Menzies' spark of hope

The patchwork nature of Britain's retailing recovery was underlined yesterday when John Menzies, the newspaper distributor and retailer, said crucial like-for-like December retail sales were up 5 per cent. It followed the downbeat Christmas trading statement put out last week by Kingfisher, the Woolworths-to-B&Q DIY chain, a generally lacklustre announcement from House of Fraser, and recent upbeat remarks from Tesco and Next.

Ranald Noel-Paton, Menzies managing director, said he did not want to overplay the Christmas advance, but said it "was a glimmer of life. It could have been worse."

In the six months to October Menzies made pre-tax profits of £7.3m, up 16 per cent, on sales on continuing operations up £2.3m to £575.4m. The interim dividend moves up 12.2 per cent to 4.6p on earnings per share ahead 29 per cent to 7.6p.

Menzies does not give a divisional profits breakdown at the halfway mark, but a pivotal performer was its Early Learning Centres high street chain, where sales rose 11 per cent - well above its retailing median increase. ELC now has 175 stores and eight new superstores, the latter successfully adding nursery and children's clothing to its traditional product range.

Mr Noel-Paton said there was great potential in the new concept. The company expects to open between 50 and 80 of the new concept stores.

Menzies' newspaper, magazine and books retailing chain, whose outlets are frequently seen on station concourses, fared less well. The rail strike cost it about £100,000 a day in sales, or 2 per cent of turnover.

Menzies' wholesaling arm pushed up sales volumes, although profits remained close to last year's levels. The group believes it will emerge strong from the newspaper price wars.

But Mr Noel-Paton acknowledged that following the putting out to competitive tender of a number of distribution contracts for News International Menzies' share of NI distribution had dropped from 22 to 19 per cent.

Borrowings are running at 19 per cent of shareholders' funds, compared with 24 per cent at this time last year. Capital spending rose from £10m to £14m, directed mainly to the Early Learning Centre chain.