TIDMSNWS
RNS Number : 1868Y
Smiths News PLC
03 May 2023
This announcement contains inside information
Smiths News plc
(Smiths News or the Company)
Unaudited Interim Financial Results for the 26 weeks ended 25
February 2023
Continued good performance delivering on all key metrics
Headlines
-- Revenues up 1.0% driven by price increases and sporting & news events
-- Adjusted operating profit of GBP20.4m up 6.8%
-- Inflationary impacts and operational efficiencies in line with planning assumptions
-- Major contract renewals - 65% of total newspaper and magazine
revenues now secured through to at least 2029
-- Further progress of ancillary revenues and organic business development
-- Good performance driving Adjusted EPS of 5.6p up 9.8%
-- Bank Net Debt of GBP22.9m is down 41.0% and Average Net Debt of GBP26.3m is down 55.3%
-- Interim dividend of 1.4p, in line with intent to pay GBP10.0m
in total dividends for the year, the maximum payable under existing
banking facilities
-- On-track to meet market expectations for the full year
Adjusted continuing results 26 weeks 26 weeks to Change
(1) to 26 Feb 2022
25 Feb
2023
Revenue GBP550.1m GBP544.8m 1.0%
Adjusted operating profit GBP20.4m GBP19.1m 6.8%
Profit before tax GBP17.1m GBP15.3m 11.8%
Earnings per share 5.6p 5.1p 9.8%
Statutory continuing results
Revenue GBP550.1m GBP544.8m 1.0%
Profit before tax GBP17.1m GBP14.6m 17.1%
Statutory profit GBP13.3m GBP11.6m 14.7%
Earnings per share 5.6p 4.8p 16.7%
Interim dividend per share 1.4p 1.4p -
Free cash flow (outflow)
/ inflow (2) (GBP0.2m) GBP17.5m (101.1%)
Bank Net Debt (3) GBP22.9m GBP38.8m (41.0%)
Average Bank Net Debt GBP26.3m GBP58.9m (55.3%)
------------------------------ ---------- ------------- ---------
A combination of stronger revenues, beneficial margin mix and
the focused management of cost pressures has delivered profit
growth and debt reduction in an inflationary environment. Revenues
increased by 1.0% aided by newspaper price increases, which have
had the consequent impact of reducing volumes. In parallel, the
securing of cost efficiencies across the network has mitigated
inflationary impacts in line with plan. As a result, Adjusted
operating profit, Cash Generation and Bank Net Debt remain firmly
on track to meet market expectations.
Outlook
Over the last 12 months, our core sales have benefitted from
strong cover price rises across the newspaper sector; we see this
as a consequence of inflationary pressures rather than a structural
change in the market. Revenue and volumes are expected to return
towards historic trends in the second half. We are confident,
however, that with our continued focus on efficiency and close
management of costs, the business remains on track to meet market
expectations for the full year. As a result, the Board has the
confidence to reiterate its intention to pay GBP10.0m in total
dividends for this financial year, the maximum payable under
existing banking facilities.
Jonathan Bunting, Chief Executive Officer, commented:
"This is a pleasing first half performance, founded on the hard
work and focused strategy of the last three years. Our results have
benefitted from strong revenues but are equally a consequence of
robust cost management and the securing of efficiencies that can be
sustained over time. Smiths News generates strong and predictable
cash flows as demonstrated by a further year-on-year reduction in
net debt. The business is on-track to meet expectations for the
full year and with 65% of publisher contract revenues secured to
2029, we can look ahead with confidence."
Enquiries:
Smiths News PLC Via Buchanan
Jonathan Bunting, Chief Executive
Officer
Paul Baker, Chief Financial Officer
www.smithsnews.co.uk
Buchanan
Richard Oldworth / Jamie Hooper
/ Toto Berger
smithsnews @buchanan.uk.com
www.buchanan.uk.com 020 7466 5000
A recording of the presentation for analysts will be made
available on the Company's website on the afternoon of Wednesday 3
May 2023 - see the Investor Zone section at
www.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 may not be
comparable with similar measures disclosed by other companies.
(1) The following are key non-IFRS measures identified by the
Company in the consolidated financial statements as Adjusted
results:
a. Adjusted operating profit - is defined as operating profit
including the operating profit of the businesses from the date of
acquisition and excludes Adjusted items and operating profit of
businesses disposed of in the year or treated as held for sale.
b. Continuing Adjusted profit before tax (PBT) - is defined as
Continuing Adjusted operating profit less finance costs and
including finance income attributable to Continuing Adjusted
operating profit and before Adjusted items.
c. Continuing Adjusted earnings per share - is defined as
Continuing 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. Adjusted items - Adjusting items of income or expense are
excluded in arriving at Adjusted operating profit to present a
further measure of the Company'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
Company's ordinary activities or are 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. They are disclosed and described
separately in Note 4 of the Interim Consolidated 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 the dividend, the impact of acquisitions and
disposals, the repayment of bank loans and 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
and overdrafts but excludes unamortised arrangement fees and
excludes IFRS16 lease liabilities.
(4) H1 2023 - refers to the 26 weeks ended 25 February 2023 and
FY2023 refers to the 52 week period ending 26 August 2023. H1 2022
refers to the 26 week period ended 26 February 2022 and FY2022
refers to the 52 week period ended 27 August 2022.
(5) The Interim Financial Results have been prepared and
presented on a Continuing Operations basis after adjusting for the
Discontinued Operations of the Tuffnells business, which was sold
in May 2020.
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
Interim Financial Results for the half-year ended 25 February 2023
and the Report and Accounts for the year ended 27 August 2022
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
Our performance over the first half represents a clear
continuation of the progress over recent years, with a stable
business model delivering profit and cash in line with
expectations.
Adjusted operating profit of GBP20.4m was up 6.8% (HY2022:
GBP19.1m) from Revenue of GBP550.1m that was up by 1.0%. Adjusted
profit before tax of GBP17.1m was up 11.8% (HY2022: GBP15.3m). Free
cash outflow of GBP0.2m was temporarily impacted by the phasing of
payments but remains in line with expectations as indicated by our
Average Net Debt which has fallen by 55.3% to GBP26.3m. Adjusted
EPS of 5.6p (HY2022: 5.1p) is up 9.8%.
The key factors in driving this overall performance were:
-- Strong cover price rises driving revenues into growth, significantly ahead of historic trends
-- Continued strong sales from higher margin one shots and
sticker collections, further boosted by World Cup volumes and
magazine special editions
-- Securing of efficiencies to mitigate inflationary impacts in
line with our planning assumptions
-- Improvements in ancillary revenues of GBP0.3m in the period
-- Lower depreciation charges of GBP0.5m
H1 revenue boosted by cover price increases
Cover price increases on newspapers have contributed to a
reversal of historic trends at a revenue level, with a consequent
impact on volumes which declined at higher levels than
historically. Higher margin one shots have also maintained their
growth, driven by a combination of World Cup, Premier League and
Pokémon sticker collections, with a further boost from news
events.
Looking ahead, we expect revenues in the second half to return
towards historic trends, due to a slowing of cover price rises and
a stronger H2 comparator.
Operational efficiencies mitigating net inflation
On the cost side, inflationary impacts remain in line with our
planning assumptions, with operating efficiencies delivering a
significant, if not total, mitigation. This is a good result in
what has been an especially challenging environment for cost
control.
The last eighteen months have seen significant pressure on
distributors as driver shortages and fuel prices add to wage
inflation and increases in overhead costs. While our contractor
model has helped to reduce the volatility of these pressures, it is
not immune to the macro trends. Cost efficiency measures will
remain a key element of our business model going forward as sales
volumes continue to decline. This is a core strength of the
business and we are confident of maintaining the current level of
inflationary offset over the full year. We continue to plan on the
basis of an ability to secure sustainable operational efficiencies
in the region of GBP4.0m to GBP5.0m per annum.
Major contract renewals
As previously announced, the Company concluded new contracts
with each of Frontline, Seymour and Associated Newspapers in
October 2022 and with Telegraph Media Group in January 2023. In
total, by the end of the period, we had secured circa 46% of our
current newspaper and magazine revenues on new long-term agreements
extending to 2029.
In April 2023, Smiths News reached a further agreement with News
UK to renew our exclusive distribution contract encompassing all of
our existing territories. This means we have now secured over 65%
of our current business revenues on long-term agreements through to
at least 2029. With the majority of the publisher agreements now in
place and the remaining contracts phased over the intervening
years, we can plan ahead with confidence.
Organic business development
Smiths News Recycle, our new business initiative providing
convenient waste recycling services to retailers has proceeded from
regional trial to network-wide experimentation. The service
leverages our current distribution and network recycling
facilities, making it an attractive and complementary bolt-on to
core operations. We are pleased with the initial response of our
independent customers to this new service and to date, we have
c.1,900 customers as part of the wider trial. We continue to refine
our offer, measure the economics and assess the scalability, in
line with our strategic approach.
In addition, we continue to pursue our strategy of exploring and
trialing new profit streams from a range of adjacent opportunities
that complement our core operations. Notably, in the period, we
have increased the supply of DVDs and books to leading supermarkets
and will be reviewing the potential for similar offers across our
customer base. Meanwhile, the additional rental income we secured
in FY2022 from third party logistics suppliers has repeated and
continues to make a small, but welcome, contribution to reducing
overheads.
M&A
During the period, the Company recorded costs of GBP0.6m in
exploring a potential acquisition aligned to our growth strategy.
The target was complementary to our core business, had close
alignment with our markets and commercial synergies with elements
of our operations. Despite making significant progress and
undertaking due diligence, the economics of the proposed
transaction and the changing macro-economic climate meant that the
Board concluded that proceeding would not be in the interests of
all stakeholders.
Cash generation and debt reduction
The business continues to generate strong and predictable cash
flow. Comparisons with the prior year are impacted by an adverse
timing impact of GBP5.0m in the payment cycle and one-off receipts
of GBP14.6m in the equivalent period last financial year.
As working capital varies significantly across the monthly
payment cycle, we consider Average Net Debt to be the best
indicative measure of our progress against the extent to which we
are drawing on our facilities. Its reduction to GBP26.3m is a
significant milestone, confirming the transformation in our
underlying capital strength over the last three years.
Dividend
An interim dividend of 1.4p per share will be paid on 6 July
2023 to shareholders on the register on 9 June 2023; the
ex-dividend date will be 8 June 2023. This distribution is in line
with last year and consistent with the Company's intention, subject
to performance, of paying total annual dividends of GBP10.0m p.a.,
the maximum payable under the terms of our banking facilities which
mature in August 2025.
Board announcements
As previously announced, Deborah Rabey joined the Board as an
independent non-executive director with effect from 1 March 2023.
Deborah brings a wealth of experience in supply chains, global
sourcing, change management and general marketing. She spent 23
years with Tesco PLC to October 2022 and is currently Interim Chief
Customer Officer at the mixed-goods retailer, Wilko.
