Smiths News

Newspaper distributor Smiths News (NWS) has unveiled an upbeat first-quarter update amid progress in its newly acquired Dawson business.

The FTSE Small Cap constituent reported a 1.9% rise in total revenues on a year-on-year basis for the 18 weeks to 7 January. Its core newspaper distribution business, Smiths News, announced a 3.2% slide in like-for-like sales, which the group notes stands against a 3.5% decline in the second half of 2010/11. It added that newspaper performance had been 'stronger' as a result of rising cover prices while magazines were said to have performed 'broadly in line' with expectations.

In its Bertrams division – a book wholesaler that it acquired in 2009 in a deal worth £8.6m – sales slipped by 0.6% on a like-for-like basis. The group did not reveal figures for Dawson, the academic bookseller it purchased last year for £20m, but it remarked that the performance of Dawson is 'in line with expectations', with integration of the business said to be 'progressing well'.

JP Morgan, joint broker together with Liberum, is forecasting pre-tax profits of £43m (EPS: 17.52p) on sales of £1.77bn for the year to August 2012. in 2013, profits of £45m (EPS: 18.6p) on revenues of £1.74bn are expected.

Last rated by Growth Company Investor in October at 87.75p, the shares currently trade at 80p. Smiths News has made valiant attempts over the past few years to diversify, something that is particularly important for a company that doesn't operate in a growth sector (newspaper distribution).

Having slipped from a 2011 peak of 108p, the company looks set to face further pressures in what is a shrinking industry, with its hopes lying in previously mooted suggestions that it will use its distribution network to provide services other than newspapers and magazines. We retain our hold rating for now.