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Menzies suspends dividend amid coronavirus disruption
10th Mar 2020 14:41
(Sharecast News) - John Menzies reported a 2% improvement in top line revenue at constant currency in its full-year results on Tuesday, at ?1.33bn, although it confirmed it was suspending its dividend in the midst of the coronavirus outbreak.
The London-listed aviation services company said its underlying operating profit for the year ended 31 December came in at ?52.5m, down from ?55.1m year-on-year, while its reported operating profit rose to ?39.6m from ?34m, which the board described as a "robust" performance.
Underlying earnings per share totalled 24.9p, down from 37.6p in 2018.
The firm noted an exceptional charge of ?3.0m for the year, down from the ?43.8m in 2018, which included restructuring costs and spend for transactions and their integration, offset by net recoveries on the settlement of legal claims and increased disposal proceeds.
Operationally, Menzies said it took "decisive actions" to right size the business and position itself for sustainable growth during 2019, noted that it strengthened its executive team and management structure in the period.
It said its "revitalised" commercial approach was resulting in a return to organic growth, as it completed its cost and efficiency programme.
The company described the results as "robust", especially given the "challenging" trading environment.
Looking into 2020, the directors said they were "pleased" with how they had right-sized the business during the second half of 2019, adding that given the otherwise underlying positive momentum of the business, the headwind presented by the Covid-19 coronavirus outbreak was "very disappointing".
The short term focus was on strengthening its balance sheet, Menzies said.
A number of measures, including a reduction in capital expenditure and a clampdown on discretionary spend, were already in place, with the board saying it would look to materially reduce its leverage position during the year.
The directors said they were focussed on delivering profitable growth in the 2020 full year, and given the previously-stated impact of coronavirus on the operations of the group and the ongoing uncertainty of the extent of the impact on the aviation industry, they said it was prudent, and in the best interests of shareholders, to suspend the dividend temporarily.
Menzies said it remained committed to a dividend strategy which prudently allocated profits between returns to shareholders and further investing in the growth potential of the group, while maintaining a strong balance sheet which protected against the risks of cyclical markets.
The board said the "decisive action" would support the company to maximise shareholder value in the short term by accelerating the pace of deleveraging the balance sheet, targeting a net debt-to-EBITDA leverage ratio of 2x to 2.5x by the end of 2020, while retaining the flexibility to grow the business.
As a result, the directors confirmed they were not recommending a final dividend payment for the year.
They added that they were pleased to have completed a successful re-financing with its banking syndicate in January, explaining that as a result, the group had extended its current levels of facilities at ?325m through to 2025, with improved covenants.
"Last year, we said we would be 'fit for 2020' by doing five things: right-sizing the business, fixing underperforming operations, improving customer engagement, investing in our team and targeting higher margin business," said chief executive officer Giles Wilson.
"We've delivered on all five thanks to the hard work of all our colleagues."
Wilson said Menzies now had the right team and the right structure that put the company in a strong position to take advantage of opportunities in the structural growth aviation market.
"As we start 2020, our short term focus is on strengthening the balance sheet and I have put in place a number of measures that I believe will make a material difference during the year."
Executive chairman Philipp Joeinig added that the company was currently experiencing "some headwinds" due to the impact of Covid-19 on its activities, but added that in the medium and long term, the board saw "genuine opportunities" for growth.
"In 2020, we have two goals - firstly, a significant reduction in our leverage position by the end of the year through focusing on cash and capital expenditure management.
"Secondly, to achieve continued growth by expanding our services to support customer growth and by moving into new higher yielding markets."
Joeinig said that, with the investment Menzies had made in its people, he was confident it had the right team to deliver.
"We now have a board with a proven track record in the industry, a strengthened executive management team, and strong regional leaders pulling together in the right direction."
At 1433 GMT, shares in John Menzies were down 3.97% at 242p.
The London-listed aviation services company said its underlying operating profit for the year ended 31 December came in at ?52.5m, down from ?55.1m year-on-year, while its reported operating profit rose to ?39.6m from ?34m, which the board described as a "robust" performance.
Underlying earnings per share totalled 24.9p, down from 37.6p in 2018.
The firm noted an exceptional charge of ?3.0m for the year, down from the ?43.8m in 2018, which included restructuring costs and spend for transactions and their integration, offset by net recoveries on the settlement of legal claims and increased disposal proceeds.
Operationally, Menzies said it took "decisive actions" to right size the business and position itself for sustainable growth during 2019, noted that it strengthened its executive team and management structure in the period.
It said its "revitalised" commercial approach was resulting in a return to organic growth, as it completed its cost and efficiency programme.
The company described the results as "robust", especially given the "challenging" trading environment.
Looking into 2020, the directors said they were "pleased" with how they had right-sized the business during the second half of 2019, adding that given the otherwise underlying positive momentum of the business, the headwind presented by the Covid-19 coronavirus outbreak was "very disappointing".
The short term focus was on strengthening its balance sheet, Menzies said.
A number of measures, including a reduction in capital expenditure and a clampdown on discretionary spend, were already in place, with the board saying it would look to materially reduce its leverage position during the year.
The directors said they were focussed on delivering profitable growth in the 2020 full year, and given the previously-stated impact of coronavirus on the operations of the group and the ongoing uncertainty of the extent of the impact on the aviation industry, they said it was prudent, and in the best interests of shareholders, to suspend the dividend temporarily.
Menzies said it remained committed to a dividend strategy which prudently allocated profits between returns to shareholders and further investing in the growth potential of the group, while maintaining a strong balance sheet which protected against the risks of cyclical markets.
The board said the "decisive action" would support the company to maximise shareholder value in the short term by accelerating the pace of deleveraging the balance sheet, targeting a net debt-to-EBITDA leverage ratio of 2x to 2.5x by the end of 2020, while retaining the flexibility to grow the business.
As a result, the directors confirmed they were not recommending a final dividend payment for the year.
They added that they were pleased to have completed a successful re-financing with its banking syndicate in January, explaining that as a result, the group had extended its current levels of facilities at ?325m through to 2025, with improved covenants.
"Last year, we said we would be 'fit for 2020' by doing five things: right-sizing the business, fixing underperforming operations, improving customer engagement, investing in our team and targeting higher margin business," said chief executive officer Giles Wilson.
"We've delivered on all five thanks to the hard work of all our colleagues."
Wilson said Menzies now had the right team and the right structure that put the company in a strong position to take advantage of opportunities in the structural growth aviation market.
"As we start 2020, our short term focus is on strengthening the balance sheet and I have put in place a number of measures that I believe will make a material difference during the year."
Executive chairman Philipp Joeinig added that the company was currently experiencing "some headwinds" due to the impact of Covid-19 on its activities, but added that in the medium and long term, the board saw "genuine opportunities" for growth.
"In 2020, we have two goals - firstly, a significant reduction in our leverage position by the end of the year through focusing on cash and capital expenditure management.
"Secondly, to achieve continued growth by expanding our services to support customer growth and by moving into new higher yielding markets."
Joeinig said that, with the investment Menzies had made in its people, he was confident it had the right team to deliver.
"We now have a board with a proven track record in the industry, a strengthened executive management team, and strong regional leaders pulling together in the right direction."
At 1433 GMT, shares in John Menzies were down 3.97% at 242p.