TIDMSNWS
RNS Number : 1855K
Smiths News PLC
04 May 2022
This announcement contains inside information
Smiths News plc
(Smiths News or the Company)
Unaudited Interim Financial Results for the 26 weeks ended 26
February 2022
Good performance delivering profit growth and strong net debt
reduction
Resilient sales and a clear focus on our operational priorities
have driven a good performance, with Adjusted profit growth, cash
generation and Bank Net Debt reduction all showing progress in line
with or ahead of expectations. Total revenue at -1.2% is a strong
performance in the context of long-term trends, with a beneficial
product mix resulting in a 2.9% increase in core sales margin.
Achieving Bank Net Debt of below 1 x Adjusted EBITDA (ex IFRS16
leases) is ahead of the expectations announced in November 2021.
The inflationary pressures outlined at that time continue to be
balanced by a combination of favourable margin mix, additional
revenues and structured cost control underpinning our confidence
that full year performance will be in line with market
expectations.
Adjusted continuing results 26 weeks 26 weeks to Change
(7) to 27 Feb 2021
26 Feb 2022
Revenue GBP544.8m GBP551.6m -1.2%
Adjusted EBITDA (ex IFRS16
leases) (4) GBP20.7m GBP20.5m 1.0%
Operating profit (1) GBP19.1m GBP18.9m 1.1%
Profit before tax (1) GBP15.3m GBP14.4m 6.3%
Earnings per share 5.1p 4.6p 10.9%
Statutory continuing results
(7)
Revenue GBP544.8m GBP551.6m -1.2%
Profit before tax GBP14.6m GBP16.0m -8.8%
Statutory profit GBP11.6m GBP13.0m -10.8%
Earnings per share 4.8p 5.3p -9.4%
Interim dividend per share 1.4p Nil p -
Free cash flow (2) GBP17.5m GBP4.6m 280.4%
Bank Net Debt (5) GBP38.8m GBP70.0m -44.6%
Net debt (including IFRS16
leases) (5) GBP67.4m GBP101.3m -33.5%
------------------------------ ------------- ------------- -------
Headlines
-- Performance in line with market expectations, with progress
driven by favourable margin mix, structured cost control and
additional revenues.
-- Key performance measures of Adjusted EBITDA (ex IFRS16
leases) , Free cash flow, Adjusted EPS and Bank Net Debt all show
progress and are on track for the full year.
-- Interim dividend of 1.4p representing an increase of 180%
compared to the reinstated dividend of 0.5p announced in June
2021.
-- Revenue of -1.2% reflects a historically strong performance
from newspapers and magazines, with margins further benefiting from
mix and one shot sales.
-- Impact of inflationary costs in line with expectations,
mitigated by a carefully structured programme to secure offsetting
efficiencies and additional revenue streams.
-- Successful extension and amendment of banking facilities in
December 2021, enabling increased returns for shareholders in line
with business performance.
-- Bank Net Debt below 1 x Adjusted EBITDA (ex IFRS16 leases),
has been achieved well ahead of the initial target, after
benefiting from planned one off receipts totalling GBP14.6m.
Outlook
Building on a good first half, underlying trading for the year
to date is in line with market expectations. The net impact of
inflationary pressure remains consistent with our planning
assumptions, while the cost mitigation programme and continued
favourable sales mix means the business is on track to meet the
market's expectations for the full year.
Jonathan Bunting, Chief Executive Officer, commented:
"The combination of resilient sales, well-structured cost
planning and revenue gains has been the foundation of a pleasing
first half performance. The delivery of growing and sustainable
shareholder returns from the core business remains our top priority
as demonstrated by the increase in the interim dividend."
Enquiries:
Smiths News plc Via Buchanan below
Jonathan Bunting, Chief Executive Officer
Paul Baker, Chief Financial Officer
https://smithsnews.co.uk
Buchanan 0207 466 5000
Richard Oldworth / Jamie Hooper / Toto Berger
smithsnews@buchanan.uk.com
www.buchanan.uk.com
A recording of the presentation for analysts will be made
available on the Company's website on the afternoon of Wednesday 4
May 2022 - see the Investor Zone section at
https://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'
'Adjusted EBITDA' 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:
Continuing 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.
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.
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.
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) Operating cash flow is defined as operating profit adding
back non-cash items amortisation, depreciation, share based
payments, share of profits of jointly controlled entities, and
non-cash pension costs, adjusting the increase/ decrease in working
capital then deducting pension contributions and tax payments in
accordance with its presentation in Note 10 of the Interim
Consolidated Financial Statements.
(4) Adjusted EBITDA (ex IFRS16) - is calculated as Adjusted
operating profit before depreciation and amortisation, excluding
the impact of IFRS16 changes to leases. In line with loan
agreements Adjusted Bank EBITDA used for covenant calculations is
calculated as Adjusted operating profit before depreciation,
amortisation, Adjusted items and share based payments charge but
after adjusting for the last 12 months of profits/(losses) for any
acquisitions or disposals made in the year.
(5) Bank Net Debt - is calculated as loans, borrowings,
overdrafts, obligations under finance leases (excluding the
adoption of IFRS16 lease accounting standards) less cash and cash
equivalents, as bank covenants are tested under frozen GAAP. Net
Debt (including IFRS16 lease transition) is calculated as loans,
borrowings, overdrafts, obligations under leases less cash and cash
equivalents.
(6) H1 2022 - refers to the 26 weeks ended 26 February 2022 and
FY2022 refers to the 52 week period ending 27 August 2022. H1 2021
refers to the 26 week period ended 27 February 2021 and FY2021
refers to the 52 week period ended 28 August 2021.
(7) The Interim 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 26 February 2022
and the Report and Accounts for the year ended 28 August 2021 which
can be found on the Investor Zone section of the Smiths News plc
website - https://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
Trading in the first half was characterised by resilient sales
revenue on core newspapers and magazine categories, with margin
benefitting from a favourable sales mix and further benefit to
EBITDA from additional revenue streams (including from the leasing
of spare warehouse space and an increase in contracted prices for
the sale of waste paper).
Adjusted EBITDA ( ex IFRS16 leases ) of GBP20.7m was up 1.0% (H1
2021: GBP20.5m) from revenue of GBP544.8m, which was down 1.2% (H1
2021: GBP551.6m). Core sales of newspapers and magazines continue
to provide a relatively predictable bedrock of revenue, and while
year on year comparisons are still complicated by prior year
COVID-19 restrictions, overall trends are now stable in comparison
to the fluctuations of the last two years.
The business has delivered strong cash flow in H1 2022
benefitting from GBP14.6m of one-off receipts, further reducing its
borrowings so that Bank Net Debt is now below 1x EBITDA. As a
consequence, an interim dividend of 1.4p per share has been
proposed, representing an increase of 180% on the reinstated
dividend of 0.5p per share announced in June 2021.
Sales resilience
The combined sales of newspapers and magazines are down compared
to the prior year period by
(-1.6%) with monthly magazines (+1.1%) performing better than
newspapers (-2.9%) and weekly magazines (-2.6%). This represents a
resilient performance in the context of historic long term trends.
Total sales revenue has also benefited from a boost in higher
margin one shots and specials (+45.2%) as traffic returned to high
street stores. This favourable mix results in an increase in
overall margin of 2.9% in the period.
While year on year comparisons are complicated by prior year
COVID-19 restrictions, the overall trend is pleasing and reflects a
re-stabilisation of the market after two years of relative
volatility. We anticipate the recent ending of virtually all
COVID-19 restrictions in the United Kingdom to be supportive of the
gradual restoration of demand in high volume travel and commuting
retailers, representing those sectors most impacted by the
pandemic.
Inflationary pressure and mitigation
In addition to general cost inflation, virtually all
distribution businesses have been impacted by three additional
pressures: driver shortages and consequent wage/contractor
inflation; national minimum wage increases; and fuel price rises.
Our response has been structured and proportionate. Our
well-established cost efficiency programme has continued, focused
on maintaining service levels while seeking efficiencies and
compensating new revenues.
Managing inflationary pressure continues to be a top operational
priority. In line with the estimates we gave at our Preliminary
Financial Results in November 2021 we currently expect the full
year net impact to be in the region of GBP2.0m. The rise in
national minimum wage and further increases in fuel prices largely
as a result of the war in Ukraine will result in some annualised
carry over to FY2023.
Capital management
On 2 November 2021 the Company received a payment of GBP6.5m in
relation to the first instalment of deferred consideration arising
from the sale of Tuffnells in May 2020. More recently (and
following the balance sheet date), the Company has received a
further payment of GBP7.5m on 29 April 2022 in full and final
settlement of the deferred consideration, payment being received
ahead of the second instalment due in August 2022 and the final
instalment in May 2023. This sum will be used to pay down debt
under the terms of the banking agreement.
In December 2021 the Company received a sum of GBP8.1m in
consideration of the net cash surplus resulting from the winding up
of the WHSmith Pension Trust (News section). More broadly, these
funds represent the finalisation of the buy-out process, removing
any potential future cash drain from legacy pension
commitments.
In December 2021 the Company also favourably extended and
amended its current banking agreements to comprise a GBP60.0m
amortising term loan and a revolving credit facility with an
initial limit of GBP30.0m. The agreement also increased the cap on
dividends and distributions from GBP6m to GBP10m for each financial
year during the term of the facilities, enabling the business to
increase cash returns to shareholders.
Free cash flow and Bank Net Debt
Continuing free cash flow of GBP17.5m (H1 2021: GBP4.6m)
benefitted from the receipts of the pension surplus (GBP8.1m) and
Tuffnells deferred consideration (GBP6.5m), both of which were used
to pay down debt under the terms of the previous banking
agreements. Bank Net Debt of GBP38.8m (H1 2021: GBP70.0m) is
equivalent to 0.9 x Adjusted EBITDA (ex IFRS16 leases) and the
Company's average daily Bank Net Debt during H1 2022 was GBP58.9m,
a decrease of 34.2% from the prior period (H1 2021: GBP89.5m) .
