Smiths News (LSE:SNWS) — Full Year results for the year ended 29 August 2026

0:01 Good morning, ladies and gentlemen, and welcome to the SMITHS NEWS PLC full year results investor presentation. Questions are encouraged. They can be submitted at any time via the Q and A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish your responses where it's appropriate to do so on the Investor Meet company platform. Before we begin, we would just like submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now

0:32 like to turn you over to CEO, John Bunting. John, good morning, sir. Good morning, and thank you for joining us. I'm joined today by our Chief Financial Officer, Richard Clay and together we'd like to take you through our FY twenty twenty six results, the progress we've made across the business and most importantly why we believe the next phase of our strategy represents a transformational opportunity for SMITHS NEWS. Turning to the headlines. Pleasingly, we've delivered a strong financial performance across FY twenty twenty six with results in line with the upgraded market expectations. The group delivered adjusted operating profit of GBP 38,700,000 and adjusted profit after tax of GBP 27,400,000.

1:19 This excellent performance has been in part enabled by further positive momentum in collectibles, supported by a strong FIFA Men's World Cup and ongoing Pokemon demand. We also generated a 31% year on year improvement in growth revenues, with a particularly pleasing contribution from recycling activities. From an efficiency perspective, we again delivered GBP 4,500,000 of operational savings during the year, in line with budget. Finally, on the financial highlights, we are proposing a final ordinary dividend of GBP 3.9 per share, taking the FY twenty twenty six dividend to 5.65p per share.

1:58 Before I hand over to Richard, who will do a deeper dive on the numbers, I wanted to talk briefly about our Go National program, which we will touch on in greater detail later in the presentation. Go National is a result of a number of exclusive national newspaper and magazine contract renewals that will see us transform our operational footprint across Wales, England and Scotland, generating a significant annual revenue uplift from 2027 through to 2037. The Go National program will be funded using our existing cash resources and financial arrangements. And we'll see us invest between £21,000,000 and £27,000,000 to establish a national capability as we open an additional 23 new depots, create around 700 new delivery routes and recruit more than 1,000 new subcontractor delivery partners and colleagues.

2:50 This represents both a financial and operational transformation of the group. And with that, we expect this program to generate between £12,000,000 and £18,000,000 of additional operating profit from FY 2029 onwards. We have also reiterated our intention to maintain FY 2027 ordinary dividend at or above 5.2p. But importantly, we've added significant operational scale to our business, creating yet further opportunities to extend our market reach in the future. I'd now like to hand over to Richard.

3:28 Thank you, John. I'll start with the financial summary. Overall, the FY twenty six results reflect a strong performance. Revenue reduced 2.6% to 1,036 million, which was in line with historic norms when adjusting for the World Cup revenues. Adjusted operating profit of 38,700,000 was 1% lower than prior year, which was 4% ahead of year end consensus expectations and in line with recently updated expectations. Adjusted profit after tax moved the variances into positive territory with adjusted profit after tax at one and a half percent at 27,400,000, and adjusted earnings per share at 1.8% at 11.3 p.

4:16 This included the impact of lower net finance costs, benefiting from higher average net cash of 15,700,000, as you see here, and better deposit rates. And in terms of dividend, a final dividend is proposed at 3.9 p, bringing the full year dividend to 5.65 p. Now looking at revenue in a bit more detail. Newspapers and magazines revenues were 3.9% lower year on year, which as I said was in line with historic norms and also within our guidance of three to 5% reduction each year. This is the net impact of volume decline and cover price increases. We see different cover price increases and volume impacts for each publisher with some seeing a higher net decline than others, and this is the weighted average.

5:08 Collectibles revenues were up 31.9, and this was driven by the World Cup trading card and sticker sales as well as continued demand for Pokemon products. International football competitions typically enhance the group's performance in alternative year... With alternate years, the even ones, due to timing of the FIFA World Cups and the way for European championships. Finally, the revenue from our growth verticals of recycle, new categories, and final mile was up 31.3%, an improvement on the prior year where they grew by 16%. Whilst these revenues are still smaller than the overall mix, growth verticals remain at the heart of our long term strategy.

