smiths connect warehouse

Connect Group revenues fell 3.1% to £1.59bn

Distribution company Connect Group is to cut 340 jobs in the face of falling sales and pre-tax profits.

The cuts represent 6% of the firm’s 5,666-strong workforce, with the layoffs coming across its combined business in 2018.

Connect Group said in its full-year results to 31 August 2017 that revenues fell 3.1% to £1.59bn, with pre-tax profits down 4.6% to £48m.

Net debt decreased 42.1% to £82.1m following the £64.4m sale of its education and care supplier division.

The company said it needed to make the job cuts as part of its growth strategy following the merger of operational, sales and marketing, and central support under a single leadership team.

“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,” said Connect Group CEO Mark Cashmore.

“A two-year transformation programme is under way, 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.”

The company said the integration of the divisions was expected to deliver £15m worth of savings by 2019.

Revenues for its news distribution, which includes the UK’s largest news wholesaling business Smiths News, also tumbled 4.2% to £1.38bn.

It said the lack of a major football tournament in 2017 was partly to blame for the dip in sales as it had resulted in a reduction of football sticker collections.

A growing demand for “rapid overnight and early morning delivery” helped double the volume of its Pass My Parcel delivery service with Amazon to one million outbound and return parcels.

Despite this, it reported a loss of £6.3m, which it partly attributed to an investment in IT to “support future service propositions”.

A “challenging year” for its mixed freight business saw operating profits fall 19.9% to £12m. However, revenue rose 5% to £183.2m.

Connect said it expected a return to growth in 2018 following the restructuring of the business.

“The group expects to deliver solid financial returns throughout the period of transformation, and maintain strong cashflows that will allow for both investment and continued strong returns to shareholders,” the firm said.