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Connect Group operates a diverse portfolio of businesses leading distribution specialists in carefully chosen markets. With a combined revenue of £1.8bn, we employ 4,500 staff and operate in the UK and worldwide.

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Connect Group Fundamentals

Berenberg comment:
"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."

Smiths News agrees new long term contract with News UK

Connect Group is pleased to announce that, following competitive tender, it has successfully renewed its long term contract with News UK, confirming Smiths News' current distribution territories within the United Kingdom through to July 2024. The contract secures revenues of c£200m p.a. (at current values).

News UK is the United Kingdom's market leading national newspaper publisher with titles including The Sun, The Times and Sunday Times. This long term contract is an endorsement of Smiths News' leading service offer and efficient route to market for both publishers and retailers.

Mark Cashmore, Chief Executive Officer commented:

"We are delighted to confirm this significant publisher agreement for our newspaper and magazine distribution business. Visibility of future revenues underpins the ability of Smiths News to continue to deliver strong profits and cash. The contract is good news for the supply chain as a whole and positions the Group well to secure a similar outcome with our other publisher partners".

Peel Hunt Hold 31.53 - - Reiterates

Trading Update

Overall performance

In summary, trading in the period has seen a continuation of the challenging trends experienced throughout the year; as a result, the Group expects its full year trading performance to be below expectations.

Berenberg Hold 33.45 40.00 35.00 Downgrades