REG - Smiths News PLC - Final Results
05/11/2024 07:00
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RNS Number : 8967K Smiths News PLC 05 November 2024
This Announcement Contains Inside Information
Smiths News plc
("Smiths News" or the "Company")
Final Results for the 53 weeks ended 31 August 2024
Robust trading performance delivers results ahead of market expectations
Debt refinancing and materially lower debt underpins renewed capital
allocation and diversification ambitions
Proposed total ordinary dividend for the year of 5.15 pence per share,
alongside a further special dividend of 2.0 pence per share
Smiths News (LSE: SNWS), the UK's largest news wholesaler and a leading
provider of early morning end-to-end supply chain solutions, today announces
its final results for the 53 weeks ended 31 August 2024 (the "Period" or "FY
2024").
Key highlights:
· Financial performance across FY 2024 ahead of market expectations*
· Revenues of £1,104m (+1.1% versus FY 2023) and adjusted operating profit of
£39.1m (+£0.3m versus FY 2023), supported by sales from the men's UEFA
European Championships and the additional week of trading**
· Continued focus on operational efficiencies, delivering £5.6m cost savings in
FY 2024
· 91%*** of existing publisher revenue streams secured subject to contract until
2029
· Increased contribution to operating profit from organic growth initiatives of
£2.0m (FY 2023 £0.7m)
· Average Bank Net Debt during the period decreased 53% to £11.7m
· Free cash flow of £7.3m and closing Bank Net Debt of £11.0m were both
impacted by the 53(rd) week
· May 2024 debt refinancing allows the Company to implement a revised capital
allocation policy and significantly reduces interest costs
· Proposed final ordinary dividend of 3.4 pence per share due to be paid on 6
February 2025, resulting in a total ordinary dividend for the year of 5.15
pence per share (+23% on FY 2023)
· The Company proposes a further special dividend of 2.0 pence per share to be
paid on 6 February 2025 resulting in total dividends (interim, final and
special) for the year of 7.15 pence per share (+72% on FY 2023)
Adjusted results ((1)) 53 weeks to 52 weeks to Change
31 Aug 2024 26 Aug 2023
Revenue £1,103.7m £1,091.9m 1.1%
Operating profit £39.1m £38.8m 0.8%
Profit after tax £24.7m £25.6m (3.5%)
Earnings per share 10.3p 10.8p (0.5p)
Statutory results
Revenue £1,103.7m £1,091.9m 1.1%
Operating profit £40.0m £38.3m 4.4%
Profit after tax £25.5m £25.1m 1.6%
Earnings per share 10.6p 10.6p 0.0p
Cash flow and net debt
Free cash flow ((2)) £7.3m £21.8m (66.5%)
Bank Net Debt ((3)) £11.0m £4.2m 161.9%
Average Bank Net Debt £11.7m £25.0m (53.2%)
Dividend per share 7.15p 4.15p 3.00p
Adjusted results ((1)) 53 weeks to 52 weeks to Change
31 Aug 2024 26 Aug 2023
Revenue £1,103.7m £1,091.9m 1.1%
Operating profit £39.1m £38.8m 0.8%
Profit after tax £24.7m £25.6m (3.5%)
Earnings per share 10.3p 10.8p (0.5p)
Statutory results
Revenue £1,103.7m £1,091.9m 1.1%
Operating profit £40.0m £38.3m 4.4%
Profit after tax £25.5m £25.1m 1.6%
Earnings per share 10.6p 10.6p 0.0p
Cash flow and net debt
Free cash flow ((2)) £7.3m £21.8m (66.5%)
Bank Net Debt ((3)) £11.0m £4.2m 161.9%
Average Bank Net Debt £11.7m £25.0m (53.2%)
Dividend per share 7.15p 4.15p 3.00p
* Company compiled analyst consensus can be found on Smiths News's website:
Analyst consensus
(https://www.smithsnews.co.uk/investor-zone/investors/consensus-and-key-metrics/)
** The impact of the 53(rd) week was an increase to revenue of 1.9%, an
increase to adjusted operating profit of £0.9m and a cash outflow of £15.7m
*** 74% of publisher contracts signed to 2029, additional 17% secured under
Heads of Terms agreement
Strategy
· The Company's vision is to consolidate our position as one of the UK's leading
providers of early morning end to end supply chain solutions
· As outlined previously, the Company has identified several growth initiatives
that build on its expertise in warehousing, reverse logistics and early
morning final mile services, across its extensive high-density UK delivery
network
· The news and magazines business remains resilient, with 91%*** of revenues
under renewed long-term agreements to 2029, and its asset-light, flexible cost
base model underpins the Company's strategy to build growth revenues
· Established growth initiatives that leverage these proven capabilities, such
as Smiths News Recycle, are delivering good progress
Outlook
· Refinancing agreement, announced in May 2024, removes restrictions on
shareholder distributions and allows the Company to implement its revised
capital allocation policy
· Cost-out plans in place to deliver continued savings, targeting approximately
£5.0m annually
· Three-year internal investment programme underway to ensure the business is
positioned to support our market-leading news and magazines offering alongside
additional growth opportunities
· 91%*** of existing publisher revenue streams secured subject to contract to
2029, providing the Company with stability of and visibility over revenues
across the medium term
· Anticipated growing contribution from growth initiatives
· Outlook remains in line with market expectations and the Company has delivered
a good start to trading in the current financial year
Jonathan Bunting, Chief Executive Officer, commented:
"Our performance over FY 2024 reflects the resilience of our news and
magazines business and impact of our cost efficiency initiatives. The
refinancing agreement announced in May removes restrictions on shareholder
returns and also enables internal investment to support both our news and
magazines business and our growth plans.
"Our growth programme is centred around Smiths News's asset-light, flexible
cost base and our established competencies across reverse logistics,
warehousing and early morning final mile services. These position us well to
drive profitability from complementary market opportunities in growth areas
such as recycling, final mile and warehousing verticals.
"We have today announced both a final ordinary dividend of 3.4 pence per
share, and a further special dividend of 2.0 pence per share. This means that
we propose to return over £17.2m to our shareholders in respect of FY 2024.
"In summary, Smiths News is well placed to continue to deliver a resilient
performance over the medium term. Meanwhile, the combination of the recently
announced investment programme and dividend policy demonstrates our ability to
meet the ongoing needs of the business while providing attractive cash returns
to shareholders."
For further information, please contact:
Smiths News plc via Vigo Consulting
Jonathan Bunting, Chief Executive Officer
Paul Baker, Chief Financial Officer
www.smithsnews.co.uk (http://www.smithsnews.co.uk)
Vigo Consulting Tel: +44 (0) 20 7390 0230
Jeremy Garcia / Fiona Hetherington / Verity Snow
smithsnews@vigoconsulting.com (mailto:smithsnews@vigoconsulting.com)
About Smiths News
For over 200 years, Smiths News has been delivering newspapers to retailers
across the UK. It distributes newspapers, magazines and ancillary items on
behalf of the major national and regional publishers, delivering to
approximately 22,400 customers across England and Wales on a daily basis. The
speed of turnaround and density of Smiths News' coverage is critical to its
position as a leading provider of early morning end-to-end supply chain
solutions.
For more information, please visit: www.smithsnews.co.uk
(http://www.smithsnews.co.uk)
Person responsible for arranging release of this announcement:
Stuart Marriner, Company Secretary & General Counsel
Smiths News plc, Rowan House, Cherry Orchard North, Kembrey Park, Swindon SN2
8UH
Email: cosec@smithsnews.co.uk (mailto:cosec@smithsnews.co.uk)
Notes
The Company uses certain performance measures for internal reporting purposes
and employee incentive arrangements. The terms 'Bank Net Debt', 'free cash
flow', 'Adjusted operating profit', 'Adjusted profit before tax', 'Adjusted
earnings per share' and 'Adjusted items' are not defined terms under IFRS and
therefore are Alternative Performance Measures (APM) and may not be comparable
with similar measures disclosed by other companies.
(1) The following are key APMs identified by the Company in the Group Financial
Statements as Adjusted results:
a. Adjusted operating profit - is defined as operating profit excluding
Adjusting items.
b. Adjusted profit before tax (PBT) - is defined as profit before tax
excluding the impact of Adjusting items.
c. Adjusted earnings per share - is defined as Adjusted PBT, less taxation
attributable to Adjusted PBT and including any adjustment for minority
interest to result in adjusted profit after tax attributable to shareholders;
divided by the basic weighted average number of shares in issue.
d. Adjusting items - Adjusting items of income or expenses are excluded in
arriving at adjusted operating profit to present a further measure of the
Company's performance. Each Adjusting items is considered to be significant in
nature and/or quantum, non-recurring in nature and/or unrelated to the Group's
ordinary activities or consistent with items treated as adjusting in prior
periods. Excluding these items from profit metrics provides readers with
helpful additional information on the performance of the business across
periods because it is consistent with how the business performance is planned
by, and reported to, the Board and the Executive Team. Adjusting items are
disclosed and described separately in Note 3 to the Group Financial Statements
to provide further understanding of the financial performance of the
Company. A reconciliation of adjusted profit to statutory profit is presented
on the income statement.
(2) Free cash flow - is defined as cash flow excluding the following: payment of
dividends, the impact of acquisitions and disposals, the repayment of bank
loan principal amounts and outflows for purchases of own shares (EBT share
purchases).
(3) Bank Net Debt - represents the net position drawn under the Company's banking
facilities and is calculated as total debt less cash and cash equivalents.
Total debt includes loans and borrowings excluding amortised arrangement fees,
overdrafts and obligations under finance leases under accounting standards
applicable in 2019.
Cautionary Statement
This document contains certain forward-looking statements with respect to
Smiths News plc's financial condition, its results of operations and
businesses, strategy, plans, objectives and performance. Words such as
'anticipates', 'expects', 'intends', 'plans', 'believes', 'seeks',
'estimates', 'targets', 'may', 'will', 'continue', 'project' and similar
expressions, as well as statements in the future tense, identify
forward-looking statements. These forward-looking statements are not
guarantees of Smiths News plc's future performance and relate to events and
depend on circumstances that may occur in the future and are therefore subject
to risks, uncertainties and assumptions. There are a number of factors which
could cause actual results and developments to differ materially from those
expressed or implied by such forward looking statements, including, among
others the enactment of legislation or regulation that may impose costs or
restrict activities; the re-negotiation of contracts or licences; fluctuations
in demand and pricing in the industry; fluctuations in exchange controls;
changes in government policy and taxations; industrial disputes; war and
terrorism. These forward-looking statements speak only as at the date of this
document. Unless otherwise required by applicable law, regulation or
accounting standard, Smiths News plc undertakes no responsibility to publicly
update any of its forward- looking statements whether as a result of new
information, future developments or otherwise. Nothing in this document should
be construed as a profit forecast or profit estimate. This document may
contain earnings enhancement statements which are not intended to be profit
forecasts and so should not be interpreted to mean that earnings per share
will necessarily be greater than those for the relevant preceding financial
period. The financial information referenced in this document does not contain
sufficient detail to allow a full understanding of the results of Smiths News
plc. For more detailed information, please see the Preliminary Financial
Results and/or the Annual Report and Accounts, each for the 53-week period
ended 31 August 2024 which can each be found on the Investor Zone section of
the Smiths News plc website - www.smithsnews.co.uk. However, the contents of
Smiths News plc's website are not incorporated into and do not form part of
this document.
OPERATING REVIEW
Overview of performance
Smiths News continued to see robust trading throughout FY 2024, delivering
results ahead of market expectations for the period. These results reflect a
pleasing period across the business, supported by the performance of our
established news and magazines operations, alongside increased contributions
from strategic growth initiatives and the Company's ongoing cost efficiency
programme. Trading performance was further bolstered by sales of collectables
from England and Scotland's participation in the men's UEFA European
Championships, and the additional benefit of a 53rd week in the reporting
period.
The Company delivered adjusted operating profit of £39.1m (FY 2023: £38.8m)
from revenue of £1,103.7m (FY 2023: £1,091.9m), including the benefit of the
53rd week. This was despite ongoing inflationary pressures, lower magazine
waste prices and the anticipated continued volume decline in the newspaper and
magazine market. Adjusted profit before tax was £33.2m (FY 2023: £32.3m),
marking a £0.9m increase. Free cash flow was £7.3m, in line with plans, and
skewed by the 53-week reporting period, with the additional week including
scheduled publisher payments. On a 52-week comparative basis, free cash flow
remained in line with plan at £23.0m (FY 2023: £21.8m inflow). Average Bank
Net Debt saw a notable decrease of 53% to £11.7m (FY 2023: £25.0m), and Bank
Net Debt was impacted by net payments of £15.7m in the 53rd week, rising by
£6.8m to £11.0m as a result, compared to £4.2m in FY 2023. Adjusted EPS
stood at 10.3p (FY 2023: 10.8p), a decrease of 0.5p.
As previously stated, the Company remains focused on continuing to deliver
first-class service within its news and magazines business, while
simultaneously exploring opportunities that build on its expertise in early
morning end-to-end supply chain solutions. Management is seeking to drive
opportunities that build upon these capabilities, alongside successfully
mitigating the long-established and gradual decline of sales of print
newspapers and magazines.
The Company's established expertise in early morning supply chain management,
including end to end and final mile logistics sits centrally in its growth
strategy as it seeks to further leverage this skill set.
A year of continued progress and building growth
FY 2024 has been a year of continued progress. The Company has made
significant strides in strengthening its business, achieving strong progress
in reducing average bank net debt, and creating headroom to deliver further
attractive returns to shareholders. As announced at the half year results in
May 2024, the Company signed a new financing agreement which removed certain
restrictions on dividends and distribution of capital. The new agreement
allows Smiths News to implement its revised capital allocation policy, which
includes consideration of future shareholder returns and facilitates
investment in its core capabilities and exploration of potential adjacent
market opportunities.
As outlined previously, the Company has been developing growth initiatives
that build on its expertise in warehousing, reverse logistics and early
morning final mile services, across its extensive high-density UK delivery
network. These initiatives seek to layer additional services over our existing
provision in the news and magazines markets, creating a compelling proposition
for both current and prospective customers.
To date, our growth initiatives have included the delivery of new products and
services for existing customers, including the previously announced rollout of
Smiths News Recycle which capitalises on our core reverse logistics
capabilities. Additionally, we have expanded the range of our services to
national supermarket and convenience store clients with the distribution of
books, home entertainment and new products, utilising our expertise in
warehousing and early morning final mile services, alongside network
optimisation.
Refinancing and implementation of revised capital allocation policy
In May 2024, the Company announced the successful refinancing of the business,
reflecting the continued strengthening of the underlying performance and
material reduction in total and average net debt. The new facility comprises a
£40m revolving credit facility, with an additional uncommitted accordion
facility of up to £10m. The facility is set to run for a minimum 3-year term
at an initial 2.45% margin over SONIA, with options to extend for up to a
further 2 years. The new facility removes the cap on distributions to
shareholders and supports investment in the business.
Prior to the refinancing agreement, the total annual dividend payment was
capped at a maximum of £10m per annum. The refinancing has removed this cap
and allows the Company to implement its revised capital allocation policy,
which comprises:
· Maintaining a strong balance sheet with a Bank Net Debt: Bank
EBITDA ratio of less than 1.0x
· Continued investment in both the news and magazines business and
organic growth initiatives
· Payment of sustainable ordinary dividend, maintaining 2x dividend
cover
· Disciplined approach to inorganic growth initiatives, focused on
bolt-on acquisitions with clear accretive returns to enhance shareholder value
· Further returns to shareholders when appropriate.
Dividend
Following the interim ordinary dividend of 1.75p, paid in July 2024, the
Company proposes to pay a final ordinary dividend of 3.4 pence per share on 6
February 2025 (FY 2023: 2.75p per share) to shareholders on the register on 10
January 2025, which will bring the total proposed dividend for the year to
5.15 pence per share. The ex-dividend date will be 9 January 2025.
Additionally - in line with the Company's revised capital allocation policy
and reflecting the greater discretion relating to shareholder distributions
allowed by the renegotiation of its banking facilities - the Company proposes
to pay a special dividend of 2.0 pence per share, to be paid alongside the
final ordinary dividend on 6 February 2025 to shareholder on the register at
10 January 2025.
Growth initiatives
The Company continues to explore strategic organic growth initiatives that
leverage and expand upon the business' core competencies of early morning and
final mile services, warehousing and reverse logistics, which remain central
to our newspaper and magazine operations.
Smiths News Recycle - a waste recycling service for our retail customers and
other appropriate outlets - was initially launched to a select group of
customers in February 2023. It was rolled out more broadly across a larger
portion of our network in November 2023 and as of 31 August 2024, had been
adopted by approximately 5,000 customers, representing strong penetration of
the Company's existing customer footprint. The success of Smiths News Recycle
can be attributed to our long-standing reverse logistics capabilities, and
deep understanding of the unique dynamics of the early-morning and final mile
markets - core competencies which will remain central to our growth plans. We
believe there is scope to expand this service beyond our existing customer
base.
The application of our core competencies - specifically warehousing and early
morning final mile services - to other growth initiatives includes the
delivery of books and home entertainment to multiple national supermarket
chains, as well as new products to a national grocer, both of which are
progressing well. The Company is currently engaged in discussions with a
number of other potential customers, aiming to further extend the delivery of
its services.
Operating profit generated from our organic growth initiatives in FY 2024 was
£2.0m versus £0.7m in FY 2023, demonstrating the Company's ability to
identify and develop growth angles that leverage existing infrastructure and
are complementary to our news and magazines operations.
Internal investment programme
As highlighted in our half year results, the Company will be undertaking an
investment programme over the next three years, increasing investment in the
business by approximately £2.0m per annum over that period to £6.0m per
annum. The investment will include the implementation of a new warehouse
management system which will optimise warehouse operations going forward, a
transport management system and investment in facilities, ensuring that we
continue to provide our customers and suppliers with the best quality service.
Furthermore, investment in technology will ensure the Company is better able
to support its growth initiatives including the provision of end-to-end supply
chain solutions for new and existing clients. Following this period of
investment, annual capital investment in the business is expected to return to
circa. £4.0m maintenance capex per annum thereafter.
Contract renewals
Further to the recent announcements of contract renewals with the Financial
Times, Smiths News now has secured 91% of its publisher revenue streams out to
2029, providing underlying revenue stability and assurance.
This includes the signing of a Head of Terms for a new 5-year commercial
agreement with Reach plc, which commenced in October 2024, subject to
contract.
