Annual Report and Accounts 2022
For every
journey
there’s a
Find out more about WHSmith at: whsmithplc.co.uk
@whsmithofficial@whsmith
youtube.com/WHSmith linkedin.com/company/whsmith
Here at WHSmith
our purpose is simple:
to make every one of
life’s journeys better
Supporting our customers’ journeys
has been key since 1792.”
As we celebrate 230 years since the Company was founded, we continue
to support the many journeys our colleagues, customers and shareholders
make. Supporting the journey of our people is our top priority. We’re a
diverse team of over 12,000 colleagues across 30 countries and we’re
committed to championing their career journey with us while also
promoting a culture where everyone can be their best self. We’re all on
thesame journey – to create a better business.
Supporting our customers’ journeys has been key since 1792. Whether a
visit to one of our stores while travelling through an airport in the UK or
overseas, to a hospital, or through a railway station. Or supporting the many
communities we serve on the high street; purchasing a first book, back to
school stationery, revision guides. We’re there for every journey, and with
more than 1,700 stores across the globe, we’re proud to have evolved into
the global travel retailer we are today.
For our shareholders, value creation remains central to our journey and
we will continue to invest for the longer term where we see attractive
opportunities for profitable growth.
Carl Cowling
Group Chief Executive
Our purpose
Disclaimer
This Annual report has been prepared for, and only for, the members of the Company, as a body, and no other persons. The Company, its directors, employees, agents or
advisers do not accept or assume responsibility to any other person to whom this document is shown or into whose hands it may come and any such responsibility or liability
is expressly disclaimed. By their nature, the statements concerning the risks and uncertainties facing the Group in this Annual report involve uncertainty since future events and
circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at
the date of preparation of this Annual report and the Company undertakes no obligation to update these forward-looking statements. Nothing in this Annual report should be
construed as a profit forecast.
Strategic report
Group at a glance 2
Business model 6
Chairman’s statement 8
Group Chief Executive’s Q&A 10
Key market drivers 12
Our strategy 14
Key performance indicators 16
Review of operations – Travel 19
Review of operations – High Street 24
Outlook 25
Financial review 26
Section 172(1) statement 30
Sustainability 37
– Climate-related disclosures 44
Non-financial reporting statement 56
Principal risks and uncertainties 57
– Viability statement 62
Corporate governance
Directors’ biographies 64
Corporate governance report 66
– Audit Committee 74
– Nominations Committee 79
– ESG Committee 81
Directors’ remuneration report 83
Directors’ report 105
Statement of directors’
responsibilities
108
Financial statements
Independent auditors’ report to
the members of WH Smith PLC
109
Group income statement 116
Group statement of
comprehensive income
117
Group balance sheet 118
Group cash flow statement 119
Group statement of changes
in equity
120
Notes to the financial statements 121
Company balance sheet 169
Company statement of
changesin equity
169
Notes to the Company
financial statements
170
Additional information
Glossary 173
Information for shareholders 182
About us
Revenue
£1.4bn
Headline Group profit before tax
and non-underlying items
1
£73m
Headline diluted earnings per share
before non-underlying items
1
41.7p
Total number of stores
1,723
Group profit before tax
£63m
Dividend per share
9.1p
Financial and operational highlights
In this report
• WHSmith is a global travel retailer with a presence in 30 countries,
mainly in airports
• We are present in a wide range of locations including airports,
hospitals, railway stations and motorway service areas
• Our smaller UK High Street business is present on most significant
high streets and shopping centres, mainly in prime locations
• As WHSmith continues on its journey to be a better business,
wehave a strong commitment to the principles of sustainability
• WHSmith employs over 12,000 colleagues
• WH Smith PLC is listed on the London Stock Exchange (“SMWH”)
and is included in the FTSE 250 Index
• WHSmith has a growing online presence and reaches customers
online via: whsmith.co.uk, funkypigeon.com, cultpens.com,
treeofhearts.co.uk and dottyaboutpaper.co.uk
1 Alternative performance measure described and explained in the Glossary on page 173
1WH Smith PLC Annual Report and Accounts 2022
Group at a glance – Travel
Travel UK
Travel UK is the largest division in the Group and has a presence in a wide range of
locations, including airports, hospitals, railway stations and motorway service areas
across the UK.
Making our customers’ journeys easier is our passion,
whether they’re travelling by air, by foot, by road or by
train.As one of the world’s leading travel retailers, we are
thetrusted home for travel essentials in the UK and it’s
howwe support the millions of journeys made each year.
Our customers need convenience and have less time to
browse, so we have tailored ranges providing a one-stop-
shop solution, with a wide range of products, including food
and drink, books, magazines, digital accessories, health and
beauty products and souvenirs.
With WHSmith for travel essentials, and InMotion – our
world-leading technology retailer – at UK airports, we’re
continuing to grow our presence around the UK, providing
our customers with the essentials we know make their
journey just that little bit better. We also partner with some
of the UK’s most popular retailers, such as Marks and
Spencer Simply Food (M&S), Costa Coffee, Well Pharmacy
and the Post Office. This allows us to tailor the product and
service proposition to meet the needs of our customers
and landlord partners in all the locations we operate in
throughout the UK.
In the UK, we operate over 580 stores in travel locations
and hospitals, with stores ranging in size from 90 square
feet to more than 6,000 square feet, and we’re constantly
evolving the way we do things; opening new world-leading
stores, transforming our customers’ experience, increasing
our category ranges and continuing to grow our network
of third-party partnerships. Explore our current UK Travel
channels on pages 20 to 22 to see how we aim to make
every one of life’s journeys better.
Stores
580+
Revenue
£521m
Scan here for an overview
of our TravelUK business.
2 WH Smith PLC Annual Report and Accounts 2022
Strategic report
North America
and Rest of the World
As a global travel retailer with a presence in 30countries and more than 100 airports
around the world, our brand and tailored customer proposition is synonymous with the
travelling experience, having exposure to millions of travellers every year.
From the United States to Australia, the Middle East, Asia
and Europe, we’ve welcomed many new customers since our
journey began in London in 1792, and we continue to grow.
We have over 600 stores outside of the UK. We are
continually looking for new store locations, while working
hard to ensure our existing stores are providing outstanding
customer service, operating successfully and delivering
strong returns.
We are constantly innovating and adapting to ensureour
customers receive the best experience possible.Whether itis
through sourcing the latest digital accessories and bestselling
books or food to go in each territory, or through the expansion
and distinct style of our US retail business, MRG, or the first-
class customer experience we provide under our technology
brand, InMotion.
With a small market share across the globe, theopportunities
are substantial and we’re committed to our future as a global
travel retailer.
Stores
600+
Countries
30
Revenue
£406m
Scan here for an overview of our North
America and Rest of the World businesses.
3WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Our journey to
a better business
We recognise we have an obligation to grow our business sustainably, providing financial
returns for our shareholders whilst maintaining high standards of environmental stewardship
and social equity to create value for all stakeholders. Working with our business partners,
suppliers and customers, we are looking forward to delivering the step-changes that are
needed for sustainable living.
Read more about our sustainability strategy on pages 37 to 43.
4 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Group at a glance – High Street
High Street
For generations, WHSmith has supported the UK high street with an extensive
reachacross the UK and a presence on nearly every significant high street and
shopping centre.
We are proud to be a familiar and trusted brand that
customers expect on their journey through life; from learning
to read, going to school, revising for exams to finding a great
book. As the hub of the high street, we are also committed
to supporting every generation of customers to come.
Across our diverse estate of over 525 stores on UK high
streets, with our wide-ranging store sizes and formats,
wesell a wide range of products in the following categories:
Stationery (including greeting cards, general stationery,
art and craft, and gifting), News and Impulse (including
newspapers, magazines, confectionery and drinks) and
Books. Our High Street stores are also home to c. 200 Post
Offices, further cementing our position on the high street
and at the heart of the communities we serve.
We are also growing as a multichannel retailer.
WHSmith High Street includes our online businesses:
whsmith.co.uk, which sells a range of books, stationery,
magazines and gifts, providing a convenient online
service to complement our High Street stores; our online
personalised greeting cards site, funkypigeon.com; leading
online specialist pen retailer, cultpens.com; and personalised
stationery sites treeofhearts.co.uk and dottyaboutpaper.co.uk
complement our existing Stationery ranges to enhance our
customer offer.
Stores
525+
Revenue
£473m
Scan here for an overview
of our HighStreet business.
5WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
How we create value:
A commitment to operating responsibly
You can read more about our approach to Environmental,
SocialandCorporate Governance throughout the report.
Read more on page 37.
Understanding customers
We understand and meet the needs of the
travelling customer better than anyone else.
Landlord partners
Our market leading store design, range
breadth and forensic approach to retailing
allows us to deliver superior economics and
innovative formats for landlord partners.
Our people
We have over 12,000 dedicated colleagues
across our stores, distribution centres and
head offices.
Store locations
We have a network of over 1,100 Travel
stores in premium, high footfall locations in
30 countries, and over 525 stores in prime
locations on UK high streets.
Product range
We work closely with a number of strategic
partners (e.g. M&S Simply Food, Costa Coffee
and the Post Office) to provide relevant
products and services to our customers
and landlords.
Service offering
We work closely with our strategic partners to
service the needs of the travelling customer.
Operational efficiency
We maintain an ongoing focus on efficiency,
productivity and cash generation in each
channel and territory.
Business model
Our unique combination
of strengths:
Underpinned by:
Creating value
for our stakeholders
Format and
Store design
Through our suite
of market leading,
innovative retail store
formats we are able to
secure premium, high
footfall locations for
our stores
For life’s
Reinvest in
growing our
business
Our disciplined approach
to operational efficiency
and cash generation
allows us to reinvest
capital in our stores and
product offering
6 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Our customers
We bring our customers the best products
and services for whichever of life’s journeys
they’re on.
Our people
We provide an inclusive and rewarding place
forour colleagues to build a career.
Our investors
We focus on providing consistent, profitable
and sustainable growth, returning surplus cash
to shareholders through a clear dividend policy
and share buybacks.
Our landlord partners
We are proud of our strong landlord
relationships and we work collaboratively
withthem to ensure flexibility and that we
meetcustomer needs.
Our suppliers and business partners
We work collaboratively with our suppliers
and business partners to provide customers
with a wide range of products and to grow
ourbusiness and theirs.
Our community groups
We operate a responsible business that
contributes to the communities in which
we operate.
Read about how we engage with
our stakeholders on page 30.
Creating value for:
Our culture and values
You can read more about our colleagues,
values and diversity throughout the report.
Read more on page 40.
Product range
We work with our
suppliers and partners
to bring together a
broad range of products
and services to meet the
needs of our customers
Forensic approach
to retailing
We continuously evaluate
our store space and the
performance of our categories
to ensure that we are
maximising returns
journeys
7WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
We’re committed
to our future as a
global travel retailer
Chairman’s statement
During the year, we have won some important strategic
tenders across the globe and we now have a store opening
pipeline of 150 stores won and scheduled to open over the
next three years. While there is a good geographic spread of
new store openings, 70 of these are in North America where
we continue to see plentiful opportunity to grow our North
America business further.
In our UK High Street business, we have continued to
implement the strategy that has served us well; focusing on
costs, increasing margins and generating cash. This ensures
that the cash flow and profits of this business are robust
and sustainable.
It has previously been announced that I will be retiring from
the Board on 30 November 2022, and this is therefore my
last statement as Chairman of the Company. I am immensely
proud to have been part of the WHSmith success story
for over a decade. The Group has gone from strength to
strength and we are now in our strongest ever position
as a global Travel retailer with over 1,700 stores across
30 countries. WHSmith is a great company and working
with the Board and Executive teams has been a hugely
enjoyable and rewarding experience. I also remain humbled
by the extraordinary effort and commitment of our entire
team across our distribution centres, head offices and
stores and, in particular, how everyone responded to the
Covid-19 pandemic.
The Group has made excellent progress throughout 2022 and we are now in the
strongest ever position as a global travel retailer. Passenger numbers are recovering
welland the growth opportunities for the Group are substantial. The resumption of
thedividend reflects the strength of current trading and a high level of confidence
inthefuture and, as we enter 2023, the Group is extremely well positioned to make
significant progress.
The resumption of the dividend
reflects the strength of current
trading and a high level of
confidence inthe future.”
Henry Staunton
Chairman
8 WH Smith PLC Annual Report and Accounts 2022
Strategic report
I will be succeeded as Chair by Annette Court. Annette
was appointed by the Board in September this year as a
non-executive director and Chair Designate. Annette has
a proven track record as a Chair of a publicly quoted
company and brings a wealth of experience from her Board
appointments and has a strong background in financial
services and technology. Annette will oversee the next
exciting phase for the Company working with the Board
andExecutive teams to deliver our global growth strategy
and I wish her every success.
I am also pleased that Marion Sears has joined us as a
non-executive director during the year. Marion has extensive
financial and retail expertise and replaces Annemarie Durbin
as Chair of the Remuneration Committee. I would like to
take this opportunity to thank Annemarie for her valued
contribution to the Board over the past nine years.
Corporate governance
Corporate governance remains an important area of focus
for the Board and underpins the sustainability of our business
and the achievement of our strategy. A more detailed
explanation of our approach to corporate governance can be
found in our Corporate governance report on pages 66 to 73.
Sustainability
We are committed to adopting a market-leading position
on responsible business practices, and seek to make a
positive impact on the planet, the lives of our people and the
communities in which we operate. This year, we were the top
performing specialty retailer in Morningstar’s Sustainalytics
ESG Benchmark and we were, once again, included in the
Dow Jones World Sustainability Index. During the year, we
have also committed to target net zero emissions by 2050.
Further information on all aspects of our sustainability
programmes can be found on pages 37 to 43.
We have an exceptionally
strongteam at WHSmith,
ledbyanoutstanding leadership
team, and I would like to
take thisopportunity to wish
everyoneat the Company
theverybest for the future.”
People
We have had a year of intense activity across all ourdivisions
and none of this would have been possible without the
significant contribution of all our colleagues. We havean
exceptionally strong team at WHSmith, led by an outstanding
leadership team, and I would like to take this opportunity to
wish everyone at the Company the very best for the future.
Outlook
Whilst there is economic uncertainty, we are financially strong
and with the return to a normalised travel environment, and
the strength of the Group’s growth opportunities, the Group
is very well positioned for a year of significant progress in
2023. Value creation remains central to our plans and the
Group will continue to invest for the longer term where it
sees attractive opportunities for profitable growth.
£1.4bn
Revenue
9.1p
Dividend per share
Henry Staunton
Chairman
10 November 2022
9WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Q
Looking back at the 2021/22
financial year, what has been
the highlight?
A
2022 has been a really strong year of recovery
for the Group and I am pleased to report that
the momentum is continuing. We delivered
revenue of £1.4bn, ahead of 2019, and Headline
trading profit
1
of £73m. We are trading ahead
of 2019 levels and, importantly, the Group
is in its strongest ever position as a global
Travel retailer.
Though the pandemic was very challenging,
we used the time well to strengthen our Travel
business internationally. We have had another
really strong year in winning new business and
now have 150 stores won and due to open
across North America, Rest of the World and
the UK over the next three years. This is in
addition to the 98 stores we opened in the
financial year.
We have also reinstated the dividend,
proposing a final dividend of 9.1p per share.
None of this would be possible without the
unwavering support of our colleagues across
the globe for which I am sincerely grateful.
Q
What is driving the
Group’s success?
A
The Group has made excellent progress in the
year. The key driver of our success continues
to be our forensic approach to retailing across
each of our businesses and initiatives that
position us well for the future:
Space growth: We have opened 98 stores
during the year and now have a new store
pipeline of 150 stores to open across the
globeover the next three years.
ATV growth: We have continued to focus
on re-engineering our ranges and this is
delivering good results.
Category development: We have focused on
identifying further opportunities where we
can reposition our traditional news, books and
convenience format to a one-stop-shop travel
essentials format.
Cost and cash management: We remain
focused on cost control and minimising our
cost base, particularly given our significant
investment programme.
with
Group Chief Executive
CarlCowling
Q
&
A
1 Alternative performance measure defined and explained on page 173
2 As reported (excludes pro forma North America adjustment)
3 Constant currency
10 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Q
As the growth engine of the
Group, to what extent have you
seen a rebound in revenue and
profitability in Travel?
A
In Travel, while the first half was impacted
by the Omicron variant of Covid-19 from
December 2021 to February 2022, thereafter
we saw a robust recovery across all our travel
markets and a strong rebound in profitability.
Total Travel revenue was £927m, up 131
per cent compared to the previous year
generating a Total Travel Headline trading
profit
1
of £89m. This momentum has
continued into the new financial year and
in the 10 week period to 5 November 2022,
Travel revenue has been 148 per cent of 2019
2
(141 per cent on constant currencies).
Q
What progress have you made
to become more sustainable?
A
Our sustainability commitments remain as
important as ever and I am pleased by the
progress we are making, however there is still
more to be done.
We set our target to achieve net zero and we
are in the process of collaborating with our
suppliers, landlords and customers to work
towards this goal.
We were delighted to be ranked the highest
performing specialty retailer in Morningstar’s
ESG Sustainalytics benchmark in the year and
be included, once again, in the DowJones
Sustainability Index as one of only 12
retailers globally.
Q
Have you seen a consistent
recovery across the Group
versus2019?
A
The Group saw a strong recovery during the
year which has continued into the current
financial year.
All our channels in Travel UK have seen a
sustained and strong recovery across the year
with the division delivering sales of 113 per cent
of 2019 in Q4 and 118 per cent in the first 10
weeks of the current financial year.
We saw a strong performance from North
America. Given its domestic focus, the North
America market recovered the quickest
from the pandemic. Transportation Security
Administration (‘TSA’) data and visitor
numbers in Las Vegas have continued to
improve during the year.
Across our Rest of the World division,
as anticipated, the pace of recovery has
varied by geography with the strongest
recovery in Europe and, more recently,
notable improvements in Australia and Asia.
Revenue in the first 10 weeks of the current
financial year was at 131 per cent of 2019
3
levels
reflecting the ongoing recovery and opening
of new stores.
We saw a consistently good performance
in High Street throughout the year with the
important December 2021 trading period at
90per cent of 2019.
We were delighted to be ranked
the highest performing specialty
retailer in Morningstar’s ESG
Sustainalytics benchmark in
the year.”
11WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Travel
Our Travel stores around the world experience high levels
of seasonal footfall, driven by leisure travel and in particular,
during the summer.
Footfall in airports is driven by the global demand for flights
and during the Covid-19 pandemic, passenger numbers in all
geographies were impacted by government-imposed travel
restrictions. As these restrictions have been relaxed, we have
seen a robust recovery in passenger levels, primarily driven
by pent up demand for leisure travel. However, recovery has
been uneven and a gap exists between markets, especially
where travel restrictions are still in place and where Covid-19
vaccine availability and uptake has been more limited.
Domestic travel, especially in North America and short-haul
leisure have been the fastest to recover, with business travel
and long-haul recovering more slowly, particularly in Asia.
The Airports Council International (ACI) expects passenger
numbers to recover to 2019 levels by 2024.
Hotels and resorts in North America have seen a strong
rebound in visitors. Visitors to Las Vegas had recovered to
96 per cent of 2019 levels in September 2022.
In the UK, Rail passenger numbers have also been impacted
by government restrictions during the Covid-19 pandemic
and shifts towards more flexible working patterns.
Network Rail concourse data suggests rail passengers were
down 20 per cent in October 2022 vs 2019.
The UK Government continues to invest in the National
Health Service and in building new and extended hospitals.
Our markets are impacted by macro economic conditions.
As we enter a period of uncertainty in global economies as a
consequence of interest rates, inflation and conflict, footfall
and costs could be impacted.
How we respond:
• Our market leading store formats and breadth of product
range ensure we maximise the number of passengers
shopping in our stores
• We are growing our average transaction value by offering
customers a breadth of travel essentials products at a
variety of price points
• Our operational expertise and agility allow us to rapidly
adapt to changing market conditions and volatility in
passenger numbers
• We remain extremely disciplined in focusing on
controlling costs
• We plan to offset inflation through productivity savings,
simplifying our operating model and price increases,
where appropriate
• We continue to ensure that we offer consumers great
quality products and value for money through our
promotional offering
High Street
High Street’s performance is dependent upon overall growth
in consumer spending and the levels of footfall on the UK
high street. There is a wide disparity in store performance
depending on location, with smaller market towns and
more affluent catchments tending to perform better than
city centre locations. Like Travel, High Street is impacted by
macroeconomic trends including factors such as levels of
employment, interest rates and consumer spending.
How we respond:
• We continue to invest in growing our online businesses to
complement our in store proposition
• We continue to ensure we have profitable stores in the
right locations through regular review of our store estate
and keeping leases short and flexible
• We maintain a forensic approach to store space in order
tomaximise returns from our core categories
• We maintain a forensic approach to productivity and
efficiency in our operations
-90
-80
-70
-60
-50
-40
-30
-20
-10
0
Q1 Q3Q2
2021 2022
Q4 Q2 Q3 Q4Q1
Impact of Covid-19 on quarterly passenger traffic by region vs pre-Covid-19 baseline
Africa
Asia-Pacific
Europe
LATAM
and Caribbean
North America
Middle East
Key
Estimated traffic loss
(% compared to projected baseline)
Calendar year
Key market drivers
12 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Expanding our
global reach
We continue to grow our North America and Rest of the
World businesses, welcoming more customers across
new countries and territories. Our brand is synonymous
with the travelling experience, with exposure to millions
of international travellers every year. We know that when
journeying through an airport, it’s the destination that
mattersto our customers and the journey that matters to us.
For more information on our North America and Rest of the World
businesses, please refer to pages 22 and 23.
1,700+
stores across
30
countries
13WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Our strategyOur strategy
Our purpose
To make every
one of life’s
journeys better
Our vision
To be the world’s
number one travel
essentials retailer
Strategic priorities Progress
Forensic approach toretail
• Space management
• In-store execution
• Tight cost control
• Industry leading returns
Innovative storeformats
• Format development
• Portfolio of world class brands
• Forensic approach to maximising
sales density
Enablers
A strong and focused strategy
We measure our performance against our strategy using our KPIs on pages 16 and 17.
Profit growth. Strong cash generation.
ATV growth
• Space management
• Refitting stores
• Range development
Space growth
• Opening new stores
• Winning new business
• New, better quality space
• Extending contracts
• Developing formats and brands
98
new stores opened
during the year
150
new store pipeline
through to 2024
Over 10%
increase in ATV
across our channels
14 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Low cost operations
• Efficient, nimble supply chain
• Simplification
• Focus on cost control
High performing teams
• Attract, retain and develop the
best talent
• Diverse and inclusive workplace
Driving sustainability
• Minimising our impact on the planet
• Engaging our people
• Contributing to communities
Focused capital allocation. Shareholder returns.
WHSmith
Group
High Street
Cost and Cash
management
• Flexible rent model
• Investing for growth
• Productivity and efficiencies
Maintain
profitability and
cash generation
of High Street
and grow our
digital businesses
Category
development
• One-stop-shop travel
essentials format
• Developing the InMotion brand
• Improving ranges
Travel
£33m
Headline trading profit
£42m
of cost savings delivered
across the business
Expand
food to go, tech accessories,
health andbeauty
Invest
for future growth
and sustainable returns
15WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Key performance indicators
Our key performance indicators (“KPIs”) comprise a number of financial and non-financial metrics that enable us to evaluate
our performance against our strategic goals. Certain KPIs are Alternative performance measures, which are defined and
explained on page 173. These measures are used by the Board as they provide additional useful information on the underlying
performance of the Group. Statutory equivalents are provided where relevant.
1 Alternative performance measure defined and explained in the Glossary on page 173
Financial
Revenue (£m) Profit/(loss) (£m)
The below profit/(loss) measures are stated
on a pre-IFRS 16 basis
2
022 1,400
2
021 886
2
020
1,021
2
019 1,397
2
018 1,262
Group
£1,400m
2
022
73
2
021 (55)
2
020
(69)
2
019 155
2
018 145
Headline Group profit/(loss) before tax
and non-underlying items
1
£73m
2
022 927
2
021 401
2
020
553
2
019 817
2
018 672
Total Travel
£927m
2
022 89
2
021 (39)
2
020
(33)
2
019 117
2
018 103
Total Travel Headline trading profit/(loss)
1
£89m
2
022 33
2
021 19
2
020
(10)
2
019 60
2
018 60
High Street Headline trading profit/(loss)
1
£33m
2
022 473
2
021 485
2
020
468
2
019 580
2
018 590
High Street
£473m
16 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Non-financial
1 Alternative performance measure defined and explained in the Glossary
on page 173
2 2018 comparative number not available
Free cash flow
1
(£m)
Free cash flow is defined as net cash inflow from
operating activities before the cash flow effect of
non-underlying items and pension funding, less capital
expenditure (see page 28).
2
022 41
2
021 14
2
020
(41)
2
019 109
2
018 96
£41m
2
022
9.1
2
021
2
020
2
019 58.2
2
018 54.1
Dividend per share (p)
T
otal dividend per share
9.1p
Nil
Nil
2
022 41.7
2
021 (23.7)
2
020
(44.2)
2
019 114.7
2
018 108.2
E
arnings per share
Headline diluted earnings/(loss) per share
before non-underlying items
1
(p)
41.7p
2
022 1,723
2
021 1,710
2
020
1,742
2
019 1,595
2
018 1,474
Group total number of stores
1
,723
2
022
2
021
2
020
2
019 28,098
9,215
33,072
CO
2
emissions (tonnes of CO
2
e)
2
Global Scope 1 and 2 emissions
10,367
10,367
17WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Growing our
UK presence
As one of the world’s leading travel retailers, we are the
trusted home for travel essentials in the UK supporting the
millions of journeys made each year. We’re continuing to grow
our presence, providing our customers with the essentials we
know make their journey just that little bit better, whether
they’re travelling by air, on foot, by road or by train.
For more information on our Travel UK business, please refer
to pages20 to 22.
580+
Travel stores across the UK
18 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Review of operations
Travel
Total Travel revenue
£927m
(2021: £401m)
Total Travel Headline trading profit
1
£89m
(2021: loss of £(39)m)
Total Travel revenue (year on year)
+131%
(2021: (27)%)
1 Alternative performance measure defined and explained in the Glossary on page 173
2 Travel stores include motorway and international joint ventures and franchise units
Performance review
I am pleased to report that our Travel business has had a
strong year of recovery. Despite the pandemic, the Travel
division is now in an even stronger position. Though the
pandemic was very challenging, we used the time well to
strengthen our business both in the UK and internationally.
Total revenue was £927m (2021: £401m), up 131 per
centcompared to the previous year resulting in a Total
TravelHeadline trading profit1 in the period of £89m
(2021: loss of £39m).
Trading profit/
(loss)
1
(IFRS 16)
Headline trading
profit/(loss)
1
(pre-IFRS 16) Revenue
£m 2022 2021 2022 2021 2022 2021
Travel UK 60 (29) 54 (32) 521 195
North America 33 2 31 6 288 166
Rest of the World 3 (17) 4 (13) 118 40
Total Travel 96 (44) 89 (39) 927 401
We continue to capitalise on the multiple growth
opportunities across the globe and to focus on initiatives
that position us well for future growth. These include:
Business development and winning new business
Through building and managing relationships with all our
landlord partners, we look to win new space, improve the
quality and amount of space, develop new formats and
extend contracts. Going forward, we expect to win around
50 to 60 new stores a year.
The strong momentum that we saw in Q4 has
continued into the new financial year with the
Group now in its strongest ever position as a
global travel retailer.”
Carl Cowling
Group Chief Executive
ATV growth and spend per passenger
We aim to grow ATV 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 tech ranges; and expanding existing categories, e.g.
premium food ranges.
Minimising costs
We remain focused on cost efficiency and productivity,
andmaking value creating investments.
The strong momentum that we saw in Q4 has continued
intothe new financial year with the Group now inits strongest
position ever as a global travel retailer. Passenger numbers
have recovered strongly albeit with further recovery and we
are very well positioned to capitalise on the significant space
growth opportunities across each of our markets.
As at 31 August 2022, our global Travel business operated
from 1,196 units
2
(31 August 2021: 1,166 units). As at 31 August
2022, we are present in over 100 airports and 30 countries
with 298 stores in North America, 109 stores in Europe,
84 in the Middle East and India and 118 in Asia Pacific.
Excluding franchise units, Travel occupies 1.0m square feet.
19WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Review of operations continued
Travel UK
All our channels in Travel UK have seen a sustained and
strong recovery across the year with the division delivering
revenue of 113 per cent of 2019
2
in Q4 and 118 per cent in the
first 10 weeks of the current financial year.
Total revenue in the year was £521m which, together with
improved margins, resulted in a Headline trading profit
1
of £54m (2021: loss of £32m). We have seen a consistent
double digit increase in ATV versus 2019 across our Air,
Hospital and Rail channels during the period as a result of
our work to broaden our categories and extend our ranges.
Per cent of 2019 Revenue
2
Air Hospitals Rail Total
H1 FY22 60% 90% 70% 71%
Q3 FY22 111% 102% 87% 102%
Q4 FY22 124% 110% 90% 113%
Year to 31 August 2022 93% 98% 79% 90%
10 weeks to
5 November 2022
132% 114% 92% 118%
As at 31 August 2022, Travel UK had 587 stores. In addition,
over the next three years, we expect to win and open an
additional 10 to 15 stores each year in UK Travel, with the
majority of the new stores in the Hospitals channel.
Air
In Air, we saw a significant step up in revenue over the
key summer trading period, with sales in July and August
2022 at 121 per cent and 126 per cent respectively of 2019.
This was during a period of disruption and passenger
caps at some UK airports which limited the number of
passengers travelling.
As was the case pre-pandemic, leisure passengers are our
most important customer segment. We continue to focus
on expanding our proposition and identifying opportunities
where we can reposition our traditional news, books and
convenience (NBC) format to a unique one-stop-shop for
travel essentials. By extending our categories, such as health
and beauty, tech, food to go and pharmacy products, we
are able to provide time-pressed travelling customers with
a fast and convenient shopping experience, under one roof.
This enables us to expose customers to a broader range
of categories which has resulted in an increase in sales
per square metre, a higher ATV and spend per passenger.
This delivers good returns for us with improved margins
and attractive economics for our landlords. Customer and
landlord feedback has been very positive.
We have now opened 30 of the 33 InMotion stores that we
recently won in UK Air, positioning us as the market-leading
technology retailer in travel locations globally. We are
pleased with the performance of our new InMotion stores
in UK Air, which are trading above our initial expectations.
Combining the learnings and expertise from our InMotion
stores in the US, as well as the results of extensive customer
research in the UK, these stores provide a first-class
customer service experience and showcase a range of
premium brands, such as Apple, Bose, Sony and Samsung,
as well as an extensive range of tech accessories.
Hospitals
The Hospital channel is an important channel for us and
is our second largest channel by revenue in Travel UK.
During the year, we have seen a consistent improvement in
revenue as restrictions eased.
Our Hospital channel is a good example of how we continue
to innovate with a strong proposition tailored to each
location. We are able to offer hospital trusts a broad suite of
formats and brands including WHSmith, M&S Simply Food,
Costa Coffee and the Post Office. We now have 49 M&S
Simply Food or shared space stores across our hospital
estate, 11 Costa Coffee shops and three Post Offices.
In addition, there are considerable opportunities for us to
open new space in hospitals. As at 31 August 2022, we
operated from 136 stores in around 100 hospitals and we
believe there are a further 200 hospitals which could support
at least one of our four store formats. The UK Government
continues to invest in both infrastructure and staff numbers
in the health sector as the sector emerges from Covid-19.
Over the medium-term, we would expect to open on
average 8 to 10 new stores each year in the Hospital channel.
Rail
Rail remains an attractive channel with opportunities to
grow. According to the Department for Transport, pre-
pandemic rail had approximately 1.7bn passenger journeys
per year with leisure passengers accounting for around 40
per cent of these journeys.
During the year, we have seen a steady improvement in
revenue as travel restrictions eased and this momentum has
continued into the new financial year, despite the disruption
caused by the recent rail strikes. Passenger numbers are
now at 80 per cent of 2019 levels with leisure and weekend
passenger numbers recovering the fastest. We know from
our segmentation and return on space analysis in Rail that
this customer segment is the most valuable to us.
1 Alternative performance measure defined and explained in the Glossary on page 173
2 Equivalent month in 2019
20 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Going big in the US
The US is the largest travel retail market in the world and
the growth opportunities are substantial. Through our
rapid expansion programme and the distinct style of our
US retail business, MRG, together with the excitement of a
first-class customer experience under the InMotion brand,
we’re committed to our future as a global travel retailer.
Read more about our North America business on page 22.
290+
stores across North America
21WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
As with our other channels in Travel, we continue to invest
in re-engineering our ranges and broadening our categories
to meet customer and landlord needs. In the first half of the
year, we opened our first one-stop-shop format in Rail at
London’s Euston Station. This store combines our traditional
news, books and convenience offer with tech, health and
beauty products and a pharmacy. We have received positive
feedback from customers and the store is performing
strongly. During the current financial year, we will be trialling
our one-stop-shop for travel essentials format in Rail across
a further eight major Network Rail locations, including
London Paddington, London Victoria and London Liverpool
Street stations. Across these stores, we will be investing
in new store layouts and enhancing the space afforded to
categories such as health and beauty.
In addition, we have opened a new standalone bookshop at
Edinburgh Waverley Station and our first Rail store with a
combined M&S food offer at Bristol Temple Meads Station.
Early customer and landlord reaction has been positive.
North America
We saw a strong performance from North America. Given
its domestic focus, the North America market recovered the
fastest from the pandemic. TSA (Transportation Security
Administration) data and visitor numbers in Las Vegas have
continued to improve during the year. Total revenue for the
year in North America was £288m (2021: £166m), an increase
of 73 per cent of which 10 per cent was due to changes in
exchange rates. Headline trading profit
1
of £31m (2021: £6m),
reflects the recovery in passenger numbers and improved
margins. In the current financial year, we expect our North
America business to become an increasingly significant
part of the Group and the second largest in profit terms,
after Travel UK. The Group is exposed to movements in the
GBP:USD exchange rate. A 10 cent move in this rate results
in a c.£3m movement in annual profit. Current consensus
suggests an average exchange rate of GBP:USD of 1.30.
The growth opportunities in North America are substantial.
The US is the largest travel retail market in the world with
annual sales, pre-pandemic, at $3.2bn. Approximately 85 per
cent of passengers are domestic, with leisure passengers
being the largest segment. TSA data continues to show a
gradual recovery in passenger numbers week on week, with
passenger numbers at the end of October 2022 at 95 per
cent of 2019 levels.
Given the similar customer dynamic and high footfall
environments to our Travel UK business, we have applied
our forensic approach to retailing from the UK to the US
market and we are seeing good results. This includes: space
management; category development to higher margin
products such as health and beauty and tech; enhanced
promotional activity; and, increased operational efficiencies,
for example by introducing self-scan tills which we
introduced in September 2022.
Including the 22 store openings in the year, MRG now have
78 and InMotion 118 stores trading in airports. We continue
to grow our North America business at pace and we have
a very strong pipeline of new store openings, including
some significant tender wins at Los Angeles and Salt Lake
City airports. During the year, we have won an additional 22
stores and we expect to open 49 in the current financial year.
So far this financial year, we have won a further five stores
including Jacksonville and Boston airports. Our analysis of
the North American market pre-pandemic shows that there
were a total of 2,004 news and gift and specialty retail stores
in the top 70 airports, giving our North America business
a market share of c.12 per cent
2
. With MRG’s continued
success rate of winning new tenders and our expectation of
the amount of space likely to come to the market for tender
over the medium-term, we are well placed to grow our North
America business.
Outside of the airport business, the Resorts channel
continues to be attractive. MRG is a leading player in this
channel in Las Vegas with stores located on the key visitor
locations of the Strip and Fremont Street. MRG has very
longstanding relationships with resort landlords and a
significant amount of expertise built up over an extended
period. The Resorts channel has similar dynamics to our
Travel UK business with a high number of short stay visitors
who tend to remain close to their hotel. Visitors to Las Vegas
were approximately 3.4m in the month of September 2022,
c. four per cent below 2019.
In addition, we have won and opened our first store in Rail
in North America. This store opened in February 2022 at
Moynihan Train Hall, New York. While it is still early days, this
store is performing well and in line with our expectations.
We have also won a further store at neighbouring
Penn Station.
Our revenue performance in the current year has reflected
these trends with overall revenue in North America at 130
per cent
3
of 2019 levels for the 10 weeks to 5 November 2022
(of which 13 per cent relates to currency movements, giving
growth of 117 per cent at constant currencies).
Review of operations continued
1 Alternative performance measure defined and explained in the Glossary on page 173
2 Based on store numbers, including stores won, not yet open
3 Includes pro forma MRG for 2019
22 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Rest of the World
Total revenue for the year in ROW was £118m (2021: £40m).
Headline trading profit
1
was £4m (2021: loss of £13m).
As anticipated, the pace of recovery has varied by
geography with the strongest recovery in Europe and, more
recently, notable improvements in Australia and Asia. As we
have done in Travel UK, we have remained focused on areas
within our control, including increasing ATV. Revenue in the
first 10 weeks of the current financial year was at 131 per
cent to 2019
2
, reflecting the ongoing recovery and opening
new stores.
As this market continues to recover, we expect to see
more space become available. Our strong and compelling
proposition and our very low market share currently means
there is significant opportunity to grow this business in new
and existing territories through our traditional convenience
retail proposition and with technology tenders under the
InMotion brand. We continue to use our three operating
models of directly run, franchise and joint-venture in order
tocreate value and win new business.
We have made good progress in the year opening 38 new
stores, and winning 63 stores, with significant tender wins
in Spain, Belgium, Italy, Sweden, Norway and Australia.
Utilising our experience from our North America business,
we have created a localised store design concept for each
airport, drawing on local landmarks and popular cultural
references. This has been well received by landlords and
gives us confidence in winning more stores in new territories
as space becomes available.
In addition, we continue to build on areas where we already
have stores, for example, in Spain which is one of the most
popular destinations for the UK leisure traveller. In the first
half of the financial year, we won an additional 31 stores
across Spanish airports, of which we have opened 23 to date.
These stores are performing well and we know from our
prior experience of operating in the country that our brand
and offer resonates well in this market. We successfully
executed this store opening programme at pace to ensure
over half the stores were trading throughout the peak
summer period.
1 Alternative performance measure defined and explained in the Glossary on page 173
2 Constant currency
We also continue to see good opportunities to win new
business in the technology market under our InMotion
brand. During the year, we have won seven InMotion stores
in Dublin, Milan, Stockholm and Gothenburg. We now have
a total of 11 InMotion stores outside of the UK and North
America of which six are open. We remain well positioned
to benefit from further opportunities as more space
becomes available.
We have 311 stores open and a further 76 won and yet to
open. Of the 311 stores open, 45 per cent are directly-run,
8per cent are joint venture and 47 per cent are franchise.
Region Number of stores
Europe 109
Middle East and India 84
Asia Pacific 118
23WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
We only renew a lease where we are confident of delivering
economic value over the life of that lease. We have c.460
leases due for renewal over the next three years, including
over 150 where we are holding over and in negotiation with
our landlord. The store closure process is cash neutral.
As at 31 August 2022, the High Street business operated
from 527 WH Smith stores
2
(2021: 544) which occupy 2.5m
square feet (2021: 2.6m square feet). 17 WH Smith stores
were closed in the period (2021: 24).
Specialist websites
Funkypigeon.com delivered, as expected, total revenue
of £35m (2021: £54m) and Headline EBITDA
1
of £8m
(2021: £14m) reflecting the cyber incident in April.
Funkypigeon.com is recovering well and we are confident
of the substantial opportunities to grow the platform
further, and significantly grow revenue and profits over the
medium-term.
The market for greeting cards in the UK is substantial and
estimated at £1.6bn
3
with online penetration continuing to
grow. The UK greeting card market has been stable with
adults sending on average 20
3
greeting cards per person
each year.
We have redeveloped the funkypigeon.com app to improve
customer conversion and we have also launched a next day
delivery service which operates seven days a week to further
enhance our customer proposition. This has received very
positive customer feedback.
During the year, we increased our investment and focus
on whsmith.co.uk. This has included focusing on customer
conversion, product presentation and broadening our
approach to marketing. Our specialist pen website, cultpens.
com, has continued to outperform the UK market with
growing sales internationally. We have extended our ranges
to broaden our customer offer and, during the year, we
launched product personalisation to further develop the
gifting category. This includes laser engraving of pens and
notebook embossing. We are seeing good results.
1 Alternative performance measure defined and explained in the Glossary on page 173
2 Including branches in Guernsey and the Isle of Man
3 Company estimates/OC&C 2019
Review of operations continued
Performance review
During the year, High Street delivered a resilient performance
with Headline trading profit
1
of £33m (2021: £19m – which
included £30m of UK Government support on rates) as
expected, with revenue of £473m (2021: £485m). On an IFRS
16 basis trading profit
1
was £45m (2021: £36m). We managed
the business tightly, focusing on costs and cash generation.
We are pleased with the start to the new financial year with
LFL revenue up 2 per cent on the prior year for the 10 weeks
to 5 November 2022.
The strategy we have in place in our High Street business
remains as relevant today as it has ever been and ensures
that the cash flow and profits of this business are robust
and sustainable.
We consider retail space as a strategic asset and we utilise
our space to maximise returns in the current year, in ways
that are sustainable over the longer-term. 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.
Driving efficiencies remains a core part of our strategy and
we continue to focus on all areas of cost in the business.
During the year, we have delivered savings of £42m and
we are on track to deliver savings of £24m over the next
three years, of which £12m will be delivered in the current
financial year. These savings come from right across the
business, including rent savings at lease renewal (on average
53 per cent) which continue to be a significant proportion,
marketing efficiencies and productivity gains from our
distribution centres. We have, for many years, actively fixed
our energy costs in stores well in advance of consuming the
energy. We have currently fixed our energy costs to August
2023 at rates that were put in place 12 months ago.
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 under two years.
High Street
Revenue
£473m
(2021: £485m)
Headline trading profit
1
£33m
(2021: £19m)
Total revenue (year on year)
(2)%
(2021: +4%)
24 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Outlook
2022 has been a successful year for the Group and we enter
the new financial year in the strongest ever position as a
global travel retailer with multiple growth opportunities
across the world.
We have opened 98 new stores in the year and we have a
pipeline of 150 new stores yet to open across 16 countries
and in airports as varied as Los Angeles, Salt Lake City,
Brussels, Oslo and Melbourne.
We continue to grow our North America business at pace
and we have a very strong pipeline of new store openings.
In the current financial year, our North America business is
set to become larger than our UK High Street business and
we see significant opportunities to grow this business further.
This coming year, we have an extensive investment
programme and expect capex to be around £150m.
Our InMotion technology stores have had a very good year.
We now have over 150 InMotion stores open including 36
outside of the US. Our recently opened stores in the UK
are trading ahead of our initial expectations and we have
received excellent feedback from customers and landlords.
We see significant scope to grow the brand globally.
Our High Street division, including our online businesses,
delivered another resilient and profitable performance.
These businesses continue to generate strong cash flow
allowing us to invest across the Group.
The resumption of the dividend reflects our strong current
trading and the Board’s confidence in the future prospects of
the Group.
We have started the year well and, while there is economic
uncertainty, travel patterns globally continue to improve
and this, combined with the strength of the Group’s growth
opportunities, means that we are well positioned for a year
of significant progress in 2023.
Carl Cowling
Group Chief Executive
10 November 2022
25WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Group
Total Group revenue at £1,400m (2021: £886m) was up 58
per cent compared to the prior year and slightly ahead of
2019. It was the highest annual revenue generated by the
Group since its creation in its current form in 2006.
The Group saw a strong recovery during the year which has
continued into the current financial year. Total Group revenue
as a percentage of 2019 total revenue by quarter has been:
Per cent of 2019 Revenue
2
FY2022 FY2023
Q1 Q2 Q3 Q4
10 weeks to
5 November
2022
Travel UK 69% 72% 102% 113% 118%
North America
3
91% 91% 110% 116% 117%
Rest of the World
4
41% 48% 87% 116% 131%
Total Travel
5
83% 81% 122% 135% 148%
7
High Street
6
87% 84% 79% 81% 87%
Group 85% 83% 106% 117% 125%
Second half revenue for the Group was 113 per cent of 2019
on a total basis and 89 per cent on a like-for-like
1
(“LFL”)
basis as shown in the table below. LFL revenue in Travel was
92 per cent of 2019.
H2 FY2022 per cent of
2019 revenue
2
Total LFL
Travel UK 109% 94%
North America
3
113% 94%
Rest of the World
4
103% 82%
Total Travel
5
130% 92%
High Street
6
82% 83%
Group 113% 89%
Financial review
In Travel, while the first half was impacted by the Omicron
variant from December 2021 to February 2022, we saw
thereafter a robust recovery across all our travel markets
and a strong rebound in profitability. Travel revenue for the
second half was at 130 per cent
5
of 2019 (92 per cent on a
LFL
1
basis) and over the key summer trading period from
June to August, Travel revenue was at 135 per cent of 2019
(96 per cent on a LFL
1
basis).
In the 10 week period to 5 November 2022, Travel revenue
has been 148 per cent
7
of 2019 which demonstrates the
intrinsic strength of our business and the markets in which
we operate.
We saw a consistently good performance in High Street
throughout the year with the important December 2021
trading period at 90 per cent of 2019.
The Headline Group profit from trading operations
1
for the
year was £122m (2021: loss of £20m) with Headline Group
profit before tax and non-underlying items
1
at £73m (2021:
loss of £55m). After non-underlying items, the Headline
Group profit before tax
1
was £61m (2021: loss of £104m).
The Group profit before tax including non-underlying items
and on an IFRS 16 basis, was £63m (2021: loss of £116m).
IFRS
Headline
(pre-IFRS 16)
1
£m 2022 2021 2022 2021
Travel UK trading profit/(loss)
1
60 (29) 54 (32)
North America trading profit
1
33 2 31 6
Rest of the World trading
profit/(loss)
1
3 (17) 4 (13)
Total Travel trading profit/(loss)
1
96 (44) 89 (39)
High Street trading profit
1
45 36 33 19
Group profit/(loss) from
trading operations
1
141 (8) 122 (20)
Unallocated central costs (24) (19) (24) (19)
Group operating profit/(loss)
before non-underlying items
1
117 (27) 98 (39)
Net finance costs (34) (24) (25) (16)
Group profit/(loss) before tax
and non-underlying items
1
83 (51) 73 (55)
Non-underlying items
1
(20) (65) (12) (49)
Group profit/(loss) before tax 63 (116) 61 (104)
The Board has announced that it will be reinstating
the dividend of 9.1p per share in respect of the
financial year ended 31 August 2022.”
Robert Moorhead
Chief Financial Officer and Chief Operating Officer
1 Alternative performance measure defined and explained in the Glossary
on page 173
2 Equivalent month in 2019
3 Pro forma, constant currency
4 Constant currency
5 As reported (excludes pro forma North America adjustment)
6 Includes internet businesses
7 141 per cent on constant currency basis
26 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Unallocated central costs increased in the year due to
highershare-based payment charges and £2m costs in
relation to a new payroll system which previously would
havebeen treated as capex and now is treated as opex under
the new accounting guidelines for software as a service.
The Group has a strong balance sheet, is very cash
generative and has substantial liquidity. In addition to
£327mofconvertible bonds which mature in 2026 and
£133m of term loan with a maturity in 2025, the Group has
an undrawn £250m Revolving Credit Facility (RCF) which
matures in 2025.
The Group has the following cash, committed facilities and
drawn debt as at 31 August 2022:
£m 31 August 2022 Maturity
Cash and cash equivalents
8
£132m
Revolving Credit Facility
9
£250m April 2025
Term Loan £133m April 2025
Convertible bonds £327m May 2026
As at 31 August 2022, Headline net debt
1
was £296m
(2021: £291m) with access to over £350m of liquidity (£101m
cash on deposit and £250m undrawn RCF). We continued to
focus on cash. Group free cash flow
1
was £41m (2021: £14m),
reflecting the strong trading performance as well as our
investment in growth opportunities with capital investment
in the year of £83m (2021: £44m).
The Group pays a fixed coupon at 1.625 per cent on the
convertible bonds and the term loan is interest bearing at
a margin over SONIA. As a consequence, around 70 per
cent of our debt is at fixed interest rates. The Group places
surplus cash in overnight interest bearing accounts ensuring
immediate liquidity. As at 31 August 2022, the Group had
£101m placed in interest bearing deposit accounts.
The Board has announced that it will be reinstating the
dividend and is proposing a final dividend of 9.1p per share
in respect of the financial year ended 31 August 2022 which
is payable on 26 January 2023. This reflects our strong start
to the year and our confidence in the future prospects of the
Group. Assuming a one third/two third split between interim
and final dividends, this implies a cover ratio of 3 times
earnings for the full year. Our intention is to return, in time,
to a cover ratio of around 2.5 times normalised earnings paid
on an interim and final basis on a one third/two thirds split.
The Group’s disciplined 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;
• paying a dividend for our shareholders;
• undertaking attractive value-creating acquisitions in strong
and growing markets;
• returning surplus cash to shareholders.
Leverage at 31 August 2022 was 2.0x EBITDA. We have a
leverage target of between 0.75 and 1.25 times EBITDA and we
anticipate achieving this level within the next 12 to 18 months,
including this year’s significant investment programme.
Non-underlying items
1
Items which are not considered part of the normal
operatingcosts of the business, are non-recurring and are
exceptional because of their size, nature or incidence, are
treated as non-underlying items and disclosed separately.
Non-underlying items in the year are detailed in the table
below, and most do not impact cash.
The cash spend relating to non-underlying items in the
2022 financial year was £16m and mainly related to activity
announced in 2020 and 2021.
IFRS
Headline
(pre-IFRS 16)
1
£m 2022 2021 2022 2021
Impairment of Property,
plant and equipment and
Right-of-use assets
13 42 5 18
Amortisation of acquired
intangible assets
3 3 3 3
Costs related to cyber incident 4 – 4 –
Onerous leases – – – 5
Stock provisions, write-offs
and other costs
– 3 – 6
Restructuring costs – 9 – 9
Costs associated with refinancing – 6 – 6
Cost relating to
business combinations
– 2 – 2
20 65 12 49
Impairment of Property, plant and equipment and
Right-of-use assets
The Group has carried out an assessment for indicators
of impairment across the store portfolio. This assessment
has identified a number of stores where experience and
expectations of the longer-term impact of Covid-19 is more
negative than previously assumed, primarily driven by the
impact of Covid-19 on consumer shopping patterns.
The impairment review compared the value-in-use
of individual store cash-generating units, based on
managements’ assumptions regarding likely future trading
performance, taking into account the effect of Covid-19, to
the carrying values at 31 August 2022. Following this review,
a non-cash charge of £5m (2021: £18m) was recorded for
impairment of retail store assets on a pre-IFRS 16 basis, and
£13m (2021: £42m) on an IFRS 16 basis which includes an
impairment of right-of-use assets of £8m (2021: £28m).
Amortisation of acquired intangible assets
Amortisation of acquired intangible assets primarily relates
to the MRG and InMotion brands. This is a non-cash charge.
8 Cash and cash equivalents comprises cash on deposit of £101m and cash in
transit of £31m
9 Undrawn as at 31 August 2022 and 9 November 2022
27WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Costs related to cyber incident
Costs of £4m were incurred in relation to the Funky Pigeon
cyber security incident and include impairment of software
assets, third party consultancy support and legal and
other costs.
Other non-underlying items in the prior year included
stock provisioning and impairment relating to the impact
of Covid-19, restructuring costs following a review of store
operations across our High Street business, costs associated
with the refinancing activity in April 2021 and further
integration costs in relation to the acquisition of MRG which
completed in December 2019.
A tax credit of £4m (2021: £12m) has been recognised in
relation to the above items (£3m pre-IFRS 16
1
(2021: £9m)).
Net finance costs
IFRS
Headline
(pre-IFRS 16)
1
£m 2022 2021 2022 2021
Interest payable on bank loans
and overdrafts
9 10 9 10
Interest on convertible bonds 14 4 14 4
Unwind of discount on onerous
lease provisions (pre-IFRS 16)
– – 2 2
Interest on lease liabilities 11 10 – –
Net finance costs 34 24 25 16
Pre-IFRS 16
1
net finance costs for the year were £25m
(2021: £16m) with the year on year increase reflecting the
refinancing undertaken in the prior year. Cash costs in
relation to this were £10m lower at £15m.
The interest on the convertible bonds includes the accrued
coupon (a fixed coupon of 1.625 per cent) and c.£8m of the
non-cash debt accretion charge.
The £2m non-cash unwind of discount on onerous lease
provisions relates to onerous lease provisions recognised in
the prior year as a result of Covid-19. This relates to pre-IFRS
16 only and does not exist under IFRS 16.
Lease interest of £11m arises on lease liabilities recognised
under IFRS 16, bringing the total net finance costs under
IFRS 16 to £34m (2021: £24m).
Tax
The effective tax rate
1
was 17 per cent (2021: 47 per cent) on
the profit for the year. Corporation tax payments in the year
were £6m after all possible loss relief for the current year had
been used (2021: refunds of £10m following the carry back
of 2021 losses against prior year profits). Based on legislation
in place as at 10 November, we expect the tax rate in the
current year to be 23 per cent.
Financial review continued
Fixed charges cover
1
pre-IFRS 16
1
£m 2022 2021
Headline net finance costs
1
25 16
Net operating lease charges
(pre-IFRS 16)
1
241 151
Total fixed charges 266 167
Headline profit/(loss) before tax
and non-underlying items
1
73 (55)
Headline profit before tax, non-
underlying items and fixed charges
339 112
Fixed charges cover – times 1.3x 0.7x
Fixed charges, comprising property operating lease charges
and net finance costs, were covered 1.3 times (2021: 0.7
times) by Headline profit/loss before tax, non-underlying
items and fixed charges, reflecting the return to profitability
of the Group.
Cash flow
Free cash flow
1
reconciliation
pre-IFRS 16
1
£m 2022 2021
Headline Group operating profit/(loss)
before non-underlying items
1
98 (39)
Depreciation, amortisation and
impairment (pre-IFRS 16)
2
49 50
Non-cash items 8 8
Operating cash flow
3
155 19
Capital expenditure (83) (44)
Working capital (pre-IFRS 16)
2
(10) 37
Net tax (paid) / refunded (6) 10
Net finance costs paid (pre-IFRS 16) (15) (8)
Free cash flow
1
41 14
The free cash inflow
1
for the year was £41m. This mainly
reflects the return to profit of the business with the
operating cash inflow increasing by £136m to £155m and
continued investment in the Group as we recover from the
impact of the pandemic and open new stores.
We had a working capital outflow of £10m in the year
reflecting the launch of InMotion in the UK and investment
tosupport the recovery of trading in Travel.
Net corporation tax payments in the period were £6m,
compared to refunds of £10m last year.
Capital expenditure was £83m (2021: £44m), which includes
the additional spend from opening 98 stores around
the world.
2022 2021
New stores and store development 37 17
Refurbished stores 22 17
Systems 13 9
Other 11 1
Total capital expenditure 83 44
1 Alternative performance measure defined and explained in the Glossary
onpage173
2 Excludes cash flow impact of non-underlying items
3 Headline Group operating profit/(loss) before depreciation, amortisation
andimpairment (pre-IFRS 16) and other non-cash items
28 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Reconciliation of Headline net debt
1
Headline net debt is presented on a pre-IFRS 16 basis.
See Note 18 of the Financial statements for the impact of
IFRS 16 on net debt.
As at 31 August 2022, the Group had Headline net debt
1
of
£296m comprising convertible bonds of £292m, term loans
of £132m (net of fees), £4m of finance lease liabilities and net
cash of £132m (2021: £291m, convertible bonds of £283m,
term loans of £132m (net of fees), £6m of finance lease
liabilities and net cash of £130m).
Headline
(pre-IFRS 16)
1
£m 2022 2021
Opening Headline net debt
1
(291) (301)
Movement in year
Free cash flow 41 14
Pensions (2) (3)
Non-underlying items (16) (38)
Net purchase of own shares for
employee share schemes
(7) (2)
Equity component of convertible bond – 41
Other (21) (2)
Closing Headline net debt
1
(296) (291)
Cash 132 130
Term Loans (net of fees) (132) (132)
Convertible bond (292) (283)
Finance leases (pre-IFRS 16) (4) (6)
(296) (291)
In addition to the free cash flow, the Group paid defined
benefit pension funding of £2m (see Note 5 on pensions),
and £16m of non-underlying items which mainly relate to
restructuring following the review of store and head office
operations, as previously reported and charged to the
income statement in prior years.
On an IFRS 16 basis, net debt was £869m, which includes an
additional £573m of lease liabilities.
Pensions
On 8 August 2022, the Group announced that the Trustee
of the WH Smith Pension Trust, (the “Trust”), had purchased
a bulk annuity insurance policy from Standard Life, insuring
all liabilities to pay all future defined benefit pensions to
the Trust’s 12,950 members and any eligible dependants.
The insurance policy was purchased using most of the
existing assets held within the Trust, without the need for the
Group to make any additional cash contributions.
The bulk annuity policy matches the Trust’s cash flow
benefit obligations to its members, removing longevity and
other demographic risks as well as investment, interest rate
and inflation risks. As a result of this comprehensive risk-
removal, the Group will not be required to make any future
cash contributions into the Trust regarding defined benefit
liabilities, therefore the previously recognised minimum
funding liability (£2m as at 31 August 2021) has been
derecognised. During the year ended 31 August 2022, prior
to the completion of the buy-in transaction, the Group made
a contribution of £2m to the scheme (2021: £3m).
As at 31 August 2022, the scheme had an IAS 19 surplus of
£120m (2021: surplus of £284m), representing the remaining
assets of the scheme after the bulk annuity policy purchase
above. The Group has continued not to recognise this
surplus under the requirements of IFRS 14.
The IAS 19 pension deficit on the relatively small UNS defined
benefit pension scheme was £nil (2021: £1m).
Balance sheet
The Group had Headline net assets of £404m, an increase
of £138m on last year end reflecting the investment in
store openings and exchange differences on translation of
goodwill. Under IFRS the Group had net assets of £311m.
IFRS
Headline
(pre-IFRS 16)
1
£m 2022 2021 2022 2021
Goodwill and other
intangible assets
543 473 544 474
Property, plant and equipment 219 174 211 167
Right-of-use assets 446 328 – –
Investments in joint ventures 2 2 2 2
1,210 977 757 643
Inventories 198 135 198 135
Payables less receivables (269) (214) (284) (237)
Working capital (71) (79) (86) (102)
Derivative financial assets 1 – 1 –
Net current and deferred
tax assets
54 56 54 46
Provisions (14) (14) (26) (28)
Operating assets employed 1,180 940 700 559
Net debt (869) (755) (296) (291)
Net assets excluding
pensionliability
311 185 404 268
Pension liability – (3) – (3)
Deferred tax asset
on pension liability
– 1 – 1
Total net assets 311 183 404 266
Robert Moorhead
Chief Financial Officer and Chief Operating Officer
10 November 2022
29WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Our people
Landlord
partners
Customers
Investors
Suppliers
and business
partners
Community
groups
To make every
one of life’s
journeys better
Our purpose:
Section 172(1) statement
Stakeholders can be impacted in different ways by decisions which are taken by the
Board. Regular stakeholder engagement enables us to operate in a balanced and
responsible way and ensures that the Board is aware of stakeholder views and interests.
These stakeholder views and concerns are integral to ensuring a considered and
balanced approach to the Board’s decision-making processes.
Moving forward
with our stakeholders
The Board accesses information from stakeholders through
a number of methods including direct engagement, such
as in-person meetings, participation in listening groups and
store visits; and indirectly through the review of reports and
updates from senior executives who meet regularly with
stakeholder groups.
WHSmith is required to provide information on how the
directors have performed their duty under section 172 of
the Companies Act 2006 to promote the success of the
Company and in doing so to have regard to the interests
of its stakeholders. Our interactions with key stakeholders
and the ways in which their interests have been taken
into account by the directors in their decision-making
aresummarised on the following pages.
