TIDMJSG
RNS Number : 5278Q
Johnson Service Group PLC
01 March 2016
Johnson Service Group PLC
Preliminary Announcement for the Financial Year ended 31
December 2015
"Continuing strong growth"
Johnson Service Group PLC (the 'Group'), the leading UK textile
services business, announces its Preliminary Results for the
financial year ended 31 December 2015.
FINANCIAL HIGHLIGHTS
Continuing Operations 2015 2014 Increase
--------------------------------- ---------- ---------- ----------
Revenue GBP234.4m GBP210.4m 11.4%
Adjusted Operating Profit(1) GBP27.9m GBP21.8m 28.0%
Adjusted Profit Before Tax(2) GBP25.2m GBP20.0m 26.0%
Adjusted Fully Diluted Earnings
Per Share(3) 6.30p 5.20p 21.2%
Profit Before Tax GBP12.7m GBP11.6m 9.5%
Dividend 2.10p 1.70p 23.5%
Net Debt GBP71.2m GBP28.5m n/a
OPERATIONAL HIGHLIGHTS
-- Continuing strong performance with Adjusted Operating Profit(1)
up 28% to GBP27.9 million and Adjusted Profit Before Tax(2)
up 26% to GBP25.2 million
-- Strategic acquisitions of London Linen and Ashbon successfully
completed and immediately earnings enhancing
-- Textile Rental performed ahead of management expectations
with high levels of customer retention
-- Restructuring of Drycleaning successfully completed; positive
progress with our Waitrose partnership
-- Sustained increase in Adjusted Earnings Per Share; Final
Dividend up 20.8% to 1.45p, making a full year dividend of
2.10p, an increase of 23.5%
Chris Sander, Chief Executive Officer of Johnson Service Group,
commented:
"Our business sustained strong growth momentum in 2015, as
demonstrated by the increase in revenue and adjusted profit before
tax. The acquisitions of London Linen and Ashbon have successfully
increased our reach and capability in the key hotel, restaurant and
catering market. The Group remains focused on ensuring the best
possible service for our customers and sustainable returns for our
shareholders. We are well placed to continue our growth both
organically and through earnings enhancing acquisitions."
1 'Adjusted Operating Profit' is before charging GBP3.5 million
(2014: GBP1.6 million) of amortisation and impairment of intangible
assets (excluding software amortisation) and GBP9.0 million (2014:
GBP6.8 million) of exceptional items.
2 'Adjusted Profit Before Tax' is Adjusted Operating Profit, less total finance cost.
3 'Adjusted Fully Diluted Earnings per Share' is calculated
using Adjusted Profit Before Tax, and deducting the charge to, or
adding the credit for, taxation thereon.
ANALYST MEETING
The Company will present to analysts at 09:30 today at Investec,
2 Gresham St, 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
www.jsg.com
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 total finance cost.
CHAIRMAN'S STATEMENT
Overview
I am delighted to report that the Group continues to make very
good progress, delivering a result which is significantly ahead of
2014. Our successful acquisitions of London Linen and Ashbon during
the year have been immediately earnings enhancing. Our
Apparelmaster and Stalbridge businesses have continued to perform
ahead of expectations.
Since the year end we have completed the acquisition of Zip
Textiles (Services) Limited, which complements our existing Bourne
business.
The implementation of the restructuring of our Drycleaning
business has been completed successfully and we have further
developed our relationship with Waitrose.
Given the encouraging performance of the Group, and our
confidence in the future prospects of the business, we are
proposing a final dividend of 1.45 pence per share, making a total
dividend for the full year of 2.10 pence, an increase of 23.5%.
Group Results
Total revenue for the year increased to GBP234.4 million (2014:
GBP210.4 million) benefiting from the acquisitions of London Linen
in April 2015 and Ashbon in November 2015. Underlying organic
growth was 4.1%. Adjusted operating profit increased by 28.0% to
GBP27.9 million (2014: GBP21.8 million). The key drivers of this
performance are explained further in the Chief Executive's
Operating Review.
Total finance cost was GBP2.7 million (2014: GBP1.8 million),
reflecting higher average bank borrowings and an increase in the
notional interest charge on net pension liabilities to GBP0.6
million (2014: GBP0.2 million).
Adjusted profit before tax increased by 26.0% to GBP25.2 million
(2014: GBP20.0 million).
Amortisation and impairment of intangible assets (excluding
software amortisation) increased to GBP3.5 million (2014: GBP1.6
million), reflecting the acquisitions of London Linen and Ashbon.
Exceptional items amounted to an aggregate charge of GBP9.0 million
(2014: GBP6.8 million) and comprise the costs incurred in
implementing the Drycleaning restructuring of GBP6.5 million as
announced in January 2015, costs in relation to business
acquisition activity and subsequent restructuring totalling GBP1.5
million, and the final costs arising from the successful relocation
to our new workwear processing facility in Leeds amounting to
GBP1.0 million.
Profit before tax was GBP12.7 million (2014: GBP11.6
million).
The effective tax rate on adjusted profit before tax was 19.5%
(2014: 22.4%). After the amortisation and impairment of intangible
assets (excluding software amortisation) and exceptional items
noted above, the post-tax profit from continuing operations was
GBP10.3 million (2014: GBP8.6 million).
Adjusted fully diluted earnings per share from continuing
operations were up 21.2% to 6.3 pence (2014: 5.2 pence). Fully
diluted earnings per share from continuing operations after
exceptional items were 3.2 pence (2014: 2.9 pence).
Dividend
The Board is recommending a final dividend of 1.45 pence per
share (2014: 1.20 pence), making a total dividend in respect of
2015 of 2.10 pence per share (2014: 1.70 pence), an increase of
23.5%. The dividend increase reflects the significant increase in
underlying adjusted profit before tax and our confidence in the
prospects of the business.
The proposed final dividend, if approved by Shareholders, will
be paid on 13 May 2016 to Shareholders on the register at close of
business on 15 April 2016. The ex-dividend date is 14 April
2016.
Finances
Total net debt at the end of 2015 was GBP71.2 million (December
2014: GBP28.5 million), with the strong trading performance and
equity raising helping to offset the funding of the acquisitions of
London Linen and Ashbon and the significant investment in capital
expenditure in the wider business. Interest cover, based on
adjusted operating profit and excluding notional interest, was 13.3
times (2014: 13.6 times).
A new bank facility, which currently comprises a GBP100.0
million revolving credit facility, was agreed in April 2015 and
runs to April 2020.
Interest payable on bank borrowings is based upon LIBOR plus a
margin which is linked to gearing levels. The applicable margin
during 2015 was, on average, 1.61% and will be 1.75% for at least
the first quarter of 2016. We have mitigated our exposure to
increases in LIBOR rates through the use of interest rate hedging.
Two interest rate hedging arrangements, 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.