Outlook
Over the last 12 months, our core sales have benefitted from
strong cover price rises across the newspaper sector; we see this
as a consequence of inflationary pressures rather than a structural
change in the market. Revenue and volumes are expected to return
towards historic trends in the second half. We are confident,
however, that with our continued focus on efficiency and close
management of costs, the business remains on track to meet market
expectations for the full year. As a result, the Board has the
confidence to reiterate its intention to pay GBP10.0m in total
dividends for this financial year, the maximum payable under
existing banking facilities.
FINANCIAL REVIEW
Overview
Key financial profit and debt metrics were ahead of the prior
year half, driven by strong sales, beneficial margin mix and the
focused mitigation of inflationary pressures.
Revenues of GBP550.1m were ahead of last year by 1.0% (H1 2022:
GBP544.8m) having benefitted from one-off events and from newspaper
price increases, which have had a consequent impact on volumes.
Inflationary pressures were still present, but largely mitigated by
cost management and continuing ancillary revenue streams. Adjusted
operating profit of GBP20.4m was a GBP1.3m increase on the prior
year half (H1 2022: GBP19.1m).
The increase in Adjusted operating profit led to an increase in
profit before tax from GBP15.3m to GBP17.1m and an increase in
Adjusted EPS from 5.1p to 5.6p.
Average Bank Net Debt for the half year fell by GBP32.6m (55.3%)
from GBP58.9m in H1 2022 to GBP26.3m in H1 2023, owing to strong
ongoing cash flow and the receipt of the final Tuffnells GBP7.5m
deferred consideration in April 2022. Bank Net Debt reduced from
GBP38.8m in H1 2022 to GBP22.9m this half year (FY2022:
GBP14.2m).
Continuing free cash flow for the half year was an outflow of
GBP0.2m (H1 2022: GBP17.5m inflow) and includes a working capital
outflow since year end of -GBP13.6m (H1 2022: -GBP7.8m), part of
our normal working capital cycle. Free cash flow is -GBP17.7m lower
than last year as the prior year benefitted from a one-off pension
surplus (GBP8.1m), Tuffnells deferred consideration receipt
(GBP6.5m) and due to the GBP5m timing impact of trade receivables
which were paid on 27 February 2023, the first working day of the
second half.
Adjusting items had a net neutral impact on statutory profit
after tax, with GBP0.6m of costs associated with an aborted
acquisition, offset by provisions releases which were the result of
a contract renewal with our shared service centre partner.
Statutory profit after tax increased from GBP11.5m in H1 2022 to
GBP13.3m.
An interim dividend of 1.4p per share (GBP3.3m) is proposed by
the Board, due to be paid in July 2023.
Continuing Adjusted Results
Group
Continuing Adjusted results GBPm 26 weeks 26 weeks Change
to to
25 Feb 2023 26 Feb 2022
---------------------------------- ------------- ------------- --------
Revenue 550.1 544.8 1.0%
Operating profit 20.4 19.1 6.8%
Net finance costs (3.3) (3.8) 13.2%
---------------------------------- ------------- ------------- --------
Profit before tax 17.1 15.3 11.8%
Taxation (3.8) (3.1) (22.6)%
---------------------------------- ------------- ------------- --------
Effective tax rate 22.2% 20.3% 190 bps
---------------------------------- ------------- ------------- --------
Profit after tax 13.3 12.2 9.0%
---------------------------------- ------------- ------------- --------
Revenue was GBP550.1m (H1 2022: GBP544.8m), up 1.0% on the prior
year, aided by the 2022 World Cup, Premier League and Pokémon
trading cards and by newspaper cover price increases. This compares
to the historic revenue trend of c.-3% to -5%.
Newspaper revenues were up 0.5% and included the benefit of
cover price increases since the second half of FY2022, which had an
impact on volumes. Magazine revenue was down c.6%, in line with
historic trends. Revenue from one shots was up 88%, supported by
World Cup football collections and by a continuation of strong
Premier League and Pokémon trading card performance seen in H2
FY2022.
The increase in Adjusted operating profit of GBP1.3m to GBP20.4m
(H1 2022: GBP19.1m) can be attributed to:
-- Improvement in wholesale margin (GBP0.8m), driven by higher underlying revenue
-- The benefit of new ancillary revenue contracts (GBP0.3m)
-- The annualisation of inflationary increases to the depot cost
base made last year, offset by depot cost savings and the benefit
of higher rates for the sale of waste paper (net impact
-GBP0.3m)
-- Lower depreciation (GBP0.5m) reflecting lower capex over the last 3 years
Net finance charges of GBP3.3m (H1 2022: GBP3.8m) were lower
than the prior year half by GBP0.5m due to lower amortisation of
bank arrangement fees following the amendment and extension of
banking facilities in December 2021. Interest on bank debt of
GBP1.9m was consistent with the prior year (H1 2022: GBP1.9m) as
lower average net debt was offset by increased interest rates.
Adjusted profit before tax was GBP17.1m, up 11.8% on H1 2022.
Taxation of GBP3.8m includes a higher effective tax rate of 22.2%
compared to the prior period (H1 2022: 20.3%) due to the increase
in the corporation tax rate from 19% to 25% from April 2023.
Statutory Results
Group
Continuing Operations GBPm 26 weeks 26 weeks Change
to to
25 Feb 26 Feb
2023 2022
Revenue 550.1 544.8 1.0%
Operating profit 20.4 17.0 20.0%
Net finance costs (3.3) (2.4) (37.5)%
------------------------------------------------ --------- --------- --------
Profit before tax 17.1 14.6 17.1%
Taxation (3.8) (3.0) (26.7)%
------------------------------------------------ --------- --------- --------
Effective tax rate 22.2% 20.5% 170bps
------------------------------------------------ --------- --------- --------
Profit after tax 13.3 11.6 14.7%
------------------------------------------------ --------- --------- --------
Discontinued Operations GBPm
------------------------------------------------ --------- --------- --------
Loss for the year from discontinued operations - (0.1) 100.0%
------------------------------------------------ --------- --------- --------
Profit attributable to equity shareholders
continuing and discontinued operations 13.3 11.5 15.7%
------------------------------------------------ --------- --------- --------
Statutory Continuing profit before tax of GBP17.1m was a GBP2.5m
increase on the prior year (H1 2022: GBP14.6m). The increase was
driven by the GBP1.8m increase in Adjusted profit before tax
described above and lower adjusting items (H1 2023: net GBPnil, H1
2022: GBP0.7m).
The Company has net liabilities of GBP25.7m on its balance sheet
(H1 2022: GBP38.7m). The net liabilities arose largely as a result
of impairments to the assets and goodwill of the Tuffnells business
prior to its sale in May 2020.
Earnings per share
Continuing Adjusted Continuing Statutory
----------------------------------- ---------------------- -----------------------
26 weeks 26 weeks 26 weeks 26 weeks
to to 26 to to 26
25 Feb Feb 2022 25 Feb Feb 2022
2023 2023
----------------------------------- ---------- ---------- ---------- -----------
Earnings attributable to ordinary
shareholders (GBPm) 13.3 12.2 13.3 11.6
Basic weighted average number of
shares (millions) 236.7 240.7 236.7 240.7
Basic Earnings per share 5.6p 5.1p 5.6p 4.8p
Diluted weighted number of shares
(millions) 249.3 252.0 249.3 252.0
Diluted Earnings per share 5.3p 4.8p 5.3p 4.6p
----------------------------------- ---------- ---------- ---------- -----------
Continuing Adjusted basic earnings per share of 5.6p, is an
increase of 0.5p on the prior year driven by the improved trading
of the business and a reduction of average number of shares due to
employee benefit trust share purchases.
Statutory continuing basic earnings per share, which includes
adjusted items, is up 0.8p to 5.6p (H1 2022: 4.8p) due to increased
profit and a reduction in the weighted number of shares.
Dividend
26 weeks 26 weeks
to to
25 Feb 2023 26 Feb
2022
------------------------------------------ ------------- ---------
Dividend per share (proposed) 1.4p 1.4p
Dividend per share (paid and recognised) 2.75p 1.15p
------------------------------------------ ------------- ---------
The Board is proposing an interim dividend of 1.4p per share (H1
2022: 1.4p). The proposed dividend will be paid on 6 July 2023 to
shareholders on the register at close of business on 9 June 2023.
The ex-dividend date will be 8 June 2023.
The FY2022 final dividend of 2.75p per share (GBP6.5m) was
approved by shareholders at the Annual General Meeting on 24
January 2023, paid on 9 February 2023 and is recognised in the
Interim Financial Statements.
Adjusted items
Continuing Operations GBPm 26 weeks to 26 weeks to
25 Feb 2023 26 Feb 2022
------------------------------------- ------------- -------------
Transformation programme planning
credit/ (costs) - (0.6)
Aborted acquisition costs (0.6) -
Pensions - (1.7)
Network and reorganisation credit/
(costs) 0.6 0.2
Total before tax and interest - (2.1)
Finance income - unwind of deferred
consideration - 1.4
------------------------------------- ------------- -------------
Total before tax - (0.7)
Taxation - 0.1
------------------------------------- ------------- -------------
Total after taxation - (0.6)
Adjusted items before tax of net GBP0.02m were a GBP0.7m
decrease on the prior year period (H1 2022: GBP0.7m). In the
current period, the Company incurred GBP0.6m of costs for due
diligence and legal activity associated with an aborted
acquisition. These costs were offset by GBP0.6m of credits relating
to provisions releases which were the result of a contract renewal
with our shared service centre partner.
In the prior year, adjusting items related to GBP0.6m of costs
connected to strategic planning projects, GBP1.7m of costs in
respect of the return of the net GBP8.1m pension surplus and
rationalising the Company's pension portfolio, reorganisation
provision releases of GBP0.2m (credit) and GBP1.4m to the unwind of
the Tuffnells deferred consideration which was settled by the end
of April 2022.
Further information on these items can be found in Note 4 of the
Interim Financial Statements. Adjusted items are defined in the
Glossary to the Interim Financial Statements and present a further
measure of the Group'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
GBPm 26 weeks 26 weeks
to to
25 Feb 26 Feb
2023 2022
---------------------------------------------------- --------- ---------
Adjusted operating profit 20.4 19.1
Depreciation & amortisation 4.8 5.3
---------------------------------------------------- --------- ---------
Adjusted EBITDA 25.2 24.4
Working capital movements (13.6) (7.8)
Capital expenditure (2.1) (1.2)
Lease payments (3.2) (3.3)
Net interest and fees (2.7) (5.2)
Taxation (3.9) (3.4)
Other 0.8 0.4
---------------------------------------------------- --------- ---------
Free cash flow (excluding Adjusted items) 0.5 3.9
---------------------------------------------------- --------- ---------
Adjusted items (cash effect) - return of pension
surplus - 8.1
Adjusted items (cash effect) - receipt of deferred
consideration - 6.5
Adjusted items (cash effect) - Other (0.7) (1.0)
Continuing Free cash flow (0.2) 17.5
---------------------------------------------------- --------- ---------
Free cash flow of GBP0.2m (outflow) was GBP17.7m lower than H1
2022 (GBP17.5m inflow) due to a GBP5.8m increase in the working
capital movement and two one-off items in H1 2022, being the
GBP8.1m pension surplus receipt and GBP6.5m deferred consideration
received from Tuffnells. These items were offset by the absence of
bank refinancing fees (H1 2022: GBP2.7m).
