WH Smith headline loss of £69m

WH Smith

WH Smith plc (LON:SMWH) has announced its preliminary results for the year ended 31 August 2020.

·    Decisive actions taken to protect colleagues, customers and the business since the start of the pandemic

·    Challenging year with a Headline loss of £69m but with improving trends prior to current lockdown

·    Focused plan on customer conversion, increasing average transaction value, category development and cost management; delivering good results across all UK and international travel markets

·    Continue to focus on opportunities for further growth

·    Encouraging signs of recovery in North America; continue to open new stores and win new business

·    Resilient performance from High Street business; steady recovery since first lockdown; 558 stores currently trading

·    Robust balance sheet; finished October ahead of plan with cash on deposit of £83m and undrawn facilities of £320m

·    Underlying cash burn for November approximately £20m

·    The Group is well positioned as travel markets recover

Group financial summary:

Aug 2020 (IFRS)Aug 2020(IAS 17*)Aug 2019(IAS 17)% Change(IAS 17)
Travel trading (loss)/profit1£(27)m£(33)m£117m(128)%
High Street trading (loss)/profit1£(4)m£(10)m£60m(117)%
Group (loss)/profit from trading operations1£(31)m£(43)m£177m(124)%
Headline Group (loss)/profit before tax1£(68)m£(69)m£155m(145)%
Headline (loss)/earnings per share1(43.3)p(44.2)p114.7p(139)%
Non-underlying costs1 £(212)m £(157)m £(20)m 
Group (loss)/profit before tax£(280)m£(226)m£135m(267)%
Basic (loss)/earnings per share(199.2)p(160.0)p98.1p(263)%
Diluted (loss)/earnings per share(199.2)p(160.0)p97.2p(265)%

Revenue performance:

High Street468(19)%(19)%

* The Group adopted IFRS 16 ‘Leases’ with effect from 1 September 2019 using the modified retrospective approach to transition and has therefore not restated prior periods. The results for the year ended 31 August 2020 are not directly comparable with those reported in prior periods under the previous applicable accounting standard, IAS 17 ‘Leases’. In order to aid comparability, the results for the year ended 31 August 2020 have also been presented on a pre-IFRS 16 (IAS 17) basis and commentary throughout this report will refer to these pre-IFRS 16 numbers. Measures presented under IAS 17 are identified with a “*”.  All prior period measures are presented on an IAS 17 basis. Reconciliations from IAS 17 measures to IFRS 16 measures are provided in the Glossary on page 53. Group revenue was not affected by the adoption of IFRS 16, and therefore all references to and discussion of revenue, and like-for-like revenue are based on statutory measures.

 Monthly recurring cash burn before any cost deferrals or one-off savings/costs

1 Alternative Performance Measure (APM) defined and explained in the Glossary on page 53. Unless otherwise stated, all references in this announcement to growth rates and year-on-year comparisons relating to the Group’s statutory and alternative performance measures are stated on a consistent basis under IAS 17.

Carl Cowling, Group Chief Executive, commented:

“The Group delivered a strong first half performance and traded strongly prior to the outbreak of Covid-19. Since March, we have been heavily impacted by the pandemic.  Despite the many challenges faced, we responded quickly and took decisive actions to protect our colleagues, customers and the business, including strengthening our financial position. 

“While passenger numbers continue to be significantly impacted in the UK, our North American business, where 85% of passengers are domestic, is beginning to see some encouraging signs of recovery.  In addition, we continue to open new stores in the US and win significant tenders across major US airports.   

“In High Street, we had seen a steady recovery and we were well set up both in stores and online as we went into the second lockdown. We currently have 558 stores open.

“We have a robust plan across all our businesses focusing on cost management and initiatives within our control which support us in the immediate term and position us well to emerge stronger as our markets recover. 

“I have nothing but enormous admiration for all our colleagues across the business, be it in stores, our distribution centres or our head offices.  Their support and commitment has been outstanding during this difficult period and I would like to thank every one of them for how they have responded.

