Shares in office supplies specialist Office2office (OFF) fell over 9 per cent on the back of these half-year figures, which revealed a 49 per cent fall in underlying pre-tax profit to £2m. Moreover, the company warned that full-year profits will be down from the previous year, and - in an effort to conserve cash - the half-year dividend has been axed.
A steady decline in the contracted office market was offset by growing demand for document outsourcing and market services. Accordingly, turnover in the business critical services division rose 18 per cent to £43.4m - although margin pressure meant that divisional cash profit was largely flat at £3.8m. On the procurement side, turnover was marginally lower at £75.7m, but underlying cash profits dipped from £6.1m to £4.8m - here, a drift by customers towards ordering little and often helped support sales but drove up distribution costs. Chairman David Callear admitted that existing clients continue to reduce spending and have been switching to lower-margin products. Some new contracts are also taking longer than expected to translate into a revenue stream.
Broker WH Ireland has reduced its full-year earnings estimates by 14 per cent and now expects pre-tax profit of £5m with EPS of 10.1p (from £6.5m and 13.4p in 2012).
| OFFICE2OFFICE (OFF) | ||||
|---|---|---|---|---|
| ORD PRICE: | 33p | MARKET VALUE: | £12m | |
| TOUCH: | 33-34p | 12-MONTH HIGH: | 142p | LOW: 32p |
| DIVIDEND YIELD: | 10.9% | PE RATIO: | 30 | |
| NET ASSET VALUE: | 48p* | NET DEBT: | 135% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 113 | 0.89 | 1.80 | 3.60 |
| 2013 | 119 | 1.17 | 2.30 | nil |
| % change | +5 | +31 | +28 | -100 |
*Includes intangible assets of £57m, or 158p a share | ||||
