More than a quarter of the group's share price disappeared after it released two Trading Updates this morning.
Companies: Connect Group
Connect Group (LON: CNCT), the name behind Smiths News and Tufnells has seen its share price dive today after it issued two RNS statements, including a Trading Update for the 19 weeks to January 13.
Shares were down 28% on Monday morning as it announced Group Revenues had slipped 3.5% year to date, "with the anticipated decline of newspaper and magazine sales more than offsetting revenue growth in Mixed Freight and Pass My Parcel (PMP)".
Its News Distribution and Media division saw Revenues decline 4.1% whilst Mixed Freight saw marginal Revenue growth of 1.3%
The update also said a combination of delays in contracts, weaker margins and slower than anticipated realisation of cost reductions meant:
"...[we] now expect full-year adjusted profit before tax for the continuing operations to be in the range of £42m to £45m."
Management also released a second Trading Update today saying it was having troubles regarding the sale of its Books Division, which was first announced in December.
The second RNS statement said:
The disposal was conditional only on anti-trust merger approval from the German Federal Cartel Office which was subsequently received (as expected) on 17 January 2018. As a result, the SPA is now unconditional and under its terms completion is obliged to occur by 31 January 2018 at the latest.
Despite this, Connect Group has been notified by a letter received on Sunday 21 January 2018 stating, inter alia, that Aurelius Omega Ltd (the purchasing vehicle) "can no longer complete on the current terms (as we, the Directors of Aurelius Omega Ltd, can see no way of financing this transaction)". Connect Group has sought urgently to clarify Aurelius' position, including the legal basis, if any, upon which it purports not to complete on the transaction and we have reiterated in writing that Aurelius is legally obliged to complete the transaction on or before 31 January 2018.
Today's dive in price means the stock trades at roughly half that just 12 months ago. Consensus forecasts Revenues to continue to decline over the coming years while it trades on a forecast earnings multiple of 6x, half the industry median of 13x.