30 WH Smith PLC Annual Report and Accounts 2022
Strategic report
What they care about
• To feel valued
• To be rewarded fairly
• To be treated with respect and dignity
• To have opportunities for personal growth and
career development
How did we engage?
• Our designated non-executive director for workforce
engagement, Simon Emeny, provided oversight for
the Board
• Simon Emeny and Marion Sears, Remuneration Committee
Chair, attended employee forums to discuss, amongst
other topics, the Company’s approach to remuneration,
including executive remuneration and how this aligns to
wider Company pay policy
• The Group People Director updated the Board
on employee-related matters, including employee
engagement, staff retention rates, learning and
development, gender pay gap, diversity and inclusion,
andworkforce remuneration
• The Group Chief Executive and other senior executives
hosted fortnightly webinars with Head Office colleagues
to provide strategy and performance updates and answer
any questions
• Senior executives attended business meetings throughout
the year, including leadership meetings, trading updates
and risk committee meetings
• Our annual employee engagement survey was followed
upwith insight meetings to gain further understanding
• Employees raised issues, questions and concerns through
direct mailboxes for senior executives
• The Group Chief Executive and the CFO/COO engaged
with employees who are members of the Company’s
defined benefits pension scheme to explain the rationale
for the purchase by the Trustee of the WH Smith Pension
Trust of an insurance policy from Standard Life to pay all
future benefits to the members of the scheme
What were the key topics raised?
• Opportunities for career development
• Cost of living impacts
• New ways of working and return to the office
• Work-life balance and wellbeing
• Difficulties in accessing internal communications and
learning and development materials
• Diversity and inclusion in Head Offices
How did we respond?
• We launched a new e-learning platform to make it easier
for all colleagues to access career development materials
• Senior managers provided more regular and frequent
career development talks
• In addition to annual pay rises, we brought forward next
year’s pay increase for store colleagues to help with the
cost of living crisis
• We refined flexible working arrangements to allow staff to
choose more days when they are able to work from home
• We launched a new internal communications platform,
accessible online for all employees, at a time of
their choosing
• We introduced a reciprocal mentoring scheme to increase
the diversity of feedback to senior management, and
create greater opportunities for under-represented Head
Office colleagues
• The Board approved an action plan to address actions
from the employee survey and monitored implementation
throughout the year
Our people
The success of WHSmith depends on the 12,000 colleagues who work for the
Company. It is essential that they feel engaged, motivated and appreciated.
Strategic report Corporate governance Financial statements Additional information
31WH Smith PLC Annual Report and Accounts 2022
Section 172(1) statementSection 172(1) statement continued
What they care about
• Availability and range of products
• Convenience
• Customer service
• Value for money
• Safe and responsibly sourced products
How did we engage?
• Board members visited stores in the UK, US and Europe
to assess and review the customer experience and
service standards
• We commissioned customer engagement surveys and
focus groups to understand customer perceptions of
WHSmith and what else they would like to see
• The Managing Directors of each business unit updated
the Board on customer engagement, market trends and
commercial responses
• Quantitative and qualitative analysis of customer feedback
at the point of sale, online surveys and focus groups have
provided additional customer insights this year
• Store teams and customer service teams are in constant
dialogue with customers
• The Board received regular updates on customer feedback
and service standards and ensured systems were in place
to comply with all relevant product safety legislation
What were the key topics raised?
• Nature of store environments
• Product availability
• Pricing
• Customer service levels
• Environmental footprints of products
How did we respond?
• The Board received strategy updates from the Managing
Directors of each business unit and approved the
commercial customer-facing strategies
• We continued to invest in existing and new stores
• We extended our categories and ranges, including
a greater focus on food, health and beauty and
technology products
• Customer feedback was communicated to the
relevant parts of the business for implementation
where appropriate
• We continued to reduce environmental footprints where
possible and have evolved product environmental labelling
Customers
Customer loyalty and enthusiasm for our brands are critical to our success.
Understanding the needs of our customers ensures that we provide the products
and service levels that they need.
32 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Investors
Our investors include individual and institutional shareholders, and providers of
debt and financial capital, such as banks and bondholders. We maintain an active
dialogue with our investors through an extensive investor relations programme.
What they care about
• Long term value creation and growth opportunities
• High-performing board and senior executives
• High standards of business conduct and good
environmental, social and corporate governance
• Transparency
How did we engage?
• Individual meetings, virtual presentations and investor
roadshows with members of the Board
• The Board receives reports and updates on shareholder
relations at each meeting to ensure that the Board and its
Committees are kept informed of investors’ and advisers’
views on strategy and corporate governance
• Direct engagement for investors via our investor
relations team
• Annual report and interim trading updates with investor
presentations by the Group Chief Executive and CFO/COO
• Investor website providing information to all shareholders
• Announcements and presentations on our interim and
preliminary end-of-year financial results, interspersed by
more regular trading updates
• Stock Exchange Regulatory News Service announcements
• An online portal, operated by our registrar, Computershare,
which provides shareholders with the ability to manage
their shareholdings
• Our annual general meeting which was again held in
person for the first time since 2019
What were the key topics raised?
• Strategy for growth following Covid-19
• Operational delivery
• Corporate governance practices
• Succession planning
• Remuneration policy
• ESG strategy, targets and reporting
How did we respond?
• The Remuneration Committee developed the new
remuneration policy for shareholder approval at the 2022
AGM, including ESG performance metrics in short-term
bonus plans and Long-term Incentive Plan
• We appointed Marion Sears as the new Chair of the
Remuneration Committee and Annette Court as a
non-executive director and Chair designate
• The ESG Committee incorporated investor feedback into
the ESG strategy
33
Strategic report Corporate governance Financial statements Additional information
WH Smith PLC Annual Report and Accounts 2022
Section 172(1) statement continuedSection 172(1) statement continued
What they care about
• Store formats and product ranges that are appealing to
their customers
• Value of sales per square metre of retail space
• Effective operational implementation
• Compliance with their sustainability requirements
How did we engage?
• Board, executive and senior management level meetings
with landlords
• Regular dialogue with landlord representatives
on performance levels in existing stores and
future opportunities
• Meetings, webinars and written engagement as part of
tender submissions for new contracts
• Participation in various landlord-hosted working groups to
collaborate on different issues
What were the key topics raised?
• Board approval for tenders in Spain, Norway, Belgium,
SaltLake City and Los Angeles
• Opening plans for stores post Covid-19
• Commercial terms for lease agreements for High
Street stores
• Operational impacts of staffing levels in European airports
and the impact on availability of goods
• Environmental clauses as part of lease agreements
How did we respond?
• New stores opened in 13 countries
• Maintaining high levels of store opening hours as
passenger numbers recovered
• Dialogue with landlords to ensure flexibility
• On-going dialogue with airport operators on ways to work
together to ensure that we meet customer needs
• Joint working initiatives with landlords to develop green
lease agreements
Landlord partners
Our landlord partners own the buildings where our retail units are located.
They include airport operators, rail infrastructure partners, hospital trusts and other
retail estate landlords. Our business success is dependent on retaining and winning
new space and in order to do so, we must understand what considerations are
important for them.
34 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Community groups
The relationship we have with the communities where our stores and distribution
centres are located is key to the sustainability of our business. We want to serve
our local communities, be that in a town, hospital or travel hub. We alsowant to
provide jobs and help local economies where we are based.
What they care about
• A retail presence that may attract other retailers
tothe locality
• Availability of core products and services such as
convenience offerings in hospitals and Post Office
servicesin High Street stores
• Support for local and national charities
• High standards of corporate responsibility for
environmental and social issues
How did we engage?
• The Board’s ESG Committee met three times during the
financial year and received briefings from the Sustainability
Director on environmental and social issues, including
interactions with stakeholders
• Participation in sustainability-focused working groups for
trade organisations such as the British Retail Consortium
and Ethical Trading Initiative
• Regular meetings with key charity partners
• Participation in ESG surveys run by organisations such as
the not-for-profit disclosure organisation, CDP
• Stakeholders can raise questions, views and concerns
through the sustainability@whsmith.co.uk inbox
What were the key topics raised?
• The need to preserve core services provided by
PostOffices embedded in WHSmith stores
• Opportunities for working with partners to bridge the
divide in children’s literacy levels which has widened as
aresult of Covid-19
• Upholding of workers’ rights in the supply chain during
on-going Covid-19 outbreaks and the situation in Ukraine
How did we respond?
• The ESG Committee approved the Sustainability Strategy,
with revised action plans and targets under the three
pillars of Planet, People and Community
• We continued our long-term partnership with the National
Literacy Trust, and provided financial and in-kind support
to a number of other charities and community causes
• Participation in industry working groups on key
environmental and social issues
35WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Section 172(1) statement continued
What they care about
• Fair trading and prompt payment in line with terms
• Opportunities for growth in their business
• A business partner that treats them fairly
• Responsible sourcing and high ethical standards
inthesupply chain
How did we engage?
• Board overview of information on key suppliers where
material, for example when approval of major supplier
orfranchise contracts is required
• Overview by the Audit and ESG Committees of labour and
environmental standards in the supply chain via quarterly
and annual updates
• Direct engagement with suppliers and franchise partners
via individual meetings
• Supplier conferences for major groups of suppliers such as
trade suppliers for individual businesses or geographies,
orsuppliers of goods not for resale
• Supplier feedback surveys
• Programme of audit and supplier engagement on
labour standards
• Anonymised survey of workers in our own-brand
supply chain
What were the key topics raised?
• Supplier and product innovation
• Strategies for science based carbon targets and net zero
emission strategies
• Compliance requirements for emerging legislation
• Border entry trade controls
How did we respond?
• The Board, through the Audit Committee, received
updates on the risk and resilience of our supply chains
• The ESG Committee approved a new Scope 3 target for
75% of our value chain to be covered by science based
targets by 2027
• We engaged with 20 of our top suppliers to ensure they
had a roadmap in place for net zero emissions and had
setscience based targets
Suppliers and business partners
We rely upon over 3,000 suppliers to provide products, goods not for resale and
services which are critical for the smooth running of our business. They range from
large multi-national companies to small and medium sized enterprises. We also
have agreements with a number of partners to run franchised stores on our behalf.
36 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Sustainability
Our sustainability strategy concentrates on those areas
that our stakeholders have told us are important to them
and where we believe our scale and influence can bring
about positive change. Minimising our impact on the
planet, engaging our people, and contributing to our
communities, provide the framework for our activities and
reporting. Our sustainability strategy is underpinned by a
strong foundation of responsible business principles and
practices to make sure we operate our business in the right
way. We developed our strategy in 2020, and over the last
financial year, we have refined our objectives for each area,
to provide direction for our activities until at least 2025.
Continuing our journey to
a more sustainable business
WHSmith has a long-standing commitment to high standards of environmental, social
and corporate governance. As an international retailer what we do, and how we do it,
can impact the people and the world around us. We operate and source from countries
all over the world, and our activities and the production, packaging and disposal of the
products we sell can have wider consequences. We interact with many thousands of
customers every day, and our activities can make a real difference to the local
communities where we operate.
Delivering value to our investors, customers and landlord partners
Our journey to a sustainable business
Scan here for an overview of
our approach to Sustainability
Minimising our impact
on the planet
Read more about how we
will minimise our impact on
the planet on page 39
Read more about how
we will engage our
people on pages 40 to 42
Read more about how
we will contribute to
communities on page 43
Topic Aim
Climate
action
Net zero GHG
emissions by 2050
Cutting
waste
Reduce
environmental
impact from
packaging
and materials
Protecting
natural
resources
Net zero
deforestation
Topic Aim
Health,
safety and
wellbeing
Create an
environment that
supports physical,
mental and financial
wellbeing
Diversity
and inclusion
Increase
diversity of senior
management
Human rights
and our
supply chain
Protect worker
rights in our
supply chains
Topic Aim
Literacy Help all children
to develop a love
of reading
Supporting
charities and
local causes
Make a positive
impact through
fundraising,
donations
and volunteering
Engaging
our people
Contributing
to communities
37WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Sustainability continued
Governance
Our Environmental, Social and Governance (ESG)
Committee, a subcommittee of the Board, leads and
oversees delivery of our sustainability strategy, setting our
ambition and monitoring progress. The Board receives
updates on performance against our strategy and
sustainability risks at least three times a year. The work
of the committee is detailed on pages 81 to 82. The ESG
Steering Group chaired by the Group Chief Executive has
responsibility for leading the delivery of our sustainability
commitments and meets once per month to review progress
against our objectives. The ESG Steering Group provides a
report for each ESG Committee meeting. We include ESG
metrics in incentive plans for senior management and for
2022, ESG metrics formed part of the annual bonus plan for
our Chief Executive and CFO/COO. For the 2023 financial
year, we are integrating ESG measures into the Long-Term
Incentive Plan and Performance Share Plan for senior
executives. Further details are provided on pages 90 and 98.
We continue to rank highly in external benchmarks and
indices, including (as at 31 August 2022):
• Dow Jones Sustainability Index: for the last two
years, WHSmith has been included in the Dow Jones
Sustainability World Index, one of only twelve retailers to
be recognised globally in this way
• Sustainalytics: WHSmith received an ESG Risk Rating of
10.3 and was assessed by Sustainalytics to be at low risk of
experiencing material financial impacts from ESG factors.
WHSmith’s ESG Risk Rating places it first in the speciality
retail sector
• ISS ESG Corporate Rating: WHSmith currently ranks
in the top ten per cent of retail companies, with an
Environmental and Social Quality Score of 1, representing
the highest level of disclosure
• MSCI: WHSmith has a rating of AA in the MSCI ESG
Ratings assessment
• FTSE4Good: WHSmith is a constituent of the FTSE4Good
Index Series
Materiality – how we decide what to
measure andreport
We listen to the view of our stakeholders in a number of
different ways, which we set out in more detail on pages
30 to 36. We use the information they provide to identify
the issues that are most important to them and which are
therefore significant for our business. Our ESG Committee
and other relevant governance bodies regularly discuss
new and existing themes and issues that matter to our
stakeholders. Our management team then uses this insight
to choose what we measure and include within our Annual
Report and our Sustainability Report, based on the ESG
issues which are important to our investors, customers,
colleagues and other stakeholders. Our reporting is informed
by stock exchange listing and disclosure rules.
Responsible business
We aim to always act with integrity, making the right decisions
and demonstrating the appropriate behaviours to earn the
respect of our customers and all those with whom we do
business. Our Code of Business Conduct sets out how our
business operates, and what is expected of every person
who works for and on behalf of WHSmith. It includes policies
relating to individual conduct, such as for anti-bribery and anti-
corruption measures, conflicts of interest, and data protection,
as well as those relating to how we work together, such as
for diversity and inclusion, anti-harassment and bullying, and
health and safety. It also sets out our business standards in
relation to fair trading practices, such as pricing and marketing,
quality and product safety, trade controls, competition and
supply chain practices. All employees are required to confirm
that they have read and are working in accordance with
our Code of Business Conduct on an annual basis and are
encouraged to report any suspected breaches using our
independently operated and confidential Speak Up helpline.
Our Code of Business Conduct sets out in detail how those
working for us should behave and what they should do if
they are confronted with bribery or corruption. We require
all employees and anyone working for us in any capacity
to comply with the UK Bribery Act, in addition to any local
anti-bribery and anti-corruption laws. Our Code of Business
Conduct states that employees or others working on our
behalf must never offer or accept any kind of bribe, and
that our subcontractors, consultants, agents and others we
work with must have similar anti-bribery and anti-corruption
measures in place.
We are looking forward to working with our
business partners, suppliers and customers to
deliver the step-changes that are needed for
sustainable living.”
Carl Cowling
Group Chief Executive
38 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Minimising our impact
on the planet
Urgent and sustained action is needed to address
the threat to the health of our planet. The impacts of
climate change are being felt around the world, and
businesses are both responsible for, and dependent
on, a healthy and sustainable environment.
Our Environmental Policy, sets out our commitments
to minimising our business impacts on the planet,
including those relating to climate change, reducing
waste and protecting natural resources. We regularly
review progress against our objectives and targets
and aim for continual improvement year on year.
Targets
Net zero GHG emissions by 2050
• By 2030: reduce absolute Scope 1 and2
Greenhouse Gas (GHG) emissions by 80 per cent
from a 2020 base year.*
• By 2027: 75 per cent of suppliers by emissions
covering purchased goods and services and
upstream transportation and distribution will
havescience based targets.*
* Both of these near-term targets have been validated
by the Science Based Targets initiative.
Cutting waste
• By 2025: reduce waste material, minimise plastic
packaging and remove loose plastic glitter from
WHSmith-brand products.
Protecting natural resources
• By 2025: ensure forestry materials in own-brand
products and core non-trade goods come from
recycled or certified sources.
Climate action
Climate change remains one of the most pressing,
challenging issues facing our world and we acknowledge we
need to play our part. We have a long-standing commitment
to reduce emissions from our operations and have been
improving energy efficiency and minimising fuel use for
nearly two decades. More information on our strategy to
reduce emissions and manage climate-related risks and
opportunities are included in our climate-related disclosures
on pages 44 to 56.
Cutting waste
Waste is not only damaging to the environment but adds
additional cost to our business. We are focused on reducing
excess materials and maximising recycling wherever we
can. In our High Street stores, we operate a recycling
system which enables us to recycle most forms of waste,
including cardboard, paper, plastics and metals. Waste is also
segregated in our distribution centres and offices. 99 per
cent (2021: 93) of our waste was diverted from landfill during
this financial year.
It is still a relatively small component of our overall waste
volumes, but as the number of food lines that we sell
continues to grow, we are working hard to eliminate food
waste. One of the main sources of this type of waste is
from unsold sandwiches which have reached their use-by
date. We have implemented a number of initiatives, such
as better stock control systems to improve forecasting
of chilled food sales, so that we only stock food that we
expect to sell. We also operate a discounting strategy in all
of our stores, with processes in place to reduce the price
of any sandwiches that are approaching, but have not yet
exceeded, their use-by date. This year, we partnered with the
food redistribution organisation Too Good to Go, to pilot an
online application to connect customers to our stores that
have surplus unsold food. This application allows customers
to reserve a bag of food which is approaching its use by
date to purchase later in the day from a WHSmith store at a
significant discount. The results of the pilot showed that the
solution worked well for some locations, particularly those
that could be accessed by a larger customer base late in
the day. We are now working to extend the trial to stores in
hospital locations.
Operational waste
2022 2021 2020
Total waste (tonnes) 3,247 3,623 3,449
Percentage diverted
fromlandfill
99 93 88
Packaging materials are designed to protect items, to
maintain quality and to enhance product shelf life. However,
the manufacturing of packaging uses resources, and the
inappropriate disposal of packaging can impact air, land and
marine environments when no longer needed. We regularly
review the type and quantities of packaging we use,
including primary packaging for our own-brand products
and the secondary packaging used to protect goods during
transit and distribution. We seek to identify opportunities to
minimise packaging where possible and use better solutions
39WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Engaging our people
Our employees and those who work for us in our
supply chain and for our business partners are critical
to our customers’ experiences and perceptions and
vital to our success. We want to attract, motivate and
retain the best people to deliver a great customer
service and help our business to grow. The Group
employs approximately 12,000 people and is proud
of its long history of being regarded as a responsible
and respected employer. We have a full suite of
employee policies and our Code of Business Conduct
sets out the behaviours we expect from those
working for us and on our behalf.
Targets
Create an environment that supports
physical, mental and financial wellbeing
• By 2025: improve our employee engagement
score from a 2021 base year.
• On-going: ensure all managers receive mental
wellbeing training.
• On-going: maintain equal numbers of mental health
and physical first aiders.
Increase diversity of senior management
• By 2025: increase gender and ethnic diversity of
the Board, Group Executive Committee and Senior
Manager populations.
Protect worker rights in our supply chains
• On-going: ensure we audit our own brand suppliers
at least every two years.
• By 2023: develop an audit and engagement
programme for our tier two suppliers.
such as cardboard for products, easier to recycle forms of
plastic and re-usable skips for the internal transfer of stock.
This year we have improved our management information
systems to be able to record and track over time the types
and volumes of different types of packaging associated
with our own-brand products. We have now removed loose
plastic glitter from all WHSmith-branded products, including
stationery items and seasonal items such as cards and
gift wrap.
Protecting natural resources
Paper-based products are a core part of WHSmith’s
product offering and we are committed to minimising
the environmental impacts from paper sourcing for our
own-brand products. As part of our work towards this
objective, and in line with the requirements of national and
international timber regulations, we carry out an in-depth
and rigorous assessment of supplier timber-sourcing
systems. We have set as a minimum standard, recycled
or certified timber materials from known, legal, and well-
managed sources. Our Sustainable Forests Policy sets out
our standards and requirements for our supply chain.
Our sourcing teams work with our suppliers to help them
understand our requirements and how the data they provide
is needed to demonstrate that any paper, card or wood used
in a WHSmith product is sourced from a certified or recycled
source. We can now demonstrate through certification
that more than 99.7 per cent (2021: 99.3) of our WHSmith-
branded products contain materials originating from
certified and recycled material.
Sustainability continued
Employee engagement
To help us to understand more about how our colleagues
feel about working for WHSmith, we appointed a third-
party research organisation to carry out our first UK wide
employee engagement survey in October 2021. The survey
asked 22 questions and covered a wide range of topics,
including communication, environment, customer focus
and culture. The results of the survey were presented to
the Board by the Group People Director in December 2021
and highlighted a number of opportunities for change that
could improve the employee experience. The Board agreed
an action plan to improve the working environment in head
offices and stores; improve dialogue and engagement;
and build collaboration across teams. More targeted
pulse surveys throughout the year allowed us to monitor
the effectiveness of these actions. A second employee
engagement survey was undertaken in October 2022, and
was sent to all employees across the Group. The action plan
resulted in an improvement in the employee engagement
40 WH Smith PLC Annual Report and Accounts 2022
Strategic report
score over the 12 month period. Continuing to improve the
culture of the business is important to the long-term success
of the Group and employee engagement has now been
included as a performance measure within the Company’s
Long-Term Incentive Plan and Performance Share Plan.
Health, safety and wellbeing
We are committed to maintaining high standards of
health, safety and wellbeing and the Board monitors the
Company policies, processes and practices on an annual
basis. The Group has a Health and Safety Committee that
comprises employee representatives and professional health
and safety advisers. Colleagues receive health, safety and
wellbeing training appropriate to their role, including in
relation to fire safety, manual handling, how to prevent slips,
trips and falls and how to recognise and help colleagues who
may be affected by poor mental health. The Group Health
and Safety at Work Policy is the basis for our health and
safety management system which sets out our procedures
and processes. This year, there were 27 reportable accidents
in the UK involving employees, contractors and members of
the public and no fatalities.
Accidents and injuries
2022 2021 2020
Major injuries 2 2 2
Other reportable accidents 25 28 27
Total reportable injuries
andaccidents
27 30 29
We believe that supporting the mental wellbeing of our
employees is equally as important as looking after their
physical health and safety. Our strategy to promote mental
wellbeing has three main objectives: to improve awareness
and reduce stigma; to raise the level of mental health
support across the business; and to develop a culture which
promotes good mental health. We work in partnership with
accredited organisations, such as Time to Change, and
mental health charities including MQ, the mental health
research charity; Place2Be, the leading national children’s
mental health charity; and CALM, a movement against male
suicide. More than 1,200 line managers have now received a
half-day Mental Health First Aid England awareness course
and we have an equal number of mental and physical health
first aiders across the Group. We recognise the importance
of financial wellbeing on mental health and colleagues have
access to a number of schemes that provide assistance.
The WHSmith Benevolent Fund is a registered charity
established in 1925 for the benefit of current and retired
employees and their families who are in financial difficulty
or hardship and in need. Over the past two years, we have
added a partnership with Salary Finance, to allow colleagues
to access free financial education and loans at lower interest
rates than those offered by traditional lenders.
Diversity and inclusion
WHSmith recognises that each one of our employees is core
to the success of our business, whatever their age, race,
religion, gender, sexual orientation or physical ability. We are
committed to promoting a culture of equality, diversity and
inclusion through our policies, procedures and working
practices. We want to ensure that all our employees receive
equal and fair treatment, and this applies to recruitment and
selection, terms and conditions of employment, promotion,
training, development opportunities and employment
benefits. We believe in creating a culture throughout the
Group that is free from discrimination and harassment and
we will not permit or tolerate discrimination in any form.
Our diversity and inclusion action plan sets out how we
are working towards our goal of creating an environment
where everybody is welcome and feels they can belong.
It is focused on three themes: improving awareness and
education through better communication and colleague
engagement; improving data quality, processes and systems;
and widening external partnerships and collaborations.
This year, we have introduced diversity and inclusion training
materials as part of our new online portal. More detailed
face-to-face training sessions were also provided for the
senior executive team. Our Diversity and Inclusion Working
Committee and divisional listening groups with senior
management have enabled colleagues to engage directly
with leadership and work collaboratively on improvements.
This year, we have also introduced one-to-one reciprocal
mentoring between senior management and colleagues
from across the business to increase the diversity of
feedback to senior management and create greater
opportunities for under-represented groups. We have
continued to improve the quality of data and information
that we hold in relation to employee diversity and extended
our use of balanced shortlists for senior-level recruitment
to a larger number of roles, with the aim of identifying and
accessing a more diverse pool of talent.
We run regular internal engagement campaigns linked with
key events during the year, including International Women’s
Day, Pride, Black History Month, International Day of Persons
with Disabilities and a variety of religious celebrations.
We have signed several industry charters, committing to
making progress on improving diversity and inclusion in
our business. We are one of eight founding members of a
collaboration community called Diversity in Retail, which
is dedicated to increasing diversity and inclusion at all
levels within organisations in the retail sector. We are also
signatories to the British Retail Consortium’s Diversity and
Inclusion Charter and have joined the Women In Hospitality,
Travel and Leisure collaboration community.
We remain committed to improving the gender balance in
our senior staff populations and the proportion of women
at Group Executive and senior manager level has increased
this year. Activities designed to promote more women into
senior positions include a balanced succession planning
process and mentoring schemes. We continue to work with
Everywoman who provide a host of personal development
tools aimed mainly at women, including monthly webinars,
workbooks and relevant career development articles.
The partnership also provides our employees with links
to an external network of professional women in other
organisations so that contact, connections and relationships
41WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Sustainability continued
can be made easily. We have also enhanced our maternity
policy for senior women, expanding provision for the first six
months of maternity leave, supported by a flexible return to
work policy.
We are continuing to build a better understanding of
diversity and inclusion across the Group and are looking
at ways to increase ethnic diversity at senior levels in our
organisation. We have signed the Race at Work Charter and
our Diversity Forum, chaired by our Group Chief Executive,
provides an opportunity for colleagues to meet, provide
feedback for senior management and suggestions for
improving diversity and inclusion in WHSmith.
We benchmark our diversity profile versus our peers and
the national average to ensure that our employee profile and
that of our management team reflect our commitment to
diversity. Our latest Gender Pay Report can be found on our
website. In terms of equal opportunities, the Company gives
full and fair consideration to applications for employment
when these are received from disabled people. Should an
employee become disabled when working for the Company,
we will endeavour to adapt the work environment and
provide retraining if appropriate so that they may continue
their employment. Training, career development and
promotion opportunities are equally applied for all our
employees, regardless of disability.
Human rights and our supply chain
One of our key social risks is the need for us to source
products sustainably, ensuring that workers in our supply
chain are treated well, and that their human rights are
respected. We are committed to ensuring full respect for the
human rights of anyone working for us in any capacity and
we are committed to ensuring there is fair and safe work for
all workers throughout our supply chain. We have developed
a due diligence process to make sure we are identifying and
assessing any potential and actual risks, and that we are
providing appropriate risk control, mitigation and remedy
where needed. Our approach to human rights is laid out in
our Human Rights Policy.
We have identified six priority areas for protecting human
rights in our supply chain: health and safety; freedom of
association and collective bargaining; access to grievance
mechanisms; working hours and overtime; preventing
modern slavery; and gender equality. We work with
suppliersand other third parties to develop and progress
targets and action plans for improvements across these
areas. We take a zero-tolerance approach to modern slavery.
Our latest Modern Slavery Statement sets out the steps we
have taken to prevent modern slavery in our own operations
and supply chain.
WHSmith is a member of the Ethical Trading Initiative
(ETI), an alliance of companies, trade unions and non-
governmental organisations that promotes respect for
workers’ rights around the globe. Our Responsible Sourcing
Standards are based on the ETI Base Code and underpin
our strategy and sustainable sourcing activities. We will only
place orders with suppliers who are committed to working
towards compliance with these standards, and we endeavour
to bring about continual improvement through aprogramme
of factory audits and ongoing engagement.
Our in-house audit and engagement team conducts
audits of our own-brand suppliers at least every two years,
assessing compliance with our standards and grading
suppliers as gold, silver, bronze and unacceptable. We use
a mix of announced and unannounced audits and a factory
must be graded bronze or above if we are to work with
them. Our ESG Committee reviews our responsible sourcing
strategy annually, looking at our audit and engagement
programmes, emerging trends and risks, targets and
performance. This year, we identified two potential new
suppliers and one existing supplier who were unable
to provide the necessary levels of documentation and
assurance, even after on-going dialogue and engagement.
As a result, no further orders were placed with them.
To supplement the information we gain from supplier audits,
our team also spends a significant part of its time engaging
with suppliers on an ongoing basis to build stronger and
more transparent relationships. The team’s engagement
focuses on resolving specific issues identified during audits
and on delivering wider projects to help suppliers deliver
on key areas such as worker representation or health and
safety. We have an independent hotline for workers to report
issues they are concerned about, which we then investigate
and follow up with suppliers to ensure they are addressed.
This year, we have extended our audit and engagement
focus to begin to look at some of the key suppliers providing
components to our direct suppliers and the results for these
tier two suppliers are now incorporated into our reporting.
Male and female representation across the Group (as at 31 August 2022)
2022 2021
Male Female Male Female
Number Per cent Number Per cent Number Per cent Number Per cent
Board
1
5 63 3 37 5 63 3 37
Group Executive Committee Members
2
7 70 3 30 7 78 2 22
Senior managers
3
53 65 29 35 46 68 22 32
Managers
4
349 48 371 52 315 48 345 52
All employees 5,143 37 8,876 63 4,052 35 7,688 65
1 Board includes all statutory directors
2 Group Executive Committee Members are those who have responsibility for planning, directing or controlling the activities of the Company
3 Includes Group Executive Committee Members and colleagues graded at levels one and two below
4 Includes head office colleagues graded at the level below 3 plus Store Managers, Cluster Managers and Post Office Managers
42 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Contributing to communities
WHSmith is at the heart of communities across
the UK, whether in travel hubs, hospitals or high
streets. We are committed to making a positive
impact wherever we operate. As a major retailer of
books and stationery, we are particularly passionate
about literacy and life-long learning. We are a long-
term advocate for the development of reading
and writing skills and we have provided help over
many years to children and young people who need
additional support.
Targets
Help all children to develop a love of reading
• By 2025: work with the National Literacy Trust to
provide a book to every child in the UK who does
not own one of their own.
Make a positive impact through fundraising,
donations and volunteering
• By 2025: Increase the number of employees
involved in supporting charities through fundraising
and volunteering.
Literacy
We have a long-term partnership with the National Literacy
Trust, and this year we continued our support for their Young
Readers’ Programme, providing books and other materials
for schools in socio-economically disadvantaged areas of
the country. In addition, the WHSmith Group Charitable
Trust (the WHSmith Trust) provided financial support for
the programme, supported by donations from WHSmith
customers and employees.
Research by the National Literacy Trust shows that
approximately 410,000 children in the United Kingdom do
not own a book of their own. Covid-19 has widened the gap
in children’s literacy between affluent parts of the country
and areas of greater socio-economic deprivation. We are
working with the National Literacy Trust to ensure every
child in the country can own a book of their own. To date we
have donated the equivalent of 321,000 books, through book
donations and financial contributions to provide the support
that is needed.
WHSmith continues to take a leading role in the delivery of
the World Book Day initiative, which is the biggest annual
celebration of books and reading in the UK. Many of our
High Street stores participated, redeeming book vouchers
enabling children to choose one of the special World Book
Day books or offset the cost against any of our children’s
ranges of books. We also partnered with the WHSmith Trust
to donate WHSmith vouchers to schools across the UK
for them to choose books to increase their school library
resources. Over 305,000 World Book Day vouchers were
redeemed and WHSmith vouchers totalling £25,000 were
donated to over 200 schools.
Supporting charities and local causes
As part of the celebrations for our 230th anniversary,
colleagues participated in fundraising on behalf of the
WHSmith Trust. We also provided opportunities for
customers to donate to local charities via collection points
in store. To support and encourage employee involvement
with charities, the WHSmith Trust matches funds raised by
employees for charities of their choosing and recognises
employees who volunteer through a financial donation to
thecharity equivalent to the value of the time spent.
This year, through our charity partnerships, colleague
and customer fundraising and in-kind donations we have
donated £868,000 to charities and other good causes.
The full extent of our community investment activity is
outlined in our Sustainability Report 2022 and details of
howwe engage with charities and other good causes are
setout in our Code of Business Conduct.
43WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Introduction
The Financial Stability Board’s Task Force on Climate-related
Financial Disclosures (“TCFD”) established a framework
for understanding and analysing climate-related risks and
opportunities. WHSmith recognises that climate change
presents a number of potential risks and opportunities for
our business and we have been working towards alignment
of our internal processes with TCFD recommendations
over the last three years. Our target is to be net zero across
our value chain by 2050 and we are committed to regular,
transparent reporting to communicate our progress.
We have considered our TCFD-related reporting obligations
under the UK’s Financial Conduct Authority Listing Rules
and the table below details where we have included
information which is either fully or partially consistent with
TCFD recommendations and recommended disclosures,
taking into account the all-sector guidance published by the
Task Force. Our approach to materiality for TCFD reporting
is the same as for other components of ESG and is set out
on page 38. We consider that we are fully consistent with
Climate-related disclosures
Sustainability continued
each of the TCFD recommendations and recommended
disclosures, except for the following:
• Strategy (c): Describe the resilience of the organisation’s
strategy, taking into consideration different climate-related
scenarios, including a 2°C or lower scenario. This was the
first year that we have undertaken quantitative scenario
analysis and work is on-going to fully interpret the
results and fully understand the impacts on our future
business strategy.
• Metrics and Targets (a): Disclose the metrics used by
the organisation to assess climate-related risks and
opportunities in line with its strategy and risk management
process. Having conducted quantitative scenario analysis,
we are now evaluating further the metrics and indicators
we use to assess risks and opportunities and considering
whether we need to develop additional measures to be
fully consistent with the all-sector guidance.
We plan to complete the additional work necessary to be
fully consistent with these two recommended disclosures in
the next 12 months and will report against them in the 2023
Annual Report and Accounts.
TCFD recommendations and recommended disclosures
Level of
Consistency
Disclosure location
(page)
Governance
(a) Describe the board’s oversight of climate-related risks and opportunities 45
(b) Describe management’s role in assessing and managing climate-related risks
andopportunities
45
Strategy
(a) Describe the climate-related risks and opportunities the organisation has identified over
theshort, medium and long term
46 to 50
(b) Describe the impact of climate-related risks and opportunities on the organisation’s
businesses, strategy and financial planning
47 to 50
(c) Describe the resilience of the organisation’s strategy, taking into consideration different
climate-related scenarios, including a 2°C or lower scenario
51
Risk management
(a) Describe the organisation’s processes for identifying and assessing climate-related risks 51
(b) Describe the organisation’s processes for managing climate-related risks
52
(c) Describe how processes for identifying, assessing and managing climate-related risks
areintegrated into the organisation’s overall risk management
52
Metrics and targets
(a) Disclose the metrics used by the organisation to assess climate-related risks and
opportunities in line with its strategy and risk management process
53
(b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions,
and the related risks
54 to 55
(c) Describe the targets used by the organisation to manage climate-related risks and
opportunities and performance against targets
55 to 56
Fully consistent
Partially consistent
44 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Governance
Board oversight of climate-related risks
andopportunities
The Board has ultimate responsibility for ensuring climate
change is embedded into the Company’s strategy, risk
management and financial planning processes. The Board
has delegated oversight of certain climate-related activities
to the following committees and any issues of material
significance are brought back to the Board for discussion
asthey occur:
• The Audit Committee has responsibility for ensuring that
the Company has identified climate-related risks and
opportunities, that they have been adequately assessed
and that appropriate risk management, monitoring and
mitigation plans are in place. The Committee also oversees
the Company’s obligations in relation to non-financial
reporting. The Committee receives quarterly climate
updates from the Group Audit and Risk Director as part
of the Company’s wider risk management processes, and
this year climate risks and opportunities were included
in the consideration and approval of principal risks and
uncertainties, non-financial reporting disclosures and
integration with financial reporting.
• The ESG Committee has responsibility for ensuring the
Company has appropriate climate policies, action plans
and targets that are part of a wider sustainability strategy.
This includes the development of short, medium and
long-term goals and targets in relation to climate change,
and monitoring progress against those commitments.
This year, the ESG Committee discussed climate change
in three meetings. The Committee received dedicated
briefings on climate change from the Sustainability
Director on net zero, TCFD requirements and the work
of the Science Based Targets Initiative (SBTi). Skills and
experience of Committee members are set out on pages
64 to 65 including details of those directors who have
experience on climate change. Decisions taken by the
Committee this year included sign-off on a new net
zero commitment, near-term targets for Scope 1 and 2
reductions and supplier engagement plans to tackle Scope
3 emissions. The work of the ESG Committee is detailed
on pages 81 to 82.
• The Remuneration Committee ensures that the Company
incentive plans are aligned with targets relating to climate-
change. Climate-related performance indicators form
part of the Annual Bonus scorecard for the Group Chief
Executive and CFO/COO and for awards to be made in
FY23, climate-related targets will also be included in the
LTIP as set out on page 98. Incentives associated with
decarbonisation targets were discussed in two of the
Committee meetings this year.
Management’s role in assessing and managing
climate-related risks and opportunities
The Group Chief Executive has the delegated authority from
the Board to manage WHSmith’s actions in relation to the
Company’s strategy, including climate change. He is assisted
by a number of senior managers in the assessment and
management of climate-related matters:
• The Group Sustainability Director supports the Group
Chief Executive in progressing WHSmith’s net zero
transition strategy, including the development of climate
scenarios, embedding decarbonisation plans into
business activities and ensuring progress is appropriately
Board
Ultimate responsibility for all aspects of ESG, including strategy, risk management and prioritisation of key issues
Group Executive Committee
Defines and monitors business strategy and financial plans, including those related to ESG
ESG Committee
Provides oversight of the ESG
strategyand monitors progress
againstobjectives and targets
Audit Committee
Provides oversight of risk
management of ESG, including
internal controls and external
reporting requirements
Remuneration Committee
Ensures remuneration policies
and plans support ESG targets
Business Risk Committees
Provide oversight of the ESG strategyand monitor
progress againstobjectives and targets
ESG Steering Group
Responsible for developing ESG action plans and
delivering progress against objectives and targets
45WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
monitored. She is responsible for updating the Board and
the ESG Committee on climate-related matters at least
three times a year.
• The Managing Directors of each business identify, manage
and mitigate climate-related risks and opportunities
associated with their activities. They are also responsible
for ensuring the delivery of plans to reduce emissions
and capitalise on carbon-related opportunities within
their businesses.
• The CFO/COO is responsible for monitoring the effective
application of the Company’s processes for managing
material risks, including those related to climate change.
He is also responsible for providing assurance over
financial information and climate-related disclosures.
There are a number of governance bodies and reporting
processes to ensure management is informed about climate-
related issues. The ESG Steering Group chaired by the Group
Chief Executive has responsibility for leading the delivery of
our sustainability commitments including those relating to
climate change. It meets once per month to review progress
against targets and this provides the basis for a report to
the ESG Committee three times per year. The Business Risk
Committees are responsible for identifying and assessing
climate-related risks and opportunities and ensuring
appropriate due diligence and mitigation. They meet once
per quarter and provide input to the Group risk report to
theAudit Committee four times per year.
Climate strategy
Earlier this year we announced a target to transition to a net
zero emissions business by 2050 (see “Metrics and targets”
on page 55 for more detail). The majority of our emissions
come from our wider value chain, and we will need to
collaborate with suppliers, landlords and customers if we are
to meet this goal.
Climate-related risks and opportunities identified
over the short, medium and long term
Our processes for identifying and assessing climate-related
risks and opportunities are set out under “Climate risk
management” (page 51). We consider Environment and
Sustainability, which includes climate-related issues, to be a
principal risk based on stakeholder expectations that we will
conduct our business in a responsible and sustainable way
and that failing to deliver our sustainability agenda could
damage our reputation, introduce higher costs and impact
our ability to meet our strategic objectives.
Impact of climate-related risks
andopportunities
We have incorporated climate-related risks and opportunities
into our business strategy as described on pages 14 to 15.
The Group’s risks and opportunities do not vary significantly
across the different sectors and geographies in which
WHSmith operates. We have started to incorporate the
financial impacts from climate risks and opportunities into
our financial planning processes and will continue to evolve
our approach as our understanding develops of the outputs
from modelling different climate scenarios.
We consider climate-related risks and opportunities
across the short-, medium-, and long-term which we
define as:
• Short-term – up to three years: we develop financial
plans and use them to manage performance on a
three-year cycle. We assess the Group’s viability
under the requirements of the UK Corporate
Governance Code over a three-year period and
our financial plans incorporate decarbonisation
measures required to meet our near-term targets
and address short-term risks.
• Medium-term – three to ten years: many of our
financial commitments, such as store leases,
contractual agreements with landlord partners, and
the useful economic life of our assets often exceed
three-years. Medium-term climate-related risks are
considered in all investment decisions involving
longer term commitments and many of our
climate-related opportunities are often materialised
within this time scale.
• Long term – beyond ten years: it is expected that
the product mix in our stores could look very
different to the current offering, addressing the
societal changes that will come with transitioning
to a net zero world. This timescale is beyond our
financial planning and investment period horizons,
but we recognise that longer-term risks need to
be incorporated into our future business strategy
and planning.
Climate-related risks and opportunities
The following tables set out the climate-related risks and
opportunities which have been identified, the potential
impact they may have on WHSmith and the resilience of
the business to respond. Transition risks are associated with
societal changes in public sector policies, technologies,
markets or stakeholder expectations as the world moves
to a low-carbon economy. Physical risks arise from the
increasing severity and frequency of acute climate-related
weather events, or longer-term chronic changes to the
climate. Mitigation and adaptation to climate change can
also produce opportunities for business.
The business and financial impacts from the risks and
opportunities detailed in these tables have been described
assuming no mitigation or control measures are in place
and are subject to uncertainties attributed to the underlying
scenario models, impact pathways and assumptions made.
These assumptions include that our business activities
remain largely unchanged throughout and that we do not
change our sourcing strategy or the nature of our store
portfolio. They also assume that any increases in costs are
fully absorbed by WHSmith and not passed on to customers.
In reality, costs are likely to be shared with others in the
value chain. The financial impacts quoted are not forecasts,
but are outputs derived using different data inputs and
plausible modelled scenarios which are subject to a range
of uncertainties.
Sustainability continued
46 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Transition risks
Potential financial impact (pre-mitigation)
<£10m
£10-30m
>£30m
*These financial ranges align with our other risk management processes
Potential financial impact, strategic response
andbusiness resilience*
Summary description Business impact Short-term Medium-term Long-term
Policy
andlegal
Increased costs for energy
and fuel from carbon
pricing and associated
regulatory changes.
Carbon pricing could result in increased
costs for energy for our buildings and for
vehicle fuel primarily in the UK and to a
lesser extent in other markets. Carbon
pricing could also be felt through the
supply chain increasing the cost of trade
and non-trade products and for increasing
costs for distribution from more onerous
compliance and policy requirements such
as low emission zones.
We closely monitor any changes
in legislation and have a balanced
purchasing strategy for energy to hedge
price volatility. We continue to reduce
energy consumption and switch to low
carbon alternatives wherever feasible.
We have included potential future cost
increases for energy and fuel in our
financial plans.
Introduction of plastics
tax, extended producer
responsibility reform and
extension of single use
plastic restrictions.
The introduction of taxes on plastic
packaging in the UK, Italy and Spain is
an additional cost. Changes to extended
producer responsibility legislation are
increasing costs for operational waste
disposal and packaging costs for goods
for sale.
We closely monitor any potential policy
changes and have implementation
plans ready for compliance with any
new legislation and costs are included
in financial plans. We are minimising
packaging and increasing the amount
of recycled content in our own-brand
packaging and encouraging our wider
supply chain to do the same.
Technology Increased costs associated
with building efficiency
standards.
In the UK, our Swindon distribution
centre and some of our High Street
stores are heated by natural gas. As the
UK transitions to a low-carbon economy,
there will be a need to invest in newer
technology to replace gas-fired heating
and air-conditioning systems. Any delay
may result in increased energy and
maintenance costs.
Capital expenditure on gas control
systems is reducing our reliance on
natural gas. We continue to invest in
lower-carbon alternatives for heating
and air conditioning during store refits
and building upgrades, and these costs
are included in our financial plans. We
have also invested in more energy
efficient chiller units with doors and
aerofoil technology to minimise cold
airlosses.
47WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Transition risks continued
Potential financial impact (pre-mitigation)
<£10m
£10-30m
>£30m
*These financial ranges align with our other risk management processes
Potential financial impact, strategic response
andbusiness resilience*
Summary description Business impact Short-term Medium-term Long-term
Market Risk of increasing fuel
costs because of changing
market dynamics,
geopolitical energy
policies and industry
decarbonisation trends.
Changes in energy pricing could
resultin increased costs for energy
forour buildings and for vehicle fuel
inall markets.
Our energy procurement team are
constantly looking at ways of minimising
the costs that we pay for electricity and
gas, through a balanced procurement
strategy. Over the past decade we
have reduced our UK electricity and
gas consumption by 34 per cent,
driving down costs and emissions. We
will continue to upgrade our energy
management systems and deliver
energy management programmes to
drive further reductions.
Sentiment towards air
travel may become more
negative resulting in
consumers and business
customers preferring to
take fewer flights.
Sales in WHSmith’s airport
stores are an important revenue
stream. Areduction in passenger
numbers would impact footfall
and reduce revenue in some of
our most important stores. The UK
Government has recently published
its Jet Zero strategy which sets out
how the aviation sector can reach
net zero without any Government
intervention to limit aviation growth.
The UK Climate Change Committee’s
Sixth Carbon Budget published in
December 2020 also predicts that air
travel will continue to grow, and we
therefore think the likelihood of this
risk being realised is low.
WHSmith is collaborating with our travel
landlord partners on net zero strategies
to play our part in demonstrating to
customers industry’s intent for greener
forms of travel. We have a diverse
portfolio of stores across air, rail,
hospitals, shopping centre and high
street locations which would mitigate
changes in customer demand for any
single format.
Increased demand for
more sustainable materials
(recycled, recyclable
and sustainably certified
sources) may outstrip
supply and increase costs.
WHSmith sells a range of products
manufactured from sustainably
sourced materials, including forestry
products and food ingredients for
which certification schemes are
becoming increasingly necessary.
Theshift in corporate practices
towards being more sustainable
may mean there is limited supply
forincreased demand, resulting in
higher raw material costs.
WHSmith’s sourcing team maintain an
overview of the wider market that would
allow us to find alternative suppliers in
the case of any disruption. We sell a very
broad range of products which means
that even if certain categories of product
are impacted by supply chain challenges,
revenues can be protected via sales of
other product categories.
Sustainability continued
48 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Transition risks continued
Potential financial impact (pre-mitigation)
<£10m
£10-30m
>£30m
*These financial ranges align with our other risk management processes
Potential financial impact, strategic response
andbusiness resilience*
Summary description Business impact Short-term Medium-term Long-term
Reputation Our reputation with
investors, customers
and employees could
be harmed if we fail
to decarbonise our
business inline with
theirexpectations.
All of our key stakeholder groups,
including investors, our customers and
our employees expect us to act with
integrity and play our part in reducing
emissions and minimising global
warming. Failure to transition to net
zero could make it difficult to attract
and maintain investment and access to
capital, maintain customer loyalty for
ourbrand and attract and retain the
bestemployees.
We have set a target to reach net zero
emissions by 2050 and have reduced
Scope 1 and 2 emissions in line with
the trajectory needed to limit global
warming to 1.5
O
C. We have a plan of
action to tackle Scope 3 emissions
through engagement with suppliers,
landlord partners and business partners
in the retail sector.
Physical risks
Potential financial impact and business resilience*
Summary description Business impact Short-term Medium-term Long-term
Acute Extreme weather events,
including storms and
flooding, are becoming
more frequent.
Extreme weather events could cause
disruption to transport routes affecting
our distribution networks and our ability
to transport stock to where it is needed.
More frequent periods of heavy rainfall
could lead to flooding at one or more
ofour stores or distribution centres.
Our stock is held across WHSmith-
operated distribution centres, by
suppliers at their sites and over 1,700
stores in 30 different countries. The
impact of a flood event in our retail
estate would therefore be limited.
Ourthree distribution centres are in
locations not deemed to be at risk of
flooding. We have a diverse product
range with a limited number of fast-
moving goods, and therefore the
majority of our logistics operations
areresilient to any short-term impacts
from major weather events.
Chronic Climate change is likely
toresult in chronic
changes in precipitation
patterns with some areas
of the world experiencing
droughts, and other
areasexperiencing
greaterrainfall.
Chronic changes in precipitation
patternscould affect the supply and
availability of raw materials for some
ofour product lines such as stationery
andfood and drink, with a resulting
increase in the cost of supply.
We sell a broad range of products
whichmeans that even if certain
categories of product are impacted by
supply chain challenges, revenues can
be maintained through sales of other
product categories. We will continue
to evaluate our product offering in
the context of medium and long-
term climate change and the impacts
that thiscould have on different raw
materialsin our supply chain.
49WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Opportunities
Potential financial impact (pre-mitigation)
<£10m
£10-30m
>£30m
*These financial ranges align with our other risk management processes
Potential financial impact and current responses*
Summary description Business impact Short-term Medium-term Long-term
Products
andservices
Opportunities to win
more tenders from
landlords because of
strong sustainability
credentials.
WHSmith bids for retail space in
prime locations such as airports,
rail stations and hospitals. Landlord
partners are including sustainability
requirements in tender documents on
a more frequent basis, and a strong
sustainability offering can improve
thechances of a successful bid.
WHSmith has a well-established
sustainability programme with defined
targets and action plans against key
areas, underpinned by responsible
business policies and processes. We
benchmark well against our competitors,
being the top placed speciality retailer
in Sustainalytics ESG benchmark and a
member of the DJSI World Index for the
second year running.
Opportunities for
increased revenues as
a result of changing
consumer trends to
public transport.
A switch to lower-carbon intensity
forms of transport by business
travellers and consumers could result
in an increase in footfall and therefore
sales in some of our channels such
as rail terminals and electric vehicle
charging stations.
WHSmith is collaborating with our travel
landlord partners on net zero strategies
to play our part in demonstrating to
customers industry’s intent for greener
forms of travel. We have a diverse
portfolio of stores across air, rail, hospitals,
shopping centre and high street locations
which would maximise the opportunities
from growth in any of these formats.
Opportunities from an
increase in sales in new
and existing product
categories.
As the climate changes, there is
likely to be an increase in customer
demand for some of our existing lines
and for new products. These include
products that have the potential
to mitigate the impacts of climate
change, because they have a lower
environmental footprint, or products
that help consumers to adapt to a
changing climate, particularly for
those who are travelling.
Our commercial teams are constantly
assessing consumer trends and the
potential for new products and can
quickly adapt to any developments in
the market place to capitalise on new
opportunities. For example, in response
to a warmer climate, we are ensuring our
ranges of travel products are meeting the
needs of travellers.
Sustainability continued
50 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Resilience of WHSmith’s strategy, taking into
consideration different climate-related scenarios
To help evaluate the climate-related risks and opportunities
described on the previous pages and how resilient our
strategy is to them, we engaged external consultants to help
us to understand how our business could be affected under
two different climate scenarios:
• A current policies scenario which assumes that the
climate change policies currently in place across the
globe are preserved, and no new policies are developed.
This would result in the world warming by 2.5°C by 2050
and more than 4°C by 2100 bringing irreversible change.
Transition risks would be limited, but physical risks
would become increasingly frequent and severe in the
longer term. This scenario was chosen as it provides an
indication of possible outcomes under a business as usual
scenario where current policies and climate trajectories
are maintained. Intergovernmental Panel on Climate
Change (IPPC) Representative Concentration Pathway
8.5 (a climate pathway which assumes gas emissions will
continue to rise throughout this century) and the Network
for Greening the Financial System (NGFS) Current Policies
Scenario (which assumes only currently implemented
policies are preserved) were used as inputs. The outputs
from this scenario are shown in the “Climate-related risks
and opportunities” table on pages 47 to 50.
• A net zero 2050 scenario that limits global warming
to 1.5°C by 2100 through stringent climate policies and
innovation which are introduced immediately. Under this
scenario net zero emissions are reached by around 2050.
Transition risks are greater in the short-term, but physical
risks are less severe than under the current policies
scenario. This scenario was chosen because it allows us
to model the impacts on our business that could occur
under a policy environment introduced to limit global
warming to 1.5°C. IPPC Representative Concentration
Pathway 2.6 (which assumes a rapid decline in greenhouse
gas emissions and zero emissions by 2100), International
Energy Authority’s (“IEA’s”) World Energy Outlook Net
Zero Energy 2050 (which assumes the global energy
sector will achieve net zero greenhouse gas emissions
by2050) and the NGFS Net Zero 2050 Scenarios (which
assumes global warming is limited to 1.5°C through
stringent climate policies and innovation) were used as
inputs. We do not anticipate that the new policies and
innovations required in this scenario will be introduced
rapidly enough to have a material impact on our business
over the period covered by our three-year financial plans.
We will be undertaking further work over the next twelve
months to understand longer-term climate-related impacts
under this scenario.
Climate risk management
WHSmith’s processes for identifying and
assessing climate-related risks andopportunities
WHSmith has a defined framework for identifying and
assessing climate-related risks which is integrated into our
company-wide processes for risk identification, prioritisation
and management. We identify and assess risks associated
with climate change across all transition risks (policy and
legal, technology, market changes and reputation) and
physical risks (both acute and chronic). Processes that help
identify climate-related risks and opportunities include:
• Monitoring changes in the external policy environment,
including existing and emerging legislation, and national
and international government announcements such as
those made at COP26 in November 2021;
• Observing market developments, such as advances
in technology that may reduce our operating costs,
or changes in consumer behaviour that may impact
sales of particular products or customer footfall in
certain locations;
• Evaluating changes in our cost base related to properties,
logistics or supply of goods that may be linked to climate-
related impacts.
We use these and other processes to identify risks relating
to climate change, and to determine their significance,
both individually and relative to other risks. A detailed
register is produced annually for climate-related risks and
opportunities, across short, medium and long-term time
horizons. This register then forms an integral part of the risk
registers and summary risk maps prepared by all business
functions as described in “Principal risks and uncertainties”
on pages 57 to 63.
Risks are assessed in relation to the severity of potential
business impact (on a scale from one to six) and the
likelihood of the business being impacted (low, medium or
high). This scoring is in line with other risks included in the
Group’s risk register. We consider business impact on the
basis of both financial impact and other less quantifiable
impacts such as those relating to our reputation, our
ability to respond to a particular risk, or the impact on the
wider environment or other stakeholders. In assessing the
likelihood of the business being impacted, we consider
factors such as whether similar risks have materialised in
the past and our ability to prevent the risk from happening.
This allows us to identify the more significant potential
risks, for more detailed financial assessment, as described
in “Climate strategy” (pages 46 to 50) and as included in
“Principal risks and uncertainties” (pages 57 to 63).
51WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
WHSmith’s processes for managing
climate-related risks and opportunities
Climate-related risks are managed in line with our overall risk
appetite to ensure appropriate responses are in place for
those risks. These responses may include accepting a risk
without any further action, mitigating or reducing the risk
with appropriate controls, transferring the risk (for example
to insurance providers) or stopping or modifying the activity
that gives rise to the risk. The decision as to which response
is appropriate depends on a number of factors, including the
size of the risk (in terms of impact and likelihood), the level
of resource that would be required for different responses,
the time frame over which a risk is likely to materialise and
the extent to which the risk level could be reduced by a
response. An integrated approach ensures we manage
climate-related risks within our overall risk appetite over
different time horizons.
Our processes for managing climate-related risks and
opportunities are undertaken at Group, business function
and individual property level. They include:
• A Group-wide policy framework which includes our
Environment Policy, Code of Business Conduct and
Responsible Sourcing Requirements for Suppliers;
• Operational procedures covering, for example, processes
relating to energy and fuel management;
• Emergency response plans, for example, for flood
management or for disruption to supply networks;
• Internal audit and investigation; and
• Annual attestation processes by senior managers of
business functions, joint ventures and franchise partners.
Senior management and the Board undertake regular
reviews of risk and opportunities relating to climate change
to ensure that any emerging issues that might impact
our strategy are appropriately identified and evaluated.
Significant climate-related issues form part of risk reports
to the Audit Committee, and the ESG Committee also
evaluates the annual update of the climate risk and
opportunity register and ensures appropriate responses
are in place. At an operational level, each business function
reviews its risk profile and risk responses throughout the
year to ensure climate-related risks and opportunities are
managed effectively.
Our internal audit team provides independent assurance of
the controls in place for significant risks across the business,
and this includes advice to senior management and the
Board on the adequacy and effectiveness of climate-related
risk management. For example, this year climate risk was
included in the internal audit of supply chain operations.
Integration of the climate-related risk
management process into WHSmith’s
overallriskmanagement
Our climate-related risk management processes follow
the overall approach for Group-wide risk management.
Climate-related risks and opportunities are considered
from a strategic and operational perspective to ensure we
maintain a comprehensive view of the different types of
climate-related impacts that we face and the different time
horizons in which they may affect us. Senior management
and the Board regularly review climate-related risks and
opportunities in line with other risks, to ensure a holistic
view and optimisation of risk mitigation responses that are
properly integrated into the relevant business activities.
Sustainability continued
52 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Metrics and targets
Metrics used by WHSmith to assess climate-related risks and opportunities in line with its strategy
andrisk management process
We use a number of different metrics to measure our climate-related impacts, evaluate progress against our targets and
monitor risks and opportunities. The metrics currently used are included below. We continue to evaluate the wider suite
ofmetrics recommended by TCFD in its guidance for all sectors and will report progress in next year’s report.
Metric 2022 value Link to risk or opportunity
Absolute Scope 1 emissions
Absolute Scope 2 emissions
Absolute Scope 3 emissions
1,609 tonnes CO
2
e
8,758 tonnes CO
2
e
292,000 tonnes CO
2
e
Reputation and market opportunities
GHG emissions intensity 7.4 Tonnes CO
2
e / £ revenue
2,352 Tonnes CO
2
e / sq foot
Reputation and market opportunities
Electricity and gas consumption 82,581 MWh Increased costs for energy andfuel
Electricity from renewable sources 53,231 MWh Increased costs for energy andfuel
Reputation and market opportunities
Suppliers with science based
targets in place
20 suppliers Reputation and market opportunities
GHG emissions from
third-party distribution
18.5 tonnes CO
2
e / pallet Reputation and market opportunities
Fuel consumption 1.54 million litres Increased costs for energy andfuel
Own brand wood and paper-based
products from sustainable sources
99.7 percent Increased demand for sustainable materials
Waste diverted from landfill 99 percent Reputation and market opportunities
Remuneration: Climate-related performance indicators formed part of this year’s Annual Bonus scorecard for the Group Chief
Executive and CFO/COO and will form part of the Long-Term Incentive Plan awards to be granted in the financial year ending
31 August 2023 (see “Remuneration Committee Report” on pages 83 to 104).
Carbon pricing: The main carbon taxes affecting our business are the UK Climate Change Levy which is included in the cost
of gas and electricity used to power our buildings and the UK Fuel Duty which is included in the cost of diesel and petrol
used for the distribution of our goods. These carbon taxes are part of energy and fuel costs which we monitor on an ongoing
basis. We have also included carbon pricing in our scenario analysis, using projections from models by the IEA and NGFS as
described in “Climate strategy” on page 51.
