Smiths News Share Discussion Threads

[davebowler] 20/5/2024 13:29

Edison -

In 2023, Smiths News successfully trialled a cardboard and plastic recycling collection service in Birmingham. The service included the collection of unwanted cardboard and plastics at the same time as dropping off the day’s newspaper and magazine delivery. Smiths News now has c 5,000 subscribers, a number that has more than doubled in the last 12 months. We anticipate that the service might be suitable for c 30% of its addressable customer base, and could also be attractive to other adjacent businesses such as betting shops. Smiths has trialled other categories including the distribution of greetings cards in point-of-sale stands, DVDs and books to major retailers and some supermarkets. The product is delivered to Smiths in bulk where it breaks the supply down, picks, packs and handles returns, playing to the company’s core strengths. There are potentially other products and/or customers where this kind of service may offer value to clients, and income and a profit contribution to Smiths News, which could offset the expected decline in the core business. These are being actively explored. info @ fpcfinancial.co.uk The new business streams are potentially significant. Last year, these initiatives generated £0.7m of operating profit. In FY24, the company is anticipating that it will generate a profit contribution of c £2.0m. Ultimately, these new income streams are likely to grow further. It remains to be seen if they can be scaled sufficiently to completely offset the decline of the core business, but so far there is optimism.


Valuation of 90p with upside potential from non-core...

Our discounted cash flow (DCF) valuation remains broadly unchanged at 90p/share (from 89p), representing c 40% upside to the current share price. Smiths News trades on a P/E of 6.2x in FY24e, with a yield of 7.7% and the prospect of special dividends to bolster the yield as debt falls. In our experience, when ‘safe’ dividend yields exceed P/E ratios in absolute terms, it indicates a value opportunity. Although we currently forecast a consistent revenue decline, the early signs of success with the new business initiatives suggest that the associated profit decline may be less than we currently forecast, implying that profit and valuation risks could ultimately be to the upside. The success or otherwise of these new business streams is likely to become clearer in the next two to three years. The low P/E rating might be explained by market expectations of continued revenue declines. Our DCF valuation assumes a 5% pa revenue reduction. A full explanation of our assumptions can be found in our November 2022 update note.

[outsizeclothes.com] 18/5/2024 13:10

In any reducing interest macro scenario it's not hard to foresee 75p here with income seekers driving demand.
That's with management doing very little, which might be a good thing short-term.
Medium term a couple of reasonably priced [ forward p/e under 6 ???] smaller bolt-ons to fully use our distribution wouldn't be bad.

[lord gnome] 16/5/2024 18:12

I'm not in the least bit interested in a bid for Smith's. This is just getting started. Management has turned round the company. Now let's see where they are going to take it.

[davebowler] 16/5/2024 17:39

Wonder if the potential buyer of IDS , ex Royal Mail would like to look at this business , which is in essence also a mover of paper around the country???

[davidosh] 15/5/2024 23:58

Yes the management are excellent and everything looks very positive at present.

[hillock1] 15/5/2024 18:15

Well said I think there's a limitation of improving cost efficiency amid declining revenueThe management deserves all the credit of turnaround in the business, increasing dividend payout and new business initiatives...I believe in the management

[reddirish] 15/5/2024 16:07

The newly announced dividend policy is nicely constructed to share resources between (excellent) shareholder returns and sufficient capital to invest in growth/ reversing decline. This should secure the current level of the share price or even up to 70+, unless the chosen growth initiatives prove the equal of Tuffnels!

[aishah] 15/5/2024 15:50

Heavy accumulation going on here with 10d/3m volume up by 170%! Yielding 7.9% too.

[makinbuks] 15/5/2024 15:20

Im not against acquisitions per se. Obviously they are operating in a diminishing market and that Revenue needs to be replaced somehow at some point. There's only so much you can achieve through efficiencies and organic growth replacement initiatives. But its agree its early days in this phase of their cycle and a couple of steady as you go years with a sustainable dividend that people feel they can rely on will cause the rerating

[1knocker] 15/5/2024 13:46

Please god, no acquisitions!
I am up 110% here and enjoying an income return over over 14% on my capital invested.
I don't want the boat rocked.

[bscuit] 14/5/2024 21:25

Makinb,
An acquisition would have to be good to persuade those who remember Tuffnells. Perhaps the facility is a spoiler to ward off a predator?
I am in my second investment here. It strikes me a solid investment with agent and secure yield. I will add.

[aishah] 14/5/2024 10:46

£1.34m trade at 63.40p earlier 👀

[plasybryn] 10/5/2024 12:11

Doing nicely. Now over 60p convincingly.

