Shares in aviation services group John Menzies (MNZS) gained 4.2% to 245p as the market looked past a deep annual loss thanks to the pandemic and the fact a full recovery won’t take place until 2023, with the firm looking to growth opportunities in emerging markets.
John Menzies, which works with airlines and provides ground handling, cargo handling, cargo forwarding and into-plane fueling, has been just as badly hit as its customers as it swung to a pre-tax loss of £120.5 million in the year to 31 December 2020, compared to a £17.3 million profit in 2019.
That came as reported revenue tumbled 38% to £824.2 million amid a 49% reduction in flight volumes. The firm said it doesn’t expect a return to the volumes witnessed in 2019 until 2023.
Despite that, analysts hailed the firm’s cost management with an adjusted pre-tax loss of £38.9 million, which came in better than the £43.8 million that had been forecast.
EMERGING MARKETS CARGO OPPORTUNITY
John Menzies’ air cargo services division remained more resilient than other parts of the business in 2020 and helped maintain group performance as tonnage fell by 18% compared to the larger drop for ground handling and refueling.
The firm’s cargo forwarding business, which made up £172 million of its revenues in 2020, also delivered a record performance and contributed £7.3 million of underlying operating profit compared to big losses in other divisions.
John Menzies chairman and chief executive Philipp Joeinig told Shares that post-Covid the firm expects to make around 50% of its money from passenger services, down from over 60% at the moment, with 30% coming from cargo and 20% from fueling, with growth expected to come from emerging markets in particular.
Joeinig said, ‘We will grow more into emerging markets, and these are markets where the cargo element is strong, unlike more mature markets where there is more product separation.
‘Emerging markets have characteristics of higher growth rates and we see higher opportunities for developing the cargo business.’
He pointed to the firm’s recent air cargo contract wins with Qatar Airways to provide services at seven locations across three continents, as well as other contract wins in Iraq and Pakistan.
‘NO CHANGE IN AVIATION LANDSCAPE’
Despite the big impact the pandemic has had on the aviation sector, most airlines have been able to survive thanks to support from governments and shareholders, and Joeinig thinks the sector - which he believes will ‘always be a structural growth market’, pointing to 4% forecast annual growth in passenger and cargo volumes to 2030 - will emerge strongly from the pandemic.
He said, ‘We don’t expect to see a change in the competitive landscape. The [airlines] that aren’t going to make it already haven’t made it, and that was because of their business models before the crisis. It’s interesting times for aviation, we think the big players will emerge strongly.’
