Compound Income
  • Blog
  • Scores
  • Portfolio
    • Table of Returns
  • Resources
    • Check list
  • About
  • Contact



A Stock Delivering a growing 6% Yield....

22/4/2015

3 Comments

 
...as well as News, Media, Education, Care & Parcels. In this case it is Connect Group (CNCT) which is the former Smiths News business which I have written about in the past. Last time I wrote they had delivered a "broadly in line" up date and I feared this might lead to a few downgrades - which it did, although not to any great extent.

Today they have announced Interim Results for the six months ended 28 February 2015 which they say leaves them on track to meet full year expectations. Comparisons are somewhat clouded by the acquisition of Tuffnells the odd sized parcel distribution business and the associated rights issue. Hence they flag the adjusted figures and 7 associated notes.

The Chief Executive said:
"The Group has made an encouraging start to the year, making strategic progress across all divisions and successfully completing the major acquisition of Tuffnells. Tuffnells represents a significant step in our growth strategy and we are delighted with its initial performance. We have also been investing across the rest of the Group to position us for sustainable growth and are pleased with the progress we are making."

On their preferred underlying basis Revenues and Operating profits were up by 1.2% and 3.3% respectively but earnings (eps) were down
by 5.5% on the prior year, as was expected, by the phasing of Tuffnells post-acquisition profits and associated rights issue shares. On the dividend they increased this by an adjusted 3.6% reflecting their continued confidence in the Group's strong cash generation and future prospects. Talking of cash generation they continued to generate strong free cash flow in the period, delivering £16.0m up £4.1m or 34% on the prior year.

Despite this the balance sheet became more leveraged as a result of the acquisition.
Closing net debt at the end of the period was £157.9m versus £93.0m at August 2014 and £105.0m at February 2014. Debt at the end of the first half year is usually higher than the year end position given the weighting of free cash generation in the second half and higher dividend payment in the first half of the year. They therefore seem confident of paying some of this down in the second half and beyond due to the strong cash flow. On this and coverage etc. they said:

"
Net debt: EBITDA at the end of February 2015 was 1.94x versus 1.4x at August 2014 and 1.6x at February 2014. This remains comfortably within our main covenant ratio of 2.75x and we remain committed to continue to pay down this debt towards our historic leverage ratio."

Aside from that the balance sheet looks pretty weak with negative net assets which is a hangover from their demerger from W H Smiths, but given the nature of the business and the cash flow this is probably OK but will put some off.

Summary & Conclusion.
An in line set of results although difficult to interpret because of the deal and rights issue late last year. However, with the resultant fall in earnings and the 3.6% rise in the dividend being shy of the full year forecast growth 4.9% to 9.17p, this leaves them a lot to do in the second half. As a result I think there could be a further small drift downwards in the forecasts which I don't normally like to see.

Having said that though they do still look cheap, if not great quality operationally and financially. Thus the 8x P/E and 6%+ yield, which is reasonably well covered by earnings and cash flow, should provide some support. There does not however seem enough in these figures to get the market excited or spark a re-rating. Indeed looking at the chart (below) they continue to look a bit soggy and range bound but they are now close to being over sold in the short term. So I wouldn't put you off if you are tempted to buy them for the yield down here - just don't expect much else from them in the short term.

I continue to note the gap on the chart just below 130p so I would continue to watch them to see if they get down there, perhaps in a market shake out, as a better entry point for a trade which might also then offer the chance of a capital gain too. If it does get down there though one would have to check the reasons
as I have highlighted in the past that buying into these declining businesses can be dangerous. So on that bomb shell I'll leave you but as ever do your own research.
Picture
3 Comments
Max
22/4/2015 03:08:33 am

A "growing 6% yield" surely implies a dropping share price? ;)

Reply
Arthur
24/4/2015 12:54:50 pm

Yield rate may grow from increased payout

Reply
Jamie link
22/4/2015 04:16:24 am

It depends on the security of said yield (reasonably well covered by earnings and cash flow and the markets view on the stock. On a one day view it seem the market views it as OK as the shares are up by 3%+ at the time of writing this. Hope this helps?

