Connect Group Live Discussion

marktime1231 06 Feb 2019

Turning around? Actually added this morning, I figured if I am “confidently” holding on for things to turn around I might as well take a few more at what will with hindsight prove to be a basement level. Actually it is all just hopeful speculation.

marktime1231 02 Feb 2019

Turning around? Good points. I am going to hold on here and with DX. It might take a couple of years to achieve and considering how bad things got a full recovery is not certain, but the payday would be terrific if things do turnaround. Gatemore will be very determined to succeed, and it should not be so hard to make a scaled distribution business work given the surge in online ordering. At some stage there may be a prospect of consolidation and a merger would help realise true underlying value. I wonder if other people are ditching Connect now as the update sinks in and a market recovery means other stocks are picking up more quickly whereas there is inertia to overcome here.

NewBill1703 02 Feb 2019

Turning around? marktime1231: Still sitting on my pile of Connect shares showing a huge loss and not even a dividend anymore, but is it turning around or should I have cut and run by now … what about you Bill1703? I am sure there were good chances we missed to cut and run, MT… but I am hanging on in there. Essentially on the basis that at 37p, I think the upside - on any reasonable turnaround of core operations, driven by greater focus and appropriate cost cutting - is greater than the downside (ie. 37p), and (I still think) possibly substantially so. I don’t think this is going bust, any time soon - the balance sheet remains pretty strong (more so than credited IMHO), they are being proactive in shoring it up further, and - most importantly - FCF is still very good. Management has made too many mistakes, in an industry and market backdrop where these are ill-afforded, and we have paid for them - and continue to do so. But time will tell…

zanshin 02 Feb 2019

Turning around? Not sure. With the trading statement only a week old, I was surprised by the “no news” drop in the SP yesterday on slightly raised volume. While not anything special, at least the statement suggested some stability, with SmithsNews overall performance in line with the plan, Tuffnells expected to return to profitability in H2, and Connect group in line with expectations. Market reaction over 2 days set the tone, with significantly higher than normal trade volumes, sending the SP on a downward path, now back to where it was in November '18. My guess is that progress is not as good as the market expected, and the interim bubble has evaporated. Hopefully, that’s the fall done for now until we have better news or the market expects some.

zanshin 02 Feb 2019

Turning around? Not sure. With the trading statement only a week old, I was surprised by the “no news” drop in the SP yesterday on slightly raised volume. While not anything special, at least the statement suggested some stability, with SmithsNews overall performance in line with the plan, Tuffnells expected to return to profitability in H2, and Connect group in line with expectations. Market reaction over 2 days set the tone, with significantly higher than normal trade volumes, sending the SP on a downward path, now back to where it was in November '18. My guess is that progress is not as good as the market expected, and the interim bubble has evaporated. Hopefully, that’s the fall done for now until we have better news or the market expects some.

marktime1231 01 Feb 2019

Turning around? Yes I’ve been tracking the price and wondering why there has been a reverse in sentiment today, on no news that I can see. So you think this only has further to fall or is a bust?

zanshin 01 Feb 2019

Turning around? You may not have noticed but the sp has fallen about 25% this year, so not really a turnarounnd candidate at this stage. There’s been a slight upward trend since the price collapse in June '18, but the market was spooked today resulting in an intraday fall of circa 14%.

marktime1231 01 Feb 2019

Turning around? Still sitting on my pile of Connect shares showing a huge loss and not even a dividend anymore, but is it turning around or should I have cut and run by now … what about you Bill1703?

Frankers70 07 Nov 2018

Director buying Nice to see the CFO showing a bit of confidence with a £20k purchase. Let’s hope we’re over the worst here and the company and share price can get back on track… As ever, GLA that are invested.

Guitarsolo 29 Oct 2018

Strategy Well, Joe O. has been in the job for a couple of months now. He will have done the usual new-CEO thing of a “strategic review of operations” to see what he thinks needs to be done…and lots is probably the answer! Two months in now though…when should we expect some sort of update? The share price is stuck in the mid-30s waiting for this I think. I hope he has the pruning shears out… cut this back to the profitable news distribution and stop all the management vanity projects. If there is any way of disposing of Tuffnells for enough to clear the debt I would go for it (they paid £118m for it!!!). On the upside, two recent contract renewals keeping Smith’s position as the main distributor in the country. At least we know they are good at that even if margins are ****. Guitarsolo

