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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Menzies(john) Plc | LSE:MNZS | London | Ordinary Share | GB0005790059 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 607.00 | 607.00 | 608.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMMNZS
RNS Number : 6714X
Menzies(John) PLC
14 August 2018
John Menzies plc
Half year results for the six months ended 30 June 2018
Financial Summary
Hot Features
Premium
2018 2017
----------------------------------------------------------- -------------
Reported Add back Group Group Reported
discontinued constant
operations currency([6])
Turnover([1]) GBP641.4m GBP606.7m GBP1,248.1m GBP1,271.6m GBP1,216.8m
Underlying operating GBP20.9m GBP13.0m GBP33.9m GBP35.5m GBP30.1m
profit([2])
Operating profit GBP14.1m GBP(11.2)m GBP2.9m --- GBP7.1m
Underlying profit before GBP15.5m GBP13.0m GBP28.5m GBP30.1m GBP24.7m
taxation([3])
Profit before tax GBP8.3m GBP(11.2)m GBP(2.9)m --- GBP0.5m
Operating cash flow([4]) GBP38.4m --- GBP35.5m
Underlying earnings
per share([5]) 13.0p 12.3p 25.3p --- 21.8p
Basic earnings per share 6.7p (16.3)p (9.6)p --- (4.3)p
Dividend per share 6.0p --- 6.0p
For like-for-like comparative purposes with the prior period, certain reported figures are shown above adjusted to add back the Menzies Distribution business, which since 1 April 2018 has been classified as an asset held for sale and is presented in the Income Statement as a discontinued operation. These interim results and prior year comparatives are unaudited.
Overview:
Financial highlights
-- Group performance in the first half improved significantly -- Group underlying profit before taxation up 15% to GBP28.5m -- Menzies Aviation underlying operating profit up 9% to GBP23.7m
-- Exceptional charge was GBP26.0m (H1 2017: GBP17.6m) relating to impairment of Distribution non-current assets, corporate transaction costs and defined benefit pension de-risking
-- Underlying earnings per share up 16.1% to 25.3p (H1 2017: 21.8p) -- Interim dividend maintained at 6.0p, notwithstanding the Distribution conditional sale
Operational and strategic highlights
-- Aviation pure play business set to be created following the completion of strategic realignment
-- Menzies Distribution conditional sale agreed post period end for an enterprise value of GBP74.5m
-- Menzies Aviation produced a strong first half performance -- Contract win and renewal momentum across the network continues -- Investments in people and processes underpin our growth agenda
Forsyth Black, CEO (designate) of John Menzies plc said:
"I am very pleased to have concluded our strategic realignment that, subject to shareholder approval, will see the creation of John Menzies plc as a global pure play aviation business and allow us to focus our management and capital resources on expanding our position in the structurally growing aviation services market.
"We hold a strong position in a growing marketplace and our aim is to build on this by continuing to pursue our established strategy, by continuing to invest in our technologies and most importantly to invest in our people in order to drive growth.
"As a Board, we aim to create long-term shareholder value by continuing to grow our business, while following our Excellence Manifesto and ensuring we deliver the highest levels of service to our customers."
Notes:
1. Turnover comprises the Group's revenue from subsidiaries and the Group's share of revenue from joint ventures and associates. 2017 turnover has been restated upward by GBP0.2m for the impact of recognising a sales return reserve movement (see note 16).
2. Underlying operating profit is operating profit adjusted for non-recurring exceptional items, impairment charges associated with non-current assets, amortisation relating to acquired contract and customer relationship intangibles, 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. 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.
Notes to Editors:
1. John Menzies plc is one of Scotland's largest companies 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 aviation services business with operations worldwide.
2. Menzies Aviation is a leading global provider of passenger, ramp and cargo services. Menzies Aviation operates at 219 airports in 37 countries, supported by a team of some 33,000 highly-trained people. Each year Menzies Aviation serves some 1,000 customers, handling 1.4 million flights, 1.6 million tonnes of cargo and fuelling four million turnarounds. Customers include Air Canada, Air France-KLM, American Airlines, Cathay Pacific, Delta Air Lines, easyJet, Emirates, Frontier Airlines, IAG, Lufthansa, Norwegian Air Shuttle, Air Canada, United Airlines and China Airlines. Best in class safety and security is the number one priority each day and every day.
For further information:
John Menzies plc 0131 459 8144
Forsyth Black, Chief Executive Officer (designate)
Giles Wilson, Chief Financial Officer
John Geddes, Corporate Affairs Director
FTI Consulting 020 3727 1000
Jonathon Brill/Alex Beagley
Chairman's Statement
I am pleased with the progress that the Group has made in the past six months. On 26 July 2018, we announced the sale of Menzies Distribution to Endless LLP for an enterprise value of GBP74.5m, which completes our strategic realignment and positions John Menzies plc as a pure play aviation services business with many exciting opportunities. We are very pleased to be one of the world's leading players in a structural growth market, expanding both in size from underlying aviation growth dynamics and also where the market continues to grow as airlines outsource services.
The Board intends to build on this strong position by continuing to pursue our proven strategy, by continuing to invest in our technologies and most importantly to invest in our people in order to drive growth.
As a Board, we aim to create long-term shareholder value by growing our business in a structured and sensible way, while following our Excellence Manifesto thus ensuring we deliver the highest levels of service to our customers.
To support this and in light of our corporate change as an aviation services pure play the Board has adopted the following strategic principles:
Pursue our excellence manifesto: we aim to become the undisputed premium brand in the aviation services sector. In doing so we will set the highest standards for safety, security and performance. We will offer the deepest combination of service portfolio and geographic locations and we will deploy the most sophisticated technical solutions. Underpinning all of this is our people, they are at the heart of everything we do and we have a structured people agenda that allows us to attract, retain and develop each of our 33,000 employees.
Organic growth: we seek to grow both within our existing footprint by winning more contracts and deepening our relationships with growing airlines in growing markets. We will do this organically by entering new markets either with existing customers or through a new scale customer that provides the certainty of operations to allow the setting up of a new base.
Acquisitive growth: we will make acquisitions where the strategic fit is right to bolster existing operations and products or to enter new markets. These investments may be through participating in market consolidation or by entering joint ventures which allow us to enter new markets or to participate in airline outsourcing, particularly at hub locations.
Deliver shareholder returns: we are focused on progressively growing our margin. We aim for top line growth of 8% per annum and target a minimum EPS growth of 10% per annum. Our target net debt will be between 1.5 and 2.0 times EBITDA and we will look to continue with a progressive dividend policy where cover lies between 2 and 3 times.
Outlook
Trading since the half year continues to be in line with expectations and the Board remains confident we are on track to meet the Board's expectations for the full year.
The second half has started well with ground handling turns in the key summer period in line and cargo volumes continuing to deliver good returns. We continue to make progress expanding our fuelling business and were pleased to be awarded an exclusive contract to provide fuel farm management and into-plane fuelling by World Fuel Services at Paris Le Bourget.
We continue to focus on margin improvement by winning contracts at acceptable rates and where possible re-pricing existing contracts to match local market dynamics. In September, we are opening our newest station in South East Asia with operations starting in Jakarta, Indonesia.
The sale of Menzies Distribution is conditional on shareholder approval and we expect to secure this on 22 August 2018, which will allow the disposal to complete shortly thereafter. This will allow management to focus their attention solely on growing our aviation services business.
Overall, we have an exciting pipeline of opportunities across our portfolio and we look forward to expanding our business, growing our margin and delivering sustainable returns for our shareholders.
Group Performance Review
Group performance in the first half of 2018 improved significantly with underlying operating profit up 13% (18% in constant currency) and underlying profit before tax up 15% (22% in constant currency). The improvement was a result of a strong performance at Menzies Aviation, particularly from new operations, increased cargo tonnage and contract wins in EMEA and the Rest of World. The Group reported a loss before tax of GBP2.9m (H1 2017: profit GBP0.5m) with stronger trading profit offset by exceptional and other items, particularly relating to the integration of acquisitions, the impact of the disposal of Menzies Distribution and the continuing de-risking of the defined benefit pension scheme.
Menzies Aviation continues to consolidate its position of strength. The integration of the fuelling and the ground handling business acquired with ASIG in 2017 is now largely complete and synergies have been delivered ahead of expectations. Contract win momentum continued with turnover at constant currency up 6% year on year, and we continue to benefit from our investments into infrastructure and innovation. Menzies Distribution remains a solid business. The half year benefited from the expected gain from collectibles relating to the 2018 FIFA World Cup and performed well despite cost and volume pressures.
The Group's turnover, adding back that of the discontinued Distribution segment, was GBP1,248.1m (H1 2017: GBP1,216.8m). Group underlying profit before tax grew to GBP28.5m (H1 2017: GBP24.7m) following the strong performance in Menzies Aviation, partly offset by foreign exchange translation. The Group's loss before tax was GBP2.9m (H1 2017: profit GBP0.5m). Group underlying earnings per share rose to 25.3p (H1 2017: 21.8p).
In the continuing Aviation and Corporate segments, turnover was GBP641.4m (H1 2017: GBP625.4m). Continuing underlying operating profit grew to GBP20.9m (H1 2017: GBP19.3m) reflecting core growth in EMEA, Oceania and Cargo Forwarding and an extra month of ASIG acquired in 2017, partly offset by foreign exchange translation.
Menzies Aviation
The first half of 2018 has started well. Our teams have been busy winning and starting up new business. Underlying operating profit increased to GBP23.7m (H1 2017: GBP21.7m), up 17% in constant currency. This increase demonstrates the momentum within the division following good contract wins and renewal performance, a clear focus on productivity and continuing development of our commercial team to work with our customers to deepen relationships. The integration of the fuelling and ground handling businesses acquired with ASIG is now largely complete and the synergy benefit has exceeded expectations. Our drive internally for margin improvement continues to deliver benefits with progress made at stations delivering insufficient returns.
Overall, ground handling turns were down 6% but this was a result of our disciplined approach to risk and reward during 2017 and our decision to re-tender for historically challenged contracts only at acceptable rates. This discipline resulted in some historical poorly priced contracts being lost as previously disclosed. After allowing for the loss of these contracts, ground handling turns were up 3%.
Our into-plane fuelling business handled 2.0m aircraft turns in the first half in Americas and EMEA. Fuelling turns are up 18%, primarily as a result of the extra month of trading in 2018. In Americas, like-for-like turns were up 8% reflecting gains in San Francisco and Denver. In EMEA, our first new locations in continental Europe helped drive like-for-like turns 2% higher.
Cargo handling tonnes were up 1%. However, this figure is distorted by the loss of a significant contract in Q4 of 2017. Generally, volumes throughout the network have been strong, particularly in Americas and in EMEA where tonnages have benefited from the businesses in Budapest and the Gold Coast that were acquired during 2017. Together with strong volume, improved cargo handling yields have enhanced profitability in all our regions. To further pursue our cargo agenda we have appointed a new global head of cargo handling to reinforce our commitment to expanding this important range of services to our customers.
