These results went some way to restoring confidence after a disappointing pre-close update back in March. Connect Group (CNCT), previously known as Smiths News, did, as expected, suffer weakness in its books business, but solid results in news distribution and education and care kept the ship steady. Group adjusted pre-tax profit rose 3 per cent to £24m. Peel Hunt expects £50.5m for the full year, giving earnings per share of 20.8p (from £50.8m and 20.2p in 2012-13).
The name change reflects the shift away from news distribution and diversification into new markets such as the supply of books and education equipment. The group generated 24 per cent of its profits outside of magazine and newspaper wholesaling in the first half, and aims to get this to 50 per cent by 2016. Chief executive Mark Cashmore says this will be achieved by "organic growth, acquisitions in existing divisions, and potentially a fourth leg".
News distribution operating profit rose 4 per cent to £20.5m as cost savings boosted the operating margin by 10 basis points. Connect recently started exclusive distribution of the Metro newspaper, numbering 800,000 copies a week, and the division has secured 77 per cent of its revenue to 2019 and beyond. The education and care division, meanwhile, grew underlying operating profit by 3 per cent to £3m. But the books division suffered from soft academic and digital sales and margin pressure, causing underlying profit to slump by a third.
CONNECT GROUP (CNCT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 165p | MARKET VALUE: | £312m | |
| TOUCH: | 164-165p | 12-MONTH HIGH: | 248p | LOW: 146p |
| DIVIDEND YIELD: | 5.7% | PE RATIO: | 9 | |
| NET ASSET VALUE: | * | NET DEBT: | £105m | |
| Half-year to 28 Feb | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 905 | 18.4 | 7.0 | 3 |
| 2014 | 899 | 22.1 | 9.1 | 3.1 |
| % change | -1 | +20 | +30 | +3 |
Ex-div: 11 Jun Payment: 11 Jul *Negative shareholders' funds | ||||
