TIDMJSG
RNS Number : 8431X
Johnson Service Group PLC
01 September 2022
1 September 2022
AIM: JSG
Johnson Service Group PLC
('JSG' or 'the Group')
Interim Results for the Six Months ended 30 June 2022
and Intention to Launch a Share Buyback Programme
"Continuing recovery in HORECA Confidence for longer term
growth."
FINANCIAL PERFORMANCE: SIGNIFICANT RECOVERY ACHIEVED
- Total revenue of GBP176.2 million (June 2021: GBP99.6 million).
- Organic revenue up 73.0% compared to H1 2021 and broadly in line with H1 2019.
- Adjusted EBITDA(1) of GBP42.8 million (June 2021: GBP16.9
million); margin of 24.3% (June 2021: 17.0%).
- Adjusted operating profit(1) of GBP12.8 million (June 2021: loss of GBP9.5 million(3) ).
- Operating profit of GBP6.7 million (June 2021: loss of GBP12.3 million(3) ).
- Adjusted profit before taxation(2) of GBP11.2 million (June
2021: loss of GBP11.1 million(3) ).
- Profit before taxation of GBP5.1 million (June 2021: loss of GBP13.9 million(3) ).
- Adjusted diluted EPS of 2.3 pence (June 2021: 1.9 pence loss).
- Diluted EPS of 1.1 pence (June 2021: loss of 2.5 pence).
- Reinstatement of progressive dividend policy with interim dividend of 0.8 pence per share.
FINANCING
- Net debt, including IFRS 16 liabilities, at June 2022 of
GBP57.7 million (December 2021: GBP60.1 million).
- New GBP85 million bank facility to August 2025.
- Intention to launch a share buyback programme of up to GBP27.5 million.
OPERATIONAL HIGHLIGHTS
- Strong commercial momentum in HORECA with volumes continuing
to recover as hospitality returns to more normal and predictable
levels; Q2 volumes at 91% of 2019 level.
- Successfully continued to secure and implement price increases
across our customer base to mitigate the impact of inflationary
pressures on our cost base.
- Impact of energy price increases being proactively managed.
- Increasing sales activity and strengthening pipeline of new business enquiries.
- Continued capital investment across the estate to increase
efficiencies and underpin capacity.
- Progress made on our sustainability agenda.
Notes
1 "Adjusted EBITDA" refers to operating profit/(loss) excluding
goodwill impairment, amortisation of intangible assets (excluding
software amortisation) and exceptional items (defined as "adjusted
operating profit / (loss)") plus the depreciation charge for
property, plant and equipment, textile rental items and right of
use assets plus software amortisation.
2 "Adjusted profit / (loss) before taxation" refers to adjusted
operating profit / (loss) less total finance costs.
3 June 2021 numbers have been restated in respect of IFRIC
guidance issued in 2021 regarding accounting for cloud-based
computer arrangements under IAS38 (see note 23).
Peter Egan, Chief Executive Officer of Johnson Service Group,
commented:
"During the six-month period we have achieved a significant
improvement in the Group's financial performance and are focusing
on capital investment across the estate to improve energy and
production efficiencies and underpin capacity, alongside
implementing mitigating actions to seek to address current and
future inflationary pressures.
Our organic growth is underpinned by increased sales activity
and a strengthening pipeline of new business enquiries, whilst our
strong balance sheet and cash generation means that we remain well
placed to pursue earnings accretive acquisitions.
Reflecting our strong performance and resumption of more normal
levels of cash generation, we have today announced the
recommencement of our progressive dividend policy and our intention
to launch a share buyback programme of up to GBP27.5 million.
Trading momentum since June 2022 has remained encouraging, with
volumes in HORECA for the six weeks to the middle of August
increasing to 92% of normal. Nevertheless, and despite implementing
material price increases across our customer base, we do expect
some margin pressure in the short term, particularly in respect of
energy costs. However, based on our assumption that volumes follow
the normal seasonal pattern over the coming months and are not
impacted by a reduction in discretionary spending, or a further
material deterioration in the energy markets, as a result of
ongoing economic factors, we expect the full year outturn to be in
line with current market expectations."
