Two very different sets of results from Jessops and John Menzies today: the photography chain reported another near-5% fall in sales for last quarter, blaming the continuing impact of the high street slump. By contrast John Menzies – which has long since got out of the high street, but remains in the wholesale business – actually raised its forecasts, suggesting that a successful cost-cutting drive and the collapse of a big rival will boost its profits for the full year. It’s another reminder that the recession may have an upside for some companies in the longer term…
Jessops’ ongoing woes are no great surprise; the camera store chain has been struggling for some time, posting big losses in both of the last two years. It’s partly an issue with its model – cameras are usually cheaper on the internet, some of its recent success stories have been a bit faddish, and more and more people are relying on the phone cameras. Last quarter sales dropped 4.7%, which was even worse than previous quarters. But it’s also a financial issue: it’s been labouring for some time under a massive debt burden, which is not exactly ideal in a credit crunch and gives it virtually no room for manoeuvre. It really needs to restructure its debts, but it admitted today that it couldn’t do so without wiping out shareholders entirely.
John Menzies also used to have a very heavy debt burden, which weighed heavily on its share price – but it looks as though management have done a good job of turning things around. It shed another £30m in the first half of this year, taking the total pile down to £153m, and it has all its bankers onside. This has allowed it to focus on cutting costs (typical Scottish thrift?) and winning new business in the recession, particularly in its distribution business (which supplies newspapers and magazines to retailers). Overall, Menzies managed to boost underlying profits by 16%, meaning that it’s been able to improve its forecasts for the year as a whole – an uncommon occurrence these days.
Better still, rival Dawson News went into administration a few weeks ago, and Menzies managed to buy some of its assets. Once these are up and running next year, they should also boost revenues. As we saw with Carpetright recently, the recession can clear the field for the strongest firms in the sector, which should leave them in good shape when things start picking up. Unlike Jessops, by the looks of it.
In today's bulletin:
The NHS: Britain's unhealthiest place to work?
Manufacturers cheer up - but Governor begs to differ
John Menzies up - but Jessops slides again
'Pay now, die later' funeral packages on the rise
Green issues slip down the SME priority list