“We are a resilient and agile business. The actions we have taken have put us in a strong position to navigate this time of uncertainty and we are well positioned to benefit as our markets return to growth.”


A live webcast will be held today at 8.30am GMT for investors and analysts and will be available on our website at www.whsmithplc.co.uk.


Impact of Covid-19

Following the outbreak of Covid-19, the Group acted fast to take a number of actions to support our colleagues, customers and our business. Our number one priority is the health and wellbeing of our colleagues and our customers. All stores, distribution centres and head offices have effective safety measures in place, including social distancing measures, PPE for colleagues’ use, protective screens and guidelines to limit the number of customers in store.  In addition, all head office staff have worked from home throughout the lockdown periods.

We immediately focused on cost and cash management, including the following activities:

·    Reduced stock purchases to reflect ongoing demand, returning sale or return stock and negotiating extended payment terms

·    Reviewed all capital expenditure to focus on essential and strategic projects

·    Stopped all discretionary expenditure and reduced corporate overheads

·    Worked with landlords to significantly reduce or remove rent payments and to link, as far as possible, with revenue

·    Significant reduction in headcount across stores and head offices through furlough arrangements; including participating in the UK Government Job Retention Scheme, and subsequently restructuring to ensure headcount is in line with business requirements and reduced sales

·    Deferred tax payments in line with UK government announcements

·    The Board has decided not to pay a dividend in respect of the financial year ending 31 August 2020

·    Focused on strengthening the balance sheet and the Group’s liquidity position including bank covenant waivers for February 2021 and August 2021

Throughout the first lockdown period, and in line with government guidance, we committed to keeping a number of our stores open to serve those communities that most needed our services.  As a result, 203 High Street stores which host Post Offices remained open and c.130 Travel stores located within hospitals across the UK continued to serve NHS frontline workers. 

As lockdown restrictions were eased, we focused on the re-opening of our store estate based on the safety of our colleagues and customers, where we were able to make a cash contribution from each individual unit taking into account passenger and customer traffic flows, and the opening of transport infrastructure.  We were able to open 570 High Street stores by the end of June 2020, and at the end of August 2020, we had 285 Travel stores open in the UK and 365 stores open outside of the UK.

Following the announcement of a second lockdown in England, we have 558 stores open in High Street and 243 stores open in Travel, including 206 Post Offices and 135 hospital stores.  We were able to apply the learnings from the first lockdown to act fast where necessary to return stock, furlough staff and manage our supply chain.  We also took measures to make sure our stores can open swiftly as lockdown eases.

Strategic Initiatives

As we have re-opened our stores, we have focused on initiatives within our control that support us in the immediate term and position us well to emerge stronger as our markets recover.  These key areas of focus include:

·    Driving average transaction value and sales per passenger. We have seen increases across all our businesses

·    Extending our categories and ranges to reflect the specific needs of our customers in each location.  For example, health and beauty and hygiene and wellbeing products across our Travel stores and working from home and electrical accessories ranges across our High Street stores

·    Forensic focus on costs; completing the previously announced restructures in stores and head offices and minimising discretionary spend

·    Working with landlords building on our strong relationships to create opportunities for business development as the recovery continues

·    Investing capex in completing strategically important projects which set us up well for the future.  These deliver unique and creative propositions for landlords and customers, such as our new store at London Heathrow Airport Terminal 2 and Bowery Bay at La Guardia Airport, New York

·    Integrating our North American businesses into Las Vegas, saving c.£5m of costs annually

·    Building our internet proposition by extending our ranges, increasing our distribution capacity and building customer engagement through social media

Group Summary

Covid-19 has had a significant impact on the Group, particularly in the second half of the financial year. Total Group revenue was down 27% compared to last year at £1,021m (2019: £1,397m) with Group LFL revenue down 33% (down 64% in the second half).

