John Menzies expecting first-half loss due to Covid

Airport services company John Menzies said on Thursday that it expects to make a loss in the first half due to the Covid-19 crisis and that it has agreed a revised banking covenant structure.

Menzies said trading has remained "challenging", as expected, due to the impact of the coronavirus, although it is re-starting operations and seeing a partial return of flight schedules. Cargo volumes continue to be more resilient and its AMI business, a cargo brokerage, is trading ahead of expectations given the current lack of available capacity.

However, due to the challenging conditions experienced by the airline industry, revenue for the half year was down around 33% from last year at constant currency and it now expects to be loss-making.

Menzies said second-half profitability will benefit from a more significant contribution by various government support programmes and continuing tight cost management.

It noted that despite the crisis, it has made "very encouraging" commercial progress winning significant new business. In the first six months, it added £27m of net annualised revenue from commercial activities and since the half-year end, it has won the ground handling and cabin cleaning business of Air France/KLM in Toronto and further strengthened its relationship with Qatar Airways.

Menzies also said it has agreed a revised banking covenant structure, which will provide additional flexibility as the aviation industry recovers from the impact of the pandemic.

The net leverage covenant is replaced with a minimum EBITDA covenant, tested on a quarterly basis. The revised covenant package will remain in place until the earlier of June 2022E or net leverage remaining below 3x for two consecutive quarters.