Annual Report and Accounts 2023

The global travel retailer

Strategic report

Group at a glance 2

Business model 6

Chair’s statement 8

Group Chief Executive’s Q&A 10

Key market drivers 13

Our strategy 14

Key performance indicators 16

Review of operations – Travel 19

Review of operations – High Street 24

Outlook 24

Financial review 25

Section 172(1) statement 29

Sustainability 36

– Climate-related disclosures 41

Non-financial and sustainable

information statement

Principal risks and uncertainties 55

– Viability statement 60

Corporate governance

Directors’ biographies 62

Corporate governance report 64

– Audit Committee 72

– Nominations Committee 77

– ESG Committee 79

Directors’ remuneration report 81

Directors’ report 103

Statement of directors’

responsibilities

106

Financial statements

Independent auditors’ report to

the members of WH Smith PLC

107

Group income statement 114

Group statement of

comprehensive income

115

Group balance sheet 116

Group cash flow statement 117

Group statement of changes

in equity

118

Notes to the financial statements 119

Company balance sheet 164

Company statement of

changesin equity

164

Notes to the Company

financial statements

165

Additional information

Glossary 168

Information for shareholders 177

About us

Revenue

£1.8bn

Group profit before tax

£110m

Headline Group profit before

taxandnon-underlying items

£143m

Headline diluted earnings per share

before non-underlying items

80.3p

Total number of stores

1,767

Dividend per share

28.9p

Financial and operational highlights

In this report

WH Smith PLC is a leading global travel

retailer for travel essentials with a smaller

business on the UK high street. At the

heart of our business are our people,

customers and partners. We aim to deliver

our vision through our strategic priorities

andour forand our forensic approach to retailing and

byconstantly innoy constantly innovating, expanding globally,

improving our profitability and delivering

sustainable returns.

• WHSmith is a global travel retailer with a presence in 32 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 major

high streets and shopping centres, mainly in prime locations

• As WHSmith continues on its journey to be a better business,

we have a strong commitment to the principles of ESG

• WHSmith employs over 14,000 colleagues

• WH Smith PLC is listed on the London Stock Exchange

(“SMWH”) and is included in the FTSE 250 Index

• WHSmith reaches customers online via its digital channels:

whsmith.co.uk, funkypigeon.com, cultpens.com

anddottyaboutpaper.co.uk

1 Alternative performance measure described and explained in the Glossary on page 168

2 Includes proposed final dividend of 20.8p. Subject to shareholder approval

Our purpose

Here at WHSmith our purpose

is simple: to make every one of

life’s journeys better

Supporting the many journeys of our colleagues,

customersand shareholders is our top priority.

We’re a diverse team of over 14,000 colleagues across

32countries and we’re committed to promoting an open

and honest culture where everyone can come to work and

be their best self. During the year, we have established five

new colleague networks to ensure everyone has a voice and,

as aresult, we are accelerating positive change driven by our

people. We firmly believe in championing the career journeys

of our people too, and we know that by providing the right

support along each of our colleagues’ journeys, we’ll create

abetter business.

Supporting our customers’ journeys has been key since

theCompany was founded in 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 UK

high street. 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 stakeholders, 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

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.

Find out more about WHSmith

at: whsmithplc.co.uk

@whsmithofficial

@WHSmith

youtube.com/WHSmith

linkedin.com/company/whsmith

1WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Group at a glance – Travel

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, on foot, by road or by

train.As one of the world’s leading travel retailers, we are

thetrusted home for travel essentials in the UK and it’s

howwe support the millions of journeys made each year

byour customers.

Our customers need convenience and have less time to

browse, so we have tailored our ranges to provide a fast and

convenient one-stop-shop solution, including food and drink,

books, magazines, tech accessories, health and beauty

products and souvenirs.

With WHSmith for travel essentials, and InMotion –

ourglobally recognised tech brand – at UK airports,

we’recontinuing to grow our presence around the UK,

providing our customers with the essentials that 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 588 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 and 22 to see how we aim to

makeevery one of life’s journeys better.

Stores

588

Revenue

£709m

Travel UK

Scan here for an overview

of our Travel UK business.

Strategic report

2 WH Smith PLC Annual Report and Accounts 2023

North America

and Rest of

theWorld

As a global travel retailer with a

presencein over 30 countries and

morethan 125 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 at pace.

We have 665 stores outside of the UK and we’re growing

quickly. 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 ensure our

customers receive the best experience possible. Whether it

isthrough sourcing the latest tech accessories and

bestselling books or food to go in each location, or through

the expansion and distinct style of our US retail business,

WHSmith North America, or the first-class customer

experience we provide under our technology brand, InMotion.

With a small market share across the globe, the opportunities

to grow are substantial and we’re committed to our future as

a global travel retailer.

Stores

665

Revenue

£615m

Scan here for an overview

of our North American and

Rest of the World businesses.

3WH Smith PLC Annual Report and Accounts 2023

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 pleased with the progress we

aremaking to deliver the step-changes that are needed for

sustainable retailing.

Read more about our sustainability on pages 36 to 54.

Strategic report

4 WH Smith PLC Annual Report and Accounts 2023

Group at a glance – High Street

High Street

For generations, WHSmith has supported

the UK high street with a presence on

nearly every major high street and

shopping centre.

Across our diverse estate of 514 stores on UK high streets,

with our wide-ranging store sizes and formats, we sell a range

of products in the following categories: Stationery (including

greeting cards, 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 a multichannel retailer with our online

personalised greeting cards and gifting site, funkypigeon.com,

whsmith.co.uk, cultpens.com, our leading online specialist

pen retailer, and personalised wedding stationerysite

dottyaboutpaper.co.uk.

Stores

514

Revenue

£469m

Scan here for an overview

of our High Street business

WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

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

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 14,000 dedicated colleagues

across our stores, distribution centres and

support centres.

Store locations

We have a network of 1,253 Travel stores

inpremium, high footfall locations in 32

countries, and 514 stores in mainly 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,

Well Pharmacy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.

Our unique combination

of strengths:

Underpinned by:

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

Business model

How we create value:

Creating value

for our stakeholders

A commitment to operating responsibly

You can read more about our approach to Environmental,

Social and Corporate Governance throughout the report.

Read more on page 49.

journeys

WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

We’re

committed

to our journey

as a global

travel retailer

Chair’s statement

I am honoured to write to you as your

newChair. The last year has been one of

significant progress and growth and it is

an exciting time for theGroup. I very much

look forward tobeing part of the journey

to realise the substantial growth

opportunities that exist for us across

the globe.

The last year has been one of

significant progress and growth and

it is an exciting time for the Group.”

Annette Court

Chair

Strategic report

WH Smith PLC Annual Report and Accounts 20238

During the year, we have continued to invest in our new store

opening programme, opening a number of world-class travel

stores across the globe, with 43 new stores opened in North

America. We have also won some important tenders in new

and existing markets. We now have a store opening pipeline

of over 110 stores won and scheduled to open over the next

three years, with the majority of these new business wins in

North America. In addition, we also continue to see good

opportunities in our UK and Rest of the World divisions.

In our UK High Street business, we have a successful strategy

that has served the Group well for many years, focusing on

costs, increasing margins and generating cash. Our aim is to

ensure that the profits and cash flow of this business remain

robust and sustainable.

The proposed final dividend announced today reflects the

strength of current trading and a high level of confidence

inthe future prospects of the Group. As we enter 2024,

theGroup is in its strongest ever position as a global

travelretailer and I look forward to updating you on

furtherprogress in due course.

The Board has continued to ensure that it has the right

skillsto lead the Company, particularly given its continued

expansion in North America. Accordingly, the Board

appointed Colette Burke as a non-executive director on

1 July2023 given her significant US and retail experience.

Maurice Thompson stepped down from the Board at the

Company’s AGM in January 2023 and Kal Atwal stepped

down from the Board in September 2023 to take up the role

of Chair of Funky Pigeon. I succeeded Henry Staunton as

Chair on 1 December 2022, and I would like to take this

opportunity to thank Henry, Maurice and Kal for their

significant contribution and welcome Colette to the Board.

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 64 to 71.

Sustainability

WHSmith has a long-standing commitment to operating

responsibly and to making a positive impact on the planet,

the lives of our people and the communities in which we

operate. Our sustainability strategy captures how we will

ensure that we grow our business in a responsible, inclusive

and sustainable way. We are proud of our work this year on

carbon reduction activities, on diversity, equity and inclusion

initiatives and our continuing partnership with the National

Literacy Trust to help more children develop their literacy

skills. Further information on all aspects of our sustainability

programmes can be found on pages 36 to 54.

People

I would first like to acknowledge what an exceptional team

we have here at WHSmith. Over the past year, I have taken

great pleasure in meeting many colleagues across each of

our divisions, from our support centres to our colleagues in

our stores and distribution centres, and further afield in our

international markets. I have been made to feel

extremely welcome.

It has, without a doubt, been an exceptionally busy year, and

our colleagues have shown an unwavering determination to

drive the Group forward, support each other, and continue to

focus on our customers and partners, and I would like to take

this opportunity to thank them.

Outlook

The Group is in its strongest ever position as a global travel

retailer and we are very well positioned for another year of

significant progress and growth in 2024. We will continue

to invest for the longer term while remaining committed to

creating value for our shareholders.

Annette Court

Chair

9 November 2023

I would like to acknowledge what

an exceptional team we havehere

at WHSmith.”

Revenue

£1.8bn

Dividend per share

28.9p

1 As at 31 August 2023

2 Includes proposed final dividend of 20.8p. Subject to shareholder approval

9WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

What is driving the

Group’s success?

The Group has made excellent progress in the

year. For me, there are a variety of factors driving

the Group’s success, not least the global

scalability of our business model and our forensic

and innovative approach to retail. We now

operate in over 30 countries, opening our first

stores in Norway and Belgium in the year and

winning further new stores in new markets.

We are also seeing great results from sharing our

retail expertise and innovation across our different

geographies. Our North American business is

benefitting from our forensic approach to space

management which has always been a key feature

of our UK Travel operations. In the same way,

theability of our North American business to offer

bespoke retail formats to landlords is now being

harnessed across all our markets outside of

the US.

What has been the highlight

ofthe2023 financial year?

We have delivered another year of strong

progress with Group revenue of £1.8bn and

Headline profit before tax and non-underlying

items

of £143m. Our Travel divisions have all

seenstrong growth. While our most exciting

opportunity remains in North America, I am really

encouraged by the continued progress in the UK

and the momentum we are seeing in our Rest of

the World division.

We are a highly cash generative business and

this has enabled us to invest c.£200m over the

past two years in exciting and value creating

opportunities. Our store opening programme is on

track with 118 stores opened in the year, includinga

number of world-class stores in locations such as

Melbourne, Kansas, Oslo and Brussels. The growth

opportunities, particularly in North America,

aresubstantial and we are extremely well

positioned as a global travel retailer.

The Board’s decision to propose a final dividend

of 20.8p per share reflects good trading, the

Group’s cash generation, and confidence in the

future given the multiple growth opportunities

that exist for the Group.

There is no doubt that these results would not

bepossible without the outstanding efforts of

our entire team, and I would like to offer my

sincere thanks for their support.

with

Group Chief

Executive

CarlCowling

The Group has made excellent

progress in the year. For me,

there are a variety of factors

driving the Group’s success,

notleast the global scalability

of our business model and our

forensic and innovative

approach to retail.”

1 Alternative performance measure described and explained in the

Glossary on page 168

Strategic report

WH Smith PLC Annual Report and Accounts 202310

As the growth engine of the

Group, to what extent have you

seen a rebound in revenue and

profitability in Travel?

We have had another very successful year,

with Total Travel generating Headline trading

profit of £164m (2022: £89m). The pace of

winning new business in Travel remains strong

and it is well positioned to continue to create

value through the structurally advantaged

markets in which it operates.

We saw a strong performance across all our

markets with Total Travel revenue up 43 per cent

to £1,324m and up 27 per cent on a like-for-like

(LFL) basis. This was driven by strong

performances in all three Travel divisions, with

Travel UK up 36 per cent, North America up 32

per cent, and ROW up 99 per cent.

Total Travel is now approximately 75 per cent of

Group revenue and 85 per cent of Headline

Group profit from trading operations. Both of

these measures will increase as we continue to

grow Travel which reinforces that we are now a

global travel retailer.

In addition, we continue to focus on space

growth opportunities. During the year,

weopened 118 new stores and we now have

anew store pipeline of over 110 stores to open

across the globe over the next three years.

ATV growth also remains a key driver of our

success and we have continued to focus on

re-engineering our ranges and I’m pleased to

report that this is delivering good results.

Category development and identifying further

opportunities where we can reposition our

traditional news, books and convenience format

to a one-stop-shop travel essentials format is key

for us and we have made good progress across

our channels, particularly in the UK in the year.

Finally, and importantly, we remain very focused

on cost efficiency and productivity.

What progress have you made

on your journey to a more

sustainable business?

Sustainability remains a key focus for the business

and we have continued to make good progress

this year.

I am delighted that our near term carbon

reduction targets have been validated by the

Science Based Targets initiative. It defines the

next step on our journey to net zero by 2050

andwe remain on track to meet our Scope 1

and2 reduction target.

We have engaged with our suppliers on a range

of environmental and social issues this year and

have made good progress towards our Scope 3

goal, with 15 per cent of supply chain emissions

now covered by science based targets.

Finally, our Long-Term Incentive Plan for senior

managers and our new revolving credit facility

agreed in the year include targets aligned to

theGroup’s sustainability strategy.

1 As at 31 August 2023

2 Alternative performance measure described andexplained in the

Glossary on page 168

WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Expanding our

global reach

As a global travel retailer, our brand is already familiar to

millions of international passengers, andaswe continue to

grow our North America and Rest ofthe World businesses,

we’re delighted to welcome evenmore customers across

new countries and cities byopening world-class stores.

We know that when journeying through an airport, it’s the

destination that matters to our customers and their 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.

1,767

stores across

countries

Strategic report

WH Smith PLC Annual Report and Accounts 202312

Travel

The key market driver for Travel is the number of

passengerstravelling through the locations in which we

operate. Passenger numbers in most of our markets remain

below 2019 levels although the gap is narrowing significantly.

Analysis from the International Air Transport Association

(IATA) suggests that passenger numbers will return to 2019

levels during calendar year 2024 and then will continue to

grow in low single digits each year thereafter in the medium

term, particularly in countries with a population of growing

affluency and where physical distances support air travel,

such as the United States.

Our Travel stores around the world experience high levels

ofseasonal footfall, driven by leisure travel over the

summer months.

Footfall in airports is driven by the global demand for

flightsand, during the year, we have seen an ongoing

recovery inpassenger numbers across our markets,

primarilydrivenbypent up demand for leisure travel.

However, recoverycontinues to be uneven especially

wheretravel restrictions were in place for a longer period.

Where we havereliable data on passenger trends, we see

acorrelation between changes in passenger numbers

andour sales.

Travel faces competition in its product categories primarily

from other retailers in air, rail, hospitals and motorway

serviceareas. Our markets are impacted by macro

economicconditions. Interest rates, inflation and costs

couldimpact passenger numbers, as could the threat

of conflict.

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 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

to maximise returns from our core categories

• We maintain a forensic approach to productivity and

efficiency in our operations, aiming to keep the cost base

variable with sales.

Source: IATA view on 2024 and 2025 (published July 2023) followed by blend into long-term rate.

100

120

140

160

2019

Percentage compared to

2019 baseline

20212020 2022 2024F 2025F 2026F 2027F 2028F 2029F2023F

Global passenger demand

Key market drivers

13WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Our strategy

Strategic priorities

Space growth

• Opening new stores

• Winning new business

• New, better quality space

• Extending contracts

• Developing formats and brands

ATV growth

• Space management

• Refitting stores

• Range development

118

new stores opened

during the year

110+

new store pipeline

Increasing

ATV across

our channels

Progress

Forensic approach toretail

• Space management

• In-store execution

• Tight cost control

• Industry leading returns

Innovative storeformats

• Format development

• Portfolio of world class brands

• Forensic approach to maximising

sales density

Enablers

Profit growth. Strong cash generation.

Our purpose

To make every one of

life’sjourneys better

Our vision

To be the world’s

number one travel

essentials retailer

A strong and focused strategy

We measure our performance against our strategy using our KPIs on pages 16 and 17.

1 As at 31 August 2023

Strategic report

14 WH Smith PLC Annual Report and Accounts 2023

WHSmith Group

Cost and cash

management

• Flexible rent model

• Investing for growth

• Productivity and efficiencies

Category

development

• One-stop-shop travel

essentials format

• Internationalising the

InMotion brand

• Improving ranges

Maintain

profitability and

cash generation

£32m

Headline trading profit

£15m

of cost savings delivered

acrossthe business

Expanding

food to go, tech accessories,

health andbeauty

Investing

for future growth and

sustainable returns

£200m+

capex investment over

thelasttwoyears

Travel High Street

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

Disciplined capital allocation. Shareholder returns.

2 Alternative performance measure described and explained in the Glossary on page 168

15WH Smith PLC Annual Report and Accounts 2023

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 168. 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.

Financial

Revenue (£m) Profit/(loss) (£m)

The below profit/(loss) measures are stated

on a pre-IFRS 16 basis

023

022

(39)

021

(33)

020

117

019

Total Travel Headline trading proﬁt/(loss)

£164m

164

023

022

021

(10)

020

019

High Street Headline trading proﬁt/(loss)

£32m

023 1,793

022

021

020 1,397

1,400

886

1,021

1,397

019

Group

£1,793m

023

927

1,324

022

401

021

553

020

817

019

Total Travel

£1,324m

023 469

473

022

485

021

468

020

580

019

High Street

£469m

1 Alternative performance measure defined and explained in the Glossary on page 168

023

143

022

(55)

021

(69)

020

155

019

Headline Group proﬁt/(loss) before tax

and non-underlying items

£143m

Strategic report

16 WH Smith PLC Annual Report and Accounts 2023

Non-financial

Free cash flow

(£m)

Free cash flow is defined as net cash inflow from

operating activities before the cash flow effect of IFRS 16,

non-underlying items, pension funding and other

non-cash items, less capital expenditure (see page 27).

023

1,723

1,767

022

1,710

021

1,742

020

1,595

019

Group total number of stores

1,767

023

022

021

(41)

020

109

019

£20m

023

022

021

020

28,098

019

9,215

33,072

emissions (tonnes of CO

Global Scope 1 and 2 emissions

11,102

10,367

11,102

023

9.1

28.9

022

021

020

58.2

019

Dividend per share (p)

otal dividend per share

28.9p

Nil

023

41.7

80.3

022

(23.7)

021

(44.2)

020

114.7

019

Earnings per share (p)

Headlines diluted earnings/(loss)

per share before non-underlying items

80.3p

1 Alternative performance measure defined and explained in the Glossary on page 168

17WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

588

Travel stores across the UK

As the trusted one-stop-shop for travel essentials

across UK transport hubs, we’re here to support the

millions of customer journeys made each year. And as

we continue to grow our presence, we’re committed

to making each customer journey that little bit better.

So, whether you’re travelling by air, on foot, by road

or by train, we’re here to provide the best possible

customer experience to make your journey better.

For more information on our Travel UK business,

pleaserefer to pages 20 and 22.

Growing our

UK presence

Strategic report

18 WH Smith PLC Annual Report and Accounts 2023

Review of operations

Travel

Total Travel revenue

£1,324m

(2022: £927m)

Total Travel Headline trading profit

£164m

(2022: £89m)

Total Travel revenue (year on year)

+43%

(2022: +131%)

1 Alternative performance measure defined and explained in the Glossary onpage168

2 As at 31 August 2023

Performance review

I am pleased to report that our Travel business has had a

strong year and made significant progress.

Total revenue was £1,324m (2022: £927m), up 43 per cent

compared to last year, generating a Total Travel Headline

trading profit

in the year of £164m (2022: £89m).

Trading proﬁt

(IFRS 16)

Headline trading

proﬁt

(pre-IFRS 16) Revenue

£m 2023 2022 2023 2022 2023 2022

Travel UK 101 60 102 54 709 521

North America 52 33 49 31 380 288

Rest of the World 13 3 13 4 235 118

Total Travel 166 96 164 89 1,324 927

I am pleased to report that

ourTravel business has had

astrong year and made

significant progress.”

Carl Cowling

Group Chief Executive

In Travel, our initiatives position us well for future growth:

Space growth – 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. During the year, we opened 118 stores (see table of

store numbers on page 23) and we now have a store pipeline

of over 110 stores. Going forward, we expect to win,

onaverage, around 50 to 60 stores a year. There are

significant space growth opportunities across all our

Travel markets.

ATV growth

We aim to grow ATV through our forensic analysis of thereturn

on our space, cross-category promotions, merchandising,

storelayouts and store refits. During the year,we have

continued to focus on re-engineering our ranges and we

continue to see good ATV growth across allour channels.

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 such as premium food

ranges. Throughout the year, we have continued to focus on

identifying further opportunities where we can reposition our

traditional news, books and convenience (‘NBC’) format to a

one-stop-shop travel essentials format. The results from our

one-stop-shop stores have been positive.

Cost and cash management

We remain focused on cost efficiency and productivity,

for example, by investing in more energy efficient chillers

in-store and increasing the number of self scan tills,

particularly in North America.

WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Review of operations continued

Travel UK

Travel UK, our largest division, has delivered a year

ofsignificant growth and we continue to have good

opportunities to grow this division further.

Air passenger numbers still remain below pre-pandemic

levels and we are confident that, as passenger numbers

continue to recover, this division will see an ongoing

improvement in profitability as we leverage our fixed cost

base. All our channels in Travel UK have performed strongly

during the year with total revenue growth of 36 per cent

versus last year. We have started the new financial year

strongly with all three channels delivering good growth.

Revenue (% change)

Year to 31 August 2023

Total vs

2022

LFL

2022

Air 48% 37%

Hospitals 32% 26%

Rail 15% 19%

Total Travel UK 36% 30%

Total revenue in the year was £709m (2022: £521m) which,

together with improved margins, resulted in a Headline

trading profit of £102m (2022: £54m).

Across all our channels, we continue to focus on our key

growth drivers: space growth, increasing ATV and spend per

passenger, driving EBIT margins and benefitting from the

growth in passenger numbers. Momentum is strong and we

are seeing good results, with revenue growing ahead of

passenger numbers.

We are investing in our UK store portfolio while also

identifying new and better quality space opportunities

across each of our channels. During the year, we have made

excellent progress opening 20 new stores, including six at

airports, eight in hospitals and three in rail. We see this

annual space growth of around 15 new stores in Travel UK

extending into the medium term. We closed 19 small and less

well located stores in the year. This year, we expect to open

over 15 new stores in the UK, of which 12 are already

contracted, and close four stores.

Air

Air, which is the biggest channel in Travel UK, delivered a

strong performance with total revenue up 48 per cent and

LFL revenue up 37 per cent on the prior year.

We continually develop our retail formats to better address

the changing requirements of airport landlords

and customers.

Our one-stop-shop for travel essentials format continues

togenerate significant opportunities across all channels

andimprove profitability. We have a very strong customer

proposition which is tailored to each location and channel.

We have also opened our largest UK Travel store. This is a

6,000 square feet flagship one-stop-shop for travel essentials

store at Birmingham International airport, furtherdeveloping

this format. This new store is tailored to the requirements of

the landlord and provides passengers with a bespoke,

localised customer experience by drawing on our experience

from North America. The store offers everything you would

expect from a WHSmith, as well as a broader product range,

large health and beauty and tech zones, and coffee.

By extending our categories such as health and beauty,

techand food to go, we are able to provide time-pressed

customers with all their travel essentials under one roof with

a fast and convenient shopping experience. This enables us

to expose both new and existing customers to a broader

range of categories, which has resulted in an increase in sales

per square foot, a higher ATV and spend per passenger.

This delivers superior returns with improved margins and

attractive economics for our landlords.

Hospitals

The hospital channel, our second largest channel in Travel

UKby revenue, continued its very strong growth with total

revenue up 32 per cent and LFL revenue up 26 per cent in

the year.

This is a growing channel for us with significant opportunities

to continue to grow our space and improve the retail

proposition using our broad suite of brands. During the year,

we opened eight new stores, including Royal Liverpool and

Royal Sussex hospitals. Looking ahead, we have a good

pipeline of opportunities in this channel, where we see scope

for at least one of our four formats (WHSmith, Marks &

Spencer Simply Food, Costa Coffee and our proprietary

coffee brands) in up to 200 further hospitals.

We are excited by the opportunity to grow our coffee offer.

By using our expertise in localisation from our North

American business, we have also recently won two new

stores in Sheffield hospitals under a new coffee concept.

Working with local artists and roasteries, we have designed

abespoke store with a local coffee offer.

1 Alternative performance measure defined and explained in the Glossary onpage168

Strategic report

20 WH Smith PLC Annual Report and Accounts 2023

327

stores across North America

Going big

inthe US

Being the largest travel retail market in the world, the

opportunities in the US are substantial. Through our distinct,

localised design formats together with a ﬁrst-class customer

experience, we’re committed to our future as the largest tech

retailer in airports, globally, under our InMotion brand, and a

leading player in the travel specialty market under WHSmith

North America.

Read more about our North America business on page 22.

21WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Review of operations continued

Rail

Our Rail channel is our smallest channel in Travel UK

representing around 15 per cent of revenue. It is an attractive

market and has proven to be resilient, delivering a good

performance in the year despite the ongoing impact of

industrial action.

We have seen a very encouraging return of passengers with

leisure and weekend passengers recovering the fastest.

We know from our segmentation and return on space

analysis that leisure is the most valuable customer segment.

We continue to invest in Rail in new formats and in new

opportunities to meet landlord and customer needs.

During the year, we successfully completed the refit of our

London Paddington store to a one-stop-shop format,

extending our health and beauty ranges from one metre of

space to eight metres of space and allocating more space to

tech. This has been very well received by customers and

driven strong sales.

curi.o.city

In line with our strategy to develop our retail formats, wehave

recently launched a new premium souvenir and gifting brand,

curi.o.city. This new concept demonstrates how we are able to

adapt, innovate and create a bespoke, localised brand and

product offer. In addition to providing a new shopping

experience for travellers, this format also offers an incremental

sales opportunity in locations where we already have a

WHSmith store by selling high margin categories such as

souvenirs and fashion stationery, freeingup space in our

traditional news, books and convenience stores. We now

have six stores open at London Gatwick airport,

Bristolairport, St Pancras station and Selfridges in

Birmingham and Manchester.

It is still early days, but we also see opportunities outside

theUK with two curi.o.city stores due to open in Dubai later

this year.

North America

In North America we also saw a good performance as

passenger numbers continued to recover. We opened a

further 43 stores and closed 14 stores increasing market

share and improving the quality of our space. Total revenue

was up 32 per cent for the year and up 17 per cent in the

second half.

This performance was driven by our core MRG airport

business (which is now approximately 50 per cent of the

revenue of our North American division) which performed

strongly across the year and continues to do so. We are

seeing passenger number growth and strong demand for

our travel essentials categories.

In our smaller businesses, we saw a lack of new launches in

the electricals market in the second half which impacted

InMotion (and this has continued into this financial year)

andin our Las Vegas resorts business we were up against

astrong 2022 summer performance when there was an

exceptional number of vacationing visitors.

Overall, our North American business is trading well with

total revenue in the first nine weeks of the financial year up

15 per cent and is as such well placed for growth this year

and beyond.

Headline trading profit

was £49m (2022: £31m), reflecting the

strong recovery in passenger numbers, improved margins and

a small beneficial impact of currency. The Group is exposed to

movements in the GBP:USD exchange rate. A 5cent move

inthis rate results in a c.£2m to £3m movement in annual

Headline trading profit. Current consensus suggests an

average exchange rate of GBP:USD of 1.25.

Our North America business has become an increasingly

significant part of the Group and is now our second largest

division in profit terms, after Travel UK. The growth prospects

are substantial and we are excited by the significant

opportunities to grow this business further. Over the last two

years, we have won an additional 62 new stores.

The US is the largest travel retail market in the world with

annual sales of c.$3.8bn. Our analysis of the North American

market shows that there were a total of approximately 2,000

news and gift and specialty retail stores across the top 70

airports, giving our North America business a market share

of c.13 per cent. During the year, we have improved our rate

of winning new tenders and anticipate a large amount of

space to come onto the market over the medium term.

As aconsequence, we are in a strong

position to significantly

grow our North America market share to around 20 per cent

over the next five years.

1 Alternative performance measure defined and explained in the Glossary on page 168

2 2019 ACI Factbook, increased by CPI

3 Based on store numbers; including stores won and yet to open

Strategic report

22 WH Smith PLC Annual Report and Accounts 2023

We have applied our forensic approach to retailing from

theUK to the North American market and are seeing good

results. This includes, space management, category

development to change the mix to higher margin products

such as food to go, enhanced promotional activity and

increased operational efficiencies, for example, self-scan tills

which we are rolling out across the estate.

We continue to grow our North American business at pace,

opening 43 stores in the year at Newark, Phoenix, Orlando,

Nashville, Washington Ronald Reagan, Jacksonville, Kansas

City, Salt Lake City and Los Angeles airports. In Kansas

Cityairport, we have won 85 per cent of the retail space

comprising eight stores, all of which are open. We are seeing

strong returns.

We still have a very strong pipeline of new store openings.

In the year ending 31 August 2023, we won an additional 40

stores, including at Salt Lake City, Boston, San Diego, Portland,

Oakland and Las Vegas airports, as well as 11 stores in Canada,

across Calgary and Edmonton airports. We expect to open

over 50 stores in this financial year and close six.

Including the 43 store openings in the year, we now have 231

stores in Air (including 123 InMotion stores), 95 stores in

Resorts, and one in Rail.

Rest of the World

We saw a good recovery in the year from the ROW division

with total revenue up 99 per cent and LFL revenue up 53 per

cent on the prior year.

Our strategy for this division is clear: to enter new countries,

better understand the market, build our presence from a

small base, build global supplier relationships and drive

operational leverage to deliver higher returns. The scalability

of the Group’s retail formats is now evident having entered

28 new countries since we opened our first international

stores in 2008 and we see significant market share

opportunities for the division.

Utilising our expertise from our North America division to

localise our retail offer, combined with our current low

market share, means there is significant opportunity to grow

this business in new and existing territories through our

traditional news, books and convenience retail proposition

and with technology tenders under the InMotion brand.

We will continue to use our three operating models of

directly run, joint venture and franchise, in order to

maximisevalue and win new business.

1 Including motorway service area and international joint ventures and franchise units

We have also had another very successful year in winning

new stores with 30 new stores won across the division.

During the year, we opened 55 new stores, including stores

in Belgium, Italy, Malaysia, Norway, Spain and Sweden.

We closed 28 mainly small, franchised stores.

Outside of the news books and convenience market,

wecontinue to see good opportunities to win new business

in the tech accessories market under our InMotion brand.

InMotion is now a globally recognised brand with interest

coming from all over the world. During the year, we have

won three InMotion stores in Italy. We have won a total of

13InMotion stores outside of the UK and North America,

ofwhich ten are open. We remain well positioned to benefit

from further opportunities as more space becomes available.

We now have 338 stores of which 50 per cent are directly-

run, nine per cent are joint venture and 41 per cent are

franchise. During the current financial year, we expect to

open 40 stores and close 12 stores.

Total Travel stores

As at 31 August 2023, our global Travel business operated

from 1,253 stores

(2022: 1,196 stores). As at 31 August 2023,

we are present in over 125 airports and 32 countries with 327

stores in North America, 125 in Europe, 91 in the Middle East

and India and 122 in Asia Pacific. As part of our strategy to

improve the quality of our space, we closed 61 stores in the

year, largely smaller, less well located stores.

