TIDMMNZS
RNS Number : 9751N
Menzies(John) PLC
15 August 2017
John Menzies plc
Half year results for the six months ended 30 June 2017
Financial Summary
2017 2017 2016
Reported Constant
currency([7])
Turnover([1]) GBP1,216.6m GBP1,157.7m GBP1,002.2m
Underlying operating GBP30.1m GBP26.5m GBP21.1m
profit([2])
Operating profit GBP7.1m --- GBP6.4m
Underlying profit GBP24.7m GBP21.1m GBP18.1m
before taxation([3])
Profit before tax GBP0.5m --- GBP3.0m
Operating cash GBP35.5m --- GBP31.0m
flow([4])
Underlying earnings
per share([5] [6]) 21.8p --- 18.0p
Basic earnings
per share([6]) (4.3)p --- (2.2)p
Dividend per share 6.0p --- 5.4p
Overview
-- The Group has enjoyed a positive first half
-- Underlying profit before taxation up 36% to GBP24.7m
-- Exceptional items in operating profit were GBP17.6m (H1 2016:
GBP10.0m) relating to corporate transaction costs and defined
benefit pension de-risking resulting in profit before tax of
GBP0.5m
-- Interim dividend of 6.0p, up 11%
-- Menzies Aviation produced a strong first half performance
-- Underlying operating profit more than doubled to GBP21.7m
-- ASIG acquisition completed on 1 February 2017; business is
performing well with integration plans on track
-- Contract win momentum across the network remains strong
-- Infrastructure investments and innovation producing benefits
-- Menzies Distribution results in line with expectations
-- Underlying operating profit of GBP10.8m broadly flat after
adjusting for football related sticker sales
-- Excellent cost performance mostly offsets volume decline and wage inflation
Dr Dermot F. Smurfit, Chairman of John Menzies plc said:
"I am pleased to report that the Group is trading well.
"Menzies Aviation continues to go from strength to strength. The
recently acquired ASIG business is integrating well and generating
many opportunities for growth. Within the rest of the business
contract win momentum continued and we are benefiting from our
investments into infrastructure and innovation.
"Menzies Distribution remains a strong business, performing well
despite cost and volume pressures.
"Overall, I am very pleased with the Group's performance in the
first half and we look to the future with confidence as
demonstrated by the increased dividend payment."
Notes
1. Turnover is revenue plus the Group's share of revenue from joint ventures and associates.
2. Underlying operating profit is operating profit adjusted 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.
3. Underlying profit before taxation is underlying operating 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 and share based 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. Number of shares in the prior period has been restated to
adjust for the impact of the October 2016 rights issue.
7. Performance at constant currency has been calculated by
translating non-Sterling earnings for the current period into
Sterling at the exchange rates used for the same period in the
prior year. No adjustment has been made for the impact of
acquisitions in the current period.
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 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. Today the
company is an international business with operations worldwide.
2. Menzies Aviation is a leading global provider of passenger,
ramp and cargo services. Menzies Aviation operates at 213 airports
in 35 countries, supported by a team of some 34,500 highly-trained
people. Each year Menzies Aviation serves some 1,000 customers,
handling 1.2 million flights, 1.6 million tonnes of cargo and
fuelling over 3 million turnarounds. Customers include Air Canada,
Air France-KLM, Alaska Airlines, American Airlines, Cathay Pacific,
Delta Air Lines, easyJet, Emirates, Frontier Airlines, IAG,
Lufthansa, Norwegian Air Shuttle and United Airlines. Best in class
safety and security is the number one priority each day and every
day.
3. Menzies Distribution operates one of the largest overnight
logistics networks in the UK, providing final mile delivery for
over 100 million delivery units each year serving customers in the
press, travel and third-party logistics sectors. From over 50 sites
across Great Britain and Ireland, a team of some 3,500 employees
pick, pack, cross-dock and transport clients' materials to bring
them to their ultimate destination. In addition to its core role
within the UK print media supply chain, delivering over five
million magazines and newspapers every day, the division is
expanding into both UK retail logistics and neutral consolidation
within the fast growing parcel delivery market.
For further information:
John Menzies plc
Giles Wilson, Chief Financial Officer 0131 459 8018
John Geddes, Corporate Affairs Director 0131 459 8018
FTI Consulting
Jonathon Brill/Alex Beagley 020 3727 1000
Chairman's Statement
I have now been in post for over one year and I am pleased with
the progress the Group is making. We have strong teams in place, we
continue to invest in our infrastructure and innovation to ensure
that we are leaders in our markets and we are very well placed to
take advantage of the excellent growth opportunities that
exist.
As announced on 14 August 2017, despite the strong strategic and
commercial benefits which would arise from a combination of Menzies
Distribution and DX Group plc ("DX"), and despite further
discussions with DX following the DX announcement of 14 July 2017,
the Board does not believe it is currently possible to agree a
revised set of terms with DX for the combination which would be in
the interests of our shareholders and we have therefore terminated
discussions with DX.
The Board continues to believe there is strategic merit in and
potential shareholder value to be created by separating, at the
appropriate time, its Aviation and Distribution divisions into two
strategically focussed and independent businesses and we continue
to review the options available.
On 1 June 2017 we appointed Philipp Joeinig, as a non-executive
director, to the Board. Philipp has extensive aviation industry
knowledge and his appointment further strengthens the overall skill
set of the Board as we look to continue our expansion in the
aviation services marketplace.
Dermot Jenkinson who was appointed to the Board in 1986,
initially as an executive director and since 1999 as a
non-executive, has intimated his desire to step down and
concentrate on his growing personal business activities.
Accordingly, he will formally leave the Board on 31 October 2017.
Dermot has made an outstanding contribution to the Group over the
last 30 years both in representing the interests of the founding
Menzies family and through his highly astute business acumen and
deep knowledge of our Group. Dermot leaves with our very best
wishes for the future.
Our employees are at the heart of everything we do. I would like
to welcome the 8,000 new employees who joined us from ASIG on 1
February 2017. We now have 38,000 employees operating in 268
locations in 37 countries. Without them our business does not
function and I would like to thank them all for their efforts.
In line with the Group's plan to follow a progressive policy to
increase dividends over time, the Board has declared an interim
dividend of 6.0p per share which is payable on 17 November 2017 to
all shareholders on the register at 20 October 2017.
Outlook
The Group has continued to trade well since the period end and
we look forward to the remainder of the year with confidence.
We continue to look at our Group structure with a view to
delivering shareholder value by creating two strong pure play
companies.
Menzies Aviation has started the second half positively with
continuing contract gains, expansion of our service offering,
continued investment into infrastructure and a focus on delivering
the exciting growth opportunities that exist.
Menzies Distribution continues to seek new pathways to growth by
investing into our diversified businesses, utilising our assets
during daylight hours and within the core Newstrade business the
division is well positioned ahead of the impending publisher
contract renewals.
Overall the Board is confident with the Group's outlook for 2017
and we are firmly on track to meet the Board's expectations for the
full year.
Group Performance Review - Giles Wilson, Chief Financial
Officer
Group performance in the first half of 2017 improved
significantly with underlying operating profit up 43% (26% in
constant currency) and underlying profit before tax up 36% (17% in
constant currency). The improvement was a result of a strong
performance at Menzies Aviation, particularly as a result of the
acquisition of the ASIG business in February. The Group's profit
before tax was GBP0.5m reflecting the significant level of
investment in the ASIG acquisition and integration, the work to
demerge and sell the Menzies Distribution business and the
de-risking and restructuring of the Company's defined benefit
pension scheme.
Menzies Aviation continues to go from strength to strength. The
recently acquired ASIG business is integrating well, synergies are
tracking in line with expectations and we are developing many new
opportunities for growth. Contract win momentum continued with
constant currency turnover excluding the impact of ASIG up 12% year
on year, while we continue to benefit from our investments into
infrastructure and innovation. Menzies Distribution remains a
strong business, performing well despite cost and volume pressures.
Turnover of the Aviation segment exceeded that of Distribution for
the first time.
The Group's turnover was GBP1,216.6m (H1 2016: GBP1,002.2m).
Underlying profit before tax grew to GBP24.7m (H1 2016: GBP18.1m)
following a strong performance in Menzies Aviation and favourable
foreign exchange translation. The Group's profit before tax was
GBP0.5m (H1 2016: GBP3.0m). Group underlying earnings per share
rose to 21.8p (H1 2016 restated: 18.0p).
Financial Overview
Exceptional and other items in operating profit
Included in the Group's exceptional items in operating profit
were transaction related costs of GBP12.5m, primarily relating to
the acquisition and integration of ASIG and the work to demerge and
sell the Menzies Distribution business, and GBP5.1m of costs and
charges relating to closing the pension scheme to future accrual
and subsequently sectionalising the scheme.
Finance costs
The Group's underlying net finance charge in the period was
GBP5.4m (H1 2016: GBP3.0m). The increase reflects higher levels of
debt to fund the acquisition of ASIG, higher rates of interest
rates on US dollar borrowings and fixing of the interest rates on
50% of the $250m term loan.
Taxation
As a multinational business the Group is liable for taxation in
multiple jurisdictions around the world. The Group's underlying tax
charge for the period was GBP6.9m (H1 2016: GBP5.8m), representing
an effective underlying tax rate of 28% (H1 2016: 32%).
Earnings per share
The Group's underlying earnings per share were 21.8p (H1 2016
restated: 18.0p) as a result of the increase in profits. The
corresponding basic earnings per share were (4.3)p (H1 2016
restated: (2.2)p) driven by non-recurring items.
Defined benefit pension scheme
As at 30 June 2017, the Group's defined benefit pension scheme
showed a deficit of GBP52.1m (H1 2016: GBP52.7m) with the effect of
a decrease in the discount rate applied to the scheme liabilities
largely offset by the impacts of favourable demographic
assumptions, higher returns on invested assets and continuing
additional cash contributions. As previously reported, the Trustee
and the Company have agreed a long-term funding plan that will
result in additional annual contributions of GBP10.7m in the
2016/2017 pension year rising with the higher of inflation and the
percentage change in annual shareholder dividends up to 2025, the
latter only when exceeding 2013's level. The next triennial
valuation is set for March 2018 and new deficit contributions will
be set to reflect the sectioned pension scheme's different funding
profiles.
