Currency in GBP
Last close As at 30/03/2023
GBP0.49
▲ 0.85 (1.75%)
Market capitalisation
GBP119m
Research: Industrials
Smith News’ FY22 trading update highlighted slightly better trading than we expected as the market normalised and publishers raised cover prices. Furthermore, management was able to control costs within budget. The new financial year has started well with increased One-shot sales, which are likely to increase with the upcoming FIFA World Cup and the forthcoming coronation. We have raised our FY22 and FY23 estimates modestly, which drives our increased valuation from 92p to 94p. Smiths News is trading on a P/E of less than 3x and offers an exciting dividend yield of nearly 15%.
Smiths News |
Sub 3x P/E and a c 15% dividend yield |
Trading update |
Industrial support services |
26 September 2022 |
Share price performance
Business description
Next events
Analyst
Smiths News is a research client of Edison Investment Research Limited |
Smith News’ FY22 trading update highlighted slightly better trading than we expected as the market normalised and publishers raised cover prices. Furthermore, management was able to control costs within budget. The new financial year has started well with increased One-shot sales, which are likely to increase with the upcoming FIFA World Cup and the forthcoming coronation. We have raised our FY22 and FY23 estimates modestly, which drives our increased valuation from 92p to 94p. Smiths News is trading on a P/E of less than 3x and offers an exciting dividend yield of nearly 15%.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
08/20 |
1,164.5 |
28.2 |
10.4 |
0.0 |
2.8 |
N/A |
08/21 |
1,109.6 |
31.9 |
11.3 |
1.5 |
2.6 |
5.4 |
08/22e |
1,077.2 |
31.3 |
11.1 |
4.2 |
2.6 |
14.5 |
08/23e |
1,044.9 |
31.5 |
10.6 |
4.2 |
2.7 |
14.5 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Trading returns to normalised trends
In H222, revenue for the group benefited from price increases as publishers raised cover prices to offset their own cost increases, which had a modest benefit for Smiths. News and magazine volumes returned to ‘normal’ trends in H2 after a volatile period. Smiths also continued to benefit from higher one-shot revenue and secondary income streams such as waste-paper income and rentals. Furthermore, the company was able to manage its own cost base well, which has resulted in revised FY22 guidance that the company expects to deliver a EBITDA of ‘not less than £40m’. Cash generation was strong, which resulted in a net debt/EBITDA (ex IFRS 16) ratio of not more than 0.5x at year-end.
McColl’s administrators confirm previous guidance
Following the administration of McColl’s Retail Group in May, the administrators have confirmed that unsecured creditors can expect to receive a distribution of between 20% and 40% of outstanding balances. Smiths will provide a bad debt at the low end of the range of £4.4m to be taken as an exceptional. This is a worst-case scenario and is in line with previous guidance.
Valuation: Raised estimates lift to 94p
Given solid trading in H2, the board will recommend a FY22 dividend of ‘not less than 2.7p’, which will take the total distribution up to the maximum £10m allowed under its current banking arrangements. We are forecasting a FY22 dividend of 4.2p versus the current share price of 29p, which implies a yield of nearly 15%. The current financial year has started well and has been given an unexpected boost by One-shot volumes relating to the death and funeral of the Queen. Later this year there is the FIFA World Cup and in June 2023 it is expected that the coronation of King Charles III will take place, which are both likely to drive One-shot volumes. On raised forecasts we lift our valuation from 92p to 94p.
FY22 and FY23 estimates raised
The trading update points to a FY22 EBITDA (reported, pre-IFRS) of ‘not less than £40m’. As such we have lifted revenue slightly, which drives our FY22 EBITDA from £39.6m to £40.5m, with a similar increase feeding FY23. Full year 2022 results are expected to be released in November.
