TIDMMNZS
RNS Number : 9664G
Menzies(John) PLC
10 March 2015
10 March 2015
John Menzies plc
Final Results for the year ended 31 December 2014
Financial Summary
2014 2014 2013
Reported Constant
currency([6])
Turnover([1]) GBP1,999.9m GBP2,050.9m GBP2,000.3m
Underlying operating profit([2]) GBP51.0m GBP54.5m GBP60.1m
Underlying profit before taxation([3]) GBP44.6m GBP48.1m GBP53.1m
Profit before tax GBP25.7m -- GBP42.1m
Operating cash flow([4]) GBP74.0m -- GBP68.3m
Underlying earnings per share([5]) 49.2p -- 65.6p
Earnings per share 22.7p -- 50.1p
Dividend 16.2p -- 26.5p
Overview
-- Group underlying operating profit down 9% in constant
currency - in line with revised expectations
o Distribution continues to be resilient and highly cash
generative
o Aviation turnover growth of 9% at constant currency -
profitability held back by start-up costs, operational and
integration issues
-- Strong financial position
o Operating cash flow of GBP74.0m
o Net debt of GBP110.9m
-- Strategic refresh
o Distribution reshape in 2014 with clear business streams
o Review of Aviation business
-- Highlights attractive market growth dynamics
-- Confirms strong positioning
-- New approach focused on five strategic priorities, with a
renewed emphasis on operational excellence
-- Dividend rebased to enable investment in growth opportunities
Jeremy Stafford, Chief Executive of John Menzies plc said:
"It has been a mixed year for the Group. Distribution has been
resilient and we are pleased with the performance. Top line growth
in Aviation has been strong, however earnings have been impacted by
increased start-up costs and previously announced operational
difficulties at London Heathrow. Although these issues are now
largely resolved, this will impact the first half of 2015.
"After the challenges of 2014, our focus for 2015 will be on
operational excellence and targeted growth. Our strategic refresh
that we announced in November is now complete. While we continue to
work on our detailed implementation plans, we now have a clear
direction for the Group.
"As we move into 2015, we have excellent prospects in growing
markets. There is much to do as we prepare for the next phase of
the Group's development, and we do so with confidence."
Notes
------ --------------------------------------------------------------------
1 Turnover is Group revenue plus the Group's share of revenue
from joint ventures and associates.
------ --------------------------------------------------------------------
2 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.
------ --------------------------------------------------------------------
3 Underlying operating profit before taxation is underlying profit
less net finance charges.
------ --------------------------------------------------------------------
4 Operating cash flow is operating profit adjusted for depreciation,
amortisation, income and dividends from joint ventures and
associates, pension payments and movements in working capital
and provisions.
------ --------------------------------------------------------------------
5 Underlying earnings per share is profit after taxation and
non-controlling interest but before intangible amortisation
and impairment and exceptional items, divided by the weighted
average number of ordinary shares in issue.
------ --------------------------------------------------------------------
6 Performance at constant currency has been calculated by translating
non-Sterling earnings for the year to 31 December 2014 into
Sterling at the exchange rates used for the same period in
2013.
------ --------------------------------------------------------------------
For further information:
John Menzies plc
Jeremy Stafford, Chief Executive 0131 459 8018
Paula Bell, Chief Financial
Officer 0131 459 8018
John Geddes, Group Company Secretary 0131 459 8180
FTI Consulting
Jonathon Brill/Alex Beagley 0203 727 1000
Notes to Editors
1. John Menzies plc is one of Scotland's largest companies. The
Group has two operating divisions, Menzies Aviation and Menzies
Distribution. Both divisions operate in distinct B2B sectors where
success depends on providing an efficient, high quality,
time-critical service to their customers and partners. The company
was established in 1833 and its head office is in Edinburgh,
Scotland. Today the company is an international business with
operations worldwide.
2. Menzies Aviation is a leading global provider of passenger,
ramp and cargo services. The Menzies Aviation business is highly
successful, operating at 149 airports in 31 countries, with annual
revenue in excess of GBP700m and supported by a team of over 20,000
highly-trained people. Menzies Aviation serves over 500 customers,
handling over 1 million flights and 1.5 million tonnes of cargo per
annum. Customers include easyJet, Cathay Pacific, British Airways,
Alaska Airlines, Lufthansa, Thai Airways and many others. Best in
class safety and security is the division's #1 priority each day,
every day.
3. Menzies Distribution is a leading provider of added-value
distribution and marketing services to the newspaper and magazine
supply chain in the UK and Ireland. The division handles around 5
million newspapers and 2 million magazines (covering some 3,000
magazine titles) each day, with deliveries to around 25,000
customers. The division employs 3,600 people at 36 sites throughout
the UK and Ireland and is a strongly cash generative business, with
around 45% of the newspaper and magazine wholesale distribution
market in the UK. It has a track record of investment in innovation
and customer service delivery.
4. Further information on John Menzies plc can be found at:
www.johnmenziesplc.com, www.menziesaviation.comand
www.menziesdistribution.com
Group Performance Overview
2014 has proved to be a mixed year. The Group's turnover was
GBP1,999.9m (2013: GBP2,000.3m) up 3% on a constant currency basis.
Underlying profit before tax fell to GBP44.6m (2013: GBP53.1m)
largely as a result of the decline in profitability in the Aviation
division and the adverse impact of currency of GBP3.5m. The decline
in underlying profit before tax and an increased effective global
tax rate had a consequential impact on our underlying earnings per
share which decreased to 49.2p (2013: 65.6p). Profit before tax was
GBP25.7m (2013: GBP42.1m).
Menzies Distribution
Our Distribution business delivered a robust result in 2014 and
exceeded our expectations. Newsprint and magazine declines were
offset by a number of positive actions maintaining 2013 profit
levels into 2014 at GBP24.0m (2013: GBP24.3m). The result was
boosted by slightly better than expected sales volume in the core
category areas, a strong performance by Orbital Marketing Services
and ancillary sales related to the FIFA World Cup. Cost saving
initiatives again delivered as we innovated and continued to
rationalise our branch network. This programme drove a further
GBP3.4m of cost savings in the year.
Overall sales of newspapers and magazines were down 3% on an
absolute and like for like basis. During the year newspaper sales
benefited from a number of cover price increases in H1. Newspaper
sales value on a like for like basis was down 1% with magazines
down 6%.
We are part way though our UK distribution network
rationalisation programme in order to best serve our customers and
match capacity to declining volume. During 2014 we reduced our main
hubs from 10 to 8 and created a magazine super-hub in Maidstone.
The programme will continue into 2015 addressing further planned
initiatives.
The Orbital Marketing Services business acquired in late
November 2012 outperformed and we expect to pay a contractual earn
out during 2015. The travel brochure distribution business is
largely integrated into the core distribution network and the
e-fulfilment business has grown with new contracts signed in the
charity and cosmetics sectors.
Our retail consultancy business, FORE, had a strong year landing
a significant contract to place newspaper product into over 500
Aldi stores. This contract provided FORE with the category
management business while also adding newspaper volume to the core
business through the delivery of product in our territories.
Menzies Aviation
Turnover in the Aviation division grew 2%, 9% in constant
currency, reflecting the ongoing strong market growth dynamics that
persist. We continued to grow our footprint during the year
demonstrating our ability to win new contracts, particularly by
operating ground handling hubs for airlines. Important large ground
handling contract wins have been secured with key clients as a new
wave of outsourcing gathers momentum particularly in the US. Cargo
handling again performed strongly following increased tonnage
through existing locations and new contract wins in Australia and
Canada.
Ground handling turns were up 15% in the year reflecting the
prior year acquisitions in Australia and Colombia together with the
new hub operations. Cargo handling tonnes were up 10% following
growth from existing customers in Continental Europe, contract wins
in Australia and new operations at four locations across
Canada.
Start-up costs to support new contracts were expensed and were
GBP1.9m higher than the prior year. At constant currency underlying
operating profit was GBP33.7m (2013: GBP37.8m) reflecting both the
investment in our new contract wins and the impact of the
operational challenges. The division's strict working capital
management has been a highlight driving good cash flows in the
year.
Unprecedented operational challenges were experienced in the
year as we communicated to shareholders in our November trading
update. At London Heathrow increased costs were incurred to protect
service levels during disruption while the airport closed a
terminal and carriers were relocated. The change of terminal caused
an amount of contract churn and margin erosion, coupled with a new
market entrant and very competitive contract negotiations.
Operational matters are now largely resolved and new contracts have
been secured with American Airlines and Royal Jordanian Airlines.
During 2015 we will re-organise our management focus by terminal,
driving density and synergies where possible and re-structuring
accordingly.
During the year, significant opportunities emerged within the
North American ground handling market. The renegotiation of terms
with regional flying partners and within labour contracts following
Chapter 11 restructuring, and the subsequent consolidation of US
domestic airlines, increased the pace and scale of outsourcing.
Significant contract gains were made during the year, including
regional hub operations for Delta Air Lines in Detroit and United
Airlines in Denver. We also strengthened our footprint with low
cost carriers winning a contract to handle WestJet Airlines at one
of their main bases in Toronto, Canada. These three contracts alone
add some 200,000 turns per annum and Denver is now our largest
ground handling operation by aircraft turns.
Since the year end we have secured a seven year contract with
Norwegian Airshuttle to operate their hub operation in Oslo
together with important bases in Gothenburg and Copenhagen.
Norwegian Airshuttle is one of Europe's leading low cost airlines
and this significant win deepens our existing relationship.
Tempering the contract gains were a number of losses including
SA Express, our anchor customer in South Africa, British Airways
who transferred flights from London Heathrow Terminal 1 to their
in-house operation at Terminal 5, and contracts lost in Colombia
reflecting the difficult integration of the prior year
acquisition.
Overall, we were net winners of 60 contracts that will
contribute an additional GBP76m of revenue per annum. Contract
renewals included some 122 contracts securing GBP164m of revenue
primarily on three year terms. In particular, we were pleased to
renew our existing contract with easyJet at London Gatwick for five
years where we will handle some 60 base aircraft and 59,000 turns
per annum at their main base.
Looking ahead we see excellent growth opportunities for aviation
services, particularly in North America where the outsourcing trend
by traditional airlines is gaining real traction. We continue to
seek to expand but will do so in a logical and structured manner,
playing to our strengths and adding more products to our offering
where the local market has capacity.
Financial Overview
Finance Costs
The net finance charge in the year was GBP7.4m (2013: GBP8.2m).
The reduction largely reflected the impact of lower interest rates
on the Group's defined benefit pension scheme liabilities.
Exceptional and Other Items
Planned costs of the Distribution network rationalisation were
GBP3.7m. Following the acquisition of Orbital Marketing Services in
2012, we are pleased that performance was ahead of our expectations
and as a result GBP2.3m of additional deferred consideration
becomes payable in the first half of 2015. In Colombia, we have
lost a number of contracts and these are unlikely to be replaced in
the foreseeable future and as a result intangible assets have been
impaired by a net GBP3.2m. Non-recurring items total GBP9.2m in the
year. After exceptional costs and other items profit before tax was
GBP25.7m (2013: GBP42.1m).
Taxation and Earnings per Share
As a multinational business we are liable to taxation in
multiple jurisdictions around the world. The Group's tax charge for
the year was GBP11.7m (2013: GBP11.7m). Tax paid totalled GBP8.2m
(2013: GBP10.1m). As previously announced the underlying tax rate
was 32% (2013: 25%) reflecting the rising proportion of profits in
higher tax rate jurisdictions.
The decline in underlying profit before tax and an increased
effective global tax rate had a consequential impact on our
underlying earnings per share which decreased to 49.2p (2013:
65.6p).
Defined Benefit Pension Scheme
As at 31 December 2014, the scheme showed a deficit of GBP59.0m
(2013: GBP45.8m) an increase of GBP13.2m, largely reflecting a
reduction in the discount rate applied to the scheme liabilities,
partly offset by increased returns on assets and ongoing increased
employer contributions. The Trustee's next fund actuarial valuation
is due at 31 March 2015. As part of this process the Trustee and
the Company will agree a long-term funding strategy.
Cash Flow and Investment
During the year ended 31 December 2014, despite reduced earnings
the Group delivered increased operating cash flow of GBP74.0m
(2013: GBP68.3m). The main focus has been to reduce working capital
against a backdrop of increasing revenue. After capital expenditure
to support our contract wins, free cash flow was GBP30.0m (2013:
GBP32.6m). Investment in capital expenditure and acquired
businesses totalled GBP33.3m (2013: GBP33.5m) and included GBP8.1m
investment for the hub wins in North America.
Treasury
The Group continues to be on a strong financial footing. We have
a robust Balance Sheet built from strong operating cash flows
across the divisions and our total debt to EBITDA ratio of 1.96
times at 31 December 2014 is well within our covenant level of 3.0
times. Our interest cover is 10.5 times.
At 31 December 2014, the Group's net debt was GBP110.9m (2013:
GBP103.5m) which was comfortably below the available committed
lending facilities of GBP240.2m. GBP55.0m of facilities are due for
renewal in January 2016 and their refinance will take place during
the second half of 2015; the balance is not due for renewal before
2017.