Looking ahead, management will continue to apply a prudent capital
management policy, using excess free cash to meet the needs of all
stakeholders through a balance of lower borrowings, investment in
the business, and paying dividends within the distribution limits
of our banking agreements.
Dividend
In the light of the good first half performance and the Board's
confidence in ongoing trading, the Board has proposed an interim
dividend of 1.4p per share, representing an increase of 180% on the
reinstated dividend of 0.5p per share announced in June 2021. The
dividend will be paid on 7 July 2022 to all shareholders who are on
the share register at the close of business on 10 June 2022; the
ex-dividend date will be 9 June 2022.
Outlook
Building on a good first half, underlying trading for the year
to date is in line with market expectations. The net impact of
inflationary pressure remains consistent with our planning
assumptions, while the cost mitigation programme and continued
favourable sales mix means the business is on track to meet the
current market expectations for the full year.
FINANCIAL REVIEW
OVERVIEW
The Company has continued to generate good levels of profit and
free cash flow since last year's interim report, which, along with
the GBP8.1m receipt of pension surplus and GBP6.5m receipt of
Tuffnells deferred consideration, have resulted in a reduction in
Bank Net Debt to below 1x EBITDA (H1 2022: 0.9x; H1 2021:
1.8x).
The solid base of cash generation and the amendment to the terms
of the Company's banking facilities in December 2021 allows for an
increase in the interim dividend to 1.4p per share (GBP3.3m)
compared to 0.5p per share (GBP1.2m) announced in June 2021.
Adjusted EBITDA (ex IFRS16) of GBP20.7m and Adjusted operating
profit of GBP19.1m were both up on H1 2021 by GBP0.2m, with the
impact of inflationary pressures in the cost base more than offset
by better wholesale margin and the benefit of additional revenue
streams. While revenue decreased overall by 1.2% there was a mix
benefit at a margin level from year on year increases in magazine
and one shot sales.
At an Adjusted profit before tax level, 34.2% lower average debt
resulted in GBP0.7m lower bank interest, contributing to a GBP0.9m
increase to GBP15.3m (H1 2021: GBP14.4m).
Continuing free cash flow of GBP17.5m (H1 2021: GBP4.6m)
benefitted from pension surplus (GBP8.1m) and Tuffnells (GBP6.5m)
receipts, both of which were used to pay down debt under the terms
of the previous banking agreement. A scheduled amortisation payment
of GBP7.5m was also made in October 2021, allowing the facility to
be resized at GBP90m at its amendment in December 2021, compared to
GBP112.5m at the end of August 2021.
Closing Bank Net Debt of GBP38.8m is a reduction of GBP31.2m on
H1 2021 (GBP70.0m) and Bank Net Debt: Adjusted EBITDA (ex IFRS16)
is now 0.9x (H1 2021: 1.8x) after allowing for the payment of the
FY2021 final dividend (GBP2.8m) in February 2022. Reported Bank Net
Debt in the current and prior year period and at FY2021 year-end
benefitted from the timing of c.GBP20m publisher payments which
fell due in the following financial period. An interim dividend of
1.4p per share (GBP3.3m) is proposed by the Board, due to be paid
in July 2022.
CONTINUING ADJUSTED RESULTS
GROUP
Continuing Adjusted results GBPm 26 weeks 26 weeks Change
to to
26 Feb 2022 27 Feb 2021
---------------------------------- ------------- ------------- --------
Revenue 544.8 551.6 (1.2)%
Adjusted EBITDA (ex IFRS 16) 20.7 20.5 1.0%
Operating profit 19.1 18.9 1.1%
Net finance costs (3.8) (4.5) (15.6)%
---------------------------------- ------------- ------------- --------
Profit before tax 15.3 14.4 6.3%
Taxation (3.1) (3.0) 3.3%
---------------------------------- ------------- ------------- --------
Effective tax rate 20.3% 20.8% (50)bps
---------------------------------- ------------- ------------- --------
Profit after tax 12.2 11.4 7.0%
---------------------------------- ------------- ------------- --------
Revenue was GBP544.8m (H1 2021: GBP551.6m), down 1.2% on the
prior year, a positive performance compared to the historic trend
of c.3%-5%. Monthly magazines (+1.1%) and one shots (+45.2%)
performed strongly against a prior year period which had been
impacted by lockdowns, aided by successful releases of football
stickers and Pokémon trading cards. Newspapers and weekly magazine
sales revenue were both down c.3%, at the lower end of historic
trends, having recovered faster after the initial COVID-19
lockdowns in H2 2020.
DMD revenue of GBP2.1m (H1 2021: GBP1.8m) was up GBP0.3m (16.7%)
due to the easing of travel restrictions which impacted airlines
and airports in H1 2021. DMD's operating profit of GBP0.1m was
consistent with H1 2021 as the prior period benefitted from a
GBP0.2m one off gain.
The increase in Adjusted operating profit of GBP0.2m to GBP19.1m
(H1 2021: GBP18.9m) can be attributed to:
-- Improvement in wholesale margin (GBP1.1m), driven by higher
underlying revenue from monthly magazines and one shots (trading
cards and stickers);
-- The benefit of additional revenue streams (GBP1.5m) including
the leasing of spare warehouse space and an increase in contracted
prices for the sale of waste paper;
-- Inflationary pressures (net impact GBP1.4m) affecting the
depot cost base, particularly over the pre-Christmas peak period,
offset by depot cost savings; and
-- The impact of GBP1.1m of incidental items in H1 2022 and of
one off items that benefitted the prior period which did not
reoccur, for example strategic planning support costs in H1 2022
and the DMD lease exit in H1 2021 as mentioned above.
Net finance charges of GBP3.8m (H1 2021: GBP4.5m) were lower
than the prior period by GBP0.7m due to lower average net debt.
Adjusted profit before tax was GBP15.3m, up 6.3% on H1 2021.
Taxation of GBP3.1m indicates a marginally lower effective tax rate
of 20.3% compared to the prior period (H1 2021: 20.8%) for
continuing operations.
STATUTORY RESULTS
GROUP
Continuing Operations GBPm 26 weeks 26 weeks Change
to to
26 Feb 2022 27 Feb
2021
Revenue 544.8 551.6 (1.2)%
Operating profit 17.0 18.8 (9.6)%
Net finance costs (2.4) (2.8) (14.3)%
------------------------------------------------ ------------- --------- --------
Profit before tax 14.6 16.0 (8.8)%
Taxation (3.0) (3.0) -%
------------------------------------------------ ------------- --------- --------
Effective tax rate 20.5% 18.7%
------------------------------------------------ ------------- --------- --------
Profit after tax 11.6 13.0 (10.8)%
------------------------------------------------ ------------- --------- --------
Discontinued Operations GBPm
------------------------------------------------ ------------- --------- --------
Loss for the year from discontinued operations (0.1) (0.4) (75.0)%
------------------------------------------------ ------------- --------- --------
Profit attributable to equity shareholders
continuing and discontinued operations 11.5 12.6 (8.7)%
------------------------------------------------ ------------- --------- --------
Statutory Continuing profit before tax of GBP14.6m was a GBP1.4m
decrease on the prior year (H1 2021: GBP16.0m). The decrease was
primarily driven by the GBP1.6m of adjusting items in respect of
the costs associated with the receipt of the pension surplus from
the Trustee.
The Company has net liabilities of GBP38.7m on its balance sheet
(H1 2021: GBP69.0). The net liabilities arose largely as the 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 27 to to
26 Feb Feb 2021 26 Feb 27 Feb
2022 2022 2021
----------------------------------- ---------- ---------- ----------- ----------
Earnings attributable to ordinary
shareholders (GBPm) 12.2 11.4 11.6 13.0
Basic weighted average number of
shares (millions) 240.7 245.2 240.7 245.2
Basic Earnings per share 5.1p 4.6p 4.8p 5.3p
Diluted weighted number of shares
(millions) 252.0 256.1 252.0 256.1
Diluted Earnings per share 4.8p 4.5p 4.6p 5.1p
----------------------------------- ---------- ---------- ----------- ----------
Continuing Adjusted EPS of 5.1p, is an increase of 0.5p on the
prior year driven by the improved trading of the business and lower
interest charges.
Statutory continuing earnings per share, which includes adjusted
items, is down 0.5p to 4.8p (H1 2021: 5.3p) and reflects the
inclusion of a GBP1.6m pension administration charge in respect of
indemnity insurances and pension wind up costs within profit,
noting that the gross gain from the return of pension surplus is
recorded in Other Comprehensive Income.
DIVID
26 weeks 26 weeks
to to
26 Feb 2022 27 Feb
2021
----------------------------------------- ------------- ---------
Dividend per share (proposed) 1.4p nil
Dividend per share (paid and recognised) 1.15p nil
----------------------------------------- ------------- ---------
The Board is proposing an interim dividend of 1.4p per share,
(FY2021: 0.5p per share declared in June 2021). The proposed
dividend will be paid on 7 July 2022 to shareholders on the
register at close of business on 10 June 2022. The ex-dividend date
will be 9 June 2022. While no dividend was proposed within the H1
2021 interim report, an interim dividend of 0.5p per share
(GBP1.2m) was subsequently declared in June 2021 and paid in July
2021.
The FY2021 final dividend of 1.15p per share (GBP2.8m) was
approved by shareholders at the Annual General Meeting on 20
January 2022, paid on 10 February 2022 and is recognised in the
Group Financial Statements.
