This is #6 in our "Twelve Stocks of Christmas 2025" Series. You can review the full set here.
The Pitch
Smiths News (LON:SNWS) is a classic “cigar butt” stock, providing newspaper and magazine delivery to 22,000 retailers across England and Wales. As newspaper circulation declines, it’s thought that businesses like Smiths News are inevitably headed for extinction - but it has proved remarkably robust so far.
With the company still pumping out a healthy level of profits, and revenues declining at only a modest pace, I think it’s worth asking again whether management might yet pull more rabbits out of the hat for investors. If they invest the company’s cash flow wisely, or at least send most of it back to the company's owners, investors might continue to prosper for a surprisingly long time!
The Big Picture
A company with a checkered history: This was originally WHSmiths News, until it was carved out from WH Smith in 2006. It was then known as Connect Group from 2014 to 2020. Shareholders have suffered at various times, including from acquisitions that didn’t work out as planned. Tuffnells parcel delivery is the standout loser in this regard - bought for £113m and sold for £15m.
Learning from past mistakes: CEO Jon Bunting has been with the company since 1994. He was interim CEO from 2019, and then permanent CEO from 2020. He has not made any major acquisitions during his tenure in charge. Instead, the company has focused on paying down debt and on paying increasingly large dividends to its shareholders.
Going Deeper
Beating expectations: recent full-year results showed the company replicating last year’s result in terms of adjusted operating profit (£39.1m), and this was better than the market had expected. Excellent growth in the collectables segment helped - products like Match Attax and Pokémon cards.
No funny business: the statutory after-tax profit result (£28.3m) was actually higher than the corresponding adjusted figure (£27m). This was true last year, too. This suggests very clean accounts.
Rewarding shareholders instead of management ego through M&A: the ordinary dividend was increased from 5.15p to 5.55p, while the special dividend increased from 2p to 3p. The total payout of 8.55p was well covered by 11.1p of earnings per share.
Strengthening balance sheet: The company…