Our focus on commercial activities continued and we were the net winners of 55 contracts. Contract gains were well spread across the network. We are particularly pleased that wins included 23 in the fuelling business and a number of contracts at our lounge in Copenhagen demonstrating our commitment to developing our executive services offering. There were also 100 contract renewals in the period, securing some GBP51m of annual revenue.
Looking at segmental performance, our Americas region has performed well in the face of tough labour markets. Our management focus has been completing the integration of the fuelling and ground handling businesses acquired with ASIG and dealing with the upward pressure on living wage rates experienced by many of our stations and other businesses in the USA. Our customers are generally receptive to price increases that pass on mandated wage increases for our staff, however, wage rates in certain locations remain low and this drives staff turnover. We are developing a number of initiatives and they are already gaining traction. Cargo handling tonnages improved significantly in Dallas Fort Worth and Los Angeles and the fuelling operations profitability was enhanced by significant wins at San Francisco, Los Angeles and Cincinnati.
It is encouraging that Sint Maarten is recovering after the devastating hurricane last year. However, the almost total reduction in operations impacted the first half result and it may take time for it to reach the capacity it used to enjoy.
Profitability in EMEA continues to improve. Revenues were boosted by the new easyJet contract at Nice, British Airways passenger handling operations in Germany and higher turns across continental Europe and Africa. Contract wins included Air China at Heathrow and Martinair at Amsterdam. The new station in Dublin has started well, adding Icelandair to its core IAG customer base. The fuelling business performed well particularly the stations opening in France at Nice, Bordeaux and recently Paris Le Bourget.
We acquired the trade and assets of Airline Services Limited on 4 April 2018 with 12 locations in the UK including four new stations of Liverpool, Exeter, Newcastle and Bournemouth. We welcome 900 new employees to Menzies Aviation. The acquisition will strengthen our existing UK market position by expanding our service offering at a wider range of locations. We continue to follow competition clearance procedures with the CMA. We were disappointed that, following a detailed phase one review, the CMA announced on 7 August 2018 that they wish to refer the acquisition to a phase two investigation. We will continue to work with the CMA and look to find an acceptable outcome in due course.
In the Rest of World, trading momentum continues with both cargo and ground handling delivering positive results. We have seen ground handling renewals with Jetstar across New Zealand, cargo handling wins with Virgin Atlantic and Vietnam Airlines and the launch of a new freight forwarding trucking service at Sydney. The integration of Gold Coast Air Terminal Services in Queensland has strengthened our cargo handling offering and is performing ahead of expectations. The new operations in Indonesia are due to start in September, another step in widening our footprint in South East Asia and China.
In Cargo Forwarding, our global cargo consolidation and forwarding business, AMI, continued to perform well during the period with trading remaining strong, particularly in the UK and the USA. The new leadership team is in place to expand the geographies in which we operate and the product offerings that we provide. Key to success will be continuing to invest in enhanced systems for our customers and to optimise performance.
We continue to challenge our local teams to improve margins and this is delivering benefits. We are targeting improvements by extending our product offering such as de-icing and executive services. Technology can also play a part in improving productivity and driving better returns.
Our drive to be the market leader in our industry continues. We are investing in infrastructure and innovation across the whole of our business from the equipment that we use every day to the systems and back office functions on which our success is built. We believe that as a professional aviation services business with global operations, our customers can benefit from our innovation. Our airline customers value the automation and innovation that we are bringing to drive out costs and improve passenger and cargo services. This value enables us to win business and drive profitability.
Menzies Distribution
Menzies Distribution delivered an improved result with operating profit at GBP13.0m (H1 2017: GBP10.8m) after benefiting from a GBP1.5m reduction in depreciation and amortisation charges with the business being classified as an asset held for sale from 1 April 2018. On a like-for-like basis the underlying operating profit was GBP11.5m.
Financial Overview
Exceptional and other items in operating profit
A GBP20.8m impairment charge of intangibles and other non-current assets has been taken as an exceptional item in the half year reflecting the impact of accounting for the proposed sale of the Distribution business. Included in the Group's exceptional items in operating profit were transaction related costs of GBP4.6m, primarily relating to the integration of acquisitions, and the preparation for the disposal of Menzies Distribution. The costs of continued de-risking of the defined pension scheme were an additional GBP0.6m. Of the total GBP26.0m exceptional items (H1 2017: GBP17.6m), GBP2.7m (H1 2017: GBP13.0m) was in respect of the continuing business.
Finance costs
The Group's underlying net finance charge in the period was GBP5.4m (H1 2017: GBP5.4m) in line with the prior period.
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 GBP7.3m (H1 2017: GBP6.9m), representing an effective underlying tax rate of 26% (H1 2017: 28%).
Earnings per share
The Group's underlying earnings per share were 25.3p (H1 2017: 21.8p) as a result of the increase in profits. The corresponding basic loss per share was 9.6p (H1 2017: 4.3p) impacted by non-recurring items.
Cash flow and investments
Investments by the Group in the period were GBP15.4m, primarily relating to the acquisition of the trade and assets of Airline Services Limited in Menzies Aviation.
Operating cash flow was GBP38.4m (H1 2017: GBP35.5m). Working capital management remains a key focus for the business. Free cash flow was GBP16.4m (H1 2017: GBP5.4m). Net capital expenditure totalled GBP9.8m (H1 2017: GBP15.3m).
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 GBP231.8m (H1 2017: GBP235.4m) similar to the prior period.
The Group's net debt to EBITDA ratio was 2.1 times at 30 June 2018 (30 June 2017: 2.3 times) and interest cover was 8.4 times (H1 2017: 9.7 times), which were both well within covenanted levels. The Group had GBP344.8m of committed facilities at 30 June 2018 of which GBP52.0m were undrawn.
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 2018, the Group was impacted by unfavourable movements against the prior year, particularly with respect to sterling against the US and Australian dollars.
INDEPENT 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 2018 which comprises Group Income Statement, Group Statement of Comprehensive Income, Group Balance Sheet, Group Statement of Changes in Equity, 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 Guidance 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 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 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
Edinburgh
13 August 2018
GROUP INCOME STATEMENT (unaudited)
for the half year to 30 June 2018
-----------------------------------------------------------------------------------------------------------------------------
Half
Before year
Half exceptional Exceptional to 30
year and other and other June
Before to items items 2017
exceptional Exceptional 30 restated restated restated
and other and other June (Note (Note (Note
items items 2018 15) 15) 15)
Notes GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------ ----------------------- ------------ -------- ----------------------- ------------ ----------
Continuing
operations
Revenue 3 627.2 - 627.2 611.7 - 611.7
Net operating
costs (610.3) (6.1) (616.4) (596.0) (16.5) (612.5)
----------------- ------ ----------------------- ------------ -------- ----------------------- ------------ ----------
Operating profit
before
joint ventures
and
associates 16.9 (6.1) 10.8 15.7 (16.5) (0.8)
Share of
post-tax
results of
joint ventures
and associates 4.0 (0.7) 3.3 3.6 (0.4) 3.2
----------------- ------ ----------------------- ------------ -------- ----------------------- ------------ ----------
Operating profit 3 20.9 (6.8) 14.1 19.3 (16.9) 2.4
Analysed as:
Underlying
operating
profit(i) 3 20.9 - 20.9 19.3 - 19.3
Non-recurring
items
- transaction
related
and integration 4 - (2.1) (2.1) - (9.2) (9.2)
Non-recurring
items
- pension
related 4 - (0.6) (0.6) - (3.8) (3.8)
Contract
amortisation 4 - (3.4) (3.4) - (3.5) (3.5)
Share of joint
ventures
and associates
interest - 0.3 0.3 - 0.5 0.5
Share of joint
ventures
and associates
tax - (1.0) (1.0) - (0.9) (0.9)
----------------- ------ ----------------------- ------------ -------- ----------------------- ------------ ----------
Operating profit 20.9 (6.8) 14.1 19.3 (16.9) 2.4
----------------- ------ ----------------------- ------------ -------- ----------------------- ------------ ----------
Finance income 0.5 - 0.5 0.6 - 0.6
Finance charges
excluding
retirement
benefit
obligation
interest (5.3) (0.4) (5.7) (5.0) (1.2) (6.2)
Retirement
benefit
obligation
interest (0.6) - (0.6) (1.0) - (1.0)
----------------- ------ ----------------------- ------------ -------- ----------------------- ------------ ----------
Profit before
taxation 15.5 (7.2) 8.3 13.9 (18.1) (4.2)
Taxation 5 (4.6) 1.9 (2.7) (4.6) 2.1 (2.5)
----------------- ------ ----------------------- ------------ -------- ----------------------- ------------ ----------
Profit/(loss)
for
the period from
continuing
operations 10.9 (5.3) 5.6 9.3 (16.0) (6.7)
Discontinued
operations
Profit/(loss)
for
the period from
discontinued
operations 15 10.3 (23.9) (13.6) 8.5 (5.8) 2.7
----------------- ------ ----------------------- ------------ -------- ----------------------- ------------ ----------
Profit/(loss)
for
the period 21.2 (29.2) (8.0) 17.8 (21.8) (4.0)
----------------- ------ ----------------------- ------------ -------- ----------------------- ------------ ----------
Attributable to
equity
shareholders 21.2 (29.2) (8.0) 18.2 (21.8) (3.6)
Attributable to
non-controlling
interests - - - (0.4) - (0.4)
----------------- ------ ----------------------- ------------ -------- ----------------------- ------------ ----------
21.2 (29.2) (8.0) 17.8 (21.8) (4.0)
----------------- ------ ----------------------- ------------ -------- ----------------------- ------------ ----------
Earnings per
ordinary
share
Continuing and
discontinued
operations
Basic 6 25.3p (34.9)p (9.6)p 21.8p (26.1)p (4.3)p
Diluted 6 25.3p (34.8)p (9.5)p 21.8p (26.1)p (4.3)p
Continuing
operations
Basic 6 13.0p (6.3)p 6.7p 11.6p (19.2)p (7.6)p
Diluted 6 13.0p (6.3)p 6.7p 11.6p (19.2)p (7.6)p
----------------- ------ ----------------------- ------------ -------- ----------------------- ------------ ----------
Note:
(i) Underlying operating profit adjusts for non-recurring exceptional
items, impairment charges associated with non-current assets, amortisation
relating to acquired contract and customer relationship intangibles
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 INCOME STATEMENT (continued)
for the year ended 31 December 2017
--------------------------------------------------------------------------------------------------
Before exceptional Exceptional Full year
and other and other to 31 December
items items 2017
restated restated restated
(Note 15) (Note 15) (Note 15)
Notes GBPm GBPm GBPm
------------------------------------- ------ ------------------- ------------ ----------------
Continuing operations
Revenue 3 1,273.6 - 1,273.6
Net operating costs (1,228.5) (29.7) (1,258.2)
