Smiths News (LSE:SNWS) Q4 2026 Earnings Call

0:01 Good morning ladies and gentlemen and welcome to the Smith News plc four-year results investor presentation. Questions are encouraged they can be submitted at any time via the Q&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 we'll publish our responses where it's appropriate to do so on the Invest and Meet company platform. Before we begin we would just like to submit the following poll and if you could give that your kind attention I'm sure the company would be most grateful and I'd now like to hand 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 FY26 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.

1:00 Turning to the headlines, pleasingly we've delivered a strong financial performance across FY26 with results in line with the upgraded market expectations. The group delivered adjusted operating profit of £38.7 million and adjusted profit after tax of £27.4 million. 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 4.5 million of operational savings during the year, in line with budget.

1:46 Finally, on the financial highlights, we are proposing a final ordinary dividend of 3.9p per share, taking the FY26 dividend to 5.65p per share. Before I hand over to Richard, who will do a deeper dive on the numbers, I wanted to talk briefly about our Go National programme, which we will touch on in greater detail later in the presentation. Go National is the 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 programme will be funded using our existing cash resources and financial arrangements.

2:31 and we'll see us invest between 21 million and 27 million to establish a national capability as we open an additional 23 new depots, create around 700 new delivery routes and recruit more than 1000 new subcontractor delivery partners and colleagues. This represents both a financial and operational transformation of the group and with that we expect this program to generate between 12 million and 18 million of additional operating profit from FY29 onwards. We have also reiterated our intention to maintain FY27 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.

3:22 I'd now like to hand over to Richard. Thank you, Jon. I'll start with the financial summary. Overall, the FY26 results reflect a strong performance. Revenue reduced 2.6% to 1036 million, which was in line with historic norms when adjusting for the World Cup revenues. Adjusted operating profit of 38.7 million 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 up 1.5% at 27.4 million and adjusted earnings per share up 1.8% at 11.3p.

4:15 This included the impact of lower net finance costs benefiting from higher average net cash of 15.7 million as you see here and better deposit rates. In terms of dividend, a final dividend is proposed at 3.9p bringing the full year dividend to 5.65p. 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 3 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 a group's performance in alternate years, the even ones, due to timing of the FIFA World Cups and UEFA 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 small in the overall mix, the 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 £38.7 million reflects a the impact of inflation including the annualisation 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 4.5 million remained in line with our view of 45 million per annum and b the higher net profit in collectibles mainly from the world cup contribution from growth verticals was broadly flat prior year although revenues increased and the exit rate contribution was higher than the full year number showing 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 0.8 million lower. That, plus a slightly favourable tax rate year on year, helped EPS increase 2%, or 0.2p, to 11.3p. and finally dividend. In line with our policy of two times cover, a final dividend is proposed at 3.9p bringing the full year dividend to 5.65p up 0.1p year on year. This was also ahead of the 5.2p reference before today in the contract wins early guidance. Given no exceptional cash inflows this year, and the investment coming in Go National, which I will cover off later, no special dividend is declared this year.

7:56 Looking now to the cash flow statement, free cash flow remains strong at 24.1 million. Working down the statement, you can see EBITDA was slightly lower year on year at 48.1 million, 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 working 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 favourable 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 analysed 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 programme and transformation programme planning costs in relation to the national publisher contract wins and work relating to the tender for the DRS contract. In the prior year, we benefited from two one-off receipts, £5.4 million relating to dividends from McColls, the retailer, post-completion of liquidation proceedings, and a pension tax refund of £1.5 million.

9:38 There were no further costs in H2 associated with the previously announced UK pension regulation matter, and the group continues to disclose a contingent liability in respect to the investigation. So overall, free cash flow remains strong at £24.1 million. And what does that mean for our net cash position? This chart bridges net cash from last year's £3.3 million to this year's close of £3.9 million. 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 work and capital. and on the right one sees the consistency of these strong cash inflows over the last three years averaging 25 million 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 49.1 million in total That record in cash generation and that net cash position places us very well for what is coming next. And now back to Jon to talk through the operational review.

10:51 Thank you, Richard. Turning now to our operational performance. There are five areas I want to highlight. Newspapers and magazines remain at the centre 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 Cascary 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. I'll take each of these in turn. Starting with newspapers and magazines. The underlying market continues to perform in line with our expectations.

11:36 We anticipate annual revenue decline in the underlying market of around 3-5%, 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 the casket remains sustainable for all communities across England, Scotland and Wales for at least the next 10 years. We have now secured transformational exclusive national contracts and those contracts will significantly increase our market share from the existing 55%.

