Connect's (CNCT) £115m acquisition of next-day delivery service Tuffnells last December looks to have been a smart one. Underlying revenues at the parcel freight business grew 20 per cent, helping to send group adjusted pre-tax profit surging 13 per cent to £57m. Buoyed by the early success of Connect's shift into higher-growth areas, investors propelled the shares up 5 per cent.
But the legacy news distribution unit also put in a respectable shift. Despite heavy investment in the 'pass my parcel' service and the absence of last year's World Cup sticker sales, divisional adjusted operating profit fell just 4 per cent. Connect also benefited from £5m of cost savings, which management expects to repeat in the next two financial years. It reckons those extra funds can mitigate falling newspaper sales by bankrolling additional investments, including roughly doubling the number of parcel shops to 6,000 as the company prepares to unveil a new mobile-enabled returns service with a major retailer.
Chief executive Mark Cashmore says Connect's aggressive cost-saving strategy should also absorb the impact of the national living wage. Broker Liberum upgraded its adjusted EPS forecast for the year to August 2016 by 2 per cent to 19.5p (FY 2015: 18p).
| CONNECT (CNCT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 156p | MARKET VALUE: | £381m | |
| TOUCH: | 152-156p | 12-MONTH HIGH: | 172p | LOW: 124p |
| DIVIDEND YIELD: | 5.9% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 4p* | NET DEBT: | £144m | |
| Year to 31 Aug | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 1.73 | 32.1 | 12.1 | 8.0 |
| 2012 | 1.80 | 36.6 | 15.2 | 8.6 |
| 2013 | 1.81 | 38.9 | 15.7 | 9.3 |
| 2014 (restated) | 1.81 | 43.1 | 16.8 | 8.8 |
| 2015 | 1.88 | 29.0 | 9.3 | 9.2 |
| % change | +4 | -33 | -45 | +5 |
Ex-div: 14 Jan Payment: 12 Feb *Includes intangible assets of £175m, or 78p a share | ||||
