Office2Office profits hit hard

Office2Office, a provider of office supplies and solutions, was bullish on its prospects despite profits taking a hammering in the first half.

The company reported revenues that rose to £113.2m in the six months to June, from £99.5m the year before.

But pre-tax profit dropped by 75% to £0.7m, which the firm put down to non-recurring costs of £2.2m, increased finance costs, as well as a weak market for office products.

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It said higher borrowing levels were down to implementation costs and net working capital investment to support the new contracts.

This had been compounded by increased borrowing costs after it renegotiated facilities last year.

But the firm said its trading prospects justified it holding the interim dividend at 3.6p.

Chairman David Callear said notwithstanding challenging market conditions exacerbated by Jubilee and Olympic celebrations, recent new business wins reinforced the board's confidence about the group's trading prospects.

"We remain confident about revenue and underlying earnings performance for the second half of the year," he said.

Investors didn't appear quite so upbeat and pushed the company's shares down 6% in morning trading on Wednesday.