Annual Report and Accounts 2017
At a Glance
Highlights of the Year
John Menzies plc provides essential support services to fast-moving markets,
operating 24/7 in 36 countries around the world.
MENZIES
AVIATION
For more see our
Business Review on p14
Ground Handling
We provide front-line airport
services both above and below
the wing, ensuring passengers
and aircraft complete journeys
efficiently and on schedule.
Fuelling
Cargo Handling
Executive Services
We provide into-plane
fuelling services and fuel
farm management to airlines,
airports, oil companies and
other partners across the world.
We facilitate transportation
of goods by accepting,
storing and preparing cargo
for worldwide transit with
our airline customers.
Our Executive Services offering,
which includes services such as
lounge provision and meet-and-
greet, enhances the comfort
and convenience of executive
and VIP air travel.
Offline Services
Cargo Forwarding
We support airline customers
with enabling services, such
as maintenance, which take
place outside the scope of
their regular flying schedules.
Our neutral Cargo Forwarding
services provide shippers with
the most convenient and
competitive way to move
consignments around the world.
MENZIES
DISTRIBUTION
Profit Before Tax
£26.7m
35%
Underlying Operating Profit
£77.9m
41%
Operating Cash Flow
£109.9m
47%
Dividend Per Share
20.5p
11%
1-48
Governance
Reports
Chairman’s Introduction
50-90
50
Financial
Statements
Independent Auditor’s Report
Strategic
Report
At a Glance
Highlights of the Year
Menzies Aviation
Menzies Distribution
Chairman’s Statement
1
2
4
6
8
10
12
14
Board Structure
Board of Directors
Corporate Governance Statement
Nomination Committee Report
52
54
59
51
Group Income Statement
Statement of Comprehensive Income
103
Balance Sheets
Statements of Changes in Equity
Market Review/Menzies Aviation
Market Review/Menzies Distribution
Our Business Model
Business Review/Menzies Aviation
Audit Committee Report
61
Statements of Cash Flows
Human Resources Committee Report 66
Notes to the Accounts
Remuneration Committee Report
Directors’ Report
67
84
Five Year Summary
Subsidiary, Joint Venture
and Associate Undertakings
Business Review/Menzies Distribution 24
Statement of Directors’ Responsibilities 90
Chief Financial Officer’s Review
Risk Management
Responsible Business
28
32
38
Shareholder
Information
Notice of Annual General Meeting
177-187
177
General Information
184
91-176
91
102
104
105
107
108
160
161
For more see our
Business Review on p24
John Menzies plc Annual Report and Accounts 2017
1
MENZIES
AVIATION
Our customers are entitled
to expect the best, so we aim
to deliver nothing less than
excellence, from touchdown
to takeoff.
For more see our Business Review on p14
What We Do
Lounges
We offer landside and airside
services tailored to our
customers’ needs, timed to
their schedules and delivered
by teams with the knowledge,
tools and passion to set the
highest standards worldwide.
Performance Overview
Underlying Operating Profit
£58.8m
72%
Eventyr Lounge
elevates our Executive
Services offer
For more see our Strategy
in Action on p21
ASIG: A NEW
FUELLING
FRONTIER
Aviation
Strategic Priorities
SETTING THE
HIGHEST STANDARDS
FOR SAFETY, SECURITY
AND PERFORMANCE
HAVING THE DEEPEST
COMBINATION OF
SERVICE PORTFOLIO
AND GEOGRAPHY
HAVING THE MOST
SOPHISTICATED
TECHNICAL SOLUTIONS
1
2
3
For more see p14
For more see our Strategy
in Action on p16
For more see p15
2
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
3
13:10 GMT
Brian Wood, Ramp Agent,
takes part in the turnaround
of a wide-bodied aircraft.
Strategic Report Financial StatementsShareholder InformationGovernance Reports MENZIES
DISTRIBUTION
Providing time-critical
logistics and delivery, around
the clock, against the clock,
since 1833.
07:50 GMT Nadia Grocott, Parcels Operative,
begins her round in Central London.
GNEWT CARGO:
OUR LEAP INTO
ELECTRIC
VEHICLE
DELIVERIES
What We Do
We provide logistics services,
specialising in the consolidation
and delivery of time-sensitive
goods to retail, newstrade,
parcel and freight sectors
across the whole of the UK
and the Republic of Ireland.
Performance Overview
Underlying Operating Profit
£24.8m
0.4%
Distribution
Strategic Priorities
NATIONAL PRESENCE
MULTIPLE VALUE
PROPOSITIONS
COMPETITIVE
ADVANTAGE
FOCUS ON HIGH
STREET B2B
OPTIMISE EXISTING
RESOURCES
1
2
3
4
5
For more see our Business Review on p24
For more see p24
For more see our Strategy
in Action on p26
For more see p25
4
John Menzies plc Annual Report and Accounts 2017
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5
10:45 GMT
Chris Powley, Multi-Drop Collection
Delivery Driver, passes near
Kinlochlewe, Scotland, on an
outbound consumer delivery run.
Financial StatementsShareholder InformationGovernance Reports Strategic Report Chairman’s Statement
LOOKING TO THE FUTURE
Dr. Dermot F. Smurfit
Chairman
Dear Shareholder,
A Robust Platform
My first full year as Chairman of
John Menzies plc has proven to
be an exhilarating one that has
strongly reinforced my belief in
the significant potential that exists
within the Group. The acquisition
of ASIG at the beginning of 2017
was a transformational deal that
substantially increased the pipeline
of opportunities available to us and,
significantly, represented a step
change in the trajectory of our
Aviation business. Unsurprisingly,
therefore, the seamless integration
of ASIG into our operations was a
key focus during 2017. To ensure
a robust platform was in place
to support the enlarged business,
a dedicated integration team
was established and tasked with
the successful integration of ASIG
and anticipated synergy delivery.
I am pleased to report that the
integration team is delivering on
time and exceeding the projected
synergy target.
From a Group structure perspective,
I, together with my fellow Board
members, continue to believe there
is strategic merit in and potential
shareholder value to be created
by separating the Aviation and
Distribution Divisions into strategically
focused and independent businesses.
Accordingly, following termination of
discussions with the DX (Group) plc
and as announced in our Trading
Update in November 2017, the Board
appointed NM Rothschild to assist
in undertaking a strategic review
of Distribution with the objective
of assessing the optimum route
to split the Group and create two
strong market players. Following
the review, a sale process for
Menzies Distribution has begun.
MY FIRST FULL YEAR AS CHAIRMAN
OF JOHN MENZIES PLC HAS PROVEN
TO BE AN EXHILARATING ONE
THAT HAS STRONGLY REINFORCED
MY BELIEF IN THE SIGNIFICANT
POTENTIAL THAT EXISTS WITHIN
THE GROUP.
Read our Business Reviews on p14 and p24
Governance
In our journey to be regarded
as the undisputed market leader
in the Aviation Services industry
in terms of the quality of service
we provide, we recognise that we
must distinguish ourselves from
our competitors through setting the
highest standards in safety, security
and performance. Our continuous
drive to enforce standardisation
and transparency across our
networks is critical to achieving
this, together with the rigorous
corporate governance systems and
processes we have implemented
that ensure risks are mitigated
and quality prioritised. As detailed
later in this document, health,
safety and security are at the heart
of our business activities; optimum
health, safety and security practices
promote the interests of our
stakeholders and are fundamental
to the welfare of our People and the
success of the Group more generally.
Board Changes
Dermot Jenkinson, the Company’s
longest serving Director, intimated
his intention to retire from the Board
in August of last year. Dermot formally
stepped down at the end of October
2017, having first been appointed to
the Board in 1985 as an Executive
Director and serving as a Non-
Executive Director from 1999
onwards. I would, again, like to
thank Dermot for the outstanding
contribution he made to the Group
throughout his 32 year tenure; over
the years he not only provided
continued representation of the
founding Menzies family’s interests,
but also possessed a deep insight
and knowledge of our business
which, when coupled with
his astute business acumen,
proved invaluable.
I was delighted to welcome
a new Non-Executive Director,
Philipp Joeinig, to the Board in
June 2017. Philipp’s considerable
Aviation Services and management
consultancy experience serves to
broaden the Board’s knowledge
base and skillsets and also
strengthens the Group’s overall
leadership as it positions itself to
become the market leader in the
Aviation Services industry. I am
confident that our current Board,
together with Senior Management,
is well-positioned to drive the Group’s
strategic objectives and priorities in
2018 and tackle the ever-changing
needs of our operations.
Looking Forward
Throughout 2018 we will remain on
our quest to become the premium
provider in the Aviation Services
industry. We will continue to explore
ways of creating shareholder
value through optimisation of the
Group’s structure whilst investing
in infrastructure and innovation
throughout our networks.
Underpinning this will be the required
investment in our People, which
remains a high priority for the Board
as evidenced by the constitution of
our new Human Resources Board
Committee at the beginning of 2017
and the inaugural appointment of
Claire Hall as Group EVP People. As
a people-focused business these are
both developments that I am excited
about and which underline our strong
commitment to investing in our most
valued resource.
Both myself and the rest of your
Board look forward to 2018 with
renewed vigour.
Dr. Dermot F. Smurfit
Chairman
12 March 2018
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Financial StatementsShareholder InformationGovernance Reports Strategic Report Market Review/Menzies Aviation
A SECTOR IN GROWTH
Menzies Aviation operates in a range of markets that serve
the needs of the growing Aviation Services sector.
Ground Handling
The Ground Handling market
provides operational and logistical
support to the world’s airlines.
Participants in the market include
airline inhouse operations, airports
and outsourced providers such as
Menzies Aviation.
Ground handlers perform the
processes which allow an aircraft
to be ‘turned’, an industry term
that covers receiving an incoming
flight, offloading passengers and
their belongings, and preparing it
to depart again on its next journey.
The marketplace is highly
fragmented, with many small
handlers – limited in the services
they offer or the locations in which
they operate – and a handful of
large businesses with international
portfolios. The four largest handlers
account for approximately 10%
of the Ground Handling market.
In 2017 approximately 36m turns
were carried out globally, of which
an estimated 10.2m were outsourced
by the airlines. By 2021 it is expected
there will be approximately
44m aircraft turns undertaken
globally, of which around 12.2m
will be outsourced.
properly equipped to meet the
exacting standards demanded
of them.
A combination of general growth
in the air passenger market,
expected to be 4.7% per annum
according to Boeing’s Current
Market Outlook 2017-2036;
particular growth amongst low-
cost carriers, for whom outsourced
Ground Handling is typically central
to their business model; and a
general trend towards increased
outsourcing amongst full-service
airlines is expected to maintain the
pressure to outsource operations
over the medium to long-term.
Businesses undertaking airport
operations require a range of
certifications, training and vetting
to address issues of safety and
security. Significant investment
in equipment to establish each
operating location is also needed,
together with substantial insurance
cover levels and a reputation strong
enough to reassure airlines and
airport authorities that they are
Fuelling
Providers in the Fuelling market
offer two distinct services: into-plane
fuelling (“ITP”), which deals with the
delivery of fuel to individual aircraft
in preparation for their upcoming
journeys, and fuel farm management
(“FFM”), which is concerned with
the storage, management and
accounting of fuel supplies on
airport campuses.
Oil companies often maintain a
strong market presence, retaining
partial ownership of ITP agents or
sub-contracting ITP and storage
services to companies such as
Menzies Aviation, whilst retaining
ownership of physical assets. In
North America, airline customers
usually outsource these services
to service providers such as
Menzies Aviation individually
or through consortia.
Environmental and safety risks are
a primary concern in both these
sectors. In delivering fuel supplies to
aircraft, ITP agents follow a strictly
controlled process which accords
with the specifications of both the
airline and the manufacturer; FFM
providers are charged with ensuring
that only clean fuel of the requisite
quality is stored and distributed
via their facility.
Both providers must also satisfy
the rigorous legislative conditions,
local and otherwise, and meet
industry benchmarks and customer
requirements.
Participants in the Fuelling market
face the same requirements as
ground handlers with regard to
security, control, certification, training
and vetting. They must also apply
an increased focus on environmental
issues, due to the risks associated
with handling petroleum-based
products. Large initial investments
in station equipment, substantial
insurance cover levels and adherence
to exacting government and industry
standards are essential to the
establishment and continuance
of Fuelling operations.
Cargo Handling
The Cargo Handling market serves
the demand for the quick and reliable
transportation of high-value, time-
sensitive cargo throughout the world.
While land or sea routes are utilised
for approximately 99% of all cargo
volume, companies typically choose
to fly the most costly or perishable
items – which account for 35% of
international trade by value, if only 1%
by volume – where prompt delivery
is worth the additional expense.
Over 50m metric tonnes of cargo are
transported annually by air. There is
significant concentration around the
world’s emerging markets, with nearly
50% of tonnage passing through the
Middle East and South East Asia.
According to Boeing’s Current Market
Outlook 2017-2036, air cargo traffic
is forecast to grow 4.2% annually
over the next two decades.
Cargo Handling requires approval
from the appropriate regional
regulator together with significant
investment in infrastructure and
equipment, although this is likely
to decline as digital technology,
capable of automating its processes,
spreads.
Cargo Forwarding
Within the air cargo market, carrying
capacity is sold in units of a fixed,
minimum size. However, demand
exists to send smaller shipments
and is served by freight forwarders
or consolidators, such as Air Menzies
International, that purchase carrying
capacity in bulk and resell it to their
customers in smaller portions.
Typically a freight forwarder does
not move goods but rather arranges
their transit and may provide related
services such as collection, customs
clearance, transportation, security
clearance, security screening,
documentation and storage.
Establishing a broad service offering
of this kind requires investment in
key equipment, such as security
scanners, warehousing capacity,
and, most importantly, specialist
industry knowledge and excellent
relationships with airlines.
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Strategic Report Financial StatementsShareholder InformationGovernance Reports Market Review/Menzies Distribution
OPPORTUNITIES AHEAD
Menzies Distribution leverages its network and historical expertise
to serve a portfolio of markets in the UK and Irish logistics sectors.
Print Media
The Print Media market largely
comprises the ‘newstrade’, the
publishing and distribution of news
and magazine products throughout
the UK and the Republic of Ireland.
Publishers produce the material
and convey it to wholesalers, such
as Menzies Distribution, for onward
delivery to retailers. In the course
of a distribution cycle, a wholesaler
must break down bulk product, pick
and pack titles into orders specific
to each retail customer and provide
‘final mile’ delivery to their locations
within testing deadlines.
The marketplace is challenging,
with print volumes declining in
the face of increasing digitisation
and falling advertising revenues.
Wholesalers must leverage
economies of scale and find
technical or process improvements
on an ongoing basis to offset the
resulting decline in revenues.
Entry to this market requires a high
level of investment in an appropriate
depot network, sophisticated IT
and automated processing systems,
together with exclusive publisher
contracts.
Parcel Logistics
The UK Parcel Logistics market
provides a cost-effective means
for consumers and businesses
to move consignments of goods
around the country.
Packages are collected from
businesses or consumers by vehicles
associated with the major parcel
networks and then brought to their
sortation hubs. After being sorted
into trunk-loads by geography and
class of service, bulk parcel supplies
are then carried to distribution
centres where they are divided into
vehicle runs for final mile delivery.
In some areas, this final mile
distribution will be undertaken by
the major carriers themselves; in
others, regional agents or neutral
consolidators, such as Menzies
Distribution, will perform the
service on behalf of the carriers.
The market is experiencing a period of
sustained growth, driven by the boom
in e-commerce: according to Mintel’s
Courier and Express Delivery UK 2017
report, 2.8bn packages and parcels
were delivered in 2016, representing
an increase of 65% since 2012, a figure
which is projected to increase a
further 33% by 2021.
Operating profitably in this market,
particularly in high cost-to-serve
areas such as Menzies Distribution’s
territories in rural Scotland or
Central London, requires volumes of
considerable scale, a depot network
fit to handle those volumes and
significant investment in integrated
IT systems.
Retail Logistics
The UK Retail Logistics market
supports the B2B distribution of
products from warehouses and
distribution centres for delivery
to retail stores.
Product consignments are collected
from distribution centres in bulk and
then conveyed to individual high
headquarters, travel hubs and
commuters, particularly in the
case of free publications, on behalf
of their publishing customers.
The decline of the traditional
paid-for news and magazine market
creates opportunities for the free
market, and an increasing proportion
of publishers are expressing an
interest in transferring to free
specialist distribution.
Specialist media distributors
such as JYL Hand to Hand benefit
from long-standing relationships
with clients and contracts that are
typically negotiated in one to three
year cycles. In certain key sectors
there are also stringent security,
licensing and process control
requirements which are challenging
to overcome.
street locations through a pattern
of radial deliveries.
The market is benefiting from rising
pressure on high street retail, which
leads to businesses outsourcing
retail logistics to maximise efficiency.
The rapid and continuing growth of
e-commerce is also injecting volume
into this market.
Entry into the Retail Logistics
market requires scale, reputation,
satisfaction of stringent licensing
and insurance requirements and the
ability to adhere to ever-tightening
timeframes.
Specialist Media Distribution
Beyond the mass delivery of
publications to retail outlets, a
demand exists for such products to
be provided in specialised locations
outside the usual supply chain.
Micro-delivery specialists, such
as Menzies Distribution’s business
JYL Hand to Hand, distribute print
media products to government
departments, corporate
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Strategic Report Financial StatementsShareholder InformationGovernance Reports Our Business Model
By utilising our highly skilled people, global infrastructure and other key
resources in the delivery of a clearly defined strategy, John Menzies plc
seeks to deliver stakeholder value and sustainable returns.
Inputs
Utilising our
capabilities...
Our People
We have a workforce
of over 36,000 highly
trained employees who
drive our productivity.
Our Infrastructure
Established network
gives us the reach to
serve customers from
more than 265 locations
on 6 continents.
Our Relationships
We enjoy the hard-earned
status of a trusted partner
with many of the world’s
major airlines.
Our Strategy
We have a clear,
globally-shared vision
of how to forge success.
Menzies Aviation’s earnings come from the following activities:
For more see p8
Cargo Handling
Receiving cargo, storing and preparing it for transit,
loading and unloading the consignment and readying
it for onward transit.
Ground Handling
Performing aircraft turns,
managing passengers
and handling baggage.
Fuelling
Providing into-plane fuelling
for airlines and managing
fuel farms for our partners.
Ground Handling Turns
2017
1.4m
Fuelling Turns
2017
3.7m
Cargo Handled (Tonnes)
2017
1.6m
Cargo Forwarding
Wholesaling air cargo
capacity to freight
forwarders, couriers,
packaging agents and
customs agents.
Executive Services
Providing premium
experiences for travellers
via executive lounges, VIP
meet-and-greet services,
and more.
Offline Services
Handling key services
for airline partners which
take place away from
frontline operations,
such as maintenance
or central load planning.
Outputs
Delivering
value for…
Employees
We offer varied careers
in dynamic environments,
keeping our employees
engaged and delivering
results.
Customers
We work in partnership
with our customers
to ensure our service
offering is the correct one
to help them meet their
own business challenges.
Stakeholders
We maintain clear
oversight of our
operations, ensuring that
our business decisions
generate real value for
our stakeholders.
Our Values
We foster a culture
of excellence, trust,
respect and pride.
How we
deliver value
Safety and Security
Our exacting standards,
driven by our expert safety
and security teams, provide
clear frameworks for safe
operations across the Group.
Standardisation
We build consistent, best
practice ways of working
which are followed across
our networks to maximise
performance.
Innovation
We prioritise new thinking
in order to find innovative
ways of satisfying our
customers and gaining
competitive advantage.
Technology
We seek out and invest in the
most sophisticated technical
solutions to support stronger
performance, improved data
and greater efficiency.
Governance
We provide clear corporate
governance and compliance
processes and controls to
drive quality, reduce risk and
support effective working
throughout our business.
For further information
on our strategic
objectives see p15.
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Strategic Report Financial StatementsShareholder InformationGovernance Reports
Business Review/Menzies Aviation
AN EXCELLENT YEAR
DELIVERING STRONG GROWTH
2017 has been a very busy year for Menzies Aviation with the acquisition
and successful integration of ASIG. Underlying operating profit was up
72% to £58.8m, a record for the Division.
Forsyth Black
President & Managing
Director, Menzies Aviation
This is a result of not only the ASIG
contribution but also the continuing
growth of the underlying business,
successful commercial and business
development initiatives and our
network-wide drive for margin
improvement.
In acquiring ASIG we broadened our
portfolio of customers and services.
This, when combined with our existing
portfolio and investment into systems
and processes, significantly broadens
our customer offering and creates
many new business development
opportunities. We are a major player
in a structural growth market and
we will look to expand into new
territories as well as growing within
our existing footprint.
Our commitment to our Excellence
Manifesto that was launched in the
business in Q2 of 2017 is making
tangible progress. Centralised
functions have a relentless drive for
standardisation and efficiency and
we are implementing this approach
across our network. In 2017 we
continued to invest to ensure we
remain recognised as the leading
player in the market, providing
Where we operate
Menzies Aviation manages
its 212 operating locations
in three regional segments:
Americas
EMEA
Rest of World
‘ Excellence,
from touchdown
to takeoff’
Our Strategy
Menzies Aviation’s differentiator within the
market is the quality of service it provides,
and so its strategic programme is centred
around a customer promise of ‘Excellence,
from touchdown to takeoff’.
Known as the ‘Excellence Manifesto’, the
programme sets three objectives which
our business pursues in order to achieve
recognition as the undisputed, premium
partner in the Aviation Services industry:
1
SETTING THE HIGHEST
STANDARDS FOR SAFETY,
SECURITY AND PERFORMANCE
Menzies Aviation distinguishes itself from
other handlers by setting a stringent
benchmark for safety and security
performance, and demanding exceptional
levels of service delivery.
2
HAVING THE DEEPEST
COMBINATION OF SERVICE
PORTFOLIO AND GEOGRAPHY
Menzies Aviation strives to be the partner
of choice for major airlines, and the natural
choice for multi-service contracts, by
offering the deepest possible portfolio of
services at each station across its network.
3
HAVING THE MOST
SOPHISTICATED TECHNICAL
SOLUTIONS
Menzies Aviation employs software and
equipment which deliver the smoothest,
most appealing service experience to our
customers and the most organised, efficient
approach to resourcing of any business in
the Aviation Services market.
GMT
6
4
2
a turnaround.1
:
Peter Lett,
Ramp Agent,
prepares to unload
baggage during
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John Menzies plc Annual Report and Accounts 2017
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Strategic Report Financial StatementsShareholder InformationGovernance Reports
Business Review/Menzies Aviation continued
Strategy in Action
ASIG: A new
fuelling frontier
Following our acquisition of ASIG in February
2017, excellent progress has been made in
integrating the business into our network
and developing many new opportunities
for growth.
An inhouse design and build of a bespoke
fuel management module that integrated
with our existing billing systems was
undertaken and deployed on the first day
of solo operations, saving an estimated
£1m investment in external software and
ensuring total business continuity.
Our synergy assumptions have been
validated by detailed analysis of the business
and we are pleased to have exceeded our
original target. Further synergies are now
being explored, as we seek to maximise
the positive effect of combining two such
substantial global infrastructures.
Feedback from our customers following
the acquisition has been positive and we are
actively exploring opportunities to introduce
fuelling services to additional locations across
the Menzies Aviation network.
ASIG has become a benchmark strategic
success for Menzies Aviation: an acquisition
that materially advances us in establishing
the deepest possible service portfolio, in the
widest possible range of locations.
Fuel volume pumped (litres)
(Feb. to Dec. 2017)
34 billion
1
2
3
GMT
Piotr Tapa,
Aircraft Fueller,
delivers a new
fuel load to a
Boeing 787
Dreamliner.
5
3
4
1
:
Turnover
Underlying Operating Profit
£1,302.2m
£58.8m
50%
72%
airlines with a service provision
that allows them to outsource their
operations and therefore not invest
in their own handling provisions.
Our growth plans both commercially
and on a business development front
progressed during the year with
excellent contract gain momentum
and a far greater commercial focus
on our key customers. In addition to
the ASIG acquisition, we also made
two other acquisitions, one in Gold
Coast, Australia, and the other in
Budapest, Hungary, both of which
were bolt-on cargo businesses.
These acquisitions complement
existing operations and strengthen
our product offering in the
respective regions.
The second half of the year brought
with it some challenges outside of
the Group’s control. Our operations
experienced three hurricanes and
an earthquake within a six week
period. Operations in Sint Maarten
were badly hit as the island was
devastated by Hurricane Irma.
Operations ceased for a period but
are now gradually returning although
it will not be until Q4 of 2018 that
we expect a normal flight schedule
to be in place. Operations in Florida
were also impacted for a short while
before returning to normal. However,
our business model is resilient and
our portfolio broad and diversified;
the impact of these incidents was
therefore absorbed by gains
elsewhere in the business.
During 2017 we continued our
focus on margin improvement. This
involved every station seeking to
improve the returns that they make.
We are almost at the end of the tail
of contracts entered into some years
ago that do not deliver acceptable
returns. We did not retain the business
of easyJet at London Gatwick, which
involved some 60,000 annual turns
and some £26m of annual revenue.
Whilst this contract renewal was
priced in line with our internal
disciplines, we were, unfortunately,
not successful. As this demonstrates,
going forward we will always seek to
match risk and reward. Importantly,
there was no earnings dilution as a
result of this loss. Across the ASIG
portfolio we inherited a number of
contracts that were sub-optimal.
We have re-priced many but where
we were unable to do so we either
took decisive action to close the
operations, as we did at JFK, New
York, or we parted company amicably
with our customer as was the case
with Delta Air Lines at Atlanta.
The integration of ASIG is nearing
a successful end. The transitional
services agreement with the vendor,
BBA Aviation plc, was exited
on time on 31 July 2017 and the
business is now fully integrated
into our core systems. Synergy
attainment has been a key focus
and we are delighted that the initial
annualised target of £10.5m for 2017
was validated and exceeded. We
now expect synergies to exceed
£15m annually by the end of 2018.
Volumes across the network
were positive. Absolute cargo
volumes were up 5%, reflecting
underlying volume improvement,
new contracts and acquisitions.
Ground Handling turns were up
11% on an absolute basis.
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This reflected prior year contract wins
(particularly at London Gatwick), the
addition of ASIG and was despite the
loss of Alaska Airlines’ hub operation
in Seattle that was insourced in April
2017. During the year we carried out
3.7m into-plane fuelling turns. Core
volumes in the USA and the UK were
slightly behind budget but this was
offset by contract wins.
Commercially we had a very strong
year with 150 net contract wins.
The contracts were spread across
the regions with 74 in the Americas,
45 in EMEA and 31 in the Rest of the
World. Significant contracts were won
in Europe with IAG, in the Americas
with American Airlines and Southwest
Airlines, and in Australia with Cathay
Pacific. We were disappointed to
lose the business of Etihad at four
locations in Australia and Amsterdam;
this profitable business was lost
despite the delivery of excellent
service although we believe we were
not destined to retain the contracts.
Whilst this represents significant
profit leakage to the Australian and
Dutch businesses we are seeking
to replace the tonnage with new
customers or increased volume
from existing customers and early
signs are positive.
Renewing our existing business is
vital and we were delighted to renew
154 contracts representing £119m
of revenue with no yield diminution.
This is testament to our commercial
offering and the safe and consistent
service that we deliver.
In general, market pricing is sensible
with major players seeming to focus
on adequate returns. However, certain
markets, most recently the UK,
are still susceptible to new market
entrants with low pricing models
that we believe are not sustainable.
We will always seek to match
risk and reward and will not be
drawn into a price war in any
region. Quality and safe and secure
operations that deliver on-time
performance will always be our
‘unique selling proposition’. This
is evidenced by the launch of our
Excellence Manifesto and continuing
investment into industry-leading
systems and processes.
All three regions performed well
during the year. In the Americas
region the team performed very
well given the scale of the new
operations that ASIG brought,
together with the challenge of
expanding the underlying business.
Significant opportunities now exist
to cross-sell services and our
commercial teams are working hard
in this area. Following the acquisition
we now have enhanced relationships
with a number of US airlines and
10:45 GMT Murray Finlayson and John Donaldson, Ramp Operatives at Edinburgh Airport.
we hope to be able to expand our
offering to them beyond Fuelling.
General contract momentum was
encouraging with Ground Handling
contracts won at Los Angeles with
Sun Country Airlines and Fuelling
contracts at San Francisco with
American Airlines and Southwest
Airlines. Key renewals with
VivaAerobus at 25 locations in
Mexico and Fuelling contracts with
UPS at 14 locations in the USA were
also secured. Within North America,
the labour market continues to be
difficult for all market participants
as unemployment is at record
low levels and staff retention is
an industry-wide issue, leading to
higher levels of overtime to support
the operations. To secure service
at a number of locations we have
incurred extra cost that we have
only been able to pass onto the
airlines in certain locations. This is
an ongoing area of focus for the
Americas Management team.
EMEA, our largest geographical
region, delivered a strong financial
performance. Challenges materialised
from the failure of Air Berlin and
Monarch Airlines, as well as selective
contract losses. In November, we
secured a multi-airport deal with
IAG across the UK, Scandinavia and
the Republic of Ireland that includes
the business of British Airways,
Vueling, Iberia, Iberia Express and
Aer Lingus. The deal included some
key renewals but also the provision
of new services such as de-icing in
Edinburgh, Glasgow and Aberdeen
as well as the opening of operations
in Dublin where we will handle all
of IAG’s flights excluding the hub
operations of Aer Lingus. This is a
significant multi-airport deal with
a key global customer. The cargo
business in the region had a good
year with strong underlying volumes
particularly in Prague, London
Heathrow and Amsterdam. As
previously mentioned, we bolstered
our cargo presence in Eastern Europe
with the acquisition of Farnair in
Budapest which will complement
our existing Ground Handling
business and allows us to offer
a full service provision to airlines.
Key contracts were renewed during
the year including a number of
contracts inherited from ASIG
at London Heathrow. Within the
Fuelling business the UK performed
very well with excellent operating
standards. We also landed our first
expansion of the fuels business
in Europe outside of the UK with
contracts to maintain and operate
fuel farms and deliver into-plane
fuelling at Nice and Bordeaux with
World Fuel Services. Operations
commenced on 1 January 2018.
Significant opportunities exist
to expand the Fuelling business
throughout Europe and we are excited
by the prospects. Disappointingly,
our proposed joint venture with
Oman Air in Oman has been hit by
further delays outside our control
and we do not have any visibility
on when operations may start.
In the Rest of the World, where
our operations are more focused
towards Cargo Handling, the
business benefited from strong
cargo volume. Key contract renewals
were secured, with the exception
of Etihad, and we prospered with a
number of new contracts particularly
with Asian carriers such as Air China,
Sichuan Airlines and Vietnam Airlines.
We continue to develop our
relationship with Cathay Pacific
which has delivered benefits to all
regions and within Oceania we added
their business in Adelaide, Perth and
Christchurch. Our expansion plans
for South East Asia continued with
the opening of an office in Malaysia
and we will start handling operations
in Indonesia in 2018. South East
Asia remains an area of focus for
Menzies Aviation as the local market
has a high number of attractive
airports where insourced operations
remain prevalent.
Our drive to be the market leader
in our industry continues. We aim
to be an airline’s logistics partner
of choice who innovates and at all
times delivers on the metrics an
airline requires. To support this
aim we launched our Excellence
Manifesto in May which sets out
clear standards and goals for the
business and seeks to set us apart
from our competitors. We believe
that as a professional Aviation
Services business with global
operations our customers can
benefit from our research and
development activities. We are
continuing with our investment into
infrastructure and innovation across
the whole of our business. Central
dedicated teams are in place to
appraise all industry developments
and then, where appropriate, roll
them out across our network.
09:55 GMT Local team members, Alan Low and Colin Reid, review our operations at Edinburgh Airport
alongside Csaba Barocz, VP Quality Assurance & Operations Support UK & I.
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Shareholder Information
Business Review/Menzies
Aviation continued
We have a relentless drive for
standardisation that undoubtedly
helps to win business, as our
airline customers see the level of
automation and innovation we are
bringing to their operations, and this
also drives cost out of their business
as they no longer have to invest in
new technologies. Our industry is
professionalising and is no longer
in its infancy.
Business development is key to
our future success. We are a major
player in the Aviation Services
marketplace but we have a small
share of the available market. The
Aviation Services marketplace is
full of opportunity and we remain
committed to growing organically
and through acquisition in a structural
growth market. Our growth will
be disciplined as risk must match
reward and we will not enter markets
or contracts where our minimum
rate of return cannot be achieved.
Forsyth Black
President & Managing
Director, Menzies Aviation
12 March 2018
CET
0
1
:
6
0
The Eventyr
Lounge,
Copenhagen
Airport, ahead
of the opening
ceremony on
its first day
of operation.
Strategy in Action
Eventyr Lounge
elevates our
Executive
Services offer
Eventyr, the first non-Schengen lounge
at Copenhagen Airport, opened in
March 2017 and marks a new generation
of re-imagined European lounges for
Menzies Aviation.
‘Eventyr’ is the Danish word for ‘fairytale’,
taking inspiration from author Hans Christian
Andersen and his travels.
This development heralds a new approach
for our expanding Executive Services
offering, and embodies the strategic
push to deepen our combination of
service portfolio and geography.
Guest numbers
(Apr. – Dec. 2017)
51,000
Lounge area
750m2
Lounges operated globally
28
1
2
3
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HOW WE MEASURE OUR
AVIATION PERFORMANCE
We monitor our performance against a diverse range of financial
and non-financial key performance indicators (“KPIs”) which are
used to track progress against the Group’s strategic objectives.
Improvement on last year
Decline against last year
No change
Measuring growth drivers
and delivering value
Operational
delivery
Employee hours per
Fuelling turn
Employee hours per
Ground Handling turn
1.7
2016: n/a
2015: n/a
30.5
2016: 29.2
2015: 27.6
Why we measure this
Into-plane fuelling is a new core service for
our business and measuring the average
number of employee hours utilised for each
Fuelling turn provides critical information
on how efficiently we perform this activity
throughout our operations.
Why we measure this
Although changes in the mix of wide
and narrow-bodied aircraft handled
by our business can impact this measure,
the average number of employee hours
invested to perform each Ground Handling
turn remains a critical measure of how
efficiently we operate.
Turnover growth
43%
2016: 7%
2015: 6%
Why we measure this
We are committed to growing our Aviation
business. Revenue growth within Aviation
is therefore a key metric.
08:20 GMT Nick Zannettou, Dispatcher,
celebrates another on-schedule pushback.
Ground Handling turns
1,380,551
2016: 1,246,114
2015: 1,190,370
Why we measure this
Ground Handling is a growing, dynamic
marketplace. We monitor aircraft turns
to ensure Aviation is growing both on
a like for like and absolute basis.
Employee turnover
53.3%
2016: 50.4%
2015: 46.4%
Employee injuries per
100 full-time equivalents
Aircraft damage per
1,000 turns
0.15
2016: 0.15
2015: 0.18
0.06
2016: 0.06
2015: 0.06
Why we measure this
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. This KPI is
measured on a station-by-station basis.
Why we measure this
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 to
minimise injuries.
Why we measure this
Aircraft damage per 1,000 turns underpins
our quality service provider reputation and
ensures we maintain an industry-leading
position in safety and service delivery.
Insurance costs are also monitored and
controlled.
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John Menzies plc Annual Report and Accounts 2017
Ground Handling contract
renewal rate
80.6%
2016: 86.2%
2015: 79.1%
Operating margin
4.5%
2016: 3.9%
2015: 3.1%
Total shareholder return (“TSR”)
v FTSE SmallCap over 3 years
89.4%
2016: -19.8%
2015: -74.1%
Why we measure this
The rate of Ground Handling contracts
that we successfully tender for and renew
is a key sign of how satisfied our customers
are with the levels of service and price we
are able to provide.
Why we measure this
Operating margin in Aviation is a standard
measurement demonstrating our ability to
turn our revenue into profit, encompassing
our efficiency, controls and value generation.
Why we measure this
TSR is the most commonly used
measurement of value generated for
shareholders, capturing both capital
and dividend growth.
Note:
This is a Group, not Aviation-specific, KPI.
John Menzies plc Annual Report and Accounts 2017
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A SOLID PERFORMANCE
Distribution had a strong second half and the Division
delivered underlying operating profit at £24.8m, £0.1m
ahead of the previous year.
Returns improved year on year
through new business and organic
growth although this was partially
offset by higher vehicle costs. We
also completed the acquisition of
Gnewt Cargo, a logistics business
in Central London. This business is
unique in that it offers an all-electric
fleet of vehicles. The business
has great potential and we have
completed its integration and
This represents a solid result in the
light of continuing volume decline
and increased wage costs. The result
is particularly pleasing given that
2017 did not benefit from an uplift
in sales relating to a major football
tournament. The result was boosted
by the closure of the final salary
pension scheme which will produce
a full year ongoing benefit of £1.0m.
Overall sales of newspapers and
magazines continued to decline
in line with our expectations. Like
for like magazine volumes reduced
by 9.5% with newspaper volumes
declining by 9.9%. The Division
continued to demonstrate its ability
to drive out cost in the light of
reducing volume with around
£7m cost savings delivered.
During the year we completed the
buy-out of Eason & Son Ltd from
our joint venture operations in
Northern Ireland and the Republic
of Ireland. This acquisition now gives
the Division all-Ireland coverage and
puts us in a strong position to offer a
compelling proposition to publishers
while also offering joined-up logistics
services to new clients, as we continue
to seek new volume to put through
our network. The acquisition is
integrated and the projected
synergies have been realised.
Plans are in place for the
forthcoming round of publisher
renewals. Initial negotiations have
started and we are confident that
our service levels and ability to
offer more services within the
supply chain will help us obtain
a favourable outcome.
Our retail logistics business
continues to develop capabilities
to serve the UK high street. Our
contract with WHSmith continues
to deliver an excellent operational
service and we are working hard
to improve financial returns. There
are many opportunities within this
sector and our commercial teams
have been enhanced to ensure
we are best-placed to participate
in this important marketplace.
Menzies Parcels continued to
build momentum through the year.
Where we operate
Menzies Distribution
serves most of the
UK and the Republic
of Ireland from its
56 locations.
Turnover
£1,215.5m
0.5%
Underlying Operating Profit
£24.8m
0.4%
relocated its base into our existing
London branch network. We will
now seek to add new customers
and expand the business.
Menzies Response encountered
a difficult year trading marginally
behind expectations. Prior year
contract losses were not fully
replaced and underlying volume
declined. Cost savings partly offset
the decline and we are reviewing
the optimal structure for the
business as we move into 2018.
Menzies Media and Retail Services
performed well during the year
adding customers and broadening
its product range, particularly in
the Fore Retail Consultancy and
Hand to Hand distribution businesses.
Overall, the business is in good
health and we look forward to the
publisher renewals with confidence.
Our diversification moves are
building momentum and are
positioned in growing markets.
Greg Michael
Managing Director,
Menzies Distribution
12 March 2018
Maximisation
of our logistics
network
Menzies Distribution’s strategy is a five
point plan built around the maximisation
of its logistics network and the flexing
of that network to serve new partners.
NATIONAL PRESENCE
Expand the network to complete
our coverage of the UK and the
Republic of Ireland.
MULTIPLE VALUE
PROPOSITIONS
Build a business with multiple profitable
activities that is resilient to changes
in individual markets.
1
2
COMPETITIVE ADVANTAGE
Engage with growing markets where
our capabilities give us a competitive
advantage, allowing us to offer a best-
in-class service.
3
FOCUS ON HIGH STREET B2B
Pursue increased engagement with
the high street B2B sector, in particular
where our existing strengths and expertise
can be leveraged to greatest effect.
4
OPTIMISE EXISTING
RESOURCES
Use spare capacity within our network
to drive growth, reducing operational risks
and lowering investment requirements.
5
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Business Review/Menzies Distribution continued
Strategy in Action
Gnewt marks
leap into electric
vehicle deliveries
In August 2017 Menzies Distribution
acquired Gnewt Cargo, London’s only
all-electric delivery business.
The deal represents a major step into
sustainable delivery and an opportunity
to grow our neutral consolidation offer
by expanding existing relationships with
national parcel carriers.
Gnewt provides a platform to introduce
all-electric distribution to other UK city
centres, a compelling service proposition
for both the Parcel Logistics and Print
Media markets.
Electric vehicles in fleet
108
Gnewt employees
68
Parcels delivered
(Sept. – Dec. 2017)
953,000
1
2
3
4
5
HOW WE MEASURE OUR
DISTRIBUTION PERFORMANCE
The performance of Menzies Distribution is tracked against
KPIs which focus on sector requirements and the well-being
of our employees.
Operational
delivery
Improvement on last year
Decline against last year
Parcel volume growth
Employee injuries per
100 full-time equivalents
39%
2016: 48%
2015: n/a
0.68
2016: 0.91
2015: 0.86
Why we measure this
Parcel delivery businesses are scale-driven
operations: the movement of parcel
volumes handled by our network is a key
indicator of its utilisation and of the extent
to which we are successfully diversifying
into the Parcel Logistics sector.
Why we measure this
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 to
minimise injuries.
On-time performance
95.7%
2016: 95.4%
2015: 96.5%
Why we measure this
This measurement allows us to measure
retail delivery times and is a KPI within
publisher contracts. It is also essential
that we ensure product is with retailers
on time in order that sales are not missed.
Measuring
growth
drivers and
delivering
value
Employee turnover
32.4%
2016: 38.7%
2015: 30.4%
Why we measure this
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.
GMT
0
5
7
in Central London. 0
:
Nadia Grocott,
Parcels Operative,
begins her round
26
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RECORD UNDERLYING
OPERATING PROFIT DELIVERED
Group performance in 2017 improved significantly with underlying operating
profit up 41% (34% in constant currency) and underlying profit before tax up
35% (27% in constant currency).
Giles Wilson
Chief Financial Officer
Revenue
£2,517.7m
21%
Underlying Profit Before Tax
£67.1m
35%
Operating Cash Flow
£109.9m
47%
THE GROUP’S TURNOVER WAS
£2,517.7M (2016: £2,077.6M).
UNDERLYING PROFIT BEFORE TAX
GREW TO £67.1M (2016: £49.7M).
Read our Business Reviews on p14 and p24
Current Trading and Outlook
2018 has started well. Menzies
Aviation is trading ahead of last year,
even after accounting for the impact
of the upside of the extra month
of trading from the ASIG acquisition
and year on year foreign exchange
headwinds. Underlying volumes
are strong, synergy benefits are
being realised and contract win
momentum continues. Across
the network, our commercial and
business development teams are
busy pursuing many opportunities
to grow the business both organically
and through acquisition, whilst
also pursuing the many exciting
opportunities available within the
into-plane fuelling and fuel farm
management markets. Trading
at Menzies Distribution is in line
with our expectations and the sale
process for the Division continues
to plan.
The Board is focused on creating
a global pure play Aviation Services
business and is excited by the
opportunities that presents. We
are a very well-placed, well-funded
Group operating in a structural
growth market and we look to
the future with confidence.
Group Performance Review
Group performance in 2017 improved
significantly with underlying operating
profit up 41% (34% in constant
currency) and underlying profit
before tax up 35% (27% in constant
currency). The improvement was
the result of a strong performance
at Menzies Aviation, particularly
as a result of the completion of the
ASIG acquisition in February. The
Group’s profit before tax was £26.7m
reflecting the significant level of
investment in the ASIG acquisition
and integration, the work to demerge
and sell the Menzies Distribution
business and the de-risking and
restructuring of the Company’s
defined benefit pension scheme.
Menzies Aviation continues to go
from strength to strength. The
recently acquired ASIG business
is integrating well, synergies are
tracking ahead of expectations
and we are developing many
new opportunities for growth.
Contract win momentum continued
with constant currency turnover
excluding the impact of ASIG up
11% year on year, while we continue
to benefit from our investments
into infrastructure and innovation.
Menzies Distribution remains a
strong business, performing well
despite cost and volume pressures.
Turnover of the Aviation segment
exceeded that of Distribution for
the first time in 2017.
The Group’s turnover was £2,517.7m
(2016: £2,077.6m). Underlying
profit before tax grew to £67.1m
(2016: £49.7m) following a strong
performance in Menzies Aviation
and favourable foreign exchange
translation. The Group’s profit before
tax was £26.7m (2016: £19.8m).
Group underlying earnings per
share rose to 57.2p (2016: 47.8p).
Financial Overview
Exceptional and other
items in operating profit
Included in the Group’s exceptional
items in operating profit were
transaction related costs of £21.7m,
primarily relating to the acquisition
and integration of ASIG and the work
to demerge and sell the Menzies
Distribution business, and £5.4m
of costs and charges relating to
de-risking the defined benefit
pension scheme. This primarily
closed the pension scheme to
future accrual and subsequently
sectionalised it ahead of any
transaction relating to the disposal
of the Distribution business.
Finance costs
The Group’s underlying net finance
charge in the period was £10.8m
(2016: £5.5m). The increase reflects
higher levels of debt to fund the
acquisition of ASIG, higher interest
rates on US dollar borrowings and
fixing of the interest rates payable
on 50% of the US$250m term loan.
Taxation
As a multinational business the
Group is liable for taxation in
multiple jurisdictions around the
world. The Group’s underlying tax
charge for the period was £20.0m
(2016: £15.9m), representing an
effective underlying tax rate of 30%
(2016: 32%). As already announced,
the recent US tax changes have
meant a one-off non-cash impact
to our 2017 effective tax rate of
approximately 3%, which relates
to the revaluation of the deferred
tax assets relating to US tax losses
bought forward. We are still analysing
the final legislation and impact to
the Group with particular reference
to the overseas subsidiaries toll
charges; we do not expect these
to have a material cash impact to
the Group.
Earnings per share
The Group’s underlying earnings
per share was 57.2p (2016: 47.8p)
as a result of the increase in profits.
The corresponding basic earnings
per share was 15.1p (2016: 11.8p).
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Defined benefit pension scheme
As at 31 December 2017, the Group’s
defined benefit pension scheme
showed a deficit of £49.5m (2016:
£71.0m) with the effect of the
impacts of favourable demographic
assumptions, higher returns on
invested assets and continuing
additional cash contributions, partly
offset by a decrease in the discount
rate applied to the scheme liabilities.
As previously reported, the Trustee
and the Company have agreed a
long-term funding plan that resulted
in additional annual contributions
of £10.7m in the 2016/2017 pension
year rising with the higher of inflation
and the percentage change in annual
shareholder dividends up to 2025,
the latter only when exceeding 2013’s
level. The next triennial valuation is
set for 31 March 2018 and new deficit
contributions will be set to reflect
the sectioned pension scheme’s
different funding profiles.
The Group and the Trustee are
continually looking to de-risk the
scheme. On 31 March 2017 the
Company and Trustee agreed to
close the defined benefit pension
scheme to future accrual and on
31 May 2017 to sectionalise the
scheme. On 31 May 2017 the Company
and Trustee further agreed to split
the defined benefit pension scheme
into two sections, one supported
by the covenant of the Menzies
Distribution Division and the
remainder by the Company. The
Group will continue to guarantee the
funding of the Menzies Distribution
section for as long as the business
remains part of the Group. On
30 June 2017, 17.2% of the scheme’s
assets and liabilities were transferred
to the new Menzies Distribution
section, and this section has been
structured in a way that the funding
is set up to achieve a buy-in funding
level within five to six years. The
related exceptional charge of £5.4m
comprises the accounting impact
of revaluing past benefits for those
impacted and the costs and fees
expensed to de-risk the scheme.
