Final Results - Part 4

Smith WH PLC 26 October 2000 Part 4 WH Smith PLC Notes to Preliminary Announcement For the 12 months to 31 August 2000 4 OPERATING LEASE COMMITMENTS 2000 1999 ------------------------------------------ Future cumula- Annual tive net net Average rental rental lease Annual commit- commit- term net rental ment ment (years) commitment £m £m £m ===================================================================== WHSmith High Street 69 784 11 69 Europe Travel Retail 34 142 6 33 --------------------------------------------------------------------- UK Retailing 103 926 9 102 International Retailing 43 141 3 35 --------------------------------------------------------------------- Total Retailing Businesses 146 1,067 7 137 Publishing Businesses 4 31 8 4 WHSmith News Distribution 3 39 12 3 Property sublet to third 10 93 11 9 parties --------------------------------------------------------------------- Gross rental commitment 163 1,230 8 153 Less - external rent (18) (92) 6 (16) receivable - internal rent (2) (38) 16 (3) receivable Total 143 1,100 8 134 ===================================================================== (i) WHSmith High Street rental commitments include internal rent of £2m (1999; £3m) relating to those properties which are owned by the Company. The reduction of £1m relates to the sale and leaseback of properties previously owned by the Company to third party landlords. The cumulative future costs of internal rent is taken as the book value of those properties in the balance sheet at £38m of which £36m relates to WHSmith High Street. (ii) External rent receivable relates to properties which, are let by the Company to third parties. Of the total external rent receivable £9m (1999; £8m) relates to USA Travel Retail which sublets retail space in airports where it operates a master contract and £9m (1999; £8m) represents income on subletting surplus property. Of the future cumulative external rent receivable, £28m relates to USA Travel Retail. (iii) Outstanding contingencies under previous assignments of leases where the liability would revert to the Company if the lease defaulted are estimated at £18m per year with a future cumulative rental commitment of approximately £189m, and an average lease term of around 11 years. (iv) For those leases that are turnover related leases the annual net rental commitment is calculated using the minimum rental liability. The aggregate rental liability for these stores with minimum guaranteed rents is £44m (1999; £43m) and relates to Europe Travel Retail and International Retailing stores. WH Smith PLC Notes to Preliminary Announcement For the 12 months to 31 August 2000 5 INTEREST £m 2000 1999 ================================================================= Interest payable on bank loans and (4) (4) overdrafts Interest receivable 10 18 ----------------------------------------------------------------- 6 14 ================================================================= 6 TAXATION £m 2000 1999 ================================================================= Tax on profit on ordinary activities Corporation tax on UK profits 38 36 - Standard rate of UK corporation tax 30.0% (1999;30.6%) Foreign tax 1 2 ----------------------------------------------------------------- 39 38 ================================================================= Effective tax rate 28% 28% The effective tax rate of 28.0% for the 12 months to 31 August 2000 is below the UK standard corporation tax rate of 30.0% due mainly to the reduction of taxation on foreign profits. 7 DIVIDENDS 2000 1999 Growth % ================================================================= Interim 6.00p 5.75p 4% Final - proposed 13.00p 12.45p 4% ----------------------------------------------------------------- Total dividend 19.00p 18.20p 4% ================================================================= £m ================================================================= Interim 15 14 Final - proposed 33 31 ----------------------------------------------------------------- Total dividend 48 45 ================================================================= Dividend cover - times 2.1x 2.1x ================================================================= The final dividend will, if approved, be paid on 2 February 2001 to shareholders registered at the close of business on 10 November 2000. At 31 August 2000, the Company had 250,745,865 shares in issue. WH Smith PLC Notes to Preliminary Announcement For the 12 months to 31 August 2000 8 EARNINGS PER SHARE 8(a) Earnings Per Share 2000 1999 --------------------------------------------- £m Basic Diluted £m Basic Diluted ==================================================================== Profit attributable to 100 40.2p 40.0p 96 38.4p 38.1p shareholders Non-operating items 1 0.4p 0.4p - - - Amortisation of 2 0.7p 0.7p 2 0.5p 0.5p goodwill -------------------------------------------------------------------- Adjusted earnings 103 41.3p 41.1p 98 38.9p 38.6p ==================================================================== 8(b) Weighted Average Share Capital millions 2000 1999 ==================================================================== Weighted average shares in issue for earnings per 249 250 share Add weighted average number of ordinary shares under 1 2 option -------------------------------------------------------------------- Weighted average ordinary shares for fully diluted 250 252 earnings per share ==================================================================== (i) The weighted average number of ordinary shares in issue is stated after excluding 885,198 shares held in the Employee Share Trust. 9 FIXED CHARGES COVER £m 2000 1999 ==================================================================== Interest income (6) (14) Operating lease rentals 154 141 Property taxes 32 30 Other property costs 11 9 -------------------------------------------------------------------- Total fixed charges 191 166 Profit before tax 140 134 -------------------------------------------------------------------- Profit before tax and before fixed charges 331 300 -------------------------------------------------------------------- Fixed charges cover 1.7x 1.8x =================================================================== (i) Fixed charges cover is calculated by dividing profit before tax and fixed charges by total fixed charges. WH Smith PLC Notes to Preliminary Announcement For the 12 months to 31 August 2000 10 SEGMENTAL ANALYSIS OF OPERATING ASSETS EMPLOYED ROCE% after ROCE% capital- after ised capital- net ised net operat- operating Return ing leases on leases Return on including capital include- capital internal employ- ing 2000 employed rent 1999 ed intern- al rent £m % % £m % % ====================================================================== = WHSmith High 184 38% 16% 207 29% 14% Street Europe Travel 29 59% 28% 20 65% 22% Retail ---------------------------------------------------------------------- UK Retailing 213 40% 18% 227 33% 15% Internet Trading 8 - - 8 - - International 79 17% 14% 44 28% 21% Retailing ---------------------------------------------------------------------- Total Retailing 300 31% 16% 279 30% 16% Businesses WHSmith News 6 - - 5 - - Distribution ---------------------------------------------------------------------- Trading 306 44% 20% 284 44% 20% Operations (excluding Publishing Businesses) Publishing 228 7% 7% 209 6% 6% Businesses ---------------------------------------------------------------------- Trading 534 28% 17% 493 27% 17% Operations (including Publishing Businesses) Freehold property 38 40 Support functions (77) (77) Provisions for (14) (19) liabilities and charges ---------------------------------------------------------------------- Operating assets 481 29% 17% 437 29% 17% employed Net cash 123 105 ---------------------------------------------------------------------- Total net assets 604 542 ====================================================================== = (i) Return on capital employed and return on capital employed after capitalised net operating leases including internal rent, have been restated on a proforma basis to include a full 12 months of operating profits for Hodder Headline plc and Helicon Publishing PLC in the prior year. WH Smith PLC Notes to Preliminary Announcement For the 12 months to 31 August 2000 11 ACQUISITIONS AND GOODWILL The principal acquisitions during 2000 were: * On 1 March 2000, WHSmith USA Inc. acquired Hazelwood Enterprises Inc., a retailer with 71 hotel-based stores. The total consideration was US$19m (£12m) and was satisfied in cash. The capitalised goodwill on the transaction is £8m. In its last financial year to 31 December 1999, Hazelwood had sales of £12.3m and profit before administrative costs, interest and taxes of £0.7m. In the period since acquisition, Hazelwood had sales of £6.3m and operating profits of £0.8m. * On 17 April 2000, WHSmith USA Inc. entered into a phased acquisition of The Benjamin Company, a books, news and gifts retailer with 17 stores for £12m. On 1 June 2000, the first part of this transaction was completed with the acquisition of five stores for a total consideration of US$7.1m (£5m), with associated goodwill of £5m. In the period since acquisition, these stores had sales of £0.6m and operating profits of £0.1m. * On 7 September 1999, Hodder Headline plc purchased the business and assets of Wayland Publishing Limited, a publisher of fiction and non-fiction books for school libraries in the UK for a total consideration of £5m. The capitalised goodwill arising from the transaction is £3m. Since acquisition, Wayland has had sales of £7m with associated profits of £1m. In the year ended 31 December 1998, Wayland had sales of £9m and operating profit of £0.4m. * On 16 October 1999, the Company acquired a 33% stake in Worldwide Distribution Limited, a distributor of magazines to niche outlets for a total consideration of £0.8m. In the period since acquisition, Worldwide Distribution had estimated sales of £6.7m and profits of £0.4m. The aggregated balance sheets of these acquisitions, together with fair value adjustments, are set out below: £m Book Fair Value Fair Value Adjustments Value ====================================================================== Tangible fixed assets 2 - 2 Stock 4 (1) 3 Debtors 1 (1) - Creditors (1) - (1) Deferred taxation - 2 2 ---------------------------------------------------------------------- Net assets acquired 6 - 6 Consideration paid - cash 23 ---------------------------------------------------------------------- Capitalised goodwill 17 ====================================================================== The adjustments to book value identified in the above table reflect accounting policy changes and valuation adjustments in respect of tangible fixed assets, changes in the method of calculating the realisable value of stock, write off of pension prepayments, and changes in the method of calculating the net realisable value of advances to authors carried forward. Other Investment Activity In March 2000, Connect2U was formed. This venture is 80% owned by WH Smith PLC and 20% owned by the software provider Axon Group PLC. It will provide a business to business internet trading portal linking independent confectionery, tobacco and news retail outlets to WHSmith News Distribution and other suppliers. The business will initially target 8,000 independent retail outlets out of the 16,000 currently supplied by WHSmith. In the period to 31 August 2000, Connect2U incurred £0.5m of expenditure in the development of the portal and has a carrying value of £3m. WH Smith PLC Notes to Preliminary Announcement For the 12 months to 31 August 2000 12 GOODWILL £m ==================================================================== Cost At 1 September 1999 207 Acquisitions 17 Currency translation differences 2 -------------------------------------------------------------------- At 31 August 2000 226 ==================================================================== Accumulated amortisation At 1 September 1999 (2) Amortised in period (2) -------------------------------------------------------------------- At 31 August 2000 (4) ==================================================================== Net book value -------------------------------------------------------------------- At 31 August 2000 222 ==================================================================== At 1 September 1999 205 ==================================================================== Purchased goodwill is capitalised as an asset and amortised against profits over its useful economic life. In estimating the useful economic life of purchased goodwill, consideration is given to its durability. Goodwill arising on the earlier acquisitions of John Menzies Retail, Internet Bookshop, and Helicon is regarded by the Directors as having a useful life of 20 years and is therefore amortised through the profit and loss account over that period. The goodwill arising on the acquisition by WHSmith USA of Hazelwood is regarded as having a useful economic life of 20 years and will be amortised over this period. In accordance with FRS 10, where goodwill is regarded as having an indefinite life, it is not amortised but is subject to an annual test for impairment. As permitted under FRS 10, this represents a departure, for the purposes of giving a true and fair view, from the requirements of the Companies Act 1985, which requires goodwill to be amortised. Goodwill arising on the acquisitions of Hodder Headline (£172m) and Wayland (£3m) is regarded as having an indefinite useful life and is therefore not amortised in the profit and loss account. It is considered that the purchased goodwill is durable because both businesses are expected to maintain their market share and profitability in UK publishing over a long period. The majority of titles published and imprint names have significant lifespans due to copyright and licensing