TIDMSMWH
RNS Number : 8637S
WH Smith PLC
09 November 2023
9 November 2023
WH SMITH PLC
The global travel retailer
PRELIMINARY RESULTS ANNOUNCEMENT
FOR THE YEARED 31 AUGUST 2023
A year of strong growth
Strong start to the new financial year with Total Travel
revenue* up 16%
-- Strong performance with Group revenue up 28% to GBP1,793m (2022: GBP1,400m)
o Total revenue in Travel UK up 36%; North America up 32%; Rest
of the World ('ROW') up 99%
-- Headline profit before tax and non-underlying items up 96% to GBP143m (2022: GBP73m)
o Total Travel trading profit of GBP164m (2022: GBP89m)
o High Street trading profit of GBP32m (2022: GBP33m)
-- Headline diluted EPS before non-underlying items up 93% to 80.3p
-- New store pipeline of over 110 stores(++) won and yet to open
in Travel, including over 60 in North America
-- Investing for growth with capex in the current financial year expected to be around GBP140m
-- Proposed final dividend of 20.8p per share making full year
dividend of 28.9p per share, reflecting strong trading and cash
generation combined with confidence in future prospects
-- Strong balance sheet with leverage now at 1.4x with further strengthening expected
-- Strong start to the new financial year with continued
momentum across our Travel markets. Total revenue in the first 9
weeks to 4 November 2023 up 13% in Travel UK; up 15%* in North
America and up 27%* in ROW
Carl Cowling, Group Chief Executive, commented:
"This has been another year of significant progress for the
Group. Our Travel divisions have all seen strong growth with Travel
UK total revenue up 36%, North America up 32% and ROW up 99%, and I
am very pleased with the start to the new financial year.
"Our global travel business is growing in all our key markets.
It is highly scalable with multiple medium and long term growth
opportunities and we are seeing great results from sharing our
expertise and innovation across our different geographies. Our
North American business is benefitting from our forensic approach
to space management which has always been a key feature of our UK
Travel operations. In the same way, the ability of our North
American business to provide bespoke retail formats is now being
successfully harnessed outside of the US.
"WHSmith is a highly cash generative business. In 2024, we
expect to invest a further GBP140m which will drive further growth
and at the same time we expect our leverage to fall within our
target range.
"These results would not be possible without the extraordinary
efforts of our entire team across the globe, and I would like to
offer my sincere thanks for their support.
"The Board's decision to propose an increase to the final
dividend to 20.8p per share, making a full year dividend of 28.9p
per share, reflects the good performance, the Group's cash
generation and our confidence in the future given the multiple
growth opportunities that exist for WHSmith.
" We have started the new financial year well with total revenue
in Travel UK up 13%, North America up 15%, and ROW up 27%. With
good trading and very positive prospects, despite the uncertainty
in the economic environment, we are confident in the Group's
outlook for the new financial year."
* On a constant currency basis
Pre-IFRS 16
++ Pipeline as at 31 August 2023
Group financial summary:
Headline
IFRS 16 pre-IFRS 16(2)
-------------------- --------------------
Aug 2023 Aug 2022 Aug 2023 Aug 2022
Travel UK trading profit(1) GBP101m GBP60m GBP102m GBP54m
North America ('NA') trading profit(1) GBP52m GBP33m GBP49m GBP31m
Rest of the World ('ROW') trading profit(1) GBP13m GBP3m GBP13m GBP4m
----------------------------------------------------------- --------- --------- --------- ---------
Total Travel trading profit(1) GBP166m GBP96m GBP164m GBP89m
High Street trading profit(1) GBP43m GBP45m GBP32m GBP33m
----------------------------------------------------------- --------- --------- --------- ---------
Group profit from trading operations(1) GBP209m GBP141m GBP196m GBP122m
Group profit before tax and non-underlying items(1) GBP137m GBP83m GBP143m GBP73m
Diluted earnings per share before non-underlying items(1) 76.5p 47.7p 80.3p 41.7p
Non-underlying items(1) GBP(27)m GBP(20)m GBP(15)m GBP(12)m
--------- --------- ---------
Group profit before tax GBP110m GBP63m GBP128m GBP61m
Basic earnings per share 60.8p 36.2p 71.5p 35.4p
Diluted earnings per share 59.8p 35.6p 70.5p 34.8p
----------------------------------------------------------- --------- --------- --------- ---------
Revenue performance:
Aug 2023 Aug 2022
GBPm GBPm % change
Travel UK 709 521 36%
North America 380 288 32%
Rest of the World 235 118 99%
------------------- --------- --------- ---------
Total Travel 1,324 927 43%
High Street 469 473 (1)%
--------- ---------
Group 1,793 1,400 28%
------------------- --------- --------- ---------
(1) Alternative Performance Measure (APM) defined and explained
in the Glossary on page 44.
(2) The Group adopted IFRS 16 'Leases' with effect from 1
September 2019. The Group continues to monitor performance and
allocate resources based on pre-IFRS 16 information (applying the
principles of IAS 17), and therefore the results for the years
ended 31 August 2023 and 31 August 2022 have been presented on both
an IFRS 16 and a pre-IFRS 16 basis.
Measures described as 'Headline' are presented pre-IFRS 16.
For the purposes of narrative commentary on the Group's
performance and financial position, both pre-IFRS 16 and IFRS 16
measures are provided. Reconciliations from pre-IFRS 16 measures to
IFRS 16 measures are provided in the Glossary on page 44. Group
revenue was not affected by the adoption of IFRS 16, and therefore
all references to and discussion of revenue are based on statutory
measures.
ENQUIRIES:
WH Smith PLC
Nicola Hillman Media Relations 01793 563354
Mark Boyle Investor Relations 07879 897687
Brunswick
Tim Danaher 020 7404 5959
WH Smith PLC's Preliminary Results 2023 are available at
whsmithplc.co.uk .
GROUP OVERVIEW
The Group has had another very successful year with Total Travel
generating Headline trading profit(1) of GBP164m (2022: GBP89m),
Headline Group profit before tax and non-underlying items(1) up 96%
to GBP143m (2022: GBP73m) and Headline diluted EPS before
non-underlying items(1) up 93% to 80.3p (2022: 41.7p). The new
financial year has started well with good momentum across all our
Travel markets.
The pace of winning new business in Travel remains strong.
Across the UK, North America and Rest of the World we won 92 stores
in the year and now have over 110 stores won and due to open, of
which we expect over 100 to open this financial year whilst closing
22 stores as we focus on better quality space.
Travel is well positioned to continue to create value through
the structurally advantaged markets in which it operates and the
considerable opportunities to win and open additional stores.
Analysis from the International Air Transport Association ('IATA')
suggests that passenger numbers will return to 2019 levels during
calendar year 2024 and will continue to grow in low single digits
each year thereafter in the medium term.
We utilise our forensic approach to retailing to drive average
transaction value ("ATV') growth and space management to increase
the spend per passenger in our stores. This, combined with
scalability in the significant opportunities to win and open new
stores, gives us the confidence to continue to grow revenue,
profit, cash generation, and through operational gearing, grow our
EBIT margins.
We have made substantial progress and saw significant growth in
the year, supported by the key pillars of our strategy and our
ongoing forensic approach to retailing across each of our
businesses.
These include:
-- Space growth:
o Opening new stores;
o Winning new business;
o New, better quality space;
o Extending contracts;
o Developing formats and brands
-- ATV growth:
o Space management;
o Refitting stores;
o Range development
-- Category development:
o One-stop-shop travel essentials format;
o Internationalising the InMotion brand;
o Improving ranges, e.g. health and beauty, food to go, and
tech
-- Cost and cash management:
o Flexible rent model;
o Investing for growth (capex in the current financial year
expected to be around GBP140m);
o Productivity and efficiencies
-- Disciplined capital allocation, supporting investment in growth and shareholder returns
In the year, Travel was approximately 75% of Group revenue and
85% of Headline Group profit from trading operations. Both of these
measures will increase as we continue to grow Travel which
reinforces that we are now a global travel retailer.
Group revenue
Revenue (% change)
Year to 31 August 2023
Total LFL(1,3)
vs 2022 vs 2022
------------
Travel UK 36% 30%
North America 32% 11%
Rest of the World 99% 53%
------------ ------------
Total Travel 43% 27%
------------ ------------
High Street(4) (1)% 1%
------------ ------------
Group 28% 18%
------------ ------------
(3) Constant currency
(4) Includes internet businesses
Total Group revenue at GBP1,793m (2022: GBP1,400m) was up 28%
compared to the prior year.
In Travel, we saw a strong performance across all our markets
with Total Travel revenue up 43% and up 27% on a like-for-like(1)
('LFL') basis. This was driven by strong performances in all three
Travel divisions, with Travel UK up 36% on a total basis, North
America up 32%, and ROW up 99%.
We saw a consistently good performance in High Street throughout
the year, with the Christmas trading period flat year on year on a
LFL basis.
Passenger numbers have recovered strongly during the year and
momentum has continued into the new financial year.
Group profit
Total Travel delivered a Headline trading profit(1) in the year
of GBP164m (2022: GBP89m) with all three divisions growing
significantly: Travel UK increased by GBP48m to GBP102m; North
America increased by GBP18m to GBP49m; and ROW increased by GBP9m
to GBP13m.
High Street delivered a Headline trading profit(1) of GBP32m
(2022: GBP33m), in line with expectations.
Headline Group profit from trading operations (1) for the year
was GBP196m (2022: GBP122m) with Headline Group profit before tax
and non-underlying items (1) up 96% to GBP143m (2022 : GBP73m).
The Group profit before tax, including non-underlying items and
on an IFRS 16 basis, was GBP110m (2022: GBP63m) in the year.
Group balance sheet
The Group has a strong balance sheet, is highly cash generative
and has substantial liquidity.
The Group has the following cash and committed facilities as at
31 August 2023:
31 August
2023 Maturity
Cash and cash equivalents(5) GBP56m
---------- --------------------
Revolving Credit Facility(6) GBP400m June 2028
---------- --------------------
Convertible bonds GBP327m May 2026
---------- --------------------
(5) Cash and cash equivalents comprises cash on deposit of
GBP34m and cash in transit of GBP22m
(6) Draw down of GBP84m as at 31 August 2023
In June 2023, we completed the refinancing of the Group's
borrowing facilities with a new 5 year sustainability-linked
revolving credit facility ('RCF'). The Group also has a GBP327m
convertible bond with a maturity of 7 May 2026 which has a fixed
coupon of 1.625%.
As at 31 August 2023, Headline net debt(1) was GBP330m (2022:
GBP296m) and the Group has access to c.GBP350m of liquidity.
Leverage at the year end was 1.4x Headline EBITDA(1) . We expect to
be within our leverage envelope of between 0.75x and 1.25x Headline
EBITDA(1) by the end of this financial year.
Group cash flow
The Group generated an operating cash flow(1) of GBP235m in the
year (2022: GBP155m) demonstrating the cash generative nature of
the business. Capex was GBP122m (2022: GBP83m) as we continued to
invest in new stores, IT, energy efficient chillers and other store
equipment. As expected, we had a working capital outflow of GBP64m
in the year (2022: GBP10m). This mainly relates to investment in
new stores, the recovering Travel business and some timing. Most of
the outflow was in the first half. This year, we expect a much
smaller outflow mainly relating to opening new stores. In total,
there was a free cash inflow in the year of GBP20m (2022: GBP41m).
This year we would expect, subject to investment opportunities, an
increase in free cash generation, and net debt to be around
GBP310m.
Capital allocation policy
The cash generative nature of the Group is complemented by our
disciplined approach to capital allocation. This has been in place
for many years and continues to drive our decision making for
utilising our cash:
-- investing in our existing business and in new opportunities
where rates of return are ahead of the cost of capital; this year,
we expect capex of c.GBP140m
-- paying a dividend. We have a progressive dividend policy with
a target dividend cover, over time, of 2.5x; the Board is proposing
a full year dividend of 28.9p per share
-- undertaking attractive value-creating acquisitions in strong and growing markets; and
-- returning surplus cash to shareholders via share buy backs.
The Board has proposed a final dividend of 20.8p per share in
respect of the financial year ended 31 August 2023, which together
with the interim dividend, gives a full year dividend of 28.9p per
share. This reflects the cash generative nature of the business and
our confidence in the future prospects of the Group. Subject to
shareholder approval, the dividend will be paid on 1 February 2024
to shareholders registered at the close of business on 12 January
2024.
TOTAL TRAVEL
Total Travel revenue was GBP1,324m (2022: GBP927m), up 43%
compared to the previous year, generating a Total Travel Headline
trading profit(1) in the year of GBP164m (2022: GBP89m).
Trading profit (1) Headline trading profit (1)
GBPm (IFRS 16) (pre-IFRS 16) Revenue
2023 2022 2023 2022 2023 2022
---------- ---------- --------------- -------------- ------ -----
Travel UK 101 60 102 54 709 521
North America 52 33 49 31 380 288
Rest of the World 13 3 13 4 235 118
---------- ---------- --------------- -------------- ------ -----
Total Travel 166 96 164 89 1,324 927
---------- ---------- --------------- -------------- ------ -----
In Travel, our initiatives position us well for future growth
:
-- Space growth - Business development and winning new business
Through building and managing relationships with all our
landlord partners, we look to win new space, improve the quality
and amount of space, develop new formats and extend contracts.
During the year, we opened 118 stores and we now have a store
pipeline of over 110 stores. Going forward, we expect to win, on
average, around 50 to 60 stores a year. There are significant space
growth opportunities across all our Travel markets.
-- ATV growth
We aim to grow ATV through our forensic analysis of the return
on our space, cross-category promotions, merchandising, store
layouts and store refits. During the year, we have continued to
focus on re-engineering our ranges and we continue to see good ATV
growth across all our channels.
-- Category development
We do this by developing adjacent product categories relevant
for our customers, such as health and beauty and tech ranges, and
expanding existing categories such as premium food ranges.
Throughout the year, we have continued to focus on identifying
further opportunities where we can reposition our traditional news,
books and convenience ('NBC') format to a one-stop-shop travel
essentials format. The results from our one-stop-shop stores have
been positive.
-- Cost and cash management
We remain focused on cost efficiency and productivity, for
example, by investing in more energy efficient chillers in-store
and increasing the number of self scan tills, particularly in North
America.
TRAVEL UK
Travel UK, our largest division, has delivered a year of
significant growth and we continue to have good opportunities to
grow this division further.
Air passenger numbers still remain below pre-pandemic levels and
we are confident that, as passenger numbers continue to recover,
this division will see an ongoing improvement in profitability as
we leverage our fixed cost base. All our channels in Travel UK have
performed strongly during the year with total revenue growth of 36%
versus last year. We have started the new financial year strongly
with all three channels delivering good growth.
Revenue (% change)
Year to 31 August 2023
Total LFL(1)
vs 2022 vs 2022
------------
Air 48% 37%
Hospitals 32% 26%
Rail 15% 19%
------------ ------------
Total Travel UK 36% 30%
------------ ------------
Total revenue in the year was GBP709m (2022: GBP521m) which,
together with improved margins, resulted in a Headline trading
profit(1) of GBP102m (2022: GBP54m).
Across all our channels, we continue to focus on our key growth
drivers: space growth, increasing ATV and spend per passenger,
driving EBIT margins and benefitting from the growth in passenger
numbers. Momentum is strong and we are seeing good results, with
revenue growing ahead of passenger numbers.
We are investing in our UK store portfolio while also
identifying new and better quality space opportunities across each
of our channels. During the year, we have made excellent progress
opening 20 new stores, including 6 at airports, 8 in hospitals and
3 in rail. We see this annual space growth of around 15 new stores
in Travel UK extending into the medium term. We closed 19 small and
less well located stores in the year. This year, we expect to open
over 15 new stores in the UK, of which 12 are already contracted,
and close 4 stores.
