WH Smith PLC

1 WH Smith PLC ANNUAL REPORT AND ACCOUNTS 2015WH Smith PLCANNUAL REPORT AND ACCOUNTS 2015WH Smith Sydney International Airport 1 Strategic reportAbout us 1 Group at a glance 2 Business model and strategy 4 Our markets 6 Chairman s statement 7 Chief Executive s review 8 Review of operations: Travel 10 Review of operations: High Street 12 Financial review 14 Key performance indicators 18 Principal risks and uncertainties 20 Other disclosures 22 Corporate responsibility programme 22 Customers 22 Ethical trading and human rights 22 Forest sourcing 22 Environment 23 Social and community matters 24 Employees and diversity 25 2 Corporate governance Corporate governance report 26 Board of Directors 26 Audit Committee 28 Nominations Committee 32 Remuneration Committee 33 Directors biographies 34 Directors remuneration report 35 Directors report 53 Statement of directors responsibilities 56 3 Financial statements Independent auditors report to

2 57 the members of WH Smith PLC Group income statement 63 Group statement of 64 comprehensive income Group balance sheet 65 Group cash flow statement 66 Group statement of changes in equity 67 Notes to the accounts 68 Independent auditors report to 96 the members of WH Smith PLC Company balance sheet 98 Notes to the Company balance sheet 99 4 Other informationInformation for shareholders 101 CONTENTSDISCLAIMERThis 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.

3 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 for ward-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 for ward-looking statements. Nothing in this Annual report should be construed as a profit out more at @whsmith @whsmithofficial Smith PLC Annual report and accounts 2015 STRATEGIC REPORTCORPORATEGOVERNANCEOTHER INFORMATIONFINANCIAL STATEMENTSWH Smith PLC Annual report and accounts 201501WH Smith PLC IS ONE OF THE UK S LEADING RETAILERS AND IS MADE UP OF TWO CORE BUSINESSES TRAVEL AND HIGH STREET.

4 OUR GOAL IS TO BE:> The leading retailer in convenience, books and news for the world s travelling customer. > Britain s most popular high street stationer, bookseller and US >WH Smith PLC is one of the UK s leading retailers and is made up of two core businesses Travel and High Street. >WHSmith Travel has a presence in a wide range of locations including airports, train stations, hospitals and motorway service areas with a growing international business. >WHSmith High Street is present on most of the significant high streets in the UK. >WHSmith reaches customers online via and its specialist personalised greetings cards and gifts websites, and >WHSmith employs approximately 14,000 colleagues.

5 >WH Smith PLC is listed on the London Stock Exchange (SMWH) and is included in the FTSE 250 Index. >A commitment to the principles of corporate responsibility is a key focus for WHSmith. We continue to be ranked highly in the Business in the Community s Corporate Responsibility Index in recognition of our out more about WHSmith at Headline Group profit before tax excludes the non-cash income statement charge for pensions and pension service credit. A reconciliation of Headline Group profit before tax to statutory Profit before tax is provided in the Group Income Statement on page Restated for adoption of IAS 19 Revised and recognition of IFRIC 14 minimum funding Restated for adoption of IAS 19 Group profit before tax1 ( m) 123m+8% (2014: 114m)Headline diluted earnings per share (p) +12% (2014: ) 126/11/2015 15.

6 10WH Smith PLC Annual report and accounts 201502 Strategic reportGROUP AT A GLANCEWH Smith PLC is made up of two core businesses Travel and High sells a range of products to cater for people on the move or in need of a convenience strategy is to be the leading retailer in convenience, books and news for the world s travelling at 31 August 2015, the business operated from 736 units (2014: 712 units) mainly in airports, railway stations, motorway service areas, hospitals and workplaces. 163 of these units (2014: 129 units) are outside the delivered another strong profit1 performance, up ten per cent year on year. We made good progress in Travel s growing international business, with 200 units now open or Travel trading profit is stated after directly attributable share-based payment and pension service charges and before allocation of central costs, interest and taxation.

7 See Notes to the accounts Note 2, Segmental analysis of results on page 521m(2014: 477m)Gross margin growth50 bps(2014: 100 bps)Profit1 80m(2014: 73m)Stores736(2014: 712) 226/11/2015 15:10 STRATEGIC REPORTCORPORATEGOVERNANCEOTHER INFORMATIONFINANCIAL STATEMENTSWH Smith PLC Annual report and accounts 201503 HIGH STREETHigh Street sells a wide range of Stationery, Books, Newspapers, Magazines and Impulse strategy is to be Britain s most popular high street stationer, bookseller and at 31 August 2015, the business operated from 615 High Street stores (2014: 604 stores), located in almost all of the UK s most significant high Street delivered a good profit2 performance, up two per cent year on year.

8 2 High Street trading profit is stated after directly attributable share-based payment and pension service charges and before allocation of central costs, interest and taxation. See Notes to the accounts Note 2, Segmental analysis of results on page 657m(2014: 684m)Gross margin growth140 bps(2014: 190 bps)Profit2 59m(2014: 58m)Stores615(2014: 604) 326/11/2015 15:10WH Smith PLC Annual report and accounts 201504 Strategic reportBUSINESS MODEL AND STRATEGYOur business model explains what we do and how we deliver our primary purpose of creating value for our shareholders. We aim to do this through improving our profitability and cash flow, and delivering sustainable returns.

9 WHSmith is one of the UK s leading retailers with two distinct businesses Travel and High Street. At the heart of both our businesses are our people and our Shareholder ReturnsMaximising returns from our spaceManaging our offer to reflect changing needs of our customerDevelop new formats and channels in the UK and internationally231 The leading retailer in convenience, books and news for the world s travelling customerBritain s most popular high street stationer, bookseller and newsagentOperating responsiblyFocused use of cashOptimising efficiencyThe right people and skills5467 OUR GOALSOur two businesses have distinct goals and strategies with some common elements, for example, the WHSmith brand and some shared services.

10 Travel and High Street are run by separate management teams reflecting the different customers, strategies, operating models and cost Travel, our goal is to be the leading retailer in convenience, books and news for the world s travelling High Street, our goal is to be Britain s most popular high street stationer, bookseller and newsagent. We aim to deliver our goals through our strategic priorities and initiatives. These are detailed on the following 426/11/2015 15:10 STRATEGIC REPORTCORPORATEGOVERNANCEOTHER INFORMATIONFINANCIAL STATEMENTSWH Smith PLC Annual report and accounts 2015051 DEVELOP NEW FORMATS AND CHANNELS IN THE UK AND INTERNATIONALLYFor Travel this means: working closely with our landlords, franchise and joint-venture partners; renewing existing contracts and concessions; identifying new locations, building on the strength of the WHSmith brand; developing new formats which leverage our existing expertise.