Guitarsolo 14 Sep 2018

Private Equity takeover or trade sale soon? John, I can only hope this comes true! Sadly, my experience of CNCT has been terrible (average price c.127p). Today’s RNS sums it up yet again! Dire profit warning. Tuffnells is a dog and a half. How on earth did they pay £118m for it? Pass my Parcel has been a very costly misadventure and these costs to exit onerous contracts sound worse than many feared. Then there was the c*** up of selling the Books Division… I could go on. Why oh why couldn’t previous management have just left well alone and run the old declining Smiths business well…that generates a very acceptable return and great cash flow. But no, that wouldn’t have massaged the ego of previous management enough that they needed to prove what great business men they were so they invest in PMP, Tuffnells etc and **** the whole thing up. But I admire your positive position even if it was prior to today’s profit warning. I am holding most of my previous position hoping that Jos can wield the wand a bit an salvage something out of CNCT. Selling off the cr*p to start with, shutting down things like PMP and then probably selling the golden asset for the maximum possible. If I was brave I would top up hoping to recover some of my losses if there is a take out for say 60p net per share. However, I’ve been done over with this one so am probably not inclined to take that risk. Still, I welcome your post and am keeping my fingers crossed that something like what you propose occurs. Guitarsolo

johnficenec 13 Sep 2018

Private Equity takeover or trade sale soon? Connect Group looks ripe for a takeover from private equity. The core news distribution business is profitable, cash generative with customers locked into new 5yr contracts. The new CEO has a track record of selling businesses and the biggest rival Menzies just got taken out by private equity group Endless. The News Distribution business generated operating profit of £40m last year (to 31 Aug 17), is still trading in line and has just renegotiated 5yr contracts with its clients. The magazines business makes a handy £2m operating profit. The Tufnells parcels business is a dog and the writeoff of the value in the business will probably be a £30m hit this year. That said the business as a whole generated £36m in free cash last year and paid out £24m in dividends. Sure dividends are going to be axed this year too for shareholders, but the new owners could do what they want, the pension isn’t onerous, and net debts have been paid down to a manageable £80m. Jos Opdeweegh, the new Connect CEO, has acted as a buy side advisor for Private Equity for the past two years. Also previous companies he has been CEO or sat on the board for, Premier Farnell, Neovia logistics and Interline Brands were all sold according to his LinkedIn page. As for price Menzies gives a guide. 90% of the distribution business was sold to Endless for £75m, it made revenue of £1.2bn and operating profits of £24.8m. Roughly that gives a price of £83.3m for a £24.8m operating profit business on a multiple of 3.4 times. Applying that to Connect where you have News generating £40m, magazines £2m, and Tufnells £7m (in a good year) gives about £50m or £170m ( maybe up to £190m with a fair wind). Current market cap is £96m, or 38p per share. Could be 80p to £1 per share takeout on offer here. I have a position in Connect for this very reason.

forwardloop 14 Jun 2018

Dire Trading Update - PmP to Close - Div Cut CEO & CFO to go Connect Group PLC (LON:CNCT) almost halved in value on Wednesday after the distribution and logistics group issued what looks to be this year’s first World Cup-related profit warning. In late afternoon trading, Connect shares were down almost 44% at 29.15p, taking year-to-date falls to almost 75%. READ: Connect Group London’s top faller as revenues slide and £12mln books business sale in doubt In a trading update, the FTSE SmallCap firm “materially reduced” its full-year profit forecasts due to disappointing sales of World Cup-related products in its Smith News division, as well as a “material fall” in volumes and higher costs in its parcels delivery business, Tuffnells. Connect – formerly known as Smiths News - added that as a result of the “extremely disappointing” second half performance so far, the full-year dividend will “at a minimum be substantially reduced”. For the year ended August 2017, Connect reported pre-tax profit of £34.2mln on revenue of £1.59bn. Connect also said its chief executive officer Mark Cashmore will resign from the company after an “orderly transition” with his replacement, and its chief financial officer David Bauernfeind has left the firm immediately. Bauernfeind will be replaced by Tony Grace, the former finance head of delivery firm Yodel. Berenberg cuts to hold The dire news saw German bank Berenberg downgrade its rating for Connect to ‘hold’ from ‘buy’ after chopping its target price back to 40p from 140p. The bank also cut its 2018-20 earnings per share estimates on the group by around 30% and said it now assumes an 80% cut to the dividend going forward, resulting in a full-year dividend of 4.4p in FY18 and 2p in FY 2019/20. In a note to clients, Berenberg’s analysts said: “With the failure of the company to turnaround repeated poor performance in Tuffnells, as well as the departures of both the CEO and CFO, we believe the outlook and investment case for Connect to be unclear at present.”

kryptes 13 Jun 2018

Another IC recommendation Some while ago the Investors Chronicle strongly recommended buying shares in Connect. It was such a ridiculous piece and so devoid of logic or any connection with the real prospects for this company that I kept it and would occasionally look at the share price, which was always lower than last time I looked. Recommended buy price was 149p - now 22p. Great work IC!

Blanketstacker 05 May 2018

Re: Smiths News Just for info, two years ago Smith's News stopped taking smaller circulation local publications altogether. They were deemed no longer financially viable. Looking back this should have been a warning about pending problems.