Securing these key contract renewals provides Smiths News with revenue
stability over the medium term and enables Smiths News to plan accordingly for
its network and the delivery of these services going forward. This revenue
stability also supports additional growth initiatives to further drive
profitability.
Inflation and operational efficiencies
Cost inflation continued to impact our operating cost base in the period, in
line with our internal forecasts. Whilst showing some signs of relaxation,
these increases remained well above historic norms during the Period.
Within Smiths News, we remain focused on identifying operational efficiencies
to optimise its broader network and services. In FY 2024, we delivered £5.6m
of cost savings centred around streamlining warehouse and final mile
operations and finding efficiencies in our overhead cost base, including
reducing variable costs aligned to volume declines. Looking ahead, we continue
to identify opportunities for enhanced efficiencies and believe the previously
mentioned investment in the warehouse management system will facilitate
further savings in the longer-term.
The Company targets annual operational efficiencies of circa £5.0m,
prioritising value creation, while preserving operational resilience. Most of
this expenditure yields positive returns through our growth and cost-reduction
initiatives, with the remaining portion allocated for investments in
facilities.
Cash generation and net debt reduction
Predictable cash flow remains at the core of the Smiths News business model.
Cash generation excluding the 53(rd) week was £23.0m, in line with FY 2023
(£21.8m). Average Net Debt halved to £11.7m (FY 2023: £25.0m). Bank Net
Debt rose by £6.8m to £11.0m, impacted by net payments of £15.7m in the
53rd week.
Following the Refinancing Agreement announced in May 2024, the Company has in
place a £40m Revolving Credit Facility, with an additional uncommitted
'accordion' facility of up to £10m, which enables the business to manage its
intra-month working capital which can vary by up to £44m within each month.
Board changes
A recruitment search process commenced following confirmation from Denise
Collis (independent non-executive director and Remuneration Committee chair)
that she intends to retire from the Board at the conclusion of the 2025 AGM as
she approaches the expiry of her 9 year term. Whilst an appointment is yet
to be made, a suitable candidate is expected to positively contribute a broad
range of competencies, skills and experiences, particularly as we embrace the
future needs and strategic direction of the business and, in so doing, also
serve to improve the level of diversity on the Board. We will report further
progress in due course but, in the meantime, the Board would like to express
its sincere appreciation for Denise's significant contribution, guidance and
support during her time with the Company.
Outlook
The Company enters FY 2025 on a strong footing with trading in line with
expectations and clear plans in place for another successful year and beyond.
The news and magazines business has secure contracts and a well-established
business model, while we continue to make progress expanding our adjacent
growth initiatives. Furthermore, the recent debt refinancing allows us to
implement our revised capital allocation policy.
Going forward, the Company is focused on maximising its core capabilities and
driving revenues from continuing to deliver best-in-class service to its news
and magazines customer base and from successfully expanding organic
initiatives which leverage the existing network and competencies. These
activities are all underpinned by Smiths News' asset-light, flexible cost base
business model. From FY 2025, our aforementioned investment programme will
ensure the business is able to optimise efficiencies and streamline working
processes moving forward, facilitating the continued programme of identifying
cost management initiatives.
The proposed special dividend reflects the strength in Smiths News' business,
alongside the Board's commitment to a revised capital allocation policy;
seeking to maximise shareholder returns while simultaneously ensuring
continued investment in the business.
Moving into FY 2025, the Board remains confident for the Company's prospects,
leveraging its logistics and final mile expertise, and establishing Smiths
News firmly as one of the UK's leading providers of early morning end-to-end
supply chain solutions.
FINANCIAL REVIEW
Overview
In FY 2024 the Company traded ahead of expectation, continued to generate good
levels of cash and refinanced its banking facilities on improved terms,
enabling an update of its capital allocation policy.
Adjusted Operating Profit of £39.1m (FY 2023: £38.8m) was £0.3m ahead of
last year, benefitting from the men's UEFA European Championships
collectables, increased contribution from growth initiatives and the 53(rd)
trading week. Average net debt was reduced to £11.7m compared to £25.0m in
FY 2023. In May 2024, the Company successfully concluded a refinancing of its
banking facilities, reducing interest charges and enabling an update of its
capital allocation policy. Consequently, the full year dividend has increased
to 5.15p per share (FY 2023: 4.15p per share), representing 2x adjusted profit
after tax, and a further special dividend is to be paid representing 2.0p per
share.
The Company's financial results in FY 2024 represent 53 weeks of trading,
compared to 52 weeks in FY 2023 as the reporting year closed on the last
Saturday in August. The additional week benefitted revenue by 1.9%, adjusted
operating profit by £0.9m and did not include any significant one-off items.
From a cash and net debt perspective, the 53(rd) week was a net outflow of
£15.7m driven by scheduled calendar month end publisher payments, part of the
Company's normal working capital cycle which we have previously communicated.
Revenues of £1,103.7m (FY 2023: £1,091.9m), were up 1.1% on the prior year,
of which 1.9% related to the 53(rd) week. The remaining movement excluding the
53(rd) week of -0.8% was below the historic trend of -3% to -5%. Within
Adjusted operating profit, the benefit of the men's UEFA European
Championships collectables matched the contribution made from Royal Succession
and the World Cup in FY 2023, and cost out plans of £5.6m more than offset
the net decline in newspaper and magazines income. Inflation remains a
headwind as do prices for the sale of waste, but £1.3m increased contribution
from the Company's growth activities provides good trajectory going forward.
Adjusted operating profit was £39.1m (FY 2023: £38.8m) up £0.3m from last
year and including a £0.9m benefit of the 53(rd) week.
While lower average Bank Net Debt helped drive lower net finance costs (FY
2024: £5.9m; FY 2023: £6.5m), Adjusted profit after tax decreased by £0.9m
to £24.7m due to a £1.8m higher tax charge which included a higher headline
UK rate in FY 2024. Adjusted EPS reduced from 10.8p to 10.3p as a result.
Average Bank Net Debt for the period decreased by £13.3m (53.2%) from £25.0m
in FY 2023 to £11.7m in FY 2024, reflecting consistent ongoing cash flow
generation. Bank Net Debt of £11.0m was higher than last year (FY 2023:
£4.2m) as there was an outflow of £15.7m in the 53(rd) week, owing to
calendar month end publisher payments. Bank Net Debt on 24 August 2024 after
52 weeks was a net cash position of £4.7m. Free cash flow of £7.3m (FY 2023:
£21.8m) was equally impacted and Free cash flow after 52 weeks would have
been £23.0m, compared to the prior year period of £21.8m.
Adjusting items after tax were a credit of £0.8m as they included a £0.6m
reduction in the provision for McColls receivables and £0.3m reversal of
impairment on the investment in Rascal. This compares to a cost of £0.5m in
the prior year driven by £0.6m aborted acquisition costs.
A final ordinary dividend of 3.40p per share (£8.2m) is proposed by the Board
which makes a total full year ordinary dividend of 5.15p (£12.4m) compared to
4.15p in FY 2023 (£10.0m). A special dividend of 2.0p (£4.8m), is also to be
paid alongside the final ordinary dividend in February 2025.
Adjusted results
Group
£m 53 weeks to 52 weeks to Change
31 Aug 2024 26 Aug 2023
Revenue 1,103.7 1,091.9 1.1%
Operating profit 39.1 38.8 0.8%
Net finance costs (5.9) (6.5) (9.2%)
Profit before tax 33.2 32.3 2.8%
Taxation (8.5) (6.7) 26.9%
Effective tax rate 25.6% 20.7% 486bps
Profit after tax 24.7 25.6 (3.5%)
Revenue
Revenue was £1,103.7m (FY 2023: £1,091.9m), up 1.1% on the prior year
including a 1.9% benefit from the 53rd week. Excluding the 53(rd) week the
residual decrease of 0.8% was well below the historic revenue trend of c.-3%
to -5% and was supported by new contract wins and cover price increases.
Newspaper revenue increased by 2.5%, and by 1% excluding the impact of the
53(rd) week and the Royal succession in FY 2023. Underlying volume decreases
were more than offset by News UK and Midlands News Association contract wins
and the continuing benefit from cover price increases, although these
continued to impact volumes.
Magazine revenue was down 2% and this was 3.2% excluding 53(rd) week and Royal
Succession. Weekly and Monthly titles both performed better than expected this
year and a 3% decline is lower than the 10-year average decline of 6%.
Revenue from collectables however decreased by 7.3%, despite the men's UEFA
European Championships and benefit of the 53(rd) week. Excluding these items,
the decrease was 13% and included a weaker performance from the current
Pokémon series over the last 12 months.
Operating profit
The increase in Adjusted operating profit of £0.3m to £39.1m (FY 2023:
£38.8m) includes the following items:
· The benefit of a 53(rd) week of trading (£0.9m)
· Lower revenue from sale of waste paper (£1.1m), driven by a
reduction in price and volumes
· Increased contribution from strategic growth lines (£1.3m)
· Depot rationalisation costs of £0.6m in the prior year which
have not reoccurred
· Cost reduction plans within depot and overheads (£5.6m), which
partly offset increases to the cost base driven by inflation (£4.4m) and net
newspaper and magazine wholesale margin decline (£2.6m).
Profit after tax
Net finance charges of £5.9m (FY 2023: £6.5m) were driven by a lower average
net debt and partially offset by the write-off of unamortised fees on the
previous loan facility of £46.5m and higher average interest rates. Taxation
of £8.5m (FY 2023: £6.7m) was £1.8m higher than the prior period, driven by
the increase in the corporation tax rate from 19% to 25% from April 2023.
Profit after tax of £24.7m (FY 2023: £25.6m) was £0.9m lower than last
year.
Statutory Results
Group
£m 53 weeks to 52 weeks to Change
31 Aug 2024 26 Aug 2023
Revenue 1,103.7 1,091.9 1.1%
Operating profit 40.0 38.3 4.4%
Net finance costs (5.9) (6.5) (9.2%)
Profit before tax 34.1 31.8 7.2%
Taxation (8.6) (6.7) 28.4%
Effective tax rate 25.2% 21.1% 415bps
Profit after tax 25.5 25.1 1.6%
Statutory profit after tax of £25.5m was a £0.4m increase on the prior year
(FY 2023: £25.1m). The increase was the net of the £0.9m decrease in
Adjusted profit after tax described above and a £1.3m difference in adjusting
items which were a £0.5m cost in FY 2023 but a £0.8m credit in FY 2024.
Earnings per share
Adjusted Statutory
53 weeks to 52 weeks to 53 weeks to 52 weeks to
31 Aug 2024
31 Aug 2024
26 Aug 2023 26 Aug 2023
Earnings attributable to ordinary shareholders (£m) 24.7 25.6 25.5 25.1
Basic weighted average number of shares (millions) 240.3 237.3 240.3 237.3
Basic Earnings per share 10.3 10.8 10.6 10.6
Diluted weighted number of shares (millions) 251.1 249.9 251.1 249.9
Diluted Earnings per share 9.8 10.2 10.2 10.0
Adjusted basic earnings per share of 10.3p, was a decrease of 0.5p on the
prior year driven by the decrease in earnings of the business and an increase
in the average number of shares as a result of the employee benefit trust
holding fewer shares.
Statutory basic earnings per share remained at 10.6p (FY 2023: 10.6p) due to
the above plus higher earnings from the impact of adjusting items.
Dividends
53 weeks to 52 weeks to
31 Aug 2024 26 Aug 2023
Dividend per share (proposed) 7.15p 4.15p
Dividend per share (paid and recognised) 4.50p 4.15p
The Board is proposing a final ordinary dividend of 3.40p per share (FY 2023:
2.75p per share). The proposed final dividend is subject to approval by
shareholders at the Annual General Meeting on 16 January 2025 and has not been
included as a liability in these accounts. The Board is also proposing a
special dividend of 2.0p per share. These dividend recommendations follow the
revised capital allocation policy.
The proposed dividends will each be paid on 6 February 2025 to shareholders on
the register at close of business on 10 January 2025. The ex-dividend date
will be 9 January 2025.
Adjusting items
£m 53 weeks to 52 weeks to
31 Aug 2024 26 Aug 2023
Tuffnells provision 0.2 (0.4)
Network and reorganisation (costs)/credits (0.1) 0.5
Technology transformation costs (0.1) -
Aborted acquisition costs - (0.6)
Impairment reversal in investment in joint ventures 0.3 -
Impairment of receivables - McColl's 0.6 -
Total before tax 0.9 (0.5)
Taxation (0.1) -
Total after taxation 0.8 (0.5)
Adjusting items before tax was a credit of £0.9m compared to a net cost of
£0.5m in the prior year period. In FY 2024, the Company reduced the
impairment provision held on the McColls receivable by £0.6m following
information received from the McColls administrators, reversed the remaining
impairment held on the Rascal joint venture of £0.3m and released provisions
made following Tuffnells entering into administration of £0.2m. These credits
were partially offset by £0.1m of reorganisation costs in relation to
simplifying the Group structure and £0.1m in respect of implementation costs
for the three-year internal investment programmes highlighted above.
In the prior period, the Company incurred £0.6m of costs for due diligence
and legal activity associated with an aborted acquisition and made £0.4m of
provisions following Tuffnells falling into administration. These costs were
offset by £0.5m of credits relating to provisions releases which were the
result of a contract renewal with our shared service centre partner.
Further information on these items can be found in Note 3 to the Group
Financial Statements. Adjusting items are defined in the Glossary to the Group
Financial Statements and present a further measure of the Company's
performance. Excluding these items from profit metrics provides readers with
helpful additional information on the performance of the business across
periods because it is consistent with how the business performance is planned
by, and reported to, the Board and the Executive Team. Alternative Performance
Measures (APMs) should be considered in addition to, and are not intended to
be a substitute for, or superior to, IFRS measurements.
Free cash flow
£m 53 weeks to 52 weeks to
31 Aug 2024 26 Aug 2023
Adjusted operating profit 39.1 38.8
Depreciation and amortisation 8.5 9.2
Adjusted EBITDA 47.6 48.0
Working capital movements (17.0) (4.9)
Capital expenditure (4.4) (3.4)
Lease payments (5.9) (6.1)
Net interest and fees (5.0) (5.3)
Taxation (8.5) (6.6)
Other 0.9 1.1
Free cash flow (excluding Adjusting items) 7.7 22.8
Adjusting items (cash effect) (0.4) (1.0)
Free cash flow 7.3 21.8
Free cash flow of £7.3m was £14.5m lower than last year (£21.8m) due to the
impact of the 53(rd) week, which was a net outflow of £15.7m. The 53(rd) week
included payment made to publishers as part of the Company's normal working
capital cycle at the end of the calendar month. Free cash flow excluding the
53(rd) week was £23.0m.
The working capital outflow arose largely from scheduled publisher payments in
the 53(rd) week. Excluding the outflow in the 53(rd) week, there was a working
capital outflow of £0.4m compared to an outflow of £4.9m in the prior year.
The difference was due to the timing of receivables due from a major
supermarket multiple which are scheduled in calendar months, with the August
2023 receipt falling into the first week of FY 2024 and the August 2024
receipt falling into the last week of FY 2024.
Capital expenditure in the period was £4.4m (FY 2023: £3.4m), an increase of
£1.0m due to depot and office refurbishments during the summer of FY 2024.
Lease payments of £5.9m (FY 2023: £6.1m) decreased by £0.2m driven by
network rationalisation activities which involved the closure of one site and
the downsizing of another during FY 2024, partially offset in the second half
of the year by rent renewals.
Net interest and fees of £5.0m (FY 2023: £5.3m) decreased by £0.3m, due to
lower average net debt and interest earned on deposits partially offset by the
impact of arrangement fees incurred on refinancing.
Cash tax outflow of £8.5m was a £1.9m increase on the prior period (FY 2023:
£6.6m outflow) owing principally to the full year impact of the increase in
corporation tax rate from 19% to 25% in April 2023.
Other items relate predominantly to the non-cash share-based payment expense.
The total net cash impact of other Adjusting items was an £0.4m (FY 2023:
£1.0m) outflow.
A reconciliation of free cash flow to the net movement in cash and cash
equivalents is given in the Glossary.
Net debt
£m As at As at
31 August 2024 26 August 2023
Opening Bank Net Debt (4.2) (14.2)
Free cash flow 7.3 21.8
Dividend paid (10.8) (9.8)
Investment in joint venture - (0.3)
Purchase of shares for employee benefit trust (3.3) (1.7)
Closing Bank Net Debt (11.0) (4.2)
Bank Net Debt closed the year at £11.0m compared to £4.2m at August 2023, an
increase of £6.8m but including a £15.7m outflow in the 53(rd) week as
outlined above. The Company had a net cash position of £4.7m at the end of
the 52nd week on 24 August 2024.
Reported net debt is impacted by the timing of the Company's working capital
cycle. The intra-month working capital cash flow cycle generates a routine and
predictable cash swing within the overall bank facility of £40.0m at the
period end (FY 2023: £64.0m). This results in a predictable fluctuation of
net debt during the month compared to the closing net debt position.
Average daily bank net debt reduced from £25.0m in the prior period to
£11.7m in the current period, a reduction of £13.3m (53%) and reflecting
good ongoing cash generation.
Total dividends paid during the year amounted to £10.8m (FY 2023: £9.8m), an
increase of £1.0m. The FY 2023 final ordinary dividend of £6.7m was paid in
February (FY 2023: £6.5m), bringing the total dividend paid in respect of FY
2023 to £10.0m. The Company also paid an interim ordinary dividend in July
2024 of £4.2m (FY 2023: £3.3m).
In the prior period the Company invested £0.3m in Lucid Digital Magazines
limited, a joint venture for retailing single copy electronic versions of
newspapers and magazines under the trading name LoveMedia.
The Company's Bank Net Debt: Bank EBITDA ratio increased to 0.3x (FY 2023:
0.1x). The net outflow in the 53(rd) week, part of the Company's normal
working capital cycle, increased reported Bank Net Debt compared to the prior
year as outlined above. The Bank Net Debt: Bank EBITDA ratio covenant of 0.3x
is within our main leverage covenant ratio of 2.5x and we remain within all
our other bank covenant tests at period end.
A reconciliation of Bank Net Debt (which excludes IFRS 16 lease liabilities
and unamortised arrangement fees) to the balance sheet and Bank EBITDA (which
uses pre-IFRS16 lease accounting) to the profit and loss account is provided
in the Glossary.
