Logistics group John Menzies has exceeded City expectations with its 2016 results, seeing underlying profit increase by almost a third during a “transformational” year.
The Edinburgh-based group said underlying pre-tax profit jumped to £49.7 million, exceeding Numis’ forecast of £48m, as turnover increased to £2.08 billion from £1.99bn.
John Geddes, corporate affairs director, said the group was “very pleased” with the figures and flagged a strong underlying performance in its aviation arm, with underlying operating profit up by nearly 50 per cent to £34.2m.
Geddes also highlighted Menzies’ $202m (£165.6m) acquisition of US aviation services group ASIG, “which we’re very excited about”.
The deal, announced in September, was completed last month and the signs are positive so far, he said.
“I think we’re inheriting a workforce who’ve been a little bit unloved so they’re full of ideas… to take the business forward, but for us it’s primarily about integrating at the moment and then looking for a route to expand that.”
Analyst Martin Brown of Menzies’ house broker Shore Capital said: “While the results themselves are positive, in our opinion most importantly [they] provide a solid foundation on which the recent ASIG acquisition and the associated synergies can build.”
Looking at the group’s distribution arm, underlying operating profit was broadly flat at £24.7m but Geddes said this marked a strong performance given the continued decline in print media and higher costs related to the national living wage.
In terms of strategy, “it’s about replacing print media volume with new volume” from, say, retail logistics to the high street, Geddes said.
He added: “With that quite tight focus, we do see a path to growth but it’s by no means simple and it’s still a tough business to keep running.”
Menzies also said in December that it had started working on its largest-ever retail contract, with newsagent WH Smith, and Geddes described this agreement as “key and ground-breaking” for the distribution business.
The organisation said its group structure review continues, having faced pressure from investors to split its aviation and distribution arms, with Rothschild & Co appointed to examine such a scenario, and chairman Dermot Smurfit said an update would be given “at the latest” alongside its interim results in August.
Geddes added: “We’re making good progress, we’re happy with it and at the appropriate time we’ll tell you more.”
The board has proposed final dividend of 13.1p a share, to be paid on 3 July, lifting the full-year payout by 10 per cent to 18.5p.