RNS Number:5427D
Johnson Service Group PLC
10 September 2007
10 September 2007
Johnson Service Group PLC
Interim Statement 2007
Johnson Service Group PLC, the textile related services and facilities
management group announces its interim results for the half year ended 30th June
2007.
Results Summary
* Main business streams' adjusted operating profit* up 10% to #15.8 million
* Exceptional losses of #17.9 million include #15.9 million write-off of Group
ERP system
* Adjusted profit before tax* of #7.0 million (2006: #11.6 million)
* Interim dividend of 3.0p (2006: 4.6p).
Financial Summary (Continuing Operations)
2007 2006
Revenue #197.7m #196.9m
Revenue (excluding costs recharged to customers) #175.3m #171.2m
Reported Operating (Loss)/Profit (#8.6m) #20.4m
Adjusted Operating Profit* #12.2m #16.3m
Reported (Loss)/Profit Before Tax (#13.8m) #15.7m
Adjusted Profit Before Tax* #7.0m #11.6m
Interim dividend 3.0p 4.6p
* (before intangibles amortisation (excluding software) and exceptional items)
"Since Charles Skinner's appointment as Chief Executive in April 2007, he has
started the process of restructuring the Group and executing his strategy for
establishing Johnson Service Group as a leading provider of business services.
Our core businesses have continued to trade robustly and represent an excellent
foundation on which to build. While the next few months will involve further
reorganisation, I am confident that the Group will emerge well-placed to show
profitable growth in 2008 and beyond."
Simon Sherrard, Chairman
For further information, please contact:
Johnson Service Group PLC Hudson Sandler
Charles Skinner, Chief Executive Michael Sandler
Yvonne Monaghan, Finance Director Sandrine Gallien
Tel: 020 7290 0383 on 10th September only; Tel: 020 7796 4133
07966 234 075 thereafter
Website: www.johnsonplc.com
Chairman's Statement
This is the first set of reported figures since Charles Skinner was appointed
Chief Executive in April 2007. He has started a process of restructuring your
Company and executing his strategy for establishing Johnson Service Group as a
leading provider of business services.
The Group will continue to focus on providing services to British businesses,
particularly larger companies. We have strong market positions in three sectors:
workwear rental, uniform supply and property management services and our core
strategy will be to build on these businesses.
Our business-to-consumer activity, Johnson Cleaners (including Jeeves of
Belgravia), is the market leading drycleaning business in the UK. Partly as a
result of its ability to adapt more effectively to more stringent environmental
controls than its smaller rivals, it has an exciting future. Despite its
non-core status, your Company is well-placed to nurture Johnson Cleaners'
development over the next few years and we expect a strong improvement in
profitability.
We are firmly committed to a decentralised operating strategy with the operating
companies being given power and responsibility to run their businesses with
limited head office intervention. This involves structural changes within the
Group including the relocation of the Group Head Office to London which will
result in a significant reduction in head office numbers as well as the
termination of groupwide ERP systems development.
Group Results
Total continuing revenue in the six months to 30th June 2007 increased by 0.5%
to #197.9 million (2006: #196.9 million), while underlying revenue, excluding
costs recharged to customers, rose by 2.4% to #175.3 million (2006: #171.2
million). Continuing operating profit, excluding amortisation of intangibles
(other than software) and exceptional items, was 25% lower at #12.2 million
(2006: #16.3 million). The performance of Stalbridge, our linen rental business,
accounted for the majority of this decline. The increase in rents of #0.9
million paid on our drycleaning units following the sale and leaseback of
property undertaken at June 2006 was also a contributory factor.
Net interest charges increased from #4.7 million in 2006 to #5.2 million in
2007, reflecting higher average borrowings and interest rates during the period
offset by a notional interest credit on the defined benefit pension schemes.
Adjusted pre-tax profit on a continuing basis, excluding amortisation of
intangibles and exceptional items, was #7.0 million (2006: #11.6 million).
Net exceptional costs for the half year amounting to #17.9 million (2006: profit
#6.9 million) comprised a profit on the disposal of properties of #2.6 million
(2006: #8.6 million), restructuring costs of #1.0 million (2006: #1.7 million),
#3.6 million for the accelerated deprecation of linen stocks at Stalbridge, and
the write down of the ERP system of #15.9 million. The ERP system will only
continue to be utilised within the Stalbridge business from the end of this year
and the net book value of the software and hardware has consequentially been
written down to reflect this restricted use.
After the exceptional costs above and amortisation of intangibles (excluding
software) of #2.9 million (2006: #2.8 million) the pre-tax loss was #13.8
million (2006: profit of #15.7 million). Adjusted fully diluted earnings per
share from continuing operations were 8.1p (2006: 13.8p) while continuing
earnings per share including exceptional items and amortisation of intangibles
were a loss of 16.0p (2006: profit of 19.2p).
Finances
Total debt at the end of the first half was #150.0 million (December 2006:
#142.5 million) following the expenditure on the ERP system (#2.3 million), the
new production facility at Hinckley (#6.0 million), the acquisition of a small
textile rental operation and the payment of deferred consideration on
acquisitions in previous years.
As previously indicated, the development of the ERP system has now been
terminated. It is planned that the Hinckley facility, originally intended for
use by Stalbridge will, from 2008 onwards, be used by Johnsons Apparelmaster,
saving the significant investment which would have been required for a new
Apparelmaster facility.
A favourable movement in market assumptions together with additional cash
contributions of #1.4 million during the period has further reduced the recorded
net deficit after tax for all post retirement benefit obligations from #20.6
million at December 2006 to #8.5 million at June 2007. This deficit will
continue to be impacted by movements in assumptions and actual discount rates,
both of which are outside the control of the Group. An actuarial valuation is
currently being undertaken in respect of the main defined benefit scheme after
which the additional cash contributions currently being paid into the Scheme
will be reassessed to take account of the improvement in the funding position.