Underlying operating profit
Depreciation
Dividends from associates and joint ventures
Working capital
Net pension movement
Non-cash items
Operating cash flow
Net capital expenditure
Net interest paid
Regular tax paid
Non-recurring tax paid
Free cash flow
Equity dividends paid
Additional pension payment
Net acquisitions
Cash spend on exceptional items
Shares and rights issue
Total movement
Opening net debt
Currency translation
Closing net debt
2017
£m
77.9
27.8
6.3
1.9
1.0
(5.0)
109.9
(31.8)
(11.9)
(13.3)
(3.7)
49.2
(15.9)
(11.3)
(158.4)
(22.7)
1.5
(157.6)
(70.5)
13.7
(214.4)
2016
£m
55.2
22.3
6.6
(5.8)
0.1
(3.4)
75.0
(24.7)
(3.8)
(10.3)
(5.1)
31.1
(10.6)
(10.9)
(5.2)
(14.2)
72.9
63.1
(123.2)
(10.4)
(70.5)
Cash flow and investments
Investments by the Group in the
period were £158.4m, primarily
for the acquisition of ASIG. Also
included were the investments to
acquire Gold Coast Air Terminal
Services and Farnair Handling in
Menzies Aviation and Gnewt Cargo
and the partner’s share of the Irish
joint ventures in Menzies Distribution.
Operating cash flow was £109.9m
(2016: £75.0m). Working capital
management remains a key focus
for the business. Free cash flow
was £49.2m (2016: £31.1m). Net
capital expenditure totalled
£31.8m (2016: £24.7m).
Debt and facilities
The Group continues to operate
on a strong financial footing with
a robust balance sheet built from
strong operating cash flows across
both Divisions. At the year end, net
debt was £214.4m (2016: £70.5m)
with the increase mostly reflecting
the impact of the acquisition of ASIG.
The Group’s covenanted debt
to EBITDA ratio was 1.9 times at
31 December 2017 (31 December 2016:
0.8 times) and interest cover was 8.3
times (2016: 13.0 times), which were
both well within covenanted levels
and ahead of the targeted below 2
times debt to EBITDA by end of 2018.
The Group had £341.9m of committed
facilities at the year end of which
£56.5m were undrawn.
As previously reported, the Group
entered into a syndicated debt
facility, comprising a US$250m
term loan and a £150m revolving
credit facility in September 2016,
which expires in June 2021. The new
facility was drawn down to fund the
acquisition of ASIG on 1 February
2017 and repay existing facilities with
the exception of £10.0m remaining
on a term loan with RBS. In February
2017 the Company entered into
interest rate swaps to fix 50% of
the US$250m term loan facility
for the duration of the loan.
of three years. In the case of such
a catastrophic aircraft incident, the
Group would seek to manage the
timeframe in which any liabilities
arose in order to continue in operation.
As a result, the Board confirms that
it has a reasonable expectation that
the Group will be able to continue
in operation and meet its liabilities
as they fall due over the period of
assessment of three years.
Dividend
In line with the Group’s plan to follow
a progressive policy to increase
dividends over time, the Board has
proposed a final dividend of 14.5p
per ordinary share which is payable
on 2 July 2018 to all shareholders on
the Company’s Register of Members
at 25 May 2018. The total paid and
proposed dividend for the year is
20.5p per ordinary share (2016: 18.5p
per ordinary share), up 11% from
last year.
Giles Wilson
Chief Financial Officer
12 March 2018
Impact of foreign
currency movements
The majority of Menzies Aviation’s
stations are located outside the
UK and operate in currencies other
than Sterling. The Group hedges
the exposure of foreign currency
denominated assets to manage
the impact of currency movements
in the Group’s net assets using
forward contracts. The translation
of profits from overseas trading
entities is not hedged and as a result
the movement of exchange rates
directly affects the Group’s reported
results. In 2017 the Group benefited
from favourable movements against
the prior year, particularly with
respect to Sterling against the US
and Australian dollars. The year on
year exchange benefit was £4.1m.
Going Concern
The Group’s business activities
are set out on pages 8 to 11 of this
Annual Report and Accounts 2017
and the principal risks impacting
these activities are set out on
pages 34 to 37. The Group’s financial
position and cash flows are set
out on pages 104 and 107 along
with an analysis of its borrowings
in Note 17 on page 139. As regards
going concern, the Directors have
considered market and gearing risks.
Sensitivities to capital and liquidity
risks are set out in Note 17 on pages
136 to 142 of this Annual Report and
Accounts 2017.
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.
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.
Viability Statement
In accordance with provision C.2.2
of the UK Corporate Governance
Code (April 2016), the Directors
have assessed the prospects of the
Group over a period of three years.
The Directors believe this period to
be appropriate because the average
length of the Group’s customer
contracts is approximately three
years and the Group’s planning
cycle covers a three year period.
As detailed on pages 32 to 37 of this
Annual Report and Accounts 2017,
the Board monitors and assesses the
risks and uncertainties faced by the
Group. This includes a consideration
of the principal risks and material
uncertainties facing the Group,
including those that would threaten
its business model, future performance
or solvency. During 2017 this process
included a detailed strategic review
of the Aviation and Distribution
Divisions and a detailed three year
planning process.
For the purpose of assessing the
Group’s viability, the Directors
focused their attention on the
principal risks that are critical to
the Group’s success. These are risks
concerned with changing consumer
behaviour, increasing employee
costs, contract renewals, contract
tendering, global acts of terrorism,
security breaches and adherence to
standard operating procedures. Each
risk and its impact and mitigation
is set out on pages 34 to 37 of this
Annual Report and Accounts 2017.
Other than in the event of a
catastrophic large aircraft incident
over a populated area, none of the
plausible events in isolation or in
combination would prevent the
Group from continuing to operate
and meet its liabilities as they fall
due over the period of assessment
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Strategic Report Financial StatementsShareholder InformationGovernance Reports Risk Management
HOW WE
MANAGE RISK
Risk Framework
As can be seen from the diagram
on the opposite page, the Group
has implemented a risk management
framework that incorporates a
traditional ‘bottom up’ approach
counter-balanced by ‘top down’
involvement which both supports
and challenges our internal risk
process. Establishing and maintaining
a robust and enduring risk culture
within the Group was a key agenda
item throughout 2017 and we
continue to promote and raise
awareness of our risk initiatives
throughout our global operations,
a commitment underlined by our
dedicated central Risk team.
We recognise that a successful risk
management programme serves
to protect our assets, promote the
interests of our stakeholders and is
fundamental to the welfare of our
People and our Risk function plays
a pivotal role in the delivery of this
programme. Our risk framework
is underpinned by our Group-wide
‘8 Pillar’ Audit Programme which
drives our Group’s Risk Register and
allows us to undertake standardised
operational audits whilst assessing
internal (e.g. policies, procedures
and processes) and external
(e.g. legislative and regulatory)
compliance.
Whilst the Company’s Board of
Directors has overall responsibility
for the Group’s systems of internal
controls and risk management, the
Audit Committee has delegated
responsibility from the Board to
review the effectiveness of these
systems. The Audit Committee
nonetheless provides regular and
comprehensive updates to the
Board, reflecting the importance
which the Board places upon
identifying and actively managing
the financial and non-financial risks
with appropriate regard to the
Group’s strategic objectives.
Risk Register
These financial and non-financial
risks are captured within the Risk
Register which is subject to regular
review by both the Board and the
Executive Committee and currently
comprises 14 risk categories and 192
individual risks.
We continue to evolve our risk
process and during 2017 identified
risk owners across the business who
were asked to consider the risks
which fell under their ownership; the
central Risk team then reviewed all
audit scores against developments
within the organisation to create
new risks that were scored
accordingly. The scores were
subsequently amalgamated and
sense-checked to ensure the
principal risks generated properly
reflected the nature of our business
and the results of the controls
assurance process. Additionally,
to further enhance and promote
risk methodologies as an essential
component of business strategy,
a Risk Management Policy was
developed during the year and
incorporated into the Risk Register.
The Top 10 risks and uncertainties
which the Group faced at the end
of 2017, and continues to face, have
been identified through the internal
risk assessment process. These are
detailed on pages 34 to 37 of this
Annual Report and Accounts 2017
and derive from the Group’s Risk
Register. The most notable change
from last year is the introduction of
the risk relating to the Company’s
defined benefit pension scheme
which entered the Top 10 following
detailed consideration of a point
raised by the Financial Reporting
Council (further details of which
can be found on page 63 of this
Annual Report and Accounts 2017).
The key risks are subject to rigorous
deliberation by the Board in its
assessment of the Company’s ability
to continue as a going concern and
also when evaluating the viability of
the Company. The Going Concern
and Viability Statements can be
found on page 31 of this Annual
Report and Accounts 2017.
Internal Control
A number of systems of control
are in place within the Group to
enhance the effectiveness of our
risk management programme and
ensure that risks are timeously and
adequately identified, prioritised,
evaluated and managed. For
example and as disclosed in last
year’s Annual Report and Accounts,
each Operating Division has had
a Senior Management Committee
in place since January 2017 which
reports directly into the Executive
Committee. The standard agenda
of these Committees includes the
review of audit, compliance, human
resources and safety and security
issues and risks. Each Division and,
where appropriate, Group Finance,
also undertake annual certification
on internal control compliance.
Further, a specified function of
the Executive Committee is to
review each Operating Division’s
risk management programmes
and systems of internal control
and ensure that all required audit
outcomes, both internal and
external, are properly actioned.
Additionally, a formal internal
assessment of the Group’s risks
and internal controls is undertaken
on a six-monthly basis which is
supported by the Group’s controls
assurance provider. From a
Finance perspective, the Tax
Committee convenes on a
quarterly basis to ensure the
potential impact of any global
tax changes has been properly
assessed whilst the Treasury
Review Committee meets monthly
to review the adequacy of the
Group’s facilities against potential
utilisation and commitments
and to monitor and manage
the Group’s exposure to interest
rate and currency movements.
The effectiveness of a strong
risk management programme
and culture is critical to ensuring
the ongoing success of the
Group, enhancing the quality
of decision-making and driving
standardisation and transparency.
We will continue to evolve our risk
process during 2018 and, following
upon the acquisition of ASIG and
the associated expansion of our
global operations, intend to
move to a more automated risk
solution in 2018. Our risk profile
will remain subject to robust
review throughout the year as
we focus on fully embedding
our risk appetite and framework
throughout our operations.
Risk Management Framework
1st line
of defence
Control,
design and
implementation
I n ternal Audit
C ompliance
a g e ment Controls
n
a
M
2nd line
of defence
Oversight
Inherent
Risk
Risk
Management
Framework
Residual
Risk
Risk
3rd line
of defence
Independent
assurance
Approaches to Risk
Our shareholder value-based approach
Coverage is driven by issues that directly impact shareholder value,
with clear and explicit linkage to our strategic objectives.
Identify shareholder
value-creating activities
Evaluate impact to
shareholder value
Understand enterprise
risks (strategic, financial,
operational and
governance)
TOP DOWN
Audit Plan
BOTTOM UP
Traditional approach
Based on stakeholder interviews and analysis with focus on coverage
of identified risk areas, geography and business operations.
Evaluate impact of risks
within audit universe
Identify risks (financial,
operational and
compliance)
Define audit universe
(e.g. geography or
business unit)
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Principal Risks and Uncertainties
The Board has undertaken a robust assessment of the principal risks and uncertainties facing the Group, including
those that would threaten its business model, future performance, solvency or liquidity. The table below lists those
risks and uncertainties that the Board considers most significant and details the key mechanisms which we employ
to mitigate them.
Risk Category
Risk
Risk Description
Impact
Key Control Mechanism
Increase
Increase
Decrease
No change
Change
from 2016
Failure to negotiate existing contracts at acceptable rates or to successfully
win new contracts on terms that achieve the Group’s internal rate of return
and risk profile threshold criteria; together with the risk that a competitor
enters an airport/area leading to a loss of key staff and/or contracts.
Inability to renegotiate and retain
key material contracts at rates that
provide acceptable returns could
significantly impact Group earnings.
Business
Management
& Change
Management
Price Optimisation
in Contract
Renewals/Contract
Tendering/
Competitive
Pressure
Integration
of an Acquisition
The risks associated with the integration of a large-scale acquisition:
people, systems and equipment require to be well-managed and failure to
do so could impact the services provided to customers, result in a failure
to achieve targeted synergies and ultimately decrease staff morale.
External Shock
Global Act
of Terrorism
The risk that a global terrorism event could materially affect the airline industry
and the number of aircraft flights significantly reduced for a period of time.
Risk of ‘Brexit’
to UK & European
Operations
The risk that business becomes more difficult within the
European Union when the United Kingdom exits.
Finance
Menzies Pension
Fund
The risk associated with the Group’s historic defined benefit pension scheme
in the United Kingdom, closed to new members in 2003 and to future accrual
in 2017, and which is currently in deficit. The Group is required to make
cash contributions to address this deficit and there is a risk that the deficit
increases, due to poor asset returns or because of an increase in liabilities
arising from current financial assumptions differing from experience.
Human Resources
Increased Labour
Costs & Staff
Turnover
Our business relies on our People. Wage inflation is prominent in
many of the territories in which we operate and there are a number
of initiatives within, for example, the UK and other countries to
improve wages which in turn could impact our operations.
High staff turnover leads to low experience and skill levels to cover
required shifts. This could leave our operations without sufficient
skilled employees to deliver our business objectives.
Our Commercial teams plan ahead to ensure readiness for all
upcoming contract renewals and new business tenders. The
Group operates a Menzies Commercial Appraisal Committee
that meets monthly to review all pricing and contractual terms
before bids are submitted for new/repeat business. In addition,
we constantly strive to innovate within our operations to ensure
our operational model operates with an optimum cost base.
Detailed integration plans are put in place for every acquisition,
irrespective of size. Milestones are set and independently checked.
Dedicated resources are required to ensure that sufficient time is given
to each element of integration and the achievement of all targets.
Ground Handling cost base is flexible and could be flexed
to assist in mitigating the expected financial impact.
Failure to successfully integrate a scale
acquisition could lead to a reduction in
anticipated returns, synergy benefits
could be missed and reputational
damage to the Group could arise.
A global act of terrorism could lead
to a significant loss in revenue as
flights would be grounded and air
cargo would not be transported.
The outcome of Brexit negotiations
may affect/restrict the free movement of
persons resulting in staff recruitment issues
(in particular, during peak seasons) and
impact the operations of our customers.
This will be a key focus of our HR teams under the stewardship of
our new Group EVP People and developments in this area will be kept
under constant review to ensure we are positioned to react as and
when appropriate. Our Commercial teams also have a strategy in place
which is aimed at achieving optimum combination of service portfolio
and geography to offset any potential UK-European flight reduction.
An increase in the scheme deficit could result
in a requirement to increase the current cash
contributions which could in turn reduce the
amount that the Group can invest in growth
opportunities in its business operations.
The decision to close the Fund to future accrual was a key determinant
in reducing the risk associated with the scheme as changes in the scheme
liabilities now only result from a change in liabilities relating to past
service, not a further increase as a result of current and future service.
The ongoing controls that the Group adopts to manage this risk include
working closely with the Pension Trustee and its advisers to ensure
that investment performance and liability experience are reviewed
regularly; diversifying pension assets so that the impact decreases
in the value of certain asset classes is minimised; and ensuring that
the scheme has the optimum investment policy by matching asset
profiles with associated liabilities taking into account the future
likely mortality of members, investment returns and inflation.
Contracts with customers increasingly contain clauses that specify
statutory wage increases. We also continue to evolve our operating model
to optimise our cost base. Additionally, resource management tools are
being rolled-out to ensure roster outputs meet applicable regulations
and customer demands whilst also providing better productivity.
The Board has a particular focus on staff turnover and regularly monitors
the position. New initiatives aimed at reducing turnover are in place and
in the Americas region, for example, a dedicated function exists to address
this issue. Investment in onboarding HR systems, which vet employees to
ensure suitability for the role, exist and are gaining traction. At Group level,
the Human Resources Committee will give detailed consideration to staff
turnover and determine what can be done to make an impact in this area.
An inability to pass on statutory
increases to our customers could
materially impact profitability e.g.
the UK’s National Living Wage.
Consistently high staff turnover could result
in both a reduction in service levels and a loss
of customer contracts. Additionally, a high
number of inexperienced staff could lead
to an increase in safety-related incidents.
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Strategic Report Financial StatementsShareholder InformationGovernance Reports Risk Management continued
Principal Risks and Uncertainties
Risk Category
Risk
Risk Description
Impact
Key Control Mechanism
Human Resources
Succession
Planning
As the Group expands it is important that sufficiently trained and skilled staff
are available to fill positions created by our expanding businesses both at
supervisory and managerial levels. We must ensure sufficient developmental
programmes are in place to develop our people. We rely on having the right
people with the right skills in the right place at the right time. Without effective
succession plans the Group risks not having sufficient individuals to fill the
key roles which are required to ensure our operations run smoothly.
IT
IT Systems’
Robustness
Safety
Adherence
to Standard
Operating
Procedures
Sophisticated IT systems are at the core of all our businesses, driving efficiency.
System downtime could lead to severe operational issues and delays to customers.
External vulnerability to attack is a growing worldwide issue which could result
in erroneous information entering our processing systems or commercial
data being accessed without permission. A central IT team manages the
overall governance and integrity of the systems throughout the Group.
Within Menzies Aviation the adherence to internal standard operating
procedures and airline regulations is vital to ensure the business delivers
its strategic objectives and operates safely and securely at all times.
Security
Security Breach
The 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.
The operational and leadership impact of
failing to have sufficient people, or a stream
of trained, qualified individuals identified
as potential future business leaders, could
result in increased costs, lack of efficiency
and a failure to deliver on any, or all, of the
key strategic objectives of the Group. Our
brand loyalty could be impacted and a
competitive disadvantage could arise if we
were unable to retain internal candidates
to occupy key roles as they become
available or we lose individuals with the
requisite indepth knowledge and expertise
due to a lack of career opportunities.
A serious IT systems outage for a limited
period of time could have an operational,
financial and/or reputational impact.
Succession plans across the Group exist and the Board annually
reviews such plans for Senior Management and Executive Directors.
In 2017 a new Board committee was constituted, the Human Resources
Committee, tasked at considering all aspects of our HR offering.
Structured development programmes are in place aimed at identifying
and developing key employees while salaries and benefits are
benchmarked to ensure they remain competitive with market standards.
Heightened security has been provided with the outsourcing of our
physical hardware data centres, and associated support, to a third
party outsourced specialist. New plans to mitigate cyber-attacks
have been put in place through our Project Watertight initiative.
Disaster recovery plans exist and are reviewed periodically.
Failure to adhere to standard operating
procedures can endanger employees and
lead to poor operational performance; it could
result in a rise in aircraft damage and personal
injury incidents. In addition, the reputation of
the Group would suffer. A poor safety record
could produce increased operating costs,
including punitive and compensatory charges
and increased insurance rates, and ultimately
lead to the loss of customer contracts.
Independent audit programmes exist to ensure applicable operating
procedures are being adhered to and all audit scores are reviewed
by the senior leadership team. A dedicated Operational Excellence
function helps drive standardisation across the network whilst
significant investment in infrastructure and systems has aided the
drive for compliance and standardisation. Tailored training packages
exist and all employees undertake full and rigorous training. Safety
and security are the number one priority at every station and are
never compromised. Industry-leading safety systems are utilised.
Our internal M.O.R.S.E. system is at the heart of all our operations.
The impact of a serious security-related
incident could affect the Group’s
reputation, operational performance
and, ultimately, financial performance.
The Group works closely with airport authorities. Rigorous checking
and vetting of all employees takes place. Central support is provided
to all stations via the Group Security team, utilising the M.O.R.S.E.
intranet-based safety and security monitoring system which provides
consistent and regular reporting. A dedicated Group Security Officer
continues to raise standards across the Group and reinforce awareness.
Increase
Increase
Decrease
No change
Change
from 2016
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Strategic Report Financial StatementsShareholder InformationGovernance Reports Responsible Business
WITH 185 YEARS OF HISTORY
BEHIND US AND A STRONG
FUTURE IN OUR SIGHTS,
JOHN MENZIES PLC HAS
A RESPONSIBILITY TO SET
AND MAINTAIN THE HIGHEST
STANDARDS ACROSS ITS
GLOBAL BUSINESS
Our Vision
and Culture
We believe that a unifying vision
of the Group’s ambitions is a
powerful driver in our efforts to
deliver sustainable returns to our
stakeholders. If such a vision is
properly articulated, it can inspire
our People to push themselves
further; it can align the efforts of
our teams worldwide in achieving
our corporate goals; and it can
encourage the positive, productive
behaviours which support the
delivery of these goals.
In Menzies Aviation the vision is
that we will become the undisputed,
premium provider of Aviation
Services. We plan to actualise this
through satisfying the key strategic
objectives set out in our Excellence
Manifesto (further details of which
can be found on page 15 of this
Annual Report and Accounts 2017).
In order to raise the profile of this
vision, we incorporate it into regular
business-wide communications
and embed it through the staging
of flagship events for our leadership
teams.
“ WE WANT TO SET
GOALS FOR OUR
BUSINESS IN THE
SAME AMBITIOUS
WAY MARK BEAUMONT
SELECTS HIS
CHALLENGES: NOT
BY INCREMENTALLY
OUTPACING OUR
COMPETITORS, BUT
BY PUSHING THE
LIMITS OF WHAT
IS POSSIBLE.”
Our framework of policies and guidelines must
ensure that we foster a culture in which integrity
and responsible and sound ethical values are
at the core of all that we do.
FTSE Russell (the trading name
of FTSE International Limited
and Frank Russell Company)
has certified that John Menzies
plc is a constituent company in
the FTSE4Good Index Series,
having been independently
assessed in accordance with
the FTSE4Good criteria.
Created by the global index
provider FTSE Russell, the
FTSE4Good Index Series is
designed to identify companies
that demonstrate strong
environmental, social and
governance practices measured
against globally recognised
standards. The FTSE4Good
indices are used by a wide
variety of market participants
to create and assess responsible
investment funds and other
products.
Responsible Business in Action
AROUND THE WORLD IN 78 DAYS
Mark Beaumont, endurance athlete and author, joined Menzies
Aviation at its Global Integration Conference in Las Vegas and
addressed the delegates on the subject of ‘success on your own
terms’: the principle of setting a goal based on pushing beyond
the limits of what is commonly considered achievable and not
on incremental improvement of previous performance. Shortly
after the event Beaumont demonstrated this principle in action
by successfully circumnavigating the globe on a bicycle in under
80 days and breaking two Guinness World Records in the process.
Menzies Aviation supported his journey by streamlining the
check-in, boarding and disembarkation process at airports around
the world, helping to save vital hours which contributed to the
setting of a world record time: 78 days, 14 hours and 40 minutes.
Forsyth Black,
President & Managing Director,
Menzies Aviation
Our Vision and
Culture Highlights
Following the acquisition of ASIG,
Menzies Aviation held a Global
Integration Conference in May 2017.
The two day event took place in
Las Vegas and was the first time in
15 years that its global leadership team
had convened. The principles of the
Excellence Manifesto were launched
to delegates with a programme of
speakers delivering on a range of
pertinent topics; new relationships
were forged and shared capabilities
explored; and the opportunities to
grow Menzies Aviation’s service
offerings and operations discussed
through a day of workshop activity.
In October 2017 Menzies Distribution
hosted its first Management Summit
which explored the theme of “Our
Business, Our Growth, Our Future”;
this had a key objective of enhancing
understanding of Distribution as a
unified Division. Leaders from across
the Division gathered to discuss their
sectors of business, including current
challenges, opportunities and goals,
and consider the opportunities they
could present to their current markets,
possible entry into new markets and
diversification into new areas of
growth.
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Financial StatementsShareholder InformationGovernance Reports Strategic Report Responsible Business continued
Our People
Development, succession
and retention
As our business continues to
expand, staff retention and talent
recruitment become increasingly
important and ensuring we have the
right people in place to maximise
the present-day success of our
operations, and also provide a
robust plan for succession, is a
key area of focus for the Group.
We recognise that our People are
the driving force behind our
operational achievements and the
delivery of sustainable value to our
shareholders and understand the
importance of maintaining and
attracting proficient, driven and
talented individuals who reflect the
diversity of the many environments
in which we operate. Giving our
People the opportunity to learn
new skills, developing them through
the assumption of additional
responsibilities and progression
to managerial positions is critical
to ensuring we have the best
workforce and remain competitive
in our markets. Our commitment to
and investment in our People can
be evidenced through, for example,
Menzies Distribution’s 2017 ASPIRE
leadership programme. 12 high
potential, aspiring delegates from
across the business were selected to
participate in this annual programme
which runs over a 10 month period
Responsible Business in Action
CCTC LONDON:
BIKEWORKS
L T EAM C
A
R
H
A
L
L
E
N
G
E
LT U
U
C
S
S
O
R
C
12 managers from across the Menzies Aviation network visited
Bikeworks in September 2017 as part of its Cross Cultural Team
Challenge. Bikeworks is a not-for-profit social enterprise, based
in Hackney, East London, which runs a variety of community
cycling programmes.
The Menzies Aviation team completed an intense cycling challenge
whilst raising funds for the UK’s first mobile All-Ability Cycling
Club, a venture aimed at providing cycling opportunities for
people from marginalised communities and individuals with
physical and learning disabilities, all of which may otherwise
be a barrier to participation.
Sponsorship contributed to a new van to transport the All-Ability
unit, together with equipment and running costs for the first year
of operation.
and comprises six two day
workshops covering topics such as
coaching and leadership, developing
self and customer engagement. The
programme presents the delegates
with a significant developmental
opportunity and allows them to
form invaluable relationships within
the internal business network.
It is essential that our People reflect
the Menzies corporate culture,
possessing a commitment to set
the highest standards, an enthusiasm
for challenge and a drive to deliver
results. For this reason, our
preference is to build capability
and promote from within Group
talent pools, complementing this
with selective external recruitment
as and when required. We regularly
review and monitor the pay and
benefits offered to our employees,
benchmarking against competitors
where appropriate and ensuring
compliance with the mandatory
national living wage requirements
and Working Time Regulations.
To facilitate the development of
an internal talent pipeline, we offer
a broad range of development
opportunities to our People, from
on-the-job learning through to online
and classroom-based courses, all of
which are designed to prepare them
for the daily delivery of industry-
leading standards in every field of
our activities. Significantly, Menzies
Aviation launched a new 18 month
graduate development programme
in July 2017, with selected graduates
completing a series of placements
in operational and central functions
and attending workshops to develop
core skills and leadership qualities.
Further, with the introduction of the
UK Apprenticeship Levy in April 2017
Menzies Distribution reviewed the
upskilling of those individuals with
a desire to complete a work-based
qualification and now has over
50 apprentices currently working
on their portfolios in areas such
as Customer Service, Business
Administration and Management
with the next step to invest in
driver apprenticeships in 2018.
Our global team now exceeds
36,000 employees and continues to
grow as our operations expand. Our
continued commitment to this key
asset is underlined by two significant
events in 2017: the appointment
of a Group EVP People, Claire Hall,
and the constitution of a new Board
committee, the Human Resources
Committee, tasked with overseeing
all HR matters and addressing
specific employee issues.
Diversity and inclusion
We actively promote tolerance
and diversity at every level of our
business and recognise the value
of a diverse workforce. We aim to
create a working environment in
which inclusion and acceptance
are the norm and the additional
needs of our People are catered
for wherever possible.
Diversity is currently a key focus in
our business and is referenced within
both our People-related policies and
Employee Handbook. In 2018 we will
publish a full Diversity Policy that
builds upon our existing Diversity
Responsible Business in Action
SPIRIT OF
RECOGNITION
In June 2017 Menzies
Distribution launched a
SPIRIT (Service People
Inspiration Recognition
Innovation Teamwork)
Awards recognition
programme which provides
employees with the
opportunity to nominate
and gain recognition and
reward for their colleagues
who live up to our values
and go ‘One Step Beyond’
or ‘Above and Beyond’.
The programme has been
a great success with over
200 awards issued to-date.
Statement which seeks to actively
promote inclusion and acceptable
treatment of our People on the
grounds of, for example, age,
disability, race, religion or belief,
gender and sexual orientation. This
Policy will encompass all employees
and extend across all our networks;
it will be published and maintained
through our new Group intranet
and shared with all new employees
through the candidate onboarding
process and induction training and
with existing employees through
their refresher training.
Full and fair consideration is given
to all applications for employment
and Group policies dictate that
during the recruitment process all
individuals are treated equitably,
including those with disabilities.
Where employees become disabled
we seek to ensure their employment
can continue or alternative
employment arranged whenever
reasonable and practicable to do so.
All employees are given the same
opportunities within the Group in
terms of training, career development
and promotion; our policies and
procedures for recruitment, training,
promotion and reward promote
equality of opportunity, regardless
of background and personal
circumstances.
In line with our desire to ensure a
diverse and inclusive workforce, we
are also committed to the ideal of
equal pay for equal work and thus
Gender Diversity
(as at 31 December 2017)
Employees
25,832 male
10,373 female
Decision-makers
318 male
117 female
Board of Directors
8 male
1 female
welcome the introduction of
The Equality Act 2010 (Gender Pay
Gap Information) Regulations 2017
in the UK. We have undertaken the
necessary analysis to understand
the position in respect of male and
female pay within the requisite
Menzies entities and will publish
our results as prescribed. We will
monitor and investigate any gender
pay gap issues identified now or in
the future as a result of such analysis
and seek to suitably address any
gaps which may arise.
Our People Highlights
Claire Hall was appointed as Group
EVP People and now leads the central
Human Resources function within the
Group, driving change and developing
standardisation in employee
recruitment, training and retention.
The Human Resources Committee was
constituted by the Board in early 2017
and will assist the Board in fulfilling its
obligations in respect of all HR matters
and ensure standardisation of HR
structure, policies and processes.
Our online recruitment and applicant
tracking tool continued its successful
integration during the year with the
addition of our graded management
population and the roll-out of the
tool in Oceania and South East Asia.
The system provides a more efficient
management recruitment process and
has significantly improved the volume
and quality of external candidates.
A new SAP-based HR data
management system was launched
in the UK to enable the digitisation
and centralisation of employee data.
It is intended to roll this out to other
regions during 2018 as part of a
global project.
Global implementation of our
new learning management system,
Empower, during 2018 will enable us
to deliver e-learning courses directly
to employees, with complete records
of training and performance for each
individual.
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Strategic Report Financial StatementsShareholder InformationGovernance Reports
Responsible Business continued
Integrity and
Compliance
We are committed to conducting
our business fairly, honestly, safely
and in compliance with all applicable
laws, regulations and ethical
standards. We aim to deal with
our business partners with integrity
and in good faith and seek to avoid
doing business with third parties
who do not subscribe to equivalent
standards; accordingly, we engage
only with those business partners
(including customers, contractors,
sub-contractors, agents, suppliers
and joint venture partners) whose
business ethics and behaviours align
with those of the Group, regardless
of where in the world they might
be located.
To underline the strength of our
commitment to doing business
the Menzies way, the Company
is currently in the process of
implementing a revised Group-wide
Compliance Programme that is
designed to meet both internal and
external requirements (legislative,
regulatory and otherwise); this
will be a key 2018 initiative. Whilst
responsibility for compliance
ultimately lies with all Group
employees, the Compliance
Programme will include ongoing
efforts to assess, evaluate, monitor
and audit adherence to applicable
compliance policies and procedures.
These efforts will be supported by
functions such as Group Internal
Audit, Group Legal, Human Resources,
external audit providers and others.
The Compliance Programme
will be overseen by the Director
of Corporate Affairs and will be
a key driver in reinforcing how
business across the Group can
and should be conducted. Upon
full implementation, it will be
reviewed periodically and adapted
and enhanced as necessary to
meet changing business needs
and external requirements.
Responsible Business in Action
CCTC NEW ZEALAND:
I HAVE A DREAM
In October 2017 12 Menzies Aviation managers visited the
‘I Have a Dream’ foundation, a charity operating in Whangerai,
New Zealand. The charity supports over 600 children from low
decile schools and seeks to inspire and enable children to achieve
academic and life success.
Our team provided the children with a series of ‘dream day trips’,
including a behind-the-scenes airport tour, surfing lessons, Maori
canoeing, the release of a charity single and a talk from record-
breaking cyclist Mark Beaumont.
These unique experiences were designed to build the children’s
self-esteem, to inspire them to realise their potential and choices
and provide them with memories which would last a lifetime. The
team’s work and the funds raised also provided a legacy fund for
future activities.
partners to adhere to and the ethical
parameters within which they should
conduct business for or on behalf
of the Group. Going forward it is
intended that all business partners
will be required to sign up to, and
comply with, this Code and annual
certification of conformance will
again be required.
Bribery and corruption in any form
is not tolerated within the Group,
either directly or through third
parties, and we strive to instil the
highest ethical standards at all levels
of our operations. However, our
success depends on our People’s
commitment to doing the right thing,
at the right time, in the Menzies way
and having the courage to speak up
if they see or hear something that
appears to, or they suspect may,
breach our operating standards. In
this regard, EXPOLINK, our global
whistleblowing hotline, continues to
play an invaluable role providing an
anonymous reporting mechanism,
24 hours a day, seven days a week,
that facilitates reporting of actual
or potential illegal, unethical or
improper conduct.
Integrity and
Compliance Highlights
Underlining our zero tolerance
approach to bribery and corruption
and our commitment to conduct
business ethically, we became a
member of TRACE in May 2017.
Katy Reid was appointed Group
Compliance Manager during 2017 and
is responsible for driving the Group’s
global Compliance Programme. Her
role covers a wide range of corporate
governance matters but with a
particular focus on items relating
to, for example, anti-bribery and
anti-corruption and anti-slavery and
human trafficking; she is charged with
ensuring that our business operates
ethically and in accordance with all
applicable legislation, regulations
and standards.
In November 2017 the Group’s
first Data Protection Officer, Colin
Currie, was appointed. In addition
to assuming responsibility for the
creation of policies and guidance
relating to data protection and
subject access requests, rolling-out
relevant procedures and training and
supporting the Group on data security
and privacy-related matters, Colin,
in conjunction with other relevant
internal functions, is responsible for
ensuring that the organisation has
undertaken the necessary health
checks and is GDPR-ready when
the new legislative changes take
effect in May 2018.
Pursuant to section 54(1) of
the Modern Slavery Act 2015, the
Company published its first ever
Anti-Slavery and Human Trafficking
Statement in June 2017 setting out
the steps taken by it to ensure that
slavery and human trafficking do not
occur in our supply chains or any part
of our business.
“ WE EXPECT
EVERYONE TO
CONDUCT BUSINESS
WITH HONESTY AND
INTEGRITY – AND
TO REFRAIN FROM
DOING ANYTHING
THAT COULD HARM
OUR REPUTATION OR
OUR OPERATIONS.”
John Geddes, Company Secretary
& Director of Corporate Affairs
In this regard, a new Group Code of
Conduct has recently been finalised
that will be the foundation of the
Compliance Programme. This Code
represents our guide to doing the
right thing, at the right time and in
the right way (i.e. the Menzies way)
and provides a set of values and
standards for our People to guide
them in their decision-making
processes and set the behaviour
expected of them. It will apply to
every Group employee, at every level
within our business, and the culture
that it underpins will be fundamental
to the success of the Group, outlining
the expectations and framework for
ethical and compliant behaviour.
The Code of Conduct will be
supported by more detailed policies
and procedures which build upon
the documentation currently in
place and govern key compliance
topics across the business such
as human rights, anti-bribery and
anti-corruption and anti-slavery
and human trafficking. Everyone
who is employed by the Group will
be issued with the Code of Conduct
upon induction and required to
certify that they have read and
understood it. It is intended that
annual certification will also be
introduced.
A new Third Party Code of Conduct
is also in the process of being
compiled. This details the standards
that we expect all our business
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Strategic Report Financial StatementsShareholder InformationGovernance Reports ABOUT TRACETRACE is a globally recognised anti-bribery business organisation and leading provider of cost-effective third party risk management solutions. Members and clients include hundreds of multinational companies headquartered worldwide. For more information, visit www.TRACEinternational.org. Responsible Business continued
Health, Safety
and Security
Health, safety and security are at
the heart of our business activities,
with the management of risk serving
to inform and protect every element
of our operations. Robust risk
management systems help protect
our assets, promote the interests
of our stakeholders and are
fundamental to the welfare of our
employees and the success of the
Group. Good health, safety and
security practices are not regarded
as the responsibility of any one
individual or department; rather they
should be viewed as a collective
effort where every employee is
responsible for playing their part.
As a risk-led organisation we aim
to safeguard the health, safety
and security of all our employees;
we seek to establish and maintain
robust processes, procedures and
policies for identifying, managing
and minimising risk-related incidents;
and strive to ensure best practice
and compliance across our business
by implementing standardisation
and transparency through our
8 Pillar Audit Programme.
Our People are encouraged to
participate in the continued adoption
of risk-conscious behaviour in their
daily performance. Employees across
the Group can utilise our SMART
(Standard Menzies Audit Reporting
Tool) operational inspection tool
which allows users to submit a basic
audit of activities they observe.
In 2017 we implemented our new
Security Management System.
This is a programme to identify,
monitor and manage security
risks throughout our business
and ensures we have the ability
to prepare for, prevent and react to
security issues in the most efficient
way. Continual improvements were
also made to Group security
systems, including:
Health, Safety and
Security Highlights
Due to increased security awareness,
investment in security training, stop
and searches, improved supervision
and against more stringent reporting
standards, our security incident rate
improved by 39% during 2017.
Following the acquisition of ASIG,
Fuelling audits were performed for
the first time in 2017 and opportunities
identified for improvement; an
outcome of this will be the
development of a Fuelling-specific
8 Pillar Audit Programme in 2018
and standardisation of processes.
A total of 72 8 Pillar audits were
completed across the Group with
Ground Handling, Cargo Handling and
Distribution all reporting an average
of 90% conformance to policies and
processes. Operations were subjected
to 890 external audits, with 75% of
those audits resulting in zero findings.
The SMART tool continues to
play a key role in the management
of Group safety: Over 362,000
inspections were conducted in
2017 via the mobile application
which translates as one every
three minutes in Ground Handling,
one every 60 minutes in Cargo
Handling and one every 72 minutes
in Distribution centres.
Responsible Business in Action
10 YEARS OF IATA
Menzies Aviation was pleased to join the International Air
Transport Association (“IATA”) in Geneva in October 2017
to celebrate the 10 year anniversary of the IATA Safety Audit
for Ground Operations (“ISAGO”). IATA supports many areas
of the Aviation industry, helping to shape policy and assisting
in the development and implementation of industry standards
and technical solutions.
Menzies Aviation strives to meet the ISAGO safety
standards across its network with 17 of our stations
registered. It is also the first ground handler in
the world to be registered under the new ISAGO
Standards Manual Model 6th Edition.
• the evolvement of our
whistleblowing hotline, serviced
by EXPOLINK, into an online
portal providing 24-hour daily
global access;
• the introduction of F24, a virtual
crisis management system; and
• access to travel trackers and
International SOS, the world’s
leading medical and travel
security risk services company
that provides alerts and advice
for and about our business
travellers.
Influence on
the Environment
Employing over 36,000 employees
and with an operational network
across six continents, we are acutely
aware of the potential impact which
our business may have on the
communities in which we operate.
We recognise that being a socially
responsible company enhances our
overall value, both in the short and
long-term, and are fully committed
to the minimisation of the Group’s
environmental footprint. Under the
terms of our Environmental Mission
Statement, we seek to identify
significant aspects and impacts of
our activities on the environment,
mitigating risks and implementing
preventative measures wherever
possible; we strive to not only meet
but also exceed the requirements
of the relevant legislation and
work within best practices to
set the highest standards in all
aspects of our operations.
From waste disposal to energy
management, our environmental
processes and procedures are
subject to continual review as we
endeavour to promote sustainable
management practices and seek
to identify potential improvements.
For example, 1,168 electric vehicles,
a combination of owned and leased,
are currently utilised in Menzies
Aviation’s GSE (ground support
equipment) fleet; this figure represents
approximately 16% of our total
motorised GSE fleet and is one
which we would hope to increase
further during 2018. Additionally,
the acquisition of the Gnewt Cargo
business, which carries out final-mile
parcel deliveries in congested urban
areas within Central London using
solely electric vehicles, demonstrates
our commitment to carbon emissions
reduction and the promotion of
technologies that improve our
sustainable practices.
Throughout 2017 the Group engaged
the services of an independent
verifier, Carbon Footprint Ltd.
(“Carbon Footprint”), for carbon
emission monitoring. Going forward,
our goal is to streamline the reporting
process and feed data directly to our
independent verifier – all data would
therefore be collated by one central
party and then subsequently analysed
and reviewed. This will provide the
clearest indication of the running
carbon dioxide equivalent (“CO2e”)
levels in the business and the
effectiveness of any reduction
measures we implement. It should
be highlighted that as a result of
the ASIG integration process only
estimated figures, based on a sample
of monthly data for each of the
individual sites, have been included
in the Menzies Aviation figures
(contained on page 47 of this
Annual Report and Accounts 2017)
in respect of the ASIG entities
acquired. All ASIG emissions data
will be comprehensively captured
in 2018 and reported on in our
Annual Report and Accounts 2018.
A number of initiatives have been
identified as key focus areas for the
Group’s environmental stewardship.
A major focal point will be the
development and implementation
of an Environmental Management
System (“EMS”) across the Group
network. The EMS will be written in
accordance with the ISO 14001:2015
standard, with the future ambition
of having the EMS audited and
accredited to this standard, a level
of accreditation which will clearly
demonstrate our commitment
to environmental stewardship.
This development and implementation
is already underway with the Menzies
Aviation Iberica operation achieving
ISO 14001:2015 status during 2017.
As part of the EMS development,
it is intended that a network-wide
waste management strategy will
also be developed and implemented;
this will look at both operational and
office work areas to establish a more
robust recycling protocol and seek
to increase awareness of correct
waste segregation. We would wish
to increase the level of operational
oversight through the appropriate co-
ordination with our waste contractors,
in addition to considering waste
prevention and the ways in which
we can prevent waste production
(e.g. going paperless with some of
our processes).
Energy management is another area
which will be subject to consideration
in 2018. Where possible we will aim
to reduce the consumption of
non-renewable energy and increase
the use of renewable energy sources
and technologies that reduce fossil
fuel consumption (e.g. electric
vehicles). We will also seek to identify
opportunities in close proximity
to our operations that volunteers
can get involved in to promote
environmental causes.
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45
Strategic Report Financial StatementsShareholder InformationGovernance Reports The Group is proud of Menzies Distribution’s status as a Carbon Trust Standard holder for nine consecutive years. The Standard recognises the business’ commitment to measure, manage and reduce its carbon footprint. Responsible Business continued
Greenhouse Gas
Emissions Reporting
Under the Climate Change Act
2008 and the Companies Act 2006
(Strategic Report and Directors’
Report) Regulations 2013 (the
“Regulations”), we are mandated
to disclose the greenhouse gas
(“GHG”) emissions arising from our
operations. We disclose this figure
in the form of tonnes of CO2e on all
material emissions of the six gases
covered by the Kyoto Protocol
generated from both direct sources
and purchased electricity, heat,
steam and cooling.
The period covered for the purposes
of this GHG Emissions Reporting
section is 1 January 2017 to
31 December 2017. We report on
Scope 1 emissions (direct combustion
of fuels) and Scope 2 emissions
(indirect combustion e.g. purchased
electricity) as follows: Scope 1 –
fuels consumed by passenger
and delivery vehicles, natural gas
consumption in buildings and
fugitive emissions of refrigerants;
and Scope 2 – UK electricity and
overseas electricity.
In order to ensure optimum
transparency, all data is collated
from sites and fed into our Carbon
Tracker system, where the electricity
usage and fuel consumption is
calculated into CO2e using emission
factors issued by the Department
for Business, Energy and Industrial
Strategy (BEIS).
Our independent GHG verifier,
Carbon Footprint, was originally
engaged to certify that our 2016
data-sets were satisfactory,
methodologies appropriate and
conversion metrics/calculations
sound, and continues to provide
independent external verification
of our data. Carbon Footprint has
validated our submissions and
confirmed that for 2017 our emissions
factors, methodology and GHG
calculations are robust. It continues
to assist in the improvement of our
data collection methodologies and
is working with us to identify options
which will allow us to offset a portion
of our emissions.
Going forward we intend to improve
upon the quantity of data captured
using our Carbon Tracker, which in
turn will provide further increased
visibility on our emissions. We will
also continue to engage with our
colleagues who enter data into this
system, highlighting the importance
of this reporting generally and
requesting feedback on how the
process could be simplified
operationally together with any
other suggested improvements.
This will serve to further foster and
nourish an already positive carbon
reporting culture.
The Company also participates
in the following UK Government-
driven carbon reporting schemes:
• the Energy Savings Opportunity
Scheme (“ESOS”) which runs in
four year cycles; and
Responsible Business in Action
ENVIRONMENTAL
INNOVATION
Our acquisition of Gnewt Cargo provides us with the opportunity
to build on relationships and partnerships with public funding
bodies such as Innovate UK, Transport for London and the London
Mayor’s Office, as well as the UK’s best logistics academia.
We are currently working on a number of research partnership
projects that consider not only how we could more effectively
electrify our Distribution fleets but also explore innovative
methods of undertaking deliveries in urban locations in a more
efficient and environmentally friendly way through the reduction
of emissions and congestion.
Projects include the development and utilisation of alternative
electric vehicles exclusive to the UK market and the development
of models that utilise more deliveries on foot whilst using electric
vans as mobile depots.
CO2e Emissions
Measure
2017 Global tonnes of CO2e
Group
Total
Aviation
Division
Distribution
Division
2016 Global
tonnes
of CO2e
Total
2017 UK tonnes of CO2e
UK
Total
Aviation
Division
Distribution
Division
2016 UK
tonnes
of CO2e
Total
Combustion of fossil fuels
169,319
131,111
38,208
63,841
45,889
7,681
38,208
30,864
Electricity purchased
for own use
50,814
47,389
3,425
21,080
Total
220,133
178,500
41,633
84,921
6,202
52,091
2,777
3,425
10,458
41,633
6,443
37,307
Intensity ratios
(tonnes of CO2e)
Per £000 turnover
Per aircraft turnaround
Per £000 turnover total
0.148
0.087
• the Carbon Reduction
Commitment Energy Efficiency
Scheme (the “CRC Scheme”),
which is due to be phased-out
in the next two years.
ESOS
ESOS is a mandatory UK energy
assessment scheme which has been
in force since July 2014. It requires
larger companies and non-public
sector organisations to conduct
energy saving assessments and
identify where energy savings can
be implemented. Carbon Footprint
was appointed our Lead Assessor
and undertook our Phase 1 ESOS-
compliant energy audit, covering
the period 1 January 2014 to
31 December 2014. As a Scottish
headquartered business, we were
also required to submit these audit
findings to the Scottish Environment
Protection Agency (SEPA).
The ESOS scheme is currently in
Phase 2 and we must conduct our
Phase 2 energy assessment before
it concludes in 2019. The decision
is pending as to when this will
take place.
Carbon Footprint previously identified
a number of opportunities that would
allow us to reduce our total energy
consumption (including buildings
and direct transport-related energy).
0.034
0.137
0.120
0.068
0.041
0.140
0.035
0.037
0.028
0.034
0.124
0.027
An ongoing programme of energy
management is in place and we now
have accurate baselines of energy
consumption at our locations. Where
practical, therefore, energy saving
measures can be identified and
implemented at certain sites; we
will be able to reduce our energy
consumption and in turn our CO2e
footprint. Such initiatives will form
part of our environmental strategy
and should be reflected in the ESOS
Phase 2 assessment.
CRC Scheme
The CRC Scheme, effective from
April 2010, is an obligatory emissions
trading scheme with the stated
objective of improving energy
efficiency and reducing carbon
dioxide emissions in large public
and private sector organisations.
Under the Scheme, we must report
annually on our UK operations’
energy usage, a disclosure which
continues to be of assistance from
a GHG reporting perspective.
