British newspapers, books and stationery retailer WH Smith, posted an expected 4.5 per cent rise in year profit as its strategy of cutting costs and improving margins, rather than driving top-line sales, paid off in a tough market.

"The economic conditions remain challenging, however we have planned accordingly," chief executive Kate Swann said today.

The 219-year-old group, which also operates a number of outlets in Dublin and Shannon airports, made a pretax profit of £93 million in the year to August 31st.

WH Smith, which trades from over 580 high street stores and more than 530 outlets at airports, train stations, hospitals, motorway service stations and work places said sales fell 3 per cent to £1.27 billion.

Sales at stores open over a year fell 5 per cent but gross margin improved by 150 basis points year on year.

Ms Swann has cut costs and improved margins by focussing on more profitable products, better sourcing and better control of markdowns.

WH Smith, which ended the period with net cash of £41 million, is paying a dividend of 22.5 pence, up 16 per cent.

Shares in the firm, which have risen 16 per cent over the last six months, closed yesterday at 527.5 pence, valuing the business at about £726 million.