Berenberg lowers target price on Connect Group
Analysts at Berenberg lowered their target price on Connect Group following the firm's uneasy trading update on Friday morning.
Connect told investors the negative headwinds that led to its profit warning back in June had persisted, resulting in a further miss to its earnings guidance in 2018.
Berenberg now forecast the Tuffnells, Connect's mixed freight business, to make a full year loss after substantial declines in volumes, combined with operating headwinds and cost inflation, resulted in a material deterioration in its performance.
Berenberg said: "As before, we believe it is prudent to wait until Connect has shown evidence of a turnaround in Tuffnells before we model a recovery for this business. We, therefore, forecast that these losses will continue for the coming years."
The broker also highlighted the fact that Connect had accelerated the closure of its Pass My Parcel operations, meaning higher exit costs than previously forecast.
"Accelerating the closure of this business has brought a number of the associated costs forward, resulting in higher losses for the division in 2018," Berenberg noted.
Berenberg dropped its target price on Connect from 40p to 35p and reiterated its 'hold' rating on the firm.