------------------------------------- ------ ------------------- ------------ ----------------
Operating profit before joint
ventures and associates 45.1 (29.7) 15.4
Share of post-tax results
of joint ventures and associates 8.0 (1.0) 7.0
------------------------------------- ------ ------------------- ------------ ----------------
Operating profit 3 53.1 (30.7) 22.4
Analysed as:
Underlying operating profit(i) 3 53.1 - 53.1
Non-recurring items - transaction
related and integration 4 - (18.5) (18.5)
Non-recurring items - pension
related 4 - (4.1) (4.1)
Contract amortisation 4 - (7.1) (7.1)
Share of joint ventures and
associates interest - 0.9 0.9
Share of joint ventures and
associates tax - (1.9) (1.9)
------------------------------------- ------ ------------------- ------------ ----------------
Operating profit 53.1 (30.7) 22.4
------------------------------------- ------ ------------------- ------------ ----------------
Finance income 1.2 - 1.2
Finance charges excluding
retirement benefit obligation
interest (10.2) (1.7) (11.9)
Retirement benefit obligation
interest (1.8) - (1.8)
------------------------------------- ------ ------------------- ------------ ----------------
Profit before taxation 42.3 (32.4) 9.9
Taxation 5 (14.8) 4.4 (10.4)
------------------------------------- ------ ------------------- ------------ ----------------
Profit/(loss) for the year
from continuing operations 27.5 (28.0) (0.5)
Discontinued operations
Profit for the year from
discontinued operations 15 19.6 (7.1) 12.5
------------------------------------- ------ ------------------- ------------ ----------------
Profit for the year 47.1 (35.1) 12.0
Attributable to equity shareholders 47.7 (35.1) 12.6
Attributable to non-controlling
interests (0.6) - (0.6)
------------------------------------- ------ ------------------- ------------ ----------------
47.1 (35.1) 12.0
------------------------------------- ------ ------------------- ------------ ----------------
Earnings per ordinary share
Continuing and discontinued
operations
Basic 6 57.2p (42.1)p 15.1p
Diluted 6 57.0p (41.9)p 15.1p
Continuing operations
Basic 6 33.7p (33.6)p 0.1p
Diluted 6 33.6p (33.5)p 0.1p
------------------------------------- ------ ------------------- ------------ ----------------
Note:
(i) Underlying operating profit adjusts for non-recurring exceptional
items, impairment charges associated with non-current assets, amortisation
relating to acquired contract and customer relationship intangibles
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 2018
------------------------------------------------------------------------------------
Half year Half year Full year
to to to
30 June 30 June 31 December
2018 2017 2017
Notes GBPm GBPm GBPm
------------------------------------- ------ ---------- ---------- -------------
(Loss)/profit for the period (8.0) (4.0) 12.0
Items that will not be reclassified
subsequently to profit or loss
Continuing operations:
Actuarial gain on defined
benefit retirement obligation 12 14.6 17.5 15.7
Actuarial loss on unfunded
retirement benefit obligation - - (0.1)
Income tax effect on defined
benefit retirement obligation (2.4) (3.4) (2.7)
Impact of UK rate change
on deferred tax on retirement
benefit obligation - 0.5 -
Discontinued operations:
Actuarial loss on defined
benefit retirement obligation 15 (6.7) - -
Income tax effect on defined
benefit retirement obligation 1.2 - -
Items that may be reclassified
subsequently to profit or loss
Movement on cash flow hedges 1.2 0.7 0.5
Income tax effect on cash
flow hedges (0.2) (0.1) (0.1)
Movement on net investment
hedges 0.9 0.6 2.0
Income tax effect on net
investment hedges (0.2) (0.1) (0.4)
Exchange loss on translation
of foreign currency net
assets (5.2) (1.9) (3.7)
Income tax effect of exchange
loss on foreign currency
net assets 0.4 (0.3) 0.7
------------------------------------- ------ ---------- ---------- -------------
Other comprehensive income for
the period 3.6 13.5 11.9
--------------------------------------------- ---------- ---------- -------------
Total comprehensive income for
the period (4.4) 9.5 23.9
--------------------------------------------- ---------- ---------- -------------
Attributable to equity shareholders (4.4) 9.9 24.5
Attributable to non-controlling
interests - (0.4) (0.6)
------------------------------------- ------ ---------- ---------- -------------
(4.4) 9.5 23.9
------------------------------------- ------ ---------- ---------- -------------
GROUP BALANCE SHEET (unaudited)
as at 30 June 2018
-------------------------------------------------------------------------------
30 June
2017
30 June restated 31 December
2018 (Note 16) 2017
Notes GBPm GBPm GBPm
---------------------------------- ------ -------- ----------- ------------
Assets
Non-current assets
Intangible assets 7 167.9 202.3 203.7
Property, plant and equipment 128.8 160.4 155.6
Investments in joint ventures
and associates 27.4 27.1 27.7
Deferred tax assets 22.1 23.7 24.2
Derivative financial assets 8 2.3 - 0.9
348.5 413.5 412.1
---------------------------------- ------ -------- ----------- ------------
Current assets
Inventories 6.4 18.9 20.9
Trade and other receivables 322.4 331.2 350.2
Derivative financial assets 8 1.2 0.7 1.1
Cash and cash equivalents 10 65.7 67.0 72.8
Assets held for sale 15 146.2 - -
---------------------------------- ------ -------- ----------- ------------
541.9 417.8 445.0
---------------------------------- ------ -------- ----------- ------------
Liabilities
Current liabilities
Borrowings 10 (18.3) (10.3) (5.1)
Derivative financial liabilities 8 (0.6) (1.4) (0.5)
Trade and other payables (306.0) (317.6) (344.8)
Current income tax liabilities (9.9) (12.2) (13.5)
Provisions (13.2) (9.1) (15.8)
Liabilities held for sale 15 (102.6) - -
---------------------------------- ------ -------- ----------- ------------
(450.6) (350.6) (379.7)
---------------------------------- ------ -------- ----------- ------------
Net current assets 91.3 67.2 65.3
Total assets less current
liabilities 439.8 480.7 477.4
---------------------------------- ------ -------- ----------- ------------
Non-current liabilities
Borrowings 10 (290.8) (291.4) (283.6)
Other payables (4.6) (4.9) (4.6)
Deferred tax liabilities (4.1) (9.2) (4.7)
Provisions (3.7) (2.8) (2.5)
Retirement benefit obligation 12 (23.5) (52.1) (49.5)
---------------------------------- ------ -------- ----------- ------------
(326.7) (360.4) (344.9)
---------------------------------- ------ -------- ----------- ------------
Net assets 113.1 120.3 132.5
---------------------------------- ------ -------- ----------- ------------
Shareholders' equity
Ordinary shares 21.0 20.9 21.0
Share premium account 22.2 20.7 21.9
Treasury shares (3.2) (1.3) (1.3)
Other reserves (8.7) (5.7) (5.6)
Merger relief reserve 67.3 67.3 67.3
Retained earnings (3.6) 0.6 11.4
Capital redemption reserve 21.6 21.6 21.6
---------------------------------- ------ -------- ----------- ------------
Total shareholders' equity 116.6 124.1 136.3
Non-controlling interest
in equity (3.5) (3.8) (3.8)
---------------------------------- ------ -------- ----------- ------------
Total equity 113.1 120.3 132.5
---------------------------------- ------ -------- ----------- ------------
GROUP STATEMENT OF CHANGES IN EQUITY (unaudited)
as at 30 June 2018
-------------------------------------------------------------------------------------------------------------------------------------------
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
2017 21.0 21.9 (1.3) (5.6) 67.3 11.4 21.6 136.3 (3.8) 132.5
Loss for the
period - - - - - (8.0) - (8.0) - (8.0)
Other
comprehensive
(loss)/income - - - (3.1) - 6.7 - 3.6 - 3.6
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
Total
comprehensive
loss - - - (3.1) - (1.3) - (4.4) - (4.4)
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
New share
capital
issued - 0.3 - - - - - 0.3 - 0.3
Share-based
payments - - - - - (0.2) - (0.2) - (0.2)
Subsidiaries
acquired - - - - - - - - 0.3 0.3
Dividends
approved - - - - - (12.1) - (12.1) - (12.1)
Repurchase
of own shares - - (3.3) - - - - (3.3) - (3.3)
Disposal of
own shares - - 1.4 - - (1.4) - - - -
At 30 June
2018 21.0 22.2 (3.2) (8.7) 67.3 (3.6) 21.6 116.6 (3.5) 113.1
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
At 31 December
2016 20.9 20.5 (1.6) (4.6) 67.3 0.1 21.6 124.2 1.0 125.2
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 0.6 21.6 124.1 (3.8) 120.3
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
At 31 December
2016 20.9 20.5 (1.6) (4.6) 67.3 0.1 21.6 124.2 1.0 125.2
Profit/(loss)
for the year - - - - - 12.6 - 12.6 (0.6) 12.0
Other
comprehensive
(loss)/income - - - (1.0) - 12.9 - 11.9 - 11.9
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
Total
comprehensive
(loss)/income - - - (1.0) - 25.5 - 24.5 (0.6) 23.9
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
New share
capital
issued 0.1 1.4 - - - - - 1.5 - 1.5
Share-based
payments - - - - - 1.4 - 1.4 - 1.4
Income tax
effect of
share-based
payments - - - - - 0.6 - 0.6 - 0.6
Subsidiaries
acquired - - - - - - - - (4.2) (4.2)
Dividends
paid - - - - - (15.9) - (15.9) - (15.9)
Disposal of
own shares - - 0.3 - - (0.3) - - - -
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
At 31 December
2017 21.0 21.9 (1.3) (5.6) 67.3 11.4 21.6 136.3 (3.8) 132.5
--------------- --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
GROUP STATEMENT OF CASH FLOWS (unaudited)
for the half year to 30 June 2018
--------------------------------------------------------------------------------
Half year Half year Full year
to to to
30 June 30 June 31 December
2018 2017 2017
Notes GBPm GBPm GBPm
--------------------------------- ------ ---------- ---------- -------------
Cash flows from operating
activities
Cash generated from operations 9 23.5 15.6 70.2
Interest received 0.5 0.6 1.2
Interest paid (5.2) (8.4) (13.7)
Tax paid (7.5) (7.0) (17.0)
--------------------------------- ------ ---------- ---------- -------------
Net cash flow from operating
activities 11.3 0.8 40.7
--------------------------------- ------ ---------- ---------- -------------
Cash flows from investing
activities
Acquisitions (15.4) (172.1) (171.3)
Cash acquired with subsidiaries 13 - 12.7 12.9
Purchase of property, plant
and equipment (9.7) (15.7) (29.8)
Intangible asset additions (0.8) (0.4) (2.8)
Proceeds from sale of property,
plant and equipment 0.7 0.8 0.8
Dividends received from
equity accounted investments 2.5 3.5 6.3
--------------------------------- ------ ---------- ---------- -------------
Net cash flow used in investing
activities (22.7) (171.2) (183.9)
--------------------------------- ------ ---------- ---------- -------------
Cash flows from financing
activities
Proceeds from issue of ordinary
share capital 0.3 0.3 1.5
Purchase of own shares (3.3) - -
Proceeds from borrowings 5.2 198.4 293.4
Repayment of borrowings (1.6) (5.2) (101.3)
Dividends paid to ordinary
shareholders - - (15.9)
Net cash flow from financing
activities 0.6 193.5 177.7
--------------------------------- ------ ---------- ---------- -------------
(Decrease)/increase in net
cash and cash equivalents (10.8) 23.1 34.5
--------------------------------- ------ ---------- ---------- -------------
Effects of exchange rate
movements (0.6) (1.3) (1.7)
Opening net cash and cash
equivalents 70.9 38.1 38.1
--------------------------------- ------ ---------- ---------- -------------
Closing net cash and cash
equivalents(i) 10 59.5 59.9 70.9
--------------------------------- ------ ---------- ---------- -------------
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 2018 and are unaudited but have been formally reviewed by the Auditors and their report to the Company is set out on page 8. They were approved by the Board on 13 August 2018. 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 2017, prepared in accordance with IFRS, have been filed with the Registrar of Companies. The report of the Auditors included in that 2017 Annual Report 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 Guidance and Transparency Rules of the Financial Conduct Authority and the basis of the accounting policies set out in the 2017 Annual Report, except for the adoption of new standards and interpretations effective from 1 January 2018 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.