5:57 Looking now at the income statement in more detail, I will call out three elements. First, operating profit. The operating profit year on year at 38,700,000 reflects a, the impact of inflation, including the annualization of national insurance contributions, b, increased investments in technology and overheads, c, the lower revenues already referenced and consequential lower gross margin from newspapers and magazines, and d, lower delivery service charges due to the ongoing and gradual reduction in retails. And these were then partially offset by a, operational cost out initiatives, which at 4,500,000 remained in line with our view of 45,000,000 per annum, and b, the higher net profit in collectibles, mainly from the World Cup.

6:47 Contribution from growth verticals was broadly flat to prior year, although revenues increased and the exit rate contribution was higher than the full year number showing moment... Momentum building. Similar to the prior year, these remain the common factors impacting the income statement for SMITHS NEWS.

7:07 Secondly, you see the benefit of lower net finance charges, which were 800,000 lower. That, plus a slightly favorable tax rate year on year, helped EPS increase 2% or point two p to 11.3 p. And finally, dividend. In line with our policy of two times cover, a final dividend is proposed at 3.9 p, bringing the full year dividend to 5.65 p, up point one p year on year. This was also ahead of the 5.2 p referenced before today in the contract wins early guidance. Given no exceptional cash inflows this year and the investment coming in Go National, which we'll cover off later, no special dividend is declared this year.

7:56 Looking now to the cash flow statement. Free cash flow remained strong at 24,100,000. Working down the statement, you can see EBITDA was slightly lower year on year at 48,100,000, mainly due to the lower operating EBIT. Then working capital, which was an outflow this year. Last year, we explained the inflow was due to collectibles, and this year, the outflow is also due to collectibles. The two can be seen as offsetting one another. Overall, capital should average a small outflow in this type of business, but the timing of retailer receipts and publisher payments can lead to working capital movements at specific points in time this year due to collectibles. It is also worth noting that overall, our working capital position tends to be favorable to closing as can be seen from average net cash being higher than closing net cash.

8:52 Then CapEx. CapEx was slightly lower than usual, largely due to the timing of expenditure on properties, and tax was slightly lower, reflecting some refunds relating to prior years and the tax on adjusting items. Adjusting items are analyzed in note three of the accounts, but looking here from a cash perspective, they mainly reflect technology costs as part of the company's ongoing technology investment program and transformation program planning costs in relation to the national published contract wins and work relating to the tender for the DRS contract. In the prior year, we benefited from two one off receipts, 5,400,000 relating to dividends from the Coles, the retailer, post completion of liquidation proceedings and a pension tax refund of 1,500,000. There were no further costs in h two associated with the previously announced UK pension regulation matter, and the group continues to disclose a contingent liability in respect to the investigation.

9:50 So overall, free cash flow remains strong at 24,100,000. And what does that mean for our net cash position? This charge bridges net cash from last year's 3,300,000 to this year's close of 3,900,000. Here, we have the payment of prior year's final ordinary dividend and special dividend plus this year's interim dividend and the net cash inflow excluding working capital. And on the right, one sees the consistency of these strong cash inflows over the last three years averaging 25,000,000. The company moving from net debt to net cash both on an average and closing basis. And finally, the total dividends returned to shareholders over the last three years, which amounted to 49,100,000 in total.

10:38 That record in cash generation and that net cash position places us very well for what is coming next. And now back to John to talk through the operational review. Thank you, Richard. Turning now to our operational performance. There are five areas I want to highlight. Newspapers and magazines remain at the center of our business and provide the national platform for other areas of revenue and profit growth. Collectibles delivered another very strong performance. Recycling continues to grow rapidly and is becoming an increasingly important part of our group. Final Mile and new category businesses also made further incremental progress. And finally, we continue to invest in technology, which is increasingly important as we scale the business and improve efficiency.

11:25 I'll take each of these in turn. Starting with Newspapers and Magazines. The underlying market continues to perform in line with our expectations. We anticipate annual revenue decline in the underlying market of around 3% to 5%, albeit our own revenues will be boosted by our increased market share from July 2027 onwards. Cover price inflation remains a consistent feature of the market, while the number of retail customers stocking the category has also only reduced marginally despite the challenging high street environment. Our proposition remains differentiated by service excellence and strong partnerships. And this is particularly important because the market is undergoing structural change as publishers seek ways to ensure that Casper remains sustainable for all communities across England, Scotland and Wales for at least the next ten years.