The reduction in borrowings remains a key focus of the Group.
Dividend policy
The Board believes that the ability to develop the Group may be hampered if the
dividend represents too high a proportion of retained earnings. The Board has
therefore decided to pay a reduced interim dividend of 3.0p per share (2006:
4.6p).
Your Company has excellent prospects and good opportunities to invest capital
effectively and it is intended to pursue a progressive dividend policy once the
current dividend has been rebased to a more appropriate level.
The interim dividend will be paid on 9th January 2008 to those on the register
at the close of business on 7th December 2007.
Operating Companies' Trading
Core Businesses
Johnsons Apparelmaster, the market-leading workwear laundering and rental
business, increased revenue and adjusted operating profit compared to the first
half of 2006. Revenue increased by 9.2% to #46.3 million and adjusted operating
profit by 5.1% to #6.2 million.
The recent withdrawal of several market participants has resulted in a more
orderly market and enabled Apparelmaster to increase its market share. The
increased profit was particularly impressive given the sharply higher energy
costs which Apparelmaster experienced during the period; energy costs are
expected to decline significantly from the levels experienced in these six
months. The integration of Texicare, acquired in January 2007, was smoothly
handled and represents a model of how this market will consolidate further.
Our Corporatewear Division, the leading supplier of clothing for people at work,
also increased revenue and adjusted operating profit compared to the first half
of 2006. Revenue increased by 6.0% to #39.0 million and adjusted operating
profit by 23.7% to #4.7 million.
As with the previous year certain major customers deferred contracts which meant
that profit was lower than had been budgeted. However, the long-term contractual
nature of our customer relationships means that the sales will occur. Although
the exact timing remains uncertain, it is expected that Corporatewear will catch
up almost all of the shortfall to date in the second half of the year.
The Division is continuing to integrate what were originally six different
companies including:
- Wessex Textiles, specialising in ambulance and paramedic clothing, has now
been integrated into Dimensions Corporatewear with impressive cost savings.
- CCM, the workwear specialist, is being integrated into Dimensions.
Johnson Facilities Management traded in line with budget in the first half.
Revenue excluding costs recharged to customers reduced by 3.1% to #18.6 million
while total revenue fell by 8% to #41.2 million. Adjusted operating profit
reduced from #2.5 million in 2006 to #2.2 million in 2007.This was a commendable
performance at a time of considerable upheaval in the business.
The business was formed by the merger of SGP, which was acquired in 2005 and
specialises in the provision of property management services to the financial,
retail and leisure sectors, with Johnson Workplace Management, which is focused
primarily on the commercial office market. SGP has grown rapidly and profitably
since its formation in 2000 and it continues to attract new customers at an
impressive rate. Its customer-facing strengths are well complemented by the
sound operating skills of Workplace Management. The integration of these
businesses is progressing well.
All three of these businesses provide essential services to major British
corporations and institutions. They have strong positions in markets with high
barriers to entry, excellent earnings visibility and represent an exciting
platform for growth.
Business-to-Consumer Activities
The retail drycleaning business which comprises Johnson Cleaners, including the
former Sketchley drycleaning business, and Jeeves of Belgravia, is our only
business-to-consumer activity. In the first half, it increased adjusted
operating profit year-on-year by 22.7% to #2.7m, despite a difficult and
unseasonable Spring when the dry weather worked against it. Revenue reduced by
4.7% from #42.9 million in 2006 to #40.9 million in 2007 on a reduced number of
shops. Revenue on a like-for-like basis reduced by 0.8%.
Johnson Cleaners is the market leading drycleaning business in the UK. In recent
years there have been comparatively low barriers to entry to this market, but
this is changing due to more stringent environmental regulation such as the
Solvent Emissions Directive. We believe we are ideally placed to benefit from
these changes in the market. We own the exclusive UK rights to GreenEarth, the
silicone-based cleaning process, which has significant process and environmental
advantages over the traditional drycleaning methods and we have already
converted half of our stores to GreenEarth. Our scale means that we have far
greater resources and expertise than our competitors to implement and build on
these changes.
The Johnson Cleaners business has been underinvested in recent years. We are
confident that with increased capital expenditure for improving our stores and
their locations, coupled with an environmental awareness campaign, the financial
performance of Johnson Cleaners can significantly improve.
Other Activities
Stalbridge Linen Services, which supplies linen to the premium hotel, catering
and corporate hospitality markets, has undergone a miserable period following
its entry into the high-volume linen market in 2004. This strategic error was
compounded by the introduction of the new ERP system in April 2006 which gave
rise to invoicing problems and masked the disproportionate level of costs being
incurred in the business. In the first half of the year, it recorded an adjusted
operating loss of #1.6 million (2006: #1.8 million profit), before exceptional
costs of #3.8 million (2006: nil). Within this exceptional charge is #3.6
million for the accelerated depreciation of non-recoverable linen stock. We are
in the process of scaling Stalbridge back to its core strength as the major
supplier to the premium customer market. As part of this process, its new
high-volume facility at Hinckley is expected to be relinquished to the more
commercially viable requirements of Johnsons Apparelmaster.
Workplace Engineering, which delivers electrical, engineering and fit-out
services, continued to grow with revenue of #6.7 million (2006: #4.0 million)
and adjusted operating profit of #0.4 million (2006: #0.2 million).
Alex Reid, our specialist drycleaning supplies business, traded disappointingly
with revenue down to #5.7 million (2006: #6.4 million) and an adjusted operating
loss of #0.1 million (2006: profit #0.5 million). It has a strong market
position but has suffered from weak management information and increased
competition.
