Connect Share Discussion Threads

[lord gnome] 02/2/2018 11:45

Not currently holding, but watching this debacle from the sidelines. The problem with CNCT is that its core business is gradually dying. Its various attempts at diversification to achieve growth in new areas have all failed miserably or are at a critical investment / loss-making phase in their development e.g. pass my parcel. In the meantime there is no good news coming out of the company. No wonder the share rice is vanishing before our eyes - give me a good reason to buy? The market is screaming 'dividend cut' and this is the only thing that has sustained CNCT for some time.
Where does it go from here? I haven't clue, but I am glad I am not holding just at this moment. No schadenfreude here by the way. I sold out at a thumping loss after the share price had dropped from 160 to 120.

[speedsgh] 02/2/2018 11:42

From Annual Report 2017 -

[pg18] Books division’s carrying value was written down to a fair value less cost to sell of £15.0m when it became classified as held for sale on 31 August 2017.

The decision to dispose of the Books division followed a strategic review, which determined it was no longer core to the Group’s future direction. We are currently taking steps to find a purchaser who can provide the necessary focus and investment to take the business forward. Connect Books is a leading player in its market with strengths and prospects that are not dependent on ownership by the Group. Although potentially unsettling for colleagues in the short term, we believe that being transparent in our intentions is in the best interests of all stakeholders. Meanwhile, we are grateful for the continued efforts and professionalism of colleagues in the business...

[pg20] ... The Statutory continuing & discontinued results are impacted by:... the Board’s decision to sell the Books division with amortisation and impairment of acquired intangibles charges of £11.2m (FY16: £2.9m);...

[pg22] ... Reorganisation/other costs of £0.3m (FY16: £1.1m) relates to legal and restructuring costs incurred in the Books division...

[pg70] Independent Auditor’s report on the Valuation of the Connect Books division and the presentation of the disposal group

[pg98] Discontinued Operations
On 30 June 2017 the Education & Care division was sold (refer to Note 12 for detail). The results of this division are therefore disclosed as discontinued. The Books division was classified as held for sale on 31 August 2017 as the Group is actively marketing the division for sale and disposal is expected to be completed within a year. As such the results of the Books division are also classified as discontinued.

Profit from Discontinued Operations 2017: £1.0m (2016: £8.7m)

[turbocharge] 02/2/2018 11:42

About to top up with 3,333 shares. Don't stop me...

[elpirata] 02/2/2018 11:26

in view of that Aurelius statement and the share price volatility cnct should issue a response rns asap idf they dont its telling as far as im concerned

[baracuda2] 02/2/2018 11:26

Total over reaction as usual, I've bought more, seems an ideal opportunity to buy while everyone sells. Madness!

[aleman] 02/2/2018 11:23

Shares fallen from 110p to 65p - for a one month fall in EBIT at the breakeven books division might just be down to snow disruption up North. The rest of the business is still expecting 14p earnings. Doesn't a p/e of 4.7 already cover the uncertainties?

[cc2014] 02/2/2018 11:20

Fascinating to watch from the sidelines. Bizarre even. Even if they have to carry on running books for a long term I seem to remember from some statement it made a £0.1m loss last year. As Eastbourne says it's a small part of the business and even if the loss increased to say £2m that's pretty much irrelevant in terms of this companies EBITDA.

However, someone is trying really hard to keep the price up on L2. Huge buy orders loaded the like of which you never see on this stock. I'm surprised there's selling still going on at this price but it seems there is.

Is this a golden opportunity as someone sells out at a bargain price or is there something we don't know about going on. For sure the performance of books didn't just deteriorate in one month. (but it was December figures - I assume maybe 30% of the years turnover is done in that one month and if December ain't good it doesn't bode well in long term).

I don't know. At the moment it's risk off with any company with any gearing. I don't think the modern analyst knows how to read a set of accounts and therefore share prices are becoming somewhat irrational.

[woodsman2004] 02/2/2018 11:12

Good point danieldruff.

Long term holder here trying not to get spooked, even topped up the other day. The book division is a tiddly part of the business. The rationale for holding this stock is that as the traditional business gradually winds down the cash will be returned to shareholders in increasing lumps in the likely event that that they struggle to find new interest places to invest it.

This tiny deal seems almost irrelevant but as another posters thinks, it looks like someone is trying to drip offload their stake.

[danieldruff2] 02/2/2018 11:07

It is silly. If the sale had gone ahead and say they used the cash to reduce net debt from 82 to 72 million, how would the share price respond? Not a jot I suspect. But the fact the sale may not happen causes a massive devaluation of the whole business...

I think the market for this share is a bit concussed with all the bits of bad news that have come out recently, though if they dropped pass my parcel and reduced the value of books to zero they'd be more or less the same business as was valued double this not too long ago!

