Interim Results
Smiths News PLC
26 April 2007
Smiths News PLC
Unaudited Interim Results Announcement
for the six months ended 28 February 2007
Smiths News PLC (Smiths News) is the UK's leading newspaper and magazine
wholesaler serving 22,000 retailers across England and Wales
FINANCIAL HIGHLIGHTS - CONTINUING OPERATIONS (Unaudited)
• Revenue of £615.0m, up 4.8% (2006: £586.7m)
• Underlying(1) operating profit of £17.6m, up 13.5% (2006: £15.5m)
• Profit before tax of £15.2m, up 14.3%(2) (2006: proforma(2) - £13.3m,
statutory - £16.3m)
• Free cash flow of £9.7m(3)
• Earnings per share of 8.1p, up 12.5% (2006: 7.2p)
• Adjusted earnings per share of 6.9p(4), up 16.9%(2) (2006: proforma(2) -
5.9p)
• Interim dividend of 2.1p (2006: 2.0p) (5)
Commenting on the results, Mark Cashmore, Chief Executive said:
'I am pleased to report the business has made good progress in this, the first
half year in which we report as an independent company following the demerger.
These solid results demonstrate the inherent strengths of the business and our
strategy. Despite the challenging trading conditions, we have produced growth in
underlying profitability and cash generation.
'We continue to manage the business on the basis of limited like for like(6)
revenue growth this year. As expected newspaper cover price inflation continues
to offset circulation declines, however, the magazine market remains
challenging. The rate of revenue growth in the second half of the year will be
lower as we reach the annualisation of the contract gains in 2006.
'Our focus on service has increased customer satisfaction. Our ongoing
efficiency programme and tight control of costs is helping to deliver consistent
performance. Futhermore, we remain well placed to secure new business where
opportunities arise. We expect current trading conditions to continue for the
remainder of the year and the financial performance of the company to be in line
with expectations.'
(1) Operating profit before property profits (2007: Nil, 2006: £1.6m)
(2) Proforma 2006 results assume the £70m of debt funding introduced at the time
of the demerger, and the one off pension payment of £25m, had been made at
the beginning of the 2006 period, giving rise to a finance cost of £1.4m.
Proforma 2006 results also exclude property profits of £1.6m
(3) Excludes the one off pension funding payment of £25m and dividend payment
(4) Includes a tax adjustment to reflect the anticipated full year tax rate of
20%
(5) 2006 dividend is the Smiths News apportionment of Old WH Smith dividend
(6) Like for like revenue growth excludes publisher contract gains
These definitions are applied consistently throughout this Interim Results
Announcement
Enquiries (for 26 April only):
Smith News PLC
Alan Humphrey Investor Relations 020 7404 5959
Brunswick
Kate Holgate
Giles Croot Media Relations 020 7404 5959
A summary of Smiths News PLC's Unaudited Interim Results 2007 will be published
in The Times newspaper on 27 April 2007. Smiths News PLC's Unaudited Interim
Results 2007 are also available at www.smithsnews.co.uk and a copy of the
Unaudited Interim Results 2007 will shortly be available for inspection at the
UK Listing Authority, 25 North Colonnade, London, E14 5HS.
About Smiths News:
Smiths News was formed on 1st September 2006 following the demerger of WHSmith
plc.
Smiths News is the UK's leading newspaper and magazine wholesaler serving 22,000
retailers across England and Wales. Smiths News also collects and processes
returns, supplies sales information to publishers and provides a range of
services for its retail customers.
Smiths News has an approximate 40 per cent share of the magazine wholesaling
sector and an approximate 35 per cent share of the newspaper wholesaling sector
in the UK.
Smiths News has 44 distribution centres across England and Wales, employing
4,200 staff.
OPERATIONAL REVIEW
Smiths News made good progress over the first half of the year with performance
in line with expectations. Revenues and underlying profitability continued to
grow, despite challenging markets. Revenues of £615m are up 4.8% on 2006 and
underlying operating profit of £17.6m is up 13.5%. Cost savings have been
slightly ahead of plan and service levels have improved significantly. The
business remains highly focused on its core objectives and the benefits of
operating as an independent PLC are beginning to come through.
Total revenues grew by 4.8%, driven mainly by contract gains. Like for like
revenues were 0.3% ahead of last year. Newspapers have continued the established
trend of price growth offsetting volume declines. The magazine market, however,
has proved more challenging. Like for like revenues from monthlies and partworks
declined but increased revenues from weeklies and one-shots were not sufficient
to compensate.
