Menzies Distribution Group (MDG) suffered an almost fourfold fall in pre-tax profit last year as its core newstrade business continued to be hit by plummeting newspaper and magazine sales and a tough economic environment.

However, the group’s attempts to diversify are bearing fruit with its latest financial results revealing its largest non-newstrade revenue to date.

MDG specialises in delivering time sensitive goods to retail news, trade, parcel and freight sectors across the UK and Ireland. It has a national network of more than 100 depots, employs around 5,000 staff and operates a fleet of more than 3,200 vehicles, delivering to more than 4,700 locations a day.

Its latest annual results, for the year to 31 December 2022, reveal revenue remaining almost static at £1,268.5m (2021: £1,269.6m) with pre-tax profit plunging to £3.5m (2021: £13.5m).

MDG remained upbeat in its strategic report to the annual results, noting that, despite the difficult backdrop of the ongoing war in Ukraine, the continuing impact of COVID-19 and Brexit on the UK economy,  the cost of living crisis, rising inflation and fuel price rises, it has “delivered a robust financial performance, enabling support for our customers and the investment required to deliver on our strategy.”

MDG’s newstrade division’s revenue fell to £934.2m (2021: £977.3m) during the period, as newspaper and magazine volumes continued to decline, exacerbated by the demise of retailer McColls, a major MDG newstrade customer.

On a brighter note, in March 2023, the division successfully secured contract extensions for the distribution of Frontline and Seymour titles to 2030, and for the Daily Mail Group titles, to 2028.

Menzies Distribution Services (MDS) delivered better news, with revenue rising by £33.5m (18.7%) in the period to £212.4m (2021: £178.9m), thanks to a restructuring enabling MDS to tender for larger logistics contracts.

MDG’s Express division also boosted revenue by £8.5m (7.5%) to £121.9m (2021: £113.4m) as a result of new customer wins.

However, turnover in Menzies Parcels, which is part of the Express division, decreased by £3.5m, to £19.2m (2021: £22.7m), due to the impact of losing a major contract in 2020.

During the year MDG continued to invest in its parcels division, opening a new site in Dunoon and replacing all dock levellers in its main Scottish parcels hub in East Kilbride, with the report noting that “the group is confident that Menzies Parcels is now well positioned to build upon its market leading position as a neutral consolidator of parcel deliveries across Scotland.”

Menzies Response, a division of Express, which delivers travel brochures to 2,500 travel agents, also saw improved turnover, up £2m (33%) to £8m (2021: £6m), largely due to the end of Covid-19 travel restrictions.

Looking ahead, Menzies is placing significant hope on its recent £50m deal with parcel delivery firm and locker provider InPost, in July this year, which saw the Polish firm acquire a 30% stake in MDG, with the option to take full ownership at a later stage.

The partnership sees Menzies increase its diversification drive into the parcels sector in an exclusive deal servicing all InPost lockers in the UK.

The report also noted that Menzies successfully refinanced its £39m facility with RBS to 2025 during the year which it said “demonstrates the continued confidence of our strategic partners in the long term.”

It concluded: “The group enters the new year with a clear strategy in place to accelerate its diversification activities, working with InPost to deliver an attractive low cost high quality service to e-merchants and a highly environmentally friendly solution for parcel deliveries relative to traditional providers.

“This high growth opportunity will complement our market leading position as the only wholesaler of newspapers and magazines across both the UK and Ireland.”