior period under the
previous applicable accounting standard, IAS 17 'Leases'. To
provide meaningful comparatives, the results for the six months
ended 29 February 2020 have therefore also been presented under
IAS 17 with the growth rates shown on an IAS 17 basis. All
references to Trading profit are stated on a comparable IAS
17 basis. Group revenue was not affected by the adoption of
IFRS 16, and therefore all references to and discussion of
revenue, and like-for-like revenue are based on statutory measures.
See page 12 for more information.
** Denotes first instance of an Alternative Performance Measure
(APM) term defined and explained in the Glossary on page 41.
Unless otherwise stated, all references in this announcement
to growth rates and period-on-period comparisons relating to
the Group's statutory and alternative performance measures
are stated on a consistent basis under IAS 17.
Carl Cowling, Group Chief Executive, commented:
"The emergence of Covid-19 and the associated global pandemic
has affected all of us in ways that were unimaginable only
a short while ago. I have enormous admiration for how our colleagues
across WH Smith have responded to these unprecedented times
and I would like to thank them all.
"Our primary focus over the past eight weeks has been to protect
our colleagues across all areas of our business and our customers.
We have supported many good causes and we have kept over 300
stores open to serve the communities that most need our services
at this critical time, including the NHS and the communities
that rely on the Post Office services we provide on the high
street.
"There was very little impact of Covid-19 on our first half
results, however inevitably the performance in the second half
will be very different. During the first half, we continued
to see strong sales growth in our Travel business with total
revenue up 19%, driven by our ongoing investment and initiatives
in our UK business and our growing international businesses.
Trading profit in the first half was up 11%. Our recently acquired
US business, MRG, continued to perform well and maintained
its momentum of securing significant tender wins across major
US airports. Our High Street business also performed well delivering
Trading profit of GBP44m in the period.
"Since March, we have seen a significant impact on our business
as a result of Covid-19, with the majority of our stores closed
around the world. We were fast to react to the situation and
issued new equity via a placing, raising c.GBP162m on 6 April
2020. We also secured an additional GBP120m of bank funding.
"We are a resilient and versatile business and with the operational
actions we have taken including managing costs and the new
financing arrangements, we are in a strong position to navigate
this time of uncertainty and are well positioned to benefit
in due course from the normalisation and growth of our key
markets."
First half results overview:
* Group revenue up 7% with Group like-for-like revenue
down 1%
* Travel revenue up 19% (up 4% excluding InMotion and
MRG) and up 2% on a like-for-like basis
* Strong profit growth in Travel with Trading profit up
11% to GBP49m (2019: GBP44m)
* Integration of Marshall Retail Group (MRG)
progressing well; 12 new units won in North America,
including a major airport win
* International Travel now has 599 units open across 31
countries, including over 280 units in North America
* High Street trading profit at GBP44m (2019: GBP48m)
* Headline profit before tax at GBP80m (2019: GBP81m)
* Statutory profit before tax at GBP63m (2019: GBP65m)
Covid-19 has had a significant impact on current trading:
-- In our UK Travel business, we have seen a significant decline
in passenger numbers as a result of travel bans; the vast majority
of our stores at airports and railway stations have been
temporarily closed
-- We remain committed to serving the communities which most
need our services at this critical time; we are proud to continue
to serve NHS staff from c.130 stores located in hospitals across
the UK and have extended our groceries range to provide further
support for these key workers
-- Internationally, we are seeing broadly similar trends to the
UK with all large airport stores closed
-- In our High Street business, 203 stores with Post Offices
continue to serve their local communities by providing vital postal
and banking services at this time
-- Our online businesses have performed strongly, particularly
in books where we have seen a 400% increase in sales during the
past month
-- In April, Group total revenue was down 85% on the same period
last year, as expected, with Travel revenue down 91% and High
Street revenue down 74%
Mitigating actions taken to support our colleagues, customers
and business:
-- Our number one priority remains the health and wellbeing of our colleagues and our customers
-- Stores that continue to trade have effective safety measures
in place, including social distancing measures, PPE for colleagues'
use, protective screens at the till point, guidelines to limit the
number of customers in store
-- Distribution centres remain operational albeit at reduced
capacity with effective social distancing measures in place
-- Head office staff working from home, where possible
-- Reduced stock purchases to reflect ongoing demand, returning
sale or return stock and negotiating extended payment terms
-- All non-essential and non-contractual capital expenditure delayed
-- Stopping all discretionary expenditure and reducing corporate overheads to a minimum
-- Working with landlords to significantly reduce or remove rent
payments and ensuring rent is aligned with revenue
-- Suspension of business rates in the UK
-- Significant reduction in headcount across stores and head
offices through furlough arrangements; participating in the UK
Government Job Retention Scheme
-- Deferring tax payments in line with UK government announcements
-- The Board will not be making an interim dividend payment in the current financial year
Actions taken to strengthen the balance sheet and liquidity
position:
-- A new GBP120m 12 month + 7 month, at the option of the Group,
committed banking facility from BNP Paribas, HSBC Bank PLC and
Santander UK PLC; in addition to our existing facilities
-- Waiver on existing bank covenants at August 2020 and February 2021
-- As at 12 May our liquidity reserves were approximately GBP400m
-- Secured eligibility for the government's Covid Corporate Financing Facility (CCFF)
Continued focus in the second half of the financial year:
-- Ensure the health and wellbeing of our colleagues and
customers is at the forefront of everything we do
-- Continue to focus on managing costs
-- Plans on track for phased re-opening of stores in the second half
-- Focus on driving spend per passenger across Travel channels as stores re-open
-- Continue to invest in flagship new store formats across the UK and North America
-- MRG is well positioned to continue to grow when the US travel market re-opens
-- Maintain strong relationships with landlord partners
-- Expand relationship with M&S; extend pilot to a further 2 High Street stores
-- Maintain sales momentum of online businesses
WEBCAST:
A live webcast will be held today at 8.30am BST for investors
and analysts and will be available on our website at
www.whsmithplc.co.uk .
ENQUIRIES:
WH Smith PLC
Nicola Hillman Media Relations 01793 563354
Mark Boyle Investor Relations 07879 897687
Brunswick
Fiona Micallef-Eynaud / Camille
Ng 020 7404 5959
WH Smith PLC's Interim Results 2020 are available at
www.whsmithplc.co.uk .
GROUP OVERVIEW
Group Summary
Total Group revenue was up 7% compared to last year at GBP747m
(2019: GBP695m) with Group LFL revenue down 1%.
Group profit from trading operations increased to GBP93m (2019:
GBP92m) with Headline Group profit before tax at GBP80m (2019:
GBP81m). Including non-underlying items (relating primarily to the
acquisition of MRG) , Group profit before tax was GBP63m (2019:
GBP65m).
Headline earnings per share was 56.1p (2019: 60.6p). This
reflects Headline profit, a 19% effective tax rate** and a higher
basic weighted average number of shares in issue following the
share placement in October 2019.
Following the disruption to the business from the Covid-19
pandemic, the Board has announced that it will not be paying an
interim dividend in the current financial year.
As at 29 February net debt** (on a pre-IFRS 16 basis) including
the additional GBP200m term loan and after finance leases, was
GBP411m (2019: GBP221m). Group free cash flow** was GBP1m (2019:
GBP27m) reflecting GBP14m additional tax payments on account (now
refunded by HMRC), higher investment capex of GBP10m and further
working capital investment of GBP5m.
As announced on 6th April 2020, we have raised net proceeds of
c.GBP162m via a share placing. In addition, we have agreed a
GBP120m 12 month (plus 7 months at the option of the Group)
committed banking facility from BNP Paribas, HSBC Bank PLC and
Santander UK PLC. This is in addition to our existing facilities.
The Group has agreed waivers for the bank covenant tests at August
2020 and February 2021.
Following the acquisitions of InMotion and MRG, and the Group's
most recent re-financing as a result of Covid-19, the Group has the
following debt facilities as at 14 May:
Quantum Drawn Maturity
Available facilities
-------------- -----------------
GBP120m 'Liquidity' Facility Nil November 2021***
-------------- -----------------
GBP200m Revolving Credit Nil December 2023
Facility
-------------- -----------------
Existing debt
-------------- -----------------
GBP200m Term Loan GBP200m October 2022
-------------- -----------------
GBP200m MRG Loan GBP200m October 2022***
-------------- -----------------
*** The maturity dates above include extension options at the
Group's control
As at 12 May 2020 the Group had available cash and liquidity
reserves of c.GBP400m, being GBP200m revolving credit facility,
GBP120m liquidity facility and net cash at bank of GBP84m. The
Group's monthly cash burn under an extended lockdown is
approximately GBP25m-GBP30m per month. In addition, the Group has
secured eligibility for the CCFF. For information, the Bank of
England's guidance published on their website states that companies
with WH Smith's pre-crisis credit rating are permitted to draw up
to GBP300m. If we draw on the CCFF, the GBP120m 'Liquidity'
Facility would be terminated and any draw down would be
repayable.
TRAVEL
Travel delivered a strong performance across all channels in the
first half. Trading profit increased by 11% to GBP49m (2019:
GBP44m), of which GBP9m (2019: GBP6m) relates to our growing
international business including MRG and InMotion. Total revenue
was GBP432m (2019: GBP364m), up 19% compared to last year and up 2%
on a LFL basis driven by our initiatives and ongoing investment.
Gross margin**, excluding MRG and InMotion, was up 110bps compared
to last year.
As at 29 February 2020, our global Travel business, including
MRG and InMotion, operated from 1,194 units (31 August 2019: 1,019
units), and excluding franchise units, occupies 1.0m square
feet.
UK Travel
Total revenue in the half was GBP271m, (2019: GBP260m), up 4% on
the previous year. Total revenue in Air was up 3% with LFL revenue
up 2%; in our hospital channel, total revenue was up 13% with LFL
revenue up 6%, and in Rail, total revenue was up 2% with LFL
revenue also up 2%. Gross margin increased by 60bps during the
period, driven by a positive mix effect. Trading profit was up 5%
to GBP40m (2019: GBP38m).
We worked hard across all channels in the first half to drive
spend per passenger, delivering some positive results. Our focus on
developing our large store formats continued and we expect these
formats to position us well for the future. Our experience
continues to show that we can deliver much higher sales per
passenger from these large stores, through improved layouts and
increased capacity. Despite the current uncertainty, we remain
committed to refitting our 5,000 square foot store at Heathrow
Terminal 2 this summer. This flagship store will feature an
extensive news, books and convenience offer with the addition of a
world class health and wellbeing department with specialist staff.
The health and wellbeing department will comprise a comprehensive
range of over 3,000 products curated through our partnership with
market leading brands. In addition, the pharmacy counter will offer
healthcare advice along with a wide selection of medicines.
Hospitals are an important business for us. We continue to
invest and innovate in this channel to meet the needs of each
hospital and we have developed a strong customer offer and aligned
our ranges to the NHS strategy on healthy eating. Our broad suite
of brands, which include Costa and M&S Simply Food, also ensure
that we can tailor and adapt our proposition. Given our ongoing
investment, we continue to win and open new stores, with a further
3 stores opened in the first half.
During the current crisis, we are also delighted to be in a
position to support frontline NHS staff from our hospital stores,
ensuring we can continue to play our part in the communities we
serve. Since April, we have extended our grocery ranges in these
stores to include over 90 essential items to further support
frontline workers at this time. In addition, we have doubled the
NHS staff discount to 20% and have supported a large number of
hospitals with stock donations.
In Rail, we continued to invest in format development during the
first half. Our new large store format at Paddington Station
delivered some encouraging results and we believe there are
opportunities in the future to apply this format across our rail
channel.
International
Our business outside the UK comprises the stores we operate in
North America and WH Smith stores across the rest of the world.
During the first half, our strategy to grow our international
travel business progressed well. However, our share of the global
news, books and convenience (NBC) travel market is still small.
Total revenue for the half, including MRG and InMotion, was
GBP161m (2019: GBP104m), up 55% versus the previous year. LFL
revenue, on a constant currency basis, was up 3% excluding InMotion
and down 1% including InMotion. The impact of InMotion on LFL
revenue, was primarily the result of good availability of certain
Apple products in the prior year, which drove very strong LFL
revenue last year. The equivalent products this year were in short
supply. Trading profit for the half was GBP9m (2019: GBP6m),
including GBP1m Trading profit from MRG.
During the period, we won 38 new units internationally and
opened 21 units, making a total of 599 units open as at 29 February
2020 across the WH Smith, MRG and InMotion brands. Of the 38 units
won in the first half, 12 are in North America, 5 are in Australia,
6 are in Europe, 1 is in the Middle East and 14 are in South East
Asia and India.