The increase in working capital of GBP13.6m since year end (H1
2022: GBP7.8m) is due to the timing of period end compared to the
billing cycles of both publishers and retailers. At H1 2023, this
included the impact of GBP5m due from a major supermarket which was
received on Monday 27 February 2023 (the first working day of the
second half). These working capital cycles led to intra-month
working capital movements of up to GBP40m. Underlying working
capital levels remain consistent with the prior year period.
Cash capital expenditure in the period was GBP2.1m (H1 2022:
GBP1.2m), an increase of GBP0.9m due to depot refurbishments which
were initiated at the end of FY2022.
Lease payments of GBP3.2m (H1 2022: GBP3.3m) decreased by
GBP0.1m due to the exit of a depot lease in the second half of last
financial year.
Net interest and fees of GBP2.7m (H1 2022: GBP5.2m) decreased by
GBP2.5m, as the prior year period included the payment of GBP2.7m
arrangement fees in relation to the Company's refinancing of its
banking facilities.
Cash tax outflow of GBP3.9m was a GBP0.5m increase on the prior
year period (H1 2022: GBP3.4m outflow) owing principally to 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 and the increase is linked to increases in the
Company's share price.
In the prior year period, the wind-up of the Company's defined
benefit pension scheme (detailed further below) resulted in the
receipt of GBP8.1m and the first scheduled instalment of deferred
consideration was received from Tuffnells (GBP6.5m).
The total net cash impact of other Adjusted items was a GBP0.7m
outflow (H1 2022: GBP1.0m outflow). In the current period, amounts
related to aborted acquisition costs (GBP0.5m) and reorganisation
costs (GBP0.2m). In the prior year half, adjusting items comprised:
GBP0.8m of Transformation programme planning costs; GBP0.1m of
Pension related costs and GBP0.1m of Network and reorganisation
costs.
A reconciliation of free cash flow to the net movement in cash
and cash equivalents is given in the Glossary.
Net debt
GBPm As at As at
25 Feb 26 Feb
2023 2022
----------------------------------------------- -------- --------
Opening Bank Net Debt (14.2) (53.2)
Continuing operations free cash flow (0.2) 17.5
Discontinued operations free cash flow - (0.3)
----------------------------------------------- -------- --------
Free cash flow (0.2) 17.2
Dividend paid (6.5) (2.8)
Investment in joint venture (0.2) -
Purchase of shares for employee benefit trust (1.8) -
Bank Net Debt (22.9) (38.8)
----------------------------------------------- -------- --------
Bank Net Debt closed the period at GBP22.9m compared to GBP38.8m
at February 2022, a decrease of GBP15.9m. Average daily net debt
reduced from GBP58.9m in the first half of last year to GBP26.3m
this half year, a reduction of GBP32.6m.
The reduction in both reported and average daily bank net debt
was driven by the Company's ongoing cash flow generation and aided
by GBP22.1m of one-off receipts in FY2022, being the pension
receipt of GBP8.1m in December 2021 and deferred consideration
receipts from Tuffnells of GBP6.5m in November 2021 and GBP7.5m in
April 2022.
The Company's Bank Net Debt/EBITDA ratio decreased to 0.5x (H1
2022: 0.9x). The period end fell just before major publisher
payments of c.GBP17m were made, which benefitted reported Bank Net
Debt. Bank Net Debt rose to GBP39.8m on 28 February 2023 after the
half year end.
The intra-month working capital cash flow cycle generates a
routine and predictable cash swing of up to GBP40m within the
overall bank facility of GBP71.5m at the period end (H1 2022:
GBP90m). This results in a predictable fluctuation of net debt
during the month compared to the closing net debt position.
Discontinued items cash flow in the prior period relates to
insurance settlements for incidents which occurred during the
Company's ownership of Tuffnells prior to 2 May 2020.
During the current period, the FY2022 final dividend of GBP6.5m
was paid (H1 2022: GBP2.8m), bringing the total dividend paid in
respect of FY2022 to GBP9.8m (FY2022: GBP6m). The Company invested
GBP0.2m during the period in LoveMedia, a joint venture for
retailing single copy electronic versions of newspapers and
magazines.
The Bank Net Debt to EBITDA covenant of 0.5x is comfortably
within our main leverage covenant ratio of 1.75x and we remain well
within all our other bank covenant tests at period end.
A reconciliation of Bank Net Debt (which excludes the IFRS 16
lease creditor and unamortised arrangement fees) to the balance
sheet 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 Group and Company, the directors are
confident that headroom under our 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 Interim
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.
Pension schemes
On 3 December 2021, the Company received the sum of GBP8.1m in
respect of the net cash surplus held by the Trustee from the
finalisation of the buy-out of the defined benefit liabilities in
the News Section of the WH Smith Pension Scheme. As agreed with the
Trustee of the Scheme, the return of surplus preceded the formal
winding up steps of the News Section - the winding up of the News
Section being formally completed on 25 February 2022 through the
purchase of insurance run-off cover and the payment of taxes owed
to HMRC, which were settled by the Trustee.
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 its 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 Group's
emerging and principal risks, including those that could threaten
its business model, future performance, solvency or liquidity.
Risks remain subject to ongoing scrutiny, monitoring and
appropriate mitigation.
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
Macro-economic uncertainty
Deterioration in the macro-economic Strategic Link:
environment results in supply side * Annual budgets and forecasts take into account the Cost and
cost inflation and/or current macro-economic environment to set efficiencies,
a reduction in demand-side sales expectations internally and externally, allowing for Operations
volumes. or changing objectives to meet short and medium term
Supply-side macro-economic pressures financial targets. Change:
present the Company with additional Decreasing
cost challenges e.g.
increased competition in the * Weekly cost monitoring enables oversight and action
distribution labour market and rises on a timely basis.
in fuel and utility prices.
Adverse changes to economic
conditions result in reduced * Cover price increases in magazine and newspaper
consumer demand for newspapers and titles provide some offset against the impact of
magazines and/or reduction in volume decline.
titles/editions. These cost
increases and sales pressures
present * Use of fixed term contracts as a hedge against
a risk when they cannot be fully rapidly rising prices e.g. energy costs.
mitigated through increased prices
or other productivity
gains. * The Company continues to be significantly cash
This results in deterioration in the generating to support its strategic priorities.
level of profitability in both the
short and medium term
and impacts on the Company's ability
to execute its strategies, including
level of debt and
liquidity objectives.
---------------------------------------------------------------- -----------------
Acquisition and retention of labour
Due to the current competition in Strategic Link:
the distribution labour market the * We seek to offer market competitive terms to ensure People first,
Company is facing an talent remains engaged. Culture and
increased risk of being unable to values,
recruit and retain warehouse Costs and
colleagues and support staff. * We offer long-term contracts with our sub-contracted efficiencies
The same pressures are also being delivery partners.
felt in sourcing and retaining Change:
delivery sub-contractors Decreasing
as well as filling in-house roles * We use a variety of platforms to recruit employees
within our central support and contractors.
functions.
A failure to maintain an appropriate
level of resourcing could result in * The level of vacancies across warehouse and delivery
increased costs, contractors are monitored daily.
employee disengagement and/or loss
of management focus and underpins
the ability to address * We undertake workforce planning; performance, talent
the strategic priorities and to and succession initiatives; learning and development
deliver the forecast performance. programs; and promote the Company's culture and core
values.
* Retention plans are reviewed to address key risk
areas, and attrition across the business is regularl
y
monitored.
* Regular surveys are undertaken to monitor the
engagement of colleagues.
---------------------------------------------------------------- -----------------
Cyber security
To meet the needs of our Strategic Link:
stakeholders, our IT infrastructure * Defined risked based approach to the information Technology
and data processes need to be security roadmap and technology strategy which is
flexible, reliable and secure from aligned to the strategic plans. Change:
cyber-attacks. Increasing -
Secure infrastructure acts as a this risk has
deterrent to and helps prevent * Regular tracking of key programs against spend been
and/or mitigate the impact targets and delivery dates. re-evaluated
of external cyber-attack, insider following
threat or supplier-related breach, enhancement of
which could cause service * The Company assesses cyber risk on a day-to-day basis, the Company's IT
interruption and/or the loss of using proactive and reactive information security Infrastructure
Company and customer data. controls to mitigate common threats. and now focuses
Cyber incidents could lead to major exclusively on
adverse customer, financial, Cyber-related
reputational and regulatory * Dedicated information security investments and access security risks.
impacts. to third-party cyber security specialists. That said,
despite ongoing
investment
* The Company encourages a cyber aware culture by in the Company's
undertaking exercises such as computer-based training IT
and more regular communications about specific cyber infrastructure
threats. and IT security
(notably gaining
Cyber Essentials
* We have successfully secured Cyber Essentials and Plus
Cyber Essential Plus accreditation. certification),
the backdrop
remains
heightened,
leading to an
increased risk
assessment.
---------------------------------------------------------------- -----------------
Legal and regulatory compliance
The Company is required to be Strategic link:
compliant with all applicable * Changes in laws and regulations are monitored with Technology,
laws and regulations. Failure policies and procedures being updated as required. Sustainability,
to adhere to these could result Operations
in financial penalties and/or
reputational damage. * Business-wide mandatory training programmes for Change:
Key areas of legal and higher-risk regulatory areas. Stable
regulatory compliance include:
* GDPR
* External experts are used where applicable.
* Health and Safety
* All major policies are reviewed by the Board or Audit
Committee on an annual basis.
* Tax compliance
* Operational auditing and monitoring systems for
* Environmental legislation higher risk areas.
* Employment law
---------------------------------------------------------------- -----------------
Changes to our retailers' commercial environment
Our largest retailers (e.g. grocers Strategic link:
and symbol group members) remain * Our EPOS-based returns (EBR) solution has been Cost and
under significant pressure introduced instore with our largest retailers, efficiencies
to maximise sales and profitability improving staff efficiency in managing the magazine
by channel within their retail category, thereby reducing cost to the retailer. Change:
stores and at associated Stable
sale outlets, such as at petrol
forecourt stores. This could result * Potential to extend EBR to newspapers in order to
at any time in a category broaden efficiency-benefits to retailers.
review of the newspaper and magazine
channel, leading to a significant
reduction in newspapers' * Form stronger partnerships with emerging retailers to
and/or magazines' selling space stock magazines and newspapers.
instore in favour of other higher
margin products and/or the
delisting of all/particular titles * Expand retail offering to include single copy digital
of newspapers and/or magazines. downloads of newspapers and/or magazines to
A reduction in sales space and/or supplement physical print and category range instore.
full delisting of newspapers and/or
magazines by our largest
retailers (or a high number of other
retailers) could materially reduce
the Company's revenue,
profitability and cash flow.
