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I journeyed from Leicestershire to Swindon on Friday to attend Connect Group’s (LSE:CNCT) annual shareholders’ meeting. It was worth it. I was able to spend a considerable amount of time chatting with directors before and after the meeting, and the formal questions asked in official meeting were both welcomed and answered with as much openness as could be permitted under the unfair disclosure rules.
Detailed newsletters providing a full analysis on Connect were posted only last November (13th – 18th November). These are available for subscribers to read, so today I’ll focus on the AGM questions and answers.
Question: The cost savings at Smiths News are impressive (£6.5m in the year to the end of August). Thank you, Jon (Bunting, Group CEO and head of SN) and the team for those. How are things going this year on that front – do you expect similar savings?
Answer (Jonathan Bunting): Yes, they will be similar.
Question: I’m impressed by the changes in remuneration policy – no bonuses or LTIPs without good returns to shareholders. How confident are you that the directors will receive high performance-related rewards, and therefore shareholders will do well?
Answer (Gary Kennedy, Chair): Our philosophy is to increase the percentage of remuneration related to performance. In the past, there has been huge disappointment to see share price falls following pay outs to directors. We’re trying to get back to the core and increase profits. We are hopeful that directors and shareholders will see good rewards in future.
Question: It’s public knowledge that there is a great deal of staff disaffection at many Tuffnells’ depots – the comments on Glassdoor are excoriating regarding managers. Is progress being made in holding on to good front line operatives by improving managers above them?
(My question borders on the rude in inviting the directors to tell me whether they had “stopped beating their wife’s yet?”, so I was expecting some defensiveness and denial. But there was none of that – to their credit the directors were coolly rational)
Answer (Michael Holt, temporary Executive Chairman of Tuffnells since November. Before becoming a NED of Connect Group he was COO of FedEx Express, Europe. He works 3 days a week on turning around Tuffnells and helping with the “Strategic Review” led by Gary Kennedy – this may lead to a sale of Tuffnells):
You are absolute right about the problem of staff disaffection. To deal with it we have appointed a restructuring director and have brought in new people. There is now consultation with staff going all the way down to the floor. But, admittedly, there are some areas that still need to be addressed.
(I liked the acceptance of the core problem of staff morale – if your people are not rooting for the company then customers will be lost. It’s an issue I raised a few times in various conversations on Friday, and the impression I got was that the directors are genuinely aware of it and are genuinely trying to turn the culture).
Question: Has any more progress been made in bringing down Group debt? Are you still aiming for net debt of between £30m and £40m at the end of FY2021?
Answer (Tony Grace, FD): Yes, progress is being made. Already
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