Board
Charles Skinner joined the Board as Chief Executive in April 2007. He was
previously Chief Executive of Brandon Hire Plc.
Yvonne Monaghan, previously the Group Financial Controller joined the Board as
Finance Director in September 2007.
Simon Moate resigned from the board in July 2007 and Jim Wilkinson resigned from
the role of Finance Director in August 2007. We thank them for their
contribution to the Company in a difficult period and wish both of them well in
their future careers.
Outlook
Trading in the first two months of the second half has been encouraging.
Apparelmaster has continued to trade well and Corporatewear is on course to meet
our expectations. Johnson Facilities Management is also trading satisfactorily.
Johnson Cleaners had an excellent July and has shrugged off its weak Spring
performance. We are confident that Stalbridge is under much better control and
will, in the medium term, return to the levels of profitability of three years
ago.
Our three core businesses have strong market positions and business processes
which represent an excellent foundation on which to build a leading UK business
services company. While the next few months will involve further reorganisation,
this is necessary to ensure that your Company is structured correctly for the
longer term. I am confident that your Company will emerge from a difficult 12
months in good shape and well-placed to show profitable growth in 2008 and
beyond.
Consolidated Income Statement
Half year to Half year to Year ended
30th June 30th June 31st December
2007 2006 2006
Note #m #m #m
CONTINUING OPERATIONS:
2 REVENUE 197.9 196.9 410.9
Costs recharged to customers (22.6) (25.7) (50.3)
Revenue excluding costs recharged to customers 175.3 171.2 360.6
2 OPERATING (LOSS) / PROFIT (8.6) 20.4 23.7
OPERATING PROFIT BEFORE INTANGIBLES AMORTISATION AND EXCEPTIONAL 12.2 16.3 34.9
ITEMS
Amortisation of intangible assets (excluding software) (2.9) (2.8) (5.8)
3 Exceptional items
- Restructuring and other costs (20.5) (1.7) (20.4)
- Profit on disposal of property 2.6 8.6 15.0
2 OPERATING (LOSS) / PROFIT (8.6) 20.4 23.7
Finance costs (5.9) (4.7) (10.0)
Finance income 0.7 - 0.8
(LOSS) / PROFIT BEFORE TAXATION (13.8) 15.7 14.5
5 Taxation 4.3 (4.3) (1.1)
(LOSS) / PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS (9.5) 11.4 13.4
DISCONTINUED OPERATIONS:
LOSS FOR THE PERIOD FROM DISCONTINUED OPERATIONS - (1.0) (10.9)
(LOSS) / PROFIT FOR THE PERIOD (9.5) 10.4 2.5
6 EARNINGS PER SHARE *
Basic earnings per share
From continuing operations (16.0p) 19.4p 22.8p
From discontinued operations - (1.7p) (18.6p)
From continuing and discontinued operations (16.0p) 17.7p 4.2p
Diluted earnings per share
From continuing operations (16.0p) 19.2p 22.6p
From discontinued operations - (1.7p) (18.4p)
From continuing and discontinued operations (16.0p) 17.5p 4.2p
7 ORDINARY DIVIDENDS PAID AND PROPOSED
Interim dividend proposed 3.0p - -
Interim dividend proposed and paid - 4.6p 4.6p
Final dividend proposed and approved - - 15.0p
* Earnings per share before intangibles amortisation (excluding software) and exceptional items are shown in
Note 6.
Consolidated Statement of Recognised Income and Expense
Half year to Half year to Year ended
30th June 30th June 31st December
2007 2006 2006
Note #m #m #m
Actuarial gain on defined benefit pension plans 16.1 13.9 14.7
Taxation in respect of actuarial gain (4.8) (4.2) (4.4)
Net movement on reserves in respect of IAS 19 actuarial gains and 11.3 9.7 10.3
losses
Effects of changes in taxation rates 0.3 - -
Cash flow hedges (net of - fair value gains 0.9 - 0.1
taxation) - transfers to inventory - - 0.3
- transfers to interest (0.1) - (0.1)
NET INCOME RECOGNISED DIRECTLY IN EQUITY 12.4 9.7 10.6
(Loss) / profit for the period (9.5) 10.4 2.5
11 TOTAL RECOGNISED INCOME FOR THE PERIOD 2.9 20.1 13.1
Consolidated Balance Sheet
As at As at As at
30th June 30th June 31st December
2007 2006 2006
Note #m #m #m
ASSETS
NON-CURRENT ASSETS
Goodwill 138.9 141.0 140.0
Intangible assets 37.1 53.5 51.9
Property, plant and equipment 59.2 57.0 60.8
Textile rental items 25.1 31.5 27.6
Trade and other receivables 0.2 0.1 0.2
Derivative financial assets 1.7 - -
Deferred income tax assets 9.7 13.6 13.4
271.9 296.7 293.9
CURRENT ASSETS
Inventories 30.5 31.4 29.5
Trade and other receivables 65.0 72.1 71.1
Current income tax assets - - 0.7
Derivative financial assets 0.1 0.4 0.6
Cash and cash equivalents 9.4 6.4 11.3
105.0 110.3 113.2
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 28.2 33.8 29.4
Other creditors and accruals 62.3 56.6 69.0
Current income tax liabilities 0.2 5.2 -
Borrowings 1.2 1.1 1.1
Derivative financial liabilities 0.2 0.5 0.4
Provisions 7.1 2.7 8.5
99.2 99.9 108.4
NET CURRENT ASSETS 5.8 10.4 4.8
NON-CURRENT LIABILITIES
Borrowings 158.2 140.2 152.7
8 Retirement benefit obligations 12.7 35.5 30.7
Deferred income tax liabilities 8.6 14.0 12.6
Provisions 8.0 10.5 8.2
Derivative financial liabilities 0.7 - -
Other non-current liabilities 1.6 5.3 1.9
189.8 205.5 206.1
NET ASSETS 87.9 101.6 92.6
EQUITY
CAPITAL AND RESERVES ATTRIBUTABLE TO THE COMPANY'S EQUITY HOLDERS
11 Called up share capital 5.9 5.9 5.9
