Shares digital

Doubts about the magazine and newspaper distributor’s growth prospects weigh on the stock

by Dan Coatsworth

Magazine and newspaper distributor Smiths News (NWS) has still to provide tangible evidence it can grow beyond its core business, which partly explains why the shares have fallen by 44% to 82p in the past year. Rising profits, strong cash generation and a generous dividend currently yielding 8% would, on paper, make this a candidate for a recovery play. Investors should avoid the temptation to buy as there are no signs of a catalyst to stop negative sentiment weighing down the shares.

Full-year results on 16 October are forecast to show a 5.5% rise in pre-tax profit to £32.6 million. Taking a cut from higher cover prices has protected revenue from falling print volumes.

The news distribution market has peaked, making the market nervous about growth prospects. Rival John Menzies (MNZS) has successfully diversified into aviation services. Smiths News is still on the starting block. An operation to manage books and printed media returns for retailers could be two years away from profit. A 50% stake in Rascal Solutions has added newspaper and magazine stock management for supermarkets including Tesco (TSCO), but branching out into CDs and DVDs is still aspirational.

Shares says: It is difficult to see any near-term developments to prompt a market re-rating. Avoid