It is never good news when a company's prospective second-half revenue revival is dependant on sales of football World Cup sticker collections. That is just one of a plethora of problems at distributor Connect (CNCT), where its shares have shed half their value in the past 12 months as the group battles with a poor print media industry and Amazon-shaped competition in the parcel delivery business.
But not all of the group's problems should be blamed on wider market challenges. Management admits that operating inefficiencies sent the Tuffnells delivery business into an operating loss position, while £5m of targeted annual savings in the Smiths magazine and newspaper distribution arm will have to wait until the second half as challenges in the wider business forced a delay to the headcount reduction.
It is not all bad though; free cash flow rose more than 100 per cent to £12.7m thanks to an improvement in the working capital position and a decrease in capital expenditure. Meanwhile, the sale of the group's book division helped reduce net debt by 44 per cent.
Peel Hunt left its forecasts unchanged, expecting adjusted pre-tax profit of £42.6m, giving EPS of 13.8p in the year to August 2018 (from £48m and 15.4p in 2017).
| CONNECT GROUP (CNCT) | ||||
| ORD PRICE: | 57p | MARKET VALUE: | £141.2m | |
| TOUCH: | 56.6-57p | 12-MONTH HIGH: | 130p | LOW: 55p |
| DIVIDEND YIELD: | 17.2% | PE RATIO: | 7 | |
| NET ASSET VALUE: | 3p* | NET DEBT: | £83.6m | |
| Half-year to 28 Feb | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 793 | 16.5 | 5.4 | 3.1 |
| 2018 | 767 | 9.5 | 3.1 | 3.1 |
| % change | -3 | -42 | -43 | |
| Ex-div: | 7 Jun | |||
| Payment: | 6 Jul | |||
| *Includes intangible assets of £101m, or 41p a share | ||||
