TIDMJSG
RNS Number : 7352X
Johnson Service Group PLC
02 September 2020
2 September 2020
AIM: JSG
Johnson Service Group PLC
('JSG' or 'the Group')
Interim Results for the Six Months ended 30 June 2020
"Encouraging start to the year before COVID-19 impact.
Strong Balance Sheet, confident of long-term growth."
Impact and management of business through COVID-19 crisis
- Workwear continued to operate throughout lockdown with 12%
reduction in volume in April, steadily improving to 6% in August.
Customer retention levels were 93.8% at the end of July.
- Mothballing of the majority of HORECA plants throughout the lockdown period.
- Coronavirus Job Retention Scheme (CJRS) utilised to enable
continued employment of furloughed employees.
- Strengthened balance sheet and liquidity with bank facilities
increased to GBP175 million, temporary alternative financing
arranged through Covid Corporate Financing Facility (CCFF) and
GBP82.7 million equity placing in June 2020.
- Phased re-opening of HORECA plants as volumes began to
increase to 25% of typical levels in July and climbing to 45% in
August.
Financial Performance
- Total revenue of GBP114.8 million (June 2019: GBP167.1 million).
- Organic revenue down 34.7% (2 months to February 2020 up 5.6%).
- Adjusted EBITDA(1) of GBP24.9 million (June 2019: GBP55.2
million) with Adjusted EBITDA(1) margin of 21.7% (June 2019:
33.0%).
- Adjusted loss before tax(2) of GBP12.6 million (June 2019:
Adjusted profit before tax GBP20.1 million).
- Loss before tax of GBP18.6 million (June 2019: Profit before tax GBP15.2 million).
- Net debt pre IFRS16 at June 2020 GBP0.2 million (December 2019: GBP87.7 million).
- Net debt at June 2020 GBP39.5 million (December 2019: GBP127.7 million).
- No interim dividend declared.
Notes
1 Adjusted EBITDA refers to operating (loss)/profit excluding
amortisation of intangible assets (excluding software amortisation)
and exceptional items (defined as "Adjusted Operating
(Loss)/Profit") plus the depreciation charge for property, plant
and equipment, textile rental items and right of use assets plus
software amortisation.
2 Adjusted Loss before tax or Adjusted PBT refers to Adjusted
Operating (Loss)/Profit less total finance costs.
Peter Egan, Chief Executive Officer of Johnson Service Group,
commented:
"Our performance during the period reflects the challenging
market conditions inflicted on the business by COVID-19 following a
strong start to the year. The management team have been highly
active in addressing the impact, by taking decisive action to
ensure the long-term preservation of the business, shoring up the
Group's finances and mothballing sites to ensure that JSG is well
placed to react quickly as end markets continue to recover.
Our new Leeds high volume linen plant is scheduled to open in
October and we have identified a new Workwear site to replace the
Exeter plant destroyed by fire in January 2020, which should open
mid-2021. Both of these investments demonstrate our long-term
commitment to investing for future growth.
It remains very difficult to predict with any accuracy the
timing of a recovery to pre-COVID levels. However, with our strong
balance sheet, established market position and reputation for
quality service, we remain confident in the Group's medium-term
growth prospects as the economy and markets that we serve
recover."
SELL-SIDE ANALYST MEETING
A virtual presentation for sell-side analysts will be held today
at 9.30am, details of which will be distributed by Camarco. A copy
of the presentation will be available on the Company's website (
www.jsg.com ) following the meeting.
ENQUIRIES
Johnson Service Group PLC
Peter Egan, 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
Virginia Bull Oliver Head
Tel: 020 7597 5970 Tel: 020 3757 4992
Note: Throughout this statement 'adjusted operating loss/profit'
refers to continuing operating loss/profit before amortisation of
intangible assets (excluding software amortisation) and exceptional
items. 'Adjusted loss/profit before taxation' refers to adjusted
operating loss/profit less total finance cost. ' Adjusted EBITDA'
refers to adjusted operating loss/profit plus the depreciation
charge for property, plant and equipment, textile rental items and
right of use assets plus software amortisation. 'Adjusted EPS'
refers to earnings per share calculated based on adjusted
loss/profit after taxation. The Board considers that 'adjusted
operating loss/profit', 'adjusted loss/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.
OPERATIONAL AND FINANCIAL REVIEW
Following very strong performances over recent years the Group
had an encouraging start to 2020 with well laid plans to increase
processing capacity in both Workwear and HORECA.
The impact of COVID-19, particularly on our HORECA business, has
delayed many of those growth investment plans with our focus being
on protecting the business, safeguarding our employees and
customers and strengthening our finances in readiness for a return
to more normal trading conditions.
Actions Taken During Lockdown
Positive momentum into the first months of the year was brought
to a halt from mid-March as the impact of COVID-19 began to affect
our customers. On 20 March we announced that we were starting to
see a significant reduction in HORECA processing volumes with more
limited impact on Workwear. In May we updated the market that
HORECA revenue had fallen by some 97% in April whilst Workwear was
down 12%.
We confirmed that we had mothballed the vast majority of our 18
HORECA sites, furloughed a significant proportion of our employees
from the end of March, most notably within the HORECA division, and
implemented temporary salary reductions for the Board, Senior
Management and a number of administrative roles.
Our initial focus, once sites were mothballed, was the
preservation of cash resources and a plan to reduce non-essential
capital and revenue spend was implemented.
An increased bank facility of GBP175 million and revised bank
covenants were agreed in May 2020 and eligibility to access the
CCFF was also confirmed to provide an alternative source of
funding. An equity placing for GBP82.7 million (net) was completed
in June 2020.
Financial Performance
Our results for the first half of 2020 reflect the mothballing
of a significant number of our HORECA sites for 3 months of the
reporting period. Revenue was GBP114.8 million, down from GBP167.1
million in 2019. Adjusted EBITDA was GBP24.9 million (June 2019:
GBP55.2 million) giving a margin of 21.7% (June 2019: 33.0%).
Total finance costs increased to GBP3.1 million (June 2019:
GBP2.5 million) largely due to the accelerated recognition of
non-qualifying hedging costs of GBP0.6 million.
Exceptional costs were GBP0.5 million and relate to the write
off of plant, machinery and textile items following the fire at our
Exeter workwear plant in January 2020. The increased cost of
working for Exeter under the temporary arrangements is covered by
Business Interruption insurance. There may be further exceptional
items relating to the Exeter fire and the flood at the Treforest
Workwear plant in February 2020 in the second half of the year as
we reach a financial settlement with the insurer.
Adjusted loss before tax was GBP12.6 million (June 2019: GBP20.1
million profit).
Statutory loss before tax, after amortisation of intangibles
(excluding software amortisation) of GBP5.5 million (June 2019:
GBP4.9 million) was GBP18.6 million (June 2019: GBP15.2 million
profit before tax).
Adjusted loss per share was 2.8 pence (June 2019: adjusted
earnings per share 4.4 pence).
A number of factors have affected the reported results for the
period to June 2020:
- The Group continues to draw on support from the CJRS and this
amounted to GBP16.6 million in the first half, of which GBP1.8
million was in respect of the Workwear division and GBP14.8 million
was in respect of the HORECA division. GBP9.7 million was received
in cash during the period. Our current plans indicate that we will
continue to draw on this support, but to a lesser extent, as we
gradually return furloughed workers.
- The Board and Senior Management team accepted a temporary
salary reduction of 20% from 1 April 2020 and certain other
employees in support and administration roles, who have not been
furloughed, accepted a temporary salary reduction of 10%. This
total cost saving amounted to GBP0.3 million in the first half.
- Some 300 commercial vehicles not being utilised during
lockdown were temporarily taken off the road to save costs.
- Recognition of a partial discontinuation of hedge accounting
in respect of diesel hedging to reflect the lower diesel usage for
2020 of GBP0.6 million.
- Cash flow has benefited from the deferral of VAT (GBP10.2 million deferral to March 2021).
- Recognition of GBP0.6 million in respect of interest rate
hedges no longer qualifying as effective hedges.
Dividend
The final 2019 dividend was withdrawn saving approximately
GBP8.7 million. Due to the current situation it is not proposed to
declare a dividend in respect of the first half of 2020. The Board
is aware of the importance of dividends to Shareholders and will
reinstate dividend payments as soon as practicable although, as
stated at the time of the Placing, the Board anticipates that there
will be no dividend in respect of 2020.
Finances
As announced on 29 May 2020 the Group increased its RCF from its
incumbent banks to GBP175 million and amended its bank covenants up
to and including the test date on 31 December 2021. The Group also
has access to Government funding under the CCFF of up to GBP150
million, although none is currently drawn.
Bank covenants, tested quarterly, include a maximum level of net
debt of GBP155 million from September 2020 to September 2021,
decreasing to GBP145 million at December 2021. A minimum EBITDA
test also applies from the quarter ended December 2020 to December
2021 which is significantly below our current scenario planning and
where EBITDA is defined as Adjusted EBITDA less right of use asset
depreciation.
On 29 May 2020 JSG announced it had raised gross proceeds of
GBP85.0 million through the issue of 73.9 million new Ordinary
shares at a placing price of 115 pence per share.
Consequently, total net debt (excluding IFRS 16) at 30 June 2020
was GBP0.2 million (December 2019: GBP87.7 million) reflecting the
net placing proceeds received of GBP82.7 million. After including
the impact of IFRS 16, net debt at June 2020 was GBP39.5 million
(December 2019: GBP127.7 million).
Free cash flow in the first half was GBP38.6 million after
capital lease payments compared to GBP50.8 million in the first
half of 2019.
Post-Employment Benefits
The recorded net surplus after tax for all post-employment
benefit obligations, calculated in accordance with IAS 19, was
GBP1.1 million at June 2020, from a deficit of GBP6.1 million at
December 2019. The improvement in the position is due, in part, to
a higher return on scheme assets partially offset by a reduction in
the discount rate assumed on liabilities. We continue to have a
significant portion of scheme assets invested so as to hedge
against movements in liabilities, thereby reducing overall scheme
volatility.
The triennial valuation of the defined benefit pension scheme as
at 30 September 2019 was completed during the period. We are
tracking ahead of the recovery plan put in place at the previous
valuation and we have therefore agreed with the Trustee to continue
with the existing deficit recovery payments of GBP1.9 million per
annum until the next review in three years' time.
