Annual Report 2013
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DELIVERING
THROUGH
PEOPLE
WHO
WE ARE
DELIVERING THROUGH PEOPLE
John Menzies plc provides support services in fast-moving time-critical
markets. As a team we are passionate about performance and achieving
our vision of being a successful services business which delivers
shareholder value.
Our people are critical to our success, representing our business to
customers around the world and responding to their needs every
minute of every day.
CONTENTS
Strategic Report
02 What We Do
04 Where We Do It
06 Chairman’s Statement
08 Strategy
10 Business Model
16 Key Risks
18 Key Performance
Indicators
19 Financial Review
22 Menzies Aviation
30 Menzies Distribution
36 Corporate Social
Responsibility
Governance Reports
44 Chairman’s Introduction
46 Board of Directors
48 Directors’ Report
53 Corporate Governance
Statement
58 Nomination Committee
Report
59 Remuneration Committee
Report
76 Audit Committee Report
79 Directors’ Responsibilities
Financial Statements
80 Independent
Auditor’s Report
83 Group Income Statement
84 Group Statement of
Comprehensive Income
85 Group and Company
Balance Sheets
86 Group and Company
Statement of Changes
in Equity
88 Group and Company
Statement of Cash Flows
89 Notes to the Accounts
128 Five-Year Summary
Shareholder
Information
129 Notice of Annual
General Meeting
135 General Information
Related information
Within this year’s report we highlight further sources
of information with the following icons.
More information
in this report
Visit our website
www.johnmenziesplc.com
2013 HIGHLIGHTS
£2,000.3m
(2012: £1,996.8m)
Turnover
£53.1m
(2012: £54.5m)
Underlying profit
before tax
65.6p
(2012: 68.8p)
Underlying earnings
per share
26.5p
(2012: 25.2p)
Dividend per
share up 5%
9%
Increase in
aircraft turns
66
(2012: 24)
Net aviation
contract wins
80%
Publisher contracts
renewed to 2019
11%
Increase in
aviation underlying
operating profit
(constant currency)
– Aviation momentum
continues – underlying operating
profit up 11% (constant currency)
– Three acquisitions broaden
Aviation platform
– Continued strong cost
focus – over £5m
savings delivered
– Group financially strong
John Menzies plc
01
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Strategic Report:
John Menzies at a glance
WHAT
WE DO
John Menzies plc is passionate
about performance in all of our
businesses. Every day of the year
our people all around the world
operate in time-critical support
services, working with integrity
to deliver a safe and secure,
efficient service to our clients.
This in turn provides a strong
platform for growth.
OUR BUSINESSES
Ground Handling
Our people provide a world leading ground handling
service to airlines worldwide. Menzies Aviation is one
of the fastest growing ground handlers, operating in
over 140 airports in 31 countries. The division aims to
be the handler of choice for the world’s leading airlines.
It offers a complete range of services to the airline
industry from landside activities such as ticketing,
check-in, baggage services, dispatch and boarding
to airside activities including aircraft towing and
pushback, de-icing, passenger and baggage transfer,
ramp handling and other ancillary services.
Cargo Handling
Our cargo handling business is strategically positioned
to offer a complimentary service to our airline customers.
We manage cargo facilities at airports globally and our
cargo team are able to process and move perishable
and high value goods onto and off aircraft quickly and
reliably. We offer a full ramp transfer, load management
and import/export handling service. We can also provide
warehousing and trucking services and track and trace
systems giving customers visibility at all times.
Cargo Forwarding
Our cargo forwarding business, AMI, works exclusively
with freight forwarders and courier companies, offering
air freight rates and transport services around the world.
AMI is unique in providing a 100% neutral service to
its clients and will source the best way of moving their
goods to their destination. Its product range covers
export, import and cross-trade, express and time-definite
international road freight. It is supported by a state-of-
the-art IT infrastructure allowing clients to organise
and manage the service via the internet.
News Distribution
Overnight our network throughout the UK and Ireland
processes around 7 million newspapers and magazines
(covering 3,000 titles), with deliveries to more than
25,000 retailers. Covering c45% of all UK news print
daily, News Distribution has invested heavily in state of
the art technology and customer service to ensure our
packing and returns systems are the best they can be.
We also offer a logistics solution to other businesses
providing an efficient and cost-effective alternative to
in-house logistics, tailored to our customers individual
needs. Using our fleet of around 1,700 vehicles and
utilising sophisticated route planning software, we
cover around 130,000 miles daily – the equivalent
of going around the world five times. Our innovative
Marketing Services solutions in promotions support
retailers, publishers and wider industries with services
ranging from category management, product
placement, contact handling and data and insight.
Strategy
see page 08
Business Model
see page 10
John Menzies plc
02
Annual Report
2013
OUR BUSINESSES
Cargo Handling
Ground Handling
News Distribution
Cargo Forwarding
Marketing Services
23,500
Employees
1.7bn
Newspapers delivered
950,000
Aircraft turnarounds
1.5m
Tonnes of cargo
25,000
Newsagents
130,000
Miles daily
John Menzies plc
03
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Strategic Report:
Global Operations
WHERE
WE DO IT
Every day Menzies are hard at
work. We are growing and 2013
continued to see key landmark
achievements for our business
in every part of the world.
Strategy
see page 08
Business Model
see page 10
Central America
& Caribbean
40
ground handling
2,551
employees
In March a cruise
ship malfunction in the
Caribbean led our team in
St. Maarten to handle 21
short-notice emergency
flights to carry the
passengers home.
144
Airports across the globe
23,623
Employees world-wide
North America
ground handling
cargo facilities
17
7
5
cargo forwarding
3,423
employees
In Los Angeles we
started handling A380
aircraft in 2008. During
2013 we handled 32
every week and are
due to increase to 56 in
2014, making Menzies
one of the largest A380
handlers in the world.
In August Menzies
acquired Desacol in
Colombia, the country’s
leading service provider,
re-entering the South
American market and
now handling 50,000
turnarounds and
60,000 tonnes
of cargo
every year.
South America
ground handling
5
1
cargo facility
John Menzies plc
04
Annual Report
2013
983
employees
UK & Ireland
distribution hubs
ground handling
cargo facilities
9
16
2
2
cargo forwarding
8,783
employees
Menzies Distribution
successfully renewed 80% of
its News Industry distribution
contracts with Trade Sales Value
of almost £1bn per annum,
each for around 5 years.
Continental
Europe
29
5
ground handling
cargo facilities
3,446
employees
Oceania &
South East Asia
In October Menzies
Aviation acquired
Moose Aviation in
Sweden, a specialist
de-icing company,
complimenting and
enhancing capabilities
in the Nordic region.
Africa &
Middle East
ground handling
cargo facilities
15
9
3
cargo forwarding
1,459
employees
In December, our
Johannesburg team
handled over 40 V.V.I.P.
flights for world leaders
and dignitaries attending
the memorial event
following the passing
of Nelson Mandela.
Menzies Aviation’s
two Indian cargo
facilities in Hyderabad
and Bangalore were
voted number 1
and number 2 cargo
facilities in the country
respectively by the
Air Cargo Agents
Association of India.
India
1
2
1
ground handling
cargo facilities
cargo forwarding
ground handling
cargo facilities
16
7
5
cargo forwarding
2,419
employees
Ground handling provider
Skystar which handles
17,000 turnarounds
annually became part
of Menzies Aviation in
August. It operates at
eight airports throughout
Australia and New
Zealand, including Perth,
one of our attractive
airport targets.
559
employees
John Menzies plc
05
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 During 2013 our Aviation services business continued
to demonstrate its growth credentials, improving profit
by 11%. We have continued to invest for growth,
acquiring three businesses which extend our global
footprint and further develop relationships with airlines.
In Distribution, we continue to make significant
efficiency improvements and had a successful year
renewing contracts with publishers, although overall
profit was impacted by weak markets.
I am confident that the Group is on a firm financial
footing and we are well placed to grow our business
while delivering returns for our shareholders.
Board Changes
Paul Dollman, our Group Finance Director and Ian
Harrison, a Non-Executive Director, retired from the
Board at the AGM in May 2013. I would like to thank
them for their service and valuable input over the years.
Paula Bell joined the Board as Group Finance Director
in June 2013, and I am delighted to welcome her to
the executive team. Paula has made a good start to her
time at Menzies and the Board looks forward to her future
input. Since the year end we have announced that David
McIntosh will be leaving the Group. I would like to thank
David for his 25 years of service to Menzies Distribution
and wish him well in the future. A recruitment process
is currently underway and we will update shareholders
on developments as is appropriate.
The size and structure of the Board and its Committees
are reviewed annually. Whilst we are committed to
compliance with corporate governance codes, we believe
we have an excellent balance, with an appropriate mixture
of skills and experience. Each year the Board reviews the
future strategic direction of the Group, and also reviews
progress against its previous objectives. As we manage
the structural decline in the printed media distribution
sector, the Group has continued to grow our hugely
successful aviation services business.
Our strategic direction remains clear, and for our
management teams the challenge is to grow our product
offerings, exploiting our existing skills and abilities in an
efficient way in order to achieve shareholder return.
Strategic Report:
Chairman’s Statement
A YEAR OF
STRONG
PROGRESS
Iain Napier
Chairman
Strategy
see page 08
Governance Reports
see page 42
S.P.I.R.I.T.
see page 10
John Menzies plc
06
Annual Report
2013
Outlook
Trading conditions, particularly within the Distribution
business, are likely to remain challenging in 2014. We
expect momentum to continue at Aviation on a constant
currency basis and with further planned growth in the
aviation marketplace, a solid balance sheet and new
borrowing facilities secured, the Group is well placed
to take advantage of investment opportunities as they
arise. The Group as a whole will continue its focus on
cost management in 2014 which delivered savings in
the Distribution business alone of over £5m in 2013.
The announcement of a 5% increase in the final
dividend emphasises the robustness of the Group’s
financial prospects and the Board looks to the future
with confidence.
Iain Napier
Chairman
One of the key themes to our strategy is to be the
supplier of choice for our customers. That means
delivering an outstanding service, safely and securely
and operating with integrity in everything we do.
Our reputation is delivered daily by our people, some
24,000 individuals worldwide. Throughout the business
our culture, values and behaviour are encompassed
within the Menzies S.P.I.R.I.T. We support, train and
develop our employees so that they can deliver an
excellent, world class service to our customers, and
the Board can continue to deliver on its strategy. I would
personally like to thank each and every employee for the
contribution they made during 2013.
Scottish Independence
2014 will see a referendum in Scotland for independence
from the United Kingdom.
We recognise that this is a personal matter for the
individual but, when asked for guidance from our Scottish
employees who are eligible to vote, we will recommend
that they avail themselves fully with as much factual
information as is available and not to be unduly influenced
by the emotional or “fear of exit” messages being
expressed by the two campaigns.
From a business perspective, John Menzies plc has
a proud Scottish heritage dating back to 1833, and
importantly as part of the United Kingdom, we have
built a truly global Company.
Our Board believes that a successful Scotland, as part
of the United Kingdom, is important for UK business
and we have seen no factual evidence that another
independent government infrastructure would provide
any significant advantages. In addition the various areas
of uncertainty surrounding the independence campaign
are unhelpful and indeed detrimental to our business
planning and expansion.
In summary, we consider that the best interests of John
Menzies plc are served by Scotland remaining an integral
part of the United Kingdom with a stable, well established
political and regulatory system. We believe that within
the existing proven structure we can continue to
successfully expand our business and ensure both new
opportunities and career development for our employees.
John Menzies plc
07
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Strategic Report:
Strategy
A LONG-TERM
STRATEGY
FOR SUCCESS
Safety &
Security
Customer
Service
Efficiency
STRATEGIC
DRIVERS
Growth
People &
Integrity
Shareholder
Value
Our 6 strategic drivers are
each key to achieving our vision.
These are actively measured and
reviewed by the Board. Getting
each of these right is essential
if we are to achieve sustainable
shareholder value and our people
are to provide industry leading
levels of customer service.
John Menzies plc
08
Annual Report
2013
The Board reviews the strategy
annually to ensure it is appropriate
and that the Group is well placed to
take advantage of new opportunities.
Our 6 strategic drivers define what
we need to focus on in order to
achieve our vision to be a successful
services business that delivers
shareholder value.
Safety and
Security
Safety and security are and always have been our
number 1 priority each and every day. We take our
responsibilities to our employees, our customers, their
customers and all stakeholders extremely seriously.
Significant investment is made to ensure appropriate
training, systems and resources are in place. Providing
a safe and secure system of work is fundamental to
the provision of an efficient and productive business
that operates with integrity. Our customers rightly judge
our safety and security record when awarding contracts.
Mr MORSE, our safety and security emblem, is utilised
throughout the Group and exemplifies the Company’s
S.P.I.R.I.T. values.
Shareholder
Value
We aim to provide a long-term sustainable return to our
investors and external stakeholders. Sustainable profits
are key to the long-term success of the Group, allowing
us to continue to invest in our businesses and supporting
our ambition to grow. Sustainable profitability also allows
us to support a progressive dividend policy, rewarding
shareholders for their investment in the Group.
Growth
As airlines reshape their operating models, we must
position ourselves to take advantage of opportunities
as they arise. Ground handling is a growing market
with forecast passenger growth, airline expansion
and increased out-sourcing of non-core activities.
Contract renewals in the news distribution market
occur approximately every 5 years. In a mature market,
maintaining market share and diversification into
ancillary services allows us to fully utilise existing assets
and provide a cost efficient service to publishers and
retailers alike.
Customer
Service
Having a team of people to provide an excellent
standard of service to all our customers is a key
point of difference. Our customers expect their product
to be delivered on time, every time. In order for us to
win and retain contracts and support our expansion into
new markets we must ensure we build a reputation
for providing quality, consistency and reliability. Our
public-facing businesses reflect our customers’ brands,
whether checking-in passengers or distributing free
newspapers on the high street, we have to get
everything right.
Efficiency
To successfully operate in fast-moving, time-critical
markets we manage our operations in a highly efficient
manner. Our size and future growth brings economies of
scale to our purchasing and negotiating powers. We have
introduced standard operating procedures throughout
our divisions to ensure that each similar process is
undertaken in the same way. Maximising the utilisation
of assets through customer density drives a lean cost
base. The utilisation of common IT platforms and
state-of-the-art systems, improvement in key operational
metrics and utilisation of the asset base allows us to
offer our clients the best possible service at the lowest
possible price, driving the contract renewal processes.
People
and Integrity
People aren’t just important to our success, they’re
integral to it – and comprise a significant part of our
costs. We strive to employ the right people, with the
right skills and abilities throughout the Group. Our
reputation is derived from the service that our people
deliver, and the integrity they demonstrate. Operating
worldwide, governance and integrity are key to ensuring
the right people, with the right skills, engage at the
right time and in the right way with the business.
We recognise that we can only meet the very highest
standards through trained, safe and motivated
employees who perform well at all times. That is
why we provide high quality, specific training and
development to all our employees worldwide so that
they can behave responsibly, ethically and achieve
our objectives safely and efficiently.
S.P.I.R.I.T.
see page 10
Key Performance Indicators
see page 18
John Menzies plc
09
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136
Strategic Report:
Business Model
DELIVERING
OUR STRATEGY
EVERY DAY
THE KEY ELEMENTS OF
OUR BUSINESS MODEL...
Safety
Always our
number 1 priority.
Service
We deliver a best
in class, reliable,
affordable service
to our clients.
People
We have the best
people. We support and
develop them within
a positive culture.
S.P.I.R.I.T.
Processes
We have procedures
to provide an efficient
and effective service
delivery.
Governance
Control and compliance
are at the heart of day
to day processes.
S.P.I.R.I.T. stands for:
Safety & Security
Passion
Innovation
Reliability
Integrity
Teamwork
John Menzies plc
10
Annual Report
2013
S.P.I.R.I.T. underpins our business
model. It is delivered daily by
our people all over the world. Our
people are what sets us apart from
our competitors. These values run
through all our businesses helping
to deliver service excellence.
John Menzies plc
11
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Strategic Report:
Business Model continued
Our success depends on delivering
industry-leading service to
customers who want to work with
us. Our people and our processes
deliver our performance. We
concentrate on the aviation services
and news distribution sectors and
work hard to ensure that our people
have the tools to deliver our quality
service, safely, every day.
Network safety teams operate worldwide, supported by
a central team to ensure we maintain a strong focus on
safety compliance. SMART (Standard Menzies Audit
Report Tool) is an integral part of the safety management
system and the network safety team agrees standard
operational procedures and communicates regular safety
awareness information to the field organisation. The
priority continues to be standardising safety and other
business-critical processes.
The business continues to evolve its vehicle movement
practices, separating workplace vehicle movements from
people movements. Our route-map practices have been
highly commended by the Freight Transport Association
and the Health and Safety Executive (HSE) and remain
a case study on the HSE website, highlighting Menzies
Distribution’s safe systems of work as a blueprint for
good working practices.
Delivering
Processes
Efficiency is key to controlling cost. We have invested
heavily in IT solutions to support our people and reduce
the overall cost of providing a reliable service. In our
cargo handling business we have a complete and
integrated IT solution that encompasses all the physical
handling, documentation and messaging, in real-time,
to our clients. We also embrace the latest technology
allowing the use of iPads and iPhones as well as the
standard hand-held terminals and barcode technology.
We ensure that our teams at each location are fully
supported with the right equipment in order for them
to perform their tasks safely and efficiently. We invest
in and maintain modern equipment so that unexpected
problems and delays are minimised. Our central
operational delivery teams work closely with our
teams on the ground to monitor our process delivery
and identify areas where efficiencies can be made or
new processes developed.
We operate standard processes at all our sites to
maximise efficiency and minimise risk of injury or error.
We analyse all our work flows to continually improve
how we do things and look to fully utilise our assets,
maximising the turnarounds in an airport or diversifying
our distribution business to make more use of its fleet of
vehicles. We invest in innovative ideas and technology
to support continual improvement in the quality and
efficiency of our services. Efficiency is key to maintaining
a lean cost base and delivering a standard process and
so we invest in IT solutions to support our people and
reduce the overall cost of providing a reliable service. We
use both internally developed systems which are integral
to our ground and cargo handling operations together
with SAP, which is embedded in our news distribution
business. Smart-app technology is also embraced
with initiatives such as iMenzies downloaded by
over 6,000 retailers.
Our S.P.I.R.I.T. is central to our business model. Our
people are supported by rigorous systems and teams
for safety, customer service, operational delivery
and control and compliance. Each part of the Group
adheres to this business model which drives the culture,
performance and ultimate value in everything we do.
Delivering
Safety
Through our MORSE (Menzies Operating Responsibly
Safely and Effectively) safety system we provide
dedicated health and safety strategies, resources and
training throughout our business. We understand that
good health and safety practices are integral both to
employee welfare and to the success of the Group.
We continually review our procedures and our training
in order to develop and adopt methods of working
which reduce the likelihood of accidents. We have
integrated CSR models into our business development
strategies, which are designed to standardise and
improve business practices throughout each division.
The Divisional Managing Directors are responsible to
the Board for the health and safety of all their staff and
customers and continually review the procedures and
training in their division in order to develop and adopt
methods of working which reduce the likelihood of
accidents occurring. Reports on health and safety
performance are the first operating item at all meetings
of the Group Board and at Divisional Operating Board
meetings. They include injury statistics and trends
as well as lessons learned, training performance,
contacts with regulators and legislative changes.
John Menzies plc
12
Annual Report
2013
In our ground handling business, our Time and
Attendance systems are now used worldwide, linking
attendance at work with payroll, reducing error and
administration costs. We monitor and audit performance
in our Aviation business using the “SMART” app which
produces questions relevant to aircraft type and carrier
for every part of the service offering, such as ramp
or passenger services. The system provides random
sampling with a real-time dashboard to identify
common issues and drive conformity.
The SMART Quality Assurance and Audit programmes
with ‘8 pillar’ audits initially focused on our ground
handling activities, which recorded an average
compliance rate of more than 88%. The SMART
operational audit tool, including its innovative iPhone
application, has been successfully implemented at
all locations network-wide.
Delivering
People
We invest heavily in our people to ensure that the right
people are in the right place at the right time and able
to deliver our service with integrity.
We invest in training, reward achievement and provide
our people with the skills they need to deliver exceptional
service every day. We identify, develop and retain capable
individuals and support them with a clear governance
structure. We have training and development programmes
at all levels of the business, from a full and focused
induction programme for all employees, driver training
modules, supervisory “stepping up” programmes
for employees progressing through their career, to
programmes designed to identify and shape tomorrow’s
business leaders.
Health, safety and security training continue for everyone
throughout their time in Menzies, with E-learning utilised
to deliver standardised training modules. We have open
and informal communication channels, using innovative
techniques such as Menzies TV to share information.
Training materials which cover safety as well as advanced
driving skills to maximise fuel savings are included in
our driver training programme.
Delivering
Customer Service
Our aim is to be the provider of choice for our customers.
We achieve this through careful management of the cost
base and by leveraging customer relationships to grow
our business. We ensure that we provide an exceptional
level of service to our clients, and their customers. We
are a service delivery business and this means we
must have the right people, in the right location, with
the right skills, supported by the right equipment and
systems. But these are just the building blocks of a
world-class customer service; ongoing measurement
is critical to success. We actively monitor our own
performance against service agreements, including
on-time performance, packing accuracy and customer
satisfaction surveys. These provide our statistical
indicators. We also review our contract renewal rates
and through our ongoing close working relationships
with our clients are able to identify early and correct
the first signs of any problems.
Delivering
Governance
We have developed and invested in rigorous control
systems and manuals that are used throughout our
worldwide operations. Across the Group we have
integrated responsibility models into our business
development strategies. These responsibility models
are designed to improve business practices throughout
each division.
We also have standardised processes and procedures
for operations within our business. It means that we can
be confident that the level of service, speed of service,
quality of service and cost of service are the same
wherever in the world we are operating. A central team
support the development of network standards and work
continually to roll out improvements in how we operate.
Through internal controls procedures and self-
certification programmes we continually audit and
monitor the performance of our teams. Support and
attention is given where weaknesses are identified.
John Menzies plc
13
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136
Strategic Report
FOCUSED
ON SAFETY
DELIVERY
The Group remains on a very strong
financial footing. We have a robust
Balance Sheet built from strong cash
generation across the divisions.
John Menzies plc
14
Annual Report
2013
John Menzies plc
15
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Strategic Report:
Key Risks
KEY RISKS
THAT AFFECT
OUR BUSINESS
The implementation of our strategy can be hindered by
various risks and uncertainties. The risks that the Board
considers could have the most significant effect on John
Menzies plc are described below. Risk mitigation is
evaluated continually through the business, with a focus
on activities which can expose the Group to a higher risk
profile. However, it is acknowledged that the system can
only provide reasonable and not absolute assurance
against material risks.
Risks are evaluated for each business stream and
combined with risks which affect the Group as a whole,
to form an operational risk matrix. Each risk is measured
against three impacts – Financial, Operational and
Reputational, and together with the mitigating actions
in place, are reviewed regularly by the Group Board.
OUR RISK FLOW CHART
Risk
Impact:
Financial
Operational
Reputational
Mitigation
Risk
Description
Impact
Mitigating factors
Changing
consumer
behaviour
Growth
The risk associated
with changing consumer
behaviour and digital
media proliferation
reduces demand for
Menzies Distribution
services.
This could lead to an
acceleration of top line decline
as fewer newspapers and
magazines are sold while
individuals adapt the way
they consume media.
A focus on cost and productivity
efficiency within the core business.
New revenue opportunities from
hand to hand distribution and ancillary
services are developed to diversify
the news distribution business.
Risk of
customer
consolidation
Risk of airline industry
change, including airline
consolidation, leading
to a significantly
reduced volume.
Consolidation could result
in volume reductions across
the main product categories
where an airline is handled by
a competitor or drops a route.
Growth
Risk of consolidation
or retailer aspirations
for news distribution.
Security
breach
Safety &
Security
A risk that a serious
security breach or
incident occurs that is
directly attributable to
the actions of one of our
employees or the failure
of related processes
or training.
Large multiple retailers with
greater power could result
in preferential payment
terms and increased
service level demands.
The impact of a serious
security related incident
would affect the Group’s
reputation, operational
performance and ultimately
financial performance.
A balanced portfolio of customers
is maintained. Ground handling focuses
on growing and financially strong
airlines. Good relations are maintained
with key clients. We continue to drive
service excellence and respond to KPIs.
The Group works closely with airport
authorities. Rigorous checking and
vetting of all employees takes place.
Central support is provided to all
stations to ensure consistency, utilising
the MORSE intranet based safety
and security monitoring system,
which provides consistent and
regular reporting.
John Menzies plc
16
Annual Report
2013
Risk
Description
Impact
Mitigating factors
Risk of
contract
renewals
Growth
Failure to renegotiate
existing contracts at
acceptable rates or
to successfully win
new contracts.
Inability to renegotiate key
existing contracts could
materially affect operations
and profitability.
Health and
Safety
Safety &
Security
A risk of failing to
provide employees with
appropriate training and a
safe working environment,
together with a risk that
the Group fails to comply
with relevant health and
safety legislation.
The impact of a health and
safety failure could have
an impact on the Group’s
reputation, operational
performance and financial
performance.
A serious outage for a limited
period of time would have
both an operational and
reputational impact.
There is a strategic analysis of all options
at the time contracts in both Aviation and
Distribution are due for renewal. We
constantly evolve the operational model
to ensure an optimum cost base is
maintained. The majority of current
wholesale news contracts were
re-negotiated during 2013, and secured
through to 2019 and beyond.
Safety is the number one value across
the Group. Dedicated health and safety
teams exist throughout the business.
Detailed health and safety reports are
discussed at Operating Boards and is
the first agenda item at all John Menzies
plc Board meetings. Continual analysis
of accidents allows trends to be
identified and prompt action taken.
All of our back-up data centres have
adequate power and facilities. We
ensure that our systems remain up to
date with appropriate external firewalls
where required. Each division has its
own disaster recovery plan which is
periodically tested.
Collapse of
IT platforms
Efficiency
Inadequate
human
resources
People &
Integrity
The risk of a collapse
of an IT platform or an
external cyberattack on
the IT infrastructure. Each
division operates its own
IT platform, and both are
critical to the running of
those divisions.
Risk of inadequate
succession planning and
people development. A
risk that the Group does
not have in place adequate
succession plans for key
management roles or key
employees leave the
Group if development
opportunities do not exist.
Major safety
incident
The risk of an accident
involving an aircraft due
to safety breach.
Safety &
Security
Failure to
deliver cost-
savings
programme
The risk that the
reorganisation projects in
the Distribution business
fail to deliver anticipated
savings.
Efficiency
The impact of this risk could
result in internal candidates
not existing for key roles as
they become available or
individuals with in-depth
knowledge and skills leaving
the Group due to a lack
of opportunity.
Succession plans across the Group
exist. The Board annually reviews
succession plans for senior management
and Executive Directors. Structured
development programmes exist across
the Group aimed at identifying and
developing key employees.
The risk would have
significant reputational and
operational impacts for the
business. There would also
be a potential financial
exposure.
Significant management time
is devoted to delivering cost-
savings to the business.
Failure to deliver would affect
the financial performance of
the business, as well as
having operational time
implications and potential
reputational damage.
Standard training programmes and
pro-active safety management systems
and audit processes are in place, along
with insurance coverage where possible.
There are continual reviews at the
Operating Boards to ensure highest
possible standards and processes in place.
Well resourced project plans are in place
within the division, which are reviewed
at Board level. Regular progress review
meetings are held to measure delivery
against plan.
John Menzies plc
17
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Strategic Report:
Key Performance Indicators
HOW WE
MEASURE
OUR SUCCESS
We measure and track our performance against
each of our strategic drivers. A diverse range of
key statistics has been selected to ensure that
a balanced view of the business and its success
can be formed.
Risks
see page 16
Strategy
see page 08
Strategic
driver
Key performance
indicator (KPI)
Why we
measure this
Employee
injuries per
100 FTEs
Employees are our greatest asset and deliver our industry-
leading service. We operate in areas with heavy machinery
and must ensure that training is appropriate so that injuries
are kept to a minimum.
Safety &
Security
How we
performed
0.18
2012: 0.24
Aircraft
damage per
1,000 turns
Aircraft damage per 1,000 turns underpins our service
delivery and ensures we maintain an industry leading
position. Insurance costs are also monitored and controlled.
0.048
2012: 0.048
Employee
turnover
People &
Integrity
People are our greatest asset. We strive to employ the
right people with the right skills. We train and develop
our staff and therefore monitor employee turnover as a
key determinant in the investment we make in them.
Regional and seasonal variations exist as we operate in
many different countries and this KPI is also measured
on a country by country basis.
39.3%
2012: 41.6%
Efficiency
Operating
margin
– Aviation
Man-hours
per turn
– Aviation
A standard measurement demonstrating our ability to
turn our revenue into profit, encompassing our efficiency,
controls and value generation.
5.2%
2012: 5.0%
The man-hours required in turning an aircraft around
is a key metric for efficiency of our ground handling
operation.
29.6 hours
2012: 29.6 hours
Customer
Service
On time
performance
– Distribution
This measurement allows us to measure the retail delivery
times (RDTs) and is a key performance indicator within
publisher contracts. It is also essential that we ensure product
is with retailers on time in order that sales are not missed.
97.57%
2012: 97.08%
Contract
renewal rate
– Aviation
We measure the rate of contracts that we successfully
tender for and renew. This is a key sign of how satisfied our
customers are with the levels of service and price that we
are able to provide.
89.1%
2012: 79.7%
Aircraft
turnarounds
Ground handling is a growing, dynamic market place. We
monitor aircraft turns to ensure our business is growing
both on a like-for-like and absolute basis.
954,924 turns
2012: 876,757 turns
Growth
Aviation
revenue
growth
We are committed to growing our Aviation business.
Absolute revenue growth within the business is therefore
a key metric.
3.67%
2012: 3.01%
Shareholder
Value
Total
Shareholder
Return v
FTSE250
over 3 years
TSR is the best and most commonly used measurement
of value generated for shareholders, capturing both capital
and dividend growth.
33.1%
2012: 86.5%
John Menzies plc
18
Annual Report
2013
Strategic Report:
Financial Review
FINANCIAL
REVIEW
Paula Bell
Group Finance Director
Aviation Underlying Operating Profit (£m)
2013
2012
2011
2010
2009
23.2
15.4
37.8
34.8
30.9
Underlying Group Profit Before Tax (£m)
2013
2012
2011
2010
2009
Underlying EPS (p)
2013
2012
2011
2010
2009
Dividend per share (p)
38.2
33.7
49.5
41.9
2013
2012
2011
2010
2009
8.0
19.0
53.1
54.5
49.8
65.6
68.8
64.9
26.5
25.2
24.0
Group Performance
Much progress has been made during 2013, a busy
year for contract renewals and wins, in both our Aviation
and Distribution businesses. We now have over 80%
of our revenue streams from print media distribution
underpinned with contracts which are not due for
renewal until 2019, and in Aviation we have seen
positive growth in contract wins with both existing
customers and new customers.
Our geographic diversification continues, including
entry into Latin America, with three key Aviation
acquisitions made in the year building on our solid
global platform and positioning us well for future growth.
2013 has been an important year for building a
strong growth platform and refocusing efforts in
cost management in response to very disappointing
magazine sales in the year which impacted our results.
Turnover was £2,000.3m (2012: £1,996.8m). Underlying
profit before tax fell to £53.1m (2012: £54.5m) as the
Group continues to focus on driving growth from aviation-
related activities against a backdrop of a structural decline
in print media. We will continue to mitigate this trend
by actively managing the cost structure supporting the
print media distribution network. The small decline in
underlying profit before tax had a consequent impact
on our underlying earnings per share figure which
decreased slightly to 65.6p (2012: 68.8p).
Profit before tax was £42.1m (2012: £28.1m). 2012
included £18.4m of non-recurring items reflecting, in the
main, management actions to close cargo operations in
the UK and USA which allowed the focus to be on higher
margin operations which has yielded benefits in 2013.
Focus on our Aviation growth agenda continues with
the division now representing 63% of Group underlying
operating profit (2012: 57%). We are pleased to report
revenue growth of 4% in that division to £722.8m, and
9% operating profit growth to £37.8m. On a constant
currency basis, operating profits increased by 11%.
As expected, our Distribution division had a challenging
year as the volume of newspapers, magazines and
collectibles continue to decline with magazine sales
a particular disappointment. As a result we continue
to focus on efficiency measures, delivering over £5m
of savings in the year. Following the acquisition of
Orbital Marketing Services in 2012 we are pleased to
report this is performing to expectations and made
a valuable contribution. The impact of the core print
decline was partially offset by cost management and
new business streams although operating profit for the
year was £24.3m (2012: £27.5m). Looking forward,
a major rationalisation programme will commence in
2014 and c£5m of exceptional costs are planned over
the next two years.
John Menzies plc
19
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Strategic Report:
Financial Review continued
Taxation
As a multinational business we are liable to taxation
in multiple jurisdictions around the world. The Group’s
underlying tax charge for the year was £13.3m
(2012: £13.2m), representing an effective underlying
tax rate of 25% (2012: 24%). Tax paid totalled £10.1m
(2012: £9.5m). Looking forward, underlying tax rates
are expected to increase to c27% reflecting our entry
into Latin America and the rising proportion of profits
in higher tax rate jurisdictions.
Acquisition and Related Intangible Assets
During the year, three acquisitions were made as
part of the business development agenda in Aviation
which required an investment of £14.9m (including
debt acquired). The acquisitions build upon our regional
presence in Oceania and Scandinavia, and provide
a new entry point into Latin America. Acquisition
costs totalled £0.7m and these are highlighted as
non-recurring items in the Group Income Statement.
Defined Benefit Pension Scheme
As at 31 December 2013 the scheme showed a deficit
of £45.8m (2012: £62.5m) a reduction of £16.7m due
to improved performance on the scheme assets and
increased employer contributions. Following the
actuarial valuation carried out as at 31 March 2012,
the Company agreed with the Trustees of the Fund
to contribute an additional annual cash payment of
£11m plus RPI which commenced on 1 April 2013.
IAS19 (Revised) Employee Benefits was implemented
in 2013 and the financial statements have been
prepared accordingly. The impact on prior year financial
statements are as set out in Note 1 to the 2013 Annual
Report and results in a net reduction in operating profit
for that year of £2.1m.
Auto enrolment was introduced during the year and
in October 2013 more than 6,000 of our employees
were enrolled in the Nest pension scheme. The current
estimated impact to operating profit is an additional cost
of approximately £1m for 2014.
Cash Flow
Underlying operating profit
Depreciation
Dividends from associates and joint ventures
Working capital
Net pension movement
Non-cash items
Operating cash flow
Purchase of property, plant and equipment
Intangible asset additions
Sale of property, plant and equipment
Net capital expenditure
Net interest paid
Tax paid
Free cash flow
Equity dividends paid
Additional pension payment
Acquisitions
Net cash acquired with subsidiaries
Other investments
Cash spend on exceptional items
Net spend on shares
Total movement
Opening net debt
Currency translation
Closing net debt
John Menzies plc
20
Annual Report
2013
2013
£m
(19.4)
(3.9)
2.4
2012
£m
(16.7)
(3.1)
3.9
£m
Restated
61.0
20.2
4.5
(17.9)
(0.9)
(2.6)
64.3
(15.9)
(4.2)
(9.5)
34.7
(15.3)
(6.5)
(17.2)
2.2
0.1
(10.0)
(3.0)
(15.0)
(80.1)
2.1
(93.0)
£m
60.1
19.4
4.4
(13.0)
0.7
(3.3)
68.3
(20.9)
(4.7)
(10.1)
32.6
(15.9)
(10.4)
(13.0)
0.3
–
(4.0)
(1.8)
(12.2)
(93.0)
1.7
(103.5)
Cash Flow and Investment
In the year ended 31 December 2013 the Group had
an operating cash flow of £68.3m (2012: £64.3m) and
a free cash flow of £32.6m (2012: £34.7m). Investment
in acquired businesses and capital expenditure totalled
£33.5m (2012: £34.8m) which underlines our policy of
investing for future growth.
Treasury
The Group continues to be on a very strong financial
footing. We have a robust Balance Sheet built from
strong operating cash flows across the divisions and our
total debt to EBITDA ratio of 1.7 times at 31 December
2013 is well within our covenant level of 3 times.
Our interest cover is 12.4 times.
Going Concern
The Group’s business activities are set out on pages
2 to 3 and the principal risks impacting these activities are
set out on pages 16 to 17. The Group’s financial position
and cash flows are set out on pages 85 and 88 along with
an analysis of its borrowings in Note 22 on page 125.
As regards going concern the Directors have considered
market and gearing risks. Sensitivities to gearing risks
are set out in Note 16 on page 114 of this report.
The Group updates trading forecasts covering a
forward 12-month period on a regular basis and cash
flow forecasts show that the Group is capable of
operating within its committed banking facilities and
related financial covenants for the foreseeable future.
At the year end December 2013 the Group had net debt
of £103.5m (2012: £93.0m) which was comfortably
below the available committed lending facilities. Post
the year end, facilities that were due for renewal in the
first six months of 2014 have been renegotiated and
increased by approximately £55m to create appropriate
headroom to support business growth.
The Directors, who have reviewed the budgets,
forecasts and sensitivities for the coming year, consider
that the Group has adequate financial resources to
enable it to continue in operational existence for the
foreseeable future. Accordingly the Directors believe
that it is appropriate to continue to adopt the going
concern basis for preparing the financial statements.
The majority of Menzies Aviation’s stations are located
outside of the UK and operate in currencies other than
Sterling. The Group attempts to minimise the volatility
of transactional foreign exchange as far as possible
through the use of foreign exchange forward contracts.
The translation of profits from overseas trading entities
is not hedged and as a result the movement of exchange
rates directly affect the Group’s reported results, which
in 2013 was £0.7m. In particular the recent adverse
movements have been in the Australian dollar,
Indian rupee and South African rand.
Dividend
The Board has recommended a final dividend of
18.8p per share which is payable on 20 June 2014 to all
shareholders on the register at 23 May 2014. The total
(paid and proposed) dividend for the year has increased
by 5% to 26.5p per ordinary share and is an indication
of the underlying strength and stability in the business.
Paula Bell
Group Finance Director
John Menzies plc
21
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Strategic Report:
Menzies Aviation
John Menzies plc
22
Annual Report
2013
Menzies Aviation
FOCUSED
ON SERVICE
DELIVERY
Menzies Aviation has now
established itself as a major
force in the international
ground handling industry
operating at 144 airports in
31 countries worldwide.
John Menzies plc
23
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 GROUND HANDLING
Market review
The ground handling market continues to grow and
develop, driven by the number of aircraft in service
to satisfy growing passenger demand. Last year the
world saw 31m turnarounds of which around 9m were
outsourced by the airlines. By 2020 there are expected
to be around 46m aircraft turnarounds, of which around
20m will be outsourced.
Independent handlers continue to strengthen their
position in the market as competitive pressures
drive airlines to outsource their ground operations.
Market share is therefore forecast to continue rising.
The three main drivers in the outsourcing market are:
1. Market growth. The market is expected to grow by
around 3-5% per annum, and air traffic to continue
doubling every 15 years;
2. Flag carrier outsourcing;
3. Low-cost carrier growth. Low-cost carriers are
aggressively gaining market share and driving the
increase in flights. Core to their operating model is
to out-source their ground handling operations.
Ground handling’s contribution to Group
Ground Handling
Strategic Report:
Menzies Aviation
MENZIES AVIATION
Craig Smyth
Managing Director
and President,
Menzies Aviation
2013 HIGHLIGHTS
– Underlying operating profit up
11% at constant currency.
– Three acquisitions completed
and successfully integrated.
– Contract win momentum continues
– Cargo turnaround delivers
margin growth
Business Model
see page 10
Key Risks
see page 16
John Menzies plc
24
Annual Report
2013
Menzies Aviation operates in a highly dynamic and
competitive industry. Over recent years the market has
been consolidating around the stronger independent
handlers which have the right skills, experience, safety
and operational management systems in place.
Market consolidation is expected to continue over
the next few years.
Operating in an airport environment brings with it
related security and control issues, including certification,
training and security vetting. This, combined with initial
investment in equipment at each station, substantial
insurance cover levels, ISAGO (IATA Safety Audit
Programme for Ground Operations) standards and
reputation, creates significant barriers for potential
new entrants into the market.
What does Ground Handling do?
Our ground handling operation is a global provider of
passenger and ramp services to airlines and a major
force in the international ground handling industry. It
has grown rapidly since its conception in 1995, through
a combination of organic growth, acquisitions and the
development of niche opportunities.
Operating at 140 stations in 30 countries and supported by
a worldwide team of more than 16,000 people, we serve
over 500 airline customers handling around 1 million
flights per annum. The delivery of a consistent and
reliable operation, focused on meeting the needs of our
airline customers, is at the centre of everything we do.
Menzies Aviation aims at all times to give great service,
at the right price for the leanest cost. In delivering this,
we focus on working with attractive airlines in attractive
markets and this selective approach enables us to create
regional densities, leverage economies of scale and share
operational excellence. Our operations deliver sustainable
shareholder value growth from a team that wants to work
for us, with customers getting a great service that is safe
and secure.
We offer a full ground handling service to our customers,
and work in partnership with them to provide a seamless
experience for their passengers at the airport. Passengers
will come into contact with our team at the airport from
check-in all the way through to baggage reclamation as
they access our services, including ticket desks, boarding,
dispatch, passenger lounges and baggage reclamation
and lost baggage services.
