14 Jul 2020 07:00
This announcement contains inside information
14 July 2020
Connect Group PLC
("the Company" or "the Group")
Trading Update
Connect Group is pleased to present a year-to-date trading update for the 44 week period to 4 July 2020.
Trading Update
Core trading remains resilient despite the considerable disruption to the UK economy at present. Thanks to the outstanding efforts of our colleagues we have successfully maintained service levels to our customers and to the general public, whilst continuing at all times to safeguard the health, safety and wellbeing of colleagues and customers.
As previously reported in our interim financial results published on 13 May 2020, during the first six weeks following the UK Government's introduction of restrictions on social movement on 23 March 2020, demand for newspapers and magazines was adversely impacted by 25%, as a consequence of restrictions on movement and the temporary closure of approximately 10% of the retailers we supply (including high street and travel outlets).
Since then, with the consistent and gradual reduction in the Covid-19 lockdown restrictions and as consumer shopping behaviours have adjusted, we have seen a marked increase in retail store outlets re-opening, such that, at this time, less than 5% of our customers' stores, predominantly travel and leisure locations, remain closed. As a result, newspaper sales in the 15 week period to 4 July 2020 have been 12% lower than the equivalent period pre-lockdown. Magazine sales have similarly recovered, albeit more gradually, due in part to the continuing closure until mid-June 2020 of the majority of our largest magazine retailer's stores. Magazine sales in the same 15 week period to 4 July 2020 consequently are 18% lower to the equivalent period pre lockdown. We expect continued improvement in magazine sales during July and August 2020 as retailers re-stock to current content and copy.
Sales at Smiths News for the period 1 September 2019 to 4 July 2020 were £927m (2019: £1,012m) a decrease of 8.4%. During the same period, Smiths News has continued to deliver operational cost reductions with planned cost savings expected to be in excess of £5m in the financial year and further operational cost savings delivered in response to the reduction in volumes during the Covid-19 lockdown period. Additionally, the Company has identified a further £4m per annum of savings from the re-organisation of the operating structure of the business.
As previously reported, the Company has a £175m committed bank facility, comprising a £50m term facility and a £125m revolving credit facility. Despite the impact of the Covid-19 lockdown on trading, the Company has continued to operate well within the headroom under its current banking facilities. The facility is due to expire on 31 January 2021 and we continue to expect to complete the refinancing during the autumn of 2020.
Full Year Expectations
During the Covid-19 lockdown the Company has continued to run a range of scenarios for full year trading for the purposes of monitoring financial performance and business planning. Given the performance of the business during lockdown and the improved performance as a result of the gradual easing of restrictions, the Board now expects full year Continuing Adjusted EBITDA of between £35m to £37.5m (pre-IFRS16 lease adjustments) and Continuing Adjusted Profit Before Tax of between £26m and £28m (pre-IFRS16 lease adjustments) for FY2020. Financial guidance within this statement assumes no further material COVID-19 lockdown measures introduced in the UK prior to the Company's 52 week year end to 29 August 2020.
Jonathan Bunting, Chief Executive Officer, commented:
"In what has been unprecedented times for everyone, I am overwhelmed by the dedication and unstinting support of our colleagues which, together with the hard work of our supply chain partners, has ensured that we have continued to provide Newspapers and Magazines to every community, every day. Our trading performance is a pleasingly resilient one, and we have also taken the right action to prepare the business for the year ahead. I look forward to presenting our full year results in November 2020."
Enquiries:
Connect Group PLC
Jonathan Bunting, Chief Executive Officer
Tony Grace, Chief Financial Officer
Investor.relations@connectgroupplc.com
www.connectgroupplc.com
Buchanan (Financial PR)
Richard Oldworth / Jamie Hooper
connect@buchanan.uk.com
www.buchanan.uk.com
Person responsible for arranging release of this announcement:
Stuart Marriner, General Counsel & Company Secretary
Connect Group PLC
Rowan House
Cherry Orchard North
Kembrey Park
Swindon
SN2 8UH
email: cosec@connectgroupplc.com
LEI: 2138004O33ONVOOQXB02
About the Company
Smiths News is the UK's largest newspaper and magazine wholesaling business with an approximate 55 per cent. market share. It distributes newspapers and magazines on behalf of the major national and regional publishers, delivering to approximately 25,000 customers across England and Wales on a daily basis. The speed of turnaround in the UK and density of Smiths News' coverage is critical to one of the world's fastest physical supply chains.