BUSINESS REVIEW
Our Businesses
The Group comprises Textile Rental businesses which trade
through a number of very well recognised brands servicing the UK's
Workwear and Hotel Restaurant and Catering ('HORECA') market
sectors. The 'Johnsons Workwear' brand predominantly provides
workwear rental, protective wear and laundry services to corporates
across all industry sectors, 'Stalbridge', 'London Linen' and
'South West Laundry' provide premium linen services to the
restaurant, hospitality and corporate events market and Johnsons
Hotel Linen, our high volume linen business, comprises of Johnsons
Hotel Linen by 'Afonwen', by 'PLS' and by 'Fresh', on a regional
basis.
Changes have been made to ensure continuity of operations and to
manage the health, safety and welfare of our employees, the
majority of which were instigated prior to Government guidance
being announced. Our proactive actions have included supplies of
sanitiser, anti-bacterial wipes, floor stickers and posters for
social distancing, increased cleaning regimes, supply of face
shields and reusable, washable face masks, temperature checks,
screening in both factory and office environments, vehicle and cage
disinfection, split breaks and removing items of furniture in
offices and canteens to maintain social distancing. We continue to
review our operations, update risk assessments and implement new
processes and procedures where necessary and are reviewing further
actions for winter operations. We would like to acknowledge the
efforts of our employees and thank them for their support.
All employees returning from furlough undertake a reintroduction
to the business to ensure that they are familiarised with the
COVID-19 preventative measures and changes since they were last at
work. Various initiatives are in place for sales and service
personnel and new virtual tools have been provided to ensure we can
effectively communicate with customers, new and existing, either
digitally or in person.
We have also made significant progress in developing our new
national brand and this continues to be rolled out across the
businesses. This roll out will take several years to fully
implement and will be at a modest cost.
Workwear Division
Operating as Johnsons Workwear, we provide workwear rental,
protective wear and laundry services to some 36,000 customers in
the UK from small local businesses to the largest corporates
covering food related and other industrial sectors.
Workwear revenue in the first half was GBP64.6 million (June
2019: GBP67.5 million) reflecting the impact of COVID-19 from
mid-March. Adjusted EBITDA was GBP24.4 million (June 2019: GBP24.3
million) and adjusted operating profit was GBP11.6 million (June
2019: GBP12.1 million).
All of our Workwear sites remained open and continued to operate
throughout the period although some 550 largely non-production
employees were furloughed at the peak. Volumes have continued to
improve steadily increasing from a 12% reduction in April to a 6%
reduction in August. Some 91% of customers who advised they were
closed during lockdown have now returned at varying levels of
activity.
Whilst much of the focus of the last few months has been on
ensuring the safety of our employees and customers we have
continued to plan for the future and focus on customer retention
and service.
Customer retention levels remain high and were 93.8% at the end
of July. Despite the impact of COVID-19 our service teams have
performed well and continued to organically grow business within
existing customers. Our 'Existing Customer Satisfaction Survey'
undertaken in the first quarter of the year maintained the high
score of 86% and a second survey has been completed during
August.
Whilst capital investment has largely been delayed, some
investment was already underway in January and February. Orders for
new vehicles were placed in early 2020, which included the first
double decker unit for our Perth to Aberdeen trunking route,
required due to growing volumes. Two large washing machines were
added in the Perth plant and our additional industrial unit in
Basingstoke is now operational.
As we reported in March, our Exeter Workwear plant was
significantly damaged by fire and taken out of action. We have
continued to service all customers from alternative processing
locations using a temporary depot in Exeter. We continue to work
closely with our insurers in relation to the insurance claim and
have identified an existing new build site for fit-out. It is
expected the new site will be operational in the third quarter of
2021. Our factory in Treforest was flooded by the highest level
recorded of the River Taff on 16 February 2020. Once again both
senior and local management swiftly assessed the damage, made the
necessary arrangements to ensure that there was no adverse impact
to customer service levels, as well as managing the health, safety
and welfare of everyone on site. Plans are in place to refurbish
and install new machinery which will be completed in the final
quarter of 2020. In both instances the support and flexibility of
our employees, not only at Exeter and Treforest but other plants
who have assisted, has been excellent. The camaraderie, teamwork
and support displayed by all in such unexpected circumstances are a
true reflection of the culture we nurture within our business.
Following our Employee Engagement Survey in 2019, various
initiatives were launched during the beginning of 2020. Feedback
has been extremely positive and further initiatives will be rolled
out during the remainder of 2020.
HORECA Division
Total revenue for the HORECA division was GBP50.2 million (June
2019: GBP99.6 million), the reduction reflecting the closure of a
significant number of HORECA plants for three months of the period.
Adjusted EBITDA was GBP2.7 million (June 2019: GBP33.2 million).
Adjusted operating loss was GBP18.8 million (June 2019: GBP12.9
million profit) of which an operating loss of GBP20.2 million was
incurred in the second quarter.
Our hotel, restaurant and catering business, which includes
Johnsons Stalbridge, London Linen and South West Laundry, has had a
very challenging first half of 2020. During January to mid-March,
new sales activity was strong, customer retention good, and some
major capital projects to support growth and capacity were
completed or underway. A new continuous batch washer, dryers and
ironing line were installed in our Milborne Port factory to replace
obsolete and high maintenance machinery, and a new ironer line and
towel folding equipment were installed in Shaftesbury to support
capacity growth across the three Dorset factory locations. At
Grantham, we expanded the footprint of the factory in order to
handle the increasing growth of the business.
The impact of COVID-19 was rapid and substantial as volumes
dropped to a low of 3% of normal demand in the space of 2 weeks at
the end of March. Operations ceased completely in most plants,
although some operations continued mainly to support the Ministry
of Defence, the Ministry of Justice and similar government agency
locations. We also supported some local healthcare locations with a
free scrub suit processing service to support their effort in
dealing with the pandemic. Approximately 1,350 employees were
placed on the Government's furlough scheme at the peak, and all
incidental spend was ceased immediately. Customer communication
during the shutdown was maintained in order to foster our strong,
long-term relationships, and we have shown great flexibility in
supporting the hospitality industry in general through stock
management and reduced charging for items on rental.
With restrictions in the hospitality market being lifted in
early July in most geographies, volumes are beginning to recover,
especially in rural and coastal holiday destination locations
across the UK. Metropolitan areas are seeing a slower return to
business, especially in London, where there is a current dearth of
office workers and tourist numbers.
Within Johnsons Hotel Linen the continued integration of the
various acquired businesses has largely now been completed with a
successful migration to a single management structure and financial
reporting system with the finance department consolidating into our
Preston Brook offices.
The start of the year progressed favourably with new sales and
revenue being slightly ahead of our expectations due to a
combination of factors including positive trading and continued new
business wins from current and new customers across the country.
This continued up to the point of the COVID-19 outbreak and
thereafter business volumes dropped dramatically to almost nothing
as the United Kingdom entered lockdown. The management team took
decisive action to reduce costs and take the benefit of the UK
Government's furlough scheme for the majority of employees,
totaling approximately 2,000, whilst a remaining team of
approximately 60 individuals continued to maintain plant and
equipment, undertake finance, national accounts and other on-going
management activities.
Significant work was undertaken to reduce non-essential spend as
well as to keep focus on cash collection.
After the half year end, hotels and restaurants in the UK exited
the lockdown period in England with Wales and Scotland following a
few weeks later. The opening of gyms followed at the end of July.
Whilst it is too early to draw any long term conclusions, it is
true to say that with increased interest in the Staycation holiday
in the UK, seaside and other core regional tourist locations in the
South Coast, the South West, East Anglia, the Lake District and
tourism areas of Wales are recovering. The Scottish market has
remained more subdued reflecting a longer period of lockdown and a
greater dependency upon international tourism events. Across the
UK, major city locations such as London, Birmingham, Manchester and
Edinburgh remain softer, reflecting the lack of inbound
international tourism and major events such as sporting fixtures
and music festivals being cancelled this year.
However, trading in July and August is slightly more encouraging
than initially anticipated, despite a general lack of confidence in
international travel. Hotels in the core tourist areas are
anecdotally reporting continued healthy bookings into September and
October. We remain more cautious on the general outlook for city
centres and the general lack of international travel. The
widespread cancellation of events, conferences and weddings will
mean that we do not expect business activity within high volume
hotel linen to fully return until potentially the first half of
2022.
Construction of the new Leeds production facility remained on
schedule and on budget albeit we agreed to suspend a final
installation and commissioning of the equipment from June to
September in light of the global pandemic. The long-term investment
plan has effectively been fully completed and ready for
commissioning which will commence in September before becoming
fully operational in October. The site volumes will gradually ramp
up as we migrate customers into the new site and reduce trunking
and extended logistical costs.
We have continued to invest, despite the lockdown, in the
ongoing modernisation of equipment to ensure the business is well
placed to exploit market conditions going forward. In June we
completed the first phase of modernisation of our most recently
acquired business, Fresh Linen, with the installation of a new
washer and drying capacity. Further investment is planned for
September 2020 in order to complete the project and ensure long
term operational resilience of the site.
TECHNICAL INNOVATION
The project for updating and improving our IT systems in parts
of the HORECA division and in Workwear is ongoing. The new laundry
operating system has been successfully installed in Reading and is
currently being installed in our new Leeds site together with
Pwllheli and Chester sites, with the other Hotel Linen sites to
follow over the next six months. The design of the new Workwear
system is progressing well with a test site expected to be live
later this year.
EMPLOYEES
The past months have been extremely challenging for all of our
employees and we would like to thank them for their flexibility and
professionalism.
BREXIT
The main potential impact on the Group from Brexit and the
ongoing uncertainty around the post Brexit arrangements depends on
the extent to which it has a negative effect on the macroeconomic
environment. We consider that the potential risks we may have to
mitigate against would be a change in consumer confidence, a
reduction in levels of employment or a reluctance to invest from
within our customer base. We do recognise, however, that the
services we provide are, in many cases, essential for our customers
to continue in operation. The Group continues to review and monitor
the potential impacts of Brexit as they develop but has already
determined a number of potential mitigating actions that it could
take if required.
OUTLOOK
Since the end of June we have continued to see a further gradual
reopening of some of our Workwear customers who had temporarily
closed operations and we expect that to continue, albeit we remain
vigilant as to the potential impact of ongoing employment levels of
Workwear customers.
HORECA revenue has benefitted from summer staycations, which
have been slightly ahead of our initial expectations, but it is too
early to forecast the anticipated volumes for the remainder of this
year. Performance in the final quarter of the year will remain
closely correlated with the wider level of economic activity.
Given this uncertainty we are constantly assessing the
anticipated volumes as we move into the autumn with a view to
matching our resources to processing requirements. We have entered
into consultation with employees at some of our HORECA sites with a
view to changing working practices to minimise potential headcount
reduction.
