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Connect Group sees annual results below expectations after tough year

Connect said its plan to close its Pass My Parcel business was going well and that it had reached an agreement with key clients to wind the unit down
Connect Group sees annual results below expectations after tough year
Connect said that newspapers sales had held up well but that magazine sales had weakened further in Q4

Connect Group PLC (LON:CNCT) expects its full-year trading performance to fall below market expectations after the challenging trends experienced throughout the year continued in the fourth quarter.

The logistics group said on Friday that at its Smiths News business, newspaper sales had held up well but magazine sales had weakened further in the final quarter. The football World Cup delivered lower sales of stickers and albums than in previous tournaments but was consistent with revised expectations, it added.

READ: Connect Group lifted by extension of distribution deal with News UK

News UK’s titles include The Sun, The Times and the Sunday Times.

The logistics group, formerly known as Smiths News, said conditions in the parcel freight market remained challenging with actions to improve service and efficiency having limited time to influence financial performance in the period. As a consequence, it said Tuffnells' second-half performance was expected to be worse than in the first half.

Connect said that its plan to close its Pass My Parcel unit, announced in June 2018, had proceeded at pace and that agreement has now been reached with key clients to wind down operations and exit onerous contracts. Deliveries and collections representing over 95% of volumes ceased during August 2018 and distribution services for the remaining clients will end by January 2019, it added.

The swifter than anticipated exit from onerous contracts has led to additional operating losses in the period but is expected to have a positive impact on the level of provision required for closure costs in 2019.

The company said it had also made provisions relating to a historic underpayment to HMRC over the misapplication of national minimum wage legislation at Tuffnells and for further organisational restructuring.

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