ADJUSTED ITEMS
Continuing Operations GBPm 26 weeks to 26 weeks to 27
26 Feb 2022 Feb 2021
------------------------------------- ------------- ---------------
Transformation programme planning (0.6) -
costs
Pensions (1.7) (0.2)
Network and reorganisation costs 0.2 0.1
Total before tax and interest (2.1) (0.1)
Finance income - unwind of deferred
consideration 1.4 1.7
------------------------------------- ------------- ---------------
Total before tax (0.7) 1.6
Taxation 0.1 -
------------------------------------- ------------- ---------------
Total after taxation (0.6) 1.6
Adjusted items before tax of GBP0.7m were a GBP2.3m increase on
the prior year period (H1 2021: GBP1.6m credit). The increase was
due to GBP1.6m of additional costs in respect of the return of the
net GBP8.1m pension surplus and GBP0.1m of costs incurred in
respect of rationalising the Company's pension portfolio, GBP0.6m
of costs related to strategic planning projects and GBP0.3m related
to the lower unwind of the Tuffnells deferred consideration.
Further information on these items can be found in Note 4 of the
Group Financial Statements.
Adjusted items are defined in the Glossary to the Group
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
Free cash flow generation remains one of the Company's key
strengths. Free cash flow includes lease payments, Adjusted items,
interest, and tax.
GBPm 26 weeks 26 weeks
to to
26 Feb 27 Feb
2022 2021
---------------------------------------------------- --------- ---------
Operating profit continuing (including Adjusted
items) 17.0 18.8
Adjusting items 2.1 0.1
Depreciation & amortisation 5.3 5.5
---------------------------------------------------- --------- ---------
Adjusted EBITDA (including IFRS 16) 24.4 24.4
Working capital movements (7.8) (4.8)
Capital expenditure (1.2) (0.6)
Lease payments (3.3) (2.9)
Net interest and fees (5.2) (6.3)
Taxation (3.4) (2.8)
Other 0.4 0.2
---------------------------------------------------- --------- ---------
Free cash flow (excluding Adjusted items) 3.9 7 .2
---------------------------------------------------- --------- ---------
Adjusted items (cash effect) - return of pension 8.1 -
surplus
Adjusted items (cash effect) - receipt of deferred 6.5 -
consideration
Adjusted items (cash effect) - Other (1.0) (2.6)
Continuing Free cash flow 17.5 4.6
---------------------------------------------------- --------- ---------
The Company generated GBP17.5m of free cash flow which was
GBP12.9m higher than H1 2021 (GBP4.6m) due to the GBP8.1m receipt
of pension surplus and GBP6.5m deferred consideration received from
Tuffnells.
The increase in working capital in the year was GBP7.8m (H1
2021: GBP4.8m) due to the timing of period end compared to the
billing cycles of both publishers and retailers. These cycles lead
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 GBP1.2m (H1 2021:
GBP0.6m), an increase of GBP0.6m due to depot refurbishments which
were initiated at the end of FY2021.
Lease payments of GBP3.3m (H1 2021: GBP2.9m) have increased by
GBP0.4m due to lease renewals and rent reviews signed during the
period.
Net interest and fees of GBP5.2m (H1 2021: GBP6.3m) has
decreased by GBP1.1m, due to the lower levels of net debt. Both the
current and the prior year period included the payment of
arrangement fees in relation to the Company's refinancing of its
banking facilities (H1 2022: GBP2.7m, H1 2021 GBP2.8m).
Cash tax outflow of GBP3.4m was a GBP0.6m increase on the prior
year period (H1 2021: GBP2.8m outflow) owing principally to the
final payment in respect of the 2020 tax return in September
2021.
The wind-up of the Company's defined benefit pension scheme
(detailed further below) resulted in the receipt of GBP8.1m in
respect of the pension surplus in December 2021.
In November 2021 the first scheduled instalment of deferred
consideration was received from Tuffnells (GBP6.5m).
The total net cash impact of other Adjusted items was a GBP1m
outflow (H1 2021: GBP2.6m outflow). This comprised: GBP0.8m (H1
2021: GBPnil) of Transformation programme planning costs; GBP0.1m
(H1 2021: GBP0.2m) of Pension related costs and GBP0.1m (H1 2021:
GBP2.4m) 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
26 Feb 27 Feb
2022 2021
----------------------------------------------------- -------- --------
Opening Bank Net Debt (53.2) (79.7)
Continuing operations free cash flow 17.5 4.6
Discontinued operations free cash flow (0.3) (1.3)
----------------------------------------------------- -------- --------
Free cash flow 17.2 3.3
Dividend paid (2.8) -
Purchase of own shares for employee share schemes - (0.4)
Discontinued operations - Tuffnells working capital
loan - 6.7
Other - 0.1
Bank Net Debt (38.8) (70.0)
----------------------------------------------------- -------- --------
Bank Net Debt closed the period at GBP38.8m compared to GBP53.2m
at August 2021, a decrease of GBP14.4m. The reduction in debt was
driven by free cash flow from continuing operations of GBP17.5m as
described above. These inflows were offset by the payment of the
FY2021 final dividend of GBP2.8m in February 2022.
The Company's Bank Net Debt/EBITDA ratio decreased to 0.9x (H1
2021: 1.8x, FY2021 1.2x). The period end fell just before major
publisher payments of c.GBP20m were made, which benefitted reported
Bank Net Debt. Bank Net Debt rose to GBP61.5m on 28 February 2022
after the half year end. Following the balance sheet date, the
Company received a payment of GBP7.5m on 29 April 2022 in full and
final settlement of the deferred consideration arising from the
sale of Tuffnells in May 2020. This sum will be used to pay down
debt under the terms of the banking agreement.
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 GBP90m at the period end. This results in
a predictable fluctuation of net debt during the month compared to
the closing net debt position. Our average daily Bank Net Debt
during H1 2022 was GBP58.9m (H1 2021: GBP89.5m) a decrease of
34.2%.
Discontinued items cash flow in the current and prior period
relates to insurance settlements for incidents which occurred
during the Company's ownership of Tuffnells prior to 2 May
2020.
The Bank Net Debt to EBITDA covenant of 0.9x is comfortably
within our main leverage covenant ratio of 2.0x and we remain well
within all our other bank covenant tests at period end.
A reconciliation of Bank Net Debt (which excludes the IFRS16
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 COVID-19 and 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
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.
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 Smiths 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 risks and the regular reporting to,
and robust challenge from, both the Executive Team and Audit
Committee. The directors' assessment of these principal 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 landscape and the
Company's future strategic direction and ambition. The directors
have carried out a robust assessment of the Company's emerging and
principal risks, including those that could threaten its business
model, future performance, solvency or liquidity.
Risks are still subject to ongoing 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 Mitigations Strategic link/ change
potential impact
Macro-economic uncertainty
Deterioration in the Annual budgets and forecasts take into account the
macro-economic environment current macro-economic environment to set Strategic link:
results in supply side cost expectations internally and externally, allowing for Cost and efficiencies,
inflation. The or changing objectives to meet short Operations
Company is presented with and medium term financial targets.
cost challenges in a number Weekly cost monitoring enables oversight and action on Change:
of areas which are being a timely basis. Heightened
driven by increased Predictable level of volume decline within the core
competition in the business enables cost optimisation planning. Significant market
distribution labour market In the short term the Company has fixed energy uncertainty exists as a
and rises in fuel and contracts that mitigate current pricing volatility result of the conflict in
commodity prices. These in the market. Ukraine and continuing
cost increases present a The Company continues to be significantly cash impact of COVID-19 on the
risk when they cannot be generating to support its strategic priorities. wider indirect supply chain
fully mitigated through
increased prices
or other productivity gains.
This results in
deterioration in the 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, liquidity
objectives and returns to
shareholders.
------------------------------------------------------- ------------------------------
Acquisition and retention of labour
Due to the current We seek to offer market competitive terms to ensure Strategic link:
competition in the talent remains engaged. People first,
distribution labour market, We offer long term contracts with our sub-contracted Culture and values,
the Company is facing an delivery partners. Costs and efficiencies
increased risk of being We use a variety of platforms to recruit colleagues
unable to recruit and retain and to engage self-employed contractors. Change:
warehouse colleagues and The level of vacancies across warehouse and delivery No Change
support staff. contractors is monitored daily. The market continues to be
The same pressures are also We undertake workforce planning; performance, talent challenging, however the
being felt in sourcing and and succession initiatives; learning measures put in place have
retaining self-employed and development programmes; and promote the Company's successfully
delivery sub-contractors. culture and core values. stablised the risk.
A failure to maintain an Retention plans are reviewed to address key risk
appropriate level of areas, and attrition across the business
resourcing could result in is regularly monitored.
increased costs, Regular surveys are undertaken to monitor the
employee disengagement engagement of colleagues.
and/or loss of management
focus and underpins the
ability to address
the strategic priorities and
to deliver the forecast
performance.
------------------------------------------------------- ------------------------------
IT infrastructure and cyber security
To meet the needs of our Defined risk based approach to the information Strategic link:
stakeholders, our IT security roadmap and technology strategy which Technology
infrastructure needs to be is aligned to the strategic plans.
flexible, reliable * Regular tracking of key programmes against spend Change:
and secure. Secure targets and delivery dates. No Change
infrastructure prevents
external cyber-attack, The Company continues to
insider threat or supplier The Company assesses cyber risk on a day to day basis, invest in its infrastructure,
breach which could cause using proactive and reactive information however the background risk
service interruption and/or security controls to mitigate common threats. remains
the loss of Company and Dedicated information security investments and access high.
customer data. to third-party cyber security specialists.
