Coronavirus Update

John Menzies Plc - Full Year Results 2020

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John Menzies plc

Results for the Year Ended 31 December 2020

Financial Summary

 

2020

 

2019

 

 

Reported

Constant

currency [6]

 

Reported

 

 

 

 

 

 

Revenue

 

£824.2m

£839.9m

 

£1,325.6m

 

 

 

 

 

 

Underlying operating (loss)/profit[1]

 

£(18.5)m

£(18.7)m

 

£52.5m

Operating (loss)/profit

 

£(96.2)m

---

 

£39.6m

Underlying (loss)/profit before taxation[2]

 

£(38.9)m

£(39.1)m

 

£30.4m

(Loss)/profit before tax

 

£(120.5)m

---

 

£17.3m

 

 

 

 

 

 

Underlying (loss)/earnings per share[3]

 

(61.8)p

 ---

 

24.9p

Basic (loss)/earnings per share[4]

 

(151.1)p

---

 

12.8p

 

 

 

 

Underlying operating cash flow[5]

 

£149.6m

---

 

£134.9m

Cash generated from operations

 

£113.7m

---

 

£104.1m

 

                 

Results Overview

Response to pandemic

2020 results reflect the severe impact of passenger travel restrictions imposed in response to the  Covid-19 pandemic

Menzies has reacted quickly and effectively by:

  • Reducing costs and optimising the cash position - with significant support from global government schemes and effective cash management
  • £30m of fixed cost removed, of which two-thirds is permanent
  • Right-sizing operations and headcount in line with reduced volume
  • Working with customers to find solutions - revised pricing and strong credit management
  • Revised banking covenants - sufficient liquidity headroom to invest in growth
  • Well positioned to recover strongly

Continued delivery on long-term strategic priorities

Developing momentum in rebalancing global portfolio mix:

  • Commenced operations in Baghdad, Iraq
  • Acquisition of Royal Airport Services completed in January 2021, delivering ground and air cargo services at eight locations across Pakistan

Strong commercial progress achieved during the year:

  • Five year contract signed with Wizz Air at their main hub in Budapest
  • Significant air cargo contracts with Qatar Airways at seven locations on three continents
  • Outsourcing gains from Qantas across Australia

Financial results

Revenue down 37% in constant currency, with decrease in flight activity leading to a 49% year on year reduction in flight volumes in ground handling and fuel services

Air cargo services more resilient and cargo forwarding business delivered a record performance, boosted by strong yields

Revenue impact partly mitigated by significant cost management and global government support schemes, limiting the underlying operating loss to £18.5m before exceptional costs

Exceptional costs of £70.2m primarily reflect costs of reshaping the cost base, one off costs associated with refinancing, asset write downs and the resolution of historical claims

Underlying operating cash flow, ahead of expectations, resulted in year end net borrowings of £355.9m, with undrawn banking facilities and available cash of £141.8m

Outlook

The Board is confident about the Group's long-term outlook. Despite the crisis we are well placed to prosper as the aviation sector gradually recovers. We have a clear strategy in place, based around our strategic priorities and we believe this disciplined approach will deliver sustainable growth in the future.

As anticipated, the aviation sector in the first quarter of 2021 continues to be heavily impacted by ongoing travel restrictions. Continued tight control on costs and ongoing support from global government schemes have enabled us to maintain our operational capability as well as a strong liquidity position. As the market recovers and we exit the pandemic, we are ready to scale up our operations to meet the demands of our customers.

Overall, we anticipate a slow increase in volumes through the second quarter with a stronger recovery during the second half of the year. However, we currently do not anticipate a return to the volumes witnessed in full year 2019 before full year 2023. As the markets recover, our restructured cost base and reshaped business portfolio should enable the Group to generate structurally improved operating margins from growth in revenues.

Despite the pandemic, 2020 was a strong year commercially with key contracts won across the product portfolio and we successfully deepened relationships with a number of key airlines. Our pipeline in all geographic regions is strong as we continue to seek out new opportunities, and as a result we expect further strategic progress during the year. Since the year end, we have commenced operations at five new locations in Canada with WestJet. We have also successfully strengthened our well established relationship with Qantas in Australia following the award of an outsourcing contract for domestic ground handling to Menzies at four airports across Australia. 

Despite anticipated ongoing low flight volumes, we expect that the Group will maintain significant liquidity headroom throughout the year ahead. Once activity levels start to recover, Menzies' strong fundamental cash generation will provide the Group with the capability to invest in support of our commercial objectives and reduce leverage.

  Philipp Joeinig, Chairman and Chief Executive of John Menzies plc said:

"The Covid-19 pandemic has brought about unprecedented challenges to our business as the effects on travel continued to have a significant impact on our global operations. Despite the difficulties it presented we acted decisively, adjusting the size of our operations and ensuring sufficient liquidity was maintained. We remain a strong business and well placed to benefit as the market recovers and the industry returns to structural growth.

"Looking forward we will continue to deliver against our strategic priorities. We are winning new contracts, entering new markets and optimising our portfolio. As flight volumes recover, I am confident that we will emerge as a more agile, resilient and profitable business with a sharply focused footprint and portfolio."

Notes

1. Underlying operating profit/loss is operating profit/loss adjusted for exceptional items, impairment charges associated with non-current assets, amortisation relating to acquired contract, customer relationship and brand intangibles, and the Group's share of interest and tax on joint ventures and associates.

2. Underlying profit/loss before taxation is underlying operating profit/loss less net finance charges.

3.    Underlying earnings/loss per share is profit/loss after taxation and non-controlling interest, but before intangible amortisation and impairment and exceptional items, divided by the weighted average number of ordinary shares in issue.

4.      Prior year basic earnings per share includes the benefit of 2.0p from discontinued operations.

5.     Underlying operating cash flow is underlying operating profit/loss adjusted for depreciation, amortisation, income and dividends from joint ventures and associates, retirement obligation and share based payments, and movements in working capital and provisions.

6.      In order to increase comparability with prior year numbers, performance at constant currency has been calculated by translating non-sterling earnings for the current year into sterling at the exchange rates used for the same period in the prior year.