AVIATION services group John Menzies has tried to move onto the front foot by acquiring a business in Asia after the fallout from the coronavirus crisis took a devastating toll on the sector.
READ MORE: John Menzies could cut global staffing by a fifth
Edinburgh-based John Menzies has bought a 51 per cent stake in Pakistan’s Royal Airport Services (RAS) in a deal that will take the company into what it regards as an attractive market.
While global flight volumes have plunged following the introduction of lockdowns to slow the spread of the coronavirus, Menzies bosses appear confident the market will recover.
The acquisition was clinched amid growing hopes that effective coronavirus vaccines will soon be made widely available, which have provided a badly needed boost to sentiment in the aviation sector.
Shares in Menzies surged 16 per cent yesterday. The price of shares in John Menzies has more than doubled in value since late October but remains around half pre-crisis levels.
READ MORE: Menzies boss departs amid aviation sector slump to jpin whisky giant
Philipp Joeinig, executive chairman of Menzies, said the RAS acquisition was in line with the company’s strategy to move into new markets and could provide a strong platform for further growth opportunities in the region.
While the move into Pakistan will pose challenges, Menzies is confident in the long-term commercial potential of what it described as a growing market.
Mr Joeinig noted: “Together, as a Joint Venture, we will strive to improve aviation safety and security at the eight airports in Pakistan and foster further growth in the passenger and cargo sectors of this market, which in turn will further develop the Pakistan travel and tourism market”
At around $20m (£15m) the annual revenues generated by RAS are small compared with those of John Menzies.
The price of the acquisition was not disclosed.
The deal may have symbolic and operational significance following a period during which directors have been required to focus on helping Menzies navigate the fallout from the coronavirus crisis.
The company has retrenched in response.
Mr Joeinig said in September that the company expected to reduce job numbers by 20 percent.
It had 32,000 employees around the world before the process began.
The company is in a statutory consultation period with staff about plans that could result in 1,200 jobs going in the UK, including 300 in total at Edinburgh and Glasgow airports.
The 20% estimate was made before the Chancellor, Rishi Sunak, last month announced additional support for employers to protect jobs. This included extending the furlough scheme to March.
Around 60% of John Menzies UK employees are on furlough.
A spokesperson for John Menzies said the company was working through how the new schemes will impact UK operations but is very hopeful they will help to reduce the number of redundancies
The impact of the sector downturn was writ large in the group’s first half results. Revenues fell by a third in the six months to June, to £431.5 million. Pre-tax losses ballooned to £80.1m from £4.4m previously.
READ MORE: John Menzies severs historic links with newspaper trade
John Menzies has focused on aviation services since selling its newspaper distribution business in 2018 to the Endless private equity firm, for £74.5m.
The deal ended the group’s historic association with the news trade. The group had faced repeated calls from investors for a break-up.
The newspaper distribution business has diversified in recent years into providing delivery services connected with online retailing.
It said last month: “Menzies Distribution has been designated Key Worker status during the pandemic because it plays a key role in the UK’s critical logistics network.
“Every day, our teams deliver vital supplies to healthcare providers, including the NHS and care homes, and replenish stocks in retailers and newsagents as well as making deliveries to homes across the UK.”
Online retailers have seen sales boom amid the coronavirus lockdowns.
After posting a £1.3 billion annual loss last month, easyJet said it expected to fly no more than 20% of planned capacity for the first quarter of 2021 but would retain the flexibility to rapidly ramp up when demand returns.
John Menzies has had an air cargo handling business in India for over 10 years, and entered the ground handling market in Indonesia last year.
Shares in the group closed up 31.5p at 229.5p yesterday.
They fell from 480p in January to 74p in April.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here