Wh Smith Share Discussion Threads

[fortyfive] 08/10/2004 16:11

t- I assume it was done to permit holders to choose between paying Divi tax or Cap gains. SMWH is on track to make more per share anyway, plus the pension deficit is out the way in a tax efficient manner that boosts earnings. as these go up, I would not be surprised to see another bid approach.

[tanners] 03/10/2004 21:26

Whilst I understand the reasons for the re organisation, I am interested as to the methology behind it.

Is there an advantage to redistribute cash in this manner (i.e. by creating a C class share that will then be repurchased), and why the option for shareholders to have either the C shares re purchased or the 85p value paid as a dividend?

Views apreciated.

tanners

[fortyfive] 29/9/2004 10:17

pathetic more like. just a well announced 18 for 25 share split plus 1 pref share(@85p) per old share. see YF above.

[patricktrfc] 28/9/2004 08:59

Anyone see bloomberg last night. WH Smith down 25% - accurate stock prices or what?

[fortyfive] 20/9/2004 20:06

there was a big buy(?) of 605K shares this morning. probably temp stock shortage. still the trend is your friend. in at 305, well done YF.

[croquetman] 20/9/2004 12:58

Could it be another bid on the way? WHS will be cheaper to buy at the weekend.

[celestial] 20/9/2004 11:32

Up indeed. Any reason for this? Can't see anything in the news and it is a bit of a red day generally too!

[fortyfive] 20/9/2004 11:17

up she goes.....

[fortyfive] 19/9/2004 16:54

should make 360p eventually.
IC have a good bit on the scheme/scam or the ''WH Smith's pay plan''

My jaundiced eye turns to the new management incentive plan proposed by WH Smith. This hangs on a shareholder vote next Thursday, at a special meeting which will also say yes or no to the £220m sale of the group's book publisher, Hodder Headline. Well, at least, in contrast to the Berkeley plan covered last week, WH Smith is not tying the two resolutions together: shareholders are not required to approve the plan in order to get the Hodder payout.

It has a further virtue. Berkeley's managers face no downside: if the shares rise (for whatever reason), they're quids in; if the shares fall, they lose nothing. This feature renders hollow Berkeley's claim that the plan aligns management's and shareholders' interests.

At WH Smith, executive directors and senior managers entitled to join the plan must have a shareholding in their company, and rewards from the plan are tied to the size of that shareholding. The maximum shareholding that they can count towards the scheme is one equal to basic salary. In the case of chief executive, Kate Swann, that's £475,000.

I'm guessing she won't be pressed to find the money: as compensation for giving up her long-term incentive pay at Argos - from where she was recruited late last year - her new employers made her a special payment of £500,000 on day one, and have reserved the same again if she stays for two years. And, mindful of the 2005 bonus she was apparently eyeing up at Argos, she this month collected another £220,000 from WH Smith, purely by dint of staying in the job for the first nine months. In addition, she stands to receive an annual bonus of up to £475,000 next year. Plus the basic. Plus share options worth three times' salary.

Even leaving out the options, the bonuses and her pension arrangements, it all tots up to £2.6m in less than three years - regardless of performance. That is a lot of money for being in charge of the stock market's 200th largest company.

It is against this pretty rich background that shareholders should judge the downside she is taking on - buying £475,000-worth of WH Smith shares - in order to get into the upside of the WH Smith incentive plan. I think they should conclude that the downside is modest. Which brings us to the upside.

Here, again, one has to acknowledge that the WH Smith plan is better constructed than the Berkeley plan. At Berkeley, there is no acknowledgement of the fact that if the stock market in general rises, then so, too, do most shares - more or less regardless of whether management is doing a good job. At WH Smith, half of the payout is based on share price performance and this half is required to outperform the index. That said, the description in the WH Smith circular of how this is calculated is so obscure that despite having read it several times, I have only the barest idea of how it works. I suspect that the 13 per cent per year return figure quoted on page 41 of WH Smith's circular is there for cosmetic effect - the scheme is capable of paying out on a return of only 5 per cent per year (above the 354p "stake in the ground" set by the putative Permira takeover bid).

