Smiths News plc

Good afternoon and welcome to the Smiths News PLC full year results investor presentation. Throughout recorded presentation, investors will be in this in any mode. Questions are encouraged and they can be submitted at any time by the Q&A tab situated in the right corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives in the meeting itself. However, the company can review the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand it over to Jonathan Bunting, CEO. Good afternoon to you, sir.

Good afternoon, everyone, and welcome to Smith News full year results for the 52 weeks ended the 30th of August 2025. I'm John Bunting, CEO of Smith News, and with me today to talk through our full year results presentation is Paul Baker, our group CFO. So looking at the headlines, we're delighted to produce such a strong performance across the year, generating 39.1 million of operating profit, exceeding market expectations. Our growth verticals continue to build, producing a 16% increase in revenues. I'll talk more about our growth activities in a little more detail later on, but I think it's worth highlighting that we are pleased with our progress in the year. Volumes grew, new clients and services were introduced, and the appointment of our first MD of Smith News Recycle, Adam Wiley, is a demonstration of the confidence we have of the scale of the opportunity in that vertical. The ongoing cost savings programme continues and produced 4.9 million of operational efficiencies in FY25. Our three-year investment programme is also continuing to plan with 2.4 million of the incremental 6 million of investments made to date. This programme is designed to give our teams the tools they need to drive service and efficiency across all four verticals. The business ended the period with a net cash position of 3.3 million, supported by 6.9 million in one-off receipts, including 5.4 million from administrators of McColls. Finally, we are proposing a final ordinary dividend of 3.8 pence plus a proposed special dividend of 3 pence, underpinned by those one-off cash receipts and bringing the total for FY25 to 8.55 pence. Over a two-year period, we will therefore have returned £38 million to shareholders. I'll now hand over to Paul to talk through the financials.

Thank you, John, and good afternoon, everyone. I am pleased to report a good set of financial results, with profit ahead of expectations at £39.1 million and an improved cash position. For the financial headlines, reported revenue was down 3.6% and down 1.7% excluding the 53rd week of trading in FY2024. As I will explain further on the next slide, newspaper and magazine revenue reduced by 3% at the bottom end of our planning assumption of a 3% to 5% decline, while we saw increases in revenue from both collectibles and new verticals. Adjusted operating profit of £39.1 million was the same as last year and £0.9 million ahead of last year on a 52-week basis. This performance reflects the benefit of collectibles within our product mix and the continued realization of operational cost efficiencies. Adjusted profit after tax was 9% higher than last year at 27 million as a result of lower interest costs. Free cash flow of 36.1 million was 28.8 million higher than a year ago, in part due to timing differences within our normal working capital cycle, but also as a result of 6.9 million one-off cash receipts. The final dividend is proposed at 3.8 pence, which takes the total ordinary dividend to 5.55 pence for the year. In addition, we have proposed a special dividend of 3 pence per share, returning those one-off receipts to shareholders. Both dividends are to be paid in February 2026. Just to give a little more colour to our revenue numbers, our headline revenue numbers show a 3.6% decline on last year, but this is reduced to a 1.7% decline on a 52-week basis. Newspaper and magazines, which still make up almost 90% of our revenue, showed a 3.3% decline. This was partially offset by the annualisation of contract wins in FY 2024. Collectibles revenue increased by 17%, which is a really pleasing result, given that last year's sales included the men's UEFA football collections. And finally, revenue from our new verticals increased by 16% in the period. Expanding on collectibles, this chart shows the growth in the category over the last five years. Collectibles are made up of a number of products, the most significant of which is Premier League trading cards. While Pokemon is now our largest non-football product, we also continue to sell a number of other series, including those associated with Disney characters and Star Wars characters. Pokemon trading cards have seen a surge in popularity recently, with increasing demand from retailers for available stock. From a consumer perspective, interest ranges from children swapping cards in the playground to the trading of pristine individual cards for thousands of pounds. All these products pass through our supply chain and are delivered to retailers in the same way as newspapers and magazines. In the second half of the year, in response to the increased demand, we were able to sell old stock from within the supply chain. This gives a 1.2 million one-off benefit to overall adjusted operating profit for the year. In the next 12 months, Pokemon celebrates its 30th anniversary, and we anticipate a good level of continuing interest. We are working closely with both Pokemon and retailers to ensure availability as each new series launches. On to the adjusted income statement. Below operating profit, net finance charges in the period are £2.6 million lower than last year due to lower levels of borrowing and the improved commercials in the banking facilities signed last year. Net finance charges of £3.3 million includes lease interest of £2.4 million with the remainder being borrowing costs associated with our intra-month working capital swing. With lower finance charges, profit after tax increased by 2.3 million or 9% to 27 million, with EPS then increasing by 0.8 pence to 11.1 pence. Now turning to cash flow. Total free cash flow for the year was 36.1 million compared to 7.3 million last year. Working capital in the current year was an inflow of 4.1 million due to the additional sale of collectibles, which were beneficial to our working capital cycle over the last six months. We anticipate that this benefit will unwind over the next half year. As a reminder, the working capital outflow in FY 2024 was driven by publisher payments of 15.7 million made in the 53rd trading week, which was part of our normal working capital cycle. Capital expenditure of £4.5 million is £0.1 million higher than last year and includes £1.2 million of property spend in relation to our three-year investment programme. Lease payments have increased due to rent renewals over the last 18 months, while interest has reduced due to lower borrowings. Adjusted items were a net inflow of £5.1 million, with legal and investment costs offset by £6.9 million of one-off receipts. These were a £1.5 million tax refund and £5.4 million of receipts from the McColl's administrator. The final position recovered 98% of the original McColl's debt from 2022. And finally for me on slide 10, this chart shows the dividends we have declared over the last five years. Since refinancing and the adoption of our updated capital allocation policy in May 2024, we've proposed or declared 38 million of dividends with ordinary dividends augmented by a two-piece special last year and a three-piece special this year, which returns the one-off receipts I have just mentioned. With ongoing free cash generation of 20 to 25 million per year, our capital allocation policy remains unchanged. Our policy is to pay a two times dividend, then to consider the investment needs across all parts of the business, thereafter seeking to return further amounts to shareholders. That concludes my finance part. I'll now hand back to John.