* Menzies CEO wants to keep both businesses together
* Problems at Gatwick, Spanish contract loss hit profits (Adds financial results, context)
By Esha Vaish
Aug 18 (Reuters) - John Menzies Plc, facingpressure from investors to consider splitting its twobusinesses, said that keeping its newspaper and magazinedistribution and aviation units together was the "best wayforward".
The more cash-generative distribution arm could provide the firepower needed to expand an aviation business that offersbaggage handling and other airport services, Chief ExecutiveJeremy Stafford told Reuters on Tuesday.
"The aviation business has a great deal of opportunityaround the world and as we take full advantage of thatopportunity it requires substantial amount of cash to sustainour leading position in that market," Stafford said.
"Having a very strong cash-generative business workingalongside it gives us a winning formula."
The pressure on Menzies management to deliver on itsstrategy is likely to grow after it reported a near 60 percentfall in pretax profit to 5.8 million pounds ($9 million) in thesix months ended June 30.
Operational problems at London's Gatwick airport and theloss of a major contract with Spanish airports hurt its aviationunit, the company said on Tuesday.
Shares in the company fell as much as 7.5 percent, beforeparing some losses. They were down 3.5 percent at 475 pence at0940 GMT.
Shareholder Lakestreet Capital Partners AG suggested inApril that Menzies should consider splitting up, believing thatboth the units would be worth more separately.
While Kabouter Management, Menzies' largest independentinvestor with a stake of about 10 percent, echoed the sentiment,it was unclear if Lakestreet was able to garner the support ofthe Menzies family, which controls just over a fifth of thecompany's shares through various holdings.
Menzies has been seeking to expand its aviation business asdwindling demand had limited growth at the arm that distributesthe Financial Times and the Independent in Britain.
Lakestreet is now among Menzies' top 5 shareholders afterdisclosing in a filing on July 3 that it had raised its stake to6.027 percent from the about 3 percent held at the time of itsApril statement.
Menzies' stock had risen roughly 26 percent sinceLakestreet's April statement, valuing Lakestreet's holding atslightly over 18 million pounds. ($1 = 0.6416 pounds) (Editing by Keith Weir)
