REG - Smiths News PLC - Half-year Report
02/05/2024 07:00
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RNS Number : 8733M Smiths News PLC 02 May 2024
2 May 2024
Smiths News plc
("Smiths News" or the "Company")
Unaudited Interim Results for the 26 weeks ended 24 February 2024
Robust performance with full year results in line with market expectations
Debt refinancing complete underpins revised capital allocation policy and
significant reduction in interest costs
Smiths News (LSE: SNWS), the leading distributor of newspapers, magazines and
ancillary services to retailers across the UK, today announces unaudited
interim results for the 26 weeks ended 24 February 2024 (the "period" or
"HY2024").
Key highlights:
· Robust trading in HY2024 and on track to deliver results in line with market
expectations for FY2024
· Revenues of £539.8m (-1.9% on HY2023) and adjusted operating profit of
£18.8m
(-£1.6m) both set against a prior period that benefitted from the men's World
Cup and Royal Succession
· Operational efficiencies continue to be reflected in cost-savings of £3.1m
delivered across HY2024, in line with plan
· Major contract renewals with 74% of existing publisher revenue streams secured
until 2029
· Bank Net Debt reduced by 56% to £10.0m and average Net Debt decreased by 53%
to £12.5m
· Successful debt refinancing announced today affords the Board the ability to
implement the Company's revised capital allocation policy, and delivers a
significant reduction in interest costs
· Interim dividend of 1.75 pence per share (+25% on HY2023), due to be paid on 4
July 2024
Adjusted results ((1)) 26 weeks to 26 weeks to Change
24 Feb 2024 25 Feb 2023
Revenue £539.8m £550.1m (1.9%)
Operating profit £18.8m £20.4m (7.8%)
Profit after tax £11.8m £13.3m (11.3%)
Earnings per share 4.9p 5.6p (12.5%)
Statutory results
Revenue £539.8m £550.1m (1.9%)
Operating profit £18.6m £20.4m (8.8%)
Profit after tax £11.6m £13.3m (12.8%)
Earnings per share 4.8p 5.6p (14.3%)
Interim dividend per share 1.75p 1.40p 25.0%
Cash flow and net debt
Free cash flow inflow/(outflow) ((2)) £4.2m (£0.2m) 2,200.0%
Bank Net Debt ((3)) £10.0m £22.9m (56.3%)
Average Bank Net Debt £12.5m £26.3m (52.5%)
*Company compiled analyst consensus can be found on Smiths News' website:
Analyst consensus
(https://www.smithsnews.co.uk/investor-zone/investors/consensus-and-key-metrics/)
Outlook
• Following a robust HY2024 performance, FY2024 trading remains in
line with full year market expectations
• Trading in the second half of FY2024 will benefit from England
and Scotland's upcoming participation in the men's UEFA European Championships
• Growth strategy continues to progress and will make an
increasing contribution to the Company's profits
• New debt refinancing agreement enables Smiths News to deliver
enhanced returns to shareholders in line with 2x dividend cover under the
Company's revised capital allocation policy and to explore additional
distributions of surplus cash in the future after allowing for investment in
core business and growth opportunities
• Smiths News to continue to deliver resilient performance across
the medium term
Jonathan Bunting, Chief Executive Officer, commented:
"I am pleased to report solid performance across the first half of 2024. It
has been another period of strong cash generation, scale cost savings, and
further momentum on the contribution from our growth strategy.
"Smiths News remains on track to deliver FY2024 results in line with market
expectations."
For further information, please contact:
Smiths News plc via Vigo Consulting
Jonathan Bunting, Chief Executive Officer
Paul Baker, Chief Financial Officer
www.smithsnews.co.uk (http://www.smithsnews.co.uk)
Vigo Consulting Tel: +44 (0) 20 7390 0230
Jeremy Garcia / Fiona Hetherington / Verity Snow
smithsnews@vigoconsulting.com (mailto:smithsnews@vigoconsulting.com)
About Smiths News
For over 200 years, Smiths News has been delivering newspapers to retailers
across the UK. It distributes newspapers and magazines on behalf of the major
national and regional publishers, delivering to approximately 23,000 customers
across England and Wales on a daily basis. The speed of turnaround and the
density of Smiths News' coverage is critical to one of the world's fastest
physical supply chains.
For more information, please visit: www.smithsnews.co.uk
(http://www.smithsnews.co.uk)
Person responsible for arranging release of this announcement:
Stuart Marriner, General Counsel and Company Secretary
Smiths News plc, Rowan House, Cherry Orchard North, Kembrey Park, Swindon SN2
8UH
Email: cosec@smithsnews.co.uk (mailto:cosec@smithsnews.co.uk)
Notes
The Company uses certain performance measures for internal reporting purposes
and employee incentive arrangements. The terms 'Bank Net Debt', 'free cash
flow', 'Adjusted operating profit', 'Adjusted profit before tax', 'Adjusted
earnings per share' and 'Adjusted items' are not defined terms under IFRS and
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 interim financial statements as Adjusted results:
a. Adjusted operating profit - is defined as operating profit including the
operating profit of the businesses from the date of acquisition and excludes
Adjusting items and operating profit of businesses disposed of in the year or
treated as held for sale.
b. Adjusted profit before tax (PBT) - is defined as Adjusted operating
profit less finance costs and including finance income attributable to
Adjusted operating profit and before Adjusting items.
c. Adjusted earnings per share - is defined as Adjusted PBT, less taxation
attributable to Adjusted PBT and including any adjustment for minority
interest to result in adjusted profit after tax attributable to shareholders;
divided by the basic weighted average number of shares in issue.
d. Adjusting items - Adjusting items of income or 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 3 to the
consolidated interim 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 outflows for purchases of own shares.
(3) Bank Net Debt - represents the net position drawn under the Company's banking
facilities and is calculated as total debt less cash and cash equivalents.
Total debt includes loans and borrowings and overdrafts but excludes
unamortised arrangement fees and lease liabilities.
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 24 February 2024 and the Report and Accounts for the
year ended 26 August 2023 which can each be found on the Investor Zone section
of the Smiths News plc website - www.smithsnews.co.uk. However, the contents
of Smiths News plc's website are not incorporated into and do not form part of
this document.
OPERATING REVIEW
Overview of performance
Smiths News delivered a robust trading performance in the period. Revenue,
adjusted operating profit, and cash generation remained on track, with the
Company continuing to trade in line with market expectations for FY2024.
HY2024 performance - set against a particularly strong comparative period in
HY2023 which included the men's World Cup and the State Funeral of HM Queen
Elizabeth II - reinforces the Company's ongoing resilience and focus on cash
generation.
Adjusted operating profit of £18.8m (HY2023: £20.4m) decreased £1.6m from
revenue of £539.8m (HY2023: £550.1m), primarily due to the strong
comparative period. Adjusted profit before tax was £15.9m (HY2023: £17.1m),
marking a £1.2m decrease. Free cash outflow remained in line with plan at
£4.2m inflow (HY2023: £0.2m outflow), an increase of £4.4m from HY2023.
Average Bank Net Debt saw a notable decrease of 52.5% to £12.5m, accompanied
by a 56.3% reduction in Bank Net Debt to £10.0m during the period, compared
to HY2023. Adjusted EPS stood at 4.9p (HY2023: 5.6p), a decrease of 0.7p.
Delivering a robust performance
The trading performance in HY2024 demonstrates management's commitment to
managing ongoing operational efficiencies and to maintaining strong levels of
cash generation. Revenue has decreased by 1.9% compared to HY2023,
representing an improvement over historic levels of revenue contraction which
has previously been between 3.0% and 5.0%. The recent introduction of the
Panini Women's Super League 2024 Sticker Collection has been very well
received, surpassing sales projections due to heightened interest and
expansion within the women's game.
In HY2024, our statutory operating profit decreased by £1.8m (8.8%),
primarily as a result of stronger trading in one-shots in the prior period
including the men's World Cup and the State Funeral of HM Queen Elizabeth II,
as well as persistent pressure on magazine waste prices, independent of our
recycling operations, which has led to prolonged lower prices for sale of
magazine waste.
Looking ahead, we expect the second half performance to be boosted by England
and Scotland's participation in the men's UEFA European Championships, which
we expect to result in increased sales of stickers, trading cards and other
collectibles.
Refinancing and revised capital allocation policy
The Company today announces it has successfully completed the refinancing of
the business, with two of the existing syndicate lenders, Santander and HSBC.
The new facility comprises a £40m revolving credit facility ("RCF"), with an
additional uncommitted accordion facility of up to £10m. The facility is set
to run for a minimum 3-year term at an initial 2.45% margin over SONIA (4.00%
previously), with options to extend for up to a further 2 years.
Importantly, the facility removes the cap on distributions to shareholders
which will afford the Company greater optionality going forward.