The other half of the payout requires earnings per share to rise by at least 20 per cent plus inflation per year between now and 2007. It sounds good, but here again you have a liberal coating of cosmetics. WH Smith's earnings per share this year are extremely depressed. I see that ABN Amro's retail analyst - not the company's keenest fan - forecasts that normalised earnings will rise from 18.5p this year to 33p for the year ending August 2006, more or less by a simple "reversion to the mean" kind of recovery. If they do - and they stay there for the following year - the lower target for this half of the management incentive plan will already have been satisfied. By my estimate, earnings need only to get to 40p by 2007 to produce a maximum payout. And 40p is the level WH Smith earnings stood at in 2000 - which was not a particularly glorious year.

If you had to create a national high-street chain, your blueprint would not be WH Smith. But if you were a director trying to figure out how to make some decent money, I think you would be very happy to start from where WH Smith is now. I would not support this scheme.

[fortyfive] 13/9/2004 16:27

most of them I imagine, if they want to stay there. Also there is the positive on borrowing 120£m to square the pension fund, is it boosts after tax earnings & sorts out a takeover hinderance. Had to dump GLH today, might get some more SMWH. I get the impression there is a solid buyer out there currently, significant holders are:-
Silchester International Investors
39,150,694
15.63%

Hermes
16,432,241
6.56%

Fidelity Investments
16,381,763
6.54%

M&G Investment Management
10,464,141
4.18%

Legal & General Investment
8,629,756
3.44%

[m.t.glass] 13/9/2004 11:39

It'll be interesting to see how many senior employees are confident enough to put part of their their own paypacket upfront to qualify.. And presumably their commitment (or lack of) will be evident to colleagues and superiors..).

Who will dare join in - and who will dare be seen not to?

[fortyfive] 13/9/2004 10:10

ticking up nicely.

The scheme(see YFabove), which requires approval by shareholders at an extraordinary meeting on September 23, would allow about 40 senior employees, including executive directors, to invest up to 100 pct of their gross salary in shares. If the company outperforms over the next three years, the participating
staff would receive a share award for up to five times their initial investment.
Shareholders said they were broadly satisfied with the scheme, given that
the management had to hit high targets to receive their payouts.
"We are relatively comfortable with it because it only pays out if they do
particularly well. If the management hits any of these targets, the shares will
have gone up a lot," one top-five investor is reported as saying.
Under the terms of the scheme, the shares, currently trading at 308 pence,
must rise to an estimated 440 pence for executives to qualify for a minimum
pay-out of twice their original investment. To qualify for the maximum award,
the shares must reach an estimated 557 pence.

WH Smith PLC will be announcing its preliminary results for the year ended 31 August 2004 on Thursday 14 October 2004.

[fortyfive] 30/8/2004 12:20

just done some weekend research on this. I think your probably right ydderF. numbers stack up. turnover & assets there, yield OK. everyone commentating is so negative too, probably the floor. My local smiths is pretty grotty and poor goods & prices, but people still buy stuff in there owing to the good high street location. I'll Try 4000. p.s. stop 280p.

[ydderf] 28/8/2004 11:40

Cash back and incentive scam, sorry scheme now announced:

The directors nest feathering scheme can hardly fail. There will be 180m shares instead of 251m and that will mean an immediate boost to eps. Although the awful accounting year 2004 is irrelevant since it is now over, the reconstruction would have given pro-forma eps of 26p even for that disastrous period (analysts estimate 19p on 'old' capital). Next year £95 million should be possible - equal to 66.5m on 30% tax, or eps of 37p (!). I can see that 47p sould easily be possibly in the year after, the directors only have to ensure that the next two accounting periods are good - anyone could do this by cutting costs and not investing.

So a progression of 37p, 47p -?p should have the shareprice at £5-7 in 24 accounting months. Don't forget, this is no more than the takeover vehicle had planned, nothing magical necessary for Kate and her chums to do!