The majority of the Aviation division's stations are outside the
UK and operate in currencies other than Sterling. The Group
attempts to minimise the volatility of transactional foreign
exchange as far as possible through the use of foreign exchange
forward contracts. The translation of profits from overseas trading
entities is not hedged and as a result the movement of exchange
rates directly affect the Group's reported results, which in 2014
was GBP3.5m adverse (2013: GBP0.7m). The impact was particularly as
a result of Sterling strengthening against the Australian dollar,
South African rand, Czech koruna, Indian rupee, US dollar and the
euro.
Strategic Refresh
As announced at our trading update in November, the Board asked
management to refresh the strategic focus of the Group and this is
now complete. Whilst we continue to work on our plans, we now have
a clear direction for the Group. We will focus on growing the Group
but will do so with greater discipline and precision.
In the Distribution market, we have defined five core business
streams in which we will operate and are now focused on identifying
areas where we can broaden our offering, and become a participant
in the growing e-commerce logistics market. Our work continues in
this area, and we will provide a fuller update at the time of our
Interim Results in August 2015.
Within the Aviation sector, we will focus on five key
priorities: deepening our relationships with key customers; winning
ground handling contracts at crucial hub and base airports, already
an area of strength for our business; growing complementary
revenues, such as those from de-icing and lounge services, which
complement our established businesses; re-focusing geographical
investments to channel our investment into only the most promising
markets; and expanding our presence in those emerging markets which
are projected to hold a greater share of air traffic in the future.
Looking at each of these in turn:
Deepening key customer relationships
The division's key customers fall into three main groupings.
Firstly, Low Cost Carriers (LCCs) and regional airlines, where we
are growing market share, and Menzies Aviation is the world's
leading LCC ground handler. We achieve this position through our
dedicated focus on service while adding value to our customers.
Secondly, the traditional carriers where we are partnering with
these customers to optimise global service levels while achieving
cost synergies for our customers. Thirdly, many Asian and Middle
Eastern carriers are fast growing and we are working with them to
help roll out their services.
Pursue regional hubs and bases
Having experienced significant growth in the outsourcing of LCC
bases over the last 10 years, management believes that the next
phase of growth in ground handling outsourcing will involve the
network carriers and their regional operations, led by North
American-based carriers. We have seen this happening already with
our contract wins with Delta Air Lines in Detroit and United
Airlines in Denver. The Detroit contract, for example, is first
generation outsourcing and is a key regional jet hub that feeds
Delta's mainline operations. Importantly, there was minimal capital
investment required as we are using airline-owned equipment.
The North American network carriers typically self-handle over
three million turns annually, with approximately one million of
these at regional hubs. This provides a significant opportunity for
growth in outsourcing at regional hubs and Menzies is well placed,
through its Simplicity USA brand, to take advantage of the growth
in this segment.
Our growth is not limited to North America. We won the contract
for Norwegian Airshuttle at its international hub at Gardermoen
Airport in Oslo. In Latin America, we have for several years
provided ground handling services to VivaAerobus, a significant LCC
in the region. Their main base is in Monterrey and comprises 33,000
turns per annum. This relationship has subsequently been extended
to over 20 airports in Mexico.
Accelerate complementary services offering
The division's historic approach to cross-selling complementary
services has been opportunistic and therefore our coverage is
thinly spread across our markets. We believe that there are
significant opportunities to deepen our offering in this area,
including serviced lounges, de-icing and aircraft cleaning. The
rationale for our airline customers is that it enables them to
contract with fewer suppliers, thereby growing our relationships
with them while strengthening retention. These activities are
typically higher margin for us and we will appraise and target
existing airports and markets in the initial phase.
Re-focus geographical investment
Our investment programme will focus on where we see the most
significant opportunities for the division in the medium term. The
acceleration of outsourcing in established markets such as North
America provides us with excellent hub and base opportunities.
Expand in emerging markets
There are three main areas of focus in emerging markets. Eastern
Europe is an exciting market with growing passenger numbers. The
Middle East is an important area of focus with strong base airlines
continuing to grow their footprint. South East Asia is a sizeable
opportunity for growth with a large number of hub and base
opportunities. All of these regions are being continually assessed
to ensure that we pursue the right opportunities, at the right
price, in the right markets.
To support all of these initiatives we will evolve our business
tools and systems while continuing to invest in our people. We have
a robust Balance Sheet to build from and we have today announced a
re-basing of our dividend to contribute to our investment in
growth.
Our future success will depend on maximising the use of our
resources, ensuring that we generate the greatest possible value
from our people and infrastructure, and uniting as a Group to drive
us towards our goals.
Dividend
The Board has considered very carefully the decision to rebase
the dividend. There are a number of factors that have come together
to lead to this decision.
In addition to our 2014 trading performance we have increased
demands on our cash going forward including the final payment of
GBP10.5m for the Orbital acquisition. In addition in the Aviation
division we are seeing considerable global opportunity, in
particular with the potential in the USA, for both organic and
acquisitive investment into the business.
While at the same time as maintaining flexibility, we want to
continue to operate with a conservative balance sheet, which is
important to our customers, the Company and our shareholders.
Accordingly, the Board has recommended a final dividend of 8.1p
per share which is payable on 3 July 2015 to all shareholders on
the register at 29 May 2015. The total (paid and proposed) dividend
for the year is 16.2p per ordinary share.
Outlook
Both operating divisions are delivering to plan. Due to the
contract churn and operational issues in 2014 the 2015 results will
be more than usually weighted to the second half.
As we move into 2015, we have excellent prospects in growing
markets. Some foreign exchange volatility persists and the outcome
of the Spanish ground handling tenders has been delayed but as we
move forward there is much to do as we prepare for the next phase
of the Group's development, and we do so with confidence.
GROUP INCOME STATEMENT
for the year ended 31 December 2014 (year ended 31 December
2013)
Before
exceptional Exceptional
and other and other
items items 2014
Notes GBPm GBPm GBPm
------------------------------------------------------------------- ------ ------------- ------------- -----------
Revenue 2 1,902.9 - 1,902.9
Net operating costs (1,861.0) (16.4) (1,877.4)
------------------------------------------------------------------- ------ ------------- ------------- -----------
Operating profit 41.9 (16.4) 25.5
Share of post-tax results of joint ventures and associates 9.1 (1.5) 7.6
------------------------------------------------------------------- ------ ------------- ------------- -----------
Operating profit after joint ventures and associates 2 51.0 (17.9) 33.1
Analysed as:
-----------
Underlying operating profit* 51.0 - 51.0
Non-recurring items - rationalisation and acquisition related
costs 4(a) - (6.0) (6.0)
Non-recurring items - impairment charges 4(c) - (3.2) (3.2)
Contract amortisation 4(c) - (7.2) (7.2)
Share of interest on joint ventures and associates - 0.5 0.5
Share of tax on joint ventures and associates - (2.0) (2.0)
------------------------------------------------------------------- ------ ------------- ------------- -----------
Operating profit after joint ventures and associates 51.0 (17.9) 33.1
------------------------------------------------------------------- ------ ------------- ------------- -----------
Finance income 5 0.7 - 0.7
Finance charges 5 (5.4) (1.0) (6.4)
Other finance charge - pensions 3 (1.7) - (1.7)
------------------------------------------------------------------- ------ ------------- ------------- -----------
Profit before taxation 44.6 (18.9) 25.7
Taxation 6 (14.4) 2.7 (11.7)
Profit for the year 30.2 (16.2) 14.0
Attributable to equity shareholders 30.1 (16.2) 13.9
Attributable to non-controlling interests 0.1 - 0.1
------------------------------------------------------------------- ------ ------------- ------------- -----------
30.2 (16.2) 14.0
------------------------------------------------------------------- ------ ------------- ------------- -----------
Earnings per ordinary share 8
Basic 49.2p (26.5)p 22.7p
Diluted 49.0p (26.4)p 22.6p
Before
exceptional Exceptional
and other and other
items items 2013
Notes GBPm GBPm GBPm
------------------------------------------------------------ ------ ------------- ------------- -----------
Revenue 2 1,905.4 - 1,905.4
Net operating costs (1,852.7) (7.3) (1,860.0)
------------------------------------------------------------ ------ ------------- ------------- -----------
Operating profit 52.7 (7.3) 45.4
Share of post-tax results of joint ventures and associates 7.4 (2.5) 4.9
------------------------------------------------------------ ------ ------------- ------------- -----------
Operating profit after joint ventures and associates 2 60.1 (9.8) 50.3
Analysed as:
-----------
Underlying operating profit* 60.1 - 60.1
Non-recurring items - acquisition related costs 4(a) - (0.7) (0.7)
Non-recurring items - impairment charges 4(c) - (1.4) (1.4)
Contract amortisation 4(c) - (6.6) (6.6)
Share of interest on joint ventures and associates - 0.5 0.5
Share of tax on joint ventures and associates - (1.6) (1.6)
------------------------------------------------------------ ------ ------------- ------------- -----------
Operating profit after joint ventures and associates 60.1 (9.8) 50.3
------------------------------------------------------------ ------ ------------- ------------- -----------
Finance income 5 0.7 - 0.7
Finance charges 5 (5.3) (1.2) (6.5)
Other finance charge - pensions 3 (2.4) - (2.4)
------------------------------------------------------------ ------ ------------- ------------- -----------
Profit before taxation 53.1 (11.0) 42.1
Taxation 6 (13.3) 1.6 (11.7)
Profit for the year 39.8 (9.4) 30.4
Attributable to equity shareholders 39.8 (9.4) 30.4
------------------------------------------------------------ ------ ------------- ------------- -----------
Earnings per ordinary share 8
Basic 65.6p (15.5)p 50.1p
Diluted 65.4p (15.4)p 50.0p
* 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.