12:19 We have now secured transformational exclusive national contracts and those contracts will significantly increase our market share from the existing 55%. So while the underlying market continues to decline in line with our expectations, our ambition is to significantly grow our share of that market, which in turn complements our growth aspirations. Now turning to Collectibles. Collectibles delivered another strong performance in the year. We benefited from a record contribution from the FIFA Men's World Cup during the period. Pokemon demand continues to be underpinned by its sustained popularity. However, we do not expect any material one off boost in FY 2027. We also expanded our customer base securing new listings in four major supermarkets.

13:09 Alongside this, we are trialing a number of new collectible product lines, including Japanese anime and products from brands such as Bandai, Funko, DisneyLicana and The Gathering. This is important because we're building a broader and more diversified collectibles proposition rather than relying on a single product or franchise. And looking forward, we believe Go National gives us the potential to expand the addressable opportunity in collectibles further. Now turning to recycling. Recycling is another area where we have made substantial progress, expanding our proposition significantly with revenue up 52%. Today, our recycling activities now cover cardboard, plastic film, general waste, small wee, dry mix recycling, food waste, vapes, paper and coffee cups, processing approximately 1,250,000 bags per annum.

14:03 We now operate more than 7,000 collection services across our network with collections running seven days a week. We're utilizing vehicle capacity that already existed both across both live runs and return runs, further improving our go to market economics. Our relationships with wage brokers remains an important part of our growth engine, providing an efficient route to market and supporting our new business activities. As we shared at the half year, we believe the deposit return scheme is a significant opportunity for the business. We've submitted our bid and are expecting an outcome of the tender process before the end of the calendar year. Pleasingly, recycling is increasingly demonstrating the benefit of our existing distribution infrastructure and more importantly, our ability to use that infrastructure to build additional profits from services that our retail customers value.

14:55 Moving to Slide 14 on Final Mile and new categories. We've continued to make incremental progress across new categories in Final Mile. We now deliver more than 1,700,000 books and DVDs annually to existing customers and our service proposition around books has also expanded to include in store merchandising for one major supermarket. Greetings cards continues to be well received, and our customer base has grown to around 600 stores. Elsewhere, we've now concluded trialing engineer spare parts. Whilst there's been a valuable exercise for our teams in understanding the broader economics, we've decided to pause any further rollouts at this point, given our other corporate priorities. The broader point is that we're continuing to test adjacent opportunities while remaining disciplined about where we deploy capital and resources.

15:47 From a capability perspective, technology remains a key enabler for the continuing evolution of our business. And as previously announced, we are two years into our four year program. We are actively rolling out a new transport management system, which will enable real time tracking as well as improved communication with drivers and customers. In addition, the upgrading of our warehouse management system continues at pace and will support new methods of customer fulfillment, diversification of services, and improved inventory tracking. Our new Zoom contact center is designed to strengthen service delivery and operational efficiency across our customer experience teams. In addition, we're upgrading a number of other functions, including back office data processing, time and attendance and dynamic labor planning, creating the systems and processes that allow us to operate a larger, more complex national network efficiently.

16:40 These investments are not simply about technology for technology's sake, but become particularly important as we move into Go National. And on that note, Richard and myself will now take a deeper look into our Go National program, the key market drivers, our implementation strategy, and the financial implications for the business. So let me now turn to what we believe is an important strategic development for the group. We call it Go National. The scale of this opportunity is transformation, delivering up to $600,000,000 in additional revenues for the business, depending upon the outcome of all tenders with circa $375,000,000 secured to date. The program involves establishing 23 new depots, approximately 700 additional routes and more than 1,000 colleagues and subcontracted delivery partners.

17:29 And critically, it extends our reach across the whole of England, Wales and Scotland. This is not simply a depot expansion program, but the creation of a national distribution network that strengthens our relationships with publishers and retailers, ensuring consumers are able to access and consume news and magazine content for many years to come across all community types. This national capability also complements and enhances our existing strategy of growing new profit streams in the early morning space. So turning to the next slide for some market context. The context of the award of National Contracts is important to understand. Our publisher clients have a strategic ambition to maintain a healthy print market whilst they grow their own diversified profit streams.

