JOHN Menzies has reported a slight fall in core annual pre-tax profit but an 11% rise in underlying profits in its aviation division, which now contributes almost two-thirds of group earnings.
Menzies had warned in November that disappointing returns in the distribution division would impact the second-half result. "The second half didn't get any worse; in fact, it was a little bit better than we had hoped," said Paula Bell, finance director. "Nevertheless, we have to respond to market conditions and we are doing a new rationalisation programme which starts in 2014."
But on new "digital revenue streams" promised five years ago by former divisional director Ellis Watson, Ms Bell said: "If there was a silver bullet, someone would have found it by now."
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Distribution profits came in some £3.2m lower than the previous full year at £24.3m, despite £5m of cost-savings, but were almost entirely offset by the advance in aviation, where underlying profit was up £3m at £37.8m, and after a £500,000 adverse currency movement. Core pre-tax profit slipped from £54.5m to £53.1m, though the actual pre-tax number jumped 50% to £42.1m, following last year's exceptional actions in closing cargo depots in the US and UK, including Glasgow. That, however, has "allowed the focus to be on higher margin operations which has yielded benefits", the group said.
Ms Bell said the balance sheet, strong cash flow and £95m bank facility would support further acquisitions in the sector. The group's shares closed unchanged at 660p, their lowest since January 2013. The final dividend of 18.8p means the total is lifted 5% to 26.5p, which chairman Ian Napier said "emphasises the robustness of the group's financial prospects".
Menzies Aviation, the second biggest player behind Servisair/Swissport and created barely a decade ago to bolster the declining traditional business of the 181-year-old company, operates from 144 airports and serves airlines such as Emirates, British Airways, Cathay Pacific, Qatar and easyJet. The business invested £15m in acquisitions during the year, to build on its presence in Australia/New Zealand and Scandinavia, and provide a new entry point into Latin America via Colombia. The ground-handling business won a licence to operate at Nice and continued to expand in the US.
The cargo business was now in shape, the group said, limited to restricted licences in emerging markets and locations where one-stop cargo and ground operations was important. Absolute tonnage was down 14% and like-for-like down 2% in line with industry performance. The freight forwarding business increased profits by 11% to £4.2m, the group said.
Menzies Distribution, where managing director David McIntosh is stepping down, renewed over 80% of its publisher contract revenues in deals stretching to 2019. The main weakness was in magazine sales, down 9.2%.
Mr Napier said a search for both Mr McIntosh's successor and an additional non-executive director was under way.