On 31 March 2017 the Company and Trustee agreed to close the
defined benefit pension scheme to future accrual and on 31 May 2017
to sectionalise the scheme. The related exceptional charge of
GBP5.1m comprises the accounting impact of revaluing of past
benefits for those impacted and the costs and fees to complete the
process.
On 31 May 2017 the Company and Trustee further agreed to split
the defined benefit pension scheme into two sections, one supported
by the covenant of the Menzies Distribution division and the
remainder by the Company. The Company will continue to guarantee
the funding of the Menzies Distribution section for as long as the
business remains part of the Group. On 30 June 2017 17% of the
scheme's assets and liabilities were transferred to the new Menzies
Distribution section.
Cash flow and investments
Investments by the Group in the period were GBP159.4m, primarily
for the acquisition of ASIG in Menzies Aviation. Also included were
the investments to acquire Gold Coast Air Terminal Services in
Menzies Aviation and the partner's share of the Irish joint
ventures in Menzies Distribution.
Operating cash flow was GBP35.5m (H1 2016: GBP31.0m). Working
capital management remains a key focus for the business. Free cash
flow was GBP5.4m (H1 2016: GBP16.4m). Net capital expenditure
totalled GBP15.3m (H1 2016: GBP6.9m).
Debt and facilities
The Group continues to operate on a strong financial footing
with a robust balance sheet built from strong operating cash flows
across both divisions. At the period end, net debt was GBP235.4m
(H1 2016: GBP126.6m), mostly reflecting the impact of the
acquisition of ASIG, partly offset by net proceeds from the rights
issue in October 2016.
The Group's net debt to EBITDA ratio was 2.3 times at 30 June
2017 (30 June 2016: 1.7 times) and interest cover was 9.7 times (H1
2016: 9.3 times), which were both well within covenanted levels.
The Group had GBP351.0m of committed facilities at 30 June 2017 of
which GBP57.9m were undrawn.
As previously reported, the Group entered into a new syndicated
debt facility, comprising a $250m term loan and a GBP150m revolving
credit facility in September 2016, which expires in June 2021. The
new facility was drawn down to fund the acquisition of ASIG on 1
February 2017 and repay existing facilities with the exception of
GBP10.0m remaining on a term loan with RBS. In February 2017 the
Company entered into interest rate swaps to fix 50% of the $250m
term loan facility for the duration of the loan.
Impact of foreign exchange movements
The majority of Menzies Aviation's stations are located outside
the UK and operate in currencies other than sterling. The Group
hedges the exposure of foreign currency denominated assets to
manage the impact of currency movements in the Group's net assets
using forward contracts. The translation of profits from overseas
trading entities is not hedged and as a result the movement of
exchange rates directly affects the Group's reported results. In
the first half of 2017 the Group benefitted from favourable
movements against the prior year, particularly with respect to
Sterling against the US and Australian dollars. Excluding the
acquisition of ASIG the year on year exchange benefit was GBP2.9m
reflecting the impact of the decline in Sterling following the
Brexit vote in June 2016.
Menzies Aviation - Business Review - Forsyth Black, Managing
Director Menzies Aviation
2017 has started well. Our teams have been very busy winning and
starting up new business while also integrating the ASIG business
at 87 airports and within our head office functions. Underlying
operating profit increased to GBP21.7m (H1 2016: GBP10.4m). This
included a contribution of GBP6.4m from the ASIG business acquired
on 1 February 2017. This increase demonstrates the momentum within
the division following good contract wins and renewal performance,
a clear focus on productivity and continuing to work with our
customers to deepen relationships.
Having completed the acquisition of ASIG, we have a dedicated
team focusing on integration and synergy delivery and they continue
to make good progress. We are pleased that the business we have
bought has been in line with our expectations. Synergy delivery is
on track, and we have exited, on schedule, the transitional support
agreement with BBA Aviation plc.
We are very encouraged that the opportunities to grow the
business, particularly within the into-plane fuelling market, are
very exciting and we are also exploring further synergies between
the into-plane fuelling and ground handling businesses which had
not been forecast.
As is often the case with portfolio businesses, the ground
handling business has required some remedial action. Where possible
we have sought rate increases from customers to turn around loss
making contracts and where this has not been possible we have
closed stations that have no viable route to profitability, as
evidenced by the closure of operations at New York JFK at the end
of July. Thereafter, we are implementing Menzies' strict pricing
policy and are seeking to improve productivity.
Fuel farm management is a new business stream to the Group. We
now manage 59 farms in North America and the UK. Performance has
been in line with our expectations and we are pleased to have
developed new customer relationships with oil companies including
BP, Shell and ExxonMobil.
Across the network, ground handling volume increased by 13.0%
following prior year contract wins at London Gatwick, general
contract win momentum and new ground handling turns within the ASIG
business. Cargo handling tonnes were up marginally at 2.4% with
generally good volume throughout the network tempered by prior year
contract losses. Our into-plane fuelling business handled some 1.7m
aircraft turns in the first half and we will seek to grow
organically in North America and the UK where we have existing
operations.
Our focus on commercial activities continued with 87 contract
wins during the period, adding GBP22m of annual revenue. Contract
gains were well spread across the network. We are particularly
pleased that within the figure some 29 new into-plane fuelling
contracts were secured demonstrating customer approval of our
acquisition of ASIG and their confidence in our ability to raise
standards and deliver excellent service. There were also 59
contract renewals in the period securing some GBP39m of annual
revenue.
During the period we were notified by easyJet that they would
not be renewing their contract with us at London Gatwick. Whilst
disappointed at their decision, we cannot continue to operate
contracts where the risk profile does not match the return and we
will continue to price contracts at what we believe to be
acceptable rates. There will be no earnings dilution as a result of
this loss. easyJet continues to be an important customer and we are
committed to delivering an excellent handover to their new
supplier. We look forward to continuing to work closely with
easyJet across the many other airports we operate for them. The
strength of our relationship has been demonstrated recently with
the award of a contract to handle some 12,000 turns in Nice,
France.
Looking at regional performance, our EMEA region had a good
first half. UK operations benefited from contract wins,
particularly at London Gatwick where 16 contracts were secured in
December 2016 following the failure of a competitor. This makes
London Gatwick a strong station within the portfolio despite not
renewing the easyJet business. During March we entered the German
market, with passenger services operations commencing at four of
the country's busiest airports; Dusseldorf, Frankfurt, Hamburg and
Munich, for British Airways and BA CityFlyer. Elsewhere in the
region we continue to make progress towards the commencement of our
joint venture with Oman Air and now expect operations to start in
the third quarter of the year. Business development opportunities
within the region are strong and our teams are pursuing a number of
opportunities in new and existing markets. We continue to explore
our options in South Africa where the ground handling market is
difficult and in our Amsterdam cargo business where we are looking
to attract new customers and to re-negotiate local labour
agreements in an attempt to turn around this business. In March we
opened a landmark lounge in Copenhagen with capacity for 170 seated
guests.
In the Americas, whilst a huge amount of focus was given to the
integration of the ASIG business, we were still successful in
winning new business. Frontier Airlines awarded their base
operation in Chicago which started successfully in February, we won
further business with Norwegian Airlines at Bradley, Fort
Lauderdale and Newark as well as Zihuatanejo, Mexico. In addition,
we renewed their business in Los Angeles and Orlando. These
contract wins demonstrate the need for a seamless commercial
activity as the service and relationship in Continental Europe was
key to securing the new business. These wins were tempered as
previously announced by the loss of the Alaska Airlines contract at
their hub in Seattle. The acquisition of ASIG brings many new
airline and airline consortia relationships and our commercial
teams have been very busy appraising opportunities and looking for
ways to benefit from the significant cross selling opportunities
that now exist. Staff turnover in North America is prevalent across
the industry and we continue to look at innovative ways to tackle
this issue. We are now operating a central recruitment centre in
Dallas and have a fully online recruitment process that will allow
access to new workers quickly and more efficiently.
In Oceania, we reached agreement to acquire Gold Coast Air
Terminal Services in Queensland, Australia. This move further
strengthens our cargo offering across Australia and is a good
strategic fit with our existing operations. In New Zealand, we have
seen a large number of contract gains at Auckland that are
performing to expectations after a period of operational challenges
due to the scale of the expansion.
Within our existing operations we continue to challenge our
local teams to improve margins and this project is delivering
benefits. Improvements can, where local demand exists, be the
addition of a new product such as a lounge or de-icing services or
may just be the implementation of technology to improve
productivity and drive better returns. The UK in particular is
benefiting and we continue to see this business turnaround.
Our drive to be the market leader in our industry continues. We
are investing in infrastructure and innovation across the whole of
our business. We believe that as a professional aviation services
business with global operations our customers can benefit from our
research and development activities. This undoubtedly helps to win
business as our airline customers see the level of automation and
innovation we are bringing to their operations and this also drives
cost out of their business as they no longer have to invest in new
technologies.
AMI, our global cargo consolidation and forwarding business, has
performed well during the period with profits ahead of the same
period in the prior year. We are embarking on a project to
centralise back office functions as we seek to move the business
forward utilising a central platform where we believe further
growth can be achieved.
Menzies Distribution - Business Review - Greg Michael, Managing
Director, Menzies Distribution
Distribution delivered a slightly lower result due to lack of
football related sticker sales in the period. Underlying operating
profit was GBP10.8m (H1 2016: GBP12.0m) representing a good result
in light of increased volume reductions within the magazine market,
increased wage costs and considering that 2017 did not have a major
football event to drive sticker sales, a GBP1.4m year on year
impact. Diversified businesses continued to increase their
contribution and it is important that they continue to prosper to
partly mitigate the declines within the core newstrade
business.