11 Share premium 13.7 12.2 12.7
11 Other reserves 3.2 2.1 2.4
11 Retained earnings 65.1 81.4 71.6
TOTAL EQUITY 87.9 101.6 92.6
Consolidated Cash Flow Statement
Half year to Half year to Year ended
30th June 30th June 31st December
2007 2006 2006
Note #m #m #m
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss) / profit for the period (9.5) 10.4 2.5
Adjustments for:
5 Income - continuing operations (4.3) 4.3 1.1
tax
- discontinued operations - (0.4) (3.2)
Finance income and expense 5.2 4.7 9.2
Depreciation 13.3 14.1 28.6
Amortisation 3.7 3.2 7.3
Write-off of intangible assets 15.5 - 3.9
Write-off of textile rental items 3.6 - -
(Increase) / decrease in inventories (0.9) (1.2) 0.7
Decrease / (increase) in trade and other receivables 6.7 (7.3) (3.9)
(Decrease) / increase in trade and other payables (9.8) 2.3 1.4
Profit on sale of property, plant and equipment (2.1) (8.4) (14.5)
Loss on closure of subsidiaries - - 11.7
Additional contribution to defined benefit pension schemes (1.4) (1.4) (4.8)
Other non-cash movements (1.5) (0.8) 3.5
Cash generated from operations 18.5 19.5 43.5
Interest paid (5.8) (5.0) (9.5)
Taxation received / (paid) 0.3 (2.2) (4.3)
Net cash flows generated from operating activities 13.0 12.3 29.7
CASH FLOWS FROM INVESTING ACTIVITIES
10 Acquisition of subsidiaries (net of cash acquired) (6.0) (1.7) (4.4)
Proceeds from sale of investments in other companies - 0.9 1.4
Purchase of property, plant and equipment (9.0) (7.5) (14.9)
Proceeds from sale of property, plant and equipment 3.6 23.6 24.8
Purchase of intangible assets (2.8) (5.9) (11.8)
Purchase of textile rental items (10.4) (13.0) (24.1)
Proceeds from sale of textile rental items 1.9 2.2 3.9
Interest received 0.2 - 0.8
Net cash used in investing activities (22.5) (1.4) (24.3)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 27.0 42.0 86.0
Repayments of borrowings (20.0) (45.0) (76.0)
Capital element of finance leases (0.5) (0.5) (1.1)
Net proceeds from issue of Ordinary shares 1.0 0.3 0.8
Net proceeds from sale of own shares in relation to employee share 0.1 - 0.2
schemes
Dividends paid to company Shareholders - (8.8) (11.5)
Net cash generated from / (used in) financing activities 7.6 (12.0) (1.6)
Net (decrease) / increase in cash and cash equivalents (1.9) (1.1) 3.8
Cash and cash equivalents at beginning of period 11.3 7.5 7.5
12 Cash and cash equivalents at end of period 9.4 6.4 11.3
Notes to the Consolidated Interim Financial Statements
Johnson Service Group PLC ('the Company') and its subsidiaries ('the Group')
provide a unique range of managed services, operating in two principal areas:
textile related services and facilities management.
The Company is incorporated and domiciled in the UK. The address of its
registered office is 4 Harley Street, London W1G 9PB.
The Group consolidated interim financial statements were authorised for issue by
the Board on 10th September 2007.
1 BASIS OF PREPARATION
These unaudited consolidated interim financial statements of Johnson Service
Group PLC are for the six months ended 30th June 2007. They have been prepared
in accordance with those International Financial Reporting Standards (IFRS) and
International Financial Reporting Interpretations Committee (IFRIC)
interpretations as adopted by the European Union at 30th June 2007, and with
those parts of the Companies Act 1985 applicable to companies reporting under
IFRS. The Group has not yet adopted IAS 34, 'Interim Financial Reporting' but
intends to do so from 1st January 2008. The consolidated interim financial
statements do not comprise statutory accounts for the purpose of Section 240 of
the Companies Act 1985, and do not include all of the information or disclosures
required in the annual financial statements and should therefore be read in
conjunction with the Group's 2006 consolidated financial statements.
The consolidated interim financial statements have been prepared applying the
accounting policies and presentation which was applied in the preparation of the
published consolidated financial statements for the year ended 31st December
2006. However, in accordance with the requirements of IFRS 5, 'Non-current
Assets Held for Sale and Discontinued Operations', the consolidated interim
financial statements for 2006 previously presented have been amended to reflect
the classification of certain operations as discontinued.
Financial information for the year ended 31st December 2006 included herein is
derived from the statutory accounts for that year, which have been filed with
the Registrar of Companies. The auditors' report on those accounts was
unqualified and did not contain a statement under Section 237 (2) or 237 (3) of
the Companies Act 1985 (as amended).
The impact of seasonality or cyclicality on operations is not regarded as
significant on the consolidated interim financial statements.
2 SEGMENT ANALYSIS
Geographical segments
Revenue originates wholly within the United Kingdom and as a result, no
geographical segments are presented within these interim financial statements.
There is no significant difference between revenue by origin and revenue by
destination.
