(Correcting that Michael Holt joined Connect Group as a non-executive director in October 2018.)
(Alliance News) - Distributor Connect Group PLC changed its leadership on Wednesday as it begins a review of one of its two main businesses.
Chief Executive Jos Opdeweegh departed with effect from Tuesday. He has been replaced on an interim basis by Jon Bunting, the head of the Smiths News subsidiary.
This comes as Connect begins a strategic review of its other main unit, Tuffnells, as this business continues to struggle due to legacy problems as well as lower volumes.
Connect said it will review Bunting's interim position once the review of Tuffnells is finished. He will remain head of Smiths News whilst also leading the group.
The firm also has hired a new executive chair for Tuffnells, Michael Holt, who became a non-executive director on the Connect board in October 2018. He is a former chief operating officer for Fedex Express Europe.
Smiths News is the UK's largest distributor of newspapers and magazines, while Tuffnells is a distributor of mixed and irregular freight, such as bulky home furnishings and automotive parts.
"The group has made significant progress against many of our recovery targets but has, unfortunately, fallen short in 2019 in our ambition for stakeholders. As we look to reinvigorate our recovery plans we have announced a strategic review of Tuffnells and some associated changes at executive and board level," commented Connect Chair Gary Kennedy.
"We have a programme of immediate activity to progress in Tuffnells and the combination of clear priorities and additional support will ensure we maintain momentum. Our actions to address underperformance will take place in tandem with the overall strategic review process, which I will lead, keeping shareholder value firmly in our sights," he continued.
The Tuffnells review comes as Connect reported a widened loss for the year to August 31 of GBP37.6 million from GBP35.5 million the year prior. Smiths News was strong during the year, but Tuffnells did poorly.
The continued loss comes from a GBP45.5 million impairment to goodwill, tangible, and intangible assets of Tuffnells. On an adjusted basis, excluding this, Connect was in profit, but pretax profit fell 18% to GBP23.2 million.
Connect's revenue declined by 4.3% to GBP1.47 billion. The dividend for the year has been cut 68% to 1.0 pence from 3.1p.
"In a challenging year, we have been resolute in pursuing a recovery plan that balanced improvements to profitability, with necessary investment and prudent capital management. The revitalised performance of Smiths News and the progress with our central restructure have established a solid foundation for the group's medium term recovery," said Chair Kennedy.
"The turnaround of Tuffnells remains our most pressing challenge. The strategic review of that business and the management changes that we have announced today reflects our focus on delivering improvement and removing its drag on overall group performance."
Shares were 3.8% lower on Wednesday morning in London at a price of 28.29p each. Five years ago, they were worth 190p.
By George Collard; georgecollard@alliancenews.com
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