arrangements and range and strength of backlist titles. It is also considered that the barriers to entry which exist (and are anticipated to continue) and the nature of competition in the publishing industry are such that scale, relationships with third parties, intellectual property rights and quality of branding will prove this goodwill to be durable. Since it is not possible to identify a finite useful life for goodwill on the purchase of both Hodder Headline and Wayland, it is not possible to quantify any amortisation which would be charged. The application of an impairment test (which will be carried out annually) supports the value of goodwill and, as a result, no charge for impairment is required at the balance sheet date. WH Smith PLC Notes to Preliminary Announcement For the 12 months to 31 August 2000 13 FIXED ASSETS 13(a) Changes in Fixed Assets £m Tangible Employee Total Fixed Share Assets Scheme =================================================================== Net book value at 1 September 1999 273 2 275 ------------------------------------------------------------------- Additions 60 - 60 Disposals (3) - (3) Depreciation (42) - (42) Employee Share Scheme (note a) - 1 1 Amount written off investment in own - (2) (2) shares Acquisitions 2 - 2 Exchange 4 - 4 ------------------------------------------------------------------- Net book value at 31 August 2000 294 1 295 =================================================================== a) Amounts owed under the Employee Share Scheme, settled in cash in lieu of shares, and charged against the provision for Employee Share Schemes held within fixed assets. 13(b) Analysis of Fixed Assets £m 2000 1999 =================================================================== Freehold and long leasehold property 38 40 Short leasehold 103 97 Fixtures, fittings and equipment 153 136 Investment in own shares (note a) 1 2 ------------------------------------------------------------------- Net book value 295 275 =================================================================== a) On 3 August 1999, the Company purchased an investment in own shares of £6m in respect of 950,000 ordinary shares of 55.55p each with an aggregate nominal value of £0.5m. The total market value of these shares at 31 August 1999 was £6m. In accordance with UITF 17, the investment in own shares is recognised as an asset within fixed assets. The shares are held by an employee trust for the sole purpose of satisfying obligations under the Company's Employee Share Scheme. At 31 August 2000, 858,801 shares remained in the scheme. WH Smith PLC Notes to Preliminary Announcement For the 12 months to 31 August 2000 14 WORKING CAPITAL £m 2000 1999 ==================================================================== Stock - Continuing operations 213 203 - Acquisitions 3 - -------------------------------------------------------------------- 216 203 ==================================================================== Debtors - Continuing operations 158 143 - Acquisitions 2 - -------------------------------------------------------------------- 160 143 ==================================================================== Creditors - Continuing operations 319 307 - Acquisitions 1 - - Corporation tax 45 32 - Dividends payable 33 31 -------------------------------------------------------------------- 398 370 ==================================================================== 15 PROVISIONS FOR LIABILITIES AND CHARGES Post John Menzies Non retiremen Retail trading t acquisition £m property medical reorganisation provisions benefits provisions Total ==================================================================== At 1 September 1999 13 4 2 19 Utilised in period (3) (1) (1) (5) -------------------------------------------------------------------- At 31 August 2000 10 3 1 14 ==================================================================== In the 12 months to 31 August 2000, the amount charged to non-trading property provisions comprised £3m net rent paid for vacant or surplus properties which will continue to be charged for around 6 years. The provision for post retirement medical benefits will continue to be utilised over the remaining lives of the relevant employees. The amount charged to John Menzies Retail acquisition reorganisation provisions principally related to store closure costs and the provision is expected to be utilised in the period to 31 August 2001. WH Smith PLC Notes to Preliminary Announcement For the 12 months to 31 August 2000 16 FINANCIAL ASSETS AND LIABILITIES £m 2000 1999 ==================================================================== Cash at bank and in hand 