A strong performance at its motorway, airport and station stores helped WH Smith (SMWH) report a 15 per cent hike in underlying full- year profits.

The group posted a surplus of pounds 76 million for the year to August 31, which was marginally better than expected in the City.

Sales at its 449 store travel portfolio rose three per cent on a like-for-like basis excluding tobacco, helping offset a three per cent decline in comparable sales within the high street business.

WH Smith said it had also met cost cutting targets, saving pounds 8 million over the year, with another pounds 10 million due to be trimmed.

The group said it expected a "competitive Christmas trading season", but hoped to buoy business with the roll-out of six more standalone book stores before the end of the year at airports, taking its total to 15.

It is also launching a new postal service in 400 existing stores with express carrier DHL, targeted largely at the eBay users market.

WH Smith introduced the first DHL postal point on Wednesday, allowing customers to buy pre-packaged boxes and put them in secure in store collection points to be sent out.

It will begin introducing the service across its other stores this autumn.

Kate Swann, group chief executive of WH Smith, said travel stores continued to see a drop in sales of tobacco products as a result of the ban on smoking in enclosed spaces - with sales up one per cent when including tobacco. She added that the group had seen trade at airports ease back amid a slowdown in air travel, which has been hit by the recent record oil prices and collapse of firms such as XL Leisure.

However, the group pays rent at airports based on a percentage of sales, which she said would limit the bottom line impact.

Despite the drop in like-for-like sales at the group's high street arm, WH Smith said underlying profits within the division rose seven per cent to pounds 47 million.

A decision to focus on higher margin products - resulting in a switch away from relying on entertainment - helped bolster profit margins, as did tight controls on costs, according to the group.

WH Smith is expecting a good festive season for book sales, with a strong line-up of new releases, including comedian Alan Carr's autobiography and a new 3D Guinness World Records book.

As part of a three-to-five-year revival strategy launched in 2005, Ms Swann has reduced the company's reliance on the highly competitive entertainment market, including CDs and DVDs. It is now focused on its core books, stationery and confectionery markets.

It has also opened 82 Post Office concessions in its stores, with Bureau de Change units also introduced under plans to widen its offering.

Yesterday's annual profits beat market forecasts by up to pounds 2 million.

Growth was flat on a statutory basis, but WH Smith said profits rose 15 per cent with exceptionals stripped out.

Analysts at Dresdner Kleinwort said that while the profits rise was better than they had forecast, there were clear risks for the business, as for all retailers amid a consumer spending and economic slowdown.

But they added in a note: "However, the business is well managed and there appear to be levers still to be pulled on gross margin and costs, which should offer some protection in a difficult environment."

Shares closed up almost eight per cent at 345p.

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