Berenberg upgrades Connect Group to 'buy'

Berenberg said Connect's update showed that the business had been resilient throughout the Covid-19 crisis and that its trading performance was better than both it and perhaps even the market had expected, given how its shares had fallen off 50% since 1 January.

The German bank highlighted that revenue was only down 8% year-to-date, the cost saving of roughly £9m was higher than expected and that the company had reinstated guidance and was now eyeing adjusted pre-tax profits of £26m-28m.

Berenberg said the reinstated guidance and Connect's disposal of Tuffnells were the key drivers for its updated numbers on the group, which saw the analysts raise their target price on the firm from 15p to 27p.

While the analysts acknowledged that risks remained, they also believed that the company had shown the quality of its business.

"If management can refinance the debt by January 2021 (we believe this is likely) and deliver our full-year August 2021 earnings, we think shares look exceptionally cheap, especially on a free cash flow basis."