John Menzies PLC (LON:MNZS) warned that profits will be lower this year due to difficult conditions in the aviation market.
Shares in the Edinburgh-based airport services group, which become a pure-play aviation business last year when it sold off its newspaper distribution arm, plunged 22% to 355p on Friday morning as it alerted the market to weak cargo volumes and a reduced flight schedule.
READ: John Menzies CEO resigns after soft start to the year following 2018 profits gain
Back in March, Menzies had signalled a weaker first two months of 2019, with soft cargo volumes and difficult labour markets in North America, but had been positive about the rest of the year.
But on Friday the company, which become a pure-play aviation business last year when it sold off its newspaper distribution arm, said trading for the first half of the year had been below expectations and so full-year earnings are “not expected to exceed last year”.
New chief executive Giles Wilson, who was promoted from chief financial officer in March and made permanent in June, said: "The overall aviation market is having a difficult year.
“This inevitably is having an impact on our full year outturn. However, I firmly believe in the structural growth dynamics within our industry and all historical data points to recovery."
He said he had “taken a number of actions to right size the business” and restructured the commercial teams to “ensure we are ready to seize opportunities as they present themselves”.
Airline company issues
Russ Mould, investment director at AJ Bell, said: “Airlines have been experiencing a surfeit of problems, from technical issues grounding planes to the need to reduce capacity due to excess competition. Cargo volumes have also been weak as companies start to become more cautious about economic conditions.
He added that Wilson's optimistic look at the long-term picture is backed up by Menzies’ several contract wins in recent months.
“The perils of being a service company means you are always reliant on customers not having their own problems.
“Menzies has control over delivering its service, such as making sure the work is done as efficiently as possible. Yet it has no control over what its clients are doing or the flow of cargo it handles. That means Wilson can only do so much to keep Menzies ticking over in hard times.”