CNCT.L Regulatory News (CNCT)

26 Apr 2007 07:01

Smiths News PLC26 April 2007 Smiths News PLC Unaudited Interim Results Announcement for the six months ended 28 February 2007 Smiths News PLC (Smiths News) is the UK's leading newspaper and magazine wholesaler serving 22,000 retailers across England and Wales FINANCIAL HIGHLIGHTS - CONTINUING OPERATIONS (Unaudited) • Revenue of £615.0m, up 4.8% (2006: £586.7m) • Underlying(1) operating profit of £17.6m, up 13.5% (2006: £15.5m) • Profit before tax of £15.2m, up 14.3%(2) (2006: proforma(2) - £13.3m, statutory - £16.3m) • Free cash flow of £9.7m(3) • Earnings per share of 8.1p, up 12.5% (2006: 7.2p) • Adjusted earnings per share of 6.9p(4), up 16.9%(2) (2006: proforma(2) - 5.9p) • Interim dividend of 2.1p (2006: 2.0p) (5) Commenting on the results, Mark Cashmore, Chief Executive said: "I am pleased to report the business has made good progress in this, the firsthalf year in which we report as an independent company following the demerger.These solid results demonstrate the inherent strengths of the business and ourstrategy. Despite the challenging trading conditions, we have produced growth inunderlying profitability and cash generation. "We continue to manage the business on the basis of limited like for like(6)revenue growth this year. As expected newspaper cover price inflation continuesto offset circulation declines, however, the magazine market remainschallenging. The rate of revenue growth in the second half of the year will belower as we reach the annualisation of the contract gains in 2006. "Our focus on service has increased customer satisfaction. Our ongoingefficiency programme and tight control of costs is helping to deliver consistentperformance. Futhermore, we remain well placed to secure new business whereopportunities arise. We expect current trading conditions to continue for theremainder of the year and the financial performance of the company to be in linewith expectations." (1) Operating profit before property profits (2007: Nil, 2006: £1.6m) (2) Proforma 2006 results assume the £70m of debt funding introduced at the time of the demerger, and the one off pension payment of £25m, had been made at the beginning of the 2006 period, giving rise to a finance cost of £1.4m. Proforma 2006 results also exclude property profits of £1.6m (3) Excludes the one off pension funding payment of £25m and dividend payment (4) Includes a tax adjustment to reflect the anticipated full year tax rate of 20% (5) 2006 dividend is the Smiths News apportionment of Old WH Smith dividend (6) Like for like revenue growth excludes publisher contract gains These definitions are applied consistently throughout this Interim ResultsAnnouncement Enquiries (for 26 April only): Smith News PLCAlan Humphrey Investor Relations 020 7404 5959 BrunswickKate HolgateGiles Croot Media Relations 020 7404 5959 A summary of Smiths News PLC's Unaudited Interim Results 2007 will be publishedin The Times newspaper on 27 April 2007. Smiths News PLC's Unaudited InterimResults 2007 are also available at www.smithsnews.co.uk and a copy of theUnaudited Interim Results 2007 will shortly be available for inspection at theUK Listing Authority, 25 North Colonnade, London, E14 5HS. About Smiths News: Smiths News was formed on 1st September 2006 following the demerger of WHSmithplc. Smiths News is the UK's leading newspaper and magazine wholesaler serving 22,000retailers across England and Wales. Smiths News also collects and processesreturns, supplies sales information to publishers and provides a range ofservices for its retail customers. Smiths News has an approximate 40 per cent share of the magazine wholesalingsector and an approximate 35 per cent share of the newspaper wholesaling sectorin the UK. Smiths News has 44 distribution centres across England and Wales, employing4,200 staff. OPERATIONAL REVIEW Smiths News made good progress over the first half of the year with performancein line with expectations. Revenues and underlying profitability continued togrow, despite challenging markets. Revenues of £615m are up 4.8% on 2006 andunderlying operating profit of £17.6m is up 13.5%. Cost savings have beenslightly ahead of plan and service levels have improved significantly. Thebusiness remains highly focused on its core objectives and the benefits ofoperating as an independent PLC are beginning to come through. Total revenues grew by 4.8%, driven mainly by contract gains. Like for likerevenues were 0.3% ahead of last year. Newspapers have continued the establishedtrend of price growth offsetting volume declines. The magazine market, however,has proved more challenging. Like for like revenues from monthlies and partworksdeclined but increased