GROUP STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2014 (year ended 31 December
2013)
2014 2013
Notes GBPm GBPm
--------------------------------------------------------------------- ------ ------- -------
Profit for the year 14.0 30.4
--------------------------------------------------------------------- ------ ------- -------
Items that will not be reclassified subsequently to profit or loss:
Actuarial (loss)/gain on defined benefit pensions 3 (23.5) 9.4
Actuarial (loss)/gain on unfunded pension arrangements (0.1) 0.2
Income tax effect 4.7 (2.2)
Impact of rate change on deferred tax - (1.4)
Items that may be reclassified subsequently to profit or loss:
Movement on cash flow hedges 12 - (0.2)
Movement on net investment hedges 12 (3.7) 3.5
Income tax effect 0.8 (0.8)
Exchange loss on translation of foreign operations (0.5) (10.7)
--------------------------------------------------------------------- ------ ------- -------
Other comprehensive (loss)/income for the year (net of tax) (22.3) (2.2)
--------------------------------------------------------------------- ------ ------- -------
Total comprehensive (loss)/income for the year (8.3) 28.2
--------------------------------------------------------------------- ------ ------- -------
Attributable to equity shareholders (8.4) 28.2
Attributable to non-controlling interests 0.1 -
--------------------------------------------------------------------- ------ ------- -------
(8.3) 28.2
--------------------------------------------------------------------- ------ ------- -------
GROUP AND COMPANY BALANCE SHEETS
as at 31 December 2014 (31 December 2013)
Group Company
------------------ ---------------------
2014 2013 2014 2013
Notes GBPm GBPm GBPm GBPm
---------------------------------- ------ --- -------- -------- -------- -----------
ASSETS
Non-current assets
Intangible assets 9 116.1 126.8 - -
Property, plant and
equipment 120.1 114.3 25.1 25.8
Investments accounted
using the equity method 27.8 26.3 - -
Investment in subsidiaries - - 290.5 290.1
Deferred tax assets 12.0 9.2 6.5 3.9
276.0 276.6 322.1 319.8
---------------------------------- ------ --- -------- -------- -------- -----------
Current assets
Inventories 12.9 14.5 - -
Trade and other receivables 186.6 183.5 271.6 231.2
Derivative financial
assets 12 1.9 3.9 1.9 3.9
Cash and cash equivalents 32.8 33.8 1.0 0.9
---------------------------------- ------ --- -------- -------- -------- -----------
234.2 235.7 274.5 236.0
---------------------------------- ------ --- -------- -------- -------- -----------
LIABILITIES
Current liabilities
Borrowings 12 (3.3) (49.5) (3.2) (48.6)
Derivative financial
liabilities 12 (2.0) (0.3) (2.0) (0.3)
Trade and other payables (215.8) (202.2) (311.0) (287.7)
Current income tax
liabilities (9.0) (8.2) - -
Provisions (3.8) (3.5) - -
---------------------------------- ------ --- -------- -------- -------- -----------
(233.9) (263.7) (316.2) (336.6)
---------------------------------- ------ --- -------- -------- -------- -----------
Net current assets/(liabilities) 0.3 (28.0) (41.7) (100.6)
---------------------------------- ------ --- -------- -------- -------- -----------
Total assets less
current
liabilities 276.3 248.6 280.4 219.2
---------------------------------- ------ --- -------- -------- -------- -----------
Non-current liabilities
Borrowings 12 (140.3) (91.4) (140.2) (91.4)
Other payables (4.0) (10.5) (4.9) (5.0)
Provisions (3.3) (4.6) - -
Retirement benefit
obligation 3 (59.0) (45.8) (59.0) (45.8)
(206.6) (152.3) (204.1) (142.2)
---------------------------------- ------ --- -------- -------- -------- -----------
Net assets 69.7 96.3 76.3 77.0
---------------------------------- ------ --- -------- -------- -------- -----------
Shareholders' equity
Ordinary shares 15.4 15.4 15.4 15.4
Share premium account 20.3 20.2 20.3 20.2
Treasury shares (2.0) (3.3) (2.0) (3.3)
Other reserves (16.8) (13.4) (0.8) (0.8)
Retained earnings 29.5 55.3 21.8 23.9
Capital redemption
reserve 21.6 21.6 21.6 21.6
---------------------------------- ------ --- -------- -------- -------- -----------
Total shareholders'
equity 68.0 95.8 76.3 77.0
Non-controlling interest
in equity 1.7 0.5 - -
---------------------------------- ------ --- -------- -------- -------- -----------
Total equity 69.7 96.3 76.3 77.0
---------------------------------- ------ --- -------- -------- -------- -----------
The accounts were approved by the Board of Directors on 9 March
2015 and signed on its behalf by:
Jeremy Stafford Paula Bell
Chief Executive Officer Chief Financial Officer
GROUP AND COMPANY STATEMENT OF CHANGES IN EQUITY
as at 31 December 2014 (31 December 2013)
Share Cash Capital Total Non-controlling
Ordinary premium Treasury flow Translation Retained redemption shareholders' equity Total
shares account shares hedge reserve earnings reserve equity equity
reserve
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------- -------- ---------- -------- ------------- ---------- ----------- -------------- ---------------- --------
Group
At 31 December
2013 15.4 20.2 (3.3) (0.8) (12.6) 55.3 21.6 95.8 0.5 96.3
Profit for the
year - - - - - 13.9 - 13.9 0.1 14.0
Other
comprehensive
loss - - - - (3.4) (18.9) - (22.3) - (22.3)
--------------- ---------- -------- ---------- -------- ------------- ---------- ----------- -------------- ---------------- --------
Total
comprehensive
(loss)/income - - - - (3.4) (5.0) - (8.4) 0.1 (8.3)
--------------- ---------- -------- ---------- -------- ------------- ---------- ----------- -------------- ---------------- --------
New share
capital
issued - 0.1 - - - - - 0.1 - 0.1
Share-based
payments - - - - - 0.6 - 0.6 - 0.6
Income tax
effect
of
share-based
payments - - - - - (0.6) - (0.6) - (0.6)
Subsidiaries
acquired
(Note
14) - - - - - (1.7) - (1.7) 1.4 (0.3)
Dividends paid - - - - - (16.8) - (16.8) (0.3) (17.1)
Repurchase of
own shares - - (1.0) - - - - (1.0) - (1.0)
Disposal of
own shares - - 2.3 - - (2.3) - - - -
--------------- ---------- -------- ---------- -------- ------------- ---------- ----------- -------------- ---------------- --------
At 31 December
2014 15.4 20.3 (2.0) (0.8) (16.0) 29.5 21.6 68.0 1.7 69.7
--------------- ---------- -------- ---------- -------- ------------- ---------- ----------- -------------- ---------------- --------
At 31 December
2012 15.3 18.6 (4.1) (0.6) (4.6) 36.8 21.6 83.0 0.5 83.5
Profit for the
year - - - - - 30.4 - 30.4 - 30.4
Other
comprehensive
(loss)/income - - - (0.2) (8.0) 6.0 - (2.2) - (2.2)
--------------- ---------- -------- ---------- -------- ------------- ---------- ----------- -------------- ---------------- --------
Total
comprehensive
(loss)/income - - - (0.2) (8.0) 36.4 - 28.2 - 28.2
--------------- ---------- -------- ---------- -------- ------------- ---------- ----------- -------------- ---------------- --------
New share
capital
issued 0.1 1.6 - - - - - 1.7 - 1.7
Share-based
payments - - - - - 1.4 - 1.4 - 1.4
Income tax
effect
of
share-based
payments - - - - - 0.9 - 0.9 - 0.9
Dividends paid - - - - - (15.9) - (15.9) - (15.9)
Repurchase of
own shares - - (3.5) - - - - (3.5) - (3.5)
Disposal of
own shares - - 4.3 - - (4.3) - - - -
--------------- ---------- -------- ---------- -------- ------------- ---------- ----------- -------------- ---------------- --------
At 31 December
2013 15.4 20.2 (3.3) (0.8) (12.6) 55.3 21.6 95.8 0.5 96.3
--------------- ---------- -------- ---------- -------- ------------- ---------- ----------- -------------- ---------------- --------
Company
At 31 December
2013 15.4 20.2 (3.3) (0.8) - 23.9 21.6 77.0 - 77.0
Profit for the
year - - - - - 35.3 - 35.3 - 35.3
Other
comprehensive
loss - - - - - (18.9) - (18.9) - (18.9)
--------------- ---------- -------- ---------- -------- ------------- ---------- ----------- -------------- ---------------- --------
Total
comprehensive
income - - - - - 16.4 - 16.4 - 16.4
--------------- ---------- -------- ---------- -------- ------------- ---------- ----------- -------------- ---------------- --------
New share
capital
issued - 0.1 - - - - - 0.1 - 0.1
Share-based
payments - - - - - 0.6 - 0.6 - 0.6
Dividends paid - - - - - (16.8) - (16.8) - (16.8)
Repurchase of
own shares - - (1.0) - - - - (1.0) - (1.0)
Disposal of
own shares - - 2.3 - - (2.3) - - - -
--------------- ---------- -------- ---------- -------- ------------- ---------- ----------- -------------- ---------------- --------
At 31 December
2014 15.4 20.3 (2.0) (0.8) - 21.8 21.6 76.3 - 76.3
--------------- ---------- -------- ---------- -------- ------------- ---------- ----------- -------------- ---------------- --------
At 31 December
2012 15.3 18.6 (4.1) (0.6) - 16.6 21.6 67.4 - 67.4
Profit for the
year - - - - - 20.1 - 20.1 - 20.1
Other
comprehensive
(loss)/income - - - (0.2) - 6.0 - 5.8 - 5.8
--------------- ---------- -------- ---------- -------- ------------- ---------- ----------- -------------- ---------------- --------
Total
comprehensive
(loss)/income - - - (0.2) - 26.1 - 25.9 - 25.9
--------------- ---------- -------- ---------- -------- ------------- ---------- ----------- -------------- ---------------- --------
New share
capital
issued 0.1 1.6 - - - - - 1.7 - 1.7
Share-based
payments - - - - - 1.4 - 1.4 - 1.4
Dividends paid - - - - - (15.9) - (15.9) - (15.9)
Repurchase of
own shares - - (3.5) - - - - (3.5) - (3.5)
Disposal of
own shares - - 4.3 - - (4.3) - - - -
--------------- ---------- -------- ---------- -------- ------------- ---------- ----------- -------------- ---------------- --------
At 31 December
2013 15.4 20.2 (3.3) (0.8) - 23.9 21.6 77.0 - 77.0
--------------- ---------- -------- ---------- -------- ------------- ---------- ----------- -------------- ---------------- --------
GROUP AND COMPANY STATEMENT OF CASH FLOWS
for the year ended 31 December 2014 (year ended 31 December
2013)
Group Company
---------------- ----------------
2014 2013 2014 2013
Notes GBPm GBPm GBPm GBPm
------------------------------------ ------ ------- ------- ------- -------
Cash flows from operating activities
Cash generated from operations 11 51.0 49.5 (14.6) (13.4)
Interest received 0.7 0.6 - -
Interest paid (6.4) (5.3) (5.8) (5.0)
Tax (paid)/received (8.2) (10.1) 0.3 (2.0)
------------------------------------ ------ ------- ------- ------- -------
Net cash flow from operating
activities 37.1 34.7 (20.1) (20.4)
------------------------------------ ------ ------- ------- ------- -------
Cash flows from investing activities
Acquisitions 14 (2.2) (10.5) - -
Net cash acquired with
subsidiaries 14 - 0.3 - -
Purchase of property, plant
and equipment (28.1) (19.4) - (0.1)
Intangible asset additions (3.0) (3.9) - -
Proceeds from sale of property,
plant and equipment 1.0 2.4 - 1.6
Dividends received from
equity accounted investments 6.4 4.4 - -
------------------------------------ ------ ------- ------- ------- -------
Net cash flow (used in)/from
investing activities (25.9) (26.7) - 1.5
-------------------------------------------- ------- ------- ------- -------
Cash flows from financing activities
Proceeds from issue of
ordinary share capital 0.1 1.7 0.1 1.7
Purchase of own shares (1.0) (3.5) (1.0) (3.5)
Repayment of borrowings 10 (46.3) (2.2) (46.2) -
Proceeds from borrowings 10 52.9 13.0 52.9 13.0
Dividends paid to non-controlling
interests (0.3) - - -
Dividends paid to ordinary
shareholders 7 (16.8) (15.9) (16.8) (15.9)
Net amounts repaid by subsidiaries - - 31.4 24.1
------------------------------------ ------ ------- ------- ------- -------
Net cash flow (used in)/from
financing activities (11.4) (6.9) 20.4 19.4
(Decrease)/increase in
net cash and cash equivalents 10 (0.2) 1.1 0.3 0.5
------------------------------------ ------ ------- ------- ------- -------
Effects of exchange rate
movements (0.9) (1.6) - -
Opening net cash and cash
equivalents 33.3 33.8 0.7 0.2
------------------------------------ ------ ------- ------- ------- -------
Closing net cash and cash
equivalents* 10 32.2 33.3 1.0 0.7
------------------------------------ ------ ------- ------- ------- -------
* Net cash and cash equivalents include cash at bank and in hand
and bank overdrafts.
Notes to the Accounts
The consolidated accounts of the Group for the year ended 31
December 2014 were approved and authorised for issue in accordance
with a resolution of the Directors on 9 March 2015. John Menzies
plc is a limited company incorporated in Scotland and is listed on
the London Stock Exchange.
1. Accounting policies
A summary of the more significant accounting policies, which
have been consistently applied, is set out below.
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 (IFRS), IFRIC
interpretations and the Companies Act 2006 applicable to companies
reporting under IFRS, incorporate the accounts of the Company and
its subsidiaries, joint ventures and associates from the effective
date of acquisition or to the date of deemed disposal.
New accounting standards and interpretations affecting the
Group
The following accounting standards and interpretations have been
adopted in these accounts and have not resulted in any change to
prior year results but have resulted in some amended disclosures,
that are reflected in these financial statements.
IFRS 10 Consolidated Financial Statements sets forth the
requirements for the preparation and presentation of consolidated
financial statements and supersedes IAS 27 Consolidated and
Separate Financial Statements and SIC-12 Consolidation - Special
Purpose Entities. The standard defines a uniformly applicable
control concept for all company forms to serve as the basis for
determining which companies are to be fully consolidated. Control
is only deemed to exist if the Group is exposed, or has rights, to
variable returns from its involvement with a company and has the
ability to use its power over that company to affect the amount of
that company's returns.
IFRS 11 Joint Arrangements prescribes the accounting for joint
arrangements and supersedes IAS 31 Interests in Joint Ventures and
SIC-13 Jointly Controlled Entities - Non-Monetary Contributions by
Venturers. A joint arrangement is deemed to exist if the Group
through a contractual agreement jointly controls activities managed
with a third party. Joint control is only deemed to exist if
decisions regarding the relevant activities require the unanimous
consent of the parties sharing control. Joint arrangements are
classified as either joint operations or joint ventures. The Group
recognises the share of assets, liabilities, revenues and expenses
relating to its interest in a joint operation in accordance with
its rights and obligations. The investment in a joint venture is
accounted for using the equity method in accordance with the
provisions of the amended IAS 28 Investments in Associates and
Joint Ventures. Investments in joint ventures have been accounted
for under the equity method in previous years. Following
reassessment, Menzies Macau Airport Services Ltd has been
reclassified from an associate to a joint venture with no impact on
the primary statements. The Group only holds a 29% share in Menzies
Macau Airport Services Ltd but when the concept of power and
ability to influence returns is taken into account the Group is
effectively an equal partner and hence this investment represents a
joint venture rather than an associate.
IFRS 12 Disclosure of Interests in Other Entities prescribes the
information to be disclosed in the notes to the financial
statements about interests in subsidiaries, associates, joint
arrangements and structured entities.
The revised IAS 27 Separate Financial Statements now mostly
concerns accounting for interests in subsidiaries, associates and
joint ventures in separate financial statements under IFRS.
The publication of IFRS 13 Fair Value Measurement in May 2011
was revised in May 2013. The recoverable amount of a
cash-generating unit now only has to be disclosed for periods in
which an impairment loss has been recognised or reversed.
Additional disclosures are required when an impairment loss is
recognised and the recoverable amount is based on fair value less
costs of disposal.
