TIDMMNZS
RNS Number : 5569R
Menzies(John) PLC
09 March 2021
John Menzies plc
Results for the Year Ended 31 December 2020
Financial Summary 2020 2019
Reported Constant Reported
currency
([6])
Revenue GBP824.2m GBP839.9m GBP1,325.6m
Underlying operating (loss)/profit([1]) GBP(18.5)m GBP(18.7)m GBP52.5m
Operating (loss)/profit GBP(96.2)m --- GBP39.6m
Underlying (loss)/profit GBP(38.9)m GBP(39.1)m GBP30.4m
before taxation([2])
(Loss)/profit before tax GBP(120.5)m --- GBP17.3m
Underlying (loss)/earnings
per share([3]) (61.8)p --- 24.9p
Basic (loss)/earnings per
share([4]) (151.1)p --- 12.8p
Underlying operating cash GBP149.6m --- GBP134.9m
flow([5])
Cash generated from operations GBP113.7m --- GBP104.1m
Results Overview
Response to pandemic
-- 2020 results reflect the severe impact of passenger travel
restrictions imposed in response to the Covid-19 pandemic
-- Menzies has reacted quickly and effectively by:
o Reducing costs and optimising the cash position - with
significant support from global government schemes and effective
cash management
o GBP30m of fixed cost removed, of which two-thirds is
permanent
o Right-sizing operations and headcount in line with reduced
volume
o Working with customers to find solutions - revised pricing and
strong credit management
o Revised banking covenants - sufficient liquidity headroom to
invest in growth
o Well positioned to recover strongly
Continued delivery on long-term strategic priorities
-- Developing momentum in rebalancing global portfolio mix:
o Commenced operations in Baghdad, Iraq
o Acquisition of Royal Airport Services completed in January
2021, delivering ground and air cargo services at eight locations
across Pakistan
-- Strong commercial progress achieved during the year:
o Five year contract signed with Wizz Air at their main hub in
Budapest
o Significant air cargo contracts with Qatar Airways at seven
locations on three continents
o Outsourcing gains from Qantas across Australia
Financial results
-- Revenue down 37% in constant currency, with decrease in
flight activity leading to a 49% year on year reduction in flight
volumes in ground handling and fuel services
-- Air cargo services more resilient and cargo forwarding
business delivered a record performance, boosted by strong
yields
-- Revenue impact partly mitigated by significant cost
management and global government support schemes, limiting the
underlying operating loss to GBP18.5m before exceptional costs
-- Exceptional costs of GBP70.2m primarily reflect costs of
reshaping the cost base, one off costs associated with refinancing,
asset write downs and the resolution of historical claims
-- Underlying operating cash flow, ahead of expectations,
resulted in year end net borrowings of GBP355.9m, with undrawn
banking facilities and available cash of GBP141.8m
Outlook
The Board is confident about the Group's long-term outlook.
Despite the crisis we are well placed to prosper as the aviation
sector gradually recovers. We have a clear strategy in place, based
around our strategic priorities and we believe this disciplined
approach will deliver sustainable growth in the future.
As anticipated, the aviation sector in the first quarter of 2021
continues to be heavily impacted by ongoing travel restrictions.
Continued tight control on costs and ongoing support from global
government schemes have enabled us to maintain our operational
capability as well as a strong liquidity position. As the market
recovers and we exit the pandemic, we are ready to scale up our
operations to meet the demands of our customers.
Overall, we anticipate a slow increase in volumes through the
second quarter with a stronger recovery during the second half of
the year. However, we currently do not anticipate a return to the
volumes witnessed in full year 2019 before full year 2023. As the
markets recover, our restructured cost base and reshaped business
portfolio should enable the Group to generate structurally improved
operating margins from growth in revenues.
Despite the pandemic, 2020 was a strong year commercially with
key contracts won across the product portfolio and we successfully
deepened relationships with a number of key airlines. Our pipeline
in all geographic regions is strong as we continue to seek out new
opportunities, and as a result we expect further strategic progress
during the year. Since the year end, we have commenced operations
at five new locations in Canada with WestJet. We have also
successfully strengthened our well established relationship with
Qantas in Australia following the award of an outsourcing contract
for domestic ground handling to Menzies at four airports across
Australia.
Despite anticipated ongoing low flight volumes, we expect that
the Group will maintain significant liquidity headroom throughout
the year ahead. Once activity levels start to recover, Menzies'
strong fundamental cash generation will provide the Group with the
capability to invest in support of our commercial objectives and
reduce leverage.
Philipp Joeinig, Chairman and Chief Executive of John Menzies
plc said:
"The Covid-19 pandemic has brought about unprecedented
challenges to our business as the effects on travel continued to
have a significant impact on our global operations. Despite the
difficulties it presented we acted decisively, adjusting the size
of our operations and ensuring sufficient liquidity was maintained.
We remain a strong business and well placed to benefit as the
market recovers and the industry returns to structural growth.
"Looking forward we will continue to deliver against our
strategic priorities. We are winning new contracts, entering new
markets and optimising our portfolio. As flight volumes recover, I
am confident that we will emerge as a more agile, resilient and
profitable business with a sharply focused footprint and
portfolio."
Notes
1. (Underlying operating profit/loss is operating profit/loss
adjusted for exceptional items, impairment charges associated with
non-current assets, amortisation relating to acquired contract,
customer relationship and brand intangibles, and the Group's share
of interest and tax on joint ventures and associates.)
(2. Underlying profit/loss before taxation is underlying
operating profit/loss less net finance charges.)
(3. Underlying earnings/loss per share is profit/loss 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.)
(4. Prior year basic earnings per share includes the benefit of
2.0p from discontinued operations.)
(5. Underlying operating cash flow is underlying operating
profit/loss adjusted for depreciation, amortisation, income and
dividends from joint ventures and associates, retirement obligation
and share based payments, and movements in working capital and
provisions.)
(6. In order to increase comparability with prior year numbers,
performance at constant currency has been calculated by translating
non-sterling earnings for the current year into sterling at the
exchange rates used for the same period in the prior year.)
Enquiries
John Menzies plc
John Geddes, Corporate Affairs Director 0131 459 8144
FTI Consulting
Jonathon Brill/Fern Duncan 020 3727 1068
Analyst Presentation
There will be a presentation for analysts today at 09:30 GMT via
a live webcast on the John Menzies plc website
http://www.johnmenziesplc.com . Copies of the presentation slides
will be available on the website.
Chairman and Chief Executive's Statement
I want to start by saying thank you to our employees worldwide
for their response to the challenges caused by the pandemic. Our
teams have acted admirably throughout, reacting efficiently to a
constantly evolving situation and continuing to serve our customers
safely and sensitively, often in difficult circumstances. They
should be proud of the part they have played in helping us navigate
this year.
Growth Strategy
During the year we responded proactively as the Covid-19 crisis
unfolded, taking difficult decisions where required to protect the
Company and continued to stay focused on executing our long-term
growth strategy, ensuring we are ready to emerge strongly as the
aviation market recovers.
Our long-term growth strategy is centred on our five strategic
priorities:
1. Optimise portfolio mix
We are targeting a wider spread of activities by promoting the
organic growth of air cargo and fuelling services. We will continue
to grow our ground services business but our focus will be on areas
where we know future growth opportunities are stronger and returns
will be higher. We are also pursuing selective growth of our
ancillary services offering, where operating margins are typically
higher.
2. Targeted growth
We are expanding our network into emerging markets where margins
are typically higher, the recovery rate is forecast to be
considerably stronger and there is potential for Menzies to enhance
standards and processes for customers. Expanding our network into
these markets with strong growth dynamics will be a key part of our
growth, utilising all of our product categories. Within the ground
handling market, we will target high volume, high value contracts
in key locations making better use of resources and enabling
increased customer service and engagement. Where market dynamics
are favourable, we will also seek to selectively expand our
ancillary product portfolio.
3. Focus on margin improvement
We are committed to driving a structural improvement in the
Group's operating margin. This will be achieved by focusing our
organic and inorganic growth in structural growth markets, a
relentless focus on strong cost management and active portfolio
management across the existing business.
4. Customer first
Having strong customer relationships is the key to success in
our industry. We seek to be solutions orientated, working with
customers to deliver their goals with the aim of making Menzies
Aviation the handling provider of choice wherever we operate. Our
customer relationships have never been so important as they were in
2020. As the industry emerges from the pandemic, we believe their
strength will be vital to the delivery of our growth strategy.
5. People centric
This year we have put people at the heart of the Menzies brand.
Since 1833, it is the people at Menzies who have made us unique and
we recognise that investing in our employees will be a key
component of our success. We want to build a team of motivated and
passionate people who we will support with industry leading working
environments, training and leadership.
Despite the challenges we faced in 2020, we have demonstrated
tangible success in delivering on our strategy. Operations have now
commenced in Iraq and our acquisition in Pakistan has recently
completed. With significant contract wins with Qantas, Qatar
Airways and Wizz Air, and these new operations, we have
demonstrated our strong emerging market and fast growing market
focus. I am particularly excited by the strength of our new
opportunities pipeline across our full suite of products for the
remainder of 2021 and beyond.
Aviation Market Recovery
The impact of the Covid-19 pandemic on both the global economy
and global aviation markets in 2020 was unprecedented. However,
with vaccine programmes being rolled out across the world, there is
cause for cautious optimism as we look to the future.
As predicted, passenger markets in the first quarter of 2021
have remained weak, and we anticipate a slow recovery starting in
the second quarter with a more sustained recovery in the second
half of 2021. We do not anticipate global aviation activity levels
making a full recovery to 2019 levels until 2023. Analysing our
markets, we believe that domestic and regional passenger travel
will recover earlier and faster driven by narrow bodied, single
aisle aircraft, with long haul travel recovering more slowly. This
partly reflects forecast demand and also reflects the impact of the
long haul capacity removed by airlines during the crisis. This
trend would play to Menzies' strengths, given our long standing
core focus on servicing high volume, narrow bodied, single aisle
aircraft.
The competitive environment remains relatively unchanged from a
year ago, with global government support schemes ensuring that the
raft of business closures that might ordinarily result from such a
severe downturn has not occurred. However, as this support reduces
and aviation volumes gradually return, we do expect to see this
dynamic change.
As we look to the future, I am confident that due to our
proactive approach, our restructured cost base and reshaped
business portfolio will enable us to start generating structurally
improved operating margins as volumes recover.
I am pleased that, whilst we had to work with our banking
partners to renegotiate our covenants through to 30 June 2022, we
did not take on more borrowing and therefore have maintained a
healthy liquidity position throughout the year. We are also
confident that our current forecasts are robust and we will
continue to trade within our agreed covenant limitations.
Governance
As a Company we are dedicated to understanding how we can be
better and this year we are focused on making big changes to
enhance our Environmental, Social and Governance (ESG) impact. We
will shortly be launching our own ESG vision and targets in this
year's Annual Report.
I am committed to promoting good governance and the principles
of the Corporate Governance Code. During the year, following the
departure of Giles Wilson, it was agreed that I also assume the
position of Chief Executive Officer to best navigate the Company
through the immediate crisis, effectively execute our strategy and
deliver growth in the years to come. I am delighted with the
progress we have made and with the strong team I work with.
We are also in the process of recruiting a further non-executive
director. The Board is focused on finding the right candidate who
will add to our existing skill set and assist in driving forward
our growth agenda. This process continues and we are confident to
make an announcement later this year.
Finally, I would like to thank everyone who has been supportive
during the year. In particular our shareholders, customers and
suppliers together with my fellow colleagues around the world.
Whilst we still live in very uncertain times, I look forward with
confidence and see a prosperous future for the Group.
Group Performance Overview
2020 has presented the business with a number of significant
challenges. Until the impact of the restrictions on flight volumes
imposed as the Covid-19 pandemic accelerated globally in late March
2020, the Group had been trading well, with the cost reduction
actions taken and the renewed focus on commercial activity showing
positive results.
The many travel restrictions imposed due to the outbreak of
Covid-19 have significantly affected the Group's revenue, with
ground and fuelling services particularly badly impacted by the
dramatic reduction in flights. Ground service turns were down 59%
in the year and fuelling service events were down 46%. Our air
cargo handling and our cargo forwarding service lines have been
more resilient with reduced capacity on passenger flights driving
yields to historical highs. Overall, air cargo service tonnage was
down 18%.
Swift and decisive actions were taken in response to the impact
of the flight restrictions. We have flexed our headcount in line
with projected volumes, agency personnel schemes have been
discontinued, underutilised staff have been put on furlough and in
some countries, regrettably some staff were made redundant. We have
optimised our use of the various government support schemes around
the world, some of which have added to the Group's level of
liquidity. In addition, only essential capital expenditure has been
authorised and discretionary spend is at the lowest level in recent
years. Our actions taken and our strict credit and expense control
has resulted in a strong and sustainable level of liquidity.
Revenue for the year was GBP824.2m (2019: GBP1,325.6m), a 37%
reduction in constant currency from the prior year. The Group
recorded an operating loss of GBP96.2m in the year compared with a
GBP39.6m profit in the prior year. Excluding exceptional and other
items, the underlying operating loss for the year was GBP18.5m
compared with a profit of GBP52.5m in the prior year. The reduction
in profit was a direct result of the impact of the flight
restrictions imposed by governments in response to the Covid-19
pandemic. The loss was mitigated by various grants received and
released during the year totalling GBP139.2m. Grant income is
released from when monies are received over the period in which
in-country revenue is expected to be impacted by travel
restrictions in response to Covid-19. The release is calculated as
a set proportion of payroll expense until the monies are utilised.
