The reinvention of John Menzies received a firm stamp of approval from the City yesterday as the shares were marked up 21.5p to 371.5p, on results which showed booming magazine sales, strong recovery at Early Learning Centre (ELC), and a balance sheet cleared for a #100m expansion of the airport services business.
Chief executive David Mackay promised to restore the group's record of consistent profit growth, following a year which saw the #68m sale of its 232 High Street stores to WH Smith and a #15m write-off in its THE video and software business. He revealed that in May and June like-for-like sales in the ELC chain were 9.2% ahead, following a rise of 9.1% in the year to May 1, while magazine sales were up 8.5% on top of a 6.3% increase for the year. ELC cut its loss from #6.7m to #4m
and is now on course to return to profit and be sold off.
Mackay said he was comfortable with brokers' forecasts that pre-tax profit, which was down #5.4m to #28.6m in spite of a #2.9m boost from interest on the sale proceeds, will return to the #33m area in the current year. He said Menzies would not overpay for further acquisitions in airport services, but had #100m to spend. ''If I got 10 or 12 deals at #5m to #10m, I would much rather do that than go for a big bang.''
Menzies core business is still wholesaling of newspapers and magazines. Newspaper sales, accounting for over half the total, were restricted by publishers' price cuts, slowing overall sales growth to 1.1% at #814m,
two-thirds of the group total.
Menzies Transport Services (MTS), the second-biggest cargo handler after BA, now handles 320,000 tonnes of air cargo and has doubled in size in recent months following a string of acquisitions. Sales were up 10.7% at #47.6m, but profits are still barely registering as the business gears up.
The blot on the landscape has been THE, where sales were down #42.7m to #152.2m due
to the loss of a major contract
and a cut in sales to the John Menzies retail chain following its disposal. Investment of #1.3m, following #1m last year, is reducing warehouse space and staffing levels.
THE Games increased turnover to #120.3m, and while its main product the Nintendo N64 console will lose out later this year as rivals Sega and Sony launch new hardware, a new Nintendo launch next year should regain ground.
ELC sales were 3% down, but only because it withdrew from the nursery and childrenswear market. Toy sales recovered strongly, helped by new ranges with a stronger emphasis on learning through technology. ELC is now also selling through 200 Sainsbury stores and is to trial concessions with other retailers. Mail order sales increased by 60% and plans are advanced to develop the brand over the Internet.
Mackay said: ''I am proud we turned the business round but I am not a retailer, and we will demerge Early Learning when the time is right. It will not be a fire sale.''
The final dividend is being raised to 15.8p from 15.2p with a final payout of 11p.
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