British distribution and delivery operator Connect Group today revealed a solid half-year revenue increase and strong profit growth as it rolls out its B2C Pass My Parcel network nationwide and wins new customers in the Tuffnells B2B ‘parcel freight’ business.
The listed company is also looking at closer operational synergies between the two parcel businesses, under which the Smiths News business could deliver B2C parcels for Tufnells through the Pass My Parcel network and Tuffnells would support the Pass My Parcel operational network.
Connect Group increased overall revenues by 4.2% to £948.4 million in the six months ending February 29, 2016. Pre-tax profits rose 36% to £19.2 million on a reported basis and by 13% to £27.2 million on an adjusted basis.
CEO Mark Cashmore said: "The group has performed well in the first half, making pleasing progress with our strategic priorities. In particular, Parcel Freight has continued to deliver impressive revenue and profit growth, supported by the significant levels of new business secured in the period. The solid performance of the core News business is underpinned by resilient newspaper and magazine sales and Pass My Parcel is growing brand awareness following the launch of our new mobile enabled returns service with ASOS."
Pass My Parcel, the Click & Collect delivery business launched in 2014 with Amazon as the key launch customer, made good progress in the first half of the 2015/16 year, according to the group. Click & Collect “represents an exciting growth market” with some 80 million transactions a year and 20% growth driven by more retailer offers and the fast growth of mobile commerce, it pointed out.
“We have focused on delivering successful operations through our first major peak Christmas trading period and building brand awareness as the first phase of parcel shops bedded in. Delivery volumes over the peak trading period have proved the robustness of our capability and importantly, customer feedback was excellent with more than 99.5% of deliveries made on time. This calendar year we expect to handle circa one million parcels, demonstrating the growing scale of our operations.
“This growth will be supported by the expansion of our parcel shops over the remainder of the year. We expect to reach circa 4,000 stores ahead of peak trading in 2016, giving us an estimated 90% coverage of the UK e-commerce market,” the group stated.
Connect Group is also profiting from the acquisition more than a year ago of delivery firm Tuffnells which increased half-year revenues by 12% to £82.4 million and adjusted operating profits by 8% to £5 million. The figures confirm that Tuffnells “is winning market share” after attracting over 400 net new accounts with annualised revenues of £5 million since the start of the financial year last September.
“In winning this business, it is no coincidence that service levels are running at their highest for two years. As a number of competitors focus on more regular freight that can be handled through their automated hubs, we have benefited from strong local relationships with the small and medium sized enterprises that require a more flexible and tailored service,” the group commented.
Connect Group is investing in the Tuffnells network with two new depots so far this financial year and a further five sites due to be relocated or extended in 2016, improving efficiency and easing pressure on the remaining network. A rolling programme of upgrades covering the whole estate has also started, together with investment in the fleet and further strengthening of the management team, following the appointment of Chris Ward as Managing Director of the division in June 2015.
“Looking ahead, we remain excited about the prospects for Tuffnells' role in the wider group. Our focus to date has been on integration together with ensuring that growth was maintained through a period of significant change. With a new team in place, we are now actively exploring group-wide opportunities.
“As well as scoping the benefits of shared infrastructure, we are running trials to understand the potential for Smiths News to provide last mile distribution for Tuffnells, and for Tuffnells to support the growth of Pass My Parcel with deliveries and infrastructure that will expand our current reach.”