Whilst the CRC Scheme is scheduled
to be abolished following the
2018/2019 compliance year, our work
plans in this regard continue and we
will submit our annual compliance
report to the CRC Registry by
31 July 2018.
This Emissions Reporting section is
incorporated into the Directors’ Report
contained on pages 84 to 89 of this
Annual Report and Accounts 2017.
Influence on the
Environment Highlights
Edward Levine was appointed VP
Group Environment & Sustainability
in October 2017 and is tasked with
overseeing the Group’s Environmental
Programme and ensuring full
compliance with all legislative and
regulatory requirements.
We acquired Gnewt Cargo Limited
in August 2017; Gnewt operate the
largest all-electric vehicle fleet in the
UK and delivered over 2.8m parcels
during the year.
Cloud-based ‘Carbon Tracker’
software was implemented on a
global basis, serving to enhance
and standardise our carbon data
consolidation process and allowing
tailored carbon reduction programmes
to be implemented regionally.
We achieved a target of 90% landfill
avoidance for waste collected from
36 Menzies Distribution locations
during 2017.
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Strategic Report Financial StatementsShareholder InformationGovernance Reports GOVERNANCE REPORTS,
FINANCIAL STATEMENTS AND
SHAREHOLDER INFORMATION
Governance
Reports
Chairman’s Introduction
Board Structure
Board of Directors
50-90
50
Financial
Statements
Independent Auditor’s Report
91-176
91
Shareholder
Information
Notice of Annual General Meeting
177-187
177
51
Group Income Statement
102
General Information
184
52
54
59
Statement of Comprehensive Income 103
Corporate Governance Statement
Nomination Committee Report
Balance Sheets
Statements of Changes in Equity
Audit Committee Report
61
Statements of Cash Flows
Human Resources Committee Report 66
Notes to the Accounts
Remuneration Committee Report
Directors’ Report
67
84
Statement of Directors’ Responsibilities 90
Five Year Summary
Subsidiary, Joint Venture
and Associate Undertakings
104
105
107
108
160
161
Responsible Business continued
Our Social
Contribution
Successive generations of the
Menzies family have served as
both leaders and custodians of
John Menzies plc and, through
recognition of the importance
of social responsibility and the
impact of our operations on the
environments in which we operate,
the Company continues to preserve
and grow its operations for future
generations. We seek to provide
charitable support to organisations
that both assist and empower
the generations that preceded us
and invest in the wellbeing and
opportunities of the generations
that will follow us.
Additionally, during 2017 we were
guided by the community and
charitable priorities of our People
and also continued to support
causes with whom we have had
fruitful partnerships in the past and
who satisfy the three fundamental
objectives of our social investment
criteria i.e.:
• encourage and build relationships
within both the geographical
areas and the sectors in which
we operate;
• make charitable contributions
that reflect our shared company-
community values; and
invest in local people,
communities and industries.
•
During 2017 our Regions were asked
to identify charities which reflected
these objectives and resonated
with our continuing charitable
theme of the relationship between
generations. An annual budget
of £100,000 was approved by the
Board with £80,000 allocated to
the Main Charity Fund and £20,000
allocated to the John Maxwell
Menzies Fund, which is used to
encourage employee participation
in charitable, voluntary and
community-related activities and
provides individual cash awards of
up to £350 per employee or £700
per team of employees.
The Strategic Report on pages 1
to 48 of this Annual Report and
Accounts 2017 has been approved
by the Board of Directors in
accordance with the Companies
Act 2006 (Strategic Report and
Directors’ Report) Regulations 2013.
On behalf of the Board
John Geddes
Company Secretary &
Director of Corporate Affairs
12 March 2018
TIME TO BEAT CANCER
The Company has been touched by cancer at all levels in recent
years and thus chose to support the Beatson Cancer Charity in
the United Kingdom in honour of those colleagues who lost their
battle against the disease.
Joyce Ross, Beatson’s Corporate Partnerships Manager, said:
“Beatson Cancer Charity is so grateful for the continued support
of John Menzies plc. This vital funding will go towards patient and
family support services, plus a range of specialist posts including
nursing, radiography, physics and research-based staff as well as
additional staff training and development.”
Our Social
Contribution Highlights
In 2017 Menzies Aviation re-introduced
its Cross-Cultural Team Challenge
which saw two teams of high-
performing managers, selected from
across the globe, participate in
fundraising activities designed to
develop their leadership capabilities
and raise funds for the nominated
charities, further details of which can
be found in the case studies on pages
40 and 42.
£21,250 was donated to organisations
nominated and championed by our
People, reflecting causes close to
their hearts.
£23,750 was committed to
organisations that support and invest
in the younger generations through
promoting the wellbeing of children
and tackling issues which undermine
their life chances such as inequality,
poverty and lack of education.
£16,000 was donated to organisations
that assist and empower the
generations which preceded us
by enabling their independence,
addressing their social and health
needs and generally improving their
quality of life.
MORE THAN
JUST A MEAL
Metroport Meals on Wheels is
a Texas-based charity which
describes itself as a group of
‘neighbours helping neighbours,
working to alleviate hunger...
and foster the independence,
worth and dignity of each
individual’. Menzies Aviation’s
Americas region selected
Metroport Meals on Wheels as
one of its nominated charitable
beneficiaries for 2017 in light
of the organisation’s
positive and
compassionate
contribution to
community life.
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Strategic Report Financial StatementsShareholder InformationGovernance Reports Chairman’s Introduction
Board Structure
A ROBUST GOVERNANCE
FRAMEWORK
Board
Principal responsibility is to ensure the long-term success of the Company, assuming responsibility for the Group’s
overall strategy and providing shareholders with stability and growth.
Audit
Committee
Monitors the integrity of the
Group’s financial reporting
and financial statements,
reviews the effectiveness of
internal controls and risk
management, and oversees
the relationship with the
external auditor.
Nomination
Committee
Ensures appropriate
succession plans are in place
and reviews the structure and
composition of the Board to
ensure the necessary balance
of knowledge, skills and
experience to develop and
support Group strategy.
Remuneration
Committee
Determines and agrees the
Company’s remuneration
policy in respect of Executive
Directors and the Chairman,
together with their specific
remuneration packages.
Human Resources
Committee
Assists the Board in fulfilling
its Human Resources
obligations and ensures
standardisation, adequacy
and effectiveness of structure,
policies and process.
Dr. Dermot F. Smurfit
Chairman
Executive Committee
Responsibility for operational and strategic matters.
AVIATION
DISTRIBUTION
Dear Shareholder,
On behalf of the Board of John
Menzies plc I would like to introduce
our Governance Reports for the
financial year ending 31 December
2017. As you will see, these describe
how the Company has continued
to apply the principles of good
corporate governance contained
in the UK Corporate Governance
Code (April 2016) (the “Code”)
throughout the year and provide
information on the workings of the
Board and its Committees, together
with details of our systems of
internal control and risk
management.
In accordance with the Financial
Conduct Authority’s Listing Rules
we are required to report on how
we have complied with the main
principles of the Code. I am happy
to report that it is the view of
the Board that the Company has
complied with all relevant provisions
for the 2017 financial year and
continues to do so.
Integrity is a crucial component of
our business and as a Group we are
committed to conducting business
honestly, fairly, safely and in
compliance with all applicable laws,
regulations and ethical standards.
To do this it is imperative that
we have a robust governance
framework in place across our
operations which not only sets
the ethical parameters we must
work within but which is flexible
enough to allow us to pursue our
strategic objectives and expansion
opportunities and in turn generate
sustainable shareholder value.
knowledge further strengthens the
overall skillset of the Board which,
I believe, is well-placed to address
the constantly changing needs of
our operations and drive forward
the Group’s strategic priorities
and objectives. In 2018 we will
continue to evolve and enhance our
leadership capabilities as and when
considered desirable, unlocking
the significant potential that exists
within the Group, and ensure that
the appropriate succession plans are
in place at all levels of our business.
Dr. Dermot F. Smurfit
Chairman
12 March 2018
I am confident that we do have
such a framework in place, as clearly
proven through the transformational
ASIG deal and the successful
integration of the business into
our operations which was
underpinned by our relentless
drive for operational excellence
and standardisation.
Whilst Dermot Jenkinson resigned
during 2017 after a 32 year tenure
on the Board, I was delighted to
welcome Philipp Joeinig as a
Non-Executive Director following
a review of Board structure. Philipp’s
extensive Aviation industry
Composition of the Board
Length of Tenure
(Non-Executive Directors)
Board by Gender
1
5
1
1
3
3
4
5
Executive Director – 3
Independent Non-Executive
Director – 5
Chairman – 1
0-3 years – 4
4-6 years – 1
7-9 years – 0
More than 9 years – 0
Executive Male – 3
Executive Female – 0
Non-Executive Male – 5
Non-Executive Female – 1
UK Corporate Governance Code
The Board remains committed to the principles of good corporate governance contained in the UK Corporate
Governance Code (April 2016) (the “Code”), which is published by the Financial Reporting Council and
available on its website at www.frc.org.uk. The Company continues to follow the good practice which the
Code recommends and the Board considers that the Company has applied the principles and complied with
the provisions set out therein throughout 2017, as detailed in this Statement and the associated Reports.
The Board believes that the Annual Report and Accounts 2017 are, when taken as a whole, fair, balanced
and understandable, providing shareholders with the requisite information to assess the Company’s
performance, business model and strategy.
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Financial StatementsShareholder InformationStrategic Report Governance Reports
Board of Directors
Committee Membership Key
Audit Committee
Nomination Committee
Remuneration Committee
Human Resources Committee
Indicates Committee Chair
Name and Title
Dr. Dermot F. Smurfit
Chairman
Forsyth Black
Executive Director,
President & Managing
Director, Menzies Aviation
Giles Wilson
Executive Director,
Chief Financial Officer
John Geddes
Executive Director,
Company Secretary &
Director of Corporate Affairs
David Garman
Non-Executive Director
& Senior Independent
Director
Silla Maizey
Non-Executive Director
Geoff Eaton
Non-Executive Director
Paul Baines
Non-Executive Director
Philipp Joeinig
Non-Executive Director
Date of Appointment
July 2016
January 2016
June 2016
November 2016
June 2015
May 2014
June 2015
June 2016
June 2017
Experience and Skills
Other Appointments
Dermot brings a wealth of
cross-industry experience
to bear on his leadership
of the Company.
He previously served as
Chairman of Powerflute
Oyj and was joint Deputy
Chairman of Jefferson
Smurfit Group PLC (1994-
2003) and its worldwide
Director of Sales and
Marketing (1997-2003).
Prior to this he held a
number of other senior
positions within the group.
Dermot is a former
Chairman of Anker PLC,
Peach Holdings PLC, the
World Containerboard
Organisation and FEFCO,
the European Federation
of Corrugated Board
Manufacturers. He was
also previously Chairman
of Eurolink Motorway
Services Limited and a
Director of ACE Limited,
Aon BV., Timber Capital
Limited and The Forest
Company Limited.
Chairman of ML
Capital Group
Chairman of AustroCel
Hallein GmbH
Director of Gamma
(Fiber) Holdings 1 B.V.
During the course of his 17
year career with the Group,
Forsyth has worked in a
number of commercial and
operational leadership roles
across the Aviation Division
and most recently served
as Managing Director of
Menzies Distribution.
Forsyth brings a wealth
of commercial, managerial
and business development
experience to the Board,
having launched and
grown our African Aviation
business, established
our Aviation business in
India and led the entry of
Menzies Distribution into
the parcel delivery market.
Giles brings great
financial acumen and a
deep knowledge of the
Aviation Services market
to his role on the Board.
He has worked with
the Group since 2011
in a variety of senior
roles, including Finance
Director of Menzies
Aviation and Senior Vice-
President of the Group’s
African, Middle East and
Indian Operations.
A chartered accountant,
he was formerly Finance
Director of Commercial
Estates Group and
held senior finance
positions at Gallaher
Group PLC, including
Finance Director UK.
John has held the position
of Group Company
Secretary since 2006,
having joined the Group
in 1997. He was appointed
to the Board in late 2016
and is a member of IATA’s
Ground Operations Group.
John has extensive
knowledge of both
Operating Divisions
and his responsibilities
include Governance, Risk
and Investor Relations.
As a Chartered Secretary,
John’s career has included
Company Secretariat
posts at Bank of Scotland
plc and Guinness plc.
David brings
comprehensive
industrial experience
and logistics sector
expertise to the Board.
He was previously Chief
Executive of TDG plc,
a European contract
logistics and supply chain
management business;
an Executive Director of
Associated British Foods
plc; held Non-Executive
directorships at St Modwen
Properties PLC, Kewill
Limited, Victoria PLC
and Phoenix IT Group
PLC: and occupied a
variety of management
roles at United Biscuits.
Silla is a qualified
accountant and brings
extensive experience of
the air travel industry
to the Board.
She enjoyed an Executive
career at British Airways
(1978-2012) holding a
number of roles within
Finance, Procurement,
Corporate Responsibility
and Customer Services.
Most recently Silla served
as Managing Director
of London Gatwick.
Geoff is a chartered
accountant and has had
an extensive Executive
career, with roles including
Chief Operating Officer
of Premier Foods plc and
Chief Executive Officer
of Uniq plc. He has a
considerable business-
to-business track record
in both Europe and the
United States, experience
of diverse corporate
cultures and brings
extensive international
business experience to
his Board position.
Philipp brings a deep
understanding of the
Aviation Services industry
to the Board, having
occupied a number
of senior roles within
Swissport International
Limited over a nine year
period (2007-2016),
latterly as Executive Vice-
President covering Europe
Central, East and West.
Prior to this his career
included management
consultant roles with both
Management Consulting
Group PLC and Lausanne
Consulting Group Limited.
Paul brings extensive
Corporate Finance
experience to the Board.
Since 2013 Paul has held
senior advisory roles
with Vermilion, a leading
China-based investment
banking firm, and Smith
Square Partners, a
UK-based independent
corporate advisory firm.
He served Hawkpoint
Partners, a then leading
independent corporate
advisory business, as Chief
Executive (2003-2009)
and Executive Chairman
(2009-2013); was a main
board director of Collins
Stewart Hawkpoint plc
(2006-2012); and, prior
to joining Hawkpoint
Partners in 2000, was
Chief Executive (Corporate
Finance Division) of
Charterhouse Bank.
Director of various
Group companies
Director of various
Group companies
Board member of
the Airport Services
Association
Director of various
Group companies
Non-Executive Director
of Troy Income &
Growth Trust plc
Non-Executive Director
of Speedy Hire Plc
Director of various
private companies
Chair of NHS Business
Services Authority
Non-Executive Director
of the Crown Commercial
Service
Non-Executive Director
of Network Rail Limited
Chairman of New
England Seafood
International Limited
Chairman of Butcher’s
Pet Care Limited
Committees
n/a
n/a
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Governance Reports Financial StatementsShareholder InformationStrategic Report
Corporate Governance Statement
Board Composition and Responsibilities
Following the appointment of Philipp Joeinig and the resignation of Dermot Jenkinson during 2017, the Board
currently comprises:
• the Chairman;
• three Executive Directors; and
• five Non-Executive Directors,
as detailed in the diagram on page 51 of this Annual Report and Accounts 2017. The skills and experience of individual
Board members are a key focus, together with the collective knowledge and composition of the Board more generally,
to ensure the leadership needs of the organisation are met and the Company is well-placed to execute its strategy and
compete effectively in the markets in which it operates.
The composition of the Board is subject to annual review. Whilst the current balance of Executive/Non-Executive
Directors is considered appropriate (with specific reference to the collective balance of skills, knowledge and expertise),
at the appropriate time in 2018 the Nomination Committee will consider whether refreshment is required in light of
current or proposed Group strategic developments. All new Directors are subject to election by shareholders at the
first annual general meeting following their appointment and, together with all incumbent directors and in accordance
with best practice principles, subject to annual re-election thereafter. Further biographical information on the current
Board can be found on pages 52 and 53 of this Annual Report and Accounts 2017.
The Board’s primary collective responsibility is to promote the long-term success of the Company for the benefit of
its shareholders as a whole. In providing leadership to and setting the strategic direction of the Group, the Directors
must identify and manage the interests of internal and external stakeholders within the robust framework of internal
controls which exists.
In addition to setting and monitoring the delivery of the Group’s strategy, the Board has a formal schedule of
items specifically reserved for its consideration. The Board will, for example, consider and approve, if appropriate,
financial and operational matters such as potential acquisitions and disposals, major non-recurring projects and
capital expenditure above certain thresholds; the Group’s financial statements and Viability Statement; and the
appropriateness of going concern sign-off at the half year and year end. It also assumes regulatory and governance
responsibilities across a broad spectrum of matters including Corporate Social Responsibility, Health and Safety
and key Group policies.
Chairman
Our Chairman, Dr. Dermot F. Smurfit, is tasked with leading the Board in an ethical manner whilst promoting not
only the effectiveness of the Board and individual Directors but also effective Board relationships. He must ensure
the Board is well-balanced in terms of composition and succession-planning and oversee and appropriately action
Board evaluation. Whilst directing the Board in the determination and development of the Company’s strategy,
Dr. Smurfit ensures he is always available to Executive Directors should any issues or concerns arise and is actively
involved in engagement with shareholders and other stakeholders when required. Upon his appointment, he was
considered to satisfy the independence criteria set out in the Code.
Senior Independent Director
David Garman continues to be the Company’s Senior Independent Director. Providing assistance and support to the
Chairman in the execution of his duties, David is available to the Company’s shareholders, and other stakeholders,
where issues or concerns arise that cannot be resolved through the standard channels. In conjunction with the
Non-Executive Directors, David is also involved in the Chairman’s performance appraisal which takes place on
an annual basis.
Executive Directors
Each of our Executive Directors has specific duties and responsibilities which have been agreed by the Board as a
whole and which may at times vary in accordance with business needs and/or the evolving nature of our operations.
Collectively, the role of the Executive team is to oversee the day-to-day management of the Company, providing
clear and robust leadership to both the business as a whole and the Senior Management team whilst simultaneously
driving the successful delivery of the Group’s strategy.
Non-Executive Directors
Our Non-Executive Directors are also involved in the effective development and execution of the Group’s strategy.
They are expected to provide independent challenge to the performance of Management, including the Executive
team, where appropriate and must satisfy themselves in respect of both the robustness of the Group’s systems of
internal financial controls and risk management and the integrity of the financial information. In accordance with
best practice, our Non-Executive Directors annually evaluate the performance of the Chairman.
During 2017 one new Non-Executive Director, Philipp Joeinig, was appointed as it was considered that his experience
within the Aviation industry would be a valuable addition to the Board’s knowledge base as the Company continues
to strengthen its business and looks to take advantage of the potential expansion opportunities that exist.
Directors must exercise their judgement independently from the influences of others and the independence
of individual Directors is reviewed on an ongoing basis by the Board, taking into account the characteristics of
independence contained within the Code. All current Non-Executive Directors are considered independent and,
throughout 2017 and since the end of the financial year ending 31 December 2012, all Directors on each of the
Board Committees referenced below have been independent in compliance with the Code.
Board Meetings and Support
The Board has a formal schedule of matters reserved for its consideration and during 2017 met eight times, as
scheduled (as detailed below), although additional Board meetings may take place throughout the year if required.
Directors receive Board papers in advance of all Board meetings through a secure electronic platform and are given
the opportunity to feedback on the content and quality of Board packs via the annual Board evaluation process.
Board and Committee meetings attendance in 2017
Appointed/
resigned
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Human
Resources
Committee 1
Meetings
D Smurfit
F Black
G Wilson
J Geddes
S Maizey
D Garman
G Eaton
P Baines
P Joeinig
July 2016
January 2016
June 2016
November 2016
May 2014
June 2015
June 2015
June 2016
June 2017
Former Directors
D Jenkinson
October 2017
8
8/8
8/8
8/8
8/8
8/8
8/8
8/8
8/8
5/5
3/7
3
–
–
–
–
3/3
3/3
3/3
3/3
2/2
–
2
–
–
–
–
2/2
2/2
2/2
2/2
–
–
2
–
–
–
–
2/2
2/2
2/2
2/2
–
–
2
–
2/2
–
2/2
2/2
2/2
–
–
2/2
–
Note:
1. Claire Hall, Group EVP People, is also a member of the Human Resources Committee.
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55
Governance Reports Financial StatementsShareholder InformationStrategic Report Corporate Governance Statement continued
In July 2017 an offsite Board meeting was held in Menzies Aviation’s Americas regional Head Office at Diplomacy
House, Fort Worth, Texas, our new facility that was opened in February 2017, following the acquisition of ASIG, and
located to the immediate south of Dallas/Fort Worth International Airport. The Directors thereafter undertook a
visit to our fuel farm operations at Dallas Love Field Airport. The October Board meeting also took place offsite at
Oslo Airport, one of our Aviation network locations. The Board appreciates the value in undertaking such offsite
meetings providing, as they do, the opportunity to both engage with our People on the ground and ensure an
up-to-date awareness of the Company’s operations.
The Group Company Secretary is available to support Directors as required and is on hand to ensure that independent
professional advice is available to both Executive and Non-Executive Directors where considered necessary to enable
them to effectively discharge their directors’ duties.
Induction, Development and Diversity
A formal induction programme is in place for all new Board appointments to ensure new Directors undergo a
comprehensive introduction to the Group and are ably equipped to effectively discharge their Board and Committee
responsibilities. Whilst this programme is structured in terms of key content and items covered, it is also tailored to
the individual development needs and experience of the new Board member in question. It is imperative that all new
Directors fully understand the Group’s operations, its strategic objectives and the landscapes, regulatory, legislative
and otherwise, in which it operates and, to this end, all new Directors will participate in introductory meetings
with both the Executive team and relevant members of Senior Management in addition to undertaking site visits
to provide operational visibility. The Chairman and other Non-Executive Directors are also on hand to advise as
appropriate and structured briefings are arranged to ensure full familiarity with the Group, its governance, policies
and procedures, together with meetings with major shareholders. Philipp Joeinig underwent this induction process
following his appointment in June 2017, tailored as necessary to take account of his experience and knowledge.
There is a keen recognition that the continuing development of the Company’s Board is important if it is to perform
effectively and a number of arrangements are in place to ensure all Board members receive any training that they
require or may desire. Training needs are identified through the annual Board evaluation process following which
the Group Company Secretary and the Chairman discuss the necessary training and development outcomes,
with Directors also encouraged to undertake such site visits as may be appropriate and/or desirable to achieve
a comprehensive understanding of Group operations. The Group Company Secretary will also arrange for the
Board to be kept apprised of key regulatory, policy, governance and other issues through a variety of means such
as the inclusion of briefing papers within Board packs or the attendance of guest speakers at Board meetings.
The Board is eager that the talent pipeline within the Group continues to be fostered and supports the training
needs of all Group employees. It remains committed to diversity and equality and is fully cognisant of the
advantages which diversity, in whatever form, can introduce to important decision-making processes, both within
and outwith the Boardroom. In terms of the latter, each of the Business Leadership teams is tasked with ensuring
that the skills and talent of Group employees are advanced to enable them to progress within the internal talent
pipeline. However, whilst due regard is given to diversity in the context of potential Board appointments, individuals
are nominated and ultimately appointed to the Board on the basis of merit and evaluation against objective criteria;
the Board remains of the opinion that setting a quota will not produce the optimum result in terms of the balance of
relevant skills, knowledge and experience necessary to drive the Group’s strategic objectives and deliver long-term
shareholder growth. The Group’s approach to diversity and inclusion, including the development of a full Diversity
Policy, is detailed on page 41 of this Annual Report and Accounts 2017, which information is incorporated by
reference into this Corporate Governance Statement.
Board Recruitment and Succession Planning
As referred to above, the Nomination Committee (further details of which can be found on pages 59 and 60 of this
Annual Report and Accounts 2017) keeps the composition of the Board under review to ensure the appropriate
balance of skills, knowledge and experience is present. The size and composition is monitored on an ongoing basis
with a focus on key factors such as the Directors’ collective knowledge and experience, diversity factors (including,
but not limited to, industry and international experience, nationality and gender) and Board evaluation outcomes
(in relation to which please see the following paragraph). To ensure adequate succession plans are in place the
period in office of each Director is also considered.
External recruitment agencies may be engaged by the Nomination Committee if there is a need to fill a Board
position, whether Executive or Non-Executive. The Committee is also responsible for Chairmanship continuity
and must ensure that at any particular time a successor has been identified from within the incumbent Board
or located via external means and, similarly, with regard to the replacement of Executive Directors.
Board Evaluation
During 2017 David Garman, the Senior Independent Director, led the annual Board effectiveness evaluation. This
involved one-to-one discussions with each Director to understand and evaluate their responses to a concise Board
questionnaire, the results of which the Board also collectively reviewed.
Whilst the overall conclusion was that the Board functions in an effective manner, with a measurable improvement
being made in year on year results, some of the scoring reflected the ongoing work being undertaken in respect of
particular key initiatives and strategies. Certain matters were highlighted for more detailed discussion including the
desire to further streamline Board papers and the need to reduce discussions around operational detail which, at
times, detracted from the consideration of key agenda items. It was also noted that whilst fewer Board meetings
during the year had benefited both the preparation and quality of Board papers, the more extended period
between meetings necessitated that all key points discussed were identified and comprehensively addressed
in Board minutes.
A further evaluation outcome was that Board members were satisfied with the current Board composition but agreed
that it should be reviewed at the appropriate time in 2018, with specific reference to Group strategic developments.
Additionally, the introduction of site visits was viewed as a positive development and it was recognised that a Board
meeting should be designated or added to allow for the specific consideration of strategy and succession planning.
The Group’s HR capabilities and People agenda were again highlighted as requiring particular focus, underpinned by
the appointment of the Group’s EVP People and the establishment of the Board’s Human Resources Committee; it
was noted that in addition to staff retention issues, the Board looked forward to proposals in relation to HR strategy
more generally and a management development programme.
The Board remains a strong advocate of the principles and provisions of the Code regarding performance evaluation
and may, periodically, engage external consultants to ensure the Company’s evaluation process is fit for purpose and
refreshed as appropriate. The last such independent review took place in the final quarter of 2014.
Board Committees
There are four principal Board Committees, Nomination, Remuneration, Audit and Human Resources, further details
of which can be found on pages 59 to 83 of this Annual Report and Accounts 2017. Each of these Committees has
defined Terms of Reference, as available on the Group’s website, and delegated Board responsibilities. In accordance
with Board policy, membership of the Committees comprises solely Non-Executive Directors and the Chairman of
each of the Audit, Remuneration and Human Resources Committees is selected from Directors who are considered
independent under the terms of the Code, whilst the Chairman of the Nomination Committee is the Senior
Independent Director.
Committee membership is monitored regularly to ensure a suitable balance and rotation of Directors and the Group
Company Secretary is available to each of the Committees to both provide guidance and support as required and
ensure the Committees have the necessary resources to hand, including independent external advisers, to effectively
discharge their duties.
In addition to Committee delegation, the Board has also assigned responsibility of operational and strategic
implementation matters to the Company’s Executive Committee, comprising the Executive Directors, the Managing
Director of Menzies Distribution and other Senior Executives as required.
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Governance Reports Financial StatementsShareholder InformationStrategic Report Corporate Governance Statement continued
Nomination Committee Report
Internal Control and Risk Management
The Board has overall responsibility for the Group’s systems of internal control, covering financial, operational
and compliance, and risk management and for annually reviewing the effectiveness of these systems. The Audit
Committee has, however, delegated responsibility from the Board to review the effectiveness of these systems which
are not designed to eliminate but rather manage and mitigate the risk of failure to achieve business objectives and
provide reasonable, but not absolute, assurance against material misstatement or loss. The day-to-day responsibility
for such systems, including deployment and maintenance, sits with the relevant members of the Senior Management
team, although during 2017 the Board regularly monitored the processes by which risks were identified, evaluated
and managed and continues to keep the effectiveness of the Group’s system of internal control and risk management
under review.
Further details on how the Board manages business risks, including details of our risk management strategy, are
shown on pages 32 and 33 of this Annual Report and Accounts 2017.
Relations with Shareholders
The Board is committed to establishing and maintaining effective communications with its shareholders, together
with other third parties, and continues to develop its Investor Relations programme to ensure open and informative
lines of communication are in place.
In addition to the standard calls and meetings with analysts and investors throughout the year, full and interim
results presentations took place in London in March and August 2017 respectively whilst the Company hosted an
Aviation Capital Markets Day in November 2017. Feedback is sought and communicated to the Board after such
events, with regular updates provided on all shareholder and analyst meetings as a routine Board agenda item. The
Chairman and Senior Independent Director remain available to meet with investors throughout the year and Board
members may request meetings with major shareholders, arranged via the Group Company Secretary, as and when
considered necessary.
The Company’s website was re-launched during 2017 to make it more user-friendly and help improve dialogue with
shareholders. It contains a wide range of information on the Group, including a dedicated Investor Centre through
which the Company disseminates its various announcements, results and reports.
The Board is aware of the importance of maintaining a clear dialogue with shareholders and therefore welcomes
the use of the annual general meeting (“AGM”) as an additional forum through which to engage with shareholders;
shareholders may ask questions either about the specific business to be considered at the AGM or, more generally,
about the Group’s strategy, performance and activities. The Chair of each of the Board Committees is always
available to answer any shareholder questions and full details of the proxy votes cast on each resolution put to the
AGM are released via a London Stock Exchange announcement and also made available on the Company’s website
as soon as reasonably practicable following the AGM.
David Garman
Nomination Committee Chairman
Committee Members
Name
D Garman
S Maizey
G Eaton
P Baines
Position
Attendance
Chairman
Member
Member
Member
2/2
2/2
2/2
2/2
Welcome to the Report of the
Nomination Committee for the
2017 financial year. The Committee
comprises solely independent
Non-Executive Directors and is
chaired by me, David Garman, as
the Senior Independent Director.
The other members of the Committee
who served during the year are Silla
Maizey, Geoff Eaton and Paul Baines,
with the Group Company Secretary,
John Geddes, continuing as Secretary.
The Committee met on two occasions
during 2017 with Executive Directors
invited to attend where considered
appropriate or necessary.
The Nomination Committee operates
under formal and transparent Terms
of Reference, closely reflecting
the relevant provisions of the UK
Corporate Governance Code (April
2016) (the “Code”), which can be
found on the Company’s website.
During 2017 the Committee
considered its Terms of Reference
to ensure they remained fit for
purpose and it was agreed that very
minor alterations would be made.
Role and Responsibilities
A key responsibility of the
Nomination Committee is to
ensure that, collectively and at
any given time, the Company’s
Board of Directors possesses the
necessary balance of knowledge,
skills and experience to support
and develop the strategy of the
Group. Accordingly, the Committee
regularly evaluates this balance
and must make the appropriate
recommendations to the Board as
and when considered appropriate.
In identifying potential Board
appointees the Nomination
Committee may use open
advertising or the services of
independent external advisers to
facilitate the search in question.
The recruitment process will be
undertaken in accordance with the
relevant Group recruitment policies
and candidates from a wide range
of backgrounds, identified on the
basis of merit and against objective
criteria, including the time they
are able to commit to the role, will
be considered. The Nomination
Committee is cognisant of the
benefits that diversity can bring
both to the Boardroom and to the
success of the business itself and is
acutely aware of the importance of
giving due and proper consideration
to all aspects of diversity in its
deliberations. Further information on
the measures which the Group takes
to support diversity can be found
on pages 41 and 56 of this Annual
Report and Accounts 2017.
During 2017 Philipp Joeinig was
identified by the Nomination
Committee as a suitable candidate
for the position of independent
Non-Executive Director; the balance
of skills, knowledge and experience
of the Board had been evaluated
and the Nomination Committee
considered that Philipp’s international
management consultancy experience,
coupled with his executive career
within the Aviation industry, could
only serve to strengthen the Board’s
position as it continues to pursue
expansion opportunities. After
undertaking the requisite evaluation
and pursuant to our Terms of
Reference, I, as the Chairman of the
Nomination Committee, reported our
conclusions and recommendations
to the Board which, as a whole, was
ultimately responsible for approving
the appointment (as is the case
for all Board appointments). In
undertaking Philipp’s recruitment,
the Nomination Committee used the
appointment process outlined in the
Corporate Governance Statement
on pages 56 and 57 of this Annual
Report and Accounts 2017.
Succession Planning
The Nomination Committee is also
tasked with ensuring that appropriate
succession plans are in place for
both Directors, Executive and
Non-Executive, and other Senior
Executives of the Company.
Accordingly, it must consider what
skills and expertise may be required
on the Board in the future in light of
both the Group’s strategy and any
challenges and/or opportunities that
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Audit Committee Report
may be on the horizon. The Nomination Committee must ensure that the organisation’s leadership needs are
satisfied; the continued ability of the Group to compete effectively in the marketplace must be considered and
addressed and the sustained growth and success of the Group maintained.
During 2017 the Nomination Committee evaluated its role as regards succession planning within the Group and
noted that this was an area where there was direct crossover with the role and responsibilities of the Company’s
newly created Human Resources Committee. After careful consideration it was agreed that the Nomination
Committee would continue to focus on succession planning from a Board and Executive Committee, comprising
the next immediate level of Senior Management, perspective whilst the Human Resources Committee would
consider wider succession planning within the Group.
Further information on the above matters can be found on, and is incorporated by reference into, this Nomination
Committee Report on pages 54 to 57 of this Annual Report and Accounts 2017.
2017 and Beyond
In addition to the matters referenced above, the Nomination Committee also reviewed the current Board structure and
composition, including the length of service and relevant skillsets of each Director, during 2017. Whilst it concluded that
the Board composition was fit for purpose, a conclusion endorsed through the annual Board evaluation process, it was
agreed that a further review would be undertaken at the appropriate time in 2018 to ensure Board composition was in
alignment with any current or proposed Group strategic developments.
In 2018 the Nomination Committee will continue to monitor the leadership requirements of the business whilst
recognising the importance and attendant benefits of diversity, including gender diversity, when considering
any future Board appointments. As detailed above and in the Corporate Governance Statement, individuals are,
however, nominated and appointed to the Board on the basis of merit and evaluation against objective criteria;
no diversity quotas, gender-based or otherwise, have therefore been set or are targeted. Additionally and in
accordance with our Terms of Reference, I will liaise with the Chairman of the Remuneration Committee in relation
to the service contract and remuneration package to be offered to any proposed Executive Director or Managing
Director of the Group.
On behalf of the Nomination Committee
David Garman
Nomination Committee Chairman
12 March 2018
this page and in the table on
page 55 of this Annual Report
and Accounts 2017. At the start of
each financial year discussions take
place between the Audit Committee
Chairman and the Group Company
Secretary, during which a formal
agenda structure is agreed for
the scheduled meetings and
consideration is given to the
inclusion of non-standard agenda
items. Following each meeting,
which would generally take place
prior to a Board meeting, the Audit
Committee Chairman provides
a comprehensive report to the
Board as a whole, detailing the
Committee’s findings, activities
and recommendations.
It is standard practice for the
external auditor, Ernst & Young LLP
(“EY”), the Group’s Chairman and
the Chief Financial Officer to be
given notice of all Audit Committee
meetings and invited to attend and
speak where considered appropriate.
The Chief Financial Officer, Group
Company Secretary and certain
senior Financial Executives, together
with representatives from the internal
and external audit teams, attended
each of the Audit Committee
meetings held in 2017.
The Audit Committee receives
presentations from members of
the Senior Management team on
a variety of issues and updates are
provided on progress against the
internal control plan throughout the
year. The Audit Committee may also
meet with the external auditor in
the absence of Executive Directors,
affording the opportunity for any
items of concern to be raised with
or by the external auditor.
The Audit Committee may take such
independent professional advice as
it considers necessary to properly
effect its role.
Paul Baines
Audit Committee Chairman
Committee Members
Name
P Baines 1
S Maizey
D Garman
G Eaton
P Joeinig 2
Position
Attendance
Chairman
Member
Member
Member
Member
3/3
3/3
3/3
3/3
2/2
Notes:
1. Paul Baines became Audit Committee Chairman on 12 May 2017 when Silla Maizey stepped down
to become Human Resources Committee Chairman.
2. Philipp Joeinig was appointed to the Audit Committee upon his appointment as a Non-Executive
Director on 1 June 2017.
Having assumed the position of Audit
Committee Chairman following the
Company’s Annual General Meeting in
May 2017, I am delighted to introduce
the Audit Committee Report for the
financial year ending 31 December
2017. The Committee was previously
chaired by Silla Maizey to whom
I would like to extend my sincere
thanks for her contribution during
her Chairmanship; Silla stepped down
as Chairman to assume the role of
Chairman of the Company’s newly
created Human Resources Committee.
The Audit Committee comprises
five Non-Executive Directors: Silla
Maizey, a qualified accountant, David
Garman, Geoff Eaton, a chartered
accountant, Philipp Joeinig, who
became a member of the Audit
Committee upon his appointment as
a Non-Executive Director on 1 June
2017, and myself. The Board of the
Company has determined that
the current composition of the
Audit Committee meets with the
requirements of the UK Corporate
Governance Code (April 2016) (the
“Code”), possessing competence
relevant to the markets in which the
Company operates, although, in line
with good practice, membership will
continue to be reviewed annually.
The Audit Committee has adopted
Terms of Reference which are
displayed on the Company’s website;
these are modelled on the relevant
provisions of the Code. It has
delegated authority from the Board
for ensuring adherence to the Code
provisions and related guidance.
Audit Committee Meetings
The Audit Committee met, as
scheduled, three times during 2017,
with meeting attendance set out on
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Governance Reports Financial StatementsShareholder InformationStrategic Report Audit Committee Report continued
Role and Responsibilities
The primary role of the Audit Committee is to assist the Board in the execution of its oversight responsibilities
including, but not limited to, the effective oversight and monitoring of the integrity of the Group’s financial
reporting to ensure the interests of the Company’s shareholders are safeguarded at all times; it must assess the
quality of the internal and external audit processes and ensure that the risks which our business faces, including
financial, operational and compliance-related, are effectively managed at all times. In doing so, regard must be
had to both the evolving nature of our operations and any changes on the legislative landscape.
Other responsibilities include:
• reviewing both the Company’s financial results announcements and financial statements and the significant
judgments and estimates contained within them;
• advising the Board on whether the annual report and accounts of the Company are, when taken as a whole, 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 the accounting
policies and practices that are 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
whistleblowing (although it was decided at the August Audit Committee that whistleblowing would thereafter
fall under the remit of the Human Resources Committee); and
• overseeing all aspects of the relationship with the external auditor, including its appointment, the audit process,
the supply of non-audit services and monitoring its effectiveness and independence.
The Audit Committee has the power to request any information it considers necessary to discharge its duties,
including from Executive Directors. It believes that the information which it received from the relevant members
of Management was both sufficiently comprehensive and accurate to enable it to fulfil its role and discharge the
responsibilities incumbent upon it during 2017.
Main Activities
• The Audit Committee formally reviewed the Company’s Annual Report and Accounts 2017 (including the
Statements on Internal Control and the work of the Audit Committee) and associated business review together
with the Interim Results announcement made by the Company, which 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 Audit Committee reviewed the reports of Management and the controls assurance (internal audit) provider
and took into account the views of the external auditor. It concluded that a recommendation should be made to
the Board that the required disclosure set out in the Directors’ Responsibilities Statement could be made, as set
out on page 90 of this Annual Report and Accounts 2017.
• The Audit Committee reviewed the work of Management which involved assessing key risks at Group and
Divisional level according to their significance, likelihood and impact, in addition to the Group’s exposure to and
management of these risks. The Risk Register and evaluation of risk constantly evolve and the Audit Committee
was satisfied that Management had appropriate risk management strategies and systems in place to address the
Group’s key business risks, such strategies and systems having been in place throughout 2017 and up to the date
of approval of this document.
• The Audit Committee oversaw and monitored the integration of the ASIG business into the Group’s assurance
model and Risk framework.
• The Audit Committee considered the Group’s General Data Protection Regulation (GDPR) readiness and its
cyber security framework in response to the continuing risk of cyber security breaches.
• The Audit Committee reviewed and adopted an updated internal audit plan and considered the objectivity
and independence of the external auditor.
In addition to its standard agenda, the Audit Committee welcomed presentations on key areas of focus. The Committee
found these extremely beneficial and wishes such ad hoc presentations to continue in 2018, allowing it to be kept
updated on key risk areas of safety, security and financial control.
FRC Corporate Reporting Review
During 2017 the Financial Reporting Council (“FRC”) contacted the Company following on from its earlier
statement that it would conduct a thematic review of companies’ reporting relating to pension disclosures, with the
objective of improving the quality of such disclosures and identifying good practice. I am pleased to report that in
correspondence with us the FRC cited the future benefit payments disclosure, contained on page 109 of our Annual
Report and Accounts 2016 in a graphic format, as an example of better practice in respect of disclosures regarding
the maturity profile of the defined benefit obligation and referenced it within its paper entitled “Corporate Reporting
Thematic Review: Pension Disclosure” (November 2017). We are requested to note that the FRC review covered only
the specific disclosures relating to this thematic review and provides no assurance that our Annual Report and
Accounts 2016 was correct in all material respects.
The Audit Committee also noted the additional items which the FRC raised in relation to pension scheme risk and
the valuation of investments. After careful consideration of these matters we have included the defined benefit
pension scheme risk, impact and mitigating factors within the Principal Risks and Uncertainties detailed on pages
34 to 37 of this Annual Report and Accounts 2017 and disclose the valuation approach for those pension assets
that do not have a quoted market price in Note 23 to the Accounts.
Annual Report and Accounts 2017
The primary areas of judgement considered by the Audit Committee in relation to the financial statements contained
within this Annual Report and Accounts 2017 and how these were addressed are as follows:
Goodwill and 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 Audit Committee evaluated a paper from Management on the results of the impairment assessment which
included the assessment relating to the acquisition of the ASIG business on 1 February 2017. Key assumptions were
reviewed and challenged by the Committee, including discount rates, business risk factors and cash flow projections
based on the most recent budget and strategic reviews. Actions and factors likely to influence levels of impairment
were reviewed with alternative scenarios requested for further analysis. Taking into account the documentation
presented, the Audit Committee was satisfied with the approach and judgements taken.
Pension accounting
The assumptions made in the calculation for scheme liabilities and asset returns are underpinned by a range of
judgements. Assumptions were prepared by external actuaries, reviewed by Management and approved by the
external auditor, ensuring they were aligned to prevailing economic indicators. Changes in assumptions and the
completeness of disclosures were then summarised for the Audit Committee. The increase in mortality rates was
specifically noted. The Audit Committee was satisfied with the disclosures made and judgements taken.
Exceptional and other items
The Audit Committee considered the appropriateness of the measure of underlying profits and the classification
and transparency of items separately disclosed as exceptional and other items. It was satisfied that the measure
of underlying profits provided a reasonable view of the underlying performance of the Group and that there was
transparent disclosure of items shown separately as exceptional and other items.
Revenue recognition
The Audit Committee has reviewed the work completed by Management in the year to ensure that the Group has
appropriately recognised revenues in accordance with its contractual obligations during the period, paying attention
to expected returns. The Audit Committee was satisfied with the approach and judgements taken.
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Taxation
Provisioning for current and deferred tax liabilities and assets requires the exercising of judgement. The Audit
Committee addressed this through the receipt of a range of reports from Management and a separate Tax Committee
exists to deal with such requests (see further details on pages 32 and 33 of this Annual Report and Accounts 2017).
The Audit Committee challenged the appropriateness of Management’s views, including the extent to which these
were supported by appropriate external advice. In particular, the Committee challenged Management’s calculations
of provision for items under discussion with authorities and of the deferred tax assets and liabilities.
Provisions
The Audit Committee has challenged the assumptions used by Management in determining whether provisions
are appropriate in relation to onerous property leases and ongoing litigation matters.
External Group Audit
EY is the appointed external auditor to the Group, having been appointed in 2009 following a full tender process.
Having re-assumed the position of lead audit partner during 2016, Annie Graham continued as lead audit partner
during the Interim Results review in the summer of 2017 but then rotated to Kevin Weston for the year end audit.
There are no contractual obligations in place which restrict the Audit Committee in its choice of external audit provider.
The Audit Committee complies with the Code and the FRC Guidance on Audit Committees (April 2016) with regard
to the external audit tendering timetable and, in relation to mandatory auditor rotation and tendering, the provisions
of The Statutory Auditors and Third Country Auditors Regulations 2016 and the Competition and Markets Authority’s
Statutory Audit Services Order 2014. In accordance with this guidance and legislation, the Committee has determined
that the audit for the financial year ending 31 December 2019 should be tendered, EY having been appointed in 2009
and serving its 10 year tenure in 2018.
It is extremely important that the Audit Committee is of the opinion that its appointed external auditor has
conducted a full and effective audit and, accordingly, the performance of the external auditor is subject to annual
review. In undertaking this review the Chairman of the Audit Committee seeks the opinion of fellow Committee
members, the Chief Financial Officer and also the views of certain members of Senior Management who have been
exposed to/had input into the audit process. The Audit Committee reviews and approves both the Company’s audit
plan and the findings of the external auditor in respect of its audit of the Company’s financial statements, carefully
monitoring these to ensure completeness, accuracy, clarity and integrity.
In seeking to ensure the external auditor’s effectiveness, the Audit Committee keeps its objectivity and independence
under review together with the nature and extent of the non-audit services which it provides. Historically these
non-audit services have included dealing with the Group’s tax affairs as it was considered that its knowledge of the
Group’s business processes and controls made it best-placed to undertake this work in the most cost-effective manner.
However, a change in the applicable EU regulations regarding non-audit fees has meant that from 1 January 2017 there
is a restriction on the work that an external auditor can perform for a listed company in relation to non-audit services.
During 2016 the Company undertook a detailed review of the audit and tax services provided to it which resulted in
PricewaterhouseCoopers LLP being appointed as the Group’s tax advisers from 1 January 2017. In 2017, as in previous
years, the non-audit work undertaken on the Group’s behalf by EY was not handled by the EY external audit partner
but rather managed separately from the audit workstream.
For 2017 EY were paid audit-related fees in the sum of £1.3m, whilst non-audit fees amounted to £0.7m. The Audit
Committee regularly reviews the remuneration received by the external auditor for audit services, audit-related
services and non-audit work to ensure a balance of objectivity, value for money and compliance with statutory
duties is maintained. In 2017 the outcome of these reviews was that performance of the relevant non-audit work
(excluding the tax services referenced above) by EY continued to be the most cost-effective way of conducting
the Group’s businesses and that no conflict of interest existed between the provision of such audit and non-audit
services. Additionally, such reviews allowed the Audit Committee to confirm that the Company continued to
receive an efficient, effective and independent audit service from EY. In reaching this conclusion, the Committee
considered the outcome of the FRC’s review of EY’s audit of the 2016 Accounts, in particular around the reporting
of partners on component audits with long association and safeguards put in place, articulation of the risk around
pension liabilities and detailed testing of pension assets.
All non-audit work is put out to tender and non-audit fees paid to EY are approved by the Chief Financial Officer,
who reports any significant payments or awards of work to the Audit Committee. The Audit Committee believes
that the level and scope of these non-audit services do not impair the objectivity of the external auditor.
Following a review held at the conclusion of the 2017 audit, the Audit Committee was satisfied that EY continued
to provide an effective audit and remained independent and objective.
Internal Control and Audit
In accordance with the FRC’s Guidance on Risk Management, Internal Control and Related Financial and Business
Reporting (September 2014), the Company’s Board of Directors has overall responsibility for the Group’s systems
of internal control, covering financial, operational and compliance, and risk management. Such systems are not
designed to eliminate but rather to manage and mitigate the risk of failure to achieve business objectives and can
provide reasonable but not absolute assurance against material misstatement or loss. These systems have been in
place throughout 2017 and up to the date of approval of this Annual Report and Accounts 2017, although they do
not apply to the Group’s material joint ventures.
Whilst information on the Group’s system of internal controls and risk management framework can be found on
pages 32 and 33 of this Annual Report and Accounts 2017, the Audit Committee has delegated responsibility from
the Board to review the effectiveness of these systems.