Business segments
The Group comprises the following main business segments and entities:
Textile rental services
Workwear rental supply and laundering and linen for the * Johnsons Apparelmaster Limited
premium hotel, catering and corporate hospitality sector * Johnsons Apparelmaster Limited t/a Stalbridge Linen
Services
Corporatewear
Offering a comprehensive range of workwear and workplace * Johnson Clothing Limited t/a Boyd Cooper
clothing * Johnson Clothing Limited t/a CCM
* Johnson Clothing Limited t/a DCC Corporate Clothing
* Johnson Clothing Limited t/a Dimensions Corporatewear
* Johnson Clothing Limited t/a S Yaffy
* Johnson Clothing Limited t/a Wessex Textiles
Drycleaning
Provides drycleaning, laundry and ironing services, * Alex Reid Limited
carpet cleaning, upholstery cleaning, wedding dress * Jeeves of Belgravia Limited
cleaning and suede & leather cleaning, and the supply of * Jeeves International Limited
drycleaning consumables * Johnson Cleaners UK Limited
Facilities management
Delivering building, facilities and property management * Johnson Facilities Management Limited t/a SGP Property
services to public, commercial and retail organisations. Services
* Johnson Facilities Management Limited t/a Workplace
Engineering
* Johnson Facilities Management Limited t/a Workplace
Management
Segment information is presented in respect of the Group's business segments,
which are based on the Group's management and internal reporting structure as at
30th June 2007. Segment results include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.
Unallocated central overheads are shown separately. The exceptional items have
been included within the appropriate business segment as shown on pages 12 to
14.
Inter-segment pricing is determined on an arm's length basis.
The business segment results for the half year ended 30th June 2007, together
with comparative figures, are as follows:
Half year ended 30th June 2007 Textile Corporatewear Drycleaning Facilities Unallocated Total
rental Management
services
#m #m #m #m #m #m
REVENUE
Revenue 64.4 45.1 46.6 48.4 - 204.5
Inter-segment revenue - (6.1) - (0.5) - (6.6)
REVENUE - CONTINUING 64.4 39.0 46.6 47.9 - 197.9
Revenue - Discontinued - - - - - -
Total Revenue 64.4 39.0 46.6 47.9 - 197.9
REVENUE EXCLUDING COSTS
RECHARGED TO CUSTOMERS
Revenue 64.4 45.1 46.6 25.8 - 181.9
Inter-segment revenue - (6.1) - (0.5) - (6.6)
REVENUE EXCLUDING COSTS 64.4 39.0 46.6 25.3 - 175.3
RECHARGED TO CUSTOMERS - CONTINUING
Revenue - Discontinued - - - - - -
Total revenue excluding costs recharged to 64.4 39.0 46.6 25.3 - 175.3
customers
RESULT
Operating profit before intangibles 5.2 4.7 2.5 2.5 (2.7) 12.2
amortisation (excluding software) and
exceptional items
Amortisation of intangible assets (0.6) (1.3) - (1.0) - (2.9)
Exceptional items
- Restructuring and other costs (4.2) (0.2) - (0.2) (15.9) (20.5)
- Profit on disposal of property 1.4 - 1.2 - - 2.6
Operating (loss) / profit 1.8 3.2 3.7 1.3 (18.6) (8.6)
Finance costs (5.9)
Finance income 0.7
Loss before taxation (13.8)
Taxation 4.3
Loss for the period - Continuing (9.5)
Discontinued operations -
Loss for the period (9.5)
Half year ended 30th June 2006 Textile Corporatewear Drycleaning Facilities Unallocated Total
rental Management
services
#m #m #m #m #m #m
REVENUE
Revenue 61.9 42.8 49.3 49.4 - 203.4
Inter-segment revenue - (6.0) - (0.5) - (6.5)
REVENUE - CONTINUING 61.9 36.8 49.3 48.9 - 196.9
Revenue - Discontinued 3.7 - - - - 3.7
Total Revenue 65.6 36.8 49.3 48.9 - 200.6
REVENUE EXCLUDING COSTS
RECHARGED TO CUSTOMERS
Revenue 61.9 42.8 49.3 23.7 - 177.7
Inter-segment revenue - (6.0) - (0.5) - (6.5)
REVENUE EXCLUDING COSTS 61.9 36.8 49.3 23.2 - 171.2
RECHARGED TO CUSTOMERS - CONTINUING
Revenue - Discontinued 3.7 - - - - 3.7
Total revenue excluding costs recharged to 65.6 36.8 49.3 23.2 - 174.9
customers
RESULT
Operating profit before intangibles 8.0 3.8 3.6 2.6 (1.7) 16.3
amortisation (excluding software) and
exceptional items
Amortisation of intangible assets (0.5) (1.3) - (1.0) - (2.8)
Exceptional items
- Restructuring and other costs - - (1.7) - - (1.7)
- Profit on disposal of property - - 8.6 - - 8.6
Operating profit 7.5 2.5 10.5 1.6 (1.7) 20.4
Finance costs (4.7)
Finance income -
Profit before taxation 15.7
Taxation (4.3)
Profit for the period - Continuing 11.4
Discontinued operations - Textile rental (1.0)
services
Profit for the period 10.4
Year ended 31st December 2006 Textile Corporatewear Drycleaning Facilities Unallocated Total
rental Management
services
#m #m #m #m #m #m
REVENUE
Revenue 125.2 95.4 99.2 104.6 - 424.4
Inter-segment revenue - (12.3) - (1.2) - (13.5)
REVENUE - CONTINUING 125.2 83.1 99.2 103.4 - 410.9
Revenue - Discontinued 8.0 - - - - 8.0
Total Revenue 133.2 83.1 99.2 103.4 - 418.9
REVENUE EXCLUDING COSTS
RECHARGED TO CUSTOMERS
Revenue 125.2 95.4 99.2 54.3 - 374.1
Inter-segment revenue - (12.3) - (1.2) - (13.5)
REVENUE EXCLUDING COSTS 125.2 83.1 99.2 53.1 - 360.6
RECHARGED TO CUSTOMERS - CONTINUING
Revenue - Discontinued 8.0 - - - - 8.0
Total revenue excluding costs recharged to 133.2 83.1 99.2 53.1 - 368.6
customers
RESULT
Operating profit before intangibles 9.1 12.3 9.1 7.5 (3.1) 34.9
amortisation (excluding software) and
