Menzies: Sun on Sunday damages newspaper industry

Newspaper distributor John Menzies today warned the launch of the Sun on Sunday was hitting the Sunday newspaper market as its low cover price attracted readers from rivals.

Menzies, which handles around five million newspapers and 2.1m magazines each day, said the Sun on Sunday, priced at €1 (50p in the UK), had taken share from the likes of the Sunday Mirror and Mail on Sunday.

The Sun on Sunday launched on February 26 following the demise of The News of the World in the wake of the phone-hacking scandal at parent company News International.

However, in the overall newspaper market, sales volume decline was offset by strong cover price growth with some 12 titles increasing cover price during the six months to June 30.

John Menzies’ distribution arm recorded broadly flat operating profits of £14m (€17.8m).

It said its aviation arm – which provides baggage handling services and recently overtook newspaper distribution as its biggest profits driver – saw earnings slightly increase to £14.5m (€18.4m).

The wider group reported broadly flat underlying pre-tax profits of £25.4m (€32.3m) in the period, against £25.1m (€31.9m) a year earlier.

Shares in the FTSE 250 listed group fell nearly 2% after today’s results.

But Mike Murphy, analyst at brokers Numis Securities, said: “We continue to believe the growing aviation business will dominate the earnings profile underpinning a change in perception of the group to a business with good long term growth prospects.”

Within the magazine category, monthly title sales fell 4.4%, while weekly titles dropped 8.4% as the tough consumer climate hit sales.

Sticker magazines around the Euro 2012 football championship and Jubilee specials helped limit falls of magazine sales.

Menzies said the aviation division continued to grow with contract wins from global carriers such as British Airways and launched in two new countries during the period.

Iain Napier, chairman of John Menzies, said: “I am very pleased to be announcing another good set of results in this uncertain economic environment. We have made significant investments in Menzies Aviation to support contract wins and acquisitions to add to the momentum of the business and to generate further sustainable earnings.”