[schofi2] 08/5/2024 18:37

Share price forecast: Investors Chronicle:
The 2 analysts offering 12 month price targets for Smiths News PLC have a median target of 80.00, with a high estimate of 95.00 and a low estimate of 65.00. The median estimate represents a 39.37% increase from the last price of 57.40.

[lord gnome] 08/5/2024 17:57

Clear blue sky now. How high can we go?

[this_is_me] 08/5/2024 14:49

I've had these on the back burner for a while. It looks like we are making serious money now.

[norbert colon] 08/5/2024 07:41

I understand that Onward Opportunities fund have recently added SNWS to their PF. I like ONWD's investment strategy which is akin to that of Rockwood who I admire.

[martin44] 07/5/2024 21:55

Totally agree we now have a very sound business that will continue to roll out ongoing profits and not only produce increasing dividends but also potentially special dividends and perhaps buy backs too…..I am for one very confident in the BOD and with JB at the helm few worries of any return to the past times……which are well behind us!

[norbert colon] 07/5/2024 13:21

Too much uncertainty! Are we talking about the same business...? Jon B was on the board at the time of prior acquisitions but previously iirc he was MD for the distribution business (what is now the current SNWS business) rather than being responsible for Group strategy and acquisitions and he's made it very clear over the last 2 years+ that they won't make an acquisitions unless they are sound. Fft has answered the point on debt already.

[fft] 07/5/2024 12:16

Makinbuks, have you looked at any of the past annual reports or listened to any of the previous imc calls ? I suspect not, otherwise you would know that the average monthly cash swing is about 30m (actually 28.7m in 2023). Not difficult to find out....

[makinbuks] 07/5/2024 12:00

I just think there's too much uncertainty for a sustained period of buying and share price reaction. I don't think they were clear enough at last weeks announcement. Areas where more clarity could have been provided:

Period end debt and average debt both roughly halved, but they didn't say what peak debt was. This along with the working capital deterioration just cause speculation.

If average debt fell to £12.5m, why did we arrange a new overdraft of £40m with an additional £10m accordion? They explained that CAPEX would increase by £2m per annum for the next two years but that's almost immaterial. So they must be thinking acquisitions. Again, this isn't necessarily a bad thing but it creates uncertainty. The company's track record in this is not good. Last year we saw an exceptional charge due to an aborted acquisition.

What final dividend do they intend to pay if they hit this years forecast? They hinted that the interim was normally a third of the total payout but why not simply be explicit?

I had been encouraged by the extended contracts to 2029 but now I'm asking myself what they have had to give to gain such longevity particularly on the payment terms. Obviously this is commercially sensitive but perhaps they could reassure somewhat with specifics

[outsizeclothes.com] 07/5/2024 09:49

A delayed reaction to last week's results, but income seekers just have to be looking at this.

[schofi2] 04/5/2024 23:41

Simply Wall St
Smiths News
SNWS
Share Price 7 Day 1 Year
0.56 6.1% 14.8%


Price target increased by 10% to UK£0.80
Up from UK£0.72, the current price target is an average from 2 analysts.
New target price is 43% above last closing price of UK£0.56.
Stock is up 15% over the past year.

[nicholasblake] 02/5/2024 19:20

Free cash flow is £25m and dividend will take about £12.5m, so £12.5m a year free for acquisition, special dividends or buy backs!

[schofi2] 02/5/2024 18:21

HOME NEWS SOUTH WEST
South West
Robust first half for Smiths News
Ben Butler
By Ben Butler
2 May 2024

Robust first half for Smiths News
Smiths News has reported robust first half trading
Swindon-headquartered newspaper and magazine wholesaler Smiths News has said its growth strategy continues to progress on the back of robust first half trading.

In the 26 weeks to 24 February 2024, Smiths News reported revenue of £539.8m, a fall of 1.9 per cent compared to £550.1m during the prior period.

Operating profit fell 7.8 per cent to £18.8m from £20.4m the previous year.

Jonathan Bunting, chief executive, said: "I am pleased to report solid performance across the first half of 2024. It has been another period of strong cash generation, scale cost savings, and further momentum on the contribution from our growth strategy.

The group also announced it has signed a refinancing agreement to replace its current senior finance agreement, which was due to mature on 31 August 2025.

The new refinancing agreement with two of the company's existing lending syndicate, Santander and HSBC comprises a £40m revolving credit facility, with an additional £10m uncommitted accordion facilit.

The facilities are available initially on a three-year term at an improved competitive margin of 2.45 per cent per annum over SONIA, which is a 155bps improvement from the previous agreement. The company has the option at each of the first and second anniversaries to extend maturity on the same financial terms, with lender consent, upon new three-year maturity periods.

The agreement removes the existing cap on dividends and distributions, which was previously capped at £10m per financial year. The removal of this restriction will enable the business to implement its revised capital allocation policy.