Interim Results - 6 Months to 29 Feb 2000, Part 1

Smith WH PLC
18 April 2000

PART 1

WHSmith PLC
INTERIM ANNOUNCEMENT OF RESULTS
FOR THE SIX MONTHS TO 29 FEBRUARY 2000

WHSmith PLC announced today (18 April 2000) its results for the six
months to 29 February 2000.

Profit before tax was £101m (1999 - £105m), after £2m of additional
revenue investment in developing online trading activities. Earnings
per share were 29.2 pence per share. Sales amounted to £1.36 billion,
including a 2 per cent increase in comparable retail sales.

An interim dividend of 6.0 pence per share has been declared - an
increase of 4 per cent.

KEY POINTS

*    Comparable UK retailing sales up 2 per cent
     
*    Strong sales growth in core product areas of books, stationery
     and magazines (books up 6 per cent)
     
*    UK retailing profits £76m (up 3 per cent)
     
*    Short term disruption in US reduced profits by £3m - good
     progress on new business
     
*    60 per cent growth in online sales
     
*    Development of the online business - major alliances formed with
     BT, Carlton, Telewest and Axon
     
*    Hodder Headline sales up 10 per cent and profits up 46 per cent
     
CURRENT TRADING

Like for like UK retailing sales in the 6 week period since 1 March
2000 are up 3 per cent. There has also been a 2 per cent growth in
like for like sales in the US and continued good progress in the other
businesses. The Company is confident that it will achieve a
satisfactory performance for the remainder of the year.

Enquiries:             020 7514 9623
                       
Richard Handover       -  Chief Executive
Keith Hamill           -  Finance Director
Tim Blythe             -  Corporate Affairs Director


CHIEF EXECUTIVE'S COMMENTS

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

'In the first six months of this financial year we have maintained an
overall solid operating performance, whilst at the same time actively
positioning our businesses for the future.

'The retail market was particularly challenging.  We had strong
performances in the core categories of books, magazines and
stationery, where we had good sales growth and share gains.  In common
with our competitors we had poor sales and margins in music and video.
We are continuing to reduce our exposure to this category.

'Our publishing activities performed exceptionally well, with sales
and profits up strongly. Own brand product is starting to come through
and we are capitalising on the opportunities for digitising data and
licensing content online.

'We have continued the programme of investment in News Distribution
including the rollout of a new, fully integrated IT system. This will
put us in a strong position to improve the efficiency of the supply
chain and develop new online revenue streams.

'Looking to the future, I have enormous confidence in the potential
for WHSmith. We have a strong consumer brand and robust retailing
business, a good distribution platform and high quality content from
our consumer publishing assets. We have invested well over the last
two years in technology with our online retail engine and digitisation
capability.

'Combining our core strengths and new technology together with the
focused strategic alliances we are forging, we are creating a powerful
proposition to capitalise on new markets as they emerge and enhance
shareholder value.'

COMMENTARY

The WHSmith retailing businesses achieved profits of £79m (1999 - £80m), with
sales of £842m (1999 - £829m).

In a difficult market the UK retailing activities achieved comparable
sales growth of 2 per cent, with operating profits of £76m (1999 -
£74m).

Book sales grew by 6 per cent with good gains in market share.  There
was also a 5 per cent growth in magazines sales, a 5 per cent growth in      
stationery and exceptional growth in sales of electronic
accessories.  Own brand sales grew to 12 per cent of total sales from
10 per cent.  These performances were, however, offset by the effects
of the very poor music and video markets - with music sales down 13
per cent and video sales down 8 per cent. The decline in the music and video
categories reduced sales by £15m (2 per cent of total sales) and reduced
profits by £8m.

Overall, retailing margins were down only 0.2 percentage points - with
a 3.0 percentage point fall in music and video margins offset by
progress in other areas and favourable mix.

During the period the business rebranded 68 former John Menzies stores
to WHSmith stores.  It has also disposed of 14 former John Menzies
stores which were not suitable for rebranding.  The first
WHSmith.books.co store was opened in Leeds and the first trial WHSmith
metro style store will be opened in London in the Strand in June.  The
Travel Retail business obtained a new contract in Bristol Airport and
opened four new stores in London Underground stations.

During the period the management team has been strengthened including
the recruitment of Reg Curtis as Trading Director (from Tesco) and Ted
Smith as Operations Director (from Boots).