Airside we work to tight timescales to turn around
an aircraft, in as little as 25 minutes from arrival until
we push back the aircraft ready for departure. These
services include load control, baggage loading and
unloading, and passenger and baggage transfer. We
also perform other aircraft services including towing,
cabin cleaning and de-icing.
Ground handling turns split by geography (%)
36%
UK & Ireland
36%
Americas
16%
Cont. Europe
7%
Middle East
& Africa
5%
Oceania &
SE Asia
John Menzies plc
25
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Strategic Report:
Menzies Aviation continued
CARGO HANDLING
Market review
Airlines utilise the holds of their aircraft to satisfy demand
for high value cargo by air with approximately 5% of
international trade but 35% by value being flown. Air
cargo differs from passenger transportation in that cargo
relies more on one-way traffic and stronger business-to-
business customer relations. Companies fly high value
items where time-critical delivery is worth the additional
cost of air transportation over land or sea transportation.
Typically around 100m tonnes of cargo are transported
around the globe annually. Around 60% of all aircraft flights
have cargo in their hold, usually larger, transcontinental
aircraft. Cargo only flights account for around 2.6% of
total aircraft movements.
The most significant growth rates in recent years have
been seen in the Middle East, although North America
and Asia-Pacific remain the largest regions with each
accounting for around a third of all tonnage movements
each year. Around 20% of cargo tonne movements are
in Europe.
There is significant market concentration around
the world’s main hubs, with nearly 50% of the cargo
tonnes handled at the 20 busiest stations. In terms of
total tonnage, the market has been relatively steady over
the last couple of years. Volumes of cargo moved by air
tend to reflect economic cycles with growth between
2009 and 2011 of 6%.
The International Air Transport Association (IATA)
released figures in January 2014 showing a 6.1% growth
in demand (measured in freight tonne kilometres or FTK)
for air freight in November 2013 over the same month
in the previous year. However, in context, this falls
below the peaks noted in 2010 and 2011. All regions
reported growth except for Latin America and Africa.
The strongest performing region was the Middle
East, where carriers reported a 16.5% improvement.
Significantly, Asia-Pacific carriers, who account for some
40% of the market, reported 4.9% growth, more than
doubling the 1.8% growth of October. The increase is
largely being driven by improving economic prospects in
China along with an overall boost on Asian trade routes.
What does Cargo Handling do?
Perishable and high-end goods flow daily through our
cargo facilities around the world. We focus on ramp
transfer where we take goods into our cargo facilities,
break down and assemble the cargo ready for loading
onto the aircraft and provide storage and transfer of
goods to and from the aircraft. We can analyse and
manage loads, ensuring that the appropriate paperwork
is prepared for import and export handling. When goods
arrive, we can arrange appropriate warehousing until the
customer is ready to collect from our facilities. We have
a trucking business should our customers want the
goods delivered to them. Our sophisticated IT systems
manage the goods through their life cycle and allow a
track and trace service for our customers, which include
airlines and forwarders.
Our relationship with Air China Cargo was expanded
to include Vancouver in Canada.
Cargo handling’s contribution to Group
Cargo
Handling
John Menzies plc
26
Annual Report
2013
John Menzies plc
27
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Strategic Report:
Menzies Aviation continued
CARGO FORWARDING
Market review
Freight forwarders and consolidators bulk-book cargo
space in planes, which they then make available to
customers to book smaller consignments. Experts
in supply chain management, a forwarder does not
traditionally move goods but organises shipments
for others. They can organise the rate, collection,
customs clearance, transportation, security screening,
documentation, storage and delivery of goods that
customers move around the world. The market is
led by world trade movements, with growth in the
Asia-Europe, Middle East-Far East and North-South
America trade lanes.
What does AMI do?
Air Menzies International (AMI) was established in
1976 to provide ‘neutral’ air freight wholesale services
exclusively to freight forwarders and courier agents.
AMI’s ‘neutrality’ means that it does not offer freight
forwarding services directly to shippers, and hence it
does not compete with its customers for their shipper
business. It works with the world’s airlines and
integrators to purchase space in aircraft holds which
allows customers to benefit from AMI’s buying power,
its ability to consolidate multiple shipments and airlines’
latest spot rates. AMI’s product range covers export,
import and cross-trade, based on cargo, express and
time definite international road freight.
AMI’s convenience and online tools help customers
move shipments around the clock. Our web portal brings
together all AMI’s Express products in an easy to use
application, allowing customers to compare Express
products side-by-side. Bonded warehouse capabilities
are equipped with the latest screening machines
and experienced staff can handle almost any air
freight requirement.
AMI has been on an upward trend over the past 5
years. A highly diversified customer base has helped
AMI successfully continue its growth even in tough
economic conditions. The large freight forwarders
come to AMI during increased demands on space and
the smaller forwarding customers reach out to AMI
for its buying power, convenience and expertise.
MENZIES AVIATION BUSINESS REVIEW
2013 was a year of further progress with good profit
growth. This demonstrates the clear resilience that
the business has through its customer, product and
geographical diversity. We invested in further growth
by making acquisitions, including a strategic entry
into the Latin American market and consolidation in
Australia and New Zealand. The division also grew
by winning new contracts at both existing and new
airports. Headwinds were experienced through
foreign exchange with a number of currencies
moving adversely and through yield pressure where
the renewal of contracts in competitive western
European airports impacted profit progression.
We won 92 new contracts, at locations across the
network. 26 contracts were lost, 9 to price and the
remainder from route cessation. This adds some
£15.6m of net revenue. In addition, we renewed
114 contracts securing £104.1m annual revenue.
We experienced some yield pressure during the
year especially in Europe where competition is
particularly intense.
AMI in Miami.
Cargo forwarding’s contribution to Group
John Menzies plc
28
Annual Report
2013
Cargo
Forwarding
Aircraft turns were up 9% reflecting the benefits of
prior year contract wins and acquisitions made in the
UK and the Czech Republic. Like for like turns increased
2% representing market growth at existing stations,
although this was tempered by some airlines not flying
their anticipated schedules, particularly in the UK,
which also adversely affected ground handling margins.
2013 was a very busy year for business development.
We won a licence to operate at Nice airport in France
and have secured Norwegian Airlines as our anchor
customer. In the USA our ground handling business
continued to expand, notably with Frontier Airlines
at three new locations.
Following a period of re-structuring, cargo handling had a
good year with the operating margin improving and the
business now in the shape that we have been striving
for. It is an attractive product where good margins can
be achieved. Whilst large operations at a number of
locations still exist, our portfolio now mainly focuses on
restricted licences in emerging markets and locations
where offering airlines a one stop shop of cargo and
ground handling is important. As expected, absolute
cargo tonnes were down 14%. This reflects the closure
of large facilities in Chicago and New York together with
the downsizing of the cargo network in the UK. Like for
like tonnes were marginally down on the prior year at
2% which is in line with our expectations and published
IATA statistics.
We made three acquisitions during the year. Skystar, a
ground handling business operating at eight locations
across Australia and New Zealand, was acquired in
October. This was a key consolidation play and had a
strong strategic fit with our existing business in the region.
The acquisition has integrated well and further contracts
have been won at the new stations. We now have a very
strong presence in the region and further expansion plans
are in place. In August, we acquired Desacol, a cargo
and ground handling business based at five stations in
Colombia. This acquisition was a strategic entry into
Latin America which is an attractive region that we have
identified for further growth. The acquisition is bedding in
well and this provides a platform for other opportunities
that exist in Latin America. Lastly, we acquired Moose
Aviation, a small ground handling business based at
Stockholm Arlanda airport in Sweden which added
to our existing presence allowing us to provide a full
service to prospective and existing airline customers.
AMI, our cargo forwarding business, had another good
year increasing profits by 11% to £4.2m. The business
now has a network of offices across the globe and is
benefitting from being a truly independent player in
the busy freight forwarding marketplace.
The contract pipeline remains strong and we continue to
evaluate acquisition opportunities that we believe will
deliver the required returns. We will continue to provide
what we believe to be the best service offering in the
industry, putting safety and security at the heart of
everything we do and providing our airline customers
with the service they demand. We align ourselves with
growing, financially sound airlines and in a consolidating
market Menzies Aviation is very well placed to continue
growing as we look to deepen existing customer
relationships, expand into new territories and
attract new customers.
In July, Menzies began offering executive facilities in
Barcelona as well as exclusive personalised corporate
and private aircraft handling.
John Menzies plc
29
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Strategic Report:
Menzies Distribution
Menzies Distribution
John Menzies plc
30
Annual Report
2013
FOCUSED ON TIME- CRITICAL DELIVERY We deliver 6.7 million newspapers
and magazines using 1,700 vehicles,
covering 130,000 miles as we
undertake the ‘nightly miracle’
364 days of the year.
John Menzies plc
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Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Strategic Report:
Menzies Distribution
MENZIES
DISTRIBUTION
David McIntosh
Managing Director,
Menzies Distribution
2013 HIGHLIGHTS
– Publisher renewals continue to
progress well with over 80% of
2013 revenues secured to 2019.
– Successful cost management
programmes deliver over £5m
full year saving.
– Distribution profits impacted
by weak magazine sales.
NEWS DISTRIBUTION
Market review
The UK newspaper and magazine supply chain operates
through a finely honed process. Product from publishers
passes to wholesalers who then allocate and distribute
the product to some 25,000 retailers across the country.
The overall market is worth c£2.6bn, split roughly
two thirds news and one third magazines.
The Print Media industry is structured around the
production of newspapers and consumer magazines
by publishers, which then deliver the products to
wholesalers – such as Menzies Distribution – for
consolidation and distribution to retail outlets.
The UK newspaper and magazine print market has been
in structural decline for a number of years, as consumers
have moved to accessing media through other media
such as TV, digital devices, and discretionary spending
has reduced on the print categories. This structural
decline continued throughout 2013. Whilst publishers
attempt to slow the rate of decline, it is not anticipated
that the trend will reverse; consequently, cover price
increases in periodicals have become a recognised
means of offsetting volume reductions.
Wholesalers have only a matter of hours to get
newspapers from the presses to newsagents’ doors
around the country. It is a highly time-critical activity
and serving this supply chain within such a restricted
time window requires investment in a network of
distribution centres; sophisticated packing and returns
processing equipment; and a diverse fleet of commercial
vehicles which, taken together, create high barriers to
entry. In addition, wholesalers bid for contracts with
News distribution’s contribution to Group
News Distribution
Business Model
see page 10
Marketing
Services
John Menzies plc
32
Annual Report
2013
the publishers to serve geographical areas with each
publisher’s products, with contract terms traditionally
lasting around 5 years.
Reduction of the wholesalers’ fixed and variable cost
bases is constant within the industry. By concentrating
on quality of service, process efficiency and economies
of scale, wholesalers can maximise profitability in the
face of declining sales. Consolidation of existing networks
and maximisation of assets such as automated packing
lines will be crucial to protecting earnings. In the future,
we expect technical advances and process efficiencies
to deliver the benefits required to offset continued falling
sales and the cost of inflation.
The UK Print Media industry has, in recent years,
shown an increasing appetite for additional marketing
and promotional services. As the paid-for newspaper
market has entered long-term structural decline, there
has been an increase in the circulation of ‘free-sheets’
such as Metro and London’s Evening Standard, free
magazines such as Sport and Time Out and other
promotional activities as the major print brands look to
maintain engagement over the next decade. There is
likely to be an increasing focus on services which can
generate consumer interest, such as the production of
promotional materials; the audit of paid-for-promotions
in major retail chains; the implementation of telephone,
mailing or emailing campaigns and the staging of events
designed to promote their brands or engage with
stakeholders. The print media industry has also been
actively seeking new locations in which to place and
promote its products to consumers. Displays in airport
gates and inflight are now commonplace – and other
travel points such as ferry ports have also been trialled.
The market to provide these marketing services is
highly competitive and fragmented, with many small
players offering a wide range of services to major
publishers and retailers. Consolidation of providers and
services is anticipated over the next few years. In such a
marketplace, companies which can combine traditional
services with bespoke experiential and digital campaigns
will be well placed to lay claim to such marketing.
What does News Distribution do?
In News Distribution, we distribute some 6.7 million
newspapers and magazines, using 1,700 vehicles which
cover 130,000 miles as we undertake the ‘nightly miracle’
364 days of the year throughout the UK and Ireland.
We are experts in time-critical logistics and we are proud
of the long-standing relationships we have with retailers
and publishers alike. Using our fleet we cover 130,000
miles every day – the equivalent of driving around the
world 5 times. We also employ a dedicated team of
almost 4,000 individuals to collect, collate and deliver
newspapers and magazines. We use sophisticated
software to ensure we are deploying the most economical
vehicles on the best routes possible, and we have invested
heavily in state-of-the-art technology to ensure our packing
and returns systems are the best they can be.
We operate a network of distribution branches, covering
66% of the UK, built around 9 ‘Hub’ locations which act
as administrative and magazine-packing centres. These
hubs feed 26 spoke locations, which act as staging points
and newspaper-packing centres for highly time-critical
news distribution. As our drivers distribute new products,
they collect unsold material which is returned to our
nearest branch for processing, credit and recycling.
During 2013 we launched our Menzies Logistics Solutions
business, quickly winning a 3 year, £1.5m contract to supply
WHSmith Stores in the North of England.
9Hubs
26Spokes
5Republic of
Ireland
8Orbital
sites
John Menzies plc
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Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Strategic Report:
Menzies Distribution continued
Our ability to grow as a business whilst delivering our
existing service offering is dependent not only on our
people, but on the tools we give them. We’ve invested
heavily in ensuring we have the latest technology at our
operations disposal; from HS packing machines, and
Axon returns scanners, to Optrak route mapping, to
Track and Trace delivery monitoring. Supporting all of
this is SAP, which has enabled a wide spectrum of
process improvements and efficiencies across the
business since its implementation was completed
in 2012.
In addition to our delivery and collection service, we offer
customers the option to manage their accounts digitally
via i-menzies.com – and a smartphone app, which has
now been downloaded more than 6,000 times. 30% of
our customers now make use of these digital facilities
on a monthly basis, maintaining order levels, registering
queries and using a range of information services. Using
our SAP infrastructure, we provide publishing clients
with more information, more quickly than ever before –
aiding their print forecasts and contributing to the
overall efficiency of the supply chain.
Our core newspaper and magazine delivery has been
at the heart of the Group for almost 180 years. It has
operated in consistent and relatively stable markets.
Over recent years it has operated to provide stability
whilst providing funds for growth in the aviation
business. As its core market enters a structural decline,
opportunities exist to exploit its geographical spread and
expertise in time-critical delivery. The division continues
to be highly cash generative and with a current focus
on continual efficiency gains and exploitation of the
network, there is a positive future for the core news
distribution business.
As the market has changed, the business has adapted its
product offering, purchasing Orbital in 2012 and growing
Menzies Marketing Services, which helps businesses
to both maximise existing sales opportunities and to
open up new channels, new markets and new revenue
streams, getting them closer to their consumers. The
combined capability of our services enables clients to
maximise sales and distribution and improve reach with
retailers and corporates. The clear focus is in areas that
complement, enhance and add value to the businesses
and skill sets within the existing portfolio of individual
companies. The Marketing Service business provides
a wide portfolio of services complementary to the core
news and magazine distribution business.
MENZIES DISTRIBUTION
BUSINESS REVIEW
Despite a challenging year where weekly magazine
sales saw a step change decline in volume, we
delivered excellent cost savings, successfully renewed
over 80% of revenues from publisher contracts and
Orbital Marketing Services, the business acquired in
October 2012, delivered its expected returns. These
achievements allow the division to plan for the future
with confidence.
Sales in the magazine market were weak, with the
weekly market in particular affected by falling volumes
and title closures. As expected, due to the absence of
a major football tournament, collectibles were behind
the prior year.
We successfully restructured our network in the
South of England, spoking Portsmouth and Ryde into
the Maidstone Hub.
In 2013 Menzies Distribution won a third consecutive
Carbon Trust standard for efforts to reduce emissions.
John Menzies plc
34
Annual Report
2013
In the core categories, overall magazine sales were
down 9.2% (8.2% like for like). Weekly titles, particularly
the celebrity category, were down 10.5% (9.2% like for
like) with monthly titles down 7.5% (6.9% like for like).
During the year a number of titles closed including
Autotrader, easyLiving and More.
Newspaper sales performed ahead of expectations
with sales value up 1.5% (like for like down 2.0%),
resulting from strong cover price growth and
new business won from News International in
Northern Ireland.
During the year we continued to renew our major
publisher contracts. We now have over 80% of 2013
revenues secured through to 2019. These renewals
provide contract security and allow plans to be made
for the future shape of the business.
Productivity and cost saving initiatives continue to
deliver results. In 2013 over £5m of cost savings
were achieved.
The integration of Orbital Marketing Services progressed
well, meeting synergy and profit targets. The distribution
of printed media (travel brochures) is integrating into
the core network and we are evaluating opportunities
within the fulfilment and direct mailing markets. Menzies
Marketing Services made progress year on year but
continues to operate in a challenging environment.
To address the fall in volume we have accelerated
extensive branch rationalisation plans. The implementation
of these plans will commence in the first half of 2014 and
will run through a number of stages before completion
in the second half of 2015. As a result a number of
newspaper packing spokes will close and magazine
packing will be centralised into a smaller number of hub
locations. To deliver the project exceptional rationalisation
costs of c£5m will be incurred over the next 24 months.
It is expected that the recurring benefits of this
rationalisation will commence during 2015.
Outlook
Our News Distribution business remains focused on
its efficiency and branch rationalisation programme,
analysing our branch network and geographical spread.
Following the acquisition of Orbital in 2012 we now have
a full UK geographic coverage. We will seek to maximise
the opportunities to use our estate and vehicles for our
Menzies Logistics service. In 2013 we announced the
first significant contract with WHSmith and in 2014 we
will seek further contracts to utilise our vehicles outside
of their core news distribution timetable. We will also
continue to integrate further the Marketing Services
business streams into the core business to maximise
efficiency and opportunities to cross promote services.
We anticipate that a strong consumer demand for printed
products will remain for the foreseeable future, although
there will continue to be a steady rate of decline overall.
However, revenues remain exceptionally large, and
the News Distribution business remains central to the
Group’s overall business mix. The main challenge to
the core News Distribution business will be to continue
driving efficiencies and the removal of costs to outstrip
volume reduction, whilst at the same time developing
new, complementary revenue streams.
We have integrated parts of Orbital into our branch network,
and are on course to deliver £2.1m of business synergies.
Our Marketing Services team distributes free magazines
throughout the UK.
John Menzies plc
35
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Strategic Report:
Corporate Social Responsibility
S.P.I.R.I.T.
DRIVES OUR
SUSTAINABLE
BUSINESS
Our people conduct themselves
responsibly and we believe that
the policies and guidelines we have
in place concerning ethics, sound
business practices and wider
governance issues not only enhance
our standing in the community,
but also provide a better
business for all our stakeholders.
John Menzies plc
36
Annual Report
2013
We recognise that being a socially responsible Company
adds to and enhances the Company’s overall value, both
in the short and long term. The impact our business
activities have on the environment, communities in which
we operate, and wider society are important to us. We
understand that all our stakeholders have an interest in
our business activities, and seek to maintain an open and
participatory dialogue ensuring that our business activities
are performed in a safe, ethical and efficient way.
We therefore have policies in place covering:
– Health, Safety and Security. Our number one
priority. Operating safely and securely is central
to all our operations, and at the heart of our
S.P.I.R.I.T. culture.
– Employees. Our number one asset. Through
our people, we deliver our service every day.
– Environment. We will operate with integrity,
respecting the environments in which we operate.
– Community Investment. We will give back to
the communities in which we operate, providing a
range of assistance, including donating employee
and managerial time, matching employee donations
to charitable events and supporting organisations
financially that seek to improve quality of life.
– Supply Chain. We will behave ethically and with
integrity. We will behave with the highest of standards
and act in accordance with local laws. We will respect
those we do business with.
We have systems in place to identify, analyse and
manage key risks arising from our operations, and
develop better business methods. The policies
and guidelines we have in place set standards
concerning ethics, sound business practices
and wider governance issues.
The Board expects the Group to conduct its operations
based on sound ethical practices which are open and
free from discrimination and harassment, and will
promote a positive representation of the Group to
stakeholders. The Group has adopted and disseminated
appropriate policies and procedures, including clear
guidelines on matters such as competition law, bribery
and whistle-blowing, and the Board has tasked each
Divisional Managing Director to be responsible for the
implementation of all of these policies in their divisions.
Everyone who wears a Menzies Aviation uniform is an
ambassador for us. Airline customers and senior management
can award recognition cards in our Role Model campaign to any
uniformed employee whom they believe to be well dressed
in line with Menzies Aviation’s uniform policy, friendly and
professional and following the correct processes whilst carrying
out duties. The campaign has been a huge success with over
250 Role Model entries into a prize draw in the second half
of 2013.
John Menzies plc is included in the FTSE4Good index for
socially responsible investment. We chose to participate
and actively maintain our listing in this index because the
index measures the performance of companies that meet
globally recognised responsibility standards.
The Group publishes on its website an Annual Corporate
Social Responsibility Report which details the practices,
strategies and policies being implemented across the
divisions. A copy of the Report for 2013 can be accessed
at www.johnmenziesplc.com.
Health, Safety and Security
Good health and safety practices are integral both to
employee welfare and to the success of the Group. We
continually review our procedures and our training in order
to develop and adopt methods of working which reduce
the likelihood of accidents occurring. Our employees
operate in time-critical environments. As well as being
the responsible thing to do, it makes good business
sense to be safe and secure, as delays caused by
accidents increase costs and cause disruption for
ourselves and our customers.
Reports on health and safety performance are the first
operating item at all meetings of the Group Board and at
Divisional Operating Board meetings. They include injury
statistics and trends as well as lessons learned, training
performance, contacts with regulators and legislative
changes. The Group’s Health and Safety policy
statement, which is published on our website, focuses
on establishing a suitable environment, providing
proper training, communication and consultation
with employees.
Eighty employees from around the world received awards
under our GO-MAD station recognition programme providing
awards to staff that excel in matters of Safety, Security and
Service delivery within our aviation businesses. From these
11 were selected to receive special awards in recognition of
their individual achievements during the year.
MORSE is a key tool in our Health and Safety Strategy
and is utilised in various forms across the Group, tailored
to the operating unit. Key performance measures are
used to monitor trends and to improve our performance.
Our business units have different working environments
and so to provide clarity on the trends within each
separate business, statistics for each are analysed
individually. Details of the Health and Safety programmes
in each division, including key statistics for incidents
and near misses, can be found in the Groups Annual
Corporate Social Responsibility Report for 2013 on
our website, www.johnmenziesplc.com.
During 2013 our GO-MAD recognition programme
continued to provide recognition awards to staff that
excel in matters of Safety, Security and Service delivery
within our aviation businesses. Eighty employees
received recognition awards, from which 11 were
selected to receive special awards in recognition of
their individual achievements during the year. Other
key achievements during the year include:
– The SMART operational audit tool used by Menzies
Aviation, including the innovative iPhone application,
has been successfully implemented network-wide
producing over 100,000 aircraft safety compliance
inspections during the year, over 25% more than
the previous year.
– Menzies TV was further extended during the year
to cover more than 40 ground handling stations in
Europe, USA, Africa and Australia.
– 2013 saw the launch of Menzies computer-based
Learning Management System which complements
our current training system and allows our people
to complete their training in a new, engaging way.
– The Health and Safety team at Menzies Distribution
was restructured to locate two new advisors in
Yorkshire, allowing easier access to all areas of the
country and allowing them to spend more time in
branches and undertaking more rigid auditing.
– Leadership Development programmes throughout
the business have grown momentum with trained
and certified facilitators in all regions actively
supporting this key series. It aims to educate front
line management and supervisors highlighting the
importance of their job role. Key messages include
safety, security, training, communication and
conflict management.
– A total of 17 airports have now achieved IATA (ISAGO)
registration with a further 3 awaiting certification.
– Our Los Angeles team was presented with
Singapore Airline’s Annual Safety award at their
head office in Singapore.
– Bangalore Cargo were awarded with “Best Fire
Prevention Partner 2012-2013”.
– In Africa, teams in both Johannesburg and Durban
received the ACSA Feather Safety Award 2013
whilst Port Elizabeth was recognised with the ACSA
Best Ground Handler / Service Provider Feather
Award 2013.
John Menzies plc
37
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Strategic Report:
Corporate Social Responsibility continued
Employees
The Group recognises the value of a diverse employment
base. The principles are recognised through published
employment policies which are designed to attract, retain
and motivate quality staff. Full consideration is given
to equality legislation. We have a diverse workforce and
recruit and promote on the basis of ability. Analysis of the
gender split of our employees is shown on the Directors
Report on page 49.
Managers are expected to foster an open culture, based
on the Group’s S.P.I.R.I.T. (Safety and Security, Passion,
Innovation, Reliability, Integrity and Teamwork) values.
Training has been provided giving guidance on ethical
business practices and professional conduct. This covers
dealings with all our stakeholder groups including
customers, suppliers and of course employees.
Policies are also in place to cover the following key areas:
Attracting the right people
The Company sets out to recruit and develop high
quality individuals who have the ability to meet the high
standards of performance that will be expected of them.
We employ around 24,000 people worldwide who
we rely on to deliver a safe service to our customers.
We have robust systems in place to select the best
candidates to join our team, upholding our principles
of respect for all people, equal opportunities and dignity
at work.
Children enjoying the Parikrma football competition in India.
Reward and incentives
We will provide competitive employment packages
which encourage the best to join us. We review
the employment benefits that we offer, such as the
Sharesave Scheme in the UK, our pension schemes
and discounted travel schemes. We offer terms and
conditions of employment and levels of remuneration,
pension and other benefits that will attract, retain and
motivate employees with the necessary ability and
experience to achieve our business objectives, within
the requirements of employment legislation of each
country involved.
Training and development
We proactively support the achievement of our
operations and business objectives through the provision
of high quality, specific training and development. The
Company also recognises that the business needs of
the organisation can only be met through trained, safe
and motivated employees who perform well at all times.
Our training and development objectives are:
– To provide training for all employees to ensure that
they are able to achieve their key objectives safely
and effectively.
– To regularly review the training needs of our
employees and adjust the training as necessary
to meet the future needs of the organisation and
its employees.
– To ensure that all training and development provided
has a clearly identified business objective.
– To achieve excellence in our programmes by delivering
credible and appropriate training and development
which is motivational, relevant and demonstrably
improves the productivity and safety of our operations.
– To set and maintain high standards for all our
employees, encouraging everyone to lead by example.
Communication and consultation
Comprehensive internal communication programmes
are in place to ensure that all employees throughout
the Group are kept informed about the direction and
performance of their own division and of the rest of
the Group.
Menzies TV, now in 40 locations, was introduced as
a dynamic communication tool primarily for safety
messages to our front line staff. Safety bulletins,
business updates and local/regional messages are
broadcast on a daily basis to keep staff informed of
key topics within the business.
John Menzies plc
38
Annual Report
2013
Our divisional newsletters and magazines continue to be
available to all staff, informing them of any developments
in the business and sharing success stories from around
the globe. These closely follow the core principles of the
Group’s S.P.I.R.I.T. values, acting as the primary vehicle
for promoting and communicating its achievements.
Regular e-bulletins are also issued with Aviation divisional
news and corporate results, and disseminated through
regular crew room briefings at each airport. Crew room
briefings are also designed to provide an informal
environment where two-way communication can occur,
and employees are encouraged to raise issues, concerns
or questions in these sessions.
Recognising human rights
As a Company we support organisations in upholding
human rights principles, wherever we operate. Although
there is no definitive consensus on the boundaries of
corporate responsibility in respect of human rights,
we need to ensure that we are not involved in human
rights violations, either directly or indirectly and that we
operate in accordance with the Universal Declaration
of Human Rights (UDHR) and take account of other
internationally accepted human rights standards. In
addition to this we promote human rights through our
employment policies and practices, through our supply
chain and through the responsible use of our products
and services. The promotion of human rights through
our business activities forms part of our principle of
operating with integrity.
Whistleblowing, anti-corruption and bribery
John Menzies has a number of fundamental principles
and values which it believes are the foundation of
sound and fair business practice and as such are
important to uphold. This includes a zero tolerance
position in relation to corruption, wherever and in
whatever form that may be encountered. Anyone
representing John Menzies is expected to conduct
themselves with integrity, impartiality and honesty.
John Menzies seeks to develop a culture where
inappropriate behaviour at all levels is challenged. All
employees are encouraged to report genuine concerns
about malpractice, illegal acts or failures to comply
with recognised standards of work, without fear of
reprisal or victimisation. Individuals raising genuine
concerns will be supported and not subjected to
victimisation, detriment, or risk job security. John
Menzies operates on a global scale, and it is essential
that the Company’s policies regarding fraud, corruption
and bribery are completely understood by employees.
We actively ensure that procedures are in place to
minimise the risk of them occurring. John Menzies:
– Prohibits giving and receiving bribes;
– Commits to obeying all relevant laws;
– Commits to restricting and controlling
facilitation payments;
– Commits to restricting giving and receiving gifts.
Environment
The Group remains committed to minimising the
impact it has on the environment. Its environmental
policies have been approved and are integrated within
existing management structures and implemented
through normal business practices and procedures.
These policies address the following areas:
– Complying with legislation and best practice;
– Allocating roles, responsibilities and resources;
– Monitoring, verification and auditing of compliance;
– Data collection, analysis and reporting;
– Risk identification, assessment and management;
– Communication and dissemination of information;
– Adopting technology and working practices that are
modern, environmentally friendly and energy efficient;
– Working with customers and suppliers to address
environmental issues affecting our businesses.
At Group level, environmental issues affecting the
businesses are the responsibility of, and reported
by, each Divisional Managing Director to the Board.
Environmental risks associated with new businesses
are always assessed as part of our due diligence
process on all acquisitions.
Mr MORSE is a key tool in our Health and Safety strategy
and is utilised in various forms across the Group, tailored
to the operating unit.
John Menzies plc
39
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Strategic Report:
Corporate Social Responsibility continued
Our News Distribution division achieved the Carbon
Trust Standard for the third time in 2013 for the energy
efficiency work that has been undertaken in the division.
The Carbon Trust Standard is awarded to organisations
that measure, manage and reduce their carbon footprint
and recognises Menzies Distribution’s efforts to date and
its future commitment to measure, manage and reduce
its carbon footprint. Our Distribution business is the
largest part of the Group using carbon producing fuels in
the UK and has produced policies for managing its fuel
usage since 2008. Following a successful 2008-2011
policy which saw the division exceed its target of a 12%
reduction in gas and electricity usage, the 2012-2016
Energy and Water Policy calls for the division to reduce
electricity usage by 14% and gas by 10%. In line with
its policy all of the division’s mainland UK electricity has
been procured from fully ‘green’ renewable resources
since 2007.
Menzies Aviation operates largely in shared environments
such as airport terminals, and their direct billed energy
is significantly lower than that of Menzies Distribution.
However, they work closely with airport authorities
in minimising their energy consumption, and actively
promote efficiencies within their own premises. In
2013, Menzies Aviation in Alicante became the first
part of the Group to achieve ISO14001.
In 2013, the Group continued monitoring its energy
consumption levels in the UK as part of its requirements
under the Carbon Reduction Commitment. A new
worldwide system for monitoring and recording all
fuel based purchases is currently being rolled out which
will allow a location by location breakdown of fuel and
carbon usage. Water consumption across the business
is low and so no specific targets have been set with
The SMART operational audit tool used by Menzies Aviation,
including the innovative iPhone application, has been
successfully implemented network-wide producing over
100,000 aircraft safety compliance inspections during the
year, an increase of more than 25% over the previous year.
regards to water consumption. Both divisions do
however have a policy in place to minimise usage
and the impact of our business operations to the local
environments, including water consumption and waste.
At Menzies Distribution, packaging waste, namely
cardboard and polythene, and office paper are byproducts
of our activities. We have waste compactors installed at
all of our larger branches in the UK, which we now use
for all Dry Mixed Recyclable (DMR) materials.
Menzies Distribution has been working closely with its
waste service provider since the beginning of 2010 to
achieve the goal of 90% recycling/landfill diversion across
the division of all general waste material previously sent
to landfill. In 2010, Menzies Distribution had 19% of its
general waste being sent for recycling. By December
2013, 73% of waste was being recycled with a further
14% of waste being diverted from landfill to Refuse
Derived Fuel (RDF).
Under our contracts with newspaper and magazine
publishers, we are responsible for the collection of
unsold copies from retail outlets. Newspaper publishers
outsource the physical uplift and recycling from our
premises via third-party agents with whom we work
closely to integrate an efficient transition from our
processes to their collection.
Menzies Aviation is committed to reducing unnecessary
consumption of resources and recycling packaging such
as polythene, rope and pallets where possible. The
use of packaging materials through its AMI and cargo
businesses in the UK remains very low. Where the
division offers an aircraft cleaning service, any
waste we remove from an aircraft is, wherever possible,
processed via airport waste recycling systems.
Community Investment
John Menzies is aware that it has community obligations,
particularly within the countries and localities where it
does business. We have a positive duty to improve the
well being of individuals and to use our best endeavours
to enhance community life. A positive approach to our
community relations is in the best long term interests of
our Company and of those who work within it. We donate
our skills and expertise to work in the communities in
which we operate. Each year the Group Board sets a
budget for its charitable activities and a charities
committee allocates the expenditure.
John Menzies plc
40
Annual Report
2013
Cross Cultural Team Challenge
Menzies Aviation continued its Cross Cultural Team
Challenge programme, which it launched in 2011,
combining Senior Leadership Development with
putting something back (focused on helping children)
in communities around the world where we operate.
This year we again worked with the Parikrma Foundation
which has existing strong links to, and support from,
our business in India. Through their 4 schools, Parikrma
provides first class education and care for approximately
1,400 children from the Bangalore slums. The Challenge
in 2013 involved staging the 3rd annual Parikrma
Champions League Football tournament (PCL) for sixteen
Under-16 schools’ teams at the Bangalore Football
Stadium. There were 3 distinct community objectives:
1. To create a life changing experience for our employees,
2. For the Company to become involved in a project with
local community benefit, and
3. To work with the local community to provide
sustainable benefit.
Charity Bike Ride
In August, Menzies Distribution staged a second national
fundraising week. The centrepiece event, a 7 day cycle
relay from Edinburgh to Kent, involved more than 30 riders.
In concert with local events staged around the country
by employees, the relay raised £30,000 for charities
Children 1st and Anthony Nolan.
Charities Fund
The Company’s Charities Fund exists to provide
significant levels of support to a small number of
charities nominated by each operating division each
year, based on the following selection criteria:
– Efficiency: be involved with charities that are small
enough for our donation to make an impact, and not
be absorbed in administrative costs.
– Integrity: make donations on a ‘needs-based’
approach rather than ‘taste-based’ approach.
– Effectiveness: charities to have specific aims and
to be able to demonstrate how our contribution will
benefit their cause.
Nominations are considered for charitable organisations
suggested by the divisions, although generally donations
will not be made to certain causes or activities including
political parties, books, research papers or articles in
professional journals, religious organisations or anything
that conflicts with our Ethics Policy. In 2013, £70,000
was donated by the Company.
In addition to the main Charities Fund, employees are
actively encouraged to support chosen charities through
the Community Fund, attendance at events and the
‘Payroll Giving Scheme’ which allows for tax efficient
donations to be made to charities. The John M. Menzies
Community Fund makes individual cash awards of up to
£350 per employee, or £700 per team of employees,
undertaking a charitable or community project. Such
awards are made in consultation with the Managing
Directors of each business. During 2013, almost
£20,000 was donated via this fund.
Supply Chain
Our relationship with our customers and suppliers is
important to us – without them, we would simply not
exist. Both our businesses rely on long-term working
relationships as one of the core pillars of their business
strategy – for Menzies Distribution this can be a lifelong
arrangement with a newsagent, and for Menzies Aviation
agreements covering many years at many airports.
Airports and airlines operate on an international platform
and expect all their suppliers to operate to acceptable
standards worldwide. Menzies Aviation shares this
commitment to high standards and works with its airline
and airport partners to ensure that we all maintain and
deliver commitments to high standards throughout
the supply chain at all our locations worldwide.
The Strategic Report on pages 2 to 41 of the Annual
Report 2013 has been approved by the Board of
Directors in accordance with the Companies Act 2006
(Strategic Report and Directors’ Report) Regulations 2013.
John Geddes
Company Secretary
3 March 2014
Strategy
see page 08
Visit our website
www.johnmenziesplc.com
John Menzies plc
41
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136
Governance Reports
GOVERNANCE
REPORTS
John Menzies plc
42
Annual Report
2013
Annual Report
2013
John Menzies plc
43
Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Compliance to the UK Corporate
Governance Code
The UK Corporate Governance Code sets out the
standards of corporate governance that listed companies
should meet. I am pleased to report that John Menzies
meets all of the principles and provisions of the Code.
Leadership
In my role as Chairman of the Board, I have a duty to
shareholders to ensure that the Board works effectively
and efficiently in following its strategic objectives, which
are detailed on page 8 of the Annual Report. My role is
very much to lead the Board in challenging and guiding
the Executive Team in developing and then delivering
the strategy for the Group. We ensure that the Executive
Team continue to remain focused not just on delivering
an excellent, world leading service to their clients, but
also deliver long-term, sustainable shareholder value.
I believe also that the role of the Board as a whole is
to lead the Company, setting not only the strategy
that the business will follow but also set the culture
of the organisation. I am proud of the S.P.I.R.I.T.
values that John Menzies embraces.
Internal Control
Internal control and Corporate Governance are key
to ensuring that the business operates within the
parameters expected not only of the Board, but of all
the stakeholders in the business. I believe that robust
operating procedures are in place and have challenged
the Executive Team to ensure that they have sufficient
resource dedicated to internal control and the
implementation of their governance manuals across
their networks.
Board Structure
Our business operates within two key business
sectors, Aviation Services and Print Media Distribution,
both providing time critical delivery of services to
our customers. There are many practices that our
businesses share, but given the separate client focus
in each I feel that it continues to be appropriate for
us to have two executive Managing Directors, one
for each of the market segments. Each year the
Nomination Committee reviews the structure of the
Board, including whether it would be appropriate to
change the executive structure, and this discussion
is also held at Board meetings.
Governance Reports:
Chairman´s Introduction
Iain Napier
Chairman
Strategy
see page 08
S.P.I.R.I.T.
see page 10
Key Performance Indicators
see page 18
John Menzies plc
44
Annual Report
2013
Post year-end we announced that David McIntosh
would be leaving the Board and the position of
Managing Director for Menzies Distribution. David will
stand for re-election at this year’s AGM and remain on
the Board until a replacement is in place. A recruitment
process is now underway and the Board will keep
shareholders updated as appropriate. The Nomination
Committee keeps the structure of the Board and
succession plans for it under constant review.
I also believe that transparency in how we conduct
our business, from operating an open culture at
Board meetings where discussion and comment is
encouraged, all the way through the business. During
2013 we refreshed the Board composition and I am
pleased with the structure, controls and direction we
now have. Our Executive Team has clear strategies
for their businesses, and the Board is well placed
and balanced to provide overall governance,
leadership and direction.
Iain Napier
Chairman
Board Diversity
I agree entirely in the principles of diversity in
the Boardroom. Within Menzies, we have a female
Executive Director and a female Non-Executive Director,
2 out of 8 or 25%. I believe in recruiting the right person
for the job, irrespective of their background, with an
acknowledgement that a diverse range of skills,
backgrounds and abilities can only add to the overall
performance of the Board. I am pleased that we have
recruited on the principle of merit and ability, rather
than to fill any quotas.
Effectiveness of the Board
It is vital that the Group has an effective Board, and we
undertook a rigorous internal performance evaluation
towards the end of the year. An external evaluation is
undertaken every 3 years and was last undertaken in
2011. I am pleased that this year’s review demonstrated
that the Board is working well and did not highlight
any significant issues. As a result of the evaluation
we will make some minor amendments to the Board
administration. We have also begun the recruitment
process for a new Non-Executive Director.
Board Changes
During 2013 Paul Dollman retired as Group Finance
Director and we are pleased to have welcomed Paula
Bell as our new Group Finance Director. Paula was
identified following the use of independent external
recruitment advisers in accordance with the policy
of the Board and best practice. Paula brings with her
a wealth of experience and refreshes the Executive
Team. I believe that she has settled into her new role
well and is already delivering positive developments
in the finance function across the Group. We also
reviewed the balance of and shape of the Board,
particularly the numbers of independent and
non-independent Directors. In line with best practice,
Ian Harrison, who had served on the Board for more
than 9 years retired at the AGM in 2013. In 2014
we have begun the search for a new independent
Non-Executive Director to join the Board.
John Menzies plc
45
Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136Annual Report 2013 Governance Reports:
Directors Biographies
1. Iain Napier
– Non-Executive Chairman
– Chairman of the Nomination Committee
Background and experience
Iain was appointed Non-Executive Director of the Company in
September 2008 and became Chairman in May 2010. Iain is a
chartered management accountant has significant experience
at senior levels of international organisations having previously
been a Board Director of Bass PLC, Chief Executive of Bass
Leisure and then of Bass Brewers and Bass International
Brewers. Following Bass, he was Vice President UK and
Ireland for Interbrew SA until August 2001. He was then
Chief Executive of Taylor Woodrow International Housing and
Development from 2001 to 2005. He is currently Chairman of
McBride plc and was Chairman of Imperial Tobacco Group plc
until he stepped down in Feb 2014 after 14 years on the Board.