The strategy of driving efficiency and improving service is on track. At the
core of this is a programme of clearly targeted efficiency initiatives and we
have identified further opportunities for improvement going forward. The
consolidation of customer services into four regional call centres is now
complete; we have made further savings at all levels of the distribution network
and in central services; and the consolidation of the network is highlighting
additional efficiencies. Our new depot in Plymouth opened on 2 April, replacing
three separate buildings and providing state of the art facilities for the
future.
The key performance indicators we introduced last year have continued to improve
the consistency of service across the network; the business is recording its
highest ever performance levels and this is also reflected in customer feedback
and surveys. Our sales based replenishment system is now operational at all
locations and we have plans to expand the range and scope of the service to
encompass more retailers. To support this growth we will be investing further in
our information systems and data warehouse capability, both integral components
of our industry leading SAP enterprise system. These investments will improve
service to retailers and publishers as well as helping to reduce costs and
returns levels in the future; the investments will also underpin the competitive
advantage of the business.
Last month the Office of Fair Trading issued a press release outlining the
process it will follow to reach its conclusions on the status of contracts and
the Newspaper Code of Practice. The press release confirmed our expectation that
the process will be further delayed and we do not expect any further
announcement before the summer. Meanwhile the business is firmly focused on our
strategy based on improving service and efficiency. As the largest wholesaler
with leading technology Smiths News is well placed to respond to any change in
the market structure.
In summary, the business is meeting its objectives since demerger. By
anticipating the market trends and taking strong action on cost control, it is
delivering solid underlying profit growth despite challenging conditions.
FINANCIAL REVIEW
REVENUE
----------------------- ------- -------- -------- ---------
Feb Feb Change% Like for like
2007 2006 growth %
£m £m
----------------------- ------- -------- -------- ---------
Revenue
Newspapers 318.1 307.7 3.4% 2.5%
Magazines 272.4 254.5 7.0% (2.5%)
Other 24.5 24.5 0.0% 0.0%
----------------------- ------- -------- -------- ---------
Total revenue 615.0 586.7 4.8% 0.3%
----------------------- ------- -------- -------- ---------
Total revenues are 4.8% above last year with like for like revenues up 0.3% on
last year.
Newspaper revenues of £318.1m are up 3.4% on last year and 2.5% if contract
gains in Derby and Regional Press titles in Plymouth and Peterborough are
excluded. The trend of newspaper cover price increases more than offsetting
volume declines has continued. There was significant price activity from a
number of newspaper publishers in the early months of our financial year, but we
have seen volume declines in the first half of the year.
Magazine revenues of £272.4m are up 7.0% on 2006 driven by additional business
won from the distributor Frontline in April 2006 and contract gains in Derby in
June 2006. Excluding these contract gains like for like magazine revenues are
down 2.5% on last year. Across our four categories of magazine revenues we have
seen declines in monthly magazines and partworks more than offsetting growth in
weekly magazines and sticker collection revenues.
PROFITS
--------- --------- ---------
Feb Feb Change
2007 2006 %
£m £m
---------------------- --------- --------- ---------
Revenue 615.0 586.7 4.8%
---------------------- --------- --------- ---------
Gross profit 63.1 63.2 (0.2%)
Operating costs (45.5) (47.7) 4.6%
---------------------- --------- --------- ---------
Underlying operating profit 17.6 15.5 13.5%
---------------------- --------- --------- ---------
Gross margin has reduced from 10.8% to 10.3% due to the cost of contract
renewals finalised during the prior year. The impact of this on gross profit has
been largely offset by the benefit of higher sales from contract gains achieved
last year.
Operating costs reduced by £2.2m compared to 2006. We've continued to drive our
cost saving programme knowing that we were facing tough gross margin pressures.
In customer services, we have now completed the move to four regional customer
service centres. In magazine packing we have rescheduled the flow of work,
enabling the removal of whole shifts at some locations. We have also reviewed,
and where appropriate reduced, distribution miles by re-profiling the number and
configuration of delivery runs. There is still more to do and we have clear
plans for further efficiencies that will be delivered over the remainder of the
year and beyond.
The cost reductions have contributed to an improvement in underlying operating
profit of 13.5% to £17.6m (2006: £15.5m).
PROFIT BEFORE AND AFTER TAX
------------------ -------- ---------- -------- ---------- -------
Feb Proforma Change Statutory Change
2007 Feb % Feb %
£m 2006 2006
£m £m
------------------ -------- ---------- -------- ---------- -------
Underlying
operating profit 17.6 15.5 13.5% 15.5 13.5%
---------------- -------- ---------- -------- ---------- -------
Property profits - - 1.6
Finance Costs (2.4) (2.2) (0.8)
---------------- -------- ---------- -------- ---------- -------
Profit before tax 15.2 13.3 14.3% 16.3 (6.7%)
Taxation (0.9) (3.2) (3.9)
---------------- -------- ---------- -------- ---------- -------
Profit after tax 14.3 10.1 41.6% 12.4 15.3%
---------------- -------- ---------- -------- ---------- -------
Profit before tax for 2007 was £15.2m, an increase of 14.3% on the 2006 proforma
result and 6.7% below the 2006 statutory result.