Going concern
Having considered the Company's banking facility, the ongoing impact of
inflationary pressures within the macro-economy and the funding requirements
of the Company, the directors are confident that headroom under the bank
facility remains adequate, future covenant tests can be met and there is a
reasonable expectation that the business can meet its liabilities as they fall
due for a period of greater than 12 months (being an assessment period of 16
months) from the date of approval of the Financial Statements. For this
reason, the directors continue to adopt the going concern basis in preparing
the financial statements and no material uncertainty has been identified.
PRINCIPAL AND EMERGING RISKS
The Company has a clear framework in place to continuously identify and review
both the principal and emerging risks it faces. This includes, amongst others,
a detailed assessment of business and functional teams' principal and emerging
risks and regular reporting to, and robust challenge from, both the Executive
Team and Audit Committee. The directors' assessment of these risks is aligned
to the strategic business planning process and regulatory landscape.
Specifically, key risks are plotted on risk maps with descriptions, owners,
and mitigating actions, reporting against a level of materiality (principally
relating to impact and likelihood) consistent with their size. These risk maps
are reviewed and challenged by the Executive Team and Audit Committee and
reconciled against the Company's risk appetite. As part of the regular
principal risk process, a review of emerging risks (internal and external) is
also conducted, and a list of emerging risks is maintained and rolled-forward
to future discussions by the Executive Team and Audit Committee. Where
appropriate, these emerging risks may be brought into the principal risk
registers. Additional risk management support is provided by external experts
in areas of technical complexity to complete our bottom-up and top-down
exercises.
As part of the Board's ongoing assessment of the principal and emerging risks,
the Board has considered the performance of the business, its markets, the
changing regulatory and macro-economic landscape, the Company's future
strategic direction and ambition as well as the heightened climate-related
risk environment. The directors have carried out a robust assessment of the
Company's emerging and principal risks, including those that could threaten
its business model, future performance, solvency or liquidity. Risks are still
subject to ongoing scrutiny, monitoring and appropriate mitigation.
Key Changes in the Year
In line with our usual procedures, the opportunity to review and refresh the
Company's principal and emerging risks has resulted in an elevation of the
Growth initiatives principal risk for the reasons noted in the table below as
well as the identification of potentially a more challenging macro-economic
climate (although the principal risk has remained stable) due to the
continuing impact of inflationary pressures in the macro-economy and its
potential impact not only on the demand-side risk inherent in the print media
business but also our ability to maintain high service performance standards
and our strategic planning programmes. In light of this, we have been able to
maintain a stable number of principal risks but with a reduction in the number
of emerging risks identified by the Board given that those events previously
identified as emerging were, in fact, already broadly under review either as
part of another principal or emerging risk. Following this review, there
remains a general alignment around the nature of risks, the risk ownership,
the direction of travel, any mitigation actions to reduce the gross risk, and
acceptance of remaining net risk.
The table below details each principal business risk, those aspects that would
be impacted were the risk to materialise, our assessment of the current status
of the risk and how each is mitigated.
Principal risks and potential impact Mitigations Strategic link/ change
1. Cyber security
Global trends demonstrate a continued high volume of cyber-attacks against all · Defined risk-based approach to the information security roadmap Strategic link:
industry sectors and that cyber threats continue to indiscriminately evolve. and technology strategy which is aligned to the strategic plans.
Technology
To meet the needs of our stakeholders, our IT infrastructure and data · Regular tracking of key programmes against spend targets and
processes need to be flexible, reliable and secure from cyber-attacks. delivery dates.
Secure infrastructure acts as a deterrent to, and helps prevent and/or · The Company assesses cyber risk on a day-to-day basis, using Change:
mitigate the impact of, external cyber-attack, internal threat or proactive and reactive information security controls to detect and mitigate
supplier-related breach, which could cause service interruption and/or the common threats. Stable - despite ongoing investment and enhancements in the Company's IT
loss of Company and customer data.
infrastructure and IT security the backdrop remains heightened, leading to a
· Dedicated information security investments and access to stable risk assessment.
Cyber incidents could lead to major adverse customer, financial, reputational third-party cyber security specialists, including 24/7 security monitoring,
and regulatory impacts. incident response and specialist testing.
· The Company encourages a cyber-aware culture by undertaking
exercises, such as computer-based training and simulated phishing attacks and
regular communications about specific cyber threats.
· All functions that place reliance on business systems have
established business continuity plans that set out how to conduct key
activities if a system interruption takes place due to a disruptive event such
as a cyber-attack.
2. Macro-economic uncertainty
Deterioration in the macro-economic environment could result in supply-side · Annual budgets and forecasts take into account the current Strategic link:
cost inflation and/or a reduction in demand-side sales volumes. macro-economic environment to set expectations internally and externally,
allowing for or changing objectives to meet short- and medium-term financial Cost and efficiencies, Operations
Supply-side macro-economic pressures could present the Company with additional targets.
cost challenges, e.g. increased competition in the distribution labour market
and/or rises in fuel and utility prices. Adverse changes to economic · Weekly cost monitoring enables oversight and action on a timely
conditions could result in reduced consumer demand for newspapers and basis. Change:
magazines and/or reduction in titles/editions. These cost increases and sales
pressures present a risk when they cannot be fully mitigated through increased · Cover price increases in magazine and newspaper titles provide Stable - whilst the UK economy has returned to growth in 2024 and inflation is
prices or other productivity gains. some offset against the impact of volume decline. now within the Bank of England's target range, increases in the National
Living Wage in excess of inflation, the tightening of standards pursuant to
This could result in deterioration in the level of profitability in both the · Predictable level of volume decline within the core business the Employment Rights bill together with expected increases (with effect from
short and medium term and impacts on the Company's ability to execute its enables cost optimisation planning. April 2025) in employers' national insurance contributions recently
strategies, including level of debt and liquidity objectives.
announced by the Government is expected to add to the Company's cost base.
· Use of fixed-term contracts as a hedge against rapidly rising
prices e.g. energy costs.
· The Company continues to be significantly cash generating to
support its strategic priorities.
3. Changes to retailers' commercial environment
Our largest retailers (e.g. grocers and symbol group members) remain under · Our EPoS-based returns (EBR) solution has been introduced Strategic link:
significant pressure to maximise sales and profitability by channel within in-store with our largest retailers, improving staff efficiency in managing
their retail stores and at associated sale outlets, such as at petrol the magazine category, thereby reducing cost to the retailer. Cost and efficiencies
forecourt stores. This could result at any time in a category review of the
newspaper and/or magazine channel, leading to a significant reduction in · Potential to extend EBR to newspapers in order to broaden
newspapers' and/or magazines' selling space-in-store (or its location) in efficiency-benefits to retailers.
favour of other higher margin products and/or the delisting of all/particular
Change:
titles of newspapers and/or magazines. · Supply-side shrink activities underway and renewed focus improve
channel profitability and reduce complexity associated with the category. Stable
A reduction in (or change in location of) sales space and/or full delisting of
newspapers and/or magazines by our largest retailers (or a high number of · Form stronger partnerships with emerging retailers to stock
other retailers) could materially reduce the Company's revenue, profitability magazines and newspapers.
and cash flow.
· Expand retail offering to include single copy digital downloads
of newspapers and/or magazines to supplement physical print and category range
in-store.
4. Acquisition and retention of labour
Due to competition and constraints in the current distribution labour market, · We seek to offer market competitive terms to ensure talent Strategic link:
this could lead to an increased risk of being unable to recruit and/or retain remains engaged.
warehouse colleagues and support staff.
People first,
· We offer long-term contracts with our sub-contracted delivery
The same pressures are also being felt in sourcing and retaining delivery partners. Culture and values,
sub-contractors as well as filling in-house roles within our central support
functions. · We use a variety of platforms to recruit employees and Cost and efficiencies
contractors.
A failure to maintain an appropriate level of resourcing could result in
increased costs, employee disengagement and/or loss of management focus which · The level of vacancies across warehouse and delivery contractors
underpin our ability to address the strategic priorities and to deliver is monitored daily. Change:
forecasted performance.
· We undertake workforce planning; performance, talent and Stable
succession initiatives; learning and development programmes; and promote the
Company's culture and core values.
· Retention plans are reviewed to address key risk areas, and
attrition across the business is regularly monitored.
· Regular surveys are undertaken to monitor the engagement of
colleagues.
5. Growth initiatives
A successful growth and diversification strategy is essential to the long-term · Strong project management and governance in place to sign-off Strategic link:
success of the Company. growth initiatives and oversee their implementation.
Cost and efficiencies
Implementing new business opportunities in order to grow the Company's revenue · A Growth Business Development Group and Growth Operations
and profit streams carries an execution risk to achieving our vision and Delivery Steering Committee have been established to review and control new
purpose. business opportunities and then plan and measure the impact of these
opportunities on core operations. Change:
· Experimentation through trials of new business opportunities has Increasing - as Growth initiatives become a more significant part of our
been deployed to assess the demand and potential economic benefit of such business, space and capacity constraints at both our sites and in our vehicles
opportunities. will likely increase. In addition, layering in of change projects such as our
investment in a Warehouse Management System, and the Operational Excellence
· The Executive Team's balanced scorecard of key performance programme may create pressure in the short-term before improvements become
indicators ensures sub-optimal performance is tracked and monitored on a evident.
regular basis and allows appropriate interventions to be made.
6. Sustainability and climate change
Our sustainability linked risks extend beyond the physical and transitional · Board Sustainability Committee established (Chaired by the Chief Strategic link:
risks associated with climate change which we have previously identified, such Financial Officer) to consider and determine the Company's sustainability
as a scarcity of resources, extreme weather events, power outages, increasing strategy and progress, together with risk environment and activities and Cost and efficiencies,
regulation and associated cost in response to a drive to "net zero" carbon actions.
emissions and the increasingly stringent air quality emission zones.
Operations,
Regulatory requirements and reporting obligations on environmental, social and · Dedicated management Sustainability Steering Committee
governance (ESG) matters are increasing and ongoing investment is required to established (also chaired by the Chief Financial Officer) coordinates the Sustainability
maintain a safe working environment and to protect the Company from Company's day-to-day activities and actions in delivering the Company's
cyber-attacks, as well as making progress in delivering on our diversity and sustainability strategy, including in relation to climate change.
inclusion ambitions. In common with all major organisations, there is a risk
of reputational damage and/or loss of revenue if the Company fails to meet · Working with suppliers to ensure they share the Company's vision Change:
stakeholder expectations across our sustainability framework. to act on sustainability and climate change.
Stable
· Emissions and air quality targets in UK towns and cities are
monitored by a central team in the Operations function which ensures the
Company can fulfil its obligations to customers and remain compliant with
legal requirements.
· Operational sites are reviewed for their resilience to extreme
weather events, such as flooding, with upgrades and interventions made where
these are cost-effective. Depots are relocated to new sites (e.g. during lease
break windows) where this represents a better option than adapting an existing
location.
7. Major newspaper titles exit the market or move to digital only editions
Significant decline in advertising and/or circulation, together with rising · We seek to ensure full availability of alternative newspaper Strategic link:
production costs, could lead to one or more national newspaper titles exiting titles to maximise substitution opportunities for customers.
the market and/or publications being taken fully digital. This could lead to a
Cost and efficiencies,
significant deterioration in the Company's profitability and cash flow in both · Partial mitigation against newspaper title closures is built into
the short and medium term as well as impacting on its ability to execute its our contracts with major publishers.
strategies.
· Ongoing successful execution of our growth and diversification Change:
strategy provides longer-term mitigation through alternative profitable
revenue streams. Stable
8. Legal and regulatory compliance
The Company is required to be compliant with all applicable laws and · Changes in laws and regulations are monitored, with policies and Strategic link:
regulations. Failure to adhere to these could result in financial penalties, procedures being updated as required.
third party redress, and/or reputational damage.
Technology, Sustainability, Operations
· Business-wide mandatory training programmes for higher-risk
Key areas of legal and regulatory compliance include: regulatory areas.
· GDPR · External experts are used where applicable. Change:
· Health and Safety · All major policies are reviewed by the Board or Audit Committee Stable
on an annual basis.
· Tax compliance
· Operational auditing and monitoring systems for higher risk
· Environmental legislation areas.
· Employment law
GROUP FINANCIAL STATEMENTS
Group Income Statement
for the 53-week period ended 31 August 2024
£m 2024 2023
Note Adjusted* Adjusting Total Adjusted* Adjusting items Total
items
Revenue 1 1,103.7 - 1,103.7 1,091.9 - 1,091.9
Cost of sales 2 (1,030.5) - (1,030.5) (1,019.4) - (1,019.4)
Gross profit 2 73.2 - 73.2 72.5 - 72.5
Administrative expenses 2 (33.8) - (33.8) (33.7) (0.5) (34.2)
Net impairment (loss)/reversal on trade receivables 13 (0.1) 0.6 0.5 (0.1) - (0.1)
(Losses)/profits from joint ventures 11 (0.2) - (0.2) 0.1 - 0.1
Impairment reversal of joint venture investment 11 - 0.3 0.3 - - -
Operating profit 2 39.1 0.9 40.0 38.8 (0.5) 38.3
Finance costs 5 (6.3) - (6.3) (6.5) - (6.5)
Finance income 5 0.4 - 0.4 - - -
Profit/(loss) before tax 33.2 0.9 34.1 32.3 (0.5) 31.8
Income tax (expense) 6 (8.5) (0.1) (8.6) (6.7) - (6.7)
Profit/(loss) for the year attributable to equity shareholders 24.7 0.8 25.5 25.6 (0.5) 25.1
Earnings per share
Basic 8 10.3 10.6 10.8 10.6
Diluted 8 9.8 10.2 10.2 10.0
Equity dividends per share (paid and proposed) 7 7.15 7.15 4.15 4.15
*This measure is described in Note 1(4) of the accounting policies and the
Glossary to the Accounts. Adjusting items are set out in Note 3 to the Group
Financial Statements.
Group Statement of Comprehensive Income
for the 53-week period ended 31 August 2024
£m 2024 2023
Items that may subsequently be reclassified to the income statement:
Currency translation (subsidiaries) (0.1) -
Other comprehensive result for the year (0.1) -
Profit for the year 25.5 25.1
Total comprehensive income for the year 25.4 25.1
Group Balance Sheet
as at 31 August 2024
£m Note 2024 2023
Non-current assets
Intangible assets 9 2.4 1.9
Property, plant and equipment 10 9.7 8.8
Right of use assets 17 29.5 21.8
Interest in joint ventures 11 4.6 4.4
Deferred tax assets 18 1.3 1.7
47.5 38.6
Current assets
Inventories 12 22.1 17.7
Trade and other receivables 13 102.1 101.1
Cash and cash equivalents 15 7.0 37.3
Corporation tax receivable 0.9 0.6
132.1 156.7
Total assets 179.6 195.3
Current liabilities
Trade and other payables 14 (128.5) (141.5)
Bank loans and other borrowings 15 - (10.0)
Lease liabilities 17 (5.5) (4.9)
Provisions 19 (1.3) (2.5)
(135.3) (158.9)
Non-current liabilities
Bank loans and other borrowings 15 (17.6) (30.2)
Lease liabilities 17 (25.4) (18.3)
Non-current provisions 19 (4.6) (4.2)
(47.6) (52.7)
Total liabilities (182.9) (211.6)
Total net liabilities (3.3) (16.3)
Equity
Called up share capital 22(a) 12.4 12.4
Share premium account 22(c) 60.5 60.5
Demerger reserve 23(a) (280.1) (280.1)
Own shares reserve 23(b) (3.7) (4.4)
Translation reserve 23(c) 0.2 0.4
Retained earnings 24 207.4 194.9
Total shareholders' deficit (3.3) (16.3)
The accounts were approved by the Board of Directors and authorised for issue
on 4 November 2024 and were signed on its behalf by:
Jonathan
Bunting
Paul Baker
Chief Executive
Officer
Chief Financial Officer
Registered number - 05195191
Group Statement of Changes in Equity
for the 53-week period ended 31 August 2024
£m Note Share capital Share premium account Demerger reserve Own shares reserve Hedging and translation reserve Retained earnings Total
Balance at 27 August 2022 12.4 60.5 (280.1) (4.6) 0.4 179.4 (32.0)
Profit for the year - - - - - 25.1 25.1
Total comprehensive income for the year - - - - - 25.1 25.1
Dividends paid 7 - - - - - (9.8) (9.8)
Employee share scheme purchases - - - (1.7) - - (1.7)
Employee share scheme awards - - - 1.9 - (1.9) -
Recognition of share-based payments net of tax - - - - - 1.5 1.5
Deferred tax recognised in equity - - - - - 0.6 0.6
Balance at 26 August 2023 12.4 60.5 (280.1) (4.4) 0.4 194.9 (16.3)
Profit for the year - - - - - 25.5 25.5
Currency translation (subsidiaries) - - - - (0.2) 0.1 (0.1)
Total comprehensive income for the year - - - - (0.2) 25.6 25.4
Dividends paid 7 - - - - - (10.8) (10.8)
Employee share scheme purchases - - - (3.3) - - (3.3)
Employee share scheme awards - - - 4.0 - (3.2) 0.8
Recognition of share-based payments net of tax - - - - - 0.9 0.9
Current tax recognised in equity - - - - - 0.1 0.1
Deferred tax recognised in equity - - - - - (0.1) (0.1)
Balance at 31 August 2024 12.4 60.5 (280.1) (3.7) 0.2 207.4 (3.3)
Group Cash Flow Statement
for the 53-week period ended 31 August 2024
£m Note 2024 2023
Net cash inflow from operating activities 21 22.4 36.4
Investing activities
Dividends received from joint ventures 0.2 0.2
Purchase of property, plant and equipment (3.4) (2.6)
Purchase of intangible assets (1.0) (0.8)
Investment in joint venture 11 - (0.3)
Interest received 0.4 -
Net cash used in investing activities (3.8) (3.5)
Financing activities
Interest paid (4.9) (5.3)
Dividend paid 7 (10.8) (9.8)
Repayments of lease principal (5.9) (6.1)
Repayment of term loan (41.5) (8.0)
Net increase in revolving credit facility 17.5 -
Purchase of shares for Employee Benefit Trust (3.3) (1.7)
Net cash used in financing activities (48.9) (30.9)
Net (decrease)/increase in cash and cash equivalents (30.3) 2.0
Opening net cash and cash equivalents 37.3 35.3
Closing net cash and cash equivalents 15 7.0 37.3
Notes to the Accounts
1. Accounting policies
(1) Basis of consolidation
Smiths News plc ('the Company') is a company incorporated in England, UK under
the Companies Act 2006. The Group accounts for the 53-week period ended 31
August 2024 comprise the Company and its subsidiaries (together referred to as
the 'Group') and the Group's interests in joint ventures and associates.
