A costly schedule of restructuring during the last year at logistics and distribution firm John Menzies caused pre-tax profits to slump by more than £20 million during 2012.
Amidst “challenging market conditions”, the Edinburgh-based newspaper and magazine wholesaler, which also operates an international aviation arm, saw overall group turnover fall back to £1.996 billion from last year’s record of £2.013bn.
During the year, the 180-year-old company shut down a number of operations across its logistical and distribution network, including the closure of its operations at Glasgow, Birmingham, East Midlands and Manchester airports to concentrate activities on a major hub at London Heathrow and two smaller subsidiary sites at Belfast and Aberdeen.
The group also closed cargo-handling operations at Chicago Airport, at a cost of £7m, after exhausting options for the loss-making facility over the past two years.
As a result, exceptional costs incurred by the group ultimately led overall pre-tax profit down from £52.5m in 2011 to £32m for the year ended December 31, 2012.
Menzies laid the blame of a 2.8% fall in full-year sales from its distribution arm at the hands of the continued decline in newspaper and magazine sales.
Like-for-like magazine sales fell 6%, while like-for-like newspaper sales fell 3%, despite being ahead of expectation courtesy of cover price increases.
However, overall, chairman Iain Napier said the group’s underlying pre-tax profits rose to £58.4m, from £56.4m a year earlier.
With underlying operating profit at Menzies Distribution flatlining at £28.8m, the firm said growth was driven by the sustained performance of Menzies Aviation, which saw operating profits rise 10% to £35.6m.
The aviation division won 30 new contracts during the year, delivering £19m of additional revenue. It renewed 94 contracts worth £118m.
Mr Napier said the group continues to trade on a “sound footing” with both its divisions returning good results. Despite “challenging market conditions” for the distribution arm, he said Menzies had continued to deliver targets.
“Contract negotiations with a number of publishers continue and it is expected a number of these will be concluded during the year,” he added.
At the end of last year the logistics group announced it had successfully renewed its contract with one of the UK’s largest magazine distributors, Marketforce. The agreement will see the group’s newspaper and magazine wholesaling division Menzies Distribution continue to handle Marketforce’s products.
The contract, which secures £122m of annual sales revenue for the group, will run for five years as of January 2015.
During the year Menzies gained new contracts with groups including Courier publisher DC Thomson & Co Ltd.
business@thecourier.co.uk