Of the 318 WH Smith units open outside of North America, 38% are
directly run, 51% are franchised with the balance being joint
ventures. We will continue to use these three economic models
flexibly in order to create value and win new business.
In total, across our global Travel business outside of the UK,
we are now present in over 100 airports and 31 countries with 292
units open in North and South America, 80 units open in Europe, 108
in the Middle East and India, and 119 in Asia Pacific.
North America
Our largest market outside of the UK is North America. On 20
December 2019, we completed the acquisition of MRG, a leading and
fast-growing US travel retailer. The store opening programme for
MRG remained on track during the first half and integration into
the WH Smith Group is progressing well.
Differentiated from its competitors by its strategy of
developing highly customised retail experiences tailored to local
customers and landlords, MRG has a highly successful and proven
business model with a strong track record of concession and tender
wins. With a further 33 new airport stores due to open over the
next 4 years following successful tenders, MRG is expected to add
more than 43,000 square feet of airport retail selling space to its
current c.54,000 square feet of existing airport selling space.
MRG has maintained its momentum of tender wins. We have won a
further 12 units in the US in the period, including a number of
significant tenders in major US airports, demonstrating the growth
opportunities that exist there.
In addition to MRG, our digital accessories business, InMotion,
has an excellent store portfolio with 117 stores across 43 airports
in the US. During the half, InMotion opened 6 units.
HIGH STREET
High Street delivered a good performance in the first half with
Trading profit of GBP44m (2019: GBP48m). LFL revenue was down 4%
with total revenue down 5%. We saw a good gross margin performance,
up 100bps in the period.
Driving efficiencies remains a core part of our strategy and we
focus on all areas of cost in the business. We continue to deliver
savings as part of our cost efficiency programme whilst adjusting
our variable costs to sales. We achieved cost savings of GBP5m in
the half. These savings come from right across the business,
including rent savings at lease renewal (on average over 40%) which
continue to be a significant proportion, marketing efficiencies and
productivity gains from our distribution centres.
We have worked hard over the years to create flexibility in our
store portfolio. The average lease length is 3.5 years and we only
renew a lease where we are confident of delivering economic value
over the life of that lease. We have a rolling programme of lease
renewals and over the next three years the leases on around 400
stores expire giving us further opportunities to renegotiate our
occupation costs.
As at 29 February 2020, the High Street business operated from
575 WH Smith stores (2019: 578) which occupy 2.7m square feet
(2019: 2.7m square feet). 1 WH Smith store was closed in the
period.
Online
Our online businesses continue to deliver good growth and
complement our core stationery category.
i. Our online personalised greetings card business,
www.funkypigeon.com , performed well in the period delivering good
revenue and profit growth.
ii. www.whsmith.co.uk provides customers with a comprehensive
book and stationery offer and, during the half, we continued to see
strong sales growth in our stationery ranges online.
iii. Our specialist pen website, www.cultpens.com performed well
in the period and we continue to develop this business and grow
sales.
iv. Our recently acquired websites, www.treeofhearts.co.uk and
www.dottyaboutpaper.co.uk also performed well. Although small,
these online stationery businesses align with our digital strategy
of broadening our stationery ranges and enhancing our customer
offer.
Update on Covid-19 Impact
In view of the current uncertainty from the impact of Covid-19,
we cannot forecast with any certainty the timing of our store
re-openings in our Travel and High Street businesses. Nor can we
forecast the speed of recovery. At this stage, we are planning on a
phased store re-opening schedule across our international
territories, UK Travel channels and our High Street business.
Our experience of operating our c.300 stores over the past eight
weeks has enabled us to build on and advance our re-opening plans
to protect both our colleagues and our customers by:
- Equipping our colleagues with appropriate PPE
- Erecting protective screens at our till counters
- Ensuring appropriate social distancing measures are identified within our stores; and
- Where necessary, restricting the number of customers that enter our stores at any one time.
In Air, we expect a gradual improvement in passenger numbers
from Autumn 2020; initially led by an increase in domestic
travellers, particularly in the US where c.80% of passengers are
domestic, followed by regional, international and inter-continental
passengers. In our Hospital channel, although our stores have
remained open to serve NHS employees, we have seen a fall in sales
as a result of a reduction in visitor numbers. In Rail, we expect a
gradual improvement in passenger numbers through Autumn 2020.
We are financially strong and are an important retail partner
for our travel landlords. As a result, we are well positioned to
benefit from more space becoming available in travel locations and
extending our user clauses to drive spend per passenger. We
continue to invest in new stores and new store formats where we see
attractive opportunities for profitable growth. During the second
half, we are planning to open a new flagship store format at
Heathrow Terminal 2. MRG, our travel business in the US, has
continued to perform well since completion, maintaining its
momentum in tender wins with further contract wins at major US
airports.
GROUP
The Group generated Headline profit before tax of GBP80m (2019:
GBP81m) and, after non-underlying items, statutory profit before
tax of GBP63m (2019: GBP65m).
6 months to
Feb 2020 Feb 2020 Feb 2019 Change
(IFRS) (IAS 17) %
GBPm (IAS 17) (IAS 17)
-------------------------------------- --- --------- ---------- ---------- ----------
Travel trading profit 50 49 44 11%
High Street trading profit 47 44 48 (8)%
Group profit from trading operations 97 93 92 1%
Unallocated costs (9) (9) (9)
------------------------------------------- --------- ---------- ---------- ----------
Headline Group operating profit 88 84 83 1%
Net finance costs (8) (4) (2)
------------------------------------------- --------- ---------- ---------- ----------
Headline Group profit before tax 80 80 81 (1)%
Non-underlying items (17) (17) (16)
------------------------------------------- --------- ---------- ---------- ----------
Group profit before tax 63 63 65 (3)%
------------------------------------------- --------- ---------- ---------- ----------
Non-underlying Items
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 and incidence, are treated as
non-underlying items and disclosed separately.
Non-underlying items included in the period ending 29 February
2020 (2019: GBP16m) are:
6 months to Feb 6 months to Feb
2020 2019
--------------------------------- ---------------------------------- -------------------------
Income Cash Income Cash Impact
GBPm Statement impact Statement
---------------------------------------- ------------- ------------ ----------- ------------
Acquisition related costs:
- Transaction costs 11 12 6 6
- Integration costs 2 2 2 -
- Amortisation 1 - 1 -
Impairment of property, plant and 3 - - -
equipment
Completed High Street review - 2 7 3
---------------------------------------- ------------- ------------ ----------- ------------
17 16 16 9
---------------------------------------- ------------- ------------ ----------- ------------
Non-underlying items in the half relate primarily to acquisition
costs and a non-cash impairment charge.
Costs relating to the acquisition of MRG were GBP13m and include
transaction and integration costs. We expect full year
non-underlying costs relating to the MRG acquisition to be around
GBP19m with the additional amount in the second half being further
integration costs and the second half amortisation charges.
The GBP3m non-cash impairment charge relates to the adjusting
post balance sheet impact of Covid-19 in our Asia Pacific
businesses, primarily in Singapore, and as such met the
requirements to be recognised in the first half.
The cash cost relating to non-underlying items in the half was
GBP16m with a further GBP4m expected in the second half. The cash
impact also includes GBP2m relating to the High Street review which
was completed and fully expensed in 2019.
Net Finance Costs
6 months to
Feb 2020 Feb 2020 Feb 2019
(IFRS) (IAS 17)
GBPm (IAS 17)
----------------------------------------------- --------- ---------- ----------
Interest payable on bank loans and overdrafts 4 4 2
Interest on lease liabilities 4 - -
----------------------------------------------- --------- ---------- ----------
Net finance costs 8 4 2
----------------------------------------------- --------- ---------- ----------
Net finance costs relating to bank loans were GBP4m compared
with GBP2m last year. The non-cash pension interest charge was
GBPnil (2019: GBPnil). Lease interest of GBP4m in the current
period arises on lease liabilities recognised under IFRS 16.
Fixed Charges Cover**
6 months to 12 months
to
------------------------------------- -------------------- ----------
GBPm Feb 2020 Feb 2019 Aug 2019
------------------------------------- --------- --------- ----------
Net finance charges (IAS 17) 4 2 5
Net operating lease rentals (IAS 17) 125 110 236
Total fixed charges 129 112 241
Headline profit before tax 80 81 155
------------------------------------- --------- --------- ----------
Headline profit before tax and fixed
charges 209 193 396
------------------------------------- --------- --------- ----------
Fixed charges cover - times 1.6x 1.7x 1.6x
------------------------------------- --------- --------- ----------
Fixed charges, comprising property operating lease rentals and
net finance charges, were covered 1.6 times (2019: 1.7 times) by
Headline profit before tax and fixed charges.
Cash Flow
Free cash flow reconciliation
6 months to
GBPm Feb 2020 Feb 2019
(IAS 17)
(IAS 17)
-------------------------------------------- ------------ ---------- ----------
Headline Group operating profit 84 83
Depreciation, amortisation & impairment(1) 28 24
Non-cash items 2 3
Working capital(1) (43) (38)
Employers payroll tax on exercised share
awards (1) (1)
Capital expenditure (41) (31)
Net tax paid (24) (10)
Net interest paid (3) (2)
Movement on provisions (1) (1)
---------------------------------------------------------- ---------- ----------
Free cash flow 1 27
---------------------------------------------------------- ---------- ----------
(1) Headline, excludes the cash flow impact of non-underlying
items, explained on page 8.
The Group generated free cash flow of GBP1m during the period.
Th is is lower than last year due to GBP14m accelerated corporation
tax payments on account, GBP10m higher investment capex and GBP5m
higher working capital. The working capital movement reflects our
usual seasonality and in this half we also invested additional
working capital in our recently acquired US businesses to support
their growth.
Capital expenditure in the half was GBP41m, GBP10m higher than
the same period last year. Capital expenditure includes investment
in new Travel stores both in the UK and internationally, investment
in High Street stores and further investment in our in-store
operating model.
Net corporation tax paid increased to GBP24m in the period from
GBP10m last year, mainly as a result of the acceleration of
corporation tax payments on account. All of the tax payments made
in the first half have now been refunded.
As at 29 February 2020 the Group had net debt (on a pre-IFRS 16
basis) of GBP411m, including GBP11m of finance lease liabilities
and net borrowings of GBP400m (2019: net debt of GBP221m, including
GBP12m of finance lease liabilities and net borrowings and
overdrafts of GBP209m).
Reconciliation of net debt
Net debt is presented on an IAS 17 basis. See Note 10 of the
Interim statements for the impact of IFRS 16 on net debt.
6 months to
GBPm Feb 2020 Feb 2019
(IAS 17)
(IAS 17)
----------------------------------------- ----- ---------------- ------------------
Opening net cash 34 12
Free cash flow generated 1 27
Dividend paid(2) (47) (41)
Pension funding (1) (1)
Net purchase of shares for employee
share schemes (1) (5)
Purchase of own shares for cancellation - (25)
Acquisition of subsidiaries, net of
cash acquired (316) (161)
Proceeds of share placing 152 -
Proceeds from borrowings 200 200
Repayments of obligations under finance
leases (3) (3)
Other (3) (3)
Non-underlying items(3) (16) (9)
------------------------------------------------ ---------------- ------------------
Closing net cash / (overdraft)(1) - (9)
Borrowings (400) (200)
Finance leases (11) (12)
------------------------------------------------ ---------------- ------------------
Net debt (IAS 17) (411) (221)
Lease liabilities under IFRS 16(4) (566) -
----------------------------------------- ----- ---------------- ------------------
Net debt (IFRS) (977) (221)
------------------------------------------------ ---------------- ------------------
(1) Net cash/overdrafts is cash and cash equivalents (GBP45m;
2019: GBP48m) less bank overdrafts and other borrowings (GBP45m;
2019 GBP57m). See Condensed Group Balance Sheet on page 17.
(2) Dividend paid is the prior year final dividend.
(3) Cash flow effect of non-underlying items is explained on
page 8.
(4) Excluding GBP11m finance leases already included in IAS 17
net debt.
Following the acquisition of MRG we suspended the buyback. The
dividend payment of GBP47m was the final dividend relating to the
previous financial year and was paid on 30 January 2020. During the
period the Group acquired MRG for a net cash consideration of
GBP316m. The cash flow impact of non-underlying items was GBP16m.
Further detail is provided on page 8.
Post period end re-financing
The Group undertook an equity raise on 6 April 2020 which raised
net proceeds of c.GBP162m through a 13.7% placing of new shares.
The Group also secured a new GBP120m 12 month + 7 month (at the
option of the Group) committed banking facility from BNP Paribas,
HSBC Bank PLC and Santander UK PLC. In addition, the maturity on
the Group's two GBP200m term loans was extended to October
2022.