Pension
The recorded net deficit after tax for all post-employment
benefit obligations reduced to GBP13.0 million at December 2015
from GBP14.8 million at December 2014. This reduction in deficit is
due to an increase in the discount rate applied to liabilities.
Asset allocation has been reviewed with the Trustee and changes
made to more appropriately match assets against the remaining
scheme liabilities and to reduce interest rate and inflation risks
to a more acceptable level.
Deficit recovery payments amounted to GBP1.9 million in 2015
(2014: GBP2.0 million) and are expected to be GBP1.9 million in
2016, as agreed with the Trustee following the completion of the
triennial valuation as at 5 October 2013.
The notional interest charge, which is non-cash, amounted to
GBP0.6 million in 2015 (2014: GBP0.2 million). The charge for 2016
is dependent upon the level of the accounting deficit at 31
December 2015 and will, therefore, reduce slightly to GBP0.5
million for 2016.
Acquisition of Zip Textiles (Services) Limited ('Zip')
The acquisition of Zip was completed on 31 January 2016 for a
cash consideration of GBP15.0 million on a debt free, cash free
basis, together with additional debt of GBP2.7 million in relation
to the financing of recently installed processing equipment.
Zip, which serves the high volume hotel and leisure sectors from
its well invested processing plant in Birmingham, complements the
Group's existing Bourne business. The business has traded in line
with our expectations during our first month of ownership.
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Board Changes
Michael Del Mar is to retire as a Non-Executive Director on 5
May 2016 and we would like to thank him for his considerable
contribution and loyalty to the Group over the last 12 years. Nick
Gregg joined the Board as a Non-Executive Director on 1 January
2016.
Employees
I would like to thank all employees in every part of the Group
for their continuing commitment and dedication in delivering the
excellent quality and service which is at the centre of our
business. In particular, I would like to extend a warm welcome to
those employees who have recently joined the Group.
Outlook
The strong performance of Textile Rental in 2015 has continued
into the early part of 2016. We have maintained our strategy of
identifying businesses which complement our existing operations and
which will add value, as demonstrated by the acquisition of Zip in
January 2016. The refocus of our Drycleaning business will help us
drive improving performance.
The Board expects that the Group will continue to deliver a
strong performance and successfully implement its strategy for
2016.
Paul Moody
Non-Executive Chairman
1 March 2016
CHIEF EXECUTIVE'S OPERATING REVIEW
Johnson Service Group consists of two segments: Drycleaning,
which represents the origins of the Company; and Textile Rental
which is now by far the largest element of the Group. We have
concentrated our recent efforts on a strategic expansion of our
presence in the various sectors of Textile Rental, adding to the
initial Apparelmaster and Stalbridge businesses.
In 2014 we expanded our range of services into high volume hotel
linen rental with the acquisition of Bourne. In January 2016 we
added Zip, based in Birmingham, to further serve this market.
Together, these two market leading businesses provide us with
additional processing capacity, greater geographical reach and
logistical efficiencies for our customers.
Within the restaurant and catering business we have also
strengthened our existing market leading brand, Stalbridge, with
the acquisition of London Linen in April 2015 and then, later in
the year, the acquisition of Ashbon, based in Grantham. As well as
additional processing capacity, these acquisitions provide the
business with greater geographical reach, logistical synergies and
a more balanced operational footprint.
The Group is achieving its ambition to become a larger and more
diverse textile rental business, with market leading brands that
provide customers with highly valued levels of quality and
service.
Textile Rental
The Textile Rental business trades through four brands in the
UK. 'Apparelmaster' which predominantly provides workwear rental
and laundry services to all industry sectors; 'Stalbridge' and
'London Linen' which provide premium linen services to the
restaurant, hospitality and corporate events market; and 'Bourne',
now joined by 'Zip' from January 2016, which provides high volume
hotel linen.
A combination of strong organic growth combined with carefully
planned strategic acquisitions saw Textile Rental revenue increase
by 21.4% to GBP188.2 million (2014: GBP155.0 million) whilst
adjusted operating profit rose by 23.5% to GBP29.4 million (2014:
GBP23.8 million), both favourably impacted by the addition of
London Linen in April 2015 and Ashbon in November 2015. The
associated margin increased from 15.4% to 15.6%.
Apparelmaster performed strongly; it delivered increased sales
to both new and existing customers in a highly competitive market
environment, resulting in improved adjusted operating profit,
whilst maintaining operating margin.
The resulting cash spend on textile rental items was marginally
higher than expected, although the impact of this was partly offset
by reduced energy prices and consumption, as the business has now
successfully reduced its energy consumption per kilo of work
cleaned for the fifth consecutive year.
The workwear business continues to make major investments in its
facilities to drive efficiencies and improve productivity levels.
As part of this on-going investment a new GBP8.5 million state of
the art processing facility in Leeds has been completed, and is now
fully operational adding further processing capacity in the North
of England. Following a major refit and extension to our facility
in Perth in the latter part of 2014, an upgrade has also been
completed to the food processing facility at our site in Hull to
increase capacity. In total, capital projects to the value of
GBP4.2 million were completed in Apparelmaster.
Customer retention levels once again remained very strong as the
business continues to focus on quality improvements and responds to
the demands of the market as identified in the annual customer
survey programme.
As a result of the extreme weather at the end of the year our
Lancaster facility suffered severe flooding. Business continuity
plans were quickly put in place in order to continue to service
customers. Further work is required in 2016 to bring the facility
fully back on line and we are working with our insurers to ensure a
smooth process, although this is not expected to have an impact on
the trading performance of the business.
For 2016, Apparelmaster will continue to focus on enhanced
service delivery whilst driving operational efficiencies.
Stalbridge produced a strong performance in 2015 with increased
revenue thanks to substantial new sales wins and reduced customer
churn. Profitability and margin were improved due to lower central
overheads and higher productivity as a result of targeted
investments, which also include energy reduction features.
The focus of Stalbridge is on premium hotel, restaurant and
catering locations with market leading service and quality, and
flexible 'no contract' terms. Customer satisfaction and loyalty is
a cornerstone of the business and the results of the customer
satisfaction survey, carried out by an external agency, showed a
marked improvement in customer satisfaction during 2015 and a
ranking in the top quartile of business service companies.
The Ashbon operation in Grantham, Lincolnshire, acquired in
November 2015, has already been rebranded as Stalbridge and this
will provide the platform for the business to consolidate its
operations in the Midlands and North of England whilst improving
customer service levels and efficiency.
To support continued development of the restaurant and catering
markets, new product ranges have been developed and a new prospect
database, combining a more sophisticated sales management tool,
will be rolled out across the business throughout 2016.
London Linen, acquired in April 2015, consists of three
processing units all based in Southall on the outskirts of West
London.
The refit of one of the units processing chefs' wear and kitchen
linen, which was underway at the time of acquisition, was completed
in June. Shortly after acquisition we announced plans for a major
refit of the high quality table linen laundry with modern and
highly efficient equipment. The total investment will cost GBP4.0
million and the installation programme, which will take up to 15
months to complete, is expected to commence shortly.