Energy and fuel consumption
We use energy to light and heat our stores, distribution centres and head offices. We have been working for many years to
reduce the amount of energy we use, recognising opportunities to reduce our overall GHG emissions and operating costs
for the business. Our energy consumption in 2022 was 82,581 MWh (2021: 78,449*), a small increase rise of 5 per cent over
the previous year. A decrease in gas consumption at our Swindon site was offset by an increase in electricity consumption in
stores as a result of our business returning to normal activity levels following Covid-19.
Energy reduction measures over the past few years have included:
• Further development of our building management system to monitor energy consumption across stores and adjustment of
energy settings for lighting, heating and air conditioning to minimise energy;
• Replacement of LED lights coming to the end of their life, with new more energy-efficient ones;
• Installation of new boiler controls for gas heating systems to further reduce consumption; and
• The introduction of new fridges into our Travel stores with doors which prevent cold air losses, increasing energy efficiency.
Our fuel consumption increased this year as operations returned to normal post Covid-19, but carbon efficiency has improved
over the past decade to 18.5 kg CO
2
e / pallet for this financial year.
53WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Energy and fuel use
2022 2021 2020
Energy use (buildings) MWh
UK 62,048 64,737 86,782
Non-UK 20,533 13,712* 17,301*
Total 82,581 78,449* 104,083*
Energy use (buildings) MWh
Gas 8,817 14,673 32,765
Grid electric (renewable) 53,231 50,064 0
Grid electric (non-renewable) 20,533 13,712* 71,318*
Total 82,581 78,449* 104,083*
Fuel use (litres) 1.54 million 1.08 million 1.48 million
Scope 1, Scope 2, and Scope 3 GHG emissions, and the related risks
Global Scope 1 and 2 emissions (tonnes CO
2
e)
2022 2021 2020
Scope 1 emissions
From natural gas to heat stores, offices and distribution centres. 1,609 2,687 6,025
Percentage of emissions from UK-based operations. 100% 100% 100%
Scope 2 emissions (market based)
From electricity purchased to power stores, offices and distribution centres. 8,758 6,528* 27,047*
Percentage of emissions from UK-based operations. 0% 0% 68%*
Total Scope 1 and 2 emissions (market based) 10,367 9,215* 33,072*
Percentage of emissions from UK-based operations. 16% 29%* 74% *
Market based carbon intensity metric (revenue)
(tonnes CO
2
e per £m revenue) 7.4 10.4* 32.4*
Market based carbon intensity metric (floorspace)
(tonnes CO
2
e per sq foot) 2,352 2,014* 7,177*
Scope 2 emissions (location based)
From electricity purchased to power stores, offices and distribution centres. 18,625 17,013* 21,005*
Energy consumed from activities for which the company is responsible, including combustion of fuel, comprises only gas which is calculated from metered billing data. Energy
consumed from purchased electricity is calculated from metered billing data.
Emissions have been calculated using the methodology defined in the GHG Protocol Corporate Standard. We use the market based method for Scope 2 for our total emissions
to account for purchasing of low-carbon electricity. Our reporting boundary includes our operations in the UK and our directly run international businesses where we have
operational control, consistent with those included in our consolidated financial statements. We engaged Corporate Citizenship to provide independent limited assurance of
the energy and emissions data in the tables above in accordance with assurance standards ISAE 3000 and 3410. Further data and full details of the scope and methodology for
reporting energy, fuel use and carbon emissions and Corporate Citizenship’s full assurance statement is available in our Sustainability report 2022.
* Values have been restated to include data from all US stores in line with the rest of our reporting.
Our total Scope 1 and 2 market based emissions increased slightly this year to 10,367 tonnes CO
2
e (2021: 9,215*). The increase
was mainly a result of a larger number of stores re-opening this year following the Covid-19 pandemic. Emissions reductions
were made through investments in more efficient lighting, better gas control systems and changes to refrigeration units.
One hundred per cent of the electricity that we purchased for our buildings in the UK came from a certified renewable supply.
For directly sourced electricity, this was in the form of a renewable electricity supply contract. For some properties, we rely
on electricity provided by landlords, some of which comes from renewable sources and some from non-renewable electricity
supply contracts. For any landlord-supplied electricity which did not originate from renewable supplies, wepurchased
certificates under the Renewable Guarantees of Origin scheme. The certificates were retired on our behalf to avoid
double-counting.
Emissions from our UK operations were 1,609 tonnes CO
2
e (2021: 2,687). These residual emissions arise from the combustion
of natural gas and to date, we have been unable to remove them completely as alternative technologies appropriate for
our buildings do not yet exist. As an interim measure, we have undertaken mitigation action to compensate for these
residual emissions, by purchasing carbon reduction certificates from a Verified Carbon Standard afforestation scheme.
The afforestation acts as a carbon sink for an equivalent amount of emissions to the residual emissions from our gas supply.
Sustainability continued
54 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Global Scope 3 emissions (tonnes CO
2
e)
Scope 3 category 2022 2021 2020
1. Purchased goods and services and capital goods and services 210,000 178,000*** 404,000
2. Capital goods and services Emissions from capital goods and
services have been included in our
purchased goods and services category.
3. Fuel and energy-related activities** 3,700* 3,300*
/
*** 4,800*
/
***
4. Upstream transport and distribution** 23,000 14,500 16,800
5. Waste generated in operations 90* 200* 250*
6. Business travel 1,440* 640* 940*
7. Employee commuting 16,900 14,500 10,600
8. Upstream leased assets Included in Scope 1 and 2 emissions.
9. Downstream transport and distribution Not relevant for our business.
10. Processing of sold products Not relevant for our business.
11. Use of sold products 1,700 1,000 1,200
12. End of life treatment of sold product 30,600 19,300*** 22,300
13. Downstream leased assets Not relevant for our business.
14. Franchises 4,300* 3,500*
/
*** 4,500*
/
***
15. Investments Not relevant for our business.
Total Scope 3 emissions 292,000 235,000 465,000
Scope 3 emissions have been calculated in accordance with the Corporate Value Chain (Scope 3) Accounting and Reporting Standard. Our reporting boundary includes our
operations in the UK and our directly run international businesses where we have operational control, consistent with those included in our consolidated financial statements..
* We engaged Corporate Citizenship to provide independent limited assurance of the emissions data in the table above as marked with * in accordance with assurance
standards ISAE 3000 and 3410.
** Fuel-related emissions have been restated to include well to tank emissions.
*** Values have been restated following changes in calculation methodology. Full details are available in our Sustainability report 2022.
Further data and full details of the scope and methodology for reporting missions and Corporate Citizenship’s full assurance statement is available in our Sustainability
report2022.
The majority of our Scope 3 emissions are from Category 1: Purchased Goods and Services, Category 4: Upstream Transport
and Distribution and Category 12: End of Life Treatment of Sold Product. Emissions for Categories 1, 4 and 12 increased this
year as more of our stores re-opened following the Covid-19 pandemic and our product purchasing and sales returned to
pre-Covid levels.
Targets used by WHSmith to manage climate-related risks and opportunities and performance
Following the publication of the SBTi Net-Zero Standard in October 2021, we reviewed our approach to climate change
mitigation and revised our greenhouse gas reduction commitments. Earlier this year, we announced our new overall climate
target to become a net zero emissions business by 2050. Our definition of net zero means an intention to reduce Scope
1, 2 and 3 emissions by at least 90% by 2050 (from a 2020 baseline) before neutralising any residual emissions. Scope 3
emissions within this target include emissions from Purchased Goods and Services and Upstream Transport and Distribution
which represent the majority of our carbon footprint.
We recognise that we will be unable to reach our 2050 net zero target without the involvement of others, including
governments, suppliers, customer and landlord partners. We were a founding member of the British Retail Consortium’s
Climate Action Roadmap which was established to bring together retailers, suppliers, government, and other stakeholders,
and to support customers to deliver the UK retail industry’s ambition to be net zero by 2040.
As a first step to our long-term goal, we have set near term targets to help track our performance against our overall climate
target over time. The following targets have been validated by the SBTi as follows:
• We will reduce absolute Scope 1 and 2 GHG emissions by 80% by 2030 from a 2020 base year; and
• 75% of our suppliers (by emissions) covering purchased goods and services and upstream transport and distribution
services will have science based targets in place by 2027.
We have also set targets in relation to deforestation (page 39).
55WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Progress against targets
2020 baseline 2022 Progress
Reduce Scope 1 and 2 GHG emissions
by80% by 2030
33,072 tonnes CO
2
e 10,367 tonnes CO
2
e (69% reduction)
75% of suppliers by emissions tohave
science based targets inplace by 2027
Unknown Twenty of our largest suppliers now have
near-term targets validated by the SBTi.
Weintend to establish the systems to
calculate the proportion of emissions from
these suppliers during the next financial year
All forestry materials will be from
recycledor certified sources in
WHSmith-branded products
99 per cent >99.7 per cent
On-track to meet target
Non-financial reporting statement
The sustainability section of the Annual report on pages 37 to 56 and the WHSmith Sustainability report contain a wide range
of information about the environment, employees and social matters. The table below sets out where information on non-
financial reporting matters can be found within our Annual Report and Accounts. Our full Sustainability report is available on
our website at whsmithplc.co.uk/sustainability. The due diligence arrangements for each topic are included in the respective
policy documentation on our website.
Non-financial matter Policies and standards which govern our approach Pages
Business model Business model
Key market drivers
Our strategy
Key Performance Indicators
Principal risks and uncertainties
6 and 7
12
14 and 15
16 and 17
57 to 63
Environmental matters Section 172(1) statement
Sustainability – planet
Climate-related disclosures
Principal risks and uncertainties
30 to 36
39
44 to 56
57 to 63
Colleagues Section 172(1) statement
Sustainability – people
Directors’ remuneration report
30 to 36
40 to 42
83 to 104
Social matters Section 172(1) statement
Sustainability – communities
Principal risks and uncertainties
30 to 36
43
57 to 63
Respect for human rights Section 172(1) statement
Sustainability – people
Principal risks and uncertainties
30 to 36
42
57 to 63
Anti-corruption and anti-bribery matters Sustainability – Responsible business
Principal risks and uncertainties
38
57 to 63
Non-financial KPIs Key Performance Indicators – Non-financial
Sustainability
17
37 to 56
Principal risks and uncertainties Climate-related disclosures
Principal risks and uncertainties
44 to 56
57 to 63
Sustainability continued
56 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Risk management framework
Our risk management framework is designed so that
material business risks throughout the Group can be
identified, assessed and effectively managed. This framework
incorporates the following core elements:
Identify – Risk registers compiled by each business function
– Risk mapping to identify emerging issues
Assess – Determining the likelihood of risk occurrence
– Evaluating the potential impact
Mitigate – Agreeing actions to manage the identified risks
– Ensuring control measures are in place
Monitor – Reviewing the effectiveness of controls
– Maintaining continued oversight and tracking
Risk monitoring responsibilities
Board and Audit Committee
Overall responsibility for risk management oversight rests
with the Board, exercised through the delegated monitoring
by the Audit Committee. Day to day management of risk is
embedded within the business through a layered approach,
as summarised below.
Business Risk Committees and
ExecutiveManagement
Formal Risk Committees are held on a quarterly basis
within each Business Operating Division, comprising
members of each Divisional Executive team and Senior
Management, the CFO/COO and Group Risk and Audit
Director. These Business Risk Committees act as a forum to
review the updated risk registers and reports on ongoing risk
monitoring activity undertaken by Internal Audit, and other
corporate oversight functions.
All principal business functions compile risk registers to
identify key risks, assess them in terms of their likelihood
and potential impact, and determine appropriate control
strategies to mitigate the impact of these risks, taking
account of risk appetite.
Operational Audit, Loss Prevention and Second
Line Oversight Functions
These functions help to monitor compliance with internal
control procedures across stores, distribution centres and
other areas of the business, encompassing our ongoing
programme of store audits and stocktaking results, and help
to identify and monitor further areas of emerging risks.
Internal Audit
The Audit function facilitates the ongoing update of
corporate and business function risk registers, and conducts
an independent programme of activity in order to evaluate
and test the working of internal controls in relation to the
Group’s systems and processes. The results of this ongoing
programme are shared with the Business Risk Committees
and the Group Audit Committee.
Annual review of the effectiveness
of internal control
During the year, the Board reviewed the effectiveness of
the Group’s risk management and internal controls systems.
This review included the discussion and review of the
risk registers and the internal controls across all business
functions, as part of an annual exercise facilitated by the
Internal Audit team. During the year, the Board also received
presentations from management on specific risk areas such
as cyber risk, international expansion, and the ongoing risk
monitoring processes and appropriate mitigating controls.
Principal risks and uncertainties
M
o
n
i
t
o
r
I
d
e
n
t
i
f
y
A
s
s
e
s
s
M
i
t
i
g
a
t
e
57WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Board review of principal risks
anduncertainties
The Board has undertaken a robust assessment of the
principal risks and uncertainties facing the Group, including
those that would threaten its business model, future
performance, solvency or liquidity. Those principal risks are
described on the following pages, along with explanations
of how they are managed and mitigated. The Group
recognises that the profile of risks constantly changes
and additional risks not presently known, or that may be
currently deemed immaterial, may also impact the Group’s
business objectives and performance. Our risk management
framework is therefore designed to manage rather than
eliminate the risk of failure to achieve business objectives,
and, as such, can only provide reasonable and not absolute
assurance against these principal uncertainties impacting on
business performance.
Changes in principal risks compared
tolastyear
The table on the following page summarises the principal
risks and uncertainties agreed by the Board. The table
incorporates further information relating to the movement in
the level of these risk exposures during the year, to highlight
whether, in our view, exposure to each of the principal risks
isincreasing, decreasing or remains broadly the same.
Continuing risks of Covid-19
The Covid-19 pandemic has affected all aspects of the
business and the markets in which we operate. We believe
that the overall level of risk has decreased since last year
due to the roll-out of the Covid-19 vaccine and the easing
of restrictions in many of the countries in which we operate.
Whilst we believe that we are now well prepared for the
introduction of new restrictions, there remains a risk that the
Group could be negatively impacted by the emergence of
new variants of Covid-19 or other pandemics. As a result of
this reduction in risk, we have removed Covid-19 as a specific
principal risk and have chosen to reflect the potential impact
of it to the Group within our other principal risk headings to
the extent that these may generate further risk of business
interruption, disruption to our supply chain, and wider
economic and market uncertainty.
Conflict in Ukraine
While we have been saddened by the ongoing conflict
in Ukraine, WHSmith has no direct operations in Ukraine,
Russiaor Belarus, nor do we have any product suppliers
located in these countries. Like many businesses we
anticipate that the continuation and potential escalation of
this conflict will impact us through increasing inflationary
pressures from rising fuel and energy prices and disruption
to our supply chain caused by transport disruption.
These risks will continue to be monitored through our
ongoing risk management framework and principal
risk reporting.
Emerging risks
Our risks will continue to evolve in response to future events
and new challenges, where further emerging risks may
develop that could materially impact the business in the
future. Our Risk Forums and Monitoring Framework seek
toidentify such potential changes in our risk landscape.
Principal risks and uncertainties continued
58 WH Smith PLC Annual Report and Accounts 2022
Strategic report
The table below summarises our other continuing principal risks and uncertainties.
Key: Change in risk level
higher no change lower
Risk/description Mitigation Change in risk level
Economic, political, competitive and market risks
The Group operates in highly competitive
markets and in the event of failing to
compete effectively with travel, convenience
and other similar product category retailers,
this may affect revenues obtained through
our stores. Failure to keep abreast of
market developments, including the use
of new technology, could threaten our
competitive position.
Factors such as the economic climate,
levels of household disposable income,
seasonality of sales, changing demographics
and customer shopping patterns, and
raw material costs could impact on
profit performance.
The Group may also be impacted in the UK
and internationally, by any future pandemics,
escalation of global conflict, political
developments such as regulatory and tax
changes, increasing scrutiny by competition
authorities, and other changes in the general
condition of retail and travel markets.
The Group’s performance is dependent on levels of
consumer confidence and upon effectively predicting
and quickly responding to changing consumer
demands, both in the UK and internationally. The
Group conducts customer research to understand
current demands and preferences in order to help
translate market trends into saleable merchandise and
store formats.
The Group has continued to monitor the economic
issues caused by the conflict in Ukraine and its impact
on the economy. We do this through our membership
of industry bodies who provide insight and updates in
relation to these issues.
The Group actively monitors the impact of inflation
on its cost base and supply chain and will incorporate
hedging strategies where appropriate and invest
to increase productivity and efficiency to mitigate
these affects.
Uncertainties relating
to the impacts
from new Covid-19
variants; continued
turbulence from
geopolitical tensions
as a result of the
conflict in Ukraine;
and increasing
inflation may continue
to impact our supply
chain and cost base,
customer spending
and shopping
habits, and create
economic uncertainty.
Brand and reputation
The WHSmith brand is an important asset
and failure to protect it from unfavourable
publicity could materially damage its
standing and the wider reputation of the
business, adversely affecting revenues.
As the Group continues to expand its
convenience food offer in travel locations,
associated risks include compliance
with food hygiene and health and safety
procedures, product and service quality,
environmental and ethical sourcing and
associated legislative and regulatory
requirements, including the latest allergen
and calorie labelling regulations.
The Group monitors the Company’s reputation, brand
standards and key service and compliance measures
to ensure the maintenance of operating standards
and regulatory compliance across all our operations.
We undertake regular customer engagement surveys
to understand and adapt our product, offer and
store environment.
We operate a framework for monitoring compliance
with all regulatory, hygiene and safety standards,
encompassing supplier and store audits and clearly
defined sourcing policies. We have a programme
in place to manage any ESG risks and ensure the
reputation of the brand is protected.
Key suppliers and supply chain management
The Group has agreements with key
suppliers in the UK, Europe and the Far East
and other countries in which it operates.
The interruption or loss of supply of core
category products from these suppliers to
our stores may affect our ability to trade.
Quality of supply issues may also impact the
Group’s reputation and impact our ability
to trade.
Further escalation of geopolitical risks
may cause disruption to the supply chain
which may necessitate the diversification
of sourcing own brand products from the
Far East.
The Group conducts risk assessments of all its
key suppliers to identify alternatives and develop
contingency plans in the event that any of these key
suppliers fail.
Suppliers are required to comply with the conditions
laid out in our Supplier Code of Conduct that covers
areas such as production methods, employee working
conditions and quality control.
The Group has contractual and other arrangements
with numerous third parties in support of its business
activities. None of these arrangements alone are
individually considered to be essential to the business
of the Group.
Uncertainties relating
to the impact
of Covid-19 and
geopolitical risks on
our product sourcing
and supply chain.
59WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Risk/description Mitigation Change in risk level
Store portfolio
The quality and location of the Group’s store
portfolio are key contributors to the Group’s
strategy. Retailing from a portfolio of good
quality real estate in prime retail areas and
key travel hubs at commercially reasonable
rates remains critical to the performance of
the Group.
All of High Street’s stores are held under
operating leases, and consequently the
Group is exposed, to the extent that any
store becomes unviable as a result of rental
costs. Most Travel stores are held under
concession agreements, on average for five
to ten years, although there is no guarantee
that concessions will be renewed or that
Travel will be able to bid successfully for
new contracts.
The Group undertakes research of key markets and
demographics to ensure that we continue to occupy
prime sites and identify appropriate locations to acquire
new space.
We maintain regular dialogue and good relationships
with all our key landlords. The Group also conducts
customer research and analysis to gather feedback
on changing consumer requirements, which is shared
with landlords as part of this ongoing relationship
management programme.
Business interruption
An act of terrorism or war, or an outbreak
of a further pandemic disease, could reduce
the number of customers visiting WHSmith
outlets, causing a decline in revenue and
profit. In the past, our Travel business has
been impacted by geopolitical events such
as major terrorist attacks, which have led
to reductions in customer traffic. Closure of
travel routes both planned and unplanned,
such as the disruption caused by natural
disasters or weather-related events, may also
have a material effect on business.
The Group operates from a number of
distribution centres and the closure of
any one of them may cause disruption to
the business.
In common with most retail businesses, the
Group also relies on a number of important
IT systems, where any system performance
problems, cyber risks or other breaches in
data security could affect our ability to trade.
The Group has a framework of operational procedures
and business continuity plans that are regularly
reviewed, updated and tested. The Group also has a
comprehensive insurance programme covering our
global assets, providing cover ranging from property
damage and product and public liability, to business
interruption and terrorism. Back up facilities and
contingency plans are in place and are reviewed and
tested regularly to ensure that business interruptions
are minimised.
The Group’s IT systems receive ongoing investment to
ensure that they are able to respond to the needs of
the business. Back-up facilities and contingency plans
are in place and are tested regularly to ensure that data
is protected from corruption or unauthorised use.
Risks of interruptions
occurring as a result
of new Covid-19
variants or escalation
of geopolitical risks
could impact our
global operations
andsupply chain.
Reliance on key personnel
The performance of the Group depends on
its ability to continue to attract, motivate
and retain key head office and store staff.
The retail sector is very competitive and the
Group’s personnel are frequently targeted by
other companies for recruitment.
The Group reviews key roles and succession plans.
The Remuneration Committee monitors the levels
and structure of remuneration for directors and
senior management and seeks to ensure that they
are designed to attract, retain and motivate the key
personnel to run the Group successfully.
International expansion
The Group continues to expand
internationally. In each country in which the
Group operates, the Group may be impacted
by political or regulatory developments,
or changes in the economic climate or the
general condition of the travel market.
The Group utilises three business models to manage
risk in our overseas locations: directly-run, joint venture
and franchise.
The Group uses external consultants to advise on
compliance with international legislative and regulatory
requirements, to monitor developments that may
impact our operations in overseas territories and to
conduct reputational due diligence on potential new
business partners. Our geographical spread of activity
mitigates against the material concentration of risk in
any one area.
Increasing risk arises
from the continuing
growth of our
international business
into new countries
and increasing
geopolitical threats.
Principal risks and uncertainties continued
60 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Risk/description Mitigation Change in risk level
Cyber risk and data security
The Group is subject to the risk of systems
breach or data loss from various sources
including external hackers or the infiltration of
computer viruses. Theft or loss of Company
or customer data or potential damage to
any systems from viruses, ransomware or
other malware, or non compliance with data
protection legislation, could result in fines and
reputational damage to the business that
could negatively impact our sales.
The Group employs a framework of IT controls to
protect against unauthorised access to our systems
and data, including monitoring developments in
cyber security. This control framework encompasses
the maintenance of firewalls and intruder detection,
encryption of data, regular penetration testing
conducted by our appointed external quality assurance
providers and engagement with third party specialists,
where appropriate.
We have a Steering Group overseeing our approach
and response to cyber risk, and monitoring our
programme of ongoing compliance with the Payment
Card Industry Data Security Standard and GDPR.
Continuing increase
in number of external
reported cyber-attacks.
Treasury, financial and credit risk management
The Group’s exposure to and management
of capital, liquidity, credit, interest rate
and foreign currency risk are analysed
further in Note 21 on page 156 of the
financial statements.
The Group also has credit risk in relation to
its trade, other receivables and sale or return
contracts with suppliers.
The Group is exposed to interest
rate changes and movements in
foreign currencies.
The Group’s Treasury function seeks to reduce
exposures to interest rates, foreign exchange and other
financial risks, to ensure sufficient liquidity is available
to meet foreseeable needs and to invest cash assets
safely and profitably.
The Group does not engage in speculative trading
in financial instruments and transacts only in relation
to underlying business requirements. The value of
any deposit that can be placed with any approved
counterparty is based on short-term and long-term
credit ratings and, in accordance with the Group’s
treasury policy, it is limited to a maximum of £75m for
each approved counterparty.
The Group’s Treasury policies and procedures are
periodically reviewed and approved by the Audit
Committee and are subject to Group Internal
Audit review.
The Group has a committed multi-currency revolving
credit facility of £250m provided by a syndicate of five
lending banks, which is undrawn and due to mature in
April 2025.
The Group also has a £327m Convertible Bond at a
fixed coupon rate of 1.625 per cent which expires in
May 2026.
Environment and sustainability
Our investors, customers and colleagues
expect us to conduct our business in a
responsible and sustainable way. Climate
change is now recognised as a global
emergency. Failure to deliver our stated
sustainability commitments could damage
our reputation and introduce higher
costs and impact our ability to meet
strategic objectives.
Our sustainability strategy, Our Journey to a Better
Business, sets out policies, objectives and action plans
to address our key issues. It is overseen by Board and
Executive level committees. We have set a target to
be net zero by 2050 and are taking action across the
business to increase our climate resilience. We continue
to focus on more environmentally-responsible sourcing
practices, reducing and redesigning packaging where
possible and ensuring traceability forforestry products.
61WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Assessing the impact of our principal risks on our strategic priorities
The table below maps our strategic priorities with our principal risks, to demonstrate which of these risks could have an
impact on the ongoing achievement of these strategic priorities.
Economic,
political,
competitive
and market
risks
Brand and
reputation
Key suppliers
and supply
chain
management
Store
portfolio
Business
interruption
Reliance
on key
personnel
International
expansion
Treasury,
financial and
credit risk
management
Cyber risk
and data
security
Environment
and
sustainability
Travel
Space growth
ATV growth
Category
development
Cost and
cash management
High Street
Maintain profitability
and cash generation
of our High Street
and digital businesses
Focused capital
allocation
Viability statement
In accordance with the UK Corporate Governance Code
2018, the directors are required to issue a “viability
statement” declaring whether the directors believe the
Company is able to continue to operate and meet its
liabilities over a period greater than 12 months.
In assessing the Group’s viability, the Board has considered
current and historical performance, the Group’s current
financial position, the business model and strategy, our
approach to risk management and our principal risks and
uncertainties and mitigating factors (see pages 57 to 62).
The Group’s business model and strategy is presented in
the Strategic report on pages 2 to 29. The Strategic report
describes the Group’s plans at both Group and operating
division level. These plans consider the Group’s cash flows,
committed funding liquidity positions, forecast future
funding and key financial metrics.
Current financing
The Group’s financing arrangements comprise a £250m
multi-currency revolving credit facility (“RCF”) maturing in
April 2025, and a term loan of £133m, also maturing in April
2025. As at 31 August 2022 the Group had not drawn down
on the RCF, and had £101m cash on deposit. In April 2021 the
Group also issued £327m convertible bonds with a maturity
of April 2026.
The covenants on the above facilities are tested half-yearly.
The covenant test at 31 August 2022 is based on minimum
liquidity. The covenant tests from 28 February 2023 onwards
are based on fixed charges cover and net borrowings.
Principal risks and uncertainties continued
62 WH Smith PLC Annual Report and Accounts 2022
Strategic report
Assessment period
In determining the appropriate timeframe for assessing the
Group’s viability the Board has considered the impact of
Covid-19 and challenges in the macroeconomic environment
including the cost of living impact and historically high
inflation rates.
A three year period is considered the most appropriate
timeframe for the Group’s viability assessment for
several reasons:
• It is consistent with the Group’s financial planning cycle,
management incentive schemes and medium term
financing considerations.
• The Group updates its three year plan annually, taking into
consideration the identified principal and emerging risks
over this timeframe. The three year plan was approved
by the Board in June 2022, and the Budget for 2023 was
approved by the Board in September 2022.
Assessment of viability
In making the viability assessment, the directors have
modelled a number of scenarios for the three year period
to 31 August 2025. As disclosed in the Strategic report
on pages 57 to 62, the Board has undertaken a robust
assessment of the emerging and principal risks facing the
Group, including those that would threaten its business
model, future performance, solvency or liquidity. The process
of mitigating and managing these risks is described on
pages 57 to 62 of the Strategic report.
Within the viability scenario modelling we have applied an
assumption that we will be able to refinance external debt
and renew our revolving credit facilities as they become due.
The base case scenario is consistent with the Board
approved 2023 Budget and the three year plan, which takes
into consideration uncertainties regarding the impact of
Covid-19 and challenges in the macroeconomic environment.
Under this scenario the Group has significant liquidity and
comfortably complies with all covenant tests during the
three year assessment period.
The base case forecasts have been subject to stress-testing,
which models the impact of several “severe but plausible”
downside scenarios, based on the identified principal risks
covering a range of operational and financial impacts.
The aim of this modelling is to understand the circumstances
that could lead to the viability of the Group being
threatened, with particular focus given to those risks which
would have the most material and pervasive impacts.
• Economic downturn
Representing a fall in demand and cost inflation,
in the context of inherent uncertainties due to the
impact of Covid-19 and other challenges in the
macroeconomic environment.
We have applied the same assumptions modelled as
part of the going concern assessment (refer to page 121)
extrapolated across the remainder of the three year
viability assessment period. This scenario assumes a
10 per cent reduction in revenue versus base case across all
our businesses (Travel UK, North America, Rest of the World
and High Street). Apart from an equal reduction in turnover
rents in our Travel businesses, we have not assumed any
decrease in other variable costs.
Further scenarios have been modelled taking into
consideration other key principal risks to the Group,
including the:
• Loss of a key contract in Travel
• Supply chain disruption
• Impact of a data breach and potential fines
• Increases in interest rates
• Impact of increased carbon pricing
We consider likelihood of these scenarios occurring
concurrently to be improbable and are confident in the
Group’s ability to apply mitigating actions in such a scenario.
Mitigating actions that would be available to the Group in
the above scenario include reduction or deferral of non-
committed capital expenditure, reductions in discretionary
operating spend, reduction or suspension of dividends,
restructuring of operations and renegotiation of facilities.
The scenario analysis has not taken such mitigating actions
into account.
The anticipated costs of our net zero climate change
commitments have been incorporated within the base case
model within the next three years. As set out in our climate-
related disclosures on pages 44 to 56, the impact on the
Group’s financial performance and position is not expected
to be material in the short term, however we have modelled
a scenario related to the potential impact of increased
carbon pricing within the assessment period.
Conclusion
Taking account all of the above matters, the Group’s current
financial performance and position, and the principal risks,
the directors have a reasonable expectation that the Group
will be able to continue in operation and meet its liabilities as
they fall due over the viability assessment period.
This Strategic report was approved by the Board on
10 November 2022.
On behalf of the Board
Carl Cowling
Group Chief Executive
10 November 2022
63WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
1 2 3 4
Directors’ biographies
2. Carl Cowling
Group Chief Executive
Date of appointment: 26 February 2019. Carl was
appointed as Group Chief Executive on 1 November 2019.
Committee membership: ESG Committee and
Nominations Committee.
Skills and experience: Carl has considerable retail
experience and has been instrumental in the
development and execution of the Company’s strategy.
His strong leadership and strategic expertise enable
him to lead the Group and create shareholder value.
He joined WHSmith as Managing Director, Travel in
November 2014. In 2017, he was appointed Managing
Director, High Street. Prior to joining WHSmith, Carl was
Managing Director of Global partnerships at Carphone
Warehouse and previously spent over a decade at
Dixons where he held the roles of Ecommerce Director,
Commercial Director and Managing Director of the
airport retailing business, Dixons Travel.
3. Robert Moorhead
Chief Financial Officer and Chief Operating Officer
Date of appointment: 1 December 2008.
Skills and experience: Robert has over 25 years of retail
and financial management experience, which has proved
invaluable in his role as Chief Financial Officer and Chief
Operating Officer. He has a deep understanding of the
Group’s businesses and strategy and has a strong track
record of creating shareholder value. He is a Chartered
Accountant and joined WHSmith in 2004 as Retail
Finance Director. He is a non-executive director and Chair
of the Audit Committee of The Watches of Switzerland
Group PLC. Previously, he was Group Finance Director at
Specsavers Optical Group and Finance and IT Director of
World Duty Free Europe. He also held a number of roles
at B&Q and Kingfisher Group. He started his career at
Price Waterhouse.
4. Annette Court
Non-executive director and Chair Designate
Date of appointment: 1 September 2022. Annette will
beappointed as Chair on 1 December 2022.
Committee membership: Member of the Nominations
Committee. Annette will also become Chair of the
Nominations Committee on 1 December 2022.
Skills and experience: Annette has a proven track record
as a Chair of a publicly quoted company and brings
a wealth of experience from her Board appointments
and has a strong background in financial services and
technology. She is currently chair of Admiral Group plc
and a non-executive director of Sage Group plc. She was
previously the CEO of Europe General Insurance for
Zurich Financial Services and the CEO of Direct Line
Group (formerly RBS Insurance). She has also been
a member of the Board of the Association of British
Insurers (ABI).
1. Henry Staunton
Chairman
Date of appointment: 1 September 2010. Henry was
appointed as Chairman on 1 September 2013. Henry will
step down as Chairman on 30 November 2022.
Committee membership: Chair of the Nominations
Committee and a member of the ESG Committee and
Remuneration Committee.
Skills and experience: Henry brings a breadth of
experience and leadership in both executive and non-
executive roles. He has extensive finance, media and
retail expertise and is Chairman of Capital and Counties
Properties PLC. He was previously the Finance Director
of Granada and ITV, Chairman of Ashtead Group,
Phoenix Group Holdings and Vice Chairman of Legal
andGeneral PLC.
Ian Houghton is Company Secretary and Legal Director
and was appointed in September 1998.
64 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
6 75 8 9
8. Marion Sears
Non-executive director
Date of appointment: 1 February 2022.
Committee membership: Chair of the Remuneration
Committee and a member of the Audit Committee,
ESGCommittee and Nominations Committee.
Skills and experience: Marion has financial and
retail expertise. Marion had a career in the City as an
analyst and subsequently in investment banking and
international M&A. Marion has extensive board and
remuneration committee experience as she has served
on a number of private and public company boards as
a non-executive director. Marion is currently a non-
executive director at Dunelm Group PLC, abrdn New
Dawn Investment Trust PLC and Keywords Studios PLC.
Marion is also a Member of Chapter Zero, the Directors’
Climate Forum, and a regular attendee of its events.
5. Kal Atwal
Non-executive director
Date of appointment: 1 February 2021.
Committee membership: Chair of the ESG Committee
and a member of the Audit Committee, Nominations
Committee and Remuneration Committee.
Skills and experience: Kal has substantial marketing
and digital expertise. She spent 16 years at BGL Group
and held several roles, including Founding Managing
Director of comparethemarket.com and Group Director
responsible for brand-led businesses, group strategy and
corporate communications. Kal was also Chair of Simply
Cook prior to its sale to Nestlé. Kal is a non-executive
director at Royal London Group, Admiral Financial
Services, a subsidiary of Admiral Group Plc, Whitbread
PLC and a board advisor for Simply Cook Limited.
7. Simon Emeny
Non-executive director
Date of appointment: 26 February 2019.
Committee membership: Senior Independent Director
and a member of the Audit Committee, ESG Committee,
Nominations Committee and Remuneration Committee.
Skills and experience: Simon has a wealth of consumer-
facing experience, including transport hub sites, and
brings this broad range of skills and commercial
expertise to the Board and its Committees. He is Group
Chief Executive of Fuller, Smith & Turner PLC, a role he
has held since 2013. Simon was previously the Senior
Independent Director of Dunelm Group PLC.
9. Maurice Thompson
Non-executive director
Date of appointment: 26 February 2019.
Committee membership: Member of the Audit
Committee, ESG Committee, Nominations Committee
and Remuneration Committee.
Skills and experience: Maurice has substantial Board
and financial expertise, with over 30 years of experience
in the international banking industry. He is able to draw
upon his extensive knowledge of financial and strategic
experience to assist the Board and its Committees.
He previously held the position of Chief Executive of
Citibank in the UK.
6. Nicky Dulieu
Non-executive director
Date of appointment: 9 September 2020.
Committee membership: Chair of the Audit Committee
and a member of the ESG Committee, Nominations
Committee and Remuneration Committee.
Skills and experience: Nicky has substantial financial
and retail expertise. She trained as an accountant and
held various strategic and financial roles within Marks
& Spencer Group plc over a 23-year period. In 2006,
Nicky joined the Board of Hobbs Limited as Chief
Operating Officer and Finance Director and was Chief
Executive from 2008 until 2014. With her finance and
retail expertise, she is a valuable member of the Board
and Chair of the Audit Committee. She is a non-executive
director at Redrow Plc, The Unite Group PLC and
Adnams Plc.
Previous directors who served during the financial year
ended 31 August 2022: Annemarie Durbin stepped down
as a director of the Company on 19 January 2022.
65WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
read about our engagement with investors on page 33,
withour customers on page 32, with our employees on
page 31 and community involvement on page 35 and our
approach to rewarding our workforce in the Remuneration
report on page 89.
There are a number of effective employee engagement
processes in place across the Group, including the employee
engagement survey and employee forums. Simon Emeny
is the designated non-executive director with responsibility
for workforce engagement. He attended a number of
employee forums throughout the year which enabled
him to engage directly with employees on a wide range
of subjects, including agile working, remuneration and
career development. Simon Emeny met the Group People
Director to review the outcomes from the engagement
survey. Marion Sears, Chair of the Remuneration
Committee, also attended a number of forums to explain
and answer questions on the Company’s approach to
remuneration, including executive pay. Feedback relating
to workforce engagement has been reported to the Board
and Committees.
Section 172 of the Companies Act 2006 (the “Act”) requires
a director to have regard to stakeholder interests when
discharging their duty to promote the success of the
Company for the benefit of the shareholders as a whole.
You can read how the Board has had regard to the interests
of the Company’s stakeholders in accordance with Section
172 of the Act on pages 30 to 36.
Board changes
The Board has continued to give extensive thought to the
rotation of long-serving directors this year. As part of the
succession plan, Annemarie Durbin, who was the Chair
of the Remuneration Committee, stepped down from the
Board at the Company’s AGM in January 2022. During the
year, the Board appointed Marion Sears as a non-executive
director and Chair of the Remuneration Committee on
1 February 2022.
As announced on 8 June 2022, Annette Court was
appointed as a non-executive director and Chair Designate.
Annette joined the Board on 1 September 2022 and will
succeed me as Chair on 1 December 2022. I wish Annette
every success as she joins the Board at a very exciting time
for the Company as it continues to recover following the
Covid-19 pandemic.
Board role and effectiveness
The Board of the Company is committed to achieving the
highest standards of corporate governance.
As Chairman, my role is to run the Board to ensure that
the Company operates effectively and ensure that the
Board works collaboratively and has the right balance of
skills, knowledge, independence and experience to assess,
manageand mitigate risks.
This report, which forms part of the Directors’ report,
provides details of how the Company has applied the
principles of, and complied with the provisions of, the UK
Corporate Governance Code 2018 (the “Code”). A copy
ofthe Code is available publicly from frc.org.uk.
Purpose, values and culture
Our purpose is to make every one of life’s journeys better.
We have been serving customers through our presence
in town centres, travel hubs and hospitals for 230 years,
providing a retail destination of choice and a sense of
community for thousands of customers every day. We have
a presence in 30 countries, employ over 12,000 employees,
source products from thousands of suppliers and play
an important part in creating vibrant and sustainable
local economies.
We recognise we have an obligation to grow our business
sustainably, providing financial returns for our shareholders,
whilst maintaining high standards of environmental
stewardship and social equity. In delivering these obligations,
it is important that our employees, business partners and
suppliers are able to make the right decisions. We support
them with a strong values-based culture, ongoing training
and development, and a solid foundation of responsible
business governance, policies and programmes. You can
read more about our purpose, values and culture on
pages30 to 46.
Stakeholder engagement
As a Company, we have a long-standing commitment to
high standards of corporate responsibility, which includes
considering the interests of a broad stakeholder group in
making business decisions. The Board remains focused on
all our stakeholders, including our workforce, customers,
shareholders and the communities we are part of. You can
Corporate governance remains an important
area of focus for the Board and underpins
the sustainability of our business and the
achievement of our strategy.”
Henry Staunton
Chairman
Corporate governance report
66 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
Thanks
I would like to thank our shareholders and stakeholders for
their continued support and also the Board and all of our
colleagues across the Group for their tremendous efforts
andongoing commitment in our 230th anniversary year.
I feel extremely privileged to have served as Chairman
of this very special Company and am confident of its
future success.
Henry Staunton
Chairman
The Company’s disclosures on its application of the
principles of the Code can be found on the following pages:
Board leadership
and Company purpose
Chairman’s letter
ESG Committee report
See pages 66 and 67
See pages 81 and 82
Purpose, values and culture See page 66
Strategy See pages 2 to 63
Shareholder and stakeholder
engagement
See pages 30 to 36
Division of responsibilities
Leadership, commitment
and Board support
See pages 67 and 68
Composition, succession
and evaluation
Board evaluation See pages 70 and 71
Nominations Committee report See pages 79 and 80
Audit, risk and internal control
Risks, viability and going concern See pages 75 to 77
Audit Committee report See pages 74 to 78
Remuneration
Directors’ remuneration report See pages 83 to 104
The information that is required by Disclosure Guidance
andTransparency Rule 7.2 to be contained in the Company’s
Corporate governance statement is included in this Corporate
governance report, in the Directors’ remuneration report on
pages 83 to 104 and in the Directors’ report on pages 105
to 107.
Composition and operation of the Board
As at the date of this report, the Board comprised the
Chairman, two executive directors and six independent
non-executive directors (including the Chair Designate).
Short biographies of each of these directors, which illustrate
their range of experience, are set out on pages 64 and 65.
There is a clear division of responsibility at the head of the
Company: Henry Staunton (Chairman) being responsible for
running the Board and Carl Cowling (Group Chief Executive)
being responsible for implementing strategy, leadership
of the Company and managing it within the authorities
delegated by the Board. Simon Emeny is the Senior
Independent Director. The Board structure ensures that no
individual or group dominates the decision-making process.
10 November 2022
Corporate governance statement
This report, which forms part of the Directors’ report,
together with the Strategic report and Directors’ remuneration
report provides details of how the Company has applied the
principles of the Code.
Throughout the financial year ended 31 August 2022 and
up to the date of this report, the Board considers that it has
complied with the provisions of the Code except as follows:
1. Chairman’s tenure (Provision 19): Henry Staunton’s tenure
as Chairman of the Company. Henry Staunton was
appointed to the Board in September 2010 and became
Chairman in September 2013. The Company announced
on 8 June 2022 that Henry Staunton will retire from
the Board on 30 November 2022 and that Annette
Court will succeed him as Chair on 1 December 2022.
As previously explained, the Board believed that it was
important to theongoing success of the Company that
Henry Staunton remained as Chairman as the Company
recovered from the impact of the Covid-19 pandemic.
Further information on Annette Court’s appointment
canbe found on page 79.
2. Pension Alignment (Provision 38): The pension
contribution rates for executive directors, Carl Cowling
and Robert Moorhead, reflect the historical retirement
benefits available to employees that joined the Company at
similar times. The Board recognises that the contribution
rates under these arrangements are higher than the
majority of the current workforce and, as such, the pension
contribution rate for any new executive director is now
aligned with the majority of the workforce which is
approximately three per cent. The pension contributions
for Carl Cowling and Robert Moorhead will be reduced to
align with the wider workforce rate from 1 January 2023.
67WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
All the directors, whose biographies are on pages 64 and 65,
served throughout the financial year ended 31 August 2022
and up to the date of this report with the exception of:
• Marion Sears who was appointed as a non-executive
director on 1 February 2022; and
• Annette Court who was appointed as a non-executive
director on 1 September 2022.
All of the non-executive directors who served during the
year and up to the date of this report are considered by
theBoard to be independent.
All directors have access to the advice and services of the
Company Secretary and may take independent professional
advice at the Company’s expense in the furtherance of
their duties. The Board receives appropriate and timely
information, with Board and Committee papers normally
being sent out a week before meetings take place. The need
for director training is regularly assessed by the Board.
The interests of the directors and their immediate families
in the share capital of the Company, along with details of
directors’ share awards, are contained in the Directors’
remuneration report on pages 83 to 104.
At no time during the year did any of the directors have
a material interest in any significant contract with the
Company or any of its subsidiaries.
Attendance at Board meetings
The Board met nine times during the year. It is expected
that all directors attend Board meetings and Committee
meetings unless they are prevented from doing so by prior
commitments. The minimum time commitment expected
from the non-executive directors is one day per month
attendance at meetings, together with attendance at
the AGM, Board away-days and site visits, plus adequate
preparation time. Where directors are unable to attend
meetings, they receive the papers for that meeting giving
them the opportunity to raise any issues and give any
comments to the Chairman in advance of the meeting.
Following the meeting, the Chairman briefs any director
not present on the discussions and any decisions taken
atthe meeting.
The following table shows the number of Board and
Committee meetings held during the financial year
ended 31 August 2022 and the attendance record of
individual directors:
Corporate governance report continued
Number of meetings attended
Directors and role Board skills and competencies
Board
9
Audit
3
ESG
3
Nominations
5
Remuneration
7
Henry Staunton
Chairman
Finance and retail expertise; strong
boardleadership and considerable
governance experience.
8 of 9 – 3 of 3 2 of 5 6 of 7
Kal Atwal
Non-executive director
Marketing and digital expertise;
entrepreneurial approach to business.
9 of 9 3 of 3 3 of 3 5 of 5 7 of 7
Carl Cowling
Group Chief Executive
Strategic and retail expertise; strong
leadership of the Group and creation
ofshareholder value.
9 of 9 – 3 of 3 5 of 5 –
Nicky Dulieu
Non-executive director
Finance and retail expertise; extensive
knowledge of retail and customer service.
9 of 9 3 of 3 3 of 3 5 of 5 7 of 7
Simon Emeny
Non-executive director
Commercial expertise and a wealth of
consumer facing experience.
9 of 9 3 of 3 3 of 3 5 of 5 7 of 7
Robert Moorhead
Chief Financial Officer/
Chief Operating Officer
(“CFO/COO”)
Retail and financial expertise; deep
understanding of the Groupandstrategy,
andcreation ofshareholdervalue.
9 of 9 – – – –
Marion Sears
Non-executive director
Financial and retail expertise with
extensiveboard and remuneration
committeeexperience.
5 of 5 2 of 2 2 of 2 3 of 3 3 of 3
Maurice Thompson
Non-executive director
Board and financial expertise; extensive
strategic knowledge and experience.
9 of 9 3 of 3 3 of 3 5 of 5 7 of 7
a) Henry Staunton did not attend the Nominations or Board meetings that related to the appointment of his successor. These meetings were chaired by Simon Emeny,
theSenior Independent Director. Henry Staunton also did not attend the meeting of the Remuneration Committee that related to the appointment of his successor.
b) Marion Sears was appointed as a director of the Company on 1 February 2022.
c) Henry Staunton, Carl Cowling and Robert Moorhead were invited to and attended all three meetings of the Audit Committee.
d) Carl Cowling was invited to and attended five meetings of the Remuneration Committee. Robert Moorhead was invited to and attended one meeting of the
RemunerationCommittee.
e) Robert Moorhead was invited to and attended five meetings of the Nominations Committee.
f) Robert Moorhead was invited to and attended three meetings of the ESG Committee.
g) Annemarie Durbin stepped down from the Board on 19 January 2022. Prior to leaving the Company she attended four meetings of the Board.
h) The Board and the Remuneration Committee have met twice since 31 August 2022. The Audit Committee and the ESG Committee have met once since 31 August 2022.
Henry Staunton was unable to attend the October 2022 Remuneration Committee meeting due to a prior commitment which had been arranged before the meeting was convened.
He received the papers in advance of the meeting and gave his comments to the Chair. Annette Court was unable to attend the November 2022 Board meeting due to a
prior commitment which had been arranged before the meeting was convened. She received the papers in advance of the meeting and gave her comments to the Chairman.
68 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
Board tenure and gender diversity
The table below shows a breakdown of the composition of
the Board as at 31 August 2022:
Tenure Male/Female
0–1 year 1 Male 5 63%
1–3 years 2 Female 3 37%
3–6 years 3
6–9 years 0 Executive/Non-executive
10+ years 2 Executive 2 25%
Non-executive 6 75%
Matters reserved for the Board
The Board manages the Company through a formal schedule
of matters reserved for its decision, with its key focus
being on creating long-term sustainable shareholder value.
The significant matters reserved for its decision include:
the overall management of the Company; approvalof the
business model and strategic plans including acquisitions
and disposals; approval of the Company’s commercial
strategy and operating and capital expenditure budgets;
approval of the Annual report and financial statements,
material agreements and non-recurring projects; treasury
and dividend policy; control, audit and risk management;
executive remuneration; and environmental, social and
corporate governance matters.
The Board has a forward timetable to ensure that it allocates
sufficient time to key areas of the business. The timetable
is flexible enough for items to be added to any agenda
as necessary. The Board’s annual business includes Chief
Executive’s reports, including business reports; financial
results; strategy and strategy updates, including in-depth
sessions on specific areas of the business and strategic
initiatives; consideration of potential acquisitions and meeting
with new management teams; risk management; dividend
policy; investor relations; health and safety; whistleblowing;
sustainability strategy; Board evaluation; governance and
compliance; communications and the Annual report.
During the year, the Board assessed the basis on which the
Company generates and preserves value over the long-term
and considered the opportunities and risks to the ongoing
future success of the business, the sustainability of the
Company’s business model and how its governance contributes
to the delivery of its strategy. Further information on the risks
and opportunities to the future success of the Company can
be found in the Strategic report on pages 2to 63.
Board activities in the financial year ended 31 August 2022
Strategy
• Approval of Company purpose, values and culture
• Approval of the Group’s long term objectives and
commercial strategy of the Group
• Oversight of Group performance against strategy
andbudget
• Approval of the sustainability strategy and report
• Updates on Group response to ongoing issues
relating to Covid-19
• Reviewing the strategic plans for each of the
businesses
• Three-Year Plan
• Project approvals
• Corporate strategy updates
Financial and operational performance
• The Company’s preliminary and interim results,
trading statements and the Annual report
• Going concern and viability statements
• Fair, balanced and understandable assessment
• Dividend, treasury and tax strategies
• Approval of the budget
• Approval of capital expenditure
Other stakeholder engagement
Customers • Customer initiatives and experience updates
• Updates on ensuring the safety of customers
• Extending our categories and ranges, including
a greater focus on food, health and beauty and
technology products
• Reviewing customer feedback and approving
customer-facing strategies
• Investing in existing and new stores
• Continuing to reduce environmental footprints
where possible and improving product
environmental labelling
Other stakeholder engagement
Shareholders • Annual General Meeting
• Consultation on remuneration and outcome of
AGMvoting
• Investor relations updates
• Consultation on Board composition
69WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Other stakeholder engagement (continued)
Employees • Annual health, safety and wellbeing reviews to
ensure employee safety
• Company purpose, values and culture
• Inclusion and diversity update
• People strategy
• Defined Benefit Pension Scheme Buy-In
• Consideration of workforce pay including
theannualpay review
• Modern slavery update and statement
• Talent, succession planning and leadership
• Employee engagement insights
• Gender pay gap reporting
• Introduction of agile working
Governance and risk
• Risk framework and internal control review
• Regulatory compliance updates
• Litigation and disputes updates
• Group delegation of authority review
• Succession planning and appointment of new Chair
• Principal risks and uncertainties review
• Review of cyber security
• Conflicts of Interest and new appointments
• Terms of Reference review
• Board evaluation process
Corporate governance report continued
TCFD and climate change
The Board received presentations and updates on the
requirement this year to make disclosures that are consistent
with the Task Force on Climate-related Financial Disclosures
(“TCFD”) recommendations and recommended disclosures.
You can read more on our TCFD disclosures on pages
44to 56.
Defined Benefit Pension Scheme Buy-In
The Company, like many other companies which have
been around for a long time, previously provided a defined
benefit pension scheme (“DB Scheme”) for employees.
The benefits of the DB Scheme are backed by the assets of
the WHSmith Pension Trust (the “Trust”), which have been
built up by investing money contributed by the Company.
These contributions reflect the Company’s obligation to
stand behind the DB Scheme at times when it was assessed
as having insufficient assets to cover its commitments
to the members. In the early 2000s, the DB Scheme
developed a serious deficit, which peaked at approximately
£250m in 2004. In order to deal with the deficit, the
Company and Trustee took a number of actions that have
since proved successful. In particular, action was taken to
reduce the impact on funding from inflation and interest
rate movements. Careful management of those factors,
together with significant contributions by the Company,
has removed the deficit over the past two decades. As a
result of this careful management, the Trustee was able to
buy an insurance policy from Standard Life to pay all future
benefits to the members of the DB Scheme. This means that
the Company is no longer required to make contributions to
the DB Scheme and has removed the risk of having to make
any future payments regarding defined benefit liabilities.
The Board believes that the purchase of the insurance policy
is a good outcome for the 12,950 pensioners and deferred
members of the DB Scheme as any risks associated with
the payment of their benefits have now very substantially
reduced. As a result, the Trust is no longer reliant on
earning investment returns, nor on the financial strength of
the Company.
Board evaluation
The performance of the Board, its Committees and its
individual directors is a fundamental component of the
Company’s success. The Board regularly reviews its own
performance. A formal internally facilitated evaluation was
carried out in July 2022. The evaluation was co-ordinated
and directed by the Chairman with the support of the
Company Secretary. A questionnaire was prepared by the
Chairman and the Company Secretary and formed the basis
of in-depth interviews with each director. The main areas
considered during the evaluation were strategy, operations
and risk; succession planning; Board composition; Company
purpose, values and culture; and Board Committees.
The results of the assessment confirmed the strength
of the management of the Company, a shared focus
and deep understanding of the business, a sound
governance framework and practices compliant with the
Code. Additionally, the culture of the Board remains very
good, being open and frank, whilst also supportive and
collaborative. As a result of the review, the Board agreed an
action plan that will be implemented in the financial year
ending 31 August 2023 and will include continued focus on
executive and non-executive succession planning and the
overall composition of the Board; increasing focus on people
issues and retention of key senior executives; and steps to
improve the Board’s procedures and effectiveness, including
the effectiveness of the annual strategy session. The Board
reviewed the actions agreed following the externally
facilitated evaluation carried out in 2021 and agreed that
good progress had been made in respect of these actions,
including in respect of the Company’s Board succession plan
(most notably, the appointment of two new non-executive
directors, including the appointment of Annette Court as
successor to the Chairman) and improvements in the Board’s
procedures – for example, how the Board is updated on the
key strategic initiatives which were identified at the Board
strategy session. In addition to the Board and Committee
evaluation process, the Group Chief Executive reviews the
performance of the CFO/COO and other senior executives.
70 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
The Chairman reviews the performance of the Group
Chief Executive.
The Chairman also undertook a rigorous review with each
ofthe non-executive directors to assess their effectiveness
and commitment to the role. During the year, the Chairman
had regular meetings with the non-executive directors,
without the executive directors present, to discuss Board
issues and how to maintain the best possible team. The Board
is satisfied that each of the non-executive directors dedicates
sufficient time to the business of the Company and contributes
to its governance and operations. The Senior Independent
Director met the other non-executive directors to undertake
a rigorous assessment of Henry Staunton’s performance
given that he has served as Chairman for nine years and
has been on the Board for twelve years. The non-executive
directors confirmed that there are no relationships or
circumstances which are likely to affect, or could appear to
affect, his judgement or independence. The non-executive
directors, taking into account the views of the executive
directors, concluded that Henry Staunton continues to act
and perform effectively as Chairman and demonstrates his
commitment to the role.
Succession planning
Under the Company’s Articles of Association, directors are
required to retire and submit themselves for re-election
every three years and new directors appointed by the Board
offer themselves for election at the next AGM following their
appointment. However, in accordance with the Code, the
Board has agreed that all directors wishing to be appointed
will stand for election or re-election at the forthcoming AGM.
At the last AGM on 19 January 2022, all the directors at that
time (aside from Annemarie Durbin) stood for election or
re-election and were duly elected by shareholders.
As reported last year, Simon Emeny, the Senior Independent
Director, led a search for Henry Staunton’s replacement
as Chairman. Further information on Annette Court’s
appointment can be found on page 79.
The Company’s Articles of Association give a power to
the Board to appoint directors and, where notice is given
and signed by all the other directors, to remove a director
from office.
During the year ahead, the Board will continue to focus
on executive succession planning to ensure the readiness
of internal candidates for all key roles across the business.
The Board is committed to good governance, culture and
leadership, recognising that these are key considerations
for a strong, sustainable business and that the tone comes
from the top. The Company’s purpose, values and culture
will continue to form an important part of the Board’s
discussions. The Nominations Committee will continue to
support the Board by ensuring that culture is built into
recruitment and succession considerations.
Culture
The Board assesses and monitors the culture of the business
in a number of ways, including through: interaction with
executives, members of the senior management team, and
other employees in Board meetings and on visits to stores,
offices and other Company locations; regular Board agenda
items and supporting papers, covering risk management,
internal audit reports and follow-up actions, customer
engagement, health and safety, employee engagement and
retention, whistleblowing and regulatory breaches; assessing
the results of staff surveys, reviewing a range of employee
indicators, including engagement, retention, absence,
learning and development, gender pay, diversity, workforce
composition and demographics; and engaging with other
stakeholders, as described in the Section 172 Statement
on pages 30 to 36 and the Corporate governance report.
During the year, the Board was satisfied that the practices
and behaviour of the Board and employees were aligned
with the Company’s purpose, values and strategy.
The Board recognises the importance of being visible and
accessible to customers and employees. During the year the
non-executive directors attended business risk committee
meetings, employee forums and accompanied management
on site visits to the High Street and Travel stores. The Board
also visited the head office and stores of the Company’s
US subsidiaries, Marshall Retail Group and InMotion, to
gain a better understanding of the operation and culture of
the businesses. The Board believes that site visits provide
directors with valuable insights into the business, helping to
deepen their knowledge and understanding of the Company.
When joining the Board, a new non-executive director
typically meets individually with each Board member
and with senior management to give them insight into all
aspects of the business, including our strategy, culture,
values, sustainability, governance, and the opportunities and
challenges facing the business. The Company Secretary
briefs them on policies, Board and Committee procedures,
and core governance practice. They visit a number of
business locations and meet key advisers. They also receive
induction materials including recent Board and Committee
papers and minutes, strategy papers, investor presentations,
Matters Reserved for the Board and the Board Committees’
Terms of Reference.
During the year, Marion Sears participated in an induction
programme which included:
• review of previous Board papers and minutes, a briefing
paper on the duties of directors, Terms of Reference
for the Board and Committees, and Group policies and
procedures including the Code of Dealing;
• meetings with senior management, including the
Managing Directors of the Group’s businesses, Group
People Director, Group Risk Director, Investor Relations
Director and Legal Director/Company Secretary;
• meetings with advisers; and
• store visits.
71WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
A similar induction programme has been designed for
Annette Court, details of which will be included in the
AnnualReport next year.
The Board considered and approved that Nicky Dulieu
could be appointed as a non-executive director of The Unite
Group PLC, with effect from 1 September 2022. The Board
concluded that there was no conflict in Nicky Dulieu being
appointed to the board of The Unite Group PLC and that
the demands associated with a non-executive director
role would not affect her commitment to the Company.
The Board also considered and approved the proposed
appointment of Henry Staunton as Chairman of the Post
Office Limited following his departure from the Board on
30 November 2022.
Diversity policy
The Board values diversity in all its forms, both within its
own membership and at all levels of the Group. The Board is
highly supportive of the initiatives the Company has in place
to promote diversity throughout the business. The Board
believes that diversity in its widest sense is a key component
to the success of the Company and receives reports on the
Company’s diversity profile to ensure that the workforce
reflects our commitment to diversity. The Board aims to
ensure its membership, and that of the wider Group, reflects
diversity in its broadest sense so that it has a combination
of demographics, skills, experience, race, age, gender,
sexual orientation, education and professional background
thereby providing a wide range of perspectives, insights
and challenge needed to support good decision-making.
The Board’s diversity policy aims to ensure that the Board
nominations and appointments process is based on fairness,
respect and inclusion, and that the search for candidates will
be conducted with due regard to the benefits of diversity.
The Board also supports the recommendations of the
Parker Review on ethnic diversity and has met the target
for non-white directors. The Board recognises that there
is more to do to increase the ethnic representation across
the Company.
Further information on the Company’s commitment to
diversity can be found in the Nominations Committee report
on pages 79 and 80 and in the Employees section of the
Strategic report on pages 40 to 42.
Risk management
The Board has overall responsibility for the Group’s system
of risk management and internal control (including financial
controls, controls in respect of the financial reporting
process and operational and compliance controls) and has
conducted a detailed review of its effectiveness during
the year to ensure that management has implemented its
policies on risk and control. This review included receiving
reports from management, discussion, challenge, and
assessment of the principal risks.