Proforma results for 2006 exclude the profit on the sale of our Newcastle and
Durham properties and assume that the two large demerger related transactions,
namely drawing down £70m of debt and making a one-off £25m pension funding
payment, were transacted at the start of the 2006 financial year.
The income tax charge for the first half represents the UK Corporation tax rate
of 30%, adjusted for a one off provision release of £4m that occurred in the
period. This is due to the successful conclusion of some prior year matters with
HMRC. This provision related to a former WHSmith Group company of which Smiths
News was the parent company. We anticipate the full year effective tax rate will
be around 20%.
EARNINGS PER SHARE AND DIVIDEND
----------- ----------- ---------
Feb Proforma Statutory
2007 Feb Feb
2006 2006
----------- ----------- ---------
Profit after tax from continuing operations (£m) 14.3 10.1 12.4
Adjusted taxation (2.1) - -
----------- ----------- ---------
Adjusted profit after tax 12.2 10.1 12.4
Basic number of shares (millions) 176.9 172.0 172.0
Basic EPS 8.1p 5.9p 7.2p
Adjusted EPS 6.9p 5.9p 7.2p
If our 2007 tax charge is adjusted to reflect our anticipated rate for the full
year of 20% our adjusted profit after tax becomes £12.2m, giving an adjusted EPS
of 6.9p, an increase of 16.9% on last year.
The increase in EPS has been driven by improved underlying profits, and benefits
from a low tax charge. The weighted average number of shares increased by 4.9m
due to the early vesting of some schemes and the allocation of share trust
assets, both as a direct result of the demerger.
The Board has declared an interim dividend of 2.1p per ordinary share; this
represents a 5% increase on the 2.0p allocation of the Old WH Smith dividend.
The dividend will be paid on 15th June 2007 to shareholders registered at the
close of business on 18th May 2007.
FREE CASH FLOW - from continuing operations
---------- -----------
£m 6 months to 12 months to
28 Feb 2007 31 Aug 2006
---------- -----------
Profit before interest and tax 17.6 34.3
Depreciation & Amortisation 2.7 6.6
Non cash items 0.5 1.2
Working capital (0.5) (8.1)
Capital expenditure (1.2) (2.1)
Tax (4.7) (4.4)
Net Interest paid (1.6) -
Ongoing pension deficit funding (3.1) (7.0)
--------------------------------- ---------- -----------
Free cash flow 9.7 20.5
--------------------------------- ---------- -----------
We have generated £9.7m of free cash flow in the 6 months to 28 February 2007. A
feature of the period was the continued tight management of working capital and
capital expenditure.
NET DEBT
Net debt has increased to £64.0m from £41.7m. The increase arises mainly from
the one off contribution of £25.0m into the Smiths News section of the Pension
Trust on 1 September 2006, offsetting the positive free cash flow in the period,
and reducing the pension liability accordingly.
PENSION
On the date of demerger, 31 August 2006, the assets and liabilities of the
Pension Trust and WH Smith Retirement Savings Plan were split between Smiths
News and the WH Smith Retail Business by way of a 'sectionalisation'. Each
section contains the accounts of members who are or were employed by the
relevant business.
At 31 August 2006, the Smiths News gross defined benefit pension deficit under
IAS 19 was £49.0m. On 1st September 2006, a one-off contribution of £25m was
made to the Smiths News section of the Pension Trust. Additional payments of
£5.4m per annum for the next five years have been agreed with the Trustees.
The pension deficit at 28th February 2007 was £20.5m. The scheme will close to
future service accruals in May 2007.
