Connect Share Discussion Threads

[elpirata] 13/6/2018 20:04

Berenberg:

Connect Group has released a trading update this morning
stating that a number of negative headwinds have transpired in the second half, resulting in a significant miss to the company’s earnings guidance for 2018E. The major components of this are a failed recovery in the Mixed
Freight (Tuffnells) business, greater-than-expected losses in Pass My Parcel (PMP) and disappointing volumes of World Cup stickers sales. As a result of this announcement, we reduce our 2018-20E EPS forecasts by c30%. With lower earnings and reduced cash generation, the company has decided to substantially reduce its dividend payment. We assume an 80% cut to the dividend going forward resulting in a full-year dividend of 4.4p in FY 2018E and 2p in FY 2019/20E. At the same time, management changes have been announced, with CEO Mark Cashmore to leave the business once the board has found a successor and Tony Grace to join the group as interim CFO. 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. We
downgrade to Hold and reduce our price target to 40p.

Peel Hunt;

PHe FY2018E PBT down 11% yoy to £42.6m (EPS 13.8p). On the basis of the statement, there will be a £10m downgrade to forecasts at the minimum resulting in FY2018E PBT of £32.6m at most (EPS 10.6p). The downgrade could be in the region of £15m, which would result in FY2018E PBT of £27.6m (EPS 8.9p).

[speedsgh] 13/6/2018 20:03

According to @SharesMagDan (Dan Coatsworth, editor of Shares Magazine), Berenberg are forecasting DPS 2018: 4.44p, 2019: 2.00p, 2020: 2.00p

[runthejoules] 13/6/2018 20:00

Arnie voice: 'CNCT IS EX-DIVIDEND... FOREVER!!!'

Gallows humour. Bought £2.5k for my mum at about 110p and haven't sold yet, value trap idiot.

[aleman] 13/6/2018 19:42

Fangorn2
13 Jun '18 - 18:46 - 1140 of 1141

"the Group confirms that the Full Year Dividend for FY2018 will at a minimum be substantially reduced from that paid in FY2017."

ie Best case scenario: A substantial cut - probably 75% cut
ie Worst case scenario: Divi cut 100% to nada, nothing.

Not bloody difficult people.

Basic English.

FY2018 dividend can't be cut to zero or even 75%. It's already gone ex-dividend to the tune of 3.1p. That's part of what makes it a bit odd and perhaps ambiguous. I wonder if they meant to say final dividend. Not quite basic English.

I agree next year could see zero.



nigelpm - Finding someone who agrees with you does not mean you are not mad. We could all be mad!

[nigelpm] 13/6/2018 18:53

Phew! Thank christ for that. Thought I was going mad for a sec.

[fangorn2] 13/6/2018 18:46

Goodness me.

Nigel is spot on.

"The Full Year Dividend for FY2018 will be substantially reduced from that paid in FY2017"

Substantially reduced. Read at least a 75% cut on basis of this sentence above alone.


and :

"the Group confirms that the Full Year Dividend for FY2018 will at a minimum be substantially reduced from that paid in FY2017."

ie Best case scenario: A substantial cut - probably 75% cut
ie Worst case scenario: Divi cut 100% to nada, nothing.

Not bloody difficult people.

Basic English.

They've left some flexibility from base case scenario of a massive cut, to completely abolishing it, so as to give new management the choice to

a)Cut it substantially
b)Cut it completely.

New management will cut it completely.

[nigelpm] 13/6/2018 17:45

That's exactly what the first assumes otherwise they'd have said something different.

[aleman] 13/6/2018 17:17

Yes, it is. They should have stuck with that. I'd have assumed no final with that but the second ambiguous statement makes me wonder what meaning they were intending to get across, as if they might still consider some type of small final. I'm guessing not, though.

[nigelpm] 13/6/2018 16:39

Aleman,

but you were provided with much clearer wording earlier :

"The Full Year Dividend for FY2018 will be substantially reduced from that paid in FY2017"

That is crystal clear.

I don't understand why you think in totality it's ambiguous!

[dogwalker] 13/6/2018 15:15

'At a minimum' the divi will be substantially reduced. Got that.
What about 'at a maximum'? Perhaps it will be substantially increased !
Never mind the commas, it's the missing words that count.
Onwards & upwards .

[speedsgh] 13/6/2018 13:53

Early Distribution comprises news distribution (Smiths News), media (DMD, serving the needs of airlines & travel points) & the now-defunct click-&-collect services (Pass My Parcel). Ignoring the latter, Smiths News is the main profitable operation which is in long term decline and that has been subsidising the ex-CEO's failed diversification strategy. It is therefore concerning to see negatives creeping in with respect to this division...

"Total revenue in Early Distribution (comprising Smiths News, PMP and DMD) was £1,026m, a decrease of 2.9% (FY2017: £1,056m).

Sales of core newspapers and magazines remain in line with expectations; however, the benefit of World Cup related product is currently weaker than anticipated."

How thin are profit margins here? And how much can future revenues from this division be relied upon? What happens if current contracts are not awarded to CNCT when they come up for renewal? AFAICS there are potential risks to this core business too.

[greyingsurfer] 13/6/2018 13:50

If you intend to stop paying a dividend, why not just say it? Maybe they are leaving that decision to the new CEO/management teamExactly, they are leaving the options as wide as they can, makes good sense.

[nigelpm] 13/6/2018 13:41

Aleman,

What part of this in the RNS isn't clear :

"The Full Year Dividend for FY2018 will be substantially reduced from that paid in FY2017"

and :

"the Group confirms that the Full Year Dividend for FY2018 will at a minimum be substantially reduced from that paid in FY2017."

[aleman] 13/6/2018 13:38

smithless - 1.47 was indicated at the interims. Where do you get 1.8 from? And they just agreed new loan facilities of £175m against £83m debt. That suggests some headroom in what banks thought was acceptable, even if EBITDA falls some.

[lord gnome] 13/6/2018 13:05

Perhaps they might now try to sell what’s left of Tufnell to DX. Isn’t that where most of Tufnell’s management went when they were sacked by Cashmore et al? They could probably get it for £1.

[lonrho] 13/6/2018 11:56

Ft alphaville market live not exactly positive just now but value depends on sorting out tuffnels as it can't be allowed to become the next DX.

[smithless] 13/6/2018 11:54

Aleman - Tuffnells IHMO will be the next casualty once new CEO looks under the bonnet and will need a restructure or exit and will have consequences for its main covenant ratio of 2.75x EBITDA - currently 1.8x at the interims. The dividend will have to be slashed. The yield is telling you that and to payout would be complete incompetence on top of incompetence

[edmundshaw] 13/6/2018 11:54

Aleman is right. A substantial reduction from 2017 means at 27p we will not be on a 38% yield. Who'd have thought it? The wording tells us almost nothing. It could be 6p (unlikely) or nowt or anything in between.

[citytrader66] 13/6/2018 11:50

pull back to c.24p most likely. from there maybe hold or go lower IMO.

[aleman] 13/6/2018 11:33

You took the comma out, nigelpm! With the comma, a substantial reduction ought to mean the lowest of the range, so possibly higher than that. Yet that somehow does not fit the tone so I'm not saying you are wrong. I'm saying the comma in the phraseology chosen makes it ambiguous.

[the_boy_plunger] 13/6/2018 11:30

orders were not filled to ordinary joe......that would be silly, as ud make money
pre-filled collapse?!

[citytrader66] 13/6/2018 11:28

i got a quote at 20p, clicked to buy but it didn't get actioned. sods law!
next time i'll try setting a limit order and see if that works.