In the latter part of 2015 a programme of customer migration
commenced and, as a result, customers in the North East of England
and Scotland have been transferred to the Stalbridge processing
unit in Glasgow.
Organic sales growth and customer retention have continued to be
strong and the business has performed to management's expectations.
We are very pleased with the progress made to date.
Bourne had another successful year, its first full year within
the Textile Rental division. Despite price competition being
stronger than usual in the first half, Bourne has had some success
in delivering new sales wins. In addition high quality product and
great service levels to our customer base resulted in high
retention of business.
Hotel occupancy levels have been slightly higher during the
year, with large hotel groups continuing to expand both via
acquisition and new openings. Business development focus has been
on the budget hotel market as well as the four star hotel sector
which have both experienced high growth rates over many years.
In common with the rest of the Group, Bourne continues to invest
in improved plant and machinery to gain higher productivity and
reduced energy consumption. Technology has been adopted to produce
a more objective measure of quality, which will continue to improve
consistency and quality to our customers.
Investment has continued in IT with a customer portal roll out
completed during the year replacing a paper based system. This has
led to greater accuracy of linen counts and better service levels
to our customers.
The addition of Zip to the Group will allow us to better service
high volume linen customers over a larger geographical area.
Drycleaning
Our Drycleaning business is represented across the UK through
the highly recognised 'Johnsons Cleaners' brand and our
London-based premium brand, 'Jeeves'.
Total revenue reduced to GBP46.2 million (2014: GBP55.4
million), reflecting the reduced number of branches in the
portfolio, whilst adjusted operating profit increased to GBP2.0
million (2014: GBP1.6 million).
The branch reorganisation programme announced in January 2015
was completed to schedule, with the closure of 101 branches. The
total cost of the programme was budgeted at GBP6.5 million, and
costs are in line with this budget.
The positive progress we have made in our partnership with
Waitrose has been encouraging. We have added a further 65 locations
within the year to take our total in-store representation to 143.
The trading performance of these locations in 2015 provides a very
positive platform for further revenue growth in 2016.
2015 saw the launch of our first e-commerce proposition through
johnonsbridal.com. The results were positive for this new channel
and the platform will be further developed to broaden the online
household proposition in 2016.
Chris Sander
Chief Executive Officer
1 March 2016
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CONSOlidated Income Statement
Year ended Year ended
31 December 31 December
Note 2015 2014
GBPm GBPm
REVENUE FROM CONTINUING OPERATIONS 2 234.4 210.4
OPERATING PROFIT 2 15.4 13.4
OPERATING PROFIT BEFORE AMORTISATION AND
IMPAIRMENT OF INTANGIBLE ASSETS (EXCLUDING
SOFTWARE AMORTISATION) AND EXCEPTIONAL ITEMS 2 27.9 21.8
Amortisation and impairment of intangible
assets (excluding software amortisation) (3.5) (1.6)
Exceptional items 3
- Restructuring and other costs (7.5) (1.3)
- Costs in relation to business acquisition
activity (1.5) (0.6)
- Pension costs - (4.9)
OPERATING PROFIT 2 15.4 13.4
Finance cost (2.2) (1.6)
Finance income 0.1 -
Notional interest (0.6) (0.2)
------------------------------------------------- ------------ ------------
TOTAL FINANCE COST 4 (2.7) (1.8)
PROFIT BEFORE TAXATION 12.7 11.6
Taxation charge * 6 (2.4) (3.0)
------------------------------------------------- ------------ ------------
PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS 10.3 8.6
RESULT FOR THE YEAR FROM DISCONTINUED OPERATIONS 12 - -
------------------------------------------------- ------------ ------------
PROFIT FOR THE YEAR ATTRIBUTABLE TO EQUITY
HOLDERS 10.3 8.6
------------------------------------------------- ------------ ------------
EARNINGS PER SHARE ** 7
Basic earnings per share
From total operations 3.2p 2.9p
------------------------------------------------- ------------ ------------
Fully diluted earnings per share
From total operations 3.2p 2.9p
------------------------------------------------- ------------ ------------
Adjusted basic earnings per share
From total operations 6.3p 5.3p
------------------------------------------------- ------------ ------------
Adjusted fully diluted earnings per share
From total operations 6.3p 5.2p
------------------------------------------------- ------------ ------------
* Including GBP0.8 million credit (2014: GBP0.4 million credit)
relating to amortisation and impairment of intangible assets
(excluding software amortisation) and GBP1.7 million credit (2014:
GBP1.1 million credit) in relation to exceptional items of which
GBP0.2 million credit (2014: GBP0.2 million charge) relates to the
prior year.
** Earnings per share from continuing operations are the same as for total operations.
Consolidated Statement of COMPREHENSIVE Income
Year ended Year ended
31 December 31 December
2015 2014
GBPm GBPm
Profit for the year 10.3 8.6
--------------------------------------------------------------------------------- --------------------- ------------
Items that will not be subsequently reclassified
to profit or loss
Re-measurement and experience gains / (losses)
on post-employment benefit obligations 1.2 (11.5)
Taxation in respect of re-measurement and experience
(gains) / losses (0.2) 2.3
Change in deferred tax due to change in tax
rate (0.2) -
Items that may be subsequently reclassified
to profit or loss
Cash flow hedges (net of taxation) - fair value
loss (1.0) (0.4)
- transfers to
administrative cost 0.3 -
- transfers to finance
cost 0.3 0.3
--------------------------------------------------------------------------------- --------------------- ------------
OTHER COMPREHENSIVE INCOME / (LOSS) FOR THE
YEAR 0.4 (9.3)
TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE
YEAR 10.7 (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 1st
January 2014 26.2 14.1 1.6 0.6 (0.3) 28.3 70.5
Profit for the
year - - - - - 8.6 8.6
Other comprehensive
loss - - - - (0.1) (9.2) (9.3)
-------------------------- --------- --------- --------- ------------ --------- ---------- --------------
Total comprehensive
loss for the year - - - - (0.1) (0.6) (0.7)
-------------------------- --------- --------- --------- ------------ --------- ---------- --------------
Share options
(value of employee
services) - - - - - 0.4 0.4
Purchase of shares
by the 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 3.8 0.4 - - - 10.2 14.4
Dividend paid - - - - - (3.9) (3.9)
-------------------------- --------- --------- --------- ------------ --------- ---------- --------------
Transactions with
Shareholders recognised
directly in
Shareholders'
equity 3.8 0.4 - - - 6.0 10.2
-------------------------- --------- --------- --------- ------------ --------- ---------- --------------
Balance at 31st
December 2014 30.0 14.5 1.6 0.6 (0.4) 33.7 80.0
-------------------------- --------- --------- --------- ------------ --------- ---------- --------------
Balance at 1st
January 2015 30.0 14.5 1.6 0.6 (0.4) 33.7 80.0
Profit for the
year - - - - - 10.3 10.3
Other comprehensive
(loss) / income - - - - (0.4) 0.8 0.4
-------------------------- --------- --------- --------- ------------ --------- ---------- --------------
Total comprehensive
(loss) /
income for the year - - - - (0.4) 11.1 10.7
-------------------------- --------- --------- --------- ------------ --------- ---------- --------------
Share options
(value of employee
services) - - - - - 0.5 0.5
Deferred tax on
share options - - - - - 0.1 0.1
Issue of share
capital 3.1 - - - - 18.1 21.2
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Dividend paid - - - - - (5.7) (5.7)
-------------------------- --------- --------- --------- ------------ --------- ---------- --------------
Transactions with
Shareholders recognised
directly in
Shareholders'
equity 3.1 - - - - 13.0 16.1
-------------------------- --------- --------- --------- ------------ --------- ---------- --------------
Balance at 31st
December 2015 33.1 14.5 1.6 0.6 (0.8) 57.8 106.8
-------------------------- --------- --------- --------- ------------ --------- ---------- --------------
* 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 31st
December 2015, the EBT held 20,739 shares (2014: 20,739).
