TIDMJSG
RNS Number : 9810F
Johnson Service Group PLC
27 February 2018
27 February 2018
AIM: JSG
Johnson Service Group PLC
('JSG' or 'the Group')
Preliminary Results for the Year Ended 31 December 2017
"Strong financial performance and established growth
platform"
FINANCIAL HIGHLIGHTS: STRONG PERFORMANCE
Continuing Operations 2017 2016 Increase
---------------------------- ---------- ---------- ----------
Adjusted Results(1)
Revenue GBP290.9m GBP256.7m 13.3%
Adjusted operating profit GBP43.3m GBP37.7m 14.9%
Adjusted profit before
taxation GBP39.7m GBP33.8m 17.5%
Adjusted diluted earnings
per share 8.7p 7.6p 14.5%
Dividend 2.8p 2.5p 12.0%
Net debt(2) GBP91.3m GBP98.2m -
Statutory Results
Operating profit GBP34.8m GBP29.8m 16.8%
Profit before taxation GBP31.2m GBP25.9m 20.5%
Diluted earnings per share 6.9p 5.9p 16.9%
-- Strong financial performance reflects organic revenue growth
of 5.1%(3) and successful delivery of earnings from
acquisitions
-- Net debt to adjusted EBITDA ratio of 1.6x (2016: 1.8x)
demonstrates the impact of the Group's strong cash flows
-- Board recommends a 11.8% increase in final dividend to 1.9
pence per share (2016: 1.7 pence) which together with the interim
dividend, takes the total dividend for the year up 12.0% to 2.8
pence per share (2016: 2.5 pence)
OPERATIONAL HIGHLIGHTS: DELIVERING ON STRATEGIC AIMS
-- Highly focused textile services business with increasing UK
geographical coverage:
- Disposal of Drycleaning division in January 2017
- PLS in Edinburgh, acquired in July 2017, to extend coverage of
our high volume linen services to Scotland and Northern England
- StarCounty in Wrexham, acquired in December 2017, to increase
the geographical coverage of our Stalbridge brand across the North
West and West Midlands
-- Continuing capital investment to increase production capacity
and efficiency:
- Accelerated investment in 2017 to support the demand from
strong organic sales generated during the year
1 Excluding amortisation of intangible assets (excluding
software amortisation) and net exceptional items (see note 5).
2 Net debt at 31 December 2016 included GBP0.8 million of cash
within "assets classified as held for sale".
3 Excluding revenue from acquisitions completed in 2017, the
full year benefit of acquisitions completed in 2016 and the one-off
benefit of some GBP2.6 million of revenue for work processed in
2017 on behalf of a privately owned laundry whose plant was out of
commission.
Chris Sander, Chief Executive Officer of Johnson Service Group
PLC, the UK's leading textile services provider, commented:
"During the year Johnson Service Group continued to meet its
strategic objectives by transforming the Group into a highly
focused Textile Services business. In doing so, we have delivered
another strong financial performance underpinned by significant
organic growth together with growth from acquisitions which
continue to extend the geographical coverage of our businesses. The
operational strategy of continuing to invest capital in modern,
highly efficient equipment has helped mitigate cost pressures and
supported margin growth. With strong new business sales, the
benefit of recent acquisitions and a continued focus on delivering
service excellence, we remain confident in the year ahead."
SELL-SIDE ANALYSTS MEETING
The Company will present to sell-side analysts at 09:30 today 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 (www.jsg.com)
Chris Sander, CEO
Yvonne Monaghan, CFO
Tel: 020 3757 4992 (on the day)
Tel: 01928 704 600 (thereafter)
Investec Investment Banking (NOMAD) Camarco (Financial PR)
David Flin Ginny Pulbrook
Carlton Nelson Ben Woodford
Darren Vickers Tom Huddart
Tel: 020 7597 4000 Tel: 020 3757 4992
Note
Throughout this statement 'adjusted operating profit' refers to
continuing operating profit before amortisation of intangible
assets (excluding software amortisation) and exceptional items.
'Adjusted profit before taxation' refers to adjusted operating
profit less total finance cost. 'Adjusted EBITDA' for gearing
purposes, refers to adjusted operating profit for the relevant
period plus the depreciation charge for property, plant and
equipment and software amortisation. 'Adjusted EPS' refers to EPS
calculated based on adjusted profit after tax. The Board considers
that 'adjusted operating profit', 'adjusted profit before
taxation', 'adjusted EBITDA' and 'adjusted EPS', which all exclude
the effects of non-recurring items or non-operating events, provide
useful information for Shareholders on underlying trends and
performance'.
The Drycleaning results in the Income Statement for 2016 have
been classified as Discontinued Operations and the corresponding
assets and liabilities have been classified as held for sale in the
Balance Sheet as at 31 December 2016.
OPERATIONAL AND FINANCIAL REVIEW
Financial Results
Total continuing revenue for the year to 31 December 2017
increased by 13.3% to GBP290.9 million (2016: GBP256.7 million),
reflecting the Group's continuing strong organic growth performance
of 5.1% and contributions from the acquisitions of Professional
Linen Services ('PLS') in July 2017 and StarCounty ('Star') in
December 2017, as well as the full year benefit of acquisitions
completed in 2016. Adjusted operating profit increased by 14.9% to
GBP43.3 million (2016: GBP37.7 million).
The total finance cost was GBP3.6 million (2016: GBP3.9 million)
reflecting lower average debt levels and a reduced notional
interest charge of GBP0.4 million (2016: GBP0.6 million) on the
Group's net pension liabilities.
Adjusted profit before taxation increased by 17.5% to GBP39.7
million (2016: GBP33.8 million).
Net exceptional items from continuing operations were GBP0.5
million (2016: GBP1.0 million) and were in respect of acquisition
and subsequent integration activity. The statutory profit before
taxation, after amortisation of intangible assets (excluding
software amortisation) of GBP8.0 million (2016: GBP6.9 million),
increased by 20.5% to GBP31.2 million (2016: GBP25.9 million).
Continuing adjusted diluted earnings per share increased by
14.5% to 8.7 pence (2016: 7.6 pence). Diluted earnings per share
from continuing operations after amortisation of intangible assets
(excluding software amortisation) and exceptional items increased
by 16.9% to 6.9 pence (2016: 5.9 pence).
Dividend
The Board is pleased to recommend an increased final dividend of
1.9 pence per share (2016: 1.7 pence), which reflects the Group's
strong performance and confidence in the future prospects of the
business. Together with the interim dividend, this takes the total
dividend for the year to 2.8 pence per share (2016: 2.5 pence), an
increase of 12.0% year-on-year.
The proposed final dividend, if approved by Shareholders, will
be paid on 11 May 2018 to Shareholders on the register at close of
business on 13 April 2018. The ex-dividend date is 12 April
2018.
Post-Employment Benefits
The recorded net deficit after taxation for all post-employment
benefit obligations reduced to GBP9.8 million at 31 December 2017
from GBP14.8 million at 31 December 2016. The reduction reflects
the benefit of strong asset returns and deficit recovery
contributions offset in part by the net impact of a slight
reduction in the discount rate and small increase in the assumed
inflation rate.
Asset allocation remains under constant review with the Trustee.
Changes have been made to more appropriately match assets against
the remaining scheme liabilities and to reduce interest rate and
inflation risks to a more acceptable level when market dynamics
change.
The current agreement with the Trustee of the defined benefit
pension scheme required deficit recovery payments of GBP1.9 million
in the year to December 2017. In addition to this agreed schedule
of contributions a further payment of GBP1.5 million was made to
the pension scheme in April 2017.
The triennial actuarial valuation of the defined benefit scheme
as at 30 September 2016 was finalised during the year. Calculated
under the more prudent technical provisions of the scheme, the
actuarial deficit has increased to GBP39.3 million. However given
the additional contribution of GBP1.5 million referred to above,
the Trustee has agreed that ongoing deficit funding contributions
will remain at the current level of GBP1.9 million per annum.
Cash Flow and Banking
Total net debt at the year-end stood at GBP91.3 million (31
December 2016: GBP98.2 million). The Group's strong trading
performance and cash generation helped to offset the impact of both
the acquisitions we made in the year and our significant investment
in capital expenditure across the business. Interest cover, based
on adjusted operating profit and excluding notional interest, is
13.5 times (2016: 11.4 times).
The Group remains well funded. A revolving credit facility of
GBP120.0 million was agreed in April 2016 and runs to April 2020
and is considerably in excess of the current anticipated level of
borrowings.