In the USA retail business changes in store format and buying
procedures in hotels have caused some disruption to the business. The
results have also been affected by difficulties in maintaining the
supply of the popular toy 'Beanie Babies' and market pressures on
labour costs.  Comparable sales were flat with profits down to £3m
(1999 - £6m).  The performance of this business will improve in the
second half as the benefits of the changes made start to come through.

The branded stores have been well received and contracts have been won
for new business worth £19m of sales per year.  These sales will start
to come through in the second half.  The new business includes the
important contract for news and gift retailing at the new
international terminal at Kennedy airport in New York.

The acquisition of Hazelwood Enterprises Inc was completed on 1 March
2000 for £12m.  Hazelwood operates stores in 70 hotels in the USA.  In
the year to 31 December 1999 it achieved sales of £11.5m and profit
before administrative costs, interest and taxes of £2.6m.

On 17 April 2000 the acquisition of Benjamin Books for £12m was
announced.  Benjamin operates 17 book stores and news and gift stores
in 9 US airports.  In the year to 31 December 1999 it achieved sales
of £16.4m with profit before administrative costs, interest and taxes
of £2.1m. It is intended to convert a number of the book stores
acquired  to the WHSmith.books.co format.

Sales in Asia have grown by 20 per cent and the first stores have been
opened under the contract for the international terminal at Sydney
airport.

Online Trading increased sales by 60 per cent to £4m. Further
investment has been made in developing a multi-channel retailing and
fulfilment capability. In order to substantially increase the number
of WHSmith Online users a number of strategic alliances have been
reached.

The agreement with BT covers bookselling on all existing and future
platforms including BT Easicom and BT WAP, and immediate access to
1.3m users.

A strategic partnership with Carlton has been agreed to develop a co-
branded online offer through WHSmith Online and Carlton.com. WHSmith
will provide the online transactional capability and Carlton will
provide access to 22m viewers supported by a £15m advertising
campaign.

Agreement has also been reached with Telewest to be the bookseller on
their broadband interactive TV services.

In line with the strategy to integrate WHSmith's channels to market,
kiosks are now being installed in 19 stores and these will be rolled
out to the majority of stores over the rest of the year.

The Hodder Headline publishing business, acquired on 27 May 1999 has
made excellent progress. During the half year it achieved record sales
of £62m (up 10 per cent on its comparable period) and profits of £8m
(up 46 per cent on its comparable period).  The Wayland educational
publishing business was acquired in September 1999 and contributed
£0.4m to the profits for the period.

The sale of Hodder Headline books by WHSmith stores has been increased
by 15 per cent to £14m.

Hodder Headline's strong sales performance was led by 'Managing My
Life: My Autobiography' by Sir Alex Ferguson and 'White Cap and Bails'
by Dickie Bird.  There were also very strong contributions from
Josephine Cox's 'Somewhere, Someday' and 'The Gilded Cage', from John
le Carre's 'Single & Single' and from Sheila O'Flanagan's 'Suddenly
Single'. Other leading best sellers included new works from Phil
Craig, Stephen King, Tom Clancy and James Patterson.

A number of the 'Teach Yourself' Revision Guides have been digitised
by Helicon and licensed to other websites including Research Machines'
'Living Library'.

WHSmith News Distribution increased sales by 3 per cent to £507m.  The
introduction of new automated operating processes and the progressive
rollout of SAP, a fully integrated IT system, has caused some
additional costs and operating profits were £18m, down from £19m. Once
fully implemented these investments will strengthen the operational
capacity and competitive position of the business.

In March, the formation of Connect2U was announced.  This venture is
80 per cent owned by WHSmith and 20 per cent owned by the software
provider Axon Group plc.
It will provide a business to business internet trading portal linking
independent retail outlets (particularly in the CTN trade) to WHSmith
News Distribution and other suppliers. It is anticipated that the
venture will reduce the operating costs and develop additional online
revenue streams. The business will initially target 8,000 independent
retail outlets out of the 20,000 currently supplied by WHSmith.

Operating profit was £98m (1999 - £95m). Interest income fell to £3m
from £10m.  The reduction reflects £5m attributable to the acquisition
of Hodder Headline (which made a £3m contribution after funding costs)
and a £2m reduction due to lower interest rates relative to the
comparable period.  Interest rates are currently ahead of those in the
second half of the prior year and the interest rate reduction in the
first half is expected to be compensated for by an equivalent increase
in the second half.

Earnings were 29.2 pence per share and the interim dividend has been
increased to 6.0 pence up 4 per cent.

The financial position of the business remains robust with £145m of
net cash and total net assets of £600m. Free cash flow amounted to
£74m (1999 - £69m) after £23m of capital expenditure.


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