Excluding franchise units, Travel occupies 1.1m square feet.

Region

At 31 August

2022 Opened Closed

At 31 August

2023

UK 587 20 (19) 588

North America

– Air 198 41 (8) 231

– Resorts / Rail 100 2 (6) 96

Total North America 298 43 (14) 327

Rest of the World

– Europe 109 31 (15) 125

– Middle East and India 84 8 (1) 91

– Asia Pacific 118 16 (12) 122

Total Rest of the World 311 55 (28) 338

Total Travel 1,196 118 (61) 1,253

23WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Performance review

During the year, High Street delivered a good performance

with Headline trading profit of £32m in line with expectations

(2022: £33m), and revenue of £469m (2022: £473m).

We managed the business tightly, keeping focused on costs

and cash generation.

The strategy we have in place in our High Street business

isas relevant today as it has ever been with a focus on

delivering robust and sustainable cashflows and profits.

We utilise our space to maximise returns in ways that are

sustainable over the longer term. We have extensive and

detailed space and range elasticity data for every store

whichwe use to allocate space to categories.

Driving efficiencies remains a core part of that strategy and we

continue to focus on all areas of cost in the business. During the

year, we have delivered savings of £15m and we are on track to

deliver savings of £21m over the next three years, of which

£10m are planned in the current financial year. These savings

come from right across the business, including rent savings at

lease renewal (on average 50 per cent over the last 12 months)

which continue to be a significant proportion, marketing

efficiencies and productivity gains from our supply chain.

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 where rents are

falling. The average lease length in our High Street business,

including where we are currently holding over at lease end,

isunder two years. We only renew a lease where we are

confident of delivering economic value over the life of that

lease. We have c.480 leases due for renewal over the next

three years, including over 100 where we are holding over

and in negotiation with the landlord. The store closure

process is cash neutral.

As at 31 August 2023, the High Street business operated

from 514 stores (2022: 527) which occupy 2.5m square feet

(2022: 2.5m square feet). 13 stores were closed in the year

(2022: 17).

Funkypigeon.com delivered, as expected, total revenue

of£32m (2022: £35m) and Headline EBITDA of £5m

(2022: £8m). We continue to see opportunities to grow

theplatform further, growing revenue and profits over the

medium term.

This has been another year of strong progress, and we enter

the new financial year in our strongest ever position as a

global travel retailer.

Our Travel divisions have all seen strong growth with Travel

UK total revenue up 36 per cent, North America up 32 per

cent and ROW up 99 per cent, and I am very pleased with

the start to the new financial year.

We are a highly cash generative business and this has enabled

us to invest over £200m over the past two years in exciting

and value creating opportunities.

We have opened 118 new stores in the year and we now

havea pipeline of over 110 new stores yet to open across

ninecountries and in airports as varied as Salt Lake City,

Bostonand Gold Coast.

Our InMotion technology stores have had another very good

year with our stores in the UK trading ahead of our initial

expectations. We continue to see significant scope to grow

the brand globally.

Our High Street division delivered a good, profitable

performance and continues to generate strong cash flow

allowing us to invest across the Group.

The proposed final dividend reflects the good performance,

the Group’s cash generation and our confidence in the future

given the multiple growth opportunities that exist

for WHSmith.

We have started the new financial year well with total

revenue in Travel UK up 13 per cent, North America up 15 per

cent

, and ROW up 27 per cent

. With good trading and very

positive prospects, despite the uncertainty in the economic

environment, we are confident in the Group’s outlook for the

new financial year.

Carl Cowling

Group Chief Executive

9 November 2023

High Street Outlook

Headline trading profit

£32m

(2022: £33m)

Total revenue (year on year)

(1)%

(2022: (2)%)

Review of operations continued

1 Alternative performance measure defined and explained in the Glossary on page 168

2 Including branches in Guernsey and the Isle of Man

3 As at 31 August 2023

4 On a constant currency basis

Strategic report

24 WH Smith PLC Annual Report and Accounts 2023

The Board is recommending a

final dividend of 20.8p per share

in respect of the financial year

ended 31 August 2023.”

Robert Moorhead

Chief Financial Officer and Chief Operating Officer

Financial review

Group

Total Group revenue at £1,793m (2022: £1,400m) was up 28

per cent compared to the prior year.

Revenue (% change)

Year to 31 August 2023

Total

vs 2022

LFL

vs 2022

Travel UK 36% 30%

North America 32% 11%

Rest of the World 99% 53%

Total Travel 43% 27%

High Street

(1)% 1%

Group 28% 18%

In Travel, we saw a strong performance across all our markets

with Total Travel revenue up 43 per cent and up27 per cent

on a LFL

basis. This was driven by strong performances in all

three Travel divisions, withTravel UK up 36 per cent on a

total basis, North America up 32 per cent, and ROW up 99

per cent.

We saw a consistently good performance in High Street

throughout the period, with the Christmas trading period flat

year on year on a LFL basis.

Passenger numbers have recovered strongly during the year

and momentum has continued into the new financial year.

We have had a strong start to the new financial year with

continued momentum across our Travel markets. Total Travel

revenue in the first nine weeks to 4 November 2023 was up

16 per cent on a total basis, with Travel UK up 13 per cent,

North America up 15 per cent and ROW up 27 percent.

IFRS

Headline

(pre-IFRS 16)

£m 2023 2022 2023 2022

Travel UK trading profit

101 60 102 54

North America trading profit

52 33 49 31

Rest of the World trading profit

13 3 13 4

Total Travel trading profit

166 96 164 89

High Street trading profit

43 45 32 33

Group profit from

tradingoperations

209 141 196 122

Unallocated central costs (27) (24) (27) (24)

Group operating profit before

non-underlying items

182 117 169 98

Net finance costs

(45) (34) (26) (25)

Group profit before tax and

non-underlying items

137 83 143 73

Non-underlying items

1, 4

(26) (20) (13) (12)

Non-underlying items –

Financecosts

(1) – (2) –

Group profit before tax 110 63 128 61

Total Travel delivered a Headline trading profit

in the year

of£164m (2022: £89m) with all three divisions growing

significantly: Travel UK increased by £48m to £102m;

NorthAmerica increased by £18m to £49m; and ROW

increased by £9m to £13m.

High Street delivered a Headline trading profit

of £32m

(2022: £33m), in line with expectations.

Headline Group profit from trading operations

for the year

was £196m (2022: £122m) with Headline Group profit before

tax and non-underlying items

at £143m (2022: £73m).

The Group profit before tax, including non-underlying items

and on an IFRS 16 basis, was £110m (2022: £63m) in the year.

Unallocated central costs increased in the year due to higher

share-based payment charges and investing as the

business recovers.

1 Alternative performance measure defined and explained in the Glossary onpage168

2 Includes internet businesses

3 On a constant currency basis

4 Excluding non-underlying Finance costs

25WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Financing and capital allocation

The Group has a strong balance sheet, is highly cash generative

and has substantial liquidity.

The Group has the following cash and committed facilities as

at 31 August 2023:

£m 31 August 2023 Maturity

Cash and cash equivalents

£56m

Revolving Credit Facility

£400m June 2028

Convertible bonds £327m May 2026

In June 2023, we completed the refinancing of the Group’s

borrowing facilities with a new five year sustainability-linked

revolving credit facility (‘RCF’). The Group also has a £327m

convertible bond with a maturity of 7 May 2026 which has a

fixed coupon of 1.625 per cent.

As at 31 August 2023, Headline net debt

was £330m

(2022: £296m) and the Group has access to c.£350m of

liquidity. Leverage at the year end was 1.4x Headline EBITDA

We expect to be within our leverage envelope of between

0.75x and 1.25x Headline EBITDA

by the end of this

financial year.

The cash generative nature of the Group is complemented

by our disciplined approach to capital allocation. This has

been in place for many years and continues to drive our

decision making for utilising our cash:

• investing in our existing business and in new opportunities

where rates of return are ahead of the cost of capital;

thisyear, we expect to have capex of c.£140m;

• paying a dividend. We have a progressive dividend policy

with a target dividend cover of 2.5x; the Board has

proposed a full year dividend of 28.9p per share;

• undertaking attractive value-creating acquisitions in strong

and growing markets; and

• returning surplus cash to shareholders via share buy backs.

The Board has proposed a final dividend of 20.8p per share

in respect of the financial year ended 31 August 2023,

whichtogether with the interim dividend, gives a full year

dividend of 28.9p per share. This reflects the cash generative

nature of the business and our confidence in the future

prospects of the Group. Subject to shareholder approval,

thedividend will be paid on 1 February 2024 to shareholders

registered at the close of business on 12 January 2024.

1 Cash and cash equivalents comprises cash on deposit of £34m and cash in transit

of £22m

2 Draw down of £84m as at 31 August 2023

3 Alternative performance measure defined and explained in the Glossary onpage168

4 Before non-underlying items

Net finance costs

IFRS

Headline

(pre-IFRS 16)

£m 2023 2022 2023 2022

Interest payable on bank loans

and overdrafts

12 9 12 9

Interest on convertible bonds 14 14 14 14

Unwind of discount on onerous

contract provisions

– – – 2

Interest on lease liabilities 19 11 – –

Net finance costs before

non-underlying items

45 34 26 25

Headline net finance costs

(pre-IFRS 16) for the year were

£26m (2022: £25m). Cash spend in relation to financing

costs were £10m lower at £16m.

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.

Lease interest of £19m arises on lease liabilities recognised

under IFRS 16, bringing the total net finance costs before

non-underlying items under IFRS 16 to £45m (2022: £34m).

Tax

The effective tax rate

was 19 per cent (2022: 17 per cent) on

the profit for the year. Net corporation tax payments in the

year were £13m (2022: £6m). Based on current legislation,

we expect the tax rate in the current year to be 25 per cent.

Earnings per share

Calculation of Headline earnings per share

2023 2022

Headline profit before tax

(£m) 143 73

Headline income tax expense

(£m) (28) (12)

Headline profit for the year

(£m) 115 61

Attributable to non-controlling interests

(£m) (9) (6)

Headline profit for the year attributable to

equity holders of WH Smith PLC

(£m)

106 55

Weighted average shares in issue (diluted)

(no.of shares, millions)

132 132

Headline diluted EPS

(p) 80.3p 41.7p

The above measures are calculated on a pre-IFRS 16 basis.

EPS calculated on an IFRS 16 basis is provided in Note 9 to

the financial statements, and a reconciliation between the

IFRS 16 and pre-IFRS 16 earnings per share is provided in

Note A4 to the Glossary on page 173.

The diluted weighted average number of shares in issue used

in the calculation of Headline diluted EPS assumes that the

convertible bond is not dilutive.

Profit attributable to non-controlling interests primarily

represents the joint venture partner share of profit in relation

to airport contracts in the US. As at 31 August 2023 the

profit attributable to non-controlling interests of £9m

(2022: £6m), is c.18 per cent (2022: 19 per cent) of North

America Headline trading profit.

Financial review continued

Strategic report

26 WH Smith PLC Annual Report and Accounts 2023

Non-underlying items

Items which are not considered part of the normal operating

costs 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.

Most do not impact cash.

The cash spend relating to non-underlying items in the 2023

financial year was £9m and mainly related to activity

announced in 2020 and 2021.

IFRS

Headline

(pre-IFRS 16)

£m 2023 2022 2023 2022

Impairment of Property,

plant and equipment and

Right-of-use assets 19 13 4 5

Provisions for onerous

contracts 3 – 5 –

Finance costs – discount

unwind on provisions for

onerous contracts – – 1 –

Other 5 7 5 7

27 20 15 12

Impairment of Property, plant and equipment and Right-of-

use (‘ROU’) assets

The Group has carried out an assessment for indicators of

impairment across the store portfolio.

The impairment review compared the value-in-use of

cash-generating units, based on managements’ assumptions

regarding likely future trading performance, to the carrying

values at 31 August 2023. As a result of this exercise, anon-

cash charge of £4m (2022: £5m) was recorded for impairment

of retail store assets on a pre-IFRS 16 basis, and£19m

(2022: £13m) on an IFRS 16 basis which includes an

impairment of ROU assets of £15m (2022: £8m). Thisnon-

cash impairment to the ROU asset primarily results from the

difference between the Incremental Borrowing Rate (‘IBR’)

used to establish the ROU asset and the weighted average

cost of capital (‘WACC’) rate used to discount the future cash

flows of certain stores in Spain.

Provisions for onerous contracts

A charge of £3m (on an IFRS 16 basis) has been recognised

in the income statement in non-underlying items to provide

for the unavoidable costs of continuing to service a non-

cancellable contract, in certain locations where revenue

recovery to pre-Covid-19 levels has not been observed.

On apre-IFRS 16 basis this charge is £5m.

Finance costs relating to the discount unwind on previously

recognised provisions for onerous contracts has also been

recognised in non-underlying items.

Other non-underlying items

Other non-underlying items include: non-cash amortisation

of acquired intangible assets of £3m (2022: £3m) primarily

related to the MRG and InMotion brands; costs associated

with pensions £1m related to the pension scheme’s purchase

of a bulk annuity insurance policy as described in Note 26;

and finance costs associated with refinancing £1m to

derecognise the carrying value of unamortised fees in

respect of the extinguished term loan and revolving

credit facility.

Other non-underlying items in the prior year also included

costs of £4m incurred due to a cyber security incident in

relation to one of the Group’s websites. This included

impairment of software assets of £1m, third party

consultancy support and legal and other costs.

A tax credit of £5m (2022: £4m) has been recognised in

relation to the above items (£2m pre-IFRS 16 (2022: £3m)).

Cash flow

Free cash flow

reconciliation

pre-IFRS 16

£m 2023 2022

Headline Group operating profit before

non-underlying items

169 98

Depreciation, amortisation and

impairment (pre-IFRS 16)

52 49

Non-cash items 14 8

Operating cash flow

1, 2

235 155

Capital expenditure (122) (83)

Working capital (pre-IFRS 16)

(64) (10)

Net tax paid (13) (6)

Net finance costs paid (pre-IFRS 16) (16) (15)

Free cash flow

20 41

The Group generated an operating cash flow of £235m in

the year (2022: £155m) demonstrating the cash generative

nature of the business. Capex was £122m (2022: £83m) as

wecontinued to invest in new stores, IT and energy efficient

chillers and other store equipment. As expected we had a

working capital outflow of £64m in the year (2022: £10m).

This mainly relates to investment in new stores, the recovering

Travel business following the Covid-19 pandemic and some

timing. Most of the outflow was in the first half. This year we

expect a much smaller outflow mainly relating to opening

new stores. In total, there was a free cash inflow in the year

of£20m (2022: £41m). This year we would expect, subject

toinvestment opportunities, an increase in freecash

generation, and Headline net debt

to be around £310m.

Net corporation tax payments in the period were £13m

(2022: £6m).

1 Alternative performance measure defined and explained in the Glossary onpage168

2 Excludes cash flow impact of non-underlying items

27WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Capex was £122m (2022: £83m) which includes the additional

spend from opening 118 stores around the world.

£m 2023 2022

New stores and store development 58 37

Refurbished stores 20 22

Systems 19 13

Other 25 11

Total capital expenditure 122 83

Reconciliation of Headline net debt

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 2023, the Group had Headline net debt

£330m comprising convertible bonds of £301m, £1m of

finance lease liabilities and net overdrafts of £28m

(2022: £296m, convertible bonds of £292m, term loans of

£132m (net of fees), £4m of finance lease liabilities and net

cash of £132m).

Headline

(pre-IFRS 16)

£m 2023 2022

Opening Headline net debt

(296) (291)

Free cash flow

20 41

Dividends paid (22) –

Pension contributions – (2)

Non-underlying items

(9) (16)

Net purchase of own shares for

employee share schemes

(8) (7)

Other (15) (21)

Closing Headline net debt

(330) (296)

Net (overdraft)/cash (28) 132

Term loans (net of fees) – (132)

Convertible bond (301) (292)

Finance leases (pre-IFRS 16) (1) (4)

Headline net debt (330) (296)

In addition to the free cash flow, the Group paid £9m 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. The other outflows related to the dividend

£22m (2022: £nil) being the final dividend from 2022 and

theinterim dividend from 2023. In addition we spent £8m

(2022: £7m) on own shares for the Group’s share schemes.

Other includes non-cash accretion on the convertible bond,

and payments to non-controlling interests.

On an IFRS 16 basis, net debt was £895m (2022: £869m),

which includes an additional £565m (2022: £573m) of

lease liabilities.

Fixed charges cover

pre-IFRS 16

£m 2023 2022

Headline net finance costs

26 25

Net operating lease charges

(pre-IFRS16)

326 241

Total fixed charges 352 266

Headline profit before tax andnon-

underlying items

143 73

Headline profit before tax, non-

underlying items and fixed charges

495 339

Fixed charges cover – times 1.4x 1.3x

Fixed charges, comprising property operating lease charges

and net finance costs, were covered 1.4 times (2022: 1.3 times)

by Headline profit before tax, non-underlying items and

fixed charges.

Balance sheet

The Group had Headline net assets of £449m, £45m higher

than last year end reflecting the investment in store openings

and exchange differences on translation of goodwill.

Under IFRS the Group had net assets of £340m.

IFRS

Headline

(pre-IFRS 16)

£m 2023 2022 2023 2022

Goodwill and other

intangibleassets

505 543 506 544

Property, plant and equipment 270 219 263 211

Right-of-use assets 444 446 – –

Investments in joint ventures 2 2 2 2

1,221 1,210 771 757

Inventories 205 198 205 198

Payables less receivables (219) (269) (216) (284)

Working capital (14) (71) (11) (86)

Net derivative financial asset – 1 – 1

Net current and deferred

taxassets

45 54 45 54

Provisions (17) (14) (26) (26)

Operating assets employed 1,235 1,180 779 700

Net debt (895) (869) (330) (296)

Total net assets 340 311 449 404

Robert Moorhead

Chief Financial Officer and Chief Operating Officer

9 November 2023

1 Alternative performance measure defined and explained in the Glossary onpage168

Financial review continued

Strategic report

28 WH Smith PLC Annual Report and Accounts 2023

Section 172(1) statement

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 are

summarised on the following pages.

Moving forward

with our stakeholders

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.

Our purpose:

To make every

one of life’s

journeys better

Our people

Customers

Investors

Landlord partners

Community

groups

Suppliers

and business

partners

29WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Section 172(1) statement continued

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 Group’s approach to remuneration, including

executive remuneration and how this aligns to wider Group

pay policy

• The Chief People Officer updated the Board on employee-

related matters, including employee engagement, staff

retention rates, learning and development, gender pay

gap, diversity and inclusion, and workforce 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

• Board members and senior executives attended business

meetings throughout the year, including leadership meetings,

trading updates and risk committee meetings

• Our annual employee engagement survey was followed

upwith insight meetings to gain further understanding

• Employees raised issues, questions and concerns through

direct mailboxes for senior executives

What were the key topics raised?

• Development and growth for all of our colleagues

• Communications on our strategic growth

• Work life balance and wellbeing

• Diversity and inclusion across our business

How did we respond?

• The Board approved an action plan to address actions

from the employee survey and monitored implementation

throughout the year

• We continued to leverage our e-learning platform, giving all

colleagues access to career development modules

• We increased our communication and engagement,

including more webinars and business line specific

meetings, chaired by our senior executives

• Created a new Head of Wellbeing position to support

ourglobal wellbeing strategy and have enhanced our

wellbeing offering

• Strengthened our Diversity, Equity and Inclusion

Committee, chaired by our Group Chief Executive to include

members from across our stores and distribution centres

• Launched five employee networks, chaired by sponsors

from our Executive Committee, giving all colleagues the

opportunity to participate and influence our broader

DEI strategy

Our people

The success of WHSmith depends on

the 14,000 colleagues who work for

theGroup. It is essential that they feel

engaged, motivated and appreciated.

Strategic report

30 WH Smith PLC Annual Report and Accounts 2023

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

• The Managing Directors of each business unit updated

theBoard on customer engagement, market trends and

commercial responses

• We continue to use quantitative and qualitative analysis

ofcustomer feedback through point of sale, online surveys

and focus groups, which 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?

• Convenience of our offering

• Nature of store environments

• Customer service levels

• Product availability

• Pricing

How did we respond?

• The Board received strategy updates from the Managing

Directors of each business unit and approved the

customer-facing commercial strategies

• We continued to invest in existing and new stores

• We extended choice of product for customers across

different categories including food, health and beauty

andtechnology products

• Explored ways to continue to improve our service model

to make the customer experience as effortless and

efficient as possible

• Customer feedback was communicated to the relevant

parts of the business for actioning where appropriate

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.

31WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Section 172(1) statement continued

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

• At our annual general meeting at which the Group Chief

Executive gives an update on how the Group is performing

and the Board answer questions from shareholders

What were the key topics raised?

• Strategy for growth

• Operational delivery

• Corporate governance practices

• Succession planning

• ESG strategy, targets and reporting

How did we respond?

• Annette Court met with shareholders as part of her

induction programme as Chair of the Board

• We conducted investor interactions through meetings

withmajor institutional shareholders, individual

shareholder groups and financial analysts

• Meetings were attended by Directors and senior

management including our Chair, Group Chief Executive,

CFO/COO

• The ESG Committee incorporated investor feedback into

the ESG strategy. We also delivered an online ESG briefing

for shareholders

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.

Strategic report

32 WH Smith PLC Annual Report and Accounts 2023

What they care about

• Store formats and product ranges that are appealing

totheir customers

• Customer service and satisfaction

• 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 Australia, Hungary, Italy,

Norway, Sweden and USA

• Commercial recovery post Covid-19 and the associated

upturn in passenger numbers

• Operational impacts of staffing levels and the impact on

stock availability in European airports

• Emerging trends in retailing and implications for

store formats

• Commercial terms for lease agreements for High

Street stores

• Sustainability requirements as part of tender submissions

and subsequent landlord partner dialogue

How did we respond?

• 55 new stores opened

• A heightened focus on product ranges, stock volumes and

staffing levels to match an upturn in airport footfall and

meet demand

• Further investment in store design, shop fit outs and

product ranging

• Variety of format options including extension of a one stop

shop for journey essentials, greater localisation of designs

and a providing a platform for a variety of brands

• 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.

33WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Section 172(1) statement continued

What they care about

• A retail presence that may attract other retailers to

the locality

• Availability of core products and services such as

convenience offerings in hospitals and Post Office services

in 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 maintain a vibrant retail offering providing

core services for local communities

• Support for community groups and charities local to

our stores

• The importance of support for pre-school children in

disadvantaged areas to address disparities in levels

of literacy

How did we respond?

• The ESG Committee reviewed and approved the

Sustainability Strategy, action plans and targets for the year

under the three pillars of Planet, People and Community

• We continued our long-term partnerships with the

National Literacy Trust in the UK and Miracle Flights in

North America, and provided financial and in-kind support

to a number of other charities and community causes

• We discussed possible partnerships with landlord partners

to look at ways to help local communities

• Participation in industry working groups on

keyenvironmental and social issues

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 also want to provide jobs and help

local economies where weare based.

Strategic report

34 WH Smith PLC Annual Report and Accounts 2023

What they care about

• Fair trading and prompt payment in line with agreed terms

• Opportunities for growth in their business

• A business partner that treats them fairly

• Responsible sourcing and high ethical standards in the

supply chain

How did we engage?

• Board overview of information on key suppliers where

material, for example when approval of major supplier or

franchise 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,

orsuppliers 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

• Supply chain operations to ensure right products at the

right time

• 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

• We worked with business partners to provide suppliers

with customer insight data specific to our stores

• Provided an option for suppliers to access information

through a dedicated data portal

• We engaged with suppliers on human rights due diligence

in their supply chains and carbon reduction targets

and plans

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.

35WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Sustainability

Our sustainability strategy is a key part of how we operate.

It concentrates on those areas which are important for the

success of our business and where we can bring positive

change. It was developed taking into account the views of

our stakeholders on the issues that they felt were important

for our business and where we have the greatest potential

impacts on society and the environment.

WHSmith has a long-standing commitment to operate in a responsible and sustainable

way. As a major international retailer, our operations can have far-reaching consequences

and we are increasingly sensitive to the environmental and social challenges facing the

world today. Our customers, colleagues and business partners all want us to act in a

responsible way and we know that operating sustainably enables better

business performance.

The three main pillars of our strategy, focus on Planet,

Peopleand our Communities and provide the framework

forour activities. They are underpinned by a strong

foundation of responsible business principles and practices

to ensure we operate in the right way.

Continuing our journey

to a more sustainable business

Minimising our

impact on the planet

Net zero by 2050

Reduce impacts from

packaging and waste

Net zero deforestation

Our Journey to a Sustainable Business

Creating value for all stakeholders

Responsible business policies and processes

Engaging

our people

Support wellbeing

Increase diversity of

senior management

Protect worker rights in the

supply chain

Contributing to

communities

Help children

develop a love of reading

Make a positive impact through

fundraising, donations

and volunteering

Strategic report

36 WH Smith PLC Annual Report and Accounts 2023

Governance

Good environmental and social governance (ESG) is central

to successful risk management, business development and

delivery of the expectations of shareholders. A robust

framework of clear governance structures, risk management

processes and internal controls are embedded across

WHSmith and are key for the delivery of our

sustainability commitments.

Our board-level ESG Committee, leads and oversees delivery

of our sustainability strategy, setting our ambition and

monitoring progress. The Committee is responsible for

understanding the potential impact and related risks of ESG

considerations on the business. It approves the Company’s

sustainability strategy, including policies, objectives and a

roadmap for delivery and monitors progress against agreed

targets. The work of the Committee is detailed on pages 79

and 80.

The ESG Committee receives input from the ESG Steering

Group, which is chaired by the Group Chief Executive and

has responsibility for leading the delivery of our sustainability

commitments. The ESG Steering Group meets monthly to

review progress against our objectives. Each of the key

components of our strategy has a series of targets and

anaction plan for implementation.

Individual issues are managed by the most appropriate

owners across the business. They work with WHSmith’s

Sustainability Director whose role is to advance the various

initiatives, co-ordinate implementation of the sustainability

programme and provide updates to the key

governance bodies.

Quarterly updates are also provided to the Group Audit

Committee on key ESG risk areas. As part of WHSmith’s risk

management processes (see pages 55 to 60), detailed risk

registers are maintained by each business and used to

identify, manage and monitor risks at quarterly Business

RiskCommittees. The Business Risk Committees review the

progress made towards achieving our long-term

sustainability targets once a quarter, together with any

emerging issues which need to be considered.

We include ESG metrics in our incentive plans for senior

management. Further details are provided on pages 86 to

96. This year we agreed a new revolving credit facility with

asyndicate of banks for a five-year term with extension

options. The facility includes specific annual targets aligned

to the Group’s sustainability strategy with lower interest

rates if the targets are met.

Our governance framework

Board

Ultimate responsibility for all aspects of ESG, including strategy,

risk management and prioritisation of key issues

Audit Committee

Provides oversight of risk

management of ESG, including

internal controls and external

reporting requirements

ESG Committee

Provides oversight of the ESG strategy

and monitors progress against

objectives and targets

Remuneration Committee

Ensures remuneration policies

and plans support ESG targets

Group Executive Committee

Defines and monitors business strategy and financial plans,

including those related to ESG

ESG Steering Group

Responsible for developing ESG action plans and

delivering progress against objectives and targets

Business Risk Committees

Responsible for implementing risk management

processes including those relating to ESG

37WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Sustainability continued

Materiality and our approach to reporting

We undertake an annual materiality assessment to determine

the most important sustainability issues for our business.

This assessment is based on the extent to which our

activities could impact society and the environment, and the

extent to which a socio-economic, environmental or ethical

issue could impact our business financially.

Our materiality assessment incorporates the views of internal

and external stakeholders who provide input in a number of

different ways, which are set out in more detail on pages 29

to 35. We use feedback from stakeholders to identify the

issues that are most important to them, the areas where

theybelieve our activities could have the biggest impact

onsociety and the environment and the extent to which

different issues could generate significant risks or

commercial opportunities for our business.

Our ESG Committee and other relevant governance bodies

regularly discuss new and existing themes and issues that

matter to our stakeholders. Priority issues are addressed by

programmes and action plans with clear and measurable

targets and committed resources. Our ESG Steering

Committee reviews our materiality assessment annually and

chooses what we measure and include within our reporting

based on priority issues for our investors, customers,

colleagues and other stakeholders. Our reporting is

informedby stock exchange listing and disclosure rules.

We remain committed to transparent and balanced

sustainability reporting and commissioned SLR Consulting

toconduct a limited assurance engagement over selected

Information which is marked with a * in this report.

Further details are provided in our Sustainability Addendum.

This year we have streamlined our sustainability reporting to

reduce duplication and help stakeholders find the information

they need more easily. All of our reporting is available on

our website:

• This Annual Report has a summary of the progress against

our sustainability strategy and targets for the year and

meets our statutory obligations

• The Sustainability Addendum is updated annually and

includes our most recent materiality matrix, sustainability

performance data, third party assurance statement and

content tables for key reporting standards

• Policies and position statements describe our

expectations and management approach for key topics

For the third year

WHSmith has

beenincluded in

theDowJones

Sustainability

WorldIndex,

oneofonly eleven

speciality retailers

tobe included.

WHSmith received

anESG Risk Rating

of10.1 and was

assessed by

Sustainalytics to

beatlow risk of

experiencing material

financial impacts

fromESG factors.

WHSmith achieved a

‘C+’ rating. This is

supported by our

‘Prime’ status, which

is given to companies

that are perceived to

be sustainability

leaders in

their industry.

WHSmith has a

ratingof AA in

theMSCI ESG

Ratings assessment.

WHSmith achieved

aclimate disclosure

score of ‘A’, one of

just 283 companies to

achieve this

score globally.

DISCLOSURE INSIGHT AC TION

Benchmarks and external ratings

We engage with a number of external proxy agencies, benchmarking schemes and other membership organisations.

This year we became signatories of the UN Global Compact and we continue to rank highly in external benchmarks and

indices, including the following (as at 31 August 2023):

Strategic report

38 WH Smith PLC Annual Report and Accounts 2023

Climate action

The impacts of climate change are being felt across our

operations and our supply chains and by many of those who

form part of our wider value chain. We are committed to

playing our part in helping to reduce emissions to avoid the

most severe consequences of climate change.

WHSmith has a long history of reducing carbon emissions

through greater energy efficiency, investment in technology

and equipment and switching to lower carbon sources of

energy and fuel.

We have set a target to be net zero across our full value

chain by 2050, aligned to a 1.5˚C trajectory. Our carbon

transition plan includes a number of initiatives to reduce

energy and fuel use, switch more of our power to renewable

sources and take action to adapt to the changing climate.

We know that we will not be able to reach net zero in

isolation, and therefore are encouraging customers,

suppliers, business partners and policy makers to join us

onour journey.

More information on our climate strategy, including our

commitments, climate risks and opportunities and action

plans for transitioning to net zero are included in our TFCD

disclosures on pages 41 to 48.

Reducing 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. Separate facilities for

waste segregation are available in our distribution centres

andoffices. We use reusable skips to transport goods

between our distribution centres and stores, rather than less

robust cardboard boxes which would need to be recycled

more frequently and add to the waste we generate.

More widely across the Group, we are working with our

suppliers to minimise the quantities of secondary packaging

used to protect products being transported to our stores,

which helps to reduce the waste being generated from our

operational activity.

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.

Aim Target Progress

Climate

action

Net zero emissions

by2050

By 2030: reduce absolute Scope 1

and2 emissions by 80 per cent

from2020 baseyear.

