Smiths News is delivering on its promises, with the core business operating to trend, supported by efficiency initiatives, and with collectables outperforming. This stability, and the receipt of £6.9m of one-offs, has allowed Smiths News to declare a ‘special’ dividend for the second year in succession. Furthermore, the new verticals are being established as trials prove concepts and new contracts are won. Confidence is building and the outlook for the core business of newspaper and magazines plus collectables is robust, with potential upside from the new verticals adding some gloss. We have lifted our forecasts and raised our valuation to 95p/share.

Smiths News’ PBT increased by 11% in H125, a combination of higher profits and lower financing costs as both debt and debt margins declined. However, in addition to this and perhaps more exciting is confirmation that Smiths has appointed a managing director for its recycling operations from within the industry, a clear endorsement of the potential in this area. Furthermore, its new activities are already gathering momentum, which is mitigating the structural decline of the news and magazine activity and, we believe, has the potential to result in long-term profit growth. This in turn underpins cash generation and dividends, and could see further distributions. We have maintained our operating profit forecasts and valuation of 93p/share, but reduced our FY25 net debt estimate.