Final Results - Part 1

Smith WH PLC
18 October 2001

                                                                              
PART ONE

18 October 2001
WH SMITH PLC

PRELIMINARY RESULTS ANNOUNCEMENT
FOR THE 12 MONTHS ENDED 31 AUGUST 2001

WH Smith PLC announced today (18 October 2001) its preliminary results
for the 12 months to 31 August 2001.

KEY POINTS

Total sales up 6% to £2.7 billion
- UK Retailing sales up 6% to £1.4bn
- Hodder Headline sales up 10% to £128m
- US Retailing sales up 28% to £245m
- News Distribution sales down 2% to £1.0bn

Profit before tax and exceptional items down 8% to £130 million
- UK Retailing profits up 13% to £89m
- Hodder Headline profits up 13% to £18m
- US Retailing profits down 17% to £10m
- News Distribution profits down 32% to £26m

EPS  before exceptional items and amortisation of goodwill down 6% to 38.6p
EPS  after exceptional items and amortisation of goodwill down 21% to 31.7p

Final dividend maintained at 13p

UK Retailing current trading strong

CHIEF EXECUTIVE'S COMMENTS

Commenting on the results, Richard Handover, Chief Executive said:

'Performances from our UK Retail business and Hodder Headline have
been very pleasing and we are taking immediate action to improve the
performance of the US Travel Retail business, which has been impacted
by the marked slow-down in the US.  We are already seeing improvements
in News Distribution, which has historically proved resilient in
poorer economic periods.

'While the economic outlook is currently difficult to judge, we
continue to be encouraged by the performance of our UK operations.
The Group's defensive qualities and strong foundations give us
confidence in our future prospects.'

Enquiries:
WH Smith PLC
Richard Handover     -  Chief Executive            020 7409 3222
John Warren          -  Finance Director           020 7409 3222
Richard Manhire      -  Investor Relations         020 7514 9686
Louise Evans         -  Media Relations            020 7514 9624

Brunswick                                          020 7404 5959
Timothy Grey
Katya Wright

To see a video interview with Richard Handover, Chief Executive, and
John Warren, Finance Director go to www.whsmithplc.com or
www.cantos.com

CHIEF EXECUTIVE'S REVIEW

Excellent performances from our UK Retail business and Hodder Headline
have been offset by disappointing results from our International
Retail and News Distribution businesses.

UK Retail's strong result was achieved through excellent sales growth
and good cost control.

All of our key product categories had strong growth with books up 4%,
stationery up 5%, entertainment up 11% following weak performance in
the prior year, and news & express up 8%. Exceptional growth from the
entertainment and news & express categories had an adverse impact on
the sales mix and gross margin decreased marginally by 0.2 percentage
points.  The strong sales performance reduced fixed costs as a
percentage of sales and, as a result, the net margin, excluding
Online, increased from 6.5% to 6.8%.

Hodder Headline had another excellent year with double-digit sales and
profit growth. Both consumer and education and consumer titles were
strong during in the year, with a record 43 titles on top 10 best
seller lists in the year.

Our US Retail business had a difficult year due to the overall
slowdown in the US economy, which had an increasingly negative impact
on hotel occupancy rates and passenger numbers throughout the second
half of the year.  Asia Travel Retail was also affected by a slow-down
in the second half.

As expected, News Distribution profits fell during the year due to a
weak magazine market, costs arising from the continued rollout of the
SAP computer system and higher distribution costs in operational costs
were as a result of caused by an the increase ing in the weight of
newspapers.

As a result of the slowdown in Internet growth, Helicon, our digital
reference publisher and Connect2U, our business to business trading
portal, incurred losses of £5m in total, up from £1m in the prior
year. We have consequently reviewed all our Internet activities and
have decided to write-down the investment in our non-WHSmith branded
Internet businesses. The write-down of these investments has resulted
in an exceptional charge of £11m.