2023 emissions are 66* per cent lower

than 2020.

By 2027: 75 per cent of suppliers by

emissions covering purchased goods

and services and up-stream transport

and distribution will have science

basedtargets.

15* per cent of GHG emissions from

purchased goods and services and

up-stream transport and distribution

arefrom suppliers with science

basedtargets.

Reducing

waste

Reduce environmental

impact from packaging

and materials

By 2025: reduce waste material and

minimise own-brand plastic packaging.

In 2020 we sent 400 tonnes (12 per

cent) of waste to landfill. In 2023 we

sent 24* tonnes (one* per cent)

ofwaste tolandfill.

Protecting

natural

resources

Net zero deforestation By 2025: ensure forestry materials in

own-brand products and core non-

trade goods come from recycled or

certifiedsources.

In 2023, 100* per cent of pulp, paper

and timber products purchased for

resale were from certified sources or

recycled material. Further work is

planned to assess certification in

relation to non-trade goods.

* We engaged SLR Consulting to provide independent limited assurance of the data marked with * in accordance with assurance standard ISAE 3000. Full details of

the methodology and SLR Consulting’s assurance statement are available at whsmithplc.co.uk/sustainability

Minimising our impact on the planet

39WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Sustainability continued

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

solutions such as cardboard and forms of plastic that can be

recycled where these provide a better environmental option.

We track the types and volumes of different types of

packaging associated with our own-brand products and

have removed loose plastic glitter from all WHSmith-

branded products, including stationery items and seasonal

items such as cards and gift wrap.

The number of food lines that we sell continues to grow, and so

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 better stock control systems to

improve forecasting and ordering of chilled food, 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.

We partner with the food redistribution organisation Too

Good to Go, who provide an online application to connect

customers to any of 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 reduced price. This is

working well at our hospital locations and we are expanding

its use to other stores in other locations.

These actions all help to minimise the amount and proportion

of waste which is sent for treatment and disposal. This year

99* per cent (2022: 99* per cent) of our waste was sent for

recycling or to energy from waste facilities rather than for

disposal to landfill.

Operational waste

2023 2022 2021

Total waste (tonnes) 3,105* 3,247* 3,623*

Percentage diverted

fromlandfill

99* 99* 93*

* We engaged SLR Consulting to provide independent limited assurance of the data

marked with * in accordance with assurance standard ISAE 3000. Full details of

the methodology and SLR Consulting’s assurance statement are available at

whsmithplc.co.uk/sustainability

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 the sourcing of any paper,

cardor wood components for our products.

Our Sustainable Forests Policy sets out our standards and

requirements for our supply chain, and includes a zero

deforestation policy for any WHSmith-branded products.

Our standards require that all paper, card and wood for our

own-brand products are sourced from legal and well

managed forests that have been certified to credible

certification standards such as FSC® or PEFC™ or from

verified recycled sources.

Suppliers must provide proof of Chain of Custody

certification 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 can now demonstrate through certification that

100* per cent (2022: 99.7* per cent) of WHSmith-branded

products containing paper-based materials originate from

certified or recycled material.

We are currently updating our procedures and supplier

guidance to ensure we are ready for the introduction of

theEU Deforestation Regulation in 2024.

Strategic report

40 WH Smith PLC Annual Report and Accounts 2023

TCFD Reporting

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. Our target is to be net zero across our value

chain by 2050.

We have considered our TCFD-related reporting obligations

under the UK’s Financial Conduct Authority Listing Rules

and in line with the requirements of Listing Rule 9.8.6R,

ourdisclosure of climate-related financial information is

consistent with the Recommendations of the TCFD and

therecommended disclosures and all-sector guidance.

Our approach to materiality for TCFD reporting is the same

as for other components of ESG and is set out on page 38.

Board oversight of climate risks

andopportunities

The Board has ultimate responsibility for ensuring climate

change is embedded into the Group’s strategy, risk

management, financial and business planning processes.

Climate considerations are taken into account for

performance monitoring and any decisions regarding major

financial approvals and acquisitions. The ESG, Audit and

Remuneration Committees of the Board provide oversight

ofcertain climate-related activities and any issues of material

significance are discussed as they occur. The work of the

committees is detailed on pages 72 to 80.

The Audit Committee has responsibility for ensuring that

theGroup has identified climate risks and opportunities,

thatthose risks and opportunities have been adequately

assessed and that appropriate risk management, monitoring

and mitigation plans are in place. The Committee also

oversees the Group’s wider obligations in relation to non-

financial reporting. Climate-related matters are included in

quarterly updates from the Group Audit and Risk Director

aspart of the Group’s wider risk management processes.

The ESG Committee has responsibility for ensuring the

Group 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,

development of a carbon transition plan and monitoring

progress. This year, the ESG Committee discussed climate

change in three meetings. The Committee received

dedicated briefings from the Sustainability Director on

current legislation and emerging developments in relation

tocarbon and nature, and reviewed progress against the

Group’s carbon targets. Climate-related skills and experience

of individual Committee members are set out on pages 62

to 63.

TCFD recommendations and

recommendeddisclosures

Disclosure

location (page)

Governance

(a) Describe the board’s oversight of climate-

related risks and opportunities

Page 41

(b) Describe management’s role in assessing

and managing climate-related risks

andopportunities

Page 42

Strategy

(a) Describe the climate-related risks and

opportunities the organisation has

identified over the short, medium and

longterm

Pages 43 to 44

(b) Describe the impact of climate-related

risks and opportunities on the

organisation’s businesses, strategy and

financial planning

Page 44

organisation’s strategy, taking into

consideration different climate-related

scenarios, including a 2°C or

lowerscenario

Page 44

Risk management

(a) Describe the organisation’s processes

foridentifying and assessing climate-

related risks

Page 42

(b) Describe the organisation’s processes

formanaging climate-related risks

Pages 43 to 45

assessing and managing climate-related

risks are integrated into the organisation’s

overall risk management

Pages 43 to 45

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

Page 46

(b) Disclose Scope 1, Scope 2, and,

ifappropriate, Scope 3 greenhouse gas

(GHG) emissions, and the related risks

Pages 47 to 48

organisation to manage climate-related

risks and opportunities and performance

against targets

Page 48

The Remuneration Committee ensures that the Group’s

incentive plans are aligned with targets relating to climate-

change. Climate-related performance indicators formed part

of the Annual Bonus scorecard for the Group Chief Executive

and CFO/COO and carbon reduction targets were included

in the Long-Term Incentive Plan awards as set out on page

96. Incentives associated with decarbonisation targets were

discussed in two of the Committee meetings this year.

41WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Sustainability continued

Management’s role

The Group Chief Executive has the delegated authority from

the Board to manage WHSmith’s actions in relation to the

Group’s strategy and 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 developing climate scenarios,

identifying climate risks and opportunities, developing

transition plans and embedding them into business

activities, and ensuring progress is appropriately

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, monitor,

manage and mitigate climate 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 Group’s processes for managing climate

risks. 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

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 risks and opportunities and ensuring appropriate due

diligence and mitigation. They meet once per quarter and

provide input to the Group risk report to the Audit

Committee four times per year.

Identifying and assessing risks

andopportunities

Our framework for identifying and assessing climate-related

risks is integrated into company-wide processes for risk

identification and prioritisation (see pages 55 to 60).

We usethe following processes to identify and assess

transition and physical risks and opportunities:

• Monitoring of changes in the external policy environment,

including existing and emerging legislation, and

government announcements;

• Observing market developments, such as technological

advances that may reduce our operating costs, or changes

in consumer behaviour that may impact sales of particular

products or customer footfall in certain locations; and

• Evaluating changes in our cost base related to properties,

logistics or supply of goods that may be linked to climate-

related impacts.

We maintain a register of climate risks and opportunities,

across short, medium and long-term time horizons.

These time horizons are defined as follows:

• Short-term – up to three years: we develop financial plans

and use them to manage expectations and 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 some store leases, contractual

agreements with landlord partners, and the useful

economic life of our assets often exceed three years.

Medium-term climate risks are considered in all investment

decisions involving longer-term commitments and many

of our climate-related opportunities are often materialised

within this time.

• 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 to transitioning to a net zero world. This timescale

isbeyond our financial planning and investment period

horizons, but we recognise that longer-term risks may

need to be incorporated into our future business strategy

and planning.

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 all other risks included in the Group’s

risk register. Determination of the severity of impact includes

both financial and reputational components, and other factors

such as our ability to respond to a particular risk. In assessing

the likelihood, we consider factors such as whether similar risks

have materialised in the past and our ability to mitigate the risk.

This allows us to identify the more significant potential risks,

for more detailed financial assessment and incorporation into

the risk registers and summary risk maps prepared by all

business functions.

We consider Environment and Social 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. Failing to deliver our

sustainability agenda could damage our reputation,

introducehigher costs and impact our ability to meet

ourstrategic objectives.

Strategic report

42 WH Smith PLC Annual Report and Accounts 2023

Scenario analysis

In order to further assess and evaluate climate risk and

opportunities, in 2022 we commissioned external consultants

to help us understand how our business could be affected

under two climate scenarios over short, medium and

long-term horizons.

Current policies scenario

This scenario assumes only currently implemented

government policies are preserved. There is no reduction

inemissions and climate change accelerates to 2.5°C of

warming by 2050 and >4°C by 2100 bringing irreversible

change. This scenario provides an indication of potential

outcomes under business as usual. It involves little to no

transition risks in the early stages (as no additional action

isbeing taken), but results in irreversible and disruptive

physical risks.

Net zero 2050 scenario

This is an ambitious scenario that limits global warming to

1.5°C by 2100 through stringent and immediate climate

policies and innovation, reaching net zero emissions around

2050. It offers an indication of potential outcomes where

global warming is limited to current internationally agreed

levels. It involves more transition risks in the early stages and

physical risks are less extreme than under the Current

Policies scenario. It is only relevant to medium and long-term

time horizons because of the timescales needed

to implement.

Climate risks and opportunities and their

impact on our business

This analysis helped us to estimate indicative financial

impacts from different climate risks under the two scenarios.

The table on page 44 sets out the most significant climate

risks and opportunities for WHSmith, the potential impacts

they may have on our business and our resilience to respond.

We have assessed transition risks associated with societal

changes in policies, technologies, markets and stakeholder

expectations and physical risks arising from acute climate-

related weather events, or longer-term chronic changes to

the climate. Opportunities from mitigation and adaptation to

climate change are also included.

The impacts detailed in the table on page 44 are stated prior

to mitigation or controls being in place and are subject to

uncertainties attributed to the underlying scenario models,

impact pathways and assumptions made. They assume that

our business activities remain largely unchanged throughout

and any increases in costs are fully absorbed by WHSmith.

The financial impacts quoted are not forecasts but are based

on the outputs from the 2022 modelling derived from

different data inputs and plausible modelled scenarios and

are subject to a wide range of uncertainties.

The financial implications of the risks and opportunities

identified are considered within the Group’s financial

planning processes. The modelling undertaken to date has

determined that the financial impacts are not expected to be

significant within our short-term forecast period. Over the

medium and longer-term the results of the scenario analysis

have been considered in the assessment of viability and

goodwill impairment where appropriate but are not

considered to be material. We will continue to keep this

assessment under review.

The results of our scenario analysis do not currently identify

any significant impact on our business model over the time

horizon assessed, and therefore no further changes in

strategy are required, beyond our current activities to

decarbonise our business in line with limiting global

temperature rises to 1.5°C.

Managing climate risks and opportunities

Climate 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 risks within our overall risk appetite over different

time horizons.

43WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Sustainability continued

Summary of climate-related risk and opportunities

Potential ﬁnancial impact

Climate risk and business impact

Short

term

Medium

term

Long

term Business resilience and strategic response

Increased energy and fuel prices from changes in

carbon taxes, geopolitical energy policies and

industry decarbonisation could result in higher costs

for operating buildings, transport and purchase of

goods. (Policy and legal, and market risk).

Geographies affected: global retail, purchasing and

distribution operations.

Current policies

We closely monitor any changes in legislation, taxation

policies and market dynamics. Our procurement team

seek to minimise the price we pay for electricity and

gas. We have a balanced energy purchasing strategy

to mitigate price volatility. We continue to reduce

energy consumption and switch to low carbon

alternatives wherever feasible. Future cost projections

for energy and fuel are included in our financial plans.

Metrics used: Electricity, gas and fuel consumption

(page 47); Energy and fuel pricing (not disclosed).

Net zero 2050

Switching to lower carbon sources of power and

fuel could result in increased costs. In the UK, our

Swindon distribution centre and some of High

Street stores are heated by natural gas. To meet net

zero targets and new building standards, we will

need to invest in gas replacement systems and

electric vehicles which could incur additional costs

(Technology and Reputation risk).

Geographies affected: global operations, but

particularly UK.

Current policies

Capital expenditure on gas control systems has

reduced our reliance on natural gas. We continue to

invest in lower-carbon alternatives for heating and air

conditioning during store refits and building upgrades.

Both capital and operating expenditure projections for

energy and fuel are included in our financial plans.

Metrics used: Scope 1, 2 and 3 emissions (pages 47 to

48); Electricity, gas and fuel consumption (page 47);

Renewable electricity pricing (not disclosed); Landlord

partner commercial terms (not disclosed).

Net zero 2050

Climate change is likely to result in chronic changes

in precipitation patterns with some regions

experiencing droughts and others greater rainfall.

These changes could affect the supply and

availability of raw materials for some product

categories such as stationery and food and drink,

with a resulting increase in the cost of supply.

(Chronic physical risk).

Geographies affected: global purchasingoperations.

Current policies

We sell a broad range of products which means that

even if certain categories 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 this could have on different raw materials

in our supply chain and if necessary, adapt our ranges

as appropriate.

Metrics used: Cost of Sales (page 133); Scope 3

emissions (page 48).

Net zero 2050

Extreme weather events, including storms and

flooding are becoming more frequent and could

cause disruption to transport routes affecting our

distribution network 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 of our stores or distribution centres.

(Acutephysical risk).

Geographies affected: global retail and

distributionoperations.

Current policies

Our stock is held across a number of WHSmith-

operated distribution centres, by suppliers at their sites

and over 1,750 stores in 32 different countries. The

impact of a flood event would therefore be limited. We

have a diverse product range with a limited number of

fast-moving goods, and therefore the majority of our

logistics operations are resilient to any short-term

impacts from major weather events.

Metrics used: Insurance costs (not disclosed).

Net zero 2050

There may be opportunities for increased revenues

as a result of changing consumer trends relating to a

switch to public transport and increased sales from

new and existing product categories. A switch to

lower-carbon intensity forms of transport could

result in an increase in revenues in some of our

channels. As the climate changes, there is also likely

to be an increase in customer demand for some of

our existing lines and new products. These include

those that have the potential to mitigate the impacts

of climate change, because they have a lower

environmental footprint, or products that help

customers to adapt to a changing climate,

particularly for those who are travelling.

(Physicalopportunity). Geographies affected:

globalretail operations.

Current policies

WHSmith is collaborating with our landlord partnerson

net zero strategies to play our part in demonstrating

industry’s intent for greener forms of travel. We have a

diverse portfolio of stores across air, rail, hospitals,

shopping centres and high street locations which

would maximise the opportunities for growth in any of

these formats. Our commercial teams are constantly

assessing consumer trends and the potential for new

products and can quickly adapt to any developments

in the marketplace to capitalise on new opportunities.

For example, in response to a warmer climate, we are

ensuring ranges of travel products are meeting the

needs of travellers.

Metrics used: Commercial sales from products

designed for a lower-carbon economy (notdisclosed).

Net zero 2050

<£10m £10–30m >£30m

1 Potential financial impact determined by impact on annual margin prior to any mitigation activity. Ranges have

been chosen to align with our other accounting processes. There have been no identified impacts on investment

in research and development, acquisitions or divestments or access to capital.

Strategic report

44 WH Smith PLC Annual Report and Accounts 2023

In addition to the strategic responses in the table,

otherprocesses for managing climate risks and

opportunities are undertaken at Group, business

functionand individual property level and include:

• A Group-wide policy framework which includes our

Environment Policy, Code of Business Conduct and

Responsible Sourcing Requirements for Suppliers;

• Monitoring of key metrics including energy and fuel

consumption and pricing, cost of sales, consumer trend

data and sales information;

• 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. The ESG Committee evaluates the

annual update of the climate risk and opportunity register

and ensures appropriate responses are in place. At an

operational level, each business division reviews its risk

profile and risk responses throughout the year to ensure

climate 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 risk

management. For example, this year climate risk was

included in the internal audit of supply chain operations.

Our climate risk management processes follow the overall

approach for Group-wide risk management. Climate risks and

opportunities are considered from a strategic and operational

perspective to ensure we maintain a comprehensive view of

potential climate-related impacts over different time horizons.

Senior management and the Board regularly review climate

risks and opportunities in line with other risks, to ensure a

holistic view and that risk mitigation responses are

appropriate to risk materiality and properly integrated

intorelevant business activities.

Climate strategy

The Group’s strategy incorporates the delivery of our

sustainability plans as a key enabler, including minimising our

impact on the planet and decarbonising our activities

(pages14 to 15). We recognise that transitioning to a net

zero business is the best way of mitigating our climate risks

and capitalising on any climate-related opportunities.

Our target is to become a net zero emissions business by

2050. Our intention is to reduce Scope 1, 2 and 3 emissions

by at least 90 per cent by 2050 (from a 2020 baseline)

before neutralising any residual emissions.

As a first step to this long-term goal, we have set near term

targets to help track our performance against our overall

climate target over time. The following targets were

developed using SBTI’s Criteria and Recommendations for

Near-Term Targets, Version 5.0 and have been validated

by SBTi.

• We will reduce absolute Scope 1 and 2 GHG emissions by

80 per cent by 2030 from a 2020 base year; and

• 75 per cent 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.

Our carbon transition strategy focuses on a number of

key actions:

• Continuing to reduce our electricity and gas consumption

through increased energy efficiency and investment in

more efficient heating, lighting and cooling;

• Continuing to invest in renewable electricity for direct

and indirect power purchases;

• Reducing our dependence on fossil fuels for transport

and logistics;

• Enhancing supplier engagement across all Business

Divisions to ensure our supply chain is adequately

disclosing carbon emissions and setting targets to

reduce them;

• Working with landlord and franchise partners to look at

opportunities to collaborate to reduce emissions;

• Reducing carbon emissions from packaging;

• Working with others in the retail sector to encourage other

stakeholders such as governments and policy makers to

make more rapid and larger scale interventions towards

net zero. We were a founding member of the British Retail

Consortium’s Climate Action Roadmap which was

established to bring together retailers, suppliers, policy

makers and other stakeholders, and to support customers

to deliver the UK retail industry’s ambition to be net zero

by 2040.

45WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Sustainability continued

Metrics and performance against targets

We use a number of different metrics to measure our

climate-related impacts, evaluate progress against our

targets and monitor risks and opportunities. They have been

developed with consideration of the cross-industry metrics

described in the TCFD implementation guidance table A2.1,

where we consider these to be material to our business.

Key metrics used to measure and manage climate risk and

opportunities are listed below and included in the table on

page 44.

Other metrics used to monitor climate-related

impacts include:

Executive remuneration: Climate-related performance

indicators formed part of last year’s Annual Bonus scorecard

for the Group Chief Executive and CFO/COO and the

Long-Term Incentive Plan (see Directors’ remuneration report

on pages 81 to 102).

Revolving credit facility: This year we agreed a new revolving

credit facility for a five-year term with two uncommitted

extension options of one year each with a syndicate of banks.

The facility includes specific annual targets aligned to the

Group’s Sustainability strategy and we will benefit from lower

interest rates on any drawdown if we meet these targets.

These targets include on-going delivery of Scope 1 and 2

reductions and agreement with suppliers to set science-based

carbon reduction targets to cover Scope 3.

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 International Energy Authority and the

Network for Greening the Financial System.

External benchmarks: We monitor performance on climate

change in external benchmarks, including the CDP Climate

Change disclosure initiative and this year we were included

in the leadership group of companies with an ‘A’ rating.

Metrics for managing climate risk

Metric Link to risk Units 2023 2022 2021

Electricity and gas

consumption

Increased costs for energy

and fuel

MWh 83,908* 82,581* 78,449*

Fuel consumption Increased costs for energy

and fuel

millions of litres 1.73* 1.54* 1.08*

Electricity from

renewablesources

Increased costs for energy

and fuel

MWh 52,101* 53,231* 50,064*

Increased costs for meeting

net zero targets

Absolute Scope 1

emissions

Increased costs for meeting

net zero targets

tonnes CO

e 1,765* 1,609* 2,687*

Absolute Scope 2

emissions

Increased costs of raw

materials

9,337* 8,758* 6,528*

Absolute Scope 3

emissions

404,420* 291,730* 234,940*

Other climate-related metrics

Metric Signiﬁcance Units 2023 2022 2021

Suppliers with science

based targets in place

Linked to Scope 3 target Number 54* 20* NA*

Percentage of Category 1

and 4 Scope 3 emissions

covered by science

basedtargets

Linked to Scope 3 target Per cent 15* NA NA

Own brand wood and

paper-based products

from sustainable sources

Linked to Deforestation target Per cent 100* >99* 99*

Waste diverted

fromlandfill

Component of Scope 3

emissions

Per cent 99* 99 93

GHG emissions intensity Industry benchmark tonnes

e/£revenue

6.2* 7.4* 10.4*

tonnes CO

e/sq ft 2,437* 2,352* 2,014*

* We engaged SLR Consulting to provide independent limited assurance of the data marked with * in accordance with assurance standard ISAE 3000. Full details of the

methodology and SLR Consulting’s assurance statement are available at whsmithplc.co.uk/sustainability

Strategic report

46 WH Smith PLC Annual Report and Accounts 2023

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 2023 was 83,908* MWh

(2022: 82,581*) an increase of two per cent. The main reason

for this increased consumption was an expansion in the

number of stores that we operate from 1,723 in 2022 to

1,767in 2023. We are continuing with a range of energy

reduction measures to minimise the amount of electricity

andgas that we use. These include:

• 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 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 in 2023 was 1.73 million* litres

(2022: 1.54 million*) an increase of 12 per cent due to

expansion of our Travel business requiring more transport

ofstock from our distribution centres to stores.

Energy and fuel use

2023 2022 2021

Energy use (buildings) MWh

UK 61,750* 62,048* 64,737*

Non-UK 22,158* 20,533* 13,712*

Total 83,908* 82,581* 78,449*

Energy use (buildings) MWh

Gas 9,649* 8,817* 14,673*

Grid electric (renewable) 52,101* 53,231* 50,064*

Grid electric (non-renewable) 22,158* 20,533* 13,712*

Total 83,908* 82,581* 78,449*

Fuel use (litres) 1.73 million* 1.54 million* 1.08 million*

Scope 1, Scope 2, and Scope 3 greenhouse gas (ghg) emissions, and the related risks

Global Scope 1 and 2 emissions (tonnes CO

2023 2022 2021

Scope 1 emissions

From natural gas to heat stores, offices and distribution centres. 1,765* 1,609* 2,687*

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. 9,337* 8,758* 6,528*

Percentage of emissions from UK-based operations. 0%* 0%* 0%*

Total Scope 1 and 2 emissions (market based) 11,102* 10,367* 9,215*

Percentage of emissions from UK-based operations. 16%* 16%* 29%*

Market based carbon intensity metric (revenue)

(tonnes CO

e per £m revenue) 6.2* 7.4* 10.4*

Market based carbon intensity metric (floorspace)

(tonnes CO

e per sq foot) 2,437* 2,352* 2,014*

Scope 2 emissions (location based)

From electricity purchased to power stores, offices and distribution centres. 19,361* 18,625* 17,013*

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. Our reported Scope 1 and 2 emissions include all UK and international properties,

both owned and leased, over which we have operational control.

*We engaged SLR Consulting 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 SLR Consulting’s full assurance statement is

available at whsmithplc.co.uk/sustainability

47WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Sustainability continued

Our total Scope 1 and 2 market based emissions increased

slightly this year to 11,102* tonnes CO

e (2022: 10,367*), as a

result of an expansion in our Travel Rest of World business.

Emissions reductions were made through investments in

more efficient lighting, better gas and electricity control

systems and changes to refrigeration units, including the

deployment of new ranges of chillers with closing doors.

One hundred per cent of the electricity for buildings in the

UK is renewably sourced, as a result of certificates purchased

under the Renewable Guarantees of Origin scheme.

All certificates are retired on our behalf to avoid

double-counting.

Emissions from our UK operations were 1,765* tonnes CO

(2022: 1,609*). 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 the

technology and nature of our operations evolve, we expect

to be able to reduce emissions from these activities.

Global Scope 3 emissions (tonnes CO

Scope 3 category 2023 2022 2021

1. Purchased goods and services and capital goods and services 332,000 210,000 178,000

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 6,400* 3,700* 3,300*

4. Upstream transport and distribution 19,000 23,000 14,500

5. Waste generated in operations 80* 90* 200*

6. Business travel 1,940* 1,440* 640*

7. Employee commuting 17,600 16,900 14,500

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 Not calculated 1,700 1,000

12. End of life treatment of sold product 22,000 30,600 19,300

13. Downstream leased assets Not relevant for our business.

14. Franchises 5,400 4,300 3,500

15. Investments Not relevant for our business.

Total Scope 3 emissions 404,420 291,730 234,940

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 SLR Consulting 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. Further data and full details of the scope and methodology for reporting emissions and SLR Consulting’s full assurance statement are available at

whsmithplc.co.uk/sustainability

The majority of our Scope 3 emissions are from Category 1:

Purchased Goods and Services, and emissions increased this

year as our sales continued to grow. As a first step towards

our target for 75 per cent of suppliers to have science-based

targets in place, we have started to engage with our largest

suppliers. 54 of them now have science based targets in place,

representing 15 per cent of Category 1, 2 and 4 emissions.

We are working with our transport and logistics operators to

reduce Category 4 emissions, and have reduced emissions

per pallet moved by approximately 30* per cent since 2007,

through better route planning and optimisation of delivery

schedules, driver training and working with suppliers to

reduce fuel consumption and emissions.

Progress against targets

2020 baseline 2023 Progress

Reduce Scope 1 and 2 GHG emissions

by 80% by 2030

33,072* tonnes CO

e 11,102* tonnes CO

66%* reduction

75% of suppliers by emissions to have

science-based targets in place by 2027

Unknown 15%* of emissions are covered by

science-based targets

All forestry materials will be from

recycled or certified sources in

WHSmith-branded products

99%* 100%*

On track to meet target

Strategic report

48 WH Smith PLC Annual Report and Accounts 2023

Aim Target Progress

Health and

wellbeing

Create an environment

that supports

physical,mental and

financialwellbeing

By 2025: improve our employee

engagement score from a 2021

base year.

Our second global engagement survey took

place in October 2022, with a 24 per cent

improvement in engagement scores. In 2023,

ourthird global engagement survey delivered

aconsistent engagement score.

On-going: ensure all

managersreceive mental

wellbeingtraining.

Improved data collection has highlighted a gap

inline manager training which is currently

beingaddressed.

On-going: maintain at least as

many mental health first aiders

as physical first aiders.

We have at least as many mental health first

aiders as physical firstaiders.

Diversity,

equity

and

inclusion

Increase diversity of

senior management

By 2025: increase gender

andethnic diversity of the

Board,Group Executive

Committeeand Senior

Managerpopulations.

At 31 August, 2023, the proportion of women

atBoard level had increased to 63* per cent.

Therewas a slight decrease in the proportion

ofwomen on the Group Executive Committee.

Theproportion of female Senior Managers

increased from 32* per cent in 2021 to 40* per

cent in 2023. four per cent of Senior Managers

were from ethnic minorities.

Supply

chain

human

rights

Protect worker rights

inour supply chains

On-going: ensure we audit our

own-brand suppliers at least

every two years.

As at 31 August 2023 86 per cent of supplier sites

had been audited through site visits and 14 per

cent had been assessed through desktop audit

within the previous two year period.

By 2023: develop an audit and

engagement programme for

our tier two suppliers.

As at 31 August 2023, 173 tier two suppliers to

our direct tier one suppliers have been identified

for additional due diligence. To date we have

visited 21 per cent of these suppliers.

By 2025: 15 per cent of

own-brand suppliers will have

worker representation

committees in place.

As at 31 August, 2023 five* per cent of own

brand suppliers have worker representation

committees in place.

* We engaged SLR Consulting to provide independent limited assurance of the data marked with * in accordance with assurance standard ISAE 3000. Full details of

the methodology and SLR Consulting’s assurance statement are available at whsmithplc.co.uk/sustainability

Employee engagement

Effective colleague engagement and an open, inclusive

culture are essential to creating an environment for our

teams to deliver for our customers. Our Group Chief

Executive, CFO/COO and the Managing Directors of each

business brief our head office teams on a monthly basis to

provide updates on the Company’s strategy and the latest

operational developments and answer any questions.

We have a number of other communication channels that

are used for engaging colleagues across the business,

including feedback forums with senior management and

various network committees with executive sponsors.

To help us to understand more about how our colleagues feel

about working for WHSmith, we use a third-party research

organisation to carry out our annual engagement survey.

The results of the survey are used each year to create an

action plan to improve the working environment in head

offices and stores; improve dialogue and engagement; and

build collaboration across our teams. Continuing to improve

the culture of the business is important to the long-term

success of the Group and our target to improve employee

engagement by 2025 has now been included as a

performance measure in senior management incentive plans.

Engaging our people

49WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Sustainability continued

Learning and development

Our learning and development programmes are designed to

provide our employees with the knowledge and skills they

need to deliver their role and to support them as they

develop their careers. We provide a range of learning

opportunities and initiatives that are designed to help our

employees develop their aptitude and experience.

These include online courses, workshops, mentoring and

coaching and we continue to review and develop these

activities, to ensure that they meet the requirements of our

business and the learning and development needs for our

employees. Individuals also have regular career

conversations with their managers during the year, with

more formal performance reviews taking place twice yearly.

Mentoring plays a critical role in the development of our

talent pipeline at all levels, providing targeted one-to-one

support for individuals from someone in a more senior role.

Managers and senior executives act as mentors supporting

employees with their development requirements to ensure

they are ready to take on more challenging roles.

Reward and benefits

We believe in rewarding all employees with fair and

competitive reward packages. All employees are entitled to

abase salary and benefits, including pension and staff

discount. Participation in a pension plan is offered to all

employees in accordance with local legislation.

In the UK, WHSmith 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 on favourable terms. At the end of

the savings period, the participant has the opportunity to

buy the shares at a special option price that is fixed at the

start of the scheme at a discount to the share price at that

time. As at the 31 August 2023, 835 employees were

participating in our Sharesave scheme.

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 responsibilities, processes and procedures.

This year, there were 48* reportable accidents across the

group involving employees, contractors and members of the

public and no fatalities. This increase is regrettable and we

continue to look at the root causes of safety incidents to try

to eradicate them at source.

Reportable accidents

2023 2022

UK 33* 27*

USA 0* 0*

Australia 1* 0*

Rest of the World 14* 7*

Total 48* 34*

* We engaged SLR Consulting to provide independent limited assurance of the data

marked with * in accordance with assurance standard ISAE 3000. Full details of

the methodology and SLR Consulting’s assurance statement are available at

whsmithplc.co.uk/sustainability

We are committed to creating a workplace where our

colleagues feel valued, that they have a sense of belonging

and are supported at every stage of their career with

WHSmith. Our aim is to ensure that all line managers are

trained in mental health awareness and that they have

access to the right tools to be able to support colleagues

who may be experiencing stressful life events. We continue

to have at least as many trained mental health first aiders as

physical first aiders to ensure colleagues can access support

when they need it.

