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Connect abandons strategy

The group has closed Pass My Parcel and won't pay a final dividend as it scrambles to redirect its strategy
November 6, 2018

The decline in print media has long been the source of Connect Group’s (CNCT) woes, but these full-year figures suggest the current turnaround plan isn't actually working. 

IC TIP: Sell at 34pp

As news and media revenues continue to fall, the group has looked to distribution to drive future growth. However, delivery business Tuffnells swung into the red last year, while losses from pick-up-and-drop-off brand Pass My Parcel forced it to close.

Despite making “good progress” in restructuring its business since July 2017, integrating the operations, sales and marketing functions only "weakened operational performance" and damaged internal accountability.

Having appointed new chief executive Jos Opdeweegh in September, it will now return to a separate business unit structure. The intention is to push Tuffnells back towards profitability, which will include addressing "historical underinvestment". Bosses also hope to claw back more costs at Smiths News, and renegotiate key contracts there. A new recovery strategy isn't due until January, but cancelling the final dividend should free up a bit of cash in the meantime.

Analyst Peel Hunt has placed forecasts for adjusted FY2019 pre-tax profit of £27m, and EPS of 8.7p (down from £28.4m and 9.3p in FY2018) under review.

CONNECT GROUP (CNCT)  
ORD PRICE:34pMARKET VALUE:£84m
TOUCH:33.9-34.4p12-MONTH HIGH:120pLOW: 17p
DIVIDEND YIELD:9.1%PE RATIO:NA
NET ASSET VALUE:*NET DEBT:£83.4m
Year to 31 AugTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20141.8143.116.88.8
20151.8829.09.39.2
20161.6535.211.39.5
20171.5934.211.09.8
20181.53-35.5-15.53.1**
% change-4---
Ex-div:na   
Payment:na   
*Negative shareholders' funds **No final dividend - interim payment of 3.1p paid in July 2018