Air
Air, which is the biggest channel in Travel UK, delivered a
strong performance with total revenue up 48% and LFL revenue up 37%
on the prior year.
We continually develop our retail formats to better address the
changing requirements of airport landlords and customers.
Our one-stop-shop for travel essentials format continues to
generate significant opportunities across all channels and improve
profitability. We have a very strong customer proposition which is
tailored to each location and channel. Next week, we will open our
largest UK Travel store. This is a 6,000 sq ft flagship
one-stop-shop for travel essentials store at Birmingham
International airport, further developing this format. This new
store will be tailored to the requirements of the landlord and
provides passengers with a bespoke, localised customer experience
by drawing on our experience from North America. The store will
offer everything you would expect from a WHSmith, as well as a
broader product range, large health and beauty and tech zones, and
coffee.
By extending our categories such as health and beauty, tech and
food to go, we are able to provide time-pressed customers with all
their travel essentials under one roof with a fast and convenient
shopping experience. This enables us to expose both new and
existing customers to a broader range of categories, which has
resulted in an increase in sales per square foot, a higher ATV and
spend per passenger. This delivers superior returns with improved
margins and attractive economics for our landlords.
Hospitals
The hospital channel, our second largest channel in Travel UK by
revenue, continued its very strong growth with total revenue up 32%
and LFL revenue up 26% in the year.
This is a growing channel for us with significant opportunities
to continue to increase our space and improve the retail
proposition using our broad suite of brands. During the year, we
opened 8 new stores, including Royal Liverpool and Royal Sussex
hospitals. Looking ahead, we have a good pipeline of opportunities
in this channel, where we see scope for at least one of our four
formats (WHSmith, Marks & Spencer Simply Food, Costa Coffee,
and our proprietary coffee brands) in up to 200 further
hospitals.
We are excited by the opportunity to grow our coffee offer. By
using our expertise in localisation from our North American
business, we have recently won two new stores in Sheffield
hospitals under a new coffee concept. Working with local artists
and roasteries, we have designed a bespoke store with a local
coffee offer.
Rail
Our Rail channel is our smallest channel in Travel UK
representing around 15% of revenue. It is an attractive market and
has proven to be resilient, delivering a good performance in the
year despite the ongoing impact of industrial action.
We have seen a very encouraging return of passengers with
leisure and weekend passengers recovering the fastest. We know from
our segmentation and return on space analysis that leisure is our
most valuable customer segment.
We continue to invest in Rail in new formats and in new
opportunities to meet landlord and customer needs. During the year,
we successfully completed the refit of our London Paddington store
to a one-stop-shop format, extending our health and beauty ranges
from 1 metre of space to 8 metres of space and allocating more
space to tech. This has been very well received by customers and
driven strong sales.
curi.o.city
In line with our strategy to develop our retail formats, we have
recently launched a new premium souvenir and gifting brand,
curi.o.city. This new concept demonstrates how we are able to
adapt, innovate and create a bespoke, localised brand and product
offer. In addition to providing a new shopping experience for
travellers, this format also offers an incremental sales
opportunity in locations where we already have a WHSmith store by
selling high margin categories such as souvenirs and fashion
stationery, freeing up space in our traditional news, books and
convenience stores. We now have 6 stores open at London Gatwick
airport, Bristol airport, St Pancras station and Selfridges in
Birmingham and Manchester.
It is still early days, but we also see opportunities outside
the UK with 2 curi.o.city stores also due to open in Dubai later
this year.
As at 31 August 2023, Travel UK had 588 stores (2022: 587).
NORTH AMERICA
In North America we also saw a good performance as passenger
numbers continued to recover. We opened a further 43 stores and
closed 14 stores increasing market share and improving the quality
of our space. Total revenue was up 32% for the year and up 17% in
the second half.
This performance was driven by our core MRG airport business
(which is now approximately 50% of the revenue of our North
American division) which performed strongly across the year and
continues to do so. We are seeing passenger number growth and
strong demand for our travel essentials categories.
In our smaller businesses we saw a lack of new launches in the
electricals market in the second half which impacted InMotion (and
this has continued into this financial year) and in our Las Vegas
resorts business we were up against a strong 2022 summer
performance when there was an exceptional number of vacationing
visitors.
Overall, our North American business is trading well with total
revenue in the first 9 weeks of the financial year up 15%(3) and is
as such well placed for growth this year and beyond.
Headline trading profit(1) was GBP49m (2022: GBP31m), reflecting
the strong recovery in passenger numbers, improved margins and a
small beneficial impact of currency. The Group is exposed to
movements in the GBP:USD exchange rate. A 5 cent move in this rate
results in a c.GBP2m to GBP3m movement in annual Headline trading
profit(1) . Current company compiled consensus suggests an average
exchange rate of GBP:USD of 1.25.
Our North America business has become an increasingly
significant part of the Group and is now our second largest
division in profit terms, after Travel UK. The growth prospects are
substantial and we are excited by the significant opportunities to
grow this business further. Over the last two years, we have won an
additional 62 new stores.
The US is the largest travel retail market in the world with
annual revenue of c.$3.8bn(7) . Our analysis of the North American
market shows that there were a total of approximately 2,000 news
and gift and specialty retail stores across the top 70 airports,
giving our North America business a market share of c.13%(8) .
During the year, we have improved our rate of winning new tenders
and anticipate a large amount of space to come onto the market over
the medium term. As a consequence, we are in a strong position to
significantly grow our North America market share to around 20%
over the next five years.
We have applied our forensic approach to retailing from the UK
to the North American market and are seeing good results. This
includes, space management, category development to change the mix
to higher margin products such as food to go, enhanced promotional
activity and increased operational efficiencies, for example,
self-scan tills which we are rolling out across the estate.
We continue to grow our North American business at pace, opening
43 stores in the year at Newark, Phoenix, Orlando, Nashville,
Washington Ronald Reagan, Jacksonville, Kansas City, Salt Lake City
and Los Angeles airports. In Kansas City airport, we have won 85%
of the retail space comprising 8 stores, all of which are open. We
are seeing strong returns.
We still have a very strong pipeline of new store openings. In
the year ending 31 August 2023, we won 40 stores, including stores
at Salt Lake City, Boston, San Diego, Portland, Oakland and Las
Vegas airports, as well as 11 stores in Canada, across Calgary and
Edmonton airports. We expect to open over 50 stores in this
financial year and close 6.
Including the 43 store openings in the year, we now have 231
stores in Air (including 123 InMotion stores), 95 stores in
Resorts, and 1 in Rail.
REST OF THE WORLD
We saw a good recovery in the year from the ROW division with
total revenue up 99% and LFL revenue up 53% on the prior year.
Our strategy for this division is clear: to continue to enter
new countries, better understand the market, build our presence
from a small base, build global supplier relationships and drive
operational leverage to deliver higher returns. The scalability of
the Group's retail formats is now evident having entered 28 new
countries since we opened our first international stores in 2008
and we see significant market share opportunities for the
division.
Utilising our expertise from our North America division to
localise our retail offer, combined with our current low market
share, means there is significant opportunity to grow this business
in new and existing territories through our traditional NBC retail
proposition and with technology tenders under the InMotion brand.
We will continue to use our three operating models of directly run,
joint venture and franchise, in order to maximise value and win new
business.
We have also had another very successful year in winning new
stores with 30 new stores won across the division.
During the year, we opened 55 new stores, including stores in
Belgium, Italy, Malaysia, Norway, Spain and Sweden. We closed 28
mainly small, franchised stores.
(7) 2019 ACI Factbook, increased by CPI
(8) Based on store numbers; including stores won and yet to
open
Outside of the NBC market, we continue to see good opportunities
to win new business in the tech accessories market under our
InMotion brand. InMotion is now a globally recognised brand with
interest coming from all over the world. During the year, we have
won 3 InMotion stores in Italy. We have won a total of 13 InMotion
stores outside of the UK and North America, of which 10 are open.
We remain well positioned to benefit from further opportunities as
more space becomes available.
We now have 338 stores of which 50% are directly-run, 9% are
joint venture and 41% are franchise. During the current financial
year, we expect to open 40 stores and close 12 stores.
Total Travel stores
During the year, we opened 118 stores in Travel. As at 31 August
2023, our global Travel business operated from 1,253 stores (2022:
1,196). As part of our strategy to improve the quality of our
space, we closed 61 stores in the year, largely smaller, less well
located stores. Excluding franchise stores, Travel occupies 1.1m
square feet. See page 15 for analysis of store numbers by
region.
No. of stores At 31
At 31 August
August 2022 Opened Closed 2023
Travel UK 587 20 (19) 588
North America 298 43 (14) 327
Rest of the World 311 55 (28) 338
------------- ------- ------- --------
Total Travel 1,196 118 (61) 1,253
------------- ------- ------- --------
HIGH STREET
During the year, High Street delivered a good performance with
Headline trading profit(1) of GBP32m, in line with expectations
(2022: GBP33m), and revenue of GBP469m (2022: GBP473m). We managed
the business tightly, keeping focused on costs and cash
generation.
The strategy we have in place in our High Street business is as
relevant today as it has ever been with a focus on delivering
robust and sustainable cash flows and profits.
We utilise our space to maximise returns in ways that are
sustainable over the longer-term. We have extensive and detailed
space and range elasticity data for every store which we use to
allocate space in categories.
Driving efficiencies remains a core part of that strategy and we
continue to focus on all areas of cost in the business. During the
year, we have delivered savings of GBP15m and we are on track to
deliver savings of GBP21m over the next 3 years, of which GBP10m
are planned in the current financial year. These savings come from
right across the business, including rent savings at lease renewal
(on average 50% over the last 12 months) which continue to be a
significant proportion, marketing efficiencies and productivity
gains from our supply chain.
Over the years, we have actively looked to put as much
flexibility into our store leases as we can, and this leaves us
well positioned in the current environment where rents are falling.
The average lease length in our High Street business, including
where we are currently holding over at lease end, is under 2 years.
We only renew a lease where we are confident of delivering economic
value over the life of that lease. We have c.480 leases due for
renewal over the next 3 years, including over 100 where we are
holding over and in negotiation with the landlord. The store
closure process is cash neutral.
As at 31 August 2023, the High Street business operated from 514
stores (2022: 527) which occupy 2.5m square feet (2022: 2.5m square
feet). 13 stores were closed in the year (2022: 17).
Funkypigeon.com delivered, as expected, total revenue of GBP32m
(2022: GBP35m) and Headline EBITDA(1) of GBP5m (2022: GBP8m). We
continue to see opportunities to grow the platform further, growing
revenue and profits over the medium term.
ENVIRONMENTAL, SOCIAL AND CORPORATE GOVERNANCE ('ESG')
We have excellent sustainability credentials and we continue to
make good progress. We are one of the top performing specialty
retailers in Morningstar's Sustainalytics ESG Benchmark and, during
the year, we were awarded an AA from MSCI ESG ratings. In addition,
we were included, once again, in the Dow Jones World Sustainability
Index, awarded an A rating in CDP's annual climate leadership
survey as well as being rated as Prime by ISS.
We have set our target to achieve net zero by 2050 and are
working with our supply chain to help reduce emissions across our
value chain.
The need for literacy support is as important as ever and we
continue to invest in our partnership with the National Literacy
Trust. Over the course of the next year, we will be sponsoring a
new reading hub in Swindon as part of their Early Years Matter
campaign.
We have made excellent progress in the year to further support
our colleagues' journeys. We now have 5 employee networks focusing
on Pride, gender, parents and carers, disability, and race and
culture. All of these networks are sponsored by members of our
Executive team and are encouraging an open and honest forum for
colleagues to drive positive change within the business.
In addition, we have launched a new mentoring scheme in the year
focused on fostering female talent within our organisation.
FINANCIAL REVIEW
The Group generated a Headline profit before tax and
non-underlying items(1) of GBP 143 m (2022: GBP73m) and, after
non-underlying items and IFRS 16, a Group profit before tax of GBP
110 m (2022: GBP63m).
Headline
IFRS pre-IFRS 16(1)
-------------------------------- ------------ -----------------
GBPm 2023 2022 2023 2022
-------------------------------- ----- ----- -------- -------
Travel UK trading profit (1) 101 60 102 54
North America trading profit
(1) 52 33 49 31
Rest of the World trading
profit (1) 13 3 13 4
-------------------------------- ----- ----- -------- -------
Total Travel trading profit
(1) 166 96 164 89
High Street trading profit
(1) 43 45 32 33
Group profit from trading
operations (1) 209 141 196 122
Unallocated central costs (27) (24) (27) (24)
-------------------------------- ----- ----- -------- -------
Group operating profit before
non-underlying items (1) 182 117 169 98
Net finance costs(9) (45) (34) (26) (25)
-------------------------------- ----- ----- -------- -------
Group profit before tax and
non-underlying items (1) 137 83 143 73
Non-underlying items (1, 9) (26) (20) (13) (12)
Non-underlying items - Finance
costs (1) (1) - (2) -
-------------------------------- ----- ----- -------- -------
Group profit before tax 110 63 128 61
-------------------------------- ----- ----- -------- -------
(9) Excluding non-underlying Finance costs disclosed below
Unallocated central costs increased in the year reflecting
higher share-based payment charges and investing as the business
recovers.
Headline net finance costs before non-underlying items(1)
(pre-IFRS 16) for the year were GBP26m (2022: GBP25m).
Cash spend in relation to finance costs were GBP10m lower at
GBP16m.
The interest on the convertible bonds includes the accrued
coupon (a fixed coupon of 1.625%) and c.GBP 8m of the non-cash debt
accretion charge.
Lease interest of GBP19m arises on lease liabilities recognised
under IFRS 16, bringing the total net finance costs before
non-underlying items under IFRS 16 to GBP45m (2022: GBP34m).
IFRS
----------------------------------------- ------------ ------------
GBPm 2023 2022 2023 2022
----------------------------------------- ----- ----- ----- -----
Interest payable on bank loans and
overdrafts 12 9 12 9
Interest on convertible bonds 14 14 14 14
Unwind of discount on onerous contract
provisions - - - 2
Interest on lease liabilities 19 11 - -
----------------------------------------- ----- ----- ----- -----
Net finance costs before non-underlying
items 45 34 26 25
----------------------------------------- ----- ----- ----- -----
Tax
The effective tax rate(1) was 19% (2022: 17%) on the profit for
the year. Net corporation tax payments in the year were GBP13m
(2022: GBP6m). Based on current legislation, we expect the tax rate
in the current year to be 25%.
Earnings per share
Calculation of Headline earnings per share
Headline
pre-IFRS 16(1)
------------------------------------------------- ----------------
2023 2022
------------------------------------------------- ------- -------
Headline profit before tax(10) (GBPm) 143 73
Income tax expense(10) (GBPm) (28) (12)
-------------------------------------------------- ------- -------
Headline profit for the year(10) (GBPm) 115 61
Attributable to non-controlling interests (GBPm) (9) (6)
-------------------------------------------------- ------- -------
Headline profit for the year attributable
to equity holders of
WH Smith PLC(10) (GBPm) 106 55
Weighted average shares in issue (diluted)
(no. of shares - millions) 132 132
Headline diluted EPS(10) (p) 80.3p 41.7p
-------------------------------------------------- ------- -------
(10) Before non-underlying items
The above measures are calculated on a pre-IFRS 16 basis.
EPS calculated on an IFRS 16 basis is provided in Note 8 to the
financial statements, and a reconciliation between the IFRS 16 and
pre-IFRS 16 earnings per share is provided in Note A4 to the
Glossary on page 44.
The diluted weighted average number of shares in issue used in
the calculation of Headline diluted EPS(1) assumes that the
convertible bond is not dilutive.