He is a Non-Executive Director of Molson Coors Brewing
Company and William Grant & Sons Holdings Limited.
Other appointments
– Chairman of McBride plc
– Non-Executive Director of the Molson Coors Brewing Company
– Non-Executive Director of William Grant & Sons Limited
3. Eric Born
– Non-Executive Director
– Member of the Audit Committee
– Member of the Nomination Committee
– Member of the Remuneration Committee
Background and experience
Eric was appointed a Non-Executive Director in September
2010. He became Chief Executive at Wincanton plc in December
2010, having previously been Chief Operating Officer. Prior to
this he was Group Senior Vice President & President West/South
Europe at GateGroup, the global provider of onboard services
and products to the passenger airline industry, and has also
held senior roles including Managing Director of Frimago AG in
Switzerland and Managing Director of Office World in the UK.
Other appointments
– Chief Executive of Wincanton PLC
2. Paula Bell
– Executive Director, Group Finance Director
Background and experience
Paula joined the Board as Group Finance Director in June 2013.
Paula is a Fellow of the Chartered Institute of Management
Accountants and prior to joining John Menzies was Group
Finance Director of Ricardo Plc from 2006 where she played
a key role in the strategic diversification and growth of the
business, driving strong cost and cash management. Previous
roles include Finance Director of Gatwick Airport and Director of
Finance of AWG Plc. Over a ten year period at Rolls-Royce Plc
Paula was Finance Director for large scale divisions before
becoming Business Development Director for their international
energy Transmission and Distribution Group leading on strategy,
sales and marketing and an extensive merger and acquisition
programme in emerging territories. Paula is also the Senior
Independent Director and Chairman of the Audit committee
of Laird PLC.
Other appointments
– Non-Executive Director and Senior Independent Director
of Laird plc
4. Ian Harley
– Non-Executive Director
– Senior Independent Director
– Chairman of the Audit Committee
– Member of the Remuneration Committee
– Member of the Nomination Committee
Background and experience
Ian was appointed a Non-Executive Director of the Company
in February 2009 and Senior Independent Director in May 2011.
He is Chairman of Rentokil Initial Pension Trustee Limited having
previously spent 8 years on the Rentokil Initial plc Board. Ian has
previously held a variety of posts in the Finance, Retail Banking
and Wholesale Banking Divisions of Abbey National and spent
nine years on its Board as Finance Director and Chief Executive
Officer. He is Chairman of the Court of the Whitgift Foundation
and acts as an advisor to Independent Audit Limited, chairing
its Advisory Board. He was Senior Independent Director at
Remploy Limited until 2010 and is a Fellow of the Institute of
Chartered Accountants and a Fellow and Past President of the
Institute of Bankers. He is Chairman of the Audit Committee.
Other appointments
– Chairman of Rentokil Initial Pension Trustee Limited.
John Menzies plc
46
Annual Report
2013
5. Dermot Jenkinson
– Non-Executive Director
8. Craig Smyth
– Executive Director, Menzies Aviation
Background and experience
Dermot was appointed to the Board in 1986 and held various
executive responsibilities before assuming a non-executive role
in 1999. He founded beCogent Limited in 1999, a contact centre
and related consultancy business and was Executive Chairman
until 2010 when the business was sold to Teleperformance SA.
Dermot contributes from his breadth of knowledge gained both
from his experiences in the Company and through a wide range
of executive management roles. He also represents the interests
of the Menzies family who collectively are our major shareholder.
Other appointments
– Non-Executive Director of Scottish Friendly Association.
– Non-Executive Director of Transcom Worldwide SA.
Background and experience
Craig was appointed to the Board in March 2007. He was a
founder executive of the Aviation division and has worked for
Menzies Aviation since 1994. In 2003, he moved from being
the Chief Financial Officer into the operational and commercial
role as Vice President, Americas and was appointed Managing
Director of Menzies Aviation in February 2004. He is a
chartered accountant.
6. David McIntosh
– Executive Director, Menzies Distribution
9. John Geddes
– Company Secretary
Background and experience
David was appointed to the Board in June 2009. He joined the
Group in 1989 becoming Finance Director of Menzies Distribution
in 1999. More recently as Commercial and Marketing Director, he
was responsible for commercial contractual arrangements, key
retail and publisher relationships and business information
provision. He is a chartered accountant.
Background and experience
John was appointed as Company Secretary in 2006. A
chartered secretary, he joined the Group in 1997 and was
previously Company Secretary of Menzies Aviation. His
career has also included posts at Bank of Scotland plc
and Guinness plc.
7. Octavia Morley
– Non-Executive Director
– Chairman of the Remuneration Committee
– Member of the Audit Committee
– Member of the Nomination Committee
Background and experience
Octavia was appointed a Non-Executive Director in 2006 and is
Chief Executive of Crew Clothing Limited. She has significant
experience in managing dynamic, fast-paced organisations having
previously been Chief Executive of Lighterlife Limited and Marketing
Director and Commercial Director at Woolworths plc. She has also
held positions as Managing Director, ecommerce at Asda Stores
Limited and as Buying and Merchandising Director at Laura Ashley
plc. Octavia is Chairman of the Remuneration Committee.
Other appointments
– Chief Executive of Crew Clothing Limited.
John Menzies plc
47
Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136Annual Report 2013 In accordance with the requirements of the Companies Act 2006 and the UK Listing Authority’s Listing,
Disclosure and Transparency Rules, the following sections describe the matters that are required for inclusion
in the Director’s Report and were approved by the Board. Further details of matters required to be included in
the Director’s Report are incorporated by reference into this report, as detailed below.
Directors
The Directors serving during the year or subsequently are shown below. The Directors as at the end of the financial
year, and their biographies, are shown on pages 46 and 47. Subsequent to the year end, it has been announced that
David McIntosh will resign from the Board once a successor has been identified. In the meantime he will stand for
re-election to the Board at the 2014 AGM.
Directors interests in the ordinary shares of the Company were as follows:
Name
Iain Napier
Eric Born
Paula Bell
Ian Harley
Appointed/resigned
Appointed September 2008 Beneficial
Position
Chairman
Non-Executive Director Appointed September 2010
Executive Director
Senior Independent
Director
Appointed June 2013
Appointed February 2009
–
–
Beneficial
Dermot Jenkinson Non-Executive Director Appointed December 1985 Beneficial
David McIntosh
Octavia Morley
Craig Smyth
Paul Dollman
Ian Harrison
Appointed June 2009
Executive Director
Non-Executive Director Appointed January 2006
Appointed March 2007
Executive Director
Executive Director
Resigned May 2013
Non-Executive Director Resigned May 2013
Non-beneficial
Beneficial
–
Beneficial
–
–
There have been no subsequent changes to these interests as at 3 March 2014.
31 December
2013
5,000
–
–
4,000
31 December
2012
5,000
–
–
4,000
1,885,860
2,747,860
84,512
–
116,734
–
–
2,010,860
2,807,860
92,995
–
150,364
–
–
No Director had any material interest in any contract, other than a service contract as set out on page 63.
Substantial Shareholdings
In addition to the Directors’ interests, the Company has been notified of the following interests of 3% or more in
its issued ordinary share capital as at 31 December 2013 and 3 March 2014:
Name
Schroder Investment Management
DC Thomson Pensions
Mrs P Menzies
Mr D Ramsay
Unicorn Asset Management
Number of
ordinary
shares at
3 March 2014
11,783,568
5,162,711
2,529,650
2,408,002
2,983,992
% ordinary
share capital
Number of
ordinary
shares at
31 December
2013
19.31 11,377,602
8.46
5,162,711
4.15 2,529,650
3.95 2,408,002
4.89 2,683,992
% ordinary
share capital
18.65
8.46
4.15
3.95
4.40
Directors’ and Officers’ Liability Insurance
The Company has arranged, in accordance with the Companies Act 2006 and the Articles of Association qualifying
third party indemnities against financial exposure that the Directors may incur in the course of their professional
duties. Equivalent qualifying third party indemnities were, and remain, in force for the benefit of those Directors who
stood down from the Board during the year ended 31 December 2013. Alongside these indemnities, the Company
places Directors’ and Officers’ liability insurance cover for each Director.
John Menzies plc
48
Annual Report
2013
Governance Reports: Directors’ Reportfor the year ended 31 December 2013 Dividends
The Directors recommend the payment of a final
dividend of 18.8p per ordinary share (2012: 17.85p),
payable on 20 June 2014 to shareholders on the
Register as at the close of business on 23 May 2014.
The shares will be quoted as ex-dividend on 21 May
2014. This final dividend, together with the interim
dividend of 7.7p per ordinary share (2012: 7.35p) paid on
22 November 2013, makes a total dividend of 26.5p per
ordinary share for the year ended 31 December 2013.
Political Donations
It is the Group’s policy not to make political donations
and therefore no political donations were made, including
donations as defined for the purposes of the Political
Parties Elections and Referendums Act 2000.
Financial Risk Management Objectives
and Policies
The financial risk management objectives and policies,
including the policy for hedging each major type of
forecasted transaction for which hedge accounting is
used is detailed in note 16 of the Annual Report and
Accounts 2013.
Exposure to Risk
The risk exposure of the Group including the exposure
to price risk, credit risk, liquidity risk and cash flow
risk is included in note 16 of the Annual Report and
Accounts 2013.
Financial Instruments
Details of the use of financial instruments and financial
risk management are included in note 16 of the Annual
Report and Accounts 2013.
Employee Involvement
Details of how the Company involves its employees
are contained in the Strategic Report on pages 36 to 41
which are incorporated by reference into this report.
Post Balance Sheet Events
There have been no important financial events
affecting the Company (or any subsidiaries included in
its consolidation) since the end of the financial year.
Subsequent to the year end, it has been announced
that David McIntosh will resign from the Board.
The Board will advise shareholders of developments
as appropriate.
Outlook
An indication of the likely future developments in
the business of the Company (and its subsidiaries) is
included in the Strategic Report on pages 2 to 41.
Research
The Company is not actively involved in research activities.
Geographical Spread
John Menzies plc operates in 31 countries worldwide.
Details of the geographical spread can be found on
pages 4 to 5 of the Strategic Report.
Employment Policies
Policies regarding the hiring, continuing employment
and training, career development and promotion
opportunities, for all employees both in the UK and
worldwide, together with reports on employee
involvement and representation are contained in the
Corporate Responsibility Section of the Strategic
Report on pages 36 to 41.
At the end of 2013 the split of male to female employees
in the Group was:
Directors
Decision makers
All employees
Male
6
107
16,090
Female
2
17
7,533
Policy and Practice on Payment of Creditors
The Group does not operate a standard code in respect
of payments to suppliers. Each division is responsible for
agreeing the terms and conditions under which business
transactions with its suppliers are conducted, including
the terms of payment. It is Group policy that payments to
suppliers are made in accordance with the agreed terms
provided that the supplier has performed in accordance
with all relevant terms and conditions. At the year end
the amount owed to trade creditors by the Group was
equivalent to 32.1 days (2012: 32.5 days) of purchases
from suppliers.
Audit Information
Having made the requisite enquiries, so far as the
Directors in office at the date of the signing of this report
are aware, there is no relevant audit information of which
the auditors are unaware and each Director has taken
all reasonable steps to make themselves aware of
any relevant audit information and to establish that the
auditors are aware of that information. A resolution to
reappoint Ernst & Young LLP as auditors to the Company
and to authorise the Board to set their remuneration will
be proposed at the Annual General Meeting.
Share Capital and Structure
The Company has two classes of shares: ordinary
shares and 9% cumulative preference shares. As
at 31 December 2013 the Company had an issued
share capital of £16,800,421 comprising 1,394,587
9% cumulative preference shares of £1 each and
61,623,336 ordinary shares of 25p each. Of these
61,623,336 ordinary shares, 613,319 were held as
Treasury Shares. These figures include 135,111 ordinary
shares with a nominal value of £33,778 representing
0.2% of the issued share capital which was purchased
as Treasury Shares at an average price of £7.68 per
share during 2013, to be used for the satisfaction of
John Menzies plc
49
Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136Annual Report 2013 The Company is not aware of any arrangement by which
with the Company’s co-operation, financial rights carried
by shares are held by persons other than the holders of
its ordinary shares or 9% cumulative preference shares.
The Company is not aware of any agreement between
holders of its securities which may result in restrictions
on the transfer of its securities or on voting rights.
Allotment and Issue of Shares
The Directors are, by shareholder resolutions passed at
the AGM of the Company on 17 May 2013, generally
and unconditionally authorised to exercise all the powers
of the Company to allot shares in the Company and to
grant rights to subscribe for, or to convert any security
into, shares in the Company, up to an aggregate
nominal amount of £5,054,080. The Directors are also
empowered to allot equity securities (within the meaning
of section 560 of the 2006 Act) of the Company for cash
on a non pre-emptive basis. This power is limited to:
(a) any allotment where equity securities have been
offered to holders of equity securities in proportion
(as nearly as may be) to their then holdings of such
securities; and
(b) any other allotment of equity securities up to an
aggregate nominal value of £10,108,160.
Such authority and power expire at the Company’s AGM
being held on 16 May 2014, unless previously revoked,
varied or renewed. It is proposed that such authority
and power be renewed by shareholder resolutions at
the Company’s forthcoming AGM, but without prejudice
to the exercise of any such authority prior to the date of
such resolution.
Purchase of Own Shares
The Company is, by shareholder resolution passed at
the AGM of the Company on 17 May 2013, authorised to
purchase up to 6,064,896 of its own ordinary shares at a
maximum price equal to the higher of:
(i) 105% of the average of the middle market
quotations for such ordinary shares of the Company
as derived from the London Stock Exchange for the
five business days immediately prior to the date of
conclusion of the contract for any such purchase; and
(ii) the amount stipulated by Article 5(1) of the EU
Buy-Back and Stabilisation Regulation 2003 (being
the higher of the price of the last independent trade
and the highest current independent bid for an
ordinary share in the Company on the trading venues
where the market purchases by the Company will be
carried out and that the minimum price that may be
paid is 25p per share.
Governance Reports:
Directors’ Report continued
for the year ended 31 December 2013
share plan awards. In addition, under an option available
to employees, 273,634 shares with a market value of
£2,115,191 that would otherwise have been issued to
employees were withheld in return for the Company
settling the employee’s tax liability relating to the
share-based payment. The accounting for this
transaction reflects its substance and has been
recognised in Treasury shares as an issue and buy-
back of shares. During the year the Company did not
purchase any of its own shares for cancellation.
No share in the capital of the Company may be allotted
at a discount nor shall they be allotted except as paid up
both in regard to nominal amount and premium to the
minimum extent permitted by the 2006 Companies Act.
ARTICLES OF ASSOCIATION
Transfer of Shares
There is no restriction on the transfer of shares in
the Company, other than as contained in the Articles.
Subject to the Articles and the requirements of the UK
Listing Authority, the Directors may refuse to register
a transfer of a certificated share which is not fully paid
provided that this power will not be exercised so as to
disturb the market in the shares.
Voting Rights
Deadlines for exercising voting rights and appointing a
proxy or proxies to vote on resolutions to be passed at the
AGM on 16 May 2014 are specified in the Notice of AGM.
Every ordinary shareholder present in person or by proxy
at a general meeting of the Company shall on a show of
hands have one vote unless, in the case of the latter, he
has been appointed by more than one shareholder and
has received instructions to vote both in favour of and
against the same resolution in which case he will have
one vote against that resolution and one vote for. On a
poll, every shareholder present in person at a general
meeting or by proxy, shall have one vote for every
share of which they are the holder, and if the holders
of the preference shares have the right to vote on
any resolution, each holder shall have one vote for
every preference share of which he is the holder.
The holders of the preference shares shall have no
right as such to receive notice of or attend or vote at
any general meeting of the Company unless either:
(i) at the date of the notice convening the meeting the
dividend payable on such shares or a part thereof is
six months or more in arrears; or
(ii) the business of the meeting includes the
consideration of a resolution for reducing the capital
of or winding up the Company or for altering the
objects of the Company as stated in its Articles or
for the sale of the undertaking of the Company or
any substantial part thereof or any resolution altering
or abrogating any of the special rights or privileges
attached to the preference shares, in which
circumstances the holders of the preference shares
shall have the right to vote on any such resolution.
John Menzies plc
50
Annual Report
2013
Significant Agreements – Change of Control
The Group’s divisions, Menzies Aviation and Menzies
Distribution, have agreements in place with suppliers
and customers, some of which contain change of control
clauses giving rights to these suppliers and customers
on a takeover bid for the Company. A change of control
of the Company following a takeover bid may cause a
number of other agreements to which the Company or
its subsidiaries are party, such as banking arrangements,
property leases and licence agreements to take effect,
alter or terminate. In addition the Directors’ service
agreements and employee share plans would be
similarly affected on a change of control.
Emissions Reporting
In accordance with the Companies Act 2006 (Strategic
Report and Directors’ Reports) Regulations (the
Regulation), the Company is required to report on all
material emissions of the 6 Kyoto gases from direct
sources and from purchased electricity, heat, steam
and cooling, and in the form of tonnes of Carbon Dioxide
equivalent (CO2e). This covers all of the Company’s
operations worldwide and includes indirectly purchased
energy. This requirement differs from the Company’s
obligations to report its UK CRC Energy Efficiency
scheme which broadly only required directly purchased
energy in the UK to be disclosed. During 2013 the
Company worked with its energy advisers, Briar
Associates, to develop an efficient and cost efficient
system for recording all energy emissions for reporting
under the Regulation. For the Distribution business
this process is already established. By the second half
of the year a monitoring system for parts of the business
not captured by the CRC Energy Efficiency Scheme
was being implemented throughout the Aviation UK
businesses. Given the complexity of the international
operations, it was decided to ensure that this was
working smoothly and producing quality data before it
was rolled out around the world. Full worldwide rollout
has commenced during 2014, and should be completed
by the end of the year. This means that reliable
information for 2013 comprises the data collated from
the Distribution business, and is reported below. Data
for the parts of the UK Aviation business not covered
by the CRC Energy Efficiency Scheme are now being
collated for 2014, and a full picture for the UK will be
available in the report to December 2014. Worldwide
rollout is currently underway, and therefore full
worldwide figures will not be available until the year
beginning January 2015. Extrapolations on a worldwide
basis cannot be accurately undertaken due to variance
in CO2e emissions and operational practices on a
country by country basis. We continue to work with
Briar Associates to implement the measuring tools, and
also to have the figures independently verified by them.
The Company is also, by shareholder resolution passed
at the AGM of the Company on 17 May 2013, authorised
to purchase up to 1,394,587 9% cumulative preference
shares at a maximum price which is the higher of:
(i) 110% of the average of the middle market
quotations for such 9% cumulative preference
shares of the Company as derived from the
London Stock Exchange for the five business
days immediately prior to the date of conclusion
of the contract for any such purchase; and
(ii) the amount stipulated by Article 5(1) of the EU
Buy-Back and Stabilisation Regulation 2003 (being
the higher of the price of the last independent trade
and the highest current independent bid for a 9%
cumulative preference share in the Company on the
trading venues where the market purchases by the
Company will be carried out, and that the minimum
price that may be paid is £1 per share.
These authorities expire at the AGM on 16 May 2014
and it is proposed that these authorities be renewed
by shareholder resolution at that AGM, but without
prejudice to the exercise of any such authorities prior
to the date of such resolutions.
Appointment of Directors
Directors may be appointed by the Company by an
ordinary resolution of shareholders. The Board may
appoint a Director either to fill a vacancy or as an
additional Director and any Director so appointed will
hold office only until the next AGM and shall then be
eligible for reappointment. If not reappointed at such
meeting, such a Director will vacate office at its
conclusion, except where a resolution is passed to
appoint someone in his or her place (other than with
effect from a time later than the conclusion of the
meeting) or a resolution for his or her reappointment is
put to the meeting and lost (in either which case the
retirement takes effect from the passing of the relevant
resolution). A Director is not required to hold shares
in the capital of the Company. Directors are provided
with documentation on the Company and its activities.
An appropriate induction is provided for new Directors
and ongoing training is provided as and when it may
be required.
Retirement of Directors
In accordance with best practice guidelines all of the
Directors of the Company shall retire at each AGM of
the Company.
Directors’ Powers
The business of the Company shall be managed by
the Board which may exercise all the powers of the
Company whether relating to the management of the
business or not subject to restrictions contained in the
Articles. The Articles detail the specific powers of the
Directors. Copies of the Articles may be obtained from
the Company Secretary or from the Company’s website
www.johnmenziesplc.com
The Articles can only be amended by Special Resolution
of the Company in General Meeting.
John Menzies plc
51
Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136Annual Report 2013 Governance Reports:
Directors’ Report continued
for the year ended 31 December 2013
Methodology:
We have used the UK Government’s “Environmental
Reporting Guidelines: Including mandatory greenhouse
gas emissions reporting guidance, June 2013” and
emission factors from UK Government Conversion
Factors for Company Reporting 2013. The data used in
calculating the emissions for our Distribution business is:
– that gathered to fulfil our requirements under the
CRC Energy Efficiency scheme;
– data relating to our fleet fuel consumption; and
– estimates of our Company car use, short term car
rentals, and contractors’ vehicle use in terms of
fuel use/mileage.
The data used in calculating the emissions for our
Aviation business is:
– data relating to the site electricity and heating fuel
use that we are responsible for;
– data relating to our vehicle fleet fuel consumption.
In association with our independent advisers, Briar
Associates, the Company has selected to use tonnes of
CO2e per £ turnover for John Menzies plc, but also at a
divisional level to measure tonnes CO2e per £ turnover
for the Distribution business. For the aviation business,
where KPI’s are measured against aircraft turnarounds,
the Company will measure tonnes of CO2e per
aircraft turn.
UK Distribution data for the year to December 2013:
Combustion of fuel and operation of facilities
(excluding electricity):
18,112 tonnes of CO2e
Electricity purchased for own use:
6,275 tonnes of CO2e
Total:
24,387 tonnes of CO2e
Intensity ratio:
0.019 tonnes CO2e per £’000 turnover for the
Distribution business
Annual General Meeting
Notice of the John Menzies plc Annual General Meeting
for 2014 is contained at the end of the Annual Report
and Accounts for 2013.
Approved and issued by the Board of Directors on
3 March 2014.
John Geddes
Company Secretary
3 March 2014
John Menzies plc
52
Annual Report
2013
Governance Reports:
Corporate Governance Statement
The Board remains committed to the
principles of good corporate governance
as it continues delivering its strategy.
The UK Corporate Governance Code is
an integral part of our principles and we
continue to follow the best practice that
it recommends. The Board believes that
the Company is fully compliant with the
principles of the Code.
The Board considers that the Annual
Report and Accounts for the year ended
31 December 2013 taken as a whole
are fair, balanced and understandable
and provide the information necessary
for shareholders to assess the Company’s
performance, business model and strategy.
AUDIT
COMMITTEE
1.
3.
2.
Name
1. I Harley – Chairman
2. E Born – Member
3. O Morley – Member
Main Responsibilities
To monitor the integrity of the financial statements,
internal control and risk management, whilst overseeing
the relationship with the external auditors.
REMUNERATION
COMMITTEE
NOMINATION
COMMITTEE
2.
1.
3.
1.
3.
2.
4.
Name
1. O Morley – Chairman
2. I Harley – Member
3. E Born – Member
Name
1. I Napier – Chairman
2. E Born – Member
3. I Harley – Member
4. O Morley – Member
Main Responsibilities
To determine and agree the framework and policy for
the remuneration of Directors, Company Secretary and
other members of the senior management team as it is
designated to consider.
Main Responsibilities
To review the structure, balance and composition
of the Board and its Committees and propose
new appointments.
John Menzies plc
53
Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136Annual Report 2013 Governance Reports:
Corporate Governance Statement continued
LEADERSHIP
Board Responsibilities and Composition
The Board’s key responsibility is to ensure the
Company’s prosperity by collectively directing
the Company’s affairs whilst meeting the appropriate
interests of its shareholders and stakeholders. In
addition to business and financial issues, the Board
must deal with challenges and issues relating to
corporate governance, corporate social responsibility
and corporate ethics. Its key decision making
responsibilities to ensure the long term prosperity
of the Company include the approval of strategic
plans, financial statements, acquisitions and disposals
and major non-recurring projects and major capital
expenditures. A formal schedule of matters reserved
for the Board is detailed in the Group’s Corporate
Governance Manual.
The Board met eight times in 2013 and has a formal
schedule of matters specifically reserved to it for
decision. It consists of eight Directors, five of whom
are non-executive (including the Chairman) and three
executive. Biographies for each Director, and their
position on the Board, are contained on pages 46 and 47.
The Company does not have a Chief Executive Officer;
instead it has an Executive Managing Director for
Menzies Aviation, an Executive Managing Director for
Menzies Distribution and an Executive Group Finance
Director. Each Executive Director has clearly defined
duties and responsibilities which, having been agreed
by the Board, are regularly reviewed with the Chairman.
The Role of the Board Members
The role of the Chairman is distinct from other positions,
is clearly defined and is non-executive. The position
exists to lead the Board in strategic discussions,
ensuring accurate, clear and timely information is
available to all Directors. The Chairman is available
to the Executive Directors to discuss any concerns or
issues that may arise, and ensure that risk and long
term shareholder value remain a key focus for the
Executive Directors. In managing Board meetings,
the Chairman is aware that sufficient time needs to
be made available for the discussion of items, whilst
developing an atmosphere which encourages active
participation by all Directors. On appointment the
Chairman was considered to meet the independence
criteria as defined in the FRC UK Corporate
Governance Code (the “Code”).
The role of the executive team is to implement on a day
to day basis the strategy for their division that has been
agreed by the Board. They are also expected to report
regularly to the Board on any issues that are happening
within their business and their proposed resolutions
when problems occur.
Ian Harley has been the Senior Independent Director
since May 2011. Ian has indicated that he continues to
have sufficient time available to meet with shareholders
and other stakeholders where required and will be
available where discussions with either the Chairman
or the Executive Directors are not appropriate.
Throughout 2013, all of the Directors on each of the Board
Committees have been independent, in compliance with
the Code.
Re-election of Directors
In accordance with best practice guidelines, all
Directors offer themselves for re-election at each AGM.
As reported in January 2014, David McIntosh will stand
down from the Board. He will remain a Director until
a replacement has been recruited and will therefore
stand for re-election at the AGM in 2014.
EFFECTIVENESS
The Board recognises and believes that having a
balance of skills, knowledge and experience is vital in
successfully developing and challenging its strategy.
All Directors are expected to behave in the interests
of all shareholders and bring with them independent
judgement in reaching their decisions. The Board
believes that the current balance between executive
and Non-Executive Directors is appropriate. The Board
reviews its composition annually, paying particular
regard to the length of tenure of each Director to
ensure that there are identified candidates when
the Board needs refreshed.
Board Performance Evaluation
The Board is supportive of the principles and provisions of
the Code on Board performance evaluation. The Board’s
policy is to conduct rigorous performance evaluations
internally on an annual basis, using external consultants
to refresh the process at least every three years. An
evaluation by an independent external consultant was last
carried out in 2011 and so internal evaluation of the Board,
its members and its Committees was conducted towards
the end of 2013.
Non-Executive Directors are required to constructively
challenge and contribute to the strategic development
of the Company and are appointed for an initial term of
three years. They are expected to satisfy themselves to
the integrity of the financial information, controls, and
risk management within the businesses by scrutinising
the performance of management and challenging
information presented to them.
The Company Secretary in association with the Chairman
circulates a detailed questionnaire to each Director,
covering all aspects of the Board, its Committees and
its performance. The questionnaire asked each Director
to rate the performance and quality on issues covering
the Board and Committees’ structure, composition,
procedures and administration. The evaluation also
looked at the Group strategy, performance monitoring
John Menzies plc
54
Annual Report
2013
against strategy and the Board’s risk appetite. The
questionnaire looked at the skills, balance and diversity
on the Board together with the leadership of the
Chairman and performance of the executive team
along with people and succession planning.
In association with the questionnaire, the Chairman
held a meeting with the Non-Executive Directors to
discuss the performance of the executive team, and
the Non-Executive Directors held a meeting to discuss
the performance of the Chairman. The results of the
questionnaire and the meetings were presented to the
Board in December. Overall the results were positive
indicating that the Board and its Committees was
performing well and generally comprised the right mix
of skills and experience. However, the evaluation process
confirmed that the Board should recruit an additional
Non-Executive Director. The Nomination Committee
has been tasked with producing a detailed description
of the role and the qualities and skills required for the
successful candidate. Some administrative changes are
also being introduced to address minor issues raised.
Independence
In addition to the Chairman, who satisfied the
independence criteria set out in the code on appointment,
three of the Non-Executive Directors are considered
independent (Eric Born, Ian Harley and Octavia Morley).
Dermot Jenkinson is not considered independent under
the code having been on the Board since 1985, initially
as an Executive Director and latterly as a Non-Executive
Director. Dermot Jenkinson continues to represent the
continuing involvement of the founding Menzies family
and contributes effectively to the Board. He brings to
the Board a breadth of skills and experience from his
knowledge of the Company and from his background
in business and general management. Ian Harrison, a
Director not considered independent under the Code,
retired at the AGM in 2013. This means that four of
the eight Directors are considered independent in
accordance with the Code.
Since the end of 2012, all of the Directors on each of
the Board Committees have been independent, in
compliance with the code.
The Board continually review the best future shape
and size and at this time the Board is well balanced
and able to meet the challenges and opportunities
that face the business.
Efficiency
Board papers are sent one week prior to all Board
meetings to ensure that Directors have sufficient time
to familiarize themselves with the items for discussion.
The Company uses electronic packs to ensure quick and
secure communication of the papers to each Director. As
part of the annual Board evaluation process, Directors are
asked to confirm if they are happy with the quality and
range of papers that are presented to them, and if they
feel that they have sufficient information on which to
base their decision making.
Diversity
The Board fully supports diversity, recognising the
benefits that diverse viewpoints can bring in key
decision making. We are committed to encouraging
and developing all our employees and the Board to
reach their full potential, irrespective of their gender,
race or sexuality. It is our intention to always keep the
benefits that derive from a diverse Board in mind when
making future appointments. However the Board does
not believe that setting a quota is the most appropriate
method for achieving a balanced Board and all
appointments will be made on merit. The Board is also
committed to developing talent throughout the Group and
provide appropriate training, support and development to
those identified as displaying potential.
Accountability and Board Committees
The Board met eight times in 2013 and has a formal
schedule of matters specifically reserved to it
for decision.
Board and Committee meetings and attendance in 2013:
Meetings
I Napier
P Bell
E Born
I Harley
D Jenkinson
D McIntosh
O Morley
C Smyth
I Harrison
P Dollman
Appointed/
(resigned)
10/6/2013
(17/5/2013)
(17/5/2013)
Board
8
8/8
5/5
7/8
8/8
7/8
8/8
8/8
8/8
3/3
3/3
Audit
Committee
3
3/3
–
2/3
3/3
–
–
3/3
–
–
–
Remuneration
Committee
2
1/1
–
2/2
2/2
–
–
2/2
–
–
–
Nomination
Committee
1
1/1
–
1/1
1/1
–
–
1/1
–
–
–
John Menzies plc
55
Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136Annual Report 2013 Governance Reports:
Corporate Governance Statement continued
The Board also delegates specific responsibilities with
written terms of reference to the Board Committees
detailed below and to the Divisional Operating Boards.
Information of an appropriate quality is issued in a
timely manner to assist the Board in performing its
duties. New Directors receive an appropriate induction
tailored to their needs. All members of the Board have
access to the advice and services of the Company
Secretary and may take independent professional
advice as appropriate at the expense of the Company.
Directors are also encouraged to visit divisional
operations and to undertake such activities and
training as is appropriate or may be required or
desirable in order to carry out their duties.
The Board has established Committees with defined
terms of reference and it is the Board’s policy that all
Non-Executive Directors should contribute to the
membership of its Committees. Our Board Committees
comprise solely independent Non-Executive Directors,
with the Audit Committee and Remuneration Committee
having three members and the Nomination Committee
four members. The Chairmen of the Audit and
Remuneration Committees are chosen from Directors
who are independent under the terms of the Code,
whilst the Chairman of the Nomination Committee is
also Chairman of the Board.
The Board has also delegated operational and strategy
implementation matters to the Operating Boards of
Menzies Aviation and Menzies Distribution, both of
which have two Executive Directors on them.
Succession Planning and Board Recruitment
The Board is aware that it is essential to have a
suitable succession plan in place for when members
of the Board either move on or retire. It therefore
formally reviews succession plans each year. The
Board also reviews the composition of each of the
Board Committees to ensure that there is a suitable
rotation of Directors on the Committees.
With regard to the replacement of any Executive
Directors, the Board has tasked the Nomination
Committee with reviewing potential internal candidates
and nominating suitable external candidates as and
when such a position arises. Alongside this, each of
the Divisional Operating Boards have a responsibility to
ensure that talented individuals within the business are
nurtured and given every opportunity to develop their
skills, such that they might become suitable candidates
to join the Board.
For the Chairman, the Nomination Committee has
responsibility for ensuring that there is a suitable
candidate on the Board, or that a suitable candidate
is identified externally, to ensure a smooth transition
of chairmanship when required. The Nomination
Committee will also engage external recruitment
agencies in finding suitable candidates for either
executive or non-executive positions where required
and any candidate will be expected to meet with each
member of the executive team and the Nomination
Committee prior to any offer being made.
Nomination Process
The Nomination Committee is tasked with identifying
and nominating candidates to the Board when a position
is identified. The Committee operates under formal and
transparent terms of reference which are available to view
on the Company website, www.johnmenziesplc.com.
The Committee regularly reviews the structure, size
and composition (including the skills, knowledge and
experience) required of the Board compared to its
current position and make recommendations to the
Board with regard to any changes; taking into account,
amongst other things:
– the results of the Board evaluation process,
– the total number of Directors,
– the balance of executive and Non-Executive Directors
and the balance of independent Non-Executive Directors,
– the need to ensure appropriate collective knowledge
and experience, the length of service of Directors and
diversity factors (including the skills mix, regional and
industry experience and gender);
The Committee gives full consideration to succession
planning for Directors, Non-Executive Directors and other
senior executives in the course of its work, taking into
account the challenges and opportunities facing the
Company, and what skills and expertise are therefore
needed on the Board in the future. It is responsible for
identifying and nominating for the approval of the Board,
candidates to fill Board vacancies as and when they
arise. Before any appointment is made by the Board, the
Committee evaluates the balance of skills, knowledge
and experience on the Board, and, in the light of this
evaluation prepares a detailed description of the role
and capabilities required for a particular appointment.
In identifying suitable candidates the Committee shall:
– use open advertising or the services of an independent
external advisers to facilitate the search;
– consider candidates from a wide range of backgrounds;
– ensure recruitment is undertaken in accordance with
the Company’s equal opportunities and dignity at work
policy (available to view on the Company website); and
– consider candidates on merit and against objective
criteria, taking care that appointees have enough
time available to devote to the position.
John Menzies plc
56
Annual Report
2013
Induction
On appointment a structured induction programme is
used to familiarise Directors with the business. This
programme was followed for Paula Bell who joined during
the year. The programme is tailored for each new Director
to ensure that they receive a focused and appropriate
induction plan. Each new Director spends time with the
executive team to understand their strategic goals and
objectives for their businesses. They will also discuss any
issues that are currently being addressed and how the
division operates. Following this the new Director will
meet with the management teams in each business and
in the Group head office, and undertake various site visits
to see how the businesses operate and how the various
parts of the organisation interact. A new Director also has
structured meetings with the Chairman and Non-Executive
Directors to familiarise them with the Board and its
structures, and the operating responsibilities expected
from the position. Following the site visits and meetings,
the new Director will then have the opportunity to discuss
with the Company Secretary if they have any further
training requirements, whether they would like to
arrange any meetings with major shareholders or
would like further meetings as part of their Company
familiarisation process.
Training and Development
The Board believes that regularly updating the skills and
abilities of the Board is vital to achieving the Company’s
objectives. As well as refreshing Board composition, the
Board also looks to receive regular updates, training and
development. The Company Secretary is responsible to
the Chairman for ensuring that regular updates are
provided to the Board on regulatory and governance
changes, reporting requirements and market practices.
The annual Board evaluation process is used to identify
any training requirements or areas of weakness, and the
Company Secretary works with the Chairman to provide
appropriate training, either to the Board as a whole or on
an individual basis as required.
Information and Support
All Directors, including Non-Executive Directors have
access to independent professional advice at the
Company’s expense. This is arranged via the Company
Secretary. In addition, the Board Committees are
supported by external professional advisors who
provide additional information and undertake work on
behalf of the Committee independent of the Company
management structure. The Company Secretary is
responsible to each Committee for ensuring that
sufficient resources are available to it to undertake
its duties. In addition to providing sufficient resources,
the Company Secretary is responsible for ensuring
that the Group Corporate Governance Manual and
all Board procedures are complied with, and makes
himself available to all Directors to provide advice
where required.
Communication with Shareholders
The Board has responsibility for, and has developed
a comprehensive programme to ensure that effective
communication with shareholders, analysts and
the financial press is maintained throughout each
financial year. Through its annual and interim
reports, results and other announcements and the
dissemination of information via the Group’s website
at www.johnmenziesplc.com, the Board seeks to
present its strategy and performance in an objective
and balanced manner.
Shareholders attending the AGM are invited to ask
questions during the AGM and also to meet the Directors
after the formal business has concluded. The chairmen
of the Board Committees will also be available to answer
questions from any shareholder at the AGM. Full details
of proxy votes cast on each resolution will be made
available to shareholders at the Meeting and, in keeping
with best practice, will be made available on the
Company’s website after the Meeting.
Directors are able at any time to request additional
meetings with major shareholders, such meetings
arranged via the Company Secretary. The Board
receives reports at each of its meetings on any
meetings held with shareholders or with details of
meetings with analysts and analyst reports. The
Chairman and senior independent Director are also
available for contact with shareholders at any time.
John Menzies plc
57
Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136Annual Report 2013 • Succession Planning: to ensure that appropriate
plans are in place at all times for orderly succession
for Board members, taking into account the challenges
and opportunities facing the Company and what skills
and expertise are therefore likely to be needed on the
Board in the future,
• Review Leadership and Structure: to review annually
the structure, size and composition (including the
skills, knowledge and experience) of the Board and
its Committees and also the leadership needs of the
organisation, both executive and non-executive, and
make recommendations to the Board with regard to
any changes with a view to ensuring the continued
ability of the organisation to compete effectively in
the marketplace.
Work Undertaken in 2013
During 2013 the Committee undertook a review of the
Boards structure. At the start of the year the Committee
and the Board concluded the recruitment process
for the new Group Financial Director. The Committee
used the process outlined in the Corporate Governance
Statement on page 56. Following a review of the
Board structure, the diversity of talent on the Board,
and the strategic direction chosen by the Board,
the Committee recommended that an additional
independent Non-Executive Director should be recruited.
The balance of skills, knowledge and experience of the
Board was evaluated and the Committee has developed
an appointment specification. An external recruitment
adviser has been retained to assist in identifying
suitable candidates and this recruitment process is
now underway in accordance with the process outlined
in the Report on Directors’ Remuneration on page 63.
The Committee also reviewed succession plans within
the Group and for the Board, with particular attention
paid to Non-Executive Directors.
Objectives for 2014
During 2014 the Committee will lead the recruitment
process for a new Independent Non-Executive Director
to join the Board. It will also continue to evaluate the
Board structure and composition and succession plans,
and make appropriate recommendations to the Board.
Governance Reports:
Nomination Committee Report
NOMINATION
COMMITTEE
Ian Napier
Chairman
Board members
Name
I Napier
E Born
I Harley
O Morley
Position
Chairman
Member
Member
Member
Nomination Committee
The Nomination Committee has terms of reference
modelled closely on those set out in the Code and
its responsibilities include recommending new Board
appointments and succession planning. A copy of
its terms of reference is available on the Company’s
website. The Board as a whole is responsible for
making new appointments to the Board on the
recommendation of the Nomination Committee and
nominating recommended candidates for election by
shareholders on first appointment and thereafter for
re-election at relevant intervals.
Composition of the Committee
The Nomination Committee comprises solely
independent Non-Executive Directors, and is chaired
by the Board Chairman. There were no changes to
the membership of the Committee during the year.
The Company Secretary acts as Secretary to
the Committee. Executive Directors may attend the
Committee by invitation to discuss specific agenda items.
Role and Responsibilities of the Committee
The Nomination Committee is primarily responsible
for identifying and recommending to the Board a
Chairman or Non-Executive Director, and identifying
and recommending Executive Directors to a brief laid
down by the Board.
The Committee’s main duties are to
• Evaluate: (before making a recommendation to
the Board), the balance of skills, knowledge and
experience on the Board and, in the light of this
evaluation, prepare a description of the role and
capabilities required for a particular appointment,
and also review the time required from a non-
executive to effectively fulfil their duties;
John Menzies plc
58
Annual Report
2013
Governance Reports:
Remuneration Committee Report
REMUNERATION
COMMITTEE
Octavia Morley
Chairman
Board members
Name
O Morley
I Harley
E Born
I Napier
Position
Chairman
Member
Member
Past member
Annual Statement by Octavia Morley
Remuneration Committee Chair
I am pleased to introduce the Directors’ Remuneration
Report for the year ended 31 December 2013 on behalf
of the Board.