The most significant grant was US$82.8m grant funding from the US
government of which GBP38.9m was recognised as grant income in the
year. The loss before tax was GBP120.5m (2019: profit of GBP17.3m).
The underlying loss per share was 61.8p (2019: 24.9p earnings per
share).
Our commercial teams around the world have been very active in
the period and have made encouraging progress winning and renewing
significant new business, and also preparing to start-up in new
stations in new regions of the world. In 2020 we added a number of
significant contracts and our net gain in annualised revenue was
significantly up on previous years. The emphasis has been on all
areas of the business, not only ground services but also the higher
margin air cargo and fuelling services businesses.
Our response to the flight restrictions has been swift and
decisive. We have engaged with our customers to seek and secure
interim price arrangements and also to match as closely as possible
our headcount to the expected volumes of flights. Consequently, we
have had to reduce our headcount. At the height of the Covid-19
related flight restrictions, our headcount was 50% lower than the
same period in the prior year, with agency personnel arrangements
ended, and many permanent staff on temporary leave or furlough
schemes. Since then, staff have begun to return to work and at the
end of the year our workforce was around 18,000, 40% lower than the
previous year.
In the first half of 2021, we will continue to welcome back more
of our people as we scale up our operations to meet the growing
volumes of flights. As we will be a smaller business in the near
term, we recognise the significant impact this has had on our
colleagues that have left us. Throughout the process of change we
have been doing everything we can to minimise the number of job
losses across the network. To ensure we are as competitive as
possible as the recovery continues, we have addressed multiple
contract terms at single locations by working with our staff to
harmonise pay and conditions. We believe that our success in
harmonisation is vital to ensure that we can compete effectively
and win new profitable business.
Business Review
Americas
In the Americas region, the impact of flight restrictions in
response to the pandemic has not been as great as in other parts of
the world, reflecting the significant proportion of the business
that is regional rather than intercontinental, and therefore less
affected by the international flight restrictions. In the USA, air
cargo volumes held up well with our two largest operations in Los
Angeles and San Francisco maintaining volumes close to pre-pandemic
levels. The US fuelling and ground service businesses saw volumes
drop in the second quarter of the year and then modestly improve in
the second half. In the rest of the region, Canada fuel farm
management and the Canadian and Colombian air cargo businesses
remained steady and profitable. However, the ground services
operations in Canada, Mexico and Colombia were severely impacted,
with operations in Colombia closed at one point.
Profitability was less affected compared with other regions due
to the cost savings measures put in place in response to the
crisis, which resulted in the closure of operations at Boston,
Newark, New Orleans and Tijuana, together with the impact of
government support. The US business received $82.8m of job support
grants under the Coronavirus Aid, Relief, and Economic Security Act
that has provided welcome financial relief for Menzies in the USA
and other key suppliers and carriers across the country's airline
industry. Due to the significant support given to the US based
airlines, we did see some evidence of insourcing and this resulted
in the loss of our ground handling contract with United Airlines in
Denver. Although this loss was partly mitigated by ancillary
services wins elsewhere in the USA with the airline. We do not
expect a significant change to the market dynamics in North America
and see any insourcing as a short-term trend only. Important
government support, albeit on a lesser scale, was received in
Canada in the form of emergency wage subsidies.
In terms of our strategic priorities, as well as the portfolio
management action taken to close the stations mentioned above, our
work to optimise the portfolio mix resulted in a number of notable
contract wins and renewals. We successfully added Qatar Airways air
cargo services at Los Angeles and San Francisco evidencing our
growing relationship with Qatar Airways globally and renewed
multi-station fuelling services agreements with UPS and FedEx.
Within the region, our focus on emerging market growth saw the
successful renewal of ramp services with VivaAerobus across 21
stations in Mexico.
Our focus on margin improvement gained traction with enhanced
commercial terms secured in many locations including with Air
France/KLM at five air cargo service operations in Canada and at
Bogota. We also successfully negotiated short-term rate
improvements with airlines across the region in response to lower
volumes during the pandemic.
EMEA
The EMEA region saw the largest reduction in flight schedules
with ground handling turns down 64% compared with prior year. Our
ground services business in the UK, Spain, Eastern Europe,
Scandinavia and South Africa were severely disrupted in the second
quarter, however there was an improvement in volumes in the second
half of the year.
Within the fuelling services business in the UK and France,
margins were maintained due to the fee-per-service nature of the
contracts, although volume was significantly down. Cargo volumes in
Amsterdam remained strong, and our cargo operations at London
Heathrow have been running ahead of the prior year since the large
contract win with Qatar Airways in June.
The profit impact of the decline in revenues has been partly
mitigated by strong cost control, government support schemes and
tough decisions regarding uneconomic operations. We ceased agency
personnel arrangements, where appropriate employees were furloughed
through government schemes, and regrettably, a number of redundancy
programmes were undertaken. Government support schemes have had a
positive impact on Menzies' ability to maintain the right level of
staffing particularly in the UK, the Netherlands and Sweden.
In the UK, we ceased ground service operations at Birmingham,
Bristol, Exeter, Liverpool, Newcastle and Stansted. Where possible
we have engaged with our workforce to harmonise labour agreements
in order to become a leaner organisation and be in a better
position to win new business.
Despite the crisis we have continued to make progress with our
strategic priorities in the region. We are currently in
negotiations with a number of airlines across the region for
improved pricing and other recompense in response to the changes in
flight volumes. In the UK, we won ground service contracts with
Loganair at Edinburgh, Glasgow and London Heathrow, and with TUI
Airways at Glasgow, London Gatwick and Manchester. We also won
WizzAir ground services business at Oslo, which partly mitigates
the significant reduction in Norwegian Air Shuttle volumes
following the airline's decision to downsize operations. Other wins
included Volotea at Nantes and TUI Airways at Gothenburg.
Within the region, we made considerable progress with our
strategy to expand into emerging markets. We were delighted to win
the Wizz Air ground services contract at Budapest, the carrier's
home airport. We also added a contract with LIFT Airline at
Johannesburg and we were awarded an operating licence at Larnaca
and Paphos in Cyprus ahead of commencing ground service operations
in February 2021. Since the year end, the acquisition of Royal
Airport Services has completed, bringing ground and air cargo
services at eight locations across Pakistan, while operations have
commenced at Baghdad, Iraq.
As well as the new air cargo services in Pakistan, our work to
optimise the portfolio mix and target a better spread of activities
resulted in us winning cargo contracts with Cargolux at Budapest
and Qatar Airways at London Heathrow. The contract with Qatar
Airways embodies our strategic priority of customer engagement and
the growing prevalence of regional or global agreements. The
contract is part of a joint approach to develop Qatar Airways
global cargo network in a handling partnership programme.
Rest of World
The Rest of World region focuses on Australasia and South East
Asia. As with the rest of the Group, volumes were depressed in the
region with air cargo tonnage down 24% and ground services 58%
lower than prior year. Our operations in Macau, China felt the
impact of the government restrictions in response to the pandemic
virtually all year, as it was one of the first territories to be
impacted. Passenger flights were severely impacted, however air
cargo traffic remained at pre-pandemic levels for most of the
year.
The air cargo business was resilient in both Australia and New
Zealand. Profitability in the two countries was maintained through
the handling of emergency relief flights, cargo only aircraft where
cargo replaced passengers on the main deck, and the optimisation of
government job retention schemes, particularly in Australia. Our
fuelling services business in Thailand has been mothballed and is
unlikely to restart unless sufficient scale can be achieved.
The Rest of World region is a key area in terms of our strategic
priority of delivering emerging market growth. Stronger forecast
economic growth and the demographic trend of a growing middle class
means this region is expected to experience significantly higher
growth in aviation activity over the next 20 years compared with
many other geographical regions.
During the year we successfully grew and optimised our portfolio
in the region, adding ground services and air cargo services
contracts with Qatar Airways at Sydney, Melbourne, Perth and
Adelaide and air cargo services at Auckland. We also won a contract
to provide high volume, narrow bodied ground services with Jetstar
Airways at Melbourne. Operations in Indonesia progressed with the
PT Mitra Adira Utama air cargo business now successfully
integrated.
Cargo Forwarding
During the year our cargo forwarding business, Air Menzies
International (AMI) performed strongly, strengthening its position
as one of the world's largest neutral providers of airfreight and
express services.
AMI has benefited from restricted cargo capacity reflecting the
grounding of many international passenger flights. Despite fewer
bookings, the size and yield of each booking has been considerably
higher than in recent years. While the impact of the reduction in
cargo capacity across the industry provided positive momentum to
the business during the year, the business also swiftly and
proactively responded to the change in cargo capacity to find
solutions for its customers, chartering aircraft and filling them
with air cargo demand on key trade lanes.
Financial Overview
Banking Facilities
As previously reported, the Company completed the refinance of
the Group's bank facilities in January 2020 that were due to mature
in 2021 and replaced them with a US$235m amortising loan and a
GBP145m revolving credit facility, both due to mature in January
2025. In response to the financial impact of the pandemic related
flight restrictions, the Company agreed a revised temporary banking
covenant structure with its banking group for the facilities in
August.
The new covenant structure provides sufficient flexibility to
support the Group through the expected recovery period. The key
terms are that a net leverage covenant is suspended and replaced
with a minimum EBITDA covenant and a new covenant requiring the
Group to keep a minimum of GBP45m liquidity. The interest cover
covenant is also suspended. The revised covenant structure will
remain in place until the earlier of June 2022 or whenever the
Group's leverage as measured on a pre-IFRS 16 basis remains below
3.0 times for three consecutive quarters. At that point, the Group
will revert to the original net leverage and interest cover
covenants for the remainder of the facilities' term. The interest
margin is 4.0% and will reduce to 3.5% when the Group's leverage,
as measured on a pre-IFRS 16 basis, falls back below 3.0 times.
Exceptional Items in Operating Profit
Exceptional items in operating profit were a GBP70.2m charge to
profits (2019: GBP4.7m) comprised GBP58.8m of restructuring
incurred to reshape the business in response to and because of the
Covid-19 pandemic travel restrictions, transaction related costs of
GBP2.4m, primarily to set up the new business in Iraq and GBP9.0m
of costs to reimburse the insurer in respect of an insurance claim
from 2017.
The Covid-19 pandemic restructuring costs comprised GBP27.1m of
costs incurred to write down assets, and GBP31.7m of restructuring
costs that comprised GBP27.0m of costs to resize the business as a
result of the downturn in volumes, and GBP4.7m of professional and
advisory fees to secure the successful renegotiation of the new
covenant structure.
Interest and Taxation
The Group's underlying net finance costs were GBP20.4m (2019:
GBP22.1m).
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 GBP14.2m (2019: GBP9.5m) representing an
effective underlying tax rate of -37% (2019: 31%). The increase was
mainly due to de-recognising deferred tax assets in various
jurisdictions.
Loss per Share
The Group's underlying loss per share was 61.8p (2019: 24.9p
earnings per share). The reduction was a result of the decrease in
underlying profits and the increase in the effective underlying tax
rate. The corresponding basic loss per share was 151.1p (2019:
12.8p per share for continuing and discontinued operations).
Defined Benefit Retirement Obligation
The reported UK defined benefit retirement obligation has
increased by GBP1.4m since 31 December 2019 to GBP6.7m. This
relatively small increase is attributable to effective hedging
strategy as the GBP39.1m adverse impact of lower discount rates on
future liabilities was mostly offset by GBP32.1m positive impact of
returns on the pension scheme assets and GBP3.7m of contributions
from the Group.
Impact of Foreign Currency Movements
The majority of the Group's operations are located outside the
UK and account in currencies other than the Group's reporting
currency. The Group hedges the sterling 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 affects the
Group's reported results. In 2020, there was minimal impact on the
Group's results due to exchange rate movements against the prior
year. Net borrowings are also subject to foreign currency
movements, primarily on the US dollar denominated term loan and
non-sterling lease liabilities.
Dividend
No dividend is to be paid in respect of the 2020 results (2019:
6.0p per share).
Group Liquidity
The Group has been effective in the proactive management of cash
and liquidity. Underlying operating cash flow was GBP149.6m (2019:
GBP134.9m). The increase was largely the result of strong debtor
collections and upfront support from governmental agencies. Working
capital management remains a key focus for the business. Cash
generated from operations was GBP113.7m (2019: GBP104.1m). Free
cash flow was GBP105.7m (2019: GBP81.1m). Net capital expenditure
was GBP20.7m (2019: GBP21.5m). The resulting net cash and cash
equivalents on hand at 31 December 2020 was GBP121.8m, GBP48.8m
higher than 31 December 2019.
At 31 December 2020 reported net borrowings were GBP355.9m
(2019: GBP391.5m) largely reflecting lower lease liabilities. Net
debt used for measuring leverage for banking covenant purposes,
particularly excluding the impact of reporting leases under IFRS
16, was GBP214.7m (2019: GBP216.6m). The Group had GBP316.9m of
committed banking facilities at 31 December 2020, of which
GBP296.9m were drawn.
Going Concern
The UK Corporate Governance Code requires the Directors to state
whether the Board considers it appropriate to adopt the going
concern basis of accounting in preparing the financial statements,
and to identify any material uncertainties to the Company's ability
to continue as a going concern over a period of at least 12 months
from the date of approval of the financial statements. In adopting
the going concern basis for preparing these financial statements,
the Board has considered the Group's business activities, together
with factors likely to affect its future development, its
performance and principal risks and uncertainties. The spread of
Covid-19 has precipitated an unprecedented level of air travel
restrictions being imposed by governments across the world.
