JOHN Menzies, the Edinburgh-based newspaper distributor and baggage handler, today reported a sharp fall in full-year profits after being hit by the downturn in the aviation industry.
Although operating profits before pension costs rose 15.1 per cent to £25.2 million in the year to December 27, on turnover 3.7 per cent higher at £1.24 billion, pre-tax profits fell to £3.1m, from £17.7m a year earlier.
The fall was blamed on ex
ceptional costs of £17.2m, which were mainly due to the writedown of the carrying values of its assets in Menzies World Cargo UK and Talma Peru, the group’s South American aviation services arm.
"Although both businesses are expected to trade profitably during 2004, trading conditions remain difficult," said Menzies chief executive Patrick Macdonald, although he said the outlook for the group as a whole was positive.
The Sars virus, the threat of terrorist attacks, the crisis in the United States airline industry and the war on Iraq have all hit the aviation sector.
Menzies Aviation, which manoeuvres aircraft on the ground, moves bags and handles cargo, suffered difficult trading conditions during the first half of the current financial year, running up a loss of £600,000.
But for the year as a whole, Aviation saw operating profits jump 10.8 per cent to £4.1m, on turnover 1.2 per cent higher at £239.7m. Mr Macdonald said the results were "encouraging", thanks to a stronger second half for the business.
Last month Menzies promoted Craig Smyth to the position of managing director of its Aviation division.
Mr Smyth is currently a director at the business, and will take up his new role following the retirement of the current managing director, Peter Smith, following the group’s annual meeting next month.
At the group’s newspaper and magazine distribution business, operating profits rose 8.7 per cent to £31.2m on turnover 4.3 per cent higher at just over £1bn.
Mr Macdonald said: "Menzies Distribution has again performed successfully with results driven by newspaper cover price increases and strong magazine launches."
Looking ahead, he said the distribution arm is well placed to cope with the competitive environment, while Aviation has been repositioned to perform more robustly in current market conditions.