Subsidiary undertakings are included in the Group Accounts from the date on
which control is obtained. They are deconsolidated from the date on which
control ceases. All significant subsidiary accounts are made up to 31 August
2024 and are included in the Group Accounts.
Unless otherwise noted references to 2023 and 2024 relate to a 52-week period
ended 26 August 2023 and the 53-week period ended 31 August 2024 as opposed to
calendar year.
The Accounts were authorised for issue by the directors on 4 November 2024.
(2) Accounting basis of preparation
The financial information contained within this preliminary announcement for
the 53 weeks to 31 August 2024 and the 52 weeks to 26 August 2023 does not
comprise statutory financial statements for the purpose of the Companies Act
2006 but is derived from those statements. The statutory accounts for Smiths
News PLC for the 52 weeks to 26 August 2023 have been filed with the Registrar
of Companies and those for the 53 weeks to 31 August 2024 will be filed
following the Company's annual general meeting. The auditor's reports on the
accounts for both the 53 weeks to 31 August 2024 and the 52 weeks to 26 August
2023 were unqualified, did not draw attention to any matters by way of
emphasis, and did not include a statement under Section 498 (2) or (3) of the
Companies Act 2006. The Annual Report and Accounts will be available for
shareholders in December 2024.
The Accounts are prepared on the historical cost basis with the exception of
certain financial instruments and are presented in Pound Sterling and rounded
to £0.1m, except where otherwise indicated.
The Group Accounts have been prepared in accordance with UK-adopted
International Accounting Standards (IAS) in conformity with the requirements
of the Companies Act 2006.
Intra-group balances and unrealised gains and losses or income and expenses
arising from intra-group transactions are eliminated in preparing the Group
Accounts. Unrealised gains and losses arising from transactions with joint
ventures are eliminated to the extent of the Group's interest in these
entities.
(3) Going concern
The Group accounts have been prepared on a going concern basis.
When assessing the going concern of the Group, the directors have reviewed the
year-to-date financial actuals, as well as detailed financial forecasts for
the period up to 1 March 2026, the going concern period.
The Group currently has a net current liability position of £3.2m as at 31
August 2024. All bank covenant tests were met at the year end. The key Bank
Net Debt: Bank EBITDA ratio of 0.3x was below the covenant test threshold of
2.5x. The threshold reduced from 1.75x on 24 February 2024 then increased to
2.5x on 2 May 2024 when the facility was amended and extended.
The intra-month working capital cash flow cycle at Smiths News generates a
routine and predictable cash swing and therefore a predictable fluctuation in
Bank Net Debt during the course of the month compared to the closing net debt
position. The Group's average daily Bank Net Debt during the period was
£11.7m (2023: £25.0m). The Company utilises a Revolving Credit Facility
(RCF) to manage the cash swing. At the year end, £20.5m of the RCF was
available and the Company had £7.0m of cash on hand, giving headroom of
£27.5m.
3i) Bank facility
The Group's banking facility was refinanced during the year which at the
balance sheet date comprises an RCF of £40.0m and an uncommitted accordion
facility of £10.0m. The RCF is available less committed letters of credit
amounting to £1.5m (see Note 17). The agreement is with HSBC and Santander.
The facility's current margin is 2.45% per annum over SONIA and has a final
maturity date of 2 May 2027 with the option of two one-year extension with
lender consent on the first and second anniversaries.
3ii) Reverse stress testing
The directors have prepared their base case forecast which represents their
best estimate of cash flows over the going concern period which is up to 1
March 2026, and in accordance with FRC guidance have prepared a reverse stress
test that identifies either a lack of liquidity or breach of the Bank Net
Debt: Bank EBITDA ratio that at peak debt would create a scenario which could
lead to the facility being exhausted or becoming repayable on demand,
respectively.
A point of insufficient liquidity would occur in November 2025 if Bank EBITDA
was 60% below the Board approved three-year plan. The directors consider the
likelihood of this level of downturn to be remote based on:
· current trading which is in line with expectations;
· year-on-year declines in revenues would have to be
significantly greater than historical trends;
· 91% of contracts secured with publishers to 2029
(including Heads of Terms); and
· the Company continues to trade with adequate profit to
service its debt covenants.
3iii) Mitigating actions
In the event the break environment scenario went from being remote to possible
then management would seek to take mitigating actions to maintain liquidity
and compliance with the bank facility covenants. The options within the
control of management would be to:
· Optimise liquidity by working capital management of the
peak-to-trough intra-month movement. Utilising existing vendor management
finance arrangements with retailers and optimising contractual payment cycles
to suppliers which would improve liquidity headroom;
· Not pay planned dividend payments;
· Delay non-essential capex projects;
· Cancel discretionary annual bonus payments;
· Increase the principal facility amount by exercising the
£10 accordion option in the RCF Facility; and
· Identify other overhead and depot savings.
More extreme mitigating actions would also be available if the scenario arose.
The Company has vendor finance arrangements in place where it has the ability
to request early payment of invoices at a small discount, the payments are
non-recourse and the invoices are considered settled from both sides once
payment is received. The Company has not made use of this facility in the
current or prior periods, nor since the balance sheet date.
3iv) Assessment
Having considered the above and the funding requirements of the Group and
Company, the directors are confident that headroom under the bank facility
remains adequate, future covenant tests can be met and there is a reasonable
expectation that the business can meet its liabilities as they fall due for a
period of greater than 12 months (being an assessment period of 16 months)
from the date of approval of the Group Financial Statements. For this reason,
the directors continue to adopt the going concern basis in preparing the
financial statements and no material uncertainty has been identified.
(4) Alternate performance measures
In reporting financial information, the Group presents alternative performance
measures (APMs), which are not defined or specified under the requirements of
IFRS.
The Group believes that these APMs (listed in the Glossary), are not
considered to be a substitute for, or superior to, IFRS measures but provide
stakeholders with additional helpful information on the performance of the
business. These APMs are consistent with how the business performance is
planned and reported within the internal management reporting to the Board and
Executive Team.
The APMs do not have standardised meaning prescribed by IFRS and therefore may
not be directly comparable to similar measures presented by other companies.
(5) Estimates and judgements
The preparation of these accounts requires management to make judgements,
estimates and assumptions that affect the application of accounting policies
and the reported amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
Key accounting judgements
The significant judgements made in the accounts are:
Revenue recognition
The Group recognises the wholesale sales price for its sales of newspapers and
magazines. The Group is considered to be the principal based on the following
indicators of control over its inventory: discretion to establish prices; it
holds some of the risk of obsolescence once in control of the inventory on
returns; and has the responsibility of fulfilling the performance obligation
on delivery of inventory to its customers. If the Group were considered to be
the agent, revenue and cost of sales would reduce by £937.3m (2023:
£926.5m).
Determining lease terms
In determining lease terms, management considers all facts and circumstances
that create an economic incentive to exercise an extension option, or not
exercise a termination option. Extension options (or periods after termination
options) are only included in the lease term if the lease is reasonably
certain to be extended (or not terminated).
For leases of distribution centres and equipment, the following factors are
the most relevant:
· the Company continually considers the optimal network
structure in its judgement over lease terms;
· if there are significant penalties to terminate (or not
extend), the Company is typically reasonably certain to extend (or not
terminate);
· if any leasehold improvements are expected to have a
significant remaining value, the Company is typically reasonably certain to
extend (or not terminate); and
· otherwise, the Group considers other factors including
historical lease durations and the costs and business disruption required to
replace the leased asset. Most extension options in vehicle leases have not
been included in the lease liability, because the Group could replace the
assets without significant cost or business disruption.
The lease term is reassessed if an option is actually exercised (or not
exercised) or the Group becomes obliged to exercise (or not exercise) it. The
assessment of reasonable certainty is only revised if a significant event or a
significant change in circumstances occurs, which affects this assessment, and
that is within the control of the lessee.
Adjusting items
Adjusting items of income or expense are excluded in arriving at adjusted
operating profit to present a further measure of the Group's performance. Each
adjusting item is considered to be significant in nature and/or quantum,
non-recurring in nature and/or considered to be unrelated to the Group's
ordinary activities or consistent with items treated as adjusting in prior
periods. Excluding these items from profit metrics provides readers with
helpful additional information on the performance of the business across
periods because it is consistent with how the business performance is planned
by, and reported to, the Board and the Executive Team.
The classification of adjusting items requires significant management
judgement after considering the nature and intentions of a transaction.
Adjusted measures are defined with other APMs in the Glossary.
Based on the nature of the transactions, adjusting items after tax was a
credit of £0.8m (2023: charge of £0.5m) and a breakdown is included within
Note 3.
Key sources of estimation uncertainty
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in the period
of the revision and future periods if the revision affects both current and
future periods.
The key assumptions concerning the future, and other key sources of estimation
uncertainty at the end of the reporting period that may have a significant
risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are as follows.
Impairment of investments in joint ventures
Investments in joint ventures are reviewed for impairment if events or changes
in circumstances indicate that the carrying amount may not be recoverable.
When a review for impairment is conducted, the recoverable amount is
determined using value in use calculations. The value in use method requires
the Company to determine appropriate assumptions in relation to the cash flow
projections over the three-year plan period (which is a key source of
estimation uncertainty), the terminal growth rate to be applied beyond this
three-year period and the risk-adjusted post-tax discount rate used to
discount the assumed cash flows to present value. The assumption that cash
flows continue into perpetuity is a source of significant estimation
uncertainty.
During the period, the Group calculated a value-in-use of £5.5m based on the
future cash flows of the Rascal business, which were discounted at a rate of
13.2% and a terminal growth rate applied of 0%. As a result, the remaining
previous cumulative impairment of £0.3m was reversed, increasing the
investment's carrying value to £4.6m (2023: £4.3m). Refer to note 11 for
further details.
Property provision
The Group holds a property provision which estimates the future liabilities to
restore leased premises to an agreed standard at the date the lease is
terminated. The provision is calculated based on key assumptions including the
length of time properties will be occupied, the discount rate applied, and the
future costs of restoration and the condition of the property at the assumed
exit date.
The property provision represents the estimated future cost of the Group's
potential dilapidation costs on properties across the Group adjusted for
inflation. These provisions have been discounted to present value and this
discount will be unwound over the life of the leases.
A change in any of these assumptions could materially impact the provision
balance. Refer to Note 19 for further details on the sensitivity of the
assumptions used to calculate the property provision. The property provision's
carrying value at the year end was £5.2m (2023: £4.9m).
Net impairment loss on trade receivables
During the period ended 27 August 2022 McColls Retail Group had gone into
administration and an impairment loss provision of £4.4m was recognised.
During the current period the administrators provided an update which included
a reduced expected timeline to settlement of 4-12 months (2023: 9-12 months)
with an increase to the range of possible recovery of 30-50% (2023: 20-50%).
Given the historic low level of credit losses incurred in the ordinary course
of business, there is limited information to determine an expected recovery of
the McColls receivable. Management has therefore determined that a best
estimate is that 30% (2023: 20%) of the outstanding balance of £5.5m remains
recoverable from McColls Retail Group as at the administration date of 9 May
2022.
At 31 August 2024 the Group holds an expected credit loss provision of £3.8m
(2023: £4.4m) representing 70% (2023: 80%) of the total receivables balance
of £5.5m. If the Company had considered 50% of the total balance of £5.5m to
be recoverable in line with the upper range of the administrator's estimate,
the provision recognised would have been £2.8m.
The impairment reversal of £0.6m (2023: nil) has been presented in adjusting
items, consistent with the impairment loss of £4.4m recognised during the
period ended 27 August 2022.
(6) Revenue
Sales of newspapers and magazines
Sales of newspapers and magazines are recognised when control of the products
has transferred, that is, when the products are delivered to the retailer and
there is no unfulfilled obligation that could affect the retailer's acceptance
of the products, the risks of obsolescence and loss have been transferred to
the retailer. Goods are sold to retailers on a sale or return basis with risks
transferred back to the Group.
Distribution income
Distribution income is recognised when the products such as newspapers and
magazines are delivered to the retailer and there are no unfulfilled
obligations that could affect the retailer's acceptance of the products.
Voucher income
Voucher income represents the margin income received from managing the process
of collecting voucher payments from retailers and passing them on to voucher
processing centres. The Group is primarily responsible for fulfilling the
service.
Sales and marketing
The Group supplies marketing services to both retailers and suppliers. This
includes services such as shelf stacking, stock checking and merchandising.
The Group is primarily responsible for fulfilling the services.
Sale of waste
Income from the sale of recyclable waste represents the amount received per
tonne of newspapers and magazines returns sold on for recycling. The Group has
primary responsibility for fulfilling the service.
Returns reserve
Newspapers and magazines sales are made on a sale or return basis, therefore
the Group is required to estimate a value relating to expected returns from
retailers. Likewise, as the publishers are required to provide the Group with
credit for any purchase returns, so a purchase returns reserve is also
required. The key estimates used in calculating the period end reserve are
rates of returns (based on historical tends), average shelf life of the
product types and average price of each product type. These estimates are
similarly applied to calculate the credit for purchase returns.
Revenue for goods supplied with a right of return is stated net of the value
of any returns. Newspapers and magazines are often sold with retrospective
volume discounts based on aggregate net sales. Revenue from these sales is
recognised based on the price specified in the contract, net of the estimated
volume discounts. Accumulated experience is used to estimate and provide for
the discount and returns, using the expected value method, and revenue is only
recognised to the extent that it is highly probable that a significant
reversal will not occur. A returns reserve accrual and discount accrual
(included in trade and other payables) is recognised for expected volume
discounts and refunds payable to customers in relation to sales made until the
end of the reporting period. A right to the returned goods (included in other
debtors) is recognised for the products expected to be returned.
No element of financing is deemed present because the sales are made with
short credit terms, which is consistent with market practice.
A receivable is recognised when the goods are delivered, since this is the
point in time that the consideration is unconditional because only the passage
of time is required before the payment is due.
(7) Cost of sales and gross profit
The Group considers cost of sales to equate to cost of inventories recognised
as an expense and distribution costs as these are considered to represent for
the Group direct costs of making a sale.
The Group considers gross profit to equal revenue less cost of sales.
(8) Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax
is recognised in the income statement, except to the extent it relates to
items recognised in other comprehensive income or directly in equity. Current
tax is the expected tax payable based on the taxable profit for the year,
using tax rates enacted, or substantively enacted, at the balance sheet date
and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on the balance sheet liability method, providing for
temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes.
The amount of deferred tax provided is calculated using tax rates enacted or
substantively enacted at the balance sheet date and are expected to apply when
the related deferred tax asset is realised or the deferred tax liability is
settled. Deferred tax assets are recognised to the extent that it is probable
that future taxable profits will be available against which these temporary
differences can be utilised.
(9) Segmental reporting
The Board is responsible for allocating resources and assessing the
performance of the business and is therefore identified as the chief operating
decision maker.
The Group has determined that it has one reportable segment identified as
Smiths News, a UK market-leading distributor of newspapers, magazines and
ancillary services to retailers across the UK. The performance of Smiths News
is reviewed, on a monthly basis, by the Board, making decisions based on the
Group as whole.
Included in revenues arising from Smiths News are revenues of approximately
£100.5m (2023: £99.5m) which arose from sales to the Group's largest
customer. Three other customers contributed 13.9% (2023: 13.1%) or more of the
Group's revenue in 2024.
No segmental analysis is required on geographical lines as substantially all
of the Group's activities are in the United Kingdom. As a result, no segmental
disclosure is provided.
(10) Dividends
Interim and final dividends are recorded in the financial statements in the
period in which they are declared.
(11) Capitalisation of internally generated development costs
Expenditure on developed software is capitalised when the Group is able to
demonstrate all of the following:
· the technical feasibility of the resulting asset;
· the ability (and intention) to complete the development
and use it;
· how the asset will generate probable future economic
benefits;
· adequate technical, financial and other resources to
complete the development and to use the software are available; and
· the ability to measure reliably the expenditure
attributable to the asset during its development.
Software costs are also capitalised if they can be hosted on another server,
are portable and the Group has sole rights to the software. Subsequent to
initial recognition, internally generated intangible assets are reported at
cost less accumulated amortisation and accumulated impairment losses, on the
same basis as intangible assets that are acquired separately. Software costs
provided on a licence agreement (software-as-a-service) are expensed as
incurred.
(12) Joint ventures
The Group Financial Statements include the Group's share of the total
recognised gains and losses in its joint ventures on an equity accounted
basis.
Investments in joint ventures are carried in the balance sheet at cost
adjusted by post-acquisition changes in the Group's share of the net assets of
the joint ventures, less any impairment losses. The carrying values of
investments in joint ventures include acquired goodwill. Losses in joint
ventures that are in excess of the Group's interest in the joint venture are
recognised only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the joint venture.
(13) Business combinations - goodwill and intangibles
The Group uses the acquisition method of accounting to account for business
combinations. The cost of an acquisition is measured at the fair value of the
assets given, equity instruments issued, liabilities incurred or assumed at
the date of exchange. Acquisition-related costs are recognised in profit or
loss as incurred. Any deferred or contingent purchase consideration is
recognised at fair value over the period of entitlement.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured, initially, at their fair
values at the acquisition date, irrespective of the extent of any
non-controlling interest.
Goodwill arising on all acquisitions is initially recognised as an asset at
cost and is subsequently measured at cost less any accumulated impairment
losses.
The carrying value of goodwill is reviewed annually for impairment or whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable. Intangible assets arising under a business combination (acquired
intangibles) are capitalised at fair value as determined at the date of
exchange and are stated at fair value less accumulated amortisation and
impairment losses. Amortisation of acquired intangibles is charged to the
income statement on a straight-line basis over the estimated useful lives as
follows:
Customer relationships - 2.5 to
7.5 years
Trade
name
- 5 to 10 years
Software and development costs - 3 to 7 years
Computer software and internally generated development costs which are not
integral to the related hardware are capitalised separately as an intangible
asset and stated at cost less accumulated amortisation and impairment losses.
Assets held under leases (right-of-use assets) are depreciated over their
expected useful lives on the same basis as owned assets or, where shorter,
over the term of the relevant lease.
