WH Smith : Interim Results Announcement 6 Months to 28 February 2022 READ MORE

27 April 2022

WH SMITH PLC

INTERIM RESULTS ANNOUNCEMENT For the six months ended 28 February 2022

The Group has emerged from the pandemic operationally stronger and with significantly enhanced growth opportunities

• • Successfully navigated the business through the pandemic - recovery well underway

• • Group well positioned to benefit from new store opening opportunities in the global travel market

• • Total Travel revenue in the 8 week period to 23 April 2022 at 114% of 2019

• • New store pipeline of over 125 stores won in Travel, including 63 in North America and 31 in Spain; 28 new InMotion technology stores now open in UK airports; global rollout of InMotion continues

• • Focused plan on customer conversion, increasing average transaction value (ATV) and category development continues to drive performance as passenger numbers recover

• • Headline profit before tax and non-underlying items* of £14m (2021: loss of £19m)

• • Total Travel trading profit* of £10m (2021: loss of £28m)

• • High Street trading profit* of £26m (2021: £24m)

• • Continued investment across the business funded from cash flow and strong balance sheet

Carl Cowling, Group Chief Executive, commented:

"The Group has delivered a good performance with a strong rebound in profitability. We have seen a recovery across all our travel markets despite the impact of the Omicron variant in Q2, and we are in a strong position to capture growth as the recovery continues. I would like to thank all our colleagues around the world who have worked extremely hard to help the business make such good progress and deliver these results.

"Across the globe, we continue to roll out our Travel stores across all our formats. Since the start of the financial year, we have won 74 stores, including a significant tender win in Spain, bringing the total pipeline to over 125 stores. We expect more space to become available, particularly in North America, as our markets continue to recover.

"In addition, we have opened 28 new technology stores in the UK under our InMotion brand, including our recently opened flagship store at Heathrow Terminal 5. These stores have received excellent feedback from landlords and customers. Outside of the US and the UK, we have opened and won a further 11 InMotion stores across 6 countries and we see significant potential to grow the brand globally.

"Our High Street business delivered a resilient and profitable performance in the period, despite the challenges facing the UK high street. During the period, our online businesses continued to perform well against a strong pandemic-related performance in the prior year.

"Looking ahead, we continue to invest in the business where we see attractive growth opportunities and have positioned the Group well to benefit from the return of passenger numbers. We have improved the scale and footprint of the business and are operationally stronger than prior to the pandemic. While there are some uncertainties in the broader global economy, the Group is well positioned to capitalise on the ongoing recovery in our key markets and take advantage of the many opportunities ahead."

* Pre-IFRS 16

Group financial summary:

IFRS	Headline
pre-IFRS 162
6 months to Feb 2022 6 months to Feb 2021	6 months to Feb 2022 6 months to Feb 2021
Travel UK trading profit/(loss)1 North America trading profit/(loss)1 Rest of the World trading loss1	£9m £(19)m £8m £(4)m £(2)m £(8)m	£3m £(19)m £8m £(3)m £(1)m £(6)m
Total Travel trading profit/(loss)1 High Street trading profit1	£15m £35m £(31)m £33m	£10m £(28)m £26m £24m
Group profit/(loss) from trading operations1	£50m £2m	£36m £(4)m
Group profit/(loss) before tax and non-underlying items1 Earnings / (loss) per share before non-underlying items1	£24m 13.0p £(17)m (12.9)p	£14m 6.9p £(19)m (13.6)p
Non-underlying items1	£(6)m £(21)m	£(3)m £(18)m
Group profit/(loss) before tax Basic earnings/(loss) per share Diluted earnings/(loss) per share	£18m £(38)m 9.2p (26.7)p 9.2p (26.5)p	£11m £(37)m 5.3p (26.0)p 5.3p (25.8)p

Revenue performance:

£m	% change vs 6 months to Feb 2021
Travel UK North America Rest of the World 189 139% 116 111% 33 106%
Total Travel 338 125%
High Street 270 -%
Group 608 45%

• 1 Alternative Performance Measure (APM) defined and explained in the Glossary on page 41.