The refinancing has been a major strategic priority for management as the
Company seeks greater autonomy and flexibility relating to its capital
allocation policy. This policy has been revised and now comprises:
· Maintaining a strong balance sheet with a Bank Net Debt: Adjusted
EBITDA ratio of less than 1.0x
· Continued investment in both core business and organic growth
· Payment of sustainable ordinary dividend, maintaining 2x dividend
cover
· Disciplined approach to inorganic growth, focused on bolt-on
acquisitions with clear accretive returns to enhance shareholder value
· Further returns to shareholders when appropriate
Investors will see an immediate benefit from the refinancing, with an
increased ordinary dividend under the Company's policy of maintaining two
times dividend cover. The interim dividend proposed, which is typically a
third of the total dividend paid in any given financial year, is 25% higher at
1.75p.
Inflation and operational efficiencies
Inflation continued to be mitigated during the period with price rises now
slowing. We are still seeing the continued impact of cost inflation on our
day-to-day operations, but this is trending in line with our expectations. Our
ongoing commitment to strategic cost efficiency planning remains a key
foundation of our operations, bolstering our ability to maintain the current
level of inflationary offset.
Across HY2024 we realised savings totalling £3.1m through diligent
implementation of operational efficiencies, including further optimisation of
our network and a reduction in central overheads. We remain focused on
identifying further opportunities for enhanced efficiencies.
The Company continues to deliver ongoing operational efficiencies of circa
£5.0m annually, as we focus on maximising value creation whilst maintaining
operational resilience. Having now completed our refinancing, we aim to
increase our capital investment in the business by circa £2.0m per annum for
a 3-year period, before returning to circa £4.0m per annum thereafter.
The majority of this expenditure has positive returns through our growth and
cost-out programs, with the remaining amounts representing investment in
facilities.
Contract renewals
The Company has in place contract renewals covering 74% of its existing
publisher revenue streams, ensuring revenue stability through to at least 2029
while simultaneously expanding our network through additional national and
regional title contract awards. In October 2023, the Company announced that it
had secured contracts for the distribution of regional press titles from the
Midlands News Association, as well as newspaper distribution contracts for
News UK titles within the Company's established London territories. These have
been integrated into the Company's established UK footprint and are fully
operational.
With the majority of the renewed publisher agreements in place and the
remaining contracts phased over the intervening years, we are confident that
these additional revenue streams will position the Company well to continue to
deliver over the medium term.
Organic business development
Aligned with the Company's strategic vision, management remains committed to
pursuing organic growth initiatives that complement our core distribution
skill set, while safeguarding the integrity of our newspaper and magazine
operations. In February 2023, we launched Smiths News Recycle, a waste
recycling service tailored for our retail customers. We continue to generate
solid traction, with a subscriber base now approaching 5,000.
Additionally, we have further extended our reach, distributing books and DVDs
into a major nationwide supermarket, and ancillary items to a major national
group of retail convenience stores. We continue to explore further
opportunities, including the distribution of greetings cards to a network of
independent newsagents.
Our endeavours to drive organic growth ventures continue to deliver positive
momentum and are expected to generate £2.0m of profit in FY2024 versus £0.7m
in FY2023. As these new business initiatives continue to provide further
revenue streams, we are optimistic about the Company's growth potential.
Cash generation and significant debt reduction
In HY2024, the business generated £4.2m of free cash flow, compared to a
£0.2m outflow in HY2023. This £4.4m increase was driven by the timing of a
receipt from a major customer in the prior period as part of the normal
working capital cycle.
Bank Net Debt was down 56.3% in the period to £10.0m (HY2023: £22.9m). Given
the significant fluctuations in working capital throughout the monthly payment
cycle, we consider Average Net Debt as the more reliable measure to determine
our utilisation of facilities. During the period, Average Net Debt reduced
52.5% to £12.5m (HY2023: £26.3m), reflecting our prudent management of
resources and the consistent cash flow generation of the business. This
represents a significant strategic milestone for the business, underpinning
our underlying capital strength.
Dividend
An interim dividend of 1.75p per share will be paid on 4 July 2024 (HY2023:
1.40p per share) to shareholders on the register on 7 June 2024. The
ex-dividend date will be 6 June 2024.
As detailed above, the Company has today announced a renegotiation of its
banking facilities. As a result of this agreement, restrictions over the total
annual dividend payment - which was previously capped at a maximum of £10.0m
per annum - will be relaxed going forward, affording the Company greater
discretion over distribution of cash to shareholders in line with our revised
capital allocation policy, should it be deemed appropriate to do so.
Outlook
The Company has made a robust start to the second half of FY2024 and remains
on track to meet market expectations for FY2024. Second half performance will
be bolstered by England and Scotland's upcoming participation in the men's
UEFA European Championships in the summer.
The marginal easing of inflationary pressures on consumer spending, alongside
progress in driving growth through new organic profit streams, ongoing
operational efficiencies and continued cost management initiatives, form the
foundations for the Board's confidence for the FY2024 outturn.
The Board are committed to distribution of dividends in line with our revised
capital allocation policy going forward following the removal of upper limits
on shareholder cash distribution in our new banking facilities.
FINANCIAL REVIEW
Overview
The Company has had a robust start to FY2024 with trading in line with full
year expectations and with continued predictable free cash flow. Following the
balance sheet date, the business has successfully concluded a refinancing of
its banking facility with a syndicate comprising of existing lenders Santander
and HSBC as detailed in the refinancing RNS released today. The interim
dividend has increased to 1.75p per share (HY2023: 1.40p per share).
Revenue was £539.8m (HY2023: £550.1m), down 1.9% on the prior year, of which
1.7% related to the men's World Cup and State Funeral of HM Queen Elizabeth II
during HY2023. The profit impact of these items (£1.2m) and lower revenue
from the sale of waste paper (£0.9m), offset by £0.7m from the contribution
of new ancillary revenue lines largely accounts for the £1.6m reduction in
adjusted operating profit to £18.8m (HY2023: £20.4m). Cost reduction plans
offset the impact of inflation and ongoing newspaper and magazines decline
with a net £0.2m impact.
The £1.6m decrease in Adjusted operating profit resulted in a £1.5m decrease
in Adjusted profit after tax from £13.3m to £11.8m. While lower levels of
average net debt resulted in £0.4m lower net finance costs, this was
partially offset by the increase in corporation tax rate (£0.3m).
Consequently, adjusted EPS reduced from 5.6p to 4.9p.
Trading in the second half of FY2024 will benefit from the men's UEFA European
Championships football collectables and the flow through of newspaper contract
wins which commenced in Q2 FY2024, mitigated by a lower comparable rate for
the sale of waste paper. We therefore anticipate FY2024 trading performance to
be second-half weighted, where FY2023 was first half weighted.
Average Bank Net Debt for the period decreased by £13.8m (52.5%) from £26.3m
in HY2023 to £12.5m in HY2024, reflecting good ongoing cash flow generation.
Bank Net Debt reduced by £12.9m from £22.9m in HY2023 to £10.0m.
Free cash flow for the period was an inflow of £4.2m (HY2023: outflow of
£0.2m). Free cash flow includes a working capital outflow since year end of
£7.3m (HY2023: outflow of £13.6m), part of our normal working capital cycle.
Working capital outflow was £6.3m lower than the prior period due to the
delayed receipt of trade receivables from a major supermarket during the prior
period. The remaining movement in free cash flow (adverse £1.9m) is the
result of lower profits.
Adjusting items decreased statutory profit after tax by £0.2m (HY2023: £nil)
and statutory profit after tax decreased from £13.3m in HY2023 to £11.6m in
HY2024.
An interim dividend of 1.75p (HY2023: 1.40p) per share (£4.2m) is proposed by
the Board, due to be paid in July 2024.
Adjusted results
Group
£m 26 weeks to 26 weeks to Change
24 Feb 2024 25 Feb 2023
Revenue 539.8 550.1 (1.9)%
Operating profit 18.8 20.4 (7.8)%
Net finance costs (2.9) (3.3) 12.1%
Profit before tax 15.9 17.1 (7.0)%
Taxation (4.1) (3.8) (7.9)%
Effective tax rate 25.8% 22.2% (3.6)%
Profit after tax 11.8 13.3 (11.3)%
Revenue
Revenue was £539.8m (HY2023: £550.1m), down 1.9% on the prior year, of which
1.7% related to the men's World Cup and Royal Succession during HY2023. The
remaining reduction of 0.2% compares to a historic revenue trend of c.-3% to
-5%.
Newspaper revenues were up 0.1% despite ongoing underlying volume decline,
owing to the News UK and Midlands News Association contract wins in October
2023 and some continuing benefit from cover price increases. Magazine revenue
was down c.5%, in line with historic trends. Revenue from collectables
increased by 5% (excluding World Cup and Royal Succession) with Premier League
football collections performing better than last year and contribution from
the first Women's Super League sticker collection.
