23rd Apr 2014 11:59
LONDON (Alliance News) - Connect Group PLC, formerly known as Smiths News PLC, Wednesday raised its interim dividend as it saw pretax profit rise, boosted by good performances across most of its businesses offsetting weakness in its Books division.
The distributor proposed an interim dividend of 3.1 pence, up from 3.0 pence.
Connect Group posted pretax profit of GBP22.1 million in the half year to February 28, up from a restated GBP18.4 million a year before, despite seeing revenue drop to GBP898.7 million from GBP904.7 million, as exceptional costs relating to acquisitions did not recur.
The company changed its name to Connect Group on Wednesday as part of a re-branding to reflect its diversification strategy, moving away from being primarily a newspaper distributor.
In the previous year the company posted exceptional costs of GBP4.9 million, including GBP2.1 million in acquisition costs and a GBP1.4 million amortisation of acquired intangibles. During the recent half year, Connect posted exceptional costs of GBP1.9 million, including network reorganisation costs, amortisation and impairment charges.
Smiths News, now the company's news distribution segment, posted revenue of GBP748.6 million, down from GBP761.1 million, as it continued to weather the challenging magazine and newspaper markets. The company said it remained on track to deliver cost savings of GBP20 million by 2015 in this segment, having cut a further GBP3.2 million during the first half.
In its Media segment, revenues were up GBP12.3 million from GBP11.8 million as it won new business and extended contracts. Margin improved to 49.6% from 44.1%.
In its Books segment, revenue rose to GBP106.6 million from GBP98.3 million, driven by growth from its online bookshop Wordery and by acquisitions. However, margin in this segment declined to 18.1% from 19.0% as it continued to see margin pressure in UK trade and libraries sales.
Connect said that weaker-than-expected digital and academic sales were offset by Wordery's strong growth. However, academic markets continue to face challenges with tighter university budgets and strong competition.
The company said it continued to invest in its digital services by upgrading its UK platform and developing new language platforms. Although it continues to invest in this segment, it noted that revenue will take longer to materialise from this investment than it had originally expected.
In Education and Care, revenue rose to GBP31.2 million from GBP30.5 million, and margin improved to 40.5% from 39.3%.
The company said it continued to focus on its diversification strategy, seeking to generate 50% of its profits outside of newspaper and magazine wholesaling by 2016. Currently, 24% of the company's profits coming from outside of the newspaper and magazine wholesaling segments.
Broker Liberum reiterated its 'Buy' rating for Connect, saying that the in-line results are "a first step in reassuring a nervous market after a disappointing pre-close".
Liberum noted that issues within the company's Books segment are "both understood and being addressed", whilst "the remaining 94% of group earnings before interest, tax and amortisation continues to perform well."
Shares in Connect Group last traded flat at 165.00 pence Wednesday.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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