WH Smith is facing stiff competition from supermarket rivals

The retailer reported pre-tax profits after one-off costs of �64m ($112m) for the year to 31 August, reversing a loss of �135m in 2004.

However, it warned that trading remained tough, and like-for-like sales at its stores fell 2% in the first six weeks of its new financial year.

WH Smith has been battling competition from online retailers and supermarkets.

Pre-tax profits before goodwill amortisation and exceptional items were �73m, up from �46m last year.

At close, shares in WH Smith were up 22.75 pence, or 6.67%, at 364 pence on the London Stock Exchange.

Cost control

Chief executive Kate Swann said the company was on target to deliver �30m in savings over three years, after stripping �18m in costs from the business over the past 12 months.

We have done a good job keeping our costs under control Kate Swann, WH Smith chief executive Check WH Smith's shares

She said WH Smith had identified an additional �18m in savings on top of the �30m turnaround programme.

"Our plan was not based on sales growth - it was on getting the cost base of the business under control," Ms Swann said.

"We have done a good job keeping our costs under control," she told the BBC.

An increased range of stationery, books and greetings cards "had driven sales" at the retailer's stores, Ms Swann added.

Hodder sale

However, the 213-year-old company reported 1% fall in sales at its news distribution business during the first six weeks of the current financial year.

WH Smith added that it was cautious about consumer spending at its 542 High Street stores in the run up to the key Christmas trading season.

Ms Swann joined WH Smith from general stores group Argos in 2003, and is seeking to turn around the company through an ambitious restructuring drive.

WH Smith returned �205m to shareholders last year following the sale of its underperforming publisher Hodder Headline for �229m.