We anticipate that there will continue to be further
opportunities for consolidation of the market.
In view of the ongoing impact of COVID-19 and the resultant
uncertainty around HORECA we remain unable to give guidance on the
outcome for 2020 although we currently anticipate that the Adjusted
EBITDA margin for the full year will be similar to that in the
first half.
It remains very difficult to predict with any accuracy the
timing of a recovery to pre COVID-19 levels. However, with our
strong balance sheet, established market position and reputation
for quality service, we remain confident in the Group's medium-term
growth prospects as the economy and markets that we serve
recover.
RESPONSIBILITY STATEMENT
The condensed consolidated interim financial statements comply
with the Disclosure Guidance and Transparency Rules ('DTR') of the
United Kingdom's Financial Conduct Authority in respect of the
requirement to produce a half-yearly financial report. The interim
report is the responsibility of, and has been approved by, the
Directors.
The Directors confirm that to the best of their knowledge:
-- this financial information has been prepared in accordance
with IAS 34, 'Interim Financial Reporting' as adopted by the
European Union;
-- this interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
-- this interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related party
transactions and changes therein).
The Directors of Johnson Service Group PLC are listed in the
Johnson Service Group PLC Annual Report for 2019. Details of the
Directors are available on the Johnson Service Group PLC website:
www.jsg.com
By order of the Board
Peter Egan Yvonne Monaghan
Chief Executive Officer Chief Financial Officer
2 September 2020 2 September 2020
Forward Looking Statements
Certain statements in these condensed consolidated interim
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 Company'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
interim 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.
Consolidated Income Statement
Half year Half Year Year ended
to to 31 December
30 June 30 June 2019
2020 2019 GBPm
Note GBPm GBPm
Revenue 2 114.8 167.1 350.6
Operating (loss) / profit 2 (15.5) 17.7 42.7
Operating (loss) / profit before amortisation
of intangible
assets (excluding software amortisation)
and exceptional items (9.5) 22.6 52.8
Amortisation of intangible assets (excluding
software amortisation) (5.5) (4.9) (10.1)
Exceptional items 3 (0.5) - -
Operating (loss) / profit 2 (15.5) 17.7 42.7
Finance cost 4 (3.1) (2.5) (4.6)
(Loss) / profit before taxation (18.6) 15.2 38.1
Taxation credit / (charge) 7 2.5 (2.9) (7.2)
(Loss) / profit for the period attributable
to equity holders (16.1) 12.3 30.9
---------------------------------------------- ------ --------- --------- ------------
Earnings per share 8
Basic earnings per share (4.2p) 3.3p 8.4p
---------------------------------------------- ------ --------- --------- ------------
Diluted earnings per share (4.2p) 3.3p 8.3p
---------------------------------------------- ------ --------- --------- ------------
Adjusted basic earnings per share (2.8p) 4.4p 10.6p
---------------------------------------------- ------ --------- --------- ------------
Adjusted diluted earnings per share (2.8p) 4.4p 10.5p
---------------------------------------------- ------ --------- --------- ------------
Consolidated Statement of Comprehensive Income
Half year to Half year Year ended
30 June to 30 June 31 December
2020 2019 2019
Note GBPm GBPm GBPm
(Loss) / profit for the period (16.1) 12.3 30.9
----------------------------------------------------------- ----------- ----------- ------------
Items that will not be subsequently
reclassified to profit or loss
Re-measurement and
experience gains
/ (losses) on
post-employment benefit
- obligations 14 7.7 (9.1) (4.5)
Taxation in respect of re-measurement
- and experience (gains) / losses (1.5) 1.6 0.7
Change in deferred tax due to change in
tax rate 0.2 - -
Items that may be subsequently reclassified
to profit or loss
- fair value
Cash flow hedges (loss)
- (net of taxation) / gain (2.8) 0.2 (0.2)
- transfers to administrative
expenses 0.9 - 0.1
- transfers to
finance
cost 0.7 0.1 0.2
---------------------------------------- ----------------- ------------ ----------- ------------
Other comprehensive income / (loss) for
the period 5.2 (7.2) (3.7)
-----------------------------------------------------------
Total comprehensive (loss) / income for
the period (10.9) 5.1 27.2
----------------------------------------------------------- ------------ ----------- ------------
The notes on pages 15 to 31 form an integral part of these
condensed consolidated interim financial statements.
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 31 December
2018 36.8 15.7 1.6 0.6 (0.6) 136.3 190.4
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Change in accounting
standard - - - - - 0.2 0.2
Restated balance at 1
January 2019 36.8 15.7 1.6 0.6 (0.6) 136.5 190.6
Profit for the period - - - - - 12.3 12.3
Other comprehensive income
/ (loss) for the period - - - - 0.3 (7.5) (7.2)
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Total comprehensive income
for the period - - - - 0.3 4.8 5.1
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Share options (value
of employee services) - - - - - 0.4 0.4
Purchase of shares by
EBT* - - - - - (0.2) (0.2)
Current tax on share
options - - - - - 0.3 0.3
Deferred tax on share
options - - - - - (0.1) (0.1)
Issue of Share Capital 0.2 0.4 - - - - 0.6
Dividend paid - - - - - (7.7) (7.7)
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Transactions with Shareholders
recognised directly in
Shareholders' equity 0.2 0.4 - - - (7.3) (6.7)
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Balance at 30 June 2019 37.0 16.1 1.6 0.6 (0.3) 134.0 189.0
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Profit for the period - - - - - 18.6 18.6
Other comprehensive income
/ (loss) for the period - - - - (0.2) 3.7 3.5
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Total comprehensive (loss)
/ income for the period - - - - (0.2) 22.3 22.1
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Share options (value
of employee services) - - - - - 0.4 0.4
Deferred tax on share
options - - - - - 0.3 0.3
Dividend paid - - - - - (4.3) (4.3)
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Transactions with Shareholders
recognised directly in
Shareholders' equity - - - - - (3.6) (3.6)
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Balance at 31 December
2019 37.0 16.1 1.6 0.6 (0.5) 152.7 207.5
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Loss for the period - - - - - (16.1) (16.1)
Other comprehensive (loss)
/ income for the period - - - - (1.2) 6.4 5.2
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Total comprehensive loss
for the period - - - - (1.2) (9.7) (10.9)
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Share options (value
of employee services) - - - - - 0.5 0.5
Deferred tax on share
options - - - - - (0.3) (0.3)
Issue of Share Capital 7.4 - - - - 75.3 82.7
Transactions with Shareholders
recognised directly in
Shareholders' equity 7.4 - - - - 75.5 82.9
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Balance at 30 June 2020 44.4 16.1 1.6 0.6 (1.7) 218.5 279.5
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
* The Group has an Employee Benefit Trust (EBT), to administer
share plans and to acquire shares, using funds contributed by the
Group, to meet commitments to employee share schemes. As at 30 June
2020, the EBT held 8,388 shares (June 2019: 12,468; December 2019:
12,468).
Consolidated Balance Sheet
As at As at As at
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Note
Non-current assets
Goodwill 9 130.5 128.1 130.5
Intangible assets 10 32.8 36.1 36.7
Property, plant and equipment 11 108.8 87.8 104.0
Right-of-use assets 12 37.9 47.5 39.0
Textile rental items 13 44.6 53.5 56.8
Trade and other receivables 0.8 0.7 0.7
Post-employment benefit assets 14 2.3 - -
Deferred income tax assets 0.6 3.0 2.6
358.3 356.7 370.3
------------------------------------ ------ -------- -------- ------------
Current assets
Inventories 1.9 2.4 2.3
Trade and other receivables 35.3 57.0 54.5
Current income tax assets 2.3 - -
Cash and cash equivalents 7.3 9.8 8.3
46.8 69.2 65.1
------------------------------------ ------ -------- -------- ------------
Current liabilities
Trade and other payables 64.2 67.0 69.2
Current income tax liabilities - 3.8 4.5
Borrowings 7.4 10.7 10.9
Lease liabilities 5.7 10.1 5.6
Derivative financial liabilities 0.8 0.1 -
Provisions 1.0 1.3 1.4
79.1 93.0 91.6
------------------------------------ ------ -------- -------- ------------
Non-current liabilities
Post-employment benefit obligations 14 1.0 12.8 7.3
Deferred income tax liabilities 6.1 6.8 6.8
Trade and other payables 1.2 2.5 0.5
Borrowings - 85.8 84.7
Lease liabilities 34.0 33.7 34.8
Derivative financial liabilities 2.1 0.2 0.5
Provisions 2.1 2.1 1.7
46.5 143.9 136.3
------------------------------------ ------ -------- -------- ------------
NET ASSETS 279.5 189.0 207.5
------------------------------------ ------ -------- -------- ------------
Capital and reserves attributable to the
Company's Shareholders
Share capital 15 44.4 37.0 37.0
Share premium 16.1 16.1 16.1
Merger reserve 1.6 1.6 1.6
Capital redemption reserve 0.6 0.6 0.6
Hedge reserve (1.7) (0.3) (0.5)
Retained earnings 218.5 134.0 152.7
------------------------------------ ------ -------- -------- ------------
Total equity 279.5 189.0 207.5
------------------------------------ ------ -------- -------- ------------
The notes on pages 15 to 31 form an integral part of these
condensed consolidated interim financial statements. The condensed
consolidated interim financial statements on pages 11 to 31 were
approved by the Board of Directors on 2 September 2020 and signed
on its behalf by:
Yvonne Monaghan
Chief Financial Officer
Consolidated Statement of Cash Flows
Half year Half year Year ended
to to 31 December
30 June 30 June 2019
2020 2019 GBPm
Note GBPm GBPm
Cash flows from operating activities
(Loss) / profit for the period (16.1) 12.3 30.9
Adjustments for:
Taxation (credit)
/ charge 6 (2.5) 2.9 7.2
Total finance
cost 3.1 2.5 4.6
Depreciation 34.3 32.6 66.1
Amortisation 5.6 4.9 10.2
Loss on disposal of tangible fixed
assets 0.5 - -
Decrease in inventories 0.4 0.4 0.6
Decrease / (increase) in trade and
other receivables 19.4 (5.9) (0.5)
(Decrease) / increase in trade and
other payables (3.0) 5.6 2.2
Deficit recovery payments in respect
of post-employment benefit obligations (0.9) (0.9) (1.9)
Share-based payments 0.5 0.4 0.8
Post-employment benefit obligations - (0.1) -
Increase / (decrease) in provisions 0.3 0.1 (0.2)
------------------------------------------- ------ --------- --------- ------------
Cash generated from operations 41.6 54.8 120.0
Interest paid (2.4) (2.3) (4.6)
Taxation paid (4.3) (4.6) (9.3)
------------------------------------------- ------ --------- --------- ------------
Net cash generated from operating
activities 34.9 47.9 106.1
------------------------------------------- ------ --------- --------- ------------
Cash flows from investing activities
Acquisition of business (net of cash
and cash equivalents acquired) 16 (0.7) (0.2) (8.5)
Purchase of other intangible assets 10 (1.3) (1.1) (2.3)
Purchase of property, plant and equipment (8.0) (8.8) (18.8)
Purchase of software (0.5) (0.5) (1.2)
Proceeds from sale of property, plant
and equipment - 0.1 0.3
Purchase of textile rental items (17.6) (22.8) (48.2)
Proceeds received in respect of special
charges 1.0 1.2 2.3
Net cash used in investing activities (27.1) (32.1) (76.4)
------------------------------------------- ------ --------- --------- ------------
Cash flows from financing activities
Proceeds from borrowings 58.0 52.0 88.0
Repayments of borrowings (143.0) (53.0) (91.1)
Capital element of leases (3.0) (4.0) (13.2)
Purchase of own shares by EBT - (0.2) (0.2)
Net proceeds from issue of Ordinary
shares 82.7 0.6 0.6
Dividend paid - (7.7) (12.0)
Net cash used in financing activities (5.3) (12.3) (27.9)
------------------------------------------- ------ --------- --------- ------------
Net increase in cash and cash equivalents 2.5 3.5 1.8
Cash and cash equivalents at beginning
of the period (2.9) (4.7) (4.7)
------------------------------------------- ------ --------- --------- ------------
Cash and cash equivalents at end
of the period 18 (0.4) (1.2) (2.9)
------------------------------------------- ------ --------- --------- ------------
Cash and cash equivalents comprise:
Cash 7.3 9.8 8.3
Overdraft (7.7) (11.0) (11.2)
Cash and cash equivalents at end
of the period (0.4) (1.2) (2.9)
------------------------------------------- ------ --------- --------- ------------
The notes on pages 15 to 31 form an integral part of these
condensed consolidated interim financial statements.