EVENTS OCCURING AFTER THE YEAR-END

The exceptional events that have occurred since the year-end have had
a material impact on our US Travel Retail business.  At this early
stage, it is still very difficult to assess accordingly the full year
impact on sales and profitability.  However, we are reviewing all our
operations in both airports and hotels with a view to reducing fixed
costs.

In the light of current trading difficulties in the US, and the
uncertainties in global travel markets generally, we will be taking a
more cautious view of any further international retail expansion.

In July, we announced we had agreed in principle to sell the News
Distribution business to ABN Amro Private Equity Limited for £215m.
We recently announced that we were unable to complete the transaction
at a price that reflected the true value of the business.  We believe
that the decision not to sell is in the best interests of
shareholders.  We incurred £5m of costs during the sale process, which
have been treated as an exceptional charge.

CURRENT TRADING AND OUTLOOK

In the 6 weeks to 13 October 2001, UK Retailing like for like sales
are up 9%, Australia and New Zealand Retailing like for like sales are
up 9% and News Distribution sales are up 4%. Reflecting the impact of
the events of 11 September, US Travel Retailing like for like sales
are down 24%.

The UK Retail business remains the cornerstone of the Group and we
will continue to invest to grow this business.  Hodder Headline is one
of the most profitable and vibrant publishing houses in the UK, with
an excellent track record, and we will continue to drive growth in
this business. Whilst the US business faces extremely challenging
trading conditions in the short term, we see no reason to believe that
this market will not ultimately return to growth.  News Distribution,
in current market circumstances, is expected to trade strongly and
continue its attractive record of cash generation.

FINANCIAL COMMENTARY AND ANALYSIS
YEAR ENDED 31 AUGUST 2001

The financial performance of the core business continues to show good
progress, with UK Retail generating strong sales and growth in profits.
Similarly, Hodder Headline has produced excellent results in its second
full year within the Group.  However the performance by the International
retail businesses and WHSmith News Distribution has been disappointing.

Earnings per share were 31.7p whilst adjusted earnings before exceptional
items and amortisation of goodwill were 38.6p.  Dividends were maintained
at 19.0p.

The Company delivered free cash flow of £64m and finished the year with a
robust balance sheet.

Trading results

The trading results can be summarised as follows:

£m                              2001    2000   Growth %      Comparable
                                                         Sales Growth %
____________________________   _____   _____   ________  ______________
Sales                                                                  
                                                                       
UK Retailing                   1,415   1,330         6%              5%
International Retailing          284     204        39%              1%
____________________________   _____   _____   ________  ______________
Total Retailing                1,699   1,534        11%              5%
Publishing (1,2)                 115     105        10%             10%
WHSmith News Distribution (1)    921     945        -3%             -3%
____________________________   _____   _____   ________  ______________
Total                          2,735   2,584         6%              3%
____________________________   _____   _____   ________  ______________
                                                                       

Operating profit                                      
                                                      
UK Retailing                      89      79       13%
International Retailing            8      12      -33%
____________________________    ____   _____   _______
Total Retailing                   97      91        7%
Publishing (3)                    16      16         -
WHSmith News Distribution (4)     23      37      -38%
____________________________    ____   _____   _______
Total Trading Profit             136     144       -6%
Support Costs                   (12)    (12)         -
Internal Rents                     3       3         -
____________________________    ____   _____   _______
Total Operating Profit           127     135       -6%
Exceptional Items               (16)       -         -
____________________________    ____   _____   _______
                                                     _
Total                            111     135      -17%
____________________________    ____   _____   _______
                                                      

1 excludes sales to other WHS businesses
2 includes Helicon sales £3m (2000; £3m)
3 includes Helicon loss of £2m (2000; £nil)
4 includes Connect2U loss of £3m (2000; £1m)

RETAILING

The results for retailing businesses comprise:

£m                             2001     2000   Growth        Comparable
                                                    %    Sales Growth %
__________________________   ______   ______   ______   _______________
Sales                                                                  
High Street                   1,120    1,058       6%                5%
Europe Travel Retail            287      265       8%                6%
WHSmith Online                    8        7      21%               21%
__________________________   ______   ______   ______   _______________
UK Retailing                  1,415    1,330       6%                5%
USA Travel Retail               245      192      28%                0%
WHSmith ASPAC                                                          
- Asia                           16       12      33%               20%
- Australia / New Zealand        23        -        -                 -
__________________________   ______   ______   ______   _______________
International Retailing         284      204      39%                1%
__________________________   ______   ______   ______   _______________
Total Retailing               1,699    1,534      11%                5%
__________________________   ______   ______   ______   _______________
                                                                       
Operating profit                                                       
High Street                      76       69      10%                  
Europe Travel Retail             20       17      18%                  
WHSmith Online                  (7)      (7)        -                  
__________________________   ______   ______   ______   _______________
UK Retailing                     89       79      13%                  
USA Travel Retail                10       12     -17%                  
WHSmith ASPAC                                                          
- Asia                          (2)        -        -                  
- Australia / New Zealand         -        -        -                  
__________________________   ______   ______   ______   _______________
International Retailing           8       12     -33%                  
__________________________   ______   ______   ______   _______________
Total Retailing                  97       91       7%                  
__________________________   ______   ______   ______   _______________
                                                                       


UK Retailing

The Company is continuing to focus on improving the basics of its retailing
offer and operations which has driven both turnover and profitability over
the past 3 years. Total retailing space has risen by 1% to 3.17m square
feet over the past year.  The businesses had 728 stores at the year end.

UK Retailing sales grew by 6% to £1,415m, 5% like for like, and continued
to be led by progress in the core product categories. Book sales grew by
4%, stationery sales by 5%, magazines by 1% and newspapers by 7%.  Express
category sales grew by 20% driven predominantly by phonecards.  Total
entertainment sales grew by 11% with growth in music, multimedia and DVDs
more than compensating for the market decline in video sales.

This excellent sales performance resulted in strong growth in gross
contribution, up £30m, with the gross margin percentage being broadly
maintained.  Strong promotions and an increase in own brand sales continue
to drive both a differentiated customer offer and contribution.  Total
expenses as a proportion of sales declined by half a percentage point.  As
a result, UK retailing net margins rose to 6.3% from 5.9%.
Online sales increased by 21% to £8m and trading losses were contained at
£7m, in line with expectations.  The online business now operates as an
integral part of UK Retailing and will continue to support  this channel to
market.

UK High Street

This business operates 539 stores in the UK with 2.9m square feet of
selling space mainly located in high street locations, but now developing
increased representation in out-of-town retail parks.

Sales by the business of £1,120m were up 6%, like for like 5%, with all
product categories showing year on year growth.

Gross contribution increased by 5%, £21m over last year. Gross margins
declined by 0.2% points due to a mix movement towards lower margin
products.

Profits increased by 10% to £76m and net margins grew to 6.8% of sales,
compared with 6.5% in the previous year, largely driven by strong sales
growth leveraging the existing fixed cost base.

Europe Travel Retail

This business operates 189 stores with 0.2m square feet of selling space
mainly focused on UK airports and railway stations.

Sales of £287m were up 8%, like for like 6%, reflecting a particularly
strong performance in airports and London stations.  This performance was
achieved despite disruption to the national rail network during the first
half of the financial year which adversely impacted provincial stations.

Gross contribution was £9m better than last year with margins improving by
0.2% points.  This was partly offset by an increase of £3m of associated
turnover rents in line with sales growth. Profits grew to £20m from £17m
and net margins improved from 6.4% to 7.0%.

USA Travel Retail

This business operates 573 stores with 0.57m square feet of selling space
in both airport and hotel locations across the USA.

Sales increased by 28% to £245m but were flat on a comparable basis, after
accounting for the impact of new space and exchange movements.  On a
comparable basis, year on year growth in the airport business was 3% whilst
the hotel business declined by 4%, driven predominantly by the reduction in
hotel occupancy rates.  Gross contribution increased to £33m with gross
margin improving by 1% point.