Overall sales of newspapers were in line with management
expectations. Newspaper volumes were down 9.8% on a like for like
basis although the sector continued to benefit from cover price
appreciation such that sales value on a like for like basis was
down 1.7%. Magazine volumes were below expectations, down 11.0% on
a like for like basis and 8.7% in value terms, albeit the decline
has marginally improved in the last two months of the period. Sales
volume was boosted by new contracts most notably supply to Lidl
across the network.
Cost savings initiatives again delivered an excellent result. In
the period GBP3.5m cost savings were generated through further
productivity initiatives, automation within the branch network and
the annualisation of the prior year network re-organisation.
In May, we bought out Eason & Son, our joint venture partner
across Ireland, and now have full control of operations. This
strengthens our position as we are the only wholesaler operating
throughout the UK and the Republic of Ireland and puts us in a
great position to offer joined-up logistics services to new clients
across both territories, strengthening our connection with the
existing publishers.
Retail logistics operations continued to gain traction in the
period. Our initial national contract with WHSmith continues, we
are delivering a good service to our customer and the contract is
making a positive contribution to the division. Returns however,
are behind those forecast due to a number of operational
challenges. These challenges have resulted in a number of lessons
being learned and we are now in a much stronger place to add new
contracts and ensure the forecast returns are delivered. In this
regard on 4 April 2017 we began delivering medical supplies on
behalf of NHS Scotland. The deal sees us collecting stock from
their national distribution centre in Larkhall and distributing it
to hospitals across all regional health boards in Scotland. This
contract builds on the WHSmith business we have and we will look to
further broaden our offering during the remainder of the year.
Menzies Parcels started the year behind expectations but has
finished the period strongly following new business wins from TNT
and Aspray24, the national and international logistics providers.
In general we are seeing volumes harden and we anticipate that this
will continue in the second half.
Performance at Menzies Response remains challenging outside of
the travel brochure distribution business which is performing to
plan. Restructuring plans are in place and they will be delivered
in the second half.
Our other diversified businesses, Hand2Hand and Fore, continue
to trade well and are meeting management expectations.
We continue to look forward to the impending 2019 contract
renewals and have entered into preliminary discussions with
publishers. We enter this critical period with confidence. We have
a quality service offering, a well-funded business and an
opportunity to provide more services and utilise our increasing
footprint in the UK and the Republic of Ireland.
Independent review report to John Menzies plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2017 which comprises the Group Income
Statement, the Group Statement of Comprehensive Income, the Group
Balance Sheet, the Group Statement of Changes in Equity, the Group
Statement of Cash Flows and the related notes 1 to 16. We have read
the other information contained in the half yearly financial report
and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2017 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
Glasgow
14 August 2017
GROUP INCOME STATEMENT (unaudited)
for the half year to 30 June 2017
------------------------------------------------------------------------------------------------------------------
Before Half Before Half
exceptional Exceptional year exceptional Exceptional year
and and to 30 and and to 30
other other June other other June
items items 2017 items items 2016
Notes GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------ ------------- ------------ ---------- ------------- ------------ --------
Revenue 3 1,174.1 - 1,174.1 956.0 - 956.0
Net operating
costs (1,148.4) (22.5) (1,170.9) (939.2) (13.9) (953.1)
-------------------------- ------ ------------- ------------ ---------- ------------- ------------ --------
Operating profit
before joint
ventures and
associates 25.7 (22.5) 3.2 16.8 (13.9) 2.9
Share of post-tax
results of joint
ventures and
associates 4.4 (0.5) 3.9 4.3 (0.8) 3.5
-------------------------- ------ ------------- ------------ ---------- ------------- ------------ --------
Operating profit 3 30.1 (23.0) 7.1 21.1 (14.7) 6.4
Analysed as:
Underlying operating
profit(i) 3 30.1 - 30.1 21.1 - 21.1
Non-recurring
items - transaction
related and integration 4 - (12.5) (12.5) - (2.8) (2.8)
Non-recurring
items - pension
related 4 - (5.1) (5.1) - - -
Non-recurring
items - impairment
charges 4 - - - - (7.2) (7.2)
Contract amortisation 4 - (4.9) (4.9) - (3.9) (3.9)
Share of interest
on joint ventures
and associates - 0.5 0.5 - 0.3 0.3
Share of tax
on joint ventures
and associates - (1.0) (1.0) - (1.1) (1.1)
-------------------------- ------ ------------- ------------ ---------- ------------- ------------ --------
Operating profit 30.1 (23.0) 7.1 21.1 (14.7) 6.4
-------------------------- ------ ------------- ------------ ---------- ------------- ------------ --------
Finance income 5 0.6 - 0.6 0.3 - 0.3
Finance charges 5 (5.0) (1.2) (6.2) (2.4) (0.4) (2.8)
Other finance
charge - pensions 13 (1.0) - (1.0) (0.9) - (0.9)
-------------------------- ------ ------------- ------------ ---------- ------------- ------------ --------
Profit before
taxation 24.7 (24.2) 0.5 18.1 (15.1) 3.0
Taxation 6 (6.9) 2.4 (4.5) (5.8) 1.1 (4.7)
-------------------------- ------ ------------- ------------ ---------- ------------- ------------ --------
Profit/(loss)
for the period 17.8 (21.8) (4.0) 12.3 (14.0) (1.7)
-------------------------- ------ ------------- ------------ ---------- ------------- ------------ --------
Attributable
to equity shareholders 18.2 (21.8) (3.6) 12.5 (14.0) (1.5)
Attributable
to non-controlling
interests (0.4) - (0.4) (0.2) - (0.2)
-------------------------- ------ ------------- ------------ ---------- ------------- ------------ --------
17.8 (21.8) (4.0) 12.3 (14.0) (1.7)
-------------------------- ------ ------------- ------------ ---------- ------------- ------------ --------
Earnings per
ordinary share(ii)
Basic 7 21.8p (26.1)p (4.3)p 18.0p (20.2)p (2.2)p
Diluted 7 21.8p (26.1)p (4.3)p 18.0p (20.2)p (2.2)p
-------------------------- ------ ------------- ------------ ---------- ------------- ------------ --------
Notes:
(i) Underlying operating profit adjusts for non-recurring
exceptional items, impairment charges associated with goodwill,
joint venture assets and other intangibles, contract amortisation
and the Group's share of interest and tax on joint ventures and
associates to provide an appreciation of the impact of those items
on operating profit.
(ii) The half year 2016 EPS figures have been restated to adjust
for the impact of the October 2016 Rights Issue.
GROUP INCOME STATEMENT (continued)
for the year ended 31 December 2016
-----------------------------------------------------------------------------------
Before Full year
exceptional Exceptional to 31
and other and December
items other items 2016
Notes GBPm GBPm GBPm
--------------------------------- ------ ------------- ------------- ----------
Revenue 3 1,981.6 - 1,981.6
Net operating costs (1,935.2) (26.3) (1,961.5)
--------------------------------- ------ ------------- ------------- ----------
Operating profit
before joint ventures
and associates 46.4 (26.3) 20.1
Share of post-tax
results of joint
ventures and associates 8.8 (1.3) 7.5
--------------------------------- ------ ------------- ------------- ----------
Operating profit 3 55.2 (27.6) 27.6
Analysed as:
Underlying operating
profit(i) 3 55.2 - 55.2
Non-recurring items
- transaction related
and integration 4 - (8.8) (8.8)
Non-recurring items
- impairment charges 4 - (9.6) (9.6)
Contract amortisation 4 - (7.9) (7.9)
Share of interest
on joint ventures
and associates - 0.6 0.6
Share of tax on joint
ventures and associates - (1.9) (1.9)
--------------------------------- ------ ------------- ------------- ----------
Operating profit 55.2 (27.6) 27.6
--------------------------------- ------ ------------- ------------- ----------
Finance income 5 0.7 - 0.7
Finance charges 5 (4.6) (2.3) (6.9)
Other finance charge
- pensions 13 (1.6) - (1.6)
--------------------------------- ------ ------------- ------------- ----------
Profit before taxation 49.7 (29.9) 19.8
Taxation 6 (15.9) 4.1 (11.8)
--------------------------------- ------ ------------- ------------- ----------
Profit for the year 33.8 (25.8) 8.0
--------------------------------- ------ ------------- ------------- ----------
Attributable to equity
shareholders 34.3 (25.8) 8.5
Attributable to non-controlling
interests (0.5) - (0.5)
--------------------------------- ------ ------------- ------------- ----------
33.8 (25.8) 8.0
--------------------------------- ------ ------------- ------------- ----------
Earnings per ordinary
share
Basic 7 47.8p (35.9)p 11.8p
Diluted 7 47.7p (35.9)p 11.8p
--------------------------------- ------ ------------- ------------- ----------
Notes:
(i) Underlying operating profit adjusts for non-recurring
exceptional items, impairment charges associated with goodwill,
joint venture assets and other intangibles, contract amortisation
and the Group's share of interest and tax on joint ventures and
associates to provide an appreciation of the impact of those items
on operating profit.
