Good morning. Good morning, everyone. Welcome to the Smiths News PLC's Preliminary Results Presentation for FY 2023. I'm looking forward to explaining how the good results we announce today are reflective of the progress we have made on a number of fronts. Our headline message is very much one of reliable delivery, and that despite the challenging economic environment, Smiths News continues to generate positive and predictable returns, which benefit all stakeholders. It's a performance we are proud of, and as I said, I'm looking forward to explaining it in more detail this morning. Today's presentation will follow our usual format. I'll cover a summary of the highlights, Paul Baker, our Chief Financial Officer, will then review our financial results before I return to discuss progress on the wider strategy and call out our priorities for the current year.
As always, we welcome any questions you may have, and we'll take these at the end of the slides. Finally, can I remind everyone that this presentation is being recorded and will be available to view on the investor section of our website later this afternoon? Starting with the headlines. We've delivered a good performance in all key areas, amounting to a strong overall result, despite the pressure of inflation and its particular challenges for the transport and distribution sector. From a financial perspective, we have exceeded market expectations. Adjusted operating profit of GBP 38.8 million is up 1.8%. Free cash flow of GBP 21.8 million has again supported a dividend of GBP 10 million and contributed to halving our average net debt to GBP 25 million.
Turning to core operations, sales have benefited this year from sustained cover price rises, offsetting the impact of continued volume declines. They were further boosted by the FIFA Men's World Cup taking place this financial year and the publications of several special editions following the sad death of Her Majesty the Queen in September 2022. Equally importantly, we have once again achieved cost efficiencies in excess of GBP 5 million, with an overall delivery of GBP 5.8 million, of which GBP 4.8 million were from the distribution operations. This has been a core competence of the business now for over a decade and is a particularly valuable quality for any business in the current inflationary climate. Which takes me to the strategic headline of 65% of our contracts now secured to at least 2029. This is a milestone achievement and absolutely critical to our future planning.
We are delighted to have made this progress as it underpins not only our assumptions for costs and revenues and therefore free cash, but also our plans for sustainability, people, capital investment and, equally importantly, new profit streams. I'll talk later about growth, including the progress of Smiths News Recycle, that is now live across our full network, and some of the other opportunities we've made progress on that leverage our capabilities and infrastructure. In summary, our performance in 2023 is very much a continuation of the path we set out to follow, with progress on all fronts, and it's a reflection of the focus we apply and the determination we have to put stakeholder interests at the forefront of all that we do. I'll now hand over to Paul, who will discuss in more detail our financial results.
Thank you, Jon, and good morning, everyone. Starting on slide five with the financial headlines. Revenues increased in the period by 0.2%, ahead of the historic norm of a 3%-5% decline. You may recall at the half year, we reported 1% revenue growth, supported by price increases, the royal succession, and the men's football world cup. The second half had no material one-off impact, but pricing remained beneficial, albeit not as strong as the second half last year. Adjusted operating profit increased 1.8% to GBP 38.8 million, of which the royal succession contributed GBP 0.7 million. Underlying profit was therefore in line with last year, despite the impact of GBP 4.7 million of inflation, which, along with just over GBP 3 million of margin decline, was offset by our strong cost out plans and ancillary revenue streams.
Adjusted earnings per share remained in line with last year at GBP 0.108. Average net debt halved from GBP 50 million last year to GBP 25 million this year. This was the result of free cash flow of GBP 21.8 million, which was in line with expectations and of the annualization impact of GBP 22.1 million, one-off receipts which we received in the prior year. Dividends are proposed at GBP 0.0415, the same as last year, and the business anticipates distributing up to the maximum permitted under our financing agreement of GBP 10 million for the full year. Now, on slide six, to give a little more color to our revenues. As we mentioned at the half year, we have benefited from royal succession and the Men's World Cup collectibles, which overall contributed 1% revenue growth.
Excluding these items, underlying revenues were down 0.8%, compared to a historic trend of a 3%-5% decline. Daily newspapers in particular benefited from ongoing price increases, although these were lower than last year. These price increases had a consequent impact on volumes, which declined 13% compared to a historic norm of 9%-11%. There were 26% price increases in the second half of 2023, compared with 37% in the same period last year. Increases in the final quarter were 50% down on the prior year. Therefore, we can expect revenue to slowly return to historic trends as pricing begins to normalize. Magazine revenue and volume decline was in line with previous years. Collectibles, which now represent 4% of our underlying revenue, continued to perform really well, up 43% year-on-year.
