Edinburgh aviation services group Menzies reports strong trading and key currency change

In issuing a trading update ahead of the March annual results, the group said overall trading during the latter part of the fourth quarter was in line with the board’s expectations.

Menzies told investors: “Despite the impact of changing travel restrictions related to the Omicron variant, the business delivered strong performance across a number of service lines which, coupled with continued productivity gains, enabled the group to end the year on a strong note.

“Cash generation also remained positive, with the group maintaining a strong liquidity position and year-end net debt in line with expectations.”

The bosses also highlighted an “excellent” commercial performance with new contracts won and renewed.

“Looking to the year ahead, we remain confident in our current projections for a continued recovery in global flight volumes,” they added.

The group said it would change its reporting currency to US dollars instead of pounds sterling, noting that the percentage of its services provided in the UK has dropped significantly and now represents just 11% of overall revenue. Accordingly, the March financial results will be presented in dollars.

In late November, Menzies highlighted his resilience in the face of tougher global travel restrictions and pointed out that less than 10% of his business was in long-haul passenger flights.

The company said trading for the full year would at least be in line with market expectations after a stronger-than-expected performance in recent months.

He noted that globally, the air cargo services market remains robust and he is seeing a steady increase in aircraft movements across all regions, supporting a continued recovery in its ground handling business and refueling.

Menzies Aviation operates at over 200 airports in 37 countries, supported by a team of 25,000 people.

Despite the negative impact of the pandemic on the global aviation industry, the company has sealed a series of contract renewals and new contracts over the past two years.

The November update flagged up some challenges the company is facing, including labor availability, especially in North America.

Robin Speakman, analyst at brokerage Shore Capital, said: “We see strong evidence in Menzies’ performance over the past year of the company’s continued evolution into 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 won and renewed new contracts with a resurgent development of cargo operations, which we also plan to maintain. The impact of a new Omicron wave on the pandemic seems to us to have been well managed.

John Menzies began 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 established in 2018, creating Menzies Distribution and leaving the rest of the business to focus on providing aviation services.

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