12 May 2020 29 February 2020
Net cash / (overdraft) GBP84m (GBP34m)
at bank (1)
----------------------- -----------------
Revolving Credit Facility GBP200m (2) GBP200m
----------------------- -----------------
Further Liquidity Facility GBP120m (2)
----------------------- -----------------
InMotion - Term Loan GBP200m GBP200m
----------------------- -----------------
MRG - Term Loan GBP200m GBP200m
----------------------- -----------------
(1) Net cash at bank includes cash at bank and drawdown on the
revolving credit facility.
(2) Undrawn as at 12 May 2020
In the context of restrictions imposed following the Covid-19
pandemic, our cash burn per month would be approximately
GBP25m-GBP30m in an extended lockdown scenario.
Balance sheet
GBPm Feb 2020 Feb 2020 Aug 2019
(IFRS) (IAS 17) (IAS 17)
----------------------------------------- --------- ---------- ----------
Goodwill and other intangible assets 510 512 225
Property, plant and equipment 228 243 201
Right of use assets 540 - -
Investments in joint ventures 3 3 4
----------------------------------------- --------- ---------- ----------
1,281 758 430
----------------------------------------- --------- ---------- ----------
Inventories 188 188 174
Payables less receivables (130) (145) (178)
----------------------------------------- --------- ---------- ----------
Working capital 58 43 (4)
----------------------------------------- --------- ---------- ----------
Derivative financial asset 1 1 2
Net current and deferred tax asset
/ (liability) 3 (1) (3)
Provisions (2) (4) (5)
----------------------------------------- --------- ---------- ----------
Operating assets employed 1,341 797 420
Net debt (977) (411) (180)
----------------------------------------- --------- ---------- ----------
Net assets excluding pension liability 364 386 240
Pension liability (4) (4) (4)
Deferred tax asset on pension liability 1 1 1
----------------------------------------- --------- ---------- ----------
Total net assets 361 383 237
----------------------------------------- --------- ---------- ----------
The Group had net assets of GBP386m before pension liabilities
and associated deferred tax assets, GBP146m higher than last year
end, reflecting the share placement in October 2019, and profits
for the period offset by dividends paid. Net assets after the
pension liability and associated deferred tax asset were GBP383m
compared to GBP237m at 31 August 2019. Under IFRS the Group had net
assets of GBP361m.
We have performed an assessment of the impact of Covid-19 on the
Group to ascertain if the outbreak or related government actions
constitute an adjusting post balance sheet event under IAS 10
'Events after the Reporting Date'. Following our review, apart from
our Asia Pacific businesses, we have concluded that the government
actions occurred after the end of the reporting period, and are
therefore non-adjusting. A non-cash impairment charge of GBP3m was
recorded in the Group income statement as a result of our
assessment. This charge is included within non-underlying items
(see page 8).
Principal Risks and Uncertainties
The Group's Annual Report and Accounts 2019, a copy of which is
available on the Group's website at www.whsmithplc.co.uk, sets out
the principal risks and uncertainties which could impact the Group
for the remainder of the current financial year (see Annual Report
and Accounts 2019 pages 20 to 25). These include: economic,
political, competitive and market risks; brand and reputation; key
suppliers and supply chain management; store portfolio; business
interruption (including pandemics); reliance on key personnel;
international expansion; treasury, financial and credit risk
management; and cyber risk and data security. In addition, the
ongoing impact of Covid-19 is a significant risk facing the Group
for the remainder of the current financial year, due to uncertainty
around the timing and extent of the recovery on our ability to
re-open and operate our Travel and High Street stores, both in the
UK and Internationally, and its impact upon the levels of global
and domestic travel. The Group has deployed a framework of
operational procedures, mitigating actions and business continuity
plans as outlined in this announcement and will continue to adapt
these plans as the situation evolves.
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.
Impact of IFRS 16 Leases
The Group has implemented IFRS 16 using the modified
retrospective approach, which means that
prior year balances have not been restated. IFRS 16 superseded
the lease guidance under IAS 17 and the related interpretations.
The results for the six months ended 29 February 2020 included on
pages 1 to 11 have been shown both including the impact of IFRS 16,
and on a pre-IFRS 16 basis. Results have been discussed on a
pre-IFRS 16 basis to show meaningful year on year comparisons.
Accounting under IFRS 16
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.
Income Statement impact
The impact of the implementation of IFRS 16 on the Income
Statement is as follows:
6 months IFRS 16 Adjustment 6 months
to to
29 Feb 2020 29 Feb 2020
GBPm IAS 17 IFRS 16
--------------------------------- -------------- ------------------ -------------
Revenue 747 - 747
--------------------------------- -------------- ------------------ -------------
Headline Group operating profit 84 4 88
Finance cost (4) (4) (8)
--------------------------------- -------------- ------------------ -------------
Headline Group profit before tax 80 - 80
Non-underlying items (17) - (17)
--------------------------------- -------------- ------------------ -------------
Group Profit before tax 63 - 63
Income tax expense (15) - (15)
Profit for the period 48 - 48
--------------------------------- -------------- ------------------ -------------
The impact of the adoption of IFRS 16 on a segmental basis is
summarised below:
6 months IFRS 16 Adjustment 6 months
to to
29 Feb 2020 29 Feb 2020
GBPm IAS 17 IFRS 16
------------------------------------- -------------- ------------------ -------------
Travel trading profit(1) 49 1 50
High Street trading profit 44 3 47
------------------------------------- -------------- ------------------ -------------
Group profit from trading operations 93 4 97
Unallocated costs (9) - (9)
------------------------------------- -------------- ------------------ -------------
Headline Group operating profit 84 4 88
------------------------------------- -------------- ------------------ -------------
(1) Includes International Trading profit of GBP9m under IAS 17 and GBP10m under IFRS 16
Cash Flow impact
There is no impact on cash flows, although the classification of
cash flows has changed, with an increase in net cash inflows from
operating activities being offset by a decrease in net cash inflows
from financing activities.
6 months IFRS 16 Adjustment 6 months
to to
29 Feb 2020 29 Feb 2020
GBPm IAS 17 IFRS 16
----------------------------------- -------------- ------------------ -------------
Net cash inflows from operating
activities 25 48 73
Net cash outflows from investing
activities (357) - (357)
Net cash inflows from financing
activities 329 (48) 281
Net decrease in cash in the period (3) - (3)
----------------------------------- -------------- ------------------ -------------
Balance Sheet impact
The impact on the Balance Sheet of the IFRS 16 at 29 February
2020 was as follows:
At At
29 Feb IFRS 16 Adjustment 29 Feb 2020
GBPm 2020 IFRS 16
IAS 17
----------------------------------------- -------- --------------------- -------------
Goodwill and other intangible assets 512 (2) 510
Property, plant and equipment 243 (15) 228
Right-of-use assets - 540 540
Investments in joint ventures 3 - 3
----------------------------------------- -------- --------------------- -------------
758 523 1,281
----------------------------------------- -------- --------------------- -------------
Inventories 188 - 188
Payables less receivables (145) 15 (130)
----------------------------------------- -------- --------------------- -------------
Working capital 43 15 58
----------------------------------------- -------- --------------------- -------------
Derivative financial asset 1 - 1
Net current and deferred tax liability (1) 4 3
Provisions (4) 2 (2)
----------------------------------------- -------- --------------------- -------------
Operating assets employed 797 544 1,341
Net (debt) / funds (411) (566) (977)
----------------------------------------- -------- --------------------- -------------
Net assets excluding pension liability 386 (22) 364
Pension liability (4) - (4)
Deferred tax asset on pension liability 1 - 1
----------------------------------------- -------- --------------------- -------------
Total net assets 383 (22) 361
----------------------------------------- -------- --------------------- -------------
Further information on the impact of the adoption of IFRS 16 can
be found in Note 1 on page 21.
WH Smith PLC
Condensed Group Income Statement
For the 6 months to 29 February 2020
6 months to 29 Feb 6 months to 28 Feb 2019
2020
(unaudited) (1) (unaudited)
------------------------------ ---- ----------------------------------- ----------------------------------
Non-underlying Non-underlying
GBPm Note Headline(2) items(3) Total Headline(2) items(3) Total
------------------------------ ---- ----------- -------------- ------ ----------- -------------- -----
Revenue 2 747 - 747 695 - 695
Group operating profit
/ (loss) 2 88 (17) 71 83 (16) 67
Finance costs 5 (8) - (8) (2) - (2)
Profit / (loss) before
tax 80 (17) 63 81 (16) 65
Income tax expense 6 (15) - (15) (15) 1 (14)
------------------------------ ---- ----------- -------------- ------ ----------- -------------- -----
Profit / (loss) for the
period 65 (17) 48 66 (15) 51
------------------------------ ---- ----------- -------------- ------ ----------- -------------- -----
Attributable to equity holders
of the parent 64 (17) 47 66 (15) 51
Attributable to non-controlling
interests 1 - 1 - - -
------------------------------------ ----------- -------------- ------ ----------- -------------- -----
65 (17) 48 66 (15) 51
Earnings per share
Basic 8 41.6p 47.2p
Diluted 8 41.2p 46.8p
Equity dividends per share(4) 7 0.0p 17.2p
(1) The Group has initially applied IFRS 16 at 1 September 2019,
using the modified retrospective approach. Under this approach,
comparative information is not restated and the cumulative effect
of applying IFRS 16 is recognised in Retained earnings at the date
of initial application (see Note 1).
(2) ' Headline' denotes an alternative performance measure. See
Glossary on page 41 for definition of alternative performance
measures.
(3) See Note 3 for an analysis of Non-underlying items. See
Glossary on page 41 for definition of alternative performance
measures.
(4) D ividend per share is the interim dividend. No interim
dividend is proposed in the current period.
WH Smith PLC
Condensed Group Income Statement
For the 6 months to 29 February 2020
6 months to 29 Feb 12 months to 31 Aug
2020 2019
(unaudited) (1) (audited)
------------------------------ ---- ----------------------------------- ----------------------------------
Non-underlying Non-underlying
GBPm Note Headline(2) items(3) Total Headline(2) items(3) Total
------------------------------ ---- ----------- -------------- ------ ----------- -------------- -----
Revenue 2 747 - 747 1,397 - 1,397
Group operating profit
/ (loss) 2 88 (17) 71 160 (20) 140
Finance costs 5 (8) - (8) (5) - (5)
Profit / (loss) before
tax 80 (17) 63 155 (20) 135
Income tax expense 6 (15) - (15) (28) 1 (27)
------------------------------ ---- ----------- -------------- ------ ----------- -------------- -----
Profit / (loss) for the
period 65 (17) 48 127 (19) 108
------------------------------ ---- ----------- -------------- ------ ----------- -------------- -----
Attributable to equity holders
of the parent 64 (17) 47 125 (19) 106
Attributable to non-controlling
interests 1 - 1 2 - 2
------------------------------------ ----------- -------------- ------ ----------- -------------- -----
65 (17) 48 127 (19) 108
Earnings per share
Basic 8 41.6p 98.1p
Diluted 8 41.2p 97.2p
Equity dividends per share(4) 7 0.0p 58.2p
(1) The Group has initially applied IFRS 16 at 1 September 2019,
using the modified retrospective approach. Under this approach,
comparative information is not restated and the cumulative effect
of applying IFRS 16 is recognised in Retained earnings at the date
of initial application (see Note 1).
(2) ' Headline' denotes an alternative performance measure. See
Glossary on page 41 for definition of alternative performance
measures.
(3) See Note 3 for an analysis of Non-underlying items. See
Glossary on page 41 for definition of alternative performance
measures.
(4) No interim dividend is proposed in the current period.
WH Smith PLC
Condensed Group Statement of Comprehensive Income
For the 6 months to 29 February 2020
6 months 12 months
to to
6 months
to 29 Feb 28 Feb 31 Aug
2020 2019 2019
(unaudited)
GBPm Note (1) (unaudited) (audited)
-------------------------------------------------- ----- -------------- ------------- -----------
Profit for the period 48 51 108
-------------------------------------------------- ----- -------------- ------------- -----------
Other comprehensive (loss) / income:
Items that will not be reclassified subsequently
to the income statement:
Actuarial losses on defined benefit pension
schemes 4 (1) (1) (3)
(1) (1) (3)
Items that may be reclassified subsequently
to the income statement:
(Losses) / gains on cash flow hedges
* Net fair value (losses) / gains (9) (1) 2
8 - -
* Reclassified and reported in goodwill
* Reclassified and reported in inventories - - (1)
Exchange differences on translation of
foreign operations (8) (7) 10
-------------------------------------------------- ----- -------------- ------------- -----------
(9) (8) 11
Other comprehensive (loss) / income for
the period, net of tax (10) (9) 8
-------------------------------------------------- ----- -------------- ------------- -----------
Total comprehensive income for the period 38 42 116
-------------------------------------------------- ----- -------------- ------------- -----------
Attributable to equity holders of the
parent 37 42 114
Attributable to non-controlling interests 1 - 2
-------------------------------------------------- ----- -------------- ------------- -----------
38 42 116
-------------------------------------------------- ----- -------------- ------------- -----------
(1) The Group has initially applied IFRS 16 at 1 September 2019,
using the modified retrospective approach. Under this approach,
comparative information is not restated and the cumulative effect
of applying IFRS 16 is recognised in Retained earnings at the date
of initial application (see Note 1).