18:15 To maintain a sustainable long term route to market for printed media, publishers have taken time to consider how they best create a supply chain that is efficient, avoids duplication of costs, and critically better meets the needs of retailers today and indeed their likely future needs. As a consequence, a number of publishers have decided to move to national contracts, and SMITHS NEWS has been successful in winning those that have been tendered so far. Over the last six months, we've secured exclusive long term contract awards with NEWS UK, Associated Newspapers, Frontline and Seabourg, and more recently, The Telegraph Media Group. These contracts not only see an extension of our contracts in our existing territories after 2037, but also extend the contract to deliver services across England, Wales and Scotland.

19:01 Once these contracts are up and running, we will have just over 60% of the newspaper magazine market. That delivers GBP $375,000,000 of additional revenue in our new territories alongside GBP $585,000,000 of annual revenues we already generate from our existing footprint. The blue box on this slide highlights when these new contracts commence, starting with NEWS UK and then The Telegraph Group in 2027, associated newspapers in 2028 and Frontline and Seymour in 2030. Looking at our remaining contracts as detailed in the yellow box, we have existing contracts in place with a number of key publishers and we'll continue to discuss with them their supply chain preferences for the coming years. Publishers have been the driving force behind this industry consolidation, seeking a single sustainable supply chain capable of not only supporting their own future needs, but critically those of many thousands of retailers that are the vital link to consumers in urban and rural communities.

19:58 The key is that we are entering this next phase of the market from a position of strength. We already have the relationships, operational expertise and network capabilities required to support our clients and customers. Go National builds on those foundations. I'll now hand over to Richard to provide more content around the financials of Go National.

20:20 Thank you, John. So what are the financial impacts of our Go National program? We divide these impacts into five key element... Elements labeled one to five on this slide. Taking the first three, the build phase relates to the setting up in the new territories ready for the first contract with NEWS UK, which starts in July 2027, as you saw on the previous slide. We estimate we will spend 21 to £27,000,000 in this phase. We will account for these upfront costs as either adjusting items or CapEx depending on the nature of the cost, I. E. They will not impact adjusted operating profit. Next is the transition phase.

21:06 This period lasts from the start of the first contract in July f y twenty seven to the end of f y twenty eight. Initially, in July and August next year, we expect to have new UK titles in our vans, but the other contracts start later. So there will be an inherent inefficiency in this period as we deliver to the vast majority of locations, but with reduced titles and therefore volumes. In f y twenty seven, we estimate this will cost 7 to £9,000,000. In f y twenty eight, we expect this to initially continue to cost us each month, but as more contracts come live, they will add profit. And the net impact in f y twenty eight is is expected to be 0 to £2,000,000 in incremental profit.

21:52 We will account for both this incremental cost in f y twenty seven and the incremental profit in f y twenty eight in adjusted operating profit. And finally, the scale phase lasts from f y twenty nine onwards. And as context, contracts announced to date mostly end in 2037. This phase is expected to add 12 to £18,000,000 of incremental net adjusted operating profit in each year. So why are the ranges? We have modeled many scenarios of how we expect this to unfold, and I will call out two factors in particular. First, which depots we select? We are well on track for locating all the 23 depots John referenced earlier, but we have may... Based our expectations on averages.

22:42 Some may have low CapEx fit out, but higher rents, and others vice versa. So this is not only a potential difference in the quantum, but also in the split of costs that could impact our results. And secondly, what additional contracts we win and exactly when each contract starts will impact where we are in the range, and we are conscious of reducing the need to update the market too frequently in the future beyond the revenue impacts. So far, we have won five contracts with aggregate revenues of circa 375,000,000. We are working with all existing partners to secure further contracts and hope to be successful in many of them. So to be clear, should we win further contracts, we will only update the ranges at the point we believe we have fallen outside them.

23:31 Finally, we reiterate here regarding dividend and financing arrangements, and I will cover both of these off in more detail on a capital priority slide later.