Cyber incidents could lead The Company encourages a cyber aware culture by
to major adverse customer, undertaking exercises such as computer-based
financial, reputational and training and more regular communications about
regulatory specific cyber threats.
impacts. Flexible and
reliable IT infrastructure
means the Company is able to
meet its strategic
goals and react quickly to
changing events. The lack of
this could lead to the
Company being
unable to execute its
strategic goals.
------------------------------------------------------- ------------------------------
Legal and regulatory compliance
The Company is Changes in laws and regulations are monitored with Strategic link:
required to be policies and procedures being updated as Technology,
compliant with required. Sustainability,
all applicable Business-wide mandatory training programmes are in Operations
laws and place for higher risk regulatory areas.
regulations. External experts are used where applicable. Change:
Failure All major policies are reviewed by the Board or Audit No Change
to adhere to Committee on an annual basis.
these could Operational auditing and monitoring systems for higher The Company has a well
result in risk areas. managed process for
financial monitoring changes in
penalties and/or legislation and complying
reputational with them.
damage.
Key areas of
legal and
regulatory
compliance
include:
GDPR Health &
Safety
Tax compliance
Environmental
legislation
Employment law
------------------------------------------------------- ------------------------------
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
3 May 2022 3 May 2022
Smiths News plc
Condensed Consolidated Income Statement (Unaudited)
For the 26 weeks to 26 February 2022
GBPm Note 26 weeks to 26 26 weeks to 27 Audited
Feb 2022 Feb 2021 52 weeks to 28 Aug
2021
------------------ ------ ------------------------------
Adjusted Adjusted Total Adjusted Adjusted Total Adjusted Adjusted Total
items items items
(Note (Note (Note
4) 4) 4)
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Continuing Operations
Revenue 3 544.8 - 544.8 551.6 - 551.6 1,109.6 - 1,109.6
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Cost of Sales (508.0) - (508.0) (515.9) - (515.9) (1,036.2) - (1,036.2)
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Gross profit 36.8 - 36.8 35.7 - 35.7 73.4 - 73.4
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Administrative
expenses (17.9) (2.1) (20.0) (16.9) (0.1) (17.0) (33.9) (1.9) (35.8)
Income from
joint ventures 0.2 - 0.2 0.1 - 0.1 0.1 (0.3) (0.2)
Impairment
of joint venture
investment - - - - - - - (1.6) (1.6)
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Operating
profit/(loss) 3 19.1 (2.1) 17.0 18.9 (0.1) 18.8 39.6 (3.8) 35.8
Finance costs (3.8) (3.8) (4.5) - (4.5) (8.8) - (8.8)
Finance Income - 1.4 1.4 - 1.7 1.7 0.1 3.5 3.6
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Profit before
tax 3 15.3 (0.7) 14.6 14.4 1.6 16.0 30.9 (0.3) 30.6
Income tax
(expense)/credit 6 (3.1) 0.1 (3.0) (3.0) - (3.0) (4.6) 0.3 (4.3)
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Profit/(loss)
for the period
from Continuing
Operations 12.2 (0.6) 11.6 11.4 1.6 13.0 26.3 - 26.3
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Discontinued Operations
Loss for the
period from
Discontinued
Operations 9 - (0.1) (0.1) - (0.4) (0.4) - (0.1) (0.1)
------------------ ------ --------- --------- -------- --------- --------- --------
Profit/(loss)
attributable
to equity
shareholders
Continuing
and Discontinued
Operations 12.2 (0.7) 11.5 11.4 1.2 12.6 26.3 (0.1) 26.2
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- ---------
Audited
Note 26 weeks to 26 26 weeks to 27 52 weeks to 28 Aug
Feb 2022 Feb 2021 2021
------------------ ------ ------------------------------ ------------------------------ ---------------------------------
Earnings in pence
per share from
Continuing Operations
Basic 8 5.1 4.8 4.6 5.3 10.8 10.8
Diluted 8 4.8 4.6 4.5 5.1 10.3 10.3
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Earnings in pence
per share total
Basic 8 5.1 4.8 4.6 5.1 10.8 10.8
Diluted 8 4.8 4.6 4.5 4.9 10.3 10.3
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Equity dividends
pence per
share 7 1.4 nil 1.65
------------------ ------ --------- --------- -------- --------- --------- -------- ---------- --------- ----------
Condensed Consolidated Statement of Comprehensive Income
(Unaudited)
For the 26 weeks to 26 February 2022
GBPm Note Audited
26 weeks 26 weeks 52 weeks
to to to 28 Aug
26 Feb 2022 27 Feb 2021 2021
------------------------------------------- ----- -------------- -------------- -----------
Continuing
Items that will not be reclassified
to the Income Statement:
Reassessment as to recoverability
of retirement benefit scheme
surplus 5 14.8 0.1 0.4
Tax relating to components of
other comprehensive income that
will not be reclassified 5 (5.1) - 0.2
------------------------------------------- ----- -------------- -------------- -----------
9.7 0.1 0.6
Other comprehensive income for
the period - Continuing 9.7 0.1 0.6
Profit for the period - Continuing 11.6 13.0 26.3
Total comprehensive income for
the period - Continuing 21.3 13.1 26.9
Other comprehensive income for - - -
the period Discontinued
Loss for the year - Discontinued (0.1) (0.4) (0.1)
------------------------------------------- ----- -------------- -------------- -----------
Total comprehensive loss for
the period - Discontinued (0.1) (0.4) (0.1)
------------------------------------------- ----- -------------- -------------- -----------
Total comprehensive income for
the period attributable to shareholders: 21.2 12.7 26.8
------------------------------------------- ----- -------------- -------------- -----------
Total comprehensive income for the period was fully attributable
to the equity holders of the parent company.
Consolidated Balance Sheet (Unaudited)
As at 26 February 2022
GBPm Note Audited
As at As at As at
26 Feb 2022 27 Feb 2021 28 Aug 2021
-------------------------------------- ----- -------------- -------------- -------------
Non-current assets
Intangible assets 11 2.0 3.0 2.3
Property, plant and equipment 8.3 8.1 9.4
Right of use assets 27.7 30.7 28.4
Interest in joint venture 3.0 4.8 2.9
Other receivables - 3.2 2.3
Deferred tax assets 1.7 0.8 1.8
42.7 50.6 47.1
-------------------------------------- ----- -------------- -------------- -------------
Current assets
Inventories 14.6 15.2 13.2
Trade and other receivables 106.0 98.4 106.6
Cash and bank deposits 12 24.3 10.0 19.3
144.9 123.6 139.1
-------------------------------------- ----- -------------- -------------- -------------
Total assets 187.6 174.2 186.2
-------------------------------------- ----- -------------- -------------- -------------
Current liabilities
Trade and other payables (131.3) (125.4) (136.5)
Current tax liabilities - (1.9) (0.3)
Lease Liabilities (6.1) (5.9) (5.9)
Bank overdrafts and other borrowings 12 (13.3) (21.3) (21.2)
Provisions 13 (2.4) (4.1) (3.6)
(153.1) (158.6) (167.5)
Non-current liabilities
Bank loans and other borrowings 12 (46.9) (56.7) (50.1)
Non-current provisions 13 (3.8) (2.5) (3.0)
Lease Liabilities (22.5) (25.4) (23.3)
(73.2) (84.6) (76.4)
-------------------------------------- ----- -------------- -------------- -------------
Total liabilities (226.3) (243.2) (243.9)
-------------------------------------- ----- -------------- -------------- -------------
Total net liabilities (38.7) (69.0) (57.7)
-------------------------------------- ----- -------------- -------------- -------------
Equity
Called up share capital 15 12.4 12.4 12.4
Share premium account 15 60.5 60.5 60.5
Other reserves (282.1) (281.5) (283.6)
Retained earnings 170.5 139.6 153.0
-------------------------------------- ----- -------------- -------------- ---------------
Total shareholders' equity (38.7) (69.0) (57.7)
-------------------------------------- ----- -------------- -------------- ---------------
Condensed Consolidated Statement of Changes in Equity
(Unaudited)
For the 26 weeks to 26 February 2022
GBPm Note Share Share Other Retained Total
Capital Premium Reserves Earnings equity
Account
---------------------------------- ------ ---------------- ---------------- ---------- ---------- --------
Balance at 29 August 2020 12.4 60.5 (281.5) 127.0 (81.6)
------------------------------------------ ---------------- ---------------- ---------- ---------- --------
Profit for the period - - - 12.6 12.6
Remeasurements of retirement
benefit schemes - - - 0.1 0.1
Total comprehensive income
for the period - - - 12.7 12.7
Employee share schemes purchases - - (0.5) - (0.5)
Employee share schemes awards - - 0.5 (0.5-) -
Recognition of share-based
payments - - - 0.4 0.4
---------------- ---------------- ---------- ---------- --------
Balance at 27 February 2021 12.4 60.5 (281.5) 139.6 (69.0)
------------------------------------------ ---------------- ---------------- ---------- ---------- --------
Profit for the period - - - 13.6 13.6
Actuarial gain on defined
benefit pension scheme - - - 0.3 0.3
Tax relating to components
of other comprehensive income - - - 0.2 0.2
Total comprehensive income
for the period - - - 14.1 14.1
Dividends Paid - - - (1.2) (1.2)
Employee share schemes purchases - - (2.2) - (2.2)
Employee share schemes awards - - 0.1 (0.1) -
Recognition of share-based
payments - - - 0.6 0.6
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 - - - 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 - - - (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)
------------------------------------------ ---------------- ---------------- ---------- ---------- --------
Condensed Consolidated Cash Flow Statement (Unaudited)
For the 26 weeks to 26 February 2022
GBPm Note 26 weeks 26 weeks 52 weeks
to to to
26 Feb 2022 27 Feb 2021 28 Aug 2021
--------------------------------------- ----- ------------- ------------- -------------
Net cash from operating activities 10 20.3 13.1 41.4
--------------------------------------- ----- ------------- ------------- -------------
Investing activities
Dividends from joint ventures 0.1 0.1 0.2
Capital expenditure (1.2) (0.6) (2.4)
Loan receipts - 6.5 6.5
Deferred consideration receipts 6.5 - -
Interest receivable - 0.2 0.1
Net cash received in investing
activities 5.4 6.2 4.4
--------------------------------------- ----- ------------- ------------- -------------
Financing activities
Interest paid (2.5) (3.5) (6.8)
Arrangement fees paid (2.7) (2.8) (2.7)
Dividends paid (2.8) - (1.2)
Repayments of leases (3.3) (2.9) (5.9)
Purchase of share for employee
benefit trust - (0.4) (2.6)
Repayment of term loan and revolving
credit facility (50.4) (80.0) (57.5)
New loans issued 60.0 80.0 80.0
Net (decrease) in borrowings (19.0) (50.3) (80.2)
Net cash used in financing activities (20.7) (59.9) (76.9)
--------------------------------------- ----- ------------- ------------- -------------
Net increase/(decrease) in cash
and cash equivalents 5.0 (40.6) (31.1)
Effect of foreign exchange rate
changes - - (0.2)
--------------------------------------- ----- ------------- ------------- -------------
5.0 (40.6) (31.3)
Opening net cash and cash equivalents 19.3 50.6 50.6
--------------------------------------- ----- ------------- ------------- -------------
Closing net cash and cash equivalents 24.3 10.0 19.3
--------------------------------------- ----- ------------- ------------- -------------
During the period, cash outflow from operating activities
attributed to Discontinued Operations amounted to GBP0.3m (H1 2021:
GBP1.3m outflow) and GBPnil was received in respect of investing
activities (H1 2021: GBPnil received). There were GBPnil (H1 2021:
GBPnil) cash outflows associated with financing activities
attributable to Discontinued Operations.
Notes to the Condensed Unaudited Interim Financial
Statements
For the 26 weeks to 26 February 2022
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 2021 Annual Report and Accounts. On 31
December 2020, 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 26
February 2022 (prior financial period 26 weeks to 27 February 2021,
prior financial period 52 weeks ended 28 August 2021).
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 prior financial
period 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 issued by BDO LLP. The auditors review opinion on the 26
weeks period ended 26 February 2022 is at the end of this
report.
A) Discontinued Operations
On 28 February 2020, the Board concluded that the Tuffnells
division had met the criteria as being held for sale and should be
classified as a Discontinued Operation in accordance with
International Financial Reporting Standards (IFRS) 5 'Non-current
Assets Held for Sale and Discontinued Operations'. On 2 May 2020
Tuffnells was sold, but the Company assumed liability to settle
certain pre-disposal insurance and legal claims relating to
employer's liability, public liability, motor accident claims and
legal claims, held as provisions, the movement on which has passed
through the income statement in the period. The net results of
Discontinued Operations are presented separately in the
consolidated income statement.
B) Going concern
The condensed interim financial statements have been prepared on
a going concern basis.
The Company currently has a net liability position of GBP38.7m
as at 26 February 2022. All bank covenant tests were met at the
period end with the key Bank Net Debt: EBITDA (ex IFRS16) ratio of
0.9x, below the facility agreement covenant test threshold of 2.0x
reducing by 0.25x to 1.75x at 25 February 2023.
The intra-month working capital cash flow cycle generates a
routine and predictable cash swing of up to GBP40m, the Company
utilises the Revolving Credit Facility (RCF) to manage this,
GBP27.0m of the RCF remains available at the period end. This
results in a predictable fluctuation of Bank Net Debt during the
month compared to the closing Bank Net Debt position. Our average
daily Bank Net Debt during H1 2022 was GBP58.9m (H1 2021:
GBP89.5m).
Bank facility
The Company has a facility of GBP90 million, comprising a GBP60
million amortising term loan ('Facility A') and a GBP30 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 4.25% per annum, plus 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:
agreed repayments against Facility A arising from funds received in
relation to deferred consideration received following the sale of
Tuffnells and any disposal proceeds, plus an amortisation schedule
of GBP3.0m in the remainder of FY2022, GBP8m in FY2023 and then
GBP10m in FY2024 and FY2025 respectively for the repayment of
Facility A and a final bullet payment; and capped dividend payments
of up to GBP10m in respect of any financial year. The RCF will
reduce by GBP5m in November 2022 and then by GBP2.5m every 6 months
from 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.
Any remaining balances will be repaid on or before the final
maturity date of the facility which 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 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 February 2023 if EBITDA (ex
IFRS 16) was 40% below expectations and the deferred consideration
from the sale of Tuffnells was not received. The directors consider
the likelihood of this level of downturn and non-receipt 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 until at least 2024;
-- banking facilities extend to August 2025; 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 up to 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 FY2022 nor FY2021.
Assessment
Having considered the above and the funding requirements of the
Group and Company, the directors are confident that headroom under
the bank facility remains adequate, future covenant tests can be
met and there is a reasonable expectation that the business can
meet its liabilities as they fall due for a period of greater than
12 months (being an assessment period of 16 months) from the date
of approval of the Group Financial Statements. For this reason, the
directors continue to adopt the going concern basis in preparing
the financial statements and no material uncertainty has been
identified.
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 changes in key accounting judgements and estimates in the
period are laid out below.
Retirement benefit obligations
During the period, the Trustee reached the position where it was
advised that it could legally distribute the pension cash surplus
to the employer as 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.
Tuffnells deferred consideration
In H1 2022, Tuffnells Holdings Limited (formerly Palm Bidco
Limited (THL)) approached the Company regarding the outstanding
deferred consideration payable following the acquisition of
Tuffnells in May 2020. Mindful of the current macro-economic
climate and to extinguish any further liability or outstanding
arrangements with THL, the Board agreed revised terms such that the
Company will accept GBP7.5m in full and final settlement of the
outstanding deferred consideration where received on or before 2
August 2022 (Note 9 for further details). If payment of GBP7.5m is
not received on or before 2 August 2022, the terms revert back to
the original agreement with a total of GBP8.5m payable in two equal
tranches of GBP4.25m with the first due on or prior to 2 August
2022 and the second due on or prior to 2 May 2023.
The carrying value of the deferred consideration as at the
balance sheet date has been assessed in light of the revised terms,
expected timing of the cashflows and amended discount rate and
there is no material impact.
The Company has performed sensitivity analysis on the carrying
value of the deferred consideration as at the balance sheet date
using the possible scenarios below:
-- If the assumption for the likely timing of the cash receipt
is accelerated by one month, the impact as at H1 2022 would be a
GBP0.4m increase in the carrying value of the Tuffnells deferred
consideration receivable and a credit to finance income of the same
amount; and
-- If the assumption for the likely timing of the cash receipt
is accelerated by three months, the impact as at H1 2022 would be a
GBP0.7m increase in the carrying value of the Tuffnells deferred
consideration receivable and a credit to finance income of the same
amount.
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 26 weeks to 27 52 weeks to 28
Feb 2022 Feb 2021 Aug 2021
----------------- ------- ---------------------------------- ---------------------------------- ----------------------------------
Continuing Discontinued Total Continuing Discontinued Total Continuing Discontinued Total
Note
----------------- ------- ----------- ------------- ------ ----------- ------------- ------ ----------- ------------- ------
Transformation
programme
planning
costs (a) (0.6) - (0.6) - - - (1.1) - (1.1)
Pension (b) (1.7) - (1.7) (0.2) - (0.2) (1.0) - (1.0)
Network and
re-organisation
costs (c) 0.2 - 0.2 0.1 - 0.1 0.1 - 0.1
Share of loss
from joint
ventures (d) - - - - - - (0.3) - (0.3)
Asset
impairments (e) - - - - - - (1.6) - (1.6)
Review and sale
of Tuffnells (f) - (0.1) (0.1) - (0.4) (0.4) - (0.6) (0.6)
VAT Refund (g) - - - - - - - 0.4 0.4
Other - - - - - - 0.1 - 0.1
Total before tax
and interest (2.1) (0.1) (2.2) (0.1) (0.4) (0.5) (3.8) (0.2) (4.0)
Finance income
- unwind of
deferred
consideration (h) 1.4 - 1.4 1.7 - 1.7 3.5 - 3.5
----------------- ------- ----------- ------------- ------ ----------- ------------- ------ ----------- ------------- ------
Total before tax (0.7) (0.1) (0.8) 1.6 (0.4) 1.2 (0.3) (0.2) (0.5)
Taxation 0.1 - 0.1 - - - 0.3 0.1 0.4
-------------------------- ----------- ------------- ------ ----------- ------------- ------ ----------- ------------- ------
Total after taxation (0.6) (0.1) (0.7) 1.6 (0.4) 1.2 - (0.1) (0.1)
-------------------------- ----------- ------------- ------ ----------- ------------- ------ ----------- ------------- ------
Adjusted items on a continuing basis for the period totalled a
cost GBP0.6m after tax for the period, compared to GBP1.6m credit
in the prior period.
Adjusted items are defined in the Glossary. In the directors'
opinion, removing these items from 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 the 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 costs GBP0.6m (H1 2021: GBPnil, FY 2021: GBP1.1m)
The Company continued to incur professional fees in relation to
strategic planning projects which will be concluded in H2 2022.
These costs are reported as adjusting items on the basis that they
are significant in both nature and quantum and are non-recurring in
nature.
b) Pensions GBP1.7m (H1 2021: GBP0.2m, FY 2021: GBP1.0m)
The Trust completed the wind-up of the News Section of the WH
Smith 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 former members owed amounts following
the Lloyds GMP ruling in November 2020. The monies paid into the
escrow account have been accounted for as an Adjusted item through
the income statement. The winding up of the News Section was
formally completed on 25 February 2022 through the purchase of
insurance run-off cover at a cost of GBP0.1m less than the amount
held in the escrow account. This amount has been credited to the
Adjusted items in the Income statement.