Investment in infrastructure and the overall slowdown in the US economy,
resulted in a disproportionate increase in the cost base. As a result,
profits declined by £2m to £10m, from £12m the previous year, with net
margin reducing from 6.3% to 4.1%.

WHSmith ASPAC

Asia

The business operates 24 stores with 32,000 square feet of selling space in
Singapore, Malaysia, Hong Kong and Australia.  Throughout the year to
August 2001, sales increased to £16m, up 20% on a comparable basis.  The
increase in gross contribution of £1m was more than offset by an increase
in the cost base, resulting in a loss of £2m.

Australia / New Zealand

In June 2001 the Company acquired the Whitcoulls (New Zealand) and Angus &
Robertson (Australia) bookstores at a net cost of £34m.  The business
generated sales of £23m since acquisition and is expected to be earnings
enhancing in the current financial year.

Publishing

This has been the second successful full year for Hodder Headline in the WH
Smith Group.  Sales have grown to £128m, representing an increase of 10%
over the last year. These results include internal sales to WHSmith
retailing businesses of £16m (£14m in 2000) where we continue to drive
rapid own brand development.

Contribution increased by £6m, with the gross margin percentage broadly
maintained. Operating costs increased by £4m, principally due to higher
volume related distribution costs and marketing spend.  Profits increased
by 13% from £16m to £18m.

Helicon, our digital publisher, incurred a £2m loss during this financial
year and its future is under review.


WHSmith News Distribution

This business is the UK's leading wholesaler of magazines and newspapers,
operating from 53 depots throughout England and Wales.

Total sales amounted to £1,024m, a decrease of 2% on last year reflecting,
in particular, a downturn in the magazine market.  Overall sales included
£103m (2000 - £102m) of sales to the WHSmith retailing businesses.

As a result of the sales decline, gross contribution fell by £3m although
the gross margin percentage was maintained.  Operating costs increased by
£9m primarily as a result of the planned replacement of the IT
infrastructure via the implementation of SAP systems, the increasing weight
of newspapers and the National Distribution initiative.

Consequently, profits declined by £12m to £26m.  With the non-recurrence of
one-off costs, and the efficiency benefits from the SAP systems beginning
to flow through, we anticipate some profit recovery in the current
financial year.

Other profit items

Centrally controlled support costs at £12m in line with last year.

Internal rents on the freehold property owned by the Company, which are
charged to the businesses, were £3m which is in line with last year.

Exceptional Items

As a result of the slowdown in Internet growth, we have reviewed all our
Internet activities and have decided to write-down the investment in our
non-WHSmith branded Internet businesses, Helicon and Connect2U.  The write-
down of these investments has resulted in exceptional charges of £11m in
total.

On 4 October 2001, the potential disposal of WHSmith News Distribution was
terminated.  Consequently, the associated professional fees of £5m have
been charged in the financial year.

Interest

The results include interest income of £3m, compared with £6m in the
previous year.  The reduction of £3m arises principally from the impact of
the acquisition of the Whitcoulls (New Zealand) and Angus & Robertson
(Australia) bookstores, the purchase of shares under the ESOP scheme and
the return of capital to shareholders through share repurchase .

Taxation

The tax charge for the year is £35m, including £1m on international
profits.  The effective tax rate, excluding exceptional items, is 28 per
cent in line with the previous year.  This is below prevailing UK tax rates
due to the reduction of taxation on foreign profits and the utilisation of
provisions.

Operating Leases

In common with other retailers, the Company's stores are mainly held under
operating leases, which are not regarded as debt for accounting purposes.
The UK High Street leases are on standard 'institutional' lease terms, now
typically with 15 year leases subject to five year upwards only rent
reviews.  The Travel Retail stores operate mainly through turnover related
leases, usually with minimum rent guarantees, and generally varying in
length from 5 to 10 years.