Although this has had a broadly positive impact on cargo handling
and forwarding businesses, it has had a negative impact on flight
volumes that drive the ground and fuelling services businesses.
After reviewing the current liquidity position, financial
forecasts and stress testing of potential risks and based on the
current funding facilities outlined, the Board has a reasonable
expectation that the Company and Group has sufficient resources to
continue in operational existence for the foreseeable future, which
is for the period to 30 June 2022. The Group has a strong liquidity
position. As a result, the Board continues to adopt the going
concern basis of accounting in preparing the Company and Group
financial statements. The period of management's going concern
assessment is the period to 30 June 2022.
In the event of further severe downside risks beyond the
Company's severe but plausible downside case as outlined in note 1
of the consolidated financial statements, the Board has identified
a material uncertainty arising as a result of the impact that
prolonged international travel restrictions could have on the
delayed recovery of the business that, were they not adequately
mitigated as they have so far may risk a breach of the leverage and
interest cover covenants on the Company's unsecured facilities at
30 June 2022, a date over two years before the expiry of such
facilities in January 2025 and over two years after the start of
the pandemic. If such circumstance were to arise, the Company would
have sufficient time to take steps to further mitigate any risk
arising and, if necessary, to seek to agree with its lenders, as it
did following the outbreak of the pandemic, a further waiver of or
variation to such covenants.
Full Year Results for the year ended 31 December 2020
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2020 (year ended 31 December 2019)
----------------------------------------------------------------------------------------------------------------------
Before Before
exceptional Exceptional exceptional Exceptional
and other and other and other and other
items items 2020 items items 2019
Notes GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ------ ------------- ------------ --------- ------------- ------------ ----------
Continuing operations
Revenue 2 824.2 - 824.2 1,325.6 - 1,325.6
Net operating costs (844.4) (76.8) (921.2) (1,280.7) (11.3) (1,292.0)
----------------------------- ------ ------------- ------------ --------- ------------- ------------ ----------
Operating (loss)/profit
before joint ventures
and associates (20.2) (76.8) (97.0) 44.9 (11.3) 33.6
Share of post-tax
results of joint ventures
and associates 1.7 (0.9) 0.8 7.6 (1.6) 6.0
----------------------------- ------ ------------- ------------ --------- ------------- ------------ ----------
Operating (loss)/profit 2 (18.5) (77.7) (96.2) 52.5 (12.9) 39.6
Analysed as:
Underlying operating
(loss)/profit(i) 2 (18.5) - (18.5) 52.5 - 52.5
Exceptional items
- transaction related
and integration 3 - (2.4) (2.4) - 5.1 5.1
Exceptional items
- restructuring related 3 - (31.7) (31.7) - (10.2) (10.2)
Exceptional items
- asset impairment 3 - (17.8) (17.8) - (5.4) (5.4)
Exceptional items
- estimated credit
loss 3 - (9.3) (9.3) - - -
Exceptional items
- insurance and other
legal settlements 3 - (9.0) (9.0) - 5.8 5.8
Acquired intangible
asset amortisation 3 - (6.6) (6.6) - (6.6) (6.6)
Share of joint ventures
and associates interest - - - - 0.2 0.2
Share of joint ventures
and associates tax - (0.9) (0.9) - (1.8) (1.8)
----------------------------- ------ ------------- ------------ --------- ------------- ------------ ----------
Operating (loss)/profit (18.5) (77.7) (96.2) 52.5 (12.9) 39.6
----------------------------- ------ ------------- ------------ --------- ------------- ------------ ----------
Finance income 0.2 - 0.2 0.6 - 0.6
Finance charges excluding
retirement benefit
obligation interest (20.6) (3.9) (24.5) (22.3) (0.2) (22.5)
Retirement benefit
obligation interest - - - (0.4) - (0.4)
----------------------------- ------ ------------- ------------ --------- ------------- ------------ ----------
(Loss)/profit before
taxation (38.9) (81.6) (120.5) 30.4 (13.1) 17.3
Taxation (14.2) 6.3 (7.9) (9.5) 1.2 (8.3)
----------------------------- ------ ------------- ------------ --------- ------------- ------------ ----------
(Loss)/profit for
the year from continuing
operations (53.1) (75.3) (128.4) 20.9 (11.9) 9.0
Discontinued operations
Profit for the year
from discontinued
operations 17 - - - - 1.7 1.7
----------------------------- ------ ------------- ------------ --------- ------------- ------------ ----------
(Loss)/profit for
the year (53.1) (75.3) (128.4) 20.9 (10.2) 10.7
----------------------------- ------ ------------- ------------ --------- ------------- ------------ ----------
Attributable to equity
shareholders (52.1) (75.3) (127.4) 21.0 (10.2) 10.8
Attributable to
non-controlling
interests (1.0) - (1.0) (0.1) - (0.1)
----------------------------- ------ ------------- ------------ --------- ------------- ------------ ----------
(53.1) (75.3) (128.4) 20.9 (10.2) 10.7
----------------------------- ------ ------------- ------------ --------- ------------- ------------ ----------
Earnings per ordinary
share
Continuing operations
Basic 5 (61.8)p (89.3)p (151.1)p 24.9p (14.1)p 10.8p
Diluted 5 (61.8)p (89.3)p (151.1)p 24.9p (14.1)p 10.8p
Continuing and discontinued
operations
Basic 5 (61.8)p (89.3)p (151.1)p 24.9p (12.1)p 12.8p
Diluted 5 (61.8)p (89.3)p (151.1)p 24.9p (12.1)p 12.8p
----------------------------- ------ ------------- ------------ --------- ------------- ------------ ----------
Note:
(i) Underlying operating (loss)/profit adjusts for exceptional items,
impairment charges associated with non-current assets, amortisation
relating to acquired contract, customer relationship and brand 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.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2020 (year ended 31 December 2019)
------------------------------------------------------------------------------
2020 2019
Note GBPm GBPm
----------------------------------------------------- ----- -------- ------
(Loss)/profit for the year (128.4) 10.7
Items that will not be reclassified subsequently
to profit or loss
Actuarial (loss)/gain on defined benefit retirement
obligation 14 (3.8) 2.0
Actuarial loss on unfunded retirement benefit
obligation (0.3) (0.1)
Income tax effect on defined benefit retirement
obligation - (0.4)
Loss on equity instrument at fair value through
other comprehensive income - (2.0)
Items that may be reclassified subsequently
to profit or loss
Movement on cash flow hedges (2.1) (1.9)
Income tax effect on cash flow hedges 0.4 0.3
Movement on net investment hedges (1.2) 0.7
Income tax effect on net investment hedges 0.2 (0.1)
Exchange gain/(loss) on translation of foreign
currency net assets 2.3 (8.1)
Income tax effect of exchange loss on foreign
currency net assets (0.2) -
----------------------------------------------------- ----- -------- ------
Other comprehensive loss for the year (4.7) (9.6)
----------------------------------------------------- ----- -------- ------
Total comprehensive (loss)/income for the year (133.1) 1.1
----------------------------------------------------- ----- -------- ------
Attributable to equity shareholders (132.1) 1.2
Attributable to non-controlling interests (1.0) (0.1)
----------------------------------------------------- ----- -------- ------
(133.1) 1.1
----------------------------------------------------- ----- -------- ------
CONSOLIDATED BALANCE SHEET
as at 31 December 2020 (31 December 2019)
---------------------------------------------------------------------------
2020 2019
Notes GBPm GBPm
---------------------------------------------- ------ -------- --------
Assets
Non-current assets
Intangible assets 6 167.1 178.1
Property, plant and equipment 7 236.5 278.1
Investments in joint ventures and associates 14.0 16.2
Other investments 0.1 0.2
Deferred tax assets 21.2 23.7
438.9 496.3
---------------------------------------------- ------ -------- --------
Current assets
Inventories 5.7 5.8
Trade and other receivables 8 185.1 242.7
Current income tax receivables 1.8 3.9
Derivative financial assets 9 0.2 0.8
Cash and cash equivalents 11 209.1 90.5
401.9 343.7
---------------------------------------------- ------ -------- --------
Liabilities
Current liabilities
Borrowings 9 (137.0) (91.6)
Derivative financial liabilities 9 (0.8) (0.2)
Trade and other payables (233.7) (187.2)
Current income tax liabilities (14.4) (12.4)
Provisions 13 (45.0) (55.2)
(430.9) (346.6)
---------------------------------------------- ------ -------- --------
Net current liabilities (29.0) (2.9)
Total assets less current liabilities 409.9 493.4
----------------------------------------------- ------ -------- --------
Non-current liabilities
Borrowings 9 (425.0) (390.8)
Other payables (0.4) (0.5)
Derivative financial liabilities 9 (2.4) (0.2)
Deferred tax liabilities (3.1) (3.1)
Provisions 13 (17.3) (6.2)
Retirement benefit obligation 14 (6.7) (5.3)
----------------------------------------------- ------ -------- --------
(454.9) (406.1)
---------------------------------------------- ------ -------- --------
Net (liabilities)/assets (45.0) 87.3
----------------------------------------------- ------ -------- --------
Ordinary shares 21.1 21.1
Share premium account 23.6 23.5
Treasury shares (1.2) (1.2)
Other reserves (17.8) (17.2)
Merger relief reserve 67.3 67.3
Retained earnings (158.5) (27.7)
Capital redemption reserve 21.6 21.6
----------------------------------------------- ------ -------- --------
Total shareholders' equity (43.9) 87.4
Non-controlling interest in equity (1.1) (0.1)
----------------------------------------------- ------ -------- --------
Equity (45.0) 87.3
----------------------------------------------- ------ -------- --------
The accounts were approved by the Board of Directors on 9 March
2021 and signed on its behalf by:
Philipp Joeinig Alvaro Gomez-Reino
Chairman and Chief Executive Officer Chief Financial Officer
Company No. SC34970
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
as at 31 December 2020 (31 December 2019)
----------------------------------------------------------------------------------------------------------------------------------------------
Translation
Share and Merger Capital Total
Ordinary premium Treasury hedge relief Retained redemption shareholders' Non-controlling
shares account shares reserves reserve earnings reserve equity equity Equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
At 31 December
2019 21.1 23.5 (1.2) (17.2) 67.3 (27.7) 21.6 87.4 (0.1) 87.3
Loss for the
year - - - - - (127.4) - (127.4) (1.0) (128.4)
Other
comprehensive
loss - - - (0.6) - (4.1) - (4.7) - (4.7)
------------------ --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
Total
comprehensive
loss - - - (0.6) - (131.5) - (132.1) (1.0) (133.1)
------------------ --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
New share capital
issued - 0.1 - - - - - 0.1 - 0.1
Share-based
payments - - - - - 0.7 - 0.7 - 0.7
At 31 December
2020 21.1 23.6 (1.2) (17.8) 67.3 (158.5) 21.6 (43.9) (1.1) (45.0)
------------------ --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
Translation
Share and Merger Capital Total
Ordinary premium Treasury hedge relief Retained redemption shareholders' Non-controlling
shares account shares reserves reserve earnings reserve equity equity Equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
At 31 December
2018 21.1 23.1 (2.6) (8.1) 67.3 (17.2) 21.6 105.2 (3.9) 101.3
Impact of
adoption
of IFRS 16 - - - - - (1.6) - (1.6) - (1.6)
------------------ --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
Adjusted equity
at 1 January
2019 21.1 23.1 (2.6) (8.1) 67.3 (18.8) 21.6 103.6 (3.9) 99.7
Profit/(loss)
for the year - - - - - 10.8 - 10.8 (0.1) 10.7
Other
comprehensive
loss - - - (9.1) - (0.5) - (9.6) - (9.6)
------------------ --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
Total
comprehensive
(loss)/income - - - (9.1) - 10.3 - 1.2 (0.1) 1.1
------------------ --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
New share capital
issued - 0.4 - - - - - 0.4 - 0.4
Share-based
payments - - - - - 0.8 - 0.8 - 0.8
Income tax effect
of share-based
payments - - - - - (0.3) - (0.3) - (0.3)
Subsidiaries
acquired (Note
15) - - - - - - - - 2.2 2.2
Recapitalisation
of subsidiary - - - - - - - - 0.5 0.5
Expiry of
acquisition
related options - - - - - - - - 1.6 1.6
Dividends paid
(Note 4) - - - - - (17.3) - (17.3) (0.4) (17.7)
Repurchase of
Company's shares - - (1.0) - - - - (1.0) - (1.0)
Disposal of
Company's
shares - - 2.4 - - (2.4) - - - -
------------------ --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
At 31 December
2019 21.1 23.5 (1.2) (17.2) 67.3 (27.7) 21.6 87.4 (0.1) 87.3
------------------ --------- -------- --------- ------------ -------- --------- ----------- -------------- ---------------- --------
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2020 (year ended 31 December 2019)
--------------------------------------------------------------------------------
2020 2019
Notes GBPm GBPm
------------------------------------------------------ ------ ------- -------
Cash flows from operating activities
Cash generated from operations 10 113.7 104.1
Interest received 0.2 0.6
Interest paid on lease liabilities (7.3) (7.6)
Other interest paid including arrangement fees (16.4) (13.5)
Tax paid (2.5) (11.8)
------------------------------------------------------ ------ ------- -------
Net cash flow from operating activities 87.7 71.8
------------------------------------------------------ ------ ------- -------
Cash flows from investing activities
Acquisitions 15 - (7.2)
Cash acquired with subsidiaries 15 - 0.4
Investment in joint ventures - (0.4)
Disposal of joint venture - 2.6
Disposal of minority equity investment - 3.0
Increased disposal consideration - 1.8
Purchase of property, plant and equipment (24.2) (29.7)
Intangible asset additions (1.0) (5.3)
Proceeds from sale of property, plant and equipment 4.5 13.5
Dividends received from equity accounted investments 2.1 6.3
------------------------------------------------------ ------ ------- -------
Net cash flow used in investing activities (18.6) (15.0)
------------------------------------------------------ ------ ------- -------
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 0.1 0.4
Purchase of Company's shares - (1.0)
Proceeds from borrowings 46.6 50.0
Repayment of borrowings excluding leases - (10.9)
Principal element of lease repayments (59.9) (57.1)
Dividends paid to non-controlling interests - (0.4)
Dividends paid to ordinary shareholders 4 - (17.3)
Net cash flow used in financing activities (13.2) (36.3)
------------------------------------------------------ ------ ------- -------
Increase in net cash and cash equivalents 55.9 20.5
Effects of exchange rate movements (6.0) (3.1)
Opening net cash and cash equivalents(i) 71.9 54.5
------------------------------------------------------ ------ ------- -------
Closing net cash and cash equivalents (i) 11 121.8 71.9
------------------------------------------------------ ------ ------- -------
Note:
(i) Net cash and cash equivalents comprise cash at bank and in hand
and bank overdrafts.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
Basis of preparation
The consolidated financial statements, which have been prepared
under the historical cost convention, in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and in accordance with
International Financial Reporting Standards (IFRS) adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European
Union, incorporate the financial statements of the Company and its
subsidiaries, joint ventures and associates from the effective date
of acquisition or to the date of deemed disposal.