revenues from weeklies and one-shots were not sufficientto compensate. The strategy of driving efficiency and improving service is on track. At thecore of this is a programme of clearly targeted efficiency initiatives and wehave identified further opportunities for improvement going forward. Theconsolidation of customer services into four regional call centres is nowcomplete; we have made further savings at all levels of the distribution networkand in central services; and the consolidation of the network is highlightingadditional efficiencies. Our new depot in Plymouth opened on 2 April, replacingthree separate buildings and providing state of the art facilities for thefuture. The key performance indicators we introduced last year have continued to improvethe consistency of service across the network; the business is recording itshighest ever performance levels and this is also reflected in customer feedbackand surveys. Our sales based replenishment system is now operational at alllocations and we have plans to expand the range and scope of the service toencompass more retailers. To support this growth we will be investing further inour information systems and data warehouse capability, both integral componentsof our industry leading SAP enterprise system. These investments will improveservice to retailers and publishers as well as helping to reduce costs andreturns levels in the future; the investments will also underpin the competitiveadvantage of the business. Last month the Office of Fair Trading issued a press release outlining theprocess it will follow to reach its conclusions on the status of contracts andthe Newspaper Code of Practice. The press release confirmed our expectation thatthe process will be further delayed and we do not expect any furtherannouncement before the summer. Meanwhile the business is firmly focused on ourstrategy based on improving service and efficiency. As the largest wholesalerwith leading technology Smiths News is well placed to respond to any change inthe market structure. In summary, the business is meeting its objectives since demerger. Byanticipating the market trends and taking strong action on cost control, it isdelivering solid underlying profit growth despite challenging conditions. FINANCIAL REVIEW REVENUE----------------------- ------- -------- -------- --------- Feb Feb Change% Like for like 2007 2006 growth % £m £m----------------------- ------- -------- -------- ---------RevenueNewspapers 318.1 307.7 3.4% 2.5%Magazines 272.4 254.5 7.0% (2.5%)Other 24.5 24.5 0.0% 0.0%----------------------- ------- -------- -------- ---------Total revenue 615.0 586.7 4.8% 0.3%----------------------- ------- -------- -------- --------- Total revenues are 4.8% above last year with like for like revenues up 0.3% onlast year. Newspaper revenues of £318.1m are up 3.4% on last year and 2.5% if contractgains in Derby and Regional Press titles in Plymouth and Peterborough areexcluded. The trend of newspaper cover price increases more than offsettingvolume declines has continued. There was significant price activity from anumber of newspaper publishers in the early months of our financial year, but wehave seen volume declines in the first half of the year. Magazine revenues of £272.4m are up 7.0% on 2006 driven by additional businesswon from the distributor Frontline in April 2006 and contract gains in Derby inJune 2006. Excluding these contract gains like for like magazine revenues aredown 2.5% on last year. Across our four categories of magazine revenues we haveseen declines in monthly magazines and partworks more than offsetting growth inweekly magazines and sticker collection revenues. PROFITS --------- --------- --------- Feb Feb Change 2007 2006 % £m £m---------------------- --------- --------- ---------Revenue 615.0 586.7 4.8%---------------------- --------- --------- --------- Gross profit 63.1 63.2 (0.2%)Operating costs (45.5) (47.7) 4.6%---------------------- --------- --------- ---------Underlying operating profit 17.6 15.5 13.5%---------------------- --------- --------- --------- Gross margin has reduced from 10.8% to 10.3% due to the cost of contractrenewals finalised during the prior year. The impact of this on gross profit hasbeen largely offset by the benefit of higher sales from contract gains achievedlast year. Operating costs reduced by £2.2m compared to 2006. We've continued to drive ourcost saving programme knowing that we were facing tough gross margin pressures.In customer services, we have now completed the move to four regional customerservice centres. In magazine packing we have rescheduled the flow of work,enabling the removal of whole shifts at some locations. We have also reviewed,and where