The Audit Committee has reviewed the Group’s internal control structure and approved the scope of work and fees
for external controls assurance providers. The Committee continues to believe that due to the complexity of the
Group’s business and the international nature of the business, the internal audit function is best served by using
both internal staff and external providers. Accordingly, the function is delivered by a combination of operational
teams, Deloitte LLP, with its widespread global presence, and, as required, other external operational providers.
Whilst internal staff and other external advisers generally undertake operational branch and station audits, the
work undertaken by the firm relates principally to financial controls.
The Audit Committee reviews findings from the internal audit programme (on financial and key non-financial risks),
together with areas identified for improvement, and these are prioritised for action by Management. Follow-up
reports from Management are considered by the Committee to ensure any weaknesses that have been identified
are fully addressed and appropriate correctional measures implemented. Whilst no system of internal control can
provide absolute assurance against material loss, the Group’s systems are designed to provide the Directors with
reasonable assurance that risks can be promptly identified and appropriate remedial action taken.
A standard accounting manual continues to be used by the Finance teams throughout the Group, ensuring that
transactions and balances are recognised and measured in accordance with prescribed accounting policies and
information is appropriately reviewed and reconciled as part of the reporting process. Additionally, a standard
reporting tool is employed by all Group entities resulting in the consistent collation and presentation of financial
information which in turn facilitates the production of the consolidated financial statements.
The Audit Committee has carefully considered and evaluated the effectiveness of the systems of internal control
for the period from 1 January 2017 to the date of approval of this document and concluded that the Group has
sound systems of risk management and internal controls in place.
On behalf of the Audit Committee
Paul Baines
Audit Committee Chairman
12 March 2018
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Remuneration Committee Report
Silla Maizey
Human Resources Committee
Chairman
Committee Members
Name
S Maizey
F Black
J Geddes
D Garman
P Joeinig
C Hall1
Position
Attendance
Chairman
Member
Member
Member
Member
Member
2/2
2/2
2/2
2/2
2/2
2/2
Note:
1. Claire Hall sits on this Board Committee in her capacity as Group EVP People.
Welcome to the inaugural Report
of the Human Resources (“HR”)
Committee, chaired by me,
Silla Maizey, and comprising both
Executive Directors (Forsyth Black
and John Geddes) and Non-Executive
Directors (David Garman and Philipp
Joeinig), together with Claire Hall,
Group EVP People. The Committee
was constituted by the Board at the
beginning of 2017 to recognise the
importance of our People to our
future success and to ensure we
pursue best practice particularly
in areas such as staff retention and
succession planning; constitution of
the Committee was considered the
most appropriate and direct means
by which to address these issues and
ensure suitable Board visibility and
input on those matters which affect
our most highly valued resource.
Meetings and Purpose
Committee meeting attendance is
set out both above and on page 55
of this Annual Report and Accounts
2017; as can be seen, the Committee
assembled on two occasions in
its first year. At the initial meeting
it was agreed that the Committee
would convene not less than three
times a year and would link in with
the Nomination Committee, as and
when required.
Draft Terms of Reference for the
Committee were also considered
at this first meeting and, following
a detailed discussion around the
proposed key priorities of the
Committee, agreed. The finalised
Terms of Reference can be found
on the Company’s website and
these set out the threefold purpose
of the Committee, specifically:
• to assist the Board in fulfilling
its obligations in respect of all
HR matters;
• to ensure standardisation of HR
structure, policies and process; and
• to review, monitor and make
recommendations to Executive
Management with regard to all
HR matters.
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John Menzies plc Annual Report and Accounts 2017
Role and Responsibilities
The Committee is expected to
satisfy itself that HR management
activities across the Group are both
effective and adequate and ensure
that such activities are embedded
across the network within a
standardised framework. The
consensus at the first Committee
meeting was that primary areas of
focus should be overall HR strategy
and priorities, together with staff
turnover and retention rates.
The role of the Committee with
regard to training was also discussed
and it was agreed that operational
training would not fall within its
remit but rather the Committee
would review and monitor people
development programmes and
initiatives. Further, in light of
discussions regarding employee
engagement, the decision was taken
to shift responsibility for overseeing
the Group’s whistleblowing policies
and practices from the Audit
Committee to the HR Committee.
In 2017 presentations were made to
the Committee on key topics such
as the current employee training
programme and framework and the
HR systems and processes in place
across our networks. These provided
significant insight and reinforced the
need for continuous improvement.
Headline staff turnover figures were
also a principal focus and discussed
in conjunction with associated future
reporting requirements.
I look forward to reporting to you
next year on the challenges which
we have faced during 2018 and the
steps which have been taken to
address these in striving to underline
our commitment to retain, foster and
develop our People.
On behalf of the Human Resources
Committee
Silla Maizey
Human Resources Committee
Chairman
12 March 2018
Given the changes made to our
Remuneration Policy last year, and
the strong level of support received
from our shareholders in this regard,
we are not proposing any further
amendments to our Remuneration
Policy for 2018. We will continue to
operate under the Remuneration
Policy approved at the 2017 AGM
and, as disclosed last year, this
includes not making any further
awards under the Company’s Share
Matching Plan (“SMP”) from 2018.
The Remuneration Report details the
remuneration which the Company’s
Executive and Non-Executive
Directors received in 2017 and
contains a summary of the current
Remuneration Policy.
Remuneration Outcomes for 2017
2017 was a successful year for the
Company both from a financial and
strategic perspective. This success
is reflected in the Remuneration
Committee’s assessment of the 2017
outcomes set out in this Report.
The Remuneration Committee
has reviewed base salary levels for
Executive Directors and determined
that with effect from 1 May 2018
each of Forsyth Black, Giles Wilson
and John Geddes will receive a
salary increase of 2%. This is in line
with the salary increases for other
Group employees.
For the 2017 annual bonus plan, the
Remuneration Committee reviewed
Group Underlying Profit before Tax
performance and the performance
of Forsyth Black, Giles Wilson and
John Geddes against KRAs. Details
of financial targets, 2017 performance
and individual awards are disclosed
on pages 75 and 76 of this Annual
Report and Accounts 2017, including
improved disclosure of performance
in respect of the KRA element.
Geoff Eaton
Remuneration Committee
Chairman
Committee Members
Name
G Eaton
S Maizey
D Garman
P Baines
Position
Attendance
Chairman
Member
Member
Member
2/2
2/2
2/2
2/2
As the Chairman of the Remuneration
Committee I am once again pleased
to introduce the Company’s
Remuneration Report for the 2017
financial year.
In our Annual Report and Accounts
2016 we set out a new Remuneration
Policy which was both appropriate
to our size and our circumstances
and introduced a number of best
practice features. The Remuneration
Committee was delighted that this
Policy was approved at our last
annual general meeting (“AGM”),
with 99% of the votes cast on the
relevant resolution in favour of the
new Remuneration Policy.
Under this Remuneration Policy
our incentive structure, including
the annual bonus award and the
Company’s Long-Term Incentive Plan
(“LTIP”), is simple and aligned with
the interests of our shareholders.
A summary of our approach for
incentive plans is as follows:
• Our incentive opportunity
comprises a maximum bonus
of 100% of salary and an LTIP
award of up to 100% of salary.
• Annual bonus awards are
awarded based on Group
Underlying Profit before Tax
(80%) and performance in Key
Result Areas (“KRAs”) (20%).
20% of any award is deferred in
ordinary shares of the Company
for three years (“Deferred
Shares”).
• LTIP awards align Executive
remuneration with long-term
value creation for our
shareholders, strengthened
through an additional 12 month
holding period from 2018
onwards; maximum vesting
under the LTIP requires out-
performance of median total
shareholder return (“TSR”) of
the FTSE SmallCap index by
30% over three years.
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The 2015 LTIP awards were assessed by the Remuneration Committee based on performance to 31 December 2017.
The Remuneration Committee determined that the relevant performance measures were met and awards will vest
as appropriate following the Company’s final results announcement on 13 March 2018. Further details are provided
on pages 76 and 77 of this Annual Report and Accounts 2017.
Directors’ Remuneration Policy
This section of the Remuneration Committee Report contains a summary of the Company’s Remuneration Policy
in respect of its Directors. As detailed above, the Remuneration Policy was approved by shareholders at the
Company’s AGM on 12 May 2017 and took effect immediately upon receipt of such approval.
In August 2017 share awards granted to Giles Wilson and John Geddes in August 2015, prior to their appointments
to the Board of Directors, vested. Details of these awards are disclosed on page 80 of this Annual Report and
Accounts 2017.
2018 AGM and Beyond
The Remuneration Committee continues to monitor governance developments and has noted the UK Government’s
proposed corporate governance reforms. As these proposals take shape and are finalised we will consider how
they will impact our approach to Executive remuneration and disclosure.
The remainder of this Remuneration Committee Report comprises a summary of our current Remuneration Policy,
approved at the 2017 AGM, and our Annual Report on Remuneration for 2017, which will be put to a shareholder
vote at our 2018 AGM and in relation to which we look forward to receiving your views and support.
On behalf of the Remuneration Committee
Geoff Eaton
Remuneration Committee Chairman
12 March 2018
The Company’s Remuneration Policy is available on its website at: www.johnmenziesplc.com.
Directors’ Remuneration: Principles
The Company’s Remuneration Policy has been developed to ensure that the Company is well-placed to attract,
retain and motivate Directors with the ability and experience necessary to run the Company successfully, whilst
also aligning Executive remuneration with the financial returns of its shareholders.
Purpose and
link to strategy
1 Basic salary
Attract and retain high
performing individuals,
reflecting market value
of role and Executive’s
skills and experience.
Operation
Maximum opportunity
Performance metrics
Normally reviewed annually.
Salaries for 2018 will be:
• F Black: £357,000
• G Wilson: £331,500
• J Geddes: £255,000
There is no maximum
opportunity. Salary
increases will normally be
in line with the average
increase awarded in the
wider employee population.
None, although
individual and Company
performance are factors
taken into account
when setting salaries.
The Remuneration Committee
takes into consideration a
number of factors when
setting salaries including
(but not limited to):
• the size and scope
of an individual’s
responsibilities;
• an 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.
Higher increases may
be made in certain
circumstances and at the
Remuneration Committee’s
discretion. For example,
this may include (but is
not limited to):
•
increase in the scope
and/or responsibility
of an individual’s role;
• development of an
individual within
the role;
• corporate events
such as a significant
acquisition or Group
restructuring which
impacts the scope
of a role; and
• where it is considered
necessary for the
retention of an
Executive or to reflect
significant changes
in market practice.
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Purpose and
link to strategy
2 Annual bonus
Incentivise delivery of
Group and individual
objectives and enhance
performance.
Bonus in
Deferred Shares
Encourage a longer-
term focus which is
aligned to shareholders
and discourages
inappropriate
risk-taking.
3 LTIP
Incentivise value
creation over the
medium and long-term.
To reward the execution
of the Group’s strategy.
To encourage longer-
term thinking and
planning.
To align the interests
of shareholders and
Directors.
Operation
Maximum opportunity
Performance metrics
Maximum annual award
is 100% of salary.
Maximum annual grant
value is 100% of salary.
The annual bonus is paid
in cash and shares, based on
the Remuneration Committee’s
assessment of performance
during the financial year
in question.
20% of any award is paid in
Deferred Shares with such
shares having dividend
entitlements.
The Remuneration Committee
may claw back bonus awards
for a period of three years
after the end of the relevant
bonus year in the event of
misstatement of accounts
that materially increased
the amount of bonus paid or
misconduct by an employee
which has or could have led
to their employment being
summarily terminated.
The Remuneration Committee
may alter the level of deferral
at any time.
Awards under the LTIP may
be in the form of a conditional
right to acquire shares or an
option to acquire shares.
Vesting of shares is dependent
on the attainment of
performance criteria over a
period of at least three years.
After vesting all shares
must be held for a further
12 month period.
All measures and
targets are reviewed
annually and set at
the start of each
financial year.
The measures will
include relevant Group
and/or Divisional
financial measures
and may include
performance against
KRAs or other
strategic measures
as appropriate.
At least 70% of the
bonus will be based
on financial measures.
Performance criteria
are reviewed and set at
the start of each award
period, using one or
more of relative TSR,
Group Earnings Per
Share performance,
Return on Capital
Employed or any other
Group financial and/or
Divisional performance
measures.
No more than 25% of
an award vests on the
attainment of threshold
target.
Purpose and
link to strategy
4 Pension
Provide market levels
of pension provision.
Operation
Maximum opportunity
Performance metrics
Directors can participate
in the Menzies Money
Purchase Pension Scheme
or cash equivalent.
None.
Under the Menzies Money
Purchase Pension Scheme
Directors may receive a
pension contribution of
up to 20% of salary.
5 Benefits
Provide market levels
of benefits provision.
F Black and J Geddes
participated in a defined
benefit pension scheme until
it closed to future accrual on
31 March 2017. The scheme
closed to new entrants in 2003.
The defined benefit pension
plan is operated by the
trustees of the Menzies
Pension Fund. These
arrangements were agreed
prior to 27 June 2012.
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 Remuneration
Committee may introduce or
remove benefits offered to
individuals where it considers
it appropriate to do so.
Where Executive Directors
are required to relocate, the
Remuneration Committee
may, if considered appropriate,
offer additional relocation or
expatriate benefits.
The Remuneration
Committee may determine
that Executive Directors
receive a cash supplement
of up to 20% of salary in
lieu of pension.
The defined benefit
pension scheme provided
pension of up to two-thirds
of pensionable earnings
or the ‘scheme earnings’
cap if lower. Participating
Directors received a
payment of 20% of the
difference between the cap
and their current salary.
As the cost of providing
other benefits, including
health insurance and life
assurance, may vary from
year to year, it is not
considered 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.
None.
Company
Sharesave Scheme
Provide the Company’s
UK employees with
an interest in the
performance of
its shares.
Accumulated savings
may be used to exercise
an option to acquire shares
in the Company.
Monthly contributions of
up to the HMRC-approved
limit over a three or five
year period.
None.
The option price of such
shares may be discounted
by up to the HMRC-approved
level (currently 20%).
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Remuneration Committee Report continued
Purpose and
link to strategy
Shareholding
guidelines
Align the Executive
Directors with the
long-term interests
of shareholders.
Chairman and
Non-Executive
Directors’ fees
Attract Non-Executive
Directors of sufficient
skills and experience
to fulfil the role.
Operation
Maximum opportunity
Performance metrics
Shareholding guidelines
for Executive Directors
are 100% of salary (built
up over time).
The fees for Non-Executive
Directors comprise a basic
payment plus additional
payments for being
Chairman of a Committee,
a Committee member
or for being the Senior
Independent Director.
Differential fee levels may
be paid for Non-Executive
Directors depending on the
skills, experience, nationality
and responsibilities of an
individual or additional time
commitments for the role.
The Chairman receives a fee
for services to the Company.
A portion of Chairman and
Non-Executive Directors’
fees may be delivered as
shares in the Company.
Non-Executive Directors’
fees are reviewed periodically
by the Board with reference
to external benchmarking.
Notes:
1. Annual bonus
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 the Group’s KRAs. This balance allows the Remuneration Committee to effectively reward performance
against the key elements of the Group’s 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.
2. LTIP
The ultimate goal of the Company is to provide long-term sustainable returns to shareholders. The performance measures are intended to align
Executive remuneration with this goal. In particular (for 2018):
Relative TSR – Total shareholder return relative to a relevant peer group is currently considered to be the best measure of the Company’s ultimate
delivery of value to shareholders. The Remuneration Committee considers that this promotes alignment between Executive Director reward and
shareholders’ financial returns. Targets are set with reference to wider market practice and are positioned at a level which the Remuneration
Committee considers represent stretching performance.
3. 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 also 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 an HMRC-approved Sharesave Scheme, in which all employees (including Executive Directors) are eligible to participate
and which aims to promote a sense of ownership amongst staff.
1. Illustrations of Remuneration Policy
The following charts illustrate the different elements of Executive Directors’ remuneration under three different
performance scenarios: ‘Fixed pay’, ‘On-target performance’ and ‘Maximum performance’. The assumptions used
are provided below the charts.
President & MD, Menzies Aviation
Chief Financial Officer 1
Corporate Affairs Director &
Group Company Secretary
£1,250,000
£1,000,000
£750,000
£500,000
£250,000
£0
£711k
13%
25%
62%
£443k
100%
£1,157k
31%
£1,250,000
£1,000,000
31%
£750,000
38%
£413k
100%
£500,000
£250,000
£0
£1,076k
31%
31%
38%
£661k
13%
25%
62%
£1,250,000
£1,000,000
£750,000
£500,000
£250,000
£0
£832k
31%
31%
38%
£513k
12%
25%
63%
£322k
100%
Fixed pay
On-target
performance
Maximum
performance
Fixed pay
On-target
performance
Maximum
performance
Fixed pay
On-target
performance
Maximum
performance
LTIP Annual Bonus Fixed
Component
Base salary
Pension
Benefits
Annual bonus (cash
and ordinary shares)
LTIP
Fixed pay
On-target performance
Maximum performance
Base salary for 2018
Defined contribution/cash supplement value for 2018
Taxable value of annual benefits provided in 2017
0% of salary
0% vesting
50% of salary
25% vesting
100% of salary
100% vesting
Note:
1. Benefits exclude one-off relocation costs provided in 2017.
2. 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.
The Group employs over 36,000 people in 268 locations globally and the Remuneration Committee therefore did
not believe it practical or reasonable to consult employees on the Remuneration Policy for Executive Directors during
2017. The Remuneration Committee took into account employee conditions across the Group when determining the
Remuneration Policy.
3. Consideration of Shareholder Views
The Remuneration 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.
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Remuneration Committee Report continued
Annual Report on Remuneration
Total Remuneration Received for the Year Ended 31 December 2017
The table below provides a single figure of remuneration for each member of the Board, broken down into each
element of pay and compared to the previous year.
The table below and the subsequent sections 1 to 8 are subject to audit by the Company’s auditor.
Base salary/fee
£000
Taxable
benefits 1
£000
Annual bonus
£000
Legacy awards
£000
LTIP6
£000
Total long-term
incentives
£000
Pension total
£000
Total
remuneration
£000
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
Executive Directors
F Black 2
G Wilson
350 289
15
14 329 275
317
175
148
46
319
J Geddes 2
250
27
16
2 245
Non-Executive Directors
D Smurfit 3
150
173
S Maizey
D Garman
G Eaton
P Baines
P Joeinig 4
46
49
46
44
25
46
49
46
25
–
Former Directors
D Jenkinson 5
34
69
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
96
96
– 304
– 304
–
297
– 393
– 234
– 330
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
77
63
80
70 1,075 648
35 1,240 431
9
921
64
–
–
–
–
–
–
–
–
–
–
–
–
–
–
150
173
46
49
46
44
25
46
49
46
25
–
34
69
175
26
–
–
–
–
–
–
–
Notes:
1. Benefits offered to Executive Directors include a car allowance and health insurance. Details of the pension arrangements for each of the Directors are
included on page 79 of this Annual Report and Accounts 2017. As noted in last year’s Annual Report on Remuneration, the Company agreed to meet
further expenditure during 2017 in relation to Giles Wilson’s relocation costs following his appointment to the Board in 2016. These costs totalled
£133,000 in 2017.
2. For Forsyth Black and John Geddes the pension figure above comprises the increase in value of the Menzies Pension Fund accrual from 1 January to
31 March 2017 (at which point the scheme was closed to future accrual) plus cash in lieu of pension contributions made from 1 April to 31 December 2017.
Along with other similarly impacted employees, John Geddes received a payment of £33,783 in recognition of his consent to the closure to accrual of the
Menzies Pension Fund which is also included in the pension total figure above. Further details are included at section 7 below.
3. As detailed in section 2, part of the Chairman’s fee is made up of 20,000 ordinary shares of £0.25 each in the Company (“Ordinary Shares”). No Ordinary
Shares have yet been issued in relation to the year ending 31 December 2017.
4. Relevant remuneration reflects the appointment date of Philipp Joeinig to the Board (1 June 2017).
5. Relevant remuneration reflects the resignation date of Dermot Jenkinson from the Board (31 October 2017).
6. The value of the 2015 LTIP award that will vest in March 2018 is based on the average share price for the three months to 31 December 2017.
1. Base Salary
Salaries of Executive Directors and other Company staff are reviewed annually. The current salaries for Executive
Directors are set out below and are usually updated annually on 1 May. It has been determined that the salaries of
each of Forsyth Black, Giles Wilson and John Geddes will be increased by 2% on 1 May 2018.
When determining the remuneration of Executive Directors, the Remuneration Committee takes account of pay
and employment conditions in the Group as a whole.
Name
F Black
G Wilson
J Geddes
2016 salary
2017 salary
2018 salary
£300,000
£300,000
£250,000
£350,000
£325,000
£250,000
£357,000
£331,500
£255,000
Percentage
increase for 2018
2%
2%
2%
Name
F Black
G Wilson
J Geddes
2. Non-Executive Directors’ and Chairman’s Fees
For 2017 the fees policy for Non-Executive Directors was as follows:
Basic payment
Committee Chairmanship
Committee membership
Senior Independent Director
Fee level
£40,000
£6,000
£2,500
£6,000
Directors receive one fee either for Committee Chairmanship or Committee membership, irrespective of the number
of Committees on which they serve. The fees paid to Non-Executive Directors in respect of each of the positions
detailed above are reviewed annually. They were reviewed in March 2018 and it was agreed that no changes would
be made at this time.
The Chairman’s fees comprise a cash fee of £150,000 per annum plus 20,000 Ordinary Shares per annum. The portion
of fees delivered as Ordinary Shares will also apply in 2018. This fee arrangement was approved by shareholders at the
Company’s general meeting convened on 11 October 2016.
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 Remuneration Committee at the start of the relevant performance period and taking into account market
expectations at that time. Bonus payments are non-pensionable.
2017 bonus awards
For 2017 bonuses were calculated as follows:
Financial performance
Weighting
(percentage of
Measure
salary) Threshold target
Stretch target
Performance
achieved
Overall achieved
(percentage of
salary)
Group Underlying Profit before Tax 1
80%
£61.5m
£66.2m
£67.9m
80%
KRA performance
The KRAs for the Executive Directors were set at the start of the year and covered a number of key operational
and strategic areas including:
• a reduction in the number of reported health and safety incidents;
• the successful integration of the ASIG business into our operations following its acquisition at the beginning
of 2017 and increasing the size and scope of support functions as a result of the expansion in our networks;
• enabling the Group to restructure from a strategic and pension liability perspective;
• widening the Company’s shareholder base; and
•
increasing Group cash flow through focusing on improved Aviation Division debtor management.
The KRA outcomes for 2017 are as follows:
Weighting
(maximum
percentage of
salary)
KRA
performance
achieved
(percentage of
salary)
20%
20%
20%
14%
18%
18%
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Annual bonus awards
Name
F Black
G Wilson
J Geddes
Financial
performance
achieved
(percentage of
salary)
KRA
performance
achieved
(percentage of
salary)
Overall achieved
(percentage of
salary)
Cash value
of award
£000 2
80%
80%
80%
14%
18%
18%
94%
98%
98%
£329
£319
£245
Notes:
1. Calculated in accordance with the Bonus Scheme Rules.
2. 20% of all bonus awards are deferred in the Company’s Ordinary Shares for a three year period to December 2020.
Operation of policy for 2018 bonus awards
The performance measures used for 2018 annual bonus awards will be the same as those detailed above.
Performance targets will be disclosed retrospectively where considered appropriate as the Board considers
that the disclosure of prospective targets is not appropriate due to their commercial sensitivity.
4. SMP
Under the SMP, Executive Directors were invited to invest up to 40% of any annual cash bonus into the SMP. No SMP
awards were granted during 2017. As detailed in the Annual Report and Accounts 2016, the SMP has been discontinued
from 1 January 2018 and no further awards will be granted to Executive Directors.
2016 SMP awards
As detailed in the Annual Report and Accounts 2016, the performance measures and targets for awards made
under the SMP in March 2016 were set as follows:
Measurement
EPS v CPI
Threshold target (25% vesting)
Stretch target (100% vesting)
EPS growth equals CPI growth
EPS growth exceeds CPI growth by 3%
Outstanding SMP awards are as follows:
2015 LTIP awards
LTIP awards made to Executive Directors during the financial year ending 31 December 2015 are detailed below.
As the performance criteria has been achieved, these awards will vest as appropriate following the Company’s final
results announcement on 13 March 2018.
Criteria
John Menzies plc EBITDA
TSR v FTSE250
Weighting
Threshold target
(25% vesting)
Stretch target
(100% vesting)
Attainment
50%
50%
£79.2m
£87.5m
TSR =
FTSE250
median
TSR >
FTSE250
median +
30%
100%
100%
Name
F Black
G Wilson
J Geddes
Overall vesting
(percentage of
maximum)
100%
Performance
period
1/1/2015-
31/12/2017
Shares granted/vesting 1
44,098
43,227
33,928
Note:
1. These award figures have been adjusted to reflect the Rights Issue undertaken by the Company in 2016.
2017 LTIP awards
As disclosed in the Annual Report and Accounts 2016, performance measures and targets for the LTIP awards
made in March 2017 were as follows:
Group performance criteria
Weighting
Threshold target (25% vesting)
Stretch target (100% vesting)
TSR v FTSE SmallCap
100%
TSR = FTSE
SmallCap median
TSR > FTSE
SmallCap + 30%
31 December
2016
Granted
during 2017
Market
price of
award
Vested
during 2017
Lapsed
during 2017
Gain/(loss)
£’000
31 December
2017
Performance
period
Details of the LTIP awards made in March 2017 are shown in the table headed ‘Scheme Interests Awarded During
2017’ on page 78 of this Annual Report and Accounts 2017.
Operation of policy for 2018 LTIP awards
The performance measures for LTIP awards made in 2018 will be as follows:
Group performance criteria
Weighting
Threshold target (25% vesting)
Stretch target (100% vesting)
TSR v FTSE SmallCap
100%
TSR = FTSE
SmallCap median
TSR > FTSE
SmallCap + 30%
Name
F Black
G Wilson
2,385 1
2,757 1
–
–
478.0p
478.0p
–
–
–
–
–
–
2,385
2,757
1/1/2016-
31/12/2018
1/1/2016-
31/12/2018
Note:
1. These award figures have been adjusted to reflect the Rights Issue undertaken by the Company in 2016.
5. LTIP
Under the Company’s LTIP all awards are subject to a three year performance period with appropriate targets.
The Company’s LTIP targets are designed to align the interests of the Executive Directors with those of the
Company’s shareholders and promote a long-term interest in the success of the Group. As detailed in the Annual
Report and Accounts 2016, the Company has sought to further strengthen alignment with shareholders through an
additional 12 month retention period for all new LTIP awards, with this holding period normally continuing post an
Executive leaving employment.
The performance criteria are set at threshold and stretch level. At threshold, 25% of an LTIP award will vest,
increasing on a straight-line basis to 100% for stretch or greater achievement.
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Governance Reports Financial StatementsShareholder InformationStrategic Report Remuneration Committee Report continued
Outstanding LTIP awards as at 31 December 2017 are shown below:
Name
31 December
2016
Granted
during 2017
F Black
44,098 1
76,736 1
–
–
Market
price of
award
385p
443p
–
60,449
579p
G Wilson
43,227 1
37,610 1
–
–
385p
443p
–
51,813
579p
J Geddes
33,928 1
33,571 1
–
–
385p
443p
–
43,178
579p
Vested
during 2017
Lapsed
during 2017
Gain/(loss)
£’000
31 December
2017
Performance
period
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
44,0982
76,736
60,449
43,2272
37,610
51,813
33,9282
33,571
43,178
1/1/2015-
31/12/2017
1/1/2016-
31/12/2018
1/1/2017-
31/12/2019
1/1/2015-
31/12/2017
1/1/2016-
31/12/2018
1/1/2017-
31/12/2019
1/1/2015-
31/12/2017
1/1/2016-
31/12/2018
1/1/2017-
31/12/2019
Notes:
1. These award figures have been adjusted to reflect the Rights Issue undertaken by the Company in 2016.
2. The awards will vest as appropriate following the Company’s final results announcement on 13 March 2018.
6. Scheme Interests Awarded During 2017
Name
Type of interest
F Black
G Wilson
J Geddes
LTIP 1 – conditional
shares
Save As You Earn 2
LTIP 1 – conditional
shares
Save As You Earn 2
LTIP 1 – conditional
shares
Save As You Earn 2
Basis on which
award made
Maximum
number of
shares
awarded
Share price
on date of
grant of
option
Face value
of shares
Percentage
vesting at
threshold
Performance
period end
100% of salary
n/a
60,449
634
100% of salary
n/a
100% of salary
n/a
51,813
634
43,178
317
£5.79
£5.67
£5.79
£5.67
£5.79
£5.67
£350,000
£3,595
£300,000
£3,595
£250,000
£1,797
25%
n/a
25%
n/a
25%
n/a
31/12/2019
31/11/2020
31/12/2019
31/11/2020
31/12/2019
31/11/2020
Notes:
1. The exercise price for Ordinary Shares granted under the LTIP is zero.
2. The exercise price for Ordinary Shares granted under the Save As You Earn Scheme is the Ordinary Share price at the date of grant discounted by 20%.
LTIP awards are subject to performance conditions and the value delivered on vesting depends on performance
against pre-defined targets over the relevant period and changes in the Company’s Ordinary Share price between
grant and vesting.
The face value of awards is calculated using the Ordinary Share price on the date of grant. The face value of the
Save As You Earn award is calculated using the share option price under the Sharesave Scheme in the relevant year.
7. Total Pension Entitlements
Scheme benefits/cash payments in lieu of pension contributions
Both Forsyth Black and John Geddes were members of the Menzies Pension Fund, accruing 1/60th and 1/30th
respectively of their pensionable salaries (subject to the scheme earnings cap) for each year of pensionable service.
On 31 March 2017 the Menzies Pension Fund was closed to future accrual. From 1 April 2017 they now each receive
a cash payment equal to 20% of their salary in lieu of pension contribution. Along with other similarly impacted
employees, John Geddes received a payment in recognition of his consent to the closure to accrual of the Menzies
Pension Fund. He received £33,783 in April 2017 and, provided that he remains in employment with the Company,
will receive a second payment of £20,270 in April 2020.
Giles Wilson receives a cash payment equivalent to 20% of his salary in lieu of pension contribution.
Unfunded arrangement
The total of the transfer values for unfunded pension entitlements, held on the Company’s Balance Sheet at
31 December 2017 for former Directors, totalled £1,938,196 (2016: £1,829,597), from which annual pensions of £61,179
were paid to former Directors (2016: £59,438).
8. Directors’ Shareholdings and Share Interests
Executive Directors are expected to build a shareholding in the Company of 100% of salary under the Directors’
Remuneration Policy approved by shareholders at the Company’s AGM in May 2017. The Remuneration Committee
believes that shareholding guidelines of 100% of salary, coupled with the additional 12 month holding period
required for all future LTIP awards, creates a strong, but proportionate, alignment with shareholders. Executive
Directors are given a period of time to build their shareholding in the Company.
The following table shows Directors’ shareholdings and share interests as at 31 December 2017 together with share
options exercised during 2017:
Name
D Smurfit
F Black
G Wilson
J Geddes
S Maizey
D Garman
G Eaton
P Baines
P Joeinig
Number of
shares owned
(including
Deferred
Shares)
Unvested
conditional
shares subject
to performance
conditions (LTIP
and BCIP/SMP
awards)
Unvested
options over
shares subject
to savings
contracts
(SAYE)
Vested options
exercised during
2017
Unvested
conditional
shares not
subject to
performance
conditions
425,000
35,342
27,800
17,886
2,035
13,571
4,077
3,000
20,000
–
211,964
147,165
125,192
–
–
–
–
–
–
1,338
1,338
2,090
–
–
–
–
–
–
0
0
0
–
–
–
–
–
–
0
0
0
–
–
–
–
–
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John Menzies plc Annual Report and Accounts 2017
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Governance Reports Financial StatementsShareholder InformationStrategic Report Remuneration Committee Report continued
Legacy awards
The share interests table above includes the following outstanding awards for current Executive Directors (granted
prior to their appointment to the Board) as at 31 December 2017:
Name
31 December
2016
Initial value
of award
Vested during
2017
Lapsed during
2017
Gain/(loss)
£000
31 December
2017
Retention
period
The Large and Medium-sized Companies and Groups (Accounts and Report) Regulations 2008 (the “Regulations”)
require companies to show the total remuneration of any director who undertakes the role of Chief Executive
Officer (“CEO”) in each of the last nine years. As the Company’s Executive structure did not include the role of CEO
prior to October 2014 and after 13 January 2016, the following table shows the required figures for the highest paid
Director in each year:
F Black 1
28,296
£124,250
–
G Wilson 1
13,780
£75,000
13,780
14,515
£63,740
–
J Geddes 1
13,780
£75,000
13,780
14,515
£63,740
–
–
–
–
–
–
–
–
–
–
–
28,296
–
14,515
–
14,515
1/7/2015
30/6/20182
19/8/2014
19/8/20173
1/7/2015
30/6/20182
19/8/2014
19/8/20173
1/7/2015
30/6/20182
Notes:
1. The award figures detailed for each of the Executive Directors have been adjusted to reflect the Rights Issue undertaken by the Company in 2016.
2. Unvested conditional shares subject to performance conditions (EPS growth of 3% per annum).
3. Conditional shares subject to continued employment.
9. Clawback and Malus
Awards granted to Executive Directors during 2017 are subject to the following clawback and malus provisions:
• Cash and Deferred Shares may be clawed back for a period of three years after the end of the relevant bonus
year in the event of misstatement of accounts that materially increased the amount of bonus paid or misconduct
by an employee which has or could have led to their employment being summarily terminated.
• Matching deferred bonus awards and LTIP awards may be clawed back after vesting where the Company is
required to restate its accounts to a material extent; where the Board becomes aware of any material wrongdoing
on the part of an employee which would have entitled the Company to terminate the employee’s employment; or
where there is any other reason the Remuneration Committee includes in the relevant terms at the time an award
is made. The clawback period will be set by the Remuneration Committee.
10. Nine Year Historical TSR Performance and Executive Director Pay
The following graph compares the Company’s TSR for the nine years to December 2017 with the equivalent
performance of the FTSE SmallCap Index.
1200
1000
800
600
400
200
0
8
0
0
2
9
0
0
2
010
2
011
2
012
2
013
2
014
2
015
2
016
2
017
2
John Menzies plc FTSE Small Cap
Highest paid
Director in
the year
Role
Total
remuneration
(£000)
Annual
bonus award
(percentage
of maximum)
Long-term
incentive
vesting
(percentage
of maximum)
2009:
Dollman
2010:
Dollman
2011:
Dollman
2012:
Dollman
2013:
Smyth
Group
Finance
Director
Group
Finance
Director
Group
Finance
Director
Group
Finance
Director
MD,
Menzies
Aviation
January-
October
2014:
Smyth
MD,
Menzies
Aviation
October-
December
2014:
Stafford
2015:
Stafford
1/1/16-
13/1/16:
Stafford
13/1/16-
31/12/16:
Black
2017:
Wilson
CEO
CEO
CEO
President &
MD, Menzies
Aviation
Chief
Financial
Officer
757
750
3,578
1,735
1,203
725
167
493
41 1
648
1,240
75%
74%
74%
63%
46%
22%
40%
100%
100%
84%
–
–
45%
n/a
–
–
–
–
95%
98%
0%
100%
Note:
1. A payment of £65,200 (gross) was also made to Jeremy Stafford for loss of office together with a contribution of £4,000 plus VAT towards legal fees
incurred in connection with his loss of office.
11. Percentage Change in Remuneration
The Regulations also require companies to show the annual change in base salary, benefits and annual bonus
for any director undertaking the role of CEO during the financial year in question, in this case regarded as being
Forsyth Black, together with the average change for all Group employees. Whilst the table below details this
information, given the geographical spread of the Group’s operations and taking into account the different rates
of wage inflation that exist, the average for Group employees for comparison with Forsyth Black is based on a like
for like change in basic pay per full time equivalent in the UK employee base.
CEO
Average for Group employees
Base salary
(percentage
change)
Benefits
(percentage
change)
Annual bonus
(percentage
change)
17%
5%
5%
0%
20%
15%
12. Relative Importance of Spend on Pay
The total Group spend on employee remuneration during 2017 and the immediately preceding financial year is
reflected in the following table:
Group employee remuneration costs
Dividend distribution
Share buyback
2016
2017
£582.1m
£10.6m
£Nil
£857.5m
£15.9m
£Nil
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Governance Reports Financial StatementsShareholder InformationStrategic Report Remuneration Committee Report continued
13. Service Contracts and Letters of Appointment
As detailed in the Annual Report and Accounts 2016, the Remuneration Committee determined that, having due
regard to prevailing market conditions and practice among companies of comparable size, a 12 month notice period
was more appropriate for both the Executive and the Company. Accordingly, following shareholder approval of the
Directors’ Remuneration Policy at the Company’s AGM in May 2017, new service contracts were put in place with the
Executive Directors, the details of which are as follows:
Name
F Black
G Wilson
J Geddes
Date of service contract
Notice period
June 2017
June 2017
June 2017
Terminable on 52 weeks’ notice
Terminable on 52 weeks’ notice
Terminable on 52 weeks’ notice
All Executive Directors’ service contracts and Non-Executive Directors’ letters of appointment are available for
inspection at the Company’s registered office.
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 these 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.
14. The Remuneration Committee
During 2017 the following Non-Executive Directors were members of the Remuneration Committee:
Name
G Eaton
S Maizey
D Garman
P Baines
Position
Attendance
Chairman
Member
Member
Member
2/2
2/2
2/2
2/2
Advisers to the Remuneration Committee
During 2017 the Remuneration Committee was advised by remuneration consultants from Deloitte LLP. Total
fees in relation to Executive remuneration consulting were £23,050. Deloitte also provided advice in relation to
controls assurance.
Deloitte was appointed by the Remuneration Committee and, as a member of the Remuneration Consultants’
Group, voluntarily operates under the Code of Conduct in relation to Executive Remuneration Consulting in the
United Kingdom. Each year the Chairman of the Remuneration Committee agrees the protocols under which
Deloitte will provide advice to support independence. The Remuneration Committee is satisfied that the advice
which it has received from Deloitte has been objective and independent.
In addition, legal advice was sought by the Remuneration Committee from the Company’s solicitors, Maclay Murray
& Spens LLP (now Dentons UKMEA LLP following their merger on 30 October 2017), where considered appropriate.
The Group’s Chief Financial Officer and Group Company Secretary also provided internal support and guidance
to the Remuneration Committee where appropriate. They are, however, specifically excluded from any matters
concerning the details of their own remuneration. Members of the Remuneration Committee have no personal
financial interest (other than as shareholders) in the matters to be decided by the Remuneration Committee and
no day-to-day involvement in the running of the business of the Group.
15. Remuneration Resolutions
The table below provides the results of the Directors’ Remuneration Report 2016 resolution and the Directors’
Remuneration Policy 2017 resolution, both of which were tabled at the Company’s AGM in May 2017:
Resolution
Votes for
Percentage
Votes against
Percentage
Votes total
Votes withheld
Directors’ Remuneration
Report 2016
47,724,478
98.42%
765,561
1.58% 48,490,039
9,582
Directors’ Remuneration
Policy 2017
47,997,165
98.99%
491,118
1.01% 48,488,283
11,338
An advisory resolution to approve this Remuneration Report will be tabled at the forthcoming AGM.
The Chairman of the Remuneration Committee will be available to answer questions from the Company’s
shareholders on this Remuneration 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 Chairman of
the Company. This approval will not be denied where the Chairman is confident that the appointment in question
will not interfere with the Director’s ability to perform their duties for the Company or provide a conflict of interest.
Executive Directors are entitled to retain any fees received under such appointments.
On behalf of the Remuneration Committee
Geoff Eaton
Remuneration Committee Chairman
12 March 2018
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Governance Reports Financial StatementsShareholder InformationStrategic Report Directors’ Report
For the year ended 31 December 2017
The following sections provide information on those items which are required to be included in this Directors’
Report, pursuant to the requirements of the Companies Act 2006 (the “2006 Act”), the Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008 (as amended by the Companies Act 2006
(Strategic Report and Directors’ Report) Regulations 2013) (the “2013 Regulations”) and the Financial Conduct
Authority’s (the “FCA”) Listing Rules. Some items are incorporated by reference into this Directors’ Report,
as detailed below.
Directors’ and Officers’ Liability Insurance
In accordance with the 2006 Act and the Company’s Articles of Association (the “Articles”), the Company has
arranged qualifying third party indemnities against financial exposure which the Directors may incur in the course
of their professional duties for the Company. Equivalent qualifying third party indemnities were, and remain, in force
for the benefit of those Directors who stood down from the Board during 2017. In addition to these indemnities, the
Company places Directors’ and Officers’ liability insurance cover for each Director.
Directors
All of the Directors who served during 2017 are shown in the table below. Biographies of those Directors who were
in office at the end of 2017 are included on pages 52 and 53 of this Annual Report and Accounts 2017 and all of
these Directors held office throughout 2017 with the exception of Philipp Joeinig who was appointed to the Board
on 1 June 2017. Dermot Jenkinson resigned from the Board on 31 October 2017 having been appointed since 1985,
initially as an Executive Director and since 1999 as a Non-Executive Director.
Dividends
The Directors recommend the payment of a final dividend of 14.5p per Ordinary Share (2016: 13.1p), payable on
2 July 2018 to shareholders on the Company’s Register of Members as at the close of business on 25 May 2018. The
shares will be quoted as ex-dividend on 24 May 2018. This final dividend, together with the interim dividend of 6.0p
per Ordinary Share (2016: 5.4p) paid on 17 November 2017, makes a total dividend of 20.5p per Ordinary Share for
the 2017 financial year.
Current and former Directors’ interests in the Company’s ordinary shares of £0.25 each (the “Ordinary Shares”)
were as follows:
Name
D Smurfit
F Black
G Wilson
J Geddes
S Maizey
D Garman
G Eaton
P Baines
P Joeinig
Position
Appointed/resigned
Appointed Jul. 2016
Appointed Jan. 2016
Chairman
President & Managing
Director, Menzies
Aviation
Chief Financial Officer Appointed Jun. 2016
Appointed Nov. 2016
Director of Corporate
Affairs & Group
Company Secretary
Non-Executive Director Appointed May 2014
Non-Executive Director Appointed Jun. 2015
Non-Executive Director Appointed Jun. 2015
Non-Executive Director Appointed Jun. 2016
Non-Executive Director Appointed Jun. 2017
Beneficial
Beneficial
Beneficial
Beneficial
Beneficial
Beneficial
Beneficial
Beneficial
Beneficial
31 December
2017
31 December
2016
425,000
35,342
425,000
10,829
27,800
17,886
24,406
15,880
2,035
13,571
4,077
3,000
20,000
2,035
13,571
4,000
–
n/a
Former Directors:
D Jenkinson
Non-Executive Director Resigned Oct. 2017
Beneficial
Non-beneficial
n/a
n/a
748,857
314,000
There have been no subsequent changes to these interests as at 12 March 2018.
No Director had any material interest in any contract, other than a service contract as set out on page 82 of this
Annual Report and Accounts 2017.
Substantial Shareholdings
In addition to the Directors’ interests set out above, the Company had been notified of the following interests of 3%
or more in its Ordinary Shares as at 31 December 2017 and 12 March 2018:
Name
Kabouter Management LLC
Shareholder Value Management AG
Lakestreet Capital Partners AG
D.C. Thomson & Company Limited
Sterling Strategic Value Fund S.A.
Premier Asset Management
Number of
Ordinary Shares
as at 12 March
2018
10,512,735
8,526,805
6,094,478
5,013,058
4,285,000
3,715,017
Percentage of
issued Ordinary
Shares as at
12 March
2018
12.55
10.18
7.28
5.99
5.12
4.44
Number of
Ordinary Shares
as at
31 December
2017
Percentage of
issued Ordinary
Shares as at
31 December
2017
10,394,697
8,526,805
6,094,478
5,013,058
3,698,632
3,804,649
12.42
10.19
7.28
5.99
4.42
4.55
Political Donations
In accordance with its policy, the Group did not give any money for political purposes nor did it make any donations
to political organisations or independent candidates or incur any political expenditure during 2017.
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, are detailed in Note 17 to the Accounts contained in
this Annual Report and Accounts 2017, which information is incorporated by reference into this Directors’ Report.
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 17 to the Accounts contained in this Annual Report and Accounts 2017, which information is
incorporated by reference into this Directors’ Report.
Financial Instruments
Details of the use of financial instruments and financial risk management are included in Note 17 to the Accounts
contained in this Annual Report and Accounts 2017, which details are incorporated by reference into this
Directors’ Report.
Employee Involvement
Details of how the Company involves its employees in its business are contained in the Strategic Report section
of this Annual Report and Accounts 2017 (pages 1 to 48), which details are incorporated by reference into this
Directors’ 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 2017.
Outlook
An indication of the likely future developments in the business of the Company (and its subsidiaries) is included
in the Strategic Report section of this Annual Report and Accounts 2017 (pages 1 to 48), which details are
incorporated by reference into this Directors’ Report.
Research
The Company is not actively involved in research activities.
Geographical Spread
The Company operates in 36 countries worldwide and details of this geographical spread can be found on
pages 14 and 24 of this Annual Report and Accounts 2017, which details are incorporated by reference into this
Directors’ Report.
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Governance Reports Financial StatementsShareholder InformationStrategic Report Directors’ Report continued
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 Responsible Business section of this Annual Report and Accounts 2017 (pages 38 to 48), which
details are incorporated by reference into this Directors’ Report.
At the end of 2017 the split of male to female employees in the Group was:
Employee group
Directors
Decision-makers
All employees
Male
8
318
25,832
Female
1
117
10,373
Full and fair consideration is given to all applications for employment; Group policies dictate that during the
recruitment process all individuals are treated equitably, including those with disabilities. Where employees become
disabled whilst employed by the Group we would seek to ensure that their employment could continue or alternative
employment arranged whenever reasonable and practicable to do so, subject to any necessary training taking place
and making reasonable adjustments where necessary. All employees, irrespective of whether they have a physical
or mental disability, are given the same opportunities within the Group in terms of training, career development
and promotion; our policies and procedures for recruitment, training, promotion and reward promote equality of
opportunity, regardless of background and personal circumstances.
Policy and Practice on Payment of Creditors
The Group does not operate a standard code in respect of payments to suppliers. Each operating business 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 end of
2017 the amount owed to trade creditors by the Group was equivalent to 37.6 days (2016: 33.9 days) of purchases
from suppliers.
Audit Information
So far as the Directors in office at the date of signing of this Directors’ Report are aware, having made the requisite
enquiries, there is no relevant audit information in terms of which the Company’s auditor is unaware and each
Director has taken all reasonable steps to make themselves aware of any relevant audit information and to establish
that the auditor is aware of that information. Resolutions to re-appoint Ernst & Young LLP as auditor of the Company
and to authorise the Board to set its remuneration will be proposed at the Company’s forthcoming annual general
meeting (“AGM”).
Share Capital and Structure
The Company has two classes of shares: the Ordinary Shares of £0.25 each and preference shares of £1.00 each
(the “Preference Shares”). As at 31 December 2017 the Company had an issued share capital comprising 1,394,587
Preference Shares and 83,955,951 Ordinary Shares. Of these 83,955,951 Ordinary Shares, 257,523 were held as
treasury shares. During 2017 the Company did not purchase any Ordinary Shares to be held in Treasury.
During 2017 the Company did not purchase any of its own shares for cancellation.
No shares in the capital of the Company can be allotted at a discount nor can they be allotted except as paid up
both in regard to nominal amount and premium to the minimum extent permitted by the 2006 Act.
