Last close As at 05/08/2026
GBP0.72
▲ −1.00 (−1.37%)
Market capitalisation
GBP179m
Research: Industrials
Smiths News’ recent trading update highlights continued growth in adjusted operating profit, which is anticipated to be at least in line with market expectations of £38.3m (Edison: £38.1m). This represents a marginal increase of 0.5% year-on-year, despite the substantial inflationary impacts seen in the past two years. We expect additional publisher contract renewals to be secured in the next year, which should further bolster the company’s cash-generative business model and underpin the sustainability of the business in the long term. Our forecasts are unchanged, as is our valuation of 89p/share, which represents substantial upside.
Written by
Smiths News |
Resilient performance despite headwinds |
Trading update |
Industrial support services |
4 October 2023 |
Share price performance
Business description
Analysts
Smiths News is a research client of Edison Investment Research Limited |
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Smiths News’ recent trading update highlights continued growth in adjusted operating profit, which is anticipated to be at least in line with market expectations of £38.3m (Edison: £38.1m). This represents a marginal increase of 0.5% year-on-year, despite the substantial inflationary impacts seen in the past two years. We expect additional publisher contract renewals to be secured in the next year, which should further bolster the company’s cash-generative business model and underpin the sustainability of the business in the long term. Our forecasts are unchanged, as is our valuation of 89p/share, which represents substantial upside.
Year |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
08/21 |
1,109.6 |
31.9 |
11.3 |
1.5 |
3.7 |
3.6 |
08/22 |
1,089.3 |
32.3 |
11.7 |
4.2 |
3.6 |
10.0 |
08/23e |
1,056.6 |
33.1 |
11.0 |
4.2 |
3.8 |
10.0 |
08/24e |
1,024.9 |
33.5 |
10.8 |
4.2 |
3.9 |
10.0 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Despite current economic volatility, the combination of sustained margin mix, tight cost control and new profit streams has enabled Smiths News to maintain its strong performance in FY23. Adjusted operating profit is expected to be marginally ahead of our estimate and compared to FY22. This is partially attributable to improved volumes from the World Cup and one-off events. The board has recommended a minimum final FY23 dividend of 2.7p/share which, combined with the 1.4p interim dividend, implies an attractive 10% yield that is more than twice covered by our 2023 EPS estimate of 11.0p. Our forecasts are unchanged.
Smiths News has rolled out a service collecting waste cardboard and plastic for recycling at the same time as delivering newspapers and magazines (more than 2,000 independent customers have signed up so far). Alongside additional service offerings, including the distribution of DVDs and books to major retailers and supermarkets, this could provide additional profit streams, somewhat shielding the company from the expected decline in its core business. It has also signed numerous long-term publisher contracts, providing a steady stream of revenue up to 2029/30. Other discussions with leading UK publishers are ongoing and we expect additional contract renewals to be secured in the next year, which would bolster future cash generation.
Our DCF valuation is unchanged at 89p/share, representing more than 100% upside to the slightly subdued current share price. Preliminary results are due to be published on 8 November.
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Research: Financials
ABC arbitrage group (ABCA) reported net income of €8.8m in H123, down 46% y-o-y, which in our view represents a reasonable result amid unfavourable market conditions. The market continues to be characterised by low volatility and limited M&A activity, weighing on ABCA’s main arbitrage strategies. After the end of June 2023, both ABCA Opportunities and ABCA Reversion funds managed to show strong performance, improving the outlook for the H223 results. Meanwhile, ABCA’s AUM remained flat in H123. The company reiterated its intention to pay out 80% of profits in dividends, with a minimum DPS of €0.30.