152 174 Repayable in one year or less or on (1) (39) demand Repayable in more than one year but - (1) not more than two years Repayable in more than five years (28) (29) -------------------------------------------------------------------- Net cash 123 105 ==================================================================== The Company has additional committed facilities of £165m available not utilised maturing in May 2002. £m 2000 Cashflow 1999 ==================================================================== Cash at bank and in hand (note a) 152 (22) 174 Debt - Sterling floating rate (note b) (26) 2 (28) - Sterling fixed rate (note c) (3) 28 (31) - Sterling interest free loan (note d) - 10 (10) -------------------------------------------------------------------- Net cash 123 18 105 ==================================================================== a) Cash at bank is held on short-term deposit, bearing interest at an average rate of 5.9%. The only material foreign exchange exposure at 31 August 2000 relates to the financial assets and liabilities in USA Travel Retail. Cash at bank and in hand includes £9m worth of US dollars. b) Floating rate debt represents loan notes repayable in 2008 and bearing interest at a rate of 1% per annum below LIBOR. c) Sterling fixed rate debt includes 5?% redeemable unsecured loan stock of £2m (1999; £2m). d) In connection with the sale of Do It All. e) In addition to the above at 31 August 2000 the Group had unredeemed 'B' shares of £2m which carry a net non-cumulative preferential dividend set at 75% of six month LIBOR. WH Smith PLC Notes to Preliminary Announcement For the 12 months to 31 August 2000 17 SHARE CAPITAL 17(a) Authorised 2000 1999 ========================================== Number of Number of Nominal shares Nominal shares value value (millions) £m (millions) £m ==================================================================== Ordinary shares of 333 185 333 185 55.55p each 'B' shares of 53.75p 286 153 286 153 each -------------------------------------------------------------------- At 31 August 2000 338 338 ==================================================================== 17(b) Allotted and Fully Paid 2000 1999 ========================================== Number of Nominal Number of Nominal shares value shares value (millions) £m (millions) £m ==================================================================== Ordinary shares of 251 140 250 140 55.55p each 'B' shares of 53.75p 4 2 4 2 each -------------------------------------------------------------------- At 31 August 2000 142 142 ==================================================================== The number of shares issued in the year to 31 August 2000 was 579,000 ordinary shares with a nominal value of £0.3m (1999; 1,368,000 shares) relating to share options exercised for a consideration of £2m. At 31 August 2000 the number of options held under employee share schemes was 8.4 million shares (1999; 4.7 million). 18 RESERVES Capital Share redemp- Revalua- Profit & premium tion tion loss £m account reserve reserve account ==================================================================== At 1 September 1999 84 155 8 151 -------------------------------------------------------------------- Profit retained for the - - - 52 period Premium on the issue of 2 - - - shares Currency translation - - - 7 differences -------------------------------------------------------------------- Reserves at 31 August 86 155 8 210 2000 ==================================================================== The profit and loss account reserve at 31 August 2000 is stated after writing off previously acquired goodwill of £58m - including USA Travel Retail £39m. WH Smith PLC Notes to Preliminary Announcement For the 12 months to 31 August 2000 19 NOTES TO THE CASH FLOW STATEMENT Reconciliation of operating profit to net cash flow from operating activities £m 2000 1999 ==================================================================== Operating profit 134 120 Depreciation of fixed assets 42 41 Amortisation of goodwill 2 2 (Increase)/ decrease in stock (10) 6 Increase in debtors (15) (9) Increase/(decrease) in creditors 12 (6) Cash spend against provisions (5) (9) Currency translation differences 3 - ==================================================================== Net cash inflow from operating activities 163 145 ==================================================================== 20 POST BALANCE SHEET EVENTS On 10 October 2000, WHSmith USA Inc. completed the second part of the agreed purchase of The Benjamin Company. As part of this purchase WHSmith USA Inc. acquired 5 stores in Denver and Atlanta for a total consideration of US$5.2m (£3.6m). The capitalised goodwill on this transaction is £2.7m. WH Smith PLC Notes to Preliminary Announcement For the 12 months to 31 August 2000 21 PREPARATION OF PRELIMINARY ANNOUNCEMENT 21 (a) Basis of Preparation The preliminary announcement for the 12 months to 31 August 2000 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 1999. 