Notes to the Condensed Consolidated Interim Financial
Statements
Johnson Service Group PLC (the 'Company') and its subsidiaries
(together 'the Group') provide textile rental and related services
across the UK.
The Company is incorporated and domiciled in the UK, its
registered number is 523335 and the address of its registered
office is Johnson House, Abbots Park, Monks Way, Preston Brook,
Cheshire, WA7 3GH. The Company is a public limited company and has
its primary listing on the AIM division of the London Stock
Exchange.
The condensed consolidated interim financial statements were
authorised for issue by the Board on 2 September 2020.
1 BASIS OF PREPARATION
These condensed consolidated interim financial statements of the
Group are for the half year ended 30 June 2020. They have been
prepared in accordance with the Disclosure and Transparency Rules
of the Financial Conduct Authority and with IAS 34, 'Interim
Financial Reporting', as adopted by the European Union.
The condensed consolidated interim financial statements have not
been reviewed or audited, nor do they comprise statutory accounts
for the purpose of Section 434 of the Companies Act 2006, and do
not include all of the information or disclosures required in the
annual financial statements and should therefore be read in
conjunction with the Group's 2019 consolidated financial
statements, which have been prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union.
Financial information for the year ended 31 December 2019
included herein is derived from the statutory accounts for that
year, which have been filed with the Registrar of Companies. The
auditors' report on those accounts was unqualified, did not contain
an emphasis of matter paragraph and did not contain a statement
under Section 498 of the Companies Act 2006.
Financial information for the half year ended 30 June 2019
included herein is derived from the condensed consolidated interim
financial statements for that period.
Going Concern
The Group has reacted quickly and decisively to the COVID-19
pandemic, implementing a range of prudent cost management and cash
preservation actions, securing additional funding facilities,
revising bank covenants and raising equity in order to protect the
business from any potential adverse impact. Notwithstanding all of
these actions, t here continues to be uncertainty surrounding the
resolution of the pandemic and the impact on the wider economy.
The current and plausible future impact of COVID-19 and the
related macroeconomic environment on the Group's activities and
performance has been considered by the Board in preparing its going
concern assessment. The Group has prepared a number of scenarios
reflecting trading performance in the first half of the year and
various, more pessimistic, expectations for market developments
over the remainder of 2020 and 2021 to reflect subdued trading
conditions.
After considering the current financial projections, available
facilities and the sensitivities, the Directors of the Company are
satisfied that the Group has sufficient resources for its
operational needs and will remain in compliance with the financial
covenants in its bank facilities for at least the next 12 months
from the date of approving these condensed consolidated interim
financial statements. As a consequence, and having reassessed the
principal risks and uncertainties, the Directors considered it
appropriate to adopt the going concern basis in preparing the
condensed consolidated interim financial statements.
The process and key judgments in coming to this conclusion are
set out below. The Board is required to assess going concern at
each reporting period. These assessments are significantly more
difficult currently given the uncertainties about the impact of
COVID-19, the extent and duration of social distancing measures and
the impact on the markets in which we operate. The level of
judgment to be applied has therefore increased considerably. The
Directors have considered three main factors in reaching their
conclusions on going concern, as set out below.
1) Cash Flows and Sensitivity Analysis
In assessing going concern, the Directors considered a variety
of scenarios in the context of the COVID-19 pandemic. These
scenarios are not the forecasts of the Company but are designed to
stress test liquidity and covenant compliance. EBITDA used within
the scenarios is that used for bank covenant purposes, which is
defined as adjusted operating profit before property, plant and
equipment depreciation, rental stock depreciation and software
amortisation. The three most relevant scenarios, in ascending order
of severity, reviewed to test going concern are as follows:
Base Case Scenario
The base case scenario assumed that the HORECA market slowly
began to reopen from July 2020, initially with modest levels of
revenue which gradually increased during 2020 and 2021. Revenue at
the start of the recovery was assumed at 25% of typical activity
levels, gradually improving each month to reach 75% of typical
activity by the end of 2020 with further incremental increases
throughout 2021. In Workwear, it was assumed that organic revenue
of (12%) in April 2020 gradually improves to (9%) in Q4 2020, with
further incremental increases throughout 2021.
Severe but Plausible Scenario
In this scenario, the gradual recovery in the HORECA market
referred to above is slower and only reaches 60% of typical
activity by the end of 2020, with further incremental increases
throughout 2021.
Extreme Scenario
In this scenario, the gradual recovery in the HORECA market is
subdued, as for the 'severe but plausible scenario' above, together
with a further 30% reduction in the Group EBITDA.
1 BASIS OF PREPARATION (continued)
2) Covenants
At the same time as extending its bank facilities, the Group
renegotiated its banking covenants such that the pre-existing
covenants were replaced, up to and including until the December
2021 covenant test date, with a maximum net debt and a minimum
EBITDA threshold. The original covenants will return from March
2022. In all three scenarios, the Group should be able to meet its
financial covenants throughout the period to December 2021.
A decline in underlying EBITDA well in excess of that
contemplated in the scenarios would need to persist throughout the
period to 31 December 2021 for a covenant breach in relation to
minimum EBITDA to occur. The Directors do not consider such a
scenario plausible. The Group also has a number of mitigating
actions under its control (which were not included in the
scenarios) including minimising capital expenditure to critical
requirements, further reducing levels of discretionary spend and
rationalising its overhead base in order to be able to meet the
covenant tests.
3) Liquidity
The Group extended its committed debt facilities in May 2020.
The revised facilities comprise a GBP135 million revolving credit
facility, which matures in August 2023, together with a GBP40
million accordion facility, which is due to mature in May 2022 but
which may be extended for a further one year, subject to lender
approval. Quarterly covenant tests allow for maximum bank
borrowings of GBP155 million at each quarter end from September
2020 through to September 2021, reducing to GBP145 million for the
quarter ending December 2021.
Following the successful equity placement that raised net
proceeds of GBP82.7 million (see note 15), the Group repaid its
bank borrowings. As a consequence, the available bank facilities
provide ample liquidity when judged against drawn borrowings of
GBP0.4 million at 30 June 2020. In all scenarios modelled, the
Group should be able to operate within the level of its current
bank facilities.
2 SEGMENT ANALYSIS
Segment information is presented in respect of the Group's
operating segments, which are based on the Group's management and
internal reporting structure as at 30 June 2020. These segments are
the same as those included within the 2019 Annual Report and
Accounts.
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. The Board has identified two main
reporting segments, being Workwear and Hotel, Restaurants and
Catering ('HORECA'). Discontinued Operations are reported
separately. Results, assets, liabilities and other information not
included within Workwear, HORECA or Discontinued Operations are
reported separately within All Other Segments.
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. Segment results include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis. Any right-of-use assets, lease liabilities and
depreciation relating to internal property leases with Johnson
Group Properties PLC are eliminated on consolidation. Interest
income and expenditure are not included in the result for each
reporting segment that is reviewed by the Board.
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, post-employment benefit 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 current income tax liabilities,
bank borrowings, derivative financial liabilities, post-employment
benefit obligations and deferred income tax liabilities, all of
which are managed on a central basis. These balances are part of
the reconciliation to total assets and liabilities.
