(Adds analysts' comments, details; updates share movement)
By Abhirup Roy
July 9 (Reuters) - Smiths News Plc, the largestnewspaper and magazine distributor in the UK, said it won twocontract extensions with a combined value of more than 320million pounds ($478.00 million), pushing shares up as much as7.5 percent.
The company said it extended wholesaling agreements withAssociated Newspapers Ltd, publisher of the Daily Mail and Mailon Sunday, until October 2021 and with COMAG, distributor forpublishers such as Cosmopolitan, Vogue and GQ, until December2020.
Smiths News said it had now secured about 800 million poundsof revenue at its newspaper and magazine distribution businessuntil at least 2019.
"The company has a roughly 6 percent dividend yield, andsecure revenues and visibility on revenues essentially underpinsthat dividend yield and the growth in that yield," EdisonInvestment Research analyst Zsolt Mester said.
Smiths News also reported a marginal increase in revenue forthe 44 weeks to July 6, helped by contribution from its 2012acquisition of The Consortium, a distributor of consumablesupplies to the education sector.
The company has been expanding its higher-margin bookwholesaling business and diversifying into educational supplies,with the aim of generating half of its revenue from outside thenewspaper and magazine wholesaling business by 2016.
While revenue from its Bertrams book wholesaling businessincreased 2 percent on a like-for-like basis, for the period,revenue from its newspaper and magazine distribution businessfell 4.6 percent on a like-for-like basis.
The newspaper and magazine business accounted for more than80 percent of total revenue in the first half of 2013.
"The challenge for them is just to maintain profitability inthat (newspaper and magazine distribution) business whilerevenue declines," N+1 Singer analyst James Tetley said.
The company's diversification strategy mirrors that of rivalJohn Menzies Plc, which receives most of its profitfrom aviation support services.
Menzies had in March said it expected trading at itsnewspaper business, which distributes the Financial Times andthe Independent in the UK, to remain challenging in 2013 ascustomers buy fewer magazines.
Shares in Smiths News were up 7 percent at 167 pence at 0950GMT on Tuesday on the London Stock Exchange.($1 = 0.6695 British pounds) (Reporting by Abhirup Roy in Bangalore; Editing by GopakumarWarrier, Supriya Kurane)
Smiths News (SNWS)