Standards and interpretations that have also been adopted in
these accounts and have not had a material impact on the Group's
accounts in the period of initial application
- IAS 32 Financial Instruments: Presentation on offsetting
financial assets and financial liabilities
- IAS 19 - Defined benefit plans - employee contributions
- Annual Improvements to IFRSs - 2010 to 2012 cycle
- Annual Improvements to IFRSs - 2011 to 2013 cycle
- IAS 36 (amendment) Impairment of Assets: Recoverable Amount
Disclosures for Non-Financial Assets
- IAS 39 (amendment) Financial Instruments: Novation of
Derivatives and Continuation of Hedge Accounting
- IFRIC 21 Levies
- Improvements to IFRSs (issued May 2012)
Standards and amendments to standards that have been issued but
are not effective for 2014 and have not been early adopted
- IFRS 9 Financial Instruments* - effective date 1 January 2018
- IFRS 15 Revenue from Contracts with Customers* - effective date 1 January 2017
- Amendments to IFRS 10, IFRS 12 and IAS 28: Investment
Entities, Applying the Consolidation Exception* - effective date 1
January 2016
- Amendment to IAS 1 Cash Flow Statements: Disclosure
Initiative* - effective date 1 January 2016
- Annual Improvements to IFRSs - 2012 to 2014 cycle* - effective date 1 January 2016
- Amendments to IFRS 10 and IAS 28: Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture* -
effective date 1 January 2016
- IAS 27 (amendment) Separate Financial Statements: Equity
method in separate financial statements* - effective date 1 January
2016
- Amendments to IAS 16 and IAS 38: Clarification of Acceptable
Methods of Depreciation and Amortisation* - effective date 1
January 2016
- Amendments to IFRS 11: Accounting for Acquisitions of
Interests in Joint Operations* - effective date 1 January 2016
*Not yet adopted for use in the European Union.
The above standards and interpretations will be adopted in
accordance with their effective dates and have not been adopted in
these financial statements.
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.
As permitted by Section 408 of the Companies Act 2006 no Income
Statement is presented by the Company.
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 have
non-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, and only
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: the
contractual arrangement(s) with the other vote holder(s) 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 in full 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, it derecognises the related
assets (including goodwill), liabilities, non-controlling interest
and other components of equity while any resultant gain or loss is
recognised in the Income Statement. Any investment retained is
recognised at fair value.
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 other 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 subsidiaries of 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 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.
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 is 29% owned. They are treated as joint
ventures in the Group accounts because the parties to each of the
ventures work together with equal powers to control the entities.
Each venturer in the respective entity retains the power of veto,
and overall key strategic, operational and financial decisions
require the unanimous consent of both parties.
The financial statements of each associate or joint venture are
prepared for the same reporting period as the Group. The Indian
joint ventures have a statutory year end of 31 March. Worldwide
Magazine Distribution Ltd has a statutory year end of 30 April.
When necessary, adjustments are made to bring the accounting
policies in line with those of the Group.
Revenue
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.
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 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.
Property, plant and equipment
Property, plant and equipment is stated at cost, including
acquisition expenses, less accumulated depreciation. Depreciation
is provided on a straight-line basis at the following rates:
Freehold and long leasehold properties - over 50 years
Short leasehold properties - over the remaining lease term
Plant and equipment - over the estimated life of the asset
between 3 and 20 years.
Inventories
Inventories, being goods for resale and consumables, are stated
at the lower of purchase cost and net realisable value.
Pensions
The operating and financing costs of pensions are charged to the
Income Statement in the period in which they arise and are
recognised separately. The costs of past service benefit
enhancements, settlements and curtailments are also recognised in
the period in which they arise. The difference between actual and
expected returns on assets during the year, including changes in
actuarial assumptions, is recognised in the Statement of
Comprehensive Income. Pension costs are assessed in accordance with
the advice of qualified actuaries.
With regard to defined contribution schemes, the Income
Statement charge represents contributions made.
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.
Current and deferred tax is recognised in the Income Statement
except if it relates to an item recognised directly in equity or in
other comprehensive income, in which case it is recognised directly
in equity or in the Statement of Comprehensive Income
respectively.
Intangible assets
Goodwill
Business combinations since 1 January 2010 have been and
continue to be 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 26 December 2004 (the
date of transition to IFRS) has been retained at the previous UK
GAAP amounts subject to being tested for impairment at that
date.
Goodwill acquired is recognised as an asset and reviewed for
impairment at least annually by assessing the recoverable amount of
each cash-generating unit to which the goodwill relates. When the
recoverable amount of the cash-generating unit is less than the
carrying amount, an impairment loss is recognised. Any impairment
is recognised in the Income Statement.
Goodwill arising on the acquisition of joint ventures and
associates is included within the carrying value of the
investment.
Contracts
The fair value attributed to contracts at the point of
acquisition is determined by discounting the expected future cash
flows to be generated from that asset at the relevant risk-adjusted
weighted average cost of capital for the Group. This amount is
included in intangible assets as contracts and amortised over the
estimated useful life on a straight-line basis. Separate values are
not attributed to internally-generated customer relationships.
Contract amortisation is business-stream dependent. 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 similar criteria
to the goodwill test. In the Aviation business and for
non-publisher contracts in the Distribution business, contracts are
amortised on a straight-line basis over ten years as this period is
the minimum time-frame management considers when assessing
businesses for acquisition.
Computer software
Costs associated with developing or maintaining computer
software programs are recognised as an expense as incurred. Costs
that are directly attributable with the production of identifiable
and unique software products controlled by the Group, and that will
probably generate economic benefits exceeding costs beyond one
year, are recognised as intangible assets. These direct costs
include the costs of software development employees. Computer
software assets are amortised over their estimated useful lives,
usually three to five years.
Leases
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
Assets acquired under finance leases are capitalised in the
Balance Sheet at their fair value or, if lower, at the present
value of the minimum lease payments, each determined at the
inception of the lease. The corresponding liability to the lessor
is recorded in the Balance Sheet as a finance lease obligation. The
lease payments are apportioned between finance charges to the
Income Statement and a reduction of the lease obligations.
Rental payments under operating leases are charged to the Income
Statement on a straight-line basis over applicable lease
periods.
Trade receivables
If there is objective evidence that the Group will not be able
to collect all of the amounts due under the original terms of an
invoice, a provision on the respective trade receivable is
recognised. In such an instance the carrying value of the
receivable is reduced with the amount of the loss recognised in the
Income Statement.
Cash and cash equivalents
Cash and cash equivalents in the Balance Sheet comprise cash at
bank and in hand and short-term deposits with an original maturity
of three months or less. Bank overdrafts are shown within
borrowings in current liabilities in the Balance Sheet.
Foreign currencies
Foreign currency assets and liabilities of the Group are
translated at the rates of exchange ruling at the Balance Sheet
date. The trading results of overseas subsidiaries, joint ventures
and associates are translated at the average exchange rate ruling
during the year, with the exchange difference between average rates
and the rates ruling at the Balance Sheet date being taken to
reserves.
Any differences arising on the translation of the opening net
investment, including goodwill, in overseas subsidiaries, joint
ventures and associates, and of applicable foreign currency loans,
are dealt with as adjustments to reserves. All other exchange
differences are dealt with in the Income Statement.
Derivative financial instruments and hedging activities
The Group uses forward contracts and cross-currency swaps as
derivatives to hedge the risk arising from the retranslation of
foreign currency denominated items.
The Group has derivatives that are designated as hedges of
overseas net investments in foreign entities (net investment
hedges) and derivatives that are designated as hedges of the
exchange risk arising from the retranslation of highly probable
forecast revenue denominated in non-local currency of some of its
overseas operations (cash flow hedges).
Derivative contracts entered into by the Group are expected to
continue to be highly effective until they expire. The
effectiveness of these contracts is monitored during the year. As a
result, all derivatives have been recorded using hedge accounting,
which is explained below.
All derivatives are measured at fair value, which is calculated
as the present value of all future cash flows from the derivative
discounted at prevailing market rates.
Changes in the fair value of the effective portion of net
investment hedges are recorded in equity and are only recycled to
the Income Statement on disposal of the overseas net
investment.
Changes in the fair value of the effective portion of cash flow
hedges are recorded in equity until such time as the forecast
transaction occurs, at which time they are recycled to the Income
Statement. If 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
re-assessing categorisation (based on the lowest level input that
is significant to the fair value measurement as a whole) at the end
of each reporting period.
Provisions
Provisions are recognised when the Group has a present 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 of.
Share-based payments
Equity-settled share-based payments are measured at fair value
at the date of grant and recognised as an expense over the vesting
period. The amount recognised as an expense is adjusted to reflect
the actual number of share options that vest unless the options do
not vest as a result of a failure to satisfy market conditions.
Fair value is measured by use of a relevant pricing model.
Use of estimates and judgements
The preparation of the consolidated accounts requires management
to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. These estimates will, by
definition, seldom equal the related actual results particularly
given changes in economic conditions and the level of uncertainty
regarding their duration and severity.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and in any future periods
affected. The most important estimates and judgements are set out
below.
Joint ventures and associates
Judgement is required to determine when the Group has joint
control over an arrangement, which requires an assessment of the
relevant activities and when the decisions in relation to those
activities require unanimous consent. The Group has determined that
the relevant activities for its joint arrangements are those
relating to the operating and capital decisions of the arrangement,
including the approval of the annual capital and operating
expenditure budgets for the joint arrangement, as required by the
joint venture agreements applicable to the entity's joint
arrangements.
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 9 for further details.
Impairment
Impairment testing is carried out on any assets that show
indications of impairment and annually on goodwill and intangibles
that are not subject to amortisation. This testing involves
exercising management judgement about future cash flows and other
events which are by their nature uncertain. See Note 9 for further
details.
Retirement benefits
The assumptions underlying the calculation of retirement
benefits are important and based on independent advice. Changes in
these assumptions could have a material impact on the measurement
of the Group's retirement benefit obligation. See Note 3 for
further details.
Income taxes
The Group is subject to income tax in numerous jurisdictions and
significant judgement is required in determining the provision for
tax. There are many transactions and calculations for which the
ultimate tax determination is uncertain. The Group recognises
provisions for tax based on estimates of the taxes that are likely
to become due. Where the final tax outcome is different from the
amounts that were initially recorded, such differences will impact
the current income tax and deferred tax provisions in the period in
which such determination is made. See Note 6 for further
details.
Provisions
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.
Revenue recognition
Judgement must be exercised to ensure that revenue is recognised
in accordance with contractual terms, including in relation to the
level of expected returns.
Exceptional items
Exceptional items are those material items which, by virtue of
their size or incidence, are presented separately in the Income
Statement to enable a full understanding of the Group's financial
performance. These exclude certain elements of intangible asset
impairment and amortisation, which are also presented separately in
the Income Statement.
Transactions which may give rise to exceptional items include
restructuring of business activities (in terms of rationalisation
costs and onerous lease provisions), gains or losses on the
disposal of businesses and acquisition transaction and other
related costs including changes in deferred consideration.
Dividend distributions
Final ordinary dividends are recognised as liabilities in the
accounts in the period in which the dividends are approved by the
Company's shareholders.
Financial risk factors
The Group is exposed to financial risks: liquidity risk,
interest rate fluctuations, foreign exchange exposures and credit
risk. See Note 12 for further details.
Definitions and non-GAAP measures used by management
Management believes that the following non-GAAP or adjusted
measures provide a useful comparison of business performance and
reflect the way in which the business is controlled:
Turnover includes revenue from subsidiaries and the Group's
share of revenue from joint ventures and associates.
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.
Underlying profit before taxation is defined as underlying
operating profit less net finance charges.
Underlying earnings per share is profit after taxation and
non-controlling interest, but before intangible amortisation and
impairment and exceptional items, divided by the weighted average
number of ordinary shares in issue.
Free cash flow is defined as the cash generated after net
capital expenditure, interest and taxation, before special pension
contributions, acquisitions, disposals, cash raised, ordinary
dividends and net spend on shares.
Total debt to EBITDA ratio is net debt plus guarantees and
excluding financial derivatives and preference shares divided by
EBITDA being the underlying operating profit plus depreciation and
computer software amortisation.
Interest cover is EBITA divided by external interest charge.
EBITA is underlying operating profit plus computer software
amortisation. External interest charge excludes the net finance
income or charge related to pensions.
2. SEGMENT INFORMATION
For management purposes the Group is organised into two
operating divisions: Distribution and Aviation. The two divisions
are organised and managed separately based upon their key markets.
The Distribution segment provides newspaper and magazine
distribution services across the UK and Ireland along with
marketing services. The Aviation segment provides cargo and
passenger ground handling services across the world.
The information presented to the Board for the purpose of
resource allocation and assessment of segment performance is
focused on the performance of each division as a whole but also
contains performance information on a number of operating segments
within the Aviation division. The Board assesses the performance of
the operating segments based on a measure of adjusted segment
result before exceptional items and intangibles amortisation. Net
finance income and expenditure is not allocated to segments as this
activity is driven by the central treasury function.
Segment information is presented in respect of the Group's
reportable segments together with additional geographic and Balance
Sheet information. Transfer prices between segments are set on an
arm's-length basis.