• 2 The Group adopted IFRS 16 'Leases' with effect from 1 September 2019. The Group continues to monitor performance and allocate resources based on pre-IFRS 16 information (applying the principles of IAS 17), and therefore the results for the periods ended 28 February 2022 and 28 February 2021 have been presented on both an IFRS 16 and a pre-IFRS 16 basis.

  Measures described as 'Headline' are presented pre-IFRS 16.

  For the purposes of narrative commentary on the Group's performance and financial position, both pre-IFRS 16 and IFRS 16 measures are provided. Reconciliations from pre-IFRS 16 measures to IFRS 16 measures are provided in the Glossary on page 41. Group revenue was not affected by the adoption of IFRS 16, and therefore all references to and discussion of revenue are based on statutory measures.

WEBCAST:

A live webcast will be held today at 9.00am BST for investors and analysts and will be available on our website atwww.whsmithplc.co.uk.

ENQUIRIES:

WH Smith PLC

Nicola Hillman	Media Relations	01793 563354
Mark Boyle	Investor Relations	07879 897687
Brunswick
Tim Danaher	020 7404 5959

WH Smith PLC's Interim Results 2022 are available atwww.whsmithplc.co.uk.

GROUP OVERVIEW Strategic Initiatives

In the first few months of the financial year, we saw a steady improvement in Travel's trading performance as vaccination rates increased and travel restrictions eased. This improving trend was interrupted by the emergence of the Omicron variant in December. We acted quickly to ensure we kept stores trading, managed inventory levels and continued to recruit colleagues, anticipating the impact of Omicron would be relatively short. Since February, as travel restrictions have been further eased, we have seen the recovery in our travel markets continue with a strong performance over the Easter holiday period.

Throughout the pandemic, we have continued to focus on a number of key strategic initiatives, including:

• • Driving ATV and sales per passenger

• • Developing our formats in Travel to better meet customer and landlord requirements by repositioning our stores as one-stop-shops for travel essentials

• • Working with landlords, building on our strong relationships, to create opportunities for:

  • i. Winning new business

  • ii. Extending categories

  • iii. Renewing key contracts, and

  • iv. Improving the quality and location of the space where we operate.

• • Investing capex in strategically important projects which set us up well for the future, such as our new Travel store formats in the UK, North America and the Rest of the World

• • Building our internet proposition by extending ranges, investing in the websites, marketing, fulfilment and building customer engagement through social media

• • Forensic focus on returns on investment, costs and cash.

Group Summary

Total Group revenue in the first half was £608m (2021: £420m), up 45% on last half year.

Travel saw a steady recovery from September to November. This was interrupted by the Omicron variant for a short period from December to February. Since then, we have seen a relaxing of restrictions around the world. Travel revenue for the half was at 82% of 20193, compared to 63% in Q4 of the previous financial year. In the 8 week period to 23 April 2022, Travel revenue has been 114% of 20193 which demonstrates the strength of the recovery. Over the Easter holiday period, Travel revenue was at 126% of 2019, giving us confidence for the key summer trading period.

We saw a consistently good performance in High Street throughout the half with the important December trading period at 90% of 2019.

The Headline Group profit from trading operations1 for the period was £36m (2021: loss of £4m) with Headline Group profit before tax and non-underlying items1 at £14m (2021: loss of £19m).

Including non-underlying items, the Headline Group profit before tax1 was £11m (2021: loss of £37m). Group profit before tax, on a statutory basis (after non-underlying items and including the effect of IFRS 16), was £18m (2021: loss of £38m).

The Group's financing arrangements include a £250m Revolving Credit Facility (RCF) which matures in 2025, £327m of convertible bonds which mature in 2026 and £133m of term loan with a maturity in 2025. The Group pays a fixed coupon at 1.625% on the convertible bonds and the term loan is interest bearing at a margin over SONIA and is due to mature on 28 April 2025.