Reply

Your comment will be posted after it is approved.


Leave a Reply.

    RSS Feed

    Google+

    Archives

    December 2020
    November 2020
    October 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    August 2019
    June 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014

    Categories

    All
    32Red
    Aberdeen Am
    Admin
    A G Barr
    Alliance Pharma
    Alternative Telecoms
    AMEC
    Amino Technologies
    Amlin
    Anglo Pacific
    Asset Allocation
    Auto Trader Group
    BA Systems
    BATS
    Behavioural Finance
    Bellway
    Berendsen
    BHP Billiton
    Bloomsbury Publishing
    Bodycote
    Books
    Bovis Homes
    BREXIT
    Britvic
    Catlin-group
    Central Asia Metals
    Centrica
    Character Group
    Churchill China
    Cineworld
    City Of London Investment Group
    Clarkson
    Commercial Property
    Compound
    Computacenter
    Connect Group
    Croda
    Currencies
    Demographics
    Diageo
    Diploma
    Directors Dealings
    Dividends
    Easyjet
    Economics
    Emerging Markets
    Emis
    Empiric Student Property
    Etfs
    Fairpoint
    Ferguson
    Ferrexpo
    Finsbury Foods
    Food Retailers
    Forterra
    Games Workshop
    Gateley
    Go Compare
    Goid
    Greene King
    GSK
    Hargreaves Services
    Hays
    Headlam
    Hedge Funds
    Hill & Smith
    House Builders
    Howden
    HSBC
    IG Group
    Imperial Tobacco
    Indivor
    Inflation
    Insurance
    Intermediate Capital
    Interserve
    Investec
    Investment Trusts
    It
    ITV
    James Halstead
    Jarvis Investment Management
    JLT
    Jupiter Fund Management
    KCOM
    Kingfisher
    Legal & General
    Lloyds Bank
    Maintel
    Man Group
    Market Timing Indicator
    Market Valuation
    Marston's
    Matchtec
    Media
    Merlin Entertainment
    Micro Focus
    Mining
    Mitie
    Miton Group
    Moenysupermarket
    Mondi
    Moneysupermaket.com
    Music
    National Grid
    N.Brown
    News
    Next
    Nichols
    Norcros
    Oil
    Page Group
    Paypoint
    Pennon
    Persimmon
    Personal Finance
    Pharmaceuticals
    Phoenix Group
    Photo Me
    Photo-Me
    Plus500
    Podcasts
    Polar Capital
    Politics
    Portfolio
    Portmeirion
    Provident Financial
    PZC
    Qinetiq
    Ramsdens Holdings
    Rank Group
    Reckitt Benckiser
    Renewable Energy
    Renew Holdings
    Renishaw
    Research Papers
    Restaurant Group
    Retailers
    RIO
    RM Group
    Rolls Royce
    RPC
    RPS
    Safestore
    Sainsburys
    Savills
    Schroders
    Scores
    SCS Group
    Sell Discipline
    Shareholder Yield
    Share Picks
    Short Interest
    Somero
    Spectris
    Sprue Aegis
    SSE
    Stock Spirits
    S & U Plc
    TalkTalk
    Taptica
    Tax
    Technology
    Telecoms
    Tobacco
    Trading Ideas
    TSB
    TUI
    UK Market Update
    Unilever
    Utilitywise
    Value
    Victrex
    Vodafone
    VP.
    Water Utilities
    WH Smiths
    William Hill
    Wynstay
    XL Media
    XP Power
    Yield
    Zytronic

    googleda4a17cac6d02bb9.html
    File Size: 0 kb
    File Type: html
    Download File

Powered by Create your own unique website with customizable templates.
  • Blog
  • Scores
  • Portfolio
    • Table of Returns
  • Resources
    • Check list
  • About
  • Contact