These continue to have a higher margin than newspapers and magazines, supporting our overall profit delivery… Onto slide seven. As I outlined earlier, adjusted operating profit increased to GBP 38.8 million, due to the benefit of the Royal succession, and with cost out plans and ancillary revenues offsetting both inflation and margin decline. Net finance charges have reduced by GBP 0.5 million, as the extension of our debt facilities last year resulted in lower bank arrangement fee charges. The impact from higher SONIA rates was largely offset by the lower average debt. Profit after tax of GBP 25.6 million is GBP 0.1 million lower than last year, and includes the higher impact of the higher U.K. corporation tax rates. This had no material impact on headline EPS, which is maintained at GBP 0.108. On to slide eight.
Continuing free cash flow for the year was GBP 21.8 million, and includes a working capital outflow of GBP 4.9 million, compared to GBP 0.6 million last year. This outflow was part of our normal working capital cycle, with a large customer payment received during the first week of 2024. Capital expenditure of GBP 3.4 million is ahead of last year, and more closely aligned to our target of GBP 4 million per annum, as we are now back on track with our depot refurbishment program. Lease payments have reduced GBP 0.3 million year on year, due to the exit of one lease last year and the timing of two renewals. Net interest and fees are significantly lower than 2022, as we paid GBP 2.9 million of arrangement fees last year.
The cash impact of adjusting items were GBP 1 million, which largely related to the cost of an aborted M&A, which Jon just mentioned at the half year. Finally, as a reminder, the prior year benefited from GBP 22.1 million of one-off receipts. Moving on to bank net debt on slide nine. Bank net debt continues to reduce, and the business has generated almost GBP 25 million of cash flow before working capital and dividends. Over the last two years, we have focused on average net debt as a headline measure, as reporting net debt with is impacted by the timing of our working capital cycle. Average net debt has reduced by GBP 64 million, or 72%, over this period. A consistent level of cash flow of GBP 20 million-GBP 25 million for the last three years allows the business to reduce debt and plan with certainty.
We have separated out working capital, which this year is a GBP 5 million outflow due to the timing of receipts just mentioned, but would normally expect a working capital outflow of about GBP 1 million. The timing of publisher payments will have a greater impact next year on a reported basis, due to the impact of the 53rd week, which we will cover on the next chart. So on slide 10, underlying cash flow for 2024 is expected to be consistent with last year, and this will enable average net debt to reduce further to circa GBP 15 million. However, as we have been highlighting through the last few reporting cycles, reported net debt will be impacted by the inclusion of a 53rd week, which will bring publisher payments of circa GBP 20 million into the last week of the financial year.
Concluding the financial presentation, we expect the trends of the second half of 2023 to continue, with cost out and growth offsetting the headwinds of inflation and margin decline, as well as the lower prices for the sale of waste paper. As a result, the business intends to maintain performance in 2024 in line with current market expectations. With that, I'll hand back to Jon, who will provide a strategy update.
Thank you, Paul. So page 12. So in summary, we've achieved a good performance with a clear and sustained focus on the priorities we set out for the year. Indeed, the bullets on this slide are virtually identical to those that we shared in May at our interim results. The key elements have not changed, and indeed it would have been odd had they done so. One of the features of our business is its relative predictability, providing we keep close control of the critical triangle of service, clients, and long-term efficiencies, which, as indicated by the green ticks, is exactly what we've done for the remainder of the second half. Now, at the half year, we also spoke about our long-term strategy, and in particular, those three elements we've stated as our critical goals.
To remind you of these, they are: enhancing our core business, so that we continue to serve customers with market-leading service proposition that supports operational efficiency and generates reliable profits and cash flow. Secondly, leveraging our capabilities in new and complementary markets, exploring and testing opportunities in an agile way, and backing that approach with appropriately sized investment. And thirdly, delivering for all stakeholders throughout, delivering great service, supporting our people and the investment the business needs, enhancing our customer and client relationships, and providing attractive returns for our investors, underpinned by a strong balance sheet. So let's look at each of these in turn. As I said earlier, the milestone achievement this year was the securing of 65% of our publisher contracts through to 2029. At the end of FY 2022, we had 45% secured and were building a significant amount of momentum.