No significant failings or weaknesses were identified from
this review. In addition, the Board received presentations
from management on higher risk areas, for example,
cyber security and international expansion. The Board has
established an organisational structure with clearly defined
lines of responsibility which identify matters requiring
approval by the Board. Steps continue to be taken to
embed internal control and risk management further into
the operations of the business and to deal with areas
that require improvement which come to the attention of
management and the Board. Such a system is, however,
designed to manage rather than eliminate the risk of
failure to achieve business objectives, and can only provide
reasonable and not absolute assurance against material
misstatement or loss.
The Board confirms that there is an ongoing process
for identifying, evaluating and managing emerging and
principal risks faced by the Group, including those risks
relating to social, environmental and ethical matters.
This year these have included climate-related risks and
opportunities in readiness for reporting consistent with the
TCFD recommendations and recommended disclosures.
The Board undertakes a robust assessment of the Group’s
emerging and principal risks. The Board confirms that the
processes have been in place for the year under review
and up to the date of this report and that they accord with
the Financial Reporting Council (“FRC”) Guidance on Risk
Management, Internal Control and Related Financial and
Business Reporting (the “Risk Management and Internal
Control Guidance”). The processes are regularly reviewed
by the Board. The principal risks and uncertainties facing
the Group together with the procedures and processes
for identifying, managing and the steps taken to mitigate
principal and emerging risks can be found in the Strategic
report on pages57 to 63.
Further information on internal controls and risk management
can be found in the Audit Committee report on page 77.
Engagement with shareholders
The Board’s primary role is to promote the success of the
Company and the interests of shareholders. The Board
is accountable to shareholders for the performance and
activities of the Group. The Company recognises the
importance of communicating with its shareholders to
ensure that its strategy and performance are understood.
This is achieved principally through the Annual report and
accounts and the AGM. In addition, a range of corporate
information, including all Company announcements and
presentations, is available to investors on the Company’s
website whsmithplc.co.uk. For more information on
shareholder engagement see page 33.
Formal presentations are made to institutional shareholders
following the announcement of the Company’s full year and
interim results. The Board recognises that the AGM is normally
the principal forum for dialogue with private shareholders.
All directors normally attend the AGM and are available to
answer questions that shareholders may wish to raise.
Corporate governance report continued
72 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
The Board as a whole is kept fully informed of the views and
concerns of major shareholders. The Group Chief Executive
and CFO/COO update the Board following meetings with
major shareholders and analysts’ briefings are circulated
to the Board. The Head of Investor Relations also carries
out a regular programme of work and reports to the Board
the views and information needs of institutional and major
investors. This is part of the regular contact that the Group
maintains with its institutional shareholders. When requested
to do so, the Chairman and non-executive directors attend
meetings with major shareholders. The Chairman spoke to
some of the Company’s largest shareholders to discuss the
composition of the Board.
Following the 2022 AGM, at which a significant minority of
shareholders voted against the approval of the remuneration
report, Marion Sears, the new Chair of the Remuneration
Committee, sought the views of the Company’s largest
shareholders and representatives in respect of the
Company’s remuneration practices. The Remuneration
Committee understands that shareholders’ primary concern
was the payment of bonuses to executive directors.
The Chairman also engaged with the Company’s largest
shareholders and representatives in respect of Maurice
Thompson’s re-election as a director, in order to fully
understand their concerns.
Anti-corruption
The Company has continued to enhance its policies and
procedures in order to meet the requirements of the Bribery
Act 2010. These policies and procedures include training
for individuals to ensure awareness of acts that might be
construed as contravening the Bribery Act. The Group’s
policy on anti-bribery and corruption is included in the
Company’s Code of Business Conduct at whsmithplc.co.uk/
sustainability.
Fair, balanced and understandable
The Board confirms that it considers the 2022 Annual
report and accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Company’s position and
performance, business model and strategy.
Discussion of the Board’s assessment of the Annual report
and accounts is described in the Audit Committee report
onpage 76.
Board Committees
The Board delegates specific responsibilities to the Board
Committees, being the Audit, ESG, Nominations and
Remuneration Committees. Details of the role, composition,
responsibilities and activities of the Audit Committee can
be found on pages 74 to 78, the ESG Committee on pages
81 and 82, the Nominations Committee on pages 79 and
80 and the Remuneration Committee in the Directors’
remuneration report on pages 83 to 104. The role and
responsibilities of each Committee are set out in formal
Terms of Reference which are available on the Company’s
website whsmithplc.co.uk.
In addition, the following Committees support the Board in
fulfilling its responsibilities:
Approvals Committee
The Approvals Committee facilitates the internal approvals
process by approving matters as delegated by the Board.
The Approvals Committee comprises the Group Chief
Executive and the CFO/COO.
Disclosure Committee
The Disclosure Committee is responsible for ensuring
compliance with the Company’s obligations under the UK
Market Abuse Regulation and the maintenance of disclosure
controls and procedures. The Disclosure Committee
comprises all of the directors of the Company and the
Company Secretary.
73WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
I am pleased to present my report on the
activities of the Audit Committee for the
financial year ended 31 August 2022.”
Nicky Dulieu
Chair of the Audit Committee
Corporate governance report continued
Audit Committee report
A summary of the activities undertaken by the Committee
during the year is as follows:
• considering papers from management on the significant
financial reporting judgements made in the preparation of
the Interim report and the Annual report and accounts;
• considering the Company’s going concern statement and
papers from management which consider the liquidity and
covenant compliance of the Group;
• considering the Company’s viability statement and papers
from management which consider the long-term viability
of the Group;
• considering presentations and updates on the
requirement to make disclosures consistent with the TCFD
recommendations and recommended disclosures;
• considering the accounting implications of the Company’s
Defined Benefit Pension Scheme Buy-in;
• reviewing the effectiveness of the Group’s financial
reporting, internal control policies and procedures for the
identification, assessment and reporting of risk, including
cyber security and tax;
• reviewing the Company’s approach to cyber security
following the cyber-attack on Funky Pigeon;
• monitoring the integrity of the Group’s financial
statements and trading statements;
• assessing and recommending to the Board that the
Annualreport is fair, balanced and understandable;
• reviewing the Interim report and the Annual report and
accounts, including, where relevant, compliance with
the Listing Rules, Disclosure Guidance and Transparency
Rules, Code and statutory reporting requirements and
recommending those documents for Board approval;
• receiving updates and recommendations on the reforms
to Corporate Governance and internal controls proposed
by BEIS;
• considering the Company’s emerging and principal risks
and uncertainties and reviewing the mitigating actions
that management has taken to ensure that these risks
areappropriately monitored and controlled;
• considering the Company’s systems and framework
of controls designed to detect and report fraud and
money laundering;
Audit Committee report
Dear Shareholder
As Chair of the Audit Committee, I am pleased to present
my report on the activities of the Audit Committee for the
financial year ended 31 August 2022. Our principal objectives
are to oversee and assist the Board in its responsibility to
produce a set of Annual report and accounts which are
fair, balanced and understandable and to provide effective
financial governance in respect of the Group’s financial
results, the performance of both the internal audit function
and the external auditors, and the management of the
Group’s systems of internal control, business risks and
related compliance activities.
The other members of the Committee are Kal Atwal, Simon
Emeny, Marion Sears and Maurice Thompson, who are all
independent non-executive directors. The Board considers
that I have recent and relevant financial experience, as
required by the Code, and that the Committee, as a
whole, has competence relevant to the sector in which the
Company operates. At the invitation of the Committee, the
Chair of the Board, the Group Chief Executive, the CFO/
COO, the Director of Audit and Risk, representatives of
the Group’s senior management team and of the external
auditors attend meetings. The Committee has regular
privatemeetings with the external and internal auditors
during the year.
During the financial year ending 31 August 2023, the
Committee will focus on undertaking a tender for external
audit services. PricewaterhouseCoopers LLP (“PwC”) has
provided external audit services to the Group since being
first appointed as the Company’s external auditors at the
2015 AGM. In line with applicable law and regulation, the
Committee will hold a competitive tender process in the
nextfinancial year, as set out on page 78.
74 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
• receiving reports from Internal Audit in respect of calls to
the Company’s confidential Speak Up helpline and after
undertaking a review, appointing an external company,
Safecall, to provide the helpline service for the Group;
• receiving reports and presentations from members of
the Company’s senior management and its business risk
committees on areas of the Company’s control and risk
management processes;
• receiving and reviewing reports from the Internal
Audit and Risk teams and reviewing and agreeing their
annual plans;
• holding private meetings with the external and
internal auditors;
• agreeing the scope of PwC’s annual audit plans, assessing
the effectiveness of the external audit process and
considering the accounting, financial control and audit
issues reported by PwC that flowed from their work;
• reviewing external auditor independence and approving
the policy on the engagement of PwC to supply non-
audit services;
• negotiating and agreeing the audit fee;
• undertaking a performance review of Internal Audit and
the external auditors;
• reviewing the Company’s treasury policy;
• approval of the Group Tax Strategy;
• receiving updates on the policies and procedures for the
General Data Protection Regulation (“GDPR”);
• considering and approving the report on the Company’s
payment practices;
• assessing new accounting standards; and
• reviewing the Committee’s Terms of Reference.
Significant financial reporting issues and
areas of judgement
In preparing the financial statements, there are a number of
areas requiring the exercise by management of particular
judgement. The Committee’s role is to assess whether the
judgements made by management are reasonable and
appropriate. In order to assist in this evaluation, the CFO/
COO presents an accounting paper to the Committee twice
a year, setting out the key financial reporting judgements,
and other papers as required. The main areas of judgement
that have been considered by the Committee in the
preparation of the financial statements are as follows:
Going concern and viability
The Committee reviewed management’s assessment of
viability and going concern. The Committee considered
the Group’s performance and financial position and the
forecast assumptions applied in the approved budget and
three-year plan. The Committee also considered the Group’s
financing facilities and future funding plans. In making the
going concern and viability assessments, the Committee
gave consideration to the downside scenarios modelled
given the uncertainties surrounding the current challenging
macroeconomic environment. Based on this, the Committee
concluded that the assumptions applied are appropriate
in both the viability and going concern assessments, and
confirmed that the application of the going concern basis for
the preparation of the financial statements continued to be
appropriate, with no material uncertainties. The Committee
received a report from PwC on the work undertaken to
assess going concern and viability and specifically discussed
the content of the disclosures made in the Strategic report
on page 62 and the basis of preparation within Note 1 of the
financial statements on page 121.
Impairment review of store assets
The Committee received and considered a paper from
management covering the judgements made in respect of
the impairment testing of the Group’s property, plant and
equipment and right-of-use store assets. This paper detailed
managements’ judgements regarding the identification of
indicators of impairment, and where impairment indicators
were identified, the valuation methodology, basis of key
assumptions and the key drivers of the cash flow forecasts.
The Committee challenged management on the
assumptions used within the impairment models and
received and discussed a paper from PwC on their work
in this area, which specifically considered and reported on
their challenge and assessment of the key assumptions used
and that the resultant charges were allocated appropriately.
The Committee was satisfied that the approach adopted
by management was sufficiently robust to identify when an
impairment charge of store assets needs to be recognised
and how it should be assessed and reported.
Given that management has continued to report on the
performance of the business on a pre-IFRS 16 basis within its
Alternative Performance Measures alongside the statutory
measures derived under IFRS 16, the paper and discussions
considered impairment assessment of store assets on
both bases.
Inventory valuation
The Committee received a paper from management on
accounting for and valuation of inventory. It discussed
the judgements made by management, with specific
consideration given to inventory provisioning (both on an
underlying and non-underlying basis), including provision
for out-of-date, slow moving or obsolete stock and the
classification and disclosure of related charges in the
income statement and financial statements. The Committee
also received a paper from PwC regarding the audit work
they performed over the valuation of inventory and the
presentation of inventory provision charges in the income
statement split between underlying and non-underlying.
The Committee is satisfied that the process and judgement
adopted by management for the valuation of inventory is
sufficiently robust to establish the value of inventory held
and is satisfied as to the appropriateness of the Company’s
provisioning policy and presentation of inventory provisions.
75WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Non-underlying items
The Committee considered the presentation of the
financialstatements and, in particular, the presentation
of non-underlying items in accordance with the Group
accounting policy. This policy states that adjustments are
only made to reported profit before tax in determining
an alternative performance measure where charges are
not considered part of the normal operating costs of the
business, are non-recurring or are considered exceptional
because of their size, nature or incidence. The Committee
received detailed reports from management outlining the
judgements applied in relation to the non-underlying costs
incurred during the year.
These costs were attributable to the impairment charges
recognised in relation to stores where performance is not
expected to recover as a result of the impact of Covid-19;
costs incurred in connection with the Funky Pigeon cyber
incident; and amortisation of acquired intangible assets.
This was a key area of focus for the Committee which was
cognisant of the need to ensure that costs were appropriately
classified and that the disclosure of the non-underlying
items was sufficient for users of the financial statements
to understand the nature and reason for the costs.
The Committee challenged management on the nature
ofcosts classified as non-underlying.
Pensions
The Committee considered the accounting treatment
and disclosure of the defined benefit scheme buy-in,
with particular regard to the application of IAS 19 in the
recognition of asset remeasurement losses through other
comprehensive income. The Committee considered the
current guidance and requirements in respect of pensions
accounting, reviewed the judgements made in respect of
the assumptions used in the valuation of the Company’s
obligations under the scheme and the non-recognition
of theIAS 19 surplus. A report on pensions accounting
and related disclosures was provided by PwC which set
out the work performed including their challenge on the
classification of the buy-in and related expenses through
other comprehensive income, as well as assessment of
key scheme valuation assumptions compared to their
independently observed ranges.
Viability statement
The Committee reviewed the process and assessment of
theCompany’s prospects made by management in support
of its longer-term viability statement, including:
• the review period and alignment with the Company’s
internal plans and forecasts and with its work to
support the going concern basis of presentation for the
financial statements;
• the assessment of the capacity of the Company to remain
viable after consideration of future cash flows, borrowings
and mitigating factors; and
Corporate governance report continued
• the modelling of the potential financial impact of
certain of the Company’s principal risks materialising
using severe but plausible scenarios on the Company’s
financial performance.
The Committee considered the viability statement and
related analyses alongside its work on going concern, as set
out in this report on page 75. It also discussed the clarity and
appropriateness of the disclosures made within the viability
statement and discussed these with PwC.
The viability statement is set out in the Strategic report on
page 63.
Fair, balanced and understandable
assessment
At the request of the Board, the Committee has considered
whether, in its opinion, the 2022 Annual report and accounts,
taken as a whole, is fair, balanced and understandable, and
provides the information necessary for shareholders to
assess the Company’s position and performance, business
model and strategy. The Committee was assisted in its
review by a number of processes, including the following:
• the Annual report and accounts is drafted by senior
management with overall co-ordination by a member of
the Group Finance team to ensure consistency across the
relevant sections;
• an internal verification process is undertaken to ensure
factual accuracy;
• an independent review is undertaken by the Director
of Audit and Risk to assess whether the Annual report
and accounts is fair, balanced and understandable
using a set of pre-defined indicators (such as
consistency with internally reported information and
investor communications);
• comprehensive reviews of drafts of the Annual report
andaccounts are undertaken by the executive directors
and other senior management;
• an advanced draft is reviewed by the Board and the
Company’s Legal Director and, in relation to certain
sections, by external legal advisers; and
• the final draft of the Annual report and accounts is
reviewed by the Committee prior to consideration by
the Board.
Following its review, the Committee advised the Board
that the Annual report and accounts, taken as a whole,
wasconsidered to be fair, balanced and understandable and
that it provided the information necessary for shareholders
to assess the Company’s position and performance, business
model and strategy.
76 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
Risk management and internal controls
The Committee monitors and regularly reviews the
effectiveness of the Group’s risk management processes and
internal financial and non-financial controls. The key features
of the risk management process that were in place during
the year are as follows:
• each business conducts risk assessments based on
identified business objectives, which are reviewed and
agreed annually by the executive management of each
business. Risks are considered in respect of strategy,
reputation, operations, financial and compliance and
are evaluated in respect of their potential impact and
likelihood. These risk assessments are updated and
reviewed quarterly and are reported to the Committee;
• a Group risk assessment is also undertaken by the Internal
Audit team, which considers all areas of potential risk
across all systems, functions and key business processes.
This risk assessment, together with the business risk
assessments, forms the basis for determining the Internal
Audit Plan. Audit reports in relation to areas reviewed are
discussed and agreed with the Committee;
• the Internal Audit team meets annually with all senior
executives, to undertake a formal review and certification
process in assessing the effectiveness of the internal
controls across the Group. The results of this review are
reported to the Committee;
• the Committee confirms to the Board that it has reviewed
the effectiveness of the systems of internal control,
including financial, operational, and compliance controls
and risk management for the period of this report, in
accordance with the Code and the Risk Management and
Internal Control Guidance;
• the Board is responsible for approving the annual budget
and the three-year plan, for approving major acquisitions
and disposals and for determining the financial structure
of the Company, including treasury and dividend policy.
Monthly results, variances from plan and forecasts are
reported to the Board;
• the Committee assists the Board in the discharge of
its duties regarding the Group’s financial statements,
accounting policies and the maintenance of
internal business, operational and financial controls.
The Committee invites input and attendance from
members of the senior management team of the Group
at its meetings to discuss the design and operation of
key business and internal controls and the assessment of
risks that affect the Group. The Committee provides a link
between the Board and PwC through regular meetings;
• the Company has in place internal control and risk
management systems in relation to the process for
preparing consolidated financial statements. The key
features of these systems are that management regularly
monitors and considers developments in accounting
regulations and best practice in financial reporting
and, where appropriate, reflects developments in the
consolidated financial statements. PwC also keeps
the Committee appraised of these developments; the
Committee and the Board review the draft consolidated
financial statements. The Committee receives reports from
management and PwC on significant judgements, changes
in accounting policies, changes in accounting estimates
and other pertinent matters relating to the consolidated
financial statements, and provides robust and independent
challenge to management where appropriate; and the full
year financial statements are subject to external audit and
the half-year financial statements are reviewed by PwC;
• the Internal Audit team advises and assists management
in the establishment and maintenance of adequate
internal controls and reports to the Committee on the
effectiveness of those controls;
• there is a comprehensive system for budgeting and planning
and for monitoring and reporting the performance of the
Company’s business to the Board. Monthly results are
reported against budget and prior year, and forecasts for the
current financial year are regularly revised in light of actual
performance. These results and forecasts cover profits,
cash flows, capital expenditure and balance sheets; and
• routine reports are prepared to cover treasury activities
and risks, for review by senior executives, and annual
reports are prepared for the Board and Committee
covering tax, treasury policies, insurance and pensions.
The Director of Audit and Risk attends the meetings of the
Committee to discuss the above matters.
77WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
External auditor
During the year PwC reported to the Committee on their
independence from the Company. The Committee and
the Board are satisfied that PwC has adequate policies
and safeguards in place to ensure that auditor objectivity
and independence are maintained. The Committee has
recommended to the Board the re-appointment of PwC
as the external auditors for the 2023 financial year and the
directors will be proposing the re-appointment of PwC at
the forthcoming AGM.
PwC were first appointed as external auditors at the 2015
AGM, following a competitive tender process completed in
2014. Jonathan Lambert was appointed as the PwC audit
partner and Senior Statutory Auditor at the conclusion of
the 2019 financial year.
In accordance with the Competition and Markets Authority
(“CMA”) Statutory Audit Services Order 2014, the Company
is required to conduct a competitive audit tender by
December 2024. The Committee has discussed the most
appropriate time to carry out the external audit tender
process taking into account the recent appointment of
new directors, the continuing significant US expansion and
the Group’s extensive growth opportunities. As a result, at
its meeting on 8 November 2022, the Committee decided
to proceed with an audit tender during 2023, which will
commence with issuing a Request for Proposal (“RFP”) in
February 2023, with a view to appointing the successful
audit firm for the financial year ending 31 August 2025.
In making this decision, the Committee has had regard
to the timeline, selection criteria and the involvement of
Committee members and audit and finance teams in the
various stages of the process. The Committee considers
that the proposed timeline achieves the optimal balance
between business priorities, as the Company continues to
recover from the impact of Covid-19, and internal capacity
which will ensure a rigorous and comprehensive audit tender
process. The Committee considers that a competitive tender
is in the best interests of our shareholders as it will allow
the Company to appoint the audit firm that will provide the
highest quality, most effective and efficient audit.
The Committee will continue to monitor the appointment,
effectiveness and independence of PwC as external auditors,
as well as considering whether this proposed timing remains
appropriate in light of business developments, applicable law
and regulation.
In line with the Committee’s Terms of Reference, the
Committee undertook a thorough assessment of the quality,
effectiveness, value and independence of the 2021 financial
year audit provided by PwC. The Director of Audit and Risk
prepared a questionnaire seeking the views and feedback
of the Board, together with those of Group and divisional
management, and it formed the basis of further discussion
with respondents. Input was sought from Committee
members and from members of the management team
on areas including the auditor’s expertise, professionalism,
independence and challenge; their planning and audit
approach; the quality and content of reporting and the
Corporate governance report continued
outputs from the audit; and governance of the audit
including assessment of team members’ performance and
independence. The findings of the survey were considered
by the Committee and concluded that PwC continued
to perform effectively and remains independent. As a
result, PwC’s re-appointment as external auditors at the
forthcoming AGM is recommended to shareholders.
The Committee has a formal policy on the Company’s
relationship with its external auditors in respect of non-audit
work to ensure that auditor objectivity and independence
are maintained. The policy is reviewed annually by the
Committee. The only non-audit work undertaken by PwC
in the financial year ended 31 August 2022 related to
the interim review. The auditors may only provide such
services if such advice does not conflict with their statutory
responsibilities and ethical guidance. The Committee made
enquiries of PwC and management and were satisfied that
no such conflict existed.
On behalf of the Committee, my approval is required before
the Company uses PwC for non-audit services as specifically
set out in the policy, or if the fees exceed £25,000 per
matter. The Committee is satisfied that the Company was
compliant during the year with both the Code and the
FRC’s Ethical and Auditing Standards in respect of the
scope and maximum level of permitted fees incurred for
non-audit services provided by PwC. For the financial year
ended 31 August 2022 the non-audit fees paid to PwC were
£115,000, of which £113,800 related to the interim review, and
the audit fees payable to PwC were £1,138,000.
The Company has complied during the financial year under
review, and up to the date of this report, with the provisions
of the CMA Statutory Audit Services Order 2014.
Nicky Dulieu
Chair of the Audit Committee
10 November 2022
78 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
Nominations Committee report
The Committee keeps itself updated on key developments
relevant to the Company, including on the subject of diversity
and inclusion. The Board believes in creating throughout the
Company a culture free from discrimination in any form and
is proud of its long history of being regarded as a responsible
and respected employer. The Board believes that the benefits
of a diverse workforce will help the Company achieve its
strategic objectives.
The Committee is fully committed to supporting diversity
and inclusion at Boardroom and senior executive level in
compliance with the Code and recognises the importance
of diversity in effective decision-making. The long-term
aim is to increase the diversity of our Board in all forms.
The importance of diversity extends beyond the Board
to senior management and throughout the Company.
The Committee monitors the progress made to increase
diversity at Board and senior management levels and
compliance with targets and best practice recommendations
set for gender diversity by the FTSE Women Leaders Review
and for ethnic diversity by the Parker Review.
During the year under review, the Company had 37 per cent
women on the Board, 30 per cent in the Group Executive
Team and 35 per cent in the senior leadership team.
The Board is committed to strengthening the pipeline of
women in senior roles across the business and an action
plan has been agreed to take further steps to improve
workplace diversity.
The Company requires gender balanced shortlists for all
internal and external recruitment at a senior executive
level to ensure that we attract more women at senior level.
Further information on the gender balance of those in
senior management and their direct reports is set out in
theStrategic report on page 42. The Company continues
to work with “Everywoman” who provide a host of personal
development tools aimed at women and also provide our
employees with links to an external network of professional
women in other organisations.
The Board recognises that diversity is not limited to gender,
but includes skills, experience, ethnicity, disability and sexual
orientation. The Board is committed to having a diverse and
inclusive leadership team and will monitor ethnic diversity
across the Group. The Company has complied with the
recommendations of the Parker Review. Actions include the
provision of mentoring, as well as focused initiatives to better
Nominations Committee
Dear Shareholder
As Chair of the Nominations Committee, I am pleased to
present my report on the activities of the Nominations
Committee for the financial year ended 31 August 2022.
The Committee’s principal responsibility is to ensure that
the Board comprises individuals with the requisite skills,
knowledge, independence and experience to ensure that
it is effective in discharging its responsibilities and ensure
that appropriate procedures are in place for the nomination,
selection and succession of directors and senior executives.
The Committee comprises a majority of independent non-
executive directors. The other members of the Committee
are Kal Atwal, Annette Court, Carl Cowling, Nicky Dulieu,
Simon Emeny, Marion Sears and Maurice Thompson. In the
event of any matters arising concerning my membership
of the Board, I would absent myself from the meeting as
required by the Code and the Senior Independent Director
would take the Chair.
The Committee met five times during the year. The principal
matters discussed at the meetings were succession planning
for Board and senior executives, the appointment of Marion
Sears as a non-executive director and Annette Court as a
non-executive director and Chair Designate, career planning
and identifying talent across the businesses and reviewing
the work that has been undertaken in respect of improving
diversity in the Company’s senior executive group.
As reported last year, Simon Emeny, the Senior Independent
Director, led a search for my replacement as Chairman. A role
description and person specification were prepared and the
Company appointed an external recruitment consultant,
Lygon Group, to assist in the process of identification of
potential candidates. Lygon have signed up to the voluntary
code of conduct for executive search firms and had no other
connection to the Company or its Directors. The Committee
was regularly appraised by Simon Emeny on progress to
identify and appoint my successor. Following this search, a
number of candidates were shortlisted and initially met with
Simon Emeny and the Company Secretary of whom three
then met the Group Chief Executive and the CFO/COO. As a
result of these interviews, two candidates met the remaining
members of the Board. At the conclusion of the recruitment
process, the Committee recommended the appointment of
Annette Court to the Board.
The Committee will continue to focus on
succession planning and talent management
for key roles in the business.”
Henry Staunton
Chair of the Nominations Committee
79WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Corporate governance report continued
understand the challenges faced by under-represented
groups employed within the Company. The Company’s
recruitment policy requires that for all senior management
roles there must be a shortlist which includes at least one
candidate from a non-white minority ethnic background.
We will continue to appoint on merit, whilst aiming to
broaden the diversity of the talent pipeline.
The Company has a Diversity and Inclusion committee
consisting of employees from across the Group together
with the Group Chief Executive and the Group People
Director. The committee met ten times during the financial
year ended 31 August 2022 and made recommendations
on recruitment, and engaged with our customers and
employees to mark cultural and diversity related events
during the year. The work of the Diversity and Inclusion
committee is reported to the ESG Committee.
Further information on diversity is set out in the Employees
section of the Strategic report on pages 40 to 42.
The Committee will continue to focus on succession planning
and talent management for key roles across the business,
to ensure the Company develops a pipeline of high-quality
internal candidates for senior management roles. Work is
being undertaken to ensure succession arrangements are in
place for Board members and key management.
The latest Board evaluation report confirmed that the culture
of the Board is excellent, being very open and collaborative.
The Board continues to have a broad mix of skills, diversity,
experience and talent, which enables the Board and the
Committees to work effectively. Details of the Board
evaluation which took place in July 2022 are set out on
pages 70 and 71.
This will be my last letter to you as Chair of the Nominations
Committee. As previously announced, Annette Court
succeeds me as Chair of the Board and of the Nominations
Committee on 1 December 2022. I wish Annette every
success in the future.
Henry Staunton
Chair of the Nominations Committee
10 November 2022
80 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
• Employees: employees take pride in working for a
purpose-driven organisation with high ESG standards.
In reviewing the Company’s overall approach to ESG and
sustainability, the Committee received an update from the
Group Sustainability Director on key external drivers and
the views of different stakeholder groups. The Committee
assessed the most material ESG risks and the mitigation
measures in place to ensure they are being appropriately
managed and reported. Following on from the materiality
assessment, the Committee reviewed the Company’s
sustainability strategy, assessing recent progress under the
three strategic pillars of Planet, People and Communities
and approving an updated set of objectives and targets for
future activity. The Committee also approved updates for all
ESG-related policies during the financial year.
Under the Planet pillar of the strategy, the Committee
dedicated one of its meetings to climate change, including
the requirements for net zero and for reporting in line with
the recommendations and recommended disclosures of
the Task Force on Climate-related Financial Disclosures
(TCFD). The Committee received a briefing on the scope
of the TCFD recommendations, and the Company’s
approach to reporting in accordance with the UK’s Financial
Conduct Authority Listing Rule on climate-related financial
disclosures. This formed a pre-cursor to the approval
of TCFD reporting disclosures by the Audit Committee.
The Committee also approved a revised target for the
business to reach net zero emissions by 2050, with near
term targets for a reduction in Scope 1 and 2 emissions and
for engaging with suppliers to ensure science based targets
are in place (see pages 53 to 56.)
In relation to People, the Committee reviewed the results
of the Employee Engagement survey and approved the
action plan to increase engagement across the Company.
The Committee received a presentation on the Company’s
approach to responsible sourcing and human rights,
and provided advice to management on mitigating risk.
The Committee reviewed the Company’s approach to
Modern Slavery due diligence and recommended to the
Board approval of the Group Modern Slavery statement
for FY2022.
During the year, the Committee also discussed the
Company’s approach to community engagement and
support for children’s literacy through its work with the
ESG Committee
Dear Shareholder
As Chair of the ESG Committee, I am pleased to present
my first report on the activities of the ESG Committee for
the financial year ended 31 August 2022. Sustainability is an
integral part of the Company’s purpose and is embedded in
our values and the way in which we operate. The Committee
has been established to oversee the Company’s approach to
ESG and it has an important role to play in contributing to
the long-term success of the business.
The Committee is responsible for reviewing and approving
the Company’s strategy, policies and performance in relation
to ESG matters and ensuring they are integrated into the
core business strategy of the Group. The Committee is also
responsible for approving key performance indicators; short,
medium and long-term ESG targets and monitoring progress
towards targets on a regular basis. The Committee’s Terms
of Reference are available on the Company’s website at
whsmithplc.co.uk.
The Committee comprises a majority of independent non-
executive directors. The members of the Committee are
Carl Cowling, Nicky Dulieu, Simon Emeny, Marion Sears,
Henry Staunton and Maurice Thompson. The Committee
met three times during the year, receiving inputs from senior
managers across the business and regular updates from
the ESG Steering Committee which is chaired by the Group
Chief Executive.
One of the key considerations of the Committee is ensuring
the interests of stakeholders are included in any review of
the Company’s approach to ESG and sustainability:
• Investors: strong, Board-level ESG governance is a key
requirement of an effective sustainability programme.
• Governments and policy makers: local and international
legal and regulatory obligations on ESG topics continue
to increase.
• Landlords and suppliers: upholding high ethical standards
throughout our value chain is critical for landlords,
business partners and suppliers when deciding whether
they should do business with WHSmith.
• Local communities and NGOs: ESG topics affect the lives
of the people in the communities that we serve and the
non-governmental organisations that we work with.
The Committee is providing the Board
with enhanced oversight of the Company’s
ESG activities.”
Kal Atwal
Chair of the ESG Committee
ESG Committee report
81WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
National Literacy Trust. The Committee was informed about
the difference that WHSmith’s contributions are making
to the lives of children in socially disadvantaged parts of
the UK, and the impact that it is having on children’s ability
to read.
For the first time, ESG performance metrics will form
part of the Long Term Incentive Plan for awards in 2022.
In reviewing the ESG strategy and ensuring that objectives
and targets are appropriate for driving improvement, the
ESG Committee provided support to the Remuneration
Committee in choosing appropriate measures.
Over the next year, I look forward to the Committee’s
continued oversight and scrutiny of the Group’s ESG agenda,
including further presentations from senior executives and
experts from across the Company. During 2023, the Committee
will review the Group’s diversity and inclusion programme,
the plans for supplier engagement on net zero and how
the ESG programme is being adopted by the Company’s
international operations.
Kal Atwal
Chair of the ESG Committee
10 November 2022
Corporate governance report continued
ESG Committee report continued
82 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
Directors’ remuneration report
The Company’s Directors’ remuneration policy has worked
well supporting the Company’s long-term strategy to create
shareholder value. You can see how the Company has, over
the past ten years, generated shareholder value in the TSR
graph on page 95.
Executive pay outcome for the financial
yearended 31 August 2022
The Group returned to profitability this year with Headline
Group profit before tax and non-underlying items
1
of
£73m. This result was an increase in profitability of £128m
compared to a loss of £55m in the previous financial year.
This strong performance was achieved as a result of the
actions taken by management both to re-open closed
outlets following the pandemic, as well as to focus significant
effort on winning new business, especially in Travel, and
open newly-won outlets quickly to take advantage of the
resurgence of travel during the Easter and Summer periods.
The easing of Covid-19 related restrictions around the world
led to a rebound in demand at Travel outlets in most parts
of the world and placed significant pressure on supply chain
logistics and staffing levels. As a result of key decisions
including an interim workforce pay award, management
achieved an excellent start to the post-Covid-19 recovery
and the Company is proposing to pay its first dividend since
January 2020. Further information regarding the Company’s
performance during the year can be found in the Strategic
report on pages 2 to 63.
As set out above, management were well prepared, and
we believe the strong start to our business recovery in
the year is fairly reflected in a full bonus pay-out for the
executive directors. However, for the third consecutive year
LTIP vesting has been affected as a result of the impact
of Covid-19 on the Company. The 2019 LTIP awards which
were subject to the achievement of EPS and relative TSR
performance measures over the three years ended 31 August
2022 have not met threshold performance and the awards
have lapsed. Accordingly, the total remuneration earned by
Carl Cowling was £1,632,000 and the total remuneration
earned by Robert Moorhead was £1,293,000.
Annual statement from the Remuneration
Committee Chair
Dear Shareholder
On behalf of the Remuneration Committee (the“Committee”),
I am pleased to present the Directors’ remuneration report
for the financial year ended 31 August 2022 which is in line
with the Company’s approved Directors’ remuneration policy.
The Directors’ remuneration policy was supported by 88 per
cent of our shareholders at our AGM in 2022.
The Company’s Directors’ remuneration policy can be
summarised as providing at or below the median of market
levels of fixed pay but with the opportunity to earn upper
quartile levels of remuneration if the executives deliver
superior returns for shareholders.
Executive remuneration packages are structured so
that they:
• are aligned to the Company’s strategy to deliver
shareholder returns and promote its long-term success;
• are aligned with the interests of shareholders;
• are competitive and provide a very clear bias to variable
pay with stretching and rigorous performance measures
and conditions;
• do not promote unacceptable behaviours or encourage
unacceptable risk taking;
• include robust malus/clawback provisions and holding
periods which permit the recoupment of variable pay
if the pay-out was based on misstated financial results
or an error or incorrect information, or if the Committee
concludes that circumstances arose during the bonus year
or vesting period which would have warranted summary
dismissal of the individual concerned or if there is an
insolvency having regard to the Committee’s assessment
of the involvement of the individual to such event; and
• take into account Company-wide pay and
employment conditions.
1 Alternative performance measure defined and explained in the Glossary on
page173
Our Directors’ remuneration policy hasworked
well supporting the Company’s long-term strategy
and providing alignment with stakeholders.”
Marion Sears
Chair of the Remuneration Committee
83WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Salary
Following the annual salary review in March 2022, the
majority of the Company’s employees (who are based in
stores and Distribution Centres) received a 6.6 per cent
pay increase, head office employees received a 4 per cent
pay increase and senior executives received a 3 per cent
pay increase with effect from 1 April 2022. As a result of
economic pressures and the impact upon all aspects of
recruitment, in order to support colleagues and ensure
the staffing capability needed for our business recovery,
the Company, as a responsible employer, decided to bring
forward the March 2023 pay review by nine months and
increased the pay of store colleagues in the UK High
Street and Travel businesses with effect from 1 July 2022.
This decision further increased the pay of these employees
by approximately 5 per cent. The next salary review for all
employees will be in March 2023.
Robert Moorhead, in line with other senior executives,
received a pay increase of 3 per cent with effect from
1 April 2022.
As explained in 2020 and 2021, and as previously discussed
with shareholders, Carl Cowling was appointed as Chief
Executive in November 2019 on a base salary of £525,000.
It was intended this should rise in staged increments,
according to best practice, to £600,000 by 1 April 2022.
However, as explained in 2021, due to the Covid-19 lockdown
much of the business was closed, directors took a reduction
in salary/fees and Carl Cowling’s planned increases were
delayed. Now that the business recovery is established, the
Committee has fulfilled its commitment to Carl Cowling and
has brought his base salary to a level slightly below median
for FTSE 250 CEOs. Accordingly, during the period under
review, Carl Cowling’s salary increased from £550,000
to £575,000 with effect from 1 September 2021 (delayed
from 1 April 2021) and to £600,000 with effect from 1 April
2022. This increase was in line with the arrangements put
in place on his appointment as Group Chief Executive in
November 2019.
Annual bonus
For the financial year ended 31 August 2022, the bonus target
reverted to Headline profit before tax and non-underlying
items
1
as the primary metric rather than Headline EBITDA
1
which was used in the previous financial year.
The Group’s Headline profit before tax and non-underlying
items
1
for the financial year ended 31 August 2022 was £73m
compared to a loss of £55m for the financial year ended
31 August 2021. This exceptional performance resulted
in approximately 2,245 employees receiving a bonus
under the annual bonus plan for the financial year ended
31 August 2022.
As a result of this performance, Carl Cowling will receive
a bonus payment of £960,000 of which £499,200 will
be deferred into shares and Robert Moorhead will receive
a bonus payment of £725,120 of which £377,062 will be
deferred into shares. The deferred shares must be held
for upto three years and then retained if the director
has not met the Company’s share ownership guidelines.
The executive directors’ personal objectives are set out on
page 97. The Committee determined that the formulaic
out-turn under the annual bonus plan was appropriate and
should be applied without discretionary adjustment.
LTIP
The 2019 LTIP vesting percentage was determined by
the growth in the Company’s Headline EPS and relative
TSR over the three year performance period which ended
on 31 August 2022. The Company did not meet the
performance targets for the 2019 LTIP and the awards
lapsed. The Committee determined that the formulaic out-
turn under the LTIP was appropriate and should be applied
without discretionary adjustment.
Pay for the financial year ending
31August2023
The Company will continue to apply the Directors’
remuneration policy during the financial year ending
31 August 2023 and in particular:
• as reported as part of the Directors’ remuneration policy
renewal, performance targets for the LTIP awards to be
granted in November 2022 will be based 20 per cent on
ESG metrics, 40 per cent on Headline EPS and 40 per cent
against relative TSR;
• the pension contributions for Carl Cowling and Robert
Moorhead will be reduced to align with the wider
workforce rate of 3 per cent from 1 January 2023; and
• the fee paid to the Chair of the Company will increase
from £256,150 to £320,000 per annum from 1 December
2022. In assessing chair fees as part of our chair
succession process, we noted the increased fee levels for
this role generally and took into account the increasing
complexity of the Group’s international operations and
global strategic positioning together with reviewing
relevant benchmarking from FIT.
Salaries for the executive directors are reviewed with
effect from April each year and no decision has been taken
regarding any potential increase from April 2023.
Directors’ remuneration report continued
84 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
Shareholder engagement
During the year, the Committee consulted with our largest
shareholders and their representative bodies on the Company’s
new Directors’ remuneration policy. The feedback was
supportive of the introduction of ESG performance measures
in the Company’s LTIP and was helpful for both the Board and
the Committee in finalising the Directors’ remuneration policy,
which was approved by shareholders at the 2022 AGM.
Following the 2022 AGM, at which a significant minority
of shareholders voted against the Directors’ remuneration
report, I, as the new Committee Chair, engaged again with
the Company’s largest shareholders and representatives.
The feedback from those shareholders who engaged was
considered by the Committee. The Committee noted that
most of the concerns raised by shareholders related to issues
specific to the impact of Covid-19 on the Company and that
these issues would not recur in the financial year ended
31 August 2022.
Conclusion
During the year the leadership team focused on the strategic
decisions needed to establish a strong recovery from the
Covid-19 pandemic. As a result of improving performance
of the Travel business, maintaining High Street performance,
securing new Travel outlets, and introducing further pay
and benefit support for workforce colleagues, management
has delivered a strong financial result for shareholders,
returning to profitability and recommending the payment of
a dividend. Accordingly, the total remuneration earned by
the CEO and CFO/COO reflects a full bonus payment but, as
a result of the impact of Covid-19, does not include any LTIP
vesting as the LTIP award made in 2019 has lapsed.
In the current year we will continue to support workforce
colleagues with competitive pay and listen carefully
to feedback through continued engagement. We are
including ESG climate and people metrics in the LTIP for
the first time and we will work hard to ensure that we
deliver the continued business recovery for the benefit of
all stakeholders.
I hope that shareholders will support the Directors’
remuneration report and I look forward to meeting you
atthe AGM.
Marion Sears
Chair of the Remuneration Committee
10 November 2022
Stakeholder alignment
After considering the experience of each of our stakeholder
groups during the financial year ended 31 August 2022, the
Committee believes that the remuneration of the executive
directors is proportionate and appropriate when taking into
account the experience of the Company’s stakeholders.
In making this determination, the Committee considered
thefollowing factors:
• The financial performance of the Group has been strong.
As a result of management actions undertaken during
the financial year which enabled the Company to take
advantage of increased economic activity more generally
and in travel in particular, the Company returned to
profitability by making a Headline PBT
1
of £73m.
• Whilst the financial position has clearly been impacted
by Covid-19, the Committee considers that management
has made significant progress on the Group’s strategic
objectives. The Committee believes that the Group is now
well placed to generate high growth as restrictions ease
and the global travel market continues to recover.
• All eligible employees received at least one pay
increase during the year. The majority of the Company’s
employees (who are based in stores and Distribution
Centres) received a 6.6 per cent pay increase, head office
employees received a 4 per cent pay increase and senior
executives received a 3 per cent pay increase with effect
from 1 April 2022. The Company also brought forward the
March 2023 pay review by nine months and increased the
pay of store colleagues in the UK High Street and Travel
businesses with effect from 1 July 2022.
• Positive feedback was received following employee
engagement on remuneration.
• Continued support was given to local communities
and charitable activity. You can read more about the
Company’s work on page 35.
• The Company did not receive any UK furlough support in
the financial year despite the ongoing impact of Covid-19
on the business, particularly in the first half of the year.
• The Company is resuming the payment of dividends
to shareholders as the directors have proposed a final
dividend of 9.1 pence per share for the financial year ended
31 August 2022 (no dividends were paid in respect of the
2020 and 2021 financial years).
1 Alternative performance measure described and explained in the Glossary on
page 173
85WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
This Directors’ Remuneration Report has been prepared in
accordance with the Large and Medium-Sized Companies
and Groups (Accounts and Reports) Regulations 2008, as
amended in 2013, 2018 and 2019 (the “Regulations”), LR 9.8
of the UKLA Listing Rules and the UK Corporate Governance
Code 2018 (the “Code”).
1. Information subject to audit
The following information has been audited by PwC:
• Section 2.10 – Summary of non-executive directors’
remuneration 2022;
• Section 2.11 – Summary of executive directors’
remuneration 2022;
• Section 2.12 – Payments made to former directors;
• Section 2.13 – Payments for loss of office;
• Section 2.18 – Annual bonus targets;
• Section 2.19 – Share plans; and
• Section 2.22 – Directors’ interests in shares.
2. Annual Directors’ remuneration report
The Committee presents the annual report on remuneration
which, together with the introductory letter by the Chair of the
Committee on pages 83 to 85, will be put to shareholders as
an advisory vote at the forthcoming Annual General Meeting.
2.1 Remuneration Committee
Marion Sears is Chair of the Committee. The other members
of the Committee are Kal Atwal, Nicky Dulieu, Simon Emeny,
Henry Staunton and Maurice Thompson.Annemarie Durbin
stepped down as Chair of the Committee on 19 January 2022.
At the invitation of the Committee, the Group Chief Executive
and representatives of the Committee’s external independent
remuneration adviser regularly attend meetings.
The Committee met seven times during the year.
All Committee members are expected to attend meetings.
The table on page 68 in the Corporate governance report
shows the number of meetings held during the year
ended 31 August 2022 and the attendance record of
individual directors.
In order to avoid any conflict of interest, remuneration is
managed through well-defined processes ensuring no
individual is involved in the decision-making process related
to their own remuneration. In particular, the remuneration
of all executive directors is set and approved by the
Committee; none of the executive directors are involved in
the determination of their own remuneration arrangements.
The Committee also receives support from external advisers
and evaluates the support provided by those advisers
annually to ensure that advice is independent, appropriate
and cost-effective.
During the year, the Committee continued to receive advice
from FIT Remuneration Consultants LLP (FIT), which is
a member of the Remuneration Consultants Group (the
professional body) and adheres to its code of conduct.
FIT was appointed by the Committee following a formal
review and has no other relationship with the Company or
any individual director. The Committee is satisfied that FIT
continues to provide objective and independent advice.
FIT’s fees in respect of the year under review were £45,943
(excluding VAT) and were charged on the basis of FIT’s
standard terms of business.
Wendy Stroud, Group People Director, and Ian Houghton,
Company Secretary, also materially assisted the Committee
in carrying out its duties, except in relation to their own
remuneration. No director or manager is involved in any
decisions as to their own remuneration. The Group Chief
Executive also attends Committee meetings but excludes
himself in relation to discussion of his own remuneration,
asdoes the Chairman.
The Committee maintains an ongoing dialogue with our
major shareholders and proxy agencies to understand their
views. Any major changes to the Directors’ remuneration
policy or its operation would be subject to prior consultation
as necessary.
Directors’ remuneration report continued
86 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
Key Committee activities during the year
Alignment to strategy
andwiderworkforce
Assessed the ongoing alignment of remuneration structures, measures and targets
to strategy.
Reviewed wider workforce remuneration.
Reviewed the gender pay gap report and recommended to the Board that the gender
pay gap report be published.
Engaged with the workforce about executive remuneration.
Shareholder engagement
Considered investor feedback on the Directors’ remuneration policy and the voting
outcomes at the 2022 AGM.
Pay for performance
Assessed performance against targets set for the financial year ended 31 August 2021
annual bonus and LTIP awards granted in the financial year ended 31 August 2019
and considered whether any discretion should be used to adjust formulaic outcomes
if necessary.
Reviewed and approved targets for annual bonus and LTIP.
Reviewed the performance of the executive directors and senior leadership team against
personal objectives.
Considered remuneration to ensure that it retains and motivates an outstanding
management team.
Governance
Reviewed progress of the executive directors against shareholding requirements.
Approved the 2021 Directors’ remuneration report.
Pay/fees
Approved pay rises for Carl Cowling, Robert Moorhead and the senior leadership team.
Approved the Chairman’s fee increase.
Approved the fees of the new Chair, Annette Court, prior to her appointment. The fee
paid to the Chair of the Company will increase from £256,150 to £320,000 per
annum from 1 December 2022. In assessing chair fees as part of the chair succession
process, the Committee noted the increased fee levels for this role generally and
took into account the increasing complexity of the Group’s international operations
and global strategic positioning together with reviewing relevant benchmarking from
FIT. Annette Court will be paid £60,000 per annum as a non-executive director from
1 September 2022 which shall increase to £320,000 per annum from the date she
becomes Chair on 1 December 2022.
87WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
The Committee also considered the factors set out in Provision 40 of the Code. The Committee believes that the Company’s
current Directors’ remuneration policy addresses those factors as set out below:
Simplicity
• the Directors’ remuneration policy and our approach to its implementation are simple,
appropriately designed and well understood, reinforcing the Group’s culture as well
as strategy;
• the Committee reviews performance metrics and targets each year to ensure that they
continue to be clear and aligned to delivery of the strategy;
Predictability
• the performance measures used in the incentive plans are well aligned to the Group’s
strategy and goals, with stretching and achievable targets: the maximum awards under
any award are clearly stated and, therefore, predictable;
Proportionality
• the balanced approach is proportionate and drives behaviours that promote high
performance and sustainable growth to drive the long-term success of the Company for
the benefit of all stakeholders, without encouraging or rewarding excessive risk-taking;
• the Committee retains sufficient discretion to adjust formulaic incentive outcomes
or require the repayment of previous awards to ensure that poor performance is
not rewarded;
Risk
• the Committee reviews and sets performance targets each year to ensure that they
drive the right behaviours and are appropriately stretching without encouraging
unnecessary risks;
• risk management is operated through annual bonus deferral, LTIP holding periods and
post-employment shareholding;
• malus and clawback provisions apply to the annual bonus, DBP and LTIP;
Clarity
• the Committee maintains a continual dialogue with shareholders and proxy agencies to
understand their views. We consulted with shareholders on remuneration arrangements,
listening to and taking into account the feedback we received when developing the
remuneration policy;
• our approach to disclosure is transparent with clear rationale provided on its
maintenance and any changes to policy;
• when considering remuneration for executive directors and senior management, the
Committee takes into account the pay and conditions of employees across the Group
and, where appropriate, exercises oversight of remuneration throughout the Company;
Alignment to culture
• the Committee assesses performance under the annual bonus plan against a range of
objectives, including those related to our values and strategy;
• the introduction of ESG targets to the LTIP from the grant in 2022 will further help to
ensure incentive schemes drive behaviours consistent with Company purpose, values
and strategy.
Directors’ remuneration report continued
88 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
2.4 Statement of consideration of employment
conditions elsewhere in the Company and
differences to executive director policy
Our employees are a key component of the Company’s
performance and our overall reward strategy aims to support
this. When considering remuneration arrangements for
executive directors and senior management, the Committee
takes into account the pay and conditions of employees
across the Group. The Committee receives in-depth data
from the Group People Director on wider workforce pay and
conditions and, where appropriate, exercises oversight of
remuneration throughout the Group.
Our approach to reward for our employees is based on the
following principles:
• competitive: setting pay with reference to internal relativity
and external market practices;
• simple: helping all employees to understand how they
are rewarded;
• fair: achieving consistent outcomes through flexible and
transparent policies; and
• sustainable: aligning reward to business strategy
and performance.
All employees are entitled to base salary and benefits,
including pension and staff discount. The Company operates
an HMRC Approved Save-As-You-Earn share option
scheme (“Sharesave Scheme”) which provides employees
with the opportunity to acquire shares in the Company.
Approximately 560 employees participate in the Sharesave
Scheme. Our Employee Assistance Programme offers all
employees access to free, 24/7 confidential telephone,
online and face-to-face advice for problems they may be
experiencing at home or work. Employees also have access
to the Company’s Benevolent Fund charity, which can
provide financial assistance in cases of significant hardship
and provide recuperative holidays and care breaks.
Participation in a pension plan is offered to all employees
on a contributory basis and we have approximately 5,765
employees in our pension plans.
2.5 Gender pay disclosures
The Committee reviewed the gender pay gap report and
recommended to the Board that the gender pay gap
report be published. You can find more information on the
Company’s gender pay gap and the actions that are being
implemented to reduce it on pages 41 to 42.
2.6 Senior executive remuneration
The Committee approved the remuneration of the
Company’s senior executives during the financial year ended
31 August 2022.
2.2 How our Directors’ remuneration policy is
linked to our strategy
Our Directors’ remuneration policy focuses on an approach
to pay which we believe is in our shareholders’ best interests
and promotes the long-term success of the Company.
Whilst it provides executive remuneration packages which
are competitive, there is a very clear bias to variable pay
with stretching and rigorous performance measures
and conditions designed to deliver superior returns for
shareholders. Our Directors’ remuneration policy has worked
well supporting the Company’s long-term strategy to
create shareholder value and recruit high calibre executives.
You can see how the Company has generated shareholder
returns in the TSR graph on page 95.
2.3 Engaging with our employees on pay
Employee engagement is supported through clear
communication of the Group’s performance and objectives.
This information is cascaded via team briefings, employee
events, intranet sites and e-newsletters. We conduct regular
employee engagement surveys and the results are shared
with all staff and actions agreed to respond to specific points
of feedback, with employee focus groups used to help
understand the staff feedback in more depth.
The Committee receives regular reports from the
Group People Director and Senior Managers on Group
remuneration. The reports cover changes to pay, benefits,
pensions and share schemes. Additionally, Simon Emeny,
non-executive director with responsibility for workforce
engagement, and Marion Sears, Chair of the Committee,
attended employee forums to discuss, amongst other
topics, the Company’s approach to remuneration and,
morespecifically, executive remuneration and how this
alignsto the wider Company pay policy. The Committee
considers the feedback from these sessions when making
decisions on executive remuneration, and the results of
employee engagement surveys which include questions
about pay and working environment are discussed by the
Committee and the Board.
The Company is proud of its long history of being regarded
as a responsible and respected employer and regularly
reviews the overall structure of pay practices across the
Group and the wider retail sector to ensure it remains
competitive and is able to retain and attract employees.
During the year, management’s specific targeted actions
have reduced the number of employee vacancies although
the employment market remains challenging both in the UK
and in many international locations.
89WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
2.7 Performance measure selection and
approach to target setting
Annual bonus plan
The performance targets used under the annual bonus plan
are set annually to support the Company’s strategic priorities
and reinforce financial performance. The performance
targets are typically set by the Committee based on a range
of factors, principally the Company’s budget as approved
by the Board. The Committee agreed that the performance
targets for the annual bonus plan for the financial year ended
31 August 2022 should revert to being based on Headline
profit before tax and non-underlying items¹. The Committee,
in setting the bonus targets for the financial year ended
31 August 2022, was mindful of the impact of Covid-19 on
the Company and the markets in which we operate and
took into consideration market consensus for the financial
year ended 31 August 2022. The Committee agreed that
the range used to determine the level of pay-out under the
annual bonus plan in respect of the financial targets should
be widened given that the proposed target pay-out under
the annual bonus plan was stretching and uncertain due to
on-going and unpredictable Covid-19 restrictions.
Participants can earn a bonus based on the achievement
of a financial target, for example, Headline profit before tax
and non-underlying items¹ and a personal rating measured
against one or more specific financial and/or non-financial
objectives, including ESG targets. The maximum level
of bonus paid to a participant in the plan is dependent
on the achievement of both the maximum target for the
financial target and the highest personal performance
rating. The Committee sets a threshold pay-out target
and amaximum pay-out target with straight-line vesting
between the targets.
In exceptional circumstances, up to 20 per cent of the
maximum bonus opportunity may be payable independent
of the financial out-turn. For on-target achievement of the
financial target and a good personal rating, an executive
would earn approximately 48 per cent of the maximum
bonus available under the annual bonus plan. Any bonus in
excess of the on-target level is deferred into shares under
the Deferred Bonus Plan (“DBP”). One third of the shares
arereleased on each anniversary of the date of grant.
Different bonus measures and targets may apply in
subsequent years within the overall constraints of the plan.
Long-term incentives
The Committee regularly reviews the performance targets
applicable to the LTIP to ensure that they align with the
Company’s strategy and reinforce financial performance.
The performance targets are typically set by the Committee
based on a range of factors, including the Company’s three
year plan, sustainability strategy and the market sectors
in which it operates. The Committee may change the
measures and/or targets in respect of subsequent awards.
The Committee believes that a combination of financial,
market-based conditions and corporate responsibility as the
basis for the performance targets for the LTIP is best suited
to the needs of the Company and its shareholders in order
to reward sustained long-term performance and the creation
of shareholder value. The performance targets for awards
made under the LTIP in the financial year ended 31 August
2022 were 50 per cent growth in Headline pre-tax earnings
per share and 50 per cent based on relative TSR over three
financial years ending 31 August 2024 compared with the
FTSE All Share Retailers Index.
The Committee is proposing that any awards made in the
financial year ending 31 August 2023 will be based on the
following targets each measured over the three financial
years ending 31 August 2025:
• 40 per cent based on Headline pre-tax earnings per
share (calculated on a pre-IFRS 16 basis). EPS has been
defined as fully diluted (including an assumption that the
convertible bonds issued in 2020 fully convert into shares)
before non-underlying items and excluding IAS 19 pension
charges together with other adjustments as considered
appropriate by the Committee (although practice has
been to make limited adjustments);
• 40 per cent based on relative TSR over three financial
years compared with the FTSE All Share Retailers Index.
Threshold vesting will occur for TSR in line with median
and maximum vesting will occur for TSR in line with the
upper quartile of the comparator group; and
• 20 per cent based on the ESG measures as set out in the
table on page 98.
Directors’ remuneration report continued
1 Alternative performance measure described and explained in the Glossary on
page 173
90 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
2.8 Implementation of Directors’ remuneration policy in the financial year ended 31August2022
This section sets out how the Directors’ remuneration policy has been implemented in the financial year ended
31 August 2022.
Element of pay Implementation of policy
Executive directors
Base salary
As previously reported, Carl Cowling’s salary increased from £550,000 to £575,000
with effect from 1 September 2021 and to £600,000 with effect from 1 April 2022 in
accordance with the arrangements put in place on his appointment as Group Chief
Executive in November 2019. This reflects an effective increase of nine per cent.
Robert Moorhead, in line with other senior executives, received a pay increase of three
per cent with effect from 1 April 2022.
The current salaries are: Carl Cowling – £600,000; and Robert Moorhead – £453,200.
Benefits
No changes were made to these elements of remuneration within the financial year
ended 31 August 2022 (although the cost of providing benefits may change without any
action by the Company).
Executive directors received a car allowance, private medical insurance and life assurance,
in addition to other benefits, during the financial year ended 31 August 2022.
Pension
Carl Cowling received a total benefit equivalent to 12.5 per cent of base salary and Robert
Moorhead received a total benefit equivalent to 25 per cent of base salary. During the
financial year ended 31 August 2022, Carl Cowling and Robert Moorhead received all
of their pension contribution as a salary supplement after applying for fixed protection.
Part of the amount otherwise paid to the Company’s defined contribution scheme was
reduced to reflect the requirement to pay employers’ National Insurance.
Annual bonus
The bonus payable for the financial year ended 31 August 2022 in respect of Carl Cowling
and Robert Moorhead was £960,000 and £725,120 respectively.
The bonus was assessed against a sliding scale target of Headline profit before tax and
non-underlying items
1
and is then moderated (on a downwards only basis) by reference
to the achievement of personal objectives.
The target range for the year ended 31 August 2022 and achievement of personal
objectives is set out on page 97.
Long-term incentives
Annual LTIP awards were set at 335 per cent for Carl Cowling and 310 per cent for
Robert Moorhead.
The terms of and the performance measures applicable to the LTIP awards made in the
financial year ended 31 August 2022 are described on page 98.
Vesting of LTIP awards is determined based on the following measures: 50 per cent is
based on EPS growth and 50 per cent is based on relative TSR. The performance period
is three years. There is a subsequent two-year holding period.
The Committee approved these performance measures as they are directly linked to the
objectives set out in the Group’s strategy; there is a direct link with shareholder value and
there is a clear line of sight for participants between performance and reward.
The Committee retains a broad discretion to reduce vesting levels, including if it considers
that there would otherwise be a windfall gain or if management fail to deliver on the
Company’s overall ESG expectations.
The award granted in November 2019 lapsed as the Company did not meet the
performance targets.
1 Alternative performance measure described and explained in the Glossary on
page 173
91WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Element of pay Implementation of policy
Shareholding guidelines
Carl Cowling is required to hold 300 per cent of salary in shares. Robert Moorhead is
required to hold 250 per cent of salary in shares. In accordance with the Company’s
Directors’ remuneration policy, Carl Cowling is expected to achieve compliance with the
shareholding requirement within six years of him joining the Board on 26 February 2019.
As at 31 August 2022 Carl Cowling held 33,108 shares with a value of £473,279
(approximately 79 per cent of salary) and Robert Moorhead held 197,973 shares with a
value of £2,830,024 (approximately 624 per cent of salary).
Carl Cowling is required to retain shares worth 300 per cent of salary and Robert
Moorhead (or any other executive directors) to retain shares worth 250 per cent of salary
for two years post-cessation of employment. This requirement applies to new awards and
all unvested awards from the adoption of the policy in January 2022.