Smiths News PLC
Group Income Statement (Unaudited)
For the 6 months ended 28 February 2007
------------------------- ------ --------------------- ---------
6 months to 12 months to
£m Note 28 Feb 2007 28 Feb 2006 31 Aug 2006
------------------------- ------ --------- ---------- ---------
Continuing operations
Revenue 2 615.0 586.7 1,210.6
------------------------- ------ --------- ---------- ---------
Operating profit 17.6 17.1 34.3
------------------------- ------ --------- ---------- ---------
Analysed between:
Before property disposals 17.6 15.5 33.0
Profit on property disposals - 1.6 1.3
------------------------- ------ --------- ---------- ---------
Finance costs (2.4) (0.8) (2.3)
------------------------- ------ --------- ---------- ---------
Profit before tax 2 15.2 16.3 32.0
------------------------- ------ --------- ---------- ---------
Income tax expense 4 (0.9) (3.9) (6.4)
------------------------- ------ --------- ---------- ---------
Profit after tax from
continuing operations 14.3 12.4 25.6
Profit for the period from
discontinued operations 10 - 49.7 32.1
------------------------- ------ --------- ---------- ---------
Profit for the period 14.3 62.1 57.7
------------------------- ------ --------- ---------- ---------
Earnings per share:
Basic - continuing operations 6 8.1p 7.2p 14.9p
Diluted - continuing operations 6 7.9p 7.1p 14.8p
Basic 6 8.1p 36.1p 33.5p
Diluted 6 7.9p 35.5p 33.3p
------------------------- ------ --------- ---------- ---------
Smiths News PLC
Group Balance Sheet (Unaudited)
As at 28 February 2007
------------------------------ ----- -------- -------- --------
At At At
£m Note 28 Feb 2007 28 Feb 2006 31 Aug 2006
------------------------------ ----- -------- -------- --------
Non-current assets
Goodwill - 15.1 -
Other intangible assets 2.1 16.8 2.6
Property, plant and equipment 18.2 204.0 19.2
Deferred tax assets 9.9 31.3 15.6
Interests in associates 0.2 0.3 0.3
Derivative financial instruments 0.5 - -
------------------------------ ----- -------- -------- --------
30.9 267.5 37.7
------------------------------ ----- -------- -------- --------
Current assets
Inventories 11.9 171.2 12.2
Available for sale investments 1.1 - -
Trade and other receivables 59.8 140.6 70.0
Derivative financial instruments - 0.8 -
Cash and cash equivalents 7 11.0 63.0 10.8
------------------------------ ----- -------- -------- --------
83.8 375.6 93.0
------------------------------- ----- -------- -------- --------
Total assets 114.7 643.1 130.7
------------------------------ ----- -------- -------- --------
Current liabilities
Trade and other payables (107.8) (317.3) (118.5)
Current tax liabilities (8.9) (31.3) (14.6)
Obligations under finance leases 7 (1.3) (5.3) (1.3)
Bank overdrafts and other
borrowings 7 (22.9) (50.0) -
Short-term provisions - (7.0) -
------------------------------ ----- -------- -------- --------
(140.9) (410.9) (134.4)
------------------------------ ----- -------- -------- --------
Non-current liabilities
Bank loans and other borrowings 7 (49.6) (8.7) (49.6)
Retirement benefit obligation 3 (20.6) (87.3) (49.1)
Deferred tax liabilities (2.3) (11.5) (1.7)
Long-term provisions (0.7) (7.9) (0.7)
Obligations under finance leases 7 (1.2) (11.0) (1.6)
Other non-current liabilities (0.6) (8.0) (0.9)
------------------------------ ----- -------- -------- --------
(75.0) (134.4) (103.6)
------------------------------- ----- -------- -------- --------
Total liabilities (215.9) (545.3) (238.0)
------------------------------ ----- -------- -------- --------
Total net assets (101.2) 97.8 (107.3)
------------------------------ ----- -------- -------- --------
Shareholders' equity
Called up share capital 9 9.1 660.2 9.1
'C' share reserve 9 - 3.1 -
ESOP reserve 9 (3.7) (34.0) (7.1)
Revaluation reserve 9 - 3.1 -
Other reserve 9 (280.1) (278.4) (280.1)
Hedging Reserve 9 0.5 (0.2) -
Retained earnings 9 173.0 (256.0) 170.8
------------------------------ ----- -------- -------- --------
Total equity (101.2) 97.8 (107.3)
------------------------------ ----- -------- -------- --------
Smiths News PLC
Group Cash Flow Statement (Unaudited)
For the 6 months to 28 February 2007
--------------------------------- ----- -------------------- --------
6 months to 12 months to
£m Note 28 Feb 2007 28 Feb 2006 31 Aug 2006
--------------------------------- ----- -------- -------- --------
Net cash (used in) / from
operating activities 8 (12.5) 63.5 105.3
-------------------------------- ----- -------- -------- --------
Investing activities
Interest received 0.6 1.2 1.6
Loan repaid by associate 0.1 - -
Proceeds on disposal of property,
plant and equipment - 8.3 10.5
Proceeds on settlement of loan notes - 11.3 11.3
Non-operating disposal costs - (2.3) (3.0)
Net cash in subsidiaries disposed - - (66.4)
Purchase of property, plant and equipment (1.2) (12.2) (26.4)
Purchase of intangible assets - - (5.0)
----------------------------------- -------- -------- --------
Net cash (used in) / from