Today, we've passed the tipping point that provides certainty of our territories and service requirements for the next six years. It's an enviable position for any business, and in our case, it enables the planning of efficiencies and network consolidation that underpin our cost saving plans. But it also enables us to plan and develop our growth profit streams with confidence, given that we know which postcodes we'll be distributing to and our likely economics. It's also pleasing to have secured a new and additional agreement with News U.K. for their direct deliveries into London. This new business slots into our existing operations and is a reflection of the way we are working ever closer with publishers on supply chain efficiency and indeed, sustainability. Although not shown on this slide because it is new business, it's equivalent to a further 2.7% of market share.
Even more recently, we've also secured an agreement with Midland Newspaper Association for regional distribution in the Midlands for circa GBP 5 million of additional revenue. Of course, the contracts also give us excellent visibility of likely future cash flows, positioning us well as we come towards the renewal of our banking arrangements that come to an end in 2025. And finally, I should just confirm that the remaining contracts are operating well. These include some rolling agreements with smaller or regional publishers, as well as some larger contracts that we would expect to renew during this financial year. The other key elements of enhancing the core are the twin tracks of service and efficiency, and it is the ability to achieve both without compromise to either. That is a vital ingredient of our long-term success.
On the service side of the equation, our goal is to work with our supply chain partners to make the news and magazine category as easy as possible to execute at store level. We think this is an area where we can continue to use our market leadership, ensuring that our retail customers continue to see the category as a category their consumers love and is becoming simpler to manage. The bedrock of our retail service is, of course, delivering on time and accurately, and we continue to exceed our contractual KPIs in both areas. For a number of our scale retail customers, we've adjusted the commercial model to minimize the risk of shrink. This is an area of growing concern for multiple retailers across many different categories, and it's really pleasing that for magazines, we've made this move already.
But by combining our excellent base service, with these additional value-added services, we make the category easier and more profitable for our retail customers, demonstrating to all supply chain partners that we are the market leader, not only in size, but in vision and commitment, too. If we turn to efficiency, our approach here is a well-developed one, with an enviable track record of securing scale savings now for over a decade. In FY 2022, it's exactly the same. Lower volumes enabled us to remove warehouse activity costs and, where appropriate, consolidate delivery routes. In addition, our distribution centers are almost entirely pure-play logistics centers, with administration and customer service activities centralized. It gives us the advantage not only of cost efficiencies, but also a more consistent and dedicated customer service proposition.
Lastly, as I think many of you will know, we have two offshore service centers for customer experience, technology, and finance. We continue to work well with our service provider in this area, benefiting from the labor arbitrage, but we can also see an opportunity for more automation in the future. Looking to the current year, we would expect our savings to be of a similar level to the historic norm of circa GBP 5 million. On to slide 16. So if we think about turning to our leveraging our capabilities, we recognize the importance of developing new and complementary profit streams that use our skills, capacity, and proven assets. In particular, we have chosen to focus on potential profit streams that play to our strengths and competitive advantage, rather than seeking to diversify in the purest sense.
This time last year, you will have heard me talk about our strategy to enhance the core, add more, and move up the value chain, and our plans to pursue and explore a spectrum of growth opportunities. Since then, we have made progress on each of these, albeit as expected, with some moving at a faster pace than others. So taking each in turn. In the area of logistics services, we have made progress, growing the number of clients whom we either rent spare space or provide sortation and delivery services. This provides welcome additional revenue, and we'll continue to look for further opportunities in this area. From a supply chain integration perspective, we spoke last year about how we are the U.K.'s largest home news delivery provider working from our warehouses. That relationship continues to be a mutually beneficial one.
