Menzies profits climb to 30.7m pounds: Tabloid price war must be good for sales, says chairman

THE 17p cut in the price of the Mirror to 10p yesterday produced a 'very strong' sales performance, according to John Menzies, which distributes about 16.5 per cent of Britain's newspapers. 'Anything which increases volumes must be good news for us,' said Ranald Noel-Paton, group managing director.

His comments came as the group announced that it had made pounds 30.7m profit before tax in the year to 1 May, up from pounds 16.6m the previous year. The 1992 figures were, however, depressed by an pounds 8.8m provision for closing the Early Learning Centre chain in the US. Excluding that, profits rose 17 per cent from pounds 25.7m.

The cost of closing the US business was less than expected and pounds 1.1m was written back to profits in 1993. Mr Noel-Paton said the remaining pounds 1m provision would be kept on the balance sheet in case other costs arose, although none were expected.

The John Menzies retail chain had a difficult year, with flat like-for-like sales because of poor demand for paperback books and toys. Stephen Robinson, the recently installed managing director, is aiming to boost its performance by creating 'multi- specalist' stores.

The poor performance from John Menzies meant that operating profits from the retail businesses fell from pounds 11.3m to pounds 11.1m, despite a strong performance from the British Early Learning Centres. Their sales rose 9 per cent, on a like-for-like basis, although since the year-end, growth has slowed. Mr Noel-Paton said that was partly because of poor weather in May, which affected sales of outdoor products.

Profits in the distribution division rose from pounds 18.5m to pounds 20.9m. In newspapers, good demand for magazines and an improvement in the Sunday newspaper market helped compensate for declining sales of daily newspapers. But TBD, its audio, video and computer software business - which services a range of high street customers incluing Boots - was hit by reduced music volumes. Its office distribution business managed to increase sales, despite fierce competition, helped by the acquisition of RMG.

The Monopolies and Mergers Commission is investigating the newspaper distribution business and its report is due out in late summer. But Menzies said it had no doubt the business operated efficiently and in the public interest.

Debt fell from pounds 24 to pounds 8m, or 9 per cent of shareholders' funds, and the group expects to remain cash-generative this year. That meant interest payable fell from pounds 4.1m to pounds 1.9m.

Earnings per share were 35.3p compared with 15.5p, or 28.4p before the US closure costs. The dividend was increased 8 per cent to 10.8p via a 7p final. But the shares fell 5p to 499p.

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