WHSmith has partnered with several organisations to ensure

our mental wellbeing provision is robust and meaningful.

In the UK, the Retail Trust provides our Employee Assistance

Programme (EAP), offering support for employees and

immediate family members, and in store counselling when

incidents occur which could impact the wellbeing of the

whole team. Localised EAP offerings are also available for

employees in other countries.

Research shows that financial wellbeing can have a strong

impact on our mental health. Current and retired employees

and their families who are in financial difficulty or hardship

can apply to the WHSmith Benevolent Fund, a registered

charity established in 1925.

This year, we have also continued our partnership with Salary

Finance, enabling UK colleagues to access free financial

education and loans at lower rates than those typically

offered by traditional lenders. To enhance this offer, financial

support and many useful budgeting and educational

resources are also available for our employees to access

through our EAP.

Diversity, equity and inclusion

At WHSmith, our people are fundamental to the success of

our business whatever their age, race, religion, gender, sexual

orientation or disability. We continue to focus on developing

a culture of diversity, equity and inclusion (DEI), backed up

by a framework of policies, procedures and ways of working.

We hope that our people genuinely feel that they can bring

their whole selves to work. 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 working

environment that is free from discrimination and harassment

and we will not permit or tolerate this in any form.

Strategic report

50 WH Smith PLC Annual Report and Accounts 2023

Our DEI action plans set out how we are working towards

our goal of creating an environment where everybody is

welcome and feels they belong. Our DEI Committee enables

colleagues from across our business to engage directly with

leadership and work collaboratively on improvements.

We have continued to improve the quality of data and

information that we hold in relation to our people, with data

collection identified as an ongoing priority for our business.

We recognise the value that employee networks can bring.

The founding of employee networks, including those for

Pride, Gender Equity, Race and Culture, Disability and

Parents and Carers has provided a vehicle for employee-led

engagement and input to our DEI strategy.

The networks are each sponsored by a member of the Group

Executive, providing visible senior leadership and a way for

employee views to be relayed to the senior management team.

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.

As part of our ongoing DEI strategy, we have several external

partnerships that have evolved over the years. These not

only allow us to build our external profile as both a retailer

and employer of choice, but they also allow us to benchmark

our work against peer organisations.

We have signed several industry charters, committing to

making progress on improving DEI in our business. We are

signatories to the British Retail Consortium’s Diversity and

Inclusion Charter, have joined the industry organisation,

Diversity in Retail and are partnering with Black Young

Professionals to help us to attract, engage, recruit and retain

black talent. This year we also joined the Stonewall Diversity

Champions programme, developed to unlock the potential

of our LGBTQ+ workforce.

We benchmark our diversity profile versus national averages to

ensure that our employee profile andthat of our management

team reflect our commitment to diversity.

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.

We remain committed to improving diversity at senior levels

and the proportion of women at Senior manager level has

increased this year. 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 contacts,

connections and relationships can be made easily.

Our latest Gender Pay Report can be found on our website.

It shows a reduction in the pay gap due to a greater

proportion of females moving into senior roles.

Male and female representation across the Group (as at 31 August 2023)

2023 2022 2021

Male Female Male Female Male Female

Number Per cent Number Per cent Number Per cent Number Per cent Number Per cent Number Per cent

Board

3* 37* 5* 63* 5* 63* 3* 37* 5* 63* 3* 37*

Group Executive

Committee Members

9* 82* 2* 18* 7* 70* 3* 30* 7* 78* 2* 22*

Senior managers

49* 60* 32* 40* 49* 65* 26* 35* 46* 68* 22* 32*

Managers

349* 49* 369* 51* 349* 48* 371* 52* 315* 48* 345* 52*

All employees 5710* 38* 9,225* 62* 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. 2022 figures previously included Board Members so have been restated.

4 Includes head office colleagues graded at the level below 3 plus Store Managers, Cluster Managers and Post Office Managers.

* We engaged SLR Consulting to provide independent limited assurance of the data marked with * in accordance with assurance standard ISAE 3000. Full details of the

methodology and SLR Consulting’s assurance statement are available at whsmithplc.co.uk/sustainability

Ethnicity data for UK employees (as at 31 August 2023)

2023

2022

2021 Census

Asian 17%* 15%* 9%

Black 3%* 4%* 4%

Mixed 1%* 1%* 3%

Other 2%* 1%* 2%

White 77%* 79%* 82%

1 The data covers 91 per cent of UK based employees in 2023 and 89 per cent in 2022.

2 Census data covers England and Wales.

* We engaged SLR Consulting to provide independent limited assurance of the data marked with * in accordance with assurance standard ISAE 3000. Full details of the

methodology and SLR Consulting’s assurance statement are available at whsmithplc.co.uk/sustainability

51WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Sustainability continued

Human rights and our supply chain

As an international retailer, we have a responsibility to

respect and support the dignity, wellbeing and human

rightsof those in our own business, our supply chain and

thecommunities that we serve.

We must act in a way that avoids infringing the rights of

others and prevents adverse human rights impacts from our

activities. We manage human rights risks through our due

diligence processes in line with the United Nations Guiding

Principles for Business and Human Rights.

Our Human Rights Policy provides further details on our

approach and sets out the minimum requirements that

everyone working for and with WHSmith must meet. We are

committed to ensuring full respect for the human rights of

anyone working for us in any capacity and to fair and safe

work for all workers throughout our supply chain.

We have mapped out our salient labour issues and 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 use a number of sources of information

and data including generic information published by

governments, international agencies, trade unions, non-

governmental organisations (NGOs) and other third-party

experts; and information specific to our supply chain

gathered from workers during site visits, worker surveys and

worker representation committee meetings. We prioritise

those risks where the impact on workers is likely to be

greatest and where we are likely to be able to have the

greatest impact through our actions.

We work with suppliers and 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 and 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 a programme of factory

audits and ongoing engagement.

To ensure we are identifying and assessing any risks from

workers’ rights or environmental issues through our sourcing

activities, we have developed a due diligence process to

provide appropriate risk control, mitigation and remedy

where needed.

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.

This year, we commenced an audit programme of key tier two

suppliers who manufacture major components that are then

used by our direct tier one suppliers of finished products.

These audits are identifying similar levels of compliance and

issues as for our tier one suppliers, and we are now working

with them to build capacity to improve standards for workers

further down our supply chains.

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 progress against our

responsible sourcing strategy annually, looking at our audit

and engagement programmes, emerging trends and risks,

targets and performance.

The most frequent issues identified in our audits include

health and safety non-conformances, compliance with

conditions relating to working hours and missing paperwork.

We also frequently identify non-conformance with social

insurance requirements, a common problem in China where

most of our suppliers are based.

This year, we identified three suppliers who were unable to

provide the necessary levels of documentation and assurance,

even after on-going dialogue and engagement. As a result,

orders have been suspended until such time as we can reach

the necessary level of assurance that suppliers are meeting

our standards.

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 supplier management to ensure any complaints

or suggestions are dealt with in the appropriate way. Calls to

the hotline typically involve queries about topics such as pay,

accommodation and relations with other workers.

This year, we set a target to increase the number of suppliers

covered by our worker representation initiative. The aim of this

programme is to help suppliers to develop fully functioning

worker committees to represent workers on any matter

affecting their rights, employment conditions or working

environment to resolve problems as they arise. 11*suppliers

(fiveper cent of the total supplier base) have now joined this

programme and have established committees that have been

operating for a year or more.

Strategic report

52 WH Smith PLC Annual Report and Accounts 2023

Literacy

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 cities and towns and

areas of greater socio-economic deprivation.

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.

This was augmented by the WHSmith Group Charitable

Trust (the WHSmith Trust) which provided a financial

contribution towards the programme, supported by

donations from WHSmith customers and employees.

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 over 420,000

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 325,000 World Book Day vouchers were redeemed

and WHSmith vouchers totalling £20,000 were donated to

over 200 schools.

Supporting charities and local causes

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

the charity 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

£996,000* to charities and other good causes. The full extent

of our community investment activity is outlined in our

Sustainability Addendum 2023 and details of how we

engage with charities and other good causes are set out

inour Code of Business Conduct.

Our North American business has a longstanding partnership

with a charity called Miracle Flights which is a non profit

organisation providing commercial flights for children in

needof life-saving medical care, not found in their local

communities. WHSmith North America sells their toy bear

mascot in stores and this year raised over £100,000 for the

work of the charity.

Our International team have also raised money and provided

product donations for local charities and causes in the

vicinity of our airport stores.

Aim Target Progress

Literacy 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.

Since 2021, we have donated over

420,000 books (or cash equivalent).

Supporting

charities

and local

causes

Make a positive impact

through fundraising,

donations and

volunteering

By 2025: increase the number of

employees involved in supporting

charities through fundraising

andvolunteering.

Applications for support to the

WHSmithTrust from employees

supporting charities through fundraising

and volunteering increased by 50 per

cent this year.

Contributing to communities

* We engaged SLR Consulting to provide independent limited assurance of the data

marked with * in accordance with assurance standard ISAE 3000. Full details of

the methodology and SLR Consulting’s assurance statement are available at

whsmithplc.co.uk/sustainability

53WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Responsible business practices

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. Everyone who works for or on behalf of

WHSmith has a responsibility to report anything that they

are aware of that may be unlawful or criminal or could

amount to an abuse of our policies, systems or processes.

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. Reports can be made internally or

using our independently operated and confidential Whistle

blowing helpline at safecall.co.uk/report.

Safecall operates under a non-retaliation policy, so that

anyone who raises a concern in good faith is treated fairly,

with no negative consequences for their employment.

Each report is formally and robustly investigated and

monitored to ensure that any corrective action or

remediation has been undertaken.

Safecall is available to our suppliers and business partners

and is communicated through our Responsible Sourcing

Standards. These standards set out in more detail the

behaviours and conduct we expect from all suppliers.

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.

Non-financial and sustainable

informationstatement

The sustainability section of the Annual Report on pages 36

to 54, the 2023 Sustainability Addendum and the Policies

and Position Statements section of our website contain

awide range of information about the environment,

employeesand social matters. The table below sets out where

information on non-financial and sustainability matters can

be found within our Annual Report and Accounts. The due

diligence arrangements for each topic are included in the

respective policy documentation on our website.

Disclosure

Policies and standards which

govern our approach Pages

Business model 6 and 7

Environmental

matters

Section 172(1) statement

Sustainability – planet

Principal risks and

uncertainties

29 to 35

39 to 48

55 to 60

Climate-related matters TCFD reporting 41 to 48

Colleagues Section 172(1) statement

Sustainability – people

Directors’ remuneration

report

29 to 35

49 to 52

81 to 102

Social matters Section 172(1) statement

Sustainability –

communities

Principal risks and

uncertainties

29 to 35

55 to 60

Respect for

human rights

Section 172(1) statement

Sustainability – people

Principal risks and

uncertainties

29 to 35

49 to 52

55 to 60

Anti-corruption and

anti-bribery matters

Sustainability –

Responsible business

Principal risks and

uncertainties

55 to 60

Non-financial KPIs Key Performance

Indicators – Non-financial

Sustainability

36 to 54

Principal risks and

uncertainties

TCFD reporting

Principal risks and

uncertainties

41 to 48

55 to 60

Sustainability continued

Strategic report

54 WH Smith PLC Annual Report and Accounts 2023

Principal risks and uncertainties

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

ExecutiveManagement

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.

55WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Board review of principal and emerging

risks anduncertainties

The Board has undertaken a robust assessment of the

principal and emerging 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

tolastyear

The table on pages 56 to 59 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 is

increasing, decreasing or remains broadly the same.

Continuing pandemic risks

While we are well prepared for the re-introduction of any

possible trading and travel restrictions, there remains a risk

that the Group could be negatively impacted by the

emergence of new variants of Covid or of other future

pandemics. We continue to reflect this potential impact

within our various Principal Risk headings, to the extent that

these may generate further risks of business interruption,

disruption to our supply chain, or result in wider economic

and market uncertainty.

Ongoing global conflicts

WHSmith has no direct operations in countries impacted by

current ongoing global conflicts. The business could however

be significantly impacted by any further potential escalation

of these conflicts or wider geopolitical threats.

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

toidentify such potential changes in our risk landscape.

Principal risks and uncertainties continued

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 revenue, changing demographics and

customer shopping patterns, and raw material

costs could impact on profit performance.

The Group may also be impacted by

politicaldevelopments both in the UK and

Internationally, such as regulatory and tax

changes, increasing scrutiny by competition

authorities and other changes in the general

condition of retail and travel markets or

impacts from further geopolitical threats or

escalation in global conflict.

The Group’s performance is dependent upon the 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.

Uncertainties relating

to the impacts of

geopolitical threats/

any escalation of

global conflict, or from

the cost of living crisis

on consumer

spending, or a

reintroduction of

constraints due

tonew pandemic

activity.

Strategic report

56 WH Smith PLC Annual Report and Accounts 2023

Risk/description Mitigation Change in risk level

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 offer in travel locations

introducing a wider range of products,

associated risks include compliance with food

hygiene and health and safety procedures,

product and service quality, environmental or

ethical sourcing, and associated legislative

and regulatory requirements.

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 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 and procedures. Our ESG

related policies and processes encompass risk

identification and mitigation in respect of all

environmental, ethical sourcing and other

reputational risks.

Key suppliers and supply chain management

The Group has agreements with key suppliers

in the UK, Europe and the Asia 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.

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 from

anygeopolitical

threats/ escalation in

global conflict;

increasing energy

prices; or further

pandemic constraints

impacting

our Asian supply

chain.

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.

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.

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.

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.

57WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Principal risks and uncertainties continued

Risk/description Mitigation Change in risk level

Business interruption

An act of terrorism or war, or an outbreak of a

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 particularly

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 three 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.

Uncertainties relating

to the impacts of

geopolitical threats/

any escalation in

global conflict, or a

reintroduction of

constraints due to

new pandemic activity

generating further

possible business

interruption.

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.

Continued growth of

International

operations and

uncertainties relating

to the impact of

geopolitical threats /

any escalation of

global conflict.

Cyber risk, data security and GDPR compliance

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 revenue.

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 the GDPR.

Continuing increase

inno. of externally

reported cyber

threatsand

recent ransomware

attack.

Strategic report

58 WH Smith PLC Annual Report and Accounts 2023

Risk/description Mitigation Change in risk level

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 149 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’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.

In June we announced completion of our refinancing,

with a new £400m revolving credit facility. The new

facility is provided by a syndicate of banks and is

sustainability linked. It consists of a five year term with

two uncommitted extension options of one year each,

which would, subject to lender approval, extend the

tenor of the new revolving credit facility to six or seven

years if exercised.

Environment and Social 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 effectively respond

andinfluence our value chain and wider

stakeholders to decarbonise could damage

our reputation and introduce higher costs.

Delivery against our sustainability targets and

meeting regulatory obligations is vital.

We have identified several climate related

risks, including:

• increases in the cost of energy and fuel

from carbon pricing and changing market

dynamics; and

• disruption to supply of goods and

increases in supply chain costs caused by

acute and chronic changes in

weather patterns.

Although the impact is limited over our

outlook period, these risks are potentially

significant over the longer term.

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 for forestry products. We also have business

continuity plans in place for our most significant

product lines to protect supply chain disruption.

59WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Principal risks and uncertainties continued

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 will be

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 55 to 60).

The Group’s business model and strategy is presented on

pages 2 to 28. 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 £400m

multi-currency revolving credit facility (‘RCF’) maturing in

June 2028. As at 31 August 2023 the Group had drawn down

£84m on the RCF, and had £34m cash on deposit. The Group

also has £327m convertible bonds in issue with a maturity of

May 2026.

The covenants on the above facilities are tested half-yearly

and are based on fixed charges cover and net borrowings.

Assessment period

In determining the appropriate timeframe for assessing

theGroup’s viability the Board has considered the ongoing

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 and 2023 Budget

was approved by the Board in September 2023.

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.

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, data

security

and GDPR

compliance

Environment

and social

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

     

Disciplined capital

allocation

       

Strategic report

60 WH Smith PLC Annual Report and Accounts 2023

Assessment of viability

In making the viability assessment, the directors have

modelled a number of scenarios for the three year period

31 August 2026. As disclosed in the Strategic report on

pages 55 to 60, 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 55 to 60 of the Strategic report.

Within the viability scenario modelling we have applied an

assumption that we will be able to refinance existing lending

facilities as they become due.

The base case scenario is consistent with the Board

approved 2024 Budget and the three year plan, which takes

into consideration uncertainties regarding the ongoing

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 substantial cost inflation,

in the context of ongoing challenges in the macro-

economic environment.

We have applied the same assumptions modelled as part

of the going concern assessment (refer to page 119)

extrapolated across the remainder of the three year viability

assessment period. This scenario assumes reductions to

revenue assumptions of between five and ten per cent versus

base case as appropriate by division; additional inflation in

labour costs beyond that included in the base case; and

margin pressures. 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:

• 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 scenarios 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 41 to 48, 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 of all 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

9 November 2023.

On behalf of the Board

Carl Cowling

Group Chief Executive

9 November 2023

61WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Directors’ biographies

1. Annette Court

Chair

Date of appointment: 1 September 2022. Annette was

appointed as Chair on 1 December 2022.

Committee membership: Chair of the

Nominations Committee.

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 a non-executive director of Sage

Group plc. She was previously the chair of Admiral Group

plc, 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).

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: Member of the

ESG 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.

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.

3. Robert Moorhead

Chief Financial Officer and Chief Operating Officer

Date of appointment: 1 July 2023.

Committee membership: Member of the Audit

Committee, ESG Committee, Nominations Committee

and Remuneration Committee.

Skills and experience: Colette has significant US and retail

experience. She is the Executive Vice President and Chief

Commercial Officer of the LEGO Group, responsible for

the Group’s global commercial strategy. Prior to joining

the LEGO Group, she had a 25-year career at consumer

electronics company, Bose Corporation as Global Head

ofSales and Marketing and across a wide range of

commercial, general management and marketing

leadership roles at a global, regional and national

level,including 19 years working in the United States.

4. Colette Burke

Non-executive director

Corporate governance

62 WH Smith PLC Annual Report and Accounts 2023WH Smith PLC Annual Report and Accounts 2023

Previous directors who served during the financial year

ended 31 August 2023:

Henry Staunton stepped down as Chairman of the

Company on 30 November 2022.

Maurice Thompson stepped down as a director of the

Company on 18 January 2023.

Kal Atwal stepped down as a director of the Company

on 12 September 2023.

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 the Senior

Independent Director at Redrow Plc and The Unite

Group PLC and a non-executive director of the John

Lewis Partnership plc.

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 is also a non-executive

director of National Gallery Global Limited. He was

previously the Senior Independent Director of Dunelm

Group PLC.

5. Nicky Dulieu

Non-executive director

6. Simon Emeny

Non-executive director

Date of appointment: 1 February 2022.

Committee membership: Chair of the ESG Committee

and Remuneration Committee and a member of the

Audit Committee and Nominations Committee.

Skills and experience: Marion has considerable 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 a non-executive director

at Dunelm Group PLC and Keywords Studios PLC.

Marion is also a Member of Chapter Zero, the Directors’

Climate Forum, and a regular attendee of its events.

7. Marion Sears

Non-executive director

Ian Houghton

is Company Secretary and Legal Director and was

appointed in September 1998.

6 75

63WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Corporate governance report

Board role and effectiveness

The Board of the Company is committed to achieving

thehighest standards of corporate governance.

As Chair, 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,

manageand 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 of

the 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 over 230 years,

providing a retail destination of choice and a sense of

community for thousands of customers every day. We have

a presence in 32 countries, employ over 14,000 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 colleagues, 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 pages

29 to 54.

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 colleagues, customers,

shareholders and the communities we are part of. You can

read about our engagement with investors on page 32,

withour customers on page 31, with our employees on

page30 and community involvement on page 34 and

ourapproach to rewarding our workforce in the

Remuneration report on pages 86 and 87.

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. Board members attended employee

forums and engaged with employees throughout the year on

a wide range of subjects, including the Company’s approach

to executive pay.

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 29 to 35.

Board changes

The Board has continued to give thought to ensuring that

ithas the right skills to lead the Company, particularly given

its continued expansion in North America. Accordingly,

theBoard appointed Colette Burke as a non-executive

director on 1 July 2023 given that she has significant US and

retail experience. Maurice Thompson stepped down from the

Board at the Company’s AGM in January 2023 and Kal Atwal

stepped down from the Board in September 2023 to take up

the role of Chair of Funky Pigeon. As previously announced,

Isucceeded Henry Staunton asChair on 1 December 2022.

The Board of the Company

iscommitted to achieving

thehighest standards of

corporate governance.”

Annette Court

Chair

Corporate governance

64 WH Smith PLC Annual Report and Accounts 2023

Thanks

I would like to thank our shareholders and stakeholders for

their support in my appointment as Chair of the Company.

I would also like to thank the Board and my colleagues

across the Group for their tremendous efforts and ongoing

commitment to its continued success.

Annette Court

Chair

9 November 2023

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 2023 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. Chair’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. Henry Staunton retired

from the Board on 30 November 2022 and was replaced

by Annette Court on 1 December 2022. As previously

explained, the Board believed that it was important to

the ongoing success of the Company that Henry

Staunton remained as Chairman as the Company

recovered from the impact of the Covid-19 pandemic.

2. Pension Alignment (Provision 38): The pension

contribution rates for executive directors. Carl Cowling

and Robert Moorhead’s pension contribution rates

previously reflected the historical retirement benefits

available to employees that joined the Company at

similar times. The pension contributions for Carl Cowling

and Robert Moorhead were aligned with the wider

workforce rate from 1 January 2023.

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

Chair’s letter See pages 64 and 65

ESG Committee report See pages 79 and 80

Purpose, values and culture See page 64

Strategy See pages 1 to 61

Shareholder and stakeholder

engagement

See pages 29 to 35

Division of responsibilities

Leadership, commitment

and Board support

See pages 65 and 66

Composition, succession

and evaluation

Board evaluation See pages 68 and 69

Nominations Committee report See pages 77 and 78

Audit, risk and internal control

Risks, viability and going concern See pages 73 to 76

Audit Committee report See pages 72 to 76

Remuneration

Directors’ remuneration report See pages 81 to 102

The information that is required by Disclosure Guidance

andTransparency 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 81 to 102 and in the Directors’ report on

pages 103 to 105.

Composition and operation of the Board

As at the date of this report, the Board comprised the Chair,

two executive directors and four independent non-executive

directors. Short biographies of each of these directors, which

illustrate their range of experience, are set out on pages 62

and 63. There is a clear division of responsibility at the head

of the Company: Annette Court (Chair) 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.

65WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Corporate governance report continued

All the directors, whose biographies are on pages 62 and 63,

served throughout the financial year ended 31 August 2023

and up to the date of this report with the exception ofColette

Burke who was appointed as a non-executive director on

1 July 2023.

All of the non-executive directors who served during the

year and up to the date of this report are considered by

theBoard 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 91 to 102.

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 13 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 Chair in advance of the meeting.

Following the meeting, the Chair briefs any director not

present on the discussions and any decisions taken at

the meeting.

The following table shows the number of Board and

Committee meetings held during the financial year

ended31 August 2023 and the attendance record of

individual directors:

Number of meetings attended

Directors and role Board skills and competencies

Board

Tenure –

Years

Board

Audit

ESG

Nominations

Remuneration

Annette Court

(a)

Chair

Finance and retail expertise; strong

boardleadership and considerable

governanceexperience.

1 12 of 13

(b)

– – 3 of 3 2 of 2

Kal Atwal

(c)

Non-executive director

Marketing and digital expertise;

entrepreneurial approach to business.

3 13 of 13 5 of 5 3 of 3 3 of 3 5 of 5

Colette Burke

(d)

Non-executive director

US and retail expertise; strong commercial

and marketing experience on a global level.

1 2 of 2 2 of 2 1 of 1 – –

Carl Cowling

(e)

Group Chief Executive

Strategic and retail expertise; strong

leadership of the Group and creation of

shareholder value.

4 12 of 13

(f)

– 3 of 3 3 of 3 –

Nicky Dulieu

Non-executive director

Finance and retail expertise; extensive

knowledge of retail and customer service.

3 13 of 13 5 of 5 3 of 3 3 of 3 5 of 5

Simon Emeny

Non-executive director

Commercial expertise and a wealth of

consumer facing experience.

4 13 of 13 5 of 5 3 of 3 3 of 3 5 of 5

Robert Moorhead

(g)

Chief Financial Officer/

Chief Operating Officer

(“CFO/COO”)

Retail and financial expertise; deep

understanding of the Group and strategy,

and creation of shareholder value.

15 13 of 13 – – – –

Marion Sears

Non-executive director

Financial and retail expertise with

extensive board and remuneration

committee experience.

2 13 of 13 5 of 5 3 of 3 3 of 3 5 of 5

a) Annette Court attended the Remuneration Committee meetings following her appointment as a non-executive director of the Company on 1 September 2022 but ceased

tobe a member of this committee following her appointment as Chair on 1 December 2022. Annette Court was invited to and attended 4 meetings of the Audit Committee,

2 meetings of the ESG Committee and 3 meetings of the Remuneration Committee.

b) Annette Court was unable to attend the November 2022 Audit, ESG and Board meetings due to a prior commitment which had been arranged before the meetings were

convened. She received the papers in advance of the meetings and gave her comments to the Chairman.

c) Kal Atwal stepped down from the Board on 12 September 2023.

d) Colette Burke was appointed as a director of the Company on 1 July 2023.

e) Carl Cowling ceased to be a member of the Nominations Committee on 31 August 2023. Carl Cowling was invited to and attended 5 meetings of the Audit Committee and

5meetings of the Remuneration Committee.

f) Carl Cowling was unable to attend the July 2023 Board 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.

g) Robert Moorhead was invited to and attended 5 meetings of the Audit Committee, 3 meetings of the ESG Committee and 2 meetings of the Nominations Committee.

h) Henry Staunton stepped down from the Board on 30 November 2022. Prior to leaving the Company he attended one meeting of the Board.

i) Maurice Thompson stepped down from the Board on 18 January 2023. Prior to leaving the Company he attended 3 meetings of the Board.

j) The Board and the Remuneration Committee have met twice since 31 August 2023. The Audit Committee and the ESG Committee have met once since 31 August 2023.

Corporate governance

66 WH Smith PLC Annual Report and Accounts 2023

Board and executive management diversity

The table below shows a breakdown of the composition of the Board and executive management as at 31 August 2023 in

accordance with the new Listing Rules disclosure requirements. As at 31 August 2023, one of the four senior positions on the

Board was held by a woman and the representation of women on the Board was 63 per cent, and the Board composition

included one director from an ethnic minority background. As at the date of this report, the representation of women on the

Board was 57 per cent following Kal Atwal’s departure from the Board on 12 September 2023. The Board recognises that it

does not currently meet the Listing Rules ethnic diversity target of at least one director from an ethnic minority background,

however the Board is committed to continued enhancement of its diversity, as set out further in the Nominations Committee

report on pages 77 and 78. At the year end, the Board and members of executive management were asked to complete a

diversity disclosure questionnaire to confirm which of the categories set out in the table below they identify with:

Gender identity

Number of Board

members % of the Board

Number of senior positions

on the Board (CEO, CFO,

Chair and SID)

Number in executive

management

% of executive

management

Women 5 63 1 2 18

Men 3 37 3 9 82

Non-binary – – – – –

Not specified/prefer not to say – – – – –

Ethnic background

Number of Board

members % of the Board

Number of senior positions

on the Board (CEO, CFO,

Chair and SID)

Number in executive

management

% of executive

management

White British or other White

(including minority-White Groups)

7 88 4 11 100

Mixed/Multiple Ethnic Groups – – – – –

Asian/Asian British 1 12 – – –

Black/African/Caribbean/

BlackBritish

– – – – –

Other ethnic group, including Arab – – – – –

Not specified/prefer not to say – – – – –

1 Executive management includes the Group Executive Committee (most senior executive body below the Board) and the Company Secretary, excluding administrative and

support staff, as defined by the Listing Rules.

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; approval

of 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; risk

management; dividend policy; investor relations; health and

safety; whistleblowing; sustainability strategy; Board

evaluation; governance and compliance; communications

and the Annual report.

The Board set itself a number of objectives, including People

and future talent planning, Culture, Group operations,

growing the Company’s North American businesses and

sustainability at the beginning of the year to help it manage

the Company and support its strategy. The Board reviewed

how it had met its objectives at each meeting during the

year and as part of the Board evaluation. The Board has set

new objectives for the financial year ending 31 August 2024.

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

1to 61.

67WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Corporate governance report continued

Climate-related financial disclosures

The Board received presentations and updates on the

progress of the Company to comply with the Listing Rules

requirement to make disclosures which are consistent with

the Task Force on Climate-related Financial Disclosures

(“TCFD”) recommendations and recommended disclosures,

and the new Companies Act 2006 requirements in relation

to climate-related financial disclosures. You can read more

on our climate-related financial disclosures on pages 39 to 48.

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. An internally facilitated evaluation was carried

out in October 2023. The evaluation was co-ordinated and

directed by the Chair with the support of the Company

Secretary. A questionnaire was prepared by the Chair and

the Company Secretary.

Board activities in the financial year ended 31 August 2023

Strategy

• Approval of Company purpose and values

• Approval of the Group’s long term objectives and

commercial strategy of the Group

• Oversight of Group performance against strategy

and budget

• Approval of the sustainability strategy and report

• 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

• Climate related disclosures

• Approval of new Bank facility

• Dividend, treasury and tax strategies

• Approval of the budget

• Approval of capital expenditure

• Audit tender – approval of re-appointment

of PwC

Other stakeholder engagement

Customers • Customer initiatives and experience updates

• Extending our categories and ranges, including a

greater focus on food, health and beauty and

technology products

• Global sourcing strategy

• 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

Shareholders • Annual General Meeting

• Investor relations updates

• Consultation on Board composition and

executive remuneration

• Chair met significant shareholders

Employees • Annual health, safety and wellbeing reviews to

ensure employee safety

• Company culture

• Focus on Diversity, Equity and Inclusion

• People strategy

• Consideration of workforce pay including the

annual pay review

• Modern slavery update and statement

• Talent, succession planning and leadership

• Employee engagement insights

• Gender pay gap reporting

• Colleague leadership and development

Governance and risk

• Risk framework and internal control review

• Regulatory compliance updates

• Group delegation of authority review

• Succession planning

• Principal risks and uncertainties review

• Cyber security

• Conflicts of Interest and new appointments

• Committee Terms of Reference review

• Board evaluation process

Corporate governance

68 WH Smith PLC Annual Report and Accounts 2023

The main areas considered during the evaluation were

strategy, operations and risk; succession planning; Board

composition; Company purpose, values and culture;

ESGandsustainability; 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, with the appropriate level of challenge,

discussion and debate. As a result of the review, the Board

agreed an action plan that will be implemented in the

financial year ending 31 August 2024 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 effectiveness,

including more time with members of the senior leadership

team and continual improvement of the strategy process.

The results of the review were also fed into the Board’s

agreed objectives for 2024. The Board reviewed the actions

agreed following the internally facilitated evaluation carried

out in 2022 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 a new non-executive director with

considerable US experience) and a greater focus on talent

management and succession plans at Senior Leadership

level to strengthen the diversity of the senior management

pipeline. In addition to the Board and Committee evaluation

process, the Group Chief Executive reviews the performance

of the CFO/COO and other senior executives.

The Chair reviews the performance of the Group

Chief Executive.