Going concern
The UK Corporate Governance Code requires the Directors to state
whether the Board considers it appropriate to adopt the going
concern basis of accounting in preparing the financial statements,
and to identify any material uncertainties to the Company's ability
to continue as a going concern over a period of at least 12 months
from the date of approval of the financial statements. In adopting
the going concern basis for preparing these financial statements,
the Board has considered the Group's business activities, together
with factors likely to affect its future development, its
performance and principal risks and uncertainties. The spread of
Covid-19 has precipitated an unprecedented level of air travel
restrictions being imposed by governments across the world.
Although this has had a broadly positive impact on cargo handling
and forwarding businesses, it has had a negative impact on flight
volumes that drive the ground and fuelling services businesses.
After reviewing the current liquidity position, financial
forecasts and stress testing of potential risks and based on the
current funding facilities outlined, the Board has a reasonable
expectation that the Company and Group has sufficient resources to
continue in operational existence for the foreseeable future, which
is for the period to 30 June 2022. The Group has a strong liquidity
position. As a result, the Board continues to adopt the going
concern basis of accounting in preparing the Company and Group
financial statements. The financial statements for the year ended
31 December 2020 were approved by the Board on 8 March 2021. The
period of management's going concern assessment is the period to 30
June 2022.
In the event of further severe downside risks beyond the
Company's severe but plausible downside case, the Board has
identified a material uncertainty arising as a result of the impact
that international travel restrictions could have on the delayed
recovery of the business that may risk a breach of the leverage and
interest cover covenants at 30 June 2022. If such circumstance were
to arise, the Company would take steps to further mitigate any risk
arising and, if necessary, to seek to agree with its lenders, as it
did following the outbreak of the pandemic, a further waiver of or
variation to such covenants.
Going concern assessment
Travel restrictions imposed in response to the Covid-19 pandemic
have had a significant impact on revenues generated from ground
services and into-plane fuelling. In order to respond to the
ongoing market uncertainty over the going concern period,
significant management actions have been taken in response,
including cost saving measures, the application for and the receipt
of significant government support in several countries (including
loans and grant monies received from the US government as part of
the Coronavirus Aid, Relief, and Economic Security Act, JobKeeper
Payment in Australia and Coronavirus Job Retention Scheme in the
UK), tight cash management and the successfully agreed revised
covenant structure with the Group's banks.
The structural changes to the cost base and the continuing
expansion into emerging markets gives confidence that the Group
will be in a better place to benefit from the recovery in passenger
volumes. In addition, the balance of revenue streams that the Group
has within its business model has given some protection against the
level of decline in passenger related volumes experienced due to
travel restrictions imposed on airlines in response to Covid-19.
This balance includes exposure to less impacted markets such as
cargo handling, cargo forwarding and fuel farm management, a
greater proportion of ground services and into-plane fuelling
revenues being generated from less impacted domestic and regional
travel rather than international travel, and the geographical
spread as a result of operating in over 30 countries.
Assumptions and stress testing
The Board considered the liquidity position and forecast EBITDA
in the Group's financial forecasts prepared to 30 June 2022,
recognising the challenges around reliably estimating and
forecasting the effects of Covid-19 particularly on the ground and
fuel service businesses. The key areas of forecasting uncertainty
include the extent and duration of border and travel restrictions
in the countries in which the Group operates and the recovery in
ground and fuel services aircraft turns.
In reaching its conclusion on the going concern assessment, the
Board also considered the findings of the work performed to support
the statement on the long-term viability of the Company and the
Group. As noted below, this included assessing forecasts of severe
but plausible downside scenarios and further downside stress
testing related to the Company's principal risks, notably the
extent to which the recovery in the ground and fuel services
businesses assumed in its base case forecasts is at risk.
The relevant forecast revenue assumptions as a percentage of the
average pre Covid-19 levels for the impacted ground and fuel
services in the first half of 2021, second half of 2021 and for the
first half of 2022 under the base case and a severe but plausible
downside case are set out below.
H1 2021 H2 2021 H1 2022
------------------------------- -------- -------- --------
Base case 51% 62% 79%
Severe but plausible downside
case 48% 54% 63%
These assumptions reflect the Company's view on the likely rate
of recovery along with information from some of the Group's largest
airline customers. The percentages have been benchmarked against
various recovery scenarios prepared by external third parties
including the European Organisation for the Safety of Air
Navigation, the International Civil Aviation Organization and the
International Air Transport Association.
The Group has taken actions in response to the impact of the
ongoing travel restrictions to increase the resilience of the
business, reflecting the restructure of the business that has taken
place during 2020 and the revised cost base that has resulted in a
leaner and more agile workforce. These overhead and labour cost
savings are largely within the control of management and therefore
the Board is confident they can be implemented. The controllable
cost mitigating actions have been considered in the severe but
plausible scenario.
In the Company's assumptions, government assistance has been
assumed only for the period committed by the authorities in
writing. However, the Board is hopeful that this support will
continue, commensurate with the impact of travel restrictions and
through the period during which such travel restrictions persist,
as experienced in 2020 and the first quarter of 2021.
Liquidity and EBITDA headroom
The Group's main committed borrowing facilities comprised its
fully drawn US$235m term loan and the GBP145m revolving credit
facility, both available until their maturity dates of January
2025, and loans from the US government having a maturity date of
2030. The US dollar term loan has repayment instalments of US$10m
that fell due in January 2021 and US$15m that is to fall due in
each of January 2022, 2023 and 2024. As at 31 December 2020, the
Group's available liquidity comprised of GBP20.0m of undrawn
revolving credit facility and GBP121.8m of net cash balances across
the Group.
The Group must comply with certain banking covenants measured
quarterly. Until 31 March 2022, these relate to maintaining a
minimum liquidity of GBP45m and exceeding predetermined minimum
EBITDA levels. At 30 June 2022 the covenants revert to an interest
cover exceeding three times and a net debt to EBITDA ratio as
measured on a pre-IFRS 16 basis not exceeding three times, both as
stipulated under the Group's banking facilities prior to the
agreement of the revised covenant structure.
Under both the base case scenario and the severe but plausible
downside cases, the Group is forecast to have positive headroom
against its two banking covenants for minimum liquidity and minimum
EBITDA measured quarterly through to 31 March 2022, and against its
original interest cover and leverage covenants in place and
measured at 30 June 2022, the end of the going concern period.
A further downside stress test, beyond the severe but plausible
downside case, considering the impact of continued international
travel restrictions has been considered. Were impacted ground and
fuel services businesses volumes in the first half of 2022 to be
less than 54% of pre-Covid-19 levels, and the impacts were not to
be adequately mitigated, there could be a leverage and interest
cover breach at the 30 June 2022 measurement date. If such
circumstance were to arise, the Company would take steps to further
mitigate any risk arising and, if necessary, to seek to agree with
its lenders, as it did following the outbreak of the pandemic, a
further waiver of or variation to such covenants.
Going concern statement
After reviewing the current liquidity position, financial
forecasts and stress testing of potential risks and based on the
current funding facilities outlined, the Board has a reasonable
expectation that the Company and the Group has sufficient resources
to continue in operational existence for the foreseeable future,
which is for the period to 30 June 2022. As a result, the Board
continues to adopt the going concern basis of accounting in
preparing the Company and Group financial statements.
In the event of further severe downside risks beyond the
Company's severe but plausible downside case, the Board has
identified a material uncertainty arising as a result of the impact
that international travel restrictions could have on the delayed
recovery of the business that risk a breach of the leverage and
interest cover covenants at 30 June 2022 that may cast significant
doubt upon the Company's ability to continue as a going concern. If
such circumstance were to arise, the Company would seek to agree
with its lenders, as it did following the outbreak of the pandemic,
a further waiver of or variation to such covenants, in order to
continue as a going concern. The financial statements do not
include the adjustments that would result if the Company and the
Group were unable to continue as a going concern.
New accounting standards and amendments
Five new accounting amendments are applicable for the first time
in 2020. However, they have no material impact on the financial
statements of the Group. These new standards are:
Amendment to IFRS 16 Leases - Covid-19-Related Rent Concessions
- effective date 1 June 2020
Amendments to IFRS 3 Business Combinations - effective date 1
January 2020
Amendments to IFRS 9, IAS 39 and IFRS 17 - Rate Benchmark Reform
- effective date 1 January 2020
Amendments to IAS 1 and IAS 8 - Definition of Material -
effective date 1 January 2020
Amendments to References to the Conceptual Framework in IFRS
Standards - effective date 1 January 2020
Standards and amendments to standards that have been issued that
are applicable for the Group but are not effective for 2020 and
have not been early adopted are:
IFRS 17 Insurance Contracts, including Amendments to IFRS 17(i)
- effective date 1 January 2023
Amendments to IAS 1 Presentation of Financial Statements:
Classification of Liabilities as Current or Non-current(i) -
effective date 1 January 2023
Amendments to IFRS 3 Business Combinations; IAS 16 Property,
Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and
Contingent Assets; Annual Improvements 2018-2020(i) - effective
date 1 January 2022
Amendments to IFRS 4 Insurance Contracts - deferral of IFRS 9 -
effective date 1 January 2021
Amendments to IAS 1 Presentation of Financial Statements and
IFRS Practice Statement 2: Disclosure of Accounting policies(i) -
effective date 1 January 2023
Amendments to IAS 8 Accounting policies, Changes in Accounting
Estimates and Errors: Definition of Accounting Estimates(i) -
effective date 1 January 2023
Note:
(i) IFRS 17 and other amendments and improvements set out above
are not yet adopted for use in the European Union.
Revenue recognition
Ramp, passenger, into-plane fuelling and other aviation related
services income is recognised at the time the service is provided
in accordance with the terms of the relevant contract. Air cargo
services revenue is recognised at the point of departure for
exports and at the point that the goods are ready for despatch for
imports. Revenue excludes value added and sales taxes and charges
collected on behalf of customers.
The timing of customer billing in relation to the satisfaction
of performance obligations results in amounts being recorded in the
Balance Sheet for accrued and deferred income. Individual billing
arrangements vary by customer and contract. Accrued income is
recognised on contracts for which performance obligations have been
satisfied but have not yet been billed to customers at the Balance
Sheet date. When the recovery of such amounts becomes
unconditional, the customer is billed and the amounts are
transferred to trade receivables. Deferred income is recognised in
respect of payments received from customers in advance of the Group
fulfilling its performance obligations under contracts.
Franchise and consortia fees represent revenue earned from
periodic management fees for fuel farms and franchising
arrangements, which are recognised in accordance with contractual
rates over time.
Government grants
Government grants are recognised in the Income Statement on a
systematic basis over the periods in which the Group recognises
expenses for the related costs for which the grants are intended to
compensate. Unutilised income at the period end is recognised in
deferred income on the Balance Sheet. Government grants are
recognised when there is reasonable assurance that the grant will
be received and all conditions attached to the grant will be
complied with.
Non-GAAP measures
The Group's consolidated financial statements are prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and in accordance
with International Financial Reporting Standards (IFRS) adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union. In measuring our performance, the financial
measures that are used include those that have been derived from
the reported results in order to eliminate factors that 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, customer relationship and brand amortisation
As disclosed above, contract, customer relationship and brand
amortisation relates to intangible assets recognised on historic
acquisitions and since it is transaction related it is presented
separately in order to provide an appreciation for underlying
business performance.
Share of earnings from joint ventures and associates
As disclosed in the Income Statement, the Group's share of
post-tax profit relating to joint ventures and associates is
included within operating profit given the similarity of those
operations to wholly owned businesses.
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, joint
venture assets and other intangibles, contract, customer
relationship and brand amortisation and the Group's share of joint
ventures and associates interest and tax to provide an appreciation
of the impact of those items on operating profit.
Underlying profit before taxation
As disclosed on the face of the Income Statement, underlying
profit before taxation is defined as underlying operating profit
less net finance charges and before exceptional items as set out
above in the underlying operating profit definition.