appropriate reduced, distribution miles by re-profiling the number andconfiguration of delivery runs. There is still more to do and we have clearplans for further efficiencies that will be delivered over the remainder of theyear and beyond. The cost reductions have contributed to an improvement in underlying operatingprofit of 13.5% to £17.6m (2006: £15.5m). PROFIT BEFORE AND AFTER TAX ------------------ -------- ---------- -------- ---------- ------- Feb Proforma Change Statutory Change 2007 Feb % Feb % £m 2006 2006 £m £m------------------ -------- ---------- -------- ---------- ------- Underlying operating profit 17.6 15.5 13.5% 15.5 13.5%---------------- -------- ---------- -------- ---------- -------Property profits - - 1.6Finance Costs (2.4) (2.2) (0.8)---------------- -------- ---------- -------- ---------- -------Profit before tax 15.2 13.3 14.3% 16.3 (6.7%)Taxation (0.9) (3.2) (3.9)---------------- -------- ---------- -------- ---------- -------Profit after tax 14.3 10.1 41.6% 12.4 15.3%---------------- -------- ---------- -------- ---------- ------- Profit before tax for 2007 was £15.2m, an increase of 14.3% on the 2006 proformaresult and 6.7% below the 2006 statutory result. Proforma results for 2006 exclude the profit on the sale of our Newcastle andDurham properties and assume that the two large demerger related transactions,namely drawing down £70m of debt and making a one-off £25m pension fundingpayment, were transacted at the start of the 2006 financial year. The income tax charge for the first half represents the UK Corporation tax rateof 30%, adjusted for a one off provision release of £4m that occurred in theperiod. This is due to the successful conclusion of some prior year matters withHMRC. This provision related to a former WHSmith Group company of which SmithsNews was the parent company. We anticipate the full year effective tax rate willbe around 20%. EARNINGS PER SHARE AND DIVIDEND ----------- ----------- --------- Feb Proforma Statutory 2007 Feb Feb 2006 2006 ----------- ----------- --------- Profit after tax from continuing operations (£m) 14.3 10.1 12.4 Adjusted taxation (2.1) - - ----------- ----------- ---------Adjusted profit after tax 12.2 10.1 12.4 Basic number of shares (millions) 176.9 172.0 172.0 Basic EPS 8.1p 5.9p 7.2pAdjusted EPS 6.9p 5.9p 7.2p If our 2007 tax charge is adjusted to reflect our anticipated rate for the fullyear of 20% our adjusted profit after tax becomes £12.2m, giving an adjusted EPSof 6.9p, an increase of 16.9% on last year. The increase in EPS has been driven by improved underlying profits, and benefitsfrom a low tax charge. The weighted average number of shares increased by 4.9mdue to the early vesting of some schemes and the allocation of share trustassets, both as a direct result of the demerger. The Board has declared an interim dividend of 2.1p per ordinary share; thisrepresents a 5% increase on the 2.0p allocation of the Old WH Smith dividend.The dividend will be paid on 15th June 2007 to shareholders registered at theclose of business on 18th May 2007. FREE CASH FLOW - from continuing operations ---------- -----------£m 6 months to 12 months to 28 Feb 2007 31 Aug 2006 ---------- ----------- Profit before interest and tax 17.6 34.3Depreciation & Amortisation 2.7 6.6Non cash items 0.5 1.2Working capital (0.5) (8.1)Capital expenditure (1.2) (2.1)Tax (4.7) (4.4)Net Interest paid (1.6) -Ongoing pension deficit funding (3.1) (7.0)--------------------------------- ---------- -----------Free cash flow 9.7 20.5--------------------------------- ---------- ----------- We have generated £9.7m of free cash flow in the 6 months to 28 February 2007. Afeature of the period was the continued tight management of working capital andcapital expenditure. NET DEBT Net debt has increased to £64.0m from £41.7m. The increase arises mainly fromthe one off contribution of £25.0m into the Smiths News section of the PensionTrust on 1 September 2006, offsetting the positive free cash flow in the period,and reducing the pension liability accordingly. PENSION On the date of demerger, 31 August 2006, the assets and liabilities of thePension Trust and WH Smith Retirement Savings Plan were split between SmithsNews and the WH Smith Retail Business by way of a 'sectionalisation'. Eachsection contains the accounts of members who are or were employed by therelevant business. At 31 August 2006, the Smiths News gross defined benefit pension deficit underIAS 19 was £49.0m. On 1st September 2006, a one-off contribution of £25m wasmade to the Smiths News section of the Pension Trust. Additional payments of£5.4m per annum for the next five years have been agreed with the Trustees. The pension deficit at 28th February 2007 