I have been Chairman of the Remuneration Committee
(the “Committee”) since May 2010 and believe that it is
essential that executive remuneration be fair, balanced
and reflective of the general markets and environments
in which we operate.
In preparing this report we have embraced the new
reporting regulations and for the first time include
a Policy Report that will be subject to a separate
binding vote at the forthcoming annual general meeting.
In creating the Policy Report we have endeavoured to
fully apply the new regulations whilst maintaining an
element of flexibility that may be required to deal with
future developments and to ensure that the best
interests of shareholders are maintained at all times.
As you will see in the Policy Report no material changes
are proposed in the remuneration package offered to
our Executive Directors and no changes to the structure
of the package are envisaged at this time.
Following on from the Policy Report is the Annual
Remuneration Report, including details of the
remuneration received by Directors during 2013.
During the year Paul Dollman retired and was replaced
as Group Finance Director by Paula Bell. The package
offered to Paula is in line with market practice and our
recruitment policy outlined on page 63. On retirement,
and in accordance with the plan rules, it was agreed that
Paul Dollman would have pro-rata vesting of some of his
outstanding awards subject to performance conditions.
Any such awards are fully disclosed in this report. As
announced in January, David McIntosh will be leaving
the Company after 25 years’ of service. The treatment
of his incentive awards is set out on page 73.
In our continuing drive for transparency and full disclosure
we will continue to publish the performance targets
relating to the annual bonus plan following the end of the
performance period. With regard to Long-Term Incentive
Plans any element of the performance criteria that is not
based on EPS or TSR will also be disclosed at the end of
the performance period.
During the year ended 31 December 2013, the
Committee has:
– Reviewed incentive structures. It is important that we
continue to ensure that our remuneration structure
remains fair and compliant with best practice principles.
– Reviewed basic salaries. Salary increases to be
implemented on 1 May 2014 for Paula Bell,
Craig Smyth and David McIntosh are 3%.
Octavia Morley
3 March 2014
John Menzies plc
59
Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136Annual Report 2013
Governance Reports:
Remuneration Committee Report continued
DIRECTORS’ REMUNERATION – PRINCIPLES
The remuneration policy below has been developed to be sufficient to attract, retain and motivate Directors of the
ability and experience necessary to run the Company successfully, whilst also aligning executive remuneration
with the experience of shareholders.
In setting Executive Directors’ remuneration, the Committee follows corporate governance requirements.
In particular, no Director is involved in the setting of their own remuneration.
SECTION 1 – DIRECTORS’ REMUNERATION POLICY
The following sections set out our Directors’ Remuneration Policy (the “Policy”). This Policy will be put forward for
shareholder approval at the 2014 AGM in accordance with section 439A of the Companies Act 2006. This policy
will apply from the date of our 2014 AGM.
Remuneration Policy
Purpose and
link to strategy
Basic Salary
Attract and retain high
performing individuals
reflecting market value
of role and executive’s
skills and experience.
Annual Bonus
Incentivise delivery of
Group and individual
objectives and enhance
performance.
Deferred bonus in shares
encourages a longer
term focus that is aligned
to shareholders and
discourages risk taking.
Operation
Maximum opportunity
Performance metrics
Normally reviewed annually.
Salaries for 2014 will be:
– P Bell: £319,587
– D McIntosh: £301,036
– C Smyth: £336,316
The Committee takes into consideration
a number of factors when setting
salaries, including (but not limited to):
– The size and scope of the
individual’s responsibilities;
– The individual’s skills,
experience and performance;
– Typical salary levels for
comparable roles at appropriate
comparator companies;
– Pay and conditions elsewhere
in the Company; and
– Inflation in the relevant market.
The annual bonus is paid in cash and
shares, based on the Committee’s
assessment of performance in
the year.
20% of any award is paid in deferred
shares. These shares have dividend
entitlements.
The Committee may clawback bonus
awards for a period of three years
after the end of the relevant bonus
year in the event of the misstatement
of accounts that materially increased
to the amount of bonus paid, or
misconduct by an employee which has
or could have led to their employment
being summarily terminated.
The Committee may increase the
level of deferral at any time.
There is no maximum opportunity.
Normally, salary increases will be in
line with the average increase awarded
in the wider employee population.
Higher increases may be made
in certain circumstances, at the
Committee’s discretion. For example,
this may include (but is not limited to):
– Increase in the scope and/or
responsibility of the individual’s role;
– Development of the individual
within the role;
– Corporate events such as a significant
acquisition or Group restructuring
which impacts the scope of role; and
– Where it is considered necessary
for the retention of an executive
or to reflect significant changes
in market practice.
Maximum annual award is 100%
of salary.
None, however individual and Company
performance are factors taken into
account when setting salaries.
All measures and targets are reviewed
annually and set at the start of the
financial year.
The measures will include relevant
Group and/or divisional financial
measures, and may include
performance against Key Results
Areas (KRAs) or other strategic
measures as appropriate.
At least 70% of the bonus will
be based on performance against
financial measures.
For 2014, awards will be based
85% on Group or divisional financial
measures and 15% on KRAs.
Bonus
Co-investment Plan
Directors can voluntarily invest up
to 40% of any cash bonus received.
Deferred bonus in shares
encourages a longer
term focus that is aligned
to shareholders and
discourages risk taking.
Long-term performance
measures incentivise
performance over the
medium and long term.
Vesting of shares is dependent on the
attainment of performance criteria.
Invested and matching shares
usually vest over three years.
Matching awards may incorporate
the value of dividends over the
performance period.
Directors can currently voluntarily
invest up to 40% (on a gross basis)
of any cash bonus received.
Investments are matched at a
maximum of 1:1 with shares that
vest dependant on performance.
The maximum opportunity is
32% of salary.
Performance criteria are reviewed
and set at the start of each award.
Matching awards will vest based
on Group EPS performance.
No more than 25% of the award vests
on the attainment of threshold target.
John Menzies plc
60
Annual Report
2013
Purpose and
link to strategy
Long-term
incentive Plan
To incentivise value
creation over the medium
and long term.
To reward the execution
of our strategy.
To encourage longer
term thinking and
planning.
To align the interests
of shareholders and
Directors.
Operation
Maximum opportunity
Performance metrics
Vesting of shares is dependent on the
attainment of performance criteria
over a period of at least three years.
Maximum annual grant value
is 100% of salary.
Performance criteria are reviewed and
set at the start of each award, using
one or more of relative TSR, Group
EPS performance, Return On Capital
Employed or any other Group financial
measure and divisional performance
measures.
Given the difference in responsibilities
between the Board Directors, the
weightings and measures may vary
between participating Executive
Directors. For example, heads of
divisions will typically have a portion
of award based on the performance
of their division.
For 2014 awards, performance will
be based on: relative TSR, Group
and Divisional financial measures.
No more than 25% of the award vests
on the attainment of threshold target.
Pension
To provide market levels
of pension provision.
Directors appointed from 2013
onwards participate in a money
purchase pension scheme or
cash equivalent.
C Smyth and D McIntosh participate
in a defined benefit pension scheme.
The scheme closed to new entrants
in 2007.
The defined benefit pension plans
are operated by the trustees of
the John Menzies Pension Fund.
These arrangements were agreed
prior to 27 June 2012.
Directors appointed from
2013 onwards receive a pension
contribution of up to 20% of salary.
None.
The defined benefit pension scheme
provides pension of up to two-thirds
of pensionable earnings, or the
‘scheme earnings cap’ if lower.
The earnings cap is £135,000.
Accruals up to this cap are limited
to 1%.
Participating Directors receive a
payment of 20% of the difference
between the cap and their
current salary.
The Committee may determine
that executives may receive a cash
supplement of up to 20% of salary
in lieu of pension.
Benefits
To provide market levels
of benefits provision.
Company Share-save
Gives all employees
worldwide an interest
in the performance of
John Menzies shares.
Shareholding guidelines
Executive Directors receive benefits
which typically may include (but
are not limited to) private health
insurance, life assurance, ill-health
insurance protection and a company
car allowance. Other benefits may be
operated through salary sacrifice. The
Committee may introduce or remove
benefits offered to individuals if it
considers it appropriate.
Where Executive Directors are
required to relocate, the Committee
may offer additional expatriate
benefits, if considered appropriate.
Accumulated savings may be used to
exercise an option to acquire shares.
The option price may be discounted
by up to the HMRC approved level
(currently 20%).
The car allowance is currently £13,361.
None.
The cost of providing other benefits,
including health insurance and life
assurance, may vary from year-to-year.
Therefore it is not practical to define
a maximum level for these or any
other benefits.
The level of any relocation benefits,
allowances and expenses will depend
on the specific circumstances.
There is no overall maximum level
of benefits.
Monthly contribution of up to the
HMRC approved limit over a three
or five year period.
None.
Shareholding guidelines for Executive Directors are 200% of salary (built up over time). Details of how these operate are set out each year in the
Annual Remuneration Report.
Chairman and
Non-Executive
Director fees
The fees for Non-Executive Directors comprise a basic payment and additional payments for being Chairman of a
Committee or a Committee member, or the Senior Independent Director. Differential fee levels may be paid for
Non-Executive Directors depending on the skills, experience, nationality and responsibilities of the individual.
To attract Non-Executive
Directors of sufficient
skills and experience
to fulfil the role.
The Chairman is eligible for a single fee for all services to the Group.
Non-Executive Directors are not eligible to participate in any John Menzies incentive plans.
Non-executives fees are reviewed periodically by the Board, with reference to external benchmarking.
John Menzies plc
61
Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136Annual Report 2013 Governance Reports:
Remuneration Committee Report continued
Notes to the Table:
Performance measures
a) Annual bonus
The annual bonus performance measures have been chosen to
provide an appropriate balance between incentivising Executive
Directors to meet financial targets for the year and to deliver in
the Group’s Key Results Areas. This balance allows the Committee
to effectively reward performance against the key elements of
our strategy.
Threshold and stretch targets are derived from a review of the
historical and projected performance of the Group and its peers,
together with an analysis of analysts’ expectations.
b) Bonus Co-Investment Plan
BCIP awards are based on Group EPS performance targets measured
over three years to incentivise and reward long-term earnings growth.
The Committee sets targets to be appropriately stretching, with
regard to a number of internal and external reference points.
c) Long-Term Incentive Plan
The ultimate goal of the Group is to provide long-term sustainable
returns to shareholders. The performance measures are intended to
align executive remuneration with this goal. In particular (for 2014):
Relative TSR – Total Shareholder Return (TSR) relative to a relevant
peer group remains the best measure of the Company’s ultimate
delivery of value to shareholders. The Committee considers that this
promotes alignment between Executive Director reward and the
shareholder experience. Targets are set with reference to wider
market practice and are positioned at a level which the Committee
consider represents stretching performance.
Group and Divisional targets – the structure of the Group means
it is important to reward certain Executive Directors based on the
long-term performance of the Group and either the Aviation or
Distribution division.
d) Differences in remuneration policy for Directors and other employees
Remuneration arrangements throughout the Group are based on the
principle that reward should be set at competitive levels to support the
delivery of the Group’s strategy, and should attract, retain and motivate
individuals who have the necessary skills for each role. Pay differs for
employees of different seniority and for those operating in different
parts of the world. For example, in accordance with market practice and
shareholder expectations, the remuneration arrangements for Executive
Directors place a significant emphasis on long-term performance related
pay compared to other employees. The Company also operates a
HMRC approved Share-save plan, in which all employees (including
Executive Directors) are eligible and which aims to promote a sense
of ownership amongst staff.
The 2005 Bonus Co-Investment Scheme and the
Long-Term Incentive Plan shall be operated in accordance
with the rules of the plans as approved by shareholders.
Long-Term Incentive Plan awards are made under the
2007 Divisional Performance Share Plan approved by
shareholders at the 2007 AGM. Awards may be adjusted
in accordance with the rules approved by shareholders.
For example, Long-Term Incentive Plan and Bonus
Co-Investment Plan awards may be adjusted in the
event of any variation of the Company’s share capital.
The Committee may recommend to the Board that it
amends the targets applicable to LTIP awards if an
event occurs which causes the Committee to reasonably
consider that, having due regard for the interests of
shareholders, the performance targets should be varied
to ensure a fair measure of performance or a more
effective incentive for participants.
Reclaim provisions (clawback) apply where stated
on page 60. Other elements of remuneration are
not subject to recovery provisions.
The Committee reserves the right to make any
remuneration payments and payments for loss of
office (including exercising any discretions available to
it in connection with such payments) notwithstanding
that they are not in line with the Policy where the terms
of the payment were agreed (i) before the Policy came
into effect or (ii) at a time when the relevant individual
was not a Director of the Company and, in the opinion
of the Committee, the payment was not in consideration
for the individual becoming a Director of the Company.
For these purposes “payments” includes the Committee
satisfying awards of variable remuneration and, in relation
to an award over shares, the terms of the payment are
“agreed” at the time the award is granted.
The Committee may make minor amendments to
the Policy (for regulatory, exchange control, tax or
administrative purposes or to take account of a change
in legislation) without obtaining shareholder approval
for that amendment.
John Menzies plc
62
Annual Report
2013
1. Recruitment Policy
In determining appropriate remuneration arrangements
on hiring a new Executive Director, the Committee will
take into consideration all relevant factors, including but
not limited to the role, the remuneration being forfeited
and the jurisdiction the candidate was recruited from.
The Committee is mindful of the need to avoid paying
more than is necessary on recruitment.
Salary would be set to take into account role
and responsibilities. For interim positions a cash
supplement may be paid rather than salary (for
example a Non-Executive Director taking on an
executive function on a short-term basis).
The Committee may make awards on hiring an external
candidate to “buyout” remuneration arrangements
forfeited on leaving a previous employer. In doing so the
Committee will take account of relevant factors including
any performance conditions attached to these awards,
the form in which they were granted (e.g. cash or shares)
and the time over which they would have vested. The
key principle would be that “buyout” awards should
not be more valuable than those forfeited.
Normally the maximum variable remuneration
(excluding buyouts) would be in line with the policy
table, comprising a maximum of 232% of salary
(100% Annual Bonus, 100% Long-Term Incentive Plan
and 32% Bonus Co-Investment Plan). The Committee
retains the flexibility to determine that for the first year
of appointment any Annual Bonus award will be
subject to such conditions as it may determine.
John Menzies currently has a board structure which does
not include a CEO position. Against that background there
is the potential that a new Executive Director could have
different roles and responsibilities which may need to be
reflected in their remuneration arrangements. Taking this
into account the Committee may, for the first year, make
an additional performance related incentive award of
up to 50% of salary. The form of any award would be
determined at the time. The overall maximum is
therefore 282% of salary.
Where an executive is appointed from within the
organisation, the normal policy of the Company is that
any legacy arrangements would be honoured in line with
the original terms and conditions. Similarly, if an Executive
Director is appointed following John Menzies’ acquisition
of, or merger with, another company, legacy terms and
conditions would be honoured.
In the event of the appointment of a new Non-Executive
Director, remuneration arrangements will be in line with
those detailed in the relevant table above.
2. Service Contracts and Letters
of Appointment
The Executive Directors have service contracts with
the Company, listed below. The Group’s practice on
notice periods is that they should be for a period of
12 months for both the executive and the Company.
The Committee considers that the notice periods are
reasonable and in the interests of shareholders having
due regard to prevailing market conditions and practice
among companies of comparable size.
Date of contract
Executive
Directors
Expiry date
P Bell
10/06/2013 Terminable on 52 weeks’ notice
D McIntosh 24/07/2009 Terminable on 52 weeks’ notice
20/03/2007 Terminable on 52 weeks’ notice
C Smyth
All Executive Directors’ service contracts and Non-
Executive Director letters of appointment are available for
inspection at the Group’s registered office in Edinburgh.
The Chairman and each of the Non-Executive Directors
have letters of appointment. The letters of appointment
do not contain any contractual entitlement to a termination
payment and the Directors can be removed in accordance
with the Company’s Articles of Association. The Chairman
and all Non-Executive Directors are subject to annual
re-election.
3. Payments to Outgoing Directors
i) Executive Directors will be entitled to receive
their basic salary and contractual benefits for any
notice period. The Company may in its absolute
discretion elect to terminate an Executive Director’s
employment by making a payment in lieu of notice of
the individual’s salary for that period. The Committee
may structure any such payments in such a way
as it deems appropriate taking into account the
circumstances of departure. Any payments of
compensation will be subject to negotiation and the
Group Policy includes consideration of appropriate
mitigation, including phasing of payments.
ii) The cost of legal, tax or other advice incurred by an
Executive Director in connection with the termination
of their employment may be met by the Company.
Additional payments may be made where required
to settle legal disputes, or as consideration for new
or amended post-employment restrictions.
iii) In the event of a Director’s departure, any outstanding
share awards will be treated in accordance with the
relevant plan rules. The following principles apply for
the treatment of remuneration elements following
loss of office for a Director:
John Menzies plc
63
Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136Annual Report 2013 Governance Reports:
Remuneration Committee Report continued
There is no automatic entitlement to annual bonus. Taking into account the circumstances of
leaving, the Committee may award a bonus in respect of performance in the financial year
with appropriate consideration of time pro-rating.
Shares are required to be transferred back to the Company (or the Director to pay the market
value to the Company) in circumstances of resignation or dismissal. In other circumstances the
deferred shares would normally be retained by the Director.
If a Director ceases office or employment with the Group any unvested awards will lapse unless
the individual is a good leaver.
Good leavers are those participants who leave by reason of death, injury, ill-health, disability,
retirement, redundancy, the transfer of the individual’s employing company or business out of
the Group or such other circumstances as the Committee may determine. This discretion will
not be exercised where the individual is dismissed for misconduct. For good leavers awards
will vest subject to the Committee’s assessment of the extent to which the performance
targets have been met, and, unless the Committee determines otherwise, time pro-rating by
reference to the proportion of the performance period elapsed. On death the matching ratio
shall be one to one unless the Committee determines that it should apply a lower ratio taking
into account the particular circumstances, the time elapsed in the performance period and
the extent to which the performance targets are likely to be achieved.
If a Director ceases office or employment with the Group any unvested awards will lapse unless
the individual is a good leaver.
Good leavers are those participants who leave by reason of injury, ill-health, disability,
retirement (with the agreement of the employing company), redundancy, the transfer of the
individual’s employing company or business out of the Group or such other circumstances as
the Committee may determine. This discretion will not be exercised where the individual is
dismissed for misconduct. Awards will vest on the normal vesting date subject to performance
to the end of the relevant performance period and time pro-rating.
If the participant dies, awards will normally vest as soon as practical on a time-apportioned
basis and subject to the Committee’s assessment of the likelihood that the performance
condition will be met in the ordinary course of events.
The Director will be eligible to receive the standard contribution to the defined contribution
pension plan, or cash equivalent, during the notice period.
Under the Menzies Pension Fund, on early retirement the Director receives a pension which
is reduced to reflect early payment in accordance with the rules of the scheme.
Leavers will be treated in accordance with the approved plan rules.
The Company may make a contribution towards reasonable legal fees incurred in relation to
any agreement to cease employment.
The Committee would determine the leaving terms for any such award at the time of grant.
Annual bonus
Deferred bonus
shares
Bonus
Co-Investment
Plan – matching
awards
Long-Term
Incentive Plan
(2007 Divisional
Performance
Share Plan)
Pension
Company
Share-Save
Benefits
Buyout awards
and additional
recruitment
awards
In the event of a change of control or winding up of the Company, treatment of share awards will be in accordance
with the relevant plan rules, which are in summary:
– On change of control LTIP awards may vest taking into account the Committee’s assessment of the extent
to which the performance targets have been met and the proportion of the performance period that has elapsed.
– BCIP awards may vest on change of control and winding up subject to the Committee’s assessment of the extent
to which the performance targets have been met, and, unless the Committee determines otherwise, time
pro-rating by reference to the proportion of the performance period elapsed.
John Menzies plc
64
Annual Report
2013
4. Illustration of remuneration policy
The following charts illustrate the different elements of the Executive Directors’ remuneration under three different
performance scenarios: ‘Fixed, ‘Mid’ and ‘Maximum’. The assumptions used are provided below the charts.
£ ‘000
1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
0
39.8%
30.1%
31.7%
22.8%
39.8%
30.1%
31.7%
22.8%
39.8%
30.1%
31.7%
22.8%
100%
45.5%
30.1%
100%
45.5%
30.1%
100%
45.5%
30.1%
Fixed
Mid
Maximum
Fixed
Mid
Maximum
Fixed
Mid
Maximum
Group Finance Director
MD, Menzies Aviation
MD, Menzies Distribution
Salary and benefits Annual bonus LTIP and BCIP
As announced in January 2014 David McIntosh is currently working his notice period. He will participate in the
annual bonus plan for 2014 on a time worked basis, and will not receive LTIP or BCIP grants in 2014. The above
assumes that David works for all of 2014. See page 73 for further details of his arrangements.
Component
Base salary
Pension
Benefits
Annual bonus (cash
and deferred shares)
Bonus
Co-Investment Plan
Long-term
Incentive Plan
‘Fixed’
0% of salary
‘Mid’
Base salary for 2014
Defined benefit – Single figure value for 2013
Defined contribution/Cash supplement – value for 2014
Taxable value of annual benefits provided in 2013
50% of salary
0% of salary
25% vesting of 1:1 match
0% vesting
25% vesting
‘Maximum’
100% of salary
100% vesting
of 1:1 match
100% vesting
The values for the Bonus Co-Investment Plan and the Long-Term Incentive Plan exclude share price growth during the performance period.
5. Consideration of employee conditions elsewhere in the Group
The average base salary increase awarded across the workforce provides a key reference point when
determining levels of increase for the Executive Directors to ensure that all arrangements remain reasonable.
John Menzies employs around 24,000 people in over 140 locations globally and the Committee therefore did
not believe it practical or reasonable to consult employees on the remuneration policy for Executive Directors
during the year. The Committee takes into account employee conditions across the Group when determining
remuneration policy.
6. Consideration of shareholder views
The Committee reviews shareholder feedback on executive remuneration matters as well as developments in
investor body guidelines, and has taken these into account in formulating executive remuneration policies. John
Menzies’ policies and practices have not changed materially for a number of years. Were a material change to be
made to any of the policies, the Committee would look to discuss the changes in advance with major shareholders.
John Menzies plc
65
Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136Annual Report 2013 Governance Reports:
Remuneration Committee Report continued
SECTION 2 – ANNUAL REPORT ON REMUNERATION
Total remuneration received for the year ended December 2013
The new disclosure regulations require companies to provide a single figure of remuneration for each Director,
broken down into each element of pay and compared to the previous year. This information is set out below.
(Audited)
Base
salary/fee
£’000
Benefits
£’000
Annual
bonus
£’000
Bonus
Co-Investment
Plan
£’000
Long-term
Incentive
Plans
£’000
Total
Long-term
incentives
£’000
Pension
Total
Remuneration
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
174
–
289 279
323 314
Executive Directors
Paula Bell
David McIntosh
Craig Smyth
Non-Executive Directors
Iain Napier
Ian Harley
Dermot Jenkinson
Octavia Morley
Eric Born
Former Directors
Paul Dollman
Ian Harrison
181 176
49
40
43
40
50
40
44
40
134 336
40
17
8
15
15
–
52
–
15
61
–
15 150 200
–
–
59
–
–
–
–
79 243 360 243 439
82 587 640 646 722
–
35
61
69
–
– 269
54 608
848
63 1,203 1,314
–
–
–
–
–
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 181
50
–
40
–
44
–
40
–
176
49
40
43
40
15
–
20 158
–
–
42 149 541 915 583 1,064
–
–
–
–
–
–
18 162 760 1,735
40
17
–
–
Notes:
1. The value for 2013 BCIP and LTIP represents the estimate of the plans which will vest in March 2014 based on the average share price for the
3 months to 31 December 2013.
2. Paul Dollman participated in an unfunded arrangement above the pension cap rather than a cash allowance.
3. Benefits offered to Directors include a car allowance and health insurance. Details of the pension arrangements for each of the Directors are
included on page 71.
4. The Long-Term Incentive Plans figure includes gains realised during the year from exercising Executive Share Options, together with the value
of the LTIP as detailed above.
1. Base salary
Salaries of Executive Directors and other staff are reviewed annually. The current salaries for Executive Directors
are set out below and will be increased with effect from 1 May 2014. When determining executive remuneration,
the Committee takes account of pay and employment conditions in the Company as a whole.
Paula Bell
David McIntosh
Craig Smyth
2012 salary
–
£283,500
£316,725
2013 salary
£310,000
£292,005
£326,227
2014 salary
£319,587
£301,036
£336,316
% increase for 2014
3%
3%
3%
John Menzies plc
66
Annual Report
2013
2. Non-Executive Directors fees
For 2013 the fees policy for Non-Executive Directors was:
Basic payment
Committee Chairmanship
Committee membership
Senior Independent Director
Group Chairman
Fee level
£38,000
£6,000
£2,500
£6,000
£182,800
Directors receive one fee either for Committee Chairmanship or Committee Membership, irrespective of the
number of Committees on which they serve.
There has been no change to non-executive remuneration since 2012. These fee levels are subject to review
during 2014 and it has been agreed that from 1 May 2014 the basic payment made to Non-Executive Directors
will increase to £40,000.
3. Annual bonus scheme
The Executive Directors participate in a discretionary bonus scheme which is subject to the achievement of
challenging Group, Divisional and personal targets designed to encourage excellent performance. Targets are set
by the Committee at the start of the performance period taking into account market expectations at that time.
Bonus payments are non-pensionable.
2013 awards included in the single figure
For the year ended 31 December 2013, bonuses were calculated as follows:
Name
P Bell
D McIntosh
C Smyth
P Dollman
Measure
Group PBT
Aviation EBIT*
Distribution EBIT*
Key Result Areas (KRAs)
Distribution EBIT*
Key Result Areas (KRAs)
Aviation EBIT*
Key Result Areas (KRAs)
Group PBT
Aviation EBIT*
Distribution EBIT*
Key Result Areas (KRAs)
Threshold
Target
£58.5m
£37.5m
£29.3m
–
£29.3m
–
£37.5m
–
£58.5m
£37.5m
£29.3m
–
Stretch
Target
£61.0m
£40.0m
£31.1m
–
£31.1m
–
£40.0m
–
£61.0m
£40.0m
£31.1m
–
* Divisional EBIT has been restated in accordance with IAS19 restatement
** Pro-rated for service period
The specific KRA targets are considered to be commercially sensitive.
Cash value
of award
(Audited)
£000
£52**
£0
£150
£20**
Weighting
(Percent
of salary)
28.3%
28.3%
28.3%
15%
85%
15%
85%
15%
28.3%
28.3%
28.3%
15%
Overall
Achieved
16%
100%
0%
–
47%
40%
16%
–
20% of all bonus awards are deferred in John Menzies shares for three years to December 2016.
Operation of policy for 2014 awards
The performance measures used for 2014 annual bonus awards will be on the same basis as the above.
Performance targets will be disclosed retrospectively as the board considers that the disclosure of
prospective targets would be commercially sensitive.
John Menzies plc
67
Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136Annual Report 2013 Governance Reports:
Remuneration Committee Report continued
4. Bonus Co-Investment Plan
Under the Bonus Co-Investment Plan (‘BCIP’) Executive Directors are invited to invest up to 40% of any cash bonus
into the BCIP.
2011 awards included in the single figure
Awards made in 2011 were on a 1:1 matching basis. 25% of the matching shares on these awards will be paid on
achieving threshold level (3% real per annum EPS growth above RPI), rising on a straight line basis to 100% paid at
or above stretch targets (6% real per annum EPS growth above RPI). Any dividends accrued on shares which vest
will be paid in cash on vesting.
The performance period for awards made in 2011 ended on 31 December 2013. The real per annum growth in EPS
for the Company over the performance period of the award was above the threshold level but below the stretch level,
resulting in 56% of the award vesting. The shares will vest on 7 March 2014.
P Dollman
C Smyth
Shares
Granted
8,752*
12,370
Attainment
56%
56%
Shares
Vesting
4,901
6,927
Performance
Period
1/1/2011-31/12/2013
1/1/2011-31/12/2013
*
Paul Dollman originally had a potential maximum award of 11,054 shares. This has been pro-rated for the time served during the performance
period in accordance with the scheme rules. His attainment percentages were calculated as at the date of his retirement rather than the end of
the performance period, in accordance with the scheme rules.
2013 awards
For March 2013 awards in respect of BCIP, performance measures and targets are as follows:
Group Performance Criteria
Threshold Target (25% vesting)
Stretch Target (100% vesting)
Earnings Per Share (EPS)
EPS growth exceeds RPI growth by 3%
EPS growth exceeds RPI growth by 6%
Details of 2013 awards are shown in the Scheme interests awarded during the financial year table on page 70.
Operation of policy for 2014 awards
The performance measures for 2014 awards, in respect of awards under the BCIP, will be as follows:
Group Performance Criteria
Threshold Target (25% vesting)
Stretch Target (100% vesting)
Earnings Per Share (EPS)
EPS growth equals RPI growth
EPS growth exceeds RPI growth by 3%
John Menzies plc
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Annual Report
2013
5. Long-Term Incentive Plan
Under this plan all awards are subject to a three year performance period with appropriate targets.
The Group Finance Director’s targets are split equally between the two Group Performance Criteria. The targets
for Divisional Managing Directors are based 75% on the two Group Performance Criteria, and 25% on their own
division’s performance measured using Divisional Financial Results (DFR). The LTIP targets align each Director to
the performance of both the Group and future profitability of their division and are considered appropriate given
the structure of the Group. Performance conditions are reviewed for each cycle of the LTIP.
The performance criteria are set at threshold and stretch level. At threshold, 25% of the award will vest,
increasing on a straight-line basis to 100% for stretch or greater achievement.
2011 awards included in the single figure
The awards made to Executive Directors in 2011 are detailed below. The shares will vest after the final results
announcement on 4 March 2014.
Shares
Granted
Criteria
Threshold
Target
Stretch
Target Attainment Weighting
Shares
Vesting
Performance
Period
P Dollman
55,252*
TSR v FTSE250
Median Median +30%
EPS v RPI RPI + 3% p.a. RPI + 8% p.a.
D McIntosh 53,260 Divisional Op Profit
TSR v FTSE250
C Smyth
65,217 Divisional Op Profit
TSR v FTSE250
£28.6m
£30.1m
Median Median +30%
EPS v RPI RPI + 3% p.a. RPI + 8% p.a.
£30.9m
£35.5m
Median Median +30%
EPS v RPI RPI + 3% p.a. RPI + 8% p.a.
100% 37.5%
43% 37.5%
100%
25%
100% 37.5%
43% 37.5%
100%
43%
0%
50% 39,505
(71.5%
50%
of max)*
25% 28,547
(53.6%
of max)
1/1/11
– 31/12/13
1/1/11
– 31/12/13
51,260
(78.6%
of max)
1/1/11
– 31/12/13
* Paul Dollman originally had a potential maximum award of 69,782 shares. This has been pro-rated for the time served during the performance
period in accordance with the scheme rules. His attainment percentages were calculated as at the date of his retirement rather than the end
of the performance period, in accordance with the scheme rules.
2013 awards
For March 2013 awards, performance measures and targets are as follows:
Group Performance Criteria
Total Shareholder Return (TSR)
Earnings Per Share (EPS)
Divisional Financial Results
Threshold Target
(25% vesting)
TSR equals the FTSE 250
median result
EPS growth exceeds RPI
growth by 3%
Will be disclosed at the end
of the performance period
Stretch Target
(100% vesting)
TSR equals the FTSE 250
median result plus 30%
EPS growth exceeds RPI
growth by 8%
Will be disclosed at the end
of the performance period
As disclosure of the DFR targets could be considered a profits forecast and is viewed by the Committee to be both
price and commercially sensitive, the Committee has decided that it will retrospectively disclose the threshold and
stretch targets for an award in its report following the end of the performance period.
Details of 2013 awards are shown in the Scheme interests awarded during the financial year table on page 70.
John Menzies plc
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Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136Annual Report 2013
Governance Reports:
Remuneration Committee Report continued
Operation of policy for 2014 awards
The performance measures for 2014 awards will be as follows. The DFR targets will be disclosed retrospectively.
Group Performance Criteria
Total Shareholder Return (TSR)
Divisional Financial Results
Threshold Target
(25% vesting)
TSR equals the FTSE 250
median result
Will be disclosed at the end
of the performance period
Stretch Target
(100% vesting)
TSR equals the FTSE 250
median result plus 30%
Will be disclosed at the end
of the performance period
6. Scheme interests awarded during the financial year
Paula Bell
David McIntosh
Craig Smyth
Type of interest
LTIP – conditional
shares
BCIP – conditional
shares
Save As You Earn
LTIP – conditional
shares
BCIP – conditional
shares
Save As You Earn
LTIP – conditional
shares
BCIP – conditional
shares
Basis on which
award made
Maximum
Number of
shares awarded
Face value
of shares (£)
% Vesting at
threshold
Performance
period end
100% of salary
34,533
£266,940
25% 31/12/2015
1:1 match on
deferred bonus
n/a
100% of salary
1:1 match on
deferred bonus
n/a
100% of salary
1:1 match on
deferred bonus
–
–
25% 31/12/2015
571
36,675
£3,597
£283,498
30/11/2016
25% 31/12/2015
1,020
£7,711
25% 31/12/2015
474
40,915
£2,986
£316,273
30/11/2016
25% 31/12/2015
5,899
£44,596
25% 31/12/2015
LTIP and BCIP awards are subject to performance conditions and the value delivered on vesting depends on
performance against pre-defined targets over the period and changes in John Menzies’ share price between
grant and vesting.
The face value of awards is calculated using the share price on the date of grant. This was £7.73 on 6 March 2013
for the LTIP and for the BCIP the share price on 21 March 2013 was £7.56. The face value of the Save As You Earn
is calculated using the Option Price of the Plan.
John Menzies plc
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Annual Report
2013
7. Total pension entitlements
Scheme benefits
David McIntosh and Craig Smyth are members of the Menzies Pension Fund, a defined benefit scheme which
provides pension on retirement at age 60 of up to two-thirds of pensionable earnings, or the ‘scheme earnings cap’
if lower, together with additional benefits as detailed below. Pensionable earnings are based on base salary.
Paula Bell does not participate in the Menzies Pension Fund.
Paul Dollman withdrew from the Menzies Pension Fund in 2011, and received a cash payment equivalent to £48k
per annum in lieu of pension saving.
Unfunded arrangement
The pensionable salary of Paul Dollman was restricted as a consequence of the ‘scheme earnings cap’. He has an
unfunded pension undertaking from the Company to provide in total the same level of pension as if the ‘scheme
earnings cap’ did not apply. This entitlement was effective from his date of appointment as a Director. Upon retiring
he began receiving a pension and cash sum under this arrangement.
The total of the transfer values for unfunded pension entitlements, held on the Company’s balance sheet at
31 December 2013 for current and former Directors, calculated on an IAS 19 Restated basis, totalled £1,379,989
(2012: £1,730,908), from which annual pensions of £44,537 were paid to former Directors (2012: £21,078).
Cash payments in Lieu of Pension Contributions
Craig Smyth and David McIntosh received a cash payment equal to 20% of their respective salaries above
the earnings cap which is included in other benefits.
Paula Bell receives a cash payment equivalent to 20% of her salary in lieu of any pension contributions.
Pension details are as follows:
Pension
as at
31 December
2012
£’000
Capital
value at
31 December
2012
£’000
Increase
in accrued
pension (net
of inflation)
£’000
39.1
62.9
50.1
60.8
782.0
1258.0
1002.0
1216.0
0.6
0.9
2.1
2.0
Name
P Dollman1
P Dollman2
C Smyth
D McIntosh
Age
57
57
46
50
Capital value
of increases at
31 December
2013 or date
Directorship
ceased if
earlier (net
of inflation
and
Director’s
contributions)
£’000
12.0
18.0
31.2
29.2
Pension at
31 December
2013 (or date
Directorship
ceased,
if earlier
£’000
Statutory
revaluation
£’000
0.4
0.6
1.0
1.3
40.1
64.4
53.2
64.1
Capital
Value at
31 December
2013 or date
membership
ceased if
earlier
£’000
802.0
1288.0
1064.0
1282.0
Increases in
Capital Value
(net of
inflation)
and
Director’s
contributions
£’000
3.7
3.7
30.3
29.8
Director’s
contributions
during the
period
£’000
–
–
10.8
10.8
Notes:
1. The funded portion of P Dollman’s benefits. Benefits are quoted as at 17 May 2013 as this was the date he left employment and stepped down
as a Director of the Company.
2. The unfunded portion of P Dollman’s benefits. Benefits are quoted as at 17 May 2013 as this was the date he left employment and stepped down
as a Director of the Company.
John Menzies plc
71
Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136Annual Report 2013 Governance Reports:
Remuneration Committee Report continued
8. Directors’ Shareholding and Share Interests
Executive Directors are expected to build a shareholding of 200% of salary. All Executive Directors have met their
shareholding requirements except Paula Bell, who having joined during 2013 is expected to build her shareholding
over time.
The table below shows Director shareholding and share interests as at 31 December 2013, and share options
exercised in the year.
Number of shares
owned (including
connected persons)
Including deferred
shares
Unvested conditional
shares subject to
performance
conditions (LTIP and
BCIP awards)
Paula Bell
David McIntosh
Craig Smyth
Iain Napier
Ian Harley
Dermot Jenkinson –
Beneficial
Non-Beneficial
Octavia Morley
Eric Born
Former Directors
Paul Dollman
–
84,512
116,734
5,000
4,000
1,885,860
2,747,860
–
–
n/a
34,533
138,504
180,603
–
–
–
–
–
64,004
Unvested options
over shares subject
to savings contracts
(SAYE)
571
1,826
–
–
–
–
–
–
–
Vested options
exercised in
the year
–
60,189
98,896
–
–
–
–
–
112,930
Details of unvested share awards (excluding details included elsewhere in this report) are as follows:
2011, 2012 and 2013
LTIP awards
Performance measured using a combination of some or all of the following measures:
– Relative TSR vs FTSE 250, with 25% vesting for median performance
and 100% vesting for median performance +30%
– Group EPS growth targets of RPI +3% p.a. for 25% vesting
and RPI +8% p.a. for 100% vesting
– Divisional Financial Results (DFR) for the Aviation or Distribution
divisions (targets to be disclosed retrospectively)
2011, 2012 and 2013
BCIP awards
Performance measured against Group EPS growth targets of
RPI +3% p.a. for 25% vesting and RPI +6% p.a. for 100% vesting.
John Menzies plc
72
Annual Report
2013
9. Payments to outgoing and past Directors
Paul Dollman
Paul Dollman retired from the Board in May 2013. Paul will receive a proportion of his 2013 Annual Bonus pro-rated
for the period of time before his retirement.
Under the terms of the Long-Term Incentive Plan, he is entitled to a pro-rated proportion of the 2011 award which
matures in March 2014. This is pro-rated up to the point of retirement. The award made under this Plan for 2012
lapsed upon retirement. The outstanding award under the Bonus Co-Investment Plan for 2011, maturing in March
2014 has also been pro-rated to the point of retirement. Any award made under these plans will be subject to the
performance criteria conditions.
Paul Dollman was also entitled to claim from his funded pension and unfunded pension. He took an early retirement
pension from his unfunded arrangement (details on page 71) and deferred his funded approved pension.
David McIntosh
As announced in January 2014, the Company has mutually agreed with David McIntosh that, after 25 years of service,
he will leave the Company to pursue other interests. David is currently working his notice period of 12 months. It is not
intended that there will be any payments in lieu of notice. David will participate in the 2014 annual bonus pro-rated for
time worked. David will not be made LTIP or BCIP awards during the year. In terms of subsisting LTIP and BCIP
awards, the Committee determined that the 2013 awards would lapse in full. Recognising David’s contribution to the
Company, it determined that the 2012 awards should subsist subject to performance measured at the normal time
and also subject to time pro-rating. SAYE options and deferred bonus share awards will lapse.
10. Five year historical TSR Performance and Executive Director pay
The following graph compares the Company’s total shareholder return for the five years to December 2013 with the
equivalent performance of the FTSE250 Index. The Committee consider that, given the scale and global spread of
the Group’s activities, the most appropriate comparison is with this Index.
800
600
400
200
0
31 Dec 08
31 Dec 09
31 Dec 10
31 Dec 11
31 Dec 12
31 Dec 13
John Menzies plc TSR
FTSE250 TSR
The regulations require companies to show the total remuneration for the Director undertaking the role of Chief
Executive Officer in each of the last five years. As our current executive structure does not include the role of
CEO the following table shows the required figures for the highest paid Director in each year.
Highest Paid Director in the Year
Total remuneration (£’000)
Annual bonus award (% of maximum)
Long-term incentive vesting (% of maximum)
2009
Dollman
757
75%
22%
2010
Dollman
750
74%
40%
2011
Dollman
3,578
74%
100%
2012
Dollman
1,735
63%
100%
2013
Smyth
1,203
46%
84%
John Menzies plc
73
Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136Annual Report 2013 Governance Reports:
Remuneration Committee Report continued
11. Percentage change in remuneration
The regulations require companies to show the annual change base salary, benefits and annual bonus for the
Director undertaking the role of Chief Executive Officer in the year and the average change for all Group employees.
As our current executive structure does not include the role of CEO the following table shows the required figures
for the highest paid Director. Given the geographical spread of our business and different rates of wage inflation
etc that exist, the average for Group employees for comparison with the highest paid Director
is based on the total UK employee base.