2 SEGMENT ANALYSIS (continued)
The reporting segment results for the half year ended 30 June
2020, together with comparative figures, are as follows:
All Other
Half year to 30 June 2020 Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Revenue
Rendering of services 63.4 50.2 - 113.6
Sale of goods 1.2 - - 1.2
----------------------------------------------------------------- ------------- --------- ------- ---------- --------
64.6 50.2 - 114.8
----------------------------------------------------------------- ------------- --------- ------- ---------- --------
Operating profit / (loss) before amortisation
of intangible assets (excluding software
amortisation) 11.6 (18.8) (2.3) (9.5)
Amortisation of intangible assets
(excluding software amortisation) (0.1) (5.4) - (5.5)
Exceptional items (0.5) - - (0.5)
Operating profit / (loss) 11.0 (24.2) (2.3) (15.5)
Finance costs (3.1)
Loss before taxation (18.6)
Taxation 2.5
----------------------------------------------------------------- ------------- --------- ------- ---------- --------
Loss for the period attributable
to equity holders (16.1)
Discontinued All Other
Operations Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm GBPm
Balance sheet information
Segment assets - 138.9 250.9 2.8 392.6
Unallocated assets: Deferred income
tax assets 0.6
Post-employment benefit asset 2.3
Current income tax assets 2.3
Cash and cash equivalents 7.3
Total assets 405.1
----------------------------------------------------------------- ------------- --------- ------- ---------- --------
Segment liabilities (3.4) (44.6) (54.2) (6.0) (108.2)
Unallocated liabilities: Bank
borrowings (7.4)
Deferred income
tax liabilities (6.1)
Derivative
financial
liabilities (2.9)
Post-employment
benefit
obligations (1.0)
------------------------------------------------------------------ ------------- --------- ------- ---------- --------
Total liabilities (125.6)
----------------------------------------------------------------- ------------- --------- ------- ---------- --------
Discontinued All Other
Operations Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm GBPm
Other information
Non-current asset additions
- Property, plant and equipment - 3.1 10.2 - 13.3
- Right of use assets - 0.4 0.8 - 1.2
- Textile rental items - 7.6 4.2 - 11.8
- Intangible software - 0.4 - - 0.4
- Customer contracts - - 1.3 - 1.3
Depreciation and amortisation
expense
- Property, plant and equipment - 2.5 5.5 - 8.0
- Right of use assets - 1.0 2.2 0.1 3.3
- Textile rental items - 9.2 13.8 - 23.0
- Intangible software - 0.1 - - 0.1
- Customer contracts - 0.1 5.4 - 5.5
2 SEGMENT ANALYSIS (continued)
All Other
Half year to 30 June 2019 Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Revenue
Rendering of services 65.2 99.5 - 164.7
Sale of goods 2.3 0.1 - 2.4
----------------------------------------------------------------------- ------------- --------- ------- ---------- ----------
67.5 99.6 - 167.1
----------------------------------------------------------------------- ------------- --------- ------- ---------- ----------
Operating profit / (loss) before amortisation
of intangible assets (excluding software
amortisation) 12.1 12.9 (2.4) 22.6
Amortisation of intangible assets (excluding
software amortisation) (0.2) (4.7) - (4.9)
Operating profit / (loss) 11.9 8.2 (2.4) 17.7
Finance cost (2.5)
Profit before taxation 15.2
Taxation (2.9)
----------------------------------------------------------------------- ------------- --------- ------- ---------- ----------
Profit for the period attributable
to equity holders 12.3
Discontinued All Other
Operations Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm GBPm
Balance sheet information
Segment assets - 138.7 272.2 2.2 413.1
Unallocated assets: Deferred income
tax assets 3.0
Cash and cash equivalents 9.8
--------------------------------------------------------------------------------------- --------- ------- ----------
Total assets 425.9
----------------------------------------------------------------------- ------------- --------- ------- ---------- ----------
Segment liabilities (3.6) (42.7) (65.0) (5.4) (116.7)
Unallocated liabilities: Bank
borrowings (96.5)
Current income tax
liabilities (3.8)
Deferred income tax
liabilities (6.8)
Derivative financial
liabilities (0.3)
Post-employment benefit
obligations (12.8)
------------------------------------------------------------------------ ------------- --------- ------- ---------- ----------
Total liabilities (236.9)
----------------------------------------------------------------------- ------------- --------- ------- ---------- ----------
Discontinued All Other
Operations Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm GBPm
Other information
Non-current asset additions
- Property, plant and equipment - 2.4 7.6 - 10.0
- Right of use assets - 1.1 1.2 - 2.3
- Textile rental items - 10.0 10.9 - 20.9
- Intangible software - 0.6 - - 0.6
- Customer Contracts - - 1.1 - 1.1
Depreciation and amortisation
expense
- Property, plant and equipment - 2.1 4.3 - 6.4
- Right of use assets - 1.2 2.3 0.1 3.6
- Textile rental items - 8.9 13.7 - 22.6
- Customer contracts - 0.2 4.7 - 4.9
2 SEGMENT ANALYSIS (continued)
All Other
Year ended 31 December 2019 Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Revenue
Rendering of services 131.3 215.0 - 346.3
Sale of goods 4.0 0.3 - 4.3
--------------------------------------------------------------------- ----- ------------- --------- ------- ---------- --------
135.3 215.3 - 350.6
--------------------------------------------------------------------- ----- ------------- --------- ------- ---------- --------
Operating profit / (loss) before amortisation
of intangible
assets (excluding software amortisation)
and exceptional items 24.4 33.1 (4.7) 52.8
Amortisation of intangible assets (excluding
software amortisation) (0.5) (9.6) - (10.1)
Exceptional items - - - -
Operating profit / (loss) 23.9 23.5 (4.7) 42.7
Finance cost (4.6)
Profit before taxation 38.1
Taxation (7.2)
---------------------------------------------------------------------------- ------------- --------- ------- ---------- --------
Profit for the period attributable
to equity holders 30.9
---------------------------------------------------------------------------- ------------- --------- ------- ---------- --------
Discontinued All Other
Operations Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm GBPm
Balance sheet information
Segment assets - 139.3 284.0 1.2 424.5
Unallocated assets: Deferred
income tax assets 2.6
Cash and cash
equivalents 8.3
----------------------------------------------------------------------- --- ------------- --------- ------- ---------- --------
Total assets 435.4
-------------------------------------------------------------------- ------ ------------- --------- ------- ---------- --------
Segment liabilities (3.5) (39.3) (65.6) (4.8) (113.2)
Unallocated liabilities: Current
income tax liabilities (4.5)
Bank borrowings (95.6)
Derivative financial
liabilities (0.5)
Post-employment benefit
obligations (7.3)
Deferred income tax
liabilities (6.8)
---------------------------------------------------------------------------- ------------- --------- ------- ---------- --------
Total liabilities (227.9)
-------------------------------------------------------------------- ------ ------------- --------- ------- ---------- --------
Discontinued All Other
Operations Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm GBPm
Other information
Non-current asset additions
- Property, plant and equipment - 5.6 13.9 - 19.5
- Right of use assets - 1.7 4.8 - 6.5
- Textile rental items - 20.5 25.6 - 46.1
- Intangible software - 1.3 - - 1.3
- Customer Contracts - - 2.3 - 2.3
Depreciation and amortisation
expense
- Property, plant and equipment - 4.6 9.3 - 13.9
- Right of use assets - 2.2 4.9 - 7.1
- Textile rental items - 17.9 27.2 - 45.1
- Intangible software - 0.1 - - 0.1
- Customer contracts - 0.5 9.6 - 10.1
3 EXCEPTIONAL ITEMS
Half year Half year Year ended
to to 31 December
30 June 30 June 2019
2020 2019
GBPm GBPm GBPm
Exeter asset write-off 0.5 - -
Total exceptional items 0.5 - -
------------------------ ----------- ---------- -------------
Current year exceptional items
During the half year to 30 June 2020, the net book value of
plant, machinery and textile items destroyed in a Workwear
processing plant fire has been charged to exceptional items.
Prior year exceptional items
During the prior year, professional fees of GBP0.1 million were
paid relating to the acquisition of Fresh Linen Holdings Limited,
together with its trading subsidiary Fresh Linen Limited and a
further dormant company Pure Laundry Limited ('Fresh Linen').
Further information relating to the acquisitions is provided in
note 33 of the 2019 Annual Report and Accounts. This has been
offset by GBP0.1 million of prior year credits relating to previous
acquisitions. There were no exceptional items in the half year to
30 June 2019.
4 FINANCE COST
Half year Half year Year ended
to to 31 December
30 June 30 June 2019
2020 2019 GBPm
GBPm GBPm
Interest payable on bank loans
and overdrafts 1.3 1.3 2.4
Discontinuance of hedge accounting on
interest rate
swaps previously designated as cashflow
hedges 0.6 - -
Amortisation of bank facility
fees 0.2 0.2 0.3
Finance costs on lease liabilities 0.9 0.9 1.8
Notional interest on post-employment benefit
obligations 0.1 0.1 0.1
3.1 2.5 4.6
---------------------------------------------- ---------- ---------- -------------
The charge for the half year to 30 June 2020 includes GBP0.6
million in respect of interest rate derivatives which no longer
qualify for hedge accounting following the reduction of bank
debt.
5 DIVIDS
An interim dividend in respect of the year ended 31 December
2019 of 1.15 pence was proposed and paid in November 2019 at a cash
cost of GBP4.3 million.
A final dividend payment in respect of the year ended 31
December 2019 of 2.35 pence per Ordinary share was proposed but
later cancelled. The cash benefit to the Group of this action was
some GBP8.7 million.
Furthermore, the Board anticipates that no dividend will be
payable in respect of the current financial year.
6 ADJUSTED (LOSS) / PROFIT BEFORE AND AFTER TAXATION
Half year Half year Year ended
to to 31 December
30 June 30 June 2019
2020 2019 GBPm
GBPm GBPm
(Loss) / profit before taxation (18.6) 15.2 38.1
Amortisation of intangible assets (excluding
software amortisation) 5.5 4.9 10.1
Exceptional items 0.5 - -
Adjusted (loss) / profit before taxation (12.6) 20.1 48.2
Taxation on adjusted loss / (profit) 2.2 (3.8) (9.1)
---------------------------------------------- ---------- ---------- -------------
Adjusted (loss) / profit after taxation (10.4) 16.3 39.1
---------------------------------------------- ---------- ---------- -------------
7 TAXATION
Half year Half year Year ended
to to 31 December
30 June 30 June 2019
2020 2019 GBPm
GBPm GBPm
Current tax
UK corporation tax (credit) / charge
for the period (2.4) 3.8 9.4
Adjustment in relation to previous
periods (0.1) (0.3) (0.5)
--------------------------------------- ---------- ---------- -------------
Current tax (credit) / charge for
the period (2.5) 3.5 8.9
Deferred tax
Origination and reversal of temporary
differences (0.8) (0.9) (1.7)
Changes in statutory tax rate 0.7 - (0.2)
Adjustment in relation to previous
years 0.1 0.3 0.2
Deferred tax credit for the period - (0.6) (1.7)
--------------------------------------- ---------- ---------- -------------
Total (credit) / charge for taxation
included in the income statement (2.5) 2.9 7.2
--------------------------------------- ---------- ---------- -------------
Taxation in relation to amortisation of intangible assets
(excluding software amortisation) has increased the credit for
taxation on continuing operations in the half year to 30 June 2020
by GBP0.3 million ( June 2019 : GBP0.9 million reduction in the
charge; December 2019 : GBP1.9 million reduction in the charge).
Taxation in relation to exceptional items in the half year to 30
June 2020 was GBPnil (June 2019: GBPnil; December 2019:
GBPnil).
During the half year to 30 June 2020, a GBP1.0 million credit
relating to deferred taxation (June 2019: GBP1.5 million credit;
December 2019: GBP0.7 million credit) has been recognised in other
comprehensive income.