Profit attributable to non-controlling interests primarily
represents the joint venture partner share of profit in relation to
airport contracts in the US. As at 31 August 2023 the profit
attributable to non-controlling interests of GBP9m (2022: GBP6m),
is c.18% (2022: 19%) of North America Headline trading profit(1)
.
Non-underlying items (1)
Items which are not considered part of the normal operating
costs of the business, are non-recurring and are exceptional
because of their size, nature or incidence, are treated as
non-underlying items and disclosed separately. Non-underlying items
in the year are detailed in the table below. Most do not impact
cash.
Headline
IFRS pre-IFRS 16(1)
-------------------------------------- ----- ------------ ------------------
GBPm Ref. 2023 2022 2023 2022
-------------------------------------- ----- ----- ----- -------- --------
Impairment of Property, plant and
equipment and Right-of-use assets
('ROU') (1) 19 13 4 5
Provisions for onerous contracts (2) 3 - 5 -
Finance costs - discount unwind
on provisions for onerous contracts (2) - - 1 -
Other (3) 5 7 5 7
27 20 15 12
-------------------------------------- ----- ----- ----- -------- --------
(1) Impairment of Property, plant and equipment and Right-of-use
assets
The Group has carried out an assessment for indicators of
impairment across the store portfolio.
The impairment review compared the value-in-use of
cash-generating units, based on managements' assumptions regarding
likely future trading performance, to the carrying values at 31
August 2023. As a result of this exercise, a non-cash charge of
GBP4m (2022: GBP5m) was recorded for impairment of retail store
assets on a pre-IFRS 16 basis, and GBP19m (2022: GBP13m) on an IFRS
16 basis which includes an impairment of ROU assets of GBP15m
(2022: GBP8m). This non-cash impairment to the ROU asset primarily
results from the difference between the Incremental Borrowing Rate
('IBR') used to establish the ROU asset and the WACC rate used to
discount the future cash flows of certain stores in Spain.
(2) Provisions for onerous contracts
A charge of GBP3m (on an IFRS 16 basis) has been recognised in
the income statement in non-underlying items to provide for the
unavoidable costs of continuing to service a non-cancellable
contract, in certain locations where revenue recovery to
pre-Covid-19 levels has not been observed. On a pre-IFRS 16 basis
this charge is GBP5m.
Finance costs relating to the discount unwind on previously
recognised provisions for onerous contracts has also been
recognised in non-underlying items.
(3) Other
Other non-underlying items include: non-cash amortisation of
acquired intangible assets of GBP3m (2022: GBP3m) primarily related
to the MRG and InMotion brands; costs associated with pensions
GBP1m related to the pension scheme's purchase of a bulk annuity
insurance policy as described in Note 16; and finance costs
associated with refinancing GBP1m to derecognise the carrying value
of unamortised fees in respect of the extinguished term loan and
revolving credit facility. Other non-underlying items in the prior
year also included costs of GBP4m incurred due to a cyber security
incident in relation to one of the Group's websites. This included
impairment of software assets of GBP1m, third party consultancy
support and legal and other costs.
A tax credit of GBP 5 m (2022: GBP4m) has been recognised in
relation to the above items (GBP 2 m pre-IFRS 16 (2022:
GBP3m)).
The cash spend relating to non-underlying items in the 2023
financial year was GBP9m and mainly related to activity announced
in 2020 and 2021.
Cash flow
Free cash flow (1) reconciliation
pre-IFRS 16(1)
------------------------------------- ------------- ---------------------------
GBPm 2023 2022
---------------------------------------------- ---------- ------ ---------
Headline Group operating profit before
non-underlying items (1) 169 98
Depreciation, amortisation and impairment
(pre-IFRS 16) (11) 52 49
Non-cash items 14 8
---------------------------------------------- ---------- ------ ---------
Operating cash flow (1, 11) 235 155
Capital expenditure (122) (83)
Working capital (pre-IFRS 16)(11) (64) (10)
Net tax paid (13) (6)
Net finance costs paid (pre-IFRS 16) (16) (15)
Free cash flow(1) 20 41
---------------------------------------------- ---------- ------ ---------
(11) Excludes cash flow impact of non-underlying items
The Group generated an operating cash flow(1) of GBP235m in the
year (2022: GBP155m) demonstrating the cash generative nature of
the business. Capex was GBP122m (2022: GBP83m) as we continued to
invest in new stores, IT and energy efficient chillers and other
store equipment. As expected we had a working capital outflow of
GBP64m in the year (2022: GBP10m). This mainly relates to
investment in new stores, the recovering Travel business and some
timing. Most of the outflow was in the first half. This year we
expect a much smaller outflow mainly relating to opening new
stores. In total, there was a free cash inflow in the year of
GBP20m (2022: GBP41m). This year we would expect, subject to
investment opportunities, an increase in free cash generation.
Net corporation tax payments in the period were GBP13m (2022:
GBP6m).
Capex was GBP122m (2022: GBP83m) which includes the additional
spend from opening 118 stores around the world.
GBPm 2023 2022
---------------------------------- ----- -----
New stores and store development 58 37
Refurbished stores 20 22
Systems 19 13
Other 25 11
---------------------------------- ----- -----
Total capital expenditure 122 83
---------------------------------- ----- -----
Reconciliation of Headline net debt (1)
Headline net debt(1) is presented on a pre-IFRS 16 basis. See
Note 9 of the Financial statements for the impact of IFRS 16 on net
debt.
As at 31 August 2023, the Group had Headline net debt(1) of
GBP330m comprising convertible bonds of GBP301m, GBP1m of finance
lease liabilities and net overdrafts of GBP28m (2022: GBP296m,
convertible bonds of GBP292m, term loans of GBP132m (net of fees),
GBP4m of finance lease liabilities and net cash of GBP132m ).
Headline(1)
pre-IFRS 16
GBPm 2023 2022
Opening Headline net debt(1) (296) (291)
Free cash flow(1) 20 41
Dividends paid (22) -
Pension contributions - (2)
Non-underlying items(1) (9) (16)
Net purchase of own shares for employee share
schemes (8) (7)
Other (15) (21)
----------------------------------------------- ------ ------
Closing Headline net debt(1) (330) (296)
----------------------------------------------- ------ ------
Net (overdraft)/cash (28) 132
Term loans (net of fees) - (132)
Convertible bond (301) (292)
Finance leases (pre-IFRS 16) (1) (4)
----------------------------------------------- ------ ------
Headline net debt(1) (330) (296)
----------------------------------------------- ------ ------
In addition to the free cash flow, the Group paid GBP9m of
non-underlying items, which mainly relate to restructuring
following the review of store and head office operations, as
previously reported and charged to the income statement in prior
years. The other outflows related to the dividend GBP22m (2022:
GBPnil) being the final dividend from 2022 and the interim dividend
from 2023. In addition, we spent GBP8m (2022: GBP7m) on own shares
for the Group's share schemes. Other includes non-cash accretion on
the convertible bond, and payments to non-controlling
interests.
On an IFRS 16 basis, net debt was GBP895m (2022: GBP869m), which
includes an additional GBP565m (2022: GBP573m) of lease
liabilities.
Fixed charges cover(1)
pre-IFRS 16(1)
------------------------------------------- -----------------
GBPm 2023 2022
-------------------------------------------- -------- -------
Headline net finance costs(1) 26 25
Net operating lease charges (pre-IFRS
16) (1) 326 241
Total fixed charges 352 266
Headline profit before tax and
non-underlying items (1) 143 73
-------------------------------------------- -------- -------
Headline profit before tax, non-underlying
items and fixed charges 495 339
-------------------------------------------- -------- -------
Fixed charges cover - times 1.4x 1.3x
-------------------------------------------- -------- -------
Fixed charges, comprising property operating lease charges and
net finance costs, were covered 1.4 times (2022: 1.3 times) by
Headline profit before tax, non-underlying items and fixed
charges.
Balance sheet
Headline(1)
IFRS pre-IFRS 16
-------------------------------- -------------- --------------
GBPm 2023 2022 2023 2022
-------------------------------- ------ ------ ------ ------
Goodwill and other intangible
assets 505 543 506 544
Property, plant and equipment 270 219 263 211
Right-of-use assets 444 446 - -
Investments in joint ventures 2 2 2 2
-------------------------------- ------ ------ ------ ------
1,221 1,210 771 757
-------------------------------- ------ ------ ------ ------
Inventories 205 198 205 198
Payables less receivables (219) (269) (216) (284)
-------------------------------- ------ ------ ------ ------
Working capital (14) (71) (11) (86)
-------------------------------- ------ ------ ------ ------
Net derivative financial asset - 1 - 1
Net current and deferred tax
assets 45 54 45 54
Provisions (17) (14) (26) (26)
-------------------------------- ------ ------ ------ ------
Operating assets employed 1,235 1,180 779 700
Net debt (895) (869) (330) (296)
-------------------------------- ------ ------ ------ ------
Total net assets 340 311 449 404
-------------------------------- ------ ------ ------ ------
The Group had Headline net assets of GBP449m, GBP45m higher than
last year end reflecting the investment in new store openings and
exchange differences on translation of goodwill. Under IFRS the
Group had net assets of GBP340m.
Total Travel stores by region
No. of stores At 31
August 2023
Travel UK 588
-------------
North America
-------------
Air 231
Resorts / Rail 96
------------------------- -------------
Total North America 327
------------------------- -------------
Rest of the World
-------------
Europe 125
Middle East and India 91
Asia Pacific 122
------------------------- -------------
Total Rest of the World 338
------------------------- -------------
Total Travel 1,253
-------------
PRINCIPAL AND EMERGING RISKS AND UNCERTAINTIES
The Board regularly reviews and monitors the risks and
uncertainties that could have a material effect on the Group's
financial results. The principal risks and uncertainties that could
lead to a material impact have not significantly changed from those
listed in the Annual Report and Accounts 2022. No new principal
risks were identified in the year, however there were five risks
where the potential impact had increased over the year, with the
remaining risks having no change in their overall impact. We have
also recognised that the ongoing global conflicts have created
further uncertainty in the macro economy. A summary of the
principal risks has been provided below:
Risk and Impact
change in
risk level
Economic, The Group operates in highly competitive markets and in
political, the event of failing to compete effectively with travel,
competitive convenience and other similar product category retailers,
and market this may affect revenues obtained through our stores.
risks - increased Failure to keep abreast of market developments, including
the use of new technology, could threaten our competitive
position.
Factors such as the economic climate, levels of household
disposable income, seasonality of revenue, changing demographics
and customer shopping patterns, and raw material costs
could impact on profit performance.
The Group may also be impacted by political developments
both in the UK and internationally, such as regulatory
& tax changes, increasing scrutiny by competition authorities
and other changes in the general condition of retail and
travel markets or impacts from further geopolitical threats
or escalation in global conflict.
----------------------------------------------------------------------
Brand and The WHSmith brand is an important asset and failure to
reputation protect it from unfavourable publicity could materially
- no change damage its standing and the wider reputation of the business,
adversely affecting revenues.
As the Group continues to expand its convenience offer
in travel locations introducing a wider range of products,
associated risks include compliance with food hygiene
and health and safety procedures, product and service
quality, environmental or ethical sourcing, and associated
legislative and regulatory requirements.
----------------------------------------------------------------------
Key suppliers The Group has agreements with key suppliers in the UK,
and supply Europe and Asia and other countries in which it operates.
chain management The interruption or loss of supply of core category products
- increased from these suppliers to our stores may affect our ability
to trade.
Quality of supply issues may also impact the Group's reputation
and impact our ability to trade.
----------------------------------------------------------------------
Store portfolio The quality and location of the Group's store portfolio
- no change are key contributors to the Group's strategy. Retailing
from a portfolio of good quality real estate in prime
retail areas and key travel hubs at commercially reasonable
rates remains critical to the performance of the Group.
Most Travel stores are held under concession agreements,
on average for five to ten years, although there is no
guarantee that concessions will be renewed or that Travel
will be able to bid successfully for new contracts. All
of High Street's stores are held under operating leases,
and consequently the Group is exposed, to the extent that
any store becomes unviable as a result of rental costs.
----------------------------------------------------------------------
Business interruption An act of terrorism or war, or an outbreak of a pandemic
- increased disease, could reduce the number of customers visiting
WHSmith outlets, causing a decline in revenue and profit.
In the past, our Travel business has been particularly
impacted by geopolitical events such as major terrorist
attacks, which have led to reductions in customer traffic.
Closure of travel routes both planned and unplanned, such
as the disruption caused by natural disasters or weather-related
events, may also have a material effect on business. The
Group operates from three distribution centres and the
closure of any one of them may cause disruption to the
business.
In common with most retail businesses, the Group also
relies on a number of important IT systems, where any
system performance problems, cyber risks or other breaches
in data security could affect our ability to trade.
----------------------------------------------------------------------
Reliance on The performance of the Group depends on its ability to
key personnel continue to attract, motivate and retain key head office
- no change and store staff. The retail sector is very competitive
and the Group's personnel are frequently targeted by other
companies for recruitment.
----------------------------------------------------------------------
International The Group continues to expand internationally. In each
expansion country in which the Group operates, the Group may be
- increased impacted by political or regulatory developments, or changes
in the economic climate or the general condition of the
travel market.
----------------------------------------------------------------------
Cyber risk, The Group is subject to the risk of systems breach or
data security data loss from various sources including external hackers
and GDPR compliance or the infiltration of computer viruses. Theft or loss
- increased of Company or customer data or potential damage to any
systems from viruses, ransomware or other malware, or
non-compliance with data protection legislation, could
result in fines and reputational damage to the business
that could negatively impact our revenue.
----------------------------------------------------------------------
Treasury, The Group's exposure to and management of capital, liquidity,
financial credit, interest rate and foreign currency risk are analysed
and credit further in Note 21 on page 155 of the Annual Report and
risk management Accounts 2022.
- no change The Group also has credit risk in relation to its trade,
other receivables and sale or return contracts with suppliers.
----------------------------------------------------------------------
Environment Our investors, customers and colleagues expect us to conduct
and Social our business in a responsible and sustainable way. Climate
Sustainability change is now recognised as a global emergency. Failure
- no change to effectively respond and influence our value chain and
wider stakeholders to decarbonise could damage our reputation
and introduce higher costs. Delivery against our sustainability
targets and meeting regulatory obligations is vital.
We have identified several climate related risks, including;
* Increases in the cost of energy and fuel from carbon
pricing and changing market dynamics;
* Disruption to supply of goods caused by acute and
chronic changes in weather patterns.
Although the impact is limited over our outlook period,
these risks are potentially significant over the longer
term.
----------------------------------------------------------------------
This announcement contains inside information which is disclosed
in accordance with the Market Abuse Regulations.
This announcement contains certain forward-looking statements
with respect to the operations, performance and financial condition
of the Group. By their nature, these statements involve uncertainty
since future events and circumstances can cause results to differ
from those anticipated. Nothing in this announcement should be
construed as a profit forecast. We undertake no obligation to
update any forward-looking statements whether as a result of new
information, future events or otherwise.
WH Smith PLC
Group Income Statement
For the year ended 31 August 2023
2023 2022
------------------------------ ---- --------------------------------------- --------------------------------------
Before Before
non-underlying Non-underlying non-underlying Non-underlying
GBPm Note items(1) items(2) Total items(1) items(2) Total
------------------------------ ---- --------------- -------------- ------ --------------- -------------- -----
Revenue 2 1,793 - 1,793 1,400 - 1,400
2,
Group operating profit/(loss) 3 182 (26) 156 117 (20) 97
Finance costs 5 (45) (1) (46) (34) - (34)
Profit/(loss) before
tax 137 (27) 110 83 (20) 63
Income tax (expense)/credit 6 (27) 5 (22) (14) 4 (10)
------------------------------ ---- --------------- -------------- ------ --------------- -------------- -----
Profit/(loss) for the
year 110 (22) 88 69 (16) 53
------------------------------ ---- --------------- -------------- ------ --------------- -------------- -----
Attributable to equity holders
of the parent 101 (22) 79 63 (16) 47
Attributable to non-controlling
interests 9 - 9 6 - 6
------------------------------------ --------------- -------------- ------ --------------- -------------- -----
110 (22) 88 6 9 ( 16) 53
Earnings per share
Basic 8 60.8p 36.2p
Diluted 8 59.8p 35.6p
All results relate to continuing operations of the Group.
