Shares in WH Smith plummeted on Thursday after the newsagent and travel retailer acknowledged an accounting error that has eliminated tens of millions of pounds from its profits.
The FTSE 250 company revealed that a "financial review" uncovered an overstatement of approximately £30m of anticipated headline trading profit in its North America division, which was "largely due to the accelerated recognition of supplier income" in the region, as reported by .
Consequently, the firm confirmed that North American profit would be revised downward to £25m from previous market forecasts of £55m, reducing overall headline profit to £110m.
WH Smith stated it had commissioned auditors Deloitte to "undertake an independent and comprehensive review" and would deliver a further update in its results announcement.
Tricky start for slimmed-down WH Smith
WH Smith shares dropped 30 per cent to 775p in early London trading on Thursday.
The stock has declined by approximately two-fifths over the past year.
Earlier this year, the Swindon-based enterprise completed a transaction to sell its high street outlets to private equity firm Modella, retaining only its railway station and airport locations.
The transaction will witness the WH Smith brand vanish from the high street after more than 200 years, with Modella intending to rebrand the sites "TG Jones."
WH Smith was compelled to reduce its anticipated proceeds from the transaction to £40m from £52m, due to lower-than-expected cash flow in the period preceding the sale. Over the past decade, WH Smith has concentrated predominantly on its travel retail sector, which operates in airports, train stations and hospitals.
As the travel retail sector becomes increasingly profitable, the high street arm now only contributes to 15 per cent of WH Smith's annual profit.