23:44 So now to explore each of those elements in a bit more detail. First, the build or investment phase with cost of 21 to £27,000,000. We have a dedicated Go National project team already set up and embedded in the business with a transformation director and team below. And as I said, we have started sourcing the 23 depots which will require fitting out to make operational. Then as we get close to go live, we will start recruiting colleagues and contractors for pre go live training. We will account for all these costs as either adjusting items or CapEx depending on their nature and expect all or almost all of these costs to be incurred within f y twenty seven, and the majority will be in the second half of f y twenty seven, although the work is well underway.

24:34 We expect to deliver this Go National network expansion within existing cash resources and financing arrangements. As context, our average next... Net cash in f y twenty six was 15,700,000. Our f y twenty six closing net cash was 3,900,000, and our RCF is 40,000,000. And we have modeled this carefully to confirm this statement. Finally, we are very attuned to the execution risk inherent in such a transformational investment and have implemented new governance and controls to manage this. The next phase we refer to is transition. Post go live in July next year, we will receive revenues on the new contracts in the new territories as they come on board and payout the cost of the depots, colleagues, and other costs to deliver those contracts from go live.

25:27 In July 27, we will just have music titles, including the times as shown here, followed by the telegraph in October 27. But by January 28, we will also have associated newspaper titles, including the mail as shown here. And in time, we may reasonably expect other publishers' titles will help our financial position. As can be expected, there are a lot of unknowns at this stage. Some of the elements in the build phase could impact this view as described previously. And if at any stage, the ranges were viewed as materially incorrect, we would update the market at that point.

26:04 In f y twenty nine, we reached the scale phase, and this is when consistently we expect the new territories to deliver incremental profit each month and thus each year. The variability of assumptions here is higher, and so the range is wider. Importantly, it is worth noting these ranges only include the incremental net profit associated with the news and magazines vertical, including collectibles. We expect there will be further opportunity in the other growth verticals of recycle, final mile, and new categories, but these have not been included at this stage. We have previously given revenue figures for contracts and will continue to do so should there be further announcements. The net profit range here is driven off individual revenue and cost assumptions, But overall, the net operating margin is expected to be in the region of 3%.

26:54 This compares to our current margin of 4%, but note, a, that the new territories have a different cost profile as they are more rural, and b, this margin would be expected to be enhanced over time by growth verticals. The scale period drives the financial returns of the new contracts.

27:16 Given these impacts are transformational, but also larger than normally reported, I thought it would be useful to underline that our capital priorities remain unchanged. Our first priority is to invest in the business both to secure the existing news and magazines business, but also to grow our growth verticals. Since I joined, I've had to evaluate a number of potential investments, and I further strengthened the disciplined approach used. Our investments are always tested against the returns hurdle, whether it's evaluating an individual final mile contract, DRS, or the recent go national contracts. The returns hurdle is always ahead of WACC, but can be adjusted for perceived risk.

28:02 The returns on Go National are expected to be substantially ahead of WACC. Go National is, in our view, an excellent example of organic growth investment. Our second priority is dividend, and we see this as core to SMITHS NEWS investment case. Given the level of investment over the next twelve to eighteen months impacting particularly f y twenty seven, we have previously confirmed that we intend to maintain the ordinary dividend at or above 5.2 p and I reiterate that guidance today. Investment is a short term phase and dividend remains a key priority. Our third priority is, where applicable, to return excess cash to shareholders, which has typically been through special dividends, distributing one off inflows to shareholders.

28:50 We will continue to evaluate this and other options in the future, but given the investment in Go National over the next twelve to eighteen months, this is not deemed appropriate at this time. Finally, it is important to underline that we have a strong balance sheet. We currently have net cash, but we expect that to move to net debt as we invest in Go National. We remain comfortably within our current RCF facility and below one times leverage. I will now hand back to John to talk through strategic priorities and outlook. Thank you, Richard. In the year ahead, we have a number of important deliverables as we seek to go national, implement market leading technology, maintain our growth momentum and of course, continue through our existing business with a high degree of rigor that we do today.