(1) Alternative performance measure. The Group has defined and
explained the purpose of its alternative performance measures in
the Glossary on page 44.
(2) See Note 4 for an analysis of non-underlying items. See
Glossary on page 44 for a definition of Alternative Performance
Measures.
WH Smith PLC
Group Statement of Comprehensive Income
For the year ended 31 August 2023
GBPm Note 2023 2022
--------------------------------------------- ------ ----- -----
Profit for the year 88 53
------------------------------------------------------ ----- -----
Other comprehensive (loss)/income:
Items that will not be reclassified
subsequently to the income statement:
Actuarial gains on defined benefit pension 1 -
schemes
1 -
Items that may be reclassified subsequently
to the income statement:
(Losses)/gains on cash flow hedges
* Net fair value (losses)/ gains (3) 3
Exchange differences on translation of
foreign operations (40) 71
------------------------------------------------------ ----- -----
(43) 74
Other comprehensive (loss)/income for
the year, net of tax (42) 74
------------------------------------------------------ ----- -----
Total comprehensive income for the year 46 127
------------------------------------------------------ ----- -----
Attributable to equity holders of the
parent 39 120
Attributable to non-controlling interests 7 7
------------------------------------------------------ ----- -----
46 127
---------------------------------------------------- ----- -----
WH Smith PLC
Group Balance Sheet
As at 31 August 2023
GBPm Note 2023 2022
------------------------------------- ------- -------- --------- ---------
Non-current assets
Goodwill 11 436 471
Other intangible assets 11 69 72
Property, plant and equipment 12 270 219
Right-of-use assets 13 444 446
Investments in joint ventures 2 2
Deferred tax assets 43 55
Trade and other receivables 9 9
------------------------------------- ------- -------- --------- ---------
1,273 1,274
------------------------------------- ------- -------- --------- ---------
Current assets
Inventories 205 198
Trade and other receivables 112 87
Derivative financial assets 1 1
Current tax receivable 3 -
Cash and cash equivalents 9 56 132
------------------------------------- ------- -------- --------- ---------
377 418
------------------------------------- ------- -------- --------- ---------
Total assets 1,650 1,692
------------------------------------- ------- -------- --------- ---------
Current liabilities
Trade and other payables (340) (365)
Bank overdrafts and other borrowings 9 (84) (20)
Lease liabilities 14 (116) (131)
Derivative financial liabilities (1) -
Current tax liability (1) (1)
Short-term provisions (1) -
(543) (517)
Non-current liabilities
Bank loans and other borrowings 9 (301) (404)
Long-term provisions (16) (14)
Lease liabilities 14 (450) (446)
(767) (864)
------------------------------------- ------- -------- --------- ---------
Total liabilities (1,310) (1,381)
------------------------------------- ------- -------- --------- ---------
Total net assets 340 311
------------------------------------- ------- -------- --------- ---------
Shareholders' equity
Called up share capital 29 29
Share premium 316 316
Capital redemption reserve 13 13
Translation reserve 5 43
Other reserves (255) (244)
Retained earnings 209 138
------------------------------------- ------- -------- --------- ---------
Total equity attributable to equity
holders of the parent 317 295
------------------------------------- ------- -------- --------- ---------
Non-controlling interests 23 16
------------------------------------- ------- -------- --------- ---------
Total equity 340 311
------------------------------------- ------- -------- --------- ---------
WH Smith PLC
Group Cash Flow Statement
For the year ended 31 August 2023
GBPm Note 2023 2022
------------------------------------------- ---- ----- -----
Operating activities
Cash generated from operating activities 10 302 219
Interest paid(1) (35) (26)
Financing arrangement fees (3) -
Income taxes paid (15) (6)
Income taxes refunded 2 -
------------------------------------------- ---- ----- -----
Net cash inflow from operating activities 251 187
------------------------------------------- ---- ----- -----
Investing activities
Purchase of property, plant and equipment (106) (70)
Purchase of intangible assets (16) (13)
Net cash outflow from investing activities (122) (83)
------------------------------------------- ---- ----- -----
Financing activities
Dividends paid (22) -
Purchase of own shares for employee
share schemes (8) (7)
Distributions to non-controlling interests (6) (1)
Repayment of term loans 9 (133) -
Net drawdown on short term borrowings 9 84 -
Capital repayments of obligations
under leases 9 (118) (96)
Net cash outflow from financing activities (203) (104)
------------------------------------------- ---- ----- -----
Net decrease in cash and cash equivalents
in the year (74) -
------------------------------------------- ---- ----- -----
Opening cash and cash equivalents 132 130
Effect of movements in foreign exchange
rates (2) 2
------------------------------------------- ---- ----- -----
Closing cash and cash equivalents 9 56 132
------------------------------------------- ---- ----- -----
(1) Includes interest payments of GBP19m on lease liabilities
(2022: GBP11m).
WH Smith PLC
Group Statement of Changes in Equity
For the year ended 31 August 2023
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 reserves earnings parent interests equity
----------------- -------- ------------ ------------ --------- ----------- ------------- ---------------- -------
Balance at 1
September
2022 345 13 43 (244) 138 295 16 311
Profit for the
year - - - - 79 79 9 88
----------------- -------- ------------ ------------ --------- ------ ------------------ ---------------- -------
Other
comprehensive
(loss)/income:
Cash flow hedges - - - (3) - (3) - (3)
Actuarial gains
on defined
benefit
pension schemes - - - - 1 1 - 1
Exchange
differences
on translation
of foreign
operations - - (38) - - (38) (2) (40)
Total
comprehensive
(loss)/income
for
the year - - (38) (3) 80 39 7 46
Employee share
schemes - - - (8) 12 4 - 4
Dividends paid
(Note 7) - - - - (22) (22) - (22)
Deferred tax on
share-based
payments - - - - 1 1 - 1
Distributions to
non-controlling
interest - - - - - - (6) (6)
Non-cash
movement
on
non-controlling
interests - - - - - - 6 6
Balance at 31
August 2023 345 13 5 (255) 209 317 23 340
----------------- -------- ------------ ------------ --------- ------ ------------------ ---------------- -------
Balance at 1
September
2021 345 13 (27) (240) 82 173 10 183
Profit for the
year - - - - 47 47 6 53
----------------- -------- ------------ ------------ --------- ------ ------------------ ---------------- -------
Other
comprehensive
income:
Cash flow hedges - - - 3 - 3 - 3
Exchange
differences
on translation
of foreign
operations - - 70 - - 70 1 71
----------------- -------- ------------ ------------ --------- ------ ------------------ ---------------- -------
Total
comprehensive
income for the
year - - 70 3 47 120 7 127
Employee share
schemes - - - (7) 9 2 - 2
Non-cash
movement
on
non-controlling
interests - - - - - - (1) (1)
----------------- -------- ------------ ------------ --------- ------ ------------------ ---------------- -------
Balance at 31
August
2022 345 13 43 (244) 138 295 16 311
----------------- -------- ------------ ------------ --------- ------ ------------------ ---------------- -------
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
1. Basis of preparation
Whilst the information included in the consolidated financial
statements has been prepared in accordance with UK-adopted
International Accounting Standards in conformity with the
requirements of the Companies Act 2006, this announcement does not
itself contain sufficient information to comply with IFRSs. The
financial information in this full year results statement does not
constitute statutory accounts within the meaning of Section 434 of
the Companies Act 2006.
Statutory accounts for the year ending 31 August 2022 have been
delivered to the Registrar of Companies and those for 2023 will be
delivered following the Company's Annual General Meeting. The
Annual Report for the year ending 31 August 2023 and this full year
results statement were approved by the Board on 9 November 2023.
The auditors have reported on the Annual Report for the years ended
on 31 August 2023 and 2022 and neither report was qualified and
neither contained a statement under Section 498(2) or (3) of the
Companies Act 2006.
The consolidated financial information for the year ended 31
August 2023 has been prepared on a consistent basis with the
financial accounting policies set out in the Accounting Policies
section of the WH Smith PLC Annual Report and Accounts 2022 except
as described below. The Group has adopted the following standards
and interpretations which became mandatory for the first time
during the year ended 31 August 2023. The Group has considered the
below new standards and amendments and has concluded that they are
either not relevant to the Group or they do not have a significant
impact on the Group's consolidated financial statements.
Amendments to IFRS 3 Business combinations
Amendment to IAS 16 Property, plant and equipment
Amendment to IAS 37 Provisions, contingent liabilities and
contingent assets
Annual Improvements 2018-2020 Amendments to IFRS 1, IFRS 9 and IFRS 16
At the Group balance sheet date, the following standards and
interpretations, which have not been applied in these condensed
financial statements, were in issue but not yet effective:
IFRS 17 Insurance contracts
Amendment to IAS 12 Taxation
Amendment to IAS 8 Accounting policies, Changes in Accounting
Estimates
and Errors
Amendments to IAS 1 Presentation of financial statements
Amendments to IFRS 16 Leases
Narrow scope amendments to IFRS 3, IAS 16 and IAS 37
The directors anticipate that the adoption of these standards
and interpretations in future years will have no material impact on
the Group's condensed financial statements.
Alternative Performance Measures (APM's)
The Group has identified certain measures that it believes will
assist the understanding of the performance of the business. These
APMs are not defined or specified under the requirements of
IFRS.
The Group believes that these APMs, which are not considered to
be a substitute for, or superior to, IFRS measures, provide
stakeholders with additional useful information on the underlying
trends, performance and position of the Group and are consistent
with how business performance is measured internally. The APMs are
not defined by IFRS and therefore may not be directly comparable
with other companies' APMs.
The key APMs that the Group uses include: measures before
non-underlying items, Headline profit before tax, Headline earnings
per share, trading profit, Headline trading profit, Headline Group
profit from trading operations, like-for-like revenue, gross
margin, fixed charges cover, Headline EBITDA, Net debt and Headline
net debt and free cash flow. These APMs are set out in the Glossary
on page 44 including explanations of how they are calculated and
how they are reconciled to a statutory measure where relevant.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
1. Basis of preparation (continued)
Non-underlying items
The Group has chosen to present a measure of profit and earnings
per share which excludes certain items, that are considered
non-underlying and exceptional due to their size, nature or
incidence, and are not considered to be part of the normal
operations of the Group. These measures exclude the financial
effect of non-underlying items which are considered exceptional or
occur infrequently such as, inter alia, restructuring and
transformation costs linked to a Board agreed programme, costs
relating to business combinations, impairment charges and other
property costs, significant items relating to pension schemes, and
impairment charges and items meeting the definition of
non-underlying specifically related to the Covid-19 pandemic, and
the related tax effect of these items. In addition, these measures
exclude the income statement impact of amortisation of intangible
assets acquired in business combinations, which are recognised
separately from goodwill. This amortisation is not considered to be
part of the underlying operating costs of the business and has no
associated cash flows.
The Group believes that the separate disclosure of these items
provides additional useful information to users of the financial
statements to enable a better understanding of the Group's
underlying financial performance.
Further details of the non-underlying items are provided in Note
4.
Going concern
The consolidated financial statements have been prepared on a
going concern basis.
The directors are required to assess whether the Group can
continue to operate for the 12 months from the date of approval of
these financial statements.
The Group overview describes the Group's financial position,
cash flows and borrowing facilities and also highlights the
principal risks and uncertainties facing the Group. The Group
overview also sets out the Group's business activities together
with the factors that are likely to affect its future developments,
performance and position.
In making the going concern assessment, the directors have
undertaken a rigorous assessment of current performance and
forecasts for the 12-month period to November 2024, including
expenditure commitments, capital expenditure and available
borrowing facilities. The Group's borrowing facilities are
described in the Group overview on page 4. The covenants on these
facilities are tested half-yearly and are based on fixed charges
cover and net borrowings. The directors have also considered the
existence of factors beyond the going concern period that could
indicate that the going concern basis is not appropriate.
The directors have modelled a base case scenario consistent with
the latest Board approved forecasts, which include management's
best estimates of market conditions and include a number of
assumptions including passenger numbers, sales growth and cost
inflation. Under this scenario the Group has significant liquidity
and complies with all covenant tests throughout the assessment
period.
As a result of uncertainty and challenges in the macroeconomic
environment, this base case scenario has been stress-tested by
applying severe, but plausible, downside assumptions of a magnitude
and profile in line with previous experience of economic downturns.
These assumptions include reductions to revenue assumptions of
between 5 and 10 per cent versus the base case as appropriate by
division; additional inflation in labour costs beyond that included
in the base case; and margin pressures. Apart from an equal
reduction in turnover-based rents in our Travel businesses, this
scenario does not assume a decrease in other variable costs, and is
therefore considered severe. Under this downside scenario the Group
would continue to have significant liquidity headroom on its
existing facilities and complies with all covenant tests throughout
the assessment period.
Based on the above analysis, the directors have concluded that
the Group is able to adequately manage its financing and principal
risks, and that the Group will be able to continue to meet its
obligations as they fall due and operate within the level of its
facilities for at least 12 months from the date of approval of
these financial statements.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
1. Basis of preparation (continued)
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make judgements, estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent
assets and liabilities. Actual results could differ from these
estimates and any subsequent changes are accounted for with an
effect on income at the time such updated information becomes
available.
The most critical accounting judgements and sources of
estimation uncertainty in determining the financial condition and
results of the Group are those requiring the greatest degree of
subjective or complex judgement. These relate to the classification
of items as non-underlying, assessment of lease substitution
rights, determination of the lease term, impairment reviews of
other non-current assets and inventory valuation.
Critical accounting judgements
Non-underlying items
The Group has chosen to present a measure of profit and earnings
per share which excludes certain items that are considered
non-underlying and exceptional due to their size, nature or
incidence, and are not considered to be part of the normal
operations of the Group. These measures exclude the financial
effect of non-underlying items which are considered exceptional and
occur infrequently such as, inter alia, restructuring and
transformation costs linked to a Board agreed programme,
amortisation of acquired intangibles assets, costs relating to
business combinations, impairment charges and other property costs,
significant items relating to pension schemes, and impairment
charges and items meeting the definition of non-underlying
specifically related to the Covid-19 pandemic, 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.
The classification of items as non-underlying requires
management judgement. The definition of non-underlying items has
been applied consistently year on year. Further details of
non-underlying items are provided in Note 4.
IFRS 16 Lease accounting
Substantive substitution rights
Judgement is required in determining whether a contract meets
the definition of a lease under IFRS 16. Management has determined
that certain retail concession contracts give the landlord
substantive substitution rights because the contract gives the
landlord rights to relocate the retail space occupied by the Group.
In such cases, management has concluded that there is not an
identified asset and therefore such contracts are outside the scope
of IFRS 16. For these contracts, the Group recognises the payments
as an operating expense on a straight-line basis over the term of
the contract unless another systematic basis is more representative
of the time pattern in which economic benefits from the underlying
contract are consumed.
Determination of lease term
In determining the lease term for contracts that have options to
extend or terminate early at the Group's discretion, management has
applied judgement in determining the likelihood of whether such
options will be exercised. This is based on the length of time
remaining before the option is exercisable, performance of the
individual store and the trading forecasts.
