Menzies delivers as it cuts debt and signs new deals

Published on Thursday 25 June 2009 21:54

SHARES in newspaper distribution and cargo handling group Menzies shot up nearly 18 per cent yesterday after the company announced it has slashed debt and expects improved profits in the first half of this year.

In a pre-close trading statement to the Stock Exchange, Menzies said it expected profit for its first six months to be better than during the same period last year. And it added that net debt would be lower than expected – between 140 million and 150m.

Analysts at Royal Bank of Scotland had predicted that the debt would hit 159m and the statement from the Edinburgh-headquartered group led to a massive rise in the share price.

Menzies disclosed that debt was reduced thanks to 10m raised on the sale of non-core assets and the sale and leaseback of "certain operational assets". In its statement, the group said profits would be better in the first half of the year, despite a "marginally lower" contribution from its aviation arm, which has been hit by the global downturn in air passenger travel.

RBS said Menzies aviation markets look to have stabilised, albeit at depressed levels, and the group "is well positioned to grow when conditions improve".

RBS added that as profits were going to be higher than the first half of 2008 – 11.4m – then Menzies would be on track to meet its forecast 24.5m profit as the second half of the year is historically stronger.

Menzies admitted conditions had been tough for the aviation side, but said that it will continue to meet full-year expectations as losses in poor cargo markets were offset by cost-cutting, including the loss of 400 jobs across the globe.

The group was bullish on its other business, saying that Menzies distribution had had an "excellent year".

In addition to cost-cutting, the distribution business won market share in the highly competitive magazines and newspaper distribution industry, worth more than 130m.

In recent months, seven of Britain's largest newspaper and magazine publishers have renegotiated distribution contracts, all of which have favoured Menzies and Smiths News over smaller rival Dawson Holdings.