[ydderf] 28/8/2004 11:38

now we know the details
Cash back and incentive scam, sorry scheme now announced:

They directors nest feathering scam hardly fail. There will be 180m shares instead of 251m and that will mean an immediate boost to eps. Although the awful accounting year 2004 is irrelevant since it is now over, the reconstruction would have given pro-forma eps of 26p even for that disasterous period (analysts estimates 19p on 'old' capital). Next year £95 million should be possible - equal to 66.5m on 30% tax, or eps of 37p (!). I can see that 47p sould easily be possibly in the year after, the directors only have to ensure that the next two accounting periods are good - anyone could do this by cutting costs and not investing.

So a progression of 37p, 47p -?p should have the shareprice at £5-7 in 24 accounting months. Don't forget, this is no more than the takeover vehicle had planned, nothing magical necessary for Kate and her chums to do!

[ydderf] 28/8/2004 11:37

now we know the details

Cash back and incentive scam, sorry scheme now announced:

They directors nest feathering scam hardly fail. There will be 180m shares instead of 251m and that will mean an immediate boost to eps. Although the awful accounting year 2004 is irrelevant since it is now over, the reconstruction would have given pro-forma eps of 26p even for that disasterous period (analysts estimates 19p on 'old' capital). Next year £95 million should be possible - equal to 66.5m on 30% tax, or eps of 37p (!). I can see that 47p sould easily be possibly in the year after, the directors only have to ensure that the next two accounting periods are good - anyone could do this by cutting costs and not investing.

So a progression of 37p, 47p -?p should have the shareprice at £5-7 in 24 accounting months. Don't forget, this is no more than the takeover vehicle had planned, nothing magical necessary for Kate and her chums to do!

[croquetman] 25/8/2004 13:44

When is the EGM? Is it 30 days after the notice?

[ydderf] 19/8/2004 10:10

....interesting........i am beginning to think that close to 300p will be the level a couple of months after the divestment. As soon as it becomes apparent that the xmas period is going to be better then the stupidly low expectations of the non-thinkersanistas - the share price will rocket.

[croquetman] 03/8/2004 14:08

Any idea what the impact on the share price will be when the 85p per share is distributed? Will it hit the price like a dividend or will it have much less impact? If its the former could we see a new bidder coming back in at around 300p

[ydderf] 02/8/2004 13:05

croquetman - just buy the shares imho - the rest of you can see what the MASTER saw now perhaps........

[croquetman] 02/8/2004 12:51

Does the sale of Hodder really mena "The return of cash to shareholders is equivalent to approximately 85 pence per share" as the press release suggests. What date is the important share holding date for this.

[0238jr] 30/7/2004 10:06

likewise- unlike many who go short, i wish all holders well (at least now that i am out!)

[0238jr] 30/7/2004 07:27

clinton cards sell cards. they are the best at it. if you want to buy a card it clintons is one of the few places you chose to go.

smiths on the other hand sell all sorts of stuff, and aren't the best at any of it.

if i want to buy a book, i certainly don't consider smiths as a first stop= other than for the emergency purchase at the station/ airport etc.

finspreads seem to have closed my position on this for some reason, but this still looks like it's going down to me.

[ydderf] 30/7/2004 05:10

jeffian - my thoughts:

WH Smiths ( like M&S ) is embedded in the UK culture, there is very little possibility of it fading away, in fact on static turnover and profits into infinity it still must be worth 3-400m

There is a turnover of 3bn overall, every additional 1% on operating margins would yield 30m, - give each of those steps a p/e of 8 = 240 m market cap uplift. They have exceptionally - freakish even - low op margins at present.

The bid has spread fear and urgency (just like in M&S) amongst the many who have a lot to lose in being taken over, after years of laziness, they have to perform, and what they have to do isn't very difficult. Go into a Clinton Card shop and tell me how difficult that is! Do the Clinton staff all have P.hds? Has some magic ingredient been applied there, beyond the ken of any normal mortal to replicate - but WHS have much more muscle than Clinton. The same applies to their other offers, they can take market dominance in the product areas of their choice.

If they fail, they will either be bid for again - after all the pension poison pill would have have been neutralised - or they will revert to normal profits and earnings, giving a p/e of about 8 at this level.It's worth remembering that the slump in profits was after years of steady earnings and the simple causes have already been identified - poor stock and offer on dvds and cds, and no competitive offer on books - and rectified, AND the US alabatross has been slain.