John Menzies, the global aviation services business, has provided an update regarding current trading and its financing position. Trading in Q2 to date has been ahead of management expectations, with a recovery in flight activity anticipated to begin from early July.
The board believes the group now has sufficient liquidity capable of supporting the group’s requirements into 2021 following significant proactive cost action taken and the benefit of government schemes around the network
As set out in its trading update in March 2020, the spread of COVID-19 has had a significant adverse impact on the group’s financial performance. As expected, the very challenging conditions experienced from the end of the first quarter have continued during the second quarter to date, with the majority of customer flights grounded.
During April and May 2020, ground handling and fuelling activity was c75% lower than 2019, with the group’s ancillary passenger airline services similarly affected. Cargo performance continues to be slightly more resilient overall with total volumes down c37% year on year in April. As a result of this substantial reduction in activity levels, revenues in April and into May were consistent with expectations at the time of the March Trading Update and c64% below budgeted levels.
Despite the significantly reduced revenue, strong cost management, together with quick and effective mitigating actions, resulted in an overall performance for April and into May that was better than expected at the time of the March Trading Update.
“We continue to tightly manage outstanding payments with our airline customers and are pleased that in the majority of cases payment terms continue to be adhered to. At this time, whilst we have been affected by the impact on our customers, we have not incurred any material bad debts during the current crisis,” said the handler.
Whilst the level of ongoing uncertainty is such that the board does not consider it appropriate to provide financial guidance for the remainder of the current financial year at this time, the group has been working closely with its customers on planning for forthcoming flight schedules. The board currently expects activity levels witnessed in May to remain subdued into June, before a gradual return from early July.
“As volume builds, we expect to see short haul capacity return first with long haul capacity taking longer to recover. In addition, we expect cargo revenues to continue to build back as customers employ more innovative measures to meet demand, such as using passenger aircraft for cargo only flights. Our freight forwarding business, AMI, continues to trade well and in line with 2019 performance, with a positive outlook for the coming months,” said the group.
The board recognises that there will be significant opportunities for aviation services groups who are able to emerge from this crisis with their capability and service offering preserved. We are pleased that our liquidity headroom is capable of providing a secure platform as we start to build back our operations. Overall, the board is confident in the long-term growth potential of the aviation services market and believes that, as a global leader, John Menzies will emerge strongly from this challenging period.