SELL-SIDE ANALYST MEETING
A presentation for sell-side analysts will be held today at
09:30, 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 Rosie Driscoll
Virginia Bull Toby Strong
Tel: 020 7597 5970 Tel: 020 3757 4992/4981
Note: Throughout this statement 'adjusted operating
profit/(loss)' refers to continuing operating profit/(loss) before
goodwill impairment, amortisation of intangible assets (excluding
software amortisation) and exceptional items. 'Adjusted
profit/(loss) before taxation' refers to adjusted operating
profit/(loss) less total finance cost. 'Adjusted EBITDA' refers to
adjusted operating profit/(loss) 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 profit/(loss) after
taxation. Underlying adjusted EPS refers to adjusted EPS calculated
to exclude the impact of the 'super-deduction' capital allowances
introduced by HMRC for a limited period. The Board considers that
'adjusted operating profit/(loss)', 'adjusted profit/(loss) before
taxation, 'adjusted EBITDA', 'adjusted EPS' and 'underlying
adjusted EPS', all of which 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
We are pleased with the overall performance of the Group in what
has been another challenging period. Workwear, which remained
resilient throughout the pandemic, recorded revenue growth of 2.3%
in the first half alongside strong customer retention, which
remained at 95%. As the first half progressed, Workwear saw a small
contraction within a number of accounts in terms of products on
rental and the market remains competitive. Positively though, we
are continuing to see a recovery in HORECA as hospitality returns
to more normal and predictable levels. Organic growth was strong in
the first half of the year, as the Group benefited from like for
like volume recovery, net new business and improved pricing, and
our underlying EBITDA margin increased significantly year on
year.
Inflationary pressures have impacted the Group in the first half
but we have continued to secure and implement price increases
across our customer base to mitigate the impact. Importantly, we
have also continued to focus on improved energy and production
efficiencies and the delivery of our quality customer service.
Our existing scale, expertise and operational excellence means
that we are well placed to capitalise on opportunities as our
commercial markets continue to recover.
FINANCIAL REVIEW
Financial Results
Our results for the first half of 2022 reflect the slow start to
the year in HORECA and the subsequent recovery in volume. Half year
revenue was GBP176.2 million, up from GBP99.6 million in 2021.
Adjusted EBITDA was GBP42.8 million (June 2021: GBP16.9 million)
giving a margin of 24.3% (June 2021: 17.0%). In the prior period,
for the six months to 30 June 2021, the Group benefited from
Coronavirus Job Retention Scheme (CJRS) claims of GBP9.9
million.
Total finance costs remained at GBP1.6 million (June 2021:
GBP1.6 million).
The exceptional charge of GBP0.5 million (June 2021: credit of
GBP2.6 million) relates to site clearance costs at the Exeter site
which was destroyed by fire in January 2020. We anticipate further
costs in the second half of the year as well as an exceptional
credit of GBP1.5 million having now reached a financial settlement
with the insurer in relation to the fire.
The adjusted profit before taxation was GBP11.2 million (June
2021: loss of GBP11.1 million).
Statutory profit before taxation, after amortisation of
intangible assets (excluding software amortisation) of GBP4.2
million (June 2021: GBP5.4 million), goodwill impairment of GBP1.4
million (June 2021: GBPnil) and an exceptional charge of GBP0.5
million (June 2021: exceptional credit of GBP2.6 million) was
GBP5.1 million (June 2021: loss of GBP13.9 million).
The tax rate on the adjusted profit before taxation, excluding
exceptional items, the amortisation of software (excluding software
amortisation) and goodwill impairment, was 9.7% ( June 2021 : 23.1
% ) . The rate is significantly below the headline corporation tax
rate for the full year of 19% due to the impact of the capital
allowances super-deduction which offers 130% first-year relief on
qualifying main rate plant and machinery investments until 31 March
2023. The impact of this super-deduction in the first half of 2022
is estimated to be a GBP2.6 million credit to corporation tax.
Adjusted diluted earnings per share was 2.3 pence (June 2021:
adjusted diluted loss per share 1.9 pence). Excluding the impact of
the capital allowances super-deduction, the adjusted diluted
earnings per share was 1.7 pence.
