John Menzies confirms sale of distribution arm under way

● Comes as group reports ‘strong’ set of results for 2017 ● Record profit for aviation arm after US acquisition

Logistics and airport services firm John Menzies has revealed that the sale process for its distribution arm has started.

The Edinburgh-based group made the announcement as it reported its 2017 results, describing the year as “transformational”.

Turnover increased to £2.5 billion from £2.1bn, while pretax profit grew to £26.7 million from £19.8m. Corporate affairs director John Geddes told The Scotsman that the group is “very, very pleased” with the results, which include record underlying operating profit of £77.9m, a year-on-year jump of 41 per cent.

He also noted underlying earnings per share jumping by a fifth, with a proposed final dividend of 14.5p giving a total dividend of 20.5p for the year, up 11 per cent, showing the board’s optimism.

Menzies’ aviation business had what he described as an “excellent” year on the back of the group’s $202m (£144.5m) purchase of US aviation services group ASIG, which completed in February last year.

Underlying operating profit at Menzies’ aviation arm was up 72 per cent to a new high of £58.8m, despite several headwinds such as Air Berlin and Monarch Airlines collapsing. It also saw net contract wins in the year total 150 and included a “significant” tie-up with British Airways owner International Airlines Group.

Geddes also highlighted a “really solid” performance by the group’s distribution business despite volume declines in the newspaper and magazine market. Underlying operating profit for this area was in line with last year at £24.8m.

The group said the sale process for Menzies Distribution has been launched, after the group last year dropped plans for a £40m merger between the unit and parcels business DX Group, and in 2016 appointed financial adviser Rothschild & Co to look at splitting its two divisions. Geddes said an information memorandum has been released to the marketplace and the board is “committed to creating a pure-play aviation business”.

He added: “We think we’re in a good place to kick on from here after a very strong year.”

Analyst Martin Brown of Shore Capital said Menzies delivered a “strong set of results”, with its aviation and distribution units beating expectations. Steve Woolf of Numis said that after the ASIG deal, Menzies has “greater scale, diversity and resilience… The proposed sale of the distribution business would create a cleaner corporate structure for future growth initiatives”. French Connection has said it is “very close” to returning to profit, but continues to shut stores and warned that Britain’s high street would remain under pressure. The fashion chain saw annual pre-tax losses nearly halve to £2.3 million from £5.3m the previous year as it axed lossmaking stores and overhauled ranges. On an underlying basis, operating losses narrowed to £600,000, down from some £3.7m the previous year. Retail like-for-like sales grew 0.8 per cent.