The business has an annual minimum net rental commitment of £161m (net of
£17m of external rent receivable).  The total future rental commitment at
the balance sheet date amounted to £1.1bn with the leases having an average
life of 7 years.  The net present value of these commitments is
approximately £0.7bn.  Although large, these commitments are characteristic
of the sector and the risks associated with them depend on their liquidity
which is mainly influenced by the quality and location of the sites.  These
are considered to be satisfactory.

Fixed Charges Cover

A key measure of financial strength for the businesses is fixed charges
cover.  The fixed charges comprise operating lease rentals, property taxes,
other property costs and interest.  These were covered 1.62 times by
profits (excluding exceptional items) before fixed charges, a slight
reduction from the previous year when the ratio was 1.73.

Earnings Per Share

Earnings per share were 31.7p whilst adjusted earnings before exceptional
items and amortisation of goodwill were 38.6p (2000 - 41.3p).  The
exceptional items consisted of the write down of the investments in Helicon
and Connect2U and the professional fees related to the terminated disposal
of WHSmith News Distribution.

Dividends

The Company's dividend policy is that, over the long term, dividends should
be covered two times by earnings.

The Board is proposing a final dividend of 13 pence in line with last year.
The final dividend will, if approved, be paid on 1 February 2002 to
shareholders registered at the close of business on 26 October 2001. This
will give a dividend for the full year of 19 pence in line with last year.
The total cost of the dividend will be £47m. Excluding exceptional items,
the proposed dividend is covered two times by earnings.

Free Cash Flow and Cash Balances

The operating free cash flow available for the payment of dividends (before
acquisitions and financing items) amounted to £64m compared with a strong
£83m in the previous year.

£m                                                2001          2000
______________________________________________  ______        ______
Profit before tax                                  130           140
Depreciation / Amortisation of Goodwill             50            44
______________________________________________  ______        ______
Cash Profit                                        180           184
Working capital                                    (9)          (10)
Capital expenditure                               (68)          (60)
Disposal of Assets                                   2             1
Tax paid                                          (38)          (27)
Provision spend                                    (3)           (5)
______________________________________________  ______        ______
Free Cash Flow                                      64            83
______________________________________________  ______        ______
                                                                    

The movement in working capital is £1m favourable to the previous year.
This can be further analysed as follows:

£m                                                  2001       2000
______________________________________________   _______   ________
Stock                                               (18)       (10)
Debtors                                             (22)       (15)
Creditors                                             31         12
Exchange                                               -          3
______________________________________________   _______   ________
Working Capital                                      (9)       (10)
______________________________________________   _______   ________
                                                                   

The £22m outflow in debtors and the stock outflow of £18m, aimed at
improving in-store stock availability, were largely funded by the £31m
improvement in creditors.

A high level of capital expenditure has been maintained as follows:

                                                                £m
________________________________________________________   _______
New stores                                                      14
Refurbished stores                                              30
Systems                                                         17
Other                                                            7
________________________________________________________   _______
Total                                                           68
________________________________________________________   _______
                                                                  

Tax paid during the year increased by £11m due to the self-assessment
transitional payment regime.

The provision spend relates principally to surplus properties.

The total movements in net cash positions comprise:

                                                                £m
________________________________________________________   _______
Opening net cash                                               123
Free cash flow                                                  64
Dividends                                                     (48)
Acquisition of businesses                                     (51)
Purchase of shares for employee share schemes                 (13)
Repurchase of own shares                                       (9)
Issue of shares                                                  3
Cash in subsidiaries acquired                                    6
________________________________________________________   _______
Closing net cash                                                75
________________________________________________________   _______
                                                                  

Return of Capital to Shareholders

During the year the Company returned £9m to shareholders, comprising of the
purchase and cancellation of 2m ordinary shares.

ESOP Share Purchase

In November 2000 the Company purchased 3m of its own ordinary shares of
nominal value of 55.55p each with an aggregate market value of £13m.  These
shares were held for the sole purpose of satisfying obligations under the
employee share schemes.

