Smiths News delivers dividend heaven

Any fears over the decline in newspapers and magazines on the business were dispelled as chief executive Mark Cashmore told the Investors Chronicle that by 2016 less than half of the pre-tax profits will come from these core areas. After signing a £200m contract with News International which runs to 2019, and factoring in additional cost savings, Oriel Securities thinks that all but guarantees £40m of operating profit from the News business for the next four years. On this basis, this implies a target of group operating profits of £80m by 2016, up from £51m in last year.

In the latest 12-month period, underlying operating profits rose by £1m to £39m in the News business despite a 1.9 per cent decline in revenue. Mr Cashmore said that having delivered £25m in cost savings, he is now targeting an additional £15m over the next three years. But this is not all about cutting costs as Bertram's books has been galvanised by the addition of the Dawson business which offers a wider customer base and additional opportunities for growth. Gross margins and underlying sales both rose at eye catching rates there.

Oriel upgraded forecasts by 3 per cent and expects current year adjusted pre-tax profits of £52.5m and EPS of 21.2p, up from £47.5m and 19.9p, last year.