Intangible assets, property, plant and equipment and
right-of-use asset impairment reviews
Property, plant and equipment, right-of-use assets and
intangible assets are reviewed for impairment if events or changes
in circumstances indicate that the carrying amount may not be
recoverable. When a review for impairment is conducted, the
recoverable amount of an asset or a cash-generating unit is
determined based on value-in-use calculations prepared on the basis
of management's assumptions and estimates.
The key assumptions in the value-in-use calculations include
growth rates of revenue and the pre-tax discount rate. Further
information in respect of the Group's intangible assets, property,
plant and equipment and right-of-use assets is included in Notes
11, 12 and 13 respectively.
Inventory valuation
Inventory is carried at the lower of cost and net realisable
value which requires the estimation of sell through rates, and the
eventual sales price of goods to customers in the future. Any
difference between the expected and the actual sales price achieved
will be accounted for in the year in which the sale is made. A
sensitivity analysis has been carried out on the calculation of
inventory provisions. The key assumption driving the stock
provision calculation is forecast revenue. A 10 per cent change in
the revenue assumptions applied in the provision calculation,
representing a reasonably possible outcome, would reduce the
carrying value of inventories by GBP2m (2022: GBP2m).
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
2. Segmental analysis of results
IFRS 8 requires segment information to be presented on the same
basis as that used by the Chief Operating Decision Maker for
assessing performance and allocating resources. The Group's
operating segments are based on the reports reviewed by the Board
of Directors who are collectively considered to be the chief
operating decision maker.
For management and financial reporting purposes, the Group is
organised into two operating divisions which comprise four
reportable segments - Travel UK, North America, Rest of the World
within the Travel division, and High Street.
The information presented to the Board is prepared in accordance
with the Group's IFRS accounting policies, with the exception of
IFRS 16, and is shown below as Headline information in Section b).
A reconciliation to statutory measures is provided below in
accordance with IFRS 8, and in the Glossary on page 44 (Note
A2).
a) Revenue
GBPm 2023 2022
------------------- ------ ---------------
Travel UK 709 521
North America 380 288
Rest of the World 235 118
-------------------- ------ ---------------
Total Travel 1,324 927
High Street 469 473
Group revenue 1,793 1,400
-------------------- ------ ---------------
Rest of the World revenue includes revenue from Australia of
GBP82m (2022: GBP40m), Ireland GBP47m (2022: GBP30m) and Spain
GBP46m (2022: GBP21m). No other country has individually material
revenue.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
2. Segmental analysis of results (continued)
b) Group results
2023 2022
------------------ --------------- ------------------------------ --------------------------------------- ------
Headline
Headline
before Headline
non-underlying Headline before non-underlying
items non-underlying non-underlying items
(1) items (1) items(1) (1)
(pre-IFRS IFRS (pre-IFRS IFRS
GBPm 16) (pre-IFRS16) 16 Total 16) (pre-IFRS16) 16 Total
------------------ --------------- --------------- ----- ------ --------------- --------------- ----- ------
Travel UK trading
profit/(loss) 102 - (1) 101 54 - 6 60
North America
trading
profit 49 - 3 52 31 - 2 33
Rest of the World
trading
profit/(loss) 13 - - 13 4 - (1) 3
------------------ --------------- --------------- ----- ------ --------------- --------------- ----- ------
Total Travel
trading
profit 164 - 2 166 89 - 7 96
High Street
trading
profit 32 - 11 43 33 - 12 45
------------------ --------------- --------------- ----- ------ --------------- --------------- ----- ------
Group profit from
trading
operations 196 - 13 209 122 - 19 141
Unallocated
central
costs (27) - - (27) (24) - - (24)
------------------ --------------- --------------- ----- ------ --------------- --------------- ----- ------
Group operating
profit before
non-underlying
items 169 - 13 182 98 - 19 117
Non-underlying
items
(Note 4) - (13) (13) (26) - (12) (8) (20)
------------------ --------------- --------------- ----- ------ --------------- --------------- ----- ------
Group operating
profit/(loss) 169 (13) - 156 98 (12) 11 97
Finance costs (26) - (19) (45) (25) - (9) (34)
Non-underlying
finance
costs (Note 4) - (2) 1 (1) - - - -
------------------ --------------- --------------- ----- ------ --------------- --------------- ----- ------
Profit/(loss)
before
tax 143 (15) (18) 110 73 (12) 2 63
Income tax
(expense)/credit (28) 2 4 (22) (12) 3 (1) (10)
------------------ --------------- --------------- ----- ------ --------------- --------------- ----- ------
Profit/(loss) for
the year 115 (13) (14) 88 61 (9) 1 53
------------------ --------------- --------------- ----- ------ --------------- --------------- ----- ------
(1) Presented on a pre-IFRS 16 basis. Alternative Performance
Measures are defined and explained in the Glossary on page 44.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
2. Segmental analysis of results (continued)
c) Other segmental items
2023
-------------------------------- -------------------------------------------------------------------
Non-current assets(1) Right-of-use assets
-------------------------------- ----------------------------------------- ------------------------
Capital Depreciation
GBPm additions and amortisation Impairment Depreciation Impairment
-------------------------------- ---------- ----------------- ---------- ------------ ----------
Travel UK 30 (17) - - -
North America 47 (13) - - -
Rest of the World 17 (6) - - -
-------------------------------- ---------- ----------------- ---------- ------------ ----------
Total Travel 94 (36) - - -
High Street 28 (15) - - -
Unallocated - (2) - - -
-------------------------------- ---------- ----------------- ---------- ------------ ----------
Headline, before non-underlying
items (pre-IFRS 16) 122 (53) - - -
Headline non-underlying
items (pre-IFRS 16) - (3) (4) - -
-------------------------------- ---------- ----------------- ---------- ------------ ----------
Headline, after non-underlying
items (pre-IFRS 16) 122 (56) (4) - -
Impact of IFRS 16 - - - (104) -
Non-underlying items (IFRS
16)(2) - - - - (15)
Group 122 (56) (4) (104) (15)
-------------------------------- ---------- ----------------- ---------- ------------ ----------
2022
-------------------------------- --------------------------------------------------------------------------
Non-current assets(1) Right-of-use assets
-------------------------------- ------------------------------------------------ ------------------------
Depreciation
GBPm Capital additions and amortisation Impairment Depreciation Impairment
-------------------------------- ----------------- ----------------- ---------- ------------ ----------
Travel UK 30 (16) - - -
North America 22 (11) - - -
Rest of the World 13 (2) - - -
-------------------------------- ----------------- ----------------- ---------- ------------ ----------
Total Travel 65 (29) - - -
High Street 25 (15) (2) - -
Unallocated - (3) - - -
-------------------------------- ----------------- ----------------- ---------- ------------ ----------
Headline, before non-underlying
items (pre-IFRS 16) 90 (47) (2) - -
Headline non-underlying
items (pre-IFRS 16) - (3) (6) - -
-------------------------------- ----------------- ----------------- ---------- ------------ ----------
Headline, after non-underlying
items (pre-IFRS 16) 90 (50) (8) - -
Impact of IFRS 16 - - - (81) -
Non-underlying items (IFRS
16) - - - - (8)
Group 90 (50) (8) (81) (8)
-------------------------------- ----------------- ----------------- ---------- ------------ ----------
(1) Non-current assets including property, plant and equipment
and intangible assets, but excluding right-of-use assets.
(2) The impairment under IFRS 16 mostly relates to the Rest of the World segment
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
3. Group operating profit
2023 2022
------------------------ ---- --------------------------------------- --------------------------------------
Before Before
non-underlying Non-underlying non-underlying Non-underlying
GBPm Note items items Total items items Total
------------------------ ---- --------------- -------------- ------ --------------- -------------- -----
Revenue 1,793 - 1,793 1,400 - 1,400
Cost of sales (682) - (682) (538) - (538)
------------------------ ---- --------------- -------------- ------ --------------- -------------- -----
Gross profit 1,111 - 1,111 862 - 862
Distribution costs(1) (746) - (746) (588) - (588)
Administrative expenses (197) - (197) (161) - (161)
Other income(2) 14 - 14 4 - 4
Non-underlying items 4 - (26) (26) - (20) (20)
------------------------ ---- --------------- -------------- ------ --------------- -------------- -----
Group operating profit 182 (26) 156 117 (20) 97
------------------------ ---- --------------- -------------- ------ --------------- -------------- -----
(1) During the year there was an underlying impairment charge of
GBPnil (2022: GBP2m) for property, plant and equipment and other
intangible assets included in distribution costs. Other impairment
charges are included in non-underlying items. See Note 4.
(2) Other income includes remeasurement of right-of-use assets,
insurance recoveries and other property related income.
GBPm 2023 2022
------------------------------------------- ----- -----
Cost of inventories recognised as
an expense 682 538
Write-down of inventories in the
year(3) 3 2
Depreciation of property, plant and
equipment 42 37
Depreciation of right-of-use assets
- land and buildings 101 78
- other 3 3
Amortisation of intangible assets 14 13
Impairment of property, plant and
equipment 4 7
Impairment of right-of-use assets 15 8
Impairment of intangibles - 1
(Income)/expenses relating to leasing:
- expense relating to short-term
leases 22 17
- expense relating to variable lease
payments not included in the measurement
of the lease liability 29 29
- income relating to Covid-19 rent
reductions - (5)
Other occupancy costs 49 59
Staff costs 367 293
-------------------------------------------- ----- -----
(3) Write-down of inventories in the year are included within
the amounts disclosed as Cost of inventories recognised as an
expense, and recognised in Cost of sales.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
4. Non-underlying items
Items which are not considered part of the normal operations of
the business, are non-recurring or are considered exceptional
because of their size, nature or incidence, are treated as
non-underlying items and disclosed separately. Further details of
the non-underlying items are included in Note 1, and in the
Financial review on page 11.
GBPm 2023 2022
------------------------------------------- ----- -----
Amortisation of acquired intangible
assets 3 3
Impairment of assets
* property, plant and equipment 4 5
* right-of-use assets 15 8
Provisions for onerous contracts 3 -
Costs associated with pensions 1 -
Costs related to cyber incident - 4
-------------------------------------------- ----- -----
Non-underlying items, included in
operating profit 26 20
Finance costs associated with refinancing 1 -
Non-underlying items, before tax 27 20
Tax credit on non-underlying items (5) (4)
-------------------------------------------- ----- -----
Non-underlying items, after tax 22 16
-------------------------------------------- ----- -----
Non-underlying items recognised in the year are as follows:
Amortisation of acquired intangible assets
Amortisation of acquired intangible assets primarily relates to
the MRG and InMotion brands (see Note 11).
Impairment of property, plant and equipment and right-of-use
assets and provisions for onerous contracts
The Group has carried out an assessment for indicators of
impairment across the store portfolio. Where an indicator of
impairment has been identified, an impairment review has been
performed to compare the value-in-use of store cash generating
units, based on management's assumptions regarding likely future
trading performance, to the carrying value of the cash-generating
unit as at 31 August 2023. As a result of this exercise, a charge
of GBP19m (2022: GBP13m) was recorded within non-underlying items
for impairment of retail store assets, of which GBP4m (2022: GBP5m)
relates to property, plant and equipment and GBP15m (2022: GBP8m)
relates to right-of-use assets. The majority of the impairment of
right-of-use assets relates to the difference between the
incremental borrowing rate used to establish the right-of-use
assets and the WACC rate used to discount the future cash flows of
certain stores in Spain. Refer to Note 12 for details of impairment
of store cash-generating units.
The impairment recognised on a pre-IFRS 16 basis is provided in
the Glossary on page 44.
A charge of GBP3m has been recognised in the income statement to
provide for the unavoidable costs of continuing to service a
non-cancellable contract. This provision will be utilised over the
next three financial years.
Costs associated with pensions
Professional fees of GBP1m (2022: GBPnil) have been incurred
related to the pension scheme's purchase of a bulk annuity
insurance policy as described in Note 16.
Costs associated with refinancing
A charge of GBP1m (2022: GBPnil) has been included in
non-underlying items to derecognise the carrying value of
unamortised fees in respect of the extinguished term loan and
revolving credit facility. See Note 9.
Other prior year non-underlying items
Other non-underlying items in the prior year included costs of
GBP4m incurred due to a cyber security incident in relation to one
of the Group's websites. This includes impairment of software
assets of GBP1m, third party consultancy support and legal and
other costs.
A tax credit of GBP5m (2022: GBP4m) has been recognised in
relation to non-underlying items.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
5. Finance costs
GBPm 2023 2022
------------------------------------ ----- -----
Interest payable on bank loans and
overdrafts 12 9
Interest on convertible bonds 14 14
Interest on lease liabilities 19 11
Cost associated with refinancing 1 -
46 34
------------------------------------ ----- -----
Costs associated with refinancing are included in non-underlying
items (see Note 4).
6. Income tax expense
GBPm 2023 2022
--------------------------------------------- ----- -----
Tax on profit 13 6
Blended standard rate of UK corporation tax
21.5% (2022: 19.0%)
Adjustment in respect of prior years (2) -
--------------------------------------------- ----- -----
Total current tax expense 11 6
--------------------------------------------- ----- -----
Deferred tax - current year 19 8
Deferred tax - prior year (3) -
--------------------------------------------- ----- -----
Tax on profit before non-underlying items 27 14
--------------------------------------------- ----- -----
Tax on non-underlying items - deferred tax (5) (4)
--------------------------------------------- ----- -----
Total tax on profit 22 10
--------------------------------------------- ----- -----
Reconciliation of the taxation charge
GBPm 2023 2022
------------------------------------------------- ----- -----
Tax on profit at blended standard rate of
UK corporation tax 21.5% (2022: 19.0%) 24 12
Tax effect of items that are not deductible
or not taxable in determining taxable profit (3) -
Derecognition / (recognition) of deferred
tax balances 7 (1)
Differences in overseas tax rates (1) (1)
Adjustment in respect of prior years - current (2) -
tax
Adjustment in respect of prior years - deferred (3) -
tax
------------------------------------------------- ----- -----
Total income tax charge 22 10
------------------------------------------------- ----- -----
The effective tax rate, before non-underlying items, is 19 per
cent (2022: 17 per cent).
The UK corporation tax rate is 25 per cent. Up to the 1 April
2023 the corporation tax rate was 19 per cent.
On 20 June 2023, Finance (No.2) Act 2023 was substantively
enacted in the UK, introducing a global minimum effective tax rate
of 15%. The legislation implements a domestic top-up tax and a
multinational top-up tax, effective for accounting years starting
on or after 31 December 2023. The Group has applied the exemption
under IAS 12 to recognising and disclosing information about
deferred tax assets and liabilities related to top-up income taxes.
This will be applicable for the year ending 31 August 2025.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
7. Dividends
Amounts paid and recognised as distributions to shareholders in
the year are as follows:
GBPm 2023 2022
---------------------------------------------------- ---- ----
Dividends
Final dividend for the year ended 31 August 2022 of
9.1p per ordinary share (2022: nil) 12 -
Interim dividend for the year ended 31 August 2023
of 8.1p per ordinary share (2022: nil) 10 -
---------------------------------------------------- ---- ----
22 -
---------------------------------------------------- ---- ----
The Board has proposed a final dividend of 20.8p per share,
amounting to a final dividend of GBP27m, which is not included as a
liability in these financial statements and, subject to shareholder
approval, will be paid on 1 February 2024 to shareholders
registered at the close of business on 12 January 2024.
