JOHN MENZIES PLC Registered office: 2 Lochside Avenue Edinburgh Park Edinburgh EH12 9DJ, UK Tel: +44 (0) 131 225 8555 Fax: +44 (0) 131 220 1491 Email: [email protected] Web: www.johnmenziesplc.com ANNUAL REPORT AND ACCOUNTS 2016 ACCOUNTS AND REPORT ANNUAL PLC MENZIES JOHN

Registered in Scotland with company number SC34970 ANNUAL REPORT AND ACCOUNTS 2016 STRATEGIC REPORT FINANCIAL STATEMENTS 01 Highlights 85 Independent Auditor’s Report 02 Our Business at a Glance 92 Group Income Statement 04 Chairman’s Statement 93 Group Statement of Comprehensive Income 06 Financial Review 94 Group and Company Balance Sheets 10 Business Performance Review: 95 Group and Company Statements Menzies Aviation of Changes in Equity 18 Business Performance Review: 96 Group and Company Statements Menzies Distribution of Cash Flows 22 Market Overview 97 Notes to the Accounts 24 Our Business Model and Strategy 137 Five Year Summary 26 Our Strategy at a Glance 138 List of all Subsidiary, Joint Venture and 28 Key Performance Indicators Associate Undertakings 30 Risk Management 34 Resources, Relationships and Responsibilities SHAREHOLDER INFORMATION 147 Notice of Annual General Meeting GOVERNANCE REPORTS 154 General Information 42 Chairman’s Introduction 44 Board of Directors 46 Corporate Governance Statement 51 Nomination Committee Report 53 Audit Committee Report 58 Remuneration Committee Report 79 Directors’ Report 84 Directors’ Responsibilities

Design, consultancy and production www.luminous.com WHO WE ARE John Menzies plc is a time-critical logistics and support specialist. In 36 countries around the world our employees provide market-leading service to meet our customers’ needs. Wherever you find a Menzies

logo, you’ll find people delivering around the clock, STRATEGIC REPORT against the clock.

WHAT WE DO Our Operating Divisions provide services to the international airline sector and, within the UK, to the print media, travel and parcel markets. In every sphere of our operations, we trade in delivery: whether we are bringing parcels to retail, passengers to aircraft or cargo from one side of the world to the other, our core skills of scheduling, storage and transport

management are the driving force behind our service offer. REPORTS GOVERNANCE

HOW WE MANAGE The Group is managed on a Divisional and a geographical basis. Our Distribution Division in the UK and Ireland operates as one segment. Our Aviation Division is managed primarily in three regional segments, with the Cargo Forwarding segment managed globally.

OUR GROWTH We are exposed to growth markets in both Divisions MARKETS and are well-placed both to exploit the growth in air travel and to increase our share of the volume in the

UK logistics market. FINANCIAL STATEMENTS

OUR We put our customers at the heart of everything we PHILOSOPHY do, focusing on doing our work the right way, every day, to strengthen our partnerships with them.

TURNOVER* DIVIDEND PER SHARE

£2,076.7m 18.5p SHAREHOLDER INFORMATION (2015: £1,993.3m) (2015: 16.8p)

UNDERLYING PROFIT O PER ATIN G BEFORE TAX* CASH FLOW* £49.7m £75.0m (2015: £38.2m) (2015: £64.8m)

PROFIT BEFORE TAX £19.8m (2015: £18.2m)

*As defined in Note 1 to the Financial Statements.

1

OUR BUSINESS AMERICAS EMEA REST OF WORLD Americas AT A GLANCE EMEA Rest of World STRATEGIC REPORT

JOHN MENZIES AROUND THE WORLD GOVERNANCE REPORTS GOVERNANCE

With the acquisition of ASIG completing in Within our geographical EMPLOY EES COUNTRIES IN WHICH February 2017, our global network now spans areas, we deliver four (2017) WE OPERATE (2017) 36 countries, including new operations in Panama, key service-lines to the Bahamas and Thailand. An expanded team our customers as 35,000 36 of 35,000 Menzies employees strives to deliver illustrated below. DELIVERY UNITS CARGO TONNES AIRCRAFT TURNS excellent experiences for our customers across (2016) HANDLED (2016) (2016) a range of logistics and airport services disciplines at 245 locations across the world. 100m 1.6m 1.2m

G R O U N D Dedicated to providing LOGISTICS Providing final mile delivery C A R G O At 34 stations around the FUELLING Operating under the ASIG FINANCIAL STATEMENTS HANDLING market-leading service at for approximately 100 HANDLING world, this business works to brand, our business supports 200 airports across the million delivery units each move clients’ perishable and airline customers by offering globe, this business supports year and serving customers high-value goods on and off ‘into-plane fuelling’ services millions of passengers in the print media, retail, aircraft in a tightly-timed at 73 locations. each year from check-in travel and parcel logistics fashion. The business This business also manages to take-off, on behalf of sectors, this business also offers access to 59 fuel farms. our airline customers. operates one of the largest warehousing and trucking overnight logistics networks facilities which help convey in the United Kingdom. consignments to the next step in the supply chain.

EMPLOYEES EMPLOYEES 3,400 4,000 SHAREHOLDER INFORMATION

LOCATIONS LOCATIONS 36 77

Pawel Bartoszek, Baggage Handler

EMPLOYEES EMPLOYEES 24,500 3,100

LOCATIONS LOCATIONS 200 34

2 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 3 CHAIRMAN’S STATEMENT

I am pleased to report good progress Group Company Secretary, to join the across the Group as we continue to Board as Corporate Affairs Director in AN INTEGRATED APPROACH build on our strategic objectives in November. Your Board and I are both Divisions. We have announced confident that we now have the a strong set of results and believe we correct leadership team in place to Below we summarise the key Key Performance Indicators

are back on track after a period of drive the Group forward. STRATEGIC REPORT elements that lead to the creation We monitor a shortlist of critical underperformance. Menzies Aviation A STRONG YEAR and protection of sustainable value. metrics to ensure our performance completed the largest acquisition in In addition to the Board appointments, Our focused and integrated achieves the required standards. the Group’s history with the US$202m we also recruited Greg Michael to lead approach has already delivered acquisition of ASIG in February 2017 our Distribution Division. Greg has Read more on page 28 tangible returns for our stakeholders. and is extremely well-placed in significant experience of the UK growing markets, whilst Menzies logistics market and he will bring his Our Vision Resources, Relationships Distribution continued to focus on own expertise and drive to the Division We are dedicated to beating and Responsibilities delivering new volume through our as we continue to create new revenue the clock for the benefit of our We recognise the impact our existing markets. We now have a new streams away from print media. customers: delivering services activities have on the environment, Senior Management team in place all which are tailored to their needs, the communities in which we operate of whom, together with your Board, are In May of last year, Iain Napier intimated performed by experts and fitted and the wider society around us – working hard to unlock the significant his intention to step down and he seamlessly into the time-critical and operate accordingly. We are working hard to unlock the potential REPORTS GOVERNANCE potential that exists within the Group. retired from the Board at our Annual window for their businesses. Read more on page 34 within the Group and your Board and I look General Meeting. Iain led the Board for forward to the future with great confidence. GROUP STRUCTURE seven years and I would like to thank Our Business Model Risk Management As I outlined in August of last year, him for his efforts. Dermot Jenkinson We employ our people and Risk and uncertainty have the we are undertaking a review of the then assumed the role of interim infrastructure, in line with a suite of potential to hinder our progress Group structure to decide whether the Chairman and ran the process that led key controls, to complete a pipeline toward the Group’s strategic current situation with two Operating to my appointment in June. To complete of work secured by our contracts objectives. We focus on mitigating Divisions that operate in distinctly the balance of Non-Executives and and thereby generate profit. those risks, to provide reasonable different markets is the best way to to implement the findings of our prior Read more on page 24 – although not absolute – create shareholder value. To help with year Board evaluation, Paul Baines assurance against material risks. the process we appointed Rothschild was appointed as a Non-Executive Read more on page 30 and they are working closely with Director in June. Paul has extensive Management as we review our options. City experience and brings a new and Our Strategy FINANCIAL STATEMENTS In addition, at our request, the Trustee welcome dynamic to the Board. Dr Dermot F. Smurfit of the Group’s defined benefit pension CHAIRMAN scheme, in consultation with the GOVERNANCE Company, is reviewing the structure As I will discuss later in this document, Customer Emerging Optimised Diversified Growth of the scheme. The Trustee is being your Board remains committed to ethos opportunities investment offer agenda advised by Hymans Robertson ensuring that we continue to operate and Grant Thornton and we have within the robust corporate governance Read more on page 26 appointed Lincoln Pensions and PwC framework which is in place across to advise us in this respect. This work our networks and which underpins our continues as we evaluate the options culture and values. Maintaining high Your Board recognises the need to HR developments and also our efforts that are open to us and I remain governance standards is a priority of retain and develop our employee base. to reduce staff turnover. The Terms of confident that I will be able to update your Board and we believe it key to In this regard we have strengthened Reference for the Committee can be SHAREHOLDER INFORMATION shareholders on the outcome of both the successful growth of the our Human Resources (“HR”) function found on the Group website. this review at the time of our Interim Group and the generation of sustainable across the network with an enlarged Results in August. shareholder value. team and a significant investment There is a great deal of work ahead for into HR systems, including a us but it is an incredibly exciting time BOARD CHANGES EMPLOYEES pre-employment on-boarding system to be part of our business and your During the year we have seen Employees are at the heart of everything to help us recruit and retain the right Board and I look forward to the future significant change within the that we do. I would personally like to calibre of employees. with great confidence. Executive team. Forsyth Black thank all of our 27,000 staff for their became President & Managing efforts in 2016. I am also particularly Staff turnover is one of the major Dr Dermot F. Smurfit Director at Menzies Aviation, after pleased to welcome 8,000 new challenges facing the Aviation services Chairman a successful spell leading our employees who join the Menzies industry, particularly in the USA, and 7 March 2017 Distribution Division, and Giles Wilson family following our acquisition we are attempting to directly address assumed the role of Chief Financial of ASIG. this issue. In this regard, I have Officer, following senior finance and constituted a Human Resources operational roles within the Aviation Committee of the Board to review all Division. To complete the Executive team I asked John Geddes, previously

4 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 5 FINANCIAL REVIEW

GROUP UNDERLYING OUTLOOK OPERATING PROFIT IN The Group has started the year well. CONSTANT CURRENCY The underlying Aviation business is continuing to trade positively with contract momentum continuing

+12 % and a strong pipeline of opportunities. STRATEGIC REPORT A TRANSFORMATIONAL We have completed the acquisition OPERATING CASH FLOW of ASIG and are very excited about YEAR UP 16% TO the opportunities ahead of us. Our integration plans are on track and we will look to take advantage of our £75.0m extended footprint and product offering that exists as we look to further strengthen the Aviation business. AVIATION TURNOVER

At Menzies Distribution the softer +16% magazine volumes experienced in (+7% IN CONSTANT Q4 2016 have continued. Our focus Both Divisions have delivered strong results in the year and we REPORTS GOVERNANCE CURRENCY) remains on cost-savings and finding are now well-placed for the next chapter of growth. Underlying new volume through retail logistics operating profit improved 12% in constant currency and where our national coverage provides operating cash flow 16%. us with previously unexploited opportunities and neutral consolidation in the parcel market where we will look Broomhall DaCosta and Bill Watson, to build scale during the year. Baggage Handlers

Overall the Board is confident with The Group’s turnover was £2,076.7m TAXATION AND the Group’s outlook for 2017 and will (2015: £1,993.3m). Underlying profit EARNINGS PER SHARE look to capitalise on opportunities before tax grew to £49.7m (2015: As a multinational business in both Divisions. £38.2m) following a return to growth the Group is liable for taxation in at our Aviation Division and favourable multiple jurisdictions around the FINANCIAL STATEMENTS INTRODUCTION GROUP PERFORMANCE REVIEW foreign exchange translation. world. Our underlying tax charge for Giles Wilson I am pleased to be reporting the Group performance in 2016 improved Underlying earnings per share rose the year was £15.9m (2015: £12.2m), CHIEF FINANCIAL OFFICER 2016 financial performance results with profit before tax ahead of the to 47.8p (2015 restated: 37.8p). Profit representing an effective underlying for John Menzies plc. It has been a prior year and underlying profit before before tax was £19.8m (2015: £18.2m). tax rate of 32% (2015: 32%). transformational year for the Group tax up 30%, 17% in constant currency, which has made for a very exciting as a result of the delivery against our FINANCE COSTS Underlying earnings per share were start to my new role as Chief Financial clear and focused strategic objectives The net underlying finance charge in 47.8p (2015 restated: 37.8p), directly Officer. Our diverse portfolio of for both Operating Divisions. Good the year was £5.5m (2015: £6.7m). The impacted by the increase in profits. companies and operations offers progress was made in Aviation where lower level of costs reflects reduced Basic earnings per share were 11.8p excellent opportunities to any individual prior year operational issues were levels of debt and pension interest. (2015 restated: 14.6p) additionally seeking a challenge in a dynamic, resolved and contract win momentum affected by non-recurring items. fast-paced environment and, in fact, returned. In Distribution the business EXCEPTIONAL AND OTHER ITEMS SHAREHOLDER INFORMATION prior to assuming my current position performed robustly, continuing to Included in exceptional items were I worked in our Aviation Division for expand in the UK parcel market and transaction-related costs of £8.8m five years, during which time I had within the retail logistics sector as we largely relating to the acquisition of the opportunity to be involved in the seek to add new volume to our network ASIG. Non-cash costs of £9.6m were establishment of our Dubai office. to replace the declines in print media. incurred during the year relating to the impairment of goodwill and other Our Finance function, supported by The acquisition of ASIG, which fixed assets in the Netherlands cargo a focused Group Finance team based announced in September 2016 business following loss of earnings as in our Edinburgh Head Office, spans and completed in February 2017, a result of lower freighter volumes in the world with dedicated finance is transformational for the Aviation Amsterdam flown by Martinair. professionals working in conjunction business and we are focussing our with our operational and commercial efforts on implementing our detailed teams in 36 countries. I am proud to integration programme to realise be part of the Menzies team, working the significant synergy benefits that alongside so many committed and exist, and then look to take advantage passionate individuals, and I look of the exciting opportunities that the forward to fully welcoming our ASIG combined platform gives us. colleagues into the Menzies family.

6 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 7 FINANCIAL REVIEW CONTINUED

GROUP CASH FLOW GOING CONCERN 2016 2015 In September 2016 we entered into a As detailed on pages 30 to 33 of this As a result, the Board confirms that £m £m new syndicated debt facility, comprising The Group’s business activities are set Annual Report and Accounts 2016, the it has a reasonable expectation that Underlying operating profit 55.2 44.9 a US$250m term loan and a £150m out on pages 2 and 3 of this Annual Board monitors and assesses the risks the Group will be able to continue Depreciation 22.3 21.0 rolling credit facility, which expires in Report and Accounts 2016 and the and uncertainties faced by the Group. in operation and meet its liabilities Dividends from associates and joint ventures 6.6 6.5 June 2021. The new facility was drawn principal risks impacting these This includes a consideration of the as they fall due over the period of

down to fund the acquisition of ASIG activities are set out on pages 32 and principal risks and material uncertainties assessment of three years. STRATEGIC REPORT Working capital (5.8) (2.2) on 1 February 2017 and repay our existing 33. The Group’s financial position and facing the Group, including those that Net pension movement 0.1 (0.3) facilities with the exception of £10.0m cash flows are set out on pages 94 would threaten its business model, DIVIDEND Non-cash items (3.4) (5.1) remaining on the RBS term loan. and 96 along with an analysis of its future performance or solvency. In line with the Group’s plan to follow Operating cash flow 75.0 64.8 borrowings in Note 23 on page 134. During 2016 this process included a progressive policy to increase Net capital expenditure (24.7) (20.3) We were very pleased by the take-up As regards going concern, the Directors a detailed strategic review of both dividends over time, the Board has Net interest paid (3.8) (5.1) of the new syndicated facility which have considered market and gearing Aviation and Distribution and a proposed a final dividend of 13.1p per Regular tax paid (10.3) (7.7) was oversubscribed. We have retained risks. Sensitivities to capital and detailed three year planning process. ordinary share which is payable on Non-recurring tax paid (5.1) – our previous banking group of liquidity risks are set out in Note 17 3 July 2017 to all shareholders on the Barclays, HSBC, KBC, Lloyds and RBS on pages 124 to 129 of this Annual For the purpose of assessing the Company’s Register of Members Free cash flow 31.1 31.7 as well as welcoming BNP Paribas, Report and Accounts 2016. Group’s viability, the Directors focused at 26 May 2017. The total paid and Equity and non-controlling interest SunTrust and Fifth Third into the their attention on the principal risks proposed dividend for the year is 18.5p dividends paid (10.6) (8.0) syndication group. As a result, the The Group updates trading forecasts that are critical to the Group’s success. per ordinary share (2015: 16.8p per Additional pension payment (10.9) (11.6) REPORTS GOVERNANCE Group’s banking covenants are in a covering a forward 12-month period on These are risks concerned with ordinary share), up 10% from last year. Net acquisitions (5.2) (16.0) strong position with headroom to a regular basis and cash flow forecasts changing consumer behaviour, Cash spend on exceptional items (14.2) (8.5) support future growth. show that the Group is capable of increasing employee costs, contract Giles Wilson Net proceeds from Rights Issue 72.9 – operating within its committed renewals, contract tendering, global Chief Financial Officer Total movement 63.1 (12.4) In February 2017 we entered into banking facilities and related financial acts of terrorism, security breaches 7 March 2017 Opening net debt (123.2) (110.9) interest rate swaps to fix 50% of the covenants for the foreseeable future. and adherence to standard operating Currency translation (10.4) 0.1 US$250m term loan facility for the procedures. Each risk and its impact duration of the loan. The Directors, who have reviewed the and mitigation is set out on pages 32 Closing net debt (70.5) (123.2) budgets, forecasts and sensitivities and 33 of this Annual Report and The majority of Menzies Aviation’s for the coming year, consider that Accounts 2016. DEFINED BENEFIT CASH FLOW AND INVESTMENT stations are located outside the UK the Group has adequate financial PENSION SCHEME Investments in the year included £5.2m and operate in currencies other than resources to enable it to continue Other than in the event of a catastrophic

As at 31 December 2016, the scheme for the acquisitions of Renaissance FINANCIAL STATEMENTS sterling. The Group attempts to in operational existence for the large aircraft incident over a populated showed a deficit of £71.0m (2015: Aviation Limited in Bermuda, Thistle minimise the volatility of the limited foreseeable future. Accordingly, area, none of the plausible events £43.4m), an increase of £27.6m largely Couriers Limited and Edinburgh Arts transactional foreign exchange risk the Directors believe that it is in isolation or in combination would reflecting a decrease in the discount and Entertainment Limited and the as far as possible by using foreign appropriate to continue to adopt prevent the Group from continuing to rate applied to the scheme liabilities. earn-out payment relating to the exchange forward contracts. the going concern basis for preparing operate and meet its liabilities as they Following the Trustee’s triennial Fore Partnership. Operating cash flow the financial statements. fall due over the period of assessment actuarial valuation at 31 March 2015, was £75.0m (2015: £64.8m). Working The translation of profits from of three years. In the case of such the Trustee and the Company have capital management remains a key overseas trading entities is not hedged VIABILITY STATEMENT a catastrophic aircraft incident, agreed a long-term funding plan focus for the business. Free cash and as a result the movement of In accordance with provision C.2.2 of the Group would seek to manage the that results in additional annual flow was £31.1m (2015: £31.7m). Net exchange rates directly affects the the UK Corporate Governance Code timeframe in which any liabilities arose contributions of £10.7m in the 2016/2017 capital expenditure totalled £24.7m Group’s reported results. In the year (September 2014), the Directors have in order to continue in operation. pension year rising with the higher of (2015: £20.3m). the Group benefited from favourable assessed the prospects of the Group inflation and the percentage change movements against the prior year over a period of three years. The SHAREHOLDER INFORMATION in annual shareholder dividends up to TREASURY particularly against the US dollar, the Directors believe this period to be 2025, the latter only when exceeding The Group continues to operate on a Australian dollar, the euro and other appropriate because the average length 2013’s level. strong financial footing. We benefit European currencies. of the Group’s customer contracts from a robust balance sheet built from is approximately three years and the We are at an advanced stage of talks strong operating cash flows across Group’s planning cycle covers a three with the Trustee with regard to the our Divisions. At the year end, net debt year period. structure of the Group’s defined was £70.5m (2015: £123.2m), mostly benefit pension scheme, the Menzies reflecting the net proceeds from the Pension Fund, and its liabilities and Rights Issue. will provide an update in due course. On 28 February 2017 we informed Our net debt to EBITDA ratio was the active members of the scheme, 0.8 times at 31 December 2016 (2015: following an extensive consultation 1.8 times) and interest cover was process, that the Group has taken the 13.0 times (2015: 8.8 times), well within decision to close the Menzies Pension our covenanted levels. We had £170.0m Fund to future accrual on 31 March 2017. of committed facilities at the year end of which £68.7m were undrawn.

8 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 9 BUSINESS PERFORMANCE INTRODUCTION A new leadership level, Executive Vice Within the EMEA region, we Andrea Petcu REVIEW: MENZIES AVIATION My first year as President & Managing President (“EVP”), has been introduced successfully added a de-icing contract Passenger Service Agent, Director of Menzies Aviation has been directly beneath me and three regional with Norwegian Air Shuttle at its hub Heathrow a momentous and transformational EVPs (Americas, EMEA and Rest of in Oslo which bolts onto our existing one and we have achieved a lot in a very World) now report directly into me. seven year ground handling agreement short space of time. We have successfully Each EVP is responsible for all product that commenced in April 2015. negotiated and completed the lines within their region, ensuring Significantly, 16 contracts were gained acquisition of ASIG, not only making direct accountability, and each works at London Gatwick in December Menzies the largest independent with central teams to ensure a following the failure of a competitor. into-plane fueller in the world, but joined-up approach is in place for We are now the largest handler at

substantially growing our footprint commercial activities and also in Gatwick with over 30 customers. STRATEGIC REPORT A RETURN across the Americas in particular. We relation to our cornerstones of These wins with carriers such as have also set the groundwork for entry safety, security and compliance. Ryanair, Vueling Airlines, Icelandair TO GROWTH into the ground handling market in and Thomas Cook Airlines, strengthen Oman and Germany and are working BUSINESS REVIEW our UK position and demonstrate that behind the scenes on entry into other 2016 was a strong year with a return contracts must be gained at sustainable markets. Quite apart from our growth to growth. Underlying operating profit rates to ensure a robust service can be in Kuala Lumpur, Malaysia, during ACQUISITION OF ASIG in fuelling, our other complementary was significantly ahead of the prior delivered to our customers. the year to take advantage of the On 16 September 2017 we announced service business lines have been year, up £11.1m at £34.2m, and up emerging opportunities in what the proposed acquisition of ASIG from growing steadily. £6.2m on a constant currency basis. In the Americas, further progress was is a fast-growing region with many BBA Aviation plc for US$202m. This is Turnover was up 16%; 7% on a made with Frontier Airlines where we expanding low-cost carriers. a truly transformational deal and In achieving what we have we had constant currency basis. There was now handle its hub locations at Denver strengthens our position as a

A strong year with a return to ensure that the backbone of our a strong delivery against our strategic and Chicago that represent some We continue to focus on station leading player in the global aviation REPORTS GOVERNANCE business was strong and capable to growth and underlying objectives with new hub operations, 27,000 turnarounds per annum. profitability and all underperforming services market. of coping with the level and pace of further expansion of complementary The Chicago operations started in stations are scrutinised and turnaround operating profit increase change. To that end, we have invested services, a transformational acquisition February 2017 and represented over plans put in place where appropriate. The deal has strong strategic and in constant currency of 27%. in systems, processes and people and a deepening of customer 5,000 turnarounds. We also had Within the UK our turnaround plans financial rationale and provides an to support our transformation. As relationships. This was underpinned by significant wins in Los Angeles where are delivering benefits. Prior year enlarged growth platform in attractive these roll out across the world, we a material and recurring investment in Virgin America was a returning operational issues at London Gatwick growing markets. By putting both will be setting a new benchmark in infrastructure and people to promote customer and a new contract with China and Heathrow are fixed. Loss-making businesses together there is significant standardisation through processes standardisation across the business. Airlines was secured. This progress was contracts elsewhere in the UK are synergy potential and the deal will be and technology for our industry. tempered after Alaska Airlines made being re-priced or not renewed to materially earnings enhancing in the Ground handling volume continued to a strategic business decision to ensure that as we progress we only first full year. The transaction was Additionally, to ensure we manage our grow with a 5% increase during 2016 transition its ground service contract contract at terms that generate completed on 1 February 2017 and business effectively a new Divisional driven by contract wins in Europe to its in-house provider, McGee Air sustainable returns. In Amsterdam, we detailed integration plans are now FINANCIAL STATEMENTS Management structure is in place. and North America. Cargo handling Services, in Seattle effective from continue to review our cargo handling being implemented. ASIG’s overall volumes reduced in absolute terms 2 May 2017. We remain a key business options where we are facing falling performance in 2016 was in line with Forsyth Black during the year by 7% as a result of partner for Alaska Airlines in many volumes and high labour costs. the assumptions in our acquisition high prior year volume in North America, important markets in both the USA assessment. PRESIDENT & MANAGING DIRECTOR, following the West Coast seaport and Mexico. We expect our relationship To ensure we can achieve market- MENZIES AVIATION strike, and the forecast reduction in with Alaska to remain strong in the leading positions we made significant ASIG adds some four million into- volume by Martinair in Amsterdam; future, even more so with the recent investment in infrastructure during plane fuelling turnarounds together however this was offset by continued acquisition of ASIG which is a major 2016. A recurring investment of with the management of fuel farms contract wins in Australia. fuelling partner for Alaska. During our £3.0m was made to enhance systems, at 59 locations and 100,000 ground time in Seattle with Alaska we are proud processes and central support handling turnarounds. ASIG has over Our focus on commercial activities that we made its hub one of the best functions as we ensure that the 600 customers, many of whom are continued with 68 net contract wins performing in the USA. platform that we run the business also Menzies customers, and we are during 2016, adding £45m of from is fit for purpose as we embark excited by the opportunities that exist SHAREHOLDER INFORMATION annualised revenue. Contract gains In addition to the de-icing contract upon our next period of growth. to broaden our product offering into were well spread across the network. with Norwegian Air Shuttle, our drive our existing business and into new There were 106 contract renewals to add margin accretive complementary In February 2016 we acquired the territories. The acquisition will add 60 in the year securing some £81m services contracts, typically where we business of Renaissance Aviation, new airports and spans seven countries. of revenue. already operate, continued. Lounges the exclusive licence holder in were opened in Copenhagen, Bermuda, for £2.5m. Operations An agreement was reached with the In Oceania, where the contracting Windhoek and Queenstown. Line are fully integrated and the business Competition and Markets Authority model can be different with cargo maintenance facilities were added is performing well. (“CMA”) to hold the ASIG operations and ground handling typically in New Zealand and Bermuda. at Aberdeen airport separately in order awarded within a single contract, At Air Menzies International (“AMI”), to satisfy the requirements of the CMA we won new contracts with Malaysia The opening of a regional office in our global cargo consolidation and to ultimately divest those operations Airlines at three Australian airports Dubai has been a success and was forwarding business, performance and obtain UK merger clearance. and renewed Emirates for five years fundamental to the creation of our was muted with earnings marginally at two airports in New Zealand. joint venture with Oman Air where we behind the prior year on a constant Forsyth Black Air Canada, a new customer, started expect operations to start by the end currency basis in line with the President & Managing Director, up in Sydney and Melbourne. of H1. Following on from this we will generally subdued cargo market Menzies Aviation open a business development office in the first half of the year. 7 March 2017

10 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 11 BUSINESS PERFORMANCE REVIEW: MENZIES AVIATION CONTINUED OUR STRATEGY IN ACTION

FUELLING SERVICES ASIG ACQUISITION CREATES WEALTH STRATEGIC REPORT OF OPPORTUNITY

In September 2016 John Menzies plc announced the proposed REPORTS GOVERNANCE acquisition of ASIG, an airport services business best known as a market leader in into-plane (“ITP”) fuelling and fuel farm management (“FFM”), for US$202 million.

Fuelled A MAJOR ADDITION TO market – ASIG is a leader in ITP ASIG teams pumped more OUR SERVICE PORTFOLIO fuelling and FFM in the USA and the than 10 billion gallons of fuel UK – and provides greater scale and directly into aircraft in 2016. The acquisition of ASIG, which diversification to Menzies Aviation’s completed in February 2017, was a complementary services such as FINANCIAL STATEMENTS transformational deal for the Group. equipment maintenance and Serviced It creates one of the largest aviation de-icing. Additionally, the acquisition ASIG ground crew services businesses in the world, will help strengthen our position performed over 100,000 substantially enhancing the Group’s with key customers through the aircraft turns in 2016. network to cover 209 locations in provision of increased services in 34 countries, doubling the size of our more locations, allowing existing existing North American operations customer relationships to be Locations and adding significant scale at major leveraged further to accelerate ASIG operates at 87 international gateways. In particular, growth and new customer locations, including the acquisition strengthens relationships to be built. 27 with an overlapping our service offering at major Menzies presence. intercontinental gateways such as The strategic rationale for the London Heathrow, San Francisco, acquisition was compelling and Denver and Los Angeles. in strong alignment with all of SHAREHOLDER INFORMATION our stated strategic priorities for The deal also significantly enhances Aviation, as set out on page 26 Aviation’s product offering, principally of this Annual Report and through entry into the fuelling services Accounts 2016.

Key numbers “This is a truly transformational deal and I welcome 8,000 Over 4 million all ASIG employees into the Menzies family. employees fuelling turns have joined us as part of the were carried out by ASIG’s ITP ASIG business. fuelling business in 2016. ASIG brings exciting new product lines to the Group, giving us great opportunities to further 60 airports strengthen our Aviation business.” have been added to our network via ASIG’s operational presence. Forsyth Black President & Managing Director, Menzies Aviation

12 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 13 BUSINESS PERFORMANCE REVIEW: MENZIES AVIATION CONTINUED OUR STRATEGY IN ACTION

GROUND HANDLING GATWICK SECURES 16 NEW CONTRACTS IN LATE 2016 STRATEGIC REPORT

“The efforts of our commercial and operational teams at Gatwick throughout

this period were remarkable. With a successful Following the withdrawal of a competitor in the marketplace, REPORTS GOVERNANCE cutover period behind us, our focus is on our team successfully secured and implemented 16 new ground handling contracts for London Gatwick in the last quarter of 2016, maintaining that standard and delivering a adding over 18,000 turns annually to our volume at the airport. consistently excellent service to our customers.”

Andy Lord Executive Vice-President – EMEA, Menzies Aviation

Serviced FINANCIAL STATEMENTS RISING TO THE CHALLENGE Key numbers Our Gatwick team performed over 1,750 Beginning in October 2016, our aircraft turns for new Gatwick station experienced one 141 customers in the final of the busiest commercial periods quarter of 2016. in our recent history: we secured employees 16 new airline agreements – including have been recruited by our Gatwick Peak period Ryanair, Vueling Airlines and team to meet the surge in demand. With new customers Icelandair – over a three month included, our ground crews period after a competitor withdrew simultaneously handle from the market. Over 18,000 between 20 to 30 at a time. The challenge then fell to our aircraft turns operational team to deliver this

new volume; 141 additional will be performed annually at SHAREHOLDER INFORMATION colleagues were recruited in Gatwick under the terms of these order to meet demand. new contracts. By 1 December 2016, all of our new customers were being handled, 2 new customers generating peak periods during the day in which 20 to 30 aircraft were agreed their first partnerships with being serviced simultaneously. Menzies Aviation in the course of these negotiations.

Narendra Pankhania, Pushback Driver

14 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 15 BUSINESS PERFORMANCE REVIEW: MENZIES AVIATION CONTINUED OUR STRATEGY IN ACTION

GROUND HANDLING NEW FRONTIER “The speed with which our team at STRATEGIC REPORT FOR SIMPLICITY Denver established this operation and the service level they have delivered for Frontier are a tremendous credit to our business.”

Terry Trainor Senior Vice-President, US Operations, Menzies Aviation

Our US ground handling subsidiary agreed a deal, beginning REPORTS GOVERNANCE in September 2016, to handle the low-cost carrier Frontier Airlines at its base in Denver.

Serviced FINANCIAL STATEMENTS A SHOW OF CONFIDENCE Key numbers Our ground crew performed IN OUR SERVICE over 20,000 aircraft turns From 17 September 2016 Simplicity 250 employees for Frontier across the operatives began supporting 60 have been recruited by our Denver Menzies network in 2016. team to resource this new contract. daily flights at Denver Airport Passengers for Frontier. An estimated 1.2 million Our contract covers the provision passengers flew on Frontier of ramp handling, passenger, short 22,500 aircraft aircraft handled by tow and operational services. turns Simplicity in 2016. It adds almost 22,500 aircraft turns will be performed annually Locations to our annual volume at Denver at Denver under the terms Our business handles

Airport, equivalent to almost a of the contract. Frontier at 7 of our SHAREHOLDER INFORMATION quarter of Frontier’s total turns – network locations. a major show of confidence in our capabilities. 2.3 million It is resourced by a team of approximately 250 Simplicity passengers employees, bringing our total are estimated to fly from Denver station roster to over 650. on Frontier aircraft annually.

16 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 17 BUSINESS PERFORMANCE REVIEW: MENZIES DISTRIBUTION

INTRODUCTION the Division to plan positively for the I am absolutely delighted to be joining future with long-term contracts in Menzies at this exciting time. I believe place. Planning has commenced there are great opportunities available for the negotiation of the publisher for our business to take advantage contracts in 2019 and 2020.

of. We have an experienced and STRATEGIC REPORT ROBUST DELIVERY dedicated workforce, our existing Cost savings during 2016 were £5.1m network puts us in a position of representing an excellent performance. CONTINUES strength from which to grow and we This result was achieved through hold a strong market position within further productivity initiatives, the print media supply chain. Our automation within the branch network challenge is to develop our offering and the annualisation of the prior year into new areas in the wider UK network re-organisation. logistics market. Opportunities exist to selectively expand, creating new The National Living Wage legislation volume to put through our existing commenced in 2016 and has had a network. I am very much looking significant impact on our cost base. In forward to working with the team to 2016 the cost was £1.8m. This will rise to GOVERNANCE REPORTS GOVERNANCE Robust delivery continues with underlying continue building our Menzies’ brand an estimated £2.2m in 2017. During the operating profits broadly flat at £24.7m and capabilities through the development year the majority of the increased cost Kevin Finlayson diversification continues apace. of a strategic national network. was mitigated by additional cost- Parcels Warehouse Operative, Inverness saving initiatives. Going forward we will BUSINESS REVIEW continue to innovate and diversify to securing the supply and category an existing network that operates Distribution delivered a stable mitigate the increased cost. performance against the prior year as management of news into all Aldi predominantly during the night to stores in the UK. facilitate the distribution of print underlying operating profit remained We continue to progress our media and we will utilise this asset broadly flat at £24.7m (2015: £25.1m). diversification strategy, creating new Performance at Menzies Response base during daylight hours. There Trading benefited from strong volume in growing markets to offset remained behind expectations due to are many opportunities within the football-related sticker sales and an falling volume within print media. contracts lost and operational issues. parcels market and we will continue excellent cost reduction performance During 2016 our retail logistics offering

Plans are in place to resolve these to investigate how we can use our FINANCIAL STATEMENTS which helped mitigate continued signed its first national deal. A contract issues to turn the business around and existing sophisticated returns volume decline and increased cost award by WHSmith sees Menzies Greg Michael these measures will be implemented technology within the wider logistics pressure as a result of the introduction Distribution operate from three of its MANAGING DIRECTOR, during the first half of 2017. market. To ensure we are able to offer of the National Living Wage. Our retail distribution centres utilising our MENZIES DISTRIBUTION the standards required within the strategy to diversify into new market own network and 80 vehicles of During the second half of 2016 national parcel carrier market we segments, reducing our reliance varying size to deliver stock to all 1,200 we acquired Edinburgh Arts are investing in new technologies on newspapers and magazines, WHSmith retail outlets across the UK. and Entertainment Limited, an to ensure our IT offering meets the continues to make progress with an During the year a new distribution Edinburgh-based leaflet distribution demands of the market. Following the acquisition within Menzies Parcels centre was opened in Exeter which business that will bolt onto our existing opening of a new distribution centre and new contracts delivered in the enables us to provide a truly national Take One Media business. By combining in Exeter during the year we are now retail logistics sector. service and we hope to leverage new the two businesses we now have a near able to offer a UK-wide solution to the contracts following the success with national offering and are well-placed UK logistics market and will look to Overall sales of newspapers and WHSmith. SHAREHOLDER INFORMATION magazines were in line with to tender for new contracts on a national build on our recent contract wins and basis across the tourism sector. ensure commercially that the market Management expectations. Menzies Parcels had another busy is aware that Menzies Distribution Newspaper volumes were down 7.0% year making a further acquisition, In advance of the contract renewal is an emerging player in the market. on a like for like basis although the Thistle Couriers, based in Aberdeen. process with publishers that sector continued to benefit from cover Thistle Couriers delivers approximately concludes in 2019-2020 work has Greg Michael price appreciation such that sales 1,000 overnight parcels per day in the commenced to scenario plan the Managing Director, value on a like for like basis was down Aberdeen area, further extending the various options that exist. Menzies Distribution 2.5%. Magazine volumes were down service area of Menzies Parcels within 7 March 2017 9.5% on a like for like basis and 6.0% Scotland. The acquisition is synergistic Looking ahead, the proliferation of in value terms, albeit the decline was with our existing parcels business and internet shopping continues at pace steeper in the last quarter. A new five property portfolio. and the UK logistics market is year wholesale distribution agreement forecasting very positive growth was secured with Northern & Shell Our retail consultancy business, the projections as a result. Menzies during 2016 as well as new regional Fore Partnership, had a good year, Distribution is in a strong position distribution contracts with Johnston renewing a category management to grow into this market. We have Press in Portsmouth and Northern contract with Marks & Spencer and Ireland. These contracts further help

18 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 19 BUSINESS PERFORMANCE REVIEW: MENZIES DISTRIBUTION CONTINUED OUR STRATEGY IN ACTION

LOGISTICS RETAIL LOGISTICS OFFERING GOES STRATEGIC REPORT NATIONAL

“Our experience of working with Menzies Distribution to-date has been WHSmith selected Menzies Distribution as its logistics partner for REPORTS GOVERNANCE excellent… we had a strong desire UK store distribution, trusting our team and our network to control to extend this quality of service and deliveries to over 1,200 stores nationwide. flexible approach to the rest of the UK, which was a major factor in choosing Menzies.”

David McKinlay Supply Chain Director, WHSmith

Retail locations FINANCIAL STATEMENTS A GROWING PARTNERSHIP Key numbers Menzies Distribution delivered to 1,200 The partnership was secured WHSmith locations following a competitive tender 65 in 2016. process and extended Menzies Distribution’s previous relationship employees Pallets delivered with WHSmith, which had seen us joined our business to service Our business delivered provide the same services in the this contract. 110,000 pallets to WHSmith North of England and Scotland. outlets in 2016. Under this new partnership Menzies Distribution operates from WHSmith’s 1,000 daily three existing distribution centres in pallet drops Birmingham, Swindon and Dunstable,

whilst also delivering to WHSmith’s on average are carried out SHAREHOLDER INFORMATION stores from our own network by Menzies’ vehicles to of depots. WHSmith stores. To resource the contract, we have added almost 80 vehicles and 220,000 pallets welcomed 65 new employees to our business. will be delivered annually under the term of this contract.

Dean Gorman, Delivery Driver

20 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 21 MARKET OVERVIEW

CARGO HANDLING MARKET GROUND HANDLING MARKET offloading luggage and cargo; acquisition of ASIG continues this performing supporting tasks such consolidating trend. as recharging of on-board batteries; reloading new baggage, cargo and A combination of general growth in The air cargo market is driven by The ground handling market serves passengers; and towing or pushing the air passenger market, expected OUR demand to deliver high value, time- the logistical needs of airline the planes into a position from to be 4.8% per annum according STRATEGIC REPORT sensitive cargo across the globe. customers across the world. Service which they can take off again. to Boeing’s Current Market Outlook Companies choose to fly high value providers range from in-house Critical support services, such as the 2016-2035; particular growth MARKETS items where delivery within a tight organisations maintained by airlines operation of check-in desks, gates and amongst low-cost carriers, for whom time window is worth the additional to outsourced providers such as passenger lounges, are also provided outsourced ground handling is cost of air transportation over land Menzies Aviation. Ground handlers by ground handling businesses, central to their business model; and or sea. Less than 1% of international undertake the essential processes including Menzies Aviation. a general trend towards increased trade by volume, but 35% by value, required to ‘turn’ aircraft, an industry outsourcing amongst full-service travels by air. strikes in North America, and term that covers conveying In 2016 approximately 33 million airlines is expected to maintain the through a manufacturing slowdown passengers from planes after arrival; turns were carried out globally, of pressure to outsource operations Over 50m metric tonnes of cargo are in late 2015 which meant a slow which an estimated 7.1 million were over the medium to long-term. transported annually by air around start to the year, although volumes outsourced by the airlines. By 2020, the world. There is significant market later recovered. there are expected to be approximately Operating in an airport environment REPORTS GOVERNANCE Whilst our Aviation and concentration around the world’s 46 million aircraft turns, of which brings with it related security and Distribution Divisions operate emerging markets, with nearly 50% As cargo handling and digital around 9.9 million will be outsourced. control issues, including certification, in distinct markets, they are of the cargo tonnes passing through technology proliferate, we expect the training and security vetting. This, the Middle East and South East Asia. market to become more competitive. related by a common theme: There was notable consolidation combined with initial investment According to Boeing’s Current Market Nonetheless, cargo handling the importance of service during 2016, with the handler in equipment at each station, Outlook 2016-2035, air cargo traffic requires significant investment in Aviator largely exiting the UK substantial insurance cover levels, excellence, delivered within is forecast to grow 4% annually over infrastructure and equipment which, market. This event triggered a ISAGO (IATA Safety Audit programme a time-critical window. the next two decades. coupled with the necessity of approval by the appropriate regional substantial movement of contracts for Ground Operations) standards The market in 2016 suffered both in regulator, creates a substantial to the other established handlers. and reputation, creates considerable comparison to 2015, when air cargo barrier to entry. Menzies Aviation’s own recent barriers for possible market newcomers. received a one-off boost from port FINANCIAL STATEMENTS PRINT MEDIA SUPPLY CHAIN split roughly two-thirds news and AIRCRAFT FUELLING MARKET services to companies such as responsible for the maintenance and one-third magazines, and it has been (FROM 1 FEBRUARY 2017) ASIG/Menzies Aviation, whilst operation of jet fuel storage facilities in structural decline for decades as retaining ownership of physical assets. and accounting of customer fuel consumers have increasingly switched balances. Prior to departure, ITP agents deliver The UK print media supply chain is to other forms of media. structured around the production of The aircraft fuelling market is the requested amount of jet fuel into Both types of provider must focus The impact of digital content has newspapers and consumer magazines comprised of two parts: into-plane a designated aircraft, in accordance on delivering jet fuel in the safest, escalated in 2016: while UK advertising by publishers who then deliver the (“ITP”) fuelling and airport fuel with the specifications of both the most efficient manner whilst spend as a whole rose 4.4% in products to wholesalers – such storage. The ITP market provides airline and manufacturer. adhering to government, industry the year, newspaper and magazine aircraft refuelling services for airline and customer standards. as Menzies Distribution – for Fuel storage providers focus on advertising revenues declined customers on behalf of oil companies consolidation and distribution to ensuring that clean jet fuel is received, When operating at an airport these (according to The Advertising which have sold jet fuel to those retail outlets. This process is highly stored and distributed in and out markets have the same security, Association/WARC Expenditure SHAREHOLDER INFORMATION airline customers; the fuel storage time-sensitive given the short of their facility. They are also control, certification, training and Report, Q3 2016). Furthermore, digital market provides on-airport jet fuel shelf-life of news products. vetting issues as ground handling. readers generate less revenue for storage for airlines and fuel suppliers. In addition, they require an increased Wholesalers operate long-term publishers: in a report by Deloitte In North America, airline customers focus on environmental issues due contracts with both the publishers of LLP entitled ‘UK News Media: an of scale, wholesalers can provide usually outsource these services to to the handling of petroleum-based newspapers and consumer magazines engine of original news content and that cost-effective delivery and oil companies or service providers products. Large initial investments and each individual retailer who sells democracy’, the value of a digital maximise profitability in the face such as ASIG/Menzies Aviation in equipment and, particularly, the final printed copy. This intermediary reader is estimated at £15 per annum of declining sales. either individually or through in infrastructure at each station, role places far greater demands on the compared with a traditional print Both the high levels of investment consortia. In Europe, the model differs substantial insurance cover levels wholesalers than a traditional ‘niche’ media reader at c.£124 per annum. required (in an appropriate depot in that oil companies maintain a and the need to adhere to exacting delivery role would and has required Consequently, publishers have network and transport fleet) and the stronger presence, retaining partial government and industry standards significant investment in network incentives both to refocus on their exclusivity of publisher distribution ownership of ITP agents or sub- create significant barriers for coverage, transportation efficiencies print products and to seek the most contracts – which are negotiated in contracting ITP and storage potential new entrants into and IT to keep pace with the demands cost-effective route to market for five year cycles – present high barriers the market. of the industry. those products. to entry for potential competitors. The print media sector is estimated By concentrating on quality of service, to be worth around £2.6bn per annum, process efficiency and economies

22 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 23 OUR BUSINESS MODEL AND STRATEGY

John Menzies plc provides support services in OUR STRATEGY Customer ethos Emerging opportunities fast-moving, time-critical markets. We believe Our strategy aims to optimise our Our customers will favour Our markets do not that the passion of our people, and their returns on existing investments, partners who most closely stand still so we pay commitment to delivering great customer whilst opening pathways to understand and support close attention to their new growth. their businesses, so we respective landscapes

experiences, are crucial to delivering shareholder focus on deepening our in order to capitalise STRATEGIC REPORT relationships with them. on opportunities as HOW WE value – and this belief informs our entire approach Read more on page 26 they arise. DELIVER VALUE: to doing business. Optimised investment Diversified offer Growth agenda Deploying our resources A diverse service offering Investing the outputs of a BUSINESS MODEL in the areas of greatest opens the door to a greater strongly cash-generative opportunity, and pressing share of each customer’s business into new them to deliver the best spending and potentially opportunities drives the possible return, are crucial to entirely new customer Group’s future growth. to the creation of constituencies. shareholder value. GOVERNANCE REPORTS GOVERNANCE WHAT WE DO KEY ACTIVITIES Our two core Operating The value we deliver to our shareholders ultimately emerges from the key activities in which we specialise. Divisions aim to deliver market- TEAMOR SAFET leading service to customers SECRIT under time-critical conditions. Ground handling Cargo handling Fuelling Logistics A set of critical support services The movement of perishable/ The process of fuelling directly The picking, packing, E Wherever you find a Menzies which support the businesses high-value goods on and into aircraft and managing the cross-docking and delivery ACTIVITIES logo, you’ll find people of our airline customers, off aircraft, alongside the fuel farm infrastructure which of 100 million packages delivering around the clock, including the handling of warehousing and transportation supports this service. annually for the UK’s against the clock. passengers and baggage of these goods on behalf of print media, travel and and the towing of planes. our airline customers. parcel sectors. INTEGRIT FINANCIAL STATEMENTS SUSTAINABLE VALUE KEY CONTROLS OUR RESOURCES PASSION HOW WE DO IT Working within a detailed We manage our key resources in line with measured Each of our business streams delivers for our customers E OR standards on safety, security and service, established by utilising the skills of our team and the capabilities CONTROLS RESORCES corporate governance framework, underpinned by a operating processes and governance policies. of our infrastructure. robust technical platform, and following standard operating procedures which establish Safety Process design People Contracts RELIAILIT INNOVATION efficient practices in safe, Our detailed standards, driven Our central teams develop and We have a workforce of over Agreements which typically secure environments, our by our expert safety teams, enforce standard protocols 35,000 highly trained run for three to five years people operate to the highest provide clear frameworks across all our activities, employees who drive provide our businesses with SHAREHOLDER INFORMATION for safe operations across ensuring that we consistently our productivity. a secure pipeline of activity. standards of service delivery. the Group. work ‘the Menzies way’. Additionally, we have made Locations Transport network Service significant investment in Our established infrastructure Our dedicated fleet of delivery Driven by a business-wide focus infrastructure to build a leading gives us the reach to serve vehicles drives around on key accounts, we target and position to scale business customers from more than 130,000 miles each day, monitor the service performance through enhanced systems, 245 locations on 6 continents. operating within exceptionally of all our operations. processes and people. tight deadlines.

DELIVERING Employees Customers Shareholders PROTEC TING A ND Governance KPIs Risks VALUE We offer varied careers in We work in partnership with We maintain clear oversight of our MEASURING VALUE A clear structure of corporate We monitor a shortlist of We maintain a register of key dynamic environments, keeping our customers to ensure our businesses, making certain that guidelines upholds our critical metrics to ensure risks to our businesses which our employees engaged and service offering is the correct our business decisions generate standards, ensuring that we that our performance achieves we work to mitigate through delivering results. one to help them meet their real value for our shareholders. operate effectively and in the standards required by our strategic plans and own business challenges. compliance with regulation. our customers. operational processes.

Read more on page 46 Read more on page 28 Read more on page 30

24 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 25 OUR STRATEGY AT A GLANCE

Whilst our Operating Divisions are distinct, they are united by the need to deliver daily service excellence within precise and challenging time limits.

This shared central purpose is reflected in our STRATEGIC REPORT ONE STRATEGIC Customer familiarity with emerging economies primary avenues by which we will common strategic priorities, which provide a ethos in which outsourcing may not be deliver this new volume. prevalent. This principle was a driving broad vision of the Group’s path to success and Within Aviation our focus is on VISION ACROSS Both our Divisions believe in a force behind the opening of our translate into Divisional approaches consistent broadening our product offering proactive partnership approach Dubai office in 2016 and our current at existing locations, utilising our with our core thinking. to customer relations and, over the proposals for an office in Kuala THE BUSINESS existing infrastructure to deliver past two years, have actively sought Lumpur, Malaysia. to develop strong commercial new services and increase margins. functions. In Distribution such The addition of activities such an approach is vital as we start as de-icing, lounges and line Optimised maintenance to our product range AVIATION Our strategic approach has five to diversify beyond our traditional investment at various stations is an example PRIORITIES consistent facets across both clients and build relations with a of our Operating Divisions. new customer base. In Aviation a All businesses must invest wisely. of this principle in action.

E HUBS AND B focus on global key accounts and REPORTS GOVERNANCE RSU ASE Operating in growing markets PU S a co-ordinated approach have paid presents us with many opportunities MPLEMENT E CO ARY dividends and helped to grow our AT SE and we must therefore ensure we Growth ER RV L IC CE RAPHIC E relationships with key customers select only those where the returns C EOG AL IN S agenda A S G VE U ST across multiple regions. OC M on our investments are optimised. -F ERGI E E EM NG M N Whether prevailing market R IN A T Such an approach involves ND RK Central to our customer ethos is PA ET conditions are good, fair or X S assessing market dynamics, labour E N KEY CUST ensuring we understand the needs S O OM challenging, a business must CU ER availability and the general economic O S and requirements of our customers identify a pathway to growth in F and consistently delivering the level conditions which exist, all of which can influence our potential returns. order to ensure future prosperity. STRATEGY of service expected. Attention to We believe that a successful detail and provision of high-quality Within Distribution we must growth agenda requires both a CUSTOMER ETHOS services deliver success for our consistently enhance our investment robust business model and access EMERGING OPPORTUNITIES customers and further strengthen in our branch network to ensure the to emerging markets. Both our our relationships with them. optimum structure is in place in the FINANCIAL STATEMENTS OPTIMISED INVESTMENT Operating Divisions satisfy these face of declining print media volume. prerequisites and are well-placed DIVERSIFIED OFFER In Aviation the acquisition of ASIG in to take advantage of our market GROWTH AGENDA Emerging February 2017 is a clear example of standing as we look to the future. opportunities identifying an optimal investment F O S Within Distribution our route C R target – and in so doing securing U E G S M to growth is through forging O O S To continue to prosper we must R N S T S a new business which will help O K E Y C U E W N constantly look to the future. Both partnerships with new customers, N I us deliver against each of our five E U S C U T B our Divisions operate in fast-moving, which, when allied to our traditional O R A L P A R C E L N strategic pillars in successive years. S T I O A AT N I S dynamic markets and by closely contracts, produce sufficient volume D N I M E T W O R K O P T monitoring advancements we can to sustain and expand our network. E X P S E A N D P O N ensure that our strategy is both fit M E N Z I E S R E S Diversified In Aviation our recent acquisition S for purpose and aligned to new U S N of ASIG neatly demonstrates our TA AT I O offer I N C A S H G E N E R growth areas. growth pathway: take part in the SHAREHOLDER INFORMATION DISTRIBUTION In Distribution we are constantly The Group has long recognised consolidation of the airline services the value of a diversified offering; PRIORITIES analysing the opportunities within market; expand our product the UK logistics market. This it was this rationale which led to portfolio; and ensure that as major approach will allow the Division to the creation of our Aviation Division. new opportunities emerge, our scale identify the emerging opportunities Today we consider active efforts and capability make us a natural STRATEGIC PROGRESS in this rapidly expanding sector; to to diversify to be a fundamental candidate to seize them. map its unique footprint and vehicle part of our strategic approach. During the last 12 months, both Divisions and within the parcel market where we In the year ahead, both Divisions have executed the clearly defined have made a further acquisition, Thistle will continue to progress their plans assets against their requirements; Within Distribution this principle strategic plans detailed in our Annual Couriers Limited, to add scale. and deliver against their common and to concentrate our efforts on is particularly important given Report and Accounts 2015. strategic priorities. those which best dovetail with our the need to replace declining print In Aviation progress was made against resources and expertise. media volumes with new volume In Distribution we have continued all five strands of our strategy. Most from additional customers, and is our drive to replace falling print media significant was the US$202m acquisition Similarly, in Aviation we collect commercial intelligence which addressed through diversification volumes with new product volume, of ASIG, which will help us grow in into the wider UK logistics market. drawn from the wider UK logistics market. new markets, widen our product assists in our prioritisation of and customer density, and provide opportunity; for example, tracking Our growing footprint in both retail This programme has successfully considerable scale from which we analysis of aircraft orders to identify logistics and in the UK parcel market delivered new contracts for store delivery can continue to expand. those regions with the strongest as a neutral consolidator are the with multiple retailers, notably WHSmith, growth potential or increasing our

26 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 27 KEY PERFORMANCE INDICATORS

HOW WE We measure and track our performance against a set STRATEGIC REPORT of key performance indicators (“KPIs”) relevant to our core MEASURE activities. A diverse range of statistics has been selected to ensure that a balanced view of our operations and their OUR DELIVERY success can be formed.

