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I travelled down from Leicestershire to Swindon on Friday to meet the directors of Connect Group (LSE:CNCT) at the AGM – I was the only non-managerial shareholder (or at least the only one to ask questions). I’ve been a shareholder for about a year and half, but it’s been a bumpy ride: my initial purchases were over £1. We had an awful profit warning last year and the shares fell to around 28p. I analysed the firm again at that point and reasoned that the business of distributing newspapers and magazines was still a good one; pumping out over £20m of post-tax earnings per year (see newsletters: 14th – 27th June 2018). I June 2018 I trebled my holding at 28.5p.
The real concern was, and is, the Tuffnells business bought for £139m in 2014. Last year it fell into losses due to poor management (around £6m). I valued this business at nothing and still thought the Group worth investing in, mostly because of the solid income flow from newspaper distribution, Smith News, SN.
The Group spent last year closing (a costly process) a business developed as an experiment to make use of its newspaper distribution network to carry items for the likes of Amazon and ASOS to newsagents (called Pass My Parcel).
With that business out of the way and having previously sold other businesses ranging from book wholesalers to educational material suppliers, the Group is now focusing on Smith News, Tuffnells and a small business delivering newspapers and video to over 80 airlines at 115 airports called Dawson Media Direct, DMD.
Since I first bought the CEO and FD who led a value-destroying diversification strategy with its overpriced acquisitions have gone and have been replaced by an impressive new team.
I doubled my holding last week at 40.86p. At that price the company has a MCap £100.5m.
I wrote a detailed set of newsletters on Connect in December, so I’ll not go over that ground again. Here I’ll just report what I picked up at the AGM and a little from a recent webcast made by the directors.
My question: One of the most significant complaints by Tuffnells’ front liners was the lack of contact with senior managers, who they thought did not properly understand day to day operations – it fact, the managers sent out from the Connect Group were ignorant. How are you changing this?
Answer: Firstly, there has
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