WH Smith PLC
Condensed Group Balance Sheet
As at 29 February 2020
At At At
29 Feb 2020 28 Feb 2019 31 Aug 2019
(unaudited) (unaudited) (audited)
GBPm Note (1)
------------------------------------- ------- ------------- ------------ -----------
Non-current assets
Goodwill 9 431 160 176
Other intangible assets 9 79 45 49
Property, plant and equipment 9 228 193 201
Right-of-use assets 9 540 - -
Investments in joint ventures 3 3 4
Deferred tax assets 6 8 8
Trade and other receivables 10 9 10
------------------------------------- ------- ------------- ------------ -----------
1,297 418 448
------------------------------------- ------- ------------- ------------ -----------
Current assets
Inventories 188 173 174
Trade and other receivables 77 67 73
Derivative financial assets 1 - 2
Current tax receivable 12 - -
Cash and cash equivalents 10 45 48 49
------------------------------------- ------- ------------- ------------ -----------
323 288 298
------------------------------------- ------- ------------- ------------ -----------
Total assets 1,620 706 746
------------------------------------- ------- ------------- ------------ -----------
Current liabilities
Trade and other payables (205) (216) (250)
Bank overdrafts and other borrowings 10 (45) (57) (15)
Retirement benefit obligations 4 (1) (1) (1)
Lease liability 10 (126) (5) (5)
Current tax liabilities - (11) (7)
Short-term provisions - (1) (1)
(377) (291) (279)
Non-current liabilities
Bank loans and other borrowings 10 (400) (200) (200)
Retirement benefit obligations 4 (3) (3) (3)
Long-term provisions (2) (3) (4)
Lease liability 10 (451) (7) (9)
Deferred tax liabilities (14) (2) (3)
Other non-current liabilities (12) (12) (11)
------------------------------------- ------- ------------- ------------ -----------
(882) (227) (230)
------------------------------------- ------- ------------- ------------ -----------
Total liabilities (1,259) (518) (509)
------------------------------------- ------- ------------- ------------ -----------
Total net assets 361 188 237
------------------------------------- ------- ------------- ------------ -----------
Capital and reserves
Called up share capital 12 25 24 24
Share premium 160 8 9
Capital redemption reserve 13 13 13
Translation reserve (1) (9) 8
Other reserve (276) (274) (274)
Retained earnings 435 424 455
------------------------------------- ------- ------------- ------------ -----------
Total equity attributable to equity
holders of the parent 356 186 235
------------------------------------- ------- ------------- ------------ -----------
Non-controlling interest 5 2 2
------------------------------------- ------- ------------- ------------ -----------
Total equity 361 188 237
------------------------------------- ------- ------------- ------------ -----------
(1) The Group has initially applied IFRS 16 at 1 September 2019,
using the modified retrospective approach. Under this approach,
comparative information is not restated and the cumulative effect
of applying IFRS 16 is recognised in Retained earnings at the date
of initial application (see Note 1).
WH Smith PLC
Condensed Group Cash Flow Statement
For the 6 months to 29 February 2020
6 months to 12 months
to
GBPm 29 Feb 2020 28 Feb 2019 31 Aug 2019
(unaudited) (unaudited) (audited)
Note (1)
------------------------------------------- ---- ------------ ------------ -----------
Operating activities
Cash generated from operating activities 11 79 50 153
Interest paid (6) (2) (4)
------------------------------------------- ---- ------------ ------------ -----------
Net cash inflow from operating activities 73 48 149
------------------------------------------- ---- ------------ ------------ -----------
Investing activities
Purchase of property, plant and equipment (35) (26) (47)
Purchase of intangible assets (6) (5) (12)
Acquisition of subsidiaries, net of
cash acquired (316) (161) (161)
Acquisition of investments in joint
ventures - (1) -
Net cash outflow from investing activities (357) (193) (220)
------------------------------------------- ---- ------------ ------------ -----------
Financing activities
Dividend paid 7 (47) (41) (60)
Distributions to non-controlling interests (1) - (2)
Issue of share capital 152 - -
Issue of new shares for employee share
schemes - - 1
Purchase of own shares for cancellation - (25) (32)
Purchase of own shares for employee
share schemes (1) (5) (7)
Proceeds from borrowings 230 224 182
Financing arrangement fees (1) (1) (1)
Repayments of obligations under leases (51) (3) (6)
Net cash inflow from financing activities 281 149 75
------------------------------------------- ---- ------------ ------------ -----------
Net (decrease) / increase in cash
and cash equivalents in the period (3) 4 4
------------------------------------------- ---- ------------ ------------ -----------
Opening cash and cash equivalents 49 45 45
Effect of movements in foreign exchange
rates (1) (1) -
------------------------------------------- ---- ------------ ------------ -----------
Closing cash and cash equivalents 45 48 49
------------------------------------------- ---- ------------ ------------ -----------
WH Smith PLC
Condensed Group Cash Flow Statement (continued)
For the 6 months to 29 February 2020
Reconciliation of net cash flow to movement in net debt
6 months to 12 months
to
--------------------------------------------- ---- -------------------------- -----------
29 Feb 2020 28 Feb 2019 31 Aug 2019
(unaudited) (unaudited) (audited)
GBPm Note (1)
--------------------------------------------- ---- ------------ ------------ -----------
Net debt at beginning of the period (180) (2) (2)
Impact of adoption of IFRS 16 1 (479) - -
Lease liability acquired through business
combination 15 (98) - -
Net (decrease) / increase in cash
and cash equivalents (3) 4 4
Increase in debt (230) (224) (182)
Net movement in lease liability 12 2 -
Effect of movements in foreign exchange
rates 1 (1) -
--------------------------------------------- ---- ------------ ------------ -----------
Net debt at end of the period 10 (977) (221) (180)
--------------------------------------------- ---- ------------ ------------ -----------
(1) The Group has initially applied IFRS 16 at 1 September 2019,
using the modified retrospective approach. Under this approach,
comparative information is not restated and the cumulative effect
of applying IFRS 16 is recognised in Retained earnings at the date
of initial application (see Note 1).
WH Smith PLC
Condensed Group Statement of Changes in Equity
For the 6 months to 29 February 2020
Called Total
up equity
share attributable
capital to equity
and Capital holders
share redemption Translation Other Retained of the Non-controlling Total
GBPm premium reserve reserves reserve(1) earnings parent interest equity
------------------- -------- ------------ ------------ ----------- --------- ------------- ---------------- -------
Balance at 1
September
2019 33 13 8 (274) 455 235 2 237
Impact of adoption
of
IFRS 16 - - - - (22) (22) - (22)
Profit for the
period - - - - 47 47 1 48
------------------- -------- ------------ ------------ ----------- --------- ------------- ---------------- -------
Other
comprehensive
income/(expense):
Actuarial losses
on
defined benefit
pension
schemes - - - - (1) (1) - (1)
Cash flow hedges - - - (1) - (1) - (1)
Exchange
differences
on translation of
foreign
operations - - (8) - - (8) - (8)
------------------- -------- ------------ ------------ ----------- --------- ------------- ---------------- -------
Total
comprehensive
income for the
period - - (8) (1) 46 37 1 38
Recognition of
share-based
payments - - - - 2 2 - 2
Dividends paid
(Note
7) - - - - (47) (47) - (47)
Employee share
schemes - - - (1) - (1) - (1)
Issue of shares 152 - - - - 152 - 152
Non-controlling
interest
arising on
acquisition - - - - - - 2 2
------------------- -------- ------------ ------------ ----------- --------- ------------- ---------------- -------
Balance at 29
February
2020 (unaudited) 185 13 - (276) 434 356 5 361
------------------- -------- ------------ ------------ ----------- --------- ------------- ---------------- -------
Balance at 1
September
2018 32 13 (2) (268) 437 212 - 212
Profit for the
period - - - - 51 51 - 51
------------------- -------- ------------ ------------ ----------- --------- ------------- ---------------- -------
Other
comprehensive
income/(expense):
Actuarial losses
on
defined benefit
pension
schemes - - - - (1) (1) - (1)
Cash flow hedges - - - (1) - (1) - (1)
Exchange
differences
on translation of
foreign
operations - - (7) - - (7) - (7)
------------------- -------- ------------ ------------ ----------- --------- ------------- ---------------- -------
Total
comprehensive
income for the
period - - (7) (1) 50 42 - 42
Recognition of
share-based
payments - - - - 3 3 - 3
Dividends paid
(Note
7) - - - - (41) (41) - (41)
Employee share
schemes - - - (5) - (5) - (5)
Purchase of own
shares
for cancellation - - - - (25) (25) - (25)
Non-controlling
interest
arising on
acquisition - - - - - - 2 2
------------------- -------- ------------ ------------ ----------- --------- ------------- ---------------- -------
Balance at 28
February
2019 (unaudited) 32 13 (9) (274) 424 186 2 188
------------------- -------- ------------ ------------ ----------- --------- ------------- ---------------- -------
Balance at 1
September
2018 32 13 (2) (268) 437 212 - 212
Profit for the
year - - - - 106 106 2 108
------------------- -------- ------------ ------------ ----------- --------- ------------- ---------------- -------
Other
comprehensive
income/(expense):
Actuarial losses
on
defined benefit
pension
schemes - - - - (3) (3) - (3)
Cash flow hedges - - - 1 - 1 - 1
Exchange
differences
on translation of
foreign
operations - - 10 - - 10 - 10
------------------- -------- ------------ ------------ ----------- --------- ------------- ---------------- -------
Total
comprehensive
income for the
year - - 10 1 103 114 2 116
Recognition of
share-based
payments - - - - 6 6 - 6
Dividends paid
(Note
7) - - - - (60) (60) - (60)
Employee share
schemes - - - (7) - (7) - (7)
Non-controlling
interest
arising on an
acquisition - - - - - - 2 2
Distributions to
non-controlling
interests - - - - - - (2) (2)
Premium on issue
of
shares 1 - - - - 1 - 1
Purchase of own
shares
for cancellation - - - - (31) (31) - (31)
------------------- -------- ------------ ------------ ----------- --------- ------------- ---------------- -------
Balance at 31
August
2019 (audited) 33 13 8 (274) 455 235 2 237
------------------- -------- ------------ ------------ ----------- --------- ------------- ---------------- -------
(1) Other reserve includes Revaluation reserve of GBP2m (August
2019: GBP2m), ESOP reserve of (GBP2m) (August 2019: (GBP6m)),
hedging reserve of GBP1m (August 2019: GBP2m) and Other reserves of
(GBP277m) (August 2019: (GBP272m)). The 'Other' reserve includes
reserves created in relation to the historical capital
reorganisation, proforma restatement and the demerger from Connect
Group PLC (formerly Smiths News PLC) in 2006.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
1. Basis of preparation, Accounting policies and Approval
of Interim Statement
The Condensed Interim Financial Statements for the 6 months
ended 29 February 2020 have been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Conduct
Authority and with IAS 34, "Interim Financial Reporting" as adopted
by the European Union. This report should be read in conjunction
with the Group's Annual Report and Accounts 2019, which have been
prepared in accordance with IFRSs as adopted by the European
Union.
The financial information set out in this report does not
constitute statutory accounts within the meaning of section 435 of
the Companies Act 2006. The Annual Report and Accounts 2019 have
been filed with the Registrar of Companies. The auditors' report on
those accounts was unqualified, did not include a reference to any
matters to which the auditors drew attention by way of emphasis
without qualifying the report and did not contain statements under
s498(2) or s498(3) of the Companies Act 2006.
The Condensed Interim Financial Statements have been prepared in
accordance with the accounting policies set out in the 2019 Annual
Report and Accounts and it is these accounting policies which are
expected to be followed in the preparation of the full financial
statements for the financial year ended 31 August 2020, except as
outlined below.
Taxes on income in the interim period are accrued using the tax
rate that would be applicable to the expected total annual profit
or loss.