Improvement on last year Decline against last year

OPERATIONAL DELIVERY REPORTS GOVERNANCE SAFETY AND SECURITY PEOPLE AND INTEGRITY EFFICIENCY PROCESSES AND CONTROLS CUSTOMER SERVICE Aircraft damage per Ensuring excellence Employee injuries per Employee turnover Employee hours per turn – On-time performance – 1,000 turns We seek to operate safely 100 full-time equivalents Aviation Distribution and securely, maintaining a consistently high quality of service and skilled workforce. 0.12 0.02 48.7% 29.2hrs 95.4% Our operational KPIs track the extent to which we have 2015: 0.28 2015: 0.06 2015: 44.2% 2015: 27.6hrs 2015: 96.5% met this goal. 2014: 0.15 2014: 0.05 2014: 49.7% 2014: 28.8hrs 2014: 97.1%

FINANCIAL STATEMENTS

Why we measure this Why we measure this Why we measure this Why we measure this Why we measure this Employees are our greatest asset and deliver Aircraft damage per 1,000 turns underpins our We strive to employ the right people with Narrow-bodied aircraft account for over 85% This measurement allows us to measure our industry-leading service. We operate in quality service provider reputation and ensures the right skills. We train and develop our of all aircraft turns within Aviation – and the retail delivery times and is a KPI within areas with heavy machinery and must ensure we maintain an industry-leading position in staff and therefore monitor employee average number of employee hours invested to publisher contracts. It is also essential that that training is appropriate to keep injuries to safety and service delivery. Insurance costs turnover as a key determinant in the perform each one is a critical measure of how we ensure product is with retailers on time a minimum. are also monitored and controlled. investment we make in them. Regional and efficiently we operate. in order that sales are not missed. seasonal variations exist as we operate in many different countries and this KPI is measured on a station-by-station basis.

Operating margin – Contract renewal Total shareholder return (“TSR”) MEASURING OUR GROWTH Aircraft turns Aviation turnover growth

DRIVERS AND DELIVERING Aviation rate – Aviation v FTSE250 over 3 years SHAREHOLDER INFORMATION FUTURE VALUE Delivering profitable growth We aim to consistently grow 1, 2 4 6 ,114 7% 3.9% 86.2% -17% the scale and profitability turns of our Operating Divisions. These metrics give the clearest visibility of our 2015: 1,190,370 turns 2015: 6% 2015: 3.1% 2015: 79.1% 2015: -82% success in this area. 2014: 1,100,789 turns 2014: 9% 2014: 4.1% 2014: 72.6% 2014: -50%

Why we measure this Why we measure this Why we measure this Why we measure this Why we measure this Ground handling is a growing, dynamic We are committed to growing our Aviation A standard measurement demonstrating We measure the rate of contracts that we TSR is the most commonly used measurement marketplace. We monitor aircraft turns Division. Revenue growth within the Division our ability to turn our revenue into profit, successfully tender for and renew. This is a key of value generated for shareholders, capturing to ensure Aviation is growing both on is therefore a key metric. encompassing our efficiency, controls sign of how satisfied our customers are with both capital and dividend growth. a like-for-like and absolute basis. and value generation. the levels of service and price that we are able to provide.

28 JOHN MENZIES PLC – ANNUAL REPORT 2016 29 RISK MANAGEMENT

Operating Divisions and, since its Risk Register process to ensure that all therefore continues to evolve. Indeed, contained within this Annual Report creation in 2015, it has raised the business risks are reflected, assessed it is expected that our Risk team will and Accounts 2016. profile and awareness of Group risk and audited. be heavily involved in the successful programmes internally and served integration of ASIG into the Group PROGRESS DURING 2016 to change cultural attitudes towards Our employees are accountable for which, in itself, introduces a new The approach of being a risk-led

risk-profiling. Through our risk working to established standards and risk profile. organisation continued to be STRATEGIC REPORT EFFECTIVE RISK programmes we look to support the for identifying and escalating risks so embedded throughout 2016. The delivery of our business objectives that they can be appropriately managed. The table on pages 32 and 33 of this central Risk team, comprising Health MANAGEMENT IS KEY whilst protecting the interests of all We are committed to market-leading Annual Report and Accounts 2016 & Safety, Security, Insurance, Audit stakeholders. The existence of a safety programmes and through our details the principal risks and and Compliance, maintained a high- strong risk culture within the internal M.O.R.S.E. (Menzies Operating uncertainties which faced the Group at profile presence throughout the Group TO OUR SUCCESS decision-making process enhances Responsibly, Safely and Effectively) the end of 2016 and which continue to and ensured that the risk appetite of the quality of decision-making and system we log all safety incidents, do so. These risks, and the wider Risk the Group was sustained. safeguards our assets. including ‘near misses’, to ensure the Registers, were subject to detailed root cause of each and every incident review by the Board and, whilst they do In Aviation the implementation of a Within both Divisions we have an ‘8 is investigated and lessons learned not comprise all of the risks faced by risk radar aimed at assisting regional Pillar’ audit programme which allows and communicated throughout the Group, they represent those that business leaders to predict and tailored audits of our operations. The the businesses. the Board considers are most significant. manage risk has been launched and,

OUR APPROACH TO RISK REPORTS GOVERNANCE The importance of identifying programme itself and the results of whilst the model continues to evolve, its With both our Aviation and Distribution and actively managing the these audits help drive standardisation PRINCIPAL RISKS In accordance with the provisions of existence alone is helping to promote Divisions operating in fast-moving and across the Group – they promote AND UNCERTAINTIES the UK Corporate Governance Code better informed decision-making. financial and non-financial risks dynamic industries, the identification increased transparency, high standards Our risk profile is subject to rigorous (September 2014), the Board takes that the Group faces is at the and mitigation of risk is vitally and quality service whilst also ensuring and ongoing review, with the results of into consideration the principal risks Presentations of the work undertaken heart of what we do. An effective important. Accordingly, the Board that our operations are compliant with internal audits and operational incidents in the context of determining whether by the Risk team and future plans places great importance on our risk risk management programme both our internal policies, procedures being used by our central Risk team to adopt the going concern basis have been provided to the Board programmes and the systems of helps protect our assets and and processes and applicable laws to compile our Risk Registers. The Risk of accounting and in assessing the which wholeheartedly endorses and internal control which are in place, and regulatory requirements. The 8 Registers are assessed on a six- prospects of the Company for the encourages the activities of the team. promote the interests of receiving regular updates through the Pillar programme is kept under monthly basis by the Audit Committee purpose of preparing the Viability In a business where health, safety our stakeholders. Audit Committee. The Risk function constant review and is linked to our and risks are reviewed objectively Statement. The Going Concern and and security are vital, the Risk function sits centrally within Group to allow during each review. Our risk profile Viability Statements can be found will continue to develop and influence it to operate independently of both on page 9 of the Strategic Report as we continue to grow. FINANCIAL STATEMENTS

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30 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 31 RISK MANAGEMENT RISK AND DESCRIPTION IMPACT MITIGATING FACTORS CONTINUED GLOBAL ACT OF TERRORISM The risk that a global terrorism event could A global act of terrorism could lead to a Ground handling cost base is flexible and materially affect the airline industry and the significant loss in revenue as flights would could be flexed to assist in mitigating the Risk and uncertainty have the potential to hinder number of aircraft flights is significantly be grounded and air cargo would not expected financial impact. reduced for a period of time. be transported. progress toward the Group’s strategic objectives. We focus on mitigating those risks, to provide reasonable – although not absolute – SECURITY BREACH The risk that a serious security breach or The impact of a serious security-related incident The Group works closely with airport

assurance against material risks. incident occurs that is directly attributable could affect the Group’s reputation, operational authorities. Rigorous checking and vetting of STRATEGIC REPORT PRINCIPAL to the actions of one of our employees or the and, ultimately, financial performance. all employees takes place. Central support is The table below profiles those risks and failure of related processes or training. provided to all stations via the Group Security uncertainties that the Board believes team, utilising the M.O.R.S.E. intranet-based RISKS AND safety and security monitoring system which most significant, together with the activity provides consistent and regular reporting. that we undertake to mitigate them. A dedicated Group Security Officer continues UNCERTAINTIES to increase standards across the Group and raise awareness.

ADHERENCE TO STANDARD OPERATING PROCEDURES RISK AND DESCRIPTION IMPACT MITIGATING FACTORS Within Aviation the adherence to internal Failure to adhere to standard operating Independent audit programmes exist to standard operating procedures and airline procedures can endanger employees and lead ensure applicable operating procedures PRICE OPTIMISATION IN CONTRACT RENEWALS/CONTRACT TENDERING/COMPETITIVE PRESSURE regulations is vital to ensure the Division to poor operational performance; it could are being adhered to and all audit scores

Failure to negotiate existing contracts at Inability to renegotiate and retain key Our Commercial teams plan ahead to ensure delivers its business objectives and operates result in a rise in aircraft damage and personal are reviewed by the senior leadership team. REPORTS GOVERNANCE acceptable rates or to successfully win new material contracts at rates that provide readiness for all upcoming contract renewals safely and securely at all times. injury incidents. In addition, the reputation of A dedicated Operational Excellence team contracts on terms that achieve the Group’s acceptable returns could significantly and new business tenders. The Group operates the Group would suffer. A poor safety record helps drive standardisation across the internal rate of return and risk profile impact Group earnings. a Menzies Commercial Appraisal Committee could produce increased operating costs, network whilst significant investment in threshold criteria. that meets monthly to review all pricing and including punitive and compensatory charges infrastructure and systems has aided the contractual terms before bids are submitted and increased insurance rates, and ultimately drive for compliance and standardisation. for new/repeat business. In addition, we lead to the loss of customer contracts. Tailored training packages exist and all constantly strive to innovate within our employees undertake full and rigorous operations to ensure our operational model training. Safety and security are the number operates with an optimum cost base. one priority at every station and are never compromised. Industry-leading safety systems are utilised. Our internal M.O.R.S.E. INCREASED LABOUR COSTS system is at the heart of all our operations. Our businesses rely on our people. Wage An inability to pass on statutory increases to Contracts with customers increasingly inflation is prominent in many of the our customers could materially impact contain clauses which specify statutory wage territories in which we operate. There are a profitability e.g. the UK’s National Living Wage. increases. We also continue to evolve our ROBUST IT SYSTEMS FINANCIAL STATEMENTS number of initiatives within the UK and other operating model to optimise our cost base. Sophisticated IT systems are at the core of A serious IT outage for a limited period of During 2016 our IT infrastructure was countries to improve wages which could Additionally, resource management tools are all our businesses, driving efficiency. System time could have an operational, financial outsourced to SunGard, thereby increasing impact our businesses. being rolled-out in our Aviation Division to downtime could lead to severe operational and reputational impact. the robustness and reliability of our hardware. ensure roster outputs meet applicable issues and delays to customers. External New plans to mitigate cyber-attacks have regulations and customer demands whilst vulnerability to attack is a growing worldwide been put in place through our Project also providing better productivity. issue which could result in erroneous Watertight initiative. Disaster recovery plans information entering our processing exist and are reviewed periodically. systems or commercial data being EMPLOYEE TRAINING accessed without permission. The risk that employees are not trained or Inadequate delivery of training and recurrent A focus on training through increased re-trained to mandated levels to adequately training results in the risk of employee injury, resource and training delivery specialists undertake standard operating procedures. poor productivity, poor customer service together with an increase in standard STAFF TURNOVER and the likelihood of a vehicle or aircraft e-learning packages across the Group, High staff turnover leads to low experience Consistently high staff turnover could result The Board has a particular focus on staff damage incident. allowing efficient delivery of training and and skill levels to cover required shifts. This in both a reduction in service levels and a loss turnover and reviews the position at each ease of record-keeping. We now also include could leave our Operating Divisions without of customer contracts. Additionally, a high Board meeting. New initiatives aimed at SHAREHOLDER INFORMATION training compliance as part of the monthly sufficient skilled employees to deliver our number of inexperienced staff could lead reducing turnover are in place and in the self-certification process. Training is business objectives. to an increase in safety-related incidents. Americas region, for example, a dedicated also one of the key pillars in our ‘8 Pillar’ function exists to address this issue. audit programme. Investment in onboarding HR systems, which vet employees to ensure suitability for the role, exist and are gaining traction. At Group SUCCESSION PLANNING level, the Human Resources Committee will give detailed consideration to staff turnover As the Group expands it is important that The operational and leadership impact of failing Succession plans across the Group exist and determine what can be done to make sufficiently trained and skilled staff are to have sufficient people, or a stream of trained, and the Board annually reviews such plans an impact in this area. available to fill positions created by our qualified individuals identified as potential for Senior Management and Executive expanding businesses both at supervisory future business leaders, could result in Directors. In 2017 a new Board committee and managerial levels. We must ensure increased costs, lack of efficiency and a failure was constituted, the Human Resources sufficient developmental programmes are to deliver on any (or all) of the key strategic Committee, tasked at looking at all aspects INTEGRATION OF ACQUISITION in place to develop our people. We rely on objectives of the Group. Our brand loyalty could of our HR offering. Structured development The risks associated with the integration of a Failure to successfully integrate a scale Detailed integration plans are put in place having the right people with the right skills be impacted and a competitive disadvantage programmes are in place aimed at identifying large-scale acquisition: people, systems and acquisition could lead to a reduction in for every acquisition, irrespective of size. in the right place at the right time. Without could arise if we were unable to retain internal and developing key employees while salaries equipment require to be well-managed and anticipated returns, synergy benefits could Milestones are set and independently effective succession plans the Group risks candidates to occupy key roles as they become and benefits are benchmarked to ensure they failure to do so could impact the services be missed and reputational damage to the checked. Dedicated resources are required not having sufficient individuals to fill the available or we lose individuals with the remain competitive with market standards. provided to customers, result in a failure to Group could arise. to ensure that sufficient time is given to each key roles which are required to ensure our requisite in-depth knowledge and expertise achieve targeted synergies and ultimately element of integration and the achievement businesses run smoothly. due to a lack of internal career opportunities. decrease staff morale. of all targets.

32 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 33 RESOURCES, RELATIONSHIPS OUR PEOPLE pools, complementing this with GENDER DIVERSITY (DEC. 2016) AND RESPONSIBILITIES Our people are one of our most selective external recruitment as EMPLOYEES highly-valued resources – our and when required. operational performance and the delivery of shareholder value are We provide a broad range of 19,302 dependent upon attracting and development opportunities for our MALE retaining a highly skilled, motivated people, from on-the-job learning and talented workforce that reflects through to online and classroom-based the diversity of the societies in which courses to ensure we promote and 8,779 FEMALE we operate. We seek to: maintain best-in-class standards,

motivate our employees and support DECISION-MAKERS STRATEGIC REPORT RECOGNISING OUR • create an environment of inclusion the requirements of our businesses. within which our people are treated Additionally, we regularly review and 273 RESPONSIBILITIES with respect, dignity and in monitor the pay and benefits offered to MALE accordance with our human our employees, benchmarking against rights responsibilities; competitors where appropriate. National • attract, retain and motivate Living Wage is applied as required 85 a quality and diverse workforce, and working hours are determined FEMALE recruiting and promoting on in accordance with applicable laws. BOARD OF DIRECTORS the basis of ability; and Our Human Resources team plays • develop the capabilities of our an integral role and our commitment workforce with a focus on the skills to our people is evidenced by the 8 MALE required to maintain safe and strengthening of this function in 2016 REPORTS GOVERNANCE reliable operations and encourage through the recruitment of specialist our employees to achieve their full capability in the areas of Rewards, potential, irrespective of ethnicity, Learning and HR systems. 1 national origin, religion, gender FEMALE and gender identity, age, sexual orientation, marital status, disability, or any other protected characteristic. DIVERSITY AND INCLUSION with additional needs, including OUR APPROACH As a global organisation, we aim for disabilities, where necessary. Where As our operations continue to expand, a workforce which is representative existing employees become disabled, our global headcount increased from of the societies in which we operate. our policy is to provide continued 25,600 at the end of 2015 to 28,100 We seek to create an environment employment and training at the end of 2016. Indeed, a key focus of inclusion and acceptance. Policies wherever possible. FINANCIAL STATEMENTS across the Group is continuing to and procedures for recruitment, ensure that we recruit and retain promotion, training and reward Full consideration is given to equality individuals with the necessary skills promote equality of opportunity legislation and an analysis of pay and and results-driven attitude to deliver regardless of background benefits relative to the gender split of the high standards of performance and personal circumstances. our employees will be reported on in which our stakeholders expect. Where Our recruitment process facilitates accordance with recent legislative possible, we aim to build capability and inclusion and adjustments are developments at the relevant time. promote from within Group talent made to accommodate those

Conducting our operations satisfied the requirements to become

responsibly is central to the culture of a constituent of the FTSE4Good SHAREHOLDER INFORMATION our business. The Group’s framework Index Series. of policies and guidelines sets clear standards to ensure that our business Created by the global index provider activities remain ethical, responsible FTSE Russell, the FTSE4Good and sound. Index Series is designed to measure the performance of Our Corporate Social Responsibility companies demonstrating strong Report is published on our website Environmental, Social and and this details the CSR practices, Governance (ESG) practices. The strategies and policies which we have FTSE4Good indices are used by a in place across our Operating Divisions. wide variety of market participants to create and assess responsible FTSE Russell (the trading name investment funds and other products. of FTSE International Limited and Frank Russell Company) confirms that John Menzies plc has been independently assessed according Pawel Bartoszek and Philip Zigah, Baggage Handlers to the FTSE4Good criteria, and has

34 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 35 RESOURCES, RELATIONSHIPS AND RESPONSIBILITIES CONTINUED

EMPLOYEE ENGAGEMENT OUR SOCIAL CONTRIBUTION the regions and communities in which STRATEGIC REPORT INVESTING IN FUTURE GENERATIONS Our Managers hold regular team and John Menzies plc recognises that we work. All donations must adhere one-to-one meetings with their staff, as a socially responsible company we to our Ethics Policy and satisfy the Menzies Distribution enjoys a close Hospital and the Highland Children’s To learn more about this initiative, complemented by formal processes must give careful consideration to following selection criteria: working relationship with the Unit. Menzies has a long-standing visit https://vimeo.com/189281874 in certain jurisdictions. We seek to the impact which our operations may ARCHIE Foundation. relationship with the Foundation, maintain constructive relationships have on the communities in which • efficiency: we aim to be involved having provided free delivery services with labour unions across our Group we operate. We remain cognisant of with charities which are ‘lean’ In October 2016 a Menzies delivery to it since 2013. and we have an active Employee Forum our obligation to do what we can to enough for our donation to make van packed full of over £2,000 worth Ewan Ferguson, Menzies Parcels, shops for toys to be donated to the in our Distribution Division where positively influence our community an impact and not be absorbed of toys and games arrived at the ARCHIE foundation employees may voice their opinions relations and we endeavour to in administrative costs; Royal Aberdeen Children's Hospital about future activities and proposals enhance community life wherever and • integrity: we aim to make donations before being unloaded and carried within the Division. Employee Forum whenever possible. Our community on a ‘needs’ rather than ‘taste’ into a ward by a team of ARCHIE and representatives are elected by their investment remains founded upon basis; and Menzies volunteers. GOVERNANCE REPORTS GOVERNANCE peers and receive training to build three fundamental objectives: • effectiveness: we support charities and develop the necessary skillset that have specific aims and can The toys donated were specifically required to represent their • to build relationships within the demonstrate how our contribution selected for hospital use, being easy colleagues and present their views communities in which we operate; will benefit their cause. to keep clean and sterilise to prevent on significant issues. • to make charitable contributions the spread of infections. that reflect our shared company- In addition to the Charities Fund, 2016 HIGHLIGHTS community values; and employees are actively encouraged The ARCHIE Foundation is the official • 2016 saw the introduction and • to invest in local people and to support charitable causes through charity of the Royal Aberdeen worldwide roll-out of our new industries. attendance at charitable events Children’s Hospital, Tayside Children’s recruitment and applicant tracking and via the John Maxwell Menzies tool across the Group, supporting OUR APPROACH Community Fund. Under this Fund ASSISTING THE OLDER GENERATIONS efficient recruitment processes John Menzies plc is a individual cash awards of up to

Amongst the organisations which the Music is neurologically special: such reconnect with their identities whilst FINANCIAL STATEMENTS for colleagues and candidates. multigenerational business with £350 per employee or £700 per Group has supported, perhaps the is the power of the stimulus that improving their awareness and • A new learning management system successive generations of the Menzies team of employees can be made most innovative is Playlist for Life, monitoring evidence shows that the enhancing their ability to understand. has been developed to hold all family having served as both leaders to those undertaking a charitable a music and dementia charity brain of a person listening to music training material and accurately and, ultimately, custodians of the or community project. focused on ensuring that every becomes active in many different To learn more, visit Playlist for record and report on training Company as they sought to preserve person living with dementia has areas. Indeed, there is growing Life’s website at: performance, enabling the delivery and successfully grow it for passing on 2016 HIGHLIGHTS access to a playlist of ‘personally evidence that PMM can amplify www.playlistforlife.org.uk. of training courses and content to future generations. Accordingly, we During 2016 the Company donated meaningful music’ (“PMM”) as a these effects for people living with through e-learning directly to are acutely aware of the connection £80,000 out of which: gateway to a better life. dementia, bringing them great our employees. between those who have helped build happiness and helping them • Following significant discussion in the environment in which we work and • £25,000 was committed to 2016 around succession planning those who will inherit what is left behind. organisations focused on assisting and staff retention rates, a Human and empowering the generations

Resources Committee was Stemming from this overarching which preceded us by enabling their SHAREHOLDER INFORMATION constituted by the Board at the theme of the relationship between independence, addressing their beginning of 2017. This Committee generations, a theme selected to social needs and/or providing will have overall responsibility for reflect the story of the Menzies health or end-of-life care; and key policy decisions relating to business itself, our charitable giving • £44,000 was committed to bodies employees and governance of is centred around organisations supporting and investing in the the Group’s people management that assist and empower the generations which will follow us by processes. Principal areas of focus generations that preceded us and promoting the wellbeing of children will include human resources invest in the wellbeing and opportunities and tackling the issues which structure and standardisation, of the generations that will succeed us. undermine their life chances. recruitment and succession planning and addressing staff Guided by this, the Board of John retention rates. Menzies plc provides an annual budget for our Charities Fund. The funds available through this are allocated to charities, nominated on a regional basis, which reflect these values and which are also relevant to

36 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 37 RESOURCES, RELATIONSHIPS AND RESPONSIBILITIES CONTINUED

OUR ENVIRONMENTAL IMPACT growth of our operations in a variety OUR APPROACH As detailed in our Annual Report and • the employment of a dedicated data collection of the Group’s STRATEGIC REPORT With a global network spanning 36 of ways, including through the use During 2016 the Group invested Accounts 2015, Menzies Distribution route efficiency specialist to reduce carbon footprint. countries, we endeavour to protect the of energy efficient technology, in ‘Carbon Tracker’ software to remains the holder of its fourth the number of miles driven across • As part of an IT transformation environments in which we operate investment in systems for data consolidate each Division’s carbon consecutive Carbon Trust Standard the Distribution network. exercise, consolidation of four and, to the extent possible, seek to collection and analysis and a data into a cloud-based system. The award in recognition of the sustained separate data centres into one integrate environmental sustainability commitment to monitoring and anticipated outcome of this project reduction in the Division’s carbon While Distribution accounts for the facility using cloud computing into our businesses. During 2016 auditing our environmental data. is that our approach to monitoring footprint. The Division will be applying largest part of the Group’s usage of services, thus significantly the Group made a number of key environmental information will be for re-certification during 2017 and in carbon producing fuels in the UK, reducing our power consumption acquisitions in both the Aviation Within this area we strive to: further standardised and the data doing so intends to highlight a number Aviation is also focused on reducing through the use of more power and Distribution Divisions and we collection process simplified across of improvements that were actioned the carbon emissions arising from efficient technologies. recognise that, in such expansion, • foster and advance energy efficient our global network. The system, which throughout 2016 including: the tonnes and turns handled at • Significant savings of 97,022 kWh we must remain cognisant of our practices throughout our Aviation is scheduled to be implemented each station in the Division. were made by Air Menzies responsibilities and ensure that and Distribution networks; during 2017, will be constructed • an initiative to reduce mileage International (“ ”) during 2016,

AMI REPORTS GOVERNANCE our environmental management • identify, assess and manage to analyse the volume of carbon through the use of double 2016 HIGHLIGHTS due principally to re-location to a processes adapt and evolve environmental risks; and consumed on a regional basis, thus deck trailers; • Investment in and development of new energy efficient office building accordingly. Our practices and • comply with all applicable legislative allowing tailored carbon reduction • enforcing energy saving lighting a new Carbon Tracker system to in Sydney, Australia. procedures seek to address the and regulatory requirements. programmes to be implemented. at all hubs, spokes and offices provide improved monitoring and throughout Distribution; and

GREENHOUSE GAS • buildings-related energy such This Emissions Reporting section is As previously disclosed, Carbon EMISSIONS REPORTING 2015 as natural gas (Scope 1) and incorporated into the Directors’ Report Footprint identified a number of Global 2015 Under the Climate Change Act 2008 electricity (Scope 2); and contained on pages 79 to 83 of this opportunities amounting to over 20% tonnes UK tonnes Measure 2016 Global tonnes of CO e of CO e 2016 UK tonnes of CO e of CO e and the Companies Act 2006 • vehicle and equipment fuel Annual Report and Accounts 2016. of total energy (including buildings 2 2 2 2 (Strategic Report and Directors’ Group Aviation Distribution Aviation Distribution consumption (Scope 1). and direct transport-related energy). Total Division Division Total UK Total Division Division Total Report) Regulations 2013 (the We also participate in the following UK In order to help achieve this, we are Combustion FINANCIAL STATEMENTS “Regulations”), we are mandated Carbon Footprint Ltd (“Carbon Government-led carbon and energy implementing an ongoing programme of fossil fuels 63,841 40,722 23,119 61,719 30,864 7,745 23,119 27,179 to disclose the greenhouse gas Footprint”) continues to provide management programmes, further of energy management, consisting Electricity purchased (“GHG”) emissions for which we independent external verification details of which are provided below: of detailed baselining and monthly for own use 21,080 16,057 5,023 19,553 6,443 1,420 5,023 7,469 are responsible. Specifically, we are of our data and was engaged by analysis of sites and identifying Total 84,921 56,779 28,142 81,272 37,307 9,165 28,142 34,648 required to report, in the form of us to certify that our 2016 data-sets • the Energy Savings Opportunity opportunities for reducing carbon Intensity ratios tonnes of carbon dioxide equivalent were satisfactory, methodologies Scheme (“ESOS”), which runs and associated costs, including site (tonnes of CO2e) Per £000 (“CO2e”), on all material emissions of appropriate and conversion metrics/ in four year cycles; and surveys, training and improved turnover 0.065 0.023 0.059 0.023 the six gases covered by the Kyoto calculations sound. As before, and • the Carbon Reduction communications. Such initiatives Per aircraft Protocol generated from both direct with Carbon Footprint’s assistance, Commitment Energy Efficiency will not only enable us to reduce our turnaround 0.068 0.046 0.068 0.124 0.031 0.035 sources and purchased electricity, we continue our endeavours to Scheme (the “CRC Scheme”), overall carbon footprint but will also Per £000 heat, steam and cooling. improve our data accuracy and which is due to be phased-out form part of our strategy for ESOS turnover total 0.041 0.041 0.027 0.025 report on a global basis. in the next two years. Phase 2 compliance (2019) if required.

To ensure we achieve the transparency Due to reductions made in gas SHAREHOLDER INFORMATION CARBON TRUST required and deliver effective emissions Carbon Footprint has validated our ESOS consumption across Distribution we ESOS management, we must implement submissions and confirmed that ESOS is a mandatory energy carbon TM are pleased to report that our latest and utilise robust and accepted for 2016 our emissions factors, assessment scheme which has been Compliant footprint CRC Annual Report (2015-2016 CRC) methods. Accordingly, whilst the methodology and GHG calculations in force since July 2014 and requires totalled 8,960 tonnes, which is the Regulations provide no prescribed are robust. Going forward it is our larger companies and non-public CRC SCHEME lowest CRC data submission we have methodology, we collate our GHG data intention to use a Carbon Tracker tool sector organisations in the UK to, The CRC Scheme, effective from reported to-date. on a quarterly basis and calculate (as referred to above) which will inter alia, undertake energy saving April 2010, is an obligatory emissions our carbon footprint annually using provide a means for data entry to be assessments and identify where trading scheme which has the stated Whilst the CRC Scheme is scheduled The Group is proud of Menzies the latest Defra (Department for delegated to team members across energy savings can be made. Whilst objective of improving energy to be abolished at the end of Phase 2 Distribution’s status as a Carbon Environment, Food and Rural Affairs) the business, thus engaging them the future of ESOS in its current form efficiency and reducing carbon dioxide (2014-2019), our workplans in this Trust Standard holder for eight emissions factors. on a regular (monthly) basis in energy is uncertain, Carbon Footprint was emissions in large public and private regard continue to remain underway consecutive years. and carbon management. This has appointed our Lead Assessor sector organisations. Under the terms and we will submit our annual The period covered for the purposes of the benefit of both standardising and previously carried-out an of the Scheme we are required to report compliance report to the CRC The Standard recognises the this GHG Emissions Reporting section reporting across the business and ESOS-compliant energy audit for annually on our UK operations’ energy Registry by 31 July 2017. Division’s commitment to is 1 January 2016 to 31 December 2016 raising awareness of our commitment the relevant period, i.e. 1 January 2014 usage, a disclosure which continues to measure, manage and reduce and our calculations are for Scope 1 to reducing our carbon footprint. to 31 December 2014, to ensure we be of assistance from a GHG reporting its carbon footprint. and Scope 2 emissions i.e.: fulfilled our legislative obligations. perspective.

38 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 39 RESOURCES, RELATIONSHIPS AND RESPONSIBILITIES CONTINUED

HEALTH, SAFETY AND SECURITY of providing clear guidance to those lawful in all our dealings. Any Group STRATEGIC REPORT The management of health, safety WHAT IS M.O.R.S.E.? who represent the Group and ensure representative, whether employee, and security risks is embedded within The M.O.R.S.E (Menzies they act ethically and with integrity contractor or otherwise, is expected to our culture and in the way in which we Operating Responsibly, Safely and in their dealings with third parties. conduct themselves ethically and with conduct our day-to-day operations. Effectively) safety programme is integrity, impartiality and honesty. We Stringent risk management practices the Group’s Safety Management SUPPLY CHAIN consider it essential that our Group are vital to both employee welfare and System and is a key mechanism Both our Aviation and Distribution policies regarding fraud, bribery and the success of the Group: operating in our health, safety and security Divisions rely on long-term, working corruption be clearly understood by as we do in time-critical environments, strategy. The system promotes a relationships with our customers, all who represent us. incidents can result in both increased risk-conscious culture throughout suppliers and business partners. We costs and disruption for our businesses the Group where safety and are committed to ensuring that we Our zero tolerance position in and customers. We consistently security are a top priority in all work with third parties to deliver the relation to bribery and corruption review our health, safety and security our operations. highest standards throughout our is supported by Group policies and GOVERNANCE REPORTS GOVERNANCE procedures and training and seek to service supply chain, upholding not procedures which include the conduct develop work processes and protocols Communication and awareness only the best-in-class service which of risk assessments, the inclusion aimed at minimising the likelihood of our standard operating our customers have come to expect of appropriate clauses in third party of accidents occurring. We promote procedures are essential to the but also the values to which we contracts and staff training. In relation the attitude that good health, safety success of the M.O.R.S.E. system are committed. to the latter, we provide training to and security practices are not the and we therefore circulate those employees for whom we believe responsibility of any one individual or regular updates in this regard, Our ability to be a safe and it is most relevant, depending on, for department – it should be a collective underpinned with a strong responsible operator depends, in part, example, the nature or location of their effort with every employee assuming compliance message. on the capability and performance of role. We seek to develop a culture responsibility for ensuring a safe and Yogesh Parekh, Head of Internal Audit (Operations) those who assist us to carry out our where inappropriate behaviour at all secure working environment. operations. We therefore engage with levels is challenged. OUR APPROACH 2016 HIGHLIGHTS OPERATING WITH INTEGRITY third parties on areas such as health FINANCIAL STATEMENTS As a risk-led organisation we seek to: As detailed on page 30 of this Annual • The SMART tool continues to play The Group is dedicated to operating and safety, operational performance, The Group’s Security team worked Report and Accounts 2016, effective a significant role in our Safety fairly, honestly and in compliance and ethics: we seek to work with with whistleblowing hotline experts, • guarantee the health, safety and risk management is key to our success, Management System for both with all applicable laws and ethical organisations which share our Expolink, to implement a single security of all our employees; protecting our assets and promoting Divisions. In 2016 there were 286,581 standards. Wherever we operate in the commitment to ethical and safe platform across the Group’s global • establish policies, procedures and the interests of our stakeholders, and inspections conducted via the mobile world we believe that we must foster working practices; we aim to have network. The outcome of this was processes for identifying, managing further details of our progress in this application: 1 every 3 minutes in a culture in which integrity and suitable provisions incorporated that a new whistleblowing programme and minimising risk-related area can be found on these pages. ground handling, 1 every 60 minutes responsible and ethical values are within third party contracts; and was implemented globally in 2016 accidents and incidents; and in cargo handling and 1 every 72 at the very core of all our activities we expect and encourage our to encourage employees to report Driven by our ‘8 Pillar’ audit programme, • drive standardisation and minutes in Distribution centres. and decision-making processes. employees and contractors to genuine concerns about malpractice, transparency in this area to ensure applicable to both Divisions, our • A total of 37 audits were completed behave in a manner which is illegal acts or failures, without fear of the requisite compliance. businesses place a premium on for ground handling and cargo Our fundamental principles are that consistent with our Ethics Policy. reprisal, victimisation or risk to job transparency, high standards and handling in 2016 with an overall we must: security. We identify and correct areas

quality service. Additionally, our SMART increase is compliance standards In accordance with the requirements of non-conformance and take SHAREHOLDER INFORMATION WE HAVE A TOTAL OF 22 (Standard Menzies Audit Reporting – ground handling improved by 5% of the Modern Slavery Act 2015 and ISAGO REGISTERED GROUND • uphold the highest standards of disciplinary action where appropriate. Tool) operational inspection tool allows and cargo handling by 3%. HANDLING STATIONS integrity in all our operations; and at the relevant time, we will detail on users across the Group to submit • In Aviation a total of 22 stations • conduct our activities within the our website the steps we are taking The Strategic Report on pages 2 to 41 a basic audit of activities which they have now achieved IATA/ISAGO parameters of all applicable to ensure that slavery and human of this Annual Report and Accounts observe and serves to encourage registration, an international safety legislative, regulatory and trafficking are not taking place in 2016 has been approved by the Board the continued adoption of risk- audit program recognised by our ethical requirements. any of our supply chains or in any part of Directors in accordance with the 22 conscious behaviour in our customers, airport regulators and of our business. We are reviewing our Companies Act 2006 (Strategic day-to-day performance. by the Aviation industry itself. OUR APPROACH current policies, practices and training Report and Directors’ Report) Our Ethics Policy applies to all in light of this new legislation to ensure Regulations 2013. Group-operated businesses and they are adequate. details the key principles and values John Geddes which we consider represent the WHISTLEBLOWING, ANTI-BRIBERY Group Company Secretary foundation of sound and fair business AND CORRUPTION 7 March 2017 practices. Built upon this foundation, We have a responsibility to our our Compliance programme reflects employees, our shareholders and the these beliefs and translates them into countries and communities in which everyday scenarios with the objective we do business to be ethical and

40 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 41 CHAIRMAN’S INTRODUCTION

In accordance with the Financial As we continue with the execution of Conduct Authority’s Listing Rules we our strategy it is imperative that our are required to report on how we have Board contains the appropriate balance complied with the main principles of of skills, experience, independence the UK Corporate Governance Code and knowledge to succeed. Whilst I

(September 2014) (the “Code”) which am satisfied that it does so at this STRATEGIC REPORT EFFECTIVE we fully endorse. It is the view of the time, this will be kept under continual Board that we have complied with all review. Further, whilst we recognise GOVERNANCE relevant provisions of the Code for the the importance of diversity across our financial year ended 31 December 2016 business we will continue to recruit and continue to do so. on the basis of merit and ability rather than on a quota-driven basis. COMPOSITION OF THE OARD BOARD STRUCTURE Executive Director 3 A key priority during 2016 was the issue CONCLUSION Independent Non-Executive Director 4 of Board succession and, following The reports which follow detail how Non-Independent 1 Jeremy Stafford’s resignation and we applied the principles of good Non-Executive Director a review of our Board structure and governance during the 2016 financial Chairman 1 the landscapes in which we operate, year. Whilst I consider that our Board GOVERNANCE REPORTS GOVERNANCE We remain committed to ensuring that strong governance Forsyth Black was appointed is ably equipped to drive forward the measures are in place throughout our operations and we seek President & Managing Director Group’s strategy and address any to establish that the highest standards are firmly embedded within of Menzies Aviation in January 2016. challenges which arise, this must our everyday practices. Thereafter, Giles Wilson became be done within the appropriate Chief Financial Officer in June 2016, governance, regulatory and legislative following Paula Bell’s resignation, parameters. Going forward, we will and the Executive team was further continue to enhance and refine our strengthened by the appointment governance policies and processes of John Geddes, Group Company to ensure that the highest standards Secretary, to the Board in November are embedded within our everyday 2016 as Corporate Affairs Director. The practices and operations. balance of the Board must meet the changing needs of our businesses and Dr Dermot F. Smurfit FINANCIAL STATEMENTS DEAR SHAREHOLDER, these appointments are regarded as Chairman On behalf of the Board of John LENGTH OF TENRE NON Dr Dermot F. Smurfit pivotal in the effective implementation 7 March 2017 Menzies plc I would like to introduce EECTIVE DIRECTORS CHAIRMAN of the Group’s strategy. our Corporate Governance Report 0–3 years 4 for the financial year ended 4–6 years 0 The Nomination Committee continues 31 December 2016. 7–9 years 0 to ensure that the Board is refreshed and strengthened when required. More than 9 years 1 During my period as Chairman it has Indeed, following a process to identify become obvious to me that a strong suitable independent Non-Executive governance framework is in place Directors, we were delighted to within Menzies and I am pleased announce the appointment of Paul to confirm that promoting and Baines to the Board in June 2016, SHAREHOLDER INFORMATION maintaining high standards of his extensive City experience adding corporate governance continue to be a further dimension to the Board’s a priority for us. We remain committed skillsets. Additionally, I assumed the to ensuring that rigorous governance position of Chairman in July 2016 measures are at the core of our following Iain Napier’s resignation after operations and recognise that an leading the Board for seven years. effective governance system is essential if we are to continue to deliver the Group’s strategy and at the

same time ensure that enhanced and OARD GENDER sustainable shareholder returns are Executive Male 3 achieved. Indeed good corporate Executive Female 0 governance is fundamental not only to Non-Executive Male 5 the success of the Group itself but also to us, the Board, properly discharging Non-Executive Female 1

our stewardship responsibilities.

42 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 43 BOARD OF DIRECTORS

BOARD OF STRATEGIC REPORT DIRECTORS

growing e-commerce logistics market. Executive (Corporate Finance Division) Director of Associated British Foods plc Forsyth has a strong track record in of Charterhouse Bank. He was thereafter and held a variety of management roles commercial, managerial and business appointed Chief Executive of Hawkpoint at United Biscuits. David is currently a development roles, having previously in 2003 and Executive Chairman from Non-Executive Director of Troy Income & led the inception and development of 2009 until 2013. He was a director of Growth Trust plc and a director of several Menzies Aviation in India and Africa. Collins Stewart Hawkpoint plc from private companies. He has held Non- 2006 until 2012. Executive directorships at St Modwen OTHER APPOINTMENTS Properties PLC, Kewill Limited, Victoria

Director of various Group companies REPORTS GOVERNANCE DR DERMOT F. SMURFIT GILES WILSON DERMOT JENKINSON PLC and Phoenix IT Group PLC within CHAIRMAN EXECUTIVE DIRECTOR: NON-EXECUTIVE DIRECTOR the last five years. CHIEF FINANCIAL OFFICER Dermot became Chairman of the Dermot was appointed to the Board OTHER APPOINTMENTS Giles was appointed Chief Financial Company in July 2016. He was Chairman in 1986 and held various Executive Non-Executive Director Officer of John Menzies plc with effect of Powerflute Oyj until December 2014 responsibilities before assuming a of Troy Income & Growth Trust plc from 1 June 2016. Giles has worked with and joint Deputy Chairman of Jefferson Non-Executive role within the Company in Director of various private companies Smurfit Group PLC, a leading packaging the Group since 2011 in a variety of 1999. He was appointed Interim Chairman group, from 1994 to 2003 and its worldwide senior roles, including Finance Director of the Group on 20 May 2016 and GEOFF EATON of Menzies Aviation. Previously he was Director of Sales and Marketing from remained in this position until 25 July NON-EXECUTIVE DIRECTOR based in Dubai as Senior Vice-President 1997 until 2003. Prior to this he held a JOHN GEDDES 2016. Dermot was Executive Chairman of Geoff was appointed to the Board as of the Group’s African, Middle East number of other senior positions within EXECUTIVE DIRECTOR: beCogent, a contact centre and related a Non-Executive Director in June 2015. and Indian operations. A chartered CORPORATE AFFAIRS DIRECTOR & the Group. GROUP COMPANY SECRETARY consultancy business, until 2010 when the Geoff has had an extensive Executive accountant, he was formerly Finance business was sold to Teleperformance SA. Dermot is the current Chairman of ML John was appointed to the Board in career which includes the positions of Director of Commercial Estates Group Thereafter, in 2013, he founded Ascensos Capital Group. He is a former Chairman November 2016 as Corporate Affairs Chief Operating Officer of Premier Foods FINANCIAL STATEMENTS and prior to that held senior finance Limited, a follow-on to beCogent. of Anker PLC and Peach Holdings PLC, Director, having first joined the Group plc and Chief Executive Officer of Uniq plc. positions at Gallaher Group PLC, Dermot’s contribution to the Board stems SILLA MAIZEY both AIM-listed companies, and of the in 1997. Prior to this appointment John He has considerable business-to- including Finance Director UK. from the breadth of knowledge gained NON-EXECUTIVE DIRECTOR World Containerboard Organisation held the position of Group Company business experience in both Europe from both his experiences within the Silla was appointed to the Board as and FEFCO, the European Federation OTHER APPOINTMENTS Secretary, a role which he assumed in and the United States and is currently Company and a wide range of Executive a Non-Executive Director in May 2014 of Corrugated Board Manufacturers. Director of various Group companies 2006 and which he retains. John has an Chairman of both New England Seafood Management roles. having enjoyed an Executive career Dermot was previously Chairman extensive knowledge of both Operating International Limited and Butcher’s at British Airways where she worked of Eurolink Motorway Services Limited, Divisions and spent two years working OTHER APPOINTMENTS Pet Care Limited. Geoff is a chartered in a number of different functions. a toll road operator for one of the largest within the Aviation Division. Within his Executive Chairman of Ascensos Limited accountant. Most recently, Silla served as Managing single toll roads in Ireland, a Director of role, John supports the Board and his Vice-Chairman of the Scottish Friendly OTHER APPOINTMENTS Director of London Gatwick and both ACE Limited, a major worldwide Executive colleagues and is responsible Assurance Society Chairman of New England Seafood was previously involved in Finance, insurance company, and Aon BV, a major for key areas such as Governance, Risk Director of various private companies International Limited Procurement, Corporate Responsibility insurance broking business, and CEO/ and Investor Relations. Chairman of Butcher’s Pet Care Limited and Customer Services. Silla is Chair of Director of the TMG Group, an Irish As a Chartered Secretary John’s career NHS Business Services Authority and engineering group. He was a Non- SHAREHOLDER INFORMATION FORSYTH BLACK has included Company Secretariat was recently appointed a Non-Executive Executive Director of Timber Capital EXECUTIVE DIRECTOR: posts at both Bank of Scotland plc and Director of Network Rail Limited. She Limited and The Forest Company PRESIDENT & MANAGING DIRECTOR OF Guinness plc. He is a board member is also a Non-Executive Director of the Limited until recently. MENZIES AVIATION of the Airport Services Association, Crown Commercial Service, a Government Forsyth is President & Managing Director OTHER APPOINTMENTS an industry body for the world’s major Executive agency responsible for of Menzies Aviation and was appointed Chairman of ML Capital Group ground handling service providers and centralised procurement for government to the Board in January 2016. He has suppliers, and is a member of IATA’s departments and the wider public sector. been with the Group for 16 years, during PAUL BAINES Ground Handling Group. Silla is a qualified accountant. which time he has occupied predominantly NON-EXECUTIVE DIRECTOR DAVID GARMAN senior Aviation roles. Forsyth served Paul was appointed to the Board as a NON-EXECUTIVE DIRECTOR & OTHER APPOINTMENTS as Senior Vice-President of Africa, Non-Executive Director in June 2016. SENIOR INDEPENDENT DIRECTOR Chair of NHS Business Services Authority the Middle East and India and latterly Since 2013 he has held senior advisory David was appointed to the Board as a Non-Executive Director of the Crown was Managing Director of Menzies roles with both Vermilion, a leading Non-Executive Director in June 2015. He Commercial Service Distribution. In this role he oversaw China-based investment banking firm, has a broad range of industrial experience Non-Executive Director of Network a successful network rationalisation and Smith Square Partners, a UK-based and was previously Chief Executive of Rail Limited programme together with entry into the independent corporate advisory firm. TDG plc (now TDG Limited), a European Prior to joining Hawkpoint Partners in contract logistics and supply chain 2000, Paul held the position of Chief management business, an Executive

44 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 45 CORPORATE GOVERNANCE STATEMENT

To ensure the effective discharge of its and ran the process to appoint a performance of Management and to the Board on any issues which arise responsibilities, the Board gathers on permanent successor. On 25 July 2016 the information presented to them within the Group and present their a regular basis and during 2016 met Dr Dermot F. Smurfit was appointed whilst contributing to the strategic proposed resolutions when problems 12 times (as set out on page 47 of this the new Chairman of the Company development of the Group. They are occur. Annual Report and Accounts 2016). with Dermot Jenkinson continuing on expected to satisfy themselves on

It has a formal schedule of matters the Board as a Non-Executive Director. the integrity of financial information Each Executive Director has clearly STRATEGIC REPORT CORPORATE GOVERNANCE specifically reserved for its and be comfortable that the Group’s defined duties and responsibilities consideration, as set out in the Group’s The Chairman performs a non- systems of internal financial controls which, having been agreed by the STATEMENT Corporate Governance Manual, and is Executive role which is clearly defined and risk management are rigorous Board, are regularly reviewed with made up of nine Directors comprising: and which is distinct from other Board and robust. the Chairman. positions. His function is to lead the • the Chairman; Board in strategic discussions and, One new Non-Executive Director, As noted above, Forsyth Black was • three Executive Directors; in accordance with the Code, to Paul Baines, was appointed during appointed President & Managing • four independent Non-Executive ensure that accurate, clear and timely 2016 as it was considered that his Director of Menzies Aviation and an Directors; and information is available to all Directors. extensive City experience would add Executive Director of the Company • one non-independent The Chairman is available to the an additional dimension to the skillset in January 2016, whilst Giles Wilson Non-Executive Director. Executive Directors to discuss any of the Board with particular reference assumed the position of Chief concerns or issues which may arise to its strategy and risk profile. Financial Officer and John Geddes Biographies for each of these REPORTS GOVERNANCE The Board remains committed to the principles of good corporate and seeks to ensure that risk and the role of Corporate Affairs Director Directors can be found on pages 44 governance as it continues to advance the Group’s strategy. long-term shareholder value remain a David Garman has been Senior in June 2016 and November 2016 and 45 of this Annual Report and The Financial Reporting Council’s UK Corporate Governance Code key focus for the Executive Directors. Independent Director since his respectively. Accounts 2016. (September 2014) (the “Code”) is an integral part of our values In conducting Board meetings, the appointment in August 2015. David is Chairman is aware that sufficient time expected to make himself available to Board Committees and we continue to follow the good practice which it recommends. Following Jeremy Stafford’s needs to be available for the discussion the Company’s shareholders, and other The Board also delegates specific resignation in January 2016, the Board The Board considers that the Company has been compliant with of agenda items (with particular stakeholders where required, should responsibilities to the Board structure was reviewed: Forsyth Black the provisions set out in the Code throughout 2016. The Code is reference to strategic issues), whilst any issues or concerns arise and Committees detailed in the table was appointed President & Managing fostering an atmosphere which where discussions with the Chairman below. These Committees have publicly available on www.frc.org.uk. Director of Menzies Aviation and an encourages active participation by and/or the Executive Directors are not defined Terms of Reference and Executive Director of the Company The Board believes that the Annual Report and Accounts 2016 and discussion between all Executive considered appropriate. information of an appropriate quality whilst Mark Cassie, the Operations are, when taken as a whole, fair, balanced and understandable, and Non-Executive Directors. is issued to them in a timely manner Director of Menzies Distribution, and Executive Directors to assist in the performance of their FINANCIAL STATEMENTS providing shareholders with the requisite information to assess Paul McCourt, the Finance Director Non-Executive Directors The role of the Executive Directors is duties. It is the Board’s policy that all the Company’s performance, business model and strategy. of Menzies Distribution, both served Non-Executive Directors are appointed to develop and implement the overall independent Non-Executive Directors as Interim Managing Director of for an initial term of three years and, in Group strategy, which has been should contribute to the membership the Division during 2016 (preceding accordance with the Code, are required agreed by the Board, on a daily basis. of its Committees. the permanent appointment of to challenge constructively both the They are expected to report regularly Greg Michael in January 2017). The Managing/Interim Managing Directors (as appropriate) of both BOARD AND COMMITTEE MEETINGS AND ATTENDANCE IN 2016 Divisions worked alongside the Audit Remuneration Nomination previous Chief Financial Officer, Appointed/resigned Board Committee Committee Committee CODE PRINCIPLES if considered appropriate, potential 1 Paula Bell, until Giles Wilson’s Meetings 12 3 3 5 A summary of the Company’s key acquisitions and disposals, financial appointment in June 2016 from which D Smurfit July 2016 6/6 – – – corporate governance practices statements and major non-recurring SHAREHOLDER INFORMATION point they liaised closely with him. F Black January 2016 12/12 – – – is as follows: projects and capital expenditure. In addition to consideration of significant G Wilson June 2016 8/8 – – – Additionally, John Geddes, Group LEADERSHIP operational and financial matters, J Geddes November 2016 1/1 – – – Company Secretary since 2006, was RESPONSIBILITIES OF THE BOARD the Board also addresses corporate D Jenkinson – 10/12 – – – appointed to the Board in November The principal responsibility of the governance and social responsibility S Maizey – 10/12 3/3 3/3 5/5 2016 as Corporate Affairs Director. Board is to ensure the Company’s issues together with challenges D Garman – 12/12 3/3 3/3 5/5 long-term success by collectively arising in areas as diverse as health ROLE OF BOARD MEMBERS G Eaton – 12/12 3/3 3/3 5/5 directing the Company’s affairs within and safety, employment and the Chairman P Baines June 2016 7/8 2/2 2/2 2/2 the parameters of the Company’s environment. In effecting their After eight years on the Board and in internal control framework whilst responsibilities as members of the Former Directors line with the reduction of his other plc identifying and managing the Board, the Directors remain cognisant I Napier May 2016 4/4 – – 2/2 responsibilities, Iain Napier informed interests of its internal and external of their statutory obligation to act in a P Bell May 2016 4/4 – – – the Company of his wish to retire and stakeholders. In seeking to ensure manner which they consider, in good J Stafford January 2016 – – – – stepped down as Chairman following the prosperity of the Company, the faith, would be most likely to promote the Company’s annual general Board assumes responsibility for the success of the Company for the Note: meeting (“AGM”) in May 2016. Dermot 1. Additionally, four meetings occurred in 2016 at which a duly appointed committee of the Board of Directors was present. the overall strategy of the Group benefit of its shareholders as a whole. Jenkinson, a Non-Executive Director, whilst considering and approving, assumed the role of Interim Chairman

46 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 47 CORPORATE GOVERNANCE STATEMENT CONTINUED

Our Board Committees comprise solely EFFECTIVENESS INDEPENDENCE To ensure a smooth transition of DIVERSITY visits and meetings, the new Director independent Non-Executive Directors, COMPOSITION OF THE BOARD The Chairman, Dr Dermot F. Smurfit, Chairmanship when required, the The Board fully supports diversity will then have the opportunity to with all Committees having four The Board recognises that, in was considered to satisfy the Nomination Committee continues and recognises the benefits which discuss whether they have any further members. The Chairs of the Audit and accordance with the Code, it, together independence criteria set out in the to have responsibility for ensuring that diverse viewpoints can bring to key training requirements with the Group Remuneration Committees are chosen with its Committees, must have the Code upon his appointment whilst there is a suitable candidate on the decision-making processes. The Company Secretary and whether

from Directors who are considered appropriate balance of skills, knowledge four of the Non-Executive Directors Board or, alternatively, that a suitable Board is committed to developing they would like to arrange any meetings STRATEGIC REPORT independent under the terms of the of the Company and expertise to are considered independent (Silla candidate is identified externally. When and encouraging both members of with the Company’s major shareholders. Code, whilst the Chairman of the ensure it can effectively discharge its Maizey, Geoff Eaton, David Garman necessary, the Nomination Committee the Board and all Group employees to This programme was followed for Nomination Committee is the Senior duties and responsibilities. All Directors and Paul Baines). Having been will also engage with external achieve their full potential, irrespective all Directors who were appointed Independent Director. are expected to act in a way which they on the Board since 1985, initially recruitment agencies to identify suitable of gender, race or sexuality. The Board to the Board during 2016, modified consider, in good faith, would be most as an Executive Director and latterly candidates for both Executive and is aware of the benefits which as appropriate for those who had In January 2017, an additional Board likely to promote the success of the as a Non-Executive Director, Dermot Non-Executive positions. derive from a diverse board when previously been in the employment Committee was constituted called Company for the benefit of its Jenkinson is not considered considering any future appointments. of the Group and tailored to suit the Human Resources Committee. shareholders as a whole whilst independent under the Code. Dermot NOMINATION PROCESS Notwithstanding this, the Board does individual expertise and experience. This is chaired by Silla Maizey, a Non- exercising their judgement is, however, regarded as contributing As detailed above, the Nomination not believe that setting a quota is the Executive Director, and comprises independently from the influences of effectively to the Board by providing Committee is tasked with identifying most appropriate means by which TRAINING AND DEVELOPMENT four members. The purpose of the others. Whilst the Board considers the a breadth of experience and depth of and nominating candidates to the to achieve a balanced Board and all The Board believes that regularly Committee is to assist the Board in current balance between Executive knowledge of the Company due to his Board when a position is identified. It appointments will be made on merit updating the knowledge and skills GOVERNANCE REPORTS GOVERNANCE fulfilling its obligations with regard and Non-Executive Directors is time in office, allied to his background operates under formal and transparent against objective criteria. of the Board is vital to its proper to all HR issues and to ensure that appropriate, it reviews its composition in business and general management. Terms of Reference and further details and effective functioning and to adequate and effective policies and annually and pays particular regard of its activities can be found on pages INDUCTION the attainment of the Company’s processes are in place throughout the to the length of tenure of each Director Throughout 2016 and since the end of 51 and 52 of this Annual Report and Upon appointment Directors participate objectives. The Group Company Group, making recommendations to to ensure there are identified candidates the financial year ending 31 December Accounts 2016. The Nomination in a structured induction programme Secretary is responsible for ensuring Executive Management as and when when it is considered the Board needs 2012, all of the Directors on each of Committee regularly reviews the to provide familiarity with the business that regular updates are provided to required. Key areas of focus of the to be refreshed. the Board Committees have been structure, size and composition of the Group. The programme is tailored the Board in respect of regulatory, Committee will include HR structure independent in compliance with (including the skills, knowledge and to the individual needs of each new legislative and governance changes, and standardisation, recruitment and During 2016 a recruitment process the Code. experience) required of the Board as Director and its objective is to ensure applicable reporting requirements and succession planning and addressing was undertaken following the against its current position and makes that any new Director receives a focused relevant market practices. The annual staff retention rates. We are a people procedure outlined on page 52 of this SUCCESSION PLANNING AND recommendations to the Board taking and appropriate induction which will Board evaluation process is used to business and we recognise that we Annual Report and Accounts 2016 BOARD RECRUITMENT into account: assist them in fulfilling their role both on identify any training requirements and/ must continue to invest in this highly- which, as indicated above, led to the The Board is aware that it is essential the Board and on any Board Committee or areas of weakness and the Group FINANCIAL STATEMENTS • the results of any Board evaluation valued resource. The constitution of appointment of Paul Baines as a to have a suitable succession plan to which they are appointed. Company Secretary subsequently process; the Human Resources Committee will Non-Executive Director in June 2016. in place in the event Board members Additionally, each new Director spends works with the Chairman to ensure the • the total number of Directors; assist us in this commitment and will This appointment, together with the either move on or retire and, time with the Executive team to requisite training is provided, on either • the balance of Executive and guide our approach in dealing with aforementioned appointments of accordingly, reviews its succession understand the strategic goals and a Board or an individual basis. Non-Executive Directors and the staff turnover. Forsyth Black, Giles Wilson, Dr Dermot plans on an annual basis. The Board objectives of the Group and discussions independent quota of the latter; and F. Smurfit and John Geddes are also reviews the composition of each will take place around current issues The Board is committed to developing • the need to ensure appropriate Additionally, the Board has viewed as further strengthening the of the Board Committees to ensure a affecting the Group and in respect of talent throughout the Group and collective knowledge and experience, delegated operational and strategic Board and assisting in the support suitable rotation of Directors occurs. operational items. advocates that appropriate training, the length of service of the Directors implementation matters to the and development of the Company’s support and development opportunities and diversity factors (including, but Company’s Executive Committee strategic outlook. With regard to the replacement of any Thereafter a new Director will meet are afforded to those employees not limited to, skills mix, regional which comprises the Executive Executive Director, the Board has with the Management teams in the identified as displaying potential (as and industry experience and gender).

