JOHN Menzies saw its aviation division return to growth in 2016, helping lift pre-tax profits by 8.8 per cent to £19.8 million on revenue of £2.1 billion.
The results do not include a contribution from recently acquired refuelling business ASIG, but the group said its impact would be “materially earnings enhancing” in 2017.
Corporate affairs director John Geddes said the group would focus on integrating ASIG and expanding its distribution business, with wholesale grocery delivery being one possibility.
He also said the review into the corporate structure of its aviation and distribution businesses was scheduled to report to the market by August.
Aviation growth was fuelled by significant contract wins, notably with Frontier and United in the US, and a focus on key accounts, in addition to beneficial currency exchange rates.
Mr Geddes, said: “Across the network we have seen return to growth and we are now seeing a bit of momentum behind us after some problems in the UK.”
In 2015 contractual issues at Gatwick Airport led to £6m in lost earnings.
Having amended the structure of its aviation business to focus on geography ahead of the ASIG deal, its EMEA (Europe, Middle East and Africa) division turned an £800,000 operating loss into a £6m profit in 2016, as revenue climbed 12 per cent to £391m.
The Americas division increased underlying operating profits by 35 per cent to £12.9m as revenue climbed 26 per cent to £220m.
Revenue in the rest of the world was £140m, with profit of £11m.
The $202m deal for ASIG was completed in February when Menzies satisfied competition concerns by agreeing to hold refuelling operations at Aberdeen Airport separately. Following the deal Menzies Aviation now operates at 209 airports in 34 countries, and has about 31,600 employees.
Mr Geddes acknowledged that “there will ultimately be some” job losses related to the acquisition, but added that as the group expands he expects ASIG staff to successful apply for new positions.
In 2015 ASIG reported an $18m pre-tax profit on revenue of $415m, before it was reclassified by previous owner BBA as a discounted operation for its 2016 accounts, but on an underlying basis, ASIG’s operating profit increased by 34 per cent to $27.5m
“[ASIG’s] 2016 has been on the button and in line with our expectations, which is a big tick in the box,” said Mr Geddes. “What we are seeing so far is we have bought what we thought we’d bought. It will be significantly earning enhancing.”
He said integration was the key priority, with one or two ground handling issues to be resolved, adding: “We are very excited at the opportunities it brings – into-plane fuelling gives us a whole new product line, which if we can marry with ground handling, gives us an exciting opportunity and a very strong market share going forward.”
At Menzies Distribution, a new management team has been put in place to lead the growth of the business. Revenue grew four per cent to £1.3bn with underlying operating profit up 23 per cent to £55.2m.
Mr Geddes said that diversi- fication would be key to growth, citing a contract award by WH Smith that sees Menzies Distribution deliver stock to WH Smith retail outlets.
He added there was scope to widen that. “That is the focus. What can we deliver that doesn’t have to be there first thing in the morning? We’re looking at a variety of contracts, some in food, some in crisps, there are a number of areas. That is a competitive market and we’ve got to make sure we expand in a smart manner.”
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