Business segment information
Pre-exceptional
Revenue operating profit/(loss)
------------------ ---------------------------
2014 2013 2014 2013
GBPm GBPm GBPm GBPm
------------------------------- -------- -------- ------------- ------------
Distribution 1,261.3 1,277.5 24.0 24.3
Aviation
Ground Handling 470.6 454.0 12.0 21.9
Cargo Handling 149.4 149.8 13.8 11.7
Cargo Forwarding 118.6 119.0 4.4 4.2
-------------------------------- -------- -------- ------------- ------------
738.6 722.8 30.2 37.8
Corporate - - (3.2) (2.0)
-------------------------------- -------- -------- ------------- ------------
1,999.9 2,000.3 51.0 60.1
Joint ventures and associates (97.0) (94.9) - -
-------------------------------- -------- -------- ------------- ------------
1,902.9 1,905.4 51.0 60.1
------------------------------- -------- -------- ------------- ------------
A reconciliation of segment pre-exceptional operating
profit/(loss) to profit before tax is provided below.
Distribution Aviation Corporate Group
2014 Notes GBPm GBPm GBPm GBPm
-------------------------------- ------ ------------- --------- ---------- ------------
Operating profit/(loss) 14.5 14.2 (3.2) 25.5
Share of post-tax results
of joint ventures 1.5 6.0 - 7.5
Share of post-tax results
of associates - 0.1 - 0.1
-------------------------------- ------ ------------- --------- ---------- ------------
Operating profit/(loss) after
joint ventures and associates 16.0 20.3 (3.2) 33.1
Net finance expense (7.4)
-------------------------------- ------ ------------- --------- ---------- ------------
Profit before taxation 25.7
-------------------------------- ------ ------------- --------- ---------- ------------
Analysed as:
Pre-exceptional operating
profit/(loss)* 24.0 30.2 (3.2) 51.0
Rationalisation costs 4(a) (3.7) - - (3.7)
Acquisition related earn-out
adjustment 4(a) (2.3) - - (2.3)
Net impairment loss 4(c) - (3.2) - (3.2)
Contract amortisation 9 (1.6) (5.6) - (7.2)
Share of interest on joint
ventures and associates - 0.5 - 0.5
Share of tax on joint ventures
and associates (0.4) (1.6) - (2.0)
-------------------------------- ------ ------------- --------- ---------- ------------
Operating profit/(loss) after
joint ventures and associates 16.0 20.3 (3.2) 33.1
-------------------------------- ------ ------------- --------- ---------- ------------
Distribution Aviation Corporate Group
2013 GBPm GBPm GBPm GBPm
--------------------------------- ----- ------------- --------- ---------- ------
Operating profit/(loss) 21.2 26.3 (2.1) 45.4
Share of post-tax results
of joint ventures 1.1 3.5 - 4.6
Share of post-tax results
of associates - 0.3 - 0.3
--------------------------------- ----- ------------- --------- ---------- ------
Operating profit/(loss) after
joint ventures and associates 22.3 30.1 (2.1) 50.3
Net finance expense (8.2)
--------------------------------- ----- ------------- --------- ---------- ------
Profit before taxation 42.1
--------------------------------- ----- ------------- --------- ---------- ------
Analysed as:
Pre-exceptional operating
profit/(loss)* 24.3 37.8 (2.0) 60.1
Acquisition related transaction
costs 4(a) - (0.6) (0.1) (0.7)
Impairment provision 4(c) - (1.4) - (1.4)
Contract amortisation 9 (1.7) (4.9) - (6.6)
Share of interest on joint
ventures and associates - 0.5 - 0.5
Share of tax on joint ventures
and associates (0.3) (1.3) - (1.6)
--------------------------------- ----- ------------- --------- ---------- ------
Operating profit/(loss) after
joint ventures and associates 22.3 30.1 (2.1) 50.3
--------------------------------- ----- ------------- --------- ---------- ------
* Pre-exceptional operating profit/(loss) is defined as
operating profit/(loss) excluding intangible amortisation as shown
in Note 4(c) and exceptional items but including the pre-tax share
of results from joint ventures and associates.
Distribution Aviation Corporate Group
2014 GBPm GBPm GBPm GBPm
---------------------------------- ------------- ---------- ----------- --------
Segment assets 186.1 275.8 3.5 465.4
Unallocated assets 44.8
---------------------------------- ------------- ---------- ----------- --------
Total assets 510.2
---------------------------------- ------------- ---------- ----------- --------
Segment liabilities (116.3) (94.3) (18.5) (229.1)
Unallocated liabilities (211.4)
---------------------------------- ------------- ---------- ----------- --------
Total liabilities (440.5)
---------------------------------- ------------- ---------- ----------- --------
Segment net assets/(liabilities) 69.8 181.5 (15.0) 236.3
Unallocated net liabilities (166.6)
---------------------------------- ------------- ---------- ----------- --------
Net assets 69.7
---------------------------------- ------------- ---------- ----------- --------
Distribution Aviation Corporate Group
2013 GBPm GBPm GBPm GBPm
---------------------------------- ------------- ---------- ----------- --------
Segment assets 192.9 270.9 5.5 469.3
Unallocated assets 43.0
---------------------------------- ------------- ---------- ----------- --------
Total assets 512.3
---------------------------------- ------------- ---------- ----------- --------
Segment liabilities (115.7) (92.6) (12.8) (221.1)
Unallocated liabilities (194.9)
---------------------------------- ------------- ---------- ----------- --------
Total liabilities (416.0)
---------------------------------- ------------- ---------- ----------- --------
Segment net assets/(liabilities) 77.2 178.3 (7.3) 248.2
Unallocated net liabilities (151.9)
---------------------------------- ------------- ---------- ----------- --------
Net assets 96.3
---------------------------------- ------------- ---------- ----------- --------
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.
Distribution Aviation Corporate Group
2014 GBPm GBPm GBPm GBPm
---------------------------------- ------------- ------------ -------------- ---------
Capital expenditure - property,
plant and equipment 2.3 25.8 - 28.1
Capital expenditure - intangible
assets 2.2 0.8 - 3.0
Depreciation 4.2 15.3 0.7 20.2
Amortisation of intangible
assets 4.0 6.9 - 10.9
Impairment of intangible - 3.6 - -
assets
Gain on disposal of property,
plant and equipment - 0.2 - 0.2
---------------------------------- ------------- ------------ -------------- ---------
Distribution Aviation Corporate Group
2013 GBPm GBPm GBPm GBPm
---------------------------------- ------------- ------------ -------------- ---------
Capital expenditure - property,
plant and equipment 2.3 17.0 0.1 19.4
Capital expenditure - intangible
assets 1.9 1.6 0.4 3.9
Depreciation 4.9 13.8 0.7 19.4
Amortisation of intangible
assets 3.6 6.0 - 9.6
Goodwill impairment - 1.4 - 1.4
Gain on disposal of property,
plant and equipment - - 0.3 0.3
---------------------------------- ------------- ------------ -------------- ---------
Geographic information
Revenue Non-current assets
-------------------- ------------------ ---------------------
2014 2013 2014 2013
GBPm GBPm GBPm GBPm
-------------------- -------- -------- ---------- ---------
UK 1,391.8 1,418.0 109.5 118.1
Continental Europe 161.2 160.5 44.7 50.7
USA 116.6 109.5 35.9 30.1
Rest of world 233.3 217.4 73.9 68.5
-------------------- -------- -------- ---------- ---------
1,902.9 1,905.4 264.0 267.4
-------------------- -------- -------- ---------- ---------
3. PENSION SCHEMES
The principal Group-funded defined benefit scheme in the UK is
the Menzies Pension Fund (the Fund), to which employees contribute
to. The charge to the Income Statement is assessed in accordance
with independent actuarial advice from Hymans Robertson LLP (the
Actuary) using the projected unit method. Certain Group
subsidiaries 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 pension charge to operating profit in the Income Statement
is:
2014 2013
GBPm GBPm
---------------------- ----- -----
Menzies Pension Fund 2.1 3.4
Other schemes 12.5 10.7
---------------------- ----- -----
14.6 14.1
---------------------- ----- -----
Financial assumptions
The Actuary undertook a valuation of the Fund as at 31 December
2014 (31 December 2013) under IAS 19. In deriving the results the
Actuary used the projected unit method and the following financial
assumptions:
2014 2013
% %
------------------------------------------ ----- -----
Rate of increase in salaries 3.0 3.3
Rate of increase in pensions (prior to
1 May 2006) 3.5 3.7
Rate of increase in pensions (from 1 May
2006 to 1 June 2010) 2.0 2.4
Rate of increase in pensions (after 1
June 2010) 1.0 1.0
Price inflation 3.0 3.3
Discount rate 3.7 4.6
------------------------------------------ ----- -----
Assumptions regarding future mortality experience are set based
on advice that uses published statistics and experience in the
business.
The average life expectancy in years of a pensioner retiring at
65 on the Balance Sheet date is:
2014 2013
Years Years
-------- ------ ------
Male 20.9 20.9
Female 22.5 22.5
----------- ------ ------
The average life expectancy in years of a pensioner retiring at
65, 20 years after the Balance Sheet date is:
2014 2013
Years Years
-------- ------ ------
Male 21.7 21.7
Female 23.7 23.7
----------- ------ ------
Fair value of assets (and reconciliation to net pension
liabilities)
2014 2013
------------------------------ ------------------------------
Total Total
value value
at 31 at 31
Quoted Unquoted December Quoted Unquoted December
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------- --------- ---------- ------- --------- ----------
Equities 114.7 11.7 126.4 84.6 - 84.6
Bonds 110.6 2.8 113.4 79.9 - 79.9
Investment funds 4.2 12.0 16.2 64.4 22.9 87.3
Property 0.4 23.0 23.4 19.4 - 19.4
Other 5.4 28.1 33.5 3.1 7.7 10.8
---------------------------- ------- --------- ---------- ------- --------- ----------
Total value of assets 235.3 77.6 312.9 251.4 30.6 282.0
Defined benefit obligation (371.9) (327.8)
---------------------------- ------- --------- ---------- ------- --------- ----------
Recognised in Balance
Sheet (59.0) (45.8)
Related deferred
tax asset 11.8 9.2
---------------------------- ------- --------- ---------- ------- --------- ----------
Net pension liabilities (47.2) (36.6)
---------------------------- ------- --------- ---------- ------- --------- ----------
Sensitivity analysis
Changes in assumptions compared with actuarial assumptions for
the value of liabilities are shown below:
2014 2013
Note GBPm GBPm
------------------------------------------ -------- ---------- -----------------
0.5% decrease in discount rate 408.5 358.1
1 year increase in life expectancy 383.1 337.6
0.5% decrease in salary increases (i) 371.9 327.8
0.5% decrease in inflation 342.8 311.0
------------------------------------------ -------- ---------- -----------------
(i) Active members' benefits, once accrued, revalue at CPI capped
at 1% p.a. and so changes in the level of salary increase do
not affect the past service liability value.
Information about the defined benefit Number Liability Average duration
obligation split (years)
------------------------------------------ -------- ---------- -----------------
Active members 499 24% 24.8
Deferred members 3,623 32% 22.6
Pensioners 2,206 44% 12.8
------------------------------------------ -------- ---------- -----------------
Total 6,328 100% 18.8
------------------------------------------ -------- ---------- -----------------
2014 2013
Components of pension expense GBPm GBPm
--------------------------------------------- ---------- --------------
Amounts charged/(credited) to operating
profit
Current service cost 1.8 1.8
Administrative costs 1.1 1.6
Effect of curtailments (0.8) -
--------------------------------------------- ---------- --------------
Total service cost 2.1 3.4
--------------------------------------------- ---------- --------------
Amounts included in finance costs
--------------------------------------------- ---------- --------------
Interest cost on defined benefit obligation 14.7 13.7
Interest income on Fund assets (13.0) (11.3)
--------------------------------------------- ---------- --------------
Net finance charge 1.7 2.4
--------------------------------------------- ---------- --------------
Pension expense 3.8 5.8
--------------------------------------------- ---------- --------------
Amounts recognised in the Statement GBPm GBPm
of Comprehensive Income
--------------------------------------------- ---------- --------------
Returns on assets excluding amounts
included in net interest 18.8 16.1
Changes in financial assumptions (42.3) (6.7)
--------------------------------------------- ---------- --------------
Actuarial (loss)/gain (23.5) 9.4
--------------------------------------------- ---------- --------------
Change in scheme assets during the GBPm GBPm
year
--------------------------------------------- ---------- --------------
Fair value of assets at start of year 282.0 257.2
Interest income 13.0 11.3
Company contributions 14.1 13.1
Employee contributions 0.8 0.9
Effect of settlements (1.8) (0.4)
Benefits and expenses paid (14.0) (16.2)
Returns on assets excluding amounts
included in net interest 18.8 16.1
--------------------------------------------- ---------- --------------
Fair value of assets at end of year 312.9 282.0
--------------------------------------------- ---------- --------------
The actual return on scheme assets was a gain of GBP31.8m (2013:
GBP27.4m).
Change in defined benefit obligation GBPm GBPm
during the year
-------------------------------------- ------- -------
Defined benefit obligation at start
of year 327.8 319.7
Total service cost 2.9 3.4
Interest cost 14.7 13.7
Effect of settlements (2.6) (0.4)
Employee contributions 0.8 0.9
Benefits and expenses paid (14.0) (16.2)
Changes in financial assumptions 42.3 6.7
-------------------------------------- ------- -------
Defined benefit obligation at end of
year 371.9 327.8
-------------------------------------- ------- -------
Nature of benefits, regulatory framework and the Company's
responsibilities for 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 interest of the beneficiaries of the Fund, and
UK legislation, including trust law. The Trustee and the Company
have the joint power to set the contributions that are paid to the
Fund.