8. Earnings per share
a) Earnings
GBPm 2023 2022
------------------------------------------- ----- -----
Profit for the year, attributable
to equity holders of the parent 79 47
-------------------------------------------- ----- -----
Non-underlying items, after tax (Note
4) 22 16
-------------------------------------------- ----- -----
Profit for the year before non-underlying
items, attributable to equity holders
of the parent 101 63
-------------------------------------------- ----- -----
Weighted average share capital
b)
Millions 2023 2022
----------------------------------------- ----- -----
Weighted average ordinary shares
in issue 130 130
Less weighted average ordinary shares - -
held in ESOP Trust
----------------------------------------- ----- -----
Weighted average shares in issue
for earnings per share 130 130
Add weighted average number of ordinary
shares under option 2 2
Weighted average ordinary shares
for diluted earnings per share 132 132
------------------------------------------ ----- -----
c) Basic and diluted earnings per share
Pence 2023 2022
--------------------------------- ----- -----
Basic earnings per share 60.8 36.2
----------------------------------- ----- -----
Adjustment for non-underlying
items 16.9 12.3
----------------------------------- ----- -----
Basic earnings per share before
non-underlying items 77.7 48.5
----------------------------------- ----- -----
Diluted earnings per share 59.8 35.6
----------------------------------- ----- -----
Adjustment for non-underlying
items 16.7 12.1
----------------------------------- ----- -----
Diluted earnings per share
before non-underlying items 76.5 47.7
----------------------------------- ----- -----
Diluted earnings per share takes into account various share
awards and share options including SAYE schemes, which are expected
to vest, and for which a sum below fair value will be paid.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
8. Earnings per share (continued)
As at 31 August 2023 the convertible bond has no dilutive effect
as the inclusion of these potentially dilutive shares would improve
earnings per share (31 August 2022: improve earnings per
share).
The calculation of earnings per share on a pre-IFRS 16 basis is
provided in the Glossary on page 44.
9. Analysis of net debt
Movement in net debt can be analysed as follows:
Sub-total
Liabilities
Revolving from
Convertible credit financing Cash and Net
GBPm Term loans bonds facility Leases activities cash equivalents debt
--------------------- ----------- ----------- ---------- ------ ------------- ------------------ ------
At 1 September
2022 (132) (292) - (577) (1,001) 132 (869)
Other non-cash
movements (1) (9) - (148) (158) - (158)
Other cash movements 133 - (84) 137 186 (74) 112
Currency translation - - - 22 22 (2) 20
At 31 August 2023 - (301) (84) (566) (951) 56 (895)
Sub-total
Liabilities
Revolving from
Convertible credit financing Cash and
GBPm Term loans bonds facility Leases activities cash equivalents Net debt
---------------------- ----------- ----------- ---------- ------ ------------- ------------------ ---------
At 1 September
2021 (132) (283) - (470) (885) 130 (755)
Other non-cash
movements - (9) - (184) (193) - (193)
Other cash movements - - - 107 107 - 107
Currency translation - - - (30) (30) 2 (28)
At 31 August 2022 (132) (292) - (577) (1,001) 132 (869)
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
9. Analysis of net debt (continued)
An explanation of Alternative Performance Measures, including
Net debt on a pre-IFRS 16 basis, is provided in the Glossary on
page 44.
Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and
short-term bank deposits with an original maturity of three months
or less. The carrying amount of these assets approximates to their
fair value.
Lease liabilities
Non-cash movements in lease liabilities mainly relate to new
leases, modifications and remeasurements in the year.
Term loans and revolving credit facilities
On 14 June 2023 the Group announced new financing arrangements.
The Group's existing lending facilities, comprising a GBP250m
revolving credit facility ('RCF') and a term loan were cancelled
and repaid. The Group's four-year committed GBP133m term loan with
Santander UK PLC, Barclays Bank PLC, BNP Paribas, J.P. Morgan
Securities PLC and HSBC UK Bank PLC, was repaid as part of the
above refinancing. Instalments of GBP20m were paid prior to the
repayment.
This repayment was funded by drawings under new facilities
consisting of a GBP400m RCF (the 'New RCF'). The New RCF is for a
five-year term due to mature on 13 June 2028, with two uncommitted
extension options of one year each, which would, subject to lender
approval, extend the tenor to six or seven years if exercised. The
New RCF is provided by a syndicate of banks: Barclays Bank PLC, BNP
Paribas, Citibank N.A. London Branch, Fifth Third Bank National
Association, HSBC UK Bank PLC, JP Morgan Securities PLC, PNC
Capital Markets LLC, Banco Santander SA London Branch and
Skandinaviska Enskilda Banken AB (PUBL). Utilisation is interest
bearing at a margin over SONIA. As at 31 August 2023, the Group has
drawn down GBP84m on the New RCF (2022: GBPnil, on the RCF).
Transaction costs of GBP4m relating to the New RCF have been
capitalised and are amortised to the Income statement on a
straight-line basis.
Convertible bonds
The Group has issued GBP327m (2022: GBP327m) guaranteed senior
unsecured convertible bonds due in 2026. The bond covers a
five-year term beginning on 7 May 2021 with a 1.625 per cent per
annum coupon payable semi-annually in arrears in equal instalments.
The bonds are convertible into new and/or existing ordinary shares
of WH Smith PLC. The initial conversion price was set at GBP24.99
representing a premium of 40 per cent above the reference share
price on 28 April 2021 (GBP17.85). The conversion price at 31
August 2023 was GBP24.7032. If not previously converted, redeemed
or purchased and cancelled, the bonds will be redeemed at par on 7
May 2026.
The convertible bond is a compound financial instrument,
consisting of a financial liability component and an equity
component, representing the value of the conversion rights. The
initial fair value of the liability portion of the convertible bond
was determined using a market interest rate for an equivalent
non-convertible bond at the issue date. The liability is
subsequently recognised on an amortised cost basis using the
effective interest rate method until extinguished on conversion or
maturity of the bonds. The remainder of the proceeds was allocated
to the conversion option and recognised in equity (Other reserves),
and not subsequently remeasured. As a result, GBP286m was initially
recognised as a liability in the balance sheet on issue and the
remainder of the proceeds of GBP41m, which represents the option
component, was recognised in equity.
Transaction costs of GBP6m were allocated between the two
components and the element relating to the debt component of GBP5m
is amortised through the effective interest rate method. The issue
costs apportioned to the equity component of GBP1m have been
deducted from equity.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
10. Cash generated from operating activities
GBPm 2023 2022
Group operating profit 156 97
Depreciation of property, plant and equipment 42 37
Impairment of property, plant and equipment 4 7
Amortisation of intangible assets 14 13
Impairment of intangible assets - 1
Depreciation of right-of-use assets 104 81
Impairment of right-of-use assets 15 8
Non-cash change in lease liabilities - (5)
Share-based payments 12 9
Gain on remeasurement of leases (5) (4)
Other non-cash items (incl. foreign exchange) 7 (12)
Increase in inventories (12) (56)
Increase in receivables (22) (42)
(Decrease)/increase in payables (15) 88
Pension funding - (2)
Movement on provisions (through utilisation
or income statement) 2 (1)
Cash generated from operating activities 302 219
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
11. Intangible assets
Brands
and franchise Tenancy
GBPm Goodwill contracts rights Software Total
Cost:
At 1 September 2022 471 50 13 114 648
Additions - - - 16 16
Foreign exchange (35) (4) - (2) (41)
At 31 August 2023 436 46 13 128 623
Accumulated amortisation:
At 1 September 2022 - 12 8 85 105
Amortisation charge - 3 - 11 14
Foreign exchange - (1) - - (1)
At 31 August 2023 - 14 8 96 118
Net book value at 31
August 2023 436 32 5 32 505
Cost:
At 1 September 2021 406 42 13 102 563
Additions - - - 13 13
Disposals - - - (2) (2)
Foreign exchange 65 8 - 1 74
At 31 August 2022 471 50 13 114 648
Accumulated amortisation:
At 1 September 2021 - 7 8 75 90
Amortisation charge - 3 - 10 13
Impairment charge - - - 1 1
Disposals - - - (2) (2)
Foreign exchange - 2 - 1 3
At 31 August 2022 - 12 8 85 105
Net book value at 31 August
2022 471 38 5 29 543
Goodwill of US$64m (GBP50m) (2022: US$70m / GBP60m) relating to
the acquisition of the InMotion Entertainment Group of companies in
2018 is expected to be deductible for tax purposes in the
future.
The carrying value of goodwill is allocated to the segmental
businesses as follows:
GBPm 2023 2022
Travel UK 272 295
North America 122 132
Rest of the World 27 29
Total Travel 421 456
High Street 15 15
436 471
Included within Tenancy rights are certain assets that are
considered to have an indefinite life of GBP4m (2022: GBP4m),
representing certain rights under tenancy agreements, which include
the right to renew leases, therefore no amortisation has been
charged. Management has determined that the useful economic life of
these assets is indefinite because the Group can continue to occupy
and trade from certain premises for an indefinite period. These
assets are reviewed annually for indicators of impairment.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
11. Intangible assets (continued)
Impairment of goodwill and intangible assets
The Group tests goodwill for impairment annually or where there
is an indication that goodwill might be impaired. For impairment
testing purposes, goodwill is allocated to groups of CGUs in a
manner that is consistent with our operating segments, as this
reflects the lowest level at which goodwill is monitored. All
goodwill has arisen on acquisitions of groups of retail stores.
These acquisitions are then integrated into the Group's operating
segments as appropriate. Acquired brands are considered together
with goodwill for impairment testing purposes, and are therefore
considered annually for impairment.
Goodwill and acquired brands have been tested for impairment by
comparing the carrying amount of each group of CGUs, including
goodwill and acquired brands, with the recoverable amount
determined from value-in-use calculations. The value-in use of each
group of CGUs has been calculated using cash flows derived from the
Group's latest Board-approved budget and three year plan, initially
extrapolated to five years. The forecasts reflect knowledge of the
current market, together with the Group's expectations on the
future achievable growth and committed store openings. Cash flows
beyond the initial forecast period are extrapolated using estimated
long-term growth rates.
For certain groups of CGUs, additional adjustments to cash flows
have been made during the extrapolation process for an extended
period of up to 15 years before calculating a terminal value. This
extended period of time is required to establish a normalised cash
flow base on which a terminal value calculation can be
appropriately calculated. The main reasons for cash flow
adjustments include the need to forecast lease renewals under IFRS
16, and the unwinding of certain cash flow benefits arising from
acquisitions in North America.
The key assumptions on which the forecast three-year cash flows
of the CGUs are based include revenue and the pre-tax discount
rate. Other assumptions in the model relate to gross margin, cost
inflation and longer-term growth rates:
-- The values assigned to each of the revenue, product mix and
operating cost assumptions were determined based on the
extrapolation of historical trends within the Group and external
information on expected future trends in the travel and high street
retail sectors.
-- The pre-tax discount rates are derived from the Group's
weighted average cost of capital, which has been calculated using
the capital asset pricing model, the inputs of which include a
risk-free rate, equity risk premium, Group size premium and a risk
adjustment (beta). Country-specific discount rates were not
considered to be materially different to the Group rate. The
pre-tax discount rate used in the calculations was 13.2 per cent
(2022: 11.9 per cent).
-- The long-term growth rate assumptions are between 0 per cent
and 2 per cent (2022: 0 per cent and 2 per cent).
The immediately quantifiable impacts of climate change and costs
expected to be incurred in connection with our net zero
commitments, are included within the Group's budget and three year
plan which have been used to support the impairment reviews, with
no material impact on cash flows.
The value-in-use estimates indicated that the recoverable amount
of goodwill exceeded the carrying value for each group of CGUs. As
a result, no impairment has been recognised in respect of the
carrying value of goodwill in the year (2022: GBPnil).
As disclosed in Note 1, Accounting policies, the forecast cash
flows used within the impairment model are based on
assumptions which are sources of estimation uncertainty and it
is possible that significant changes to these assumptions could
lead to an impairment of goodwill and acquired brands. Given the
inherent uncertainties due to challenges in the macroeconomic
environment, management have considered a range of sensitivities on
each of the key assumptions, with other variables held constant.
The sensitivities include applying increases in the discount rate
by 2 per cent and reductions in the long-term growth rates to 0 per
cent. Under these severe scenarios, the estimated recoverable
amount of goodwill and acquired brands still exceeded the carrying
value.
Furthermore, outputs of the quantitative climate change scenario
analysis have also been taken into consideration in the sensitivity
analysis, and has shown that climate change is not considered to be
a key driver in determining the outcome.
The sensitivity analysis showed that no reasonably possible
change in assumptions would lead to an impairment.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
12. Property, plant and equipment
Land and buildings
Freehold Leasehold Fixtures Equipment
GBPm Properties improvements and fittings and vehicles Total
Cost or valuation:
At 1 September 2022 18 329 232 127 706
Additions - 63 24 19 106
Reclassifications - - 5 (5) -
Foreign exchange - (7) (7) (1) (15)
At 31 August 2023 18 385 254 140 797
Accumulated depreciation:
At 1 September 2022 10 230 155 92 487
Depreciation charge - 20 15 7 42
Impairment charge - 3 - 1 4
Reclassifications - 1 (1) - -
Foreign exchange - (2) (3) (1) (6)
At 31 August 2023 10 252 166 99 527
Net book value at 31 August
2023 8 133 88 41 270
Cost or valuation:
At 1 September 2021 18 290 196 110 614
Additions - 32 29 16 77
Disposals - (3) (1) (1) (5)
Foreign exchange - 10 8 2 20
At 31 August 2022 18 329 232 127 706
Accumulated depreciation:
At 1 September 2021 10 206 140 84 440
Depreciation charge - 19 11 7 37
Impairment charge - 4 2 1 7
Disposals - (3) (1) (1) (5)
Foreign exchange - 4 3 1 8
At 31 August 2022 10 230 155 92 487
Net book value at 31 August
2022 8 99 77 35 219
Impairment of property, plant and equipment
For impairment testing purposes, the Group has determined that
each store is a separate CGU or in some cases a group of stores is
considered to be a CGU where the stores do not generate largely
independent cash inflows. CGUs are tested for impairment at the
balance sheet date if any indicators of impairment have been
identified. The identified indicators include loss-making stores,
stores earmarked for closure and under-performance of individual
stores versus forecast.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
12. Property, plant and equipment (continued)
Impairment of property, plant and equipment (continued)
For those CGUs where an indicator of impairment has been
identified, property, plant and equipment and right-of-use assets
have been tested for impairment by comparing the carrying amount of
the CGU with its recoverable amount determined from value-in-use
calculations. It was determined that value-in-use was higher than
fair value less costs to sell.
The value-in-use of CGUs is calculated using discounted cash
flows derived from the Group's latest Board-approved budget and
three-year plan, and reflects historic performance and knowledge of
the current market, together with the Group's views on the future
achievable growth for these specific stores. Cash flows beyond the
forecast period are extrapolated using growth rates and inflation
rates appropriate to each store's location. Cash flows have been
included for the remaining lease life for the specific store. These
growth rates do not exceed the long-term growth rate for the
Group's retail businesses in the relevant territory. Where stores
have a short remaining lease life, an extension to the lease has
been assumed where management consider it likely that an extension
will be granted. The immediately quantifiable impacts of climate
change and costs expected to be incurred in connection with our net
zero commitments, are included within the Group's budget and three
year plan which have been used to support the impairment reviews,
with no material impact on cash flows. The useful economic lives of
store assets are short in the context of climate change scenario
models therefore no medium to long-term effects have been
considered.
The key assumptions on which the forecast three-year cash flows
of the CGUs are based include revenue and the pre-tax discount
rate. Other assumptions in the model relate to gross margin, cost
inflation and longer-term growth rates. In developing these
forecasts, management have used available information, including
historical knowledge of the store level cash flows.
The pre-tax discount rates are derived from the Group's weighted
average cost of capital, which has been calculated using the
capital asset pricing model, the inputs of which include the
risk-free rate, equity risk premium, Group size premium and a risk
adjustment (beta). Country-specific discount rates were not
considered to be materially different to the Group rate. The
pre-tax discount rate used in the calculations was 13.2 per cent
(2022: 11.9 per cent).
