Smiths News plc

Good morning ladies and gentlemen and welcome to the Smith News plc four-year results investor presentation. 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 we'll publish our responses where it's appropriate to do so on the Invest and Meet company platform. Before we begin 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'd now like to hand you over to CEO John Bunting. John, good morning sir.

Good morning and thank you for joining us. I'm joined today by our Chief Financial Officer Richard Clay and together we'd like to take you through our FY26 results, the progress we've made across the business and most importantly why we believe the next phase of our strategy represents a transformational opportunity for Smiths News. Turning to the headlines, pleasingly we've delivered a strong financial performance across FY26 with results in line with the upgraded market expectations. The group delivered adjusted operating profit of £38.7 million and adjusted profit after tax of £27.4 million. This excellent performance has been in part enabled by further positive momentum in collectibles, supported by a strong FIFA Men's World Cup and ongoing Pokemon demand. We also generated a 31% year-on-year improvement in growth revenues, with a particularly pleasing contribution from recycling activities. From an efficiency perspective, we again delivered 4.5 million of operational savings during the year, in line with budget. Finally, on the financial highlights, we are proposing a final ordinary dividend of 3.9p per share, taking the FY26 dividend to 5.65p per share. Before I hand over to Richard, who will do a deeper dive on the numbers, I wanted to talk briefly about our Go National programme, which we will touch on in greater detail later in the presentation. Go National is the result of a number of exclusive national newspaper and magazine contract renewals that will see us transform our operational footprint across Wales, England and Scotland, generating a significant annual revenue uplift from 2027 through to 2037. The Go National programme will be funded using our existing cash resources and financial arrangements. and we'll see us invest between 21 million and 27 million to establish a national capability as we open an additional 23 new depots, create around 700 new delivery routes and recruit more than 1000 new subcontractor delivery partners and colleagues. This represents both a financial and operational transformation of the group and with that we expect this program to generate between 12 million and 18 million of additional operating profit from FY29 onwards. We have also reiterated our intention to maintain FY27 ordinary dividend at or above 5.2p but importantly we've added significant operational scale to our business creating yet further opportunities to extend our market reach in the future. I'd now like to hand over to Richard.

Thank you, Jon. I'll start with the financial summary. Overall, the FY26 results reflect a strong performance. Revenue reduced 2.6% to 1036 million, which was in line with historic norms when adjusting for the World Cup revenues. Adjusted operating profit of 38.7 million was 1% lower than prior year, which was 4% ahead of year-end consensus expectations and in line with recently updated expectations. Adjusted profit after tax moved the variances into positive territory with adjusted profit after tax up 1.5% at 27.4 million and adjusted earnings per share up 1.8% at 11.3p. This included the impact of lower net finance costs benefiting from higher average net cash of 15.7 million as you see here and better deposit rates. In terms of dividend, a final dividend is proposed at 3.9p bringing the full year dividend to 5.65p. Now looking at revenue in a bit more detail. Newspapers and magazines revenues were 3.9% lower year on year which as I said was in line with historic norms and also within our guidance of 3 to 5% reduction each year. This is the net impact of volume decline and cover price increases. We see different cover price increases and volume impacts for each publisher with some seeing a higher net decline than others and this is the weighted average. Collectibles revenues were up 31.9% and this was driven by the World Cup trading card and sticker sales, as well as continued demand for Pokemon products. International football competitions typically enhance a group's performance in alternate years, the even ones, due to timing of the FIFA World Cups and UEFA European Championships. Finally, the revenue from our growth verticals of Recycle, New Categories and Final Mile was up 31.3%, an improvement on the prior year where they grew by 16%. Whilst these revenues are still small in the overall mix, the growth verticals remain at the heart of our long-term strategy. Looking now at the income statement in more detail, I will call out three elements. First, operating profit. The operating profit year on year at £38.7 million reflects a the impact of inflation including the annualisation of national insurance contributions, b increased investments in technology and overheads, c the lower revenues already referenced and consequential lower gross margin from newspapers and magazines, and d lower delivery service charges due to the ongoing and gradual reduction in retails. and these were then partially offset by a operational cost out initiatives which at 4.5 million remained in line with our view of 45 million per annum and b the higher net profit in collectibles mainly from the world cup contribution from growth verticals was broadly flat prior year although revenues increased and the exit rate contribution was higher than the full year number showing momentum building Similar to the prior year, these remain the common factors impacting the income statement for Smiths News. Secondly, you see the benefit of lower net finance charges, which were 0.8 million lower. That, plus a slightly favourable tax rate year on year, helped EPS increase 2%, or 0.2p, to 11.3p. and finally dividend. In line with our policy of two times cover, a final dividend is proposed at 3.9p bringing the full year dividend to 5.65p up 0.1p year on year. This was also ahead of the 5.2p reference before today in the contract wins early guidance. Given no exceptional cash inflows this year, and the investment coming in Go National, which I will cover off later, no special dividend is declared this year. Looking now to the cash flow statement, free cash flow remains strong at 24.1 million. Working down the statement, you can see EBITDA was slightly lower year on year at 48.1 million, mainly due to the lower operating EBIT. then working capital which was an outflow this year last year we explained the inflow was due to collectibles and this year the outflow is also due to collectibles the two can be seen as offsetting one another overall working capital should average a small outflow in this type of business but the timing of retailer receipts and publisher payments can lead to working capital movements at specific points in time this year due to collectibles It is also worth noting that overall our working capital position tends to be favourable to closing as can be seen from average net cash being higher than closing net cash. Then capex, capex was slightly lower than usual largely due to the timing of expenditure on properties and tax was slightly lower reflecting some refunds relating to prior years and the tax on adjusting items. Adjusting items are analysed in note three of the accounts but looking here from a cash perspective they mainly reflect technology costs as part of the company's ongoing technology investment programme and transformation programme planning costs in relation to the national publisher contract wins and work relating to the tender for the DRS contract. In the prior year, we benefited from two one-off receipts, £5.4 million relating to dividends from McColls, the retailer, post-completion of liquidation proceedings, and a pension tax refund of £1.5 million. There were no further costs in H2 associated with the previously announced UK pension regulation matter, and the group continues to disclose a contingent liability in respect to the investigation. So overall, free cash flow remains strong at £24.1 million. And what does that mean for our net cash position? This chart bridges net cash from last year's £3.3 million to this year's close of £3.9 million. Here we have the payment of prior year's final ordinary dividend and special dividend plus this year's interim dividend and the net cash inflow excluding work and capital. and on the right one sees the consistency of these strong cash inflows over the last three years averaging 25 million the company moving from net debt to net cash both on an average and closing basis and finally the total dividends returned to shareholders over the last three years which amounted to 49.1 million in total That record in cash generation and that net cash position places us very well for what is coming next. And now back to Jon to talk through the operational review.