investing activities (0.5) 6.3 (77.4)
----------------------------------- -------- -------- --------
Financing activities
Interest paid (2.2) (4.0) (7.3)
Dividend paid (7.1) (16.0) (25.0)
Repayments of obligations under
finance leases (0.4) (3.3) (5.6)
New bank loans raised (net
of financing costs) 22.9 0.3 49.2
Repayments of borrowings - (30.0) (76.6)
Derivative cash movement - (0.5) (0.5)
Issue of shares to satisfy
employee share schemes - 0.5 5.8
Repurchase of equity component
of 'C' shares - - (3.3)
-------------------------------- ----- -------- -------- --------
Net cash from / (used in)
financing activities 13.2 (53.0) (63.3)
-------------------------------- ----- -------- -------- --------
Net increase / (decrease)
in cash and cash equivalents
- continuing operations 0.2 (7.7) 3.6
Net increase in cash and
cash equivalents
- discontinued operations - 24.5 27.4
Net cash in subsidiaries
disposed
- discontinued operations - - (66.4)
-------------------------------- ----- -------- -------- --------
Net increase / (decrease)
in cash and cash
equivalents in period 0.2 16.8 (35.4)
-------------------------------- ----- -------- -------- --------
Opening net cash and cash
equivalents 10.8 46.2 46.2
-------------------------------- ----- -------- -------- --------
Closing net cash and cash
equivalents 11.0 63.0 10.8
-------------------------------- ----- -------- -------- --------
Reconciliation of net cash flow to movement in net debt
-------------------------------- ----- -------- -------- --------
Net debt at beginning of the period - as
reported (41.7) (55.6) (55.6)
IAS 39 - Deferred shares and 'C' shares
classified as financial liabilities - (6.7) (6.7)
Increase / (decrease) in cash and cash
equivalents 0.2 16.8 (35.4)
(Increase) / decrease in debt (22.9) 30.0 39.1
Net movement in finance leases 0.4 3.5 16.9
-------------------------------- ----- -------- -------- --------
Net debt at end of the period 7 (64.0) (12.0) (41.7)
-------------------------------- ----- -------- -------- --------
Smiths News PLC
Group Statement of Recognised Income and Expenses (Unaudited)
For the 6 months to 28 February 2007
-------------------------------- ------------- --------
6 months to 12 months to
£m 28 Feb 2007 28 Feb 2006 31 Aug 2006
-------------------------------- -------- -------- --------
Exchange differences arising on
translation of foreign operations - (1.1) (2.2)
Gain/(Loss) on cash flow hedges 0.5 - (2.0)
Actuarial gains / (losses) on
defined benefit pension schemes 1.2 0.6 (32.8)
UK deferred tax attributable to
pension scheme liabilities (6.4) 1.4 7.3
UK current tax attributable to the
additional pension scheme contributions 2.0 2.0 4.0
-------------------------------- -------- -------- --------
Net income recognised directly in equity (2.7) 2.9 (25.7)
Profit for the period 14.3 62.1 57.7
-------------------------------- -------- -------- --------
Total recognised income and expense
for the period 11.6 65.0 32.0
-------------------------------- -------- -------- --------
Total recognised income and expense for the period is fully attributable to
equity holders of the parent company.
Smiths News PLC
Notes to the Unaudited Interim Financial Statements
For the 6 months to 28 February 2007
1 Basis of preparation
These Interim Financial Statements are unaudited and not reviewed.
The Unaudited Interim Financial Statements for the six months ended 28 February
2007 have been prepared on a basis consistent with the accounting policies set
out in Smiths News PLC's Annual Report for the year ended 31 August 2006. The
Unaudited Interim Financial Statements should therefore be read in conjunction
with the 2006 Annual Report, which is available on the company's website,
www.smithsnews.co.uk.
The Unaudited Interim Financial Statements for the six months ended 28 February
2007, which were approved by the board of directors on 26 April 2007, do not
constitute statutory accounts within the meaning of section 240 of the Companies
Act 1985. The information relating to the year ended 31 August 2006 is an
extract from the published Annual Report for that year, which has been delivered
to the Registrar of Companies, and on which the Auditors' Report was unqualified
and did not contain statements under section 237(2) or 237(3) of the UK
Companies Act 1985.
The Unaudited Interim Financial Statements are prepared in accordance with
International Accounting Standards, including International Accounting Standards
and interpretations issued by the International Accounting Standards board and
its committees, and as interpreted by any regulatory bodies applicable to the
group as adopted for use in the European Union.
2 Segmental analysis of results
Turnover and profit before tax are derived from the one principal activity of
the group, being the wholesaling of newspapers and magazines. The group operates
solely in the UK. The segmental results of discontinued operations are disclosed
in note 10.
