October 4, 2008

John Menzies Caught in Air Turbulence ; AVIATION

John Menzies revealed a blow to profits yesterday after its ground handling and cargo arm was caught in the turbulence facing the airline industry.

The Edinburgh-based firm, which employs 14,000 people at airports worldwide, said cuts to winter airline schedules and weaker cargo volumes would have a "material effect" on earnings at Menzies Aviation.

It forecast divisional earnings of between pounds 14 million and pounds 16 million for the current year, compared with house broker ABN's forecast of pounds 21 million. Menzies said its newspaper distribution arm continued to trade in line with hopes.

Shares fell 18 per cent yesterday after brokers cut their group profit forecasts, with ABN lowering its target by pounds 7 million to pounds 29.2 million.

John Menzies chairman William Thomson said: "As a group we remain strong. Menzies distribution continues on its stable path generating significant earnings and I believe that the strategy at Menzies Aviation remains the correct one and will deliver growth in the medium to long term."

Menzies said flight schedules for the winter period, particularly in Europe, and cargo volumes were much weaker than it had anticipated in August. It blamed the price of oil and falling consumer demand for the cargo decline.

Shore Capital stockbrokers said trading conditions for the aviation arm had changed dramatically in the six weeks since the company's last update.

Analyst Karl Burns added: "Today's disappointing statement highlights the poor visibility within the current aviation market."

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