The Group has adopted the following standards and
interpretations which became mandatory for the first time during
the current financial year. Except as outlined below the adoption
of these standards has had no material impact on the Group.
IFRS 16 Leases
IFRIC 23 Uncertainty over Income Tax Treatment
Amendment to IFRS Financial instruments - Prepayment features
9 with negative compensation
Amendments to IAS Investments in associates - Long term interests
28 in associates and joint ventures
Amendments to IAS Employee benefits - Plan amendment, curtailment
19 or settlement
Annual Improvements 2015-2017 cycle
At the Group balance sheet date, the following standards and
interpretations, which have not been applied in these financial
statements, were in issue but not yet effective (and in some cases
had not yet been adopted by the EU):
IFRS 17 Insurance Contracts
IFRS 14 Regulatory Deferral Accounts
Amendments to IFRS 9, IAS Interest Rate Benchmark Reform
39 and IFRS 7
Amendments to IFRS 3 Definition of a Business
Amendments to IAS 1 Classification of liabilities as current
or non-current
Amendments to IFRS 10 and Sale of assets between investor and
IAS 28 its Associate or JV
Amendments to IAS 1 and Definition of Material
IAS 8
Amendments to Conceptual References in IFRS Standards
Framework
The directors anticipate that the adoption of these standards
and interpretations will have no material impact on the Group's
financial statements.
IFRS 16 Leases
The Group has applied IFRS 16 effective from 1 September 2019
which superseded the lease guidance under IAS 17 and the related
interpretation.
Nature of change
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.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
1. Basis of preparation, Accounting policies and Approval of Interim
Statement (continued)
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. There will be no
impact on cash flows, although the presentation of the Cash Flow
Statement will change, with an increase in net cash inflows from
operating activities being offset by an increase in net cash
outflows from financing activities.
Impact on the Group
The standard has primarily affected the accounting for the
group's operating leases relating to properties.
The Group has applied the simplified transition approach
(modified retrospective approach) and recognised the lease
liability on transition at the present value of the remaining lease
payments, discounted using the incremental borrowing rate (IBR) at
the date of transition. Right of use assets are measured at
either:
- their carrying amount as if IFRS 16 had been applied since the
lease commencement date, discounted by the Group's incremental
borrowing rate at transition date. The Group has applied this
methodology to a small number of its property leases where
sufficient historical information has been available to facilitate
this.
- an amount equal to the lease liability, adjusted by the amount
of any prepaid or accrued lease payments. The Group has applied
this methodology to the majority of its leases as the sufficient
historical data was not available to enable a retrospective
calculation.
The weighted average discount rate applied on transition date is
1.78%.
The Group has not restated comparatives and the cumulative
effect of initially applying IFRS 16 is recognised as an adjustment
to the opening reserves at the date of transition.
The Group has elected to apply the following practical
expedients as allowed under IFRS 16:
- Exclude short-term leases (lease with a remaining term of less
than one-year) and low-value assets (defined as less than $5,000 at
initial cost);
- Rely on its assessment of whether leases are onerous
immediately before the date of transition as an alternative to
performing an impairment review. This is applied on a lease by
lease basis;
- Exclude initial direct costs from the measurement of the
right-of-use asset on transition; and
- The use of hindsight, such as in determining the lease term if
the contract contains options to extend or terminate the lease.
The Group has not applied the practical expedient of placing
reliance on the previous identification of a lease under IAS 17 but
has assessed all its existing lease contracts to determine whether
they meet the new definition of a lease and therefore fall within
the scope of IFRS 16. This has resulted in multiple contracts,
where the lessor is considered to have substantive substitution
rights over the associated assets, falling outside the scope of
IFRS 16. In addition to this, where Group has not taken the
practical expedient of taking an onerous lease provision under IAS
37 as a proxy to the opening impairment charge, the Group has
undertaken the impairment review at the date of transition. These
are explained further below under section "key areas of
judgement".
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
1. Basis of preparation, Accounting policies and Approval of Interim
Statement (continued)
Impact on the financial statements
(i) Balance Sheet impact on transition
At IFRS 16 At
31 Aug 2019 Adjustment 1 Sep 2019
GBPm (Audited) (unaudited)
------------------------------------- ------------ ------------ ----------- ------------
Non-current assets
Goodwill 176 - 176
Other intangible assets 49 - 49
Property, plant and equipment (1) 201 (18) 183
Right-of-use assets - 457 457
Investments in joint ventures 4 - 4
Deferred tax assets (2) 8 4 12
Trade and other receivables 10 - 10
--------------------------------------------------- ------------ ----------- ------------
448 443 891
-------------------------------------------------- ------------ ----------- ------------
Current assets
Inventories 174 - 174
Trade and other receivables (3) 73 (3) 70
Derivative financial assets 2 - 2
Cash and cash equivalents 49 - 49
--------------------------------------------------- ------------ ----------- ------------
298 (3) 295
-------------------------------------------------- ------------ ----------- ------------
Total assets 746 440 1,186
--------------------------------------------------- ------------ ----------- ------------
Current liabilities
Trade and other payables (4) (250) 15 (235)
Bank overdrafts and other borrowings (15) - (15)
Retirement benefit obligations (1) - (1)
Obligations under finance leases
(5) (5) 5 -
Lease liability - (108) (108)
Current tax liabilities (7) - (7)
Short-term provisions (1) - (1)
(279) (88) (367)
Non-current liabilities
Retirement benefit obligations (3) - (3)
Bank overdrafts and other borrowings (200) - (200)
Long-term provisions (6) (4) 2 (2)
Obligations under finance leases
(5) (9) 9 -
Lease liability - (385) (385)
Deferred tax liabilities (3) - (3)
Other non-current liabilities (11) - (11)
--------------------------------------------------- ------------ ----------- ------------
(230) (374) (604)
-------------------------------------------------- ------------ ----------- ------------
Total liabilities (509) (462) (971)
--------------------------------------------------- ------------ ----------- ------------
Total net assets 237 (22) 215
--------------------------------------------------- ------------ ----------- ------------
Capital and reserves
Called up share capital 24 - 24
Share premium 9 - 9
Capital redemption reserve 13 - 13
Translation reserve 8 - 8
Other reserve (274) - (274)
Retained earnings 455 (22) 433
--------------------------------------------------- ------------ ----------- ------------
Total equity attributable
to equity holders of the parent 235 (22) 213
--------------------------------------------------- ------------ ----------- ------------
Non-controlling interest 2 - 2
--------------------------------------------------- ------------ ----------- ------------
Total equity 237 (22) 215
--------------------------------------------------- ------------ ----------- ------------
(1) In respect of transfer of former finance leases and
impairment on the date of initial application of IFRS 16.
(2) Deferred tax recognised on transition impact on opening
retained earnings.
(3) Adjustment mainly in respect of prepaid rent.
(4) Adjustment in respect of lease incentive and rent
accrual.
(5) Adjustment in respect of former finance lease liability now
reclassified as lease liability.
(6) Adjustment in respect of onerous lease provision.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
1. Basis of preparation, Accounting policies and Approval of Interim
Statement (continued)
The table below shows a reconciliation from the total operating
lease commitment as disclosed at 31 August 2019 to the total lease
liability recognised in the financial statements on the date of
transition:
At 1 Sep 2019
GBP'm
Operating lease commitment at 31 August 2019 as
disclosed in the Group's consolidated financial
statements 986
----------------------------------------------------------- ---------------
Discounted using the incremental borrowing rate
at 1 September 2019 920
Leases where landlords have substantive substitution
rights (i.e., leases outside the scope of IFRS 16)(1) (412)
Leases with variable lease payment(2) (12)
Recognition exemption for short-term leases(3) (10)
Extension options reasonably certain to be exercised(4) 4
Termination options reasonably certain to be exercised(4) (11)
----------------------------------------------------------- ---------------
Additional lease liabilities recognised at 1 September
2019 479
Finance lease liabilities as at 31 August 2019 14
Total Lease liabilities recognised at 1 September
2019 493
----------------------------------------------------------- ---------------
(1) Contracts that were considered to be a lease under IAS 17
which do not meet the definition of a lease under IFRS 16,
principally because the owner/suppler is considered to have
substantive substitution rights over the associated assets. This is
explained further below under the section "key areas of
judgement".
(2) Contracts where the minimum lease payments are dependent
upon a variable factor and therefore the lease payments are in
substance variable in nature.
(3) The Group has applied the practical expedient to classify
leases for which the leases term ends within 12 months of the date
of initial application of IFRS 16 as short-term leases. The Group
has also applied the recognition exemption for short term
leases.
(4) Previously, lease commitments only included non-cancellable
periods in the lease agreements. Under IFRS 16, the lease term
includes period covered by options to extend or terminate the lease
where the Group is reasonably certain that such options will be
exercised.
(ii) Income statement impact
As a result of applying IFRS 16, the Group has recognised
depreciation and interest costs in respect of leases that are
within the scope of IFRS 16 (which were previously classified as
operating leases), rather than rental expense. During the period
ended 29 February 2020, the Group recognised GBP48m of additional
depreciation charges and GBP4m of additional interest costs in
respect of these leases instead of recognising the rental expense
of GBP52m, resulting in a net nil impact on profit.
(iii) Cash flow impact
As a result of applying IFRS 16, there is an increase in net
cash inflows from operating activities by GBP48m being offset by an
increase in net cash outflows from financing activities by GBP48m.
There is no impact on the net cash flow.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
1. Basis of preparation, Accounting policies and Approval of Interim
Statement (continued)
Key areas of judgement in applying IFRS 16
Substantive substitution rights
Judgement is involved in determining whether a contract meets
the definition of a lease under IFRS 16. Management has determined
that certain lease contracts give the lessor substantive
substitution rights because the contract gives the lessor rights to
relocate the retail space occupied by the lessee. In such cases,
management has concluded that there is not an identified asset and
therefore such contracts are outside the scope of IFRS 16.
Determination of Incremental Borrowing Rate (IBR)
The application of IFRS 16 required judgement around the
calculation of the IBR. This has been determined on a
lease-by-lease basis based on the right-of-use asset in a similar
economic environment and taking into account the risk-free rate,
adjusted for factors such as the credit rating and the lease
term.
Determination of lease term
In determining the lease term for contracts that have options to
extend or terminate early, 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.
Impairment assessment
The right of use asset is tested for impairment on a lease by
lease basis as at the transition date in accordance with IAS 36.
Each store is regarded to be a cash generating unit. In estimating
the future net cashflow, judgement is made around the lease term
and estimated profit growth which is based on the underlying
economics of the individual stores such as the store contribution
and location. As part of estimating the value-in-use, future cash
flows for each store are discounted based on the Group's weighted
average cost of capital which is determined based on factors such
as risk-free rate and risk premium.
The Group has recorded an impairment of GBP21m to the
right-of-use assets and fixed assets with a corresponding
adjustment to the opening reserves. The impairment predominantly
resulted from the application of different discount rates in line
with the applicable accounting standards. IFRS 16 requires using an
incremental borrowing rate based on which the right-of-use assets
is recorded whereas the value-in-use calculation under IAS 36
requires the cash flow to be discounted using a pre-tax discount
rate, for which we have used the pre-tax weighted average cost of
capital. The application of these standards caused an impairment on
numerous right-of-use assets and fixed assets.
All accounting policies in respect of lease accounting will be
updated to reflect the application of IFRS 16 in the consolidated
financial statements for the year ended 31 August 2020.
Other key areas of judgement
Following the acquisition of MRG on 20(th) December 2019, we
classified the business of the newly acquired entity into our
Travel segment. This is considered appropriate as MRG shares
similar economic characteristics with the Travel segment, and its
operations are managed within Travel. Goodwill arising on the
acquisition has been allocated to the group of Travel cash
generating units.
Following the outbreak of Covid-19, we have undertaken an
assessment of events after the end of the reporting period to
ascertain if any of these events provide further information with
respect to conditions existing at the balance sheet date. Following
our review, we have concluded that apart from our Asia Pacific
businesses, the events linked to the Covid-19 pandemic that have
occurred after the balance sheet date are non-adjusting under IAS
10 'Events after the end of the reporting period'. We have reached
this conclusion based on a detailed review of factors that existed
at the period end in each of our key jurisdictions, including
government action taken on free movement of people, and action by
airlines to suspend international flights.