Articles of Association
Transfer of shares
There are no restrictions on the transfer of shares in the Company other than as contained in the Articles. Subject
to the Articles, the Admission and Disclosure Standards of the London Stock Exchange and any requirements of
the FCA, 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 Company’s shares.
Voting rights
Deadlines for exercising voting rights and appointing a proxy or proxies to vote on the resolutions to be considered
at the Company’s forthcoming AGM are specified in the Notes to 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, they have been appointed by more than one shareholder and have received instructions to
vote both in favour of and against the same resolution in which case they will have one vote against that resolution
and one vote for. On a poll, every shareholder of the Company present in person or by proxy at a general meeting of
the Company shall have one vote for every share which they hold and, if the holders of the Preference Shares have
the right to vote on any resolution, each such holder shall have one vote for every Preference Share which they hold.
The holders of the Preference Shares shall have no right 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 Preference 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 attaching to the Preference Shares, in which circumstances the holders of the Preference Shares
shall have the right to vote on any such resolution.
The Company is not aware of any arrangement by which, with the Company’s co-operation, financial rights carried
by its shares are held by persons other than the holders of its Ordinary Shares or Preference Shares. The Company
is not aware of any agreement between holders of its shares which may result in restrictions on the transfer of its
shares or on voting rights attaching thereto.
Allotment and Issue of Shares
The Directors are, by shareholder resolution passed at the 2017 AGM, 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 £13,941,418 of which any amount in excess of £6,970,709
may only be applied to fully pre-emptive rights issues. Such authority and power will expire at the Company’s
forthcoming AGM unless previously revoked, varied or renewed. It is proposed that such authority and power be
renewed by shareholder resolution at this AGM but without prejudice to the exercise of any such authority and
power prior to the date of such resolution. Accordingly, shareholders will be asked to grant an authority to allot
relevant securities: (i) up to a nominal amount of £6,988,085; and (ii) up to a nominal amount of £13,976,170 (after
deducting from such limit any relevant securities allotted under (i)), in connection with an offer of a rights issue,
such authority to apply until the conclusion of the AGM to be held in 2019 or, if earlier, close of business on
30 June 2019.
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Governance Reports Financial StatementsShareholder InformationStrategic Report Directors’ Report continued
Purchase of Own Shares
The Company is, by shareholder resolution passed at the 2017 AGM, authorised to purchase up to 8,364,852 of its
Ordinary Shares at a maximum price which is the higher of:
(i) an amount equal to 105% of the average of the middle market quotations for such Ordinary Shares 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 on
the trading venues where the market purchases by the Company will be carried out),
and at a minimum price of £0.25 per Ordinary Share.
The Company is also, by shareholder resolution passed at the 2017 AGM, authorised to purchase up to 1,394,587
of its Preference Shares at a maximum price which is the higher of:
(i) an amount equal to 110% of the average of the middle market quotations for such Preference Shares 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 Preference Share on
the trading venues where the market purchases by the Company will be carried out),
and at a minimum price of £1.00 per Preference Share.
These authorities will expire at the Company’s forthcoming AGM when it is proposed that they be renewed but
without prejudice to the exercise of any such authorities prior to the date of such resolutions being put to the
Company’s shareholders.
Disapplication of Pre-Emption Rights and Notice of General Meetings
In response to shareholder feedback and noting the repeated opposition in past years of more than 20% of the
shareholder votes cast in respect of proposed resolutions to: (i) disapply pre-emption rights upon the allotment of
new shares; and (ii) convene general meetings, other than annual general meetings, on short notice of 14 days, the
Directors have decided not to propose such resolutions, which have been in accordance with Investment Association
principles and market practice, at the forthcoming AGM.
Directors
Appointment of Directors
Directors may be appointed by the Company by an ordinary resolution of its shareholders. The Board may appoint
a Director either to fill a vacancy or as an additional Director and any Director so appointed shall hold office only
until the next AGM of the Company following such appointment and shall then be eligible for re-appointment. If not
re-appointed at such AGM, such a Director will vacate office at its conclusion except where a resolution is passed
to appoint someone in their place (other than with effect from a time later than the conclusion of the AGM) or a
resolution for their re-appointment is put to the AGM and lost (in either which case the retirement takes effect from
the passing of the relevant resolution).
An appropriate induction is provided by the Company to all new Directors and ongoing training is supplied as and
when it may be required, with documentation on the Company and its activities distributed to Directors on a regular
basis. A Director is not required to hold shares in the capital of the Company.
Retirement of Directors
In accordance with best practice principles, all Directors 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 its business or otherwise, subject to any restrictions contained in the
Articles which detail the specific powers of the Directors. Copies of the Articles may be obtained from the Group
Company Secretary or from the Company’s website at www.johnmenziesplc.com.
The Articles can only be amended by a special resolution of the Company’s shareholders in general meeting.
Significant Agreements – Change of Control
The Group’s operating businesses 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 any of its subsidiaries are a party, such as banking arrangements, property leases and licence
agreements, to take effect, alter or terminate. Additionally, the Directors’ service agreements and employee share
plans would be similarly affected upon a change of control.
Emissions Reporting
The information required to be included in this Directors’ Report pursuant to the 2013 Regulations in respect of
greenhouse gas emissions is included in the Responsible Business section of this Annual Report and Accounts 2017
on pages 45 to 47, which information is incorporated by reference into this Directors’ Report.
Annual General Meeting
Notice of the Company’s forthcoming AGM is contained at the end of this document.
Approved and issued by the Board of Directors.
On behalf of the Board of Directors
John Geddes
Company Secretary & Director of Corporate Affairs
12 March 2018
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Independent Auditor’s Report to the Members of John Menzies plc
The Directors are responsible for preparing the Company’s Annual Report, Remuneration Report and its financial
statements in accordance with applicable law and regulations. Company law requires the Directors to prepare
such 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 (“IFRS”) as adopted by the European Union.
In preparing those financial statements the Directors are required to:
Opinion
In our opinion:
• John Menzies plc’s Group financial statements and parent company financial statements (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 2017 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with International Financial
Reporting Standards (“IFRSs”) as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted
• select suitable accounting policies in accordance with IAS 8 Accounting Policies, Changes in Accounting
by the European Union as applied in accordance with the provisions of the Companies Act 2006; and
Estimates and Errors, and then apply them consistently;
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006,
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
and, as regards the Group financial statements, Article 4 of the IAS Regulation.
understandable information;
• provide additional disclosures when compliance with the specific requirements in IFRS 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 IFRS, 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 Accounts 2017, when taken as a whole, are fair, balanced and
understandable and provide the information necessary for shareholders to assess the Company’s position and
performance, business model and strategy.
We have audited the financial statements of John Menzies plc, which comprise:
Group
Parent Company
Consolidated Balance Sheet as at 31 December 2017
Balance Sheet as at 31 December 2017
Consolidated Income Statement for the year then ended Statement of Changes in Equity for the year then ended
Consolidated Statement of Comprehensive Income
for the year then ended
Cash Flow Statement for the year then ended
Consolidated Statement of Changes in Equity for
the year then ended
Related notes 1 to 28 to the financial statements
including a summary of significant accounting policies
Consolidated Statement of Cash Flows for the year
then ended
Related notes 1 to 28 to the financial statements,
including a summary of significant accounting policies
The Directors are responsible for the maintenance and integrity of the Company’s website (www.johnmenziesplc.com).
Legislation in the United Kingdom concerning the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
The financial reporting framework that has been applied in their preparation is applicable law and 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.
Directors’ Statement Pursuant to the Disclosure Guidance and Transparency Rules
Each of the Directors confirms that to the best of their knowledge and belief:
• the financial statements, prepared in accordance with IFRS, 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 and Accounts 2017 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.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of
the financial statements section of our report below. We are independent of the Group and Company in accordance
with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom,
including the Financial Reporting Council’s Ethical Standard as applied to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Use of Our Report
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.
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Conclusions Relating to Principal Risks, Going Concern and Viability Statement
We have nothing to report in respect of the following information in the Annual Report, in relation to which ISAs
(UK) requires us to report to you whether we have anything material to add or draw attention to:
• the disclosures in the Annual Report set out on page 34 that describe the principal risks and explain how they
are being managed or mitigated;
• the Directors’ confirmation set out on page 34 in the Annual Report that they have carried out a robust assessment
of the principal risks facing the entity, including those that would threaten its business model, future performance,
solvency or liquidity;
• the Directors’ statement set out on page 31 in the financial statements about whether they considered it
appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any
material uncertainties to the entity’s ability to continue to do so over a period of at least 12 months from the
date of approval of the financial statements;
• whether the Directors’ statement in relation to going concern required under the Listing Rules in accordance
with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or
• the Directors’ explanation set out on page 31 in the Annual Report as to how they have assessed the prospects
of the entity, over what period they have done so and why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the entity will be able to continue in operation
and meet its liabilities as they fall due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
Overview of Our Audit Approach
Key audit matters
• ASIG acquisition accounting including identification and valuation of
Audit scope
acquisition intangibles and fair value adjustments.
• Valuation of pension liabilities and impact of closure to future accrual.
• Assessment of the carrying value of Distribution goodwill and indefinite
life intangibles.
• Risk of misstatement due to management override, fraud and error
specifically around revenue recognition.
• We performed an audit of the complete financial information of five
components and audit procedures on specific balances for a further
25 components.
• The components where we performed full or specific audit procedures
accounted for 84% of adjusted profit before tax, 84% of revenue and
80% of total assets.
Materiality
• Overall Group materiality of £2.6m which represents 5% of adjusted
profit before tax.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those that had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion
thereon, and we do not provide a separate opinion on these matters.
Key Observations Communicated
to the Audit Committee
We have concluded that the ASIG
acquisition accounting, including
the identification of acquisition
intangibles and fair value
adjustments is materially correct
and appropriately disclosed in line
with IFRS 3 Business Combinations.
Risk
Our Response to the Risk
ASIG acquisition accounting
including identification and
valuation of acquisition
intangibles and fair value
adjustments
Refer to the Audit Committee
Report (page 61); Accounting
policies (page 108); and Note 25
of the Consolidated Financial
Statements (page 155).
On 1 February 2017 the Group
completed its acquisition of
the ASIG operations from BBA
Aviation plc for total consideration
of £166.0m.
The significant risk arises because
of the level of judgement required
by management in determining
the fair value of net assets required
of £88.4m (which includes the
identification and measurement
of acquisition intangible assets
of £38.4m).
We have read the Stock Purchase
Agreement entered into by John
Menzies plc in relation to the
acquisition of ASIG Holdings Limited
and ASIG Holdings Corporation from
BBA Aviation plc and in our audit of
the accounting of the acquisitions we
considered whether the appropriate
accounting treatment had been
applied.
We agreed the consideration paid to
the Stock Purchase Agreement and
lawyers fund transfer agreement.
We have obtained an understanding
of management’s processes in place
to identify fair value adjustments and
have vouched a sample of fair value
adjustments to corroborative evidence
to support the fair value adjustments
assessed by management.
We challenged the assumptions and
methodologies used by management
to derive the fair value of intangible
assets. We used our valuation
specialists to assist us in considering
the approach taken by management
and in assessing key assumptions (e.g.
historical client attrition rates and
synergies). We obtained corroborative
evidence for the explanations provided
by management (e.g. comparing key
assumptions to market data, underlying
accounting records, past performance
of the acquired business, and the
Group’s forecast supporting the
acquisition).
We also performed sensitivity analysis
to determine the impact of changes in
the key assumptions (e.g. discount rate
and longevity of acquired client
relationships), both individually and in
aggregate.
We assessed the adequacy of
disclosures within the financial
statements.
All audit work in relation to this key
audit matter was undertaken by the
primary audit team.
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Key Observations Communicated
to the Audit Committee
We have concluded that the
pension liability is materially
correct and that management’s
judgements in relation to
underlying actuarial assumptions
were appropriate.
We have concluded that the
curtailment loss is materially
correct and that management’s
judgements in relation to
underlying actuarial assumptions
at the date of closure to future
accrual were appropriate.
Risk
Our Response to the Risk
We have obtained an understanding
and made an assessment of the key
controls and processes in place to
determine the actuarial assumptions.
We considered the competency and
objectivity of management’s expert.
We have tested to ensure that the data
used by the actuaries was accurate.
Our actuarial specialists evaluated
the methodology applied to calculate
the pension liabilities as well as the
appropriateness of the underlying
actuarial assumptions, both at the
date of closure to future accrual
and at the year end.
We have assessed the adequacy
of disclosures within the financial
statements following the Financial
Reporting Council’s thematic review.
All audit work in relation to this
key audit matter was undertaken
by the primary audit team.
Valuation of pension liabilities
and impact of closure to future
accrual
Refer to the Audit Committee
Report (page 61); Accounting
policies (page 108); and Note 23
of the Consolidated Financial
Statements (page 144).
The Group makes provision for
the net pension deficit of its
defined benefit pension scheme.
During the year, the scheme
was closed to future accrual and
was subsequently sectionalised,
resulting in a specific allocation
of the net deficit to a Distribution
subsidiary, Menzies Distribution
Limited.
The significant risk relates to
the potential misstatement of
the pension liability (£49.5m)
due to the significant judgements
being exercised by management
in determining the appropriate
underlying actuarial assumptions
both at the date of closure to
future accrual and at the year end.
The actuarial assumptions at the
date of closure to future accrual
determine the quantum of
curtailment loss (£2.7m).
Risk
Our Response to the Risk
Key Observations Communicated
to the Audit Committee
Assessment of the carrying value
of Distribution goodwill and
indefinite life intangibles
We have obtained an understanding
and evaluated the key controls and
processes in place over management’s
impairment review.
We concur with management
that it remains appropriate for
the Distribution contracts to be
considered to have indefinite lives.
Refer to the Audit Committee
Report (page 61); Accounting
policies (page 108); and Note 11
of the Consolidated Financial
Statements (page 126).
The significant risk arises because
of the amount of goodwill (£15.5m)
and indefinite life assets (£12.9m)
relative to net assets and the
level of management judgement
required in estimating future cash
flows and the appropriate growth
and discount rates, especially
in relation to the Distribution
operations given the number of
Distribution contracts requiring
renewal from 2019.
We have tested the integrity of the
valuation models.
We have assessed the key assumptions
used by management being future
cash flows, growth and discount rates
and evaluated the reasonableness
using our valuation specialists.
We have concluded that the
goodwill and intangible assets
with indefinite life balances are
appropriately valued.
We concur with management’s
assessment that there is no
impairment in the Distribution
goodwill.
We obtained an understanding and
evaluated the impact of the ongoing
publisher negotiation process on the
cash flows used in the value in use
calculations.
We have assessed management’s
sensitivity analysis showing the impact
of a reasonably possible change in
impairment assumptions.
We have assessed the adequacy
of disclosures within the financial
statements.
All audit work in relation to this key
audit matter was undertaken by the
primary audit team.
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Key Observations Communicated
to the Audit Committee
We have concluded that revenue
recognised in the year is materially
correct on the basis of procedures
performed both at Group and by
component audit teams.
Risk
Our Response to the Risk
Risk of misstatement due to
management override, fraud and
error specifically around revenue
recognition
Refer to the Audit Committee
Report (page 61); Accounting
policies (page 108); and Note 2
of the Consolidated Financial
Statements (page 118).
There is a risk that the financial
statements as a whole are not free
from material misstatement due to
the risk of management override
of controls whether caused by
fraud or error.
Revenue recognition is a particular
area of focus for our audit in
considering possible areas of
management bias and fraud.
We recognise that sales
arrangements for the Group are
generally straightforward, requiring
minimal judgement to be exercised.
Accordingly, we focus on the
application of contractual rates for
new and amended contracts within
the Aviation business, recognising the
ongoing contract churn in this area
(specifically around new contracts,
their formal agreement and revision
to terms on existing contracts).
For the Distribution business,
management use judgement to
estimate the returns liability and
associated asset in respect of returns
of newspapers and magazines.
We have obtained an understanding
of the key controls and processes in
place over revenue recognition.
At full scope components we
employed data analytic techniques
to correlate sales through to debtors
and cash receipts.
For all in scope locations we performed
detailed testing of a sample of sales
transactions to ensure that revenue had
been appropriately recognised in line
with the underlying contractual terms.
We specifically focused on the revenue
recognised on Aviation contracts.
For Distribution, we reviewed the
estimate of return liability and
corresponding asset, based on actual
returns during January 2018 and
margin percentage at the date of
sale. We have tested the impact of
management’s adjustment to restate
the returns liability and associated
asset as disclosed in Note 28 of the
Consolidated Financial Statements.
We have assessed the effectiveness
of management override controls
through inspection of supporting
information for non-routine manual
journal entries focused on individually
unusual and material revenue journals.
We performed full and specific scope
audit procedures over this risk area in
30 locations, which covered 84% of
the risk amount.
Scope of Our Audit
Full scope
Specific scope
Parent and consolidation
adjustments
Overall coverage
Components
2017
2016
5
25
30
4
31
35
Percentage
of profit before tax1
Percentage
of revenue
Percentage
of total assets
2017
81
53
134
(50)
84
2016
2017
2016
2017
2016
90
41
131
(55)
76
60
24
84
–
84
65
24
89
–
89
52
28
80
–
80
36
44
80
–
80
Note:
1. Percentage of profit before tax is calculated against the adjusted profit before tax measure used to calculate materiality.
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Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our
audit scope for each entity within the Group. Taken together, this enables us to form an opinion on the consolidated
financial statements. We take into account size, risk profile, the organisation of the Group and effectiveness of Group-
wide controls, changes in the business environment and other factors such as recent internal audit results when
assessing the level of work to be performed at each entity.
In assessing the risk of material misstatement to the financial statements, and to ensure we had adequate
quantitative coverage of significant accounts in the financial statements, of the 119 reporting components of the
Group, we selected 30 components covering entities within the United Kingdom, the United States of America,
Australia, Spain, the Czech Republic, South Africa, Panama, the Dominican Republic and in Macau, China which
represent the principal business units within the Group.
Of the 30 components selected, we performed an audit of the complete financial information of five components (full
scope components), which were selected based on their size or risk characteristics. For the remaining 25 components
(specific scope components), we performed audit procedures on specific accounts within that component that we
considered had the potential for the greatest impact on the significant accounts in the financial statements either
because of the size of these accounts or their risk profile.
The audit scope of specific scope components may not have included testing of all significant accounts of the
component but will have contributed to the coverage of accounts tested for the Group.
Of the remaining 89 components that together represent 16% of the Group’s adjusted profit before tax, none is
individually greater than 5% of the Group’s adjusted profit before tax. For these components, we performed other
procedures, including analytical review, testing of consolidation journals and intercompany eliminations to respond
to any potential risks of material misstatement to the financial statements.
Changes from the prior year
One component has been brought into full scope and three as specific following the ASIG acquisition. One
component has been removed from specific scope and two components have been downgraded from specific
scope to specified procedures.
Involvement with component teams
In establishing our overall approach to the Group audit, we determined the type of work that needed to be
undertaken at each of the components by us, as the primary audit engagement team, or by component auditors
from other EY global network firms operating under our instruction. Of the five full scope components, audit
procedures were performed on four of these directly by the primary audit team. For the 25 specific scope
components, where the work was performed by component auditors, we determined the appropriate level of
involvement that we, as the primary audit team, needed to have to enable us to determine that sufficient audit
evidence had been obtained as a basis for our opinion on the Group as a whole.
The audit work on the UK and North America full scope reporting units was performed directly by the primary
audit team covering four of the five full scope locations. The primary audit team interacted regularly with all
component teams through emails and teleconferencing where appropriate during various stages of the audit,
reviewed key working papers and were responsible for the scope and direction of the audit process. This, together
with the additional procedures performed at Group level, gave us appropriate evidence for our opinion on the
financial statements.
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Our Application of Materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified
misstatements on the audit and in forming our audit opinion.
Materiality
We determined materiality for the Group to be £2.6m (2016: £2.0m), which is 5% (2016: 5%) of adjusted profit
before tax. We believe that adjusted profit before tax provides us with the appropriate measure for determining
the materiality based on the focus of the user of the financial statements.
We determined materiality for the Company to be £1.7m (2016: £1.7m), which is 1% (2016: 1%) of equity. We believe
that equity provides us with the appropriate measure for determining the materiality based on the focus of the
user of the financial statements.
During the course of our audit, we reassessed initial materiality and have deemed this still to be appropriate at the
year end.
Performance materiality
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment,
our judgement was that performance materiality was 75% (2016: 75%) of our planning materiality, namely £1.9m
(2016: £1.5m). We have set performance materiality at this percentage due to our understanding of the perspective
of the users of the financial statements.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement
accounts is undertaken based on a percentage of total performance materiality. The performance materiality set for
each component is based on the relative scale and risk of the component to the Group as a whole and our assessment
of the risk of misstatement at that component. In the current year, the range of performance materiality allocated to
components was £0.3m to £1.1m (2016: £0.3m to £1.1m).
Reporting threshold
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess
of £0.1m (2016: £0.1m), which is set at 5% of planning materiality, as well as differences below that threshold that,
in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above
and in light of other relevant qualitative considerations in forming our opinion.
Other Information
The other information comprises the information included in the Annual Report, including the five year review and
shareholder information set out on pages 160 to 187, other than the financial statements and our auditor’s report
thereon. The Directors are responsible for the other information.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in this report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other information. If, based on the work we have performed,
we conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our responsibility to specifically address the following
items in the other information and to report as uncorrected material misstatements of the other information where
we conclude that those items meet the following conditions:
• Fair, balanced and understandable set out on page 90 – the statement given by the Directors that they consider
the Annual Report and financial statements taken as a whole is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group’s performance, business model and strategy, is
materially inconsistent with our knowledge obtained in the audit; or
• Audit Committee reporting set out on page 61 – the section describing the work of the Audit Committee does
not appropriately address matters communicated by us to the Audit Committee is materially inconsistent with
our knowledge obtained in the audit; or
• Directors’ statement of compliance with the UK Corporate Governance Code set out on page 50 – the parts of the
Directors’ statement required under the Listing Rules relating to the Company’s compliance with the UK Corporate
Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule
9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.
Opinions 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.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
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Matters on Which We Are Required to Report by Exception
In light of the knowledge and understanding of the Group and the parent company and its environment obtained in
the course of the audit, we have not identified material misstatements in the strategic report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us 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.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on page 90, the Directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view in accordance,
and for such internal control as the directors determine is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group and Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Group or the Company or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
The objectives of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the
financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of
material misstatement due to fraud, through designing and implementing appropriate responses; and to respond
appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the
prevention and detection of fraud rests with both those charged with governance of the entity and management.
Our approach was as follows:
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and
determined that the most significant include IATA regulations, UK Department for Transport, applicable health
& safety and data protection regulations, competition and consumer protection laws, labour regulations and
employee rights laws.
• We understood how the Company is complying with those frameworks by making enquiries of management,
internal audit, those responsible for legal and compliance procedures and the Company Secretary. We corroborated
our enquiries through our review of board minutes, papers provided to the Audit Committee and correspondence
received from regulatory bodies.
• We assessed the susceptibility of the Group’s financial statements to material misstatement, including how
fraud might occur by meeting with management within various parts of the business to understand where they
considered there was susceptibility to fraud. We also considered performance targets and their influence on
efforts made by management to manage earnings or influence the perceptions of analysts. Where this risk was
considered to be higher, we performed audit procedures to address each identified fraud risk. These procedures
included testing manual journals and were designed to provide reasonable assurance that the financial statements
were free from fraud or error.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and
regulations. Our procedures included a review of board minutes to identify any non-compliance with laws and
regulations, and enquiries of Senior Management.
• We identified any instances of non-compliance with laws and regulations at Group components through the
direction and oversight of our component audit teams. We discussed any potential findings with Senior
Management.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Other matters we are required to address
• Following the recommendation of the Audit Committee, we were appointed as auditor and signed an engagement
letter on 20 December 2017. We were appointed by the Company at the Annual General Meeting in 2009 to audit
the financial statements for the year ending 31 December 2009 and subsequent financial periods. The period of
total uninterrupted engagement including previous renewals and reappointments is nine years, covering the years
ending 31 December 2009 to 31 December 2017.
• The non-audit services prohibited by the Financial Reporting Council’s Ethical Standard were not provided to
the Group or the Company and we remain independent of the Group and the Company in conducting the audit.
• The audit opinion is consistent with the additional Report to the Audit Committee.
Kevin Weston (Senior Statutory Auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Edinburgh
12 March 2018
Notes:
1. The maintenance and integrity of the John Menzies plc website is the responsibility of the Directors; the work carried out by the auditor does not
involve consideration of these matters and, accordingly, the auditor accepts no responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the website.
2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
100 John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
101
Financial StatementsShareholder InformationGovernance Reports Strategic Report Group Income Statement
For the year ended 31 December 2017 (year ended 31 December 2016)
Group Statement of Comprehensive Income
For the year ended 31 December 2017 (year ended 31 December 2016)
Profit for the year
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain/(loss) on defined benefit retirement obligation
Actuarial loss on unfunded retirement benefit obligation
Income tax effect on defined benefit retirement obligation
Impact of UK rate change on deferred tax on retirement benefit obligation
Items that may be reclassified subsequently to profit or loss:
Movement on cash flow hedges
Income tax effect on cash flow hedges
Movement on net investment hedges
Income tax effect on net investment hedges
Exchange (loss)/gain on translation of foreign currency net assets
Income tax effect of exchange loss/gain on foreign currency net assets
Other comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year
Attributable to equity shareholders
Attributable to non-controlling interests
Notes
23
17
17
2017
£m
12.0
15.7
(0.1)
(2.7)
–
0.5
(0.1)
2.0
(0.4)
(3.7)
0.7
11.9
23.9
24.5
(0.6)
23.9
2016
£m
8.0
(36.8)
(0.3)
7.4
(1.6)
–
–
(15.2)
3.0
33.1
(4.0)
(14.4)
(6.4)
(5.8)
(0.6)
(6.4)
Before
exceptional
and other
items
£m
Exceptional
and other
items
£m
Notes
Before
exceptional
and other
items
Restated
(Note 28)
£m
2017
£m
Exceptional
and other
items
£m
2016
Restated
(Note 28)
£m
Revenue
Net operating costs
2
3
2,460.5
(2,391.5)
– 2,460.5
(2,429.1)
(37.6)
1,982.5
(1,936.1)
–
(26.3)
1,982.5
(1,962.4)
Operating profit before joint ventures
and associates
Share of post-tax results of joint
ventures and associates
Operating profit
Analysed as:
Underlying operating profit(i)
Non-recurring items – transaction
related and integration
Non-recurring item – pension related
Non-recurring item – impairment
charges
Contract amortisation
Share of joint ventures and associates
interest
Share of joint ventures and associates
tax
Operating profit
Finance income
Finance charges excluding retirement
benefit obligation interest
Retirement benefit obligation interest
Profit before taxation
Taxation
Profit for the year
Attributable to equity shareholders
Attributable to non-controlling
interests
Earnings per ordinary share
Basic
Diluted
2
5
5
5
5
7
7
23
8
69.0
(37.6)
31.4
46.4
(26.3)
20.1
8.9
77.9
(1.1)
7.8
(38.7)
39.2
8.8
55.2
(1.3)
(27.6)
7.5
27.6
77.9
–
77.9
55.2
–
55.2
(21.7)
(5.4)
–
(10.5)
(21.7)
(5.4)
–
(10.5)
0.9
0.9
–
–
–
–
–
–
(2.0)
77.9
(38.7)
(2.0)
39.2
–
–
–
–
–
–
(8.8)
–
(9.6)
(7.9)
0.6
(1.9)
55.2
(27.6)
(8.8)
–
(9.6)
(7.9)
0.6
(1.9)
27.6
1.2
–
1.2
0.7
–
0.7
(10.2)
(1.8)
67.1
(20.0)
(1.7)
–
(40.4)
5.3
(11.9)
(1.8)
26.7
(14.7)
47.1
(35.1)
12.0
(4.6)
(1.6)
49.7
(15.9)
33.8
(2.3)
–
(29.9)
4.1
(25.8)
(6.9)
(1.6)
19.8
(11.8)
8.0
47.7
(35.1)
12.6
34.3
(25.8)
8.5
(0.6)
47.1
–
(35.1)
(0.6)
12.0
(0.5)
33.8
–
(25.8)
(0.5)
8.0
10
10
57.2p
57.0p
(42.1)p
(41.9)p
15.1p
15.1p
47.8p
47.7p
(35.9)p
(35.9)p
11.8p
11.8p
Note:
(i) Underlying operating profit adjusts for non-recurring exceptional items, impairment charges associated with goodwill, joint venture assets and other
intangibles, 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.
102
John Menzies plc Annual Report and Accounts 2017
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103
Financial StatementsShareholder InformationGovernance Reports Strategic Report
Group and Company Balance Sheets
As at 31 December 2017 (31 December 2016)
Group and Company Statements of Changes in Equity
As at 31 December 2017 (31 December 2016)
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investments in joint ventures and associates
Investments in subsidiaries
Deferred tax assets
Derivative financial 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 assets/(liabilities)
Total assets less current liabilities
Non-current liabilities
Borrowings
Other payables
Deferred tax liabilities
Provisions
Retirement benefit obligation
Net assets
Shareholders’ equity
Ordinary shares
Share premium account
Treasury shares
Other reserves
Merger relief reserve
Retained earnings(i)
Capital redemption reserve
Total shareholders’ equity
Non-controlling interest in equity
Equity
Group
Company
Notes
2017
£m
2016
Restated
(Note 28)
£m
2017
£m
2016
£m
11
12
13
13
14
17
15
17
17
17
16
22
17
16
14
22
23
24
203.7
155.6
27.7
–
24.2
0.9
412.1
20.9
350.2
1.1
72.8
445.0
104.0
127.3
30.9
–
24.2
–
–
23.4
–
306.1
5.8
0.9
286.4
336.2
16.0
224.8
0.4
38.9
280.1
–
504.5
1.1
5.0
510.6
(5.1)
(0.5)
(344.8)
(13.5)
(15.8)
(39.0)
(6.1)
(234.2)
(11.3)
(4.2)
(3.3)
(0.5)
(338.0)
–
(2.7)
–
23.9
–
292.6
10.1
–
326.6
–
345.4
0.4
1.0
346.8
(38.5)
(6.1)
(317.1)
–
–
(379.7)
(294.8)
(344.5)
(361.7)
65.3
477.4
(14.7)
271.7
166.1
502.3
(283.6)
(4.6)
(4.7)
(2.5)
(49.5)
(64.7)
(4.0)
(2.8)
(4.0)
(71.0)
(283.6)
–
–
–
(42.5)
(344.9)
(146.5)
(326.1)
132.5
125.2
176.2
21.0
21.9
(1.3)
(5.6)
67.3
11.4
21.6
136.3
(3.8)
132.5
20.9
20.5
(1.6)
(4.6)
67.3
0.1
21.6
124.2
1.0
125.2
21.0
21.9
(1.3)
(0.5)
67.3
46.2
21.6
176.2
–
176.2
(14.9)
311.7
(64.7)
(4.9)
–
(1.1)
(71.0)
(141.7)
170.0
20.9
20.5
(1.6)
(0.9)
67.3
42.2
21.6
170.0
–
170.0
Ordinary
shares
£m
Share
premium
account
£m
Treasury
shares
£m
Translation
and
hedge
reserves
£m
Merger
relief
reserve
£m
Retained
earnings
£m
Capital
redemption
reserve
£m
Total
share-
holders’
equity
£m
Non-
controlling
equity
£m
Equity
£m
Group
At 31 December 2016
as previously reported
20.9
20.5
(1.6)
(4.6)
67.3
3.2
21.6
127.3
1.0
128.3
Prior year adjustment
(Note 28)
At 31 December 2016
restated
Profit/(loss) for the year
Other comprehensive
(loss)/income
Total comprehensive
(loss)/income
New share capital issued
Share-based payments
Income tax effect of
share-based payments
Subsidiaries acquired
(Note 25)
Dividends paid
Disposal of own shares
–
–
–
–
–
(3.1)
–
(3.1)
–
(3.1)
20.9
20.5
(1.6)
(4.6)
67.3
–
–
–
0.1
–
–
–
–
–
–
–
–
1.4
–
–
–
–
–
–
–
–
–
–
–
–
–
0.3
–
(1.0)
(1.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
12.6
12.9
25.5
–
1.4
0.6
–
(15.9)
(0.3)
21.6
124.2
1.0
125.2
–
–
–
–
–
–
–
–
–
12.6
(0.6)
12.0
11.9
–
11.9
24.5
(0.6)
23.9
1.5
1.4
0.6
–
–
–
1.5
1.4
0.6
–
(15.9)
–
(4.2)
–
–
(4.2)
(15.9)
–
At 31 December 2017
21.0
21.9
(1.3)
(5.6)
67.3
11.4
21.6
136.3
(3.8)
132.5
At 31 December 2015
as previously reported
15.4
20.4
(1.8)
(21.6)
Prior year adjustment
(Note 28)
At 31 December 2015
restated
Profit/(loss) for the year
Other comprehensive
income/(loss)
Total comprehensive
income/(loss)
New share capital issued
Rights Issue costs
Share-based payments
Income tax effect of
share-based payments
Dividends paid
Disposal of own shares
–
–
–
–
15.4
–
20.4
–
(1.8)
–
(21.6)
–
17.0
–
–
5.5
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
0.2
–
–
–
–
–
35.6
21.6
69.6
1.6
71.2
(3.1)
–
(3.1)
–
(3.1)
32.5
8.5
21.6
–
66.5
8.5
1.6
(0.5)
68.1
8.0
(31.3)
–
(14.3)
(0.1)
(14.4)
17.0
–
(22.8)
–
–
–
–
–
–
69.7
(2.4)
–
–
–
0.8
–
–
–
0.3
(10.6)
(0.1)
–
–
–
–
–
–
–
(5.8)
(0.6)
(6.4)
75.3
(2.4)
0.8
0.3
(10.6)
0.1
–
–
–
–
–
–
75.3
(2.4)
0.8
0.3
(10.6)
0.1
At 31 December 2016
20.9
20.5
(1.6)
(4.6)
67.3
0.1
21.6
124.2
1.0
125.2
Note:
(i) The Company’s loss after tax for the year was £0.1m (2016: profit £46.5m).
The accounts were approved by the Board of Directors on 12 March 2018 and signed on its behalf by:
Dr. Dermot F. Smurfit
Chairman
Giles Wilson
Chief Financial Officer
Company No. SC34970
104
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
105
Financial StatementsShareholder InformationGovernance Reports Strategic Report
Group and Company Statements of Changes in Equity continued
As at 31 December 2017 (31 December 2016)
Group and Company Statements of Cash Flows
For the year ended 31 December 2017 (year ended 31 December 2016)
Ordinary
shares
£m
Share
premium
account
£m
Treasury
shares
£m
Translation
and
hedge
reserves
£m
Merger
relief
reserve
£m
Retained
earnings
£m
Capital
redemption
reserve
£m
Total
share-
holders’
equity
£m
Non-
controlling
equity
£m
Company
At 31 December 2016
Loss for the year
Other comprehensive gain
Total comprehensive
income
New share capital issued
Share-based payments
Income tax effect of
share-based payments
Intragroup transfer of
pension obligation
Dividends paid
Disposal of own shares
20.9
–
–
20.5
–
–
(1.6)
–
–
–
0.1
–
–
–
–
–
–
1.4
–
–
–
–
–
–
–
–
–
–
–
0.3
(0.9)
–
0.4
0.4
–
–
–
–
–
–
67.3
–
–
42.2
(0.1)
12.6
21.6
–
–
170.0
(0.1)
13.0
–
–
–
–
–
–
–
12.5
–
1.4
0.1
6.2
(15.9)
(0.3)
–
–
–
–
–
–
–
12.9
1.5
1.4
0.1
6.2
(15.9)
–
At 31 December 2017
At 31 December 2015
Profit for the year
Other comprehensive loss
21.0
15.4
–
–
21.9
20.4
–
–
Total comprehensive
income
New share capital issued
Rights Issue costs
Share-based payments
Dividends paid
Disposal of own shares
–
5.5
–
–
–
–
–
0.1
–
–
–
–
(1.3)
(0.5)
67.3
46.2
21.6
176.2
(1.8)
–
–
–
–
–
–
–
0.2
(0.9)
–
–
–
–
–
–
–
–
–
–
–
–
69.7
(2.4)
–
–
–
36.9
46.5
(31.3)
15.2
–
–
0.8
(10.6)
(0.1)
21.6
–
–
91.6
46.5
(31.3)
–
–
–
–
–
–
15.2
75.3
(2.4)
0.8
(10.6)
0.1
At 31 December 2016
20.9
20.5
(1.6)
(0.9)
67.3
42.2
21.6
170.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Equity
£m
170.0
(0.1)
13.0
12.9
1.5
1.4
0.1
6.2
(15.9)
–
176.2
91.6
46.5
(31.3)
15.2
75.3
(2.4)
0.8
(10.6)
0.1
170.0
Cash flows from operating activities
Cash generated from operations
Interest received
Interest paid
Tax paid
Net cash flow from/(used in) operating activities
Cash flows from investing activities
Acquisitions
Cash acquired with subsidiaries
Investment in associate
Loan repayment by associate
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 flow used in investing activities
Cash flows from financing activities
Net proceeds from issue of ordinary share capital
Proceeds from borrowings
Repayment of borrowings
Dividends paid to ordinary shareholders
Net amounts (lent to)/repaid by subsidiaries
Net cash flow from/(used in) financing activities
Increase/(decrease) in net cash and cash equivalents
Effects of exchange rate movements
Opening net cash and cash equivalents(i)
Closing net cash and cash equivalents(i)
Group
Company
2017
£m
2016
£m
2017
£m
2016
£m
70.2
1.2
(13.7)
(17.0)
40.7
(171.3)
12.9
–
–
(29.8)
(2.8)
0.8
6.3
(183.9)
1.5
293.4
(101.3)
(15.9)
–
177.7
34.5
(1.7)
38.1
70.9
46.1
0.7
(7.7)
(15.4)
23.7
(4.7)
0.3
(0.4)
0.3
(24.5)
(2.6)
2.4
6.6
(22.6)
72.9
–
(64.0)
(10.6)
–
(1.7)
(0.6)
4.8
33.9
38.1
(9.4)
–
(12.4)
(2.7)
(15.8)
–
(7.2)
(3.7)
(24.5)
(26.7)
–
–
–
–
(0.3)
–
–
–
(0.3)
1.5
293.4
(101.3)
(15.9)
(148.9)
28.8
4.0
–
1.0
5.0
–
–
–
–
–
–
–
–
–
72.9
–
(63.4)
(10.6)
28.0
26.9
0.2
–
0.8
1.0
Notes
18
25
25
9
19
Note:
(i) Net cash and cash equivalents include cash at bank and in hand and bank overdrafts.
106
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
107
Financial StatementsShareholder InformationGovernance Reports Strategic Report
Notes to the Accounts
The consolidated accounts of the Group for the year ended 31 December 2017 were approved and authorised for
issue in accordance with a resolution of the Directors on 12 March 2018. John Menzies plc, a public company with
registered number SC34970 and registered address of 2 Lochside Avenue, Edinburgh Park, Edinburgh EH12 9DJ,
is a limited company incorporated in Scotland and 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.
Basis of preparation
The consolidated accounts, which have been prepared under the historical cost convention and in accordance
with EU Endorsed International Financial Reporting Standards, 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.
As permitted by section 408 of the Companies Act 2006, no Income Statement is presented by the Company.
New accounting standards and amendments
Three new accounting standards and amendments are applicable for the Group for the first time in 2017. However,
they do not impact the annual consolidated financial statements of the Group. These are:
Amendment to IAS 7: Disclosure Initiative – effective date 1 January 2017
Amendment to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses – effective date 1 January 2017
Annual Improvements to IFRS 2014-2016 cycle – effective date 1 January 2017
Standards and amendments to standards that have been issued that are applicable for the Group but are not
effective for 2017 and have not been early adopted in these financial statements are:
IFRS 9 Financial Instruments – effective date 1 January 2018
IFRS 15 Revenue from Contracts with Customers – effective date 1 January 2018
IFRS 16 Leases – effective date 1 January 2019
IFRS 2 Classification and Measurement of Share Based Payment Transactions(i) – effective date 1 January 2018
IFRIC 22 Foreign Currency Transactions and Advance Consideration(i) – effective date 1 January 2018
IFRIC 23 Uncertainty over Income Tax Treatments(i) – effective date 1 January 2019
Annual Improvements to IFRS 2015-2017 cycle(i) – effective date 1 January 2019
Amendments to IAS 19 Plan Amendment, Curtailment or Settlement(i) – effective date 1 January 2019
Note:
(i) IFRS 2 amendment, IFRIC 22 and 23, annual improvements 2015-2017 and IAS 19 amendments are not yet adopted for use in the European Union.
The above standards and amendments will be adopted in accordance with their effective dates and for standards
with a future effective date, the Directors are in the process of assessing the likely impact and look to finalisation
of the standards before formalising their view.
Ahead of the adoption of IFRS 15 Revenue from Contracts with Customers on 1 January 2018, Management’s review
of a representative sample of material contracts to ensure compliance with the new standard is at an advanced
stage and has indicated that there is expected to be no material adjustment on adoption of IFRS 15. Substantially all
revenue earned by the Group is recognised at the point of service or on delivery of goods, and revenue recognised
does not vary materially from the consideration to which the Group is entitled. Were any adjustment to be required,
the modified retrospective approach would be adopted with the cumulative impact of any adjustment recognised in
retained earnings on transition date.
As part of the IFRS 15 review exercise, reconsideration has been made of the previous view that the historic
approach to accounting for sales returns in the Distribution Division in the period in which they occurred was
not materially misstated and concluded that, with the imminent application of the new standard, it is qualitatively
material and have adjusted retrospectively. A restatement has been made to the Balance Sheet to recognise an
adjustment to receivables and corresponding payables to reflect contractual obligations in relation to returns.
The Income Statement also has been restated to reflect the change in sales and net operating costs as a result
of the movements in these amounts. See Note 28 for detail. For clarity, there is no impact from these adjustments
on prior year reported profit before taxation or earnings per share. Following the restatement, Management does
not expect there to be an impact from the accounting for sales returns assets and liabilities on implementation of
IFRS 15 on 1 January 2018.
Ahead of the adoption of IFRS 16 Leases on 1 January 2019, management is in the process of collating information
to ensure compliance with the new standard. The new standard removes the distinction between operating leases
and finance leases and brings most of the assets subject to lease onto the balance sheet as fixed assets with the
corresponding liability shown as debt. This will materially gross up the Balance Sheet with the recognition of a new
right of use asset which will be depreciated through the Income Statement and a lease liability on which interest will
be charged through the Income Statement.
Ahead of the application of IFRS 9 Financial Instruments on 1 January 2018, management has reviewed the impact
of the new standard. Management expects the impact on the accounting for hedging arrangements to be minimal
and the expected credit loss model for impairment reviews will not have an overall impact on the Group. The
expected credit loss approach may impact the individual retained earnings of individual entities within the Group
due to the potential additional impairment provision for long term intercompany receivables. These potential
impairments would not impact on the Group as they would be intragroup items.
Basis of consolidation
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 do not have coterminous 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.
Control is achieved when the Group is exposed or has rights to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an
investee if the Group has all of the following: power over the investee (i.e. existing rights that give it the current ability
to direct the relevant activities of the investee); exposure or rights to variable returns from its involvement with the
investee; and the ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and
when the Group has less than a majority of the voting or similar rights of an investee, it considers all relevant facts and
circumstances in assessing whether it has power over an investee, including: contractual arrangement with other vote
holders of the investee; rights arising from other contractual arrangements; and the Group’s voting rights and potential
voting rights.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes
to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control
over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses
of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the
date the Group obtains control until the date the Group ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent
of the Group and to the non-controlling interests, even if this results in the non-controlling interest having a deficit
balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
policies into line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses
and cash flows relating to transactions between members of the Group are eliminated on consolidation.
A change in the ownership interest of a subsidiary without a loss of control is accounted for as an equity transaction.
If the Group loses control over a subsidiary, the related assets including goodwill, liabilities, non-controlling interests
and other components of equity are derecognised, while any resultant gain or loss is recognised in the Income
Statement. Any investment retained is recognised at fair value.
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Joint ventures and associates
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement
have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of
an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the
parties sharing control.
An associate is an entity over which the Group has significant influence. Significant influence is the power to
participate in the financial and operating policy decisions of the investee, but is not control or joint control over
those policies.
The considerations made in determining significant influence or joint control are similar to those necessary to
determine control over subsidiaries.
The Group’s investments in its associates and joint ventures are accounted for using the equity method. Under the
equity method, the investment in an associate or a joint venture is initially recognised at cost. The carrying amount
of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint
venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying
amount of the investment and is not tested for impairment individually.
The Income Statement reflects the Group’s share of the results of operations of the associate or joint venture.
Any change in other comprehensive income of those investees is presented as part of the Group’s Statement
of Comprehensive Income. In addition, when there has been a change recognised directly in the equity of the
associate or joint venture, the Group recognises its share of any changes, when applicable, in the Statement of
Changes in Equity. Unrealised gains and losses resulting from transactions between the Group and the associate
or joint venture are eliminated to the extent of the interest in the associate or joint venture.
The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on the face of the
Income Statement outside operating profit and represents profit or loss after tax and non-controlling interests in
the associate or joint venture.
After application of the equity method, the Group determines whether it is necessary to recognise an impairment
loss on its investment in its associate or joint venture. At each reporting date, the Group determines whether there
is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, the
Group calculates the amount of impairment as the difference between the recoverable amount of the associate or
joint venture and its carrying value, and then recognises the loss within the share of the profit of an associate and
a joint venture in the Income Statement.
Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and
recognises any retained investment at its fair value. Any difference between the carrying amount of the associate
or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and
proceeds from disposal is recognised in the Income Statement.
In India, Menzies Bobba Ground Handling Services Private Ltd is 51% owned, Menzies Aviation Bobba (Bangalore)
Private Ltd and Hyderabad Menzies Air Cargo Private Ltd are 49% owned, and Menzies Macau Airport Services Ltd
in China is 29% owned. They are treated as joint ventures in the Group accounts as 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 all parties.
Revenue
In the Aviation business, cargo handling and forwarding 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, into plane fuelling and
aviation related services income is recognised at the time the service is provided in accordance with the terms of
the relevant contract. Revenue excludes value-added and sales taxes and charges collected on behalf of customers.
In the Distribution business, revenue is recognised on the despatched value of goods sold, excluding value-added
tax. Product is sold to 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.
Property, plant and equipment
Property, plant and equipment is stated at cost, including costs to acquire, less accumulated depreciation.
Depreciation is provided on a straight-line basis at the following rates:
Freehold and long leasehold properties – over the shorter of the remaining lease term and 50 years.
Short leasehold properties – over the remaining lease term.
Plant and equipment – over the estimated life of the asset between three and 20 years.
Inventories
Inventories are goods for resale and consumables and are stated at the lower of purchase cost and net
realisable value.
Retirement benefit obligation
For the defined benefit pension scheme, 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, is
recognised in the Statement of Comprehensive Income. Pension charges are assessed in accordance with the
advice of qualified actuaries.
For the defined contribution pension schemes, the Income Statement charge represents contributions made.
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.
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.
The financial statements of each associate or joint venture are prepared for the same reporting period as the
Group. The Group’s three Indian joint ventures have a statutory year end of 31 March. Where necessary, adjustments
are made to bring the accounting policies in line with those of the Group.
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 the Statement of Changes in
Equity or in the Statement of Comprehensive Income as appropriate.
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1. Accounting Policies continued
Intangible assets
Goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as
the aggregate of the consideration transferred, measured at the 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 the date of transition to IFRS on 26 December 2004 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 of intangible assets 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 relevant risk-adjusted weighted average cost of
capital for the Group. Values are not attributed to internally generated customer relationships.