Underlying earnings per share
As disclosed on the face of the Income Statement, underlying
earnings per share is defined as profit after taxation and
non-controlling interest before intangible amortisation and
impairment and exceptional items, divided by the weighted average
number of ordinary shares in issue. The calculation of underlying
earnings per share is set out in Note 5.
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, capitalised lease repayments, ordinary dividends and net
spend on shares.
2020 2019
GBPm GBPm
------------------------------------------------------- ------- -------
Cash generated from operations 113.7 104.1
Adjusted for:
Net interest paid (23.5) (20.5)
Exceptional interest paid 2.8 -
Tax paid (2.5) (11.8)
Dividends received from equity accounted investments 2.1 6.3
Purchase of property, plant and equipment (24.2) (29.7)
Intangible asset additions (1.0) (5.3)
Proceeds from sale of property, plant and equipment 4.5 13.5
Additional retirement benefit obligation contribution 3.7 12.1
Exceptional cash spend (i) 30.1 12.4
-------------------------------------------------------- ------- -------
Free cash flow 105.7 81.1
-------------------------------------------------------- ------- -------
Note:
(i) Current year exceptional spend relates mainly to redundancy
and workforce restructuring costs as set out in Note 3.
Underlying operating cash flow
Underlying operating cash flow is free cash flow before net
capital expenditure, net interest paid and taxation.
2020 2019
GBPm GBPm
----------------------------------------------------- ------ -------
Free cash flow as set out above 105.7 81.1
Adjusted for:
Purchase of property, plant and equipment 24.2 29.7
Intangible asset additions 1.0 5.3
Proceeds from sale of property, plant and equipment (4.5) (13.5)
Net interest paid excluding exceptional interest 20.7 20.5
Tax paid 2.5 11.8
Underlying operating cash flow 149.6 134.9
------------------------------------------------------ ------ -------
2. Segment Information
The Group provides ground and air cargo services as well as
into-plane fuelling and fuel farm management services across the
world. Cargo forwarding services are separately disclosed, as they
are distinct from the other types of aviation related services
provided and are provided around the world.
The Board assesses the performance of the operating segments
based on underlying operating profit/(loss). These results are
before exceptional items, intangible amortisation and share of
interest and tax on joint ventures and associates. Transfer prices
between segments are set on an arm's length basis.
Business segments
Segmental revenue and the reconciliation of segmental underlying
operating (loss)/profit to (loss)/profit before tax for the period
is set out below.
Rest Cargo
Americas EMEA of World Forwarding Group
2020 Note GBPm GBPm GBPm GBPm GBPm
-------------------------------------------- ----- --------- ------- ---------- ------------ --------
Revenue 290.9 269.5 91.8 172.0 824.2
Underlying operating profit/(loss)(i),(ii) 16.7 (51.3) 8.8 7.3 (18.5)
Exceptional items - transaction
related 3 (2.4)
Exceptional items - restructuring
related 3 (31.7)
Exceptional items - asset
impairment 3 (17.8)
Exceptional items - estimated
credit loss 3 (9.3)
Exceptional items - insurance 3 (9.0)
Acquired intangible asset
amortisation 3 (6.6)
Share of tax on joint
ventures and associates (0.9)
-------------------------------------------- ----- --------- ------- ---------- ------------ --------
Operating loss (96.2)
-------------------------------------------- ----- --------- ------- ---------- ------------ --------
Net finance expense (24.3)
-------------------------------------------- ----- --------- ------- ---------- ------------ --------
Loss before taxation (120.5)
-------------------------------------------- ----- --------- ------- ---------- ------------ --------
Rest Cargo
Americas EMEA of World Forwarding Group
2019 Note GBPm GBPm GBPm GBPm GBPm
-------------------------------------------- ----- --------- ------- ---------- ------------ --------
Revenue 464.3 552.5 161.3 147.5 1,325.6
Underlying operating profit(i),(ii) 20.9 13.4 12.2 6.0 52.5
Exceptional transaction
related and integration 3 5.1
Exceptional legal settlements
and other 3 5.8
Exceptional restructuring
and pension related items 3 (15.6)
Acquired intangible asset
amortisation 3 (6.6)
Share of interest on joint
ventures and associates 0.2
Share of tax on joint
ventures and associates (1.8)
-------------------------------------------- ----- --------- ------- ---------- ------------ --------
Operating profit 39.6
-------------------------------------------- ----- --------- ------- ---------- ------------ --------
Net finance expense (22.3)
-------------------------------------------- ----- --------- ------- ---------- ------------ --------
Profit before taxation 17.3
-------------------------------------------- ----- --------- ------- ---------- ------------ --------
Notes:
(i) Underlying operating (loss)/profit is defined as operating
(loss)/profit excluding intangible amortisation as shown in Note 3
and exceptional items but including the pre-tax share of results
from joint ventures and associates.
(ii) Included within underlying operating (loss)/profit are the
Group's share of (loss)/profit of joint ventures and associates in
EMEA GBP2.3m and Rest of World GBP(0.6)m (2019: EMEA GBP2.9m and
Rest of World GBP4.7m).
The information reported to the Chairman and Chief Executive
Officer in his capacity as chief operating decision maker does not
include an analysis of assets and liabilities by segment and
accordingly no such information is presented.
Depreciation
Capital expenditure (i) Amortisation
---------------------- --------------- ---------------
2020 2019 2020 2019 2020 2019
GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ---------- ---------- ------- ------ ------- ------
Americas 9.0 21.3 36.1 36.6 4.6 4.5
EMEA 18.5 8.2 36.1 33.9 2.3 2.2
Rest of World 2.2 3.3 10.3 10.7 1.3 1.2
Cargo Forwarding 0.7 1.4 3.9 3.5 0.5 0.3
------------------ ---------- ---------- ------- ------ ------- ------
30.4 34.2 86.4 84.7 8.7 8.2
------------------ ---------- ---------- ------- ------ ------- ------
Note:
(i) Includes GBP63.1m of depreciation relating to IFRS 16 right
of use assets (2019: GBP62.0m).
Geographic information
Non-current
Revenue assets (i)
---------------- --------------
2020 2019 2020 2019
GBPm GBPm GBPm GBPm
----------- ------ -------- ------ ------
USA 265.4 372.1 153.0 192.3
UK 172.4 287.6 91.7 96.5
Australia 102.9 161.2 40.0 44.1
Others 283.5 504.7 133.0 139.7
----------- ------ -------- ------ ------
824.2 1,325.6 417.7 472.6
----------- ------ -------- ------ ------
Note:
(i) Non-current assets exclude deferred tax assets and
derivative financial assets.
Revenue by performance obligation
2020 2019
GBPm GBPm
------------------------------ ------ --------
At the point of service 800.0 1,298.2
Franchise and consortia fees 24.2 27.4
------------------------------ ------ --------
824.2 1,325.6
------------------------------ ------ --------
Revenue is earned at the point of service in each segment of the
business. Franchise and consortia fees are earned in Americas and
EMEA.
The business 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 judgment is exercised in
determining the distinct performance obligations under the
contract. Performance obligations under ground services, fuelling
services and air cargo services 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.
Within air cargo services the business also undertakes cargo
forwarding services where 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.
Franchise and consortia fees represent revenue earned from
periodic management fees for fuel farms and franchising
arrangements, which are recognised in accordance with contractual
rates over time.
2020 2019
Employee costs GBPm GBPm
--------------------------------- -------- ------
Wages and salaries 500.1 727.4
Government payroll subsidies(i) (139.2) -
Share-based payments 0.7 0.8
Social security costs 42.3 62.6
----------------------------------- -------- ------
403.9 790.8
Pension charge 16.0 22.8
419.9 813.6
--------------------------------- -------- ------
Note:
(i) The Group benefits from various Covid-19 related government
grants and assistance programmes in many countries around the
world, most notably the Coronavirus Aid, Relief, and Economic
Security (CARES) Act in the USA, and the Coronavirus Job Retention
Scheme (CJRS) in the UK.
During 2020, the Group received US$118.4m of governmental
funding under the CARES Act. This comprised US$82.8m of grant
funding to support the payroll of the US business and US$35.6m as a
loan note as set out in Note 9. The purpose of the grant income is
to support the business through the period when aviation activity
has been most adversely impacted by the pandemic. As there is no
specific period over which the grant funding is to be utilised
Management has applied judgment in determining the appropriate
systematic basis to recognise the grant income for the Group. Grant
income is released from when monies are received over the period in
which in-country revenue is expected to be impacted by travel
restrictions in response to Covid-19. The release is based on the
expected revenue level compared to 2019 revenue and applied to
expected payroll over the anticipated recovery timeline at date of
receipt. The unutilised grant funding at 31 December 2020 is
included in Trade and Other Payables on the Balance Sheet and
disclosed separately in Note 10 Cash Generated from Operations. The
Group has complied with the grant agreement and applicable US law
in the year. As set out in Note 18 Events after the Reporting
Period, after the reporting period a further US$49.3m was received
in February 2021 comprising US$35.9m grant funding and a US$13.4m
loan note.
Under the CJRS scheme, grant income is claimed in respect of
certain costs to the Group of furloughed employees. The grant
income recognised of GBP46.5m reflects the costs incurred in the UK
in the year ended 31 December 2020 that are eligible to be included
in claims to the extent Management considers there to be reasonable
certainty that the grant will be received.
3. Exceptional and Other Items
Exceptional items included in operating profit
2020 2019
GBPm GBPm
------------------------------------------------------------- ---------- ---------
Acquisition and transaction related
costs(i) (2.4) (3.9)
Acquisition integration costs(ii) - (3.3)
Acquisition claims settlement(iii) - 12.3
Restructuring and pension de-risking
costs(iv) (31.7) (10.2)
Asset impairments(v) (17.8) (5.4)
Estimated credit loss(vi) (9.3) -
Insurance and other legal settlements(vii) (9.0) 5.8
(70.2) (4.7)
------------------------------------------------------------- ---------- ---------
Notes:
(i) Acquisition and transaction related costs comprise GBP2.4m of
joint venture set up costs. In the prior year, acquisition and transaction
related costs comprised GBP2.9m of costs in relation to aborted potential
transactions, GBP0.9m of joint venture set up costs and GBP0.1m of
other related costs.
(ii) In the prior year, acquisition integration costs related to
the integration of the Airline Services business in the UK.
(iii) In the prior year, a net credit acquisition claims settlement
of GBP12.3m was recognised.
(iv) Restructuring costs include GBP23.1m of redundancy and workforce
restructure costs, GBP4.7m for professional adviser fees related
to the re-negotiation of covenants of the Group's banking facilities
and GBP3.9m in station closure costs all in response to the need
to re-size the business following the result of the governmental
responses to the Covid-19 pandemic. In the prior year, restructuring
costs comprised GBP8.0m of redundancy payments and GBP1.3m of station
closure costs. Professional fees of GBP0.9m were also incurred to
complete a programme to de-risk the UK defined benefit pension scheme.
(v) Asset impairments include GBP8.0m of owned equipment assets
and GBP9.8m of leased property and equipment assets following a review
of post-Covid-19 asset utilisation. In the prior year GBP5.4m of
asset write-downs and refurbishments related to an asset optimisation
programme were recognised.
(vi) Estimated credit losses of GBP9.3m were incurred as a result
of certain airlines facing financial difficulties due to flight restrictions
in response to Covid-19.
(vii) Insurance and other legal settlement costs of GBP9.0m relate
to unanticipated reimbursement of costs to the insurers in respect
of an incident that occurred in 2017. No further reimbursement to
the insurer is anticipated. In the prior year, other legal settlements
resulted in a net credit of GBP5.8m.
Exceptional items included in finance charges
2020 2019
GBPm GBPm
----------------------------------------------------------- -------- ------
Impact of renegotiated banking facilities(i) (3.9) -
----------------------------------------------------------- -------- ------
Note:
(i) The Group's bank facilities were revised during the year resulting
in a fair value charge of GBP3.9m.
Acquired intangible assets amortisation included in operating
profit
Acquired intangible asset amortisation costs incurred were
GBP6.6m (2019: GBP6.6m). The amortisation relates to contract,
customer relationship and brand assets recognised on the
acquisition of businesses.
Tax effect of exceptional items
The taxation effect of the exceptional items is a net credit of
GBP5.1m (2019: net charge of GBP1.4m) due to tax deductible costs
incurred during the year, offset in part by deferred tax credits
not taken on tax deductions available for a proportion of the
exceptional costs arising during the year, following a reassessment
of the profitability of the UK business.
4. Dividends
2020 2019
Dividends paid on ordinary shares GBPm GBPm
------------------------------------------------- ------ -----
Interim paid in respect of 2019, 6.0p per share - 5.1
Final paid in respect of 2018, 14.5p per share - 12.2
- 17.3
-------------------------------------------------------- -----
Given the impact of flight restrictions in response to the
Covid-19 pandemic on the operations of the Group in 2020 and the
ongoing uncertainty of the extent of the impact on the aviation
industry, the Board believes it prudent and in the best interests
of shareholders to suspend the dividend for the time being. The
Board is therefore not recommending a final dividend payment for
the year.
