WH Smith books a return to profit

HIGH Street stationery and books group WH Smith has bounced back to profit, its half-year results showed today. The troubled retailer exceeded analysts expectations of earnings of £68m to hit £70m.

However, the figure was dragged down to £61m once exceptional items, including the cost of selling of the firm's US business, were included.

WH Smith has struggled against an onslaught from supermarkets who are taking a greater market share of book and DVD sales.

Chief executive Kate Swann, who arrived from Argos in November 2003 to head the group's recovery, said the figures represented a substantial improvement but conceded there was still a long way to go to before it could achieve a full turnaround.

Smith plunged into the red last year with a £72m loss after hefty exceptional items. One-off costs this time included an £8m impairment charge relating to a discontinued business.

Smith is not immune to the continued slowdown on the UK High Street. Total sales on continuing operations were flat at £1.4bn, though this marked an improvement on the early part of the year when Smith admitted that Christmas sales had slipped by 1%. Even so, this was not enough to prevent a 3% drop in like-for-like sales on the High Street. Book sales proved stubborn, remaining 3% adrift but stationery sales rose 4%.

Smith has struggled to compete with online retailers such as Amazon and the major supermarket groups, all of which have started selling books, magazines, newspapers and CDs in a big way. Smith's cost base has also been a problem. Swann has targeted big savings on overheads.

The stationery business has been one of the first to receive Swann's full attention and the improvement there went down well in the City. Swann said cost savings were being delivered faster than planned with £13m already achieved and another £30m due over the next three years.

Her actions have included the sale of non-core businesses, including publisher Hodder Headline which was sold last August. Some £205m of the £224m proceeds have been returned to shareholders.

Bid interest for WH Smith as a whole has waned since last year when it held talks with private equity firm Permira about a possible £940m takeover.