LONDON (Alliance News) - Office2Office PLC, which recently agreed to be taken over by EVO Business Supplies Ltd in a deal which values the business at GBP19.1 million, Thursday said that non-recurring charges all but wiped out pretax profit in the first half of 2014.
The provider of office supplies and business solutions posted pretax profit of GBP86,000 for the six months ended June 30, compared with GBP1.2 million a year earlier, as revenue fell to GBP114.6 million from GBP119.2 million.
Office2Office said its results reflected a higher level of non-recurring charges of GBP800,000 compared with GBP300,000 a year earlier.
The results come just a week after Office2Office accepted a takeover offer from EVO, a newly-created company owned by funds managed by private equity firm Endless LLP, of 51 pence per Office2Office share. Office2Office shares were quoted up 1.1% at 49.02 pence Thursday afternoon.
Office2Office on Thursday said it accepted the offer in the full knowledge that only a week later "we would be announcing results for the first half of 2014 that are on track for the year as a whole and in line with the market's and our own expectations, and with net debt reduced further since the year end."
However, it said its current on-track performance does not mask the fact that the trading environment for its managed procurement business is "challenging".
"Customer buying habits have changed, with a focus on making smaller purchasing orders on a more frequent basis, buying lower-cost products and reducing their direct costs generally," the company said.
Office2Office said the permanent shift in buying behaviour had increased its cost-to-serve and negatively impact the group's financial performance. As a result, the group has implemented a strategy to improve the performance of the managed-procurement business by cutting costs, reducing debt, and remodelling the business through changes to its logistics platform.
It concluded that combining Office2Office with another business in the office supplies industry is the best way of creating value for our shareholders, and that this can best be achieved through the EVO takeover.
Moreover, the group has in recent years focused on expanding its business critical services activity, a process which it believes has been successful to date. However, Office2Office said it does not have sufficient funds to invest further in this activity in order to fulfil its growth potential, while at the same time restructuring the group's role in the declining business supplies sector.
Office2Office said it is in discussions to refinance its GBP12.5 million term loan, GBP3 million revolving credit facilities and GBP30 million asset-backed lending facility, which are all committed to June 2015.
"Whilst these discussions are constructive, the terms of such a refinancing and when it would be completed depend in part on the group's finalising its strategic plans to address change in the business supplies sector," Office2Office said.