Operating profit
The decrease in Adjusted operating profit of £1.6m to £18.8m (HY2023:
£20.4m) includes £1.2m lower wholesale margin due to the 2022 men's World
Cup and Royal Succession. The following items account for the net residual
impact of £0.4m:
· Lower revenue from sale of waste paper (-£0.9m) driven by a
reduction in price.
· Increased contribution from strategic growth lines (+£0.7m).
· Cost reduction plans within depot and overheads (+£3.1m) which
largely offset increases to the cost base driven by inflation and ongoing
newspaper and magazine wholesale margin decline (total -£3.3m).
Profit after tax
Net finance charges of £2.9m (HY2023: £3.3m) were lower than the prior year
half as lower average net debt and deposit interest received were partially
offset by higher average interest rates. Taxation of £4.1m was £0.3m higher
than the prior period, driven by the increase in the corporation tax rate from
19% to 25% from April 2023. Profit after tax of £11.8m (HY2023: £13.3m) was
£1.5m lower than last year.
Statutory Results
Group
£m 26 weeks to 26 weeks to Change
24 Feb 2024 25 Feb 2023
Revenue 539.8 550.1 (1.9%)
Operating profit 18.6 20.4 (8.8%)
Net finance costs (2.9) (3.3) 12.1%
Profit before tax 15.7 17.1 (8.2%)
Taxation (4.1) (3.8) (7.9%)
Effective tax rate 26.1% 22.2% (3.9%)
Profit after tax 11.6 13.3 (12.8%)
Statutory profit after tax of £11.6m was a £1.7m decrease on the prior year
(HY2023: £13.3m). The decrease was driven by the £1.5m decrease in Adjusted
profit after tax described above and adjusting items of £0.2m (HY2023: net
£nil).
Earnings per share
Adjusted Statutory
26 weeks to 26 weeks to 25 Feb 2023 26 weeks to 26 weeks to
24 Feb 2024
24 Feb 2024
25 Feb 2023
Earnings attributable to ordinary shareholders (£m) 11.8 13.3 11.6 13.3
Basic weighted average number of shares (millions) 240.9 236.7 240.9 236.7
Basic Earnings per share 4.9p 5.6p 4.8p 5.6p
Diluted weighted number of shares (millions) 251.3 249.3 251.3 249.3
Diluted Earnings per share 4.7p 5.3p 4.6p 5.3p
Adjusted basic earnings per share of 4.9p, is a decrease of 0.7p on the prior
year driven by the decrease in earnings of the business and an increase in the
average number of shares from the employee benefit trust holding fewer shares.
Statutory basic earnings per share decreased by 0.8p to 4.8p (HY2023: 5.6p)
due to the above plus lower earnings from the impact of adjusting items.
Dividend
26 weeks to 26 weeks to
24 Feb 2024 25 Feb 2023
Dividend per share (proposed) 1.75p 1.40p
Dividend per share (paid and recognised) 2.75p 2.75p
The Board is proposing an interim dividend of 1.75p per share (HY2023: 1.40p
per share). The proposed dividend will be paid on 4 July 2024 to shareholders
on the register at close of business on 7 June 2024. The ex-dividend date will
be 6 June 2024.
The FY2023 final dividend of 2.75p per share (£6.7m) was approved by
shareholders at the Annual General Meeting on 31 January 2024, paid on 8
February 2024 and is recognised in the Interim Financial Statements.
Adjusting items
£m 26 weeks to 24 Feb 2024 26 weeks to 25 Feb 2023
Network and reorganisation (costs)/credits (0.1) 0.6
Tuffnells provision (0.1) -
Aborted acquisition costs - (0.6)
Total before and after taxation (0.2) -
Adjusting items before tax of £0.2m were an increase on the prior year period
(HY2023: net £nil). In the current period, the Company incurred £0.1m of
costs for network and reorganisation in relation to simplifying the Group
structure and £0.1m in respect of additional insurance claims identified
following Tuffnells falling into administration.
In the prior period, the Company incurred £0.6m of costs for due diligence
and legal activity associated with an aborted acquisition. These costs were
offset by £0.6m of credits relating to provisions releases which were the
result of a contract renewal with our shared service centre partner.
Further information on these items can be found in Note 3 to the Interim
Financial Statements. Adjusting items are defined in the Glossary to the
Interim Financial Statements and present a further measure of the Company's
performance. Excluding these items from profit metrics provides readers with
helpful additional information on the performance of the business across
periods because it is consistent with how the business performance is planned
by, and reported to, the Board and the Executive Team. Alternative Performance
Measures (APMs) should be considered in addition to, and are not intended to
be a substitute for, or superior to, IFRS measurements.
Free cash flow
£m 26 weeks to 26 weeks to
24 Feb 2024 25 Feb 2023
Adjusted operating profit 18.8 20.4
Depreciation and amortisation 4.0 4.8
Adjusted EBITDA 22.8 25.2
Working capital movements (7.3) (13.6)
Capital expenditure (1.9) (2.1)
Lease payments (2.7) (3.2)
Net interest and fees (2.4) (2.7)
Taxation (4.3) (3.9)
Other 0.2 0.8
Free cash flow (excluding Adjusting items) 4.4 0.5
Adjusting items (cash effect) (0.2) (0.7)
Free cash flow 4.2 (0.2)
Free cash flow of £4.2m inflow was £4.4m higher than HY2023 (£0.2m outflow)
due to a £6.3m decrease in working capital outflows and a lower cash outflow
from adjusting items.
The decrease in working capital of £7.3m (HY2023: £13.6m) since year end is
due to the timing of period end compared to the billing cycles of both
publishers and retailers. In HY2023, this included the impact of amounts due
from a major supermarket which were delayed into the second half of FY2023.
Cash capital expenditure in the period was £1.9m (HY2023: £2.1m), a decrease
of £0.2m.
Lease payments of £2.7m (HY2023: £3.2m) decreased by £0.5m due to leases
that ended in the second half of FY2023.
Net interest and fees of £2.4m (HY2023: £2.7m) decreased by £0.3m, due to
lower average net debt and interest earned on deposits partially offset by
higher average rates.
Cash tax outflow of £4.3m was a £0.4m increase on the prior period (HY2023:
£3.9m outflow) owing principally to the increase in corporation tax rate from
19% to 25% in April 2023.
Other items relate predominantly to the non-cash share-based payment expense
and is linked to the expected outcome of performance related share schemes.
The total net cash impact of other Adjusting items was an £0.2m (HY2023:
£0.7m) outflow. In the current period, amounts related to settled Tuffnells
claims (£0.1m) and reorganisation costs (£0.1m). In the prior period,
amounts comprised of aborted acquisition costs (£0.5m) and reorganisation
costs (£0.2m).
A reconciliation of free cash flow to the net movement in cash and cash
equivalents is given in the Glossary.
Net debt
£m As at As at
24 Feb 2024 25 Feb 2023
Opening Bank Net Debt (4.2) (14.2)
Free cash flow 4.2 (0.2)
Dividend paid (6.7) (6.5)
Investment in joint venture - (0.2)
Purchase of shares for employee benefit trust (3.3) (1.8)
Bank Net Debt (10.0) (22.9)
Bank Net Debt at 24 February 2024 was £10.0m compared to £22.9m at 25
February 2023, a decrease of £12.9m. Average daily net debt reduced from
£26.3m in the prior period to £12.5m in the current period, a reduction of
£13.8m (52.5%).
The reduction in both reported and average daily Bank Net Debt was driven by
the Company's ongoing cash flow generation.
The Company's Bank Net Debt: Adjusted EBITDA ratio decreased to 0.3x (HY2023:
0.5x). The prior period end fell just before major publisher payments were
made, which benefitted reported Bank Net Debt. Bank Net Debt rose to £39.8m
on 28 February 2023 after the half year end.
The Bank Net Debt: Adjusted EBITDA ratio covenant of 0.3x is within our main
leverage covenant ratio of 1.50x and we remain within all our other bank
covenant tests at period end.
A reconciliation of Bank Net Debt (which excludes IFRS 16 lease liabilities
and unamortised arrangement fees) to the balance sheet is provided in the
Glossary.
During the current period, the FY2023 final dividend of £6.7m was paid
(HY2023: FY2022 final dividend of £6.5m), bringing the total dividend paid in
respect of FY2023 to £10.0m (FY2022: £9.8m). In the prior period the Company
invested £0.2m in Lucid Digital Magazines limited, a joint venture for
retailing single copy electronic versions of newspapers and magazines under
the trading name LoveMedia.
Going concern
Having considered the Company's new banking facility, the ongoing impact of
inflationary pressures within the macro-economy and the funding requirements
of the Company, the directors are confident that headroom under the new bank
facility remains adequate, future covenant tests can be met and there is a
reasonable expectation that the business can meet its liabilities as they fall
due for a period of greater than 12 months (being an assessment period of 16
months) from the date of approval of the Interim Financial Statements. For
this reason, the directors continue to adopt the going concern basis in
preparing the financial statements and no material uncertainty has been
identified.