was £20.5m. The scheme will close tofuture service accruals in May 2007. Smiths News PLCGroup Income Statement (Unaudited)For the 6 months ended 28 February 2007 ------------------------- ------ --------------------- --------- 6 months to 12 months to£m Note 28 Feb 2007 28 Feb 2006 31 Aug 2006------------------------- ------ --------- ---------- ---------Continuing operationsRevenue 2 615.0 586.7 1,210.6------------------------- ------ --------- ---------- ---------Operating profit 17.6 17.1 34.3------------------------- ------ --------- ---------- ---------Analysed between:Before property disposals 17.6 15.5 33.0Profit on property disposals - 1.6 1.3------------------------- ------ --------- ---------- ---------Finance costs (2.4) (0.8) (2.3)------------------------- ------ --------- ---------- ---------Profit before tax 2 15.2 16.3 32.0------------------------- ------ --------- ---------- ---------Income tax expense 4 (0.9) (3.9) (6.4)------------------------- ------ --------- ---------- ---------Profit after tax fromcontinuing operations 14.3 12.4 25.6Profit for the period fromdiscontinued operations 10 - 49.7 32.1------------------------- ------ --------- ---------- ---------Profit for the period 14.3 62.1 57.7------------------------- ------ --------- ---------- --------- Earnings per share:Basic - continuing operations 6 8.1p 7.2p 14.9pDiluted - continuing operations 6 7.9p 7.1p 14.8pBasic 6 8.1p 36.1p 33.5pDiluted 6 7.9p 35.5p 33.3p------------------------- ------ --------- ---------- --------- Smiths News PLCGroup Balance Sheet (Unaudited)As at 28 February 2007 ------------------------------ ----- -------- -------- -------- At At At£m Note 28 Feb 2007 28 Feb 2006 31 Aug 2006------------------------------ ----- -------- -------- --------Non-current assets Goodwill - 15.1 -Other intangible assets 2.1 16.8 2.6Property, plant and equipment 18.2 204.0 19.2Deferred tax assets 9.9 31.3 15.6Interests in associates 0.2 0.3 0.3Derivative financial instruments 0.5 - ------------------------------- ----- -------- -------- -------- 30.9 267.5 37.7------------------------------ ----- -------- -------- -------- Current assetsInventories 11.9 171.2 12.2Available for sale investments 1.1 - -Trade and other receivables 59.8 140.6 70.0Derivative financial instruments - 0.8 -Cash and cash equivalents 7 11.0 63.0 10.8------------------------------ ----- -------- -------- -------- 83.8 375.6 93.0------------------------------- ----- -------- -------- --------Total assets 114.7 643.1 130.7------------------------------ ----- -------- -------- --------Current liabilitiesTrade and other payables (107.8) (317.3) (118.5)Current tax liabilities (8.9) (31.3) (14.6)Obligations under finance leases 7 (1.3) (5.3) (1.3)Bank overdrafts and other borrowings 7 (22.9) (50.0) -Short-term provisions - (7.0) ------------------------------- ----- -------- -------- -------- (140.9) (410.9) (134.4)------------------------------ ----- -------- -------- --------Non-current liabilitiesBank loans and other borrowings 7 (49.6) (8.7) (49.6)Retirement benefit obligation 3 (20.6) (87.3) (49.1)Deferred tax liabilities (2.3) (11.5) (1.7)Long-term provisions (0.7) (7.9) (0.7)Obligations under finance leases 7 (1.2) (11.0) (1.6)Other non-current liabilities (0.6) (8.0) (0.9)------------------------------ ----- -------- -------- -------- (75.0) (134.4) (103.6)------------------------------- ----- -------- -------- --------Total liabilities (215.9) (545.3) (238.0)------------------------------ ----- -------- -------- --------Total net assets (101.2) 97.8 (107.3)------------------------------ ----- -------- -------- --------Shareholders' equityCalled up share capital 9 9.1 660.2 9.1"C" share reserve 9 - 3.1 -ESOP reserve 9 (3.7) (34.0) (7.1)Revaluation reserve 9 - 3.1 -Other reserve 9 (280.1) (278.4) (280.1)Hedging Reserve 9 0.5 (0.2) -Retained earnings 9 173.0 (256.0) 170.8------------------------------ ----- -------- -------- --------Total equity (101.2) 97.8 (107.3)------------------------------ ----- -------- -------- -------- Smiths News PLCGroup Cash Flow Statement (Unaudited)For the 6 months to 28 February 2007 --------------------------------- ----- -------------------- -------- 6 months to 12 months to£m Note 28 Feb 2007 28 Feb 2006 31 Aug 2006--------------------------------- ----- -------- -------- -------- Net cash (used in) / fromoperating activities 8 (12.5) 63.5 105.3-------------------------------- ----- -------- -------- -------- Investing activitiesInterest received 0.6 1.2 1.6Loan repaid by associate 0.1 - -Proceeds on disposal of property, plant and equipment - 8.3 10.5Proceeds on settlement of loan notes - 11.3 11.3Non-operating disposal costs - (2.3) (3.0)Net cash in