Consolidated Balance Sheet
As at As at
31 December 31 December
Note 2015 2014
GBPm GBPm
ASSETS
NON-CURRENT ASSETS
Goodwill 93.5 56.2
Intangible assets 36.6 11.7
Property, plant and equipment 58.2 51.3
Textile rental items 36.5 30.5
Trade and other receivables 0.4 3.3
Deferred income tax assets 3.4 4.6
228.6 157.6
----------------------------------------------------- ------------ ------------
CURRENT ASSETS
Inventories 2.7 2.1
Trade and other receivables 40.5 30.3
Cash and cash equivalents 0.1 0.2
----------------------------------------------------- ------------ ------------
43.3 32.6
----------------------------------------------------- ------------ ------------
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 52.6 43.7
Current income tax liabilities 2.9 1.5
Borrowings 7.3 6.9
Derivative financial liabilities 0.3 -
Provisions 6.2 4.6
----------------------------------------------------- ------------ ------------
69.3 56.7
----------------------------------------------------- ------------ ------------
NET CURRENT LIABILITIES (26.0) (24.1)
----------------------------------------------------- ------------ ------------
NON-CURRENT LIABILITIES
Post-employment benefit
obligations 10 16.0 18.5
Deferred income tax liabilities 6.7 1.8
Trade and other payables 2.2 0.9
Borrowings 64.0 21.8
Derivative financial liabilities 0.6 0.4
Provisions 6.3 10.1
----------------------------------------------------- ------------ ------------
95.8 53.5
----------------------------------------------------- ------------ ------------
NET ASSETS 106.8 80.0
----------------------------------------------------- ------------ ------------
CAPITAL AND RESERVES ATTRIBUTABLE TO THE COMPANY'S
SHARE HOLDERS
Share capital 33.1 30.0
Share premium 14.5 14.5
Merger reserve 1.6 1.6
Capital redemption reserve 0.6 0.6
Hedge reserve (0.8) (0.4)
Retained earnings 57.8 33.7
----------------------------------------------------- ------------ ------------
TOTAL SHAREHOLDERS EQUITY 106.8 80.0
----------------------------------------------------- ------------ ------------
Consolidated Statement OF Cash Flows
Year ended Year ended
31 December 31 December
Note 2015 2014
GBPm GBPm
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year 10.3 8.6
Adjustments for:
Income tax charge
/ (credit) - continuing operations 6 2.4 3.0
- discontinued operations 12 - (0.7)
Total finance cost - continuing operations 4 2.7 1.8
Depreciation 33.0 28.3
Amortisation 3.6 1.6
Decrease in inventories 0.1 0.2
(Increase) / decrease in trade and other receivables (0.8) 0.6
Increase in trade and other payables 2.5 1.6
Loss on disposal of business - 0.4
Costs in relation to business acquisition activity 1.5 0.6
Deficit recovery payments in respect of post-employment
benefit obligations (1.9) (2.0)
Share-based payments 0.5 0.4
Post-employment benefit obligations (0.1) 4.6
Decrease in provisions (2.3) (3.1)
------------
Cash generated from operations 51.5 45.9
Interest paid (2.2) (2.0)
Taxation paid (2.3) (0.1)
---------------------------------------------------------------- ------------ ------------
Net cash generated from operating activities 47.0 43.8
---------------------------------------------------------------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of business (net of cash acquired) (70.4) (22.4)
Proceeds from sale of business (net of cash
disposed) 0.9 0.1
Purchase of property, plant and equipment (4.4) (11.6)
Proceeds from sale of property, plant and equipment 0.1 0.1
Purchase of intangible assets - (0.1)
Purchase of textile rental items (27.5) (24.9)
Proceeds received in respect of special charges 2.2 1.9
Net cash used in investing activities (99.1) (56.9)
---------------------------------------------------------------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 93.0 66.0
Repayment of borrowings (54.3) (70.0)
Capital element of finance leases (1.6) (0.8)
Purchase of own shares by EBT - (0.9)
Net proceeds from issue of Ordinary shares 21.2 14.4
Dividend paid (5.7) (3.9)
---------------------------------------------------------------- ------------ ------------
Net cash generated from financing activities 52.6 4.8
---------------------------------------------------------------- ------------ ------------
Net increase / (decrease) in cash and cash equivalents 0.5 (8.3)
Cash and cash equivalents at beginning of the
year (4.9) 3.4
Cash and cash equivalents at end of the year (4.4) (4.9)
---------------------------------------------------------------- ------------ ------------
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Cash and cash equivalents at the end of the year include cash of
GBP0.1 million and an overdraft of GBP4.5 million (2014: GBP0.2
million and GBP5.1 million respectively).
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1 BASIS OF PREPARATION
The financial information contained within this Preliminary
Announcement has been prepared on a going concern basis in
accordance with International Financial Reporting Standards as
adopted by the European Union (IFRS), IFRS Interpretations
Committee (IFRS IC) interpretations and the Companies Act 2006
applicable to companies reporting under IFRS.
The financial information has been prepared using accounting
policies consistent with those set out in the 2015 Annual
Report.
The financial information set out within this Preliminary
Announcement does not constitute the Company's statutory accounts
for the years ended 31st December 2014 or 31st December 2015 within
the meaning of Section 434 of the Companies Act 2006, but is
derived from those accounts.
Statutory accounts for 2014 have been delivered to the Registrar
of Companies, and those for 2015 will be delivered as soon as
practicable but not later than 30th April 2016. The auditor has
reported on those accounts; the reports were unqualified and did
not contain a statement under Section 498(2) or (3) of the
Companies Act 2006.
2 SEGMENT ANALYSIS
Segment information is presented based on the Group's management
and internal reporting structure as at 31st December 2015.
