Guitarsolo
26 Oct 2017
Re: Results Having had a spin through the results I am surprised not to see a bigger leap in the share price (although as I type it is ticking up!) to at least where we were before the recent wobble - just over £1.The declines are all where we predicted but overall, 15.5p EPS and a 9.8p divi looks good to me. Where else can you get a 10% yield, x1.6 covered by earnings and x1.1 covered by FCF?! Debt is down substantially as the sale proceeds were used to reduce debt (now £82m or thereabouts). Click and Collect made a c.£6m loss but this is reducing and they expect to break even with it in FY19 and the group expects to return to growth (I presume they mean profit growth) next year. That bodes well for the already generous dividend to moderately grow again. If I wasn't already pretty loaded with these I would add again to bring my 125p average down a bit more. Guitarsolo - all is fine here. Leave this cash cow in the bottom draw and shut again.
Mardyke
26 Oct 2017
Re: Results Everything is down? What about the dividend? That's up !
JohnOfYork
26 Oct 2017
Re: Results Market likes the results. Buy price 0.96.
Blanketstacker
26 Oct 2017
Results Everything is down 3-4%, except cashflow, which is down 20%. Hopefully this is already in the price, but I expect to see a considerable fall on opening.
casabanker
25 Oct 2017
Re: Mistaken identity There seems to be a growing number of shares that have a low PER and a high dividend rate. On the face of it, they look like bargains to inexperienced investors but usually end up being value traps. Debt levels are not always easy to extricate from the balance sheet, some AIM stocks capitalise costs as investments and then look like positives and finding pension commitments is not readily highlighted.No wonder the poor PI has difficulty finding good reliable stocks to hold for the long term particularly in today's market. Casa.
Bill1703
25 Oct 2017
Re: Mistaken identity "Normally a big pension deficit would deter me from plunging in but the case is very different from the usual story where a big debt like this would act as a serious drag... I think this investment is hopefully classed as a value one rather than the defensive type that I have been favouring lately."Yes, Casa, and I hope your purchase is rewarded... in short order, with any luck?!I think Kingham has confused the pensions issue for some - he looks first and foremost at the gross liabilities... fair enough, I have seen others do the same, but it does ignore a pretty crucial part of the equation - which shines a very different light on the likes of CNCT, which doesn't have a deficit at all, to all intents and purposes.Indeed, their pension position is merely one reflection of a business which looks, in almost all respects, a well managed and conservatively financed operation, which doubtless would be highly valued by shareholders - were it not for the one wrinkle... its core field of operation being in long term structural decline. Okay, an important wrinkle, but still...Interestingly, Kingham seems to think the dividend will - and should - be cut, largely due to the sale of (and consequent loss of earnings from) the Education biz... and the market is telling us it already has been slashed, pretty much. I am not so sure. If so, why not cut at H1, when the Education sale was already known and priced, and the operation hived off as "discontinued"... but they actually increased it? And Education was hardly a major contributor to profits... well under 10% in H1. There's been not even the merest hint of a cut in subsequent updates, and no analyst is forecasting it as far as I can see.Either way, we will find out soon enough....
Bill1703
25 Oct 2017
Re: Mistaken identity "Where are you seeing a pension hole of 500M Casa?? - The figures I look at show a negligible pension deficit, of 20M, against pension assets of around 500M... And that's only 20M in deficit instead of 120M profit because they cant recognise 140M of unrealised profit..."Yes, the +£500m is gross pension liabilities, but they are overall in surplus (as the Kingham article makes clear) - no "black hole" here!FYI a very good piece in the FT recently, about why we are worrying too much about pension deficits... to do with changing life expectancy trends and likely bond yield trajectory. Very much chimes with my own views - not least, the market has always panicked about big pension deficits for already-highly indebted stocks, without acknowledging the natural hedge. Pension deficits remains big as long as interest rates stay low, meaning less pressure on debt levels... and as rates "normalise", it may be bad news for interest costs on your debt, but your pension deficit issue quickly goes away.But I digress... the Kingham article is good (thanks to Blanketstacker for sharing) and covers all the bases. If anything he underplays the free cash flow story, which is absolutely key here... FCF yields of 22%/18% last two FY, a good 4x the UK market average, and covering the divi over 2x. Even though FCF will likely trend lower from this year (on a continuing biz basis), it should remain in very attractive territory. And that is before you consider P/E and EV/EBITDA both below 5x, and a +10% divi yield... how many stocks can you name with this kind of profile?"However the continual decline of CNCT is worrying, perhaps all will become clear tomorrow?"Yes, with such moves I always worry the market knows something we don't - even though it shouldn't! And sometimes it does... though this is no dodgy AIM micro-cap (at least, not yet!!)Best guess... it does NOT here. It is merely an increasingly paranoid market, shunning anything that smacks of specific risk, particularly with big UK exposure and a "structural long term decline" tag - no matter how cheap. So I think they will at least hold the divi - no pressure to cut (from any of FCF, balance sheet or earnings), no hint at any material trading issues in latest updates, and they have the disposal cash coming in. They might even hike it (!?!) - they increased it in H1. And FWIW, I think there is a good case for a share buy-back programme, to shrink the capital base in line with the gradually (but not, as yet, terminally) declining core business.Famous last words and all that! And even if the divi story is confirmed and we do get some kind of SP bounce, I wouldn't expect anything dramatic... the current market will inevitably remain narrowly focused on the negatives. But as long as they can keep generating the cash, at some point the value WILL come out for this one - one way or another!
