Total sales up 6% to £2.7 billion

UK Retailing sales up 6% to £1.4bn

Hodder Headline sales up 10% to £128m

US Retailing sales up 28% to £245m

News Distribution sales down 2% to £1.0bn

Profit before tax and exceptional items down 8% to £130 million

UK Retailing profits up 13% to £89m

Hodder Headline profits up 13% to £18m

US Retailing profits down 17% to £10m

News Distribution profits down 32% to £26m

EPS before exceptional items and amortisation of goodwill down 6% to 38.6p

EPS after exceptional items and amortisation of goodwill down 21% to 31.7p

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

Performances from our UK Retail business and Hodder Headline have been very pleasing and we are taking immediate action to improve the performance of the US Travel Retail business, which has been impacted by the marked slow-down in the US. We are already seeing improvements in News Distribution, which has historically proved resilient in poorer economic periods.

While the economic outlook is currently difficult to judge, we continue to be encouraged by the performance of our UK operations. The Group’s defensive qualities and strong foundations give us confidence in our future prospects.

Excellent performances from our UK Retail business and Hodder Headline have been offset by disappointing results from our International Retail and News Distribution businesses.

UK Retail’s strong result was achieved through excellent sales growth and good cost control.

All of our key product categories had strong growth with books up 4%, stationery up 5%, entertainment up 11% following weak performance in the prior year, and news & express up 8%. Exceptional growth from the entertainment and news & express categories had an adverse impact on the sales mix and gross margin decreased marginally by 0.2 percentage points. The strong sales performance reduced fixed costs as a percentage of sales and, as a result, the net margin, excluding Online, increased from 6.5% to 6.8%.

Hodder Headline had another excellent year with double-digit sales and profit growth. Both education and consumer titles were strong during the year, with a record 43 titles on top 10 best seller lists in the year.

Our US Retail business had a difficult year due to the overall slowdown in the US economy, which had an increasingly negative impact on hotel occupancy rates and passenger numbers throughout the second half of the year. Asia Travel Retail was also affected by a slow-down in the second half.

As expected, News Distribution profits fell during the year due to a weak magazine market, costs arising from the continued rollout of the SAP computer system and higher distribution costs caused by an increase in the weight of newspapers.

As a result of the slowdown in Internet growth, Helicon, our digital reference publisher and Connect2U, our business to business trading portal, incurred losses of £5m in total, up from £1m in the prior year. We have consequently reviewed all our Internet activities and have decided to write-down the investment in our non-WHSmith branded Internet businesses. The write-down of these investments has resulted in an exceptional charge of £11m.

SOURCE: COMPANY PRESS RELEASE