Interest payable on bank borrowings is based upon LIBOR plus a
margin which is linked to gearing levels. The applicable margin
during 2017 was, on average, 1.73% (2016: 1.67%) and will remain at
a similar level for at least the first quarter of 2018. We have
mitigated our exposure to increases in LIBOR rates through the use
of interest rate hedging. Two hedging arrangements, each for
GBP15.0 million of borrowings, are in place 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. Two further hedging arrangements, each for GBP10.0 million,
were entered into at the end of June 2016 whereby LIBOR is replaced
by a fixed rate of 0.49% to June 2018 and 0.5525% to June 2019.
OPERATIONAL HIGHLIGHTS
Introduction
The Group reported another year of substantial growth with both
divisions delivering higher levels of new business wins and
maintaining consistently high levels of customer retention. In line
with our strategic objective of continuing to build a nationwide
business, the acquisition of PLS, a high volume linen plant based
in Edinburgh, provides geographical extension of our services in
Scotland and the North East of England, whilst the acquisition of
StarCounty, based in Wrexham, provides an excellent platform for
the extension and consolidation of the Stalbridge trading area in
the North West of England.
Following the sale of the Drycleaning division in January 2017,
the Group is now entirely focused on textile service activities,
covering Workwear rental and linen services to the Hotel,
Restaurant and Catering ("HORECA") sectors. Going forward, we will
report on these two Divisions.
The planned capital investment programme was accelerated during
the year in many of our existing locations to ensure that we both
improved efficiencies and created additional capacity to meet the
demands from the strong organic sales generated throughout the
year.
Our Businesses
Our Group now comprises of Textile Service businesses that trade
through a number of very well recognised and respected brands,
servicing the UK's Workwear and HORECA sectors. Following the
successful integration of numerous acquisitions over the last five
years we now have several regional brands servicing similar
markets. We have therefore taken the decision to implement a review
to consolidate branding in order to maximise and extend national
brand recognition. We currently anticipate that this will take up
to three years to fully implement and the associated modest cost
will not have a material impact on the reported earnings of the
Group over that period.
In conjunction with this review, work has also commenced on
upgrading and consolidating our operational IT platforms for both
workwear and high volume linen to ensure that we continue to
provide market leading solutions for our business and our
customers. Design, build and implementation of the system is
expected to be a two year programme utilising our own in house team
of experts.
Workwear Division
The Group's workwear business provides workwear rental and
laundry services, trading under the 'Apparelmaster' brand, to a
very large cross section of industry and commerce, including many
large blue chip corporates.
Apparelmaster enjoyed another very strong and successful year
with revenue increasing by 4.0% to GBP122.4 million (2016: GBP117.7
million). Organic growth was aided by record new sales wins, which
were well ahead of management targets. This reflected the on-going
investment in our sales and marketing department. Almost 15% of the
total value of new sales were to those customers who had previously
not had a rental service. Sales to existing customers also
increased and this, combined with high levels of customer retention
at 95.4% (2016: 94.6%), delivered year on year growth against a
backdrop of an ever changing competitive environment.
The strong new sales combined with production efficiencies and
careful cost control, increased adjusted operating profit by 6.0%
to GBP21.1 million (2016: GBP19.9 million) resulting in an improved
margin of 17.2% (2016: 16.9%).
Our business ethos, which is focused on nationwide coverage,
strong local service and continued investment in our facilities,
has helped us to increase customer confidence. Customer
satisfaction scores, both for our new and longer term customers,
have improved. During the year, evidence of this confidence was
borne through a number of large national contracts being
successfully renewed.
Apparelmaster continues to work closely with its supply chain
and, recognising market trends, has introduced new food trade and
leisurewear ranges. We review our garment range on an ongoing basis
to ensure that we meet the ever changing needs of customers by
keeping abreast of the latest fashion trends.
In line with our operational strategy, Apparelmaster has
continued to invest in plant and machinery and commercial fleets,
with the emphasis on best in class equipment to drive production
efficiencies and optimise energy consumption. In particular, the
plants at Brighton, Basingstoke and Letchworth have been upgraded
to increase capacity and efficiency in relation to food industry
garment processing, where growth has been particularly strong.
Further refurbishments to the Hinckley cleanroom are due to be
completed in early 2018. In total, capital expenditure amounted to
GBP4.5 million (2016: GBP5.4 million), with a further GBP17.9
million (2016: GBP16.5 million) on new rental stock.
Computer tablet software enhancements have been provided to our
sales and service staff, which integrate the sales and service
processes and make the face to face customer experience more
productive with faster and more efficient responses to their
business needs. Further enhancements have been developed and were
launched in January 2018.
The Johnsons Academy, which provides targeted, in-house training
and development for employees, allows opportunities for further
staff development and improves the skill base of the business. We
are pleased with the success of the Academy and the numbers of
staff who are moving through the business to fill vacant management
positions.
HORECA Division
The Group provides premium linen services to the hotel,
restaurant, hospitality and corporate events market through
'Stalbridge' and 'London Linen' as well as high volume hotel linen
services through 'Afonwen', 'Bourne' and 'PLS'.
The total revenue for the HORECA division was up 21.2% to
GBP168.5 million (2016: GBP139.0 million). This GBP29.5 million
increase includes contributions from additional months of trading
from acquisitions completed in both 2016 and 2017. In addition, it
reflects the one-off benefit of some GBP2.6 million of revenue for
work processed between February and October 2017 on behalf of a
privately owned laundry whose plant was out of commission. New
business sales throughout the year were strong, contributing
organic growth of 6.0%.
Adjusted operating profit increased by GBP5.0 million to GBP26.8
million (2016: GBP21.8 million) with an operating margin of 15.9%
(2016: 15.7%). The margin in 2017, excluding the benefit from the
work processed for the privately owned laundry referred to above,
was 15.2%, still ahead of our expectations.
The HORECA division has continued to invest in upgrading its
plants with the aim of increasing both capacity and throughput.
During the year total expenditure on plant and equipment amounted
to GBP12.0 million (2016: GBP9.2 million) with a further GBP25.2
million (2016: GBP18.0 million) invested in new rental stock.
Throughout 2017 Stalbridge has built on their previous
successful performance with accelerated revenue and margin growth,
led by impressive new sales wins, which were significantly ahead of
management targets. Stalbridge's flexible and responsive approach
is very well received by their clients.
Given that Stalbridge's operating model has no long term
customer contracts, a real focus is placed on customer satisfaction
and building a reputation for providing very high service levels.
The 2017 customer satisfaction score, provided by The Leadership
Factor, an independent customer experience consultancy, was the
highest yet recorded, and reflected actions taken by the management
to improve service and quality levels even further.
Significant capital investments have been made to support the
growth. During the year new washing and finishing equipment was
installed in Grantham, additional soiled storage and towel drying
in Sturminster Newton, new ironing equipment in Glasgow and
increased clean work and packing space in Shaftesbury.
Further significant investment is planned in early 2018, both in
existing factory locations and in Southall, where Stalbridge has
recently taken on the management of Caterers Linen Supply. This
business was originally acquired as part of the London Linen Group
and had some common customers with Stalbridge. An additional
factory unit is being developed adjacent to the existing Southall
factory to accommodate future business growth and a further
investment of GBP3.3 million in processing equipment will be
completed by summer 2018.
At the half year we commented on the need for additional
processing capacity near to the North West of England and we are
pleased to have completed the acquisition of StarCounty in Wrexham
in December. The plant is being integrated into the Stalbridge
business and will provide processing capacity for servicing our
customers in this area of the UK.
Once the Southall and Wrexham sites are fully operational they
will allow some further consolidation of distribution and service
costs.
Revenue at London Linen has also seen strong organic growth,
driven by strong new sales combined with a number of existing multi
location customers continuing to open additional new sites. A
number of contract extensions were secured on key customers,
typically for a further two or three years.
Operationally, the main focus of London Linen in the year was
the completion of the GBP4.5 million capital investment programme.
The investment included a total reorganisation of the incoming
soiled goods sorting system with a new mezzanine floor containing
highly automated conveyor systems, new ergonomically efficient
sorting tables and an automated bag-loading system which transports
soiled linen directly to two new continuous batch washers. The
capital investment programme was completed during the first half of
the year, on schedule and on budget. It has helped to reduce
operating costs as well as increasing production capacity and
improving the quality of linen. The benefits of this investment
have been particularly evident in the run up to the busy Christmas
period. These efficiencies, along with the increased sales, have
helped to offset increasing employment costs, driven by the higher
NLW and the apprenticeship levy, together with general upward
inflationary pressures, in particular relating to linen
purchases.
