Dawson shut out as Smiths and Menzies win Mirror deal

Sarah Marks
29 May 2009

Forget newspaper wars — the battle to get your daily paper into the shops is just as vicious as anything the redtops can hurl at each other.

Smiths News and John Menzies announced their victory today in the fight for a lucrative annual contract with Daily Mirror owner Trinity Mirror.
However, their triumph has forced main rival Dawson Holdings out of the market altogether.

Smiths jumped 7¾p today to 109¾p as it revealed it had beaten Dawson Holdings to win a new five-year distribution contract with Trinity Mirror, worth £183 million a year.

This will deliver an extra £47 million in annual sales with £5 million coming from regional titles. A chipper-sounding chief executive Mark Cashmore said Smiths had won £400 million of new business in recent months.

Dawson, which this year celebrates its 200th anniversary, said it will abandon newspaper distribution and announced the departure of boss Peter Harris.

The company, which traces its history back to a single newsagent and bookseller in Cannon Street at a time when headlines warned of Napoleon's unswerving advance through Europe, fell by 17.5%, or 1¾p to 8¼p. Altium Securities today halved its target to 5p from 10p although it was advising clients to sit on their shares.

John Menzies, up 6¾p at 137¾p, also emerged a winner, having renegotiated a distribution deal with Trinity which will bring in around £200 million a year.

After yesterday's losses the market was back on the winning track with the FTSE 100 notching up 64.76 points to 4452.3.

The dollar's renewed weakness translates into higher commodity prices and there was strong support across the board for all the miners.

Lonmin led the way up 117p at 1434p, followed by Xstrata, 49.5p ahead at 699p. Eurasian Natural Resources were 38p better at 651½p while Rio Tinto added 98p to 2854p.

Cairn Energy also had a good day up 84p at 2540p on the back of an agreement that sees Indian Oil Corp buy 1.7 million tonnes of Cairn India's crude oil over the next two years.

Dealers said that despite the upward movement the underlying market felt directionless with investors deprived of hard company news on which to make a stand.

Having started the month at 4,242.71, the blue-chip index has not reflected the adage to sell in May and go away till St Ledger's day.

The latest economic statistics from the US showed that contraction in GDP was not quite as steep as had previously been feared and the American market opened up with the Dow Jones 19.59 points up at 8423.39.

Housebuilders took comfort in the latest figures from mortgage lender Nationwide which showed a 1.2% rise in prices in May. Persimmon was 21p ahead at 366½p and Redrow rose 9p to 199p. Bellway added 9.5p to 645.5p.

Severn Trent's dismal figures ensured it took a hammering — down 15p to 1125p — and dragged down other utility groups. Pennon Group was 3.5p lower at 472.5p while 17p was shaved off Scottish & Southern Energy, down at 1169p.

Engineering group Cookson shone out among the second-liners with a 16p jump to 272p following a glowing note from broker Merrill Lynch.

Merrills has upped its target to 400p from 270p and says the newsflow could trigger further dramatic improvements as inventories have now been run to a low and restocking should be on the horizon for Cookson's clients.

It has upped its estimate for earnings next year by 6% but suggests earnings would rise by 20% if Cookson manages a 10% increase in organic growth.

Brewer and pub group Greene King fell 22¾p to 437¼p as Deutsche Bank today sold off the rump of the shares not taken up in the rights issue which closed last night with 93% acceptances.

The remaining 5.46 million shares were sold for 440p. Greene King launched the £208 million rights issue at the end of last month to raise a war chest to pounce on any quality boozers coming on to the market as the credit crisis forces landlords to sell up.

It may also use the money to buy back some of its debt at a discounted rate — it currently owes about £1.4 billion.

The issue, priced at 270p a share, was fully underwritten with Greene King generally viewed as one of the strongest brewing and pub companies.

The City is expecting about £115 million in profits this year.