5. Earnings per Share
Basic Underlying(i)
----------------- -----------------
2020 2019 2020 2019
GBPm GBPm GBPm GBPm
------------------------------------------------ --------- ------ -------- -------
(Loss)/profit for the year after tax
as set out in the Income Statement (128.4) 10.7 (53.1) 20.9
Adjustment to exclude result relating
to non-controlling interests 1.0 0.1 1.0 0.1
------------------------------------------------ --------- ------ -------- -------
(Loss)/earnings for the year attributable
to equity shareholders (127.4) 10.8 (52.1) 21.0
------------------------------------------------ --------- ------ -------- -------
Basic earnings per ordinary share
(Loss)/earnings per ordinary share (151.1)p 12.8p
Diluted (loss)/earnings per ordinary (151.1)
share p 12.8p
Underlying earnings per ordinary share
(i)
(Loss)/earnings per ordinary share (61.8)p 24.9p
Diluted (loss)/earnings per ordinary
share (61.8)p 24.9p
Number of ordinary shares in issue
Weighted average (million) 84.3 84.2
Diluted weighted average (million) 84.3 84.2
------------------------------------------------ --------- ------ -------- -------
Continuing operations
(Loss)/profit for the year after tax
as set out in the Income Statement (128.4) 10.7 (53.1) 20.9
Adjustment to exclude result from discontinued
operations - (1.7) - -
Adjustment to exclude result relating
to non-controlling interest 1.0 0.1 1.0 0.1
------------------------------------------------ --------- ------ -------- -------
(Loss)/earnings for the year attributable
to equity shareholders (127.4) 9.1 (52.1) 21.0
------------------------------------------------ --------- ------ -------- -------
Basic earnings per ordinary share
(Loss)/earnings per ordinary share (151.1)p 10.8p
Diluted (loss)/earnings per ordinary (151.1)
share p 10.8p
Underlying earnings per ordinary share
(61 .8
(Loss)/earnings per ordinary share )p 24.9p
Diluted (loss)/earnings per ordinary ( 61
share .8)p 24.9p
------------------------------------------------ --------- ------ -------- -------
Discontinued operations
(Loss)/profit for the year after tax
as set out in the Income Statement (128.4) 10.7 (53.1) 20.9
Adjustment to exclude result from continuing
operations 128.4 (9.0) 53.1 (20.9)
------------------------------------------------ --------- ------ -------- -------
Earnings for the year attributable
to equity shareholders - 1.7 - -
------------------------------------------------ --------- ------ -------- -------
Basic earnings per ordinary share
Earnings per ordinary share - 2.0p
Diluted earnings per ordinary share - 2.0p
Underlying earnings per ordinary share
Earnings per ordinary share - -
Diluted earnings per ordinary share - -
------------------------------------------------ --------- ------ -------- -------
Note:
(i) Underlying earnings is presented as an additional
performance measure and is stated before exceptional items.
The weighted average number of fully paid shares in issue during
the year excludes those held by the employee share trusts. The
diluted weighted average is calculated by adjusting for all
outstanding share options that are potentially dilutive (i.e. where
the exercise price is less than the average market price of the
shares during the year). There was no impact of these share options
on the diluted weighted average number of shares by (2019: Nil) and
there was no anti-dilutive impact on basic or underlying EPS in the
year.
6. Intangible Assets
Contracts,
customer
relationships Computer
Goodwill and brands software Total
GBPm GBPm GBPm GBPm
------------------------------------ ---------- ---------------- ---------- ------
Cost
At 31 December 2019 153.6 108.8 19.2 281.6
Additions - - 1.0 1.0
Currency translation (2.4) 0.4 - (2.0)
------------------------------------ ---------- ---------------- ---------- ------
At 31 December 2020 151.2 109.2 20.2 280.6
------------------------------------ ---------- ---------------- ---------- ------
Amortisation and impairment
At 31 December 2019 23.4 68.4 11.7 103.5
Amortisation charge - 6.6 2.1 8.7
Impairment(i) - - 1.1 1.1
Currency translation (0.9) 1.1 - 0.2
------------------------------------ ---------- ---------------- ---------- ------
At 31 December 2020 22.5 76.1 14.9 113.5
------------------------------------ ---------- ---------------- ---------- ------
Net book value
At 31 December 2020 128.7 33.1 5.3 167.1
------------------------------------ ---------- ---------------- ---------- ------
At 31 December 2019 130.2 40.4 7.5 178.1
------------------------------------ ---------- ---------------- ---------- ------
Note:
(i) Computer software assets of GBP1.1m were impaired following
a review of post Covid-19 asset utilisation. Along with other impairments,
this amount is included in the GBP8.0m exceptional charge set out
in Note 3.
Contracts,
customer
relationships Computer
Goodwill and brands software Total
GBPm GBPm GBPm GBPm
------------------------------------ ---------- ---------------- ---------- ------
Cost
At 31 December 2018 136.8 103.8 14.6 255.2
Subsidiaries acquired (Note 15) 20.5 6.2 - 26.7
Additions - - 5.3 5.3
Disposals - - (0.7) (0.7)
Currency translation (3.7) (1.2) - (4.9)
------------------------------------ ---------- ---------------- ---------- ------
At 31 December 2019 153.6 108.8 19.2 281.6
------------------------------------ ---------- ---------------- ---------- ------
Amortisation and impairment
At 31 December 2018 24.4 61.5 10.1 96.0
Amortisation charge - 6.6 1.6 8.2
Currency translation (1.0) 0.3 - (0.7)
------------------------------------ ---------- ---------------- ---------- ------
At 31 December 2019 23.4 68.4 11.7 103.5
------------------------------------ ---------- ---------------- ---------- ------
Net book value
At 31 December 2019 130.2 40.4 7.5 178.1
------------------------------------ ---------- ---------------- ---------- ------
At 31 December 2018 112.4 42.3 4.5 159.2
------------------------------------ ---------- ---------------- ---------- ------
Goodwill acquired through business combinations has been
allocated at acquisition to cash generating units (CGUs) that are
expected to benefit from the business combination. The carrying
amount of the goodwill has been allocated to the operating units is
provided below.
2020 2019
Pre-tax Pre-tax
discount discount
rate used rate used
in impairment in impairment
review Goodwill review Goodwill
---------------------------------- --------------- --------- --------------- ---------
GBPm GBPm GBPm GBPm
---------------------------------- --------------- --------- --------------- ---------
Americas Ground services 10% 55.0 10% 55.6
Cargo services 9% 9.9 9% 9.5
EMEA Ground services 11% 45.1 12% 45.1
Cargo services 11% 2.8 10% 2.8
Rest of World 11% 7.4 9% 8.3
Cargo forwarding 11% 8.5 11% 8.9
128.7 130.2
---------------------------------- --------------- --------- --------------- ---------
The Group tests goodwill annually for impairment or more
frequently if there are indications that these might be impaired.
The basis of these impairment tests including key assumptions are
set out below.
The recoverable amounts of the CGUs are determined from value in
use calculations. These calculations use future cash flow
projections based on financial forecasts approved by Management.
The key assumptions for these forecasts are those regarding revenue
growth, net margin, capital expenditure and the level of working
capital required to support trading, which Management estimates
based on past experience and expectations of future changes in the
market.
The value in use calculations use a post-tax discount rate
assumption in a range from 7% to 8% (2019: 7% to 8%) based on the
Group's weighted average post-tax cost of capital and having
considered the uncertainty risk attributable to individual CGUs.
The equivalent pre-tax discount rate is a range from 9% to 11%
(2019: 9% to 12%) as shown in the table above. The pre-tax rate has
been applied to pre-tax cash flows.
Value in use calculations are based on Board approved budgets
and outlooks extrapolated out for five years. Growth rates in the
cash flows beyond three years have been assumed to be Nil% (2019:
Nil%). Net margin assumptions are based on historic experience.
Base case forecasts show significant headroom above carrying
value for each CGU. Sensitivity analysis has been undertaken for
each CGU to assess the impact of any reasonably possible change in
key assumptions. For all significant CGUs there are no reasonably
possible change that would cause the carrying values to exceed
recoverable amounts.
7. Property, Plant and Equipment
Right Right
Owned Leasehold Right of use of use
freehold property of use asset Owned asset
property improvements asset subleased plant plant
property as lessor and equipment and equipment Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ----------- --------------- ----------- ----------- --------------- --------------- -------
Cost
At 31 December
2019 5.8 51.5 109.4 0.8 234.1 115.5 517.1
Additions 0.1 2.2 - - 27.1 - 29.4
Right of use
assets
recognised - - 44.6 - - 6.0 50.6
Disposals - (1.4) (19.8) - (29.2) (46.8) (97.2)
Currency
translation 0.4 0.3 1.1 - (0.4) 0.7 2.1
------------------- ----------- --------------- ----------- ----------- --------------- --------------- -------
At 31 December
2020 6.3 52.6 135.3 0.8 231.6 75.4 502.0
------------------- ----------- --------------- ----------- ----------- --------------- --------------- -------
Depreciation
At 31 December
2019 4.3 34.5 30.5 0.2 138.6 30.9 239.0
Charge for the
year 0.1 2.7 37.4 - 20.5 25.7 86.4
Disposals - (1.1) (17.2) - (24.3) (23.8) (66.4)
Impairment(i) - - - - 6.3 - 6.3
Currency
translation - 0.4 0.2 - (0.4) - 0.2
------------------- ----------- --------------- ----------- ----------- --------------- --------------- -------
At 31 December
2020 4.4 36.5 50.9 0.2 140.7 32.8 265.5
------------------- ----------- --------------- ----------- ----------- --------------- --------------- -------
Net book value
At 31 December
2020 1.9 16.1 84.4 0.6 90.9 42.6 236.5
------------------- ----------- --------------- ----------- ----------- --------------- --------------- -------
At 31 December
2019 1.5 17.0 78.9 0.6 95.5 84.6 278.1
------------------- ----------- --------------- ----------- ----------- --------------- --------------- -------
Note:
(i) Owned equipment assets of GBP6.3m were impaired following a
review of post Covid-19 asset utilisation. Along with other
impairments this amount is included in the GBP8.0m exceptional
charge set out in Note 3.
Right Right
Owned Leasehold Right of use of use
freehold property of use asset Owned asset
property improvements asset subleased plant plant
property as lessor and equipment and equipment Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ----------- --------------- ----------- ----------- --------------- --------------- -------
Cost
At 31 December
2018 11.8 51.8 - - 218.1 - 281.7
Impact of adoption
of IFRS 16 - - 97.9 - - 117.9 215.8
------------------- ----------- --------------- ----------- ----------- --------------- --------------- -------
Adjusted balance
at 1 January 2019 11.8 51.8 97.9 - 218.1 117.9 497.5
Acquisitions (Note
15) - 0.1 - - 4.2 2.7 7.0
Additions 0.3 1.3 - - 27.3 - 28.9
Right of use
assets
recognised - - 15.2 0.8 - 4.5 20.5
Disposals (6.1) (0.4) (0.8) - (9.2) (6.6) (23.1)
Currency
translation (0.2) (1.3) (2.9) - (6.3) (3.0) (13.7)
------------------- ----------- --------------- ----------- ----------- --------------- --------------- -------
At 31 December
2019 5.8 51.5 109.4 0.8 234.1 115.5 517.1
------------------- ----------- --------------- ----------- ----------- --------------- --------------- -------
Depreciation
At 31 December
2018 5.6 33.4 - - 126.7 - 165.7
Impact of adoption
of IFRS 16 - - 0.6 - - - 0.6
Adjusted balance
at 1 January 2019 5.6 33.4 0.6 - 126.7 - 166.3
Charge for the
year 0.2 2.1 29.8 - 20.4 32.2 84.7
Disposals (1.5) (0.4) (0.1) - (5.1) (1.2) (8.3)
Impairment - - 1.0 0.2 - 0.6 1.8
Currency
translation - (0.6) (0.8) - (3.4) (0.7) (5.5)
------------------- ----------- --------------- ----------- ----------- --------------- --------------- -------
At 31 December
2019 4.3 34.5 30.5 0.2 138.6 30.9 239.0
------------------- ----------- --------------- ----------- ----------- --------------- --------------- -------
Net book value
At 31 December
2019 1.5 17.0 78.9 0.6 95.5 84.6 278.1
------------------- ----------- --------------- ----------- ----------- --------------- --------------- -------
At 31 December
2018 6.2 18.4 - - 91.4 - 116.0
------------------- ----------- --------------- ----------- ----------- --------------- --------------- -------
8. Trade and Other Receivables
2020 2019
GBPm GBPm
------------------------------------------- ------- ------
Trade receivables 113.1 142.8
Less: provision for estimated credit loss (13.1) (2.5)
------------------------------------------- ------- ------
Net trade receivables 100.0 140.3
Accrued income 23.1 27.3
Consortia related receivables 6.4 7.7
Prepayments 18.3 14.6
Other receivables 37.3 52.8
------------------------------------------- ------- ------
185.1 242.7
------------------------------------------- ------- ------
The average credit period on sale of goods is 44 days (2019: 39
days). Interest is not charged on trade receivables.
During the year GBP23.1m of accrued income at 31 December 2020
was recognised in the Income Statement (2019: GBP27.3m).
Consortia related receivables include re-billable expenses and
restricted cash relating to fuel farm management services.
Restricted cash represents funding received from customers and held
in a fiduciary capacity to be used on their behalf to satisfy fuel
farm cash funding requirements within 12 months and is therefore
classified as a current asset.
Credit risk management
Customer credit risk is managed by each business unit subject to
the Group's established policy, procedures and controls relating to
customer credit risk management. New customers are subject to
formal credit checks. Credit terms for new customers cannot exceed
30 days without prior approval. New contracts and renewals with
existing customers are subject to credit worthiness checks.
Existing or previous trading experiences are taken into account
before making a recommendation on terms. Receivables 12 months
overdue are provided in full unless there is clear evidence of
collectability. Bad debts written off require prior approval.