12:28 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 boosts in fy27 we also expanded our customer base securing new listings in four major supermarkets alongside this we are trialing a number of new collectible product lines including japanese anime and products from brands such as bandai funko disney lakana and magic 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.

13:27 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 1.25 million bags per annum. We now operate more than 7,000 collection services across our network with collections running seven days a week. We are utilising vehicle capacity that already exists across both live runs and return runs, further improving our go-to-market economics.

14:20 Our relationship with waste 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. Moving to slide 14 on final mile and new categories. We've continued to make incremental progress across new categories and final mile. We now deliver more than 1.7 million 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.

15:16 Greetings cast continues to be well received and our customer base has grown to around 600 stores. Elsewhere, we've now concluded trialling engineer spare parts. Whilst it's been a valuable exercise for our teams in understanding the broader economics, We've decided to pause any further rollout 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. 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 programme. 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.

16:06 In addition, the upgrading of our warehouse management system continues at pace and will support new methods of customer fulfilment, diversification of services and improved inventory tracking. Our new zoom contact centre 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 labour planning, creating the systems and processes that allow us to operate a larger, more complex national network efficiently. 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 programme, the key market drivers, our implementation strategy and the financial implications for the business.

16:58 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 million in additional revenues for the business depending upon the outcome of all tenders, with circa £375 million secured to date. The programme involves establishing 23 new depots, approximately 700 additional routes and more than 1,000 colleagues and subcontractor delivery partners. and critically, it extends our reach across the whole of England, Wales and Scotland. This is not simply a depot expansion programme, 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.

17:50 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 for 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. 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.

18:39 Over the last six months we've secured exclusive long-term contract awards with News UK, Associated Newspapers, Frontline and Seaborg and more recently the Telegraph Media Group. These contracts not only see an extension of our contracts in our existing territories app to 2037 but also extend the contract to deliver services across England, Wales and Scotland. Once these contracts are up and running we will have just over 60% of the newspaper magazine market. That delivers £375 million of additional revenue in our new territories, alongside £585 million 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.

19:32 Looking at our remaining contracts as detailed in the yellow box we have existing contracts in place with a number of key publishers and will 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. 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. GoNational builds on those foundations. I'll now hand over to Richard to provide more content around the financials of GoNational.

20:20 Thank you, John. So what are the financial impacts of our GoNational programme? We divide these impacts into five key elements labelled 1 to 5 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 million 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. This period lasts from the start of the first contract in July FY27 to the end of FY28.

21:13 Initially in July and August next year we expect to have News 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 FY27 we estimate this will cost seven to nine million pounds. In FY28 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 FY28 is expected to be zero to two million pounds in incremental profit. We will account for both this incremental cost in FY27 and incremental profit in FY28 in adjusted operating profit.

22:01 and finally the scale phase lasts from FY29 onwards and as context contracts announced to date mostly end in 2037. This phase is expected to add 12 to 18 million pounds of incremental net adjusted operating profit in each year. So why the ranges? We have modelled 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 Jon referenced earlier but we have based our expectations on averages. Some may have low capex fit out but higher rents and others vice versa so there is not only a potential difference in the quantum but also in the split of costs that could impact our results.

22:54 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 million. 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. Finally we reiterate here regarding dividend and financing arrangements and I will cover both of these off in more detail on a capital priorities slide later.

23:44 So now to explore each of those elements in a bit more detail. First the build or investment phase with costs of 21 to 27 million pounds. 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 FY27 and the majority will be in the second half of FY27 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 FY26 was 15.7 million. Our FY26 closing net cash was 3.9 million and our RCF is 40 million. And we have modelled 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 as 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 pay out 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 News UK 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. 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. In FY29 we reach the scale phase and this is when consistently we expect the new charities to deliver incremental profit each month and thus each year.

26:15 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, fine and mild 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%. 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.

27:08 The scale period drives the financial returns of the new contracts. 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 have had to evaluate a number of potential investments and I have further strengthened the disciplined approach used. Our investments are always tested against a returns hurdle whether it's evaluating an individual final mile contract, DRS or the recent GO National contracts.

27:57 The returns hurdle is always ahead of whack but can be adjusted for perceived risk. The returns on GO National are expected to be substantially ahead of whack. 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 12 to 18 months impacting particularly FY27, we have previously confirmed that we intend to maintain the ordinary dividend at or above 5.2p and I reiterate that guidance today. The 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 12 to 18 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, but remain comfortably within our current RCF facility and below one times leverage. I will now hand back to Jon 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 to 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 12 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 categories 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 summarise, 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 the 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. 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.

