2019 Full Year Results 10 March 2020
WELCOME – PHILIPP JOEINIG MENZIES EXECUTIVE MANAGEMENT BOARD JOHN GEDDES PHILIPP JOEINIG GILES WILSON ALVARO GOMEZ-REINO MERVYN WALKER Chief Executive Officer Corporate Affairs Director Chief Operating Officer Executive Chairman Chief Financial Officer 2
Highlights
2019 HIGHLIGHTS MENZIES HERITAGE ACTIONS DELIVERED PEOPLE. PASSION. PRIDE. • Decisive action taken to right-size the business for growth Since 1833 • Cost and efficiency programmes delivered and benefits realised • Commercial team bolstered to target customer engagement and drive growth • Logistics specialists • Greater focus on operational discipline • Time critical services • Executive team strengthened • Customer centric • Innovators 4
2019 ACHIEVEMENTS People focus Strategic Reduced growth plans overhead costs Decisive actions created momentum Achievements for 2020 Fixed Customer and underperforming organic growth stations 5
2020 IMMEDIATE RESPONSE TO COVID-19 RESILIENT BUSINESS MODEL COST ACTIONS • Flexible operating model • Tight cost management across all areas • Remaining close to customer • Ban on all non essential spend • Global business • Recruitment freeze • Experienced management team BALANCE SHEET ACTIONS • No final dividend • Reduction in capital expenditure outlay • Target leverage reduction: Net debt to EBITDA below 2 to 2.5 times by year end 6
Financial overview
FINANCIAL HIGHLIGHTS Record aviation revenue Exceptional charge £1.3bn £3.0m Significant reduction on prior year +2% on 2018 in constant currency Underlying EBITDA Covenanted debt to EBITDA £138.7m 2.86x 10.5% margin Within 3.25x covenant Underlying operating profit Net borrowings £52.5m £391.5m Robust despite market challenges New facilities agreed to 2025 Underlying EPS 24.9p Tax and interest impact 8
UNDERLYING OPERATING PROFIT £m 0.6 6.2 3.1 1.8 3.7 4.6 0.7 1.8 5.6 5.5 55.1 52.5 51.9 2019 2019 Cargo Schedules, 2018 Commercially Net Business Cost Residual IFRS16 lease Translation 2018 pre-FX volume & mix trading & exclusive unviable commercial development efficiencies Distribution accounting airline failures licence stations fixed gains costs losses 9
SEGMENTAL PERFORMANCE £m Revenue Underlying operating profit 2019 2019 2018 2019 2019 2018 Constant Constant Reported Reported currency currency Americas 464.3 447.9 463.8 20.9 20.0 17.2 EMEA 552.5 559.6 517.3 13.4 13.6 16.6 Rest of World 161.3 165.1 157.6 12.2 12.3 14.8 Cargo Forwarding 147.5 148.9 152.3 6.0 6.0 6.5 1,325.6 1,321.5 1,291.0 52.5 51.9 55.1 Margin 4.0% 3.9% 4.3% Notes: Current year underlying operating profit adjusted for constant currency for comparative purposes Prior year restated to show the previously reported Corporate function subsumed within the four operating segments 10
MOVEMENT IN NET BORROWINGS £m 32.3 (199.6) 12.1 21.5 134.9 0.2 30.7 6.7 (391.5) 237.1 Opening net Operating cash Tax & interest Pension Net capital Net M&A Dividend & other Translation Lease Closing net borrowings flow expenditure accounting borrowings Note: Operating cash flow and tax & interest include the impact of the new lease accounting standard as appropriate 11
GROUP RE-FINANCING IN JANUARY 2020 NEW FIVE-YEAR FACILITY IMPROVED TERMS • • Extended maturities until 2025 Improved covenants: • Same margins as previous financing 3.25x and up to 3.5x in case of acquisitions • • Strong support from existing and new banks Improved documentation on exchange rate: Consistent P&L and balance sheet rates • New asset-backed financial indebtedness permitted 12
Business review
THE MARKET IN 2019 ECONOMY • Global economic uncertainty in depressed markets • Brexit and US/China trade war CARGO • Economic uncertainty reduced cargo volumes globally • Mix from import to export in Oceania reduced yields AIRLINES • Boeing 737 Max materially impacted airline flying schedules • Airline failures LABOUR • Some improvement in North American market, but remained difficult • Hardening in Eastern Europe as economies prosper 14
