A successful year for the flagship news distribution business at Connect Group (CNCT) offset plunging profitability in the book division. Underlying pre-tax profits ended the year more or less flat, though post-tax earnings were boosted by a lower tax rate.
Connect Group used to be known as Smiths News. It changed its name to signal a strategic shift away from the declining print-media business, from which it wants to make no more than half its underlying profits. So it's ironic that news distribution was the star performer in the year to August, with underlying operating profits rising 7 per cent to £42.9m - more than three-quarters of the total. The strong performance was entirely down to cost cutting. Sales benefited from the World Cup, cover price inflation and supermarket promotions, but still fell 2 per cent on a like-for-like basis.
The results were accompanied by the announcement of two new initiatives to support the group's diversification strategy. 'Pass My Parcel' will be a new click-and-collect delivery service linking Amazon with the thousands of independent retailers Connect has dealt with for years, while 'Jack's Beans' already installs and services coffee machines in 120 corner shops nationwide.
Broker JP Morgan Cazenove expects adjusted pre-tax profits of £48.6m for 2014-15, giving adjusted EPS of 20.1p.
| CONNECT GROUP (CNCT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 162p | MARKET VALUE: | £307m | |
| TOUCH: | 160-163p | 12-MONTH HIGH: | 248p | LOW: 135p |
| DIVIDEND YIELD: | 6.0% | PE RATIO: | 9 | |
| NET ASSET VALUE: | * | NET DEBT: | £93m | |
| Year to 31 August | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 1.83 | 28.1 | 11.7 | 7.40 |
| 2011 | 1.73 | 32.1 | 12.1 | 8.00 |
| 2012 | 1.80 | 36.6 | 15.2 | 8.60 |
| 2013 | 1.81 | 38.9 | 15.7 | 9.30 |
| 2014 | 1.81 | 43.1 | 18.6 | 9.70 |
| % change | - | +11 | +18 | +4 |
*Negative shareholder funds Ex-div: 8 Jan Payment: 6 Feb | ||||