Highest Paid Director
Average for
Group employees
Base salary
(% change)
Benefits
(% change)
Annual bonus
(% change)
3
1
0
0
-25%
-20%
12. Relative importance of spend on pay
The total spend on employee remuneration at John Menzies during 2013 is reflected in the following table:
Group employee remuneration costs:
Dividend distribution:
Share buyback:
£476m
£15.9m
£0m
13. Legacy Plans
Executive Share Option Scheme
Pre-2005 Share options were granted to Executive Directors under an Executive Share Option Scheme, normally on
an annual basis at a level of one times salary. All grants were discretionary and awards could be varied depending on
specific circumstances. The number of Options still held in the Executive Share Option Scheme are shown below
and the cost to the Company is shown in Note 20 to the accounts.
The options are exercisable on a sliding scale where growth in underlying earnings per share exceeded RPI plus
3%-8% per annum in the three years from grant, adjusted to normalise pension and tax charges. The performance
conditions attaching to these options have been met in full and there will be no further awards made under the
Executive Share option Scheme.
31 Dec
2013
Granted
during
year
P Dollman
C Smyth
–
–
–
–
Exercised
during
year
58,714
43,062
Market price
at date of
exercise(p)
Lapsed
during
year
766
766
–
–
Gain/
(loss)
£’000
204
150
31 Dec
2012
58,714
43,062
Exercise
Price
(p)
Exercisable
from
Exercisable
to
418
418
07/05/2007
07/05/2007
06/05/2014
06/05/2014
* The exercises that were transacted during the year represent the final transactions in this scheme. There will be no further awards to Executive
Directors under this plan.
14. The Remuneration Committee
The Committee determines the remuneration of the Chairman and the Executive Directors (Tier 1) and the next level
of senior executives (Tier 2) on behalf of the Board. It has formal Terms of Reference set by the Board modelled on
the 2010 UK Corporate Governance Code, which are displayed on the Company’s website.
During 2013 the following Non-Executive Directors were members of the Committee:
Name
O Morley
I Harley
E Born
Title
Attendance
Chairman
Member
Member
3/3
3/3
3/3
John Menzies plc
74
Annual Report
2013
Advisers to the Remuneration Committee
During the year the Committee was advised by
remuneration consultants from Deloitte LLP. Total
fees in relation to executive remuneration consulting
was £20,600. Deloitte LLP also provided advice in
relation to controls assurance.
Deloitte LLP were appointed by the Committee. Deloitte
LLP is a member of the Remuneration Consultants’
Group and as such voluntarily operates under the code of
conduct in relation to executive remuneration consulting
in the UK. The Committee Chairman agrees each year
the protocols under which Deloitte LLP provides advice
to support independence. The Committee is satisfied
that the advice they have received from Deloitte LLP
has been objective and independent.
In addition, legal advice from Maclay Murray & Spens
LLP was sought by the Committee where appropriate.
Paul Dollman and Paula Bell, in their role as Group
Finance Director, and John Geddes, Group Company
Secretary, also provided internal support and guidance
to the Committee where appropriate. They are, however,
specifically excluded from any matters concerning the
details of their own remuneration. Members of the
Committee have no personal financial interest (other
than as shareholders) in the matters to be decided by
the Committee and no day-to-day involvement in the
running of the business of the Group.
15. Annual General Meeting
At the 2013 AGM, shareholders approved the 2012
Directors’ Remuneration report. 98.88% of votes cast
by proxy supported the resolution, 1.07% rejected the
resolution and 0.05% votes were withheld.
A resolution to approve this report and the Directors’
Remuneration Policy will be tabled at the 2014 AGM.
The Chairman of the Committee will be available to
answer questions from shareholders on this report.
16. External Appointments
The Board recognises the benefits to the individual and
to the Company of involvement by Executive Directors
as Non-Executive Directors on the boards of other
companies. Prior to accepting an invitation to become
a Non-Executive Director of another company, an
Executive Director must receive approval from the
Group Chairman. This approval will not be denied where
the Chairman is confident that the appointment will not
interfere with the Director’s ability to perform his duties
for the Company nor provide a conflict of interest.
Executive Directors are entitled to retain any fees
received under these appointments. For the year ended
December 2013, Paula Bell continued an external
non-executive appointment with Laird plc and Paul
Dollman continued a non-executive appointment with
Scottish Amicable Life Association Society. Details
of fees received are as follows:
Paul Dollman: £15,000 (2012: £36,000)
(Scottish Amicable Life Association Society)
Paula Bell: £52,000 (Laird Plc)
On behalf of the Board
Octavia Morley
Remuneration Committee Chairman
3 March 2014
John Menzies plc
75
Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136Annual Report 2013
Governance Reports:
Audit Committee Report
AUDIT COMMITTEE
Ian Harley
Chairman
Board members
Name
I Harley
E Born
O Morley
I Napier
Position
Chairman
Member
Member
Past member
The Committee provides effective oversight and
governance over the financial integrity of the Group’s
financial reporting and ensuring that the interests of
shareholders are protected at all times. The Committee
assesses the quality of the internal and external audit
processes, and ensures the risks which the business
faces are being effectively managed.
It is vitally important that we operate a culture where
the very best controls environment exists throughout
our global operations.
The Committee will continue to review and update
our activities in line with new legislation but also as
the nature of our operating businesses evolve.
There has been no change to the membership of the
Committee during the year.
John Menzies plc
76
Annual Report
2013
Committee’s Role and Responsibilities
The Committee assists the Board in the execution of its
responsibilities for corporate governance and internal
control and has adopted terms of reference modelled on
those set out in the Code. The Group Finance Director,
Group Company Secretary and certain senior financial
executives as appropriate, together with representatives
from the internal and external audit teams, attend each
meeting of the Committee. It is a requirement that at least
one Audit Committee member has suitable financial
experience and Ian Harley, who is a qualified accountant,
has been identified as meeting this requirement.
A copy of the Audit Committee’s terms of reference is
available on the Company’s website.
The Audit Committee has delegated authority from the
Board for ensuring adherence to the Code provisions and
related guidance.
Responsibilities
The responsibilities of the Audit Committee include:
– reviewing the financial results announcements and
financial statements and reviewing significant
judgments and estimates contained within them;
– advising the Board on whether the annual report and
accounts, taken as a whole, are fair, balanced and
understandable and provide the information necessary
for shareholders to assess the Company’s
performance, business model and strategy;
– ensuring compliance with applicable accounting
standards and reviewing the appropriateness of
accounting policies and practices in place;
– reviewing the Company’s internal financial controls
and the effectiveness of the internal audit function;
– reviewing the Group’s policies and practices
concerning business conduct, ethics and integrity,
fraud and whistle-blowing; and
– overseeing all aspects of the relationship with the
external auditors, including their appointment, the
audit process, the supply of non-audit services and
monitoring their effectiveness and independence.
The Committee also exists to ensure that the
interests of shareholders are protected and does so
by ensuring the integrity of the published financial
statements are rigorously reviewed and that the
Company has undertaken an effective and full audit
process each year. This audit process is currently
facilitated by Ernst & Young LLP (“EY”).
Review of Committee Meetings
As scheduled the Committee met three times in 2013.
Meeting attendance was as follows:
Ian Harley
Eric Born
Octavia Morley
3/3
2/3
3/3
The Chairman provides a full report of its activities,
findings and recommendations to the Board after
each meeting.
During the year the Committee generally follows a formal
agenda structure for each of the meetings that are
planned. The Agenda is reviewed at the start of each year
by the Committee Chairman and the Company Secretary
and look to include any items over and above the standard
items that the Committee may wish to review.
Normally the Chairman of the Board, the Group Finance
Director and external auditor are given notice of all of the
meetings and may be invited to attend and speak at any
meeting. The external auditor has the opportunity to
meet with the Audit Committee without any Executive
Directors present whenever necessary.
The Audit Committee has the authority to seek any
information it requires from any employee of the
Company and believes it has received sufficient, reliable
information from management to enable it to fulfil its
responsibilities during the year.
Activities during the Year
In 2013 the Committee formally reviewed and
recommended the annual report (including the statements
on internal control and the work of the Committee) and
associated business review together with the interim
results announcements made by the Company. This
aspect of its work focused on key accounting policies,
estimates and judgments, including significant or unusual
transactions or changes to these. In doing so the
Committee reviewed the reports of management and
the controls assurance (internal audit) provider and took
into account the views of the external auditors.
The Committee also reviewed the work of management
which involved assessing key risks at Group and
divisional level according to their significance, likelihood
and impact, as well as the Company’s exposure to and
management of these risks. The register and evaluation
of risk constantly evolves and the Committee was
satisfied that management had appropriate risk
management strategies and systems in place to
address the Group’s key business risks.
Following the successful implementation of the SAP IT
business system in our News Distribution division, the
Committee reviewed plans demonstrating the evolution
of the financial systems and processes which set out
new initiatives which have been completed during the
year, such as improvements to resourcing, balance sheet
reconciliation completeness and general efficiencies and
effectiveness to the processes. The Committee also
discussed the merit in driving more efficiency from the
use of the SAP IT system.
In addition to the standard agenda the Committee
welcomes presentations from the business on key areas
of focus. As an example, in Menzies Aviation a new
centrally based Security Manager was appointed in May
2013. The Security Manager has a specific remit to
oversee effective control of the cash handling and
security protocols that are required within a growing
global aviation business and to ensure that security
risks are approached in the same way at each and every
airport where we operate. A presentation on the role
and remit was given to the December meeting of the
Committee. The Committee is keen to review the
internal control environment and has a particular
focus to understand risks in relation to fraud.
The primary areas of judgement considered by the
Committee in relation to the 2013 accounts, and how
these were addressed were:
Goodwill & Intangible Assets
The review for impairment of goodwill and intangible
assets is based on cash flow projections to calculate a
value in use for each area based on forecasts prepared
by each division. The achievability of the forecast is a
risk, given inherent uncertainty within any financial
projection. The Committee reviews the assumptions
to assess the value in use as part of the audit.
Pension Accounting
The assumptions assumed in the calculation for scheme
liabilities and asset returns are underpinned by a range
of judgment. The Committee reviews these assumptions
which are supported by professional advice from external
advisory firms.
External Group Audit
Ernst & Young LLP (“EY”) are the appointed auditors to
John Menzies plc. They were appointed in 2009 after a
full tender process. The main Audit Partner last changed
in 2011. There are no contractual obligations in place that
restrict the Committee in their choice of Audit provider.
The Committee reviews and approves the audit plan, as
well as the findings of the external auditors from its audit
of the annual financial statements.
It is vitally important that the Committee believe its
appointed Auditors undertake a full and effective audit.
Their performance is reviewed annually. In undertaking
the review the Chairman of the Committee seeks views
from fellow Committee members, the Group Finance
Director and also a wide range of senior management
who were exposed to the Audit process. The outputs
from the Audit provider are also reviewed for accuracy,
clarity and also to ensure that they reflect the level of
detail undertaken during the audit.
As part of its review of the effectiveness of the external
auditors, the Audit Committee keeps under review their
objectivity and independence and the nature and extent of
the non-audit services which they provide. These services
have historically included dealing with the Group’s tax
affairs and acquisition-related due diligence, where their
knowledge of the Group’s business processes and controls
makes them best placed to undertake this work cost-
effectively on the Group’s behalf. The work undertaken
for the Group by the audit team is handled by a different
partner from the tax and other non-audit services and is
managed out of a separate office.
John Menzies plc
77
Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136Annual Report 2013 Governance Reports:
Audit Committee Report continued
During 2013, audit fees amounted to approximately £1m,
whilst non-audit fees to EY amounted to approximately
£1m. The Committee regularly reviews the remuneration
received by the Company’s auditors for audit services,
audit-related services and non-audit work. These reviews
are to ensure a balance of objectivity, value for money
and compliance with their duties. The outcome of these
reviews was that performance of the relevant non-audit
work by our auditors was the most cost-effective way of
conducting our business and that no conflicts of interest
existed between such audit and non-audit work. These
reviews enable the Committee to confirm that we
continue to receive an efficient, effective and
independent audit service.
All non-audit work is put out to tender and non-audit fees
paid to EY are approved by the Group Finance Director,
who reports any significant payments or awards of work
to the Committee. The Committee believes that the level
and scope of these non-audit services does not impair
the objectivity of the Company’s auditors.
Following a review held at the conclusion of the 2013 audit
the Committee was satisfied that EY provided an effective
audit and that they remain independent and objective.
Internal control and Risk management
A key factor in the Group’s approach to internal control
is the recognition of the need for risk awareness and
the ownership of risk management by Executives at
all levels. Each division has its own Operating Board.
A Statement of Group Policies and Procedures (the
”Statement”) sets out the responsibilities of these
Operating Boards, including authority levels, reporting
disciplines and responsibility for risk management and
internal control.
Each Operating Board has also adopted a Corporate
Governance Manual detailing its controls in implementing
these Policies and Procedures set out in the Statement.
These manuals were reviewed during the year and
updated to incorporate legislative changes and best
practice. Certain activities, including treasury, taxation,
insurance, pension and legal matters are controlled
centrally with reports reviewed by the Board
as appropriate.
Key identified risks, both financial and non-financial (see
page 16 for full details) (the latter including environmental,
social and governance risks), are reviewed by the Board as
well as at Operating Board level on an ongoing basis, with
a formal six-monthly review of risks and controls taking
place, supported by the Group’s Controls Assurance
provider. The scoring matrix used in the production of
the respective risk registers was reviewed and updated
to more accurately reflect the risk likelihood and its
corresponding impact on the Group. This was undertaken
in conjunction with Deloitte, our external Controls
Assurance provider. The Divisional Operating Boards
also review each division’s performance, strategy and risk
management. Annual compliance statements on internal
control are certified by each Divisional Board and where
appropriate the Group finance function.
John Menzies plc
78
Annual Report
2013
A Treasury Review Committee meets monthly to review
the adequacy of the Group’s facilities against potential
utilisation and commitments, as well as to monitor and
manage the Group’s exposure to interest rate and
currency movements. All minutes and matters arising
from the Treasury Committee are included in the Main
Board papers.
Further details on how the Board manages business
risks are shown on pages 16 and 17, and stakeholder
risks in particular are summarised in the Corporate
Social Responsibility report on pages 36 to 41.
Internal Audit
The Committee reviewed the Group’s internal control
structure, approved the scope of work and fees for the
controls assurance provider and debated whether the
internal audit function should be brought in-house. It
concluded that due to the complexity of the Group’s
business and the international nature of the aviation
business, the internal audit function was best served
by continuing to be outsourced to Deloitte LLP, given
their global spread and resources.
In accordance with the revised Turnbull Guidance,
the Directors are responsible for the Group’s system of
internal control which covers financial, operational and
compliance controls together with risk management.
The system has been in place throughout 2013 and up
until the date of this report, except that it did not apply
to the Group’s material joint ventures.
Findings from the internal audit programme (on
financial and key non-financial risks) and areas identified
for improvement are reviewed by the Audit Committee
and prioritised for action by management. The Audit
Committee reviews follow-up reports from management
to ensure that any weaknesses identified in internal audit
reports submitted to it are fully addressed and that
improved procedures are adopted.
The use of our standard accounting manual by finance
teams throughout the Group ensures that transactions
and balances are recognised and measured in accordance
with prescribed accounting policies and that information
is appropriately reviewed and reconciled as part of the
reporting process. The use of a standard reporting tool
by all entities in the Group ensures that information is
gathered and presented in a consistent way that facilitates
the production of the consolidated financial statements.
Whilst no system can provide absolute guarantee and
protection against material loss, the system is designed
to give the Directors reasonable assurance that problems
can be identified promptly and remedial action taken as
appropriate. The Directors, through the Board’s review of
risk and the work of the Audit Committee, have reviewed
the effectiveness of the system of internal control for the
accounting period under review and following the
implementation of new procedures within Menzies
Distribution consider that it accords with guidance.
Governance Reports:
Directors’ Responsibilities
DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the
Annual Report, the Remuneration Report and the
financial statements in accordance with applicable
law and regulations. Company law requires the
Directors to prepare financial statements for each
financial year. Under Company law the Directors must
not approve the financial statements unless they are
satisfied that they give a true and fair view of the state
of affairs of the Company. The Directors have prepared
the Group and Parent Company financial statements
in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
In preparing those financial statements the Directors are
required to:
– select suitable accounting policies in accordance
with IAS 8: Accounting Polices, Changes in
Accounting Estimates and Errors and then apply
them consistently;
– present information, including accounting policies, in
a manner that provides relevant, reliable, comparable
and understandable information;
– provide additional disclosures when compliance
with the specific requirements in IFRSs is
insufficient to enable users to understand the
impact of particular transactions, other events
and conditions on the Group’s financial position
and financial performance; and
– state that the Group has complied with IFRSs,
subject to any material departures disclosed and
explained in the financial statements.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the Company and of the Group and enable them to
ensure that the financial statements comply with the
Companies Act 2006 and Article 4 of the IAS Regulation.
They are also responsible for safeguarding the assets of
the Company and of the Group and hence for taking
reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors believe that the Annual Report and
Financial Statements, when taken as a whole, are fair,
balanced and understandable.
The Directors are responsible for the maintenance
and integrity of the Company’s website
(www.johnmenziesplc.com). Legislation in the
UK concerning the preparation and dissemination
of financial statements may differ from legislation
in other jurisdictions.
Directors’ Statement pursuant to the
Disclosure Rules and Transparency Rules
Each of the Directors confirms that, to the best of
each person’s knowledge and belief:
– the financial statements, prepared in accordance with
IFRSs as adopted by the EU, give a true and fair view
of the assets, liabilities, financial position and profit of
the Group as a whole; and
– the Strategic Report contained in the Annual Report
includes a fair review of the development and
performance of the business and the position of the
Group as a whole, together with a description of the
principal risks and uncertainties that they face.
John Menzies plc
79
Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136Annual Report 2013 Financial Statements:
Independent Auditor’s Report to the Members of John Menzies plc
We have audited the Group financial statements of
John Menzies plc for the year ended 31 December 2013
which comprise the Group Income Statement, the
Group Statement of Comprehensive Income, the Group
and Company Balance Sheets, the Group and Company
Statements of Changes in Equity, the Group and
Company Statements of Cash Flows and the related
notes 1 to 26. The financial reporting framework that
has been applied in their preparation is applicable law
and International Financial Reporting Standards (IFRSs)
as adopted by the European Union and, as regards the
Parent Company financial statements, as applied in
accordance with the provisions of the Companies
Act 2006.
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company’s
members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company
and the Company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors
and Auditor
As explained more fully in the Directors’ Responsibilities
Statement set out on page 79, the Directors are
responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on
the financial statements in accordance with applicable
law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the
Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements
are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the Group’s
and the Parent Company’s circumstances and have
been consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates
made by the Directors; and the overall presentation of
the financial statements. In addition, we read all the
financial and non-financial information in the Annual
Report and Accounts to identify material inconsistencies
with the audited financial statements and to identify any
information that is apparently materially incorrect based
on, or materially inconsistent with, the knowledge
acquired by us in the course of performing the audit.
If we become aware of any apparent material
misstatements or inconsistencies we consider
the implications for our report.
Opinion on financial statements
In our opinion:
– the financial statements give a true and fair view of
the state of the Group’s and of the Parent Company’s
affairs as at 31 December 2013 and of the Group’s
profit for the year then ended;
– the Group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
– the Parent Company’s financial statements have
been properly prepared in accordance with IFRSs
as adopted by the European Union and as applied in
accordance with the requirements of the Companies
Act 2006; and
– the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
Our assessment of risks of material
misstatement
We identified the following risks that have had the
greatest impact on the overall audit strategy; the
allocation of resources in the audit; and directing
the efforts of the engagement team:
The assessment of the carrying value of goodwill
and intangible assets with indefinite life;
– We focused on this area because the determination of
whether or not an impairment charge for goodwill and
intangible assets was necessary involved subjective
judgements by Directors about the future performance
of relevant parts of the business.
The assessment of the valuation of defined benefit
pension scheme assets and liabilities;
– We focused on this area because the determination
of the actuarial liability involved the application of a
number of judgemental assumptions.
The completeness of balance sheet reconciliations
within the Distribution business;
– We focused on this area because management had
identified issues with the performance of a number
of balance sheet reconciliations specifically within
the Distribution business.
The risk of misstatement due to management
override, fraud and error specifically around
revenue recognition.
– ISAs (UK & Ireland) require that we consider this and
we focused on the complexity of revenue recognition
and in particular product returns.
John Menzies plc
80
Annual Report 2013 Our application of materiality
We set certain thresholds for materiality. These provide
a basis for determining the nature, timing and extent of
risk assessment procedures, identifying and assessing
the risk of material misstatement and determining the
nature, timing and extent of further audit procedures.
Based on our professional judgement, we determined
materiality for the Group to be £2.65m (2012: £2.9m),
which is 5% of underlying profit before tax from
continuing operations.
We agreed with the Audit Committee that we would
report to the Committee all audit differences in excess of
£160,000 (2012: £160,000), as well as differences below
that threshold that, in our view, warranted reporting on
qualitative grounds, such as exceptional items.
An overview of the scope of our audit
Following our assessment of the risk of material
misstatement to the Group financial statements, we
selected 31 components which represented the principal
business units within the Group’s reportable segments
or Group functions and account for approximately 90%
(2012: 90%) of the Group’s revenues and approximately
80% (2012: 80%) of the Group’s profit before tax. Four
of these were subject to a full audit, including the Parent
Company, whilst the remaining 27 were subject to specific
audit procedures where the extent of our testing was
based on our assessment of the risks of material
misstatement identified above and of the materiality
of the Group’s business operations at those locations.
They were also selected to provide an appropriate basis
for undertaking audit work to address the risks of material
misstatement identified above. For the remaining
components, we performed other procedures to confirm
there were no significant risks of material misstatement
in the Group financial statements.
The audit work at the 31 locations was executed at levels
of materiality applicable to each individual entity which
were much lower than Group materiality. Included within
the 31 specific scope locations are one associate entity
and four joint ventures. In each case we were also the
auditor and had the necessary access in order to
perform the required specific procedures.
Our response to the risks identified above was
as follows:
Assessment of the carrying value of goodwill
and intangible assets with indefinite life
– We performed centralised testing of management’s
impairment reviews, including the integrity of models,
and we challenged the use of management’s
assumptions (set out in note 11) including the
reasonableness of cash flow projections, discount
rates, perpetuity rates and the sensitivities used;
Assessment of the valuation of defined benefit
pension scheme assets and liabilities
– We challenged management’s assumptions (set out
in note 4) used in the calculation of the defined benefit
obligation, including price inflation, discount rate and
life expectancy with the support of experts; we agreed
a sample of pension assets for existence through
third party confirmations and for valuation using
market valuations where available;
Completeness of balance sheet reconciliations
within the Distribution business
– We obtained the population of reconciliations to
ensure their completeness and performed detailed
testing of reconciliations deemed significant to
our audit;
Risk of misstatement due to management
override, fraud and error specifically around
revenue recognition
– We performed detailed testing of a sample of sales
and accrued income to ensure that revenue had been
appropriately recognised in the correct period and to
verify its completeness and valuation.
– We tested a sample of items included in other creditors
and accruals to supporting documentation to agree
their existence and valuation and performed post
balance sheet reviews to confirm their completeness.
These procedures were supplemented with journal
entry testing, analytical review procedures and
enquiry of management.
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion:
– the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with
the Companies Act 2006;
– the information given in the Strategic Report and the
Directors’ Report for the financial year for which the
Group and Company financial statements are prepared
is consistent with the Group and Company financial
statements; and
– the information given in the Corporate Governance
Statement set out on page 78 with respect to internal
control and risk management systems in relation to
financial reporting processes and about share capital
structures is consistent with the financial statements.
John Menzies plc
81
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Financial Statements:
Independent Auditor’s Report to the Members of John Menzies plc continued
Under the Listing Rules we are required to review:
– the Directors’ Statement, set out on page 21, in
relation to going concern; and
– the part of the Corporate Governance Statement
relating to the Company’s compliance with the nine
provisions of the UK Corporate Governance Code
specified for our review.
James Nisbet
Senior Statutory Auditor
for and on behalf of Ernst & Young LLP,
Statutory Auditor
Edinburgh
3 March 2014
Matters on which we are required to report
by exception
We have nothing to report in respect of the following:
Under the ISAs (UK and Ireland), we are required to
report to you if, in our opinion, information in the annual
report is:
– materially inconsistent with the information in the
audited financial statements; or
– apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the Group acquired
in the course of performing our audit; or
– is otherwise misleading.
In particular, we are required to consider whether
we have identified any inconsistencies between our
knowledge acquired during the audit and the Directors’
Statement that they consider the annual report is fair,
balanced and understandable and whether the annual
report appropriately discloses those matters that we
communicated to the Audit Committee which we
consider should have been disclosed.
Under the Companies Act 2006 we are required to report
to you if, in our opinion:
– adequate accounting records have not been kept by
the Parent Company, or returns adequate for our audit
have not been received from branches not visited by
us; or
– the Parent Company financial statements and the part
of the Directors’ Remuneration Report to be audited
are not in agreement with the accounting records and
returns; or
– certain disclosures of Directors’ remuneration
specified by law are not made; or
– we have not received all the information and
explanations we require for our audit; or
– a Corporate Company Statement has not been
prepared by the Company.
John Menzies plc
82
Annual Report 2013
Financial Statements:
Group Income Statement
for the year ended 31 December 2013 (year ended 31 December 2012)
Before
exceptional
and other
items
£m
1,905.4
(1,852.7)
52.7
Exceptional
and other
items
£m
–
(7.3)
(7.3)
Notes
2
3
2013
Total
£m
1,905.4
(1,860.0)
45.4
Before
exceptional
and other
items
Restated
(Note 1)
£m
1,903.5
(1,849.1)
54.4
Exceptional
and other
items
£m
–
(23.0)
(23.0)
2012
Total
Restated
(Note 1)
£m
1,903.5
(1,872.1)
31.4
7.4
(2.5)
4.9
6.6
(2.8)
3.8
2
60.1
(9.8)
50.3
61.0
(25.8)
35.2
5(a)
5(c)
5(c)
7
7
4
8
10
60.1
–
–
–
–
–
60.1
0.7
(5.3)
(2.4)
53.1
(13.3)
39.8
–
(0.7)
(1.4)
(6.6)
0.5
(1.6)
(9.8)
–
(1.2)
–
(11.0)
1.6
(9.4)
60.1
(0.7)
(1.4)
(6.6)
0.5
(1.6)
50.3
0.7
(6.5)
(2.4)
42.1
(11.7)
30.4
61.0
–
–
(18.4)
61.0
(18.4)
–
–
–
–
61.0
0.8
(4.6)
(2.7)
54.5
(13.2)
41.3
(1.8)
(4.6)
0.6
(1.8)
(4.6)
0.6
(1.6)
(1.6)
(25.8)
–
(0.6)
–
(26.4)
3.9
(22.5)
35.2
0.8
(5.2)
(2.7)
28.1
(9.3)
18.8
39.8
(9.4)
30.4
41.3
(22.5)
18.8
65.6p
65.4p
(15.5)p
(15.4)p
50.1p
50.0p
68.8p
68.5p
(37.5)p
(37.3)p
31.3p
31.2p
Revenue
Net operating costs
Operating profit
Share of post-tax results of
joint ventures and associates
Operating profit after joint
ventures and associates
Analysed as
Underlying operating profit*
Non-recurring items
Associate goodwill
impairment
Contract amortisation
Share of interest on joint
ventures and associates
Share of tax on joint ventures
and associates
Operating profit after joint
ventures and associates
Finance income
Finance charges
Other finance charge
– pensions
Profit before taxation
Taxation
Profit for the year
Attributable to
equity shareholders
Earnings per ordinary share
Basic
Diluted
* Underlying operating profit is consistently presented adjusting for non-recurring exceptional items, intangible amortisation associated with goodwill
impairment on associate assets and contract amortisation, and the Group’s share of interest and tax on joint ventures and associates to provide an
appreciation of the impact of those items on operating profit.
John Menzies plc
83
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Financial Statements:
Group Statement of Comprehensive Income
for the year ended 31 December 2013 (year ended 31 December 2012)
Profit for the year
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain/(loss) on defined benefit pensions
Actuarial gain/(loss) on unfunded pension arrangements
Income tax effect
Impact of rate change on deferred tax
Items that may be reclassified subsequently to profit or loss:
Movement on cash flow hedges
Income tax effect
Movement on net investment hedges
Income tax effect
Exchange loss on translation of foreign operations
Other comprehensive income for the year (net of tax) attributable to
equity shareholders
Total comprehensive income for the year attributable to
equity shareholders
Notes
4
16
16
2012
Restated
(Note 1)
£m
18.8
(16.4)
(0.1)
4.0
(1.3)
1.4
(0.3)
(0.4)
0.1
(4.8)
2013
£m
30.4
9.4
0.2
(2.2)
(1.4)
(0.2)
–
3.5
(0.8)
(10.7)
(2.2)
(17.8)
28.2
1.0
John Menzies plc
84
Annual Report 2013 Financial Statements:
Group and Company Balance Sheets
as at 31 December 2013 (31 December 2012 and 31 December 2011)
Notes
2013
£m
Group
2012
Restated
(Note 1)
£m
2011
Restated
(Note 1)
£m
11
12
13
13
19
14
16
16
16
15
19
16
15
19
4
20
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investments accounted using
the equity method
Investment in subsidiaries
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Derivative financial assets
Cash and cash equivalents
LIABILITIES
Current liabilities
Borrowings
Derivative financial liabilities
Trade and other payables
Current income tax liabilities
Provisions
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Borrowings
Other payables
Derivative financial liabilities
Provisions
Retirement benefit obligations
Net assets
Shareholders’ equity
Ordinary shares
Share premium account
Treasury shares
Other reserves
Retained earnings
Capital redemption reserve
Total shareholders’ equity
Non-controlling interest in equity
Total equity
126.8
114.3
26.3
–
9.2
276.6
14.5
183.5
3.9
33.8
235.7
(49.5)
(0.3)
(202.2)
(8.2)
(3.5)
(263.7)
(28.0)
248.6
(91.4)
(10.5)
–
(4.6)
(45.8)
(152.3)
96.3
15.4
20.2
(3.3)
(13.4)
55.3
21.6
95.8
0.5
96.3
123.0
116.8
28.9
–
14.5
283.2
14.1
183.5
0.9
34.0
232.5
(46.2)
(0.6)
(210.4)
(9.7)
(2.2)
(269.1)
(36.6)
246.6
(81.1)
(10.0)
–
(9.5)
(62.5)
(163.1)
83.5
15.3
18.6
(4.1)
(5.2)
36.8
21.6
83.0
0.5
83.5
108.8
123.4
31.5
–
11.9
275.6
15.3
169.7
1.5
24.4
210.9
(3.4)
(1.9)
(211.6)
(12.0)
(2.9)
(231.8)
(20.9)
254.7
(100.4)
(1.8)
(0.3)
(3.6)
(50.8)
(156.9)
97.8
15.2
17.4
(8.3)
(1.2)
52.5
21.6
97.2
0.6
97.8
Company
2012
Restated
(Note 1)
£m
2011
Restated
(Note 1)
£m
–
28.0
–
290.2
9.0
327.2
–
217.3
0.9
0.3
218.5
(46.1)
(0.6)
(283.0)
–
–
(329.7)
(111.2)
216.0
(81.1)
(5.0)
–
–
(62.5)
(148.6)
67.4
15.3
18.6
(4.1)
(0.6)
16.6
21.6
67.4
–
67.4
–
28.8
–
292.8
7.3
328.9
–
180.0
1.5
1.1
182.6
(2.8)
(1.9)
(291.0)
–
–
(295.7)
(113.1)
215.8
(100.4)
(5.0)
(0.3)
–
(50.8)
(156.5)
59.3
15.2
17.4
(8.3)
(1.7)
15.1
21.6
59.3
–
59.3
2013
£m
–
25.8
–
290.1
3.9
319.8
–
231.2
3.9
0.9
236.0
(48.6)
(0.3)
(287.7)
–
–
(336.6)
(100.6)
219.2
(91.4)
(5.0)
–
–
(45.8)
(142.2)
77.0
15.4
20.2
(3.3)
(0.8)
23.9
21.6
77.0
–
77.0
The accounts were approved by the Board of Directors on 3 March 2014 and signed on its behalf by:
Iain Napier
Chairman
Paula Bell
Group Finance Director
John Menzies plc
85
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136
Financial Statements:
Group and Company Statement of Changes in Equity
as at 31 December 2013 (31 December 2012)
Ordinary
shares
£m
Share
premium
account
£m
Treasury
shares
£m
Cash
flow
hedge
reserve
£m
Translation
reserve
£m
Retained
earnings
£m
Capital
redemption
reserve
£m
Total
shareholders’
equity
£m
Non-
controlling
equity
£m
Total
equity
Restated
(Note 1)
£m
Group
At 31 December 2012
(as previously reported)
Impact of IAS 19R
At 31 December 2012
Restated (Note 1)
Profit for the year
Other comprehensive income
Total comprehensive income
New share capital issued
Share-based payments
Income tax effect of
share-based payments
Dividends paid
Repurchase of own shares
Disposal of own shares
At 31 December 2013
At 31 December 2011
(as previously reported)
Impact of IAS 19R
At 31 December 2011
Restated (Note 1)
Profit for the year
Restated (Note 1)
Other comprehensive income
Total comprehensive income
New share capital issued
Share-based payments
Income tax effect of
share-based payments
Dividends paid
Repurchase of own shares
Disposal of own shares
At 31 December 2012
15.3
–
15.3
–
–
–
0.1
–
–
–
–
–
15.4
18.6
–
18.6
–
–
–
1.6
–
–
–
–
–
20.2
(4.1)
–
(4.1)
–
–
–
–
–
–
–
(3.5)
4.3
(3.3)
(0.6)
–
(0.6)
–
(0.2)
(0.2)
–
–
–
–
–
–
(0.8)
(4.6)
–
(4.6)
–
(8.0)
(8.0)
–
–
32.5
4.3
36.8
30.4
6.0
36.4
–
1.4
–
–
–
–
(12.6)
0.9
(15.9)
–
(4.3)
55.3
15.2
–
17.4
–
(8.3)
–
(1.7)
–
0.5
–
42.4
10.1
21.6
–
21.6
–
–
–
–
–
–
–
–
–
21.6
21.6
–
78.7
4.3
83.0
30.4
(2.2)
28.2
1.7
1.4
0.9
(15.9)
(3.5)
–
95.8
0.5
–
0.5
–
–
–
–
–
–
–
–
–
0.5
79.2
4.3
83.5
30.4
(2.2)
28.2
1.7
1.4
0.9
(15.9)
(3.5)
–
96.3
87.1
10.1
0.6
–
87.7
10.1
15.2
17.4
(8.3)
(1.7)
0.5
52.5
21.6
97.2
0.6
97.8
–
–
–
0.1
–
–
–
–
–
15.3
–
–
–
1.2
–
–
–
–
–
18.6
–
–
–
–
–
–
–
(4.3)
8.5
(4.1)
–
1.1
1.1
–
–
–
–
–
–
(0.6)
–
(5.1)
(5.1)
–
–
–
–
–
–
(4.6)
18.8
(13.8)
5.0
–
1.4
1.7
(15.3)
–
(8.5)
36.8
–
–
–
–
–
–
–
–
–
21.6
18.8
(17.8)
1.0
1.3
1.4
1.7
(15.3)
(4.3)
–
83.0
–
–
–
–
–
–
(0.1)
–
–
0.5
18.8
(17.8)
1.0
1.3
1.4
1.7
(15.4)
(4.3)
–
83.5
John Menzies plc
86
Annual Report 2013 Ordinary
shares
£m
Share
premium
account
£m
Treasury
shares
£m
Cash
flow
hedge
reserve
£m
Translation
reserve
£m
Retained
earnings
£m
Capital
redemption
reserve
£m
Total
shareholders’
equity
£m
Non-
controlling
equity
£m
Total
equity
Restated
(Note 1)
£m
Company
At 31 December 2012
(as previously reported)
Impact of IAS 19R
At 31 December 2012
Restated (Note 1)
Profit for the year
Other comprehensive income
Total comprehensive income
New share capital issued
Share-based payments
Dividends paid
Repurchase of own shares
Disposal of own shares
At 31 December 2013
At 31 December 2011
(as previously reported)
Impact of IAS 19R
At 31 December 2011
Restated (Note 1)
Profit for the year
Other comprehensive income
Total comprehensive income
New share capital issued
Share-based payments
Dividends paid
Repurchase of own shares
Disposal of own shares
At 31 December 2012
15.3
–
15.3
–
–
–
0.1
–
–
–
–
15.4
15.2
–
15.2
–
–
–
0.1
–
–
–
–
15.3
18.6
–
18.6
–
–
–
1.6
–
–
–
–
20.2
17.4
–
17.4
–
–
–
1.2
–
–
–
–
18.6
(4.1)
–
(4.1)
–
–
–
–
–
–
(3.5)
4.3
(3.3)
(8.3)
–
(8.3)
–
–
–
–
–
–
(4.3)
8.5
(4.1)
(0.6)
–
(0.6)
–
(0.2)
(0.2)
–
–
–
–
–
(0.8)
(1.7)
–
(1.7)
–
1.1
1.1
–
–
–
–
–
(0.6)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
12.3
4.3
16.6
20.1
6.0
26.1
–
1.4
(15.9)
–
(4.3)
23.9
5.0
10.1
15.1
37.7
(13.8)
23.9
–
1.4
(15.3)
–
(8.5)
16.6
21.6
–
21.6
–
–
–
–
–
–
–
–
21.6
21.6
–
21.6
–
–
–
–
–
–
–
–
21.6
63.1
4.3
67.4
20.1
5.8
25.9
1.7
1.4
(15.9)
(3.5)
–
77.0
49.2
10.1
59.3
37.7
(12.7)
25.0
1.3
1.4
(15.3)
(4.3)
–
67.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
63.1
4.3
67.4
20.1
5.8
25.9
1.7
1.4
(15.9)
(3.5)
–
77.0
49.2
10.1
59.3
37.7
(12.7)
25.0
1.3
1.4
(15.3)
(4.3)
–
67.4
John Menzies plc
87
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Financial Statements:
Group and Company Statement of Cash Flows
for the year ended 31 December 2013 (year ended 31 December 2012)
Cash flows from operating activities
Cash generated from operations
Interest received
Interest paid
Tax paid
Net cash from operating activities
Cash flows from investing activities
Loan repaid by associate
Acquisitions
Net cash acquired with subsidiaries
Purchase of property, plant and equipment
Intangible asset additions
Proceeds from sale of property, plant and equipment
Dividends received from equity accounted investments
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary share capital
Purchase of own shares
Repayment of borrowings
Proceeds from borrowings
Dividends paid to ordinary shareholders
Net amount repaid by subsidiaries
Net cash (used in)/from financing activities
Increase in net cash and cash equivalents
Effects of exchange rate movements
Opening net cash and cash equivalents
Closing net cash and cash equivalents*
Group
2013
£m
49.5
0.6
(5.3)
(10.1)
34.7
–
(10.5)
0.3
(19.4)
(3.9)
2.4
4.4
(26.7)
1.7
(3.5)
(2.2)
13.0
(15.9)
–
(6.9)
1.1
(1.6)
33.8
33.3
2012
£m
43.3
0.6
(4.8)
(9.5)
29.6
0.1
(17.2)
2.2
(16.7)
(3.1)
3.9
4.5
(26.3)
1.3
(4.3)
(17.9)
44.1
(15.3)
–
7.9
11.2
(0.6)
23.2
33.8
Company
2013
£m
(13.4)
–
(5.0)
(2.0)
(20.4)
–
–
–
(0.1)
–
1.6
–
1.5
1.7
(3.5)
–
13.0
(15.9)
24.1
19.4
0.5
–
0.2
0.7
2012
£m
(10.4)
–
(4.5)
(2.2)
(17.1)
–
–
–
–
–
–
–
–
1.3
(4.3)
(17.9)
44.1
(15.3)
9.2
17.1
–
–
0.2
0.2
Notes
21
24
24
22
22
22
22
* Net cash and cash equivalents include cash at bank and in hand and bank overdrafts.
John Menzies plc
88
Annual Report 2013 Financial Statements:
Notes to the Accounts
The consolidated accounts of the Group for the year ended 31 December 2013 were approved and authorised for
issue in accordance with a resolution of the Directors on 3 March 2014. John Menzies plc is a limited company
incorporated in Scotland and is listed on the London Stock Exchange.
1. Accounting policies
A summary of the more significant accounting policies, which have been consistently applied, is set out below.
New accounting standards and interpretations affecting the Group
In the current year the Group has adopted the amendments to IAS 1 Presentation of items of Other Comprehensive
Income, IFRS 13 Fair Value Measurement and IAS 19R Employee Benefits.
The amendments to IAS 1 require items of Other Comprehensive Income to be grouped by those that will be
reclassified subsequently to profit or loss and those that will never be reclassified subsequently to profit or loss,
together with their associated income tax. The amendments have been applied retrospectively and, hence, the
presentation of items in Other Comprehensive Income have been restated to reflect the change. The effect of these
changes is evident from the Group Statement of Comprehensive Income.
IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change
when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS
when fair value is required or permitted. The application of IFRS 13 has not materially impacted the fair value
measurements carried out by the Group. IFRS 13 also requires specific disclosures on fair values, some of which
replace existing disclosure requirements in other standards, including IFRS 7 Financial Instruments: Disclosures.
The relevant disclosures are reflected in Note 16.
