WH Smith up to £66m as refocus pays off

Three years into a five-year plan devised to rescue a business that seemed headed for extinction, Swann was able to report profit up a third to £66 million in the year that ended in August.

She was set to face questions from the City today about what she intends to do next, and whether she will use the company's strong cash position to begin an aggressive share buyback programme.

The former Argos executive, who joined Smiths in November 2003, tried to play down talk that the recovery is secure.

"We don't feel it is done. We set out a five-year plan, and there is still further to go," she said. "We do have a good cash position, and we will be looking at use of capital."

Swann, 42, began her career at WH Smith by recording spectacular annual losses of £135 million, leading to immediate scepticism that the group had appointed the right person.

Until recently, she was fending off talk the group would fall to a takeover, ending its 212-year history as a household name on the UK High Street.

Her strategy has been to move away from sales of entertainment goods to focus on the core of WH Smith - magazines, newspapers, confectionery and books.

Reflecting the overhaul, like-for-like sales fell 4% but margins improved thanks to £10 million of cost savings over the year.

Swann admitted there is an "uncertain consumer environment" heading into the key Christmas season, but average transaction values are less than £5 a time at WH Smith, meaning it should be less vulnerable to jitters in the economy. A marketeer who has also worked at DIY chain Homebase, she said the group has "planned accordingly" for reduced consumer confidence.

WH Smith's travel arm now operates from 309 outlets in railway stations and airports and on motorways. It gets hit when weather is bad and people travel less but now accounts for more than a third of group profits after beating analysts' expectations. The performance on the High Street was roughly in line with City predictions.

WH Smith signed a joint venture earlier this year to open 70 post offices within its stores. Twenty-three are trading so far, with Swann claiming customer feedback has been good. She concedes that integrating a post office into already-busy stores is "operationally complex", and has assigned a separate management team to make the rollout as smooth as possible.

Swann admits that long queues can be an issue at bigger stores on High Streets but says the group is working to keep customers happy.

Total sales in 2007 hit £1.2 billion, slightly down on a year earlier. A final dividend of 8.1p, up 31%, will be paid, taking the total to 11.8p.

The shares were today at 4071/2p, valuing the company at £745 million.