The business continues to explore ways that further capital
expenditure can continue to improve capacity, productivity and
consistency, including the use of electronic inspection systems and
improvements to our ironing capability.
The programme to fully co-ordinate the sales and service
functions of the London Linen and London Workwear brands is almost
complete. We believe this initiative will enhance customer service
and streamline product offerings to customers.
The high volume linen brands of Afonwen, Bourne and PLS have
performed very well throughout 2017. There has been continued focus
on improving the efficiencies within the transport network by
reallocating customers to their closest operating production
facility, which reduces costs and ultimately improves customer
service. The GBP3.0 million investment at the Chester laundry was
completed on time and on budget, resulting in significant
improvements to output and efficiency levels and to the quality of
the finished products.
The high volume linen brands are increasingly working together
with a new national accounts management structure and sales
strategy, to further exploit opportunities with national hotel
customers and other prospects. During the year, and despite the
competitive pressure on pricing, the business continued to
successfully re-tender and agree commercial terms with an important
number of key accounts in its core market of the budget and
corporate 4 star hotel market place. In addition the business
experienced strong customer loyalty at a time of increased
uncertainty amongst some of our competitors.
In July we also completed the strategically important
acquisition of PLS in Edinburgh, providing us with capacity and
coverage in the Scottish market as well as strengthening the
customer base in North East England. We are already seeing the
benefit of this with additional business being secured, from both
existing customers opening new hotels in the region as well as from
new customers, by virtue of us now being able to cover the Scottish
market place. We are looking to invest in upgrading production
capability over the year ahead, as well as strengthening our sales
team to enable greater coverage of the Scottish hotel market.
Customer retention has remained high throughout the year, as has
overall customer satisfaction, and new systems and procedures are
being introduced to benchmark performance and identify areas for
further enhancement.
Over the year ahead, we are seeking to further integrate the
Afonwen and Bourne operations with the appointment of a newly
created role of Operations Director, to help focus the business on
continued integration, operational efficiencies and continuous
improvement across all sites.
Employees
Our teams across the business have continued to work with skill,
enthusiasm and dedication and have helped to ensure that our
customers receive market-leading service standards.
The Board would like to thank them for their significant
contribution to the continuing success of the Group.
Board Changes
As announced on 5 December 2017, Peter Egan, currently Managing
Director of our workwear business, will join the Board on 1 April
2018 as Chief Operating Officer ahead of assuming the role of CEO.
Chris Sander, the current CEO, has agreed to remain on the Board
until the end of 2018 to ensure a smooth and effective transition
to Peter within that period.
Outlook
During the year Johnson Service Group has continued to meet its
strategic objectives by transforming the Group into a highly
focused Textile Services business. In doing so, we have delivered
another strong financial performance underpinned by significant
organic growth together with growth from acquisitions, which
continue to extend the geographical coverage of our businesses. The
operational strategy of continuing to invest capital in modern,
highly efficient equipment has helped mitigate cost pressures and
supported margin growth.
The Group's performance since the year end has been in line with
management expectations and with strong new business sales,
existing strong cash flows and an established strategy, we remain
confident in the year ahead.
By order of the Board,
Chris Sander Yvonne Monaghan
Chief Executive Officer Chief Financial Officer
27 February 2018 27 February 2018
CONSOlidated Income Statement
Year Year
ended ended
31 December 31 December
2017 2016
Note GBPm GBPm
Revenue from continuing operations 2 290.9 256.7
Operating profit 2 34.8 29.8
Operating profit before amortisation
of intangible assets
(excluding software amortisation)
and exceptional items 2 43.3 37.7
Amortisation of intangible assets
(excluding software amortisation) (8.0) (6.9)
Exceptional items 3
- Costs in relation to business
acquisition activity (0.5) (1.2)
- Pension costs - (0.3)
- Profit on disposal of freehold
property - 0.5
-------------------------------------- ---- ------------ ------------
Operating profit 2 34.8 29.8
Finance cost (3.2) (3.3)
Notional pension interest (0.4) (0.6)
-------------------------------------- ---- ------------ ------------
Total finance cost 4 (3.6) (3.9)
Profit before taxation 31.2 25.9
Taxation charge * 6 (5.8) (5.0)
-------------------------------------- ---- ------------ ------------
Profit for the year from continuing
operations 25.4 20.9
Profit / (loss) for the year from
discontinued operations 13 0.3 (0.3)
-------------------------------------- ---- ------------ ------------
Profit for the year attributable
to equity holders 25.7 20.6
-------------------------------------- ---- ------------ ------------
Earnings per share 7
Basic earnings per share
From continuing operations 6.9p 6.0p
From discontinued operations 0.1p (0.1p)
-------------------------------------- ---- ------------ ------------
From total operations 7.0p 5.9p
-------------------------------------- ---- ------------ ------------
Diluted earnings per share
From continuing operations 6.9p 5.9p
From discontinued operations 0.1p (0.1p)
-------------------------------------- ---- ------------ ------------
From total operations 7.0p 5.8p
-------------------------------------- ---- ------------ ------------
Adjusted basic earnings per share
From continuing operations 8.7p 7.7p
From discontinued operations - 0.4p
--------------------------------------- ---- ------------
From total operations 8.7p 8.1p
--------------------------------------- ---- ------------
Adjusted diluted earnings per share
From continuing operations 8.7p 7.6p
From discontinued operations - 0.4p
--------------------------------------- ---- ------------
From total operations 8.7p 8.0p
--------------------------------------- ---- ------------
* Including GBP1.7 million credit (2016: GBP1.5 million credit)
relating to amortisation of intangible assets (excluding software
amortisation) and GBP0.1 million credit (2016: GBP0.2 million
credit) relating to exceptional items.
Consolidated Statement of COMPREHENSIVE Income
Year ended Year ended
31 December 31 December
2017 2016
GBPm GBPm
Profit for the year 25.7 20.6
------------------------------------------------------------------------------------------ ------------ ------------
Items that will not be subsequently
reclassified to profit or loss
Re-measurement and experience gains
/ (losses) on post-employment benefit
obligations 3.2 (3.5)
Taxation in respect of re-measurement
and experience (gains) / losses (0.6) 0.6
Change in deferred tax due to change
in tax rate (0.1) (0.1)
Items that may be subsequently reclassified
to profit or loss
Cash flow hedges (net of taxation)
- fair value gains / (losses) 0.2 (0.4)
- transfers to administrative
expenses - 0.2
- transfers to finance cost 0.4 0.3
------------------------------------------------------------------------------------------ ------------ ------------
TOTAL OTHER COMPREHENSIVE INCOME
/ (LOSS) FOR THE YEAR 3.1 (2.9)
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR 28.8 17.7
------------------------------------------------------------------------------------------ ------------ ------------
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 2016 33.1 14.5 1.6 0.6 (0.8) 57.8 106.8
Profit for
the year - - - - - 20.6 20.6
Other comprehensive
income / (loss) - - - - 0.1 (3.0) (2.9)
--------------------- --------- --------- --------- ------------ --------- ---------- --------------
Total comprehensive
income for the
year - - - - 0.1 17.6 17.7
--------------------- --------- --------- --------- ------------ --------- ---------- --------------
Share options
(value of employee
services) - - - - - 0.8 0.8
Current tax
on share options - - - - - 0.2 0.2
Issue of share
capital 3.4 0.5 - - - 25.4 29.3
Dividend paid - - - - - (7.7) (7.7)
--------------------- --------- --------- --------- ------------ --------- ---------- --------------
Transactions
with Shareholders
recognised
directly in
Shareholders'
equity 3.4 0.5 - - - 18.7 22.6
--------------------- --------- --------- --------- ------------ --------- ---------- --------------
Balance at
31 December
2016 36.5 15.0 1.6 0.6 (0.7) 94.1 147.1
--------------------- --------- --------- --------- ------------ --------- ---------- --------------
Balance at
1 January 2017 36.5 15.0 1.6 0.6 (0.7) 94.1 147.1
Profit for
the year - - - - - 25.7 25.7
Other comprehensive
income - - - - 0.6 2.5 3.1
--------------------- --------- --------- --------- ------------ --------- ---------- --------------
Total comprehensive
income for the
year - - - - 0.6 28.2 28.8
--------------------- --------- --------- --------- ------------ --------- ---------- --------------
Share options
(value of employee
services) - - - - - 0.7 0.7
Current tax
on share options - - - - - 0.2 0.2
Issue of share
capital 0.1 0.2 - - - - 0.3
Dividend paid - - - - - (9.5) (9.5)
--------------------- --------- --------- --------- ------------ --------- ---------- --------------
Transactions
with Shareholders
recognised
directly in
Shareholders'
equity 0.1 0.2 - - - (8.6) (8.3)
--------------------- --------- --------- --------- ------------ --------- ---------- --------------
Balance at
31 December
2017 36.6 15.2 1.6 0.6 (0.1) 113.7 167.6
--------------------- --------- --------- --------- ------------ --------- ---------- --------------
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 31
December 2017, the EBT held 16,256 shares (2016: 20,739).
