Directors' Responsibilities and Internal Control

The directors are responsible for the Group's system of internal control, which covers financial, operational and compliance controls together with risk management. Whilst no system can provide absolute guarantee and protection against material loss, the system is designed to give the directors reasonable assurance that problems can be identified promptly and remedial action taken as appropriate. The directors, through the board's review of risk and the work of the audit Committee, have reviewed the effectiveness of the system of internal control for the accounting period under review and consider that it accords with revised guidance. There were no material weaknesses in the Group's system of internal control relating to financial control during the year. The key features of the Group's internal control system are:

Control Environment

A key factor in the Group’s approach to internal control is the recognition of the need for risk awareness and the ownership of risk management by executives at all levels. Each operating division has its own Board. A Statement of Group Policies and Procedures sets out the responsibilities of these Divisional Boards, including authority levels, reporting disciplines and responsibility for risk management and internal control. Certain activities, including treasury, taxation, insurance, pension and legal matters are controlled centrally with reports reviewed by the Board as appropriate.

Risk Identification and Review

Key identified risks, both financial and non financial (the latter including environmental, social and governance “ESG” risks), are reviewed by the Board as well as at Operating Board level on an ongoing basis, with a formal annual review of risks and controls taking place, supported by the Group’s Controls Assurance provider.

The Divisional Operating Boards also review each division’s performance, strategy and risk management. Annual compliance statements on internal control are certified by each Divisional Board. A Treasury Review Committee meets regularly to review the adequacy of the Group’s facilities against potential utilisation and commitments, as well as to monitor and manage the Group’s exposure to interest rate and currency movements.

Financial Reporting

There is a comprehensive Group-wide system of financial reporting. Figures reported include profit, cash flows, capital expenditure, balance sheet and relevant performance indicators. Each operating division prepares an annual budget which is approved by the Board. Thereafter a formal re-forecasting exercise is undertaken at least twice during the year. Actual monthly results are monitored against budget, forecasts and the previous year’s results. Any significant variances are investigated and acted upon as appropriate.

Investment Appraisal

There are clearly defined investment guidelines for capital expenditure. All such expenditure is subject to formal authorisation procedures, with major proposals being considered by the Board. Post investment appraisals are conducted for all material capital projects.

Fraud, Corruption and Bribery

John Menzies plc operates on a global scale, and it is essential that the company’s policies regarding fraud and corruption are not only completely understood by employees, but actively ensures that procedures are in place to minimise the risk of them occurring.

John Menzies plc:

Prohibits giving and receiving bribes
Commits to obeying all relevant laws
Commits to restricting and controls facilitation payments
Commits to restricting giving and receiving gifts

Each division is responsible for ensuring that procedures are in place and that these principles are communicated to all employees.

Giving and receiving gifts is normal practice in many business cultures where we operate. The Group recognizes that offering and receiving gifts may also be appropriate to mark high level meetings and key business milestones and that entertaining or being entertained by contacts in partner companies, suppliers and contractors can be part of forming good business relationships, particularly in some local cultures. However, care must be taken to ensure that the gift and/or hospitality could not be construed as an improper inducement, or be seen as an attempt improperly to affect the outcome of a decision by the person to whom the offer is being made.

Each division has policies and procedures in place referring to gifts and hospitality, legal and risk management, including fraud and corruption.

The annual formal internal audit investigates whether there have been any instances of fraud, corruption or bribery. These are sent to the Group’s Audit Committee as part of their overall audit report. Any instances which are picked up are advised immediately to the appropriate Divisional Managing Director to investigate further and act appropriately.

All employees will be made aware of the Group whistleblowing policy, and provided with details of how they can bring to the company’s attention any cases of corruption, bribery, fraud, employee welfare abuse or any other matter that is in breach with the Company's ethical business policies contained in the Groups Corporate Guidelines that they become aware of.

Menzies Aviation operates in a diversified, global environment, and as such is seen as at a higher risk of fraud or corruption occurring. To prevent against this, and actively promote good governance, in the Spring of 2008 a tour by Menzies Aviations’ Secretariat was undertaken of sites in Africa, India, Australia, New Zealand and East Asia. Senior staff at each location received a presentation on Corporate Governance, including:

Examples of good and bad governance
Company risk through failed governance
Reporting Procedures, authorities and restrictions
Analysis of the divisional Governance Manual
Risk to the business and individual with breaching the principles of the Divisional Governance Manual

A Competition Law “Do’s and Don’ts” has also been circulated in 2008 to senior location managers, who are empowered to ensure that their staff are all aware of their individual responsibilities.

Menzies Distribution