exceptional items
Amortisation of intangible assets (1.0) (2.6) (0.2) (2.0) - (5.8)
Exceptional items
- Restructuring and other costs (6.2) (1.7) (5.7) (1.1) (5.7) (20.4)
- Profit on disposal of property - 1.5 13.5 - - 15.0
Operating profit 1.9 9.5 16.7 4.4 (8.8) 23.7
Finance costs (10.0)
Finance income 0.8
Profit before taxation 14.5
Taxation (1.1)
Profit for the period - Continuing 13.4
Discontinued operations - Textile rental (10.9)
services
Profit for the period 2.5
3 EXCEPTIONAL ITEMS
Half year to Half year to Year ended
30th June 30th June 31st December
2007 2006 2006
#m #m #m
Restructuring costs - Textile rental services (0.6) - (0.8)
- Corporatewear (0.2) - (1.7)
- Drycleaning - (1.7) (2.9)
- Facilities management (0.2) - (1.1)
- Group - - (1.6)
- Total (1.0) (1.7) (8.1)
Onerous lease and environmental costs - - (1.7)
Write-off of rental stock (3.6) - -
Write-off of software development costs (15.9) - (3.9)
Drycleaning - costs relating to potential disposal - - (2.6)
Uninsured losses - - (4.1)
Total restructuring and other costs (20.5) (1.7) (20.4)
Property disposals - Sale and leaseback - 8.6 13.0
- Others 2.6 - 2.0
- Total 2.6 8.6 15.0
(17.9) 6.9 (5.4)
Had the #3.6 million exceptional write-off of rental stock not occurred,
additional depreciation of #1.2 million would have been charged to operating
profit before intangibles amortisation (excluding software) and exceptional
items in the period.
The #15.9 million write-off of software development costs includes #0.4 million
relating to computer hardware specific to that system.
4 ADJUSTED PROFIT BEFORE TAXATION
Half year to Half year to Year ended
30th June 30th June 31st December
2007 2006 2006
#m #m #m
(Loss) / profit before taxation (13.8) 15.7 14.5
Intangibles amortisation (excluding software) 2.9 2.8 5.8
Restructuring and other costs 20.5 1.7 20.4
Profit on disposal of property (2.6) (8.6) (15.0)
Adjusted profit before taxation 7.0 11.6 25.7
5 TAXATION
Half year to Half year to Year ended
30th June 30th June 31st December
2007 2006 2006
#m #m #m
Current tax expense
UK corporation tax charge for the period - continuing operations 0.6 5.4 5.3
Adjustment in relation to previous periods - continuing operations - (0.2) (1.5)
Current tax charge for the period - continuing operations 0.6 5.2 3.8
Deferred tax expense
Origination and reversal of temporary differences - continuing operations (4.9) (0.4) (2.6)
Adjustment in relation to previous periods - continuing operations - (0.5) (0.1)
Deferred tax credit for the period - continuing operations (4.9) (0.9) (2.7)
Total (credit) / charge for taxation included in the income statement for (4.3) 4.3 1.1
continuing operations
Taxation on the restructuring and other costs in the current period has reduced
the UK corporation tax charge by #6.1 million (June 2006: #0.1 million
reduction; December 2006: #4.4 million reduction). Tax relief on intangibles
amortisation has reduced UK corporation tax by #0.9 million (June 2006: #1.3
million reduction; December 2006: #2.7 million reduction). The tax charge on
the property disposals has increased the charge for taxation by #0.5 million
(June 2006: #2.3 million increase; December 2006: #1.9 million increase).
Accounting implications of the 'Finance Bill 2007'
The Group has considered the accounting implications of the 'Finance Bill 2007'
following its approval in the House of Commons on 26th June 2007. The main
implications identified are as follows:
* The rate of UK Corporation Tax is to be reduced from 30% to 28% with effect
from 1st April 2008.
* Industrial buildings allowances (IBA's) are to be gradually phased out.
Whilst these changes have no effect on current tax assets and liabilities which
arose prior to the effective date of change, there are implications for deferred
tax accounting. The reduction in tax rate will not impact deferred tax that is
expected to reverse prior to 1st April 2008. For deferred tax that is expected
to reverse after this date, the Group has been required to determine the impact
of the above changes. As a result, included within the deferred tax expense
above is #0.1 million, this being the effect of the change in the deferred tax
balance over the full year based upon application of the annual effective rate
as disclosed below. In addition, a deferred tax credit of #0.3 million has been
separately recognised in the Statement of Recognised Income and Expense in
respect of items which flow directly through equity.
Reconciliation of effective tax rate
The taxation (credit) / charge for the six months to 30th June 2007 is
calculated based on the estimated average annual effective income tax rate of
31.1% (half year ended 30th June 2006: 27.4%; year ended 31st December 2006:
7.6%), as compared to the tax rates expected to be enacted or substantively
enacted at the annual balance sheet date of 30% (half year ended 30th June 2006:
30%; year ended 31st December 2006: 30%). Differences between the estimated
average annual effective income tax rate and statutory rate include, but are not
limited to, the effect of non-deductible expenses, tax incentives not recognised
in profit or loss, the effect of tax losses utilised and under/over provisions
in previous years.
