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WHSmith Reports

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October 15-31, 2003 Edition

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sales up slightly. WHSmith Reports Strong

Rebound in Book Sales

LONDON/03/10/16–WHSmith’s High Street book stores reported a strong rebound in the second half of the year with like-for-like sales (lif) in books up 11 percent, following a drop of 4 percent in the first half of the fiscal year. WHSmith owns Hodder Headline, publishers in the UK of the Harry Potter series. Book sales grew by only 1 percent for the full year.

Excluding the Harry Potter release, lfl sales for the Group publishing unit increased in the second half by 5 percent, however gross margin declined 3 percent as a result of discounting on Harry Potter and costs of certain book promotions.

In the entertainment segment, lfl sales of entertainment product fell 6 percent in the second half, continuing the trend of the first half of the year. Gross margin in entertainment products fell by 3 percent, largely due to pricing competition for CDs. Despite the overall weak performance in entertainment, the company maintained its strong growth of DVD sales, up 68 percent over the previous year.

The Hodder Headline publishing group, a core business for WHSmith, reported revenues up by 2 percent to £136m, aided by bestsellers from James Patterson, Martina Cole, Michel Thomas, Kate Adie and Hillary Clinton.

Sales at the Hodder Educational unit, however, fell considerably as a result of a crisis in school funding in the UK, but fell within the company’s expectations. Profit was flat year-to-year at £19m and overall net margin decreased by 13.2 percent, nearly the same as for 2002.

Commenting on the results, Richard Handover, Group Chief Executive said: “UK Retail has had a difficult year following a disappointing Christmas trading period. In the second half we have seen a good performance in the books category and our stationery and news & express categories have traded satisfactorily. However, as previously disclosed, weak sales within the entertainment category, reflecting the challenging music market, continued throughout the year and severely restricted overall profitability.

“Hodder Headline maintained its profits despite its educational business being adversely affected by the well publicized funding shortfalls in schools,” Handover continued. ” Best selling titles included ‘Maura’s Game’ by Martina Cole and ‘The Kindness of Strangers’ by Kate Adie. “The Group’s cash position and balance sheet remain strong. “This year has started the way we finished last year, with extremely testing trading conditions. As we enter the all important Christmas trading period our markets remain intensely competitive. However we believe that we have strengthened our offer in terms of product, value and advertising compared to last year,” he concluded.