Directors, the Managing Director tasked the Nomination Committee businesses and in the Group’s Head and when considered appropriate). SHAREHOLDER INFORMATION of Menzies Distribution and other with both reviewing potential internal Office and will undertake various site Senior Executives as required. candidates and nominating suitable visits to understand how the Divisions INFORMATION AND SUPPORT external candidates as and when such operate and how the various parts of All Directors, including Non-Executive a position arises. Additionally, each of the Group interact. A new Director will Directors, have access to independent the Business Leadership teams has a also participate in structured meetings professional advice at the Company’s responsibility to ensure that talented with the Chairman and Non-Executive expense where they consider it individuals within the Group are Directors to ensure they are familiar necessary to discharge their nurtured and given every opportunity with the Board, its structures and the responsibilities as Directors of the to develop their skills, such that they operating responsibilities associated Company. This advice is arranged via might progress their career within with the position to which they have the Group Company Secretary who the organisation. been appointed. Following the site must make himself available to all Directors to provide advice and assistance where required. Additionally, the Board Committees are supported by external professional advisers who provide additional information/ support and undertake work on

48 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 49 CORPORATE GOVERNANCE NOMINATION COMMITTEE STATEMENT CONTINUED REPORT

behalf of the relevant Committee During 2016 the review was conducted Further details of our risk management NOMINATION COMMITTEE independent of the Company’s by the Senior Independent Director, strategy can be found on pages 30 The Terms of Reference of the Management structure. The Group David Garman. Each Director and 31 of this Annual Report and Nomination Committee, a copy of Company Secretary is responsible completed a detailed questionnaire Accounts 2016. which is available on the Company’s to each Committee for ensuring that and the collated results were reviewed website, are closely modelled on those

sufficient resources are available collectively by the Board. In addition, RELATIONS WITH SHAREHOLDERS set out in the UK Corporate Governance STRATEGIC REPORT to enable it to fully and effectively David Garman conducted one-to-one DIALOGUE NOMINATION Code (September 2014) (the “Code”). perform its duties together with interviews with each Director to The Board has responsibility for The principal responsibility of the ensuring compliance with Board discuss their responses and any communicating with the Company’s COMMITTEE REPORT Nomination Committee is to ensure procedures and the Group’s Corporate personal views they held. The findings shareholders and has developed a that, collectively and at any given time, Governance Manual. Directors are detailed a number of areas that comprehensive programme to ensure the members of the Board possess also encouraged to visit operations required greater focus going forward. that effective communication with the necessary balance of knowledge, and to undertake such activities and The Group’s HR capabilities and the shareholders, analysts and the skills and experience to support and training as is appropriate or may be ability to tackle staff turnover were financial press is maintained develop the strategy of the Company. required or desirable for them to highlighted together with a need for an throughout each financial year. In seeking to achieve this, the competently undertake their duties. enhanced customer and competitor Through its annual and interim reports, Nomination Committee will recommend focus; a requirement to manage results and other announcements and new Board appointments as and when Board papers are circulated one week operational key performance the dissemination of information via considered appropriate and will ensure GOVERNANCE REPORTS GOVERNANCE prior to all Board meetings to ensure indicators closely; and a desire to the Company’s website, the Board that appropriate succession planning that Directors have sufficient time to streamline Board papers to ensure seeks to present its strategy and procedures are in place. In accordance familiarise themselves with the items significant information is clearly performance in an objective and with our Terms of Reference, I, as for discussion. The Company uses communicated. Overall, however, balanced manner. the Chairman of the Nomination electronic packs to ensure quick and the review concluded that the Committee, report our conclusions secure communication of papers to Board functions effectively. Shareholders are invited to ask to the Board and it is the Board as each Director. As part of the annual questions during the forthcoming a whole which is responsible for Board evaluation process, Directors ELECTION AND RE-ELECTION AGM and also to meet with the making new appointments upon are asked to confirm whether they are OF DIRECTORS Directors after the formal business our recommendation. happy with the quality and range of In accordance with the provisions of of the AGM has concluded. The Chair papers provided to them and whether the Code, all incumbent Directors are of each of the Board Committees will COMPOSITION they consider they are presented with subject to annual re-election by the be available to answer questions The Nomination Committee is chaired sufficient contextual information Company’s shareholders. All other from any shareholder at the AGM. by me, David Garman, the Senior FINANCIAL STATEMENTS upon which to base their decisions. Directors are subject to election Full details of proxy votes cast on each Independent Director, and comprises by shareholders at the first AGM resolution will be released via a London solely independent Non-Executive BOARD PERFORMANCE following their appointment and Stock Exchange announcement and Directors. During 2016 Iain Napier EVALUATION annual re-election thereafter. will also be made available on the resigned as Chairman of the Company The Board is supportive of the Company’s website as soon as and thus stood down as Chairman of principles and provisions of the ACCOUNTABILITY reasonably practicable following the Nomination Committee. The Group Code in respect of Board performance RISK AND ASSURANCE the AGM. David Garman Company Secretary continues to act as evaluation and its policy is to conduct A key function of the Board is to NOMINATION COMMITTEE CHAIRMAN Secretary to the Nomination Committee rigorous internal evaluations of its provide assurance that the internal Directors are, at any time, able to pursuant to its Terms of Reference and own performance and that of its controls and operation of the Group request additional meetings with COMMITTEE MEMBERS it remains the case that Executive Committees and individual Directors are sufficient and effective. During major shareholders and any such Name Position Directors may, by invitation, attend 1 on an annual basis. External 2016 the Board regularly reviewed the meetings will be arranged via the D Garman Chairman Nomination Committee meetings SHAREHOLDER INFORMATION consultants are used to refresh the processes whereby risks are identified, Group Company Secretary. At each S Maizey Member to discuss specific agenda items. process usually every three years with evaluated and managed. The Group’s Board meeting the Board receives an G Eaton Member the last evaluation being undertaken internal audit programme and risk update report both on these meetings ROLE AND RESPONSIBILITIES P Baines2 Member by an independent external consultant management processes were also and on analyst meetings and/or As noted above, the Nomination I Napier1 Past Chairman in the final quarter of 2014. reviewed and updated and the Board analyst reports. The Chairman and Committee operates under formal and transparent Terms of Reference and continues to keep the effectiveness Senior Independent Director are Notes: of the Group’s system of internal also available for the Company’s 1. Iain Napier stepped down as Chairman of the Nomination Committee when he resigned is essentially tasked with identifying control and risk management under shareholders to contact at any time. as Chairman of the Company on 20 May 2016. David Garman assumed the position and recommending candidates to the of Chairman at this time. continued review. 2. Paul Baines was appointed to the Nomination Committee upon his appointment as Board when a position is identified or a Non-Executive Director on 1 June 2016. becomes available.

The Nomination Committee’s main duties, as set out in its Terms of Reference, are as follows: • Evaluate: to evaluate, before making a recommendation to the Board, the balance of skills,

50 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 51 NOMINATION COMMITTEE AUDIT COMMITTEE REPORT CONTINUED REPORT

knowledge and experience on Before any appointment is made by Additionally, and as highlighted in the AUDIT COMMITTEE the Board and, in light of this the Board, the Nomination Committee Annual Report and Accounts 2015, the The Audit Committee provides effective evaluation, prepare a description evaluates the balance of skills, Nomination Committee continued to oversight and governance over the of the role and capabilities required knowledge and experience currently monitor the leadership requirements of financial integrity of the Group’s for a particular appointment. on the Board and, in light of this both our Divisions and the structure of financial reporting to ensure that the

• Succession plan: to ensure that evaluation, prepares a detailed the Board during 2016. This led to the interests of the Company’s shareholders STRATEGIC REPORT appropriate plans are in place at all description of the role and capabilities Nomination Committee appointing AUDIT COMMITTEE are protected at all times. It assesses the times for orderly succession of required for a particular appointment. independent recruitment consultant quality of the internal and external audit Board members, taking into account In identifying suitable candidates the Korn Ferry, which has no other REPORT processes and ensures that the risks the challenges and opportunities Nomination Committee shall: connection with the Company, to assist which our businesses face are being facing the Group and what skills and in identifying suitable candidates for effectively managed. expertise may therefore be required • use open advertising or the services specific roles before undertaking on the Board in the future. of independent external advisers to a rigorous interview and reference It is vitally important that we operate • Review leadership and structure: facilitate the search; process. The outcome of this process a culture where the very best controls to review annually: (i) the structure, • consider candidates from a wide was the appointment of Paul Baines, environment exists throughout our size and composition (including the range of backgrounds; as a Non-Executive Director, and Greg global operations. Accordingly, the skills, knowledge and experience) of • ensure recruitment is undertaken in Michael, as Managing Director of Audit Committee not only continually the Board and its Committees and accordance with the Group’s equal Menzies Distribution, in June 2016 reviews and updates our activities GOVERNANCE REPORTS GOVERNANCE make recommendations to the opportunities policies; and and January 2017 respectively. In in line with new legislation but also Board with regard to any changes; • consider candidates on merit and undertaking this recruitment, the against the context of the evolving and (ii) the leadership needs of the against objective criteria, ensuring Nomination Committee used the nature of our operating businesses. organisation, both Executive and that potential appointees have appointment process outlined in the Non-Executive, with a view to sufficient time available to devote Corporate Governance Statement on All of the members of the Audit ensuring the continued ability to the position. pages 48 and 49 of this Annual Report Committee are Non-Executive of the organisation to compete and Accounts 2016. The balance of Directors and during 2016 the effectively in the marketplace. A number of Senior Management skills, knowledge and experience of the Committee continued to be chaired changes took place within the Group in Board was evaluated and the by me, Silla Maizey. Other members Further details on these items can be 2016 and the Nomination Committee Nomination Committee developed the comprised Geoff Eaton, a chartered found on, and are incorporated by played a significant role during this requisite appointment specifications. accountant, David Garman and reference into this Nomination period of transition. Indeed, a Paul Baines, who was appointed to Committee Report, on pages 48 to 50 fundamental priority of the Nomination OBJECTIVES FOR 2017 the Audit Committee on 1 June 2016 FINANCIAL STATEMENTS of this Annual Report and Accounts 2016. Committee was the appointment of It is the Nomination Committee’s following his appointment as a replacements for the Chief Executive intention to continue to oversee the Non-Executive Director. I will step MAIN ACTIVITIES IN 2016 Officer, Jeremy Stafford, and the Chief composition and structure of the Board, down as Chairman of the Audit During 2016 the Nomination Financial Officer, Paula Bell, who left the ensuring that the Group is at all times Committee at the forthcoming annual Committee met on five occasions. Company in January 2016 and July 2016 structured to successfully deliver its general meeting in May 2017, having Meeting attendance is set out on the respectively (although the latter strategy and to compete effectively in been appointed Chairman of the table on page 47 of this Annual Report resigned from the Board in May 2016). the marketplaces within which it Silla Maizey Company’s newly created Human and Accounts 2016. The Committee led the process which operates. During 2017 the Nomination AUDIT COMMITTEE CHAIRMAN Resources Committee, and Paul resulted in the internal appointments of Committee will also continue to closely Baines will assume my position. The Nomination Committee gives full Forsyth Black as President & Managing monitor the structure, membership and BOARD MEMBERS consideration to succession planning Director of Menzies Aviation in January succession plans of its Committees Name Position The composition of the Audit Committee

for Directors, both Non-Executive and 2016 and Giles Wilson as Chief Financial and, more generally, the leadership S Maizey Chairman meets with the requirements of the SHAREHOLDER INFORMATION Executive, and other Senior Executives Officer in June 2016. requirements of our businesses, making D Garman Member UK Corporate Governance Code of the Company in the course of its recommendations to the Board where G Eaton Member (September 2014) (the “Code”) but, work, taking into account the challenges The Nomination Committee was also considered appropriate. Additionally in line with good practice, membership P Baines1 Member and opportunities facing the Company involved in the process which led to the and in accordance with the Nomination is reviewed annually. and determining what skills and appointment of Dr Dermot F. Smurfit as Committee’s Terms of Reference, I will Note: expertise will thus be required on the the new Chairman of the Company. liaise with the Chairman of the 1. Paul Baines was appointed to the Audit Committee upon his appointment as a Non-Executive Director ROLE AND RESPONSIBILITIES Board in the future. Indeed, a principal Remuneration Committee in relation to on 1 June 2016. The Audit Committee assists the Board focus of the Nomination Committee These appointments, together with the service contract and remuneration in the execution of its responsibilities in during 2016 was to review succession the appointment of John Geddes as package to be offered to any proposed respect of corporate governance and plans for both the Board and, more Corporate Affairs Director in November Executive Director or Managing Director. internal control and has adopted Terms generally, for senior business leaders 2016, are viewed as both further of Reference modelled on those set out within the Group whilst also liaising strengthening the Group’s senior On behalf of the Board in the Code. During 2016 the Group’s with the Remuneration Committee in leadership team and ensuring that Chief Financial Officer, Group relation to any service contract and individuals of the appropriate calibre David Garman Company Secretary and certain senior remuneration package being offered are in place to lead the Group and drive Nomination Committee Chairman Financial Executives, together with to a proposed Executive Director or forward its strategic objectives. 7 March 2017 representatives from the internal and Managing Director of the Group. external audit teams, attended each

52 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 53 AUDIT COMMITTEE REPORT CONTINUED

meeting of the Audit Committee. It is The Audit Committee also exists MAIN ACTIVITIES IN 2016 liquidity and solvency; and reviewed PENSION ACCOUNTING particular, the Committee challenged a requirement that at least one Audit to safeguard the interests of the • The Audit Committee formally the results of Management’s The assumptions made in the Management’s calculations of Committee member has suitable Company’s shareholders and thus reviewed and recommended the scenario modelling and the reverse calculation for scheme liabilities and provisions for items under discussion financial experience and both myself, seeks to ensure the integrity of Company’s Annual Report and stress testing of these models. asset returns are underpinned by a with authorities and of the deferred Silla Maizey, and Geoff Eaton are the published financial statements Accounts 2015 (including the • The Audit Committee reviewed range of judgements. Assumptions tax assets and liabilities.

accountants, qualified and chartered through their rigorous review and Statements on Internal Control and increased automation within the were prepared by external actuaries, STRATEGIC REPORT respectively, and have been identified a full and effective audit process being the work of the Audit Committee) Aviation Division to ensure key reviewed by Management and PROVISIONS as meeting this requirement. undertaken by the Company each and associated business review deliverables were achieved. approved by the external auditor, The Audit Committee has challenged financial year. This external audit together with the Interim Results In addition to its standard agenda, ensuring that they were aligned the assumptions used by Management A copy of the Audit Committee’s Terms process is currently undertaken by announcement made by the the Audit Committee welcomed with prevailing economic indicators. in determining whether provisions of Reference is available on the Ernst & Young LLP (“EY”). Company. This aspect of its work presentations from both Divisions Changes in assumptions and the are appropriate in relation to onerous Company’s website. focused on key accounting policies, on key areas of focus. The Audit completeness of disclosures were property leases and ongoing REVIEW OF AUDIT estimates and judgements, Committee is keen to continue to summarised for the Audit Committee. litigation matters. The Audit Committee has delegated COMMITTEE MEETINGS including significant or unusual be kept updated on key risk areas The increase in mortality rates was authority from the Board for ensuring As scheduled, the Audit Committee transactions or changes to these. of safety, security and financial specifically noted. The Audit Committee EXTERNAL GROUP AUDIT adherence to the Code provisions and met three times during 2016. Meeting In doing so the Audit Committee control and ad hoc presentations was satisfied with the disclosures EY is the appointed external auditor related guidance. attendance is set out in the table on reviewed the reports of will continue to take place made and judgements taken. to the Group, having been appointed page 47 of this Annual Report and Management and the controls during 2017. in 2009 following a tender process. GOVERNANCE REPORTS GOVERNANCE RESPONSIBILITIES Accounts 2016. assurance (internal audit) provider EXCEPTIONAL AND OTHER ITEMS Whilst James Nisbet became lead The responsibilities of the Audit and took into account the views The primary areas of judgement The Audit Committee considered the audit partner during 2015 due to Annie Committee include: The Audit Committee Chairman of the external auditor. considered by the Audit Committee appropriateness of the measure of Graham, the previous lead audit provides a full report of its activities, • The Audit Committee reviewed in relation to the financial statements underlying profits and the classification partner, being on maternity leave, • reviewing the Company’s financial findings and recommendations to the work of Management which contained within this Annual Report and transparency of items separately Annie re-assumed this position during results announcements and the Board after each meeting. involved assessing key risks at and Accounts 2016 and how these disclosed as exceptional and other 2016. There are no contractual financial statements and the Group and Divisional level were addressed are as follows: items. It was satisfied that the measure obligations in place which restrict the significant judgements and During each financial year the Audit according to their significance, of underlying profits provided a Audit Committee in its choice of estimates contained within them; Committee Chairman generally likelihood and impact, as well as GOODWILL AND reasonable view of the underlying external audit provider. • advising the Board on whether the follows a formal agenda structure the Group’s exposure to and INTANGIBLE ASSETS performance of the Group and that annual report and accounts of the for each of the meetings which are management of these risks. The The review for impairment of goodwill there was transparent disclosure of It is vitally important that the Audit Company are, when taken as a whole, planned. The agenda is reviewed at the Risk Register and evaluation of risk and intangible assets is based on cash items shown separately as exceptional Committee considers that its fair, balanced and understandable start of each year by the Committee constantly evolve and the Audit flow projections to calculate a value in and other items. appointed external auditor conducts a FINANCIAL STATEMENTS and provide the information Chairman and the Group Company Committee was satisfied that use for each area based on forecasts full and effective audit and, accordingly, necessary for shareholders to Secretary and they consider the Management had appropriate risk prepared by each Division. The REVENUE RECOGNITION its performance is subject to annual assess the Company’s performance, inclusion of any items over and above management strategies and achievability of the forecast is a risk, The Audit Committee has reviewed the review. In undertaking this review the business model and strategy; the standard items which the Audit systems in place to address the given inherent uncertainty within any work completed by Management in Chairman of the Audit Committee • ensuring compliance with Committee may wish to review. Group’s key business risks, such financial projection. the year to ensure that the Group has seeks the opinion of fellow Committee applicable accounting standards strategies and systems having appropriately recognised revenues members, the Chief Financial Officer and reviewing the appropriateness Ordinarily the Chairman of the Board been in place throughout 2016 The Audit Committee evaluated in accordance with its contractual and the views of certain members of of accounting policies and and the Chief Financial Officer, and up to the date of approval a paper from Management on the obligations during the period, paying Senior Management who have been practices which are in place; together with the external auditor, are of this document. results of the impairment assessment. attention to expected returns. The exposed to/had input into the audit • reviewing the Company’s internal given notice of all Audit Committee • The Audit Committee reviewed Key assumptions were reviewed and Audit Committee was satisfied with process. The Audit Committee reviews financial controls and the meetings and may be invited to attend and adopted an updated internal challenged by the Committee, the approach and judgements taken. and approves both the Company’s effectiveness of the internal

and speak at any meeting. The external audit plan, increasing the level including discount rates, business risk audit plan and the findings of the SHAREHOLDER INFORMATION audit function; auditor has the opportunity to meet of audits at both the operational factors and cash flow projections TAXATION external auditor in respect of its audit • reviewing the Group’s policies and with the Audit Committee without and controls level. based on the most recent budget and Provisioning for current and deferred of the Company’s financial statements, practices concerning business any Executive Directors present • The Audit Committee also reviewed strategic reviews. Actions and factors tax liabilities and assets requires the carefully monitoring these to ensure conduct, ethics and integrity, whenever necessary. the objectivity and independence likely to influence levels of impairment exercising of judgement. The Audit completeness, accuracy, clarity fraud and whistleblowing; and of the external auditor. were reviewed with alternative Committee addressed this through and integrity. • overseeing all aspects of the The Audit Committee has the • The Audit Committee reviewed scenarios requested for further the receipt of a range of reports from relationship with the external authority to seek any information it the process undertaken by analysis. Taking into account the Management and a separate Tax In seeking to ensure the external auditor, including its appointment, requires from any employee of the Management to support and allow documentation presented, the Audit Committee has been established to auditor’s effectiveness, the Audit the audit process, the supply of Company and believes it has received the Directors to make the Group’s Committee was satisfied with the deal with such requests (see further Committee keeps its objectivity and non-audit services and monitoring sufficient, reliable information from Viability Statement. The Committee approach and judgements taken. detail below). The Audit Committee independence under review together its effectiveness and independence. Management to enable it to fulfil its considered and provided input into challenged the appropriateness of with the nature and extent of the responsibilities during 2016. The the determination of the period Management’s views, including the non-audit services which it provides. Audit Committee can take such over which viability should be extent to which these are supported Historically these non-audit services independent professional advice assessed; which of the Group’s by appropriate external advice. In have included dealing with the Group’s as it considers necessary. principal risks and combinations tax affairs as it was considered its thereof should be modelled to knowledge of the Group’s business assess the impact on the Group’s

54 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 55 AUDIT COMMITTEE REPORT CONTINUED

processes and controls made it All non-audit work is put out to tender From January 2017, each Operating INTERNAL AUDIT The use of a standard accounting best-placed to undertake this work and non-audit fees paid to EY are Division has had a Senior Management The Audit Committee reviewed the manual by Finance teams throughout in the most cost-effective manner. approved by the Chief Financial Committee which meets quarterly Group’s internal control structure the Group ensures that transactions However, a change in the applicable Officer, who reports any significant and reports directly into the Executive and approved the scope of work and balances are recognised and EU regulations regarding non-audit payments or awards of work to the Committee. These Committees have and fees for external controls measured in accordance with

fees has meant that from 1 January Audit Committee. a standard agenda to review, inter alia, assurance providers. prescribed accounting policies and STRATEGIC REPORT 2017 there is a restriction on the work audit, compliance, HR and safety that information is appropriately that an external auditor can perform With regard to work as Reporting and security issues. The Operating Due to the complexity of the Group’s reviewed and reconciled as part of the for a listed company in relation to Accountant, the Audit Committee Divisions have also adopted Corporate business and the international nature reporting process. Further, the use of non-audit services. During 2016 was satisfied that EY was the most Governance Manuals which detail of the Aviation business, the Audit a standard reporting tool by all entities the Company undertook a detailed appropriate and cost-effective the requisite controls in implementing Committee has decided that the in the Group ensures that information review of the audit and tax services provider of this service and therefore the policies and procedures set out internal audit function is best is gathered and presented in a provided to it which resulted in such appointment was in the best in the Statement. Certain activities, served by using a mixture of external consistent manner which facilitates PricewaterhouseCoopers LLP being interests of the Group. In order to including Treasury, Taxation, Insurance, providers and internal staff. As a the production of the consolidated appointed as the Group’s tax advisers ensure auditor independence was Pensions and Legal, are controlled result the function is delivered by financial statements. from 1 July 2017. maintained, the Reporting Accountant centrally with reports reviewed by the a combination of Deloitte LLP work was led by a partner and senior Board as appropriate. (“Deloitte”), given its global spread Whilst no system can provide absolute In 2016, as in previous years, the teams independent of the audit team. and resources, other external guarantee and protection against GOVERNANCE REPORTS GOVERNANCE non-audit work undertaken on the The Audit Committee believes that the During 2016 the Risk Register operational providers as required and material loss, the system is designed Group’s behalf by EY was not handled level and scope of these non-audit process evolved further. Risks are operational teams. The work undertaken to give the Directors reasonable by the EY external audit partner services do not impair the objectivity now categorised into 14 areas with by Deloitte primarily focuses on assurance that problems can be but managed separately from of the external auditor. key identified risks, both financial and financial controls and business identified promptly and remedial the audit workstream. non-financial (the latter including management with operational branch action taken as appropriate. The Following a review held at the conclusion environmental, social and governance and station audits undertaken by Directors, through the Board’s During 2016, audit fees paid to EY of the 2016 audit the Audit Committee risks), reviewed by the Board as well external advisers and internal staff. review of risk and the work of the amounted to £1.0m and non-audit was satisfied that EY continued to as the Executive Committee on an Audit Committee, have reviewed the fees amounted to £3.3m. Non-audit provide an effective audit and remained ongoing basis. A formal six-monthly In accordance with the Financial effectiveness of the system of internal fees included £1.9m in connection with independent and objective. review of risks and controls takes Reporting Council’s Guidance on control for the accounting period the work as Reporting Accountant on place, supported by the Group’s Risk Management, Internal Control under review and consider that it the prospectus and circular relating INTERNAL CONTROL AND controls assurance provider. The and Related Financial and Business accords with guidance. to the acquisition of ASIG and the RISK MANAGEMENT Executive Committee also reviews Reporting (September 2014), the FINANCIAL STATEMENTS associated Rights Issue. The Audit A key factor in the Group’s approach each Division’s performance, strategy Directors are responsible for the On behalf of the Board Committee regularly reviews the to internal control is the recognition and risk management. Annual Group’s system of internal control remuneration received by the external of the need for risk awareness and compliance statements on internal which covers financial, operational and Silla Maizey auditor for audit services, audit-related the ownership of risk management control are certified by each Division compliance controls together with risk Audit Committee Chairman services and non-audit work to ensure by Executives at all levels. The Group and, where appropriate, the Group management. The system has been in 7 March 2017 a balance of objectivity, value for operates an Executive Committee Finance function. Details of the key place throughout 2016 and up until the money and compliance with statutory which convenes six times per annum risks identified through this exercise date of this Annual Report and Accounts duties is maintained. The outcome to review the risk programmes are included on pages 32 and 33 of 2016, except that it did not apply to the of these reviews in 2016 was that and internal audit outcomes and this Annual Report and Accounts 2016. Group’s material joint ventures. performance of the relevant non-audit ensure that all required actions are work (excluding the tax services implemented. All risk and compliance A Treasury Review Committee meets Findings from the internal audit

referenced above) by EY continued programmes are also reviewed quarterly monthly to review the adequacy of the programme (on financial and key SHAREHOLDER INFORMATION to be the most cost-effective way of by Divisional senior leadership teams. Group’s facilities against potential non-financial risks) and areas conducting the Group’s businesses Additionally, a Statement of Group utilisation and commitments and identified for improvement are and that no conflict of interest existed Policies and Procedures (the to monitor and manage the Group’s reviewed by the Audit Committee and between the provision of such audit “Statement”) sets out the exposure to interest rate and currency prioritised for action by Management. and non-audit services. Additionally, responsibilities of the Executive movements. Additionally, a Tax The Audit Committee reviews follow- such reviews enabled the Audit Committee, including authority Committee meets quarterly to assess up reports from Management to Committee to confirm that the levels, reporting disciplines and the impact of any tax changes which ensure that any weaknesses identified Company continued to receive an responsibility for risk management may affect the Group in any of the in internal audit reports submitted to efficient, effective and independent and internal control. jurisdictions in which it operates. it are fully addressed and improved audit service from EY. procedures adopted. Further details on how the Board manages business risks are shown on pages 30 and 31 of this Annual Report and Accounts 2016.

56 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 57 REMUNERATION COMMITTEE REPORT

STATEMENT BY GEOFF EATON, • The Share Matching Plan (“SMP”) The Remuneration Committee The packages of all new Board REMUNERATION COMMITTEE will be discontinued after the 2017 determined that it would be members are in line with the CHAIRMAN awards. This will simplify the appropriate for part of the Chairman’s Company’s Remuneration Policy On behalf of the Board, I am pleased remuneration package and reduce fee to be delivered as a fixed number (and the New Policy). to introduce the Company’s the overall headline incentive of shares. This portion of his fee

Remuneration Report for the financial opportunity available. There is no arrangement was approved by LTIP STRATEGIC REPORT REMUNERATION year ended 31 December 2016. This change to the Long-Term Incentive the Company’s shareholders at As disclosed in the Company’s Annual Report details the Remuneration Policy Plan (“LTIP”) award maximum, the general meeting convened Report and Accounts 2015, 2016 awards COMMITTEE REPORT for the Company’s Executive and which will continue at 100% on 11 October 2016. Dr Smurfit was to Executive Directors under the updated Non-Executive Directors and provides of salary. awarded 20,000 ordinary shares in rules of the Company’s LTIP were based details of their remuneration for 2016. • Alignment with shareholders the Company on 17 November 2016 on Total Shareholder Return as this was will be strengthened through an and, subject to his continuation in considered the most appropriate target Having been appointed in September additional 12 month holding period office, the same number of ordinary for rewarding delivery of long-term 2015 I have now completed my first full for future LTIP awards. The holding shares will be part of his fee shareholder value. 2017 LTIP awards year as Chairman of the Company’s period will normally continue post arrangement in 2017 and 2018. will be made on a similar basis. Remuneration Committee and, an Executive leaving. during my tenure to-date, I have been • The Remuneration Committee As detailed in the Annual Report However as we progress with keen to ensure that our Executive considered that the current and Accounts 2015, Jeremy Stafford our strategy, the Remuneration GOVERNANCE REPORTS GOVERNANCE remuneration is fair, balanced and shareholding guidelines of resigned his position as Chief Committee will review whether to reflective of the general markets and 200% of salary are excessive for Executive Officer and Director reintroduce a financial measure, such environments in which we operate. a company of John Menzies’ size of the Company in January 2016. as long-term growth, into the LTIP. and disproportionate to the level As previously disclosed (and in The Remuneration Policy which of long-term share incentive accordance with section 430(2B) of REMUNERATION OUTCOMES the Company adopted following being offered. The shareholding the Companies Act 2006), following The Remuneration Committee shareholder approval at its annual guidelines will therefore be discussions between Mr Stafford and has reviewed 2017 base salary general meeting (“AGM”) in May 2014 reduced to 100% of salary. The the Company, Mr Stafford received levels for Executive Directors. On is designed to both reflect the Remuneration Committee believes a payment of £65,200 (gross) for loss appointment to the Board, Forsyth strategic objectives of the Company that this level of shareholding, of office. He also received a maximum Black’s salary was set initially at a and to drive long-term shareholder together with the new holding contribution of £4,000 plus VAT towards lower level to allow for increases as value. Whilst we continued to operate period requirement, will create legal fees incurred in connection with he developed in the role. Against within this Remuneration Policy a strong, but proportionate, his leaving. No other remuneration that background the Remuneration FINANCIAL STATEMENTS during 2016, a revised Remuneration alignment with shareholders. payment or any payment for loss of Committee determined that it Policy (the “New Policy”) will be put • It is proposed that Executive office has been made to Mr Stafford. was appropriate for his salary to be forward for shareholder approval at Directors will enter into new service increased from £300,000 to £350,000 the forthcoming AGM to ensure we contracts which provide for a His unvested LTIP and SMP awards from 1 January 2017. Additionally, remain compliant with the applicable 12 month notice period for both lapsed in January 2016. Giles Wilson’s salary will be increased reporting regime. Shareholders will the Executive and the Company from £300,000 to £325,000 with effect Geoff Eaton have a binding vote on the resolution (as opposed to the current six Additionally, Paula Bell resigned from from 1 May 2017, an increase which also REMUNERATION COMMITTEE CHAIRMAN to approve the New Policy. month period). the Board in May 2016. She did not reflects his progress in the role since receive any payments in relation to his appointment. John Geddes’ salary COMMITTEE MEMBERS As you will see in the Policy section I hope that shareholders will agree her resignation and her unvested LTIP was reviewed when he was appointed Name Position of this Remuneration Committee that overall we have taken a balanced and SMP awards lapsed in May 2016. to the Board in November 2016.

G Eaton Chairman Report, the New Policy remains approach to Executive remuneration. SHAREHOLDER INFORMATION S Maizey Member largely unchanged from the current We have reduced maximum incentives Following a review of the The 2014 LTIP and Bonus Remuneration Policy. However, we D Garman Member and introduced holding periods, Management structure, Forsyth Black Co-Investment Plan awards were have looked at the Remuneration but have also reviewed shareholding was appointed President & Managing assessed by the Remuneration P Baines1 Member Policy afresh, particularly in the guidelines and contracts and set Director of Menzies Aviation and an Committee based on performance to Note: context of the Company’s current these at what we consider to be Executive Director of the Company in 31 December 2016. The Remuneration 1. Paul Baines was appointed to the Remuneration Committee upon his appointment position, strategy and performance reasonable for a company of our size. January 2016. Giles Wilson was Committee determined that the as a Non-Executive Director on 1 June 2016. ambitions. We have a new Executive appointed Chief Financial Officer relevant performance measures were Management team which the BOARD CHANGES in June 2016 following Paula Bell’s not met and such awards will lapse Remuneration Committee Having completed seven years as resignation. John Geddes, the Group following the Company’s final results is keen to align with the Company’s Chairman of the Company, Iain Napier Company Secretary, was appointed to announcement on 8 March 2017. performance, whilst ensuring that stepped down from the Board the Board in the position of Corporate Further details are provided on pages the overall package is balanced and following the Company’s AGM in May Affairs Director in November 2016 and 71 and 72 of this Annual Report and reasonable in the context of a FTSE 2016. Thereafter Dr Dermot F. Smurfit Paul Baines was appointed as Accounts 2016. SmallCap company. The key changes was appointed as the new Chairman a Non-Executive Director with which are reflected in the New Policy in July 2016. effect from 1 June 2016. Geoff Eaton are as follows: Remuneration Committee Chairman 7 March 2017

58 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 59 REMUNERATION COMMITTEE REPORT CONTINUED

Purpose and link to strategy Operation Maximum opportunity Performance metrics 1. BASIC SALARY Normally reviewed annually. There is no maximum None, although individual Attract and retain high Salaries for 2017 will be: opportunity. Salary increases and Group performance are performing individuals, will normally be in line with the factors taken into account • F Black: £350,000 reflecting market value average increase awarded in when setting salaries. • G Wilson: £325,000 of role and Executive’s the wider employee population. STRATEGIC REPORT • J Geddes: £250,000 DIRECTORS’ REMUNERATION skills and experience. Higher increases may be The Remuneration made in certain circumstances POLICY Committee takes into and at the Remuneration consideration a number Committee’s discretion. of factors when setting For example, this may include salaries including (but (but is not limited to): not limited to): • increase in the scope • the size and scope of an and/or responsibility individual’s responsibilities; of an individual’s role; • an individual’s skills, • development of an experience and individual within the role; DIRECTORS’ REMUNERATION: PRINCIPLES performance; • corporate events such as REPORTS GOVERNANCE The current Remuneration Policy, which is available at www.johnmenziesplc.com, was approved by the Company’s • typical salary levels a significant acquisition shareholders at its annual general meeting (“AGM”) on 16 May 2014. However, in compliance with section 439A of the for comparable roles or Group restructuring Companies Act 2006 (the “2006 Act”), the following Remuneration Policy (the “New Policy”) is being put forward for at appropriate which impacts the scope shareholder approval at the Company’s 2017 AGM. The New Policy contained here will be subject to a binding vote comparator companies; of a role; and and will take effect immediately upon receipt of such approval from the Company’s shareholders. The Company’s • pay and conditions • where it is considered Remuneration Policy has been developed to ensure that the Company is well placed to attract, retain and motivate elsewhere in the necessary for the retention Directors with the ability and experience necessary to run the Company successfully, whilst also aligning Executive Company; and of an Executive or to reflect remuneration with the financial returns of its shareholders. The clawback and malus policy remains as included in the • inflation in the significant changes in Company’s Annual Report and Accounts 2015 and the only material differences between the current Remuneration relevant market. market practice. Policy and the New Policy are, as set out on page 59 of this Annual Report and Accounts 2016, as follows: 2. ANNUAL BONUS The annual bonus is paid Maximum annual award All measures and targets Incentivise delivery of in cash and shares, based is 100% of salary. are reviewed annually and • We are removing the Bonus Co-investment Plan (“BCIP”)/Share Matching Plan (“SMP”) following 2017. This results Group and individual on the Remuneration set at the start of each FINANCIAL STATEMENTS in a reduction in the headline total opportunity. objectives and Committee’s assessment financial year. • The current Remuneration Policy provides for a shareholding target of 200% for Executive Directors but this enhance performance. of performance during the The measures will include is reduced to 100% under the New Policy. financial year in question. relevant Group and/or • All new awards made under the Company’s Long-Term Incentive Plan (“LTIP”) will have a 12 month retention period Divisional financial attached post-vesting. DEFERRED BONUS 20% of any award is paid measures and may include • The service contracts for the Executive Directors provide for a six month notice period for both the Executive and the IN SHARES in deferred shares with performance against Key Company (with the exception of Forsyth Black who may terminate his appointment upon giving not less than 12 months’ Encourages a longer- such shares having term focus which dividend entitlements. Results Areas (“KRAs”) or notice). It is proposed that the Executive Directors enter into new service contracts which provide for a 12 month notice is aligned to other strategic measures period for both the Executive and the Company. The Remuneration Committee shareholders as appropriate. may claw back bonus awards and discourages for a period of three years after At least 70% of the inappropriate the end of the relevant bonus bonus will be based

risk-taking. SHAREHOLDER INFORMATION year in the event of the on financial measures. misstatement of accounts that materially increased the amount of bonus paid or misconduct by an employee which has or could have led to their employment being summarily terminated. The Remuneration Committee may increase the level of deferral at any time.

60 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 61 REMUNERATION COMMITTEE REPORT CONTINUED

Purpose and link to strategy Operation Maximum opportunity Performance metrics Purpose and link to strategy Operation Maximum opportunity Performance metrics BCIP/SMP Directors can voluntarily invest Directors can voluntarily Performance criteria are 5. BENEFITS Executive Directors receive As the cost of providing other None. The BCIP/SMP will up to 40% of any cash bonus invest up to 40% (on a reviewed and set at the start To provide market benefits which typically may benefits, including health be discontinued from awarded, after deduction of gross basis) of any cash of each award period. levels of benefits include, but are not limited insurance and life assurance, 1 January 2018. tax, to acquire contributory bonus received. provision. to, private health insurance, may vary from year to year, it Matching awards will vest shares. It is the amount of the life assurance, ill-health is not considered practical to STRATEGIC REPORT Investments are matched based on Group Earnings Per gross bonus invested which insurance protection and define a maximum level for at a maximum of 1:1 with Share (“ ”) performance. determines the number of EPS a company car allowance. these or any other benefits. shares that vest dependent qualifying shares. No more than 25% of an Other benefits may be The level of any relocation on performance. award vests on the attainment operated through salary benefits, allowances and Matching shares are awarded The maximum opportunity of threshold target. sacrifice. The Remuneration expenses will depend on based on the number of is 32% of salary for the award Committee may introduce or the specific circumstances. qualifying shares. in 2017. No SMP award will remove benefits offered to There is no overall maximum Vesting of shares is be granted following the individuals where it considers level of benefits. dependent on the attainment 2017 awards. it appropriate to do so. of performance criteria. Where Executive Directors Matching shares usually vest are required to relocate, the

over three years. Remuneration Committee REPORTS GOVERNANCE may, if considered appropriate, Matching awards may offer additional relocation or incorporate the value of expatriate benefits. dividends over the relevant performance period. COMPA N Y Accumulated savings may Monthly contributions of None. SH A RES AV E be used to exercise an option up to the HMRC-approved 3. LTIP Awards under the LTIP may Maximum annual grant value Performance criteria are SCHEME to acquire ordinary shares of limit over a three or five To incentivise value be in the form of a conditional is 100% of salary. reviewed and set at the start This provides the £0.25 each in the Company year period. creation over the right to acquire shares or an of each award period, using Company’s UK (“Ordinary Shares”). medium and option to acquire shares. one or more of relative Total employees with long-term. Shareholder Return (“TSR”), The option price of such Vesting of shares is an interest in the Group EPS performance, Ordinary Shares may be To reward the dependent on the attainment performance of Return on Capital Employed discounted by up to the execution of the its shares.

of performance criteria over a FINANCIAL STATEMENTS or any other Group financial HMRC-approved level Group’s strategy. period of at least three years. and/or Divisional (currently 20%). To encourage performance measures. After vesting all shares longer-term thinking SHAREHOLDING Shareholding guidelines must be held for a further No more than 25% and planning. GUIDELINES for Executive Directors are 12 month period. of an award vests on To align the Executive 100% of salary (built up To align the interests the attainment of Directors with the over time). of shareholders threshold target. long-term interests and Directors. of shareholders. 4. PENSION Directors can participate Under the Menzies Money None. To provide market in the Menzies Money Purchase Pension Scheme levels of pension Purchase Pension Scheme Directors may receive provision. or cash equivalent. a pension contribution SHAREHOLDER INFORMATION of up to 20% of salary. F Black and J Geddes participate in a defined The Remuneration benefit pension scheme. Committee may determine The scheme closed to new that Executive Directors entrants in 2007. receive a cash supplement of up to 20% of salary in lieu The defined benefit pension of pension. plans are operated by the trustees of the Menzies The defined benefit Pension Fund. These pension scheme provides arrangements were agreed pension of up to two-thirds prior to 27 June 2012. of pensionable earnings or the ‘scheme earnings cap’ if lower. Participating Directors receive a payment of 20% of the difference between the cap and their current salary.

62 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 63 REMUNERATION COMMITTEE REPORT CONTINUED

Purpose and link to strategy Operation Maximum opportunity Performance metrics The Remuneration Committee reserves the right to make any remuneration payments and/or payments for loss of office (including exercising any discretions available to it in connection with such payments), notwithstanding that they are not CHAIRMAN AND The fees for Non-Executive in line with the New Policy set out above, where the terms of the payment were agreed: (i) before 16 May 2014 (the date NON-EXECUTIVE Directors comprise a basic on which the Company’s first shareholder-approved Directors’ Remuneration Policy came into effect); (ii) before the New DIRECTORS’ FEES payment plus additional To attract Non- payments for being Chairman Policy set out above came into effect, provided that the terms of the payment were consistent with the shareholder-approved

Executive Directors of a Committee, a Committee Directors’ Remuneration Policy in force at the time they were agreed; or (iii) at a time when the relevant individual was not STRATEGIC REPORT of sufficient skills and member or for being the a Director of the Company and, in the opinion of the Remuneration Committee, the payment was not in consideration for experience to fulfil Senior Independent Director. the individual becoming a Director of the Company. For these purposes ‘payments’ includes the Remuneration Committee the role. Differential fee levels may be satisfying awards of variable remuneration and, in relation to an award over shares, the terms of the payment are ‘agreed’ paid for Non-Executive at the time the award is granted. Directors depending on the skills, experience, nationality, The Remuneration Committee may make minor amendments to the Remuneration Policy (for regulatory, exchange and responsibilities of control, tax or administrative purposes or to take account of a change in legislation) without obtaining shareholder an individual or additional approval for that amendment. time commitments for the role. 1. CLAWBACK AND MALUS The Chairman receives a fee Awards granted during 2016 and onwards to Executive Directors are subject to the following terms:

for services to the Company. • Cash and deferred bonuses may be clawed back for a period of three years after the end of the relevant bonus year REPORTS GOVERNANCE A portion of Chairman and in the event of the misstatement of accounts that materially increased the amount of bonus paid or misconduct by Non-Executive Directors’ an employee which has or could have led to their employment being summarily terminated. fees may be delivered as • Matching deferred bonus awards and LTIP awards may be clawed back after vesting where the Company is required Company shares. to restate its accounts to a material extent; the Board becomes aware of any material wrongdoing on the part of an employee which would have entitled the Company to terminate the employee’s employment; or any other reason the Non-Executive Directors’ fees Remuneration Committee includes in the relevant terms at the time an award is made. The clawback period will be set are reviewed periodically by by the Remuneration Committee. the Board with reference to external benchmarking. 2. RECRUITMENT POLICY In determining appropriate remuneration arrangements upon hiring a new Executive Director, the Remuneration Notes: 1. Annual bonus Committee will take into consideration all relevant factors including, but not limited to, the role, the remuneration being The annual bonus performance measures have been chosen to provide an appropriate balance between incentivising Executive Directors to meet financial forfeited and the jurisdiction the candidate was recruited from. The Remuneration Committee is mindful of the need to FINANCIAL STATEMENTS targets for the year and to deliver the Group’s KRAs. This balance allows the Remuneration Committee to effectively reward performance against the key avoid paying more than is necessary upon recruitment. elements of the Group’s strategy. Threshold and stretch targets are derived from a review of the historical and projected performance of the Group and its peers, together with an analysis of analysts’ expectations. Salary should be set to take into account role and responsibilities. For interim positions a cash supplement may be paid 2. LTIP rather than salary (e.g. a Non-Executive Director taking on an Executive function on a short-term basis). The ultimate goal of the Company is to provide long-term sustainable returns to shareholders. The performance measures are intended to align Executive remuneration with this goal. In particular (for 2017): Relative TSR – Total shareholder return relative to a relevant peer group is currently considered to be the best measure of the Company’s ultimate delivery The Remuneration Committee may make awards on hiring an external candidate to ‘buy out’ remuneration arrangements of value to shareholders. The Remuneration Committee considers that this promotes alignment between Executive Director reward and shareholders’ financial returns. Targets are set with reference to wider market practice and are positioned at a level which the Remuneration Committee considers represent forfeited upon leaving a previous employer. In doing so the Remuneration Committee will take account of relevant factors stretching performance. including any performance conditions attached to these awards, the form in which they were granted (i.e. cash or shares) 3. Differences in remuneration policy for Directors and other employees and the time over which they would have vested. The key principle should be that buyout awards should not be more Remuneration arrangements throughout the Group are based on the principle that reward should be set at competitive levels to support the delivery of the Group’s strategy and also attract, retain and motivate individuals who have the necessary skills for each role. Pay differs for employees of different seniority and valuable than those forfeited. for those operating in different parts of the world. For example, in accordance with market practice and shareholder expectations, the remuneration arrangements for Executive Directors place a significant emphasis on long-term performance related pay compared to other employees. The Company also Normally the maximum variable remuneration (excluding buyouts) would be in line with the Directors’ Remuneration

operates an HMRC-approved Sharesave Scheme, in which all employees (including Executive Directors) are eligible to participate and which aims to promote a SHAREHOLDER INFORMATION sense of ownership amongst staff. Policy table above. The Remuneration Committee retains the flexibility to determine that for the first year of appointment any annual bonus award will be subject to such conditions as it may determine. Against that background, where the The LTIP and the SMP will be operated in accordance with the rules of the respective plans as approved by shareholders. potential exists that a new Executive Director could have different roles and responsibilities to those currently appointed, Awards may be adjusted in accordance with the rules approved by shareholders. For example, LTIP and SMP awards may such responsibilities may require to be reflected in that Executive Director’s remuneration arrangements. Taking this into be adjusted in the event of any variation of the Company’s share capital. The Remuneration Committee may recommend account the Remuneration Committee may, for the first year, make an additional performance-related incentive award to the Board that it amends the targets applicable to LTIP or SMP awards if an event occurs which causes the Remuneration of up to 50% of salary. The form of any award would be determined at the relevant time. Committee to reasonably consider that, having due regard to the interests of shareholders, the performance targets should be varied to ensure a fair measure of performance or a more effective incentive for participants. Where an Executive Director is appointed from within the Group, the normal policy of the Company is that any legacy arrangements should be honoured in line with the original terms and conditions. Similarly, if an Executive Director is appointed following the Company’s acquisition of, or merger with, another company, legacy terms and conditions should be honoured.

In the event of the appointment of a new Non-Executive Director, remuneration arrangements will be in line with those detailed in the Remuneration Policy table above.

64 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 65 REMUNERATION COMMITTEE REPORT CONTINUED

3. SERVICE CONTRACTS AND LETTERS OF APPOINTMENT LTIP If a Director ceases office or employment with the Company any unvested awards will The Executive Directors have service contracts with the Company as detailed below. The Company’s practice on notice lapse unless the individual is a good leaver. periods has been that they should be for a period of six months for both the Executive and the Company. The Remuneration Committee has determined that, having due regard to prevailing market conditions and practice among companies Good leavers are those participants who leave by reason of injury, disability, of comparable size, and subject to the New Policy being approved by the Company’s shareholders, the service contracts retirement (with the agreement of the employing company), redundancy, the transfer of the individual’s employing company or business out of the Group or such other

of Executive Directors should contain a 12 month notice period for both the Executive and the Company. STRATEGIC REPORT circumstances as the Remuneration Committee may determine. This discretion will not be exercised where the individual is dismissed for misconduct. Awards will Executive Director Date of service contract Notice period vest no earlier than the normal vesting date subject to performance to the end of the 1 F Black 13/01/2016 Terminable on 26 weeks’ notice relevant performance period and time pro-rating. The Remuneration Committee G Wilson 15/04/2016 Terminable on 26 weeks’ notice may determine the extent to which the additional holding period will continue to J Geddes 23/11/2016 Terminable on 26 weeks’ notice apply post leaving.

Note: If the participant dies, awards will normally vest as soon as practical on a time- 1. Forsyth Black may terminate his appointment upon the giving of not less than 52 weeks’ notice. apportioned basis and subject to the Remuneration Committee’s assessment of the likelihood that the performance conditions will be met in the ordinary course of events. All Executive Directors’ service contracts and Non-Executive Directors’ letters of appointment are available for inspection Pension The Director will be eligible to receive the standard contribution to the defined at the Company’s registered office. contribution pension plan, or cash equivalent, during the notice period. Company Leavers will be treated in accordance with the rules of the approved Scheme. The Chairman and each of the Non-Executive Directors have letters of appointment. The letters of appointment do not Sharesave Scheme REPORTS GOVERNANCE contain any contractual entitlement to a termination payment and these Directors can be removed in accordance with Benefits The Company may make a contribution towards reasonable legal fees incurred in the Company’s Articles of Association. The Chairman and all Non-Executive Directors are subject to annual re-election. relation to any agreement to cease employment. Buyout awards The Remuneration Committee should determine the leaving terms for any such award 4. PAYMENTS TO OUTGOING DIRECTORS and additional at the time of grant. Executive Directors will be entitled to receive their basic salary and contractual benefits for any notice period. The Company recruitment awards may, in its absolute discretion, elect to terminate an Executive Director’s employment by making a payment in lieu of notice of the individual’s salary for that period. The Remuneration Committee may structure any such payments in such The Remuneration Committee reserves the right to make any other payments in connection with a Director’s cessation a way as it deems appropriate, taking into account the circumstances of departure. Any payments of compensation will of office or employment where the payments are made in good faith in discharge of an existing legal obligation (or by way be subject to negotiation and, the Remuneration Policy includes consideration of appropriate mitigation, including of damages for breach of such an obligation) or by way of a compromise or settlement of any claim arising in connection phasing of payments. with the cessation of a Director’s office or employment. Any such payments may include, but are not limited to, amounts in respect of accrued leave, paying any fees for outplacement assistance and/or the Director’s legal or professional advice In the event of a Director’s departure, any outstanding share awards will be treated in accordance with the rules of the relevant fees in connection with his cessation of office or employment. FINANCIAL STATEMENTS share plan. The following principles apply for the treatment of remuneration elements following loss of office of a Director: In the event of a change of control or winding-up of the Company, the treatment of share awards will be in accordance with the rules of the relevant share plan which, in summary, are as follows: Annual bonus There is no automatic entitlement to annual bonus. Taking into account the circumstances of leaving, the Remuneration Committee may award a bonus • LTIP awards may vest upon a change of control, taking into account the Remuneration Committee’s assessment of the in respect of performance in the relevant financial year with appropriate consideration extent to which the performance targets have been met and the proportion of the performance period that has elapsed. of time pro-rating. • BCIP/SMP awards may vest upon a change of control and winding-up, subject to the Remuneration Committee’s Deferred bonus shares Deferred bonus shares are required to be transferred back to the Company (or the assessment of the extent to which the performance targets have been met and, unless the Remuneration Committee Director to pay the market value of such shares to the Company) in circumstances determines otherwise, time pro-rating by reference to the proportion of the performance period elapsed. of resignation or dismissal. In other circumstances the deferred bonus shares would normally be retained by the Director. BCIP/SMP If a Director ceases office or employment with the Company any unvested awards will

lapse unless the individual is a good leaver. SHAREHOLDER INFORMATION Good leavers are those participants who leave by reason of death, injury, ill-health, disability, retirement, redundancy, the transfer of the individual’s employing company or business out of the Group or such other circumstances as the Remuneration Committee may determine. This discretion will not be exercised where the individual is dismissed for misconduct. For good leavers, awards will vest subject to the Remuneration Committee’s assessment of the extent to which the performance targets have been met and, unless the Remuneration Committee determines otherwise, time pro-rating by reference to the proportion of the performance period elapsed. Under the BCIP and upon death, the matching ratio will be 1:1 unless the Remuneration Committee determines that it should apply a lower ratio taking into account the particular circumstances, the time elapsed in the performance period and the extent to which the performance targets are likely to be achieved. Under the SMP and upon death, time pro-rating by reference to the proportion of the performance period elapsed will apply unless the Remuneration Committee determines that it would be fairer to apply a substantially higher or lower matching ratio taking into account the particular circumstances, the time elapsed in the performance period and the extent to which the performance targets are likely to be achieved.

66 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 67 REMUNERATION COMMITTEE REPORT CONTINUED

5. ILLUSTRATIONS OF REMUNERATION POLICY The following charts illustrate the different elements of the Executive Directors’ remuneration under three different performance scenarios: ‘Fixed, ‘Mid’ and ‘Maximum’. The assumptions used are provided below the charts.