An impairment analysis is performed at each reporting date using
a provision matrix to measure expected credit losses. Days past due
is a key indicator of rates. The Group evaluates the concentration
of risk with respect to trade receivables and contract assets as
low due to its wide customer base. There is minimum risk relating
to consortia related receivables due to funding received in advance
for fuel farm operations.
The credit risk exposure on the Group's trade receivables and
accrued income is set out below.
Trade receivables
-------------------------------------------
Accrued Current 31-60 61-90 Over
income days days 90 days Total
2020 GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- -------- -------- ------ ------ --------- ------
Estimated credit loss rate - 0.6% 8.3% 28% 61%
Gross carrying amount 23.1 69.9 21.8 6.4 15.0 113.1
Expected credit loss - 0.4 1.8 1.8 9.1 13.1
---------------------------- -------- -------- ------ ------ --------- ------
Trade receivables
-------------------------------------------
Accrued Current 31-60 61-90 Over
income days days 90 days Total
2019 GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- -------- -------- ------ ------ --------- ------
Estimated credit loss rate - 0.2% 0.4% 4.7% 36%
Gross carrying amount 27.3 108.4 24.5 4,3 5.6 142.8
Expected credit loss - 0.2 0.1 0.2 2.0 2.5
---------------------------- -------- -------- ------ ------ --------- ------
Allowance for expected credit loss
2020 2019
GBPm GBPm
---------------------- ------ ------
At beginning of year 2.5 3.9
Amounts provided 11.4 0.6
Amounts released (0.2) (1.7)
Amounts utilised (0.7) (0.2)
Currency translation 0.1 (0.1)
----------------------- ------ ------
At end of year 13.1 2.5
----------------------- ------ ------
9. Financial Instruments
Derivative financial instruments
Recognised in the Balance Sheet
2020 2019
GBPm GBPm
----------------------- ------ ------
Current asset 0.2 0.8
Current liability (0.8) (0.2)
Non-current liability (2.4) (0.2)
----------------------- ------ ------
Net fair value (3.0) 0.4
----------------------- ------ ------
Adjusted to fair value through the Statement of Other
Comprehensive Income
2020 2019
GBPm GBPm
----------------------------------------- ------ ------
Cash flow hedges:
Interest rate swaps (2.4) (0.2)
Foreign currency net investment hedges:
Foreign exchange forward contracts (0.6) 0.6
----------------------------------------- ------ ------
Net fair value (3.0) 0.4
----------------------------------------- ------ ------
The Group is exposed to certain risks relating to its ongoing
business operations. The primary risks managed using derivative
instruments are foreign currency risk and interest rate risk. 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.
The Group uses a hierarchy for determining and disclosing the
fair value of financial instruments by valuation technique as set
out below.
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 that are not based on observable market
data.
During the year, all derivative financial instruments were
measured using Level 2 fair value measurements (2019: all Level 2).
For financial instruments that are recognised at fair value on a
recurring basis, the Group determines whether transfers have
occurred between levels in the hierarchy by re-assessing
categorisation (based on the lowest level input that is significant
to the fair value measurement as a whole) at the end of each
reporting period.
Cash flow hedges
2020 2019
------------ ------------
Liabilities Liabilities
GBPm GBPm
------------------------------------------- ------------ ------------
Fair value of cash flow hedges - interest
rate swaps (2.4) (0.2)
(2.4) (0.2)
------------------------------------------- ------------ ------------
Current value - -
Non-current value (2.4) (0.2)
--------------------------------------------- ------------ ------------
(2.4) (0.2)
------------------------------------------- ------------ ------------
Foreign currency net investment hedges
2020 2019
--------------------- ---------------------
Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm
------------------------------------ ------- ------------ ------- ------------
Fair value of foreign currency net
investment hedges 0.2 (0.8) 0.8 (0.2)
Current value 0.2 (0.8) 0.8 (0.2)
------------------------------------ ------- ------------ ------- ------------
Other financial instruments
Contingent consideration
The liabilities for contingent consideration and other
acquisition related amounts are Level 3 derivative financial
instruments. The fair value of contingent acquisition related
amounts is set out below.
2020 2019
GBPm GBPm
-------------------------- ----- -----
PlaneBiz 2015 Ltd 1.7 1.6
GTO Global Logistics Inc 0.2 0.2
--------------------------- ----- -----
Interest-bearing loans and borrowings
2020 2019
Maturity GBPm GBPm
--------------------------- ---------------- ------ ------
Bank overdrafts On demand 87.3 18.6
Non-amortising sterling
bank loans January 2025 125.0 109.0
Amortising US dollar term
loan January 2025 175.8 177.9
US government loan January 2030 26.2 -
Spanish government backed
loans June 2025 3.6 -
French government backed
loans July 2021 1.3 -
Lease liabilities Various 141.4 175.5
Preference shares Non-redeemable 1.4 1.4
--------------------------- ---------------- ------ ------
562.0 482.4
-------------------------------------------- ------ ------
Current value 136.2 91.6
Non-current value 425.8 390.8
--------------------------------------------- ------ ------
562.0 482.4
-------------------------------------------- ------ ------
The Company has issued 1,394,587 cumulative preference shares of
GBP1 each. These shares are not redeemable and pay an interest
coupon of 9% semi-annually.
Refinancing
In January 2020 the Group completed the refinance of its bank
facilities maturing in June 2021, replacing them with a $235m US
dollar denominated amortising term loan and a GBP145m revolving
credit facility both due to mature in January 2025. Due to the
impact of Covid-19 on the Group, a new covenant package was agreed
with the Group's lending syndicate to ensure that these facilities
remain in place. This agreement secures additional flexibility to
support the Group through to June 2022. Beyond this date the Group
will revert to the original covenants for the remainder of the
facilities' term.
The key terms of the new covenant package are: the net leverage
covenant is replaced with a minimum EBITDA covenant tested on a
quarterly basis; a new minimum liquidity covenant requiring the
Group to keep a minimum of GBP45m liquidity; a new interest margin
of 4.0% while the Group is above 3.5:1 net debt to EBITDA, as
measured and on a pre-IFRS 16 basis; and interest cover covenant is
suspended. The new covenant package will remain in place until the
earlier of June 2022 or Group leverage, as measured and on a
pre-IFRS 16 basis, being below 3.0:1 for two consecutive
quarters.
As set out in Note 3, a fair value adjustment of GBP3.9m was
recognised as an exceptional charge and increased debt relating to
increased interest margin agreed under the revised facilities. This
increased debt will be amortised over the remaining term of the
facility.
Government grant and loan financing
Between June and September 2020 the Group received US$118.4m of
federal funding in the US under the Coronavirus Aid, Relief, and
Economic Security (CARES) Act. This comprised US$82.8m of grant
funding to support the payroll of the US business and US$35.6m in
the form of a loan note. The loan note is a ten year non-amortising
term loan that attracts 1.0% cash and 3.0% non-cash interest during
the first five years. After the fifth year the interest rates
increase annually by 1.0% each year, capped at 8.0%. There are no
early repayment penalties relating to this loan. The loan note is
included within proceeds from borrowings in the Statement of Cash
Flows. The Group has complied with the grant agreement and
applicable US law in the period. The Group has also complied with
the requirements of the separate loan note during the period.
On 3 June 2020 the Group also received support in Spain where
the Group received a GBP3.6m bank loan that is backed by an 80%
guarantee from the Spanish government. This five year term loan
amortises monthly over four years from July 2021 and attracts a
margin of 2.5% above EURIBOR, with a minimum rate payable of
2.5%.
On 15 July 2020 the Group also received support in France where
the Group received a GBP1.3m bank loan, guaranteed by the French
government. This loan attracts a margin of 0.25% above EURIBOR for
the first year. After the first year the loan can be repaid
immediately or over a period from one to five years. The interest
rate for the repayment period is EURIBOR + 1% for one to two years'
duration and EURIBOR +2% for the three to five year period.
Net borrowings
2020 2019
GBPm GBPm
--------------------------------------- -------- -------
Interest-bearing loans and borrowings 562.0 482.4
Derivative financial instruments 3.0 (0.4)
----------------------------------------- -------- -------
Total borrowings 565.0 482.0
Less: cash at bank, cash in hand
and short-term deposits (209.1) (90.5)
----------------------------------------- -------- -------
355.9 391.5
--------------------------------------- -------- -------
The book and fair values of net borrowings is provided
below.
2020 2019
------------------------ ------------------------
Book value Fair value Book value Fair value
GBPm GBPm GBPm GBPm
-------------------------------------- ----------- ----------- ----------- -----------
Short-term bank borrowings 8.7 8.7 16.2 16.2
Medium-term bank borrowings 293.1 293.1 270.7 270.7
Long-term borrowings 31.5 31.5 1.4 1.4
Short-term lease liabilities 41.0 41.0 56.8 56.8
Long-term lease liabilities 100.4 100.4 118.7 118.7
Derivative financial instruments 3.0 3.0 (0.4) (0.4)
Bank overdrafts 87.3 87.3 18.6 18.6
-------------------------------------- ----------- ----------- ----------- -----------
Total financial liabilities 565.0 565.0 482.0 482.0
Less: cash at bank, cash in hand and
short-term deposits (209.1) (209.1) (90.5) (90.5)
-------------------------------------- ----------- ----------- ----------- -----------
Net borrowings 355.9 355.9 391.5 391.5
-------------------------------------- ----------- ----------- ----------- -----------
At 31 December 2020 undrawn committed facilities of GBP20.0m
expired in more than five years (2019: GBP41.0m between two and
five years).
10. Cash Generated from Operations
2020 2019
GBPm GBPm
------------------------------------------------------------ -------- -------
(Loss)/profit before tax(i) (120.5) 19.0
Net interest charge 24.3 22.3
Share of post-tax results of joint ventures and associates (0.8) (6.0)
Depreciation 86.4 84.7
Amortisation of intangible assets 8.7 8.2
Share-based payments expense 0.7 0.8
Cash spend on onerous leases (2.9) (0.9)
Loss/(gain) on sale of property, plant and equipment 0.1 (1.7)
Pension charge 1.3 1.0
Pension contributions in cash (3.7) (12.1)
Continuing operations exceptional items 70.2 4.7
Discontinued operations exceptional items - (1.7)
Cash spend on exceptional items(ii) (27.2) (11.5)
Government grant funding received 23.9 -
Decrease/(increase) in working capital 53.2 (2.7)
113.7 104.1
------------------------------------------------------------ -------- -------
Notes:
(i) Prior year includes both continuing and discontinued
operations.
(ii) Current year spend relates mainly to redundancy and
workforce restructuring costs as set out in Note 3.
11. Changes in Net Borrowings
Lease liabilities
recognised
during
31 December the year Fair value Currency 31 December
2019 less terminations Cash flows movements translation 2020
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ----------- ------------------ ---------- ---------- ------------ -----------
Cash at bank and
in hand 90.5 - 123.3 - (4.7) 209.1
Bank overdrafts (18.6) - (67.4) - (1.3) (87.3)
----------------------- ----------- ------------------ ---------- ---------- ------------ -----------
Net cash and cash
equivalents 71.9 - 55.9 - (6.0) 121.8
Bank loans due
within one year (16.2) - 7.5 - - (8.7)
Lease liability
due within one
year (56.8) (1.1) 17.4 - (0.5) (41.0)
Preference shares (1.4) - - - - (1.4)
Government loans
due after one
year - - (26.2) - - (26.2)
Debt due after
one year (270.7) - (27.9) (3.9) 5.5 (297.0)
Lease liability
due after one
year (118.7) (23.1) 42.5 - (1.1) (100.4)
Net derivative
assets/(liabilities) 0.4 - (0.1) (3.3) - (3.0)
----------------------- ----------- ------------------ ---------- ---------- ------------ -----------
Net borrowings (391.5) (24.2) 69.1 (7.2) (2.1) (355.9)
----------------------- ----------- ------------------ ---------- ---------- ------------ -----------
As set out in the Statement of Cash Flows, proceeds from
borrowings were GBP46.6m (2019: GBP50.0m) and repayments of
borrowings were GBPNil (2019: GBP10.9m). The principal element of
lease payments were GBP59.9m (2019: GBP57.1m).
Currency translation movements result from the Group's policy of
hedging overseas net assets, which are denominated mainly in US
dollars, euros and Australian dollars. The translation effect on
net debt is offset by the translation effect on net assets, which
resulted in an overall net exchange gain of GBP1.1m (2019: loss of
GBP7.5m). The net loss is recognised in other comprehensive
income.
12. Leasing
The Group leases various offices, warehouses, ground handling
equipment and vehicles as a lessee. Lease contracts are typically
entered into for fixed periods of one to ten years but may have
break options or extension options as set out below. The Group's
obligations under its leases are secured by the lessor's title to
the leased assets. The Group also has certain leases of property
and equipment with lease terms of 12 months or less and leases of
office equipment with low value. The Group applies the short-term
lease and low value assets recognition exemptions for these
leases.
The carrying amounts of right of use assets recognised and the
movements during the year are set out in Note 7. The carrying
amounts of lease liabilities and the movements during the year are
set out in Note 9 and Note 11. The maturity profile of the Group's
lease liabilities based on contractual undiscounted payments are
set out in Note 9 along with the currency and interest rate
profile. Cash outflows relating to both capitalised and
non-capitalised leases were GBP95.2m (2019: GBP102.5m).
The following are the lease related amounts recognised in the
Income Statement.