[eastbourne1982] 02/2/2018 11:01

Surely the books element is a small part of the business, on the face of it the share price movement is ridiculous.

[mister md] 02/2/2018 11:01

Closed my trade at 73p yesterday and took a loss on this one

Somebody on i i i site has posted this today:

"Munich/London February 1, 2018 – Aurelius Omega Limited (“AOL”), a group company of AURELIUS Equity Opportunities SE & Co. KGaA (ISIN DE000A0JK2A8) refers to the proposed acquisition of the books division of Connect Group PLC (“Connect Books”) pursuant to a share purchase agreement dated 20 December 2017.

Very shortly after signing of the transaction, we were informed that there was a severe under-performance of the Connect Books business for the month of December 2017, which led to a significant decrease in forecasted EBIT for the financial year 2017/2018. This was a marked deviation from the forecasts provided to us by Connect Group before signing of the transaction. As a result of this change, our banking partners confirmed that they could no longer provide financing for the proposed acquisition.

We have made several attempts to find a mutually satisfactory solution with Connect Group and the banking partners, but it now appears unlikely that the transaction will proceed."

[cc2014] 02/2/2018 10:40

What's surprising is Aurelius have published their reason. And if it's not true the lawyers will slaughter them. So, there must be something in it.

I have closed my trade and it was pretty scary as I was on direct access CFD's. I only had 22,000 shares, some from 75 and some from 73.4. I closed around two thirds at 72 and as soon as I took out the volume there a load of stops triggered and immediately the 50k support at 70 got pulled and turned out to be fake. Rest gone as well at not a great price but significantly better than it is now.

Tbh I would happily buy some real shares at this price and hold them long term but the Aurelius situation worries me. Not about them pulling out as the lawyers will sort that, but that they saw something they didn't like albeit very belatedly.

The losses from the book side should be in the run rate already so that should leave the dividend secure but if there really is a significant deterioration in the book side then their profits fall, which I would argue is now partially or fully in the price. Nevertheless the sells still keep coming like someone is trying unsuccessfully to drip them into the market.

Price is now 65.8-66.0 as I write with the sells coming in larger quantities.

Is it a bargain or is there a huge underlying problem in books we don't know about?

[nigelpm] 02/2/2018 10:40

I'd ignore the dividend at this point - it's meaningless - cash flow should still be strong though.

[retsius] 02/2/2018 10:26

Now yielding over 14%(gulp!)
Does anyone have any figures for the Book Division? Did it make any profit over the past three years?
R.

[smithless] 02/2/2018 10:18

Not a holder, but has been on wishlist. Quite an accusation Aurelius are making and the silence from Connect's management is not helping the share price. Looks interesting from a cash flow perspective, but the insane dividend yield is telling and more cash should be used to pay down debt or do something more useful with it.

[zimbtrader] 01/2/2018 18:04

Lawyers will just love getting stuck in here and lawyers never lose personally. I see this getting ugly. And expensive. Exit time?

[nigelpm] 01/2/2018 17:53

Who enters into SAP agreement just on forecasts?

This is somewhat different I'd argue. If assumptions and trading really did deteriorate that much in a couple of weeks I'd be amazed - I suspect their concern is that the numbers provided to them weren't accurate.

But I'm merely surmising at this point.

[nigelpm] 01/2/2018 17:43

Very shortly after signing of the transaction, we were informed that there was a severe under-performance of the Connect Books business for the month of December 2017, which led to a significant decrease in forecasted EBIT for the financial year 2017/2018. This was a marked deviation from the forecasts provided to us by Connect Group before signing of the transaction. As a result of this change, our banking partners confirmed that they could no longer provide financing for the proposed acquisition.

Lawyers will be all over this part - what assumptions were behind the forecasts and were these reasonable? Why didn't the financial due diligence pick this up? Was it genuinely a marked change within a couple of weeks?

Wow - not great.

[nigelpm] 01/2/2018 17:40

Ouch - that doesn't bode well at all - I now understand why the share price tanked.

[smithless] 01/2/2018 17:09

Who enters into SAP agreement just on forecasts? One month's slippage hmm. Sounds like Aurelius got cold feet and is trying to wriggle out. Unless Aurelius put an opt-out clause in the SAP if Dec sale were under x, I would think under contact law it has a very weak case. Small beer overall, but annoying

[speedsgh] 01/2/2018 16:14

TurboCharge - 1 Feb '18 - 14:14 - 772 of 773
Dodgy Aurelius

or dodgy Connect Group? Time will doubtless tell.

[turbocharge] 01/2/2018 14:14

Dodgy Aurelius

[elpirata] 01/2/2018 12:09

one month underperformance? doesnt stack up (in my book)

[rcturner2] 01/2/2018 12:03

I agree, seems very odd.