Distribution and aviation services business John Menzies (MNZS) slumps 23% to 375p as reorganisations by airlines at Heathrow Airport hit profit margins.

In an interim management statement for the three months to end-October, Menzies' chief financial officer Paula Bell warns the margin squeeze will continue into 2015. Investment bank N+1 Singer reduces its 2014 and 2015 earnings per share (EPS) forecasts by around 17% and 15% respectively to 47.7p and 50.8p.

Web chart - Menzies

Menzies is being hit by the in-sourcing of some of British Airways’ ground handling operations at Heathrow, which is reducing available workload and has increased competition on the remaining contracts.

British Airways’ accelerated move from Terminal One to Terminal Five has involved taking some of its ground handling business in-house, reducing the available aircraft turnarounds up for tender. And the opening of Terminal Two in June has led to other airlines changing their outsourcing agreements with aviation suppliers, according to Menzies' interim report.

Craig Smyth, the managing director of Menzies’ aviation arm, leaves with immediate effect. Smyth, who helped set up the aviation operation and has been with the business since 1993, resigned in August and was serving his notice period. It is understood that he quit after failing to get the group’s chief executive position. Menzies appointed ex-Serco executive Jeremy Stafford as chief executive, who started on 2 October.

The Edinburgh-headquartered business is best known as a distributor of newspapers and magazines to newsagents. Its aviation division, which provides passenger, ramp and cargo services at airports across the world, contributed slightly more than a third of its operating profit in the six months to end-June, around £6.6 million.

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Issue Date: 05 Nov 2014