Exhibit 1: Revised estimates
2021 |
2022 |
2023 |
||||||
Old |
New |
% chg |
Old |
New |
% chg |
|||
Revenue |
1,109.6 |
1,076.3 |
1,077.2 |
0.1% |
1,044.0 |
1,044.9 |
0.1% |
|
YoY % change |
- |
-3.0% |
-2.9% |
- |
-3.0% |
-3.0% |
- |
|
EBITDA - Edison basis |
44.9 |
41.9 |
42.8 |
2.1% |
40.7 |
41.6 |
2.2% |
|
YoY % change |
- |
-6.7% |
-4.7% |
- |
-2.9% |
-2.8% |
- |
|
EBITDA - Reported pre IFRS 16 |
|
42.6 |
39.6 |
40.5 |
2.3% |
38.4 |
39.3 |
2.3% |
YoY % change |
|
- |
-7.0% |
-4.9% |
- |
-3.0% |
-3.0% |
- |
Normalised operating profit |
40.6 |
37.4 |
38.3 |
2.4% |
36.1 |
37.0 |
2.5% |
|
YoY % change |
- |
-7.9% |
-5.7% |
- |
-3.5% |
-3.4% |
- |
|
PBT (Reported, post-exceptionals) |
30.6 |
24.7 |
25.7 |
4.1% |
28.5 |
29.5 |
3.5% |
|
YoY % change |
- |
-19.3% |
-16.0% |
- |
15.4% |
14.7% |
- |
|
EPS - Diluted, normalised |
10.8 |
10.2 |
10.6 |
3.5% |
9.8 |
10.1 |
2.8% |
|
YoY % change |
- |
-5.8% |
-2.5% |
- |
-3.9% |
-4.6% |
- |
|
DPS |
1.5 |
4.2 |
4.2 |
0.0% |
4.2 |
4.2 |
0.0% |
|
YoY % change |
- |
180.0% |
180.0% |
- |
0.0% |
0.0% |
- |
|
Net debt (pre IFRS 16) |
-53.2 |
-21.4 |
-20.6 |
-3.5% |
-6.7 |
-5.1 |
-23.2% |
|
YoY % change |
- |
-59.8% |
-61.2% |
- |
-68.7% |
-75.1% |
- |
Source: Smiths News and Edison Investment Research
Exhibit 2: Financial summary
£'m |
2019 |
2020 |
2021 |
2022e |
2023e |
2024e |
||
31-August |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||||
Revenue |
|
|
1,303.5 |
1,164.5 |
1,109.6 |
1,077.2 |
1,044.9 |
1,013.5 |
Cost of Sales |
(1,217.5) |
(1,091.4) |
(1,036.2) |
(1,004.7) |
(974.5) |
(945.3) |
||
Gross Profit |
86.0 |
73.1 |
73.4 |
72.5 |
70.4 |
68.3 |
||
EBITDA |
|
|
60.1 |
40.4 |
44.9 |
42.8 |
41.6 |
40.4 |
Normalised operating profit |
|
|
44.0 |
35.4 |
40.6 |
38.3 |
37.0 |
35.8 |
Amortisation of acquired intangibles |
(0.1) |
(0.2) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
(7.2) |
(7.8) |
(1.9) |
(2.5) |
(1.0) |
(1.0) |
||
Share-based payments |
(0.4) |
(0.3) |
(1.0) |
(1.0) |
(1.0) |
(1.0) |
||
Impairment |
0.0 |
(6.0) |
(1.6) |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
0.0 |
(0.3) |
(4.5) |
0.0 |
0.0 |
||
Reported operating profit |
36.3 |
21.1 |
35.8 |
30.3 |
35.0 |
33.8 |
||
Net Interest |
(6.0) |
(7.2) |
(8.7) |
(7.0) |
(5.5) |
(5.1) |
||
Profit Before Tax (norm) |
|
|
38.0 |
28.2 |
31.9 |
31.3 |
31.5 |
30.7 |
Profit Before Tax (reported) |
|
|
30.3 |
14.8 |
30.6 |
25.7 |
29.5 |
28.7 |
Reported tax |
(8.4) |
(2.8) |
(4.3) |
(5.1) |
(6.5) |
(7.2) |
||
Profit After Tax (norm) |
29.6 |
25.4 |
27.6 |
26.2 |
25.0 |
23.5 |
||
Profit After Tax (reported) |
21.9 |
12.0 |
26.3 |
20.6 |
23.0 |
21.5 |
||
Discontinued operations |
(53.4) |
(18.7) |
(0.1) |
(0.1) |
0.0 |
0.0 |
||
Net income (normalised) |
29.6 |
25.4 |
27.6 |
26.2 |
25.0 |
23.5 |
||
Net income (reported) |
(31.5) |
(6.7) |
26.2 |
20.5 |
23.0 |
21.5 |
||
Basic average number of shares outstanding (m) |
246 |
245 |
244 |
237 |
237 |
237 |
||
EPS - basic normalised (p) |
|
|
12.01 |
10.39 |
11.33 |
11.06 |
10.55 |
9.94 |
EPS - diluted normalised (p) |
|
|
11.98 |
10.28 |
10.83 |
10.56 |
10.07 |
9.48 |
EPS - basic reported (p) |
|
|
(12.78) |
(2.74) |
10.76 |
8.66 |
9.71 |
9.09 |
Dividend (p) |
1.00 |
0.00 |
1.50 |
4.20 |
4.20 |
4.20 |
||
Revenue growth (%) |
#DIV/0! |
(-10.7) |
(-4.7) |
(-2.9) |
(-3.0) |
(-3.0) |
||
Gross Margin (%) |
6.6 |
6.3 |
6.6 |
6.7 |
6.7 |
6.7 |
||
EBITDA Margin (%) |
4.6 |
3.5 |
4.0 |
4.0 |
4.0 |
4.0 |
||
Normalised Operating Margin |
3.4 |
3.0 |
