Connect : Disposal of Books Division

Connect Group PLC

('Connect Group' or 'the Group')

Disposal of Books division to Aurelius Equity Opportunities

Connect Group PLC announces that it has signed an agreement to dispose of its Books division ('Connect Books') with the listed pan-European mid-market investorAurelius Equity Opportunities SE & Co. KGaA ('Aurelius'), for a total cash consideration of up to £11.6m. Under the terms of the agreement, £10.6m will become payable at completion and up to £1.05m will be payable on the successful recovery of certain third party debt receivables and certain tax refunds from relevant tax authorities. The agreement with Aurelius is subject to common warranties, indemnities and limitations.

Connect Books is a multi-channel wholesaler, distributor and retailer of printed and digital books, with operations in the UK, the Netherlands, and France. The senior management team of Connect Books, including Managing Director Justin Adams, will transfer with the business.

Strategic Highlights

· The disposal follows Connect Group's announcement at its preliminary results in October 2017 that Connect Books is no longer considered to be core to the Group's growth strategy.

· The disposal allows Connect Group to focus solely on the integration of its core businesses comprising Smiths News, Tuffnells Parcels Express and Pass My Parcel and the growth opportunities that arise from leveraging its scale and leadership in Early Morning and Mixed Freight distribution.

· The agreement with Aurelius comprises the sale of all of Connect Books' trading businesses, including: Bertram Books, Wordery, Dawson Books and Bertram Library Services in the UK together with Erasmus, Houtschild and Dawson Books' overseas subsidiaries.

· The disposal will complete following anti-trust merger approval from the German Federal Cartel Office. We do not anticipate any complications with this and would consequently expect completion to take place early in the New Year. An announcement confirming completion will be issued in due course.

Financial Highlights

· Consideration of £10.6m at completion with up to £1.05mpayable on the successful recovery of certain third party debt receivables and the receipt of, or credit being given for, certain tax refunds from relevant tax authorities, which are expected to be collected within 12 months of completion.

· The net cash proceeds of the disposal will be used to reduce the Group's borrowings.

· Connect Books' EBIT for the 12 months to 31 August 2017 reported a £2.0m loss within the Group's discontinued operations, which included £3.2m of exceptional charges to operating profit before the decision to treat the division as 'held for sale' on 31 August 2017. Adjusted loss before tax was £2.0m and statutory loss before tax was £12.8m, after impairment and amortisation charges. The value of its gross assets at 31 August 2017 was £64.4m and the Net Book Value was £15.0m.

Mark Cashmore, Chief Executive Officer, commented:

'We are pleased to announce the sale of Connect Books to Aurelius Equity Opportunities. Earlier this year we concluded that the Books division was no longer core to our future, but this in no way detracts from its position as leader in the books distribution markets. We believe the agreement represents a good outcome for all key stakeholders.

The disposal is consistent with our strategy to focus on opportunities in Early Morning and Mixed Freight distribution. In this regard, the integration of the Group's businesses is proceeding at pace and the disposal will give us greater financial flexibility as we continue to drive our strategic priorities.

Looking ahead, the Group remains focused on delivering long-term value for shareholders, focusing and leveraging our capabilities to deliver sustainable growth, strong cash generation and dividend.'

The Group will announce its trading statement on 23 January 2018 and its interim financial results for the six months ending 28 February 2018 on 1 May 2018.

Enquiries:

About Connect Group

Connect Group PLC is a UK based specialist distributor and a leading provider of distribution solutions in complex and fragmented markets. The Group's networks are focused on serving high drop density early morning deliveries, and the demands of mixed and irregular sized freight.

The Group's core businesses are each leading players in their markets:

Early Distribution

Smiths News is the UK's largest newspaper and magazine wholesaling business with an approximate 55 per cent. market share. It distributes newspapers and magazines on behalf of the major national and regional publishers, delivering to approximately 27,000 customers across England and Wales on a daily basis. The speed of turnaround and density of Smiths News' coverage is critical to one of the world's fastest physical supply chains.

Pass My Parcel is a wholly owned Click & Collect service which leverages our combined networks to provide efficient solutions for online and high street retailers. Its network of parcelshops provides national consumer reach for deliveries and returns. Bespoke services for larger clients, serving their early morning and in-store requirements are a recent development in this rapidly evolving sector.

Dawson Media Direct supplies newspapers, magazines and inflight entertainment technology and content to over 80 airlines in 50 countries. Delivering to strict time windows with security accreditation, DMD serves the specialist needs of airlines and travel points in the UK and worldwide with printed and digital media.

Mixed Freight

Tuffnells is a leading distributor of mixed and irregular freight, serving approximately 5,000 small and medium sized enterprises across the UK. Its network of 37 depots collects and delivers mixed parcel freight consignments, specialising in items of irregular dimension and weight ('IDW'), examples of which include bulky items, building materials and automotive parts. With a mix of local and national clients, Tuffnells completes up to 70,000 daily deliveries, offering a range of timed services that are responsive to customer demand.