Malus/clawback
The annual bonus plan, DBP and LTIP rules include a provision for clawback (before or
within a period of three years following payment or vesting or earlier change of control)
of a bonus or award if (a) the Company materially misstated its financial results and as
a result the bonus or award was made, paid or vested to a greater extent than it should
have been (b) the extent to which any performance target or other condition was met
was based on an error or inaccurate or misleading information or assumptions and as
a result the bonus or award was made, paid or vested to a greater extent than it should
have been (c) the Committee concludes that circumstances arose during the bonus
year or vesting period which would have warranted summary dismissal of the individual
concerned or (d) there is an event of insolvency having regard to the involvement of the
individual executive in the circumstances which led to such insolvency.
Non-executive directors
Annual fees
The fees of the Chairman of the Board and non-executive directors were increased with
effect from 1 April 2022. The current fees are £256,150 for the Chairman of the Board and
£60,000 for the role of non-executive director with additional fees of:
(i) £15,000 payable for the role of Senior Independent Director (“SID”); and
(ii) £15,000 payable for being the Chair of the Audit, ESG or Remuneration Committee.
Directors’ remuneration report continued
92 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
2.9 Implementation of Directors’ remuneration policy in the financial year ending 31August2023
This section sets out how the Directors’ remuneration policy will be implemented in the financial year ending 31 August 2023.
Element of pay Implementation of policy
Executive directors
Base salary
Carl Cowling and Robert Moorhead will be eligible, in line with other head office staff, for
any increase in salary from 1 April 2023 following the March 2023 review.
Benefits
No changes are expected to be made to these elements of remuneration within the
financial year ending 31 August 2023.
Pension
The pension contributions for Carl Cowling and Robert Moorhead will be reduced to align
with the wider workforce rate of 3 per cent from 1 January 2023.
Annual bonus
The bonus opportunity for Carl Cowling and Robert Moorhead will be 160 per cent of
annual salary. It is envisaged that the bonus metrics will be based on a matrix of financial
and personal performance. Any bonus in excess of the on-target level will be deferred
into shares.
Long-term incentives
Annual LTIP awards will be set at 335 per cent of salary for Carl Cowling and 310 per
cent for Robert Moorhead. Vesting of LTIP awards is determined based on the following
measures: 40 per cent is based on EPS growth, 40 per cent is based on relative TSR
and 20 per cent on ESG measures. The level of award vesting for threshold performance
is 25 per cent. The EPS performance targets will be based on the growth in Headline
pre-tax earnings per share. The TSR condition remains a median to upper quartile scale
relative to the FTSE All Share Retailers Index constituents. The ESG measures are a
reduction in Scope 1 and 2 carbon emission intensity; engagement with suppliers in
respect of Scope 3 carbon emissions; meeting gender diversity targets; and improved
employee engagement.
Shareholding guidelines
Carl Cowling is required to hold 300 per cent of salary in shares and Robert Moorhead
is required to hold 250 per cent of salary in shares. The post-cessation share ownership
guidelines require Carl Cowling to retain shares worth 300 per cent of salary and Robert
Moorhead (or any other executive directors appointed) to retain shares worth 250 per
cent of salary for two years post-cessation of employment. This requirement applies to
new awards and all unvested awards from the adoption of the Directors’ remuneration
policy in January 2022.
Malus/clawback
No changes are expected to be made to the malus and clawback provisions set out in the
annual bonus plan, DBP and LTIP rules.
The Directors’ remuneration policy in respect of the non-executive directors will be applied as follows:
Element of pay Implementation of policy
Non-executive directors
Annual fees
The fees of the new Chair, Annette Court, will be £320,000 per annum from 1 December
2022. The fee paid to the Chair of the Company will increase from £256,150 to £320,000
per annum from 1 December 2022. In assessing chair fees as part of the chair succession
process, the Committee noted the increased fee levels for this role generally and took
into account the increasing complexity of the Group’s international operations and global
strategic positioning together with reviewing relevant benchmarking from FIT.
The fees of the Chair and non-executive directors will be subject to a review in
March 2023.
93WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
2.10 Summary of non-executive directors’ remuneration 2022 (audited)
The table below summarises the total remuneration for non-executive directors as a single figure for the financial year ended
31 August 2022. Non-executive directors are not paid a pension and do not participate in any of the Company’s variable
incentive schemes:
Base fee
£’000
Committee/SID fee
£’000
Benefits
(a)
£’000
Total
£’000
2022 2021 2022 2021 2022 2021 2022 2021
Henry Staunton 244 235 – – – – 244 235
Kal Atwal
(b)
57 32 13 – – – 70 32
Nicky Dulieu 57 54 13 7 1 1 71 62
Simon Emeny 57 55 13 12 – – 70 67
Marion Sears
(c)
34 – 8 – – – 42 –
Maurice Thompson 57 55 – – 2 – 59 55
Directors who resigned during the year
Annemarie Durbin
(d)
23 55 5 12 – – 28 67
Total £’000s 529 486 52 31 3 1 584 518
a) Benefits primarily consist of travel and subsistence costs incurred in the normal course of business, in relation to meetings on Board and Committee matters and other
Company events which are considered taxable.
b) Kal Atwal was appointed as a non-executive director on 1 February 2021 and was appointed Chair of the ESG Committee with effect from 1 September 2021.
c) Marion Sears was appointed as a non-executive director and Chair of the Remuneration Committee on 1 February 2022.
d) Annemarie Durbin stepped down as a director of the Company on 19 January 2022.
2.11 Summary of executive directors’ remuneration 2022 (audited)
The table below summarises the total remuneration for executive directors as a single figure for the financial year ended
31 August 2022:
Salary
£’000
Benefits
(a)
£’000
Pension
(b)
£’000
Total fixed
remuneration
£’000
Annual
bonus
(c)
£’000
LTI
(d)
£’000
Total variable
remuneration
£’000
Total
remuneration
£’000
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
Carl Cowling 585 550 14 14 73 69 672 633 960 550 – – 960 550 1,632 1,183
Robert
Moorhead 445 440 14 14 109 107 568 561 725 358 – – 725 358 1,293 919
Total £’000s 1,030 990 28 28 182 176 1,240 1,194 1,685 908 – – 1,685 908 2,925 2,102
a) Benefits relate mainly to the provision of a car allowance, private medical insurance and life assurance.
b) The pension figures in the table above include both the pension contribution into the Company’s defined contribution pension scheme and any salary supplement received
inlieu.
c) The performance measures for the annual bonus, and achievement against them, together with details of the level of deferral are set out on pages 97 and 98.
d) The performance measures for the LTIP, and achievement against them, are set out on pages 98 and 99. The performance conditions for the awards granted in November
2019 were not met and the awards lapsed.
The total aggregate emoluments (excluding LTI) paid to the Board in the financial year ended 31 August 2022 was
£3,509,000 and in the financial year ended 31 August 2021 was £2,646,000.
2.12 Payments made to former directors (audited)
Stephen Clarke stepped down as Group Chief Executive on 31 October 2019. Under the rules of the LTIP, Stephen Clarke
was treated as a good leaver and retained a reduced number of unvested awards. During the year, Stephen Clarke exercised
the balance of his 2016 LTIP award which vested in 2019 but was subject to a two year holding period. The 2018 LTIP
award lapsed.
Stephen Clarke also retained awards under the DBP. These awards vested in respect of 2,360 shares in the financial year
ended 31 August 2022.
No other payments were made in the financial year ended 31 August 2022 to former directors of the Company.
2.13 Payments for loss of office (audited)
No payments were made in respect of any director’s loss of office in the financial year ended 31 August 2022.
Directors’ remuneration report continued
94 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
2.14 Assessing pay and performance
You can see how the Company has generated shareholder value since 2012 in the TSR graph below. As can be seen from the
graph, the Company generated a return of (12) per cent over the financial year ended 31 August 2022 compared to the FTSE
All Share Retailers Index which generated a return of (32) per cent over the same period.
WH Smith FTSE All Share Retailers Index
Accounting year end
2012
0
50
100
150
200
250
300
350
400
450
2013 20152014 2016 2018 2019 2020 2021 20222017
Total shareholder return performance since 31 August 2012
a) The graph illustrates the TSR performance on a cumulative basis (with dividends reinvested) as at the end of each of the last ten financial years compared with the FTSE All
Share Retailers Index (the “Index”) over the same period.
b) The Company is a member of the Index and, as such, this sector was considered to be the most appropriate comparator group upon which a broad equity market index is
calculated.
The table below summarises the Group Chief Executive’s remuneration and how the Company’s variable pay plans have paid
out over the past ten years.
Financial year ended 31 August CEO
Single figure of total
remuneration
£’000
Annual bonus (vesting versus
maximum opportunity)
%
Long-term incentive (vesting
versus maximum opportunity)
%
2022 Carl Cowling 1,632 100 –
2021 Carl Cowling 1,183 63 –
2020 – from 1 November 2019 Carl Cowling 531 – 13
2020 – until 31 October 2019 Stephen Clarke 221 – 13
2019 Stephen Clarke 3,416 100 69
2018 Stephen Clarke 2,879 93 58
2017 Stephen Clarke 4,112 98 81
2016 Stephen Clarke 5,179 100 98
2015 Stephen Clarke 4,148 100 100
2014 Stephen Clarke 2,546 100 100
2013 – from 1 June Stephen Clarke 4,067 100 97
2013 – until 31 May Kate Swann 9,192 100 98
95WH Smith PLC Annual Report and Accounts 2022
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2.15 Annual change in remuneration of each director compared to employees
The table below shows the percentage changes in the remuneration of each director (salary/fees, annual bonus and taxable
benefits) from financial year to subsequent financial year over the three financial years to 31 August 2022 compared with the
percentage changes in the average of those components of pay for UK employees employed by WH Smith Retail Holdings
Limited over that period. The Company has chosen to voluntarily disclose this information, given that WH Smith PLC is not an
employing company.
Salary/fee increase/(decrease)
%
Annual bonus increase/(decrease)
%
Taxable benefits increase/(decrease)
%
Financial year ended 31 August 2022 2021 2020 2022 2021 2020 2022 2021 2020
Carl Cowling 6 14 140 75 100 (100) 10 – 100
Robert Moorhead 1 5 5 103 100 (100) – – –
Henry Staunton 4 5 (5) n/a n/a n/a – – –
Kal Atwal 119 – – n/a n/a n/a – – –
Nicky Dulieu 15 – – n/a n/a n/a – – –
Simon Emeny 4 14 111 n/a n/a n/a – – –
Marion Sears – – – n/a n/a n/a – – –
Maurice Thompson 4 4 86 n/a n/a n/a 100 (100) –
UK employees 8 5 7 47 100 (100) (16) 3 18
a) Marion Sears was appointed as a non-executive director and Chair of the Remuneration Committee on 1 February 2022.
b) Carl Cowling’s salary increased from £550,000 to £575,000 with effect from 1 September 2021 and to £600,000 with effect from 1 April 2022.
c) Robert Moorhead’s salary increased by 3 per cent with effect from 1 April 2022.
d) Kal Atwal was appointed as a non-executive director on 1 February 2021 and was appointed Chair of the ESG Committee with effect from 1 September 2021.
e) The reduction in the taxable benefits for UK employees is as a result of employees ceasing to receive the Company’s private medical insurance and the move away from diesel
cars under the Company car scheme.
2.16 Group Chief Executive pay compared to pay of UK employees
The ratios comparing the total remuneration of the Group Chief Executive (as included in the single total figure of
remuneration table on page 95) to the remuneration of the 25th, 50th and 75th percentile of our UK employees are set out
below. The disclosure will build up over time to cover a rolling ten-year period.
We expect the pay ratio to vary from year to year, driven largely by the variable pay outcome for the Group Chief Executive,
which will significantly outweigh any other changes in pay at WH Smith.
Group Chief Executive pay ratios
Financial year ended 31 August Method 25th percentile pay ratio Median pay ratio 75th percentile pay ratio
2022 Option A 87:1 86:1 65:1
2021 Option A 70:1 70:1 52:1
2020 Option A 43:1 41:1 33:1
2019 Option A 239:1 207:1 201:1
WH Smith has chosen to use Option A to calculate its Group Chief Executive pay ratio as it believes that it is the most robust
way for it to calculate the three ratios from the options available in the Regulations.
Total remuneration for all UK full-time equivalent employees of the Company on 31 August 2022 has been calculated in
line with the single figure methodology and reflects their actual earnings received in the financial year ended 31 August
2022 (excluding business expenses). Set out in the table below is the base salary and total pay and benefits for each of
the percentiles.
£ 25th percentile pay ratio Median pay ratio 75th percentile pay ratio
Salary 18,850 18,850 23,505
Total pay and benefits 18,850 18,910 25,011
The Company believes the median pay ratio for the year ended 31 August 2022 is consistent with the pay, reward and
progression policies for the Company’s UK full-time equivalent employees. This group is the most appropriate comparator
for the Group Chief Executive as he is a full-time employee based in the UK and approximately 77 per cent of all WH Smith
employees are based in the UK. The increase in the pay ratios in 2022 as compared to 2021 is attributable to the increase in
base pay and the amount of variable remuneration received by the Group Chief Executive as a result of the Group returning
to profitability in the financial year ended 31 August 2022.
Directors’ remuneration report continued
96 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
2.17 Relative importance of spend on pay
The table below shows the total cost of remuneration paid to or receivable by all employees in the Group as well as dividends
paid during the financial year ended 31 August 2022. There were not considered to be any other significant distributions and
payments or other uses of profit or cash flow deemed by the directors to assist in understanding the relative importance of
spend on pay for the purposes of the table below.
Total cost of remuneration Distribution to shareholders
2021
£m
2022
£m
% change 2021
£m
2022
£m
% change
232 293 26 – – –
2.18 Annual bonus targets (audited)
The performance targets used under the annual bonus plan are normally set annually to support the Company’s strategic
priorities and reinforce financial performance. The performance targets are set by the Committee based on a range of factors,
principally the Company’s budget as approved by the Board. The Committee agreed that the performance targets for the
annual bonus plan for the financial year ended 31 August 2022 should be based on Headline profit before tax and non-
underlying items
1
.
The Committee, in setting the bonus targets for the financial year ended 31 August 2022, was mindful of the impact of
Covid-19 on the Company and the markets in which we operate and took into consideration market consensus for the
financial year ended 31 August 2022. The Committee agreed that the range used to determine the level of pay-out under
thebonus plan in respect of the financial targets should be widened given that the proposed target pay-out under the bonus
plan was stretching and uncertain due to on-going and unpredictable Covid-19 restrictions.
Under the annual bonus plan, participants can earn a bonus based on the achievement of a financial target and a personal
rating measured against one or more specific (financial and/or non-financial) objectives. The maximum level of bonus paid
to a participant in the plan is dependent on the achievement of both the maximum financial target and the highest personal
performance rating. The Committee sets a threshold pay-out target and a maximum pay-out target with straight-line vesting
between the targets.
For the financial year ended 31 August 2022, no bonus was payable unless both the threshold financial target and at least
an acceptable personal rating (i.e. “Developing”) were achieved. For on-target achievement of the profit target and a good
personal rating (i.e. “Strong”), an executive would earn approximately 48 per cent of the maximum bonus available under the
plan. Any bonus payable will be paid in cash and shares.
Bonuses for the financial year ended 31 August 2022 could be earned according to the following scale (as a percentage of
each executive’s respective maximum):
Financial performance against Headline Group profit before tax
and non-underlying items
1
target Role model Outstanding Strong Developing Underachiever
Max: £66m 100% 80% 60% 40% 0%
Target: £55m 80% 64% 48% 32% 0%
Threshold: £45m 40% 32% 24% 16% 0%
Interpolation between points in the matrix is permitted.
The Company’s Headline profit before tax and non-underlying items
1
for the financial year ended 31 August 2022 was £73m.
This performance resulted in approximately 2,245 employees also receiving a bonus under the annual bonus plan for the
financial year ended 31 August 2022. For Carl Cowling, his personal rating is based on a range of objectives including driving
employee engagement to ensure that we remain a good place to work and retain our best people; continuing the Group’s
progress towards Net Zero; developing the talent and succession pipeline of the senior team to ensure the business is
prepared for its increasingly global nature; delivering the InMotion international growth strategy; and building and developing
the US management team. Following the successful achievement of all of his key personal objectives, Carl Cowling will receive
a bonus payment of £960,000 of which £499,200 will be deferred into shares. For Robert Moorhead, his personal rating is
based on a range of objectives including driving employee engagement to ensure that we remain a good place to work and
retain our best people; continuing the Group’s progress towards Net Zero; delivering the Group free cash flow target; working
with the Trustee of the Company’s DB pension scheme to facilitate the buy-in; and accelerating the transformation in Finance
capability in MRG. Following the successful achievement of all of his key personal objectives, Robert Moorhead will receive a
bonus payment of £725,120 of which £377,062 will be deferred into shares.
1 Alternative performance measure described and explained in the Glossary on
page 173
97WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
For the annual bonus plan for the financial year ending 31 August 2023, the bonus metrics will also be based on a similar
matrix of financial and personal performance with the financial performance measure being Headline profit before tax and
non-underlying items
1
. The financial bonus metrics will apply across the Group’s bonus plans, so that the whole organisation
isfocused on delivering financial performance via the metrics that are applicable to each business. The Committee will
publish the Group targets for that financial year in next year’s report and, consistent with market practice, has elected not
to pre-disclose them (or give numerical personal objectives) on the basis of commercial sensitivity. Any bonus payable in
respect of the financial year ending 31 August 2023 will be paid in cash and shares. Any bonus payable over target will be
deferred into shares for a period of up to three years under the DBP. The shares will be released one third on each anniversary
of the date of grant irrespective of whether the recipient is an employee of the Company (other than in a case of termination
for misconduct).
2.19 Share plans (audited)
The Committee regularly reviews the performance conditions applicable to the LTIP to ensure that they align with the
Company’s strategy and reinforce financial performance. The Committee may change the conditions and/or targets in respect
of subsequent awards. The Committee retains a broad discretion to reduce vesting levels, including if it considers that there
would otherwise be a windfall gain or if management fail to deliver on the Company’s ESG expectations.
The performance conditions for awards granted under the LTIP in the financial year ended 31 August 2022 were based on the
following Headline diluted earnings per share before non-underlying items
1
and relative TSR targets each measured at the end
of the three financial years to 31 August 2024:
• 50 per cent based on Headline pre-tax earnings per share
1
(calculated on a pre-IFRS 16 basis) of 75p to 110p with 25
percent of this component vesting at threshold increasing on a straight-line basis to 100 percent at maximum. EPS is
defined as fully diluted pre-exceptional items and excluding IAS 19 pension charges together with other adjustments as
considered appropriate by the Committee (although practice has been to make limited adjustments); and
• 50 per cent based on relative TSR over three financial years compared with the FTSE All Share Retailers Index.
Threshold vesting will occur for TSR in line with median and maximum vesting will occur for TSR in line with the upper
quartile of the comparator group consistent with prior awards. FIT independently carries out the relevant TSR growth
calculation for the Company.
The performance condition for awards granted under the LTIP in the financial year ending 31 August 2023 will also include
ESG performance measures and will therefore be based on the following conditions each measured at the end of the three
financial years to 31 August 2025:
• 40 per cent based on Headline pre-tax earnings per share
1
(calculated on a pre-IFRS 16 basis) of 100p to 125p with 25
percent of this component vesting at threshold increasing on a straight-line basis to 100 percent at maximum. EPS is
defined as fully diluted pre-exceptional items and excluding IAS 19 pension charges together with other adjustments
asconsidered appropriate by the Committee (although practice has been to make limited adjustments);
• 40 per cent based on relative TSR over three financial years compared with the FTSE All Share Retailers Index.
Threshold vesting will occur for TSR in line with median and maximum vesting will occur for TSR in line with the upper
quartile of the comparator group consistent with prior awards. FIT independently carries out the relevant TSR growth
calculation for the Company; and
• 20 per cent based on the Company’s ESG strategy as set out in the table below:
Target
Reduction in Scope
1 and 2 emissions per
square metre of floor space
tonnes per m
2
Scope 3 emissions:
Target engagement of
suppliers by emissions
who will have approved
science-based targets
by 2025
Gender Diversity
Increase in %
of women in Senior
Executive team
Employee
Engagement Score
% improvement
Minimum – 25% vesting 5% 35% 5% Maintain
Maximum – 100% vesting 15% 45% 10% 5%
Directors’ remuneration report continued
1 Alternative performance measure described and explained in the Glossary on
page 173
98 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
Outstanding awards
The Company did not meet the performance conditions for the 2019 LTIP and the awards lapsed on 5 November 2022.
The Committee determined that the formulaic out-turn under the LTIP was appropriate and should be applied without
discretionary adjustment.
Details of the conditional awards (in the form of nil-cost options) to acquire ordinary shares of the Company granted to
executive directors are as follows:
Number of
shares subject
to awards at
31 August
2021
(a)
Number
of shares
subject
to awards
granted
during the
year
Number of
dividend
accrual
shares
awarded
during the
year
Number
of shares
subject
to awards
exercised
during the
year
Number
of shares
subject
to awards
lapsed during
the year
Number
of shares
subject to
awards at
31 August
2022
(f)
Share price
at date
of grant
(pence)
(i)
Face value of
award at date
of grant
£’000 Exercise period
Carl Cowling
LTIP 2016
(b)
17,345 – 281 17,626 – – 1551.00 720 20.10.19 – 20.10.26
LTIP 2017
(c)
5,104 – – – – 5,104 2036.67 743 26.10.20 – 26.10.27
LTIP 2018
(d)
40,515 – – – 40,515 – 1832.67 743 01.11.23 – 01.11.28
LTIP 2019
(e)
79,557 – – – – 79,557 2210.67 1,759 05.11.24 – 05.11.29
DBP 2019
(h)
2,703 – – 1,351 – 1,352 2258.67 90 24.10.20 – 24.10.29
LTIP 2020
(g)
126,257 – – – – 126,257 1459.33 1,843 19.11.25 – 19.11.30
LTIP 2021
(g)
– 122,769 – – – 122,769 1569.00 1,926 19.11.26 – 19.11.31
DBP 2021
(h)
– 8,132 – – – 8,132 1569.00 128 19.11.22 – 19.11.31
Total 271,481 130,901 281 18,977 40,515 343,171
Robert Moorhead
LTIP 2016
(b)
27,973 – 453 28,426 – – 1551.00 1,161 20.10.19 – 20.10.26
LTIP 2017
(c)
7,982 – – – – 7,982 2036.67 1,161 26.10.20 – 26.10.27
LTIP 2018
(d)
63,354 – – – 63,354 – 1832.67 1,161 01.11.23 – 01.11.28
LTIP 2019
(e)
61,701 – – – – 61,701 2210.67 1,364 05.11.24 – 05.11.29
DBP 2019
(h)
2,685 – – 1,342 – 1,343 2258.67 90 24.10.20 – 24.10.29
LTIP 2020
(g)
93,468 – – – – 93,468 1459.33 1,364 19.11.25 – 19.11.30
LTIP 2021
(g)
– 86,934 – – – 86,934 1569.00 1,364 19.11.26 – 19.11.31
DBP 2021
(h)
– 5,286 – – – 5,286 1569.00 83 19.11.22 – 19.11.31
Total 257,163 92,220 453 29,768 63,354 256,714
a) The number of shares subject to awards is the maximum (100 per cent) number of shares that could be received by the executive if the performance targets are fully met
except that, in respect of awards granted from October 2016 onwards, consistent with market practice, any part of the awards which vest will benefit from the accrual of
dividend roll-up.
b) In respect of the award granted on 20 October 2016 under the LTIP held by Carl Cowling, the remaining 50 per cent of the vested shares became exercisable on the fifth
anniversary of the date of grant. The value of the 17,626 shares on the date of vesting was £285,870.77 (1621.8698p per ordinary share). In respect of the award granted on
20October 2016 under the LTIP held by Robert Moorhead, the remaining 50 per cent of the vested shares became exercisable on the fifth anniversary of the date of grant.
The value of the 28,426 shares on the date of vesting was £474,443.07 (1669.0462 per ordinary share).
c) In respect of the awards granted on 26 October 2017 under the LTIP held by Carl Cowling and Robert Moorhead, the vested shares were subject to a two year holding period,
and became exercisable on 26 October 2022, being the fifth anniversary of the date of grant.
d) The performance conditions for awards granted on 1 November 2018 under the LTIP were:
(i) 40 per cent based on the Company’s TSR performance against the FTSE All Share Retailers Index constituents. Vesting will occur on the following basis: below median –
Nil; median – 25 per cent; upper quartile – 100 per cent; and on a straight-line basis between 25 per cent and 100 per cent; and
(ii) 60 per cent based on growth in the adjusted diluted EPS of the Company. Vesting will occur on the following basis: below 5 per cent – Nil; 5 per cent – 25 per cent;
10percent or more – 100 per cent; and on a straight-line basis between 25 per cent and 100 per cent. For these purposes, EPS will be determined by reference to fully
diluted EPS before exceptional items and will exclude IAS 19 pension charges from the calculation, adjusted as considered appropriate by the Committee to ensure
consistency. TheCompany did not meet the performance conditions and the awards lapsed on 1 November 2021.
e) The performance conditions for awards granted on 5 November 2019 under the LTIP were:
(i) 40 per cent based on the Company’s TSR performance against the FTSE All Share Retailers Index constituents. Vesting will occur on the following basis: below median –
Nil; median – 25 per cent; upper quartile – 100 per cent; and on a straight-line basis between 25 per cent and 100 per cent; and
(ii) 60 per cent based on growth in the adjusted diluted EPS of the Company. Vesting will occur on the following basis: below 5 per cent – Nil; 5 per cent – 25 per cent;
10percent or more – 100 per cent; and on a straight-line basis between 25 per cent and 100 per cent. For these purposes, EPS will be determined by reference to fully
diluted EPS before exceptional items and will exclude IAS 19 pension charges from the calculation, adjusted as considered appropriate by the Committee to ensure
consistency. The Company did not meet the performance conditions and the awards lapsed on 5 November 2022.
f) No awards have been granted to directors between 1 September 2022 and 10 November 2022.
g) The awards granted in the financial years ended 31 August 2021 and 31 August 2022 under the LTIP will only vest to the extent that the performance targets as set out on
pages 98 and 99 are satisfied.
h) The awards granted in the financial years ended 31 August 2020 and 31 August 2022 under the DBP will be released one third on each anniversary of the date of grant.
Details of the awards are set out on page 98. The awards accrue the benefit of any dividends paid by the Company and are not subject to performance conditions. In respect
of the award granted on 24 October 2019 held by Carl Cowling, 1,351 shares vested with a total value of £21,911.46 (1621.8698p per ordinary share). In respect of the award
granted on 24 October 2019 held by Robert Moorhead, 1,342 shares vested with a total value of £22,398.60 (1669.0462 per ordinary share).
i) The share price used for calculating the awards at the date of grant is the average of the middle market quotations for the Company’s Ordinary Shares as derived from the
London Stock Exchange Daily Official List for the three business days prior to the date of grant.
j) None of the Board participate or hold shares in the Company’s Sharesave Scheme.
99WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
2.20 WH Smith Employee Benefit Trust
The WH Smith Employee Benefit Trust (the “Trust”) is used to facilitate the acquisition of ordinary shares in the Company
to satisfy awards granted under the Company’s share plans. The Trust is a discretionary trust, the sole beneficiaries being
employees (including executive directors) and former employees of the Group and their close relations. The Trustee is
Computershare Trustees (C.I.) Limited, an independent professional trustee company based in Jersey. The Company intends
that the ordinary shares in the Trust will be used to satisfy all outstanding awards and options made under the Company’s
share plans. The Trustee may exercise all rights attached to the shares held in the Trust in accordance with their fiduciary
duties and the relevant plan rules or other governing documents. The Trustee has agreed to waive its rights to all dividends
payable on the ordinary shares held in the Trust.
Following purchases of 480,286 shares in the financial year ended 31 August 2022, the number of WH Smith PLC shares held
in the Trust at 31 August 2022 was 622,989. The Group’s accounting policy with respect to the Trust is detailed within Note 1 to
the financial statements (see page 121) and movements are detailed in the Group statement of changes in equity on page 120.
2.21 Dilution limits
Awards under the LTIP are currently satisfied using market purchase shares which may be acquired by the Trust as described
in the paragraph above. WH Smith’s share plans comply with recommended guidelines on dilution limits, and the Company
has always operated within these limits.
2.22 Directors’ interests in shares (audited)
The beneficial interests of the directors and their immediate families in the ordinary shares of the Company are set out below:
Number of shares subject to holding periods
Number of shares subject to
performance conditions
Ordinary shares DBP LTIP LTIP
31 August 2022
(or date of
leaving)
31 August 2021
(or date of
appointment)
31 August
2022
31 August
2021
31 August
2022
31 August
2021
31 August
2022
31 August
2021
Kal Atwal 3,608 3,608 – – – – – –
Carl Cowling 33,108 23,051 9,484 2,703 5,104 22,449 328,583 246,329
Nicky Dulieu 2,500 – – – – – – –
Simon Emeny 4,427 4,427 – – – – – –
Robert Moorhead 197,973 197,973 6,629 2,685 7,982 35,955 242,103 218,523
Marion Sears
(a)
5,000 2,500 – – – – – –
Henry Staunton 39,523 39,523 – – – – – –
Maurice Thompson 3,452 3,452 – – – – – –
Directors who resigned during the year
Annemarie Durbin
(g)
1,952 1,952 – – – – – –
a) Marion Sears was appointed as a non-executive director on 1 February 2022.
b) The LTIP amount above is the maximum potential award that may vest subject to the performance conditions described on pages 98 and 99.
c) The performance conditions for the October 2019 LTIP were not met and the awards lapsed.
d) There has been no further change in the directors’ interests shown above between 1 September 2022 and 10 November 2022.
e) The middle market price of an ordinary share at the close of business on 31 August 2022 was 1429.50p (31 August 2021: 1632p).
f) See Table of Outstanding awards on page 99 for details of awards exercised during the financial year ended 31 August 2022.
g) Annemarie Durbin stepped down as a director of the Company on 19 January 2022.
2.23 Voting at the Annual General Meeting
Statement of voting at 2022 AGM
The table below shows the voting outcome at the Annual General Meeting on 19 January 2022 for approval of the Directors’
remuneration policy:
Resolution Votes for % for
Votes
against % against
Total
votes cast
Votes
withheld
Approval of Directors’ remuneration policy 99,470,149 88.36% 13,100,796 11.64% 112,570,945 169,032
Directors’ remuneration report continued
100 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
Statement of voting at 2022 AGM
The table below shows the voting outcome at the Annual General Meeting on 19 January 2022 for approval of the annual
Directors’ remuneration report:
Resolution Votes for % for
Votes
against % against
Total
votes cast
Votes
withheld
Approval of Directors’ remuneration report 52,332,420 54.40% 43,861,419 45.60% 96,193,839 16,546,138
A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes ‘for’ and ‘against’
a resolution.
As explained in the announcement of the voting outcome at the Annual General Meeting on 19 January 2022, the Company
understands that the primary reason for the significant percentage of votes against the resolution to approve the Directors’
remuneration report was the payment of bonuses to the executive directors. The Committee sought the views of the
Company’s largest shareholders and representatives in respect of the Company’s remuneration practices to ensure that
shareholder concerns are well understood. The Committee is committed to regular engagement with shareholders and to
ensuring that executive director remuneration is fair and competitive and supports the long-term success of the Company.
3. The Directors’ remuneration policy: extract
The Directors’ remuneration policy was approved by shareholders at the Annual General Meeting held on 19 January 2022
and applies from that date. The Directors’ remuneration policy table is set out below for information only. The full Directors’
remuneration policy is set out on pages 61 to 72 of the 2021 Annual report and accounts which is available in the investor
relations section of the Company’s website at whsmithplc.co.uk/investors.
The following table explains the different elements of remuneration we pay to our executive directors:
Element and purpose Policy and opportunity Operation and performance measures
Base salary
This is the basic element of pay
and reflects the individual’s role
and position within the Group,
with some adjustment to reflect
their capability and contribution.
Base salary is used to attract and
retain executive directors who can
deliver our strategic objectives
and create shareholder value.
• While base salaries are reviewed each year,
the Company’s policy is not automatically
to award an inflationary increase.
When reviewing salaries, the Committee
takes into account a range of factors
including the Group’s performance, market
conditions, the prevailing market rates for
similar positions in comparable companies,
the responsibilities, individual performance
and experience of each executive director
and the level of salary increases awarded to
employees throughout the Group.
• Base salaries are benchmarked against both
FTSE 250 companies and other leading
retailers. While the Committee applies
judgement rather than setting salaries by
reference to a fixed percentile position, its
general approach is to constrain base salaries
to a median or lower level.
• While the Committee’s general approach is
to keep salaries at or below median, and, in
the normal course, would not expect salary
increases to be higher than the average for
other head office staff, given the need for a
formal cap, the Committee had limited the
maximum salary in the previous policy which
it may award to £680,000 (as increased
by RPI from January 2019, approximately
£739,000 at the year-end). No changes to
this cap are proposed.
• Base salary is paid monthly in cash.
• Base salaries are reviewed typically
annually with any changes normally
taking effect from 1 April.
101WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Element and purpose Policy and opportunity Operation and performance measures
Benefits
To provide other benefits valued
by the recipient which assist
them in carrying out their duties
effectively. Competitive benefits
assist in attracting and retaining
executive directors.
• Provide market competitive benefits in kind.
• The Company may periodically amend the
benefits available to staff. The executive
directors would normally be eligible to
receive such amended benefits on similar
terms to all senior staff.
• The value of benefits (other than relocation
costs) paid to an executive director in any
year will not exceed £80,000. In addition,
the Committee reserves the right to
pay relocation costs in any year or any
ongoing costs incurred as a result of
such relocation to an executive director if
considered appropriate to secure the better
performance by an executive director of their
duties. In the normal course, such benefits
would be limited to two years following
a relocation.
• Benefits received by executive
directors comprise a car allowance,
staff discount, private medical
insurance and life assurance.
• While the Committee does not
consider it to form part of benefits
in the normal usage of that term,
it has been advised that corporate
hospitality (whether paid for by the
Company or another) and business
travel for directors may technically
come within the applicable rules and
so the Committee expressly reserves
the right to authorise such activities
within its agreed policies.
Pension
To aid retention and remain
competitive within the
marketplace. The pension provides
an income following retirement.
• Provide an employer-sponsored pension
plan or equivalent cash allowance.
Pension contributions (or cash in lieu) for
new executive directors will be aligned with
the average rate available to UK-based
colleagues more generally, approximately
3 per cent of salary but subject to periodic
review. The pension contribution for
Carl Cowling is 12.5 per cent and Robert
Moorhead is 25 per cent of base salary until
31 December 2022. It will reduce to align
withthe wider workforce rate, approximately
3 per cent of salary, from 1 January 2023.
• All executive directors are eligible to
participate in the Company’s defined
contribution pension plan and/or
receive a salary supplement in lieu
(which is not taken into account as
salary for calculation of bonus, LTIP
orother benefits).
• Although the mix may change,
currently up to five per cent of salary
is paid into a registered pension and
up to 20 per cent by way of a salary
supplement. If the individual elects to
receive the five per cent direct (e.g.
to avoid breaching HMRC limits),
employers’ NICs are deducted from
that element.
Directors’ remuneration report continued
102 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
Element and purpose Policy and opportunity Operation and performance measures
Annual bonus
To motivate employees and
incentivise delivery of annual
performance targets.
• During the policy period the bonus
potential is 160 per cent of base salary with
target levels at 48 per cent of maximum
and threshold bonus levels at 16 per cent
of maximum.
• Clawback provisions apply to the annual
bonus plan.
• Bonuses are paid in cash and shares.
Any bonus payable over target is deferred
into shares for a period of up to three years
under the DBP. The shares are released one
third on each anniversary of assessment.
• The performance measures applied
may be financial or non-financial and
corporate, divisional or individual and
in such proportions as the Committee
considers appropriate. As set out on
page 79, currently, under the annual
bonus plan, participants can earn a
bonus based on the achievement
of a financial target and a personal
rating measured against one or
more specific (financial and/or non-
financial) objectives. The maximum
level of bonus paid to a participant
in the plan is dependent on the
achievement of both the maximum
target for the financial target and the
highest personal performance rating.
• In exceptional circumstances, up
to 20 per cent of the maximum
bonus opportunity may be payable
independent of the financial out-turn.
• The appropriateness of performance
measures is reviewed annually to
ensure they continue to support the
Company’s strategy.
• Once set, performance measures
and targets will generally remain
unaltered unless events occur which,
in the Committee’s opinion, make it
appropriate to make adjustments
to ensure they operate as originally
intended and to take account of
events which were not foreseen
when the performance targets were
originally set.
103WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Element and purpose Policy and opportunity Operation and performance measures
Long-term incentives
To motivate and incentivise
delivery of sustained performance
over the long-term, the Group will
operate the Long-Term Incentive
Plan (“LTIP”). Awards delivered
in shares to provide further
alignment with shareholders.
• The normal policy is to award executive
directors with shares with an initial face value
of up to 350 per cent of base salary each
year under the LTIP. In practice, awards of
335 per cent for the Group Chief Executive
and 310 per cent for any other executive
director are made annually.
• The LTIP will credit participants with the
benefit of accrual for dividends paid over
theperformance and any holding period.
• Malus and clawback provisions (in respect
of both unvested and vested paid awards)
apply to the LTIP.
• Awards are subject to a combined vesting
and holding period of at least five years
preventing the delivery and sale of shares
until the end of the holding period.
• The Committee may set such
performance conditions as it
considers appropriate (whether
financial or non-financial and whether
corporate, divisional or individual)
over a period of at least three
financial years.
• Once set, performance conditions
and targets will generally remain
unaltered unless events occur which,
in the Committee’s opinion, make it
appropriate to make adjustments to
the performance conditions, provided
that any adjusted performance
condition is, in its opinion, neither
materially more nor less difficult to
satisfy than the original condition.
• Executive directors can earn up
to 25 per cent of the award for
threshold performance.
• The Company will honour the vesting
of all outstanding awards granted
prior to this remuneration policy
coming into force in accordance
withthe terms of such awards.
All-employee share plans
To encourage share ownership
by employees, thereby allowing
them to share in the long-term
success of the Group and align
their interests with those of
theshareholders.
• Executive directors are able to participate
inall-employee share plans on the same
terms as other Group employees.
• Sharesave – individuals may save
up to such limit as permitted by the
relevant legislation (currently £500
each month) for a fixed period of
three years. At the end of the savings
period, individuals may use their
savings to buy ordinary shares in the
Company at a discount of up to 20
per cent of the market price set at
thelaunch of each scheme.
• In line with the governing legislation,
no performance conditions are
attached to options granted under
the Sharesave Scheme. In addition,
executive directors may participate
in other comparable all-employee
incentives on the same basis as
other employees.
On behalf of the Board
Marion Sears
Chair of the Remuneration Committee
10 November 2022
Directors’ remuneration report continued
104 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
Directors’ report
Dividends
The Headline Group profit before tax and non-underlying
items
1
for the financial year ended 31 August 2022 was
£73m (2021: Headline loss before tax and non-underlying
items
1
of £55m). The directors recommend the payment of
a final dividend for the financial year ended 31 August 2022
of 9.1p per ordinary share on 26 January 2023 to members
on the Register at the close of business on 6 January 2023.
The total dividend for the financial year ended 31 August
2022 is 9.1p per ordinary share as no interim dividend was
declared at the half-year (2021: nil).
Share capital
WH Smith PLC is a public company limited by shares.
The issued share capital of the Company, together with
details of shares issued during the year, is shown in Note
22to the financial statements on page 159.
The issued share capital of the Company as at 31 August
2022 was 130,910,434 ordinary shares of 22
6
⁄
67
p each.
These shares are listed on the London Stock Exchange and
can be held in certificated or uncertificated form.
The Company is not aware of any agreements between
shareholders that may result in restrictions on the transfer
ofsecurities and voting rights.
There are no restrictions on the transfer of ordinary shares
inthe Company other than certain restrictions imposed
by laws and regulations (such as insider trading laws and
market requirements relating to closed periods), including
the requirements of the UK Market Abuse Regulation
and the Listing Rules, and also the Company’s Share
Dealing Code whereby directors and certain employees
of the Company require Board approval to deal in the
Company’s securities.
The rights and obligations attaching to the Company’s
ordinary shares, in addition to those conferred on their
holders by law, are set out in the Company’s Articles of
Association, a copy of which can be obtained from the
Company’s website whsmithplc.co.uk. The holders of
ordinary shares are entitled to receive the Company’s report
and accounts, to attend and speak at general meetings of
the Company, to appoint proxies and to exercise voting
rights, and to receive a dividend, if declared, subject to the
deduction of any sums due from the holder of ordinary
shares to the Company on account of calls or otherwise.
Changes to the Company’s Articles of Association must
beapproved by special resolution of the Company.
The Trustee of the WH Smith Employee Benefit Trust
holds ordinary shares in the Company on behalf of the
beneficiaries of the Trust, who are the employees and former
employees of the Group. If any offer is made to the holders
of ordinary shares to acquire their shares, the Trustee will
not be obliged to accept or reject the offer in respect of any
shares which are at that time subject to subsisting options,
but will have regard to the interests of the option holders
and can consult them to obtain their views on the offer, and
subject to the foregoing, the Trustee will take the action with
respect to the offer it thinks fair.
Directors’ report
The directors present their report and the audited
consolidated financial statements for the financial year
ended 31 August 2022. The Company is the ultimate
parent company of the WHSmith group of companies
(the“Group”). WH Smith PLC is registered in England
and Wales (Number 5202036) and domiciled in the
The Company has chosen, in accordance with Section
414C(11) of the Companies Act 2006, to include certain
information in the Strategic report that would otherwise
berequired to be disclosed in this Directors’ report,
as follows:
Information Page number
Likely future developments in the business 19 to 29
Branches outside the UK 24
Disclosures concerning greenhouse gas
emissionsand energy consumption
37 to 56
Employment of disabled persons 42
Employee engagement 40 to 42
Engagement with external stakeholders 30 to 36
Other information, which forms part of this Directors’ report,
can be found in the following sections of the Annual report:
Section Page number
Corporate governance report 66 to 82
Directors’ biographies 64 and 65
Statement of directors’ responsibilities 108
Information on use of financial instruments 151 to 158
This Directors’ report (including information specified
aboveas forming part of this report) fulfils the requirements
of the Corporate governance statement for the purposes
ofDTR 7.2.
The information required by Listing Rule 9.8.4R is disclosed
on the following pages of this Annual report:
Subject matter Page number
Allotment of shares for cash
pursuant to the WH Smith
employee share incentive plans
104 Directors’ remuneration
report/Note 22 on page 159
of the financial statements
Arrangement under which
theWH Smith Employee
Benefit Trust has waived or
agreed to waive dividends/
future dividends
100 Directors’
remuneration report
1 Alternative performance measure described and explained in the Glossary on
page 173
105WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Directors’ conflicts
The Company’s Articles of Association permit the Board
to consider and, if it sees fit, to authorise situations where
a director has an interest that conflicts, or may possibly
conflict, with the interests of the Company (“Situational
Conflicts”). The Board has a formal system in place for
directors to declare Situational Conflicts to be considered for
authorisation by those directors who have no interest in the
matter being considered. In deciding whether to authorise
a Situational Conflict, the non-conflicted directors must act
in the way they consider, in good faith, would be most likely
to promote the success of the Company, and they may
impose limits or conditions when giving the authorisation,
orsubsequently, if they think this is appropriate.
Any Situational Conflicts considered by the Board, and any
authorisations given, are recorded in the Board minutes
and in a register of conflicts which is reviewed regularly
bythe Board.
Directors’ indemnities
The Company maintained directors’ and officers’ liability
insurance in the financial year ended 31 August 2022 and up
to the date of this report which gives appropriate cover for
any legal action brought against its directors. The Company
has provided and continues to provide an indemnity for
its directors, which is a qualifying third party indemnity
provision for the purposes of Section 234 of the Companies
Act 2006.
Company’s shareholders
Information provided to the Company pursuant to the
Financial Conduct Authority’s (FCA) Disclosure Guidance
and Transparency Rules (DTRs) is published on a Regulatory
Information Service and on the Company’s website. As at
31 August 2022, the following information had been received,
in accordance with DTR5, from holders of notifiable interests
in the Company’s issued share capital. It should be noted
that these holdings may have changed since notified to
the Company.
Holder Number
% as at date
of notification
Nature
of holding
Causeway Capital
Management LLC
10,635,624 8.12 Direct
BlackRock Inc. 9,473,306 7.21 Indirect
M&G PLC 7,971,971 6.92 Indirect
The Capital Group
Companies Inc.
6,564,720 5.01 Indirect
Marathon Asset
Management LLP
6,539,399 4.99 Indirect
Royal London Asset
Management Ltd
6,539,691 4.99 Direct
The Company received no other notifications in the period
between 31 August 2022 and the date of this report.
Purchase of own shares
At the 2022 AGM, authority was given for the Company to
purchase, in the market, up to 13,090,880 ordinary shares
of 22
6
⁄
67
p each, renewing the authority granted at the 2021
AGM. The Company did not purchase any of its own shares
during the financial year. The Company intends to renew
the authority to purchase its own shares at the forthcoming
AGM as the directors believe that having the flexibility to
buy back shares is in the best interests of the Company.
The directors do not currently envisage utilising this
authority in the financial year ending 31 August 2023.
Issue of new ordinary shares
During the financial year ended 31 August 2022, 1,633
ordinary shares of the Company were issued under the
Sharesave Scheme at prices between 1400p and 1609.60p.
The Articles of Association of the Company provide that the
Board may, subject to the prior approval of the members
of the Company, be granted authority to exercise all the
powers of the Company to allot shares or grant rights to
subscribe for or convert any security into shares, including
new ordinary shares.
Significant agreements/financing
agreements – change of control
A change of control of the Company following a takeover
bid may cause a number of agreements to which the
Company or its trading subsidiaries is party, such as
commercial trading contracts, banking arrangements,
property leases, licence and concession agreements, to
takeeffect, alter or terminate. In addition, the service
agreements of some senior executives and employee share
plans would be similarly affected on a change of control,
including, in the case of some employees, in relation to
compensation for loss of office.
The Company has an unsecured £250m multi-currency
revolving credit facility with Barclays Bank PLC, HSBC Bank
PLC, J.P. Morgan Securities, Santander UK PLC and BNP
Paribas for general corporate and working capital purposes.
The Company also has an unsecured £133m term loan with
Barclays Bank PLC, HSBC Bank PLC, Santander UK PLC and
BNP Paribas. If there is a change of control of the Company,
and agreeable terms cannot be negotiated between the
parties, any lender may cancel the commitment under the
loan agreements and all outstanding amounts for that lender,
together with accrued interest, shall be immediately payable.
The Company has a £327m convertible bond. The Bond
holders have the right to early redemption in the event of
achange of control of the Company.
Directors’ report continued
106 WH Smith PLC Annual Report and Accounts 2022
Corporate governance
Disclosure of information to the auditors
Having made the requisite enquiries, as far as each of the
directors is aware, there is no relevant audit information
(as defined in Section 418 of the Companies Act 2006)
of which the Company’s auditors are unaware, and each
of the directors has taken all steps he or she should have
taken as a director in order to make himself or herself aware
of any relevant audit information and to establish that the
Company’s auditors are aware of that information.
Annual General Meeting
The AGM of the Company will be held at the offices of
Herbert Smith Freehills LLP, Exchange House, Primrose
Street, London EC2A 2EG on 18 January 2023 at 11.30am.
The Notice of Annual General Meeting is given, together
with explanatory notes, in the booklet which accompanies
this report.
This report was approved by the Board on10 November 2022.
By order of the Board
Ian Houghton
Company Secretary
10 November 2022
Political donations
It is the Company’s policy not to make political donations
and no political donations, contributions or political
expenditure were made in the year (2021: £nil).
Going concern
The Group’s business activities, together with the factors
that are likely to affect its future developments, performance
and position, are set out in the Strategic report on pages
2 to63. The Financial review on pages 26 to 29 of the
Strategic report also describes the Group’s financial position,
cash flows and borrowing facilities, further information
on which is detailed in Notes 18 to 21 of the financial
statements on pages 153 to 158. As at 31 August 2022, the
Group is in a net current liability position. In addition, Note
21 of the financial statements on page 155 includes the
Group’s objectives, policies and processes for managing
its capital; itsfinancial risk management objectives; details
of its financial instruments and hedging activities; and its
exposures to credit risk and liquidity risk. The Strategic
report on pages 57 to 63 also highlights the principal risks
and uncertainties facing the Group.
The directors are required to assess whether the Group
can continue to operate for a minimum of 12 months from
the date of approval of these financial statements, and
to prepare the financial statements on a going concern
basis. The directors consider that the Group Company
has adequate resources to remain in operation for the
foreseeable future and have therefore continued to
adopt the going concern basis in preparing the financial
statements. The basis of preparation of the financial
statements and a more detailed explanation of the work
undertaken in respect of going concern are set out in
Note1of the financial statements on page 121.
The longer-term viability statement is in the Strategic report
on page 62.
Independent auditors
PwC has expressed its willingness to continue in office as
auditors of the Company. A resolution to re-appoint PwC
as auditors to the Company and a resolution to authorise
the Audit Committee to determine its remuneration will be
proposed at the AGM.
107WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Statement of directors’ responsibilities
in respect of the financial statements
The directors are responsible for preparing the Annual report
and the financial statements in accordance with applicable
law and regulation.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors have prepared the Group financial statements
in accordance with UK-adopted international accounting
standards and the Company financial statements in
accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 101 “Reduced Disclosure
Framework”, and applicable law).
Under company law the directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and
Company and of the profit or loss of the Group for that
period. In preparing the financial statements, the directors
are required to:
• select suitable accounting policies and then apply
them consistently;
• state whether applicable UK-adopted international
accounting standards have been followed for the Group
financial statements and United Kingdom Accounting
Standards, comprising FRS 101 have been followed
for the Company financial statements, subject to any
material departures disclosed and explained in the
financial statements;
• make judgements and accounting estimates that are
reasonable and prudent; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Group
and Company will continue in business.
The directors are also responsible for safeguarding the
assets of the Group and Company and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Group’s and Company’s transactions and disclose with
reasonable accuracy at any time the financial position of the
Group and Company and enable them to ensure that the
financial statements and the Directors’ remuneration report
comply with the Companies Act 2006.
The directors are responsible for the maintenance and integrity
of the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Directors’ confirmations
Each of the directors, whose names and functions are listed
in the Directors’ biographies confirms that, to the best of
their knowledge:
• the Group financial statements, which have been prepared
in accordance with UK-adopted international accounting
standards give a true and fair view of the assets, liabilities,
financial position and profit of the Group;
• the Company financial statements, which have been
prepared in accordance with United Kingdom Accounting
Standards comprising FRS 101, give a true and fair view of
the assets, liabilities, financial position of the Company;and
• the Strategic report includes a fair review of the
development and performance of the business and the
position of the Group and Company, together with a
description of the principal risks and uncertainties that
it faces.
Carl Cowling
Group Chief Executive
Robert Moorhead
Chief Financial Officer and Chief Operating Officer
10 November 2022
108 WH Smith PLC Annual Report and Accounts 2022
Financial statements
Report on the audit of the
financial statements
Opinion
In our opinion:
• WH Smith PLC’s Group financial statements and Company
financial statements (the “financial statements”) give a
true and fair view of the state of the Group’s and of the
Company’s affairs as at 31 August 2022 and of the Group’s
profit and the Group’s cash flows for the year then ended;
• the Group financial statements have been properly
prepared in accordance with UK-adopted international
accounting standards;
• the Company financial statements have been properly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 “Reduced
Disclosure Framework”, and applicable law); and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements, included within
the Annual Report, which comprise: the Group and
Company balance sheets as at 31 August 2022; the Group
income statement and Group statement of comprehensive
income; the Group cash flow statement, and the Group and
Company statements of changes in equity for the year then
ended; and the notes to the financial statements, which
include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the
Audit Committee.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable
law. Our responsibilities under ISAs (UK) are further
described in the Auditors’ responsibilities for the audit of
the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance
with the ethical requirements that are relevant to our audit
of the financial statements in the UK, which includes the
FRC’s Ethical Standard, as applicable to listed public interest
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by the FRC’s Ethical Standard
were not provided.
Other than those disclosed in Note 3, we have provided
no non-audit services to the company or its controlled
undertakings in the period under audit.
Independent auditors’ report to the members
of WH Smith PLC
Our audit approach
Context
During 2022, the Group continued its recovery from the
Covid-19 pandemic and continued its expansion in the travel
sector with the opening of a number of InMotion stores in
the UK and further store openings in the USA. 2022 saw a
return to profitability after the impact of the pandemic in
2020 and 2021. In planning our work, we were mindful of the
increased focus on the impacts of climate change risk on
the companies and their financial reporting. As part of our
audit we made enquiries of management to understand the
process adopted to assess the extent of the potential impact
of climate change on the Group’s financial statements.
The Directors consider that the impact of climate change
does not give rise to a material financial statement impact.
We used our knowledge of the Group to evaluate the
Directors’ assessment. We particularly considered how
climate change risks could impact the assumptions made
in the forecasts prepared by management and used in
their impairment and going concern assessments. We also
considered the consistency of the disclosures in relation
to climate change made in the other information within
the Annual Report with the financial statements and our
knowledge from our audit.
Our audit approach
Overview
Audit scope
• For the purposes of scoping the Group audit we have
assessed the seven components of the business; High
Street, Travel UK, InMotion, MRG, Rest of World, Company
and Central.
• For the purposes of the Group audit, we performed a
full scope audit on the High Street, Travel UK, MRG and
InMotion components, whilst Rest of World, Central and
Company components based on their value relative to the
rest of the Group.
• The audits of the InMotion and MRG components were
performed by PwC Las Vegas.
• Our audit scoping gave us coverage of approximately 97%
of absolute Group profit before tax, with approximately
97% coverage of revenue.
• We performed a full scope audit for the Company.
Key audit matters
• Impairment of store property, plant & equipment and
right-of-use (Group) and impairment of investments
(Company).
• Inventory valuation (Group)
• Pension buy-in disclosure and liability valuation (Group)
109WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Materiality
• Overall Group materiality: £7,000,000 (2021: £5,700,000)
based on professional judgement of considering a number
of potential benchmarks (specifically revenue and certain
profit based benchmarks, both for the current year and
over a number of years), given that using 5% of a three
year average of profit before tax and exceptional items
(used in the prior year) would have resulted in a lower level
of materiality in 2022 than in 2021 despite the fact that the
Group’s profit before tax has increased year-on-year.
• Overall company materiality: £8,400,000
(2021: £8,400,000) based on 1% of total assets.
• Performance materiality: £5,250,000 (2021: £4,300,000)
(Group) and £6,300,000 (2021: £6,300,000) (company).
The scope of our audit
As part of designing our audit, we determined materiality
and assessed the risks of material misstatement in the
financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance in the
audit of the financial statements of the current period
and include the most significant assessed risks of material
misstatement (whether or not due to fraud) identified by
the auditors, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources
in the audit; and directing the efforts of the engagement
team. These matters, and any comments we make on the
results of our procedures thereon, were addressed in the
context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide
aseparate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The pension buy-in accounting is a new key audit matter this
year. The Convertible bond and refinancing was a one off
transaction in the prior year. One off transactions and equal
prominence of Alternative Performance Measures ‘APMs’
and Going concern, which were key audit matters last year,
are no longer included because of the reduced number
of non-underlying items, lack of new APMs and improved
performance of the Group meaning that these items had a
lower impact on audit effort this financial year. Otherwise,
the key audit matters below are consistent with last year.
Key audit matter How our audit addressed the key audit matter
Impairment of store property, plant & equipment
and right-of-use (Group) and impairment of
investments (Company)
Refer to Note 1 (a), Basis of preparation, Non-underlying
items and 1(q) Critical accounting judgements and key
sources of estimation uncertainty and Notes 11 and 12
(Property, plant & equipment and Right-of-use assets).
The Group has a material operational retail asset base which
may be vulnerable to impairment in the event of trading
performance being below expectations. For the purposes
of impairment testing, each retail store is considered to be a
separate cash generating unit (CGU). A review of impairment
triggers was performed at the operating segment level.
This identified the need for a full impairment assessment
for High Street stores. Management performed a store level
value-in-use-model which resulted in the recognition of an
impairment charge. In Travel UK, North America and Rest
of World, impairment triggers were not identified at the
operating segment level. However, a store level impairment
trigger review identified outlying stores which resulted
in an impairment charge in Rest of World, Travel UK and
North America. We focused on this area because of the
inherent judgement and estimation uncertainty involved in
determining key assumptions such as the future sales profile
and discount rates, and the magnitude of the assets under
consideration. Recoverability of investments in subsidiary
undertakings (Company). Refer to note 3 in the Company
financial statements. The parent company had £835m of
investments in subsidiary undertakings. There is a risk that
the performance of the subsidiary undertakings is not
sufficient to support their carrying value and the assets
maybe impaired.
We obtained management’s impairment trigger assessment,
both at the operational format and store level, and
considered the conclusions reached to be appropriate.
We obtained an understanding of how management had
developed its forecast for the future trading for those stores
where an impairment trigger had been identified, including
obtaining a detailed understanding of the key assumptions
made in developing these forecasts. We satisfied ourselves
that the forecasts were reasonable and had been prepared
with appropriate Board involvement. In forming this
conclusion, we benchmarked projections to credible third
parties where available. With the assistance of our valuation
experts we tested the impairment models for the High
Street stores, including challenging management forecasts
at a store level, as well considering other assumptions
such as the sales profile and discount rate, and found
that these assumptions were reasonable. We assessed
the mathematical accuracy and integrity of the models
and determined that the impairment charge had been
appropriately calculated. Given the estimation uncertainty
inherent in the impairment process, we re-performed
the sensitivity analysis. We satisfied ourselves that any
reasonable possible change that results in a material
adjustment to the impairment charge had been considered.
We considered the disclosure of the non-underlying
impairment charge and were satisfied that this is in line
with management’s policy. We evaluated management’s
assessment of impairment indicators and considered
the consistency with other audit procedures performed.
We evaluated management’s assessment of impairment
indicators for the investment in subsidiary undertaking and
considered the consistency with other audit procedures
performed. We found that management’s view that there
were no impairment indicators was appropriate.
Independent auditors’ report to the members
of WH Smith PLC continued
110 WH Smith PLC Annual Report and Accounts 2022
Financial statements
Key audit matter How our audit addressed the key audit matter
Inventory valuation (Group)
Refer to Note 1 (h) Inventories and Note 1 (q) Critical
accounting judgements and key sources of estimate
uncertainty. Inventory consists of a number of product
categories including books, news and magazines, impulse,
stationery, travel essentials and consumer electronics. A large
proportion of inventory is supplied through sale or return
arrangements, including the majority of books, newspapers
and magazines and therefore the valuation of these items
are considered to be lower risk. However, a number of
inventory lines are perishable or not on a sale or return basis,
and items such as books, fashion, journey solutions and
consumer electronics are at a greater risk of obsolescence.
The Group’s inventory provision is primarily based on ageing
profile, obsolescence risk and forecast sales performance.
The assumptions in the calculation are consistent with the
prior year. Judgement is required to estimate future sales
to clear this inventory and with respect to alternative exit
routes for inventory which attract different provisioning rates.
We focused on the valuation of the inventory provisions
due to the size of the balance and the estimates involved in
determining the future sales forecasts and the complexity of
the calculation.
We gained an understanding of each provision category
and analysed the movement between current year and prior
year. We developed an independent expectation of the
provision required using a combination of ageing analysis
and historic inventory data. We performed testing over
the ageing data to ensure its accuracy. For the consumer
electronics inventory, we developed an independent
expectation using comparable external stock turn data.
The provisions are consistent with the Group’s accounting
policy and also reflect changes in the ageing profile.
We satisfied ourselves that the inventory provisions were
materially accurate. Given the estimates involved we
reviewed a sensitivity analysis to satisfy ourselves that a
reasonable possible change would not result in a material
adjustment to the carrying value of the inventory.