£’000 1500 ANNUAL REPORT STRATEGIC REPORT 1400 1300 Total: £1,246k Total: £1,153k ON REMUNERATION 1200 1100 28% TOTAL REMUNERATION RECEIVED FOR THE YEAR ENDED 31 DECEMBER 2016 28% The table below provides a single figure of remuneration for each member of the Board, broken down into each element 1000 of pay and compared to the previous year. Total: £841k 900 9% 9% 800 Jeremy Stafford resigned from the Board on 13 January 2016 whilst Paula Bell and Iain Napier stepped down following the Total: £710k Total: £655k 30% Company’s annual general meeting (“AGM”) on 20 May 2016. 700 12% 12% 28% 2% 2% 600 28% 9% Forsyth Black was appointed to the Board on 13 January 2016, both Giles Wilson and Paul Baines were appointed with REPORTS GOVERNANCE 25% 25% Total: £459k 500 Total: £434k Total: £399k effect from 1 June 2016, Dr Dermot F. Smurfit became Chairman on 25 July 2016 and John Geddes was appointed to 14% 30% the Board with effect from 23 November 2016. 400 2% Total: £261k 27% 300 The table below and items 1 to 8 are subject to audit by the Company’s auditor. 100% 61% 35% 100% 200 61% 35% 100% 57% 31% Bonus 100 Taxable Co-investment Long-term Total long-term Total Base salary/fee benefits1 Annual bonus Plan Incentive Plan incentives Pension remuneration 0 Fixed Mid Maximum Fixed Mid Maximum Fixed Mid Maximum £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 President & MD, Menzies Aviation Chief Financial Officer1 Corporate Affairs Director 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 LTIP BCIP/SMP Annual Bonus Fixed Executive Directors F Black2 289 – 14 – 275 – – – – – – – 70 – 648 –

Component ‘Fixed’ ‘Mid’ ‘Maximum’ 2 G Wilson 175 – 46 – 175 – – – – – – – 35 – 431 – FINANCIAL STATEMENTS Base salary Base salary for 2017 J Geddes2 27 – 2 – 26 – – – – – – – 9 – 64 – Pension Defined benefit – single figure value for 2016 Non-Executive Directors Defined contribution/cash supplement – value for 2017 D Smurfit2,3 173 – – – – – – – – – – – – – 173 – Benefits Taxable value of annual benefits provided in 2016 D Jenkinson4 69 40 – – – – – – – – – – – – 69 40 Annual bonus (cash 0% of salary 50% of salary 100% of salary S Maizey 46 45 – – – – – – – – – – – – 46 45 and deferred shares) D Garman 49 27 – – – – – – – – – – – – 49 27 BCIP/SMP 0% of salary 25% vesting 100% vesting of 1:1 match G Eaton 46 26 – – – – – – – – – – – – 46 26 of 1:1 match on deferral of 40% of 2 ‘Maximum’ bonus P Baines 25 – – – – – – – – – – – – – 25 – LTIP 0% vesting 25% vesting 100% vesting Former Directors J Stafford5,6 33 400 1 13 – – – – – – – – 7 80 41 493

Notes: P Bell5 188 319 9 15 – – – – – – – – 36 64 233 398 SHAREHOLDER INFORMATION 1. Benefits exclude one-off relocation costs provided in 2016. 5 2. The values for the BCIP/SMP and the LTIP exclude share price growth following grant or the value of any dividend equivalent payments. I Napier 78 188 – – – – – – – – – – – – 78 188

Notes: 6. CONSIDERATION OF EMPLOYEE CONDITIONS ELSEWHERE IN THE GROUP 1. Benefits offered to Executive Directors include a car allowance and health insurance. Giles Wilson’s benefits for 2016 include £37,000 for relocation costs The average base salary increase awarded across the workforce provides a key reference point when determining levels in relation to his appointment to the Board and the Company has agreed to meet some further expenditure in 2017 in relation to his relocation. Details of the of increase for the Executive Directors to ensure that all arrangements remain reasonable. pension arrangements for each of the Directors are included on page 75 of this Annual Report and Accounts 2016. 2. Relevant remuneration reflects the individual appointment dates of each of Forsyth Black (13 January 2016), Giles Wilson (1 June 2016), John Geddes (23 November 2016), Dr Dermot F. Smurfit (25 July 2016) and Paul Baines (1 June 2016) to the Board. The Group employs 35,000 people in 245 locations globally and the Remuneration Committee therefore did not believe 3. Part of the Company’s fee arrangement with Dr Smurfit for his services in his first year as Chairman was a cash fee satisfied by way of issue of up to 20,000 ordinary it practical or reasonable to consult employees on the Remuneration Policy for Executive Directors during 2016. The shares of £0.25 each in the Company (“Ordinary Shares”). Therefore, in accordance with the resolutions approved by the Company’s shareholders at the general meeting convened on 11 October 2016, the Company transferred 20,000 Ordinary Shares out of Treasury to Dr Smurfit on 17 November 2016 at a price of 490.8483 pence Remuneration Committee took into account employee conditions across the Group when determining the New Policy. per Ordinary Share. For the avoidance of doubt, the value of these Ordinary Shares is included in the fee figure for Dr Smurfit. 4. The figure of £69,000 reflects the pro-rated increase of Dermot Jenkinson’s fee from £40,000 to £188,000 during the period in which he held the office of 7. CONSIDERATION OF SHAREHOLDER VIEWS Interim Chairman. 5. Relevant remuneration reflects the individual leaving dates of each of Jeremy Stafford (13 January 2016), Paula Bell (29 July 2016) and Iain Napier (20 May 2016). The Remuneration Committee reviews shareholder feedback on Executive remuneration matters as well as developments 6. A payment of £65,200 (gross) was also made to Jeremy Stafford for loss of office together with a contribution of £4,000 plus VAT towards legal fees incurred in in investor body guidelines, and has taken these into account in formulating Executive remuneration policies. connection with the foregoing. No other remuneration payment or any payment for loss of office of the type specified in section 430(2B) of the Companies Act 2006 was made to him.

68 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 69 REMUNERATION COMMITTEE REPORT CONTINUED

1. BASE SALARY 2016 BONUS AWARDS Salaries of Executive Directors and other Company staff are reviewed annually. The current salaries for Executive Directors For 2016 bonuses were calculated as follows: are set out below and are usually updated annually on 1 May. Cash value Threshold Stretch Performance Weighting Overall of award On appointment to the Board, Forsyth Black’s salary was set initially at a lower level to allow for increases as he developed Name Measure target target achieved (% of salary) achieved £’0004

in the role. Against that background the Remuneration Committee determined that it was appropriate for his salary to be F Black Group Underlying STRATEGIC REPORT increased from £300,000 to £350,000 from 1 January 2017. Additionally, Giles Wilson’s salary will be increased from Profit before Tax2 £38.9m £42.9m £44.3m 70% 100% £275 £300,000 to £325,000 from 1 May 2017. Group Cash Conversion 98% 102% 117% 10% 100% KRAs3 – – – 20% 76% When determining the remuneration of Executive Directors, the Remuneration Committee takes account of pay and G Wilson1 Group Underlying employment conditions in the Group as a whole. Profit before Tax2 £38.9m £42.9m £44.3m 70% 100% £175

Percentage Group Cash Conversion 98% 102% 117% 10% 100% increase 3 2015 salary 2016 salary 2017 salary for 2017 KRAs – – – 20% 100% F Black1 – £300,000 £350,000 16.7% J Geddes Group Underlying Profit before Tax2 £38.9m £42.9m £44.3m 70% 100% £26 G Wilson2 – £300,000 £325,000 8.3% Group Cash Conversion 98% 102% 117% 10% 100% J Geddes3 – £250,000 £250,000 0% KRAs3 – – – 20% 88% GOVERNANCE REPORTS GOVERNANCE Notes: 1. Forsyth Black was appointed President & Managing Director of Menzies Aviation on 13 January 2016. Notes: 2. Giles Wilson was appointed Chief Financial Officer of the Company on 1 June 2016. 1. The targets for Giles Wilson relate to the period from 1 June 2016, when he assumed the role of Chief Financial Officer, and make up 7/12ths of his award. 3. John Geddes was appointed Corporate Affairs Director on 23 November 2016. 2. Calculated in accordance with the Bonus Scheme Rules. 3. The specific KRA targets are considered to be commercially sensitive and it is not considered appropriate to disclose them. 4. 20% of all bonus awards are deferred in the Company’s shares for a three year period to December 2019. 2. NON-EXECUTIVE DIRECTORS’ AND CHAIRMAN’S FEES 5. Neither Jeremy Stafford nor Paula Bell received any bonus payment in 2016 having resigned from the Board on 13 January 2016 and 20 May 2016 respectively. For 2016 the fees policy for Non-Executive Directors was as follows: OPERATION OF POLICY FOR 2017 BONUS AWARDS Fee level The performance measures used for 2017 annual bonus awards will not contain a Group Cash Conversion element and will Basic payment £40,000 comprise Group Underlying Profit before Tax (80%) and KRAs (20%). Performance targets will be disclosed retrospectively Committee Chairmanship £6,000 where considered appropriate as the Board considers that the disclosure of prospective targets is not appropriate due to their Committee membership £2,500 commercial sensitivity.

Senior Independent Director £6,000 FINANCIAL STATEMENTS 4. BONUS CO-INVESTMENT PLAN (“BCIP”)/SHARE MATCHING PLAN (“SMP”) Directors receive one fee either for Committee Chairmanship or Committee membership, irrespective of the number of Under the BCIP and, from 2016 onwards, under the SMP, Executive Directors are invited to invest up to 40% of any annual Committees on which they serve. The fees paid to Non-Executive Directors in respect of each of the positions detailed cash bonus into the BCIP/SMP (as appropriate). As previously indicated, however, it is intended to withdraw the SMP from above are reviewed annually. They were reviewed in March 2017 and it was agreed that no changes would be made in 2017. 1 January 2018.

The Chairman’s fees comprise a cash fee of £150,000 per annum plus 20,000 Ordinary Shares per annum. The portion of 2014 BCIP AWARDS fees delivered as Ordinary Shares will also apply in 2017 and 2018. This fee arrangement was approved by shareholders at Awards made under the BCIP in March 2014 were on a 1:1 matching basis. 25% of the matching shares on these awards the Company’s general meeting convened on 11 October 2016. were due to be paid if the threshold target (EPS growth exceeds the Retail Price Index (“RPI”) by 0%) was achieved, rising on a straight-line basis to 100% paid at or above stretch target (EPS growth exceeds the RPI by 3%+). Any dividends 3. ANNUAL BONUS SCHEME accrued on shares which vest are paid in cash upon vesting. The Executive Directors participate in a discretionary bonus scheme which is subject to the achievement of challenging The performance period for awards made in 2014 ended on 31 December 2016. The per annum growth in EPS for the Group, Divisional and personal targets designed to encourage excellent performance. Targets are set by the Remuneration SHAREHOLDER INFORMATION Committee at the start of the relevant performance period and taking into account market expectations at that time. Company over the performance period of the award was below the threshold level and accordingly the awards will lapse. Bonus payments are non-pensionable.

70 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 71 REMUNERATION COMMITTEE REPORT CONTINUED

2015 BCIP AWARDS Shares Threshold Stretch Shares For BCIP awards made in March 2015 performance measures and targets were set as follows: granted1 Criteria target target Attainment Weighting vesting Performance period G Wilson1 22,460 Menzies £43.4m £50.0m 0% 75% – 1/1/2014- Measurement Threshold target (25% vesting) Stretch target (100% vesting) Aviation 31/12/2016 EPS v Consumer Price Index (“CPI”) EPS growth equals CPI growth EPS growth exceeds CPI growth by 3% underlying operating profit STRATEGIC REPORT 2016 SMP AWARDS TSR v FTSE250 TSR = FTSE250 TSR > FTSE250 0% 25% As detailed in the Annual Report and Accounts 2015, the performance measures and targets for awards made under the median median + 30% SMP in March 2016 were as follows: F Black1 10,392 Menzies £43.4m £50.0m 0% 75% – 1/1/2014- Aviation 31/12/2016 Measurement Threshold target (25% vesting) Stretch target (100% vesting) underlying EPS v CPI EPS growth equals CPI growth EPS growth exceeds CPI growth by 3% operating profit TSR v FTSE250 TSR = FTSE250 TSR > FTSE250 0% 25% Details of awards made under the SMP in 2016 are shown in the table headed ‘Scheme interests awarded during 2016’ median median + 30% on page 74 of this Annual Report and Accounts 2016. J Geddes1 19,391 John Menzies plc £62.9m £71.7m 0% 50% – 1/1/2014- underlying profit 31/12/2016 The same performance measures and targets will be used for awards made under the SMP in 2017. before tax TSR v FTSE250 TSR = FTSE250 TSR > FTSE250 0% 50% GOVERNANCE REPORTS GOVERNANCE The performance criteria are set at threshold and stretch level. At threshold, 25% of a BCIP/SMP award will vest, increasing median median + 30% on a straight-line basis to 100% for stretch or greater achievement. Former Directors J Stafford2 52,631 John Menzies plc £62.9m £71.7m – 50% – 1/1/2014- Outstanding BCIP/SMP awards are as follows: underlying 31/12/2016 operating profit Granted Vested Lapsed 31 December during Market price during during Gain/(loss) 31 December TSR v FTSE250 TSR = FTSE250 TSR > FTSE250 50% Name 2015 2016 of award 2016 2016 £’000 2016 Performance period median median + 30% 1 F Black – 2,385 478.0p – – – 2,385 1/1/2016-31/12/2018 P Bell2 40,817 John Menzies plc £62.9m £71.7m – 50% – 1/1/2014- G Wilson1 3,513³ – 646.5p – – – 3,513 1/1/2014-31/12/2016 underlying 31/12/2016 – 2,757 478.0p – – – 2,757 1/1/2016-31/12/2018 operating profit J Geddes1 436³ – 646.5p – – – 436 1/1/2014-31/12/2016 TSR v FTSE250 TSR = FTSE250 TSR > FTSE250 50%

Former Directors median median + 30% FINANCIAL STATEMENTS J Stafford2 3,959 – 375.8p – 3,959 – – 1/1/2015-31/12/2017 2 Notes: P Bell 2,841 – 646.5p – 2,841 – – 1/1/2014-31/12/2016 1. The award figures detailed for each of the current Executive Directors have been adjusted to reflect the re-calculated amount following the Rights Issue 9,509 – 652.0p – 9,509 – – 1/1/2015-31/12/2017 undertaken by the Company in 2016. 2. All outstanding awards for each of Jeremy Stafford and Paula Bell lapsed upon their resignation from the Board in January 2016 and May 2016 respectively.

Notes: 1. The award figures detailed for each of the current Executive Directors have been adjusted to reflect the re-calculated amount following the Rights Issue 2016 LTIP AWARDS undertaken by the Company in 2016. As disclosed in the Annual Report and Accounts 2015, performance measures and targets for the LTIP awards made 2. All outstanding awards for each of Jeremy Stafford and Paula Bell lapsed upon their resignation from the Board in January 2016 and May 2016 respectively. in March 2016 were as follows: 3. As the performance criteria have not been achieved, this award shall lapse following the Company’s final results announcement on 8 March 2017.

Threshold target Stretch target 5. LONG-TERM INCENTIVE PLAN (“LTIP”) Group performance criteria Weighting (25% vesting) (100% vesting) Under the Company’s LTIP all awards are subject to a three year performance period with appropriate targets. TSR v FTSE SmallCap Index 100% TSR = FTSE TSR > FTSE SmallCap

SmallCap median median result + 30% SHAREHOLDER INFORMATION The Company’s LTIP targets are designed to align the interests of the Executive Directors with those of the Company’s shareholders and to promote a long-term interest in the success of the Group. Details of the LTIP awards made in March 2016 are shown in the table headed ‘Scheme interests awarded during 2016’ on page 74 of this Annual Report and Accounts 2016. The performance criteria are set at threshold and stretch level. At threshold, 25% of a LTIP award will vest, increasing on a straight-line basis to 100% for stretch or greater achievement. OPERATION OF POLICY FOR 2017 AWARDS The performance measures for LTIP awards made in 2017 will be as follows: 2014 LTIP AWARDS LTIP awards made to Executive Directors during the financial year ending 31 December 2014 are detailed below. As the Threshold target Stretch target performance criteria have not been achieved, these awards shall lapse following the Company’s final results announcement Group performance criteria Weighting (25% vesting) (100% vesting) on 8 March 2017. TSR 100% TSR = FTSE TSR = FTSE SmallCap SmallCap median median result + 30%

72 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 73 REMUNERATION COMMITTEE REPORT CONTINUED

Outstanding LTIP awards as at 31 December 2016 are shown below: LTIP and BCIP/SMP awards are subject to performance conditions and the value delivered on vesting depends on performance against pre-defined targets over the relevant period and changes in the Company’s share price between grant and vesting. 31 December Granted Market price Vested Lapsed Gain/(loss) 31 December Name 2015 during 2016 of award during 2016 during 2016 £’000 2016 Performance period The face value of awards is calculated using the share price on the date of grant. The face value of the Save As You Earn F Black1 10,3923 – 654p – – – 10,392 1/1/2014-31/12/2016 award is calculated using the share option price under the Sharesave Scheme in the relevant year. 44,098 – 385p – – – 44,098 1/1/2015-31/12/2017 STRATEGIC REPORT – 76,736 443p – – – 76,736 1/1/2016-31/12/2018 7. TOTAL PENSION ENTITLEMENTS G Wilson1 22,4603 – 654p – – – 22,460 1/1/2014-31/12/2016 SCHEME BENEFITS/CASH PAYMENTS IN LIEU OF PENSION CONTRIBUTIONS 43,227 – 385p – – – 43,227 1/1/2015-31/12/2017 Forsyth Black is a member of the Menzies Pension Fund and accrues 1/60th of his pensionable salary (subject to the – 37,610 443p – – – 37,610 1/1/2016-31/12/2018 scheme earnings cap) for each year of pensionable service. J Geddes1 19,3913 – 654p – – – 19,391 1/1/2014-31/12/2016 Giles Wilson was a member of the Menzies Money Purchase Pension Scheme which provides Company contributions 33,928 – 385p – – – 33,928 1/1/2015-31/12/2017 equivalent to 20% of salary (subject to the scheme earnings cap). Due to annual and lifetime allowance purposes, he – 33,571 443p – – – 33,571 1/1/2016-31/12/2018 opted out of the Scheme with effect from 31 March 2016 and now receives a cash payment equivalent to 20% of his Former Directors salary in lieu of pension contribution. J Stafford2 52,631 – 570p – 52,631 – – 1/1/2014-31/12/2016 103,896 – 385p – 103,896 – – 1/1/2015-31/12/2017 John Geddes is a member of the Menzies Pension Fund and accrues 1/30th of his pensionable salary (subject to the P Bell2 40,817 – 654p – 40,817 – – 1/1/2014-31/12/2016 scheme earnings cap) for each year of pensionable service. GOVERNANCE REPORTS GOVERNANCE 82,935 – 385p – 82,935 – – 1/1/2015–31/12/2017 Where the scheme earnings cap applies, Forsyth Black and John Geddes receive a cash payment equivalent to 20% – 72,159 443p – 72,159 – – 1/1/2016-31/12/2018 of their salary above the cap.

Notes: 1. The award figures detailed for each of the current Executive Directors have been adjusted to reflect the Rights Issue undertaken by the Company in 2016. Neither Paula Bell nor Jeremy Stafford participated in the Menzies Pension Fund whilst Executive Directors. They were entitled 2. All outstanding awards for each of Jeremy Stafford and Paula Bell lapsed upon their resignation from the Board in January 2016 and May 2016 respectively. to join the Menzies Money Purchase Pension Scheme or elect to receive an equivalent cash payment. Both received cash 3. As the performance criteria have not been achieved, this award shall lapse following the Company’s final results announcement on 8 March 2017. payments equivalent to 20% of their salary in lieu of any pension contribution, pro-rated to reflect their respective periods in office in 2016. 6. SCHEME INTERESTS AWARDED DURING 2016 UNFUNDED ARRANGEMENT Maximum Share price number of on date of Face Percentage The total of the transfer values for unfunded pension entitlements, held on the Company’s Balance Sheet at 31 December Basis on which shares grant of value of vesting at Type of interest award made awarded option shares (£) threshold Performance period end 2016 for former Directors, calculated on an IAS 19 basis, totalled £1,829,597 (2015: £1,529,597), from which annual pensions of £59,438 were paid to former Directors (2015: £63,815). FINANCIAL STATEMENTS F Black1 LTIP3 – 100% 76,736 £4.43 £339,940 25% 31/12/2018 conditional of salary shares 8. DIRECTORS’ SHAREHOLDINGS AND SHARE INTERESTS Executive Directors have been expected to build a shareholding in the Company of 200% of salary but this will reduce SMP3 – 1:1 matched 2,385 £4.78 £11,400 25% 31/12/2018 to 100% under the New Policy (if approved). Executive Directors are given a period of time to build their shareholding. conditional on deferred shares bonus The following table shows Directors’ shareholdings and share interests as at 31 December 2016 together with share Save As n/a 704 £4.80 £3,379 n/a 31/11/2019 options exercised during 2016: You Earn4 G Wilson1 LTIP3 – 75% 37,610 £4.43 £166,612 25% 31/12/2018 Unvested conditional conditional of salary shares subject Unvested Unvested shares to performance options over conditional shares 3 Number of shares conditions (LTIP shares subject Vested options not subject to SMP – 1:1 matched 2,757 £4.78 £13,178 25% 31/12/2018 owned (including and BCIP/SMP to savings exercised performance SHAREHOLDER INFORMATION conditional on deferred deferred shares) awards) contracts (SAYE) during 2016 conditions shares bonus D Smurfit 425,000 – – – – Save As n/a 704 £4.80 £3,379 n/a 31/11/2019 F Black 10,829 161,907 2,203 – – 4 You Earn G Wilson 24,406 124,082 704 – 13,780 1 3 J Geddes LTIP – 75% 33,571 £4.43 £148,720 25% 31/12/2018 J Geddes 15,880 101,841 1,041 – 13,780 conditional of salary D Jenkinson – Beneficial 67,857 – – – – shares – Non-beneficial 995,000 – – – – Save As n/a 356 £4.80 £1,709 n/a 31/11/2019 You Earn4 S Maizey 2,035 – – – – D Garman 13,571 – – – – Former Directors P Bell2 LTIP3 – 100% 72,159 £4.43 £319,664 25% 31/12/2018 G Eaton 4,000 – – – – conditional of salary P Baines – – – – – shares Former Directors I Napier – – – – – Notes: P Bell – – – – – 1. The award figures detailed for each of the current Executive Directors have been adjusted to reflect the Rights Issue undertaken by the Company in 2016. 2. All outstanding awards for Paula Bell lapsed upon her resignation from the Board in May 2016. J Stafford 15,573 – – – – 3. The exercise price for shares granted under the SMP and LTIP is zero. 4. The exercise price for shares granted under the Save As You Earn scheme is the share price at the date of grant discounted by 20%.

74 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 75 REMUNERATION COMMITTEE REPORT CONTINUED

LEGACY AWARDS 10. PERCENTAGE CHANGE IN REMUNERATION The share interests table above includes the following outstanding awards for current Executive Directors (granted prior The Regulations also require companies to show the annual change in base salary, benefits and annual bonus for any to their appointment to the Board) as at 31 December 2016: director undertaking the role of CEO during the financial year in question, in this case regarded as being Forsyth Black, together with the average change for all Group employees. Whilst the table below details this information, given the Vested Lapsed 31 December Initial value during during Gain/(loss) 31 December geographical spread of the Group’s operations and taking into account the different rates of wage inflation which exist, Name 2015 of award 20162 2016 £’000 2016 Retention period

the average for Group employees for comparison with Forsyth Black is based on the total UK employee base. STRATEGIC REPORT F Black1 – £124,250 – – – 28,296 1/7/2015-30/6/20182 Base salary Benefits Annual bonus 1 3 G Wilson – £75,000 – – – 13,780 19/8/2014-19/8/2017 (% change) (% change) (% change) – £63,740 – – – 14,515 1/7/2015-30/6/20182 CEO -25% +7% n/a1 J Geddes1 – £75,000 – – – 13,780 19/8/2014-19/8/20173 Average for Group employees +2% 0% -43% – £63,740 – – – 14,515 1/7/2015-30/6/20182 Note: 1. Percentage change in remuneration for the role of CEO is based on Jeremy Stafford’s 2015 remuneration and Forsyth Black’s 2016 remuneration. Notes: Jeremy Stafford did not receive a bonus for 2015 and therefore the percentage change in annual bonus cannot be calculated for 2016. 1. The award figures detailed for each of the current Executive Directors have been adjusted to reflect the re-calculated amount following the Rights Issue undertaken by the Company in 2016. 2. Unvested conditional shares subject to performance conditions (EPS growth of 3% per annum). 11. RELATIVE IMPORTANCE OF SPEND ON PAY 3. Unvested conditional shares subject to continued employment. The total Group spend on employee remuneration during 2016 and the immediately preceding financial year is reflected in the following table: 9. EIGHT YEAR HISTORICAL TSR PERFORMANCE AND EXECUTIVE DIRECTOR PAY REPORTS GOVERNANCE The following graph compares the Company’s TSR for the eight years to December 2016 with the equivalent performance 2015 2016 of the FTSE SmallCap Index. Whilst previously the FTSE250 Index was considered the most appropriate comparative Index, after careful consideration the Remuneration Committee decided that from 2016 onwards it would be more Group employee remuneration costs £506.7m £582.1m appropriate to benchmark the Company against the FTSE SmallCap Index. Dividend distribution £8.0m £10.6m Share buyback £0m £0m 1,000

800 12. THE REMUNERATION COMMITTEE During 2016 the following Non-Executive Directors were members of the Remuneration Committee: 600

Name Position Attendance 400 G Eaton Chairman 3/3 200

D Garman Member 3/3 FINANCIAL STATEMENTS

0 Dec-2008 Dec-2009 Dec-2010 Dec-2011 Dec-2012 Dec-2013 Dec-2014 Dec-2015 Dec-2016 S Maizey Member 3/3 P Baines (appointed June 2016) Member 2/2 John Menzies plc FTSE SmallCap

The Large and Medium-sized Companies and Groups (Accounts and Report) Regulations 2008 (the “Regulations”) require ADVISERS TO THE REMUNERATION COMMITTEE companies to show the total remuneration of any director who undertakes the role of Chief Executive Officer (“CEO”) in each During 2016 the Remuneration Committee was advised by remuneration consultants from Deloitte LLP. Total fees of the last eight years. As the Company’s Executive structure did not include the role of CEO prior to October 2014 and after in relation to Executive remuneration consulting were £38,025. Deloitte also provided advice in relation to 13 January 2016, the following table shows the required figures for the highest paid Director in each year: controls assurance.

Highest paid 2009: 2010: 2011: 2012: 2013: January- October- 2015: 1/1/16- 13/1/16- Deloitte was appointed by the Remuneration Committee. Deloitte is a member of the Remuneration Consultants’ Group Director in the year Dollman Dollman Dollman Dollman Smyth October December Stafford 13/1/16: 31/12/16: and, as such, voluntarily operates under the Code of Conduct in relation to Executive Remuneration Consulting in the 2014: 2014: Stafford Black United Kingdom. Each year the Chairman of the Remuneration Committee agrees the protocols under which Deloitte will

Smyth Stafford SHAREHOLDER INFORMATION provide advice to support independence. The Remuneration Committee is satisfied that the advice which it has received Role Group Group Group Group MD, MD, CEO CEO CEO President from Deloitte has been objective and independent. Finance Finance Finance Finance Menzies Menzies & MD, Director Director Director Director Aviation Aviation Menzies In addition, legal advice was sought by the Remuneration Committee from Maclay Murray & Spens LLP, the Company’s Aviation solicitors, where considered appropriate. Total remuneration 757 750 3,578 1,735 1,203 725 167 493 411 648 (£’000) The Group’s Chief Financial Officer and Group Company Secretary also provided internal support and guidance to the Annual bonus award 75% 74% 74% 63% 46% – 45% – – 95% Remuneration Committee where appropriate. They are, however, specifically excluded from any matters concerning the (% of maximum) details of their own remuneration. Members of the Remuneration Committee have no personal financial interest (other Long-term incentive 22% 40% 100% 100% 84% – n/a – – 0% than as shareholders) in the matters to be decided by the Remuneration Committee and no day-to-day involvement in vesting (% of the running of the business of the Group. maximum)

Note: 1. A payment of £65,200 (gross) was also made to Jeremy Stafford for loss of office together with a contribution of £4,000 plus VAT towards legal fees incurred in connection with his loss of office.

76 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 77 REMUNERATION COMMITTEE DIRECTORS’ REPORT REPORT CONTINUED

13. REMUNERATION RESOLUTIONS The table below provides the results of the Directors’ Remuneration Report 2015 resolution and the Directors’ Remuneration Policy 2013 resolution which were tabled at the Company’s AGM in May 2016 and May 2014 respectively:

Votes Votes Votes Resolution for Percentage against Percentage Votes total withheld

Directors’ Remuneration STRATEGIC REPORT Report 2015 46,397,914 92.88% 3,557,734 7.12% 49,955,648 37,136 DIRECTORS’ REPORT Directors’ Remuneration FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 Policy 2013 36,476,336 99.67% 78,488 0.21% 36,599,865 45,041 The following sections provide information on those items which are required to be included in this Directors’ Report, pursuant to the requirements of the Companies Act 2006 (the “ ”), the Large and Medium-sized Companies An advisory resolution to approve this Remuneration Report will be tabled at the forthcoming AGM, together with a 2006 Act and Groups (Accounts and Reports) Regulations 2008 (as amended by the Companies Act 2006 (Strategic Report and binding resolution to approve the Directors’ Remuneration Policy as set out on pages 60 to 68 of this Annual Report and Directors’ Report) Regulations 2013) (the “ ”) and the Financial Conduct Authority’s (the “ ”) Listing Accounts 2016. The Chairman of the Remuneration Committee will be available to answer questions from the Company’s 2013 Regulations FCA Rules. Some items are incorporated by reference into this Directors’ Report, as detailed below. shareholders on this Remuneration Report. DIRECTORS 14. EXTERNAL APPOINTMENTS All of the Directors who served during 2016 are shown in the table below. Biographies of those Directors who were in office The Board recognises the benefits to the individual and to the Company of involvement by Executive Directors as at the end of 2016 are included on pages 44 and 45 of this Annual Report and Accounts 2016 and all of these Directors held GOVERNANCE REPORTS GOVERNANCE Non-Executive Directors on the boards of other companies. Prior to accepting an invitation to become a Non-Executive office throughout 2016 with the exception of Forsyth Black, who was appointed to the Board on 13 January 2016; Giles Director of another company, an Executive Director must receive approval from the Chairman of the Company. This Wilson and Paul Baines, who were both appointed as Directors on 1 June 2016; the Company’s Chairman, Dr Dermot F. approval will not be denied where the Chairman is confident that the appointment in question will not interfere with the Smurfit, who was appointed to the Board on 25 July 2016; and John Geddes, who was appointed Corporate Affairs Director Director’s ability to perform their duties for the Company or provide a conflict of interest. Executive Directors are entitled on 23 November 2016. After eight years on the Board Iain Napier stood down from his position as Chairman of the Company to retain any fees received under such appointments. following the Company’s annual general meeting (“AGM”) on 20 May 2016. Jeremy Stafford and Paula Bell also resigned from the Board on 13 January 2016 and 20 May 2016 respectively. On behalf of the Board Current and former Directors’ interests in the Company’s ordinary shares of £0.25 each (the “Ordinary Shares”) were as follows: Geoff Eaton Appointed/ 31 December 31 December Remuneration Committee Chairman Name Position resigned 2016 2015 7 March 2017 D Smurfit Chairman Appointed Beneficial 425,000 n/a July 2016

G Wilson Chief Appointed Beneficial 24,406 n/a FINANCIAL STATEMENTS Financial June 2016 Officer F Black President & Appointed Beneficial 10,829 n/a Managing January 2016 Director of Menzies Aviation J Geddes Corporate Appointed Beneficial 15,880 n/a Affairs Director & November Group Company 2016 Secretary D Jenkinson Non-Executive Appointed Beneficial 748,857 1,801,443

Director December SHAREHOLDER INFORMATION 1985 Non-beneficial 314,000 2,432,860 S Maizey Non-Executive Appointed Beneficial 2,035 1,500 Director May 2014 D Garman Non-Executive Appointed Beneficial 13,571 10,000 Director June 2015 G Eaton Non-Executive Appointed Beneficial 4,000 – Director June 2015 P Baines Non-Executive Appointed – – n/a Director June 2016 Former Directors I Napier Chairman Resigned Beneficial n/a 15,360 May 2016 P Bell Chief Financial Resigned Beneficial n/a 17,519 Officer May 2016 J Stafford Chief Executive Resigned Beneficial n/a 19,920 Officer January 2016

78 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 79 DIRECTORS’ REPORT CONTINUED

There have been no subsequent changes to these interests as at 7 March 2017. RESEARCH AUDIT INFORMATION During 2016 the Company did not The Company is not actively involved So far as the Directors in office at the purchase any of its own shares No Director had any material interest in any contract, other than a service contract as set out on page 66 of this Annual in research activities. date of the signing of this Directors’ for cancellation. Report and Accounts 2016. Report are aware, having made the GEOGRAPHICAL SPREAD requisite enquiries, there is no relevant No shares in the capital of the SUBSTANTIAL SHAREHOLDINGS

The Company operates in 36 audit information in terms of which the Company can be allotted at a discount STRATEGIC REPORT In addition to the Directors’ interests set out above, the Company had been notified of the following interests of 3% countries worldwide and details of this Company’s auditor is unaware and nor can they be allotted except as paid or more in its Ordinary Shares as at 31 December 2016 and 7 March 2017: geographical spread can be found on each Director has taken all reasonable up both in regard to nominal amount

Number of pages 2 and 3 of this Annual Report steps to make themselves aware of and premium to the minimum extent Number of Percentage of Ordinary Shares Percentage of and Accounts 2016, which details are any relevant audit information and permitted by the 2006 Act. Ordinary Shares issued Ordinary as at 31 December issued Ordinary Name as at 7 March 2017 Shares 2016 Shares incorporated by reference into this to establish that the auditor is aware Kabouter Management LLC 10,000,767 11.95% 10,008,237 11.96% Directors’ Report. of that information. Resolutions to ARTICLES OF ASSOCIATION re-appoint Ernst & Young LLP as TRANSFER OF SHARES Shareholder Value Management AG 8,513,117 10.21% 8,513,117 10.21% EMPLOYMENT POLICIES auditor of the Company and to There are no restrictions on the Lakestreet Capital Partners AG 7,124,421 8.55% 7,124,421 8.55% Policies regarding the hiring, authorise the Board to set its transfer of shares in the Company D.C. Thomson & Company Limited 5,163,058 6.20% 5,163,058 6.20% continuing employment and training, remuneration will be proposed at other than as contained in the Articles. Premier Asset Management 3,778,571 4.53% 3,778,571 4.53% career development and promotion the Company’s forthcoming AGM. Subject to the Articles, the Admission opportunities, for all employees both and Disclosure Standards of the GOVERNANCE REPORTS GOVERNANCE in the UK and worldwide, together SHARE CAPITAL AND STRUCTURE London Stock Exchange and any DIRECTORS’ AND OFFICERS’ POLITICAL DONATIONS EMPLOYEE INVOLVEMENT with reports on employee involvement The Company has two classes of requirements of the FCA, the Directors LIABILITY INSURANCE In accordance with its policy, the Group Details of how the Company involves and representation, are contained shares: the Ordinary Shares of £0.25 may refuse to register a transfer of In accordance with the 2006 Act and did not give money for political purposes its employees in its business are in the Resources, Relationships and each and preference shares of £1.00 a certificated share which is not fully the Company’s Articles of Association nor did it make any donations to contained in the Strategic Report Responsibilities section of this Annual each (the “Preference Shares”). As at paid provided that this power will not (the “Articles”), the Company has political organisations or independent section of this Annual Report and Report and Accounts 2016 (pages 34 31 December 2016 the Company had be exercised so as to disturb the arranged qualifying third party candidates or incur any political Accounts 2016 (pages 2 to 41), which to 41), which details are incorporated an issued share capital comprising market in the Company’s shares. indemnities against financial exposure expenditure during 2016. details are incorporated by reference by reference into this Directors’ Report. 1,394,587 Preference Shares and which the Directors may incur in the into this Directors’ Report. 83,636,895 Ordinary Shares. Of these VOTING RIGHTS course of their professional duties for FINANCIAL RISK MANAGEMENT At the end of 2016 the split of male to 83,636,895 Ordinary Shares, 310,338 Deadlines for exercising voting rights the Company. Equivalent qualifying OBJECTIVES AND POLICIES POST BALANCE SHEET EVENTS female employees in the Group was: were held as treasury shares. During and appointing a proxy or proxies to vote third party indemnities were, and The financial risk management ACQUISITION OF ASIG 2016 the Company did not purchase on the resolutions to be considered at remain, in force for the benefit of those objectives and policies, including the On 1 February 2017 the Group Name Male Female any Ordinary Shares to be held in the Company’s forthcoming AGM are FINANCIAL STATEMENTS Directors who stood down from the policy for hedging each major type announced the completion of the Directors 8 1 Treasury. Whilst it is the Company’s specified in the Notes to the Notice Board during 2016. In addition to these of forecasted transaction for which acquisition of 100% of the share capital Decision-makers 273 85 general policy that shares held in of AGM. Every ordinary shareholder indemnities, the Company places hedge accounting is used, are detailed of (and voting rights in) ASIG Holdings All employees 19,302 8,779 Treasury will be used for the satisfaction present in person or by proxy at a Directors’ and Officers’ liability in Note 17 to the Accounts contained in Ltd and ASIG Holdings Corp for of share plan awards, the Company general meeting of the Company insurance cover for each Director. this Annual Report and Accounts 2016, US$202m. Further details are set out POLICY AND PRACTICE transferred 20,000 Ordinary Shares shall, on a show of hands, have one which information is incorporated by in Note 28 to the Accounts contained ON PAYMENT OF CREDITORS out of Treasury to Dr Dermot F. Smurfit vote unless, in the case of the latter, DIVIDENDS reference into this Directors’ Report. in this Annual Report and Accounts 2016. The Group does not operate a on 17 November 2016 at a price of they have been appointed by more than The Directors recommend the standard code in respect of payments 490.8483p per Ordinary Share. This one shareholder and have received payment of a final dividend of 13.1p per EXPOSURE TO RISK DEFINED BENEFIT to suppliers. Each operating business transfer was to reflect the fact that part instructions to vote both in favour Ordinary Share (2015: 11.8p), payable The risk exposure of the Group, PENSION SCHEME is responsible for agreeing the terms of the Chairman’s fee arrangement for of and against the same resolution on 3 July 2017 to shareholders on the including the exposure to price risk, On 28 February 2017 the Company and conditions under which business his services would be a cash fee to be in which case they will have one vote Company’s Register of Members as at credit risk, liquidity risk and cash flow informed the active members of the transactions with its suppliers are satisfied by way of issue of Ordinary against that resolution and one vote SHAREHOLDER INFORMATION the close of business on 26 May 2017. risk, is included in Note 17 to the Company’s defined benefit pension conducted, including the terms Shares, as approved by the Company’s for. On a poll, every shareholder of the The shares will be quoted as ex-dividend Accounts contained in this Annual scheme, the Menzies Pension Fund, of payment. It is Group policy that shareholders at its general meeting on Company present in person or by proxy on 25 May 2017. This final dividend, Report and Accounts 2016, which that it will ask the Trustee to amend the payments to suppliers are made in 11 October 2016 (the “2016 GM”). at a general meeting of the Company together with the interim dividend of information is incorporated by Fund Rules to close the Fund to future accordance with the agreed terms shall have one vote for every share 5.4p per Ordinary Share (2015: 5.0p) reference into this Directors’ Report. accrual on 31 March 2017. provided that the supplier has which they hold and, if the holders of the paid on 18 November 2016, makes performed in accordance with all Preference Shares have the right to vote a total dividend of 18.5p per Ordinary FINANCIAL INSTRUMENTS OUTLOOK relevant terms and conditions. At the on any resolution, each such holder shall Share for the 2016 financial year. Details of the use of financial An indication of the likely future end of 2016 the amount owed to trade have one vote for every Preference instruments and financial risk developments in the business of creditors by the Group’s Head Office Share which they hold. management are included in Note 17 to the Company (and its subsidiaries) was equivalent to 33.9 days (2015: 32.4 the Accounts contained in this Annual is included in the Strategic Report days) of purchases from suppliers. Report and Accounts 2016, which section of this Annual Report and details are incorporated by reference Accounts 2016 (pages 2 to 41), which into this Directors’ Report. details are incorporated by reference into this Directors’ Report.

80 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 81 DIRECTORS’ REPORT CONTINUED

The holders of the Preference Shares Such authority and power will expire The Company is also, by shareholder An appropriate induction is provided EMISSIONS REPORTING shall have no right to receive notice at the Company’s forthcoming AGM resolution passed at the 2016 AGM, by the Company to all new Directors The information required to be included of or attend or vote at any general unless previously revoked, varied or authorised to purchase up to and ongoing training is supplied as in this Directors’ Report pursuant meeting of the Company unless either: renewed. It is proposed that such 1,394,587 of its Preference Shares and when it may be required, with to the 2013 Regulations in respect of (i) at the date of the notice convening authority and power be renewed by at a maximum price which is equal documentation on the Company and greenhouse gas emissions is included

the meeting the dividend payable shareholder resolutions at this AGM to the higher of: its activities distributed to Directors in the Resources, Relationships and STRATEGIC REPORT on such Preference Shares or a part but without prejudice to the exercise (i) an amount equal to 110% of the on a regular basis. A Director is not Responsibilities section of this Annual thereof is six months or more in of any such authority and power prior average of the middle market required to hold shares in the capital Report and Accounts 2016 on pages arrears; or to the date of such resolutions. quotations for such Preference of the Company. 38 and 39, which information is (ii) the business of the meeting Accordingly, shareholders will be asked Shares as derived from the London incorporated by reference into this includes the consideration of a to grant an authority to allot relevant Stock Exchange Daily Official RETIREMENT OF DIRECTORS Directors’ Report. resolution for reducing the capital securities: (i) up to a nominal amount List for the five business days In accordance with best practice of or winding-up the Company of £6,970,709; and (ii) up to a nominal immediately prior to the date of principles, all Directors shall retire ANNUAL GENERAL MEETING or for altering the objects of the amount of £13,941,418 (after deducting conclusion of the contract for any at each AGM of the Company. Notice of the Company’s forthcoming Company as stated in its Articles from such limit any relevant securities such purchase; and AGM is contained at the end of or for the sale of the undertaking allotted under (i)), in connection with (ii) the amount stipulated by Article DIRECTORS’ POWERS this document. of the Company or any substantial an offer of a rights issue, such 5(1) of the EU Buy-Back and The business of the Company shall part thereof or any resolution authority to apply until the conclusion Stabilisation Regulation 2003 be managed by the Board which Approved and issued by the Board GOVERNANCE REPORTS GOVERNANCE altering or abrogating any of the of the AGM to be held in 2018 or, if (being the higher of the price of may exercise all the powers of the of Directors on 7 March 2017. special rights or privileges attaching earlier, on 30 June 2018. A special the last independent trade and Company, whether relating to the to the Preference Shares, in which resolution will also be proposed to the highest current independent management of its business or John Geddes circumstances the holders of the confer power upon the Directors to bid for a Preference Share on the otherwise, subject to any restrictions Company Secretary Preference Shares shall have the make non pre-emptive issues for cash trading venues where the market contained in the Articles which detail 7 March 2017 right to vote on any such resolution. in connection with rights issues and purchases by the Company will the specific powers of the Directors. otherwise up to a nominal amount be carried out) and at a minimum Copies of the Articles may be obtained The Company is not aware of any of £1,045,606. price of £1.00 per Preference Share. from the Group Company Secretary arrangement by which, with the or from the Company’s website at Company’s co-operation, financial PURCHASE OF OWN SHARES These authorities will expire at the www.johnmenziesplc.com. rights carried by its shares are held by The Company is, by shareholder Company’s forthcoming AGM when it persons other than the holders of its resolution passed at the 2016 AGM, is proposed that they be renewed but The Articles can only be amended by Ordinary Shares or Preference Shares. authorised to purchase up to 6,170,313 without prejudice to the exercise of a special resolution of the Company’s FINANCIAL STATEMENTS The Company is not aware of any of its Ordinary Shares at a maximum any such authorities prior to the date shareholders in general meeting. agreement between holders of its price which is equal to the higher of: of such resolutions being put to the shares which may result in restrictions (i) an amount equal to 105% of the Company’s shareholders. SIGNIFICANT AGREEMENTS – on the transfer of its shares or on average of the middle market CHANGE OF CONTROL voting rights attaching thereto. quotations for such Ordinary Shares APPOINTMENT OF DIRECTORS The Group’s operating businesses have as derived from the London Stock Directors may be appointed by the agreements in place with suppliers and ALLOTMENT AND ISSUE Exchange Daily Official List for Company by an ordinary resolution customers, some of which contain OF SHARES the five business days immediately of its shareholders. The Board may change of control clauses giving rights The Directors are, by shareholder prior to the date of conclusion appoint a Director either to fill a to these suppliers and customers on a resolutions passed at the 2016 AGM of the contract for any such vacancy or as an additional Director takeover bid for the Company. A change and then subsequently at the 2016 purchase; and and any Director so appointed shall of control of the Company following

GM, authorised to exercise all the (ii) the amount stipulated by Article hold office only until the next AGM a takeover bid may cause a number SHAREHOLDER INFORMATION powers of the Company to allot shares 5(1) of the EU Buy-Back and of the Company following such of other agreements to which the in the Company and to grant rights to Stabilisation Regulation 2003 appointment and shall then be eligible Company or any of its subsidiaries are subscribe for, or to convert any security (being the higher of the price of for re-appointment. If not re-appointed a party, such as banking arrangements, into, shares in the Company, up to the last independent trade and at such AGM, such a Director will property leases and licence an aggregate nominal amount of the highest current independent vacate office at its conclusion except agreements, to take effect, alter or £13,938,423 of which any amount bid for an Ordinary Share on the where a resolution is passed to terminate. Additionally, the Directors’ in excess of £8,796,495 may only be trading venues where the market appoint someone in their place (other service agreements and employee applied to fully pre-emptive rights issues. purchases by the Company will than with effect from a time later share plans would be similarly affected be carried out) and at a minimum than the conclusion of the AGM) or upon a change of control. price of £0.25 per Ordinary Share. a resolution for their re-appointment is put to the AGM and lost (in either which case the retirement takes effect from the passing of the relevant resolution).

82 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 83 DIRECTORS’ RESPONSIBILITIES

DIRECTORS’ RESPONSIBILITIES

The Directors are responsible for • state that the Group has complied DIRECTORS’ STATEMENT preparing the Company’s Annual with IFRSs, subject to any material PURSUANT TO THE Report, Remuneration Report and its departures disclosed and explained DISCLOSURE GUIDANCE financial statements in accordance in the financial statements. AND TRANSPARENCY RULES with applicable law and regulations. Each of the Directors confirms that to Company law requires the Directors The Directors are responsible for the best of their knowledge and belief: to prepare such financial statements keeping adequate accounting records • the financial statements, prepared for each financial year. Under company that are sufficient to show and explain in accordance with IFRSs, give a law the Directors must not approve the Company’s transactions and true and fair view of the assets, the financial statements unless they disclose with reasonable accuracy liabilities, financial position and are satisfied that they give a true and at any time the financial position profit of the Group as a whole; and fair view of the state of affairs of the of the Company and of the Group • the Strategic Report contained in Company. The Directors have prepared and enable them to ensure that the the Annual Report and Accounts the Group and Parent Company financial statements comply with the 2016 includes a fair review of the financial statements in accordance Companies Act 2006 and Article 4 development and performance of with International Financial Reporting of the IAS Regulation. They are also the business and the position of the Standards (“IFRSs”) as adopted by the responsible for safeguarding the Group as a whole, together with European Union. assets of the Company and of the a description of the principal risks Group and hence for taking reasonable and uncertainties that they face. In preparing those financial statements steps for the prevention and detection the Directors are required to: of fraud and other irregularities. • select suitable accounting policies The Directors believe that the Annual in accordance with IAS 8 Report and Accounts 2016, when Accounting Policies, Changes in taken as a whole, are fair, balanced Accounting Estimates and Errors, and understandable and provide the and then apply them consistently; information necessary for shareholders • present information, including to assess the Company’s position accounting policies, in a manner and performance, business model that provides relevant, reliable, and strategy. comparable and understandable information; The Directors are responsible • provide additional disclosures for the maintenance and integrity when compliance with the specific of the Company’s website requirements in IFRSs is insufficient (www.johnmenziesplc.com). to enable users to understand the Legislation in the United Kingdom impact of particular transactions, concerning the preparation and other events and conditions on the dissemination of financial statements Group’s financial position and may differ from legislation in financial performance; and other jurisdictions.