New accounting standards and amendments
Several new accounting standards and amendments are applicable for the first time in 2018. However, they have no material impact on the annual consolidated financial statements or the interim condensed financial statements of the Group. These are:
IFRS 15 Revenue from Contracts with Customers - effective date 1 January 2018
IFRS 9 Financial Instruments - effective date 1 January 2018
IFRS 2 Classification and Measurement of Share Based Payment Transactions - effective date 1 January 2018
IFRIC 22 Foreign Currency Transactions and Advance Consideration - effective date 1 January 2018
On 1 January 2018 the Group adopted IFRS 15 using the modified retrospective method applied to those contracts which were not completed as of 1 January 2018. Results for reporting periods beginning on or after 1 January 2018 have and will be presented under IFRS 15, while prior period amounts are not adjusted and continue to be reported in accordance with historic accounting under IAS 18.
The Group has not identified any changes to revenue recognition practices under IFRS 15. The Group's revenue is primarily based on fees for services and the transfer of goods. The individual contract terms determine whether and when revenue is recognised and the amount. The presentation of trade and other receivables and trade and other payables is impacted by the new standard, however there is no impact on the total balances recognised. Revenue from contracts with customers disaggregated by the timing of performance obligations being satisfied is presented in Note 3. The estimate of sales returns is based on past experience and requires judgement.
As set out in the Annual Report and Accounts 2017, the historic approach to accounting for sales returns in the Distribution Division in the period in which they occurred was adjusted. A restatement has been made to the 30 June 2017 Balance Sheet to recognise an adjustment to receivables and corresponding payables to reflect contractual obligations in relation to returns. The Income Statement for the six months ended 30 June 2017 has also been restated to reflect the change in sales and net operating costs as a result of the movements in these amounts. See Note 16 for detail. For clarity, there has been no impact from these adjustments on prior period reported profit before taxation or earnings per share. Following the restatement, there were no further impacts from the accounting for sales returns assets and liabilities on implementation of IFRS 15 on 1 January 2018.
With regard to IFRS 9 Financial Instruments, the impact on hedging arrangements is minimal and the expected credit loss model for impairment reviews does not have an overall impact on the Group. There have been no classification changes and the hedging requirements of IAS 39 continue to be applied. The expected credit loss approach may impact the individual retained earnings of individual entities within the Group due to the potential additional impairment provision for long term intercompany receivables. These potential impairments do not impact on the Group as they would be intragroup items.
Standards and amendments to standards that have been issued but are not effective for 2018 and have not been early adopted are:
IFRS 16 Leases - effective date 1 January 2019
Amendments to IFRS 9 Prepayment Features with Negative Compensation - effective date 1 January 2019
IFRIC 23 Uncertainty over Income Tax Treatments(i) - effective date 1 January 2019
Annual Improvements to IFRS 2015-2017 cycle(i) - effective date 1 January 2019
Amendments to IAS 19 Plan Amendment, Curtailment or Settlement(i) - effective date 1 January 2019
IFRS 17 Insurance Contracts(i) - effective date 1 January 2021
Amendments to IAS 28: Long-term Interests in Associated and Joint Ventures(i) - effective date 1 January 2019
Amendments to References to the Conceptual Framework in IFRS Standards(i) - effective date 1 January 2020
Note:
(i) Not yet adopted for use in the European Union.
Ahead of the adoption of IFRS 16 Leases on 1 January 2019, Management is collating information to ensure compliance with the new standard. The new standard removes the distinction between operating leases and finance leases and will result in a significant number of leased assets being recognised as non-current assets with a corresponding liability shown as debt. This will materially gross up the Balance Sheet with the recognition of a new right of use asset which will be depreciated through the Income Statement and a lease liability on which interest will be charged through the Income Statement.
Non-GAAP measures
The Group's reported results are prepared in accordance with IFRSs as adopted by the European Union and applied in accordance with the provisions of the Companies Act 2006. In measuring the Group's performance, the financial measures that are used include those which have been derived from the reported results in order to eliminate factors which distort period-on-period comparisons. These are considered non-GAAP financial measures. This information, along with comparable GAAP measurements, is useful to investors in providing a basis for measuring our operational performance. Management uses these financial measures, along with the most directly comparable GAAP financial measures, in evaluating performance and value creation. Non-GAAP measures should not be considered in isolation from, or as a substitute for, financial information in compliance with GAAP. Non-GAAP financial measures as reported by the Group may not be comparable with similarly titled amounts reported by other companies.
Contract amortisation relates to intangible assets recognised on historic acquisitions and therefore since it is transaction related it is presented separately in order to provide stakeholders and Management with an appreciation for underlying business performance.
The Group's share of post-tax profit relating to joint ventures and associates is included within operating profit. IAS 1 Presentation of Financial Statements does not prescribe where the investors' share of post-tax profit is presented in the Income Statement but Management presents the results within operating profit after joint ventures and associates given the similarity of those operations to other wholly owned businesses.
The Group's definitions of non-GAAP measures are set out below and provide reconciliations to relevant GAAP measures.
Turnover
Turnover comprises the Group's revenue from subsidiaries and the Group's share of revenue from joint ventures and associates.
Half year
to
30 June Full year
Half year 2017 to
to 30 June restated 31 December
2018 (Note 16) 2017
GBPm GBPm GBPm
------------------------------------ ------------ ----------- -------------
Continuing operations
Revenue 627.2 611.7 1,273.6
Share of revenue of joint ventures
and associates 14.2 13.7 28.6
------------------------------------ ------------ ----------- -------------
641.4 625.4 1,302.2
Discontinued operations
Revenue 606.7 562.6 1,186.9
Share of revenue of joint ventures
and associates - 28.8 28.6
------------------------------------ ------------ ----------- -------------
606.7 591.4 1,215.5
Combined turnover 1,248.1 1,216.8 2,517.7
------------------------------------ ------------ ----------- -------------
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 non-current assets, amortisation relating to acquired contract and customer relationship intangibles 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 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
------------------------------------------- ------------ ---------- -------------
Cash generated from operations 23.5 15.6 70.2
Adjusted for:
Net interest paid (4.7) (4.3) (12.5)
Exceptional interest paid - (3.5) 0.6
Tax paid (7.5) (7.0) (17.0)
Dividends received from equity accounted
investments 2.5 3.5 6.3
Purchase of property, plant and equipment (9.7) (15.7) (29.8)
Intangible asset additions (0.8) (0.4) (2.8)
Proceeds from sale of property, plant
and equipment 0.7 0.8 0.8
Special pension contribution 5.8 5.4 11.3
Exceptional cash spend 6.6 11.0 22.1
------------------------------------------- ------------ ---------- -------------
Free cash flow 16.4 5.4 49.2
------------------------------------------- ------------ ---------- -------------
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 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
------------------------------------------- ------------ ---------- -------------
Free cash flow as set out above 16.4 5.4 49.2
Adjusted for:
Purchase of property, plant and equipment 9.7 15.7 29.8
Intangible asset additions 0.8 0.4 2.8
Proceeds from sale of property, plant
and equipment (0.7) (0.8) (0.8)
Net interest paid excluding exceptional
interest 4.7 7.8 11.9
Tax paid 7.5 7.0 17.0
Underlying operating cash flow 38.4 35.5 109.9
------------------------------------------- ------------ ---------- -------------
3. SEGMENT INFORMATION
For management purposes the Group has been organised into two Operating Divisions, Aviation and Distribution, and a central Corporate function. The two Operating Divisions are organised and managed separately based upon their key markets. The Aviation Division provides ground handling and cargo services as well as into-plane fuelling and fuel farm management services across the world. The Distribution Division provides newspaper and magazine distribution services along with marketing and logistics services across the United Kingdom and the Republic of Ireland. The Distribution Division is classified as held for sale.
The information presented to the Board for the purpose of resource allocation and assessment of segment performance is focused on the performance of each Division as a whole but also contains performance information on a number of operating segments within the Aviation Division. The Board assesses the performance of the operating segments based on a measure of adjusted segment result before exceptional items, intangible amortisation and share of joint ventures and associates interest and tax. Net finance income and expenditure is not allocated to segments as this activity is managed by a central treasury function.
Segment information is presented in respect of the Group's reportable segments together with additional geographic and Balance Sheet information. Transfer prices between segments are set on an arm's length basis.
