Smiths News is a specialist distribution business operating through four divisions: Smiths News (the UK?s leading newspaper and magazine wholesaler), Bertrams (distributor of physical and digital books), The Consortium (a distributor of educational consumable products) and Media & Marketing (supplier of newspapers and magazines to airlines and provider of in-flight entertainment and logistics support).
Today’s 43-week trading update confirms that Smiths News’s demand is returning to normality, and this has been given a boost by sales of ‘one-shots’ as sporting events have returned. With trading expected to be ahead of market expectations, FY21 EBITDA could be c 4–5% higher than the current consensus of £46.8m. Trading beyond the current year has good visibility given that most of Smiths’ contracts are now in place until at least 2024. Net debt is expected to fall to 1.0x EBITDA by the end of FY23, and dividends are well covered and growing. The stock trades on a pre-upgrade forward P/E of 4.6x for FY22e, and yields 5.3% on FY22e DPS.