84 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 NOTICE OF ANNUAL GENERAL MEETING

This document is important and 3. REMUNERATION POLICY 16. AUTHORITY TO STRATEGIC REPORT requires your immediate attention. To approve the Directors’ Remuneration ALLOT SHARES If you are in any doubt about what Policy as set out in the Annual Report That the directors of the Company action you should take you are and Accounts for the financial year (the “Directors”) be and are hereby recommended to consult your ended 31 December 2016. generally and unconditionally independent financial adviser authorised, pursuant to section 551 4. DIVIDEND authorised under the Financial of the Companies Act 2006 (the To declare a final dividend of 13.1 pence Services and Markets Act 2000 or, if “2006 Act”), to exercise all powers per ordinary share in the Company outside the UK, another appropriately of the Company to allot shares in for the financial year ended authorised financial adviser. If you the Company and to grant rights 31 December 2016. have sold or transferred all of your to subscribe for, or to convert any ordinary shares in John Menzies plc, 5-13. ELECTION AND security into, shares in the Company, RE-ELECTION OF DIRECTORS such rights and shares together being

you should forward this document, REPORTS GOVERNANCE together with accompanying 5. To elect Dermot Smurfit as “relevant securities”: documents, to the purchaser or a director of the Company. (a) otherwise than pursuant to transferee or to the stockbroker, 6. To elect Giles Wilson as a director paragraph (b) below, up to an bank or other agent through whom of the Company. aggregate nominal amount of the sale or transfer was effected, £6,970,709 (such amount to be for transmission to the purchaser 7. To elect Paul Baines as a director reduced by the aggregate nominal or transferee. of the Company. amount of any equity securities (as Notice is hereby given that the Annual 8. To elect John Geddes as a director defined by section 560 of the 2006 General Meeting of John Menzies plc of the Company. Act) allotted under paragraph (b) (the “ ”) will be held in the below in excess of £6,970,709); and Company 9. To re-elect Forsyth Black as Waldorf Astoria Edinburgh – The a director of the Company. (b) comprising equity securities up to

Caledonian, Princes Street, Edinburgh, FINANCIAL STATEMENTS an aggregate nominal amount of EH1 2AB on Friday 12 May 2017 at 10. To re-elect Geoff Eaton as £13,941,418 (such amount to be 2:00pm (the “Meeting”) to transact a director of the Company. reduced by the nominal amount the following business: 11. To re-elect Silla Maizey as a director of any relevant securities allotted ORDINARY RESOLUTIONS of the Company. under paragraph (a) above) in To consider and, if thought fit, pass connection with an offer by way 12. To re-elect Dermot Jenkinson as Resolutions 1-16, each of which will of a rights issue to: (i) holders of a director of the Company. be proposed as an ordinary resolution: ordinary shares in the capital of the 13. To re-elect David Garman as Company in proportion (as nearly 1. REPORT AND ACCOUNTS a director of the Company. as may be practicable) to their To receive the Annual Accounts of the respective holdings; and (ii) holders Company for the financial year ended 14. RE-APPOINTMENT of equity securities in the capital 31 December 2016, the Strategic OF AUDITOR of the Company as required by SHAREHOLDER INFORMATION Report and the Reports of the To re-appoint Ernst & Young LLP as the rights of those securities or as Directors and Auditor thereon. the Company’s auditor to hold office the Directors otherwise consider 2. REMUNERATION REPORT from the conclusion of this Meeting necessary, but subject to such To approve the Report on Directors’ until the conclusion of the next exclusions or other arrangements Remuneration (excluding the general meeting at which Annual as the Directors may deem Directors’ Remuneration Policy) as Accounts are laid before the Company. necessary or expedient to deal set out in the Annual Report and with treasury shares, fractional 15. REMUNERATION OF AUDITOR Accounts for the financial year entitlements, record dates, legal To authorise the directors of the ended 31 December 2016. or practical problems arising under Company to fix the remuneration the laws of any overseas territory or of the Company’s auditor. the requirements of any regulatory body or stock exchange or by virtue of shares being represented by depository receipts or any other matter;

147 SHAREHOLDER INFORMATION

NOTICE OF ANNUAL GENERAL MEETING CONTINUED

and provided that (unless previously (b) of the Section 551 Resolution, previously granted to the Directors (being the higher of the price (b) the maximum price which may 20. LENGTH OF NOTICE STRATEGIC REPORT renewed, varied or revoked) this such power shall be limited to the under sections 570 and 573 of the of the last independent trade be paid for each such Preference OF MEETING authority shall expire at the conclusion allotment of equity securities in 2006 Act but without prejudice to any and the highest current Share under this authority shall That a general meeting of the of the next Annual General Meeting of connection with a rights issue only) allotment of equity securities already independent bid for an Ordinary be the higher of: Company, other than an annual the Company or, if earlier, the close of to: (i) the holders of ordinary shares made or agreed to be made pursuant Share on the trading venues general meeting, may be called business on 30 June 2018 save that in the capital of the Company in to such powers. where the market purchases by (i) an amount equal to 110% of the on not less than fourteen clear the Company shall be entitled to make proportion (as nearly as may be the Company pursuant to the average of the middle market days’ notice. The Board confirms that, in offers or agreements before the expiry practicable) to their respective authority conferred by this quotations for any such accordance with the Pre-Emption By order of the Board of Directors of such authority which would or holdings; and (ii) the holders of Resolution 18 will be carried out), Preference Share as derived Group’s Statement of Principles (“PEG might require relevant securities to equity securities in the capital of and the minimum price which from the London Stock John Geddes Principles”), it does not intend to issue be allotted after such expiry and the the Company as required by the may be paid for any such Exchange Daily Official List Company Secretary shares for cash representing more Directors shall be entitled to allot rights of those securities or as the Ordinary Share is 25p, in each for the five business days 24 March 2017 than 7.5% of the Company’s issued relevant securities pursuant to any Directors otherwise consider case exclusive of the expenses immediately prior to the date ordinary share capital in any rolling REPORTS GOVERNANCE such offer or agreement as if the necessary, but subject to such of purchase (if any) payable by of conclusion of the contract for three year period to those who are not authority conferred hereby had not exclusions or other arrangements the Company; and any such purchase; and existing shareholders without prior expired. This authority is in substitution as the Directors may deem consultation with shareholders. (c) the authority hereby conferred shall (ii) the amount stipulated by Article for and to the exclusion of all necessary or expedient to deal expire (unless previously renewed, 5(1) of the EU Buy-back and unexercised existing authorities with treasury shares, fractional 18. PURCHASE OF OWN varied or revoked) at the conclusion Stabilisation Regulation 2003 previously granted to the Directors entitlements, record dates, legal or ORDINARY SHARES BY of the next Annual General Meeting (being the higher of the price of under the 2006 Act but without practical problems arising under THE COMPANY of the Company or, if earlier, the the last independent trade and prejudice to any allotment of shares the laws of any overseas territory or That the Company be and is hereby close of business on 30 June 2018 the highest current independent or grants of rights already made, the requirements of any regulatory authorised pursuant to section 701 of except in relation to the purchase bid for a Preference Share on the offered or agreed to be made body or stock exchange or by virtue the Companies Act 2006 (the “2006 of Ordinary Shares for which a trading venues where the market pursuant to such authorities. of shares being represented by Act”) to make market purchases contract was concluded before purchases by the Company depository receipts or any other (within the meaning of section 693(4)

SPECIAL RESOLUTIONS the authority expired and which pursuant to the authority FINANCIAL STATEMENTS matter; and of the 2006 Act) of its own ordinary To consider, and if thought fit, pass might or will be executed wholly conferred by this Resolution 19 shares of 25p each (“Ordinary Resolutions 17 – 20, each of which will (b) the allotment pursuant to the or partly after its expiration and will be carried out), and the Shares”), on such terms and in such be proposed as a special resolution: authority granted by paragraph the Company may make such minimum price which may be manner as the directors of the (a) of the Section 551 Resolution a purchase in pursuance of such paid for any such Preference 17. AUTHORITY TO DISAPPLY Company may from time to time (otherwise than pursuant to contract as if the authority hereby Share is £1, in each case PRE-EMPTION RIGHTS determine, provided that: paragraph (a) of this Resolution 17) conferred had not expired. exclusive of the expenses of That, subject to the passing of to any person or persons of equity (a) the maximum number of Ordinary purchase (if any) payable by Resolution 16 in the Notice of Annual securities up to an aggregate Shares hereby authorised to be 19. PURCHASE OF OWN the Company; and General Meeting of the Company nominal amount of £1,045,606, purchased is 8,364,852, PREFERENCE SHARES BY dated 24 March 2017 (the “Section 551 (c) the authority hereby conferred shall representing approximately 5% representing approximately 10% THE COMPANY Resolution”), the directors of the expire (unless previously renewed, of the issued ordinary share capital of the issued ordinary share capital That the Company be and is hereby Company (the “Directors”) be and are varied or revoked) at the conclusion of the Company as at 24 March 2017; of the Company as at 24 March 2017; authorised pursuant to section 701 of hereby empowered pursuant to of the next Annual General Meeting SHAREHOLDER INFORMATION the Companies Act 2006 (the “2006 section 570 and section 573 of the (b) the maximum price which may be of the Company or, if earlier, the and provided that (unless previously Act”) to make market purchases Companies Act 2006 (the “2006 Act”) paid for each such Ordinary Share close of business on 30 June 2018, renewed, varied or revoked) this power (within the meaning of section 693(4) to exercise all powers of the Company under this authority shall be the except in relation to the purchase shall expire at the conclusion of the of the 2006 Act) of its own 9% to allot equity securities (within the higher of: of Preference Shares for which a next Annual General Meeting of the cumulative preference shares meaning of sections 560(1)–(3) of the contract was concluded before Company or, if earlier, at the close of of £1 each (“Preference Shares”), 2006 Act) wholly for cash pursuant to (i) an amount equal to 105% of the the authority expired and which business on 30 June 2018 save that on such terms and in such manner the authority conferred by the Section average of the middle market might or will be executed wholly the Company shall be entitled to make as the directors of the Company 551 Resolution and/or by way of a sale quotations for any such Ordinary or partly after its expiration and offers or agreements before the expiry may from time to time determine, of treasury shares as if section 561(1) of Share as derived from the the Company may make such of such power which would or might provided that: the 2006 Act did not apply to any such London Stock Exchange Daily a purchase in pursuance of such require equity securities to be allotted allotment provided that this power Official List for the five business (a) the maximum number of contract as if the authority hereby after such expiry and the Directors shall be limited to: days immediately prior to the Preference Shares hereby conferred had not expired. shall be entitled to allot equity date of conclusion of the contract authorised to be purchased is (a) the allotment of equity securities securities pursuant to any such offer for any such purchase; and 1,394,587, representing 100% of the in connection with an offer or issue or agreement as if the power conferred issued Preference Share capital of of equity securities (but, in the case hereby had not expired. This power is (ii) the amount stipulated by Article the Company as at 24 March 2017; of an allotment pursuant to the in substitution for and to the exclusion 5(1) of the EU Buy-back and authority granted under paragraph of all unexercised existing powers Stabilisation Regulation 2003

148 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 149 SHAREHOLDER INFORMATION

NOTICE OF ANNUAL GENERAL MEETING CONTINUED

EXPLANATORY NOTES RESOLUTIONS 5–13: ELECTION At the Company’s AGM in May 2016, As at 24 March 2017, the Company RESOLUTIONS 18 AND Any purchase of Ordinary Shares STRATEGIC REPORT The following information provides AND RE-ELECTION OF the Directors were given authority to held 310,338 of its Ordinary Shares 19: AUTHORITY TO would be by means of market additional background information to DIRECTORS allot shares in the capital of the in Treasury. BUY-BACK SHARES purchase through the London several of the proposed Resolutions: Biographical details of the Directors to Company up to an aggregate nominal These special resolutions give the Stock Exchange. Resolution 17 will, if passed, give be elected or re-elected, as is the case, amount of £10,283,856, representing Company authority to make market RESOLUTIONS 2 AND 3: the Directors power, pursuant purchases of its Ordinary Shares and RESOLUTION 20: LENGTH at this year’s AGM can be found on approximately two-thirds of the REMUNERATION REPORT to the authority to allot granted 9% cumulative preference shares (the OF NOTICE OF MEETING pages 44 and 45 of the Annual Report Company’s issued ordinary share AND POLICY under Resolution 16, to allot equity “Preference Shares”) in the market, Before the introduction of the and Accounts 2016. Dermot Smurfit, capital as at 1 April 2016. At a general In accordance with the provisions of securities (as defined in sections as permitted by the 2006 Act. The Companies (Shareholders’ Rights) Giles Wilson, Paul Baines and John meeting of the Company held on 11 the Companies Act 2006 (the “2006 560(1)–(3) of the 2006 Act) or sell authorities set the minimum and Regulations 2009 (the “Regulations”), Geddes, having been appointed as October 2016, the Directors were given Act”), the Company’s Report on treasury shares for cash on a non maximum prices and limit the number the minimum notice period permitted Directors since last year’s AGM, will an additional specific authority to allot Directors’ Remuneration (excluding pre-emptive basis without first of Ordinary Shares that can be by the 2006 Act for general meetings stand for election in accordance with shares in the capital of the Company the Directors’ Remuneration Policy) offering them to existing shareholders purchased to 8,364,852 (representing (other than AGMs) was 14 clear days. the Company’s Articles of Association in connection with a rights issue up to will be put to an annual shareholder of the Company in proportion to their approximately 10% of the issued One of the amendments made to the REPORTS GOVERNANCE and, in accordance with the principles an aggregate nominal amount of Ordinary Shares as at 24 March 2017) vote by ordinary resolution. This vote is existing shareholdings in limited 2006 Act by the Regulations was to of good governance set out in the UK £3,654,567. To the extent not and the number of Preference Shares advisory in nature and is in respect of circumstances. This power will permit increase the minimum notice period for Corporate Governance Code, all other previously utilised, these authorities to 1,394,587 (representing 100% of the overall remuneration package the Directors to allot equity securities: general meetings of listed companies Directors who will continue following are due to expire at the end of this the issued Preference Shares as at which is in place for directors of the to 21 days, but with the ability for the AGM will seek re-election. year’s AGM. (a) in relation to a pre-emptive rights 24 March 2017). Company (the “Directors”) – it is companies to reduce this period back issue only, up to a maximum not specific to individual levels of In proposing the election or It is considered appropriate that the The authorities, if granted, will expire to 14 days (other than for AGMs) nominal amount of £13,941,418 remuneration nor is the entitlement of re-election, as is the case, of the Directors again be granted authority at the conclusion of the next AGM provided that two conditions are met. (representing approximately of the Company or, if earlier, the close a Director to remuneration conditional Directors, the Chairman has to allot shares in the capital of the The first condition is that a company two-thirds of the issued ordinary of business on 30 June 2018. The on the vote being passed. confirmed that, following rigorous Company up to a maximum nominal offers a facility for shareholders to vote share capital of the Company as Directors have no present intention internal performance evaluations amount of £13,941,418, which amount by electronic means. This condition is The Directors’ Remuneration Policy at 24 March 2017); and of exercising the authority to purchase (described on pages 49 and 50 of the represents approximately two-thirds met if a company offers a facility, is, however, subject to a binding the Preference Shares but will keep

Annual Report and Accounts 2016), of the Company’s issued ordinary (b) in any other case, up to a maximum accessible to all shareholders, to FINANCIAL STATEMENTS shareholder vote by ordinary resolution the matter under review, taking into each individual continues to make an share capital as at 24 March 2017 and nominal value of £1,045,606, appoint a proxy by means of a website. at least every three years. As this was account the financial resources of the effective and valuable contribution thus complies with the IMA Guidelines representing approximately 5% of The second condition is that there is last approved at the Company’s annual Company, the Company’s share price to the Board and demonstrates and PEG Principles. Accordingly, the issued ordinary share capital of and future funding opportunities. The an annual resolution of shareholders general meeting (“AGM”) in May 2014, commitment to their role. 27,882,836 ordinary shares of the Company as at 24 March 2017 authority would only be exercised if the approving the reduction of the the Company is seeking shareholder £0.25 each (the “Ordinary Shares”), (the latest practicable date prior to Directors believed that to do so would minimum notice period from 21 clear approval in respect of the proposed RESOLUTIONS 16 AND 17: representing approximately one-third publication of this Notice of AGM), result in an increase in earnings per days to 14 clear days. The Directors new Directors’ Remuneration Policy, AUTHORITY TO ALLOT of the Company’s issued ordinary otherwise than in connection with share and would be in the interests of have confirmed that they will only use which sets out the Company’s SHARES AND DISAPPLY share capital, may be allotted pursuant an offer to existing shareholders of the Company’s shareholders generally. the shorter notice period in limited forward-looking policy on Directors’ PRE-EMPTION RIGHTS to a fully pre-emptive rights issue. the Company. circumstances where the proposal remuneration, at the forthcoming AGM. The Investment Management As at 24 March 2017, the Company held 310,338 Ordinary Shares in Treasury. in question is time-sensitive and Further details of the proposed new Association’s Share Capital The authority sought by Resolution 16 The Directors have no present The Company may make purchases the short notice would clearly be to Directors’ Remuneration Policy are set Management Guidelines (the “IMA will last until the conclusion of the next intention of exercising this power. of its Ordinary Shares, taking into the advantage of the Company’s out on pages 60 to 68 of the Annual Guidelines”) and the PEG Principles AGM of the Company or, if earlier, the SHAREHOLDER INFORMATION Were the Board to exercise this power, account the financial resources of the shareholders as a whole. Report and Accounts 2016. If approved permit, and regard as routine, an close of business on 30 June 2018. The it confirms that it will make disclosures Company, the Company’s share price by shareholders, it will take immediate authority to allot up to two-thirds of Directors have no present intention of Resolution 20 is therefore proposed as in the announcement regarding the and future funding opportunities. binding effect and, as is currently the a company’s existing issued share exercising this authority, although a special resolution which would be issue, and in the subsequent annual No voting rights attach to Ordinary case, the Company will be unable to capital. They provide that any amount they have confirmed that should the effective until the Company’s next report, such as those contemplated Shares whilst held in Treasury nor make a remuneration payment to a in excess of one-third of a company’s power authorised in Resolution 16 be AGM when it would be intended to in the Pre-Emption Group Guidance are dividends payable on them. The current or prospective Director or a issued share capital should only utilised then all Directors would stand authority sought under Resolution 18 propose that the approval be renewed. issued in May 2016. The power, if payment for loss of office to a current be applied to fully pre-emptive for re-election at the next AGM (as will only be exercised if the Directors granted, will expire at the conclusion or past Director, unless such payment rights issues. they currently do in accordance with believe that to do so would result in of the next AGM of the Company or, is consistent with the Policy or has the principles of good governance). an increase in earnings per share if earlier, the close of business on been approved by a resolution of the and would be in the interests of the 30 June 2018. Company’s shareholders. Company’s shareholders generally.

150 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 151 SHAREHOLDER INFORMATION

NOTICE OF ANNUAL GENERAL MEETING CONTINUED

RECOMMENDATION 5. If you appoint a proxy, this will not Company and, therefore, the total It is the responsibility of the CREST annual accounts and reports were STRATEGIC REPORT The Directors consider that all these prevent you attending the AGM and number of voting rights in the member concerned to take (or, if laid in accordance with section 437 Resolutions are in the best interests of voting in person if you wish to do so. Company as at 24 March 2017 the CREST member is a CREST of the 2006 Act. The Company the Company and its shareholders as is 83,338,190. personal member or sponsored may not require the shareholder 6. The right to vote at the AGM is a whole and are most likely to promote member or has appointed a voting requesting any such website determined by reference to the 11. CREST members who wish to the success of the Company. service provider(s), to procure that publication to pay its expenses Company’s Register of Members appoint a proxy or proxies by utilising Accordingly, they unanimously their CREST sponsor or voting in complying with sections 527 as at the close of business on the CREST electronic proxy recommend that you vote in favour service provider(s) take(s)) such or 528 of the 2006 Act. Where the Wednesday 10 May 2017 or, if the appointment service may do so for of all the proposed Resolutions. action as shall be necessary Company is required to place AGM is adjourned, at 5:00pm on the AGM and any adjournment(s) to ensure that a message is a statement on a website under NOTES TO THE NOTICE OF AGM the day two days prior to the thereof by utilising the procedures transmitted by means of the section 527 of the 2006 Act, it must 1. Information about the AGM is adjourned meeting. Changes to described in the CREST Manual. CREST system by any particular forward the statement to the available from the Company’s entries on the Register of Members CREST personal members or other time. In this connection, CREST Company’s auditor not later than website: www.johnmenziesplc.com. after that time shall be disregarded CREST sponsored members, and REPORTS GOVERNANCE members and, where applicable, the time when it makes the in determining the rights of any those CREST members who have 2. As a shareholder, you are entitled their CREST sponsors or voting statement available on the website. shareholder to attend and vote at appointed a voting service to appoint one or more proxies to service providers are referred, The business which may be dealt the AGM. provider(s), should refer to their exercise all or any of your rights to in particular, to those sections of with at the AGM includes any CREST sponsor or voting service attend, speak and vote at the AGM. 7. As a shareholder, you have the right the CREST Manual concerning statement that the Company has provider(s), who will be able to take A proxy need not be a shareholder to put questions at the AGM relating practical limitations of the CREST been required to publish on a the appropriate action on their behalf. of the Company. You may appoint to the business being dealt with at system and timings. website under section 527 of the more than one proxy provided each the AGM. 12. In order for a proxy appointment 2006 Act. 14. The Company may treat as proxy is appointed to exercise rights made by means of CREST to be 8. Any person to whom this notice is invalid a CREST Proxy Instruction 17. You may not use any electronic attached to different shares. valid, the appropriate CREST sent who is a person nominated in the circumstances set out address provided either in this You may not appoint more than message (a “CREST Proxy under section 146 of the 2006 Act in Regulation 35(5)(a) of the Notice of AGM or any related one proxy to exercise the rights Instruction”) must be properly

to enjoy information rights (a Uncertificated Securities documents to communicate with FINANCIAL STATEMENTS attached to any one share. authenticated in accordance with “Nominated Person”) may, under Regulations 2001. the Company for any purpose other Euroclear UK & Ireland Limited’s 3. A Form of Proxy is enclosed. To be an agreement between them and than as expressly stated. specifications and must contain 15. Under section 338 of the 2006 Act, valid, your Form of Proxy and any the shareholder by whom they were the information required for such shareholders may require the DOCUMENTS power of attorney or other authority, nominated, have a right to be instructions, as described in the Company to give, to shareholders of The following documents will be if any, under which it is signed or a appointed (or to have someone else CREST Manual. The message must the Company entitled to receive this available for inspection during usual notarially certified copy of that power appointed) as a proxy for the AGM. be transmitted so as to be received Notice of AGM, notice of a resolution business hours on any day (except of attorney or authority should be If a Nominated Person has no such by the issuer’s agent (ID 3RA50) so which may properly be moved and is Saturday, Sunday and Bank Holidays) sent to Computershare Investor proxy appointment right or does as to arrive no later than 48 hours intended to be moved at the AGM. from the date of sending this Notice Services (“Computershare”) at The not wish to exercise it, they may, before the commencement of the Under section 338A of the 2006 Act, of AGM up to and including the date Pavilions, Bridgwater Road, Bristol under any such agreement, have AGM or any adjourned meeting. shareholders may request the of the AGM at the registered office of BS99 6ZY so as to arrive no later than a right to give instructions to the For this purpose, the time of receipt Company to include in the business the Company and at the offices of the 48 hours before the commencement shareholder as to the exercise will be taken to be the time (as to be dealt with at the AGM any Company’s solicitors, Maclay Murray SHAREHOLDER INFORMATION of the AGM. No amendments to, or of voting rights. determined by the timestamp matter (other than a proposed & Spens LLP, at One London Wall, submission or withdrawal of, any 9. The statement of the rights of applied to the shareholder resolution) which may properly London EC2Y 5AB: Form of Proxy shall be effective if shareholders in relation to the information message by the CREST be included in the business. lodged with Computershare less (a) copies of the Directors’ service appointment of proxies in Notes 2, Applications Host) from which the than 48 hours before the time 16. It is possible that, pursuant to contracts with the Company; and 3 and 4 above does not apply to issuer’s agent is able to retrieve the appointed for the holding of the requests made by shareholders of Nominated Persons. The rights message by enquiry to CREST in (b) the terms of appointment of the AGM or any adjourned meeting. the Company under section 527 of described in these paragraphs can the manner prescribed by CREST. Non-Executive Directors of the 2006 Act, the Company may be 4. It is possible for you to submit only be exercised by shareholders the Company. 13. CREST members and, where required to publish on a website a your proxy votes online. Further of the Company. applicable, their CREST sponsors statement setting out any matter information on this service can be On the date of the AGM, these 10. As at 24 March 2017, the issued or voting service providers should relating to: (i) the audit of the found on your Form of Proxy or, documents will be available for ordinary share capital of the note that Euroclear UK & Ireland Company’s accounts (including the if you receive communications inspection at the venue of the AGM Company comprised 83,648,528 Limited does not make available auditor’s report and the conduct of electronically, voting information from 12 noon until the conclusion Ordinary Shares and the Company special procedures in CREST for the audit) that are to be laid before will be contained within your of the AGM. held 310,338 of these Ordinary any particular messages. Normal the AGM: or (ii) any circumstances email broadcast. Shares in Treasury. Each Ordinary system timings and limitations will connected with an auditor of the Share carries the right to one vote therefore apply in relation to the Company ceasing to hold office at a general meeting of the input of CREST Proxy Instructions. since the previous meeting at which

152 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 153 SHAREHOLDER INFORMATION

GENERAL INFORMATION

INTERNET Write: CHARGES PAYMENT OF DIVIDENDS PRINCIPAL ADVISERS STRATEGIC REPORT The Company operates a The John Menzies plc Registrar, Commission for the above share It is in the interests of both the AUDITOR website which can be found at Computershare Investor Services dealing service will be at a rate of 1% Company and its shareholders for Ernst & Young LLP www. johnmenziesplc.com. This site is PLC, The Pavilions, Bridgwater Road, and will be subject to a minimum fee of dividends to be paid directly into bank G1, 5 George Square regularly updated to provide you with Bristol BS99 6ZZ £25. Additionally, UK share purchases or building society accounts. Any Glasgow G2 1DY information about the Company and will be subject to a 0.5% stamp duty shareholder who wishes to receive Computershare should be notified CORPORATE ADVISERS its Operating Divisions. In particular, charge whilst a levy of £1.00 will be dividends in this way should contact promptly in writing of any change Numis Securities Limited all of the Company’s press releases imposed by the Panel for Takeovers Computershare to obtain a dividend in a shareholder’s address. The London Stock Exchange Building and announcements can be found and Mergers for single trades in mandate form. Computershare’s online Investor 10 Paternoster Row on this site together with copies of excess of £10,000. Centre also enables you to view your 9 % CUMUL ATI V E London EC4M 7LT its Annual Reports and Accounts. shareholding and update your address SETTLEMENT PREFERENCE SHARES JOINT BROKERS JOHN MENZIES INVESTOR and payment instructions online. You You will be required to pay for any Dividends will be paid on 1 April 2017 Shore Capital Stockbrokers Limited RELATIONS APP can register at www.investorcentre. shares purchased by debit card at and 2 October 2017. REPORTS GOVERNANCE Bond Street House The Company has an Investor co.uk. In order to register, you will the time of the transaction. You must ORDINARY SHARES 14 Clifford Street Relations App for iPhone and iPad need your SRN which you can therefore ensure that you have A final dividend of 13.1p per Ordinary London W1S 4JU users. The App provides users with find on your share certificate sufficient cleared funds available Share was proposed by the Directors the Company’s latest share price, or dividend confirmation. in your debit card account to pay PRINCIPAL BUSINESS ADDRESSES on 8 March 2017 and, subject to regulatory and business news, for the shares in full. JOHN MENZIES PLC SHARE PRICE shareholder approval, will be paid annual/interim reports and 2 Lochside Avenue The current price of the Company’s SHAREGIFT on 3 July 2017 to shareholders on the presentations. The App can be Edinburgh Park ordinary shares of £0.25 each (the If you have only a small number of Company’s Register of Members as downloaded via the Company’s Edinburgh EH12 9DJ “Ordinary Shares”) can be viewed shares which would cost more for you at close of business on 26 May 2017. website or by visiting your App store. Telephone: +44 (0) 131 225 8555 on the Company’s website at to sell than they are worth, you may Any interim dividends for the financial Email: [email protected] SHARE REGISTER AND www.johnmenziesplc.com. wish to consider donating them to the year ended 31 December 2017 will SHAREHOLDER ENQUIRIES charity ShareGift (Registered Charity MENZIES DISTRIBUTION

TELEPHONE SHARE be paid on 17 November 2017 to FINANCIAL STATEMENTS Any enquiry concerning your No. 1052686) which specialises in 2 Lochside Avenue DEALING SERVICE shareholders on the Company’s shareholding should be directed accepting such shares as donations. Edinburgh Park A share dealing service has been Register of Members as at close of to the Company’s Registrar, There are no implications for UK Edinburgh EH12 9DJ arranged with Stocktrade which business on 20 October 2017. Computershare Investor Services PLC Capital Gains Tax purposes (no gain or Telephone: +44 (0) 131 467 8070 provides a simple way of buying (“Computershare”), and should clearly loss) on gifts of shares to charity and it INVESTOR RELATIONS or selling shares in the Company. MENZIES AVIATION state your name, address and is also possible to obtain income tax For any Investor Relations enquiries, To use this service you should call 2 World Business Centre Heathrow Shareholder Reference Number relief. If you wish to do this the details please contact us by one of the the following telephone number and Newall Road (“SRN”). The contact details are are as follows: following means: quote reference “John Menzies plc London Heathrow Airport as follows: dial and deal”: Telephone: Telephone: Hounslow TW6 2SF Telephone: +44 (0) 20 7930 3737 +44 (0) 131 225 8555 Telephone: +44 (0) 20 8750 6000 Telephone: +44 (0) 370 703 6303 +44 (0) 131 240 0414 Web: Web:

Web: www.sharegift.org www.johnmenziesplc.com SHAREHOLDER INFORMATION www.investorcentre.co.uk Email: Email: Email: [email protected] [email protected] www.investorcentre.co.uk/contactus Write: John Menzies plc, 2 Lochside Avenue, Edinburgh Park, Edinburgh EH12 9DJ, ANALYSIS OF SHAREHOLDINGS marked for the attention of at 31 December 2016 Emma Wadsworth

Total number of Percentage of Shareholding Number of Percentage of Ordinary Shares Ordinary Shares (Ordinary Shares) shareholders shareholders held held 1-1,000 2,962 80.25 682,608 0.82 1,001-5,000 464 12.57 946,504 1.13 5,001-10,000 67 1.82 476,571 0.57 10,001-100,000 117 3.17 4,117,191 4.92 Over 100,000 81 2.19 77,414,021 92.56 Total 3,691 100 83,636,895 100.00

154 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 155 SHAREHOLDER INFORMATION

GENERAL INFORMATION CONTINUED

CORPORATE CALENDAR (PROVISIONAL DATES) 8 March 2017 Preliminary announcement of Annual Results 28 March 2017 Annual Report and Accounts and Notice of AGM released 1 April 2017 Payment of dividend on Preference Shares 12 May 2017 AGM 26 May 2017 Record date for final dividend on Ordinary Shares 3 July 2017 Payment of final dividend on Ordinary Shares 15 August 2017 Announcement of Interim Results 2 October 2017 Payment of dividend on Preference Shares 20 October 2017 Record date for interim dividend on Ordinary Shares 17 November 2017 Payment of interim dividend on Ordinary Shares

156 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 INDEPENDENT AUDITOR’S REPORT TO STRATEGIC REPORT THE MEMBERS OF JOHN MENZIES PLC

OUR OPINION ON THE FINANCIAL STATEMENTS REPORTS GOVERNANCE In our opinion: • John Menzies plc’s Group financial statements and parent company financial statements (the “financial statements”) give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December 2016 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted by the European Union; • the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006, and, as regards the Group financial statements, Article 4 of the IAS Regulation.

WHAT WE HAVE AUDITED FINANCIAL STATEMENTS John Menzies plc’s financial statements comprise:

Group Parent company • Group Balance Sheet as at 31 December 2016 • Company Balance Sheet as at 31 December 2016 • Group Income Statement for the year then ended • Company Statement of Changes in Equity as at • Group Statement of Comprehensive Income for the 31 December 2016 year then ended • Company Statement of Cash Flows for the year • Group Statement of Changes in Equity as at then ended 31 December 2016 • Related Notes 1 to 28 to the accounts • Group Statement of Cash Flows for the year then ended • Related Notes 1 to 28 to the accounts

The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the SHAREHOLDER INFORMATION European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

OVERVIEW OF OUR AUDIT APPROACH Risks of material misstatement • Assessment of the carrying value of goodwill and intangible assets with indefinite life. • Assessment of the valuation of defined benefit pension scheme assets and liabilities. • Risk of misstatement due to management override, fraud and error specifically around revenue recognition. Audit scope • We performed an audit of the complete financial information of four components and audit procedures on specific balances for a further 30 components. • The components where we performed full or specific audit procedures accounted for 76% of adjusted profit before tax (“PBT”) and 89% of revenue. Materiality • Overall Group materiality of £2m which represents 5% of adjusted PBT.

85 FINANCIAL STATEMENTS

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JOHN MENZIES PLC CONTINUED

OUR ASSESSMENT OF RISK OF MATERIAL MISSTATEMENT Risk Our response to the risk What we concluded to the Audit Committee STRATEGIC REPORT We identified the risks of material misstatement described below as those that had the greatest effect on our overall audit Risk of misstatement due to We tested controls over revenue We concluded that revenue recognised strategy, the allocation of resources in the audit and the direction of the efforts of the audit team. In addressing these risks, management override, fraud recognition. At ‘full scope components’ in the year is materially correct on the we have performed the procedures below which were designed in the context of the financial statements as a whole and, and error specifically around we employed data analysis techniques basis of procedures performed both at consequently, we do not express any opinion on these individual areas. revenue recognition to correlate sales through to Group and by component audit teams. Risk Our response to the risk What we concluded to the Audit Committee cash receipts. Refer to the Audit Committee Report Assessment of the carrying value We obtained management’s We have concluded that the goodwill (page 55); accounting policies (page At both full and ‘specific scope of goodwill and intangible assets impairment assessment and examined and intangible assets with indefinite 97); and Note 2 of the consolidated components’ we performed detailed with indefinite life (£104.0m, the calculation methodology and life balances are materially correct. financial statements (page 104). testing of a sample of sales and 2015: £108.3m) sources for key assumptions. accrued income to ensure that revenue There continues to be pressure on Refer to the Audit Committee Report We corroborated the key had been appropriately recognised in the Group to meet expectations and (page 55); accounting policies (page assumptions, being the cash line with the underlying contract terms.

targets. Management reward and REPORTS GOVERNANCE 97); and Note 11 of the consolidated flows, growth assumptions and We specifically focused on the revenue incentive schemes based on achieving financial statements (page 116). discount rates supported by our recognised on new Aviation contracts. profit targets may also place pressure valuations specialists. We focused on this area because the to manipulate revenue recognition. We tested the level of returns of assessment of the carrying value of We performed sensitivity analysis over newspapers and magazines and Sales arrangements are generally these assets is inherently subjective significant assumptions used in the assessed the impact of expected post straightforward requiring minimal due to the judgement involved in models to ascertain the point at which balance sheet returns on revenues judgement to be exercised. estimating future cash flows and in an impairment would be triggered and recognised in the year. calculating the discount rate to apply considered the likelihood of such We focused on the application of We performed cut-off testing around to these cash flows. a change. contractual rates within Aviation the period end. recognising the ongoing contract We read the disclosure in the churn in this area and the level of Other audit procedures specifically financial statements in respect of returns in the Distribution business designed to address the risk of management’s impairment testing to FINANCIAL STATEMENTS due to the level of judgement management override of controls confirm these are consistent with the being applied. include journal entry testing, applying conclusions of our audit work and meet particular focus to individually unusual the disclosure requirements of the These risks include the potential for and/or material revenue journals. relevant accounting standards. management to intentionally misstate Assessment of the valuation of We reviewed the scheme rules to We have concluded that the pension revenue recognised. These procedures were supplemented with analytical review procedures and defined benefit pension scheme ensure our understanding is current. liability is materially correct and that We also focused on the risk of assets and liabilities (£71.0m, management’s judgements in relation enquiry of management. We tested the input data used by the management override of controls 2015: £43.4m) to underlying actuarial assumptions actuary to company records. through the processing of material were appropriate. Refer to the Audit Committee Report revenue journals. We evaluated the key actuarial (page 55); accounting policies (page assumptions with the assistance of our 97); and Note 4 of the consolidated In the prior year, our report included a risk of material misstatement in relation to risk that items are inconsistently specialists to determine if these were SHAREHOLDER INFORMATION financial statements (page 108). (or inappropriately) classified as ‘exceptional and other items’. In the current year we have concluded that the risk within an acceptable range. of misclassification has diminished due to the nature of items now being classified as exceptional and other items. We focused on this area because We verified a sample of assets the Group is exposed to significant for existence through third party pension fund movements, over which confirmations and for valuation using it has limited control as the quantum market valuations where available or of a surplus/deficit depends on the other supporting evidence. successful investment policy as well as the selection of underlying We read the disclosure in the financial assumptions. Significant judgement statements in respect of pensions to is required to determine the consider whether these are consistent assumptions for future salary and with the conclusions of our audit work pension increases, discount rate, and meet the disclosure requirements inflation, investment returns and of the relevant accounting standards. member longevity, resulting in the risk that liabilities are misstated.

86 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 87 FINANCIAL STATEMENTS

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JOHN MENZIES PLC CONTINUED

THE SCOPE OF OUR AUDIT The reporting components where we performed audit procedures were: The audit work on the UK and On the basis of our risk assessments, SCOPE OF THE AUDIT OF THE STRATEGIC REPORT

TAILORING THE SCOPE Components Percentage of PBT Percentage of revenue North America full scope reporting together with our assessment of the FINANCIAL STATEMENTS Our assessment of audit risk, our 2016 2015 2016 2015 2016 2015 units was performed directly by the Group’s overall control environment, An audit involves obtaining evidence evaluation of materiality and our Number Number % % % % primary audit team covering three our judgement was that performance about the amounts and disclosures allocation of performance materiality Full scope 4 4 90 66 65 68 of the four full scope locations. The materiality was 75% (2015: 75%) of in the financial statements sufficient determine our audit scope for each Specific scope 31 30 41 63 24 22 primary team interacted regularly our planning materiality, namely £1.5m to give reasonable assurance that entity within the Group. Taken 35 34 131 129 89 90 with all component teams through (2015: £1.1m). We have set performance the financial statements are free together, this enables us to form an Parent and emails and teleconferencing where materiality at this percentage due from material misstatement, whether opinion on the consolidated financial consolidation appropriate during various stages of to historical experience with the caused by fraud or error. This includes statements. We take into account size, adjustments (55) (55) – – the audit, reviewed key working papers Company demonstrating an effective an assessment of: whether the risk profile, the organisation of the accounting policies are appropriate to Overall and were responsible for the scope control environment and low history Group and effectiveness of Group coverage 76 74 89 90 and direction of the audit process. of misstatements. the Group’s and the parent company’s wide controls, changes in the business This, together with the additional circumstances and have been Audit work at component locations REPORTS GOVERNANCE environment and other factors such procedures performed at Group consistently applied and adequately Percentage of PBT is calculated CHANGES FROM THE PRIOR YEAR for the purpose of obtaining audit as recent internal audit results when level, gave us appropriate evidence disclosed; the reasonableness of against the adjusted PBT measure To ensure sufficient coverage and to coverage over significant financial assessing the level of work to be for our opinion on the Group significant accounting estimates used to calculate materiality. add a degree of unpredictability to the statement accounts is undertaken performed at each entity. financial statements. made by the Directors; and the audit, one component was raised from based on a percentage of total The audit scope of specific scope overall presentation of the financial In assessing the risk of material specific to full scope and one lowered OUR APPLICATION performance materiality. The components may not have included statements. In addition, we read all the misstatement to the Group financial from full to specific scope, one OF MATERIALITY performance materiality set for each testing of all significant accounts financial and non-financial information statements, and to ensure we had component was raised from We apply the concept of materiality component is based on the relative of the component but will have in the annual report to identify material adequate quantitative coverage of residual to specific scope and one in planning and performing the audit, scale and risk of the component to the contributed to the coverage of inconsistencies with the audited significant accounts in the financial component was reduced from in evaluating the effect of identified Group as a whole and our assessment accounts tested for the Group. financial statements and to identify statements, of the 104 (2015: 101) specific to residual scope. misstatements on the audit and of the risk of misstatement at that any information that is apparently reporting components of the Group, The Group audit risk in relation to the in forming our audit opinion. component. In the current year, the INVOLVEMENT WITH materially incorrect based on, excluding the parent entity, we carrying value of goodwill and range of performance materiality FINANCIAL STATEMENTS COMPONENT TEAMS MATERIALITY or materially inconsistent with, selected 35 (2015: 34) components intangible assets with indefinite life allocated to components was £0.1m In establishing our overall approach The magnitude of an omission or the knowledge acquired by us in the covering entities within the UK, USA, and the valuation of defined benefit to £1.1m (2015: £0.2m to £0.9m). to the Group audit, we determined misstatement that, individually or in course of performing the audit. If Australia, Netherlands, Spain, Czech pension scheme assets and liabilities the type of work that needed the aggregate, could reasonably be REPORTING THRESHOLD we become aware of any apparent Republic, South Africa, Dominican was subject to audit procedures by the to be undertaken at each of the expected to influence the economic An amount below which identified material misstatements or Republic, India and Macau, which primary team on the entire amount. components by us, as the primary decisions of the users of the financial misstatements are considered as inconsistencies we consider the represent the principal business units The Group risk of misstatement due to audit engagement team, or by statements. Materiality provides being clearly trivial. implications for our report. within the Group. management override, fraud and error component auditors from other EY a basis for determining the nature specifically around revenue recognition We agreed with the Audit Committee RESPECTIVE RESPONSIBILITIES Of the 35 components selected, we global network firms operating under and extent of our audit procedures. was subject to audit procedures at that we would report to them all OF DIRECTORS AND AUDITOR performed an audit of the complete our instruction. Of the four full scope each of the full and specific scope We determined materiality for the uncorrected audit differences in As explained more fully in the financial information of four (2015: components, audit procedures were components with revenue. Group to be £2.0m (2015: £1.5m), excess of £100,000 (2015: £100,000), Directors’ Responsibilities Statement four) components (full scope performed on two of these directly which is 5% of adjusted PBT (2015: as well as differences below that set out on page 84, the Directors components) which were selected Of the remaining 69 (2015: 67) by the primary audit team and two by SHAREHOLDER INFORMATION 5%) of £39.8m (2015: £28.9m) being threshold that, in our view, warranted are responsible for the preparation based on their size or risk components that together represent a component audit team. Of the 31 reported PBT of £19.8m (2015: £18.2m) reporting on qualitative grounds. of the financial statements and for characteristics. For the remaining 31 24% (2015: 26%) of the Group’s (2015: 30) specific scope components, adjusted for exceptional items and being satisfied that they give a true (2015: 30) components (specific scope adjusted PBT, none is individually audit procedures were performed We evaluate any uncorrected net impairment losses of £20.1m (2015: and fair view. Our responsibility is to components), we performed audit greater than 5% of the Group’s on 16 (2015: 16) of these directly by misstatements against both the £10.7m). We believe that adjusted audit and express an opinion on the procedures on specific accounts adjusted PBT. For these components, the primary audit team. For the 15 quantitative measures of materiality PBT provides us with a consistent financial statements in accordance within each component that we we performed other procedures, (2015: 14) specific scope components, discussed above and in light of other measure of underlying year on year with applicable law and International considered had the potential for the including analytical review, where the work was performed by relevant qualitative considerations performance as it excludes the Standards on Auditing (“ISAs”) (UK greatest impact on the significant intercompany eliminations and component auditors, we determined in forming our opinion. impact of non-recurring items. and Ireland). Those standards require accounts in the Group financial obtaining audit evidence to respond the involvement that we, as the us to comply with the Auditing statements either because of the size to any potential risks of material primary team, needed to have with PERFORMANCE MATERIALITY Practices Board’s Ethical Standards of these accounts or their risk profile. misstatement to the Group each component team to enable us The application of materiality at the for Auditors. financial statements. to determine that sufficient audit individual account or balance level. evidence had been obtained as a It is set at an amount to reduce to an basis for our opinion on the Group appropriately low level the probability as a whole. that the aggregate of uncorrected and undetected misstatements exceeds materiality.

88 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 89 FINANCIAL STATEMENTS

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF JOHN MENZIES PLC CONTINUED

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Listing Rules review We are required to review: We have no STRATEGIC REPORT Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are requirements exceptions to report. required to state to them in an Auditor’s Report and for no other purpose. To the fullest extent permitted by law, we do not • the Directors’ Statement in relation to going concern, set out on page 9 accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit and longer-term viability, set out on page 9; and work, for this report, or for the opinions we have formed. • the part of the Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006 Governance Code specified for our review. In our opinion: • the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the STATEMENT ON THE DIRECTORS’ ASSESSMENT OF THE PRINCIPAL RISKS THAT WOULD THREATEN THE Companies Act 2006; SOLVENCY OR LIQUIDITY OF THE ENTITY • based on the work undertaken in the course of the audit: ISAs (UK and Ireland) We are required to give a statement as to whether we have anything We have nothing –– the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial reporting material to add or to draw attention to in relation to: material to add or statements are prepared is consistent with the financial statements; to draw attention to. • the Directors’ confirmation in the Annual Report that they have carried REPORTS GOVERNANCE –– the Strategic Report and Directors’ Report have been prepared in accordance with applicable legal requirements; out a robust assessment of the principal risks facing the entity, including those that would threaten its business model, future performance, In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, solvency or liquidity; we have identified no material misstatements in the Strategic Report or Directors’ Report. • the disclosures in the Annual Report that describe those risks and MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION explain how they are being managed or mitigated; ISAs (UK and We are required to report to you if, in our opinion, financial and non We have no • the Directors’ Statement in the Financial Statements about whether Ireland) reporting financial information in the annual report is: exceptions to report. they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material • materially inconsistent with the information in the audited financial uncertainties to the entity’s ability to continue to do so over a period statements; or of at least twelve months from the date of approval of the Financial • apparently materially incorrect based on, or materially inconsistent with, Statements; and

our knowledge of the Group acquired in the course of performing our • the Directors’ explanation in the annual report as to how they have FINANCIAL STATEMENTS audit; or assessed the prospects of the entity, over what period they have done so • otherwise misleading. and why they consider that period to be appropriate, and their Statement as to whether they have a reasonable expectation that the entity will be In particular, we are required to report whether we have identified any able to continue in operation and meet its liabilities as they fall due over inconsistencies between our knowledge acquired in the course of the period of their assessment, including any related disclosures performing the audit and the Directors’ Statement that they consider drawing attention to any necessary qualifications or assumptions. the annual report and accounts taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders Annie Graham (Senior Statutory Auditor) to assess the entity’s performance, business model and strategy; and for and on behalf of Ernst & Young LLP, Statutory Auditor whether the Annual Report appropriately addresses those matters that Glasgow we communicated to the Audit Committee that we consider should have 7 March 2017

been disclosed. Notes: SHAREHOLDER INFORMATION Companies Act 2006 We are required to report to you if, in our opinion: We have no 1. The maintenance and integrity of the John Menzies plc web site is the responsibility of the Directors; the work carried out by the auditors does not involve reporting exceptions to report. consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since • adequate accounting records have not been kept by the Parent they were initially presented on the web site. 2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Company, or returns adequate for our audit have not been received from branches not visited by us; or • the Parent Company Financial Statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. • a Corporate Governance Statement has not been prepared by the Company

90 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 91 FINANCIAL STATEMENTS

GROUP INCOME GROUP STATEMENT OF STATEMENT COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2016 (YEAR ENDED 31 DECEMBER 2015) FOR THE YEAR ENDED 31 DECEMBER 2016 (YEAR ENDED 31 DECEMBER 2015)

Before Before 2016 2015 STRATEGIC REPORT exceptional Exceptional exceptional Exceptional Notes £m £m and other and other and other and other items items 2016 items items 2015 Profit for the year 8.0 9.9 Notes £m £m £m £m £m £m Items that will not be reclassified subsequently to profit or loss: Revenue 2 1,981.6 – 1,981.6 1,899.2 – 1,899.2 Actuarial (loss)/gain on defined benefit pensions 4 (36.8) 5.6 Net operating costs 3 (1,935.2) (26.3) (1,961.5) (1,862.8) (17.6) (1,880.4) Actuarial loss on unfunded pension arrangements (0.3) – Operating profit 46.4 (26.3) 20.1 36.4 (17.6) 18.8 Income tax effect on pension arrangements 7.4 (1.1) Share of post-tax results of joint ventures Impact of UK rate change on deferred tax on pension arrangements (1.6) (0.9) and associates 8.8 (1.3) 7.5 8.5 (1.5) 7.0 Operating profit after joint ventures Items that may be reclassified subsequently to profit or loss: and associates 2 55.2 (27.6) 27.6 44.9 (19.1) 25.8 Movement on cash flow hedges 23 – (0.1)

Movement on net investment hedges 23 (15.2) (1.5) REPORTS GOVERNANCE Analysed as: Income tax effect on net investment hedges 3.0 0.3 Underlying operating profit(i) 55.2 – 55.2 44.9 – 44.9 Exchange gain/(loss) on translation of foreign operations 33.1 (3.9) Non-recurring items – transaction related items and rationalisation 5 – (8.8) (8.8) – (5.8) (5.8) Income tax effect of exchange gain/loss on foreign operations (4.0) 0.6 Non-recurring items – impairment charges 5 – (9.6) (9.6) – (4.7) (4.7) Other comprehensive loss for the year (net of tax) (14.4) (1.0) Contract amortisation 5 – (7.9) (7.9) – (7.1) (7.1) Total comprehensive (loss)/income for the year (6.4) 8.9 Share of interest on joint ventures and associates – 0.6 0.6 – 0.7 0.7 Attributable to equity shareholders (5.8) 8.9 Share of tax on joint ventures Attributable to non-controlling interests (0.6) – and associates – (1.9) (1.9) – (2.2) (2.2) (6.4) 8.9 Operating profit after joint ventures

and associates 55.2 (27.6) 27.6 44.9 (19.1) 25.8 FINANCIAL STATEMENTS

Finance income 7 0.7 – 0.7 0.8 – 0.8 Finance charges 7 (4.6) (2.3) (6.9) (5.6) (0.9) (6.5) Other finance charge – pensions 4 (1.6) – (1.6) (1.9) – (1.9) Profit before taxation 49.7 (29.9) 19.8 38.2 (20.0) 18.2 Taxation 8 (15.9) 4.1 (11.8) (12.2) 3.9 (8.3) Profit for the year 33.8 (25.8) 8.0 26.0 (16.1) 9.9

Attributable to equity shareholders 34.3 (25.8) 8.5 26.2 (16.1) 10.1 Attributable to non-controlling interests (0.5) – (0.5) (0.2) – (0.2)

33.8 (25.8) 8.0 26.0 (16.1) 9.9 SHAREHOLDER INFORMATION Earnings per ordinary share(ii) 10 Basic 47.8p (35.9)p 11.8p 37.8p (23.2)p 14.6p Diluted 47.7p (35.9)p 11.8p 37.8p (23.2)p 14.6p

Notes: (i) Underlying operating profit adjusts for non-recurring exceptional items, impairment charges associated with goodwill, joint venture assets and other intangibles, contract amortisation and the Group’s share of interest and tax on joint ventures and associates to provide an appreciation of the impact of those items on operating profit. (ii) The 2015 EPS figures have been restated to adjust for the impact of the October 2016 Rights Issue as set out in Note 10.

92 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 93 FINANCIAL STATEMENTS

GROUP AND COMPANY GROUP AND COMPANY STATEMENTS BALANCE SHEETS OF CHANGES IN EQUITY AS AT 31 DECEMBER 2016 (31 DECEMBER 2015) AS AT 31 DECEMBER 2016 (31 DECEMBER 2015)

Group Company Share Translation Merger Capital Total Non- STRATEGIC REPORT Ordinary premium Treasury and hedge relief Retained redemption shareholders’ controlling Total 2016 2015 2016 2015 shares account shares reserves reserve earnings reserve equity equity equity Notes £m £m £m £m £m £m £m £m £m £m £m £m £m £m ASSETS Group Non-current assets At 31 December 2015 15.4 20.4 (1.8) (21.6) – 35.6 21.6 69.6 1.6 71.2 Intangible assets 11 104.0 108.3 – – Profit/(loss) for the year – – – – – 8.5 – 8.5 (0.5) 8.0 Property, plant and equipment 12 127.3 114.4 23.9 24.4 Other comprehensive income/(loss) – – – 17.0 – (31.3) – (14.3) (0.1) (14.4) Investments accounted using the equity method 13 30.9 26.4 – – Total comprehensive income/(loss) – – – 17.0 – (22.8) – (5.8) (0.6) (6.4) Investments in subsidiaries 13 – – 292.6 291.0 Deferred tax assets 14 24.2 12.2 10.1 2.8 New share capital issued 5.5 0.1 – – 69.7 – – 75.3 – 75.3 286.4 261.3 326.6 318.2 Rights Issue costs – – – – (2.4) – – (2.4) – (2.4) Current assets Share-based payments – – – – – 0.8 – 0.8 – 0.8 Inventories 16.0 14.7 – – Income tax effect of REPORTS GOVERNANCE Trade and other receivables 15 243.6 201.9 345.4 288.1 share-based payments – – – – – 0.3 – 0.3 – 0.3 Derivative financial assets 17 0.4 0.6 0.4 0.6 Dividends paid – – – – – (10.6) – (10.6) – (10.6) Cash and cash equivalents 38.9 34.1 1.0 0.8 Disposal of own shares – – 0.2 – – (0.1) – 0.1 – 0.1 298.9 251.3 346.8 289.5 At 31 December 2016 20.9 20.5 (1.6) (4.6) 67.3 3.2 21.6 127.3 1.0 128.3 LIABILITIES At 31 December 2014 15.4 20.3 (2.0) (16.8) – 29.5 21.6 68.0 1.7 69.7 Current liabilities Profit/(loss) for the year – – – – – 10.1 – 10.1 (0.2) 9.9 Borrowings 17 (39.0) (3.4) (38.5) (2.9) Other comprehensive (loss)/income – – – (4.8) – 3.6 – (1.2) 0.2 (1.0) Derivative financial liabilities 17 (6.1) (2.3) (6.1) (2.3) Total comprehensive (loss)/income – – – (4.8) – 13.7 – 8.9 – 8.9 Trade and other payables 16 (249.9) (217.3) (317.1) (310.3) New share capital issued – 0.1 – – – – – 0.1 – 0.1 Current income tax liabilities (11.3) (10.0) – – Share-based payments – – – – – 0.5 – 0.5 – 0.5

Provisions 20 (4.2) (4.9) – – Dividends paid – – – – – (8.0) – (8.0) (0.1) (8.1) FINANCIAL STATEMENTS (310.5) (237.9) (361.7) (315.5) Repurchase of own shares – – (0.1) – – – – (0.1) – (0.1) Net current (liabilities)/assets (11.6) 13.4 (14.9) (26.0) Disposal of own shares – – 0.3 – – (0.1) – 0.2 – 0.2 Total assets less current liabilities 274.8 274.7 311.7 292.2 At 31 December 2015 15.4 20.4 (1.8) (21.6) – 35.6 21.6 69.6 1.6 71.2 Non-current liabilities Borrowings 17 (64.7) (152.2) (64.7) (152.2) Company Other payables 16 (4.0) (3.5) (4.9) (5.0) At 31 December 2015 15.4 20.4 (1.8) (0.9) – 36.9 21.6 91.6 – 91.6 Deferred tax liabilities 14 (2.8) (1.5) – – Profit for the year – – – – – 46.5 – 46.5 – 46.5 Provisions 20 (4.0) (2.9) (1.1) – Other comprehensive loss – – – – – (31.3) – (31.3) – (31.3) Retirement benefit obligation 4 (71.0) (43.4) (71.0) (43.4) Total comprehensive income – – – – – 15.2 – 15.2 – 15.2 (146.5) (203.5) (141.7) (200.6) New share capital issued 5.5 0.1 – – 69.7 – – 75.3 – 75.3

Net assets 128.3 71.2 170.0 91.6 SHAREHOLDER INFORMATION Rights Issue costs – – – – (2.4) – – (2.4) – (2.4) Shareholders’ equity Ordinary shares 21 20.9 15.4 20.9 15.4 Share-based payments – – – – – 0.8 – 0.8 – 0.8 Share premium account 20.5 20.4 20.5 20.4 Dividends paid – – – – – (10.6) – (10.6) – (10.6) Treasury shares (1.6) (1.8) (1.6) (1.8) Disposal of own shares – – 0.2 – – (0.1) – 0.1 – 0.1 Other reserves (4.6) (21.6) (0.9) (0.9) At 31 December 2016 20.9 20.5 (1.6) (0.9) 67.3 42.2 21.6 170.0 – 170.0 Merger relief reserve 21 67.3 – 67.3 – At 31 December 2014 15.4 20.3 (2.0) (0.8) – 21.8 21.6 76.3 – 76.3 Retained earnings(i) 3.2 35.6 42.2 36.9 Profit for the year – – – – – 19.1 – 19.1 – 19.1 Capital redemption reserve 21.6 21.6 21.6 21.6 Other comprehensive (loss)/income – – – (0.1) – 3.6 – 3.5 – 3.5 Total shareholders’ equity 127.3 69.6 170.0 91.6 Total comprehensive (loss)/income – – – (0.1) – 22.7 – 22.6 – 22.6 Non-controlling interest in equity 1.0 1.6 – – New share capital issued – 0.1 – – – – – 0.1 – 0.1 Total equity 128.3 71.2 170.0 91.6 Share-based payments – – – – – 0.5 – 0.5 – 0.5 Dividends paid – – – – – (8.0) – (8.0) – (8.0) Note: (i) The Group’s profit after tax for the year was £8.0m (2015: £9.9m). The Company’s profit after tax for the year was £46.5m (2015: £19.1m). Repurchase of own shares – – (0.1) – – – – (0.1) – (0.1) The accounts were approved by the Board of Directors on 7 March 2017 and signed on its behalf by: Disposal of own shares – – 0.3 – – (0.1) – 0.2 – 0.2 At 31 December 2015 15.4 20.4 (1.8) (0.9) – 36.9 21.6 91.6 – 91.6 Dr Dermot F. Smurfit Giles Wilson Chairman Chief Financial Officer Company No. SC34970

94 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 95 FINANCIAL STATEMENTS

GROUP AND COMPANY STATEMENTS NOTES TO THE ACCOUNTS OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2016 (YEAR ENDED 31 DECEMBER 2015)

Group Company The consolidated accounts of the not impact the annual consolidated The above standards and STRATEGIC REPORT 2016 2015 2016 2015 Group for the year ended 31 December financial statements of the Group. amendments will be adopted in Notes £m £m £m £m 2016 were approved and authorised for accordance with their effective dates • Amendments to IAS 27: Equity Cash flows from operating activities issue in accordance with a resolution and have not been adopted in these Method in Separate Financial Cash generated from operations 22 46.1 35.9 (15.8) (15.6) of the Directors on 7 March 2017. financial statements. Statements – effective date John Menzies plc, a public company Interest received 0.7 0.8 – – 1 January 2016 For standards with a future effective with registered number SC34970 and Interest paid (7.7) (5.9) (7.2) (4.6) • Amendments to IAS 1: Disclosure date, the Directors are in the process registered address of 2 Lochside Tax (paid)/received (15.4) (7.7) (3.7) 0.6 Initiative – effective date of assessing the likely impact and look Avenue, Edinburgh Park, Edinburgh Net cash flow from/(used in) operating activities 23.7 23.1 (26.7) (19.6) 1 January 2016 to finalisation of the standards before EH12 9DJ, is a limited company • Amendments to IAS 16 and IAS 38: formalising their view. Ahead of the Cash flows from investing activities incorporated in Scotland and listed Clarification of Acceptable adoption of IFRS 15 Revenue from Acquisitions 25 (4.7) (15.1) – – on the London Stock Exchange. Methods of Depreciation and Contracts with Customers on Cash acquired with subsidiaries 25 0.3 1.3 – – 1. ACCOUNTING POLICIES Amortisation – effective date 1 January 2018, management is in REPORTS GOVERNANCE Investment in associate (0.4) – – – A summary of the more significant 1 January 2016 the process of reviewing all material Loan repayment by associate 0.3 – – – accounting policies, which have been • Amendments to IFRS 11: Accounting contracts to ensure compliance Redemption of joint venture preference shares – 0.8 – – consistently applied, is set out below. for Acquisitions of Interests in with the new standard. The review Purchase of property, plant and equipment (24.5) (22.2) – – Joint Operations – effective date so far has indicated there are no BASIS OF PREPARATION 1 January 2016 material adjustments. Intangible asset additions (2.6) (2.6) – – The consolidated accounts, which have • Improvements to IFRS 2012-2014 Proceeds from sale of property, been prepared under the historical cost BASIS OF CONSOLIDATION cycle – effective date 1 January 2016. plant and equipment 2.4 4.5 – – convention and in accordance with The consolidated accounts of the Dividends received from equity EU Endorsed International Financial Group include the assets, liabilities Standards and amendments to accounted investments 6.6 6.5 – – Reporting Standards (“IFRSs”), IFRIC and results of the Company and standards that have been issued Net cash flow used in investing activities (22.6) (26.8) – – interpretations and the Companies Act subsidiary undertakings in which but are not effective for 2016 and Cash flows from financing activities 2006 applicable to companies reporting John Menzies plc has a controlling have not been early adopted are: FINANCIAL STATEMENTS Net proceeds from issue of ordinary share capital 72.9 0.1 72.9 0.1 under IFRS, incorporate the accounts interest, using accounts drawn up to of the Company and its subsidiaries, • Amendment to IAS 7: Disclosure 31 December except where entities Purchase of own shares – (0.1) – (0.1) joint ventures and associates from the Initiative* – effective date have non-coterminous year ends. In Repayment of borrowings (64.0) (0.4) (63.4) – effective date of acquisition or to the 1 January 2017 such cases, the information is based Proceeds from borrowings – 15.3 – 15.3 date of deemed disposal. • Amendment to IAS 12: Recognition on the accounting period of these Dividends paid to ordinary shareholders 9 (10.6) (8.0) (10.6) (8.0) of Deferred Tax Assets for entities and is adjusted for material As permitted by section 408 of the Net amounts repaid by subsidiaries – – 28.0 12.1 Unrealised Losses* – effective date changes up to 31 December. Companies Act 2006, no Income 1 January 2017 Accordingly, the information Net cash flow (used in)/from financing activities (1.7) 6.9 26.9 19.4 Statement is presented by • IFRS 9 Financial Instruments* – consolidated is deemed to cover the (Decrease)/increase in net cash and the Company. cash equivalents (0.6) 3.2 0.2 (0.2) effective date 1 January 2018 same period for all entities throughout Effects of exchange rate movements 4.8 (1.5) – – NEW ACCOUNTING STANDARDS • IFRS 15 Revenue from Contracts the Group. AND AMENDMENTS AFFECTING with Customers* – effective date Opening net cash and cash equivalents 33.9 32.2 0.8 1.0 Control is achieved when the Group THE GROUP 1 January 2018 SHAREHOLDER INFORMATION (i) is exposed, or has rights, to variable Closing net cash and cash equivalents 23 38.1 33.9 1.0 0.8 There are no immediate changes to • IFRS 16 Leases* – effective date returns from its involvement with the UK financial and corporate reporting 1 January 2019 Note: investee and has the ability to affect (i) Net cash and cash equivalents include cash at bank and in hand and bank overdrafts. requirements following the UK’s • IFRS 2 Classification and those returns through its power over decision to leave the European Measurement of Share-based the investee. Specifically, the Group Union on 23 June 2016. Payment Transactions* – effective controls an investee if, and only if, the date 1 January 2018 The European Markets and Securities Group has all of the following: power • Improvements to IFRS 2014-2016 Authority has issued ‘Guidelines on over the investee (i.e. existing rights cycle* – effective date 1 January 2017 Alternative Performance Measures’ that give it the current ability to direct • IFRIC 22 Foreign Currency which are effective from 3 July 2016 the relevant activities of the investee); Transactions and Advanced and which have been followed exposure, or rights, to variable returns Consideration* – effective date in explaining the Group’s use of from its involvement with the investee; 1 January 2018 non-GAAP measures in these and the ability to use its power over the

financial statements. Several Note: investee to affect its returns. new accounting standards and * Not yet adopted for use in the European Union. amendments are applicable for the first time in 2016. However, they do

