REFILE-UPDATE 2-John Menzies backs Scotland staying in the UK

Tue Aug 19, 2014 6:02am EDT

(Corrects to add dropped word "Scotland" to the bank's name in paragraph 4; corrects typo in paragraph 6)

* Says hopes for 'no' vote on Scottish referendum

* Says UK ground services revenue to be "significantly down"

* Sees 4 mln stg hit to year profit due to currency moves

* Shares fall 3 pct in early trading

By Esha Vaish

Aug 19 (Reuters) - Edinburgh-based John Menzies Plc says it hopes that Scotland does not split from the United Kingdom as Scottish companies will have more opportunities if Britain is not split up.

"We don't actually think Scotland should be independent," Finance Director Paula Bell told Reuters. "We'll be so glad to get back to normal when it's all over and hopefully the voters will vote for no independence."

Recent opinion polls have suggested Scottish separatists are closing the gap on their unionist rivals ahead of the Sept. 18 referendum, though a rejection of independence still looks more likely.

While some Scottish firms such as Royal Bank of Scotland Group Plc are mulling options if Scotland goes it alone, Bell said John Menzies would wait till the results to decide whether it needed to change.

The company reported on Tuesday a 9 percent fall in first-half profit as a strong pound hit its aviation business, which carries out work such as baggage handling.

Its shares fell 3 percent to 622.62 pence by 0850 GMT on the London Stock Exchange.

John Menzies said it expected full-year earnings from its UK ground-handling business to be "significantly down" from last year due to the loss of some British Airways business at Heathrow airport in London.

Apart from baggage handling, the aviation business handles ticketing, check-ins, aircraft de-icing and runs VIP lounges.

John Menzies did not say how much its UK aviation business contributes to overall earnings or revenue or give an estimate of how the UK aviation business woes would affect overall earnings this year.

The company has expanded its aviation business, whose customers include British carrier easyJet and Germany's Lufthansa, as dwindling demand for publications constrains growth in its larger distribution business.

Excluding the impact of currency movements, turnover in the aviation services business rose 7 percent to 386.3 million pounds in the six months ended June 30. Revenue in the distribution business rose marginally to 638.7 million pounds.

"While the structural growth drivers in aviation remain in place, price pressure and challenges in UK ground handling at Heathrow airport ... lead us to lower our forecasts for full year 2014," Numis analyst Steve Woolf said.

The brokerage cut its forecast for 2014 profit before tax and amortisation by 5.8 percent to 47.3 million pounds.

The company's first-half underlying pretax profit dropped to 20.7 million pounds ($34.6 million) from 22.8 million pounds a year earlier.

Turnover rose 2.7 percent to 1.03 billion pounds in constant currency terms, helped by a net increase in airline service contracts.

John Menzies said it was using forward contracts to minimise the impact of adverse foreign exchange movements, but sterling's gains against currencies such as the U.S. and Australian dollars, South African rand and Indian rupee were still hurting.

The company expected full-year profits to take a hit of about 4 million pound due to currency translations, Bell said.

The pound rose more than 3.3 percent against the dollar in the first six months of the year. ($1 = 0.5980 British Pounds) (Editing by Gopakumar Warrier and Rodney Joyce)