The focus this year, however, will be the successful integration of the News U.K. direct retail business in London and the Midland Newspaper Association regional business in the Midlands. In relation to direct consumer, in the autumn of 2022, we made a modest joint venture investment in the launch of Love Media. This is a pay-as-you-go digital service that enables consumers to buy digital copies of newspapers or magazines from their local retail store simply by scanning a QR code. Of all the areas of growth, this was the last to market, and it's still very early days. For us, it represents a limited investment and continued experimentation in what is a growing market that we're keen to stay close to. For now, it's a complementary service offer for our publishers and retailers, and time will tell whether it's a solution that consumers embrace.
Finally, for categories and data, we spoke last year about using the DVD market to demonstrate to our larger retail customers the advantage of using the proven news and magazine supply chain for other categories. Working in partnership with our magazine distributor, Frontline, we have this year added books to that list of products, and we distribute to that, to some of the largest multiple retailers in the U.K. We expect both the number of customers and the breadth of categories to increase in this current year. Which brings me to the most advanced of our new ventures in the service expansion area, and that is Smiths News Recycle. This is a material news service that was initially aimed at our independent customers. To remind you, the service collects cardboard and plastic waste from our retail customers on a weekly, paid-for basis.
This service backs on to our core delivery and returns capability. The waste is prepared and baled at our depots and sold to recyclers at a profit. This year, we've gone from a small regional trial to a full national rollout. We're also now live in additional 900 local bookmakers. We're looking at additional waste categories and potential strategic partners that would make this service even more attractive. And in total, we now have over 4,000 paying customers who describe our service as flexible, convenient, and excellent value... which takes us to the third element of our strategy, to deliver for all stakeholders. I believe today's results, and indeed, those of the last three years, confirm that we are succeeding. Our retailer and publisher services are market-leading, and we benchmark number one.
We have the confidence of our publishers to award contracts through to 2029, and in relation to shareholders, for the second year in succession, we'll be paying the maximum dividend under our banking agreements. This is the equivalent to a yield of above 8%. Net debt and average net debt have materially reduced over the last four years, as you've heard Paul discuss, positioning us well to renew our financial agreements ahead of 2025. And our new profit streams are now beginning to flow without risk to our core focus or indeed finances. Turning finally to people in the environment, these are best viewed as part of our ESG, ESG strategy.
Now, you may recall this graphic when we called out our pillars of the environment and people as priorities because they had the most impact on our supply chain and are the primary concern of our partners in relation to our performance. On the environment, we've made good progress in reducing fleet and warehouse emissions in FY 2023, and in line with governance best practice, have adopted a science-based approach to further targets. For the period between FY 2024 and FY 2028, we've set an absolute reduction target relating to Scope 1 and 2 emissions of 4.96% linear per year, and a reduction in Scope 3 emissions for the relevant categories we can control are 32.5% cumulative.
In relation to people, we've focused particularly on the benefits of greater diversity and inclusion, with training, employee surveys, and the enhancement of our communications and employee networking groups. We're, of course, committed to training and developing all of our people, maintaining the long service and industry expertise that underpins our competitive advantage, while also appointing new talent and functional expertise that enhances our skill set. And finally, our prioritization of the environment and people pillars does not mean that we've downgraded anything else. Indeed, we continue to work closely with our partners, make contributions to our communities, and we've established a really strong governance process for our ESG approach, examples of which are the science-based targets I've just mentioned, the achievement of Cyber Essentials Plus certification, and the ongoing investment in health and safety, which is clearly a non-negotiable priority every day in every location.
Looking to the current year, our key priorities were focused once again on the issues we've discussed today. Managing inflation and cost reduction remain a critical task, and doing this in a way that ensures we maintain service and customer satisfaction. Sustainable cost reductions of circa GBP 5 million are an established goal for which we have an excellent track record in achieving, but we do not underestimate the scale of the task. We're in advanced discussions with other publishers for the remaining contracts and would hope to conclude a number of those shortly. While looking to the longer term, we are targeting further progress on our new revenue streams, knowing these will play a bigger role in our revenues over time. Finally, we will open discussions with our finance partners to refinance our banking facilities, which currently expire in August 2025.
Which brings me to the outlook for the current financial year, which has started well. Our network changes and operational cost savings are on track, and, providing we do not see any further cost spikes, we expect them to offset the impacts of inflation in the year. New revenues are building, which is, of course, good news as our various growth platforms become more established. In summary, we're currently on track to once again meet market expectations for the full year.