96 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 97 FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

1. ACCOUNTING POLICIES liabilities, non-controlling interest and the Group recognises its share of any venturer in the respective entity INVENTORIES the balance sheet date and are STRATEGIC REPORT CONTINUED other components of equity while any changes, when applicable, in the retains the power of veto, and overall Inventories, being goods for resale expected to apply when the deferred Generally, there is a presumption that resultant gain or loss is recognised in Statement of Changes in Equity. key strategic, operational and and consumables, are stated at tax asset is realised or the deferred a majority of voting rights results in the Income Statement. Any investment Unrealised gains and losses resulting financial decisions require the the lower of purchase cost and net tax liability is settled. Deferred tax is control. To support this presumption retained is recognised at fair value. from transactions between the Group consent of all parties. realisable value. provided on temporary differences and when the Group has less than and the associate or joint venture are arising on investments in subsidiaries, JOINT VENTURES The financial statements of each PENSIONS a majority of the voting, or similar, eliminated to the extent of the interest joint ventures and associates, except AND ASSOCIATES associate or joint venture are prepared For the defined benefit schemes, rights of an investee, it considers all in the associate or joint venture. where the timing of the reversal of A joint venture is a type of joint for the same reporting period as the the operating and financing costs of relevant facts and circumstances in the temporary difference can be arrangement whereby the parties that The aggregate of the Group’s share of Group. The Indian joint ventures have pensions are charged to the Income assessing whether it has power over controlled and it is probable that the have joint control of the arrangement profit or loss of an associate and a joint a statutory year end of 31 March. Statement in the period in which they an investee, including: the contractual temporary difference will not reverse have rights to the net assets of the venture is shown on the face of the Worldwide Magazine Distribution Ltd arise and are recognised separately. arrangement(s) with the other vote in the foreseeable future. A deferred joint venture. Joint control is the Income Statement outside operating has a statutory year end of 30 April. The costs of past service benefit holder(s) of the investee, rights arising tax asset is recognised only to the contractually agreed sharing of profit and represents profit or loss Where necessary, adjustments are enhancements, settlements and REPORTS GOVERNANCE from other contractual arrangements, extent that it is probable that future control of an arrangement, which after tax and non-controlling interests made to bring the accounting policies curtailments are also recognised in and the Group’s voting rights and taxable profits will be available against exists only when decisions about the in the associate or joint venture. in line with those of the Group. the period in which they arise. potential voting rights. which the asset can be utilised. relevant activities require unanimous The difference between actual and After application of the equity method, REVENUE The Group reassesses whether or not consent of the parties sharing control. expected returns on assets during the Current and deferred tax is recognised the Group determines whether it is In the Aviation business, cargo handling it controls an investee if facts and year, including changes in actuarial in the Income Statement except if it An associate is an entity over which necessary to recognise an impairment and forwarding revenue is recognised circumstances indicate that there are assumptions, is recognised in the relates to an item recognised directly the Group has significant influence. loss on its investment in its associate at the point of departure for exports changes to one or more of the three Statement of Comprehensive Income. in equity or in other comprehensive Significant influence is the power or joint venture. At each reporting date, and at the point that the goods are ready elements of control. Consolidation of Pension costs are assessed in income, in which case it is recognised to participate in the financial and the Group determines whether there is for despatch for imports. Other ramp, a subsidiary begins when the Group accordance with the advice of directly in equity or in the Statement of operating policy decisions of the objective evidence that the investment passenger and aviation related services obtains control over the subsidiary qualified actuaries. Comprehensive Income respectively. investee, but is not control or joint in the associate or joint venture is income is recognised at the time the and ceases when the Group loses control over those policies. impaired. If there is such evidence, service is provided in accordance with For the defined contribution schemes, INTANGIBLE ASSETS control of the subsidiary. Assets, FINANCIAL STATEMENTS the Group calculates the amount of the terms of the relevant contract. the Income Statement charge Goodwill liabilities, income and expenses of The considerations made in impairment as the difference between Revenue excludes value-added and represents contributions made. Business combinations since a subsidiary acquired or disposed determining significant influence or joint the recoverable amount of the sales taxes and charges collected on 1 January 2010 have been and of during the year are included in the control are similar to those necessary to TAXATION associate or joint venture and its behalf of customers. continue to be accounted for using consolidated financial statements determine control over subsidiaries. Current tax is the amount of tax carrying value, and then recognises the acquisition method. The cost of from the date the Group obtains In the Distribution business, revenue payable or recoverable in respect of The Group’s investments in its the loss within the share of the profit an acquisition is measured as the control until the date the Group is recognised on the despatched value the taxable profit or loss for the period. associates and joint ventures are of an associate and a joint venture in aggregate of the consideration ceases to control the subsidiary. of goods sold, excluding value-added accounted for using the equity the Income Statement. Deferred tax is provided in full, using transferred, measured at the tax. Product is sold to retailers on a Profit or loss and each component method. Under the equity method, the liability method, on temporary acquisition date fair value, and the Upon loss of significant influence over sale or return basis. Revenue for goods of other comprehensive income are the investment in an associate or differences between the carrying amount of any non-controlling the associate or joint control over the supplied with a right of return is stated attributed to the equity holders of a joint venture is initially recognised amount of an asset or liability in interest in the acquiree. Acquisition joint venture, the Group measures and net of the value of any returns. the parent of the Group and to the at cost. The carrying amount of the the Balance Sheet and its tax base. costs incurred are expensed and recognises any retained investment at non-controlling interests, even if this investment is adjusted to recognise PROPERTY, PLANT Deferred tax arising from the initial included in exceptional items. SHAREHOLDER INFORMATION its fair value. Any difference between results in the non-controlling interest changes in the Group’s share of net AND EQUIPMENT recognition of an asset or liability in the carrying amount of the associate Goodwill arising on acquisitions before having a deficit balance. When assets of the associate or joint venture Property, plant and equipment is stated a transaction, other than a business or joint venture upon loss of significant 26 December 2004 (the date of necessary, adjustments are made to since the acquisition date. Goodwill at cost, including acquisition expenses, combination, that at the time of the influence or joint control and the fair transition to IFRS) has been retained the financial statements of subsidiaries relating to the associate or joint less accumulated depreciation. transaction affects neither accounting value of the retained investment and at the previous UK GAAP amounts to bring their accounting policies into venture is included in the carrying Depreciation is provided on a straight- nor taxable profit or loss, is not proceeds from disposal is recognised subject to being tested for impairment line with the Group’s accounting amount of the investment and is not line basis at the following rates: recognised. Deferred tax liabilities in the Income Statement. at that date. policies. All intragroup assets and tested for impairment individually. represent tax payable in future periods Freehold and long leasehold liabilities, equity, income, expenses Menzies Bobba Ground Handling in respect of taxable temporary Goodwill acquired is recognised as The Income Statement reflects the properties – over 50 years or the and cash flows relating to transactions Services Private Ltd is 51% owned, differences. Deferred tax assets an asset and reviewed for impairment Group’s share of the results of remaining lease term if shorter between members of the Group are Menzies Aviation Bobba (Bangalore) represent tax recoverable in future at least annually by assessing the operations of the associate or joint eliminated in full on consolidation. Private Ltd and Hyderabad Menzies Short leasehold properties – over the periods in respect of deductible recoverable amount of each cash- venture. Any change in other Air Cargo Private Ltd are 49% owned remaining lease term temporary differences, the carry generating unit to which the goodwill A change in the ownership interest of comprehensive income of those and Menzies Macau Airport Services forward of unused tax losses and the relates. When the recoverable amount a subsidiary, without a loss of control, investees is presented as part of the Plant and equipment – over the Ltd is 29% owned. They are treated as carry forward of unused tax credits. of the cash-generating unit is less is accounted for as an equity Group’s other comprehensive income. estimated life of the asset between joint ventures in the Group accounts than the carrying amount, an transaction. If the Group loses control In addition, when there has been 3 and 20 years. Deferred tax is determined using the because the parties to each of the impairment loss is recognised. Any over a subsidiary, it derecognises the a change recognised directly in the tax rates and tax laws that have been ventures work together with equal impairment is recognised in the related assets (including goodwill), equity of the associate or joint venture, enacted or substantively enacted at powers to control the entities. Each Income Statement.

98 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 99 FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

1. ACCOUNTING POLICIES LEASES Any differences arising on the Changes in the fair value of the SHARE-BASED PAYMENTS Impairment STRATEGIC REPORT CONTINUED Leases are classified as finance leases translation of the opening net effective portion of cash flow hedges Equity-settled share-based payments Impairment testing is carried out on Goodwill arising on the acquisition whenever the terms of the lease transfer investment, including goodwill, in are recorded in equity until such time are measured at fair value at the date any assets that show indications of of joint ventures and associates is substantially all the risks and rewards of overseas subsidiaries, joint ventures as the forecast transaction occurs, at of grant and recognised as an expense impairment and annually on goodwill included within the carrying value ownership to the lessee. All other leases and associates, and of applicable which time they are recycled to the over the vesting period. The amount and intangibles that are not subject of the investment. are classified as operating leases. foreign currency loans, are dealt with Income Statement. If the occurrence recognised as an expense is adjusted to amortisation. This testing involves as adjustments to reserves. All other of the transaction results in a non- to reflect the actual number of share exercising management judgement Contracts Assets acquired under finance leases exchange differences are dealt with financial asset or liability, then amounts options that vest unless the options about future cash flows and other The fair value attributed to contracts are capitalised in the Balance Sheet in the Income Statement. recycled from equity are included in do not vest as a result of a failure to events which are by their nature at the point of acquisition is at their fair value or, if lower, at the the cost of the non-financial asset or satisfy market conditions. Fair value uncertain. See Note 11 for further details. determined by discounting the present value of the minimum lease DERIVATIVE FINANCIAL liability. If the forecast transaction is measured by use of a relevant expected future cash flows to be payments, each determined at the INSTRUMENTS AND Retirement benefits remains probable but ceases to be pricing model. generated from that asset at the inception of the lease. The corresponding HEDGING ACTIVITIES The assumptions underlying the highly probable then, from that point, relevant risk-adjusted weighted liability to the lessor is recorded in the The Group uses forward contracts as ESTIMATES AND JUDGEMENTS calculation of retirement benefits are REPORTS GOVERNANCE changes in fair value are recorded in average cost of capital for the Group. Balance Sheet as a finance lease derivatives to hedge the risk arising The preparation of the consolidated important and based on independent the Income Statement within finance This amount is included in intangible obligation. The lease payments are from the retranslation of foreign accounts requires management advice. Changes in these assumptions costs. Similarly, if the forecast assets as contracts. Separate values apportioned between finance charges currency denominated items. to make judgements, estimates could have a material impact on the transaction ceases to be probable then are not attributed to internally to the Income Statement and a and assumptions that affect the measurement of the Group’s retirement The Group has derivatives that are the entire fair value recorded in equity generated customer relationships. reduction of the lease obligations. application of accounting policies benefit obligation. See Note 4 for designated as hedges of overseas net and future changes in fair value are and the reported amounts of assets, further details and sensitivities. Contract amortisation is business- Rental payments under operating investments in foreign entities (net posted to the Income Statement within liabilities, income and expenses. stream dependent. In the Distribution leases are charged to the Income investment hedges) and derivatives finance costs. Income taxes These estimates will, by definition, business, capitalised publisher Statement on a straight-line basis that are designated as hedges of The Group is subject to income tax in For assets and liabilities that are seldom equal the related actual contracts are not amortised due to the over the applicable lease periods. the exchange risk arising from the numerous jurisdictions and significant recognised in the financial statements results, particularly given changes in very long-term nature of the business. retranslation of highly probable forecast judgement is required in determining TRADE RECEIVABLES on a recurring basis, the Group economic conditions and the level of These contracts are tested annually revenue denominated in non-local the provision for tax. There are many

If there is objective evidence that the determines whether transfers have uncertainty regarding their duration FINANCIAL STATEMENTS for impairment using similar criteria currency of some of its overseas transactions and calculations for Group will not be able to collect all of occurred between levels in the and severity. to the goodwill test. In the Aviation operations (cash flow hedges). which the ultimate tax determination the amounts due under the original hierarchy by reassessing categorisation business and core non-publisher Estimates and underlying assumptions is uncertain. The Group recognises terms of an invoice, a provision on Derivative contracts entered into by (based on the lowest level input contracts in the Distribution business, are reviewed on an ongoing basis. provisions for tax based on estimates the respective trade receivable is the Group are expected to continue that is significant to the fair value most contracts are amortised on a Revisions to accounting estimates are of the taxes that are likely to become recognised. In such an instance the to be highly effective until they expire. measurement as a whole) at the end straight-line basis over ten years as recognised in the period in which the due based on management’s carrying value of the receivable is The effectiveness of these contracts is of each reporting period. this period is the minimum time-frame estimate is revised and in any future interpretation of country specific tax reduced with the amount of the loss monitored during the year. As a result, management considers when PROVISIONS periods affected. The most important law and the likelihood of settlement. recognised in the Income Statement. all derivatives have been recorded assessing businesses for acquisition. Provisions are recognised when estimates and judgements are set Management uses the services of using hedge accounting, which is Certain other contracts are amortised CASH AND CASH EQUIVALENTS the Group has a present legal or out below. a professional firm together with an explained below. over the remaining life of the contract. Cash and cash equivalents in the constructive obligation as a result in-house tax expert and historical Intangible assets Balance Sheet comprise cash at bank All derivatives are measured at fair of a past event and it is probable that experience when assessing tax risks. Computer software On the acquisition of a business it is and in hand and short-term deposits value, which is calculated as the an outflow of resources embodying Where the final tax outcome is SHAREHOLDER INFORMATION Costs associated with developing necessary to attribute fair values to any with an original maturity of three present value of all future cash flows economic benefits will be required different from the amounts that were or maintaining computer software intangible assets acquired, provided months or less. Bank overdrafts are from the derivative discounted at to settle the obligation and a reliable initially recorded, such differences will programs are recognised as an they meet the criteria to be recognised. shown within borrowings in current prevailing market rates. estimate can be made of the amount impact the current income tax and expense as incurred. Costs that are The fair values of these intangible liabilities in the Balance Sheet. of the obligation. deferred tax provisions in the period directly attributable to the production Changes in the fair value of the assets are dependent on estimates of in which such determination is made. of identifiable and unique software FOREIGN CURRENCIES effective portion of net investment SHARE CAPITAL attributable future revenues, margins See Notes 8 and 14 for further details. products controlled by the Group, and Foreign currency assets and liabilities hedges are recorded in equity and Ordinary shares are classed as equity. and cash flows, as well as appropriate that will probably generate economic of the Group are translated at the rates are only recycled to the Income Where the Company purchases its discount rates. In addition, the benefits exceeding costs beyond one of exchange ruling at the balance Statement on disposal of the own shares the consideration paid, allocation of useful lives to acquired year, are recognised as intangible sheet date. The trading results of overseas net investment. including any directly attributable intangible assets requires the assets. These direct costs include overseas subsidiaries, joint ventures incremental costs, is deducted application of judgement based on the costs of software development and associates are translated at the from the equity attributable to the available information and management employees. Computer software assets average exchange rate ruling during Company’s equity holders until the expectations at the time of recognition. are amortised over their estimated the year, with the exchange difference shares are cancelled, reissued or See Note 11 for further details. useful lives, usually three to between average rates and the rates disposed of. seven years. ruling at the balance sheet date being taken to reserves.

100 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 101 FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

1. ACCOUNTING POLICIES Revenue recognition GAAP measurements, is useful Turnover STRATEGIC REPORT CONTINUED Judgement must be exercised to to investors in providing a basis Turnover comprises revenue from subsidiaries and the Group’s share of revenue from joint ventures and associates.

The Group has in place a pension ensure that revenue is recognised in for measuring our operational 2016 2015 funding arrangement and has also accordance with contractual terms, performance. Our management uses £m £m claimed a reduced rate of tax in an including in relation to the level of these financial measures, along with Revenue 1,981.6 1,899.2 overseas territory, based on the nature expected returns. the most directly comparable GAAP Share of revenue of joint ventures and associates 95.1 94.1 of its activities in that territory, both of financial measures, in evaluating our EXCEPTIONAL ITEMS Turnover 2,076.7 1,993.3 which are subject to enquiry by the performance and value creation. Exceptional items are those material relevant tax authority. The Group does Non-GAAP measures should not be UNDERLYING OPERATING PROFIT items which, by virtue of their size or not recognise potential benefits from considered in isolation from, or as a As disclosed on the face of the Income Statement underlying operating profit adjusts for non-recurring exceptional items, incidence, are presented separately in such arrangements to its effective substitute for, financial information impairment charges associated with goodwill, joint venture assets and other intangibles, contract amortisation and the the Income Statement to enable a full tax rate until the agreement of the in compliance with GAAP. Non-GAAP Group’s share of interest and tax on joint ventures and associates to provide an appreciation of the impact of those items understanding of the Group’s financial relevant tax authority is obtained and financial measures as reported by the on operating profit. REPORTS GOVERNANCE performance. These exclude certain therefore an appropriate provision is Group may not be comparable with elements of intangible asset UNDERLYING PROFIT BEFORE TAXATION held until that point. Other uncertain similarly titled amounts reported by impairment and amortisation, which As disclosed on the face of the Income Statement underlying profit before taxation is defined as underlying operating tax provisions are held for potential tax other companies. are also presented separately in the profit, less net finance charges and before exceptional and other items. authority challenge of our transfer Income Statement. Contract amortisation relates to pricing arrangements and for tax UNDERLYING EARNINGS PER SHARE intangible assets recognised on authority challenge against our Transactions which may give rise As disclosed on the face of the Income Statement underlying earnings per share is defined as profit after taxation and historic acquisitions and therefore interpretation of local tax legislation to exceptional items include non-controlling interest before intangible amortisation and impairment and exceptional items, divided by the weighted since it is transaction related it is where application of that legislation restructuring of business activities average number of ordinary shares in issue. presented as a non-recurring cost in is unclear. Whilst there is a range (in terms of rationalisation costs and order to provide stakeholders and FREE CASH FLOW of potential outcomes for these onerous lease provisions), gains or management with an appreciation for Free cash flow is defined as the cash generated after net capital expenditure, interest and taxation, before special pension uncertain tax positions, management’s losses on the disposal of businesses the underlying business performance. contributions, acquisitions, disposals, exceptional items, cash raised, ordinary dividends and net spend on shares. best estimate of how these provisions and acquisition transaction and other may move and impact the Group’s related costs including changes in The Group’s share of post-tax profit 2016 2015 FINANCIAL STATEMENTS £m £m Income Statement over the next deferred consideration. relating to joint ventures and Cash generated from operations 46.1 35.9 12 months is an increase in the tax associates is included within operating DIVIDEND DISTRIBUTIONS liability of £1.3m to a decrease in profit. IAS 1 Presentation of Financial Adjusted for: Final ordinary dividends are the tax liability of £1.0m. Statements does not prescribe where Net interest paid (7.0) (5.1) recognised as liabilities in the the investor’s share of post-tax profit is Exceptional interest paid 3.2 – The Group has made an assessment accounts in the period in which presented in the Income Statement but Tax paid (15.4) (7.7) of the use of tax losses in calculating the dividends are approved by the management presents the results its deferred tax asset and liability Company’s shareholders. Dividends received from equity accounted investments 6.6 6.5 within operating profit after joint including losses in the United States Purchase of property, plant and equipment (24.5) (22.2) FINANCIAL RISK FACTORS ventures and associates given the of America that may be subject to Intangible asset additions (2.6) (2.6) The Group is exposed to financial risks: similarity of those operations to other section 382 restrictions should the Proceeds from sale of property, plant and equipment 2.4 4.5 liquidity risk, interest rate fluctuations, wholly owned business operations. ownership of the Company change foreign exchange exposures and credit Special pension contribution 10.9 11.6 SHAREHOLDER INFORMATION significantly in the future. Below we set out our definitions risk. See Note 17 for further details. Exceptional cash spend 11.4 10.8 of non-GAAP measures and Provisions Free cash flow 31.1 31.7 NON-GAAP MEASURES provide reconciliations to relevant The Group exercises judgement Our reported results are prepared in GAAP measures. in determining whether provisions UNDERLYING OPERATING CASH FLOW accordance with IFRS as adopted by are required in relation to onerous Underlying operating cash flow is free cash flow before net capital expenditure, net interest paid and taxation. the European Union and applied in property leases. Judgement is 2016 2015 accordance with the provisions of the necessary in assessing the likelihood £m £m Companies Act 2006. In measuring our of whether or not an alternative use Free cash flow (as set out above) 31.1 31.7 performance, the financial measures can be found for these properties or a Adjusted for: that we use include those which have suitable tenant can be found in order Purchase of property, plant and equipment 24.5 22.2 been derived from our reported results to cover the cost of the lease. This in order to eliminate factors which Intangible asset additions 2.6 2.6 likelihood will vary depending on the distort period-on-period comparisons. Proceeds from sale of property, plant and equipment (2.4) (4.5) size, location and type of property. These are considered non-GAAP Net interest paid excluding exceptional interest 3.8 5.1 See Note 20 for further details. financial measures. We believe this Tax paid 15.4 7.7 information, along with comparable Underlying operating cash flow 75.0 64.8

102 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 103 FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

2. SEGMENT INFORMATION A reconciliation of segment underlying operating profit/(loss) to profit before tax is provided below. STRATEGIC REPORT

For management purposes the Group is organised into two Operating Divisions: Aviation and Distribution. The two Divisions Aviation Distribution Corporate Group are organised and managed separately based upon their key markets. The Aviation Division provides cargo and passenger 2016 Notes £m £m £m £m ground handling services across the world. The Distribution Division provides newspaper and magazine distribution Operating profit/(loss) 7.2 20.7 (7.8) 20.1 services along with marketing and logistics services across the UK and Ireland. Share of post-tax results of joint ventures and associates 6.5 1.0 – 7.5 The information presented to the Board for the purpose of resource allocation and assessment of segment performance is focused on the performance of each division as a whole but also contains performance information on a number of Operating profit/(loss) after joint ventures operating segments within the Aviation Division. The Board assesses the performance of the operating segments based and associates 13.7 21.7 (7.8) 27.6 on a measure of adjusted segment result before exceptional items, intangible amortisation and share of interest and tax Net finance expense (7.8) on joint ventures and associates. Net finance income and expenditure is not allocated to segments as this activity is Profit before taxation 19.8 managed by the central treasury function. Segment information is presented in respect of the Group’s reportable segments together with additional geographic Analysed as: GOVERNANCE REPORTS GOVERNANCE and Balance Sheet information. Transfer prices between segments are set on an arm’s-length basis. Underlying operating profit/(loss)(i) 34.2 24.7 (3.7) 55.2 Transaction and restructure related items 5 (4.9) 0.2 (4.1) (8.8) BUSINESS SEGMENT INFORMATION Net impairment loss 5 (9.6) – – (9.6) Revenue Underlying operating profit/(loss) 2016 2015 2016 2015 Contract amortisation 11 (5.1) (2.8) – (7.9) £m £m £m £m Share of interest on joint ventures Aviation and associates 0.6 – – 0.6 Americas 219.8 173.7 12.9 9.6 Share of tax on joint ventures and associates (1.5) (0.4) – (1.9) EMEA 391.2 350.7 6.0 (0.8) Operating profit/(loss) after joint ventures Rest of World 139.6 112.4 10.9 10.0 and associates 13.7 21.7 (7.8) 27.6 Cargo Forwarding 117.5 112.5 4.4 4.3

868.1 749.3 34.2 23.1 Aviation Distribution Corporate Group FINANCIAL STATEMENTS Distribution 1,208.6 1,244.0 24.7 25.1 2015 Notes £m £m £m £m Corporate – – (3.7) (3.3) Operating profit/(loss) 7.0 16.8 (5.0) 18.8 2,076.7 1,993.3 55.2 44.9 Share of post-tax results of joint ventures and associates 5.4 1.6 – 7.0 Joint ventures and associates (95.1) (94.1) – – Operating profit/(loss) after joint ventures 1,981.6 1,899.2 55.2 44.9 and associates 12.4 18.4 (5.0) 25.8 In anticipation of the ASIG acquisition on 1 February 2017, the Board has amended the structure of reporting to reflect a Net finance expense (7.6) more geographic organisation rather than a line of business presentation. The Board believes that analysis of the Aviation Profit before taxation 18.2 performance on a geographical basis provides the user with the most relevant information and is consistent with the basis for internal management review. For comparative purposes in this Annual Report and Accounts the above information is Analysed as: also presented under the segmental basis utilised in previous years as set out below. Underlying operating profit/(loss)(i) 23.1 25.1 (3.3) 44.9

Revenue Underlying operating profit/(loss) Rationalisation and acquisition related items 5 (0.2) (3.9) (1.7) (5.8) SHAREHOLDER INFORMATION 2016 2015 2016 2015 £m £m £m £m Net impairment loss 5 (4.7) – – (4.7) Aviation Contract amortisation 11 (4.6) (2.5) – (7.1) Ground Handling 591.5 490.0 13.0 4.1 Share of interest on joint ventures and Cargo Handling 159.1 146.8 16.8 14.7 associates 0.7 – – 0.7 Cargo Forwarding 117.5 112.5 4.4 4.3 Share of tax on joint ventures and associates (1.9) (0.3) – (2.2) 868.1 749.3 34.2 23.1 Operating profit/(loss) after joint ventures and associates 12.4 18.4 (5.0) 25.8 Distribution 1,208.6 1,244.0 24.7 25.1 Corporate – – (3.7) (3.3) Note: (i) Underlying operating profit/(loss) is defined as operating profit/(loss) excluding intangible amortisation as shown in Note 5 and exceptional items but including 2,076.7 1,993.3 55.2 44.9 the pre-tax share of results from joint ventures and associates. Joint ventures and associates (95.1) (94.1) – – 1,981.6 1,899.2 55.2 44.9

104 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 105 FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

2. SEGMENT INFORMATION CONTINUED GEOGRAPHIC INFORMATION STRATEGIC REPORT

Aviation Distribution Corporate Group Revenue Non-current assets(i) 2016 £m £m £m £m 2015 2015 Segment assets 314.2 200.0 8.0 522.2 2016 restated 2016 restated £m £m £m £m Unallocated assets 63.1 United Kingdom 1,331.9 1,363.1 102.5 110.2 Total assets 585.3 United States of America 169.1 140.3 44.3 36.8 Others 480.6 395.8 115.4 102.1 Segment liabilities (126.6) (111.3) (30.4) (268.3) 1,981.6 1,899.2 262.2 249.1 Unallocated liabilities (188.7) Total liabilities (457.0) Note: (i) Non-current assets exclude deferred tax assets.

Segment net assets/(liabilities) 187.6 88.7 (22.4) 253.9 3. NET OPERATING COSTS GOVERNANCE REPORTS GOVERNANCE Unallocated net liabilities (125.6) 2016 2015 Notes £m £m Net assets 128.3 Goods for resale and other direct operating costs 1,086.1 1,110.8 Aviation Distribution Corporate Group Employment costs 4 582.1 506.7 2015 £m £m £m £m Exceptional items 5 8.8 5.8 Segment assets 264.8 199.7 1.9 466.4 Net impairment loss 5 9.6 4.7 Unallocated assets 46.2 Intangible assets amortisation 11 11.1 10.6 Total assets 512.6 Depreciation 12 22.3 21.0 Other operating charges 241.5 220.8 Segment liabilities (93.6) (116.7) (20.6) (230.9) 1,961.5 1,880.4 Unallocated liabilities (210.5)

Total liabilities (441.4) Other operating charges include: FINANCIAL STATEMENTS

2016 2015 Segment net assets/(liabilities) 171.2 83.0 (18.7) 235.5 £m £m Operating leases and hire charges – plant and equipment 32.1 27.5 Unallocated net liabilities (164.3) Rent of properties 34.9 31.8 Net assets 71.2 Gain on disposal of property, plant and equipment (0.1) (0.6) Unallocated assets comprise deferred tax assets, cash and cash equivalents. Unallocated liabilities comprise retirement Currency translation gain (0.4) – benefit obligation, borrowings, current income tax liabilities and deferred tax liabilities.

Aviation Distribution Corporate Group During the year, the Group (including its overseas subsidiaries) obtained the following services from the Group’s auditor 2016 £m £m £m £m at costs as detailed below.

Capital expenditure – property, plant and equipment 23.1 2.7 0.3 26.1 2016 2015 Capital expenditure – intangible assets 1.8 0.8 – 2.6 £m £m

Audit of the Company and consolidated accounts 0.3 0.3 SHAREHOLDER INFORMATION Depreciation 17.3 4.3 0.7 22.3 Audit of the Company’s subsidiaries pursuant to legislation 0.7 0.7 Amortisation of intangible assets 5.9 5.2 – 11.1 Other assurance services relating to Class 1 circular 1.9 – Impairment of intangible assets 7.2 – – 7.2 Tax compliance 0.4 0.5 (Gain)/loss on disposal of property, plant and equipment (0.3) 0.2 – (0.1) Tax advisory 1.0 0.4

4. EMPLOYEES Aviation Distribution Corporate Group 2015 £m £m £m £m 2016 2015 Capital expenditure – property, plant and equipment 16.4 4.4 – 20.8 £m £m Wages and salaries 517.0 451.9 Capital expenditure – intangible assets 0.5 2.1 – 2.6 Share-based payments 0.7 0.5 Depreciation 15.7 4.6 0.7 21.0 Social security costs 46.6 40.5 Amortisation of intangible assets 5.8 4.8 – 10.6 564.3 492.9 Impairment of intangible assets 4.0 – – 4.0 Pension charge 17.8 13.8 (Gain)/loss on disposal of property, plant and equipment (1.0) 0.4 – (0.6) 582.1 506.7

For the Company, wages and salaries were £1.1m (2015: £1.4m), share-based payments were £0.1m (2015: £0.2m), social security costs were £0.1m (2015: £0.2m) and the pension charge was £0.1m (2015: £Nil) for eight employees (2015: eight).

106 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 107 FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

4. EMPLOYEES CONTINUED Further information regarding the membership of the Fund is: STRATEGIC REPORT

The average number of people employed by the Group during the year was: Average liability Number Liability split duration (years) 2016 2015 Aviation 23,677 21,737 2016 Distribution 3,465 3,387 Active members 401 18% 22.8 Corporate 34 31 Deferred members 3,200 37% 22.6 27,176 25,155 Pensioners 2,131 45% 13.0 5,732 100% 18.3 The above includes 18,786 people employed outside the UK (2015: 16,893).

PENSION SCHEMES 2015 Defined contribution schemes Active members 445 16% 21.8 Certain Group subsidiaries participate in a number of pension schemes which are of a defined contribution nature

Deferred members 3,353 34% 21.0 REPORTS GOVERNANCE and some of which operate overseas. The Income Statement charge for defined contribution schemes represents the Pensioners 2,138 50% 11.9 contributions payable. 5,936 100% 16.5 2016 2015 £m £m Overall weighted average liability duration is 18.3 years (2015: 16.5 years). Defined contribution schemes pension charge 14.6 11.6 Future benefit payments Defined benefit scheme Estimated undiscounted benefit payments expected to be paid from the Fund over its life, derived from the data used in The principal Group-funded defined benefit scheme in the UK is the Menzies Pension Fund (“the Fund”) to which the triennial valuation of the Fund as at 31 March 2015 is shown on the following graph: employees contribute. The charge to the Income Statement is assessed in accordance with independent actuarial advice 20 from PricewaterhouseCoopers LLP (“the Actuary”) using the projected unit method.

The pension charge to operating profit in the Income Statement relating to the Fund is £3.2m (2015: £2.2m). 15 FINANCIAL STATEMENTS Fund financial assumptions and information 10 The Actuary undertook a valuation of the Fund as at 31 December 2016 (2015: 31 December 2015). In deriving the results the

Actuary used the projected unit method and the following financial assumptions: 5 2016 2015 % % 0

Undiscounted benefit payments (£m) 2017 2047 2077 Annual rate of increase in salaries 3.3 3.0 Annual rate of increase in pensions (prior to 1 May 2006) 3.7 3.5 Pensioner members Deferred members Active members Annual rate of increase in pensions (from 1 May 2006 to 1 June 2010) 2.2 2.1 Fair value of fund assets and liabilities Annual rate of increase in pensions (after 1 June 2010) 1.0 1.0 2016 2015 Annual price inflation 3.3 3.0 Total value at Total value at Discount rate 2.7 4.0 Quoted Unquoted 31 December Quoted Unquoted 31 December £m £m £m £m £m £m

Assumptions regarding future mortality experience are set based on advice that uses published statistics and experience Equities 131.5 0.3 131.8 127.4 0.3 127.7 SHAREHOLDER INFORMATION in the business. Bonds 92.0 – 92.0 130.8 – 130.8 Investment funds 6.3 – 6.3 1.8 4.0 5.8 The average future life expectancy for a pensioner aged 65 on the balance sheet date is: Liability driven investment funds – 77.2 77.2 – – – 2016 2015 Years Years Property – 25.0 25.0 4.1 24.4 28.5 Male 22.0 22.2 Annuity contracts – 7.8 7.8 – 7.0 7.0 Female 23.5 23.7 Cash 13.0 – 13.0 7.3 – 7.3 Other 3.4 12.4 15.8 3.0 2.3 5.3 The average future life expectancy at age 65 for a non-pensioner aged 40 on the balance sheet date is: Total value of assets 246.2 122.7 368.9 274.4 38.0 312.4 2016 2015 Years Years Defined benefit obligation (439.9) (355.8) Male 23.5 23.8 Recognised in Balance Sheet (71.0) (43.4) Female 24.8 25.0 Related deferred tax asset (Note 14) 12.1 7.8 Net pension liabilities (58.9) (35.6)

The Fund holds annuity contracts in respect of a number of members that provide cash flows to the Fund which exactly match the benefit payments to these members.

108 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 109 FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

4. EMPLOYEES CONTINUED The return on scheme assets (including interest income) was a gain of £61.2m (2015: £6.6m). STRATEGIC REPORT Changes in assumptions compared with actuarial assumptions for the value of liabilities are: The change in defined benefit obligation during the year is: 2016 2015 £m £m 2016 2015 £m £m 0.5% decrease in discount rate 481.0 386.5 Defined benefit obligation at start of year 355.8 371.9 One year increase in life expectancy 454.4 366.5 Total service cost 3.5 3.3 0.5% decrease in inflation 425.2 334.4 Interest cost 13.9 13.4 0.25% increase in pensions 449.4 362.8 Effect of settlements (0.7) (3.3) 0.5% decrease in salary increases(i) 439.9 355.8 Employee contributions 0.7 0.7 Note: Benefits and expenses paid (19.0) (19.7) (i) Active members’ benefits, once accrued, revalue at the Consumer Price Index capped at 1% p.a. and so changes in the level of salary increase do not affect the past service liability value. Changes in demographic assumptions (4.7) 11.2 The sensitivities have been calculated using approximate methods taking into account the duration of the Fund’s Changes in financial assumptions 93.3 (17.1) REPORTS GOVERNANCE liabilities. In relation to sensitivities, the Company recognises actuarial gains and losses immediately through the Experience (2.9) (4.6) re-measurement of the net defined benefit liability. Defined benefit obligation at end of year 439.9 355.8

Pension expense Benefits, regulatory framework and governance of the Fund The components of pension expense are: The Fund is a registered defined benefit career average revalued earnings scheme subject to the UK regulatory framework 2016 2015 for pensions, including the Scheme Specific Funding requirements. The Fund is operated under trust and as such, the £m £m Trustee of the Fund is responsible for operating the Fund and it has a statutory responsibility to act in accordance with the Amounts charged/(credited) to operating profit Fund’s Trust Deed and Rules, in the best interest of the beneficiaries of the Fund, and UK legislation, including trust law. Current service cost 1.9 2.0 The Trustee and the Company have the joint power to set the contributions that are paid to the Fund. Administrative costs 1.6 1.3 Risks Effect of settlements (0.3) (1.1) The nature of the Fund exposes the Company to the risk of paying unanticipated additional contributions to the Fund in Total service cost 3.2 2.2 times of adverse experience. FINANCIAL STATEMENTS Amounts included in finance costs The most financially significant risks are likely to be: the risk that movements in the value of the Fund’s liabilities are not Interest cost on defined benefit obligation 13.9 13.4 met by corresponding movements in the value of the Fund’s assets; lower than expected investment returns; members Interest income on Fund assets (12.3) (11.5) living for longer than expected and higher than expected actual inflation, pension and salary increase experience. Net finance charge 1.6 1.9 The sensitivity analysis disclosed above is intended to provide an indication of the impact on the value of the Fund’s liabilities of the risks highlighted. Pension expense 4.8 4.1 Asset-liability matching strategies The amounts recognised in the Statement of Comprehensive Income are: At the beginning of 2016 the Fund held a mixture of UK gilts. index-linked gilts and corporate bonds which provided a 2016 2015 degree of liability hedging. During the year ended 31 December 2016, the Trustee took steps to increase the level of interest £m £m rate and inflation hedging of the Fund’s liabilities. Returns on assets excluding net interest income 48.9 (4.9) In May 2016 the Trustee agreed to de-risk and increase hedging to approximately 30% of liabilities on a gilts basis across SHAREHOLDER INFORMATION Changes in demographic assumptions 4.7 (11.2) interest rates and inflation using leveraged liability driven investment (“LDI”) funds. This was funded by reducing the Changes in financial assumptions (93.3) 17.1 Fund’s UK equity allocation and moving a proportion of the Fund’s index-linked gilts into the LDI funds. Experience 2.9 4.6 Given the increase in interest rates towards the end of the year, the Trustee agreed to increase the Fund’s interest rate Actuarial (loss)/gain (36.8) 5.6 hedging further to approximately 40% in December 2016 by moving investments from index-linked gilts into LDI funds. Changes in Fund assets and defined benefit obligation The Fund’s inflation hedging remains around 30%. The change in scheme assets during the year is: The Trustee’s current investment strategy, having consulted with the Company, is to invest the majority of the Fund’s 2016 2015 assets in a mix of equities and bonds, in order to strike a balance between maximising the returns on the Fund’s assets £m £m and minimising the risks associated with lower than expected returns on the Fund’s assets. Fair value of assets at start of year 312.4 312.9 Interest income 12.3 11.5 The Trustee has implemented a de-risking process such that the Fund’s assets are gradually switched out of equities and into bonds as funding improves. This should lead to better matching of assets and liabilities as the Fund matures whilst at Returns on assets excluding interest income 48.9 (4.9) the same time locking in favourable asset performance. The Trustee is required to regularly review its investment strategy Company contributions 14.0 14.1 in light of the revised term and nature of the Fund’s liabilities and will be next considering this as part of its 2018 valuation Employee contributions 0.7 0.7 exercise. The current benchmark is to hold 70% in growth assets such as equities and 30% in bonds including index-linked Effect of settlements (0.4) (2.2) and fixed-interest Government bonds and corporate bonds. Benefits and expenses paid (19.0) (19.7) Fair value of assets at end of year 368.9 312.4

110 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 111 FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

4. EMPLOYEES CONTINUED 6. DIRECTORS’ EMOLUMENTS STRATEGIC REPORT Funding arrangements and funding policy that affect future contributions Emoluments paid to the Directors of John Menzies plc are:

The triennial valuation process in which the Trustee and the Company agree the long-term funding strategy has been 2016 2015 concluded and a Schedule of Contributions dated 4 March 2016 has been agreed. The Schedule of Contributions sets out £m £m the additional contributions required to meet the funding shortfall between the value of the Fund’s assets and liabilities. Salary and fees 1.3 1.1 The additional contributions have been agreed as being nine annual contributions of £10.7m per annum rising with the Bonus 0.5 – higher of RPI or the annual percentage change in dividends and beginning in the year ended 31 March 2017 and continuing Termination payments 0.1 – to the year ended 31 March 2025. The impact of changes in dividends would only apply when dividends paid are at least Pension salary supplement 0.1 0.2 at the level of those paid in 2013. 2.0 1.3 In total, the Company expects to contribute around £14m to the Fund during the year to 31 December 2017. Gains made on exercise of Long-Term Incentive Plan awards were £Nil (2015: £Nil). The Company has considered the accounting treatment under IFRIC 14 of the current deficit and the impact of the minimum funding requirement committed by the Company to 2025. A review of the Fund Rules has confirmed that the Further details of the Directors’ remuneration are disclosed in the Directors’ Remuneration Report.

Group has an unconditional right to a refund of a projected future surplus at some point in the future. There is no 7. FINANCE COSTS (PRE-EXCEPTIONAL) REPORTS GOVERNANCE requirement for the Group to adjust the Balance Sheet to recognise the future agreed deficit recovery contributions. 2016 2015 £m £m Other information Finance income Small settlements have occurred over the year. There have been no other Fund amendments or curtailments. Bank deposits 0.7 0.8 5. EXCEPTIONAL AND OTHER ITEMS EXCEPTIONAL ITEMS INCLUDED IN OPERATING PROFIT 2016 2015 Finance charges £m £m Bank loans and overdrafts (4.5) (5.5) Acquisition and other transaction related costs(i) (9.1) (0.4) Preference dividends (0.1) (0.1) Acquisition related earn-out adjustment(ii) 0.3 (0.2) (4.6) (5.6) Rationalisation costs(iii) – (3.5) Management restructure and strategic review(iv) – (1.7)

Net finance costs (3.9) (4.8) FINANCIAL STATEMENTS (8.8) (5.8) Notes: 8. TAXATION (i) Acquisition and other transaction related costs relate to the Rights Issue process and acquisition of ASIG Holdings Ltd and ASIG Holdings Corp. on 1 February 2017 TAX CHARGE IN INCOME STATEMENT (acquisition costs £5.7m and integration costs £1.3m) in the Aviation Division as well as other smaller acquisitions including Renaissance Aviation Ltd in Aviation, and Thistle Couriers Ltd and Edinburgh Arts and Entertainment Ltd in the Distribution Division (£0.2m total). In addition, aborted Aviation transaction costs were 2016 2015 £0.9m while restructure consultancy costs were £0.8m and other ongoing transaction costs were £0.2m. In the prior year the costs related largely to the £m £m acquisition of AJG Parcels Ltd in June 2015 and Oban Express Parcel Service Ltd in Distribution in November 2015. Current tax (ii) Contingent consideration relating to the acquisition of Fore Partnership was settled for £1.3m being £0.3m lower than anticipated at 31 December 2015 in the Distribution Division. In the prior year, a charge was recognised relating to contingent consideration for Fore Partnership which was partly offset by a credit arising UK corporation tax on profits for the year 1.0 0.1 on settlement of the Orbital Marketing Services Group contingent consideration. Overseas tax 11.4 8.9 (iii) In the prior year, costs of £3.3m were incurred rationalising excess capacity in the Distribution Division, Restructuring costs of £0.2m were also incurred in the Aviation Division in Spain. Adjustments to prior years’ liabilities (0.1) 0.1 (iv) In the prior year, costs of £1.7m were incurred relating to redundancy and advisory costs relating to the work performed to reshape the senior management team 12.3 9.1 and review the strategic direction of the Group’s business in order to prioritise the opportunities for growth. EXCEPTIONAL ITEMS INCLUDED IN FINANCE CHARGES

2016 2015 Deferred tax SHAREHOLDER INFORMATION £m £m Origination and reversal of temporary differences (1.5) (2.6) Acquisition related financing costs(i) (1.5) – Adjustments to prior years’ liabilities (0.6) (0.2) Unwind discount costs(ii) (0.2) (0.2) (2.1) (2.8) Notes: (i) Relating to ticking fees and an amortisation of underwriting fees on the new financing facilities agreed in the period required to fund the acquisition of ASIG Retirement benefit obligation 1.6 2.0 Holdings Ltd and ASIG Holdings Corp. on 1 February 2017. (0.5) (0.8) (ii) Relating to deferred consideration and onerous lease provisions. INTANGIBLE ASSETS AMORTISATION AND IMPAIRMENT INCLUDED IN OPERATING PROFIT Tax on profit on ordinary activities 11.8 8.3 2016 2015 £m £m TAX RELATED TO ITEMS CHARGED/(CREDITED) OUTSIDE INCOME STATEMENT Contract amortisation(i) (7.9) (7.1) 2016 2015 Net impairment loss(ii) (9.6) (4.7) £m £m Notes: Deferred tax on actuarial (loss)/gain on retirement benefit obligation (7.4) 1.1 (i) Contracts capitalised as intangible assets on the acquisition of businesses. Deferred tax impact of UK rate change on pension arrangements 1.6 0.9 (ii) In the Aviation Division an impairment of goodwill of £7.2m and property, plant and equipment of £2.4m was triggered by the loss of volumes with key customers at the cargo operations in Amsterdam and the impact this has on the overall business. The recoverable amount of cash-generating unit is £Nil based on a value in Deferred tax on share-based payments (0.3) – use methodology utilising a pre-tax discount rate of 9% (2015: 9%). In the prior year, following the loss of licences in the Aviation Division in Spain an impairment Current tax on net exchange adjustments 0.4 (0.9) charge of £4.7m was recognised representing a write-off of intangible assets of £4.0m and other associated assets of £0.7m. Deferred tax on net exchange adjustments 0.6 – The taxation effect of the exceptional items is a net credit of £2.2m (2015: net credit of £1.7m) in relation to tax deductions available for a proportion of the exceptional costs arising during the year. (5.1) 1.1

112 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 113 FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

8. TAXATION CONTINUED 9. DIVIDENDS STRATEGIC REPORT EFFECTIVE TAX RATE DIVIDENDS PAID ON ORDINARY SHARES

The reconciliation between tax charge and the product of accounting profit multiplied by the Group’s domestic tax rate is: 2016 2015 £m £m 2016 2015 £m £m Interim paid in respect of 2016, 5.4p per share 3.3 – Profit before tax 19.8 18.2 Final paid in respect of 2015, 11.8p per share 7.3 – Profit before tax multiplied by standard rate of corporation tax in the UK of 20.0% Interim paid in respect of 2015, 5.0p per share – 3.0 (2015: 20.25%) 4.0 3.7 Final paid in respect of 2014, 8.1p per share – 5.0 Non-deductible expenses including intangible amortisation 3.5 3.1 10.6 8.0 Depreciation on non-qualifying assets 0.3 0.4 Unrelieved overseas losses 1.5 1.5 Dividends of £0.1m were waived on Treasury shares (2015: £Nil). Deferred tax assets written off 1.5 0.1 The Directors are proposing a final dividend in respect of the year to 31 December 2016 of 13.1p per ordinary share, which will Deferred tax asset recognised on overseas losses carried forward (1.6) (2.0) absorb an estimated £10.9m of shareholders’ funds. Payment will be made on 3 July 2017 to shareholders on the register at REPORTS GOVERNANCE Deferred tax liability recognised on undistributed reserves of overseas subsidiaries 1.1 1.2 the close of business on 26 May 2017.

Exceptional items 1.8 0.4 TREASURY SHARES Utilisation of previously unrecognised losses (0.9) (0.3) Ordinary shares are held for employee share schemes. At 31 December 2016 the Company held 310,338 (2015: 345,176) Higher tax rates on overseas earnings 2.8 1.9 ordinary shares with a market value of £1.8m (2015: £1.4m).

Share of joint venture and associate post-tax result included in profit before tax (1.5) (1.6) 10. EARNINGS PER SHARE Adjustments to prior years’ liabilities (0.7) (0.1) Basic Underlying(i) At the effective corporation tax rate of 59.6% (2015: 45.6%) 11.8 8.3 2015 2015 2016 restated 2016 restated £m £m £m £m Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2015 (on 26 October 2015) and Profit for the year as set out in the Income Finance Bill 2016 (on 7 September 2016). These include reductions to the main rate to reduce the rate from 20% to 19% Statement 8.0 9.9 33.8 26.0 from 1 April 2017 and to 17% from 1 April 2020. As the reductions in the main rate of corporation tax were substantively FINANCIAL STATEMENTS Loss relating to non-controlling interests 0.5 0.2 0.5 0.2 enacted at the balance sheet date, and reduce the tax rate applying when temporary differences reverse on or after Earnings for the year attributable to equity shareholders 8.5 10.1 34.3 26.2 1 January 2017, it could have the effect of reducing the UK deferred tax assets and liabilities depending upon the timing of the reversal of the temporary differences. As most of the temporary differences reversing on or after 1 January 2017 relate to the UK pension deficit which has arisen predominantly due to actuarial gains/losses taken to other comprehensive Basic income, the reduction in the deferred tax asset has been debited to other comprehensive income and therefore has not Earnings per ordinary share (pence) 11.8p 14.6p had an effect on the effective tax rate or on profit for the year. Diluted earnings per ordinary share (pence) 11.8p 14.6p FACTORS THAT MAY AFFECT FUTURE TAX CHARGES Historical adjusted earnings per ordinary The Group has estimated tax losses carried forward which arose in subsidiary companies operating in the undernoted share (pence) 13.8p 16.5p jurisdictions and are available for offset against future profits of those subsidiaries. Deferred tax assets have not been recognised in respect of these losses as they have arisen in subsidiaries where it is not probable that future taxable Underlying(i) profits will be available against which such assets could be utilised. Earnings per ordinary share (pence) 47.8p 37.8p SHAREHOLDER INFORMATION Losses Diluted earnings per ordinary share (pence) 47.7p 37.8p 2016 2015 Historical adjusted earnings per ordinary share (pence) 55.9p 42.7p £m £m Expiry Colombia 3.5 2.6 Carry forward indefinitely Number of ordinary shares in issue Germany 20.8 17.8 Carry forward indefinitely Weighted average (million) 71.8 69.4 Namibia 0.4 – Carry forward indefinitely Diluted weighted average (million) 71.9 69.4 Netherlands 4.4 3.6 Carry forward for 4 years Historical weighted average (million) 61.4 61.3 Norway 14.7 11.9 Carry forward indefinitely South Africa 8.1 5.1 Carry forward indefinitely Note: (i) Underlying earnings is presented as an additional performance measure and is stated before exceptional items, intangible amortisation and impairment. Sweden 4.3 3.3 Carry forward indefinitely United States of America 31.2 37.1 Carry forward for up to 20 years 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 The Group has capital losses in the UK of approximately £10.4m (2015: £10.4m) that are available for offset against future dilutive, that is, where the exercise price is less than the average market price of the shares during the year. taxable gains arising in the UK. No deferred tax asset has been recognised in respect of these losses.