Contract amortisation is business stream dependent. In the Distribution business, capitalised publisher contracts are
not amortised due to the very long-term nature of the business. These contracts are tested annually for impairment
using the same criteria as for the testing of the goodwill. In the Aviation business and core non-publisher contracts
in the Distribution business, most contracts are amortised on a straight-line basis over ten years as this period is the
minimum timeframe Management considers when assessing businesses for acquisition. Certain other contracts are
amortised over the remaining life of the contract.
Computer Software
Costs associated with developing or maintaining computer software programs are recognised as an expense as
incurred. Costs that are directly attributable to 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. These direct costs include the cost of software development employees. Computer software assets
are amortised over their estimated useful lives, usually three to seven 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 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 the
applicable lease periods.
Trade receivables
If there is objective evidence that the Group is not be able to collect amounts due under the original terms of a
sales invoice, a provision against 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.
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 interest rate swaps and forward contracts as derivatives to hedge the risks arising from interest
rates and the retranslation of foreign currency denominated items.
The Group has derivatives that are designated as hedges of overseas net investments in foreign currency
denominated entities (net investment hedges) and derivatives that are designated as hedges of interest rates and
the exchange risk arising from the retranslation of highly probable forecast revenue denominated in foreign 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, derivatives have been recorded using hedge
accounting. Derivatives are measured at fair value, which is calculated as the present value of 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 the occurrence of the
transaction results in a non-financial asset or liability, then amounts recycled from equity are 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 are 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 are 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 reassessing 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 liabilities of uncertain timing and amount. Provisions are recognised when the Group has a present
legal or constructive obligation as a result of a past event and 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.
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.
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Financial StatementsShareholder InformationGovernance Reports Strategic Report 1. Accounting Policies continued
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 given changes in economic
conditions and the level of uncertainty regarding their duration and severity.
Estimates
Management has made a number of accounting assumptions and estimates which, if they transpire to be materially
incorrect, have a risk of resulting in a material adjustment to the carrying amount of assets and liabilities in the
future. 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
assumptions and estimates 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 cash flows, 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. See Note 11 for further details.
Impairment
In accordance with IAS 36 Impairment of Assets, management performs an impairment review on any assets that
show indications of impairment and annually on goodwill and intangibles that are deemed to have indefinite lives.
During the current year, no impairment indicators were noted over individual assets. Management’s impairment
review of goodwill and indefinite life intangibles involves exercising judgement about future cash flows and other
events that are by their nature uncertain. Management has disclosed the pre-tax discount rates used when
performing this review in Note 11. From Management’s review, no impairment was identified (2016: £9.6m).
Retirement Benefit Obligation
In accordance with IAS 19 Employee Benefits, management is responsible for making a number of financial and
demographic assumptions in relation to the defined benefit pension scheme that has a direct impact on the
pension deficit recognised within the financial statements. The assumptions underlying the calculation of the
retirement benefit obligation are important and management has determined the appropriate estimates based
on independent actuarial advice. Changes in these assumptions could have a material impact on the measurement
of the Group’s retirement benefit obligation. See Note 23 for further details.
Judgements
The following are key judgements, apart from those involving estimations which are dealt with separately above, that
Management has made in the process of applying the Group’s accounting policies and that have a significant effect
on the amounts recognised within the financial statements.
Provisions
In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, the Group exercises judgement in
determining whether provisions are required in relation to onerous property leases. Judgement is necessary in assessing
the likelihood of whether or not an alternative use can be found for these properties or a suitable tenant can be found
in order to cover the cost of the lease. This likelihood will vary depending on the size, location and type of property.
Management has performed a review of all leases at year end and concluded that a small minority are deemed to be
onerous and such leases have been fully provided for.
In accordance with IAS 37, the Group also exercises judgement in determining whether provisions are required in relation
to workers’ compensation claims, warranty claims and legal claims. Judgement is necessary in assessing the veracity,
measurement and probability of the claims. Management has reviewed available external and internal information relating
to these types of claims and has made appropriate provisions accordingly.
See Note 22 for further details.
Income Taxes
The Group is subject to income tax in a number of jurisdictions and 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 by estimating the taxes that are likely to become due, based
on Management’s interpretation of country specific tax law and the likelihood of settlement. Management uses the
services of a professional firm together with the expertise and historic experience of the Group’s inhouse tax team
when assessing tax risks. 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. See Notes 8 and 14 for further details.
The main provision held by the Group is against a claim for a reduced rate of tax in an overseas territory, based on
the nature of its activities in that territory which is subject to enquiry by the relevant tax authority. The Group does
not recognise the potential benefit to its effective tax rate from that claim until the agreement of the relevant tax
authority is obtained and therefore an appropriate provision is held until that point. Other uncertain tax provisions
are held for potential tax authority challenge of transfer pricing arrangements, deemed distributions of profits, the
tax treatment of interest and foreign exchange differences on certain intercompany loans and for tax authority
challenge against the interpretation of local tax legislation where the application of that legislation is unclear.
During the year the tax treatment of the pension funding arrangement which the Group has in place was agreed
with the relevant tax authority resulting in a £1.0m credit to prior year current tax. Whilst there is a range of
potential outcomes for these uncertain tax positions, Management’s best estimate of how these provisions may
move and impact the Group’s Income Statement over the next 12 months is an increase in the tax liability of £2.0m
to a decrease in the tax liability of £0.2m.
The Group has made an assessment of the use of tax losses in calculating its deferred tax asset and liability including
losses in the United States of America that may be subject to section 382 restrictions should the ownership of the
Company change significantly in the future.
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 that 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 acquisition
transaction and other related costs including changes in deferred consideration.
Dividend distributions
Final ordinary dividends are recognised as liabilities 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. See Note 17 for further details.
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Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued 1. Accounting Policies continued
Non-GAAP measures
The Group’s reported results are prepared in accordance with IFRSs as adopted by the European Union and applied
in accordance with the provisions of the Companies Act 2006. In measuring our performance, the financial measures
that are used include those which have been derived from the reported results in order to eliminate factors which
distort period-on-period comparisons. These are considered non-GAAP financial measures. This information, along
with comparable GAAP measurements, is useful to investors in providing a basis for measuring our operational
performance. Management uses these financial measures, along with the most directly comparable GAAP financial
measures, in evaluating performance and value creation. Non-GAAP measures should not be considered in isolation
from, or as a substitute for, financial information in compliance with GAAP. Non-GAAP financial measures as reported
by the Group may not be comparable with similarly titled amounts reported by other companies.
Contract amortisation relates to intangible assets recognised on historic acquisitions and therefore since it is transaction
related it is presented separately in order to provide stakeholders and Management with an appreciation for underlying
business performance.
The Group’s share of post-tax profit relating to joint ventures and associates is included within operating profit. IAS 1
Presentation of Financial Statements does not prescribe where the investors’ share of post-tax profit is presented in
the Income Statement but Management presents the results within operating profit after joint ventures and associates
given the similarity of those operations to other wholly owned businesses.
The Group’s definitions of non-GAAP measures are set out below and provide reconciliations to relevant
GAAP measures.
Turnover
Turnover comprises revenue from subsidiaries and the Group’s share of revenue from joint ventures and associates.
Revenue
Share of revenue of joint ventures and associates
Turnover
Note:
(i) As set out in Note 28 revenue for the year ending 31 December 2016 has been restated.
2017
£m
2016(i)
£m
2,460.5
57.2
1,982.5
95.1
2,517.7
2,077.6
Underlying Operating Profit
As disclosed on the face of the Income Statement, underlying operating profit adjusts for non-recurring exceptional
items, impairment charges associated with goodwill, joint venture assets and other intangibles, contract amortisation
and the Group’s share of joint ventures and associates interest and tax to provide an appreciation of the impact of
those items on operating profit.
Underlying Profit Before Taxation
As disclosed on the face of the Income Statement, underlying profit before taxation is defined as underlying operating
profit, less net finance charges and before exceptional and other items.
Underlying Earnings per Share
As disclosed on the face of the Income Statement, underlying earnings per share is defined as profit after taxation
and non-controlling interest before intangible amortisation and impairment and exceptional items, divided by the
weighted average number of ordinary shares in issue.
The calculation of underlying earnings per share is set out in Note 10.
Free Cash Flow
Free cash flow is defined as the cash generated after net capital expenditure, interest and taxation, before special
pension contributions, acquisitions, disposals, exceptional items, cash raised, ordinary dividends and net spend
on shares.
Cash generated from operations
Adjusted for:
Net interest paid
Exceptional interest paid
Tax paid
Dividends received from equity accounted investments
Purchase of property, plant and equipment
Intangible asset additions
Proceeds from sale of property, plant and equipment
Additional retirement benefit obligation contribution
Exceptional cash spend
Free cash flow
2017
£m
70.2
(12.5)
0.6
(17.0)
6.3
(29.8)
(2.8)
0.8
11.3
22.1
49.2
2016
£m
46.1
(7.0)
3.2
(15.4)
6.6
(24.5)
(2.6)
2.4
10.9
11.4
31.1
Underlying Operating Cash Flow
Underlying operating cash flow is free cash flow before net capital expenditure, net interest paid and taxation.
Free cash flow as set out above
Adjusted for:
Purchase of property, plant and equipment
Intangible asset additions
Proceeds from sale of property, plant and equipment
Net interest paid excluding exceptional interest
Tax paid
Underlying operating cash flow
2017
£m
49.2
29.8
2.8
(0.8)
11.9
17.0
109.9
2016
£m
31.1
24.5
2.6
(2.4)
3.8
15.4
75.0
2. Segment Information
For management purposes the Group is organised into two Operating Divisions, Aviation and Distribution, and a
central Corporate function. The two Operating Divisions are organised and managed separately based upon their
key markets. The Aviation Division provides ground handling and cargo services as well as into-plane fuelling and
fuel farm management services across the world. The Distribution Division provides newspaper and magazine
distribution services along with marketing and logistics services across the United Kingdom and the Republic
of Ireland.
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, intangible amortisation and share
of joint ventures and associates interest and tax. Net finance income and expenditure is not allocated to segments as
this activity is managed by a 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.
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Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued 2. Segment Information (continued)
Business segment information
Aviation
Americas
EMEA
Rest of World
Cargo Forwarding
Distribution
Corporate
Joint ventures and associates
460.4
525.1
173.3
143.4
1,302.2
1,215.5
–
2,517.7
(57.2)
219.8
391.2
139.6
117.5
868.1
1,209.5
–
2,077.6
(95.1)
2,460.5
1,982.5
23.0
14.9
15.5
5.4
58.8
24.8
(5.7)
77.9
–
77.9
Notes
Aviation
£m
Distribution
£m
Corporate
£m
28.2
7.0
35.2
58.8
(15.5)
–
(7.1)
0.9
(1.9)
35.2
19.4
0.8
20.2
24.8
(1.1)
–
(3.4)
–
(0.1)
20.2
5
5
11
(16.2)
–
(16.2)
(5.7)
(5.1)
(5.4)
–
–
–
12.9
6.0
10.9
4.4
34.2
24.7
(3.7)
55.2
–
55.2
Group
£m
31.4
7.8
39.2
77.9
(21.7)
(5.4)
(10.5)
0.9
(2.0)
(16.2)
39.2
(12.5)
26.7
The reconciliation of segmental underlying operating profit/(loss) to profit before tax is:
2017
Operating profit/(loss) before joint ventures and associates
Share of post-tax results of joint ventures and associates
Operating profit/(loss)
Analysed as:
Underlying operating profit/(loss)(ii)
Exceptional transaction related items
Exceptional pension de-risking costs
Contract amortisation
Share of joint ventures and associates interest
Share of joint ventures and associates tax
Operating profit/(loss)
Net finance expense
Profit before taxation
Revenue
Underlying operating
profit/(loss)
2017
£m
2016(i)
£m
2017
£m
2016
£m
2016
Operating profit/(loss) before joint ventures and associates
Share of post-tax results of joint ventures and associates
Operating profit/(loss)
Analysed as:
Underlying operating profit/(loss)(ii)
Rationalisation and acquisition related items
Net impairment loss
Contract amortisation
Share of joint ventures and associates interest
Share of joint ventures and associates tax
Operating profit/(loss)
Net finance expense
Profit before taxation
Notes
Aviation
£m
Distribution
£m
Corporate
£m
7.9
5.8
13.7
34.2
(4.9)
(9.6)
(5.1)
0.6
(1.5)
13.7
20.0
1.7
21.7
24.7
0.2
–
(2.8)
–
(0.4)
21.7
(7.8)
–
(7.8)
(3.7)
(4.1)
–
–
–
–
(7.8)
5
5
11
Group
£m
20.1
7.5
27.6
55.2
(8.8)
(9.6)
(7.9)
0.6
(1.9)
27.6
(7.8)
19.8
Notes:
(i) As set out in Note 28 revenue for the year ending 31 December 2016 has been restated.
(ii) Underlying operating profit/(loss) is defined as operating profit/(loss) excluding intangible amortisation as shown in Note 5 and exceptional items but
including the pre-tax share of results from joint ventures and associates.
2017
Segment assets
Unallocated assets
Total assets
Aviation
£m
Distribution
£m
Corporate
£m
574.0
179.2
6.9
Segment liabilities
Unallocated liabilities including retirement benefit obligation
(241.6)
(100.2)
(25.9)
Total liabilities
Segment net assets/(liabilities)
Unallocated net liabilities including retirement benefit obligation
332.4
79.0
(19.0)
Net assets
2016
Segment assets(i)
Unallocated assets
Total assets
Segment liabilities(i)
Unallocated liabilities
Total liabilities
Segment net assets/(liabilities)
Unallocated net liabilities
Net assets
Aviation
£m
Distribution
£m
Corporate
£m
314.2
181.2
8.0
(126.6)
(95.6)
(30.4)
187.6
85.6
(22.4)
Group
£m
760.1
97.0
857.1
(367.7)
(356.9)
(724.6)
392.4
(259.9)
132.5
Group
£m
503.4
63.1
566.5
(252.6)
(188.7)
(441.3)
250.8
(125.6)
125.2
118
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
119
Note:
(i) As set out in Note 28 current receivables and payables at 31 December 2016 have been restated.
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued 2. Segment Information continued
Unallocated assets comprise deferred tax assets, cash and cash equivalents. Unallocated liabilities comprise
retirement benefit obligation, borrowings, current income tax liabilities and deferred tax liabilities.
During the year, the Group (including its overseas subsidiaries) obtained the following services from the Group’s
auditor at costs as detailed below.
2017
Capital expenditure – property, plant and equipment
Capital expenditure – intangible assets
Depreciation
Amortisation of intangible assets
Gain on disposal of property, plant and equipment
2016
Capital expenditure – property, plant and equipment
Capital expenditure – intangible assets
Depreciation
Amortisation of intangible assets
Impairment of intangible assets
(Gain)/loss on disposal of property, plant and equipment
Geographic information
United Kingdom
United States of America
Others
Notes:
(i) Non-current assets exclude deferred tax assets.
(ii) As set out in Note 28 revenue for the year ending 31 December 2016 has been restated.
3. Net Operating Costs
Goods for resale and other direct operating costs
Employment costs
Exceptional items
Net impairment loss
Intangible assets amortisation
Depreciation
Other operating charges
Note:
(i) As set out in Note 28 costs for the year ending 31 December 2016 has been restated.
Other operating charges include:
Operating leases and hire charges – plant and equipment
Rent of properties
Gain on disposal of property, plant and equipment
Currency translation gain
Aviation
£m
Distribution
£m
Corporate
£m
26.5
1.9
23.3
8.1
–
2.1
0.9
3.7
5.8
(0.1)
0.3
–
0.8
–
–
Aviation
£m
Distribution
£m
Corporate
£m
23.1
1.8
17.3
5.9
7.2
(0.3)
2.7
0.8
4.3
5.2
–
0.2
0.3
–
0.7
–
–
–
Group
£m
28.9
2.8
27.8
13.9
(0.1)
Group
£m
26.1
2.6
22.3
11.1
7.2
(0.1)
Revenue
Non-current assets(i)
2017
£m
1,423.7
362.0
674.8
2016(ii)
£m
1,332.8
169.1
480.6
2,460.5
1,982.5
2017
£m
129.3
136.3
121.4
387.0
2016
£m
102.5
44.3
115.4
262.2
Notes
4
5
5
11
12
2017
£m
1,144.9
857.5
27.1
–
13.9
27.8
357.9
2016(i)
£m
1,087.0
582.1
8.8
9.6
11.1
22.3
241.5
2,429.1
1,962.4
2017
£m
47.8
47.1
(0.1)
–
2016
£m
32.1
34.9
(0.1)
(0.4)
Audit of the Company and consolidated accounts
Audit of the Company’s subsidiaries pursuant to legislation
Transaction advisory services
Tax compliance
Tax advisory
4. Employee costs
Wages and salaries
Share-based payments
Social security costs
Pension charge
Employee costs (pre-exceptional)
2017
£m
0.3
1.0
0.7
–
–
2017
£m
768.3
1.4
66.6
836.3
21.2
857.5
2016
£m
0.3
0.7
1.9
0.4
1.0
2016
£m
517.0
0.7
46.6
564.3
17.8
582.1
For the Company, wages and salaries were £1.3m (2016: £1.1m), share-based payments were £0.3m (2016: £0.1m),
social security costs were £0.1m (2016: £0.1m) and the pension charge was £Nil (2016: £0.1m) for nine employees
all of whom were members of the Board (2016: eight).
The average number of people employed by the Group during the year was:
Aviation
Distribution
Corporate
2017
2016
33,054
3,563
36
23,677
3,465
34
36,653
27,176
The above includes 26,235 people employed outside the United Kingdom (2016: 18,786).
Retirement benefit obligation charge
Certain Group subsidiaries participate in a number of pension schemes which are of a defined contribution nature
and some of which operate overseas. The Income Statement charge for defined contribution schemes represents
the contributions payable. The Group also operated a defined benefit scheme in the United Kingdom as set out in
Note 23.
The retirement benefit obligation charge, pre-exceptional, was:
Defined contribution schemes charge
Defined benefit scheme charge – Section A
Defined benefit scheme charge – Section B
Retirement benefit obligation charge (pre-exceptional)
2017
£m
19.0
2.1
0.1
21.2
2016
£m
14.6
3.2
–
17.8
120
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
121
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued 5. Exceptional and Other Items
Exceptional items included in operating profit
Acquisition and other transaction related costs(i)
Pension de-risking costs(ii)
Integration costs(iii)
Acquisition related earn-out adjustment(iv)
2017
£m
(7.8)
(5.4)
(13.9)
–
2016
£m
(9.1)
–
–
0.3
(27.1)
(8.8)
6. Directors Emoluments
Emoluments paid to the Company’s Directors are:
Salary and fees
Bonus
Pension salary supplement
Termination payments
2017
£m
1.5
0.9
0.2
–
2.6
2016
£m
1.3
0.5
0.1
0.1
2.0
Notes:
(i) Acquisition and other transaction related costs reflect £3.2m of costs incurred relating to the work undertaken to demerge and sell the Distribution
business, £2.2m pre-acquisition costs (including corporate finance and professional advisor fees) relating to the acquisition of ASIG Holdings Ltd
and ASIG Holdings Corp. (ASIG) on 1 February 2017, £1.2m increase in onerous lease provision, £0.4m transaction related costs relating to Hyderabad
Menzies Air Cargo Private Ltd, £0.4m transaction related costs relating to the planned acquisition of a joint venture business in Oman and £0.3m
relating to the step acquisition of EM News Distribution (Ireland) Ltd and EM News Distribution (NI) Ltd and acquisitions of Gold Coast Air Terminal
Services Pty Ltd and Gnewt Cargo Ltd.
Acquisition and other transaction related costs in the prior year relate to the Rights Issue process and acquisition of ASIG (acquisition costs £5.7m
and integration costs £1.3m) as well as the acquisition of Renaissance Aviation Ltd, Thistle Couriers Ltd and Edinburgh Arts and Entertainment Ltd
(£0.2m total). In addition, aborted Aviation transaction costs were £0.9m while restructure consultancy costs were £0.8m and other transaction costs
were £0.2m.
(ii) Pension de-risking costs relate to fees and charges incurred in order to close the Company’s defined benefit pension fund to future accrual (including
curtailment costs of £2.7m) and in relation to the sectionalisation of the scheme as set out in Note 23.
(iii) Integration costs relate to the ASIG acquisition in Aviation and comprise integration related costs incurred post acquisition, predominantly integration
team, IT consultancy and systems related costs and rationalisation, predominantly redundancy.
(iv) In the prior year, contingent consideration relating to the acquisition of Fore Partnership in Distribution was settled for £1.3m being £0.3m lower than
anticipated at 31 December 2015.
Exceptional items included in finance charges
Acquisition related finance costs(i)
Unwind discount costs(ii)
2017
£m
(0.7)
(0.1)
2016
£m
(1.5)
(0.2)
Notes:
(i) Acquisition related finance costs relate to write-off of bilateral facility fees, pre-acquisition ticking fees and amortisation of underwriting fees on the
financing facilities agreed in 2016 to fund the acquisition of ASIG on 1 February 2017. In the prior year £1.5m of costs were recognised relating to ticking
fees and amortisation of underwriting fees on the same financing facilities.
(ii) Unwind discount costs relate to deferred consideration and onerous lease provisions.
Intangible assets amortisation and impairment included in operating profit
Contract amortisation(i)
Net impairment loss(ii)
2017
£m
(10.5)
–
2016
£m
(7.9)
(9.6)
Notes:
(i) Contract amortisation relates to intangible assets recognised on the acquisition of businesses.
(ii) In the prior year a £9.6m impairment was recognised relating to goodwill (£7.2m) and property, plant and equipment (£2.4m) at the cargo operations
in Amsterdam.
The taxation effect of the exceptional items is a net credit of £2.2m (2016: net credit of £2.2m) in relation to tax
deductions available for a proportion of the exceptional costs arising during the year.
Gains made on the exercise of Long Term Incentive Plan awards were £1.0m (2016: £Nil).
Further details of the Directors’ remuneration are disclosed in the Directors’ Remuneration Report.
7. Finance Costs
Finance income
Bank deposits
Finance charges
Bank loans and overdrafts
Preference dividends
2017
£m
2016
£m
1.2
0.7
(10.1)
(0.1)
(10.2)
(4.5)
(0.1)
(4.6)
Net finance costs excluding retirement benefit obligation interest charge (pre-exceptional)
(9.0)
(3.9)
8. Taxation
Tax charge in income statement
Current tax
UK corporation tax on profits for the year
Overseas tax
Adjustments to prior years’ liabilities
Deferred tax
Origination and reversal of temporary differences
Adjustments to prior years’ liabilities
Retirement benefit obligation
2017
£m
0.2
16.8
(1.3)
15.7
(1.6)
(0.4)
(2.0)
1.0
(1.0)
2016
£m
1.0
11.4
(0.1)
12.3
(1.5)
(0.6)
(2.1)
1.6
(0.5)
Tax on profit on ordinary activities
14.7
11.8
122
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
123
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued
8. Taxation continued
Tax related to items charged/(credited) outside income statement
Deferred tax on actuarial gain/(loss) on retirement benefit obligation
Deferred tax impact of UK rate change on pension arrangements
Current tax on share-based payments
Deferred tax on share-based payments
Current tax on net exchange adjustments
Deferred tax on net exchange adjustments
2017
£m
2.7
–
(0.1)
(0.5)
(0.2)
–
1.9
2016
£m
(7.4)
1.6
–
(0.3)
0.4
0.6
(5.1)
Effective tax rate
The reconciliation between tax charge and the product of accounting profit multiplied by the Group’s domestic tax
rate is:
Profit before tax
Profit before tax multiplied by standard rate of UK corporation tax of 19.25% (2016: 20%)
Non-deductible expenses including intangible amortisation
Depreciation on non-qualifying assets
Unrelieved overseas losses
Deferred tax assets written off
Deferred tax asset recognised on overseas losses carried forward
Deferred tax liability recognised on undistributed reserves of overseas subsidiaries
Exceptional items
Utilisation of previously unrecognised losses
Higher tax rates on overseas earnings
Share of joint venture and associate post-tax result included in profit before tax
Adjustments to prior years’ liabilities
Impact of tax rate changes
At the effective corporation tax rate of 55.1% (2016: 59.6%)
2017
£m
26.7
5.1
3.3
0.3
0.9
–
(0.3)
–
3.2
(1.4)
4.8
(1.6)
(1.7)
2.1
14.7
2016
£m
19.8
4.0
3.5
0.3
1.5
1.5
(1.6)
1.1
1.8
(0.9)
2.8
(1.5)
(0.7)
–
11.8
The main rate of UK corporation tax reduced from 20% to 19% from 1 April 2017 and is legislated to reduce further
to 17% from 1 April 2020.
The US Tax Cuts and Jobs Act was enacted on 22 December 2017 implementing significant changes to the US
corporate tax regime. Whilst most of the US tax changes take effect from 1 January 2018, the reduction in the US
federal tax rate from 35% to 21% has resulted in the US deferred tax asset being revalued at 31 December 2017 based
on the lower federal tax rate, resulting in a tax charge of £2.1m for the year. The mandatory deemed repatriation of
certain deferred foreign earnings (the toll tax) arose in 2017 and those deemed earnings provisionally estimated at
£9.8m have been sheltered by losses not recognised in deferred tax. The Group continues to consider the implications
of the US tax changes including whether the toll tax can be sheltered by foreign tax credits rather than losses.
Factors that may affect future tax charges
The Group has tax losses carried forward that arose in subsidiary companies operating in the undernoted
jurisdictions and 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.
Colombia
Germany
Namibia
Norway
South Africa
Sweden
The Netherlands
United States of America
Losses
2017
£m
1.2
20.2
0.5
16.5
14.7
2.2
1.6
23.2
2016
£m
Expiry
Carry forward indefinitely
3.5
Carry forward indefinitely
20.8
Carry forward indefinitely
0.4
Carry forward indefinitely
14.7
Carry forward indefinitely
8.1
Carry forward indefinitely
4.3
4.4
Carry forward for 4 years
31.2 Carry forward for up to 20 years
The Group has capital losses in the United Kingdom of approximately £10.4m (2016: £10.4m) that are available for
offset against future taxable gains arising in the United Kingdom. No deferred tax asset has been recognised in
respect of these losses.
9. Dividends
Dividends paid on ordinary shares
Interim paid in respect of 2017, 6.0p per share
Final paid in respect of 2016, 13.1p per share
Interim paid in respect of 2016, 5.4p per share
Final paid in respect of 2015, 11.8p per share
2017
£m
5.0
10.9
–
–
15.9
2016
£m
–
–
3.3
7.3
10.6
Dividends of £Nil were waived on Treasury shares (2016: £0.1m).
The Directors are proposing a final dividend in respect of the year to 31 December 2017 of 14.5p per ordinary share,
which will absorb an estimated £12.1m of shareholders’ funds. Payment will be made on 2 July 2018 to shareholders
on the register at the close of business on 25 May 2018.
Treasury shares
Ordinary shares are held for employee share schemes. At 31 December 2017, the Company held 257,523 (2016:
310,338) ordinary shares with a market value of £1.8m (2016: £1.8m).
124
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
125
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued 10. Earnings Per Share
Profit for the year as set out in the Income Statement
Loss relating to non-controlling interests
Earnings for the year attributable to equity shareholders
Basic earnings per ordinary share
Earnings per ordinary share
Diluted earnings per ordinary share
Underlying earnings per ordinary share(i)
Earnings per ordinary share
Diluted earnings per ordinary share
Number of ordinary shares in issue
Weighted average (million)
Diluted weighted average (million)
Basic
Underlying(i)
2017
£m
12.0
0.6
12.6
2016
£m
8.0
0.5
8.5
2017
£m
47.1
0.6
47.7
2016
£m
33.8
0.5
34.3
15.1p
15.1p
11.8p
11.8p
83.4
83.7
71.8
71.9
57.2p
57.0p
47.8p
47.7p
Note:
(i) Underlying earnings is presented as an additional performance measure and is stated before exceptional items, intangible amortisation and
impairment charges.
The weighted average number of fully paid shares in issue during the year excludes those held by the employee
share trusts. The diluted weighted average is calculated by adjusting for all outstanding share options that are
potentially dilutive (i.e. where the exercise price is less than the average market price of the shares during the year).
Cost
At 31 December 2015
Acquisitions (Note 25)
Additions
Disposals
Currency translation
At 31 December 2016
Amortisation and impairment
At 31 December 2015
Amortisation charge
Released on disposal
Impairment (Note 5)
Currency translation
At 31 December 2016
Net book value
At 31 December 2016
At 31 December 2015
64.6
0.4
–
–
12.1
77.1
12.3
–
–
7.2
5.8
25.3
51.8
52.3
Contracts,
customer
relationships
and brand
£m
Computer
software
£m
Goodwill
£m
Total
£m
188.7
3.1
2.6
(0.1)
18.9
213.2
80.4
11.1
–
7.2
10.5
109.2
91.6
2.7
–
–
6.8
101.1
46.1
7.9
–
–
4.7
58.7
32.5
–
2.6
(0.1)
–
35.0
22.0
3.2
–
–
–
25.2
42.4
45.5
9.8
10.5
104.0
108.3
As set out in Note 5, the impairment of goodwill of £7.2m in the prior year relates to the Aviation cargo business
in the Netherlands.
Goodwill acquired through business combinations and intangible assets with indefinite lives have been allocated at
acquisition to cash generating units (CGUs) that are expected to benefit from the business combination. The carrying
amount of the goodwill and intangible assets with indefinite lives has been allocated to the operating units as per the
table below.
11. Intangible Assets
Cost
At 31 December 2016
Acquisitions (Note 25)
Additions
Disposals
Currency translation
At 31 December 2017
Amortisation and impairment
At 31 December 2016
Amortisation charge
Released on disposal
Currency translation
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
Contracts,
customer
relationships
and brand
£m
Computer
software
£m
Goodwill
£m
77.1
78.0
–
–
(7.4)
101.1
42.4
–
(3.1)
(2.3)
35.0
–
2.8
(1.9)
–
Total
£m
213.2
120.4
2.8
(5.0)
(9.7)
147.7
138.1
35.9
321.7
25.3
–
–
(2.3)
23.0
58.7
10.5
–
(0.9)
25.2
3.4
(1.9)
–
109.2
13.9
(1.9)
(3.2)
Aviation
Americas
EMEA
Cargo
Forwarding
Ground handling
Cargo handling
Ground handling
Cargo handling
USA, Australia and New Zealand
South Africa
68.3
26.7
118.0
Rest of World
124.7
51.8
69.8
42.4
9.2
9.8
203.7
104.0
Distribution
Core
Other
Great Britain
Ireland
2017
2016
Pre-tax
discount
rate used in
impairment
review
Goodwill
£m
Contracts
£m
Pre-tax
discount
rate used in
impairment
review
Goodwill
£m
Contracts
£m
11%
11%
9%
9%
10%
12%
10%
9%
9%
9%
54.1
9.3
30.4
3.0
6.3
2.1
4.0
7.3
3.4
4.8
124.7
–
–
–
–
–
–
–
12.9
–
–
12.9
9%
8%
9%
7%
10%
11%
9%
8%
8%
8%
11.7
10.1
3.5
2.9
6.4
2.1
3.2
7.3
–
4.6
51.8
–
–
–
–
–
–
–
12.9
3.1
–
16.0
As set out in Note 25, the step acquisitions relating to the Irish joint ventures in the Distribution Division resulted
in the effective disposal of £3.1m historic contracts and the subsequent recognition of £3.3m goodwill relating to
these fully controlled entities.
126
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
127
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued 12. Property, Plant and Equipment
Group
Freehold
property
£m
Leasehold
property
£m
Plant and
equipment
£m
11. Intangible Assets continued
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 value in use calculations use a post-tax discount rate assumption in a range from 7% to 9% (2016: 5% to 13%)
based on the Group’s weighted average post-tax cost of capital and having considered the uncertainty risk
attributable to individual CGUs. The equivalent pre-tax discount rate is a range from 9% to 12% (2016: 7% to 11%)
as shown in the table above. The pre-tax rate has been applied to pre-tax cash flows.
Aviation
Aviation contracts are amortised on a straight-line basis over ten years as this period is the minimum timeframe
Management considers when assessing businesses for acquisition. The carrying value of Aviation contracts is
£46.1m (2016: £14.1m) and the average remaining amortisation period is six years (2016: three years).
Value in use calculations are based on Board approved budgets and plans for a three year period and extrapolated
for a further two year period. Growth rates in the cash flows beyond the three year period have been assumed to
be Nil% (2016: Nil%). 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. For all significant
CGUs there is no reasonably possible change that would cause the carrying values to exceed recoverable amounts.
Distribution
Distribution publisher contracts are not amortised due to the very long-term nature of the business in the United
Kingdom. 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
tested annually for impairment using the criteria outlined above.
Value in use calculations are based on Board approved budgets and plans for a three year period and extrapolated
for a further two year period. This reflects Management’s specific business expectations for 2021 and 2022. Growth
rates in the cash flows beyond the three year period have been assumed to be -8% to Nil% (2016: -9% to Nil%). 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.
Most Distribution core non-publisher 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. The carrying value
of Distribution non-publisher contracts is £10.9m (2016: £12.3m) and the average remaining amortisation period is
four years (2016: five years).
Cost
At 31 December 2016
Acquisitions (Note 25)
Additions
Disposals
Currency translation
At 31 December 2017
Depreciation
At 31 December 2016
Charge for the year
Disposals
Currency translation
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
Cost
At 31 December 2015
Acquisitions (Note 25)
Additions
Disposals
Currency translation
At 31 December 2016
Depreciation
At 31 December 2015
Charge for the year
Disposals
Impairment (Note 5)
Currency translation
At 31 December 2016
Net book value
At 31 December 2016
At 31 December 2015
Company
Freehold
property
£m
32.9
–
0.3
–
–
33.2
9.0
0.8
–
–
9.8
Company
Freehold
property
£m
32.6
–
0.3
–
–
32.9
8.2
0.8
–
–
–
9.0
Total
£m
337.6
31.9
28.9
(5.4)
(6.1)
263.2
21.1
26.4
(5.4)
(6.4)
298.9
386.9
169.9
24.0
(4.7)
(2.2)
210.3
27.8
(4.7)
(2.1)
187.0
231.3
34.9
–
1.2
–
–
36.1
12.5
0.7
–
–
13.2
39.5
10.8
1.3
–
0.3
51.9
27.9
3.1
–
0.1
31.1
22.9
22.4
20.8
11.6
111.9
93.3
155.6
127.3
23.4
23.9
Group
Freehold
property
£m
Leasehold
property
£m
Plant and
equipment
£m
Total
£m
287.7
0.6
26.1
(6.2)
29.4
217.3
0.6
24.8
(6.1)
26.6
263.2
337.6
137.3
19.4
(3.9)
2.4
14.7
173.3
22.3
(3.9)
2.4
16.2
169.9
210.3
34.8
–
0.1
(0.1)
0.1
34.9
11.7
0.7
–
–
0.1
12.5
35.6
–
1.2
–
2.7
39.5
24.3
2.2
–
–
1.4
27.9
22.4
23.1
11.6
11.3
93.3
80.0
127.3
114.4
23.9
24.4
128
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
129
As set out in Note 5, the impairment of fixed assets of £2.4m in the prior year relates to the Aviation cargo business
in the Netherlands where the assets were fully impaired.
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued
13. Investments
2017
Net book value
At 31 December 2016
Share of profits after tax
Dividends received during the year
Additions
Loan repaid
Currency translation
At 31 December 2017
2016
Net book value
At 31 December 2015
Share of profits after tax
Dividends received during the year
Additions
Loan repaid
Currency translation
Other
At 31 December 2016
Group
Company
Interest in joint
ventures
£m
Interest in
associates
£m
Other
£m
Total
£m
Subsidiaries
£m
30.3
7.8
(7.3)
–
(2.8)
(0.9)
27.1
0.4
–
–
–
–
–
0.4
0.2
–
–
–
–
–
0.2
30.9
7.8
(7.3)
–
(2.8)
(0.9)
27.7
292.6
–
–
13.5
–
–
306.1
Group
Company
Interest in joint
ventures
£m
Interest in
associates
£m
Other
£m
Total
£m
Subsidiaries
£m
26.1
7.5
(6.3)
–
–
3.3
(0.3)
30.3
0.1
–
–
0.4
(0.3)
0.2
–
0.4
0.2
–
–
–
–
–
–
0.2
26.4
7.5
(6.3)
0.4
(0.3)
3.5
(0.3)
30.9
291.0
–
–
–
–
1.6
–
292.6
Material joint ventures
2017
Country of incorporation
Statutory year end
Business activity
Interest held – ordinary shares
Interest held – preference shares
Group’s share of total comprehensive
income
Group’s share of net assets
Summarised Balance Sheet
Current assets(i)
Non-current assets
Current liabilities
Non-current liabilities
Net assets
EM News
Distribution
(NI) Ltd
£m
Menzies Bobba
Ground Handling
Services
Private Ltd
£m
Menzies Aviation
Bobba
(Bangalore)
Private Ltd
£m
Hyderabad
Menzies Air
Cargo Private
Ltd
£m
Menzies Macau
Airport
Services Ltd
£m
United Kingdom
India
India
India
China
31 December
31 March
31 March
31 March
31 December
Distribution of
newspapers and
magazines in
Northern Ireland
Ramp and
passenger
services in
Hyderabad
Cargo handling
services in
Bangalore
Cargo handling
services in
Hyderabad
Ramp, passenger
and cargo
handling in
Macau
50%
0%
78%
–(ii)
–
–
–
–
–
51%
0%
51%
47%
5.7
0.6
(0.7)
–
5.6
49%
100%
49%
69%
12.3
4.6
(1.8)
–
15.1
49%
100%
49%
54%
5.7
6.8
(0.1)
–
12.4
29%
0%
29%
29%
9.5
7.3
(5.9)
(0.1)
10.8
Notes:
(i) Includes cash and cash equivalents
(ii) Following the step acquisition set out in Note 25 this entity is no longer a joint venture undertaking at 31 December 2017.
10.3
3.8
–
Reconciliation of net assets to carrying value
Net assets
Partners’ share of net assets
Unpaid dividends
Carrying amount of the investment
Summarised Income Statement
Revenue
Depreciation and amortisation
Other operating costs
Interest income
Income tax
Profit from continuing operations
Comprehensive income for the year
Group’s share of total comprehensive
income
Group’s carrying amount of the investment
At 31 December 2016
Group’s share of total comprehensive income
Dividends received during the year
Loan repaid
Currency translation
At 31 December 2017
–
–
–
–
24.7
–
(24.0)
–
(0.1)
0.6
0.6
0.5
3.5
0.5
(1.4)
(2.6)
–
–
5.6
(3.0)
3.2
5.8
3.8
(0.1)
(3.2)
0.3
(0.1)
0.7
0.7
0.4
5.7
0.4
(0.2)
–
(0.1)
5.8
15.1
(4.7)
–
10.4
14.3
(0.9)
(7.6)
0.6
(1.8)
4.6
4.6
2.2
11.0
2.3
(2.6)
–
(0.3)
10.4
3.9
4.0
12.4
(5.7)
–
6.7
10.9
(0.3)
(7.1)
1.0
(1.1)
3.4
3.4
1.8
5.9
1.7
(0.7)
–
(0.2)
6.7
10.8
(7.6)
–
3.2
36.9
(1.1)
(26.5)
–
(1.1)
8.2
8.2
2.4
3.2
2.4
(2.1)
–
(0.3)
3.2
130
John Menzies plc Annual Report and Accounts 2017
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131
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued 13. Investments continued
Group’s individually immaterial joint ventures and associates
2016
Interest held – ordinary shares
Interest held – preference shares
Group’s share of total comprehensive
income
Group’s share of net assets
Summarised Balance Sheet
Current assets(i)
Non-current assets
Current liabilities
Net assets
Note:
(i) Includes cash and cash equivalents
EM News
Distribution
(NI) Ltd
£m
Menzies Bobba
Ground Handling
Services
Private Ltd
£m
Menzies Aviation
Bobba
(Bangalore)
Private Ltd
£m
Hyderabad
Menzies Air
Cargo
Private Ltd
£m
Menzies Macau
Airport
Services Ltd
£m
50%
0%
78%
69%
9.2
0.7
(4.8)
5.1
51%
0%
51%
47%
5.6
0.3
(0.5)
5.4
49%
100%
49%
76%
11.3
5.3
(2.0)
14.6
49%
100%
49%
58%
8.5
4.1
(1.9)
10.7
29%
0%
29%
29%
9.7
7.2
(6.2)
10.7
0.1
3.9
9.8
3.9
2.2
Reconciliation of net assets to carrying value
Net assets
Partners’ share of net assets
Unpaid dividends
Carrying amount of the investment
Summarised Income Statement
Revenue
Depreciation and amortisation
Other operating costs
Interest income
Income tax
Profit from continuing operations
Comprehensive income for the year
Group’s share of total comprehensive
income
Group’s carrying amount of the investment
At 31 December 2015
Group’s share of total comprehensive
income
Dividends received during the year
Currency translation
At 31 December 2016
5.1
(1.6)
–
3.5
58.6
(0.2)
(56.3)
–
(0.4)
1.7
1.7
1.4
3.5
1.4
(1.4)
–
3.5
5.4
(2.9)
3.2
5.7
2.5
(0.3)
(2.1)
0.3
–
0.4
0.4
0.2
5.3
0.2
(0.1)
0.3
5.7
14.6
(3.6)
–
11.0
12.3
(0.9)
(6.3)
0.6
(1.6)
4.1
4.1
2.1
9.6
2.1
(2.1)
1.4
11.0
10.7
(4.8)
–
5.9
9.4
(0.2)
(5.8)
0.4
(0.8)
3.0
3.0
1.4
4.2
1.4
(0.4)
0.7
5.9
10.7
(7.5)
–
3.2
33.3
(1.0)
(24.0)
–
(1.0)
7.3
7.3
2.1
2.9
2.1
(2.3)
0.5
3.2
Carrying amount of interests in joint ventures and associates
Share of profit from continuing operations
Currency translation
Total comprehensive income
2017
£m
1.4
0.5
–
0.5
2016
£m
1.4
0.3
0.6
0.9
The listing of joint venture and associates, along with all subsidiary undertakings, is presented on pages 161 to 176.
14. Deferred Tax
Deferred tax assets
Retirement benefit obligation
Share-based payments
Tax losses
Other temporary differences
Deferred tax liabilities
Intangible assets
Overseas tax on unremitted earnings
Other overseas temporary differences
Accelerated capital allowances and other temporary differences
Recognised in Balance Sheet
Deferred tax asset
Deferred tax liability
Movement in net deferred tax assets in the year:
Income Statement: retirement benefit obligation
Income Statement: other
Exchange adjustments
Movement on acquisition
Reclassification of corporation tax
Tax related to items (credited)/charged outside Income Statement
Group
Company
2017
£m
8.4
1.3
5.9
8.6
2016
£m
12.1
0.6
5.8
5.8
24.2
24.3
(4.6)
–
(0.1)
–
(4.7)
24.2
(4.7)
19.5
(1.0)
2.0
(0.7)
(2.6)
2.4
(2.0)
(1.9)
–
(2.4)
(0.4)
(0.1)
(2.9)
24.2
(2.8)
21.4
(1.6)
2.1
1.3
(0.2)
3.6
5.5
10.7
2017
£m
7.2
0.2
0.6
0.4
8.4
–
–
–
(2.6)
(2.6)
5.8
–
5.8
(0.9)
0.6
–
–
–
(4.0)
(4.3)
2016
£m
12.1
0.2
–
0.7
13.0
–
–
–
(2.9)
(2.9)
10.1
–
10.1
(1.6)
0.5
–
–
2.5
5.9
7.3
The value of unremitted earnings of the Group’s subsidiaries on which no deferred tax liability has been provided is
£20.1m (2016: £11.1m). No deferred tax liability has been recognised on the basis that the Group can control the timing
of the remittance of these reserves and there are currently no plans for these reserves to be remitted.
132
John Menzies plc Annual Report and Accounts 2017
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133
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued Group
2017
£m
0.6
0.5
0.3
3.0
4.4
2016
£m
0.3
0.3
0.7
2.5
3.8
15. Trade and Other Receivables
Ageing of impaired receivables
Group
Company
Trade receivables
Less: sales returns
Less: provision for doubtful debts
Net trade receivables
Accrued income
Consortium related receivables
Other receivables
Prepayments
Amounts owed by Group companies
2017
£m
287.5
(23.7)
(4.4)
259.4
34.8
27.4
11.5
17.1
–
350.2
2016(i)
£m
199.7
(18.8)
(3.8)
177.1
21.8
–
7.2
18.7
–
2017
£m
2016(i)
£m
–
–
–
–
0.3
–
0.5
4.2
499.5
–
–
–
–
1.4
–
1.0
5.2
337.8
The average credit period on sale of goods is 42 days (2016: 36 days). Interest is not charged on trade receivables.
Consortium related receivables include re-billable expenses and restricted cash related to fuel farm management
services. Restricted cash represents funding received from customers and held in a fiduciary capacity to be used on
their behalf to satisfy fuel farm management expenses within 12 months and is therefore classified as a current asset.
Note:
(i) As set out in Note 28 trade receivables at 31 December 2016 have been reduced by £18.8m to recognise a returns liability within the
0 to 30 days
31 to 60 days
61 to 90 days
Over 90 days
224.8
504.5
345.4
16. Trade and Other Payables
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 fair value.
Due within one year
Trade payables
Less: sales returns
Net trade payables
Accruals
Deferred income
Consortium related payables
Other payables
Other taxes and social security costs
Amounts owed to Group companies
Due after more than one year
Other payables
Group
Company
2017
£m
2016(i)
£m
2017
£m
2016(i)
£m
119.4
(20.2)
100.8
(15.7)
99.2
164.1
3.1
39.1
32.7
6.6
–
85.1
116.1
2.0
–
27.1
3.9
–
–
–
–
17.0
–
–
3.6
–
317.4
344.8
234.2
338.0
–
–
–
17.2
–
–
2.3
–
297.6
317.1
4.6
4.0
–
4.9
Group
2017
£m
3.8
1.8
(0.5)
(0.7)
–
4.4
2016
£m
3.2
1.4
(0.4)
(0.5)
0.1
3.8
The Directors consider that the carrying value of trade and other payables approximates to fair value.
Consortium related payables comprise fuel farm payables and related working fund payables.
Included within other payables is contingent consideration and other contingent acquisition related amounts as
disclosed in Note 17. Such amounts included within other payables due within one year are £0.4m (2016: £Nil) and
other payables due after more than one year are £3.6m (2016: £3.4m).
Note:
(i) As set out in Note 28 trade payables at 31 December 2016 have been reduced by £15.7m to recognise a sales returns receivable within the
Distribution Division.
Neither past
due nor
impaired
£m
Past due not impaired
31–60 days
£m
61–90 days
£m
183.3
133.0
51.4
35.2
12.1
4.9
over
90 days
£m
12.6
4.0
Total
£m
259.4
177.1
Distribution Division.
Ageing of net trade receivables
2017
2016(i)
Provision for doubtful debts
At beginning of year
Amounts provided
Amounts released
Amounts utilised
Currency translation
At end of year
134
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
135
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued 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 of cash flow hedges – currency forward contracts
Fair value of cash flow hedges – interest rate swaps
Cash flow hedges
Foreign Exchange Forward Contracts
At 31 December 2017 the Group held foreign currency forward contracts designed as hedges of transaction
exposures arising from revenue in foreign currencies. 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 for revenue in
foreign currencies were assessed to be highly effective.
The cash flow hedge reserve records the portion of the gains or losses on hedging instruments used as cash flow
hedges that are determined to be 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 2017 the Group entered into US$125m of interest rate swaps with an amortising
profile to match 50% of the US$250m term loan maturing in June 2021. At 31 December 2017, 34.9% (2016: 8.6%) of
the Group’s borrowings were fixed.