Business segments
Revenue Underlying operating profit/(loss)
---------------------- ------------- ---------------------------------------
Half year
to
30 June
Half year 2017 Full year Half year Half year Full year
to restated to to to to
30 June (Note 31 December 30 June 30 June 31 December
2018 16) 2017 2018 2017 2017
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ---------- ---------- ------------- ----------- ----------- -------------
Continuing operations
Aviation
Americas 230.2 226.5 460.4 11.0 11.9 23.0
EMEA 258.6 248.2 525.1 4.1 1.8 14.9
Rest of World 80.6 84.6 173.3 5.8 6.1 15.5
Cargo Forwarding 72.0 66.1 143.4 2.8 1.9 5.4
641.4 625.4 1,302.2 23.7 21.7 58.8
Corporate - - - (2.8) (2.4) (5.7)
------------------------- ---------- ---------- ------------- ----------- ----------- -------------
641.4 625.4 1,302.2 20.9 19.3 53.1
Joint ventures and
associates (14.2) (13.7) (28.6) - - -
------------------------- ---------- ---------- ------------- ----------- ----------- -------------
627.2 611.7 1,273.6 20.9 19.3 53.1
Discontinued operations
Distribution 606.7 591.4 1,215.5 13.0 10.8 24.8
Joint ventures and
associates - (28.8) (28.6) - - -
------------------------- ---------- ---------- ------------- ----------- ----------- -------------
606.7 562.6 1,186.9 13.0 10.8 24.8
------------------------- ---------- ---------- ------------- ----------- ----------- -------------
The reconciliation of segmental underlying operating profit/(loss) to the profit/(loss) for the period is provided below.
Aviation Corporate Total
Half year to 30 June 2018 Notes GBPm GBPm GBPm
--------------------------------------- ------ --------- ---------- -------
Operating profit/(loss)
before joint ventures and
associates 15.2 (4.4) 10.8
Share of post-tax results
of joint ventures and associates 3.3 - 3.3
Operating profit/(loss) 18.5 (4.4) 14.1
Analysed as:
Underlying operating profit/(loss)(i) 23.7 (2.8) 20.9
Exceptional transaction
related items 4 (1.1) (1.6) (2.7)
Contract amortisation 4 (3.4) - (3.4)
Share of interest on joint
ventures and associates 0.3 - 0.3
Share of tax on joint ventures
and associates (1.0) - (1.0)
Operating profit/(loss) 18.5 (4.4) 14.1
------ --------- ----------
Net finance expense (5.8)
--------------------------------------- ------ --------- ---------- -------
Profit before taxation 8.3
Taxation (2.7)
--------------------------------------- ------ --------- ---------- -------
Profit for the period from
continued operations 5.6
Loss for the period from
discontinued operations 15 (13.6)
--------------------------------------- ------ --------- ---------- -------
Loss for the period (8.0)
--------------------------------------- ------ --------- ---------- -------
Aviation Corporate Total
Half year to 30 June 2017 Notes GBPm GBPm GBPm
--------------------------------------- ------ --------- ---------- -------
Operating profit/(loss)
before joint ventures and
associates 7.3 (8.1) (0.8)
Share of post-tax results
of joint ventures and associates 3.2 - 3.2
Operating profit/(loss) 10.5 (8.1) 2.4
Analysed as:
Underlying operating profit/(loss)(i) 21.7 (2.4) 19.3
Exceptional transaction
related items 4 (7.3) (5.7) (13.0)
Contract amortisation 4 (3.5) - (3.5)
Share of interest on joint
ventures and associates 0.5 - 0.5
Share of tax on joint ventures
and associates (0.9) - (0.9)
--------------------------------------- ------ --------- ---------- -------
Operating profit/(loss) 10.5 (8.1) 2.4
--------------------------------------- ------ --------- ---------- -------
Net finance expense (6.6)
--------------------------------------- ------ --------- ---------- -------
Loss before taxation (4.2)
Taxation (2.5)
--------------------------------------- ------ --------- ---------- -------
Loss for the period from
continued operations (6.7)
Profit for the period from
discontinued operations 15 2.7
--------------------------------------- ------ --------- ---------- -------
Loss for the period (4.0)
--------------------------------------- ------ --------- ---------- -------
Aviation Corporate Total
Full year to 31 December 2017 Notes GBPm GBPm GBPm
-------------------------------------------- ------- ---------- ----------- -------
Operating profit/(loss) before
joint ventures and associates 28.2 (12.8) 15.4
Share of post-tax results
of joint ventures and associates 7.0 - 7.0
Operating profit/(loss) 35.2 (12.8) 22.4
Analysed as:
Underlying operating profit/(loss)(i) 58.8 (5.7) 53.1
Exceptional transaction related
items 4 (15.5) (3.0) (18.5)
Exceptional pension de-risking
costs 4 - (4.1) (4.1)
Contract amortisation 4 (7.1) - (7.1)
Share of interest on joint
ventures and associates 0.9 - 0.9
Share of tax on joint ventures
and associates (1.9) - (1.9)
-------------------------------------------- ------- ---------- ----------- -------
Operating profit/(loss) 35.2 (12.8) 22.4
-------------------------------------------- ------- ---------- ----------- -------
Net finance expense (12.5)
-------------------------------------------- ------- ---------- ----------- -------
Profit before taxation 9.9
Taxation (10.4)
-------------------------------------------- ------- ---------- ----------- -------
Loss for the year from continued
operations (0.5)
Profit for the year from discontinued
operations 15 12.5
-------------------------------------------- ------- ---------- ----------- -------
Profit for the year 12.0
-------------------------------------------- ------- ---------- ----------- -------
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
Discontinued
Continuing operations operations
------------------------ -------------
Aviation Corporate Distribution Total
Half year to 30 June 2018 GBPm GBPm GBPm GBPm
------------------------------- ----------- ----------- ------------- ------
Property, plant and equipment 8.3 - 1.1 9.4
Intangible assets 0.1 - 0.7 0.8
------------------------------- ----------- ----------- ------------- ------
Half year to 30 June 2017
------------------------------- ----------- ----------- ------------- ------
Property, plant and equipment 14.1 0.3 0.5 14.9
Intangible assets 0.1 - 0.3 0.4
------------------------------- ----------- ----------- ------------- ------
Full year to 31 December 2017
------------------------------- ----------- ----------- ------------- ------
Property, plant and equipment 26.5 0.3 2.1 28.9
Intangible assets 1.9 - 0.9 2.8
------------------------------- ----------- ----------- ------------- ------
Revenue by country
Half year
to
30 June 2017 Full year to
Half year to restated 31 December
30 June 2018 (Note 16) 2017
GBPm GBPm GBPm
------------------------- -------------- -------------- -------------
Continuing operations
United States of
America 182.0 179.7 362.0
United Kingdom 131.0 134.4 284.4
Others 314.2 297.7 627.2
-------------------------- -------------- -------------- -------------
627.2 611.7 1,273.6
Discontinued operations
United Kingdom 568.4 555.3 1,139.3
Other 38.3 7.3 47.6
-------------------------- -------------- -------------- -------------
606.7 562.6 1,186.9
Combined revenue 1,233.9 1,174.3 2,460.5
-------------------------- -------------- -------------- -------------
Revenue by performance obligation
Half year
to
30 June
2018
GBPm
-------------------------- ----------
Continuing operations
At the point of service 616.7
Other 10.5
--------------------------- ----------
627.2
Discontinued operations
On the transfer of goods 561.5
At the point of service 41.3
Other 3.9
--------------------------- ----------
606.7
Combined revenue 1,233.9
--------------------------- ----------
At the point of service
The Aviation Division provides customers with a comprehensive handling service whilst aircraft are on the ground, encompassing a variety of critical support services including baggage handling, cleaning, fuelling, de-icing and towing. The level of service required can vary according to conditions therefore judgement is exercised in determining the distinct performance obligations under the contract. Performance obligations under ground handling and cargo handling contracts constitute a package of services provided together within a single aircraft turnaround. The interrelated activities are considered to be integrated in providing a single turnaround to customers. Revenue on these contracts is recognised according to the actual work carried out, typically governed by a schedule of agreed rates, at the time the service is provided.
In addition, the cargo forwarding business contracts with customers to fulfil the single performance obligation to facilitate the transportation of goods from one location to another. The business directs the performance of this obligation, selecting carriers to use. Revenue is recognised at the point of delivery as this is the point at which the revenue is significantly assured.
In the Distribution business, revenue from delivery charges for goods, publications and parcels is recognised at the point when the service is provided, at the contractual rate. Distribution also undertakes storage and fulfilment services for customers whereby revenue is recognised at agreed rates per contract for storage, and a contractual rate per despatch.
On the transfer of goods
In the Distribution business, print media revenues arise from the sale and distribution of time-sensitive newspapers and magazines to retailers and is recognised at the point of delivery to the retailer. Sales to retailers are made with a right of return for unsold publications and is estimated at the point of revenue recognition. The estimate of sales returns is based on past experience and requires judgement.
4. EXCEPTIONAL AND OTHER ITEMS
Exceptional items included in operating profit
Half year
to Half year Full year to
30 June to 31 December
2018 30 June 2017 2017
Continuing operations GBPm GBPm GBPm
----------------------------------------- ----------- ---------------- ---------------
Acquisition and transaction
related costs(i) (0.3) (3.8) (4.6)
Acquisition integration costs(ii) (1.8) (5.4) (13.9)
Pension de-risking costs(iii) (0.6) (3.8) (4.1)
------------------------------------------ ----------- ---------------- ---------------
(2.7) (13.0) (22.6)
----------------------------------------- ----------- ---------------- ---------------
Notes:
(i) Acquisition and transaction related costs primarily relate to
the acquisition of the trade and assets of Airline Services Limited.
In the prior year transaction related costs reflect GBP2.2m pre-acquisition
costs relating to the acquisition of ASIG Holdings Ltd and ASIG Holdings
Corp. (ASIG), GBP1.2m increase in onerous lease provision, GBP0.4m
transaction related costs relating to Hyderabad Menzies Air Cargo
Private Ltd, GBP0.4m transaction related costs relating to the planned
acquisition of a joint venture business in Oman and acquisition of
Gold Coast Air Terminal Services Pty Ltd.
(ii) Acquisition integration costs GBP1.8m relate to the ASIG acquisition
and Airline Services acquisition where the costs comprise integration
team, IT consultancy and systems related costs and rationalisation.
In the prior year the costs related to ASIG integration costs only.
(iii) Pension de-risking costs relate to fees and charges incurred
to remove cost and volatility from retirement benefit obligations.
In the prior year costs related to fees to close the Company's defined
benefit pension scheme to future accrual and in relation to the sectionalisation
of the scheme.
Exceptional items included in finance charges
Half year Half year Full year to
to to 31 December
30 June 2018 30 June 2017 2017
Continuing operations GBPm GBPm GBPm
-------------------------------- -------------- -------------- -------------
Unwind discount costs(i) (0.1) (0.1) (0.1)
Acquisition related financing
costs(ii) - (0.6) (0.7)
--------------------------------- -------------- -------------- -------------
Notes:
(i) Unwind discount costs relate to deferred consideration and onerous
lease provisions.
(ii) In the prior year, acquisition related financing costs related
to write-off 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 in 2017.