Following a full review of the assets the Group held in the Asia
Pacific region as at the balance sheet date, we recognised a GBP3m
non-cash impairment charge of property, plant and equipment in our
Singapore locations. This charge is recorded in non-underlying
items in the Group Income statement. See page 26 and Note 3 for
further details of non-underlying items.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
1. Basis of preparation, Accounting policies and Approval of Interim
Statement (continued)
Alternative performance measures
The Group has identified certain alternative performance
measures ("APMs") that it believes will assist the understanding of
the performance of the business. The Group believes that High
Street and Travel trading profit, Group profit from trading
operations, Fixed charges cover, Gross margin, Like-for-like
revenue, Free cash flow, Return on capital employed and Net debt
provide useful information to users of the financial statements.
The terms are not defined terms under IFRS and may therefore not be
comparable with similarly titled measures reported by other
companies. They are not intended to be a substitute for, or
superior to, IFRS measures. Many of these APMs will be used on both
an IFRS basis and on an IAS 17 basis (i.e. before the impact of
IFRS 16). The Group has defined and outlined the purpose of its
APMs in the Glossary on page 41.
Non-underlying items
The Group has chosen to present a Headline measure of profit and
earnings per share which excludes certain items, which are
considered non-underlying and exceptional due to their size, nature
or incidence, and are not considered to be part of the normal
operating costs of the Group. These costs may include the financial
effect of non-underlying items which are considered exceptional
and/or occur infrequently such as, inter alia, restructuring costs,
impairment charges and onerous lease charges, amortisation of
acquired intangibles, costs relating to business combinations, and
the related tax effect of these items. The Group believes that they
provide additional useful information to users of the financial
statements to enable a better understanding of the Group's
underlying financial performance.
Further details of the non-underlying items are provided in Note
3.
Going concern
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, and to prepare the financial statements
on a going concern basis. The directors report that they have
re-assessed the principal risks, reviewed current performance and
forecasts, combined with expenditure commitments, including capital
expenditure, and borrowing facilities. The directors have concluded
that it is appropriate to adopt the going concern basis of
accounting in preparing the interim financial information, having
undertaken a rigorous assessment of the financial forecasts
particularly in the context of the ongoing Covid-19 pandemic, for
the reasons set out below.
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 has
acted quickly to mitigate the impact of Covid-19 by taking steps to
strengthen our balance sheet and to ensure access to further
funding. As announced on 6th April 2020, we have raised c.GBP162m
of additional funding via a share placing. In addition, we have
agreed a GBP120m 12 month (plus 7 months at the option of the
Group) committed banking facility from BNP Paribas, HSBC Bank PLC
and Santander UK PLC. This is in addition to our existing
facilities. The Group has reached an agreement with its lenders to
waive all covenants on these facilities for August 2020 and
February 2021.
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. The Annual Report and
Accounts 2019 includes the Group's objectives, policies and
processes for managing its capital; its financial risk management
objectives; details of its financial instruments and hedging
activities; and its exposures to credit risk and liquidity risk.
Whilst Covid-19 did not have a significant impact on our results
for the six months to 29 February 2020, it has significantly
impacted our business after the end of the reporting period. At
present, the majority of our stores are temporarily closed, apart
from our locations that are providing essential services such as
our Hospital stores, and our High Street stores with Post
Offices.
The Group has undertaken a detailed exercise to model the
ongoing financial impact of Covid-19, particularly on the Group's
liquidity. This modelling has included a number of "downside"
scenarios involving assumptions in respect of the speed of store
re-openings and the extent to which trading recovers. In preparing
this sensitivity analysis, we have used severe but plausible
assumptions. Under the most extreme scenario modelled, being a
prolonged closure of our stores, the Group has sufficient financial
resources to meet its obligations for the 12 months from the date
of approval of these financial statements.
The Condensed Interim Financial Statements are unaudited but
have been reviewed by our auditors and were approved by the Board
of Directors on 14 May 2020.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
2. Segmental analysis of results
For management and financial reporting purposes, the Group is
organised into two operating divisions and reportable segments -
High Street and Travel. 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)
to make strategic decisions and allocate resources.
Following the acquisition of MRG on 20th December 2019, we
classified the business of the newly acquired entity into our
Travel segment. This is considered appropriate as MRG shares
similar economic characteristics with the Travel segment, and its
operations are managed within Travel. Goodwill arising on the
acquisition has been allocated to the group of Travel cash
generating units.
IFRS 8 requires segment information to be presented on the same
basis as that used by the Board for assessing performance and
allocating resources.
a) Group revenue
6 months to 12 months
to
--------------- ---------------------------- ------------
29 Feb 2020 28 Feb 2019 31 Aug 2019
GBPm (unaudited) (unaudited) (audited)
--------------- ------------- ------------- ------------
Travel 432 364 817
High Street 315 331 580
Group revenue 747 695 1,397
--------------- ------------- ------------- ------------
Seasonality
Sales in the High Street business are subject to seasonal
fluctuations, with peak demand in the Christmas trading period,
which falls in the first half of the Group's financial year. Sales
in the Travel business are also subject to seasonal fluctuations,
with higher demand during peak travel periods particularly during
the summer holiday months.
b) Group results
6 months to 12 months
to
-------------------------------------- ----------------------------- ------------
29 Feb 2020 28 Feb 2019 31 Aug 2019
GBPm (unaudited) (unaudited) (audited)
-------------------------------------- -------------- ------------- ------------
Travel trading profit 50 44 117
High Street trading profit 47 48 60
Group profit from trading operations 97 92 177
Unallocated costs (9) (9) (17)
-------------------------------------- -------------- ------------- ------------
Headline Group operating profit 88 83 160
Non-underlying items (Note 3) (17) (16) (20)
-------------------------------------- -------------- ------------- ------------
Group operating profit 71 67 140
Finance costs (8) (2) (5)
Income tax expense (15) (14) (27)
Profit for the period 48 51 108
-------------------------------------- -------------- ------------- ------------
Included within Travel revenue and Trading profit is
International revenue of GBP161m (2019: GBP104m) and International
Trading profit of GBP10m (2019: GBP6m). International revenue
includes revenue from the USA of GBP84m (2019: GBP30m).
Group profit before finance charges and taxation for the period
to 29 February 2020 is stated after the write-down of inventories
to net realisable value of GBP2m (2019: GBP1m).
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
2. Segmental analysis of results (continued)
c) Balance sheet
As at 29 Feb 2020
GBPm Travel High Street Group
-------------------------- -------- --------------- ------
Assets
Segment assets 1,048 530 1,578
Unallocated assets - - 42
-------------------------- -------- --------------- ------
Consolidated total assets 1,048 530 1,620
-------------------------- -------- --------------- ------
Liabilities
Segment liabilities (422) (374) (796)
Unallocated liabilities - - (463)
------------------------------- ----- ----- -------
Consolidated total liabilities (422) (374) (1,259)
------------------------------- ----- ----- -------
Net assets 626 156 361
------------------------------- ----- ----- -------
As at 28 Feb 2019
GBPm Travel High Street Group
-------------------------- -------- --------------- ------
Assets
Segment assets 381 271 652
Unallocated assets - - 54
-------------------------- -------- --------------- ------
Consolidated total assets 381 271 706
-------------------------- -------- --------------- ------
Liabilities
Segment liabilities (101) (126) (227)
Unallocated liabilities - - (291)
------------------------------- ----- ----- -----
Consolidated total liabilities (101) (126) (518)
------------------------------- ----- ----- -----
Net assets 280 145 188
------------------------------- ----- ----- -----
As at 31 Aug 2019
GBPm Travel High Street Group
-------------------------- -------- --------------- ------
Assets
Segment assets 410 282 692
Unallocated assets - - 54
-------------------------- -------- --------------- ------
Consolidated total assets 410 282 746
-------------------------- -------- --------------- ------
Liabilities
Segment liabilities (138) (126) (264)
Unallocated liabilities - - (245)
------------------------------- ----- ----- -----
Consolidated total liabilities (138) (126) (509)
------------------------------- ----- ----- -----
Net assets 272 156 237
------------------------------- ----- ----- -----
Segment assets include intangible assets, property, plant and
equipment, inventories and receivables. Segment liabilities
comprise operating liabilities.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
3. Non-underlying items
Items which are not considered part of the normal operating
costs of the business are non-recurring and are considered
exceptional because of their size, nature and 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 Group Overview on page 8.
6 months to 12 months
to
----------------------------------------- ----------------------------- ------------
29 Feb 2020 28 Feb 2019 31 Aug 2019
GBPm (unaudited) (unaudited) (audited)
----------------------------------------- -------------- ------------- ------------
Costs relating to business combinations 13 8 11
Amortisation of acquired intangible
assets 1 1 2
Impairment of property, plant and 3 - -
equipment
High Street business review - 7 7
17 16 20
----------------------------------------- -------------- ------------- ------------
During the period, we incurred transaction and integration costs
of GBP13m in relation to the acquisition of Marshall Retail Group
(MRG) which completed on 20 December 2019, as well as the
amortisation of intangible assets relating to the InMotion and MRG
brands.
As discussed on page 25, we have concluded that the impact of
government actions to control the spread of Covid-19 in our Asia
Pacific businesses is an adjusting post balance sheet event. As a
result, a non-cash impairment charge of property, plant and
equipment of GBP3m has been recorded in the Group income statement
in relation to our Singapore business.
Non-underlying items in 2019 relate to the acquisition and
integration of InMotion and the review of our High Street
business.
4. Retirement benefit obligations
WH Smith PLC has operated a number of defined benefit schemes
(which are closed to new entrants and future service accrual) and
defined contribution pension schemes. The main pension arrangements
for employees are operated through a defined contribution scheme,
WH Smith Retirement Savings Plan, and a defined benefit scheme,
WHSmith Pension Trust. The most significant scheme is the defined
benefit WHSmith Pension Trust.
The retirement benefit obligations recognised in the balance
sheet for the respective schemes at the relevant reporting dates
were:
At At At
29 Feb 2020 28 Feb 2019 31 Aug 2019
GBPm (unaudited) (unaudited) (audited)
----------------------------------------- ------------ ------------ ------------
WHSmith Pension Trust (3) (3) (3)
United News Shops Retirement Benefits
Scheme (1) (1) (1)
----------------------------------------- ------------ ------------ ------------
Retirement benefit obligation recognised
in the balance sheet (4) (4) (4)
----------------------------------------- ------------ ------------ ------------
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
4. Retirement benefit obligations (continued)
WHSmith Pension Trust
The market value of the assets and the present value of the
liabilities in the scheme at the relevant reporting dates were:
GBPm At At At
29 Feb 2020 28 Feb 2019 31 Aug 2019
(unaudited) (unaudited) (audited)
----------------------------------------- ------------ ------------ ------------
Present value of the obligations (1,103) (994) (1,107)
Fair value of plan assets 1,405 1,262 1,461
----------------------------------------- ------------ ------------ ------------
Surplus before consideration of asset
ceiling 302 268 354
Amounts not recognised due to effect
of asset ceiling (302) (268) (354)
Additional liability recognised due
to minimum funding requirements (3) (3) (3)
----------------------------------------- ------------ ------------ ------------
Retirement benefit obligation recognised
in the balance sheet (3) (3) (3)
----------------------------------------- ------------ ------------ ------------
Total (expense) / income recognised in the Statement of
Comprehensive Income ("SOCI"):
12 months
6 months to to
----------------------------------------------- -------------------------- -----------
29 Feb 2020 28 Feb 2019 31 Aug 2019
GBPm (unaudited) (unaudited) (audited)
----------------------------------------------- ------------ ------------ -----------
Total actuarial loss before consideration
of asset ceiling (6) (20) (141)
(Loss) on plan assets excluding amounts
included in net interest cost (50) (12) 190
Gain / (loss) resulting from changes
in amounts not recognised due to effect
of asset ceiling excluding amounts
recognised in net interest cost 55 31 (52)
Gain resulting from changes in additional - - -
liability due to minimum funding requirements
excluding amounts recognised in net
interest cost
Total actuarial loss recognised in
other comprehensive income (1) (1) (3)
----------------------------------------------- ------------ ------------ -----------
Actuarial losses recognised in the statement of comprehensive
income on the United News Shops Retirement Benefits Scheme were
GBPnil in the period to 29 February 2020 (28 February 2019:
GBPnil).
