Edinburgh's Menzies says it has 'not wasted this crisis' as it eyes aviation rebound
In a trading update to investors, bosses said market conditions were likely to remain challenging through the early part of the new year.
However, they pointed to “positive developments” with regard to the roll out of Covid vaccination programmes and the potential for a gradual recovery in volumes from the second quarter of 2021.
Chairman and chief executive Philipp Joeinig said: “I see the opportunities for the business as being stronger than ever.
“I am pleased that we have not wasted this crisis, having instead used it to become more competitive. We are well on track with our rebased growth strategy and we are moving in the right direction towards being the service provider of choice to our customers.”
The group, which was forced to lay off thousands of workers amid the crisis as air travel plunged, said it was confident in the medium and long-term growth potential of the aviation services market.
It also flagged the potential to secure new business and acquisitions, telling investors: “Over the medium to long term, the board expects that the benefits of the reduced cost base, together with the ongoing good commercial momentum will contribute to structurally improved operating margins and consistent cash generation.
“This will enable the group to both reduce its leverage and take advantage of selective strategic opportunities that may arise.
“John Menzies… is well positioned to take advantage of the pipeline of organic and inorganic opportunities that exist.”
In its trading update for 2020, Menzies – one of Scotland’s oldest companies, dating back to 1833 – said market conditions remained “volatile and challenging” during the second half.
Despite that, the group has continued to trade in line with the expectations set out in its interim results at the end of September.
Revenues for the second half were similar to those reported in the first half and for the full year were 37 per cent below the previous year.
In the second half, activity levels showed an “encouraging recovery” through the third quarter, Menzies added, after the “very severe” reduction in the second quarter.
Towards the end of the period activity levels declined as a result of normal seasonal factors, as well as the impact of further travel restrictions.
Ground and fuelling service volumes ended the year 50 per cent below the prior year. Revenues from air cargo services were more resilient, the firm noted, with volumes some 20 per cent below 2019 levels and strengthened by higher yields.
Robin Speakman, an analyst at brokerage Shore Capital, said: “Revenues for the full year were indicated down by circa 37 per cent, a touch lower than our model which was framed in late September before the emergent second pandemic wave was fully understood.
“In this context, Menzies has performed robustly to our minds. The long-term case for air services providers remains intact beyond the pandemic, in our view.”
A message from the Editor:
Thank you for reading this article. We’re more reliant on your support than ever as the shift in consumer habits brought about by coronavirus impacts our advertisers. If you haven’t already, please consider supporting our trusted, fact-checked journalism by taking out a digital subscription: www.scotsman.com/subscriptions
Want to join the conversation? Please or to comment on this article.