Intangible assets amortisation included in operating profit
Half year Full year to
Half year to to 31 December
30 June 2018 30 June 2017 2017
Continuing operations GBPm GBPm GBPm
------------------------------ ---------------- --------------- --------------
Contract amortisation(i) (3.4) (3.5) (7.1)
------------------------------- ---------------- --------------- --------------
Note:
(i) Contract amortisation relates to contract and customer relationships
capitalised as intangible assets on the acquisition of businesses.
5. TAXATION (CONTINUING AND DISCONTINUED OPERATIONS)
The underlying effective tax rate for the full year 2018 is estimated at 26% (full year 2017: 30%). Therefore, the underlying effective tax rate used for the half year 2018 was 26% (half year 2017: 28%). 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 2017: GBP1.0m and full year to 31 December 2017: GBP2.0m).
The taxation effect of the exceptional items is a GBP0.5m net credit (half year to 30 June 2017: GBP1.4m net credit, full year to 31 December 2017: GBP2.2m net credit) in relation to tax deductions available for a proportion of the exceptional costs arising during the period.
6. EARNINGS PER SHARE
Basic Underlying(i)
----------------------------------- ---------------------------------------
Half
year Full year Full year
Half year to 30 to Half year Half year to
to 30 June 31 December to 30 to 30 31 December
June 2018 2017 2017 June 2018 June 2017 2017
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ----------- ------- ------------- ----------- ----------- -------------
Continuing and discontinued
operations
(Loss)/profit for the
period as set out in
the Income Statement (8.0) (4.0) 12.0 21.2 17.8 47.1
Adjustment for loss
relating to non-controlling
interests - 0.4 0.6 - 0.4 0.6
------------------------------ ----------- ------- ------------- ----------- ----------- -------------
Earnings for the period
attributable to equity
shareholders (8.0) (3.6) 12.6 21.2 18.2 47.7
------------------------------ ----------- ------- ------------- ----------- ----------- -------------
Basic
Earnings per ordinary
share (9.6)p (4.3)p 15.1p
Diluted earnings per
ordinary share (9.5)p (4.3)p 15.1p
Underlying
Earnings per ordinary
share 25.3p 21.8p 57.2p
Diluted earnings per
ordinary share 25.3p 21.8p 57.0p
Number of ordinary shares in
issue
Weighted average (million) 83.7 83.4 83.4
Diluted weighted average
(million) 83.9 83.4 83.7
------------------------------ ----------- ------- ------------- ----------- ----------- -------------
Continuing operations
(Loss)/profit for the
period as set out in
the Income Statement (8.0) (4.0) 12.0 21.2 17.8 47.1
Adjustment to exclude
result from discontinued
operations 13.6 (2.7) (12.5) (10.3) (8.5) (19.6)
Adjustment for loss
relating to non-controlling
interest - 0.4 0.6 - 0.4 0.6
------------------------------ ----------- ------- ------------- ----------- ----------- -------------
Earnings for the period
attributable to equity
shareholders 5.6 (6.3) 0.1 10.9 9.7 28.1
------------------------------ ----------- ------- ------------- ----------- ----------- -------------
Basic
Earnings per ordinary
share 6.7p (7.6)p 0.1p
Diluted earnings per
ordinary share 6.7p (7.6)p 0.1p
Underlying
Earnings per ordinary
share 13.0p 11.6p 33.7p
Diluted earnings per
ordinary share 13.0p 11.6p 33.6p
------------------------------ ----------- ------- ------------- ----------- ----------- -------------
Discontinued operations
(Loss)/profit for the
period as set out in
the Income Statement (8.0) (4.0) 12.0 21.2 17.8 47.1
Adjustment to exclude
result from continuing
operations (5.6) 6.7 0.5 (10.9) (9.3) (27.5)
------------------------------ ----------- ------- ------------- ----------- ----------- -------------
Earnings for the period
attributable to equity
shareholders (13.6) 2.7 12.5 10.3 8.5 19.6
------------------------------ ----------- ------- ------------- ----------- ----------- -------------
Basic Earnings per ordinary share (16.3)p 3.2p 15.0p Diluted earnings per ordinary share (16.2)p 3.2p 14.9p Underlying Earnings per ordinary share 12.3p 10.2p 23.5p Diluted earnings per ordinary share 12.3p 10.2p 23.4p ------------------------------ ----------- ------- ------------- ----------- ----------- ------------- 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, (i.e. where the exercise price is less than the average market price of the shares during the period).
7. INTANGIBLE ASSETS
Intangible assets for the continuing and discontinued operations comprise goodwill of GBP118.6m (June 2017: GBP117.0m, December 2017: GBP124.7m), contracts and customer relationship intangibles of GBP65.2m (June 2017: GBP76.5m, December 2017: GBP69.8m) and capitalised software costs of GBP8.8m (June 2017: GBP8.8m, December 2017: GBP9.2m). The principal cause of the GBP11.1m decrease in intangible assets in the period relates to the impairment relating to the Distribution business as set out in Note 15, partly offset by goodwill and customer relationship intangibles recognised on acquisition of the trade and assets of Airline Services Limited as set out in Note 13. Intangible assets relating to continuing operations are GBP167.9m as set out on the Balance Sheet and discontinued operations GBP24.7m as set out in Note 15.
8. 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
The Group uses three levels for determining and disclosing the fair value of financial instruments by valuation technique:
Level quoted (unadjusted) prices in active markets for identical assets
1: 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 that use inputs that have a significant effect on
3: the recorded fair value not based on observable market data.
As at 30 June 2018, the Group had the following financial instruments held at fair value with movements recognised through the Statement of Other Comprehensive Income:
31 December
30 June 2018 30 June 2017 2017
Level 2 Level 2 Level 2
GBPm GBPm GBPm
------------------------------------- ------------- ------------- ------------
Financial assets:
Foreign exchange contracts - hedged 1.2 0.7 1.1
Interest rate swaps - hedged 2.3 - 0.9
Financial liabilities:
Foreign exchange contracts - hedged 0.6 1.4 0.5
------------------------------------- ------------- ------------- ------------
During the half year to 30 June 2018 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.
30 June 2018 30 June 2017 31 December 2017
------------------------ ------------------------ ------------------------
Book value Fair value Book value Fair value Book value Fair value
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ ----------- ----------- ----------- ----------- ----------- -----------
Current borrowings 18.3 18.5 10.3 10.5 5.1 5.3
Non-current borrowings 290.8 290.9 291.4 291.8 283.6 283.8
------------------------ ----------- ----------- ----------- ----------- ----------- -----------
Contingent consideration
The acquisition of Gold Coast Air Terminal Services Pty Ltd included an earn-out target, which should it be met would require the Group to pay the vendor up to an additional GBP0.4m in 2019. This earn-out target is based on an annualised EBITDA level and, should the minimum target not be met, no further payment would be required. The difference between the fair value at the date of acquisition and the maximum payable contingent consideration is not considered to be material. Management expects that the target will be met and therefore the contingent consideration has been provided for. During the period ended 30 June 2018, contingent consideration of GBP0.4m was cash settled.
The acquisition of PlaneBiz 2015 Ltd in 2014 included options in relation to the 40% shareholding owned by a third party. These options take the form of a put option in favour of the third party shareholders for up to 30% of the share capital, exercisable in 2018 and 2019. Following the expiry of this put option the Group then has a call option, exercisable for a 60 day period, for the remaining shares that have not been exercised under the put option. The fair value of the put option has been calculated based on the expected discounted cash flows of the underlying value, which is the expected average annual EBITDA over the preceding three years multiplied by 5.5. The call option is considered to have a negligible fair value.
The liabilities for contingent consideration and other acquisition related amounts are Level 3 derivative financial instruments.
31 December
30 June 2018 30 June 2017 2017
GBPm GBPm GBPm
------------------------------------ ------------- ------------- ------------
Fair value of contingent and other
acquisition related amounts:
Gold Coast Air Terminal Services
Pty Ltd 0.4 0.8 0.8
PlaneBiz 2015 Ltd 3.2 3.4 3.2
------------------------------------ ------------- ------------- ------------
9. CASH GENERATED FROM OPERATIONS
Full year
Half year Half year to
to 30 June to 30 June 31 December
2018 2017 2017
Continuing and discontinued operations GBPm GBPm GBPm
----------------------------------------- ------------ ------------ -------------
Operating (loss)/profit before joint
ventures and associates (0.4) 3.2 31.4
Depreciation 13.0 13.3 27.8
Amortisation of intangible assets 5.4 6.5 13.9
Share-based payments 0.7 0.7 1.4
Non-exceptional onerous lease provision
charge/(release) 0.7 1.3 (0.8)
Cash spend on onerous leases (1.9) (0.6) (1.0)
(Gain)/loss on sale of property, plant
and equipment (0.2) 0.1 (0.1)
Pension charge 0.6 1.4 2.2
Pension contributions in cash (5.9) (6.5) (12.5)
Acquisition and related exceptional
items 5.2 16.3 27.1
Impairment loss 20.8 - -
Cash spend on exceptional items (4.7) (10.4) (21.1)
Increase in inventories (0.5) (2.9) (4.9)
Increase in trade and other receivables (20.8) (109.9) (25.4)
Increase in trade and other payables
and provisions 11.5 103.1 32.2
23.5 15.6 70.2
----------------------------------------- ------------ ------------ -------------
10. CHANGES IN NET BORROWINGS
31 December Half year Fair value Currency 30 June
2017 cash flows movements translation 2018
GBPm GBPm GBPm GBPm GBPm
------------------------------- ------------ ----------- ----------- ------------ --------
Cash at bank and in
hand 72.8 2.2 - (0.6) 74.4
Bank overdrafts (1.9) (13.0) - - (14.9)
------------------------------- ------------ ----------- ----------- ------------ --------
Net cash and cash equivalents 70.9 (10.8) - (0.6) 59.5
Bank loans due within
one year (3.2) (0.2) - - (3.4)
Preference shares (1.4) - - - (1.4)
Debt due after one year (282.2) (2.7) - (4.5) (289.4)
Net derivative assets
(at fair value) 1.5 (0.7) 2.1 - 2.9
------------------------------- ------------ ----------- ----------- ------------ --------
Net debt (214.4) (14.4) 2.1 (5.1) (231.8)
------------------------------- ------------ ----------- ----------- ------------ --------
As set out in Note 15, discontinued operations includes cash of GBP8.7m. All other amounts set out above relate to continuing operations and are presented in the Balance Sheet.
As set out in the cash flow statement, proceeds from borrowings were GBP5.2m (full year to 31 December 2017: GBP293.4m) and repayments of borrowings were GBP1.6m (full year to 31 December 2017: GBP101.3m).
Current borrowings of GBP18.3m in the Balance Sheet include bank overdrafts of GBP14.9m and bank loans of GBP3.4m. Non-current borrowings in the Balance Sheet of GBP290.8m include preference shares of GBP1.4m and bank debt of GBP289.4m. Net derivative assets of GBP2.9m shown above include derivative financial assets of GBP3.5m and derivative financial liabilities of GBP0.6m as set out on the Balance Sheet.
