John Menzies team hails 'stellar' year

Published on Tuesday 9 March 2010 20:17

PAUL Dollman, finance director at aviation and distribution group John Menzies, yesterday claimed the "worst was behind us" as he revealed pre-tax profits had more than doubled to £22 million.

• Paul Dollman, group finance director, David McIntosh, MD Menzies distribution and Craig Smyth, MD Menzies aviation. Picture: Complimentary

The firm reinstated its dividend after a year's hiatus, with an interim payment of 8p due on 1 April but has no plans to recommend a final 2009 dividend ahead of its annual meeting.

Edinburgh-based Menzies said it has had a "stellar" year in its distribution side, which performed ahead of expectation. In its aviation business, the firm said "flexing" costs – the result of pay freezes and an 8 per cent staff reduction – saw profits and turnover also rise.

This was despite poor conditions, particularly in cargo handling, where absolute tonnes were down 17.8 per cent.

The aviation division, which handles both luggage and cargo for the airline industry, suffered during the global crisis. Yet the division's revenues increased 1.3 per cent to 507m in the year to 31 December with underlying operating profit up by 12 per cent.

Dollman said cost cuts and new ground-handling contract wins in Australia, South Africa and the US had served to make the business "resilient".

"Having the wide geographical footprint and the growing reputation of the business has helped us," said Dollman.

"People thought we would react like an airline. But we are a service provider and our business model is a lot more resilient than people gave us credit for."

In its "stellar" distribution division, Menzies said costs of opening new depots and taking on new business was less than expected following the collapse of rival distribution firm Dawson.

Distribution revenue increased by 4.5 per cent to 1.2 billion and operating profits were up 19.7 per cent, despite a 5.5 per cent fall in sales of magazines and a 1.9 per cent decline in newspaper sales.

The group reduced debt by more than 50m, but also said the gap in its pension scheme had widened from 25.6m to 60m.

Dollman said the deficit in its defined benefit pension fund was due to a change in longevity figures, but said "that is quite normal". He said the group had agreed with the fund trustees to pay 6m a year additional funding.

"Even with restoring dividends and additional payment to the pension funds, both of these two businesses will be cash generative this year and debt will still come down," he insisted.

The dividend's return will win fans for Menzies' often neglected stock in the City. Shares yesterday rose 4.4 per cent to 342p.

Dolman said the group was often perceived by investors and analysts as a "complicated story" due to its having two distinct businesses under one company.

He said there were no plans to split the businesses and argued the defensive nature of the distribution side was a useful contrast to the potential growth prospects of the aviation division.