Connect (CNCT) continues to make encouraging progress in its drive to diversify away from its declining print distribution business. Heavy investment and last December's £55m rights issue weighed on the bottom line in these half-year results, but the company's £113m acquisition of next-day delivery service Tuffnells, which was financed by the new equity, has hit the ground running. Tuffnells, which specialises in parcels of irregular dimension and weight, reported sales growth of 17 per cent for the period since acquisition. It also won 300 new customers, worth about £4.5m in sales per year.
Meanwhile, Connect's cash-generative "engine room", as management put it, remains resilient. The company's news operations saw sales slip 2 per cent - ahead of the targeted decline - despite lower cover price inflation. Management also remains on track to deliver at least £5m of cost savings during the year, part of which will be used to nearly treble the parcel shop network used by Pass My Parcel, the click-and-collect delivery service Connect has developed with Amazon.
The company continues to generate a lot of cash. At £16m, free cash flow was up 34 per cent in the first half, spurring management to hike the dividend. Broker JPMorgan Cazenove expects adjusted pre-tax profit of £54.4m for the full year, giving adjusted EPS of 18.9p.
| CONNECT (CNCT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 151p | MARKET VALUE: | £367m | |
| TOUCH: | 148-151p | 12-MONTH HIGH: | 188p | LOW: 122p |
| DIVIDEND YIELD: | 5.8% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 1p* | NET DEBT: | £158m | |
| Half-year to 28 Feb | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 899 | 22.1 | 8.2** | 2.8** |
| 2015 | 910 | 14.1 | 4.6 | 2.9 |
| % change | +1 | -36 | -44 | +4 |
Ex-div: 11 Jun Payment: 10 Jul *Includes intangible assets of £173m, or 71p a share **Adjusted for Dec 2014 rights issue | ||||