---------------------------------------------------------------- -----------------
Growth and diversification
A successful growth and Strategic link:
diversification strategy is * Strong project management and governance in place to Cost and
essential to the long-term success sign-off growth initiatives and oversee their efficiencies
of implementation.
the Company. At the same time, Change:
maintaining the Company's Stable
outstanding and sector-leading * A Growth Delivery Operations Steering Committee has
standards been established to monitor the impact of new
of service in newspaper and magazine business opportunities on core operations.
wholesaling is paramount to help
fund growth and diversification
opportunities and support publisher * Pilots and trials of new business opportunities have
contract renewals, each of which been deployed to assess both the potential economic
deliver shareholder value. benefit of such opportunity and its likely impact on
Implementing new business growth maintaining the Company's outstanding and
opportunities without detrimentally sector-leading standards of service in newspaper and
impacting the Company's magazine wholesaling.
core newspaper and magazine
wholesaling carries an execution
risk to both the new initiative * Executive Team balanced scorecard of key performance
and ensuring the Company remains indicators ensures sub-optimal performance is tracked
able to deliver sector-leading and monitored on a regular basis and allows
support to publisher clients. appropriate interventions to be made.
---------------------------------------------------------------- -----------------
Sustainability and climate change
Climate change is a widely Strategic link:
acknowledged global emergency. In * Sustainability Steering Committee established Cost and
the UK, government and regulatory (chaired by the Chief Financial Officer) to efficiencies,
changes in response to a drive to coordinate the Company's action on climate change. Operations,
'net zero' carbon emissions and Sustainability
increasingly stringent air
quality targets for UK towns and * Emissions and air quality targets in UK towns and Change:
cities could make it more difficult cities are monitored by a central team in the Stable
and costly for the Company Operations function, which ensures the Company can
to undertake newspaper and magazine fulfil its obligations to customers and remain
wholesaling activities within the UK compliant with legal requirements.
or within particular
towns and cities. In addition to
these transitional risks associated * Operational sites are reviewed for their resilience
with moving to a low to extreme weather events such as floodings, with
carbon future, there are also a upgrades and interventions made where these are
range of ongoing physical risks. cost-effective. Depots are relocated to new sites
These include an increase (e.g. during lease break windows) where this
in the frequency of extreme weather represents a better option than adapting an existing
events which may result in power location.
outages, disruption to
our service operations and/or impact
our ability to serve our customers * Working with suppliers to ensure they share the
in an efficient and Company's vision to act on climate change.
cost-effective manner.
In common with all major
organisations, there is a risk of
reputational damage and/or loss
of revenue if the Company fails to
meet stakeholder expectations for
action on climate change.
---------------------------------------------------------------- -----------------
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
-- the unaudited condensed set of financial statements has been
prepared in accordance with UK adopted IAS 34 'Interim Financial
Reporting';
-- the interim management report includes a true and fair review
of the information required by DTR 4.2.7R, being an indication of
important events during the first 26 weeks and description of
principal risks and uncertainties for the remaining 26 weeks of the
year; and
-- the interim management report includes a true and fair review
of the information required by DTR 4.2.8R, being disclosure of
related parties' transactions that have taken place in the first 26
weeks of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
On behalf of the Board
Jonathan Bunting Paul Baker
Chief Executive Officer Chief Financial Officer
2 May 2023 2 May 2023
INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Income Statement (Unaudited)
For the 26 weeks to 25 February 2023
GBPm Note 26 weeks to 25 26 weeks to 26 Audited
Feb 2023 Feb 2022 52 weeks to 27 Aug
2022
------------------ ------ ------------------------------
Adjusted Adjusted Total Adjusted Adjusted Total Adjusted* Adjusted Total
items items items
(Note (Note (Note
4) 4) 4)
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Continuing Operations
Revenue 3 550.1 - 550.1 544.8 - 544.8 1,089.3 - 1,089.3
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Cost of Sales (512.4) - (512.4) (508.0) - (508.0) (1,016.6) - (1,016.6)
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Gross profit 37.7 - 37.7 36.8 - 36.8 72.7 - 72.7
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Administrative
expenses (17.4) (0.0) (17.4) (17.9) (2.1) (20.0) (35.0) (2.5) (37.5)
Net impairment
loss on trade
receivables - - - - - - - (4.4) (4.4)
Other income - - - - - - 0.1 - 0.1
Income from
joint ventures 0.1 - 0.1 0.2 - 0.2 0.3 - 0.3
Impairment
of joint venture
investment - - - - - - - 1.2 1.2
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Operating
profit 3 20.4 (0.0) 20.4 19.1 (2.1) 17.0 38.1 (5.7) 32.4
Finance costs (3.3) - (3.3) (3.8) - (3.8) (7.0) - (7.0)
Finance Income - - - - 1.4 1.4 - 2.5 2.5
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Profit before
tax 3 17.1 (0.0) 17.1 15.3 (0.7) 14.6 31.1 (3.2) 27.9
Income tax
credit/(expense) 6 (3.8) - (3.8) (3.1) 0.1 (3.0) (5.4) 0.9 (4.5)
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Profit for
the period
from Continuing
Operations 13.3 (0.0) 13.3 12.2 (0.6) 11.6 25.7 (2.3) 23.4
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Discontinued
Operations
Loss for
the period
from
Discontinued
Operations 9 - - - - (0.1) (0.1) - - -
------------------ ------ --------- --------- -------- --------- --------- --------
Profit
attributable
to equity
shareholders
Continuing
and Discontinued
Operations 13.3 (0.0) 13.3 12.2 (0.7) 11.5 25.7 (2.3) 23.4
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- ---------
26 weeks to 25 26 weeks to 26 Audited
Note Feb 2023 Feb 2022 52 weeks to 27 Aug
2022
------------------ ------ ------------------------------
Earnings in pence
per share from
Continuing Operations
Basic 8 5.6 5.6 5.1 4.8 10.8 9.8
Diluted 8 5.3 5.3 4.8 4.6 10.2 9.3
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Earnings in pence
per share total
Basic 8 5.6 5.6 5.1 4.8 10.8 9.8
Diluted 8 5.3 5.3 4.8 4.6 10.2 9.3
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Equity dividends
pence per
share (paid
and proposed) 7 1.4 1.4 4.15 4.15
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
* This measure is described in the Glossary. Adjusted items are
set out in Note 4 of the interim financial statements.
Condensed Consolidated Statement of Comprehensive Income
(Unaudited)
For the 26 weeks to 25 February 2023
GBPm Note Audited
26 weeks 26 weeks 52 weeks
to to to
25 Feb 26 Feb 2022 27 Aug 2022
2023
------------------------------------- ----- ----------- -------------- -------------
Continuing
Items that will not be reclassified
to the Income Statement
Reassessment as to recoverability
of retirement benefit scheme
surplus 5 - 14.8 14.8
Tax relating to components of
other comprehensive income that
will not be reclassified 5 - (5.1) (5.1)
------------------------------------- ----- ----------- -------------- -------------
Other comprehensive income for
the period - Continuing - 9.7 9.7
Profit for the period - Continuing 13.3 11.6 23.4
Total comprehensive income for
the period - Continuing 13.3 21.3 33.1
Loss for the period - Discontinued - (0.1) -
------------------------------------- ----- ----------- -------------- -------------
Total comprehensive loss for - (0.1) -
the period - Discontinued
------------------------------------- ----- ----------- -------------- -------------
Total comprehensive income for
the period 13.3 21.2 33.1
------------------------------------- ----- ----------- -------------- -------------
Consolidated Balance Sheet (Unaudited)
As at 25 February 2023
GBPm Note Audited
As at As at As at
25 Feb 26 Feb 2022 27 Aug 2022
2023
--------------------------------- ----- --------- -------------- -------------
Non-current assets
Intangible assets 10 1.8 2.0 1.7
Property, plant and equipment 8.4 8.3 8.6
Right of use assets 23.3 27.7 26.3
Interest in joint venture 4.5 3.0 4.2
Other receivables - - -
Deferred tax assets 1.4 1.7 1.1
39.4 42.7 41.9
--------------------------------- ----- --------- -------------- -------------
Current assets
Inventories 18.8 14.6 15.6
Trade and other receivables 104.6 106.0 95.7
Cash and bank deposits 11 23.6 24.3 35.3
Corporation tax receivable 0.6 - 0.9
147.6 144.9 147.5
--------------------------------- ----- --------- -------------- -------------
Total assets 187.0 187.6 189.4
--------------------------------- ----- --------- -------------- -------------
Current liabilities
Trade and other payables (137.4) (131.3) (140.3)
Current tax liabilities - - -
Bank loans and other borrowings 11 (10.0) (13.3) (8.0)
Lease Liabilities (5.3) (6.1) (5.9)
Provisions 12 (2.2) (2.4) (3.0)
(154.9) (153.1) (157.2)
Non-current liabilities
Bank loans and other borrowings 11 (34.7) (46.9) (39.1)
Lease Liabilities (19.6) (22.5) (21.7)
Non-current provisions 12 (3.5) (3.8) (3.4)
(57.8) (73.2) (64.2)
--------------------------------- ----- --------- -------------- -------------
Total liabilities (212.7) (226.3) (221.4)
--------------------------------- ----- --------- -------------- -------------
Total net liabilities (25.7) (38.7) (32.0)
--------------------------------- ----- --------- -------------- -------------
Equity
Called up share capital 14 12.4 12.4 12.4
Share premium account 14 60.5 60.5 60.5
Other reserves (285.8) (282.1) (284.3)
Retained earnings 187.2 170.5 179.4
--------------------------------- ----- --------- -------------- ---------------
Total shareholders' deficit (25.7) (38.7) (32.0)
--------------------------------- ----- --------- -------------- ---------------
Condensed Consolidated Statement of Changes in Equity
(Unaudited)
For the 26 weeks to 25 February 2023
GBPm Note Share Share Other Retained Total
Capital Premium Reserves Earnings equity
Account
---------------------------------- ----- ---------------- ---------------- ---------- ---------- --------
Balance at 28 August 2021 12.4 60.5 (283.6) 153.0 (57.7)
---------------------------------- ----- ---------------- ---------------- ---------- ---------- --------
Profit for the period - - - 11.5 11.5
Actuarial gain on defined
benefit pension scheme 5 - - - 14.8 14.8
Tax relating to components
of other comprehensive income - - - (5.1) (5.1)
Total comprehensive income
for the period - - - 21.2 21.2
Dividends Paid 7 - - - (2.8) (2.8)
Employee share schemes awards - - 1.5 (1.5) -
Recognition of share-based
payments - - - 0.6 0.6
---------------- ---------------- ---------- ---------- --------
Balance at 26 February 2022 12.4 60.5 (282.1) 170.5 (38.7)
---------------------------------- ----- ---------------- ---------------- ---------- ---------- --------
Profit for the period - - - 11.9 11.9
Total comprehensive income
for the period - - - 11.9 11.9
Dividends Paid 7 - - - (3.3) (3.3)
Employee share schemes purchases - - (2.2) - (2.2)
Recognition of share-based
payments, net of tax - - - 0.6 0.6
Current tax recognised in
equity - - - (0.1) (0.1)
Deferred tax recognised in
equity - - - (0.2) (0.2)
Balance at 27 August 2022 12.4 60.5 (284.3) 179.4 (32.0)
Profit for the period - - - 13.3 13.3
Total comprehensive income
for the period - - - 13.3 13.3
Dividends Paid 7 - - - (6.5) (6.5)
Employee share schemes purchases - - (1.8) - (1.8)
Recognition of share-based
payments - - - 1.0 1.0
Deferred tax recognised in
equity - - 0.3 - 0.3
---------------------------------- ----- ---------------- ---------------- ---------- ---------- --------
Balance at 25 February 2023 12.4 60.5 (285.8) 187.2 (25.7)
---------------------------------- ----- ---------------- ---------------- ---------- ---------- --------
Condensed Consolidated Cash Flow Statement (Unaudited)
For the 26 weeks to 25 February 2023
GBPm Note 26 weeks 26 weeks Audited
to to 52 weeks
25 Feb 2023 26 Feb 2022 to
27 Aug 2022
--------------------------------------- ----- ------------- ------------- -------------
Net cash inflow from operating
activities 9 7.8 20.3 49.8
--------------------------------------- ----- ------------- ------------- -------------
Investing activities
Dividends received from joint
ventures - 0.1 0.2
Purchase of property, plant
and equipment (2.1) - (1.3)
Purchase of intangible assets - - (0.7)
Net proceeds on sale of property,
plant and equipment - - 0.1
Investment in joint ventures (0.2) - -
Capital expenditure - (1.2) -
Deferred consideration receipts - 6.5 14.0
Net cash (used in) / generated
from investing activities (2.3) 5.4 12.3
--------------------------------------- ----- ------------- ------------- -------------
Financing activities
Interest paid (2.7) (2.5) (5.1)
Arrangement fees paid - (2.7) (2.9)
Dividend paid (6.5) (2.8) (6.1)
Repayments of lease principal (3.2) (3.3) (6.4)
Repayment of term loan (3.0) (50.4) (83.0)
New loans issued - 60.0 60.0
Decrease in borrowings - (19.0) -
Purchase of shares for employee
benefit trust (1.8) - (2.6)
Net cash used in financing
activities (17.2) (20.7) (46.1)
--------------------------------------- ----- ------------- ------------- -------------
Net (decrease) / increase in
cash and cash equivalents (11.7) 5.0 16.0
Effect of foreign exchange rate - - -
changes
--------------------------------------- ----- ------------- ------------- -------------
(11.7) 5.0 16.0
Opening net cash and cash equivalents 35.3 19.3 19.3
--------------------------------------- ----- ------------- ------------- -------------
Closing net cash and cash equivalents 23.6 24.3 35.3
--------------------------------------- ----- ------------- ------------- -------------
Notes to the Condensed Unaudited Interim Financial
Statements
For the 26 weeks to 25 February 2023
1 Basis of Preparation
Smiths News plc is comprised of the Company and its subsidiaries
(together referred to as the 'Company').