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. The Board determines the operating segments based on
these reports and on the internal reporting structure. For
reporting purposes, in accordance with IFRS 8, the Board aggregates
operating segments with similar economic characteristics and
conditions into reporting segments, which form the basis of this
reporting. The Board has identified two reporting segments being
Textile Rental and Drycleaning. Within the Textile Rental reporting
segment, four operating segments have been identified being
Apparelmaster, Stalbridge, Bourne and London Linen. The Drycleaning
reporting segment consists of one operating segment.
The Board assesses the performance of the reporting segments
based on a measure of earnings before interest and tax, both
including and excluding the effects of non-recurring items from the
reporting segments, such as restructuring costs and impairments
when the impairment is the result of an isolated, non-recurring or
non-operating event. Interest income and expenditure are not
included in the result for each reporting 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 purpose of segmental reporting. Any transactions
between segments are reported in the relevant performance or
position line items. There have been no changes in measurement
methods used compared to the prior year.
Other information provided to the Board is measured in a manner
consistent with that in the financial statements. Segment assets
exclude deferred income tax assets, current income tax assets and
cash and cash equivalents, all of which are managed on a central
basis. Segment 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 are part of the
reconciliation to total assets and liabilities.
The exceptional items have been included within the appropriate
business segment as shown on pages 13 to 14.
The Group comprises the following segments:
Textile Rental
Supply and laundering of workwear * Apparelmaster
garments, premium linen to the
hotel, catering and corporate
hospitality markets, linen to * Stalbridge (including Ashbon)
the volume hotel market and sale
of ancillary items.
* Bourne
* London Linen
Drycleaning
Provision of drycleaning, laundry * Johnsons Cleaners
and ironing services, carpet
cleaning, upholstery cleaning,
wedding dress cleaning and suede * Jeeves
& leather cleaning.
All Other Segments
Comprising of central and group
costs.
Textile All Other
Year ended 31st December 2015 Rental Drycleaning Segments Total
Continuing GBPm GBPm GBPm GBPm
REVENUE 188.2 46.2 - 234.4
------------------------------------------- -------- ------------ ---------- ------
RESULT
Operating profit before amortisation
and impairment of intangible assets
(excluding software amortisation)
and exceptional items 29.4 2.0 (3.5) 27.9
Amortisation and impairment of intangible
assets
(excluding software amortisation) (3.5) - - (3.5)
Exceptional items:
- Restructuring and other costs (1.0) (6.5) - (7.5)
- Costs in relation to business
acquisition activity (1.5) - - (1.5)
Operating profit / (loss) 23.4 (4.5) (3.5) 15.4
Total finance cost (2.7)
Profit before taxation 12.7
Taxation (2.4)
------------------------------------------- -------- ------------ ---------- ------
Profit for the year 10.3
------------------------------------------- -------- ------------ ---------- ------
All
Discontinued Textile Other
Operations Rental Drycleaning Segments Total
GBPm GBPm GBPm GBPm GBPm
OTHER INFORMATION
Non-current asset additions
- Property, plant and equipment - 7.6 0.7 - 8.3
- Textile rental items - 28.4 - - 28.4
Depreciation and amortisation
expense
- Property, plant and equipment - 6.9 1.8 0.2 8.9
- Textile rental items - 24.1 - - 24.1
- Intangible software - 0.1 - - 0.1
- Customer contracts - 3.5 - - 3.5
--------------------------------------------------------- ------------- -------- ------------ ---------- --------
BALANCE SHEET INFORMATION
Segment assets 1.5 234.6 19.2 13.1 268.4
Unallocated assets: Deferred
income tax assets 3.4
Cash and cash
equivalents 0.1
--------------------------------------------------------- ------------- -------- ------------ ---------- --------
Total assets 271.9
--------------------------------------------------------- ------------- -------- ------------ ---------- --------
Segment liabilities (2.8) (51.5) (16.9) (3.1) (74.3)
Unallocated liabilities: Deferred
income tax liabilities (6.7)
Bank borrowings (64.3)
Current income tax
liabilities (2.9)
Derivative financial
liabilities (0.9)
Post-employment
benefit obligations (16.0)
--------------------------------------------------------- ------------- -------- ------------ ---------- --------
Total liabilities (165.1)
--------------------------------------------------------- ------------- -------- ------------ ---------- --------
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The results, assets and liabilities of all segments arise in the
Group's country of domicile, being the United Kingdom.
Textile All Other
Year ended 31st December 2014 Rental Drycleaning Segments Total
GBPm GBPm GBPm GBPm
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
(excluding software amortisation) (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
Total finance cost (1.8)
------------------------------------------- -------- ------------ ---------- -------
Profit before taxation 11.6
Taxation (3.0)
------------------------------------------- -------- ------------ ---------- -------
Profit for the year - continuing
operations 8.6
Result for the period - discontinued
operations -
------------------------------------------- -------- ------------ ---------- -------
Profit for the year 8.6
------------------------------------------- -------- ------------ ---------- -------
Discontinued Textile All Other
Operations Rental Drycleaning Segments Total
GBPm GBPm GBPm GBPm GBPm
OTHER INFORMATION
Non-current 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: Deferred
income tax liabilities (1.8)
Bank borrowings (25.6)
Current income tax
liabilities (1.5)
Derivative
financial
liabilities (0.4)
Post-employment
benefit
obligations (18.5)
----------------------------------------------------- ------------- -------- ------------ ---------- ------------
Total liabilities (110.2)
----------------------------------------------------- ------------- -------- ------------ ---------- ------------
The results, assets and liabilities of all segments arise in the
Group's country of domicile, being the United Kingdom.
3 EXCEPTIONAL ITEMS
2015 2014
GBPm GBPm
Restructuring and other costs - Textile Rental (1.0) (1.3)
- Drycleaning (6.5) -
---------------------------------------------------- ------ ------
(7.5) (1.3)
Costs in relation to business acquisition activity (1.5) (0.6)
Pension costs - (4.9)
Total exceptional items (9.0) (6.8)
---------------------------------------------------- ------ ------
Current year exceptional items
Restructuring and other costs - Textile Rental
A new processing facility has been constructed to replace an
existing Textile Rental facility in Leeds. The total cost of this
relocation, excluding the capital investment, was GBP2.3 million,
of which, GBP1.3 million was charged to exceptional items in 2014
with the remaining cost of GBP1.0 million charged to exceptional
items in 2015. Of the total cost, GBP0.9 million was non-cash
relating to the impairment of property, plant and equipment.
Restructuring and other costs - Drycleaning
As previously announced on 6th 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 in the two
years to 2017, where renewal was unlikely to be financially viable.
Of these branches, 101 closed during 2015.
The charge to the Group's Income Statement for the restructuring
of the Drycleaning business and associated property provisions is,
in aggregate, GBP6.5 million net. Of this charge GBP0.3 million was
non-cash relating to the impairment of property, plant and
equipment.
Costs in relation to business acquisition activity
During the year costs relating to business acquisition activity
of GBP1.5 million have been recognised. Professional fees of GBP0.5
million and Stamp Duty of GBP0.3 million were paid relating to the
acquisition of London Linen. Professional fees of GBP0.2 million
were paid in relation to the acquisition of Ashbon. Costs of GBP0.4
million are in relation to reorganisation and integration costs
relating to the two business acquisitions in the year. The
remainder of the costs relate to fees and expenses incurred during
negotiations with undisclosed targets.
Prior year exceptional items
Restructuring and other costs - Textile Rental
As noted above, GBP1.3 million was charged in 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. The remainder of the costs relate to
fees and expenses incurred during negotiations with undisclosed
targets,
Pension costs
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During the prior year, the Group closed its 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 along with GBP0.2 million of
associated fees.
4 TOTAL FINANCE COST
2015 2014
GBPm GBPm
Finance cost:
- Interest payable on bank loans and overdrafts (1.7) (1.2)
- Amortisation of bank facility fees (0.3) (0.2)
- Provision discount unwind (0.1) (0.1)
- Interest payable on obligations under
finance leases (0.1) (0.1)
Finance cost before notional interest on
post-employment benefit obligations (2.2) (1.6)
Finance income 0.1 -
Notional interest on post-employment benefit
obligations:
- Pension scheme liability (0.6) (0.1)
- Private healthcare - (0.1)
-------------------------------------------------- ------ ------
(0.6) (0.2)
Total finance cost (2.7) (1.8)
-------------------------------------------------- ------ ------
5 ADJUSTED PROFIT BEFORE AND AFTER TAXATION
2015 2014
Continuing operations GBPm GBPm
Profit before taxation 12.7 11.6
Amortisation and impairment of intangible
assets (excluding software amortisation) 3.5 1.6
Restructuring and other costs 7.5 1.3
Costs in relation to business acquisition
activity 1.5 0.6
Pension costs - 4.9
Adjusted profit before taxation 25.2 20.0
Taxation on adjusted profit (4.9) (4.5)
-------------------------------------------- ------ ------
Adjusted profit after taxation 20.3 15.5
-------------------------------------------- ------ ------
6 TAXATION
2015 2014
GBPm GBPm
Current tax
UK corporation tax charge for the year 3.3 2.9
Adjustment in relation to previous years (0.4) (0.4)
--------------------------------------------------- ------ ------
Current tax charge for the year 2.9 2.5
Deferred tax
Origination and reversal of temporary differences (0.2) (0.1)
Changes in statutory tax rate (0.3) -
Adjustment in relation to previous years - 0.6
--------------------------------------------------- ------ ------
Deferred tax (credit) / charge for the year (0.5) 0.5
Total charge for taxation included in the Income
Statement for continuing operations 2.4 3.0
--------------------------------------------------- ------ ------
The tax charge for the period is lower (2014: higher) than the
effective rate of Corporation Tax in the UK of 20.25% (2014:
21.50%). The differences are explained below:
2015 2014
GBPm GBPm
Profit before taxation per the Income Statement 12.7 11.6
---------------------------------------------------- ------ -----
Profit before taxation multiplied by the effective
rate of Corporation Tax in the UK 2.6 2.5
Factors affecting taxation charge for the year:
Tax effect of expenses not deductible for tax
purposes 0.4 0.3
Changes in statutory tax rate (0.2) -
Adjustments to tax in respect of prior periods (0.4) 0.2
---------------------------------------------------- ------ -----
Total charge for taxation included in the Income
Statement for continuing operations 2.4 3.0
---------------------------------------------------- ------ -----
Taxation in relation to amortisation and impairment of
intangible assets (excluding software amortisation) has reduced the
charge by GBP0.8 million (2014: reduced charge by GBP0.4 million).
Taxation on exceptional items in the current year has reduced the
charge for taxation relating to continuing operations by GBP1.7
million (2014: reduced charge by GBP1.1 million) of which GBP0.2
million credit (2014: GBP0.2 million charge) relates to the prior
year.
The tax charge for the year is based on the effective rate of UK
Corporation Tax for the period of 20.25% (2014: 21.50%). Changes to
the UK Corporation Tax rates were announced on 8th July 2015. These
changes were substantively enacted as part of Finance Bill 2015 on
26th October 2015. These include reductions to the main rate to
reduce the rate to 19% from 1st April 2017 and to 18% from 1st
April 2020.
Deferred income taxes at the balance sheet date have been
measured at the tax rate expected to be applicable at the date the
deferred income tax assets and liabilities are realised. Management
has performed an assessment, for all material deferred income tax
assets and liabilities, to determine the period over which the
deferred income tax assets and liabilities are forecast to be
realised, which has resulted in an average deferred income tax rate
of 19% being used to measure all deferred tax balances as at 31st
December 2015. The impact of the change in tax rate to 19% has been
a GBP0.3 million credit to the Income Statement and a GBP0.2
million credit recognised directly in Shareholders' equity.
During the year, a GBPnil credit relating to current taxation
(2014: GBP1.2 million credit) and a credit of GBP0.1 million
relating to deferred taxation (2014: charge of GBP1.0 million) have
been recognised directly in Shareholders' equity.
7 EARNINGS PER SHARE
2015 2014
GBPm GBPm
Profit for the financial year from continuing
operations attributable to Shareholders 10.3 8.6
Result for the financial year from discontinued
operations attributable to Shareholders - -
Amortisation and impairment of intangible assets
from continuing operations (net of taxation) 2.7 1.2
Exceptional costs from continuing operations
(net of taxation) 7.3 5.7
Exceptional credit from discontinued operations
(net of taxation) - (0.2)
Adjusted profit attributable to shareholders 20.3 15.5
Adjusted loss attributable to Shareholders relating
to discontinued operations - (0.2)
----------------------------------------------------- ------------ ------------
Adjusted profit attributable to Shareholders 20.3 15.3
Weighted average number of Ordinary shares 319,966,663 291,829,363
Dilutive potential Ordinary shares 3,239,840 5,001,228
----------------------------------------------------- ------------ ------------
Fully diluted number of Ordinary shares 323,206,503 296,830,591
----------------------------------------------------- ------------ ------------
Basic earnings per share
From continuing operations 3.2p 2.9p
From discontinued operations - -
----------------------------------------------------- ------------ ------------
From continuing and discontinued operations 3.2p 2.9p
----------------------------------------------------- ------------ ------------
Adjustment for amortisation and impairment of
intangible assets (continuing operations) 0.8p 0.4p
Adjustment for exceptional items (continuing
operations) 2.3p 2.0p
Adjusted basic earnings per share (continuing
operations) 6.3p 5.3p
Adjusted basic earnings per share (discontinued
operations) - -
----------------------------------------------------- ------------ ------------
Adjusted basic earnings per share from continuing
and discontinued operations 6.3p 5.3p
----------------------------------------------------- ------------ ------------
Diluted earnings per share
From continuing operations 3.2p 2.9p
From discontinued operations - -
----------------------------------------------------- ------------ ------------
From continuing and discontinued operations 3.2p 2.9p
----------------------------------------------------- ------------ ------------
Adjustment for amortisation and impairment of
intangible assets (continuing operations) 0.8p 0.4p
Adjustment for exceptional items (continuing
operations) 2.3p 1.9p
Adjusted diluted earnings per share (continuing
operations) 6.3p 5.2p
Adjusted diluted earnings per share (discontinued
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operations) - -
----------------------------------------------------- ------------ ------------
Adjusted diluted earnings per share from continuing
and discontinued operations 6.3p 5.2p
----------------------------------------------------- ------------ ------------
Basic earnings per share is calculated using the weighted
average number of Ordinary shares in issue during the year,
excluding those held by the EBT, based on the profit for the year
attributable to Shareholders.
Adjusted earnings per share figures are given to 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 performance 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 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 years ended 31st December 2015
and 31st December 2014, potential Ordinary shares have been treated
as dilutive, as their inclusion in the diluted earnings per share
calculation 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
dilutive potential Ordinary shares outstanding at the balance sheet
date if those transactions had occurred before the end of the
reporting period.
8 DIVIDENDS
2015 2014
Dividend per share
Final dividend proposed 1.45p -
Interim dividend paid 0.65p 0.50p
Final dividend paid -- 1.20p
2015 2014
GBPm GBPm
Shareholders' funds utilised
Final dividend proposed 4.8 -
Interim dividend paid 2.1 1.5
Final dividend paid - 3.6
The Directors propose the payment of a final dividend in respect
of the year ended 31st December 2015 of 1.45 pence per share. This
will utilise Shareholders' funds of GBP4.8 million and will be
paid, subject to Shareholder approval, on 13th May 2016 to
Shareholders on the register of members on 15th April 2016. The
trustee of the EBT has waived the entitlement to receive dividends
on the Ordinary shares held by the trust. In accordance with IAS 10
there is no payable recognised at 31st December 2015 in respect of
this proposed dividend.
9 CAPITAL EXPENDITURE AND COMMITMENTS
Capital Expenditure
During the year the Group acquired property, plant and equipment
and intangible assets for a cost of GBP8.3 million (2014: GBP14.8
million), excluding property, plant and equipment and intangible
assets acquired through business combinations. In addition, textile
rental items with a cost of GBP28.4 million were acquired in the
year (2014: GBP24.9 million), excluding textile rental items
acquired through business combinations.
Offsetting this, property, plant and equipment with a net book
value of GBP0.1 million was disposed (2014: GBP0.1 million). In
addition, amounts received in respect of textile rental special
charges were GBP2.2 million (2014: GBP1.9 million).
Capital Commitments
Orders placed for future capital expenditure contracted but not
provided for in the financial statements are shown below:
2015 2014
GBPm GBPm
Property, plant and equipment 0.6 1.5
------------------------------- ----- -----
10 POST-EMPLOYMENT BENEFIT OBLIGATIONS
The Group has applied the requirements of IAS 19(R), 'Employee
Benefits' (revised June 2011) to its employee pension schemes and
post-retirement healthcare benefits.
The Group operates a defined benefit pension scheme, the Johnson
Group Defined Benefit Scheme ('JGDBS'). The JGDBS was closed to
future accrual on 31st December 2014.
As part of the Group's objective to reduce its overall pension
liability, deficit recovery payments of GBP1.9 million (2014:
GBP2.0 million) were paid to the JGDBS.
A net re-measurement and experience gain of GBP1.2 million
(2014: loss of GBP11.5 million) has been recognised in the year to
31st December 2015. This is as a result of the scheme's assets and
liabilities performing differently to previous assumptions and
changes to the assumptions used in calculating liabilities of the
schemes.
The Group is currently undertaking a Flexible Retirement Option
exercise. Deferred members aged over 55 received an offer from the
Group during the second half of 2015 and members have received
advice from an Independent Financial Advisor. Transfer value
payments for those members accepting the offer are expected to be
paid in early 2016.
The expected financial impact of the exercise has been
recognised as a change in the assumption of the expected number of
future transfers out of the Scheme. Last year this assumption was
nil. As the transfer values to be paid are higher than the
equivalent liabilities calculated using the IAS19 assumptions as at
31st December 2015, this has resulted in a loss estimated at GBP1.2
million, being recognised within the re-measurement gains and
losses due to changes in demographic assumptions.
The gross post-employment benefit obligation and associated
deferred income tax asset thereon is shown below:
2015 2014
GBPm GBPm
Gross post-employment benefit obligation 16.0 18.5
Deferred income tax asset thereon (3.0) (3.7)
------------------------------------------ ------ ------
Net liability 13.0 14.8
------------------------------------------ ------ ------
The reconciliation of the opening gross post-employment benefit
obligation to the closing gross post-employment benefit obligation
is shown below:
2015 2014
GBPm GBPm
Opening gross post-employment benefit obligation 18.5 4.3
Current service cost - 0.4
Past service cost - 4.7
Notional interest 0.6 0.2
Employer contributions (1.9) (2.6)
Re-measurement and experience (gains) / losses (1.2) 11.5
Closing gross post-employment benefit obligation 16.0 18.5
-------------------------------------------------- ------ ------
11 CALLED-UP SHARE CAPITAL
2015 2014
GBPm GBPm
Authorised
383,025,739 (2014: 383,025,739)
Ordinary shares of 10p
each 38.3 38.3
----------------------------------- ------------ ----- ------------ -----
2015 2014
Issued and Fully Paid Shares GBPm Shares GBPm
Ordinary shares of 10p
each:
- At start of period 299,985,593 30.0 262,326,451 26.2
- New shares issued 30,584,430 3.1 37,659,142 3.8
- At end of period 330,570,023 33.1 299,985,593 30.0
----------------------------------- ------------ ----- ------------ -----
Issue of Ordinary shares of 10p each
An analysis of the new shares issued in each period is shown
below:
2015 2014
Issued and Fully Paid Shares GBP Shares GBP
Ordinary shares of 10p
each:
note
- Placing 1 30,011,802 3,001,180 26,253,940 2,625,394
note
- EBT 2 - - 9,090,000 909,000
note
- Approved LTIP 3 78,632 7,863 1,140,281 114,028
note
- SAYE 4 493,996 49,400 1,174,921 117,492
New shares issued 30,584,430 3,058,443 37,659,142 3,765,914
--------------------------------- ----------- ---------- ----------- ----------
Note 1: During the period the Group placed 30,011,802 (2014:
26,253,940) Ordinary shares with existing and new institutional
investors raising net proceeds of GBP21.1 million (2014: GBP12.8
million) of which GBP3.0 million (2014: GBP2.6 million) was
credited to share capital. 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.
