Shares in aviation services firm John Menzies (MNZS) have dropped 15% to 390p after it admitted that trading has fallen short of expectations in the first half of its financial year.
In a trading update ahead of its half-year results, John Menzies also said full-year earnings will be flat at best.
It blames challenges in the wider aviation market - driven in part by weak cargo volumes and a lower number of flights - for its poor performance.
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The second largest aviation services group in the world with almost 35,000 employees and operations at 200 airports in over 30 countries, John Menzies’ scale means it is able to take advantage of economic and aviation growth better than most of its rivals.
But it also means the business is more exposed when there is a downturn in the aviation market, particularly after it sold its newspaper and magazine distribution business last year to focus on international airport services.
TROUBLED YEAR
John Menzies has had a troubled time in the past year, with its former CEO Forsyth Black resigning in March after warning of a slower start to 2019.
The firm also had to deal with a shareholder revolt over boardroom pay, after a fifth of investors refused to back its proposal for a long-term reward scheme for top executives.
Despite its full-year results to the end of December 2018 holding up resiliently, with a jump of more than 50% in pre-tax profit to £21.6m on turnover of £1.29bn, its share price has responded accordingly to all the drama.
Shares in the firm have plunged over 30% in the year-to-date, falling from a high of 575p at the end of February.
BETTER LONG TERM PROSPECTS
Analysts at Shore Capital forecast a 10% reduction in earnings this year for John Menzies, and warn that it is being impacted by both the troubled airline sector and technical challenges faced by the likes of Boeing.
However, the firm itself sees prospects improving in the medium to long-term, and Shore Capital agrees.
The analysts think that aviation at a fundamental level ‘remains a structural growth industry’ and that John Menzies ‘remains well placed to capitalise on this’ with its proven capabilities and global client list.
