(Sharecast News) - Shares in John Menzies rallied in morning trading after second-quarter trading at the aviation services specialist beat expectations.
The company said Covid-19 had had a "significant, adverse impact" on its financial performance, with ground handling and fuelling activity down 75% on the previous year during April and May. Its ancillary passenger airline services were similarly affected, and while cargo had proved "slightly more resilient", total volumes were still down 37% year-on-year in April.
As a result, revenues in April and into May were around 64% below budgeted levels, as predicted in the company's last trading update in March.
However, Menzies added: "Despite the significantly reduced revenue, strong cost management, together with quick and effective mitigating actions, resulted in an overall performance for April and into May that was better than expected at the time of the March trading update."
It said it now expected a recovery in flight activity to begin from early July, and that it had sufficient liquidity capable of supporting its needs into 2021.
The market welcomed the update, and by 1200 BST, the stock was trading 13% higher at 163.40p.
Eoghan Reid, analyst at Berenberg, which has a 'buy' rating on the stock, said: "With liquidity secure until 2021 and the trough of flight activity behind it, Menzies' imminent risks are reduced - which we think should be taken well by investors.
"However, we note that other risks remain and the company needs to manage the recovery sensibly while the balance sheet remains elevated. We update our numbers to reflect the negative impact from Covid-19, and move our price target down to 210p, to better reflect the risks and uncertainty ahead."
Robin Speakman, analyst at Shore Capital, said: "Menzies is now positioned, with some work still to do, to see the business reflate and begin to address the opportunities likely to emerge in this strategic industry.
"We continue to anticipate profitable operations returning at Menzies, as airlines resume flights in due course. Menzies was profitably going into the Covid-19 outbreak and is set to be profitable and potentially strategically stronger coming out - many of its smaller peers in particular may not survive this event, in our view."
8 Nov 2019 15:56