New CEO takes action
Aviation difficulties force Menzies to warn on profits
Aviation services face a number of issues
John Menzies, the Edinburgh-based aviation services company, has warned that full-year profits will fall below expectations because of a range of industry-wide issues.
The company provides services such as moving aircraft, fuelling as well as handling baggage and cargo for the likes of Easyjet and British Airways-owner IAG.
In a trading update ahead of half-year results next month, it said: “Trading across the group has been disappointing, reflecting the challenges that the wider aviation market is currently facing driven in part by weak cargo volumes and flight schedule reductions.
“Against this backdrop, performance in the first half of the year has been below expectations and consequently the board now believes that earnings for the full year are not expected to exceed last year.”
The group has been implementing several actions including a cost rationalisation programme aimed at delivering at least £10m of cost savings, the majority of which should materialise in 2020.
Overall the board said it believes that the medium and long term fundamentals of, and prospects for, the business are sound and it remains confident that the actions being taken in the current year underpin the its expectations for 2020.
Giles Wilson, newly-appointed chief executive, said: “The overall aviation market is having a difficult year. This inevitably is having an impact on our full year outturn. However, I firmly believe in the structural growth dynamics within our industry and all historical data points to recovery.
“Accordingly, I believe we remain well placed to prosper. Since my appointment I have taken a number of actions to right size the business, we have also restructured our commercial teams to ensure we are ready to seize opportunities as they present themselves.
“We have a great, motivated team and I look forward with confidence.”
The company will issue interim figures on 13 August.
Russ Mould, investment director at AJ Bell, said: “The aviation services group has been caught up in the airline sector’s current turmoil and the fallout from concerns about slowing global economic growth.
“Airlines have been experiencing a surfeit of problems, from technical issues grounding planes to the need to reduce capacity due to excess competition. Cargo volumes have also been weak as companies start to become more cautious about economic conditions.
“Giles Wilson is only one month into his new permanent role as chief executive and so he’s not going to be best pleased about starting the new chapter of his career with a profit warning.
“However he gives an optimistic look at the long-term picture and to Menzies’ credit it has been winning quite a few contracts in recent months.
“The perils of being a service company means you are always reliant on customers not having their own problems.
“Menzies has control over delivering its service, such as making sure the work is done as efficiently as possible. Yet it has no control over what its clients are doing or the flow of cargo it handles. That means Wilson can only do so much to keep Menzies ticking over in hard times.”