The last 12 months have been turbulent for Richard Handover, chief executive of the British international retail and publishing group WH Smith. Wrangles and disputes within the WHS magazine and newspaper distribution division have dominated the headlines in the U.K. for the last year and profits have fallen. It was no surprise when the distribution business was put up for sale in April 2001. Analysts predict that the sale could bring in £200 million—£250 million ($300 million—$380 million).

On the brighter side, the retail sector has been performing well, with operating profits up 9%, to £83 million, on sales of £925 million for the first six months of fiscal 2001 ended February 28. Hodder Headline, acquired in 1999, helped push publishing profits up 13%, to £9 million, on a sales gain of 11%, to £68 million. Handover is now at a crossroads; his historical core business of newspaper distribution and sales is in crisis. Is it time to invest more heavily in WHS' new publishing ventures (it's well known that Handover has an interest in buying an American book publisher) or to expand in an uncertain retail market?

WH Smith is one of the best-known brands in the U.K. where it operates 530 bookstores. It also owns 552 travel stores in the U.S. where sales were £114 million in the first six months of the fiscal year.

Handover started delivering newspapers for the company as a boy of 17 and is a typical from-the-bottom-to-the-top man. He landed the top job three and a half years ago, when WH Smith was having identity problems, after acquisitions in music and DIY retail. His first act as chief executive was to sell Waterstone's and the Our Price record shops. With the money in the bag, Handover purchased book and stationery stores from John Menzies and Hodder Headline publishing.

"We've spent the last three years organizing the base of the business and getting the floorboards nailed down, which will allow us to go off and grow the business in new areas and new formats," he said. New factory outlets, metro stores and local community stores are in the planning stage. Handover is also enthusiastic about WH Smith's publishing interests and has used the expertise at Hodder Headline to create a significant range of exclusive branded books for WHS stores. Cookery and travel have performed particularly well, and there are plans to expand children's fiction and home education. WHS already has 60% of the home education market in the U.K.

Tim Hely Hutchinson, chief executive of Hodder Headline, told PW about the project with WH Smith On-Line to digitize a small number of its titles for the WH Smith eBookstore, which opens in the summer. The rights for 50 titles have been cleared.

Hely Hutchinson has been collaborating with Helicon, WH Smith's specialist reference and technical publishing division, which in turn has a long-standing relationship with Microsoft and can fulfil the necessary technical demands to make eBookstore a reality.

Helicon is WH Smith's secret weapon in providing material for the home learning market online. David Attwooll, Helicon's managing director, explained that its online reference information has been set up specifically to integrate with the curriculum taught in schools. Helicon has many clients in the U.S. and licenses its reference material and search engines widely through Bell & Howell and EBSCO. Significantly, it maintains and tailors separate U.S. databases, parallel to the U.K. reference databases. Helicon is negotiating with a major U.S. educational television organization to provide online information using digital technology.

Michael Holyoke, Helicon's technical director, envisages a scenario in which WH Smith will sell a Hodder title to a business traveler who will read it on a PDA in a digital format bought at one of WHS's travel retail stores in the U.S.