Connect Share Discussion Threads

[aleman] 25/4/2017 15:57

Given that it is increasingly looking like we are going into recession, most of that surplus will evaporate. The remaining funds will see their deficits expand so those lower company payments planned from 2018 on might not happen. On the other hand, the explosion of deaths due to dementia (now the UK's biggest killer from not being in the top 10 pre-2003) has reduced life expectancies for three consecutive years when they were forecasted to keep rising. This will significantly benefit funding in the longer term when assumptions are changed, if not for reasons we would like.

[fenners66] 25/4/2017 15:52

That seems unfair to me. If you are a responsible employer you will ensure any deficits are made up. But any surplus you can say goodbye to pending the end of the liabilities.

[fenners66] 25/4/2017 15:45

A bit of digging found this:



Why worry about a trapped
surplus?
In the UK, recovering a trapped surplus is slow,
diffi cult and costly.
Slow
– refunds are generally only possible
once all the liabilities have been fully secured;
this is likely to be in many years’ time.
Diffi cult
– trustees often use surplus to de-
risk the investment strategy and scheme
rules can permit or even require trustees to
enhance benefi ts before a surplus is returned
to the sponsor.
Costly
– any refunds are subject to a high tax
rate of 35 per cent, compared to corporation
tax relief on contributions paid to the pension
scheme that may be nil if you’re not paying
corporation tax, or dropping to 20 per cent from
April 2015 if you are paying corporation tax

[edmundshaw] 25/4/2017 15:20

What happens I believe depends on the trust deed. For example, the beneficiaries may get a distribution, or the funds may revert to the employer. But as you say, the trust is unlikely to be wound up any time soon.

[fenners66] 25/4/2017 15:13

Edmund thats where I got it from - the detail I missed was :
Smiths News defined

and Smiths News section of the WH Smith Pension Trust

As I said I guess trust committee will not allow consolidation of the "section" that's in deficit into the trust that's in surplus. Presumably slightly different members interests to protect.
So what happens eventually to the £136m surplus?

All the pensioners die and the trust is left with cash - which then reverts to the company? It may be a long way down the line but can they sell it?

[edmundshaw] 25/4/2017 14:43

fenners, I think you are a bit overly negative.

In the past Connect/Smiths has promised many efficiency savings, and as far as I know has delivered them very well; so I expect they will continue to do so.

I agree parcel services is a wait-and-see.

Education is being sold at a profit, but that is no great shakes. However the loss of profits will be partly offset by reduced interest payments, and of course will also allow more focused management.

Not sure why you are confused by the pensions. Did you read the relevant note, right before "RISKS AND UNCERTAINTIES"? Thre are multiple defined pensions, and the large surplus is trapped in one of them and so of no benefit to the company.

I think this has been a disappointing half, but nothing to panic about, and all in the rather low share price.

[fenners66] 25/4/2017 12:34

Don't get me wrong I'm a holder so, so am I , but we also have to keep a critical eye on what's going on.

[lord gnome] 25/4/2017 12:23

Brokers are clearly a lot more positive than anyone on this board. I will be very happy if they are proved right.

[laffin] 25/4/2017 12:05

Brokers Views Today

...............................OldP NewP
25 Apr 17 Peel Hunt Add 131.00 167.00 167.00 Reiterates
25 Apr 17 Berenberg Buy 131.00 185.00 185.00 Reiterates
25 Apr 17 finnCap Buy 131.00 200.00 200.00 Reiterates
25 Apr 17 Liberum Capital Buy 131.00 170.00 170.00 Reiterates

[lord gnome] 25/4/2017 10:55

BERENBERG CUTS CONNECT GROUP PRICE TARGET TO 175 (185) PENCE – ‘BUY’

Apologies for CAPS - cut and paste job!

[fenners66] 25/4/2017 09:18

Just read through the results and I can see why we have been marked down.
7.5% dividend buys some time to get this turned around.

