Shares in major Scottish logistics and distribution firm John Menzies slumped on Tuesday after the company issued a full-year profits warning.
The firm said profits were likely to be “slightly lower than previously expected” after trading was hit within its magazine and newspaper distribution arm.
The warning, which sent shares more than 7% lower in morning trading, came as the Edinburgh firm updated the markets on trading in the four months to October 31.
The company said it had seen “disappointing returns” from ancillary revenues, sticker collections and weaker-than-forecast seasonal sales within the distribution division’s marketing services business in recent months and cautioned that profits would be impacted during the second half of the year.
However, Menzies said its aviation division had continued to perform well on a constant currency basis and its overall outlook remained positive.
Ground handling volumes were 2% ahead on a like-for-like basis but cargo handling, which accounts for more than a quarter of the division’s overall profits, was down 3% on the same measure as a result of the closure of a number of loss-making cargo facilities during the course of 2012.
Menzies said the recent £14.1 million acquisition of two new ground handling units in Australia and Colombia had now been completed and both were functioning well.
It also announced a new five-year tie-up with Hong Kong-based carrier Cathay Pacific for ground handling services at five locations across Australia and New Zealand.
Menzies said the contract, the value of which has been undisclosed, would help to “underpin future revenue streams and will balance expected yield pressure forecast into 2014.”
In its update, the company said there had been no material change to the group’s financial circumstances since August but warned investors that full year results would be impacted as a result of the problems within the distribution division.
However, the company said it remained confident for the future.
“The group continues to maintain a strong balance sheet, with positive cash generation which leaves it well placed to support medium term growth ambitions,” Menzies said.
“Looking ahead, we know our markets, we have experienced management teams and have a clear strategy to deliver growth.
“The board remains confident in the group’s future and believes it is well placed and appropriately financed to deliver further shareholder value.”