Movement in net retirement benefit liability during the
period:
12 months
6 months to to
----------------------------------------- -------------------------- -----------
GBPm 29 Feb 2020 28 Feb 2019 31 Aug 2019
(unaudited) (unaudited) (audited)
----------------------------------------- ------------ ------------ -----------
At beginning of period (3) (3) (3)
Current service cost - - -
Net interest cost on the defined benefit - - -
liability
Contributions from sponsoring companies 1 1 3
Actuarial losses on defined benefit
pension schemes (1) (1) (3)
----------------------------------------- ------------ ------------ -----------
At end of period (3) (3) (3)
----------------------------------------- ------------ ------------ -----------
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
4. Retirement benefit obligations (continued)
In accordance with the requirements of IFRIC 14 management has
recognised the net present value of the schedule of contributions
as a liability of GBP3m (2019: GBP3m). The defined benefit pension
schemes are closed to further accrual and the present value of the
economic benefits of the IAS 19 surplus in the pension scheme of
GBP302m (2019: GBP268m) available as a reduction of future
contributions is GBPnil (2019: GBPnil). As a result, the Group has
not recognised this IAS 19 surplus on the balance sheet. There is
an ongoing actuarial deficit primarily due to the different
assumptions and calculation methodologies used compared to those on
interpretation of IAS 19.
A full actuarial valuation of the Scheme is carried out every
three years with interim reviews in the intervening years. The
latest full actuarial valuation of the Pension Trust was carried
out as at 31 March 2017 by independent actuaries using the
projected unit credit method. Following the valuation, the deficit
was GBP11m. The Group has agreed a revised annual funding schedule
with the Trustees from September 2017 for the following six years,
which includes the deficit recovery contributions and other running
costs, of just under GBP3m. The next full actuarial valuation will
be as at 31 March 2020.
During the period, the Group made a contribution of GBP1m to the
WHSmith Pension Trust (2019: GBP1m) in accordance with the agreed
pension deficit funding schedule. The Group expects the cash
payments for the year ended 31 August 2020 to be approximately
GBP3m in total in relation to the scheme (year ended 31 August
2019: GBP3m).
The principal long-term assumptions used in the IAS 19 valuation
were:
6 months to 12 months
to
-------------------------------------- -------------------------- -----------
29 Feb 2020 28 Feb 2019 31 Aug 2019
% (unaudited) (unaudited) (audited)
-------------------------------------- ------------ ------------ -----------
Rate of increase in pension payments 2.95 3.22 3.13
Rate of increase in deferred pensions 2.20 2.20 2.20
Discount rate 1.70 2.75 1.85
RPI Inflation assumption 3.00 3.30 3.20
CPI Inflation assumption 2.20 2.20 2.20
-------------------------------------- ------------ ------------ -----------
5. Finance costs
6 months to 12 months
to
------------------------------------------ ---------------------------- ------------
29 Feb 2020 28 Feb 2019 31 Aug 2019
GBPm (unaudited) (unaudited) (audited)
------------------------------------------ ------------- ------------- ------------
Interest payable on bank loans and
overdrafts 4 2 5
Interest on lease liabilities 4 - -
Net interest cost on the defined benefit - - -
pension liabilities
8 2 5
------------------------------------------ ------------- ------------- ------------
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
6. Income tax expense
6 months to 12 months
to
------------------------------------- ---------------------------- ------------
29 Feb 2020 28 Feb 2019 31 Aug 2019
GBPm (unaudited) (unaudited) (audited)
------------------------------------- ------------- ------------- ------------
Tax on profit 5 16 32
Adjustment in respect of prior year
UK corporation tax - (1) (4)
------------------------------------- ------------- ------------- ------------
Total current tax charge 5 15 28
------------------------------------- ------------- ------------- ------------
Deferred tax - current year 10 - (1)
Deferred tax - prior year - - 1
------------------------------------- ------------- ------------- ------------
Tax on headline profit 15 15 28
------------------------------------- ------------- ------------- ------------
Tax on non-underlying items - (1) (1)
------------------------------------- ------------- ------------- ------------
Total tax on profit 15 14 27
------------------------------------- ------------- ------------- ------------
The effective tax rate, before non-underlying items, was 19%
(2019: 18%). The UK corporation tax rate has been 19 per cent with
effect from 1 April 2018. In the Spring Budget 2020, the Government
announced that from 1 April 2020 the corporation tax rate would
remain at 19% (rather than reducing to 17%, as previously enacted).
This new law was substantively enacted on 17 March 2020. As the
proposal to keep the rate at 19% had not been substantively enacted
at the balance sheet date, its effects are not included in these
financial statements.
7. Dividends
Amounts paid and recognised as distributions to shareholders in
the period are as follows:
6 months to 12 months
to
------------------------------------ ---------------------------- ------------
29 Feb 2020 28 Feb 2019 31 Aug 2019
(audited)
GBPm (unaudited) (unaudited)
------------------------------------ ------------- ------------- ------------
Dividends
2018 Final dividend of 38.1p per
ordinary share - 41 41
2019 Interim dividend of 17.2p per
ordinary share - - 19
2019 Final dividend of 41.0p per 47 - -
ordinary share
47 41 60
------------------------------------ ------------- ------------- ------------
The directors have not declared an interim dividend in respect
of the period ending 29 February 2020.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
8. Earnings per share
a) Earnings
6 months to 12 months
to
--------------------------------------- ---------------------------- ------------
29 Feb 2020 28 Feb 2019 31 Aug 2019
GBPm (unaudited) (unaudited) (audited)
--------------------------------------- ------------- ------------- ------------
Earnings attributable to shareholders 47 51 106
--------------------------------------- ------------- ------------- ------------
Non-underlying items 17 15 19
--------------------------------------- ------------- ------------- ------------
Headline earnings attributable to
shareholders 64 66 125
--------------------------------------- ------------- ------------- ------------
b) Weighted average share capital
6 months to 12 months
to
----------------------------------------- ---------------------------- ------------
29 Feb 2020 28 Feb 2019 31 Aug 2019
(audited)
Millions (unaudited) (unaudited)
----------------------------------------- ------------- ------------- ------------
Weighted average ordinary shares
in issue 113 108 108
Less weighted average ordinary shares - - -
held in ESOP Trust
----------------------------------------- ------------- ------------- ------------
Weighted average ordinary shares
for basic earnings per share 113 108 108
Add weighted average number of ordinary
shares under option 1 1 1
Weighted average ordinary shares
for diluted earnings per share 114 109 109
----------------------------------------- ------------- ------------- ------------
c) Basic and diluted earnings per share
6 months to 12 months
to
------------------------------ --- ---------------------------- ------------
29 Feb 2020 28 Feb 2019 31 Aug 2019
(audited)
Pence (unaudited) (unaudited)
------------------------------ --- ------------- ------------- ------------
Basic earnings per share 41.6 47.2 98.1
----------------------------------- ------------- ------------- ------------
Adjustments for non-headline
items 15.0 13.9 17.6
----------------------------------- ------------- ------------- ------------
Headline basic earnings per
share 56.6 61.1 115.7
----------------------------------- ------------- ------------- ------------
Diluted earnings per share 41.2 46.8 97.2
----------------------------------- ------------- ------------- ------------
Adjustments for non-headline
items 14.9 13.8 17.5
----------------------------------- ------------- ------------- ------------
Headline diluted earnings
per share 56.1 60.6 114.7
----------------------------------- ------------- ------------- ------------
Diluted earnings per share takes into account various share
awards and share options including SAYE schemes, which are expected
to vest, and for which a sum below fair value will be paid.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
9. Capital Expenditure and Goodwill
In the financial period, there were additions to property, plant
and equipment of GBP36m (28 February 2019: GBP24m). Property, plant
and equipment also grew by GBP37m as a result of the acquisition of
MRG. There were no material disposals of tangible assets during the
period (28 February 2019: GBPnil).
On transition to IFRS, right of use assets of GBP457m were
recognised on the Group balance sheet. During the 6 months to 29
February 2020, the Group acquired additional right of use assets of
GBP37m through signing of new leases and extension of existing
leases. Right of use assets also grew by GBP98m as a result of the
acquisition of MRG.
Capital expenditure in respect of intangible assets totalled
GBP7m (28 February 2019: GBP5m) in the period. An additional brand
of GBP29m was recognised within intangible assets on the
acquisition of MRG. There were no material disposals of intangible
assets during the period (28 February 2019: GBPnil).
Goodwill increased by GBP255m in the period. The acquisition of
MRG (see Note 15) resulted in additional goodwill of GBP257m being
recognised on the balance sheet. The remaining movement is as a
result of movements in exchange rates.
10. Analysis of net debt / funds
Net debt / funds can be analysed as follows:
At At
29 Feb 2020 28 Feb 2019 At
31 Aug 2019
GBPm (unaudited) (unaudited) (audited)
------------------------------------------------ ------------ ------------- ------------
Cash and cash equivalents 45 48 49
Borrowings
* Revolving credit facility (45) (57) (15)
* Bank loans (400) (200) (200)
* Lease liability (IAS 17) (11) (12) (14)
------------------------------------------------ ------------ ------------- ----------------
Net debt (IAS 17) (411) (221) (180)
(566) - -
* Additional Lease liability (IFRS 16)(1)
Net debt (IFRS 16) (977) (221) (180)
------------------------------------------------ ------------ ------------- ----------------
(1) Total lease liability under IFRS 16 is GBP577m including
finance lease liabilities previously recognised on balance sheet
under IAS 17 (GBP11m).
Movement in net debt:
At At
31 Aug 29 Feb
2019 2020
Impact
of IFRS On acquisition Currency
GBPm (audited) 16 of subsidiaries Cash flow Other translation (unaudited)
--------------------------------------------- ----------- ------- ---------------- ---------- ------ ------------- ------------
Cash and cash
equivalents 49 - 1 (4) - (1) 45
Borrowings
* Borrowings - repayable after one year (200) - (115) (200) 115 - (400)
* Revolving credit facility (15) - - (30) - - (45)
* Lease liability (14) (479) (98) 54 (42) 2 (577)
--------------------------------------------- ----------- ------- ---------------- ---------- ------ ------------- ------------
Net debt (180) (479) (212) (180) 73 1 (977)
--------------------------------------------- ----------- ------- ---------------- ---------- ------ ------------- ------------
An explanation of Alternative performance measures, including
Net debt is provided in the Glossary on page 41.
Cash and cash equivalents comprise cash held by the Group and
short-term bank deposits with an original maturity of three months
or less. The carrying amount of these assets approximates their
fair value.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
10. Analysis of net debt / funds (continued)
The adoption of IFRS 16 on 1 September 2019 has resulted in the
recognition of substantial right of use assets and corresponding
lease liabilities on the Group balance sheet. On the transition
date, GBP479m of lease liabilities have been recognised. In
addition, lease liabilities of GBP98m have been recognised as a
result of the acquisition of MRG.
The amounts included within the Other category include the
repayment of a loan acquired as part of the acquisition of MRG (see
Note 15). This payment is included within investing activities in
the Group cash flow statement. Movements related to the lease
liability are non-cash, and relate mainly to new leases or
modifications in the period.
The Group has in place a five-year committed multi-currency
revolving credit facility of GBP200m with Barclays Bank PLC, HSBC,
BNP Paribas and Santander UK PLC. The revolving credit facility is
due to mature on 9 December 2023. The RCF utilisation is
interest-bearing at a margin over LIBOR. As at 29 February 2020
this Group had drawn down GBP45m (28 February 2019: GBP57m) on this
facility.
The Group also has a four-year committed term loan of GBP200m
with the same banks that was drawn down at the time of the
acquisition of InMotion (30 November 2018). This term loan is due
to mature on 29 October 2022. The loan is interest-bearing at a
margin over LIBOR.
During the period, the Group agreed an additional syndicated
GBP200m term loan to fund the acquisition of MRG. This loan is
interest bearing at a margin over LIBOR and is due to mature on 17
October 2020. The Group has options to extend the term of this loan
for up to two further six-month periods to 17 October 2021. After
the period end, the Group has agreed options to extend the term of
this loan to October 2022.
After the period end, the Group agreed an increase to the
multi-currency revolving credit facility of GBP120m (See Note 16).
This increase will be in place until 8 November 2021 if the Group
opts to use the extension option available to them. After this
point the facility will revert to the original GBP200m.
11. Net cash inflow from operating activities
6 months to 12 months
to
------------------------------------------- ---------------------------- ------------
GBPm 29 Feb 2020 28 Feb 2019 31 Aug 2019
(audited)
(unaudited) (unaudited)
------------------------------------------- ------------- ------------- ------------
Group operating profit 71 67 140
Depreciation and amortisation 78 24 50
Impairment losses 3 - 1
Share-based payments 2 3 6
Profit on disposal of property, plant
and equipment - - (2)
Other non-cash items - - 1
Increase in inventories (2) (3) (2)
Increase in receivables (3) (3) (6)
Decrease in payables (44) (26) (3)
Pension funding (1) (1) (3)
Income taxes paid (24) (10) (27)
Movement on provisions (1) (1) (2)
Net cash inflow from operating activities 79 50 153
------------------------------------------- ------------- ------------- ------------
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
12. Called Up Share Capital
29 Feb 2020 (unaudited) 28 Feb 2019 (unaudited) 31 Aug 2019
(audited)
----------------- ------------------------------- -------------------------------- --------------------------------
Number of shares Nominal value Number of shares Nominal value Number of shares Nominal value
(millions) GBPm (millions) GBPm (millions) GBPm
----------------- ---------------- ------------- ----------------- ------------- ----------------- -------------
Equity
Ordinary shares
of 22 6/67p 115 25 108 24 108 24
----------------- ---------------- ------------- ----------------- ------------- ----------------- -------------
Total 115 25 108 24 108 24
----------------- ---------------- ------------- ----------------- ------------- ----------------- -------------
During the six-month period to 29 February 2020 the Company
issued 7,209,303 shares in a share placing at a price of GBP21.50
per share raising proceeds of GBP152m net of issue cost.