GROUP STATEMENT OF COMPREHENSIVE INCOME (unaudited)
for the half year to 30 June 2017
-------------------------------------------------------------------------------
Half year Half year Full year
to to to
30 June 30 June 31 December
2017 2016 2016
Note GBPm GBPm GBPm
--------------------------------- ----- ---------- ---------- -------------
(Loss)/profit for
the period (4.0) (1.7) 8.0
Items that will not be
reclassified subsequently
to profit or loss:
Actuarial gain/(loss)
on defined benefit
pensions 13 17.5 (13.8) (36.8)
Actuarial loss on
unfunded pension
arrangements - - (0.3)
Income tax effect
on pension arrangements (3.4) 2.6 7.4
Impact of UK rate
change on deferred
tax on pension arrangements 0.5 - (1.6)
Items that may be reclassified
subsequently to profit
or loss:
Movement on cash
flow hedges 0.7 0.2 -
Income tax effect
on cash flow hedges (0.1) - -
Movement on net investment
hedges 0.6 (9.5) (15.2)
Income tax effect
on net investment
hedges (0.1) - 3.0
Exchange (loss)/gain
on translation of
foreign operations (1.9) 22.2 33.1
Income tax effect
of exchange loss/gain
on foreign operations (0.3) - (4.0)
--------------------------------- ----- ---------- ---------- -------------
Other comprehensive income/(loss)
for the period 13.5 1.7 (14.4)
---------------------------------------- ---------- ---------- -------------
Total comprehensive income
for the period 9.5 - (6.4)
---------------------------------------- ---------- ---------- -------------
Attributable to equity
shareholders 9.9 0.2 (5.8)
Attributable to non-controlling
interests (0.4) (0.2) (0.6)
--------------------------------- ----- ---------- ---------- -------------
9.5 - (6.4)
--------------------------------- ----- ---------- ---------- -------------
GROUP BALANCE SHEET (unaudited)
as at 30 June 2017
----------------------------------------------------------------------------
30 June 30 June 31 December
2017 2016 2016
Notes GBPm GBPm GBPm
---------------------------------- ------ -------- -------- ------------
Assets
Non-current assets
Intangible assets 8 202.3 104.3 104.0
Property, plant and
equipment 160.4 119.3 127.3
Investments in joint
ventures and associates 27.1 29.6 30.9
Deferred tax assets 23.7 13.0 24.2
413.5 266.2 286.4
---------------------------------- ------ -------- -------- ------------
Current assets
Inventories 18.9 14.1 16.0
Trade and other receivables 352.6 225.7 243.6
Derivative financial
assets 9 0.7 - 0.4
Cash and cash equivalents 11 67.0 46.2 38.9
439.2 286.0 298.9
---------------------------------- ------ -------- -------- ------------
Liabilities
Current liabilities
Borrowings 11 (10.3) (68.5) (39.0)
Derivative financial
liabilities 9 (1.4) (9.8) (6.1)
Trade and other payables (335.9) (233.4) (249.9)
Current income tax
liabilities (12.2) (8.8) (11.3)
Provisions (9.1) (5.5) (4.2)
(368.9) (326.0) (310.5)
---------------------------------- ------ -------- -------- ------------
Net current assets/(liabilities) 70.3 (40.0) (11.6)
Total assets less
current liabilities 483.8 226.2 274.8
---------------------------------- ------ -------- -------- ------------
Non-current liabilities
Borrowings 11 (291.4) (94.5) (64.7)
Other payables (4.9) (3.8) (4.0)
Deferred tax liabilities (9.2) - (2.8)
Provisions (2.8) (3.1) (4.0)
Retirement benefit
obligation 13 (52.1) (52.7) (71.0)
---------------------------------- ------ -------- -------- ------------
(360.4) (154.1) (146.5)
---------------------------------- ------ -------- -------- ------------
Net assets 123.4 72.1 128.3
---------------------------------- ------ -------- -------- ------------
Shareholders' equity
Ordinary shares 20.9 15.4 20.9
Share premium account 20.7 20.5 20.5
Treasury shares (1.3) (1.7) (1.6)
Other reserves (5.7) (8.7) (4.6)
Merger relief reserve 67.3 - 67.3
Retained earnings 3.7 23.6 3.2
Capital redemption
reserve 21.6 21.6 21.6
---------------------------------- ------ -------- -------- ------------
127.2 70.7 127.3
Non-controlling interest
in equity (3.8) 1.4 1.0
---------------------------------- ------ -------- -------- ------------
Total equity 123.4 72.1 128.3
---------------------------------- ------ -------- -------- ------------
GROUP STATEMENT OF CHANGES IN EQUITY (unaudited)
as at 30 June 2017
-------------------------------------------------------------------------------------------------------------------------------------------
Translation
Share and Merger Capital Total
Ordinary premium Treasury hedge relief Retained redemption shareholders' Non-controlling Total
shares account shares reserves reserve earnings reserve equity equity equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
At 31 December
2016 20.9 20.5 (1.6) (4.6) 67.3 3.2 21.6 127.3 1.0 128.3
Loss for
the period - - - - - (3.6) - (3.6) (0.4) (4.0)
Other
comprehensive
(loss)/income - - - (1.1) - 14.6 - 13.5 - 13.5
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
Total
comprehensive
(loss)/income - - - (1.1) - 11.0 - 9.9 (0.4) 9.5
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
New share
capital
issued - 0.2 - - - - - 0.2 - 0.2
Share-based
payments - - - - - 0.6 - 0.6 - 0.6
Subsidiaries
acquired - - - - - - - - (4.4) (4.4)
Dividends
approved - - - - - (10.9) - (10.9) - (10.9)
Disposal
of own
shares - - 0.3 - - (0.2) - 0.1 - 0.1
At 30 June
2017 20.9 20.7 (1.3) (5.7) 67.3 3.7 21.6 127.2 (3.8) 123.4
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
At 31 December
2015 15.4 20.4 (1.8) (21.6) - 35.6 21.6 69.6 1.6 71.2
Loss for
the period - - - - - (1.5) - (1.5) (0.2) (1.7)
Other
comprehensive
income/(loss) - - - 12.9 - (11.2) - 1.7 - 1.7
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
Total
comprehensive
income/(loss) - - - 12.9 - (12.7) - 0.2 (0.2) -
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
New share
capital
issued - 0.1 - - - - - 0.1 - 0.1
Share-based
payments - - - - - 0.8 - 0.8 - 0.8
Disposal
of own
shares - - 0.1 - - (0.1) - - - -
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
At 30 June
2016 15.4 20.5 (1.7) (8.7) - 23.6 21.6 70.7 1.4 72.1
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
At 31 December
2015 15.4 20.4 (1.8) (21.6) - 35.6 21.6 69.6 1.6 71.2
Profit/(loss)
for the
year - - - - - 8.5 - 8.5 (0.5) 8.0
Other
comprehensive
income/(loss) - - - 17.0 - (31.3) - (14.3) (0.1) (14.4)
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
Total
comprehensive
income/(loss) - - - 17.0 - (22.8) - (5.8) (0.6) (6.4)
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
New share
capital
issued 5.5 0.1 - - 69.7 - - 75.3 - 75.3
Rights
Issue costs - - - - (2.4) - - (2.4) - (2.4)
Share-based
payments - - - - - 0.8 - 0.8 - 0.8
Income
tax effect
of
share-based
payments - - - - - 0.3 - 0.3 - 0.3
Dividends
paid - - - - - (10.6) - (10.6) - (10.6)
Disposal
of own
shares - - 0.2 - - (0.1) - 0.1 - 0.1
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
At 31 December
2016 20.9 20.5 (1.6) (4.6) 67.3 3.2 21.6 127.3 1.0 128.3
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
GROUP STATEMENT OF CASH FLOWS (unaudited)
for the half year to 30 June 2017
--------------------------------------------------------------------------
Half year Half year Full year
to to to
30 June 30 June 31 December
2017 2016 2016
Notes GBPm GBPm GBPm
--------------------------- ------ ---------- ---------- -------------
Cash flows from operating
activities
Cash generated from
operations 10 15.6 20.4 46.1
Interest received 0.6 0.3 0.7
Interest paid (8.4) (2.7) (7.7)
Tax paid (7.0) (5.3) (15.4)
--------------------------- ------ ---------- ---------- -------------
Net cash flow from
operating activities 0.8 12.7 23.7
--------------------------- ------ ---------- ---------- -------------
Cash flows from investing
activities
Acquisitions 14 (172.1) (4.6) (4.7)
Cash acquired with
subsidiaries 14 12.7 0.3 0.3
Investment in associate - (0.3) (0.4)
Loan repayment by
associate - - 0.3
Purchase of property,
plant and equipment (15.7) (7.9) (24.5)
Intangible asset
additions (0.4) (0.4) (2.6)
Proceeds from sale
of property, plant
and equipment 0.8 1.4 2.4
Dividends received
from equity accounted
investments 3.5 1.8 6.6
--------------------------- ------ ---------- ---------- -------------
Net cash flow used
in investing activities (171.2) (9.7) (22.6)
--------------------------- ------ ---------- ---------- -------------
Cash flows from financing
activities
Proceeds from issue of
ordinary share capital 0.2 0.1 72.9
Disposal of own shares 0.1 - -
Repayment of borrowings (5.2) (2.8) (64.0)
Proceeds from borrowings 198.4 8.7 -
Dividends paid to
ordinary shareholders - - (10.6)
Net cash flow from/(used
in) financing activities 193.5 6.0 (1.7)
--------------------------- ------ ---------- ---------- -------------
Increase/(decrease)
in net cash and cash
equivalents 23.1 9.0 (0.6)
--------------------------- ------ ---------- ---------- -------------
Effects of exchange
rate movements (1.3) 3.0 4.8
Opening net cash
and cash equivalents 38.1 33.9 33.9
--------------------------- ------ ---------- ---------- -------------
Closing net cash
and cash equivalents(i) 11 59.9 45.9 38.1
--------------------------- ------ ---------- ---------- -------------
Note:
(i) Net cash and cash equivalents include cash at
bank and in hand and bank overdrafts.
NOTES TO THE INTERIM ACCOUNTS
1. INTRODUCTION
These interim condensed financial statements are prepared in a
consolidated format. They relate to the half year to 30 June 2017
and are unaudited but have been formally reviewed by the Auditors
and their report to the Company is set out herein. They were
approved by the Board on 14 August 2017. These interim condensed
financial results do not comprise statutory accounts within the
meaning of Section 435 of the Companies Act 2006. Statutory
accounts for the year to 31 December 2016, prepared in accordance
with IFRS, have been filed with the Registrar of Companies. The
report of the Auditors included in that Annual Report and Accounts
2016 was unqualified and did not contain a statement under either
Section 498(2) or Section 498(3) of the Companies Act 2006.