All intangible assets are reviewed for impairment when there are indications
that the carrying value may be higher than its recoverable value. The
recoverable value used is the value in use. The value in use is determined by
estimating the future cash inflows and outflows to be derived from continuous
use of the asset and applying the appropriate discount rate to those future
cash flows. Where the carrying value is higher than the calculated value in
use, an impairment loss will be recognised.
(14) Property, plant and equipment
Property, plant and equipment assets are stated at cost less accumulated
depreciation and any recognised impairment losses. No depreciation has been
charged on freehold land. Other assets are depreciated, to a residual value,
on a straight-line basis over their estimated useful lives, as follows:
Freehold and long-term leasehold properties - over 20 years
Short-term leasehold properties - shorter of the lease
period and the estimated remaining economic life
Fixtures and
fittings - 3 to 15
years
Equipment
- 5 to 12 years
Computer equipment - up
to 5 years
Vehicles
- up to 5 years
Assets held under leases are depreciated over their expected useful lives on
the same basis as owned assets or, where shorter, over the term of the
relevant lease. All property, plant and equipment is reviewed for impairment
when there are indications that the carrying value may not be recoverable.
(15) Leasing
Leases are recognised as a right-of-use asset and a corresponding liability at
the date at which the leased asset is available for use by the Group.
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of the
following lease payments:
· fixed payments (including in-substance fixed payments)
less any lease incentives receivable;
· variable lease payments that are based on an index or a
rate, initially measured using the index or rate as at the commencement date;
· amounts expected to be payable by the Group under
residual value guarantees;
· the exercise price of a purchase option if the Group is
reasonably certain to exercise that option; and
· payments of penalties for terminating the lease, if the
lease term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also
included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be readily determined, which is generally the case
for leases in the Group, the lessee's incremental borrowing rate is used,
being the rate that the individual lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value to the right-of-use asset
in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
· where possible, uses recent third-party financing
received by the individual lessee as a starting point, adjusted to reflect
changes in financing conditions since third-party financing was received;
· makes adjustments specific to the lease where applicable,
for example with regards to the term and security.
The Group is exposed to potential future increases in variable lease payments
based on an index or rate, which are not included in the lease liability until
they take effect. When adjustments to lease payments based on an index or rate
take effect, the lease liability is reassessed and adjusted against the
right-of-use asset.
Lease payments are allocated between principal and finance cost. The finance
cost is charged to profit or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability
for each period.
Right-of-use assets are measured at cost comprising the following:
· the amount of the initial measurement of lease liability;
· any lease payments made at or before the commencement
date less any lease incentives received;
· any initial direct costs; and
· restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset's
useful life and the lease term on a straight-line basis. If the Group is
reasonably certain to exercise a purchase option, the right-of-use asset is
depreciated over the underlying asset's useful life.
Payments associated with short-term leases of equipment and vehicles and all
leases of low-value assets are recognised on a straight-line basis as an
expense in profit or loss. Short-term leases are leases with a lease term of
12 months or less. Low-value assets comprise IT equipment and small items of
office furniture.
Extension and termination options
Extension and termination options are included in a number of property and
equipment leases across the Group. These are used to maximise operational
flexibility in terms of managing the assets used in the Group's operations.
The majority of extension and termination options held are exercisable only by
the Group and not by the respective lessor.
Modifications
When the Group revises its estimate of the term of any lease (because, for
example, it re-assesses the probability of a lessee extension or termination
option being exercised), it adjusts the carrying amount of the lease liability
to reflect the payments to make over the revised term, which are discounted
using a revised discount rate. The carrying value of lease liabilities is
similarly revised when the variable element of future lease payments dependent
on a rate or index is revised, except the discount rate remains unchanged.
In both cases an equivalent adjustment is made to the carrying value of the
right-of-use asset, with the revised carrying amount being amortised over the
remaining (revised) lease term. If the carrying amount of the right-of-use
asset is adjusted to zero, any further reduction is recognised in profit or
loss.
(16) Inventories
Inventories comprise goods held for resale and are stated at the lower of cost
or net realisable value. Inventories are valued at cost comprising direct
materials and, where applicable, direct labour costs and those overheads that
have been incurred in bringing the inventories to their present location and
condition.
(17) Financial instruments
Financial assets and financial liabilities are recognised on the Group's
balance sheet when the Group becomes a party to the contractual provisions of
the instrument. The Group derecognises financial assets and liabilities only
when the contractual rights and obligations are transferred, discharged or
expire.
Financial assets comprise trade and other receivables and cash and cash
equivalents. Financial liabilities comprise trade payables, financing
liabilities and bank borrowings.
(18) Financial assets
The Group classifies its financial assets in the following measurement
categories:
· those to be measured subsequently at fair value (either
through profit or loss (FVPL) or through comprehensive income (FVCI); and
· those to be measured at amortised cost.
The classification depends on the entity's business model for managing the
financial assets and the contractual terms of the cash flows.
Trade receivables
Trade receivables are initially measured at fair value, which for trade
receivables is equal to the consideration expected to be received from the
satisfaction of performance obligations, plus any directly attributable
transaction costs. Subsequent to initial recognition these assets are measured
at amortised cost less any provision for impairment losses including expected
credit losses. The Group applies the simplified approach to measuring expected
credit losses which uses a lifetime expected loss allowance for all trade
receivables. To measure the expected credit losses, trade receivables have
been grouped based on shared credit risk characteristics such as the ageing of
the debt and the credit risk of the customers. An historical credit loss rate
is then calculated for each group and then adjusted to reflect expectations
about future credit losses. The Group does not have any significant contract
assets.
Classification as trade receivables
Trade receivables are amounts due from customers for goods sold or services
performed in the ordinary course of business. They are generally due for
settlement within 30 days and are therefore all classified as current. Trade
receivables are recognised initially at the amount of consideration that is
unconditional, unless they contain significant financing components, in which
case they are recognised at fair value. The Group holds the trade receivables
with the objective of collecting the contractual cash flows, and so it
measures them subsequently at amortised cost using the effective interest
method. Details about the Group's impairment policies and the calculation of
the loss allowance are provided in Note 13.
Due to the short-term nature of the current receivables, their carrying amount
is considered to be the same as their fair value.
Other receivables
Other receivables are recognised on trade date, being the date on which the
Group has the right to the asset. Other receivables are derecognised when the
rights to receive cash flows from the other receivables have expired or have
been transferred and the Group has transferred substantially all the risks and
rewards of ownership.
At initial recognition, the Group measures other receivables at their fair
value plus, in the case of a financial asset not held at FVPL, transaction
costs that are directly attributable to the acquisition of the financial
asset. Transaction costs of FVPL financial assets are expensed in profit or
loss.
Subsequent measurement of other receivables depends on the Group's business
model for managing the asset and the cash flow characteristics of the asset.
The Group classifies its other receivables at amortised cost.
Assets that are held for collection of contractual cash flows, where those
cash flows represent solely payments of principal and interest, are measured
at amortised cost. Interest income from these financial assets is included in
finance income using the effective interest rate method. Any gain or loss
arising on derecognition is recognised directly in profit or loss and
presented in other gains/(losses) together with foreign exchange gains and
losses. Impairment losses are presented as a separate line item in Note 2.
The Group classifies its financial assets as at amortised cost only if both of
the following criteria are met:
· the asset is held within a business model whose objective
is to collect the contractual cash flows; and
· the contractual terms give rise to cash flows that are
solely payments of principal and interest.
The Group applies the general approach to impairment under IFRS 9 based on
significant increases in credit risk rather than the simplified approach for
trade receivables using lifetime ECL.
(19) Trade and other payables
These amounts represent liabilities for goods and services provided to the
Group prior to the end of the financial year which are unpaid. The amounts are
unsecured and are usually paid within 30 days of recognition. Trade and other
payables are presented as current liabilities unless payment is not due within
12 months after the reporting period. They are recognised initially at their
fair value and subsequently measured at amortised cost using the effective
interest method.
(20) Treasury
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in
hand and short-term deposits with an original maturity of three months or
less. BACS and next-day payments are recognised at the settlement date, rather
than when they are initiated, to reflect the nature of these transactions. In
the consolidated balance sheet, bank overdrafts are shown within borrowings in
current liabilities. Cash and cash equivalents in the cash flow statement
comprise cash at bank and in hand and bank overdrafts which form part of the
Group's cash management.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument
is any contract that evidences a residual interest in the assets of the Group
after deducting all of its liabilities. Equity instruments issued are recorded
at the proceeds received, net of direct issue costs.
Bank borrowings
Interest-bearing bank loans and overdrafts are initially measured at fair
value (being proceeds received, net of direct issue costs), and are
subsequently measured at amortised cost, using the effective interest rate
method. Finance charges, including premiums payable on settlement or
redemptions and direct issue costs, are accounted for on an accruals basis and
taken to the income statement using the straight line method and are added to
the carrying value of the instrument to the extent that they are not settled
in the period in which they arise.
Modification/derecognition of financial liabilities
Financial liabilities are derecognised when there is extinguishment of the
original financial liability and recognition of a new financial liability.
Equally, significant modification of the terms of the existing financial
liability is accounted for as an extinguishment of the original financial
liability and recognition of a new financial liability.
Foreign currencies
Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on acquisition of a foreign entity, are treated as
assets and liabilities of the foreign entity and are translated at foreign
exchange rates ruling at the balance sheet date. The revenues and expenses of
foreign operations are translated at an average rate for the period where this
rate approximates to the foreign exchange rates ruling at the dates of the
transactions.
Foreign currency transactions
Transactions in foreign currencies are recorded using the rate ruling at the
date of the transaction. Monetary assets and liabilities denominated in
foreign currencies at the balance sheet date are translated at the foreign
exchange rate ruling at that date. Foreign exchange differences arising on
translation are recognised in the income statement. Non-monetary assets and
liabilities that are measured in terms of historical cost in a foreign
currency are translated using the exchange rate at the date of the
transaction. Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated at foreign exchange
rates ruling at the dates the fair value was determined.
(21) Provisions
Provisions are recognised when the Group has a present legal or constructive
obligation as a result of a past event and it is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions are
measured at the present value of the directors' best estimate of the
expenditure required to settle the present obligation at the balance sheet
date and if this amount is capable of being reliably estimated. If such an
obligation is not capable of being reliably estimated, no provision is
recognised and the item is disclosed as a contingent liability where material.
Where the effect is material, the provision is determined by discounting the
expected future cash flows.
(22) Retirement benefit costs
Defined contribution schemes
The Group operates two defined contribution schemes for the benefit of its
employees. Payments to the Group's schemes are recognised as an expense in the
income statement as incurred.
(23) Employee Benefit Trust
Smiths News Employee Benefit Trust
Where any Group company purchases the Company's shares, for example as the
result of a share buy-back or a share-based payment plan, the consideration
paid, including any directly attributable incremental costs (net of income
taxes) is deducted from equity as 'own shares reserve' until those shares are
either cancelled or reissued.
The shares held by the Smiths News Employee Benefit Trust are valued at the
historical cost of the shares acquired. This value is deducted in arriving at
shareholders' funds and presented as the own share reserve.
(24) Share schemes
Share-based payments
The Group operates several share-based payment schemes, being the Sharesave
Scheme, the Executive Share Option Scheme, the LTIP and the Deferred Bonus
Plan. Details of these are provided in the Directors' Remuneration report and
in Note 25.
Equity-settled share-based schemes are measured at fair value at the date of
grant. The fair value is expensed with a corresponding increase in equity on a
straight-line basis over the period during which employees become
unconditionally entitled to the options. The fair values are calculated using
an appropriate option pricing model. The income statement charge is then
adjusted to reflect expected and actual levels of vesting based on non-market
performance-related criteria.
Administrative expenses and distribution and marketing expenses include the
cost of the share-based payment schemes.
(25) Changes in accounting policies
During the period the Group has adopted the following accounting standards and
interpretations:
· Definition of Accounting Estimates - Amendments to IAS 8;
· Disclosure of Accounting Policies - Amendments to IAS 1
and IFRS Practice Statement;
· Deferred Tax related to Assets and Liabilities arising
from a Single Transaction - Amendments to IAS 12
The standards and amendments adopted had no impact on the financial statements
to prior periods and are not expected to significantly affect the current or
future periods. There are no other standards that are not yet effective and
that would be expected to have a material impact on the entity in the current
or future reporting periods and on foreseeable future transactions.
New standards and interpretations not yet applied
At the date of authorisation of these financial statements, the following
standards and interpretations that are potentially relevant to the Group and
which have not been applied in these financial statements were in issue but
not yet effective (and in some cases had not yet been adopted by the UK):
· Classification of Liabilities as Current or Non-current -
Amendments to IAS 1;
· IFRS S1 and S2; and
· IFRS 18.
There are no other standards that are not yet effective and that would be
expected to have a material impact on the entity in the current or future
reporting periods and on foreseeable future transactions.
2. Operating profit
The Group's results are analysed as follows:
£m 2024 2023
Note Adjusted Adjusting items Total Adjusted Adjusting items Total
Revenue 1,103.7 - 1,103.7 1,091.9 - 1,091.9
Cost of inventories recognised as an expense (937.3) - (937.3) (926.5) - (926.5)
Distribution costs (93.2) - (93.2) (92.9) - (92.9)
Cost of sales (1,030.5) - (1,030.5) (1,019.4) - (1,019.4)
Gross profit 73.2 - 73.2 72.5 - 72.5
Other administrative expenses (24.4) - (24.4) (23.4) (0.5) (23.9)
Share-based payment expense 25 (0.9) - (0.9) (1.1) - (1.1)
Net impairment (loss)/reversal on trade receivables (0.1) 0.6 0.5 (0.1) - (0.1)
Impairment reversal of joint venture investment - 0.3 0.3 - - -
Share of (losses)/profits from joint ventures 11 (0.2) (0.2) 0.1 - 0.1
EBITDA 47.6 0.9 48.5 48.0 (0.5) 47.5
Depreciation on property, plant and equipment 10 (2.2) - (2.2) (2.2) - (2.2)
Depreciation on right-of-use assets 17 (5.9) - (5.9) (6.4) - (6.4)
Amortisation of intangibles 9 (0.4) - (0.4) (0.6) - (0.6)
Operating profit 39.1 0.9 40.0 38.8 (0.5) 38.3
Operating profit is stated after charging/(crediting):
£m Note 2024 2023
Depreciation on property, plant and equipment 10 2.2 2.2
Amortisation of intangible assets 9 0.4 0.6
Depreciation on right-of-use assets 17 5.9 6.4
Short-term and low-value lease charges on equipment and vehicles 0.5 0.4
Lease rental income - land and buildings (0.4) (0.4)
Staff costs (excluding share-based payments) 4 44.5 44.1
Included in administrative expenses are amounts payable by the Company and its
subsidiary undertakings in respect of audit and non-audit services which are
as follows:
£m 2024 2023
Fees payable to the Company's auditor for the audit of the Company's annual 0.2 0.2
accounts - BDO LLP
Fees payable to the Company's auditor for the audit of the Company's 0.5 0.4
subsidiaries - BDO LLP
Total non-audit fees 0.1 0.1
Total fees 0.8 0.7
Details of the Company's policy on the use of auditors for non-audit services
and how the auditor's independence and objectivity was safeguarded are set out
in the Audit Committee report of the FY2024 Annual Report and Accounts.
3. Adjusting items
£m 2024 2023
Tuffnells provision credit/(charge) (a) 0.2 (0.4)
Network and reorganisation (costs)/credits (b) (0.1) 0.5
Technology transformation costs (c) (0.1) -
Aborted acquisition costs (d) - (0.6)
Administrative expenses - (0.5)
Impairment reversal on trade receivables (e) 0.6 -
Impairment reversal of investment in joint ventures (f) 0.3 -
Total before tax 0.9 (0.5)
Taxation (0.1) -
Total after taxation 0.8 (0.5)
The Group recognised a total adjusting items credit before tax of £0.9m
(2023: charge of £0.5m) and credit of £0.8m (2023: charge of £0.5m) after
tax respectively.
Adjusting items are defined in the accounting policies in Note 1 and in the
Glossary. In the directors' opinion, removing these items from the adjusted
profit provides a relevant analysis of the trading results of the Group
because it is consistent with how the business performance is planned by, and
reported to, the Board and Executive Team. However, these additional measures
are not intended to be a substitute for, or superior to, IFRS measures. They
comprise:
Administrative expenses: net £nil (2023: £0.5m)
(a) Tuffnells provision: £0.2m credit (2023: £0.4m cost)
As part of the sale of Tuffnells Parcels Express Limited (Tuffnells) in May
2020, a contractual agreement was put in place in respect of the future
treatment and responsibility of certain insurance claims brought or notified
to insurers. This agreement extinguished the Group's exposure to new accident
and insurance claims brought after the sale of Tuffnells but which related to
the Group's period of ownership of Tuffnells up to May 2020. However, as a
result of Tuffnells falling into administration in June 2023, the
enforceability of, and subsequent recoverability under, this contractual
agreement has been negatively impacted and the Group's insurers have instead
looked to the Group to stand behind the excess/deductible limit of such claims
and in the prior period a provision of £0.4m was recognised in addition to
existing claims.
During the period, a review of provisions was held in respect of all remaining
claims held following utilisations in the period and as a result, the
provision was reduced by £0.2m, which represents management's best estimate
of remaining claims brought. The cash impact of utilisations on claims in the
period was an outflow of £0.1m (2023: £0.2m).
These provisions have been reported as adjusting items on the basis that it
relates to a former discontinued operation and is therefore outside the
normal course of activity.
(b) Network and reorganisation: £0.1m costs (2023: £0.5m net credit)
During the period, an additional £0.1m of costs were incurred with regards to
simplifying the DMD group structure.
During the prior period, there was a reversal of accrued amounts of £0.6m
relating to projects in connection with our outsourced Shared Service Centre
(SSC) in India, where accrued costs relating to overheads on projects would no
longer materialise. These amounts were released to the income statement when
these projects concluded. This was partially offset by £0.1m of costs
incurred with regards to simplifying the DMD group structure.
The cash impact of network and reorganisation was a £0.2m outflow (2023:
£0.2m).
(c) Technology transformation costs: £0.1m (2023: £nil)
During the period, the Group commenced a transformation programme to enhance
its technology infrastructure and enable alignment to the Group's updated
vision and strategy.
