John Menzies issues profits warning

Logistics group John Menzies has issued a profits warning following problems with its ground handling contract at London Gatwick Airport.

Menzies said rectifying "operational issues" at the airport would cost an extra £6m in the second half of 2015.

It warned full-year profits could be £2m lower than previously forecast.

However, it reported strong profit growth at its US hubs, while its distribution arm was "delivering ahead of forecast".

In a trading update for the 10 months to 30 October, Edinburgh-based Menzies said: "Within the aviation division, service levels at London Gatwick have been restored.

"However, the actions we have put in place to mitigate the operational issues and deliver the customer's operational requirements will cost £6m of additional investment, mainly in manpower, in the second half of the year, and will impact this year's earnings.

"Contract negotiations with this customer continue, and we are working towards a resolution before the year end."

'Disappointed'

Menzies said its aviation division continued to perform well in all regions outside the UK.

Ground handling turns and cargo tonnes were up 9% and 4% respectively, with revenue in the period up 6% on last year.

Chief executive Jeremy Stafford said: "During a busy period of transition, we continue to progress with the group's strategic objectives.

"Our distribution business is quickly gaining traction in the UK e-logistics market, whilst continuing to deliver cost and cash improvement initiatives.

"Aviation continues to benefit from growth in the Americas, whilst we continue to work through UK operational matters.

"I am disappointed that contractual issues at London Gatwick have led us to revise our aviation outlook for this year, albeit largely offset with strong progress in our distribution business.

"The group remains well placed to drive earnings."