Where the value-in-use was less than the carrying value of the
CGU, an impairment of property, plant and equipment and
right-of-use assets was recorded. These stores were impaired to
their recoverable amount of GBP34m, which is their carrying value
at year end. The Group has recognised an impairment charge of GBP4m
(2022: GBP7m) to property, plant and equipment, no impairment to
software (2022: GBP1m) and GBP15m (2022: GBP8m) to right-of-use
assets. The majority of the impairment of right-of-use assets
relates to the difference between the incremental borrowing rate
used to establish the right-of-use assets and the WACC rate used to
discount the future cash flows of certain stores in Spain.
Impairments of GBP19m (2022: GBP14m) have been presented as
non-underlying items in the current year (see Note 4).
As disclosed in Note 1, Basis of preparation, the forecast cash
flows used within the impairment model are based on assumptions
which are sources of estimation uncertainty and changes to these
assumptions could lead to further impairments to assets. As a
result, the Group has applied certain sensitivities in isolation to
demonstrate the impact on the impairment charge of changes in key
assumptions. An increase of 1 per cent in the discount rate has
been modelled and would have resulted in an increase in the
impairment charge of GBP1m across intangible assets, property,
plant and equipment and right of use assets.
The impairment assessment has also been performed on a pre-IFRS
16 basis. See Glossary on page 44.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
13. Right-of-use assets
Land and
GBPm buildings Equipment Total
At 1 September 2022 440 6 446
Additions 93 - 93
Modifications and remeasurements 41 1 42
Depreciation charge (101) (3) (104)
Impairment charge (15) - (15)
Effect of movements in foreign exchange
rates (18) - (18)
Net book value at 31 August 2023 440 4 444
Land and
GBPm buildings Equipment Total
At 1 September 2021 319 9 328
Additions 160 - 160
Modifications and remeasurements 25 - 25
Disposals (2) - (2)
Depreciation charge (78) (3) (81)
Impairment charge (8) - (8)
Effect of movements in foreign exchange
rates 24 - 24
Net book value at 31 August 2022 440 6 446
Impairment of right-of-use assets
Right-of-use assets of GBP15m (2022: GBP8m) have been impaired
in the year. This impairment charge has been presented in
non-underlying items (see Note 4). The approach to impairment
testing is described in detail in Note 12, Property, plant and
equipment.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
14. Lease liabilities
Land and
GBPm buildings Equipment Total
At 1 September 2022 574 3 577
Additions 91 - 91
Modifications and remeasurements 39 1 40
Disposals (2) - (2)
Interest 19 - 19
Payments (135) (2) (137)
Effect of movements in foreign exchange
rates (22) - (22)
At 31 August 2023 564 2 566
Land and
GBPm buildings Equipment Total
At 1 September 2021 463 7 470
Additions 159 - 159
Modifications and remeasurements 18 - 18
Disposals (4) - (4)
Interest 11 - 11
Payments (103) (4) (107)
Effect of movements in foreign exchange
rates 30 - 30
At 31 August 2022 574 3 577
GBPm 2023 2022
Analysis of total lease liabilities:
Non-current 450 446
Current 116 131
Total 566 577
The Group leases land and buildings for its retail stores,
distribution centres, storage locations and office property. These
leases have an average remaining lease term of 4 years. Some leases
include an option to break before the end of the contract term or
an option to renew the lease for an additional term after the end
of the term. Management assess the lease term at inception based on
the facts and circumstances applicable to each property.
Other leases are mainly forklift trucks for the retail stores
and distribution centres, office equipment and vehicles. These
leases have an average remaining lease term of 3 years.
The Group reviews the retail lease portfolio on an ongoing
basis, taking into account retail performance and future trading
expectations. The Group may exercise extension options, negotiate
lease extensions or modifications. In other instances, the Group
may exercise break options, negotiate lease reductions or decide
not to negotiate a lease extension at the end of the lease term.
Certain property leases contain rent review terms that require rent
to be adjusted on a periodic basis which may be subject to market
rent or increases in inflation measurements.
Many of the Group's property leases, particularly in Travel
locations, also incur payments based on a percentage of revenue
(variable lease payments) achieved at the location. In line with
IFRS 16, variable lease payments which are not based on an index or
rate are not included in the lease liability. See Note 3 for the
expense charged to the Income statement relating to variable lease
payments not included in the measurement of the lease
liability.
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
14. Lease liabilities (continued)
In response to the Covid-19 pandemic, an amendment was issued to
IFRS 16 in June 2020 and further extended in March 2021. This
amendment (practical expedient) allows the impact on the lease
liability of temporary rent reductions/waivers affecting rent
payments due on or before June 2022, to be recognised in the Income
statement in the period they are received, rather than as lease
modifications, which would require the remeasurement of the lease
liability using a revised discount rate with a corresponding
adjustment to the right-of-use asset. The Group has applied this
practical expedient to all Covid-19 rent reductions/waivers that
meet the requirements of the amendment. This resulted in a credit
to the Income statement of GBP5m for the year ended 31 August
2022.
Details of Income statement charges for leases are set out in
Note 3. The right-of-use asset categories on which depreciation is
incurred are presented in Note 13. Interest expense incurred on
lease liabilities is presented in Note 5.
The total cash outflow for leases in the financial year was
GBP181m (2022: GBP150m). This includes cash outflow for short-term
leases of GBP19m (2022: GBP16m) and variable lease payments (not
included in the measurement of lease liability) of GBP25m (2022:
GBP28m).
15. Contingent liabilities and capital commitments
GBPm 2023 2022
----- -----
Bank guarantees and guarantees in respect of
lease agreements 61 51
Bank guarantees are principally in favour of landlords and could
be drawn down on by landlords in the event that the Group does not
settle its contractual obligations under lease or other
agreements.
Contracts placed for future capital expenditure approved by the
directors but not provided for in these financial statements amount
to GBP27m (2022: GBP30m).
GBPm 2023 2022
----- -----
Commitments in respect of property, plant and
equipment 25 28
Commitments in respect of other intangible
assets 2 2
27 30
WH Smith PLC
Notes to the Financial Statements
For the year ended 31 August 2023
16. Retirement benefit obligations
WH Smith PLC has operated a number of defined benefit and
defined contribution pension plans. The main pension arrangements
for employees are operated through a defined benefit scheme,
WHSmith Pension Trust, and a defined contribution scheme, WHSmith
Retirement Savings Plan.
WHSmith Pension Trust
The WHSmith Pension Trust Final Salary Section is a funded final
salary defined benefit scheme; it was closed to defined benefit
service accrual on 2 April 2007 and has been closed to new members
since 1996. Benefits are based on service and salary at the date of
closure or leaving service, with increases currently based on CPI
inflation in deferment and RPI inflation in payment.
The WHSmith Pension Trust is independent of the Group and is
administered by a Trustee. The Trustee is responsible for the
administration and management of the scheme on behalf of the
members in accordance with the Trust Deed and relevant legislation.
An Investment Committee of the Trustees to the scheme meets
regularly to review the performance of the investment managers and
the scheme as a whole. The Group is represented on this
Committee.
In August 2022 the WH Smith Pension Trust purchased a bulk
annuity insurance policy from Standard Life, part of Phoenix Group,
insuring all liabilities to pay all future defined benefit pensions
to the Trust's 12,950 members and any eligible dependants. The
insurance policy was purchased using most of the existing assets
held within the Trust, without the need for the Group to make any
additional cash contributions. The bulk annuity policy matches the
Trust's cash flow benefit obligations to its members, removing
longevity and other demographic risks as well as investment,
interest rate and inflation risks.
As a result of this comprehensive risk-removal, WH Smith PLC is
no longer required to make any future cash contributions into the
Trust regarding defined benefit liabilities. During the prior year
ended 31 August 2022, prior to the completion of the buy-in
transaction, the Group made a contribution of GBP2m to the scheme
in accordance with the agreed funding schedule.
The Group does not have an unconditional right to derive
economic benefit from any surplus in the scheme, as the Trustees
retain the right to enhance benefits under the Trust deed, and
therefore the present value of the economic benefits of any IAS 19
surplus in the pension scheme available on a reduction of future
contributions is GBPnil (2022: GBPnil). Accordingly, no balance
sheet asset or liability exists in relation to this scheme. The
income statement impact of this scheme is limited to administrative
costs only.
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2023
Alternative performance measures
In reporting financial information, the Group presents
alternative performance measures, 'APMs', which are not defined or
specified under the requirements of IFRS.
The Group believes that these APMs, which are not considered to
be a substitute for or superior to IFRS measures, provide
stakeholders with additional useful information on the underlying
trends, performance and position of the Group and are consistent
with how business performance is measured internally. The
alternative performance measures are not defined by IFRS and
therefore may not be directly comparable with other companies'
alternative performance measures.
Non-underlying items
The Group has chosen to present a measure of profit and earnings
per share which excludes certain items, that are considered
non-underlying and exceptional due to their size, nature or
incidence, and are not considered to be part of the normal
operations of the Group. These measures exclude the financial
effect of non-underlying items which are considered exceptional or
occur infrequently such as, inter alia, restructuring and
transformation costs linked to a Board agreed programme, costs
relating to business combinations, impairment charges and other
property costs, significant items relating to pension schemes, and
impairment charges and items meeting the definition of
non-underlying specifically related to the Covid-19 pandemic, and
the related tax effect of these items. In addition, these measures
exclude the income statement impact of amortisation of intangible
assets acquired in business combinations, which are recognised
separately from goodwill. This amortisation is not considered to be
part of the underlying operating costs of the business and has no
associated cash flows.
The Group believes that separate disclosure of these items
provide additional useful information to users of the financial
statements to enable a better understanding of the Group's
underlying financial performance.
IFRS 16
The Group adopted IFRS 16 in the year ended 31 August 2020. IFRS
16 superseded the lease guidance under IAS 17 and the related
interpretations. IFRS 16 sets out the principles for the
recognition, measurement, presentation and disclosure of leases and
requires lessees to account for all leases under a single
on-balance sheet model as the distinction between operating and
finance leases is removed. The only exceptions are short-term and
low-value leases. At the commencement date of a lease, a lessee
will recognise a lease liability for the future lease payments and
an asset (right-of-use asset) representing the right to use the
underlying asset during the lease term. Lessees are required to
separately recognise the interest expense on the lease liability
and the depreciation expense on the right-of-use asset.
Management have chosen to exclude the effects of IFRS 16 for the
purposes of narrative commentary on the Group's performance and
financial position in the Group Overview. The effect of IFRS 16 on
the Group income statement is to front-load total lease expenses,
being higher at the beginning of a lease contract, and lower
towards the end of a contract, and this is further influenced by
timing of renewals and contract wins, and lengths of contracts. As
a result of these complexities, IFRS 16 measures of profit and
EBITDA (used as a proxy for cash generation) do not provide
meaningful KPIs or measures for the purposes of assessing
performance, concession quality or for trend analysis, therefore
management continue to use pre-IFRS 16 measures internally.
The impact of the implementation of IFRS 16 on the Income
statement and Segmental information is provided in Notes A1 and A2
below. There is no impact on cash flows, although the
classification of cash flows has changed, with an increase in net
cash flows from operating activities being offset by a decrease in
net cash flows from financing activities, as set out in Note A9
below. The balance sheet as at 31 August 2023 both including and
excluding the impact of IFRS 16 is shown in Note A10 below.
Leases policies applicable prior to 1 September 2019
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
Assets held under finance leases are recognised as assets of the
Group at their fair value determined at the inception of the lease
or, if lower, at the present value of the minimum lease payments.
The corresponding liability to the lessor is included in the
balance sheet as a finance lease obligation. These assets are
depreciated over their expected useful lives on the same basis as
owned assets or, where shorter, over the term of the relevant
lease. Lease payments are apportioned between finance charges and a
reduction of the lease obligations so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance
charges are recognised directly in the income statement.
Rentals payable and receivable under operating leases are
charged to the income statement on a straight-line basis over the
term of the relevant lease. Benefits received and receivable as an
incentive to enter into an operating lease are also spread on a
straight-line basis over the lease term. The Group has a number of
lease arrangements in which the rent payable is contingent on
revenue. Contingent rentals payable, based on store revenues, are
accrued in line with revenues generated.
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2023
Definitions and reconciliations
In line with the Guidelines on Alternative Performance Measures
issued by the European Securities and Markets Authority ('ESMA'),
we have provided additional information on the APMs used by the
Group below, including full reconciliations back to the closest
equivalent statutory measure.
Reconciling
Closest equivalent items to
APM IFRS measure IFRS measure Definition and purpose
Income statement measures
Headline measures Various See Notes Headline measures exclude the
A1-A11 impact of IFRS 16 (applying the
principles of IAS 17). Reconciliations
of all Headline measures are provided
in Notes A1 to A12.
Group profit Group profit See Group Group profit before tax and non-underlying
before tax before tax income statement items excludes the impact of non-underlying
and non-underlying and Note items as described below. A reconciliation
items A1 from Group profit before tax and
non-underlying items to Group
profit before tax is provided
on the Group income statement
on page 18, and on a Headline
(pre-IFRS 16) basis in Note A1.
Group profit Group operating See Note Group profit from trading operations
from trading profit 2 and Note and segment trading profit are
operations A2 stated after directly attributable
and segment share-based payment and pension
trading profit service charges and before non-underlying
items, unallocated costs, finance
costs and income tax expense.
A reconciliation from the above
measures to Group operating profit
and Group profit before tax on
an IFRS 16 basis is provided in
Note 2 to the financial statements
and on a Headline (pre-IFRS 16)
basis in Note A2.
Non-underlying None Refer to Items which are not considered
items definition part of the normal operating costs
and see Note of the business, are non-recurring
4 and Note and considered exceptional because
A6 of their size, nature or incidence,
are treated as non-underlying
items and disclosed separately.
The Group believes that the separate
disclosure of these items provides
additional useful information
to users of the financial statements
to enable a better understanding
of the Group's underlying financial
performance. An explanation of
the nature of the items identified
as non-underlying on an IFRS 16
basis is provided in Note 4 to
the financial statements, and
on a Headline (pre-IFRS 16) basis
in Note A6.
Earnings per Earnings per Non-underlying Profit for the year attributable
share before share items, see to the equity holders of the parent
non-underlying Note 7 and before non-underlying items divided
items Note A4 by the weighted average number
of ordinary shares in issue during
the financial year. A reconciliation
is provided on an IFRS 16 basis
in Note 7 and on a Headline (pre-IFRS
16) basis in Note A4.
Headline diluted Earnings per Non-underlying Earnings per share before non-underlying
earnings per share items, see items (defined above) on a pre-IFRS
share Note 7 and 16 basis and assuming no dilutive
Note A4 impact of the convertible bond.
In the year ended 31 August 2023,
on a statutory basis, the bond
is also not dilutive.
Headline EBITDA Group operating Refer to Headline EBITDA is Headline Group
profit definition operating profit before non-underlying
items adjusted for pre-IFRS 16
depreciation, amortisation and
impairment.
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2023
Reconciling
Closest equivalent items to
APM IFRS measure IFRS measure Definition and purpose
Income statement measures (continued)
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 and non-underlying items. See
Note 6 on an IFRS 16 basis, and Notes
A3 and A6 on a pre-IFRS 16 basis.
Fixed charges None Refer to This performance measure calculates
cover definition the number of times Profit before
tax covers the total fixed charges
included in calculating profit or
loss. Fixed charges included in this
measure are net finance charges (excluding
finance charges from IFRS 16 leases)
and net operating lease rentals stated
on a pre-IFRS 16 basis.
The calculation of this measure is
outlined in Note A5.
Gross Gross profit Not applicable Where referred to throughout the Preliminary
margin margin announcement statement, gross margin
is calculated as gross profit divided
by revenue.