These unaudited condensed consolidated interim financial
statements have been prepared in accordance with UK-adopted IAS 34
'Interim Financial Reporting' and also in accordance with the
measurement and recognition principles of UK adopted international
accounting standards. They do not include all of the information
required for full annual financial statements and should be read in
conjunction with the 2022 Annual Report and Accounts. On 31
December 2020, the International Financial Reporting Standards
(IFRS) as adopted by the European Union at that date was brought
into the UK law and became UK-adopted international accounting
standards, with future changes being subject to endorsement by the
UK Endorsement Board. The Company transitioned to UK-adopted
international accounting standards in its consolidated financial
statements for the 52-week period ending 27 August 2022. There was
no impact or changes in accounting from the transition. The
financial period represents the 26 weeks ended 25 February 2023
(prior financial period 26 weeks to 26 February 2022, prior
financial period 52 weeks ended 27 August 2022).
The Company has applied the same accounting policies and methods
of computation in these interim consolidated financial statements,
as in its statutory accounts for the 52 weeks ended 27 August
2022.
These condensed consolidated interim financial statements for
the current period and prior financial periods do not constitute
statutory accounts as defined in section 434 of the Companies Act
2006. A copy of the statutory accounts for the 52 weeks ended 27
August 2022 has been filed with the Registrar of Companies. The
auditor's report on those accounts was not qualified, did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying the report and did
not contain statements under section 498(2) or (3) of the Companies
Act 2006. The auditor's review opinion on the 26 weeks period ended
25 February 2023 is at the end of this report.
Going concern
The condensed interim financial statements have been prepared on
a going concern basis.
The Company currently has a net liability position of GBP25.7m
as at 25 February 2023. All bank covenant tests were met at the
period end with the key Bank Net Debt: EBITDA (ex IFRS 16) ratio of
0.6x, below the facility agreement covenant test threshold of
1.75x, with no further reduction thereafter.
The intra-month working capital cash flow cycle generates a
routine and predictable cash swing of up to GBP40m. This results in
a predictable fluctuation of bank net debt during the course of the
month compared to the closing net debt position. Our average daily
Bank Net Debt during H1 2023 was GBP26.3m (H1 2022: GBP58.9m). The
Company utilises the Revolving Credit Facility (RCF) to manage the
cash swing. At the end of the period GBP25m was available and the
Company had GBP23.6m of cash on hand giving headroom of
GBP48.6m.
Bank facility
The Company has a facility comprising a GBP46.5 million
amortising term loan ('Facility A') and a GBP25 million revolving
credit facility ('RCF'). The agreement is with a syndicate of banks
comprising lenders HSBC, Barclays, Santander and Clydesdale
Banks.
The facility's current margin is 4% per annum over SONIA (in
respect of Facility A and the RCF).
Consistent with the Company's stated strategic priorities to
reduce net debt, the terms of the facility agreement include: an
amortisation schedule of GBP8m in FY2023, and then GBP10m in FY2024
and FY2025; a reduction in the RCF of GBP5m per year; and capped
dividend payments at GBP10m per year.
The final maturity date of the facility is 31 August 2025.
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 the 16 months up to 31 August 2024, and in
accordance with FRC guidance have prepared a reverse stress test
that would create a covenant break scenario which could lead to the
facilities being repayable on demand.
The break scenario would occur in August 2024 if EBITDA (ex IFRS
16) was 35% below the Board's approved three-year plan. Facility
headroom of GBP2.7m would still exist at this point. 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;
-- the contracts are secured with publishers past 2024; and
-- the Company continues to trade with adequate profit to service its debt covenants.
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 of c.GBP40m. 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; 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 HY2023 nor FY2022.
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 Interim 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.
2 Accounting Policies
Adoption of new IFRSs
There has been no significant impacts from the adoption of new
accounting standards in the current period.
Alternative performance measures
In reporting financial information, the Company presents
alternative performance measures (APMs), which are not defined or
specified under the requirements of IFRS and therefore may not be
directly comparable to similar measures presented by other
companies.
The Company 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.
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 Company recognises the wholesale sales price for its sales
of newspapers and magazines. The Company 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; and has the
responsibility of fulfilling the performance obligation on delivery
of inventory to its customers. If the Company were considered to be
the agent, revenue and cost of sales would reduce by GBP464.9m
(HY2022: GBP460.8m).
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 are considered to be unrelated to the Company's ordinary
activities or are 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 totalled GBP0.02m (H1 2022: GBP0.7m) and a breakdown is
included within Note 4.
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 future costs of restoration and the condition of the
property at the future exit date.
The property provision represents the estimated future cost of
the Group's potential dilapidation costs on non-trading properties
across the Group. As the current economic outlook is for increased
inflation, the Group has assessed the effect of inflation as
material on the provisions. The provisions have therefore been
adjusted for the effect of 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 12 for further details on the
sensitivity of the assumptions used to calculate the property
provision. The property provisions carrying value at the end of the
period is GBP4.7m (H1 2022: GBP4.2m)
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 prior financial year, 52-weeks ended 27 August 2022,
the Company had reviewed the business plan for the Rascal Joint
Venture, and it was determined that the potential challenges
anticipated to arise in 2021 have not materialised, with the
successful renewal of contracts previously considered to be at
risk. The Company therefore chose to reverse the impairment
previously booked by GBP1.2m. In 2021, the assessment was that
certain challenges could arise from increasing market competition,
which resulted in an impairment loss of GBP1.6m being recognised.
Following this, a value-in-use of GBP4.2m was calculated based on
the future cash flows of the business, which were discounted at a
rate of 13% and a terminal growth rate applied of 0%. The outcome
was a reversal of impairment of GBP1.2m in 2022.
For 2023, the available headroom after comparing the net assets
of the joint venture to its computed value-in-use is continuously
being monitored. There was no impairment reversal for Rascal in the
current period.
Impairment of receivables
On 9 May 2022 (the "administration date"), McColl's Retail Group
went into administration. A statement of claim form was filed with
the Administrators for an amount of GBP5.5m. The administrators
issued notification on 27 May 2022 that they expected unsecured
creditors to receive between 20-40% of approved claims. Management
has not received any further information from the Administrators as
at the balance sheet date and issuance of this report and has
therefore provided a best estimate that only 20% of the outstanding
balance is recoverable. The Company recognised a net impairment
loss of GBP4.4m, representing 80% of the total balance of GBP5.5m
in FY2022.
Simultaneously on the administration date, Wm Morrison
Supermarkets Ltd ("Morrisons") agreed terms with the administrator
to acquire McColl's in a pre-packaged insolvency agreement. The
Company continues to trade with McColl's under the new ownership
structure. The Company's bad debt exposure relates solely to the
outstanding trade receivable balance as at the administration
date.
The bad debt from McColl's has limited predictive value given
the historic low level of bad debts incurred in the ordinary course
of business. Management considers that the level of bad debt
provision in place is adequate and has decided not to make any
additional provision for this debt.
Retirement benefit obligations
During FY2022, the Trustee reached the position where it was
advised that it could legally distribute the pension cash surplus
to the employer and it had completed activities to trace former
members of the Trust impacted by the GMP ruling. This gave the
Company an unconditional right to the surplus asset and as such the
IAS 19 pre-tax surplus of GBP14.8m has been recognised through
other comprehensive income in H1 2022 and the IFRIC14 ceiling
eliminated. Subsequently, the Company received the sum of GBP8.1m,
the value of the surplus net of tax and costs on 3 December
2021.
As agreed with the Trustee, the return of the surplus preceded
the formal winding up steps of the News Section of the pension
scheme, with the winding up of the scheme formally being completed
on 25 February 2022 through the purchase of insurance run-off cover
and payment of taxes owed to HMRC by the Trustee.
As part of the closure of the scheme the Company agreed to
deposit GBP1.3m of the pension surplus into an escrow account to
fund the insurance costs for the Trustee and the outstanding
liability to former members in respect of the Lloyds GMP ruling in
November 2020. The funds held in escrow are not considered an asset
of the Company and are not recognised on the balance sheet. The
cost of the insurances have been recognised through administration
expenses in the income statement and treated as an Adjusted
item.
The Company has agreed run-off indemnity coverage for any member
claims that are uninsured liabilities capped at GBP6.5m over the
next 60 years. This potential liability is considered a contingent
liability at the period end and reported as such.
3 Segmental Analysis of Results
In accordance with IFRS 8 'Operating Segments', management has
identified its operating segments. The performance of these
operating segments is reviewed, on a monthly basis, by the Board. S
ince the discontinuation of the Tuffnells business, management
consider that due to size there is now only one Continuing segment
that meets the IFRS 8 criteria.