In H1 2022, the Company incurred GBP0.4m (H1 2022: GBP0.2m) in
pension administrative expenses and other professional fees as a
result of the winding up process.
Costs of GBP0.1m (H1 2021: GBP0.4m) were incurred in the
rationalisation of the Company's pension portfolio.
These costs are reported as adjusting items on the basis they
are significant in both nature and quantum and are unrelated to the
Group's ordinary activities.
c) Network and re-organisation credits GBP0.2m (H1 2021: GBP0.1m, FY 2021: GBP0.1m)
The disposal of the Tuffnells business and lockdowns associated
with the COVID-19 pandemic led to the Company restructuring its
support functions and a reorganisation provision was put in place.
The Company has released GBP0.2m (H1 2021: GBP0.1m, FY 2021:
GBP0.1m) of this provision in the current period.
These costs are reported as adjusting items on the basis that
the original provision was reported as adjusting.
d) Share of profit of joint ventures GBPnil (H1 2021: GBPnil, FY 2021: GBP0.3m)
During the period ended 28 August 2021 Rascal Solutions Limited,
one of the Company's joint ventures wrote off an intangible asset
in its own accounts as it considered it to have no future economic
value. There has been no significant asset impairments or write
downs in the current period.
These costs are considered adjusting because they are
significant to the investment in Rascal, are non-recurring in
nature and to aid comparability between periods.
e) Asset Impairments GBPnil (H1 2021: GBPnil, FY 2021: GBP1.6m)
During the period ended 28 August 2021 the Company reviewed the
business plan for its Rascal joint venture and assessed that its
investment had been impaired by GBP1.6m. In the current period
Rascal has performed in line with expectations and no further
impairment loss or reversal is indicated.
The Company considers the impact to be adjusting given the
impairment charge is significant in both quantum and nature to the
results of the Company.
f) Review and sale of Tuffnells GBP0.1m (HY 2021: GBP0.4, FY 2021: GBP0.6m)
As part of the sale of Tuffnells the Company assumed liability
to settle certain pre-disposal insurance and legal claims relating
to: employer's liability, public liability, motor accident claims
and legal claims. In the current financial period GBP0.1m (HY 2021:
GBP0.4m, FY 2021: GBP0.6m ) of costs were recognised due to
clarification of the likely settlement costs of existing
claims.
These costs are considered adjusting because they are unrelated
to the Company's ordinary activities and to aid comparability
between periods.
g) VAT refund GBPnil (HY 2021: GBPnil, FY 2021: GBP0.4m)
During the period ended 28 August 2021 the Company received a
refund of VAT previously considered as non-recoverable on prior
disposals of businesses previously owned by the Group.
This income was reported as adjusted based on its quantum and
that it was unrelated to the Group's ordinary activities.
h) Finance income - deferred consideration GBP1.4m income (H1 2021: GBP1.7m, FY 2021: GBP3.5m)
During the current period, GBP1.4m of finance income has been
recognised in relation to the unwind of the discount on the
Tufnells deferred consideration.
The deferred consideration arose on the disposal of Tuffnells
and for that reason has been classified as adjusting because it
does not relate to the underlying trade of the business.
5 Retirement Benefit Obligation
Defined benefit pension schemes
In the period the Company was responsible for one defined
benefit scheme, 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.
The amounts recognised in the balance sheet are as follows:
GBPm As at 26 As at 27 As at 28
Feb 2022 Feb 2021 Aug 2021
---------------------------- ----------- ------------ ------------
Present value of defined
benefit obligation - (470.4) (0.1)
Fair value of assets - 486.4 14.9
---------------------------- ----------- ------------ ------------
Net surplus - 16.0 14.8
Amounts not recognised due
to asset limit - (16.0) (14.8)
Pension liability - - -
---------------------------- ----------- ------------ ------------
The IAS 19 pre-tax surplus of GBP14.8m has been recognised
through other comprehensive income in H1 2022 after the Trustee
confirmed its intention to return the surplus cash to the employer
giving the Company an unconditional right to the surplus. The 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, which
has now been reversed.
On 3 December 2021, the Company received the sum of GBP8.1m in
respect of the net cash surplus held by the Trustee following
finalisation of the buy-out of the defined benefit liabilities in
the News Section of the Trust. As agreed with the Trustee, 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 payment of taxes owed to HMRC.
The pension surplus of GBP8.1m (net of tax and costs) received
was recognised as cash on the balance sheet and in accordance with
the requirements of the banking agreement, this cash has been used
to repay existing debt.
The tax charge which represents 35% of the surplus (GBP5.1m) has
been treated in accordance with the recognition of the surplus and
recognised through other comprehensive income. The liability was
extinguished in January 2022 when the Trustee paid the outstanding
tax balance on behalf of the Company.
The Company had 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.
During the period GBP0.4m of administration expenses were
incurred by the Trustee to obtain legal and consulting advice
before the surplus of GBP8.1m could be refunded. These
administration costs have been recognised in the income statement
as an Adjusted item.
The principal long-term assumptions used to calculate scheme
liabilities on all Company schemes are:
% p.a. 26 weeks to 26 weeks to 52 weeks to
26 Feb 2022 27 Feb 2021 28 Aug 2021
----------------------------- -------------- ------------- -------------
Discount rate N/a 1.80% 1.95%
Inflation assumptions - CPI N/a 2.70% 2.80%
Inflation assumptions - RPI N/a 3.30% 3.40%
----------------------------- -------------- ------------- -------------
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 value Defined Impact of Total
of scheme benefit IFRIC 14
assets obligation on defined
benefit
pension
schemes
------------------------------------------ ----------- ------------- ------------ ------
At 29 August 2020 496.4 (481.2) (15.2) -
------------------------------------------ ----------- ------------- ------------ ------
Interest cost 3.6 (3.6) (0.1) (0.1)
Total amount recognised in income
statement 3.6 (3.6) (0.1) (0.1)
------------------------------------------ ----------- ------------- ------------ ------
Return on plan assets excluding
amounts included in net interest (2.9) - - (2.9)
Actuarial gains on scheme liabilities - 3.7 - 3.7
Change in surplus not recognised - - (0.7) (0.7)
------------------------------------------ ----------- ------------- ------------ ------
Amount recognised in other comprehensive
income (2.9) 3.7 (0.7) 0.1
------------------------------------------ ----------- ------------- ------------ ------
Employer contributions - - - -
Benefit payments (10.7) 10.7 - -
------------------------------------------ ----------- ------------- ------------ ------
Amounts included in cash flow
statement (10.7) 10.7 - -
------------------------------------------ ----------- ------------- ------------ ------
At 27 February 2021 486.4 (470.4) (16.0) -
------------------------------------------ ----------- ------------- ------------ ------
Interest cost 0.8 (0.6) (0.1) 0.1
Administration expenses (0.4) - - (0.4)
Total amount recognised in income
statement 0.4 (0.6) (0.1) (0.3)
------------------------------------------ ----------- ------------- ------------ ------
Return on plan assets excluding
amounts included in net interest (5.8) - - (5.8)
Actuarial gains on scheme liabilities - 4.8 - 4.8
Change in surplus not recognised - - 1.3 1.3
------------------------------------------ ----------- ------------- ------------ ------
Amount recognised in other comprehensive
income (5.8) 4.8 1.3 0.3
------------------------------------------ ----------- ------------- ------------ ------
Employer contributions - - - -
Benefit payments (3.8) 3.8 - -
------------------------------------------ ----------- ------------- ------------ ------
Amounts included in cash flow
statement
------------------------------------------ ----------- ------------- ------------ ------
Settlement (462.3) 462.3 - -
------------------------------------------ ----------- ------------- ------------ ------
At 28 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 26 February 2022 - - - -
------------------------------------------ ----------- ------------- ------------ ------
6 Income Tax Expense
The income tax charge for the 26 weeks ended 26 February 2022 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
before tax from Continuing Operations is 20.3% (H1 2021: 20.8%).
The rate of tax on Adjusted profits (on both Continuing and
Discontinued Operations) is 20.5% (H1 2021: 18.7%).
An increase in the UK corporation tax rate to 25% from 1 April
2023 was substantially enacted at the balance sheet date. Taxation
for other jurisdictions is calculated at the rates prevailing in
the respective jurisdictions.
7 Dividends
Paid and proposed dividends 26 weeks 26 weeks 52 weeks 26 weeks 26 weeks 52 weeks
for the period to 26 to 27 to 28 to 26 to 27 to 28
Feb 2022 Feb 2021 Aug 2021 Feb 2022 Feb 2021 Aug 2021
Per share Per share Per share GBPm GBPm GBPm
----------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Interim dividend 1.4p - 0.5p 3.3 - 1.2
Final dividend - - 1.15p - - 2.8
----------------------------- ---------- ---------- ---------- ---------- ---------- ----------
1.4p - 1.65p 3.3 - 4.0
----------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Recognised dividends
for the period
Per share Per share Per share GBPm GBPm GBPm
----------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Final dividend - prior
year - - 1.15p 2.8 - -
Interim dividend - - - - - - -
current year
----------------------------- ---------- ---------- ---------- ---------- ---------- ----------
- - 1.15p 2.8 - -
----------------------------- ---------- ---------- ---------- ---------- ---------- ----------
An interim dividend of 1.4p per ordinary share is proposed for
the 26-week period to 26 February 2022 (February 2021: GBPnil per
ordinary share), which is expected to be paid on 7 July 2022 to all
shareholders who are on the register of members at the close of
business on 10 June 2022. The ex-dividend date will be 9 June 2022.