Revenue for the six months to 28 February 2006 includes £56.5m (12 months to 31
August 2006: £115.9m) of sales to WH Smith PLC. Prior to the demerger these were
treated as inter-company sales and therefore excluded from revenue in the
published accounts for these periods.
3 Retirement benefit obligation
The pension arrangements for employees are operated through the Smiths News PLC
sections of the WH Smith PLC pension schemes. There is a defined benefit scheme,
WHSmith Pension Trust ('Pension Trust'), and a defined contribution scheme,
WHSmith Retirement Savings Plan. The Smiths News section of the Pension Trust
will close to future service accruals in May 2007.
The market value of the assets and the present value of the liabilities in the
defined benefit scheme were:
£m At 28 Feb 2007 At 28 Feb 2006 At 31 Aug 2006
----------------------------- ---------- ---------- ----------
Present value of the obligations (343.4) (1,033.0) (334.0)
Fair value of plan assets 322.9 946.0 285.0
----------------------------- ---------- ---------- ----------
Deficit in the pension scheme (20.5) (87.0) (49.0)
Retirement medical benefit
liabilities (0.1) (0.3) (0.1)
----------------------------- ---------- ---------- ----------
Retirement benefit obligation
recognised in the balance sheet (20.6) (87.3) (49.1)
Deferred taxation 6.2 26.2 14.7
----------------------------- ---------- ---------- ----------
Net retirement obligation (14.4) (61.1) (34.4)
----------------------------- ---------- ---------- ----------
Movements in the present value of the defined benefit scheme obligations in the
period were as follows:
------------------------------- ---------------- ---------
6 months to 12 months to
£m 28 Feb 2007 28 Feb 2006 31 Aug 2006
------------------------------- --------- --------- ---------
At beginning of period (334.0) (967.6) (967.6)
Current service cost (1.5) (4.7) (9.5)
Interest cost (8.5) (23.6) (46.9)
Actuarial losses (5.4) (53.6) (16.6)
Benefits paid 6.0 16.5 32.8
Subsidiaries disposed - - 673.8
------------------------------- --------- --------- ---------
At end of period (343.4) (1,033.0) (334.0)
------------------------------- --------- --------- ---------
Movements in the fair value of defined benefit scheme assets in the year were as
follows:
------------------------------- ---------------- ---------
6 months to 12 months to
£m 28 Feb 2007 28 Feb 2006 31 Aug 2006
------------------------------- --------- --------- ---------
At beginning of period 285.0 871.5 871.5
Expected return on scheme assets 7.7 21.7 42.4
Actuarial gains / (losses) 6.6 54.2 (16.2)
Contributions 29.6 15.1 28.4
Benefits paid (6.0) (16.5) (32.8)
Subsidiaries disposed - - (608.3)
------------------------------- --------- --------- ---------
At end of period 322.9 946.0 285.0
------------------------------- --------- --------- ---------
4 Income tax expense
The income tax rate for the six-month period is 6% (six months ended 28 February
2006: 24%; Year ended 31 August 2006: 20%). This represents the UK Corporation
tax rate of 30%, adjusted for a one off provision release of £4m that occurred
in this six-month period.
5 Dividends
Amounts recognised as distributions to shareholders in the period are as
follows:
-------------------------------- ----------------------- ---------
6 months to 12 months to
28 Feb 2007 28 Feb 2006 31 Aug 2006
-------------------------------- -------- -------- --------
Dividend per share
Interim - paid - - 5.1p
Final - paid 4.0p 9.2p 9.2p
-------------------------------- -------- -------- --------
4.0p 9.2p 14.3p
-------------------------------- -------- -------- --------
£m
-------------------------------- -------- -------- --------
Dividends
Interim - paid - - 8.8
Final - paid 7.1 15.8 15.8
-------------------------------- -------- -------- --------
7.1 15.8 24.6
-------------------------------- -------- -------- --------
On 28 February 2006 the Group also paid a dividend of £140,600 (£142,088 on 31
August 2006) in respect of 'C' shares and £40,563 (£40,992 on 31 August 2006) in
respect of 'B' shares.
In addition, the directors are recommending an interim dividend in respect of
the period ending 28 February 2007 of 2.1p per ordinary share (2006: 2.0p -
being the Smiths News apportionment of the WH Smith PLC dividend). This will be
paid on 15 June 2007 to shareholders registered at the close of business on 18
May 2007.