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Note 2: During the year, nil (2014: 9,090,000) Ordinary shares
were allotted to the EBT at nominal value to be used in relation to
employee share option exercises. The total nominal value received
in the year was GBPnil (2014: GBP909,000). In the prior year, at
the time of allotment, the EBT already held 31,000 Ordinary shares
of 10 pence each which, together with the 9,090,000 newly allotted
Ordinary shares of 10 pence each, were part used to satisfy the
exercise of 9,100,261 LTIP options.
Note 3: 78,632 (2014: 1,140,281) Approved LTIP options were
exercised with a total nominal value of GBP7,863 (2014:
GBP114,028).
Note 4: 493,996 (2014: 1,174,921) SAYE Scheme options were
exercised with a total nominal value of GBP49,400 (2014:
GBP117,492).
The total proceeds received on allotment in respect of all of
the above transactions were GBP21.2 million (2014: GBP14.4 million)
and were credited as follows:
2015 2014
GBPm GBPm
Share capital 3.1 3.8
Share premium - 0.4
Retained earnings 18.1 10.2
21.2 14.4
------------------- ----- -----
12 BUSINESS COMBINATIONS AND DISCONTINUED OPERATIONS
London Linen
On 30th April 2015 the Group acquired the entire 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 of GBP0.8 million.
London Linen's operations are focused on the restaurant and
catering linen rental market and it currently supplies some 900
customers at over 3,400 locations. London Linen operates from a
76,000 sq ft leased premises located in Southall, West London,
which processes, on average, 1.6 million pieces of linen per week,
with a peak of some 2.0 million pieces.
Since acquisition, London Linen has generated a profit of GBP2.3
million on revenue of GBP23.1 million. Had the business been
acquired at the start of the year it is estimated that profit of
GBP3.6 million would have been generated on revenue of GBP33.2
million.
The fair values of the assets and liabilities acquired are as
follows:
Accounting Fair value
Net assets Fair value policy of assets
acquired adjustments realignment acquired
GBPm GBPm GBPm GBPm
Goodwill - 35.1 - 35.1
Intangible assets - Customer
contracts - 25.5 - 25.5
Intangible assets - Software 0.6 - - 0.6
Property, plant and equipment 6.6 - (0.3) 6.3
Textile rental items 2.9 - 0.6 3.5
Inventories 1.0 - (0.3) 0.7
Trade and other receivables 4.4 - 0.2 4.6
Cash 4.4 - - 4.4
Trade and other payables (4.6) - (0.2) (4.8)
Current income tax liability (0.7) - 0.1 (0.6)
Deferred income tax liability (0.9) (5.1) - (6.0)
--------------------------------- ----------- ------------- ------------- -----------
13.7 55.5 0.1 69.3
------------------------------- ----------- ------------- ------------- -----------
Goodwill represents the deferred income tax arising on the
recognition of the customer lists and contracts plus the expected
benefits to the wider Group arising from the acquisition. None of
the acquired goodwill is expected to be deductible for tax
purposes.
Ashbon
On 27th November 2015, the Group acquired the entire share
capital of Ashbon Services Limited ('Ashbon') for a net
consideration of GBP5.5 million, of which GBP1.1 million was
deferred, plus associated fees of GBP0.2 million. GBP0.2 million of
the deferred consideration was payable to the vendors upon
finalisation of the completion accounts. This amount was paid
subsequent to the year end. The remaining GBP0.9 million will be
payable, either to the vendors, to HMRC, or proportionately between
the vendors and HMRC, upon reaching agreement with HMRC as to
certain employment taxation matters relating to prior years. Such
agreement is not expected within 12 months of the balance sheet
date.
Ashbon, which serves the catering, hotel and leisure industries
from its processing plant in Grantham, complements the Group's
existing Stalbridge, Bourne and London Linen businesses, providing
operational efficiencies and additional production capacity for the
Midlands and North of England.
Since acquisition, Ashbon has generated a profit of GBPnil on
revenue of GBP0.3 million. Had the business been acquired at the
start of the period it is estimated that profit of GBP0.5 million
would have been generated on revenue of GBP5.1 million.
The fair values of the assets and liabilities acquired are as
follows:
Fair
Accounting value
Net assets Fair value policy of assets
acquired adjustments realignment acquired
GBPm GBPm GBPm GBPm
Goodwill - 2.2 - 2.2
Intangible assets - Customer
contracts - 2.4 - 2.4
Property, plant and equipment 1.3 - - 1.3
Textile rental items 0.6 - (0.2) 0.4
Trade and other receivables 2.7 - - 2.7
Deferred income tax asset 0.1 - - 0.1
Trade and other payables (1.6) - - (1.6)
Loan obligations (0.9) - - (0.9)
Finance Lease obligations (0.4) - - (0.4)
Current income tax liability (0.2) - - (0.2)
Deferred income tax liability - (0.5) - (0.5)
1.6 4.1 (0.2) 5.5
------------------------------- ----------- ------------- ------------- -----------
Goodwill represents the deferred income tax arising on the
recognition of the customer lists and contracts plus the expected
benefits to the wider Group arising from the acquisition. None of
the acquired goodwill is expected to be deductible for tax
purposes.
Both London Linen and Ashbon have been included in the textile
rental segment, London Linen as a separate CGU and Ashbon within
the Stalbridge CGU.
Cash flows from business acquisition activity
The cash flows in relation to business acquisition activity are
summarised below:
2015 2014
GBPm GBPm
Consideration paid 73.7 26.7
Cash acquired (4.4) (4.9)
Cost in relation to business
acquisition activity 1.1 0.6
---------------------------------- ------ ------
70.4 22.4
------------------------------ ------ ------
A further GBP0.4 million of business acquisition costs are
expected to be paid in 2016.
In 2014, the Group acquired the entire share capital of Bourne
Services Group Limited along with its subsidiary company Bourne
Textile Services Limited (together 'Bourne') for gross
consideration of GBP26.7 million plus fees. Full details were
provided in the 2014 Annual Report. There have been no changes to
the fair values stated.
DISPOSALS AND DISCONTINUED OPERATIONS
There were no business disposals in the current or prior
year.
No further costs for discontinued operations have been
recognised in the year.
During 2015, deferred consideration of GBP0.8 million and
contingent consideration of GBP0.2 million, both in relation to the
disposal of the FM division in 2013, was received.
The cash flows from discontinued operations included within the
Consolidated Statement of Cash Flows are as follows:
2015 2014
GBPm GBPm
Proceeds from disposal 1.0 0.1
Payment of costs relating to disposals (0.1) -
Net proceeds from sale of business 0.9 0.1
Net cash used in operating activities (1.2) (0.8)
Net cash flow (0.3) (0.7)
----------------------------------------- ------ ------
13 ANALYSIS OF NET DEBT
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