WH Smith faces accounting scandal and regulatory probe as profits tumble

WH Smith is under formal investigation by the Financial Conduct Authority following a significant accounting error in its United States business. This misstatement, which inflated profits over several years, resulted in the recent resignation of chief executive Carl Cowling. The mistake prompted a restatement of group profits for the financial years ending August 2023 and August 2024.

The FTSE 250 travel retailer published its delayed annual results after auditors required more time to address the scale of the problem. The blunder came to light after management discovered an overstatement of approximately £30 million in expected trading profit in North America. This revelation wiped nearly £600 million from WH Smith’s stock market valuation and resulted in the largest single day share price decline in the company’s history.

Headline profit before tax for the financial year fell to £108 million, compared to £114 million the previous year and well below the £140 million forecast before the accounting issues emerged. Profits in the North American division reached £15 million, the upper limit of a previously revised estimate. The company has cut its annual dividend for the first time since the pandemic, now paying 17.3p per share, down from 33.6p last year. On the day results were announced, shares declined by 7 percent to close at 637p.

WH Smith stated it will apply malus and clawback to reclaim bonuses awarded to former chief executive Carl Cowling and ex-chief financial officer Robert Moorhead, with the pair having received a combined £3.3 million in bonuses between 2023 and 2024. A Deloitte review identified the cause of the accounting errors as a lack of financial oversight and a focus on target-driven performance within the US business.

Nicky Dulieu, chairwoman of the remuneration committee, will step down at the company’s annual meeting in February. The results signal the first comprehensive view of the challenges facing WH Smith as it seeks to recover credibility and restore investor confidence. The Financial Reporting Council may launch a further probe into auditor PwC, but no final decision has been made. Interim chief executive Andrew Harrison remarked that it has been a difficult year for the group, noting that there is much to do to rebuild confidence and improve returns.