Rm Regulatory News (RM.)

This announcement contains inside information

Connect Group PLC

('Connect Group' or 'the Group')

Disposal of Education & Care division to RM plc for £64.4m enterprise value

Connect Group PLC, a leading specialist distributor, announces that it has signed an agreement with RM plc ("RM") to dispose of its Education & Care division ("Education & Care"), for a cash consideration of £56.5m on a cash free, debt free basis. RM will also assume responsibility for the defined benefit pension schemes within Education & Care which at 31 August 2016 had a balance sheet deficit of £7.9m1. Total consideration equates to an enterprise value of £64.4m.

Highlights

· The disposal is consistent with the Group's strategy to focus its primary investment on growth opportunities within News & Media and Parcel Freight.

· Education & Care's EBITDA for the 12 months to 31 August 2016 was £9.0m. Adjusted profit before tax was £7.8m, while statutory profit before tax was £6.7m. The value of the gross assets at 31 August 2016 was £57.4m.

· The net cash proceeds of the disposal will reduce Group borrowings and provide greater flexibility to pursue growth opportunities that can leverage the Group's scale and strength in specialist distribution.

· The disposal will complete following approval from RM's shareholders and receipt of clearance from the Competition & Markets Authority. A further update will be provided at Connect Group's interim results on 25 April 2017.

· Education & Care is an independent supplier of consumable products to the Education and Care markets, trading through The Consortium and West Mercia Supplies brands. It currently serves over 30,000 customers with an extensive range of over 40,000 products.

Financial Highlights

· Enterprise value of £64.4m, equating to a 7.2x multiple on 2016 EBITDA. This comprises cash proceeds of £56.5m and an assumed value of £7.9m1, on an IFRS basis, for the transfer of Education & Care's pension schemes liability.

· The Group's current progressive dividend policy will not be affected by the disposal.

Mark Cashmore, Group Chief Executive, commented:

"We are pleased to announce the sale of our Education & Care division to RM plc. Having received a number of approaches and after conducting a detailed review, we have concluded that the disposal represents the right option for the Group, the division and our strategy.

The disposal will provide the Group with greater financial flexibility as we continue to drive our operational priorities and growth strategy. Looking ahead, the Group remains focused on delivering long-term value for shareholders, deploying our capital to deliver a balance of strong dividend, deleverage and re-investment for further growth."

The Group will announce its interim results for the six months ending 28 February 2017 on 25 April 2017.

Notes:

1 assessed under International Accounting Standard 19 ("IAS19")

Enquiries:

About Connect Group

Connect Group PLC is a leading specialist distributor operating in large and diverse markets. The Group has four separate divisions, connecting suppliers to customers in an efficient, knowledgeable and service oriented way:

· Connect News & Media - Encompassing: Smiths News, Dawson Media Direct and Pass My Parcel. 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 majority of the major national publishers as well as a large number of regional publishers serving approximately 30,000 customers across England and Wales on a daily basis, including large general retailers as well as smaller independent newsagents with approximately 40 million newspapers supplied weekly; Dawson Media Direct is an international media direct business supplying newspapers, magazines and inflight entertainment technology and content to over 80 airlines in 50 countries. Pass My Parcel, a wholly-owned 'click and collect' delivery service, operated by the Smiths News business, has a network of over 3,000 parcel shops and clients which include Amazon and ASOS.

· Connect Parcel Freight - Tuffnells is a leading provider of next-day B2B delivery of mixed parcel freight consignments, specialising in items of irregular dimension and weight ("IDW"), examples of which include bulky furnishings, building materials and automotive parts. Tuffnells offers distribution coverage throughout the UK through a network of 37 depots and operates a largely depot-to-depot operational model, delivering over 13 million consignments per annum, through a wide range of services to over 4,500 customers focusing on SMEs.

· Connect Education & Care - An independent supplier of consumable products to the Education and Care markets through The Consortium and West Mercia Supplies. The division currently serves over 30,000 customers with an extensive range of over 40,000 products across a branded, own-brand and value range, including stationery, arts and craft and cleaning.

· Connect Books - Combining a number of recognised brands in print and digital bookselling, including Bertrams, Dawson Books and Wordery. A leading distributor of printed and digital books, the division supplies a mix of traditional and online booksellers, academic and public libraries and direct to consumer through Wordery.