Every time WHSmith posts results, the same magic is performed: sales fall and profits rise. But while everyone knows that Paul Daniels is an illusionist, Swann pulls hard cash out of the hat – tangible wealth that registers in shareholders’ real-world accounts.
Despite the financial wizardry, some shareholders find it hard to believe that such a spell can be cast indefinitely. That unease, combined with typically downbeat comments from Swann about the intensity of competition at Christmas, meant WHSmith shares plunged by nearly 7 per cent – even as the retailer revealed a 29 per cent profits uplift to£66 million.
So, how long can Swann continue to work wonders? Unless Christmas really does turn out to be a disaster, Swann is in line for a bonus of£3.5 million and the management team will divvy up£20 million under a long-term incentive plan drawn up in 2004.
The reward is based on earnings per share and total shareholder return criteria, so it is reflective of concrete improvements. Now, WHSmith’s board is busy drawing up a new three-year plan to run until August 2010.
Swann’s continued buy-in to a taxing incentive scheme would indicate her confidence that WHSmith can continue to square the circle of rising profits and falling turnover, or even that she sees the opportunity to launch into sales growth.
One mark of a successful company is that it should run successfully, even after a great chief executive leaves. In WHSmith’s case, its fortunes seem locked to Swann.
The day she decides to move on is likely to be seen as the day that WHSmith loses its magic.
Sweet Success for Thorntons
Thorntons is rapidly re-establishing its credentials in the increasingly competitive luxury chocolate market.
The retailer may have lost its master chocolatier in Carry On circumstances – he resigned after being caught squashing truffles in one of rival Hotel Chocolat’s stores – but last week it delivered numbers to die for.
Chief executive Mike Davies and chairman John von Spreckelsen can clearly work magic themselves and they’ve got a growth story too.
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