July 5, 2019 / 6:20 AM / 5 months ago

Menzies nosedives after profit warning as aviation services struggle

(Reuters) - John Menzies Plc (MNZS.L) warned on Friday that earnings would not grow in 2019 as the British aviation servicing company battles weak cargo volumes and cuts in flight schedules, sending its shares more than 20% lower.

European airlines have warned of a challenging market in terms of passenger numbers, while cargo volumes are also stagnating.

“The overall aviation market is having a difficult year. This inevitably is having an impact on our full year outturn,” said Chief Executive Officer Giles Wilson, the former finance officer who was promoted this year.

John Menzies shares plunged 21.4% to 360 pence at 0721 GMT.

Its warning comes after Germany’s Lufthansa (LHAG.DE) sent shockwaves through the European airline sector last month when it cut its full-year profit forecast.

“Lufthansa’s recent profit downgrade cited an almost halving of its cargo margins and IATA reduced its full-year growth outlook for air freight to 0% in June. Clearly Menzies is not immune to these market issues,” Berenberg analysts said.

Lufthana’s warning followed gloomy comments from Irish budget airline Ryanair (RYA.I). Air France-KLM (AIRF.PA) also reported a widening quarterly loss.

Menzies also said performance in the first half of the year has been below expectations, adding it would save at least 10 million pounds as part of a cost-cutting plan.

Menzies, which offers ground handling, fuelling and cargo handling services for airlines, is considering strategic and structural options and has appointed Swiss private equity fund manager Christian Kappelhoff-Wulff to its board.

The review followed the departure of Chief Executive Officer Forsyth Black in March.

Menzies, which traces its roots back to a bookshop founded in 1833, became a pure play aviation business after it agreed to sell its newspaper distribution business to a private equity firm last year.

Reporting by Samantha Machado in Bengaluru; Editing by Arun Koyyur/Keith Weir

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