During the half year to 30 June 2020, GBPnil relating to current
taxation (June 2019: GBP0.3 million credit; December 2019: GBP0.3
million credit) and a GBP0.3 million charge relating to deferred
taxation (June 2019: GBP0.1 million charge; December 2019: GBP0.2
million credit) has been recognised directly in Shareholders'
equity.
Reconciliation of effective tax rate
Taxation on non-exceptional items for the half year to 30 June
2020 is calculated based on the estimated average annual effective
tax rate (excluding prior year items) of 16.7% (June 2019: 18.9%;
December 2019: 20.0%). This compares to the weighted average tax
rate expected to be enacted or substantively enacted at the balance
sheet date of 19.0% (June 2019: 19.0%; December 2019: 19.0%).
Taxation on exceptional items is calculated based on the actual tax
charge or credit for each specific item.
Differences between the estimated average annual effective tax
rate and statutory rate include, but are not limited to, the effect
of non-deductible expenses. The adjustment for under or over
provisions in previous years is recognised when the amounts are
agreed.
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 19.0% being used to measure all deferred tax balances as at 30
June 2020 (June 2019: 17.5%; December 2019: 17.0%).
8 EARNINGS PER SHARE
Half year Half Year ended
to year to 31 December
30 June 30 June 2019
2020 2019
GBPm GBPm GBPm
(Loss) / profit for the period attributable
to Shareholders (16.1) 12.3 30.9
Amortisation of intangible assets (net
of taxation) 5.2 4.0 8.2
Exceptional items (net of taxation) 0.5 - -
Adjusted (loss) / profit attributable
to Shareholders (10.4) 16.3 39.1
--------------------------------------------- ------------ ------------ --------------
Number Number Number
of shares of shares of shares
Weighted average number of Ordinary shares 381,549,911 368,536,954 369,145,562
Potentially dilutive options* 969,267 833,439 2,710,583
--------------------------------------------- ------------ ------------ --------------
Fully diluted number of Ordinary shares 382,519,178 369,370,393 371,856,145
--------------------------------------------- ------------ ------------ --------------
Pence Pence Pence
Basic earnings per share per share per share per share
Basic earnings per share (4.2p) 3.3p 8.4p
Adjustment for amortisation of intangibles
assets 1.4p 1.1p 2.2p
Adjustment for exceptional items - - -
Adjusted basic earnings per share (2.8p) 4.4p 10.6p
--------------------------------------------- ------------ ------------ --------------
Diluted earnings per share
Diluted earnings per share (4.2p) 3.3p 8.3p
--------------------------------------------- ------------ ------------ --------------
Adjustment for amortisation of intangibles
assets 1.4p 1.1p 2.2p
Adjustment for exceptional items - - -
Adjusted diluted earnings per share (2.8p) 4.4p 10.5p
--------------------------------------------- ------------ ------------ --------------
* Includes outstanding share options granted to employees.
Basic earnings per share is calculated using the weighted
average number of Ordinary shares in issue during the period,
excluding those held by the Employee Benefit Trust, based on the
(loss) / profit for the period 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 Company 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 earnings per share if
the performance conditions, as set out in the Board Report on
Remuneration in the 2019 Annual Report and Accounts, are
satisfied.
Potentially dilutive 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. For the periods to 30 June 2019 and 31 December 2019,
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. For the
period to 30 June 2020, potentially dilutive Ordinary shares have
not been treated as dilutive as their inclusion in the diluted
earnings per share calculation reduces the loss 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.
9 GOODWILL
As at As at As at
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Cost
Brought forward 130.5 128.1 128.1
Business combinations - - 2.4
Closing 130.5 128.1 130.5
------------------------ --------- --------- -------------
In accordance with International Financial Reporting Standards,
goodwill is not amortised, but instead is tested at least annually
for impairment and carried at cost less accumulated impairment
losses.
Impairment tests for goodwill
The allocation of goodwill to Cash Generating Units (CGUs) is as
follows:
As at As at As at
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Workwear 41.7 41.7 41.7
--------------- --------- --------- -------------
Stalbridge 19.1 19.0 19.1
London Linen 29.2 29.2 29.2
Hotel Linen 40.5 38.2 40.5
--------------- --------- --------- -------------
HORECA 88.8 86.4 88.8
--------------- --------- --------- -------------
Total 130.5 128.1 130.5
The recoverable amount for each of the Cash Generating Units
(CGUs) is as follows:
As at As at As at
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Workwear 266.7 576.7 596.8
-------------- --------- --------- -------------
Stalbridge 123.7 250.8 289.2
London Linen 71.4 168.2 170.1
Hotel Linen 167.2 337.3 464.7
-------------- --------- --------- -------------
HORECA 362.3 756.3 924.0
-------------- --------- --------- -------------
Total 629.0 1,333.0 1,520.8
-------------- --------- --------- -------------
The recoverable amount of a CGU is primarily determined based on
value-in-use calculations. These calculations use pre-tax cash flow
projections based on financial budgets and forecasts, ordinarily
covering three years, which are approved by the Board. Income and
costs within the budget are derived on a detailed, 'bottom up'
basis - all income streams and cost lines are considered and
appropriate growth, or decline, rates are assumed for each, all of
which are then reviewed, challenged and stress tested, firstly by
senior management and ultimately by the Board. Income and cost
growth forecasts are risk adjusted to reflect specific risks facing
each CGU and take into account the markets in which they operate.
Cash flows beyond the above period are, ordinarily, extrapolated
using the estimated growth rate stated below, which does not exceed
the long-term average growth rate for the markets in which the
CGU's operate, into perpetuity. When assessing the recoverable
amount for CGUs as at 30 June 2020, the forecasts covered the
period to the end of 2022. The Group has previously stated
that, as a result of COVID-19, it does not currently expect
trading to normalise to 2019 levels until the first half of 2022.
As a result, cash flows for 2023 were assumed, for the purpose of
determining the recoverable amount of a CGU only, to be the same as
for 2019. Cash flows beyond that period were then extrapolated
using the estimated growth rate stated below. Other than as
included in the financial forecasts, it is assumed that t here are
no material adverse changes in legislation that would affect the
forecast cash flows.
The pre-tax discount rate used within the recoverable amount
calculations was 10.21% (June 2019: 5.47%; December 2019: 5.47%)
and is based upon the weighted average cost of capital reflecting
specific principal risks and uncertainties. The discount rate takes
into account, amongst other things, the risk-free rate of return
(derived from a 20-year government bond price), the market risk
premium and beta factor reflecting the average Beta for the Group
and comparator companies which are used in deriving the cost of
equity.
9 GOODWILL (continued)
The same discount rate has been used for each CGU as the
principal risks and uncertainties associated with the Group, as
highlighted on pages 30 to 31, would also impact each CGU in a
similar manner. The Board acknowledge that there are additional
factors that could impact the risk profile of each CGU. These
additional factors were considered by way of sensitivity analysis
performed as part of the impairment tests. For example, a further
three-month lockdown was assumed at the end of 2020, such that the
cash flows for each CGU were akin to those experienced during the
lockdown earlier in 2020; this sensitivity did not result in any
impairment of goodwill relating to the CGUs.
The level of any impairment recognised is predominantly
dependent upon judgments used in arriving at future growth rates
and the discount rate applied to cash flow projections. Key drivers
to future growth rates are dependent on the Group's ability to
maintain and grow income streams whilst effectively managing
operating costs. The level of headroom may change if different
growth rate assumptions or a different pre-tax discount rate were
used in the cash flow projections. The Directors consider that
there are no reasonably possible changes to the discount rate that
would materially change the outcome of the impairment review.
Sensitivities were performed, however, on the annual growth rate
whereby the 2.0% used in the initial impairment review was reduced
down to nil. Such a change did not result in any impairment of
goodwill relating to the CGUs. Where the value-in-use calculations
suggest an impairment, the Board would consider alternative use
values prior to realising any impairment, being the fair value less
costs to dispose.
The key assumptions used for value-in-use calculations are as
follows:
30 June 30 June 31 December
2020 2019 2019
Annual growth rate (after forecast
period) 2.00% 1.87% 1.23%
Risk free rate of return 0.64% 1.87% 1.23%
Market risk premium 8.25% 6.25% 6.25%
Beta Factor 1.22 0.64 0.72
Cost of debt 4.45% 3.62% 3.27%
Having completed the 2020 impairment review, no impairment has
been recognised in relation to the CGUs (2019: no impairment).
10 INTANGIBLE ASSETS
Capitalised software
As at As at As at
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Opening net book value 1.9 0.7 0.7
Additions 0.4 0.6 1.3
Amortisation (0.1) - (0.1)
Closing net book value 2.2 1.3 1.9
------------------------ --------- --------- -------------
Other intangible assets
As at As at As at
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Opening net book value 34.8 38.6 38.6
Additions 1.3 1.1 2.3
Business Combinations - - 4.0
Amortisation (5.5) (4.9) (10.1)
Closing net book value 30.6 34.8 34.8
------------------------ --------- --------- -------------
Other intangibles assets comprise of customer contracts and
relationships.
11 PROPERTY, PLANT AND EQUIPMENT
As at As at As at
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Opening net book value 104.0 96.0 96.0
Additions 13.3 10.0 19.5
Business combinations - - 4.3
Depreciation (8.0) (6.4) (13.9)
Disposals (0.5) - (0.3)
Transfer between right-of-use assets - (11.8) (1.6)
Closing net book value 108.8 87.8 104.0
-------------------------------------- --------- --------- -------------
Following the adoption of IFRS 16, the transfer between the
right-of-use assets represents the reclassification of the net book
value of finance lease assets held at 1 January 2019 to the
right-of-use assets, offset by the reclassification of the net book
value of finance lease assets back to property, plant and equipment
where the lease expired in the period and the assets are now
owned.
CAPITAL COMMITMENTS
Orders placed for future capital expenditure contracted but not
provided for in the financial statements are shown below:
As at As at As at
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Software 0.9 1.3 -
Property, plant and equipment 5.6 10.3 5.2
------------------------------- --------- --------- -------------
Property, plant and equipment capital commitments as at 30 June
2020 includes GBP2.1 million in relation to new machinery at our
Clacton site, acquired with Fresh Linen in November 2019, to
increase capacity and efficiency.