The Headline Group loss from trading operations1 for the year was £43m* (2019: profit of £177m) with Headline Group loss before tax1 at £69m* (2019: profit of £155m). Including non-underlying items the Group loss before tax1 was £226m* (2019: profit of £135m). The Group loss before tax, after non-underlying items and including IFRS 16, was £280m.

Following disruption to the business from Covid-19, the Board has announced that it will not be paying a dividend in respect of the financial year ending 31 August 2020.

As announced on 6 April 2020, we raised net proceeds of c.£160m via a share placing and at the same time agreed a £120m 12 month (plus 7 months at the option of the Group) committed banking facility from BNP Paribas, HSBC Bank PLC and Santander UK PLC. This was in addition to our existing facilities. The Group has also agreed waivers for the bank covenant tests at August 2020, February 2021 and August 2021.

As at 31 August net debt1 was £301m* (2019: £180m).  Group free cash flow1 was an outflow of £41m* (2019: free cash flow generated of £109m).  As at 31 August 2020, the Group had cash of £108m of which £82m was cash on deposit2 giving us access to £402m of liquidity (undrawn revolving credit facility (RCF) of £200m, liquidity loan of £120m and cash on deposit2 of £82m.) 

The Group has the following debt facilities as at 11 November 2020:

Amount Drawn at 31 August and 11 November 2020Maturity
Available facilities
£120m ‘Liquidity’ Facility£nilNovember 2021***
£200m Revolving Credit Facility£nilDecember 2023
Existing debt
£200m Term Loan£200mOctober 2022
£200m MRG Loan£200mOctober 2022***

*** The maturity dates above include extension options at the Group’s control

2 Cash and cash equivalents of £108m is cash on deposit/cash at bank of £82m, plus £26m of cash in transit/held at stores.

As at 30 October 2020, the Group had cash on deposit of £83m and access to £320m of committed facility from the RCF and liquidity loan.  At that point, the Group owed approximately £80m primarily relating to rent, restructuring charges, and outstanding creditors as we entered the second lockdown.  We anticipate these payments will be made during the first half of the financial year.  Therefore, the Group had £323m of available cash and facilities at the end of October 2020.  We have worked hard to reduce the cash outflow, managing costs, stock in-take, capex projects and negotiating rent reductions as well as improved trading.  The Group’s underlying monthly cash burn for November is expected to be £20m including any furlough mitigation.  The improved trading and good cash management resulted in our underlying cash burn in September and October being £5m to £10m per month which was better than we had originally expected. 

In April, the Group secured eligibility to the Government’s Covid Corporate Financing Facility (CCFF) for up to £300m. The Group never utilised the facility. The CCFF is currently being reviewed and like many companies, the Group is in dialogue with the CCFF concerning its eligibility.


Prior to Covid-19, our Travel business was trading very well having delivered its seventh year of like-for-like sales growth. The second half however was significantly impacted by Covid-19 across our UK and international markets resulting in a full year trading loss1 of £33m* (2019: profit of £117m), of which £32m* (2019: profit of £20m) relates to our international business including MRG and InMotion. Total revenue was £553m (2019: £817m), down 32% compared to last year and down 43% on a LFL basis. 

The table below shows the impact of Covid-19 in the second half of our financial year:

TravelH1H2Full Year
YOY movement in Revenue (%)19%(73)%(32)%
Trading (loss)/profit1 (£m)49m*(82)m*(33)m*

As at 31 August 2020, our global Travel business, including MRG and InMotion, operated from 1,174 units (31 August 2019: 1,019 units).  Of these, 650 were open as at 31 August 2020.  Excluding franchise units, Travel occupies 1.0m square feet.

UK Travel

In our UK Travel business, we saw a significant decline in passenger numbers as a result of travel restrictions in the second half of the financial year. Total revenue in the year was £344m, (2019: £565m), down 39% on the previous year. In air, total revenue was down 48% with LFL revenue also down 48%; in our hospital channel, total revenue was down 15% with LFL revenue down 20%, and in rail, total revenue was down 42% with LFL revenue down 40%. This resulted in a trading loss1 of £1m* (2019: profit of £97m).