PRINCIPAL AND EMERGING RISKS
The Company has a clear framework in place to continuously identify and review
both the principal and emerging risks it faces. This includes, amongst others,
a detailed assessment of business and functional teams' principal and emerging
risks and regular reporting to, and robust challenge from, both the Executive
Team and Audit Committee. The directors' assessment of these risks is aligned
to the strategic business planning process and regulatory landscape.
Specifically, key risks are plotted on risk maps with descriptions, owners,
and mitigating actions, reporting against a level of materiality (principally
relating to impact and likelihood) consistent with their size. These risk maps
are reviewed and challenged by the Executive Team and Audit Committee and
reconciled against the Company's risk appetite. As part of the regular
principal risk process, a review of emerging risks (internal and external) is
also conducted, and a list of emerging risks is maintained and rolled-forward
to future discussions by the Executive Team and Audit Committee. Where
appropriate, these emerging risks may be brought into the principal risk
registers. Additional risk management support is provided by external experts
in areas of technical complexity to complete our bottom-up and top-down
exercises.
As part of the Board's ongoing assessment of the principal and emerging risks,
the Board has considered the performance of the business, its markets, the
changing regulatory and macro-economic landscape, the Company's future
strategic direction and ambition as well as the heightened climate-related
risk environment. The directors have carried out a robust assessment of the
Company's emerging and principal risks, including those that could threaten
its business model, future performance, solvency or liquidity. Risks are still
subject to ongoing scrutiny, monitoring and appropriate mitigation.
The table below details each principal business risk, those aspects that would
be impacted were the risk to materialise, our assessment of the current status
of the risk and how each is mitigated.
Principal risks and potential impact Mitigations Strategic link/ change
Cyber security
Global trends demonstrate a continued high volume of cyber-attacks against all · Defined risk-based approach to the information security roadmap Strategic link:
industry sectors and that cyber threats continue to indiscriminately evolve. and technology strategy which is aligned to the strategic plans.
Technology
To meet the needs of our stakeholders, our IT infrastructure and data · Regular tracking of key programmes against spend targets and
processes need to be flexible, reliable and secure from cyber-attacks. delivery dates.
Secure infrastructure acts as a deterrent to and helps prevent and/or mitigate · The Company assesses cyber risk on a day-to-day basis, using Change:
the impact of external cyber-attack, internal threat or supplier-related proactive and reactive information security controls to detect and mitigate
breach, which could cause service interruption and/or the loss of Company and common threats. Stable - despite ongoing investment and enhancements in the Company's IT
customer data.
infrastructure and IT security the backdrop remains heightened, leading to a
· Dedicated information security investments and access to stable risk assessment.
Cyber incidents could lead to major adverse customer, financial, reputational third-party cyber security specialists, including 24/7 security monitoring,
and regulatory impacts. incident response and specialist testing.
· The Company encourages a cyber-aware culture by undertaking
exercises, such as computer-based training and simulated phishing attacks and
regular communications about specific cyber threats.
Macro-economic uncertainty
Deterioration in the macro-economic environment could result in supply side · Annual budgets and forecasts take into account the current Strategic link:
cost inflation and/or a reduction in demand-side sales volumes. macro-economic environment to set expectations internally and externally,
allowing for or changing objectives to meet short and medium term financial Cost and efficiencies, Operations
Supply-side macro-economic pressures could present the Company with additional targets.
cost challenges, e.g. increased competition in the distribution labour market
and rises in fuel and utility prices. Adverse changes to economic conditions · Weekly cost monitoring enables oversight and action on a timely
could result in reduced consumer demand for newspapers and magazines and/or basis. Change:
reduction in titles/editions. These cost increases and sales pressures present
a risk when they cannot be fully mitigated through increased prices or other · Cover price increases in magazine and newspaper titles provide Stable
productivity gains. some offset against the impact of volume decline.
This could result in deterioration in the level of profitability in both the · Predictable level of volume decline within the core business
short and medium term and impacts on the Company's ability to execute its enables cost optimisation planning.
strategies, including level of debt and liquidity objectives.
· Use of fixed-term contracts as a hedge against rapidly rising
prices e.g. energy costs.
· The Company continues to be significantly cash generating to
support its strategic priorities.
Changes to retailers' commercial environment
Our largest retailers (e.g. grocers and symbol group members) remain under · Our EPoS-based returns (EBR) solution has been introduced Strategic link:
significant pressure to maximise sales and profitability by channel within in-store with our largest retailers, improving staff efficiency in managing
their retail stores and at associated sale outlets, such as at petrol the magazine category, thereby reducing cost to the retailer. Cost and efficiencies
forecourt stores. This could result at any time in a category review of the
newspaper and/or magazine channel, leading to a significant reduction in · Potential to extend EBR to newspapers in order to broaden
newspapers' and/or magazines' selling space-in-store (or its location) in efficiency-benefits to retailers.
favour of other higher margin products and/or the delisting of all/particular
Change:
titles of newspapers and/or magazines. · Supply-side shrink activities underway and renewed focus improve
channel profitability and reduce complexity associated with the category. Stable
A reduction in (or change in location of) sales space and/or full delisting of
newspapers and/or magazines by our largest retailers (or a high number of · Form stronger partnerships with emerging retailers to stock
other retailers) could materially reduce the Company's revenue, profitability magazines and newspapers.
and cash flow.
· Expand retail offering to include single copy digital downloads
of newspapers and/or magazines to supplement physical print and category range
in-store.
Acquisition and retention of labour
Due to competition and constraints in the current distribution labour market, · We seek to offer market competitive terms to ensure talent Strategic link:
this could lead to an increased risk of being unable to recruit and/or retain remains engaged.
warehouse colleagues and support staff.
People first,
· We offer long-term contracts with our sub-contracted delivery
The same pressures are also being felt in sourcing and retaining delivery partners. Culture and values,
sub-contractors as well as filling in-house roles within our central support
functions. · We use a variety of platforms to recruit employees and Cost and efficiencies
contractors.
A failure to maintain an appropriate level of resourcing could result in
increased costs, employee disengagement and/or loss of management focus which · The level of vacancies across warehouse and delivery contractors
underpin our ability to address the strategic priorities and to deliver is monitored daily. Change:
forecasted performance.
· We undertake workforce planning; performance, talent and Stable
succession initiatives; learning and development programmes; and promote the
Company's culture and core values.
· Retention plans are reviewed to address key risk areas, and
attrition across the business is regularly monitored.
· Regular surveys are undertaken to monitor the engagement of
colleagues.
Growth and diversification
A successful growth and diversification strategy is essential to the long-term · Strong project management and governance in place to sign-off Strategic link:
success of the Company. At the same time, maintaining the Company's growth initiatives and oversee their implementation.
outstanding and sector-leading standards of service in newspaper and magazine
Cost and efficiencies
wholesaling is paramount to help fund growth and diversification opportunities · A Growth Business Development Group and Growth Operations
and support publisher contract renewals, each of which deliver shareholder Delivery Steering Committee have been established to review and control new
value. business opportunities and then plan and measure the impact of these
opportunities on core operations. Change:
Implementing new business growth opportunities without detrimentally impacting
the Company's core newspaper and magazine wholesaling carries an execution · Experimentation through trials of new business opportunities has Stable
risk to both the new initiative and ensuring the Company remains able to been deployed to assess the demand and potential economic benefit of such
deliver sector-leading support to publisher clients. opportunities and any likely impact on maintaining the Company's outstanding
and sector-leading standards of service in newspaper and magazine wholesaling.
· The Executive Team's balanced scorecard of key performance
indicators ensures sub-optimal performance is tracked and monitored on a
regular basis and allows appropriate interventions to be made.
Sustainability and climate change
Our sustainability linked risks extend beyond the physical and transitional · Board ESG Committee established (Chaired by the Chief Financial Strategic link:
associated with climate change which we have previously identified, such as a Officer) to consider and determine the Company's sustainability strategy and
scarcity of resources, extreme weather events, power outages, increasing progress, together with risk environment and activities and actions. Cost and efficiencies,
regulation and associated cost in response to a drive to "net zero" carbon
emissions and the increasingly stringent air quality emission zones. · Dedicated management Sustainability Steering Committee Operations,
Regulatory requirements and reporting obligations on environmental, social and established (also chaired by the Chief Financial Officer) coordinates the
governance (ESG) matters are increasing and ongoing investment is required to Company's day-to-day activities and actions in delivering the Company's Sustainability
maintain a safe working environment and to protect the Company from sustainability strategy, including in relation to climate change.
cyber-attacks, as well as making progress in delivering on our diversity and
inclusion ambitions. In common with all major organisations, there is a risk · Working with suppliers to ensure they share the Company's vision
of reputational damage and/or loss of revenue if the Company fails to meet to act on sustainability and climate change. Change:
stakeholder expectations across our sustainability framework.
