React. Reset. Rebuild. John Menzies plc Annual Report and Accounts 2020 Strategic Report INTRODUCTION FROM OUR CHAIRMAN & CEO IN THIS REPORT Welcome to our Annual Report Our purpose React. and Accounts 2020. Read more on page 4 Read more on pages 6 and 7 During what continues to be an unprecedented period for the aviation industry, I am pleased to be able to introduce our year in review. In acknowledgement of this and the impacts experienced from COVID-19, we have shared details and stories relating to the Group’s initial response to protect our business and People, Reset. Rebuild. how we reset our business practices Read more on pages 8 and 9 Read more on pages 10 and 11 and focus, and how we are building back even better for the future. We look forward to 2021, proud of how far we’ve come since 1833. Philipp Joeinig Chairman & CEO 9 March 2021 STRATEGIC REPORT 1-71 GOVERNANCE REPORTS 72-130 FINANCIAL STATEMENTS 131-216 FINANCIAL HIGHLIGHTS Highlights 1 Chairman and Chief Exectutive Officer’s Independent Auditor’s Report 131 • Revenue down 37% in constant currency, with decrease in flight activity Introduction to Corporate Governance 72 leading to a 49% year on year reduction in flight volumes in ground handling Who We Are and What We Do 2 Consolidated Income Statement 143 and fuel services. Our Board of Directors 76 Our Purpose 4 Consolidated Statement • Air cargo services more resilient and cargo forwarding business delivered Corporate Governance Statement 78 of Comprehensive Income 144 How We Responded to COVID-19 6 a record performance, boosted by strong yields. View more online Nomination Committee Report 89 Consolidated Balance Sheet 145 Chairman and Chief Executive • Revenue impact partly mitigated by significant cost management and global Our investor site gives Officer’s Statement 12 Audit Committee Report 95 Consolidated Statement government support schemes, limiting the underlying operating loss to £18.5m you direct access to of Changes in Equity 146 before exceptional costs. Market Review 16 Human Resources Committee Report 100 further information Consolidated Statement • Exceptional costs of £70.2m primarily reflect costs of reshaping the cost base, about John Menzies plc: Business Model 18 Remuneration Committee Report 103 of Cash Flows 147 one off costs associated with refinancing, asset write downs and the resolution https://menziesaviation. Our Strategy 20 Strategic Committee Report 122 Notes to the Consolidated of historical claims. Financial Statements 148 com/investor-centre/ Key Performance Indicators 21 Directors’ Report 124 • Underlying operating cash flow, ahead of expectations, resulted in year end Company Financial Statements 194 net borrowings of £355.9m, with undrawn banking facilities and available cash Business Review 22 Statement of Directors’ Responsibilities 130 of £141.8m. Five Year Summary 201 Chief Financial Officer’s Review 32 Subsidiary, Joint Venture OPERATIONAL HIGHLIGHTS Risk Management 36 and Associate Undertakings 202 • Commenced operations in Baghdad. Responsible Business and Sustainability 46 • Acquisition of Royal Airport Services completed in January 2021, delivering Section 172 Statement 64 SHAREHOLDER ground and air cargo services at eight locations across Pakistan. INFORMATION 217-228 • Five year contract signed with Wizz Air at their main hub in Budapest. Notice of Annual General Meeting 217 • Significant air cargo contracts with Qatar Airways at seven locations on three continents. General Information 225 • Outsourcing gains from Qantas across Australia. John Menzies plc Annual Report and Accounts 2020 1 Strategic Report WHO WE ARE WHAT WE DO Menzies Aviation is a leading global provider of landside We operate in a range of markets that serve the and airside services operating in 198 airports in 34 needs of the growing Aviation Services sector. countries, across 6 continents. Best in class safety and Our core products are: security is the number one priority each and every day. Menzies Aviation manages its operating locations in three regional segments: Americas, EMEA and Rest of World. Ground services Air cargo services OPERATING LOCATION REVENUE BY REGIONAL SEGMENT We provide frontline airport services, both above Air cargo travels the world every day either and below wing, ensuring passengers and aircraft in dedicated freighter aircraft or in the holds of Americas EMEA Rest of World complete journeys efficiently and on schedule. passenger aircraft. We provide an important role in this vital part of global logistics. We support Our services include welcoming and serving our airline customers with reliable, safe, secure 45% 41% 14% passengers at check-in and baggage drops, and timely handling of their cargo. These sorting, loading and unloading baggage, ramp