Smiths News - 43-week trading update implies upgrades

Today’s 43-week trading update confirms that Smiths News’s demand is returning to normality, and this has been given a boost by sales of ‘one-shots’ as sporting events have returned. With trading expected to be ahead of market expectations, FY21 EBITDA could be c 4–5% higher than the current consensus of £46.8m. Trading beyond the current year has good visibility given that most of Smiths’ contracts are now in place until at least 2024. Net debt is expected to fall to 1.0x EBITDA by the end of FY23, and dividends are well covered and growing. The stock trades on a pre-upgrade forward P/E of 4.6x for FY22e, and yields 5.3% on FY22e DPS.