subsidiaries disposed - - (66.4)Purchase of property, plant and equipment (1.2) (12.2) (26.4)Purchase of intangible assets - - (5.0)----------------------------------- -------- -------- --------Net cash (used in) / frominvesting activities (0.5) 6.3 (77.4)----------------------------------- -------- -------- -------- Financing activitiesInterest paid (2.2) (4.0) (7.3)Dividend paid (7.1) (16.0) (25.0)Repayments of obligations under finance leases (0.4) (3.3) (5.6)New bank loans raised (net of financing costs) 22.9 0.3 49.2Repayments of borrowings - (30.0) (76.6)Derivative cash movement - (0.5) (0.5)Issue of shares to satisfy employee share schemes - 0.5 5.8Repurchase of equity component of "C" shares - - (3.3)-------------------------------- ----- -------- -------- --------Net cash from / (used in)financing activities 13.2 (53.0) (63.3)-------------------------------- ----- -------- -------- -------- Net increase / (decrease)in cash and cash equivalents - continuing operations 0.2 (7.7) 3.6 Net increase in cash andcash equivalents - discontinued operations - 24.5 27.4 Net cash in subsidiariesdisposed - discontinued operations - - (66.4)-------------------------------- ----- -------- -------- --------Net increase / (decrease)in cash and cashequivalents in period 0.2 16.8 (35.4)-------------------------------- ----- -------- -------- --------Opening net cash and cashequivalents 10.8 46.2 46.2-------------------------------- ----- -------- -------- --------Closing net cash and cashequivalents 11.0 63.0 10.8-------------------------------- ----- -------- -------- -------- Reconciliation of net cash flow to movement in net debt -------------------------------- ----- -------- -------- --------Net debt at beginning of the period - asreported (41.7) (55.6) (55.6) IAS 39 - Deferred shares and 'C' sharesclassified as financial liabilities - (6.7) (6.7) Increase / (decrease) in cash and cashequivalents 0.2 16.8 (35.4) (Increase) / decrease in debt (22.9) 30.0 39.1 Net movement in finance leases 0.4 3.5 16.9-------------------------------- ----- -------- -------- --------Net debt at end of the period 7 (64.0) (12.0) (41.7)-------------------------------- ----- -------- -------- -------- Smiths News PLCGroup Statement of Recognised Income and Expenses (Unaudited)For the 6 months to 28 February 2007 -------------------------------- ------------- -------- 6 months to 12 months to£m 28 Feb 2007 28 Feb 2006 31 Aug 2006-------------------------------- -------- -------- -------- Exchange differences arising on translation of foreign operations - (1.1) (2.2) Gain/(Loss) on cash flow hedges 0.5 - (2.0) Actuarial gains / (losses) ondefined benefit pension schemes 1.2 0.6 (32.8) UK deferred tax attributable topension scheme liabilities (6.4) 1.4 7.3 UK current tax attributable to theadditional pension scheme contributions 2.0 2.0 4.0-------------------------------- -------- -------- --------Net income recognised directly in equity (2.7) 2.9 (25.7) Profit for the period 14.3 62.1 57.7-------------------------------- -------- -------- --------Total recognised income and expensefor the period 11.6 65.0 32.0-------------------------------- -------- -------- -------- Total recognised income and expense for the period is fully attributable toequity holders of the parent company. Smiths News PLCNotes to the Unaudited Interim Financial StatementsFor the 6 months to 28 February 2007 1 Basis of preparation These Interim Financial Statements are unaudited and not reviewed.The Unaudited Interim Financial Statements for the six months ended 28 February2007 have been prepared on a basis consistent with the accounting policies setout in Smiths News PLC's Annual Report for the year ended 31 August 2006. TheUnaudited Interim Financial Statements should therefore be read in conjunctionwith the 2006 Annual Report, which is available on the company's website,www.smithsnews.co.uk. The Unaudited Interim Financial Statements for the six months ended 28 February2007, which were approved by the board of directors on 26 April 2007, do notconstitute statutory accounts within the meaning of section 240 of the CompaniesAct 1985. The information relating to the year ended 31 August 2006 is anextract from the published Annual Report for that year, which has been deliveredto the Registrar of Companies, and on which the Auditors' Report was unqualifiedand did not contain statements under section 237(2) or 237(3) of the UKCompanies Act 1985. The Unaudited Interim Financial Statements are prepared in accordance withInternational Accounting Standards, including International Accounting Standardsand interpretations issued by the International Accounting Standards board andits committees, and as interpreted by any regulatory bodies applicable to thegroup as adopted for use in the European Union. 