6 EARNINGS PER SHARE
Half year to Half year to Year ended
30th June 30th June 31st December
2007 2006 2006
#m #m #m
(Loss)/profit for the period attributable to Ordinary Shareholders (9.5) 11.4 13.4
(continuing operations)
Loss for the period attributable to Ordinary Shareholders (discontinued - (1.0) (10.9)
operations)
Intangibles amortisation (excluding software) (net of taxation) 2.0 1.5 3.1
Exceptional costs from continuing operations (net of taxation) 12.3 (4.7) 2.9
Exceptional costs from discontinued operations (net of taxation) - - 9.2
Adjusted profit attributable to Ordinary Shareholders 4.8 7.2 17.7
Weighted average number of Ordinary shares 59,293,499 58,802,635 58,843,450
Dilutive options - 871,987 709,375
Fully diluted number of Ordinary shares 59,293,499 59,674,622 59,552,825
Basic earnings per share
From continuing operations (16.0p) 19.4p 22.8p
From discontinued operations - (1.7p) (18.6p)
From continuing and discontinued operations (16.0p) 17.7p 4.2p
Adjustment for intangibles amortisation 3.4p 2.5p 5.2p
Adjustment for exceptional costs (continuing operations) 20.7p (7.9p) 4.9p
Adjustment for exceptional costs (discontinued operations) - - 15.8p
Adjusted basic earnings per share (continuing operations) 8.1p 14.0p 32.9p
Adjusted basic earnings per share (discontinued operations) - (1.7p) (2.8p)
Adjusted basic earnings per share from continuing and discontinued 8.1p 12.3p 30.1p
operations
Diluted earnings per share
From continuing operations (16.0p) 19.2p 22.6p
From discontinued operations - (1.7p) (18.4p)
From continuing and discontinued operations (16.0p) 17.5p 4.2p
Adjustment for intangibles amortisation 3.4p 2.5p 5.1p
Adjustment for exceptional costs (continuing operations) 20.7p (7.9p) 4.9p
Adjustment for exceptional costs (discontinued operations) - - 15.6p
Adjusted diluted earnings per share (continuing operations) 8.1p 13.8p 32.6p
Adjusted diluted earnings per share (discontinued operations) - (1.7p) (2.8p)
Adjusted diluted earnings per share from continuing and discontinued 8.1p 12.1p 29.8p
operations
Basic earnings per share is calculated using the weighted average number of
shares in issue during the year, excluding those held by the ESOP, based on the
profit for the period attributable to Ordinary Shareholders.
Adjusted earnings per share figures are given to exclude the effects of
intangibles amortisation (excluding software) and exceptional items, all net of
taxation, and are considered to show the underlying results of the Group.
For diluted earnings per share, the weighted average number of Ordinary shares
in issue is adjusted to assume conversion of all dilutive potential Ordinary
shares. The Company has dilutive potential Ordinary shares arising from share
options granted to employees where the exercise price is less than the average
market price of the Company's Ordinary shares during the year.
Potential Ordinary shares are dilutive at the profit from continuing operations
level when their conversion to Ordinary shares would decrease earnings per share
or increase loss per share from continuing operations. In the period to 30th
June 2007, potential Ordinary shares are undilutive, as their inclusion in the
diluted earnings per share calculation would reduce the loss from continuing
operations, and hence have been excluded. For the periods ending 30th June 2006
and 31st December 2006, potential Ordinary shares have been treated as dilutive
for the purpose of diluted earnings per share from continuing and discontinued
operations, as their inclusion decreases earnings per share from continuing
operations.
There were no events occurring after the balance sheet date that would have
changed significantly the number of Ordinary shares or potential Ordinary shares
outstanding at the balance sheet date, if those transactions had occurred before
the end of the reporting period.
7 DIVIDENDS
Half year to Half year to Year ended
30th June 30th June 31st December
2007 2006 2006
Ordinary dividends paid and proposed
Interim dividend proposed 3.0p - -
Interim dividend proposed and paid - 4.6p 4.6p
Final dividend proposed and approved - - 15.0p
On 10th May 2007 a dividend of 15.0p in respect of the 2006 final dividend on
the Ordinary shares was approved by Shareholders at the Annual General Meeting.
The dividend, classified within 'other creditors and accruals' at 30th June
2007, was paid on 9th July 2007, utilising #8.9 million of Shareholders' funds.
The Directors are proposing an interim dividend in respect of the year ended
31st December 2007 of 3.0p which will reduce Shareholders' funds by #1.8
million. The dividend will be paid on 9th January 2008 to Shareholders on the
register of members at the close of business on 7th December 2007. The Trustee
of the ESOP has waived the entitlement to receive dividends on the Ordinary
shares held by the Trust.
In accordance with International Financial Reporting Standards, these financial
statements do not reflect a liability in respect of the proposed interim
dividend.
8 RETIREMENT BENEFIT OBLIGATIONS
The Group has applied the requirements of IAS 19 Employee Benefits to its
employee pension schemes and post-retirement healthcare benefits.
As part of the Group's objective to reduce its overall pension liability,
additional contributions of #1.4 million were paid to the Johnson Group Staff
Pension Scheme during the period to 30th June 2007 (30th June 2006: #1.4
million; 31st December 2006: #4.2 million). In addition, a further contribution
of #0.6 million was paid to the WML Final Salary Pension Scheme in July 2006.
No such contribution has been paid in the period to 30th June 2007.
Following discussions with the Group's appointed actuary it has been identified
that an actuarial gain of #16.1 million should be recognised in the period to
30th June 2007. This is principally as a result of an increase in the rate used
to discount the scheme liabilities to a present value, together with the effect
of scheme assets and liabilities performing differently to previous assumptions.