4 Adjusted Items
The table below summarises the (costs) / income that have been
classified as Adjusted items in the period:
GBPm 26 weeks to 26 weeks to 26 52 weeks to 27
25 Feb 2023 Feb 2022 Aug 2022
----------------- ------- ---------------------------------- ---------------------------------- ----------------------------------
Continuing Discontinued Total Continuing Discontinued Total Continuing Discontinued Total
Note
----------------- ------- ----------- ------------- ------ ----------- ------------- ------ ----------- ------------- ------
Transformation
programme
planning
credit/(costs) (a) - - - (0.6) - (0.6) (0.9) - (0.9)
M&A costs (b) (0.6) - (0.6) - - - - - -
Pension (c) - - - (1.7) - (1.7) (1.8) - (1.8)
Network and
re-organisation
costs (d) 0.6 - 0.6 0.2 - 0.2 0.2 - 0.2
----------------- ------- ----------- ------------- ------ ----------- ------------- ------ ----------- ------------- ------
Administrative
expenses (0.0) - (0.0) (2.1) - (2.1) (2.5) - (2.5)
Net impairment
loss on trade
receivables (e) - - - - - - (4.4) - (4.4)
Asset impairment
reversal (f) - - - - - - 1.2 - 1.2
Review and sale
of Tuffnells (g) - - - - (0.1) (0.1) - - -
Total before
tax and interest (0.0) - (0.0) (2.1) (0.1) (2.2) (5.7) - (5.7)
Finance income
- unwind of
deferred
consideration (h) - - - 1.4 - 1.4 2.5 - 2.5
----------------- ------- ----------- ------------- ------ ----------- ------------- ------ ----------- ------------- ------
Total before
tax (0.0) - (0.0) (0.7) (0.1) (0.8) (3.2) - (3.2)
Taxation (0.0) - (0.0) 0.1 - 0.1 0.9 - 0.9
-------------------------- ----------- ------------- ------ ----------- ------------- ------ ----------- ------------- ------
Total after taxation (0.0) - (0.0) (0.6) (0.1) (0.7) (2.3) - (2.3)
-------------------------- ----------- ------------- ------ ----------- ------------- ------ ----------- ------------- ------
The Company incurred a total of GBP0.02m (H1 2022: GBP0.8m) of
Adjusted items before tax and after tax GBP0.02m (H1 2022: GBP0.7m)
respectively.
Adjusted items are defined in the Glossary. The impact of
removing these items from the adjusted
profit provides a relevant analysis of the trading results of
the Company 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:
a) Transformation programme planning GBPnil (H1 2022: GBP0.6m cost, FY2022: GBP0.9m cost)
These relate to prior transformation projects. These were
reported as adjusting items in the previous period on the basis
that they were significant in nature and quantum and are considered
to be non-underlying items.
The total impact on net cash from operating activities was
GBPnil (H1 2022: GBP1.3m outflow).
b) M&A costs GBP0.6m (H1 2022: GBPnil, FY2022: GBPnil)
The Company incurred costs during the period for due diligence
and legal costs associated with an aborted acquisition during 2022.
The cash impact of these items was GBP0.5m outflow (H1 2022:
GBPnil).
c) Pensions GBPnil (H1 2022: GBP1.7m, FY2022: GBP1.8m)
In FY2022, the Trust completed the wind up of the news section
of the WH Smiths Pension Trust (the Company's defined benefit
pension scheme), with a Deed of Termination signed by the Company
and the Trustee on 25 February 2022. As part of the wind up,
GBP1.3m was paid to an escrow account in December 2021 for the
Trustee to purchase indemnity insurance and to cover future claims
from members owed amounts following the Lloyds ruling in November
2020. This amount was accounted for as an adjusted item through the
income statement.
In addition, on 25 February 2022, the winding up of the News
Section was formally completed through the purchase of insurance
run-off cover, plus other associated professional fees at a total
cost of GBP0.6m. GBP0.3m of these costs was funded from the total
pre-tax pension surplus received of GBP14.8m, see Note 5 for
further details. A refund of GBP0.1m due to the Company in relation
to the total amount previously held in escrow was credited against
these costs.
In 2021, the Company incurred GBP1.0m in pension administrative
expenses and other professional fees as a result of the winding up
process.
These costs were reported as adjusting items on the basis that
they are significant in nature and quantum and are unrelated to the
Group's ordinary activities.
There is no impact on net cash inflow from operating activities
during the current period as the winding up process is now
completed (FY2022: GBP7.9m inflow).
d) Network and re-organisation GBP0.6m credit (H1 2022: GBP0.2m credit, FY2022: GBP0.2m credit)
During the financial period, there has been a reversal of
accrued amounts of GBP0.5m relating to projects in connection with
our outsourced Shared Service Centre (SSC) in India, where accrued
costs relating to overheads on projects will no longer materialise.
These amounts have been released to the income statement. The
projects were concluded in FY2022.
In addition, during FY2022, the Company restructured its support
functions and put in place a reorganisation provision. This arose
in FY2021 as a result of the disposal of the Tuffnells business in
FY2020, and subsequent lockdowns associated with the COVID-19
pandemic. The Company has released GBP0.1m of this provision in the
current period (H1 2022: GBP0.2m, FY2022: GBP0.2m). The cash impact
of restructuring payments was a GBP0.2m outflow (H1 2022: GBP0.1m,
FY2022 GBP0.1m)
e) Net impairment loss on trade receivables GBPnil (H1 2022: GBPnil, FY2022: GBP4.4m)
On 9 May 2022 (the "administration date"), McColl's Retail Group
went into administration. A statement of claim form was filed with
the Administrators for an amount of GBP5.5m. The administrators
issued notification on 27 May 2022 that they expected unsecured
creditors to receive between 20-40% of approved claims. Management
has not received any further information from the Administrators as
at the balance sheet date and issuance of this report and has
therefore provided a best estimate that only 20% of the outstanding
balance is recoverable. The Company recognised a net impairment
loss of GBP4.4m, representing 80% of the total balance of GBP5.5m
in FY2022.
Simultaneously on the administration date, Wm Morrison
Supermarkets Ltd ("Morrisons") agreed terms with the administrator
to acquire McColl's in a pre-packaged insolvency agreement. The
Company continues to trade with McColl's under the new ownership
structure. The Company's bad debt exposure relates solely to the
outstanding trade receivable balance as at the administration
date.
In the FY2022, this cost was reported as an adjusting item on
the basis that they were significant in nature and quantum, are
considered non-underlying items, outside the normal course of
activity and will aid comparability from one period to the next.
The bad debt from McColl's has limited predictive value given the
historic low level of bad debts incurred in the ordinary course of
business. No additional provision for this debt in the current
period.
f) Asset impairment reversal GBPnil (H1 2022: GBPnil, FY2022: GBP1.2m)
During FY2022, the Company reviewed the business plan for the
Rascal Joint Venture and it was determined that the potential
challenges anticipated to arise in 2021 had not materialised, with
the successful renewal of contracts previously considered to be at
risk. The Company therefore chose to reverse the impairment
previously booked by GBP1.2m in period ended 27 August 2022.
There has been no changes in the current period.
The Company considers the impact of the above to be adjusting
given the impairment charges are significant in both quantum and
nature to the results of the Company.
g) Review and sale of Tuffnells GBPnil (HY 2022: GBP0.1m, FY2022: GBPnil)
During the period ended 28 August 2021, as part of the sale of
Tuffnells in 2020, the Company assumed a liability to settle
certain pre-disposal insurance and legal claims related to:
employer's liability, public liability, motor accident claims and
legal claims. In 2021, GBP0.6m of costs were recognised due to
clarification of the likely settlement costs of existing
claims.
h) Finance income - deferred consideration GBPnil (H1 2022:
GBP1.4m income, FY2022: GBP2.5m credit)
During the 52-week period ended 27 August 2022, GBP2.5m was
recognised in Finance income, GBP3.5m as the unwind of discount on
the original total deferred consideration that was due of GBP15.0m.
This was offset by the GBP1.0m agreed reduction in deferred
consideration due. The deferred consideration related to the
disposal of Tuffnells that took place in 2020, and for that reason
it was classified as adjusting because it did not relate to the
Group's ordinary activities.
The total deferred consideration has now been received, and the
Company is not expecting any more additional payments.
5 Retirement Benefit Obligation
Defined benefit pension schemes
During FY20 22 , the Group operated one defined benefit scheme,
the news section of the WH Smith Pension Trust (the 'Pension
Trust').
On 25 February 2022 the scheme was wound-up with a Deed of
Termination being signed by the Company and the Trustee at that
date.
In the prior period to February 2022, GBP14.8m was recognised
through other comprehensive income after the previously
unrecognised IAS19 pension asset was received in cash, net of
GBP5.1m tax and administrative expenses of GBP1.6m.
An asset was not previously recognised as the Company did not
have an unconditional right to the surplus and, therefore, the net
surplus in the scheme was restricted with an IFRIC 14 asset
ceiling. This was reversed during the prior financial period,
enabling the Company to receive the sum of GBP8.1m (net of tax and
costs) following finalisation of the buy-out of the defined benefit
liabilities in the News Section of the Trust.
The return of surplus preceded the formal winding up steps of
the News Section, the winding up of the News Section being formally
completed during the prior year on 25 February 2022 through the
purchase of insurance run-off cover and payment of taxes owed to
HMRC.
A summary of the movements in the net balance sheet asset /
(liability) and amounts recognised in the Company Income Statement
and Other Comprehensive Income are as follows:
GBPm Fair Defined Impact Total
value benefit of IFRIC
of scheme obligation 14 on defined
assets benefit
pension
schemes
---------------------------------- ----------- ------------- --------------- ------
At 29 August 2021 14.9 (0.1) (14.8) -
---------------------------------- ----------- ------------- --------------- ------
Purchase of indemnity insurance (1.2) - - (1.2)
Other Administrative expenses (0.4) - - (0.4)
---------------------------------- ----------- ------------- --------------- ------
Total amount recognised in
income statement (1.6) - - (1.6)
---------------------------------- ----------- ------------- --------------- ------
Change in surplus not previously
recognised (0.1) 0.1 14.8 14.8
Tax relating to the repayment
of pension surpluses - - (5.1) (5.1)
Amount recognised in other
comprehensive income (0.1) 0.1 9.7 9.7
---------------------------------- ----------- ------------- --------------- ------
Tax paid (5.1) - 5.1 -
Refund of surplus to Company (8.1) - - (8.1)
---------------------------------- ----------- ------------- --------------- ------
Amounts included in cash flow
statement (13.2) - 5.1 (8.1)
---------------------------------- ----------- ------------- --------------- ------
At 27 August 2022 - - - -
---------------------------------- ----------- ------------- --------------- ------
At 26 February 2023 - - - -
---------------------------------- ----------- ------------- --------------- ------
6 Income Tax Expense
The income tax charge for the 26 weeks ended 25 February 2023 is
calculated based upon the effective tax rates expected to apply to
the Company for the full year. The rate of tax on Adjusted profits
from Continuing Operations is 22.2% (H1 2022: 20.3%). The rate of
tax on Adjusted profits (on both Continuing and Discontinued
Operations) is 22.2% (H1 2022: 20.5%).