Recent trading in UK Travel has been impacted by quarantine measures and reduced passengers on public transport.  Revenue in September and October was 32% of 2019 sales.  Hospital revenue continues to track at around 64% of 2019 sales.  Following the announcement of the second lockdown in England, we expect to be further impacted and for the recovery not to begin until the second half.

We have worked hard across all our channels to implement a robust plan focusing on key priorities within our control that support us in the immediate term and will enable us to emerge stronger when our markets recover.  Our key areas of focus include: cost management, increasing conversion and average transaction value, category development and identifying opportunities for further growth.


In air, whilst we saw some early signs of recovery from leisure passengers in July as lockdown restrictions were eased, passenger numbers stalled as quarantine requirements were broadened.  Despite the reduction in passenger numbers, we have continued to build on our strong position in this channel by focusing on increasing conversion and our average transaction value.  This has been achieved by further extending our categories and existing ranges into new categories such as health and beauty, and hygiene and wellbeing products.  We have seen some positive results with scope to do more.

During the second half, we opened a new flagship store at London Heathrow Airport Terminal 2. This new format store builds upon the success of our combined WHSmith and pharmacy format store that opened at London Gatwick Airport in the prior year. Our experience shows that we can deliver higher sales per passenger from these large stores, through improved layouts, increased capacity and by providing a one-stop-shop for time pressed passengers. With over 5,000 square feet of selling space, this flagship store features an extensive news, books and convenience offer with the addition of a world class health and wellbeing department with specialist staff.  The health and wellbeing department comprises a comprehensive range of over 3,000 products curated through our partnership with market leading, global brands. In addition, the pharmacy counter offers healthcare advice along with a wide selection of medicines.  We have received very positive feedback from both our customers and landlords.  While this format is not suitable for all locations, we expect it to be of interest to landlords as they reconfigure their space in the future.


Hospitals are an important channel for us and this is now our second largest channel by sales in UK Travel.  This channel is a great example of how we continue to innovate to meet the specific needs of each hospital.  We have developed a strong customer offer and aligned our ranges to the NHS strategy on healthy eating.  Our broad suite of brands, which include Costa and M&S Simply Food, also ensure that we can tailor and adapt our proposition to each hospital’s requirements. We believe there are further opportunities to improve the hospital retail offer in the UK and we are well positioned to grow this channel further.

Throughout the second half, during the height of the pandemic and in the second lockdown, we committed to keeping our stores open in c.130 hospitals across the UK in order to support frontline NHS staff.  While sales were clearly impacted with no hospital visitors, these stores performed well.  We also extended our grocery ranges in these stores to further support NHS staff, ensuring we continued to play our part in the communities we serve.


Rail remains an important channel with significant long-term investment in new lines and station redevelopments.  During the year, our performance was impacted by travel restrictions in the second half.  We saw some improvement in performance in July, however this was stalled by further government restrictions in early September. Similar to air, we have focused on extending our ranges and increasing average transaction value.

We now have c.60% of our UK Travel store estate open.

We have focused on all areas of cost across our UK Travel business. As a result of the significant decline in passenger numbers, we took the difficult decision to review our store operations in August 2020, reducing headcount across the Travel business. 


Within our International Travel division, North America now represents c.50% of our stores outside of the UK and we continue to see further opportunities to grow this business. Outside of North America, we still have a relatively small market share of the international news, books and convenience (NBC) market and we believe there is good long-term potential for us to continue to grow our space. During the first half of the financial year, our strategy to grow our International Travel business progressed well.  In line with our UK Travel business, the second half was adversely impacted by Covid-19.

Total revenue for the year, including Marshall Retail Group (MRG) and InMotion, was £209m (2019: £252m), down 17% versus the previous year.  LFL revenue, on a constant currency basis, was down 43%.  The trading loss for the year was £32m* (2019: profit £20m).