The gross retirement benefit liability and associated deferred tax asset
thereon, together with the net liability is shown below:
Half year to Half year to Year ended
30th June 2007 30th June 2006 31st December
2006
#m #m #m
Gross retirement benefit liability (12.7) (35.5) (30.7)
Deferred tax asset thereon 4.2 10.6 10.1
Net liability (8.5) (24.9) (20.6)
9 FINANCIAL COMMITMENTS
CAPITAL EXPENDITURE
Contracts placed for future financial expenditure contracted but not provided
for in the financial statements are shown below:
Half year to Half year to Year ended
30th June 30th June 31st December
2007 2006 2006
#m #m #m
Intangible assets - - 0.4
Property, plant and equipment 1.3 7.3 2.2
1.3 7.3 2.6
10 BUSINESS COMBINATIONS
ACQUISITIONS
Consideration paid and net assets acquired
The material businesses acquired during the period are shown below. Unless
otherwise stated, 100% of either the voting equity instruments or the trade and
net assets of each business was acquired.
PROVISIONAL FAIR VALUE
Consideration Net Separately
and costs assets Identified
acquired intangible
assets Goodwill
#m #m #m #m
Texicare (acquired 1st January 2007) 3.2 1.6 1.6 -
Adjustments to prior period deferred consideration (1.1) - 0.1 (1.2)
Total acquisitions and adjustments in the period 2.1 1.6 1.7 (1.2)
Consideration has been satisfied by: #m
Cash consideration payable 3.0
Professional fees and other costs 0.1
Deferred consideration 0.1
Acquisitions in the period 3.2
Adjustment relating to previous year acquisitions (1.1)
2.1
The deferred consideration relates to the acquisition of Texicare, and is
dependent upon the achievement of certain performance targets. Amounts provided
represent the maximum amount payable should all targets be met.
Net assets at the date of acquisition
Net assets Provisional Provisional Provisional
acquired Accounting fair value carrying
Policy adjustments value at
adjustments date of
acquisition
#m #m #m #m
Texicare
Tangible fixed assets - property, plant and equipment 0.4 0.1 - 0.5
Tangible fixed assets - rental items 1.2 (0.2) - 1.0
Inventories 0.1 - - 0.1
Cash and cash equivalents 0.1 - - 0.1
Trade and other receivables 0.8 - (0.2) 0.6
Creditors and other liabilities (0.5) - (0.2) (0.7)
2.1 (0.1) (0.4) 1.6
Adjustments made to the fair value of assets of businesses acquired in the
period are provisional due to the short period of ownership. Adjustments in
respect of acquisitions in 2006 arose due to increased knowledge of assets and
liabilities resulting from a longer period of ownership.
Analysis of net cash flow in respect of acquisitions
#m
Cash consideration and costs paid 3.1
Deferred consideration paid on acquisitions in prior years 3.0
Payments to acquire businesses 6.1
Cash acquired (0.1)
Net cash flow 6.0
Impact of acquisitions on the consolidated revenue and profit for the period
Texicare is a traditional workwear laundry based in Northwest England, with a
mixture of industrial and food garment streams.
In the six months to 30th June 2007, Texicare contributed revenue of #2.0m and
operating profit before intangibles amortisation (excluding software) and
exceptional items of #0.3m to the Group consolidated profit for the period.
11 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Share Share Other Retained Total
capital premium reserves earnings equity
#m #m #m #m #m
Balance at 1st January 2006 5.9 11.9 2.1 70.0 89.9
Total recognised income and expense for the - - - 20.1 20.1
period
Dividends - - - (8.8) (8.8)
Issue of share capital - 0.3 - - 0.3
Share options (value of employee services) - - - 0.1 0.1
Balance at 30th June 2006 5.9 12.2 2.1 81.4 101.6
Total recognised income and expense for the - - 0.3 (7.3) (7.0)
period
Dividends - - - (2.7) (2.7)
Issue of share capital - 0.5 - - 0.5
Consideration received by ESOP - - - 0.2 0.2
Balance at 31st December 2006 5.9 12.7 2.4 71.6 92.6
Total recognised income and expense for the - - 0.8 2.1 2.9
period
Dividends - - - (8.9) (8.9)
Issue of share capital - 1.0 - - 1.0
Share options (value of employee services) - - - 0.2 0.2
Consideration received by ESOP - - - 0.1 0.1
Balance at 30th June 2007 5.9 13.7 3.2 65.1 87.9
12 ANALYSIS OF NET DEBT
Cash and cash Debt due Debt due Finance Total
equivalents within one after more leases net debt
year than one year
#m #m #m #m #m
Balance at 1st January 2006 7.5 (1.0) (138.2) (5.5) (137.2)
Cash flow (1.1) 1.0 2.0 0.5 2.4
Other non-cash changes - - (0.1) - (0.1)
Balance at 30th June 2006 6.4 - (136.3) (5.0) (134.9)
Cash flow 4.9 - (13.0) 0.6 (7.5)
Other non-cash changes - - (0.1) - (0.1)
Balance at 31st December 2006 11.3 - (149.4) (4.4) (142.5)
Cash flow (1.9) - (7.0) 0.5 (8.4)
Other non-cash changes - - 0.9 - 0.9
Balance at 30th June 2007 9.4 - (155.5) (3.9) (150.0)
13 PUBLISHED FINANCIAL STATEMENTS
Copies of the interim report are to be sent to Shareholders and will be
available to members of the public at the Company's registered office at 4
Harley Street, London W1G 9PB. The report can also be accessed on the internet
at www.johnsonplc.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR VDLFBDKBEBBE
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