2 Segmental analysis of results Turnover and profit before tax are derived from the one principal activity ofthe group, being the wholesaling of newspapers and magazines. The group operatessolely in the UK. The segmental results of discontinued operations are disclosedin note 10. Revenue for the six months to 28 February 2006 includes £56.5m (12 months to 31August 2006: £115.9m) of sales to WH Smith PLC. Prior to the demerger these weretreated as inter-company sales and therefore excluded from revenue in thepublished accounts for these periods. 3 Retirement benefit obligation The pension arrangements for employees are operated through the Smiths News PLCsections of the WH Smith PLC pension schemes. There is a defined benefit scheme,WHSmith Pension Trust ("Pension Trust"), and a defined contribution scheme,WHSmith Retirement Savings Plan. The Smiths News section of the Pension Trustwill close to future service accruals in May 2007. The market value of the assets and the present value of the liabilities in thedefined benefit scheme were: £m At 28 Feb 2007 At 28 Feb 2006 At 31 Aug 2006----------------------------- ---------- ---------- ----------Present value of the obligations (343.4) (1,033.0) (334.0)Fair value of plan assets 322.9 946.0 285.0----------------------------- ---------- ---------- ----------Deficit in the pension scheme (20.5) (87.0) (49.0)Retirement medical benefitliabilities (0.1) (0.3) (0.1)----------------------------- ---------- ---------- ----------Retirement benefit obligation recognised in the balance sheet (20.6) (87.3) (49.1) Deferred taxation 6.2 26.2 14.7----------------------------- ---------- ---------- ----------Net retirement obligation (14.4) (61.1) (34.4)----------------------------- ---------- ---------- ---------- Movements in the present value of the defined benefit scheme obligations in theperiod were as follows: ------------------------------- ---------------- --------- 6 months to 12 months to£m 28 Feb 2007 28 Feb 2006 31 Aug 2006------------------------------- --------- --------- ---------At beginning of period (334.0) (967.6) (967.6)Current service cost (1.5) (4.7) (9.5)Interest cost (8.5) (23.6) (46.9)Actuarial losses (5.4) (53.6) (16.6)Benefits paid 6.0 16.5 32.8Subsidiaries disposed - - 673.8------------------------------- --------- --------- ---------At end of period (343.4) (1,033.0) (334.0)------------------------------- --------- --------- --------- Movements in the fair value of defined benefit scheme assets in the year were asfollows: ------------------------------- ---------------- --------- 6 months to 12 months to£m 28 Feb 2007 28 Feb 2006 31 Aug 2006------------------------------- --------- --------- ---------At beginning of period 285.0 871.5 871.5Expected return on scheme assets 7.7 21.7 42.4Actuarial gains / (losses) 6.6 54.2 (16.2)Contributions 29.6 15.1 28.4Benefits paid (6.0) (16.5) (32.8)Subsidiaries disposed - - (608.3)------------------------------- --------- --------- ---------At end of period 322.9 946.0 285.0------------------------------- --------- --------- --------- 4 Income tax expense The income tax rate for the six-month period is 6% (six months ended 28 February2006: 24%; Year ended 31 August 2006: 20%). This represents the UK Corporationtax rate of 30%, adjusted for a one off provision release of £4m that occurredin this six-month period. 5 Dividends Amounts recognised as distributions to shareholders in the period are asfollows:-------------------------------- ----------------------- --------- 6 months to 12 months to 28 Feb 2007 28 Feb 2006 31 Aug 2006-------------------------------- -------- -------- --------Dividend per share Interim - paid - - 5.1pFinal - paid 4.0p 9.2p 9.2p-------------------------------- -------- -------- -------- 4.0p 9.2p 14.3p-------------------------------- -------- -------- -------- £m-------------------------------- -------- -------- --------Dividends Interim - paid - - 8.8Final - paid 7.1 15.8 15.8-------------------------------- -------- -------- -------- 7.1 15.8 24.6-------------------------------- -------- -------- -------- On 28 February 2006 the Group also paid a dividend of £140,600 (£142,088 on 31August 2006) in respect of "C" shares and £40,563 (£40,992 on 31 August 2006) inrespect of "B" shares. In addition, the directors are recommending an interim dividend in respect ofthe period ending 28 February 2007 of 2.1p per ordinary share (2006: 2.0p -being the Smiths News apportionment of the WH Smith PLC dividend). This will bepaid on 15 June 2007 to shareholders registered at the close of business on 18May 2007. 