North America

We completed the acquisition of MRG, a leading and fast-growing US travel retailer in December 2019.  The combination of WH Smith, MRG and InMotion now enables the Group to participate in the entire North American airport specialty retail market.  Differentiated from its competitors by its strategy of developing highly customised retail experiences tailored to local customers and landlords, MRG has a highly successful and proven business model with a strong track record of concession and tender wins.  Although impacted by Covid-19 in the second half, MRG won a further 8 stores, including stores at San Francisco, Denver and Newark airports, and along with InMotion have a further 39 stores won but yet to open. 

During the second half, MRG opened a new walk-through format of stores at La Guardia Airport, New York.  This format is a first in North America. The Bowery Bay showcases around 15,000 square feet of selling space, curating a number of travel essential and specialty international retailers and brands including Kate Spade and Kiehl’s.  All these stores are operated by MRG with the digital accessories range provided by InMotion. This is the first InMotion implant within MRG and we believe there is scope for further opportunities for InMotion to be part of the MRG assortment of products and brands and for InMotion to open further stores in resorts.

InMotion has an excellent store portfolio with 116 stores across 43 airports in North America. During the year, InMotion opened 8 units, including units at San Francisco, Washington Dulles and Salt Lake City international airports.

While Covid-19 has had a significant impact on our North American business, approximately 85% of passengers in the US are domestic with leisure passengers an important segment, and we therefore anticipate a faster recovery in this market versus the rest of the world. TSA data continues to show a consistent, gradual recovery in passenger numbers week on week, with passenger numbers now at 35% of 2019 levels.  In addition, the Las Vegas resorts business is proving resilient with occupancy rates continuing to improve, particularly at the weekend.  Importantly, a significant number of visitors travel by car to Las Vegas.  Data from the Las Vegas Conventions and Visitors Authority suggests that vehicle movements between California and Nevada remain robust with volumes up 10% in September compared to 2019.  Our sales performance has reflected these trends with overall sales in North America at 44% of 2019 levels in October.  We currently have 224 stores open (136 MRG and 88 InMotion).

During the second half, we accelerated the integration of InMotion into the MRG head office in Las Vegas.  Given the exceptional circumstances, with the majority of stores closed, we acted quickly to integrate the businesses much earlier than we originally planned at acquisition.  The integration is progressing well, and we expect it to be complete by the end of the calendar year.  Going forward, we expect this to deliver savings of c.£5m per annum.

Rest of the World

Outside of the UK and North America, our WH Smith international business is seeing broadly similar trends with passenger numbers significantly down year on year. Similar to the UK, we remain focused on areas within our control, including increasing average transaction value, re-negotiating rents and extending our leases.  Of the 307 WH Smith stores outside the UK, we have re-opened 159 stores to date.  Recovery in these markets is likely to take some time and we are planning accordingly.  We will temporarily close stores if they become uneconomic and as airlines adjust volumes and schedules.  Revenue in September and October was at 18% of 2019 levels.

Despite the disruption in the second half, outside of North America we won 26 new WH Smith units internationally in the year and opened 16 units, making a total of 307 WH Smith international units as at 31 August 2020.  40% are directly run, 52% are franchised with the balance being joint ventures.  We will continue to use these three economic models flexibly in order to create value and win new business.

In total, across our global Travel business outside of the UK, we are now present in over 100 airports and 30 countries with 277 units open in North America, 83 units open in Europe, 104 in the Middle East and India, and 120 in Asia Pacific.


High Street delivered a resilient performance despite a very challenging second half with a full year trading loss1 of £10m* (2019: profit of £60m). Total revenue was down 19% with like-for-like revenue down 19%.