The Chair also undertook a review with each of the non-

executive directors to assess their effectiveness and

commitment to the role. During the year, the Chair 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 an assessment of Annette Court’s performance.

The non-executive directors confirmed that there are no

relationships or circumstances which are likely to affect,

orcould appear to affect, her judgement or independence.

The non-executive directors, taking into account the views of

the executive directors, concluded that Annette Court is an

effective Chair and clearly demonstrates her 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 18 January 2023, all the directors at that

time (aside from Maurice Thompson) stood for election or

re-election and were duly elected by shareholders.

The Board is proposing to update the Company’s Articles of

Association at the AGM on 26 January 2024 to include a

provision that all directors will retire and offer themselves for

reappointment at each AGM. Carl Cowling’s service contract

provides for notice of 12 months from either party and

Robert Moorhead’s service contract provides for notice

of12 months from the Company and nine months from

RobertMoorhead. The Chair, who has a letter of appointment,

isappointed for an initial term of three years. Her appointment

may be terminated at any time by either the Company or the

Chair on three months notice. The non-executive directors,

who have letters of appointment, are appointed for an initial

term of three years. These appointments can be terminated at

any time by either the Company or the non-executive director

without notice.

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,

DE&I, workforce composition and demographics; and

69WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Corporate governance report continued

engaging with other stakeholders, as described in the

Section 172 Statement on pages 29 to 35 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 Brussels Airport and Gatwick Airport to gain a

better understanding of the operation and culture of the

International and UK Travel 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, Annette Court 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, Chief

People Officer, Group Risk Director, Investor Relations

Director and Legal Director/Company Secretary;

• meetings with key shareholders;

• attended trading and risk committees;

• meetings with advisers; and

• store visits.

A similar induction programme has been designed for

Colette Burke who joined the Board as a non-executive

director on 1 July 2023.

The Board considered and approved that Nicky Dulieu could

be appointed as a non-executive director of The John Lewis

Partnership plc, with effect from 27 April 2023. The Board

concluded that there was no conflict in Nicky Dulieu being

appointed to the board of The John Lewis Partnership plc

and that the demands associated with a non-executive

director role would not affect her commitment to

the Company.

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 sets out the Company’s approach to diversity

applicable to the Board, its Committees and senior

management and aims to ensure that the Board nominations

and appointments process and the hiring and promotions

process for senior management is based on fairness, respect

and inclusion, and that the search for candidates will be

conducted with due regard to the benefits of diversity.

Further information on the Company’s commitment to

diversity can be found in the Nominations Committee report

on pages 77 and 78 and in the Employees section of the

Strategic report on pages 49 to 51.

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. During the year, the Company was the

target of a cyber security incident in the UK which resulted

in illegal access to some company data. Upon becoming

aware of the incident, the Company immediately launched

an investigation, engaged specialist support services and

implemented its incident response plans, which included

notifying the relevant authorities. There was no impact on

Corporate governance

70 WH Smith PLC Annual Report and Accounts 2023

the trading activities of the Group. The Board takes the issue

of cyber security extremely seriously and has implemented

the recommendations that were made following the

investigation into the causes of the incident.

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. 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

pages55 to 61.

Further information on internal controls and risk

management can be found in the Audit Committee report

on pages 75 and 76.

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 32.

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.

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 Chair and non-executive directors attend

meetings with major shareholders.

The Chair, following her appointment, met and spoke to

some of the Company’s largest shareholders to gain their

views on the Company and the composition of the Board.

The Chair and Chair of the Remuneration Committee also

engaged with the Company’s largest shareholders and

representatives prior to the Company’s AGM in

January 2023.

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 2023 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 on

page 75.

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 72 to 76, the ESG Committee on pages 79

and 80, the Nominations Committee on pages 77 and 78

and the Remuneration Committee in the Directors’

remuneration report on pages 81 to 102. 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.

71WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Corporate governance report continued

Audit Committee report

During the financial year ended 31 August 2023, the

Committee held a competitive tender for external audit

services and recommended to the Board that

PricewaterhouseCoopers LLP (“PwC”) be re-appointed as

the Company’s external auditor. You can read more about

this process on page 76.

A summary of other activities undertaken by the Committee

during the year is as follows:

• reviewing the Company’s approach to cyber security

including the actions taken following the cyber-incident;

• considering the Company’s re-financing arrangements

including a new long term sustainability linked facility;

• 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 Company’s

climate-related financial 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;

• monitoring the integrity of the Group’s financial

statements and trading statements;

• assessing and recommending to the Board that the Annual

report 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,

Corporate Governance Code and statutory reporting

requirements and recommending those documents for

Board approval;

• receiving updates and recommendations on the reforms to

Corporate Governance Code and internal controls

proposed by the UK Government;

• considering the Company’s emerging and principal risks

and uncertainties and reviewing the mitigating actions that

management has taken to ensure that these risks are

appropriately monitored and controlled;

• considering the Company’s systems and framework

ofcontrols designed to detect and report fraud and

money laundering;

• receiving reports from Internal Audit in respect of calls to

the Company’s confidential Speak Up helpline (which is

operated by an external company, Safecall, who were

appointed in 2022);

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 2023. 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 auditor, and the management of the Group’s

systems of internal control, business risks and related

compliance activities.

The other members of the Committee are Colette Burke,

Simon Emeny and Marion Sears, 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.

The Committee met five times during the year. 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 auditor attend meetings.

The Committee has regular private meetings with the

external and internal auditors during the year.

I am pleased to present

myreport on the activities

oftheAudit Committee for

thefinancial year ended

31 August 2023.”

Nicky Dulieu

Chair of the Audit Committee

Corporate governance

72 WH Smith PLC Annual Report and Accounts 2023

• 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’s 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 auditor;

• reviewing the Company’s treasury policy;

• approval of the Group Tax Strategy;

• receiving updates on the policies and procedures for the

UK General Data Protection Regulation (“GDPR”);

• considering and approving the report on the Company’s

payment practices;

• assessing the impact of new accounting standards and

guidance; and

• reviewing the Committee’s Terms of Reference.

Audit Committees and the External Audit:

Minimum Standard

In May 2023, the Financial Reporting Council published the

Audit Committees and the External Audit: Minimum

Standard (the “Standard”). The Standard took effect

immediately for FTSE 350 companies on a comply or explain

basis. Given that the Standard was published in the latter half

of the Company’s financial year and both the tender process

and the evaluation of the effectiveness of PwC’s 2022

financial year audit had been largely completed by the time

the Standard was published, those processes did not comply,

or comply in full, with the provisions of the Standard.

This Audit Committee report describes how and the extent

to which the Company has complied with the provisions of

the Standard (in particular the External Auditor section of

this report). The Committee is working to embed the

requirements of the Standard into its policies, practices and

procedures and this will be a focus for the Committee in the

coming year.

There were no shareholder requests for certain matters to be

covered in the audit during the year and there were no

regulatory inspections of the quality of the Company’s audit.

An explanation of the application of the Group’s accounting

policies is provided on pages 119 to 130.

FRC Corporate Reporting Review

The Company received a letter on 22 February 2023 from

the Financial Reporting Council (FRC) noting that it had

carried out a limited review of the Annual report and

accounts for the year ended 31 August 2022. The letter

indicated that the FRC had not identified any matters on

which it wished to raise specific questions but made some

observations relating to certain disclosures included in the

Annual report. As a result, the Company has sought to

improve its disclosures in the Annual report this year.

The FRC’s letter points out that its review was solely based

on a review of the Company’s Annual report and accounts

for the year ended 31 August 2022. It states that the review

did not benefit from a detailed knowledge of the Company’s

business or an understanding of the underlying transactions

entered into and that the FRC’s role is not to verify the

information provided but to consider compliance with

reporting requirements and, as a result, the review provides

no assurance that the Company’s 2022 Annual report and

accounts are correct in all material respects.

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 statement

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.

73WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Corporate governance report continued

The Committee reviewed the process and assessment of the

Company’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

• 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 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 pages 60 and 61 and the basis of

preparation within Note 1 of the financial statements on

page 119.

The viability statement is set out in the Strategic report on

page 60.

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, the rationale for the

impairment charge, and its disclosure as a non-underlying

item. The Committee also 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 the disclosures made.

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, 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. 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.

Non-underlying items

The Committee considered the presentation of the financial

statements 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 and

provisions for onerous contracts recognised in relation to

stores where carrying value of assets is not expected to be

recovered by the store’s value-in-use; costs associated with

pensions; costs associated with refinancing; 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ofcosts classified as non-underlying.

Corporate governance

74 WH Smith PLC Annual Report and Accounts 2023

Fair, balanced and

understandableassessment

At the request of the Board, the Committee has considered

whether, in its opinion, the 2023 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 and

accounts 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, was considered

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.

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 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;

• 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

75WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Corporate governance report continued

• 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.

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. PwC were first appointed as

external auditor 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.

External Audit tender

In accordance with the Competition and Markets Authority

(“CMA”) Statutory Audit Services Order 2014, the Company

undertook a competitive audit tender during the financial year

ended 31 August 2023. The tender was led by me as Chair of

the Committee supported by the CFO/COO and the Group

Finance Team (the “Selection Panel”) and overseen by the

Committee. The Selection Panel invited a number of firms,

including PwC the incumbent auditor, to participate in the

audit tender. The Company ensured that all tendering firms

had the necessary access to information and individuals

during the tendering process. The Company received formal

tenders from those firms who were in a position to tender.

The Selection Panel developed a scoring matrix for the tender

to assess the quality of each candidate firm and the

deliverability of its proposals, with a clear emphasis placed on

the quality, independence, experience and capacity of the

audit team and partner; global geographic presence and

experience of overseas audits; the use of data analytics and

digital techniques to improve audit quality and efficiency;

experience and understanding of the challenges, risks and

constraints within the Retail sector and how this will translate

into value added insight and advice; and the ability to provide

the full range of services required, including financial audit,

specialist technical support and audit of tax.

The Selection Panel received formal presentations and held a

number of meetings with each candidate firm to ensure that

every candidate firm received sufficient information about

the Group. The Committee after deliberation, agreed to

recommend two candidate firms to the Board for

consideration and, after discussion, the Board agreed that

PwC should be re-appointed as the Company’s Statutory

Auditor for the 2025 financial year. The directors will be

proposing the re-appointment of PwC at the forthcoming

AGM. The Committee will continue to monitor the objectivity,

effectiveness and independence of PwC as external auditor.

External Auditor effectiveness

In line with the Committee’s Terms of Reference, the

Committee undertook a thorough assessment of the quality,

effectiveness, value and independence of the 2022 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 and whether the agreed audit plan had been met;

the quality and content of reporting and the 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 and that the audit was of a sufficiently

high standard. As a result, PwC’s re-appointment as external

auditor at the forthcoming AGM is recommended

to shareholders.

External Auditor independence

The Committee has a formal policy on the Company’s

relationship with its external auditor 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 significant non-audit work undertaken by PwC in the

financial year ended 31 August 2023 related to the interim

review. The auditor 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 it was compliant

during the year with its policy 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 2023 the non-audit fees paid to PwC were

£123,000, of which £122,000 related to the interim review,

and the audit fees payable to PwC were £1,398,000.

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

9 November 2023

Corporate governance

76 WH Smith PLC Annual Report and Accounts 2023

Nominations Committee report

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 2023.

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 Colette Burke, Nicky Dulieu, Simon Emeny

and Marion Sears. 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 three times during the year.

The principal matters discussed at the meetings were

succession planning for Board and senior executives, career

planning, identifying talent across the businesses and

reviewing the work that has been undertaken in respect of

improving diversity in the Company’s senior leadership

group and the appointment of Colette Burke as a non-

executive director. The Committee appointed an external

recruitment consultant, Lygon Group, to assist in the

appointment of Colette Burke. Lygon Group have signed up

to the voluntary code of conduct for executive search firms

and had no other connection to theCompany or

its Directors.

As part of the Board’s succession plan, the Committee has

appointed an external recruitment consultant, Russell Reynolds

Associates, to assist in the identification of potential candidates

to join the Board following the departure of Maurice Thompson

and Kal Atwal from the Board. Russell Reynolds Associates

have signed up to the voluntary code of conduct for executive

search firms and have no other connection to the Company or

its Directors. Following Kal Atwal’s departure from the Board,

the Committee recognises that the Board does not currently

meet the Listing Rules ethnic diversity target of at least one

director from an ethnic minority background, however the

Board is committed to continued enhancement of its diversity.

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. 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 the new Listing

Rules targets for gender and ethnic diversity.

The Committee will continue to

focus on succession planning

and talent management for key

roles in the business.”

Annette Court

Chair of the Nominations Committee

77WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Corporate governance report continued

During the year under review, the Company had 63 per cent

women on the Board and 40 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 the

Strategic report on page 51. 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. During the year, the Company complied

with the recommendations of the Parker Review.

Actions include the provision of mentoring, as well as

focused initiatives to better 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 an ethnic minority 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 Chief People Officer.

The committee met three times during the financial year

ended 31 August 2023 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 49 to 51.

The Committee will continue to focus on succession planning

and talent management for key roles across the Group, 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

with the appropriate level of challenge, discussion and

debate. 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 October 2023 are set out on

pages 68 and 69.

Annette Court

Chair of the Nominations Committee

9 November 2023

Corporate governance

78 WH Smith PLC Annual Report and Accounts 2023

ESG Committee report

Dear Shareholder

As previously announced, I was appointed as Chair of the ESG

Committee on 12 September 2023 as a result of Kal Atwal

stepping down from the Board to take up an executive role

within the Group. I would like to thank Kal for her contribution

to the Committee and wish her every success in her new role.

As Chair, I am pleased to present my report on the activities

of the ESG Committee for the financial year ended 31 August

2023. 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

Colette Burke, Carl Cowling, Nicky Dulieu and Simon Emeny.

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.

These include:

• 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.

• 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 receives an annual update from

the Group Sustainability Director on emerging developments

for key external drivers and the views of different stakeholder

groups. This year, this included consideration of the work of

the Taskforce on Nature-Related Financial Disclosures

(TNFD), developments in standards for carbon transition

plans, policy making in relation to human rights due diligence

and emerging standards and legislation for sustainability

reporting. The Committee discussed how these

developments should be incorporated into the Company’s

sustainability strategy.

The Committee assessed the material ESG risks and the

mitigation measures in place to ensure they are being

appropriately managed and reported. This work then

informed the Committee’s review of the Company’s

sustainability strategy, assessing recent progress under the

three strategic pillars of Planet, People and Communities.

The Committee approved objectives, targets and action

plans for the financial year and beyond.

Under the Planet pillar of the strategy, the Committee

considered the impact of the Company’s activities on climate

change. The Company has a target to be net zero across its

value chain by 2050.

The Group Sustainability Director provided an update on

climate change and the Committee reviewed and approved

the Company’s action plans to become a net zero emissions

business by 2050. A series of short to medium-term targets

to reduce Scope 1, 2 and 3 emissions have been approved

bythe Committee and were validated during the year

bythe SBTi.

Sustainability is key to the long-

term success of our business and

maintaining trust in our brand.”

Marion Sears

Chair of the ESG Committee

79WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Corporate governance report continued

The Committee received a presentation and provided

feedback on the work the Company is undertaking to

engage its suppliers and encourage them to adopt their

ownscience-based targets and develop carbon

reduction plans.

In respect of waste reduction and minimisation, the

Committee reviewed the plans to reduce the amount of

waste material that is sent to landfill, to minimise plastic

packaging and to remove loose plastic glitter from the

Company’s own brand products.

The Committee continued to monitor the Company’s

progress on complying with the Listing Rules requirement to

make disclosures consistent with the Task Force on Climate-

related Financial Disclosures (TCFD) recommendations and

recommended disclosures, and the Companies Act 2006

requirements in relation to climate-related

financial disclosures.

In relation to the People pillar of the strategy, the Committee

reviewed the results of the Employee Engagement survey

and approved the action plan to increase engagement

across the Company. Following the appointment of a new

Head of Wellbeing, the Committee received an update on

the Company’s evolving work on colleague wellbeing, mental

health first aid and financial support.

The Committee received updates on the Company’s

Diversity, Equity and Inclusion programme, including the

work of the DEI networks, executive sponsorship and work

with external organisations such as Diversity in Retail,

Stonewall and Everywoman.

The Committee received an update on the Company’s work

on responsible sourcing practices and the work that is being

undertaken in respect of improving the human rights of

workers in its supply chain. The update included audit and

engagement activity with both tier 1 and tier 2 suppliers, a

review of the typical issues that were encountered and how

the Company’s engagement activities are designed to build

capacity with its supply chain to identify and remedy

common challenges.

The Committee also reviewed proposals for the Company to

extend its due diligence activity beyond own-brand products

to consider policies, processes and engagement with

suppliers for third party branded goods.

The Committee reviewed the Company’s approach to

Modern Slavery due diligence and recommended to the

Board approval of the Group Modern Slavery statement.

During the year, the Committee also discussed the

Company’s approach to community engagement in the

UKand the work that is being undertaken with the National

Literacy Trust in respect of the Young Readers Programme.

Committee members heard of the work of the Trust to

empower children and young people to develop the literacy

skills they need to succeed in life, and how WHSmith is

supporting the work of the Trust with early years and

primary school children.

As in 2022, ESG performance metrics will form part of the

Long Term Incentive Plan for awards in 2023. 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 which are set

out on page 96. The ESG Committee also approved the

targets included in the Company’s new sustainability linked

loan finance facility.

All ESG-related policies, covering Company activity in

relation to issues such as the environment, health and safety,

human rights, anti bribery and corruption and employee and

supplier codes of conduct are reviewed and updated

annually. The ESG Committee reviewed and approved

finalised policies for publication.

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 2024, in addition

to regular reviews covering emerging issues and materiality,

and sustainability strategy, action plans and targets, the

Committee will receive updates and review the following:

• Progress on net zero, carbon transition plans and targets

for Scope 1 and 2 emission reductions and supplier targets

for Scope 3 emissions;

• Further evolution of due diligence for worker rights in

WHSmith’s supply chain;

• Any potential implications of the recommendations for

nature-related risk management and disclosure from

the TNFD;

• Progress against employee engagement and DEI targets

and the Company’s work to continue to evolve its offering,

including consideration of the recommendation from the

latest Parker Review report to set a target for the

percentage of senior management who identify as

beingin an ethnic minority; and

• Sustainability strategy and action plans for WHSmith

North America.

Marion Sears

Chair of the ESG Committee

9 November 2023

Corporate governance

80 WH Smith PLC Annual Report and Accounts 2023

Directors’ remuneration report

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

2023 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 and the Directors’ remuneration report was supported

by 99 per cent of our shareholders at our AGM in 2023.

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 performance.

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

• take into account Company-wide pay and

employment conditions.

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 91.

Executive pay outcome for the financial

year ended 31 August 2023

The Group performed strongly during the year with Headline

profit before tax and non-underlying items almost doubling

to £143m (2022: £73m). This strong performance was

achieved by management continuing to capitalise on

multiple growth opportunities including the significant

recovery in passenger numbers, growing average transaction

values, expanding ranges and categories and winning new

stores across the globe utilising the Group’s broad suite of

brands. We have achieved a significant comeback from the

issues caused by the pandemic and have a clear vision to

move from convenience stores to one-stop shops for travel

essentials around the world. As a result, the Group is in its

strongest ever position as a global travel retailer.

Further information regarding the Company’s performance

during the year can be found in the Strategic report on

pages 1 to 61.

We believe that this strong performance is fairly reflected in

a full bonus pay-out for the executive directors. The 2020

LTIP vesting percentage is determined by the growth in the

Company’s relative TSR over the three-year performance

period which ended on 31 August 2023. The Company

substantially met the performance targets for the 2020 LTIP

as the Company’s TSR ranked between 6 and 7 out of 17

companies in the comparator group and this delivered 65

per cent LTIP vesting. Accordingly, the total remuneration

earned by Carl Cowling was £2,914,000 and the total

remuneration earned by Robert Moorhead was £2,204,000.

Salary

Following the annual salary review in March 2023, the

majority of the Company’s employees (who are based in

stores and distribution centres) received a 6.5 per cent pay

increase, head office employees received a 6 per cent pay

increase and senior executives received a 4 per cent pay

increase with effect from 1 April 2023.

Carl Cowling and Robert Moorhead, in line with other senior

executives, received a pay increase of 4 per cent with effect

from 1 April 2023.

Annual bonus

For the financial year ended 31 August 2023, the financial

bonus target was Headline profit before tax and non-

underlying items. The Group’s Headline profit before tax and

non-underlying items for the financial year ended 31 August

2023 was £143m compared to £73m for the financial year

ended 31 August 2022. This excellent performance resulted in

approximately 2,420 employees across the Group receiving a

bonus under the annual bonus plan for the financial year ended

31 August 2023.

1 Alternative performance measure defined and explained in the Glossary onpage168

The Directors’ Remuneration

Policy has worked well,

delivering pay for performance.”

Marion Sears

Chair of the Remuneration Committee

81WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Directors’ remuneration report continued

The Company’s long-standing approach to determining

bonus out-turns is to consider the Headline profit before

taxagainst a pre-set range. No adjustments were made to

the target originally set with the maximum of that range

exceeded. Once the financial element has been assessed,

thisessentially becomes the maximum bonus which may

beawarded in normal circumstances with each executive’s

personal performance then considered using the standard

grading system applied on a company-wide basis. Each of

the two executive directors were assessed as “Role Models”

which led to the formulaic financial out-turn being applied

without any reduction on the basis of their

personal performance.

As a result of this performance, each of the executive

directors were awarded 100 per cent of their potential

resulting in Carl Cowling receiving a bonus payment of

£998,400 of which £519,168 will be deferred into shares and

Robert Moorhead receiving a bonus payment of £754,125 of

which £392,145 will be deferred into shares. The deferred

shares must be held for up to three years and then retained

if the director has not met the Company’s share ownership

guidelines. The bonus out-turn also takes account of the

executive directors’ performance against personal objectives

and this is set out on pages 94 and 95. The Committee

determined that the formulaic out-turn under the annual

bonus plan was appropriate and should be applied without

discretionary adjustment.

LTIP

The 2020 LTIP vesting percentage was determined solely by

the growth in the Company’s TSR relative to the constituents

of the FTSE All Share General Retailers sector over the

three-year performance period which ended on 31 August

2023. This was because the performance condition was set

in November 2020 when the Company was significantly

impacted by the effects of Covid-19. The Company

substantially met the performance target for the 2020 LTIP

with 65 per cent of the award vesting. The Committee

considered the formulaic outcome carefully as to whether

the award vesting should be adjusted for windfall gains and

concluded that it should not because the share price at grant

did not reflect a one-off low point. The purpose of

companies adjusting for windfall gains is to remove the

benefit of artificially low share prices at grant. The Company

out-performed the wider retail sector over the performance

period but the absolute share price has not risen above the

level at grant (although it has risen significantly from the

Covid low point) so there is not considered to be any

windfall. The effects of the Covid-19 pandemic on the

Company resulted in structural changes in share capital and

debt which remain. There has not been any significant share

price rebound to indicate a windfall gain and the sole use of

relative TSR as the performance metric means that vesting

istruly aligned to shareholder experience. Accordingly,

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

31 August 2024

The Company will continue to apply the Directors’

remuneration policy during the financial year ending

31 August 2024. 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 2024.

Stakeholder alignment

After considering the experience of each of our stakeholder

groups during the financial year ended 31 August 2023,

theCommittee believes that the remuneration of the

executive directors is proportionate and appropriate.

In making this determination, the Committee considered

thefollowing factors:

• The financial performance of the Group has been

strong.As a result of management actions undertaken

during the financial year, the Company made a Headline

profit before tax and non-underlying items

of £143m.

• We have continued to make significant progress on the

Group’s strategic objectives and are well placed to

generate growth as the global travel market continues

torecover and we deliver new stores and formats.

• We supported our workforce. The majority of the

Company’s employees (who are based in stores and

distribution centres) received a 6.5 per cent pay increase,

head office employees received a 6 per cent pay increase

and senior executives received a 4 per cent pay increase

with effect from 1 April 2023.

• 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 34.

• The directors have proposed a final dividend of 20.8 pence

per share which together with the interim dividend of 8.1

pence per share paid in August 2023 makes a total

dividend of 28.9 pence per share for the financial

yearended 31 August 2023.

Shareholder engagement

During the year, the Committee consulted with our largest

shareholders and their representative bodies on the Company’s

approach to remuneration. The feedback was supportive of the

approach adopted by the Committee and the Company

received 99 per cent support for the Remuneration Report at

the AGM in January 2023. We will begin engaging with our

largest shareholders in respect of our new Directors’

remuneration policy in early 2024. The new policy will be

submitted to shareholders for approval at our AGM in 2025.

1 Alternative performance measure defined and explained in the Glossary onpage168

Corporate governance

82 WH Smith PLC Annual Report and Accounts 2023

Conclusion

During the year the leadership team focused on the strategic

decisions needed to develop the Group’s position further as

an important global travel retailer. As a result of the improving

performance of the Global Travel business, securing new

Travel outlets, maintaining High Street performance,

introducing further pay and benefit support for workforce

colleagues and supporting local communities, management

has delivered a strong financial result for shareholders,

significantly increasing profitability and recommending the

payment of a final dividend of 20.8p per share. Accordingly,

and taking into account shareholder experience, we consider

the total remuneration earned by the CEO and CFO/COO of a

full bonus payment and 65 per cent vesting of the 2020 LTIP

award to be appropriate and well deserved.

In the current year we will continue to support workforce

colleagues with competitive pay and listen carefully to

feedback through continued engagement. We will work

hardto ensure that we deliver continued business growth

forthe benefit of all stakeholders.

I hope that shareholders will support the Directors’

remuneration report and I look forward to meeting

youatthe AGM.

Marion Sears

Chair of the Remuneration Committee

9 November 2023

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 2023;

• Section 2.11 – Summary of executive directors’

remuneration 2023;

• 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 81 to 83, 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 Colette Burke, Nicky Dulieu and Simon

Emeny. Henry Staunton stepped down as a director and

member of the Committee on 30 November 2022, Annette

Court stepped down as a member of the Committee on

30 November 2022, Maurice Thompson stepped down as a

director and member of the Committee at the AGM on

18 January 2023 and Kal Atwal stepped down as a director

and member of the Committee on 12 September 2023.

At the invitation of the Committee, the Chair, Group Chief

Executive, Chief People Officer and representatives of the

Committee’s external independent remuneration adviser

regularly attend meetings.

The Committee met five times during the year. All Committee

members are expected to attend meetings. The table on page

66 in the Corporate governance report shows the number of

meetings held during the year ended 31 August 2023 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 £51,831

(excluding VAT) and were charged on the basis of FIT’s

standard terms of business.

Helen Webb, Chief People Officer, and Ian Houghton,

Company Secretary, also materially assisted the Committee

in carrying out its duties, except in relation to their own

remuneration. The Chair and Group Chief Executive also

attend Committee meetings but exclude themselves in

relation to discussions in respect of their own remuneration.

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.

83WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Directors’ remuneration report continued

Key Committee activities during the year

Alignment to strategy

andwiderworkforce

Assessed the ongoing alignment of remuneration structures, measures and targets to

strategy. This included the introduction of ESG measures into the LTIP awards which align with

our business objectives for carbon reduction, leadership diversity and workforce engagement.

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. The Committee Chair

attended employee forums to discuss, amongst other topics, the Company’s approach

toremuneration and, more specifically, executive remuneration and how this aligns to the

wider Company pay policy. Representatives confirmed that they were reassured by the

uniform structure of remuneration throughout the Group, the governance surrounding

executive pay and the fact that high pay out-turns are only made on the basis of

strong performance.

Shareholder engagement

The Committee Chair and Company Secretary met with major shareholders and discussed

the Directors’ remuneration Policy, FY22 outcomes and FY23 implementation.

Considered investor feedback on remuneration.

Pay for performance

Assessed performance against bonus targets set for the financial year ended 31 August

2022 and LTIP awards granted in the financial year ended 31 August 2020 and considered

whether any discretion should be used to adjust formulaic outcomes.

Reviewed the performance of the executive directors and senior leadership team against

personal objectives.

Reviewed and approved targets for annual bonus and LTIP awards made in

November 2022.

Governance

Reviewed progress of the executive directors against shareholding requirements.

Approved the 2022 Directors’ remuneration report.

Reviewed proxy agent commentary.

Pay/fees

Approved pay rises for Carl Cowling, Robert Moorhead and the senior leadership team.

Agreed that the Chair would not receive an increase in her fee.

Corporate governance

84 WH Smith PLC Annual Report and Accounts 2023

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

• Policy and remuneration structure have been broadly consistent over many years and

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 outcomes

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 deliver 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

required shareholding 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 inclusion of ESG targets in the LTIP further helps to ensure incentive schemes drive

behaviours consistent with Company purpose, values and strategy.

85WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Directors’ remuneration report continued

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 and there is always

provision for questions, and to hear feedback.

The Committee receives regular reports from the Chief

People Officer 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, more specifically, executive

remuneration and how this aligns to the wider Company pay

policy. Representatives told us they were reassured by the

uniform structure of remuneration throughout the Group,

thegovernance surrounding executive pay and the fact that

high pay out-turns are only made on the basis of strong

performance. The introduction of ESG targets for our leaders

was considered to be good for the Company. The Committee

considers the feedback from these sessions when making

decisions on executive remuneration and any 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.

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. The table below shows how the

performance measures that we use in our variable pay align to our strategy.

Alignment to Strategy

Alignment to our

Stakeholders’ Interests

Annual Bonus

Headline PBT

• Headline PBT

is one of our main KPIs assessing the profitability of the

Group and provides stakeholders with information on the performance

ofthe Group before the effect of non-underlying items. The indicative

financial out-turn is subject to both potential reduction under the

assessment of personal performance which includes behaviour and

ESGbased factors and through the broad power to apply malus.

Shareholders

and Investors

LTIP

EPS • EPS indicates how we are creating long term value forour shareholders. Shareholders

and Investors

Relative TSR • Aligns management with the wider shareholder experience and reinforces

our focus on creating superior returns for shareholders.

Shareholders

and Investors

ESG • The Company has an ambitious ESG strategy.

We have set stretching targets in respect of our impact on the

environment, senior executive team diversity andsupplier engagement.

Customers and

communities, Workforce,

Suppliers, Shareholders

and Investors

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 Chief People Officer 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

Save-As-You-Earn share option scheme (“Sharesave Scheme”)

which provides employees with the opportunity to acquire

shares in the Company.

1 Alternative performance measure defined and explained in the Glossary onpage168

Corporate governance

86 WH Smith PLC Annual Report and Accounts 2023

Approximately 835 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. The Company’s senior

executives also participate in the Company’s long term

incentive plan designed to support the Company’s long-term

strategy to create shareholder value.

Participation in a pension plan is offered to all employees

ona contributory basis and we have approximately 6,730

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 50 and 51.

2.6 Senior executive remuneration

The Committee approved the remuneration of the

Company’s senior executives during the financial year ended

31 August 2023.

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 2023 should be based on Headline profit before

tax and non-underlying items. The Committee, in setting the

bonus targets for the financial year ended 31 August 2023,

was mindful of the enduring 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 2023. The Committee agreed that the

target range used to determine the level of pay-out under

the annual bonus plan should be narrower than that applied

in the financial year ended 31 August 2022.

Participants can earn a bonus based on the achievement of a

financial target, for example, Headline profit before tax and

non-underlying items 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 a maximum 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 are

released 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 measures

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 measures for awards

made under the LTIP in the financial year ended 31 August

2023 were 40 per cent growth in Headline pre-tax earnings

per share, 40 per cent based on relative TSR over three

financial years ending 31 August 2025 compared with the

FTSE All Share Retailers Index and 20 per cent based on

ESG measures.

