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Smiths News

LSE: SNWS

Market Cap£101m

Last Close 40.6p

Smiths News is the UK’s largest newspaper and magazine distributor with a c 55% market share covering 24,000 retailers in England and Wales. It has a range of long-term exclusive distribution contracts with major publishers, supplying a mix of supermarkets and independent retailers.

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Investment summary

Smiths News’ FY22 results were strong, with revenue and profit ahead of market expectations. Continuing adjusted PBT increased by 0.6% to £31.1m as financing costs reduced and net debt fell to £14.2m. Management was successful in mitigating inflation and controlling costs within budget. FY23 has started well, with uplifts in one-shot revenues and ancillary income. However, we have upgraded our forecasts, and an increase in the discount rate has driven a decrease in our DCF valuation from 94p to 89p. Smiths News trades on an FY23e P/E of 3.8x with a 10% yield, which we believe is attractive for a company with such cash-generative characteristics.

Y/E Aug
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (fd) (p)
P/E (x)
P/CF (x)
2020A 1164.5 40.4 28.2 10.28 3.9 2.5
2021A 1109.6 44.9 31.9 10.83 3.7 2.2
2022E 1077.2 42.8 31.3 10.56 3.8 2.2
2023E 1044.9 41.6 31.5 10.07 4.0 2.3
Industry outlook

Volumes of newspaper and magazine sales have been falling at an average rate of c 5% pa for many years as first TV and radio and then online have taken over as the primary source of news consumptions by an increasingly younger audience. Cover price inflation has partially offset lost revenue, but Smiths News has had to, and continues to, cut costs repeatedly to make up the short-fall. These characteristics are likely to persist into the future.

Last updated on 30/11/2022
Content on Smiths News
Smiths News – Better FY22 than expected; 10% dividend yield
Industrials | research Update | 24 November 2022
Stack of newspapers
Smiths News – Sub 3x P/E and a 15% dividend yield
Industrials | research Update | 26 September 2022
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Smiths News – Stronger balance sheet leads to big dividend hike
Industrials | research Update | 31 May 2022
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Share price graph
Balance sheet
Forecast net debt (£m) 20.6
Forecast gearing ratio (%) 68
Price performance
%
1m
3m
12m
Actual 12.2 32.3 11.5
Relative* 5.0 28.0 8.5
52-week high/low 42.5p/27.5p
*% relative to local index
Key management
David Blackwood Chairman
Jonathan Bunting CEO
Paul Baker CFO
George Cooper Head of corporate and finance