The table below shows the impact of Covid-19 on the second half of our financial year:

High StreetH1H2Full Year
YOY movement in Revenue (%)(5)%(39)%(19)%
Trading (loss)/profit1 (£m)44m*(54)m*(10)m*

Throughout the first lockdown period we kept 203 stores open to ensure that those stores that include a Post Office could continue to serve their local communities and provide access to vital postal and banking services.

We consider retail space as a strategic asset and we utilise our space to maximise a return in the current year in ways that are sustainable for future years. We have extensive and detailed space and range elasticity data for every store, built up over many years and we utilise our space to maximise the return on every metre drop of display space in every store.  This approach remains as appropriate today as it has ever been.

As with our Travel business, we have focused on initiatives within our control with a greater focus on: increasing average transaction value, where we have seen some very positive results; category development, introducing new ranges such as health and hygiene, electrical accessories and working from home ranges; and good cost control.

Driving efficiencies remains a core part of our strategy and we continue to focus on all areas of cost in the business. We achieved cost savings of £23m in the year. These savings come from right across the business, including rent savings at lease renewal (on average over 45%) which continue to be a significant proportion, government property rates holiday, marketing efficiencies and productivity gains from our distribution centres.  An additional £34m of cost savings have been identified over the next three years of which £21m are planned for 2021.

Over the years, we have actively looked to put as much flexibility into our store leases as we can, and this leaves us well positioned in the current environment.  The average lease length in our High Street business, including where we are currently holding over at lease end is 2.5 years.  We only renew a lease where we are confident of delivering economic value over the life of that lease.  We have c.420 leases due for renewal over the next three years, including 120 where we are holding over and in negotiation with the landlord.  Depending on the negotiations with our landlords and the government’s future approach to property rates, we anticipate closing c.25 stores in the current financial year as the leases on these stores expire. While this is not an easy decision to make for our colleagues or the communities we serve, it is vital we retain a strong and cash generative high street portfolio going forward.

As at 31 August 2020, the High Street business operated from 568 WH Smith stores (2019: 576) which occupy 2.7m square feet (2019: 2.7m square feet).  Eight WH Smith stores were closed in the year.


Our online businesses have delivered strong growth, particularly in the second half. 

i.    Our online personalised greetings card business, www.funkypigeon.com, has delivered high levels of growth with record sales over key trading events and good profit growth.

ii.    www.whsmith.co.uk provides customers with a comprehensive book and stationery offer and, during the year we invested in a new website.  In addition, we have focused on extending our ranges and building our customer base. In the second half, we delivered growth of over 240%. 

iii.   Our specialist pen website, www.cultpens.com has continued to perform well in the year.  During the year, we have focused on extending our luxury pen range which now includes a full range of Montblanc pens and accessories.


Despite the challenges and uncertainties faced in the second half, WH Smith responded quickly to protect the business and we are in a stronger position than forecast in August 2020.  We had reduced our cash burn to £5m-£10m per month in September and October, managed our cash position well and entered November with access to £323m of liquidity. We expect cash burn in November of approximately £20m. We have a robust plan in place, and we expect to emerge stronger operationally as our markets recover. 

We have a resilient hospital channel and we are committed to playing our part to support NHS staff on the frontline.  In air, we expect a gradual improvement in domestic passenger numbers first, particularly in the US where c.85% of passengers are domestic, followed by international and inter-continental passengers. In rail, as government restrictions are lifted, and more people return to work, we expect to see a gradual improvement in sales. Outside the UK, we will continue to focus on our key initiatives and we expect to see a continued improvement in passenger traffic in North America.

We are financially strong and are an important retail partner for our travel landlords. As a result, we are well positioned to benefit from further opportunities, including extending our user clauses to drive spend per passenger. We will continue to invest in new stores and new store formats in the UK and North America where we see attractive opportunities for profitable growth.

In view of the continuing uncertainty from the impact of Covid-19 we continue to plan cautiously for a wide range of outcomes.  As we have done since March, we will manage the business by focusing on the short-term actions that manage cash and costs along with ensuring we are well positioned for economic recovery, particularly in our Travel business. 

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