IN 1792 a certain William Henry Smith thought he could make a living from a small shop selling and delivering newspapers in central London. It was to be the basis of a classic success story which would span the centuries. Today the company is the largest retailer of newspapers, books, videos and recorded music in Britain making W.H. Smith a household name alongside Woolworth and Marks & Spencer. For over 200 years the company has been consistently profitable but a disastrous foray into DIY stores brought a noble tradition shuddering to a stand still.

Annual results this week reveal a massive deficit of £197 million, the first loss in its history. The main blow came from accountancy considerations which set £145 million of intangible "goodwill" from the troublesome subsidiaries against the profit and loss account.

Chief executive Bill Cockburn says lessons have been learnt but industry analysts believes the group needs a drastic overhaul if it is to survive into the new millennium, let alone the next 200 years. William Henry Smith would have been most displeased.