Last close As at 05/08/2026
GBP0.73
▲ 1.00 (1.39%)
Market capitalisation
GBP179m
Research: Industrials
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.
Smiths News |
43-week trading update implies upgrades
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13 July 2021 |
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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.
Trading stabilising, boosted by ‘one-shots’
Today’s trading update for the 43-week period to 26 June confirms that Smiths News’s core newspaper and magazine business has continued to stabilise as the operating environment begins to return to normality, post lock-down. This positive trend has been given a further boost by sales of ‘one-shots’, stickers and albums, as major events like the European Football Championship and other sports events have driven increased volume.
2021 consensus EBITDA could rise c 4–5%
Going into this trading update, 2021 consensus (Refinitiv) EBITDA stood at £46.9m on a pre-IFRS basis. As a result of trading being better than market expectations, and c £1m of EBITDA contribution from the ‘one-shots’, we believe EBITDA for the current year could rise by c 4–5%, which would be amplified at the EPS level due to the fixed nature of other costs in the income statement. Average net debt remains in line with expectations.
Limited impact on dividend expectations
The implied EPS upgrade is unlikely to have any impact on the dividend payout this year due to the caps in place. However, it does imply that dividend cover is likely to rise from 5x giving investors increased comfort in the robustness of future payouts. The company is targeting cover of 2x in the longer term, which could imply upside to payments after 2023 when the dividend cap is removed.
Valuation: c 5x P/E, >5% yield in FY22e
Pre upgrade, consensus earnings estimates for 2021 and 2022 imply P/E ratios of c 5x in both years, which is undemanding in our view. The resumption of dividends, previously announced, is also encouraging and consensus implies a yield of 3.7% this year, rising to 5.3% in FY22e, which we believe is attractive. The company also has a longer-term ambition to pay ‘special’ dividends from excess cash.
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Consensus estimates
Source: Refinitiv and company data |
Smiths News is a research client of Edison Investment Research Limited
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Research: TMT
Edel’s H121 figures showed good progress, with revenues ahead by 11% to €123.3m and an EBITDA margin of 13.0%, up from 9.2% in H120. Digital revenues continued to benefit from the growth of the music streaming platforms, while the continuing popularity of vinyl is supporting results at optimal media. The expansion of co-operation with Universal Music Group bodes well particularly for FY22 and on, with guidance increased also for FY21. The share price is up 83% over the past 12 months yet it continues to trade at a discount to global entertainment and publishing stocks on historical EV/EBITDA and EV/sales multiples, partly due to limited liquidity.