6 Earnings per share
a) Earnings
--------------------- -------- ------------------ --------
6 months to 6 months to 12 months to
28 Feb 2007 28 Feb 2006 31 Aug 2006
--------------------- -------- ------------------ --------
£m Continuing Continuing Discontinued Total Total
--------------------- -------- ------- -------- ------ --------
Profit for the period
attributable to
shareholders 14.3 12.4 49.7 62.1 57.7
--------------------- -------- ------- -------- ------ --------
b) Basic earnings per share
--------------------- -------- ------------------ --------
6 months to 6 months to 12 months to
28 Feb 2007 28 Feb 2006 31 Aug 2006
--------------------- -------- ------------------ --------
Continuing Continuing Discontinued Total Total
--------------------- -------- ------- -------- ------ --------
Earnings per share 8.1p 7.2p 28.9p 36.1p 33.5p
--------------------- -------- ------- -------- ------ --------
c) Diluted earnings per share
---------------------- -------- ------------------ --------
6 months to 6 months to 12 months to
28 Feb 2007 28 Feb 2006 31 Aug 2006
---------------------- -------- ------------------ --------
Continuing Continuing Discontinued Total Total
---------------------- -------- ------- -------- ------ --------
Earnings per share 7.9p 7.1p 28.4p 35.5p 33.3p
---------------------- -------- ------- -------- ------ --------
d) Weighted average share capital
6 months to 12 months to
Millions 28 Feb 2007 28 Feb 2006 31 Aug 2006
---------------------------------- -------- -------- --------
Weighted average shares in issue for
earnings per share 176.9 172.0 172.2
---------------------------------- -------- -------- --------
Add weighted average number of
ordinary shares under option 3.4 3.1 1.3
---------------------------------- -------- -------- --------
Weighted average ordinary shares for
fully diluted earnings per share 180.3 175.1 173.5
---------------------------------- -------- -------- --------
7 Analysis of net debt
----------------------------------- -------- -------- --------
£m At At At
28 Feb 2007 28 Feb 2006 31 Aug 2006
----------------------------------- -------- -------- --------
Cash and cash equivalents 11.0 63.0 10.8
Bank Loans due within one year (22.9) (50.0) -
Finance leases (2.5) (16.3) (2.9)
Bank loans due after more than one
year (49.6) (8.7) (49.6)
----------------------------------- -------- -------- --------
Net debt (64.0) (12.0) (41.7)
----------------------------------- -------- -------- --------
Movements in net debt can be further analysed as follows:
----------------------------- -------- ------- ------- ---------
£m At Cash flow Non Cash At
Movement
28 Feb 2007 31 Aug 2006
----------------------------- -------- ------- ------- ---------
Cash and cash equivalents 11.0 0.2 - 10.8
Debt - Sterling floating rate (35.0) (22.9) 37.5 (49.6)
Debt - Sterling fixed rate (37.5) - (37.5) -
Obligations under finance leases (2.5) 0.4 - (2.9)
----------------------------- -------- ------- ------- ---------
Net debt (64.0) (22.3) - (41.7)
----------------------------- -------- ------- ------- ---------
At 28 February 2007 floating rate debt comprises a £12.1m unsecured term loan
bearing an interest rate of six month LIBOR plus 75 basis points and a £22.9m
unsecured revolving credit facility bearing an interest rate of LIBOR plus 75
basis points. Fixed rate debt comprises £37.5m of unsecured term loan bearing an
interest rate of 5.13% plus 75 basis points.
8 Net cash inflow / (outflow) from operating activities
------------------------------ ------------- --------
6 months to 12 months to
£m 28 Feb 2007 28 Feb 2006 31 Aug 2006
------------------------------ -------- -------- --------
Operating profit from continuing operations 17.6 17.1 34.3
Operating profit from discontinued operations - 65.1 52.4
------------------------------ -------- -------- --------
17.6 82.2 86.7
Operating exceptional items - (5.0) 7.0
Adjustment for pension funding (3.1) (10.4) (18.9)
Depreciation of property,
plant and equipment 2.2 17.8 34.5
Profit on sale of property,
plant and equipment - (4.0) (6.0)
Impairment of property,
plant and equipment - 1.6 2.6
Amortisation of intangible assets 0.5 3.2 6.8
Share based payments 0.5 3.6 8.5
(Increase) / decrease in inventories 0.3 (9.4) 7.3
(Increase) / decrease in receivables 10.2 (17.9) (6.7)
Increase / (decrease) in payables (11.0) 5.0 1.3
Income taxes paid (4.7) (0.1) (6.0)
Cash spend against provisions - (1.0) (3.3)
------------------------------ -------- -------- --------
Net cash inflow
from operating activities
before exceptional and one
off items 12.5 65.6 113.8
One off pension funding payment (25.0) - -
Cash outflow relating to
exceptional operating item
(PRMB Settlement) - (2.1) (2.1)
Cash outflow relating to
exceptional operating item
(De-merger costs) - - (6.4)