Consolidated Balance Sheet
As at As at
31 December 31 December
2017 2016
GBPm GBPm
NON-CURRENT ASSETS
Goodwill 120.3 115.6
Intangible assets 43.5 47.9
Property, plant and equipment 89.3 81.7
Textile rental items 50.0 44.1
Trade and other receivables 0.3 0.3
Deferred income tax assets 2.9 4.2
306.3 293.8
-------------------------------------- ------------ ------------
CURRENT ASSETS
Inventories 2.9 2.2
Trade and other receivables 47.2 43.3
Derivative financial assets 0.1 -
Cash and cash equivalents 5.3 2.9
Assets classified as held for sale - 17.2
-------------------------------------- ------------ ------------
55.5 65.6
-------------------------------------- ------------ ------------
CURRENT LIABILITIES
Trade and other payables 65.3 60.6
Current income tax liabilities 3.8 4.3
Borrowings 14.5 19.9
Derivative financial liabilities - 0.3
Provisions 2.2 1.9
Liabilities directly associated with
assets classified as held for sale - 9.4
-------------------------------------- ------------ ------------
85.8 96.4
-------------------------------------- ------------ ------------
NON-CURRENT LIABILITIES
Post-employment
benefit obligations 12.0 18.2
Deferred income tax liabilities 9.5 10.0
Trade and other payables 3.1 2.3
Borrowings 82.1 82.0
Derivative financial liabilities 0.2 0.5
Provisions 1.5 2.9
-------------------------------------- ------------ ------------
108.4 115.9
-------------------------------------- ------------ ------------
NET ASSETS 167.6 147.1
-------------------------------------- ------------ ------------
CAPITAL AND RESERVES ATTRIBUTABLE
TO THE COMPANY'S SHAREHOLDERS
Share capital 36.6 36.5
Share premium 15.2 15.0
Merger reserve 1.6 1.6
Capital redemption reserve 0.6 0.6
Hedge reserve (0.1) (0.7)
Retained earnings 113.7 94.1
-------------------------------------- ------------ ------------
TOTAL SHAREHOLDERS' EQUITY 167.6 147.1
-------------------------------------- ------------ ------------
The notes on pages 12 to 24 form an integral part of these
condensed consolidated financial statements. The condensed
consolidated financial statements on pages 8 to 24 were approved by
the Board of Directors on 27 February 2018 and signed on its behalf
by:
Yvonne Monaghan
Chief Financial Officer
Consolidated Statement OF Cash Flows
Year Year
ended ended
31 December 31 December
2017 2016
GBPm GBPm
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year 25.7 20.6
Adjustments for:
Taxation charge / (credit)
- continuing operations 5.8 5.0
- discontinued operations (0.3) 0.6
Total finance cost -
continuing operations 3.6 3.9
- discontinued operations - 0.1
Depreciation 48.8 44.5
Amortisation 8.2 7.1
Revaluation of assets classified
as held for sale - 2.0
Profit on sale of property, plant
and equipment (0.1) -
(Increase) / decrease in inventories (0.7) 0.4
(Increase) / decrease in trade and
other receivables (2.1) 0.8
Increase in trade and other payables 1.9 0.9
Costs in relation to business acquisition
activity 0.5 1.2
Deficit recovery payments in respect
of post-employment benefit obligations (3.4) (1.9)
Share-based payments 0.8 0.8
Post-employment benefit obligations (0.1) (0.1)
Decrease in provisions (1.0) (4.4)
Cash generated from operations 87.6 81.5
Interest paid (2.8) (3.0)
Taxation paid (6.9) (5.9)
----------------------------------------------------------------------------- ------------ ------------
Net cash generated from operating
activities 77.9 72.6
----------------------------------------------------------------------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of businesses (net of
cash and overdrafts acquired) (9.2) (58.0)
Proceeds from sale of business (net
of cash disposed) - discontinued
operations 7.1 -
Purchase of property, plant and equipment (16.5) (15.5)
Proceeds from sale of property, plant
and equipment 0.2 0.6
Purchase of textile rental items (43.1) (34.5)
Proceeds received in respect of special
charges 2.1 2.7
Net cash used in investing activities (59.4) (104.7)
----------------------------------------------------------------------------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 82.0 88.0
Repayment of borrowings (88.2) (69.3)
Capital element of finance leases (5.3) (5.3)
Net proceeds from issue of Ordinary
shares 0.3 29.3
Dividend paid (9.5) (7.7)
----------------------------------------------------------------------------- ------------ ------------
Net cash (used in) / generated from
financing activities (20.7) 35.0
----------------------------------------------------------------------------- ------------ ------------
Net (decrease) / increase in cash
and cash equivalents (2.2) 2.9
Cash and cash equivalents at beginning
of the year (1.5) (4.4)
----------------------------------------------------------------------------- ------------ ------------
Cash and cash equivalents at end
of the year (3.7) (1.5)
----------------------------------------------------------------------------- ------------ ------------
Cash and cash equivalents comprise:
Cash 5.3 2.9
Overdraft (9.0) (5.2)
Within assets classified as held
for sale - 0.8
Cash and cash equivalents at end
of year (3.7) (1.5)
----------------------------------------------------------------------------- ------------ ------------
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1 BASIS OF PREPARATION & FORWARD LOOKING STATEMENTS
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 2017 Annual
Report.
The financial information set out within this Preliminary
Announcement does not constitute the Company's statutory accounts
for the years ended 31 December 2017 or 31 December 2016 within the
meaning of Section 434 of the Companies Act 2006, but is derived
from those accounts.
Statutory accounts for 2016 have been delivered to the Registrar
of Companies, and those for 2017 will be delivered as soon as
practicable but not later than 30 April 2018. 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.
Forward Looking Statements
Certain statements in these condensed consolidated financial
statements constitute forward-looking statements. Any statement in
this document that is not a statement of historical fact including,
without limitation, those regarding the Group's future
expectations, operations, financial performance, financial
condition and business is a forward-looking statement. Such
forward-looking statements are subject to risks and uncertainties
that may cause actual results to differ materially. These risks and
uncertainties include, among other factors, changing economic,
financial, business or other market conditions. These and other
factors could adversely affect the outcome and financial effects of
the plans and events described in these condensed consolidated
financial statements. As a result you are cautioned not to place
reliance on such forward-looking statements. Nothing in this
document should be construed as a profit forecast.
2 SEGMENT ANALYSIS
Segment information is presented based on the Group's management
and internal reporting structure as at 31 December 2017.
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 the
reporting in the Annual Report.
Prior to its disposal on 4 January 2017, the Drycleaning
business comprised a single reporting segment with all other
operating businesses being reported within the 'Textile Rental'
reporting segment. In addition, the Group also provided analysis
for two further reporting segments: 'Discontinued Operations' and
'All Other Segments'. As a result of the Drycleaning disposal, the
Board considered whether it remained appropriate to continue
reporting under the remaining segments.
The Board considered the aggregation criteria set out within
IFRS 8, 'Operating Segments', which allows for two or more
operating segments to be combined as a single reporting segment
if:
1) aggregation provides financial statement users with
information that allows them to evaluate the business and the
environment in which it operates; and
2) they have similar economic characteristics (e.g. similar
long-term average gross margins would be expected) and are similar
in each of the following respects:
-- the nature of the products and services;
-- the nature of the production processes;
-- the type or class of customer for their products and
services;
-- the methods used to distribute their products or provide
their services; and
-- the nature of the regulatory environment (i.e. banking,
insurance or public utilities), if applicable.
After careful consideration, the Board deemed it appropriate to
introduce two new reporting segments (in addition to 'Discontinued
Operations' and 'All Other Segments'), being:
1) Workwear: comprising of our Apparelmaster business only; and
2) Hotel, Restaurants and Catering ('HORECA'): comprising of our
Stalbridge, London Linen, Afonwen and Bourne businesses, each of
which are a separate operating segment.