The Committee is proposing that any awards made in the

financial year ending 31 August 2024 will have the same

structure and be based on the following targets each

measured over the three financial years ending

31 August 2026:

• 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 (in particular, including significant

non-recurring expenditure which was not included within

the Group’s plans at the time the targets were set) 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 96.

1 Alternative performance measure defined and explained in the Glossary onpage168

87WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Directors’ remuneration report continued

2.8 Implementation of Directors’ remuneration policy in the financial year ended 31 August 2023

This section sets out how the Directors’ remuneration policy has been implemented in the financial year ended

31 August 2023.

Element of pay Implementation of policy

Executive directors

Base salary Carl Cowling and Robert Moorhead, in line with other senior executives, received a pay increase

offour per cent with effect from 1 April 2023.

The current salaries are: Carl Cowling – £624,000; and Robert Moorhead – £471,328.

Benefits No changes were made to these elements of remuneration within the financial year ended

31August 2023 (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 2023.

Pension The pension contributions for Carl Cowling and Robert Moorhead were reduced to align with the

wider workforce rate of three per cent from 1 January 2023.

During the financial year ended 31 August 2023 Carl Cowling received a total benefit equivalent to

sixper cent of base salary and Robert Moorhead received a total benefit equivalent to ten per cent

of base salary. 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 2023 in respect of Carl Cowling and

Robert Moorhead was £998,400 and £754,125 respectively.

The bonus was assessed against a sliding scale target of Headline profit before tax and non-

underlying items 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 2023 and achievement of personal objectives is set

out on pages 93 to 95.

Long-term incentives Annual LTIP awards were again 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 2023 are described on page 96.

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 is based on ESG metrics.

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 2020 substantially met the performance condition and 65 per cent

of the 2020 LTIP award vested.

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 2023 Carl Cowling held 37,965 shares with a value of £556,947 (approximately

89per cent of salary) and Robert Moorhead held 203,847 shares with a value of £2,669,091

(approximately 565 per cent of salary).

Carl Cowling is required to retain shares worth 300 per cent of salary (or his actual holding if lower)

and Robert Moorhead (or any other executive directors) to retain shares worth 250 per cent of

salary (or his actual holding if lower) 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.

1 Alternative performance measure defined and explained in the Glossary onpage168

Corporate governance

88 WH Smith PLC Annual Report and Accounts 2023

Element of pay Implementation of policy

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 current fee of the Chair of the Board is £320,000 and this did not increase with other annual

increases in April 2023 in view of the Chair’s recent appointment. 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 non-executive directors were increased with effect from 1 April 2023. The current

fees are £62,400 for the role of non-executive director with additional fees of:

(i) £15,600 payable for the role of Senior Independent Director (“SID”); and

(ii) £15,600 payable for being the Chair of the Audit, ESG or Remuneration Committee.

2.9 Implementation of Directors’ remuneration policy in the financial year ending 31 August 2024

This section sets out how the Directors’ remuneration policy will be implemented in the financial year ending 31 August 2024.

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 2024 following the March 2024 review.

Benefits No changes are expected to be made to these elements of remuneration within the financial year

ending 31 August 2024.

Pension The pension contributions for Carl Cowling and Robert Moorhead are three per cent in line with the

wider workforce.

Annual bonus The bonus opportunity for Carl Cowling and Robert Moorhead will remain at 160 per cent of annual

salary. It is envisaged that the bonus metrics will be based on a matrix of financial and personal

performance. 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 in excess of the on-target

level will be deferred into shares.

Long-term incentives Annual LTIP awards will remain 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 as described on page 96, 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 emissions;

engagement with suppliers in respect of reducing Scope 3 carbon emissions; meeting senior

leadership team gender and ethnic diversity targets.

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 (or his actual holding if lower) and Robert

Moorhead (or any other executive directors appointed) to retain shares worth 250 per cent of salary

(or actual holding if lower) 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.

89WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Directors’ remuneration report continued

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 Chair and non-executive directors will be subject to a review in March 2024.

2.10 Summary of non-executive directors’ remuneration 2023 (audited)

The table below summarises the total remuneration for non-executive directors as a single figure for the financial year ended

31 August 2023. 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

2023 2022 2023 2022 2023 2022 2023 2022

Annette Court

(b)

255 – – – – – 255 –

Kal Atwal

(c)

61 57 15 13 1 – 77 70

Colette Burke

(d)

10 – – – – – 10 –

Nicky Dulieu 61 57 15 13 – 1 76 71

Simon Emeny 61 57 15 13 – – 76 70

Marion Sears 61 34 15 8 – – 76 42

Directors who resigned during the year

Henry Staunton

(e)

64 244 – – – – 64 244

Maurice Thompson

(f)

23 57 – – – 2 23 59

Directors who resigned in 2022

Annemarie Durbin

(g)

– 23 – 5 – – – 28

Total £’000s 596 529 60 52 1 3 657 584

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) Annette Court was appointed as a non-executive director on 1 September 2022 and was appointed Chair with effect from 1 December 2022.

c) Kal Atwal stepped down as a director of the Company on 12 September 2023.

d) Colette Burke was appointed as a non-executive director on 1 July 2023.

e) Henry Staunton stepped down as a director of the Company on 30 November 2022.

f) Maurice Thompson stepped down as a director of the Company on 18 January 2023.

g) Annemarie Durbin stepped down as a director of the Company on 19 January 2022.

2.11 Summary of executive directors’ remuneration 2023 (audited)

The table below summarises the total remuneration for executive directors as a single figure for the financial year ended

31 August 2023:

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

2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022

Carl Cowling 610 585 15 14 37 73 662 672 998 960 1,254 – 2,252 960 2,914 1,632

Robert

Moorhead

461 445 14 14 46 109 521 568 754 725 929 – 1,683 725 2,204 1,293

Total £’000s 1,071 1,030 29 28 83 182 1,183 1,240 1,752 1,685 2,183 – 3,935 1,685 5,118 2,925

a) Benefits relate to the provision of a car allowance, private medical insurance and life assurance.

b) The pension figures in the table above are the salary supplement received in lieu of any pension contribution into the Company’s defined contribution pension scheme.

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 93 to 95.

d) The performance measures for the LTIP, and achievement against them, are set out on page 97. The performance conditions for the awards granted in November 2020 were

substantially met and 65 per cent of the award vested and the remaining 35 per cent lapsed. The share price used to calculate the LTI figure in the table is 1511.7p, being the

average share price for the Company over the last quarter of the financial year ended 31 August 2023. The LTI figures in the table for 2023 include share price appreciation of

£43,000 for Carl Cowling and £32,000 for Robert Moorhead as the share price as at the date of grant on 19 November 2020 was 1459.33p.

The total aggregate emoluments (excluding LTI) paid to the Board in the financial year ended 31 August 2023 was

£3,592,000 and in the financial year ended 31 August 2022 was £3,509,000.

Corporate governance

90 WH Smith PLC Annual Report and Accounts 2023

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 2017 LTIP award which vested in 2020 but was subject to a two year holding period.

Stephen Clarke also retained awards under the DBP. These awards vested in respect of 2,360 shares in the financial year

ended 31 August 2023.

No other payments were made in the financial year ended 31 August 2023 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 2023.

2.14 Assessing pay and performance

You can see how the Company has generated shareholder value since 2013 in the TSR graph below. As can be seen from the

graph, the Company generated a return of 109 per cent over the financial year ended 31 August 2023 compared to the FTSE

All Share Retailers Index which generated a return of 17 per cent over the same period.

WH Smith PLC FTSE All Share Retailers Index

Accounting year end

100

150

200

250

300

2013 20152014 2016 2018 2019 2020 2021 2022 20232017

Total shareholder return performance since 31 August 2013

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)

2023 Carl Cowling 2,914 100 65

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

91WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Directors’ remuneration report continued

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 four financial years to 31 August 2023 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 2023 2022 2021 2020 2023 2022 2021 2020 2023 2022 2021 2020

Carl Cowling 4 6 14 140 4 75 100 (100) 7 10 – 100

Robert Moorhead 4 1 5 5 4 103 100 (100) – – – –

Annette Court

(a)

– – – – n/a n/a n/a n/a – – – –

Kal Atwal

(b)

9 119 – – n/a n/a n/a n/a 100 – – –

Colette Burke

(c)

– – – – n/a n/a n/a n/a – – – –

Nicky Dulieu 9 15 – – n/a n/a n/a n/a (100) 100 – –

Simon Emeny 9 4 14 111 n/a n/a n/a n/a – – – –

Marion Sears 81 – – – n/a n/a n/a n/a – – – –

UK employees 11 8 5 7 (4) 47 100 (100) 15 (16) 3 18

a) Annette Court was appointed as a non-executive director on 1 September 2022 and was appointed Chair with effect from 1 December 2022.

b) Kal Atwal stepped down as a director of the Company on 12 September 2023.

c) Colette Burke was appointed as a non-executive director on 1 July 2023.

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 90) 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

2023 Option A 135:1 135:1 107:1

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 2023 has been calculated in line

with the single figure methodology and reflects their actual earnings received in the financial year ended 31 August 2023

(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 21,598 21,598 27,030

Total pay and benefits 21,598 21,598 27,340

The Company believes the median pay ratio for the year ended 31 August 2023 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 71 per cent of all WH Smith

employees are based in the UK. The increase in the pay ratios in 2023 as compared to 2022 is attributable to the increase in

base pay and the amount of variable remuneration received by the Group Chief Executive.

Corporate governance

92 WH Smith PLC Annual Report and Accounts 2023

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 2023. 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

2022

£m

2023

£m

% change 2022

£m

2023

£m

% change

293 367 25 – 22 N/A

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 2023 should be based on Headline profit before tax and non-

underlying items.

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 2023, 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 2023 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

target Role model Outstanding Strong Developing Underachiever

Max: £141.75m 100% 80% 60% 40% 0%

Target: £135m 80% 64% 48% 32% 0%

Threshold: £114.75m 40% 32% 24% 16% 0%

Interpolation between points in the matrix is permitted.

1 Alternative performance measure defined and explained in the Glossary onpage168

93WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Directors’ remuneration report continued

The executive directors’ personal ratings are based on a range of objectives. Carl Cowling’s personal objectives included:

Objective Achievement

Deliver strategy review • Carl Cowling undertook and presented the strategy review and set out clear actions for approval

by the Board

• Successfully delivered against those objectives over the remainder of the year with Headline PBT

up 96 per cent compared to 2022

Supply Chain and

Systems transformation

• Development of the Supply Chain and Systems transformation road map for Board approval

• Reviewed risks, opportunities and valuations for proposed plans

Develop the talent

andsuccession

pipelineof the senior

leadership team

• Senior Leadership Team performed strongly throughout the year

• Retained the current highly experienced and regarded team despite significant pressure in the

external recruitment market

• The Board approved the succession plan for the senior leadership team

Global Food Offer • Carl Cowling successfully oversaw the creation and development of both a premium food offer

and meal deal range for the Group’s key global markets

• Successful roll-out of the plan across all businesses. New food offer well received by landlords

andcustomers

North American

operating model

• Carl Cowling launched various initiatives following a review of the North American

operating model

• Creation of a plan for upgrading the IT infrastructure and supply chain to allow accelerated

expansion of the North American business

ESG – Net Zero • Setting ambitious targets on climate action which are SBTi approved, reducing waste and

protecting natural resources. By 2030 reduce absolute Scope 1 and 2 GHG emissions by 80 per

cent; by 2025 reducing waste, minimising plastic; and by 2025 ensure forestry materials in own-

brand products and core non-trade products come from recycled or certified sources

• Launched initiative of encouraging suppliers to sign up to Scope 3 science based targets

• The Board approved the Group’s carbon transition plan for the business to be Net Zero by 2050

Corporate governance

94 WH Smith PLC Annual Report and Accounts 2023

Robert Moorhead’s personal objectives included:

Objective Achievement

Deliver strategy review • Robert Moorhead undertook and presented the strategy review and set out clear actions for

approval by the Board

• Successfully delivered against those objectives over the remainder of the year with Headline PBT

up 96 per cent compared to 2022

Deliver ESG

commitments – TCFD

• Robert Moorhead undertook and presented the plan for the Company to meet all of the 11 TCFD

requirements as set out in the Sustainability section of the Annual Report on pages 39 to 48

• Robert Moorhead successfully delivered the actions over the remainder of the year so that the

Company now fully meets the TCFD reporting requirements

Develop Finance Team • Developing a highly experienced finance team

• The Board approved the succession plan for the finance team

To commence

refinancing of facilities

• Robert Moorhead undertook and presented the strategy for the refinancing of the Group’s facilities

and set out clear actions for approval by the Board

• Robert Moorhead successfully delivered against those objectives and the Company completed the

refinancing of the Group’s facilities in June 2023

Work with the Trustees

of the DB pension

scheme

• Robert Moorhead successfully worked with the Trustees of the Group’s Defined Benefit

Pension Scheme

ESG – Net Zero • Setting ambitious targets on climate action which are SBTi approved, reducing waste and

protecting natural resources. By 2030 reduce absolute Scope 1 and 2 GHG emissions by 80 per

cent; by 2025 reducing waste, minimising plastic; and by 2025 ensure forestry materials in own-

brand products and core non-trade products come from recycled or certified sources

• Launched initiative of encouraging suppliers to sign up to Scope 3 science based targets

• The Board approved the Group’s carbon transition plan for the business to be Net Zero by 2050

The Company’s Headline profit before tax and non-underlying items for the financial year ended 31 August 2023 was £143m.

This performance resulted in approximately 2,420 employees across the Group also receiving a bonus under the annual

bonus plan for the financial year ended 31 August 2023. Both Carl Cowling and Robert Moorhead were awarded a Personal

Rating of Role Model and following the successful achievement of all of his key personal objectives, Carl Cowling will receive

abonus payment of £998,400 of which £519,168 will be deferred into shares for a period of up to three years. Following the

successful achievement of all of his key personal objectives, Robert Moorhead will receive a bonus payment of £754,125 of

which £392,145 will be deferred into shares for a period of up to three years.

For the annual bonus plan for the financial year ending 31 August 2024, 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. The financial bonus metrics will apply across the Group’s bonus plans, so that the whole organisation is

focused 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 2024 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).

1 Alternative performance measure defined and explained in the Glossary onpage168

95WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Directors’ remuneration report continued

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 condition for awards granted under the LTIP in the financial year ending 31 August 2023 were 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 (calculated on a pre-IFRS 16 basis) of 100p to 125p with 25 per cent

of this component vesting at threshold increasing on a straight-line basis to 100 per cent at maximum. EPS is defined as fully

diluted (including an assumption that the convertible bonds issued in 2020 fully convert into shares) before 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);

• 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 intensity

(tonnes COe per m

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

Leadership team

Employee

Engagement Score

% improvement

Minimum – 25% vesting 5% 35% 5% Maintain

Maximum – 100% vesting 15% 45% 10% 5%

The performance condition for awards granted under the LTIP in the financial year ending 31 August 2024 will be based on

the following conditions each measured at the end of the three financial years to 31 August 2026:

• 40 per cent based on Headline pre-tax earnings per share (calculated on a pre-IFRS 16 basis) of 121p to 146p with 25 per

cent of this component vesting at threshold increasing on a straight-line basis to 100 per cent at maximum. As in previous

years, EPS has been defined as fully diluted (assuming that the convertible bonds issued in 2020 fully convert into shares)

and before non-underlying items and excluding IAS 19 pension charges. This year the Committee has also reserved the

flexibility to exclude specific non-recurring investment expenditure that was not included in the Group’s plans at the time

the targets were set. The purpose of this flexibility is to ensure a fair measurement of performance and to avoid the EPS

targets acting as a disincentive to any investments or major projects which the Board may approve to underpin the

long-term growth strategy. A full explanation of any excluded costs would be provided at the time of vesting;

• 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 target

(tonnesCOe)

Scope 3 emissions:

Target engagement of

suppliers by emissions

who will have approved

science-based targets

by 2026

Gender Diversity:

% of women in Senior

Leadership team

Ethnic Diversity:

% of employees of ethnic

background in Senior

Leadership team

Minimum – 25% vesting 8,960 45% 40% 6%

Maximum – 100% vesting 8,491 60% 42% 10%

Outstanding awards

The performance conditions for the awards granted in November 2020 were substantially met and 65 per cent of the award

vested and the remaining 35 per cent lapsed. The Committee determined that the formulaic out-turn under the LTIP was

appropriate and should be applied without discretionary adjustment as it was satisfied that the Company’s TSR was reflective

of the Company’s underlying financial performance and that nothing occurred to negatively impact the performance

achieved during the performance period.

1 Alternative performance measure defined and explained in the Glossary onpage168

Corporate governance

96 WH Smith PLC Annual Report and Accounts 2023

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

2022

(a)

Number of

subject

to awards

granted

during

the year

Number of

dividend

accrual

awarded

during

the year

Number of

subject to

awards

exercised

during

the year

Number of

subject

to awards

lapsed

during

the year

(b)

Number

of shares

subject to

awards at

31 August

2023

(c)

Share price

at date

of grant

(pence)

(d)

Face value of

award at date

of grant

£’000 Exercise period

Carl Cowling

LTIP 2017

(e)

5,104 – – 5,104 – – 2036.67 743 26.10.20 – 26.10.27

LTIP 2019 79,557 – – – 79,557 – 2210.67 1,759 05.11.24 – 05.11.29

DBP 2019

(f)

1352 – – 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

(h)

122,769 – – – – 122,769 1569.00 1,926 19.11.26 – 19.11.31

DBP 2021

(f)

8,132 – – 2,710 – 5,422 1569.00 128 19.11.22 – 19.11.31

LTIP 2022

(i)

– 146,430 – – – 146,430 1372.67 2,010 21.11.27 – 21.11.32

DBP 2022

(f)

– 36,367 – – – 36,367 1372.67 499 21.11.23 – 21.11.32

Total 343,171 182,797 – 9,166 79,557 437,245

Robert Moorhead

LTIP 2017

(e)

7,982 – – 7,982 – – 2036.67 1,161 26.10.20 – 26.10.27

LTIP 2019 61,701 – – – 61,701 – 2210.67 1,364 05.11.24 – 05.11.29

DBP 2019

(f)

1,343 – – 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

(h)

86,934 – – – – 86,934 1569.00 1,364 19.11.26 – 19.11.31

DBP 2021

(f)

5,286 – – 1,762 – 3,524 1569.00 83 19.11.22 – 19.11.31

LTIP 2022

(i)

– 102,349 – – – 102,349 1372.67 1,405 21.11.27 – 21.11 32

DBP 2022

(f)

– 27,736 – – – 27,736 1372.67 381 21.11.23 – 21.11 32

Total 256,714 130,085 – 11,087 61,701 314,011

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, consistent with market practice, any part of the awards which vest will benefit from the accrual of dividend roll-up.

b) The performance conditions for the 2019 LTIP awards were not met and the awards lapsed.

c) No awards have been granted to directors between 1 September 2023 and 9 November 2023.

d) 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.

e) In respect of the award granted on 26 October 2017 under the LTIP held by Carl Cowling, the vested shares became exercisable on the fifth anniversary of the date of grant.

The value of the 5,104 shares on the exercise date was £69,689.64 (13.6539p per ordinary share). In respect of the award granted on 26 October 2017 under the LTIP held by

Robert Moorhead, the vested shares became exercisable on the fifth anniversary of the date of grant. The value of the 7,982 shares on the exercise date was £108,985.63

(13.6539p per ordinary share).

f) The awards granted in the financial years ended 31 August 2022 and 31 August 2023 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 97. 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, 1,352 shares vested with a total exercise value of £18,460.11 (13.6539p per ordinary share). In respect of the

award granted on 24 October 2019 held by Robert Moorhead, 1,343 shares vested with a total exercise value of £18,337.22 (13.6539p per ordinary share). In respect of the

award granted on 19 November 2021 held by Carl Cowling, 2,710 shares vested with a total exercise value of £37,002.14 (13.6539p per ordinary share). In respect of the award

granted on 19 November 2021 held by Robert Moorhead, 1,762 shares vested with a total exercise value of £24,058.22 (13.6539p per ordinary share).

g) The performance condition for awards granted in the financial year ended 31 August 2021 under the LTIP was based on the Company’s TSR performance against the FTSE All

Share General 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. The performance conditions were substantially met with 65 per cent of the shares subject to the awards vesting. As

a result, the total number of shares vesting for Carl Cowling will be 82,985 shares including 918 dividend accrual shares and for Robert Moorhead 61,434 shares including 680

dividend accrual shares. TheCommittee confirmed it was satisfied that the Company’s TSR was reflective of its underlying financial performance and that nothing occurred

to negatively impact the performance achieved during the performance period. The award is subject to a two year holding period.

h) The performance conditions for awards granted on 19 November 2021 under the LTIP were:

(i) 50 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) 50 per cent based on growth in the adjusted diluted EPS of the Company. Vesting will occur on the following basis: below 75p – Nil; 75p – 25 per cent; 110p 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 awards are subject to a

two-year holding period and will become exercisable on the fifth anniversary of the date of grant.

i) The awards granted in the financial year ended 31 August 2023 under the LTIP will only vest to the extent that the performance targets as set out on page 96 are satisfied.

j) None of the Board participate or hold shares in the Company’s Sharesave Scheme.

97WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Directors’ remuneration report continued

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 522,508 shares in the financial year ended 31 August 2023, the number of WH Smith PLC shares held

in the Trust at 31 August 2023 was 1,031,943. The Group’s accounting policy with respect to the Trust is detailed within Note 1

to the financial statements (see page 119) and movements are detailed in the Group statement of changes in equity on

page 118.

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

Number of ordinary shares DBP LTIP LTIP

31 August 2023

(or date of

leaving)

31 August 2022

(or date of

appointment)

31 August

2023

31 August

2022

31 August

2023

31 August

2022

31 August

2023

31 August

2022

Kal Atwal 3,608 3,608 – – – – – –

Colette Burke – – – – – – – –

Annette Court 6,000 3,000 – – – – – –

Carl Cowling 37,965 33,108 41,789 9,484 – 5,104 395,456 328,583

Nicky Dulieu 2,500 2,500 – – – – – –

Simon Emeny 4,427 4,427 – – – – – –

Robert Moorhead 203,847 197,973 31,260 6,629 – 7,982 282,751 242,103

Marion Sears 7,600 5,000 – – – – – –

Directors who resigned during the year

Henry Staunton 39,523 39,523 – – – – – –

Maurice Thompson 3,452 3,452 – – – – – –

a) Kal Atwal stepped down as a director of the Company on 12 September 2023.

b) Colette Burke was appointed as a non-executive director on 1 July 2023.

c) Annette Court was appointed as a non-executive director on 1 September 2022.

d) The LTIP amount above is the maximum potential award that may vest subject to the performance conditions described on pages 96 and 97.

e) The performance conditions for the awards granted in November 2020 were substantially met and 65 per cent of the award vested and the remaining 35 per cent lapsed.

f) There has been no further change in the directors’ interests shown above between 1 September 2023 and 9 November 2023.

g) The middle market price of an ordinary share at the close of business on 31 August 2023 was 1467p (31 August 2022: 1429.50p).

h) See Table of Outstanding awards on page 97 for details of awards exercised during the financial year ended 31 August 2023.

i) Henry Staunton stepped down as a director of the Company on 30 November 2022.

j) Maurice Thompson stepped down as a director of the Company on 18 January 2023.

Corporate governance

98 WH Smith PLC Annual Report and Accounts 2023

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

Statement of voting at 2023 AGM

The table below shows the voting outcome at the Annual General Meeting on 18 January 2023 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 111,077,545 99% 1,119,902 1% 112,197,447 52,097

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.

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.

99WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Directors’ remuneration report continued

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

three 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

with the wider workforce rate,

approximately three 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 or other 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.

Corporate governance

100 WH Smith PLC Annual Report and Accounts 2023

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.

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

the performance 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 with the terms of such awards.

101WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Element and purpose Policy and opportunity Operation and performance measures

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 the shareholders.

• Executive directors are able to participate in

all-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 the launch 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

9 November 2023

Directors’ remuneration report continued

Corporate governance

102 WH Smith PLC Annual Report and Accounts 2023

Directors’ report

The directors present their report and the audited

consolidated financial statements for the financial year ended

31 August 2023. 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 United Kingdom.

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 be

required to be disclosed in this Directors’ report, as follows:

Information Page number

Likely future developments in the business 19 to 28

Branches outside the UK 24

Disclosures concerning greenhouse gas

emissions and energy consumption

39 to 48

Employment of disabled persons 51

Employee engagement 49 to 51

Engagement with external stakeholders 29 to 35

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 64 to 80

Directors’ biographies 62 and 63

Statement of directors’ responsibilities 106

Information on use of financial instruments 149 to 152

This Directors’ report (including information specified above

as forming part of this report) fulfils the requirements of the

Corporate governance statement for the purposes of DTR 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

102 Directors’ remuneration

report/Note 22 on page 153 of

the financial statements

Arrangement under which

the WH Smith Employee

Benefit Trust has waived or

agreed to waive dividends/

future dividends

98 Directors’

remunerationreport

Dividends

The Headline Group profit before tax and non-underlying

items for the financial year ended 31 August 2023 was

£143m (2022: £73m). The directors recommend the payment

of a final dividend for the financial year ended 31 August

2023 of 20.8p per ordinary share on 1 February 2024 to

members on the Register at the close of business on

12 January 2024. The final dividend and the interim dividend

of 8.1p per ordinary share paid on 3 August 2023 make a

total dividend of 28.9p per ordinary share for the financial

year ended 31 August 2023 (2022: 9.1p).

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 22

to the financial statements on page 153.

The issued share capital of the Company as at 31 August

2023 was 130,912,453 ordinary shares of 22

⁄

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

ofsecurities and voting rights.

There are no restrictions on the transfer of ordinary shares in

the 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 be

approved 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.

1 Alternative performance measure defined and explained in the Glossary on page 168

103WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Purchase of own shares

At the 2023 AGM, authority was given for the Company to

purchase, in the market, up to 13,091,043 ordinary shares

of22

⁄

p each, renewing the authority granted at the 2022

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 2024.

Issue of new ordinary shares

During the financial year ended 31 August 2023, 2,019

ordinary shares of the Company were issued under the

Sharesave Scheme at 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 take effect, 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.

New financing arrangements

On 14 June 2023, the Company completed the refinancing of

the Group’s existing £363m lending facilities. The Group’s

previous £363m lending facilities, which consisted of a

£250m revolving credit facility (‘RCF’) and a £113m term loan

were cancelled and repaid. This repayment was funded by

drawings under new facility consisting of a £400m RCF

(the‘New RCF’). The New RCF is a sustainability linked loan

finance facility.

The New RCF is for a five-year term with two uncommitted

extension options of one year each, which would, subject to

lender approval, extend the tenor of the New RCF to six or

seven years, if exercised. The New RCF is provided by a

syndicate of banks: Barclays, BNP Paribas, Citi Commercial

Bank, Fifth Third, HSBC, JP Morgan, PNC, Santander

and SEB.

The Company has a £327m convertible bond. The Bond

holders have the right to early redemption in the event of a

change of control of the Company.

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, or subsequently,

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 by the Board.

Directors’ indemnities

The Company maintained directors’ and officers’ liability

insurance in the financial year ended 31 August 2023 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 2023, 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

9,124,792 6.97 Direct

BlackRock Inc. 9,046,160 6.90 Indirect

FMR LLC 6,570,219 5.02 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

a) On 8 September 2023 Causeway Capital Management LLC notified the Company

of a holding of 9,173,890 shares (7.01 per cent Direct holding).

b) On 12 September 2023 M&G Plc notified the Company of a holding of 6,575,480

shares (5.02 per cent Indirect holding).

c) On 14 September 2023 FMR LLC notified the Company of a holding of 6,511,725

shares (4.97 per cent Indirect holding).

d) On 5 October 2023 FMR LLC notified the Company ofaholding of 6,982,997

shares (5.33 per cent Indirect holding).

The Company received no other notifications in the period

between 31 August 2023 and the date of this report.

Directors’ report continued

Corporate governance

104 WH Smith PLC Annual Report and Accounts 2023

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 (2022: £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

1to61. The Financial review on pages 25 to 28 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 147 to 152. As at 31 August 2023, the Group is in a

net current liability position. In addition, Note 21 of the

financial statements on pages 149 to 152 includes 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 to credit risk and liquidity risk. The Strategic

report on pages 55 to 60 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 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 Note 1 of the financial statements

onpage 119.

The longer-term viability statement is in the Strategic report

on page 60.

Independent auditors

During the year the Company conducted a tender of the

Statutory Auditor contract. More information on the tender

process can be found in the Audit Committee report on

pages 72 to 76. Following the tender process, the Audit

Committee recommended to the Board that PwC should be

re-appointed as the Company’s Statutory Auditor to take

effect from 1 September 2024. Accordingly, the Board has

taken the decision to recommend the re-appointment of

PwC as the Company’s Statutory Auditor and resolutions

tore-appoint PwC and to authorise the Audit Committee to

determine their remuneration will be proposed at the AGM.

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 26 January 2024 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 on

9 November 2023.

By order of the Board

Ian Houghton

Company Secretary

9 November 2023

105WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

The directors are responsible for preparing the Annual report

and accounts 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, 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

materialdepartures 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 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 also 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, and 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

9 November 2023

Statement of directors’ responsibilities

in respect of the financial statements

Corporate governance

106 WH Smith PLC Annual Report and Accounts 2023

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 2023 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 as applied in accordance with the

provisions of the Companies Act 2006;

• the Company financial statements have been properly

prepared in accordance with United Kingdom Generally

Accepted Accounting Practice (United Kingdom

Accounting Standards, including 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 and Accounts 2023 (the “Annual

Report”), which comprise: the Group and Company balance

sheets as at 31 August 2023; 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.

Independent auditors’ report to the members

of WH Smith PLC

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 in the period under audit.

Our audit approach

Overview

Audit scope

• For the purposes of scoping the Group audit, we have

identified three financially significant components

which required a full scope audit; High Street, Travel UK,

andNorth America.

• We also performed a full scope audit on Jersey,

funkypigeon.com, and Hospitals and audited specific

financial statement line items within Travel Rest of World,

Retail Holdings, and the Company based on their value

relative to the rest of the Group.

• The audit of the North America component (comprising

InMotion and MRG) was performed by PwC Las Vegas.

• Our audit scoping gave us coverage of approximately

86per cent of Group revenue.

• We performed a full statutory audit of the Company

(WHSmith PLC).

Key audit matters

• Impairment of store property, plant & equipment and

right-of-use assets (Group) and impairment of investments

in subsidiaries (Company) (Group and Company)

• Inventory valuation (Group)

Materiality

• Overall Group materiality: £8,000,000 (2022: £7,000,000)

based on professional judgement of considering a number

of potential benchmarks (specifically revenue and profit

based benchmarks), given that some aspects of the

business are still in recovery following the pandemic.

• Overall Company materiality: £9,200,000

(2022: £8,400,000) based on one per cent of total assets.

• Performance materiality: £6,000,000 (2022: £5,250,000)

(Group) and £6,900,000 (2022: £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.

107WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Independent auditors’ report to the members

of WH Smith PLC continued

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

aseparate opinion on these matters.

This is not a complete list of all risks identified by our audit.