21 (b) Preliminary Announcement The results for the 12 months to 31 August 2000 and 12 months to 31 August 1999 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 2000 which will be filed with the Registrar of Companies and 12 months to 31 August 1999 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 2000. Appendices Appendix Five Year Financial Summary - Group Profit and Loss Account 1 - Group Balance Sheet 2 - Group Cash Flow Statement 3 - Group Cash Flow Statement 4 Analysis of Free Cash Flow - Segmental Analysis of Sales and Profits 5 Sales - Segmental Analysis of Sales and Profits 6 Operating Profits Proforma Return on Capital Employed after Capitalising 7 Leases Appendix 1 WH Smith PLC Five Year Financial Summary Group Profit and Loss Account 12 months to ----------------------------------------- £m Proforma Proforma 31 31 31 31 31 August August August August May 2000 1999 1998 1997 1996 ====================================================================== Sales - Continuing 2,570 2,391 2,175 2,021 1,912 operations - Acquisitions 14 - - - - ---------------------------------------------------------------------- 2,584 2,391 2,175 2,021 1,912 - Discontinued - - 643 790 916 operations ---------------------------------------------------------------------- Total sales 2,584 2,391 2,818 2,811 2,828 ====================================================================== Operating profit/(loss) ====================================================================== - Continuing 133 120 88 26 (41) operations - Acquisitions 2 - - - - ---------------------------------------------------------------------- 135 120 88 26 (41) - Discontinued - - 37 36 25 operations ---------------------------------------------------------------------- Operating profit/(loss) 135 120 125 62 (16) Profit/(loss) on sale of 1 - 122 - (160) operations Amount written off investment (2) - - - - in own shares ---------------------------------------------------------------------- Profit/(loss) on ordinary 134 120 247 62 (176) activities before interest and taxation Interest 6 14 7 (6) (18) ---------------------------------------------------------------------- Profit/(loss) on ordinary 140 134 254 56 (194) activities before taxation Tax on profit/(loss) on (39) (38) (39) (25) (3) ordinary activities ---------------------------------------------------------------------- Profit/(loss) on ordinary 101 96 215 31 (197) activities after taxation Minority interests (1) - (4) (2) (3) ---------------------------------------------------------------------- Profit/(loss) attributable to 100 96 211 29 (200) shareholders Proforma dividend apportioned (48) (45) (43) (44) (44) to 12 months ---------------------------------------------------------------------- Retained earnings 52 51 168 (15) (244) ====================================================================== Earnings/(loss) per share 40.2p 38.4p 76.5p 10.2p (71.4p) Diluted earnings/(loss) per 40.0p 38.1p 76.2p 10.0p (69.4p) share Adjusted earnings per share 41.3p 38.9p 35.5p 31.0p 19.2p Proforma dividend per share 19.00p 18.20p 16.60p 15.65p 15.65p apportioned to 12 months Fixed charges cover * 1.7x 1.8x 1.7x 1.6x 1.5x Proforma dividend cover * 2.1x 2.1x 2.1x 2.0x 1.2x Tax charge * 28.0% 28.0% 28.0% 31.0% 36.0% * before exceptional items Appendix 2 WH Smith PLC Five Year Financial Summary Group Balance Sheet Proforma Proforma 31 31 31 31 31 £m August August August August May 2000 1999 1998 1997 1996 =================================================================== Fixed assets Goodwill 222 205 29 - - Tangible assets 295 275 312 424 561 ------------------------------------------------------------------- Total fixed assets 517 480 341 424 561 ------------------------------------------------------------------- Current assets Stock 216 203 200 332 273 Debtors 160 143 102 143 163 Creditors (394) (368) (366) (437) (425) ------------------------------------------------------------------- Net current operating (18) (22) (64) 38 11 (liabilities)/assets ------------------------------------------------------------------- Pension prepayment - - - - 73 Long term creditors (4) (2) (3) (3) (48) Provisions for liabilities (14) (19) (28) (34) (86) and charges ------------------------------------------------------------------- Operating