An increase in the UK corporation tax rate to 25% from 1 April
2023 was substantially enacted at the balance sheet date. The
effective tax rate for the full year is computed based on a hybrid
rate, which combines 19% for the first seven months of the
financial year with 25% for the remaining 5 months of financial
year.
Taxation for other jurisdictions is calculated at the rates
prevailing in the respective jurisdictions.
7 Dividends
Paid and proposed 26 weeks 26 weeks 52 weeks 26 weeks 26 weeks 52 weeks
dividends for the period to 25 to 26 to 27 to 25 to 26 to 27
Feb 2023 Feb 2022 Aug 2022 Feb 2023 Feb 2022 Aug 2022
Per Per share Per share GBPm GBPm GBPm
share
--------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Interim dividend -
proposed 1.40p 1.40p 1.40p 3.3 3.3 3.3
Final dividend - proposed - - 2.75p - - 6.7
--------------------------- ---------- ---------- ---------- ---------- ---------- ----------
1.40p 1.40p 4.15p 3.3 3.3 10.0
--------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Recognised dividends
for the period
Per Per share Per share GBPm GBPm GBPm
share
--------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Final dividend - prior
year 2.75p - 1.15p 6.5 2.8 2.8
Interim dividend -
current year 1.40p - 1.40p 3.3 - 3.3
--------------------------- ---------- ---------- ---------- ---------- ---------- ----------
4.15p - 2.55p 9.8 2.8 6.1
--------------------------- ---------- ---------- ---------- ---------- ---------- ----------
An interim dividend of 1.4p per ordinary share is proposed for
the 26-week period to 25 February 2023 (February 2022: 1.4p per
ordinary share), which is expected to be paid on 6 July 2023 to all
shareholders who are on the register of members at the close of
business on 9 June 2023. The ex-dividend date will be 8 June
2023.
The FY2022 final dividend of 2.75p (GBP6.5m) was approved by
shareholders at the Annual General Meeting on 24 January 2023 and
paid on 9 February 2023 and is recognised in this period.
8 Earnings per share
26 weeks to 25 26 weeks to 26 52 weeks to 27
Feb 2023 Feb 2022 Aug 2022
Earnings Weighted Pence Earnings Weighted Pence Earnings Weighted Pence
(GBPm) average per (GBPm) average per (GBPm) average per
number share number share number share
of shares of shares of shares
million million million
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Weighted average
number of shares
in issue 247.7 247.7 247.7
Shares held
by the ESOP
(weighted) (11.0) (7.0) (9.2)
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
236.7 240.7 238.5
Basic earnings
per share (EPS)
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Continuing
operations
Adjusted earnings
attributable
to ordinary
shareholders 13.3 236.7 5.6 12.2 240.7 5.1 25.7 238.5 10.8
Adjusted items (0.0) (0.6) (2.3) - -
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Earnings attributable
to ordinary
shareholders 13.3 236.7 5.6 11.6 240.7 4.8 23.4 238.5 9.8
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Discontinued
operations
Adjusted Profit
attributable
to ordinary
shareholders - 236.7 - - 240.7 - - - -
Adjusted items - - - (0.1) - - - -
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Profit/(loss)
attributable
to ordinary
shareholders - 236.7 - (0.1) 240.7 - - - -
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Total - Continuing
and Discontinued
Operations
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Adjusted earnings
attributable
to ordinary
shareholders 13.3 236.7 5.6 12.2 240.7 5.1 25.7 238.5 10.8
Adjusted items - (0.7) (2.3) - -
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Earnings attributable
to ordinary
shareholders 13.3 236.7 5.6 11.5 240.7 4.8 23.4 238.5 9.8
---------------------- -------- ---------- ------ -------- ---------- -------
Diluted earnings
per share (EPS)
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Effect of dilutive
securities 12.6 11.3 13.5
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Continuing
Diluted Adjusted
EPS 13.3 249.3 5.3 12.2 252.0 4.8 25.7 252.0 10.2
Diluted EPS 13.3 249.3 5.3 11.6 252.0 4.6 23.4 252.0 9.3
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Discontinued
Diluted Adjusted
EPS - - - - 252.0 - - - -
Diluted EPS - - - (0.1) 252.0 - - - -
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Total - Continuing
and Discontinued
Operations
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Diluted Adjusted
EPS 13.3 249.3 5.3 12.2 252.0 4.8 25.7 252.0 10.2
Diluted EPS 13.3 249.3 5.3 11.5 252.0 4.6 23.4 252.0 9.3
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Due to the higher average amount of shares held in Trust during
the period and the number of options outstanding in the prior
period, the dilutive shares decreased the basic number of shares at
February 2023 by 2.7m to 249.3m (Feb 2022: 252m) and resulted in a
Continuing diluted Adjusted EPS of 5.3p, an increase of 0.3p or 6%
on prior period.
The calculation of diluted EPS reflects the potential dilutive
effect of employee incentive schemes of 12.6m dilutive shares (Feb
2022: 11.3m).
9 Net Cash Inflow from Operating Activities
26 weeks 26 weeks 52 weeks
to to to
GBPm 25 Feb 26 Feb 27 Aug
2023 2022 2022
------------------------------------- ----- --------- --------- ---------
Operating profit - continuing 20.4 17.0 32.4
Operating loss - discontinued - (0.1) -
Operating profit - total 20.4 16.9 32.4
Impairment reversal of investments
in joint ventures - - (1.2)
Share of profits of joint ventures (0.1) (0.2) (0.3)
Adjustment for pension funding - 8.1 8.1
Depreciation of property, plant
and equipment 1.1 1.2 2.3
Depreciation of right of use assets 3.4 3.3 6.9
Amortisation of intangible assets 0.3 0.8 1.3
Share-based payments 1.0 0.6 1.2
Increase in inventories (3.2) (1.4) (2.4)
(Increase)/decrease in receivables (8.5) (2.2) 1.7
(Decrease)/increase in payables (1.9) (4.5) 3.9
Decrease in provisions (0.8) (0.5) (0.4)
Non-cash pension costs - 1.6 1.6
Income tax paid (3.9) (3.4) (5.3)
Net cash inflow from operating
activities 7.8 20.3 49.8
-------------------------------------------- --------- --------- ---------
During the period, cash outflow from operating activities
attributed to Discontinued Operations amounted to GBPnil (H1 2022:
GBP0.3m outflow).
10 Intangible Assets
Goodwill is not amortised but tested annually for impairment. As
a result of these reviews, goodwill was fully impaired in previous
periods.
There are no material acquired intangible assets. The breakdown
of acquired intangibles and goodwill is as follows:
Goodwill Acquired Intangibles Total
------- ----------------------------------------- ------------------------------------ ------------------------------------
GBPm On acquisition H1 H1 FY On acquisition H1 H1 FY On acquisition H1 H1 FY
2023 2022 2022 2023 2022 2022 2023 2022 2022
------- --------------- -------- ----- ------- -------------- ------ ----- ----- -------------- ------ ----- -------
DMD 5.7 - - - 2.6 - - - 8.3 - - -
Smiths
News - - - - 0.3 - - - 0.3 - - -
Total 5.7 - - - 2.9 - - - 8.6 - - -
------- --------------- -------- ----- ------- -------------- ------ ----- ----- -------------- ------ ----- -------
Other intangibles 1.8 2.0 1.7
------------------------ -------- ----- ------- -------------- ------ ----- ----- -------------- ------ ----- -------
Total Intangible
assets 1.8 2.0 1.7
----------------------------- --------- --- --- -------------- ------ ----- ----- -------------- ------ ----- -----
11 Cash and Borrowings
Cash and borrowings by currency (sterling equivalent) are as
follows:
GBPm Sterling Euro USD Other Total At 26 At 27
25 Feb 2022 Aug 2022
Feb
2023
-------------------------------- --------- ---- --- ----- -------- ---------
Cash and bank deposits 22.2 0.7 0.5 0.2 23.6 24.3 35.3
Overdrafts- included in
cash and cash equivalents - - - - - - -
-------------------------------- --------- ---- --- ----- -------- --------- ---------
Net Cash and cash equivalents 22.2 0.7 0.5 0.2 23.6 24.3 35.3
-------------------------------- --------- ---- --- ----- -------- --------- ---------
Revolving credit facility - - - - - (3.0) -
Term loan - disclosed
within current liabilities (10.0) - - - (10.0) (10.3) (8.0)
Term loan - disclosed
within non-current liabilities (36.5) - - - (36.5) (49.8) (41.5)
Unamortised arrangement
fees - disclosed within
non-current liabilities 1.8 - - - 1.8 2.9 2.4
-------------------------------- --------- ---- --- ----- -------- --------- ---------
Total borrowings (44.7) - - - (44.7) (60.2) (47.1)
-------------------------------- --------- ---- --- ----- -------- --------- ---------
Net borrowings (22.5) 0.7 0.5 0.2 (21.1) (35.9) (11.8)
-------------------------------- --------- ---- --- ----- -------- --------- ---------
Total borrowings
-------------------------------- --------- ---- --- ----- -------- --------- ---------
Amount due for settlement
within 12 months (10.0) - - - (10.0) (13.3) (8.0)
Amount due for settlement
after 12 months (34.7) - - - (34.7) (46.9) (39.1)
-------------------------------- --------- ---- --- ----- -------- --------- ---------
(44.7) - - - (44.7) (60.2) (47.1)
-------------------------------- --------- ---- --- ----- -------- --------- ---------
Cash and bank deposits 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 December 2021, an agreement was signed to extend and amend
the existing financing arrangements. The original facility which
was due to expire in November 2023 has been extended to August
2025. The new facility comprises an initial GBP60 million
amortising term loan ('Facility A') and a GBP30 million revolving
credit facility ('RCF'). Facility A was also repayable from any
proceeds that were received from the deferred consideration as part
of the sale of Tuffnells, and any other disposal proceeds. The
agreement is with a syndicate of banks comprising lenders HSBC,
Barclays, Santander and Clydesdale Banks. The final maturity date
of the facility is 31 August 2025.
The terms of the facility agreement include: an amortisation
schedule of GBP8m in FY2023, and then GBP10m in FY2024 and FY2025;
a reduction in the RCF of GBP5m per year; and capped distributions
at GBP10m per year. At the half year end, the Term loan had reduced
to GBP46.5m. The RCF reduced by GBP5m in November 2022 and was
GBP25m at half year end, this will reduce by GBP2.5m every six
months from 28 February 2023 onwards. 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 4.00% per annum over SONIA
(in respect of Facility A and the RCF).
At 25 February 2023, the Company had GBP25m (26 February 2022:
GBP27.0m) of undrawn committed borrowing and cash facilities in
respect of which all conditions precedent had been met.
