Regulatory Announcements
09 March 2010
REG-Menzies(John) PLC: Final Results
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REG-Menzies(John) PLC: Final Results - Part 2
- Part 2: For the preceeding part double click ID
Net cash used in investing 4.1 (38.1) - -
activities
Cash flows from financing activities
Net proceeds from issue of - 0.8 - 0.8
ordinary share capital
Repayment of borrowings 10 (54.3) (16.5) (54.3) (16.7)
Proceeds from borrowings 10 14.3 45.9 14.3 45.9
Dividends paid to ordinary - (15.5) - (15.5)
shareholders
Amounts repaid by/(provided - - 49.4 3.9
to) subsidiaries
Net cash from financing activities (40.0) 14.7 9.4 18.4
Increase/(decrease) in net 10 3.5 (4.1) (0.8) (0.3)
cash and cash equivalents
Effects of exchange rate (0.2) 0.3 (0.2) 0.3
movements
Opening net cash and cash 17.2 21.0 0.8 0.8
equivalents
Closing net cash and cash 20.5 17.2 (0.2) 0.8
equivalents*
*Net cash and cash equivalents include cash at bank and in hand and bank
overdrafts.
Notes to the Accounts
The consolidated accounts of the Group for the year ended 31 December 2009 were
approved and authorised for issue in accordance with a resolution of the
directors on 8 March 2010. John Menzies plc is a limited company incorporated
in Scotland and is listed on the London Stock Exchange
1. Accounting policies
A summary of the more significant accounting policies, which have been
consistently applied, is set out below.
The following new standards, amendments to standards and interpretations have
been issued but are not effective for 2009 and have not been adopted early:-
IFRS 1 '(Amendment) Limited Exemption from Comparative IFRS 7 disclosures' is
effective for periods on or after 1 July 2010
IFRS 2 '(Amendment) Group Cash-settled Share-based Payment Transactions' is
effective for periods on or after 1 January 2010
IFRS 3 'Business Combinations (Revised)' is effective for annual periods on or
after 1 July 2009
IFRS 9 'Financial Instruments: Classification & Measurement' is effective for
periods on or after 1 January 2013
IAS 24 '(Revised) Related Party Disclosures' is effective for periods on or
after 1 January 2011
IAS 27 'Consolidated and Separate financial statements (Revised)' is effective
for annual periods on or after 1 July 2009
IAS 32 '(Amendment) classification of right Issues' is effective for annual
periods on or after 1 February 2010
IAS 39 '(Amendment) Eligible Hedged items' is effective for annual periods on
or after 1 July 2009
IFRIC 14 '(Amendment) Prepayments of a Minimum Funding Requirement' is
effective for periods on or after 1 January 2011
IFRIC 17 'Distribution of non-cash Assets to owners' is effective for annual
periods on or after 1 July 2009
IFRIC 18 'Transfers of assets from customers' is effective for annual periods
on or after 1 July 2009
IFRIC 19 'Extinguishing Financial Liabilities with Equity Instruments' is
effective for periods on or after 1 July 2010
The Group has adopted the following new and amended IFRS's as of 1 January
2009:
The adoption of IAS 1 (revised) has required the reconciliation of movements in
equity, previously disclosed in Note 21 in the accounts for the year ended 31
December 2008, to be presented as a primary statement entitled 'Statement of
Changes in Equity'. In addition the Statement of Recognised Income and Expense
has been replaced with the Statement of Comprehensive Income.
IFRS 7 'Financial Instruments: Disclosures' required additional disclosures as
shown in Note 16.
IFRS 8 'Operating segments' . In adopting IFRS 8 the Group has concluded that
the operating segments were the same as the business segments determined under
IAS 14 'Segmental Reporting'. Details of these operating segments are disclosed
in Note 2.
IAS 23 `Borrowing costs'. In adopting IAS 23 (revised) the Group has amended
its accounting policy and, from 1 January 2009, now capitalises borrowing costs
on qualifying assets. The implementation of this policy has had no material
impact on the Group's accounts.
As permitted by section 408 of the Companies Act 2006 no income statement is
presented for the Company.
Basis of consolidation
The consolidated accounts, which have been prepared under the historical cost
convention and in accordance with EU Endorsed International Financial Reporting
Standards (IFRS), IFRIC interpretations and the Companies Act 2006 applicable
to companies reporting under IFRS, incorporate the accounts of the Company and
its subsidiaries, joint ventures and associates from the effective date of
acquisition or to the date of deemed disposal.
The consolidated accounts of the Group include the assets, liabilities and
results of the Company and subsidiary undertakings in which John Menzies plc
has a controlling interest, using accounts drawn up to 31 December except where
entities have non-coterminus year ends. In such cases, the information is based
on the accounting period of these entities and is adjusted for material changes
up to 31 December. Accordingly, the information consolidated is deemed to cover
the same period for all entities throughout the Group.
Joint ventures and associates
A joint venture is an entity in which the Group holds an interest on a
long-term basis and which is jointly controlled by the Group and one or more
other venturers under a contractual agreement.
An associate is an undertaking, not being a subsidiary or joint venture, over
which the Group has significant influence and can participate in the financial
and operating policy decisions of the entity.
The Group's share of the results of joint ventures and associates is included
in the Group Income Statement using the equity method of accounting.
Investments in joint ventures and associates are carried in the Group Balance
Sheet at cost plus post-acquisition changes in the Group's share of the net
assets of the entity, less any impairment in value. The carrying values of
investments in joint ventures and associates include acquired goodwill.
Revenue
Distribution - revenue is recognised on the weekly dispatched value of goods
sold, excluding value-added tax.
Aviation - cargo revenue is recognised at the point of departure for exports
and at the point that the goods are ready for dispatch for imports. Other ramp,
passenger and aviation-related services income is recognised at the time the
service is provided in accordance with the terms of the contract. Revenue
excludes value-added and sales taxes, charges collected on behalf of customers
and intercompany transactions.
Property, plant and equipment
Property, plant and equipment is stated at cost, including acquisition
expenses, less accumulated depreciation. Depreciation is provided on a
straight-line basis at the following rates:
Freehold and long leasehold properties - over 50 years
Short leasehold properties - over the remaining lease term
Plant and equipment - over the estimated life of the asset.
Inventories
Inventories, being goods for resale and consumables, are stated at the lower of
purchase cost and net realisable value.
Pensions
The operating and financing costs of pensions are charged to the income
statement in the period in which they arise and are recognised separately. The
costs of past service benefit enhancements, settlements and curtailments are
also recognised in the period in which they arise. The difference between
actual and expected returns on assets during the year, including changes in
actuarial assumptions, are recognised in the statement of comprehensive income.
Pension costs are assessed in accordance with the advice of qualified
actuaries.
With regard to defined contribution schemes, the income statement charge
represents contributions made.
Pension financing costs are now shown separately in the income statement.
Taxation
Current tax is the amount of tax payable or recoverable in respect of the
taxable profit or loss for the period.
Deferred tax is provided in full, using the liability method, on temporary
differences between the carrying amount of an asset or liability in the balance
sheet and its tax base. Deferred tax arising from the initial recognition of an
asset or liability in a transaction, other than a business combination, that at
the time of the transaction affects neither accounting nor taxable profit or
loss, is not recognised. Deferred tax liabilities represent tax payable in
future periods in respect of taxable temporary differences. Deferred tax assets
represent tax recoverable in future periods in respect of deductible temporary
differences, the carry forward of unused tax losses and the carry forward of
unused tax credits.
Deferred tax is determined using the tax rates and tax laws that have been
enacted or substantively enacted at the balance sheet date and are expected to
apply when the deferred tax asset is realised or the deferred tax liability is
settled. Deferred tax is provided on temporary differences arising on
investments in subsidiaries, joint ventures and associates, except where the
timing of the reversal of the temporary difference can be controlled and it is
probable that the temporary difference will not reverse in the foreseeable
future. A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against which the asset
can be utilised.
Current and deferred tax is recognised in the income statement except if it
relates to an item recognised directly in equity or in other comprehensive
income, in which case it is recognised directly in equity or in the Group
Statement of Comprehensive Income.
Intangible assets
Goodwill
Goodwill arising on consolidation represents the excess of the cost of an
acquisition over the fair value of the Group's share of the net assets of the
acquired subsidiary, associate or joint venture at the date of acquisition.
Goodwill acquired is recognised as an asset and reviewed for impairment at
least annually by assessing the recoverable amount of each cash-generating unit
to which the goodwill relates. When the recoverable amount of the
cash-generating unit is less than the carrying amount, an impairment loss is
recognised.
Any impairment is recognised in the income statement.
Goodwill arising on the acquisition of joint ventures and associates is
included within the carrying value of the investment.
Goodwill arising on acquisitions before 26 December 2004 (the date of
transition to IFRS) has been retained at the previous UK GAAP amounts subject
to being tested for impairment at that date.
Contracts
The fair value attributed to contracts at the point of acquisition is
determined by discounting the expected future cash flows to be generated from
that asset at the risk-adjusted weighted average cost of capital for the Group.
This amount is included in intangible assets as "contracts" and amortised over
the estimated useful life on a straight-line basis. Separate values are not
attributed to internally-generated customer relationships.
Contract amortisation is business-stream dependent. At Distribution, contracts
capitalised are not amortised due to the very long-term nature of the business
in the UK. These contracts are, however, tested annually for impairment using
similar criteria to the goodwill test. At Aviation, contracts are amortised on
a straight-line basis over ten years as this period is the minimum time-frame
management considers when assessing businesses for acquisition.
Development costs
Development expenditure incurred on individual projects is carried forward only
if all the criteria set out in IAS 38 "Intangible assets" are met. Following
the initial recognition of development expenditure, the cost is amortised over
the project's estimated useful life, usually three to five years.
Computer software
Costs associated with developing or maintaining computer software programs are
recognised as an expense as incurred. Costs that are directly attributable with
the production of identifiable and unique software products controlled by the
Group, and that will probably generate economic benefits exceeding costs beyond
one year, are recognised as intangible assets. Direct costs include the costs
of software development employees. Costs are amortised over their estimated
useful lives, usually three to five years.
Leases
Leases are classified as finance leases whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
Assets acquired under finance leases are capitalised in the balance sheet at
their fair value or, if lower, at the present value of the minimum lease
payments, each determined at the inception of the lease. The corresponding
liability to the lessor is recorded in the balance sheet as a finance lease
obligation. The lease payments are apportioned between finance charges (charged
to the income statement) and a reduction of the lease obligations.
Rental payments under operating leases are charged to the income statement on a
straight-line basis over applicable lease periods.
Available for sale investments
Investments are classified as available for sale if their carrying amount will
be recovered principally through a sale transaction rather than through
continuing use. Available for sale investments are stated at the lower of
carrying value and fair value less costs to sell.
Trade receivables
If there is objective evidence that the Group will not be able to collect all
of the amounts due under the original terms of an invoice, a provision on the
respective trade receivable is recognised. In such an instance, the carrying
value of the receivable is reduced, with the amount of the loss recognised in
the income statement.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in
hand and short-term deposits with an original maturity of three months or less.
Bank overdrafts are shown within borrowings in current liabilities in the
balance sheet.
Foreign currencies
Foreign currency assets and liabilities of the Group are translated at the
rates of exchange ruling at the balance sheet date. The trading results of
overseas subsidiaries, joint ventures and associates are translated at the
average exchange rate ruling during the year, with the exchange difference
between average rates and the rates ruling at the balance sheet date being
taken to reserves.
Any differences arising on the translation of the opening net investment,
including goodwill, in overseas subsidiaries, joint ventures and associates,
and of applicable foreign currency loans, are dealt with as adjustments to
reserves. All other exchange differences are dealt with in the income
statement.
Derivative financial instruments and hedging activities
The Group uses forward contracts and cross-currency swaps as derivatives to
hedge the risk arising from the retranslation of foreign currency denominated
items.
The Group has derivatives which are designated as hedges of overseas net
investments in foreign entities (net investment hedges) and derivatives which
are designated as hedges of the exchange risk arising from the retranslation of
highly probable forecast revenue denominated in non-local currency of some of
our overseas operations (cash flow hedges).
In all cases, the derivative contracts entered into by the Group have been
highly effective during the reporting period, and are expected to continue to
be highly effective until they expire. As a result, all derivatives have been
recorded using hedge accounting, which is explained below.
All derivatives are measured at fair value, which is calculated as the present
value of all future cash flows from the derivative discounted at prevailing
market rates.
Changes in the fair value of the effective portion of net investment hedges are
recorded in equity, and are only recycled to the income statement on disposal
of the overseas net investment.
Changes in the fair value of the effective portion of cash flow hedges are
recorded in equity until such time as the forecast transaction occurs, at which
time they are recycled to the income statement. If, however, the occurrence of
the transaction results in a non-financial asset or liability, then amounts
recycled from equity would be included in the cost of the non-financial asset
or liability. If the forecast transaction remains probable but ceases to be
highly probable then, from that point, changes in fair value would be recorded
in the income statement within finance costs. Similarly, if the forecast
transaction ceases to be probable then the entire fair value recorded in equity
and future changes in fair value would be posted to the income statement within
finance costs.
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Share capital
Ordinary shares are classed as equity. Where the Company purchases its own
shares the consideration paid including any directly attributable incremental
costs, is deducted from the equity attributable to the Company's equity holders
until the shares are cancelled, reissued or disposed of.
Share-based payments
Equity-settled share-based payments are measured at fair value at the date of
grant and recognised as an expense over the vesting period. The amount
recognised as an expense is adjusted to reflect the actual number of share
options that vest unless the options do not vest as a result of a failure to
satisfy market conditions. Fair value is measured by use of a relevant pricing
model.
Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future. These
estimates will, by definition, seldom equal the related actual results
particularly so given the prevailing difficult economic conditions and the
level of uncertainty regarding their duration and severity.
The Board has considered the critical accounting estimates and assumptions used
in the Accounts and concluded that the main areas of significant risk which may
cause a material adjustment to the carrying amount of assets and liabilities
within the next financial year is in respect of the carrying value of
intangible assets and the assumptions used to calculate pension benefits.
Impairment of long-lived assets
The Group periodically evaluates the net realisable value of long-lived assets,
including goodwill, other intangible assets and tangible fixed assets, having
regard to a number of factors, including business plans, projected results and
discounted future cash flows.
Assets that have an indefinite useful life, such as goodwill, are not subject
to amortisation and are tested annually for impairment or whenever events or
changes in circumstance indicate that the carrying amount may not be
recoverable.
Assets that are subject to amortisation are tested for impairment whenever
events or changes in circumstance indicate that the carrying amount may not be
recoverable.
An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset's fair value less costs to sell and value in use. The fair value is,
in most cases, based on the discounted present value of the future cash flows
expected to arise from the cash generating unit to which the goodwill relates,
or from the individual asset or asset group.
Estimates are used in deriving these cash flows and the discount rate. The
complexity of the estimation process and issues related to the assumptions,
risks and uncertainties inherent with the application of the intangible and
tangible fixed asset accounting policies affect the amounts reported in the
financial statements.
In particular, if different estimates of the projected future cash flows or a
different selection of an appropriate discount rate or long-term growth rate
were made, these changes could materially alter the projected value of the cash
flows of the asset and, as a consequence, materially different amounts would be
reported in the financial statements. These estimates are interlinked and
specific to the circumstances of each asset, so that it is not appropriate to
indicate how reported amounts might change if different estimates were made.
Pensions
The assumptions include corporate bond yields, investment return, price and
salary inflation and mortality assumptions. Full details of assumptions used to
calculate the pension assets and liabilities are found in Note 3.
Exceptional items
Exceptional items are those material items which, by virtue of their size or
incidence, are presented separately in the income statement to enable a full
understanding of the Group's financial performance. These exclude certain
elements of intangible asset impairment and amortisation, which are also
presented separately in the income statement.
Transactions which may give rise to exceptional items include restructurings of
business activities (in terms of rationalisation costs and onerous lease
provisions) and gains or losses on the disposal of businesses.
Dividend distributions
Final ordinary dividends are recognised as liabilities in the accounts in the
period in which the dividends are approved by the Company's shareholders.
Financial risk factors
The Group is exposed to financial risks: liquidity risk, interest rate
fluctuations, foreign exchange exposures and credit risk. More details on these
are disclosed in Note 16.
2. SEGMENT INFORMATION
For management purposes the Group is organised into two operating divisions:
Distribution and Aviation. These two divisions are organised and managed
separately based upon their key markets and each is treated as an operating
segment and reportable segment in accordance with IFRS8.
The operating and reportable segments were determined based on the reports
reviewed by the Board which are used to make decisions about the allocation of
resources between the two divisions.
The Distribution segment provides newspaper and magazine distribution services
across the UK along with marketing services. The Aviation segment provides
cargo and passenger ground handling services across the world.
The Board assesses the performance of the operating segments based on a measure
of adjusted segment result before exceptional items and intangibles
amortisation. Net finance income and expenditure are not allocated to segments
as this type of activity is driven by the central treasury function.
The amounts provided to the Board with respect to total assets and total
liabilities are measured in a manner consistent with that of the Accounts. The
assets are allocated based on the operations of the segment and the physical
location of the asset. The liabilities are allocated based on the operations of
the segment.
The Group's interest bearing liabilities are not considered to be segment
liabilities but rather are managed by the central treasury function.
Segment information is presented in respect of the Group's operating segments
together with additional geographic information. Transfer prices between
segments are set on an arm's length basis.
Segment results Distribution Aviation Corporate Group
2009 £m £m £m £m
Revenue 1,218.5 507.2 - 1,725.7
Operating profit/(loss) 26.7 (1.4) (1.0) 24.3
Share of post-tax results 1.3 2.9 - 4.2
of joint ventures
Share of post-tax results - 1.7 - 1.7
of associates
Operating profit/(loss) 28.0 3.2 (1.0) 30.2
after joint ventures and
associates
Net finance expense (8.2)
Profit before tax 22.0
Analysed as:
Pre-exceptional operating 28.6 15.8 (1.0) 43.4
profit/(loss)*
(Loss)/gain on disposal of - (0.5) 1.7 1.2
property, plant and
equipment (Note 4)
Gain on disposal of - 0.2 - 0.2
interest in joint venture
(Note 4)
Impairment provisions (Note - (2.8) - (2.8)
4)
Onerous lease provision - - (1.7) (1.7)
(Note 4)
Rationalisation costs (Note - (4.7) - (4.7)
4)
Contract amortisation (Note - (3.3) - (3.3)
9)
Share of tax on joint (0.6) (1.5) - (2.1)
ventures and associates
Operating profit/(loss) 28.0 3.2 (1.0) 30.2
after joint ventures and
associates
2008 £m £m £m £m
Revenue 1,166.2 500.9 - 1,667.1
Operating profit/(loss) 22.7 (0.6) (2.7) 19.4
Share of post-tax results 0.1 2.5 - 2.6
of joint ventures
Share of post-tax results - 1.0 - 1.0
of associates
Operating profit/(loss) 22.8 2.9 (2.7) 23.0
after joint ventures and
associates
Net finance expense (13.1)
Profit before tax 9.9
Analysed as:
Pre-exceptional operating 23.9 14.1 (1.5) 36.5
profit/(loss)*
Gain on disposal of - 8.2 - 8.2
interest in joint venture
Impairment provisions (Note (0.8) (4.8) - (5.6)
4)
Onerous lease provision - (3.8) (1.2) (5.0)
(Note 4)
Rationalisation costs (Note - (6.7) - (6.7)
4)
Contract amortisation (Note - (2.5) - (2.5)
9)
Share of interest on joint (0.1) (0.3) - (0.4)
ventures and associates
Share of tax on joint (0.2) (1.3) - (1.5)
ventures and associates
Operating profit/(loss) 22.8 2.9 (2.7) 23.0
after joint ventures and
associates
* Pre-exceptional operating profit/(loss) is defined as operating profit/(loss)
excluding intangible amortisation as shown in Note 4(b) and exceptional items
but including the pre-tax share of results from joint ventures and associates.
Distribution Aviation Corporate Group
2009 £m £m £m £m
Segment assets 184.2 267.9 5.9 458.0
Unallocated assets 51.4
Total assets 509.4
Segment liabilities (124.0) (70.2) (18.5) (212.7)
Unallocated liabilities (257.1)
Total liabilities (469.8)
Segment assets/(liabilities) 60.3 196.4 (11.3) 245.3
Unallocated net liabilities (205.7)
Net assets 39.6
2008 £m £m £m £m
Segment assets 167.6 317.5 3.3 488.4
Unallocated assets 34.6
Total assets 523.0
Segment liabilities (108.3) (80.7) (33.6) (222.6)
Unallocated liabilities (237.8)
Total liabilities (460.4)
Segment assets/(liabilities) 59.3 236.8 (30.3) 265.8
Unallocated net liabilities (203.2)
Net assets 62.6
Unallocated assets comprise deferred tax assets, cash and cash equivalents.
Unallocated liabilities comprise retirement benefit obligations, borrowings,
current income tax liabilities and deferred tax liabilities.
Distribution Aviation Corporate Group
2009 £m £m £m £m
Capital expenditure 7.0 8.1 - 15.1
Depreciation 5.8 18.2 0.9 24.9
Amortisation of intangible 1.2 3.5 - 4.7
assets (Note 9)
Goodwill impairment (Note 4) - 1.8 - 1.8
Gain on disposal of property, - - (1.7) (1.7)
plant and equipment
2008 £m £m £m £m
Capital expenditure 8.7 31.6 - 40.3
Depreciation 5.6 17.1 0.9 23.6
Amortisation of intangible 0.5 2.5 - 3.0
assets (Note 9)
Goodwill impairment (Note 4) - 4.8 - 4.8
(Gain)/loss on disposal of - (0.3) 0.4 0.1
property, plant and equipment
Geographic information
Revenue Segment non-current
assets
2009 2008 2009 2008
£m £m £m £m
United Kingdom 1,369.0 1,316.2 182.9 181.4
Continental Europe 112.5 128.2 35.3 46.4
Americas 126.6 116.9 25.8 32.0
Rest of the World 117.6 105.8 60.3 61.4
1,725.7 1,667.1 304.3 321.2
3. PENSIONS
Pension schemes
With regard to the principal Group-funded defined benefit scheme in the UK (the
Menzies Pension Fund), to which the employees contribute, the charge to the
income statement is assessed in accordance with independent actuarial advice
from Hymans Robertson LLP ("the Actuary"), using the projected unit method.
Certain Group subsidiaries operate overseas and participate in a number of
pension schemes, which are of a defined contribution nature. The income
statement charge for defined contribution schemes represents the contributions
payable.
The pension charge to the income statement is analysed as follows:
2009 2008
£m £m
Menzies Pension Fund 1.6 2.3
Other schemes 7.4 7.1
9.0 9.4
The Actuary undertook a valuation of the Menzies Pension Fund as at 31 December
2009 (2008 : 31 December) under IAS 19.
In deriving the results the Actuary used the projected unit method and the
following financial assumptions:
2009 2008
% %
Rate of increase in salaries 3.50 3.60
Rate of increase in pensions (prior to 1 3.60 3.35
April 2006)
Rate of increase in pensions (after 1 2.50 2.50
April 2006)
Price inflation 3.50 3.10
Discount rate 5.70 6.40
Assumptions regarding future mortality experience are set based on advice from
the Actuary in accordance with published statistics and experience in the
business.
The average life expectancy in years of a pensioner retiring at 65 on the
balance sheet date is:
2009 2008
Male 20.5 18.4
Female 22.3 21.2
The average life expectancy in years of a pensioner retiring at 65, 20 years
after the balance sheet date is:
2009 2008
Male 21.8 19.2
Female 24.3 22.0
Fair value of assets (and expected return on assets)
Long-term Value at Long-term Value at
rate of December rate of December
return 2009 return 2008
% £m % £m
Equities 7.9 141.1 7.3 110.5
Bonds 5.7 46.2 6.1 44.3
Property 6.9 23.9 6.3 26.8
Other 0.5 0.7 2.0 0.8
Total value of assets 211.9 182.4
Defined benefit obligation (296.4) (218.0)
Recognised in balance (84.5) (35.6)
sheet
Related deferred tax asset 23.7 10.0
Net pension liabilities (60.8) (25.6)
Sensitivity analysis
A reduction in the discount rate will increase the assessed value of the
defined benefit obligation and a rise in the discount rate will decrease the
assessed value of the defined benefit obligation. The overall effect of a
change in the discount rate for the Fund of 0.1% would be an increase/decrease
to the defined benefit obligation of around 1.8%/£5.3m.
The effect of changing the assumption regarding life expectancy by one year
longer than the disclosed table would be to increase the assessed value of the
defined benefit obligation by around 3% to £305m.
Components of pension expense
2009 2008
Amounts charged to operating profit £m £m
Current service cost 1.8 2.3
Past service cost 0.2 -
Gains on curtailments and settlements (0.4) -
Total amount charged to the Income 1.6 2.3
Statement
Amounts included in finance costs £m £m
Expected return on pension scheme assets 11.9 15.8
Interest on pension liabilities (13.7) (13.5)
Net financial (charge)/return (1.8) 2.3
Pension expense 3.4 -
Amounts recognised in the Statement of £m £m
Comprehensive Income
Gain/(loss) on assets 26.4 (78.1)
(Loss)/gain on defined benefit obligation (76.4) 29.4
Actuarial loss (50.0) (48.7)
Change in scheme assets during the year £m £m
Fair value of assets at start of year 182.4 250.2
Expected return on assets 11.9 15.8
Company contributions 4.5 3.6
Employee contributions 1.3 1.4
Assets distributed on settlements (1.5) -
Benefits and expenses paid (13.1) (10.5)
Gain/(loss) on assets 26.4 (78.1)
Fair value of assets at end of year 211.9 182.4
The actual return on scheme assets was a gain of £38.3m (2008: a loss of £
62.3m)
Change in defined benefit obligation during £m £m
the year
Defined benefit obligation at start of year 218.0 240.7
Current service cost 1.8 2.3
Past service cost 0.2 -
Interest cost 13.7 13.5
Liabilities extinguished on settlements (1.9) -
Employee contributions 1.3 1.4
Benefits and expenses paid (13.1) (10.5)
Loss/(gain) on defined benefit obligation 76.4 (29.4)
Defined benefit obligation at end of year 296.4 218.0
Expected employer contributions for 2010 are estimated to be £6 million.
History of experience gains and losses
2009 2008 2007 2006 2005
£m £m £m £m £m
Gain/(loss) on scheme assets 26.4 (78.1) (2.7) 12.0 19.8
Percentage of scheme assets 12.5% 42.8% 1.0% 5.0% 9.5%
Actuarial (loss)/gain on (76.4) 29.4 (0.5) 11.4 (29.4)
defined benefit obligation
Percentage of scheme 25.8% 13.5% 0.2% 5.0% 12.2%
liabilities
Total value of assets 211.9 182.4 250.2 237.2 208.5
Defined benefit obligation (296.4) (218.0) (240.7) (231.8) (241.1)
Recognised in balance sheet (84.5) (35.6) 9.5 5.4 (32.6)
4 (a) EXCEPTIONAL ITEMS
2009 2008
Notes £m £m
Gain on disposal of property, (i) 1.2 -
plant and equipment
Gain on disposal of interest in (ii) 0.2 8.2
joint venture
Impairment provisions (iii) (1.0) (3.8)
Onerous lease provision (iv) (1.7) (5.0)
Rationalisation costs (v) (4.7) (6.7)
(6.0) (7.3)
(i) The Group completed a number of property and equipment sale and
leaseback arrangements, which resulted in a gain on disposal of
£1.2m.
(ii) During 2009 the Group disposed of the 50% interest in Freshport
BV for a consideration of £0.6m and in 2008 disposed of the 50%
interest in Talma Menzies SRL for a consideration of £10.3m.
(iii) The 2009 impairment provision reduces the carrying value of the
Group's 40% interest in Menzies Chengdu Aviation Services
Limited, which is held as an available for sale asset, to its
estimated recoverable amount.
During 2008, following a deterioration in the North American
cargo handling market the acquired goodwill in respect of
Aeroground Inc was tested for impairment in accordance with IAS
36 and a goodwill charge of £3.0m (approximately 1/3 of the
original amount capitalised) was recognised. This goodwill
impairment resulted from poor post-acquisition performance
exacerbated by global market conditions. The recoverable amount
of the cash-generating unit was measured based on a value in use
calculation and a pre-tax discount rate of 11.1%. The Group's
investment in associate company Worldwide Magazine Distribution
Ltd was also reviewed for impairment in accordance with IAS 36
and restated to reflect current trading performance. As a
result, an impairment charge of £0.8m was recognised.
(iv) This provision is in respect of future obligations on leasehold
properties, which became empty during 2009 and 2008.
(v) Costs of rationalising excess capacity comprising asset
write-downs and staff redundancy costs in the Aviation business
during 2009 and 2008.
4 (b) INTANGIBLE AMORTISATION
2009 2008
£m £m
Goodwill impairment (i) (1.8) (1.8)
Contract amortisation (ii) (3.3) (2.5)
(5.1) (4.3)
(i) As permitted under the transitional requirements of IFRS1, the
acquisition accounting of business combinations completed prior
to the transition date has not been restated. As a result, assets
which were previously capitalised as goodwill have not been
reclassified as other intangible assets. Accordingly, these
financial statements include an impairment charge of £1.8m (2008:
£1.8m) reflecting the remaining life of the current licence at
Menzies Macau Aviation Services Ltd.
(ii) This charge relates to contracts capitalised as intangible assets
on the acquisition of businesses.
The taxation effect of the exceptional items is a net credit of £
0.6m (2008: £1.1m).
5. FINANCE COSTS
2009 2008
£m £m
Finance income:
Bank deposits 0.6 2.3
0.6 2.3
Finance charges:
Bank loans and overdrafts (6.9) (9.9)
Preference dividends (0.1) (0.1)
Foreign currency loss - (7.7)
(7.0) (17.7)
Net finance costs (6.4) (15.4)
During 2008 the Group executed cross-currency basis swaps which reduced its
interest costs by £1.0m. The foreign currency loss incurred of £7.7m was
exactly matched by tax relief of £7.7m. The tax relief comprised £2.2m at the
standard rate of corporation tax in the UK of 28% and a non-taxable exchange
gain of £5.5m.
6. TAXATION
2009 2008
(a) Analysis of charge in year £m £m
Current tax
UK corporation tax on profits for the year - 0.8
Overseas tax
- More to follow, for following part double click ID
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