Aviation services provider John Menzies (MNZS) has said that with the majority of customer flights cancelled, ground handling and fuelling activity was 75 per cent lower year-on-year in April and May. Cargo volumes have been more resilient, down 37 per cent versus a year earlier. This translated to revenue coming in almost two-thirds below budgeted levels. Even so, the group says trading in the second quarter has been better than it anticipated back in March.
It remained cash generative across April and May thanks to the unwinding of its working capital, continued collection of customer payments and lower costs. Menzies says it has not seen any material bad debts from its airline customers as yet. Government support schemes across many countries have also helped offset its largest cost, labour, which represents more than 60 per cent of revenue.
The group expects to reach peak headroom of £180m against its committed borrowing facilities in June and believes it has sufficient liquidity to take it into next year. It is in discussions with its lenders over a revised covenant structure for the rest of 2020 and 2021. Berenberg notes that a breach is likely at the test at the end of June but thinks that a waiver will be agreed.
