(Adds analysts' comments, details; updates share movement)
By Abhirup Roy
July 9 Smiths News Plc, the largest
newspaper and magazine distributor in the UK, said it won two
contract extensions with a combined value of more than 320
million pounds ($478.00 million), pushing shares up as much as
The company said it extended wholesaling agreements with
Associated Newspapers Ltd, publisher of the Daily Mail and Mail
on Sunday, until October 2021 and with COMAG, distributor for
publishers such as Cosmopolitan, Vogue and GQ, until December
Smiths News said it had now secured about 800 million pounds
of revenue at its newspaper and magazine distribution business
until at least 2019.
"The company has a roughly 6 percent dividend yield, and
secure revenues and visibility on revenues essentially underpins
that dividend yield and the growth in that yield," Edison
Investment Research analyst Zsolt Mester said.
Smiths News also reported a marginal increase in revenue for
the 44 weeks to July 6, helped by contribution from its 2012
acquisition of The Consortium, a distributor of consumable
supplies to the education sector.
The company has been expanding its higher-margin book
wholesaling business and diversifying into educational supplies,
with the aim of generating half of its revenue from outside the
newspaper and magazine wholesaling business by 2016.
While revenue from its Bertrams book wholesaling business
increased 2 percent on a like-for-like basis, for the period,
revenue from its newspaper and magazine distribution business
fell 4.6 percent on a like-for-like basis.
The newspaper and magazine business accounted for more than
80 percent of total revenue in the first half of 2013.
"The challenge for them is just to maintain profitability in
that (newspaper and magazine distribution) business while
revenue declines," N+1 Singer analyst James Tetley said.
The company's diversification strategy mirrors that of rival
John Menzies Plc, which receives most of its profit
from aviation support services.
Menzies had in March said it expected trading at its
newspaper business, which distributes the Financial Times and
the Independent in the UK, to remain challenging in 2013 as
customers buy fewer magazines.
Shares in Smiths News were up 7 percent at 167 pence at 0950
GMT on Tuesday on the London Stock Exchange.
($1 = 0.6695 British pounds)
(Reporting by Abhirup Roy in Bangalore; Editing by Gopakumar
Warrier, Supriya Kurane)