John Menzies profits hit by aviation contract losses

Key aviation contract losses at the end of last year have hit first-half profits for John Menzies.

The Edinburgh-based company said aviation turnover rose by 8% on strong cargo volumes.

But group pre-tax profit fell from £14.2m to £5.8m for the six months to 30 June, partly as a result of contract losses and restructuring costs.

However, it reported that its distribution arm outperformed management's expectations.

Group revenue rose from £944.4m in the first half of last year to £954.1m.

In addition to the loss of contracts, operating profit in its ground handling operations was affected by reduced volumes at London Heathrow following terminal changes.

The company also described as "disappointing" its failure to win a tender in May run by Spanish airport authority Aena.

Menzies said it was now diverting its attention to "other opportunities across the network".

In November, the company issued a profits warning on its aviation unit after facing a "number of challenges" which were affecting its ground-handling business in the UK.

Menzies Aviation undertakes aircraft refuelling, cargo and baggage handling at airports worldwide, as well as aircraft de-icing and other services.

Cost savings

Its distribution division performed strongly in the first half of 2015, maintaining profits levels seen in the previous year.

Menzies said this had been achieved in part by making "significant" cost savings that had offset the impact of a continuing decline in newspapers and magazines.

Sales of newspapers during the period were 4% down on a like-for-like basis, but the company benefited from cover price increases in the second quarter and from successful contract wins.

Its results statement said: "We are in a period of transition, with focus on both growth and reshaping the existing business.

"The strategic review has been completed for the group and we have consolidated two management teams into one new executive team to drive forward our clear agenda.

"With our strategy in place we now have a clear route to earnings growth in both divisions."