114 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 115 FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

10. EARNINGS PER SHARE CONTINUED As set out in Note 5, the impairment of goodwill of £7.2m relates to the Aviation cargo business in The Netherlands where STRATEGIC REPORT The 2015 results have been restated to adjust for the impact of the October 2016 Rights Issue with the discount reflected as a both the goodwill and fixed assets were fully impaired. In the prior year the £4.0m impairment relates to the Aviation bonus issue. The restatement adjusts the 2015 results for the impact of the bonus factor, but not the increase in the Group’s Division in Spain where the asset was fully impaired. available capital which has been raised but not deployed in the period due to the related acquisition of ASIG completing on Goodwill acquired through business combinations and intangible assets with indefinite lives have been allocated at acquisition 1 February 2017. As such, an additional measure, ‘historical adjusted earnings per ordinary share’, has been presented to enable to cash-generating units (“CGUs”) that are expected to benefit from the business combination. The carrying amount of the the comparison of 2016 performance on a consistent capital base. This has been calculated by adjusting the 2016 weighted goodwill and intangible assets with indefinite lives has been allocated to the operating units as per the table below. average number of shares for this measure to remove the full effect of the Rights Issue. The Directors consider that this provides an underlying measure that is comparable to underlying earnings per share presented historically. 2016 2015 Pre-tax Pre-tax 11. INTANGIBLE ASSETS discount rate discount rate Computer used in used in Goodwill Contracts software Total impairment impairment £m £m £m £m review Goodwill Contracts review Goodwill Contracts £m £m £m £m £m £m Cost At 31 December 2015 64.6 91.6 32.5 188.7 Aviation REPORTS GOVERNANCE Americas cargo 8% 10.1 – 9% 8.5 – Acquisitions (Note 25) 0.4 2.7 – 3.1 Americas other 9.1% 11.7 – 10% 9.9 – Additions – – 2.6 2.6 Disposals – – (0.1) (0.1) EMEA cargo 7% 2.9 – 8.7% 9.6 – Currency translation 12.1 6.8 – 18.9 EMEA other UK ground handling 8% 3.1 – 9% 3.1 – Other Europe ground handling 16% 0.4 – 11% 0.4 – At 31 December 2016 77.1 101.1 35.0 213.2 Cargo Forwarding USA, Australia and New Zealand 9.5% 6.4 – 10% 5.4 – Amortisation and impairment South Africa 11% 2.1 – 12% 1.7 – At 31 December 2015 12.3 46.1 22.0 80.4 Rest of World 8.5% 3.2 – 9% 2.2 – Amortisation charge – 7.9 3.2 11.1 Distribution Impairment (Note 5) 7.2 – – 7.2 Core Great Britain 8% 7.3 12.9 9% 7.3 12.9

Currency translation 5.8 4.7 – 10.5 Northern Ireland 8% – 3.1 9% – 3.1 FINANCIAL STATEMENTS At 31 December 2016 25.3 58.7 25.2 109.2 Parcels 8% 4.6 – 9% 4.2 – 51.8 16.0 52.3 16.0 Net book value At 31 December 2016 51.8 42.4 9.8 104.0 The CGUs in the above table are presented in a format closely aligned with the segmental information in Note 2. At 31 December 2015 52.3 45.5 10.5 108.3 The Group tests goodwill and intangible assets with indefinite lives annually for impairment, or more frequently if there are

Computer indications that these might be impaired. The basis of these impairment tests including key assumptions are set out below. Goodwill Contracts software Total £m £m £m £m The recoverable amounts of the CGUs are determined from value in use calculations. These calculations use future cash Cost flow projections based on financial forecasts approved by management. The key assumptions for these forecasts are At 31 December 2014 59.5 90.8 30.4 180.7 those regarding revenue growth, net margin, capital expenditure and the level of working capital required to support Acquisitions (Note 25) 4.2 1.7 – 5.9 trading, which management estimates based on past experience and expectations of future changes in the market. SHAREHOLDER INFORMATION Additions – – 2.6 2.6 The value in use calculations use a post-tax discount rate assumption in a range from 5% to 13% (2015: 6% to 9%) based Disposals – – (0.5) (0.5) on the Group’s weighted average post-tax cost of capital and having considered the uncertainty risk attributable to Currency translation 0.9 (0.9) – – individual CGUs. The equivalent pre-tax discount rate is a range from 7% to 16% (2015: 8% to 13%) as shown in the table above. The pre-tax rate has been applied to pre-tax cash flows. At 31 December 2015 64.6 91.6 32.5 188.7 AVIATION Amortisation and impairment Aviation contracts are amortised on a straight-line basis over ten years as this period is the minimum time-frame management At 31 December 2014 10.9 34.9 18.8 64.6 considers when assessing businesses for acquisition. The carrying value of Aviation contracts is £14.1m (2015: £15.1m) and Amortisation charge – 7.1 3.5 10.6 the average remaining amortisation period is two years (2015: three years). Released on disposal – – (0.3) (0.3) Value in use calculations are based on Board approved budgets and plans for a three year period and extrapolated for Impairment (Note 5) – 4.0 – 4.0 a further two year period. Growth rates in the cash flows beyond the three year period have been assumed to be Nil% Currency translation 1.4 0.1 – 1.5 (2015: Nil%). Net margin assumptions are based on historic experience. At 31 December 2015 12.3 46.1 22.0 80.4 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 Net book value CGUs there is no reasonably possible change that would cause the carrying values to exceed recoverable amounts. At 31 December 2015 52.3 45.5 10.5 108.3 At 31 December 2014 48.6 55.9 11.6 116.1

116 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 117 FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

11. INTANGIBLE ASSETS CONTINUED As set out in Note 5, the impairment of fixed assets of £2.4m relates to the Aviation cargo business in The Netherlands STRATEGIC REPORT DISTRIBUTION where the assets were fully impaired. Additionally, equipment with a net book value of £1.0m was disposed for Distribution publisher contracts are not amortised due to the very long-term nature of the business in the UK. The Group a consideration of £1.0m and leased back over a five year period under an operating lease arrangement. distributes to approximately 45% of the UK retail market and has only one major competitor. In such circumstances the Group Company Board considers that there is no foreseeable limit to the period over which the contracts are expected to generate cash Freehold Leasehold Plant and Freehold flows and have been determined to have an indefinite life. These contracts are tested annually for impairment using the property property equipment Total property £m £m £m £m £m criteria outlined above. Cost Value in use calculations are based on Board approved budgets and plans for a three year period and extrapolated for a At 31 December 2014 35.0 35.9 218.3 289.2 32.6 further two year period. This reflects management’s specific business expectations for 2020 and 2021. Growth rates in the Acquisitions (Note 25) – – 1.3 1.3 – cash flows beyond the three year period have been assumed to be -8.5% to Nil% (2015: -2% to Nil%). Net margin assumptions Additions – 1.1 19.7 20.8 – are based on historic experience. Disposals (0.2) (0.9) (14.8) (15.9) – Base case forecasts show significant headroom above carrying value for each CGU. Sensitivity analysis has been undertaken Currency translation – (0.5) (7.2) (7.7) – REPORTS GOVERNANCE for each CGU to assess the impact of any reasonably possible change in key assumptions. There is no reasonably possible At 31 December 2015 34.8 35.6 217.3 287.7 32.6 change that would cause the carrying values to exceed recoverable amounts.

Most Distribution core non-publisher contracts are amortised on a straight-line basis over ten years as this period is the Depreciation minimum time-frame management considers when assessing businesses for acquisition. The carrying value of At 31 December 2014 11.0 23.4 134.7 169.1 7.5 Distribution non-publisher contracts is £12.3m (2015: £14.3m) and the average remaining amortisation period is five years Charge for the year 0.7 2.0 18.3 21.0 0.7 (2015: six years). Disposals – (0.7) (11.3) (12.0) – 12. PROPERTY, PLANT AND EQUIPMENT Currency translation – (0.4) (4.4) (4.8) – Group Company At 31 December 2015 11.7 24.3 137.3 173.3 8.2 Freehold Leasehold Plant and Freehold property property equipment Total property £m £m £m £m £m Net book value

Cost At 31 December 2015 23.1 11.3 80.0 114.4 24.4 FINANCIAL STATEMENTS At 31 December 2015 34.8 35.6 217.3 287.7 32.6 At 31 December 2014 24.0 12.5 83.6 120.1 25.1 Acquisitions (Note 25) – – 0.6 0.6 – Additions 0.1 1.2 24.8 26.1 0.3 13. INVESTMENTS Disposals (0.1) – (6.1) (6.2) – Group Company Interest in joint Interest in Currency translation 0.1 2.7 26.6 29.4 – ventures associates Other Total Subsidiaries At 31 December 2016 34.9 39.5 263.2 337.6 32.9 2016 £m £m £m £m £m Net book value Depreciation At 31 December 2015 26.1 0.1 0.2 26.4 291.0 At 31 December 2015 11.7 24.3 137.3 173.3 8.2 Share of profits after tax 7.5 – – 7.5 – Charge for the year 0.7 2.2 19.4 22.3 0.8 Dividends received during the year (6.3) – – (6.3) –

Disposals – – (3.9) (3.9) – Additions – 0.4 – 0.4 – SHAREHOLDER INFORMATION Impairment (Note 5) – – 2.4 2.4 – Loan repaid – (0.3) – (0.3) – Currency translation 0.1 1.4 14.7 16.2 – Currency translation 3.3 0.2 – 3.5 1.6 At 31 December 2016 12.5 27.9 169.9 210.3 9.0 Other (0.3) – – (0.3) – At 31 December 2016 30.3 0.4 0.2 30.9 292.6

Net book value Group Company At 31 December 2016 22.4 11.6 93.3 127.3 23.9 Interest in joint Interest in ventures associates Other Total Subsidiaries At 31 December 2015 23.1 11.3 80.0 114.4 24.4 2015 £m £m £m £m £m Net book value At 31 December 2014 27.3 0.3 0.2 27.8 290.5 Share of profits after tax 7.0 – – 7.0 – Dividends received during the year (7.5) – – (7.5) – Other (0.8) – – (0.8) – Currency translation 0.1 (0.2) – (0.1) 0.5 At 31 December 2015 26.1 0.1 0.2 26.4 291.0

118 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 119 FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

13. INVESTMENTS CONTINUED Menzies Bobba STRATEGIC REPORT EM News Ground Handling Menzies Aviation Hyderabad Menzies Macau MATERIAL JOINT VENTURES Distribution Services Bobba (Bangalore) Menzies Air Cargo Airport (NI) Ltd Private Ltd Private Ltd Private Ltd Services Ltd Menzies Bobba 2015 £m £m £m £m £m EM News Ground Handling Menzies Aviation Hyderabad Menzies Macau Distribution Services Bobba (Bangalore) Menzies Air Cargo Airport Interest held – ordinary shares 50% 51% 49% 49% 29% (NI) Ltd Private Ltd Private Ltd Private Ltd Services Ltd 2016 £m £m £m £m £m Interest held – preference shares 0% 0% 100% 100% 0% Country of incorporation UK India India India Macau Group’s share of total comprehensive income 78% 51% 49% 49% 29% Statutory year end 31 December 31 March 31 March 31 March 31 December Group’s share of net assets 69% 47% 76% 58% 29% Distribution of Ramp and Cargo handling Cargo handling Ramp, passenger newspapers and passenger services in services in and cargo magazines in services in Bangalore Hyderabad handling in Macau Summarised Balance Sheet Business activity Northern Ireland Hyderabad Current assets(i) 9.7 4.6 11.8 6.8 8.9 Interest held – ordinary shares 50% 51% 49% 49% 29% Non-current assets 1.0 0.5 5.0 2.0 5.5

Interest held – preference shares 0% 0% 100% 100% 0% REPORTS GOVERNANCE Current liabilities (5.6) (0.5) (4.2) (1.5) (4.8) Group’s share of total comprehensive income 78% 51% 49% 49% 29% Net assets 5.1 4.6 12.6 7.3 9.6 Group’s share of net assets 69% 47% 76% 58% 29%

Note: Summarised Balance Sheet (i) Includes cash and cash equivalents 0.1 3.4 8.4 3.2 2.8 Current assets(i) 9.2 5.6 11.3 8.5 9.7 Non-current assets 0.7 0.3 5.3 4.1 7.2 Reconciliation of net assets to carrying value Current liabilities (4.8) (0.5) (2.0) (1.9) (6.2) Net assets 5.1 4.6 12.6 7.3 9.6 Net assets 5.1 5.4 14.6 10.7 10.7 Partners’ share of net assets (1.6) (2.5) (3.0) (3.1) (6.7) Unpaid dividends – 3.2 – – – Note: Carrying amount of the investment 3.5 5.3 9.6 4.2 2.9 (i) Includes cash and cash equivalents 0.1 3.9 9.8 3.9 2.2 FINANCIAL STATEMENTS Summarised Income Statement Reconciliation of net assets to carrying value Revenue 61.9 2.4 10.1 8.2 28.1 Net assets 5.1 5.4 14.6 10.7 10.7 Depreciation and amortisation (0.2) (0.3) (0.7) (0.2) (0.8) Partners’ share of net assets (1.6) (2.9) (3.6) (4.8) (7.5) Other operating costs (59.6) (2.0) (4.5) (4.8) (19.6) Unpaid dividends – 3.2 – – – Interest income – 0.3 0.8 0.3 – Carrying amount of the investment 3.5 5.7 11.0 5.9 3.2 Income tax (0.3) (0.2) (1.7) (1.0) (0.9) Profit from continuing operations 1.8 0.2 4.0 2.5 6.8 Summarised Income Statement Comprehensive income for the year 1.8 0.2 4.0 2.5 6.8 Revenue 58.6 2.5 12.3 9.4 33.3 Group’s share of total comprehensive income 1.4 0.1 2.0 1.2 2.0 Depreciation and amortisation (0.2) (0.3) (0.9) (0.2) (1.0)

Other operating costs (56.3) (2.1) (6.3) (5.8) (24.0) SHAREHOLDER INFORMATION Group’s carrying amount of the investment Interest income – 0.3 0.6 0.4 – At 31 December 2014 3.5 6.3 10.0 3.9 3.1 Income tax (0.4) – (1.6) (0.8) (1.0) Group’s share of total comprehensive income 1.4 0.1 2.0 1.2 2.0 Profit from continuing operations 1.7 0.4 4.1 3.0 7.3 Dividends received during the year (1.4) (0.4) (2.3) (0.9) (2.5) Comprehensive income for the year 1.7 0.4 4.1 3.0 7.3 Redemption of preference shares – (0.8) – – – Group’s share of total comprehensive income 1.4 0.2 2.1 1.4 2.1 Currency translation – 0.1 0.1 – 0.3 At 31 December 2015 3.5 5.3 9.8 4.2 2.9 Group’s carrying amount of the investment At 31 December 2015 3.5 5.3 9.6 4.2 2.9 GROUP’S INDIVIDUALLY IMMATERIAL JOINT VENTURES AND ASSOCIATES Group’s share of total comprehensive income 1.4 0.2 2.1 1.4 2.1 2016 2015 £m £m Dividends received during the year (1.4) (0.1) (2.1) (0.4) (2.3) Carrying amount of interests in joint ventures and associates 1.4 0.7 Currency translation – 0.3 1.4 0.7 0.5 At 31 December 2016 3.5 5.7 11.0 5.9 3.2 Share of profit from continuing operations 0.3 0.3 Currency translation 0.6 (0.4) Total comprehensive income 0.9 (0.1)

The listing of joint ventures and associates, along with all subsidiary undertakings, is presented on pages 138 to 146.

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14. DEFERRED TAX AGEING OF NET TRADE RECEIVABLES STRATEGIC REPORT

Group Company Neither past Past due not impaired due nor 2016 2015 2016 2015 impaired 31–60 days 61–90 days over 90 days Total £m £m £m £m £m £m £m £m £m Deferred tax assets 2016 151.8 35.2 4.9 4.0 195.9 Retirement benefit obligation 12.1 7.8 12.1 7.8 2015 134.2 22.0 4.2 1.0 161.4 Share-based payments 0.6 0.2 0.2 0.1 Tax losses 5.8 2.1 – – PROVISION FOR DOUBTFUL DEBTS Other temporary differences 5.8 5.5 0.7 – Group 24.3 15.6 13.0 7.9 2016 2015 £m £m At beginning of year 3.2 2.9 Deferred tax liabilities

Amounts provided 1.4 1.3 REPORTS GOVERNANCE Overseas tax on unremitted earnings (2.4) (1.2) – – Amounts released (0.4) (0.4) Other overseas temporary differences (0.4) (0.3) – – Amounts utilised (0.5) (0.6) Accelerated capital allowances and other Currency translation 0.1 – temporary differences (0.1) (0.6) (2.9) (3.3) At end of year 3.8 3.2 Other UK temporary differences – (2.8) – (1.8) (2.9) (4.9) (2.9) (5.1) AGEING OF IMPAIRED RECEIVABLES

Group Recognised in Balance Sheet 2016 2015 £m £m Deferred tax asset 24.2 12.2 10.1 2.8 0 to 30 days 0.3 0.2 Deferred tax liability (2.8) (1.5) – – 31 to 60 days 0.3 0.2 21.4 10.7 10.1 2.8 61 to 90 days 0.7 0.3 FINANCIAL STATEMENTS Over 90 days 2.5 2.5 Movement in net deferred tax assets in the year: 3.8 3.2 Income Statement: Retirement benefit obligation (1.6) (2.0) (1.6) (2.0) Other 2.1 2.8 0.5 0.3 The other classes within trade and other receivables do not include impaired assets. The Directors consider that the Exchange adjustments 1.3 (0.1) – – carrying value of trade and other receivables approximates to fair value.

Movement on acquisition (0.2) – – – 16. TRADE AND OTHER PAYABLES Reclassification of corporate tax 3.6 – 2.5 – Group Company Statement of Comprehensive Income 5.5 (2.0) 5.9 (2.0) 2016 2015 2016 2015 10.7 (1.3) 7.3 (3.7) £m £m £m £m Due within one year At 31 December 2016, there was a deferred tax liability of £2.4m (2015: £1.2m) for taxes that would be payable on the Trade payables 100.8 98.7 – – SHAREHOLDER INFORMATION unremitted earnings of certain of the Group’s subsidiaries and its associates or joint ventures. No deferred tax liability Accruals and deferred income 118.1 87.3 17.2 13.6 has been recognised for amounts that are permanently reinvested. Other payables 27.1 25.9 2.3 1.5 The unrecognised deferred tax liability on the unremitted earnings of the Group’s subsidiaries, associates and joint Other taxes and social security costs 3.9 5.4 – – ventures at 31 December 2016 is £1.0m (2015: £1.3m). Amounts owed to Group companies – – 297.6 295.2 15. TRADE AND OTHER RECEIVABLES 249.9 217.3 317.1 310.3

Group Company 2016 2015 2016 2015 Due after more than one year £m £m £m £m Other payables 4.0 3.5 4.9 5.0 Trade receivables 199.7 164.6 – – Less: provision for doubtful debts (3.8) (3.2) – – The Directors consider that the carrying value of trade and other payables approximates to fair value. Net trade receivables 195.9 161.4 – – Included within other payables is contingent consideration and other contingent acquisition related amounts as disclosed Other receivables 7.2 9.3 1.0 0.2 in Note 17. Amounts included within other payables due within one year are £Nil (2015: £1.6m) and other payables due after Prepayments 40.5 31.2 6.6 1.1 more than one year are £3.4m (2015: £2.7m). Amounts owed by Group companies – – 337.8 286.8 243.6 201.9 345.4 288.1

The average credit period on sale of goods is 36.1 days (2015: 31.0 days). Interest is not charged on trade receivables.

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17. FINANCIAL INSTRUMENTS Interest rate swaps STRATEGIC REPORT DERIVATIVE FINANCIAL INSTRUMENTS The Group’s policy is to minimise exposures to interest rate risk by ensuring an appropriate balance of long-term and Group Company short-term floating rates. During 2016 the Group had no interest rate swaps in place. At 31 December 2016, 8.6% (2015: 2016 2015 2016 2015 9.1%) of the Group’s borrowings were fixed. £m £m £m £m 2016 2015 Cash flow hedges: Liabilities Liabilities £m £m Foreign exchange forward contracts (0.4) (0.4) (0.4) (0.4) Fair value of cash flow hedges – currency forward contracts (0.4) (0.4) Foreign currency net investment hedges: Current value (0.4) (0.4) Foreign exchange forward contracts (5.3) (1.3) (5.3) (1.3) Current net fair value (5.7) (1.7) (5.7) (1.7) For 2016, if interest rates on Sterling denominated borrowings had been 0.5% higher/lower with all other variables held constant, post-tax profit for the year would have been £0.6m (2015: £0.7m) lower/higher, mainly as a result of higher/lower The Group only enters into derivative financial instruments that are designated as hedging instruments. The fair values interest expense on floating rate borrowings. of foreign currency instruments are calculated by reference to current market rates. REPORTS GOVERNANCE Foreign currency net investment hedges FAIR VALUE HIERARCHY The Group’s treasury policy is to hedge the exposure of foreign currency denominated assets to minimise foreign exchange As at 31 December 2016, the Group held the following financial instruments measured at fair value. The Group uses risk. This is primarily achieved using forward contracts denominated in the relevant foreign currencies. Gains or losses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: on the retranslation of these hedges are transferred to reserves to offset any gains or losses on translation of the net Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities. investments in the subsidiary undertakings. Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, The notional principal amounts of the outstanding forward foreign exchange contracts are: either directly or indirectly. Currency value Sterling equivalent 2016 2015 2016 2015 Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on million million £m £m observable market data. Australian dollar 24.0 23.9 14.1 11.8 For financial instruments that are recognised at fair value on a recurring basis, the Group determines whether transfers Canadian dollar 5.5 5.5 3.3 2.7 have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is Colombian peso 4,000 4,000 1.1 0.9 FINANCIAL STATEMENTS significant to the fair value measurement as a whole) at the end of each reporting period. Czech koruna 115.0 115.0 3.6 3.1 DERIVATIVE FINANCIAL INSTRUMENTS ADJUSTED TO FAIR VALUE THROUGH THE OTHER Danish krone 10.0 10.0 1.1 1.0 COMPREHENSIVE INCOME STATEMENT Euro 9.6 15.0 8.2 11.1

Level 1 Level 2 Level 3 Total Indian rupee 810 810 9.7 8.3 2016 £m £m £m £m Mexican peso 51.0 51.0 2.0 2.0 Financial assets: New Zealand dollar 3.0 3.0 1.7 1.4 Foreign exchange contracts – hedged – 0.4 – 0.4 Norwegian krone 7.0 7.0 0.7 0.5 Financial liabilities: South African rand 30.0 30.0 1.8 1.3 Foreign exchange contracts – hedged – 6.1 – 6.1 Swedish krona 50.0 50.0 4.5 4.0 US dollar 41.5 45.0 33.6 30.5 SHAREHOLDER INFORMATION Level 1 Level 2 Level 3 Total 2015 £m £m £m £m 2016 2015 Financial assets: Assets Liabilities Assets Liabilities Foreign exchange contracts – hedged – 0.6 – 0.6 £m £m £m £m Financial liabilities: Fair value of foreign currency net investment hedges 0.4 (5.7) 0.6 (1.9) Foreign exchange contracts – hedged – 2.3 – 2.3 Current value 0.4 (5.7) 0.6 (1.9)

During the year ended 31 December 2016, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

CASH FLOW HEDGES Foreign exchange forward contracts At 31 December 2016 the Group held foreign currency forward contracts designed as hedges of transaction exposures arising from non-local currency revenue. These contracts were in line with the Group’s policy to hedge significant forecast transaction exposures for a maximum 18 months forward. The cash flow hedges of non-local revenue were assessed to be highly effective.

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17. FINANCIAL INSTRUMENTS CONTINUED Net debt STRATEGIC REPORT

OTHER FINANCIAL INSTRUMENTS Group Company Contingent consideration 2016 2015 2016 2015 The acquisition of PlaneBiz 2015 Ltd in 2014 included options in relation to the 40% shareholding owned by a third party. £m £m £m £m These options take the form of a put option in favour of the third party shareholders for up to 30% of the share capital, Derivative financial instruments 5.7 1.7 5.7 1.7 exercisable in 2018 and 2019. Following the expiry of this put option the Group then has a call option, exercisable for a Interest-bearing loans and borrowings 103.7 155.6 103.2 155.1 60 day period, for the remaining shares that have not been exercised under the put option. The fair value of the put option Total borrowings 109.4 157.3 108.9 156.8 has been calculated based on the expected discounted cash flows of the underlying value, which is the expected average Less: cash at bank, cash in hand and short-term deposits 38.9 34.1 1.0 0.8 annual EBITDA over the preceding three years multiplied by 5.5. The call option is considered to have a negligible fair value. 70.5 123.2 107.9 156.0 The liabilities for contingent consideration and other acquisition related amounts are Level 3 derivative financial instruments. The book and fair values are:

2016 2015 2016 2015

£m £m Book value Fair value Book value Fair value REPORTS GOVERNANCE Fair value of contingent consideration: £m £m £m £m Fore Partnership – 1.6 Short-term borrowings 38.0 38.2 2.7 3.0 Fair value of other contingent acquisition related amounts: Medium-term borrowings 63.3 64.0 150.8 151.7 PlaneBiz 2015 Ltd 3.4 2.7 Long-term borrowings 1.4 1.4 1.4 1.4 Derivative financial instruments 5.7 5.7 1.7 1.7 Interest-bearing loans and borrowings Finance leases 0.2 0.2 0.5 0.5 Group Company Bank overdrafts 0.8 0.8 0.2 0.2 2016 2015 2016 2015 Total financial liabilities 109.4 110.3 157.3 158.5 Maturity £m £m £m £m Obligations under finance leases April 2017 to April 2018 0.2 0.5 – – Less: cash at bank, cash in hand and short-term deposits 38.9 38.9 34.1 34.1 Bank overdrafts On demand 0.8 0.2 0.5 0.2 Net debt 70.5 71.4 123.2 124.4 FINANCIAL STATEMENTS Non-amortising bank loans January 2017 The fair value of the fixed term, amortising borrowing is calculated as the present value of all future cash flows discounted to December 2018 91.3 140.8 91.3 140.8 at prevailing market rates. Amortising term loan March 2020 10.0 12.7 10.0 12.7 Other than trade and other receivables and payables, there are no financial assets or liabilities excluded from the above Preference shares Non-redeemable 1.4 1.4 1.4 1.4 analysis. No financial assets or liabilities were held or issued for trading purposes. 103.7 155.6 103.2 155.1 A separate table has not been prepared analysing the Company’s book values and fair values. The £0.5m difference Current 39.0 3.4 38.5 2.9 in book values relates to interest bearing loans and borrowings and is deemed to be short-term in nature. Non-current 64.7 152.2 64.7 152.2 At 31 December 2016 the currency and interest rate profile of financial liabilities was: 103.7 155.6 103.2 155.1 2016 2015 Floating Fixed Floating Fixed To fund the planned acquisition of ASIG, the Group put in place unsecured, committed bank loans that were conditional rate rate rate rate financial financial financial financial on the acquisition occurring. These loan facilities were put in place in September 2016 and as well as funding the ASIG liabilities liabilities Total liabilities liabilities Total SHAREHOLDER INFORMATION acquisition were to refinance all current bank loans. The new facilities are a $250m term loan and a £150m revolving £m £m £m £m £m £m credit facility and both have a maturity of June 2021. Sterling denominated 92.3 11.4 103.7 141.5 14.1 155.6 Net derivative liabilities 5.7 – 5.7 1.7 – 1.7 Funds were drawn down to meet the acquisition consideration and to repay the existing facilities on 1 February 2017. 98.0 11.4 109.4 143.2 14.1 157.3 Non-amortising bank loans are drawn against unsecured, committed revolving bank credit facilities maturing between January 2017 and December 2018. At 31 December 2016 the expiry profile of undrawn committed facilities was: The amortising term loan is repayable between 2017 and 2020 with interest payable at a fixed rate of 6.23%. The loan has Group Company 2016 2015 2016 2015 a weighted average maturity of two years (2015: two years). £m £m £m £m The Company has issued 1,394,587 cumulative preference shares of £1 each. These shares are not redeemable and pay Between one and two years 68.7 20.0 68.7 20.0 an interest coupon of 9% semi-annually. Between two and five years – 44.3 – 44.3 68.7 64.3 68.7 64.3

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17. FINANCIAL INSTRUMENTS CONTINUED Liquidity risk STRATEGIC REPORT OTHER FINANCIAL INSTRUMENTS CONTINUED The Group manages liquidity risk by maintaining adequate reserves and banking facilities by continuously monitoring Trade and other receivables and payables forecast and actual cash flows. The following is an analysis of the maturity of the Group’s financial liabilities and derivative Trade and other receivables and trade and other payables carrying values of £203.1m (2015: £170.7m) and £246.0m (2015: financial liabilities based on the remaining period at the balance sheet date to the contractual maturity date. The amounts £211.9m) respectively, in respect of the Group, and £338.8m and £371.1m (2015: £287.0m and £310.3m), in respect of the disclosed in the table are the contractual undiscounted cash flows. Floating rate interest is estimated using the prevailing Company, are assumed to approximate to their fair values due to their short-term nature. rate at the balance sheet date. Net values of transaction hedging are disclosed in accordance with the contractual terms of these derivative instruments. Sensitivity and risk information Foreign currency sensitivity Due under Due between Due between Due over 1 year 1 and 2 years 2 and 5 years 5 years For 2016, if Sterling had weakened/strengthened by 10% on currencies that have a material impact on the Group profit 2016 £m £m £m £m before tax and equity, with all other variables held constant the effect would have been: Interest-bearing loans and borrowings (40.2) (60.8) (6.8) – 2016 2015 Preference shares (0.1) (0.1) (0.4) (1.5) Effect on profit Effect on Effect on profit Effect on Other liabilities (0.1) (0.1) – –

before tax equity before tax equity REPORTS GOVERNANCE Changes in rate £m £m £m £m Trade and other payables (127.9) (4.0) – – US dollar +10% 1.5 3.8 1.0 2.1 Financial derivatives (85.6) – – – US dollar -10% (1.2) (3.1) (0.8) (1.7) (253.9) (65.0) (7.2) (1.5) Australian dollar +10% 1.0 1.8 0.9 1.6 Due under Due between Due between Due over Australian dollar -10% (0.8) (1.5) (0.7) (1.3) 1 year 1 and 2 years 2 and 5 years 5 years 2015 £m £m £m £m Indian rupee +10% 0.6 1.3 0.6 0.6 Interest-bearing loans and borrowings (6.4) (96.3) (66.8) – Indian rupee -10% (0.5) (1.0) (0.5) (0.5) Preference shares (0.1) (0.1) (0.4) (1.5) Euro +10% 0.5 – 0.5 0.9 Other liabilities (0.5) – – – Euro -10% (0.4) – (0.4) (0.7) Trade and other payables (124.6) (3.5) – – South African rand +10% (0.1) 0.8 – 0.6 Financial derivatives (79.0) – – – South African rand -10% 0.1 (0.7) – (0.5) (210.6) (99.9) (67.2) (1.5) FINANCIAL STATEMENTS The impact of the Group’s exposure to all other foreign currencies is not considered to be material to the overall results of the Group. 18. OPERATING LEASE COMMITMENTS The future aggregate minimum lease payments under non-cancellable operating leases are: Capital risk Group The Group manages its capital structure in order to minimise the cost of capital whilst ensuring that it has access to Property Other ongoing sources of finance such as the debt capital markets. The Group defines capital as the sum of net debt (see Note 2016 2015 2016 2015 23) and equity attributable to equity holders of the Company (see Group and Company Statement of Changes in Equity). £m £m £m £m The only externally imposed capital requirements for the Group are debt to EBITDA and interest cover under the terms Within one year 33.0 28.1 32.0 26.1 of the bank facilities, with which the Group has fully complied during both the current year and the prior year. To maintain Between one and five years 63.4 64.9 53.9 51.6 or adjust its capital structure, the Group may adjust the dividend payment to shareholders and/or issue new shares. After five years 29.5 37.7 0.1 0.2 Credit risk 125.9 130.7 86.0 77.9

The Group considers its exposure to credit risk at 31 December to be: SHAREHOLDER INFORMATION 19. CAPITAL COMMITMENTS Group Company 2016 2015 2016 2015 Group Company £m £m £m £m 2016 2015 2016 2015 Bank deposits 38.9 34.1 1.0 0.8 £m £m £m £m Trade receivables 195.9 161.4 – – Contracted but not provided – property, plant and equipment 1.3 1.5 – – 234.8 195.5 1.0 0.8

For banks and financial institutions, the Group’s policy is to transact with independently rated parties with a minimum rating of ‘A’. If there is no independent rating, the Group assesses the credit quality of the counterparty taking into account its financial position, past experience and other factors. In addition to the relevant items above, the Company is exposed to credit risk in relation to on-demand amounts owed by Group companies.

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20. PROVISIONS COMPANY SHARE SCHEMES STRATEGIC REPORT

Property Other Group The Company operates the following share-based payment arrangements: 2016 2015 2016 2015 2016 2015 £m £m £m £m £m £m Savings-related Share Option Scheme The Company operates a Savings-related Share Option Scheme which is open to all full and part-time employees in At beginning of year 5.4 6.9 2.4 0.2 7.8 7.1 the UK. Annual grants of options are made in September or October each year and become exercisable after three years. Provided/(released) during year 1.6 1.1 (0.4) 2.4 1.2 3.5 Employees enter into a savings contract with the Yorkshire Building Society who administers the scheme. The options are Unwind of discount 0.2 0.1 – – 0.2 0.1 granted at a 20% discount of the share price at the date of grant and lapse if not exercised within six months of maturity. Utilised during year (1.6) (2.8) (0.1) (0.2) (1.7) (3.0) Special provisions apply to employees who leave their employment due to ill health, redundancy or retirement. Reclassification from accruals – – 0.4 – 0.4 – Bonus Co-investment Plan (“BCIP”) Currency translation loss 0.3 0.1 – – 0.3 0.1 The BCIP offers Executive Directors and other senior executives selected by the Board the opportunity to invest part of At end of year 5.9 5.4 2.3 2.4 8.2 7.8 their annual cash bonus for a financial year in the Company’s shares, entitling them, provided certain performance targets are met, to a grant of additional matching shares. Since 2010 the ratio of matching shares to contributory shares has been GOVERNANCE REPORTS GOVERNANCE Current 3.0 2.5 1.2 2.4 4.2 4.9 set at 1:1. The maximum amount of the annual cash bonus which may be eligible for matching has been set at 40%. The net Non-current 2.9 2.9 1.1 – 4.0 2.9 of tax amount is applied in the purchase of shares. 5.9 5.4 2.3 2.4 8.2 7.8 The first bonus award that qualified for investment in shares under the plan was the award for the financial year ended December 2004 and the last qualifying bonus award was for the financial year which commenced ten years after the The property related provisions are in respect of obligations for vacated leasehold properties where applicable sublet adoption of the Plan. A revised plan was approved at the Annual General Meeting of the Company on 15 May 2015 income may be insufficient to meet obligations under head leases. The provisions for property costs unwind over the and the BCIP will be discontinued following 2017. Further details are on page 62. period between 2017 and 2041. Other provisions include redundancy and legal claims provisions. Performance targets are based on real growth in earnings measured over three financial years. For awards in 2014, The Company carries £1.1m of provision relating to a legal claim. This is not expected to be utilised within one year. if the percentage growth in the Company’s Earnings Per Share (“EPS”) is Retail Prices Index (“RPI”) +3% pa or more, then CONTINGENT LIABILITIES the number of matching shares that will vest is one. For EPS growth of between RPI +0% pa and RPI +3% pa, the number The Company has guaranteed certain trading obligations of its subsidiaries in the normal course of business. of matching shares vesting will be calculated on a straight-line basis. No matching shares will vest for EPS percentage growth of RPI +0% pa or less for any award. For awards in 2015, if the percentage growth in the Company’s EPS is Consumer

21. SHARE CAPITAL FINANCIAL STATEMENTS Prices Index (“CPI”) +3% pa or more, then the number of matching shares that will vest is one. If the threshold growth 2016 2015 in EPS is achieved (CPI +0%) then 25% of the matching shares will be paid. For EPS growth of between CPI +0% pa and £m £m CPI +3% pa, the number of matching shares vesting will be calculated on a straight-line basis. No matching shares will Allotted, called up and fully paid vest for EPS percentage growth below CPI +0% pa for any award. Opening – 61,703,133 ordinary shares of 25p each 15.4 15.4 Rights Issue(i) 5.5 – Long-term Incentive Plan (“LTIP”) The LTIP enables divisional and senior management to align more closely with the achievement of target Group and Allotted under share option schemes(ii) – – divisional financial results. A detailed description of this plan is included in the Directors’ Remuneration Report on page 62. Closing – 83,636,895 ordinary shares of 25p each 20.9 15.4 Shares will vest at the end of three year financial periods. A £Nil award will be achieved where the financial target is at Notes: or below the threshold performance target and 100% will vest where the results are equal to or greater than the stretch (i) As part of the Rights Issue process 21,922,403 ordinary shares of 25p each were allotted to shareholders. performance target, with a result between threshold and stretch being made on a straight-line basis. Actual performance The provisions of the Companies Act 2006 relating to Merger Relief (sections 612 and 613) were applied to the above mentioned Rights Issue raised through a cash box structure. This resulted in the creation of a merger reserve, after deducting share issue costs of £2.4m. The cash box method of effecting an issue of shares for targets for Executive Directors are disclosed in the Directors’ Remuneration Report in the year following the expiry of the

cash enabled the Company to issue shares without giving rise to a share premium. performance period. SHAREHOLDER INFORMATION (ii) As a result of share scheme allotments, 12,583 (2015: 40,567) ordinary shares having a nominal value of £3,146 (2015: £10,141) were issued during the year at a share premium of £58,608 (2015: £150,098). FAIR VALUES OF SHARE OPTIONS Options are valued using the Black-Scholes option-pricing or Monte Carlo simulation models as appropriate. No performance Employees hold options to subscribe for shares in the Company under the Savings-related Share Option Scheme approved by conditions are included in the fair value calculations. the shareholders, details of which are shown below. Options on 12,583 shares were exercised in 2016 and 499,151 options lapsed.

Revised exercise Exercise price price(i) Exercise 2016 2015 Year of grant (pence) (pence) period Number Number 2012 497 2015-2016 – 237,902 2013 630 557 2016-2017 216,702 251,883 2014 495 437 2017-2018 345,637 366,493 2015 350 309 2018-2019 472,804 493,441 2016 480 424 2019-2020 553,750 – 1,588,893 1,349,719

Note: (i) Revised for the Rights Issue in October 2016.

130 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 131 FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

21. SHARE CAPITAL CONTINUED BCIP LTIP STRATEGIC REPORT The fair value per option granted and the assumptions used in the calculation are: 2016 2015 2016 2015 Savings-related Option Scheme Weighted Weighted Weighted Weighted average average average average Date of grant (October) 2016 2015 2014 2013 price price price price Share price at grant date (pence) 592 412 569 799 Number (pence) Number (pence) Number (pence) Number (pence) Exercise price (pence) 480 350 495 630 Outstanding at start of year 53,522 577 69,391 666 1,159,966 527 881,429 663 Vesting period (years) 3 3 3 3 Awards made 15,920 473 23,127 376 595,076 445 679,229 404 Expected volatility 33% 33% 26% 25% Lapsed (30,723) 669 (38,996) 617 (720,175) 568 (400,692) 617 Option life (years) 3.5 3.5 3.5 3.5 Outstanding at end of year 38,719 461 53,522 577 1,034,867 527 1,159,966 527 Expected life (years) 3.5 3.5 3.5 3.5 Range of award date prices 376-647 376-756 404-654 404-773 Risk-free rate 1.0% 1.0% 1.4% 4.6% Weighted average remaining (i) contractual life (years) 1.4 1.3 1.4 1.6

Expected dividends expressed as a dividend yield 3.0% 6.0% 3.7% 4.0% REPORTS GOVERNANCE Fair value per option (pence) 152 90 136 143 CHARGE FOR SHARE-BASED INCENTIVE SCHEMES Charge per option (pence)(ii) 106 63 95 95 The total charge for the year relating to employee share-based plans was £0.7m (2015: £0.5m), all of which related to equity-settled share-based payment transactions. After tax the total charge was £0.6m (2015: £0.5m). The expected volatility is based on the historical volatility over the last three years. The expected life is the average expected period to vesting. The risk free rate of return is the zero coupon UK government bonds of a term consistent AWARD OF SHARES with the assumed award life. The Chairman was awarded 20,000 ordinary shares in the year, as part of his remuneration package. The shares were issued on 17 November 2016 at a market value of 490.8p per share. It is proposed that should Dr Smurfit continue to retain Notes: (i) Based on the daily 12 month trailing dividend yield averaged over the 12 months prior to valuation date. office that a similar award will be made on the second and third anniversaries of the initial award, up to a maximum value of (ii) The difference between the fair value and charge per option is due to adjustments for forfeiture risk. £0.1m annually. BCIP LTIP 22. CASH GENERATED FROM OPERATIONS Date of grant (March) 2016 2015 2014 2016 2015 2014 Share price at grant date (pence) 478 376 647 443 404 654 Group Company 2016 2015 2016 2015 FINANCIAL STATEMENTS Contractual life (years) 3 3 3 3 3 3 £m £m £m £m Expected departure 0% 0% 0% 0% 0% 0% Operating profit/(loss) 20.1 18.8 (4.1) (2.7) Expected outcome of meeting Depreciation 22.3 21.0 0.8 0.7 performance criteria 51% 59% 59% n/a 56% 62% Amortisation of intangible assets 11.1 10.6 – – Fair value per share (pence) 245 220 379 169 165 319 Share-based payments 0.7 0.5 0.7 0.5 Charge per share award (pence)(i) 245 220 379 169 165 319 Onerous lease provision 1.6 0.3 – –

Note: Cash spend on onerous leases (1.5) (2.8) – – (i) Adjusted for forfeiture risk. Gain on sale of property, plant and equipment (0.1) (0.6) – – MOVEMENT IN SHARE OPTIONS Pension charge 3.5 3.3 – – A reconciliation of conditional share movements of executive share options, savings-related share options and all other Pension credit (0.3) (1.1) – –

share-based schemes is: Pension contributions in cash (14.0) (14.1) (14.0) (14.1) SHAREHOLDER INFORMATION Savings-related Option Scheme Acquisition, restructure and rationalisation related costs 9.1 5.3 4.1 – 2016 2015 Cash spend on exceptional items (9.9) (8.0) (3.3) – Weighted Weighted average average Acquisition related earn-out adjustment (0.3) 0.2 – – exercise exercise Net impairment loss 9.6 4.7 – – price price Number (pence) Number (pence) Increase in inventories (1.3) (1.8) – – Outstanding at start of year 1,349,719 468 1,427,845 507 Increase in trade and other receivables (37.3) (16.2) – – Granted 750,908 426 499,297 350 Increase in trade and other payables and provisions 32.8 15.8 – – Forfeited/expired (499,151) 465 (536,856) 467 46.1 35.9 (15.8) (15.6) Exercised (12,583) 492 (40,567) 395 Outstanding at end of year 1,588,893 411 1,349,719 468 Exercisable 215,111 237,902 Range of exercise prices 309-557 350-630 Weighted average remaining contractual life (years) 1.6 1.6

132 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 133 FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

23. CHANGES IN NET BORROWINGS The fair value of assets and liabilities arising from the acquisitions are: STRATEGIC REPORT

Subsidiaries Currency Edinburgh Arts 2015 Cash flows acquired translation 2016 Renaissance Thistle Couriers and £m £m £m £m £m Aviation Ltd Ltd Entertainment Ltd Total Total 2016 2016 2016 2016 2015 Cash at bank and in hand 34.1 (0.3) 0.3 4.8 38.9 £m £m £m £m £m Bank overdrafts (0.2) (0.6) – – (0.8) Non-current assets Net cash and cash equivalents 33.9 (0.9) 0.3 4.8 38.1 Intangible assets (contracts) 1.9 0.6 0.2 2.7 1.7 Bank loans due within one year (2.7) (35.3) – – (38.0) Property, plant and equipment 0.1 0.4 0.1 0.6 1.3 Preference shares (1.4) – – – (1.4) Current assets 0.6 0.7 0.2 1.5 2.1 Finance leases (0.5) 0.6 (0.3) – (0.2) Cash/overdraft 0.1 0.2 – 0.3 1.3 Debt due after one year (150.8) 87.5 – – (63.3) Current liabilities (0.2) (0.6) (0.3) (1.1) (2.4) Net derivative liabilities (1.7) 11.2 – (15.2) (5.7) Finance leases – (0.2) (0.1) (0.3) (0.7) GOVERNANCE REPORTS GOVERNANCE Net debt (123.2) 63.1 – (10.4) (70.5) Non-current liabilities – (0.1) – (0.1) – Net assets acquired at fair value 2.5 1.0 0.1 3.6 3.3 Currency translation movements result from the Group’s policy of hedging its 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 Current assets acquired with Renaissance Aviation Ltd, Thistle Couriers Ltd and Edinburgh Arts and Entertainment Ltd on net assets resulting in an overall net exchange gain of £16.9m (2015: loss of £4.5m). The net gain is recognised in other include £0.7m, £0.6m and £0.2m of trade receivables at fair value respectively, the gross amount acquired. The fair values comprehensive income. of the net assets of the companies acquired remain provisional pending the formal completion of the valuation process. 24. CASH FLOW HEDGE RESERVE The acquired businesses contributed £0.2m profit before taxation and £5.6m revenue from acquisition date. If the The cash flow hedge reserve records the portion of the gains or losses on hedging instruments used as cash flow hedges businesses had been acquired on 1 January 2016, Group revenue and profit before taxation for continuing operations that are determined to be effective. would have been £1,983.2m and £19.9m respectively. Transaction fees of £0.2m relating to these acquisitions were 25. ACQUISITIONS incurred and expensed during the period. During the period the Group acquired 100% of the share capital of each of Renaissance Aviation Ltd, Thistle Couriers Ltd On 4 April 2016 the Group acquired 20% of the share capital of Hamilton Aero Maintenance Ltd for a consideration of and Edinburgh Arts and Entertainment Ltd. £0.4m. The company provides line maintenance and engineering support services and is based in New Zealand. FINANCIAL STATEMENTS

On 9 February 2016 the Group acquired Renaissance Aviation Ltd, a ground handling company based in Bermuda. The CONTINGENT AND DEFERRED CONSIDERATION Group has acquired the company to develop our presence in the region. These financial statements include the impact As set out in Note 5, contingent consideration of £1.3m relating to the Fore Partnership was settled in March 2016. Deferred of ten months’ trading results. consideration of £0.3m relating to the acquisition of Menzies Parcels Ltd (formerly known as AJG Parcels Ltd) was cash On 9 February 2016 the Group acquired Thistle Couriers Ltd, a logistics company based in Scotland. The Group has settled in May 2016. acquired the company to realise the potential of the existing UK logistics network. These financial statements include 26. RELATED PARTY TRANSACTIONS the impact of ten months’ trading results. During the year the Group transacted with related parties in the normal course of business and on an arm’s-length basis. On 29 September 2016 the Group acquired Edinburgh Arts and Entertainment Ltd, a leaflet distribution company based in These sales to and from related parties are made at normal market prices. Details of these transactions are: Scotland. The Group has acquired the company to realise the potential of the existing distribution network. These financial Amounts owed to related Amounts owed statements include the impact of three months’ trading results. Group Sales to party at by related party at Division Aviation Distribution Distribution share related 31 December 31 December holding party 2016 2016 SHAREHOLDER INFORMATION Edinburgh Arts Related party % £m £m £m Renaissance Thistle Couriers and Aviation Ltd Ltd Entertainment Ltd Total Total Menzies Bobba Ground Handling Services Private Ltd 51 0.1 – – 2016 2016 2016 2016 2015 Name £m £m £m £m £m Hyderabad Menzies Air Cargo Private Ltd 49 0.1 – 0.1 Purchase consideration Menzies Macau Airport Services Ltd 29 0.3 – 0.1 Cash paid 2.3 1.1 0.1 3.5 6.8 EM News Distribution (NI) Ltd 50 0.6 5.0 – Deferred consideration 0.2 0.3 – 0.5 0.7 EM News Distribution (Ireland) Ltd 50 1.0 0.1 – 2.5 1.4 0.1 4.0 7.5 Key management personnel include individuals who are Executive Directors of the Group and those having authority and Less: fair value of net assets acquired 2.5 1.0 0.1 3.6 3.3 responsibility for planning, directing and controlling activities of the operating divisions as disclosed in the segmental Goodwill – 0.4 – 0.4 4.2 analysis. Remuneration of key management personnel is as follows:

2016 2015 Goodwill recognised with respect to Thistle Couriers Ltd is primarily attributable to the expertise in hard-to-reach logistic £m £m locations in the UK and synergies with the Group. Short-term employee benefits 5.5 4.5 Post-employment pension and medical benefits 0.5 0.5 Termination payments 0.1 – Share-based payments 0.7 0.5 6.8 5.5

134 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 135 FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED FIVE YEAR SUMMARY

26. RELATED PARTY TRANSACTIONS CONTINUED 2016 2015 2014 2013 2012 STRATEGIC REPORT Certain activities, including treasury, taxation, insurance, pension and legal matters are provided by the Company to £m £m £m £m £m subsidiary companies and are recharged on a cost-plus basis. The amount recharged and settled in respect of 2016 was Revenue £0.2m (2015: £0.2m). Aviation 843.4 728.0 718.8 702.5 679.3 The amounts owed to and due by the Company from dealings with subsidiary companies are disclosed in Notes 15 and 16. Distribution 1,138.2 1,171.2 1,184.1 1,202.9 1,224.2 1,981.6 1,899.2 1,902.9 1,905.4 1,903.5 Transactions between the Company and other Group companies primarily related to financing activities.

27. RELATED UNDERTAKINGS Operating profit The subsidiary entities and entities in which John Menzies plc has a significant interest at 31 December 2016 are disclosed Aviation 34.2 23.1 30.2 37.8 34.8 as an appendix to these financial statements. Distribution 24.7 25.1 24.0 24.3 27.5 28. EVENTS AFTER THE REPORTING PERIOD 58.9 48.2 54.2 62.1 62.3 ACQUISITION OF ASIG

Corporate (3.7) (3.3) (3.2) (2.0) (1.3) REPORTS GOVERNANCE On 1 February 2017, the Group announced the completion of the acquisition of 100% of the voting rights of ASIG Holdings Underlying operating profit 55.2 44.9 51.0 60.1 61.0 Ltd and ASIG Holdings Corp. (together “ASIG”) for $202m. ASIG is a leading aviation services business, providing ground, Exceptional and other items (26.3) (17.6) (16.4) (8.7) (24.8) fuel and airport facility services to airlines, airports, oil companies and industry partners in the commercial aviation sector. It delivers comprehensive service solutions including into-plane fuelling, fuel farm management, ground handling, aircraft Share of interest and tax on joint ventures technical support services, facilities equipment maintenance and de-icing at 87 airports across seven countries in the and associates (1.3) (1.5) (1.5) (1.1) (1.0) Americas, Europe and Asia. Profit before interest 27.6 25.8 33.1 50.3 35.2 Net finance costs (7.8) (7.6) (7.4) (8.2) (7.1) The acquisition was a Class 1 transaction under the UK Listing Rules, receiving shareholder approval on 11 October 2016. Profit before taxation 19.8 18.2 25.7 42.1 28.1 The deal has been funded by a combination of a Rights Issue and borrowings through new facilities comprising a $250m term loan and a £150m revolving credit facility with maturities of June 2021. Per ordinary share No further disclosures have been provided in respect of business combinations after the balance sheet date on the basis Dividends paid 10.6p 13.1p 26.9p 25.6p 24.4p that the initial accounting is not yet complete. (i) Underlying earnings 47.8p 37.8p 43.5p 58.0p 60.8p FINANCIAL STATEMENTS DEFINED BENEFIT PENSION SCHEME Basic earnings(i) 11.8p 14.6p 20.1p 44.3p 27.7p On 28 February 2017 the Company informed the active members of the Company’s defined benefit pension scheme, the Menzies Pension Fund, that it will ask the Trustee to amend the Fund Rules to close the fund to future accrual Note: (i) Restated to adjust for the impact of the October 2016 Rights Issue as set out in Note 10. on 31 March 2017. SHAREHOLDER INFORMATION

136 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 137 FINANCIAL STATEMENTS

LIST OF ALL SUBSIDIARY, JOINT VENTURE AND ASSOCIATE UNDERTAKINGS

DETAILS OF RELATED UNDERTAKINGS AT 31 DECEMBER 2016 STRATEGIC REPORT Interests in all of the companies listed below are in the ordinary share capital of these undertakings, except where otherwise stated.

