Smiths News plc

Good afternoon and welcome to the Smiths News PLC investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and could be submitted at any time via the Q&A tab situated on the right-hand 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 during the meeting itself. However, the company can review all 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 you over to John Bunting, CEO. Good afternoon, sir.

Hello everyone and welcome to Smith News interim results for the 26 weeks ended the 28th of February 2026. I'm John Bunting, Smith News CEO and joining me today is our Chief Financial Officer Richard Clay. Richard joined the company in February of this year and we're delighted to have him on board. So before we dive into the detail, let me quickly cover off the broader headlines. Once again, Smiths News delivered a positive performance with full year results expected to be in line with market expectations. Pleasingly, the business generated adjusted operating profit of 18.3 million and adjusted profit after tax of 12.7 million, underpinning our interim dividend of 1.75 P per share. Our newspaper and magazine activities continue to remain resilient, tracking broader print market trends and historic norms. In addition, we have now secured 96% of our newspaper and magazine revenues to 2029 or beyond, following the renewal of a long-term contract with the Guardian newspaper group. The collectibles market has remained strong, driven by ongoing demand for Pokemon, including the 30th anniversary, and we're obviously looking forward to the summer men's FIFA World Cup, which typically provides a one-off boost to the second half. Progress continues across all the verticals, with recycling revenues up over 50%, an obvious highlight. I'll now hand over to Richard, who'll walk you through our financial performance in a little more detail.

Thank you, John, and good morning to everyone. Starting with the financial summary, revenues declined by 3.9% in the period, which is in line with our guidance of minus three to 5%. Whilst revenue from newspaper and magazines decreased at just above 4%, we saw an increase in revenue from collectibles and our growth verticals. We will look at revenue in more detail on the next slide. Adjusted operating profit decreased by 1.1 million to 18.3 million, impacted by the annualization of national insurance contributions since last April and ongoing investments in our cost base. The performance of collectibles, including Pokemon, and the ongoing benefit of cost reduction plans partially mitigated the impact of both inflation and lower income from newspapers and magazines. We expect full year results to be in line with market expectations. It is worth remembering that over the next few months, we will see revenue from FIFA World Cup trading card and sticker collections, which will give our profit a second half weighting this year. Free cash flow of 21.2 million was 7.9 million higher than last year and included a working capital timing benefit of 7.6 million, part of our normal working capital cycle. Underlying cash flow remains strong and has supported the move to an average net cash position, which was 16.2 million for the half year, noting that the ordinary and special dividends of 16.7 million were paid in February at the end of the reporting period. To give a little more colour to our revenue numbers on this slide, Our headline revenue number shows a 3.9% decline on the same period last year, which again is within the 3.5% annual decline which we guide to. Newspapers and magazines continue to make up over 90% of total revenue, and the 4.1% decline in these products drives the overall performance. Collectibles has continued to perform well, and we saw revenue up 13.3% since last half year. Revenue from growth verticals, while relatively small compared to the headline newspapers and magazines revenue, increased by 35%, in particular due to additional revenues in the recycle vertical, which John will touch upon later. Onto the adjusted income statement. Below operating profit, net finance charges were 0.4 million lower than last year, with the company in a net cash position from up to the first half. With lower finance charges, PBT reduced by 0.7 million, or 4%, to 17.0 million, with EPS then decreasing by 3.7% to 5.2p. An interim delivered end of 1.75p 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 21.2 million, an increase of 7.9 million from last year, partly due to favourable timing of our working capital cycle, which gave a £10.1 million benefit when compared to last year. There are two items worth noting in this slide. Firstly, you may remember that we received two significant one-off inflows in the first half of FY25, £1.6 million from the Administrations of McColls and a £1.5 million tax credit from the sale of the Smiths News pension scheme. These were included within the £2.1 million presented as adjusting items inflows last year. Secondly, adjusting items in this period consisted of technology investment costs of 0.3 million, strategic project costs of 0.2 million and professional fees of 0.1 million in relation to the pension regulator's review of the Tufnell's defined benefit pension scheme. As previously announced, the Board is reviewing the warning notice received from the pensions regulator with its advisers and will have an opportunity to make submissions in response. the Board maintains the view that Smiths News acted reasonably throughout its time as parent of Tufnells and that it was an overall net contributor of funding to Tufnells during its period of ownership. Working down from working capital, capital expenditure at £0.9 million was £1.4 million lower than last year, reflecting the investment cycle and where we are in individual programmes. Lease payments reduced by 0.3 million year-on-year, in part due to properties exited in the first half of FY25. And tax cash payments were higher than last year, as the prior period included a credit relating to previous tax years. Finally, for me, this slide shows a 12-month rolling cash flow, bridging 12.4 million of net debt a year ago to a 7.8 million net cash position this half year. Over the last 12 months, the business has generated an underlying cashflow of 26.8 million, consistent with our guidance of circa 20 to 25 million annual inflow that the business has been delivering for some time. Noting that this figure includes 3.7 million received from the McColls administrator in the second half of last year, which formed part of the basis for the 7.4 million special dividend paid in February. We continue to focus on average net cash or debt as a headline measure, as our reported closing position is impacted by the timing of our working capital cycle and dividends. Average net debt of 1.1 million at H1 2025 improved to net cash of 16.2 million in H1 2026. In terms of dividends for the current year, the Board continues to assess the cash generated from trading alongside the needs to invest across all areas of business before deciding on distributions in line with our capital allocation policy. I'll now hand back to John.