GLEN ARNOLD INVESTMENTS
  • About
  • Henry Spain
  • Books
    • My Books
    • Other Books
  • Blog
  • Portfolio
    • Buffett-style
    • Modified price earnings ratio
    • Net Current Asset Value
  • Resources
    • glossary of investment terms >
      • A - B
      • C
      • D - E
      • F - G
      • H - I - J - K
      • L - M - N
      • O - P
      • Q - R
      • S
      • T - U - V - W - Y - Z
    • TOP 10 TIPS FOR INVESTORS

Connect Group – The Smiths News business

25/3/2020

0 Comments

 
Connect Group’s (LSE:CNCT) Smiths News produces profits and lots of cash flow year after year because it is a duopolist (alongside Menzies) delivering newspapers and magazines to shops.  The duopolists tend to stick to their own territories when allocating their vans – it is pointless having two rivals vans passing each other in rural Norfolk for example, so either SN or M will take that contract.

A barrier deterring entry to the newspaper distribution business: A potential entrant would have to win five-year contracts from the major publishers on operating margins of around 3% and then organise a fleet of vans, with drivers and sorting depots. All the while, SN and M, with their efficiencies and experience, will be breathing down their necks and constantly undercutting on price.

Connect’s Dawson Media Direct, DMD, which supplies printed and digital media to airlines and travel points in the UK and worldwide, has recently suffered after losing contracts because some airlines switched to electronic newspapers.

In the year to the end of August DMD’s revenue and income, for the first time, are subsumed within Smiths News numbers.  This is to be expected given that DMD is now quite small and engaged in media distribution.

Smiths News

Smiths News has a declining turnover because the volume of newspapers and magazines bought in the UK has fallen and is expected to continue to fall. Offsetting this are cover price rises, but nonetheless SN’s revenue has dropped by 3% - 5% per year – see table.  This pattern has severely disturbed Mr Market – why buy into a business with falling sales?

The pattern of sales also bothered Connect’s leadership team over the past decade.  It bothered them so much they thought it a good idea to go out and spend ​………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
 

0 Comments



Leave a Reply.

    Picture

    Glen Arnold

    I'm a full-time investor running my portfolio. I invest other people's money into the same shares I hold under the Managed Portfolio Service at Henry Spain. Each of my client's individual accounts is invested in roughly the same proportions as my "Model Portfolio" for which we charge 1.2% + VAT per year. If you would like to join us contact Jackie.Tran@henryspain.co.uk

     investing is about making the right decisions, not many decisions.

    Categories

    All
    Berkshire Hathaway (NYSE:BRK.A)
    Caffyns
    Capital And Counties
    Character Group
    Charlie Munger
    Connect Group
    Daejan-lsedjan
    Dewhurst-lsedwhta
    Highcroft
    Investment-ideas
    Investment Philosophy
    John Templeton
    J Smart
    McCarthy And Stone
    MS International
    Orchard Funding
    Samuel Heath
    Tandem
    TClarke (LSE:CTO)
    Town Centre Securities
    Wynnstay

    Archives

    May 2023
    April 2023
    March 2023
    February 2023
    January 2023
    December 2022
    October 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020

    RSS Feed

In the short-run, the market is a voting machine – reflecting a voter-registration test that requires only money, not intelligence or emotional stability – but in the long-run, the market is a weighing machine.  Benjamin Graham




  • About
  • Henry Spain
  • Books
    • My Books
    • Other Books
  • Blog
  • Portfolio
    • Buffett-style
    • Modified price earnings ratio
    • Net Current Asset Value
  • Resources
    • glossary of investment terms >
      • A - B
      • C
      • D - E
      • F - G
      • H - I - J - K
      • L - M - N
      • O - P
      • Q - R
      • S
      • T - U - V - W - Y - Z
    • TOP 10 TIPS FOR INVESTORS