Direct or indirect Direct or indirect holding (100% unless holding (100% unless Subsidiary undertaking Country of incorporation Registered address otherwise stated) Subsidiary undertaking Country of incorporation Registered address otherwise stated) Administracion de Servicios en Tierra, Mexico Plaza Alamos Local 2, SM 311, MZ 26 Lote Indirect Cranford Forwarders Bond Ltd United Kingdom 2 World Business Centre Heathrow, Indirect S.A. de C.V. 03-01 Boulevard Luis Donaldo Colosio Newall Road, London Heathrow Airport, C.P. 77560, Cancun, Quintana Roo Hounslow TW6 2SF Aeroground, Inc. United States 2711 Centerville Road, Suite 400, Indirect Czech GH s.r.o. Czech Republic K Letisti 1049/57, 161 00 Prague 6 Indirect Wilmington, Delaware 19808 DNDS Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Air Marketing Services Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Newall Road, London Heathrow Airport, Hounslow TW6 2SF Hounslow TW6 2SF Edinburgh Arts and Entertainment Ltd United Kingdom 2 Lochside Avenue, Edinburgh Park, Indirect

Air Menzies International (Aust) Pty Ltd Australia Unit 12, Discovery Cove, 1801 Botany Road, Indirect Edinburgh EH12 9DJ REPORTS GOVERNANCE Banksmeadow NSW 2019 Elmdon Cargo Handling Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Air Menzies International (Cape) Proprietary Ltd South Africa New Agents Road, Unit 6, Air Cargo Centre, Indirect (65%) Newall Road, London Heathrow Airport, Cape Town International Airport, Cape Town Hounslow TW6 2SF Air Menzies International (India) Private Ltd India Cargo Terminal 1, Indirect Express Handling (Scotland) Ltd United Kingdom 2 Lochside Avenue, Edinburgh Park, Indirect Kempegowda International Airport, Edinburgh EH12 9DJ Bangalore 560300 FMD Ltd United Kingdom Unit 1 Griffin Business Park, Walmer Way, Indirect Air Menzies International (Netherlands) B.V. The Netherlands Anchoragelaan 50, Indirect Birmingham B37 7UX 1118 LE Luchthaven Schiphol Fore Retail Consultancy Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Air Menzies International (NZ) Ltd New Zealand c/o Buddle Findlay, Level 18, PwC Tower, Indirect Newall Road, London Heathrow Airport, 188 Quay Street, Auckland 1140 Hounslow TW6 2SF Air Menzies International (USA), Inc. United States 2711 Centerville Road, Suite 400, Indirect Heathrow Aviation Services Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Wilmington, Delaware 19808 Newall Road, London Heathrow Airport, Air Menzies International Holding (NZ) Ltd New Zealand c/o Buddle Findlay, Level 18, PwC Tower, Indirect Hounslow TW6 2SF 188 Quay Street, Auckland 1140 HO/Menzies Investimentos & Transportes Macau Avenida da Praia Grande 665, Indirect FINANCIAL STATEMENTS Air Menzies International Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Investments Limitada Edificio Great Will Newall Road, London Heathrow Airport, James Waddell & Company Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Hounslow TW6 2SF Newall Road, London Heathrow Airport, Air Menzies International SA Proprietary Ltd South Africa Unit 3 Aviation Park, 17 Pomona Road, Indirect Hounslow TW6 2SF Kempton Park, Johannesburg JEM Education Direct Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Airbase Flight Support Ltd Isle of Man 66 Athol Street, Douglas IM1 1JE Indirect Newall Road, London Heathrow Airport, Hounslow TW6 2SF Airbase Flight Support Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, JM Nominees Ltd United Kingdom 2 World Business Centre Heathrow, Direct Hounslow TW6 2SF Newall Road, London Heathrow Airport, Hounslow TW6 2SF Airport Handling Services Srl Romania Calea Aeroportului 4, Arad Indirect JM Secretaries Ltd United Kingdom 2 World Business Centre Heathrow, Direct Airports Bureau Systems Ltd United Kingdom Windmill House, 91-93 Windmill Road, Indirect Newall Road, London Heathrow Airport, Sunbury-on-Thames TW16 7EF Hounslow TW6 2SF AMI Ocean Ltd United Kingdom 2 Lochside Avenue, Edinburgh Park, Direct John Menzies (108) Ltd United Kingdom 2 World Business Centre Heathrow, Indirect SHAREHOLDER INFORMATION Edinburgh EH12 9DJ Newall Road, London Heathrow Airport, AU Logistics Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Hounslow TW6 2SF Newall Road, London Heathrow Airport, John Menzies (Birmingham) Ltd United Kingdom 2 World Business Centre Heathrow, Direct Hounslow TW6 2SF Newall Road, London Heathrow Airport, Australian AirSupport Pty Ltd Australia c/o Norton Rose Fullbright, Level 21, Indirect Hounslow TW6 2SF 111 Eagle Street, Brisbane QLD 4000 John Menzies (Edinburgh) Ltd United Kingdom 2 Lochside Avenue, Edinburgh Park, Direct Aviation Service Leader (Chile) S.A. Chile Est. Arturo Alessandri, Amunategui 277, 3F, Indirect Edinburgh EH12 9DJ Santiago John Menzies (GB) Ltd United Kingdom 2 Lochside Avenue, Edinburgh Park, Direct BP Travel Marketing Services Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Edinburgh EH12 9DJ Newall Road, London Heathrow Airport, John Menzies Corporate Services Ltd United Kingdom 2 World Business Centre Heathrow, Direct Hounslow TW6 2SF Newall Road, London Heathrow Airport, Cargo 2000 Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Hounslow TW6 2SF Newall Road, London Heathrow Airport, John Menzies Digital Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Hounslow TW6 2SF Newall Road, London Heathrow Airport, Cargosave Ltd United Kingdom 2 World Business Centre Heathrow, Direct Hounslow TW6 2SF Newall Road, London Heathrow Airport, John Menzies Distribution Ltd United Kingdom 2 World Business Centre Heathrow, Direct Hounslow TW6 2SF Newall Road, London Heathrow Airport, Chester Independent Wholesale United Kingdom 2 World Business Centre Heathrow, Indirect Hounslow TW6 2SF Newsagents Ltd Newall Road, London Heathrow Airport, Hounslow TW6 2SF

138 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 139 FINANCIAL STATEMENTS

LIST OF ALL SUBSIDIARY, JOINT VENTURE AND ASSOCIATE UNDERTAKINGS CONTINUED

Direct or indirect Direct or indirect STRATEGIC REPORT holding (100% unless holding (100% unless Subsidiary undertaking Country of incorporation Registered address otherwise stated) Subsidiary undertaking Country of incorporation Registered address otherwise stated) John Menzies Finance Ltd United Kingdom 2 World Business Centre Heathrow, Direct MCS Trustee Ltd United Kingdom 2 Lochside Avenue, Edinburgh Park, Direct Newall Road, London Heathrow Airport, Edinburgh EH12 9DJ Hounslow TW6 2SF Media on the Move Ltd United Kingdom 2 World Business Centre Heathrow, Indirect John Menzies Holding GmbH Germany Rechtsanwaelte Hoelters & Elsing, Indirect Newall Road, London Heathrow Airport, Immermannstrasse 40, 40210 Dusseldorf Hounslow TW6 2SF John Menzies International Ltd United Kingdom 2 Lochside Avenue, Edinburgh Park, Indirect Menzies Aviation – Portugal – Servicos De Portugal Avenida Antonio Augusto de Aguiar, Indirect Edinburgh EH12 9DJ Carga, Unipessoal, LDA No. 183, R/C Dto., 1050-014 Lisbon John Menzies USA Holdings, Inc. United States 2711 Centerville Road, Suite 400, Direct Menzies Aviation (Africa) Pty Ltd South Africa Unit F4, CTX Business Park, Indirect Wilmington, Delaware 19808 Cape Town International Airport, Cape Town John Menzies USA, Inc. United States 2711 Centerville Road, Suite 400, Direct Menzies Aviation (Asia Pacific) Ltd British Virgin Islands Newhaven Corporate Services (BVI) Limited, Indirect Wilmington, Delaware 19808 3rd Floor, Omar Hodge Building, Wickhams Cay I, PO Box 362, Road Town, Tortola Jones, Yarrell & Co. Ltd United Kingdom 2 World Business Centre Heathrow, Indirect REPORTS GOVERNANCE Newall Road, London Heathrow Airport, Menzies Aviation (Australia) Pty Ltd Australia c/o Norton Rose Fullbright, Level 21, Indirect Hounslow TW6 2SF 111 Eagle Street, Brisbane QLD 4000 Jones Yarrell Leadenhall Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Menzies Aviation (Aviation) B.V. The Netherlands Anchoragelaan 50, Indirect Newall Road, London Heathrow Airport, 1118 LE Luchthaven Schiphol Hounslow TW6 2SF Menzies Aviation (Brasil) Ltda Brazil Avenida Nove de Julho no. 4865, 5 Andar, Indirect Leisure Target Tourism Services Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Conjunto 51, Sala A, Sao Paulo Newall Road, London Heathrow Airport, Menzies Aviation (Canada) Ltd Canada 6500 Silver Dart Drive, Suite 257, Indirect Hounslow TW6 2SF Mississauga, Ontario L5P 1B2 London Cargo Group Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Menzies Aviation (Cargo) B.V. The Netherlands Anchoragelaan 50, Indirect Newall Road, London Heathrow Airport, 1118 LE Luchthaven Schiphol Hounslow TW6 2SF Menzies Aviation (Chengdu) Ltd United Kingdom 2 World Business Centre Heathrow, Indirect London Cargo Handling Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Newall Road, London Heathrow Airport, Hounslow TW6 2SF Hounslow TW6 2SF Menzies Aviation (Czech) s.r.o. Czech Republic K Letisti 1049/57, 161 00 Prague 6 Indirect FINANCIAL STATEMENTS London Cargo Imports Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Menzies Aviation (DEL), Inc. United States 2711 Centerville Road, Suite 400, Indirect Newall Road, London Heathrow Airport, Wilmington, Delaware 19808 Hounslow TW6 2SF Menzies Aviation (Denmark) A/S Denmark Copenhagen Airport, Terminal 2, Indirect Lonsdale Universal Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Lufthavnsboulevarden 6, 2770 Kastrup Newall Road, London Heathrow Airport, Hounslow TW6 2SF Menzies Aviation (Dominicana) Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Lonsdale Universal Trustees Ltd United Kingdom 2 World Business Centre Heathrow, Direct Hounslow TW6 2SF Newall Road, London Heathrow Airport, Hounslow TW6 2SF Menzies Aviation (EMEA) B.V. The Netherlands Luna Arena, Herikerbergweg 238, Indirect 1101 CM Amsterdam Luton Ramp Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Menzies Aviation (EMEA) Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Hounslow TW6 2SF Newall Road, London Heathrow Airport, Hounslow TW6 2SF Luton Services Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Menzies Aviation (FR9) B.V. The Netherlands Anchoragelaan 50, Indirect Hounslow TW6 2SF 1118 LE Luchthaven Schiphol SHAREHOLDER INFORMATION MA Secretaries Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Menzies Aviation (France) SAS France Aeroport Toulouse Blagnac, Hall C, Indirect Newall Road, London Heathrow Airport, 31700 Blagnac Hounslow TW6 2SF Menzies Aviation (Freighter Handling) B.V. The Netherlands Anchoragelaan 50, Indirect MAG Nominees Ltd United Kingdom 2 World Business Centre Heathrow, Indirect 1118 LE Luchthaven Schiphol Newall Road, London Heathrow Airport, Menzies Aviation (Ground Services) Australia c/o Norton Rose Fullbright, Level 21, Indirect Hounslow TW6 2SF Australia Pty Ltd 111 Eagle Street, Brisbane QLD 4000 Magazine Solutions Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Menzies Aviation (Handling) Proprietary Ltd South Africa Unit F4, CTX Business Park, Indirect (65%) Newall Road, London Heathrow Airport, Cape Town International Airport, Cape Town Hounslow TW6 2SF Menzies Aviation (Hungary) Kft Hungary Liszt Ferenc Nemzetkozi Repuloter, Indirect Mancargo Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Repules Oktatasi Kozpont, 17, sz Newall Road, London Heathrow Airport, H-1185 Budapest Hounslow TW6 2SF Menzies Aviation (Ibérica) S.A. Spain Calle Nunez Morgado 6-Bj Dc, 28036 Madrid Indirect Manchester Cargo Centre Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Menzies Aviation (India) Private Ltd India Plot No-C-04 L, Cargo Terminal-1, Indirect Newall Road, London Heathrow Airport, Kempegowda International Airport, Devanahalli, Hounslow TW6 2SF Bangalore 560300 Manchester Handling Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Menzies Aviation (Italy) srl Italy Via Cappuccini 4, 20122 Milan Indirect Newall Road, London Heathrow Airport, Hounslow TW6 2SF Menzies Aviation (LCC) B.V. The Netherlands Anchoragelaan 50, Indirect 1118 LE Luchthaven Schiphol MASCARGO (Macau) Company Ltd Macau Avenida da Praia Grande 665, Indirect Edificio Great Will

140 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 141 FINANCIAL STATEMENTS

LIST OF ALL SUBSIDIARY, JOINT VENTURE AND ASSOCIATE UNDERTAKINGS CONTINUED

Direct or indirect Direct or indirect STRATEGIC REPORT holding (100% unless holding (100% unless Subsidiary undertaking Country of incorporation Registered address otherwise stated) Subsidiary undertaking Country of incorporation Registered address otherwise stated) Menzies Aviation (Lounge) B.V. The Netherlands Anchoragelaan 50, Indirect Menzies Aviation Colombia Holdings S.A.S. Colombia Carrera 7, No 71 – 21 Torre A, Oficina 602, Indirect 1118 LE Luchthaven Schiphol Bogota Menzies Aviation (Luton) Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Menzies Aviation Colombia S.A.S. Colombia Carrera 7, No 71 – 21 Torre A, Oficina 602, Indirect Newall Road, London Heathrow Airport, Bogota Hounslow TW6 2SF Menzies Aviation Contracts (NL) B.V. The Netherlands Anchoragelaan 50, Indirect Menzies Aviation (Mexico) S.A. de C.V. Mexico Plaza Alamos Local 2, SM 311, MZ 26 Lote Indirect 1118 LE Luchthaven Schiphol 03-01 Boulevard Luis Donaldo Colosio Menzies Aviation Corporate Services Ltd United Kingdom 2 World Business Centre Heathrow, Indirect C.P. 77560, Cancun, Quintana Roo Newall Road, London Heathrow Airport, Menzies Aviation (Mumbai) Passenger Ltd Mauritius 5th Floor, Ebene Esplanade, 24 Cybercity, Ebene Indirect Hounslow TW6 2SF Menzies Aviation (Namibia) Proprietary Ltd Namibia Bougain Villas, 78 Sam Mujoma Drive, Windhoek Indirect Menzies Aviation Denmark Lounges A/S Denmark Menzies Aviation, Copenhagen Airport, Indirect Menzies Aviation (New Zealand) Ltd New Zealand George Bolt Memorial Drive, Indirect Petersdalvej 13, 1st, 2770 Kastrup

Auckland Airport, Auckland 2022 Menzies Aviation Finance (USA) LLC United States 2711 Centerville Road, Suite 400, Indirect REPORTS GOVERNANCE Menzies Aviation (NL) Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Wilmington, Delaware 19808 Newall Road, London Heathrow Airport, Menzies Aviation Group (Philippines) B.V. The Netherlands Luna Arena, Herikerbergweg 238, Indirect Hounslow TW6 2SF 1101 CM Amsterdam Menzies Aviation (Oslo) AS Norway Sigrid Undsets plass, Terminalen, Indirect Menzies Aviation Handling Ltd United Kingdom 2 World Business Centre Heathrow, Indirect 2060 Gardermoen, 0235 Ullensaker Newall Road, London Heathrow Airport, Menzies Aviation (Poland) Sp. z o.o. Poland ul. Sienna 72/3, 00-833 Warsaw Indirect Hounslow TW6 2SF Menzies Aviation (Romania) S.A. Romania Henri-Coanda International Airport, Calea Indirect Menzies Aviation Holdings (Asia Pacific) Ltd British Virgin Islands Newhaven Corporate Services (BVI) Limited, Indirect Bucurestilor no 224E, Otopeni City, Ilfov 3rd Floor, Omar Hodge Building, Wickhams Cay I, PO Box 362, Road Town, Tortola Menzies Aviation (Santo Domingo) Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Menzies Aviation Holdings (Australia) Pty Ltd Australia c/o Norton Rose Fullbright, Level 21, Indirect Hounslow TW6 2SF 111 Eagle Street, Brisbane QLD 4000 Menzies Aviation (Schiphol) B.V. The Netherlands Luna Arena, Herikerbergweg 238, Indirect Menzies Aviation Holdings (Brasil) Ltda Brazil Avenida Nove de Julho no. 4865, 5 Andar, Indirect 1101 CM Amsterdam Conjunto 51, Sala A, Sao Paulo

Menzies Aviation (South Africa) (Cargo) South Africa Unit F4, CTX Business Park, Indirect (65%) Menzies Aviation Holdings Ltd United Kingdom 2 World Business Centre Heathrow, Indirect FINANCIAL STATEMENTS Proprietary Ltd Cape Town International Airport, Cape Town Newall Road, London Heathrow Airport, Hounslow TW6 2SF Menzies Aviation (South Africa) (Cleaning) South Africa Unit F4, CTX Business Park, Indirect (65%) Proprietary Ltd Cape Town International Airport, Cape Town Menzies Aviation Holdings (Venezuela) S.A. Venezuela Aeropuerto Internacional Simon Bolivar, Indirect Nivel 1, Sector 1, Maiquetia Menzies Aviation (South Africa) (Pty) Ltd South Africa Unit F4, CTX Business Park, Indirect (65%) Cape Town International Airport, Cape Town Menzies Aviation Hyderabad (Passenger) Ltd Mauritius 5th Floor, Ebene Esplanade, 24 Cybercity, Ebene Indirect Menzies Aviation (Stockholm) AB Sweden Box 197, SE 190-45, Stockholm, Arlanda Indirect Menzies Aviation, Inc. United States 2711 Centerville Road, Suite 400, Indirect Wilmington, Delaware 19808 Menzies Aviation (Support Services) B.V. The Netherlands Anchoragelaan 50, Indirect 1118 LE Luchthaven Schiphol Menzies Aviation International Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Menzies Aviation (Support) B.V. The Netherlands Anchoragelaan 50, Indirect Hounslow TW6 2SF 1118 LE Luchthaven Schiphol Menzies Aviation Jerez UTE Spain Calle Nunez Morgado, 6-Bj Dc, 28036 Madrid Indirect Menzies Aviation (Sverige) AB Sweden Box 197, SE 190-45, Stockholm, Arlanda Indirect Menzies Aviation Leasing (Mexico) S.A. de C.V. Mexico Plaza Alamos Local 2, SM 311, MZ 26 Lote Indirect Menzies Aviation (Sweden) AB Sweden Box 51, 230 32 Malmo, Sturup Indirect 03-01 Boulevard Luis Donaldo Colosio

Menzies Aviation (Texas), Inc. United States 2711 Centerville Road, Suite 400, Indirect C.P. 77560, Cancun, Quintana Roo SHAREHOLDER INFORMATION Wilmington, Delaware 19808 Menzies Aviation Murcia-San Javier UTE Spain Calle Nunez Morgado, 6-Bj Dc, 28036 Madrid Indirect Menzies Aviation (UK) Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Menzies Aviation plc United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Newall Road, London Heathrow Airport, Hounslow TW6 2SF Hounslow TW6 2SF Menzies Aviation (USA), Inc. United States 2711 Centerville Road, Suite 400, Indirect Menzies Aviation Puerto Plata S.A. Dominican Republic 7 and 8 of General Gregorio Luperon, Indirect Wilmington, Delaware 19808 International Airport, Sosua, Puerto Plata Menzies Aviation (Venezuela) S.A. Venezuela Aeropuerto Internacional Simon Bolivar, Indirect Menzies Aviation Services (Asia Pacific) LLC United States 2711 Centerville Road, Suite 400, Indirect Nivel 1, Sector 1, Maiquetia Wilmington, Delaware 19808 Menzies Aviation (Washington), Inc. United States 2711 Centerville Road, Suite 400, Indirect Menzies Aviation Services Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Wilmington, Delaware 19808 Newall Road, London Heathrow Airport, Menzies Aviation (Windhoek Lounge) (Pty) Ltd Namibia Bougain Villas, 78 Sam Mujoma Drive, Windhoek Indirect Hounslow TW6 2SF Menzies Aviation Alicante UTE Spain Calle Nunez Morgado, 6-Bj Dc, 28036 Madrid Indirect Menzies Aviation Services SL Spain Calle Nunez Morgado 6-Bj Dc, 28036 Madrid Indirect Menzies Aviation Almeria UTE Spain Calle Nunez Morgado, 6-Bj Dc, 28036 Madrid Indirect Menzies Aviation Services Venezuela S.A. Venezuela Aeropuerto Internacional Simon Bolivar, Indirect Menzies Aviation Bermuda Ltd Bermuda Thistle House, 4 Burnaby Street, Hamilton HM 11 Indirect Nivel 1, Sector 1, Maiquetia Menzies Aviation Cargo (Bangalore) Ltd Mauritius 5th Floor, Ebene Esplanade, 24 Cybercity, Ebene Indirect Menzies Aviation Spain SL Spain Calle Nunez Morgado, 6-Bj Dc, 28036 Madrid Indirect Menzies Aviation Cargo (Hyderabad) Ltd Mauritius 5th Floor, Ebene Esplanade, 24 Cybercity, Ebene Indirect Menzies Aviation St. Maarten B.V. Sint Maarten P.O. Box 2003, Princess Juliana Airport Indirect Menzies Aviation Cargo (Romania) S.R.L. Romania Henri-Coanda International Airport, Calea Indirect Menzies Aviation Washing Denmark A/S Denmark Menzies Aviation, Copenhagen Airport, Indirect Bucurestilor no 224E, Otopeni City, Ilfov Petersdalvej 13, 1st, 2770 Kastrup

142 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 143 FINANCIAL STATEMENTS

LIST OF ALL SUBSIDIARY, JOINT VENTURE AND ASSOCIATE UNDERTAKINGS CONTINUED

Direct or indirect Direct or indirect STRATEGIC REPORT holding (100% unless holding (100% unless Subsidiary undertaking Country of incorporation Registered address otherwise stated) Subsidiary undertaking Country of incorporation Registered address otherwise stated) Menzies Aviation Washing Oslo AS Norway Sigrid Undsets plass, Terminalen, Indirect Oban Express Parcel Service Ltd United Kingdom 2 Lochside Avenue, Edinburgh Park, Indirect 2060 Gardermoen, 0235 Ullensaker Edinburgh EH12 9DJ Menzies Cargo Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Ogden Aviation Services (Chile) Ltda Chile Est. Arturo Alessandri, Amunategui 277, 3F, Indirect Newall Road, London Heathrow Airport, Santiago Hounslow TW6 2SF Ogden Cargo Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Menzies Cargo Services Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Newall Road, London Heathrow Airport, Hounslow TW6 2SF Hounslow TW6 2SF Orbital Mailing Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Menzies Client Solutions (USA), Inc. United States 2711 Centerville Road, Suite 400, Indirect Newall Road, London Heathrow Airport, Wilmington, Delaware 19808 Hounslow TW6 2SF Menzies Client Solutions Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Orbital Mailing Services Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Newall Road, London Heathrow Airport, GOVERNANCE REPORTS GOVERNANCE Hounslow TW6 2SF Hounslow TW6 2SF Menzies Digital Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Orbital Marketing Services Group Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Newall Road, London Heathrow Airport, Hounslow TW6 2SF Hounslow TW6 2SF Menzies Distribution Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Orbital Print Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Newall Road, London Heathrow Airport, Hounslow TW6 2SF Hounslow TW6 2SF Menzies Express Baggage Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Perth Cargo Centre Pty Ltd Australia c/o Norton Rose Fullbright, Level 21, Indirect Newall Road, London Heathrow Airport, 111 Eagle Street, Brisbane QLD 4000 Hounslow TW6 2SF PlaneBiz 2015 Ltd New Zealand George Bolt Memorial Drive, Indirect (60%) Menzies Group Holdings Ltd United Kingdom 2 World Business Centre Heathrow, Direct Auckland Airport, Auckland 2022 Newall Road, London Heathrow Airport, PMD Healthcare Marketing Services Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Hounslow TW6 2SF Newall Road, London Heathrow Airport, Menzies Marketing Services Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Hounslow TW6 2SF FINANCIAL STATEMENTS Newall Road, London Heathrow Airport, Princes Street (Jersey) Ltd Jersey 47 Esplanade, St Helier JE1 0BD Indirect Hounslow TW6 2SF Project Athena (Jersey) Limited Jersey Elian SPV Corporate Services (Jersey) Limited, Direct Menzies Parcels Ltd United Kingdom 2 Lochside Avenue, Edinburgh Park, Indirect 44 Esplanade, St Helier JE4 9WG Edinburgh EH12 9DJ Reed Aviation Spain SL Spain Calle Nunez Morgado, 6-Bj Dc, 28036 Madrid Indirect Menzies Security Services B.V. The Netherlands Anchoragelaan 50, Indirect Rose Street Nominees Ltd United Kingdom 2 Lochside Avenue, Edinburgh Park, Indirect 1118 LE Luchthaven Schiphol Edinburgh EH12 9DJ Menzies Select Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Simplicity Ground Services, LLC United States 2711 Centerville Road, Suite 400, Indirect Newall Road, London Heathrow Airport, Wilmington, Delaware 19808 Hounslow TW6 2SF Skycare Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Menzies Services, Inc. United States 2711 Centerville Road, Suite 400, Direct Newall Road, London Heathrow Airport, Wilmington, Delaware 19808 Hounslow TW6 2SF Menzies Services Ltd United Kingdom 2 World Business Centre Heathrow, Direct Skyport Handling Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Newall Road, London Heathrow Airport, Hounslow TW6 2SF

Hounslow TW6 2SF SHAREHOLDER INFORMATION Menzies Travel Media Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Skyport Handling Services Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Newall Road, London Heathrow Airport, Hounslow TW6 2SF Hounslow TW6 2SF Menzies Wholesale Ltd United Kingdom 2 Lochside Avenue, Edinburgh Park, Direct Skystar Airport Services NZ Pty Ltd New Zealand George Bolt Memorial Drive, Indirect Edinburgh EH12 9DJ Auckland Airport, Auckland 2022 Menzies World Cargo (Ireland) Ltd Ireland First Floor, Riverside Two, Indirect Skystar Airport Services Pty Ltd Australia c/o Norton Rose Fullbright, Level 21, Indirect 43/49 Sir John Rogerson’s Quay, 111 Eagle Street, Brisbane QLD 4000 Dublin 2 Southampton Airport Cargo Services Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Menzies World Cargo (Rotterdam) B.V. The Netherlands Brandenburghbaan 2b, 3045 AK Rotterdam Indirect Newall Road, London Heathrow Airport, Menzies World Cargo Amsterdam B.V. The Netherlands Anchoragelaan 50, Indirect Hounslow TW6 2SF 1118 LE Luchthaven Schiphol Menzies World Cargo Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Hounslow TW6 2SF Menzies Worldwide Distribution Ltd United Kingdom 2 Lochside Avenue, Edinburgh Park, Direct Edinburgh EH12 9DJ Moose Aviation Services AB Sweden Box 2, 190 45 Stockholm, Arlanda Indirect MPF Trustee Ltd United Kingdom 2 Lochside Avenue, Edinburgh Park, Direct Edinburgh EH12 9DJ

144 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 145 FINANCIAL STATEMENTS

LIST OF ALL SUBSIDIARY, JOINT VENTURE AND ASSOCIATE UNDERTAKINGS CONTINUED

Direct or indirect holding (100% unless Subsidiary undertaking Country of incorporation otherwise stated) Take One Media Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Hounslow TW6 2SF The London Cargo Centre Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Hounslow TW6 2SF Thistle Couriers Ltd United Kingdom 2 Lochside Avenue, Edinburgh Park, Indirect Edinburgh EH12 9DJ The Menzies Group Ltd United Kingdom 2 World Business Centre Heathrow, Direct Newall Road, London Heathrow Airport, Hounslow TW6 2SF The Network (Field Marketing & Promotions) United Kingdom 2 World Business Centre Heathrow, Indirect Company Ltd Newall Road, London Heathrow Airport, Hounslow TW6 2SF Top Attractions Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Hounslow TW6 2SF Wyng Group Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Hounslow TW6 2SF Wyng Roadflight Ltd United Kingdom 2 World Business Centre Heathrow, Indirect Newall Road, London Heathrow Airport, Hounslow TW6 2SF Direct or indirect holding (100% unless Joint venture or associate undertaking Country of incorporation otherwise stated) AMI Asia HK Ltd Hong Kong Room 1403, Causeway Commercial Building, Indirect (50%) 3 Sugar Street, Causeway Bay EM News Distribution (Ireland) Ltd Ireland 80 Middle Abbey Street, Dublin 1 Indirect (50%) EM News Distribution (NI) Ltd United Kingdom 11 Airport Road West, Belfast BT3 9JZ Indirect (50%) Hyderabad Menzies Air Cargo Private Ltd India Air Cargo Terminal, Rajiv Gandhi International Indirect (49%); 100% Airport, Shamshabad, Hyderabad 500409 of preference shares Menzies Aviation Bobba (Bangalore) Private Ltd India Plot No-C-04L, Cargo Terminal-1, Indirect (49%); 100% Kempegowda International Airport, Devanahalli, of preference shares Bangalore 560300 Menzies Bobba Ground Handling Services India H.No.6-3-345/1/2, Flat No. 102, Apurupa Classic, Indirect (51%) Private Ltd Road No. 1, Banjara Hills, Hyderabad 500034 Menzies Macau Airport Services Ltd Macau Avenido de Aeroporto, Edificio Airport Indirect (29%) Logistic Business Centre, 1 andar, sala 52, Taipa Swissport Menzies Handling PMR UTE Spain Avenida Central 25, 28042 Madrid Indirect (19.5%) Worldwide Magazine Distribution Ltd United Kingdom Unit 1 Griffin Business Park, Walmer Way, Indirect (50%) Birmingham B37 7UX Zaankracht Uitzendbureau Schipol B.V. The Netherlands Stationsplein 979, 1117 CE Schiphol Indirect (30%)

146 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 NOTICE OF ANNUAL GENERAL MEETING

This document is important and 3. REMUNERATION POLICY 16. AUTHORITY TO STRATEGIC REPORT requires your immediate attention. To approve the Directors’ Remuneration ALLOT SHARES If you are in any doubt about what Policy as set out in the Annual Report That the directors of the Company action you should take you are and Accounts for the financial year (the “Directors”) be and are hereby recommended to consult your ended 31 December 2016. generally and unconditionally independent financial adviser authorised, pursuant to section 551 4. DIVIDEND authorised under the Financial of the Companies Act 2006 (the To declare a final dividend of 13.1 pence Services and Markets Act 2000 or, if “2006 Act”), to exercise all powers per ordinary share in the Company outside the UK, another appropriately of the Company to allot shares in for the financial year ended authorised financial adviser. If you the Company and to grant rights 31 December 2016. have sold or transferred all of your to subscribe for, or to convert any ordinary shares in John Menzies plc, 5-13. ELECTION AND security into, shares in the Company, RE-ELECTION OF DIRECTORS such rights and shares together being

you should forward this document, REPORTS GOVERNANCE together with accompanying 5. To elect Dermot Smurfit as “relevant securities”: documents, to the purchaser or a director of the Company. (a) otherwise than pursuant to transferee or to the stockbroker, 6. To elect Giles Wilson as a director paragraph (b) below, up to an bank or other agent through whom of the Company. aggregate nominal amount of the sale or transfer was effected, £6,970,709 (such amount to be for transmission to the purchaser 7. To elect Paul Baines as a director reduced by the aggregate nominal or transferee. of the Company. amount of any equity securities (as Notice is hereby given that the Annual 8. To elect John Geddes as a director defined by section 560 of the 2006 General Meeting of John Menzies plc of the Company. Act) allotted under paragraph (b) (the “ ”) will be held in the below in excess of £6,970,709); and Company 9. To re-elect Forsyth Black as Waldorf Astoria Edinburgh – The a director of the Company. (b) comprising equity securities up to

Caledonian, Princes Street, Edinburgh, FINANCIAL STATEMENTS an aggregate nominal amount of EH1 2AB on Friday 12 May 2017 at 10. To re-elect Geoff Eaton as £13,941,418 (such amount to be 2:00pm (the “Meeting”) to transact a director of the Company. reduced by the nominal amount the following business: 11. To re-elect Silla Maizey as a director of any relevant securities allotted ORDINARY RESOLUTIONS of the Company. under paragraph (a) above) in To consider and, if thought fit, pass connection with an offer by way 12. To re-elect Dermot Jenkinson as Resolutions 1-16, each of which will of a rights issue to: (i) holders of a director of the Company. be proposed as an ordinary resolution: ordinary shares in the capital of the 13. To re-elect David Garman as Company in proportion (as nearly 1. REPORT AND ACCOUNTS a director of the Company. as may be practicable) to their To receive the Annual Accounts of the respective holdings; and (ii) holders Company for the financial year ended 14. RE-APPOINTMENT of equity securities in the capital 31 December 2016, the Strategic OF AUDITOR of the Company as required by SHAREHOLDER INFORMATION Report and the Reports of the To re-appoint Ernst & Young LLP as the rights of those securities or as Directors and Auditor thereon. the Company’s auditor to hold office the Directors otherwise consider 2. REMUNERATION REPORT from the conclusion of this Meeting necessary, but subject to such To approve the Report on Directors’ until the conclusion of the next exclusions or other arrangements Remuneration (excluding the general meeting at which Annual as the Directors may deem Directors’ Remuneration Policy) as Accounts are laid before the Company. necessary or expedient to deal set out in the Annual Report and with treasury shares, fractional 15. REMUNERATION OF AUDITOR Accounts for the financial year entitlements, record dates, legal To authorise the directors of the ended 31 December 2016. or practical problems arising under Company to fix the remuneration the laws of any overseas territory or of the Company’s auditor. the requirements of any regulatory body or stock exchange or by virtue of shares being represented by depository receipts or any other matter;

147 SHAREHOLDER INFORMATION

NOTICE OF ANNUAL GENERAL MEETING CONTINUED

and provided that (unless previously (b) of the Section 551 Resolution, previously granted to the Directors (being the higher of the price (b) the maximum price which may 20. LENGTH OF NOTICE STRATEGIC REPORT renewed, varied or revoked) this such power shall be limited to the under sections 570 and 573 of the of the last independent trade be paid for each such Preference OF MEETING authority shall expire at the conclusion allotment of equity securities in 2006 Act but without prejudice to any and the highest current Share under this authority shall That a general meeting of the of the next Annual General Meeting of connection with a rights issue only) allotment of equity securities already independent bid for an Ordinary be the higher of: Company, other than an annual the Company or, if earlier, the close of to: (i) the holders of ordinary shares made or agreed to be made pursuant Share on the trading venues general meeting, may be called business on 30 June 2018 save that in the capital of the Company in to such powers. where the market purchases by (i) an amount equal to 110% of the on not less than fourteen clear the Company shall be entitled to make proportion (as nearly as may be the Company pursuant to the average of the middle market days’ notice. The Board confirms that, in offers or agreements before the expiry practicable) to their respective authority conferred by this quotations for any such accordance with the Pre-Emption By order of the Board of Directors of such authority which would or holdings; and (ii) the holders of Resolution 18 will be carried out), Preference Share as derived Group’s Statement of Principles (“PEG might require relevant securities to equity securities in the capital of and the minimum price which from the London Stock John Geddes Principles”), it does not intend to issue be allotted after such expiry and the the Company as required by the may be paid for any such Exchange Daily Official List Company Secretary shares for cash representing more Directors shall be entitled to allot rights of those securities or as the Ordinary Share is 25p, in each for the five business days 24 March 2017 than 7.5% of the Company’s issued relevant securities pursuant to any Directors otherwise consider case exclusive of the expenses immediately prior to the date ordinary share capital in any rolling REPORTS GOVERNANCE such offer or agreement as if the necessary, but subject to such of purchase (if any) payable by of conclusion of the contract for three year period to those who are not authority conferred hereby had not exclusions or other arrangements the Company; and any such purchase; and existing shareholders without prior expired. This authority is in substitution as the Directors may deem consultation with shareholders. (c) the authority hereby conferred shall (ii) the amount stipulated by Article for and to the exclusion of all necessary or expedient to deal expire (unless previously renewed, 5(1) of the EU Buy-back and unexercised existing authorities with treasury shares, fractional 18. PURCHASE OF OWN varied or revoked) at the conclusion Stabilisation Regulation 2003 previously granted to the Directors entitlements, record dates, legal or ORDINARY SHARES BY of the next Annual General Meeting (being the higher of the price of under the 2006 Act but without practical problems arising under THE COMPANY of the Company or, if earlier, the the last independent trade and prejudice to any allotment of shares the laws of any overseas territory or That the Company be and is hereby close of business on 30 June 2018 the highest current independent or grants of rights already made, the requirements of any regulatory authorised pursuant to section 701 of except in relation to the purchase bid for a Preference Share on the offered or agreed to be made body or stock exchange or by virtue the Companies Act 2006 (the “2006 of Ordinary Shares for which a trading venues where the market pursuant to such authorities. of shares being represented by Act”) to make market purchases contract was concluded before purchases by the Company depository receipts or any other (within the meaning of section 693(4)

SPECIAL RESOLUTIONS the authority expired and which pursuant to the authority FINANCIAL STATEMENTS matter; and of the 2006 Act) of its own ordinary To consider, and if thought fit, pass might or will be executed wholly conferred by this Resolution 19 shares of 25p each (“Ordinary Resolutions 17 – 20, each of which will (b) the allotment pursuant to the or partly after its expiration and will be carried out), and the Shares”), on such terms and in such be proposed as a special resolution: authority granted by paragraph the Company may make such minimum price which may be manner as the directors of the (a) of the Section 551 Resolution a purchase in pursuance of such paid for any such Preference 17. AUTHORITY TO DISAPPLY Company may from time to time (otherwise than pursuant to contract as if the authority hereby Share is £1, in each case PRE-EMPTION RIGHTS determine, provided that: paragraph (a) of this Resolution 17) conferred had not expired. exclusive of the expenses of That, subject to the passing of to any person or persons of equity (a) the maximum number of Ordinary purchase (if any) payable by Resolution 16 in the Notice of Annual securities up to an aggregate Shares hereby authorised to be 19. PURCHASE OF OWN the Company; and General Meeting of the Company nominal amount of £1,045,606, purchased is 8,364,852, PREFERENCE SHARES BY dated 24 March 2017 (the “Section 551 (c) the authority hereby conferred shall representing approximately 5% representing approximately 10% THE COMPANY Resolution”), the directors of the expire (unless previously renewed, of the issued ordinary share capital of the issued ordinary share capital That the Company be and is hereby Company (the “Directors”) be and are varied or revoked) at the conclusion of the Company as at 24 March 2017; of the Company as at 24 March 2017; authorised pursuant to section 701 of hereby empowered pursuant to of the next Annual General Meeting SHAREHOLDER INFORMATION the Companies Act 2006 (the “2006 section 570 and section 573 of the (b) the maximum price which may be of the Company or, if earlier, the and provided that (unless previously Act”) to make market purchases Companies Act 2006 (the “2006 Act”) paid for each such Ordinary Share close of business on 30 June 2018, renewed, varied or revoked) this power (within the meaning of section 693(4) to exercise all powers of the Company under this authority shall be the except in relation to the purchase shall expire at the conclusion of the of the 2006 Act) of its own 9% to allot equity securities (within the higher of: of Preference Shares for which a next Annual General Meeting of the cumulative preference shares meaning of sections 560(1)–(3) of the contract was concluded before Company or, if earlier, at the close of of £1 each (“Preference Shares”), 2006 Act) wholly for cash pursuant to (i) an amount equal to 105% of the the authority expired and which business on 30 June 2018 save that on such terms and in such manner the authority conferred by the Section average of the middle market might or will be executed wholly the Company shall be entitled to make as the directors of the Company 551 Resolution and/or by way of a sale quotations for any such Ordinary or partly after its expiration and offers or agreements before the expiry may from time to time determine, of treasury shares as if section 561(1) of Share as derived from the the Company may make such of such power which would or might provided that: the 2006 Act did not apply to any such London Stock Exchange Daily a purchase in pursuance of such require equity securities to be allotted allotment provided that this power Official List for the five business (a) the maximum number of contract as if the authority hereby after such expiry and the Directors shall be limited to: days immediately prior to the Preference Shares hereby conferred had not expired. shall be entitled to allot equity date of conclusion of the contract authorised to be purchased is (a) the allotment of equity securities securities pursuant to any such offer for any such purchase; and 1,394,587, representing 100% of the in connection with an offer or issue or agreement as if the power conferred issued Preference Share capital of of equity securities (but, in the case hereby had not expired. This power is (ii) the amount stipulated by Article the Company as at 24 March 2017; of an allotment pursuant to the in substitution for and to the exclusion 5(1) of the EU Buy-back and authority granted under paragraph of all unexercised existing powers Stabilisation Regulation 2003

148 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 149 SHAREHOLDER INFORMATION

NOTICE OF ANNUAL GENERAL MEETING CONTINUED

EXPLANATORY NOTES RESOLUTIONS 5–13: ELECTION At the Company’s AGM in May 2016, As at 24 March 2017, the Company RESOLUTIONS 18 AND Any purchase of Ordinary Shares STRATEGIC REPORT The following information provides AND RE-ELECTION OF the Directors were given authority to held 310,338 of its Ordinary Shares 19: AUTHORITY TO would be by means of market additional background information to DIRECTORS allot shares in the capital of the in Treasury. BUY-BACK SHARES purchase through the London several of the proposed Resolutions: Biographical details of the Directors to Company up to an aggregate nominal These special resolutions give the Stock Exchange. Resolution 17 will, if passed, give be elected or re-elected, as is the case, amount of £10,283,856, representing Company authority to make market RESOLUTIONS 2 AND 3: the Directors power, pursuant purchases of its Ordinary Shares and RESOLUTION 20: LENGTH at this year’s AGM can be found on approximately two-thirds of the REMUNERATION REPORT to the authority to allot granted 9% cumulative preference shares (the OF NOTICE OF MEETING pages 44 and 45 of the Annual Report Company’s issued ordinary share AND POLICY under Resolution 16, to allot equity “Preference Shares”) in the market, Before the introduction of the and Accounts 2016. Dermot Smurfit, capital as at 1 April 2016. At a general In accordance with the provisions of securities (as defined in sections as permitted by the 2006 Act. The Companies (Shareholders’ Rights) Giles Wilson, Paul Baines and John meeting of the Company held on 11 the Companies Act 2006 (the “2006 560(1)–(3) of the 2006 Act) or sell authorities set the minimum and Regulations 2009 (the “Regulations”), Geddes, having been appointed as October 2016, the Directors were given Act”), the Company’s Report on treasury shares for cash on a non maximum prices and limit the number the minimum notice period permitted Directors since last year’s AGM, will an additional specific authority to allot Directors’ Remuneration (excluding pre-emptive basis without first of Ordinary Shares that can be by the 2006 Act for general meetings stand for election in accordance with shares in the capital of the Company the Directors’ Remuneration Policy) offering them to existing shareholders purchased to 8,364,852 (representing (other than AGMs) was 14 clear days. the Company’s Articles of Association in connection with a rights issue up to will be put to an annual shareholder of the Company in proportion to their approximately 10% of the issued One of the amendments made to the REPORTS GOVERNANCE and, in accordance with the principles an aggregate nominal amount of Ordinary Shares as at 24 March 2017) vote by ordinary resolution. This vote is existing shareholdings in limited 2006 Act by the Regulations was to of good governance set out in the UK £3,654,567. To the extent not and the number of Preference Shares advisory in nature and is in respect of circumstances. This power will permit increase the minimum notice period for Corporate Governance Code, all other previously utilised, these authorities to 1,394,587 (representing 100% of the overall remuneration package the Directors to allot equity securities: general meetings of listed companies Directors who will continue following are due to expire at the end of this the issued Preference Shares as at which is in place for directors of the to 21 days, but with the ability for the AGM will seek re-election. year’s AGM. (a) in relation to a pre-emptive rights 24 March 2017). Company (the “Directors”) – it is companies to reduce this period back issue only, up to a maximum not specific to individual levels of In proposing the election or It is considered appropriate that the The authorities, if granted, will expire to 14 days (other than for AGMs) nominal amount of £13,941,418 remuneration nor is the entitlement of re-election, as is the case, of the Directors again be granted authority at the conclusion of the next AGM provided that two conditions are met. (representing approximately of the Company or, if earlier, the close a Director to remuneration conditional Directors, the Chairman has to allot shares in the capital of the The first condition is that a company two-thirds of the issued ordinary of business on 30 June 2018. The on the vote being passed. confirmed that, following rigorous Company up to a maximum nominal offers a facility for shareholders to vote share capital of the Company as Directors have no present intention internal performance evaluations amount of £13,941,418, which amount by electronic means. This condition is The Directors’ Remuneration Policy at 24 March 2017); and of exercising the authority to purchase (described on pages 49 and 50 of the represents approximately two-thirds met if a company offers a facility, is, however, subject to a binding the Preference Shares but will keep

Annual Report and Accounts 2016), of the Company’s issued ordinary (b) in any other case, up to a maximum accessible to all shareholders, to FINANCIAL STATEMENTS shareholder vote by ordinary resolution the matter under review, taking into each individual continues to make an share capital as at 24 March 2017 and nominal value of £1,045,606, appoint a proxy by means of a website. at least every three years. As this was account the financial resources of the effective and valuable contribution thus complies with the IMA Guidelines representing approximately 5% of The second condition is that there is last approved at the Company’s annual Company, the Company’s share price to the Board and demonstrates and PEG Principles. Accordingly, the issued ordinary share capital of and future funding opportunities. The an annual resolution of shareholders general meeting (“AGM”) in May 2014, commitment to their role. 27,882,836 ordinary shares of the Company as at 24 March 2017 authority would only be exercised if the approving the reduction of the the Company is seeking shareholder £0.25 each (the “Ordinary Shares”), (the latest practicable date prior to Directors believed that to do so would minimum notice period from 21 clear approval in respect of the proposed RESOLUTIONS 16 AND 17: representing approximately one-third publication of this Notice of AGM), result in an increase in earnings per days to 14 clear days. The Directors new Directors’ Remuneration Policy, AUTHORITY TO ALLOT of the Company’s issued ordinary otherwise than in connection with share and would be in the interests of have confirmed that they will only use which sets out the Company’s SHARES AND DISAPPLY share capital, may be allotted pursuant an offer to existing shareholders of the Company’s shareholders generally. the shorter notice period in limited forward-looking policy on Directors’ PRE-EMPTION RIGHTS to a fully pre-emptive rights issue. the Company. circumstances where the proposal remuneration, at the forthcoming AGM. The Investment Management As at 24 March 2017, the Company held 310,338 Ordinary Shares in Treasury. in question is time-sensitive and Further details of the proposed new Association’s Share Capital The authority sought by Resolution 16 The Directors have no present The Company may make purchases the short notice would clearly be to Directors’ Remuneration Policy are set Management Guidelines (the “IMA will last until the conclusion of the next intention of exercising this power. of its Ordinary Shares, taking into the advantage of the Company’s out on pages 60 to 68 of the Annual Guidelines”) and the PEG Principles AGM of the Company or, if earlier, the SHAREHOLDER INFORMATION Were the Board to exercise this power, account the financial resources of the shareholders as a whole. Report and Accounts 2016. If approved permit, and regard as routine, an close of business on 30 June 2018. The it confirms that it will make disclosures Company, the Company’s share price by shareholders, it will take immediate authority to allot up to two-thirds of Directors have no present intention of Resolution 20 is therefore proposed as in the announcement regarding the and future funding opportunities. binding effect and, as is currently the a company’s existing issued share exercising this authority, although a special resolution which would be issue, and in the subsequent annual No voting rights attach to Ordinary case, the Company will be unable to capital. They provide that any amount they have confirmed that should the effective until the Company’s next report, such as those contemplated Shares whilst held in Treasury nor make a remuneration payment to a in excess of one-third of a company’s power authorised in Resolution 16 be AGM when it would be intended to in the Pre-Emption Group Guidance are dividends payable on them. The current or prospective Director or a issued share capital should only utilised then all Directors would stand authority sought under Resolution 18 propose that the approval be renewed. issued in May 2016. The power, if payment for loss of office to a current be applied to fully pre-emptive for re-election at the next AGM (as will only be exercised if the Directors granted, will expire at the conclusion or past Director, unless such payment rights issues. they currently do in accordance with believe that to do so would result in of the next AGM of the Company or, is consistent with the Policy or has the principles of good governance). an increase in earnings per share if earlier, the close of business on been approved by a resolution of the and would be in the interests of the 30 June 2018. Company’s shareholders. Company’s shareholders generally.

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NOTICE OF ANNUAL GENERAL MEETING CONTINUED

RECOMMENDATION 5. If you appoint a proxy, this will not Company and, therefore, the total It is the responsibility of the CREST annual accounts and reports were STRATEGIC REPORT The Directors consider that all these prevent you attending the AGM and number of voting rights in the member concerned to take (or, if laid in accordance with section 437 Resolutions are in the best interests of voting in person if you wish to do so. Company as at 24 March 2017 the CREST member is a CREST of the 2006 Act. The Company the Company and its shareholders as is 83,338,190. personal member or sponsored may not require the shareholder 6. The right to vote at the AGM is a whole and are most likely to promote member or has appointed a voting requesting any such website determined by reference to the 11. CREST members who wish to the success of the Company. service provider(s), to procure that publication to pay its expenses Company’s Register of Members appoint a proxy or proxies by utilising Accordingly, they unanimously their CREST sponsor or voting in complying with sections 527 as at the close of business on the CREST electronic proxy recommend that you vote in favour service provider(s) take(s)) such or 528 of the 2006 Act. Where the Wednesday 10 May 2017 or, if the appointment service may do so for of all the proposed Resolutions. action as shall be necessary Company is required to place AGM is adjourned, at 5:00pm on the AGM and any adjournment(s) to ensure that a message is a statement on a website under NOTES TO THE NOTICE OF AGM the day two days prior to the thereof by utilising the procedures transmitted by means of the section 527 of the 2006 Act, it must 1. Information about the AGM is adjourned meeting. Changes to described in the CREST Manual. CREST system by any particular forward the statement to the available from the Company’s entries on the Register of Members CREST personal members or other time. In this connection, CREST Company’s auditor not later than website: www.johnmenziesplc.com. after that time shall be disregarded CREST sponsored members, and REPORTS GOVERNANCE members and, where applicable, the time when it makes the in determining the rights of any those CREST members who have 2. As a shareholder, you are entitled their CREST sponsors or voting statement available on the website. shareholder to attend and vote at appointed a voting service to appoint one or more proxies to service providers are referred, The business which may be dealt the AGM. provider(s), should refer to their exercise all or any of your rights to in particular, to those sections of with at the AGM includes any CREST sponsor or voting service attend, speak and vote at the AGM. 7. As a shareholder, you have the right the CREST Manual concerning statement that the Company has provider(s), who will be able to take A proxy need not be a shareholder to put questions at the AGM relating practical limitations of the CREST been required to publish on a the appropriate action on their behalf. of the Company. You may appoint to the business being dealt with at system and timings. website under section 527 of the more than one proxy provided each the AGM. 12. In order for a proxy appointment 2006 Act. 14. The Company may treat as proxy is appointed to exercise rights made by means of CREST to be 8. Any person to whom this notice is invalid a CREST Proxy Instruction 17. You may not use any electronic attached to different shares. valid, the appropriate CREST sent who is a person nominated in the circumstances set out address provided either in this You may not appoint more than message (a “CREST Proxy under section 146 of the 2006 Act in Regulation 35(5)(a) of the Notice of AGM or any related one proxy to exercise the rights Instruction”) must be properly

to enjoy information rights (a Uncertificated Securities documents to communicate with FINANCIAL STATEMENTS attached to any one share. authenticated in accordance with “Nominated Person”) may, under Regulations 2001. the Company for any purpose other Euroclear UK & Ireland Limited’s 3. A Form of Proxy is enclosed. To be an agreement between them and than as expressly stated. specifications and must contain 15. Under section 338 of the 2006 Act, valid, your Form of Proxy and any the shareholder by whom they were the information required for such shareholders may require the DOCUMENTS power of attorney or other authority, nominated, have a right to be instructions, as described in the Company to give, to shareholders of The following documents will be if any, under which it is signed or a appointed (or to have someone else CREST Manual. The message must the Company entitled to receive this available for inspection during usual notarially certified copy of that power appointed) as a proxy for the AGM. be transmitted so as to be received Notice of AGM, notice of a resolution business hours on any day (except of attorney or authority should be If a Nominated Person has no such by the issuer’s agent (ID 3RA50) so which may properly be moved and is Saturday, Sunday and Bank Holidays) sent to Computershare Investor proxy appointment right or does as to arrive no later than 48 hours intended to be moved at the AGM. from the date of sending this Notice Services (“Computershare”) at The not wish to exercise it, they may, before the commencement of the Under section 338A of the 2006 Act, of AGM up to and including the date Pavilions, Bridgwater Road, Bristol under any such agreement, have AGM or any adjourned meeting. shareholders may request the of the AGM at the registered office of BS99 6ZY so as to arrive no later than a right to give instructions to the For this purpose, the time of receipt Company to include in the business the Company and at the offices of the 48 hours before the commencement shareholder as to the exercise will be taken to be the time (as to be dealt with at the AGM any Company’s solicitors, Maclay Murray SHAREHOLDER INFORMATION of the AGM. No amendments to, or of voting rights. determined by the timestamp matter (other than a proposed & Spens LLP, at One London Wall, submission or withdrawal of, any 9. The statement of the rights of applied to the shareholder resolution) which may properly London EC2Y 5AB: Form of Proxy shall be effective if shareholders in relation to the information message by the CREST be included in the business. lodged with Computershare less (a) copies of the Directors’ service appointment of proxies in Notes 2, Applications Host) from which the than 48 hours before the time 16. It is possible that, pursuant to contracts with the Company; and 3 and 4 above does not apply to issuer’s agent is able to retrieve the appointed for the holding of the requests made by shareholders of Nominated Persons. The rights message by enquiry to CREST in (b) the terms of appointment of the AGM or any adjourned meeting. the Company under section 527 of described in these paragraphs can the manner prescribed by CREST. Non-Executive Directors of the 2006 Act, the Company may be 4. It is possible for you to submit only be exercised by shareholders the Company. 13. CREST members and, where required to publish on a website a your proxy votes online. Further of the Company. applicable, their CREST sponsors statement setting out any matter information on this service can be On the date of the AGM, these 10. As at 24 March 2017, the issued or voting service providers should relating to: (i) the audit of the found on your Form of Proxy or, documents will be available for ordinary share capital of the note that Euroclear UK & Ireland Company’s accounts (including the if you receive communications inspection at the venue of the AGM Company comprised 83,648,528 Limited does not make available auditor’s report and the conduct of electronically, voting information from 12 noon until the conclusion Ordinary Shares and the Company special procedures in CREST for the audit) that are to be laid before will be contained within your of the AGM. held 310,338 of these Ordinary any particular messages. Normal the AGM: or (ii) any circumstances email broadcast. Shares in Treasury. Each Ordinary system timings and limitations will connected with an auditor of the Share carries the right to one vote therefore apply in relation to the Company ceasing to hold office at a general meeting of the input of CREST Proxy Instructions. since the previous meeting at which

152 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016 153 SHAREHOLDER INFORMATION

GENERAL INFORMATION

INTERNET Write: CHARGES PAYMENT OF DIVIDENDS PRINCIPAL ADVISERS STRATEGIC REPORT The Company operates a The John Menzies plc Registrar, Commission for the above share It is in the interests of both the AUDITOR website which can be found at Computershare Investor Services dealing service will be at a rate of 1% Company and its shareholders for Ernst & Young LLP www. johnmenziesplc.com. This site is PLC, The Pavilions, Bridgwater Road, and will be subject to a minimum fee of dividends to be paid directly into bank G1, 5 George Square regularly updated to provide you with Bristol BS99 6ZZ £25. Additionally, UK share purchases or building society accounts. Any Glasgow G2 1DY information about the Company and will be subject to a 0.5% stamp duty shareholder who wishes to receive Computershare should be notified CORPORATE ADVISERS its Operating Divisions. In particular, charge whilst a levy of £1.00 will be dividends in this way should contact promptly in writing of any change Numis Securities Limited all of the Company’s press releases imposed by the Panel for Takeovers Computershare to obtain a dividend in a shareholder’s address. The London Stock Exchange Building and announcements can be found and Mergers for single trades in mandate form. Computershare’s online Investor 10 Paternoster Row on this site together with copies of excess of £10,000. Centre also enables you to view your 9 % CUMUL ATI V E London EC4M 7LT its Annual Reports and Accounts. shareholding and update your address SETTLEMENT PREFERENCE SHARES JOINT BROKERS JOHN MENZIES INVESTOR and payment instructions online. You You will be required to pay for any Dividends will be paid on 1 April 2017 Shore Capital Stockbrokers Limited RELATIONS APP can register at www.investorcentre. shares purchased by debit card at and 2 October 2017. REPORTS GOVERNANCE Bond Street House The Company has an Investor co.uk. In order to register, you will the time of the transaction. You must ORDINARY SHARES 14 Clifford Street Relations App for iPhone and iPad need your SRN which you can therefore ensure that you have A final dividend of 13.1p per Ordinary London W1S 4JU users. The App provides users with find on your share certificate sufficient cleared funds available Share was proposed by the Directors the Company’s latest share price, or dividend confirmation. in your debit card account to pay PRINCIPAL BUSINESS ADDRESSES on 8 March 2017 and, subject to regulatory and business news, for the shares in full. JOHN MENZIES PLC SHARE PRICE shareholder approval, will be paid annual/interim reports and 2 Lochside Avenue The current price of the Company’s SHAREGIFT on 3 July 2017 to shareholders on the presentations. The App can be Edinburgh Park ordinary shares of £0.25 each (the If you have only a small number of Company’s Register of Members as downloaded via the Company’s Edinburgh EH12 9DJ “Ordinary Shares”) can be viewed shares which would cost more for you at close of business on 26 May 2017. website or by visiting your App store. Telephone: +44 (0) 131 225 8555 on the Company’s website at to sell than they are worth, you may Any interim dividends for the financial Email: [email protected] SHARE REGISTER AND www.johnmenziesplc.com. wish to consider donating them to the year ended 31 December 2017 will SHAREHOLDER ENQUIRIES charity ShareGift (Registered Charity MENZIES DISTRIBUTION

TELEPHONE SHARE be paid on 17 November 2017 to FINANCIAL STATEMENTS Any enquiry concerning your No. 1052686) which specialises in 2 Lochside Avenue DEALING SERVICE shareholders on the Company’s shareholding should be directed accepting such shares as donations. Edinburgh Park A share dealing service has been Register of Members as at close of to the Company’s Registrar, There are no implications for UK Edinburgh EH12 9DJ arranged with Stocktrade which business on 20 October 2017. Computershare Investor Services PLC Capital Gains Tax purposes (no gain or Telephone: +44 (0) 131 467 8070 provides a simple way of buying (“Computershare”), and should clearly loss) on gifts of shares to charity and it INVESTOR RELATIONS or selling shares in the Company. MENZIES AVIATION state your name, address and is also possible to obtain income tax For any Investor Relations enquiries, To use this service you should call 2 World Business Centre Heathrow Shareholder Reference Number relief. If you wish to do this the details please contact us by one of the the following telephone number and Newall Road (“SRN”). The contact details are are as follows: following means: quote reference “John Menzies plc London Heathrow Airport as follows: dial and deal”: Telephone: Telephone: Hounslow TW6 2SF Telephone: +44 (0) 20 7930 3737 +44 (0) 131 225 8555 Telephone: +44 (0) 20 8750 6000 Telephone: +44 (0) 370 703 6303 +44 (0) 131 240 0414 Web: Web:

Web: www.sharegift.org www.johnmenziesplc.com SHAREHOLDER INFORMATION www.investorcentre.co.uk Email: Email: Email: [email protected] [email protected] www.investorcentre.co.uk/contactus Write: John Menzies plc, 2 Lochside Avenue, Edinburgh Park, Edinburgh EH12 9DJ, ANALYSIS OF SHAREHOLDINGS marked for the attention of at 31 December 2016 Emma Wadsworth

Total number of Percentage of Shareholding Number of Percentage of Ordinary Shares Ordinary Shares (Ordinary Shares) shareholders shareholders held held 1-1,000 2,962 80.25 682,608 0.82 1,001-5,000 464 12.57 946,504 1.13 5,001-10,000 67 1.82 476,571 0.57 10,001-100,000 117 3.17 4,117,191 4.92 Over 100,000 81 2.19 77,414,021 92.56 Total 3,691 100 83,636,895 100.00

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GENERAL INFORMATION CONTINUED

CORPORATE CALENDAR (PROVISIONAL DATES) 8 March 2017 Preliminary announcement of Annual Results 28 March 2017 Annual Report and Accounts and Notice of AGM released 1 April 2017 Payment of dividend on Preference Shares 12 May 2017 AGM 26 May 2017 Record date for final dividend on Ordinary Shares 3 July 2017 Payment of final dividend on Ordinary Shares 15 August 2017 Announcement of Interim Results 2 October 2017 Payment of dividend on Preference Shares 20 October 2017 Record date for interim dividend on Ordinary Shares 17 November 2017 Payment of interim dividend on Ordinary Shares

156 JOHN MENZIES PLC – ANNUAL REPORT AND ACCOUNTS 2016