capital employed 481 437 246 425 511 Net cash/(debt) 123 105 266 (48) (105) ------------------------------------------------------------------- Total equity 604 542 512 377 406 =================================================================== Return on capital employed 29% 28% 40% 23% 16% Average number of shares 250 250 253 283 282 in issue (million) Appendix 3 WH Smith PLC Five Year Financial Summary Group Cash Flow Statement 12 months to ----------------------------------------- £m Proforma Proforma 31 31 31 31 31 August August August August May 2000 1999 1998 1997 1996 =================================================================== Cash flow from operating 163 145 179 183 160 activities Returns on investments and 6 14 7 (6) (18) servicing of finance Taxation (27) (37) (5) (21) (28) Purchase of fixed assets (60) (60) (56) (61) (95) Disposal of tangible fixed 3 54 8 106 9 assets -------------------------------------------------------------------- Cash flow from capital (57) (6) (48) 45 (86) expenditure and financial investment -------------------------------------------------------------------- Cash flow for acquisitions (22) (171) 385 23 59 and disposals -------------------------------------------------------------------- Equity dividends paid (47) (55) (44) (44) (44) -------------------------------------------------------------------- Cash flow before use of 16 (110) 474 180 43 liquid resources and financing -------------------------------------------------------------------- Issue of shares 2 5 6 7 7 Repurchase of shares - (24) (167) - - Decrease in debt (40) (63) (20) (134) (21) -------------------------------------------------------------------- Cash flow from financing (38) (82) (181) (127) (14) -------------------------------------------------------------------- (Decrease) / Increase in (22) (192) 293 53 29 cash ==================================================================== Appendix 4 WH Smith PLC Five Year Financial Summary Group Cash Flow Statement 12 months to -------------------------------------------- Proforma Proforma Analysis of free cash 31 31 31 31 31 flow (before dividends) August August August August May £m 2000 1999 1998 1997 1996 ==================================================================== Profit before tax and 140 134 142 129 89 exceptional items Depreciation / 44 43 56 61 69 amortisation of goodwill Other non cash items - - - - 15 Movement in working (10) (9) 1 8 (21) capital Capital expenditure on (60) (60) (56) (61) (95) fixed assets Disposal of tangible 1 8 8 11 9 fixed assets Tax paid (27) (29) (5) (21) (28) Cash spend against (5) (9) (13) (21) (10) reorganisation provisions ------------------------------------------------------------------- Free cash flow (before 83 78 133 106 28 dividends and investment activity) Dividends (47) (55) (44) (44) (44) Issue of shares 2 5 6 7 7 Proceeds on disposals 3 46 465 118 86 Acquisitions (23) (198) (80) - (27) Repurchase of shares and - (32) (167) - - ACT on repurchases ------------------------------------------------------------------- Cash movement in debt 18 (156) 313 187 50 ------------------------------------------------------------------- Opening net cash / 105 266 (48) (238) (154) (debt) Hodder Headline debt - (5) - - - acquired Currency translation - - 1 3 (1) movements ------------------------------------------------------------------- Closing net cash / 123 105 266 (48) (105) (debt) ==================================================================== Appendix 5 WH Smith PLC 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 May £m 2000 1999 1998 1997 1996 ==================================================================== Retailing WHSmith High Street 1,058 1,033 894 796 778 Europe Travel Retail 265 242 172 125 114 -------------------------------------------------------------------- UK Retailing 1,323 1,275 1,066 921 892 Internet Trading 7 5 1 - - International Retailing 204 186 175 154 136 -------------------------------------------------------------------- Total Retailing 1,534 1,466 1,242 1,075 1,028 Businesses Publishing Businesses 119 30 - - - - Less Internal (14) (2) - - - -------------------------------------------------------------------- Publishing Businesses 105 28 - - - WHSmith News 1,047 995 1,025 1,029 963 Distribution - Less Internal (102) (98) (92) (83) (79) -------------------------------------------------------------------- WHSmith News 945 897 933 946 884 Distribution -------------------------------------------------------------------- Continuing Operations 2,584 2,391 2,175 2,021 1,912 Disposals - - 643 790 916 -------------------------------------------------------------------- Total