29:36 In the pursuit of these critical deliverables, it is important we robustly prioritize our use of capital, management time and colleague focus. This inevitably means we'll have to make difficult decisions to slow some other projects down. Therefore, for the next twelve months, we will be actively prioritizing our deliverables in the news and magazine and recycle verticals, including if successful with DRS, and reducing the emphasis we place on new business in the new Caspers and Final Mile verticals. Our major investment programs, which create the secure foundations for our future will, of course, continue to be an area of focus and commitment. The largest of these is Go National, supported by our future technology investment. The key takeaway here is that we are investing in the core infrastructure while simultaneously developing additional revenue opportunities for the investment.

30:27 So to summarize, our strategic priorities are therefore clear. First, execute Go National successfully. Second, continue to invest in technology to make the enlarged workforce more efficient. Third, maintain our focus on efficiency and operational excellence fourth, continue growing into three other verticals with a shorter term emphasis on recycle. We believe the national network will strengthen our position in supporting publishers and retailers, whilst also unlocking further opportunities across the group's growth businesses.

31:00 So this is not simply a response to structural change in newspapers and magazines, it's an opportunity to build a broader distribution business and further expand our market reach. If we turn to Slide 26, I'll finish with the outlook. The transformational national network creates a long term revenue platform for the group. Our footprint across England, Scotland and Wales strengthens our ability to support publishers and retailers and gives us the opportunity to develop our growth verticals further. FY twenty twenty seven trading has started positively and execution of the national expansion is now underway and progressing to plan. We do expect a short term profitability impact in FY twenty twenty seven as the business absorbs the cost of expansion and transition, but have reiterated our dividend guidance.

31:46 This is an important part of the investment story. We are deliberately investing ahead of the earnings opportunity. The expansion is expected to enhance net profitability from FY 2028 with material benefits anticipated from FY 2029 and beyond. So in summary, we enter the next phase with a strong underlying business, a proven track record of market share gains, growing higher margin and higher growth verticals and a transformational set of national contracts. We believe the investments we are making today create the foundations for a larger, more diversified and more valuable SMITHS NEWS over the coming years. Richard and I are now happy to take any questions you may have. That's great, John. Richard, if I may just jump back in there and thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab that's situated on the right hand corner of your screen. But just while the team take a few moments to review those questions that have been submitted already, just like to remind you that a recording of this presentation, along with a copy of the slides and published Q and A, will all be accessible via your investor dashboards.

32:52 Guys, we have received a number of questions, and thank you to all of those on

32:55 the call for taking the time to submit their questions. But if I may just hand over to you now to address those where appropriate, and if I pick up from you at the end, that'd be great. Thank you. Thank you very much. We will attempt to group the questions into certain topics so that we can try and address them in a... In an efficient way. So starting with Go National, you are currently making between 35 and 40,000,000 from your existing footprint and say you're going to make an additional 12 to 18,000,000 from the expanded footprint. Why will you not make more? Thanks, Fiona. So I just call out three factors there. The first is that the new territories are more rural. So you would have seen that on the map in the slides, and there's therefore a higher cost to serve serve in those areas.

33:43 The second factor that I call out would be, and and others may have done this, gone to company's house and looked at the incumbent accounts. Not not... That it's not clear from those accounts exactly, what the the profit is from the existing contracts, But one can call out that there's an average of 10 to £12,000,000 worth of profit made over the last five years in those accounts. And so that's been helpful for us to understand, but we've obviously modeled our own contribution ourselves. And then just final point, synergies should help us improve, hence, the the the higher range that we've given of 12 to 18. Thank you. And on Go National, could you talk us through how you're approaching cost control on the build? And in particular, how much of the 21,000,000 to £27,000,000 of estimated implementation cost is already committed or contracted today?

34:40 And what contingency is built into that range?

34:43 Yes. I'll take that one as well. So we put in place new governance. I talked about it in the presentation. There's a new transformation director. We have a program team already well set up. We have a weekly exec where we look at all of the investments, including Go National, which are the significant number of investments that we're considering at the moment. And we also have a monthly board meeting where we also look at the the Go National program in quite a lot of detail.