Pension buy-in disclosure and liability
valuation(Group)
Refer to Note 5 to the financial statements. During the year
the WHSmith Pension Trust Final Salary Section scheme (the
Trust) was subject to a pension buy-in; whereby the liabilities
of the scheme are now covered by a bulk annuity insurance
policy insuring all liabilities to pay all future defined benefit
pensions to the Trust’s 12,950 members and any eligible
dependants. The bulk annuity policy matches the Trust’s
cash flow benefit obligations to its members, removing
longevity and other demographic risks as well as investment,
interest rate and inflation risks. The value of this policy, which
sits within plan assets, has been set as equal to the liability
of the membership which it covers. The bulk annuity policy
and the remaining scheme assets have been restricted to the
present value of the defined benefit obligation, as the Group
does not recognise a surplus under IFRIC 14. The value of the
assets which were used to purchase the policy were higher
than the buy-in asset value, with the resulting asset loss
being taken to other comprehensive income alongside actual
asset losses experienced as a result of market movements.
We focused on this area due to it being a one off transaction
related to material balances and the judgement in respect
the treatment of the asset losses recorded through other
comprehensive income. The valuation of the schemes’
liabilities requires judgement and technical expertise in
choosing appropriate assumptions. The Group uses third
party actuaries to calculate the schemes’ liabilities.
For the accounting treatment of the buy-in, we engaged
our actuarial experts to review the buy-in contract and are
comfortable that the contract does not obligate the Group
to convert the buy-in contract to a buy-out at a future date
and that the buy-in asset is equal to the scheme liability.
Our experts also reviewed the accounting entries posted
as part of the buy-in to ensure that these are appropriate
and in line with expectations for the asset losses, which
in accordance with IAS19 have been recognised in other
comprehensive income. We reviewed the pension liability
assumptions, including discount rates, inflation and mortality
rates. We compared the discount and inflation rates used to
our internally developed benchmark ranges, finding them to
be within an acceptable range. Other assumptions were also
assessed and considered to be reasonable. Based on the
procedures performed, we noted no material issues arising
from our work.
111WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
How we tailored the audit scope
We tailored the scope of our audit to ensure that we
performed enough work to be able to give an opinion on
the financial statements as a whole, taking into account the
structure of the Group and the company, the accounting
processes and controls, and the industry in which
they operate.
For the purposes of scoping the Group audit we have
assessed the seven components of the business; High
Street, Travel UK, InMotion, MRG, Rest of World, Central and
Company. There are four significant components. High Street
and Travel UK were audited by the UK Group team, and
InMotion and MRG were audited by PwC Las Vegas as
component auditors operating under our instruction.
Audit work was performed over the consolidation process,
tax, impairment, pensions and going concern at a UK Group
level. Where the work was performed by the component
auditor, we determined the level of involvement we needed
to have in their audit work to be able to conclude whether
sufficient audit evidence had been obtained as a basis for
our opinion on the Group financial statements as a whole.
We held detailed discussions with the InMotion and MRG
component audit team, including performing a pre-year
end site visit, remote review of the work performed, update
calls on the progress of their fieldwork and by attending
the clearance meetings with management via video call.
The components where we performed audit work accounted
for approximately 97% of absolute Group loss before tax
and approximately 92% of revenue. We performed audit
procedures over specific financial statement line items within
Rest of World, Central and Company components based on
their value relative to the rest of the Group. A full scope audit
was performed over the Company financial statements.
Materiality
The scope of our audit was influenced by our application
of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and
in evaluating the effect of misstatements, both individually
and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined
materiality for the financial statements as a whole as follows:
Independent auditors’ report to the members
of WH Smith PLC continued
Financial statements – Group Financial statements – Company
Overall
materiality
£7,000,000 (2021: £5,700,000). £8,400,000 (2021: £8,400,000).
How we
determinedit
professional judgement of considering a number of
potential benchmarks (specifically revenue and certain
profit based benchmarks, both for the current year
and over a number of years), given that using 5% of a
three year average of profit before tax and exceptional
items (used in the prior year) would have resulted in a
lower level of materiality in 2022 than in 2021 despite
the factthat the Group's profit before tax has increased
year-on-year
1% of total assets
Rationale for
benchmark
applied
As noted above, we considered a range of benchmarks
for determining materiality. We selected a level of
materiality that was within the range of outcomes
suggested by these benchmarks and reflected an
appropriate increase on the prior year materiality level
given the improved performance of the Group in the
current year. The materiality selected is equivalent to
approximately 8% of current year profit before tax
(2020: approximately 5% of a three-year average of
profit before tax and non-underlying items).
As the parent entity, WH Smith PLC is a holding
Company for the Group and therefore the materiality
benchmark has been determined to be based
on total assets which is a generally accepted
auditing benchmark.
112 WH Smith PLC Annual Report and Accounts 2022
Financial statements
For each component in the scope of our Group audit,
we allocated a materiality that is less than our overall
Group materiality. The range of materiality allocated
across components was £4.0 million and £6.0 million.
Certain components were audited to a local statutory
audit materiality that was also less than our overall
Group materiality.
We use performance materiality to reduce to an
appropriately low level the probability that the aggregate
ofuncorrected and undetected misstatements exceeds
overall materiality. Specifically, we use performance
materiality in determining the scope of our audit and the
nature and extent of our testing of account balances,
classesof transactions and disclosures, for example in
determining sample sizes. Our performance materiality
was 75% (2021: 75%) of overall materiality, amounting to
£5,250,000 (2021: £4,300,000) for the Group financial
statements and £6,300,000 (2021: £6,300,000) for the
Company financial statements.
In determining the performance materiality, we considered
a number of factors – the history of misstatements, risk
assessment and aggregation risk and the effectiveness of
controls – and concluded that an amount at the upper end
of our normal range was appropriate.
We agreed with the Audit Committee that we would report
to them misstatements identified during our audit above
£350,000 (Group audit) (2021: £305,000) and £420,000
(Company audit) (2021: £420,000) as well as misstatements
below those amounts that, in our view, warranted reporting
for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group’s
and the Company’s ability to continue to adopt the going
concern basis of accounting included:
• critically assessed the assumptions within the
models including; assessing the historical accuracy of
management’s forecasts and obtained corroborating
evidence for the assumptions used including forecast air
passenger numbers;
• obtained and reviewed the Group’s financing agreements;
• considered the assumptions made regarding the extent
of an economic downturn in the severe but plausible
downside case to historical actuals and external sources;
• performed independent sensitivity analyses to the severe
but plausible case to assess the impact on liquidity and
covenant headroom; and
• confirmed that consistent approaches to going concern,
viability, impairment and other key areas of estimation
assumptions have been used.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the Group’s and the Company’s ability
to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised
for issue.
In auditing the financial statements, we have concluded that
the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.
However, because not all future events or conditions can
be predicted, this conclusion is not a guarantee as to
the Group’s and the Company’s ability to continue as a
going concern.
In relation to the directors’ reporting on how they have
applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to
the directors’ statement in the financial statements about
whether the directors considered it appropriate to adopt
thegoing concern basis of accounting.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Reporting on other information
The other information comprises all of the information in the
Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for
the other information, which includes reporting based on the
Task Force on Climate-related Financial Disclosures (TCFD)
recommendations. Our opinion on the financial statements
does not cover the other information and, accordingly, we
do not express an audit opinion or, except to the extent
otherwise explicitly stated in this report, any form of
assurance thereon.
In connection with our audit of the financial statements,
our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material
inconsistency or material misstatement, we are required to
perform procedures to conclude whether there is a material
misstatement of the financial statements or a material
misstatement of the other information. If, based on the work
we have performed, we conclude that there is a material
misstatement of this other information, we are required
to report that fact. We have nothing to report based on
these responsibilities.
With respect to the Strategic report and Directors’ report,
we also considered whether the disclosures required by the
UK Companies Act 2006 have been included.
113WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Based on our work undertaken in the course of the audit,
the Companies Act 2006 requires us also to report certain
opinions and matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course
of the audit, the information given in the Strategic report
and Directors’ report for the year ended 31 August 2022
is consistent with the financial statements and has been
prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group
and Company and their environment obtained in the course
of the audit, we did not identify any material misstatements
in the Strategic report and Directors’ report.
Directors’ Remuneration
In our opinion, the part of the Directors’ remuneration report
to be audited has been properly prepared in accordance
with the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’
statements in relation to going concern, longer-term viability
and that part of the corporate governance statement
relating to the Company’s compliance with the provisions of
the UK Corporate Governance Code specified for our review.
Our additional responsibilities with respect to the corporate
governance statement as other information are described in
the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the
corporate governance statement is materially consistent with
the financial statements and our knowledge obtained during
the audit, and we have nothing material to add or draw
attention to in relation to:
• The directors’ confirmation that they have carried out a
robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those
principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being
managed or mitigated;
• The directors’ statement in the financial statements about
whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their
identification of any material uncertainties to the group’s
and company’s ability to continue to do so over a period
of at least twelve months from the date of approval of the
financial statements;
• The directors’ explanation as to their assessment of
the Group’s and Company’s prospects, the period this
assessment covers and why the period is appropriate; and
• The directors’ statement as to whether they have a
reasonable expectation that the Company will be able
to continue in operation and meet its liabilities as they
fall due over the period of its assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
Our review of the directors’ statement regarding the
longer-term viability of the Group was substantially less in
scope than an audit and only consisted of making inquiries
and considering the directors’ process supporting their
statement; checking that the statement is in alignment with
the relevant provisions of the UK Corporate Governance
Code; and considering whether the statement is consistent
with the financial statements and our knowledge and
understanding of the Group and Company and their
environment obtained in the course of the audit.
In addition, based on the work undertaken as part of
our audit, we have concluded that each of the following
elements of the corporate governance statement is
materially consistent with the financial statements and our
knowledge obtained during the audit:
• The directors’ statement that they consider the
Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary
for the members to assess the Group’s and Company’s
position, performance, business model and strategy;
• The section of the Annual Report that describes the review
of effectiveness of risk management and internal control
systems; and
• The section of the Annual Report describing the work of
the Audit Committee.
We have nothing to report in respect of our responsibility
to report when the directors’ statement relating to the
Company’s compliance with the Code does not properly
disclose a departure from a relevant provision of the Code
specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements
andtheaudit
Responsibilities of the directors for the
financialstatements
As explained more fully in the Statement of directors’
responsibilities, the directors are responsible for the
preparation of the financial statements in accordance with
the applicable framework and for being satisfied that they
give a true and fair view. The directors are also responsible
for such internal control as they determine is necessary to
enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group’s and the Company’s
ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either
intend to liquidate the Group or the Company or to cease
operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the
financialstatements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditors’ report that includes our opinion.
Independent auditors’ report to the members
of WH Smith PLC continued
114 WH Smith PLC Annual Report and Accounts 2022
Financial statements
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect
material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry,
weidentified that the principal risks of non-compliance with
laws and regulations related to health and safety, GDPR,
employment law, general food law and the UK Listing Rules,
and we considered the extent to which non-compliance might
have a material effect on the financial statements. We also
considered those laws and regulations that have a direct
impact on the financial statements such as the Companies
Act 2006 and tax legislation. We evaluated management’s
incentives and opportunities for fraudulent manipulation of the
financial statements (including the risk of override of controls),
and determined that the principal risks were related to
manipulation of revenue and management bias in accounting
estimates. The Group engagement team shared this risk
assessment with the component auditors so that they could
include appropriate audit procedures in response to such
risks in their work. Audit procedures performed by the Group
engagement team and/or component auditors included:
• Reviewing legal confirmations from external lawyers;
• Reviewing the financial statement disclosures and
agreement to underlying supporting documentation;
• Challenging assumptions made by management in
determining their significant judgements and accounting
estimates (refer key audit matters); and
• Identifying and testing unusual journals posted to revenue.
There are inherent limitations in the audit procedures
described above. We are less likely to become aware of
instances of non-compliance with laws and regulations that
are not closely related to events and transactions reflected
in the financial statements. Also, the risk of not detecting
a material misstatement due to fraud is higher than the
risk of not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations
of certain transactions and balances, possibly using data
auditing techniques. However, it typically involves selecting
a limited number of items for testing, rather than testing
complete populations. We will often seek to target particular
items for testing based on their size or risk characteristics.
In other cases, we will use audit sampling to enable us to
draw a conclusion about the population from which the
sample is selected.
A further description of our responsibilities for the audit
of the financial statements is located on the FRC’s website
at: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared
for and only for the Company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies
Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report
is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
• we have not obtained all the information and explanations
we require for our audit; or
• adequate accounting records have not been kept by the
company, or returns adequate for our audit have not been
received from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by
law are not made; or
• the company financial statements and the part of the
Directors’ remuneration report to be audited are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from
this responsibility.
Appointment
Following the recommendation of the Audit Committee,
we were appointed by the members on 21 January 2015 to
audit the financial statements for the year ended 31 January
2015 and subsequent financial periods. The period of total
uninterrupted engagement is 8 years, covering the years
ended 31 January 2015 to 31 August 2022.
Other matter
As required by the Financial Conduct Authority Disclosure
Guidance and Transparency Rule 4.1.14R, these financial
statements form part of the ESEF-prepared annual financial
report filed on the National Storage Mechanism of the
Financial Conduct Authority in accordance with the ESEF
Regulatory Technical Standard (‘ESEF RTS’). This auditors’
report provides no assurance over whether the annual
financial report has been prepared using the single electronic
format specified in the ESEF RTS.
Jonathan Lambert (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
10 November 2022
115WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
2022 2021
£m Note
Before non-
underlying
items
1
Non-
underlying
items
2
Total
Before non-
underlying
items
1
Non-
underlying
items
2
Total
Revenue 2 1,400 – 1,400 886 – 886
Group operating profit/(loss) 2, 3 117 (20 ) 97 (27 ) (65 ) (92 )
Finance costs 7 (34 ) – (34 ) (24 ) – (24 )
Profit/(loss) before tax 83 (20 ) 63 (51 ) (65 ) (116 )
Income tax (expense)/credit 8 (14 ) 4 (10 ) 24 12 36
Profit/(loss) for the year 69 (16 ) 53 (27 ) (53 ) (80 )
Attributable to equity holders of the parent 63 (16 ) 47 (29 ) (53 ) (82 )
Attributable to non-controlling interests 6 – 6 2 – 2
Earnings/(loss) per share
Basic 9 36.2 p (62.6 )p
Diluted 9 35.6 p (62.6 )p
All results relate to continuing operations of the Group.
1 Alternative performance measure. The Group has defined and explained the purpose of its alternative performance measures in the Glossary on page 173.
2 See Note 4 for an analysis of non-underlying items. See Glossary on page 173 for a definition of Alternative performance measures.
Group income statement
For the year ended 31 August 2022
116 WH Smith PLC Annual Report and Accounts 2022
Financial statements
£m Note 2022 2021
Profit/(loss) for the year 53 (80 )
Other comprehensive income/(loss):
Items that will not be reclassified subsequently to the income statement:
Actuarial losses on defined benefit pension schemes 5 – (1 )
Items that may be reclassified subsequently to the income statement:
Gains on cash flow hedges
– Net fair value gains 21 3 –
Exchange differences on translation of foreign operations 71 (13 )
Other comprehensive income/(loss) for the year, net of tax 74 (14 )
Total comprehensive income/(loss) for the year 127 (94 )
Attributable to equity holders of the parent 120 (96 )
Attributable to non-controlling interests 7 2
Group statement of comprehensive income
For the year ended 31 August 2022
117WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
£m Note 2022 2021
Non-current assets
Goodwill 10 47 1 406
Other intangible assets 10 72 67
Property, plant and equipment 11 219 1 74
Right-of-use assets 12 446 328
Investments in joint ventures 2 2
Deferred tax assets 17 55 57
Trade and other receivables 13 9 6
Current assets
Inventories 198 135
Trade and other receivables 13 87 45
Derivative financial assets 21 1 –
Cash and cash equivalents 18 132 130
Total assets 1,692 1,350
Current liabilities
Trade and other payables 14 (365 ) (265 )
Bank overdrafts and other borrowings 18 (20 ) –
Retirement benefit obligations 5 – (1 )
Lease liabilities 15 (131 ) (108 )
Current tax liability (1 ) –
Short-term provisions 16 – (2 )
(517 ) (37 6 )
Non-current liabilities
Retirement benefit obligations 5 – (2 )
Bank loans and other borrowings 18 (404 ) (415 )
Long-term provisions 16 (14 ) (12 )
Lease liabilities 15 (446 ) (362 )
(864 ) (791 )
Total liabilities (1,381 ) (1, 167 )
Total net assets 311 183
Shareholders’ equity
Called up share capital 22 29 29
Share premium 316 316
Capital redemption reserve 13 13
Translation reserve
Other reserves 25
(244 ) (240 )
Retained earnings 138 82
Total equity attributable to the equity holders of the parent 295 173
Non-controlling interests 16 10
Total equity 311 183
The consolidated financial statements of WH Smith PLC, registered number 5202036, on pages 116 to 168 were approved by
the Board of Directors and authorised for issue on 10 November 2022 and were signed on its behalf by:
Carl Cowling Robert Moorhead
Group Chief Executive Chief Financial Officer and Chief Operating Officer
Group balance sheet
As at 31 August 2022
118 WH Smith PLC Annual Report and Accounts 2022
Financial statements
£m Note 2022 2021
Operating activities
Cash generated from operating activities 20 213 113
Interest paid
1
(26 ) (13 )
Net cash inflow from operating activities 187 100
Investing activities
Purchase of property, plant and equipment (70 ) (37 )
Purchase of intangible assets (13 ) (7 )
Acquisition of subsidiaries, net of cash acquired – 1
Net cash outflow from investing activities (83 ) (43 )
Financing activities
Distributions to non-controlling interests (1 ) –
Issue of new shares for employee share schemes 22 – 1
Purchase of own shares for employee share schemes (7 ) (2 )
Proceeds from issuance of convertible bonds 18 – 327
Repayments of borrowings 18 – (267 )
Financing arrangement fees – (8 )
Capital repayments of obligations under leases 18 (96 ) (86 )
Net cash outflow from financing activities (104 ) (35 )
Net increase in cash and cash equivalents in the year – 22
Opening cash and cash equivalents 130 108
Effect of movements in foreign exchange rates 2 –
Closing cash and cash equivalents 18 132 130
1 Includes interest payments of £11 m on lease liabilities (2021: £5 m)
Group cash flow statement
For the year ended 31 August 2022
119WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
£m
Called up
share capital
and share
premium
Capital
redemption
reserve
1
Translation
reserve
Other
reserves
1
Retained
earnings
Total equity
attributable
to the equity
holders of
the parent
Non-
controlling
interests
Total
equity
Balance at 1 September 2021 345 13 (27 ) (240 ) 82 173 10 183
Profit for the year – – – – 47 47 6 53
Other comprehensive income:
Cash flow hedges – – – 3 – 3 – 3
Exchange differences on translation
offoreign operations
Total comprehensive income for the year – – 70 3 47 120 7 127
Employee share schemes – – – (7 ) 9 2 – 2
Non-cash movement on
non-controlling interests
Balance at 31 August 2022 345 13 43 (244 ) 138 295 16 311
£m
Called up
share capital
and share
premium
Capital
redemption
reserve
1
Translation
reserve
Other
reserves
1
Retained
earnings
Total equity
attributable
to the equity
holders of
the parent
Non-
controlling
interests
Total
equity
Balance at 1 September 2020 344 13 (14 ) (27 9 ) 158 222 5 227
Loss for the year – – – – (82 ) (82 ) 2 (80 )
Other comprehensive loss:
Actuarial losses on defined benefit
pension schemes (Note 5)
Exchange differences on translation
offoreign operations
Total comprehensive loss for the year – – (13 ) – (83 ) (96 ) 2 (94 )
Issue of new shares (Note 22) 1 – – – – 1 – 1
Issue of convertible bonds – value of
conversion rights (Note 25)
Deferred tax on share-based payments – – – – 1 1 – 1
Employee share schemes – – – (1 ) 6 5 – 5
Non-cash movement on
non-controlling interests
Balance at 31 August 2021 345 13 (27 ) (240 ) 82 1 73 10 183
1 For further explanation and analysis of Capital redemption reserve and Other reserves, see Note 25.
Group statement of changes in equity
For the year ended 31 August 2022
120 WH Smith PLC Annual Report and Accounts 2022
Financial statements
1. Accounting policies
a) Basis of preparation
On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-
adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement
Board. The Group transitioned to UK-adopted International Accounting Standards in its consolidated company financial
statements on 1 September 2021. This change constitutes a change in accounting framework. However, there is no impact
onrecognition, measurement or disclosure in the period reported as a result of the change in framework.
The financial statements of the Group have been prepared in accordance with UK-adopted International Accounting
Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under
those standards.
Going concern
The consolidated financial statements have been prepared on a going concern basis. The directors are required to assess
whether the Group can continue to operate for the 12 months from the date of approval of these financial statements, and to
prepare the financial statements on a going concern basis.
The Strategic report describes the Group’s financial position, cash flows and borrowing facilities and also highlights the
principal risks and uncertainties facing the Group. The Strategic report also sets out the Group’s business activities together
with the factors that are likely to affect its future developments, performance and position. Note 22 outlines the Group’s
objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial
instruments and hedging activities; and its exposures.
The directors report that they have undertaken a rigorous assessment of current performance and forecasts, including
expenditure commitments, capital expenditure and borrowing facilities, and have concluded that the Group is able to
adequately manage its financing and principal risks, and that the Group will be able to operate within the level of its facilities
and meet the required covenants for the period to February 2024. Based on this assessment, which is outlined below, it is
appropriate to adopt the going concern basis of accounting in preparing these financial statements.
In making the going concern assessment, the directors have modelled a number of scenarios for the period to February 2024.
The base case scenario is consistent with the Board approved 2023 Budget and the three year plan. Under this scenario the
Group has significant liquidity and comfortably complies with all covenant tests to February 2024.
As a result of inherent uncertainties due to the impact of Covid-19 and challenges in the macroeconomic environment, a
severe but plausible scenario has also been modelled which assumes a 10 per cent reduction in revenue versus base case
across all our businesses (Travel UK, North America, Rest of the World and High Street). We have also assumed a five per
cent increase in labour costs against base case and a 50 per cent increase in energy costs against base case where energy
costs have not been fixed. Apart from an equal reduction in turnover rents in our Travel businesses, we have not assumed
anydecrease in other variable costs.
In both the base case and severe but plausible scenarios the Group would continue to have sufficient liquidity headroom on
its existing facilities, as described above.
The covenants on the above facilities are tested half-yearly. The covenant test at 31 August 2022 is based on minimum
liquidity. The covenant tests as at 28 February 2023, 31 August 2023 and 28 February 2024 are based on fixed charges
cover and net borrowings. Under both the base case and the severe but plausible scenarios, the Group would meet these
covenant tests.
As a result of the above analysis, the directors believe that the Group has sufficient financial resources to continue in
operation and meet its obligations as they fall due for the 12 months from the date of approval of these financial statements.
New standards
The Group has adopted the following standards and interpretations which became mandatory for the year ended
31 August 2022:
Amendment to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest rate benchmark reform – Phase 2
The Group has considered the above new standards and amendments and has concluded that they are either not relevant
tothe Group or they do not have a significant impact on the Group’s consolidated financial statements.
At the date of authorisation of these consolidated Group financial statements, the following standards and interpretations,
which have not been applied in these financial statements, were in issue but not yet effective:
Amendments to IAS 16 Proceeds before intended use
Amendments to IAS 37 Onerous contracts – cost of fulfilling a contract
Narrow scope amendments to IAS 1 and IAS 8
Notes to the financial statements
121WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
1. Accounting policies (continued)
a) Basis of preparation (continued)
The directors anticipate that the adoption of these standards and interpretations in future years will have no material impact
on the Group’s financial statements.
Alternative Performance Measures (‘APMs’)
The Group has identified certain measures that it believes will assist the understanding of the performance of the business.
These APMs are not defined or specified under the requirements of IFRS.
The Group believes that these APMs, which are not considered to be a substitute for, or superior to, IFRS measures, provide
stakeholders with additional useful information on the underlying trends, performance and position of the Group and are
consistent with how business performance is measured internally. The APMs are not defined by IFRS and therefore may not
be directly comparable with other companies’ APMs.
The key APMs that the Group uses include: measures before non-underlying items, Headline profit before tax, Headline
earnings per share, trading profit, Headline trading profit, Headline Group profit from trading operations, like-for-like revenue,
gross margin, fixed charges cover, Headline EBITDA, Net debt/funds and Headline net debt/funds and free cash flow.
These APMs are set out in the Glossary on page 173 including explanations of how they are calculated and how they are
reconciled to a statutory measure where relevant.
Non-underlying items
The Group has chosen to present a measure of profit and earnings per share which excludes certain items, that are
considered non-underlying and exceptional due to their size, nature or incidence, and are not considered to be part of the
normal operations of the Group. These measures exclude the financial effect of non-underlying items which are considered
exceptional or occur infrequently such as, inter alia, restructuring costs linked to a Board agreed programme, costs relating
to business combinations, impairment charges and other property costs, significant items relating to pension schemes, and
impairment charges and items meeting the definition of non-underlying specifically related to the Covid-19 pandemic, and
the related tax effect of these items. In addition, these measures exclude the income statement impact of amortisation of
intangible assets acquired in business combinations, which are recognised separately from goodwill. This amortisation is not
considered to be part of the underlying operating costs of the business and has no associated cash flows.
The Group believes that the separate disclosure of these items provides additional useful information to users of the financial
statements to enable a better understanding of the Group’s underlying financial performance.
Further details of non-underlying items are provided in Note 4.
Accounting convention
The financial statements are drawn up on the historical cost basis of accounting, except for certain financial instruments,
share-based payments and pensions that have been measured at fair value. The financial information is rounded to the
nearest million, except where otherwise indicated. The principal accounting policies, which have been applied consistently
throughout both years except as noted above, are set out on the following pages.
Basis of consolidation
The consolidated Group financial statements incorporate the financial statements of WH Smith PLC and all its subsidiaries.
Subsidiary undertakings are all entities over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to
the Group.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the fair value of
consideration transferred over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent
liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets,
liabilities and contingent liabilities exceeds the fair value of consideration transferred, after taking into account recognised
goodwill, the excess is immediately recognised in the income statement. The separable net assets, both tangible and
intangible, of the newly acquired subsidiary undertakings are incorporated into the financial statements on the basis of the
fair value as at the effective date of control, if appropriate. Non-controlling interests are stated at the non-controlling interests’
proportion of the fair values of the assets and liabilities recognised.
Notes to the financial statements continued
122 WH Smith PLC Annual Report and Accounts 2022
Financial statements
1. Accounting policies (continued)
a) Basis of preparation (continued)
Basis of consolidation (continued)
Results of subsidiary undertakings disposed of during the financial year are included in the financial statements up to the
effective date of disposal. Where a business component representing a separate major line of business is disposed of, or
classified as held for sale, it is classified as a discontinued operation. The post-tax profit or loss of the discontinued operations
is shown as a single amount on the face of the income statement, separate from the other results of the Group.
A joint venture is an entity in which the Group holds an interest on a long-term basis and which is jointly controlled by the
Group and one or more other venturers under a contractual agreement. Management has assessed whether it has joint
control of the arrangement. Joint control exists only when decisions about the relevant activities require the unanimous
consent of the parties that collectively control the arrangement. In assessing this joint control no significant judgements
havebeen necessary.
The Group’s share of results of joint ventures is included in the Group consolidated income statement using the equity
method of accounting. The results of joint ventures in the current and prior year are not material to disclose. Investments in
joint ventures are carried in the Group consolidated balance sheet at cost plus post-acquisition changes in the Group’s share
of net assets of the entity less any impairment in value.
If the Group’s share of losses in the joint venture equals or exceeds its investment in the joint venture, the Group does not
recognise further losses, unless it has incurred obligations to do so, or made payments on behalf of the joint venture.
All intercompany transactions, balances and unrealised gains ontransactions between Group companies are eliminated.
b) Revenue
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for
the sale of goods and services to customers (which is the most significant revenue stream), sale of wholesale goods to
franchisees, and commission and fee income on concession and franchise arrangements. Revenue excludes discounts,
estimated returns, VAT and other sales-related taxes.
Revenue is recognised when performance obligations have been met and control of the goods has transferred to the
customer. The majority of the Group’s sales are for standalone products made direct to customers at standard prices either
in-store, online or through franchisees, where there is a single performance obligation. Revenue generated from different
storeformats are considered to be a single revenue stream and are subject to the same underlying economic risks.
Revenue on in-store transactions is recognised at the point of sale when control of the goods is deemed to have transferred
to the customer. Revenue in respect of online and wholesale (including sales directly to franchisees) transactions is
recognised on the transfer of control, which is on delivery of the goods to the customers. Revenue in respect of gift cards
sold by the Group is recognised on the redemption of the gift card either in-store at the point of sale or on delivery for online
redemptions. Franchise and concession fees and commission are recognised on the accruals basis in accordance with the
substance of the contracts in place, which is typically on the basis of fixed fees spread evenly over the contract period, and/or
variable amounts earned based on revenue.
c) Supplier arrangements
The Group receives income from its suppliers in the form of supplier incentives and discounts (collectively “Supplier
arrangements”). These incomes are recognised as a deduction from cost of sales on an accruals basis as they are earned for
each supplier contract. The level of complexity and judgement is low in relation to establishing the accounting entries and
estimates, and the timing of recognition.
Supplier incomes that have been invoiced but not received at the period end are recognised in Trade Receivables, or in
Trade Payables where we have the right of offset. Incomes that have been earned but not yet invoiced are accrued and are
recorded in Accrued income.
The types of supplier arrangements recognised by the Group, and the recognition policies are detailed below.
Retrospective discounts
Income earned based on sales or purchase volume triggers set bythe supplier for specific products over specific periods.
Income is calculated and invoiced based upon actual sales or purchases over the period set out in the supplier agreement,
and is recognised in the income statement as it is earned. Where the period of an agreement spans accounting periods,
income is recognised based on forecasts for expected sales or purchase volumes, informed by current performance, trends,
and the terms of the supplier agreement. Income is invoiced throughout the year in accordance with the specific supplier
terms. The carrying value of inventories is adjusted to reflect unearned elements of supplier income as the product has not
yet been sold. This income is subsequently recognised in cost ofsales when the product has been sold.
123WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
1. Accounting policies (continued)
c) Supplier arrangements (continued)
Promotional and marketing activity
Supplier income from promotional and marketing activity includes income in respect of in-store marketing and point of sale,
supplying dedicated promotional space or receiving margin support for products on promotion.
Income for promotional and marketing activity is agreed with suppliers for specific periods and products. Income is
recognised over the period of the agreement. Income is invoiced when the performance conditions in the supplier agreement
have been achieved.
d) Retirement benefit costs
Payments to the WHSmith Group defined contribution pension schemes are recognised as an expense in the income
statement as they fall due.
The cost of providing benefits for the main defined benefit scheme, WHSmith Pension Trust, and the United News Shops
Retirement Benefits Scheme are determined by the Projected Unit Credit Method, with actuarial calculations being carried
out at the balance sheet date.
Actuarial gains and losses are recognised in full in the period in which they occur. They are recognised outside the income
statement in the Group statement of comprehensive income.
The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit
obligation, as reduced by the fair value of scheme assets. Any asset resulting from the calculation is limited to the present
value of available refunds and reductions in future contributions to the plan. Where the Group is considered to have a
contractual obligation to fund the pension scheme above the accounting value of the liabilities, an onerous obligation
is recognised.
e) Intangible assets
Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method. The consideration transferred is measured at the
aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments
issued by the Group in exchange for control, of the acquiree. Costs directly attributable to the business combination are
recognised in the income statement in the period they are incurred. The cost of a business combination is allocated at the
acquisition date by recognising the acquiree’s identifiable assets, liabilities and contingent liabilities that satisfy the recognition
criteria at their fair values at that date.
The acquisition date is the date on which the acquirer effectively obtains control of the acquiree. Intangible assets are
recognised if they meet the definition of an intangible asset contained in IAS 38 and their fair value can be measured reliably.
The excess of the cost of acquisition over the fair value of the Group’s share of identifiable net assets acquired is recognised
as goodwill.
Where less than the entire equity interest of a subsidiary is acquired, the non-controlling interest is recognised at the non-
controlling interest’s share of the net assets of the subsidiary. Changes in the Group’s ownership percentage of subsidiaries
are accounted for within equity.
Goodwill
Goodwill represents the excess of the fair value of purchase consideration over the net fair value of identifiable assets and
liabilities acquired.
Goodwill is recognised as an asset at cost and subsequently measured at cost less accumulated impairment. For the purposes
of impairment testing, goodwill is allocated to the cash-generating units (CGUs) that have benefited from the acquisition.
Each store is considered to be a CGU. Goodwill is allocated to the group of CGUs making up the Group’s operating segments,
as this is the lowest level at which management monitor goodwill. Where the Group’s operating segments have changed,
goodwill is allocated to the new operating segments identified on a relative value basis.
The carrying value of goodwill is reviewed for impairment at least annually or where there is an indication that goodwill
may be impaired. If the recoverable amount of the group of cash-generating units is less than its carrying amount, then
the impairment loss is allocated first to reduce the carrying amount of the goodwill allocated to the units and then to the
other assets of the units on a pro-rata basis. Any impairment is recognised immediately in the income statement and is not
subsequently reversed.
On disposal of a subsidiary, the attributable amount of goodwill isincluded in the determination of the profit and loss
on disposal.
Notes to the financial statements continued
124 WH Smith PLC Annual Report and Accounts 2022
Financial statements
1. Accounting policies (continued)
Other intangible assets
The costs of acquiring and developing software that is not integral to the related hardware is capitalised separately as an
intangible asset. These intangibles are stated at cost less accumulated amortisation and impairment losses. Amortisation is
charged so as to write off the costs of assets over their estimated useful lives, using the straight-line method, and is recorded
in Distribution costs. The amortisation period for capitalised software costs is over a maximum period of five years.
Cloud-based software arrangements are treated as service contracts and expensed in the Group income statement as the
service is received, except where the arrangement meets the requirements for recognition as an intangible asset of the Group
under IAS 38. These criteria are met when the Group has both a contractual right to take possession of the software without
significant penalty, and the ability to run the software independently of the software host. Configuration and customisation
costs in relation to a cloud-based software arrangements are expensed alongside the related service contract in the
consolidated income statement, unless they create a separately identifiable resource controlled by the Group, in which case
they are capitalised.
Other intangible assets are valued at cost and amortised over their useful life, and the amortisation is recorded in
administrative expenses, unless the asset can be demonstrated to have an indefinite life. Other intangible assets, such as
brands, arising on business combinations are amortised over their useful lives. Amortisation of other intangible assets arising
on business combinations is included in non-underlying costs. The useful life and residual value of all intangible assets are
determined at the time of acquisition and reviewed annually for appropriateness.
All intangible assets are reviewed for impairment in accordance with IAS 36 Impairment of Assets, when there are indications
that the carrying value may not be recoverable. Assets with indefinite useful lives are tested for impairment annually.
f) Property, plant and equipment
Property, plant and equipment assets are carried at cost less accumulated depreciation and any recognised impairment
in value. The carrying values of tangible fixed assets previously revalued have been retained at their book amount.
Depreciation is charged so as to write off the costs of assets, other than land, over their estimated useful lives, using the
straight-line method, with the annual rates applicable to the principal categories being:
Freehold properties – over 20 years
Leasehold improvements – shorter of the lease period
and the estimated remaining
economic life
Fixtures and fittings – up to ten years
Equipment and vehicles – up to ten years
The residual values of property, plant and equipment are reassessed on an annual basis.
At each balance sheet date, property, plant and equipment is reviewed for impairment if events or changes in circumstances
indicate that the carrying amount may not be recoverable. When a review for impairment is conducted, the recoverable
amount is assessed by reference to the net present value ofexpected future pre-tax cash flows of the relevant cash-
generating unit or fair value, less costs to sell, if higher. Any impairment in value is charged to the income statement inthe
period in which it occurs.
g) Leasing
The Group as a lessee
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-
of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for
short-term leases (defined as leases with a lease term of 12 months or less) and leases of low-value assets. For these leases,
the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless
another systematic basis is more representative of the time pattern in which economic benefits from the leased assets
are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the lessee uses its
incremental borrowing rate.
125WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
1. Accounting policies (continued)
g) Leasing (continued)
Lease payments included in the measurement of the lease liability comprise:
• fixed lease payments, less any lease incentives receivable;
• variable lease payments that depend on an index or rate, initially measured using the index or rate at the
commencement date;
• the amount expected to be payable by the lessee under residual value guarantees;
• the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
• payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the consolidated balance sheet.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
• The lease payments change due to changes in an index, rent review or rate, in which cases the lease liability is remeasured
by discounting the revised lease payments using an unchanged discount rate.
• A lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease
liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a
revised discount rate at the effective date of the modification.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at
or before the commencement date, less any lease incentives received and any initial direct costs. They are subsequently
measured at cost less accumulated depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is
located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is
recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in
therelated right-of-use asset.
Right-of-use assets are depreciated over the lease term. The depreciation starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the consolidated balance sheet.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment
loss as described in the accounting policies in Note 1 f) Property, plant and equipment.
The lease contracts that include variable rents based on sales, which is the case with many of our retail concession contracts,
are not included in the measurement of the lease liability and the right-of-use asset. The related rents payable are recognised
as an expense in the period in which the event or condition that triggers those payables occurs and are included in profit or
loss (see Note 3).
The Group has applied the Amendment to IFRS 16 issued in June 2020 and further extension granted in March 2021.
This practical expedient allows the impact on the lease liability of temporary rent reductions/waivers affecting rent payments
due on or before June 2022, to be recognised in the income statement in the period they are received, rather than as lease
modifications, which would require the remeasurement of the lease liability using a revised discount rate with a corresponding
adjustment to the right-of-use asset.
For leases acquired as part of a business combination, the lease liability is measured at the present value of the remaining
lease payments. The right-of-use asset is measured at the same amount as the lease liability adjusted to reflect favourable or
unfavourable terms of the lease when compared to market terms.
The Group as a lessor
The Group enters into lease agreements as an intermediate lessor with respect to some of its property leases. It accounts
for the head lease and the sublease as two separate contracts. The sublease is classified as finance lease or operating lease
by reference to the right-of-use asset arising from the head lease. Whenever the terms of the lease transfer substantially all
the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as
operating leases.
Rents receivable from operating leases are recognised on a straight-line basis over the term of the relevant lease.
Notes to the financial statements continued
126 WH Smith PLC Annual Report and Accounts 2022
Financial statements
1. Accounting policies (continued)
h) Inventories
Inventories comprise goods held for resale and are stated at the lower of cost or net realisable value. Consignment stocks are
not included within stocks held by the Group. Inventories are valued using a weighted average cost method.
Cost is calculated to include, where applicable, duties, handling, transport and directly attributable costs (including a
deduction for applicable supplier income) in bringing the inventories to their present location and condition. Net realisable
value is based on estimated normal selling prices less further costs expected to be incurred in selling and distribution. Cost of
inventories includes the transfer from equity of any gains or losses on qualifying cash flow hedges relating to purchases.
Provisions are made for obsolescence, markdown below cost and shrinkage.
i) Government grants and governmentassistance
Government grants are not recognised until there is reasonable assurance that the grants will be received and that the Group
will comply with any conditions attached to them.
Government grants are recognised in the income statement over the same period as the costs for which the grants are
intended to compensate. Government grants that are receivable as compensation for expenses or losses already incurred or
for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss
in the period in which they become receivable. Government grant income is disclosed in Note 3.
In addition, the Group has benefited from government assistance in the form of business rates relief of £2m in the year
(2021: £40m).
j) Provisions
Provisions are recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of
a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are
measured at the directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date.
Where the effect is material, the provision is determined by discounting the expected future cash flows at a pre-tax rate
which reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
k) Foreign currencies
The consolidated financial statements are presented in pounds sterling (GBP), which is WH Smith PLC’s functional and
presentation currency. Items included in the financial statements of each of the Group’s subsidiaries are measured using the
currency of the primary economic environment in which the entity operates (“the functional currency”).
On consolidation, the assets and liabilities of the Group’s overseas operations are translated into sterling at exchange rates
prevailing on the balance sheet date. Income and expense items are translated into sterling at the average exchange rates for
the period. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve.
Transactions denominated in foreign currencies are recorded at the rates of exchange prevailing on the dates of
the transactions.
At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the
balance sheet date. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary
items, are included in the income statement for the period.
In order to hedge its exposure to certain foreign exchange risks, the Group enters into forward contracts (see below for
details of the Group’s accounting policies in respect of such derivative financial instruments).
l) Taxation
The tax expense included in the income statement comprises current and deferred tax.
Current tax is the expected tax payable or receivable based on the taxable profit or loss for the period, using tax rates that
have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements
and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet
liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets
are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or
from the initial recognition (other than in business combination) of other assets and liabilities in a transaction that affects
neither the tax profit nor the accounting profit.
127WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
1. Accounting policies (continued)
l) Taxation (continued)
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is
calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised.
Current and deferred tax is charged or credited in the income statement, except when it relates to items charged or credited
directly to equity, in which case the current or deferred tax is also recognised directly in equity.
m) Financial instruments
Financial assets and liabilities are recognised in the Group’s balance sheet when the Group becomes party to the contractual
provisions of the instrument.
i) Initial recognition and subsequentmeasurement
a) Financial assets
Trade and other receivables
Trade receivables are measured at fair value at initial recognition, do not carry any interest and are subsequently measured
at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are
recognised in the income statement.
Allowances for doubtful debts are recognised based on management’s expectation of losses, without regard to whether an
impairment trigger has occurred or not (an “expected credit loss” model under IFRS 9).
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original
maturity of three months or less.
b) Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all
ofits liabilities.
Borrowings
Borrowings comprise interest-bearing bank loans and overdrafts and compound financial instruments (convertible bonds).
Bank loans are initially measured at fair value (being proceeds received, net of direct issue costs), and are subsequently
measured at amortised cost, using the effective interest rate method. Transaction fees such as arrangement fees associated
with the securing of financing are capitalised and amortised through the income statement over the term of the relevant
facility. Finance charges, including premiums payable on settlement or redemptions and direct issue costs are accounted
for on an accruals basis and taken to the income statement using the effective interest rate method and are added to the
carrying value of the instrument to the extent that they are not settled in the period in which they arise.
Compound financial instruments issued by the Group comprise convertible bonds. The convertible bonds are bifurcated into
a liability component and an equity component on initial recognition. The carrying value of the liability at initial recognition
is measured using a market interest rate for an equivalent non-convertible bond at the issue date. The remainder of the
proceeds is allocated to the conversion option and recognised in equity (Other reserves), and not subsequently remeasured.
Any directly attributable transaction costs are allocated to each component in proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost
using the effective interest method. Any transaction costs apportioned to the liability is included in the carrying amount and
recognised over the contractual life of the liability using the effective interest rate method.
Trade and other payables
Trade and other payables are initially measured at fair value and are subsequently measured at amortised cost, using the
effective interest rate method.
Equity instruments
Equity instruments issued are recorded at the proceeds received, net of direct issue costs.
Notes to the financial statements continued
128 WH Smith PLC Annual Report and Accounts 2022
Financial statements
1. Accounting policies (continued)
m) Financial instruments (continued)
ii) Derecognition of financial assets and liabilities
Financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it
transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of
ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks
and rewards of ownership and it does not retain control of the financial asset.
Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group
also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially
different, in which case a new financial liability based on the modified terms is recognised at fair value.
On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid
(including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.
iii) Offsetting
Financial assets and financial liabilities are offset and the net position presented in the balance sheet when, and only when,
the Group has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise
the asset and settle the liability simultaneously.
iv) Impairment
The Group recognises loss allowances for expected credit losses (“ECLs”) on financial assets measured at amortised cost.
These are always measured at an amount equal to lifetime ECL. The maximum period considered when estimating ECLs is
the maximum contractual period over which the Group is exposed to credit risk.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when
estimating ECL, the Group considers reasonable and supportable information that is relevant and available without undue
cost or effort.
This includes both qualitative and quantitative information and analysis, based on the Group’s historical experience and
informed credit assessment and forward-looking information.
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic
prospect of recovery. This is generally the case when the Group determines that the debtor does not have the assets or
sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial
assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for
recovery of amounts due.
v) Derivative financial instruments and hedgeaccounting
The Group uses certain derivative financial instruments to reduce its exposure to foreign exchange movements in accordance
with its risk management policies. The Group primarily uses forward foreign currency contracts to manage its exposure to
changes in foreign exchange rates. The Group does not hold or use derivative financial instruments for speculative purposes.
Further details of the Group’s risk management policies are provided in Note 21.
These instruments are initially recognised at fair value on the trade date and are subsequently measured at their fair value at
the end of the reporting period. The method of recognising the resulting gain or loss is dependent on whether the derivative
is designated as a hedging instrument and the nature of the items being hedged.
Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows
are recognised directly in equity and any ineffective portion is recognised immediately in the income statement.
If the cash flow hedge of a highly probable forecasted transaction results in the recognition of an asset or liability, then, at the
time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised
in equity are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an
asset or a liability, amounts deferred in equity are recognised in the income statement in the same period as the hedged item.
For an effective hedge of an exposure to changes in the fair value of a recognised asset or liability, changes in fair value of the
hedging instrument are recognised in profit or loss at the same time that the recognised asset or liability that is being hedged
is adjusted for movements in the hedged risk and that adjustment is also recognised in profit or loss in the same period.
Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the
income statement as they arise.
129WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
1. Accounting policies (continued)
m) Financial instruments (continued)
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer
qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is
retained in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognised in equity is transferred to profit or loss for the period.
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their
risks and characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value
with unrealised gains or losses reported in the income statement.
n) Share schemes
WHSmith Employee Benefit Trust
The shares held by the WHSmith Employee Benefit Trust are valued at the historical cost of the shares acquired. They are
deducted in arriving at shareholders’ funds and are presented asan Other reserve.
Share-based payments
Employees of the Group receive part of their remuneration in the form of share-based payment transactions, whereby
employees render services in exchange for shares or rights over shares (equity settled transactions).
Equity settled share-based payments are measured at fair value at the date of grant. The fair value is calculated using an
appropriate option pricing model. The fair value is expensed to the income statement on a straight-line basis over the vesting
period, based on the Group’s estimate of the number of shares that will eventually vest.
For cash-settled share-based payments, a liability is recognised at the current fair value determined at each balance sheet
date, taking into account performance conditions and the extent to which employees have rendered service to date, with any
changes in fair value recognised in the profit or loss for the year.
o) Dividends
Final dividends are recorded in the financial statements in the period in which they are approved by the Company’s
shareholders. Interim dividends are recorded in the period in which they are approved and paid.
p) Share capital, Share premium and Otherreserves
Ordinary shares are classified as equity. Share premium arises on the excess between the fair value of the shares issued and
the par value of the shares issued. Incremental costs directly attributable to the issue of new shares or options are shown
in equity as a deduction, net of tax, against share premium. The par value of shares repurchased and cancelled under the
Group’s share buyback programme is reclassified from Share capital to the Capital redemption reserve.
For a description of Other reserves, see Note 25.
q) Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with generally accepted accounting principles requires management to
make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities. Actual results could differ from these estimates and any subsequent changes are accounted
for with an effect on income at the time such updated information becomes available.
The most critical accounting judgements and sources of estimation uncertainty in determining the financial condition
and results of the Group are those requiring the greatest degree of subjective or complex judgement. These relate to the
classification of items as non-underlying, assessment of lease substitution rights, determination of the lease term, impairment
reviews of non-current assets and inventory valuation.
Consideration of climate-related matters
In preparing the Financial statements, management has considered the potential impacts of climate change, in the context of
the Principal risks and TCFD disclosures included in the Strategic report on pages 44 to 56 in the following areas:
• going concern assessment and viability of the Group over the next three years;
• cash flow forecasts used in the impairment assessments of non-current assets including goodwill;
• carrying value and useful economic lives of property, plant and equipment, right-of-use assets and intangible assets;
• carrying value of inventories and valuation of other current assets;
• valuation of pension scheme assets.
Notes to the financial statements continued
130 WH Smith PLC Annual Report and Accounts 2022
Financial statements
1. Accounting policies (continued)
q) Critical accounting judgements and key sources of estimation uncertainty (continued)
Consideration of climate-related matters (continued)
Current assets, including inventories, are expected to be utilised within a short timeframe, and therefore no risks relating to
climate change have been identified.
Defined benefit pension scheme assets are primarily a single bulk annuity insurance policy, the valuation of which moves in
tandem with the valuation of the defined benefit obligation. As such, no climate-related risks have been identified in relation
to valuation of pension scheme assets.
The costs expected to be incurred in connection with our net zero commitments (as described on pages 44 to 56) are
included within the Group’s budget and three year plan, which have been used to support the impairment reviews of non-
current assets, including goodwill, and the going concern and viability assessments. Further disclosures in relation to the
impact of climate change on the impairment assessment of right-of-use assets and property, plant and equipment are
included in Note 11, and on goodwill in Note 10.
The Group’s initial quantitative scenario analysis (as described on pages 44 to 56) has determined that operational impacts
are not expected to be significant within the short-term forecast period. Beyond the forecast periods, the results of the
quantitative scenario analysis have been incorporated into the sensitivity analyses of viability and goodwill impairment where
appropriate, however climate change is not considered to be a key driver in determining the outcomes of these exercises and
is therefore not currently classified as a key source of estimation uncertainty within our financial statements. This assessment
will be kept under review going forward.
Critical accounting judgements
Non-underlying items
The Group has chosen to present a measure of profit and earnings per share which excludes certain items that are
considered non-underlying and exceptional due to their size, nature or incidence, and are not considered to be part of the
normal operations of the Group. These measures exclude the financial effect of non-underlying items which are considered
exceptional and occur infrequently such as, inter alia, restructuring costs linked to a Board agreed programme, amortisation
of acquired intangibles assets, costs relating to business combinations, impairment charges and other property costs,
significant items relating to pension schemes, and impairment charges and items meeting the definition of non-underlying
specifically related to the Covid-19 pandemic, and the related tax effect of these items. The Group believes that they provide
additional useful information to users of the financial statements to enable a better understanding of the Group’s underlying
financial performance.
The classification of items as non-underlying requires management judgement. The definition of non-underlying items has
been applied consistently year on year. Further details of non-underlying items are provided in Note 4.
IFRS 16 Lease accounting
Substantive substitutionrights
Judgement is required in determining whether a contract meets the definition of a lease under IFRS 16. Management has
determined that certain retail concession contracts give the landlord substantive substitution rights because the contract
gives the landlord rights to relocate the retail space occupied by the Group. In such cases, management has concluded
that there is not an identified asset and therefore such contracts are outside the scope of IFRS 16. For these contracts,
the Group recognises the payments as an operating expense on a straight-line basis over the term of the contract unless
another systematic basis is more representative of the time pattern in which economic benefits from the underlying contract
are consumed.
Determination of lease term
In determining the lease term for contracts that have options to extend or terminate early, management has applied
judgement in determining the likelihood of whether such options will be exercised. This is based on the length of time
remaining before the option is exercisable, performance of the individual store and the trading forecasts.
131WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
1. Accounting policies (continued)
q) Critical accounting judgements and key sources of estimation uncertainty (continued)
Sources of estimation uncertainty
Intangible assets, property, plant and equipment and right-of-use asset impairment reviews
Property, plant and equipment, right-of-use assets and intangible assets are reviewed for impairment if events or changes in
circumstances indicate that the carrying amount may not be recoverable. When a review for impairment is conducted, the
recoverable amount of an asset or a cash-generating unit is determined based on value-in-use calculations prepared on the
basis of management’s assumptions and estimates.
The key assumptions in the value-in-use calculations include growth rates of revenue and the pre-tax discount rate. Due to
the effects of the Covid-19 global pandemic, there is an increased level of uncertainty in all of the above assumptions such
that a reasonably possible change in these assumptions could lead to a material change in the carrying value of assets.
Further information in respect of the Group’s property, plant and equipment and right-of-use assets is included in Notes 11
and 12 respectively.
Inventory valuation
Inventory is carried at the lower of cost and net realisable value which requires the estimation of sell through rates, and the
eventual sales price of goods to customers in the future. Any difference between the expected and the actual sales price
achieved will be accounted for in the period in which the sale is made. A description of the Group’s accounting policy in
respect of inventories is included in Note 1(h). A sensitivity analysis has been carried out on the calculation of inventory
provisions, including consideration of the uncertainties arising from Covid-19. The key assumption driving the stock provision
calculation is forecast revenue. A 10 per cent change in the revenue assumptions applied in the provision calculation,
representing a reasonably possible outcome, would reduce the net realisable value of inventories by £2m.
Notes to the financial statements continued
132 WH Smith PLC Annual Report and Accounts 2022
Financial statements
2. Segmental analysis of results
IFRS 8 requires segment information to be presented on the same basis as that used by the Chief Operating Decision Maker
for assessing performance and allocating resources. The Group’s operating segments are based on the reports reviewed by
the Board of Directors who are collectively considered to be thechief operating decision maker.
For management and financial reporting purposes, the Group is organised into two operating divisions which comprise four
reportable segments – Travel UK, North America, Rest of the World within the Travel division,and High Street.
The information presented to the Board is prepared in accordance with the Group’s IFRS accounting policies, with the
exception of IFRS 16, and is shown below as Headline information in Section b). A reconciliation to statutory measures is
provided below in accordance with IFRS 8, and in the Glossary on page 173 (Note A2).
A) Revenue
£m 2022 2021
Travel UK 521 195
North America 288 166
Rest of the World 118 40
Total Travel 927 401
High Street 473 485
Revenue 1,400 886
Rest of the World revenue includes revenue from Australia of £40m (2021: £20m). No other country has individually
material revenue.
B) Group results
2022 2021
£m
Headline
before non-
underlying
items
1
(pre-IFRS 16)
Headline non-
underlying
items
1
(pre-IFRS 16) IFRS 16 Total
Headline
before non-
underlying
items
1
(pre-IFRS 16)
Headline
non-underlying
items
1
(pre-IFRS 16) IFRS 16 Total
Travel UK trading profit/(loss) 54 – 6 60 (32) – 3 (29)
North America trading profit/(loss) 31 – 2 33 6 – (4) 2
Rest of the World trading
profit/(loss)
4 – (1) 3 (13) – (4) (17)
Total Travel trading profit/(loss) 89 – 7 96 (39) – (5) (44)
High Street trading profit 33 – 12 45 19 – 17 36
Group profit/(loss) from trading
operations
122 – 19 141 (20) – 12 (8)
Unallocated central costs (24) – – (24) (19) – – (19)
Group operating profit/(loss)
before non-underlying items
98 – 19 117 (39) – 12 (27)
Non-underlying items (Note 4) – (12) (8) (20) – (49) (16) (65)
Group operating profit/(loss) 98 (12) 11 97 (39) (49) (4) (92)
Finance costs (25) – (9) (34) (16) – (8) (24)
Profit/(loss) before tax 73 (12) 2 63 (55) (49) (12) (116)
Income tax (expense)/credit (12) 3 (1) (10) 26 9 1 36
Profit/(loss) for the year 61 (9) 1 53 (29) (40) (11) (80)
1 Presented on a pre-IFRS 16 basis. Alternative performance measures are defined and explained in the Glossary on page 173
133WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
2. Segmental analysis of results (continued)
C) Other segmental items
2022
Non-current assets
1
Right of use assets
£m Capital additions
Depreciation and
amortisation Impairment Depreciation Impairment
Travel UK 30 (16) – – –
North America 22 (11) – – –
Rest of the World 13 (2) – – –
Total Travel 65 (29) – – –
High Street 25 (15) (2)
– –
Unallocated – (3) – – –
Headline, before non-underlying items (pre-IFRS 16) 90 (47) (2) – –
Headline non-underlying items (pre-IFRS 16) – (3) (6) – –
Headline, after non-underlying items (pre-IFRS 16) 90 (50) (8) – –
Impact of IFRS 16 – – – (81) –
Non-underlying items (IFRS 16) – – – – (8)
Group 90 (50) (8) (81) (8)
2021
Non-current assets
1
Right of use assets
£m Capital additions
Depreciation and
amortisation Impairment Depreciation Impairment
Travel UK 11 (14) – – –
North America 15 (10) – – –
Rest of the World 2 (3) – – –
Total Travel 28 (27) – – –
High Street 16 (17) (2)
– –
Unallocated – (4) – – –
Headline, before non-underlying items (pre-IFRS 16) 44 (48) (2) – –
Headline non-underlying items (pre-IFRS 16) – (3) (18) – –
Headline, after non-underlying items (pre-IFRS 16) 44 (51) (20) – –
Impact of IFRS 16 – 1 – (84) –
Non-underlying items (IFRS 16) – – 4 – (28)
Group 44 (50) (16) (84) (28)
1 Non-current assets including property, plant and equipment and intangible assets, but excluding right-of-use assets.
D) Non-current assets by geographical location
Non-current assets include plant, property and equipment, intangible assets and right-of-use assets.
£m 2022 2021
UK 383 397
USA 689 553
Australia 19 14
Other international 117 11
Total 1,208 975
Notes to the financial statements continued
134 WH Smith PLC Annual Report and Accounts 2022
Financial statements
3. Group operating profit
2022 2021
£m
Before non-
underlying
items
Non-
underlying
items Total
Before non-
underlying
items
Non-
underlying
items Total
Revenue 1,400 – 1,400 886 – 886
Cost of sales (538) – (538) (358) – (358)
Gross profit 862 – 862 528 – 528
Distribution costs
1
(588) – (588) (419) – (419)
Administrative expenses (161) – (161) (140) – (140)
Other income
2
4 – 4 4 – 4
Non-underlying items (Note 4) – (20) (20) – (65) (65)
Group operating profit 117 (20) 97 (27) (65) (92)
1 During the year there was an underlying impairment charge of £2m (2021: £2m) for property, plant and equipment and other intangible assets included in distribution costs.
Other impairment charges related to Covid-19 are included in non-underlying items. See Note 4.
2 Other income relates to remeasurement of right-of-use assets, and profit attributable to property.
£m 2022 2021
Cost of inventories recognised as an expense 538 358
Write-down of inventories in the year
3
2 7
Depreciation of property, plant and equipment 37 36
Depreciation of right-of-use assets
– land and buildings 78 80
– other 3 4
Amortisation of intangible assets 13 14
Impairment of property, plant and equipment 7 16
Impairment of right-of-use assets 8 28
Impairment of intangibles 1 –
(Income)/expenses relating to leasing:
– expense relating to short-term leases 17 14
– expense relating to variable lease payments not included in the measurement of the lease liability 29 27
– income relating to Covid-19 rent reductions (5) (23)
Other occupancy costs 59 27
Staff costs (Note 6) 293 232
Government grant income – (11)
Auditors’ remuneration (see below)
Audit services
Fees payable to the Group’s auditors, included in the income statement, relate to:
Fees payable to the Group’s auditors for the audit of the Group’s financial statements 0.9 1.2
Fees payable to the Group’s auditors for other services to the Group including the audit of the
Company’ssubsidiaries
0.2 0.3
Total audit and audit-related services 1.1 1.5
Non-audit services
Fees payable to the Group’s auditors for other services:
All other non-audit services 0.1 0.1
Non-audit fees including taxation and other services 0.1 0.1
Total auditors’ remuneration 1.2 1.6
Included in Administrative expenses is the auditors’ remuneration, including expenses, for audit and non-audit services,
payable to the Group’s auditors PricewaterhouseCoopers LLP and its associates as set out above. A description of the work
performed by the Audit Committee is set out in the Corporate governance section of the Directors’ report and includes an
explanation of how auditor objectivity and independence are safeguarded when non-audit services are provided by auditors.
3 Write-down of inventories in the year are included within the amounts disclosed as Cost of inventories recognised as an expense, and recognised in Cost of sales.
135WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
4. Non-underlying items
Items which are not considered part of the normal operations of the business, are non-recurring or are considered exceptional
because of their size, nature or incidence, are treated as non-underlying items and disclosed separately. Further details of
non-underlying items are included in Note 1, Accounting policies and in the Strategic report on page 27.