2020 2019
Note GBPm GBPm
-------------------------------------------- ----- ----- -----
Depreciation charge of right of use assets 7 63.1 62.0
Interest charge on lease liabilities 7.3 7.6
Expense relating to short-term leases 14.8 22.8
-------------------------------------------- ----- ----- -----
85.2 92.4
-------------------------------------------- ----- ----- -----
The Group has lease commitments relating to non-lease components
of contracts as well as short-term leases where the exemption from
capitalisation has been utilised. Future aggregate minimum
commitments under non-capitalised leases are set out below.
2020 2019
GBPm GBPm
------------------------------ ----- -----
Within one year 11.2 18.7
Between one and two years 8.4 14.7
Between two and three years 3.6 14.6
Between three and four years 0.5 4.2
Between four and five years 0.1 0.2
After five years - 0.1
23.8 52.5
------------------------------ ----- -----
Extension and termination options are included in a number of
leases across the Group. These terms are used to maximise
operational flexibility in terms of managing contracts. In
determining the lease term applicable for accounting purposes,
Management considers facts and circumstances that create economic
incentive to exercise an extension option or not to exercise a
termination option. Extension options are only included in the
lease term if the lease is reasonably certain to be extended or not
terminated. The assessment is reviewed if a significant event or
significant change in circumstances occurs which affects this
assessment and that is within the control of the lessee.
In addition, the Group has entered into one operating lease as
lessor consisting of one floor of an office building. Rental income
recognised by the Group during the year was GBP0.2m (2019:
GBP0.2m). Future minimum rentals receivable under the
non-cancellable operating lease as at 31 December 2020 are GBP0.3m
(2019: GBP0.3m) within one year and GBP0.5m between two and five
years (2019: GBP0.8m). This subleased asset is disclosed separately
in Note 7.
13. Provisions
Legal
and employee Property
Insurance related and equipment Other Group
GBPm GBPm GBPm GBPm GBPm
--------------------------- ---------- -------------- --------------- ------ -------
At 31 December 2019 32.7 20.7 5.2 2.8 61.4
Provided during year 14.5 6.7 2.2 4.6 28.0
Utilised during year (2.3) (17.8) (2.9) (3.0) (26.0)
Reclassifications - 0.1 (0.2) - (0.1)
Currency translation gain (1.0) - - - (1.0)
--------------------------- ---------- -------------- --------------- ------ -------
At 31 December 2020 43.9 9.7 4.3 4.4 62.3
--------------------------- ---------- -------------- --------------- ------ -------
Current 34.2 4.5 2.6 3.7 45.0
Non-current 9.7 5.2 1.7 0.7 17.3
--------------------------- ---------- -------------- --------------- ------ -------
43.9 9.7 4.3 4.4 62.3
--------------------------- ---------- -------------- --------------- ------ -------
Legal
and employee Property
Insurance related and equipment Other Group
GBPm GBPm GBPm GBPm GBPm
------------------------------- ---------- -------------- --------------- ------ -------
At 31 December 2018 27.0 26.8 4.9 1.2 59.9
Impact of adoption of IFRS
16 - - (3.1) - (3.1)
Adjusted balance at 1 January
2019 27.0 26.8 1.8 1.2 56.8
------------------------------- ---------- -------------- --------------- ------ -------
Provided/(released) during
year 12.9 4.5 3.7 (0.5) 20.6
Utilised during year (7.2) (7.2) (0.9) (0.4) (15.7)
Reclassifications - (3.1) 0.2 - (2.9)
Subsidiaries acquired - - 0.6 2.6 3.2
Currency translation gain - (0.3) (0.2) (0.1) (0.6)
------------------------------- ---------- -------------- --------------- ------ -------
At 31 December 2019 32.7 20.7 5.2 2.8 61.4
------------------------------- ---------- -------------- --------------- ------ -------
Current 32.7 16.8 3.3 2.4 55.2
Non-current - 3.9 1.9 0.4 6.2
------------------------------- ---------- -------------- --------------- ------ -------
32.7 20.7 5.2 2.8 61.4
------------------------------- ---------- -------------- --------------- ------ -------
Insurance provisions relate to anticipated settlement
obligations arising from past events. Reimbursement receivable
assets of GBP19.2m (2019: GBP34.4m) relating to insurance and legal
provisions are included in other receivables in Note 8. The timing
and amount of these liabilities is uncertain and is based on
estimates using available information on the claims and historical
experience of similar claims. As set out in Note 3 an exceptional
cost was recognised as a provision during the year and remains
outstanding at year end.
Legal and employee related provisions include amounts in respect
of the cost of settling workers' compensation claims in the USA.
The timing and amount of these liabilities is uncertain and is
based on estimates using available information on the claims and
historical experience of similar claims. Property, plant and
equipment provisions include equipment refurbishments and
dilapidation obligations on leasehold properties that the Group has
exited or anticipate exiting within the next two years, and
non-rent costs associated with two empty retail premises on long
leaseholds.
Other provisions mainly comprise of amounts recognised in
relation to vendor settlement negotiations.
14. Retirement Benefit Obligation
Defined benefit scheme
The principal Group-funded defined benefit pension scheme is the
Menzies Pension Fund (the Fund) in the UK. The Fund closed to
future accrual in March 2017.
The components of the actuarial (loss)/gain in the consolidated
Statement of Comprehensive Income are:
2020 2019
GBPm GBPm
-------------------------------------- ------- -------
Returns on assets excluding interest
income 32.1 36.9
Changes in demographic assumptions 4.1 2.7
Changes in financial assumptions (39.1) (39.1)
Experience (0.9) 1.5
---------------------------------------- ------- -------
Actuarial (loss)/gain (3.8) 2.0
---------------------------------------- ------- -------
Changes in Fund assets and defined benefit obligation
2020 2019
GBPm GBPm
-------------------------------------------- ------- -------
Fair value of assets at start of year 342.8 305.0
Interest income 6.6 8.5
Returns on assets excluding interest
income 32.1 36.9
Company contributions 3.7 12.1
Benefits and expenses paid (17.5) (19.7)
---------------------------------------------- ------- -------
Fair value of assets at end of year 367.7 342.8
---------------------------------------------- ------- -------
Return on scheme assets including interest
income 38.7 45.4
---------------------------------------------- ------- -------
2020 2019
GBPm GBPm
------------------------------------ ------- -------
Defined benefit obligation
at start of year 348.1 323.0
Administrative costs 1.3 1.0
Interest cost 6.6 8.9
Benefits and expenses paid (17.5) (19.7)
Changes in demographic assumptions 0.9 (2.7)
Changes in financial assumptions 39.1 39.1
Experience (4.1) (1.5)
--------------------------------------- ------- -------
Defined benefit obligation
at end of year 374.4 348.1
--------------------------------------- ------- -------
The fair value of Fund assets and liabilities is set out
below.
2020 2019
---------------------------- -------------------------------
Unquoted
Quoted (i) Total Quoted Unquoted(i) Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ------- --------- -------- ------- ------------ --------
Equities 62.7 - 62.7 89.2 - 89.2
Bonds 110.9 - 110.9 100.3 - 100.3
Investment funds 17.4 28.3 45.7 8.0 40.4 48.4
Liability driven investment
funds - 84.0 84.0 - 57.4 57.4
Property - 23.4 23.4 - 24.1 24.1
Annuity contracts(ii) - 5.1 5.1 - 5.0 5.0
Cash 27.5 - 27.5 18.4 - 18.4
Other 0.6 7.8 8.4 - - -
Assets 219.1 148.6 367.7 215.9 126.9 342.8
Defined benefit obligation (374.4) (348.1)
----------------------------- ------- --------- -------- ------- ------------ --------
Recognised in Balance
Sheet (6.7) (5.3)
Related deferred tax
asset - 0.9
----------------------------- ------- --------- -------- ------- ------------ --------
Net retirement obligation (6.7) (4.4)
----------------------------- ------- --------- -------- ------- ------------ --------
Notes:
(i) The valuations of unquoted assets have been determined by
reference to appropriate manager valuation reports.
(ii) The Fund holds annuity contracts in respect of a number of
members that provide cash flows to the Fund that match the benefit
payments to these members.
Outlook
The triennial valuation process in which the Company and Trustee
agree the long-term funding strategy was concluded for 31 March
2018 and a schedule of contributions agreed and dated 29 November
2018. The schedule of contributions sets out the additional
contributions required to meet the funding shortfall between the
value of the Fund's assets and liabilities. The additional
contributions have been agreed as monthly contributions totalling
GBP9.4m per annum rising with the higher of the UK retail price
index or the annual percentage change in dividends beginning in
December 2018 and continuing to the year ended 31 March 2026. The
Company and the Trustee have agreed that reasonable adjustment be
made for the impact of any equity raising or change in equity,
recognising the actual percentage increase in dividend per
share.
The value of the net liabilities of the fund at 31 March 2018 as
measured on the Trustee's technical provisions basis was
approximately GBP73m and the funding level, being the ratio of
assets to liabilities measured on the technical provisions basis
was 80%. The Company and the Trustee have agreed that the schedule
of contributions may be revised should the funding level reach 98%
following any quarter end before 31 March 2026. The purpose of any
revision would be to ensure that contributions are sufficient to
reach 100% by 31 March 2026 without the possibility of overfunding
at that time. The next triennial valuation of the Fund will be
effective as at 31 March 2021.
The Company expects to contribute around GBP8.4m to the Fund
during the year to 31 December 2021.
15. Acquisitions
There were no acquisitions during the year. Aggregated details
relating to the prior year are set out below and detailed more
fully in the 2019 Annual Report and Accounts.
2019
GBPm
------------------------------------- ------
Purchase consideration:
Cash paid 21.0
Trading and working capital funding
to date of completion 6.1
Working capital adjustment 0.2
Fair value of existing equity
interest in associate 0.8
Deferred consideration 0.2
------------------------------------- ------
28.3
Less: non-controlling interest
acquired at fair value (2.2)
Less: fair value of net assets
acquired 10.0
------------------------------------- ------
Goodwill 20.5
------------------------------------- ------
The fair values of assets and liabilities arising from the
acquisitions were:
2019
GBPm
----------------------------------- ------
Intangible assets - contracts
and customer relationships 6.2
Other investments 0.2
Deferred tax assets 0.1
Property, plant and equipment 7.0
Inventory 1.6
Trade and other receivables 7.7
Cash 0.4
Current borrowings (0.9)
Trade and other payables (5.9)
Provisions (3.2)
Non-current borrowings (1.8)
Non-current payables (0.1)
Deferred tax liability (1.3)
----------------------------------- ------
Net assets acquired at fair value 10.0
----------------------------------- ------
There have been no changes to the provisional fair values of the
net assets acquired in the prior year.
16. Related Party Transactions
During the year the Group transacted with related parties in the
normal course of business and on an arm's length basis. These sales
to and from related parties are made at normal market prices and
details are set out below.
Amounts Amounts
owed by owed by
related related
Group Sales to party at Sales to party at
share related 31 December related 31 December
holding party 2020 2020 party 2019 2019
Related party % GBPm GBPm GBPm GBPm
-------------------------- --------- ------------ ------------- ------------ -------------
Menzies Macau Airport
Services Ltd 29 0.5 0.1 0.5 0.1
Menzies Aviation Bobba
(Bangalore) Private Ltd 49 0.1 0.1 0.1 0.1
-------------------------- --------- ------------ ------------- ------------ -------------
Remuneration of key management personnel, who comprise Directors
of the Company and those having authority and responsibility for
planning, directing and controlling activities of the business as
disclosed in the segmental analysis, is set out below.
2020 2019
GBPm GBPm
------------------------------------- ----- -----
Short term employee benefits 2.7 2.6
Post-employment pension and medical
benefits 0.3 0.4
Termination benefits - 0.6
Share-based payments 0.7 0.8
--------------------------------------- ----- -----
3.7 4.4
------------------------------------- ----- -----
17. Discontinued Operations
In 2018 the Group disposed of Menzies Distribution Ltd and its
subsidiaries and in 2019 an exceptional gain of GBP1.7m was
recognised.
18. Events after the Reporting Period
On 26 January 2021 the Group acquired a 51% share of Royal
Airport Services for a cash consideration of GBP7.3m. Royal Airport
Services provide aviation services including ground and cargo
services and airline ticketing in Pakistan. The business handles
both domestic and international airlines at eight airports. The
acquisition accounting is not yet complete as control has recently
been obtained. No further disclosures are provided on the assets
and liabilities acquired.
Since the year end, the Group has received US$49.3m of funding
comprising US$35.9m grant funding and a US$13.4m loan note under
the Coronavirus Aid, Relief, and Economic Security Act in the
USA.
19. Annual Report and Accounts
The figures used in this statement, which was approved by the
Directors on 9 March 2021, are not the Group's statutory accounts
within the meaning of Section 434 of the Companies Act 2006 for the
year, but are taken from those accounts. The Auditor's report on
the statutory accounts was unqualified and did not contain a
statement under section 428 (4(f)) of the Companies Act 2006. In
the Auditor's report for the year ended 31 December 2020, the
auditors drew attention to a material uncertainty related to going
concern arising as a result of the impact that international travel
restrictions could have on the delayed recovery of the business
that may risk a breach of banking leverage and interest cover
covenants at 30 June 2022 and may cast significant doubt upon the
Company's ability to continue as a going concern.
The Annual Report and Accounts will be available on 8 April 2021
and the Annual General Meeting will be held at held at the
registered office of the Company, 2 Lochside Avenue, Edinburgh
Park, Edinburgh, EH12 9DJ on Friday 14 May 2021 at 2:00 p.m.
Statutory accounts for the year ended 31 December 2019 have been
delivered to the Registrar of Companies and those for the year to
31 December 2020 will be delivered following the Company's Annual
General Meeting.
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