Under IAS 19R the interest cost on the defined benefit obligation, and the expected rate of return on plan assets,
have been replaced with a net interest charge that is calculated by applying the discount rate to the net defined
benefit liability. In addition, administration expenses are now treated as an operating expense. The impact on the
results, Statement of Changes in Equity, Balance Sheet, earnings per share for the prior year and impact on the
current year, is outlined below.
Impact on results for year ended 31 December 2012
Revenue
Net operating costs
Operating Profit
Share of post-tax results of joint ventures and associates
Operating profit after joint ventures and associates
Analysed as
Underlying operating profit
Non-recurring items
Associate goodwill impairment
Contract amortisation
Share of interest on joint ventures and associates
Share of tax on joint ventures and associates
Operating profit after joint ventures and associates
Finance income
Finance charges
Other finance charge – pensions
Profit before taxation
Taxation
Profit for the year
Full year to 31 December 2012
As
previously
reported
£m
1,903.5
(1,870.0)
33.5
3.8
37.3
Prior
year
adjustment
£m
–
(2.1)
(2.1)
–
(2.1)
As
restated
£m
1,903.5
(1,872.1)
31.4
3.8
35.2
63.1
(18.4)
(1.8)
(4.6)
0.6
(1.6)
37.3
0.8
(5.2)
(0.9)
32.0
(10.4)
21.6
(2.1)
–
–
–
–
–
(2.1)
–
–
(1.8)
(3.9)
1.1
(2.8)
61.0
(18.4)
(1.8)
(4.6)
0.6
(1.6)
35.2
0.8
(5.2)
(2.7)
28.1
(9.3)
18.8
John Menzies plc
89
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 1. Accounting policies continued
Impact on Statement of Changes in Equity
Retained earnings at 1 January 2012 and 1 January 2013
have been restated from £42.4m to £52.5m and from
£32.5m to £36.8m respectively. In 2010, the future
accrual in the Menzies Pension Fund was capped at 1%
resulting in a reduction in the Fund’s liabilities. Under
IAS 19 the benefit of this reduction was being spread
over the remaining life of the Fund. Under IAS 19R this
spreading is no longer permitted and opening reserves
have been adjusted accordingly.
Impact on Balance Sheet
The impact has been to reduce the retirement benefit
obligation by £13.5m at 31 December 2011 and £5.6m
at 31 December 2012. There was a corresponding
decrease in deferred tax assets of £3.4m at
31 December 2011 and £1.3m at 31 December 2012.
The net impact was to increase the Group net assets
by £10.1m and £4.3m at 31 December 2011 and
31 December 2012 respectively.
Impact on earnings per share
Basic earnings per share at 31 December 2012 have
been restated from 36.0p to 31.3p. Diluted earnings per
share at 31 December 2012 have been restated from
35.8p to 31.2p.
Impact on current year
The net charge to the Income Statement for this
accounting period has increased by £5.4m on a pre-tax
basis (relative to that which would have applied under
the previous version of IAS 19), with a tax impact of
£1.3m. Operating profit reduced by £2.8m due to the
recognition of administrative costs as well as the 2010
active benefit change impact, while other finance
charge-pensions increased by £2.6m. The actuarial gain
recognised has increased correspondingly by £7.2m.
The additional net charge to the Income Statement
reduces basic and diluted earnings per share for total
operations by 6.9p and 6.8p respectively. The impact
from the adoption of IAS 19R has reduced the disclosed
defined benefit obligation by £9.4m with a consequent
reduction to deferred tax assets recognised of £1.9m.
The following standards, amendments to standards
and interpretations have been issued but are not
effective for 2013 and have not been early adopted:
IFRS 10 Consolidated Financial Statements – effective
date 1 January 2014
IFRS 11 Joint Arrangements – effective date
1 January 2014
IFRS 12 Disclosure of Interests in Other Entities –
effective date 1 January 2014
Amendments to IFRS 10, 11 and 12 on transition
guidance – effective date 1 January 2014
IAS 27 (revised 2011) Separate Financial Statements –
effective date 1 January 2014
IAS 28 (revised 2011) Associates and Joint Ventures –
effective date 1 January 2014
Amendment to IAS 32 Financial Instruments:
Presentation, on offsetting financial assets and financial
liabilities – effective date 1 January 2014
IFRS 9 Financial Instruments* – no effective date set
IAS 19 – Defined Benefit Plans – employee contributions
– effective date 1 July 2014.
Annual Improvements to IFRSs – 2010 – 2012 cycle –
effective date 1 July 2014.
Annual Improvements to IFRSs – 2011 – 2013 cycle –
effective date 1 July 2014.
IAS 36 (amendment) Impairment of Assets: Recoverable
Amount Disclosures for Non-Financial Assets* –
effective date 1 January 2014
IAS 39 (amendment) Financial Instruments: Novation
of Derivatives and Continuation of Hedge Accounting*
– effective date 1 January 2014
The following standards and interpretations have
also been adopted in these accounts and have not
had a material impact on the Group’s accounts in
the period of initial application:
IFRIC 21 Levies* – effective date 1 January 2014
Improvements to IFRSs (issued May 2012) – various
effective dates
IFRS 7 Financial Instruments: Disclosures (Amendment)
– Offsetting Financial Assets and Financial Liabilities –
effective date 1 January 2013
Improvements to IFRS (May 2012) – effective date
1 January 2013
* Not yet adopted for use in the European Union.
The above standards and interpretations will be adopted
in accordance with their effective dates and have not
been adopted in these financial statements. The
Directors do not anticipate that the adoption of these
standards and interpretations will have a material impact
on the Group’s financial statements in the period of
initial application.
John Menzies plc
90
Annual Report 2013Financial Statements: Notes to the Accounts continued For those standards with a later effective date, the
Directors are in the process of assessing the likely
impact and await finalisation of the standards before
formalising their view.
As permitted by Section 408 of the Companies Act 2006
no Income Statement is presented for the Company.
Basis of consolidation
The consolidated accounts, which have been prepared
under the historical cost convention and in accordance
with EU Endorsed International Financial Reporting
Standards (IFRS), IFRIC interpretations and the
Companies Act 2006 applicable to companies reporting
under IFRS, incorporate the accounts of the Company
and its subsidiaries, joint ventures and associates from
the effective date of acquisition or to the date of
deemed disposal.
The consolidated accounts of the Group include the
assets, liabilities and results of the Company and
subsidiary undertakings in which John Menzies plc
has a controlling interest, using accounts drawn up to
31 December except where entities have non-coterminus
year ends. In such cases, the information is based on the
accounting period of these entities and is adjusted for
material changes up to 31 December. Accordingly, the
information consolidated is deemed to cover the same
period for all entities throughout the Group.
Joint ventures and associates
A joint venture is an entity in which the Group holds
an interest on a long-term basis and which is jointly
controlled by the Group and one or more other venturers
under a contractual agreement.
An associate is an undertaking, not being a subsidiary
or joint venture, over which the Group has significant
influence and can participate in the financial and
operating policy decisions of the entity.
The Group’s share of the results of joint ventures and
associates is included in the Group Income Statement
using the equity method of accounting. Investments in
joint ventures and associates are carried in the Group
Balance Sheet at cost plus post-acquisition changes in
the Group’s share of the net assets of the entity, less
any impairment in value. The carrying values of
investments in joint ventures and associates include
acquired goodwill.
Revenue
Distribution – revenue is recognised on the weekly
despatched value of goods sold, excluding value-added
tax. Product is sold to UK retailers on a sale or return
basis. Revenue for goods supplied with a right of return
is stated net of the value of any returns.
Aviation – cargo revenue is recognised at the point of
departure for exports and at the point that the goods are
ready for despatch for imports. Other ramp, passenger
and aviation-related services income is recognised at
the time the service is provided in accordance with the
terms of the contract. Revenue excludes value-added
and sales taxes, charges collected on behalf of
customers and intercompany transactions.
Property, plant and equipment
Property, plant and equipment is stated at cost, including
acquisition expenses, less accumulated depreciation.
Depreciation is provided on a straight-line basis at the
following rates:
Freehold and long leasehold properties – over 50 years
Short leasehold properties – over the remaining lease term
Plant and equipment – over the estimated life of the
asset between 3 and 20 years
Inventories
Inventories, being goods for resale and consumables,
are stated at the lower of purchase cost and net
realisable value.
Pensions
The operating and financing costs of pensions are
charged to the Income Statement in the period in which
they arise and are recognised separately. The costs of
past service benefit enhancements, settlements and
curtailments are also recognised in the period in which
they arise. The difference between actual and expected
returns on assets during the year, including changes in
actuarial assumptions, are recognised in the Group
Statement of Comprehensive Income.
Pension costs are assessed in accordance with the
advice of qualified actuaries.
With regard to defined contribution schemes, the Income
Statement charge represents contributions made.
Pension financing costs are shown separately in the
Income Statement.
Taxation
Current tax is the amount of tax payable or recoverable
in respect of the taxable profit or loss for the period.
Deferred tax is provided in full, using the liability method,
on temporary differences between the carrying amount
of an asset or liability in the Balance Sheet and its tax
base. Deferred tax arising from the initial recognition of
an asset or liability in a transaction, other than a business
combination, that at the time of the transaction affects
neither accounting nor taxable profit or loss, is not
recognised. Deferred tax liabilities represent tax payable in
future periods in respect of taxable temporary differences.
Deferred tax assets represent tax recoverable in future
periods in respect of deductible temporary differences,
the carry forward of unused tax losses and the carry
forward of unused tax credits.
John Menzies plc
91
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 1. Accounting policies continued
Deferred tax is determined using the tax rates and tax
laws that have been enacted or substantively enacted at
the Balance Sheet date and are expected to apply when
the deferred tax asset is realised or the deferred tax
liability is settled. Deferred tax is provided on temporary
differences arising on investments in subsidiaries, joint
ventures and associates, except where the timing of the
reversal of the temporary difference can be controlled
and it is probable that the temporary difference will not
reverse in the foreseeable future. A deferred tax asset
is recognised only to the extent that it is probable that
future taxable profits will be available against which
the asset can be utilised.
Current and deferred tax is recognised in the Income
Statement except if it relates to an item recognised
directly in equity or in Other Comprehensive Income,
in which case it is recognised directly in equity or in the
Group Statement of Comprehensive Income respectively.
Intangible assets
Goodwill
Business combinations from 1 January 2010 are
accounted for using the acquisition method. The cost
of an acquisition is measured as the aggregate of the
consideration transferred, measured at acquisition date
fair value and the amount of any non-controlling interest
in the acquiree. Acquisition costs incurred are expensed
and included in exceptional items.
Goodwill arising on acquisitions before 26 December
2004 (the date of transition to IFRS) has been retained at
the previous UK GAAP amounts subject to being tested
for impairment at that date.
Goodwill acquired is recognised as an asset and
reviewed for impairment at least annually by assessing
the recoverable amount of each cash-generating unit
to which the goodwill relates. When the recoverable
amount of the cash-generating unit is less than the
carrying amount, an impairment loss is recognised.
Any impairment is recognised in the Income Statement.
Goodwill arising on the acquisition of joint ventures
and associates is included within the carrying value
of the investment.
Contracts
The fair value attributed to contracts at the point of
acquisition is determined by discounting the expected
future cash flows to be generated from that asset at the
risk-adjusted weighted average cost of capital for the
Group. This amount is included in intangible assets as
“contracts” and amortised over the estimated useful life
on a straight-line basis. Separate values are not attributed
to internally-generated customer relationships.
Contract amortisation is business-stream dependent. At
Distribution, publisher distribution contracts capitalised
are not amortised due to the very long-term nature of
the business in the UK. These contracts are, however,
tested annually for impairment using similar criteria to the
goodwill test. At Aviation and for non-publisher related
contracts in Distribution, contracts are amortised on a
straight-line basis over ten years as this period is the
minimum time-frame management considers when
assessing businesses for acquisition.
Computer software
Costs associated with developing or maintaining
computer software programs are recognised as an
expense as incurred. Costs that are directly attributable
with the production of identifiable and unique software
products controlled by the Group, and that will probably
generate economic benefits exceeding costs beyond
one year, are recognised as intangible assets. Direct
costs include the directly attributable costs of software
development employees. Costs are amortised over their
estimated useful lives, usually three to five years.
Leases
Leases are classified as finance leases whenever the
terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are
classified as operating leases.
Assets acquired under finance leases are capitalised
in the Balance Sheet at their fair value or, if lower, at
the present value of the minimum lease payments,
each determined at the inception of the lease. The
corresponding liability to the lessor is recorded in the
Balance Sheet as a finance lease obligation. The lease
payments are apportioned between finance charges
(charged to the Income Statement) and a reduction
of the lease obligations.
Rental payments under operating leases are charged
to the Income Statement on a straight-line basis over
applicable lease periods.
Trade receivables
If there is objective evidence that the Group will not be
able to collect all of the amounts due under the original
terms of an invoice, a provision on the respective trade
receivable is recognised. In such an instance, the
carrying value of the receivable is reduced, with the
amount of the loss recognised in the Income Statement.
Cash and cash equivalents
Cash and cash equivalents in the Balance Sheet
comprise cash at bank and in hand and short-term
deposits with an original maturity of three months or
less. Bank overdrafts are shown within borrowings
in current liabilities in the Balance Sheet.
John Menzies plc
92
Annual Report 2013Financial Statements: Notes to the Accounts continued Foreign currencies
Foreign currency assets and liabilities of the Group are
translated at the rates of exchange ruling at the Balance
Sheet date. The trading results of overseas subsidiaries,
joint ventures and associates are translated at the average
exchange rate ruling during the year, with the exchange
difference between average rates and the rates ruling at
the Balance Sheet date being taken to reserves.
Any differences arising on the translation of the
opening net investment, including goodwill, in overseas
subsidiaries, joint ventures and associates, and of
applicable foreign currency loans, are dealt with as
adjustments to reserves. All other exchange differences
are dealt with in the Income Statement.
Derivative financial instruments and
hedging activities
The Group uses forward contracts and cross-currency
swaps as derivatives to hedge the risk arising from the
retranslation of foreign currency denominated items.
The Group has derivatives which are designated as
hedges of overseas net investments in foreign entities
(net investment hedges) and derivatives which are
designated as hedges of the exchange risk arising from
the retranslation of highly probable forecast revenue
denominated in non-local currency of some of its
overseas operations (cash flow hedges).
Derivative contracts entered into by the Group are
expected to continue to be highly effective until
they expire. The effectiveness of these contracts is
monitored during the year. As a result, all derivatives
have been recorded using hedge accounting, which
is explained below.
All derivatives are measured at fair value, which is
calculated as the present value of all future cash flows
from the derivative discounted at prevailing market rates.
Changes in the fair value of the effective portion of net
investment hedges are recorded in equity, and are only
recycled to the Income Statement on disposal of the
overseas net investment.
Changes in the fair value of the effective portion of cash
flow hedges are recorded in equity until such time as
the forecast transaction occurs, at which time they are
recycled to the Income Statement. If, however, the
occurrence of the transaction results in a non-financial
asset or liability, then amounts recycled from equity
would be included in the cost of the non-financial asset
or liability. If the forecast transaction remains probable
but ceases to be highly probable then, from that point,
changes in fair value would be recorded in the Income
Statement within finance costs. Similarly, if the forecast
transaction ceases to be probable then the entire fair
value recorded in equity and future changes in fair value
would be posted to the Income Statement within
finance costs.
For assets and liabilities that are recognised in the
financial statements on a recurring basis, the Group
determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant to the
fair value measurement as a whole) at the end of each
reporting period.
Provisions
Provisions are recognised when the Group has a
present obligation (legal or constructive) as a result of
a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of
the amount of the obligation.
Share capital
Ordinary shares are classed as equity. Where the
Company purchases its own shares the consideration
paid including any directly attributable incremental
costs, is deducted from the equity attributable to
the Company’s equity holders until the shares are
cancelled, reissued or disposed of.
Share-based payments
Equity-settled share-based payments are measured
at fair value at the date of grant and recognised as an
expense over the vesting period. The amount recognised
as an expense is adjusted to reflect the actual number of
share options that vest unless the options do not vest as
a result of a failure to satisfy market conditions. Fair value
is measured by use of a relevant pricing model.
Use of estimates and judgements
The preparation of the consolidated accounts requires
management to make judgements, estimates and
assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities,
income and expenses. These estimates will, by
definition, seldom equal the related actual results
particularly so given the prevailing difficult economic
conditions and the level of uncertainty regarding their
duration and severity.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised
and in any future periods affected. The most important
estimates and judgements are set out below.
Intangible assets
On the acquisition of a business it is necessary to
attribute fair values to any intangible assets acquired
(provided they meet the criteria to be recognised). The
fair values of these intangible assets are dependent
on estimates of attributable future revenues, margins
and cashflows, as well as appropriate discount rates.
In addition, the allocation of useful lives to acquired
intangible assets requires the application of judgement
based on available information and management
expectations at the time of recognition.
John Menzies plc
93
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Definitions and non-GAAP measures used
by management
Management believes that the following non-GAAP
or adjusted measures provide a useful comparison of
business performance and reflect the way in which
the business is controlled:
Underlying profit before taxation is defined as
profit before taxation, intangible amortisation and
exceptional items.
Underlying operating profit includes each division’s
share of pre-tax profit from joint ventures and
associates, and excludes intangible amortisation
and exceptional items.
Underlying earnings per share is profit after taxation
and non-controlling interest, but before intangible
amortisation and exceptional items, divided by the
weighted average number of ordinary shares in issue.
Turnover includes revenue from subsidiaries, joint
ventures and associates.
Free cash flow is defined as the cash generated by
the business after net capital expenditure, interest
and taxation, before special pension contributions,
acquisitions, disposals, cash raised, ordinary dividends
and net spend on shares.
Total debt to EBITDA ratio. Total debt is net debt
plus guarantees and excluding financial derivatives and
preference shares. EBITDA is underlying operating profit
plus depreciation and computer software amortisation.
Interest cover is EBITA divided by external interest
charge. EBITA is underlying operating profit plus
computer software amortisation. The external interest
charge excludes net financial income/(charge) related
to pensions.
1. Accounting policies continued
Impairment
IFRS requires companies to carry out impairment testing
on any assets that show indications of impairment and
annually on goodwill and intangibles that are not subject
to amortisation. This testing involves exercising
management judgement about future cashflows and
other events which are, by their nature, uncertain.
Retirement benefits
The assumptions underlying the calculation of retirement
benefits are important and based on independent advice.
Changes in these assumptions could have a material
impact on the measurement of the Group’s retirement
benefit obligations.
Income taxes
The Group is subject to income tax in numerous
jurisdictions and significant judgement is required
in determining the provision for tax. There are many
transactions and calculations for which the ultimate
tax determination is uncertain. The Group recognises
provisions for tax based on estimates of the taxes that
are likely to become due. Where the final tax outcome is
different from the amounts that were initially recorded,
such differences will impact the current income tax
and deferred tax provisions in the period in which
such determination is made.
Exceptional items
Exceptional items are those material items which, by
virtue of their size or incidence, are presented separately
in the Income Statement to enable a full understanding
of the Group’s financial performance. These exclude
certain elements of intangible asset impairment and
amortisation, which are also presented separately in
the Income Statement.
Transactions which may give rise to exceptional items
include restructuring of business activities (in terms of
rationalisation costs and onerous lease provisions), gains
or losses on the disposal of businesses and transaction
costs associated with the acquisition of new businesses.
Dividend distributions
Final ordinary dividends are recognised as liabilities in
the accounts in the period in which the dividends are
approved by the Company’s shareholders.
Financial risk factors
The Group is exposed to financial risks: liquidity risk,
interest rate fluctuations, foreign exchange exposures
and credit risk. These are more fully discussed in
Note 16 on pages 114 to 119.
John Menzies plc
94
Annual Report 2013Financial Statements: Notes to the Accounts continued 2. Segment information
For management purposes the Group is organised into two operating divisions: Distribution and Aviation.
These two divisions are organised and managed separately based upon their key markets. The Distribution segment
provides newspaper and magazine distribution services across the UK and Ireland along with marketing services.
The Aviation segment provides cargo and passenger ground handling services across the world.
The information presented to the Board for the purpose of resource allocation and assessment of segment
performance is focused on the performance of each division as a whole but also contains performance information
on a number of operating segments within the Aviation division. The Board assesses the performance of the
operating segments based on a measure of adjusted segment result before exceptional items and intangibles
amortisation. Net finance income and expenditure are not allocated to segments as this type of activity is driven
by the central treasury function.
Segment information is presented in respect of the Group’s reportable segments together with additional geographic
and Balance Sheet information. Transfer prices between segments are set on an arm’s length basis.
Business segment information
Revenue
Pre-exceptional operating
profit/(loss)
Distribution
Aviation
– ground handling
– cargo handling
– cargo forwarding
Corporate
Joint ventures and associates
2013
£m
1,277.5
2012
£m
1,299.6
454.0
149.8
119.0
722.8
–
2,000.3
(94.9)
1,905.4
422.1
158.6
116.5
697.2
–
1,996.8
(93.3)
1,903.5
2013
£m
24.3
21.9
11.7
4.2
37.8
(2.0)
60.1
–
60.1
A reconciliation of segment pre-exceptional operating profit/(loss) to profit before tax is provided below.
2013
Operating profit /(loss)
Share of post-tax results of joint ventures
Share of post-tax results of associates
Operating profit/(loss) after joint ventures and associates
Net finance expense
Profit before tax
Analysed as
Pre-exceptional operating profit/(loss)*
Acquisition related costs (Note 5(a))
Impairment provision (Note 5(c))
Contract amortisation (Note 11)
Share of interest on joint ventures and associates
Share of tax on joint ventures and associates
Operating profit/(loss) after joint ventures and associates
Distribution
£m
21.2
1.1
–
22.3
Aviation
£m
26.3
3.5
0.3
30.1
Corporate
£m
(2.1)
–
–
(2.1)
24.3
–
–
(1.7)
–
(0.3)
22.3
37.8
(0.6)
(1.4)
(4.9)
0.5
(1.3)
30.1
(2.0)
(0.1)
–
–
–
–
(2.1)
John Menzies plc
95
2012
Restated
(Note 1)
£m
27.5
21.3
9.7
3.8
34.8
(1.3)
61.0
–
61.0
Group
£m
45.4
4.6
0.3
50.3
(8.2)
42.1
60.1
(0.7)
(1.4)
(6.6)
0.5
(1.6)
50.3
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136
2. Segment information continued
2012 – Restated (Note 1)
Operating profit/(loss)
Share of post-tax results of joint ventures
Share of post-tax results of associates
Operating profit/(loss) after joint ventures and associates
Net finance expense
Profit before tax
Analysed as
Pre-exceptional operating profit/(loss)*
Rationalisation costs (Note 5(a))
Onerous lease provision (Note 5(a))
Impairment provision (Note 5(c))
Contract amortisation (Note 11)
Share of interest on joint ventures and associates
Share of tax on joint ventures and associates
Operating profit/(loss) after joint ventures and associates
Distribution
£m
21.7
0.9
–
22.6
Aviation
£m
11.0
3.4
(0.5)
13.9
Corporate
£m
(1.3)
–
–
(1.3)
27.5
(4.1)
–
–
(0.5)
–
(0.3)
22.6
34.8
(6.6)
(7.7)
(1.8)
(4.1)
0.6
(1.3)
13.9
(1.3)
–
–
–
–
–
–
(1.3)
Group
£m
31.4
4.3
(0.5)
35.2
(7.1)
28.1
61.0
(10.7)
(7.7)
(1.8)
(4.6)
0.6
(1.6)
35.2
* Pre-exceptional operating profit/(loss) is defined as operating profit/(loss) excluding intangible amortisation as shown in Note 5(c) and exceptional
items but including the pre-tax share of results from joint ventures and associates.
2013
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Segment net assets/(liabilities)
Unallocated net liabilities
Net assets
2012 – Restated (Note 1)
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Segment net assets/(liabilities)
Unallocated net liabilities
Net assets
Distribution
£m
192.9
Aviation
£m
270.9
Corporate
£m
5.5
(115.7)
(92.6)
(12.8)
77.2
178.3
(7.3)
Distribution
£m
198.0
Aviation
£m
265.8
Corporate
£m
3.4
(123.0)
(95.9)
(13.8)
75.0
169.9
(10.4)
Group
£m
469.3
43.0
512.3
(221.1)
(194.9)
(416.0)
248.2
(151.9)
96.3
Group
£m
467.2
48.5
515.7
(232.7)
(199.5)
(432.2)
234.5
(151.0)
83.5
Unallocated assets comprise deferred tax assets, cash and cash equivalents.
John Menzies plc
96
Annual Report 2013Financial Statements: Notes to the Accounts continued
Unallocated liabilities comprise retirement benefit obligations, borrowings, current income tax liabilities and deferred
tax liabilities.
2013
Capital expenditure – property, plant and equipment
Capital expenditure – intangible assets
Depreciation
Amortisation of intangible assets
Goodwill impairment (Note 13)
Gain on disposal of property, plant and equipment
2012
Capital expenditure – property, plant and equipment
Capital expenditure – intangible assets
Depreciation
Amortisation of intangible assets
Goodwill impairment
Gain on disposal of property, plant and equipment
Geographic information
United Kingdom
Continental Europe
Americas
Rest of the World
Distribution
£m
2.3
1.9
4.9
3.6
–
–
Distribution
£m
3.4
1.7
5.0
2.1
–
(0.1)
Aviation
£m
17.0
1.6
13.8
6.0
1.4
–
Aviation
£m
13.3
1.1
14.4
5.5
1.8
(0.3)
Corporate
£m
0.1
0.4
0.7
–
–
(0.3)
Corporate
£m
–
0.3
0.8
–
–
–
Group
£m
19.4
3.9
19.4
9.6
1.4
(0.3)
Group
£m
16.7
3.1
20.2
7.6
1.8
(0.4)
Revenue
Segment non-current assets
2013
£m
1,418.0
160.5
150.9
176.0
1,905.4
2012
£m
1,437.5
145.6
146.6
173.8
1,903.5
2013
£m
118.1
50.7
40.8
57.8
267.4
2012
£m
125.2
49.0
36.4
58.1
268.7
John Menzies plc
97
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136
3. Net operating costs
Goods for resale and other operating charges
Employment costs (Note 4)
Intangible assets amortisation (Note 11)
Depreciation (Note 12)
Exceptional items (Note 5)
Other operating charges include:
Operating leases and hire charges – plant and machinery
Rent of properties
Gain on disposal of property, plant and equipment
Net exchange gain
During the year, the Group (including its overseas subsidiaries) obtained the
following services from the Group’s auditors at costs as detailed below:
Audit services
Audit of Parent Company and consolidated accounts
Audit of the Company’s subsidiaries pursuant to legislation
Non-audit services
Tax compliance
Tax advisory
Other assurance services
Due diligence
4. Employees
Wages and salaries
Share-based payments
Social security costs
Pension charge
The average number of persons employed during the year was:
Distribution
Aviation
Corporate
The numbers above include 13,862 persons employed outside the UK (2012: 13,137).
John Menzies plc
98
2013
£m
1,354.3
476.0
9.6
19.4
0.7
1,860.0
2012
Restated
(Note 1)
£m
1,377.7
448.2
7.6
20.2
18.4
1,872.1
27.9
30.6
(0.3)
(0.3)
27.1
30.2
(0.4)
–
0.3
0.7
0.3
0.4
0.1
–
2013
£m
421.4
1.4
39.1
461.9
14.1
476.0
2013
number
4,081
18,966
23
23,070
0.2
0.4
0.2
0.4
–
0.1
2012
Restated
(Note 1)
£m
397.5
1.4
37.2
436.1
12.1
448.2
2012
number
4,156
17,978
17
22,151
Annual Report 2013Financial Statements: Notes to the Accounts continued Pension schemes
With regard to the principal Group-funded defined benefit scheme in the UK (the Menzies Pension Fund), to which
the employees contribute, the charge to the Income Statement is assessed in accordance with independent actuarial
advice from Hymans Robertson LLP (“the Actuary”), using the projected unit method. Certain Group subsidiaries
operate overseas and participate in a number of pension schemes, which are of a defined contribution nature.
The Income Statement charge for defined contribution schemes represents the contributions payable.
The pension charge to the Income Statement is analysed as follows:
Menzies Pension Fund
Other schemes
2012
Restated
(Note 1)
£m
2.4
9.7
12.1
2013
£m
3.4
10.7
14.1
Financial assumptions
The Actuary undertook a valuation of the Menzies Pension Fund (“The Fund”) as at 31 December 2013
(31 December 2012) under IAS 19.
In deriving the results the Actuary used the projected unit method and the following financial assumptions:
Rate of increase in salaries
Rate of increase in pensions (prior to 1 May 2006)
Rate of increase in pensions (from 1 May 2006 to 1 June 2010)
Rate of increase in pensions (after 1 June 2010)
Price inflation
Discount rate
2013
%
3.3
3.7
2.4
1.0
3.3
4.6
Assumptions regarding future mortality experience are set based on advice that uses published statistics and
experience in the business.
The average life expectancy in years of a pensioner retiring at 65 on the Balance Sheet date is:
Male
Female
2013
20.9
22.5
The average life expectancy in years of a pensioner retiring at 65, 20 years after the Balance Sheet date is:
Male
Female
2013
21.7
23.7
2012
%
2.8
3.4
2.2
1.0
2.8
4.4
2012
20.8
22.4
2012
21.6
23.6
John Menzies plc
99
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 4. Employees continued
Fair value of fund assets (and reconciliation to net pension liabilities)
Investment funds
Equities
Bonds
Property
Other
Total value of assets
Defined benefit obligation
Recognised in Balance Sheet
Related deferred tax asset (Note 19)
Net pension liabilities
2013
2012 Restated (Note 1)
Quoted
£m
64.4
84.6
79.9
19.4
3.1
251.4
Unquoted
£m
22.9
–
–
–
7.7
30.6
Total
value at
December
£m
87.3
84.6
79.9
19.4
10.8
282.0
(327.8)
(45.8)
9.2
(36.6)
Quoted
£m
78.2
72.4
66.1
24.9
4.6
246.2
Unquoted
£m
2.5
–
–
–
8.5
11.0
Total
value at
December
£m
80.7
72.4
66.1
24.9
13.1
257.2
(319.7)
(62.5)
14.4
(48.1)
Sensitivity analysis
Changes in assumptions compared with December 2013 actuarial assumptions:
0.5% decrease in discount rate
1 year increase in life expectancy
-0.5% change in salary increases
-0.5% change in inflation
Actuarial value
of liabilities on
31 December 2013
£m
358.1
337.6
327.8*
311.0
* Active members’ benefits, once accrued, revalue at CPI capped at 1% p.a. and so changes in the level of salary increase do not affect the past service
liability value.
Information about the defined benefit obligation
Active members
Deferred members
Pensioners
Total
No. of
Members
Liability
split
Duration
(years)
573
3,742
2,317
6,632
21%
31%
48%
100%
24.0
21.9
12.2
17.7
John Menzies plc
100
Annual Report 2013Financial Statements: Notes to the Accounts continued Components of pension expense
Amounts charged/(credited) to operating profit
Current service cost
Administrative costs
Past service costs including curtailments
Total service cost
Amounts included in finance costs
Interest income on Fund assets
Interest cost on defined benefit obligation
Net financial charge
2012
Restated
(Note 1)
£m
1.7
1.0
(0.3)
2.4
11.8
(14.5)
(2.7)
2013
£m
1.8
1.6
–
3.4
11.3
(13.7)
(2.4)
Pension expense
5.8
5.1
Amounts recognised in the Statement of Comprehensive Income
Returns on assets excluding amounts included in net interest
Changes in financial assumptions
Experience
Actuarial gain/(loss)
Change in scheme assets during the year
Fair value of assets at start of year
Interest income
Company contributions
Employee contributions
Effect of settlements
Benefits and expenses paid
Returns on assets excluding amounts included in net interest
Fair value of assets at end of year
The actual return on scheme assets was a gain of £27.4m (2012: a gain of £18.4m).
Change in defined benefit obligation during the year
Defined benefit obligation at start of year
Total service cost
Interest cost
Effect of settlements
Employee contributions
Benefits and expenses paid
Changes in financial assumptions
Changes in demographic assumptions
Experience
Defined benefit obligation at end of year
£m
16.1
(6.7)
–
9.4
£m
257.2
11.3
13.1
0.9
(0.4)
(16.2)
16.1
282.0
£m
319.7
3.4
13.7
(0.4)
0.9
(16.2)
6.7
–
–
327.8
£m
6.6
(28.5)
5.5
(16.4)
£m
242.0
11.8
9.8
1.0
–
(14.0)
6.6
257.2
£m
292.8
2.4
14.5
–
1.0
(14.0)
29.0
(0.5)
(5.5)
319.7
John Menzies plc
101
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 4. Employees continued
Nature of benefits, regulatory framework and the
Company’s responsibilities for governance of the
Menzies Pension Fund
The Fund is a registered defined benefit career average
revalued earnings scheme subject to the UK regulatory
framework for pensions, including the Scheme Specific
Funding requirements. The Fund is operated under trust
and as such, the Trustee of the Fund is responsible for
operating the Fund and it has a statutory responsibility to
act in accordance with the Fund’s Trust Deed and Rules,
in the best interest of the beneficiaries of the Fund, and
UK legislation (including Trust law). The Trustee and the
Company have the joint power to set the contributions
that are paid to the Fund.
Risks to which the Fund exposes the Company
The nature of the Fund exposes the Company to the
risk of paying unanticipated additional contributions to
the Fund in times of adverse experience. The most
financially significant risks are likely to be:
– Members living for longer than expected;
– Higher than expected actual inflation and salary
increase experience;
– Lower than expected investment returns; and
– The risk that movements in the value of the Fund’s
liabilities are not met by corresponding movements
in the value of the Fund’s assets.
The sensitivity analysis disclosed above is intended to
provide an indication of the impact on the value of the
Fund’s liabilities for the risks highlighted.
Fund amendments, curtailments and settlements
Settlements of £0.4m have occurred over the year.
Expected contributions over the next
accounting year
The Company expects to contribute around £14m to
the Fund over the year to 31 December 2014.
Policy for recognising gains and losses
The Company recognises actuarial gains and losses
immediately, through the remeasurement of the net
defined benefit liability.
Methods and assumptions used in preparing the
sensitivity analyses
The sensitivities disclosed were calculated using
approximate methods taking into account the duration
of the Fund’s liabilities.
Asset-liability matching strategies used by the
Scheme or the Company
Neither the Fund nor the Company use any asset-liability
matching strategies. The Trustee’s current investment
strategy, having consulted with the Company, is to
invest the vast majority of the Fund’s assets in a mix
of equities and corporate bonds, in order to strike a
balance between:
– Maximising the returns on the Fund’s assets, and
– Minimising the risks associated with lower than
expected returns on the Fund’s assets.
However, the Trustee has implemented a de-risking
process such that the Fund assets are gradually switched
out of equities and into Government bonds as funding
improves. This should lead to better matching of assets
and liabilities as the fund matures whilst at the same
time ‘locking in’ favourable asset performance. The
Trustee is required to regularly review its investment
strategy in light of the revised term and nature of the
Fund’s liabilities and will be next considering this as part
of its 2015 valuation excercise. The current benchmark
is to hold 70% in growth assets (such as equities) and
30% in bonds (including index-linked and fixed-interest
Government bonds and corporate bonds).
Description of funding arrangements and funding
policy that affect future contributions
The Schedule of Contributions dated 31 January 2013
sets out the current contributions payable by the
Company to the Fund. The Trustee’s next formal actuarial
valuation will be due as at 31 March 2015. As part of that
valuation process the Trustee and Company will agree a
long term funding strategy, which may include a revision
to the Schedule of Contributions to take into account any
additional contributions to meet any funding shortfall
between the value of the Fund’s assets and liabilities.
John Menzies plc
102
Annual Report 2013Financial Statements: Notes to the Accounts continued 5(a) Exceptional items included in operating profit
Acquisition related transaction costs
Rationalisation costs
Onerous lease provisions
Notes
(i)
(ii)
(iii)
2013
£m
(0.7)
–
–
(0.7)
2012
£m
–
(10.7)
(7.7)
(18.4)
(i) Costs relating to the acquisition of subsidiaries during the year total £0.7m.
(ii) In 2012 the costs of rationalising excess capacity comprised asset write-downs and staff redundancy
in Distribution £4.1m and in Aviation £6.6m.
(iii) These provisions were in respect of future lease obligations in UK and US cargo at Aviation.
5(b) Exceptional items included in finance charges
Unwind discount
Notes
(i)
(i) Relating to the deferred consideration and onerous lease provisions recognised in 2012.
5(c) Intangible amortisation
Goodwill impairment
Contract amortisation
Notes
(i)
(ii)
2013
£m
(0.7)
(0.7)
2013
£m
(1.4)
(6.6)
(8.0)
2012
£m
–
–
2012
£m
(1.8)
(4.6)
(6.4)
(i)
As permitted under the transitional requirements of IFRS 1, the acquisition accounting of business combinations
completed prior to the transition date has not been restated. As a result, assets which were previously capitalised
as goodwill have not been reclassified as other intangible assets. Accordingly, these financial statements include
an impairment charge of £1.4m (2012: £1.8m) reflecting the remaining life of the current licence at Menzies
Macau Airport Services Ltd.
(ii) Relates to contracts capitalised as intangible assets on the acquisition of businesses.
The taxation effect of the exceptional items is £Nil (2012: net credit of £2.3m).
John Menzies plc
103
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 6. Directors’ emoluments
Chairman
I Napier
Executive Directors
P Bell
D McIntosh
C Smyth
Non-Executive Directors
E Born*
I Harley
D Jenkinson*
O Morley*
Former Directors
P Dollman
I Harrison*
2012
Salary/fees
Benefits
Bonus
Date of
appointment/
resignation
2013
£m
2013
£m
10/06/2013
24/07/2009
20/03/2007
17/05/2013
17/05/2013
0.2
0.2
0.3
0.3
–
0.1
–
–
0.1
–
1.2
1.3
–
–
–
–
–
–
–
–
–
–
–
0.1
2013
£m
–
0.1
–
0.1
–
–
–
–
–
–
0.2
0.4
* Certain Non-Executive Directors received less than £0.1m emoluments during the current and prior year.
7. Finance costs (pre-exceptional)
Finance income:
Bank deposits
Finance charges:
Bank loans and overdrafts
Preference dividends
Pension
salary
supplement
2013
£m
–
–
–
–
–
–
–
–
–
–
–
0.1
2013
£m
0.7
0.7
(5.2)
(0.1)
(5.3)
Total
2013
£m
0.2
0.3
0.3
0.4
–
0.1
–
–
0.1
–
1.4
1.9
2012
£m
0.8
0.8
(4.5)
(0.1)
(4.6)
Net finance costs
(4.6)
(3.8)
John Menzies plc
104
Annual Report 2013Financial Statements: Notes to the Accounts continued 8. Taxation
(a) Analysis of charge in year
Current tax
UK corporation tax on profits for the year
Overseas tax
Adjustments to prior years’ liabilities
Total current tax
Deferred tax
Origination and reversal of temporary differences
Impact of UK rate change
Adjustments to prior years’ liabilities
Retirement benefit obligations
Total deferred tax
Tax on profit on ordinary activities
(b) Current and deferred tax related to items charged/(credited) outside profit or loss
Deferred tax on actuarial loss on retirement benefit obligations
Impact of UK rate change
Current tax on fair value movement on cashflow hedges
Current tax on share-based payments
Deferred tax on share-based payments
Current tax on net exchange adjustments
Tax charge/(credit) reported outside profit or loss
2013
£m
2.4
8.2
(0.4)
10.2
0.6
(0.9)
0.1
(0.2)
1.7
1.5
11.7
2013
£m
2.2
1.4
–
(0.9)
–
(0.4)
2.3
(c) Reconciliation between tax charge and the product of accounting profit multiplied by the Group’s
domestic tax rate for the years ended 31 December 2013 and 31 December 2012 is as follows:
Profit before tax
Profit before tax multiplied by standard rate of corporation tax in the UK 23.25% (2012: 24.5%)
Non-deductible expenses (principally goodwill impairment and intangible amortisation)
Depreciation on non-qualifying assets
Unrelieved overseas losses
Overseas deferred tax assets written off
Exceptional items
Utilisation of previously unrecognised losses
Higher/(lower) tax rates on overseas earnings
Joint ventures and associates post-tax result (included in profit before tax)
Adjustments to prior years’ liabilities
Impact of UK rate change on deferred tax
At the effective corporation tax rate of 27.8% (2012: 33.1%)
2013
£m
42.1
9.8
2.5
0.5
0.8
–
0.4
(0.2)
0.5
(1.4)
(0.3)
(0.9)
11.7
John Menzies plc
105
2012
Restated
(Note 1)
£m
3.1
5.6
(1.3)
7.4
0.6
(0.4)
0.7
0.9
1.0
1.9
9.3
2012
Restated
(Note 1)
£m
(4.0)
1.3
0.3
(1.0)
(0.7)
(0.6)
(4.7)
2012
Restated
(Note 1)
£m
28.1
6.9
1.1
0.6
1.0
0.3
2.3
(0.2)
(0.2)
(1.2)
(0.8)
(0.5)
9.3
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 8. Taxation continued
The UK Government has announced that the main rate of UK corporation tax will be reduced from the current rate
of 23%, which has applied from 1 April 2013, to 20%. The fall is to be phased in over a period of two years, with a
2% reduction to 21% from 1 April 2014, and a subsequent 1% reduction to 20% from 1 April 2015. The reduction in
the main rate of corporation tax to 23% was substantively enacted on 3 July 2012. The Finance Act 2013, which was
substantively enacted on 2 July 2013, included the legislation to reduce the main rate of corporation tax from 23% to
20%. As the reduction in the main rate of corporation tax to 20% was substantively enacted at the Balance Sheet
date, and reduces the tax rate expected to apply when temporary differences reverse, it has the effect of reducing
the UK deferred tax assets and liabilities.