Like-for-like Movement in - Revenue Like-for-like revenue is the change
revenue revenue per change from in revenue from stores that have been
the income non like-for-like open for at least a year, with a similar
statement stores selling space at a constant foreign
- Foreign exchange rate.
exchange
impact
Balance sheet measures
Headline Net debt Reconciliation Headline net debt is defined as cash
net debt of net debt and cash equivalents, less bank overdrafts
and other borrowings and both current
and non-current obligations under
finance leases as defined on a pre-IFRS
16 basis. Lease liabilities recognised
as a result of IFRS 16 are excluded
from this measure.
A reconciliation of Net debt on an
IFRS 16 basis provided in Note A8.
Other measures
Free cash Net cash inflow See Note Free cash flow is defined as the net
flow from operating A7 and Group cash inflow from operating activities
activities overview before the cash flow effect of IFRS
16, non-underlying items and pension
funding, less net capital expenditure.
The components of free cash flow are
shown in Note A7 and on page 13, as
part of the Financial review.
Operating Net cash inflow See Group Operating cash flow is defined as
cash flow from operating overview Headline profit before tax and
activities non-underlying items, excluding Headline
depreciation,
amortisation, impairment and other
non-cash items. The
components of Operating cash flow
are shown on page 13, as
part of the Financial review.
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2023
A1. Reconciliation of Headline to Statutory Group operating
profit and Group profit before tax
2023
pre-IFRS 16 basis IFRS 16 Basis
IFRS 16
Headline, Headline adjustments
before non-underlying non-underlying IFRS 16 non-underlying
GBPm items items Headline adjustments items Total
Revenue 1 ,793 - 1 ,793 - - 1,793
Cost of sales ( 682) - ( 682) - - (682)
Gross profit 1 ,111 - 1 ,111 - - 1,111
Distribution costs ( 756) - ( 756) 10 - (746)
Administrative expenses ( 196) - ( 196) (1) - (197)
Other income 10 - 10 4 - 14
Non-underlying items - ( 13) (13) - (13) (26)
Group operating
profit/(loss) 1 69 ( 13) 156 13 (13) 156
Finance costs ( 26) ( 2) (28) (19) 1 (46)
Profit/(loss) before
tax 1 43 ( 15) 128 (6) (12) 110
Income tax (charge)/credit ( 28) 2 (26) 1 3 (22)
Profit/(loss) for
the year 1 15 ( 13) 102 (5) (9) 88
Attributable to:
Equity holders of
the parent 1 06 ( 13) 93 (5) (9) 79
Non-controlling
interests 9 - 9 - - 9
1 15 (13) 102 (5) (9) 88
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2023
A1. Reconciliation of Headline to Statutory Group operating
profit and Group profit before tax (continued)
2022
pre-IFRS 16 basis IFRS 16 Basis
IFRS 16
Headline, Headline adjustments
before non-underlying non-underlying IFRS 16 non-underlying
GBPm items items Headline adjustments items Total
Revenue 1,400 - 1,400 - - 1,400
Cost of sales (538) - (538) - - (538)
Gross profit 862 - 862 - - 862
Distribution costs (604) - (604) 16 - (588)
Administrative expenses (160) - (160) (1) - (161)
Other income - - - 4 - 4
Non-underlying items - (12) (12) - (8) (20)
Group operating
profit/(loss) 98 (12) 86 19 (8) 97
Finance costs (25) - (25) (9) - (34)
Profit/(loss) before
tax 73 (12) 61 10 (8) 63
Income tax (charge)/credit (12) 3 (9) (2) 1 (10)
Profit/(loss) for
the year 61 (9) 52 8 (7) 53
Attributable to:
Equity holders of
the parent 55 (9) 46 8 (7) 47
Non-controlling
interests 6 - 6 - - 6
61 (9) 52 8 (7) 53
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2023
A2. Reconciliation of Headline to Statutory Segmental trading
profit/(loss) and Group profit/(loss) from trading operations
2023
pre-IFRS 16 basis IFRS 16 basis
Headline, Headline
before non-underlying non-underlying IFRS 16
GBPm items items Headline adjustments Total
Travel UK trading profit/(loss) 102 - 102 (1) 101
North America trading profit 49 - 49 3 52
Rest of the World trading profit 13 - 13 - 13
Total Travel trading profit 164 - 164 2 166
High Street trading profit 32 - 32 11 43
Group profit from trading operations 196 - 196 13 209
Unallocated central costs (27) - (27) - (27)
Group operating profit before
non-underlying items 169 - 169 13 182
Non-underlying items - (13) (13) (13) (26)
Group operating profit/(loss) 169 (13) 156 - 156
2022
pre-IFRS 16 basis IFRS 16 basis
Headline, Headline
before non-underlying non-underlying IFRS 16
GBPm items items Headline adjustments Total
Travel UK trading profit 54 - 54 6 60
North America trading profit 31 - 31 2 33
Rest of the World trading profit/(loss) 4 - 4 (1) 3
Total Travel trading profit 89 - 89 7 96
High Street trading profit 33 - 33 12 45
Group profit from trading operations 122 - 122 19 141
Unallocated central costs (24) - (24) - (24)
Group operating profit before
non-underlying items 98 - 98 19 117
Non-underlying items - (12) (12) (8) (20)
Group operating profit/(loss) 98 (12) 86 11 97
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2023
A3. Reconciliation of Headline to Statutory tax
expense/(credit)
2023 2022
Headline Headline
(pre-IFRS IFRS 16 (pre-IFRS IFRS 16
GBPm 16) adjustments Total 16) adjustments Total
Profit before tax and non-underlying
items 143 (6) 137 73 10 83
Tax on profit - Standard
rate of UK corporation tax
21.5% (2022: 19.0%) 14 (1) 13 5 1 6
Adjustment in respect of
prior years (2) - (2) - - -
Total current tax charge/(credit) 12 (1) 11 5 1 6
Deferred tax - current year 19 - 19 7 1 8
Deferred tax - prior year (3) - (3) - - -
Deferred tax - adjustment - - - - - -
in respect of change in tax
rates
Tax charge/(credit) on Headline
profit 28 (1) 27 12 2 14
Tax on non-underlying items - - - - - -
- current tax
Tax on non-underlying items
- deferred tax (2) (3) (5) (3) (1) (4)
Total tax charge/(credit)
on profit 26 (4) 22 9 1 10
A4. Calculation of Headline and Statutory earnings per share
2023 2022
Basic Diluted Diluted
millions EPS EPS Basic EPS EPS
Weighted average shares
in issue 130 132 130 132
2023 2022
Profit Profit
for the for the
year attributable year attributable
to equity to equity
holders holders
of the Basic Diluted of the Diluted
parent EPS EPS parent Basic EPS EPS
GBPm pence pence GBPm pence pence
Headline (pre-IFRS-16 basis)
* Before non-underlying items 106 81.5 80.3 55 42.3 41.7
* Non-underlying items (13) (10.0) (9.8) (9) (6.9) (6.9)
Total 93 71.5 70.5 46 35.4 34.8
IFRS 16 adjustments
* Before non-underlying items (5) (3.8) (3.8) 8 6.2 6.0
* Non-underlying items (9) (6.9) (6.9) (7) (5.4) (5.2)
Total (14) (10.7) (10.7) 1 0.8 0.8
IFRS 16 basis
* Before non-underlying items 101 77.7 76.5 63 48.5 47.7
* Non-underlying items (22) (16.9) (16.7) (16) (12.3) (12.1)
Total 79 60.8 59.8 47 36.2 35.6
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2023
A5. Fixed charges cover
GBPm Note 2023 2022
Headline net finance costs (pre-IFRS 16) A1 26 25
Net operating lease charges (pre-IFRS 16) A11 326 241
Total fixed charges 352 266
Headline profit before tax and non-underlying
items A1 143 73
Headline profit before tax, non-underlying
items and fixed charges 495 339
Fixed charges cover - times 1.4x 1.3x
A6. Non-underlying items on pre-IFRS 16 and IFRS 16 bases
2023 2022
Headline Headline
GBPm (pre-IFRS16) IFRS 16 (pre-IFRS16) IFRS 16
Amortisation of acquired intangible
assets 3 3 3 3
Impairment of assets
* property, plant and equipment 4 4 5 5
* right-of-use assets - 15 - 8
Provisions for onerous contracts 5 3 - -
Costs associated with pensions 1 1 - -
Costs related to cyber incident - - 4 4
Non-underlying items, included
in operating profit 13 26 12 20
Finance costs associated with 1 1 - -
refinancing
Finance costs associated with 1 - - -
onerous contracts
Non-underlying items, before
tax 15 27 12 20
Tax credit on non-underlying
items (2) (5) (3) (4)
Non-underlying items, after
tax 13 22 9 16
Non-underlying items on a pre-IFRS 16 basis are calculated on a
consistent basis with IFRS 16, with the exception of the below
items.
A tax credit of GBP5m (2022: GBP4m) has been recognised in
relation to the above items (GBP2m pre-IFRS 16 (2022: GBP3m)).
Impairment of property, plant and equipment and right-of-use
assets
The impairment charge recognised on a pre-IFRS 16 basis differs
from that recognised under IFRS 16. This is mainly due to a lower
asset base pre-IFRS 16, coupled with lower expected store cash
flows, with rental expenses being included in the forecast cash
flows (treated as financing costs under IFRS 16), and a higher
discount rate. The calculation of the Group's weighted average cost
of capital differs under IFRS 16 versus pre-IFRS 16. The pre-tax
discount rate used in the IFRS 16 calculation was 13.2 per cent
(2022: 11.9) and the pre-tax discount rate used in the pre-IFRS 16
calculation was 13.2 per cent (2022: 14.4).
Right-of-use assets are not recognised on a pre-IFRS 16
basis.
A charge of GBP5m has been recognised on a pre-IFRS 16 basis to
provide for the unavoidable costs of continuing to service a
non-cancellable contract. This provision will be utilised over the
next three financial years.
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2023
A6. Non-underlying items on pre-IFRS 16 and IFRS 16 bases
(continued)
The Group's pre-IFRS 16 property provisions represent the
present value of unavoidable future net lease obligations and
related costs of leasehold property (net of estimated sublease
income and adjusted for certain risk factors) where the space is
vacant, loss-making or currently not planned to be used for ongoing
operations. The unwinding of the discount is treated as an imputed
interest charge. These provisions represent the best estimate of
the liability at the time of the balance sheet date, the actual
liability being dependent on future events such as economic
environment and marketplace demand. Expectations will be revised
each period until the actual liability arises, with any difference
accounted for in the period in which the revision is made.
A7. Free cash flow
GBPm Note 2023 2022
Net cash inflow from operating activities 251 187
Cash flow impact of IFRS 16 A9 (116) (93)
Add back:
* Cash impact of non-underlying items 9 16
* Pension funding - 2
3 -
* Financing arrangement fees
* Other non-cash items (5) 12
Deduct:
* Purchase of property, plant and equipment (106) (70)
* Purchase of intangible assets (16) (13)
Free cash flow 20 41
A8. Headline net debt
The table below shows Headline net debt (pre-IFRS 16). This
includes lease liabilities that were previously presented as
finance leases (applying the principles of IAS 17), and Group
accounting policies as applicable prior to 1 September 2019,
described in the Glossary on page 44), but excludes additional
lease liabilities recognised on application of IFRS 16.
GBPm Note 2023 2022
Borrowings
* Revolving credit facility (84) -
* Convertible bonds (301) (292)
* Bank loans - (132)
* Lease liabilities 14 (566) (577)
Liabilities from financing activities (951) (1,001)
Cash and cash equivalents 56 132
Net debt (IFRS 16) 9 (895) (869)
Add back lease liabilities recognised
under IFRS 16(1) 565 573
Headline net debt (pre-IFRS 16) (330) (296)
(1) Excludes lease liabilities previously recognised as finance
leases on a pre-IFRS 16 basis.
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2023
A9. Cash flow disclosure impact of IFRS 16
There is no impact of IFRS 16 on cash flows, although the
classification of cash flows has changed, with an increase in net
cash flows from operating activities being offset by a decrease in
net cash flows from financing activities.
2023 2022
Headline Headline
(pre-IFRS IFRS 16 (pre-IFRS IFRS 16
GBPm 16) Adjustment IFRS 16 16) Adjustment IFRS 16
Net cash inflows from
operating activities 135 116 251 94 93 187
Net cash outflows from
investing activities (122) - (122) (83) - (83)
Net cash outflows from
financing activities (87) (116) (203) (11) (93) (104)
Net decrease in cash
in the period (74) - (74) - - -
A10. Balance sheet impact of IFRS 16
The balance sheet including and excluding the impact of IFRS 16
is shown below:
2023 2022
Headline Headline
(pre-IFRS IFRS 16 IFRS (pre-IFRS IFRS 16 IFRS
GBPm 16) Adjustment 16 16) Adjustment 16
Goodwill and other intangible
assets 506 (1) 505 544 (1) 543
Property, plant and
equipment 263 7 270 211 8 219
Right-of-use assets - 444 444 - 446 446
Investments in joint
ventures 2 - 2 2 - 2
771 450 1,221 757 453 1,210
Inventories 205 - 205 198 - 198
Payables less receivables (216) (3) (219) (284) 15 (269)
Working capital (11) (3) (14) (86) 15 (71)
Net derivative financial
asset - - - 1 - 1
Net current and deferred
tax assets 45 - 45 54 - 54
Provisions (26) 9 (17) (26) 12 (14)
Operating assets employed 779 456 1,235 700 480 1,180
Net debt (330) (565) (895) (296) (573) (869)
Total net assets 449 (109) 340 404 (93) 311
WH Smith PLC
Glossary (unaudited)
For the year ended 31 August 2023
A11. Like-for-like revenue reconciliation
The reconciling items between like-for-like revenue change and
total revenue change are shown below:
Rest
Travel North of the Travel High
GBPm UK America World Total Street Group
L ike-for-like revenue
change 30% 11% 53% 27% 1% 18%
N et space impact 6% 14% 42% 14% (2)% 8%
F oreign exchange -% 7% 4% 2% -% 2%
Total revenue change 36% 32% 99% 43% (1)% 28%
A12. Operating lease expense
Amounts recognised in Headline Group operating profit on a
pre-IFRS 16 basis are as follows:
GBPm 2023 2022
Net operating lease charges 326 241
In the year ended 31 August 2020, the Group adopted IFRS 16.
IFRS 16 requires lessees to account for all leases under a single
on-balance sheet model as the distinction between operating and
finance leases is removed. In order to provide comparable
information the Group has chosen to present Headline measures of
operating profit and profit before tax, as explained in Note 2
segmental analysis.
The table above presents the pre-IFRS 16 net operating lease
charges, applying the principles of IAS 17, and Group accounting
policies as applicable prior to 1 September 2019, as described in
the Glossary on page 44.
The Group leases various properties under non-cancellable
operating lease agreements. The leases have varying terms,
escalation clauses and renewal rights. The Group has a number of
lease arrangements in which the rent payable is contingent on
revenue. Contingent rentals payable, based on store revenues, are
accrued in line with revenues generated. The average remaining
lease length across the Group is 4 years.
Rentals payable and receivable under operating leases are
charged to the income statement on a straight-line basis over the
term of the relevant lease. Benefits received and receivable as an
incentive to enter into an operating lease are also spread on a
straight-line basis over the lease term.
Temporary rent reductions due to Covid-19, affecting rent
payments due on or before June 2022, have been recognised in the
Income statement in the period they are received.
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END
FR NKFBBDBDBQDK
(END) Dow Jones Newswires
November 09, 2023 02:00 ET (07:00 GMT)
Grafico Azioni Wh Smith (LSE:SMWH)
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