· Emissions and air quality targets in UK towns and cities are Stable
monitored by a central team in the Operations function which ensures the
Company can fulfil its obligations to customers and remain compliant with
legal requirements.
· Operational sites are reviewed for their resilience to extreme
weather events, such as flooding, with upgrades and interventions made where
these are cost-effective. Depots are relocated to new sites (e.g. during lease
break windows) where this represents a better option than adapting an existing
location.
Major newspaper titles exit the market or move to digital only editions
Significant decline in advertising and/or circulation, together with rising · We seek to ensure full availability of alternative newspaper Strategic link:
production costs, could lead to one or more national newspaper titles exiting titles to maximise substitution opportunities for customers.
the market and/or publications being taken fully digital. This could lead to a
Cost and efficiencies,
significant deterioration in the Company's profitability and cash flow in both · Partial mitigation against newspaper title closures is built into
the short and medium term as well as impacting on its ability to execute its our contracts with major publishers.
strategies.
· Ongoing successful execution of our growth and diversification Change:
strategy provides longer-term mitigation through alternative profitable
revenue streams. Stable
Legal and regulatory compliance
The Company is required to be compliant with all applicable laws and · Changes in laws and regulations are monitored, with policies and Strategic link:
regulations. Failure to adhere to these could result in financial penalties, procedures being updated as required.
third party redress, and/or reputational damage.
Technology, Sustainability, Operations
· Business-wide mandatory training programmes for higher-risk
Key areas of legal and regulatory compliance include: regulatory areas.
· GDPR · External experts are used where applicable. Change:
· Health and Safety · All major policies are reviewed by the Board or Audit Committee Stable
on an annual basis.
· Tax compliance
· Operational auditing and monitoring systems for higher risk
· Environmental legislation areas.
· Employment law
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
Chief Executive Officer Chief Financial Officer
1 May 2024 1 May 2024
INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Income Statement (Unaudited)
For the 26 weeks to 24 February 2024
£m Note 26 weeks to 24 Feb 2024 26 weeks to 25 Feb 2023
Adjusted Adjusting items* Total Adjusted Adjusting items* Total
Revenue 539.8 - 539.8 550.1 - 550.1
Cost of Sales (504.9) - (504.9) (512.4) - (512.4)
Gross profit 34.9 - 34.9 37.7 - 37.7
Administrative expenses 3 (16.2) (0.2) (16.4) (17.4) - (17.4)
Income from joint ventures 0.1 - 0.1 0.1 - 0.1
Operating profit 3 18.8 (0.2) 18.6 20.4 - 20.4
Finance costs (3.2) - (3.2) (3.3) - (3.3)
Finance income 0.3 - 0.3 - - -
Profit before tax 3 15.9 (0.2) 15.7 17.1 - 17.1
Income tax expense 4 (4.1) - (4.1) (3.8) - (3.8)
Profit for the period attributable to equity shareholders 11.8 (0.2) 11.6 13.3 - 13.3
26 weeks to 24 Feb 2024 26 weeks to 25 Feb 2023
Note
Earnings in pence per share
Basic 6 4.9 4.8 5.6 5.6
Diluted 6 4.7 4.6 5.3 5.3
Equity dividends pence per share (paid and proposed) 5 1.75 1.40
*This measure is described in the Glossary. Adjusting items are set out in
Note 3 of the interim financial statements.
Condensed Consolidated Statement of Comprehensive Income (Unaudited)
For the 26 weeks to 24 February 2024
£m 26 weeks to 26 weeks to
24 Feb 2024 25 Feb 2023
Profit for the period 11.6 13.3
Items that may be reclassified to the Income Statement:
Currency translation differences (0.1) -
Total comprehensive income for the period 11.5 13.3
Consolidated Balance Sheet (Unaudited)
As at 24 February 2024
£m Note As at As at
24 Feb 2024 26 Aug 2023
Non-current assets
Intangible assets 2.1 1.9
Property, plant and equipment 8.4 8.8
Right of use assets 26.9 21.8
Interest in joint venture 4.4 4.4
Deferred tax assets 1.2 1.7
43.0 38.6
Current assets
Inventories 17.1 17.7
Trade and other receivables 104.4 101.1
Cash and bank deposits 8 16.5 37.3
Corporation tax receivable 0.9 0.6
138.9 156.7
Total assets 181.9 195.3
Current liabilities
Trade and other payables (135.8) (141.5)
Bank loans and other borrowings 8 - (10.0)
Lease liabilities (5.1) (4.9)
Provisions 9 (1.6) (2.5)
(142.5) (158.9)
Non-current liabilities
Bank loans and other borrowings 8 (25.6) (30.2)
Lease liabilities (23.3) (18.3)
Non-current provisions 9 (4.4) (4.2)
(53.3) (52.7)
Total liabilities (195.8) (211.6)
Total net liabilities (13.9) (16.3)
Equity
Called up share capital 11 12.4 12.4
Share premium account 11 60.5 60.5
Other reserves (283.6) (284.1)
Retained earnings 196.8 194.9
Total shareholders' deficit (13.9) (16.3)
Condensed Consolidated Statement of Changes in Equity (Unaudited)
For the 26 weeks to 24 February 2024
£m Note Share Capital Share Premium Account Other Retained Earnings Total equity
Reserves
Balance at 26 August 2023 12.4 60.5 (284.1) 194.9 (16.3)
Profit for the period - - - 11.6 11.6
Currency translation differences - - (0.1) - (0.1)
Total comprehensive income for the period - - (0.1) 11.6 11.5
Dividends paid 5 - - - (6.7) (6.7)
Employee share schemes purchases - - (3.3) - (3.3)
Employee share scheme awards - - 3.9 (3.9) -
Recognition of share-based payments, net of tax - - - 1.2 1.2
Deferred tax recognised in equity - - - (0.3) (0.3)
Balance at 24 February 2024 12.4 60.5 (283.6) 196.8 (13.9)
£m Note Share Capital Share Premium Account Other Retained Earnings Total equity
Reserves
Balance at 27 August 2022 12.4 60.5 (284.3) 179.4 (32.0)
Profit for the period - - - 13.3 13.3
Total comprehensive income for the period - - - 13.3 13.3
Dividends paid 5 - - - (6.5) (6.5)
Employee share schemes purchases - - (1.8) - (1.8)
Recognition of share-based payments, net of tax - - - 1.0 1.0
Deferred tax recognised in equity - - 0.3 - 0.3
Balance at 25 February 2023 12.4 60.5 (285.8) 187.2 (25.7)
Condensed Consolidated Cash Flow Statement (Unaudited)
For the 26 weeks to 24 February 2024
£m Note 26 weeks to 26 weeks to
24 Feb 2024 25 Feb 2023
Net cash inflow from operating activities 7 11.1 7.8
Investing activities
Interest received 0.3 -
Dividends received from joint ventures 0.1 -
Purchase of fixed assets (1.9) (2.1)
Investment in joint ventures - (0.2)
Net cash used in investing activities (1.5) (2.3)
Financing activities
Interest paid (2.7) (2.7)
Dividend paid (6.7) (6.5)
Repayments of lease principal (2.7) (3.2)
Repayment of term loan (15.0) (3.0)
Purchase of shares for employee benefit trust (3.3) (1.8)
Net cash used in financing activities (30.4) (17.2)
Net decrease in cash and cash equivalents (20.8) (11.7)
Opening net cash and cash equivalents 37.3 35.3
Closing net cash and cash equivalents 16.5 23.6
Notes to the Condensed Unaudited Interim Financial Statements
For the 26 weeks to 24 February 2024
1 Basis of Preparation
Smiths News plc is comprised of the Company and its subsidiaries (together
referred to as the 'Group').
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 2023 Annual Report and Accounts. The financial period
represents the 26 weeks ended 24 February 2024 (prior period 26 weeks to 25
February 2023).
The Group has applied the same accounting policies and methods of computation
in these interim consolidated financial statements, as in its statutory
accounts for the 52 weeks ended 26 August 2023, which the exception of changes
as detailed in notes 2 and 4.
These condensed consolidated interim financial statements for the current
period and prior financial periods do not constitute statutory accounts as
defined in section 434 of the Companies Act 2006. A copy of the statutory
accounts for the 52 weeks ended 26 August 2023 has been filed with the
Registrar of Companies. The auditor's report on those accounts was not
qualified, did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying the report and did not
contain statements under section 498(2) or (3) of the Companies Act 2006. The
auditor's review opinion on the 26-week period ended 24 February 2024 is at
the end of this report.
Going concern
The condensed interim financial statements have been prepared on a going
concern basis.
The Group had a net liability position of £13.9m as at 24 February 2024. All
bank covenant tests were met at the period end with the key Bank Net Debt:
Adjusted EBITDA ratio of 0.3x, below the period end facility agreement
covenant test threshold of 1.5x, with no further reduction thereafter.
