INVESTORS have wiped £84 million off the stock market worth of John Menzies after the logistics business issued a profits warning and said the head of its aviation services arm, Craig Smyth, was leaving with immediate effect.
Shares in Edinburgh-based John Menzies plunged 28 per cent after the company said the full year outturn for its aviation arm, which provides services such as ticketing and cargo handling, will be materially below board expectations.
Menzies highlighted the challenges facing the company in the UK where the changes resulting from the redevelopment of Heathrow airport have put pressure on profitability.
The company said: "The significant changes at London Heathrow have substantially reduced margins which will continue into next year and to address this situation the UK leadership team has been changed."
It added: "It has been decided that Craig Smyth, managing director of Menzies Aviation will leave the Board with immediate effect."
John Menzies did not say if Mr Smyth would receive any compensation. The company's annual report for 2013 shows Mr Smyth's salary for this year would be £336,000. Along with other executives he had a 52 week notice period.
In August John Menzies announced Mr Smyth had submitted his resignation as managing director of Menzies Aviation but would continue in his role and fulfil all of his contractual obligations. In the same announcement the company said it was searching for a group chief executive officer after seven years without having anyone in that role. There was market talk Mr Smyth may have felt disappointed at not getting the opportunity to run the wider group.
John Menzies eventually appointed Jeremy Stafford, a former head of Serco's UK operations, to the post.
In an interim management statement based on trading in the three months to October 31 issued yesterday, John Menzies said its magazine and newspaper distribution arm has been performing in line with expectations.
The fall in the company's share price suggests investors were concerned about what the IMS said about the prospects for the aviation services business, a key driver of growth at the group.
The update underlines the difficulties caused by the changes at Heathrow airport where British Airways has taken lots of ground handling work in-house since moving to the new Terminal 5.
John Menzies' joint house broker N+1 Singer noted there have been a number of contract changes at Heathrow and competition has been fierce.
William Shirley at the Liberum brokerage said the issues at Heathrow may have been more execution-related than market-related, although pricing at the airport was also partly to blame.
John Menzies also lost some contracts in Colombia while cargo returns in Australia have been behind expectations.
The company indicated Mr Stafford will be focusing much of his energy on the aviation division. It said: "Over the coming months the new Group Executive team will be addressing the current areas of under-performance in Aviation and will be reviewing strategic, operational and investment plans to gain better leverage from the strong market growth dynamics and opportunities."
On a constant currency basis Menzies Aviation revenue was up 8 per cent in the four months to October 31 compared to the same period last year.
Following the departure of its last chief executive Patrick MacDonald in 2007, John Menzies split the responsibilities between the heads of its aviation and distribution arms and a group finance director.
Mr Smyth took over the aviation division in 2004 and has been credited with playing a big part in the strong performance of the group in recent years.
Shares in John Menzies closed down 136.75p at 350p, giving it a market capitalisation of £214m. They traded at around 840p in October last year.
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