11. CONTINGENT LIABILITIES
The Group has a number of claims in the normal course of business that management believes should not result in a material impact to the accounts. These include pre-acquisition claims against ASIG that Management expects to be largely recoverable from the previous owners.
12. RETIREMENT BENEFIT OBLIGATION
Defined benefit scheme
The principal Group-funded defined benefit pension scheme is the Menzies Pension Fund (the Fund) in the United Kingdom to which employees have contributed until the Fund closed to future accrual in the prior year. Additionally, in the prior year the Fund was split into two sections Section A and Section B. Section B is expected to be transferred to the new owner of the Distribution business and for the half year to 30 June 2018 is set out in the discontinued operations Note 15. In accordance with IAS 19 the scheme valuations were assessed in accordance with independent actuarial advice from PricewaterhouseCoopers (the Actuary).
Fund financial assumptions and information
The Actuary undertook a valuation of the Fund as at 30 June 2018 (30 June 2017 and 31 December 2017). In deriving the results the Actuary used the following financial assumptions:
Half year Full year
Half year to to
to 30 June 30 June 31 December
2018 2017 2017
% % %
------------------------------- ------------ ---------- -------------
Price inflation 3.0 3.2 3.1
Discount rate 2.7 2.6 2.5
Rate of increase on pensions
accrued pre-2006 3.5 3.6 3.6
Rate of increase on pensions
accrued post-2006 2.1 2.2 2.2
------------------------------- ------------ ---------- -------------
Assumptions regarding future mortality experience are set based on advice that uses published statistics and experience in the business.
The Fair value of Fund assets and liabilities are:
Half year Full year
Half year to to
to 30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
---------------------------- ------------ ---------- -------------
Total value of assets 304.9 372.2 374.4
Defined benefit obligation (328.4) (424.3) (423.9)
------------------------------ ------------ ---------- -------------
Recognised in Balance
Sheet (23.5) (52.1) (49.5)
Related deferred tax
asset 4.0 8.9 8.4
------------------------------ ------------ ---------- -------------
Net pension liabilities (19.5) (43.2) (41.1)
------------------------------ ------------ ---------- -------------
Pension expense
The charge to the Income Statement is assessed in accordance with independent actuarial advice from the Actuary using the projected unit method.
The components of the pension expense are:
Half year Full year
Half year to to
to 30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
---------------------------------- ------------ ---------- -------------
Amounts charged to operating
profit
Current service cost - 0.6 0.6
Administrative costs 0.6 0.8 1.6
Effect of curtailments and
settlements - 2.7 2.7
------------------------------------ ------------ ---------- -------------
Total service cost 0.6 4.1 4.9
Amounts included in finance
costs
Interest cost on defined benefit
obligation 4.4 5.9 11.5
Interest income on Fund assets (3.9) (4.9) (9.7)
------------------------------------ ------------ ---------- -------------
Net finance charge 0.5 1.0 1.8
Pensions expense 1.1 5.1 6.7
------------------------------------ ------------ ---------- -------------
The amounts recognised in the Statement of Comprehensive Income are:
Half year Full year
Half year to to
to 30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
------------------------------------ ------------ ---------- -------------
Returns on assets excluding
interest income (3.0) 6.1 18.2
Changes in demographic assumptions 1.7 7.1 7.1
Changes in financial assumptions 15.9 0.7 (6.2)
Experience - 3.6 (3.4)
-------------------------------------- ------------ ---------- -------------
Actuarial gain 14.6 17.5 15.7
-------------------------------------- ------------ ---------- -------------
Changes in Fund assets and defined benefit obligation
The change in scheme assets during the period is:
Half year Full year
Half year to to
to 30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
-------------------------------------- ------------ ---------- -------------
Fair value of assets
at start of period 309.9 368.9 368.9
Interest income 3.9 4.9 9.7
Returns on assets excluding interest
income (3.0) 6.1 18.2
Company contributions 5.5 6.5 12.5
Employee contributions - 0.2 0.2
Benefits and expenses
paid (11.4) (14.4) (35.1)
---------------------------------------- ------------ ---------- -------------
Fair value of assets
at end of period 304.9 372.2 374.4
---------------------------------------- ------------ ---------- -------------
Return on scheme assets
including interest income 0.9 11.0 27.9 ---------------------------------------- ------------ ---------- -------------
The change in defined benefit obligation during the period is:
Half year Full year
Half year to to
to 30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
------------------------------------ ------------ ---------- -------------
Defined benefit obligation
at start of period 352.4 439.9 439.9
Total service cost 0.6 1.4 2.2
Exceptional curtailments - 2.7 2.7
Interest cost 4.4 5.9 11.5
Employee contributions - 0.2 0.2
Benefits and expenses paid (11.4) (14.4) (35.1)
Changes in demographic assumptions (1.7) (7.1) (7.1)
Changes in financial assumptions (15.9) (0.7) 6.2
Experience - (3.6) 3.4
-------------------------------------- ------------ ---------- -------------
Defined benefit obligation
at end of period 328.4 424.3 423.9
-------------------------------------- ------------ ---------- -------------
13. Acquisitions
On 4 April 2018 the Group acquired the trade and assets of Airline Services Limited. The business provides de-icing and aircraft presentation services at UK airports together with ground handling operations at London Gatwick. This acquisition expands our coverage into four new UK airports.
Half year Full year
to to
30 June 31 December
2018 2017
GBPm GBPm
---------------------------------- ---------- -------------
Purchase consideration:
Cash paid 14.4 172.8
Impact of assets not transferred - (2.2)
Contingent consideration - 0.8
Fair value of existing equity
interest in joint ventures - 5.8
------------------------------------ ---------- -------------
14.4 177.2
Less: non-controlling interest
acquired - 4.2
Less: fair value of net assets
acquired 6.1 95.0
Goodwill 8.3 78.0
------------------------------------ ---------- -------------
Goodwill recognised with respect to Airline Services is primarily attributable to workforce expertise and synergies with other Group companies.
The fair values of assets and liabilities arising from the acquisitions are:
Half year Full year
to to
30 June 31 December
2018 2017
GBPm GBPm
----------------------------------- ---------- -------------
Intangible assets - contracts and
customer relationships 2.5 35.8
Intangible assets - brand - 6.6
Deferred tax assets - 3.6
Property, plant and equipment 4.0 31.9
Inventory 1.1 5.0
Trade and other receivables - 101.5
Cash - 12.9
Trade and other payables (0.2) (83.6)
Provisions (0.9) (11.3)
Current income tax liabilities - (1.1)
Deferred tax liability (0.4) (6.3)
Net assets acquired at fair value 6.1 95.0
------------------------------------- ---------- -------------
The fair values of the net assets acquired remain provisional pending the formal completion of the valuation process.
On 5 February 2018 the Group invested GBP0.4m for a controlling share of a new start-up operation in Indonesia.
Contingent and deferred consideration
Contingent consideration in continuing operations of GBP0.4m relating to the acquisition of Gold Coast Air Terminal Services Pty Ltd was cash settled in April 2018. Deferred consideration in discontinued operations of GBP0.3m relating to the acquisition of AJG Parcels Ltd was cash settled in May 2018.
14. FOREIGN CURRENCY SENSITIVITY
For the period to 30 June 2018, if Sterling had weakened or 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 2018 31 December 2017
---------------------------- ----------------------------
Effect on Effect on
profit before Effect profit before Effect
tax on equity tax on equity
-----------------
Weakening/
(strengthening)
of sterling GBPm GBPm GBPm GBPm
-------------------- ----------------- --------------- ----------- --------------- -----------
US dollar 10% 1.0 (0.2) 2.0 1.6
US dollar (10)% (0.8) 0.1 (1.6) (1.3)
Australian dollar 10% 0.6 1.4 1.4 1.6
Australian dollar (10)% (0.5) (1.2) (1.2) (1.3)
Euro 10% 0.5 (0.3) 1.1 (0.8)
Euro (10)% (0.4) 0.2 (0.9) 0.7
Indian rupee 10% 0.3 1.6 0.7 1.3
Indian rupee (10)% (0.3) (1.3) (0.6) (1.1)
Canadian dollar 10% 0.3 0.7 0.5 0.7
Canadian dollar (10)% (0.3) (0.6) (0.4) (0.6)
South African rand 10% - 0.5 - 0.5
South African rand (10)% - (0.4) - (0.4)
-------------------- ----------------- --------------- ----------- --------------- -----------
The impact of the Group's exposure to other foreign currencies is not considered to be material to the overall results of the Group.
15. ASSETS AND ASSOCIATED LIABILITIES CLASSIFIED AS HELD FOR SALE
As announced in November 2017, the Board conducted a strategic review of the Distribution business with the objective of assessing the optimum route to split the Group and create two strong market players. Following the review, a sale process for Menzies Distribution began in April 2018 at which point all assets and liabilities of the Distribution business were classified as held for sale and the operations classified as discontinued. On 26 July 2018 the Group announced the conditional disposal of the Distribution business to a third party. Completion is conditional on certain regulatory approvals and is expected to complete in Q3 2018.
The Menzies Distribution business was not previously classified as held for sale or a discontinued operation. The comparative consolidated income statement has been restated to show the discontinued operation separately from continuing operations.
Results of discontinued operations
Half
Before year
exceptional Exceptional to
Half and other and other 30 June
Before year items items 2017
exceptional Exceptional to 30 restated restated restated
and other and other June (Note (Note (Note
items items 2018 16) 16) 16)
GBPm GBPm GBPm GBPm GBPm GBPm
--------------- --------------- -------------- ----------------------- ------------- ------------ ------------
Revenue 606.7 - 606.7 562.6 - 562.6
Net operating
costs (593.7) (24.2) (617.9) (552.6) (6.0) (558.6)
--------------- --------------- -------------- ----------------------- ------------- ------------ ------------
Operating
profit before
joint
ventures and
associates 13.0 (24.2) (11.2) 10.0 (6.0) 4.0
Share of
post-tax
results
of joint
ventures and
associates - - - 0.8 (0.1) 0.7
--------------- --------------- -------------- ----------------------- ------------- ------------ ------------
Operating
profit/(loss) 13.0 (24.2) (11.2) 10.8 (6.1) 4.7
Analysed as:
Underlying
operating
profit(i) 13.0 - 13.0 10.8 - 10.8
Non-recurring
items
- impairment - (20.8) (20.8) - - -
Non-recurring
items
- transaction
related
and
integration - (2.5) (2.5) - (4.6) (4.6)
Contract
amortisation - (0.9) (0.9) - (1.4) (1.4)
Share of tax
on joint
ventures and
associates - - - - (0.1) (0.1)
--------------- --------------- -------------- ----------------------- ------------- ------------ ------------
Operating
profit/(loss) 13.0 (24.2) (11.2) 10.8 (6.1) 4.7
--------------- --------------- -------------- ----------------------- ------------- ------------ ------------
Profit/(loss)
before
taxation 13.0 (24.2) (11.2) 10.8 (6.1) 4.7
Taxation (2.7) 0.3 (2.4) (2.3) 0.3 (2.0)
--------------- --------------- -------------- ----------------------- ------------- ------------ ------------
Profit/(loss)
for the
period 10.3 (23.9) (13.6) 8.5 (5.8) 2.7
--------------- --------------- -------------- ----------------------- ------------- ------------ ------------
Note:
(i) Underlying operating profit adjusts for non-recurring exceptional
items, impairment charges associated with non-current assets, amortisation
relating to acquired contract and customer relationship intangibles
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.