12 RIGHT OF USE ASSETS
As at As at As at
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Opening net book value 39.0 36.1 36.1
Transfer between property, plant and
equipment - 11.8 1.6
Additions 1.2 2.3 6.5
Business combinations - - 0.7
Reassessment/modifications 1.0 0.9 1.2
Depreciation (3.3) (3.6) (7.1)
Closing net book value 37.9 47.5 39.0
-------------------------------------- --------- --------- -------------
Following the adoption of IFRS 16, the transfer in of assets
from property, plant and equipment represents the reclassification
of the cost and associated depreciation of finance lease assets at
1 January 2019 to right-of-use assets. The transfer of assets back
to property, plant and equipment represents the reclassification of
the cost and associated depreciation of such assets back to
property, plant and equipment where the lease expired in the period
and the assets are now owned.
13 TEXTILE RENTAL ITEMS
As at As at As at
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Opening net book value 56.8 56.4 56.4
Additions 11.8 20.9 46.1
Business combinations - - 1.7
Depreciation (23.0) (22.6) (45.1)
Special charges (1.0) (1.2) (2.3)
Closing net book value 44.6 53.5 56.8
------------------------ --------- --------- -------------
14 POST-EMPLOYMENT BENEFIT ASSETS / (OBLIGATIONS)
The Group has applied the requirements of IAS 19, 'Employee
Benefits' to its employee pension schemes and post-employment
healthcare benefits.
In the half year to 30 June 2020 deficit recovery payments of
GBP0.9 million were paid by the Group to the defined benefit scheme
( June 2019 : GBP0.9 million; December 2019: GBP1.9 million).
Following discussions with the Group's appointed actuary a
re-measurement gain of GBP7.7 million has been recognised in the
half year to 30 June 2020. This is principally as a result of asset
returns over the period for the Scheme being materially higher than
interest income, leading to a gain of GBP22.0 million, partially
offset by an actuarial loss of GBP14.3 million as a result of a
decrease in the assumed discount rate and a decrease in the assumed
inflation assumptions.
The post-employment benefit asset / (obligation) and associated
deferred income tax (liability) / asset thereon are shown
below:
As at As at As at
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Post-employment benefit asset / (obligation) 1.3 (12.8) (7.3)
Deferred income tax (liability) / asset
thereon (0.2) 2.2 1.2
---------------------------------------------- --------- --------- -------------
1.1 (10.6) (6.1)
---------------------------------------------- --------- --------- -------------
The reconciliation of the opening gross post-employment benefit
obligation to the closing gross post-employment benefit asset /
(obligation) is shown below:
As at As at As at
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Opening post-employment benefit obligation (7.3) (4.6) (4.6)
Notional interest (0.1) (0.1) (0.1)
Employer contributions 0.9 0.9 1.9
Re-measurement gains / (losses) 7.7 (9.1) (4.5)
Utilisation of healthcare provision 0.1 0.1 -
-------------------------------------------- --------- --------- -------------
Closing post-employment benefit asset
/ (obligation) 1.3 (12.8) (7.3)
-------------------------------------------- --------- --------- -------------
Post-employment benefit assets / (obligations) are comprised of
the following balance sheet amounts:
As at As at As at
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Post-employment benefit assets (Non-current
assets) 2.3 - -
Post-employment benefit obligations (Non-current
liabilities) (1.0) (12.8) (7.3)
1.3 (12.8) (7.3)
-------------------------------------------------- --------- --------- -------------
15 SHARE CAPITAL
Issued share capital is as follows:
Half year Half year Year ended
to to 31 December
30 June 30 June 2019
2020 2019
GBPm GBPm GBPm
Share capital at the start of the period 37.0 36.8 36.8
New shares issued 7.4 0.2 0.2
------------------------------------------ ---------- ---------- -------------
Share capital at the end of the period 44.4 37.0 37.0
------------------------------------------ ---------- ---------- -------------
In the half year to 30 June 2020, nil SAYE scheme options were
exercised with a total nominal value of GBPnil (June 2019:
GBP36,361; December 2019: GBP38,161). In the half year to 30 June
2020, LTIP options were exercised with a total nominal value of
GBP30,000. Proceeds in excess of the nominal value were credited to
Share Premium. In the half year to 30 June 2019, LTIP options were
exercised with a total nominal value of GBP180,500.
During the period, the Company placed 73.9 million Ordinary
shares (the '2020 Placing') with existing and new institutional
investors raising net proceeds of GBP82.7 million (gross proceeds
of GBP85.0 million less costs of GBP2.3 million) of which GBP7.4
million was credited to share capital. The 2020 Placing shares
represented approximately 19.99 per cent. of the Company's existing
share capital. The 2020 Placing price of 115 pence per share was
equal to a discount of 7 per cent. to the 10-day average closing
mid-market price of 123.6 pence per share, and 2 per cent. to the
10-day volume weighted average price of 117.5 pence per ordinary
share both ending on 28 May 2020, being the last practicable day
prior to the publication of the announcement.
The 2020 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.
16 BUSINESS COMBINATIONS
There have been no business combinations in the half year to 30
June 2020.
During 2019, the Group acquired 100% of the share capital of
Fresh Linen Holdings Limited, together with its trading subsidiary
Fresh Linen Limited ('Fresh Linen') and a further dormant company
Pure Laundry Limited. Full details of the acquisition are provided
in the 2019 Annual Report and Accounts. Deferred consideration of
GBP0.7 million was paid in the half year to 30 June 2020 in
relation to this acquisition.
Also during 2019, GBP0.3 million of deferred consideration was
paid relating to the acquisition of Ashbon in 2015.
17 BORROWINGS
As at 30 June 2020, 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, 9 August 2018 and 22 May 2020, comprising a GBP135.0
million rolling credit facility (including an overdraft) which runs
to August 2023 and a GBP40.0 million rolling credit facility which
runs to 22 May 2022 with the option for a one year extension.
Under the rolling credit facilities, 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%.
Throughout the half year to 30 June 2020, the Group had in place
the following hedging arrangements which had the effect of
replacing LIBOR with fixed rates as follows:
-- for GBP15.0 million of borrowings, LIBOR is replaced with
1.070% from 30 January 2019 to 29 January 2021; and
-- for GBP15.0 million of borrowings, LIBOR is replaced with
1.144% from 30 January 2019 to 29 January 2022: and
-- for GBP15.0 million of borrowings, LIBOR is replaced with
0.805% from 8 January 2020 to 8 January 2023;
Following the receipt of the placing proceeds, the Group's
borrowing level has resulted in hedge accounting being discontinued
in June 2020. Accordingly, the Mark to Market value of GBP0.6
million, as at 30 June 2020, has been recognised as an expense
within finance cost.
Borrowings are stated net of unamortised issue costs of GBP0.6
million ( 30 June 2019: GBP0.5 million; 31 December 2019: GBP0.6
million).
18 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 fees relating to the bank facility, changing
maturity profiles, debt acquired as part of an acquisition and the
recognition of lease liabilities entered into during the
period.
At 1 At 30
January Cash Non-cash June
June 2020 2020 Flow Changes 2020
GBPm GBPm GBPm GBPm
Debt due within one year 0.3 0.1 (0.1) 0.3
Debt due after more than
one year (84.7) 85.1 (0.1) 0.3
Lease liabilities (40.4) 3.0 (2.3) (39.7)
----------------------------- --------- ------ ----------- -------
Total debt and lease
financing (124.8) 88.2 (2.5) (39.1)
Cash and cash equivalents (2.9) 2.5 - (0.4)
----------------------------- --------- ------ ----------- -------
Net debt (127.7) 90.7 (2.5) (39.5)
----------------------------- --------- ------ ----------- -------
At 1 At 30
January Cash Non-cash June
June 2019 2019 Flow Changes 2019
GBPm GBPm GBPm GBPm
Debt due within one year 0.3 - (0.1) 0.2
Debt due after more than
one year (86.6) 1.0 (0.1) (85.7)
Lease liabilities (44.6) 4.0 (3.2) (43.8)
--------------------------------- --------- ------ ----------- ----------
Total debt and lease financing (130.9) 5.0 (3.4) (129.3)
Cash and cash equivalents (4.7) 3.5 - (1.2)
--------------------------------- --------- ------ ----------- ----------
Net debt (135.6) 8.5 (3.4) (130.5)
--------------------------------- --------- ------ ----------- ----------
At 1 At 31
January Cash Non-cash December
December 2019 2019 Flow Changes 2019
GBPm GBPm GBPm GBPm
Debt due within one year (0.3) 1.1 (1.1) 0.3
Debt due after more than
one year (86.6) 2.2 (0.3) (84.7)
Lease liabilities (44.6) 13.2 (9.0) (40.4)
--------------------------------- --------- ------ ----------- ----------
Total debt and lease financing (130.9) 16.5 (10.4) (124.8)
Cash and cash equivalents (4.7) 1.8 - (2.9)
--------------------------------- ------ ----------- ----------
Net debt (135.6) 18.3 (10.4) (127.7)
--------------------------------- --------- ------ ----------- ----------
The unamortised fees due after more than one year at 30 June
2020 have been shown within non-current trade and other receivables
as there is no borrowings at the end of the period for the fees to
be offset against. In all other periods, the relevant fees are
deducted from debt due after more than one year.
The cash and cash equivalents figures are comprised of the
following balance sheet amounts:
As at
30 As at As at
June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Cash (Current assets) 7.3 9.8 8.3
Overdraft (Borrowings, Current liabilities) (7.7) (11.0) (11.2)
(0.4) (1.2) (2.9)
--------------------------------------------- ------ --------- -------------
Lease liabilities are comprised of the following balance sheet
amounts:
As at
30 As at As at
June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Amounts due within one year (Lease liabilities,
Current liabilities) (5.4) (10.1) (5.6)
Amounts due within one year (Lease liabilities,
Non-current liabilities) (34.3) (33.7) (34.8)
(39.7) (43.8) (40.4)
------------------------------------------------- ------- --------- -------------
19 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Half year Half Year ended
to year 31 December
30 June to 2019
2020 30 June
2019
GBPm GBPm GBPm
Increase in cash in the period 2.5 3.5 1.8
Decrease in debt and lease financing 88.2 5.0 16.5
--------------------------------------------- ---------- --------- ---------------------
Change in net debt resulting from cash
flows 90.7 8.5 18.3
Debt acquired through business acquisitions - - (2.4)
Leases previously recognised as operating
leases under IAS 17 - (37.2) (37.2)
Lease liabilities recognised during the
period (2.3) (3.2) (7.7)
Movement in unamortised issue costs of
bank loans (0.2) (0.2) (0.3)
Movement in net debt during the period (88.2) (32.1) (29.3)
Opening net debt (127.7) (98.4) (98.4)
--------------------------------------------- ---------- --------- ---------------------
Closing net debt (39.5) (130.5) (127.7)
--------------------------------------------- ---------- --------- ---------------------
20 RELATED PARTY TRANSACTIONS
Transactions during the year between the Company and its
subsidiaries, which are related parties, have been conducted on an
arm's length basis and eliminated on consolidation. Full details of
the Group's other related party relationships, transactions and
balances are given in the Group's financial statements for the year
ended 31 December 2019. There have been no material changes in
these relationships in the half year to 30 June 2020 or up to the
date of this Report.
