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Smiths News Shares Advance After Contract Renewals: London Mover

Smiths News Plc rose the most in 15 months after the U.K. distributor of newspapers and magazines announced two contract extensions worth about 322 million pounds ($478 million) a year.

The shares climbed 7.7 percent to 168 pence, the biggest advance since April 2012. The volume of trading was more than twice the three-month daily average.

A wholesale deal with Associated Newspapers Ltd., worth about 213 million pounds a year, has been extended to October 2021, while a wholesale agreement with Comag, valued at about 109 million pounds a year, has been extended to December 2020, the Swindon, England-based company said in a statement today. Smiths also said its “on track” to meet the market consensus for pretax profit for the year to Aug. 31.

“Today’s contract renewals within News are clearly good news for the medium term,” James Tetley, an analyst at N+1 Singer, said in a note. “We consider this a reassuring update.” N+1 Singer raised its recommendation on the stock to buy from hold and kept a price target of 185 pence a share.

Victoria Prior, an analyst at JPMorgan, reiterated an overweight rating on the stock today and set a price prediction of 213 pence, a 37 percent premium to yesterday’s closing price.

Total group revenue climbed 0.7 percent in the 44 weeks ended July 6, compared with a year earlier, helped by the April 2012 acquisition of The Consortium, a distributor of educational and care products, according to today’s statement. Sales dropped 3.2 percent at the Smiths News unit.

The Associated Newspapers contract covers 23 percent of the national newspaper distribution market, including the Daily Mail. Comag is responsible for distribution of titles including Cosmopolitan and GQ.

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