Risks to which the Fund exposes the Company
The nature of the Fund exposes the Company to the risk of paying
unanticipated additional contributions to the Fund in times of
adverse experience. The most financially significant risks are
likely to be: members living for longer than expected; higher than
expected actual inflation and salary increase experience; lower
than expected investment returns; and the risk that movements in
the value of the Fund's liabilities are not met by corresponding
movements in the value of the Fund's assets.
The sensitivity analysis disclosed above is intended to provide
an indication of the impact on the value of the Fund's liabilities
of the risks highlighted.
Fund amendments, curtailments and settlements
Small settlements have occurred over the year, details of which
are included above.
Expected contributions over the next accounting year
The Company expects to contribute around GBP14m to the Fund over
the year to 31 December 2015.
Policy for recognising gains and losses
The Company recognises actuarial gains and losses immediately
through the remeasurement of the net defined benefit liability.
Methods and assumptions used in preparing the sensitivity
analyses
The sensitivities disclosed were calculated using approximate
methods taking into account the duration of the Fund's
liabilities.
Asset-liability matching strategies
Neither the Fund nor the Company uses asset-liability matching
strategies. The Trustee's current investment strategy, having
consulted with the Company, is to invest the vast majority of the
Fund's assets in a mix of equities and corporate bonds, in order to
strike a balance between maximising the returns on the Fund's
assets and minimising the risks associated with lower than expected
returns on the Fund's assets.
The Trustee has implemented a de-risking process such that the
Fund 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 2015 valuation exercise. The
current benchmark is to hold 70% in growth assets such as equities
and 30% in bonds including index-linked and fixed-interest
Government bonds and corporate bonds.
Funding arrangements and funding policy that affect future
contributions
The Schedule of Contributions dated 31 January 2013 sets out the
current contributions payable by the Company to the Fund. The
Trustee's next formal actuarial valuation will be due as at 31
March 2015. As part of that valuation process the Trustee and
Company will agree a long-term funding strategy, which may include
a revision to the Schedule of Contributions to take into account
any additional contributions to meet any funding shortfall between
the value of the Fund's assets and liabilities.
4 (a) EXCEPTIONAL ITEMS INCLUDED IN OPERATING PROFIT
2014 2013
Notes GBPm GBPm
--------------------------------- ------- ------ ------
Rationalisation costs (i) (3.7) -
Acquisition related earn-out
adjustment (ii) (2.3) -
Acquisition related transaction
costs (iii) - (0.7)
--------------------------------- ------- ------ ------
(6.0) (0.7)
----------------------------------------- ------ ------
(i) Costs of rationalising excess capacity in the Distribution
business comprised redundancy (GBP1.8m), property (GBP1.1m)
and other related restructuring costs (GBP0.8m).
(ii) The increase in contingent consideration relates to the acquisition
of the Orbital Marketing Services Group and reflects the underlying
increase in the profit of that business in 2014.
(iii) Costs relating to the acquisition of subsidiaries in 2013.
4 (b) EXCEPTIONAL ITEMS INCLUDED IN FINANCE CHARGES
2014 2013
Notes GBPm GBPm
----------------- ------- ------ ------
Unwind discount (i) (0.5) (0.7)
----------------- ------- ------ ------
(i) Relating to deferred consideration and onerous lease provisions.
4 (c) INTANGIBLE AMORTISATION AND IMPAIRMENT INCLUDED IN OPERATING PROFIT
2014 2013
Notes GBPm GBPm
----------------------------------- ------- ------- ------
Contract amortisation (i) (7.2) (6.6)
Net impairment loss (ii) (3.2) -
Joint venture goodwill impairment (iii) - (1.4)
(10.4) (8.0)
------------------------------------------- ------- ------
(i) Contracts capitalised as intangible assets on the acquisition
of businesses.
(ii) The net impairment loss of GBP3.2m has resulted from the loss
in recent months of existing and expected business in Colombia
that has led to a significant reduction in the future expected
profitability of the operation. The amount comprises impairment
charges of GBP3.6m in relation to customer contracts, a GBP0.8m
charge for redundancy and associated costs, and a GBP1.2m
credit for contingent consideration relating to the Desacol
acquisition that is no longer expected to be incurred.
(iii) Assets that were previously capitalised as goodwill and reclassified
as other intangible assets as permitted under transitional
requirements of IFRS 1 with respect of the restatement of
acquisition accounting of business combinations completed
prior to the transition date. The charge reflected the remaining
life of the licence at Menzies Macau Airport Services Ltd.
The goodwill relating to this licence was fully impaired in
2013.
The taxation effect of the exceptional items is a net credit
GBP0.7m (2013: GBPNil).
5. FINANCE COSTS (pre-exceptional)
2014 2013
GBPm GBPm
------------------------------ ------ ------
Finance income
Bank deposits 0.7 0.7
Finance charges
Bank loans and overdrafts (5.3) (5.2)
Preference dividends (0.1) (0.1)
------------------------------ ------ ------
(5.4) (5.3)
Net finance costs (4.7) (4.6)
------------------------------ ------ ------
6. TAXATION
Analysis of charge in year
2014 2013
GBPm GBPm
------------------------------------------ ------ ------
Current tax
UK corporation tax on profits for the
year (0.4) 2.4
Overseas tax 10.1 8.2
Adjustments to prior years' liabilities 0.2 (0.4)
------------------------------------------ ------ ------
Total current tax 9.9 10.2
------------------------------------------ ------ ------
Deferred tax
Origination and reversal of temporary
differences (0.3) 0.6
Impact of UK rate change - (0.9)
Adjustments to prior years' liabilities - 0.1
------------------------------------------ ------ ------
(0.3) (0.2)
Retirement benefit obligation 2.1 1.7
------------------------------------------ ------ ------
Total deferred tax 1.8 1.5
------------------------------------------ ------ ------
Tax on profit on ordinary activities 11.7 11.7
------------------------------------------ ------ ------
Current and deferred tax related to items charged/(credited)
outside profit or loss
2014 2013
GBPm GBPm
------------------------------------------ -------- --------
Deferred tax on actuarial (loss)/gain
on retirement benefit obligation (4.7) 2.2
Impact of UK rate change - 1.4
Current tax on share-based payments - (0.9)
Deferred tax on shared-based payments 0.6 -
Current tax on net exchange adjustments (0.2) (0.4)
Deferred tax on net exchange adjustments (0.6) -
------------------------------------------ -------- --------
Tax (credit)/charge reported outside
profit or loss (4.9) 2.3
------------------------------------------ -------- --------
Reconciliation between tax charge and the product of accounting
profit multiplied by the Group's domestic tax rate for the years
ended 31 December 2014 and 31 December 2013
2014 2013
GBPm GBPm
------------------------------------------ -------- ------ --------
Profit before tax 25.7 42.1
------------------------------------------ -------- ------ --------
Profit before tax multiplied by standard
rate of corporation tax in the UK of
21.5% (2013: 23.25%) 5.5 9.8
Non-deductible expenses principally
goodwill impairment and intangible
amortisation 1.5 2.5
Depreciation on non-qualifying assets 0.4 0.5
Unrelieved overseas losses 2.0 0.8
Deferred tax assets written off 0.4 -
Exceptional items 1.4 0.4
Utilisation of previously unrecognised
losses (0.2) (0.2)
Higher tax rates on overseas earnings 2.0 0.5
Share of joint venture and associate
post-tax result included in profit
before tax (1.5) (1.4)
Adjustments to prior years' liabilities 0.2 (0.3)
Impact of UK rate change on deferred
tax - (0.9)
------
At the effective corporation tax rate
of 45.5% (2013: 27.8%) 11.7 11.7
------------------------------------------ -------- ------ --------
The main rate of UK corporation tax will be reduced from the
current rate of 21%, which has applied from 1 April 2014, to 20%
from 1 April 2015. The Finance Act 2013, which was substantively
enacted on 2 July 2013, included the legislation to reduce the main
rate of corporation tax to 20%. As the reduction in the main rate
of corporation tax to 20% was substantively enacted at the Balance
Sheet date, and reduces the tax rate expected to apply when
temporary differences reverse, it has the effect of reducing the UK
deferred tax assets and liabilities.
Factors that may affect future tax charges
The Group has estimated tax losses carried forward, which arose
in subsidiary companies operating in the undernoted jurisdictions,
that are available for offset against future profits of those
subsidiaries. Deferred tax assets have not been recognised in
respect of these losses as they have arisen in subsidiaries where
it is not probable that future taxable profits will be available
against which such assets could be utilised.
Losses
GBPm Expiry
------------- ------- ---------------------------
USA 42.0 Carry forward for up
to 20 years
South Africa 3.2 Carry forward indefinitely
Germany 19.3 Carry forward indefinitely
Norway 11.1 Carry forward indefinitely
Sweden 2.9 Carry forward indefinitely
Netherlands 3.6 Carry forward for 5
years
------------- ------- ---------------------------
The Group has capital losses in the UK of approximately GBP10.4m
that are available for offset against future taxable gains arising
in the UK. No deferred tax asset has been recognised in respect of
these losses.
7. DIVIDENDS
2014 2013
Dividends on equity shares GBPm GBPm
------------------------------------------------ ----- -----
Ordinary Interim paid in respect of 2014, 5.0 -
8.1p per share
Final paid in respect of 2013, 11.5 -
18.8p per share
Interim paid in respect of 2013,
7.7p per share - 4.7
Final paid in respect of 2012,
17.85p per share - 10.8
Paid in respect performance share
plans 0.3 0.4
16.8 15.9
------------------------------------------------ ----- -----
Dividends of GBP0.1m were waived on Treasury shares (2013:
GBP0.2m).
The Directors are proposing a final dividend in respect of the
year to 31 December 2014 of 8.1p per ordinary share, which will
absorb an estimated GBP5.0m of shareholders' funds. Payment will be
made on 3 July 2015 to shareholders on the register at the close of
business on 29 May 2015.
Treasury shares
Ordinary shares are held for employee share schemes. At 31
December 2014 the Company held 366,409 (2013: 613,319) ordinary
shares with a market value of GBP1.3m (2013: GBP4.3m).
8. EARNINGS PER SHARE
Basic Underlying*
---------------- ----------------
2014 2013 2014 2013
GBPm GBPm GBPm GBPm
----------------------------------------- ------- ------- ------- -------
Operating profit 25.5 45.4 25.5 45.4
Share of post-tax results of joint
ventures and associates 7.6 4.9 7.6 4.9
add back:
exceptional items (Note 4(a)) - - 6.0 0.7
intangible amortisation and impairment
(Note 4(c)) - - 10.4 8.0
share of interest on joint ventures
and
associates - - (0.5) (0.5)
share of tax on joint ventures
and associates - - 2.0 1.6
Net finance costs (7.4) (8.2) (6.4) (7.0)
----------------------------------------- ------- ------- ------- -------
Profit before taxation 25.7 42.1 44.6 53.1
Taxation (11.7) (11.7) (11.7) (11.7)
Exceptional tax - - (2.7) (1.6)
Non-controlling interests (0.1) - (0.1) -
----------------------------------------- ------- ------- ------- -------
Earnings for the year 13.9 30.4 30.1 39.8
----------------------------------------- ------- ------- ------- -------
Basic
Earnings per ordinary share (pence) 22.7p 50.1p
Diluted earnings per ordinary share
(pence) 22.6p 50.0p
Underlying*
Earnings per ordinary share (pence) 49.2p 65.6p
Diluted earnings per ordinary share
(pence) 49.0p 65.4p
Number of ordinary shares in issue
Weighted average (million) 61.2 60.6
Diluted weighted average (million) 61.4 60.8
----------------------------------------- ------- ------- ------- -------
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, that is where the
exercise price is less than the average market price of the shares
during the year.
* Underlying earnings are presented as an additional performance
measure. They are stated before exceptional items and intangible
amortisation and impairment.
9. INTANGIBLE ASSETS
Computer
Goodwill Contracts software Total
GBPm GBPm GBPm GBPm
----------------------------- --------- ---------- ---------- ------
Cost
At 31 December 2013 57.0 91.5 27.6 176.1
Acquisitions (Note 14) 1.3 0.7 - 2.0
Additions - - 3.0 3.0
Disposals - - (0.2) (0.2)
Currency translation 1.2 (1.4) - (0.2)
----------------------------- --------- ---------- ---------- ------
At 31 December 2014 59.5 90.8 30.4 180.7
----------------------------- --------- ---------- ---------- ------
Amortisation and impairment
At 31 December 2013 9.5 24.6 15.2 49.3
Amortisation charge - 7.2 3.7 10.9
Released on disposal - - (0.1) (0.1)
Impairment (Note 4(c)) - 3.6 - 3.6
Currency translation 1.4 (0.5) - 0.9
----------------------------- --------- ---------- ---------- ------
At 31 December 2014 10.9 34.9 18.8 64.6
----------------------------- --------- ---------- ---------- ------
Net book value
At 31 December 2014 48.6 55.9 11.6 116.1
----------------------------- --------- ---------- ---------- ------
At 31 December 2013 47.5 66.9 12.4 126.8
----------------------------- --------- ---------- ---------- ------
Computer
Goodwill Contracts software Total
GBPm GBPm GBPm GBPm
----------------------------- --------- ---------- ---------- ------
Cost
At 31 December 2012 59.2 80.5 24.0 163.7
Acquisitions (Note 14) 0.1 12.1 - 12.2
Additions - 0.3 3.6 3.9
Currency translation (2.3) (1.4) - (3.7)
----------------------------- --------- ---------- ---------- ------
At 31 December 2013 57.0 91.5 27.6 176.1
----------------------------- --------- ---------- ---------- ------
Amortisation and impairment
At 31 December 2012 10.0 18.5 12.2 40.7
Amortisation charge - 6.6 3.0 9.6
Currency translation (0.5) (0.5) - (1.0)
----------------------------- --------- ---------- ---------- ------
At 31 December 2013 9.5 24.6 15.2 49.3
----------------------------- --------- ---------- ---------- ------
Net book value
At 31 December 2013 47.5 66.9 12.4 126.8
----------------------------- --------- ---------- ---------- ------
At 31 December 2012 49.2 62.0 11.8 123.0
----------------------------- --------- ---------- ---------- ------
Goodwill acquired through business combinations and intangible
assets with indefinite lives has 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.
