We have long argued that John Menzies' (MNZS) potential has been obscured by its troubled distribution division. Now, with its sale expected at the end of August, the group has an opportunity to demonstrate its potential. Distribution will be sold to private equity firm Endless for £74.5m on a debt and cash-free basis. Shareholders will vote on the deal in a general meeting on 22 August and it is expected to complete in the following days. Should it be approved, Menzies will retain a 10 per cent stake and 83 per cent of the responsibility for funding the defined-benefit pension scheme.
Following the sale, which removes exposure to the "structurally declining print media market", the group intends to further establish itself in aviation services, using a combination of organic and acquisitive growth, offering a diversified portfolio of services across many geographies. Management is targeting sales growth of 8 per cent a year, driving earnings per share (EPS) growth of 10 per cent with two to three times dividend cover. Early indications are good, with 55 (net) new contracts signed in the period, along with 100 renewals. The integration of ASIG – the acquisition that marked the group’s move towards being an aviation company – is now largely completed and has delivered synergies ahead of expectations.
Broker Shore Capital is forecasting adjusted cash profits of £87.5m, giving EPS of 40p in 2018 (up from £79.2m and 33.7p in 2017).
| JOHN MENZIES (MNZS) | ||||
| ORD PRICE: | 645p | MARKET VALUE: | £539m | |
| TOUCH: | 645-649p | 12-MONTH HIGH: | 750p | LOW: 572p |
| DIVIDEND YIELD: | 3.2% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 140p* | NET DEBT: | 205% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 (restated) | 612 | -4.2 | -7.60 | 6.00 |
| 2018 | 627 | 8.3 | 6.70 | 6.00 |
| % change | +3 | - | - | |
| Ex-div: | 18 Oct | |||
| Payment: | 16 Nov | |||
| *Includes intangible assets of £168m, or 201p a share | ||||
