Smiths News (NWS) has done well to keep its earnings and dividends growing as it squares up to the challenge of long-term decline in newspaper and magazine distribution. A strategy of diversifying into other areas while doing what it can to mitigate the declining newspaper and magazine wholesale market paid off in respectable results. Underlying profit before tax rose 12 per cent to £53m despite flat revenues, and free cash flow jumped 20 per cent to £32.6m.
The newspaper and magazine distribution business managed to post a small increase in profit as it offset falling revenues with cost savings and there is at least reasonable visibility here with 53 per cent of annual revenues secured out to 2019 and beyond. But ultimately the aim is to reduce reliance on this division. Last year, 29 per cent of profits were generated from activities outside of newspaper and magazine wholesaling and the target is to get that to 50 per cent by 2016.
Smiths News’ other businesses primarily comprise the book supplier Bertrams and educational and care products distributor The Consortium, which was acquired in April 2012. Bertrams is also having to cope with structural shifts as the UK consumers book market contracts but a focus on international and digital expansion kept profits moving forward last year. While The Consortium delivered returns ahead of what was expected at the time of acquisition.
Broker Peel Hunt expects current year adjusted pre-tax profit of £53.8m giving EPS of 21.8p, up from £53m and 21.1p last year.
SMITHS NEWS (NWS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 208p | MARKET VALUE: | £383.9m | |
| TOUCH: | 208p-209p | 12-MONTH HIGH: | 215p | LOW: 134p |
| DIVIDEND YIELD: | 4.5% | PE RATIO: | 12 | |
| NET ASSET VALUE: | * | NET DEBT: | £98.5m | |
| Year to 31 Aug | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 1.33 | 18.4 | 9.9 | 6.80 |
| 2010 | 1.83 | 28.1 | 11.7 | 7.40 |
| 2011 | 1.73 | 32.1 | 12.1 | 8.00 |
| 2012 | 1.80 | 36.6 | 15.2 | 8.60 |
| 2013 | 1.81 | 41.9 | 17.1 | 9.30 |
| % change | +0 | +14 | +13 | +8 |
Ex-div: 8 Jan Payment: 7 Feb *Negative shareholders funds | ||||
