Kate Swann, WH Smith's new chief executive, lambasted her predecessors yesterday for "years of under-performance" as the struggling newsagent group agreed to open its books to Permira, the private equity group that has made a £940m bid approach.
The company's decision to grant Permira access to its internal figures reflects the scale of the challenge facing Ms Swann to rescue the troubled high street retail chain, which reported pre-tax interim losses of £72m. Operating profit at the group's UK retail business almost halved to £51m in the six months to end-February and its underlying sales were flat.
The former Argos boss warned there were no "over-night" solutions to the problems facing the group. Excluding £137m of exceptional losses, which included £45m to cover stock write-downs, WH Smith's pre-tax profits fell 28 per cent to £65m.
Emphasising the scale of the problems across its UK estate from selling "Eighties" stationery to not stocking children's wrapping paper at Christmas Ms Swann said: "Operationally, there have been a number of things that they [the former management] haven't done as well as could have been done." Ms Swann fired Beverley Hodson, who ran the UK chain, after a dire Christmas. Separately, it emerged that the group has succeeded in limiting Ms Hodson's payout to the bare minimum of one year's pay £330,000.
In laying bare the former management's ineptitude, Ms Swann refocused attention on the company's decision to allow her predecessor, Richard Handover, to step up to become chairman. The group is understood to be in the process of whittling down a "long list" of possible candidates to replace Mr Handover, and expects to make an announcement by the summer.
The company is axing 270 of its 1,000 head office jobs. Ms Swann said further job losses could follow as part of an operational review that could see it outsource functions such as payroll. It also slashed its interim payout by 33 per cent.
Ms Swann's solution for rescuing the group's high street business hinged on retreating to selling only its "core categories" such as books, stationery and magazines. But she failed to impress investors. One fund manager said: "Drastic action needs to be taken to turn WH Smith around.... WH Smith has tried, with little success, to emulate its past glory days. Takeover is the best option to breathe new life into this dead dog."
Richard Ratner, an analyst at Seymour Pierce, believes Permira's 375p-per-share offer undervalues the group, arguing 400p per share would be fairer.
Permira has lined up the former Hamleys chief executive Simon Burke and Smith's former finance director Keith Hamill to run the group should it proceed with an offer. Due diligence is expected to take six to eight weeks, a source close to Permira said.
Although Smith's new distribution and publishing arms fared better than its core retail estate, Ms Swann raised a question mark about Hodder Headline's future within the group, admitting there were "no sacred cows". Shares in WH Smith climbed 2.5p to 357.5p.