shipments tend to be high value and/or time handling services, de-icing aircraft in icy conditions, critical. Our role includes receiving cargo, security NUMBER OF STATIONS BY REGIONAL SEGMENT cleaning cabins ready for the next flight, providing screening, storing and readying it for onward premium experiences for travellers via executive transit. We also wholesale air cargo capacity. Americas EMEA Rest of World lounges, VIP meet-and-greet services, and more. Read more page 19 Every passenger journey can have multiple seen 108 65 25 and unseen interactions with Menzies and we always do our best to deliver safe and trusted service and a world-class passenger experience for every customer, every time. Read more page 18 Fuelling services We provide into-plane fuelling services and fuel farm management to airlines, airports, oil companies and other partners across the world. Managing the refuelling of aircraft and the TOP 10 CUSTOMERS BY REVENUE infrastructure required to support this service, is a precision activity which must operate to exacting government and industry standards, including safety and environmental regulations. Air China Frontier Airlines Air France-KLM IAG Read more page 19 American Airlines Qatar Airways Cathay Pacific Southwest easyJet United Airlines 2 John Menzies plc Annual Report and Accounts 2020 John Menzies plc Annual Report and Accounts 2020 3 Strategic Report OUR PURPOSE Our purpose is to provide safe and trusted aviation services and flexible solutions, serving the needs of our customers now and for the future. Our purpose is underpinned by our vision, ethos, values and strategy, which together help us achieve our goals and deliver value for all our stakeholders. OUR VISION OUR ETHOS OUR CORE VALUES Our vision is to make Menzies • People Each core value reflects a key Aviation the handling provider • Passion ingredient for making Menzies of choice wherever we operate • Pride a great business. Helping us by always being solutions oriented • Since 1833 create and maintain an ethical and working with our customers and inclusive culture, guide our to deliver their goals safely People are at the heart of the decisions and actions and deliver and securely. company. We are passionate about the best for our customers. providing great customer service and we take pride when a job is We put SAFETY and done well. Our heritage is part of SECURITY first who we are. We are one Menzies TEAM – everyone matters We are AGILE AND RESPONSIVE We DO THE RIGHT , always Read more about people, culture and approach THING to sustainability on pages 46 to 63 We deliver for our CUSTOMERS Read more about our stakeholders on page 19 Read more about our strategy on page 20 4 John Menzies plc Annual Report and Accounts 2020 John Menzies plc Annual Report and Accounts 2020 5 Strategic Report HOW WE RESPONDED TO COVID-19 Our initial response to the COVID-19 crisis React. Team leader ensuring accurate load The first signs of the impact of COVID-19 were reconciliation seen by our team in Macau when flights from mainland China stopped in January. This was swiftly followed by widespread border closures Supporting repatriation flights Supporting communities Special cargo In April, our team in Sydney In March some members of our In April, the Menzies team in and national lockdowns in Europe in February welcomed the longest flight Oslo team swapped their Menzies St. Maarten handled four special ever made by Austrian Airlines. uniforms for the Norwegian Home flights bringing mobile medical and around the world in March. The record-breaking flight returned Guard uniform and supported the units sent from the Netherlands to to Austria with 280 nationals who rescue and repatriation operation help St. Maarten and St. Eustatius. had been stranded due to the at Oslo airport. COVID-19 outbreak. The eight units, known as Whilst some airports closed completely, others including temporary leave and government hospitainers, come fully equipped maintained an essential skeleton service which saw funded furlough schemes. The majority of our with intensive care beds and were our colleagues assisting with a variety of services office based employees moved to working from sent by the Dutch Ministry of including repatriation flights and emergency cargo home supported by our recent investment in Health, Welfare and Sport to of personal protective equipment and medical Microsoft Teams. supplement the capacity of the personnel. Such was the demand for cargo space, Caribbean islands. our teams had to devise new ways to unload cargo In this initial period, non-essential capital packed in passenger seats. expenditure and discretionary spend was halted and all unnecessary ground service equipment We reacted quickly to reduce the number of was tracked