£m 2022 2021
Amortisation of acquired intangible assets 3 3
Costs related to cyber incident 4 –
Store Impairments
– property, plant and equipment 5 14
– right-of-use assets 8 28
Write-down of inventories – 5
Restructuring costs – 9
Costs associated with refinancing – 6
Costs relating to business combinations – 2
Other – (2)
Non-underlying items, before tax 20 65
Tax credit on non-underlying items (4) (12)
Non-underlying items, after tax 16 53
Non-underlying items recognised in the year are as follows:
Amortisation of acquired intangible assets
Amortisation of acquired intangible assets primarily relates to the MRG and InMotion brands (see Note 10).
Costs related to cyber incident
Costs of £4m incurred due to a cyber security incident in relation to one of the Group’s websites include impairment of
software assets of £1m, third party consultancy support and legal and other costs.
Impairment of property, plant and equipment and right-of-use assets
The Group has carried out an assessment for indicators of impairment across the store portfolio. This assessment has
identified a number of stores where experience and expectations of the longer-term impact of Covid-19 is more negative than
previously assumed, primarily driven by the impact of Covid-19 on consumer shopping patterns.
The impairment review compared the value-in-use of individual store cash-generating units, based on management’s
assumptions regarding likely future trading performance, taking into account the latest view of the recovery from Covid-19, to
the carrying values at 31 August 2022. As a result of this exercise, a charge of £13m (2021: £42m) was recorded within non-
underlying items for impairment of retail store assets, of which £5m (2021: £14m) relates to property, plant and equipment
and £8m (2021: £28m) relates to right-of-use assets. Refer to Note 11 for details of impairment of store cash-generating units.
The impairment recognised on a pre-IFRS 16 basis is provided in the Glossary on page 173.
A tax credit of £4m (2021: £12m) has been recognised in relation to non-underlying items.
Other prior year non-underlying items
Other non-underlying items in the prior year included stock provisioning and impairment relating to the impact of Covid-19,
restructuring costs following a review of store operations across our High Street business, costs associated with the
refinancing activity in April 2021 and further integration costs in relation to the acquisition of MRG which completed in
December 2019.
Notes to the financial statements continued
136 WH Smith PLC Annual Report and Accounts 2022
Financial statements
5. Retirement benefit obligations
WH Smith PLC has operated a number of defined benefit and defined contribution pension plans. The main pension
arrangements for employees are operated through a defined benefit scheme, WHSmith Pension Trust, and a defined contribution
scheme, WHSmith Retirement Savings Plan. The most significant scheme is WHSmith Pension Trust, which is described in
Note 5 a) i).
The retirement benefit obligations recognised in the balance sheet for the respective schemes at the relevant reporting
dates were:
£m 2022 2021
WHSmith Pension Trust – (2)
United News Shops Retirement Benefits Scheme – (1)
Retirement benefit obligation recognised in the balance sheet – (3)
Recognised as:
Current liabilities – (1)
Non-current liabilities – (2)
A) Defined benefit pension schemes
i) The WHSmith Pension Trust
The WHSmith Pension Trust Final Salary Section is a funded final salary defined benefit scheme; it was closed to defined
benefit service accrual on 2 April 2007 and has been closed to new members since 1996. Benefits are based on service and
salary at the date of closure or leaving service, with increases currently based on CPI inflation in deferment and RPI inflation
in payment.
The WHSmith Pension Trust is independent of the Group and is administered by a Trustee. The Trustee is responsible for the
administration and management of the scheme on behalf of the members in accordance with the Trust Deed and relevant
legislation. Responsibilities include the investment of funds, the triennial valuation and determining the deficit funding
schedule. Under the Articles of Association of WH Smith Pension Trustees Limited (the corporate trustee) there are four
directors nominated by the sponsor, two independent directors and four member-nominated directors. Under the member-
nominated director arrangements, the term of office of a member-nominated director is four years.
In August 2022 the WH Smith Pension Trust purchased a bulk annuity insurance policy from Standard Life, part of
Phoenix Group, insuring all liabilities to pay all future defined benefit pensions to the Trust’s 12,950 members and any
eligible dependants.
The insurance policy was purchased using most of the existing assets held within the Trust, without the need for the Group
to make any additional cash contributions. The bulk annuity policy matches the Trust’s cash flow benefit obligations to its
members, removing longevity and other demographic risks as well as investment, interest rate and inflation risks. As the
purchase price of the annuity of £1.1bn was greater than the IAS 19 accounting value of the corresponding liabilities, an asset
remeasurement loss of £508m has been recorded in other comprehensive income. This has been offset by actuarial gains on
the liabilities due to changes in financial assumptions and experience of £337m, and gains relating to changes in amounts not
recognised due to the effect of the asset ceiling of £169m.
As a result of this comprehensive risk-removal, WH Smith will not be required to make any future cash contributions into the
Trust regarding defined benefit liabilities, therefore the previously recognised minimum funding liability (£2m as at 31 August
2021) has been derecognised. The prior year liability of £2m relates to the recognition of the schedule of contributions as a
liability in accordance with the requirements of IFRIC 14. During the year ended 31 August 2022, prior to the completion of
the buy-in transaction, the Group made a contribution of £2m to the scheme (2021: £3m) in accordance with the agreed
funding schedule.
The WHSmith Pension Trust had assets valued at £933m, as at 31 August 2022 (2021: £1,456m).
137WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
5. Retirement benefit obligations (continued)
A) Defined benefit pension schemes (continued)
i) The WHSmith Pension Trust (continued)
An Investment Committee of the Trustees to the scheme meets regularly to review the performance of the investment
managers and the scheme as a whole. The Group is represented on this Committee. Although investment decisions are the
responsibility of the Trustee, the Group is an active participant of the investment sub-committee to ensure that pension plan
risks are managed efficiently.
The risk of failure of counterparties and of the investment manager is monitored regularly by the Committee. The Trustees
have the right to determine the level of contributions.
The weighted average duration of the defined benefit obligation is 15 years.
Amounts recognised in the financial statements
Balance sheet
The amounts recognised in the balance sheet under IAS 19 in relation to this plan are as follows:
£m 2022 2021
Present value of the obligations (813) (1,172)
Fair value of plan assets 933 1,456
Surplus before consideration of asset ceiling 120 284
Amounts not recognised due to effect of asset ceiling (120) (284)
Additional liability recognised due to minimum funding requirements – (2)
Retirement benefit obligation recognised in the balance sheet – (2)
The defined benefit pension schemes are closed to further accrual. The Group does not have an unconditional right to derive
economic benefit from any surplus, as the Trustees retain the right to enhance benefits under the Trust deed, and therefore
the present value of the economic benefits of the IAS 19 surplus in the pension scheme of £120m (2021: £284m) available
on a reduction of future contributions is £nil (2021: £nil). As a result, the Group has not recognised this IAS 19 surplus on the
balance sheet.
Income statement
The amounts recognised in the income statement were as follows:
£m 2022 2021
Net interest cost on the defined benefit liability – –
Past service cost – –
– –
The net interest cost has been included in finance costs. Actuarial gains and losses have been reported in the statement of
comprehensive income.
Statement of comprehensive income
Total (expense)/income recognised in the statement of comprehensive income (“SOCI”):
£m 2022 2021
Asset remeasurement (losses)/gains arising during the year (508) 58
Actuarial (loss)/gain on defined benefit obligations arising from experience (13) 5
Actuarial gain/(loss) on defined benefit obligations arising from changes in financial assumptions 350 (56)
Actuarial gain on defined benefit obligations arising from changes in demographic assumptions – 1
Total actuarial (loss)/gain before consideration of asset ceiling (171) 8
Gain/(loss) resulting from changes in amounts not recognised due to effect of asset ceiling excluding
amounts recognised in net interest cost
169 (11)
Gain resulting from changes in additional liability due to minimum funding requirements excluding
amounts recognised in net interest cost
2 1
Total actuarial loss recognised in other comprehensive income relating to the WH Smith Pension Trust – (2)
Actuarial gain recognised in other comprehensive income relating to the UNS scheme – 1
Notes to the financial statements continued
138 WH Smith PLC Annual Report and Accounts 2022
Financial statements
5. Retirement benefit obligations (continued)
A) Defined benefit pension schemes (continued)
i) The WHSmith Pension Trust (continued)
Movements in the present value of the WHSmith Pension Trust defined benefit scheme assets, obligations and minimum
funding requirement in the current year were as follows:
2022 2021
£m Assets Liabilities
Effect of asset
ceiling and
recognition
of minimum
funding
liability
Net retirement
benefit
obligation
recognised Assets Liabilities
Effect of asset
ceiling and
recognition
of minimum
funding
liability
Net retirement
benefit
obligation
recognised
At 1 September 1,456 (1,172) (286) (2) 1,412 (1,144) (271) (3)
Current service cost – – – – – – – –
Past service cost – – – – – – – –
Interest income/(expense) 25 (20) (5) – 24 (19) (5) –
Actuarial gains/(losses) (508) 337 171 – 58 (50) (10) (2)
Contributions from the
sponsoringcompanies 2 – – 2 3 – – 3
Benefits paid (42) 42 – – (41) 41 – –
At 31 August 933 (813) (120) – 1,456 (1,172) (286) (2)
The actual return on scheme assets was a loss of £483m (2021: gain of £82m). During the year, the full trust buy-in led to an
asset remeasurement loss of £508m. Actuarial losses on scheme liabilities have also arisen due to: experience losses of £13m,
as a result of the triennial valuation at 31 March 2020, which applied membership and other demographic movements over
the last 3 years; offset by the increase in the discount rate resulting in a gain of £350m.
The decrease in scheme liabilities combined with a decrease in the scheme assets, resulted in a decrease of £164m in the
unrecognised IAS 19 surplus, to £120m.
An analysis of the defined benefit scheme assets at the balance sheet date is detailed below:
2022 2021
Quoted
£m
Unquoted
£m
Total
£m %
Quoted
£m
Unquoted
£m
Total
£m %
Bonds
– Government bonds – – – – 1,211 – 1,211 83
– Corporate bonds
UK – – – – 264 – 264 18
Non-UK – – – – 342 – 342 24
Insurance policy – 813 813 87 – – – –
Investment funds
1
71 42 113 12 43 186 229 16
Derivatives
– Interest rate swaps – – – – – (85) (85) (6)
– Inflation swaps – – – – – (157) (157) (11)
– Other
2
– (1) (1) – – (503) (503) (35)
Cash and cash equivalents 8 – 8 1 155 – 155 11
Total 79 854 933 100 2,015 (559) 1,456 100
1 These actively managed pooled funds seek to provide long-term positive returns through diversified assets and strategies.
2 Other derivatives include asset swap contracts and open repurchase agreements.
No amount is included in the market value of assets relating to either financial instruments or property occupied by
the Group.
139WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
5. Retirement benefit obligations (continued)
A) Defined benefit pension schemes (continued)
i) The WHSmith Pension Trust (continued)
The principal long-term assumptions used in the IAS 19 valuation were:
% 2022 2021
Rate of increase in pension payments 3.30 3.35
Rate of increase in deferred pensions 3.30 2.55
Discount rate 4.20 1.75
RPI inflation assumption 3.70 3.45
CPI inflation assumption 3.30 2.55
The mortality assumptions in years underlying the value of the accrued liabilities for 2022 and 2021 are:
2022 2021
Years Male Female Male Female
Life expectancy at age 65
Member currently aged 65 22.8 24.0 22.7 23.9
Member currently aged 45 23.4 25.4 23.3 25.3
Sensitivity to changes in assumptions
The valuation of the retirement benefit obligation is considered a significant source of estimation uncertainty, see Note 1(q),
and therefore changes in assumptions can have a significant effect on the amounts recognised in the financial statements.
Sensitivity information has been derived using scenario analysis from the actuarial assumptions as at 31 August 2022, while
keeping all other assumptions consistent; in practice, changes in some of the assumptions may be correlated. As noted above,
the bulk annuity insurance policy has removed the Group’s exposure to these risks.
£m
Effect on liabilities
at 31 August 2022
Discount rate +/- 0.1% per annum -12/+12
Inflation assumptions +/- 0.1% per annum +10/-10
Life expectancy +/- 1 year +48/-48
United News Shops Retirement Benefits Scheme (“UNSRBS”) is closed to new entrants. The scheme provides pension
benefits for pensioners and deferred members based on salary at the date of closure, with increases based on inflation. A full
actuarial valuation of the scheme is carried out every three years with interim reviews in the intervening years. The latest full
actuarial valuation of the scheme was carried out at 5 April 2021 by independent actuaries. Following this valuation, the deficit
was less than £1m.
The valuation of the UNSRBS used for the IAS 19 disclosures is based on consistent assumptions to those used for valuing
the WHSmith Pension Trust. Scheme assets are stated at their market value at the relevant reporting date. The deficit funding
contributions are immaterial in the context of these financial statements.
The present value of obligations and fair value of assets are stated below.
£m 2022 2021
Present value of the obligations (6) (8)
Fair value of plan assets 6 7
Retirement benefit obligation recognised in the balance sheet – (1)
All of the assets of the UNSRBS scheme have a quoted market price in an active market. In the prior year there was a credit
of £1m recognised in the statement of comprehensive income in relation to actuarial gains in the year on the United News
Shops Retirement Benefits Scheme.
B) Defined contribution pension scheme
The pension cost charged to income for the Group’s defined contribution schemes amounted to £5m for the year ended
31 August 2022 (2021: £4m).
Notes to the financial statements continued
140 WH Smith PLC Annual Report and Accounts 2022
Financial statements
6. Staff costs and employees
A) Staff costs
The aggregate remuneration of employees was:
£m 2022 2021
Wages and salaries 261 208
Social security costs 17 14
Other pension costs 5 4
Share-based payments 10 6
Total Group 293 232
B) Employee numbers
The monthly average total number of employees (including executive directors) was:
No. of employees 2022 2021
Total retailing 12,459 11,194
Support functions 43 41
Total Group 12,502 11,235
7. Finance costs
£m 2022 2021
Interest payable on bank loans and overdrafts 9 10
Interest on convertible bonds 14 4
Interest on lease liabilities 11 10
34 24
141WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
8. Income tax
£m 2022 2021
Tax on profit/loss 6 –
Standard rate of UK corporation tax 19% (2021: 19%)
Adjustment in respect of prior years – (1)
Total current tax expense/(credit) 6 (1)
Deferred tax – current year (Note 17) 8 (11)
Deferred tax – prior year (Note 17) – (4)
Deferred tax – adjustment in respect of change in tax rates – (8)
Tax on profit/loss before non-underlying items 14 (24)
Tax on non-underlying items – current tax – –
Tax on non-underlying items – deferred tax (Note 17) (4) (12)
Total tax on profit/loss 10 (36)
Reconciliation of the taxation charge/(credit)
£m 2022 2021
Tax on profit/loss at standard rate of UK corporation tax 19% (2021: 19%) 12 (22)
Tax effect of items that are not deductible or not taxable in determining taxable loss – 1
Unrecognised tax losses (1) (1)
Differences in overseas tax rates (1) (1)
Adjustment in respect of prior years – (5)
Adjustment in respect of change in tax rates – (8)
Total income tax charge/(credit) 10 (36)
The effective tax rate, before non-underlying items, is 17 per cent (2021: 47 per cent). The effective tax rate is lower than the
prior year rate and the UK corporation tax rate of 19 per cent primarily due to the recognition of brought forward previously
unrecognised tax losses and the prior year effective tax rate included a credit arising on the UK tax rate change which was
substantively enacted on the 24 May 2021 from 19 to 25 per cent.
The UK corporation tax rate is 19 per cent. In the Spring Budget 2021, the UK Government announced that from 1 April 2023
the corporation tax rate would increase to 25 per cent . This new law was substantively enacted on 24 May 2021, and the main
impact of this change has been factored into 31 August 2021 year end financial statements.
The OECD has published a framework for the introduction of a global minimum effective tax rate of 15 per cent, applicable
to large multinational groups. On 20 July 2022, HM Treasury released draft legislation to implement these “Pillar 2” rules with
effect for accounting periods beginning on or after 31 December 2023. The Group is reviewing these draft rules to determine
any potential impact.
Notes to the financial statements continued
142 WH Smith PLC Annual Report and Accounts 2022
Financial statements
9. Earnings per share
A) Earnings/(loss)
£m 2022 2021
Profit/(loss) for the year, attributable to equity holders of the parent 47 (82)
Non-underlying items (Note 4) 16 53
Profit/(loss) for the year before non-underlying items, attributable to equity holders of the parent 63 (29)
B) Weighted average share capital
Millions 2022 2021
Weighted average ordinary shares in issue 130 131
Less weighted average ordinary shares held in ESOP Trust – –
Weighted average shares in issue for earnings per share 130 131
Add weighted average number of ordinary shares under option 2 –
Weighted average ordinary shares for diluted earnings per share 132 131
C) Basic and diluted earnings/(loss) per share
Pence 2022 2021
Basic earnings/(loss) per share 36.2 (62.6)
Adjustment for non-underlying items 12.3 40.5
Basic earnings/(loss) per share before non-underlying items 48.5 (22.1)
Pence 2022 2021
Diluted earnings/(loss) per share 35.6 (62.6)
Adjustment for non-underlying items 12.1 40.5
Diluted earnings/(loss) per share before non-underlying items 47.7 (22.1)
Diluted earnings per share takes into account various share awards and share options including SAYE schemes, which are
expected to vest, and for which a sum below fair value will be paid. As the Group incurred a loss in the year ended 31 August
2021, the impact of its potential dilutive ordinary shares was excluded as they would have been anti-dilutive.
As at 31 August 2022 the convertible bond has no dilutive effect as the inclusion of these potentially dilutive shares would
improve earnings per share (31 August 2021: improve loss per share).
The calculation of earnings per share on a pre-IFRS 16 basis is provided in the Glossary on page 173.
143WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
10. Intangible assets
£m Goodwill
Brands and
franchise
contracts Tenancy rights Software Total
Cost
At 1 September 2021 406 42 13 102 563
Additions – – – 13 13
Disposals – – – (2) (2)
Foreign exchange 65 8 – 1 74
At 31 August 2022 471 50 13 114 648
Accumulated amortisation
At 1 September 2021 – 7 8 75 90
Amortisation charge – 3 – 10 13
Impairment charge – – – 1 1
Disposals – – – (2) (2)
Foreign exchange – 2 – 1 3
At 31 August 2022 – 12 8 85 105
Net book value at 31 August 2022 471 38 5 29 543
Cost
At 1 September 2020 418 43 13 96 570
Acquisitions (1) – – – (1)
Additions – – – 7 7
Disposals – – – (1) (1)
Foreign exchange (11) (1) – – (12)
At 31 August 2021 406 42 13 102 563
Accumulated amortisation
At 1 September 2020 – 4 8 65 77
Amortisation charge – 3 – 11 14
Disposals – – – (1) (1)
At 31 August 2021 – 7 8 75 90
Net book value at 31 August 2021 406 35 5 27 473
Goodwill of USD $70m (£60m) relating to the acquisition of InMotion in 2018 is expected to be deductible for tax purposes in
the future.
The carrying value of goodwill is allocated to the segmental businesses as follows:
£m 2022 2021
Travel UK 295 253
North America 132 113
Rest of the World 29 25
Total Travel 456 391
High Street 15 15
471 406
Notes to the financial statements continued
144 WH Smith PLC Annual Report and Accounts 2022
Financial statements
10. Intangible assets (continued)
Included within Tenancy rights are certain assets that are considered to have an indefinite life of £4m (2021: £4m),
representing certain rights under tenancy agreements, which include the right to renew leases, therefore no amortisation has
been charged. Management has determined that the useful economic life of these assets is indefinite because the Group can
continue to occupy and trade from certain premises for an indefinite period. These assets are reviewed annually for indicators
of impairment.
Impairment of goodwill and intangible assets
The Group tests goodwill for impairment annually or where there is an indication that goodwill might be impaired.
For impairment testing purposes, the Group has determined that each store is a separate CGU, and goodwill is allocated to
groups of CGUs in a manner that is consistent with our operating segments, as this reflects the lowest level at which goodwill
is monitored. All goodwill has arisen on acquisitions of groups of retail stores. These acquisitions are then integrated into the
Group’s operating segments as appropriate. Acquired brands are considered together with goodwill for impairment testing
purposes, and are therefore considered annually for impairment.
Goodwill and acquired brands have been tested for impairment by comparing the carrying amount of each group of CGUs,
including goodwill and acquired brands, with the recoverable amount determined from value-in-use calculations. The value-in-
use of each group of CGUs has been calculated using cash flows derived from the Group's latest Board-approved budget and
three year plan, initially extrapolated to five years. The forecasts reflect knowledge of the current market, together with the
Group’s expectations on the future achievable growth and committed store openings. Cash flows beyond the initial forecast
period are extrapolated using estimated long-term growth rates.
For certain groups of CGUs, additional adjustments to cash flows have been made during the extrapolation process for an
extended period of up to 15 years before calculating a terminal value. This extended period of time is required to establish a
normalised cash flow base on which a terminal value calculation can be appropriately calculated. The main reasons for cash
flow adjustments include the need to forecast lease renewals under IFRS 16, and the unwinding of certain cash flow benefits
arising from acquisitions in North America.
The key assumptions on which forecast three-year cash flows of the CGUs are based include revenue growth, product mix
and operating costs, long-term growth rates and the pre-tax discount rate:
• The values assigned to each of the revenue, product mix and operating cost assumptions were determined based on the
extrapolation of historical trends within the Group and external information on expected future trends in the travel and high
street retail sectors.
• The pre-tax discount rates are derived from the Group’s weighted average cost of capital, which has been calculated using
the capital asset pricing model, the inputs of which include a risk-free rate, equity risk premium, Group size premium and a
risk adjustment (beta). The pre-tax discount rate used in the calculation was 11.9 per cent (2021: 10.4 per cent).
• The long-term growth rate assumptions are between 0 per cent and 2 per cent.
The immediately quantifiable impacts of climate change and costs expected to be incurred in connection with our net zero
commitments, are included within the Group’s budget and three year plan which have been used to support the impairment
reviews, with no material impact on cash flows.
The value-in-use estimates indicated that the recoverable amount of goodwill exceeded the carrying value for each group
ofCGUs. As a result, no impairment has been recognised in respect of the carrying value of goodwill in the year (2021: £nil).
As disclosed in Note 1, Accounting policies, the forecast cash flows used within the impairment model are based on
assumptions which are sources of estimation uncertainty and it is possible that significant changes to these assumptions
could lead to an impairment of goodwill and acquired brands. Given the inherent uncertainties due to challenges in
the macroeconomic environment and the continued recovery from Covid-19, management have considered a range of
sensitivities on each of the key assumptions, with other variables held constant. The sensitivities include applying increases
inthe discount rate by 1 per cent and reductions in the long-term growth rates to 0 per cent. Under these severe scenarios,
the estimated recoverable amount of goodwill and acquired brands still exceeded the carrying value.
Furthermore, outputs of the quantitative climate change scenario analysis as described on pages 44 and 56 have also been
taken into consideration in the sensitivity analysis, and has shown that climate change is not considered to be a key driver in
determining the outcome.
The sensitivity analysis showed that no reasonably possible change in assumptions would lead to an impairment.
145WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
11. Property, plant and equipment
Land and buildings
£m
Freehold
properties
Leasehold
improvements
Fixtures
andfittings
Equipment
and vehicles Total
Cost or valuation:
At 1 September 2021 18 290 196 110 614
Additions – 32 29 16 77
Disposals – (3) (1) (1) (5)
Foreign exchange – 10 8 2 20
At 31 August 2022 18 329 232 127 706
Accumulated depreciation:
At 1 September 2021 10 206 140 84 440
Depreciation charge – 19 11 7 37
Impairment charge – 4 2 1 7
Disposals – (3) (1) (1) (5)
Foreign exchange – 4 3 1 8
At 31 August 2022 10 230 155 92 487
Net book value at 31 August 2022 8 99 77 35 219
Cost or valuation:
At 1 September 2020 15 272 198 108 593
Additions 3 12 15 7 37
Acquisitions – (1) – – (1)
Disposals – (5) (5) (2) (12)
Reclassifications – 14 (11) (3) –
Foreign exchange – (2) (1) – (3)
At 31 August 2021 18 290 196 110 614
Accumulated depreciation:
At 1 September 2020 10 185 127 79 401
Depreciation charge – 17 12 7 36
Impairment charge – 9 5 2 16
Disposals – (5) (5) (2) (12)
Reclassifications – – 2 (2) –
Foreign exchange – – (1) – (1)
At 31 August 2021 10 206 140 84 440
Net book value at 31 August 2021 8 84 56 26 174
Impairment of property, plant and equipment
For impairment testing purposes, the Group has determined that each store is a separate CGU. CGUs are tested for
impairment at the balance sheet date if any indicators of impairment have been identified. The identified indicators include
loss-making stores, stores earmarked for closure, and under-performance of individual stores versus forecast as a result of
slower than expected recovery from Covid-19.
Notes to the financial statements continued
146 WH Smith PLC Annual Report and Accounts 2022
Financial statements
11. Property, plant and equipment (continued)
Impairment of property, plant and equipment (continued)
For those CGUs where an indicator of impairment has been identified, property, plant and equipment and right-of-use assets
have been tested for impairment by comparing the carrying amount of the CGU with its recoverable amount determined
from value-in-use calculations. It was determined that value-in-use was higher than fair value less costs to sell.
The value-in-use of CGUs is calculated using discounted cash flows derived from the Group’s latest Board-approved budget
and three-year plan, taking into account the projected recovery from Covid-19, and reflects historic performance and
knowledge of the current market, together with the Group’s views on the future achievable growth for these specific stores.
Cash flows beyond the forecast period are extrapolated using growth rates and inflation rates appropriate to each store’s
location. Cash flows have been included for the remaining lease life for the specific store. These growth rates do not exceed
the long-term growth rate for the Group’s retail businesses in the relevant territory. Where stores have a relatively short
remaining lease life, an extension to the lease has been assumed where management consider it likely that an extension will
be granted. The immediately quantifiable impacts of climate change and costs expected to be incurred in connection with
our net zero commitments, are included within the Group’s budget and three year plan which have been used to support the
impairment reviews, with no material impact on cash flows. The useful economic lives of store assets are short in the context
of climate change scenario models therefore no medium to long-term effects have been considered.
The key assumptions on which the forecast three-year cash flows of the CGUs are based include revenue and the pre-
tax discount rate. Other assumptions in the model relate to gross margin, cost inflation and longer-term growth rates.
The forecasts used in the impairment review are based on management’s best estimate of revenue recovery versus a “pre-
Covid-19” base, and the recovery in revenue over the forecast period. In developing these forecasts, management have used
available information, including historical knowledge of the store level cash flows, and knowledge gained during the pandemic
up to the year end date.
The pre-tax discount rates are derived from the Group’s weighted average cost of capital, which has been calculated using
the capital asset pricing model, the inputs of which include the risk-free rate, equity risk premium, Group size premium and a
risk adjustment (beta). The pre-tax discount rate used in the calculation was 11.9 per cent (2021: 10.4 per cent).
Where the value-in-use was less than the carrying value of the CGU, an impairment of property, plant and equipment and
right-of-use assets was recorded. These stores were impaired to their recoverable amount of £18m, which is their carrying
value at year end. The Group has recognised an impairment charge of £7m (2021: £16m) to property, plant and equipment,
£1m (2021: £nil) to software and £8m (2021: £28m) to right-of-use assets. Impairments of £14m (2021: £42m) have been
presented as non-underlying items in the current year (see Note 4), and impairments of £2m (2021: £2m) have been included
in underlying results.
As disclosed in Note 1, Accounting policies, the forecast cash flows used within the impairment model are based on
assumptions which are sources of estimation uncertainty and changes to these assumptions could lead to further
impairments to assets. Given the significant uncertainty regarding the impact of continued recovery from Covid-19 on the
Group’s operations and on the global economy, management have considered sensitivities to the impairment charge as a
result of changes to the estimate of future revenues achieved by the stores.
The Group has applied certain sensitivities in isolation to demonstrate the impact on the impairment charge of changes in key
assumptions. The most significant assumption is the revenue assumption. The impact of a 10 per cent reduction in revenue in
the relevant CGUs, with no change to subsequent forecast revenue growth rate assumptions, has been modelled. This would
result in a £15m increase in the impairment charge of retail store assets in the year ended 31 August 2022.
Other changes in assumptions, including an increase or decrease of 1 per cent in the discount rate, have been modelled and
have shown that any reasonably possible changes would not lead to a significant impact on the impairment charge.
The impairment assessment has also been performed on a pre-IFRS 16 basis. See Glossary on page 173.
147WH Smith PLC Annual Report and Accounts 2022
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12. Right-of-use assets
£m
Land and
buildings Equipment Total
At 1 September 2021 319 9 328
Additions 160 – 160
Modifications and remeasurements 25 – 25
Disposals (2) – (2)
Depreciation charge (78) (3) (81)
Impairment charge (8) – (8)
Effect of movements in foreign exchange rates 24 – 24
Net book value at 31 August 2022 440 6 446
£m
Land and
buildings Equipment Total
At 1 September 2020 400 13 413
Additions 45 – 45
Modifications and remeasurements (13) – (13)
Disposals (1) – (1)
Depreciation charge (80) (4) (84)
Impairment charge (28) – (28)
Effect of movements in foreign exchange rates (4) – (4)
Net book value at 31 August 2021 319 9 328
Information on the Group's leasing activities is included in Note 15, Lease liabilities.
Impairment of right-of-use assets
Right-of-use assets of £8m (2021: £28m) have been impaired in the year, as a result of the impact of Covid-19.
This impairment charge has been presented in non-underlying items (see Note 4). The approach to impairment testing is
described in detail in Note 11, Property, plant and equipment.
13. Trade and other receivables
£m 2022 2021
Current receivables
Trade receivables 57 25
Other receivables 2 5
Prepayments 12 10
Accrued income 16 5
87 45
Non-current receivables
Other receivables 3 2
Prepayments 6 4
Total trade and other receivables 96 51
Included in accrued income is £10m (2021: £3m) of accrued supplier income relating to retrospective discounts and other
promotional and marketing income that has been earned but not yet invoiced. Supplier income that has been invoiced
butnot yet settled against trade payables balances is included in trade payables where the Group has a right to offset.
There were no government grants receivables included in other receivables this year (2021: nil).
Notes to the financial statements continued
148 WH Smith PLC Annual Report and Accounts 2022
Financial statements
13. Trade and other receivables (continued)
The ageing of the Group’s current trade and other receivables is as follows:
£m 2022 2021
Trade and other receivables gross 68 35
Expected credit losses (6) (3)
Trade and other receivables net 62 32
Of which:
Amounts neither impaired nor past due on the reporting date 46 25
Amounts past due but not impaired:
Less than one month old 8 3
Between one and three months old 4 2
Between three and six months old 3 1
Between six months and one year old 1 1
Trade and other receivables net carrying amount 62 32
The Group has limited exposure to expected credit losses due to the business model. An allowance has been made for
lifetime expected credit losses from receivables at 31 August 2022 of £6m (31 August 2021: £3m). The ageing analysis of
these receivables is given in the table below. This expected credit loss allowance reflects the application of the Group’s
provisioning policy in respect of bad and doubtful debts and is based upon the difference between the receivable value and
the estimated net collectible amount. The Group establishes its provision for bad and doubtful debts by reference to past
default experience.
Ageing analysis of bad and doubtful debt provisions:
£m 2022 2021
Less than one month old – –
Between one and three months old 2 –
Between three and six months old 2 1
Between six months and one year old 2 2
6 3
No trade and other receivables that would have been past due or impaired were renegotiated during the year. No interest
is charged on the receivables balance. The other classes within trade and other receivables do not include impaired assets.
The Group does not hold collateral over these balances. The directors consider that the carrying amount of trade and other
receivables approximates their fair value.
14. Trade and other payables
£m 2022 2021
Trade payables 130 70
Other tax and social security 30 24
Other payables 96 72
Accruals 95 83
Deferred income 14 16
365 265
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average
credit period taken for trade purchases is 65 days (2021: 56 days). The directors consider that the carrying amount of trade
and other payables approximates their fair value.
Trade payables is stated net of £7m (2021: £4m) amounts receivable from suppliers in relation to supplier income, that has
been invoiced, for which the Group has the right to set off against amounts payable at the balance sheet date.
149WH Smith PLC Annual Report and Accounts 2022
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15. Lease liabilities
£m
Land and
buildings Equipment Total
At 1 September 2021 463 7 470
Additions 159 – 159
Modifications and remeasurements 18 – 18
Disposals (4) – (4)
Interest 11 – 11
Payments (103) (4) (107)
Effect of movements in foreign exchange rates 30 – 30
At 31 August 2022 574 3 577
£m
Land and
buildings Equipment Total
At 1 September 2020 548 11 559
Additions 41 – 41
Modifications and remeasurements (37) – (37)
Disposals (7) – (7)
Interest 10 – 10
Payments (87) (4) (91)
Effect of movements in foreign exchange rates (5) – (5)
At 31 August 2021 463 7 470
£m 2022 2021
Analysis of total lease liabilities:
Non-current 446
362
Current 131 108
Total 577 470
The Group leases land and buildings for its retail stores, distribution centres, storage locations and office property.
These leases have an average remaining lease term of 4 years. Some leases include an option to break before the end of the
contract term or an option to renew the lease for an additional term after the end of the term. Management assess the lease
term at inception based on the facts and circumstances applicable to each property.
Other leases are mainly forklift trucks for the retail stores and distribution centres, office equipment and vehicles. These leases
have an average remaining lease term of 3 years.
The Group reviews the retail lease portfolio on an ongoing basis, taking into account retail performance and future trading
expectations. The Group may exercise extension options, negotiate lease extensions or modifications. In other instances, the
Group may exercise break options, negotiate lease reductions or decide not to negotiate a lease extension at the end of the
lease term. Certain property leases contain rent review terms that require rent to be adjusted on a periodic basis which may
be subject to market rent or increases in inflation measurements.
Many of the Group's property leases, particularly in Travel locations, also incur payments based on a percentage of revenue
(variable lease payments) achieved at the location. In line with IFRS 16, variable lease payments which are not based on an
index or rate are not included in the lease liability. See Note 3 for the expense charged to the Income statement relating to
variable lease payments not included in the measurement of the lease liability.
Notes to the financial statements continued
150 WH Smith PLC Annual Report and Accounts 2022
Financial statements
15. Lease liabilities (continued)
In response to the Covid-19 pandemic, an amendment was issued to IFRS 16 in June 2020 and further extended in March
2021. This amendment (practical expedient) allows the impact on the lease liability of temporary rent reductions/waivers
affecting rent payments due on or before June 2022, to be recognised in the Income statement in the period they are
received, rather than as lease modifications, which would require the remeasurement of the lease liability using a revised
discount rate with a corresponding adjustment to the right-of-use asset. The Group has applied this practical expedient
to allCovid-19 rent reductions/waivers that meet the requirements of the amendment. This has resulted in a credit to the
Incomestatement of £5m for the year ended 31 August 2022 (2021: £23m).
The Group’s accounting policy for leases is set out in Note 1. Details of Income statement charges and income for leases
are set out in Note 3. The right-of-use asset categories on which depreciation is incurred are presented in Note 12.
Interest expense incurred on lease liabilities is presented in Note 7. The maturity of undiscounted future lease liabilities are
setout in Note 21.
The total cash outflow for leases in the financial year was £150m (2021: £123m). This includes cash outflow for short-term
leases of £16m (2021: £14m) and variable lease payments (not included in the measurement of lease liability) of £28m
(2021: £18m). The total future income from sub-leasing the right-of-use assets is £1m (2021: £1m).
16. Provisions
£m
Property
provision
Contingent
consideration
provision Total
At 1 September 2021 13 1 14
Charge in the year – – –
Utilised in year – (1) (1)
Reclassifications from creditors 1 – 1
At 31 August 2022 14 – 14
£m
Property
provision
Contingent
consideration
provision Total
At 1 September 2020 13 1 14
Charge in the year – – –
Utilised in year – – –
Unwinding of discount – – –
At 31 August 2021 13 1 14
Total provisions are split between current and non-current liabilities as follows:
£m 2022 2021
Included in current liabilities – 2
Included in non-current liabilities 14 12
14 14
Property provisions relate to reinstatement liabilities for stores where the long-term viability has been impacted primarily by
Covid-19. These expected costs of store closures are reviewed frequently and are based on information available as at the
reporting date as well as management’s historical experience of similar transactions. Utilisations of the property provisions are
expected to be incurred in line with the profile of the leases to which they relate.
151WH Smith PLC Annual Report and Accounts 2022
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17. Deferred tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the
current and prior years.
£m
At 1
September Rate change
(Credited) /
charged to
income
Credited to
equity
Foreign
exchange At 31 August
Accelerated tax depreciation 8 – (4) – (1) 3
Leases 5 – – – – 5
Share-based payments 2 – 2 – – 4
Retirement benefit obligation 1 – (1) – – –
Intangible assets (11) – (1) – (2) (14)
Losses carried forward 45 – (3) – 3 45
Unutilised interest expense 5 – – – 2 7
Provisions 2 – 3 – – 5
Year ended 31 August 2022 57 – (4) – 2 55
Accelerated tax depreciation 7 3 (2) – – 8
Leases 4 1 – – – 5
Share-based payments – – 1 1 – 2
Retirement benefit obligation 1 – – – – 1
Intangible assets (11) – – – – (11)
Losses 17 4 24 – – 45
Unutilised interest expense 3 – 2 – – 5
Provisions – – 2 – – 2
Year ended 31 August 2021 21 8 27 1 – 57
Deferred tax assets have not been recognised in respect of the following tax losses:
£m 2022 2021
Capital losses 84 84
Trading losses 15 23
99 107
The majority of the deferred income tax assets are expected to be recovered after more than one year.
The UK corporation tax rate is 19 per cent. In the Spring Budget 2021, the UK Government announced that from 1 April 2023
the corporation tax rate would increase to 25 per cent . This new law was substantively enacted on 24 May 2021, and the main
impact of this change has been factored into 31 August 2021 year end financial statements.
At 31 August 2022, deferred tax assets have been recognised in respect of tax losses, US unutilised interest expense and other
short term timing differences. The deferred tax assets on losses of £188m relate to carried forward tax losses which have
been recognised to the extent that they will be recoverable using the estimated future taxable income based on the approved
budgets for the Group. The Group has not recognised deferred tax assets on losses amounting to £99m (2021: £107m)
and US unutilised interest expense amounting to £13m (2021: £8m) due to uncertainty over the timing and extent of their
utilisation. The losses and US unutilised interest expense can be carried forward indefinitely and have no expiry date.
All deferred tax assets and liabilities are offset where there is considered to be a legally enforceable right to do so.
The following is an analysis of the deferred tax balances (after offset) for financial reporting purposes:
£m 2022 2021
Deferred tax liabilities (non-current liabilities) – –
Deferred tax assets 55 57
55 57
Notes to the financial statements continued
152 WH Smith PLC Annual Report and Accounts 2022
Financial statements
18. Analysis of net debt
Movements in net debt can be analysed as follows:
£m Term loans
Convertible
bonds
Revolving
credit facility Leases
Sub-total
Liabilities
from financing
activities
Cash and cash
equivalents Net debt
At 1 September 2021 (132) (283) – (470) (885) 130 (755)
Other non-cash movements – (9) – (184) (193) – (193)
Other cash movements – – – 107 107 – 107
Currency translation – – – (30) (30) 2 (28)
At 31 August 2022 (132) (292) – (577) (1,001) 132 (869)
£m Term loans
Convertible
bonds
Revolving
credit facility Leases
Sub-total
Liabilities from
financing
activities
Cash and cash
equivalents Net debt
At 1 September 2020 (400) – – (559) (959) 108 (851)
Proceeds from borrowings – (327) – – (327) 327 –
Repayments of borrowings 267 – – – 267 (267) –
Bifurcation of convertible bond – 41 – – 41 – 41
Other non-cash movements – (2) – (7) (9) – (9)
Other cash movements 1 5 – 91 97 (38) 59
Currency translation – – – 5 5 – 5
At 31 August 2021 (132) (283) – (470) (885) 130 (755)
An explanation of Alternative Performance Measures, including Net debt on a pre-IFRS 16 basis, is provided in the Glossary on
page 173.
Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three
months or less. The carrying amount of these assets approximates to their fair value.
Lease liabilities
Non-cash movements in lease liabilities mainly relate to new leases, modifications and remeasurements in the year.
Term loans and revolving credit facilities
In the prior year, the Group announced new financing arrangements. These included the issuance of £327m of convertible
bonds, the repayment of the existing £400m term loans and replacement with a new £133m term loan, and an increased
revolving credit facility of £250m.
The Group has in place a four-year committed multi-currency revolving credit facility of £250m with Santander UK PLC, BNP
Paribas, HSBC UK Bank PLC, JP Morgan Securities PLC and Barclays Bank PLC. The revolving credit facility is due to mature
on 28 April 2025. The utilisation is interest bearing at a margin over SONIA. As at 31 August 2022, the Group has drawn down
£nil on this facility (2021: £nil).
The Group has a four-year committed £133m term loan with Banco Santander S.A., London Branch, Barclays Bank PLC, BNP
Paribas and HSBC UK Bank PLC, that was drawn down at the time of the refinancing in April 2021. This loan is interest bearing
at a margin over SONIA and is due to mature on 28 April 2025. Instalments due within the next 12 months are recorded in
current liabilities.
Transaction costs of £1m (2021: £1m) relating to the term loan are amortised to the Income statement through the effective
interest rate method. Transaction costs of £1m (2021: £1m) relating to the RCF were capitalised in the previous financial year
and are amortised to the Income statement on a straight-line basis.
153WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
18. Analysis of net debt (continued)
Convertible bonds
In the prior year, the Group issued £327m guaranteed senior unsecured convertible bonds due in 2026. The bond of £327m
covers a five-year term beginning on 7 May 2021 with a 1.625 per cent per annum coupon payable semi-annually in arrears in
equal instalments. The bonds are convertible into new and/or existing ordinary shares of WH Smith PLC. The initial conversion
price was set at £24.99 representing a premium of 40 per cent above the reference share price on 28 April 2021 (£17.85).
If not previously converted, redeemed or purchased and cancelled, the bonds will be redeemed at par on 7 May 2026.
The convertible bond is a compound financial instrument, consisting of a financial liability component and an equity
component, representing the value of the conversion rights. The initial fair value of the liability portion of the convertible
bond was determined using a market interest rate for an equivalent non-convertible bond at the issue date. The liability is
subsequently recognised on an amortised cost basis using the effective interest rate method until extinguished on conversion
or maturity of the bonds. The remainder of the proceeds was allocated to the conversion option and recognised in equity
(Other reserves), and not subsequently remeasured. As a result, £286m was initially recognised as a liability in the balance
sheet on issue and the remainder of the proceeds of £41m, which represents the option component, was recognised in equity.
Transaction costs of £6m were allocated between the two components and the element relating to the debt component of
£5m is amortised through the effective interest rate method. The issue costs apportioned to the equity component of £1m
have been deducted from equity.
Further information regarding the Group's borrowings and revolving credit facilities is provided in Note 21.
19. Contingent liabilities and capital commitments
£m 2022 2021
Bank guarantees and guarantees in respect of lease agreements 51 31
Contracts placed for future capital expenditure approved by the directors but not provided for in these financial statements
amount to £30m (2021: £26m).
£m 2022 2021
Commitments in respect of property, plant and equipment 28 25
Commitments in respect of other intangible assets 2 1
30 26
Notes to the financial statements continued
154 WH Smith PLC Annual Report and Accounts 2022
Financial statements
20. Cash generated from operating activities
£m 2022 2021
Group operating profit/(loss) 97 (92)
Depreciation of property, plant and equipment 37 36
Impairment of property, plant and equipment 7 16
Amortisation of intangible assets 13 14
Impairment of intangible assets 1 –
Depreciation of right-of-use assets 81 84
Impairment of right-of-use assets 8 28
Non-cash change in lease liabilities (5) (23)
Share-based payments 9 6
Gain on remeasurement of leases (4) (3)
Other non-cash items (incl. foreign exchange) (12) (2)
(Increase)/decrease in inventories (56) 14
(Increase)/decrease in receivables (42) 4
Increase in payables 88 24
Pension funding (2) (3)
Income taxes paid (6) –
Income taxes refunded – 10
Movement on provisions (through utilisation or income statement) (1) –
Cash generated from operating activities 213 113
21. Financial instruments
Categories of financial instruments
Carrying value
£m 2022 2021
Financial assets
Derivative instruments in designated hedge accounting relationships
1
– –
Receivables at amortised cost (including cash and cash equivalents)
2
210 167
Financial liabilities
Amortised cost
3
(1,352) (1,134)
1 All derivatives are categorised as Level 2 within the fair value hierarchy. The fair value measurements relating to the instruments are derived from inputs other than quoted
prices that are observable for the asset or liability, either directly or indirectly.
2 Included within receivables held at amortised cost are trade and other receivables (excluding prepayments) and cash and cash equivalents.
3 Included within amortised cost are trade payables, other payables, accruals, borrowings, lease obligations and other non-current liabilities.
Comparison of carrying values and fair values
There were no material differences between the carrying value of non-derivative financial assets and financial liabilities and
their fair values as at the balance sheet date.
Risk management
The Group’s treasury function seeks to reduce exposures to interest rate, foreign exchange and other financial risks, and
to ensure liquidity is available to meet the foreseeable needs of the Group and to invest cash assets safely and profitably.
The Group does not engage in speculative trading in financial instruments and transacts only in relation to underlying
business requirements. The Group’s treasury policies and procedures are periodically reviewed and approved by the Group’s
Audit Committee and are subject to regular Group Internal Audit review.
155WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
21. Financial instruments (continued)
Capital risk
The Group’s objectives with respect to managing capital (defined as net debt/funds plus equity) are to safeguard the Group’s
ability to continue as a going concern, in order to optimise returns to shareholders and benefits for other stakeholders,
through an appropriate balance of debt and equity funding. Refer to Note 19 for the value of the Group’s net debt/funds and
refer to the Group statement of changes in equity for the value of the Group’s equity.
In managing the Group’s capital levels, the Board regularly monitors the level of debt in the business, the working capital
requirements, forecast financing and investing cash flows. Based on this analysis, the Board determines the appropriate
return to investors while ensuring sufficient capital is retained in the business to meet its strategic objectives. The Board has
aprogressive dividend policy and expects that, over time, dividends would be broadly covered twice by earnings calculated
on a normalised tax basis.
The Group has in place a £250m committed multi-currency revolving credit facility, and a syndicated £133m term loan.
The covenants, tested half-yearly, are based on minimum liquidity for the period ending 31 August 2022, and from
28 February 2023 are based on fixed charges cover and leverage (defined as total borrowings excluding lease liabilities
that would have been treated as an operating lease prior to the adoption of IFRS 16, less cash and cash equivalents/
consolidated EBITDA).
In the prior year, the Group issued £327m of guaranteed senior unsecured convertible bonds due in 2026. Settlement and
delivery of the convertible bonds took place on 7 May 2021. The total bond offering of £327m covers a five-year term
beginning on 7 May 2021 with a 1.625 per cent per annum coupon payable semi-annually in arrears in equal instalments.
The bonds are convertible into new and/or existing ordinary shares of the WH Smith PLC. The initial conversion price was set
at £24.99 representing a premium of 40 per cent above the reference share price on 28 April 2021 (£17.85). If not previously
converted, redeemed or purchased and cancelled, the Bonds will be redeemed at par on 7 May 2026.
Liquidity risk
The Group manages its exposure to liquidity risk by reviewing the cash resources required to meet its business objectives
through both short- and long-term cash flow forecasts. The Group has a committed multi-currency revolving credit facility
with a number offinancial institutions which is available to be drawn for general corporate purposes including working
capital. The facility is due to mature on 28 April 2025.
The Group has a policy of pooling cash flows in order to optimise the return on surplus cash and also to utilise cash within
theGroup to reduce the costs of external short-term funding.
The table below shows the maturity analysis of the undiscounted remaining contractual cash flows of the Group’s
financial liabilities:
2022 (£m)
Due within
1 year
Due between
1 and 2 years
Due between
2 and 5 years
Due over
5 years Total
Non-derivative financial liabilities
Bank loans and overdrafts 29 37 424 – 490
Trade and other payables 351 – – – 351
Lease liabilities 146 100 235 177 658
Total cash flows 526 137 659 177 1,499
2021 (£m)
Due within
1 year
Due between
1 and 2 years
Due between
2 and 5 years
Due over
5 years Total
Non-derivative financial liabilities
Bank loans and overdrafts 10 30 461 – 501
Trade and other payables 249 – – – 249
Lease liabilities 115 92 159 148 514
Total cash flows 374 122 620 148 1,264
Notes to the financial statements continued
156 WH Smith PLC Annual Report and Accounts 2022
Financial statements
21. Financial instruments (continued)
Credit risk
Credit risk is the risk that a counterparty may default on their obligation to the Group in relation to lending, hedging,
settlement and other financial activities. The Group’s principal financial assets are trade and other receivables, and bank
balances and cash which are considered to have low credit risk on initial recognition.
The Group has credit risk attributable to its trade and other receivables, including a number of sale or return contracts with
suppliers. The amounts included in the balance sheet are net of allowances for expected credit losses. The Group has adopted
the simplified approach to calculating expected credit losses allowed by IFRS 9. Historical credit loss rates are applied
consistently to groups of financial assets with similar risk characteristics. These are then adjusted for known changes in, or
any forward-looking impacts on, creditworthiness.
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that credit risk might have
increased significantly include the failure of the debtor to engage in a payment plan and failure to make contractual payments
within 180 days past due, which is in line with historical experience of increased credit risk. Indicators that an asset is credit-
impaired would include observable data in relation to the financial health of the debtor or if the debtor breaches contract.
The Group has low retail credit risk due to the transactions being principally high volume, low-value and of short maturity.
The Group has no significant concentration of credit risk, with the exposure spread over a large number of counterparties
and customers.
The credit risk on liquid funds and derivative financial instruments is considered to be low, as the Board approved Group
treasury policy limits the value that can be placed with each approved counterparty to minimise the risk of loss. These limits
are based on a short-term credit rating of P-1.
The carrying amount of financial assets recorded in the financial statements represents the Group’s maximum exposure to
credit risk. The Group does not hold collateral over any of these financial assets.
Interest rate risk
The Group is exposed to cash flow interest rate risk on floating rate bank loans and overdrafts.
At 31 August 2022, the Group had drawn down £nil (2021 £nil) from its £250m committed revolving credit facility. If the
Group draws down on this facility, it does not view any draw down as long-term in nature and therefore does not enter into
interest rate derivatives to mitigate this risk.
The Group has a four-year committed £133m term loan with Banco Santander S.A., London Branch, Barclays Bank PLC, BNP
Paribas and HSBC UK Bank PLC, that was drawn down at the time of the refinancing (April 2021). This loan is interest-bearing
at a margin over SONIA. The Group monitors the risk associated with the loan. At present, the Group has not entered into
interest rate derivatives in respect of the loan.
Foreign currency risk
Foreign exchange rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because
of the changes in foreign exchange rates. The Group’s foreign currency exposures are principally to the US dollar, Euro and
Australian dollar. The Group’s treasury function uses financial instruments to mitigate foreign exchange risk, in line with
treasury policies approved by the Board. Financial instruments include foreign exchange contracts, deposits and bank loans.
The Group uses forward foreign exchange contracts to hedge significant future transactions and cash flows denominated
in currencies other than pounds sterling. The hedging instruments have been used to hedge purchases in US dollars and to
minimise foreign exchange risk in movements of the USD/GBP exchange rates. These are designated as cash flow hedges.
At 31 August 2022 the Group had no material unhedged currency exposures.
The Group’s US dollar, Euro and Australian dollar exposure is principally operational and arises mainly through the operation
of retail stores in North America, France, Ireland, Spain, Germany, Netherlands, Italy and Australia. The Group does not use
derivatives to hedge balance sheet and profit and loss translation exposure.
The fair value of cash flow hedges recognised on the balance sheet within derivative assets/liabilities is shown below:
£m 2022 2021
Fair value of derivative assets 1 –
At 31 August 2022, the total notional amount of outstanding forward foreign exchange contracts to which the Group has
committed is US$30m (2021: US$25m). These instruments will be used to hedge cash flows occurring up to one year from
the balance sheet date.
157WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
21. Financial instruments (continued)
Gains of £nil (2021: £nil) have been transferred to the income statement and gains of £3m (2021: £nil) have been transferred
to inventories in respect of contracts that matured during the year ended 31 August 2022. In the year to 31 August 2022, the
fair value gain on the Group’s currency derivatives that are designated and effective as cash flow hedges amounted to £3m
(2021: £nil).
All the derivatives held by the Group at fair value are considered to have fair values determined by Level 2 inputs as defined
by the fair value hierarchy. There are no non-recurring fair value measurements nor have there been any transfers of assets or
liabilities between levels of the fair value hierarchy.
Sensitivity analysis as at 31 August 2022
Financial instruments affected by market risks include borrowings, deposits and derivative financial instruments. The following
analysis, required by IFRS 7 “Financial Instruments”: Disclosures, is intended to illustrate the sensitivity to changes in market
variables, being UK interest rates, and USD/GBP, EUR/GBP and AUD/GBP exchange rates.
The following assumptions were made in calculating the sensitivity analysis:
• Exchange rate fluctuations on currency derivatives that form part of an effective cash flow hedge relationship affect the
hedging reserve in equity and the fair value of the hedging derivatives.
• Year end exchange rates applied in the analysis are USD/GBP 1.1640/1 (2021: 1.3769/1), EUR/GBP 1.1607/1 (2021: 1.1652/1)
andAUD/GBP 1.6967/1 (2021: 1.8821/1).
• Group debt and hedging activities reflect the positions at 31 August 2022 and 31 August 2021 respectively.
As aconsequence, the analysis relates to the position at those dates and is not necessarily representative of the years
then ended.
The above assumptions are made when illustrating the effect on the Group’s income statement and equity given reasonable
movements in foreign exchange and interest rates before the effect of tax. The Group considers a reasonable interest rate
movement in GBP SONIA/base rate to be one per cent, based on interest rate history. Similarly, sensitivity to movements in
USD/GBP, EUR/GBP and AUD/GBP exchange rates of ten per cent are shown, reflecting changes of reasonable proportion
inthe context of movement in those currency pairs over time.
Using these assumptions, the following table shows the illustrative effect on the Group income statement and equity.
2022 2021
£m
Income
gain/(loss)
Equity
gain/(loss)
Income
(loss)/gain
Equity
(loss)/gain
GBP SONIA/base rate interest rates 1% increase – – – –
USD/GBP exchange rates 10% increase (1) (56) 1 (47)
EUR/GBP exchange rates 10% increase – – 1 1
AUD/GBP exchange rates 10% increase – 2 – 1
GBP SONIA/base rate interest rates 1% decrease – – – –
USD/GBP exchange rates 10% decrease 2 63 (1) 57
EUR/GBP exchange rates 10% decrease 1 – (1) (1)
AUD/GBP exchange rates 10% decrease – (2) – (2)
Notes to the financial statements continued
158 WH Smith PLC Annual Report and Accounts 2022
Financial statements
22. Called up share capital
Allotted and fully paid
2022 2021
£m
Number
of shares
(millions)
Nominal
value
£m
Number
of shares
(millions)
Nominal
value
£m
Equity:
Ordinary shares of 22
6
⁄
67
p 131 29 131 29
Total 131 29 131 29
During the year, 1,633 ordinary shares were allotted under the terms of the Company’s Sharesave Scheme (2021: 43,345).
There was no effect from this allotment on share premium (2021: increase of £1m).
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at the meetings of the Company.
The ESOP reserve of £9m (2021: £5m) represents the cost of shares in WH Smith PLC purchased in the market and held by
the WHSmith Employee Benefit Trust to satisfy awards and options under the Group’s executive share schemes. The total
shareholding is 622,989 (2021: 304,641).
23. Share-based payments
Summary of movements in awards and options
Number of shares
Sharesave
Schemes LTIPs PSP
Cash-settled
awards Total
Outstanding at 1 September 2021 388,479 1,982,314 532,974 52,032 2,955,799
Options and awards granted – 1,150,443 180,368 62,213 1,393,024
Options and awards exercised (1,633) (124,721) (32,164) – (158,518)
Options and awards lapsed / cancelled (68,231) (495,629) (219,901) (2,311) (786,072)
Outstanding at 31 August 2022 318,615 2,512,407 461,277 111,934 3,404,233
Exercisable at 31 August 2022 95,906 39,251 27,561 – 162,718
Outstanding at 1 September 2020 307,077 1,179,064 513,695 17,041 2,016,877
Options and awards granted 272,790 1,103,099 180,468 56,330 1,612,687
Options and awards exercised (43,345) (5,915) (10,833) (21,339) (81,432)
Options and awards lapsed / cancelled (148,043) (293,934) (150,356) – (592,333)
Outstanding at 31 August 2021 388,479 1,982,314 532,974 52,032 2,955,799
Exercisable at 31 August 2021 – – 4,839 – 4,839
Pence 2022 2021
Weighted average exercise price of awards:
– Outstanding at the beginning of the year 192.20 232.88
– Granted in the year – 236.81
– Exercised in the year 15.71 767.49
– Lapsed in the year 126.54 373.06
– Outstanding at the end of the year 136.94 192.20
– Exercisable at the end of the year 947.30 –
159WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
23. Share-based payments (continued)
Detail of movements in options and awards
LTIPs
Under the terms of the LTIP, executive directors and key senior executives may be granted conditional awards to acquire
ordinary shares in the Company (in the form of nil cost options) which will only vest and become exercisable to the extent
that the related performance targets are met.
Outstanding awards granted under the LTIPs are as follows:
Number of shares
Date of grant 2022 2021
Exercise
price (pence) Exercise period
20 October 2016 11,892 136,613 Nil Oct 2019 – 20.10.26
26 October 2017 38,315 38,315 Nil Oct 2020 – 26.10.27
1 November 2018 – 332,766 Nil Nov 2023 – 01.11.28
5 November 2019 365,640 371,521 Nil Nov 2024 – 05.11.29
19 November 2020 1,015,635 1,103,099 Nil Nov 2025 – 19.11.30
19 November 2021 1,080,925 – Nil Nov 2026 – 19.11.31
2,512,407 1,982,314
Awards will first become exercisable on the vesting date, which is the third anniversary of the date of grant. Awards made
on or after October 2016 are subject to holding periods preventing the delivery and sale of shares until the fifth anniversary
of the date of grant. For awards made in October 2016 and October 2017, the holding period applies to 50 per cent of any
shares which vest. For awards made in November 2018, and all subsequent awards, the holding period applies to 100 per cent
of any shares that vest. The awards will accrue dividends paid over the performance and any holding period. LTIP awards are
equity-settled.
Sharesave Scheme
Under the terms of the Sharesave Scheme, the Board grants options to purchase ordinary shares in the Company to
employees with at least three months service who enter into an HM Revenue & Customs approved Save-As-You-Earn (SAYE)
savings contract for a term of three years. Options are granted at up to a 20 per cent discount to the market price of the
shares on the date ofoffer and are normally exercisable for a period of six months after completion of the SAYE contract.
SAYE options are equity-settled.
Outstanding options granted under the Sharesave Scheme at 31 August 2022 and 31 August 2021 are as follows:
Number of shares
Date of grant 2022 2021
Exercise
price (pence) Exercise period
5 June 2019 (3 year) 95,906 115,689 1609.60 01.08.22 – 31.01.23
9 June 2021 (3 year) 222,709 272,790 1400.00 01.08.24 – 31.01.25
318,615 388,479
Notes to the financial statements continued
160 WH Smith PLC Annual Report and Accounts 2022
Financial statements
23. Share-based payments (continued)
Performance Share Plan (PSP)
Under the terms of the Performance Share Plan, the Board may grant conditional awards to executives. The exercise of
awards is conditional on the achievement of a performance target, which is determined by the Board at the time of grant.
The executive directors donot participate in this plan. PSP awards are equity-settled.