2017
Assets
£m
2017
Liabilities
£m
2016
Liabilities
£m
0.3
0.9
1.2
0.3
0.9
1.2
(0.2)
–
(0.2)
(0.2)
–
(0.2)
(0.4)
–
(0.4)
(0.4)
–
(0.4)
Current value
Non-current value
For 2017, if interest rates on Sterling denominated borrowings had been 0.5% higher/lower with all other variables
held constant, post-tax profit for the year would have been £0.4m (2016: £0.6m) lower/higher, mainly as a result
of higher/lower interest expense on floating rate borrowings.
For 2017, if interest rates on US dollar denominated borrowings had been 0.5% higher/lower with all other variables
held constant, post-tax profit for the year would have been £0.5m (2016: £Nil) lower/higher, mainly as a result of
higher/lower interest expense on floating rate borrowings.
17. Financial Instruments
Derivative financial instruments
Cash flow hedges:
Foreign exchange forward contracts
Interest rate swaps
Foreign currency net investment hedges:
Foreign exchange forward contracts
Net fair value
Current value
Non-current value
Group
Company
2017
£m
0.1
0.9
0.5
1.5
0.6
0.9
1.5
2016
£m
(0.4)
–
(5.3)
(5.7)
(5.7)
–
(5.7)
2017
£m
0.1
0.9
0.5
1.5
0.6
0.9
1.5
2016
£m
(0.4)
–
(5.3)
(5.7)
(5.7)
–
(5.7)
Fair value hierarchy
As at 31 December 2017 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 that have a significant effect on the recorded fair value are
observable, either directly or indirectly.
Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based
on observable market data.
For financial instruments that are recognised at fair value 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.
Derivative financial instruments adjusted to fair value through the Other Comprehensive Income Statement
2017
Financial assets:
Foreign exchange contracts – hedged
Interest rate swaps – hedged
Financial liabilities:
Foreign exchange contracts – hedged
2016
Financial assets:
Foreign exchange contracts – hedged
Financial liabilities:
Foreign exchange contracts – hedged
Level 1
£m
Level 2
£m
Level 3
£m
–
–
–
1.1
0.9
0.5
–
–
–
Level 1
£m
Level 2
£m
Level 3
£m
–
–
0.4
6.1
–
–
Total
£m
1.1
0.9
0.5
Total
£m
0.4
6.1
During the year ended 31 December 2017, 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.
136
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
137
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued 17. Financial Instruments continued
Foreign Currency Net Investment Hedges
The Group’s policy is to hedge the exposure of foreign currency denominated assets to minimise 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:
Australian dollar
Canadian dollar
Colombian peso
Czech koruna
Danish krone
Euro
Indian rupee
Mexican peso
New Zealand dollar
Norwegian krone
South African rand
Swedish krona
US dollar
Currency value
Sterling equivalent
2017
m
23.9
5.5
4,000
115.0
10.0
3.6
810
51.0
6.0
35.0
30.0
50.0
–
2016
m
24.0
5.5
4,000
115.0
10.0
9.6
810
51.0
3.0
7.0
30.0
50.0
41.5
2017
£m
13.8
3.2
1.0
4.0
1.2
3.2
9.4
1.9
3.2
3.2
1.8
4.5
–
2016
£m
14.1
3.3
1.1
3.6
1.1
8.2
9.7
2.0
1.7
0.7
1.8
4.5
33.6
Following the acquisition of ASIG in February 2017 and the related draw down of US dollar denominated debt, the
Group no longer enters into US dollar denominated forward foreign exchange contracts.
Fair value of foreign currency net investment hedges
Current value
2017
2016
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
0.8
0.8
(0.3)
(0.3)
0.4
0.4
(5.7)
(5.7)
Other financial instruments
Contingent Consideration
As set out in Note 25, in the current year the Group acquired the share capital of Gold Coast Air Terminal Services
Pty Ltd in Queensland, Australia. The final purchase price included earn out targets which, should these be met,
will require the Group to pay the vendor up to an additional £0.4m in each of March 2018 and March 2019. The earn
out targets are based on annualised EBITDA levels and, should the minimum target not be met, no further payment
would be required. The difference between the fair value at the date of acquisition and the maximum payable
contingent consideration is not considered to be material. Management expects that the target will be met and
therefore the full contingent consideration has been provided for.
The acquisition of PlaneBiz 2015 Ltd in 2014 included options in relation to the 40% shareholding owned by a third
party. These options take the form of a put option in favour of the third party shareholders for up to 30% of the
share capital, exercisable in 2018 and 2019. Following the expiry of this put option the Group then has a call option,
exercisable for a 60 day period, for the remaining shares that have not been exercised under the put option. The
fair value of the put option has been calculated based on the expected discounted cash flows of the underlying
value, which is the expected average annual EBITDA over the preceding three years multiplied by 5.5. The call
option is considered to have a negligible fair value.
The liabilities for contingent consideration and other acquisition related amounts are Level 3 derivative
financial instruments.
Fair value of contingent acquisition related amounts:
PlaneBiz 2015 Ltd
Gold Coast Air Terminal Services Pty Ltd
Interest-Bearing Loans and Borrowings
Bank overdrafts
Obligations under finance leases
Amortising Sterling term loan
Non-amortising Sterling bank loans
Amortising US dollar term loan
Preference shares
Maturity
On demand
June 2018
March 2020
June 2021
June 2021
Non-redeemable
Current value
Non-current value
2017
£m
3.2
0.8
Group
Company
2017
£m
1.9
–
7.1
93.6
184.7
1.4
2016
£m
0.8
0.2
10.0
91.3
–
1.4
2017
£m
0.1
–
7.1
93.6
184.7
1.4
2016
£m
3.4
–
2016
£m
0.5
–
10.0
91.3
–
1.4
288.7
103.7
286.9
103.2
5.1
283.6
288.7
39.0
64.7
103.7
3.3
283.6
286.9
38.5
64.7
103.2
To fund the acquisition of ASIG, the Group put in place in September 2016 unsecured, committed bank loans that
were conditional on the acquisition occurring. These facilities were drawn down in February 2017 and, as well as
funding the ASIG acquisition, were used to refinance all existing bank loans. The new facilities were drawn down
on 1 February 2017 and comprise a US$250m term loan and a £150m revolving credit facility, both with a maturity
of June 2021. At 31 December 2017 the average interest rates on these US dollar and Sterling loans were 3.6% and
2.5%, respectively.
Non-amortising bank loans are drawn against unsecured, committed revolving bank credit facilities maturing in
June 2021.
The amortising Sterling term loan is repayable between 2018 and 2020 with interest payable at a fixed rate of
6.23%. The loan has a weighted average maturity of one year (2016: two years).
The amortising US dollar term loan is repayable between 2019 and 2021. The loan has a weighted average maturity
of three years.
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.
Net Debt
Interest-bearing loans and borrowings
Derivative financial instruments
Total borrowings
Less: cash at bank, cash in hand and short-term deposits
Group
Company
2017
£m
288.7
(1.5)
287.2
72.8
214.4
2016
£m
103.7
5.7
109.4
38.9
70.5
2017
£m
286.9
(1.5)
285.4
5.0
280.4
2016
£m
103.2
5.7
108.9
1.0
107.9
138
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
139
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued
17. Financial Instruments continued
Other financial instruments continued
At 31 December 2017, the book and fair values of net debt are:
Sensitivity and Risk Information
Foreign Currency Sensitivity
For 2017, if Sterling had weakened/strengthened by 10% on currencies that have a material impact on the Group
profit before tax and equity, with all other variables held constant the effect would have been:
Short-term borrowings
Medium-term borrowings
Long-term borrowings
Derivative financial instruments
Finance leases
Bank overdrafts
Total financial liabilities
Less: cash at bank, cash in hand and short-term deposits
Net debt
2017
2016
Book value
£m
Fair value
£m
Book value
£m
Fair value
£m
3.2
14.1
269.5
(1.5)
–
1.9
287.2
72.8
3.4
14.3
269.5
(1.5)
–
1.9
287.6
72.8
214.4
214.8
38.0
63.3
1.4
5.7
0.2
0.8
109.4
38.9
70.5
38.2
64.0
1.4
5.7
0.2
0.8
110.3
38.9
71.4
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.
US dollar
US dollar
Australian dollar
Australian dollar
Euro
Euro
Indian rupee
Indian rupee
Canadian dollar
Canadian dollar
South African rand
South African rand
2017
2016
Changes in rate
Effect on profit
before tax
£m
Effect on equity
£m
Effect on profit
before tax
£m
Effect on equity
£m
+10%
–10%
+10%
–10%
+10%
–10%
+10%
–10%
+10%
-10%
+10%
–10%
2.0
(1.6)
1.4
(1.2)
1.1
(0.9)
0.7
(0.6)
0.5
(0.4)
–
–
1.6
(1.3)
1.6
(1.3)
(0.8)
0.7
1.3
(1.1)
0.7
(0.6)
0.5
(0.4)
1.5
(1.2)
1.0
(0.8)
0.5
(0.4)
0.6
(0.5)
0.3
(0.2)
(0.1)
0.1
3.8
(3.1)
1.8
(1.5)
–
–
1.3
(1.0)
0.5
(0.4)
0.8
(0.7)
Other than trade and other 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 impact of the Group’s exposure to all other foreign currencies is not considered to be material to the overall
results of the Group.
A separate table has not been prepared analysing the Company’s book values and fair values. The £1.8m difference
in book values relates to interest bearing loans and borrowings and is deemed to be short-term in nature.
At 31 December 2017, the currency and interest rate profile of financial liabilities was:
Sterling denominated
Dollar denominated
Net derivative (assets)/
liabilities
Floating
rate
financial
liabilities
£m
95.4
92.4
2017
Fixed
rate
financial
liabilities
£m
8.5
92.4
(1.5)
186.3
–
100.9
Floating
rate
financial
liabilities
£m
92.3
–
5.7
98.0
2016
Fixed
rate
financial
liabilities
£m
11.4
–
–
11.4
Total
£m
103.9
184.8
(1.5)
287.2
At 31 December 2017, the expiry profile of undrawn committed facilities was:
Between one and two years
Between two and five years
Group
Company
2017
£m
–
56.5
56.5
2016
£m
68.7
–
68.7
2017
£m
–
56.5
56.5
Total
£m
103.7
–
5.7
109.4
2016
£m
68.7
–
68.7
Trade and Other Receivables and Payables
Trade and other receivables and trade and other payables carrying values of £270.9m (2016: £184.3m restated) and
£296.0m (2016: £228.3m restated), respectively, in respect of the Group, and £500.0m and £338.0m (2016: £338.8m
and £317.1m) in respect of the Company, approximate their fair values due to their short-term nature.
Capital Risk
The Group manages its capital structure in order to minimise the cost of capital whilst ensuring that it has access
to ongoing sources of finance such as the debt capital markets. The Group defines capital as the sum of net debt
(see Note 19) 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 debt to EBITDA and
interest cover under the terms of the bank facilities, with which the Group has fully complied during both the
current year and the prior year. To maintain or adjust its 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:
Bank deposits
Trade receivables
Group
Company
2017
£m
72.8
259.4
332.2
2016(i)
£m
38.9
177.1
216.0
2017
£m
5.0
–
5.0
2016
£m
1.0
–
1.0
Note:
(i) As set out in Note 28 trade and other receivables at 31 December 2016 have been restated.
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.
In addition to the relevant items above, the Company is exposed to credit risk in relation to on demand amounts
owed by Group companies.
140
John Menzies plc Annual Report and Accounts 2017
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141
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued
17. Financial Instruments continued
Other financial instruments continued
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 maturity of the Group’s financial liabilities and
derivative financial liabilities 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. Net values of transaction hedging are disclosed
in accordance with the contractual terms of these derivative instruments.
2017
Interest-bearing loans and borrowings
Preference shares
Trade and other payables
Financial derivatives
2016(i)
Interest-bearing loans and borrowings
Preference shares
Other liabilities
Trade and other payables(i)
Financial derivatives
Due under
1 year
£m
14.6
0.1
131.9
50.3
196.9
Due under
1 year
£m
40.2
0.1
0.1
112.2
85.6
238.2
Note:
(i) As set out in Note 28 trade and other payables at 31 December 2016 have been restated.
18. Cash Generated from Operations
Operating profit/(loss) before joint ventures and associates
Depreciation
Amortisation of intangible assets
Share-based payments
Non-exceptional onerous lease provision (release)/charge
Cash spend on onerous leases
Gain on sale of property, plant and equipment
Pension charge
Pension credit
Pension contributions in cash
Acquisition and related exceptional items
Cash spend on exceptional items
Acquisition related earn-out adjustment
Net impairment loss
Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables and provisions
Due between
1 and 2 years
£m
Due between
2 and 5 years
£m
Due over
5 years
£m
23.3
0.1
4.6
(0.1)
27.9
281.7
0.4
–
(0.2)
281.9
–
1.5
–
–
1.5
Due between
1 and 2 years
£m
Due between
2 and 5 years
£m
Due over
5 years
£m
60.8
0.1
0.1
4.0
–
65.0
6.8
0.4
–
–
–
7.2
Group
Company
2017
£m
31.4
27.8
13.9
1.4
(0.8)
(1.0)
(0.1)
2.2
–
(12.5)
27.1
(21.1)
–
–
(4.9)
(25.4)
32.2
70.2
2016
£m
20.1
22.3
11.1
0.7
1.6
(1.5)
(0.1)
3.5
(0.3)
(14.0)
9.1
(9.9)
(0.3)
9.6
(1.3)
(37.3)
32.8
46.1
2017
£m
(2.3)
0.8
–
1.4
–
–
–
–
–
(12.5)
10.5
(7.3)
–
–
–
–
–
(9.4)
–
1.5
–
–
–
1.5
2016
£m
(4.1)
0.8
–
0.7
–
–
–
–
–
(14.0)
4.1
(3.3)
–
–
–
–
–
(15.8)
19. 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
Debt due after one year
Net derivative liabilities
Net debt
2016
£m
Cash flows
£m
Subsidiaries
acquired
£m
Fair value
movements
£m
Currency
translation
£m
38.9
(0.8)
38.1
(38.0)
(1.4)
(0.2)
(63.3)
(5.7)
22.7
(1.1)
21.6
34.8
–
0.2
(231.8)
4.7
(70.5)
(170.5)
12.9
–
12.9
–
–
–
–
–
12.9
–
–
–
–
–
–
–
2.5
2.5
(1.7)
–
(1.7)
–
–
–
12.9
–
11.2
2017
£m
72.8
(1.9)
70.9
(3.2)
(1.4)
–
(282.2)
1.5
(214.4)
As set out in the cash flow statement, proceeds from borrowings were £293.4m (2016: £Nil) and repayments
of borrowings were £101.3m (2016: £64.0m).
Currency translation movements result from the Group’s policy of hedging its overseas net assets, which are
denominated mainly in US dollars, Euros and Australian dollars. The translation effect on net debt is offset by the
translation effect on net assets resulting in an overall net exchange loss of £1.4m (2016: gain of £16.9m). The net
loss is recognised in other comprehensive income.
20. Operating Lease Commitments
The future aggregate minimum lease payments under non-cancellable operating leases are:
Within one year
Between one and five years
After five years
Group
Property
Other
2017
£m
35.4
61.4
47.3
144.1
2016
£m
33.0
63.4
29.5
125.9
2017
£m
39.2
67.2
7.1
113.5
2016
£m
32.0
53.9
0.1
86.0
The implementation of IFRS 16 Leases in 2019 will remove the distinction between operating leases and finance
leases and bring most of the assets subject to lease on to the Balance Sheet as fixed assets with the corresponding
liability shown as debt. This will materially gross up the Balance Sheet with the recognition of a new right of use
asset which will be depreciated through the Income Statement and a lease liability on which interest will be charged
through the Income Statement.
Property commitments relate to leases of offices and buildings around the world. Other commitments primarily
relate to leases of equipment and vehicles which generally have a contractual period of three years.
21. Capital Commitments
Contracted but not provided – property, plant and equipment
Group
Company
2017
£m
0.8
2016
£m
1.3
2017
£m
–
2016
£m
–
142
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
143
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued
22. Provisions
Property and equipment
Legal and employee related
Other
Group
At beginning of year
Provided/(released) during
year
Unwind of discount
Utilised during year
Reclassification (to)/from
accruals
Subsidiaries acquired
Currency translation (gain)/
loss
At end of year
Current
Non-current
2017
£m
5.9
0.4
–
(1.2)
–
1.0
(0.1)
6.0
3.5
2.5
6.0
2016
£m
5.4
1.6
0.2
(1.6)
–
–
0.3
5.9
3.0
2.9
5.9
2017
£m
2.2
2.8
–
(0.3)
(1.1)
4.2
(0.4)
7.4
7.4
–
7.4
2016
£m
2.3
(0.4)
–
(0.1)
0.4
–
–
2.2
1.1
1.1
2.2
2017
£m
0.1
0.3
–
(1.4)
–
6.1
(0.2)
4.9
4.9
–
4.9
2016
£m
0.1
–
–
–
–
–
–
0.1
0.1
–
0.1
2017
£m
8.2
3.5
–
(2.9)
(1.1)
11.3
(0.7)
18.3
15.8
2.5
18.3
2016
£m
7.8
1.2
0.2
(1.7)
0.4
–
0.3
8.2
4.2
4.0
8.2
The property related provisions are in respect of obligations for vacated leasehold properties where applicable sublet
income may be insufficient to meet obligations under head leases. The provisions for property costs unwind over the
period between 2018 and 2042. Other provisions include warranty claims, onerous contracts and redundancy costs.
The Company carries an onerous lease provision of £2.7m (£0.9m current and £1.8m non-current) which was
transferred during the year from a subsidiary undertaking. In the prior year the Company also carried a £1.1m
non-current provision relating to a legal claim that was reclassified to accruals during the year.
Contingent liabilities
The Group has a number of claims in the normal course of business that management believes should not result
in a material impact to the accounts. These include pre-acquisition claims against ASIG that management expects
to be largely recoverable from the previous owners.
Fund financial assumptions and information
The Actuary undertook a valuation of the Fund as at 31 December 2017 (2016: 31 December 2016) based on the Fund’s
membership data as at 31 March 2017. In deriving the results the Actuary used the following financial assumptions:
Price inflation
Discount rate
Rate of increase on pensions accrued pre-2006
Rate of increase on pensions accrued post-2006
2017
Section A
%
Section B
%
Group
%
3.1
2.5
3.6
2.2
3.2
2.3
3.6
2.2
3.1
2.5
3.6
2.2
2016(i)
Group
%
3.3
2.7
3.7
2.2
Assumptions regarding future mortality experience are set based on advice that uses published statistics and
experience in the business.
The average future life expectancy for a pensioner aged 65 on the balance sheet date is:
Male
Female
2017
Section A
Years
Section B
Years
22
23
22
23
Group
Years
22
23
2016(i)
Group
Years
22
24
The average future life expectancy at age 65 for a non-pensioner aged 40 on the balance sheet date is:
Male
Female
The membership of the Fund on the balance sheet date is:
23. Retirement Benefit Obligation
Defined benefit scheme
The principal Group-funded defined benefit pension scheme is the Menzies Pension Fund (the Fund) in the United
Kingdom to which employees have contributed until the Fund closed to future accrual on 31 March 2017.
Active members(ii)
Deferred members
Pensioners
On 31 May 2017 the Fund and was split into two sections such that the Company was the principal employer for
Section A and Menzies Distribution Ltd was the principal and sole employer for Section B. £64.3m of assets and
£71.8m of liabilities in respect of a group of pensioner members of the Fund were transferred from Section A to
Section B on 30 June 2017. Going forward the two sections of the Fund will have separate funding and investment
strategies but will continue to be governed by the Fund Rules.
In accordance with IAS 19 the scheme valuations were assessed in accordance with independent actuarial advice
from PricewaterhouseCoopers (the Actuary).
The liability split of the Fund by membership on the balance sheet date is:
Active members(ii)
Deferred members
Pensioners
2017
2016(i)
Section A
and Group
Years
23
24
2017
Section A
Section B
Group
–
3,556
1,639
5,195
–
–
509
509
–
3,556
2,148
5,704
2017
Section A
Section B
Group
–
59%
41%
–
–
100%
–
49%
51%
Group
Years
24
25
2016(i)
Group
401
3,200
2,131
5,732
2016(i)
Group
18%
37%
45%
144
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
145
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued 23. Retirement Benefit Obligation continued
Fund financial assumptions and information continued
The average liability duration of the Fund by membership on the balance sheet date is:
Fair value of Fund assets and liabilities at balance sheet date
Active members(ii)
Deferred members
Pensioners
2017
Section A
Years
Section B
Years
Group
Years
–
21
12
–
–
11
–
21
12
2016(i)
Group
Years
23
23
13
Overall weighted average liability duration is 17 years (2016: 18 years).
Notes:
(i) Prior year comparative information for the Company is not presented separately as the information set out for the Group was the same as that
of the Company.
(ii) The Fund closed to future accrual on 31 March 2017 and therefore there are no active members at 31 December 2017.
Future Fund benefit payments
Estimated undiscounted benefit payments expected to be paid from the Fund over its life, derived from member
data as at 31 March 2017, is:
)
m
£
(
s
t
n
e
m
y
a
p
t
fi
e
n
e
b
d
e
t
n
u
o
c
s
i
d
n
U
20
15
10
5
0
2018
2048
2078
Pensioner members (Section B)
Pensioner members (Section A)
Deferred members (Section A)
The analysis presented in the prior year was:
)
m
£
(
s
t
n
e
m
y
a
p
t
fi
e
n
e
b
d
e
t
n
u
o
c
s
i
d
n
U
20
15
10
5
0
2017
2047
2077
Pensioner members
Deferred memb ers
Active members
Section A
Equities
Bonds
Investment funds
Liability driven investment funds
Property
Annuity contracts(iii)
Cash
Other
Assets
Defined benefit obligation
Recognised in Balance Sheet
Related deferred tax asset (Note 14)
Net retirement obligation
Section B
Liability driven investment funds
Cash
Assets
Defined benefit obligation
Recognised in Balance Sheet
Related deferred tax asset
Net retirement obligation
2017(i)
Quoted
£m
Unquoted(ii)
£m
120.1
80.8
6.3
–
–
–
6.4
0.4
214.0
–
–
–
63.4
26.4
6.1
–
–
95.9
2017(i)
Quoted
£m
Unquoted(ii)
£m
–
0.5
0.5
64.0
–
64.0
Total
£m
120.1
80.8
6.3
63.4
26.4
6.1
6.4
0.4
309.9
(352.4)
(42.5)
7.2
(35.3)
Total
£m
64.0
0.5
64.5
(71.5)
(7.0)
1.2
(5.8)
146
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
147
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued
23. Retirement Benefit Obligation continued
Fair value of Fund assets and liabilities continued
Group
Equities
Bonds
Investment funds
Liability driven investment funds
Property
Annuity contracts(iii)
Cash
Other
Assets
Defined benefit obligation
Recognised in Balance Sheet
Related deferred tax asset (Note 14)
Net retirement obligation
2017
Quoted
£m
Unquoted(ii)
£m
120.1
80.8
6.3
–
–
–
6.9
0.4
–
–
–
127.4
26.4
6.1
–
–
214.5
159.9
2016
Unquoted(ii)
£m
0.3
–
–
77.2
25.0
7.8
–
12.4
Quoted
£m
131.5
92.0
6.3
–
–
–
13.0
3.4
246.2
122.7
Total
£m
120.1
80.8
6.3
127.4
26.4
6.1
6.9
0.4
374.4
(423.9)
(49.5)
8.4
(41.1)
Total
£m
131.8
92.0
6.3
77.2
25.0
7.8
13.0
15.8
368.9
(439.9)
(71.0)
12.1
(58.9)
Notes:
(i) Prior year comparative information for the Company is not presented separately as the information set out for the Group was the same as that
of the Company.
(ii) The valuations of unquoted assets have been determined by reference to latest available manager valuation reports.
(iii) The Fund holds annuity contracts in respect of a number of members that provide cash flows to the Fund which match the benefit payments
to these members.
The value of Fund liabilities at the balance sheet date at various assumptions are:
Pension expense
The charge to the Income Statement is assessed in accordance with independent actuarial advice from the Actuary
using the projected unit method.
The components of pension expense are:
Amounts charged/(credited) to operating profit
Current service cost
Administrative costs
Effect of curtailments and settlements
Total service cost
Amounts included in finance costs
Interest cost on defined benefit obligation
Interest income on Fund assets
Net finance charge
Pension expense
2017
Section A
£m
Section B
£m
Group
£m
0.6
1.5
2.7
4.8
10.6
(8.9)
1.7
6.5
–
0.1
–
0.1
0.9
(0.8)
0.1
0.2
0.6
1.6
2.7
4.9
11.5
(9.7)
1.8
2016(i)
Group
£m
1.9
1.6
(0.3)
3.2
13.9
(12.3)
1.6
6.7
4.8
As set out in Note 5, £2.7m of curtailment costs have been recognised as an exceptional cost in the current year
(2016: £Nil).
The amounts recognised in the Statement of Comprehensive Income are:
0.5% decrease in discount rate
One year increase in life expectancy
0.5% decrease in inflation
0.25% increase in pensions
2017
Section A
£m
Section B
£m
386.5
366.1
334.8
377.8
75.6
75.1
70.1
73.4
Group
£m
462.1
441.2
404.9
451.2
2016(i)
Group
£m
481.0
454.4
425.2
449.4
Returns on assets excluding interest income
Changes in demographic assumptions
Changes in financial assumptions
Experience
Actuarial gain/(loss)
In relation to sensitivities, the Company recognises actuarial gains and losses immediately through the re-measurement
of the net defined benefit liability.
Changes in Fund assets and defined benefit obligation
The change in scheme assets during the year is:
Fair value of assets at start of year
Sectionalisation of the Fund
Interest income
Returns on assets excluding interest income
Company contributions
Employee contributions
Effect of settlements
Benefits and expenses paid
Fair value of assets at end of year
Return on scheme assets including interest income
2017
Section A
£m
Section B
£m
Group
£m
17.0
7.1
(5.5)
(3.1)
15.5
1.2
–
(0.7)
(0.3)
0.2
18.2
7.1
(6.2)
(3.4)
15.7
2017
Section A
£m
Section B
£m
–
304.6
8.9
17.0
12.0
0.2
–
(32.8)
309.9
25.9
–
64.3
0.8
1.2
0.5
–
–
(2.3)
64.5
2.0
Group
£m
368.9
–
9.7
18.2
12.5
0.2
–
(35.1)
374.4
27.9
2016(i)
Group
£m
48.9
4.7
(93.3)
2.9
(36.8)
2016(i)
Group
£m
312.4
–
12.3
48.9
14.0
0.7
(0.4)
(19.0)
368.9
61.2
148
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
149
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued 23. Retirement Benefit Obligation continued
Changes in Fund assets and defined benefit obligation continued
The change in defined benefit obligation during the year is:
Defined benefit obligation at start of year
Sectionalisation of the Fund
Total service cost
Exceptional curtailments
Interest cost
Effect of settlements
Employee contributions
Benefits and expenses paid
Changes in demographic assumptions
Changes in financial assumptions
Experience
Defined benefit obligation at end of year
2017
Section A
£m
Section B
£m
–
368.1
2.1
2.7
10.6
–
0.2
(32.8)
(7.1)
5.5
3.1
352.4
–
71.8
0.1
–
0.9
–
–
(2.3)
–
0.7
0.3
71.5
Group
£m
439.9
–
2.2
2.7
11.5
–
0.2
(35.1)
(7.1)
6.2
3.4
423.9
2016(i)
Group
£m
355.8
–
3.5
–
13.9
(0.7)
0.7
(19.0)
(4.7)
93.3
(2.9)
439.9
Note:
(i) Prior year comparative information for the Company is not presented separately as the information set out for the Group was the same as that
of the Company.
Benefits, regulatory framework and governance of the 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 interests 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 of the Fund
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: 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; lower than expected investment returns;
members living for longer than expected; and higher than expected actual inflation and pension increase experience.
The sensitivity analysis disclosed above is intended to provide an indication of the impact on the value of the
Fund’s liabilities of the risks highlighted.
Asset-liability matching strategies
In the prior year the Trustee agreed to de-risk and increase hedging of liabilities on a gilts basis across interest rates
(40% hedged) and inflation (30% hedged) using leveraged Liability Driven Investment (LDI) funds. This was funded
by reducing the Fund’s UK equity allocation and moving a proportion of the Fund’s index-linked gilts into the LDI
funds.
Following the sectionalisation of the Fund, the Trustees and the Company agreed new investment strategies tailored
to each section’s liability profile.
The Trustee’s current investment strategy for Section A is to invest the majority of the Fund’s assets in a mix of
equities and 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.
The Trustee has implemented a de-risking process for Section A assets such that the assets are gradually switched out
of equities and into 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 2018 triennial valuation exercise. The current benchmark is to hold 60% in growth assets such as equities and
40% in bonds including index-linked and fixed-interest Government bonds and corporate bonds. Section A has also
increased the hedging of liabilities across interest rates (50% hedged) and inflation (50% hedged) using LDI.
Section B’s assets are invested in a range of credit, LDI and corporate bonds that target matching the liabilities
of Section B.
Funding arrangements and funding policy that affect future contributions
The triennial valuation process in which the Trustee and the Company agree the long term funding strategy was
concluded in the prior year and a Schedule of Contributions agreed and dated 4 March 2016. The Schedule of
Contributions sets out the additional contributions required to meet the funding shortfall between the value of
the Fund’s assets and liabilities. The additional contributions have been agreed as being nine annual contributions
of £10.7m per annum rising with the higher of RPI or the annual percentage change in dividends and beginning in
the year ended 31 March 2017 and continuing to the year ended 31 March 2025. The impact of changes in dividends
applies if dividends paid are at least at the level of those paid in 2013.
The next triennial valuation of the Fund is effective as at 31 March 2018 and the Company and Trustee will look to
agree revised long term funding strategies for Section A and Section B as part of this valuation. Specifically the
Company and Trustee have an understanding that any deficit on a gilts funding measure in Section B as at 31 March
2018 will be funded over a five or six year period.
In total, the Company expects to contribute around £11.8m to the Fund during the year to 31 December 2018.
The Company has considered the accounting treatment under IFRIC 14 of the current deficit and the impact of the
minimum funding requirement committed by the Company to 2025. A review of the Fund Rules has confirmed that
the Group has an unconditional right to a refund of a projected future surplus at some point in the future. There is no
requirement for the Group to adjust the Balance Sheet to recognise the future agreed deficit recovery contributions.
Other information
Small settlements have occurred over the year. As set out in Note 5, £2.7m (2016: £Nil) of curtailment costs have
been recognised as an exceptional cost.
24. Share Capital
Allotted, called up and fully paid
Opening – 83,636,895 ordinary shares of 25p each
Allotted under share option schemes(i)
Rights Issue
Closing – 83,955,951 ordinary shares of 25p each
2017
£m
20.9
0.1
–
21.0
2016
£m
15.4
–
5.5
20.9
Note:
(i) As a result of share scheme allotments, 329,600 (2016: 12,583) ordinary shares having a nominal value of £0.1m (2016: £Nil) were issued during the
year at a share premium of £1.4m (2016: £0.1m).
Employees 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 337,659 shares were exercised in 2017
and 330,127 options lapsed.
150
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
151
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued
24. Share Capital continued
Year of grant
2013
2014
2015
2016
2017
Exercise price
557p
437p
309p
424p
567p
Exercise
period
2016-2017
2017-2018
2018-2019
2019-2020
2021-2022
2017
Number
–
43,325
415,660
474,413
787,310
2016
Number
216,702
345,637
472,804
553,750
–
1,720,708
1,588,893
Company share schemes
The Company operates the following share-based payment arrangements:
Savings Related Share Option Scheme
The Company operates a Savings related Share Option Scheme which is open to all full and part-time employees in
the United Kingdom. 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 administers 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.
Bonus Co-Investment Plan (BCIP)
The BCIP and, in 2016 onwards, the SMP offered 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. Since 2010
the ratio of matching shares to contributory shares has been set at 1:1. The maximum amount of the annual cash
bonus which may be eligible for matching has been set at 40%. The net of tax amount is applied in the purchase
of shares.
The first bonus award that qualified for investment in shares under the plan was the award for the financial year
ended December 2004 and the last qualifying bonus award was for the financial year which commenced ten years
after the adoption of the Plan. A revised plan was approved at the Annual General Meeting of the Company on
15 May 2014 and the SMP will be discontinued following 2017.
Performance targets are based on real growth in earnings measured over three financial years. For awards in 2014,
if the percentage growth in the Company’s Earnings Per Share is Retail Prices Index +3% p.a. or more, then the
number of matching shares that will vest is one. For EPS growth of between RPI +0% p.a. and RPI +3% p.a., 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 +0% p.a. or less for any award. For awards in 2015, if the percentage growth in the
Company’s EPS is Consumer Prices Index +3% p.a. or more, then the number of matching shares that will vest is
one. If the threshold growth in EPS is achieved (CPI +0%) then 25% of the matching shares will be paid. For EPS
growth of between CPI +0% p.a. and CPI +3% p.a., the number of matching shares vesting will be calculated on
a straight-line basis. No matching shares will vest for EPS percentage growth below CPI +0% p.a. for any award.
Long-Term Incentive Plan (LTIP)
The LTIP enables divisional and Senior Management to align more closely with the achievement of target Group
and divisional financial results. A detailed description of this plan is included in the Directors’ Remuneration Report
on page 70.
Shares will vest at the end of three year financial periods. A £Nil award will be achieved where the financial results
are below the threshold performance target, 25% if at threshold and 100% will vest where the results are 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 for Executive Directors are 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 or Monte Carlo simulation models as appropriate. No
performance conditions are included in the fair value calculations.
The fair value per option granted and the assumptions used in the calculation are:
Date of grant (October)
Share price at grant date
Exercise price
Vesting period (years)
Expected volatility
Option life (years)
Expected life (years)
Risk-free rate
Expected dividends expressed as a dividend yield(i)
Fair value per option
Charge per option(ii)
Savings related Option Scheme
2017
709p
567p
3
33%
3.5
3.5
1.0%
3.0%
184p
129p
2016
592p
424p
3
33%
3.5
3.5
1.0%
3.0%
152p
106p
2015
412p
309p
3
33%
3.5
3.5
1.0%
6.0%
90p
63p
2014
569p
437p
3
26%
3.5
3.5
1.4%
3.7%
136p
95p
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.
Notes:
(i) Based on the daily 12 month trailing dividend yield averaged over the 12 months prior to valuation date.
(ii) The difference between the fair value and charge per option is due to adjustments for forfeiture risk.
Date of grant (March)
Share price at grant date
Contractual life (years)
Expected leavers
Expected outcome of meeting
performance criteria
Fair value per share
Charge per share award(i)
Note:
(i) Adjusted for forfeiture risk.
2017
637p
3
0%
31%
199p
199p
BCIP
2016
478p
3
0%
51%
245p
245p
2015
376p
3
0%
59%
220p
220p
2017
579p
3
0%
n/a
151p
151p
LTIP
2016
443p
3
0%
n/a
169p
169p
2015
404p
3
0%
56%
165p
165p
152
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
153
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued
24. Share Capital continued
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:
Outstanding at start of year
Granted
Forfeited/expired
Exercised
Outstanding at end of year
Exercisable
Range of exercise prices
Weighted average remaining contractual life (years)
BCIP
Savings related Option Scheme
2017
2016
Weighted
average
exercise
price
(pence)
411
567
449
484
462
309-567
Number
1,588,893
799,919
(330,127)
(337,659)
1,721,026
44,170
2.1
Weighted
average
exercise
price
(pence)
468
426
465
492
411
309-557
Number
1,349,719
750,908
(499,151)
(12,583)
1,588,893
215,111
1.6
LTIP
2017
2016
2017
2016
Outstanding at start of year
Awards made
Lapsed
Exercised
Number
38,719
5,486
(436)
(6,545)
Outstanding at end of year
37,224
Weighted
average
price
(pence)
461
637
647
647
452
Number
53,522
15,920
(30,723)
–
Weighted
average
price
(pence)
Weighted
average
price
(pence)
Number
Weighted
average
price
(pence)
Number
577 1,034,867
473
399,989
669
(123,017)
–
(9,440)
1,159,966
451
595,076
579
654 (720,175)
–
654
38,719
461 1,302,399
470 1,034,867
527
445
568
–
451
Range of award date
prices
Weighted average
remaining contractual life
(years)
376-637
376-647
404-579
404-654
0.9
1.4
1.1
2.3
Charge for share-based incentive schemes
The total charge for the year relating to employee share-based plans was £1.4m (2016: £0.7m), all of which related
to equity-settled share-based payment transactions. After tax the total charge was £1.1m (2016: £0.6m).
25. Acquisitions
During the year the Group acquired 100% of the share capital of ASIG Holdings Ltd and ASIG Holdings Corp.
(together ASIG) and Gold Coast Air Terminal Services Pty Ltd, Gnewt Cargo Ltd and Farnair Handling Kft.
On 1 February 2017 the Group acquired ASIG, a leading Aviation Services business. The Group has acquired the
business in order to provide comprehensive service solutions including into-plane fuelling, fuel farm management,
ground handling, aircraft technical services, facilities equipment maintenance and de-icing at airports across seven
countries in the Americas, Europe and Asia. These financial statements include the impact of 11 months’ trading results.
On 3 May 2017 the Group acquired Gold Coast Air Terminal Services Pty Ltd, a company based in Australia. The
Group has acquired the company to expand its cargo service offering in Australia. These financial statements include
the impact of eight months’ trading results.
On 30 August 2017 the Group acquired Gnewt Cargo Ltd, a company based in England. The Group has acquired
the company to expand its delivery service offering in England. These financial statements include the impact of
four months’ trading results.
On 1 November 2017 the Group acquired Farnair Handling Kft, a company based in Hungary. The Group has
acquired the company to expand its cargo service offering in Hungary. These financial statements include the
impact of two months’ trading results.
On 27 May 2017 the Group acquired 75% of the share capital of EM News Distribution (Ireland) Ltd and 25% of EM
News Distribution (NI) Ltd (together EMND). This step acquisition enables the Distribution Division to realise the
benefits of control and create the only news wholesaler serving the United Kingdom and Republic of Ireland. The
intention is to use the existing network under the Division’s control to diversify into the wider logistics and parcel
carrier market. These financial statements include the impact of seven months’ trading results.
Gold Coast
Air Terminal
Services
Pty Ltd
£m
ASIG
£m
EMND
£m
Gnewt
Cargo Ltd
£m
Farnair
Handling
Kft
£m
Purchase consideration:
Cash paid
Impact of assets not transferred
Contingent consideration
Deferred consideration
Fair value of existing equity interest
in joint ventures
Total purchase consideration
Less: non-controlling interest acquired
Less: fair value of net assets acquired
Goodwill
168.2
(2.2)
–
–
–
166.0
4.2
88.4
73.4
1.6
–
0.8
–
–
2.4
–
1.4
1.0
1.9
–
–
–
5.8
7.7
–
4.4
3.3
–
–
–
–
–
–
–
(0.2)
0.2
1.1
–
–
–
–
1.1
–
1.0
0.1
2017
£m
172.8
(2.2)
0.8
–
5.8
177.2
4.2
95.0
78.0
2016
£m
3.5
–
–
0.5
–
4.0
–
3.6
0.4
The non-controlling interest relating to ASIG is 49% of the net liabilities of ASIG Thailand (Company) Ltd of £8.6m.
Goodwill recognised with respect to ASIG is primarily attributable to workforce expertise and synergies with other
Group companies. Goodwill recognised with respect to all other acquisitions relates to anticipated synergies with
other Group companies.
154
John Menzies plc Annual Report and Accounts 2017
John Menzies plc Annual Report and Accounts 2017
155
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued
25. Acquisitions continued
The fair value of assets and liabilities arising from the acquisitions are:
26. 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. These sales to and from related parties are made at normal market prices. Details of these transactions are:
Intangible assets – customer
relationships and contracts
Intangible assets – brand
Deferred tax assets
Property, plant and equipment
Inventory
Trade and other receivables
Cash
Trade and other payables
Provisions
Current income tax liabilities
Borrowings
Deferred tax liability
Net assets acquired at fair value
Gold Coast
Air Terminal
Services
Pty Ltd
£m
ASIG
£m
EMND
£m
Gnewt
Cargo Ltd
£m
Farnair
Handling
Kft
£m
31.8
6.6
3.6
30.9
2.5
89.5
12.3
(71.4)
(11.2)
(0.7)
–
(5.5)
88.4
1.6
–
–
0.1
–
0.2
0.2
–
–
(0.2)
–
(0.5)
1.4
2.0
–
–
0.6
2.5
10.7
0.2
(11.0)
(0.1)
(0.2)
–
(0.3)
4.4
–
–
–
0.1
–
0.6
–
(0.9)
–
–
–
–
(0.2)
0.4
–
–
0.2
–
0.5
0.2
(0.3)
–
–
–
–
1.0
2017
£m
35.8
6.6
3.6
31.9
5.0
101.5
12.9
(83.6)
(11.3)
(1.1)
–
(6.3)
95.0
2016
£m
2.7
–
–
0.6
0.1
1.4
0.3
(0.9)
(0.1)
(0.1)
(0.3)
(0.1)
3.6
The fair value of the acquired ASIG net assets has decreased by £5.9m from the amounts recognised in the June
2017 results announcement. The reduction primarily relates to the recognition of additional fair value provisions of
£5.4m, and property, plant and equipment fair value adjustments of £2.3m, partly offset by higher intangible assets
relating to customer relationships of £2.5m.
Current assets acquired with ASIG include £64.0m of trade receivables at fair value. Current assets acquired with
all other acquisitions include £5.1m of trade receivables at fair value, the gross amount acquired. The fair values
of the net assets of all companies acquired except ASIG remain provisional pending the formal completion of the
valuation process.
The acquired businesses contributed £11.0m profit before taxation excluding the amount contributed from EMND
as joint venture undertakings to 27 May 2017 and £380.3m revenue from acquisition date.
If the businesses had been acquired on 1 January 2017, Group revenue and profit before taxation would have been
£2,561.6m and £30.1m, respectively. The acquired ASIG business contributed £291.7m revenue and £7.3m profit before
taxation from acquisition date. Transaction fees of £2.4m relating to acquisitions were incurred and expensed during
the period.
Deferred consideration
Deferred consideration of £0.2m relating to the acquisition of Renaissance Aviation Ltd was cash settled in March
2017. Deferred consideration of £0.3m relating to the acquisition of AJG Parcels Ltd was cash settled in May 2017.
Deferred consideration of £0.2m relating to the acquisition of Thistle Couriers Ltd was cash settled in February 2017.
Related party
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
share
holding
%
Sales to
related
party
£m
49
49
29
50
50
0.1
0.1
0.4
0.2
0.4
Amounts
owed to
related
party at
31 December
2017
£m
Amounts
owed
by related
party at
31 December
2017
£m
–
–
–
–(i)
–(i)
0.1
–
–
–(i)
–(i)
Note:
(i) Following the step acquisition set out in Note 25 these entities are no longer joint venture undertakings at 31 December 2017.
Key Management includes individuals who are Directors of the Company and those having authority and responsibility
for planning, directing and controlling activities of the Operating Divisions as disclosed in the segmental analysis.
Remuneration of key Management personnel is:
Short-term employee benefits
Post-employment pension and medical benefits
Termination payments
Share-based payments
2017
£m
6.8
0.5
–
1.4
8.7
2016
£m
5.5
0.5
0.1
0.7
6.8
Certain activities, including treasury, taxation, insurance, pension and legal matters are provided by the Company
to subsidiary companies and are recharged on a cost-plus basis. The amount recharged and settled in respect of
2017 was £0.2m (2016: £0.2m).
The amounts owed to and due by the Company from dealings with subsidiary companies are disclosed in Notes 15
and 16.
Transactions between the Company and other Group companies primarily related to financing activities.
27. Related Undertakings
The subsidiary entities and entities in which the Company has a significant interest at 31 December 2017 are
disclosed as an appendix to these financial statements.
156
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157
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued
28. Prior Year Adjustment
As set out in Note 1, Management’s review of the impact of IFRS 15 Revenue from Contracts with Customers has
highlighted that the historic accounting treatment does not comply fully with IAS 18 Revenue. Although the historic
approach adopted was not materially misstated, with the imminent application of IFRS 15 it is considered qualitatively
material and therefore there is a need for a restatement to the historic Group Balance Sheets to recognise a sales
returns asset and corresponding liability. The movement in these amounts also requires to be shown in the Group
Income Statement.
There is no impact from this restatement on the Group Statement of Comprehensive Income, the Group Cash Flow
Statement, the Group’s earnings per share or on the Company’s financial statements.
Impact on Group Income Statement
For the year ended 31 December 2016
Revenue
Net operating costs
Operating profit before joint ventures and associates
Share of post-tax results of joint ventures and associates
Operating profit
Finance income
Finance charges excluding retirement benefit obligation interest
Retirement benefit obligation interest
Profit before taxation
Taxation
Profit for the year
As previously
reported
£m
Prior year
adjustment
£m
1,981.6
(1,961.5)
0.9
(0.9)
As restated
£m
1,982.5
(1,962.4)
20.1
7.5
27.6
0.7
(6.9)
(1.6)
19.8
(11.8)
8.0
–
–
–
–
–
–
–
–
–
20.1
7.5
27.6
0.7
(6.9)
(1.6)
19.8
(11.8)
8.0
Impact on Group Balance Sheet
Assets
Non-current 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)/assets
Total assets less current liabilities
Non-current liabilities
Net assets
Shareholders’ equity
Ordinary shares
Share premium account
Treasury shares
Other reserves
Merger relief reserve
Retained earnings
Capital redemption reserve
Total shareholders’ equity
Non-controlling interest in equity
Equity
2016
2015
As previously
reported
Prior year
adjustment
As restated
As previously
reported
Prior year
adjustment
As restated
–
286.4
261.3
–
286.4
16.0
243.6
0.4
38.9
298.9
(39.0)
(6.1)
(249.9)
(11.3)
(4.2)
(310.5)
(11.6)
274.8
(146.5)
128.3
20.9
20.5
(1.6)
(4.6)
67.3
3.2
21.6
127.3
1.0
128.3
16.0
224.8
0.4
38.9
280.1
(39.0)
(6.1)
(234.2)
(11.3)
(4.2)
14.7
201.9
0.6
34.1
251.3
(3.4)
(2.3)
(217.3)
(10.0)
(4.9)
(294.8)
(237.9)
(14.7)
271.7
13.4
274.7
–
(19.7)
–
–
(19.7)
–
–
16.6
–
–
16.6
(3.1)
(3.1)
261.3
14.7
182.2
0.6
34.1
231.6
(3.4)
(2.3)
(200.7)
(10.0)
(4.9)
(221.3)
10.3
271.6
(146.5)
(203.5)
–
(203.5)
125.2
71.2
(3.1)
68.1
20.9
20.5
(1.6)
(4.6)
67.3
0.1
21.6
124.2
1.0
125.2
15.4
20.4
(1.8)
(21.6)
–
35.6
21.6
69.6
1.6
71.2
–
–
–
–
–
(3.1)
–
(3.1)
–
(3.1)
15.4
20.4
(1.8)
(21.6)
–
32.5
21.6
66.5
1.6
68.1
–
(18.8)
–
–
(18.8)
–
–
15.7
–
–
15.7
(3.1)
(3.1)
–
(3.1)
–
–
–
–
–
(3.1)
–
(3.1)
–
(3.1)
Impact on Group Statement of Changes in Equity
Retained earnings at 1 January 2016 and 1 January 2017 have both been reduced by £3.1m.
