Connect Group reports revenue and profit drop
Connect Group has reported its unaudited preliminary results for FY2017 which show a 3.1% drop in revenue at £1,594.3m, and a 4.6% drop in adjusted profit before tax at £48m. In a statement issued today (26 October), Mark Cashmore, Chief Executive Officer, said: “In what has been a challenging year, we have concurrently managed a period of tough trading while refocusing our strategy, restructuring our leadership, and disposing of the Education & Care division.
“A two-year transformation programme is underway, centred on a comprehensive integration of our core businesses, extending from leadership and central services through to the network and frontline delivery.
“We are now wholly focused on opportunities in Early Distribution and Mixed Freight – and we are moving at pace with a transformation programme, to deliver a combination of efficiencies, service and organic sales that will underpin growth.”
Focusing the divisions, Connect Group reported that revenue in Smiths News was £1,383.4m (FY16: £1,443.8m) and adjusted operating profit was £40.4m (FY16: £40.0m). This performance included the sales and costs of Pass My Parcel, which amounted to a loss of £6.3m (FY16: £4.0m).
Connect Group added that the opening of its new warehouse at Hemel Hempstead was a “step change” in the scale of its hub depots. The Smiths News network now has seven magazine hub locations, supported by 32 smaller ‘last mile and newspaper packing’ depots which operate for limited hours each day.
The Connect Group statement said that its Pass My Parcel operation “continues to grow volume and develop new services in response to emerging opportunities and growing demand for rapid overnight and early morning delivery”.
“Total volume for the year was 1 million outbound and returns parcels (FY16: 500k), building in the second half, such that the annual run rate, prior to the seasonal peak, in October 2017 was circa 2 million units,” said Connect Group. “The loss made in supporting the business was £6.3m (FY16: £4.0m) including investment in IT to support future service propositions. We aim for volumes to increase significantly in the current financial year and losses to reduce as a result.”
The group conceded that the overall volume growth through parcelshops was lower than expected. On the upside, however, it said that the introduction of returns services for Amazon in February 2017 contributed to a “significant increase” in volume in the second half, and Connect Group anticipated that this would support “momentum for further growth as we approach the Christmas and New Year peak”.
Connect Group added that its contract with UK Mail to route their returns and failed household deliveries via its parcelshop network is now scheduled to commence in 2018, following the implementation of supporting IT. Also, a small scale trial with Hovis, delivering fresh bread supplies to local retailers, has now been extended to additional areas.