The intra-month working capital cash flow cycle generates a routine cash swing
and therefore a predictable fluctuation in bank net debt during the course of
the month compared to the closing net debt position. The average daily Bank
Net Debt during the period was £12.5m (H1 2023: £26.3m). The Group utilises
the Revolving Credit Facility (RCF) to manage the cash swing. At the end of
the period £18.5m was available and the Group had £16.5m of cash on hand
giving headroom of £35.0m.
Bank facility
The Group had a facility of £46.5m at the balance sheet date, comprising a
£26.5m amortising term loan ('Facility A') and a £20.0m revolving credit
facility ('RCF'). The facility agreement at the period end was with a
syndicate of banks comprising lenders HSBC, Barclays, Santander and Clydesdale
Banks.
The facility's margin was 4% per annum over SONIA (in respect of Facility A
and the RCF).
Consistent with the Group's stated strategic priorities to reduce net debt,
the terms of the facility agreement included: an amortisation schedule of
£10m during FY2024 and £10m during FY2025; a reduction in the RCF of £2.5m
every six months; and capped dividend payments at £10m per year. During the
period, the Group made a scheduled repayment of £5m and an additional
voluntary repayment of £10m.
The final maturity date of the facility was 31 August 2025. After the period
end date, the Group agreed new bank facilities, as detailed in note 13.
Reverse stress testing
The directors have prepared their base case forecast which represents their
best estimate of cash flows over the going concern period, which is the 16
months up to 31 August 2025, and in accordance with FRC guidance have prepared
a reverse stress test that would lead to there being no facility headroom
(under the new facility).
This scenario would occur in July 2025 if Adjusted EBITDA was 51% below the
Board's approved three-year plan. The directors consider the likelihood of
this level of downturn to be remote based on:
· current trading which is in line with expectations;
· year-on-year declines in revenues would have to be significantly
greater than historical trends;
· 74% of contracts secured with publishers past 2024; and
· the Group continues to trade with adequate profit to service its
debt covenants.
Mitigating actions
In the event that the above scenario went from being 'remote' to 'possible'
then management would seek to take mitigating actions to maintain liquidity
and compliance with the new facility covenants. The options within the control
of management would be to:
· Optimise liquidity by working capital management of the
peak-to-trough intra-month movement. Utilising existing vendor management
finance arrangements with retailers and optimising contractual payment cycles
to suppliers which would improve liquidity headroom;
· Not pay planned dividend payments;
· Delay non-essential capex projects;
· Cancel discretionary annual bonus payments; and
· Identify other overhead and depot savings.
More extreme mitigating actions would also be available if the scenario arose.
The Group 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 Group has not made use of this facility in the
current or prior periods.
Assessment
Having considered the above and the funding requirements of the Group, the
directors are confident that headroom under the new bank facility remains
adequate, future covenant tests can be met and there is a reasonable
expectation that the business can meet its liabilities as they fall due for a
period of greater than 12 months (being an assessment period of 16 months)
from the date of approval of the Interim Group Financial Statements. For this
reason, the directors continue to adopt the going concern basis in preparing
the financial statements and no material uncertainty has been identified.
2 Accounting policies
Changes in accounting policies
During the period the Group has adopted the following accounting standards and
interpretations:
• Definition of Accounting Estimates - Amendments to IAS 8;
• Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS
Practice Statement;
• Deferred Tax related to Assets and Liabilities arising from a
Single Transaction - Amendments to IAS 12
The standards and amendments adopted had no impact on the financial statements
to prior periods and are not expected to significantly affect the current or
future periods. There are no other standards that are not yet effective and
that would be expected to have a material impact on the entity in the current
or future reporting periods and on foreseeable future transactions.
Alternative performance measures
In reporting financial information, the Group presents alternative performance
measures (APMs), which are not defined or specified under the requirements of
IFRS.
The Group believes that these APMs (listed in the Glossary), are not
considered to be a substitute for, or superior to, IFRS measures but provide
stakeholders with additional helpful information on the performance of the
business. These APMs are consistent with how the business performance is
planned and reported within the internal management reporting to the Board and
Executive Team.
The APMs do not have standardised meaning prescribed by IFRS and therefore may
not be directly comparable to similar measures presented by other companies.
Estimates and judgements
The preparation of these condensed consolidated interim financial statements
requires management to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from these
estimates.
Key accounting judgements
The significant judgements made are as follows:
Revenue recognition
The Group recognises the wholesale sales price for its sales of newspapers and
magazines. The Group is considered to be the principal based on the following
indicators of control over its inventory: discretion to establish prices; it
holds some of the risk of obsolescence once in control of the inventory; and
has the responsibility of fulfilling the performance obligation on delivery of
inventory to its customers. If the Group were considered to be the agent,
revenue and cost of sales would reduce by £458.7m (H1 2023: £464.9m).
Adjusting items
Adjusting items of income or expense are excluded in arriving at adjusted
operating profit to present a further measure of the Group's performance. Each
adjusting item is considered to be significant in nature and/or quantum,
non-recurring in nature and/or considered to be unrelated to the Group's
ordinary activities or consistent with items treated as adjusting in prior
periods. Excluding these items from profit metrics provides readers with
helpful additional information on the performance of the business across
periods because it is consistent with how the business performance is planned
by, and reported to, the Board and the Executive Team.
The classification of adjusting items requires significant management
judgement after considering the nature and intentions of a transaction.
Adjusted measures are defined with other APMs in the Glossary.
Based on the nature of the transactions, adjusting items after tax totalled
£0.2m (H1 2023: net £nil) and a breakdown is included within Note 3.
Key sources of estimation uncertainty
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in the period
of the revision and future periods if the revision affects both current and
future periods.
The key assumptions concerning the future, and other key sources of estimation
uncertainty at the end of the reporting period that may have a significant
risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are as follows.
Property provision
The Group holds a property provision which estimates the future liabilities to
restore leased premises to an agreed standard at the date the lease is
terminated. The provision is calculated based on key assumptions including the
length of time properties will be occupied, the future costs of restoration
and the condition of the property at the future exit date.
The property provision represents the estimated future cost of the Group's
potential dilapidation costs on properties across the Group. As the current
economic outlook is for increased inflation, the Group has assessed the effect
of inflation as material on the provisions in the current year. The provisions
have therefore been adjusted for the effect of inflation in the current year.
These provisions have been discounted to present value and this discount will
be unwound over the life of the leases.
A change in any of these assumptions could materially impact the provision
balance. Refer to Note 9 for further details on the sensitivity of the
assumptions used to calculate the property provision. The property provisions
carrying value at the end of the period was £4.9m (FY2023: £4.9m)
Impairment of investments in joint ventures
Investments in joint ventures are reviewed for impairment if events or changes
in circumstances indicate that the carrying amount may not be recoverable.
When a review for impairment is conducted, the recoverable amount is
determined using value in use calculations. The value in use method requires
the Group to determine appropriate assumptions in relation to the cash flow
projections over the three-year plan period (which is a key source of
estimation uncertainty), the terminal growth rate to be applied beyond this
three-year period and the risk-adjusted post-tax discount rate used to
discount the assumed cash flows to present value. The assumption that cash
flows continue into perpetuity is a source of significant estimation
uncertainty.
During the period, the Group reviewed the performance of the Rascal joint
venture against the business plan expectation for the period. Following this,
alongside a review of net assets to the previously computed value-in-use, the
Group concluded that there was no significant indicators of impairment
present, nor any indicators that the cumulative previous impairment recognised
of £0.4m (FY2023: £0.4m) should be reversed, and therefore no adjustment
made to the investment's carrying value of £4.4m (FY2023: £4.3m).
Impairment of receivables
At 26 August 2023 and 24 February 2024 the Group holds an expected credit loss
provision of £4.4m representing 80% of the total receivables balance of
£5.5m from McColl's Retail Group as at the administration date of 9 May 2022.
During the period the administrators provided an update which included a
reduced expected timeline to settlement of 9-12 months (FY2023: at least 12
months) with no change to the range of possible recovery of 20-50%.
The bad debt from McColl's has limited predictive value given the historic low
level of bad debts incurred in the ordinary course of business. The Group has
therefore continued to hold a net impairment loss of £4.4m, representing 80%
of the total balance of £5.5m (FY2023: £5.5m) in the current financial
period.
3 Adjusting items
The table below summarises the (costs)/credits that have been
classified as adjusting items in the period:
£m 26 weeks to 26 weeks to
24 February 2024 25 February 2023
Administrative expenses
Network and reorganisation (costs)/credits (a) (0.1) 0.6
Tuffnells provision (b) (0.1) -
Aborted acquisition costs (c) - (0.6)
Total before tax (0.2) -
Taxation - -
Total after taxation (0.2) -
The Group incurred a total of £0.2m (H1 2023: net £nil) of adjusting items
before tax and £0.2m (H1 2023: net £nil) after tax respectively.
