Investment Column: Menzies' measures bearing fruit

John Menzies, like its larger rival WH Smith, has had its share of problems over the past couple of years. Heavily dependent on newspaper wholesaling, it was badly affected by the newspaper publishers' decision to screw down distribution contracts a year ago. That compounded difficulties Menzies already faced as a result of the shake-up in the market following a 1993 Monopolies and Mergers Commission inquiry into the industry. The resulting profits warning in January hit the shares, but figures out yesterday suggest Menzies' attempts to tackle its problems are bearing fruit.

Pre-tax profits down 5.8 per cent to pounds 35.9m in the 53 weeks to 4 May were better than the market was going for and the shares responded with a 19p rise to 574p yesterday. The results reflected a modest pounds 1m recovery in newspaper wholesaling profits in the second half after a pounds 4m slide in the opening six months, which bore most of the cost of radical measures to revitalise the business. A 14 per cent like-for-like sales growth in the second half augurs well for the division.

Initial or first full-year contributions from three operations bought in 1995 helped offset the dip in newspapers, pushing profits from the whole distribution division pounds 1m ahead to pounds 27.2m. But the group's efforts to ginger up its retailing operations were again frustrated last year.

The first year of a three-year plan to rejuvenate the John Menzies newsagents chain saw it chip in something over pounds 2m to these figures, up from break- even before, with sales in refurbished stores showing an 11 per cent underlying rise. But the good work was undone at the Early Learning Centre, the toyshop chain aimed at younger children, where profits dipped over pounds 3m. The 4 per cent sales decline suggests it may be running out of steam in the face of strong competition from the likes of Woolworths and Argos. Outside consultants are taking a wholesale look at the business, but it may struggle as birth rates fall.

Arguably the best news yesterday was the forthcoming management changes, which will see the family loosen its grip at board level at least, although it retains control of over 50 per cent of the shares. David Mackay, who moves up from wholesaling to the chief executive's post, has impressed City observers.

Profits of around pounds 42m would put the shares on an undemanding forward multiple of 12. They are reasonable value on prospects of further recovery, but the market is very tight.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Evening Administrator

£8 per hour: Recruitment Genius: This Pension Specialist was established early...

Guru Careers: Executive Assistant / PA

£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot