TIDMJSG
RNS Number : 7659X
Johnson Service Group PLC
02 September 2015
2 September 2015
Johnson Service Group PLC
Interim Results for the six months ended 30 June 2015
"Another strong performance"
Johnson Service Group PLC, the Textile Services group (the
"Group"), announces its interim results for the six months ended 30
June 2015.
FINANCIAL SUMMARY
Continuing Operations H1 2015 H1 2014 % change FY 2014
---------------------------- ---------- ---------- --------- ----------
Revenue GBP109.2m GBP101.6m 7.5% GBP210.4m
Adjusted Operating Profit GBP11.3m GBP9.4m 20.2% GBP21.8m
(1)
Adjusted Profit Before Tax GBP10.1m GBP8.5m 18.8% GBP20.0m
(2)
Adjusted Fully Diluted EPS
(3) 2.6p 2.3p 13.0% 5.2p
Dividend 0.65p 0.50p 30.0% 1.70p
Net debt GBP72.4m GBP31.7m - GBP28.5m
HIGHLIGHTS
* Strong performance with Adjusted Operating Profit(1)
up by 20.2% to GBP11.3 million
* Adjusted Profit Before Tax(2) increased by 18.8% to
GBP10.1 million
* GBP64.9 million acquisition of London Linen Supply
Limited ("London Linen") in April 2015 which has been
immediately earnings enhancing
* Successful placing of 30.0 million new shares,
raising net proceeds of GBP21.1 million
* Textile Rental continues to perform ahead of
management expectations
* Drycleaning reorganisation implemented in line with
our original cost estimate
* Net debt slightly better than management expectations
at GBP72.4 million (Pro-forma(4) December 2014:
GBP73.1 million)
* New Bank Facility signed in April 2015 providing
significant headroom for future investment
1 "Adjusted Operating Profit" is before charging GBP1.3 million
(June 2014: GBP0.7 million; December 2014: GBP1.6 million)
amortisation and impairment of intangible assets (excluding
software amortisation) and exceptional items of GBP7.6 million
(June 2014: GBP1.4 million; December 2014: GBP6.8 million).
2 "Adjusted Profit Before Tax" is Adjusted Operating Profit,
less finance costs. Statutory Profit Before Tax was GBP1.2 million
(June 2014: GBP6.4 million; December 2014: GBP11.6 million).
3 "Adjusted Fully Diluted EPS" is calculated using Adjusted
Profit Before Tax and deducting the charge to, or adding the credit
for, tax attributable to those items included within Adjusted
Profit Before Tax.
4 Pro-forma basis after adjusting for the acquisition of London
Linen (GBP64.9 million plus GBP0.8 million costs) and the equity
fund raising (net proceeds GBP21.1 million). Reported net debt was
GBP28.5 million.
Chris Sander, Chief Executive Officer of Johnson Service Group,
commented:
"We are very pleased with the encouraging financial performance
of the Group in the first half of the year, underpinned by a strong
operational performance and the acquisition of London Linen. This
strategic acquisition has been earnings enhancing from day one,
significantly increases our capability to serve the vibrant London
restaurant market and complements the range of Textile Rental
services offered by our Stalbridge business. The Group continues to
invest in additional capacity at existing locations and to seek
further acquisitions in the wider Textile Rental market.
We expect further progress in the second half and the result for
the full year to be slightly ahead of current market
expectations."
ANALYST MEETING
A presentation for analysts will be held today at 09.30 at
Investec, 2 Gresham Street, London, EC2V 7QP. A copy of the
presentation will be available on the Company's website
(www.jsg.com) following the meeting.
ENQUIRIES
Johnson Service Group PLC
Chris Sander, CEO
Yvonne Monaghan, CFO
Tel: 020 3772 2500 (on the day)
Tel: 01928 704 600 (thereafter)
Investec Investment Banking (NOMAD) Bell Pottinger
David Flin Rollo Crichton-Stuart
Matt Lewis Gavin Davis
James Rudd Greg Wood
Tel: 020 7597 4000 Tel: 020 3772 2500
Note: throughout this statement "adjusted operating profit"
refers to continuing operating profit before amortisation and
impairment of intangible assets (excluding software amortisation)
and exceptional items. "Adjusted profit before tax" refers to
adjusted operating profit less finance costs.
CHAIRMAN'S STATEMENT
I am pleased to report another strong performance by the Group
for the first half of 2015, ahead of expectations and significantly
ahead of 2014.
As announced on 1 May 2015, we expanded our presence in the
restaurant and catering linen market through the acquisition of
London Linen which has contributed to the strength of performance
in our Textile Rental business and has been immediately earnings
enhancing. This acquisition is a continuation of our strategy of
buying businesses that have synergies with our existing operations
and can be integrated with ease into the wider Group. The
reorganisation of the Drycleaning business, announced in January
2015, is being successfully implemented in line with our original
cost estimate and timescale.
Net debt at June 2015 was GBP72.4 million (December 2014:
GBP28.5 million, GBP73.1 million on a pro-forma basis) after
funding the London Linen acquisition for net consideration and
related expenses of GBP65.7 million and including the receipt of
GBP21.1 million of net proceeds from the Equity Placing in May
2015.
As a result of the Group's continued encouraging performance,
and in line with our stated intention to adopt a progressive
dividend policy, the Board has recommended a 30% increase in the
interim dividend to 0.65 pence (June 2014: 0.50 pence) which will
be paid on 6 November 2015 to Shareholders on the register at the
close of business on 9 October 2015.
Group Results
Total revenue in the six months to June 2015 was GBP109.2
million (June 2014: GBP101.6 million). The half benefitted from two
months contribution from London Linen but also reflected the impact
of the reduced number of Drycleaning branches. Adjusted operating
profit increased by 20.2% to GBP11.3 million (June 2014: GBP9.4
million).
Adjusted profit before tax amounted to GBP10.1 million (June
2014: GBP8.5 million). The underlying tax rate was 20.7% (June
2014: 22.2%).
Exceptional items in the first half of 2015 amounted to GBP7.6
million (June 2014: GBP1.4 million) comprising of acquisition costs
totalling GBP0.8 million, the previously announced costs associated
with the successful relocation of our Leeds Textile Rental plant of
GBP0.6 million and the costs incurred to date in implementing the
Drycleaning reorganisation of GBP6.2 million.
Net finance costs were GBP1.2 million (June 2014: GBP0.9
million) reflecting higher levels of bank borrowings following the
London Linen acquisition and including a higher notional interest
charge on net pension liabilities of GBP0.3 million (June 2014:
GBP0.1 million).
After amortisation and impairment of intangible assets
(excluding software amortisation) of GBP1.3 million (June 2014:
GBP0.7 million) the pre-tax profit was GBP1.2 million (June 2014:
GBP6.4 million).
Adjusted fully diluted earnings per share were 2.6 pence (June
2014: 2.3 pence) while fully diluted earnings per share after
amortisation and impairment of intangible assets (excluding
software amortisation) and exceptional items were 0.2 pence (June
2014: 1.7 pence).
Pension Deficit
The recorded net deficit after tax for all post-retirement
benefit obligations has reduced to GBP12.4 million at June 2015
from GBP14.8 million at December 2014. The reduction is due, in
part, to the increase in Corporate Bond yields, which determines
the discount rate applied to liabilities.
As part of our ongoing review of scheme liabilities, and in
consideration of new pension legislation, we are currently
reviewing the options which may offer eligible scheme members more
flexibility in accessing their benefits.
The current agreement with the Trustee of the defined benefit
pension scheme requires additional contributions of GBP1.9 million
in the year to December 2015, of which GBP1.0 million was incurred
during the first half.
Finances
Total net debt at the end of the first half was GBP72.4 million
(December 2014: GBP28.5 million), slightly better than management
expectations and reflecting the strong trading performance in the
first half, the financing of the London Linen acquisition and the
Equity Placing. Our leverage ratio has reduced to below 2.0x, some
six months earlier than previously stated.
The new bank facility, entered into prior to the London Linen
acquisition, matures in April 2020 and amounts to GBP100.0 million
with an additional GBP20.0 million short term facility available to
April 2016. The facility is considerably in excess of the
anticipated level of borrowings, with comfortable cover on all bank
covenants for the foreseeable future.
Interest cover based on adjusted operating profit was 9.4 times
(June 2014: 10.4 times), with interest costs on our floating rate
borrowings continuing to benefit from the current low levels of
LIBOR. Interest rate swaps are in place for GBP20.0 million of
borrowings, whereby LIBOR is replaced by a fixed rate of 1.79% to
January 2016. Two new interest rate swaps, each for GBP15.0 million
of borrowings, have been entered into whereby LIBOR is replaced by
a fixed rate of 1.4725% for the period January 2016 to January 2019
and 1.665% for the period January 2016 to January 2020.
Dividend
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In line with our stated intention to adopt a progressive
dividend policy, whilst maintaining an adequate level of cover, the
Board has proposed an interim dividend of 0.65 pence, representing
an increase of 30% over the same period last year (June 2014: 0.50
pence), and reflecting the earnings accretion from the two recent
acquisitions, the Board's confidence in the business going forward
and a rebalancing of interim and final dividend to be broadly in
line with historic ratios.
The interim dividend will be paid on 6 November 2015 to those
Shareholders on the register of members at the close of business on
9 October 2015. The ex-dividend date is 8 October 2015.
Employees
I would like to thank our employees throughout the Group for
their continuing support and commitment and, in particular, welcome
the employees of London Linen to the Group.
Outlook
I am very pleased with the strong performance of the Group in
the first half of the year and expect the full year results for
2015 to be slightly ahead of current market expectations. The
process of integrating London Linen into the wider Textile Rental
business is on-going and proceeding to plan.
The Board's medium term strategy of seeking further acquisitions
in Textile Rental and continuing to invest in existing locations to
optimise capacity remains unchanged.
Paul Moody
Non Executive Chairman
2 September 2015
CHIEF EXECUTIVE OFFICER'S OPERATING REVIEW
Textile Rental
Our Textile Rental business trades through four very well
recognised brands servicing three market sectors within Textile
Rental in the UK. These are "Apparelmaster", which predominantly
provides workwear rental and laundry services to all sectors of
industry, "Stalbridge" and "London Linen", which provide premium
linen services to the restaurant, hospitality and corporate events
market and "Bourne", which provides high volume hotel linen.
Textile Rental revenue increased by 15.2% to GBP85.7 million
(June 2014: GBP74.4 million), whilst adjusted operating profit
increased by 14.8% to GBP12.4 million (June 2014: GBP10.8 million)
helped by the addition of the London Linen business in April 2015
and a full six months of trading from Bourne. Overall, the Textile
Rental business continues to focus on customer service in order to
maintain its high customer retention levels and on targeted
investment across the division to improve production efficiency and
capacity.
Apparelmaster had a solid first half performance with sales to
both new and existing customers being positive, despite the
challenges of competitive market conditions. This, along with the
renewal of a number of National Accounts, has resulted in increased
investment in rental stock.
The business strategy to continually improve customer service
and quality levels together with the latest initiative to
streamline and simplify customer invoicing is being particularly
well received.
As part of the on-going investment in our workwear facilities
the new GBP8.5 million state of the art facility in Leeds is now
fully operational, delivering excellent levels of efficiency and
quality combined with lower energy consumption. This new facility
has significantly increased the garment processing capacity for
Apparelmaster in the North of England and will enable delivery
efficiencies to be realised in its trading area.
Further capital investment has been completed at the Perth
facility where a substantial extension to the building, together
with additional washing and finishing equipment, has been added to
accommodate future growth.
Stalbridge has returned a strong performance in the first half
of 2015 with improved customer retention and new sales driving
revenue growth. Lower central overheads and improved productivity
have led to an enhanced margin. A product review and tighter
controls on linen stock spend and management are improving linen
utilisation.
A vigorous marketing campaign was undertaken in the first half
of 2015, building on the strong brand in its core marketplace. New
sales materials have been developed to enhance and strengthen the
sales and marketing process.
There have been investments in new machinery during the first
half of 2015, and these are providing improvements in throughput
and product quality. New energy saving equipment has been installed
in the Glasgow factory, which has also been extended in size due to
strong demand for Stalbridge's premium service in Scotland and the
North East.
Stalbridge and London Linen are working together to streamline
customer relationships and transport links and, as a result, a
number of London Linen customers in Scotland are now being serviced
from the Stalbridge operation in Glasgow.
In line with the Group's continued focus on providing
exceptional customer service, the 'My Stalbridge' customer extranet
facility, which allows our customers to access their account
details on the internet, is proving to be very popular with
prospective and existing customers and further development work is
on-going to make this even more interactive and user friendly.
We are delighted with the acquisition of London Linen, which
complements the services provided by Stalbridge, where trading
during the initial two months since acquisition was in line with
our expectations. Revenue has increased compared to the same period
last year and we remain optimistic about the business
opportunities, particularly in the vibrant London restaurant
market.
At this early stage we are working very closely with the
management teams to improve the production capabilities and
efficiencies in the existing facilities and anticipate that a
number of capital investment programmes which are currently under
review will commence towards the end of this year and into
2016.
Bourne has traded well in the face of recent volatile market
conditions and some National contract churn in the high volume UK
hotel sector. Whilst this sector has experienced a lower occupancy
rate increase than in the previous year, we have added a net 17
hotels to the business so far this year.
In line with the Textile Rental ethos, Bourne has further
developed the quality and service provided to its customers and
photographic technology has been introduced to automate the
consistency of the finished linen.
In conjunction with this investment is the introduction of a web
ordering portal for customers combined with a paperless billing
facility which has been very well received.
Drycleaning
Our Drycleaning business is represented across the UK through
the highly recognised brands of "Johnson Cleaners", and our London
based premium brand, "Jeeves of Belgravia".
Revenue was down to GBP23.5 million (June 2014: GBP27.2 million)
reflecting the reduced number of branches following the
reorganisation programme. There were 210 branches and 128 Waitrose
locations trading at the end of June 2015. Adjusted operating
profit increased to GBP0.5 million (June 2014: GBP0.4 million).
The branch reorganisation is almost complete, with the closure
of 99 branches in a 3 month period. The total cost of the programme
remains at GBP6.5 million, in line with our initial estimates.
GBP6.2 million of this was incurred in the first half, of which
GBP3.1 million was expended in cash.
We are very pleased with the progress that we have made to date
with our partnership with Waitrose, adding a further 50 locations
in the period to June. We anticipate that additional locations will
be opened throughout the remainder of the year.
We have continued the development of new routes to reach our
customers at their place of work and through our online model which
includes the launch of Johnson's Bridal and a localised online
service for the cleaning of household goods.
Chris Sander
Chief Executive Officer
2 September 2015
Responsibility Statement
The condensed consolidated interim financial statements comply
with the Disclosure and Transparency Rules ("DTR") of the United
Kingdom's Financial Conduct Authority in respect of the requirement
to produce a half-yearly financial report. The interim report is
the responsibility of, and has been approved by, the Directors.
The Directors confirm that to the best of their knowledge:
-- this financial information has been prepared in accordance
with IAS 34, 'Interim Financial Reporting' as adopted by the
European Union;
-- this interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
-- this interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related party
transactions and changes therein).
The Directors of Johnson Service Group PLC are listed in the
Johnson Service Group PLC Annual Report for 2014. There have been
no changes since 31 December 2014. Details of the Directors are
available on the Johnson Service Group PLC website: www.jsg.com
By order of the Board
Yvonne Monaghan
Chief Financial Officer
2 September 2015
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Consolidated Income Statement
Half year Half year
to to Year ended
30 June 30 June 31 December
2015 2014 2014
Note GBPm GBPm GBPm
REVENUE FROM CONTINUING OPERATIONS 2 109.2 101.6 210.4
OPERATING PROFIT 2 2.4 7.3 13.4
OPERATING PROFIT BEFORE AMORTISATION AND IMPAIRMENT
OF INTANGIBLE ASSETS (EXCLUDING SOFTWARE AMORTISATION)
AND EXCEPTIONAL ITEMS 11.3 9.4 21.8
Amortisation and impairment of intangible
assets (excluding software amortisation) (1.3) (0.7) (1.6)
Exceptional items 3
- Restructuring and other costs (6.8) (0.8) (1.3)
- Costs in relation to business acquisition
activity (0.8) (0.6) (0.6)
- Pension costs - - (4.9)
OPERATING PROFIT 2 2.4 7.3 13.4
Finance cost (0.9) (0.8) (1.6)
Notional interest (0.3) (0.1) (0.2)
---------------------------------------------------- ---- --------- --------- ------------
Total finance cost (1.2) (0.9) (1.8)
PROFIT BEFORE TAXATION 1.2 6.4 11.6
Taxation charge * 4 (0.5) (1.6) (3.0)
Profit for the period from continuing
operations 0.7 4.8 8.6
Result for the period from discontinued
operations 12 - - -
PROFIT FOR THE PERIOD ATTRIBUTABLE TO
EQUITY HOLDERS 0.7 4.8 8.6
---------------------------------------------------- ---- --------- --------- ------------
EARNINGS PER SHARE
Basic earnings per share
From continuing operations 0.2p 1.7p 2.9p
Fully diluted earnings per share
From continuing operations 0.2p 1.7p 2.9p
Adjusted basic earnings per share
From continuing operations 2.6p 2.3p 5.3p
Adjusted fully diluted earnings per share
From continuing operations 2.6p 2.3p 5.2p
The notes on pages 13 to 25 form an integral part of these
condensed consolidated interim financial statements.
* Including GBP0.3 million credit (June 2014: GBP0.1 million
credit; December 2014: GBP0.4 million credit) relating to
amortisation and impairment of intangible assets (excluding
software amortisation), GBP1.3 million credit (June 2014: GBP0.2
million credit; December 2014: GBP1.1 million credit) in relation
to exceptional items of which GBPnil relates to prior year
adjustments (June 2014: GBPnil; December 2014: GBP0.3 million
credit).
Consolidated Statement of Comprehensive Income
Half year
to Half year Year ended
30 June to 30 June 31 December
2015 2014 2014
Note GBPm GBPm GBPm
Profit for the period / year 0.7 4.8 8.6
---------------------------------------------------- ---- ------------ -------------- --------------------
Items that will not be subsequently reclassified
to profit or loss
Re-measurement and experience gains /
(losses)
on post-employment benefit obligations 8 2.3 (5.7) (11.5)
Taxation (charge) / credit in respect
of re-measurement
and experience (gains) / losses (0.5) 1.1 2.3
Items that may be subsequently reclassified
to profit or loss
Cash flow hedges
(net of taxation) - fair value loss (0.2) (0.1) (0.4)
- transfers to operating
profit 0.1 - -
- transfers to finance
cost 0.2 0.2 0.3
--------------------------------------------------- ---- ------------ -------------- --------------------
Other comprehensive income / (loss) for
the period / year 1.9 (4.5) (9.3)
TOTAL COMPREHENSIVE INCOME / (LOSS) FOR
THE PERIOD / YEAR 2.6 0.3 (0.7)
---------------------------------------------------- ---- ------------ -------------- --------------------
Consolidated Statement of Changes in Shareholders' Equity
Capital
Share Share Merger Redemption Hedge Retained Total
Capital Premium Reserve Reserve Reserve Earnings Equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2014 26.2 14.1 1.6 0.6 (0.3) 28.3 70.5
-------------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Profit for the period - - - - - 4.8 4.8
Other comprehensive income
/ (loss) for the period - - - - 0.1 (4.6) (4.5)
-------------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Total comprehensive income
for the period - - - - 0.1 0.2 0.3
Share options (value of
employee services) - - - - - 0.3 0.3
Purchase of shares by EBT* - - - - - (0.9) (0.9)
Current tax on share options - - - - - 1.2 1.2
Deferred tax on share options - - - - - (1.0) (1.0)
Issue of share capital (net
of costs) 3.7 0.2 - - - 10.2 14.1
Dividend paid - - - - - (2.4) (2.4)
Transactions with Shareholders
recognised directly in Shareholders'
equity 3.7 0.2 - - - 7.4 11.3
-------------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Balance at 30 June 2014 29.9 14.3 1.6 0.6 (0.2) 35.9 82.1
-------------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Profit for the period - - - - - 3.8 3.8
Other comprehensive loss
for the period - - - - (0.2) (4.6) (4.8)
-------------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Total comprehensive loss
for the period - - - - (0.2) (0.8) (1.0)
Share options (value of
employee services) - - - - - 0.1 0.1
Issue of share capital (net
of costs) 0.1 0.2 - - - - 0.3
Dividend paid - - - - - (1.5) (1.5)
-------------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Transactions with Shareholders
recognised directly in Shareholders'
equity 0.1 0.2 - - - (1.4) (1.1)
-------------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Balance at 31 December 2014 30.0 14.5 1.6 0.6 (0.4) 33.7 80.0
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-------------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Profit for the period - - - - - 0.7 0.7
Other comprehensive income
for the period - - - - 0.1 1.8 1.9
-------------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Total comprehensive income
for the period - - - - 0.1 2.5 2.6
Share options (value of
employee services) - - - - - 0.2 0.2
Deferred tax on share options - - - - - 0.1 0.1
Issue of share capital (net
of costs) 3.1 0.1 - - - 18.0 21.2
Dividend paid - - - - - (3.6) (3.6)
-------------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Transactions with Shareholders
recognised directly in Shareholders'
equity 3.1 0.1 - - - 14.7 17.9
-------------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Balance at 30 June 2015 33.1 14.6 1.6 0.6 (0.3) 50.9 100.5
-------------------------------------- --------- --------- --------- ------------ --------- ---------- --------
* The Group has an Employee Benefit Trust (EBT) to administer
share plans and to acquire shares, using funds contributed by the
Group, to meet commitments to employee share schemes. At 30 June
2015, the EBT held 20,739 shares (30 June 2014 and 31 December
2014: 20,739 shares).
Consolidated Balance Sheet
As at As at As at
30 June 30 June 31 December
2015 2014 2014
Note GBPm GBPm GBPm
ASSETS
NON-CURRENT ASSETS
Goodwill 91.1 56.2 56.2
Intangible assets 36.5 12.5 11.7
Property, plant and equipment 57.0 46.5 51.3
Textile rental items 35.8 29.8 30.5
Trade and other receivables 1.1 1.8 3.3
Deferred income tax assets 3.3 4.4 4.6
224.8 151.2 157.6
---------------------------------------------- ----- -------- -------- ------------
CURRENT ASSETS
Inventories 2.8 2.0 2.1
Trade and other receivables 39.7 34.9 30.3
Cash and cash equivalents 1.1 0.1 0.2
43.6 37.0 32.6
---------------------------------------------- ----- -------- -------- ------------
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 53.2 44.2 43.7
Current income tax liabilities 1.8 0.8 1.5
Borrowings 13 5.3 3.7 6.9
Derivative financial liabilities 0.2 - -
Provisions 9.1 4.9 4.6
69.6 53.6 56.7
---------------------------------------------- ----- -------- -------- ------------
NET CURRENT LIABILITIES (26.0) (16.6) (24.1)
---------------------------------------------- ----- -------- -------- ------------
NON-CURRENT LIABILITIES
Post-employment benefit obligations 8 15.4 9.0 18.5
Deferred income tax liabilities 7.0 2.7 1.8
Other non-current liabilities 0.8 1.4 0.9
Borrowings 13 68.2 28.1 21.8
Derivative financial liabilities 0.1 0.2 0.4
Provisions 6.8 11.1 10.1
98.3 52.5 53.5
---------------------------------------------- ----- -------- -------- ------------
NET ASSETS 100.5 82.1 80.0
---------------------------------------------- ----- -------- -------- ------------
EQUITY
CAPITAL AND RESERVES ATTRIBUTABLE TO THE COMPANY'S
SHAREHOLDERS
Share capital 10 33.1 29.9 30.0
Share premium 14.6 14.3 14.5
Merger reserve 1.6 1.6 1.6
Capital redemption reserve 0.6 0.6 0.6
Hedge reserve (0.3) (0.2) (0.4)
Retained earnings 50.9 35.9 33.7
---------------------------------------------- ----- -------- -------- ------------
TOTAL SHAREHOLDERS' EQUITY 100.5 82.1 80.0
---------------------------------------------- ----- -------- -------- ------------
The notes on pages 13 to 25 form an integral part of these
condensed consolidated interim financial statements. The condensed
consolidated interim financial statements on pages 9 to 25 were
approved by the Board of Directors on 2 September 2015 and signed
on its behalf by:
Yvonne Monaghan
Chief Financial Officer
Consolidated Statement of Cash Flows
Half year Half year Year ended
to to 31 December
30 June 30 June 2014
2015 2014
Note GBPm GBPm GBPm
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the period 0.7 4.8 8.6
Adjustments for:
Income tax charge
/ (credit) - continuing operations 4 0.5 1.6 3.0
- discontinued operations 12 - - (0.7)
Finance income
and expense - continuing operations 1.2 0.9 1.8
Depreciation and impairment of tangible
fixed assets 15.3 13.5 28.3
Amortisation and impairment of intangible
fixed assets 1.3 0.7 1.6
Decrease in inventories 0.3 0.2 0.2
(Increase) / decrease in trade and other
receivables (3.1) (1.9) 0.6
Increase in trade and other payables 5.1 2.9 1.6
Pre-tax loss on disposal of business 12 - - 0.4
Costs in relation to business acquisition
activity charged to Income Statement 0.8 0.6 0.6
Deficit recovery payments in respect
of post-employment benefit obligations (1.0) (1.0) (2.0)
Share-based payments 0.2 0.3 0.4
Post-employment benefit obligations (0.1) (0.1) 4.6
Increase / (decrease) in provisions 0.7 (1.9) (3.1)
-------------------------------------------------- ---- --------- ----------------- ------------
Cash generated from operations 21.9 20.6 45.9
Interest paid (1.2) (1.4) (2.0)
Taxation paid (0.9) (0.2) (0.1)
-------------------------------------------------- ---- --------- ----------------- ------------
Net cash generated from operating activities 19.8 19.0 43.8
-------------------------------------------------- ---- --------- ----------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of business (net of cash acquired) 11 (65.7) (22.3) (22.4)
Proceeds from sale of business (net of
cash disposed) 12 0.2 - 0.1
Purchase of property, plant and equipment (3.8) (4.7) (11.6)
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Proceeds from sale of property, plant
and equipment 0.1 - 0.1
Purchase of intangible assets - - (0.1)
Purchase of textile rental items (12.8) (11.4) (24.9)
Proceeds received in respect of special
charges 1.0 0.9 1.9
Net cash used in investing activities (81.0) (37.5) (56.9)
-------------------------------------------------- ---- --------- ----------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 73.5 54.0 66.0
Repayments of borrowings (27.0) (52.0) (70.0)
Capital element of finance leases (0.5) (0.4) (0.8)
Purchase of own shares by EBT - (0.9) (0.9)
Net proceeds from issue of Ordinary shares 21.2 14.1 14.4
Dividend paid (3.6) (2.4) (3.9)
Net cash generated from financing activities 63.6 12.4 4.8
-------------------------------------------------- ---- --------- ----------------- ------------
Net increase / (decrease) in cash and
cash equivalents 2.4 (6.1) (8.3)
Cash and cash equivalents at beginning
of period (4.9) 3.4 3.4
Cash and cash equivalents at end of period 14 (2.5) (2.7) (4.9)
-------------------------------------------------- ---- --------- ----------------- ------------
The notes on pages 13 to 25 form an integral part of these
condensed consolidated interim financial statements.
Notes to the Condensed Consolidated Interim Financial
Statements
Johnson Service Group PLC (the "Company") and its subsidiaries
(together, the "Group") provide textile related services to both
businesses and consumers. The Group has two distinct operating
segments:
Textile Rental
Provision and laundering of workwear, roller towels, corporate
apparel, dust mats, premium linen for the hotel, catering and
hospitality markets, linen for the high volume hotel market and the
direct sale of associated products.
Drycleaning
Provision of retail and commercial drycleaning and other
associated support services.
The Company is incorporated and domiciled in the UK, its
registered number is 523335 and the address of its registered
office is Johnson House, Abbots Park, Monks Way, Preston Brook,
Cheshire, WA7 3GH. The Company is a public limited company and has
its primary listing on the AIM division of the London Stock
Exchange.
The condensed consolidated interim financial statements were
approved for issue by the Board on 2 September 2015.
1 BASIS OF PREPARATION
These condensed consolidated interim financial statements of the
Group are for the six months ended 30 June 2015. They have been
prepared in accordance with the Disclosure and Transparency Rules
of the Financial Conduct Authority and with IAS 34, 'Interim
Financial Reporting', as adopted by the European Union.
The condensed consolidated interim financial statements have not
been reviewed nor audited, nor do they comprise statutory accounts
for the purpose of Section 434 of the Companies Act 2006, 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 2014 consolidated financial
statements, which have been prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union.
Financial information for the year ended 31 December 2014
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, did not contain
an emphasis of matter paragraph and did not contain a statement
under Section 498 of the Companies Act 2006.
Financial information for the half year ended 30 June 2014
included herein is derived from the condensed consolidated interim
financial statements for that period.
Going Concern and Future Prospects
The Directors confirm that, based upon the information and
knowledge of which they can be reasonably expected to be aware,
they have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due for
a period of not less than 36 months from the date of this report,
and that it is, therefore, appropriate to adopt the going concern
principle in preparing these condensed consolidated interim
financial statements.
Whilst the Directors expect the future prospects of the Group to
extend beyond the 36 month period referred to above, this period
has been selected, for the purpose of this statement, based upon
the following:
-- the Group has a committed bank facility, with significant
headroom both in terms of covenant compliance and availability,
through to April 2020;
-- interest rate risk is mitigated through hedging arrangements
which, currently and until 8 January 2016, replace LIBOR with a
fixed rate of 1.7900% over GBP20.0 million of borrowings.
Thereafter, additional arrangements are in place such that LIBOR is
replaced with a fixed rate of 1.4725% over GBP15.0 million of
borrowings until 8 January 2019 and LIBOR is replaced with a fixed
rate of 1.6650% over a further GBP15.0 million of borrowings until
8 January 2020;
-- the Textile Rental business, which forms the largest part of
the Group, has a diversified customer base of some 45,000
customers, the majority of which have a formal contract in place,
with varying expiry dates of up to five years, and hence providing
a secure future income stream;
-- given the diverse and unrelated nature of the Group's
customer base, there is limited concentration of credit risk;
-- the Group has prepared a three year financial budget, which
has been reviewed, challenged and approved by the Board, that
projects positive earnings under all reasonably possible
scenarios;
-- the Group continuously strives to seek out and invest in
plant and equipment that will help drive operational
efficiencies;
-- the majority of the Group's key processing sites are owned on
either a freehold or long leasehold basis thereby providing
security of tenure;
-- the wide geographic spread of processing sites mitigates the
effect of a loss of any single processing facility and,
furthermore, appropriate insurance cover is in place such that the
increased cost of working following a loss of processing capacity
may, in some circumstances, be recovered; and
-- the Group continuously reviews the adequacy and strength of
its management teams to ensure that appropriate experience and
training is given and develops succession planning as part of the
development programmes for all employees.
Although the Board is confident of the future prospects of the
Group, there remain a number of risks and uncertainties, which are
often beyond the control of the Directors, which could mean that
actual results and events may differ from those budgeted.
2 SEGMENT ANALYSIS
Segment information is presented in respect of the Group's
operating segments, which are based on the Group's management and
internal reporting structure as at 30 June 2015. Details of the
Group's segments were provided on page 59 of the 2014 Annual
Report. Following its acquisition on 30 April 2015, London Linen
Supply Limited is included within the Textile Rental segment.
The chief operating decision-maker has been identified as the
Board of Directors (the "Board"). The Board reviews the Group's
internal reporting in order to assess performance and allocate
resources. Management has determined the operating segments based
on these reports and on the internal reporting structure.
The Board assesses the performance of the operating segments
based on a measure of operating profit, both including and
excluding the effects of exceptional items from the operating
segments, such as restructuring costs and impairments when the
impairment is the result of an isolated, exceptional event.
Interest income and expenditure are not included in the results for
each operating segment that is reviewed by the Board. Segment
results include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis, for example,
rental income received by Johnson Group Properties PLC is credited
back, where appropriate, to the paying company for the purposes of
segmental reporting. There have been no changes in measurement
methods used compared with the prior year.
Other information provided to the Board is measured in a manner
consistent with that in the financial statements. Segmental assets
exclude deferred income tax assets, current income tax assets and
cash and cash equivalents, all of which are managed on a central
basis. Segmental liabilities include non-bank borrowings, but
exclude deferred income tax liabilities, current income tax
liabilities, bank borrowings and derivative financial liabilities
all of which are managed on a central basis. These balances form
part of the reconciliation to total assets and liabilities.
Inter-segment pricing is determined on an arm's length basis.
Exceptional items have been included within the appropriate
operating segment as shown on pages 14 to 16.
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The operating segment results for the half year ended 30 June
2015, together with comparative figures, are as follows:
Textile All Other
Half year to 30 June 2015 Rental Drycleaning Segments Total
GBPm GBPm GBPm GBPm
REVENUE
Total revenue 85.7 23.5 - 109.2
----------------------------------------------------- --- ------------- -------- ------------ ---------- --------
RESULT
OPERATING PROFIT BEFORE AMORTISATION
AND IMPAIRMENT OF INTANGIBLE ASSETS
(EXCLUDING SOFTWARE AMORTISATION)
AND EXCEPTIONAL ITEMS 12.4 0.5 (1.6) 11.3
Amortisation and impairment
of intangible assets (1.3) - - (1.3)
Exceptional items:
- Restructuring and other
costs (0.6) (6.2) - (6.8)
- Costs in relation to business
acquisition activity (0.8) - - (0.8)
OPERATING PROFIT / (LOSS) 9.7 (5.7) (1.6) 2.4
Total finance cost (1.2)
Profit before taxation 1.2
Taxation (0.5)
----------------------------------------------------- ----------------- -------- ------------ ---------- --------
Profit for the period 0.7
Discontinued Textile All Other
Operations Rental Drycleaning Segments Total
GBPm GBPm GBPm GBPm GBPm
OTHER INFORMATION
Fixed asset additions
- Property, plant and equipment - 3.5 0.2 - 3.7
- Textile rental items - 13.9 - - 13.9
Depreciation and amortisation
expense
- Property, plant and equipment - 3.0 1.1 0.1 4.2
- Textile rental items - 11.1 - - 11.1
- Customer contracts - 1.3 - - 1.3
BALANCE SHEET INFORMATION
Segment assets 0.8 228.8 20.1 14.3 264.0
Unallocated assets: Deferred
income tax assets 3.3
Cash and cash
equivalents 1.1
----------------------------------------------------- ----------------- -------- ------------ ---------- --------
Total assets 268.4
----------------------------------------------------- ----------------- -------- ------------ ---------- --------
Segment liabilities (1.8) (45.4) (19.7) (6.4) (73.3)
Unallocated liabilities: Bank
borrowings (70.1)
Current income tax
liabilities (1.8)
Deferred income
tax liabilities (7.0)
Derivative financial
liabilities (0.3)
Post-employment
benefit
obligations (15.4)
------------------------------------------------------ ----------------- -------- ------------ ---------- --------
Total liabilities (167.9)
----------------------------------------------------- ----------------- -------- ------------ ---------- --------
RETURN ON CAPITAL EMPLOYED (rolling
12 months) 43.2% 52.0%
2 SEGMENT ANALYSIS (continued)
Textile All Other
Half year to 30 June 2014 Rental Drycleaning Segments Total
GBPm GBPm GBPm GBPm
REVENUE
Total revenue 74.4 27.2 - 101.6
----------------------------------------------------- ------------- -------- ------------ ---------- --------
RESULT
OPERATING PROFIT BEFORE AMORTISATION
AND IMPAIRMENT OF INTANGIBLE ASSETS
(EXCLUDING SOFTWARE AMORTISATION)
AND EXCEPTIONAL ITEMS 10.8 0.4 (1.8) 9.4
Amortisation and impairment
of intangible assets (0.7) - - (0.7)
Exceptional items:
- Restructuring and other
costs (0.8) - - (0.8)
- Costs in relation to
business acquisition activity (0.6) - - (0.6)
OPERATING PROFIT / (LOSS) 8.7 0.4 (1.8) 7.3
Finance cost (0.9)
Profit before taxation 6.4
Taxation (1.6)
----------------------------------------------------- ------------- -------- ------------ ---------- --------
Profit for the period 4.8
Discontinued Textile All Other
Operations Rental Drycleaning Segments Total
GBPm GBPm GBPm GBPm GBPm
OTHER INFORMATION
Fixed asset additions
- Property, plant and equipment - 5.1 0.6 - 5.7
- Textile rental items - 12.5 - - 12.5
Depreciation and amortisation
expense
- Property, plant and equipment - 3.0 1.0 0.1 4.1
- Textile rental items - 9.4 - - 9.4
- Customer contracts - 0.7 - - 0.7
BALANCE SHEET INFORMATION
Segment assets 1.1 145.4 22.3 14.9 183.7
Unallocated assets: Deferred
income tax assets 4.4
Cash and cash
equivalents 0.1
----------------------------------------------------- ------------- -------- ------------ ---------- --------
Total assets 188.2
----------------------------------------------------- ------------- -------- ------------ ---------- --------
Segment liabilities (2.4) (37.7) (18.4) (5.7) (64.2)
Unallocated liabilities:
Bank borrowings (29.2)
Current income tax
liabilities (0.8)
Deferred income
tax liabilities (2.7)
Derivative financial
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liabilities (0.2)
Post-employment
benefit
obligations (9.0)
------------------------------------------------------ ------------- -------- ------------ ---------- --------
Total liabilities (106.1)
----------------------------------------------------- ------------- -------- ------------ ---------- --------
RETURN ON CAPITAL EMPLOYED (rolling
12 months) 40.6% 18.2%
2 SEGMENT ANALYSIS (continued)
All
Textile Other
Year ended 31 December 2014 Rental Drycleaning Segments Total
GBPm GBPm GBPm GBPm
REVENUE
Total revenue 155.0 55.4 - 210.4
----------------------------------------------------- ----- ------------- -------- ------------ ---------- -----------------
RESULT
OPERATING PROFIT BEFORE AMORTISATION
AND IMPAIRMENT OF INTANGIBLE ASSETS
(EXCLUDING SOFTWARE AMORTISATION)
AND EXCEPTIONAL ITEMS 23.8 1.6 (3.6) 21.8
Amortisation and impairment of
intangible assets (1.6) - - (1.6)
Exceptional items:
- Restructuring and other costs (1.3) - - (1.3)
- Costs in relation to business
acquisition activity (0.6) - - (0.6)
- Pension costs - - (4.9) (4.9)
OPERATING PROFIT / (LOSS) 20.3 1.6 (8.5) 13.4
Finance cost (1.8)
Profit before taxation 11.6
Taxation (3.0)
------------------------------------------------------------ ------------- -------- ------------ ---------- -----------------
Profit for the period - from continuing
operations 8.6
Result for the period - from discontinued
operations (note 12) -
------------------------------------------------------------ ------------- -------- ------------ ---------- -----------------
Profit for the period 8.6
------------------------------------------------------------ ------------- -------- ------------ ---------- -----------------
All
Discontinued Textile Other
Operations Rental Drycleaning Segments Total
GBPm GBPm GBPm GBPm GBPm
OTHER INFORMATION
Fixed asset additions
- Property, plant and equipment - 13.7 1.0 - 14.7
- Textile rental items - 24.9 - - 24.9
- Intangible software - - 0.1 - 0.1
Depreciation and amortisation
expense
- Property, plant and equipment - 6.0 2.0 0.2 8.2
- Textile rental items - 20.1 - - 20.1
- Customer contracts - 1.6 - - 1.6
BALANCE SHEET INFORMATION
Segment assets 1.1 148.5 20.9 14.9 185.4
Unallocated assets: Deferred
income tax assets 4.6
Cash and cash
equivalents 0.2
---------------------------------------------------- ------ ------------- -------- ------------ ---------- -----------------
Total assets 190.2
---------------------------------------------------- ------ ------------- -------- ------------ ---------- -----------------
Segment liabilities (4.1) (37.2) (17.7) (3.4) (62.4)
Unallocated liabilities: Bank
borrowings (25.6)
Current income
tax
liabilities (1.5)
Deferred income
tax liabilities (1.8)
Derivative
financial
liabilities (0.4)
Post-employment benefit
obligations (18.5)
------------------------------------------------------------ ------------- -------- ------------ ---------- -----------------
Total liabilities (110.2)
---------------------------------------------------- ------ ------------- -------- ------------ ---------- -----------------
RETURN ON CAPITAL EMPLOYED (rolling
12 months) 42.0% 33.7%
3 EXCEPTIONAL ITEMS
Half year Half year Year ended
to to 31 December
30 June 30 June 2014
2015 2014
GBPm GBPm GBPm
Restructuring and other costs - Textile Rental (0.6) (0.8) (1.3)
- Drycleaning (6.2) - -
(6.8) (0.8) (1.3)
Costs in relation to business acquisition
activity (0.8) (0.6) (0.6)
Pension costs - - (4.9)
Total exceptional items (7.6) (1.4) (6.8)
------------------------------------------------ ----------- ---------- -------------
Current year exceptional items
Restructuring costs - Textile Rental
A new processing facility has been constructed to replace an
existing site in Leeds. The total cost of this relocation,
excluding the capital investment, is expected to be GBP2.3 million,
of which, GBP1.3 million was charged to exceptional items in 2014,
GBP0.8 million being in the six months to June 2014. A further
GBP0.6 million has been charged in the six months to June 2015 and
the balance, in relation to the decommissioning of the old site, is
expected to be incurred in the second half of 2015.
Restructuring costs - Drycleaning
As previously announced on 6 January 2015, the Drycleaning
business continues to operate in a difficult high street
environment. In parallel with the strategy to develop alternative,
more convenient collection and delivery locations, the lease
profile of our existing estate was reviewed and 109 branches were
identified, the majority of which had leases expiring within the
next two years, where renewal will not be financially viable. Of
these branches, 99 closed during the first half of 2015.
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The estimated charge to the Group's Income Statement for the
restructuring of the Drycleaning business and associated property
provisions is, in aggregate, approximately GBP6.5 million net, of
which GBP6.2 million was recognised in the first half of 2015. The
remaining GBP0.3 million is expected to be recognised in the second
half of 2015.
Costs in relation to business acquisition activity
During the period to 30 June 2015, professional fees of GBP0.5
million and stamp duty of GBP0.3 million were paid relating to the
acquisition of London Linen Supply Limited. Further information
relating to the acquisition is provided in note 11.
Prior year exceptional items
Restructuring costs - Textile Rental
As noted above, GBP1.3 million was charged in 2014 (GBP0.8
million being in the six months to June 2014) in relation to the
relocation of a processing facility in Leeds.
Costs in relation to business acquisition activity
During the prior year, costs relating to business acquisition
activity of GBP0.6 million were recognised. Professional fees of
GBP0.4 million and stamp duty of GBP0.1 million were paid relating
to the acquisition of Bourne Services Group Limited. The remainder
of the cost relates to fees and expenses incurred during
negotiations with undisclosed targets.
Pension costs
During the prior year, the Group closed it defined benefit
pension scheme, the Johnson Group Defined Benefit Scheme (JGDBS) to
future accrual. The resulting past service cost of GBP4.7 million
was recognised as an exceptional cost together with GBP0.2 million
of other associated costs.
4 TAXATION
Half year Half year Year ended
to to 31 December
30 June 30 June 2014
2015 2014
GBPm GBPm GBPm
Current tax
UK corporation tax charge for the period 0.5 1.5 2.9
Adjustment in relation to previous periods - - (0.4)
--------------------------------------------------- ---------- ---------- -------------
Current tax charge for the period 0.5 1.5 2.5
Deferred tax
Origination and reversal of temporary differences - 0.1 (0.1)
Adjustment in relation to previous periods - - 0.6
Deferred tax charge for the period - 0.1 0.5
--------------------------------------------------- ---------- ---------- -------------
Total charge for taxation included in the
income statement for continuing operations 0.5 1.6 3.0
--------------------------------------------------- ---------- ---------- -------------
Taxation in relation to amortisation and impairment of
intangible assets has reduced the charge in the current period by
GBP0.3 million (June 2014: GBP0.1 million reduction in the charge;
December 2014: GBP0.4 million reduction in the charge). Taxation on
exceptional items in the current period has reduced the charge for
taxation relating to continuing operations by GBP1.3 million (June
2014: GBP0.2 million reduction in the charge; December 2014: GBP1.1
million reduction in the charge) of which GBPnil (June 2014:
GBPnil; December 2014: GBP0.3 million credit) relates to the prior
year.
4 TAXATION (continued)
Changes in the UK corporation tax rate
The UK corporation tax rate reduced from 21.0% to 20.0% on 1
April 2015. The impact of this rate reduction was previously
reflected in the deferred income tax balances as at 31 December
2014 and therefore this change in rate has not had any further
material effect on the deferred income tax provision of the
Group.
The change will result in a weighted average standard rate of
20.25% for 2015 (2014: 21.50%).
Changes to the UK corporation tax rates were announced in the
Chancellor's Budget on 8 July 2015. These include reductions to the
main rate to 19.0% from 1 April 2017 and to 18.0% from 1 April
2020. As these changes had not been substantively enacted at the
balance sheet date the effect is not included in these financial
statements. The overall effect of these changes, if they had
applied to the deferred income tax balance at the balance sheet
date, would be to reduce the deferred income tax asset by GBP0.3
million and reduce the deferred income tax expense for the period
by GBP0.7 million.
Reconciliation of effective tax rate
Taxation on non-exceptional items for the six months to 30 June
2015 is calculated based on the estimated average annual effective
tax rate (excluding prior year items) of 20.7% (six months ended 30
June 2014: 22.2%; year ended 31 December 2014: 22.6%). This
compares to the tax rate expected to be enacted or substantively
enacted at the balance sheet date of 20.0% (six months ended 30
June 2014: 21.0%; year ended 31 December 2014: 21.0%).
Taxation on exceptional items is calculated based on the actual
tax charge or credit for each specific item.
Differences between the estimated average annual effective tax
rate and statutory rate include, but are not limited to, the effect
of non-deductible expenses and the effect of tax losses utilised.
The adjustment for under or over provisions in previous years is
recognised when the amounts are agreed.
5 ADJUSTED PROFIT BEFORE AND AFTER TAXATION
Half year Half year Year ended
to to 31 December
30 June 30 June 2014
2015 2014
GBPm GBPm GBPm
Profit before taxation from continuing
operations 1.2 6.4 11.6
Amortisation and impairment of intangible
assets (excluding software amortisation) 1.3 0.7 1.6
Restructuring and other costs 6.8 0.8 1.3
Costs in relation to business acquisition
activity 0.8 0.6 0.6
Pension costs - - 4.9
Adjusted profit before taxation 10.1 8.5 20.0
Taxation on adjusted profit (2.1) (1.9) (4.5)
--------------------------------------------- ---------- ---------- -------------
Adjusted profit after taxation attributable
to continuing operations 8.0 6.6 15.5
--------------------------------------------- ---------- ---------- -------------
6 DIVIDENDS
Half year Half year Year ended
to to 31 December
30 June 30 June 2014
2015 2014
Dividend per share (pence)
2015 Interim dividend proposed 0.65 - -
2014 Interim dividend proposed and paid - 0.50 0.50
2014 Final dividend proposed and paid - - 1.20
----------------------------------------- ---------- ---------- -------------
0.65 0.50 1.70
----------------------------------------- ---------- ---------- -------------
Half year Half year Year ended
to to 31 December
30 June 30 June 2014
2015 2014
Shareholders' funds utilised (GBPm)
2015 Interim dividend proposed 2.1 - -
2014 Interim dividend proposed and paid - 1.5 1.5
2014 Final dividend proposed and paid - - 3.6
On 15 May 2015 a final dividend of 1.20 pence per Ordinary share
in respect of 2014 was paid to Shareholders, utilising GBP3.6
million of Shareholders' funds.
The Directors are proposing an interim dividend in respect of
the year ended 31 December 2015 of 0.65 pence which will reduce
Shareholders' funds by GBP2.1 million. The dividend will be paid on
6 November 2015 to Shareholders on the register of members at the
close of business on 9 October 2015. The Trustee of the EBT has
waived its entitlement to receive dividends on the Ordinary shares
held by the Trust.
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In accordance with International Financial Reporting Standards,
these condensed consolidated interim financial statements do not
reflect a liability in respect of the proposed interim
dividend.
7 EARNINGS PER SHARE
Half year Half Year
to year to ended
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
Profit for the period from continuing operations
attributable to Shareholders 0.7 4.8 8.6
Amortisation and impairment of intangible assets
from continuing operations (net of taxation) 1.0 0.6 1.2
Exceptional items from continuing operations
(net of taxation) 6.3 1.2 5.7
Exceptional items from discontinued operations
(net of taxation) - - (0.2)
Adjusted profit attributable to Shareholders
relating to continuing activities 8.0 6.6 15.5
Adjusted loss attributable to Shareholders
relating to discontinued activities - - (0.2)
----------------------------------------------------- ------------ ------------ --------------
Adjusted profit attributable to Shareholders 8.0 6.6 15.3
----------------------------------------------------- ------------ ------------ --------------
Number Number Number
of shares of shares of shares
Weighted average number of Ordinary shares 309,231,073 284,388,080 291,829,363
Potentially dilutive options* 2,908,147 7,278,082 5,001,228
----------------------------------------------------- ------------ ------------ --------------
Fully diluted number of Ordinary shares 312,139,220 291,666,162 296,830,591
----------------------------------------------------- ------------ ------------ --------------
Pence Pence Pence
Basic earnings per share per share per share per share
----------------------------------------------------- ------------ ------------ --------------
From continuing operations 0.2p 1.7p 2.9p
From discontinued operations - - -
----------------------------------------------------- ------------ ------------ --------------
From continuing and discontinued operations 0.2p 1.7p 2.9p
Adjustment for amortisation of intangibles
assets (continuing operations) 0.3p 0.2p 0.4p
Adjustment for exceptional items (continuing
operations) 2.1p 0.4p 2.0p
Adjusted basic earnings per share (continuing
operations) 2.6p 2.3p 5.3p
Adjusted basic earnings per share (discontinued
operations) - - -
----------------------------------------------------- ------------ ------------ --------------
Adjusted basic earnings per share from continuing
and discontinued operations 2.6p 2.3p 5.3p
----------------------------------------------------- ------------ ------------ --------------
Diluted earnings per share
----------------------------------------------------- ------------ ------------ --------------
From continuing operations 0.2p 1.7p 2.9p
From discontinued operations - - -
----------------------------------------------------- ------------ ------------ --------------
From continuing and discontinued operations 0.2p 1.7p 2.9p
----------------------------------------------------- ------------ ------------ --------------
Adjustment for amortisation of intangibles
assets (continuing operations) 0.3p 0.2p 0.4p
Adjustment for exceptional items (continuing
operations) 2.1p 0.4p 1.9p
Adjusted diluted earnings per share (continuing
operations) 2.6p 2.3p 5.2p
Adjusted diluted earnings per share (discontinued
operations) - - -
----------------------------------------------------- ------------ ------------ --------------
Adjusted diluted earnings per share from continuing
and discontinued operations 2.6p 2.3p 5.2p
----------------------------------------------------- ------------ ------------ --------------
* Includes outstanding share options granted to employees.
Basic earnings per share is calculated using the weighted
average number of shares in issue during the period, excluding
those held by the EBT, based on the profit for the period
attributable to Shareholders.
Adjusted earnings per share figures exclude the effects of
amortisation and impairment of intangible assets (excluding
software amortisation) 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
potential dilutive Ordinary shares. The Company has potential
dilutive 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 period.
Potential Ordinary shares are dilutive at the point, from a
continuing operations level, when their conversion to Ordinary
shares would decrease earnings per share or increase loss per share
from continuing operations. For the six months ended 30 June 2015,
six months ended 30 June 2014 and year ended 31 December 2014,
potential Ordinary shares have been treated as dilutive, as their
inclusion in the earnings per share calculation decreases earnings
per share.
There were no material events occurring after the balance sheet
date that would have changed significantly the number of Ordinary
shares or potential dilutive Ordinary shares outstanding at the
balance sheet date, if those transactions had occurred before the
end of the reporting period.
8 RETIREMENT BENEFIT OBLIGATIONS
The Group has applied the requirements of IAS 19R, 'Employee
Benefits' to its employee pension schemes and post-employment
healthcare benefits.
In the six months to 30 June 2015 deficit recovery payments of
GBP1.0 million in aggregate were paid by the Group to the defined
benefit scheme (June 2014: GBP1.0 million; December 2014: GBP2.0
million).
Following discussions with the Group's appointed actuary a
re-measurement gain of GBP2.3 million has been recognised in the
period to 30 June 2015. This is principally as a result of a loss
on the return on assets of GBP3.0 million offset by a GBP5.3
million financial assumptions gain on the scheme liabilities.
The Johnson Group Defined Benefit Scheme (JGDBS) was closed to
future accrual as at 31 December 2014. This resulted in a past
service cost of GBP4.7 million being recognised as an exceptional
item together with GBP0.2 million of associated costs in the year
to 31 December 2014.
The gross post-employment benefit obligation and associated
deferred income tax asset thereon, together with the net
obligation, is shown below:
As at As at As at
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
Gross post-employment benefit obligation (15.4) (9.0) (18.5)
Deferred income tax asset thereon 3.0 1.8 3.7
------------------------------------------ --------- --------- -------------
Net post-employment benefit obligation (12.4) (7.2) (14.8)
------------------------------------------ --------- --------- -------------
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The reconciliation of the opening gross post-employment benefit
obligation to the closing gross post-employment benefit obligation
is shown below:
As at As at As at
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
Opening post-employment benefit obligation 18.5 4.3 4.3
Current service cost - 0.2 0.3
Past service cost - - 4.7
Notional interest 0.3 0.1 0.2
Employer contributions (1.0) (1.2) (2.5)
Re-measurement (gains) / losses (2.3) 5.7 11.5
Utilisation of healthcare provision (0.1) (0.1) -
-------------------------------------------- --------- --------- -------------
Closing post-employment benefit obligation 15.4 9.0 18.5
-------------------------------------------- --------- --------- -------------
9 CAPITAL EXPENDITURE AND COMMITMENTS
CAPITAL EXPENDITURE
In the half year ended 30 June 2015 the Group acquired property,
plant and equipment and intangible assets for a cost of GBP3.7
million (half year ended 30 June 2014: GBP5.7 million; year ended
31 December 2014: GBP14.8 million), not including property, plant
and equipment and intangible assets acquired through business
combinations. In addition, textile rental items with a cost of
GBP13.9 million were acquired during the period (half year ended 30
June 2014: GBP12.5 million; year ended 31 December 2014: GBP24.9
million), not including textile rental items acquired through
business combinations.
Offsetting this, property, plant and equipment with a net book
value of GBP0.1 million was disposed of during the period (half
year ended 30 June 2014: GBPnil; year ended 31 December 2014:
GBP0.1 million). In addition, amounts received in respect of
textile rental special charges were GBP1.0 million (half year ended
30 June 2014: GBP0.9 million; year ended 31 December 2014: GBP1.9
million).
CAPITAL COMMITMENTS
Orders placed for future capital expenditure contracted but not
provided for in the financial statements are shown below:
As at As at As at
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
Property, plant and equipment 0.8 5.5 1.5
------------------------------- --------- --------- -------------
10 SHARE CAPITAL
The Company's authorised share capital is 383,025,739 Ordinary
shares of 10p each. This has been unchanged throughout the current
and prior periods.
Issued share capital has increased as follows:
Half year Half year Year ended
to to 31 December
30 June 30 June 2014
2015 2014
GBPm GBPm GBPm
Share capital at the start of the period 30.0 26.2 26.2
New shares issued 3.1 3.7 3.8
------------------------------------------ ---------- ---------- -------------
Share capital at the end of the period 33.1 29.9 30.0
------------------------------------------ ---------- ---------- -------------
As at 30 June 2015 the Company has issued share capital of
330,510,982 Ordinary Shares of 10p each.
During the period, the Company placed 30.0 million Ordinary
shares (the "Placing") with existing and new institutional
investors raising net proceeds of GBP21.1 million of which GBP3.0
million was credited to share capital. Additional proceeds of
GBP0.1 million were received in relation to the exercise of
employee share options. The Placing was undertaken using a cash box
structure. As a result, the Company was able to take relief under
section 612 of the Companies Act 2006 from crediting share premium
and instead transfer the net proceeds in excess of the nominal
value to retained earnings.
The Placing shares represented approximately 10.0 per cent of
the Company's existing share capital. The Placing price of 73 pence
per share was equal to the closing mid-market price per Ordinary
Share on 30 April 2015, being the latest practicable date prior to
the announcement of the Placing.
The Placing shares in all periods were issued as fully paid and
rank pari passu in all respects with the existing Ordinary shares,
including the right to receive all dividends and other
distributions declared, made or paid in respect of shares after the
date of issue of the Placing shares, other than in respect of the
final dividend of 1.20 pence per share for the year ended 31
December 2014.
11 BUSINESS COMBINATIONS
On 30 April 2015 the Group acquired 100% of the share capital of
London Linen Supply Limited ("London Linen") for a net
consideration of GBP64.9 million (being GBP69.3 million
consideration less cash acquired of GBP4.4 million) plus associated
fees.
Since acquisition, London Linen has generated a profit of GBP0.7
million on revenue of GBP5.6 million. Had the business been
acquired at the start of the period it is estimated that profit of
GBP2.0 million would have been generated on revenue of GBP15.7
million.
The provisional fair value of assets and liabilities acquired
are as follows:
Initial
Accounting fair value
Net assets Fair value policy of assets
acquired adjustments realignment acquired
GBPm GBPm GBPm GBPm
Intangible assets - Goodwill - 34.9 - 34.9
Intangible assets - Customer
lists and contracts - 25.5 - 25.5
Intangible assets - Software 0.6 - - 0.6
Property, plant and equipment 6.6 - (0.3) 6.3
Rental stock items in circulation 2.9 - 0.6 3.5
Stock 1.0 - - 1.0
Debtors 4.4 - - 4.4
Cash 4.4 - - 4.4
Trade and other creditors (4.6) - - (4.6)
Current income tax liability (0.7) - - (0.7)
Deferred income tax liability (0.9) (5.1) - (6.0)
13.7 55.3 0.3 69.3
----------------------------------- ----------- ------------- ------------- ------------
As the acquisition has had a relatively short period of
ownership the amounts above are provisional and subject to
adjustment.
Goodwill represents the expected benefits to the wider Group
arising from the acquisition plus the deferred income tax arising
from the recognition of the customer lists and contracts.
On 3 March 2014 the Group acquired 100% of the share capital of
Bourne Services Group Limited along with its subsidiary company
Bourne Textile Services Limited. The consideration paid and net
assets acquired remain as disclosed in the 2014 Annual Report.
11 BUSINESS COMBINATIONS (continued)
The cash flows in relation to business acquisition activity are
summarised below:
Half year Half year Year ended
to to 31 December
30 June 30 June 2014
2015 2014
GBPm GBPm GBPm
Consideration paid 69.3 26.7 26.7
Cash acquired (4.4) (4.9) (4.9)
Fees paid in relation to business acquisition
activity 0.8 0.5 0.6
65.7 22.3 22.4
----------------------------------------------- ---------- ---------- -------------
12 DISPOSALS AND DISCONTINUED OPERATIONS
DISPOSALS
There have been no business disposals in the six months to 30
June 2015, or in the year ended 31 December 2014.
On 7 August 2013, the Group disposed of its Facilities
Management division. During the 6 months to 30 June 2015 the Group
received GBP0.3 million of contingent consideration in relation to
the Facilities Management division disposal.
DISCONTINUED OPERATIONS
Discontinued operations in the prior year include the following
items:
-- Additional provisions of GBP0.3 million relating to future
lease commitments on properties, along with the related taxation
credit.
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-- A revision of the best estimate of the contingent
consideration receivable on the Facilities Management disposal,
which resulted in a loss of GBP0.4 million
-- A tax credit relating to the disposal of the disposal of the
Facilities Management division.
The total result relating to discontinued operations is as
follows:
Half year Half year Year ended
to to 31 December
30 June 30 June 2014
2015 2014
GBPm GBPm GBPm
Operating loss before amortisation and
impairment of intangible assets (excluding
software amortisation) and exceptional
items - - (0.3)
Loss before interest and taxation from
discontinued operations - - (0.3)
Taxation - - 0.1
--------------------------------------------- ----------- ----------- -------------------
Loss for the period (0.2)
Pre-tax loss on disposal - - (0.4)
Taxation - - 0.6
Profit on disposal - - 0.2
Result from discontinued operations - - -
--------------------------------------------- ----------- ----------- -------------------
Cash flows relating to discontinued operations are as
follows:
Half year Half year Year ended
to to 31 December
30 June 30 June 2014
2015 2014
GBPm GBPm GBPm
Proceeds from disposal 0.3 0.1 0.1
Payment of costs relating to the disposal (0.1) (0.1) -
Proceeds from sale of business 0.2 - 0.1
Net cash (used in) / generated from
operating activities (0.4) 0.2 (0.8)
Net cash flow relating to discontinued
operations (0.2) 0.2 (0.7)
------------------------------------------- ---------- ---------- -------------
13 BORROWINGS
As at 30 June 2015 the Group had a banking facility under which
bank loans were secured and drawn down under a committed facility
dated 24 April 2015 comprising a GBP100.0 million rolling credit
facility (including an overdraft) which runs to April 2020 and a
GBP20.0 million short term facility expiring on 23 April 2016.
Individual tranches are drawn down, in sterling, for periods of
up to six months at LIBOR rates of interest prevailing at the time
of drawdown, plus the applicable margin. The margin varies between
1.25% and 2.25%. As at 30 June 2015, GBP20.0 million of the bank
facility was subject to hedging arrangements which had the effect
of replacing LIBOR with a fixed rate of 1.79%.
Bank loans are stated net of unamortised issue costs of GBP0.9
million (30 June 2014: GBP0.6 million; 31 December 2014: GBP0.5
million).
14 ANALYSIS OF NET DEBT
Debt
Cash and Debt due after
cash equivalents due within more than Finance Total
one year one year leases net debt
GBPm GBPm GBPm GBPm GBPm
Balance at 31 December
2013 3.4 - (25.0) (2.9) (24.5)
Cash flow (6.1) - (2.0) 0.4 (7.7)
Other non-cash changes - - 0.6 (0.1) 0.5
------------------------ ------------------- -------------------- ------------------ -------- ----------
Balance at 30 June
2014 (2.7) - (26.4) (2.6) (31.7)
------------------------ ------------------- -------------------- ------------------ -------- ----------
Cash flow (2.2) (1.0) 7.0 0.4 4.2
Other non-cash changes - 0.2 (0.3) (0.9) (1.0)
------------------------ ------------------- -------------------- ------------------ -------- ----------
Balance at 31 December
2014 (4.9) (0.8) (19.7) (3.1) (28.5)
------------------------ ------------------- -------------------- ------------------ -------- ----------
Cash flow 2.4 - (46.5) 0.5 (43.6)
Other non-cash changes - 0.1 0.4 (0.8) (0.3)
------------------------ ------------------- -------------------- ------------------ -------- ----------
Balance at 30 June
2015 (2.5) (0.7) (65.8) (3.4) (72.4)
------------------------ ------------------- -------------------- ------------------ -------- ----------
The cash and cash equivalents figures are comprised of the
following balance sheet amounts:
As at 30 As at As at 31
June 30 June December
2015 2014 2014
GBPm GBPm GBPm
Cash and cash equivalents (Current assets) 1.1 0.1 0.2
Overdraft (Borrowings, Current liabilities) (3.6) (2.8) (5.1)
(2.5) (2.7) (4.9)
--------------------------------------------- --------- --------- ----------
15 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Half year Half Year ended
to year 31 December
30 June to 2014
2015 30 June
2014
GBPm GBPm GBPm
Inflow / (outflow) in cash in the period 2.4 (6.1) (8.3)
Cash (outflow) / inflow on change in
debt and lease financing (46.0) (1.6) 4.8
------------------------------------------ ---------- --------- -----------------
Outflow in net debt resulting from cash
flows (43.6) (7.7) (3.5)
Movement in unamortised issue costs of
bank loans 0.5 0.6 0.5
New finance leases (0.8) (0.1) (1.0)
Outflow in net debt during the period (43.9) (7.2) (4.0)
Opening net debt (28.5) (24.5) (24.5)
------------------------------------------ ---------- --------- -----------------
Closing net debt (72.4) (31.7) (28.5)
------------------------------------------ ---------- --------- -----------------
16 RELATED PARTY TRANSACTIONS
Transactions during the year between the Company and its
subsidiaries, which are related parties, have been conducted on an
arm's length basis and eliminated on consolidation. Full details of
the Group's other related party relationships, transactions and
balances are given in the Group's financial statements for the year
ended 31 December 2014. There have been no material changes in
these relationships in the half year to 30 June 2015 or up to the
date of this Report.
17 CONTINGENT LIABILITIES
The Group operates from a number of sites across the UK. Some of
the sites have operated as laundry sites for many years and
historic environmental liabilities may exist. Such liabilities are
not expected to give rise to any significant loss.
The Group has granted its Bankers and Trustee of the Pension
Schemes security over the assets of the Group. The priority of
security is as follows: for the first GBP56.0 million the Bankers
and Trustee rank pari passu; for the next GBP99.0 million in excess
of the GBP56.0 million the Bankers have priority and for anything
over GBP155.0 million the Bankers and Trustee rank pari passu.
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