Analysis of net debt
As at As at As at
GBPm 25 Feb 2023 26 Feb 2022 27 Aug 2022
--------------------------------------- ----------- ----------- -----------
Cash and cash equivalents 23.6 24.3 35.3
Current borrowings (10.0) (13.3) (8.0)
Non-current borrowings (34.7) (46.9) (39.1)
---------------------------------------- ----------- ----------- -----------
Net borrowings including unamortised
arrangement fees (21.1) (35.9) (11.8)
---------------------------------------- ----------- ----------- -----------
Unamortised arrangement fees (1.8) (2.9) (2.4)
---------------------------------------- ----------- ----------- -----------
Bank Net Debt (22.9) (38.8) (14.2)
---------------------------------------- ----------- ----------- -----------
Lease liabilities (24.9) (28.6) (27.6)
---------------------------------------- ----------- ----------- -----------
Net debt (47.8) (67.4) (41.8)
---------------------------------------- ----------- ----------- -----------
12 Provisions
GBPm Provision Reorganisation Insurance Property Total
for onerous provisions and legal provisions
contracts provision
------------------------- ------------ ---------------- ---------- ----------- --------
At 27 August 2022 (0.5) (0.9) (0.6) (4.4) (6.4)
Charged to income
statement - - - (0.2) (0.2)
Credited to income
statement - - 0.1 - 0.1
Utilised in period 0.5 0.5 (0.1) - 0.9
Unwinding of discount
utilisation - - - (0.1) (0.1)
At 25 February
2023 - (0.4) (0.6) (4.7) (5.7)
============================= ============ ================ ========== =========== ========
GBPm 25 Feb 2023 26 Feb 27 Aug
2022 2022
------------------------- ------------ ------------ -------------- ----------- ----------
Included within
current liabilities (2.2) (2.4) (3.0)
Included within
non-current liabilities (3.5) (3.8) (3.4)
----------------------------- ------------ ------------ -------------- ----------- ----------
Total (5.7) (6.2) (6.4)
----------------------------- ------------ ------------ -------------- ----------- ----------
Re-organisation provisions of GBP0.4m relates to the restructure
of the DMD business, the Smiths News network and the Group's
support functions that was announced in prior periods.
Insurance & 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
GBP0.6m relating to claims from the Tuffnells business prior to
disposal.
The property provision represents the estimated future cost of
the Group's onerous leases on non-trading properties and for
potential 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 2036, however, a significant portion of the liability
falls within ten years.
The Company 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 +/- GBP0.1m;
-- if the repair cost per square foot changes by +/- GBP1.00,
the property provision would change by +/- GBP0.3m.
13 Contingent Liabilities
The Company has a potential liability that could crystallise in
respect of previous assignments of leases where the liability could
revert to the Company if the lessee defaulted. Pursuant to the
terms of the Demerger Agreement from WH Smith PLC in 2006, any such
contingent liability, 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 GBP5m). The Company's share of such
liability has an estimated future cumulative gross rental
commitment at 25 February 2023 of GBP0.5m (27 August 2022:
GBP0.5m).
As at 25 February 2023, the Company have approved letters of
credit of GBP2.4m to the insurers of the Company for the motor
insurance and employer liability insurance policy. The letters of
credit cover the employer deductible element of the insurance
policy for insurance claims.
On winding up of the News Section of the Trust defined benefit
pension scheme, the Company has agreed run-off indemnity coverage
for any member claims that are uninsured liabilities capped at
GBP6.5m over the next 60 years.
14 Share Capital
a) Share capital
GBPm 25 Feb 2023 26 Feb 2022 27 Aug 2022
---------------------------------- ----------- ----------- -----------
Issued, authorised and fully
paid ordinary shares of 5p each
Opening balance 12.4 12.4 12.4
Closing balance 12.4 12.4 12.4
---------------------------------- ----------- ----------- -----------
b) Movement in share capital
Number (m) Ordinary shares of 5p each
--------------------- ---------------------------
At 27 August 2022 247.7
At 25 February 2023 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.
c) Share premium
GBPm 25 Feb 2023 26 Feb 2022 27 Aug 2022
----------------- ------------ ------------ ------------
Opening balance 60.5 60.5 60.5
Closing balance 60.5 60.5 60.5
----------------- ------------ ------------ ------------
15 Related Party Transactions
No related party transactions had a material impact on the
financial performance in the period or financial position of the
Company at 25 February 2023. There have been no material changes to
or material transactions with related parties as disclosed in Note
30 of the Annual Report and Accounts for the 52-week period ended
27 August 2022 other than the below:
Tuffnells Deferred Consideration
On 2 November 2021, the Group received GBP6.5m (the first
tranche) of the total amount of unsecured consideration due of
GBP15m. Following receipt of this payment, the Board agreed revised
terms with Tuffnells Holdings Limited (formerly Palm Bidco Limited)
regarding the outstanding deferred consideration payable, such that
it would accept GBP7.5m in full and final settlement of the
outstanding amount due, were it received on or before 2 August
2022. This amount was received in full during FY2022. The Chairman
of Tuffnells Holdings Limited is also a non-executive director of
Smiths News plc and recused himself from all discussions relating
to this matter.
16 Subsequent events
There are no matters to report.
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
Company'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.
APM Closest Adjustments Note/page Definition and purpose
equivalent to reconcile reference
IFRS measure to IFRS measure for reconciliation
Income Statement
Adjusted No direct N/A Note 4 Adjusting items of income or
Items equivalent expenses are excluded in arriving
at Adjusted operating profit
to present a further measure
of the Company's performance.
Each of these items is considered
to be significant in nature
and/or quantum, non-recurring
in nature and/or are considered
to be unrelated to the Company's
ordinary activities or are
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 Adjusted items Income statement/ Adjusted operating profit is
operating profit* Note 4 defined as operating profit
profit from continuing operations,
excluding the impact of adjusting
items (defined above). This
is the headline measure of
the Company's performance and
is a key management incentive
metric.
--------------- ------------------ -------------------- ----------------------------------------
Adjusted Profit Adjusted items Income statement/ Adjusted profit before tax
profit before Note 4 is defined as profit before
before tax (PBT) tax from continuing operations,
tax excluding the impact of adjusting
items (defined above).
--------------- ------------------ -------------------- ----------------------------------------
Adjusted Profit Adjusted items Income statement/ Adjusted profit after tax is
profit after Note 4 defined as profit after tax
after tax (PAT) from continuing operations,
tax excluding the impact of adjusting
items (defined above).
--------------- ------------------ -------------------- ----------------------------------------
Adjusted Operating Depreciation Adjusted This measure is based on business
EBITDA profit* and amortisation EBITDA (ex unit operating profit from
Adjusted items IFRS 16) Continuing operations. It excludes
Continuing depreciation, amortisation
Operations and adjusting items. This is
reconciliation the headline measure of the
following Company's performance and is
this Glossary a key management incentive
metric.
--------------- ------------------ -------------------- ----------------------------------------
Adjusted Operating Depreciation Adjusted This measure is based on business
EBITDA profit* and amortisation EBITDA (ex unit operating profit from
(ex IFRS16) Adjusted items IFRS16) Continuing Operations. It excludes
Continuing depreciation, amortisation
Operations and adjusting items after deducting
reconciliation IAS 17 operating lease costs.
following This is the headline measure
this Glossary of the Company's performance
and is a key management incentive
metric.
--------------- ------------------ -------------------- ----------------------------------------
Adjusted Earnings Adjusted items Note 8 Adjusted earnings per share
earnings per share is defined as continuing Adjusted
per share 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 Cash generated Dividends, Reconciliation Free cash flow is defined as
flow from acquisitions of free cash flow excluding the following:
operating and disposals, cash flow payment of the dividend, acquisitions
activities Repayment to net movement and disposals, the repayment
of bank loans, in cash of bank loans and EBT share
EBT share and cash purchases and cash flows relating
purchases, equivalents to pension deficit repair.
Pension deficit following This measure reflects the cash
repair payments this Glossary available to shareholders.
--------------- ------------------ -------------------- ----------------------------------------
Free cash Net movement Dividends, Reconciliation Free cash flow (excluding Adjusted
flow (excluding in cash acquisitions of free items) is Free cash flow adding
adjusting and cash and disposals, cash flow back Adjusted cash costs.
items) equivalents Repayment to net movement
of bank loans, in cash
EBT share and cash
purchases, equivalents
Pension deficit following
repair payments, this Glossary
Adjusted items
--------------- ------------------ -------------------- ----------------------------------------
Balance Sheet
Bank Net Borrowings Cash flow Bank Net Debt is calculated
Debt less cash statement as total debt less cash and
cash equivalents. Total debt
includes loans and borrowings,
overdrafts and obligations
under finance leases as defined
by IAS 17.
--------------- ------------------ -------------------- ----------------------------------------
Net Debt Borrowings Cash flow Net Debt is calculated as total
less cash statement debt less cash and cash equivalents.
Total debt includes loans and
borrowings, overdrafts and
obligations under leases.
--------------- ------------------ -------------------- ----------------------------------------
* Operating profit is presented on the Company's 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 of free cash flow to net movement in cash and
cash equivalents is shown below:
25 Feb 2023 26 Feb 2022 27 Aug 2022
------------------------------------------------------ ------------ ------------ ------------
Net increase/(decrease) in cash and cash equivalents (11.7) 5.0 16.0
Decrease in borrowings and overdrafts 3.0 9.4 23.0
Movement in borrowings and cash (8.7) 14.4 39.0
Dividend paid 6.5 2.8 6.1
Investment in joint ventures 0.2 - -
Outflow for EBT shares 1.8 - 2.6
Continuing free cash flow (0.2) 17.2 47.7
Discontinued free cash flow - 0.3 0.5
------------------------------------------------------ ------------ ------------ ------------
Total free cash flow (0.2) 17.5 48.2
------------------------------------------------------ ------------ ------------ ------------
Adjusted EBITDA (ex IFRS 16) Continuing Operations
reconciliation
A reconciliation of operating profit to Adjusted EBITDA (ex IFRS
16) is included below:
GBPm 26 weeks to 25 Feb 2023 26 weeks to 26 Feb 2022 52 weeks to 27 Aug 2022
------------------------------- ------------------------ ------------------------ ------------------------
Operating profit 20.4 17.0 32.4
Adjusting items (0.0) 2.1 5.7
Depreciation and amortisation 4.8 5.3 10.5
------------------------------- ------------------------ ------------------------ ------------------------
Adjusted EBITDA 25.2 24.4 48.6
Operating lease charges* (3.9) (3.7) (7.9)
Adjusted EBITDA (ex IFRS 16) 21.3 20.7 40.7
------------------------------- ------------------------ ------------------------ ------------------------
* Operating lease charges is the rental charge that would have
passed through the income statement for leases previously defined
as operating leases under IAS 17.
INDEPENDENT REVIEW REPORT TO SMITHS NEWS PLC
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the 26 weeks period ended
25 February 2023 is not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34 and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
26 weeks period ended 25 February 2023 which comprises the
Condensed Consolidated Income Statement, the Condensed Consolidated
Statement of Comprehensive Income, the Condensed Consolidated
Balance Sheet, the Condensed Consolidated Statement of Changes in
Equity, the Condensed Consolidated Group Cash Flow Statement and
the related notes to the Consolidated Unaudited Interim Financial
Statements.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE (UK & Ireland) 2410"). A review of interim
financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does
not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in Note 1, the annual financial statements of the
Group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK & Ireland) 2410, however future events
or conditions may cause the Group to cease to continue as a going
concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the
Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London UK
2 May 2023
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
This information is provided by RNS, the news service of the
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