Menzies profits tumble after ‘challenging’ year

Menzies said it does not expect any further problems at Gatwick. Picture: Contributed
Menzies said it does not expect any further problems at Gatwick. Picture: Contributed
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Logistics group John Menzies is considering further bolt-on acquisitions across the UK after posting a drop in full-year profit in a “challenging” 2015.

The Edinburgh-based group said pre-tax profit reached £18.2 million, down from £25.7m in 2014, while turnover remained broadly flat at £1.99 billion.

It said that for its aviation division turnover grew by 6 per cent, while distribution made “good” progress, mitigating the decline in media to grow operating profit to £25.1m from £24m.

The group noted that last year it “performed a strategic refresh” of the two divisions, and chief financial officer Paula Bell told The Scotsman that the implementation of the group’s strategy is “on track”.

Yesterday’s results come less than two months after Menzies surprised the City by announcing the departure for “personal reasons” of its chief executive, Jeremy Stafford, after just over a year in the role.

READ MORE: Menzies chief Jeremy Stafford quits after 15 months

Bell said that for distribution, Menzies looked for “a new way of maximising assets, and the network, and the people, to deliver something new, ideally in a growth market”. The outcome was identifying “a very simple, niche strategy” to deliver parcels to hard-to-reach areas in the growing ecommerce market.

Rather than compete directly with parcel carriers, it was decided to join forces to deliver parcels for them in more remote areas where Menzies already travels distributing print media.

“We can deliver the last part of the network for them much-more cost-effectively,” Bell said, noting that since that strategy was launched last year, Menzies has made three small bolt-on acquisitions in Scotland, “replacing lost volume of newspapers with parcels… so that helps drive the margins”.

In its results, the company highlighted the acquisition of AJG Parcels, which handles about two million parcels a year in the Highlands and Islands, for £7.5m.

Menzies then purchased Oban Express, “a complementary business to AJG, and since the year-end have also acquired Thistle Couriers, an Aberdeen-based parcel business that handles over 1,000 parcels per day”.

The group noted that it will “continue to seek both organic and acquisition opportunities as we look to build scale in our growth markets”.

Bell said strong balance-sheet management meant it was well-placed for acquisitions. “Across the UK, on our distribution side, if we can pick up any more little bolt-on acquisitions like we have thus far then we’ll continue to hunt those out. They make good sense for the strategy.”

She added that the group accepts that 2015 earnings were hit by operational issues at Gatwick, but she highlighted that these “have now been resolved”.

The results were welcomed by brokerages Shore Capital and Numis as exceeding their expectations. Steve Woolf of Numis said: “While 2015 has been a period of transition, we believe that the business now has a clearer focus on its highest growth opportunities in aviation, and the distribution business has made good progress in 2015.”

Menzies proposed a final dividend of 11.8p a share, to be paid on 1 July, giving a total payout for the year of 16.8p – an increase of 4 per cent on last time.