Almost £500m wiped off WH Smith after accounting error
WH Smith warned investors on Thursday that expected profits at its North American business had been significantly overstated, with the division expected to bring in £25m this year, down from previous forecasts of £55m.
It means the company's full-year profits are expected to be around £110m, not the £140m that analysts had previously expected.
The blunder led to WH Smith shares falling by 37pc on Thursday. This knocked £491m off the company's value and sent the company's shares to their lowest level in 12 years.
They are currently on track to record their largest-ever one-day fall.
Bosses blamed the accounting error on the 'accelerated recognition of supplier income', which led to profits being overstated.
The company's head office is understood to have been alerted to the issue in the last week. Max Izzard, the chief financial officer, has since flown out to America to settle the matter.
WH Smith has also called in Deloitte to conduct an independent review, with more details likely to be revealed when the company releases full-year profits towards the end of the year.
'In preparation for the Group's year-end results for the financial year ending August 31 2025, a current financial review has identified an overstatement of around £30m of expected headline trading profit in North America', WH Smith said.
'This overstatement is largely due to the accelerated recognition of supplier income in the North America division.'
WH Smith's North America business comprises 320 airport stores under names including District Market and Flight Stop, as well as franchised stores for brands such as Lego and Harley Davidson.
The company is focused on its lucrative travel business after agreeing to sell its 480 high street stores to the investment company Modella Capital.
The deal has led to the WH Smith name disappearing from the high street after more than 230 years, with the stores being rebranded as TG Jones – a fictional name chosen to sound similar to WH Smith.
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