--------------------------------- -------- -------- --------
Net cash (outflow) / inflow
from operating activities (12.5) 63.5 105.3
--------------------------------- -------- -------- --------
9 Reconciliation of movements in equity
------------------ ------ ------ ------ ------- ------ ------- ------ ------
£m Share 'C' Other Revaluation ESOP Translation Retained Total
Capital Shares Reserve Reserve Reserve & hedging Earnings
Reserve
------------------ ------ ------ ------ ------- ------ ------- ------ ------
Balance at 1
September 2005 660.2 3.1 (278.4) 3.1 (34.0) (0.2) (309.0) 44.8
Total recognised
income and expense for
the period - - - - - - 65.0 65.0
Dividends paid - - - - - - (16.0) (16.0)
Recognition of share based
payments - - - - - - 4.0 4.0
Balance at
28 February 2006 660.2 3.1 (278.4) 3.1 (34.0) (0.2) (256.0) 97.8
Total recognised
income and expense for
the period - - - - - (3.9) (29.1) (33.0)
Dividends paid - - - - - - (9.0) (9.0)
Employee share schemes 7.4 - (1.7) - 4.6 - (4.5) 5.8
Recognition of share based
payments - - - - - - 2.2 2.2
Repurchase of non equity
share capital - (3.1) - - - - - (3.1)
Reduction in capital (658.5) - - - - - 658.5 -
Dividend in specie - - - (3.1) 22.3 4.1 (191.3) (168.0)
Balance at 31
August 2006 9.1 - (280.1) - (7.1) - 170.8 (107.3)
Total recognised income
and expense for the period - - - - - 0.5 11.1 11.6
Dividends paid - - - - - - (7.1) (7.1)
Employee share schemes - - - - 2.6 - (2.6) -
Recognition of share based
payments - - - - - - 0.5 0.5
Transfer to available for
sale investments - - - - 0.8 - 0.3 1.1
------------------ ------ ------ ------ ------- ------ ------- ------ ------
Balance at 28
February 2007 9.1 - (280.1) - (3.7) 0.5 173.0 (101.2)
------------------ ------ ------ ------ ------- ------ ------- ------ ------
10 Discontinued operations
Smiths News PLC completed the demerger of the Retail Business on 31 August 2006.
The results of the Retail Business are classified in the financial statements as
discontinued operations for the period ended 28 February 2006 and the year ended
31 August 2006.
(a) The revenue from discontinued operations was as follows:
------------------------------ -------------- ---------
6 months to 12 months to
£m 28 Feb 2007 28 Feb 2006 31 Aug 2006
------------------------------ ---------- ---------- ---------
Revenue
Retailing businesses
High Street - 620.8 1,021.0
Travel - 150.6 318.8
------------------------------ ---------- ---------- ---------
Total revenue - discontinued
operations - 771.4 1,339.8
------------------------------ ---------- ---------- ---------
(b) The results from discontinued oeprations were as follows:
------------------------------ -------------- ---------
6 months to 12 months to
£m 28 Feb 2007 28 Feb 2006 31 Aug 2006
------------------------------ ---------- ---------- ---------
Profit
------------------------------ ---------- ---------- ---------
Profit before tax - 59.8 43.9
Income tax expense - (10.1) (11.8)
------------------------------ ---------- ---------- ---------
Profit for the year from
discontinued operations - 49.7 32.1
------------------------------ ---------- ---------- ---------
(c) The cash flows attributable to discontinued operations comprise:
------------------------------ -------------- ---------
6 months to 12 months to
£m 28 Feb 2007 28 Feb 2006 31 Aug 2006
------------------------------ ----------- ---------- ---------
From operating activities - 62.6 82.4
From / (used in) investing
activities - 5.4 (10.0)
Used in financing activities - (43.5) (45.0)
------------------------------ ----------- ---------- ---------
Net increase in cash and cash
equivalents - 24.5 27.4
------------------------------ ----------- ---------- ---------
(d) Within the results from discontinued operations, certain exceptional charges
were made as follows:
------------------------------ -------------- ---------
6 months to 12 months to
£m 28 Feb 2007 28 Feb 2006 31 Aug 2006
------------------------------ ---------- ---------- ---------
Post retirement medical benefits
settlement - 5.0 5.0
Demerger costs - - (12.5)
------------------------------ ---------- ---------- ---------
- 5.0 (7.5)
------------------------------ ---------- ---------- ---------
Post retirement medical benefits settlement:
In September 2005, the members were offered the option to be bought out of this
scheme, which was accepted by the majority of the members. The impact of the
settlement was a £5 million reduction in the net deficit and has been disclosed
as an exceptional item in discontinued operations. A small number of members
opted to remain in the scheme and the present value of the remaining future
liabilities is valued at £0.2 million net of deferred taxation.
This information is provided by RNS
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