3 Equivalent month in 2019

The Group has the following cash, committed facilities and drawn debt as at 28 February 2022:

28 February 2022	Maturity
Cash and cash equivalents	£88m4
Revolving Credit Facility5	£250m	April 2025
Term Loan	£133m	April 2025
Convertible bond	£327m	April 2026

• 4 Cash and cash equivalents comprises cash on deposit of £65m and cash in transit of £23m

• 5 Undrawn as at 28 February 2022 and 26 April 2022

As at 28 February 2022, Headline net debt1 was £336m (2021: £336m) with access to £315m of liquidity (£65m cash on deposit and £250m undrawn RCF). We continue to focus on cash. Group free cash flow1 was an outflow of £29m (2021: outflow of £13m), largely driven by capital investment of £38m (2021: £22m).

The Group's approach to capital allocation remains unchanged:

• • investing in our existing business and in new opportunities where we see attractive rates of return, ahead of the cost of capital;

• • re-establishing a dividend for our shareholders;

• • undertaking attractive value-creating acquisitions in strong and growing markets;

• • returning surplus capital to shareholders by way of share buybacks

In normalised conditions, we have a leverage target of between 0.75X and 1.25X EBITDA.

Outlook

The Group has continued to manage the business well in an evolving trading environment. We continue to invest in new Travel stores and have the financial capacity to capitalise on the ongoing recovery in our Travel markets and the significant medium term new store opening opportunities.

Our High Street business has delivered another robust performance and is well placed to continue to generate cash from its portfolio of well-located stores and internet businesses.

Given our low ticket-value categories and strong supplier relationships, we are managing the impact of current inflationary pressures.

Since the period end, and following the further relaxing of travel restrictions, we have continued to see a good recovery across all our travel markets and channels. We remain well placed for the ongoing Travel recovery and the key summer trading period which gives the Board confidence in the outlook for the remainder of the financial year.

Looking further ahead, while the broader global economy remains uncertain, the Group is well positioned to capitalise on the ongoing recovery in our key markets and take advantage of the many new store opening opportunities ahead.

TOTAL TRAVEL

Our Travel business comprises three divisions: UK, North America (NA) and Rest of the World (ROW).

Total revenue was £338m (2021: £150m), up 125% compared to the previous year resulting in a Total Travel Headline trading profit1 in the period of £10m (2021: loss of £28m).

£m	Trading profit/(loss)1 (IFRS 16)	Headline trading profit/(loss)1 (pre-IFRS 16)	Revenue
6 months to Feb 2022	6 months to Feb 2021	6 months to Feb 2022	6 months to Feb 2021	6 months to Feb 2022	6 months to Feb 2021
Travel UK North America Rest of the World	9 8 (2)	(19) (4) (8)	3 8 (1)	(19) (3) (6)	189 116 33	79 55 16
Total Travel	15	(31)	10	(28)	338	150

In all our markets, we have continued to focus on initiatives that position us well as our markets recover:

• • Business development and winning new business

  We do this through building and managing relationships with all our landlord partners to win new space, improve the quality and amount of space, develop new formats and extend contracts.

• • ATV growth and spend per passenger

  We do this through our forensic analysis of the return on our space, cross category promotions, merchandising, store layouts and store refits.

• • Category development

  We do this by developing adjacent product categories relevant for our customers, such as health and beauty and electrical accessories ranges; and expanding existing categories, e.g. premium food ranges.

• • Minimising costs

  We remain focused on cost control and minimising our cost base to reflect the level of sales whilst retaining our ability to trade as recovery occurs.

As restrictions have eased, we have seen an encouraging improvement in passenger numbers, led first by domestic travel and then short-haul. Whilst there are some uncertainties in the global economy and the speed and shape of the recovery, we are confident in the recovery of Travel, further supported by the consensus of industry forecasts including the Airports Council International (ACI) which expect passenger numbers to return to 2019 levels by 2024.

Despite the challenging trading environment during the pandemic, we are more optimistic about the prospects for a full recovery and further growth than ever before.

As at 28 February 2022, our global Travel business, including MRG and InMotion, operated from 1,162 units (31 August 2021: 1,166 units). Outside of the UK, as at 28 February 2022 we were present in over 100 airports and 29 countries.

Division	Number of stores
UK	581
North America	288
Rest of World	293
Total	1,162

Excluding franchise units, Travel occupies 1.0m square feet (31 August 2021: 1.0m square feet).