John Menzies to look into parcel delivery as profits drop

JOHN Menzies is considering delivering parcels as a way to get more out of its distribution network.

The Edinburgh company said it is in the early stages of exploring an entry into e-commerce logistics but believes it could have a scalable business model.

Annual results showed a slide in pre-tax profits from £42.1 million to £25.7m on revenue that was relatively flat at almost £2 billion. The group said that on an underlying and constant currency basis, profits were down £5m to £48.1m.

The aviation division, which mainly does ground and cargo handling, grew revenue by two per cent to £738.6m but saw underlying operating profit fall from £37.8m to £30.2m.

A major reorganisation at Heathrow was a large factor in the profit fall with British Airways taking ground-handling back in-house and a terminal closure, forcing other carriers to move.

John Menzies said it also had booked start-up costs in a number of areas as new contracts bedded in.

The newspaper and magazine distribution business held operating profits at £24m even though revenue slid from £1.28bn to £1.26bn.

Chief executive Jeremy Stafford, who joined in October, said the issues at Heathrow have largely been addressed but there may be some ongoing financial impact in the first half of this year. He said: “We have had a good hard look at what went on.”

Mr Stafford said the company was keen to build on recent contract wins in North America such as for Delta Air Lines in Detroit, United Airlines in Denver and WestJet Airlines in Toronto.

John Menzies is also looking at possible acquisitions there particularly in areas where it can cross-sell services such as de-icing of planes.

Mr Stafford said: “There is a wave of

regional hub outsourcing and that is what we have benefited from so far.

“We can see a clear organic opportunity and in terms of selling more services per station there may be opportunities to pick up a capability acquisition or get greater density.

“We are open to those as we can see it is one of those times when a market is ready to go.”

He also reiterated a commitment to South America even though there have been some contract losses in Colombia.

Mr Stafford is also putting small numbers of people into the Middle East and parts of Asia to start making connections with airlines ahead of those markets opening up.

He said: “When these markets open they can open quite quickly so you have to be ready.”

According to Mr Stafford the distribution business has started the year well and he is excited by the potential of moving into the e-commerce delivery sphere.

He said: “Clearly the distribution of e-commerce goods is growing very rapidly. We recognise that we use our as sets very intensively through the night but we have some capacity during the day. So we think we have an opportunity there.

“Through our marketing services business we have a successful fulfilment business for catalogue e-commerce operators so we think we can scale that.

“We also have a bias in our footprint to the more rural areas [of the UK]. Whilst e-commerce was very much led in the urban areas by early adopters we are seeing fast growth in rural areas and are looking at how we can play a part in that too.”