Shares digital

John Menzies (MNZS) – Finals PTP: £31.8m (£35.6m) Divi: 18.4p (14.4p)

As an operator of non-complementary businesses, Menzies still believes there is greater value in having its fingers in different pies than streamlining to have a single focus. Newspaper distribution and ground handling services for the aviation sector are completely different interests but neither could exist on their own, claims finance director Paul Dollman. ‘Distribution is a solid business, but with limited expansion prospects. Aviation is the growth engine, but we couldn’t develop it without the cash generated by the distribution arm.’

While these operations continue to sit uncomfortably together, the business is far less complex than it was last decade when it also had its fingers in the retail sector. Menzies was a staple sight on the high street until it sold the magazines-to-stationery shops to WH Smith for £68 million in 1998. Three years later it also offloaded the Early Learning Centre to private equity for £29.6 million.

Fast forward to the present and Menzies continues to surprise the market. The distribution business looks like it still has some life left as higher publication cover prices continue to offset declining volumes.

It is the aviation business that really props up the share price, which has hovered around the 550p mark for the past year. Underlying operating profit grew 24% in 2007 despite weaker times in cargo handling. This year should see growth driven by new contracts starting at ten airports in South Africa and three in India, having invested around £45 million to serve these markets.

Shares says: A PE of 11.2 for 2008 is undemanding and the shares have proved to be resilient, which is welcome in current volatile market conditions.

by: Dan Coatsworth