Eagerbeaver66
25 Oct 2017
Re: Mistaken identity Where are you seeing a pension hole of 500M Casa?? - The figures I look at show a negligible pension deficit, of 20M, against pension assets of around 500M.- And that's only 20M in deficit instead of 120M profit because they cant recognise 140M of unrealised profit which is on their pension books.- However the continual decline of CNCT is worrying, perhaps all will become clear tomorrow?
casabanker
24 Oct 2017
Mistaken identity I think CNCT is being treated by investors in a similar way to CLLN and Petrofac. They are overladen with debt which has de-stabilised their businesses. CNCT does have some debt but it is manageable. However, they do have a pension black hole of about £535m. This is enough to frighten off many investors. The good news though, is that the pension fund has an asset holding of £140m. CNCT can ignore the pension deficit for now. The dividend looks safe if the management choose to keep it at that level as it is covered by both profit and free cash flow.I am not a holder of CNCT but I will be watching carefully this week.Is it too good to be true?Casa.
Blanketstacker
24 Oct 2017
CNCT article here [link] by John Kingham on CNCT. He seems surprisingly positive! You may have to subscribe, but it is free and he is well worth reading.(Even if he divi is slashed, he says, it will still be 5% at this price!)
Blanketstacker
24 Oct 2017
Re: FY Results 26th Oct Apologies for last, computer on blink. The numbers, from the left, are
ate of report, pre-tax profit, EPS, DPS (for 2017, repeat for 2018).I am surprised to see this slip so low. Yield, if maintained, is an impossible 11%!!!!! This being cut will provide and excuse for this fall. Profit margins are tiny, but as has been said here the cashflow remains positive. I am holding for Thursday.
Blanketstacker
24 Oct 2017
Re: FY Results 26th Oct Broker notes:FinnCap 26/09/17 BUY 51.00 16.20 9.60 51.00 16.20 9.80W H Ireland Ltd 07/07/17 OUTP 53.20 17.10 9.80 55.50 17.80 10.00Peel Hunt LLP 06/06/17 ADD 50.67 16.16 9.79 55.02 17.58 10.08
Guitarsolo
24 Oct 2017
Re: FY Results 26th Oct Woah! Down sub-90p now! The market must be anticipating some seriously bad results on Thursday (26th). And I thought this was a boring stock! I would settle for boring rather than this!Come on CNCT, give us something to reverse this momentum. Even just EPS of 16p and a divi of 9.5p should do it. Guitarsolo
Bill1703
14 Oct 2017
Re: FY Results 26th Oct "It would seem that the market is factoring some risk of a nasty surprise when the results are announced... Growth is clearly limited, but even with zero growth I estimate fair value at between 130 and 150p on a DCF basis."HE - difficult to say what the market is actually expecting... could be just another structurally-challenged stock drifting ever lower, shunned by a bi-polar market apparently happy to pay ever higher prices for anything perceived as safe or "quality" while steering clear of anything redolent of specific risk or uncertainty - no matter how cheap. We know about the structural challenges, we know a big part of their business is in secular decline... it's still just TOO cheap here IMHO. Forecasts for the next couple of years would need to be significantly off to make sense of an underlying forward P/E of 6x, EV/EBITDA nearer 5x.But it is the free cash flow that stands out here... cash conversion has always been very good, and at the current SP it's showing FCF yields of 20% and 16% for last 2 FYs - truly stand-out figures. If this can be sustained at anything like these levels in subsequent years, you are looking at a stock that could generate back its own market cap in FCF in just a few years."Dividend at 9%+ is barely covered by earnings (around ~1.3), CNCT could use the FY as an opportunity to ease that back to restore cover..."Underlying EPS cover is more like 1.7-1.8x on current forecasts... pretty much a market-average level. And, as above, the FCF cover position is more revealing (and more relevant) - cover either side of 2x in recent periods, well ABOVE a market average of more like 1.3-1.4x. We shouldn't forget that the dividend as always a choice and management could always cut it on the pretext that the market is giving little value for it - the current yield already discounts a significant cut - but the metrics suggest very little immediate financial pressure to do so. "I am holding but getting nervous about the fall below 100p... Any views about how this play out?"Always hard to value a stock like this - but equally, we should never be too swayed by the short-term market view, particularly when it is in its current mood. The results will be interesting indeed, and we should keep a close focus on the FCF profile, but it's still worth more like 150p for me (which I note, FWIW, is in line with the current consensus analyst price target).
Hydrogen Economy
12 Oct 2017
FY Results 26th Oct It would seem that the market is factoring some risk of a nasty surprise when the results are announced so the SP is likely to move significantly after the announcement, direction depending whether fears or hopes are borne out. Forecast EPS are 17 18 4T 13.1 13.8 (Unadjusted)DL 16.3 16.6 (Adjusted)Growth is clearly limited, but even with zero growth I estimate fair value at between 130 and 150p on a DCF basis. Even at the lowest analyst estimate of 11p for next two years I would value at 103p. An in-line result should give a good rise. Dividend at 9%+ is barely covered by earnings (around ~1.3), CNCT could use the FY as an opportunity to ease that back to restore cover which the market would likely not appreciate, although it may be the right move longer term. A revenue decline was flagged in the trading update in July and factored into the estimates, the outlook statement is likely to be carefully watched. The full impact and costs of the sale of Education to RM remains to be seen, there may be exceptional costs hitting reported numbers. It is not unknown for companies to offload a division then find out it was carrying a bunch of Corporate costs which now drag down the rest of the businesses! Hopefully CNCT know how to allocate costs but Corporate costs will have to be reduced or paid, I am holding but getting nervous about the fall below 100p.Any views about how this play out?H2
