Edinburgh-based aviation services company John Menzies plc said on Tuesday it has temporarily suspended its dividend due to the impact of the coronavirus on its operations “and the ongoing uncertainty of the extent of the impact on the aviation industry.”
Announcing results for the year to December 31, 2019, Menzies said profit before tax fell to £17.3 million from £21.6 million as revenue rose about 2% to £1.3 billion.
John Menzies shares fell about 8% to around 231p to give the firm a current stock market value of around £213 million.
Menzies has 32,000 employees globally. It operates at more than 200 airports in 34 countries for about 500 airlines.
In its outlook, Menzies said: “Looking into 2020 we are pleased with how we have right-sized the business during the second half of 2019 and given the otherwise underlying positive momentum of the business, the headwind presented by COVID-19 is very disappointing.
“The short term focus is on strengthening our balance sheet.
“A number of measures, including reduction in capital expenditure and a clampdown on discretionary spend, are already in place and we will look to materially reduce our leverage position during the year.
“The board is focused on delivering profitable growth in the 2020 full year and given the previously stated impact of COVID-19 on the operations of the group and the ongoing uncertainty of the extent of the impact on the aviation industry, the board believes it prudent, and in the best interests of shareholders, to suspend the dividend temporarily.
“The board is committed to a dividend strategy which prudently allocates profits between returns to shareholders and further investing in the growth potential of the group whilst maintaining a strong balance sheet, which protects against the risks in cyclical markets.
“The board believes that this decisive action will 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 2 to 2.5 times by the end 2020, whilst retaining the flexibility to grow the business.
“The board is therefore not recommending a final dividend payment for the year.”
John Menzies executive chairman Philipp Joeinig said: “We are currently experiencing some headwinds due to the impact of COVID-19 on our activities but in the medium and long term we see 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.
“With the investment we have made in our people this year, I am confident we have 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.”
According to its website, Menzies’ biggest shareholders are Kabouter Management with 11.84%, Axxion SA with 9.89%, Menzies Family Holdings with 9.38%, Sterling Strategic Value Fund with 7.71%, Lakestreet Capital Partners with 6.47% and DC Thomson & Company with 5.95%.