Adjusting items are defined in the Glossary. The impact of removing these
items from statutory
profit provides a relevant analysis of the trading results of the Group
because it is consistent with how the business performance is planned by, and
reported to, the Board and Executive Team. However, these additional measures
are not intended to be a substitute for, or superior to, IFRS measures. They
comprise:
a) Network and re-organisation costs £0.1m (H1 2023: £0.6m credits)
During the current period, an additional £0.1m (H1 2023: £nil) of costs were
provided for with regards to simplifying the DMD group structure.
During the prior period, there was a reversal of accrued amounts of £0.6m
relating to projects in connection with our outsourced Shared Service Centre
(SSC) in India, where accrued costs relating to overheads on projects would no
longer materialise. These amounts were released to the income statement with
these projects concluded.
The cash impact of network and reorganisation during the period was an outflow
of £0.1m (H1 2023: £nil).
b) Tuffnells provision £0.1m (H1 2023: £nil)
As part of the sale of Tuffnells Parcels Express Limited (Tuffnells) in May
2020, a contractual agreement was put in place in respect of the future
treatment and responsibility of certain insurance claims brought or notified
to insurers. This agreement extinguished the Group's exposure to new accident
and insurance claims brought after the sale of Tuffnells but which related to
the Group's period of ownership of Tuffnells up to May 2020. However, as a
result of Tuffnells falling into administration in June 2023, the
enforceability of, and subsequent recoverability under, this contractual
agreement has been negatively impacted and the Group's insurers have instead
looked to the Group to stand behind the excess/deductible limit of such
claims.
Costs of £0.1m (H1 2023: £nil) were incurred to increase existing insurance
provisions, which represents management's best estimate of claims brought in
relation to the period, which Tuffnells was part of the Group and that
therefore are now probable to be paid by the Group as a result. The cash
impact of utilisations on existing claims was an outflow of £0.1m (H1 2023:
£nil).
c) Aborted acquisition costs £nil (H1 2023: £0.6m)
During the prior period the Group incurred due diligence and legal costs
associated with an aborted acquisition. The cash impact of these items in the
prior period was an outflow of £0.6m.
4 Income tax charge
The income tax charge for the 26 weeks ended 24 February 2024 is calculated
based upon the tax rates expected to apply to the Group for the full year. The
effective rate of tax on adjusted profits before tax is 25.8% (H1 2023:
22.2%).
An increase in the UK corporation tax rate to 25% from 1 April 2023 was
enacted during the prior period. The effective tax rate for the prior period
was computed based on a hybrid rate of 21.5%, which combines 19% for the first
seven months of the financial year with 25% for the remaining 5 months of
financial year.
Taxation for other jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
5 Dividends
Proposed dividends for the period 26 weeks to 24 Feb 2024 26 weeks to 25 Feb 2023 26 weeks to 24 Feb 2024 26 weeks to 25 Feb 2023
Per share Per share £m £m
Interim dividend - proposed 1.75p 1.40p 4.2 3.3
Recognised dividends for the period Per share Per share £m £m
Final dividend - prior year 2.75p 2.75p 6.7 6.5
An interim dividend of 1.75p per ordinary share is proposed for the 26-week
period to 24 February 2024 (H1 2023: 1.40p per ordinary share), which is
expected to be paid on 4 July 2024 to all shareholders who are on the register
of members at the close of business on 7 June 2024. The ex-dividend date will
be 6 June 2024.
The FY2023 final dividend of 2.75p (£6.7m) was approved by shareholders at
the Annual General Meeting on 31 January 2024, paid on 5 February 2024 and is
recognised in this period.
6 Earnings per share
26 weeks to 24 Feb 2024 26 weeks to 25 Feb 2023
Earnings (£m) Weighted average number of shares million Pence per share Earnings (£m) Weighted average number of shares million Pence per share
(p) (p)
Weighted average number of shares in issue 247.7 247.7
Shares held by the ESOP (weighted) (6.8) (11.0)
240.9 236.7
Basic earnings per share (EPS)
Adjusted earnings attributable to ordinary shareholders 11.8 240.9 4.9 13.3 236.7 5.6
Adjusting items (0.2) -
Earnings attributable to ordinary shareholders 11.6 240.9 4.8 13.3 236.7 5.6
Diluted EPS
Effect of dilutive securities 10.4 12.6
Diluted Adjusted EPS 11.8 251.3 4.7 13.3 249.3 5.3
Diluted EPS 11.6 251.3 4.6 13.3 249.3 5.3
Due to the lower average amount of shares held in Trust during the period and
the number of options outstanding in the current period, the weighted average
number of diluted shares at February 2024 increased to 251.3m (H1 2023:
249.3m) and resulted in a diluted adjusted EPS of 4.7p, a decrease of 0.6p on
the prior period.
The calculation of diluted EPS reflects the potential dilutive effect of
employee incentive schemes of 10.4m dilutive shares (H1 2023: 12.6m).
7 Net cash inflow from operating activities
26 weeks to 26 weeks to
£m 24 Feb 2024 25 Feb 2023
Operating profit 18.6 20.4
Share of profits of joint ventures (0.1) (0.1)
Depreciation of property, plant and equipment 1.0 1.1
Depreciation of right of use assets 2.8 3.4
Amortisation of intangible assets 0.2 0.3
Share-based payments 0.2 1.0
Increase/(decrease) in inventories 0.6 (3.2)
Increase in receivables (3.4) (8.5)
Decrease in payables (3.8) (1.9)
Decrease in provisions (0.7) (0.8)
Income tax paid (4.3) (3.9)
Net cash inflow from operating activities 11.1 7.8
Net cash flow from operating activities is stated after £0.2m (H1 2023:
£0.7m) of outflows from adjusting items.
8 Cash and borrowings
Cash and borrowings by currency (sterling equivalent) are as follows:
£m Sterling Euro USD Total At 26
24 Feb 2024 Aug 2023
Cash and bank deposits 15.8 0.4 0.3 16.5 37.3
Net cash and cash equivalents 15.8 0.4 0.3 16.5 37.3
Term loan - disclosed within current liabilities - - - - (10.0)
Term loan - disclosed within non-current liabilities (26.5) - - (26.5) (31.5)
Unamortised arrangement fees - disclosed within non-current liabilities 0.9 - - 0.9 1.3
Total borrowings (25.6) - - (25.6) (40.2)
Net borrowings (9.8) 0.4 0.3 (9.1) (2.9)
Total borrowings
Amount due for settlement within 12 months - - - - (10.0)
Amount due for settlement after 12 months (25.6) - - (25.6) (30.2)
(25.6) - - (25.6) (40.2)
Cash and bank deposits comprise cash held by the Group 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 a final maturity date of 31 August 2025.
The facility comprised an initial £60 million amortising term loan (Facility
A) and a £30 million revolving credit facility (RCF). The agreement is with a
syndicate of banks comprising lenders HSBC, Barclays, Santander and Clydesdale
Bank.
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; scheduled repayments of £8m in
FY2023 and £10m in FY2024 and FY2025 respectively for the repayment of
Facility A and a final bullet payment at maturity; and capped dividend
payments of up to £10m in respect of any financial year.
As at the period end, the term loan had reduced to £26.5m as a result of a
scheduled repayment of £5m in October 2023 and voluntary early repayment of
£10m in November 2023. The RCF was £20.0m at the period end and reduces by
£2.5m every six months from February 2024 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% per annum over SONIA (in respect of Facility A and the RCF).
At 24 February 2024, the Group had £20.0m (FY2023: £22.5m) of fully undrawn
committed borrowing and cash facilities in respect of which all conditions
precedent had been met. This is partially reduced by letters of credit of
£1.5m (FY2023: £1.5m), as detailed in note 10.
After the period end date, the Group agreed a new banking facility, as
detailed in note 13.
Analysis of net debt
As at As at
£m 24 Feb 2024 26 Aug 2023
Cash and cash equivalents 16.5 37.3
Current borrowings - (10.0)
Non-current borrowings (25.6) (30.2)
Net borrowings (9.1) (2.9)
Lease liabilities (28.4) (23.2)
Net debt (37.5) (26.1)
9 Provisions
£m Reorganisation provisions Insurance and legal provision Property provisions Total
At 27 August 2023 (1.0) (0.8) (4.9) (6.7)
Charged to income statement (0.1) (0.1) - (0.2)
Credited to income statement 0.1 - 0.1 0.2
Utilised in period 0.7 0.1 - 0.8
Unwinding of discount utilisation - - (0.1) (0.1)
At 24 February 2024 (0.3) (0.8) (4.9) (6.0)
£m 24 Feb 2024
Included within current liabilities (1.6)
Included within non-current liabilities (4.4)
Total (6.0)
Re-organisation provisions of £0.3m relates to the restructure of the DMD
business, the Smiths News network and the Group's support functions that were
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 £0.4m relating to claims from
the Tuffnells business prior to disposal.