However, as most of the UK deferred tax assets relates to the UK pension deficit, which has arisen predominantly
due to actuarial gains/losses taken to Other Comprehensive Income, the majority of the reduction in deferred tax
assets has been debited to Other Comprehensive Income and therefore has not had an effect on the effective tax
rate or on profit for the year.
(d) Factors that may affect future tax charges
The Group has estimated tax losses carried forward, which arose in subsidiary companies operating in the
undernoted jurisdictions, that are available for offset against future profits of those subsidiaries. Deferred tax assets
have not been recognised in respect of these losses as they have arisen in subsidiaries where it is not probable that
future taxable profits will be available against which such assets could be utilised.
USA
South Africa
Germany
Norway
Sweden
Netherlands
Losses
£m
40.1
2.6
21.5
11.9
3.1
6.5
Expiry
Carry forward for twenty years
Carry forward indefinitely
Carry forward indefinitely
Carry forward indefinitely
Carry forward indefinitely
Carry forward for nine years
The Group has capital losses in the UK of approximately £10.4m that are available for offset against future taxable
gains arising in the UK. No deferred tax asset has been recognised in respect of these losses.
9. Dividends
Dividends on equity shares:
Ordinary – interim paid in respect of 2013, 7.7p per share
– final paid in respect of 2012, 17.85p per share
– interim paid in respect of 2012, 7.35p per share
– final paid in respect of 2011, 17p per share
– paid in respect of 2009 performance share plan
2013
£m
4.7
10.8
–
–
0.4
15.9
2012
£m
–
–
4.4
10.2
0.7
15.3
Dividends of £0.2m were waived on Treasury shares during 2013 (2012: £0.2m).
The Directors are proposing a final dividend in respect of the year to 31 December 2013 of 18.8p per ordinary
share, which will absorb an estimated £11.6m of shareholders’ funds. Payment will be made on 20 June 2014
to shareholders on the register at the close of business on 23 May 2014.
Treasury shares
Ordinary shares are held for employee share schemes. At 31 December 2013 the Company held 613,319
(2012: 834,393) ordinary shares with a market value of £4,342,299 (2012: £5,352,631).
John Menzies plc
106
Annual Report 2013Financial Statements: Notes to the Accounts continued
10. Earnings per share
Basic
Underlying*
Operating profit
Share of post-tax results of joint ventures and associates
add back: exceptional items (Note 5(a))
intangible amortisation (Note 5(c))
share of interest on joint ventures and associates
share of tax on joint ventures and associates
Net finance costs
Profit before taxation
Taxation
Exceptional tax
Earnings for the year
Basic
Earnings per ordinary share (pence)
Diluted earnings per ordinary share (pence)
Underlying*
Earnings per ordinary share (pence)
Diluted earnings per ordinary share (pence)
2012
Restated
(Note 1)
£m
31.4
3.8
–
–
–
–
(7.1)
28.1
(9.3)
–
18.8
2013
£m
45.4
4.9
–
–
–
–
(8.2)
42.1
(11.7)
–
30.4
50.1p
50.0p
31.3p
31.2p
2012
Restated
(Note 1)
£m
31.4
3.8
18.4
6.4
(0.6)
1.6
(6.5)
54.5
(9.3)
(3.9)
41.3
2013
£m
45.4
4.9
0.7
8.0
(0.5)
1.6
(7.0)
53.1
(11.7)
(1.6)
39.8
65.6p
65.4p
68.8p
68.5p
Number of ordinary shares in issue (millions)
Weighted average
Diluted weighted average
60.645
60.826
60.066
60.273
The weighted average number of fully paid shares in issue during the year excludes those held by employee share
trusts. The diluted weighted average is calculated by adjusting for all outstanding share options which are potentially
dilutive, i.e. where the exercise price is less than the average market price of the shares during the year.
* Underlying earnings are presented as an additional performance measure. They are stated before exceptional items and intangible amortisation.
John Menzies plc
107
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136
Goodwill
£m
Contracts
£m
Computer
Software
£m
59.2
0.1
–
(2.3)
57.0
10.0
–
(0.5)
9.5
47.5
49.2
80.5
12.1
0.3
(1.4)
91.5
18.5
6.6
(0.5)
24.6
66.9
62.0
24.0
–
3.6
–
27.6
12.2
3.0
–
15.2
12.4
11.8
Goodwill
£m
Contracts
£m
Computer
Software
£m
61.8
–
–
(2.6)
59.2
10.7
–
0.3
(1.0)
10.0
60.6
21.4
–
(1.5)
80.5
14.6
4.6
–
(0.7)
18.5
49.2
51.1
62.0
46.0
20.9
–
3.1
–
24.0
9.2
3.0
–
–
12.2
11.8
11.7
Total
£m
163.7
12.2
3.9
(3.7)
176.1
40.7
9.6
(1.0)
49.3
126.8
123.0
Total
£m
143.3
21.4
3.1
(4.1)
163.7
34.5
7.6
0.3
(1.7)
40.7
123.0
108.8
11. Intangible assets
Cost
At 31 December 2012
Acquisitions (Note 24)
Additions
Currency translation
At 31 December 2013
Amortisation and impairment
At 31 December 2012
Amortisation charge
Currency translation
At 31 December 2013
Net book value
At 31 December 2013
At 31 December 2012
Cost
At 31 December 2011
Acquisitions
Additions
Currency translation
At 31 December 2012
Amortisation and impairment
At 31 December 2011
Amortisation charge
Exceptional impairment
Currency translation
At 31 December 2012
Net book value
At 31 December 2012
At 31 December 2011
John Menzies plc
108
Annual Report 2013Financial Statements: Notes to the Accounts continued Goodwill acquired through business combinations and intangible assets with indefinite lives have been allocated
at acquisition to cash generating units (CGU’s) that are expected to benefit from the business combination. The
carrying amount of the goodwill and intangible assets with indefinite lives have been allocated to the operating
units as per the table below.
Aviation
Netherlands cargo
North American cargo
Australia
AMI South Africa
Scandinavia
Ogden worldwide
Other
Distribution
Core Distribution
EM News Distribution (NI) Ltd
The Network
Media on the Move
Turners News
Chester Independent Wholesale News Ltd
North West Wholesale News Ltd
Other
Total
2013
2012
Goodwill
£m
Contracts
£m
Goodwill
£m
Contracts
£m
7.8
7.6
5.7
2.1
3.1
9.8
4.3
40.4
7.3
–
–
–
–
–
–
–
7.3
47.7
–
–
–
–
–
–
–
–
12.9
3.1
2.0
1.0
–
–
–
–
19.0
19.0
7.6
7.7
6.8
2.6
3.1
9.9
4.2
41.9
–
–
–
–
4.8
–
–
2.5
7.3
49.2
–
–
–
–
–
–
–
–
–
3.1
2.0
–
–
7.1
2.7
4.1
19.0
19.0
The Group tests goodwill and intangible assets with indefinite lives annually for impairment, or more frequently if
there are indications that these might be impaired. The basis of these impairment tests, including key assumptions
are set out below.
The recoverable amounts of the CGUs are determined from value in use calculations. These calculations use future
cash flow projections based on financial forecasts approved by management. The key assumptions for these
forecasts are those regarding revenue growth, net margin, capital expenditure and the level of working capital
required to support trading, which management estimates based on past experience and expectations of future
changes in the market.
The post-tax discount rate assumption of 8% (2012: 8%) is based on the Group’s weighted average post-tax cost of
capital having considered the uncertainty risk attributable to individual CGUs. The equivalent pre-tax discount rate is
10.4% (2012: 10.6%). The pre-tax rate has been applied to pre-tax cash flows.
Aviation
Aviation contracts are amortised on a straight-line basis over 10 years as this period is the minimum time-frame
management considers when assessing businesses for acquisition. The carrying value of Aviation contracts is
£34.1m (2012: £27.8m) and the average remaining amortisation period is 6 years (2012: 6 years).
Value in use calculations are based on Board approved budgets and plans for a 3 year period extrapolated to a 5 year
period. In the current year growth rates in the cash flows beyond the 3 year period have been assumed to be nil.
Hence, short-term revenue growth rates over 2017 and 2018 are 0% (2012: 0% to 6.5%) and longer term revenue
growth rates are 0% (2012: 0.5% to 4.1%). Net margin assumptions are based on historic experience.
Base case forecasts show significant headroom above carrying value for each CGU. Sensitivity analysis has been
undertaken for each CGU to assess the impact of any reasonably possible change in key assumptions. There is no
reasonably possible change that would cause the carrying values to exceed recoverable amounts.
John Menzies plc
109
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 11. Intangible assets continued
Distribution
Distribution publisher contracts are not amortised due to the very long-term nature of the business in the UK.
The Group distributes to approximately 45% of the UK retail market and has only one major competitor. In such
circumstances the Board considers that there is no foreseeable limit to the period over which the contracts are
expected to generate cash flows and have been determined to have an indefinite life. These contracts are,
however, tested annually for impairment using similar criteria to the goodwill test.
Value in use calculations are based on Board approved budgets and plans for a 3 year period extrapolated to a 5 year
period. Cash flows beyond the 3 year plan have been extrapolated to a 5 year period using short-term growth rates
of -2% to 20%. This reflects management’s specific business expectations.
In 2013 the CGUs were revised to reflect more accurately the way the acquired businesses have integrated into the
core Distribution business, as well as the way in which the CGUs are managed. Base case forecasts show significant
headroom above carrying value for each CGU. Sensitivity analysis has been undertaken for each CGU to assess the
impact of any reasonably possible change in key assumptions. There is no reasonably possible change that would
cause the carrying values to exceed recoverable amounts.
Distribution non-publisher contracts are amortised on a straight-line basis over 10 years as this period is the
minimum time-frame management considers when assessing businesses for acquisition. The carrying value of
Distribution non-publisher contracts is £13.6m (2012: £15.2m) and the average remaining amortisation period is
9 years (2012: 10 years).
12. Property, plant and equipment
Group
Short
leasehold
property
£m
Plant and
equipment
£m
Freehold
property
£m
Company
Freehold
property
£m
34.4
–
0.1
(1.9)
–
32.6
6.4
0.8
(0.4)
–
6.8
Total
£m
269.9
4.6
19.4
(13.1)
(11.4)
269.4
153.1
19.4
(11.0)
(6.4)
155.1
38.1
–
0.4
(1.0)
(1.4)
36.1
21.5
2.1
(0.8)
(0.7)
22.1
195.2
4.6
18.9
(10.4)
(10.0)
198.3
121.6
16.6
(9.8)
(5.7)
122.7
14.0
16.6
75.6
73.6
114.3
116.8
25.8
28.0
36.6
–
0.1
(1.7)
–
35.0
10.0
0.7
(0.4)
–
10.3
24.7
26.6
Cost
At 31 December 2012
Acquisitions (Note 24)
Additions
Disposals
Currency translation
At 31 December 2013
Depreciation
At 31 December 2012
Charge for the year
Disposals
Currency translation
At 31 December 2013
Net book value
At 31 December 2013
At 31 December 2012
John Menzies plc
110
Annual Report 2013Financial Statements: Notes to the Accounts continued Group
Short
leasehold
property
£m
Plant and
equipment
£m
Freehold
property
£m
Company
Freehold
property
£m
34.4
–
–
–
–
–
34.4
5.6
0.8
–
–
–
6.4
Total
£m
267.6
3.7
16.7
(7.9)
(6.2)
(4.0)
269.9
144.2
20.2
(6.3)
(2.7)
(2.3)
153.1
38.0
0.1
0.8
(0.6)
–
(0.2)
38.1
20.0
2.2
(0.5)
–
(0.2)
21.5
193.1
3.6
15.8
(7.3)
(6.2)
(3.8)
195.2
114.9
17.3
(5.8)
(2.7)
(2.1)
121.6
16.6
18.0
73.6
78.2
116.8
123.4
28.0
28.8
Cost
At 31 December 2011
Acquisitions
Additions
Exceptional write-offs
Disposals
Currency translation
At 31 December 2012
Depreciation
At 31 December 2011
Charge for the year
Exceptional write-offs
Disposals
Currency translation
At 31 December 2012
Net book value
At 31 December 2012
At 31 December 2011
13. Investments
36.5
–
0.1
–
–
–
36.6
9.3
0.7
–
–
–
10.0
26.6
27.2
Net book value excluding goodwill
At 31 December 2012
Share of profits after tax
Dividends received
Disposals
Currency translation
At 31 December 2013
Goodwill
At 31 December 2012
Impairment provision (Note 5(c))
At 31 December 2013
At 31 December 2013
At 31 December 2012
Group
Company
Shares in
joint ventures
£m
Shares in
associates
£m
Other
£m
Total
£m
Subsidiaries
£m
25.2
4.6
(2.8)
–
(3.0)
24.0
–
–
–
24.0
25.2
2.0
1.7
(1.6)
–
–
2.1
1.4
(1.4)
–
2.1
3.4
0.3
–
–
(0.1)
–
0.2
–
–
–
0.2
0.3
27.5
6.3
(4.4)
(0.1)
(3.0)
26.3
1.4
(1.4)
–
26.3
28.9
290.2
–
–
–
(0.1)
290.1
–
–
–
290.1
290.2
John Menzies plc
111
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 13. Investments continued
The Group's share of the results, assets and liabilities of joint ventures and associates are:
Country of
Incorporation
%
Interest
held
Revenue
£m
Profit
after tax
£m
Assets
Liabilities
More
than
1 year
£m
Less
than
1 year
£m
More
than
1 year
£m
Less
than
1 year
£m
Total
£m
46.2
1.1
1.0
9.1
(0.1)
(4.7)
5.3
Ireland
Joint ventures
EM News Distribution (NI) Ltd UK
EM News Distribution
(Ireland) Ltd
Worldwide Magazine
Distribution Ltd
Menzies Bobba Ground
Handling Services Private Ltd
Menzies Aviation Bobba
(Bangalore) Private Ltd
Hyderabad Menzies Air Cargo
Private Ltd
Zaankracht Holding BV
AMI Asia HK Ltd
UK
India
India
India
Netherlands
Hong Kong
50
50
50
51
49
49
30
50
22.8
5.7
1.4
4.4
3.3
2.1
1.0
Associates
Menzies Macau Airport
Services Ltd
Swissport Menzies Handling
PMR Ute
Macau
29
7.0
Spain
19.5
1.0
94.9
–
–
0.4
2.0
1.0
0.1
–
1.7
–
6.3
–
0.1
3.7
8.4
1.9
–
–
–
1.1
2.0
1.2
1.5
0.7
0.2
–
–
–
–
–
–
–
–
–
(1.1)
0.1
(0.1)
5.6
(0.5)
–
(0.3)
(0.1)
9.1
3.4
0.4
0.1
1.7
1.3
(0.3)
(1.0)
1.7
–
16.8
0.5
17.6
–
(0.4)
(0.1)
(7.9)
0.4
26.1
Although Menzies Bobba Ground Handling Services Private Ltd, Menzies Aviation Bobba (Bangalore) Private Ltd and
Hyderabad Menzies Air Cargo Private Ltd are 51% and 49% owned, and Zaankracht Holding BV is 30% owned, they
are treated as joint ventures in the Group accounts because the parties to each of the ventures work together with
equal powers to control the entities. Each venturer in the respective entity retains the power of veto, and overall key
strategic, operational and financial decisions require the consent of both parties.
The investment in Swissport Menzies Handling PMR Ute is treated as an associate as the Group exercises significant
influence under an operational agreement with the other shareholding parties.
The Indian joint ventures have a statutory year end of 31 March. Worldwide Magazine Distribution Limited has a
statutory year end of 30 April.
14. Trade and other receivables
Trade receivables
Less: provision for doubtful debts
Trade receivables – net
Other receivables
Prepayments
Amounts owed by Group companies
Group
Company
2013
£m
144.0
(2.1)
141.9
17.9
23.7
–
183.5
2012
£m
141.2
(2.5)
138.7
19.9
24.9
–
183.5
2013
£m
–
–
–
0.3
0.9
230.0
231.2
2012
Restated
(Note 1)
£m
–
–
–
0.5
1.4
215.4
217.3
The average credit period on sale of goods is 27.2 days (2012: 26.6 days). No interest is charged on any
receivables balance.
John Menzies plc
112
Annual Report 2013Financial Statements: Notes to the Accounts continued Ageing of trade receivables
2013
2012
Movement in the provision for doubtful debts
Balance at the beginning of the year
Amounts provided during the year
Amounts released during the year
Amounts utilised during the year
Currency translation
Balance at the end of the year
Ageing of past due and impaired receivables
0 – 30 days
30 – 60 days
60 – 90 days
over 90 days
Neither past
due nor
impaired
£m
107.1
117.6
Total
£m
141.9
138.7
Past due not impaired
30 – 60 days
£m
27.4
16.8
60 – 90 days
£m
3.2
2.4
over 90 days
£m
4.2
1.9
Group
2013
£m
2.5
0.9
(0.1)
(1.1)
(0.1)
2.1
Group
2013
£m
0.1
0.2
0.2
1.6
2.1
2012
£m
2.4
1.1
(1.0)
–
–
2.5
2012
£m
0.1
0.1
0.1
2.2
2.5
The other classes within trade and other receivables do not include impaired assets.
The Directors consider that the carrying value of trade and other receivables approximates to their fair value.
15. Trade and other payables
Due within one year
Trade payables
Other payables
Other taxes and social security costs
Amounts owed to Group companies
Due after more than one year
Other payables
Group
Company
2013
£m
2012
£m
100.4
97.4
4.4
–
202.2
104.1
102.1
4.2
–
210.4
2013
£m
–
9.6
–
278.1
287.7
2012
Restated
(Note 1)
£m
–
9.9
–
273.1
283.0
10.5
10.0
5.0
5.0
The Directors consider that the carrying value of trade and other payables approximates to their fair value.
John Menzies plc
113
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 16. Financial instruments
The objectives, policies and strategies pursued by the Group in relation to financial instruments are described below.
Derivative financial instruments
Cash Flow Hedges
Foreign exchange forward contracts
Foreign Currency Net Investment Hedge
Foreign exchange forward contracts
Total derivative financial instruments
Current
Group
2013
£m
2012
£m
Company
2013
£m
2012
£m
(0.3)
(0.1)
(0.3)
(0.1)
3.9
3.6
3.6
0.4
0.3
0.3
3.9
3.6
3.6
0.4
0.3
0.3
The Group only enters into derivative financial instruments that are designated as hedging instruments.
The fair values of foreign currency instruments are calculated by reference to current market rates.
Fair value hierarchy
As at 31 December 2013, the Group held the following financial instruments measured at fair value. The Group uses
the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are
observable, either directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based
on observable market data.
2013
Financial assets at fair value through the Income Statement
Foreign exchange contracts – hedged
Financial liabilities at fair value through the Income Statement
Foreign exchange contracts – hedged
2012
Financial assets at fair value through the Income Statement
Foreign exchange contracts – hedged
Financial liabilities at fair value through the Income Statement
Foreign exchange contracts – hedged
Assets measured at fair value
Level 1
£m
Level 2
£m
Level 3
£m
–
3.9
–
Total
£m
3.9
Liabilities measured at fair value
Total
£m
0.3
Total
£m
0.9
Total
£m
0.6
Level 1
£m
Level 2
£m
Level 3
£m
–
0.3
–
Assets measured at fair value
Level 1
£m
Level 2
£m
Level 3
£m
–
0.9
–
Liabilities measured at fair value
Level 1
£m
Level 2
£m
Level 3
£m
–
0.6
–
During the year ended 31 December 2013, there were no transfers between Level 1 and Level 2 fair value
measurements, and no transfers into and out of Level 3 fair value measurements.
John Menzies plc
114
Annual Report 2013Financial Statements: Notes to the Accounts continued Contingent Consideration:
The consideration to acquire Orbital Marketing Services Group includes contingent consideration based on future
targets being met. The contingent consideration’s range is between a minimum of £6.0m and a maximum of £12.2m
and becomes payable in 2015. The fair value of contingent consideration is the present value of expected future cash
flows based on the latest forecasts of future performance.
The consideration to acquire Fore Partnership includes contingent consideration based on future targets being met.
The contingent consideration’s range is between a minimum of £Nil and a maximum of £4.0m and becomes payable
in 2016. The fair value of contingent consideration is the present value of expected future cash flows based on the
latest forecasts of future performance. During the year an initial £0.2m down payment was made.
The consideration to acquire Desacol S.A. includes contingent consideration based upon meeting an initial entry
level cumulative EBITDA target by 2016 with the consideration being a multiple of average EBITDA over the
following three years. The contingent consideration’s range is between £Nil and a maximum of £3.0m. The fair
value of contingent consideration is the present value of expected future cash flows based on the latest forecasts
of future performance.
The liabilities for contingent consideration is a Level 3 derivative financial instrument under IFRS 7.
Fair value of the contingent consideration at 31 December 2013
Orbital Marketing Services Group
Fore Partnership
Desacol S.A.
Interest-bearing loans and
borrowings
Obligations under finance leases
Bank overdrafts
Non-amortising bank loans
Amortising term loan
Preference shares
Total interest-bearing loans
and borrowings
Current
Non-current
Maturity
February 2014
n/a
May 2014 – September 2017
March 2020
Non-redeemable
£m
7.7
0.9
1.3
2012
£m
–
0.1
105.3
20.4
1.4
127.2
46.1
81.1
127.2
Group
2013
£m
2012
£m
Company
2013
£m
0.3
0.5
121.3
17.4
1.4
140.9
49.5
91.4
140.9
–
0.2
105.3
20.4
1.4
127.3
46.2
81.1
127.3
–
0.2
121.0
17.4
1.4
140.0
48.6
91.4
140.0
Other than trade receivables and payables, there are no financial assets or liabilities excluded from the above analysis.
No financial assets or liabilities were held or issued for trading purposes.
The Company has issued 1,394,587 cumulative preference shares of £1 each. These shares are not redeemable
and pay an interest coupon of 9% semi-annually.
The amortising term loan is repayable between 2014 and 2020 with interest payable at a fixed rate of 6.23%.
The loan has a weighted average maturity of 2 years (2012: 3 years).
John Menzies plc
115
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 16. Financial instruments continued
Non-amortising bank loans are drawn against unsecured, committed revolving bank credit facilities maturing
between May 2014 and September 2017.
Net Debt
Derivative financial instruments
Interest-bearing loans and borrowings
Total borrowings
Less: cash at bank, cash in hand and short-term deposits
Financial assets and financial liabilities
Short-term borrowings
Medium-term borrowings
Long-term borrowings
Derivative financial instruments
Finance leases
Bank overdrafts
Total financial assets and financial liabilities
Less: cash at bank, cash in hand and short-term deposits
Net Debt
Group
2013
£m
(3.6)
140.9
137.3
33.8
103.5
2012
£m
(0.3)
127.3
127.0
34.0
93.0
Company
2013
£m
2012
£m
(3.6)
140.0
136.4
0.9
135.5
(0.3)
127.2
126.9
0.3
126.6
2013
2012
Book value
£m
Fair value
£m
Book value
£m
Fair value
£m
48.7
86.2
5.2
(3.6)
0.3
0.5
137.3
33.8
103.5
49.0
87.5
5.7
(3.6)
0.3
0.5
139.4
33.8
105.6
46.0
72.3
8.8
(0.3)
–
0.2
127.0
34.0
93.0
46.4
74.3
10.2
(0.3)
–
0.2
130.8
34.0
96.8
The fair value of the fixed term, amortising borrowing is calculated as the present value of all future cash flows
discounted at prevailing market rates.
Trade and other receivables and trade and other payables carrying values of £159.8m (2012: £158.6m) and £197.8m
(2012: £206.2m) respectively, in respect of the Group and £230.3m and £287.7m (2012: £215.9m and £283.0m)
in respect of the Company are assumed to approximate their fair values due to their short-term nature.
A separate table has not been prepared analysing the Company’s book values and fair values. The £0.9m difference
in book values relates to interest bearing loans and borrowings and is deemed to be short-term in nature.
Currency
Sterling
Colombian peso
South African rand
Net derivative assets
Floating
rate
financial
liabilities
£m
121.5
0.6
–
(3.6)
118.5
Fixed
rate
financial
liabilities
£m
18.8
–
–
–
18.8
2013
Total
financial
liabilities
£m
140.3
0.6
–
(3.6)
137.3
At 31 December 2013, the expiry profile of undrawn
committed facilities was as follows:
Less than one year
Between one and two years
Between two and five years
John Menzies plc
116
Group
2013
£m
48.1
–
0.2
48.3
Floating
rate
financial
liabilities
£m
105.5
–
0.1
(0.3)
105.3
2012
£m
6.1
53.4
0.1
59.6
Fixed
rate
financial
liabilities
£m
21.8
–
–
–
21.8
Company
2013
£m
48.1
–
0.2
48.3
2012
Total
financial
liabilities
£m
127.3
–
0.1
(0.3)
127.1
2012
£m
6.1
53.4
0.1
59.6
Annual Report 2013Financial Statements: Notes to the Accounts continued Cash flow hedges
Foreign exchange forward contracts
At 31 December 2013 the Group held foreign currency forward contracts designed as hedges of transaction
exposures arising from non-local currency revenue. These contracts were in line with the Group’s policy to hedge
significant forecast transaction exposures for a maximum 18 months forward.
The cash flow hedges of non-local revenue were assessed to be highly effective.
Interest rate swaps
The Group’s policy is to minimise exposures to interest rate risk by ensuring an appropriate balance of long-term
and short-term floating rates.
During 2013 the Group had no interest rate swaps in place.
At 31 December 2013, 13.3% (2012: 20.6%) of the Group’s borrowings were fixed.
Fair value of cash flow hedges – currency forward contracts
Current
2013
2012
Assets
£m
–
–
Liabilities
£m
(0.3)
(0.3)
Assets
£m
–
–
Liabilities
£m
(0.1)
(0.1)
For 2013, if interest rates on UK pound-denominated borrowings had been 0.5% higher/lower with all other variables
held constant, post-tax profit for the year would have been £0.6m (2012: £0.6m) lower/higher, mainly as a result of
higher/lower interest expense on floating rate borrowings.
Foreign currency net investment hedges
The Group’s treasury policy is to hedge the exposure of currency denominated assets to foreign exchange risk.
This is primarily achieved using forward contracts denominated in the relevant foreign currencies.
Gains or losses on the retranslation of these hedges are transferred to reserves to offset any gains or losses on
translation of the net investments in the subsidiary undertakings.
The notional principal amounts of the outstanding forward foreign exchange contracts are:
Euro
US dollar
Czech koruna
Australian dollar
New Zealand dollar
Swedish krona
Indian rupee
South African rand
Group
Company
Sterling Equivalent
2013
million
21.5
32.5
115.0
22.4
3.0
50.0
1,000.0
55.0
EUR
USD
CZK
AUD
NZD
SEK
INR
ZAR
2012
million
22.5
36.5
115.0
15.4
2.4
29.0
960.0
65.0
2013
million
21.5
32.5
115.0
22.4
3.0
50.0
1,000.0
55.0
2012
million
22.5
36.5
115.0
15.4
2.4
29.0
960.0
65.0
2013
£m
17.9
19.6
3.5
12.1
1.5
4.7
9.8
3.2
2012
£m
18.2
22.5
3.7
9.8
1.2
2.7
10.8
4.7
Fair value of foreign currency net investment hedges
Current
2013
2012
Assets
£m
3.9
3.9
Liabilities
£m
–
–
Assets
£m
0.9
0.9
Liabilities
£m
(0.5)
(0.5)
John Menzies plc
117
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 16. Financial instruments continued
Foreign currency sensitivity
For 2013, if the UK pound had weakened/strengthened by 10% on currencies which have a material impact on the
Group as regards both Profit Before Tax and Equity, with all other variables held constant the effect would have been:
Change in rate
US dollar
US dollar
Euro
Euro
Australian dollar
Australian dollar
Indian rupee
Indian rupee
USD
USD
EUR
EUR
AUD
AUD
INR
INR
+10%
+10%
+10%
+10%
-10%
-10%
-10%
-10%
2013
2012
Effect on
Profit
Before Tax
£m
0.6
(0.5)
0.7
(0.6)
0.8
(0.6)
0.5
(0.4)
Effect on
Equity
£m
2.2
(1.8)
2.3
(1.9)
1.2
(1.0)
1.1
(0.9)
Effect on
Profit
Before Tax
£m
0.3
(0.3)
0.6
(0.7)
0.7
(0.8)
0.4
(0.5)
Effect on
Equity
£m
2.0
(1.6)
1.7
(1.4)
1.2
(1.0)
1.2
(1.0)
The impact of the Group's exposure to foreign currency changes for all other currencies is not considered to be
material to the overall results of the Group.
Capital risk management
The Group manages the capital structure in order to minimise the cost of capital whilst ensuring that it has access
to ongoing sources of finance such as debt capital markets. The Group defines capital as net debt (see Note 22)
and equity attributable to equity holders of the Company (see Group and Company Statement of Changes in Equity).
The only externally imposed capital requirements for the Group are total debt to EBITDA and interest cover under
the terms of the bank facilities, with which the Group has fully complied during both the current and prior period.
To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders and/or issue
new shares.
Credit risk
The Group considers its exposure to credit risk at 31 December to be as follows:
Bank deposits
Trade receivables
2013
£m
33.8
141.9
175.7
2012
£m
34.0
138.7
172.7
For banks and financial institutions, the Group’s policy is to transact with independently rated parties with a minimum
rating of ‘A’. If there is no independent rating, the Group assesses the credit quality of the counterparty taking into
account its financial position, past experience and other factors.
Liquidity risk
The Group manages liquidity risk by maintaining adequate reserves and banking facilities, by continuously monitoring
forecast and actual cash flows.
The following is an analysis of the Group’s financial liabilities and derivative financial liabilities into relevant maturity
based on the remaining period at the Balance Sheet date to the contractual maturity date.
The amounts disclosed in the table are the contractual undiscounted cash flows. Floating rate interest is estimated
using the prevailing rate at the Balance Sheet date.
John Menzies plc
118
Annual Report 2013Financial Statements: Notes to the Accounts continued Net values of transaction hedging are disclosed in accordance with the contractual terms of these
derivative instruments.
Interest bearing loans and borrowings
Preference shares
Other liabilities
Trade and other payables
Financial derivatives
Interest bearing loans and borrowings
Preference shares
Trade and other payables
Financial derivatives
Due
within
1 year
£m
(51.4)
(0.1)
(0.3)
(197.8)
(72.5)
(322.1)
Due
within
1 year
£m
(48.7)
(0.1)
(206.2)
(73.8)
(328.8)
2013
Due
between
1-2 years
£m
(4.8)
(0.1)
–
(10.5)
–
(15.4)
2012
Due
between
1-2 years
£m
(46.2)
(0.1)
(10.0)
–
(56.3)
Due
between
2-4 years
£m
(90.0)
(0.4)
–
–
–
(90.4)
Due
between
2-4 years
£m
(31.9)
(0.4)
–
–
(32.3)
17. Operating lease commitments
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
Group
Property
Other
Company
Property
2013
£m
31.8
67.0
32.3
131.1
2012
£m
31.0
71.1
39.6
141.7
2013
£m
23.2
33.6
1.4
58.2
2012
£m
25.4
43.9
2.4
71.7
2013
£m
0.5
0.4
–
0.9
Within one year
Within two to five years
After five years
18. Capital commitments
Contracted but not provided – property, plant and equipment
Group
Company
2013
£m
2.0
2012
£m
1.4
2013
£m
–
Due
over
5 years
£m
(3.8)
(1.5)
–
–
–
(5.3)
Due
over
5 years
£m
(8.0)
(1.5)
–
–
(9.5)
2012
£m
0.5
1.0
–
1.5
2012
£m
–
John Menzies plc
119
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 19. Provisions
Group
Company
Deferred tax
Assets
Accelerated capital allowances and other temporary differences
Retirement benefit obligations
Movement in year:
Income Statement – retirement benefit obligations
– other
– exchange adjustments
Statement of Comprehensive Income
Transfer to current income tax liabilities
2012
Restated
(Note 1)
£m
0.1
14.4
14.5
(1.0)
(0.9)
–
3.4
1.1
2.6
2013
£m
–
9.2
9.2
(1.7)
0.2
(0.2)
(3.6)
–
(5.3)
Other – property related
At beginning of year
Provided during year
Unwind of discount
Utilised during year
Released during year
Currency translation
At end of year
Current
Non-current
2012
Restated
(Note 1)
£m
(5.4)
14.4
9.0
(1.0)
(0.1)
–
2.8
–
1.7
2012
£m
6.5
12.3
–
(6.9)
(0.2)
–
11.7
2.2
9.5
11.7
2013
£m
(5.3)
9.2
3.9
(1.7)
0.2
–
(3.6)
–
(5.1)
2013
£m
11.7
0.9
0.5
(4.3)
(0.6)
(0.1)
8.1
3.5
4.6
8.1
The property related provision is in respect of obligations for vacated leasehold properties where applicable sublet
income may be insufficient to meet obligations under head leases. The provision for property costs unwinds over
the period between 2014 and 2038.
Contingent liabilities
In the normal course of business, the Company has guaranteed certain trading obligations of its subsidiaries.
20. Share capital
Authorised
73,056,248 ordinary shares of 25p each
Allotted, called up and fully paid
Opening – 61,163,585 ordinary shares of 25p each
Allotted under share option schemes*
Closing – 61,623,336 ordinary shares of 25p each
2013
£m
2012
£m
18.3
18.3
15.3
0.1
15.4
15.2
0.1
15.3
As a result of share scheme allotments, 459,751 (2012: 434,242) ordinary shares having a nominal value of £114,938
(2012: £108,561) were issued during the year at a share premium of £1,564,566 (2012: £1,167,981).
*
Included in this total are 415 (2012: 1,820) ordinary shares of 25p each allotted to Directors under the Savings-Related Share Option Scheme and
101,776 (2012: 100,000) ordinary shares of 25p each allotted to Directors under the Executive Share Option Scheme with a nominal value of £25,548
(2012: £25,455).
John Menzies plc
120
Annual Report 2013Financial Statements: Notes to the Accounts continued
Potential issue of ordinary shares
Certain senior executives hold options to subscribe for shares in the Company under the Executive Share Option
Scheme approved by the shareholders, details of which are shown below. Options on 101,776 (2012: 100,000)
shares were exercised in 2013 and no options lapsed. This plan is now closed.
Date of grant
May 2004
Exercise price
(pence)
418
Exercise
period
2007 – 2014
2013
Number
–
2012
Number
101,776
Employees, including senior executives, also hold options to subscribe for shares in the Company under the
Savings-Related Share Option Scheme approved by the shareholders, details of which are shown below. Options on
357,975 shares were exercised in 2013 and 141,760 options lapsed.
Year of grant
2009
2010
2011
2012
2013
Exercise price
(pence)
279
355
395
497
630
Exercise
period
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
2013
Number
–
25,107
356,091
421,550
437,257
2012
Number
36,270
362,060
406,216
489,080
–
1,240,005 1,293,626
Company Share Schemes
The Company operates the following share-based payment arrangements:
(a) 2000 Executive Share Option Scheme (“ESOS”)
Options under the ESOS were granted to Executive Directors and senior employees of the Group on an annual
basis and mature only after three years upon which they become exercisable. The exercise period is usually seven
years from maturity and special rules apply to employees who leave the employment of the Group due to ill health,
retirement or redundancy. Options were granted with a fixed exercise price equal to the market price of shares
under option at the date of grant. No options have been issued under this scheme since 2004.
Options granted under the ESOS are subject to performance conditions and lapse if these are not achieved. The
performance hurdles require that for each annual grant three-year growth targets set by the Board are achieved.
Growth was typically measured by growth in underlying earnings per share (“EPS”) as compared to RPI plus
between 3% and 8% per annum over three years, adjusted to normalise pension and tax charges.
(b) 2008 Savings-related Share Option Scheme (“SAYE”)
The Company operates a savings-related share option scheme which is open to all eligible UK employees. Typically,
all UK employees are eligible to participate including full and part-time employees. Annual grants of options are made
in September or October each year and become exercisable after three years. Employees enter into a savings contract
with the Yorkshire Building Society, who administer the scheme. The options are granted at a 20% discount of the
share price at the date of grant and lapse if not exercised within six months of maturity. Special provisions apply to
employees who leave their employment due to ill health, redundancy or retirement.
(c) 2005 Bonus Co-Investment Plan (“BCIP”)
The Plan offers Executive Directors and other senior executives selected by the Board the opportunity to invest part
of their annual cash bonus for a financial year in the Company’s shares, entitling them, provided certain performance
targets are met, to a grant of additional matching shares. In 2010 the ratio of matching shares was reduced for future
grants from up to 2:1 to up to 1:1 of the gross deferred bonus. The maximum amount of the annual cash bonus
which may be eligible for matching was also reduced from 50% to 40%. The net of tax amount is applied in the
purchase of shares.
The first bonus award which qualified for investment in shares under the Plan was the award for the financial year
ended December 2004 and the last qualifying bonus award will be for the financial year which commences 10 years
after the adoption of the Plan.
Performance targets are based on real growth in earnings measured over three financial years. For awards before
2010, if the percentage growth in the Company’s EPS is RPI + 8% or more, then the number of matching shares that
will vest is 2. For EPS growth of between RPI + 3% pa and RPI + 8% pa, the number of matching shares vesting will
be calculated on a straight-line basis.
John Menzies plc
121
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136
20. Share capital continued
From 2010, if the percentage growth in the Company’s EPS is RPI + 6% or more, then the number of matching
shares that will vest is 1. For EPS growth of between RPI + 3% pa and RPI + 6% pa, the number of matching shares
vesting will be calculated on a straight-line basis. No matching shares will vest for EPS percentage growth of RPI +
3% pa or less for any award.
Similar provisions apply in respect of dividends, transferability of rights and leavers.
(d) 2007 Divisional Performance Share Plan (“2007 DPSP”)
The DPSP was introduced to more closely align Divisional Directors and Senior Employees with the achievement
of target divisional financial results (“DFR”). A detailed description of this plan is included in the Directors’ Remuneration
Policy on pages 60 to 65.
Shares will vest at the end of three year financial periods. A nil award will be achieved where the DFR is at or
below the Threshold Performance Target and 100% will vest where the DFR is equal to or greater than the Stretch
Performance Target, with a result between threshold and stretch being made on a straight-line basis. Actual
performance targets will be disclosed in the Directors Remuneration Report in the year following the expiry of
the performance period.
Fair values of share options
Options are valued using the Black-Scholes option-pricing model. No performance conditions are included in the
fair value calculations.
The fair value per option granted after November 2002 and the assumptions used in the calculation are as follows:
Grant date
Share price at grant date (pence)
Exercise price (pence)
Number of employees
Shares under option
Vesting period (years)
Expected volatility
Option life (years)
Expected life (years)
Risk-free rate
Expected dividends expressed as a dividend yield*
Fair value per option (pence)
IFRS 2 charge per option**
Savings-Related Option Scheme
Oct-13
799
630
1,157
437,257
3
25.0%
3.5
3.5
4.6%
4.0%
143
95
Oct-12
622
497
937
421,550
3
25.0%
3.5
3.5
4.6%
4.0%
113
75
Oct-11
498
395
732
356,091
3
25.0%
3.5
3.5
4.6%
4.0%
97
64
Oct-10
450
355
53
25,107
3
25.0%
3.5
3.5
4.6%
4.0%
77
47
The expected volatility is based on the historical volatility over the last three years. The expected life is the average
expected period to vesting. The risk free rate of return is the zero coupon UK Government bonds of a term consistent
with the assumed award life.
* Based on the daily 12-month trailing dividend yield averaged over the 12 months prior to valuation date.