2. BASIS OF PREPARATION
These interim condensed financial statements have been prepared
in accordance with IAS 34 Interim Financial Reporting, as adopted
by the European Union, the Disclosure Rules and Transparency Rules
of the Financial Conduct Authority and the basis of the accounting
policies set out in the Annual Report and Accounts 2016, except for
the adoption of new standards and interpretations effective from 1
January 2017 as noted below.
These interim condensed financial statements have been prepared
on a going concern basis as the Directors, having considered the
available relevant information, have a reasonable expectation that
the Group has adequate resources to continue in operational
existence for the foreseeable future.
Changes to accounting policies
Several new accounting standards and amendments are applicable
for the first time in 2017. However, they have no material impact
on the annual consolidated financial statements or the interim
condensed financial statements of the Group. These are:
Amendment to IAS 7: Disclosure Initiative(i) - effective date 1
January 2017
Amendment to IAS 12: Recognition of Deferred Tax Assets for
Unrealised Losses(i) - effective date 1 January 2017
Improvements to IFRS 2012-2014 cycle(i) - effective date 1
January 2017
Standards and amendments to standards that have been issued but
are not effective for 2017 and have not been early adopted are:
IFRS 9 Financial Instruments - effective date 1 January 2018
IFRS 15 Revenue from Contracts with Customers - effective date 1
January 2018
IFRS 16 Leases(i) - effective date 1 January 2019
IFRS 2 Classification and Measurement of Share Based Payment
Transactions(i) - effective date 1 January 2018
Note:
(i) Not yet adopted for use in the European Union.
For standards with a future effective date, the Directors are in
the process of assessing the likely impact and look to finalisation
of the standards before formalising their view. Ahead of the
adoption of IFRS 15 Revenue from Contracts with Customers on 1
January 2018, management is in the process of reviewing all
material contracts to ensure compliance with the new standard. The
review so far has indicated there are no material adjustments.
Non-GAAP measures
Our reported interim results are prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union and applied in accordance with the provisions of the
Companies Act 2006. In measuring our performance, the financial
measures that we use include those which have been derived from our
reported results in order to eliminate factors which distort
period-on-period comparisons. These are considered non-GAAP
financial measures. We believe this information, along with
comparable GAAP measurements, is useful to investors in providing a
basis for measuring our operational performance. Our management
uses these financial measures, along with the most directly
comparable GAAP financial measures, in evaluating our performance
and value creation. Non-GAAP measures should not be considered in
isolation from, or as a substitute for, financial information in
compliance with GAAP. Non-GAAP financial measures as reported by
the Group may not be comparable with similarly titled amounts
reported by other companies.
Contract amortisation relates to intangible assets recognised on
historic acquisitions and therefore since it is transaction related
it is presented as a non-recurring cost in order to provide
stakeholders and management with an appreciation for underlying
business performance.
The Group's share of post-tax profit relating to joint ventures
and associates is included within operating profit. IAS 1
Presentation of Financial Statements does not prescribe where the
investor's share of post-tax profit is presented in the Income
Statement but management presents the results within operating
profit given the similarity of those operations to other wholly
owned businesses.
Below we set out our definitions of non-GAAP measures and
provide reconciliations to relevant GAAP measures.
Turnover
Turnover includes revenue from subsidiaries and the Group's
share of revenue from joint ventures and associates.
Half year Full year
Half year to to
to 30 30 June 31 December
June 2017 2016 2016
GBPm GBPm GBPm
----------------------------- ----------- ---------- -------------
Revenue 1,174.1 956.0 1,981.6
Share of joint ventures and
associates revenue 42.5 46.2 95.1
----------------------------- ----------- ---------- -------------
Turnover 1,216.6 1,002.2 2,076.7
----------------------------- ----------- ---------- -------------
Underlying operating profit
As disclosed on the face of the Income Statement underlying
operating profit adjusts for non-recurring exceptional items,
impairment charges associated with goodwill, joint venture assets
and other intangibles, contract amortisation and the Group's share
of 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
As disclosed on the face of the Income Statement underlying
profit before taxation is defined as underlying operating profit,
less net finance charges and before exceptional and other
items.
Underlying earnings per share
As disclosed on the face of the Income Statement underlying
earnings per share is defined as profit after taxation and
non-controlling interest before intangible amortisation and
impairment and exceptional items, divided by the weighted average
number of ordinary shares in issue.
Free cash flow
Free cash flow is defined as the cash generated after net
capital expenditure, interest and taxation, before special pension
contributions, acquisitions, disposals, exceptional items, cash
raised, ordinary dividends and net spend on shares.
Half year Full year
Half year to to
to 30 30 June 31 December
June 2017 2016 2016
GBPm GBPm GBPm
--------------------------------- ----------- ---------- -------------
Cash generated from operations 15.6 20.4 46.1
Adjusted for:
Net interest paid (4.3) (2.4) (7.0)
Exceptional interest paid (3.5) - 3.2
Tax paid (7.0) (5.3) (15.4)
Dividends received from equity
accounted investments 3.5 1.8 6.6
Purchase of property, plant
and equipment (15.7) (7.9) (24.5)
Intangible asset additions (0.4) (0.4) (2.6)
Proceeds from sale of property,
plant and equipment 0.8 1.4 2.4
Special pension contribution 5.4 5.6 10.9
Exceptional cash spend 11.0 3.2 11.4
--------------------------------- ----------- ---------- -------------
Free cash flow 5.4 16.4 31.1
--------------------------------- ----------- ---------- -------------
Underlying operating cash flow
Underlying operating cash flow is free cash flow before net
capital expenditure, net interest paid and taxation.
Half year Full year
Half year to to
to 30 30 June 31 December
June 2017 2016 2016
GBPm GBPm GBPm
---------------------------------- ----------- ---------- -------------
Free cash flow (as set out
above) 5.4 16.4 31.1
Adjusted for:
Purchase of property, plant
and equipment 15.7 7.9 24.5
Intangible asset additions 0.4 0.4 2.6
Proceeds from sale of property,
plant and equipment (0.8) (1.4) (2.4)
Net interest paid excluding
exceptional interest 7.8 2.4 3.8
Tax paid 7.0 5.3 15.4
---------------------------------- ----------- ---------- -------------
Underlying operating cash
flow 35.5 31.0 75.0
---------------------------------- ----------- ---------- -------------
3. SEGMENT INFORMATION
For management purposes the Group is organised into two
Operating Divisions: Aviation and Distribution. The two Divisions
are organised and managed separately based upon their key markets.
The Aviation Division provides cargo and passenger ground handling
services as well as into-plane fuelling and fuel farm management
services across the world. The Distribution Division provides
newspaper and magazine distribution services along with marketing
and logistics services across the UK and the Republic of
Ireland.
The information presented to the Board for the purpose of
resource allocation and assessment of segment performance is
focused on the performance of each division as a whole but also
contains performance information on a number of operating segments
within the Aviation Division. The Board assesses the performance of
the operating segments based on a measure of adjusted segment
result before exceptional items, intangible amortisation and share
of interest and tax on joint ventures and associates. Net finance
income and expenditure is not allocated to segments as this
activity is managed 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 segments
Underlying operating
Revenue profit/(loss)
-------------------- ------------- -----------------------------------
Half Half Full Half Half Full
year year year year year year
to to to to to to
30 June 30 June 31 December 30 June 30 June 31 December
2017 2016 2016 2017 2016 2016
GBPm GBPm GBPm GBPm GBPm GBPm
------------------ --------- --------- ------------- --------- --------- -------------
Aviation
Americas 226.5 100.7 219.8 11.9 5.3 12.9
EMEA 248.2 181.8 391.2 1.8 (0.2) 6.0
Rest of World 84.6 61.7 139.6 6.1 3.7 10.9
Cargo Forwarding 66.1 52.4 117.5 1.9 1.6 4.4
625.4 396.6 868.1 21.7 10.4 34.2
Distribution 591.2 605.6 1,208.6 10.8 12.0 24.7
Corporate - - - (2.4) (1.3) (3.7)
------------------ --------- --------- ------------- --------- --------- -------------
1,216.6 1,002.2 2,076.7 30.1 21.1 55.2
Joint ventures
and associates (42.5) (46.2) (95.1) - - -
------------------ --------- --------- ------------- --------- --------- -------------
1,174.1 956.0 1,981.6 30.1 21.1 55.2
------------------ --------- --------- ------------- --------- --------- -------------
As set out in the Annual Report and Accounts 2016, the Board has
amended the structure of reporting to reflect a more geographic
organisation rather than a line of business presentation. The Board
believes that analysis of the Aviation performance on a
geographical basis provides the user with the most relevant
information and is consistent with the basis for internal
management review. The 2016 half year comparative results presented
above are therefore restated on this basis.
A reconciliation of segment underlying operating profit/(loss)
to profit/(loss) before taxation is provided below.
