The clear need to diversify
Tuesday 04 July 1995
Last year, the newspaper distribution and retailing businesses saw turnover grow 1.5 per cent and 3.5 per cent respectively: low growth rates which are not likely to improve in the foreseeable future. The pedestrian performance of the core activities meant that the group turnover rose just 2.1 per cent at pounds 1.25bn. A 10.8 per cent increase in the pre-tax profit to pounds 38.1m was therefore mainly due to operating efficiencies from continued restructuring.
Menzies is replacing its smaller newspaper wholesaling branches with a reduced total of large shed operations. The current 63 branches will eventually contract to between 35 and 40. Further moves depend on agreement for a carve-up of territories with its main rivals, WH Smith, being approved by the Office of Fair Trading.
But there is only so much extra efficiency and cost reduction to be squeezed from the existing business, hence the decision to move into new markets.
The diversification has already started with the acquisitions of 37 per cent of Funsoft, a German distributor of CD- ROM and other multimedia products. This market is far from mature and has enormous growth potential. A further diversification move has come with the joint venture with the Dutch Samas Groep to form Europe's third largest office stationary business. Management seems to have acknowledged that its existing universal Office Supplies business is not likely to become a big player. The current turnover of these two business is a combined pounds 320m.
In the long term there should be further growth from Menzies. However in the short term the share price is discounting most of that, having risen from 500p in the last three months to 581p, after yesterday's 8p rise.
Standing on a historic p/e of 13, the shares are probably high enough for now. Hold.
- 1 Half of young women unable to ‘locate vagina’ and 65% find it difficult to say the word
- 3 Saudis risk new Muslim division with proposal to move Mohamed’s tomb
- 4 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
- 5 Mexican woman becomes world’s 'oldest person' at 127
Perez Hilton apologises for publishing Jennifer Lawrence naked 4Chan photos
Jennifer Lawrence 'nude photo hacker' claims there are hundreds more celebrity images to come
Victoria Justice on naked photo leak: 'Let me nip this in the bud right now – pun intended'
Ariana Grande nude photos leak: Pictures are completely fake, say representatives
Saudis risk new Muslim division with proposal to move Mohamed’s tomb
Rotherham child sex abuse scandal: Labour Home Office to be probed over what Tony Blair's government knew - and when
What do immigrants really think of Britain? Polish immigrant's Reddit post goes viral
Ashya King: Parents of five-year-old boy refused permission to visit him in hospital and denied bail at Spanish court
With Douglas Carswell joining Ukip, my party has taken another giant step forward
When elitism grips the top of British society to this extent, there is only one answer: abolish private schools
Ashya King: 'Cruel NHS has not given us the treatment we need', says father of five-year-old with brain tumour who fled to Spain
iJobs Money & Business
£35000 - £38000 per annum + benefits: Ashdown Group: Executive Assistant/Event...
£30000 - £32000 per annum: Ashdown Group: HR Generalist (standalone) - Tunbrid...
£600 - £800 per day: Harrington Starr: Derivatives Risk Commodities Business A...
£600 - £800 per day: Harrington Starr: Power & Gas Business Analyst/Subject Ma...