Shares in aviation services group John Menzies (MNZS) fell 6.7% to 78p as it said the coronavirus outbreak will have a ‘very significant adverse impact’ on the business in the short-term.
Giving a more detailed update on the coronavirus impact following the publication of its 2019 results two weeks ago, John Menzies said the ‘impact on our business of the spread of the COVID-19 virus has increased significantly and extended across all of our international operations.’
Since 10 March, the firm said its international and domestic airline customers ground passenger flights on an ‘unprecedented scale’, resulting in significant ongoing reductions in activity for its core operations, with the number of flights handled in the past two weeks down by over 60% and ancillary services similarly hit.
The company's shares are down around 83% in the year to date.
EUROPEAN AIR TRAFFIC PLUNGES
European air traffic data over the last two weeks shows the industry has effectively been set back a quarter of a century, down to flight levels not seen since the 1990s with passenger air traffic plunging 90%.
However, Menzies said the dynamics in the cargo industry are more ‘mixed’, with increases in certain areas as freight customers seek to respond to underlying demand patterns, though volumes overall were down 20% in the past two weeks.
The company said it is taking cost reduction measures, with global headcount reduced by 17,500 while directors and senior management have taken a 20% pay cut, and is also pitching for UK government aid.
It added that the reductions are being supported in some countries by governmental schemes and that it hopes 'in the fullness of time a high number of these employees can return to the business.'
In the firm’s full year results to 31 December, net borrowings for 2019 increased to £216.6m, up from £199.6m in 2018, around £10m higher than analyst estimates, taking the net debt to EBITDA ratio to 2.9 times compared with 2.4 times in 2018.
'MENZIES ESSENTIAL TO AVIATION INDUSTRY'
Chief executive Giles Wilson said he is looking to the government to support the business and help the aviation sector ‘navigate the crisis’.
He added, ‘For the aviation supply chain to function, it requires a strong inter-reliant chain of airlines, airports and service providers.
‘Without these three components of the supply chain, working together, the sector will not function. Handlers such as Menzies are therefore essential to the recovery and future success of the UK and global aviation industry.’