Aviation Distribution Corporate Group
Half year to 30 June
2017 Note GBPm GBPm GBPm GBPm
-------------------------- ----- --------- ------------- ---------- -------
Operating profit/(loss)
before joint ventures
and associates 7.3 2.3 (6.4) 3.2
Share of post-tax
results of joint
ventures and associates 3.2 0.7 - 3.9
Operating profit/(loss) 10.5 3.0 (6.4) 7.1
Analysed as:
Underlying operating
profit/(loss)(i) 21.7 10.8 (2.4) 30.1
Exceptional transaction
related items 4 (7.3) (6.3) (4.0) (17.6)
Contract amortisation 4 (3.5) (1.4) - (4.9)
Share of interest
on joint ventures
and associates 0.5 - - 0.5
Share of tax on joint
ventures and associates (0.9) (0.1) - (1.0)
Operating profit/(loss) 10.5 3.0 (6.4) 7.1
-------------------------- ----- --------- ------------- ---------- -------
Net finance expense (6.6)
-------------------------- ----- --------- ------------- ---------- -------
Profit before taxation 0.5
-------------------------- ----- --------- ------------- ---------- -------
Aviation Distribution Corporate Group
Half year to 30 June
2016 Note GBPm GBPm GBPm GBPm
---------------------------- ----- --------- ------------- ---------- ------
Operating (loss)/profit
before joint ventures
and associates (3.1) 9.9 (3.9) 2.9
Share of post-tax
results of joint ventures
and associates 2.7 0.8 - 3.5
Operating (loss)/profit (0.4) 10.7 (3.9) 6.4
Analysed as:
Underlying operating
profit/(loss)(i) 10.4 12.0 (1.3) 21.1
Exceptional transaction
related items 4 (0.5) 0.3 (2.6) (2.8)
Net impairment loss 4 (7.2) - - (7.2)
Contract amortisation 4 (2.5) (1.4) - (3.9)
Share of interest
on joint ventures
and associates 0.3 - - 0.3
Share of tax on joint
ventures and associates (0.9) (0.2) - (1.1)
---------------------------- ----- --------- ------------- ---------- ------
Operating (loss)/profit (0.4) 10.7 (3.9) 6.4
---------------------------- ----- --------- ------------- ---------- ------
Net finance expense (3.4)
---------------------------- ----- --------- ------------- ---------- ------
Profit before taxation 3.0
---------------------------- ----- --------- ------------- ---------- ------
Aviation Distribution Corporate Group
Full year to 31 December
2016 Note GBPm GBPm GBPm GBPm
----------------------------- ----- --------- ------------- ---------- ------
Operating profit/(loss)
before joint ventures
and associates 7.9 20.0 (7.8) 20.1
Share of post-tax
results of joint ventures
and associates 5.8 1.7 - 7.5
Operating profit/(loss) 13.7 21.7 (7.8) 27.6
Analysed as:
Underlying operating
profit/(loss)(i) 34.2 24.7 (3.7) 55.2
Transaction and restructure
related items 4 (4.9) 0.2 (4.1) (8.8)
Net impairment loss 4 (9.6) - - (9.6)
Contract amortisation 4 (5.1) (2.8) - (7.9)
Share of interest
on joint ventures
and associates 0.6 - - 0.6
Share of tax on joint
ventures and associates (1.5) (0.4) - (1.9)
----------------------------- ----- --------- ------------- ---------- ------
Operating profit/(loss) 13.7 21.7 (7.8) 27.6
----------------------------- ----- --------- ------------- ---------- ------
Net finance expense (7.8)
----------------------------- ----- --------- ------------- ---------- ------
Profit before taxation 19.8
----------------------------- ----- --------- ------------- ---------- ------
Note:
(i) Underlying operating profit/(loss) is defined as operating
profit/(loss) excluding intangible amortisation as shown in Note 4
and exceptional items but including the pre-tax share of results
from joint ventures and associates.
Capital expenditure
Aviation Distribution Corporate Group
Half year to 30 June
2017 GBPm GBPm GBPm GBPm
-------------------------- --------- ------------- ---------- ------
Property, plant and
equipment 14.1 0.5 0.3 14.9
Intangible assets 0.1 0.3 - 0.4
-------------------------- --------- ------------- ---------- ------
Half year to 30 June
2016
-------------------------- --------- ------------- ---------- ------
Property, plant and
equipment 6.5 1.3 0.1 7.9
Intangible assets 0.2 0.2 - 0.4
-------------------------- --------- ------------- ---------- ------
Full year to 31 December
2016
-------------------------- --------- ------------- ---------- ------
Property, plant and
equipment 23.1 2.7 0.3 26.1
Intangible assets 1.8 0.8 - 2.6
-------------------------- --------- ------------- ---------- ------
Revenue by country
Half year Full year
to to
Half year to 30 June 31 December
30 June 2017 2016 2016
GBPm GBPm GBPm
---------------- -------------- ---------- -------------
United Kingdom 689.4 664.0 1,331.9
United States
of America 179.7 77.3 169.1
Others 305.0 214.7 480.6
----------------- -------------- ---------- -------------
1,174.1 956.0 1,981.6
---------------- -------------- ---------- -------------
4. EXCEPTIONAL AND OTHER ITEMS
Exceptional items included in operating profit
Half
year Half year Full year
to to to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
------------------------------- --------- ---------- -------------
Acquisition and other
transaction related costs(i) (7.1) (3.1) (7.5)
Acquisition integration
costs(ii) (5.4) - (1.3)
Pension related costs(iii) (5.1) - -
Acquisition related earn-out
adjustment(iv) - 0.3 -
(17.6) (2.8) (8.8)
------------------------------- --------- ---------- -------------
Notes:
(i) Acquisition and other transaction related costs reflect
GBP3.2m of costs incurred relating to work undertaken to demerge
and sell the Distribution business, GBP1.9m pre-acquisition costs
(including corporate finance and professional advisor fees)
relating to the acquisition of ASIG Holdings Ltd and ASIG Holdings
Corp. (together "ASIG") on 1 February 2017, GBP1.3m increase in
onerous lease provision, GBP0.3m transaction related costs relating
to Hyderabad Menzies Air Cargo Private Ltd, GBP0.3m transaction
related costs relating to the establishment of the joint venture
business in Oman and GBP0.1m relating to the step acquisition of EM
News Distribution (Ireland) Ltd and EM News Distribution (NI) Ltd.
In the prior year, costs relate to the Rights Issue process and
acquisition of ASIG (acquisition costs GBP5.7m and integration
costs GBP1.3m) as well as the acquisition of Renaissance Aviation
Ltd, Thistle Couriers Ltd and Edinburgh Arts and Entertainment Ltd
(GBP0.2m total). In addition, aborted Aviation transaction costs
were GBP0.9m while restructure consultancy costs were GBP0.8m and
other ongoing transaction costs were GBP0.2m.
(ii) Acquisition integration costs relate to ASIG
rationalisation (predominantly redundancy) and other integration
related costs incurred post acquisition (predominantly integration
team, IT consultancy and systems related costs).
(iii) Pension related costs relate to fees and charges of
GBP3.9m incurred in order to close the Company's defined benefit
pension fund to future accrual, including curtailment costs of
GBP2.7m as set out in Note 13, and charges of GBP1.2m incurred to
sectionalise the fund.
(iv) In the prior year, contingent consideration relating to the
acquisition of Fore Partnership was settled for GBP1.3m being
GBP0.3m lower than anticipated at 31 December 2015 in
Distribution.
Exceptional items included in finance charges
Half year Half year Full year
to to to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
--------------------- ---------- ---------- -------------
Acquisition related
financing costs(i) (0.6) - (1.5)
Unwind discount
costs(ii) (0.1) (0.1) (0.2)
---------------------- ---------- ---------- -------------
Notes:
(i) Relating to write-off of bilateral facility fees,
pre-acquisition ticking fees and amortisation of underwriting fees
on the financing facilities agreed in 2016 to fund the acquisition
of ASIG on 1 February 2017. In the prior period GBP1.5m of costs
were recognised relating to ticking fees and an amortisation of
underwriting fees on the same financing facilities.
(ii) Relating to deferred consideration and onerous lease
provisions.
Intangible assets amortisation and impairment included in
operating profit
Half year Full year
Half year to to
to 30 June 31 December
30 June 2017 2016 2016
GBPm GBPm GBPm
-------------------------- -------------- ---------- -------------
Contract amortisation(i) (4.9) (3.9) (7.9)
Net impairment
loss(ii) - (7.2) (9.6)
--------------------------- -------------- ---------- -------------
Notes:
(i) Contracts capitalised as intangible assets on the
acquisition of businesses.
(ii) In the prior year a GBP9.6m impairment was recognised
relating to goodwill (GBP7.2m) and property, plant and equipment
(GBP2.4m) at the cargo operations in Amsterdam.
5. FINANCE COSTS (PRE-EXCEPTIONAL)
Half year Half year Full year
to to to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
----------------- ---------- ---------- -------------
Finance income
Bank deposits 0.6 0.3 0.7
Finance charges
Bank loans
and overdrafts (4.9) (2.3) (4.5)
Preference
dividends (0.1) (0.1) (0.1)
------------------ ---------- ---------- -------------
(5.0) (2.4) (4.6)
Net finance
costs (4.4) (2.1) (3.9)
------------------ ---------- ---------- -------------
6. TAXATION
The underlying effective tax rate for the full year 2017 is
estimated at 28% (full year 2016: 32%). Therefore the underlying
effective tax rate used for the half year 2017 was 28% (half year
2016: 32%). The share of results from the joint ventures and
associates for the half year is after taxation of GBP1.0m (half
year to 30 June 2016: GBP1.1m and full year to 31 December 2016:
GBP1.9m).
The taxation effect of the exceptional and other items is a
GBP1.4m credit (half year to 30 June 2016: GBPNil, full year to 31
December 2016: GBP2.2m credit) in relation to tax deductions
available for a proportion of the exceptional costs arising during
the half year 2017.
7. EARNINGS PER SHARE
Basic Underlying(i)
---------------------------------- ----------------------------------
Half Half
Half year Full Half year Full
year to 30 year year to 30 year
to 30 June to to 30 June to
June 2016 31 December June 2016 31 December
2017 restated 2016 2017 restated 2016
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------- ---------- ------------- ------- ---------- -------------
Profit/(loss) for
the period as set
out in the Income
Statement (4.0) (1.7) 8.0 17.8 12.3 33.8
Loss relating to
non-controlling
interests 0.4 0.2 0.5 0.4 0.2 0.5
------------------------- ------- ---------- ------------- ------- ---------- -------------
Earnings for the
period attributable
to equity shareholders (3.6) (1.5) 8.5 18.2 12.5 34.3
------------------------- ------- ---------- ------------- ------- ---------- -------------
Basic
Earnings per ordinary
share (4.3)p (2.2)p 11.8p
Diluted earnings
per ordinary share (4.3)p (2.2)p 11.8p
Historical adjusted
earnings per ordinary
share (2.4)p 13.8p
Underlying
Earnings per ordinary
share 21.8p 18.0p 47.8p
Diluted earnings
per ordinary share 21.8p 18.0p 47.7p
Historical adjusted
earnings per ordinary
share 20.4p 55.9p
Number of ordinary shares
in issue
Weighted average
(million) 83.4 69.4 71.8
Diluted weighted
average (million) 83.4 69.5 71.9
Historical weighted
average (million) 61.3 61.4
------------------------- ------- ---------- ------------- ------- ---------- -------------
Note:
(i) Underlying earnings is presented as an additional
performance measure and is stated before exceptional items and
intangible amortisation and impairment.