The holders of ordinary shares are entitled to receive dividends
as declared from time-to-time and are entitled to one vote per
share at the meetings of the Company.
13. Contingent liabilities and capital
commitments
29 Feb 2020 28 Feb 2019 31 Aug 2019
(unaudited) (audited)
GBPm (unaudited)
------------------------------------------ ------------- ------------- ------------
Bank guarantees and guarantees in respect
of lease agreements 26 22 27
------------------------------------------ ------------- ------------- ------------
Other potential liabilities that could crystallise are in
respect of previous assignments of leases where the liability could
revert to the Group if the lessee defaulted. Pursuant to the terms
of the Demerger Agreement with Connect Group PLC (formerly Smiths
News PLC), any such contingent liability, which becomes an actual
liability, will be apportioned between the Group and Connect Group
PLC in the ratio 65:35 (provided that the actual liability of
Connect Group PLC in any 12 month period does not exceed GBP5m).
The Group's 65 per cent share of these leases has an estimated
future rental commitment at 29 February 2020 of GBP1m (31 August
2019: GBP1m).
At 29 February 2020, contracts placed for future capital
expenditure approved by the directors but not provided for amounted
to GBP35m (28 February 2019: GBP19m).
14. Related Parties
There have been no material related party transactions during
the interim period under review.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
15. Acquisitions
On 20 December 2019, the Group acquired the entire share capital
of Marshall Retail Group ('MRG') for a total cash payment of USD
$402m (GBP317m) comprising $243m of enterprise value, $146m
repayment of loan, $12m working capital, and $1m cash and
restricted cash.
MRG is an independent travel retailer operating in high footfall
airport and tourist locations in the United States. The acquisition
builds further on the acquisition of InMotion in November 2018 and
significantly strengthens the Group's offering in the United
States, the world's largest travel retail market.
Included within the provisional fair value of the net
identifiable assets on acquisition is an intangible asset of GBP29m
(US$37m) representing the MRG brand. The Board believes that the
excess of consideration paid over the net assets on acquisition of
GBP257m is best considered as goodwill on acquisition representing
future operating synergies. This amount is not tax deductible. The
provisional goodwill calculation is summarised below:
Provisional
fair value
Measurement at 29 February
Book value adjustments 2020
---------------------------------------- ----------- ------------- ----------------
GBPm GBPm GBPm
---------------------------------------- ----------- ------------- ----------------
Acquiree's net assets / (liabilities)
at acquisition date:
Intangible assets - 29 29
Right of use assets 98 2 100
Property, plant and equipment 37 (2) 35
Inventories 17 (3) 14
Cash and cash equivalents 1 - 1
Trade and other receivables 5 - 5
Deferred tax assets / liabilities - (8) (8)
Trade and other payables - current (13) (2) (15)
Other non-current liabilities (4) 3 (1)
Lease liabilities (98) - (98)
Interest-bearing loans (115) - (115)
Net identifiable assets / (liabilities) (72) 19 (53)
Non-controlling interest (2) - (2)
Goodwill on acquisition 257
---------------------------------------- ----------- ------------- ----------------
Total consideration - satisfied in
cash 202
---------------------------------------- ----------- ------------- ----------------
The provisional goodwill calculation in the table above includes
significant estimates that may be refined for a period of 12 months
from the acquisition date. Transaction and integration costs
totalling GBP13m have been incurred in the period to 29 February
2020 in respect of the acquisition.
Included in the six months ended 29 February 2020 is revenue of
GBP27m and a profit before tax of less than GBP1m in respect of
MRG. If the acquisition had taken place on 1 September 2019, total
Group revenue would have been GBP799m and Group profit before tax
would have been GBP66m.
Reconciliation of cash flows
GBPm
------------------------------------------- -----
Cash consideration 202
Cash acquired (1)
Repayment of interest-bearing loans 115
Net outflow of cash - investing activities 316
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
16. Events after the balance sheet
date
Since the end of the reporting period Covid-19 has had a
significant impact on the Group. As at 14 May 2020, in our UK
Travel business, we have seen a significant decline in passenger
numbers as a result of travel bans and the vast majority of our
stores at airports and railway stations have been temporarily
closed. Approximately 130 stores located in hospitals across the UK
remain open to serve key workers. Internationally, we are seeing
broadly similar trends to the UK with all large airport stores
closed.
In our High Street business, 203 stores with Post Offices remain
open to provide essential services to the community.
As announced on 6th April 2020, we have raised net funding of
c.GBP162m via a share placing. In addition, we have agreed a
GBP120m 12 month (plus 7 months at the option of the Group)
committed banking facility from BNP Paribas, HSBC Bank PLC and
Santander UK PLC. This is in addition to our existing facilities
and includes a waiver on the existing bank covenants at 31 August
2020 and 28 February 2021.
We have performed an assessment of the impact of Covid-19 on the
Group to ascertain if the outbreak or related government actions
constitute an adjusting post balance sheet event under IAS 10
'Events after the Reporting Date'. Following our review, apart from
our Asia Pacific businesses, we have concluded that the spread of
Covid-19 and related government actions occurred after the end of
the reporting period and is therefore a non-adjusting event.
For our Asia Pacific businesses, government actions to combat
the spread of Covid-19 were implemented before the balance sheet
date, and therefore we have assessed the impact of these conditions
as adjusting post balance sheet events. A non-cash impairment of
property, plant and equipment of GBP3m was recorded in the Group
income statement as a result of our assessment. This is included
within non-underlying items.
Although Covid-19 has not had a material impact on the Group's
first half results, uncertainty around the scale, timing and impact
of the coronavirus pandemic means it is not possible to determine
with any degree of precision the potential future impact on our
cash flows, liabilities and assets. These will be addressed in the
second half of the year when there may be more certainty about the
financial impact.
WH Smith PLC
Notes to the Condensed Interim Financial Statements
For the 6 months to 29 February 2020
Statement of Directors' Responsibilities
The Directors confirm to the best of their knowledge that:
(a) The condensed financial statements have been prepared in
accordance with IAS 34, Interim Financial Reporting, as adopted by
the EU; and
(b) This interim report includes a fair review of the
information required by:
-- DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the
financial year; and
-- DTR 4.2.8R of the Disclosure and Transparency Rules, being
related parties' transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or the performance of the Group
during that period; and any changes in the related parties'
transactions described in the last annual report that could do
so.
The Directors of WH Smith PLC are listed on the website at
www.whsmithplc.co.uk/about_whsmith/directors/ .
By order of the Board
Carl Cowling Robert Moorhead
Group Chief Executive Chief Financial Officer and Chief
Operating Officer
14 May 2020
INDEPENT REVIEW REPORT TO WH SMITH PLC
Report on the Condensed Interim Financial Statements
Our conclusion
We have reviewed WH Smith PLC's Condensed Interim Financial
Statements (the "interim financial statements") in the Interim
Results Announcement of WH Smith PLC for the 6 month period ended
29 February 2020. Based on our review, nothing has come to our
attention that causes us to believe that the interim financial
statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- The Condensed Group Balance Sheet as at 29 February 2020;
-- The Condensed Group Income Statement and Condensed Group
Statement of Comprehensive Income for the period then ended;
-- The Condensed Group Cash Flow Statement for the period then ended;
-- The Condensed Group Statement of Changes in Equity for the period then ended; and
-- The explanatory notes to the interim financial statements.
The interim financial statements included in the Interim Results
Announcement have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Interim Results Announcement, including the interim
financial statements, is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the Interim Results Announcement in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the Interim Results Announcement based on
our review. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Interim
Results Announcement and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
14 May 2020
London
Notes:
(a) The maintenance and integrity of the WH Smith PLC website is
the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial statements since they were
initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
WH Smith PLC
Glossary
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. The key APMs that the Group uses
are outlined below.
APM Closest Reconciling Definition and purpose
equivalent items to
IFRS IFRS measure
measure
Income Statement Measures
Headline Group Non-underlying Headline Group profit before tax excludes
Group profit profit items non-underlying items. A reconciliation
before tax before tax from Headline Group profit before
tax to Group profit before tax is
provided in the Group income statement
on page 14.
High Street Group Refer to Group profit from trading operations
and Travel operating definition and High Street and Travel trading
trading profit profit are stated after directly attributable
profit, share-based payment and pension service
and Group charges and before underlying items,
profit from unallocated costs, finance costs and
trading income tax expense.
operations
A reconciliation from the above measures
to Group operating profit and Group
profit before tax is provided in Note
2 to the financial statements.
Non-underlying None Refer to Items which are not considered part
items definition 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 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
is provided in Note 3 to the financial
statements.
Headline Earnings Non-underlying Profit for the year before non-underlying
earnings per items and items divided by the weighted average
per share share dilutive number of ordinary shares in issue
effect of during the financial year, adjusted
shares under for the effects of any potentially
option dilutive share options. See Note 8.
Effective None Non-underlying Total income tax charge excluding
tax rate items the tax impact of non-underlying items
divided by Group Headline profit before
tax. See Note 6.
Fixed charges None Refer to This performance measure calculates
cover definition the number of times Profit before
tax is able to cover the total fixed
charges included in calculating profit
or loss. Fixed charges included in
this measure are net finance charges
and net operating lease rentals stated
on a pre-IFRS 16 basis (i.e. in line
with IAS 17).
Gross Gross Not applicable Where referred to throughout the Interim
margin profit statement, gross margin is calculated
margin as gross profit divided by revenue.
Like-for-like Movement - Revenue Like-for-like revenue is the change
revenue in change from in revenue from stores that have been
revenue non open for at least a year, with a similar
per like-for-like selling space at a constant foreign
the income stores exchange rate. A reconciliation of
statement - Foreign these percentages is provided below. Travel High Street Group
exchange LFL revenue change 2% (4)% (1)%
impact Net new space impact 1% (1)% - %
Acquisitions 16% - % 8%
Foreign exchange impact - % - % - %
Total revenue change 19% (5)% 7%
WH Smith PLC
Glossary (continued)
Alternative Performance Measures (continued)
Balance Sheet Measures
Net debt None Reconciliation Net debt is defined as Cash and cash
of net debt equivalents, less Bank overdrafts
and other borrowings and both current
and non-current Obligations under
finance leases.
A reconciliation of Net debt is provided
in Note 10.
Other measures
Free cash Net cash inflow See Group Free cash flow is defined as the net
flow from operating Overview cash inflow from operating activities
activities (on a pre-IFRS 16 basis (i.e. in line
with IAS 17)) before non-underlying
items and pension funding, less capital
expenditure and repayments to HMRC.
The components of free cash flow are
shown on page 9, as part of the Group
Overview.
WH Smith PLC
Appendix
Analysis of retailing stores and selling space
Number of High Street stores(1)
1 Sept 2019 Opened Closed 29 Feb
2020
Total 594 - (13) 581
(1) Excludes 100 WH Smith LOCAL franchised stores
Number of Travel units
A Travel store may consist of multiple units within one
location. On an individual unit basis, Travel stores can be
analysed as follows:
1 Sept 2019 Opened Acquired Closed 29 Feb
2020
------------
Non franchise units 695 24 167 (14) 872
Joint Venture and Franchise
units(2) 324 8 - (10) 322
Total 1,019 32 167 (24) 1,194
(2) Travel units include motorway and international franchise
units, and exclude kiosks in India, and Supanews and Wild Cards and
Gifts franchisees in Australia.
Retail selling square feet ('000s)
1 Sept Opened Acquired Closed 29 Feb
2019 2020
--------- -------
High Street 2,740 - - (16) 2,724
Travel 744 29 231 (27) 977
--------- -------
Total 3,484 29 231 (43) 3,701
Total Retail selling square feet does not include franchise
units.
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 or visit www.rns.com.
END
IR GPUGUAUPUPUW
(END) Dow Jones Newswires
May 14, 2020 02:00 ET (06:00 GMT)
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