Smiths News - Growth potential and a double-digit yield

Smiths News now has contracts in place for 91% of its core revenue to 2029, implying resilience. In addition, its non-core growth activities are beginning to gather momentum, which is already mitigating the structural decline of the core activity. Furthermore, the addressable non-core ‘early morning’ market is sizable and has a profit opportunity of c £160m, which implies that there is potential to more than offset the decline seen in the core operations and could lead to long-term profit growth. This in turn underpins the cash generation and the dividends, and could see further distributions if investment for growth is not required. We have trimmed our forecasts but raise our valuation to 93p/share.