Expected efficiencies of £10m sounds good - but they have to demonstrate how this is happening.
Parcel services set to get more custom in second half but always jam tomorrow across this type of business.

DX. is another business demonstrating just how difficult it is to make any money.

Sale of education and a reduction in debt should be good - still not declaring whether there will be a profit on disposal here - though we thought there would be. I guess market is also concerned that they put funds to good use, at the moment they are a bit like a premier league manager who's expensive new signings have not really cut it.

Was a little confused about the statement on pensions - same name for pension scheme referred to a surplus of £136m and a deficit. Surely if you have closed defined benefit scheme you cant have defined contribution in deficit.

So that means two defined benefit schemes. I guess the pension committee are involved and are rejecting it, but could they combine 2 schemes and put that surplus to good use?

The impact of National living wage is referred to , but how much of the period does this cover ? Part or all 6 months? If its part then the second half impact will be worse.

Overall I and I guess the markets were looking for much better - we await full year results back to sleep........

[cwa1] 25/4/2017 08:41

I see the '17, '18 dividend forecasts are 9.8p and 10.1p respectively and today they have raised the interim and said this:-

The Group remains committed to providing strong returns for shareholders and the interim dividend of 3.1p reflects our confidence in the ongoing prospects of the Group.

Surely something(the dividend) has to give, or the price has to be re-rated at some point?

[cwa1] 25/4/2017 08:28

I guess it is just a case of how much of it is in the price already-and I think there's a fair amount. That's always assuming there actually IS a viable business in there.

[edmundshaw] 25/4/2017 08:21

On the other hand, the holding back of performance seems pretty well in the price. And as Lord G. says, the cashflow and dividend remain good.

[lord gnome] 25/4/2017 07:57

Not the most exciting or convincing statement I've ever read, but at least management seems to know where they want to go with the company. I think we may be in for a longer period of adjustment and realignment and I can't see the share price doing much until tangible results can be seen. In the meantime, at least I have a very decent dividend to console me. I can't see the share price going much, if any, lower, but I could be wrong.

[prokartace] 18/4/2017 10:18

Well the chart has turned the corner and previous wave movements indicate a climd to 155p. Not much but with the expected dividend that will give 15-16% return. Enough for me so I am going in!

[edmundshaw] 16/4/2017 17:57

Connect Interims on 25th. Next week. So hopefully the sghare price will wake up then...

[edmundshaw] 22/3/2017 17:50

If by the company you mean the BoD, reading management blurb or talking to the directors would be the best source for that.

[anley] 22/3/2017 17:37

So the question is..........how does the company see itself and what does the market want from the enterprise?

[edmundshaw] 20/3/2017 15:25

It spiked to over 240p once, but realistically selling at over anywhere over 200p was a masterstroke. Well done if you did. Of course that was also before the rights issue, and 200p before is equivalent to 178p after the issue. Since then there have been 24.7p in dividends too.

But that is history, I agree. Although I do think we deserve to be back up at that rating, i.e. in today's money at least 180p...

[bscuit] 20/3/2017 14:46

I was talking about the future. I agree divi is good, but heady days of £2.50 odd are long gone and it is again testing my perceived floor of 140.

btw I bought in at 75 some years ago when IC named it income share of the year.

[edmundshaw] 20/3/2017 09:53

Learning the lessons of history can be useful. It is no assurance of the future, but I have been hearing value trap or equivalent for this share for a long time. But the dividends keep rising, the management keeps delivering, and the efficiencies and new business keeps more than making up for the gradual decline in print.

Not having a reliable functioning crystal ball, I rarely try to predict the future...

[rcturner2] 20/3/2017 09:27

edmund, I assume he is talking about the future not the past?

[edmundshaw] 20/3/2017 09:14

It's been a value trap for the last 6 years from 80p. I have been trapped so badly in the value that my current shareholding is paid for from profits taken and dividends. I look forward to being trapped in this value for some time to come! :-)