Edinburgh aviation services group Menzies flags strong trading and key currency change
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Issuing a trading update ahead of March’s full-year results, the group said overall trading through the latter part of the fourth quarter had been in line with the board’s expectations.
Menzies told investors: “Despite the impact of changing travel restrictions related to the Omicron variant, the business saw strong performances from a number of services lines which, together with continued productivity gains, saw the group finish the year strongly.
“Cash generation has also remained positive, with the group retaining a strong liquidity position and year end net debt in line with expectations.”
Bosses also highlighted an “excellent” commercial performance with further contract wins and renewals.
“Looking at the year ahead we remain confident in our current projections for a continued recovery of global flight volumes,” they added.
The group said it would be changing its reporting currency to US dollars from pounds, noting that the percentage of its services that are provided in the UK has reduced significantly and now accounts for just 11 per cent of overall revenues. As a result, March’s financial results will be presented in dollars.
At the end of November, Menzies highlighted its resilience in the face of tighter global travel restrictions and stressed that less than 10 per cent of its business relates to long-haul passenger flights.
The firm said trading for the full year would be at least in line with market expectations after a stronger-than-expected performance in recent months.
It noted that, globally, the air cargo services market remains robust, and it was seeing a steady increase in aircraft movements in all regions, supporting a continued recovery in its ground and fuelling services businesses.
Menzies Aviation operates at more than 200 airports in 37 countries, supported by a team of 25,000 people.
Despite the negative impact on the global aviation industry from the pandemic, the firm has sealed a string of contract renewals and new business wins over the past two years.
The November update did flag some challenges facing the business, including labour availability, particularly in North America.
Robin Speakman, an analyst at brokerage Shore Capital, said: “We see strong evidence in Menzies performance through the past year of the ongoing evolution of the business to a changing market - accelerated by the pandemic.
“Significant progress has been made on cost management, in our view, with long term sustainable gains. Menzies also delivered further contract wins and renewals with a resurgent development in cargo operations, which we also expect to be sustained. The impact of a further Omicron wave to the pandemic appears to us to have been managed well.”
John Menzies started out in 1833 when its eponymous founder opened a bookshop at 61 Princes Street, Edinburgh which was to become the only wholesale bookseller north of the Border.
The newspaper and magazine distribution business was spun out in 2018, creating Menzies Distribution, and leaving the rest of the firm to focus on providing aviation services.