The Board's rationale for aggregating the Stalbridge, London
Linen, Afonwen and Bourne operating segments into a single
reporting segment is set out below:
-- the gross margins of each operating segment are within a
similar range, with the long-term average margin expected to
further align;
-- the nature of the customers, products and production
processes of each operating segment are very similar;
-- the nature of the regulatory environment is the same due to
the similar nature of products, processes and customers involved;
and
-- distribution is via exactly the same method across each
operating segment.
The 2017 segmental analysis has, therefore, been prepared as
described above and, in accordance with IFRS 8, the 2016 segmental
analysis has been adjusted to reflect the position had these
changes been in place throughout the year ended 31 December
2016.
NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)
2 SEGMENT ANALYSIS continued
The Board assesses the performance of the reporting segments
based on a measure of operating profit, 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. Other than as described above, 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.
Exceptional items have been included within the appropriate
reporting segment as shown on pages 14 to 15.
Workwear
Supply and laundering of * Apparelmaster
workwear garments and protective
wear.
HORECA
Linen services for the * Stalbridge
hotel, restaurant and catering
sector.
* London Linen
* Bourne
* Afonwen
* PLS
All Other Segments
Comprising of central and
Group costs.
NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)
2 SEGMENT ANALYSIS continued
All
Year ended 31 December HORECA Other
2017 Workwear Segments Total
GBPm GBPm GBPm GBPm
Revenue
Continuing 122.4 168.5 - 290.9
Total Revenue 290.9
------------------------------------------- ----------- --------- ---------- ------
RESULT
Operating profit / (loss)
before amortisation of intangible
assets (excluding software
amortisation) and exceptional
items 21.1 26.8 (4.6) 43.3
Amortisation of intangible assets
(excluding software amortisation) (0.5) (7.5) - (8.0)
Exceptional items:
- Costs in relation to
business acquisition activity - (0.5) - (0.5)
Operating profit / (loss) 20.6 18.8 (4.6) 34.8
Total finance cost (3.6)
Profit before taxation 31.2
Taxation (5.8)
------------------------------------------- ----------- --------- ---------- ------
Profit for the year from
continuing operations 25.4
Profit for the year from
discontinued operations 0.3
------------------------------------------- ----------- --------- ---------- ------
Profit for the year attributable
to equity holders 25.7
------------------------------------------- ----------- --------- ---------- ------
All
Discontinued HORECA Other
Operations Workwear Segments Total
GBPm GBPm GBPm GBPm GBPm
BALANCE SHEET INFORMATION
Segment assets - 116.8 236.0 0.7 353.5
Unallocated assets: Deferred
income tax assets 2.9
Derivative financial
assets 0.1
Cash and cash
equivalents 5.3
-------------------------------------------------------- ------------- --------- ---------- ---------- --------
Total assets 361.8
-------------------------------------------------------- ------------- --------- ---------- ---------- --------
Segment liabilities (4.1) (29.4) (45.1) (3.5) (82.1)
Unallocated liabilities:
Deferred income tax liabilities (9.5)
Bank borrowings (86.6)
Current income tax
liabilities (3.8)
Derivative financial
liabilities (0.2)
Post-employment
benefit
obligations (12.0)
-------------------------------------------------------- ------------- --------- ---------- ---------- --------
Total liabilities (194.2)
-------------------------------------------------------- ------------- --------- ---------- ---------- --------
OTHER INFORMATION
Non-current asset additions
- Property, plant and
equipment - 4.7 10.6 - 15.3
- Textile rental items - 17.8 25.9 - 43.7
Depreciation and amortisation
expense
- Property, plant and
equipment - 4.6 7.9 - 12.5
- Textile rental items - 15.8 20.5 - 36.3
- Intangible software - - 0.2 - 0.2
- Customer contracts - 0.5 7.5 - 8.0
The results, assets and liabilities of all segments arise in the
Group's country of domicile, being the United Kingdom.
NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)
2 SEGMENT ANALYSIS continued
All
Year ended 31 December HORECA Other
2016 (Restated) Workwear Segments Total
GBPm GBPm GBPm GBPm
Revenue
Continuing 117.7 139.0 - 256.7
Discontinued 44.3
-------------------------------------------
Total Revenue 301.0
------------------------------------------- --------- --------- ---------- ------
RESULT
Operating profit / (loss)
before amortisation of intangible
assets (excluding software
amortisation) and exceptional
items 19.9 21.8 (4.0) 37.7
Amortisation of intangible
assets (excluding software
amortisation) (0.5) (6.4) - (6.9)
Exceptional items:
- Costs in relation to
business acquisition activity - (1.2) - (1.2)
- Pension costs - - (0.3) (0.3)
- Profit on disposal
of freehold property 0.5 - - 0.5
Operating profit / (loss) 19.9 14.2 (4.3) 29.8
Total finance cost (3.9)
------------------------------------------- --------- --------- ---------- ------
Profit before taxation 25.9
Taxation (5.0)
------------------------------------------- --------- --------- ---------- ------
Profit for the year from
continuing operations 20.9
Loss for the year from
discontinued operations (0.3)
------------------------------------------- --------- --------- ---------- ------
Profit for the year 20.6
------------------------------------------- --------- --------- ---------- ------
All
Discontinued HORECA Other
Operations Workwear Segments Total
GBPm GBPm GBPm GBPm GBPm
BALANCE SHEET INFORMATION
Segment assets 17.2 116.5 217.5 1.1 352.3
Unallocated assets: Deferred
income tax assets 4.2
Cash and cash
equivalents 2.9
------------------------------------------------------ --- ------------- --------- --------- ---------- --------
Total assets 359.4
------------------------------------------------------ --- ------------- --------- --------- ---------- --------
Segment liabilities (13.7) (32.0) (42.6) (3.2) (91.5)
Unallocated liabilities:
Deferred income tax liabilities (10.0)
Bank borrowings (87.5)
Current income tax
liabilities (4.3)
Derivative
financial
liabilities (0.8)
Post-employment
benefit
obligations (18.2)
------------------------------------------------------ --- ------------- --------- --------- ---------- --------
Total liabilities (212.3)
------------------------------------------------------ --- ------------- --------- --------- ---------- --------
OTHER INFORMATION
Non-current asset additions
- Property, plant and
equipment 0.7 5.5 9.4 - 15.6
- Textile rental items - 17.0 18.4 - 35.4
Depreciation and amortisation
expense
- Property, plant and
equipment 1.4 4.3 6.4 - 12.1
- Textile rental items - 16.5 15.9 - 32.4
- Intangible software - - 0.2 - 0.2
- Customer contracts - 0.5 6.4 - 6.9
The results, assets and liabilities of all segments arise in the
Group's country of domicile, being the United Kingdom.
NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)
3 EXCEPTIONAL ITEMS
2017 2016
GBPm GBPm
Costs in relation to business acquisition
activity (0.5) (1.2)
Pension costs - (0.3)
Profit on disposal of freehold property - 0.5
Total exceptional items (0.5) (1.0)
------------------------------------------- ------ ------
Current year exceptional items
Costs in relation to business acquisition activity
During the year, professional fes of GBP0.3 million were paid
relating to the acquisitions of Clayfull Limited, which trades as
PLS, and StarCounty Textile Services Limited. In addition, costs of
GBP0.2 million were incurred as part of the integration of recent
acquisitions. Further information relating to the acquisitions is
provided in note 13.
Prior year exceptional items
Costs in relation to business acquisition activity
During the prior year, professional fees of GBP0.6 million and
Stamp Duty of GBP0.3 million were paid relating to the acquisitions
of Zip Textiles (Services) Limited, Chester Laundry Limited and
Portgrade Limited, the parent company of Afonwen Laundry Limited.
In addition, costs of GBP0.3 million were incurred as part of the
integration of recent acquisitions.
Pension costs
During the prior year, professional fees of GBP0.3 million were
incurred in respect of liability management exercises in relation
to the defined benefit pension scheme.
Profit on disposal of freehold property
A former Workwear site in Leeds that was closed in 2015 was
disposed of during the prior year for net proceeds of GBP0.5
million. The carrying value was previously written down to GBPnil
in 2014.