3.7 |
3.6 |
3.5 |
3.5 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
31.5 |
66.5 |
47.1 |
34.4 |
25.2 |
(5.8) |
Intangible Assets |
10.1 |
4.0 |
2.3 |
(1.5) |
(5.5) |
(9.5) |
||
Tangible Assets |
10.9 |
9.4 |
9.4 |
(3.4) |
(2.2) |
(1.0) |
||
Investments & other |
10.5 |
53.1 |
35.4 |
39.3 |
32.9 |
4.7 |
||
Current Assets |
|
|
181.2 |
165.9 |
139.1 |
135.5 |
132.0 |
128.7 |
Stocks |
16.2 |
14.1 |
13.2 |
12.9 |
12.5 |
12.2 |
||
Debtors |
124.2 |
101.2 |
106.6 |
103.4 |
100.3 |
97.3 |
||
Cash & cash equivalents |
24.0 |
50.6 |
19.3 |
19.2 |
19.2 |
19.2 |
||
Other |
16.8 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Liabilities |
|
|
(229.7) |
(283.9) |
(167.5) |
(129.9) |
(110.4) |
(83.0) |
Creditors |
(173.7) |
(139.5) |
(136.5) |
(131.4) |
(127.5) |
(106.4) |
||
Tax and social security |
0.0 |
(1.7) |
(0.3) |
(0.3) |
(0.3) |
(0.3) |
||
Short term borrowings |
(46.1) |
(130.1) |
(21.2) |
11.4 |
26.9 |
23.7 |
||
Other |
(9.9) |
(12.6) |
(9.5) |
(9.5) |
(9.5) |
0.0 |
||
Long Term Liabilities |
|
|
(57.3) |
(30.1) |
(76.4) |
(70.4) |
(64.4) |
(55.4) |
Long term borrowings |
(49.3) |
0.0 |
(50.1) |
(50.1) |
(50.1) |
(50.1) |
||
Other long term liabilities |
(8.0) |
(30.1) |
(26.3) |
(20.3) |
(14.3) |
(5.3) |
||
Net Assets |
|
|
(74.3) |
(81.6) |
(57.7) |
(30.3) |
(17.6) |
(15.6) |
Shareholders' equity |
|
|
(74.3) |
(81.6) |
(57.7) |
(30.3) |
(17.6) |
(15.6) |
CASH FLOW |
||||||||
Op Cash Flow before WC and tax |
60.1 |
40.4 |
44.9 |
42.8 |
41.6 |
40.4 |
||
Working capital |
(3.9) |
(5.3) |
(1.8) |
(1.6) |
(0.5) |
(17.7) |
||
Exceptional & other |
(7.7) |
(13.4) |
(1.3) |
(5.6) |
(2.0) |
(2.0) |
||
Tax |
(2.6) |
0.0 |
(6.3) |
(5.1) |
(6.5) |
(7.2) |
||
Other |
(22.9) |
1.7 |
5.9 |
14.0 |
7.0 |
7.0 |
||
Net operating cash flow |
|
|
23.0 |
23.4 |
41.4 |
44.5 |
39.7 |
20.6 |
Capex |
(8.1) |
5.3 |
(2.4) |
(4.2) |
(4.2) |
(4.2) |
||
Acquisitions/disposals |
0.0 |
(10.2) |
6.5 |
14.0 |
0.0 |
0.0 |
||
Net interest |
(5.1) |
(8.0) |
(9.4) |
(4.8) |
(3.3) |
(2.9) |
||
Equity financing |
0.0 |
(0.7) |
(2.6) |
(2.5) |
(0.8) |
(0.8) |
||
Dividends |
0.1 |
(2.2) |
(1.0) |
(5.7) |
(9.9) |
(9.9) |
||
Other |
(2.8) |
(15.6) |
(5.9) |
(8.7) |
(6.0) |
(6.0) |
||
Net Cash Flow |
7.1 |
(8.0) |
26.6 |
32.6 |
15.5 |
(3.2) |
||
Opening net debt/(cash) |
|
|
79.3 |
72.1 |
79.7 |
53.2 |
20.6 |
5.1 |
FX |
0.1 |
(0.1) |
(0.2) |
0.0 |
0.0 |
0.0 |
||
Other non-cash movements |
0.0 |
0.5 |
0.1 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
72.1 |
79.7 |
53.2 |
20.6 |
5.1 |
8.3 |
Source: Company accounts, Edison Investment Research
|
|
Research: Healthcare
Basilea Pharmaceutica continues its positive wave of Q322 activity with the successful asset purchase and sub-licence agreement of its tyrosine kinase/polo-like kinase 1 (TTK/PLK1) inhibitor, BAL0891, to SillaJen (a privately held South Korean biotech). The deal will see Basilea receive up to US$14m (CHF13.5m) in upfront and near-term milestones, with potential future milestone payments of up to c US$320m (c CHF310m). The company is also entitled to tiered royalties on net sales, which will range from single- to double-digit percentages. We see this latest development as a positive indicator of management delivering on its intention to separate the oncology business by end-FY22. We have updated our financials to align with company guidance and value Basilea at CHF903.5m or CHF76.3/share.
Get access to the very latest content matched to your personal investment style.