John Menzies puts newspaper distribution division up for sale
JOHN Menzies has decided to sever its historic links with the newspaper trade to focus on the aviation support business.
The Edinburgh-based group said it has put its newspaper and magazine distribution arm up for sale after deciding there are better growth prospects in markets such as cargo handling and plane refuelling.
The decision to sell the distribution arm comes months after plans to merge the operation with DX group fell apart.
In November Menzies appointed Rothschild investment bank to look at ways of separating the distribution and aviation divisions.
Menzies, which became a household name after running a big chain of newsagents, has faced pressure from investors over the years to break itself up.
Noting the distribution and aviation divisions operate in very different markets, corporate affairs director John Geddes said: “If you were to start a business tomorrow you would not have them under the same roof.”
However, speaking after Menzies posted a record underlying profit of £78 million, Mr Geddes said he thought the board had done a good job of resolving the challenges posed by the group owning such disparate businesses.
It has only been in recent years that Menzies has found the divisions competing for capital.
The group had been happy to use the cash generated by the distribution arm to fund its diversification into providing support for airlines.
Earnings at the distribution arm have come under pressure amid falling sales of printed newspapers and magazines. The business has required investment to help it move into areas such as providing support for internet retailing.
Mr Geddes noted: “We have stepped through it, we have taken our time and not done anything on a knee jerk basis.”
He said the plan to merge the distribution arm with Slough-based DX Group had made perfect sense and been supported by shareholders but could not be completed for various reasons.
Menzies scrapped the merger plan in August after a profit warning issued by DX made the revised cash and shares deal the firms agreed in June less appealing.
Mr Geddes is confident Menzies will be able to get a good price for the distribution business.
It has had expressions of interest from potential buyers.
The division, which has around 2,000 vehicles, has moved into growth markets such as parcel distribution.
Mr Geddes said the aviation-focused business would remain based in Edinburgh following the sale.
The group will use the sale proceeds to support the division’s growth, potentially through acquisitions, and to pay down debt.
A demerger of the distribution business remains a possibility, Mr Geddes said. This would leave shareholders with an interest in the division. Directors think the sale plan would create more value for shareholders.
Mr Geddes is confident the distribution business will remain based in Edinburgh following the sale. Any new owner will call the shots.
Menzies grew underlying profits by 41 per cent in 2017, from £55.2m in 2016. The aviation business grew profits 72%, to £58.8m, helped by the $200m acquisition of the ASIG refuelling business in December 2016. The integration is going to plan.
Distribution profits rose to £24.8m from £24.7m, which Menzies said represented a solid performance in the face of declining volumes and increasing wage costs.
The group proposed a final dividend of 14.5p taking the total to 20.5p, up 11%.
The sale of the distribution arm would require shareholder approval.
Founded in 1833, Menzies sold its newsagents arm to WH Smith in 1998.
We’ve taken our time and not done anything on a knee jerk basis