35:11 Over the next eight months, it moves basically from the team to the properties, the 23 depots, then just fitting out those and then putting people inside them for the pre go live training. So we're well on on course on on that program, and and that's the course of the 21 to 27,000,000. Thank you. And regarding the new depots, can you confirm that these would all be leased or what format it will take? Yeah. At the moment, we expect to lease them all. Thank you. And we've had a couple of questions on the remaining national contracts. On a scale of one to 10, what is your expectation that the remaining contracts will be won by SMITHS NEWS? Yeah, good question. Not going to be drawn into making predictions.

35:56 What I will say is that we have a very good relationship. I'd like to think anyway with all of our publisher clients. And therefore, you know, we would be hopeful that is reflected in the outcome of the tender process, but nothing is certain. So it's for us to demonstrate why we'd be the right partner for them, as we've demonstrated to publishers over the last few months. And just a follow on question to that, are those being run as national tenders, particularly in this regard for Reach, Market Force and the Feet?

36:23 Yeah. Again, I'm not going to comment on an individual publisher, but the tenders we've received so far are, being considered on a national basis. Thank you. And do the new ten year contracts reprice if print volumes fall faster than planned, for example, through volume triggers or minimum fees? Or does SMITHS carry the volume risk on the new depots? So as I've said a couple of times now, we are actively tendering for business at the moment. So there's a limit to what I want to say in terms of how we've approached our pricing. What I will say is that with each publisher, we've taken a shared view on what we think sales will look like. And then we've had a sensible conversation about what happens to margins if sales are better than that or indeed worse than that. But beyond that, I don't really want to comment.

37:09 Thank you. And we've got a couple of questions on DRS. Please, can you elaborate on your DRS tender and what's the scale and the opportunity?

37:19 Yeah, so we submitted our tender in September. This is for the manual collections element of the deposit return scheme. We're expecting the outcome to be before the end of the calendar year. We think we've put forward a very professional tender, but we are expecting the process to be very competitive. So there are no guarantees. In terms of the scale of the opportunity, it could be zero, nothing, all the way through to national if we are awarded everything. I think the key thing for us is we see some clear synergies in terms of utilization of both our final mile warehousing and indeed our delivery routes. Thank you. And just a short follow-up on that. When do you expect a decision on DRS? And can you describe some of the efficiencies that these contract wins would bring? Yeah, I mean, I think I probably covered both of those in my last answer, but we for absolute clarity, we're expecting to understand whether we've been successful or not by the end of December this year.

38:16 And we really think the efficiencies come through better utilization of our existing assets, whether that is our final mile warehouse locations or indeed our delivery and collection routes. Thank you. And a couple of questions on profit forecast. Are your profit forecast reasonably conservative? And do they take into account winning any incremental revenues from your growth categories such as collectibles and recycling?

38:45 I'll take that one. So I would describe... Not as conservative, I'd describe them as as realistic to the earlier point on the first question. But the... But to the sub component of that question, the ranges exclude profit from growth verticals, so we haven't put any of the profit... Incremental profit from growth verticals into those scales. Thank you. And just a bit of a follow on on collectibles. Is there a plan to distribute other card games outside of Pokemon and the ones you referenced in the presentation? So yes, so as I mentioned in the presentation, we are actively currently distributing Funko, Disney Lekana, The Gathering and Bandai. So yes, it's a simple answer. We're doing that we believe some market leading brands with very much the idea of growing in that space. And we know our retail customers value that product too.

39:39 Thank you. And we've had a question about, smaller publishers of niche magazines relying on TG Jones for a significant portion of their retail sales. Do you believe there's risk of publisher administration do you believe the risk of publisher administration has increased due to these store closures? And how much exposure does SMITHS NEWS have to this threat?

40:00 Yeah. I mean, it's a really good question. But it's not one I'm really able to comment on too much. What I can say is that TD Jones remains an important customer of ours, particularly from a magazine perspective. We can absolutely see in their largest stores that their underlying trading is improving year on year, but we all recognize there's a store rationalization program underway. And until that's finished, we won't really know the impact on sales. And certainly, we're not privy to individual brands and their profitability. So I'd have no view as to whether it was likely to increase or decrease their risk of administration. Thank you. We've had a handful of questions a bit more detailed on the financials. So we'll dive into those now. Stripping out the 3,500,000 World Cup and last year's Pokemon one off, H2 adjusted operating profit fell 9% like for like. Is that National Insurance contribution and pre expansion overhead? Or is the core eroding faster than you expected?