2014 2013
-------------------------------------- --------------------------------------
Pre-tax Pre-tax
discount discount
rate used rate used
in impairment Goodwill Contracts in impairment Goodwill Contracts
review GBPm GBPm review GBPm GBPm
Distribution
Core distribution 8% 7.3 12.9 10% 7.3 12.9
EM News Distribution
(NI) Ltd 8% - 3.1 10% - 3.1
Other 8% - 3.0 10% - 3.0
Aviation
Netherlands cargo 9% 7.3 - 10% 7.8 -
North American
cargo 10% 8.0 - 10% 7.6 -
Australasia 10% 5.7 - 10% 5.7 -
AMI South Africa 11% 2.0 - 10% 2.1 -
Scandinavia 8% 2.7 - 10% 3.1 -
Ogden worldwide 9.5% 9.4 - 10% 9.8 -
Other 8% - 11% 5.2 - 10% 4.3 -
---------------------- --------------- --------- ---------- --------------- --------- ----------
Total 47.6 19.0 47.7 19.0
---------------------- --------------- --------- ---------- --------------- --------- ----------
The Group tests goodwill and intangible assets with indefinite
lives annually for impairment, or more frequently if there are
indications that these might be impaired. The basis of these
impairment tests including key assumptions are set out below.
The recoverable amounts of the CGUs are determined from value in
use calculations. These calculations use future cash flow
projections based on financial forecasts approved by management.
The key assumptions for these forecasts are those regarding revenue
growth, net margin, capital expenditure and the level of working
capital required to support trading, which management estimates
based on past experience and expectations of future changes in the
market.
The value in use calculations use a post-tax discount rate
assumption in a range from 6% to 8% (2013: 8%) 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 8% to 11% (2013: 10%) as
shown in the table above. The pre-tax rate has been applied to
pre-tax cash flows.
Distribution
Distribution publisher contracts are not amortised due to the
very long-term nature of the business in the UK. The Group
distributes to approximately 45% of the UK retail market and has
only one major competitor. In such circumstances the Board
considers that there is no foreseeable limit to the period over
which the contracts are expected to generate cash flows and have
been determined to have an indefinite life. These contracts are
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 2018 and 2019. Growth rates in the cash flows
beyond the three year period have been assumed to be -3% to 10%
(2013: -2% to 20%). 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.
Distribution 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 GBP12.1m (2013: GBP13.6m) and the average remaining
amortisation period is eight years (2013: nine years).
Aviation
Aviation 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 Aviation contracts is GBP24.8m (2013: GBP34.1m) and the
average remaining amortisation period is four years (2013: six
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 (2013: 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.
10. ANALYSIS OF CHANGES IN NET BORROWINGS
Currency
2013 Cash flows translation 2014
GBPm GBPm GBPm GBPm
Cash at bank and in hand 33.8 (0.1) (0.9) 32.8
Bank overdrafts (0.5) (0.1) - (0.6)
------------------------------------- -------- ----------- ------------- --------
Net cash and cash equivalents 33.3 (0.2) (0.9) 32.2
Bank loans due within one
year (48.7) 46.2 - (2.5)
Preference shares (1.4) - - (1.4)
Finance leases (0.3) 0.1 - (0.2)
Debt due after one year (90.0) (48.9) - (138.9)
Net derivative assets/(liabilities) 3.6 (4.0) 0.3 (0.1)
------------------------------------- -------- ----------- ------------- --------
Net debt (103.5) (6.8) (0.6) (110.9)
------------------------------------- -------- ----------- ------------- --------
The currency translation movement results from the Group's
policy of hedging its overseas net assets, which are denominated
mainly in US dollars and Euro. The translation effect on net debt
is offset by the translation effect on net assets resulting in an
overall net exchange loss of GBP3.4m (2013: GBP8.0m). This net loss
is recognised in other comprehensive income.
11. CASH GENERATED FROM OPERATIONS
Group Company
---------------- ----------------
2014 2013 2014 2013
GBPm GBPm GBPm GBPm
------------------------------------ ------- ------- ------- -------
Operating profit/(loss) 25.5 45.4 (1.8) (0.4)
Depreciation 20.2 19.4 0.7 0.8
Amortisation of intangible
assets 10.9 9.6 - -
Share-based payments 0.6 1.4 0.6 1.4
Onerous lease provision 0.3 - - -
Cash spend on onerous leases (2.9) (2.1) - -
(Gain)/loss on sale of property,
plant and equipment (0.2) (0.3) - 0.1
Pension charge 2.9 3.4 - -
Pension credit (0.8) - - (2.2)
Pension contributions in
cash (14.1) (13.1) (14.1) (13.1)
Rationalisation costs 3.4 - - -
Cash spend on rationalisation
costs (2.3) (1.2) - -
Acquisition related earn-out 2.3 - - -
adjustment
Net impairment loss 3.2 - - -
Decrease/(increase) in inventories 1.6 (0.4) - -
(Increase)/decrease in trade
and other receivables (2.6) 4.8 - -
Increase/(decrease) in trade
and other payables and provisions 3.0 (17.4) - -
------------------------------------ ------- ------- ------- -------
51.0 49.5 (14.6) (13.4)
------------------------------------ ------- ------- ------- -------
12. FINANCIAL INSTRUMENTS
Group Company
-------------- --------------
2014 2013 2014 2013
GBPm GBPm GBPm GBPm
---------------------------------- ------ ------ ------ ------
Derivative financial instruments
Cash flow hedges:
Foreign exchange forward
contracts (0.3) (0.3) (0.3) (0.3)
Foreign currency net investment
hedge:
Foreign exchange forward
contracts 0.2 3.9 0.2 3.9
----------------------------------- ------ ------ ------ ------
(0.1) 3.6 (0.1) 3.6
---------------------------------- ------ ------ ------ ------
Current (0.1) 3.6 (0.1) 3.6
----------------------------------- ------ ------ ------ ------
The Group only enters into derivative financial instruments that
are designated as hedging instruments. The fair values of foreign
currency instruments are calculated by reference to current market
rates.
Fair value hierarchy
As at 31 December 2014, 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 quoted (unadjusted) prices in active markets for identical
1 : assets or liabilities.
Level other techniques for which all inputs that have a significant
2 : effect on the recorded fair value are observable, either
directly or indirectly.
Level techniques which use inputs that have a significant effect
3 : on the recorded fair value that are not based on observable
market data.
2014 Assets measured at fair value
----------------------------- ------------------------------------
Financial assets at fair Total Level Level 2 Level 3
value through the Income 1
Statement
----------------------------
GBPm GBPm GBPm GBPm
---------------------------- ------- ------- -------- --------
Foreign exchange contracts
- hedged 1.9 - 1.9 -
----------------------------- ------- ------- -------- --------
Liabilities measured at fair value
----------------------------- -----------------------------------------
Financial liabilities Total Level Level 2 Level 3
at fair value through 1
the Income Statement
----------------------------
GBPm GBPm GBPm GBPm
---------------------------- -------- ------- ---------- ----------
Foreign exchange contracts
- hedged 2.0 - 2.0 -
----------------------------- -------- ------- ---------- ----------
2013 Assets measured at fair value
----------------------------- ------------------------------------
Financial assets at fair Total Level Level 2 Level 3
value through the Income 1
Statement
----------------------------
GBPm GBPm GBPm GBPm
---------------------------- ------- ------- -------- --------
Foreign exchange contracts
- hedged 3.9 - 3.9 -
----------------------------- ------- ------- -------- --------
Liabilities at measured at fair value
----------------------------- --------------------------------------------
Financial liabilities Total Level Level 2 Level 3
at fair value through 1
the Income Statement
----------------------------
GBPm GBPm GBPm GBPm
---------------------------- --------- --------- ---------- ----------
Foreign exchange contracts
- hedged 0.3 - 0.3 -
----------------------------- --------- --------- ---------- ----------
During the year ended 31 December 2014, 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.
Contingent consideration
The consideration to acquire Orbital Marketing Services Group
included contingent consideration based on future targets being
met. The contingent consideration's range is between a minimum of
GBP6.0m and a maximum of GBP12.2m (2013: minimum GBP6.0m and
maximum GBP12.2m) and becomes payable in late March/early April
2015. The fair value of contingent consideration is the present
value of expected future cash flows based on the latest forecasts
of future performance.
The consideration to acquire Fore Partnership included
contingent consideration based on future targets being met. The
contingent consideration's range is between a minimum of GBPNil and
a maximum of GBP4.0m (2013: minimum GBPNil and maximum GBP4.0m) and
becomes payable in 2016. The fair value of contingent consideration
is the present value of expected future cash flows based on the
latest forecasts of future performance.
The consideration to acquire Desacol included contingent
consideration based upon meeting an initial entry level cumulative
EBITDA target by 2016 with the consideration being a multiple of
average EBITDA over the following three years. The contingent
consideration's range is between GBPNil and a maximum of GBP3.0m
(2013: minimum GBPNil and maximum GBP3.0m). The fair value of
contingent consideration is the present value of expected future
cash flows based on the latest forecasts of future performance.
As disclosed in Note 14, the acquisition of PlaneBiz 2015 Ltd in
the current year includes 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 under IFRS 7.
2014 2013
GBPm GBPm
---------------------------------------------------- ----- -----
Fair value of contingent consideration
Orbital Marketing Services Group 10.4 8.0
Fore Partnership 0.9 0.9
Desacol - 1.3
Fair value of other contingent acquisition related
amounts
PlaneBiz 2015 Ltd (Note 14) 2.8 -
---------------------------------------------------- ----- -----
Group Company
-------------- --------------
2014 2013 2014 2013
GBPm GBPm GBPm GBPm
---------------------------- ------ ------ ------ ------
Interest-bearing loans and
borrowings
Obligations under finance
leases 0.2 0.3 - -
Bank overdrafts 0.6 0.5 0.6 0.2
Non-amortising bank loans 126.2 121.3 126.2 121.0
Amortising term loan 15.2 17.4 15.2 17.4
Preference shares 1.4 1.4 1.4 1.4
----------------------------- ------ ------ ------ ------
143.6 140.9 143.4 140.0
---------------------------- ------ ------ ------ ------
Current 3.3 49.5 3.2 48.6
Non-current 140.3 91.4 140.2 91.4
----------------------------- ------ ------ ------ ------
143.6 140.9 143.4 140.0
---------------------------- ------ ------ ------ ------
Interest-bearing loans and
borrowings Maturity
Obligations under finance
leases December 2015 to June 2017
Bank overdrafts On demand
Non-amortising bank loans January 2016 to January 2018
Amortising term loan March 2020
Preference shares Non-redeemable
Other than trade receivables and payables, there are no
financial assets or liabilities excluded from the above analysis.
No financial assets or liabilities were held or issued for trading
purposes.
The Company has issued 1,394,587 cumulative preference shares of
GBP1 each. These shares are not redeemable and pay an interest
coupon of 9% semi-annually.
The amortising term loan is repayable between 2015 and 2020 with
interest payable at a fixed rate of 6.23%. The loan has a weighted
average maturity of two years (2013: two years).
Non-amortising bank loans are drawn against unsecured, committed
revolving bank credit facilities maturing between January 2016 and
January 2018.
Group Company
-------------- --------------
2014 2013 2014 2013
GBPm GBPm GBPm GBPm
---------------------------------- ------ ------ ------ ------
Net debt
Derivative financial instruments 0.1 (3.6) 0.1 (3.6)
Interest-bearing loans and
borrowings 143.6 140.9 143.4 140.0
----------------------------------- ------ ------ ------ ------
Total borrowings 143.7 137.3 143.5 136.4
Less: cash at bank, cash
in hand and short-term deposits 32.8 33.8 1.0 0.9
----------------------------------- ------ ------ ------ ------
110.9 103.5 142.5 135.5
---------------------------------- ------ ------ ------ ------
2014 2013
---------------- ----------------
Book Fair Book Fair
value value value value
GBPm GBPm GBPm GBPm
---------------------------------- ------- ------- ------- -------
Financial assets and financial
liabilities
Short-term borrowings 2.5 2.8 48.7 49.0
Medium-term borrowings 138.6 140.1 86.2 87.5
Long-term borrowings 1.7 1.7 5.2 5.7
Derivative financial instruments 0.1 0.1 (3.6) (3.6)
Finance leases 0.2 0.2 0.3 0.3
Bank overdrafts 0.6 0.6 0.5 0.5
----------------------------------- ------- ------- ------- -------
Total financial assets and
financial liabilities 143.7 145.5 137.3 139.4
Less: cash at bank, cash
in hand and short-term deposits 32.8 32.8 33.8 33.8
----------------------------------- ------- ------- ------- -------
Net debt 110.9 112.7 103.5 105.6
----------------------------------- ------- ------- ------- -------
The fair value of the fixed term, amortising borrowing is
calculated as the present value of all future cash flows discounted
at prevailing market rates.