The pension buy-in accounting, which was a key audit

matter last year, is no longer included because it was a one-

off transaction in the prior 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 assets (Group) and impairment of investments in

subsidiaries (Company) (Group andCompany)

Refer to Note 1(a), Basis of preparation, Non-underlying items

and 1(p) Critical accounting judgements and key sources

of estimation uncertainty and Notes 11 and 12 (Property,

plant& equipment and Right-of-use assets) and Note 3 in

the Company Financial statements. The Group has a material

operational retail asset base which may be vulnerable to

impairment in the event of trading performance being below

expectations. In the majority of cases, for the purposes of

impairment testing, each retail store is considered to be a

separate Cash Generating Unit (CGU). Management performed

an impairment trigger assessment. No triggers were identified

at the Group and Operating Segment level, however,

specific impairment indicators were identified for certain

CGUs within the Travel Rest of World and North America

businesses. The subsequent value-in-use-models resulted in

the recognition of a material impairment charge in Travel Rest

of World. No impairment triggers were identified within Travel

UK or High Street. 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. The 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 may be impaired.

We obtained management’s impairment trigger assessment

and assessed its methodology for reasonableness.

We considered the underlying data points and found

these to be consistent with other audit work performed.

We challenged the definition of CGUs and verified that this

is appropriate based on evidence available. We obtained

an understanding of how management had developed its

forecast for the future trading for those CGUs 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

party evidence where available. With the assistance of

our valuation experts we tested the impairment models

for the Travel Rest of World CGUs, 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 management’s sensitivity analyses. We satisfied

ourselves that any reasonable possible change that results

in a material adjustment to the impairment charge has

been disclosed. For the Company investments in subsidiary

undertakings, we evaluated whether there were any

indicators of an impairment, with specific consideration

given to the following:

• the market capitalisation of the Group, which is

significantly in excess of the investments balance; and

• the trading results of the Group, which are in line with

expectations. We consider management’s conclusion that

there are no indicators of impairment to be appropriate.

We considered the disclosure of the impairment charge as

a non-underlying item and satisfied ourselves that this is in

line with management’s policy.

108 WH Smith PLC Annual Report and Accounts 2023

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 (p) 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, and items

such as ‘firm sale’ books, fashion, and stationery 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 inherent in the provision

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 in High Street 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, including stock turn and write-

offs. We performed testing over the ageing data to ensure

its accuracy. 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.

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

performed a full scope audit on three financially significant

components (High Street, Travel UK, and North America)

and three other components (Jersey, funkypigeon.com,

andHospitals). All full scope audits were performed by

the UK Group team with the exception of North America,

whichwas audited by PwC Las Vegas as component

auditors operating under our instruction. Audit work

was performed over the consolidation process, tax,

impairment, leases 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 North America 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 86 per

cent of revenue. We performed audit procedures over specific

financial statement line items within Travel Rest of World,

Retail Holdings, and the Company components based on

their value relative to the rest of the Group using an allocation

of Group materiality. We have also performed a statutory

audit over the Company financial statements using a stand-

alone materiality.

The impact of climate risk on our audit

As part of our audit we made enquiries of management to

understand the process management adopted to assess the

extent of the potential impact of climate risk on the Group’s

financial statements and support the disclosures made

within the Strategic Report.

We challenged the completeness of management’s

climate risk assessment by reviewing the consistency of

management’s climate impact assessment with internal

climate plans and board minutes, including whether the time

horizons management has used take account of all relevant

aspects of climate change.

Management considers that the impact of climate change

does not give rise to a material financial statement impact.

We considered the impairment of store assets and going

concern to potentially be materially impacted by climate

change and consequently we focused our audit work in

these areas. In particular, we challenged management

on how the impact of their climate commitments would

impact the assumptions within the cash flows used for the

impairment analysis. In addition we ensured that the going

concern and viability assessments were also consistent with

management’s view of the impact of climate change.

We also considered the consistency of the disclosures in

relation to climate change (including the disclosures in the

Task Force on Climate-related Financial Disclosures (TCFD)

section) within the Annual Report and our knowledge

obtained from our audit.

Our procedures did not identify any material impact to the

financial statements.

109WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Independent auditors’ report to the members

of WH Smith PLC continued

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 is shown

in the table below:

Financial statements – Group Financial statements – Company

Overall

materiality

£8,000,000 (2022: £7,000,000). £9,200,000 (2022: £8,400,000).

How we

determinedit

Professional judgement of considering a number of

potential benchmarks (specifically revenue and profit

based benchmarks), given that some aspects of the

business are still in recovery following the pandemic

One per cent 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 six per cent of current year profit before

tax and 0.4 per cent of current year revenue.

WH Smith PLC is a holding company for the Group

and therefore the materiality benchmark has been

determined based on total assets, which is a generally

accepted auditing benchmark.

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 £0.1m to £7.2m.

We use performance materiality to reduce to an

appropriately low level the probability that the aggregate of

uncorrected 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, classes of

transactions and disclosures, for example in determining

sample sizes. Our performance materiality was 75 per cent

(2022: 75 per cent) of overall materiality, amounting to

£6,000,000 (2022: £5,250,000) for the Group financial

statements and £6,900,000 (2022: £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

£400,000 (Group audit) (2022: £350,000) and £460,000

(Company audit) (2022: £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 performing a sensitivity

on the revenue growth assumption to erode the

covenant headroom;

• obtained and reviewed the Group’s financing agreements,

including the new revolving credit facility the Group

entered into during the year;

• 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.

110 WH Smith PLC Annual Report and Accounts 2023

Financial statements

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

thegoing 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.

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 2023

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.

111WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Independent auditors’ report to the members

of WH Smith PLC continued

Our review of the directors’ statement regarding the longer-

term viability of the Group and Company 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

and the audit

Responsibilities of the directors for the

financialstatements

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

financial statements

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.

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,

weidentified that the principal risks of non-compliance with

laws and regulations related to GDPR, employment 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 regulations. 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;

• Enquiring of management, those charged with

governance, internal audit, and internal legal counsel

regarding instances of non-compliance with laws and

regulations and fraud;

• Scanning external sources for evidence of instances

of non-compliance with laws and regulations in the

public domain;

• Reviewing internal audit reports and minutes of meetings

of those charged with governance;

• Identifying and testing unusual journals posted to

revenue;and

• Challenging assumptions made by management

in determining their significant judgements and

accounting estimates.

112 WH Smith PLC Annual Report and Accounts 2023

Financial statements

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 August

2015 and subsequent financial periods. The period of total

uninterrupted engagement is 9 years, covering the years

ended 31 August 2015 to 31 August 2023.

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

9 November 2023

113WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

2023 2022

£m Note

Before non-

underlying

items

Non-

underlying

items

Total

Before non-

underlying

items

Non-

underlying

items

Total

Revenue 2 1,79 3 – 1,793 1,400 – 1,400

Group operating profit/(loss) 2, 3 182 (26) 156 117 (20) 97

Finance costs 6 (45) (1) (46) (34) – (34)

Profit/(loss) before tax 137 (27) 110 83 (20) 63

Income tax (expense)/credit 7 (27) 5 (22) (14) 4 (10)

Profit/(loss) for the year 110 (22) 88 69 (16) 53

Attributable to equity holders of the parent 101 (22) 79 63 (16) 47

Attributable to non-controlling interests 9 – 9 6 – 6

110 (22) 88 69 (16) 53

Earnings per share

Basic 9 60.8p 36.2p

Diluted 9 59.8p 35.6p

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 168.

2 See Note 4 for an analysis of non-underlying items. See Glossary on page 168 for a definition of Alternative performance measures.

Group income statement

For the year ended 1 August 202

114 WH Smith PLC Annual Report and Accounts 2023

Financial statements

£m Note 2023 2022

Profit for the year 88 53

Other comprehensive (loss)/income:

Items that will not be reclassified subsequently to the income statement:

Actuarial gains on defined benefit pension schemes 1 –

1 –

Items that may be reclassified subsequently to the income statement:

(Losses)/gains on cash flow hedges

– Net fair value (losses)/gains 21 (3) 3

Exchange differences on translation of foreign operations (40) 71

(43) 74

Other comprehensive (loss)/income for the year, net of tax (42) 74

Total comprehensive income for the year 46 1 27

Attributable to equity holders of the parent 39 120

Attributable to non-controlling interests 7 7

46 1 27

Group statement of comprehensive income

For the year ended 1 August 202

115WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

£m Note 2023 2022

Non-current assets

Goodwill 10 436 47 1

Other intangible assets 10 69 72

Property, plant and equipment 11 2 70 219

Right-of-use assets 12 444 446

Investments in joint ventures 2 2

Deferred tax assets 17 43 55

Trade and other receivables 13 9 9

1,273 1,2 7 4

Current assets

Inventories 205 198

Trade and other receivables 13 112 87

Derivative financial assets 21 1 1

Current tax receivable 3 –

Cash and cash equivalents 18 56 132

377 418

Total assets 1,650 1,692

Current liabilities

Trade and other payables 14 (340) (365)

Bank overdrafts and other borrowings 18 (84) (20)

Lease liabilities 15 (116) (131)

Derivative financial liabilities 21 (1) –

Current tax liability (1) (1)

Short-term provisions 16 (1) –

(543) (517)

Non-current liabilities

Bank loans and other borrowings 18 (301) (404)

Long-term provisions 16 (16) (14)

Lease liabilities 15 (450) (446)

(76 7) (864)

Total liabilities (1,310) (1,381)

Total net assets 340 311

Shareholders’ equity

Called up share capital 22 29 29

Share premium 316 316

Capital redemption reserve 25 13 13

Translation reserve

5 43

Other reserves 25

(255) (244)

Retained earnings 209 138

Total equity attributable to the equity holders of the parent 317 295

Non-controlling interests 23 16

Total equity 340 311

The consolidated financial statements of WH Smith PLC, registered number 5202036, on pages 114 to 163 were approved by

the Board of Directors and authorised for issue on 9 November 2023 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 1 August 202

116 WH Smith PLC Annual Report and Accounts 2023

Financial statements

£m Note 2023 2022

Operating activities

Cash generated from operating activities 20 302 219

Interest paid

(35) (26)

Financing arrangement fees (3) –

Income taxes paid (15) (6)

Income taxes refunded 2 –

Net cash inflow from operating activities 251 187

Investing activities

Purchase of property, plant and equipment (106) (70)

Purchase of intangible assets (16) (13)

Net cash outflow from investing activities (122) (83)

Financing activities

Dividends paid 8 (22) –

Purchase of own shares for employee share schemes (8) (7)

Distributions to non-controlling interests (6) (1)

Repayments of term loans 18 (133) –

Net drawdown on short term borrowings 18 84 –

Capital repayments of obligations under leases 18 (118) (96)

Net cash outflow from financing activities (203) (104)

Net decrease in cash and cash equivalents in the year (7 4) –

Opening cash and cash equivalents 132 130

Effect of movements in foreign exchange rates (2) 2

Closing cash and cash equivalents 18 56 132

1 Includes interest payments of £19m on lease liabilities (2022: £11m)

Group cash flow statement

For the year ended 1 August 202

117WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

£m

Called up

share capital

and share

premium

Capital

redemption

reserve

Translation

reserve

Other

reserves

Retained

earnings

Total equity

attributable

to the equity

holders of

the parent

Non-

controlling

interests

Total

equity

Balance at 1 September 2022 345 13 43 (244) 138 295 16 311

Profit for the year – – – – 79 79 9 88

Other comprehensive (loss)/income:

Cash flow hedges – – – (3) – (3) – (3)

Actuarial gains on defined benefit

pension schemes (Note 26)

– – – – 1 1 – 1

Exchange differences on translation

offoreign operations

– – (38) – – (38) (2) (40)

Total comprehensive (loss)/income for

the year

– – (38) (3) 80 39 7 46

Employee share schemes – – – (8) 12 4 – 4

Dividends paid (Note 8) – – – – (22) (22) – (22)

Deferred tax on share-based payments – – – – 1 1 – 1

Distributions to non-controlling interest – – – – – – (6) (6)

Non-cash movement on

non-controlling interests

– – – – – – 6 6

Balance at 31 August 2023 345 13 5 (255) 209 317 23 340

£m

Called up

share capital

and share

premium

Capital

redemption

reserve

Translation

reserve

Other

reserves

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

offoreign operations

– – 70 – – 70 1 71

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

– – – – – – (1) (1)

Balance at 31 August 2022 345 13 43 (244) 138 2 95 16 311

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 1 August 202

118 WH Smith PLC Annual Report and Accounts 2023

Financial statements

1. Accounting policies

a) Basis of preparation

The consolidated 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 at least 12 months from the date of

approval of these financial statements.

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 21 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.

In making the going concern assessment, the directors have undertaken a rigorous assessment of current performance and

forecasts for the 12-month period to November 2024, including expenditure commitments, capital expenditure and available

borrowing facilities. The Group’s borrowing facilities are described in the Strategic report on page 26. The covenants on these

facilities are tested half-yearly and are based on fixed charges cover and net borrowings. The directors have also considered

the existence of factors beyond the going concern period that could indicate that the going concern basis is not appropriate.

The directors have modelled a base case scenario consistent with the latest Board approved forecasts, which include

management’s best estimates of market conditions and include a number of assumptions including passenger numbers,

sales growth and cost inflation. Under this scenario the Group has significant liquidity and complies with all covenant tests

throughout the assessment period.

As a result of uncertainty and challenges in the macroeconomic environment, this base case scenario has been stress-tested by

applying severe, but plausible, downside assumptions of a magnitude and profile in line with previous experience of economic

downturns. These assumptions include reductions to revenue assumptions of between five and ten per cent versus the base

case as appropriate by division; additional inflation in labour costs beyond that included in the base case; and margin

pressures. Apart from an equal reduction in turnover-based rents in our Travel businesses, this scenario does not assume

a decrease in other variable costs, and is therefore considered severe. Under this downside scenario the Group would

continue to have significant liquidity headroom on its existing facilities and complies with all covenant tests throughout the

assessment period.

Based on the above analysis, the directors have concluded that the Group is able to adequately manage its financing and

principal risks, and that the Group will be able to continue to meet its obligations as they fall due and operate within the

levelof its facilities for at leasel of its facilities for at least 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 2023:

Amendments to IFRS 3 Business combinations

Amendment to IAS 16 Property, plant and equipment

Amendment to IAS 37 Provisions, contingent liabilities and contingent assets

Annual Improvements 2018–2020 Amendments to IFRS 1, IFRS 9 and IFRS 16

The Group has considered the above new standards and amendments and has concluded that they are either not relevant

tothe Grto the 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:

IFRS 17 Insurance contracts

Amendment to IAS 12 Taxation

Amendment to IAS 8 Accounting policies, Changes in Accounting Estimates

and Errors

Amendments to IAS 1 Presentation of financial statements

Amendments to IFRS 16 Leases

Narrow scope amendments to IFRS 3, IAS 16 and IAS 37

Notes to the financial statements

119WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

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stakvide 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 and Headline net debt and free cash flow. These APMs are set

out in the Glossary on page 168 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 and transformation 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.Tfrom 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 and

share-based payments 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, 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.

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 disc, 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.

120 WH Smith PLC Annual Report and Accounts 2023

Financial statements

1. Accounting policies (continued)

a) Basis of preparation (continued)

Basis of consolidation (continued)

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 morthe 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

havebeen necessarye been 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 ontransactions, balances and unrealised gains on transactions 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

storeformats are formats 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 contrfor each supplier contract. The level of complexity and judgement is low in relation to establishing the accounting entries

andestimatand estimates, and the timing of recognition.

Supplier incomes that have been invoiced but not received at the year 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 bythe supplier for specific products oy the 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 ttrends, 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 yproduct has not yet been sold. This income is subsequently recognised in cost ofsales when the product has been sold.t of sales when the product has been sold.

121WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

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 WH Smith 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 United News Shops Retirement Benefits Scheme is 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 year 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 year 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, or in some cases a group of stores is considered to be a CGU where the

stores do not generate largely independent cash inflows. 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.

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 ating 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 e 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 isincluded in the determination of the profit and loss ttributable amount of goodwill is included in the determination of the profit and loss

on disposal.

122 WH Smith PLC Annual Report and Accounts 2023

Financial statements

1. Accounting policies (continued)

e) Intangible assets (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 arcase 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 on a straight line basis 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.

The useful economic lives of other intangible assets are as follows:

Software – up to five years

Brands – ten to twenty years

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 ofeesent value of expected 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 inthe yome statement in the year 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 distribution costs 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.

123WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

1. Accounting policies (continued)

g) Leasing (continued)

The Group as a lessee (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 effectiv(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

therelathe related 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 year 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 year 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unfaor unfavourable terms of the lease when compared to market terms.

124 WH Smith PLC Annual Report and Accounts 2023

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 sare 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) 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.

j) 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 year. 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 year.

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).

k) 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 year, 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.

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 ais calculated at the tax rates that are expected to apply in the year 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. Deferred tax assets and

liabilities are offset where there is considered to be a legally enforceable right to do so.

125WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

1. Accounting policies (continued)

l) 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 subsequentmeasurInitial recognition and subsequent measurement

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. Credit card receivables are included in cash and cash equivalents.

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

ofits liabilities.of its 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 year 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.

126 WH Smith PLC Annual Report and Accounts 2023

Financial statements

1. Accounting policies (continued)

l) Financial instruments (continued)

ii) Derecognition of financial assets and liabilities

a) 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.

b) 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 a qualitative review of its contractual terms shows that the terms have been

significantly changed or where 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 hedgeactive financial instruments and hedge accounting

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 financial year. 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.

127WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

1. Accounting policies (continued)

l) Financial instruments (continued)

v) Derivative financial instruments and hedgeaccounting (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.

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.

m) 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 asan Other reservesented as an 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 fwith any changes in fair value recognised in the profit or loss for the year.

n) Dividends

Final dividends are recorded in the financial statements in the year in which they are approved by the Company’s

shareholders. Interim dividends are recorded in the year in which they are approved and paid.

o) Share capital, Share premium and Otherreservesemium and Other reserves

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.

p) 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 41 to 48 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; and

• carrying value of inventories and valuation of other current assets.

128 WH Smith PLC Annual Report and Accounts 2023

Financial statements

1. Accounting policies (continued)

p) 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.

The costs expected to be incurred in connection with our net zero commitments (as described on pages 41 to 48) 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 41 to 48) 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 and transformation 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 substitutionrightse substitution rights

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 at the Group’s discretion,

management has applied judgement in determining the likelihood of whether such options will be exercised. This is based

onthe length of time remaining befon the length of time remaining before the option is exercisable, performance of the individual store and the trading forecasts.

129WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

1. Accounting policies (continued)

p) 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recthe recoverable amount of an asset or a cash-generating unit is determined based on value-in-use calculations prepared

onthe basis of management’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.

Further information in respect of the Group’s intangible assets, property, plant and equipment and right-of-use assets is

included in Notes 10, 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thees, 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 year 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. The key assumption driving the stock provision calculation is forecast revenue. A ten per cent change in the

revenue assumptions applied in the provision calculation, representing a reasonably possible outcome, would reduce the

carryingvalue of incarrying value of inventories by £2m (2022: £2m).

130 WH Smith PLC Annual Report and Accounts 2023

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 thechief operonsidered to be the chief 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.el 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 168 (Note A2).

a) Revenue

£m 2023 2022

Travel UK 709 521

North America 380 288

Rest of the World 235 118

Total Travel 1,324 927

High Street 469 473

Revenue 1,793 1,400

Rest of the World revenue includes revenue from Australia of £82m (2022: £40m), Ireland £47m (2022: £30m) and Spain

£46m (2022: £21m). No other country has individually material revenue.

b) Group results

2023 2022

£m

Headline

before non-

underlying

items

(pre-IFRS 16)

Headline non-

underlying

items

(pre-IFRS 16) IFRS 16 Total

Headline

before non-

underlying

items

(pre-IFRS 16)

Headline

non-underlying

items

(pre-IFRS 16) IFRS 16 Total

Travel UK trading profit/(loss) 102 – (1) 101 54 – 6 60

North America trading profit 49 – 3 52 31 – 2 33

Rest of the World trading

profit/(loss)

13 – – 13 4 – (1) 3

Total Travel trading profit 164 – 2 166 89 – 7 96

High Street trading profit 32 – 11 43 33 – 12 45

Group profit from trading

operations

196 – 13 209 122 – 19 141

Unallocated central costs (27) – – (27) (24) – – (24)

Group operating profit before

non-underlying items

169 – 13 182 98 – 19 117

Non-underlying items (Note 4) – (13) (13) (26) – (12) (8) (20)

Group operating profit/(loss) 169 (13) – 156 98 (12) 11 97

Finance costs (26) – (19) (45) (25) – (9) (34)

Non-underlying finance costs

(Note 4)

– (2) 1 (1) – – – –

Profit/(loss) before tax 143 (15) (18) 110 73 (12) 2 63

Income tax (expense)/credit (28) 2 4 (22) (12) 3 (1) (10)

Profit/(loss) for the year 115 (13) (14) 88 61 (9) 1 53

1 Presented on a pre-IFRS 16 basis. Alternative performance measures are defined and explained in the Glossary on page 168.

131WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

2. Segmental analysis of results (continued)

c) Other segmental items

2023

Non-current assets

Right of use assets

£m Capital additions

Depreciation and

amortisation Impairment Depreciation Impairment

Travel UK 30 (17) – – –

North America 47 (13) – – –

Rest of the World 17 (6) – – –

Total Travel 94 (36) – – –

High Street 28 (15) –

– –

Unallocated – (2) – – –

Headline, before non-underlying items (pre-IFRS 16) 122 (53) – – –

Headline non-underlying items (pre-IFRS 16) – (3) (4) – –

Headline, after non-underlying items (pre-IFRS 16) 122 (56) (4) – –

Impact of IFRS 16 – – – (104) –

Non-underlying items (IFRS 16)Non-underlying items (IFRS 16)² – – – – (15)

Group 122 (56) (4) (104) (15)

2022

Non-current assets

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)

1 Non-current assets including property, plant and equipment and intangible assets, but excluding right-of-use assets.

2 The impairment under IFRS 16 mostly relates to the Rest of the World segment.

d) Non-current assets by geographical location

Non-current assets include property, plant and equipment, intangible assets and right-of-use assets.

£m 2023 2022

UK 396 383

USA 704 689

Spain 84 104

Australia 18 19

Other international 17 13

Total 1,219 1,208

132 WH Smith PLC Annual Report and Accounts 2023

Financial statements

3. Group operating profit

2023 2022

£m

Before non-

underlying

items

Non-

underlying

items Total

Before non-

underlying

items

Non-

underlying

items Total

Revenue 1,793 – 1,793 1,400 – 1,400

Cost of sales (682) – (682) (538) – (538)

Gross profit 1,111 – 1,111 862 – 862

Distribution costs

(746) – (746) (588) – (588)

Administrative expenses (197) – (197) (161) – (161)

Other income

14 – 14 4 – 4

Non-underlying items (Note 4) – (26) (26) – (20) (20)

Group operating profit 182 (26) 156 117 (20) 97

1 During the year there was an underlying impairment charge of £nil (2022: £2m) for property, plant and equipment and other intangible assets included in distribution costs.

Other impairment charges are included in non-underlying items. See Note 4.

2 Other income includes remeasurement of right-of-use assets, insurance recoveries and other property related income.

£m 2023 2022

Cost of inventories recognised as an expense 682 538

Write-down of inventories in the year

3 2

Depreciation of property, plant and equipment 42 37

Depreciation of right-of-use assets

– land and buildings 101 78

– other 3 3

Amortisation of intangible assets 14 13

Impairment of property, plant and equipment 4 7

Impairment of right-of-use assets 15 8

Impairment of intangibles – 1

(Income)/expenses relating to leasing:

– expense relating to short-term leases 22 17

– expense relating to variable lease payments not included in the measurement of the lease liability 29 29

– income relating to Covid-19 rent reductions – (5)

Other occupancy costs 49 59

Staff costs (Note 5) 367 293

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 1.1 0.9

Fees payable to the Group’s auditors for other services to the Group including the audit of the

Company’ssubsidiariess subsidiaries

0.3 0.2

Total audit and audit-related services 1.4 1.1

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 1.5 1.2

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.

133WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

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 2023 2022

Amortisation of acquired intangible assets 3 3

Impairment of assets

– property, plant and equipment 4 5

– right-of-use assets 15 8

Provisions for onerous contracts 3 –

Costs associated with pensions 1 –

Costs related to cyber incident – 4

Non-underlying items, included in operating profit 26 20

Finance costs associated with refinancing 1 –

Non-underlying items, before tax 27 20

Tax credit on non-underlying items (5) (4)

Non-underlying items, after tax 22 16

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).

Impairment of property, plant and equipment and right-of-use assets and provisions for onerous contracts

The Group has carried out an assessment for indicators of impairment across the store portfolio. Where an indicator of

impairment has been identified, an impairment review has been performed to compare the value-in-use of store cash

generating units, based on management’s assumptions regarding likely future trading performance, to the carrying value

of the cash-generating unit as at 31 August 2023. As a result of this exercise, a charge of £19m (2022: £13m) was recorded

within non-underlying items for impairment of retail store assets, of which £4m (2022: £5m) relates to property, plant and

equipment and £15m (2022: £8m) relates to right-of-use assets. The majority of the impairment of right-of-use assets relates

to the difference between the incremental borrowing rate used to establish the right-of-use assets and the WACC rate used

to discount the future cash flows of certain stores in Spain. Refer to Note 11 for details of impairment of cash-generating units.

The impairment recognised on a pre-IFRS 16 basis is provided in the Glossary on page 174.

A charge of £3m has been recognised in the income statement to provide for the unavoidable costs of continuing to service a

non-cancellable contract. This provision will be utilised over the next three financial years.

Costs associated with pensions

Professional fees of £1m (2022: £nil) have been incurred related to the pension scheme’s purchase of a bulk annuity insurance

policy as described in Note 26.

Costs associated with refinancing

A charge of £1m (2022: £nil) has been included in non-underlying items to derecognise the carrying value of unamortised

fees in respect of the extinguished term loan and revolving credit facility. See Note 18.

Other prior year non-underlying items

Other non-underlying items in the prior year included costs of £4m incurred due to a cyber security incident in relation to one

of the Group’s websites. This includes impairment of software assets of £1m, third party consultancy support and legal and

other costs.

A tax credit of £5m (2022: £4m) has been recognised in relation to non-underlying items.

134 WH Smith PLC Annual Report and Accounts 2023

Financial statements

5. Staff costs and employees

a) Staff costs

The aggregate remuneration of employees was:

£m 2023 2022

Wages and salaries 322 261

Social security costs 27 17

Other pension costs 6 5

Share-based payments 12 10

Total Group 367 293

b) Employee numbers

The monthly average total number of employees (including executive directors) was:

No. of employees 2023 2022

Total retailing 14,124 12,459

Support functions 53 43

Total Group 14,177 12,502

6. Finance costs

£m 2023 2022

Interest payable on bank loans and overdrafts 12 9

Interest on convertible bonds 14 14

Interest on lease liabilities 19 11

Costs associated with refinancing 1 –

46 34

Costs associated with refinancing are included in non-underlying items (see Note 4).

135WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

7. Income tax expense

£m 2023 2022

Tax on profit 13 6

Blended standard rate of UK corporation tax 21.5% (2022: 19.0%)

Adjustment in respect of prior years (2) –

Total current tax expense 11 6

Deferred tax – current year (Note 17) 19 8

Deferred tax – prior year (Note 17) (3) –

Tax on profit before non-underlying items 27 14

Tax on non-underlying items – deferred tax (Note 17) (5) (4)

Total tax on profit 22 10

Reconciliation of the taxation charge

£m 2023 2022

Tax on profit at blended standard rate of UK corporation tax 21.5% (2022: 19.0%) 24 12

Tax effect of items that are not deductible or not taxable in determining taxable profit (3) –

Derecognition / (recognition) of deferred tax balances 7 (1)

Differences in overseas tax rates (1) (1)

Adjustment in respect of prior years – current tax (2) –

Adjustment in respect of prior years – deferred tax (3) –

Total income tax charge 22 10

The effective tax rate, before non-underlying items, is 19 per cent (2022: 17 per cent).

The UK corporation tax rate is 25 per cent. Up to the 1 April 2023 the corporation tax rate was 19 per cent.

On 20 June 2023, Finance (No.2) Act 2023 was substantively enacted in the UK, introducing a global minimum effective tax

rate of 15 per cent. The legislation implements a domestic top-up tax and a multinational top-up tax, effective for accounting

years starting on or after 31 December 2023. The Group has applied the exemption under IAS 12 to recognising and disclosing

information about deferred tax assets and liabilities related to top-up income taxes. This will be applicable for the year ending

31 August 2025.

8. Dividends

Amounts paid and recognised as distributions to shareholders in the year are as follows:

£m 2023 2022

Final dividend for the year ended 31 August 2022 of 9.1p per ordinary share (2022: nil) 12 –

Interim dividend for the year ended 31 August 2023 of 8.1p per ordinary share (2022: nil) 10 –

22 –

The Board has proposed a final dividend of 20.8p per share, amounting to a final dividend of £2 7m, which is not included as

a liability in these financial statements and, subject to shareholder approval, will be paid on 1 February 2024 to shareholders

registered at the close of business on 12 January 2024.

136 WH Smith PLC Annual Report and Accounts 2023

Financial statements

9. Earnings per share

a) Earnings

£m 2023 2022

Profit for the year, attributable to equity holders of the parent 79 47

Non-underlying items, after tax (Note 4) 22 16

Profit for the year before non-underlying items, attributable to equity holders of the parent 101 63

b) Weighted average share capital

Millions 2023 2022

Weighted average ordinary shares in issue 130 130

Less weighted average ordinary shares held in ESOP Trust – –

Weighted average shares in issue for earnings per share 130 130

Add weighted average number of ordinary shares under option 2 2

Weighted average ordinary shares for diluted earnings per share 132 132

c) Basic and diluted earnings per share

Pence 2023 2022

Basic earnings per share 60.8 36.2

Adjustment for non-underlying items 16.9 12.3

Basic earnings per share before non-underlying items 77.7 48.5

Pence 2023 2022

Diluted earnings per share 59.8 35.6

Adjustment for non-underlying items 16.7 12.1

Diluted earnings per share before non-underlying items 76.5 47.7

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 at 31 August 2023 the convertible bond has no dilutive effect as the inclusion of these potentially dilutive shares would

improve earnings per share (2022: improve earnings per share).

The calculation of earnings per share on a pre-IFRS 16 basis is provided in the Glossary on page 173.

137WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

10. Intangible assets

£m Goodwill

Brands and

franchise

contracts Tenancy rights Software Total

Cost

At 1 September 2022 471 50 13 114 648

Additions – – – 16 16

Foreign exchange (35) (4) – (2) (41)

At 31 August 2023 436 46 13 128 623

Accumulated amortisation

At 1 September 2022 – 12 8 85 105

Amortisation charge – 3 – 11 14

Foreign exchange – (1) – – (1)

At 31 August 2023 – 14 8 96 118

Net book value at 31 August 2023 436 32 5 32 505

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

Goodwill of US$64m (£50m) (2022: US$70m / £60m) relating to the acquisition of the InMotion Entertainment Group of

companies 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 2023 2022

Travel UK 272 295

North America 122 132

Rest of the World 27 29

Total Travel 421 456

High Street 15 15

436 471

138 WH Smith PLC Annual Report and Accounts 2023

Financial statements

10. Intangible assets (continued)

Included within Tenancy rights are certain assets that are considered to have an indefinite life of £4m (2022: £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, 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 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 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). Country-specific discount rates were not considered to be materially different to the Group rate.

The pre-tax discount rate used in the calculations was 13.2 per cent (2022: 11.9 per cent).

