Try as it might logistics group Connect (CNCT) cannot escape its exposure to a rapidly declining newspaper and magazine distribution market. As it serves up yet another profit warning today the shares sink 10% to 33.5p.

This is only slightly above the all-time lows seen in mid-August. Since it was demerged from newsagent WH Smith (SMWH) the company, previously known as Smiths News before a rebranding in 2014, has lost 75% of its value while WH Smith is up 473% over the same time-frame.

Fundamental to the issues facing the group has been the decline in readership for print media as readers go online instead.

Attempts to diversify into other parts of the delivery market have seen mixed success at best with the company closing its Pass My Parcel division and the associated Parcel Shop network this year.

ONEROUS CONTRACTS

Arguably the one bit of good news is that the Pass My Parcel closure has gone off relatively smoothly, allowing the company to exit some ‘onerous contracts’.

Elsewhere, weak magazine sales, the sale of less World Cup stickers and albums this summer than during previous tournaments and challenging conditions for its parcel freight business Tuffnells are a toxic mix.

Not forgetting a £1.5m fine for Tufnells in relation to a fatality at its Brierley Hill depot in January 2016 and further provisions to cover a tax issue as well as expected restructuring costs.

New chief executive Jos Opdeweegh is conducting a strategic review of the group. Clearly, he has plenty on his plate as he looks to turn things around. He will get his first opportunity to address the market when the company’s results for the 12 months to 31 August are announced on 6 November.


Issue Date: 14 Sep 2018