Implementation costs of £0.1m have been recognised as adjusting items given
that costs over the three-year programme are expected to be a significant
change to the Company and largely comprise software-as-a-service arrangements.
The cash impact was an outflow of £0.1m.
(d) Aborted acquisition costs: £nil (2023: £0.6m)
During the prior period the Company incurred due diligence and legal costs
associated with an aborted acquisition. The cash impact of these items was an
outflow of £0.6m.
(e) Impairment provision on trade receivables: £0.6m credit (2023: £nil)
On 9 May 2022 ('the administration date'), McColls Retail Group went into
administration. A statement of claim form was filed with the administrators
for an amount of £5.5m. The latest issued notification from the
administrators on 7 June 2024 stated that unsecured creditors can be expected
to receive between 30-50% (2023: 20-50%) of approved claims. Management has
determined its best estimate of recovery to be 30% (2023: 20%) of the
outstanding balance and therefore decreased the provision held to £3.8m
(2023: £4.4m).
The Company continues to trade with McColls as acquired by Wm Morrison
Supermarkets Ltd (Morrisons) under a pre-packaged insolvency agreement with
the administrator. The Company's bad debt exposure relates solely to the
outstanding trade receivable balance as at the administration date.
This release is reported as an adjusting item on the same basis as the
impairment loss of £4.4m recognised during the prior period ended 27 August
2022.
(f) Impairment reversal of investment in joint ventures: £0.3m reversal
(2023: £nil)
During the period, the Company reviewed the business plan for the Rascal Joint
Venture. The potential challenges anticipated to arise in a prior period which
had led to an impairment at that time continue not to have materialised;
contracts remain in place and growth plans continue to progress.
As a result of this review, the remaining cumulative impairment of £0.3m
(2023: £0.3m) was released, which has been presented within adjusting to
align to the previous impairment charge, which was significant in both quantum
and nature to the results of the Group.
4. Staff costs and employees
The aggregate remuneration of employees (including executive directors) was:
£m Note 2024 2023
Wages and salaries 39.4 39.2
Social security 3.6 3.7
Pension costs 1.1 1.2
Share-based payments expense 0.9 1.1
Total 45.0 45.2
The total average number of employees (including executive directors) was:
Number 2024 2023
Operations 1,333 1,368
Support functions 98 140
Total 1,431 1,508
Defined contribution pension schemes
The Group operates two defined contribution pension schemes. For the 53 weeks
ended 31 August 2024, contributions from the respective employing company
totalled £1.1m (2023: £1.2m) which is included in the income statement.
A defined contribution plan is a pension plan under which the Group pays
contributions to an independently administered fund - such contributions are
based upon a fixed percentage of employees' pay. The Group has no legal or
constructive obligations to pay further contributions to the fund once the
contributions have been paid. Members' benefits are determined by the amount
of contributions paid by the Company and the member, together with investment
returns earned on the contributions arising from the performance of each
individual's chosen investments and the type of pension the member chooses to
buy at retirement. As a result, actuarial risk (that benefits will be lower
than expected) and investment risk (that assets invested in will not perform
in line with expectations) fall on the employee.
5. Net finance costs
£m Note 2024 2023
Interest on bank overdrafts and loans (2.7) (3.9)
Amortisation of loan arrangement fees* (1.4) (1.1)
Interest payable on leases (2.0) (1.4)
Total interest cost on financial liabilities at amortised cost (6.1) (6.4)
Unwind of discount on provisions 19 (0.2) (0.1)
Finance costs (6.3) (6.5)
Interest receivable on bank deposits 0.4 -
Net finance costs (5.9) (6.5)
*During the current period £0.8m of unamortised arrangement fees were
immediately recognised on derecognition of the previous facility.
6. Income tax expense
£m 2024 2023
Adjusted Adjusting items Total Adjusted Adjusting items Total
Current tax 8.2 0.1 8.3 6.5 - 6.5
Adjustment in respect of prior year - - - 0.2 - 0.2
Total current tax charge 8.2 0.1 8.3 6.7 - 6.7
Deferred tax - current year 0.3 - 0.3 0.5 - 0.5
Deferred tax - prior year - - - (0.4) - (0.4)
Deferred tax - impact of rate change - - - (0.1) - (0.1)
Total tax charge 8.5 0.1 8.6 6.7 - 6.7
Effective tax rate 25.6% 25.2% 20.7% 21.1%
The effective adjusted income tax rate in the year was 25.6% (2023: 20.7%).
After the impact of tax recognised on adjusting items of £0.1m (2023: £nil),
the effective statutory income tax rate was 25.2% (2023: 21.1%).
Corporation tax is calculated at the main rate of UK corporation tax of 25%
(2023: 21.5%). The UK Finance Act 2021 increased the corporate tax rate to 25%
effective from 1 April 2023, which in the prior period resulted in a blended
rate. The Group has assessed its deferred tax positions using a rate of 25%.
Taxation for other jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
The tax charge for the year can be reconciled to the profit in the income
statement as follows:
£m 2024 2023
Profit before tax 34.1 31.8
Tax on profit at the standard rate of UK corporation tax 25% (2023: 21.5%) 8.5 6.8
Income not subject to tax (0.1) 0.1
Expenses not deductible for tax purposes 0.3 0.1
Adjustment in respect of prior years 0.1 (0.2)
Share options (0.2) -
Impact of change in UK tax rate - (0.1)
Tax charge 8.6 6.7
Amounts recognised directly in equity
A current tax credit of £0.1m (2023: nil) and deferred tax charge of £0.1m
(2023: £0.6m) was recognised directly in equity during the period.
Impact of future tax changes
In November 2022 the UK Government confirmed its intention to implement
Framework Pillar Two rules in the UK, including a Qualified Domestic Minimum
Top-Up Tax rule. The subsequent Base Erosion Profit Sharing Pillar Two
legislation, enacted on 11 July 2023, has introduced a multinational top-up
tax, which applies where a UK parent member has interests in entities located
in non-UK jurisdictions, and the Group's profits in those jurisdictions are
taxed at below the minimum rate of 15%.
With revenue consistently greater than the threshold, the Group falls within
the scope of this legislation. Assessment of the potential exposure to Pillar
Two income taxes is based on the most recent available tax filings,
country-by-country reporting and financial statements for the constituent
entities in the Group. However, as the UK rate of corporation tax is 25%, and
the Group's business is primarily UK-based, initial indications are that the
impact of these rules on the Group is not expected to be material. The IAS 12
exemption to recognise and disclose information about deferred tax assets and
liabilities related to Pillar 2 income taxes has been applied.
7. Dividends
Amounts paid and proposed as distributions to equity shareholders in each
period is set out below:
Paid and proposed dividends for the year 2024 2023 2024 2023
Per share Per share £m £m
Interim dividend - paid 1.75p 1.40p 4.2 3.3
Special dividend - proposed 2.00p - 4.8 -
Final dividend - proposed 3.40p 2.75p 8.2 6.7
7.15p 4.15p 17.2 10.0
Recognised dividends for the year
Final dividend - prior year 2.75p 2.75p 6.7 6.5
Interim dividend - current year 1.75p 1.40p 4.2 3.3
4.50p 4.15p 10.8 9.8
After the balance sheet date, a final 3.40p ordinary dividend per share is
proposed for the 53 weeks ended 31 August 2024 (2023: 2.75p), alongside a
special dividend proposed of 2.00p per share, each of which is expected to be
paid on 6 February 2025 to all shareholders who are on the register of members
at close of business on 10 January 2025. The ex-dividend date will be 9
January 2025.
8. Earnings per share
2024 2023
£m Million Pence £m Million Pence
Earnings Weighted average number of shares per share Earnings Weighted average number of shares per share
Weighted average number of shares in issue 247.7 247.7
Shares held by the EBT (weighted) (7.4) (10.4)
Basic earnings per share (EPS)
Adjusted earnings attributable to ordinary shareholders 24.7 240.3 10.3 25.6 237.3 10.8
Adjusting items 0.8 - - (0.5) - -
Earnings attributable to ordinary shareholders 25.5 240.3 10.6 25.1 237.3 10.6
Diluted earnings per share (EPS)
Effect of dilutive share options 10.8 12.6
Diluted adjusted EPS 24.7 251.1 9.8 25.6 249.9 10.2
Diluted EPS 25.5 251.1 10.2 25.1 249.9 10.0
Dilutive shares increase the basic number of shares at 31 August 2024 by 10.8m
to 251.1m (26 August 2023: 12.6m to 249.9m). The calculation of diluted EPS
reflects the potential dilutive effect of employee incentive schemes.
9. Intangible assets
Goodwill Acquired intangibles Internally generated development costs Computer software costs Total
£m Customer relationships Trade name
Cost:
At 26 August 2023 5.7 2.4 0.2 1.8 2.8 12.9
Additions - - - 0.8 0.1 0.9
Disposals - (0.3) - - (0.3) (0.6)
At 31 August 2024 5.7 2.1 0.2 2.6 2.6 13.2
Accumulated amortisation and impairment:
At 26 August 2023 (5.7) (2.4) (0.2) (0.4) (2.3) (11.0)
Amortisation charge - - - (0.2) (0.2) (0.4)
Disposals - 0.3 - - 0.3 0.6
At 31 August 2024 (5.7) (2.1) (0.2) (0.6) (2.2) (10.8)
Net book value at 31 August 2024 - - - 2.0 0.4 2.4
Cost:
At 27 August 2022 5.7 2.4 0.2 3.2 7.4 18.9
Additions - - - 0.5 0.3 0.8
Disposals - - - (1.9) (4.9) (6.8)
At 26 August 2023 5.7 2.4 0.2 1.8 2.8 12.9
Accumulated amortisation and impairment:
At 27 August 2022 (5.7) (2.4) (0.2) (2.1) (6.8) (17.2)
Amortisation charge - - - (0.2) (0.4) (0.6)
Disposals - - - 1.9 4.9 6.8
At 26 August 2023 (5.7) (2.4) (0.2) (0.4) (2.3) (11.0)
Net book value at - - - 1.4 0.5 1.9
26 August 2023
Impairment of goodwill
Goodwill is not amortised but has been reviewed annually for impairment. As a
result of these reviews goodwill remains fully impaired at the end of 2024 and
2023.
10. Property, plant and equipment
£m Land and buildings
Long-term leasehold improvements Short-term leasehold Fixtures and fittings Equipment and vehicles Total
improvements
Cost:
At 26 August 2023 0.2 9.2 3.5 17.0 29.9
Additions - 1.4 0.1 1.6 3.1
Disposals (0.2) (0.9) (0.4) (2.8) (4.3)
At 31 August 2024 - 9.7 3.2 15.8 28.7
Accumulated depreciation:
At 26 August 2023 (0.2) (6.8) (1.7) (12.4) (21.1)
Depreciation charge - (0.5) (0.3) (1.4) (2.2)
Disposals 0.2 0.9 0.4 2.8 4.3
At 31 August 2024 - (6.4) (1.6) (11.0) (19.0)
Net book value at - 3.3 1.6 4.8 9.7
31 August 2024
Cost:
At 27 August 2022 0.2 10.5 3.0 23.0 36.7
Additions - 1.0 0.9 0.5 2.4
Disposals - (2.3) (0.4) (6.5) (9.2)
At 26 August 2023 0.2 9.2 3.5 17.0 29.9
Accumulated depreciation:
At 27 August 2022 (0.2) (8.7) (1.8) (17.4) (28.1)
Depreciation charge - (0.4) (0.5) (1.3) (2.2)
Disposals - 2.3 0.6 6.3 9.2
At 26 August 2023 (0.2) (6.8) (1.7) (12.4) (21.1)
Net book value at - 2.4 1.8 4.6 8.8
26 August 2023
11. Interests in joint ventures
£m 2024 2023
At 27/28 August 4.4 4.2
Additions - 0.3
Share of profit 0.1 0.1
Impairment reversal 0.3 -
Dividends received (0.2) (0.2)
At 31/26 August 4.6 4.4
The joint ventures listed below have share capital consisting solely of
ordinary shares, which are held directly by the Group.
Nature of investments in joint ventures
Company name/ Share class Group % Registered address Measurement method
(number)
Rascal Solutions Limited Ordinary A Shares 50% Silbury Court, 420 Silbury Boulevard, Milton Keynes MK9 2AF Equity method
05191277
Bluebox Systems Group Limited SC544863 Ordinary A Shares 31.8% Estantia House, Pitreavie Drive, Pitreavie Business Park, Dunfermline, Fife Equity method
KY11 8US
Fresh On The Go Limited Ordinary Shares 30% 61 Bridge Street, Kington, HR5 3DJ Equity method
08775703
Lucid Digital Magazines Limited t/a LoveMedia Ordinary Shares 50% Rowan House Cherry Orchard North, Kembrey Park, Swindon, England, SN2 8UH Equity method
12738320
The Group owns 50% of the ordinary shares of Rascal Solutions Limited, a
company incorporated in England, which in turn owns 100% of the ordinary
shares of Open-Projects Limited. The latest statutory accounts of Rascal
Solutions Limited were drawn up to 31 August 2023. Rascal Solutions Limited
provides retail support services and is a strategic partnership for the Group
to provide additional services to its existing customers.
Bluebox Systems Group Limited is the holding company of Bluebox Aviation
Systems Ltd, the principal activity of which is the sale of innovative
in-flight entertainment systems. This business is a strategic partnership with
DMD which also provides inflight media to the aviation industry.
Fresh On The Go Limited provides retail outlets with coffee vending and other
related products.
During the prior period, the Group purchased 50% of the ordinary shares in
Lucid Digital Magazines Limited trading as LoveMedia, a company incorporated
in England. LoveMedia provides single use downloads and subscriptions of
digital newspapers and magazines to consumers.
The Group holds working capital loans of £0.3m (2023: £0.3m) to LoveMedia,
which is presented within other debtors. During the current period these loans
were fully impaired with losses recognised within net losses from joint
ventures. There are no other commitments relating to its joint ventures.
All joint ventures are private companies and there is no quoted market price
available for their shares.
Dividends of £0.2m (2023: £0.2m) were received in the period from joint
ventures.
Rascal Solutions Limited investment
During the period Rascal Solutions Limited (Rascal) recorded a profit of
£0.3m (2023: £0.5m). The Group holds £4.6m (2023: £4.2m) on the balance
sheet comprising a £2.2m (2023: £1.8m) share of net assets and £2.4m (2023:
£2.4m) of goodwill. Goodwill represents the difference between the fair value
of the share of the net assets acquired and the amount paid, and forms part of
the investment in the joint venture.
During the period, the Company reviewed the business plan for the Rascal Joint
Venture considering the cumulative previous impairment recognised of £0.3m
(2023: £0.3m).
The current period impairment review was performed, resulting in a value in
use of £5.5m being calculated based on future cash flows of the Rascal
business. These cash flows were discounted at a post-tax discount rate of
13.2% and a pre-tax discount rate of 17.6% (2023: 13.6% post-tax discount rate
and pre-tax discount rate of 18.1%) and a terminal growth rate applied of 0%
(2023: 0%). As a result, the remaining impairment of £0.3m was reversed and
the investment is now held at cost plus its accumulated share of net assets.
12. Inventories
£m 2024 2023
Goods held for resale 22.0 17.5
Raw materials and consumables 0.1 0.2
Total 22.1 17.7
13. Trade and other receivables
£m 2024 2023
Trade receivables 76.4 73.5
Provision for individually assessed expected credit losses ((1)) (3.8) (4.4)
Provision for collectively assessed expected credit losses (0.1) (0.1)
72.5 69.0
Other debtors 26.4 29.4
Prepayments 1.8 1.1
Accrued income 1.4 1.6
Trade and other receivables 102.1 101.1
(1) Net impairment loss on trade receivables - McColls
Retail Group
During the period ended 27 August 2022, the Company received notice that
McColls Retail Group had gone into administration. A statement of claim was
filed with the administrators for an amount of £5.5m. The latest notification
issued from the administrators on 7 June 2024 stated that unsecured creditors
can be expected to receive between 30-50% (2023: 20-50%) of approved claims.
Management has maintained a best estimate that only 30% (2023: 20%) of the
outstanding balance is recoverable. The Company has therefore reduced the
provision to £3.8m (2023: £4.4m), representing 70% (2023: 80%) of the total
balance of £5.5m (2023: £5.5m). For more information see Note 4.
The expected credit loss provision of £3.8m (2023: £4.4m) has been allocated
to 'over 90 days overdue' (2023: over 90 days overdue), matching the ageing
profile of the £5.5m total receivable due.
If the Company had considered 50% (2023: 50%) of the total balance of £5.5m
to be recoverable in line with the upper range of the administrator's
estimate, the provision recognised would have been £2.7m (2023: £2.7m),
allocated to 'over 90 days overdue' (2023: over 90 days overdue).
On 31 October 2024, £1.6m was received from the administrators as an interim
dividend on the statement of claim filed.
Trade receivables
The average credit period taken on sale is 32 days (2023: 27 days). Trade
receivables are generally non-interest bearing.
The following table provides information about the Group's exposure to credit
risk and expected credit losses held against customer balances:
£m 2024 2023
Gross Individually Collectively assessed ECL Net Gross Individually Collectively assessed ECL Net
carrying assessed carrying carrying assessed carrying
amount ECL amount amount ECL amount
Current (not overdue) 70.4 - (0.1) 70.3 67.8 - (0.1) 67.7
30-60 days overdue 0.1 - - 0.1 - - - -
61-90 days overdue 0.1 - - 0.1 - - - -
Over 90 days overdue 5.8 (3.8) - 2.0 5.7 (4.4) - 1.3
Total 76.4 (3.8) (0.1) 72.5 73.5 (4.4) (0.1) 69.0
The following table provides information about the Group's loss rates applied
against customer balances:
% 2024 2023
Current (not overdue) <0.1 <0.1
30-60 days overdue <0.1 <0.1
61-90 days overdue <0.1 <0.1
Over 90 days overdue 70.0 80.0
Of the trade receivables balance at the end of the year:
· two customers (2023: three) had individual balances that
represented more than 10% of the total trade receivables balance. The total of
these was £20.9m (2023: £30.3m); and
· a further three customers (2023: two) had individual balances
that represented more than 5% of the total trade receivables balance. The
total of these was £16.9m (2023: £9.0m).
