- Full-year profit ahead of expectations
- Special dividend of 2p per share
- New growth initiatives outlined
UK news wholesaler Smiths News (SNWS) was the second largest gainer in the FTSE All-Share on 5 November, the shares rising as much as 13% after the company delivered better than expected full-year results and announced a special dividend of 2p per share.
The shares are up 18% year-to-date compared with a 6% advance in the FTSE All-Share index, reflecting continued momentum within the business.
CEO Jonathan Bunting commented: ‘Our performance over full year 2024 reflects the resilience of our news and magazines business and impact of our cost efficiency initiatives.
‘The refinancing agreement announced in May removes restrictions on shareholder returns and also enables internal investment to support both our news and magazines business and our growth plans.
‘We have today announced both a final ordinary dividend of 3.4 pence per share, and a further special dividend of 2 pence per share. This means that we propose to return over £17.2 million to our shareholders in respect of full year 2024.’
EARNINGS BEAT
Revenue for the 53-weeks to 31 August increased by 1% to £1.1 billion while adjusted operating profit was 0.8% higher at £39.1 million and ahead of consensus forecasts of £38.2 million.
The company made £5.6 million of cost savings through operational efficiencies, offsetting continued volume decline in the newspaper and magazine market and ongoing inflationary pressures.
Average net debt decreased 53% to £11.7 million on a 52-week comparable basis and free cash flow, excluding the impact of the 53rd week was £23 million compared with £21.8 million in 2023.
GROWTH INITIATIVES
Operating profit from organic growth initiatives jumped to £2 million from £700,000 in the prior year and Smiths News said it continues to explore strategic initiatives to exploit its high-density delivery expertise.
Initiatives include the delivery of books and home entertainment to multiple supermarket chains as well as new products to a national grocer. The company plans to invest around £6 million over the next three years to support these initiatives.
Canaccord analyst Mark Photiades commented: ‘New initiatives present a growth opportunity alongside ongoing cost reduction, and strong free cash flow generation supports dividend payments, continued business investment and the scope for additional shareholder returns.’
Photiades believes the market for early morning deliveries, excluding newspapers and deliveries is worth around £4.9 billion within which ambient products are worth circa £1.3 billion.
‘Achieving 5% to 10% share, utilising its existing infrastructure and assets, could present an incremental profit opportunity of £8 million to £16 million over the medium term, compared to the £2 million achieved in full year 2024,’ added Photiades.