** The difference between the fair value and IFRS 2 charge per option is due to adjustments for forfeiture risk.
John Menzies plc
122
Annual Report 2013Financial Statements: Notes to the Accounts continued Grant date
Share price at grant date (pence)
Number of employees
Shares awarded
Contractual life (years)
Expected departure*
Expected outcome of meeting
performance criteria
Fair value per share (pence)
IFRS 2 charge per share award**
Mar-13
756
15
24,709
3
0%
41%
338
338
2005 BCIP
Mar-12
598
13
24,984
3
0%
41%
267
267
Mar-11
486
11
45,770
3
0%
41%
217
217
Mar-13
773
21
298,902
3
0%
41%
348
348
2007 Plan
Mar-12
590
24
374,595
3
0%
41%
259
259
Mar-11
460
24
477,677
3
0%
41%
207
207
2005 BCIP – 2005 Bonus Co-Investment Plan
2007 Plan – 2007 Divisional Performance Share Plan
* Risk of forfeiture
** Adjusted for forfeiture risk
Movement in share options
A reconciliation of conditional share movements of executive share options, savings-related share options and all
other share based schemes is shown below:
Executive Share Option Scheme
Savings-Related Option Scheme
2013
2012
2013
2012
Outstanding at
start of year
Granted
Forfeited/Expired
Exercised
Outstanding at
end of year
Exercisable
Range of
exercise prices
Weighted average
remaining life
(years)
– expected
– contractual
Number
101,776
–
–
(101,776)
–
–
–
–
–
Weighted
average
exercise
price (p)
418
–
–
418
–
Number
201,776
–
–
(100,000)
101,776
101,776
Weighted
average
exercise
price (p)
374
–
–
329
418
Number
1,293,626
446,114
(141,760)
(357,975)
1,240,005
25,107
Weighted
average
exercise
price (p)
Weighted
average
exercise
price (p)
Number
419 1,289,726
497,245
630
(159,103)
446
(334,242)
350
512 1,293,626
36,270
348
497
370
283
419
418
355-630
279-395
1.3
1.3
2.1
2.1
2.1
2.1
John Menzies plc
123
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 20. Share capital continued
2007 DPSP
2005 BCIP
2013
2012
2013
2012
Weighted
average
price (p)
Number
Weighted
average
price (p)
Number
1,521,813
447 3,118,392
318,449
(175,426)
773
461
438,564
(127,143)
233
590
522
Number
156,721
25,348
(2,414)
Weighted
average
price (p)
331
756
596
Number
151,699
25,820
(579)
(513,662)
461 (1,908,000)
130
(84,192)
347
(20,219)
1,151,174
579 1,521,813
440
95,463
423
156,721
342-773
342-590
486-756
346-598
Weighted
average
price (p)
360
598
486
133
429
1.1
1.1
1.1
1.1
1.0
1.0
0.9
0.9
Outstanding at
start of year
Awards made
Lapsed
Performance
achieved
Outstanding at
end of year
Range of award
date prices
Weighted average
remaining life
(years)
– expected
– contractual
Total IFRS 2 charge for share-based incentive schemes
The total charge for the year relating to employee share-based plans was £1.4m (2012: £1.4m), all of which related to
equity-settled share-based payment transactions. After tax, the total charge was £1.1m (2012: £1.1m).
21. Cash generated from operations
Group
Company
2012
Restated
(Note 1)
£m
31.4
20.2
7.6
1.4
7.7
(1.8)
(0.4)
2.7
(0.3)
(9.8)
10.7
(8.2)
1.2
(9.3)
(9.8)
43.3
2013
£m
45.4
19.4
9.6
1.4
–
(2.1)
(0.3)
3.4
–
(13.1)
–
(1.2)
(0.4)
4.8
(17.4)
49.5
2012
Restated
(Note 1)
£m
(4.0)
0.8
–
1.4
–
(0.7)
–
2.2
(0.3)
(9.8)
–
–
–
–
–
(10.4)
2013
£m
(0.4)
0.8
–
1.4
–
–
0.1
–
(2.2)
(13.1)
–
–
–
–
–
(13.4)
Operating profit/(loss)
Depreciation
Amortisation of intangible assets
Share-based payments
Onerous lease provision
Cash spend on onerous leases
(Gain)/loss on sale of property, plant and equipment
Pension charge
Pension credit
Pension contributions in cash
Rationalisation costs
Cash spend on rationalisation costs
(Increase)/decrease in inventories
Decrease/(increase) in trade and other receivables
Decrease in trade and other payables and provisions
John Menzies plc
124
Annual Report 2013Financial Statements: Notes to the Accounts continued 22. Analysis of changes in net borrowings
Cash at bank and in hand
Bank overdrafts
Net cash and cash equivalents
Bank loans due within one year
Preference shares
Finance leases and borrowings
Debt due after one year
Net derivative assets
Net debt
2012
£m
34.0
(0.2)
33.8
(46.0)
(1.4)
–
(79.7)
0.3
(93.0)
Cash flows
£m
1.4
(0.3)
1.1
Subsidiaries
acquired
£m
–
–
–
Currency
translation
£m
(1.6)
–
(1.6)
(2.7)
–
2.2
(10.3)
–
(9.7)
–
–
(2.5)
–
–
(2.5)
–
–
–
–
3.3
1.7
2013
£m
33.8
(0.5)
33.3
(48.7)
(1.4)
(0.3)
(90.0)
3.6
(103.5)
The movement on debt due after 1 year of £10.3m relates to a non-cash movement to bank loans due within 1 year
leaving a net cash outflow on bank loans due within 1 year of £13.0m.
The currency translation movement results from the Group’s policy of hedging its overseas net assets, which are
denominated mainly in US dollars and Euro. The translation effect on net debt is offset by the translation effect on
net assets resulting in an overall net exchange loss of £8.0m (2012: loss of £5.1m). This net loss is recognised in
Other Comprehensive Income.
23. Cash flow hedge reserve
This reserve records the portion of the gains or losses on hedging instruments used as cash flow hedges that are
determined to be effective.
24. Acquisitions
During the year, the Group acquired 100% of the share capital of the following businesses:
Aviation
Total
Desacol S.A.
Skystar
Airport
Services
Moose
Aviation
Services AB
01/08/2013
£m
21/10/2013
£m
11/10/2013
£m
Division
Name
Date of acquisition
Purchase consideration
Cash paid
Deferred consideration
Contingent consideration
Total purchase consideration
Fair value of net assets acquired
Goodwill
Distribution
Top
Attractions
Ltd
04/06/2013
£m
–
–
–
–
(0.1)
0.1
–
–
1.3
1.3
1.3
–
The provisional assets and liabilities arising from the acquisitions are as follows:
Non-current assets
Intangible assets (contracts) – fair value
Property, plant and equipment
Other non-current assets
Current assets
Cash
Current liabilities
Finance leases and borrowings
Net assets acquired
–
–
–
–
–
(0.1)
–
(0.1)
4.3
2.8
0.2
2.2
0.3
(6.0)
(2.5)
1.3
£m
9.2
2.2
1.3
12.7
12.6
0.1
12.1
4.6
0.3
4.0
0.3
(6.2)
(2.5)
12.6
7.7
2.0
–
9.7
9.7
–
6.4
1.5
0.1
1.7
–
–
–
9.7
1.5
0.2
–
1.7
1.7
–
1.4
0.3
–
0.1
–
(0.1)
–
1.7
John Menzies plc
125
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136
24. Acquisitions continued
The fair values of the acquisition assets remains provisional pending an assessment of the intangible assets and
formal completion of the net asset process.
Top Attractions Ltd was acquired in order to promote growth for Take One Media (the leaflet business in Orbital
Marketing Services Group).
The Skystar Airport Services acquisition consists of the following ground handling companies: Skystar Airport
Services Pty Ltd operating in 6 airports in Australia and Skystar Airport Services NZ Pty Ltd operating in 2 airports
in New Zealand. Skystar offers a high quality, cost effective service that has captured the attention of major local
and international carriers including low cost airlines.
Desacol S.A. is a Colombian ground and cargo handling business operating in 5 airports. The acquisition of this
business provides entry into the Latin American market. The contingent consideration’s range is between a
minimum of £Nil and a maximum of £3.0m.
Moose Aviation Services AB is a specialist de-icing provider at Stockholm Arlanda Airport which will enable the
Group to provide a full suite of ground handling services at this airport. The deferred consideration of £0.2m is
payable in October 2015.
The acquired businesses contributed revenues of £9.7m from the date of acquisition and £0.6m profit before tax.
If the businesses had been acquired on 1 January 2013 revenues contributed would have been £30.9m and £3.1m
profit before tax.
Other
Deferred consideration totalling £1.1m for Flight Support, Kamino Cargo S.R.L and Orbital Marketing Services Group,
all acquired in 2012, became payable and was cash-settled in 2013. In addition, contingent consideration of £0.2m
for Fore Partnership became payable and was cash-settled in 2013.
25. Related party transactions
During the year the Group transacted with related parties in the normal course of business and on an arm’s length
basis. Details of these transactions are shown below:
Related party
Menzies Bobba Ground Handling Services Private Ltd
Hyderabad Menzies Air Cargo Private Ltd
Menzies Aviation Bobba (Bangalore) Private Ltd
Menzies Macau Airport Services Ltd
EM News Distribution (NI) Ltd
EM News Distribution (Ireland) Ltd
Group
shareholding
%
51
49
49
29
50
50
Amounts owed
to related
party at
31 December
2013
£m
–
–
–
–
7.1
–
Amounts owed
by related
party at
31 December
2013
£m
–
–
0.1
0.1
–
1.8
Sales to
related
party
£m
0.3
0.6
0.1
0.2
0.6
1.2
Key management personnel include individuals who are Executive Directors of the Group and divisional boards
having authority and responsibility for planning, directing and controlling activities of the key operating divisions as
disclosed in the segmental analysis. Remuneration of key management personnel is as follows:
Short-term employee benefits
Post-employment pension and medical benefits
Termination benefits
Share-based payments
John Menzies plc
126
2013
£m
4.5
0.4
0.2
1.4
6.5
2012
£m
4.9
0.3
–
1.4
6.6
Annual Report 2013Financial Statements: Notes to the Accounts continued Certain activities, including treasury, taxation, insurance, pension and legal matters are provided by the Parent
Company to subsidiary companies and are recharged on a cost-plus basis. The amount recharged and settled in
respect of 2013 was £0.2m (2012: £0.2m).
The amounts owed to/(due by) the Parent Company from dealings with subsidiary companies is disclosed in
Notes 14 and 15.
26. Subsidiary companies
The principal subsidiaries, Menzies Distribution Limited, Menzies Group Holdings Limited, Princes Street (Jersey)
Limited, John Menzies Finance Limited, Menzies Aviation plc and Menzies Aviation Holdings Limited are ultimately
wholly owned by the Company and operate mainly in the United Kingdom. The issued share capital of these
subsidiaries is mainly in the form of equity shares.
The Company is taking the exemption under s410 Companies Act 2006 to disclose details about principal
subsidiaries only.
John Menzies plc
127
Annual Report 2013Strategic Report 02 – 41Governance Reports 42 – 79Financial Statements 80 – 128Shareholder Information 129 – 136 Financial Statements:
Five-Year Summary
Revenue
Distribution
Aviation
Operating profit
Distribution
Aviation
Corporate
Underlying operating profit
Exceptional items
Intangible amortisation
Share of interest and tax on joint ventures
and associates
Profit before interest
Net finance costs
Profit before taxation
Per ordinary share
Dividends
Underlying earnings
Basic earnings
Restated
(Note 1)
2012
£m
Restated
(Note 1)
2011
£m
Restated
(Note 1)
2010
£m
Restated
(Note 1)
2009
£m
2013
£m
1,202.9
702.5
1,905.4
1,224.2
679.3
1,903.5
1,254.5
645.2
1,899.7
1,255.0
582.6
1,837.6
1,218.5
507.2
1,725.7
24.3
37.8
62.1
(2.0)
60.1
(0.7)
(8.0)
(1.1)
50.3
(8.2)
42.1
27.5
34.8
62.3
(1.3)
61.0
(18.4)
(6.4)
(1.0)
35.2
(7.1)
28.1
26.5
30.9
57.4
(1.2)
56.2
3.9
(5.7)
(1.7)
52.7
(6.8)
45.9
26.6
23.2
49.8
(1.2)
48.6
15.1
(5.1)
(2.3)
56.3
(10.6)
45.7
27.9
15.4
43.3
(1.0)
42.3
(6.0)
(5.1)
(2.1)
29.1
(8.6)
20.5
25.6p
65.6p
50.1p
24.4p
68.8p
31.3p
21.0p
64.9p
63.5p
13.0p
49.5p
57.9p
–
41.9p
24.0p
John Menzies plc
128
Annual Report 2013 Shareholder Information:
Notice of Annual General Meeting
Strategic Report
Governance Reports
02 – 41
42 – 79
80 – 128
Financial Statements
Shareholder Information 129 – 136
This document is important and requires
your immediate attention. If you are in any
doubt about what action you should take you
are recommended to consult your financial
adviser. If you have sold or transferred all of
your ordinary shares in John Menzies plc,
you should forward this document, together
with accompanying documents, to the
purchaser or transferee or to the stockbroker,
bank or other agent through whom the sale
or transfer was effected, for transmission
to the purchaser or transferee.
Notice is hereby given that the Annual General Meeting
(“AGM”) of John Menzies plc (the ‘Company’) will
be held in the Roxburghe Hotel, 38 Charlotte Square,
Edinburgh on Friday, 16 May 2014 at 2pm (the ‘Meeting’)
to transact the following business:
Ordinary Resolutions:
To consider and, if thought fit, pass Resolutions 1-15,
each of which will be proposed as an ordinary resolution:
1. Report and Accounts
To receive the Annual Accounts of the Company for
the financial year ended 31 December 2013, the
Strategic Report and the Reports of the Directors’
and Auditors thereon.
2. Remuneration Report
To approve the Report on Directors’ Remuneration
(excluding the Directors’ Remuneration Policy) as set out
in the Annual Report and Accounts for the financial year
ended 31 December 2013.
3. Remuneration Policy
To approve the Policy on Directors’ Remuneration as set
out on pages 60 to 65 of the Annual Report and Accounts
for the financial year ended 31 December 2013.
4. Dividend
To declare a final dividend of 18.8 pence per ordinary
share for the financial year ended 31 December 2013.
5-12. Re-election of Directors
5. To elect Paula Bell as a Director
6. To re-elect Eric Born as a Director
7. To re-elect Ian Harley as a Director
8. To re-elect Dermot Jenkinson as a Director
9. To re-elect David McIntosh as a Director
10. To re-elect Octavia Morley as a Director
11. To re-elect Iain Napier as a Director
12. To re-elect Craig Smyth as a Director
13. Appointment of Auditor
To re-appoint Ernst & Young LLP as auditors of the
Company to hold office until the conclusion of the
next general meeting at which Annual Accounts are
laid before the Company.
14. Remuneration of Auditor
To authorise the Directors to fix the auditors’
remuneration.
15. Authority to Allot Shares
That the Directors be and are hereby generally and
unconditionally authorised, pursuant to section 551 of
the Companies Act 2006 (the ‘2006 Act’) to exercise all
powers of the Company to allot shares in the Company
and to grant rights to subscribe for, or to convert any
security into, shares in the Company, such rights and
shares together being ‘relevant securities’:
(a) otherwise than pursuant to paragraph (b) below,
up to an aggregate nominal amount of £5,105,768
(such amount to be reduced by the aggregate
nominal amount of any equity securities (as defined
by section 560 of the 2006 Act) allotted under
paragraph (b) below in excess of £5,105,768; and
(b) comprising equity securities up to an aggregate
nominal amount of £10,211,537 (such amount to
be reduced by the nominal amount of any relevant
securities allotted under paragraph (a) above) in
connection with an offer by way of a rights issue
to: (i) holders of ordinary shares in the capital of
the Company in proportion (as nearly as may
be practicable) to their respective holdings; and
(ii) holders of equity securities in the capital of the
Company as required by the rights of those securities
or as the Directors otherwise consider necessary, but
subject to such exclusions or other arrangements as
the Directors may deem necessary or expedient to
deal with treasury shares, fractional entitlements,
record dates, legal or practical problems arising under
the laws of any overseas territory or the requirements
of any regulatory body or stock exchange or by virtue
of shares being represented by depository receipts
or any other matter;
And provided that (unless previously renewed, varied
or revoked) this authority shall expire at the conclusion
of the next Annual General Meeting of the Company or,
if earlier, on 30 June 2015 save that the Company shall
be entitled to make offers or agreements before the
expiry of such authority which would or might require
relevant securities to be allotted after such expiry and
the Directors shall be entitled to allot relevant securities
pursuant to any such offer or agreement as if the
authority conferred by this Resolution had not expired.
This authority is in substitution for and to the exclusion
of all unexercised existing authorities previously granted
to the Directors under the 2006 Act but without
prejudice to any allotment of shares or grants of rights
already made, offered or agreed to be made pursuant
to such authorities.
John Menzies plc
129
Annual Report 2013 Shareholder Information:
Notice of Annual General Meeting continued
Special Resolutions:
To consider, and if thought fit, pass Resolutions 16-19,
each of which will be proposed as a Special Resolution:
16. Authority to disapply pre-emption rights
That, subject to the passing of Resolution 15 in the Notice
of Annual General Meeting of the Company dated 3 April
2014 (the “Section 551 Resolution”) the Directors be
and are hereby empowered pursuant to section 570 and
section 573 of the Companies Act 2006 (the “2006 Act”)
to exercise all powers of the Company to allot equity
securities (within the meaning of sections 560 (1)-(3) of
the 2006 Act) wholly for cash pursuant to the authority
conferred by the Section 551 Resolution and/or by way
of a sale of treasury shares as if Section 561(1) of the
2006 Act did not apply to any such allotment provided
that this power shall be limited to:
(a) the allotment of equity securities in connection with
an offer or issue of equity securities (but, in the case
of an allotment pursuant to the authority granted
under paragraph (b) of the Section 551 Resolution,
such power shall be limited to the allotment of
equity securities in connection with a rights issue
only) to: (i) the holders of ordinary shares in the
capital of the Company in proportion (as nearly as
may be practicable) to their respective holdings;
and (ii) the holders of equity securities in the capital
of the Company as required by the rights of those
securities or as the Directors otherwise consider
necessary, but subject to such exclusions or other
arrangements as the Directors may deem necessary
or expedient to deal with treasury shares, fractional
entitlements, record dates, or legal or practical
problems arising under the laws of any overseas
territory or the requirements of any regulatory
body or stock exchange or by virtue of shares
being represented by depository receipts or
any other matter; and
(b) the allotment pursuant to the authority granted
by paragraph (a) of the Section 551 Resolution
(otherwise than pursuant to paragraph (a) of this
resolution) to any person or persons of equity
securities up to an aggregate nominal amount of
£770,500, representing approximately 5% of the
issued ordinary share capital of the Company as
at 3 April 2014;
And provided that (unless previously renewed, varied
or revoked) this power shall expire at the conclusion of
the next Annual General Meeting of the Company or, if
earlier, on 30 June 2015 save that the Company shall be
entitled to make offers or agreements before the expiry
of such power which would or might require equity
securities to be allotted after such expiry and the
Directors shall be entitled to allot equity securities
pursuant to any such offer or agreement as if the
power conferred hereby had not expired. This power is
in substitution for and to the exclusion of all unexercised
existing powers previously granted to the Directors
under sections 570 and 573 of the 2006 Act but without
prejudice to any allotment of equity securities already
made or agreed to be made pursuant to such powers.
17. Purchase of own ordinary shares by Company
That the Company be and is hereby authorised pursuant
to section 701 of the Companies Act 2006 (the “2006
Act”) to make market purchases (within the meaning of
Section 693(4) of the 2006 Act) of its own ordinary shares
of 25p each, on such terms and in such manner as the
Directors may from time to time determine, provided that:
(a) the maximum number of ordinary shares
hereby authorised to be purchased is 6,126,922,
representing approximately 10% of the Company’s
issued ordinary share capital as at 3 April 2014;
(b) the maximum price which may be paid for each such
ordinary share under this authority shall be the higher
of: (i) an amount equal to 105% of the average of the
middle market quotations for any such ordinary share
of the Company as derived from the London Stock
Exchange Daily Official List for the five business
days immediately prior to the date of conclusion
of the contract for any such purchase; and (ii) the
amount stipulated by Article 5(1) of the EU Buy-back
and Stabilisation Regulation 2003 (being the higher
of the price of the last independent trade and the
highest current independent bid for an ordinary share
in the Company on the trading venues where the
market purchases by the Company pursuant to the
authority conferred by this Resolution will be carried
out), and the minimum price which may be paid
for any such ordinary shares is 25p, in each case
exclusive of the expenses of purchase (if any)
payable by the Company; and
(c) the authority hereby conferred shall expire
(unless previously revoked, varied or renewed) at
the conclusion of the next Annual General Meeting
of the Company or at the close of business on
30 June 2015, whichever is earlier, except in
relation to the purchase of ordinary shares for
which a contract was concluded before the authority
expired and which might or will be executed wholly
or partly after its expiration and the Company may
make such a purchase in pursuance of such contract
as if the authority hereby conferred had not expired.
John Menzies plc
130
Annual Report 2013 Strategic Report
Governance Reports
02 – 41
42 – 79
80 – 128
Financial Statements
Shareholder Information 129 – 136
19. Length of Notice of Meeting
That a general meeting of the Company, other than an
Annual General Meeting, may be called on not less than
14 clear days’ notice.
By order of the Board
John Geddes
Company Secretary
3 April 2014
18. Purchase of own preference shares by Company
That the Company be and is hereby authorised pursuant to
section 701 of the Companies Act 2006 (the “2006 Act”)
to make market purchases (within the meaning of section
693(4) of the 2006 Act) of its own 9% cumulative
preference shares of £1 each, on such terms and in
such manner as the Directors may from time to time
determine, provided that:
(a) the maximum number of 9% cumulative preference
shares hereby authorised to be purchased is
1,394,587, representing 100% of the Company’s
issued 9% cumulative preference share capital as
at 3 April 2014;
(b) the maximum price which may be paid for each such
9% cumulative preference share under this authority
shall be the higher of:
(i) an amount equal to 110% of the average of
the middle market quotations for any such 9%
cumulative preference share of the Company
as derived from the London Stock Exchange
Daily Official List for the five business days
immediately prior to the date of conclusion
of the contract for any such purchase; and
(ii) the amount stipulated by Article 5(1) of the EU
Buy-back and Stabilisation Regulation 2003
(being the higher of the price of the last
independent trade and the highest current
independent bid for a 9% cumulative preference
share in the Company on the trading venues
where the market purchases by the Company
pursuant to the authority conferred by this
resolution will be carried out), and the minimum
price which may be paid for any such 9%
cumulative preference shares is £1, in each case
exclusive of the expenses of purchase (if any)
payable by the Company; and
(c) the authority hereby conferred shall expire (unless
previously revoked, varied or renewed) at the
conclusion of the next Annual General Meeting of
the Company or at the close of business on 30 June
2015, whichever is earlier, except in relation to the
purchase of 9% cumulative preference shares for
which a contract was concluded before the authority
expired and which might or will be executed wholly
or partly after its expiration and the Company may
make such a purchase in pursuance of such contract
as if the authority hereby conferred had not expired.
John Menzies plc
131
Annual Report 2013
Shareholder Information:
Notice of Annual General Meeting continued
Explanatory Notes
The following information provides additional background
information to several of the Resolutions proposed:
Resolutions 2 and 3 – Remuneration Report and Policy
In line with the provisions of the 2006 Act the vote on
the Directors’ Remuneration Report will be advisory
and in respect of the overall remuneration package. The
vote is not specific to individual levels of remuneration.
The Directors Remuneration Policy part of the Report,
which sets out the Company’s forward looking policy
on Directors’ Remuneration is subject to a binding
shareholder vote by ordinary resolution at least every
three years. Once the Directors’ Remuneration Policy
is approved the Company will not be able to make a
remuneration payment to a current or prospective
Director or a payment for loss of office to a current or
past Director, unless that payment is consistent with
the policy or has been approved by a resolution of
the members of the Company. The statement by the
Remuneration Committee Chairman and the annual
implementation report will, as in previous years,
be put to an annual advisory shareholder vote by
ordinary resolution.
Resolutions 5-12 – Re-election of Directors
Biographical details of the Directors to be elected and
re-elected can be found on pages 46 and 47 of the
Annual Report and Accounts for the year ended
December 2013. Paula Bell, having been appointed as
a Director since last year’s AGM will retire at this year’s
AGM in accordance with the Company’s Articles of
Association and stand for election. In accordance with
good practice all other Directors will retire at the AGM
and seek re-election.
In proposing the election and re-election of the
Directors, the Chairman has confirmed that, following
formal performance evaluation (described on page 54
of the Annual Report and Accounts for the year ended
31 December 2013), each individual continues to make
an effective and valuable contribution to the Board and
demonstrates commitment to the role.
The Board considers it appropriate that Directors
again be granted authority to allot shares in the capital
of the Company up to a maximum nominal amount
of £10,211,537 representing the guideline limit of
approximately two-thirds of the Company’s issued
ordinary share capital as at 3 April 2014. Of this amount,
20,423,075 shares, (representing one-third of the
Company’s issued ordinary share capital) can only
be allotted pursuant to a rights issue.
The power will last until the conclusion of the next AGM
of the Company or, if earlier, 30 June 2015. The Directors
have no present intention of exercising this authority,
although they have confirmed that should the power
authorised in Resolution 15 part (b) be utilised then all
Directors would stand for re-election at the next AGM.
As at 3 April 2014, the Company held 370,801 ordinary
shares in the capital of the Company as treasury shares.
Resolution 16 will, if passed, give the Directors
power, pursuant to the authority to allot granted under
Resolution 15, to allot equity securities (as defined
in sections 560 (1)-(3) of the Companies Act 2006
(the “2006 Act”) or sell treasury shares for cash on a non
pre-emptive basis without first offering them to existing
shareholders in proportion to their existing shareholdings
in limited circumstances. In light of the ABI guidelines
described in relation to Resolution 15 above, this authority
will permit the Directors to allot equity securities:
(b
(a) in relation to a pre-emptive rights issue only, up
to a maximum nominal amount of £10,211,537
(representing approximately two-thirds of the
Company’s issued ordinary share capital excluding
treasury shares) as at 3 April 2014; and
in any other case up to a maximum nominal value
of £770,500, representing approximately 5% of
the issued share capital of the Company as at
3 April 2014 (the latest practicable date prior
to publication of this Notice of Annual General
Meeting) otherwise than in connection with
an offer to existing shareholders.
Resolutions 15 and 16 – Authority to allot shares
and disapply pre-emption rights
The Association of British Insurers (ABI) guidelines issued
in December 2008 state that ABI members will permit,
and treat as routine, resolutions seeking authority to allot
shares representing up to two-thirds of the Company’s
issued share capital. The guidelines provide that the extra
routine authority (that is, the authority to allot shares
representing the additional one-third of the Company’s
issued share capital) can only be used to allot shares
pursuant to a fully pre-emptive rights issue.
At the AGM of the Company held on 17 May 2013,
the Directors followed these guidelines and were
given authority to allot relevant securities up to an
aggregate nominal amount of £10,108,161, representing
approximately two thirds of the issued share capital of
the Company as at 2 April 2013. This authority is due
to expire at the end of this year’s AGM.
The Directors have no present intention of exercising this
authority and the authority, if granted, will expire at the
conclusion of the next AGM of the Company or, if earlier,
on 30 June 2015.
Resolutions 17 and 18 – Authority to buy back shares
These special resolutions give the Company authority
to make market purchases of its own ordinary and 9%
cumulative preference shares in the market as permitted
by the 2006 Act. The authorities set the minimum
and maximum prices and limit the number of shares
that could be purchased to 6,126,922 ordinary shares
(representing approximately 10% of the issued ordinary
share capital as at 3 April 2014) and 1,394,587 9%
cumulative preference shares (representing 100%
of the issued 9% cumulative preference shares as
at 3 April 2014).
The authorities, if granted, will expire at the conclusion of
the next AGM of the Company, or, if earlier, 30 June 2015.
John Menzies plc
132
Annual Report 2013 Strategic Report
Governance Reports
02 – 41
42 – 79
80 – 128
Financial Statements
Shareholder Information 129 – 136
The Directors have no present intention of exercising the
authority to purchase the Company’s 9% cumulative
preference shares but will keep the matter under review,
taking into account the financial resources of the
Company, the Company’s share price and future funding
opportunities. The authority will only be exercised if the
Directors believe that to do so would result in an increase
in earnings per share and would be in the interests of
shareholders generally.
As at 3 April 2014, the Company held 370,801 ordinary
shares in the capital of the Company as treasury shares.
It may make purchases of its own ordinary shares,
taking into account the financial resources of the
Company, the Company’s share price and future funding
opportunities. The authority will only be exercised if
the Directors believe that to do so would result in an
increase in earnings per share and would be in the
interests of shareholders generally. Any purchases
of ordinary shares would be by means of market
purchases through the London Stock Exchange.
Listed companies purchasing their own shares are
allowed to hold them in treasury as an alternative to
cancelling them. No dividends are paid on shares
whilst held in treasury and no voting rights attach
to treasury shares.
Resolution 19 – Length of Notice of Meeting
Before the introduction of the Companies (Shareholders’
Rights) Regulations 2009 in August 2009, the minimum
notice period permitted by the 2006 Act for general
meetings (other than AGMs) was 14 days. One of the
amendments made to the 2006 Act by the Regulations
was to increase the minimum notice period for general
meetings of listed companies to 21 days, but with
the ability for companies to reduce this period back
to 14 days (other than for AGMs) provided that two
conditions are met. The first condition is that a company
offers a facility for shareholders to vote by electronic
means. This condition is met if a company offers a facility,
accessible to all shareholders, to appoint a proxy by
means of a website. The second condition is that there
is an annual resolution of shareholders approving the
reduction of the minimum notice period from 21 days to
14 days. The Directors have confirmed that they will only
use the shorter notice period in limited circumstances
where the proposal in question is time sensitive and the
short notice would clearly be to the advantage of
shareholders as a whole.
The Board is therefore proposing Resolution 19 as a
special resolution and for it to be effective until the
Company’s next AGM when it is intended to propose
that the approval be renewed.
Recommendation
The Directors consider all these Resolutions to be in the
best interests of the Company and its shareholders as
a whole, consistent with the Directors’ duty to act in the
way most likely to promote the success of the Company
for the benefit of its shareholders as a whole, and
unanimously recommend that you vote in favour of them.
Notes to the Notice of Annual
General Meeting (“AGM”)
1.
Information about the AGM is available from the
Company’s website: www.johnmenziesplc.com.
2. As a member, you are entitled to appoint one or
more proxies to exercise all or any of your rights
to attend, speak and vote at the AGM. A proxy
need not be a member of the Company. You may
appoint more than one proxy provided each proxy
is appointed to exercise rights attached to different
shares. You may not appoint more than one proxy
to exercise the rights attached to any one share.
3. A form of proxy is enclosed. To be valid, your form
of proxy and any power of attorney or other authority,
if any, under which it is signed or a notarially certified
copy of that power of attorney or authority should
be sent to Computershare Investor Services at
The Pavilions, Bridgwater Road, Bristol BS99 6ZZ
so as to arrive no later than 48 hours before the
commencement of the AGM.
4. It is possible for you to submit your proxy votes online.
Further information on this service can be found on
your proxy form, or if you receive communications
from us electronically, voting information will be
contained within your email broadcast.
5. If you appoint a proxy, this will not prevent you
attending the AGM and voting in person if you
wish to do so.
6. The right to vote at the AGM is determined by
reference to the Company’s register of members as
at the close of business on Wednesday 14 May 2014
or, if the AGM is adjourned, at 5pm on the day two
days prior to the adjourned meeting. Changes to
entries on that register after that time shall be
disregarded in determining the rights of any
member to attend and vote at the AGM.
7. As a member, you have the right to put questions at
the AGM relating to the business being dealt with at
the AGM.
8. Any person to whom this notice is sent who is a
person nominated under section 146 of the 2006 Act
to enjoy information rights (a ‘Nominated Person’)
may, under an agreement between them and the
member by whom they were nominated, have a right
to be appointed (or to have someone else appointed)
as a proxy for the AGM. If a Nominated Person has
no such proxy appointment right or does not wish
to exercise it, they may, under any such agreement,
have a right to give instructions to the member as
to the exercise of voting rights.
9. The statement of the rights of members in relation
to the appointment of proxies in Notes 2, 3 and 4
above does not apply to Nominated Persons. The
rights described in these paragraphs can only be
exercised by members of the Company.
John Menzies plc
133
Annual Report 2013 Shareholder Information:
Notice of Annual General Meeting continued
10. As at 3 April 2014, the Company’s issued ordinary
14. The Company may treat as invalid a CREST
share capital comprised 61,640,026 ordinary shares
of 25p each, and the Company held 370,801 of
its own ordinary shares of 25p each in Treasury.
Each ordinary share carries the right to one vote at
a general meeting of the Company and, therefore,
the total number of voting rights in the Company
as at 3 April 2014 is 61,269,225.
11. CREST members who wish to appoint a proxy
or proxies by utilising the CREST electronic proxy
appointment service may do so for the AGM and any
adjournment(s) thereof by utilising the procedures
described in the CREST Manual. CREST personal
members or other CREST sponsored members,
and those CREST members who have appointed a
voting service provider(s), should refer to their CREST
sponsor or voting service provider(s), who will be
able to take the appropriate action on their behalf.
12. In order for a proxy appointment made by means of
CREST to be valid, the appropriate CREST message
(a “CREST Proxy Instruction”) must be properly
authenticated in accordance with Euroclear UK &
Ireland Limited’s (EUI) specifications and must
contain the information required for such instructions,
as described in the CREST Manual. The message
must be transmitted so as to be received by the
issuer’s agent (ID 3RA50) so as to arrive no later than
48 hours before the commencement of the AGM.
For this purpose, the time of receipt will be taken to
be the time (as determined by the timestamp applied
to the Shareholder information message by the
CREST Applications Host) from which the issuer’s
agent is able to retrieve the message by enquiry
to CREST in the manner prescribed by CREST.
13. CREST members and, where applicable, their CREST
sponsors or voting service providers should note that
EUI does not make available special procedures in
CREST for any particular messages. Normal system
timings and limitations will therefore apply in relation
to the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to
take (or, if the CREST member is a CREST personal
member or sponsored member or has appointed
a voting service provider(s), to procure that his
CREST sponsor or voting service provider(s) take(s))
such action as shall be necessary to ensure that a
message is transmitted by means of the CREST
system by any particular time. In this connection,
CREST members and, where applicable, their CREST
sponsors or voting service providers are referred, in
particular, to those sections of the CREST Manual
concerning practical limitations of the CREST
system and timings.
Proxy Instruction in the circumstances set out in
Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001.
15. Under section 338 of the 2006 Act, members may
require the Company to give, to members of the
Company entitled to receive this Notice of AGM,
notice of a resolution which may properly be moved
and is intended to be moved at the AGM. Under
section 338A of that Act, members may request
the Company to include in the business to be dealt
with at the AGM any matter (other than a proposed
resolution) which may properly be included in
the business.
16. It is possible that, pursuant to requests made by
members of the Company under section 527 of the
Companies Act 2006, the Company may be required
to publish on a website a statement setting out any
matter relating to: (i) the audit of the Company’s
accounts (including the auditor’s report and the
conduct of the audit) that are to be laid before the
AGM: or (ii) any circumstances connected with an
auditor of the Company ceasing to hold office since
the previous meeting at which annual accounts and
reports were laid in accordance with section 437
of the 2006 Act. The Company may not require the
members requesting any such website publication
to pay its expenses in complying with sections 527
or 528 of the 2006 Act. Where the Company is
required to place a statement on a website under
section 527 of the Companies Act 2006, it must
forward the statement to the Company’s auditor
not later than the time when it makes the statement
available on the website. The business which may
be dealt with at the AGM includes any statement
that the Company has been required under section
527 of the 2006 Act to publish on a website.
Documents
The following documents are available for inspection
on any day (except Saturday, Sunday and Bank Holidays)
from the date of sending this Notice of AGM up to and
including the date of the AGM during usual business
hours at the registered office of the Company and at
the offices of Maclay Murray & Spens LLP, One London
Wall, London EC2Y 5AB. On the date of the AGM, they
will be available for inspection at the venue of the AGM
from 1pm until the conclusion of the meeting:
(a) copies of the Directors’ service contracts with
the Company; and
(b) the terms of appointment of the Non-Executive
Directors of the Company.
John Menzies plc
134
Annual Report 2013 Shareholder Information:
General Information
Strategic Report
Governance Reports
02 – 41
42 – 79
80 – 128
Financial Statements
Shareholder Information 129 – 136
Internet
The Group operates a website which can be found at
www.johnmenziesplc.com. This site is regularly updated
to provide you with information about the Group and
each of its operating divisions. In particular, all of the
Group’s press releases and announcements can be
found on the site together with copies of the
Group’s accounts.
John Menzies IR App
The Group has an investor relations App for iPhone and
iPad users. The App provides users with the latest share
price, regulatory and business news, annual/interim
reports and presentations. The App can be downloaded
via the Company website or by visiting your App store.
Share Registrar and Shareholder Enquiries
Any enquiries concerning your shareholding should be
directed to the Company’s Registrar and clearly state the
shareholder’s name, address and Shareholder Reference
Number (SRN). The contact details are:
Call: 0870 703 6303
Web: www.investorcentre.co.uk
Email: www.investorcentre.co.uk/contactus
Write: The John Menzies plc Registrar, Computershare
Investor Services PLC, The Pavilions, Bridgwater Road,
Bristol BS99 6ZZ
The Registrar should be notified in writing
promptly of any change in a shareholder’s address.
Computershare’s online Investor Centre also enables
you to view your shareholding and update your address
and payment instructions online. You can register at
www.investorcentre.co.uk. In order to register, you will
need your Shareholder Reference Number (SRN), which
you can find on your share certificate or tax voucher.
Share Price
The current share price of John Menzies plc ordinary
shares can be seen on the Group’s website,
www.johnmenziesplc.com.
Telephone Share Dealing Service
A share dealing service has been arranged with
Stocktrade which provides a simple way of buying
or selling John Menzies shares.
Call: +44 131 240 0414
quote reference John Menzies plc dial and deal
Charges
Commission will be 0.5%, subject to a minimum of
£17.50. Please note that UK share purchases will be
subject to 0.5% stamp duty. There will also be a PTM
(panel for takeovers and mergers) levy of £1 for single
trades in excess of £10,000.
Settlement
When buying shares you will be required to pay for your
transaction at the time of the deal by debit card and you
should ensure that you have sufficient cleared funds
available in your debit card account to pay for the shares
in full.
ShareGift
If you have only a small number of shares which would
cost more for you to sell than they are worth, you may
wish to consider donating them to the charity ShareGift
(Registered Charity 1052686) which specialises in
accepting such shares as donations. There are no
implications for Capital Gains Tax purposes (no gain or
loss) on gifts of shares to charity and it is also possible
to obtain income tax relief.
Call: 020 7930 3737
Web: www.sharegift.org
Email: help@sharegift.org
Analysis of Shareholding
at 31 December 2013
Shareholding
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
Over 100,000
Total
Number of
holders
3,408
468
61
114
64
4,115
Number of
% of
shares
holders
822,276
82.8
970,368
11.4
435,686
1.5
4,502,622
2.8
1.5 54,892,384
100 61,623,336
% of
shares
1.33
1.57
0.71
7.31
89.08
100
Payment of Dividends
It is in the interests of shareholders and the Company for
dividends to be paid directly into bank or building society
accounts. Any shareholder who wishes to receive
dividends in this way should contact the Company’s
Registrar to obtain a dividend mandate form.
9% Preference Shares
Dividends will be paid on 1 April 2014 and
1 October 2014.
John Menzies plc
135
Annual Report 2013 Corporate calendar
(Provisional dates)
4 March 2014
Preliminary Announcement
of Results
1 April 2014
4 April 2014
Payment of Dividend on 9%
Cumulative Preference Shares
Annual Report and Notice of
AGM released
16 May 2014
Management Statement issued
16 May 2014
Annual General Meeting
23 May 2014
Record date for Final Dividend
on Ordinary Shares
20 June 2014
Payment of Dividend on
Ordinary Shares
19 August 2014
Announcement of Interim Results
1 October 2014
Payment of Dividend on 9%
Cumulative Preference Shares
24 October 2014
Record date for Interim Dividend
on Ordinary Shares
11 November 2014 Management Statement issued
21 November 2014 Payment of Interim Dividend
on Ordinary Shares
Shareholder Information:
General Information continued
Ordinary Dividends
A Final Dividend of 18.8p per share was proposed
by the Directors on 3 March 2014, and will paid on
20 June 2014 to shareholders on the Register as at
the close of business on 23 May 2014.
Any Interim Dividends for 2014 will be paid on
21 November 2014 to shareholders on the register
on 24 October 2014.
Investor Relations
The Group accounts can be downloaded from our
website. For other investor relations enquiries, please
contact us at:
Call: 0131 225 8555
Fax: 0131 220 1491
Web: www.johnmenziesplc.com
Email: info@johnmenziesplc.com
Write: John Menzies plc, 2 Lochside Avenue,
Edinburgh Park, Edinburgh, EH12 9DJ
Principal Advisers
Auditors
Ernst & Young LLP
Ten George Street
Edinburgh EH2 2DZ
Corporate Financial Advisers and Joint Brokers
Numis Securities Ltd
The London Stock Exchange Building
10 Paternoster Square, London EC4M 7LT
Joint Brokers
Brewin Dolphin
48 St Vincent Street, Glasgow G2 5TS
Principal Business Addresses
John Menzies plc
2 Lochside Avenue, Edinburgh Park,
Edinburgh, EH12 9DJ
Tel: +44 (0) 131 225 8555
Fax: +44 (0) 131 220 1491
Email: info@johnmenziesplc.com
Menzies Distribution
2 Lochside Avenue, Edinburgh Park,
Edinburgh EH12 9DJ
Tel: +44 (0) 131 467 8070
Fax: +44 (0) 131 469 4797
Menzies Aviation
4 New Square, Bedfont Lakes,
Feltham, Middlesex, TW14 8HA
Tel: +44 (0) 20 8750 6000
Fax: +44 (0) 20 8750 6001
John Menzies plc
136
Annual Report 2013 Design and production:
CarnegieOrr +44(0)207 610 6140
www.carnegieorr.com
The paper used in this Report is
derived from sustainable sources
John Menzies plc
2 Lochside Avenue,
Edinburgh Park,
Edinburgh, EH12 9DJ
Tel: +44 (0) 131 225 8555
Fax: +44 (0) 131 220 1491
Email: info@johnmenziesplc.com
Web: www.johnmenziesplc.com
Registered in Scotland with company number SC34970
Registered office address as above
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