The movement in provision for expected credit losses for the period is
detailed below:
£m Note 2024 2023
At 27/28 August 4.5 4.5
Expected credit losses recognised 0.1 0.1
Reversal of individually assessed credit losses 3 (0.6) -
Amounts written off as uncollectible (0.1) (0.1)
At 31/26 August 3.9 4.5
The directors consider that the carrying amount of trade and other receivables
approximates their fair value which is considered to be a level 2 methodology
of valuing them. The inputs used to measure fair value are categorised into
different levels of the fair value hierarchy (levels 1 to 3). The fair value
measurement is categorised in its entirety in the level of the lowest level
input that is significant to the entire measurement.
Default occurs when the debt becomes overdue by 90 days.
The Group performed sensitivity analysis on the expected credit loss
(excluding losses in respect of McColls Retail Group) and should the default
rate change from expected:
· An increase in default rate by 2% would increase the expected credit
loss by £1.4m.
· A decrease in default rate by 2% would result in no credit losses.
· An increase in default rate by 5% would increase the expected credit
loss by £3.4m.
· A decrease in default rate would result in no credit losses.
Other debtors and prepayments
The largest items included within this balance are returns reserve asset of
£16.9m (2023: £16.8m) (refer to Note 1, section 6) and £8.0m (2023: £9.8m)
of publisher debtors.
14. Trade and other payables
£m 2024 2023
Trade payables (88.4) (101.0)
Other creditors (32.6) (34.0)
Accruals (7.4) (6.4)
Deferred income (0.1) (0.1)
(128.5) (141.5)
Included within other creditors is a balance of £19.8m (2023: £19.7m)
relating to the returns reserve accrual - (refer to Note 1, section 6.)
Trade and other payables principally comprise amounts outstanding for trade
purchases and ongoing costs. The average credit period taken for trade
purchases is 33 days (2023: 32 days). No interest is charged on trade
payables. The directors consider that the carrying amount of trade and other
payables approximates to their fair value using a level 2 valuation.
15. Cash and borrowings
Cash and borrowings by currency (sterling equivalent) were as follows:
£m Sterling Euro US Dollar Other Total 2024 2023
Cash and cash equivalents 6.4 0.3 0.2 0.1 7.0 37.3
Revolving credit facility (18.0) - - - (18.0) -
Term loan - current liabilities - - - - - (10.0)
Term loan - non-current liabilities - - - - - (31.5)
Unamortised arrangement fees - presented in non-current liabilities 0.4 - - - 0.4 1.3
Total borrowings (17.6) - - - (17.6) (40.2)
Net borrowings (11.2) 0.3 0.2 0.1 (10.6) (2.9)
Total borrowings
Due for settlement within 12 months - - - - - (10.0)
Due for settlement after 12 months (17.6) - - - (17.6) (30.2)
Total (17.6) - - - (17.6) (40.2)
Cash and cash equivalents comprise cash held by the Company and short-term
bank deposits with an original maturity of three months or less. The carrying
amount of these assets approximates their fair value.
In May 2024, an agreement was signed to extend and amend the existing
financing arrangements. The original facility, which was due to expire in
August 2025, has been extended to a final maturity date of 2 May 2027. The
facility comprised an initial £40.0m amortising Revolving Credit Facility
(RCF) with a £10.0m accordion option. The agreement is with HSBC and
Santander.
At the year end the RCF was £18.0m. The total available amount is £40.0m for
the life of the facility. As part of the terms of the financing, the Company
and its principal trading subsidiaries have agreed to provide security over
their assets to the lenders. The current rate on the facility is 2.45% per
annum over SONIA (in respect of the RCF).
At 31 August 2024, the Company had £22.0m (2023: £22.5m) of undrawn
committed borrowing facilities in respect of which all conditions precedent
had been met. This is partially reduced by letters of credit of £1.5m (2023:
£1.5m); further details are included in Note 20.
Reconciliation of liabilities arising from financing activities
The table below details changes in the Group's liabilities arising from
financing activities, including both cash and non-cash changes. Liabilities
arising from financing activities are those for which cash flows were, or
future cash flows will be, classified in the Group's consolidated statement of
cash flows as cash flows from financing activities.
£m Note 27 August 2023 Financing cash flows New leases Other changes 31 August
2024
Revolving credit facility 16 - 18.0 - (0.4) 17.6
Term loan 16 40.2 (41.5) - 1.3 -
Leases 23.2 (7.9) 11.2 4.4 30.9
Total 63.4 (31.4) 11.2 5.3 48.5
£m Note 28 August 2022 Financing cash flows New leases Other changes 26 August
2023
Term loan 16 47.1 (11.9) - 5.0 40.2
Leases 27.6 (7.5) 1.7 1.4 23.2
Total 74.7 (19.4) 1.7 6.4 63.4
Other changes include rent increases, interest accruals and the amortisation
of loan fees.
Analysis of net debt
£m Note 2024 2023
Cash and cash equivalents 16 7.0 37.3
Current borrowings 16 - (10.0)
Non-current borrowings 16 (17.6) (30.2)
Net borrowings (10.6) (2.9)
Lease liabilities 17 (30.9) (23.2)
Net debt (41.5) (26.1)
16. Financial instruments
Treasury policy
The Group operates a centralised treasury function to manage the Group's
funding requirements and financial risks in line with the Board-approved
treasury policies and procedures and their delegated authorities. The role of
Treasury is to ensure that appropriate financing is available for running the
businesses of the Group on a day-to-day basis, whilst minimising interest
cost. No transactions of a speculative nature are undertaken. Dealings are
restricted to those banks with suitable credit ratings and counterparty risk
and credit exposure is monitored frequently.
Capital risk management
The Group manages its capital to ensure that entities in the Group will be
able to continue as a going concern while maximising the return to
stakeholders through the optimisation of the debt and equity balance. The
capital structure of the Group consists of debt, which includes the
borrowings, cash and cash equivalents as disclosed in Note 15 and equity
attributable to equity holders of the parent, comprising issued capital,
reserves and retained earnings as disclosed in the Group statement of changes
in equity.
The only externally imposed capital requirements for the Group are Bank Net
Debt to Bank EBITDA and interest cover under the terms of the banking
facilities. The Group has fully complied during both the current year and the
prior year. To maintain or adjust its capital structure, the Group may adjust
the dividend payment to shareholders and/or issue new shares. In the prior
period there was a cap on dividends of £10.0m under the banking facility;
subject to all the covenants. As part of the refinancing in May 2024, this
restriction was removed.
The Board regularly reviews the capital structure. As part of this review, the
Board considers the cost of capital and the risks associated with each class
of capital. We expect free cash from operations to be sufficient to manage net
debt while also maintaining an attractive total shareholder return. The Group
is targeting a reduced Bank Net Debt: Bank EBITDA ratio of 0.5x during 2025,
achieved through managing free cash from operations. The Group's facilities
include a 'frozen GAAP' clause in relation to IAS 17 and Bank Net Debt: Bank
EBITDA is stated on this basis.
Liquidity risk
The Group manages liquidity risk by maintaining adequate reserves and banking
facilities and by monitoring forecast and actual cash flows. The facilities
that the Group has at its disposal to further reduce liquidity risk are
described below.
As at 31 August 2024, the Group had £40m of committed bank facilities in
place (2023: £64.0m). Bank facilities comprised a £40.0m revolving credit
facility (RCF), which expires on 2 May 2027.
The facility described above is subject to the following covenants which are
subject to a 'frozen GAAP' clause:
· Leverage cover - the Bank Net Debt: Bank EBITDA ratio which must
remain below 2.5x, increasing from 1.5x on 2 May 2024. At 31 August 2024 the
ratio was 0.3x (2023: 0.1x);
· Interest cover - the consolidated net interest: Bank EBITDA ratio
which must remain above 4x. As at 31 August 2024 the ratio was 17.9x (2023:
10.5x); and
· Guarantor cover - the annual turnover, gross assets and pre-tax
profits of the guarantors under the banking facilities contribute, at any
time, 90% or more of the annual consolidated turnover, gross assets and
pre-tax profits of the Group for each of its financial years. The guarantors,
which are all 100% owned or wholly owned subsidiaries of Smiths News plc,
comprise Smiths News plc, Smiths News Holdings Limited, and Smiths News
Trading Limited. The fixed charge cover requirement was removed on 2 May 2024.
At 31 August 2024, the Group had available £20.5m (2023: £21.0m) of undrawn
committed borrowing facilities comprising the £22.0m (2023: £22.5m) RCF
above less letters of credit of £1.5m (2023: £1.5m); and a £10m Accordion
facility, option further details are included in Note 22. There were no
breaches of loan agreements during either the current or prior years.
As the Group is cash generative its liquidity risk is considered low. The
Group's cash generation allows it to meet all loan commitments as they fall
due as well as sustain a negative working capital position.
The Group invests significant resources in the forecasting and management of
its cash flows. This is critical given a routine cash cycle at Smiths News
that results in significant predictable swings within each month; the Group's
average gross borrowing for the past year was £26.7m (2023: £45.4m). The
Group has available funding via the undrawn RCF and a £10m accordion facility
option.
The following is an analysis of the undiscounted contractual cash flows
payable under non-derivative financial liabilities. The undiscounted cash
flows will differ from both the carrying value and fair value. Floating rate
interest is estimated using the prevailing rate at the balance sheet date.
£m Due within 1 year Due between 1 and 2 years Due between 2 and 3 years Greater than 3 years Total
At 31 August 2024
Bank and other borrowings (18.0) - - - (18.0)
Trade and other payables (128.5) - - - (128.5)
Leases (7.6) (6.8) (6.0) (19.8) (40.2)
Total (154.1) (6.8) (6.0) (19.8) (186.7)
At 26 August 2023
Bank and other borrowings (10.0) (10.0) (21.5) - (41.5)
Trade and other payables (141.5) - - - (141.5)
Leases (6.1) (5.1) (4.4) (12.0) (27.6)
Total (157.6) (15.1) (25.9) (12.0) (210.6)
Counterparty risk
Dealings are restricted to those banks with suitable credit ratings and
counterparty risk and credit exposure is monitored.
Foreign currency risk
· The majority of the Group's transactions are carried out in the
functional currencies of its operations, and so transactional exposure is
limited.
· The majority of the Group's net liabilities are held in Sterling,
with £0.6m (2023: £0.6m) of net assets held in overseas currencies.
Translation exposure arises on the re-translation of overseas subsidiaries'
profits and net assets into Sterling for financial reporting purposes and is
not seen as significant.
· Note 15 denotes borrowings by currency, with no material currency
exposures to disclose.
Interest rate risk
The Group monitors its exposure to interest rate in light of the Group's debt
exposure, consideration of the macroeconomic environment and sensitivity to
potential interest rate rises. The Group avoids the use of derivatives or
other financial instruments in circumstances when the outcome would
effectively be largely dependent upon speculation on future rate movements.
Interest rate sensitivity analysis
Based on the assumption that the liabilities outstanding at the balance sheet
date were outstanding for the whole year, if interest rates had been 0.5%
higher/lower and all other variables were held constant, the Group's profit
and equity for the 53 weeks ending 31 August 2024 would decrease/increase by
£0.1m (2023: £0.2m).
Credit risk
The Group considers its exposure to credit risk to be as follows:
£m 2024 2023
Bank deposits 7.0 37.3
Trade and other receivables 98.9 98.4
105.9 135.7
Further detail on the Group's policy relating to trade receivables and other
receivables can be found in Note 13.
17. Leases
The balance sheet shows the following right-of-use assets in relation to
leases:
£m Equipment Land and buildings Total
and vehicles
Cost:
At 27 August 2023 2.0 38.4 40.4
Additions 0.3 13.3 13.6
Disposals (0.8) (2.5) (3.3)
At 31 August 2024 1.5 49.2 50.7
Accumulated depreciation:
At 27 August 2023 (1.4) (17.2) (18.6)
Depreciation charge (0.3) (5.6) (5.9)
Disposals 0.8 2.5 3.3
At 31 August 2024 (0.9) (20.3) (21.2)
Net book value at 31 August 2024 0.6 28.9 29.5
Cost:
At 28 August 2022 1.7 42.1 43.8
Additions 0.3 1.4 1.7
Disposals - (5.1) (5.1)
At 26 August 2023 2.0 38.4 40.4
Accumulated depreciation:
At 28 August 2022 (1.0) (16.5) (17.5)
Depreciation charge (0.4) (6.0) (6.4)
Disposals - 5.3 5.3
At 26 August 2023 (1.4) (17.2) (18.6)
Net book value at 26 August 2023 0.6 21.2 21.8
Amounts recognised in respect of leases
£m 2024 2023
Interest expense (included in finance cost) 2.0 1.4
Expense relating to low-value leases (included in cost of sales and 0.5 0.4
administrative expenses)
Property rental income (0.4) (0.4)
Total cash outflow from leases 7.9 6.5
Maturity analysis of lease liabilities
£m 2024 2023
Current (5.5) (4.9)
Non-current (25.4) (18.3)
Total (30.9) (23.2)
Amounts recognised as lessor:
At the balance sheet date, the Group had contracted with tenants for the
following future minimum lease payments:
£m 2024 2023
Within one year 0.3 0.2
In the second to fifth years inclusive 0.6 0.6
0.9 0.8
18. Deferred tax
Deferred tax assets are attributable to the following:
£m Fixed assets Share- based payments Other temporary differences Total
At 27 August 2023 0.4 1.0 0.3 1.7
(Charge)/credit to income (0.4) - 0.1 (0.3)
Charge to equity - (0.1) - (0.1)
At 31 August 2024 - 0.9 0.4 1.3
At 28 August 2022 0.6 0.5 - 1.1
(Charge)/credit to income (0.2) (0.1) 0.3 -
Credit to equity - 0.6 - 0.6
At 26 August 2023 0.4 1.0 0.3 1.7
The deferred tax assets have been deemed recoverable as the Group forecasts
that it will continue to make profits against which the assets can be utilised
for tax purposes. There were no deferred tax liabilities recognised in either
reporting period.
The Group has capital losses carried forward of £20.2m (2023: £20.2m).
Deferred tax assets of £5.1m (2023: £5.1m) have not been recognised in
respect of the capital losses carried forward due to the uncertainty of their
utilisation.
The deferred tax asset at the period end has been calculated based on the rate
of 25% substantively enacted at the balance sheet date on the basis that the
temporary differences are expected to unwind when that rate applies.
19. Provisions
£m Re-organisation provisions Insurance and legal provisions Property provisions Total
At 27 August 2023 (1.0) (0.8) (4.9) (6.7)
Charged to income statement (0.1) (0.1) (0.6) (0.8)
Credited to income statement - 0.3 0.2 0.5
Utilised in period 0.9 0.1 0.3 1.3
Unwinding of discount utilisation - - (0.2) (0.2)
At 31 August 2024 (0.2) (0.5) (5.2) (5.9)
£m 2024
Included within current liabilities (1.3)
Included within non-current liabilities (4.6)
Total (5.9)
Included within non-current liabilities is £4.6m (2023: £4.2m) relating to
property provisions.
Reorganisation provisions of £0.2m (2023: £1.0m) relate to the restructure
of the DMD business, the Smiths News network and the Group's support
functions.
Insurance and legal provisions represent the expected future costs of
employer's liability, public liability, motor accident claims and legal
claims; included within the total balance is £0.5m (2023: £0.8m) relating to
claims from the Tuffnells business prior to disposal.
The property provision represents the estimated future cost of dilapidation
costs across the Group. These provisions have been discounted to present value
and this discount will be unwound over the life of the leases. The provisions
cover the period to 2034 with all of the liability falling within ten years.
The Group has performed sensitivity analysis on the property provision using
the possible scenarios below:
If the discount rate changes by +/- 0.5%, the property provision would change
by +/- £0.1m (2023: +/- £0.1m).
If the repair cost per square foot changes by +/-£1.00p, the property
provision would change by +/-£0.3m (2023: +/- £0.4m).
20. Contingent assets, liabilities and capital commitments
Bank and other guarantees
As at 31 August 2024, the Group had approved letters of credit of £1.5m
(2023: £1.5m) to the insurers of the Group for the motor insurance and
employer liability insurance policies. The letters of credit cover the
employer deductible element of the insurance policy for insurance claims.
Administration of Tuffnells Parcels Express Limited (Tuffnells)
As reported in Note 3, following the administration of Tuffnells in the prior
period, additional provision is being held in light of the probable outcome of
certain insurance claims reverting to the Group which were previously being
handled by Tuffnells.
The Board has considered the administration and other associated processes in
respect of Tuffnells and notes that the Company has received a request for
information from the Pensions Regulator (tPR) in respect of an ongoing formal
investigation relating to the Tuffnells defined benefit pension scheme. The
correspondence received states that tPR requires the Company to provide
documentation to tPR in its capacity of being the former parent company of
Tuffnells. The Company has confirmed that it will assist tPR with its
enquiries in relation to this investigation. The Board has considered the
details of the information request from tPR and has concluded that no
provision is required at this stage. The Board reached this conclusion based
on the early stages of the investigation and there being no certainty as to
how tPR may use the information requested or whether a future obligation will
arise.
Indemnity coverage
On winding up of the News Section of the WH Smith Pension Trust defined
benefit pension scheme in December 2021, the Company has agreed run-off
indemnity coverage for any member claims that were uninsured liabilities
capped at £6.5m over the following 60 years. The Group is not aware of any
claims brought during either the current or prior reporting period.
Receipt of refund from overpayment of tax
On 16 October 2024 the Company received a sum of £1.5m from the WH Smith
Pension Trust in respect of the refund of an overpayment of tax made by the
Pension Trustee in 2022. This overpayment was in respect of the wind up of the
News Section of the WH Smith Pension Trust defined benefit pension scheme in
December 2021 and was recently identified following advice from third parties
and confirmed with HM Revenue & Customs.
Reversionary leases
Other potential liabilities that could crystallise are in respect of previous
assignments of leases where the liability could revert to the Group if the
lessee defaulted. Pursuant to the terms of the Demerger Agreement from WH
Smith PLC in 2006, any such contingent liability in respect of assignment
prior to demerger, which becomes an actual liability, will be apportioned
between Smiths News plc and WH Smith PLC in the ratio 35:65 (provided that the
actual liability of Smiths News plc in any 12-month period does not exceed
£5m). The Company's share of these leases has an estimated future cumulative
gross rental commitment at 31 August 2024 of £0.4m (2023: £0.5m).
Capital commitments
Contracts placed for future capital expenditure approved by the directors but
not provided for amount to £2.2m (2023: £nil).
