30th Mar 2020 10:48
(Alliance News) - Signature Aviation PLC on Monday said it will be suspending employee bonuses and its final dividend payment as a part of cost-savings plan.
The London-headquartered aviation services company said both Signature and Engine Repair & Overhaul are essential critical infrastructure providers and as such remain both open and trading.
Flying activity across the company's US network through to the third week of March was in line with expectations, Signature Aviation said. It noted that it saw limited impact on its fuel volumes from Covid-19.
However, in the "recent days" Signature Aviation said it has seen a "material" decline in flight activity across its network of on average 65% per day, as customers observe temporary stay-at-home orders and enforce social distancing.
More positively, the company highlighted that its non-fuel revenue representing one third of group revenue and predominately related to real estate, is largely unaffected by Covid-19.
In addition, the Engine Repair & Overhaul business continues to operate as expected, the company noted, and has not seen any impact of Covid-19 on revenue so far this year.
As at the start of March, the company said it expects aircraft market in the US to remain broadly flat in 2020. However, on Monday, Signature Aviation said its guidance is now not likely to materialise.
Thus, the company said it has already started to take action on its cost base. Signature Aviation's largest cost, fuel, naturally flexes with the volumes in the market, and it holds less than a week's inventory across the network.
In addition, the company said it has well established practices to manage its second largest cost, labour.
As a further measure, Signature Aviation said it has taken the decision to suspend all bonus and variable pay plans. The company also suspended the final 2019 dividend.
Finally, the company said its capital expenditure guidance for 2020 of between USD100 million and USD110 million is under review and will be materially curtailed.
"We are taking the necessary and appropriate action to manage our costs to a level consistent with flying activity. The business continues to have attractive fundamentals and robust medium-term prospects, underpinned by our market leading FBO network and its strong cash generative characteristics," said Chief Executive Mark Johnstone.
The company said it will publish its first-quarter trading update on May 15.
FTSE 250-listed Signature Aviation shares were trading 9.6% lower in London on Monday at 167.65 pence each.
By Evelina Grecenko; [email protected]
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