6 Earnings per share a) Earnings --------------------- -------- ------------------ -------- 6 months to 6 months to 12 months to 28 Feb 2007 28 Feb 2006 31 Aug 2006--------------------- -------- ------------------ -------- £m Continuing Continuing Discontinued Total Total--------------------- -------- ------- -------- ------ --------Profit for the periodattributable toshareholders 14.3 12.4 49.7 62.1 57.7--------------------- -------- ------- -------- ------ -------- b) Basic earnings per share --------------------- -------- ------------------ -------- 6 months to 6 months to 12 months to 28 Feb 2007 28 Feb 2006 31 Aug 2006--------------------- -------- ------------------ -------- Continuing Continuing Discontinued Total Total--------------------- -------- ------- -------- ------ -------- Earnings per share 8.1p 7.2p 28.9p 36.1p 33.5p--------------------- -------- ------- -------- ------ -------- c) Diluted earnings per share ---------------------- -------- ------------------ -------- 6 months to 6 months to 12 months to 28 Feb 2007 28 Feb 2006 31 Aug 2006---------------------- -------- ------------------ -------- Continuing Continuing Discontinued Total Total---------------------- -------- ------- -------- ------ -------- Earnings per share 7.9p 7.1p 28.4p 35.5p 33.3p---------------------- -------- ------- -------- ------ -------- d) Weighted average share capital 6 months to 12 months toMillions 28 Feb 2007 28 Feb 2006 31 Aug 2006---------------------------------- -------- -------- --------Weighted average shares in issue forearnings per share 176.9 172.0 172.2---------------------------------- -------- -------- --------Add weighted average number ofordinary shares under option 3.4 3.1 1.3---------------------------------- -------- -------- --------Weighted average ordinary shares forfully diluted earnings per share 180.3 175.1 173.5---------------------------------- -------- -------- -------- 7 Analysis of net debt ----------------------------------- -------- -------- --------£m At At At 28 Feb 2007 28 Feb 2006 31 Aug 2006----------------------------------- -------- -------- --------Cash and cash equivalents 11.0 63.0 10.8Bank Loans due within one year (22.9) (50.0) -Finance leases (2.5) (16.3) (2.9)Bank loans due after more than oneyear (49.6) (8.7) (49.6)----------------------------------- -------- -------- --------Net debt (64.0) (12.0) (41.7)----------------------------------- -------- -------- -------- Movements in net debt can be further analysed as follows:----------------------------- -------- ------- ------- ---------£m At Cash flow Non Cash At Movement 28 Feb 2007 31 Aug 2006----------------------------- -------- ------- ------- ---------Cash and cash equivalents 11.0 0.2 - 10.8Debt - Sterling floating rate (35.0) (22.9) 37.5 (49.6)Debt - Sterling fixed rate (37.5) - (37.5) -Obligations under finance leases (2.5) 0.4 - (2.9)----------------------------- -------- ------- ------- ---------Net debt (64.0) (22.3) - (41.7)----------------------------- -------- ------- ------- --------- At 28 February 2007 floating rate debt comprises a £12.1m unsecured term loanbearing an interest rate of six month LIBOR plus 75 basis points and a £22.9munsecured revolving credit facility bearing an interest rate of LIBOR plus 75basis points. Fixed rate debt comprises £37.5m of unsecured term loan bearing aninterest rate of 5.13% plus 75 basis points. 8 Net cash inflow / (outflow) from operating activities ------------------------------ ------------- -------- 6 months to 12 months to£m 28 Feb 2007 28 Feb 2006 31 Aug 2006------------------------------ -------- -------- --------Operating profit from continuing operations 17.6 17.1 34.3Operating profit from discontinued operations - 65.1 52.4------------------------------ -------- -------- -------- 17.6 82.2 86.7 Operating exceptional items - (5.0) 7.0Adjustment for pension funding (3.1) (10.4) (18.9)Depreciation of property, plant and equipment 2.2 17.8 34.5Profit on sale of property, plant and equipment - (4.0) (6.0)Impairment of property, plant and equipment - 1.6 2.6Amortisation of intangible assets 0.5 3.2 6.8Share based payments 0.5 3.6 8.5(Increase) / decrease in inventories 0.3 (9.4) 7.3(Increase) / decrease in receivables 10.2 (17.9) (6.7)Increase / (decrease) in payables (11.0) 5.0 1.3Income taxes paid (4.7) (0.1) (6.0)Cash spend against provisions - (1.0) (3.3)------------------------------ -------- -------- --------Net cash inflowfrom operating activitiesbefore exceptional and oneoff items 12.5 65.6 113.8 One off pension funding payment (25.0) - - Cash outflow relating toexceptional operating item(PRMB Settlement) - (2.1) (2.1) Cash outflow relating toexceptional operating item(De-merger costs) - - (6.4)--------------------------------- -------- -------- --------Net