While no dividend was proposed at the H1 2021 interim financial
report, a dividend of 0.5p per share was subsequently proposed in
June 2021 and paid in July 2021.
The FY2021 final dividend of 1.15p per share (GBP2.8m) was
approved by shareholders at the Annual General Meeting on 20
January 2022 and paid on 10 February 2022 and is recognised in this
period.
8 Earnings per share
26 weeks to 26 Feb 26 weeks to 27 52 weeks to 28
2022 Feb 2021 Aug 2020
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) (7.0) (2.5) (4.2)
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
240.7 245.2 244.5
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Basic earnings
per share (EPS)
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Continuing
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Adjusted earnings
attributable
to ordinary
shareholders 12.2 240.7 5.1 11.4 245.2 4.6 26.3 243.5 10.8
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Adjusted items (0.6) 1.6 -
Earnings attributable
to ordinary
shareholders 11.6 240.7 4.8 13.0 245.2 5.3 26.3 243.5 10.8
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Discontinued
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Adjusted Profit
attributable
to ordinary
shareholders - 240.7 - - 245.2 - - 243.5 -
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Adjusted items (0.1) (0.4) (0.1) - -
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Profit/(loss)
attributable
to ordinary
shareholders (0.1) 240.7 - (0.4) 245.2 (0.2) (0.1) 243.5 -
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Total - Continuing
and Discontinued
Operations
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Adjusted earnings
attributable
to ordinary
shareholders 12.2 240.7 5.1 11.4 245.2 4.6 26.3 243.5 10.8
Adjusted items (0.7) 1.2 (0.1)
Earnings attributable
to ordinary
shareholders 11.5 240.7 4.8 12.6 245.2 5.1 26.2 243.5 10.8
---------------------- -------- ---------- ------ -------- ---------- -------
Diluted earnings
per share (EPS)
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Effect of dilutive
securities 11.3 10.9 2.6
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Continuing
Diluted Adjusted
EPS 12.2 252.0 4.8 11.4 256.1 4.5 26.3 254.8 10.3
Diluted EPS 11.6 252.0 4.6 13.0 256.1 5.1 26.3 254.8 10.3
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Discontinued
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Diluted Adjusted
EPS - 252.0 - - 256.1 - - 254.8 -
Diluted EPS (0.1) 252.0 - (0.4) 245.2 (0.2) (0.1) 254.8 -
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Total - Continuing
and Discontinued
Operations
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
Diluted Adjusted
EPS 12.2 252.0 4.8 11.4 256.1 4.5 26.3 254.8 10.3
Diluted EPS 11.5 252.0 4.6 12.6 256.1 4.9 26.2 254.8 10.3
---------------------- -------- ---------- ------ -------- ---------- ------- -------- ---------- -------
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 2021 by 4.1m to 252.0m (Feb 2021: 256.1m) and resulted in
a Continuing diluted Adjusted EPS of 4.8p, an increase of 0.3p or
6.7% on prior period.
The calculation of diluted EPS reflects the potential dilutive
effect of employee incentive schemes of 11.3m dilutive shares (Feb
2021: 10.9m). There is no further dilutive effect from deferred
consideration in the period.
9 Discontinued Operations
Tuffnells
On 14 April 2020, a share purchase agreement was signed with
Tuffnells Holdings Limited (formerly Palm Bidco Limited (THL)) to
sell Tuffnells subject to shareholder approval. At the Company's
General Meeting held on 1 May 2020 shareholders approved the sale
and completion concluded on 2 May 2020.
The key terms of the share purchase agreement were as
follows:
Unsecured consideration payable by THL to the Company of
GBP15.0m in cash, payable in three tranches as follows:
-- GBP6.5m on the date 18 months following Completion (2 November 2021);
-- GBP4.25m on or prior to the date 27 months following Completion (2 August 2022); and
-- GBP4.25m on or prior to the date 36 months following Completion (2 May 2023).
The Company discounted the consideration at 30% and recognised
GBP7.1m on Completion. The first tranche of the unsecured
consideration (GBP6.5m) was paid on 2 November 2021 (18 months
following Completion) by THL and the remaining balance has unwound
to GBP6.5m and is shown as a current asset within Trade and other
receivables.
The Company also agreed to make available a loan facility
secured against selected properties. The total facility available
was GBP10.5m and included a 10% coupon. On Completion GBP6.5m was
drawn immediately. The facility was fully repaid (GBP6.7m) in
October 2020. As a result, the remaining part of the loan has been
cancelled and the security held over the properties has been
released.
In H1 2022, THL approached the Company regarding the outstanding
deferred consideration payable following the acquisition of
Tuffnells in May 2020. Mindful of the current macro-economic
climate and to extinguish any further liability or outstanding
arrangements with THL, the Board agreed revised terms such that the
Company will accept GBP7.5m in full and final settlement of the
outstanding deferred consideration where received on or before 2
August 2022. The carrying value of the deferred consideration has
been assessed in light of the revised terms and there is no
material impact.
Following the balance sheet date, the Company received a payment
of GBP7.5m on 29 April 2022 in full and final settlement of the
deferred consideration arising from the sale of Tuffnells in May
2020. This sum will be used to pay down debt under the terms of the
banking agreement.
Tuffnells were covered under a Company insurance policy and as
part of the disposal the decision was made that the Company would
pay for certain pre-existing motor and employment liability claims
that Tuffnells incurred prior to disposal. These claims will be
settled as they arise. On Completion the total liability was
estimated at GBP1.8m. There was a charge in the period of GBP0.1m
in respect of claims and a balance of GBP0.8m remains as a
provision at 26 February 2022.
10 Net Cash Inflow from Operating Activities
26 weeks 26 weeks 52 weeks
to to to
GBPm 26 Feb 2022 27 Feb 28 Aug
2021 2021
-------------------------------------- ----- ------------ --------- -----------
Continuing statutory operating
profit 17.0 18.8 35.8
Discontinued operating loss (0.1) (0.4) (0.2)
Operating profit 16.9 18.4 35.6
Profit on disposal of property,
plant and equipment - (0.2) (0.2)
Share of (profits)/losses of jointly
controlled entities (0.2) (0.1) 1.8
Pension receipts 8.1 - -
Depreciation of property, plant
and equipment 1.2 1.3 2.4
Depreciation of ROU assets 3.3 3.1 6.4
Amortisation of intangible assets 0.8 0.9 1.9
Impairment of Tuffnells assets - - 0.1
Share based payments 0.6 0.4 1.0
(Increase)/decrease in inventories (1.4) (1.2) 0.7
(Increase)/decrease in receivables (2.2) 9.3 5.4
Decrease in payables (4.5) (13.8) (5.1)
Decrease in provisions (0.5) (2.2) (2.8)
Non cash pension and admin costs 1.6 - 0.5
Net income tax paid (3.4) (2.8) (6.3)
Net cash inflow from operating
activities 20.3 13.1 41.4
--------------------------------------------- ----------- --------- ---------
During the period, cash outflow from operating activities
attributed to Discontinued Operations amounted to GBP0.3m (H1 2021:
GBP1.3m outflow).
11 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
2022 2021 2021 2022 2021 2021 2022 2021 2021
------- -------------- ------- ----- ------- -------------- ----- ----- ----- -------------- ----- ----- -------
DMD 5.7 - - - 2.6 - - - 8.3 - - -
Smiths
News - - - - 0.3 - - - 0.3 - - -
Total 5.7 - - - 2.9 - - - 8.6 - - -
------- -------------- ------- ----- ------- -------------- ----- ----- ----- -------------- ----- ----- -------
Other intangibles 2.0 3.0 2.3
----------------------- ------- ----- ------- -------------- ----- ----- ----- -------------- ----- ----- -------
Total Intangible
assets 2.0 3.0 2.3
---------------------------- -------- --- --- -------------- ----- ----- ----- -------------- ----- ----- -----
12 Cash and Borrowings
Cash and borrowings by currency (sterling equivalent) are as
follows:
GBPm Sterling Euro USD Other Total At 27 At 28
26 Feb Feb 2021 Aug 2021
2022
-------------------------------- --------- ---- --- ----- -------- ---------
Cash and bank deposits 23.2 0.6 0.3 0.2 24.3 10.0 19.7
Overdrafts- included in
cash and cash equivalents - - - - - - (0.4)
-------------------------------- --------- ---- --- ----- -------- --------- ---------
Net Cash and cash equivalents 23.2 0.6 0.3 0.2 24.3 10.0 19.3
-------------------------------- --------- ---- --- ----- -------- --------- ---------
Revolving credit facility (3.0) - - - (3.0) - -
Term loan - disclosed
within current liabilities (10.3) - - - (10.3) (21.3) (21.2)
Term loan - disclosed
within non-current liabilities (49.8) - - - (49.8) (58.7) (51.3)
Unamortised arrangement
fees - disclosed within
non-current liabilities 2.9 2.9 2.0 1.2
-------------------------------- --------- ---- --- ----- -------- --------- ---------
Total borrowings - Continuing (60.2) - - - (60.2) (78.0) (71.3)
-------------------------------- --------- ---- --- ----- -------- --------- ---------
Overdrafts - Discontinued - - - - - - -
Total overdraft and borrowings (60.2) - - - (60.2) (78.0) (71.3)
-------------------------------- --------- ---- --- --------
Net borrowings (37.0) 0.6 0.3 0.2 (35.9) (68.0) (52.0)
-------------------------------- --------- ---- --- ----- -------- --------- ---------
Total borrowings
-------------------------------- --------- ---- --- ----- -------- --------- ---------
Amount due for settlement
within 12 months (13.3) - - - (13.3) (21.3) (21.2)
Amount due for settlement
after 12 months (46.9) - - - (46.9) (56.7) (50.1)
-------------------------------- --------- ---- --- ----- -------- --------- ---------
(60.2) - - - (60.2) (78.0) (71.3)
-------------------------------- --------- ---- --- ----- -------- --------- ---------
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 a GBP60 million amortising term
loan ('Facility A') and a GBP30 million revolving credit facility
('RCF'). Facility A is also repayable from any proceeds received
from the deferred consideration as part of the sale of Tuffnells,
and any 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: agreed repayments
against Facility A arising from funds received in relation to
deferred consideration received following the sale of Tuffnells and
any disposal proceeds, plus an amortisation schedule of GBP3.0m in
the remainder of FY2022, GBP8m in FY2023 and then GBP10m in FY2024
and FY2025 respectively for the repayment of Facility A and a final
bullet payment; and capped dividend payments of up to GBP10m in
respect of any financial year. The RCF will reduce by GBP5m in
November 2022 and then by GBP2.5m every 6 months from 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 4.25% per annum over SONIA
(in respect of Facility A and the RCF).
