In an increasingly competitive office supplies market, Office2Office (OFF) is having to run faster just to stand still. So, despite reporting a double-digit rise in revenue, underlying pre-tax profits slumped by £1.9m to £6.5m as margins fell from 4.3 to 2.9 per cent.
Big contracts are still being secured including a Government Office Supplies Contract and a deal with Advantia in the private sector, but clients are increasingly keeping an eagle eye on the stationary cupboard. Chief executive Simon Moate said orders were characterised by an attitude of "little but often", meaning deliveries were 50 per cent up on last year, driving up distribution costs. Sales to private customers, responsible for two-thirds of revenue, grew by 15 per cent in the period, but trading profits declined from £13m to £11.2m. The business process outsourcing unit also reported a double-digit revenue increase, but profits were fractionally down to £7m.
Maintaining service levels on the Advantia contract led to exceptional logistics costs of £1.9m and, combined with restructuring and other one-off charges of £2.2m, meant net cash from operating activities fell by over half to £4.2m.
Broker Panmure Gordon expects a 20 per cent recovery in adjusted pre-tax profits and EPS to £7.8m and 16.3p (from £6.5m and 13.4p in 2012).
OFFICE2OFFICE (OFF) | ||||
|---|---|---|---|---|
| ORD PRICE: | 98p | MARKET VALUE: | £36m | |
| TOUCH: | 96-100p | 12-MONTH HIGH: | 161p | LOW: 91p |
| DIVIDEND YIELD: | 7.3% | PE RATIO: | 109 | |
| NET ASSET VALUE: | 54p* | NET DEBT: | 148% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 181 | 9.60 | 18.5 | 11.0 |
| 2009 | 187 | 8.12 | 17.2 | 11.4 |
| 2010 | 208 | 4.63 | 12.0 | 11.4 |
| 2011 | 194 | 4.29 | 12.0 | 11.4 |
| 2012 | 227 | 0.69 | 0.9 | 7.2 |
| % change | +17 | -84 | -93 | -37 |
Ex-div: 15 May Payment: 11 Jul *Includes intangible assets of £58m, or 159p a share | ||||
