Connect Group reports 3.5% revenue drop

Connect Group has reported that its revenue for the 19-week period up to 13 January was £564.5m, down 3.5%  on last year.

In a trading update issued today (22 January), Connect Group said that the anticipated decline of newspaper and magazine sales more than offset the revenue growth in Mixed Freight and Pass My Parcel (PMP).

The statement added: “While overall revenue performance has been in line with our expectations, a combination of delays to contracts in PMP, weaker margins and market uncertainty in Mixed Freight, and slower than anticipated realisation of cost reductions from the Group’s integration strategy in order to preserve current service levels, mean that we now expect full year adjusted profit before tax for the continuing operations to be in the range of £42m to £45m, with current dividend expectations underpinned by a continued good cash performance.”

Focusing more on Pass My Parcel, Connect Group said: “Volumes in Pass My Parcel of 1.3m units have grown 347% year to date, and we start the new calendar year with a run rate up 740% on January 2017.  Overall, volume growth is in line with our plans and we are pleased with this aspect of progress, which demonstrates an increasing consumer awareness of PMP, and the range and availability of its services. Year to date revenue of £2.5m is up 222%, representing strong growth.

“Despite these positive indicators, forecasted margins and costs have been adversely impacted because the primary driver of growth has been a rapid increase in lower margin customer returns through parcel shops, with further acceleration over the Christmas peak. Ongoing delays to the implementation of new contracts and the roll out of new B2B services means that the margin mix is unlikely to improve in the near term.  As a consequence, we do not now expect full year losses from PMP to reduce from those incurred in FY2017.”