JOHN Menzies yesterday said its rapidly expanding aviation business would enjoy double-digit profit growth for the "foreseeable future" as it tapped into new markets such as India and South Africa.
The upbeat outlook came as Menzies, one of Scotland's biggest companies, rewarded its shareholders with a 25 per cent dividend hike after banking annual results that were better than expected.
Revenues rose 6.3 per cent to £1.54 billion in the yea
r to 29 January, while underlying group profits totalled £38 million, up from £35.8m last time.
Menzies' aviation arm, which provides ground and cargo handling services at 120 airports in 28 countries, generated operating profits of £20.6m, a 24 per cent hike on a year earlier.
It marks the fourth consecutive year of profit growth in excess of 20 per cent, and takes earnings at the division close to those of Menzies Distribution, where profits have been under pressure from falling newspaper and magazine volumes.
During the year, operating profits at the distribution business dipped to £23.4m from £23.7m in 2006.
Group finance director Paul Dollman said the company was "not obsessed" by the 20 per cent-plus growth rate at the aviation operation, but forecast double-digit expansion for at least the next couple of years.
"We are opening in two very big and exciting markets – South Africa and India," he said. "Once we get established in India there is tons of room for growth."
Both new projects are set to deliver earnings growth in the second half of 2008 and provide full-year contributions in 2009.
The bumper numbers were delivered despite adverse currency movements and "poor" US cargo volumes, Menzies added.
Dollman said growth would continue to be driven by a combination of new contract wins, organic expansion and "selective" acquisitions.
"We are quite focused," he said. "We are not into just planting flags around the world. Airlines are keen on longer-term performance. We bulk up the markets we are in through organic expansion or small acquisitions, but we'd look at bigger ones if necessary."
Dollman was put in charge of Menzies' corporate head office last year following a boardroom shakeup that resulted in the departure of chief executive Patrick Macdonald.
At last May's annual general meeting, chairman William Thomson ruled out an early demerger or sale of the aviation business, whose £400m of revenues still pales alongside the £1.1bn-plus generated by Menzies Distribution.
Dollman said he expected sales to be "broadly flat" at the distribution arm this year, with magazine volumes, particularly monthlies, "challenging".
The final dividend was set at 18.4p a share, giving a full-year payout of 25.6p, up 25 per cent on 2006.
FILMSTAR FIRMNOW one of Scotland's leading publicly owned companies, John Menzies was founded in 1833 by an Edinburgh bookseller of the same name.
For many, the company is still best known for its retail past, even though it is ten years since the chain of high street newsagents was sold to rival WH Smith for £68 million.
Fans of the 1996 cinematic take on Irvine Welsh's cult novel Trainspotting will recognise the erstwhile flagship Edinburgh store from the film's opening scenes, when anti-heroes Renton and Spud are seen fleeing from security staff following a shoplifting spree.
Newspaper and magazine distribution has always been at the core of the business and today remains the biggest revenue generator.
The fastest growing part of the company, however, is Menzies Aviation. The division, which provides passenger, baggage and cargo handling services, employs 14,000 people at 120 airports in 28 countries.
These days, with its head office still in the heart of the Scottish capital, Menzies bills itself as a "time critical logistics company".
The full article contains 631 words and appears in The Scotsman newspaper.