4 TOTAL FINANCE COST
2017 2016
Continuing operations GBPm GBPm
Finance cost:
- Interest payable on bank loans
and overdrafts (2.5) (2.5)
- Amortisation of bank facility
fees (0.3) (0.3)
- Interest payable on obligations
under finance lease agreements (0.4) (0.5)
Total finance costs before notional
interest on post-employment benefit
obligations (3.2) (3.3)
Notional interest on post-employment
benefit obligations (0.4) (0.6)
Total finance cost (3.6) (3.9)
--------------------------------------- ------ ------
5 ADJUSTED PROFIT BEFORE AND AFTER TAXATION
2017 2016
Continuing operations GBPm GBPm
Profit before taxation 31.2 25.9
Amortisation of intangible assets
(excluding software amortisation) 8.0 6.9
Costs in relation to business
acquisition activity 0.5 1.2
Pension costs - 0.3
Profit on disposal of freehold
property - (0.5)
Adjusted profit before taxation 39.7 33.8
Taxation on adjusted profit (7.6) (6.7)
------------------------------------- ------ ------
Adjusted profit after taxation 32.1 27.1
------------------------------------- ------ ------
NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)
6 TAXATION CHARGE
2017 2016
Continuing operations GBPm GBPm
Current tax
UK corporation tax charge for the
year 7.8 7.3
Adjustment in relation to previous
years (0.9) (0.1)
--------------------------------------- ------ ------
Current tax charge for the year 6.9 7.2
Deferred tax
Origination and reversal of temporary
differences (1.4) (1.8)
Changes in tax rate (0.3) (0.3)
Adjustment in relation to previous
years 0.6 (0.1)
--------------------------------------- ------ ------
Deferred tax credit for the year (1.1) (2.2)
Total charge for taxation included
in the Income Statement 5.8 5.0
--------------------------------------- ------ ------
The tax charge for the year is lower (2016: lower) than the
effective rate of Corporation Tax in the UK of 19.25% (2016:
20.00%).
The differences are explained below:
2017 2016
Continuing operations GBPm GBPm
Profit before taxation 31.2 25.9
--------------------------------------- ------ ------
Profit before taxation multiplied
by the effective rate of Corporation
Tax in the UK 6.0 5.2
Factors affecting taxation charge
for the year:
Tax effect of expenses not deductible
for tax purposes 0.4 0.3
Changes in tax rate (0.3) (0.3)
Adjustments in relation to previous
years (0.3) (0.2)
--------------------------------------- ------ ------
Total charge for taxation included
in the Income Statement 5.8 5.0
--------------------------------------- ------ ------
Taxation in relation to amortisation of intangible assets
(excluding software amortisation) has reduced the charge for
taxation on continuing operations by GBP1.7 million (2016: GBP1.5
million reduction). Taxation in relation to exceptional items in
the current year has reduced the charge for taxation on continuing
operations by GBP0.1 million (2016: GBP0.2 million reduction).
The taxation charge is based on the effective rate of UK
Corporation Tax for the year of 19.25% (2016: 20.00%).
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 18.0% being used to measure all deferred tax balances as at 31
December 2017 (2016: 18.5%). The impact of the change in tax rates
to 18.0% has been a GBP0.3 million credit in the Income Statement
and a GBP0.1 million charge recognised within other comprehensive
income.
During the year, a GBP0.7 million charge relating to deferred
taxation (2016: GBP0.5 million credit) has been recognised in other
comprehensive income.
During the year, a GBP0.2 million credit relating to current
taxation (2016: GBP0.2 million credit) and a credit of GBPnil
relating to deferred taxation (2016: GBPnil) have been recognised
directly in Shareholders' equity.
NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)
7 EARNINGS PER SHARE
2017 2016
GBPm GBPm
Profit for the financial year from
continuing operations attributable
to Shareholders 25.4 20.9
Profit / (loss) for the financial
year from discontinued operations
attributable to Shareholders 0.3 (0.3)
Amortisation of intangible assets
from continuing operations (net of
taxation) 6.3 5.4
Impairment of assets classified as
held for sale - 2.0
Exceptional costs from continuing
operations (net of taxation) 0.4 0.8
Exceptional costs from discontinued
operations (net of taxation) - (0.3)
Adjusted profit attributable to Shareholders
relating to continuing operations 32.1 27.1
Adjusted profit attributable to Shareholders
relating to discontinued operations 0.3 1.4
---------------------------------------------- ------------ ------------
Adjusted profit attributable to Shareholders 32.4 28.5
Weighted average number of Ordinary
shares 366,167,837 352,481,294
Dilutive potential Ordinary shares 2,798,518 4,421,297
---------------------------------------------- ------------ ------------
Diluted number of Ordinary shares 368,966,355 356,902,591
---------------------------------------------- ------------ ------------
Basic earnings per share
From continuing operations 6.9p 6.0p
From discontinued operations 0.1p (0.1p)
---------------------------------------------- ------------ ------------
From continuing and discontinued
operations 7.0p 5.9p
---------------------------------------------- ------------ ------------
Adjustments for amortisation of intangible
assets (continuing operations) 1.7p 1.5p
Impairment of assets classified as
held for sale (discontinued operations) - 0.6p
Adjustment for exceptional items
(continuing operations) 0.1p 0.2p
Adjustment for exceptional items
(discontinued operations) (0.1p) (0.1p)
Adjusted basic earnings per share
(continuing operations) 8.7p 7.7p
Adjusted basic earnings per share
(discontinued operations) - 0.4p
---------------------------------------------- ------------ ------------
Adjusted basic earnings per share
from continuing and discontinued
operations 8.7p 8.1p
---------------------------------------------- ------------ ------------
Diluted earnings per share
From continuing operations 6.9p 5.9p
From discontinued operations 0.1p (0.1p)
---------------------------------------------- ------------ ------------
From continuing and discontinued
operations 7.0p 5.8p
---------------------------------------------- ------------ ------------
Adjustments for amortisation of intangible
assets (continuing operations) 1.7p 1.5p
Impairment of assets classified as
held for sale (discontinued operations) - 0.6p
Adjustment for exceptional items
(continuing operations) 0.1p 0.2p
Adjustment for exceptional items
(discontinued operations) (0.1p) (0.1p)
Adjusted diluted earnings per share
(continuing operations) 8.7p 7.6p
Adjusted diluted earnings per share
(discontinued operations) - 0.4p
---------------------------------------------- ------------ ------------
Adjusted diluted earnings per share
from continuing and discontinued
operations 8.7p 8.0p
---------------------------------------------- ------------ ------------
Basic earnings per share is calculated using the weighted
average number of Ordinary shares in issue during the year,
excluding those held by the Employee Benefit Trust, based on the
profit for the year attributable to Shareholders.
Adjusted earnings per share figures are given to exclude the
effects of amortisation 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
potentially dilutive Ordinary shares. The Group has potentially
dilutive Ordinary shares arising from share options granted to
employees. Options are dilutive under the SAYE scheme, where the
exercise price together with the future IFRS2 charge of the option
is less than the average market price of the Company's Ordinary
shares during the year. Options under the LTIP schemes, as defined
by IFRS 2, are contingently issuable shares and are therefore only
included within the calculation of diluted EPS if the performance
conditions, as set out in the Board Report on Remuneration, are
satisfied.
Potentially dilutive Ordinary shares are considered 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. For the years ended 31 December 2017 and
31 December 2016, potentially dilutive 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
potentially dilutive Ordinary shares outstanding at the balance
sheet date if those transactions had occurred before the end of the
reporting period.
NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)
8 DIVIDS
2017 2016
Dividend per share
Final dividend proposed 1.9p -
Interim dividend proposed and paid 0.9p 0.8p
Final dividend proposed and paid - 1.7p
2017 2016
GBPm GBPm
Shareholders' funds committed
Final dividend proposed 7.0 -
Interim dividend proposed and paid 3.3 2.9
Final dividend proposed and paid - 6.2
The Directors propose the payment of a final dividend in respect
of the year ended 31 December 2017 of 1.9 pence per share. This
will utilise Shareholders' funds of GBP7.0 million and will be
paid, subject to Shareholder approval, on 11 May 2018 to
Shareholders on the register of members on 13 April 2018. 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 31 December 2017 in respect
of this proposed dividend.
9 CAPITAL EXPITURE AND COMMITMENTS
Capital Expenditure
During the year the Group purchased property, plant and
equipment and intangible assets for a cost of GBP15.3 million
(2016: GBP15.6 million), excluding property, plant and equipment
and intangible assets acquired through business combinations. In
addition, textile rental items with a cost of GBP43.7 million were
acquired in the year (2016: GBP35.4 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 (2016: GBP0.6 million). In addition, amounts
received in respect of textile rental special charges were GBP2.1
million (2016: GBP2.7 million).
Capital Commitments
Orders placed for future capital expenditure contracted but not
provided for in the financial statements are shown below:
2017 2016
GBPm GBPm
Property, plant and equipment 1.4 3.2
------------------------------- ----- -----
10 POST-EMPLOYMENT BENEFIT OBLIGATIONS
The Group has applied the requirements of IAS 19, '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 31 December
2014.
