Given the structural decline in print media, much of the discussion around Connect Group's (CNCT) half-year performance has focused on its news and media business, which recorded flat adjusted profits on a 3 per cent fall in revenues. Margins have been shored up through further efficiencies, which leaves the division on track to deliver £10m in cumulative cost savings over 2017 and 2018. Newspaper revenues have held up, with price rises helping to offset volume declines, although magazine sales have continued to fall. Despite increased investment, progress in Pass My Parcel - the group's click and collect service - was slower than expected, forcing it to axe its volume target of 3m units for 2017.
Revenues in the parcel freight division were up 5 per cent to £86.6m, but adjusted operating profit fell to £4.3m from £5m. Increased fuel costs and the impact of the new national living wage upped the cost pressure, but the group used higher prices to maintain gross margins at 30 per cent.
The balance sheet will benefit from the proposed sale of the education and care business for £64.4m. Proceeds from the deal - subject to approval - will reduce the net debt to cash profits multiple to 1.2 times, from the current level of 1.8.
Analysts at Berenberg are forecasting adjusted pre tax profit of £52m, giving EPS of 17.1p for the August 2017 year-end (from £61m and 19.8p in 2016).
CONNECT GROUP (CNCT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 131p | MARKET VALUE: | £324m | |
| TOUCH: | 130-130.8p | 12-MONTH HIGH: | 168p | LOW: 127p |
| DIVIDEND YIELD: | 7.3% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 5p* | NET DEBT: | £150m | |
| Half-yearto 28 Feb | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2016 (restated) | 917 | 17.8 | 5.8 | 3.0 |
| 2017 | 912 | 17.6 | 5.7 | 3.1 |
| % change | -1 | -1 | -2 | +3 |
Ex-div: 8 Jun Payment: 7 Jul *Includes intangible assets of £133m, or 54p a share | ||||
