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WH Smith has seen pre-tax profits fall from £114m to £108m in its full-year results, as it confirmed an investigation by the Financial Conduct Authority (FCA ) has launched regarding a previous accounting error.
Despite the fall in profits, total revenues for the year rose by 5% to £1.55bn, with WH Smith also completing its transformation into a pure-play travel retailer after selling its UK high street business and Funky Pigeon.
The retailer now operates just from travel locations, with a focus on airports, rail stations and travel hubs in the UK, North America and other international markets. It saw revenues rise 5% in the UK; 7% in North America; and 12% in the rest of the world, while headline trading profits fell from £170m to £159m.
The group said earnings were affected by a year of investment in the UK and weaker performance in parts of its North American estate.
During the period, WH Smith had set strategic priorities to drive future growth by strengthening its leadership in UK travel essentials, expanding health, beauty and food-to-go ranges, and sharpening its focus in North America by exiting fashion and speciality stores and reviewing the scope of its InMotion business.
Internationally, the group said it would concentrate on core markets, pursue new growth through franchises and exit non-core territories.
WH Smith also said a remediation plan was under way following the findings of a Deloitte review announced in November, adding that the FCA had begun an investigation into the company. It did not provide further detail on the scope of the probe.
WH Smith previously postponed its full-year results following an accounting error that saw its US profits be overstated by around £30m. Earlier this year, WH Smith said it cut its profit forecast for its North American business after uncovering an accounting overstatement of around £30m.
As a result, it now expected headline trading profit from North America to be about £25m, compared with previous market expectations of around £55m.
The retailer said the error was largely linked to the accelerated recognition of supplier income in the division.
Andrew Harrison, interim group chief executive, said: “It has been a difficult end to the year for the group. The board and I are acutely aware that we have much to do to rebuild confidence in WHSmith and deliver stronger returns as we move forward.”
