Final Results - Part 3

Smith WH PLC 18 October 2001 PART THREE 18 RESERVES Share Capital Profit & premium Redemption Revaluation loss £m account reserve reserve account _________________________________ _______ __________ ___________ ________ At 1 September 2000 86 155 8 210 _________________________________ _______ __________ ___________ ________ Profit retained for the period - - - 31 Premium on the issue of shares 3 - - - Repurchase of own shares - 1 - (9) _________________________________ _______ __________ ___________ ________ At 31 August 2001 89 156 8 232 _________________________________ _______ __________ ___________ ________ The profit and loss account reserve at 31 August 2001 is stated after writing off previously acquired goodwill of £58m - including USA Travel Retail £39m. 19 NOTES TO THE CASH FLOW STATEMENT Reconciliation of operating profit to net cash flow from operating activities £m 2001 2000 ________________________________________________ ___________ __________ Operating profit 111 135 Exceptional items 16 - Non-operating items - (1) Depreciation of fixed assets 47 42 Amortisation of goodwill 3 2 Increase in stock (18) (10) Increase in debtors (22) (15) Increase in creditors 31 12 Cash spend against provisions (3) (5) Currency translation differences - 3 ________________________________________________ ___________ __________ Net cash inflow from operating activities 165 163 ________________________________________________ ___________ __________ 20 POST BALANCE SHEET EVENTS The tragic events in the USA on 11 September 2001 and their aftermath have had a material adverse effect on the trading of WHSmith USA Travel Retail. The majority of WHSmith USA Travel Retail's stores are based in airports and city centre hotels. Like for like sales in WHSmith USA Travel Retail have fallen 24% in the six weeks to 18 October 2001. The Group has initiated a restructuring of the WHSmith USA Travel Retail operations to align the business with the current market conditions but it is too early to estimate the full continuing financial effect of 11 September 2001. In accordance with SSAP 17 'Accounting for post balance sheet events', the events of 11 September 2001 and their aftermath constitute a 'non-adjusting event', as they do not relate to conditions that existed at the balance sheet date. Accordingly it is not appropriate to reflect any financial effect of these events in the balance sheet at 31 August 2001. The costs of restructuring, together with any adjustments to asset carrying values and additional liabilities which may arise as a result of the events of 11 September 2001 and any subsequent developments, will therefore be included in the accounts for the year ending 31 August 2002. 21 PREPARATION OF PRELIMINARY ANNOUNCEMENT 21(a) Basis of Preparation The preliminary announcement for the 12 months to 31 August 2001 has been prepared on the basis of the accounting policies set out in the Company's Annual Report for the 12 months to 31 August 2000. 21(b) Preliminary Announcement The results for the 12 months to 31 August 2001 and 12 months to 31 August 2000 do not comprise statutory accounts for the purpose of Section 240 of the Companies Act 1985, and have been extracted from the Company's accounts for the 12 months to 31 August 2001 which will be filed with the Registrar of Companies, and 12 months to 31 August 2000 which have been filed with the Registrar of Companies. The auditors' reports on these accounts were unqualified and did not include a statement under Section 237 (2) or (3) of the Companies Act 1985. The annual report and accounts will be posted to shareholders in November 2001. Five Year Financial Summary Group Profit and Loss Account 12 months to £m 31 31 31 Proforma Proforma August August August 31 31 2001 2000 1999 August August 1998 1997 _____________________________ ________ ________ ________ ________ ________ Sales 2,712 2,584 2,391 2,175 2,021 - Continuing operations - Acquisitions 23 - - - - _____________________________ ________ ________ ________ ________ ________ 2,735 2,584 2,391 2,175 2,021 - Discontinued operations - - - 643 790 _____________________________ ________ ________ ________ ________ ________ Total sales 2,735 2,584 2,391 2,818 2,811 _____________________________ ________ ________ ________ ________ ________ Operating profit - Continuing operations 127 135 120 88 26 - Acquisitions - - - - - _____________________________ ________ ________ ________ ________ ________ 127 135 120 88 26 - Discontinued operations - - - 37 36 - Exceptional item (16) - - - - _____________________________ ________ ________ ________ ________ ________ Operating profit 111 135 120 125 62 Profit on sale of operations - 1 - 122 - Amount written off investment - (2) - - - in own shares _____________________________ ________ ________ ________ ________ ________ Profit on ordinary activities 111 134 120 247 62 before interest and taxation Interest 3 6 14 7 (6) _____________________________ ________ ________ ________ ________ ________ Profit on ordinary activities 114 140 134 254 56 before taxation Tax on profit on ordinary (35) (39) (38) (39) (25) activities _____________________________ ________ ________ ________ ________ ________ Profit on ordinary activities 79 101 96 215 31 after taxation Minority interests (1) (1) - (4) (2) _____________________________ ________ ________ ________ ________ ________ Profit attributable to 78 100 96 211 29 shareholders Proforma dividend apportioned (47) (48) (45) (43) (44) to 12 months _____________________________ ________ ________ ________ ________ ________ Retained earnings / (loss) 31 52 51 168 (15) _____________________________ ________ ________ ________ ________ ________ Earnings per share 31.7p 40.2p 38.4p 76.5p 10.2p Diluted earnings per share 31.5p 40.0p 38.1p 76.2p 10.0p Adjusted earnings per share 38.6p 41.3p 38.9p 35.5p 31.0p Proforma dividend per share 19.00p 19.00p 18.20p 16.60p 15.65p apportioned to 12 months Fixed charges cover * 1.6x 1.7x 1.8x 1.7x 1.6x Proforma dividend cover * 2.0x 2.1x 2.1x 2.1x 2.0x Tax charge * 31.0% 28.0% 28.0% 28.0% 31.0% * before exceptional items Five Year Financial Summary Group Balance Sheet £m Proforma Proforma 31 31 31 31 31 August August August August August 2001 2000 1999 1998 1997 _______________________________ _______ ________ _______ ________ ________ Fixed assets Goodwill 236 222 205 29 - Tangible assets 326 294 273 312 424 Investments 14 1 2 - - _______________________________ _______ ________ _______ ________ ________ Total fixed assets 576 517 480 341 424 _______________________________ _______ ________ _______ ________ ________ Current assets Stock 255 216 203 200 332 Debtors 185 160 143 102 143 Creditors (447) (394) (368) (366) (437) _______________________________ _______ ________ _______ ________ ________ Net current operating (7) (18) (22) (64) 38 (liabilities)/assets _______________________________ _______ ________ _______ ________ ________ Long term creditors (2) (4) (2) (3) (3) Provisions for liabilities and (11) (14) (19) (28) (34) charges _______________________________ _______ ________ _______ ________ ________ Operating capital employed 556 481 437 246 425 Net cash/(debt) 75 123 105 266 (48) _______________________________ _______ ________ _______ ________ ________ Total equity 631 604 542 512 377 _______________________________ _______ ________ _______ ________ ________ Return on capital employed 28% 29% 29% 40% 23% Average number of shares in 249 250 250 253 283 issue (millions) Five Year Financial Summary Group Cash Flow Statement 12 months to £m Proforma Proforma 31 31 31 31 31 August August August August August 2001 2000 1999 1998 1997 _______________________________ _______ ________ _______ ________ ________ Cash flow from operating 165 163 145 179 183 activities Returns on investments and 3 6 14 7 (6) servicing of finance Taxation (38) (27) (37) (5) (21) Purchase of fixed assets (68) (60) (60) (56) (61) Purchase of shares for employee (13) - - - - share schemes Disposal of tangible fixed 2 3 54 8 106 assets _______________________________ _______ ________ _______ ________ ________ Cash flow from capital (79) (57) (6) (48) 45 expenditure and financial investment _______________________________ _______ ________ _______ ________ ________ Cash flow for acquisitions and (51) (22) (171) 385 23 disposals _______________________________ _______ ________ _______ ________ ________ Equity dividends paid (48) (47) (55) (44) (44) _______________________________ _______ ________ _______ ________ ________ Cash flow before use of liquid (48) 16 (110) 474 180 resources and financing _______________________________ _______ ________ _______ ________ ________ Issue of shares 3 2 5 6 7 Repurchase of own shares (9) - (24) (167) - Increase / (decrease) in debt 34 (40) (63) (20) (134) _______________________________ _______ ________ _______ ________ ________ Cash flow from financing 28 (38) (82) (181) (127) _______________________________ _______ ________ _______ ________ ________ (Decrease) / Increase in cash (20) (22) (192) 293 53 _______________________________ _______ ________ _______ ________ ________ 12 months to Analysis of free cash flow Proforma Proforma (before dividends) 31 31 31 31 31 August August August August August £m 2001 2000 1999 1998 1997 _______________________________ _______ ________ _______ ________ ________ Profit before tax and 130 140 134 142 129 exceptional items Depreciation / amortisation of 50 44 43 56 61 goodwill Movement in working capital (9) (10) (9) 1 8 Capital expenditure on fixed (68) (60) (60) (56) (61) assets Disposal of tangible fixed 2 1 8 8 11 assets Tax paid (38) (27) (29) (5) (21) Cash spend against provisions (3) (5) (9) (13) (21) _______________________________ _______ ________ _______ ________ ________ Free cash flow (before 64 83 78 133 106 dividends and investment activity) Dividends (48) (47) (55) (44) (44) Issue of shares 3 2 5 6 7 Proceeds on disposals - 3 46 465 118 Acquisitions (51) (23) (198) (80) - Repurchase of shares and ACT on (22) - (32) (167) - repurchases _______________________________ _______ ________ _______ ________ ________ Cash movement in debt (54) 18 (156) 313 187 _______________________________ _______ ________ _______ ________ ________ Opening net cash / (debt) 123 105 266 (48) (238) Cash / (debt) in subsidiaries 6 - (5) - - acquired Currency translation movements - - - 1 3 _______________________________ _______ ________ _______ ________ ________ Closing net cash / (debt) 75 123 105 266 (48) _______________________________ _______ ________ _______ ________ ________ Five Year Financial Summary Segmental Analysis of Sales and Profits 12 months to __________________________________________ Proforma Proforma 31 31 31 31 31 Sales August August August August August £m 2001 2000 1999 1998 1997 ______________________________ ________ ________ ________ _______ ________ Retailing WHSmith High Street 1,120 1,058 1,033 894 796 Europe Travel Retail 287 265 242 172 125 WHSmith Online 8 7 5 1 - ______________________________ ________ ________ ________ _______ ________ UK Retailing 1,415 1,330 1,280 1,067 921 International Retailing 261 204 186 175 154 ______________________________ ________ ________ ________ _______ ________ Total Retailing Businesses 1,676 1,534 1,466 1,242 1,075 Publishing Businesses 131 119 30 - - - Less Internal (16) (14) (2) - - ______________________________ ________ ________ ________ _______ ________ Publishing Businesses 115 105 28 - - WHSmith News Distribution 1,024 1,047 995 1,025 1,029 - Less Internal (103) (102) (98) (92) (83) ______________________________ ________ ________ ________ _______ ________ WHSmith News Distribution 921 945 897 933 946 ______________________________ ________ ________ ________ _______ ________ Continuing Operations 2,712 2,584 2,391 2,175 2,021 Disposals - - - 643 790 ______________________________ ________ ________ ________ _______ ________ Total Sales 2,712 2,584 2,391 2,818 2,811 ______________________________ ________ ________ ________ _______ ________ Five Year Financial Summary Segmental Analysis of Sales and Profits 12 months to Proforma Proforma 31 31 31 31 31 Operating Profit August August August August August £m 2001 2000 1999 1998 1997 _____________________________ ________ ________ ________ ________ ________ Retailing WHSmith High Street 76 69 60 49 43 Europe Travel Retail 20 17 14 7 5 WHSmith Online (7) (7) (3) - - _____________________________ ________ ________ ________ ________ ________ UK Retailing 89 79 71 56 48 International Retailing 8 12 13 7 10 _____________________________ ________ ________ ________ ________ ________ Total Retailing Businesses 97 91 84 63 58 Publishing Businesses 8 16 4 - - WHSmith News Distribution 15 37 39 45 45 _____________________________ ________ ________ ________ ________ ________ Continuing Operations 120 144 127 108 103 Support costs (12) (12) (12) (13) (13) Internal rents 3 3 5 6 10 Net pension costs - - - (3) (1) _____________________________ ________ ________ ________ ________ ________ Operating Profit before Discontinued Operations 111 135 120 98 99 Discontinued Operations - - - 37 36 _____________________________ ________ ________ ________ ________ ________ Operating Profit 111 135 120 135 135 _____________________________ ________ ________ ________ ________ ________

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