At 26 February 2022, the Company had GBP27.0m (27 February 2021:
GBP35.0m) 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 26 Feb 2022 27 Feb 2021 28 Aug 2021
--------------------------------------- ----------- ----------- -----------
Cash and bank deposits 24.3 10.0 19.7
Overdrafts - included in cash
flow as cash and cash equivalents - - (0.4)
Cash and cash equivalents 24.3 10.0 19.3
---------------------------------------- ----------- ----------- -----------
Current borrowings (13.3) (21.3) (21.2)
Non-current borrowings (46.9) (56.7) (50.1)
---------------------------------------- ----------- ----------- -----------
Net borrowings including unamortised
arrangement fees (35.9) (68.0) (52.0)
---------------------------------------- ----------- ----------- -----------
Unamortised arrangement fees (2.9) (2.0) (1.2)
---------------------------------------- ----------- ----------- -----------
Bank Net Debt (38.8) (70.0) (53.2)
---------------------------------------- ----------- ----------- -----------
Lease liabilities* (28.6) (31.3) (29.2)
---------------------------------------- ----------- ----------- -----------
Net debt (67.4) (101.3) (82.4)
---------------------------------------- ----------- ----------- -----------
* The Company's banking covenants are on a 'frozen' GAAP basis.
Bank Net Debt is net borrowings of GBP38.8m (H1 2021: 70.0m) and
finance lease liabilities of GBPnil as defined by IAS 17 (H1 2021:
GBPnil) to calculate Bank Net Debt of GBP38.8m (H1 2021:
GBP70.0m).
The movement in net debt in the period includes GBP1.0m (H1
2021: GBP0.9m) loan fee amortisation and GBP2.7m of bank
arrangement fees, being GBP1.2m fee paid on the 12 month
anniversary of the signing of the original agreement in November
2021 plus GBP1.5m to extend and amend the facility in December 2021
(H1 2021: GBP2.8m).
13 Provisions
GBPm Provision Reorganisation Insurance Property Total
for onerous provisions and legal provisions
contracts provision
------------------------- ------------ ---------------- ---------- ----------- --------
At 28 August 2021 (0.7) (0.8) (1.3) (3.8) (6.6)
Additions - - (0.1) (0.3) (0.4)
Utilised in period 0.2 0.1 0.5 - 0.8
Released 0.1 - - - 0.1
Unwinding of discount
utilisation - - - (0.1) (0.1)
At 26 February
2022 (0.4) (0.7) (0.9) (4.2) (6.2)
============================= ============ ================ ========== =========== ========
GBPm 26 Feb 2022 27 Feb 28 Aug
2021 2021
------------------------- ------------ ------------ -------------- ----------- ----------
Included within
current liabilities (2.4) (4.1) (3.6)
Included within
non-current liabilities (3.8) (2.5) (3.0)
----------------------------- ------------ ------------ -------------- ----------- ----------
Total (6.2) (6.6) (6.6)
----------------------------- ------------ ------------ -------------- ----------- ----------
Reorganisation provisions of GBP0.7m relates to the restructure
of the Smiths News network and the Company's support functions that
was announced in prior periods.
Insurance and legal provisions represent the expected future
costs of employer's liability, public liability, motor accident
claims and legal claims. Included within the total balance is
GBP0.8m relating to claims from the Tuffnells business prior to
disposal.
The property provision represents the estimated future cost of
the Company's potential dilapidation and other property exit 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 2032, however,
approximately GBP1.8m of the potential liability is likely to be
payable within five 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 +/- GBP1.00p, the
property provision would change by +/- GBP0.5m.
14 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 (the actual liability of Smiths News plc in any 12-month
period is limited to GBP5m). The Company's share of such liability
has an estimated future cumulative gross rental commitment at 26
February 2022 of GBP0.5m (28 August 2021: GBP0.5m).
As at 26 February 2022, the Company have approved letters of
credit of GBP3.1m to the insurers of the Company for the motor
insurance and employer liability insurance policy. The letter of
credit covers the employer deductible element of the insurance
policy for insurance claims. Subsequent to the period end the
Company was notified that the letters of credit reduced from
GBP3.1m to GBP2.4m.
The winding up of the News Section of the Pension Trust
following finalisation of the buy-out process to Legal &
General Assurance Society Limited was formally completed on 25
February 2022. As part of the wind up, the Company has agreed
run-off indemnity coverage with the Trustee for any future member
claims that are uninsured liabilities capped at GBP6.5m over the
next 60 years.
15 Share Capital
a) Share capital
GBPm 26 Feb 2022 27 Feb 2021 28 Aug 2021
-------------------------------- ----------- ----------- -----------
Issued 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 28 August 2021 247.7
At 26 February 2022 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 meetings of the Company. The Company has one class of
ordinary shares, which carry no right to fixed income.
c) Share premium
GBPm 26 Feb 2022 27 Feb 2021 28 Aug 2021
----------------- ------------ ------------ ------------
Opening balance 60.5 60.5 60.5
Closing balance 60.5 60.5 60.5
----------------- ------------ ------------ ------------
16 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 26 February 2022. There have been no material changes to
or material transactions with related parties as disclosed in Note
32 of the Annual Report and Accounts for the 52-week period ended
28 August 2021 other than the below;
During H1 2022, the Board agreed revised terms with Tuffnells
Holdings Limited (formerly Palm Bidco Limited) regarding the
outstanding deferred consideration payable such that the Company
will accept GBP7.5m in full and final settlement of the outstanding
deferred consideration where received on or before 2 August 2022
(see Note 9 for further detail). The Chairman of Tuffnells Holdings
Limited is also a non-executive director of Smiths News plc.
Key management compensation
Transactions between the Company and key management personnel in
the period relate only to remuneration consistent with the policy
set out in the Directors' Remuneration Report within the Company's
2021 Annual Report. There have been no other material changes to
the arrangements between the Company and key management personnel
in the period.
17 Subsequent events
As at 26 February 2022, the Company have approved letters of
credit of GBP3.1m to the insurers of the Company for the motor
insurance and employer liability insurance policy. The letter of
credit covers the employer deductible element of the insurance
policy for insurance claims. After the balance sheet date, the
Company was notified that the letters of credit reduced from
GBP3.1m to GBP2.4m.
The Company received a payment of GBP7.5m on 29 April 2022 from
Tuffnells Holdings Limited (formerly Palm Bidco Limited) in full
and final settlement of the deferred consideration arising from the
sale of Tuffnells in May 2020. This sum will be used to pay down
debt under the terms of the banking agreement.
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 Company'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 IFRS 16) Continuing Operations.
items Continuing It excludes depreciation,
Operations amortisation and adjusting
reconciliation items after deducting IAS 17
following operating lease costs. This
this Glossary is the headline measure 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. This measure reflects
purchases, equivalents the cash available to shareholders.
Pension deficit following
repair payments this Glossary
--------------- ------------------ -------------------- ----------------------------------------
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:
26 Feb 2022 27 Feb 2021 28 Aug 2021
------------------------------------------------------ ------------ ------------ ------------
Net increase/(decrease) in cash and cash equivalents 5.0 (40.6) (31.3)
Decrease in borrowings and overdrafts 9.4 50.3 57.8
Movement in borrowings and cash 14.4 9.7 26.5
Dividend paid 2.8 - 1.2
Receipt of Tuffnells Loan - (6.7) (6.7)
Net outflow on purchase of shares for EBT - 0.4 2.6
Other - (0.1) -
------------------------------------------------------ ------------ ------------ ------------
Total free cash flow 17.2 3.3 23.6
Add back cash outflow from Discontinued Operations 0.3 1.3 0.4
------------------------------------------------------ ------------ ------------ ------------
Continuing free cash flow 17.5 4.6 24.0
------------------------------------------------------ ------------ ------------ ------------
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 26 Feb 2022 26 weeks to 27 Feb 2021 52 weeks to 28 Aug 2021
------------------------------- ------------------------ ------------------------ ------------------------
Operating profit 17.0 18.8 35.8
Adjusted items 2.1 0.1 3.8
Depreciation and amortisation 5.3 5.5 10.7
------------------------------- ------------------------ ------------------------ ------------------------
Adjusted EBITDA 24.4 24.4 50.3
Operating lease charges* (3.7) (3.9) (7.7)
Adjusted EBITDA (ex IFRS 16) 20.7 20.5 42.6
------------------------------- ------------------------ ------------------------ ------------------------
* 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.
INDEPENT REVIEW REPORT TO SMITHS NEWS plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
26 week period ended 26 February 2022 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.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the 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.
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".
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. 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.
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 week period ended 26
February 2022 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.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with 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
3 May 2022
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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END
IR UOONRUUUVRAR
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