31:14 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. FY27 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 FY27 as the business absorbs the costs of expansion and transition but have reiterated our dividend guidance. 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 FY2028 with material benefits anticipated from FY29 and beyond.

32:02 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&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, I'd just like to remind you that a recording of this presentation, along with a copy of the slides and published Q&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 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 an efficient way. So starting with Go National, you are currently making between 35 and 40 million from your existing footprint and say you are going to make an additional 12 to 18 million 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 in those areas.

33:43 The second factor that I call out would be, and others may have done this, gone to companies house and looked at the incumbent accounts. It's not clear from those accounts exactly what the profit is from the existing contracts, but one can call out that there's an average of 10 to 12 million pounds 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 I just final point synergies should help us improve hence the the higher range that we've given of 12 to 18 Thank you and Ongo National could you talk us through how you're approaching cost control on the build and in particular how much of the 21 to 27 million of estimated implementation costs is already committed or contracted today 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 programme 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 Go National programme in quite a lot of detail. 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 million Thank you. And regarding the new depots, can you confirm that these will all be leased or what format it will take?

35:39 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 1 to 10, what is your expectation that the remaining contracts will be won by Smiths News? Yeah, good question. I'm not going to be drawn into making predictions. 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 uh particularly in risk guard for reach market force and the ft 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.

36:32 Thank you. And do the new 10-year contracts reprice if print volumes fall faster than planned, for example, through volume triggers or minimum fees, or do 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. 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 or nothing all the way through to national if we were 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?

38:05 Yeah I mean I think I've 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 and we really think the efficiencies come through better utilization of our existing assets whether that is our final model warehouse Thank you and a couple of questions on profit forecasts. Are your profit forecasts reasonably conservative and do they take into account winning any incremental revenues from your growth categories such as collectibles and recycling? I'll take that one. So I would describe not as conservative, I describe them as realistic to the earlier point on the first question.

38:55 But the but to the sub component of that question, the ranges exclude profit from gross verticals. So we haven't put any of the profit, incremental profit from gross 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, yeah, so as I mentioned in the presentation, we are actively currently distributing Funko, Disney Lekana, Magic 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. 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.

39:49 Do you believe there's risk of publisher administration, do you believe the risk of publisher administrations has increased due to these store closures and how much exposure does Smith News have to this threat? 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 TG Jones remains an important customer of ours, particularly from a magazine perspective. We can absolutely see in their larger stores that their underlying trading is improving year on year. but we all recognise there's a full rationalisation programme 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.

40:35 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 3.5 million world cup and last year's pokemon one-off, h2 adjusted operating profit fell nine percent like for like, is that national insurance contribution and pre-expansion overhead or is the core eroding faster than you expected? Yeah, I think that's an interesting question. I love H1 versus H2 analysis. 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 then held the rest flat. So I don't think there's anything to read into there. Thank you. And what is the planned peak month end bank borrowing in FY27-28?

41:21 And what headroom is left on the RCF? So the investment, as I talked to in the build phase in particular, moves us from a net cash position 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 in remaining within that RCAF facility. Thank you. And in respect of the dividend, the 5.2 pence floor that you referred to covers FY27. Does the board intend to hold 5.2 pence throughout the build or let it follow earnings? Yes, so the 5.2 pence, I think the word floor is the right word.

42:09 We will look at it at the end of the year again to re-evaluate, but we've made a commitment to be at or above 5.2p. and then for FY27 yeah I know that mathematically two times cover that's where the analysts have at the moment been 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 FY28 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? Yeah, we sort of covered that off a bit in interims when we were already seeing some sort of high diesel prices. But we keep them under review.

42:59 It's principally contractors where that comes through. We contract with those on an annual basis, and part of that cost is the cost of diesel. We don't actually contractually pass on that to publishers. We do on some of our growth vertical areas but 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 continue to come through and it's another strong ordinary based 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.

43:49 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. Thank you. A final question, I think. It seems that the market is seeing these results as a bit of a negative. Do you think that's an incorrect interpretation? And if so, how would you counter it? Well, I think probably just referring you to my previous answer, really. The market will make its judgment on the business as it always does.

44:35 And I would be confident that over time we'll do that correctly. Thank you very much. And final question that we've had in. If we go back two years, is this 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 position we're in now. Two years ago, I think it's testimony to the hard work, actually, of all of the colleagues in our business that that's been recognised by our clients and wanting to award us more business. So, yes, I'm delighted. Thank you very much. Thank you, Jake. Perfect, guys. That's great. 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.

45:33 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 31% and 52% 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 next 12 months and we look forward to updating you again 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 as 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.