Balance Sheet

The net assets comprise:

                                                      £m        £m
_____________________________________________   ________   _______
Tangible assets                                                326
Goodwill                                                       236
Investment                                                      14
                                                           _______
                                                               576
Stocks                                               255          
Creditors less debtors                             (190)          
                                                ________          
Working Capital                                                 65
Provisions                                                    (11)
Dividends                                                     (32)
Corporation Tax                                               (42)
_____________________________________________   ________   _______
                                                               556
Net Cash                                                        75
_____________________________________________   ________   _______
Net Assets                                                     631
_____________________________________________   ________   _______
                                                                  

Tangible assets include £43m for the Company's interest in freehold and
long leasehold property, comprising the Company's offices and depot in
Swindon and certain small stores, which are not considered suitable for
sale and leaseback.

Goodwill has increased by £14m as a result of the acquisition of the WGL
Retail Limited (Whitcoulls - New Zealand and Angus & Robertson - Australia)
and the completion of smaller acquisitions in the US and publishing, offset
by the write-down of investments in Helicon and Connect2U.

Return on Capital Employed

Total capital employed and returns thereon are as follows:

                                                            ROCE % with
                                      Operating               operating
                                        Capital  ROCE %          leases
                                    Employed £m             capitalised
_____________________________   _______________  ______     ___________
High Street                                 186     41%             17%
Europe Travel Retail                         34     59%             34%
WHSmith Online                                8       -               -
_____________________________   _______________  ______     ___________
UK Retailing                                228     38%             19%
International Retailing                     127      8%             12%
_____________________________   _______________  ______     ___________
Total Retailing                             355     30%             17%
Publishing                                  235      7%              7%
WHSmith News Distribution                   (1)       -               -
_____________________________   _______________  ______     ___________
Trading Operations                          589     24%             17%
Central items and property                 (33)       -               -
_____________________________   _______________  ______     ___________
Total*                                      556     25%             17%
_____________________________   _______________  ______     ___________
                                                                       
*  ROCE is stated excluding WHSmith ASPAC - Australia / New Zealand
  
For the prior year, comparable average returns were 29% (17% after
operating leases capitalised).

Pensions

The Company has continued to account for pensions in accordance with SSAP
24.  However FRS 17 Retirements Benefits, issued in November 2000, will not
become fully mandatory for the Company until the financial year ending 31
August 2003.  Before this date transitional disclosures are required.

The financial position of the Company is sensitive to the financial
position of its main defined benefit pension fund which has £791m of assets
as valued at 31 March 2000.  These assets are held by a trustee
administered fund to meet long term pension liabilities to past and some
present employees.  The Company has undertaken to meet any shortfalls
against these liabilities should they arise.  The variable amount and
length of defined benefit pension obligations inevitably gives rise to
measurement issues in determining the financial position of the pension
fund.


Financing

The Company has unutilised additional committed bank facilities of £113m
available.  These mature in May 2002 and are expected to be renewed.

Currency

Approximately 10 per cent of the Company's turnover is earned in foreign
currencies.  The effect of fluctuations in exchange rates was to increase
sales by £22m, and increase profit by £1m.

Currency exposures mainly relate to the translation of foreign income.  The
supply of products from outside the UK is mainly paid for in sterling.

Accounting for Goodwill

Accounting for goodwill is regulated by Financial Reporting Standard 10,
which requires goodwill on acquisitions to be capitalised and effectively
permits the non amortisation of goodwill if the value of goodwill is not
less than the amount in the accounts, can be calculated, and is durable.
The directors continue to take the view that these conditions apply to the
goodwill on the original acquisition of Hodder Headline PLC and subsequent
purchase of Wayland.  Accordingly, no amortisation has been provided on
this goodwill, which amounts to £175m.

The goodwill generated on the acquisition of the Whitcoulls (New Zealand)
and Angus & Robertson (Australia) bookstores, now part of WHSmith ASPAC, is
regarded as having a useful life of 20 years.


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