8th Jul 2014 08:47
LONDON (Alliance News) - Connect Group PLC, formally known as Smiths News, Tuesday said revenue rose 0.2% in the 44 weeks ended July 5, and said its performance remains broadly in line with current market expectations for the full year.
In its largest division, News and Media, News revenue rose 0.1%, driven by strong sales of World Cup stickers. As a result, it expects the division's full-year revenue to beat previous expectations. On a like-for-like basis, stripping out contracts, new businesses and acquisitions, revenue decreased 2.1% in this business. Media revenue dropped 3.2%, or 2.8% on a like-for-like basis.
In the company's Books division, revenue was up 2.6%, driven by recent acquisitions and a strong performance from its online bookshop Wordery, although revenue declined 3.2% on a like-for-like basis. The company is taking action to reduce costs and increase margins in this segment, but expects the division's full-year performance to fall below previous expectations due to continued sales pressure in library services and academic markets.
Connect Education and Care revenue rose 2.2%, as the company's education and early-years products performed well. In this division, its full-year performance remains in line with previous expectations.
Connect said it will announce its results for the full year to end-August on October 15.
Broker Liberum cut its price target for Connect shares to 200 pence from 220 pence, and reiterated its Buy rating, citing further weakness in the Books division. Whilst the better-than-expected World Cup sticker sales offset weakness in Books during the year, without the World Cup in 2015, these issues will prevail.
Whilst the Wordery business is a "rare positive" in the segment, its margins are low, and revenues in all other areas of Books are disappointing, Liberum said, adding it does not expect a "quick rebound" from cost savings.
"Although we expect the dividend (of 5%) to provide support and we continue to like the self-help story, we expect the market to react negatively to today's statement," Liberum said.
Shares in Connect were trading down 7.3% at 176.00 pence Tuesday morning.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
CNCT.L