As part of the Group's objective to reduce its overall pension
deficit, deficit recovery payments of GBP1.9 million (2016: GBP1.9
million) were paid to the JGDBS. In addition, a further, one-off,
deficit recovery payment of GBP1.5 million was made in April
2017.
A net re-measurement and experience gain of GBP3.2 million has
been recognised in the year to 31 December 2017. This is
principally as a result of asset returns over the period being
GBP9.8 million higher than previously assumed together with an
experience gain on liabilities of GBP1.0 million being offset, to a
lesser extent, by an increase in liabilities due to changes in
financial and demographic assumptions of GBP7.6 million.
The gross post-employment benefit obligation and associated
deferred income tax asset thereon is shown below:
2017 2016
GBPm GBPm
Gross post-employment benefit obligation 12.0 18.2
Deferred income tax asset thereon (2.2) (3.4)
------------------------------------------ ------ ------
Net liability 9.8 14.8
------------------------------------------ ------ ------
The reconciliation of the opening gross post-employment benefit
obligation to the closing gross post-employment benefit obligation
is shown below:
2017 2016
GBPm GBPm
Opening gross post-employment benefit
obligation (18.2) (16.0)
Notional interest (0.4) (0.6)
Deficit recovery payments 3.4 1.9
Re-measurement and experience gains
/ (losses) 3.2 (3.5)
Closing gross post-employment benefit
obligation (12.0) (18.2)
--------------------------------------- ------- -------
NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)
11 SHARE CAPITAL
2017 2016
Issued and Fully
Paid Shares GBPm Shares GBPm
Ordinary shares
of 10p each:
- At start of
year 365,108,019 36.5 330,570,023 33.1
- New shares
issued 1,391,356 0.1 34,537,996 3.4
- At end of year 366,499,375 36.6 365,108,019 36.5
-------------------- ------------ ----- ------------ -----
Issue of Ordinary shares of 10p each
An analysis of the new shares issued in each year is shown
below:
2017 2016
Issued and Fully
Paid Shares GBP Shares GBP
Ordinary shares
of 10p each:
note
- Placing 1 - - 33,061,540 3,306,154
note
- EBT 2 1,025,000 102,500 - -
note
- SAYE 3 366,356 36,636 1,476,456 147,645
New shares issued 1,391,356 139,136 34,537,996 3,453,799
---------------------------- ---------- -------- ----------- ----------
Note 1: During the year the Group placed nil (2016: 33,061,540)
Ordinary shares with institutional investors raising net proceeds
of GBPnil (2016: GBP28.7 million) of which GBPnil (2016: GBP3.3
million) was credited to share capital. The placing in the prior
year 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.
Note 2: 1,025,000 (2016: Nil) 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 was GBP102,500
(2016: GBPnil). At the time of allotment, the EBT already held
20,753 (2016: 20,753) Ordinary shares of 10 pence each which,
together with the 1,025,000 (2016: nil) newly allotted Ordinary
shares of 10 pence each, were part used to satisfy the exercise of
1,029,043 (2016: nil) LTIP options.
Note 3: 366,356 (2016: 1,476,456) SAYE Scheme options were
exercised with a total nominal value of GBP36,636 (2016:
GBP147,645).
The total proceeds received on allotment in respect of all of
the above transactions were GBP0.3 million (2016: GBP29.3 million)
and were credited as follows:
2017 2016
GBPm GBPm
Share capital 0.1 3.4
Share premium 0.2 0.5
Retained earnings - 25.4
0.3 29.3
------------------- ----- -----
12 BORROWINGS
As at 31 December 2017, borrowings were secured and drawn down
under a committed facility dated 21 February 2014, as amended and
restated on 24 April 2015 and as further amended and restated on 22
April 2016, comprising a GBP120.0 million rolling credit facility
(including an overdraft) which runs to 24 April 2020.
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 31 December 2017, GBP50.0 million of borrowings were
subject to hedging arrangements which had the effect of replacing
LIBOR with fixed rates as follows:
-- for GBP15.0 million of borrowings, LIBOR is replaced with
1.4725% from 8 January 2016 to 8 January 2019;
-- for GBP15.0 million of borrowings, LIBOR is replaced with
1.665% from 8 January 2016 to 8 January 2020;
-- for GBP10.0 million of borrowings, LIBOR is replaced with
0.49% from 30 June 2016 to 30 June 2018; and
-- for GBP10.0 million of borrowings, LIBOR is replaced with
0.5525% from 30 June 2016 to 30 June 2019.
Borrowings are stated net of unamortised issue costs of GBP0.4
million (31 December 2016: GBP0.7 million).
NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)
13 BUSINESS COMBINATIONS AND DISCONTINUED OPERATIONS
BUSINESS COMBINATIONS
On 28 July 2017 the Group acquired 100% of the share capital of
Clayfull Limited, which trades as PLS ('PLS'), for a net
consideration of GBP7.5 million (being a gross consideration of
GBP6.6 million adjusted for normalised working capital, cash and
debt like items together with GBP1.3 million in respect of the
acquisition of a freehold building used by PLS) plus associated
fees. Included within net consideration is GBP0.3 million of
contingent consideration. Since acquisition, PLS has generated a
profit of GBP0.2 million on revenue of GBP2.7 million. Had the
business been acquired at the start of the period it is estimated
that a profit of GBP0.2 million would have been generated on
revenue of GBP6.2 million.
On 11 December 2017 the Group acquired 100% of the share capital
of StarCounty Textile Services Limited ('Star') for a net
consideration of GBP2.0 million (being a gross consideration of
GBP3.9 million adjusted for debt like items) plus associated fees.
Included within net consideration is GBP0.2 million of contingent
consideration. Since acquisition, Star 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 a profit of GBPnil
would have been generated on revenue of GBP4.5 million.
The provisional fair value of assets and liabilities acquired
are as follows:
PLS Star Total
GBPm GBPm GBPm
Intangible assets - Goodwill 3.4 1.3 4.7
Intangible assets - Customer
contracts 2.6 1.2 3.8
Property, plant and equipment 2.9 2.0 4.9
Textile rental items 0.4 0.2 0.6
Trade and other receivables 1.3 0.6 1.9
Cash and cash equivalents 0.5 - 0.5
Trade and other payables (2.2) (1.4) (3.6)
Borrowings (0.7) (1.4) (2.1)
Deferred income tax liability (0.7) (0.5) (1.2)
------------------------------- ------ ------ ------
Net consideration 7.5 2.0 9.5
------------------------------- ------ ------ ------
Goodwill represents the deferred income tax arising on the
recognition of the customer 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.
PLS and Star have been included within the HORECA reporting
segment, PLS within the Afonwen CGU and Star within the Stalbridge
CGU.
In 2016, the Group acquired the entire share capital of Zip
Textiles (Services) Limited ('Zip'), Chester Laundry Limited
('Chester') and Portgrade Limited, together with its trading
subsidiary Afonwen Laundry Limited ('Afonwen'). Full details are
provided in the 2016 Annual Report.
Cash flows from business acquisition activity
The cash flows in relation to business acquisition activity are
summarised below:
2017 2016
GBPm GBPm
Net consideration payable 9.5 52.2
Contingent and deferred
consideration (0.5) 0.8
(Cash and cash equivalents)
/ overdraft acquired (0.5) 3.7
Cost in relation to business
acquisition activity 0.7 1.3
---------------------------------- ------ -----
9.2 58.0
------------------------------ ------ -----
The GBP0.5 million adjustment in 2017 relates to contingent
consideration of GBP0.3 million and GBP0.2 million for PLS and Star
respectively which may become payable in future periods dependent
upon the outcome of certain, currently unknown, events. The GBP0.8
million adjustment in 2016 relates to deferred consideration paid
in the prior year in relation to Ashbon, which was acquired in
2015. Further deferred consideration of GBP0.3 million relating to
that acquisition remains payable.
Costs in relation to business acquisition activity in the
current year include the payment of GBP0.2 million of costs that
were recognised in 2015 and costs in relation to business
acquisition activity in the prior year include the payment of
GBP0.1 million of costs that were recognised in 2015.
NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)
13 BUSINESS COMBINATIONS AND DISCONTINUED OPERATIONS (continued)
DISPOSALS AND DISCONTINUED OPERATIONS
On 4 January 2017 the Group disposed of its Drycleaning
operation for a consideration of GBP8.3 million on debt free, cash
free basis and subject to adjustments for normalised working
capital. The initial proceeds for the disposal, net of transaction
costs of GBP0.5 million, were GBP6.8 million, with a further GBP1.0
million of contingent consideration which was received on 29
December 2017. Disposal costs of GBP0.5 million were expensed in
the year of which payments of GBP0.4 million were made. The
remaining GBP0.1 million is expected to be paid in 2018.