21 CONTINGENT LIABILITIES
The Group operates from a number of sites across the UK. Some of
the sites have operated as laundry sites for many years and
historic environmental liabilities may exist. Such liabilities are
not expected to give rise to any significant loss.
The Group has granted its Bankers and Trustee of the Pension
Scheme (the 'Trustee') security over the assets of the Group. The
priority of security is as follows:
-- first ranking security for GBP28.0 million to the Trustee
ranking pari passu with up to GBP155.0 million of bank liabilities;
and
-- second ranking security for the balance of any remaining
liabilities to the Trustee ranking pari passu with any remaining
bank liabilities.
During the period of ownership of the Facilities Management
division the Company had given guarantees over the performance of
contracts entered into by the division. As part of the disposal of
the division the purchaser has agreed to pursue the release or
transfer of obligations under the Parent Company guarantees and
this is in process. The sale and purchase agreement contains an
indemnity from the purchaser to cover any loss in the event a claim
is made prior to release. In the period until release the purchaser
is to make a payment to the Company of GBP0.2 million per annum,
reduced pro rata as guarantees are released. Such liabilities are
not expected to give rise to any significant loss.
As a condition of the sale of the Facilities Management division
in August 2013, the Group has put in place indemnities, to the
purchaser, in relation to any future amounts payable in respect of
contingent consideration related to the Nickleby acquisition
completed in February 2012. As set out in the 2012 Annual Report
and Accounts the maximum amount payable under the terms of the
indemnity could be up to GBP5.0 million. The Directors believe the
risk of settlement at, or near, the maximum level to be remote.
22 ACCOUNTING POLICIES
Except as described below, the condensed consolidated interim
financial statements have been prepared applying the accounting
policies, presentation and methods of computation applied by the
Group in the preparation of the published consolidated financial
statements for the year ended 31 December 2019.
(a) Taxation
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual earnings
before exceptional items. Taxation on exceptional items is accrued
as the exceptional items are recognised . Prior year adjustments in
respect of taxation are recognised when it becomes probable that
such adjustment is needed.
(b) Seasonality of operations
Seasonality or cyclicality could affect all of the businesses to
varying extents, however, the Directors do not consider such
seasonality or cyclicality to be significant in the context of the
condensed consolidated interim financial statements.
(c) Critical accounting estimates and assumptions
The preparation of the condensed consolidated interim financial
statements requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets
and liabilities, income and expense. Actual results may differ from these estimates.
22 ACCOUNTING POLICIES (continued)
(d) Government Grants
In preparing the condensed consolidated interim financial
statements, IAS 20, 'Accounting for Government Grants and
Disclosure of Government Assistance' has been applied such that
grants have been recognised in profit or loss on a systematic basis
over the periods in which we have recognised the expense for the
related costs for which the grants are intended to compensate. The
benefit of GBP16.6 million relating to claims made as part of the
Coronavirus Job Retention Scheme has been credited to the Income
Statement in the period to 30 June 2020. There are no unfulfilled
conditions or other contingencies attached to this grant.
23 EVENTS AFTER THE REPORTING PERIOD
There have been no events that require disclosure in accordance
with IAS10, 'Events after the balance sheet date'.
24 PRINCIPAL RISKS AND UNCERTAINTIES
The Group operates a structured risk management process, which
identifies and evaluates risks and uncertainties and reviews
mitigation activity. The Group set out in its 2019 Annual Report
and Accounts the principal risks and uncertainties that could
impact its performance:
Financial Risks Operational Risks Regulatory Risk
- Cost Inflation - Loss of a Processing - Health and Safety
- Economy Facility - Compliance and Fraud
- Interest Rate Fluctuations - Failure of Strategy - Climate Change and
- Liquidity Risk - Customers Energy Costs
- Taxation - Competition
- Retention and Motivation
of Employees
- Information Systems
and Technology
At that time, we also commented that whilst we had not seen any
impact on trading from the COVID-19 pandemic, we would continue to
monitor the situation and seek to mitigate any resultant impact.
The pandemic developed quickly thereafter and, in response, the
Group promptly introduced a number of monitoring and mitigating
activities, including:
-- a multi-function senior management team which closely
monitors the latest developments, assessing risks, providing
guidance, and implementing preventative policies in line with
government regulations and recommendations;
-- the implementation of personal protection measures at all of
our sites, intensified hygiene and social distancing protocols and,
where possible, remote working for employees;
-- raising employee awareness of the cyber security risks and
implementing additional security measures related to remote
working;
-- controlling costs and slowing down capital expenditure to
protect cash flow and securing robust liquidity;
-- bolstering the Group's liquidity position; and
-- monitoring the impact on business operations, such as the
Group's supply chain, credit risk events and business interruptions
and implementing prompt interventions when necessary.
The Directors have reviewed the above principal risks and
uncertainties during the period and concurred that they remain
valid. Whilst we have not established a new principal risk for the
COVID -19 pandemic, the review specifically considered how the
above principal risks and uncertainties have been impacted by it,
as set out below.
Risk COVID-19 Impact
Health and Health and safety Failure to comply with the increased
Safety in the workplace amount of health and safety legislation
is an extremely and guidelines introduced in response
important consideration to COVID-19.
for any employer.
Legislation is often The Group has followed all relevant
complex and fast-changing guidelines to ensure that its facilities
and failure to ensure are COVID secure. While the potential
our employees remain risk has increased during the period
safe at work may due to COVID-19, the Directors'
lead to serious assessment is that this increase
business interruption has been mitigated by the measures
and potential damage implemented.
to reputation.
--------------------------- ---------------------------------------------
Economy Our business could HORECA customers may delay opening
be susceptible to until they are confident of demand
adverse changes for their own services having returned
in, inter alia, to more normalised levels.
economic conditions
and customer spending Given the diversity of our customer
habits, which could base, it is generally possible
impact our profitability to contain the impact of these
and cash flow. adverse conditions, and any adverse
impact on cash flow could be mitigated
in the short term by controls over
capital expenditure and other discretionary
spend.
--------------------------- ---------------------------------------------
Loss of The loss of a key Historically, the loss of a processing
a processing facility facility would most likely be as
Processing could result in a result of flooding or fire, however,
Facility significant disruption a site may now temporarily become
to our business, unavailable as a result of Government
due to the high guidance changes on either a localised
utilisation of plant or national level.
capacity.
A wide geographic spread of processing
facilities mitigates the effect
of a temporary loss of any single
facility as our estate provides
us the ability to relocate the
processing of work. Detailed plans
are in place for the processing
to be relocated quickly and efficiently.
--------------------------- ---------------------------------------------
24 PRINCIPAL RISKS AND UNCERTAINTIES (continued)
Risk COVID-19 Impact
Customers For our businesses COVID-19 may lead to a higher number
to grow organically, of customer closures than we would
we are reliant on ordinarily experience and, as set
securing and retaining out above, customers may delay
a diverse range opening until they are confident
of customers. A of demand for their own services
reliance on any having returned to more normalised
one particular customer levels.
or group of customers
may present a risk Our business model is structured
to the future cash so that we are not reliant on one
flows of the Group particular customer or group of
should they not customers and we have limited concentration
be retained. of credit risk with regard to trade
receivables given the diverse and
Adverse economic unrelated nature of the Group's
conditions may lead customer base.
to an increased
number of our customers Given the diversity of our customer
and clients being base and the various industries
unable to pay for which we serve, it is generally
existing or additional possible to contain the impact
products and services. of these adverse conditions. Any
adverse impact on cash flow could
be mitigated in the short term
by controls over capital expenditure
and other discretionary spend.
-------------------------- ----------------------------------------------
Competition We operate in a Competitors may seek to aggressively
highly competitive price contracts in order to backfill
marketplace. Aggressive volume lost during the pandemic,
pricing from our particularly as they may not have
competitors could access to the same level of liquidity
cause a reduction as the Group.
in our revenues
and margins. The Group will continue to differentiate
its proposition and focus on our
points of strength, such as transparency
of our pricing, flexibility in
our cost base, quality and value
of service and innovation.
-------------------------- ----------------------------------------------
Retention As a service orientated The Group has established training,
and Motivation Group, retaining development, performance management
of Employees and motivating the and reward programmes to retain,
best people with develop and motivate our people.
the right skills, The Group regularly reviews the
at all levels of adequacy and strength of its management
the organisation, teams to ensure that appropriate
is key to the long-term experience and training is given
success of the Group. such that there is not over reliance
Short term disruption on any one individual.
could occur if a
key member of our As a consequence of COVID-19 and/or
team was unavailable the measures implemented by authorities
at short notice, to combat COVID-19, the Group may
either on a temporary experience material labour shortages,
or permanent basis. particularly in the short-term.
By virtue of the size of the Group,
we are able to reallocate work
across our estate in the event
of employee unavailability.
-------------------------- ----------------------------------------------
Information The digital world The adoption of alternative working
Systems creates many risks practices during the pandemic may
and for a business including have increased our exposure to
Technology technology failures, external threats.
loss of confidential
data and damage We seek to assess and manage the
to brand reputation. effectiveness of our security infrastructure
and our ability to effectively
defend against current and future
cyber risks by using analysis tools
and experienced professionals to
evaluate and mitigate potential
impacts. Throughout the pandemic,
the Group has increased its focus
in this area as well as regularly
educating users of the increased
risk of cyber-attacks.
-------------------------- ----------------------------------------------
The Board will continue to closely monitor the situation over
the coming period and will take any required action to maintain
control over the impact.
Further details of the Principal Risks and Uncertainties facing
the Group were detailed on pages 28 to 31 of the 2019 Annual Report
and Accounts.
25 PUBLISHED FINANCIAL STATEMENTS
As previously announced, there is no longer a requirement to
send out half-yearly reports to all Shareholders or to advertise
the content in a national newspaper.
In order to reduce costs, the Company has taken advantage of
this reporting regime and no longer publishes half-yearly reports
for individual circulation to Shareholders. Information that would
normally be included in a half-yearly report is made available on
the Company's website at www.jsg.com .
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
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END
IR BRGDCLBGDGGB
(END) Dow Jones Newswires
September 02, 2020 02:02 ET (06:02 GMT)
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