Outstanding awards granted under the PSP are as follows:
Number of shares
Date of grant 2022 2021
Exercise
price (pence) Exercise period
23 October 2014 870 870 Nil Oct 2017 – 23.10.24
20 October 2016 3,561 3,969 Nil Oct 2019 – 20.10.26
1 November 2018 – 137,553 Nil Nov 2021 – 01.11.28
7 December 2018 – 10,476 Nil Dec 2021 – 07.12.28
5 November 2019 178,398 205,170 Nil Nov 2022 – 05.11.29
19 November 2020 121,289 174,936 Nil Nov 2021 – 19.11.30
19 November 2021 157,159 – Nil Nov 2024 – 19.11.31
461,277 532,974
Deferred Bonus Plan (DBP)
The Deferred Bonus Plan is applicable to executive directors only. Under the terms of the DBP, any bonus payable over target
is deferred into shares for a period of up to three years. One third of the deferred shares are released on each anniversary of
the bonus.
At 31 August 2022, 18,473 (2021: 10,108) shares remain deferred in accordance with this plan.
Cash-settled schemes
Under the terms of the LTIP and PSP, the Board may grant cash-settled awards to executives. The exercise of options is
conditional on the achievement of a performance target, which is determined by the Board at the time of grant. These awards
will besettled in cash based on the share price at the date of exercise. As at 31 August 2022 there were 111,934 outstanding
nil-cost cash-settled awards (2021: 52,032), which will be settled between November 2022 and November 2031. The carrying
amount of liabilities arising from share-based payment transactions is less than £1m (2021: less than £1m).
Fair value information
2022 2021
Weighted average share price at date of exercise of share options exercised during year – pence 1,573.69 1,558.60
Weighted average remaining contractual life at end of year – years 8 8
161WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
23. Share-based payments (continued)
Share options and awards granted
The aggregate of the estimated fair value of the options and awards granted in the year is:
£m 2022 2021
15 16
The fair values of the LTIP and PSP awards granted were measured using a Monte Carlo simulation model. The input range
into the Monte Carlo models was as follows:
2022 2021
Share price – pence 1,514 1,482
Exercise price – pence Nil Nil
Expected volatility – per cent 41 42
Expected life – years 3.0 2.8
Risk-free rate – per cent 0.44 (0.03)
Dividend yield – per cent 0%-2% 0%–2%
Weighted average fair value of options – pence 1,068.26 1,060.81
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the expected life of
the option.
The fair values of the Sharesave options granted in the year ended 31 August 2021 were measured using a Black Scholes
model. None were granted in the year ended 31 August 2022. The input range into the Black Scholes models was as follows
inthe year ended 31 August 2021:
2021
Share price – pence 1,785
Exercise price – pence 1,400
Expected volatility – per cent 37
Expected life – years 3.4
Risk-free rate – per cent 0.16
Dividend yield – per cent Nil
Weighted average fair value of options – pence 616.43
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the expected life of
the option.
24. Related party transactions
Transactions between businesses within this Group which are related parties have been eliminated on consolidation and are
not disclosed in this Note.
Remuneration of key management personnel
The remuneration of the executive and non-executive directors, who are the key management personnel of the Group, is set
out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.
Further information about the remuneration of individual directors is provided in the Directors’ remuneration report on pages
83 to 104.
£’000 2022 2021
Short-term employee benefits 3,327 2,470
Post-employment benefits 182 176
Share-based payments 1,577 1,042
5,086 3,688
There are no other transactions with directors.
Notes to the financial statements continued
162 WH Smith PLC Annual Report and Accounts 2022
Financial statements
25. Other reserves and Capital redemption reserve
£m Other reserves
Revaluation
reserve
ESOP
reserve
Hedging
reserve
Convertible
bond reserve Total
Balance as at 1 September 2021 (277) 2 (5) – 40 (240)
Cash flow hedges – – – 3 – 3
Employee share schemes (3) – (4) – – (7)
Balance at 31 August 2022 (280) 2 (9) 3 40 (244)
£m Other reserves
Revaluation
reserve
ESOP
reserve
Hedging
reserve
Convertible
bond reserve Total
Balance as at 1 September 2020 (277) 2 (4) – – (279)
Issue of convertible bond – value of conversion rights – – – – 40 40
Employee share schemes – – (1) – – (1)
Balance at 31 August 2021 (277) 2 (5) – 40 (240)
The Other reserves include reserves created in relation to historical capital reorganisation and proforma restatement, £(238)m
(2021: £(238)m), demerger from Smiths News PLC in 2006, £69m (2021: £69m), and cumulative amounts relating to employee
share schemes of £108m (2021: £(108)m).
The convertible bond reserve is a reserve created to recognise the equity component of the convertible bond issued in
April2021 (see Note 18) and represents the value of the conversion rights at initial recognition of £41m, net of transaction
costs of £1m.
The Capital redemption reserve of £13m (2021: £13m) represents the par value of shares repurchased and cancelled under the
Group’s share buyback programme and is reclassified from Share capital to the Capital redemption reserve.
163WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
26. Subsidiary companies
The subsidiary companies included within the financial statements are disclosed below.
UK subsidiaries
Name
Country of
incorporation/
registration
Registered
address Class of shares
Proportion of
shares held
by Group
companies % Principal activity
Held directly by WH Smith PLC:
WH Smith Retail Holdings Limited England & Wales 1 Ordinary 100 Holding company
Held indirectly:
Books & Stationers Limited England & Wales 1 Ordinary 100 Retailing
Card Market Limited England & Wales 1 Ordinary 100 Retailing
Dotty About Paper Limited England & Wales 1 Ordinary 100 Dormant
funkypigeon.com Limited England & Wales 1 Ordinary 100 Retailing
Modelzone Limited England & Wales 1 Ordinary 100 Dormant
Sussex Stationers Limited England & Wales 1 Ordinary 100 Dormant
The Card Gallery (UK) Limited England & Wales 1 Ordinary 100 Retailing
The SQL Workshop Limited England & Wales 1 Ordinary 100 Retailing
The Websters Group Limited England & Wales 1 Ordinary 100 Dormant
Tree of Hearts Limited England & Wales 1 Ordinary 100 Dormant
WH Smith (Qatar) Limited England & Wales 1 Ordinary 100 Dormant
WH Smith 1955 Limited England & Wales 1 Ordinary 100 Holding Company
WH Smith High Street Holdings Limited England & Wales 1 Ordinary 100 Holding Company
WH Smith High Street Limited England & Wales 1 Ordinary &
Preference
100 Retailing
WH Smith Hospitals Holdings Limited England & Wales 1 Ordinary &
Preference
100 Holding Company
WH Smith Hospitals Limited England & Wales 1 Ordinary 100 Retailing
WH Smith Promotions Limited England & Wales 1 Ordinary 100 Retailing
WH Smith Retirement Savings Plan Limited England & Wales 1 Ordinary 100 Dormant
WH Smith Travel 2008 Limited England & Wales 1 Ordinary 100 Holding Company
WH Smith Travel Holdings Limited England & Wales 1 Ordinary 100 Holding Company
WH Smith Travel Limited England & Wales 1 Ordinary &
Preference
100 Retailing
WH Smith US Group Holdings Limited England & Wales 1 Ordinary 100 Holding Company
WH Smith US Retail Holdings Limited England & Wales 1 Ordinary 100 Holding Company
Notes to the financial statements continued
164 WH Smith PLC Annual Report and Accounts 2022
Financial statements
The following UK subsidiaries will take advantage of the audit exemption set out within section 479A of the Companies Act
2006 for the year ended 31 August 2022.
The Company will guarantee the debts and liabilities of the below UK subsidiary undertakings at the balance sheet date in
accordance with section 479C of the Companies Act 2006. The Company has assessed the probability of loss under the
guarantee as remote.
Name Company number
Held indirectly:
Books & Stationers Limited 07515820
Card Market Limited 8956574
WH Smith 1955 Limited 549069
WH Smith High Street Holdings Limited 6560371
WH Smith Hospitals Holdings Limited 03896896
WH Smith Promotions Limited 2339902
The Card Gallery (UK) Limited 05157486
The SQL Workshop Limited 02676287
WH Smith Travel 2008 Limited 6560390
International joint ventures
The below entities are joint ventures and per the Group’s accounting policies on page 122, the Group’s share of results of
these joint ventures is included in the Group consolidated income statement using the equity method of accounting.
Name
Country of
incorporation/
registration
Registered
address Class of shares
Proportion of
shares held by
Group companies % Principal activity
Held indirectly:
WH Smith – DFA Brasil Cafeteria, Livraria E
Conveniencia Eireli
Brazil 15 Ordinary 50 Retailing
WH Smith Malaysia SDN BHD Malaysia 11 Ordinary 50 Retailing
WH Smith LLC Oman 10 Ordinary 50 Retailing
MSP Innovations, LLC USA 16 Ordinary 33 Retailing
Nash Nails MRG, LLC USA 16 Ordinary 39 Retailing
International subsidiaries
The below list of interests in overseas entities includes certain entities, particularly in the United States of America, in which
WH Smith PLC holds less than 100 per cent ownership. These entities primarily relate to airport operations in which the Group
is required to engage with a local partner in order to operate the stores. Per the accounting policy set out on page 122, the
Group has determined that it has control of these entities and has therefore consolidated their results.
26. Subsidiary companies (continued)
165WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
26. Subsidiary companies (continued)
Name
Country of
incorporation/
registration
Registered
address Class of shares
Proportion of
shares held
by Group
companies % Principal activity
Held indirectly:
WH Smith Asia Limited Hong Kong 2 Ordinary 100 Product sourcing for
Group companies
WH Smith Australia Pty Limited Australia 3 Ordinary 100 Retailing
WH Smith Calais S.A.S France 4 Ordinary 100 Retailing
WH Smith Germany GmbH Germany 5 Ordinary 100 Retailing
WH Smith Ireland Limited Ireland 6 Ordinary 100 Retailing
WH Smith Italia S.R.L Italy 7 Ordinary 100 Retailing
WH Smith Jersey Limited Jersey 8 Ordinary 100 Retailing
WH Smith LLC Qatar 9 Ordinary 49 Retailing
WH Smith Nederland B.V. Netherlands 12 Ordinary 100 Dormant
WH Smith Belgium Belgium 18 Ordinary 100 Retailing
WH Smith Norway Norway 19 Ordinary 100 Retailing
WH Smith Singapore Pte. Limited Singapore 13 Ordinary 100 Retailing
WH Smith Spain S.L. Spain 14 Ordinary 100 Retailing
WH Smith USA Holdings Inc USA 16 Ordinary 100 Holding Company
InMotion Entertainment Holdings LLC USA 16 Ordinary 100 Holding Company
InMotion Entertainment Personnel Leasing Corp USA 16 Ordinary 100 Holding Company
WH Smith USA Retail Inc USA 16 Ordinary 100 Holding Company
InMotion SFO, LLC USA 16 Ordinary 88 Retailing
Wild Retail Group Pty Limited Australia 3 Ordinary 100 Retailing
InMotion Entertainment Group, LLC USA 16 Ordinary 100 Retailing
BTS – InMotion Atlanta, LLC USA 16 Ordinary 100 Retailing
InMotion AUS, LLC USA 16 Ordinary 88 Retailing
InMotion BNA, LLC USA 16 Ordinary 84 Dormant
InMotion BNA-C,LLC USA 16 Ordinary 80 Retailing
Soundbalance BOS, LLC USA 16 Ordinary 67 Dormant
InMotion BOS-A, LLC USA 16 Ordinary 80 Dormant
InMotion BOS, LLC USA 16 Ordinary 70 Dormant
InMotion BOS-BCE, LLC USA 16 Ordinary 80 Retailing
InMotion BWI, LLC USA 16 Ordinary 60 Retailing
InMotion CLE, LLC USA 16 Ordinary 67 Retailing
Soundbalance CLT, LLC USA 16 Ordinary 67 Retailing
InMotion – SB DC, LLC USA 16 Ordinary 75 Retailing
InMotion DCA, LLC USA 16 Ordinary 75 Retailing
InMotion DEN-B, LLC USA 16 Ordinary 75 Retailing
DFW-A Retail Partners, LLC USA 16 Ordinary 60 Retailing
DFW-E Retail Partners, LLC USA 16 Ordinary 65 Retailing
DFW-D/E Retail Partners, LLC USA 16 Ordinary 70 Retailing
Soundbalance DTW, LLC USA 16 Ordinary 67 Retailing
InMotion DTW, LLC USA 16 Ordinary 75 Retailing
InMotion EWR, LLC USA 16 Ordinary 80 Retailing
InMotion EWR-B, LLC USA 16 Ordinary 85 Retailing
InMotion FLL, LLC USA 16 Ordinary 62 Retailing
InMotion FLL-T4, LLC USA 16 Ordinary 62 Retailing
InMotion IAD, LLC USA 16 Ordinary 75 Retailing
Soundbalance IAH, LLC USA 16 Ordinary 67 Retailing
BR InMotion IAH, LLC USA 16 Ordinary 65 Retailing
InMotion LAX, LLC USA 16 Ordinary 75 Retailing
Notes to the financial statements continued
166 WH Smith PLC Annual Report and Accounts 2022
Financial statements
Name
Country of
incorporation/
registration
Registered
address Class of shares
Proportion of
shares held
by Group
companies % Principal activity
InMotion LAX-IT,LLC USA 16 Ordinary 80 Retailing
Soundbalance MCO, LLC USA 16 Ordinary 67 Retailing
InMotion MCO, LLC USA 16 Ordinary 73 Retailing
Soundbalance Miami, LLC USA 16 Ordinary 67 Retailing
InMotion Bright, LLC USA 16 Ordinary 75 Retailing
InMotion MKE, LLC USA 16 Ordinary 79 Dormant
InMotion MSY, LLC USA 16 Ordinary 64 Retailing
InMotion ORD, LLC USA 16 Ordinary 70 Retailing
InMotion ORD T2, LLC USA 16 Ordinary 70 Retailing
Soundbalance PDX, LLC USA 16 Ordinary 67 Retailing
Soundbalance PHL, LLC USA 16 Ordinary 67 Retailing
InMotion PHL, LLC USA 16 Ordinary 70 Dormant
Soundbalance ATL-E, LLC USA 16 Ordinary 67 Retailing
InMotion ATL-A, LLC USA 16 Ordinary 64 Retailing
InMotion ATL, LLC USA 16 Ordinary 80 Retailing
InMotion PHX, LLC USA 16 Ordinary 80 Retailing
InMotion PHX T3, LLC USA 16 Ordinary 90 Retailing
Soundbalance SAN, LLC USA 16 Ordinary 55 Retailing
InMotion SAT, LLC USA 16 Ordinary 75 Retailing
InMotion SEA, LLC USA 16 Ordinary 88 Retailing
InMotion SFO-T3, LLC USA 16 Ordinary 85 Retailing
InMotion SFO-IT, LLC USA 16 Ordinary 90 Retailing
Soundbalance SJC, LLC USA 16 Ordinary 67 Dormant
InMotion SLC,LLC USA 16 Ordinary 80 Retailing
InMotion IAH, LLC USA 16 Ordinary 70 Dormant
InMotion SLC-A,LLC USA 16 Ordinary 85 Retailing
InMotion SLC-B,LLC USA 16 Ordinary 90 Retailing
InMotion SMF,LLC USA 16 Ordinary 90 Retailing
InMotion CLT, LLC USA 16 Ordinary 74 Retailing
SBIP, LLC USA 16 Ordinary 50 Dormant
InMotion LGA, LLC USA 16 Ordinary 75 Dormant
Marshall Retail Group Holding Co Inc USA 16 Ordinary 100 Holding company
MRG Holdings Corp USA 16 Ordinary 100 Holding company
Marshall Retail Group LLC USA 16 Ordinary 100 Retailing
The Marshall Retail Group Canada Inc Canada 17 Ordinary 100 Retailing
MRG Baltimore Concourse A, LLC USA 16 Ordinary 70 Retailing
MRG Baltimore (BWI), LLC USA 16 Ordinary 70 Retailing
MRG Chicago, LLC USA 16 Ordinary 65 Retailing
MRG Denver, LLC USA 16 Ordinary 75 Retailing
MRG Dallas II, LLC USA 16 Ordinary 65 Retailing
MRG Kansas City, LLC USA 16 Ordinary 80 Retailing
MRG LaGuardia, LLC USA 16 Ordinary 80 Retailing
MRG LaGuardia Terminal A, LLC USA 16 Ordinary 75 Retailing
MRG Los Angeles, LLC USA 16 Ordinary 70 Retailing
MRG Los Angeles T3 USA 16 Ordinary 70 Retailing
MRG Nashville, LLC USA 16 Ordinary 80 Retailing
26. Subsidiary companies (continued)
167WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
Name
Country of
incorporation/
registration
Registered
address Class of shares
Proportion of
shares held
by Group
companies % Principal activity
MRG Newark, LLC USA 16 Ordinary 74 Retailing
MRG Newark 2, LLC USA 16 Ordinary 74 Retailing
MRG Orlando, LLC USA 16 Ordinary 70 Retailing
MRG Phoenix 1, LLC USA 16 Ordinary 65 Retailing
MRG Phoenix 2, LLC USA 16 Ordinary 65 Retailing
MRG Raleigh Terminal 1, LLC USA 16 Ordinary 55 Retailing
MRG RDU T2, LLC USA 16 Ordinary 80 Retailing
MRG Sacramento, LLC USA 16 Ordinary 90 Retailing
MRG Salt Lake City, LLC USA 16 Ordinary 80 Retailing
MRG San Francisco, LLC USA 16 Ordinary 80 Retailing
MRG San Francisco Terminal 1, LLC USA 16 Ordinary 80 Retailing
MRG San Francisco Terminal 2, LLC USA 16 Ordinary 85 Retailing
MRG San Francisco Terminal 3, LLC USA 16 Ordinary 80 Retailing
MRG Savannah, LLC USA 16 Ordinary 55 Retailing
MR Seattle, LLC USA 16 Ordinary 80 Retailing
MRG Washington (DCA), LLC USA 16 Ordinary 75 Retailing
MRG Washington (IAD), LLC USA 16 Ordinary 75 Retailing
Midway Fresh MRG, LLC USA 16 Ordinary 20 Retailing
WH Smith DEN, LLC USA 16 Ordinary 70 Retailing
WH Smith DCA, LLC USA 16 Ordinary 75 Retailing
Registered addresses
1 Greenbridge Road, Swindon, Wiltshire SN3 3RX
2 Suites 13A01–04, 13 Floor, South Tower, World Finance Centre, Harbour City, Tsim Sha Tsui, Kowloon, Hong Kong
3 Suite 401, 80 William Street, Woolloomooloo NSW 2011, Australia
4 38 Rue des Mathurins, 75008 Paris 8, France
5 Terminal Ring 1, Zentralgebaude Ost, Zi. 5. 035, 40474 Dusseldorf, Germany
6 6th Floor, Grand Canal Square, Dublin 2, Ireland
7 Via Borgogna, Cap 20122, Milano, Italy
8 72/74 King Street, St Helier, Jersey, JE2 4WE
9 27 Um Ghwalinah Road, 230 C-ring Road, Doha, Qatar
10 PO Box 3275, PC112, Ruwi, Oman
11 C2–6–1, Solaris Dutamas, 1, Jalan Dutamas 1, 50480, Kuala Lumpur, Malaysia
12 Weteringschans 94, 1017 XS, Amsterdam, Netherlands
13 11 Keng Cheow Street #3–10 The Riverside Piazza, Singapore 059608
14 Paseo de Recoletos, 27, 7ª, 28004, Madrid, Spain
15 Avenida das Americas, No. 3434, Barra da Tijuca, CEP 22640–102, Rio de Janeiro, RJ, Brazil
16 3755 W Sunset Road, Las Vegas, Nevada, NV 89118, USA
17 2200 HSBC Building, 885 West Georgia Street, Vancouver, BC V6C 3E8, Canada
18 Posthofbrug 10 boîte 4, 2600 Anvers, Belgique
19 C/o CMS Kluge Advokatfirma AS, Bryggegata 6, 0250 Oslo, Norway
26. Subsidiary companies (continued)
Notes to the financial statements continued
168 WH Smith PLC Annual Report and Accounts 2022
Financial statements
£m Note 2022 2021
Non-current assets
Investments 3 835 835
835 835
Current assets
Receivables: amounts falling due within one year 4 287 298
287 298
Current liabilities
Payables: amounts falling due within one year 5 (166) (168)
Borrowings 6 (20) –
(186) (168)
Net current assets 101 130
Non-current liabilities
Borrowings 6 (404) (415)
(404) (415)
Total net assets 532 550
Shareholders’ equity
Called up share capital 8 29 29
Share premium account 316 316
Other reserves 9 40 40
Capital redemption reserve 9 13 13
Profit and loss account
1
134 152
Total equity 532 550
1 The loss for the year attributable to shareholders was £18m (2021: loss of £14m). See Note 2.
The financial statements of WH Smith PLC, registered number 5202036, on pages 169 to 172 were approved by the Board of
Directors and authorised for issue on 10 November 2022 and were signed on its behalf by:
Carl Cowling Robert Moorhead
Group Chief Executive Chief Financial Officer and Chief Operating Officer
Company statement of changes in equity
For the year ended 31 August 2022
£m
Share
capital
Share
premium
Capital
redemption
reserve
Other
reserves
Profit
and loss
account Total
Balance at 1 September 2021 29 316 13 40 152 550
Loss for the financial year – – – – (18) (18)
Total comprehensive loss for the year – – – – (18) (18)
Balance at 31 August 2022 29 316 13 40 134 532
Balance at 1 September 2020 29 315 13 – 166 523
Loss for the financial year – – – – (14) (14)
Total comprehensive loss for the year – – – – (14) (14)
Premium on issue of shares – 1 – – – 1
Issue of convertible bonds – value of conversion rights (Note 10) – – – 40 – 40
Balance at 31 August 2021 29 316 13 40 152 550
Company balance sheet
As at 31 August 2022
169WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
1. Accounting policies
A) Basis of preparation
The Company’s financial statements have been prepared on a going concern basis, as detailed in the Directors’ report on
page 105.
The financial statements are prepared in accordance with the Companies Act 2006 as applicable to companies using FRS 101.
The Company meets the definition of a qualifying entity under FRS 100 (Application of Financial Reporting Requirements)
issued by the Financial Reporting Council. Accordingly, the financial statements have been prepared in accordance with FRS
101 ‘Reduced Disclosure Framework’ as issued by the Financial Reporting Council.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemption available under the standard in
relation to share–based payments, financial instruments, capital management, presentation of comparative information in
respect of certain assets, presentation of a cash flow statement, standards not yet effective, impairment of assets and related
party transactions. Where required, equivalent disclosures are given in the consolidated financial statements of the Group.
The financial statements are prepared under the historical cost convention.
The principal accounting policies adopted are the same as those set out in Note 1 to the consolidated financial statements
except as noted below. No new accounting standards, or amendments to accounting standards, or IFRIC interpretations that
are effective for the year ended 31 August 2022, have had a material impact on the Company.
In the application of the Company’s accounting policies, the Directors do not consider that there are any further critical
accounting judgements or sources of estimation uncertainty that could lead to a material change in the carrying amounts of
assets and liabilities.
B) Investments in subsidiary undertakings
Investments in subsidiaries are valued at historical cost less provision for impairment in value. Investments in subsidiaries are
tested annually for impairment. An impairment loss is recognised for the amount by which the carrying value exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s net realisable value and value-in-use.
C) Taxation
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using
the tax rates and laws that have been enacted or substantively enacted at the balance sheet date.
D) Receivables
Receivables represent amounts due from other Group companies. Receivables are initially measured at fair value and
subsequently measured at amortised cost using the effective interest rate method, less provision for impairment. A provision
for the expected credit loss on receivables is established at inception. This is modified when there is a change in the credit
risk and hence evidence that the Company will not be able to collect all amounts due according to the original terms
of receivables.
2. Profit/(loss) for the year
The Company has not presented its own profit and loss account as permitted by Section 408 of the Companies Act 2006.
The loss for the year attributable to shareholders, which is stated on an historical cost basis, was £18m (2021: 14m) comprising
finance costs of £22m (2021: £14m), non-underlying items of £nil (2021: £6m), offset by a tax credit of £4m (2021: £6m).
There were no other recognised gains or losses.
The Company did not have any employees during the year ended 31 August 2022 (2021: nil). All directors were remunerated
by other Group companies.
3. Investments
A full list of the Company’s subsidiary undertakings is included in Note 26 of the Notes to the consolidated financial
statements. The registered office of WH Smith Retail Holdings Limited is Greenbridge Road, Swindon, Wiltshire SN3 3RX.
The investment in subsidiaries balance has been tested for impairment at the balance sheet date. The recoverable amount of
the investment is assumed to approximate the Group's market capitalisation on the London Stock Exchange, adjusted for any
assets or liabilities on the Company's balance sheet. There was substantial headroom between the recoverable amount of the
investment and its carrying value. Consequently, no impairment has been recognised in respect of the investment.
Notes to the Company financial statements
170 WH Smith PLC Annual Report and Accounts 2022
Financial statements
4. Receivables: amounts falling due within one year
£m 2022 2021
Amounts owed by subsidiary undertakings 282 293
Prepayments 1 1
Current tax receivable 4 4
287 298
Amounts receivable from subsidiary undertakings are non-interest bearing and repayable on demand. The Company has
undertaken a review of the liquidity position of the counterparty subsidiaries and noted that the subsidiaries continue to have
sufficient immediately available funds to settle the receivables at the balance sheet date. As a result, no expected credit losses
have been included in the profit and loss account in the current year in respect of these receivables.
5. Payables: amounts falling due within one year
£m 2022 2021
Amounts owed to subsidiary undertakings 162 162
Bank overdrafts 2 3
Accruals and deferred income 2 3
166 168
Amounts owed to subsidiary undertakings are unsecured, non-interest bearing and repayable on demand.
6. Borrowings
£m 2022 2021
Current Term loans 20 –
Non-current Term loans 112 132
Convertible bonds 292 283
424 415
In the prior year, the Group announced new financing arrangements. These included the issuance of £327m of convertible
bonds, the repayment of the existing £400m term loans and replacement with a new £133m term loan, and an increased
revolving credit facility of £250m.
Term loans and revolving credit facilities
At 31 August 2022, alongside other Group companies, the Company is a guarantor on a five-year committed multi-currency
revolving credit facility of £250m with Santander UK PLC, BNP Paribas, HSBC UK Bank PLC, JP Morgan Securities PLC and
Barclays Bank PLC. The revolving credit facility is due to mature on 28 April 2025. The utilisation is interest bearing at a
margin over SONIA.
At 31 August 2022, the Company has a four-year committed £133m term loan with Banco Santander S.A., London Branch,
Barclays Bank PLC, BNP Paribas and HSBC UK Bank PLC, that was drawn down at the time of the refinancing in April 2021.
This loan is interest bearing at a margin over SONIA and is due to mature on 28 April 2025.
Transaction costs of £1m relating to the term loan are being amortised through the effective interest rate method.
Convertible bonds
In the prior year, the Company issued £327m of guaranteed senior unsecured convertible bonds due in 2026. Settlement and
delivery of convertible bonds took place on 7 May 2021. The total bond offering of £327m covers a five-year term beginning
on 7 May 2021 with a 1.625 per cent per annum coupon payable semi-annually in arrears in equal instalments. The bonds
are convertible into new and/or existing ordinary shares of WH Smith PLC. The initial conversion price was set at £24.99
representing a premium of 40 per cent above the reference share price on 28 April 2021 (£17.85). If not previously converted,
redeemed or purchased and cancelled, the Bonds will be redeemed at par on 7 May 2026.
171WH Smith PLC Annual Report and Accounts 2022
Strategic report Corporate governance Financial statements Additional information
6. Borrowings (continued)
The convertible bond is a compound financial instrument, consisting of a financial liability component and an equity
component, representing the value of the conversion rights. The initial fair value of the liability portion of the convertible
bond is determined using a market interest rate for an equivalent non-convertible bond at the issue date. The liability is
subsequently recognised on an amortised cost basis using the effective interest rate method until extinguished on conversion
or maturity of the bonds. The remainder of the proceeds is allocated to the conversion option and recognised in equity
(Other reserves), and not subsequently remeasured. As a result, £286m was initially recognised as a liability in the balance
sheet on issue and the remainder of the proceeds of £41m, which represents the option component, was recognised in equity.
Transaction costs of £6m were allocated between the two components and the element relating to the debt component of
£5m is amortised through the effective interest rate method. The issue costs apportioned to the equity component of £1m
have been deducted from equity.
7. Contingent liabilities
Contingent liabilities of £1m (2021: £1m) are in relation to insurance standby letters of credit.
The Company will guarantee the debts and liabilities of the below UK subsidiary undertakings at the balance sheet date in
accordance with section 479C of the Companies Act 2006. The Company has assessed the probability of loss under the
guarantee as remote.
Name Company number
Held indirectly:
Books & Stationers Limited 07515820
Card Market Limited 8956574
WH Smith 1955 Limited 549069
WH Smith High Street Holdings Limited 6560371
WH Smith Hospitals Holdings Limited 03896896
WH Smith Promotions Limited 2339902
The Card Gallery (UK) Limited 05157486
The SQL Workshop Limited 02676287
WH Smith Travel 2008 Limited 6560390
8. Called up share capital
Allotted and fully paid
2022 2021
Number of
shares
(millions)
Nominal
value
£m
Number of
shares
(millions)
Nominal
value
£m
Equity:
Ordinary shares of 22
6
⁄
67
p 131 29 131 29
Total 131 29 131 29
During the year, 1,633 ordinary shares were allotted under the terms of the Company’s Sharesave Scheme. There was no
effect from this allotment on share premium (2021: increase of £1m).
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at the meetings of the Company.
9. Other reserves and Capital redemption reserve
Other reserves are reserves created to recognise the equity component of the convertible bond issued in April 2021 (see Note
6) and represents the value of the conversion rights at initial recognition of £41m, net of transaction costs of £1m.
The Capital redemption reserve of £13m (2021: £13m) represents the par value of shares repurchased and cancelled under the
Company’s share buyback programme is reclassified from Share capital to the Capital redemption reserve.
Notes to the Company financial statements continued
172 WH Smith PLC Annual Report and Accounts 2022
Financial statements
Strategic report Corporate governance Financial statements Additional information
173WH Smith PLC Annual Report and Accounts 2022
Alternative performance measures
In reporting financial information, the Group presents alternative performance measures, “APMs”, which are not defined or
specified under the requirements of IFRS.
The Group believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide
stakeholders with additional useful information on the underlying trends, performance and position of the Group and are
consistent with how business performance is measured internally. The alternative performance measures are not defined by
IFRS and therefore may not be directly comparable with other companies’ alternative performance measures.
Non-underlying items
The Group has chosen to present a measure of profit and earnings per share which excludes certain items, that are
considered non-underlying and exceptional due to their size, nature or incidence, and are not considered to be part of the
normal operations of the Group. These measures exclude the financial effect of non-underlying items which are considered
exceptional or occur infrequently such as, inter alia, restructuring costs linked to a Board agreed programme, costs relating
to business combinations, impairment charges and other property costs, significant items relating to pension schemes, and
impairment charges and items meeting the definition of non-underlying specifically related to the Covid-19 pandemic, and
the related tax effect of these items. In addition, these measures exclude the income statement impact of amortisation of
intangible assets acquired in business combinations, which are recognised separately from goodwill. This amortisation is not
considered to be part of the underlying operating costs of the business and has no associated cash flows.
The Group believes that the separate disclosure of these items provides additional useful information to users of the financial
statements to enable a better understanding of the Group’s underlying financial performance.
IFRS 16
The Group adopted IFRS 16 in the year ended 31 August 2020. IFRS 16 superseded the lease guidance under IAS 17 and the
related interpretations. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases
and requires lessees to account for all leases under a single on-balance sheet model as the distinction between operating and
finance leases is removed. The only exceptions are short-term and low-value leases. At the commencement date of a lease, a
lessee will recognise a lease liability for the future lease payments and an asset (right-of-use asset) representing the right to
use the underlying asset during the lease term. Lessees are required to separately recognise the interest expense on the lease
liability and the depreciation expense on the right-of-use asset.
Management have chosen to exclude the effects of IFRS 16 for the purposes of narrative commentary on the Group’s
performance and financial position in the Strategic report. The effect of IFRS 16 on the Group income statement is to front-
load total lease expenses, being higher at the beginning of a lease contract, and lower towards the end of a contract, and this
is further influenced by timing of renewals and contract wins, and lengths of contracts. As a result of these complexities, IFRS
16 measures of profit and EBITDA (used as a proxy for cash generation) do not provide meaningful KPIs or measures for the
purposes of assessing performance, concession quality or for trend analysis, therefore management continue to use pre-IFRS
16 measures internally.
The impact of the implementation of IFRS 16 on the Income statement and Segmental information is provided in Notes A1
and A2 below. There is no impact on cash flows, although the classification of cash flows has changed, with an increase in
net cash flows from operating activities being offset by a decrease in net cash flows from financing activities, as set out in
Note A9 below. The balance sheet as at 31 August 2022 both including and excluding the impact of IFRS 16 is shown in Note
A10 below.
Leases policies applicable prior to 1 September 2019
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their fair value determined at the inception of the
lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included
in the balance sheet as a finance lease obligation. These assets are depreciated over their expected useful lives on the same
basis as owned assets or, where shorter, over the term of the relevant lease. Lease payments are apportioned between
finance charges and a reduction of the lease obligations so as to achieve a constant rate of interest on the remaining balance
of the liability. Finance charges are recognised directly in the income statement.
Rentals payable and receivable under operating leases are charged to the income statement on a straight-line basis over the
term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread
on a straight-line basis over the lease term. The Group has a number of lease arrangements in which the rent payable is
contingent on revenue. Contingent rentals payable, based on store revenues, are accrued in line with revenues generated.
Glossary (unaudited)
Additional information
174 WH Smith PLC Annual Report and Accounts 2022
Glossary (unaudited) continued
Definitions and reconciliations
In line with the Guidelines on Alternative Performance Measures issued by the European Securities and Markets Authority
(“ESMA”), we have provided additional information on the APMs used by the Group below, including full reconciliations back
to the closest equivalent statutory measure.
APM
Closest
equivalent
IFRSmeasure
Reconciling items to
IFRS measure Definition and purpose
Income statement measures
Headline measures Various See Notes A1–A11 Headline measures exclude the impact of IFRS 16 (applying the
principles of IAS 17). Reconciliations of all Headline measures are
provided in Notes A1 to A11.
Group profit/(loss)
before tax and
non-underlying
items
Group
profit/(loss)
before tax
See Group
income
statement and
Note A1
Group profit/(loss) before tax and non-underlying items
excludes the impact of non-underlying items as described below.
A reconciliation from Group profit/(loss) before tax and non-
underlying items to Group profit/(loss) before tax is provided on the
Group income statement on page 116, and on a Headline (pre-IFRS
16) basis in Note A1.
Group
profit/(loss)
fromtrading
operations and
segment trading
profit/(loss)
Group
operating
profit/(loss)
See Note 2
andNote A2
Group profit/(loss) from trading operations and segment trading
profit/(loss) are stated after directly attributable share-based
payment and pension service charges and before non-underlying
items, unallocated costs, finance costs and income tax expense.
A reconciliation from the above measures to Group operating
profit/(loss) and Group profit/(loss) before tax on an IFRS 16 basis
is provided in Note 2 to the financial statements and on a Headline
(pre-IFRS 16) basis in Note A2.
Non-underlying
items
None Refer to
definition and
see Note 4
andNote A6
Items which are not considered part of the normal operating costs
of the business, are non-recurring and considered exceptional
because of their size, nature or incidence, are treated as non-
underlying items and disclosed separately. The Group believes that
the separate disclosure of these items provides additional useful
information to users of the financial statements to enable a better
understanding of the Group’s underlying financial performance.
An explanation of the nature of the items identified as non-
underlying on an IFRS 16 basis is provided in Note 4 to the financial
statements, and on a Headline (pre-IFRS 16) basis in Note A6.
Earnings/(loss) per
share before non-
underlying items
Earnings/
(loss)
per share
Non-underlying
items, see Note
10 and Note A4
Profit/(loss) for the year attributable to the equity holders of
the parent before non-underlying items divided by the weighted
average number of ordinary shares in issue during the financial year.
A reconciliation is provided on an IFRS 16 basis in Note 10 and on a
Headline (pre-IFRS 16) basis in Note A4.
Headline EBITDA Group
operating
profit/(loss)
Refer
to definition
Headline EBITDA is Headline Group operating profit/(loss) before
non-underlying items adjusted for pre-IFRS 16 depreciation,
amortisation and impairment.
Effective tax rate None Non-underlying
items
Total income tax charge/credit excluding the tax impact of non-
underlying items divided by Group Headline profit/(loss) before
tax and non-underlying items. See Note 8 on an IFRS 16 basis, and
Notes A3 and A6 on a Headline pre-IFRS 16 basis.
Fixed
charges cover
None Refer
to definition
This performance measure calculates the number of times Profit
before tax covers the total fixed charges included in calculating
profit or loss. Fixed charges included in this measure are net finance
charges (excluding finance charges from IFRS 16 leases) and net
operating lease rentals stated on a pre-IFRS 16 basis.
The calculation of this measure is outlined in Note A5.
Strategic report Corporate governance Financial statements Additional information
175WH Smith PLC Annual Report and Accounts 2022
Definitions and reconciliations (continued)
APM
Closest
equivalent
IFRSmeasure
Reconciling items to
IFRS measure Definition and purpose
Income statement measures (continued)
Gross margin Gross
profit margin
Not applicable Where referred to throughout the Annual report, gross margin is
calculated as gross profit divided by revenue.
Like-for-
like revenue
Movement in
revenue per
the income
statement
– Revenue
change from
non-like-for-
like stores
– Foreign
exchange
impact
Like-for-like revenue is the change in revenue from stores that have
been open for at least a year, with a similar selling space at a constant
foreign exchange rate.
Balance sheet measures
Headline net debt Net debt Reconciliation of
net debt
Headline net debt is defined as cash and cash equivalents, less bank
overdrafts and other borrowings and both current and non-current
obligations under finance leases as defined on a pre-IFRS 16 basis.
Lease liabilities recognised as a result of IFRS 16 are excluded from
this measure. A reconciliation of net debt on an IFRS 16 basis is
provided in Note A8.
Other measures
Free cash flow Net cash
inflow from
operating
activities
See Note A7 and
Strategic report
page 28
Free cash flow is defined as the net cash inflow from operating
activities before the cash flow effect of IFRS 16, non-underlying
items and pension funding, and less net capital expenditure.
The components of free cash flow are shown in Note A7 and on
page28, as part of the Strategic report.
Additional information
176 WH Smith PLC Annual Report and Accounts 2022
Glossary (unaudited) continued
A1. Reconciliation of Headline to Statutory Group operating profit
and Group profit beforetax
2022
pre-IFRS 16 basis IFRS 16 basis
£m
Headline, before
non-underlying
items(pre-IFRS 16)
Headline
non-underlying
items(pre-IFRS 16)
Headline
(pre-IFRS 16)
IFRS 16
adjustments Total
Revenue 1,400 – 1,400 – 1,400
Cost of sales (538) – (538) – (538)
Gross profit 862 – 862 – 862
Distribution costs (604) – (604) 16 (588)
Administrative expenses (160) – (160) (1) (161)
Other income – – – 4 4
Non-underlying items – (12) (12) (8) (20)
Group operating profit 98 (12) 86 11 97
Finance costs (25) – (25) (9) (34)
Profit before tax 73 (12) 61 2 63
Income tax (charge)/credit (12) 3 (9) (1) (10)
Profit for the year 61 (9) 52 1 53
Attributable to:
Equity holders of the parent 55 (9) 46 1 47
Non-controlling interests 6 – 6 – 6
61 (9) 52 1 53
2021
pre-IFRS 16 basis IFRS 16 basis
£m
Headline, before
non-underlying
items(pre-IFRS 16)
Headline
non-underlying
items(pre-IFRS 16)
Headline
(pre-IFRS 16)
IFRS 16
adjustments Total
Revenue 886 – 886 – 886
Cost of sales (358) – (358) – (358)
Gross profit 528 – 528 – 528
Distribution costs (431) – (431) 12 (419)
Administrative expenses (136) – (136) (4) (140)
Other income – – – 4 4
Non-underlying items – (49) (49) (16) (65)
Group operating loss (39) (49) (88) (4) (92)
Finance costs (16) – (16) (8) (24)
Loss before tax (55) (49) (104) (12) (116)
Income tax credit 26 9 35 1 36
Loss for the year (29) (40) (69) (11) (80)
Attributable to:
Equity holders of the parent (31) (40) (71) (11) (82)
Non-controlling interests 2 – 2 – 2
(29) (40) (69) (11) (80)
Strategic report Corporate governance Financial statements Additional information
177WH Smith PLC Annual Report and Accounts 2022
A2. Reconciliation of Headline to Statutory segmental trading profit/(loss)
and Group profit/(loss) from trading operations
2022
pre-IFRS 16 basis IFRS 16 basis
£m
Headline, before
non-underlying
items(pre-IFRS 16)
Headline
non-underlying
items(pre-IFRS 16)
Headline
(pre-IFRS 16)
IFRS 16
adjustments Total
Travel UK trading profit 54 – 54 6 60
North America trading profit 31 – 31 2 33
Rest of the World trading profit/(loss) 4 – 4 (1) 3
Total Travel trading profit 89 – 89 7 96
High Street trading profit 33 – 33 12 45
Group profit from trading operations
122 – 122 19 141
Unallocated central costs (24) – (24) – (24)
Group operating profit before
non-underlying items 98 – 98 19 117
Non-underlying items – (12) (12) (8) (20)
Group operating profit/(loss) 98 (12) 86 11 97
2021
pre-IFRS 16 basis IFRS 16 basis
£m
Headline, before
non-underlying
items(pre-IFRS 16)
Headline
non-underlying
items(pre-IFRS 16)
Headline
(pre-IFRS 16)
IFRS 16
adjustments Total
Travel UK trading loss (32) – (32) 3 (29)
North America trading profit/(loss) 6 – 6 (4) 2
Rest of the World trading loss (13) – (13) (4) (17)
Travel trading loss (39) – (39) (5) (44)
High Street trading profit 19 – 19 17 36
Group (loss)/profit from
trading operations (20) – (20) 12 (8)
Unallocated central costs (19) – (19) – (19)
Group operating (loss)/profit
beforenon-underlying items (39) – (39) 12 (27)
Non-underlying items – (49) (49) (16) (65)
Group operating loss (39) (49) (88) (4) (92)
Additional information
178 WH Smith PLC Annual Report and Accounts 2022
Glossary (unaudited) continued
A3. Reconciliation of Headline to Statutory tax expense/(credit)
2022 2021
£m
Headline
(pre-IFRS 16)
IFRS 16
adjustments IFRS 16
Headline
(pre-IFRS 16)
IFRS 16
adjustments IFRS 16
Profit/(loss) before tax and non-underlying items 73 10 83 (55) 4 (51)
Tax on profit/loss – Standard rate of UK corporation tax
(19.00%;2021:19.00%)
5 1 6 – – –
Adjustment in respect of prior years – – – (1) – (1)
Total current tax charge/(credit) 5 1 6 (1) – (1)
Deferred tax – current year 7 1 8 (13) 2 (11)
Deferred tax – prior year – – – (4) – (4)
Deferred tax – adjustment in respect of change in tax rates – – – (8) – (8)
Tax charge/(credit) on Headline profit/loss 12 2 14 (26) 2 (24)
Tax on non-underlying items – current tax – – – – – –
Tax on non-underlying items – deferred tax (3) (1) (4) (9) (3) (12)
Total tax charge/(credit) on profit/loss 9 1 10 (35) (1) (36)
A4. Calculation of Headline and Statutory earnings per share
2022 2021
Millions Basic EPS Diluted EPS Basic EPS Diluted EPS
Weighted average shares in issue (Note 9) 130 132 131 131
2022 2021
Profit for
the year
attributable to
equity holders
of the parent Basic EPS Diluted EPS
Profit for
the year
attributable to
equity holders
of the parent Basic EPS Diluted EPS
£m pence pence £m pence pence
Headline (pre-IFRS 16 basis)
– Before non-underlying items 55 42.3 41.7 (31) (23.7) (23.7)
– Non-underlying items (9) (6.9) (6.9) (40) (30.5) (30.5)
– Total 46 35.4 34.8 (71) (54.2) (54.2)
IFRS 16 adjustments
– Before non-underlying items 8 6.2 6.0 2 1.6 1.6
– Non-underlying items (7) (5.4) (5.2) (13) (10.0) (10.0)
– Total 1 0.8 0.8 (11) (8.4) (8.4)
IFRS 16 basis
– Before non-underlying items 63 48.5 47.7 (29) (22.1) (22.1)
– Non-underlying items (16) (12.3) (12.1) (53) (40.5) (40.5)
– Total 47 36.2 35.6 (82) (62.6) (62.6)
Strategic report Corporate governance Financial statements Additional information
179WH Smith PLC Annual Report and Accounts 2022
A5. Fixed charges cover
£m Note 2022 2021
Headline net finance costs (pre-IFRS 16) A1 25 16
Net operating lease charges (pre-IFRS 16) A11 241 151
Total fixed charges 266 167
Headline profit before tax and non-underlying items A1 73 (55)
Headline profit before tax, non-underlying items and fixed charges 339 112
Fixed charges cover – times 1.3x 0.7x
A6. Non-underlying items on pre-IFRS 16 and IFRS 16 bases
2022 2021
£m
Headline
(pre-IFRS 16) IFRS 16
Headline (pre-
IFRS 16) IFRS 16
Amortisation of acquired intangible assets 3 3 3 3
Costs related to cyber incident 4 4 – –
Impairment
– property, plant and equipment
5 5 18 14
– right-of-use assets
– 8 – 28
Other property costs
– – 5 –
Write-down of inventories
– – 5 5
Restructuring costs
– – 9 9
Costs associated with refinancing
– – 6 6
Costs relating to business combinations – – 2 2
Other
– – 1 (2)
Non-underlying items, before tax 12 20 49 65
Tax credit on non-underlying items (3) (4) (9) (12)
Non-underlying items, after tax 9 16 40 53
Non-underlying items on a pre-IFRS 16 basis are calculated on a consistent basis with IFRS 16, with the exception of the
below items.
A tax credit of £4m (2021: £12m) has been recognised in relation to the above items (£3m pre-IFRS 16 (2021: £9m)).
Impairment of property, plant and equipment and right-of-use assets
The impairment charge recognised on a pre-IFRS 16 basis differs from that recognised under IFRS 16. This is mainly due to
a lower asset base pre-IFRS 16, coupled with lower expected store cash flows, with rental expenses being included in the
forecast cash flows (treated as financing costs under IFRS 16), and a higher discount rate. The calculation of the Group’s
weighted average cost of capital differs under IFRS 16 versus pre-IFRS 16. The pre-tax discount rate used in the IFRS 16
calculation was 11.9 per cent (2021: 10.4) and the pre-tax discount rate used in the pre-IFRS 16 calculation was 14.4 per cent
(2021: 13.9).
Right-of-use assets are not recognised on a pre-IFRS 16 basis.
Other property costs
Other property costs on a pre-IFRS 16 basis include provisions for onerous lease contracts; on an IFRS 16 basis, onerous lease
contracts are recognised as an impairment of the right-of-use asset. In the prior year, as a result of the impact of Covid-19,
the Group included a charge of £5m for stores where we anticipate that we will make a cash loss over the remaining term of
their leases.
Additional information
180 WH Smith PLC Annual Report and Accounts 2022
Glossary (unaudited) continued
A6. Non-underlying items on pre-IFRS 16 and IFRS 16 bases (continued)
The Group’s pre-IFRS 16 property provisions represent the present value of unavoidable future net lease obligations and
related costs of leasehold property (net of estimated sublease income and adjusted for certain risk factors) where the
space is vacant, loss-making or currently not planned to be used for ongoing operations. The unwinding of the discount is
treated as an imputed interest charge. These provisions represent the best estimate of the liability at the time of the balance
sheet date, the actual liability being dependent on future events such as economic environment and marketplace demand.
Expectations will be revised each period until the actual liability arises, with any difference accounted for in the period in
which the revision is made.
A7. Free cash flow
£m 2022 2021
Cash generated from operating activities (Note 20) 213 113
Interest paid (26) (13)
Net cash inflow from operating activities 187 100
Cash flow impact of IFRS 16 (Note A9) (93) (83)
Add back:
– Cash impact of non-underlying items 16 38
– Pension funding 2 3
– Other non cash items 12 –
Deduct:
– Purchase of property, plant and equipment (70) (37)
– Purchase of intangible assets (13) (7)
Free cash flow 41 14
A8. Headline net debt
The table below shows Headline net debt (pre-IFRS 16). This includes lease liabilities that were previously presented as finance
leases (applying the principles of IAS 17), and Group accounting policies as applicable prior to 1 September 2019, described in
the Glossary on page 173), but excludes additional lease liabilities recognised on application of IFRS 16.
£m 2022 2021
Borrowings
– Revolving credit facility – –
– Convertible bonds (292) (283)
– Bank loans (132) (132)
– Lease liabilities (Note 16) (577) (470)
Liabilities from financing activities (1,001) (885)
Cash and cash equivalents 132 130
Net debt (IFRS 16) (Note 18) (869) (755)
Add back lease liabilities recognised under IFRS 16
1
573 464
Headline net debt (pre-IFRS 16) (296) (291)
1 Excludes lease liabilities previously recognised as finance leases on a pre-IFRS 16 basis.
A9. Cash flow disclosure impact of IFRS 16
There is no impact of IFRS 16 on cash flows, although the classification of cash flows has changed, with an increase in net
cash flows from operating activities being offset by a decrease in net cash flows from financing activities.
2022 2021
£m
Headline
(pre-IFRS 16)
IFRS 16
adjustment IFRS 16
Headline
(pre-IFRS 16)
IFRS 16
adjustment IFRS 16
Net cash inflows from operating activities 94 93 187 17 83 100
Net cash outflows from investing activities (83) – (83) (43) – (43)
Net cash (outflows)/inflows from financing activities (11) (93) (104) 48 (83) (35)
Net increase in cash in the period – – – 22 – 22
Strategic report Corporate governance Financial statements Additional information
181WH Smith PLC Annual Report and Accounts 2022
A10. Balance sheet impact of IFRS 16
The balance sheet including and excluding the impact of IFRS 16 is shown below:
2022 2021
£m
Headline (pre-
IFRS 16)
IFRS 16
adjustment IFRS 16
Headline (pre-
IFRS 16)
IFRS 16
adjustment IFRS 16
Goodwill and other intangible assets 544 (1) 543 474 (1) 473
Property, plant and equipment 211 8 219 167 7 174
Right-of-use assets – 446 446 – 328 328
Investments in joint ventures 2 – 2 2 – 2
757 453 1,210 643 334 977
Inventories 198 – 198 135 – 135
Payables less receivables (284) 15 (269) (237) 23 (214)
Working capital (86) 15 (71) (102) 23 (79)
Derivative financial asset 1 – 1 – – –
Net current and deferred tax assets 54 – 54 46 10 56
Provisions (26) 12 (14) (28) 14 (14)
Operating assets employed 700 480 1,180 559 381 940
Net debt (296) (573) (869) (291) (464) (755)
Net assets excluding pension liability 404 (93) 311 268 (83) 185
Pension liability – – – (3) – (3)
Deferred tax asset on pension liability – – – 1 – 1
Total net assets 404 (93) 311 266 (83) 183
A11. Operating lease expense
Amounts recognised in Headline Group operating profit on a pre-IFRS 16 basis are as follows:
£m 2022 2021
Net operating lease charges 241 151
In the year ended 31 August 2020, the Group adopted IFRS 16. IFRS 16 requires lessees to account for all leases under a single
on-balance sheet model as the distinction between operating and finance leases is removed. In order to provide comparable
information the Group has chosen to present Headline measures of operating profit/(loss) and profit/(loss) before tax, as
explained in Note 2 segmental analysis.
The table above presents the pre-IFRS 16 net operating lease charges, applying the principles of IAS 17, and Group accounting
policies as applicable prior to 1 September 2019, as described in the Glossary on page 173.
The Group leases various properties under non-cancellable operating lease agreements. The leases have varying terms,
escalation clauses and renewal rights. The Group has a number of lease arrangements in which the rent payable is contingent
on revenue. Contingent rentals payable, based on store revenues, are accrued in line with revenues generated.
The average remaining lease length across the Group is four years.
Rentals payable and receivable under operating leases are charged to the income statement on a straight-line basis over the
term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on
a straight-line basis over the lease term.
Temporary rent reductions due to Covid-19, affecting rent payments due on or before June 2022, have been recognised in the
Income statement in the period they are received.
Company Secretary and registered office
Ian Houghton, WH Smith PLC, Greenbridge Road, Swindon, Wiltshire SN3 3RX . Telephone 01793 616161.
Company website
This Annual report and accounts together with other information, including the price of the Company’s shares, Stock
Exchange announcements and frequently asked questions, can be found on the WH Smith PLC website at whsmithplc.co.uk.
Annual General Meeting
The Annual General Meeting will be held at the offices of Herbert Smith Freehills LLP, Exchange House, Primrose Street,
London EC2A 2EG on Wednesday 18 January 2023 at 11.30am. A separate notice convening the meeting is being sent to
shareholders and includes explanatory notes on each of the resolutions being proposed.
Shareholder enquiries – the registrars
All enquiries relating to shareholdings should be addressed to the registrars, Computershare Investor Services PLC,
ThePavilions, Bridgwater Road, Bristol BS99 6ZZ. You can call the registrars on the shareholder helpline 0371 495 0100
orvisit their website at www.investorcentre.co.uk. A textphone facility for shareholders with hearing difficulties is available
bytelephoning 0370 702 0005.
Sharedealing services
This can be done through a stockbroker, bank or building society.
Computershare, our registrars, also offer share dealing services for shareholders (in certain jurisdictions). For internet
dealing, log on to computershare.com/dealing/uk and for telephone dealing call 0370 703 0084. You will need to have your
Shareholder Reference Number (SRN) to hand when making this call. This can be found on your Form of Proxy or email
notification of availability of AGM documents.
Please note that dealing fees will apply and will vary between providers.
Dividend mandates
If you wish dividends to be paid directly into your bank account through the BACSTEL-IP (Bankers’ Automated Clearing
Services) system, you should contact Computershare for a Dividend Mandate Form or apply online at www.investorcentre.co.uk.
Shareholders who receive their dividend payments in this way receive an annual dividend confirmation once a year, with the
final dividend, detailing all payments made throughout the UK tax year.
Financial calendar
The following dates are given for information purposes only. Please check the WH Smith PLC website at whsmithplc.co.uk
nearer the relevant time for full details, and to ensure that no changes have been made.
Financial year end 31 August 2022
Preliminary results announced 10 November 2022
Annual report posted December 2022
Final dividend ex-dividend date 5 January 2023
Final dividend record date 6 January 2023
AGM 18 January 2023
Christmas trading statement 18 January 2023
Final dividend payment date 26 January 2023
Half-year end 28 February 2023
Interim results announced April 2023
Trading statement June 2023
Interim dividend ex-dividend date July 2023
Interim dividend record date July 2023
Interim dividend payment date August 2023
Financial year end 31 August 2023
ShareGIFT
If you only have a small number of shares which are uneconomic to sell, you may wish to consider donating them to charity
under ShareGIFT, a charity share donation scheme administered by the Orr Mackintosh Foundation. A ShareGIFT transfer
form may be obtained from our registrar. Further information about the scheme can be found on the ShareGIFT website at
sharegift.org.
Information for shareholders
Additional information
182 WH Smith PLC Annual Report and Accounts 2022
Warning to shareholders – boiler room scams
In recent years, many companies have become aware that their shareholders have received unsolicited phone calls or
correspondence concerning investment matters. These are typically from overseas-based “brokers” who target UK
shareholders, offering to sell them what often turn out to be worthless or high risk shares in US or UK investments.
These operations are commonly known as “boiler rooms”. Information on how to avoid share fraud or report a scam
canbefound on our website at whsmithplc.co.uk. You can also call the Financial Conduct Authority Consumer Helpline
on0800111 6768 or go to fca.org.uk/scamsmart.
UK Capital Gains Tax
Demerger 31 August 2006
Following the demerger of the Company on 31 August 2006, in order to calculate any chargeable gains or losses arising on
the disposal of shares after 31 August 2006, the original tax base cost of your ordinary shares of 2
13
⁄
81
p (adjusted if you held
your shares on 24 September 2004 and 22 May 1998 to take into account the capital reorganisations of 27 September 2004
and 26 May 1998 respectively (see below)) will have to be apportioned between the shareholdings of ordinary shares of 20p
in the Company and ordinary shares of 5p in Smiths News PLC.
The cost of your shareholding of ordinary shares of 20p in the Company is calculated by multiplying the original base cost
of your ordinary shares of 2
13
⁄
81
p (adjusted where necessary to take into account the capital reorganisations of 27 September
2004 and 26 May 1998 (see below)) by 0.69585.
The cost of your shareholding of ordinary shares of 5p is calculated by multiplying the original base cost of your ordinary
shares of 2
13
⁄
81
p (adjusted where necessary to take into account the capital reorganisations of 27 September 2004 and 26 May
1998 (see below)) by 0.30415.
As a result of the share consolidation on 22 February 2008, the nominal value of the Company’s ordinary shares increased
from 20p per ordinary share to 22
6
⁄
67
p per ordinary share.
Capital reorganisation 27 September 2004
If you acquired your shareholding on or before 24 September 2004, in order to calculate any chargeable gains or losses
arising on the disposal of shares after 24 September, the original tax base cost of your ordinary shares of 55
5
/
9
p (adjusted if
you held your shares on 22 May 1998 to take into account the capital reorganisation of 26 May 1998 (see below)) will have to
be apportioned between the shareholdings of ordinary shares of 2
13
⁄
81
p and ‘C’ shares resulting from the capital reorganisation.
The cost of your shareholding of ordinary shares of 2
13
⁄
81
p is calculated by multiplying the original base cost of your ordinary
shares of 55
5
/
9
p (adjusted where necessary to take into account the capital reorganisation of 26 May 1998 (see below)) by
0.73979.
Capital reorganisation 26 May 1998
If you acquired your shareholding on or before 22 May 1998, in order to calculate any chargeable gains or losses arising on
the disposal of shares after 22 May 1998, the original tax base cost of your ordinary shares of 50p will have to be apportioned
between the shareholdings of ordinary shares of 55
5
/
9
p and redeemable ‘B’ shares resulting from the capital reorganisation.
The cost of your shareholding of ordinary shares of 55
5
/
9
p is calculated by multiplying the original cost of your ordinary
shares of 50p by 0.90714.
March 1982 values
If you acquired your shareholding on or before 31 March 1982, in order to calculate any chargeable gains or losses arising on
disposal of shares, the tax base cost of your ordinary shares used the 31 March 1982 base values per share as follows:
‘A’ ordinary
shares
Arising from an
original shareholding
of ‘B’ ordinary shares
Ordinary shares of 20p 61.62p 50.92p
Smiths News PLC ordinary shares of 5p 26.93p 22.25p
If you have a complicated tax position, or are otherwise in doubt about your tax circumstances, or if you are subject to tax in
a jurisdiction other than the UK, you should consult your professional adviser.
“Company” means WH Smith PLC , a public limited company incorporated in England and Wales with registered number
5202036; and “Group” means the Company and its subsidiaries and subsidiary undertakings.
Strategic report Corporate governance Financial statements Additional information
183WH Smith PLC Annual Report and Accounts 2022
Notes
Additional information
184 WH Smith PLC Annual Report and Accounts 2022
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Contact details
WH Smith PLC
Greenbridge Road
Swindon, Wiltshire SN3 3RX
United Kingdom
T 01793 616161
W whsmithplc.co.uk
WHSmith Travel
133 Houndsditch
London EC3A 7BX
United Kingdom
T 020 3981 0900
W whsmithplc.co.uk
WHSmith High Street
Greenbridge Road
Swindon, Wiltshire SN3 3LD
United Kingdom
T 01793 616161
W whsmith.co.uk
Investor Relations
W whsmithplc.co.uk/investors
Media Relations
W whsmithplc.co.uk/media
Sustainability
W whsmithplc.co.uk/sustainability
Recruitment
W whsmithcareers.co.uk
Customer Service
Freepost SCE4410
Swindon, Wiltshire SN3 3XS
United Kingdom
E customer.relations@whsmith.co.uk