The property provision represents the estimated future dilapidation costs
across the Group's leased properties. These provisions have been discounted to
present value, and this discount will be unwound over the life of the leases.
The provisions cover the ten-year period to 2034, of which the liability falls
within.
The Group has performed sensitivity analysis on the property provision using
the possible scenarios below:
· if the discount rate changes by +/- 0.5%, the property provision
would change by +/- less than £0.1m;
· if the repair cost per square foot changes by +/- £1.00, the
property provision would change by +/- £0.2m.
10 Contingent liabilities and commitments
As detailed in Note 3, following the administration of Tuffnells Parcels
Express Limited (Tuffnells) in June 2023, the Group hold provisions totalling
£0.4m (FY2023: £0.4m) in light of the probable outcome of certain insurance
claims reverting to the Group which were previously being handled by
Tuffnells. The Board has considered the administration and other associated
processes in respect of Tuffnells and is not currently aware of any further
provision which may be required.
Other potential liabilities that could crystallise are in respect of previous
assignments of leases where the liability could revert to the Group if the
lessee defaulted. Pursuant to the terms of the Demerger Agreement from WH
Smith PLC in 2006, any such contingent liability in respect of assignment
prior to demerger, which becomes an actual liability, will be apportioned
between Smiths News plc and WH Smith PLC in the ratio 35:65 (provided that the
actual liability of Smiths News plc in any 12-month period does not exceed
£5m). The Group's share of these leases has an estimated future cumulative
gross rental commitment at 24 February 2024 of £0.4m (FY2023: £0.5m).
As at 24 August 2023, the Group had approved letters of credit of £1.5m
(FY2023: £1.5m) to the insurers of the Group for the motor insurance and
employer liability insurance policies. The letters of credit cover the
employer deductible element of the insurance policy for insurance claims.
On winding up of the News Section of the WH Smith Pension Trust defined
benefit pension scheme in December 2021, the Group has agreed run-off
indemnity coverage for any member claims that were uninsured liabilities
capped at £6.5m over the following 60 years. The Group is not aware of any
claims brought during either the current or prior reporting period.
11 Share capital
a) Share capital
£m 24 Feb 2024 25 Feb 2023
Issued, authorised and fully paid ordinary shares of 5p each
Opening and closing balance 12.4 12.4
b) Movement in share capital
Number (m) Ordinary shares of 5p each
At 27 August 2023 247.7
At 24 February 2024 247.7
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at the general
meetings of the Group. The Group has one class of Ordinary shares, which carry
no right to fixed income.
c) Share premium
£m 24 Feb 2024 25 Feb 2023
Opening and closing balance 60.5 60.5
12 Related Party Transactions
No related party transactions had a material impact on the financial
performance in the period or financial position of the Group at 24 February
2024. There have been no material changes to or material transactions with
related parties as disclosed in Note 30 of the Annual Report and Accounts for
the 52-week period ended 26 August 2023.
13 Subsequent events
The directors have considered the period between the balance sheet date and
the date when the accounts are authorised for issue for evidence of conditions
that existed at the balance sheet date, either adjusting or non-adjusting post
balance sheet events.
The directors have concluded that there is one non-adjusting event in the
current period:
Refinancing of banking facility
On [1 May 2024] the Group agreed and commenced a new banking facility with two
relationship banks. The facility comprises; a committed RCF of £40m, which
has a lower interest margin than, and similar covenant terms to, the previous
facilities; and an uncommitted accordion facility of £10m. The initial term
is three years with extension options at the first and second anniversary
dates.
Glossary - Alternative performance measures
Introduction
In the reporting of financial information, the directors have adopted various
Alternative Performance Measures (APMs).
These measures are not defined by International Financial Reporting Standards
(IFRS) and therefore may not be directly comparable with other companies'
APMs, including those in the Company's industry.
APMs should be considered in addition to, and are not intended to be a
substitute for, or superior to, IFRS measurements.
Purpose
The directors believe that these APMs assist in providing additional useful
measures of the Group's performance. They provide readers with additional
information on the performance of the business across periods which is
consistent with how the business performance is planned by, and reported to,
the Board and the Executive Team.
Consequently, APMs are used by the directors and management for performance
analysis, planning, reporting and incentive-setting purposes.
APM Closest equivalent IFRS measure Adjustments to reconcile to IFRS measure Note/page reference for reconciliation Definition and purpose
Income Statement
Adjusting Items No direct equivalent N/A Note 3 Adjusting items of income or expenses are excluded in arriving at adjusted
operating profit to present a further measure of the 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.
Adjusted operating profit Operating profit* Adjusted items Income statement/ Note 3 Adjusted operating profit is defined as operating profit, 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 before tax Profit before tax (PBT) Adjusted items Income statement/ Adjusted profit before tax is defined as profit before tax, excluding the
impact of adjusting items (defined above).
Note 3
Adjusted profit after tax Profit after tax (PAT) Adjusted items Income statement/ Adjusted profit after tax is defined as profit after tax, excluding the impact
of adjusting items (defined above).
Note 3
Adjusted EBITDA Operating profit* Depreciation and amortisation Financial review This measure is based on business unit operating profit. It excludes
depreciation, amortisation and adjusting items. This is the headline measure
Adjusted items of the Company's performance and is a key management incentive metric.
Adjusted earnings per share Earnings per share Adjusting items Note 3 Adjusted earnings per share is defined as adjusted PBT, less taxation
attributable to adjusted PBT and including any adjustment for minority
interest to result in adjusted PAT attributable to shareholders; divided by
the basic weighted average number of shares in issue.
Cash flow Statement
Free cash flow Cash generated Dividends, acquisitions and disposals, Reconciliation of free cash flow to net movement in cash and cash equivalents Free cash flow is defined as cash flow excluding the following: payment of the
from operating
following this Glossary dividend, acquisitions and disposals, the repayment of bank loans and EBT
activities Repayment of bank loans, share purchases. This measure reflects the cash available to shareholders.
EBT share purchases
Free cash flow (excluding adjusting items) Net movement in cash and cash equivalents Dividends, acquisitions and disposals, Reconciliation of free cash flow to net movement in cash and cash equivalents Free cash flow (excluding adjusting items) is Free cash flow adding back
following this Glossary adjusted cash costs.
Repayment of bank loans,
Outfow for purchase of own shares,
Adjusting items
Balance Sheet
Bank Net Debt Borrowings less cash Below Bank Net Debt is calculated as total debt less cash and cash equivalents.
Total debt includes loans and borrowings (excluding unamortised arrangement
fees), overdrafts and obligations under finance leases as defined by IAS 17.
Net Debt Borrowings less cash Note 8 Net Debt is calculated as total debt less cash and cash equivalents. Total
debt includes loans and borrowings, overdrafts and obligations under leases.
*Operating profit is presented on the Company's income statement. It is not
defined per IFRS, however, it is a generally accepted profit measure.
Reconciliation of free cash flow to net movement in cash and cash equivalents
26 weeks to 24 Feb 2024 26 weeks to 25 Feb 2023
Net decrease in cash and cash equivalents (20.8) (11.7)
Decrease in borrowings and overdrafts 15.0 3.0
Movement in borrowings and cash (5.8) (8.7)
Dividend paid 6.7 6.5
Investment in joint ventures - 0.2
Outflow for purchase of own shares 3.3 1.8
Total free cash flow 4.2 (0.2)
Reconciliation of bank net debt to reporting net debt
At At
24 Feb 2024 26 Aug 2023
Bank net debt (10.0) (4.2)
Unamortised arrangement fees (note 8) 0.9 1.3
Lease liabilities (28.4) (23.2)
Net debt (note 8) (37.5) (26.1)
INDEPENDENT REVIEW REPORT TO Smiths News plc
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the 26 weeks ended 24 February 2024 is not prepared, in
all material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the 26 weeks ended 24
February 2024 which comprises the Condensed Consolidated Income Statement, the
Condensed Consolidated Statement of Comprehensive Income, the Condensed
Consolidated Balance Sheet, the Condensed Consolidated Statement of Changes in
Equity, the Condensed Consolidated Group Cash Flow Statement and the related
notes to the Consolidated Unaudited Interim Financial Statements.
Basis for conclusion
We conducted our review in accordance with Revised International Standard on
Review Engagements (UK) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410
(Revised)"). A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the interim financial statements of the Group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410 (Revised), however future events or conditions may cause the
Group to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the Company a conclusion on the condensed set of consolidated
financial statements in the half-yearly financial report. Our conclusion,
including our Conclusions Relating to Going Concern, are based on procedures
that are less extensive than audit procedures, as described in the Basis for
Conclusion paragraph of this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority and for
no other purpose. No person is entitled to rely on this report unless such a
person is a person entitled to rely upon this report by virtue of and for the
purpose of our terms of engagement or has been expressly authorised to do so
by our prior written consent. Save as above, we do not accept responsibility
for this report to any other person or for any other purpose and we hereby
expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London, UK
01 May 2024
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
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