BUSINESS REVIEW AMERICAS EMEA • • Improved commercial engagement Restructure enhanced operational performance and focus • • HR initiatives reducing staff turnover in tight labour markets UK turnaround plans delivering a return to profitability • • Expansion in Canada drives higher profits Tight labour markets in Eastern Europe • • Operations in Mexico and Colombia perform strongly Lower volumes at Heathrow and Amsterdam cargo • • Focus on operational performance improvements Airline bankruptcies including Thomas Cook REST OF WORLD CARGO FORWARDING • • Change in cargo import/export mix impacted returns Strong performance in Europe and Africa • • Commercial success with key contract renewals Operating model invested for growth • • Macau delivered excellent returns Organic network expansion UK and Australia • • New Indonesian operations gaining traction Acquisition of GTO Logistics in Canada integrated 15
2019 RETURN TO COMMERCIAL GROWTH COMMERCIAL ACTIVITY ACTIONS • Refocused to be customer centric +£8m • Solution orientated approach additional annual revenue secured • Dedicated key account management Losses (18) Wins 13 179 HIGHLIGHTS new contracts won • Secured further five years with easyJet at their Luton hub • Successful key account cargo renewals in Oceania £153m • Mango Airlines contract win in South Africa • New cleaning contracts with easyJet and British Airways revenue renewed • Norwegian extensions across USA 213 • WestJet in Toronto secured for a further four years • contracts renewed Qatar success in Scandinavia across the network 16
INVESTMENT CASE – RETURNING TO HISTORICAL GROWTHS OUR REVENUE SHOWS TRACK RECORD OF GROWTH £1,326m 8% CAGR with major acquisitions 5% CAGR excluding acquisitions £645m 2011 2018 2019 NET COMMERCIAL GROWTH IS RETURNING +£1m H1 +£7m H2 2011 2018 2019 5% CAGR 2011-2016 17
2020 AND BEYOND – STRATEGIC FOCUS STRATEGIC PRIORITIES Long term sustainable growth Optimise Target scale Customer Employer of Margin portfolio mix operations engagement choice improvement STRATEGIC ENABLERS Innovation IT & systems People focus Security & safety Commercial Innovation 18
INVESTMENT CASE REMAINS STRONG REVENUE GROWTH OUR Aviation services market Annual growth to 2038 MARKET Overall Outsourced 3.4% aircraft Market growth DYNAMICS $60bn $30bn 3-4% 4.2% cargo growth 4.5% passengers Consolidation Outsourced market increasing annually Low cost carrier growth 2-3% Organic targets OUR Business development targets Outperformance growth GROWTH Scale operations driving higher returns New markets with high margin potential DYNAMICS 2-3% Growing airlines with increasing volume New market opportunities through JVs Business development growth Entering new airports with existing customers Fuelling expansion in new markets c7-10% growth Right team Right operating model Right customer centric approach OUR ABILITY TO Strong experienced executive team Safe & secure Put our customers needs first DELIVER Strengthened during 2019 Standardisation Key account managers Industry leading regional management Integrated IT platform Focus on growing key accounts Focus on delivery and margin growth Training and people development Focus on delivering innovative solutions 19
SUMMARY AND OUTLOOK SUMMARY OUTLOOK • • Robust performance in difficult markets COVID-19 is having a significant impact • • Executive leadership team strengthened Focus on strengthening balance sheet • • Commercial performance much improved Net debt target of less than 2 to 2.5 times • • Operational performance much improved Underlying business performing well • • Group banking re-financing in January 2020 Commercial pipeline strong • • People development programmes in place Business development plans in place Right team and right structure to seize opportunities in current challenging conditions 20
Thank you
Appendix 1 Environmental, social & governance
ENVIRONMENTAL, SOCIAL & GOVERNANCE Sustainability strategy and programme delivery People Wellbeing Environment Communities Governance • Code of conduct • Ex-military back to work • Inclusivity training • Electric turns every day • Mental health • Compliance programme • Community initiatives awareness • Living leadership • Carbon offsetting • Industry groups • Due diligence • Health & safety • People engagement • De-icing efficiencies standards Woven throughout our business and decision making for the future We commit to and measure against ESG benchmarks and standards IMMEDIATE Reduce Be a Plan for Engage with Develop our FOCUS carbon responsible future communities people footprint business 23
Appendix 2 Further financial information
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