LONDON (Alliance News) - Connect Group PLC said Wednesday it is trading in line with its expectations for the full year, as it posted a reduction in pretax profit for its first half due to costs related to its acquisition of Tuffnells Parcels Express Ltd last December.
The distribution company, formerly known as Smiths News, proposed an interim dividend of 2.9 pence, up from 2.8 pence in the previous year.
Connect posted a pretax profit of GBP14.1 million in the half year to the end of February, reduced from GBP22.1 million a year before, as a rise in revenue to GBP909.9 million from GBP898.7 million was offset by exceptional costs of GBP10 million in costs and amortisation charges related to its purchase of Tuffnells.
Connect acquired next-day delivery service Tuffnells for GBP113.4 million, conducting a GBP55 million rights issue of shares to partly fund the deal.
The business has been used to create a new Parcel Freight division, and Connect said that the division produced a strong early performance, which helped to offset a weaker performance from newspaper and magazines and from the Connect books business.
Newspaper and magazines revenues were down 2%, less than the company's medium-term forecast of 3% to 5%, as magazines saw an "encouraging" improvement in trends during the half year. The company said the division is on track to produce at least GBP5 million in cost savings in the current year.
Connect books revenue was down 3%, which the company attributed to its shift on focusing on "profitable sales".
Revenue in its Education and Care division was up 0.9%, boosted by a strong performance from its primary and early years products.
"The group has made an encouraging start to the year, making strategic progress across all divisions and successfully completing the major acquisition of Tuffnells. Tuffnells represents a significant step in our growth strategy and we are delighted with its initial performance. We have also been investing across the rest of the group to position us for sustainable growth and are pleased with the progress we are making," said Chief Executive Mark Cashmore in a statement.
Shares in Connect are trading up 1.9% at 146.70 pence Wednesday morning.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
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