The Drycleaning business is included in the December 2016
Balance Sheet as "assets classified as held for sale" and
"liabilities directly associated with assets held for sale". The
anticipated loss on disposal of GBP2.0 million was reflected as an
impairment of goodwill as at 31 December 2016 and included within
Discontinued Operations.
Assets and related liabilities classified as held for sale are
as follows:
Carrying
value
under
IFRS5
Assets as at
/ Liabilities 31 December
Transferred 2016
to Held & 4 January
for Sale Impairment 2017
GBPm GBPm GBPm
Intangible assets
- Goodwill 9.1 (2.0) 7.1
Intangible assets
- Software 0.1 - 0.1
Property, plant and
equipment 4.4 - 4.4
Deferred income tax
asset 0.8 - 0.8
Inventories 0.4 - 0.4
Trade and other receivables 3.6 - 3.6
Cash 0.8 - 0.8
Trade and other payables (6.0) - (6.0)
Provisions (3.4) - (3.4)
------------------------------- --------------- ----------- -------------
9.8 (2.0) 7.8
----------------------------- --------------- ----------- -------------
Included within Assets
classified as held
for sale 17.2
Included within Liabilities
directly associated with
assets held for sale (9.4)
------------------------------- --------------- ----------- -------------
Net assets disposed
of 7.8
Proceeds receivable (8.3)
Related costs 0.5
------------------------------- --------------- ----------- -------------
Profit on disposal -
------------------------------- --------------- ----------- -------------
On 7 August 2013 the Facilities Management division was disposed
of; full details of this transaction are provided in the 2013
Annual Report. There is GBP1.1 million of contingent consideration
outstanding in relation to this disposal, the receipt of which is
dependent upon the acquirer utilising acquired deferred tax assets.
This receivable has been fully provided for and no contingent
consideration was received during the current year.
There is an outstanding creditor in relation to prior year
disposal costs of GBP0.2 million (2016: GBP0.2 million
outstanding).
Discontinued operations in the current and prior year consist of
the trade relating to the Drycleaning business, the related
taxation charge and the impairment of Goodwill recognised on
classifying the related assets and liabilities as held for sale.
The prior year also includes a property provision release of GBP0.4
million for a property relating to operations discontinued in
previous years.
The total profit / (loss) relating to discontinued operations is
as follows:
2017 2016
GBPm GBPm
Revenue - 44.3
Operating result / profit
before amortisation of intangible
assets
(excluding software amortisation)
and exceptional items - 2.0
Finance cost - (0.1)
Exceptional costs - 0.4
Taxation credit / (charge) 0.3 (0.6)
------------------------------------- ----- ------
Profit for the year 0.3 1.7
Impairment of assets classified
as held for sale - (2.0)
Retained profit / (loss) from
discontinued operations 0.3 (0.3)
------------------------------------- ----- ------
NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)
13 BUSINESS COMBINATIONS AND DISCONTINUED OPERATIONS (continued)
Cash flows from discontinued operations
The cash flows from discontinued operations included within the
Consolidated Statement of Cash Flows are as follows:
2017 2016
GBPm GBPm
Proceeds from disposals 8.3 -
Payment of costs relating to disposals (0.4) -
Cash disposed of (0.8) -
Net proceeds from disposals 7.1 -
Net cash used in operating activities (0.3) (0.2)
Net cash used in investing activities - (0.9)
Net cash flow 6.8 (1.1)
---------------------------------------- ------ ------
14 ANALYSIS OF NET DEBT
Net debt is calculated as total borrowings, net of unamortised
bank facility fees, less cash and cash equivalents. Non-cash
changes represent the effects of the recognition and subsequent
amortisation of bank facility fees, changing maturity profiles,
debt acquired as part of an acquisition and new finance leases
entered into during the year.
At 1 At 31
January Cash Non-cash December
2017 Flow Changes 2017
GBPm GBPm GBPm GBPm
Debt due within one
year (9.8) 9.2 (1.1) (1.7)
Debt due after more
than one year (72.5) (3.0) (0.4) (75.9)
Finance leases (14.4) 5.3 (0.9) (10.0)
--------------------------- --------- -------- --------- ----------
Total debt and lease
financing (96.7) 11.5 (2.4) (87.6)
Cash and cash equivalents (1.5) (2.2) - (3.7)
Net debt (98.2) 9.3 (2.4) (91.3)
--------------------------- --------- -------- --------- ----------
At 1 At 31
January Cash Non-cash December
2016 Flow Changes 2016
GBPm GBPm GBPm GBPm
Debt due within one
year (1.3) (4.7) (3.8) (9.8)
Debt due after more
than one year (58.5) (14.0) - (72.5)
Finance leases (7.0) 5.3 (12.7) (14.4)
---------------------------- --------- --------- --------- ----------
Total debt and lease
financing (66.8) (13.4) (16.5) (96.7)
Cash and cash equivalents (4.4) 2.9 - (1.5)
--------- --------- --------- ----------
Net debt (71.2) (10.5) (16.5) (98.2)
---------------------------- --------- --------- --------- ----------
The cash and cash equivalents figures are comprised of the
following balance sheet amounts:
2017 2016
GBPm GBPm
Cash (Current Assets) 5.3 2.9
Overdraft (Borrowings, Current
Liabilities) (9.0) (5.2)
Cash within assets classified
as held for sale (see note 13) - 0.8
(3.7) (1.5)
--------------------------------- ------ ------
Finance lease obligations are comprised of the following balance
sheet amounts:
2017 2016
GBPm GBPm
Amounts due within one year (Borrowings,
Current Liabilities) (3.8) (4.9)
Amounts due after more than one
year (Borrowings, Non-Current Liabilities) (6.2) (9.5)
(10.0) (14.4)
--------------------------------------------- ------- -------
NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)
15 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
2017 2016
GBPm GBPm
(Decrease) / increase in cash in
year (2.2) 2.9
Decrease / (increase) in debt and
lease financing 11.5 (13.4)
--------------------------------------------- ------- -------
Change in net debt resulting from
cash flows 9.3 (10.5)
Debt acquired through business acquisitions (2.1) (16.5)
Movement in unamortised bank facility
fees (0.3) -
Movement in net debt 6.9 (27.0)
Opening net debt (98.2) (71.2)
--------------------------------------------- ------- -------
Closing net debt (91.3) (98.2)
--------------------------------------------- ------- -------
16 EVENTS AFTER THE REPORTING PERIOD
There were no events occurring after the balance sheet date that
require disclosing in accordance with IAS 10, 'Events after the
reporting period'.
17 DIRECTORS' RESPONSIBILITIES STATEMENT
The Directors are responsible for preparing the Annual Report
and Accounts in accordance with applicable law and regulation.
Having taken advice from the Audit Committee, the Board considers
the Annual Report and Accounts, taken as a whole, to be fair,
balanced and understandable and that it provides the information
necessary for Shareholders to assess the Company's performance,
business model and strategy.
The Annual Report and Accounts for the year ended 31 December
2017, which will be posted to Shareholders on or before 9 March
2018, contains the following statement regarding responsibility for
the Strategic Report, the Directors' Report (including the
Corporate Governance Report), the Board Report on Remuneration and
the financial statements included within the Annual Report and
Accounts:
Each of the Directors confirms that, to the best of their
knowledge:
-- the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and
profit or loss of the Group; and
-- the Strategic Report includes a fair review of the
development and performance of the business and the position of the
Group, together with a description of the principal risks and
uncertainties that it faces.
In the case of each Director in office at the date the
Directors' Report is approved:
-- so far as the Director is aware, there is no relevant audit
information of which the Group's auditors are unaware; and
-- they have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any relevant
audit information and to establish that the Group's auditors are
aware of that information.
18 PRELIMINARY ANNOUNCEMENT
A copy of this Preliminary Announcement is available on request
to all Shareholders by post from the Company Secretary, Johnson
Service Group PLC, Johnson House, Abbots Park, Monks Way, Preston
Brook, Cheshire, WA7 3GH. The announcement can also be accessed on
the Internet at www.jsg.com.
The Company's Annual Report will be posted to Shareholders on or
before 9 March 2018.
19 APPROVAL
The Preliminary Announcement was approved by the Board of
Directors on 27 February 2018.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR TFMPTMBBTBAP
(END) Dow Jones Newswires
February 27, 2018 02:00 ET (07:00 GMT)
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