Connect Books saw a 14.4% year-on-year rise in revenue for the first half of its financial year, driven by its wholesale and Wordery arm. However, revenue in the challenged libraries market fell more by 7.4%, thanks to austerity and the company's further withdrawal from “unprofitable public library contracts”.
The Connect Group has reported its financial results for the six months to 28th February, showing book revenue was up 14.4% year-on-year to £118.5m. It’s wholesale arm made £56.8m, up 18% year-on-year, after it won market share and “continued improvement in stock availability and customer service”.
The company said: “A strong trading performance over peak and a healthy new business pipeline has resulted in a growing market share.”
Meanwhile the Norwich-based firm’s direct-to-consumer e-commerce arm Wordery accounted for £31.8m of its book revenue, up 26.9% year-on-year.
“This strong growth was driven by continued expansion of its presence as a seller on 'market place' sites, and further growth in sales from the Wordery.com web presence in the UK and internationally,” the company said.
Connect Books originally had a 51% stake in Wordery, and its four founders sold the remaining 49% stake in September 2015. As previously reported, Will Jones, founder and m.d of Wordery, will leave the business in May, succeeded by Rob Moss, who is promoted from marketing director.
While Connect Books has seen growth in its wholesale and Wordery arm, its academic library supply business has taken a further hit, with sales down by 7.4% year-on-year over the period. The company blamed “austerity” for the downturn in the library arm, after the government reduced funding to local councils which in turn slash library budgets.
Also to blame for the lower library revenue is Connect Books’ further withdrawal from “unprofitable” public library contracts. However, the sector’s performance was slightly mitigated by Dawson Books benefiting from the contract signed last year to supply a new library in the UAE.
Overall, the adjusted operating profit for Connect Books was £1.6m, down £0.3m (13.5%) year-on-year. The company calculated the net impact of the new, higher National Living Wage was £0.3m, while other operational costs in the business increased by £0.6m.
As a result of its rising cost base, the company is using capital investment to further automate the 'pick and pack' of books, which it says will “improve service levels and raise productivity”.
During the period the the Connect Group sold its Education and Care division to RM plc for a consideration of £56.5m and the division’s defined benefit pension schemes which has a value of around £7.9m.
Overall group revenue was down 0.6% £911.8m, with gross profit at £111.2m, down by £0.6m, (0.5%), while gross margin remained flat at 12.2%.
Mark Cashmore, group chief executive, said: “In line with our plans to focus the group's investment on the two larger divisions, the proposed sale of Education & Care is an important milestone in our strategy. The resilience of News & Media and revenue growth in Tuffnells has underpinned our overall performance, allowing for continued investments to drive growth opportunities."