Before Full year
exceptional Exceptional to
and other and other 31 December
items items 2017
GBPm GBPm GBPm
------------------------------------------------ ----------------------- ------------- --------------------------
Revenue 1,186.9 - 1,186.9
Net operating costs (1,163.0) (7.9) (1,170.9)
------------------------------------------------ ----------------------- ------------- --------------------------
Operating profit before joint ventures
and associates 23.9 (7.9) 16.0
Share of post-tax results of joint
ventures and associates 0.9 (0.1) 0.8
------------------------------------------------ ----------------------- ------------- --------------------------
Operating profit/(loss) 24.8 (8.0) 16.8
Analysed as:
Underlying operating profit(i) 24.8 - 24.8
Non-recurring items - transaction
related - (4.5) (4.5)
Contract amortisation - (3.4) (3.4)
Share of tax on joint ventures and
associates - (0.1) (0.1)
------------------------------------------------ ----------------------- ------------- --------------------------
Operating profit/(loss) 24.8 (8.0) 16.8
------------------------------------------------ ----------------------- ------------- --------------------------
Profit before taxation 24.8 (8.0) 16.8
Taxation (5.2) 0.9 (4.3)
------------------------------------------------ ----------------------- ------------- --------------------------
Profit for the year 19.6 (7.1) 12.5
------------------------------------------------ ----------------------- ------------- --------------------------
Note:
(i) Underlying operating profit adjusts for non-recurring exceptional
items, impairment charges associated with non-current assets, amortisation
relating to acquired contract and customer relationship intangibles
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.
Exceptional items
Half year Half year Full year
to to to
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
------------------------------------------ ----------- ----------- --------------
Impairment of non-current assets(i) (20.8) - -
Transaction related costs(ii) (2.5) (3.3) (3.2)
Pension related costs(iii) - (1.3) (1.3)
------------------------------------------ ----------- ----------- --------------
(23.3) (4.6) (4.5)
----------------------------------------- ----------- ----------- --------------
Notes:
(i) The Group has considered the requirements to ensure that the disposal
group held for sale is held at the lower of carrying amount and fair
value less costs to sell. This has resulted in an impairment of GBP20.8m,
with GBP15.5m allocated against goodwill and the remainder allocated
on a pro rata basis to intangible assets (GBP3.5m) and property, plant
and equipment (GBP1.8m).
(ii) Transaction related costs include costs relating to the disposal
of the Distribution business. In the prior year costs of GBP1.1m related
to the aborted demerger of the Distribution business and the step
acquisition of EM News Distribution (Ireland) Ltd and EM News Distribution
(NI) Ltd.
(iii) Pension related costs incurred in the prior year relate to fees
and charges incurred in order to close the defined benefit scheme
to future accrual.
Intangible assets amortisation
Half year Half year Full year
to to to
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
---------------------------------- ------------- ------------- ----------------
Contract amortisation(i) (0.9) (1.4) (3.4)
---------------------------------- ------------- ------------- ----------------
Note:
(i) Contract amortisation relates to contract and customer relationships
capitalised as intangible assets on the acquisition of businesses.
Amortisation ceased from 31 March 2018 when the business was held
for sale.
Effect of the disposal group on financial position of the Group
30 June
2018
GBPm
--------------------------------- --------
Assets held for sale
Non-current assets
Intangible assets 24.7
Property, plant and equipment 24.5
Deferred tax assets 1.5
--------------------------------- --------
50.7
--------------------------------- --------
Current assets
Inventories 15.0
Trade and other receivables 71.8
Cash and cash equivalents 8.7
95.5
--------------------------------- --------
Total assets held for sale 146.2
--------------------------------- --------
Liabilities held for sale
Current liabilities
Trade and other payables (86.2)
Current income tax liabilities (2.8)
(89.0)
--------------------------------- --------
Non-current liablities
Provisions (0.2)
Retirement benefit obligation (13.4)
--------------------------------- --------
(13.6)
--------------------------------- --------
Total liabilties held for sale (102.6)
--------------------------------- --------
Net assets held for sale 43.6
----------------------------------- --------
Retirement benefit obligation
Defined benefit scheme
The principal Group-funded defined benefit pension scheme is the Menzies Pension Fund (the Fund) in the United Kingdom to which employees have contributed until the Fund closed to future accrual in 2017. In July 2017 the fund was sectionalised and Section B is expected to transfer to the new owners of the Menzies Distribution business.
Fund financial assumptions and information
The Actuary undertook a valuation of Section B as at 30 June 2018. In deriving the results the Actuary used the following financial assumptions:
Half year
to
30 June 2018
%
------------------------------- --------------
Price inflation 3.1
Discount rate 2.5
Rate of increase on pensions
accrued pre-2006 3.6
Rate of increase on pensions
accrued post-2006 2.1
--------------------------------- --------------
Assumptions regarding future mortality experience are set based on advice that uses published statistics and experience in the business.
The fair value of Fund assets and liabilities are:
Half year
to
30 June 2018
GBPm
------------------------------ --------------
Total value of assets 54.7
Defined benefit obligation (68.1)
-------------------------------- --------------
Recognised in Balance Sheet (13.4)
Related deferred tax asset 2.3
-------------------------------- --------------
Net pension liabilities (11.1)
-------------------------------- --------------
Pension expense
The charge to the Income Statement is assessed in accordance with independent actuarial advice from the Actuary using the projected unit method.
The components of pension expense in finance costs are:
Half year
to
30 June 2018
GBPm
----------------------------------- --------------
Interest cost on defined benefit
obligation 0.8
Interest income on Fund assets (0.7)
------------------------------------- --------------
Net finance charge 0.1
------------------------------------- --------------
The amounts recognised in the Statement of Comprehensive Income are:
Half year
to
30 June 2018
GBPm
------------------------------------- --------------
Returns on assets excluding
interest income (9.0)
Changes in demographic assumptions 0.4
Changes in financial assumptions 1.9
Actuarial loss (6.7)
--------------------------------------- --------------
Changes in Fund assets and defined benefit obligation
The change in scheme assets during the period is:
Half year
to
30 June 2018
GBPm
------------------------------------ --------------
Fair value of assets at start
of period 64.5
Interest income 0.7
Returns on assets excluding
interest income (9.0)
Contributions 0.4
Benefits and expenses paid (1.9)
-------------------------------------- --------------
Fair value of assets at end
of period 54.7
-------------------------------------- --------------
Return on scheme assets including
interest income (8.3)
-------------------------------------- --------------
The change in defined benefit obligation during the period is:
Half year
to
30 June 2018
GBPm
------------------------------------- --------------
Defined benefit obligation at
start of period 71.5
Interest cost 0.8
Benefits and expenses paid (1.9)
Changes in demographic assumptions (0.4)
Changes in financial assumptions (1.9)
--------------------------------------- --------------
Defined benefit obligation at
end of period 68.1
--------------------------------------- --------------
16. PRIOR YEAR ADJUSTMENT
As set out in the Annual Report and Accounts 2017, Management's review of the impact of IFRS 15 Revenue from Contracts with Customers highlighted that the historic accounting treatment did not comply fully with IAS 18 Revenue. Although the historic approach adopted was not materially misstated, it was considered qualitatively material and therefore there is a need for a restatement to the historic Group Balance Sheet to recognise a sales returns asset and corresponding liability. The movement in these amounts also requires to be shown in the Group Income Statement. There is no impact from this restatement on the Group Statement of Comprehensive Income, the Group Cash Flow Statement or the Group's earnings per share.
Following the classification of the Distribution Division as a discontinued operation, the results for that business for the six months ended 30 June 2017 are presented as one set of post-tax results both before and after exceptional items. Although the impact of this prior year adjustment increased revenue by GBP0.2m and decreased costs by GBP0.2m, there is no net impact to profit after tax both before and after exceptional items.
Impact on Group Balance Sheet
As at 30 June 2017
------------------------------------------
As previously Prior year
reported adjustment As restated
GBPm GBPm GBPm
---------------------------------- --- -------------- ------------ ------------
Assets
Non-current assets 413.5 - 413.5
Current assets
Inventories 18.9 - 18.9
Trade and other receivables 352.6 (21.4) 331.2
Derivative financial
assets 0.7 - 0.7
Cash and cash equivalents 67.0 - 67.0
----------------------------------------- -------------- ------------ ------------
439.2 (21.4) 417.8
-------------------------------------- -------------- ------------ ------------
Liabilities
Current liabilities
Borrowings (10.3) - (10.3)
Derivative financial
liabilities (1.4) - (1.4)
Trade and other payables (335.9) 18.3 (317.6)
Current income tax liabilities (12.2) - (12.2)
Provisions (9.1) - (9.1)
----------------------------------------- -------------- ------------ ------------
(368.9) 18.3 (350.6)
Net current assets/(liabilities) 70.3 (3.1) 67.2
Total assets less current
liabilities 483.8 (3.1) 480.7
Non-current liabilities (360.4) - (360.4)
Net assets 123.4 (3.1) 120.3
----------------------------------------- -------------- ------------ ------------
Shareholders' equity
Ordinary shares 20.9 - 20.9
Share premium account 20.7 - 20.7
Treasury shares (1.3) - (1.3)
Other reserves (5.7) - (5.7)
Merger relief reserve 67.3 - 67.3
Retained earnings 3.7 (3.1) 0.6
Capital redemption reserve 21.6 - 21.6
----------------------------------------- -------------- ------------ ------------
127.2 (3.1) 124.1
Non-controlling interest
in equity (3.8) - (3.8)
----------------------------------------- -------------- ------------ ------------
Equity 123.4 (3.1) 120.3
----------------------------------------- -------------- ------------ ------------
Impact on Group Statement of Changes in Equity
Retained earnings at 30 June 2017 has been reduced by GBP3.1m.
risks AND UNCERTAINTIES
The principal risks and uncertainties affecting the business activities of the Group remain those detailed in the Annual Report and Accounts, 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 Guidance 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. A list of current Directors is maintained on the Company website: www.johnmenziesplc.com.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR LLFIDTAIVLIT
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