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Menzies wins contracts, but outlook weakens

Labour shortages in the US are hampering group progress
March 13, 2019

John Menzies (MNZS) was likely hoping its first results update following the sale of its distribution business in September – which marked the start of its life as a pure-play aviation services group – would be wholly positive. But despite decent statutory and underlying numbers, the outlook has deteriorated, marred by the chief executive's abrupt departure after just six months in the role.

IC TIP: Sell at 510p

The group renewed 276 contracts, increasing margins in the process. It was successful in bringing in new clients, too, adding 98 new contracts net. Growth was robust in Continental Europe, where Menzies renewed its contract with easyjet (EZJ) in Amsterdam and added new ones in Gothenburg and Oslo.

Labour shortages made for a challenging year in the in the US, increasing costs and hampering operational performance. This has continued into 2019 and, along with lower cargo volumes, has had a negative effect on trading.

Chief executive Forsyth Black’s departure was announced alongside the results. This is of particular concern due to recent history. Mr Black was previously head of Menzies Aviation, and took on the role of chief executive in September when the group sold its distribution business.

Numis is forecasting adjusted EPS of 43.1p, up from 37.5p in 2018.

JOHN MENZIES (MNZS)  
ORD PRICE:510pMARKET VALUE:£428m
TOUCH:505-510p12-MONTH HIGH:694pLOW: 489p
DIVIDEND YIELD:4%PE RATIO:35
NET ASSET VALUE:125p*NET DEBT:197%
Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20141.9025.720.414.6
20151.9018.214.615.1
20161.9819.811.818.5
2017 (restated)1.279.900.1020.5
20181.2921.614.620.5
% change+1+118--
Ex-div:23 May   
Payment:1 Jul   
*includes intangible assets of £159m, or 189p a share