The weighted average number of fully paid shares in issue during
the period 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 period. The impact of share options in the
current period is anti-dilutive and is therefore disregarded in
arriving at the adjusted weighted average number of shares.
The half year 2016 results have been restated to adjust for the
impact of the October 2016 Rights Issue with the discount reflected
as a bonus issue. The restatement adjusts the comparative half year
2016 results for the impact of the bonus factor, but not the
increase in the Group's available capital which has been raised but
not deployed in the period due to the related acquisition of ASIG
completing on 1 February 2017. As such, an additional measure,
'historical adjusted earnings per ordinary share', has been
presented to enable the comparison of 2017 performance on a
consistent capital base. This has been calculated by adjusting the
2016 weighted average number of shares for this measure to remove
the full effect of the Rights Issue. The Directors consider that
this provides an underlying measure that is comparable to
underlying earnings per share presented historically.
8. INTANGIBLE ASSETS
Intangible assets comprise goodwill of GBP117.0m (June 2016:
GBP49.0m, December 2016: GBP51.8m), contracts of GBP76.5m (June
2016: GBP45.8m, December 2016: GBP42.4m) and capitalised software
costs of GBP8.8m (June 2016: GBP9.5m, December 2016: GBP9.8m). The
principal cause of the increase in goodwill and contracts in the
period relates to the acquisition of ASIG Holdings Ltd and ASIG
Holdings Corp. as set out in Note 14. Currency movements
contributed to a GBP3.8m decrease to intangible assets in the
period (June 2016: increase of GBP5.3m, December 2016: increase of
GBP10.5m).
9. FINANCIAL INSTRUMENTS
Derivative financial instruments
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 30 June 2017, the Group had the following financial
instruments held 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
1: for identical assets or liabilities.
Level other techniques for which all inputs which
2: have a significant effect on the recorded fair
value are observable, either directly or indirectly.
Level techniques which use inputs which have a significant
3: effect on the recorded fair value that are not
based on observable market data.
For financial instruments that are recognised at fair value on a
recurring basis, the Group determines whether transfers have
occurred between levels in the hierarchy by re-assessing
categorisation (based on the lowest level input that is significant
to the fair value measurement as a whole) at the end of each
reporting period.
Derivative financial instruments at fair value through other
comprehensive income statement
30 June 30 June 31 December
2017 2016 2016
Level 2 Level 2 Level 2
GBPm GBPm GBPm
---------------------------- -------- -------- ------------
Financial assets:
Foreign exchange contracts
- hedged 0.7 - 0.4
Financial liabilities:
Foreign exchange contracts
- hedged 1.4 9.8 6.1
---------------------------- -------- -------- ------------
During the half year to 30 June 2017 there were no transfers
between Level 1 and Level 2 fair value measurements, and no
transfers into and out of Level 3 fair value measurements.
All financial assets and liabilities, with the exception of
borrowings, have a carrying value that approximates to fair value
due to their short term nature.
31 December
30 June 2017 30 June 2016 2016
---------------- -------------------- --------------------
Book Fair Fair Fair
value value Book value value Book value value
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ------- ------- ----------- ------- ----------- -------
Current borrowings 10.3 10.5 68.5 68.8 39.0 39.2
Non-current
borrowings 291.4 291.8 94.5 95.4 64.7 65.4
-------------------- ------- ------- ----------- ------- ----------- -------
Contingent consideration
As set out in Note 14, in the current period the Group acquired
100% of the share capital of Gold Coast Air Terminal Services Pty
Ltd in Queensland, Australia. The final purchase price included
earn out targets which, should these be met, will require the Group
to pay the vendor up to an additional GBP0.4m in each of December
2017 and December 2018. The earn out targets are based on
annualised EBITDA levels and, should the minimum target not be met,
no further payment would be required. The difference between the
fair value at the date of acquisition and the maximum payable
contingent consideration is not considered to be material.
Management is confident that the target will be met and therefore
the full contingent consideration has been provided for.
The acquisition of PlaneBiz 2015 Ltd in 2014 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.
These liabilities for contingent consideration and other
acquisition related amounts are Level 3 derivative financial
instruments under IFRS 7.
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
-------------------------------- -------- -------- ------------
Fair value of the contingent
and other acquisition related
amounts:
Gold Coast Air Terminal
Services Pty Ltd 0.8 - -
PlaneBiz 2015 Ltd 3.4 3.1 3.4
-------------------------------- -------- -------- ------------
10. CASH GENERATED FROM OPERATIONS
Half
year Full year
to 30 Half year to
June to 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
------------------------------------- -------- ------------ -------------
Operating profit before joint
ventures and associates 3.2 2.9 20.1
Depreciation 13.3 10.6 22.3
Amortisation of intangible
assets 6.5 5.3 11.1
Share-based payments 0.7 0.6 0.7
Onerous lease provision 1.3 - 1.6
Cash spend on onerous leases (0.6) (0.7) (1.5)
Loss/(gain) on sale of property,
plant and equipment 0.1 (0.1) (0.1)
Pension charge 1.4 1.6 3.5
Pension credit - - (0.3)
Pension contributions in cash (6.5) (7.0) (14.0)
Acquisition and related exceptional
items 16.3 3.1 9.1
Cash spend on exceptional
items (10.4) (2.5) (9.9)
Acquisition related earn out
adjustment - (0.3) (0.3)
Net impairment loss - 7.2 9.6
(Increase)/decrease in inventories (2.9) 0.6 (1.3)
Increase in trade and other
receivables (109.9) (23.7) (37.3)
Increase in trade and other
payables and provisions 103.1 22.8 32.8
15.6 20.4 46.1
------------------------------------- -------- ------------ -------------
11. CHANGES IN NET BORROWINGS
Half
31 December year Subsidiaries Currency 30 June
cash
2016 flows acquired translation 2017
GBPm GBPm GBPm GBPm GBPm
------------------- ------------ -------- ------------- ------------ --------
Cash at bank and
in hand 38.9 16.7 12.7 (1.3) 67.0
Bank overdrafts (0.8) (6.3) - - (7.1)
------------------- ------------ -------- ------------- ------------ --------
Net cash and cash
equivalents 38.1 10.4 12.7 (1.3) 59.9
Bank loans due
within one year (38.0) 34.9 - - (3.1)
Preference shares (1.4) - - - (1.4)
Finance leases (0.2) 0.1 - - (0.1)
Debt due after
one year (63.3) (231.9) - 5.2 (290.0)
Net derivative
liabilities (at
fair value) (5.7) 3.7 - 1.3 (0.7)
------------------- ------------ -------- ------------- ------------ --------
Net debt (70.5) (182.8) 12.7 5.2 (235.4)
------------------- ------------ -------- ------------- ------------ --------
Current borrowings of GBP10.3m in the Balance Sheet include bank
overdrafts of GBP7.1m, bank loans of GBP3.1m and finance leases of
GBP0.1m. Non-current borrowings in the Balance Sheet of GBP291.4m
include preference shares of GBP1.4m and bank debt of GBP290.0m.
Net derivative liabilities of GBP0.7m shown above include
derivative financial assets of GBP0.7m and derivative financial
liabilities of GBP1.4m as set out on the Balance Sheet.
12. CONTINGENT LIABILITIES
The Company has guaranteed certain trading obligations of its
subsidiaries in the normal course of business.
13. RETIREMENT BENEFIT OBLIGATION
The Company's actuary undertook a valuation of the Menzies
Pension Fund ("the Fund") as at 30 June 2017 (30 June 2016 and 31
December 2016) under IAS 19. In deriving the results the actuary
used the projected unit method and the following financial
assumptions:
Half year Half year Full year
to to to
30 June 30 June 31 December
2017 2016 2016
% % %
------------------------------ ---------- ---------- -------------
Rate of increase in pensions
prior to 1 May 2006 3.6 3.5 3.7
Rate of increase in pensions
after 1 May 2006 2.2 2.1 2.2
Price inflation 3.2 2.8 3.3
Discount rate 2.6 3.2 2.7
------------------------------ ---------- ---------- -------------
The fair value of Fund assets and liabilities are:
Half year Half year Full year
to to to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
----------------------------- ---------- ---------- -------------
Total value of assets 372.2 347.0 368.9
Defined benefit obligation (424.3) (399.7) (439.9)
----------------------------- ---------- ---------- -------------
Recognised in Balance
Sheet (52.1) (52.7) (71.0)
Related deferred
tax asset 8.9 9.5 12.1
----------------------------- ---------- ---------- -------------
Net pension liabilities (43.2) (43.2) (58.9)
----------------------------- ---------- ---------- -------------
The components of the pension expense are:
Half
Half year year Full year
to to to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
Amounts included in finance costs
Interest cost on defined
benefit obligation 5.9 7.0 13.9
Interest income on Fund assets (4.9) (6.1) (12.3)
Net finance charge 1.0 0.9 1.6
Amounts charged/(credited)
to operating profit
Current service cost 0.6 0.9 1.9
Administrative costs 0.8 0.7 1.6
Effect of curtailment and
settlements 2.7 - (0.3)
-------------------------------- ---------- --------- -------------
4.1 1.6 3.2
5.1 2.5 4.8
-------------------------------- ---------- --------- -------------
The Fund was closed to future accrual on 31 March 2017 and
sectionalised on 30 June 2017. As set out in Note 4, GBP2.7m of
curtailment costs have been recognised as an exceptional cost in
the current period. In the prior year there were no exceptional
pension costs.