cash (outflow) / inflowfrom operating activities (12.5) 63.5 105.3--------------------------------- -------- -------- -------- 9 Reconciliation of movements in equity ------------------ ------ ------ ------ ------- ------ ------- ------ ------£m Share 'C' Other Revaluation ESOP Translation Retained Total Capital Shares Reserve Reserve Reserve & hedging Earnings Reserve------------------ ------ ------ ------ ------- ------ ------- ------ ------ Balance at 1September 2005 660.2 3.1 (278.4) 3.1 (34.0) (0.2) (309.0) 44.8 Total recognisedincome and expense forthe period - - - - - - 65.0 65.0 Dividends paid - - - - - - (16.0) (16.0) Recognition of share basedpayments - - - - - - 4.0 4.0 Balance at28 February 2006 660.2 3.1 (278.4) 3.1 (34.0) (0.2) (256.0) 97.8 Total recognisedincome and expense forthe period - - - - - (3.9) (29.1) (33.0) Dividends paid - - - - - - (9.0) (9.0) Employee share schemes 7.4 - (1.7) - 4.6 - (4.5) 5.8 Recognition of share basedpayments - - - - - - 2.2 2.2 Repurchase of non equityshare capital - (3.1) - - - - - (3.1) Reduction in capital (658.5) - - - - - 658.5 - Dividend in specie - - - (3.1) 22.3 4.1 (191.3) (168.0) Balance at 31August 2006 9.1 - (280.1) - (7.1) - 170.8 (107.3) Total recognised incomeand expense for the period - - - - - 0.5 11.1 11.6 Dividends paid - - - - - - (7.1) (7.1) Employee share schemes - - - - 2.6 - (2.6) - Recognition of share basedpayments - - - - - - 0.5 0.5 Transfer to available forsale investments - - - - 0.8 - 0.3 1.1------------------ ------ ------ ------ ------- ------ ------- ------ ------Balance at 28February 2007 9.1 - (280.1) - (3.7) 0.5 173.0 (101.2)------------------ ------ ------ ------ ------- ------ ------- ------ ------ 10 Discontinued operations Smiths News PLC completed the demerger of the Retail Business on 31 August 2006.The results of the Retail Business are classified in the financial statements asdiscontinued operations for the period ended 28 February 2006 and the year ended31 August 2006. (a) The revenue from discontinued operations was as follows: ------------------------------ -------------- --------- 6 months to 12 months to£m 28 Feb 2007 28 Feb 2006 31 Aug 2006------------------------------ ---------- ---------- ---------Revenue Retailing businesses High Street - 620.8 1,021.0Travel - 150.6 318.8------------------------------ ---------- ---------- ---------Total revenue - discontinuedoperations - 771.4 1,339.8------------------------------ ---------- ---------- --------- (b) The results from discontinued oeprations were as follows: ------------------------------ -------------- --------- 6 months to 12 months to£m 28 Feb 2007 28 Feb 2006 31 Aug 2006------------------------------ ---------- ---------- --------- Profit------------------------------ ---------- ---------- ---------Profit before tax - 59.8 43.9Income tax expense - (10.1) (11.8)------------------------------ ---------- ---------- ---------Profit for the year fromdiscontinued operations - 49.7 32.1------------------------------ ---------- ---------- --------- (c) The cash flows attributable to discontinued operations comprise: ------------------------------ -------------- --------- 6 months to 12 months to£m 28 Feb 2007 28 Feb 2006 31 Aug 2006------------------------------ ----------- ---------- --------- From operating activities - 62.6 82.4From / (used in) investing activities - 5.4 (10.0)Used in financing activities - (43.5) (45.0)------------------------------ ----------- ---------- ---------Net increase in cash and cashequivalents - 24.5 27.4------------------------------ ----------- ---------- --------- (d) Within the results from discontinued operations, certain exceptional charges were made as follows: ------------------------------ -------------- --------- 6 months to 12 months to£m 28 Feb 2007 28 Feb 2006 31 Aug 2006------------------------------ ---------- ---------- ---------Post retirement medical benefitssettlement - 5.0 5.0Demerger costs - - (12.5)------------------------------ ---------- ---------- --------- - 5.0 (7.5)------------------------------ ---------- ---------- --------- Post retirement medical benefits settlement: In September 2005, the members were offered the option to be bought out of thisscheme, which was accepted by the majority of the members. The impact of thesettlement was a £5 million reduction in the net deficit and has been disclosedas an exceptional item in discontinued operations. A small number of membersopted to remain in the scheme and the present value of the remaining futureliabilities is valued at £0.2 million net of deferred taxation. This information is provided by RNS The company news service from the London Stock Exchange