158
John Menzies plc Annual Report and Accounts 2017
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159
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notes to the Accounts continued Five Year Summary
Revenue
Aviation
Distribution
Underlying operating profit
Aviation
Distribution
Corporate
Exceptional and other items
Share of joint ventures and associates interest and tax
Profit before interest
Net finance costs
Profit before taxation
Per ordinary share
Dividends paid
Underlying earnings
Basic earnings
Note:
(i) As set out in Note 28 revenue has been restated in the Distribution Division.
2017
£m
2016(i)
£m
2015
£m
2014
£m
2013
£m
Interests in all of the companies listed below are in the ordinary share capital of these undertakings, except where
otherwise stated.
Subsidiary, Joint Venture and Associate Undertakings
At 31 December 2017
1,273.6
1,186.9
843.4
1,139.1
728.0
1,171.2
718.8
1,184.1
702.5
1,202.9
2,460.5
1,982.5
1,899.2
1,902.9
1,905.4
58.8
24.8
83.6
(5.7)
77.9
(37.6)
(1.1)
39.2
(12.5)
26.7
34.2
24.7
58.9
(3.7)
55.2
(26.3)
(1.3)
27.6
(7.8)
19.8
23.1
25.1
48.2
(3.3)
44.9
(17.6)
(1.5)
25.8
(7.6)
18.2
30.2
24.0
54.2
(3.2)
51.0
(16.4)
(1.5)
33.1
(7.4)
25.7
37.8
24.3
62.1
(2.0)
60.1
(8.7)
(1.1)
50.3
(8.2)
42.1
19.1p
57.2p
15.1p
17.2p
47.8p
11.8p
13.1p
37.8p
14.6p
26.9p
43.5p
20.1p
25.6p
58.0p
44.3p
Subsidiary undertakings
Country of incorporation
Registered address
Administracion de Servicios
en Tierra, S.A. de C.V.
Mexico
Aeroground, Inc.
United States
Air Marketing Services Ltd
United Kingdom
Air Menzies International
(Aust) Pty Ltd
Australia
Air Menzies International
(Cape) Proprietary Ltd
South Africa
Air Menzies International
(India) Private Ltd
India
Air Menzies International
(Netherlands) B.V.
Air Menzies International
(NZ) Ltd
The Netherlands
New Zealand
Air Menzies International
(USA), Inc.
Air Menzies International
Holding (NZ) Ltd
United States
New Zealand
Air Menzies
International Ltd
United Kingdom
Air Menzies International
SA Proprietary Ltd
South Africa
Airbase Flight Support Ltd
Isle of Man
Airbase Flight Support Ltd
United Kingdom
Aircraft Service
International Group, Inc.
United States
Plaza Alamos Local 2, SM
311, MZ 26 Lote 03-01
Boulevard Luis Donaldo
Colosio C.P. 77560, Cancun,
Quintana Roo
251 Little Falls Drive,
Wilmington, Delaware 19808
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Unit 12, Discovery Cove,
1801 Botany Road,
Banksmeadow NSW 2019
New Agents Road, Unit 6,
Air Cargo Centre, Cape
Town International Airport,
Cape Town
Cargo Terminal 1,
Kempegowda International
Airport, Bangalore 560300
Anchoragelaan 50, 1118 LE
Luchthaven Schiphol
c/o Buddle Findlay, Level 18,
PwC Tower, 188 Quay Street,
Auckland 1140
251 Little Falls Drive,
Wilmington, Delaware 19808
c/o Buddle Findlay, Level 18,
PwC Tower, 188 Quay Street,
Auckland 1140
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Unit 3 Aviation Park, 17
Pomona Road, Kempton
Park, Johannesburg
66 Athol Street, Douglas
IM1 1JE
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
251 Little Falls Drive,
Wilmington, Delaware 19808
Direct or indirect holding
(100% unless otherwise stated)
Indirect
Indirect
Indirect
Indirect
Indirect (65%)
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
160
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161
Financial StatementsShareholder InformationGovernance Reports Strategic Report
Subsidiary, Joint Venture and Associate Undertakings continued
Subsidiary undertakings
Country of incorporation
Registered address
Direct or indirect holding
(100% unless otherwise stated)
Subsidiary undertakings
Country of incorporation
Registered address
Direct or indirect holding
(100% unless otherwise stated)
Aircraft Service
International, Inc.
United States
Airports Bureau Systems Ltd United Kingdom
AMI Ocean Ltd
United Kingdom
ASIG (Thailand) Co. Ltd
Thailand
ASIG (U.K.) Ltd
United Kingdom
ASIG Canada Ltd
Canada
ASIG Ground Handling
Canada Ltd
Canada
ASIG Holdings
(Barbados) Ltd
Barbados
ASIG Holdings Corp.
United States
ASIG Holdings Ltd
United Kingdom
ASIG Lounge, Inc.
United States
ASIG Manchester Ltd
United Kingdom
ASIG Nassau Fueling
Services Ltd
Bahamas
AU Logistics Ltd
United Kingdom
Australian AirSupport
Pty Ltd
Australia
Aviation Consultancy
Services Ltd
United Kingdom
251 Little Falls Drive,
Wilmington, Delaware 19808
Windmill House, 91-93
Windmill Road, Sunbury-on-
Thames TW16 7EF
2 Lochside Avenue,
Edinburgh Park, Edinburgh
EH12 9DJ
7th-9th & 16th Floor,
Bubhajit Building, 20 North
Sathorn Road, Silom,
Bangrak, Bangkok 10500
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
6500 Silver Dart Drive, Suite
257, Mississauga, Ontario
L5P 1B2
6500 Silver Dart Drive, Suite
257, Mississauga, Ontario
L5P 1B2
The Phoenix Centre, George
Street, Belleville, St. Michael
251 Little Falls Drive,
Wilmington, Delaware 19808
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
251 Little Falls Drive,
Wilmington, Delaware 19808
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
3rd Floor. Shirley House, 253
Shirley Street, P.O. Box
N-624, Nassau
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
c/o Norton Rose Fulbright,
Level 21, 111 Eagle Street,
Brisbane QLD 4000
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Indirect
Indirect
Direct
Indirect (51%)
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Aviation Service Leader
(Chile) S.A.
Chile
Boker Aeroclean Ltd
United Kingdom
BP Travel Marketing
Services Ltd
United Kingdom
Cargo 2000 Ltd
United Kingdom
Cargosave Ltd
United Kingdom
Chester Independent
Wholesale Newsagents Ltd
United Kingdom
Coronet Aviation
Services Ltd
United Kingdom
Cranford Forwarders
Bond Ltd
United Kingdom
Czech GH s.r.o.
Czech Republic
DNDS Ltd
United Kingdom
Edinburgh Arts and
Entertainment Ltd
United Kingdom
Elmdon Cargo Handling Ltd United Kingdom
EM News Distribution
(Ireland) Ltd
EM News Distribution
(NI) Ltd
Republic of Ireland
United Kingdom
Est. Arturo Alessandri,
Amunategui 277,
3F, Santiago
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
K Letisti 1049/57, 161 00
Prague 6
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 Lochside Avenue,
Edinburgh Park, Edinburgh
EH12 9DJ
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
10 Earlsford Terrace,
Dublin 2
Victoria House, Gloucester
Street, Belfast BT1 4LS
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
162
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163
Financial StatementsShareholder InformationGovernance Reports Strategic Report Subsidiary, Joint Venture and Associate Undertakings continued
Subsidiary undertakings
Country of incorporation
Registered address
Direct or indirect holding
(100% unless otherwise stated)
Subsidiary undertakings
Country of incorporation
Registered address
Direct or indirect holding
(100% unless otherwise stated)
Express Handling
(Scotland) Ltd
United Kingdom
FARNAIR Handling
Szolgáltató Kft.
Hungary
FMD Ltd
United Kingdom
Fore Retail Consultancy Ltd United Kingdom
Gold Cost Air Terminal
Services Pty
Australia
Gnewt Cargo Ltd
United Kingdom
Heathrow Aviation
Services Ltd
United Kingdom
HO/Menzies Investimentos
& Transportes Investments
Limitada
China
James Waddell &
Company Ltd
United Kingdom
JEM Education Direct Ltd
United Kingdom
JM Nominees Ltd
United Kingdom
JM Secretaries Ltd
United Kingdom
John Menzies (108) Ltd
United Kingdom
John Menzies
(Birmingham) Ltd
United Kingdom
2 Lochside Avenue,
Edinburgh Park, Edinburgh
EH12 9DJ
H-2220 Vecses, Lorinci str.
59, C Building, Budapest
Unit 1 Griffin Business Park,
Walmer Way, Birmingham
B37 7UX
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
c/o Norton Rose Fulbright,
Level 21, 111 Eagle Street,
Brisbane QLD 4000
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Avenida da Praia Grande
665, Edificio Great Will,
Macau
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
John Menzies
(Edinburgh) Ltd
United Kingdom
John Menzies (GB) Ltd
United Kingdom
John Menzies Corporate
Services Ltd
United Kingdom
John Menzies Digital Ltd
United Kingdom
John Menzies
Distribution Ltd
United Kingdom
John Menzies Finance Ltd
United Kingdom
John Menzies
Holding GmbH
John Menzies
International Ltd
Germany
United Kingdom
John Menzies
USA Holdings, Inc.
United States
Indirect
John Menzies USA, Inc.
United States
Jones, Yarrell & Co. Ltd
United Kingdom
Direct
Direct
Indirect
Direct
Jones Yarrell Leadenhall Ltd United Kingdom
Leisure Target Tourism
Services Ltd
United Kingdom
London Cargo Group Ltd
United Kingdom
2 Lochside Avenue,
Edinburgh Park, Edinburgh
EH12 9DJ
2 Lochside Avenue,
Edinburgh Park, Edinburgh
EH12 9DJ
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Rechtsanwaelte Hoelters &
Elsing, Immermannstrasse
40, 40210 Dusseldorf
2 Lochside Avenue,
Edinburgh Park, Edinburgh
EH12 9DJ
251 Little Falls Drive,
Wilmington, Delaware 19808
251 Little Falls Drive,
Wilmington, Delaware 19808
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Direct
Direct
Direct
Indirect
Direct
Direct
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
164
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165
Financial StatementsShareholder InformationGovernance Reports Strategic Report Subsidiary, Joint Venture and Associate Undertakings continued
Subsidiary undertakings
Country of incorporation
Registered address
Direct or indirect holding
(100% unless otherwise stated)
Subsidiary undertakings
Country of incorporation
Registered address
Direct or indirect holding
(100% unless otherwise stated)
London Cargo Handling Ltd United Kingdom
London Cargo Imports Ltd
United Kingdom
Lonsdale Universal Ltd
United Kingdom
Lonsdale Universal
Trustees Ltd
United Kingdom
Luton Ramp Ltd
United Kingdom
Luton Services Ltd
United Kingdom
MA Secretaries Ltd
United Kingdom
MAG Nominees Ltd
United Kingdom
Magazine Solutions Ltd
United Kingdom
Mancargo Ltd
United Kingdom
Manchester Cargo
Centre Ltd
United Kingdom
Manchester Handling Ltd
United Kingdom
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Indirect
MCS Trustee Ltd
United Kingdom
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
MDL Ltd
United Kingdom
Media on the Move Ltd
United Kingdom
Menzies Aviation – Portugal
– Servicos De Carga,
Unipessoal, LDA
Portugal
Menzies Aviation (Africa)
Pty Ltd
South Africa
Menzies Aviation
(Asia Pacific) Ltd
British Virgin Islands
Menzies Aviation (ASIG
Ground Handling) Ltd
United Kingdom
Menzies Aviation (ASIG)
Ltd
United Kingdom
Menzies Aviation
(Australia) Pty Ltd
Australia
Menzies Aviation
(Aviation) B.V.
Menzies Aviation
(Brasil) Ltda
Menzies Aviation
(Canada) Ltd
Menzies Aviation
(Cargo) B.V.
Menzies Aviation
(Chengdu) Ltd
The Netherlands
Brazil
Canada
The Netherlands
United Kingdom
Menzies Aviation
(Czech) s.r.o.
Czech Republic
2 Lochside Avenue,
Edinburgh Park, Edinburgh
EH12 9DJ
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Avenida Antonio Augusto de
Aguiar, No. 183, R/C Dto.,
1050-014 Lisbon
Unit F4, CTX Business Park,
Cape Town International
Airport, Cape Town
Newhaven Corporate
Services (BVI) Limited, 3rd
Floor, Omar Hodge Building,
Wickhams Cay I, PO Box
362, Road Town, Tortola
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
c/o Norton Rose Fulbright,
Level 21, 111 Eagle Street,
Brisbane QLD 4000
Anchoragelaan 50, 1118 LE
Luchthaven Schiphol
Avenida Nove de Julho no.
4865, 5 Andar, Conjunto 51,
Sala A, Sao Paulo
6500 Silver Dart Drive,
Suite 257, Mississauga,
Ontario L5P 1B2
Anchoragelaan 50, 1118 LE
Luchthaven Schiphol
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
K Letisti 1049/57, 161 00
Prague 6
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
166
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167
Financial StatementsShareholder InformationGovernance Reports Strategic Report Subsidiary, Joint Venture and Associate Undertakings continued
Subsidiary undertakings
Country of incorporation
Registered address
Direct or indirect holding
(100% unless otherwise stated)
Subsidiary undertakings
Country of incorporation
Registered address
Direct or indirect holding
(100% unless otherwise stated)
Menzies Aviation
(DEL), Inc.
Menzies Aviation
(Denmark) A/S
United States
Denmark
Menzies Aviation
(Dominicana) Ltd
United Kingdom
Menzies Aviation
(EMEA) B.V.
Menzies Aviation
(EMEA) Ltd
The Netherlands
United Kingdom
Menzies Aviation (FR9) B.V.
The Netherlands
Menzies Aviation
(France) SAS
France
Menzies Aviation
(Freighter Handling) B.V.
Menzies Aviation
(Fuelling) France
Menzies Aviation (Ground
Services) Australia Pty Ltd
The Netherlands
France
Australia
Menzies Aviation
(Handling) Proprietary Ltd
South Africa
Menzies Aviation
(Hungary) Kft.
Hungary
Menzies
Aviation (Ibérica) S.A.
Menzies Aviation
(India) Private Ltd
Spain
India
Menzies Aviation
(Ireland) Limited
Republic of Ireland
Menzies Aviation (Italy) srl
Italy
Menzies Aviation (LCC) B.V.
The Netherlands
251 Little Falls Drive,
Wilmington, Delaware 19808
Copenhagen Airport,
Terminal 2,
Lufthavnsboulevarden 6,
2770 Kastrup
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Luna Arena,
Herikerbergweg 238, 1101
CM Amsterdam
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Anchoragelaan 50, 1118 LE
Luchthaven Schiphol
Aeroport Toulouse Blagnac,
Hall C, 31700 Blagnac
Anchoragelaan 50, 1118 LE
Luchthaven Schiphol
Aeroport Toulouse Blagnac,
Hall C, 31700 Blagnac
c/o Norton Rose Fulbright,
Level 21, 111 Eagle Street,
Brisbane QLD 4000
Unit F4, CTX Business Park,
Cape Town International
Airport, Cape Town
Liszt Ferenc Nemzetkozi
Repuloter, Repules
Oktatasi Kozpont, 17, sz
H-1185 Budapest
Calle Nunez Morgado 6-Bj
Dc, 28036 Madrid
Plot No-C-04L, Cargo
Terminal-1, Kempegowda
International Airport,
Devanahalli, Bangalore
560300
First Floor, Riverside Two,
43/49 Sir John Rogerson’s
Quay, Dublin 2
Via Carducci 11, 20123, Milan
Anchoragelaan 50, 1118 LE
Luchthaven Schiphol
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect (65%)
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Menzies Aviation
(Lounge) B.V.
The Netherlands
Menzies Aviation (Luton) Ltd United Kingdom
Menzies Aviation
(Mexico) S.A. de C.V.
Mexico
Menzies Aviation
(Mumbai) Passenger Ltd
Menzies Aviation
(Namibia) Proprietary Ltd
Mauritius
Namibia
Menzies Aviation
(New Zealand) Ltd
New Zealand
Menzies Aviation (NL) Ltd
United Kingdom
Menzies Aviation (Oslo) AS Norway
Menzies Aviation
(Poland) Sp. z o.o.
Menzies Aviation
(Romania) S.A.
Poland
Romania
Menzies Aviation
(Santo Domingo) Ltd
United Kingdom
Menzies Aviation
(Schiphol) B.V.
Menzies Aviation
(South Africa) (Cargo)
Proprietary Ltd
Menzies Aviation
(South Africa) (Cleaning)
Proprietary Ltd
Menzies Aviation
(South Africa) (Pty) Ltd
The Netherlands
South Africa
South Africa
South Africa
Menzies Aviation
(Stockholm) AB
Sweden
Anchoragelaan 50, 1118 LE
Luchthaven Schiphol
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Plaza Alamos Local 2, SM
311, MZ 26 Lote 03-01
Boulevard Luis Donaldo
Colosio C.P. 77560, Cancun,
Quintana Roo
5th Floor, Ebene Esplanade,
24 Cybercity, Ebene
Bougain Villas, 78 Sam
Mujoma Drive, Windhoek
George Bolt Memorial
Drive, Auckland Airport,
Auckland 2022
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Sigrid Undsets plass,
Terminalen, 2060
Gardermoen, 0235
Ullensaker
ul. Sienna 72/3, 00-833
Warsaw
Henri-Coanda International
Airport, Calea Bucurestilor
no 224E, Otopeni City, Ilfov
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Luna Arena, Herikerbergweg
238, 1101 CM Amsterdam
Unit F4, CTX Business Park,
Cape Town International
Airport, Cape Town
Unit F4, CTX Business Park,
Cape Town International,
Airport, Cape Town
Unit F4, CTX Business Park,
Cape Town International,
Airport, Cape Town
Box 197, SE 190-45,
Stockholm, Arlanda
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect (65%)
Indirect (65%)
Indirect (65%)
Indirect
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169
Financial StatementsShareholder InformationGovernance Reports Strategic Report Subsidiary, Joint Venture and Associate Undertakings continued
Subsidiary undertakings
Country of incorporation
Registered address
Direct or indirect holding
(100% unless otherwise stated)
Subsidiary undertakings
Country of incorporation
Registered address
Menzies Aviation
(Support Services) B.V.
Menzies Aviation
(Support) B.V.
Menzies
Aviation (Sverige) AB
Menzies Aviation
(Sweden) AB
The Netherlands
The Netherlands
Sweden
Sweden
Menzies Aviation (Texas), Inc. United States
Menzies Aviation (UK) Ltd
United Kingdom
Menzies Aviation (USA), Inc.
United States
Menzies Aviation
(Venezuela) S.A.
Venezuela
Menzies Aviation
(Washington), Inc.
Menzies Aviation
(Windhoek Lounge) (Pty)
Ltd
United States
Namibia
Menzies Aviation
Alicante UTE
Menzies Aviation
Almeria UTE
Menzies Aviation
Bermuda Ltd
Menzies Aviation Cargo
(Bangalore) Ltd
Menzies Aviation Cargo
(Hyderabad) Ltd
Menzies Aviation Cargo
(Romania) S.R.L.
Spain
Spain
Bermuda
Mauritius
Mauritius
Romania
Menzies Aviation Colombia
Holdings S.A.S.
Colombia
Menzies Aviation
Colombia S.A.S.
Colombia
Menzies Aviation Contracts
(NL) B.V.
Menzies Aviation Corporate
Services Ltd
The Netherlands
United Kingdom
Anchoragelaan 50, 1118 LE
Luchthaven Schiphol
Anchoragelaan 50, 1118 LE
Luchthaven Schiphol
Box 197, SE 190-45,
Stockholm, Arlanda
Box 51, 230 32
Malmo, Sturup
251 Little Falls Drive,
Wilmington, Delaware 19808
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
251 Little Falls Drive,
Wilmington, Delaware 19808
Aeropuerto Internacional
Simon Bolivar, Nivel 1,
Sector 1, Maiquetia
251 Little Falls Drive,
Wilmington, Delaware 19808
Bougain Villas, 78 Sam
Mujoma Drive, Windhoek
Calle Nunez Morgado 6-Bj
Dc, 28036 Madrid
Calle Nunez Morgado 6-Bj
Dc, 28036 Madrid
Thistle House, 4 Burnaby
Street, Hamilton HM 11
5th Floor, Ebene Esplanade,
24 Cybercity, Ebene
5th Floor, Ebene Esplanade,
24 Cybercity, Ebene
Henri-Coanda International
Airport, Calea Bucurestilor
no 224E, Otopeni City, Ilfov
Carrera 7, No 71 – 21 Torre A,
Oficina 602, Bogota
Carrera 7, No 71 – 21 Torre A,
Oficina 602, Bogota
Anchoragelaan 50, 1118 LE
Luchthaven Schiphol
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Menzies Aviation Denmark
Lounges A/S
Denmark
Menzies Aviation
Deutschland Verwaltungs
GmbH
Menzies Aviation Finance
(USA) LLC
Menzies Aviation Fuelling
Panama, Inc.
Germany
United States
Panama
Menzies Aviation Group
(Philippines) B.V.
The Netherlands
Menzies Aviation
Handling Ltd
United Kingdom
Menzies Aviation Holdings
(Asia Pacific) Ltd
British Virgin Islands
Menzies Aviation Holdings
(Australia) Pty Ltd
Australia
Menzies Aviation Holdings
(Brasil) Ltda
Brazil
Menzies Aviation
Holdings Ltd
United Kingdom
Menzies Aviation Holdings
(Venezuela) S.A.
Venezuela
Menzies Aviation
Hyderabad (Passenger) Ltd
Mauritius
Menzies Aviation, Inc.
United States
Menzies Aviation
International Ltd
United Kingdom
Menzies Aviation Jerez UTE Spain
Menzies Aviation,
Copenhagen Airport,
Petersdalvej 13, 1st,
2770 Kastrup
Carl-Theodor-Strasse 6,
40213, Dusseldorf
251 Little Falls Drive,
Wilmington, Delaware 19808
c/o Patton, Moreno & Asvat,
Capital Plaza, 8th Floor,
Roberto Motta Ave., Costa
del Este, Panama City
Luna Arena,
Herikerbergweg 238, 1101 CM
Amsterdam
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Newhaven Corporate Services
(BVI) Limited, 3rd Floor, Omar
Hodge Building, Wickhams
Cay I, PO Box 362, Road
Town, Tortola
c/o Norton Rose Fulbright,
Level 21, 111 Eagle Street,
Brisbane QLD 4000
Avenida Nove de Julho no.
4865, 5 Andar, Conjunto 51,
Sala A, Sao Paulo
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Aeropuerto Internacional
Simon Bolivar, Nivel 1, Sector
1, Maiquetia
5th Floor, Ebene Esplanade,
24 Cybercity, Ebene
251 Little Falls Drive,
Wilmington, Delaware 19808
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Calle Nunez Morgado 6-Bj
Dc, 28036 Madrid
Direct or indirect holding
(100% unless otherwise stated)
Indirect
Indirect (75%)
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
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171
Financial StatementsShareholder InformationGovernance Reports Strategic Report Subsidiary, Joint Venture and Associate Undertakings continued
Subsidiary undertakings
Country of incorporation
Registered address
Direct or indirect holding
(100% unless otherwise stated)
Subsidiary undertakings
Country of incorporation
Registered address
Direct or indirect holding
(100% unless otherwise stated)
Menzies Aviation Leasing
(Mexico) S.A. de C.V.
Mexico
Menzies Aviation Murcia-
San Javier UTE
Spain
Menzies Aviation plc
United Kingdom
Menzies Aviation Puerto
Plata S.A.
Dominican Republic
Menzies Aviation Services
(Asia Pacific) LLC
United States
Menzies Aviation
Services Ltd
United Kingdom
Menzies Aviation Services SL Spain
Menzies Aviation Services
Venezuela S.A.
Venezuela
Menzies Aviation Spain SL
Spain
Menzies Aviation
St. Maarten B.V.
Sint Maarten
Menzies Aviation Washing
Denmark A/S
Denmark
Menzies Aviation Washing
Oslo AS
Norway
Menzies Cargo Ltd
United Kingdom
Menzies Cargo Services Ltd United Kingdom
Plaza Alamos Local 2, SM
311, MZ 26 Lote 03-01
Boulevard Luis Donaldo
Colosio C.P. 77560, Cancun,
Quintana Roo
Calle Nunez Morgado 6-Bj
Dc, 28036 Madrid
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
7 and 8 of General Gregorio
Luperón, International
Airport, Sosua, Puerto Plata
251 Little Falls Drive,
Wilmington, Delaware 19808
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Calle Nunez Morgado 6-Bj
Dc, 28036 Madrid
Aeropuerto Internacional
Simon Bolivar, Nivel 1,
Sector 1, Maiquetia
Calle Nunez Morgado 6-Bj
Dc, 28036 Madrid
P.O. Box 2003, Princess
Juliana Airport
Menzies Aviation,
Copenhagen Airport,
Petersdalvej 13, 1st, 2770
Kastrup
Sigrid Undsets plass,
Terminalen, 2060
Gardermoen, 0235
Ullensaker
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Menzies Client Solutions
(USA), Inc.
United States
251 Little Falls Drive,
Wilmington, Delaware 19808
Indirect
Menzies Client Solutions Ltd
United Kingdom
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Menzies Digital Ltd
United Kingdom
Menzies Distribution Ltd
United Kingdom
Menzies Express
Baggage Ltd
United Kingdom
Menzies Group Holdings Ltd
United Kingdom
Menzies Parcels Ltd
United Kingdom
Menzies
Security Services B.V.
The Netherlands
Menzies Select Ltd
United Kingdom
Menzies Services, Inc.
United States
Menzies Services Ltd
United Kingdom
Menzies Travel Media Ltd
United Kingdom
Menzies Wholesale Ltd
United Kingdom
Menzies World Cargo
(Rotterdam) B.V.
Menzies World Cargo
(Amsterdam) B.V.
The Netherlands
The Netherlands
Menzies World Cargo Ltd
United Kingdom
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 Lochside Avenue,
Edinburgh Park, Edinburgh
EH12 9DJ
Anchoragelaan 50, 1118 LE
Luchthaven Schiphol
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
251 Little Falls Drive,
Wilmington, Delaware 19808
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 Lochside Avenue,
Edinburgh Park, Edinburgh
EH12 9DJ
Brandenburghbaan 2b, 3045
AK Rotterdam
Anchoragelaan 50, 1118 LE
Luchthaven Schiphol
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Direct
Indirect
Indirect
Indirect
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173
Financial StatementsShareholder InformationGovernance Reports Strategic Report Subsidiary, Joint Venture and Associate Undertakings continued
Subsidiary undertakings
Country of incorporation
Registered address
Direct or indirect holding
(100% unless otherwise stated)
Subsidiary undertakings
Country of incorporation
Registered address
Direct or indirect holding
(100% unless otherwise stated)
Menzies Worldwide
Distribution Ltd
United Kingdom
Moose Aviation Services AB
Sweden
MPF Trustee Ltd
United Kingdom
Oban Express Parcel
Service Ltd
United Kingdom
Ogden Aviation Services
(Chile) Ltda
Chile
Ogden Cargo Ltd
United Kingdom
Orbital Mailing Ltd
United Kingdom
Orbital Mailing Services Ltd United Kingdom
Orbital Marketing Services
Group Ltd
United Kingdom
Orbital Print Ltd
United Kingdom
Perth Cargo Centre Pty Ltd Australia
PlaneBiz 2015 Ltd
New Zealand
PMD Healthcare Marketing
Services Ltd
United Kingdom
Princes Street (Jersey) Ltd
Jersey
Reed Aviation Spain SL
Spain
2 Lochside Avenue,
Edinburgh Park, Edinburgh
EH12 9DJ
Box 2, 190 45 Stockholm,
Arlanda
2 Lochside Avenue,
Edinburgh Park, Edinburgh
EH12 9DJ
2 Lochside Avenue,
Edinburgh Park, Edinburgh
EH12 9DJ
Est. Arturo Alessandri,
Amunategui 277,
3F, Santiago
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
c/o Norton Rose Fulbright,
Level 21, 111 Eagle Street,
Brisbane QLD 4000
George Bolt Memorial
Drive, Auckland Airport,
Auckland 2022
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
47 Esplanade,
St Helier JE1 0BD
Calle Nunez Morgado 6-Bj
Dc, 28036 Madrid
Direct
Rose Street Nominees Ltd
United Kingdom
Indirect
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect (60%)
Indirect
Indirect
Indirect
Simplicity Ground
Services, LLC
United States
Skycare Ltd
United Kingdom
Skyport Handling Ltd
United Kingdom
Skyport Handling
Services Ltd
United Kingdom
Skystar Airport Services
NZ Pty Ltd
New Zealand
Skystar Airport Services
Pty Ltd
Australia
Southampton Airport
Cargo Services Ltd
United Kingdom
Take One Media Ltd
United Kingdom
The London Cargo
Centre Ltd
United Kingdom
Thistle Couriers Ltd
United Kingdom
The Menzies Group Ltd
United Kingdom
The Network
(Field Marketing &
Promotions) Company Ltd
United Kingdom
Top Attractions Ltd
United Kingdom
2 Lochside Avenue,
Edinburgh Park, Edinburgh
EH12 9DJ
251 Little Falls Drive,
Wilmington, Delaware 19808
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
George Bolt Memorial
Drive, Auckland Airport,
Auckland 2022
c/o Norton Rose Fulbright,
Level 21, 111 Eagle Street,
Brisbane QLD 4000
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 Lochside Avenue,
Edinburgh Park, Edinburgh
EH12 9DJ
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
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175
Financial StatementsShareholder InformationGovernance Reports Strategic Report Subsidiary, Joint Venture and Associate Undertakings continued
Notice of Annual General Meeting
Indirect
Indirect
Holding
Indirect (49.6%)
Indirect (50%)
Indirect (40%)
Indirect (49%);
100% of preference
shares
Indirect (49%);
100% of preference
shares
Indirect (51%)
Subsidiary undertakings
Country of incorporation
Registered address
Direct or indirect holding
(100% unless otherwise stated)
Wyng Group Ltd
United Kingdom
Wyng Roadflight Ltd
United Kingdom
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
2 World Business Centre
Heathrow, Newall Road,
London Heathrow Airport,
Hounslow TW6 2SF
Joint venture and
associate undertakings
Aircraft Service
International Group
Holdings (Thailand) Ltd
Country of incorporation
Registered address
Thailand
AMI Asia HK Ltd
China
ASIG Tanking (Thailand)
Ltd
Thailand
Hyderabad Menzies Air
Cargo Private Ltd
India
Menzies Aviation Bobba
(Bangalore) Private Ltd
India
Menzies Bobba Ground
Handling Services
Private Ltd
India
Menzies Macau Airport
Services Ltd
China
Swissport Menzies
Handling PMR UTE
Worldwide Magazine
Distribution Ltd
Spain
United Kingdom
Zaankracht Uitzendbureau
Schiphol B.V.
The Netherlands
7th-9th & 16th Floor,
Bubhajit Building, 20 North
Sathorn Road, Silom,
Bangrak, Bangkok 10500
Room 1403, Causeway
Commercial Building, 3
Sugar Street, Causeway Bay,
Hong Kong
7th-9th & 16th Floor,
Bubhajit Building, 20 North
Sathorn Road, Silom,
Bangrak, Bangkok 10500
Air Cargo Terminal, Rajiv
Gandhi International
Airport, Shamshabad,
Hyderabad 500409
Plot No-C-04L, Cargo
Terminal-1, Kempegowda
International Airport,
Devanahalli, Bangalore
560300
H.No.6-3-345/1/2, Flat No.
102, Apurupa Classic, Road
No. 1, Banjara Hills,
Hyderabad 500034
Avenido de Aeroporto,
Edificio Airport Logistic
Business Centre, 1 andar,
sala 52, Taipa, Macau
Avenida Central 25, 28042
Madrid
Unit 1 Griffin Business Park,
Walmer Way, Birmingham
B37 7UX
Stationsplein 979, 1117 CE
Schiphol
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 independent financial adviser authorised under the
Financial Services and Markets Act 2000 or, if outside the United Kingdom, another appropriately authorised
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 of John Menzies plc (the “Company”) will be held in the
Waldorf Astoria Edinburgh – The Caledonian, Princes Street, Edinburgh, EH1 2AB on Friday 18 May 2018 at 2:00pm
(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 2017, the Strategic
Report and the Reports of the Directors and Auditor 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 2017.
3. Dividend
To declare a final dividend of 14.5 pence per ordinary share in the Company for the financial year ended
31 December 2017.
4–12. Election and re-election of directors
4. To elect Philipp Joeinig as a director of the Company.
5. To re-elect Paul Baines as a director of the Company.
6. To re-elect Forsyth Black as a director of the Company.
7. To re-elect Geoff Eaton as a director of the Company.
8. To re-elect David Garman as a director of the Company.
9. To re-elect John Geddes as a director of the Company.
Indirect (29%)
10. To re-elect Silla Maizey as a director of the Company.
Indirect (19.5%)
Indirect (50%)
Indirect (30%)
11. To re-elect Dermot Smurfit as a director of the Company.
12. To re-elect Giles Wilson as a director of the Company.
13. Re-appointment of auditor
To re-appoint Ernst & Young LLP as the Company’s auditor to hold office from the conclusion of this Meeting 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 of the Company to fix the remuneration of the Company’s auditor.
176
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177
Financial StatementsShareholder InformationGovernance Reports Strategic Report Notice of Annual General Meeting continued
15. Authority to allot shares
That the directors of the Company (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”:
17. Purchase of own preference shares by the 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 (“Preference Shares”), on such terms and in such manner as the directors of the
Company may from time to time determine, provided that:
a) otherwise than pursuant to paragraph (b) below, up to an aggregate nominal amount of £6,988,085 (such
a) the maximum number of Preference Shares hereby authorised to be purchased is 1,394,587, representing 100%
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 £6,988,085); and
of the issued Preference Share capital of the Company as at 30 March 2018;
b) the maximum price which may be paid for each such 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 Preference Share 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 Preference Share on
the trading venues where the market purchases by the Company pursuant to the authority conferred by this
Resolution 17 will be carried out),
and the minimum price which may be paid for any such Preference Share 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 renewed, varied or revoked) at the conclusion of
the next Annual General Meeting of the Company or, if earlier, at the close of business on 30 June 2019, except
in relation to the purchase of 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.
Approved and issued by the Board of Directors.
On behalf of the Board of Directors
John Geddes
Company Secretary & Director of Corporate Affairs
30 March 2018
b) comprising equity securities up to an aggregate nominal amount of £13,976,170 (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, at the close of business on 30 June 2019 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 hereby 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.
Special Resolutions
To consider, and if thought fit, pass Resolutions 16 and 17, each of which will be proposed as a special resolution:
16. Purchase of own ordinary shares by the 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 (“Ordinary Shares”), on such terms and in such manner as the directors of the Company may from
time to time determine, provided that:
a) the maximum number of Ordinary Shares hereby authorised to be purchased is 8,385,702, representing
approximately 10% of the issued ordinary share capital of the Company as at 30 March 2018;
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 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 on
the trading venues where the market purchases by the Company pursuant to the authority conferred by this
Resolution 16 will be carried out),
and the minimum price which may be paid for any such Ordinary Share 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 renewed, varied or revoked) at the conclusion of
the next Annual General Meeting of the Company or, if earlier, at the close of business on 30 June 2019 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.
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Explanatory Notes
The following information provides additional background information to several of the proposed Resolutions:
Resolution 2: Remuneration Report
In accordance with the provisions of the Companies Act 2006 (the “2006 Act”), the Company’s Report on
Directors’ Remuneration (excluding the Directors’ Remuneration Policy (the “Remuneration Policy”)) will be
put to an annual shareholder vote by ordinary resolution. This vote is advisory in nature and is in respect of the
overall remuneration package which is in place for directors of the Company (the “Directors”) – it is not specific
to individual levels of remuneration nor is the entitlement of a Director to remuneration conditional on the vote
being passed.
The Remuneration Policy is, however, subject to a binding shareholder vote by ordinary resolution at least every
three years. A new Remuneration Policy was proposed and approved at the Company’s annual general meeting
(“AGM”) in May 2017, further details of which are set out on pages 69 to 73 of the Annual Report and Accounts
2017. The Company cannot make a remuneration payment to a current or prospective Director or a payment for
loss of office to a current or past Director unless such payment is consistent with the Remuneration Policy or has
been approved by a resolution of the Company’s shareholders.
Resolutions 4-12: Election and re-election of Directors
Biographical details of the Directors to be elected or re-elected, as is the case, at this year’s AGM can be found on
pages 52 and 53 of the Annual Report and Accounts 2017. Philipp Joeinig, having been appointed as a Director
since last year’s AGM, will stand for election in accordance with the Company’s Articles of Association and, in
accordance with the principles of good governance set out in the UK Corporate Governance Code, all other
Directors who will continue following the AGM will seek re-election.
In proposing the election or re-election, as is the case, of the Directors, the Chairman has confirmed that, following
rigorous internal performance evaluations (described on page 57 of the Annual Report and Accounts 2017), each
individual continues to make an effective and valuable contribution to the Board and demonstrates commitment
to their role.
Resolution 15: Authority to allot shares
The Investment Management Association’s Share Capital Management Guidelines (the “IMA Guidelines”) permit,
and regard as routine, an authority to allot up to two-thirds of a company’s existing issued share capital. They
provide that any amount in excess of one-third of a company’s issued share capital should only be applied to fully
pre-emptive rights issues.
At the Company’s AGM in May 2017, the Directors were given authority to allot shares in the capital of the Company
up to an aggregate nominal amount of £13,941,418, representing approximately two-thirds of the Company’s issued
ordinary share capital as at 24 March 2017. To the extent not utilised, this authority is due to expire at the end of this
year’s AGM.
It is considered appropriate that the Directors again be granted authority to allot shares in the capital of the
Company up to a maximum nominal amount of £13,976,170, which amount represents approximately two-thirds
of the Company’s issued ordinary share capital as at 30 March 2018 and thus complies with the IMA Guidelines.
Accordingly, 27,952,340 ordinary shares of £0.25 each (“Ordinary Shares”), representing approximately one-third
of the Company’s issued ordinary share capital, may be allotted pursuant to a fully pre-emptive rights issue.
The authority sought by Resolution 15 will last until the conclusion of the next AGM of the Company or, if earlier,
the close of business on 30 June 2019. The Directors have no present intention of exercising this authority, although
they have confirmed that should the power authorised in Resolution 15 be utilised then all Directors would stand for
re-election at the next AGM (as they currently do in accordance with the principles of good governance).
As at 30 March 2018, the Company held 145,170 of its Ordinary Shares in Treasury.
Resolutions 16 and 17: Authority to buy-back shares
Special Resolutions 16 and 17 give the Company authority to make market purchases of its Ordinary Shares and 9%
cumulative preference shares (“Preference Shares”) in the market, as permitted by the 2006 Act. The authorities
set the minimum and maximum prices and limit the number of Ordinary Shares that can be purchased to 8,385,702
(representing approximately 10% of the issued Ordinary Shares as at 30 March 2018) and the number of Preference
Shares to 1,394,587 (representing 100% of the issued Preference Shares as at 30 March 2018).
The authorities, if granted, will expire at the conclusion of the next AGM of the Company or, if earlier, at the
close of business on 30 June 2019. The Directors have no present intention of exercising the authority to purchase
the 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 would only be exercised if
the Directors believed that to do so would result in an increase in earnings per share and would be in the interests
of the Company’s shareholders generally.
As at 30 March 2018, the Company held 145,170 Ordinary Shares in Treasury. The Company may make purchases
of its Ordinary Shares, taking into account the financial resources of the Company, the Company’s share price and
future funding opportunities. No voting rights attach to Ordinary Shares whilst held in Treasury nor are dividends
payable on them. The authority sought under Resolution 16 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 the Company’s shareholders
generally. Any purchase of Ordinary Shares would be by means of market purchase through the London
Stock Exchange.
Recommendation
The Directors consider that all the above Resolutions are in the best interests of the Company and its shareholders
as a whole and are most likely to promote the success of the Company. Accordingly, they unanimously recommend
that you vote in favour of all proposed Resolutions.
Notes to the Notice of AGM
1. Information about the AGM is available from the Company’s website found at www.johnmenziesplc.com.
2. As a shareholder, 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 shareholder 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 (“Computershare”) at The Pavilions, Bridgwater Road, Bristol BS99 6ZY so
as to arrive no later than 48 hours before the commencement of the AGM. No amendments to, or submission or
withdrawal of, any Form of Proxy shall be effective if lodged with Computershare less than 48 hours before the
time appointed for the holding of the AGM or any adjourned meeting.
4. It is possible for you to submit your proxy votes online. Further information on this service can be found on your
Form of Proxy or, if you receive communications 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 16 May 2018 or, if the AGM is adjourned, at 5:00pm on the day two days prior to the
adjourned meeting. Changes to entries on the Register of Members after that time shall be disregarded in
determining the rights of any shareholder to attend and vote at the AGM.
7. As a shareholder, you have the right to put questions at the AGM relating to the business being dealt with at
the AGM.
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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 shareholder 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 shareholder as to the exercise of voting rights.
9. The statement of the rights of shareholders 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
shareholders of the Company.
10. As at 30 March 2018, the issued ordinary share capital of the Company comprised 84,002,198 Ordinary Shares
and the Company held 145,170 of these Ordinary Shares 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 30 March 2018 is 83,857,028.
16. It is possible that, pursuant to requests made by shareholders of the Company under section 527 of the 2006
Act, 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 shareholder 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 2006 Act, 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 to publish on a website
under section 527 of the 2006 Act.
17. You may not use any electronic address provided either in this Notice of AGM or any related documents to
communicate with the Company for any purpose other than as expressly stated.
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.
Documents
The following documents will be available for inspection during usual business hours 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
at the registered office of the Company and at the offices of the Company’s solicitors, Dentons UKMEA LLP, at One
Fleet Street, London EC4M 7RA:
(a) copies of the Directors’ service contracts with the Company; and
(b) the terms of appointment of the Non-Executive Directors of the Company.
On the date of the AGM, these documents will be available for inspection at the venue of the AGM from 12 noon
until the conclusion of the AGM.
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 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 or any adjourned meeting. 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
Euroclear UK & Ireland Limited 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 their 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.
14. The Company may treat as invalid a CREST 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, shareholders may require the Company to give, to shareholders 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 the 2006 Act, shareholders 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.
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Internet
The Company operates a website which can be found at www. johnmenziesplc.com. This site is regularly updated
to provide you with information about the Company and its Operating Divisions. In particular, all of the Company’s
press releases and announcements can be found on this site together with copies of its Annual Reports and Accounts.
John Menzies plc Investor Relations App
The Company has an Investor Relations App for iPhone and iPad users. The App provides users with the Company’s
latest share price, regulatory and business news, annual/interim reports and presentations. The App can be downloaded
via the Company’s website or by visiting your App store.
Share Register and Shareholder Enquiries
Any enquiry concerning your shareholding should be directed to the Company’s Registrar, Computershare Investor
Services PLC (“Computershare”), and should clearly state your name, address and Shareholder Reference Number
(“SRN”). The contact details are as follows:
Telephone:
+44 (0) 370 703 6303
Web:
Email:
Write:
www.investorcentre.co.uk
www.investorcentre.co.uk/contactus
The John Menzies plc Registrar, Computershare Investor Services PLC, The Pavilions,
Bridgwater Road, Bristol BS99 6ZZ
Computershare should be notified promptly in writing 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 SRN which you can find
on your share certificate or dividend confirmation.
Share Price
The current price of the Company’s ordinary shares of £0.25 each (the “Ordinary Shares”) can be viewed on the
Company’s website at 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
shares in the Company. To use this service you should call the following telephone number and quote reference
‘John Menzies plc dial and deal’:
Telephone:
+44 (0) 131 240 0414
Commission for this share dealing service will be at a rate of 1% and will be subject to a minimum fee of £25.
Additionally, UK share purchases will be subject to a 0.5% stamp duty charge whilst a levy of £1.00 will be imposed
by the Panel for Takeovers and Mergers for single trades in excess of £10,000.
You will be required to pay for any shares purchased by debit card at the time of the transaction. You must
therefore ensure you have sufficient cleared funds available in your debit card account to pay for the shares in full.
ShareGift
If you only have a small number of shares which may be uneconomic to sell, you may wish to consider donating
them to the charity ShareGift (Registered Charity No. 1052686) which specialises in accepting such shares as
donations. There are no implications for UK Capital Gains Tax purposes (no gain or loss) on gifts of shares to
charity and it is also possible to obtain income tax relief. If you wish to do this then the details are as follows:
Telephone:
+44 (0) 20 7930 3737
Web:
Email:
www.sharegift.org
help@sharegift.org
Analysis of Shareholdings
At 31 December 2017
Shareholding (Ordinary Shares)
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
Over 100,000
Total
Number of
shareholders
Percentage of
shareholders
Total number of
Ordinary Shares
held
Percentage of
Ordinary Shares
held
2,930
461
63
119
78
3,651
80.24
12.63
1.73
3.26
2.14
678,942
962,042
467,050
4,369,136
77,478,781
0.80
1.15
0.56
5.20
92.29
100.00
83,955,951
100.00
Payment of Dividends
It is in the interests of both the Company and its shareholders for dividends to be paid directly into bank or building
society accounts. Any shareholder who wishes to receive dividends in this way should contact Computershare to
obtain a dividend mandate form.
9% Cumulative Preference Shares
Dividends will be paid on 29 March 2018 and 1 October 2018.
Ordinary Shares
A final dividend of 14.5p per Ordinary Share was proposed by the Directors on 13 March 2018 and, subject to
shareholder approval, will be paid on 2 July 2018 to shareholders on the Company’s Register of Members as at the
close of business on 25 May 2018.
Any interim dividends for the financial year ended 31 December 2018 will be paid on 16 November 2018 to shareholders
on the Company’s Register of Members as at close of business on 19 October 2018.
Investor Relations
For any Investor Relations enquiries, please contact the Company by one of the following means:
Telephone:
+44 (0) 131 225 8555
Email:
Write:
investor.relations@johnmenziesplc.com
John Menzies plc, 2 Lochside Avenue, Edinburgh Park, Edinburgh EH12 9DJ, marked
for the attention of John Geddes, Company Secretary & Director of Corporate Affairs
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Corporate Calendar
(Provisional dates)
13 March 2018
29 March 2018
5 April 2018
18 May 2018
25 May 2018
2 July 2018
14 August 2018
1 October 2018
Preliminary announcement of Annual Results
Payment of dividend on Preference Shares
Annual Report and Accounts and Notice of AGM released
AGM
Record date for final dividend on Ordinary Shares
Payment of final dividend on Ordinary Shares
Announcement of Interim Results
Payment of dividend on Preference Shares
19 October 2018
Record date for interim dividend on Ordinary Shares
16 November 2018
Payment of interim dividend on Ordinary Shares
General Information continued
Principal Advisers
Auditors
Ernst & Young LLP
3rd Floor, 144 Morrison Street
Edinburgh EH3 8EB
Corporate advisers and joint broker
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Row
London EC4M 7LT
Joint broker
Shore Capital Stockbrokers Limited
Bond Street House
14 Clifford Street
London W1S 4JU
Principal business address
John Menzies plc
2 Lochside Avenue
Edinburgh Park
Edinburgh EH12 9DJ
Telephone:
Email:
+44 (0) 131 225 8555
info@johnmenziesplc.com
Menzies Aviation
2 Lochside Avenue
Edinburgh Park
Edinburgh EH12 9DJ
Telephone:
+44 (0) 131 467 8070
Menzies Distribution
2 Lochside Avenue
Edinburgh Park
Edinburgh EH12 9DJ
Telephone:
+44 (0) 131 467 8070
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Notes
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John Menzies plc Annual Report and Accounts 2017
Shareholder InformationFinancial StatementsGovernance Reports Strategic Report JOHN MENZIES PLC
Registered office:
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