Smiths News plc

Good afternoon, ladies and gentlemen, and welcome to the Smiths News PLC investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged. They can be submitted at any time via the Q&A tab that's just situated on the right-hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish those responses where it's appropriate to do so on the InvestorMeet company platform. And before we begin, as usual, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from Smiths News PLC. John, good afternoon, sir.

Thank you, Jay. Good afternoon, everyone, and welcome to SmithsNews interim results for the 26 weeks ending the 1st of March 2025. I'm John Bunting, CEO of SmithsNews, and with me today to talk through a half year results presentation is Paul Baker, our Group CFO. So starting with the headlines, we've made a good start to the current financial year and the business is on track to deliver the FY25 results in line with market expectations. We've seen an increase in operating profit up 3.2% alongside a strong cash flow performance in the period. As highlighted in our full year results in November last year, we continue to leverage our news and magazine business whilst also seeking to drive growth. We have made progress across all three growth verticals comprising Smith News Recycle, New Categories and Final Miles. Our internal investment programme has also gathered pace with the successful implementation of a new warehouse management system at one regional hub and the broader rollout will be complete in this financial year. We have 91% of our existing publisher revenue streams secured to 2029, which not only provide assurance of revenues across the short and medium term, but also provides the foundations to support our strategic intent to broaden our early morning end-to-end supply chain solutions. We have again generated strong cash flow in the period and today announced a proposed interim dividend of 1.75 pence per share. I'll now hand over to Paul to walk through the financials before coming back to discuss each of these points in a little more detail later in the presentation.

Many thanks, John, and good afternoon, everyone. Starting with the financial summary. Revenues declined 0.6% in the period, lower than our guidance of a 3% to 5% decline, supported by the benefit of our 2024 contract wins in London and the Midlands, as well as football and Pokemon collectibles. We will look at revenue in more detail on the next slide. Adjusted operating profit increased by 0.6 million to 19.4 million in the first half, driven by improved sales in collectibles, the annualisation of the 2024 contract wins and increased profit from our growth activities. Importantly, our ongoing cost efficiency programme is in line with plan and in the first half delivered another 3 million of gross improvements. Adjusted earnings per share increased by 10% to 5.4 pence, benefiting from the increased operating profit and the lower interest cost under our new banking facility signed in May last year. Average net debt has reduced by £11.4 million to £1.1 million, driven by consistent cash flow in the first half, but noting that the ordinary and special dividends were paid in February at the end of the reported period. Just to give a little more colour to our revenue numbers, our headline revenue numbers show a decline of 0.6% in the first half, which is again below the 3% to 5% annual decline which we guide to. Since COVID, our underlying newspaper and magazine performance, which makes up over 90% of our total revenue, has been impacted by a number of things, pricing, contract wins, and last year, the 53rd trading week. So, for example, the annualisation of our additional contract wins last financial year give a 1.6% benefit year on year. And this drives the majority of the difference between our headline number of a minus 0.6% and guidance. If you exclude this annualisation, newspaper and magazines showed a decline of minus 3.1%, which is within our expected range of 3 to 5%, albeit at the lower end. Collectibles increased in the half by 4.3%, demonstrating the continued popularity of football collections and the increased interest in the latest Pokemon series. Revenue from strategic growth initiatives, while relatively small compared to the headline newspaper and magazine revenue, also contributed to the headline movement, increasing by 25% in the two. On to the adjusted income statement. Below operating profit, net finance charges in the period are 1.2 million lower than last year, driven by the continued reduction in average debt and the improved commercials in the banking facility signed last year. We recently extended this facility for an additional year to May 2028 and have a remaining option available in 12 months' time to extend further to May 2029. With lower finance charges, Profit before tax increased by 1.8 million or 11.3% to 17.7 million with earnings per share then increasing by 10% to 5.4 pence. An interim dividend of 1.75 pence in line with last year has been approved by the board and will be paid in July. Total free cash flow for the half was an inflow of 13.3 million an increase of £9.1 million from last year, partly due to a favourable timing of our working capital cycle, but also included the inflows from both the McColls administrators and the pension tax refund, which are included within adjusting items of £2.1 million. Capital expenditure at £2.3 million is £0.4 million higher than last year and we expect this rate to accelerate into the second half in line with our planned increase in investment over the next three years. Lease payments have increased by £0.6 million year on year due to inflationary impacts on lease renewals of which there have been seven over the last 12 months. Net interest and fees are lower than in 2024 by 0.8 million, thanks to the cash impact of the lower levels of borrowing and interest margins mentioned earlier. Over the last 12 months, the business has generated an underlying cash flow of £24.2 million, consistent with the £20 to £25 million annual inflow the business has been delivering for some time. Additional income, including amounts received from the McCall's administrator and a pension tax refund, have been positive one-offs, recorded in adjusting items of £2.1 million. Over the last two years, we have focused on average net debt as a headline measure, as reported net debt is impacted by the timing of our working capital cycle. Average net debt has reduced from £12.5 million in half one 2024 to just £1 million in the first half this year, noting that the dividend payments were made at the end of the period in February and do not significantly impact the average. As a reminder, at the end of the last financial year, we announced a special dividend on top of our two times ordinary dividend. For the current year, the board will again assess the cash generated from trading, along with the needs to invest in both the core and growth sides of the business before deciding on any further distributions in line with our capital allocation policy. I'll now come back to John.