• The long-term growth rate assumptions are between zero per cent and two per cent (2022: zero per cent and two 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

ofCGUs. As a rof CGUs. As a result, no impairment has been recognised in respect of the carrying value of goodwill in the year (2022: £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, management have considered a range of sensitivities on each of the key assumptions, with other variables held

constant. The sensitivities include applying increases inthe discount rhe sensitivities include applying increases in the discount rate by two per cent and reductions in the long-term

growth rates to zero per cent. Under these 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 41 and 48 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.

139WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

11. Property, plant and equipment

Land and buildings

£m

Freehold

properties

Leasehold

improvements

Fixtures

andfittingsand fittings

Equipment

and vehicles Total

Cost or valuation:

At 1 September 2022 18 329 232 127 706

Additions – 63 24 19 106

Reclassifications – – 5 (5) –

Foreign exchange – (7) (7) (1) (15)

At 31 August 2023 18 385 254 140 797

Accumulated depreciation:

At 1 September 2022 10 230 155 92 487

Depreciation charge – 20 15 7 42

Impairment charge – 3 – 1 4

Reclassifications – 1 (1) – –

Foreign exchange – (2) (3) (1) (6)

At 31 August 2023 10 252 166 99 527

Net book value at 31 August 2023 8 133 88 41 270

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

Impairment of property, plant and equipment

For impairment testing purposes, the Group has determined that each store is a separate CGU or in some cases a group of

stores is considered to be a CGU where the stores do not generate largely independent cash inflows. 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.

140 WH Smith PLC Annual Report and Accounts 2023

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, 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 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.

In developing these forecasts, management have used available information, including historical knowledge of the store

levelcash flowel cash flows.

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). Country-specific discount rates were not considered to be materially different to the Group rate.

The pre-tax discount rate used in the calculations was 13.2 per cent (2022: 11.9 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 £34m, which is their carrying

value at year end. The Group has recognised an impairment charge of £4m (2022: £7m) to property, plant and equipment,

noimpairment to softwno impairment to software (2022: £1m) and £15m (2022: £8m) to right-of-use assets. The majority of the impairment of right-

of-use assets relates to the difference between the incremental borrowing rate used to establish the right-of-use assets and

the WACC rate used to discount the future cash flows of certain stores in Spain. Impairments of £19m (2022: £14m) have been

presented as non-underlying items in the current year (see Note 4).

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. As a result, the Group has applied certain sensitivities in isolation to demonstrate the impact on the

impairment charge of changes in key assumptions. An increase of one per cent in the discount rate has been modelled and

would have resulted in an increase in the impairment charge of £1m across intangible assets, property, plant and equipment

and right of use assets.

The impairment assessment has also been performed on a pre-IFRS 16 basis. See Glossary on page 174.

141WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

12. Right-of-use assets

£m

Land and

buildings Equipment Total

At 1 September 2022 440 6 446

Additions 93 – 93

Modifications and remeasurements 41 1 42

Depreciation charge (101) (3) (104)

Impairment charge (15) – (15)

Effect of movements in foreign exchange rates (18) – (18)

Net book value at 31 August 2023 440 4 444

£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

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 £15m (2022: £8m) have been impaired in the year. 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 2023 2022

Current receivables

Trade receivables 68 57

Other receivables 3 2

Prepayments 15 12

Accrued income 26 16

112 87

Non-current receivables

Other receivables 5 3

Prepayments 4 6

Total trade and other receivables 121 96

Included in accrued income is £12m (2022: £10m) 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

butnot ybut not yet settled against trade payables balances is included in trade payables where the Group has a right to offset.

142 WH Smith PLC Annual Report and Accounts 2023

Financial statements

13. Trade and other receivables (continued)

The ageing of the Group’s trade and other receivables is as follows:

£m 2023 2022

Trade and other receivables gross 80 68

Expected credit losses (4) (6)

Trade and other receivables net 76 62

Of which:

Amounts neither impaired nor past due on the reporting date 54 46

Amounts past due but not impaired:

Less than one month old Less than one month old 15 8

Between one and thr Between one and three months old 5 4

Between thr Between three and six months old 2 3

Between six months and one y Between six months and one year old – 1

Trade and other receivables net carrying amount 76 62

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 2023 of £4m (2022: £6m). 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 2023 2022

Less than one month old – –

Between one and three months old – 2

Between three and six months old 1 2

Between six months and one year old 3 2

4 6

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 2023 2022

Trade payables 130 130

Other tax and social security 30 30

Other payables 95 96

Accruals 68 95

Deferred income 17 14

340 365

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average

credit period taken for trade purchases is 58 days (2022: 65 days). The directors consider that the carrying amount of trade

and other payables approximates their fair value.

Trade payables is stated net of £8m (2022: £7m) 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.

143WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

15. Lease liabilities

£m

Land and

buildings Equipment Total

At 1 September 2022 574 3 577

Additions 91 – 91

Modifications and remeasurements 39 1 40

Disposals (2) – (2)

Interest 19 – 19

Payments (135) (2) (137)

Effect of movements in foreign exchange rates (22) – (22)

At 31 August 2023 564 2 566

£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 2023 2022

Analysis of total lease liabilities:

Non-current 450 446

Current 116 131

Total 566 577

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 four 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 three 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 mathe 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.

144 WH Smith PLC Annual Report and Accounts 2023

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 year 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 allCoxpedient to all Covid-19 rent

reductions/waivers that meet the requirements of the amendment. This resulted in a credit to the Incomestato the Income statement of £5m

for the year ended 31 August 2022.

The Group’s accounting policy for leases is set out in Note 1. Details of Income statement charges 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 6. The maturity of undiscounted future lease liabilities are setout in Note 21.e set out in Note 21.

The total cash outflow for leases in the financial year was £181m (2022: £150m). This includes cash outflow for short-term

leases of £19m (2022: £16m) and variable lease payments (not included in the measurement of lease liability) of £25m

(2022: £28m).

16. Provisions

£m

Property

provision

Contingent

consideration

provision Total

At 1 September 2022 14 – 14

Charge in the year 3 – 3

Utilised in year (1) – (1)

Reclassifications from creditors 1 – 1

At 31 August 2023 17 – 17

£m

Property

provision

Contingent

consideration

provision Total

At 1 September 2021 13 1 14

Utilised in year – (1) (1)

Reclassifications from creditors 1 – 1

At 31 August 2022 14 – 14

Total provisions are split between current and non-current liabilities as follows:

£m 2023 2022

Included in current liabilities 1 –

Included in non-current liabilities 16 14

17 14

A charge of £3m has been recognised in the income statement in the current year to provide for the unavoidable costs of

continuing to service a non-cancellable contract. This provision will be utilised over the next three financial years.

Property provisions principally 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, which range from one year

upto tup to ten years.

145WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

17. Deferred tax

The following are the deferred tax liabilities and assets recognised by the Group and movements thereon during the current

and prior years.

£m

Opening

balance Rate change

(Credited) /

charged to

income

(Credited) /

charged to

equity

Foreign

exchange

Closing

balance

Accelerated tax depreciation 3 (1) (14) – 1 (11)

Leases 5 – – – – 5

Share-based payments 4 – 2 – – 6

Intangible assets (14) – – – – (14)

Losses carried forward 45 1 (15) – (1) 30

Unutilised interest expense 7 – 2 – (1) 8

Provisions 5 – 14 – – 19

Year ended 31 August 2023 55 – (11) – (1) 43

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

Deferred tax assets have not been recognised in respect of the following tax losses:

£m 2023 2022

Capital losses 83 84

Trading losses 28 15

111 99

Substantially all of the deferred income tax assets are expected to be recovered after more than one year.

The UK corporation tax rate is 25 per cent.

At 31 August 2023, deferred tax assets have been recognised in respect of tax losses and US unutilised interest expense.

The deferred tax assets of £119m (2022: £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 r. The Group has not recognised deferred tax assets on losses (including capital losses) amounting to £111m

(2022: £99m) and US unutilised interest expense amounting to £33m (2022: £13m) due to uncertainty over the timing

andeand extent of their utilisation. These losses 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 2023 2022

Deferred tax liabilities (non-current liabilities) – –

Deferred tax assets 43 55

43 55

146 WH Smith PLC Annual Report and Accounts 2023

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 2022 (132) (292) – (577) (1,001) 132 (869)

Other non-cash movements (1) (9) – (148) (158) – (158)

Other cash movements 133 – (84) 137 186 (74) 112

Currency translation – – – 22 22 (2) 20

At 31 August 2023 – (301) (84) (566) (951) 56 (895)

£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)

An explanation of Alternative Performance Measures, including Net debt on a pre-IFRS 16 basis, is provided in the Glossary on

page 168.

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

On 14 June 2023 the Group announced new financing arrangements. The Group’s existing lending facilities, comprising a

£250m revolving credit facility (‘RCF’) and a term loan were cancelled and repaid. The Group’s four-year committed £133m

term loan with Santander UK PLC, Barclays Bank PLC, BNP Paribas, J.P. Morgan Securities PLC and HSBC UK Bank PLC,

wasrwas repaid as part of the above refinancing. Instalments of £20m were paid prior to the repayment.

This repayment was funded by drawings under new facilities consisting of a £400m RCF (the ‘New RCF’). The New RCF is

for a five-year term due to mature on 13 June 2028, with two uncommitted extension options of one year each, which would,

subject to lender approval, extend the tenor to six or seven years if exercised. The New RCF is provided by a syndicate of

banks: Barclays Bank PLC, BNP Paribas, Citibank N.A. London Branch, Fifth Third Bank National Association, HSBC UK Bank

PLC, JP Morgan Securities PLC, PNC Capital Markets LLC, Banco Santander SA London Branch and Skandinaviska Enskilda

Banken AB (PUBL). Utilisation is interest bearing at a margin over SONIA. As at 31 August 2023, the Group has drawn down

£84m on the New RCF (2022: £nil, on the RCF).

Transaction costs of £4m relating to the New RCF have been capitalised and are amortised to the Income statement on a

straight-line basis.

147WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

18. Analysis of net debt (continued)

Convertible bonds

The Group has issued £327m (2022: £327m) guaranteed senior unsecured convertible bonds due in 2026. The bond 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).

The conversion price at 31 August 2023 was £24.7032. If not previously converted, redeemed or purchased and cancelled,

thebonds will be redeemed athe 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 2023 2022

Bank guarantees and guarantees in respect of lease agreements 61 51

Bank guarantees are principally in favour of landlords and could be drawn down on by landlords in the event that the Group does

not settle its contractual obligations under lease or other agreements.

Contracts placed for future capital expenditure approved by the directors but not provided for in these financial statements

amount to £27m (2022: £30m).

£m 2023 2022

Commitments in respect of property, plant and equipment 25 28

Commitments in respect of other intangible assets 2 2

27 30

148 WH Smith PLC Annual Report and Accounts 2023

Financial statements

20. Cash generated from operating activities

£m 2023 2022

Group operating profit 156 97

Depreciation of property, plant and equipment 42 37

Impairment of property, plant and equipment 4 7

Amortisation of intangible assets 14 13

Impairment of intangible assets – 1

Depreciation of right-of-use assets 104 81

Impairment of right-of-use assets 15 8

Non-cash change in lease liabilities – (5)

Share-based payments 12 9

Gain on remeasurement of leases (5) (4)

Other non-cash items (incl. foreign exchange) 7 (12)

Increase in inventories (12) (56)

Increase in receivables (22) (42)

(Decrease)/increase in payables (15) 88

Pension funding – (2)

Movement on provisions (through utilisation or income statement) 2 (1)

Cash generated from operating activities 302 219

21. Financial instruments

Categories of financial instruments

Carrying value

£m 2023 2022

Financial assets

Derivative instruments not in designated hedge accounting relationships

1 –

Derivative instruments in designated hedge accounting relationships

– 1

Receivables at amortised cost

102 78

Cash and cash equivalents 56 132

Financial liabilities

Derivative instruments in designated hedge accounting relationships

(1) –

Amortised cost

(1,244) (1,322)

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. Prior year number restated to

remove £30m of payables related to other taxes and social security.

Comparison of carrying values and fair values

The carrying value of the convertible bond on the Group’s balance sheet is £301m. The fair value of the convertible bond has

been estimated at £287m using a discounted cash flow approach based on market interest rates. This represents Level 2 fair

value measurements as defined by IFRS 13.

Risk management

The Group’s treasury function seeks to reduce exposures to interest rate, foreign exchange and other financial risks, andto change 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.

149WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

21. Financial instruments (continued)

Capital risk

The Group’s objectives with respect to managing capital (defined as net debt 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 18 for the value of the Group’s net debt 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 aprogrhas a progressive dividend policy and expects that, over time, dividends would be broadly covered two and a half times by

earnings calculated on a normalised tax basis.

The Group has in place a £400m committed multi-currency revolving credit facility. The covenants, tested half-yearly,

arebased on fixare 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 pre-IFRS

16 EBITDA).

The Group has 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). The conversion price at 31 August 2023 is

£24.7032 (2022: £24.99). 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 offinancial institutions which is awith a number of financial institutions which is available to be drawn for general corporate purposes including working

capital. The facility is due to mature on 13 June 2028.

The Group has a policy of pooling cash flows in order to optimise the return on surplus cash and also to utilise cash within

theGroup tthe Group 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:

2023 (£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 89 5 331 – 425

Trade and other payables 293 – – – 293

Lease liabilities 136 110 253 164 663

Total cash flows 518 115 584 164 1,381

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 321 – – – 321

Lease liabilities 146 100 235 177 658

Total cash flows 496 137 659 177 1,469

Non-derivative financial liabilities related to Trade and other payables for the year ended 31 August 2022 have been restated

to remove balances related to other taxes and social security. This has resulted in a £30m reduction in the balance disclosed.

150 WH Smith PLC Annual Report and Accounts 2023

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 fed 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 deposits and overdrafts.

At 31 August 2023, the Group had drawn down £84m from its £400m committed revolving credit facility. In the prior year,

the Group had drawn down £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.

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 2023 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 within derivative assets/liabilities is shown below:

£m 2023 2022

Fair value of derivative (liabilities) / assets (1) 1

At 31 August 2023, the total notional amount of outstanding forward foreign exchange contracts to which the Group has

committed is US$30m (2022: US$30m). These instruments will be used to hedge cash flows occurring up to one year from

the balance sheet date.

151WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

21. Financial instruments (continued)

Foreign currency risk (continued)

Gains of £nil (2022: £nil) have been transferred to the income statement and gains of £nil (2022: gains of £3m) have been

transferred to inventories in respect of contracts that matured during the year ended 31 August 2023. In the year to 31 August

2023, the fair value loss on the Group’s currency derivatives that are designated and effective as cash flow hedges amounted

to £2m (2022: gain of £3m).

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 2023

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 1.2689/1 (2022: 1.1640/1), EUR/GBP 1.1666/1 (2022: 1.1607/1)

andAUDand AUD/GBP 1.9583/1 (2022: 1.6967/1).

• Group debt and hedging activities reflect the positions at 31 August 2023 and 31 August 2022 respectively. As aconsequenc. As a consequence,

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. 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 inthe conteoportion in the 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.

2023 2022

£m

Income

gain/(loss)

Equity

gain/(loss)

Income

(loss)/gain

Equity

(loss)/gain

GBP SONIA/base rate interest rates 1% increase (1) – – –

USD/GBP exchange rates 10% increase (3) (36) (1) (56)

EUR/GBP exchange rates 10% increase 1 (4) – –

AUD/GBP exchange rates 10% increase – (1) – 2

GBP SONIA/base rate interest rates 1% decrease 1 – – –

USD/GBP exchange rates 10% decrease 3 47 2 63

EUR/GBP exchange rates 10% decrease (2) (2) 1 –

AUD/GBP exchange rates 10% decrease 1 1 – (2)

152 WH Smith PLC Annual Report and Accounts 2023

Financial statements

22. Called up share capital

Allotted and fully paid

2023 2022

Number

of shares

(millions)

Nominal

value

£m

Number

of shares

(millions)

Nominal

value

£m

Equity:

Ordinary shares of 22

⁄

p 131 29 131 29

Total 131 29 131 29

During the year, 2,019 ordinary shares were allotted under the terms of the Company’s Sharesave Scheme (2022: 1,633).

There was no effect from this allotment on share premium (2022: £nil).

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 £15m (2022: £9m) represents the cost of shares in WH Smith PLC purchased in the market and held by

the WHSmith Emplothe WH Smith Employee Benefit Trust to satisfy awards and options under the Group’s executive share schemes. The total

shareholding is 1,031,943 (2022: 622,989).

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 2022 318,615 2,512,407 461,277 111,934 3,404,233

Options and awards granted 246,718 1,403,432 278,982 – 1,929,132

Options and awards exercised (2,019) (69,916) (34,111) – (106,046)

Options and awards lapsed / cancelled (130,165) (514,693) (219,049) – (863,907)

Outstanding at 31 August 2023 433,149 3,331,230 487,099 111,934 4,363,412

Exercisable at 31 August 2023 245 10,764 41,726 – 52,735

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

Pence 2023 2022

Weighted average exercise price of awards:

– Outstanding at the beginning of the year 136.94 192.20

– Granted in the year 16.46 –

– Exercised in the year 30.65 15.71

– Lapsed in the year 233.18 126.54

– Outstanding at the end of the year 134.87 136.94

– Exercisable at the end of the year 7.48 947.30

153WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

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 2023 2022

Exercise

price (pence) Exercise period

20 October 2016 8,404 11,892 Nil Oct 2019 – 20.10.26

26 October 2017 2,360 38,315 Nil Oct 2020 – 26.10.27

5 November 2019 – 365,640 Nil Nov 2024 – 05.11.29

19 November 2020 1,004,807 1,015,635 Nil Nov 2025 – 19.11.30

19 November 2021 1,004,940 1,080,925 Nil Nov 2026 – 19.11.31

21 November 2022 1,310,719 – Nil Nov 2027 – 21.11.32

3,331,230 2,512,407

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 ofoffer and are normally ete of offer 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 2023 and 31 August 2022 are as follows:

Number of shares

Date of grant 2023 2022

Exercise

price (pence) Exercise period

5 June 2019 (3 year) 245 95,906 1,609.60 01.08.22 – 31.01.23

9 June 2021 (3 year) 191,679 222,709 1,400.00 01.08.24 – 31.01.25

14 June 2023 (3 year) 241,225 – 1,325.60 01.08.26 – 31.01.27

433,149 318,615

154 WH Smith PLC Annual Report and Accounts 2023

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 donot participate in this plan. PSP awors do not participate in this plan. PSP awards are equity-settled.

Outstanding awards granted under the PSP are as follows:

Number of shares

Date of grant 2023 2022

Exercise

price (pence) Exercise period

23 October 2014 870 870 Nil Oct 2017 – 23.10.24

20 October 2016 3,287 3,561 Nil Oct 2019 – 20.10.26

5 November 2019 – 178,398 Nil Nov 2022 – 05.11.29

19 November 2020 83,774 121,289 Nil Nov 2021 – 19.11.30

19 November 2021 145,123 157,159 Nil Nov 2024 – 19.11.31

21 November 2022 254,045 – Nil Nov 2025 – 21.11.32

487,099 461,277

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 2023, 73,049 (2022: 18,473) 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 besettled in cash based on the share pricwill be settled in cash based on the share price at the date of exercise. As at 31 August 2023 there were 111,934 outstanding

nil-cost cash-settled awards (2022: 111,934), which will be settled at various dates up to November 2031. The carrying amount

of liabilities arising from share-based payment transactions is less than £1m (2022: less than £1m).

Fair value information

2023 2022

Weighted average share price at date of exercise of share options exercised during year – pence 1,429.62 1,573.69

Weighted average remaining contractual life at end of year – years 8 8

155WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

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 2023 2022

20 15

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:

2023 2022

Share price – pence 1,364.50 1,514.00

Exercise price – pence Nil Nil

Expected volatility – per cent 47 41

Expected life – years 3.0 3.0

Risk-free rate – per cent 3.17 0.44

Dividend yield – per cent 0%–2% 0%–2%

Weighted average fair value of options – pence 1,042.45 1,068.26

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 2023 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

inthe yin the year ended 31 August 2023:

2023

Share price – pence 1,638.00

Exercise price – pence 1,325.60

Expected volatility – per cent 76

Expected life – years 3.5

Risk-free rate – per cent 4.14

Dividend yield – per cent 1.05

Weighted average fair value of options – pence 946

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

81 to 102.

£’000 2023 2022

Short-term employee benefits 3,509 3,327

Post-employment benefits 83 182

Share-based payments 2,076 1,577

5,668 5,086

There are no other transactions with directors.

156 WH Smith PLC Annual Report and Accounts 2023

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 2022 (280) 2 (9) 3 40 (244)

Cash flow hedges – – – (3) – (3)

Employee share schemes (2) – (6) – – (8)

Balance at 31 August 2023 (282) 2 (15) – 40 (255)

£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)

The Other reserves include reserves created in relation to historical capital reorganisation and proforma restatement of

£(238)m (2022: £(238)m), demerger from Smiths News PLC in 2006 of £69m (2022: £69m), and cumulative amounts relating

to employee share schemes of £(113)m (2022: £(111)m).

The convertible bond reserve is a reserve created to recognise the equity component of the convertible bond issued in

April2021 (see NotApril 2021 (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 (2022: £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.

26. 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.

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. 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.

In August 2022 the WHSmith 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 a result of this comprehensive risk-removal, WH Smith PLC is no longer required to make any future cash contributions

into the Trust regarding defined benefit liabilities. During the prior year ended 31 August 2022, prior to the completion of the

buy-in transaction, the Group made a contribution of £2m to the scheme in accordance with the agreed funding schedule.

The Group does not have an unconditional right to derive economic benefit from any surplus in the scheme, as the Trustees

retain the right to enhance benefits under the Trust deed, and therefore the present value of the economic benefits of any IAS

19 surplus in the pension scheme available on a reduction of future contributions is £nil (2022: £nil). Accordingly, no balance

sheet asset or liability exists in relation to this scheme. The income statement impact of this scheme is limited to administrative

costs only.

157WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

26. Retirement benefit obligations (continued)

a) Defined benefit pension schemes (continued)

ii) United News Shops Retirement Benefit Scheme

The Group also operates a smaller scheme, the United News Shops Retirement Benefits Scheme (“UNSRBS”), which is closed

to new entrants and further service accrual. 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 present value of obligations and fair value of assets are stated below.

£m 2023 2022

Present value of the obligations (5) (6)

Fair value of plan assets 5 6

Retirement benefit obligation recognised in the balance sheet – –

All of the assets of the UNSRBS scheme have a quoted market price in an active market.

b) Defined contribution pension scheme

The pension cost charged to income for the Group’s defined contribution schemes amounted to £6m for the year ended

31 August 2023 (2022: £5m).

158 WH Smith PLC Annual Report and Accounts 2023

Financial statements

27. 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

159WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Notes to the financial statements continued

27. Subsidiary companies (continued)

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 2023.

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 120, 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120,theGrpage 120, the Group has determined that it has control of these entities and has therefore consolidated their results.

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 Hungary Hungary 21 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

160 WH Smith PLC Annual Report and Accounts 2023

Financial statements

27. Subsidiary companies (continued)

Name

Country of

incorporation/

registration

Registered

address Class of shares

Proportion of

shares held

by Group

companies % Principal activity

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 Sweden AB Sweden 20 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-C,LLC USA 16 Ordinary 80 Retailing

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

BR InMotion IAH, LLC USA 16 Ordinary 65 Retailing

InMotion LAX, LLC USA 16 Ordinary 75 Retailing

InMotion LAX-IT,LLC USA 16 Ordinary 80 Retailing

Soundbalance IAH, LLC USA 16 Ordinary 67 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 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, LLC USA 16 Ordinary 80 Retailing

InMotion ATL-A, LLC USA 16 Ordinary 64 Retailing

161WH Smith PLC Annual Report and Accounts 2023

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

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

InMotion SLC,LLC USA 16 Ordinary 80 Retailing

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 BNA, LLC USA 16 Ordinary 84 Dormant

InMotion BOS-A, LLC USA 16 Ordinary 80 Dormant

InMotion BOS, LLC USA 16 Ordinary 70 Dormant

InMotion MKE, LLC USA 16 Ordinary 79 Dormant

Soundbalance SJC, LLC USA 16 Ordinary 67 Dormant

InMotion IAH, LLC USA 16 Ordinary 65 Dormant

Soundbalance BOS, LLC USA 16 Ordinary 67 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 Jacksonville, LLC USA 16 Ordinary 70 Retailing

MRG Las Vegas, LLC USA 16 Ordinary 90 Retailing

MRG Oakland, LLC USA 16 Ordinary 80 Retailing

MRG Palm Springs, LLC USA 16 Ordinary 75 Retailing

MRG Portland, LLC USA 16 Ordinary 75 Retailing

MRG Phoenix 1, LLC USA 16 Ordinary 65 Retailing

MRG Phoenix 2, LLC USA 16 Ordinary 65 Retailing

MRG Newark, LLC USA 16 Ordinary 74 Retailing

MRG Newark 2, LLC USA 16 Ordinary 74 Retailing

MRG Nashville, LLC USA 16 Ordinary 80 Retailing

MRG Orlando, LLC USA 16 Ordinary 70 Retailing

MRG Raleigh Terminal 1, LLC USA 16 Ordinary 55 Retailing

MRG RDU T2, LLC USA 16 Ordinary 80 Retailing

Notes to the financial statements continued

27. Subsidiary companies (continued)

162 WH Smith PLC Annual Report and Accounts 2023

Financial statements

Name

Country of

incorporation/

registration

Registered

address Class of shares

Proportion of

shares held

by Group

companies % Principal activity

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

MRG Seattle, LLC USA 16 Ordinary 80 Retailing

MRG Washington (DCA), LLC USA 16 Ordinary 75 Retailing

MRG Washington (DCA) II, LLC USA 16 Ordinary 75 Retailing

MRG Washington (DCA) III, LLC USA 16 Ordinary 75 Retailing

MRG Washington (DCA) IV, 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 Porlezza 12, Cap 20123, 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, Belgium

19 Bryggegata 6, 0250 Oslo, Norway

20 Norrlandsgatan 16, 111 43 Stockholm

21 1139 Budapest, Vaci ut 99-105, Hungary

27. Subsidiary companies (continued)

163WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

£m Note 2023 2022

Non-current assets

Investments 3 835 835

835 835

Current assets

Receivables: amounts falling due within one year 4 87 287

87 287

Current liabilities

Payables: amounts falling due within one year 5 (130) (166)

Borrowings 6 – (20)

(130) (186)

Net current assets (43) 101

Non-current liabilities

Borrowings 6 (301) (404)

(301) (404)

Total net assets 491 532

Shareholders’ equity

Called up share capital 9 29 29

Share premium account 316 316

Other reserves 10 40 40

Capital redemption reserve 10 13 13

Profit and loss account

93 134

Total equity 491 532

1 The loss for the year attributable to shareholders was £19m (2022: loss of £18m). See Note 2.

The financial statements of WH Smith PLC, registered number 5202036, on pages 164 to 167 were approved by the Board of

Directors and authorised for issue on 9 November 2023 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 1 August 202

£m

capital

premium

Capital

redemption

reserve

Other

reserves

Profit

and loss

account Total

Balance at 1 September 2022 29 316 13 40 134 532

Loss for the financial year – – – – (19) (19)

Total comprehensive loss for the year – – – – (19) (19)

Equity dividends paid during the year – – – – (22) (22)

Balance at 31 August 2023 29 316 13 40 93 491

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

Company balance sheet

As at 1 August 202

164 WH Smith PLC Annual Report and Accounts 2023

Financial statements

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 2023, 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. 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 £19m (2022: loss of £18m)

comprising finance costs of £23m (2022: £22m), non-underlying items of £1m (2022: £nil), offset by a tax credit of £5m

(2022: £4m). There were no other recognised gains or losses.

The Company did not have any employees during the year ended 31 August 2023 (2022: nil). All directors were remunerated

by other Group companies. Disclosure of audit fees payable in respect of the Company is included in Note 3 to the Group’s

consolidated financial statements.

3. Investments

A full list of the Company’s subsidiary undertakings is included in Note 27 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.

4. Receivables: amounts falling due within one year

£m 2023 2022

Amounts owed by subsidiary undertakings 82 282

Prepayments – 1

Current tax receivable 5 4

87 287

Notes to the Company financial statements

165WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

4. Receivables: amounts falling due within one year (continued)

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 2023 2022

Amounts owed to subsidiary undertakings 129 162

Bank overdrafts – 2

Accruals and deferred income 1 2

130 166

Amounts owed to subsidiary undertakings are unsecured, non-interest bearing and repayable on demand.

6. Borrowings

£m 2023 2022

Current Term loans – 20

Non-current Term loans – 112

Convertible bonds 301 292

301 424

Term loans and revolving credit facilities

On 14 June 2023 the Group announced new financing arrangements. The Group’s existing lending facilities, comprising a

£250m revolving credit facility (‘RCF’) and a £113m term loan were cancelled and repaid.

This repayment was funded by drawings under new facilities consisting of a £400m RCF (the ‘New RCF’). Alongside other

Group companies, the Company is a guarantor on this facility.

The New RCF is for a five-year term due to mature on 13 June 2028, with two uncommitted extension options of one

year each, which would, subject to lender approval, extend the tenor to six or seven years if exercised. The New RCF is

provided by a syndicate of banks: Barclays Bank PLC, BNP Paribas, Citibank N.A. London Branch, Fifth Third Bank National

Association, HSBC UK Bank PLC, JP Morgan Securities PLC, PNC Capital Markets LLC, Banco Santander SA London Branch

and Skandinaviska Enskilda Banken AB (PUBL). Utilisation is interest bearing at a margin over SONIA. As at 31 August 2023,

theGroup has drawn down £84m on the New RCF (2022: £nil, on the RCF). The Company has not drawn on the facility.

The Company’s four-year committed £133m term loan with Santander UK PLC, Barclays Bank PLC, BNP Paribas,

J.P.Morgan Securities PLC and HSBC UK Bank PLC, was repaid as part of the above refinancing. Instalments of £20m were paid

priorto the repayment.

Convertible bonds

The Company has 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). The conversion price at 31 August 2023

was £24.7032 (2022: £24.99). 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 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.

Notes to the Company financial statements continued

166 WH Smith PLC Annual Report and Accounts 2023

Financial statements

7. Dividends

Amounts paid and recognised as distributions to shareholders in the year are as follows:

£m 2023 2022

Final dividend for the year ended 31 August 2022 of 9.1p per ordinary share (2022: nil) 12 –

Interim dividend for the year ended 31 August 2023 of 8.1p per ordinary share (2022: nil) 10 –

22 –

The Board has proposed a final dividend of 20.8p per share, amounting to a final dividend of £27m, is not included as a

liability in these financial statements and, subject to shareholder approval, will be paid on 1 February 2024 to shareholders

registered at the close of business on 12 January 2024.

8. Contingent liabilities

Contingent liabilities of £1m (2022: £1m) are in relation to insurance standby letters of credit.

The Company will guarantee the debts and liabiliti.es 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

9. Called up share capital

Allotted and fully paid

2023 2022

Number of

(millions)

Nominal

value

£m

Number of

(millions)

Nominal

value

£m

Equity:

Ordinary shares of 22

⁄

p 131 29 131 29

Total 131 29 131 29

During the year, 2,019 (2022: 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 (2022: £nil).

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.

10. 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 (2022: £13m) represents the par value of shares repurchased and cancelled under the

Company’s share buyback programme and is reclassified from Share capital to the Capital redemption reserve.

167WH Smith PLC Annual Report and Accounts 2023

Strategic report Corporate governance Financial statements Additional information

Additional information

168 WH Smith PLC Annual Report and Accounts 2023

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.