40:56 Yeah. I I think that's an interesting question. I love h one versus h two analysis. I I just view that as natural seasonality. When people have taken our numbers for next year, they've broadly taken off the World Cup and and then held the rest flat. So I don't think there's anything to read into that. Thank you. And what is the planned peak month end bank borrowing in FY 2728?

41:21 And what headroom is left on the RCF? So the investment, as I took... Talked to in the build phase in particular, moves us from a net cash position to a to a net debt position. And as I've also said that the investment is within our existing cash resources and financing arrangements. I won't give a number about the peak, but we're very confident remaining within those that RCF facility. Thank you. And in respect to the dividend, the 5.2p floor that you referred to covers FY '27. Does the board intend to hold 5.2p throughout the build or let it follow earnings?

42:02 Yes. So the 5.2p, I I think the word floor is is the right word. We will look at it at the end of the year again to to reevaluate, but that's... We've made a commitment to be at or above 5.2 p. And then for f y twenty seven, yeah, I I note that mathematically, two times cover, that's where the the analysts have at the moment been putting putting in a dividend number. I don't intend and we don't intend to be to be a slave to two times cover, and we haven't provided guidance on FY '28 yet. Thank you. And how is the company faring with ever rising diesel costs? Are these contractually passed on to your customers, or do you find other ways to mitigate the issue?

42:51 Yeah. We sort of covered that off a bit in in interims when we were already seeing some sort of high diesel prices, but we keep keep them under review. It's principally contractors that that... Where that comes through, we contract with those on a... On an annual basis and part of that cost is is the cost of diesel.

43:11 We we don't actually contractually pass on that to publishers. We do on some of our growth vertical areas, not in the publishers. So we would just manage that through our normal cost savings program. Lovely. Thank you. And are you surprised by the share price reaction today? Good question. I think it probably depends on I mean, we look at our results and say, it's a really good set of results. Financially, it's very strong, the cash flows continuing to come through. And it's another strong ordinary base dividend. I do, however, recognize that for some investors, they were hoping perhaps for a special because we've had a couple of specials in recent years. I would remind those investors though that they were on the back of one off inflows into the business, and we've not had those inflows this year. What I am really clear about though is if I think about the business in the short to medium term, we are genuinely creating a bigger, stronger, broader business that we believe will unlock value for all of our stakeholders over time. So disappointed by the initial reaction, but not totally surprised.

44:13 Thank you. It seemed a final question, think. It seems that the market is seeing these results as a bit of a negative. Do you think that's an incorrect interpretation?

44:24 And if so, how would you counter it? Well, I think probably just referring to my previous answer really, the market will make its judgment on the business as it always does. And I will be confident that over time we'll do that corrected. Thank you very much. And final question that we've had in. If we go back two years, this is how you expected the future of newspaper delivery to go, I. E. SMITHS NEWS dominating and GO NATIONAL panning out as it is? Well, I don't know if we're dominating, but I would certainly have taken the the position we're in now two years ago. I think it's testimony to to the hard work actually of all of the colleagues in our business that that's been recognized by our clients and wanting to award us more business. So, yes, I'm delighted. Thank you very much. Thank you, Jake.

45:10 Perfect, guys. That's great. And thank you very much indeed for addressing all of those questions that came in this morning. John, perhaps before really now, just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that'd be great. Yeah, no, thanks everyone for dialing in. As always, we very much appreciate your attention. We think we've had another strong year, both financially in terms of the results that we've talked through. From a strategy perspective, again, you've seen our growth revenues up 3152% when it comes to recycle. And of course, that transformational moment, that moment that relates to the national contract. So we're really pleased with where we are as a business. We're excited about the the next twelve

45:54 months, and we look forward to updating you again in in May. John, that's great. And thank you once again for updating investors this morning. Could I please ask investors not to close this session? You'll now be automatically redirected for the opportunity to provide your feedback. On behalf of the management team of SMITHS NEWS PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.