Sales 2,584 2,391 2,818 2,811 2,828 ==================================================================== Appendix 6 WH Smith PLC 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 May £m 2000 1999 1998 1997 1996 ==================================================================== Retailing WHSmith High Street 69 60 49 43 41 Europe Travel Retail 17 14 7 5 5 -------------------------------------------------------------------- UK Retailing 86 74 56 48 46 Internet Trading (8) (3) - - - International Retailing 12 13 7 10 9 -------------------------------------------------------------------- Total Retailing Businesses 90 84 63 58 55 Publishing Businesses 16 4 - - - WHSmith News Distribution 38 39 45 45 31 -------------------------------------------------------------------- Trading Profit 144 127 108 103 86 Support costs (12) (12) (13) (13) (18) Internal rents 3 5 6 10 12 Net pension costs - - (3) (1) 2 -------------------------------------------------------------------- Operating Profit before 135 120 98 99 82 Discontinued Operations Discontinued Operations - - 37 36 25 -------------------------------------------------------------------- Operating Profit 135 120 135 135 107 ==================================================================== Appendix 7 WH Smith PLC Proforma Return on Capital Employed after Capitalising Leases For the 12 months to 31 August 2000 (a) Total operating capital employed Operat- Dis- ing Cumula- counted Re- capital tive cumulat- classi- employ- future ive fied ed net future free- Total £m rent net rent hold opera- commit- commit- pro- ting Net ment ment perty capit- average (note (note (note al em- lease (i)) (ii)) (iii)) ployed term £m £m £m £m (years) ==================================================================== Retailing WHSmith High Street 184 740 423 36 643 11 Europe Travel Retail 29 142 111 - 140 6 ------------------------------------------------------------------- UK Retailing 213 882 534 36 783 9 Internet Trading 8 - - - 8 2 International 79 113 92 - 171 3 Retailing ------------------------------------------------------------------- Total Retailing 300 995 626 36 962 8 Businesses Publishing 228 31 20 - 248 8 Businesses WHSmith News 6 38 21 2 29 12 Distribution ------------------------------------------------------------------- Trading Operations 534 1,064 667 38 1,239 8 Central (53) 36 18 (38) (73) 12 items/freehold property ------------------------------------------------------------------- Total 481 1,100 685 - 1,166 8 ==================================================================== (b) Adjusted operating profit ROCE after Total capi- Add Less adjust- Ad- talis- back Depre- ment justed ing Operat- annual ciation for Opera- leases ing net (note rentals ting (note profit rent (iv)) payable profit (v)) £m £m £m £m £m % ==================================================================== Retailing WHSmith High Street 69 70 (39) 31 100 16% Europe Travel Retail 17 40 (18) 22 39 28% -------------------------------------------------------------------- UK Retailing 86 110 (57) 53 139 18% Internet Trading (8) - - - (8) - International 12 38 (28) 10 22 14% Retailing -------------------------------------------------------------------- Total Retailing 90 148 (85) 63 153 16% Businesses Publishing 16 3 (3) - 16 7% Businesses WHSmith News 38 4 (2) 2 40 - Distribution -------------------------------------------------------------------- Trading Operations 144 155 (90) 65 209 17% Central (9) (1) 2 1 (8) - items/freehold property -------------------------------------------------------------------- Total 135 154 (88) 66 201 17% ==================================================================== (i) Cumulative future rent commitment represents gross rent payable less rent receivable on sub-let space. (ii) Cumulative future rent is discounted at 10%, which is an estimate of the Company's pre-tax weighted average cost of capital, including capitalised operating leases as a source of finance. (iii) The cumulative future cost of internal rent is taken as the book value of those properties owned by the Company which are included in central items/freehold property within capital employed for continuing operations at £38m. (iv) The discounted value of future rents are depreciated on a straight line basis over the average remaining lease period. (v) Return on operating capital employed after capitalising the net future rental cash flow on operating leases (including internal rents) is calculated by dividing adjusted operating profit by total operating capital employed after discounting cumulative future rent.

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