Connect (CNCT)

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204
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A UK leading specialist distributor.

26-Oct-2017 – 90.75p – £230.3m

Preliminary Results For The Year Ended August 2017 – Looks like a miss by about 5 – 10% here. Is this built into the price for this beaten down company?

There’s quite a lot to like and even more so if this gets cheaper – It’s on a PER of 5.51, there’s a 10% Dividend (well covered) and a sector busting ROCE of 26.5%. With Net Debt reduced from £141.7m to £82.1m it’s still quite high (say 35% of Market Cap). Is this what’s holding it back? It’s holding me back at present but 10% lower this could be worth an initial nibble – Perhaps!

22-Jan-2018 – 105.6p – £261.5m – PER 6.57

Trading Update For The 19 Weeks To 13-Jan-2018 – Revenue down 3.5% to £564.5m, decline of newspaper and magazine sales greater than the revenue growth in Mixed Freight and Pass My Parcel (PMP). Expects FY adjusted PBT to be in the range of £42m to £45m – Dividend expectations underpinned by a continued good cash performance. PMP Revenue is up 222% YTD (£2.5m) but still likely to incur the same level of losses as last year. 2 year £15m targeted efficiencies to be greater in year 2.

I hold here and whilst this update is uninspiring, I will retain faith whilst that Dividend yield (almost 10%) doesn’t look like it’s in danger. Yes the Net Debt concerns me too! Just spotted this which is a concern – Update on the Disposal of the Books division to Aurelius Equity Opportunities. Will have to keep an eye on the market reaction this morning and hopefully some clarification on this disposal.

Subsequent Note: With the price down over 20% on this update/news I sold this morning, Neutral for now.

1-May-2018 – 60p – £148.6m – PER 4.37

Unaudited Interim Results For The 12 Months To End February 2018 – Nothing much to impress here except that Interim Dividend which is maintained (3.1p).

The FY Dividend currently equates to 15%+ and Net Debt (although significantly reduced) is still well over 50% of the current Market Cap. I can’t get off the fence here! In a few years time will this be trading at a much higher price yielding about 50% of my original investment amount in annual income? Or, will it still be trading around these levels, still in debt yielding a few percent. I just have no idea or even a particular bias – I am Neutral.

12-Jun-2018 – 52p – £128.8m – PER 3.78

Trading Update From 1st May To 2 June 2018 – Ouch! Performance has been extremely disappointing and the company has materially reduced its expectations for FY PBT, decided to close Pass My Parcel and wind down the associated Parcel Shop network, FY Dividend will be substantially reduced – Group is announcing senior executive changes.

I remain Neutral here as it seems I have about as much idea what is happening as the previous Execs did.

14-Sep-2018 – 37p – £91.6m – PER 3.24

Trading Update For Q1 Of The Financial Year To End August 2018 – The bad news just continues, even worse, an “organisation review” is now in progress, that’s a good idea!

This is going on my Avoid list for now and I will cease coverage until I see some positive news.

6-Nov-2018 – 37.35p – £92.5m – PER 3.36

Unaudited Preliminary Results For The 12 Months To End August 2018 – Revenue down -3.8%, PBT and EPS both down circa -40% – Statutory loss reported -£35.5m. No Final Dividend meaning the FY Dividend is down a total of -68.4% and Net Debt stands at £83.4m.

I said I would cease coverage here as this remains on my Avoid list – Just had a bit of spare time this morning so included an update only for that reason.

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