21. Net cash inflow from operating activities
£m Note 2024
2023
Operating profit 3 40.0 38.3
Impairment reversal of investment in joint venture 11 (0.3) -
Share of loss/(profit) of joint ventures 11 0.2 (0.1)
Depreciation of property, plant and equipment 10 2.2 2.2
Depreciation of right-of-use assets 17 5.9 6.4
Amortisation of intangible assets 9 0.4 0.6
Share-based payments 0.9 1.1
Increase in inventories (4.4) (2.1)
Decrease in receivables (1.0) (5.5)
(Decrease)/increase in payables (12.2) 1.9
(Decrease)/increase in provisions (0.8) 0.2
Income tax paid (8.5) (6.6)
Net cash inflow from operating activities 22.4 36.4
Net cash flow from operating activities is stated after the following 3
adjusting items:
Network and reorganisation costs (0.2) (0.2)
Tuffnells provision utilisation (0.1) (0.2)
Technology transformation costs (0.1) -
Aborted acquisition costs - (0.6)
Total adjusting items cash flow (0.4) (1.0)
22. Share capital
(a) Share capital
£m 2024 2023
Issued, authorised and fully paid:
247.7m ordinary shares of 5p each (2023: 247.7m) 12.4 12.4
(b) Movement in share capital
Number (m) Ordinary shares of 5p each
At 26 August 2023 and at 31 August 2024 247.7
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at the general
meetings of the Company. The Company has one class of ordinary shares, which
carry no right to fixed income.
No shares were issued during the current or prior periods.
(c) Share premium
£m 2024 2023
At 26 August 2023 and at 31 August 2024 60.5 60.5
23. Reserves
(a) Demerger reserve
£m 2024 2023
At 26 August 2023 and at 31 August 2024 (280.1) (280.1)
This relates to reserves created following the capital reorganisation
undertaken as part of the demerger of WH Smith PLC in 2006. The balance
represented the difference between the share capital and reserves of the Group
restated on a pro-forma basis as at 31 August 2004 and the previously reported
share capital.
(b) Own shares reserve
£m 2024 2023
Balance at 27/28 August (4.4) (4.6)
Acquired in the period (3.3) (1.7)
Disposed of on exercise of options 4.0 1.9
Balance at 31/26 August (3.7) (4.4)
The reserve represents the cost of shares in Smiths News plc purchased in the
market and held by the Smiths News Employee Benefit Trust (EBT) to satisfy
awards and options granted under the Group's Executive Share Schemes (see Note
25). The number of ordinary shares held by the EBT as at 31 August 2024 was
8,031,253 (2023: 10,613,896). In accordance with IAS 32, these shares are
deducted from shareholders' funds. Under the terms of the EBT, the Trustee has
waived all dividends on the shares it holds.
(c) Translation reserve
£m 2024 2023
At 27 August 2023 / 28 August 2022 0.4 0.4
Retranslation of reserves (subsidiaries) (0.2) -
At 31 August 2024 / 26 August 2023 0.2 0.4
24. Retained earnings
£m
Balance at 27 August 2022 179.4
Amounts recognised in total comprehensive income 25.1
Dividends paid (9.8)
Disposed of on exercise of options (1.9)
Equity-settled share-based payments, net of tax 1.5
Deferred tax recognised in equity 0.6
Balance at 26 August 2023 194.9
Amounts recognised in total comprehensive income 25.6
Dividends paid (10.8)
Disposed of on exercise of options (3.2)
Equity-settled share-based payments, net of tax 0.9
Current tax recognised in equity 0.1
Deferred tax recognised in equity (0.1)
Balance at 31 August 2024 207.4
25. Share-based payments
The Group recognised a total charge of £0.9m (2023: £1.1m) related to
equity-settled share-based payment transactions. The average share price
throughout the year was 51.5p (2023: 44.6p).
The Group operates the following share incentive schemes:
Sharesave Scheme Under the terms of the Group Sharesave Scheme, the Board may grant options to
purchase ordinary shares in the Company to eligible employees who enter into
an HM Revenue & Customs approved Save-As-You-Earn (SAYE) savings contract
for a term of three years. Options are granted at up to a 20% discount to the
market price of the shares on the day preceding the date of offer and are
normally exercisable for a period of six months after completion of the SAYE
contract.
Executive Share Option Scheme (ESOS) Under the terms of the Group Executive Share Option Scheme, the Board may
grant options to purchase ordinary shares in the Company to executives up to
an annual limit of 200% of base salary. The exercise of options is conditional
on the achievement of adjusted profit after a three-year period, which is
determined by the Remuneration Committee at the time of grant. Provided that
the target is met, options are normally exercisable until the day preceding
the tenth anniversary of the date of grant.
LTIP Under the terms of the Group LTIP, executive directors and key senior
executives may be awarded each year conditional entitlements to ordinary
shares in the Company (which may be in the form of nil cost options or
conditional awards) or, in order to retain flexibility and at the Company's
discretion, a cash sum linked to the value of a notional award of shares up to
a value of 200% of base salary. The vesting of awards is subject to the
satisfaction of a three-year performance condition, which is determined by the
Remuneration Committee at the time of grant. Subject to the satisfaction of
the performance condition, awards are normally exercisable until the tenth
anniversary of the date of grant.
Deferred Bonus Plan (DBP) Under the terms of the Group Deferred Bonus Plan, each year executive
directors and key senior executives may be granted share awards (in the form
of nil cost options) dependent on the achievement of the Annual Bonus Plan
performance targets. Awards are immediately exercisable but a two-year
hold-back period applies, during which the share certificate for such shares
is held by the Company. Separately, key senior executives may also be granted
share awards (in the form of nil cost options) under the DBP plan in respect
of a (discounted) restricted share award (dependent on continued employment
with the Company).
Details of the options/awards are as follows:
Sharesave ESOS LTIP DBP
Number of options/ awards No of shares Weighted average exercise price (p) No of shares Weighted average exercise price (p) No of shares Weighted average exercise price (p) No of shares Weighted average exercise price (p)
At 27 Aug 2022 7,579,083 25.27 1,056,744 126.1 10,893,872 - 1,499,148 -
Granted 1,316,234 55.40 - - 2,695,499 - 1,337,604 -
Exercised (264,430) - - - (2,791,373) - (1,614,771) -
Expired /Forfeited (670,274) 30.01 (256,294) 137.8 (1,429,910) - - -
At 26 Aug 2023 7,960,613 30.38 800,450 125.3 9,368,088 - 1,221,981 -
Granted 1,603,582 60.80 - - 2,994,040 - 1,389,805 -
Exercised (4,415,748) - - - (3,167,125) - (1,424,789) -
Expired /Forfeited (302,050) 42.83 (340,412) 189.5 (201,737) - (18) -
At 31 Aug 2024 4,846,397 460,038 8,993,266 - 1,186,979 -
Exercisable at 31 Aug 2024 - - 460,038 153.9 - - - -
Exercisable at 26 Aug 2023 - - 800,450 125.3 - - - -
The weighted average remaining contractual life in years of options/awards is
as follows:
Sharesave ESOS LTIP DBP
Outstanding at 31 August 2024 1.0 0.3 1.2 1.6
Outstanding at 26 August 2023 1.4 5.2 1.2 1.5
Details of the options/awards granted or commencing during the period were as
follows:
Sharesave ESOS LTIP DBP
During 2024:
Effective date of grant or commencement date Jul 2024 - Dec 2023 Dec 2023
Average fair value at date of grant or scheme commencement - pence 16.4 - 32.6 47.6
During 2023:
Effective date of grant or commencement date Jul 2023 - Jan 2023 Jan 2023
Average fair value at date of grant or scheme commencement - pence 21.5 - 34.9 50.6
The options outstanding at 31 August 2024 had exercise prices ranging from nil
to 48.9p (2023: nil to 139.5p). The weighted average share price on the date
of exercise was 45.4p (2023: 47.8p).
The Sharesave options granted during each period have been valued using the
Black-Scholes model. The LTIP performance measures include a 60% (2023: 70%)
total shareholder return (TSR) metric which is valued by reference to the
share price at date of grant less an adjustment for the TSR portion of the
award. The DBP schemes are valued by reference to the share price at the date
of grant.
The inputs to the Black-Scholes model are as follows:
Sharesave LTIP DBP
2024 options/awards:
Share price at grant date - pence 60.8 48 48
TSR adjustment - pence - (25) -
Exercise price - pence 48.9 - -
Expected volatility - per cent 69.5 - -
Expected life - years 3 - -
Risk free rate - per cent 3.9 - -
Expected dividend yield - per cent 7.48 - -
Weighted average fair value - pence 16 33 48
2023 options/awards:
Share price at grant date - pence 55.4 51 51
TSR adjustment - pence - (23) -
Exercise price - pence 44.3 - -
Expected volatility - per cent 121.5 - -
Expected life - years 3 - -
Risk free rate - per cent 4.7 - -
Expected dividend yield - per cent 8.83 - -
Weighted average fair value - pence 22 28 51
26. Post balance sheet events
The directors have considered the period between the balance sheet date and
the date when the accounts are authorised for issue for evidence of conditions
that existed at the balance sheet date, either adjusting or non-adjusting post
balance sheet events, and have concluded that, other than those events
disclosed in Note 13 and Note 20, there are no other events in the current
period.
27. Related-party transactions
Transactions between businesses within the Group which are related parties
have been eliminated on consolidation and are not disclosed in this note.
Trading transactions
Sales to related parties
£m 2024 2023
Joint ventures 0.4 0.4
Sales to related parties are for management fees and payment is due on the
last day of the month following the date of invoice. There were no amounts
owed by related parties in either period.
Non-trading transactions
Loans to related parties
£m 2024 2023
Joint ventures - 0.3
Directors' remuneration
£m 2024 2023
Salaries 0.8 0.8
Bonus 0.6 0.5
Non-executive director fees 0.4 0.4
1.8 1.7
Information concerning directors' remuneration, interest in shares and share
options is included in the Directors' Remuneration report.
There are two (2023: two) directors to whom retirement benefits are accruing
in respect of qualifying services under money purchase schemes.
Directors made gains on share options of £nil (2023: £nil).
Key management personnel (including directors)
The remuneration of the directors and the Executive Team, who are the key
management personnel of the Group, is set out below in aggregate for each of
the categories specified in IAS 24 'Related Party Disclosures'.
£m 2024 2023
Short-term employee benefits 3.0 2.9
Share-based payments 0.8 1.0
3.8 3.9
28. Subsidiary and associated undertakings
The table below summarises the interests of the Group as at 31 August 2024:
Company name/ Share class Group % Company name/ Share class Group %
(number) (number)
United Kingdom
Rowan House, Cherry Orchard North, Kembrey Park, Swindon SN2 8UH
Connect Limited Ordinary Shares 100% Martin Lavell Limited Ordinary Shares 100%
02008952 02654521 (*)
Connect Logistics Limited Ordinary Shares 100% Pass My Parcel Limited Ordinary Shares 100%
09172965 09172022
Connect News & Media Limited Ordinary Shares 100% Phantom Media Limited Ordinary Shares 100%
08572634 03805661 (*)
Connect Parcel Freight Limited Ordinary Shares 100% Smiths News Holdings Limited Ordinary Shares 100%
09295023 04236079
Connect Parcels Limited Ordinary Shares 100% Smiths News Instore Limited Ordinary Shares 100%
09172850 03364589
Connect Services Limited Ordinary Shares 100% Smiths News Investments Limited (*) Ordinary Shares 100%
08522170 06831284
Connect Specialist Distribution Group Limited Ordinary Shares 100% Smiths News Distribution Limited Ordinary Shares 100%
08458801 08506961
Connect2U Limited Ordinary Shares 100% Smiths News Trading Limited Ordinary Shares 100%
03920619 00237811
Dawson Media Services Limited 06882722 Ordinary Shares 100% Dawson Limited Ordinary Shares 100%
03433262
Dawson Guarantee Company Limited 06882393 Ordinary Shares 100% Dawson Media Direct Limited (*) 06882366 Ordinary Shares 100%
Dawson Holdings Ltd (*) Ordinary Shares 100%
00034273
Germany
Dawson Media Direct GmbH Ordinary Shares 100% Johannstr. 39 40476 Dusseldorf, Germany
HRB 96649
Hong Kong
Dawson Media Direct China Limited Ordinary Shares 100% Flat/Rm 5008 50/F, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong
1167911
Thailand
Dawson Media Direct Company Limited Ordinary Shares 48.9% 87 M Thai Tower, All Seasons Place, 23rd Floor, Wittayu Road, Lumpini
Sub-District, Pathumwan District, Bangkok, Thailand
105558138385
*Audit exemption statement
For the 53 weeks ended 31 August 2024, the companies as indicated in the table
by '(*)' above were entitled to exemption from audit under section 479A of the
Companies Act 2006 relating to subsidiary companies. As such, Smiths News plc
has provided a guarantee against all debts and liabilities in these
subsidiaries as at 31 August 2024. The members of these companies have not
required them to obtain an audit of their financial statements for the 53
weeks ended 31 August 2024.
Glossary - Alternative performance measures
Introduction
In the reporting of financial information, the directors have adopted various
alternative performance measures (APMs).
These measures are not defined by International Financial Reporting Standards
(IFRS) and therefore may not be directly comparable with other companies'
APMs, including those in the Group's industry.
APMs should be considered in addition to, and are not intended to be a
substitute for, or superior to, IFRS measurements.
Purpose
The directors believe that these APMs assist in providing additional useful
measures of the Group's performance. They provide readers with additional
information on the performance of the business across periods which is
consistent with how the business performance is planned by, and reported to,
the Board and the Executive Team.
Consequently, APMs are used by the directors and management for performance
analysis, planning, reporting and incentive-setting purposes.
The key APMs that the Group has focused on and changes to APMs within the
period can be found in Note 1.
APM Closest equivalent Adjustments to reconcile Note/page reference for Definition and purpose
IFRS measure to IFRS measure reconciliation
Income statement
Adjusting items No direct equivalent N/A Note 3 Adjusting items of income or expenses are excluded in arriving at adjusted
operating profit to present a further measure of the Group's performance. Each
Adjusting items is considered to be significant in nature and/or quantum,
non-recurring in nature and/or unrelated to the Group's ordinary activities or
consistent with items treated as adjusting in prior periods. Excluding these
items from profit metrics provides readers with helpful additional information
on the performance of the business across periods because it is consistent
with how the business performance is planned by, and reported to, the Board
and the Executive Team.
Adjusted operating profit Operating profit* Adjusting items Income statement/ Adjusted operating profit is defined as operating profit excluding the impact
of adjusting items (defined above). This is the headline measure of the
Note 3 Group's performance and is a key management incentive metric.
Adjusted profit before tax Profit before tax (PBT) Adjusting items Income statement/ Adjusted profit before tax is defined as profit before tax excluding the
impact of adjusting items (defined above).
Note 3
Adjusted profit after tax Profit after tax (PAT) Adjusting items Income statement/ Adjusted profit after tax is defined as profit after tax from continuing
operations, excluding the impact of adjusting items (defined above).
Note 3
Adjusted Operating profit* Depreciation and amortisation This measure is based on business unit operating profit from
EBITDA Adjusting items continuing operations. It excludes depreciation, amortisation and adjusting
items.
Bank EBITDA Operating profit* Depreciation and amortisation This measure is based on business unit operating profit from
Adjusting items continuing operations. It excludes depreciation, amortisation, adjusting items
and adds back operating lease charges under accounting standards applicable in
Operating lease charges 2019 and share-based payments expense. This measure is used to calculate
compliance with banking covenants.
Adjusted earnings per share Earnings per share Adjusting items Note 8 Adjusted earnings per share is defined as Adjusted PBT, less taxation
attributable to Adjusted PBT and including any adjustment for minority
interest to result in adjusted
PAT attributable to shareholders; divided by the basic weighted average
number of shares in issue.
Cash flow statement
Free cash flow Net movement in cash and cash equivalents Dividends, Free cash flow is defined as the movement in cash and cash equivalent plus the
following: payment of dividends, the impact of acquisitions and disposals, the
acquisitions and disposals, repayment of bank loan principal amounts, and outflows for purchases of own
shares (EBT share purchases). This measure reflects the cash available to the
repayment of bank loans, Group, which can be used for investments, dividends and the reduction of debt.
EBT share purchases
Free cash flow (excluding adjusting items) Net movement in cash and cash equivalents Dividends, Free cash flow (excluding adjusting items) is free cash flow adding back
adjusting cash costs.
acquisitions and disposals,
repayment of bank loans,
EBT share purchases,
pension deficit repair payments
adjusting items
Balance sheet
Bank Net Debt Borrowings less cash Cash flow statement Bank net debt is calculated as total debt less cash and cash equivalents.
Total debt includes loans and borrowings excluding unamortised arrangement
fees, overdrafts and obligations under finance leases under accounting
standards applicable in 2019.
Net debt Borrowings less cash Cash flow statement Net debt is calculated as total debt less cash and cash equivalents. Total
debt includes loans and borrowings, overdrafts and obligations under leases.
*Operating profit is presented on the Group income statement. It is not
defined per IFRS, however, is a generally accepted profit measure.
Reconciliation of free cash flow to net movement in cash and cash equivalents
A reconciliation between free cash flow and the net increase in cash and cash
equivalents is shown below:
£m 2024 2023
Net (decrease)/increase in cash and cash equivalents (30.3) 2.0
Net decrease in borrowings 23.5 8.0
Movement in borrowings and cash (6.8) 10.0
Dividend paid 10.8 9.8
Investment in joint venture - 0.3
Outflow for EBT shares 3.3 1.7
Total free cash flow 7.3 21.8
Reconciliation of bank net debt to reporting net debt
£m 2024 2023
Bank net debt (11.0) (4.2)
Unamortised arrangement fees (Note 15) 0.4 1.3
IFRS 16 lease liabilities (Note 17) (30.9) (23.2)
Net debt (Note 15) (41.5) (26.1)
Reconciliation of adjusted operating profit to Bank EBITDA
£m 2024 2023
Operating profit 40.0 38.3
Adjusting items (0.9) 0.5
Adjusted operating profit 39.1 38.8
Depreciation 2.2 2.2
Amortisation 0.4 0.6
Right of use asset depreciation 5.9 6.4
Adjusted EBITDA 47.6 48.0
Operating lease charges (8.3) (8.1)
Exclude: Share based payments expense 0.9 1.1
Bank EBITDA 40.2 41.0
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