Trade and other receivables and trade and other payables
carrying values of GBP158.6m (2013: GBP159.8m) and GBP212.4m (2013:
GBP197.8m) respectively, in respect of the Group and GBP270.2m and
GBP311.0m (2013: GBP230.3m and GBP287.7m), in respect of the
Company, are assumed to approximate their fair values due to their
short-term nature.
A separate table has not been prepared analysing the Company's
book values and fair values. The GBP0.2m difference in book values
relates to interest bearing loans and borrowings and is deemed to
be short term in nature.
2014 2013
--------------------------------------- ---------------------------------------
Floating Fixed rate Floating Fixed rate
rate financial financial rate financial financial
liabilities liabilities Total liabilities liabilities Total
Currency GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ---------------- ------------- ------ ---------------- ------------- ------
Sterling 126.8 16.6 143.4 121.5 18.8 140.3
Colombian peso 0.2 - 0.2 0.6 - 0.6
Net derivative
liabilities/(assets) 0.1 - 0.1 (3.6) - (3.6)
----------------------- ---------------- ------------- ------ ---------------- ------------- ------
127.1 16.6 143.7 118.5 18.8 137.3
----------------------- ---------------- ------------- ------ ---------------- ------------- ------
At 31 December 2014, the expiry profile of undrawn committed
facilities was:
Group Company
2014 2013 2014 2013
----------------------------
GBPm GBPm GBPm GBPm
---------------------------- ----- ----- ----- -----
Less than one year - 48.1 - 48.1
Between one and two years 55.0 - 55.0 -
Between two and five years 43.8 0.2 43.8 0.2
----------------------------- ----- ----- ----- -----
98.8 48.3 98.8 48.3
---------------------------- ----- ----- ----- -----
Cash flow hedges
Foreign exchange forward contracts
At 31 December 2014 the Group held foreign currency forward
contracts designed as hedges of transaction exposures arising from
non-local currency revenue. These contracts were in line with the
Group's policy to hedge significant forecast transaction exposures
for a maximum 18 months forward. The cash flow hedges of non-local
revenue were assessed to be highly effective.
Interest rate swaps
The Group's policy is to minimise exposures to interest rate
risk by ensuring an appropriate balance of long-term and short-term
floating rates. During 2014 the Group had no interest rate swaps in
place. At 31 December 2014, 11.6% (2013: 13.3%) of the Group's
borrowings were fixed.
2014 2013
---------------------- ---------------------
Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm
---------------------------- -------- ------------ ------- ------------
Fair value of cash flow
hedges - currency forward
contracts - (0.3) - (0.3)
----------------------------- ------- ------------ ------- ------------
Current value - (0.3) - (0.3)
----------------------------- ------- ------------ ------- ------------
For 2014, 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 GBP0.6m (2013:
GBP0.6m) lower/higher, mainly as a result of higher/lower interest
expense on floating rate borrowings.
Foreign currency net investment hedges
The Group's treasury policy is to hedge the exposure of currency
denominated assets to foreign exchange risk. This is primarily
achieved using forward contracts denominated in the relevant
foreign currencies. Gains or losses on the retranslation of these
hedges are transferred to reserves to offset any gains or losses on
translation of the net investments in the subsidiary
undertakings.
The notional principal amounts of the outstanding forward
foreign exchange contracts are:
Group and Company
--------------------------------------------------
Currency value Sterling equivalent
---------------------- ----------------------
2014 2013 2014 2013
million million GBPm GBPm
--------------------- ------- --- -------- ------------ -------- ------------
Australian dollar 26.4 22.4 13.8 12.1
Canadian dollar 5.5 - 3.0 -
Colombian peso 7,800.0 - 2.1 -
Czech koruna 115.0 115.0 3.2 3.5
Euro 21.5 21.5 16.7 17.9
Indian rupee 1,000.0 1,000.0 10.2 9.8
Mexican peso 51.0 - 2.2 -
New Zealand
dollar 3.0 3.0 1.5 1.5
Norwegian krone 7.0 - 0.6 -
South African
rand 55.0 55.0 3.0 3.2
Swedish krona 50.0 50.0 4.1 4.7
US dollar 35.0 32.5 22.4 19.6
----------------------------------- -------- ------------ -------- ------------
2014 2013
---------------------- ----------------------
Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm
--------------------- ------- --- -------- ------------ -------- ------------
Fair value of foreign
currency net investment
hedges 1.9 (1.7) 3.9 -
------------------------------ --- -------- ------------ -------- ------------
Current value 1.9 (1.7) 3.9 -
----------------------------- ---- -------- ------------ -------- ------------
Foreign currency sensitivity
For 2014, if Sterling had weakened/strengthened by 10% on
currencies that have a material impact on the Group, the effect on
profit before tax and equity, with all other variables held
constant would have been:
2014 2013
------------------------ ------------------------
Effect Effect
on profit on profit
before Effect before Effect
tax on equity tax on equity
-----
Changes in rate GBPm GBPm GBPm GBPm
------------------- ----- ----------- ----------- ----------- -----------
US dollar +10% 0.6 2.6 0.6 2.2
US dollar -10% (0.5) (2.1) (0.5) (1.8)
Euro +10% 0.7 1.3 0.7 2.3
Euro -10% (0.6) (1.1) (0.6) (1.9)
Australian dollar +10% 0.7 1.4 0.8 1.2
Australian dollar -10% (0.6) (1.1) (0.6) (1.0)
Indian rupee +10% 0.6 1.2 0.5 1.1
Indian rupee -10% (0.5) (1.0) (0.4) (0.9)
South African
rand +10% 0.3 0.8 0.4 0.8
South African
rand -10% (0.2) (0.7) (0.3) (0.6)
-------------------- ----- ----------- ----------- ----------- -----------
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.
Capital risk management
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 net debt (see Note 10) and equity attributable
to equity holders of the Company (see Group and Company Statement
of Changes in Equity). The only externally imposed capital
requirements for the Group are total debt to EBITDA and interest
cover under the terms of the bank facilities, with which the Group
has fully complied during both the current 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:
Group Company
-------------- ------------
2014 2013 2014 2013
GBPm GBPm GBPm GBPm
------------------- ------ ------ ----- -----
Bank deposits 32.8 33.8 1.0 0.9
Trade receivables 148.4 141.9 - -
-------------------- ------ ------ ----- -----
181.2 175.7 1.0 0.9
------------------- ------ ------ ----- -----
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.
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.
Due under Due between Due between Due over
1 year 1-2 years 2-5 years 5 years
2014 GBPm GBPm GBPm GBPm
Interest bearing loans
and borrowings (6.5) (5.9) (144.5) (0.3)
Preference shares (0.1) (0.1) (0.4) (1.5)
Other liabilities (0.2) - - -
Trade and other payables (133.2) (4.0) - -
Financial derivatives (83.3) - - -
-------------------------- ---------- ------------ ------------ ---------
(223.3) (10.0) (144.9) (1.8)
-------------------------- ---------- ------------ ------------ ---------
Due under Due between Due between Due over
1 year 1-2 years 2-5 years 5 years
2013 GBPm GBPm GBPm GBPm
Interest bearing loans
and borrowings (51.4) (4.8) (90.0) (3.8)
Preference shares (0.1) (0.1) (0.4) (1.5)
Other liabilities (0.3) - - -
Trade and other payables (197.8) (10.5) - -
Financial derivatives (72.5) - - -
-------------------------- ---------- ------------ ------------ ---------
(322.1) (15.4) (90.4) (5.3)
-------------------------- ---------- ------------ ------------ ---------
13. CONTINGENT LIABILITIES
In the normal course of business, the Company has guaranteed
certain trading obligations of its subsidiaries.
14. ACQUISITIONS
On 17 November 2014 the Group acquired 60% of the share capital
of PlaneBiz 2015 Ltd, a New Zealand based aviation company in order
to strengthen its position in ground and cargo handling.
PlaneBiz 2015
Ltd Total acquisitions
2014 2013
GBPm GBPm
--------------------------------- -------------- -------------------
Purchase consideration
Cash payable 0.6 9.2
Uplift on fair value of 1.1 -
assets transferred
Deferred consideration - 2.2
Contingent consideration - 1.3
--------------------------------- -------------- -------------------
Total purchase consideration 1.7 12.7
Less: fair value of net assets
acquired 1.8 12.6
Less: non-controlling interests (1.4) -
--------------------------------- -------------- -------------------
Goodwill 1.3 0.1
--------------------------------- -------------- -------------------
The assets and liabilities arising from the acquisitions are as
follows:
PlaneBiz 2015
Ltd Total acquisitions
2014 2013
GBPm GBPm
--------------------------------- -------------- -------------------
Non-current assets - fair value
Intangible assets (contracts) 0.7 12.1
Property, plant and equipment 1.1 4.6
Other non-current assets - 0.3
Current assets - 4.0
Cash - 0.3
Current liabilities - (6.2)
Finance leases and borrowings - (2.5)
--------------------------------- -------------- -------------------
Net assets acquired 1.8 12.6
--------------------------------- -------------- -------------------
The fair values of the 2014 net assets acquired (PlaneBiz 2015
Ltd) remain provisional pending the formal completion of the
valuation process.
PlaneBiz 2015 Ltd reflects the combination of part of the
Group's Aviation business in New Zealand with a third party
aviation business, the former owners of which are the 40%
shareholders of the acquired company. The shareholders' agreement
in relation to this transaction includes put and call options over
the 40% of shares the Group does not own. These options, which
become exercisable in 2018 to 2019, have been recognised as a
financial instrument included in Note 12. The fair value of the put
option is GBP2.8m with a corresponding debit to equity. The call
option is considered to have a negligible fair value. The
transaction also resulted in a GBP1.1m credit to equity on the
uplift on fair value of assets transferred.
The acquired business contributed profit before tax of GBP0.1m
from the date of acquisition. If the business had been acquired on
1 January 2014 profit before tax contributed would have been
GBP0.6m.
Other
Deferred consideration totalling GBP2.2m was paid for Skystar
(acquired in 2013), Flight Support and Kamino Cargo (both acquired
in 2012). These amounts became payable and were cash-settled in
2014.
15. CASH FLOW HEDGE RESERVE
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.
16. RELATED PARTY TRANSACTIONS
During the year the Group transacted with related parties in the
normal course of business and on an arm's length basis. Details of
these transactions are:
Amounts Amounts
owed to owed by
related related
Group share Sales party at party at
holding to related 31 December 31 December
party 2014 2014
Related party % GBPm GBPm GBPm
------------------------------------- -------------- ------------- ------------- -------------
Menzies Bobba Ground Handling
Services Private Ltd 51 0.2 - -
Hyderabad Menzies Air Cargo Private
Ltd 49 0.6 - -
Menzies Aviation Bobba (Bangalore)
Private Ltd 49 0.1 - -
Menzies Macau Airport Services
Ltd 29 0.2 - 0.1
EM News Distribution (NI) Ltd 50 0.6 5.1 -
EM News Distribution (Ireland)
Ltd 50 1.2 - 1.9
------------------------------------- -------------- ------------- ------------- -------------
Key management personnel include individuals who are Executive
Directors of the Group and divisional boards having authority and
responsibility for planning, directing and controlling activities
of the operating divisions as disclosed in the segmental analysis.
Remuneration of key management personnel is as follows:
2014 2013
GBPm GBPm
------------------------------------- ----- ------------
Short-term employee benefits 4.6 4.5
Post-employment pension and medical
benefits 0.3 0.4
Termination benefits 0.1 0.2
Share-based payments 0.6 1.4
------------------------------------- ----- ------------
5.6 6.5
------------------------------------- ----- ------------
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 2014 was GBP0.2m (2013:
GBP0.2m).
Transactions between the Company and other Group companies
primarily related to financing activities.
17. ACCOUNTS
The figures used in this statement, which was approved by the
Directors on 9 March 2015, are not the Group's statutory accounts
within the meaning of Section 434 of the Companies Act 2006 for the
year, but are taken from those accounts. The Auditor's report on
the statutory accounts was unqualified and did not contain a
statement under Section 428 (4(f)) of the Companies Act 2006.
18. ANNUAL REPORT
The Annual Report and Accounts will be available on 3 April 2015
and the Annual General Meeting will be held at the Roxburghe Hotel
in Edinburgh on 15 May 2015 at 2.00pm. Statutory accounts for the
year ended 31 December 2013 have been delivered to the Registrar of
Companies and those for the year to 31 December 2014 will be
delivered following the Company's Annual General Meeting.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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