The amounts in the Statement of Comprehensive Income are:
Half
Half year year Full year
to to to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
------------------------------------- ---------- --------- -------------
Returns on assets excluding
net interest income 6.1 30.4 48.9
Changes in demographic assumptions 7.1 - 4.7
Changes in financial assumptions 0.7 (45.8) (93.3)
Experience 3.6 1.6 2.9
------------------------------------- ---------- --------- -------------
Actuarial gain/(loss) 17.5 (13.8) (36.8)
------------------------------------- ---------- --------- -------------
The change in scheme assets during the period is:
Half
Half year year Full year
to to to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
------------------------------- ---------- --------- -------------
Fair value of assets at start
of period 368.9 312.4 312.4
Interest income 4.9 6.1 12.3
Returns on assets excluding
interest income 6.1 30.4 48.9
Company contributions 6.5 7.0 14.0
Employee contributions 0.2 0.3 0.7
Effect of settlements - - (0.4)
Benefits and expenses paid (14.4) (9.2) (19.0)
------------------------------- ---------- --------- -------------
Fair value of assets at end
of period 372.2 347.0 368.9
------------------------------- ---------- --------- -------------
The return on scheme assets (including interest income) in the
half year to 30 June 2017 was a gain of GBP11.0m (half year to 30
June 2016: GBP36.5m and full year to 31 December 2016:
GBP61.2m).
The change in defined benefit obligation during the period
is:
Half
Half year year Full year
to to to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
------------------------------------ ---------- --------- -------------
Defined benefit obligation
at start of period 439.9 355.8 355.8
Total service cost 1.4 1.6 3.5
Exceptional curtailments 2.7 - -
Interest cost 5.9 7.0 13.9
Effect of settlements - - (0.7)
Employee contributions 0.2 0.3 0.7
Benefits and expenses paid (14.4) (9.2) (19.0)
Changes in demographic assumptions (7.1) - (4.7)
Changes in financial assumptions (0.7) 45.8 93.3
Experience (3.6) (1.6) (2.9)
------------------------------------ ---------- --------- -------------
Defined benefit obligation
at end of period 424.3 399.7 439.9
------------------------------------ ---------- --------- -------------
14. Acquisitions
During the period the Group acquired 100% of the share capital
of ASIG Holdings Ltd and ASIG Holdings Corp. (together "ASIG") and
Gold Coast Air Terminal Services Pty Ltd.
On 1 February 2017 the Group acquired ASIG, a leading aviation
services business. The Group has acquired the business in order to
provide comprehensive service solutions including into-plane
fuelling, fuel farm management, ground handling, aircraft technical
services, facilities equipment maintenance and de-icing at airports
across seven countries in the Americas, Europe and Asia. These
interim financial statements include the impact of five months'
trading results.
On 3 May 2017 the Group acquired Gold Coast Air Terminal
Services Pty Ltd, a company based in Australia. The Group has
acquired the company to expand its cargo service offering in
Australia. These interim financial statements include the impact of
two months' trading results.
On 27 May 2017 the Group also acquired 75% of the share capital
EM News Distribution (Ireland) Ltd and 25% of EM News Distribution
(NI) Ltd (together "EMND I and EMND NI"). This step acquisition
enables the Menzies Distribution group to realise the benefits of
being the only news wholesaler serving the UK and Republic of
Ireland. The intention is to use the existing network under the
business' control to diversify into the wider logistics and parcel
carrier market. These interim financial statements include the
impact of one month's trading results.
Half
Gold Coast EMND year
Air Terminal I and to 30 Full year
Services EMND June to 31 December
ASIG Pty Ltd NI 2017 2016
GBPm GBPm GBPm GBPm GBPm
---------------------------- ------ -------------- ------- ------- ----------------
Purchase consideration:
Cash paid 167.8 1.6 1.9 171.3 3.5
Impact of assets
not transferred (2.1) - - (2.1) -
Contingent consideration - 0.8 - 0.8 -
Deferred consideration - - - - 0.5
Fair value of existing
equity interest
in joint ventures - - 5.8 5.8 -
---------------------------- ------ -------------- ------- ------- ----------------
Total purchase
consideration 165.7 2.4 7.7 175.8 4.0
Less: non-controlling
interest acquired 4.4 - - 4.4 -
Less: fair value
of net assets acquired 94.3 1.4 4.4 100.1 3.6
Goodwill 67.0 1.0 3.3 71.3 0.4
---------------------------- ------ -------------- ------- ------- ----------------
The non-controlling interest relating to ASIG has been measured
as 49.0% of the net liabilities of ASIG Thailand (Company) Ltd of
GBP9.0m.
Goodwill recognised with respect to ASIG is primarily
attributable to workforce expertise and synergies with the Group.
Goodwill recognised with respect to Gold Coast Air Terminal
Services Pty Ltd is primarily attributable to synergies with the
Group. Goodwill recognised with respect to EMND I and EMND NI is
primarily attributable to synergies with the Group.
The fair value of assets and liabilities arising from the
acquisitions are:
EMND Half
Gold Coast I and year
Air Terminal EMND to 30 Full year
Services NI June to 31 December
ASIG Pty Ltd 2017 2016
GBPm GBPm GBPm GBPm GBPm
---------------------------- ------- -------------- ------- ------- ----------------
Non-current assets:
Intangible assets
(customer relationships
and contracts) 29.3 1.6 2.0 32.9 2.7
Intangible assets
(brand) 6.6 - - 6.6 -
Property, plant
and equipment 33.2 0.1 0.6 33.9 0.6
Inventory 2.5 - 2.5 5.0 0.1
Trade and other
receivables 88.6 0.2 10.7 99.5 1.4
Cash 12.3 0.2 0.2 12.7 0.3
Trade and other
payables (66.9) - (11.0) (77.9) (0.9)
Provisions (5.8) - (0.1) (5.9) (0.1)
Current income
tax liabilities - (0.2) (0.2) (0.4) (0.1)
Borrowings - - - - (0.3)
Deferred tax liability (5.5) (0.5) (0.3) (6.3) (0.1)
Net assets acquired
at fair value 94.3 1.4 4.4 100.1 3.6
---------------------------- ------- -------------- ------- ------- ----------------
Current assets acquired with ASIG include GBP63.3m of trade
receivables at fair value, the gross amount acquired less provision
for bad debts of GBP6.0m. Current assets acquired with Gold Coast
Air Terminal Services Pty Ltd, EMND I and EMND NI include GBP5.1m
of trade receivables at fair value, the gross amount acquired. The
fair values of the net assets of all companies acquired remain
provisional pending the formal completion of the valuation
process.
The acquired businesses contributed GBP5.6m profit before
taxation and GBP148.7m revenue from acquisition date. If the
businesses had been acquired on 1 January 2017, Group revenue and
profit before taxation would have been GBP1,261.9m and GBP2.9m
respectively. Transaction fees of GBP2.0m relating to these
acquisitions were incurred and expensed during the period.
Deferred consideration
Deferred consideration of GBP0.2m relating to the acquisition of
Renaissance Aviation Ltd was cash settled in March 2017. Deferred
consideration of GBP0.3m relating to the acquisition of Menzies
Parcels Ltd (formerly known as AJG Parcels Ltd) was cash settled in
May 2017. Deferred consideration of GBP0.3m relating to the
acquisition of Thistle Couriers Ltd was cash settled in February
2017.
15. Related Party Transactions
In prior periods the Group owed EM News Distribution (NI) Ltd,
formerly a joint venture company prior to 27 May 2017, GBP7.2m at
30 June 2016 and GBP5.0m at 31 December 2016. In prior periods the
Group also owed another former joint venture company EM News
Distribution (Ireland) Ltd GBP3.3m at 30 June 2016 and GBP0.1m at
31 December 2016. During the period the partner's stakes in these
joint ventures were acquired as set out in Note 14.
16. FOREIGN CURRENCY SENSITIVITY
For the period to 30 June 2017, if Sterling had
weakened/strengthened by 10% on currencies that have a material
impact on the Group profit before tax and equity, with all other
variables held constant the effect would have been:
Half year to Full year to
30 June 2017 31 December 2016
------------------------ ------------------------
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% 1.3 0.8 1.5 3.8
US dollar - 10% (1.0) (0.7) (1.2) (3.1)
Australian dollar +10% 0.5 1.7 1.0 1.8
Australian dollar - 10% (0.4) (1.4) (0.8) (1.5)
Indian rupee +10% 0.3 1.4 0.6 1.3
Indian rupee - 10% (0.3) (1.1) (0.5) (1.0)
Euro +10% 0.2 (0.2) 0.5 -
Euro - 10% (0.2) 0.1 (0.4) -
South African
rand +10% (0.1) 0.7 (0.1) 0.8
South African
rand - 10% - (0.6) 0.1 (0.7)
------------------- --------- ----------- ----------- ----------- -----------
The impact of the Group's exposure to other foreign currencies
is not considered to be material to the overall results of the
Group.
risks AND UNCERTAINTIES
The principal risks and uncertainties affecting the business
activities of the Group remain those detailed in the Annual Report
and Accounts 2016, a copy of which is available on the Group
website at www.johnmenziesplc.com. The Board considers that these
remain a current reflection of the risks and uncertainties facing
the business for the remaining six months of the financial
year.
Directors' Responsibility Statement in respect of the Condensed
Interim Financial Statements
The Directors confirm that this condensed set of financial
statements has been prepared in accordance with IAS 34 Interim
Financial Reporting, as adopted by the European Union, and that the
interim management report includes a fair review of the information
required by the Disclosure Rules and Transparency Rules of the
Financial Conduct Authority, paragraphs DTR 4.2.7 R and DTR 4.2.8
R. The Directors of John Menzies plc are listed in the Annual
Report and Accounts 2016. A list of current Directors is maintained
on the Company website: www.johnmenziesplc.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR OKQDPCBKDAFD
(END) Dow Jones Newswires
August 15, 2017 02:00 ET (06:00 GMT)
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