Dividend
Reflecting the recovery during recent months and the confidence
that trading levels have returned to, and will remain at, more
normal levels, the Board has reinstated its dividend payments. An
interim dividend of 0.8 pence per share will be paid on 4 November
2022 to those Shareholders on the register of members on 7 October
2022. The ex-dividend date is 6 October 2022. The dividend
represents a return to our progressive dividend policy and it is
the Board's current intention to reduce dividend cover from our
historical level of cover of 3 times to 2.5 times by financial year
2024.
Finances
Free cash flow in the first half of the year, after capital
lease payments, was GBP30.0 million compared to GBP5.7 million in
the first half of 2021, reflecting the improved trading
performance.
Total net debt (excluding IFRS 16) at 30 June 2022 was GBP21.9
million, a similar level to the December 2021 position of GBP22.3
million and reflecting significant investment in new rental stock,
which is now at more normal levels. After including the impact of
IFRS 16, net debt at June 2022 was GBP57.7 million (December 2021:
GBP60.1 million).
A new GBP85.0 million bank facility was entered into on 8 August
2022 for an initial three-year term. The initial margin is 1.45%
over SONIA. The terms of the facility provide an option to extend
the term for up to a further two years and an option to increase
the facility by up to a further GBP50.0 million, both with bank
consent. It is our intention to add ambitious sustainability
performance targets to this facility in the near future in order to
make it a Sustainability Linked Loan facility.
Covenants remain unchanged and comprise a leverage covenant
(total debt to EBITDA) of less than three times and interest cover
of not less than four times. At 30 June 2022 the leverage ratio was
0.6 times.
Capital Structure and Share Buyback Programme
Our Capital Allocation policy remains unchanged. The Group's
objective is to employ a disciplined approach to investment,
returns and capital efficiency to deliver sustainable compounding
growth whilst also maintaining a strong balance sheet. We continue
to see exciting opportunities to deploy capital organically and
have a good M&A pipeline. Even after taking into consideration
ongoing capital expenditure at current levels to fund organic
growth, payment of dividends and acquisitions within the M&A
pipeline, the Group has significant headroom under its committed
facilities and target leverage of 1-1.5x.
As a result, the Board announces that, later this month, it
intends to launch a share buyback programme of the Company's
ordinary shares for up to a maximum aggregate consideration of
GBP27.5 million during the period up until the Company's 2023
Annual General Meeting in early May 2023. A further announcement
will be made in due course.
Defined Benefit Pension Scheme ('the Scheme')
The recorded net surplus after tax for the Scheme, calculated in
accordance with IAS 19, was GBP5.9 million at June 2022 compared to
a net deficit of GBP0.9 million at December 2021. The improvement
in the position is due, in part, to a higher discount rate assumed
on liabilities and lower assumed inflation. 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 next triennial valuation of the defined benefit pension
scheme will be undertaken as at 30 September 2022 and we will
continue with the existing deficit recovery payments of GBP1.9
million per annum until the result of the review is finalised.
BUSINESS REVIEW
Our Businesses
The Group comprises of 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. Within HORECA, 'Stalbridge' and
'London Linen' provide premium linen services to the restaurant,
hospitality and corporate events market and Johnsons Hotel Linen,
our high volume linen business primarily serves the corporate four
star and budget hotel market. Also within HORECA, our recently
acquired Northern Ireland business, Lilliput, predominantly
services hotels and restaurants as well as a number of healthcare
customers.
The year began with the continuing impact of COVID-19 which
particularly impacted HORECA volumes. As business activity began to
recover to more normal levels we, like many other UK businesses,
have experienced cost inflation and volatility. We have agreed
price increases across the customer base which will help to offset
cost inflation and we will continue to keep pricing under
review.
Energy
Energy costs (comprising gas, electricity and diesel) have been
highly volatile over the period and remain so. Costs for the first
half of 2022 were significantly higher than the equivalent period
in 2019 and represented 9.3% of revenue in the six months to 30
June 2022 (June 2019: 6.5%).
In respect of the third quarter this year, over 80% of our
anticipated electricity usage and some 90% of our anticipated gas
usage is fixed at prices significantly below current day ahead
rates. In quarter four, those proportions increase to 100% and 95%,
respectively. Looking ahead, 100% of our electricity requirement is
fixed for the first quarter next year with up to 40% thereafter up
to and including September 2024. Similarly, we have fixed pricing
in place for some 67% of our anticipated gas requirement through to
September 2023. In addition, we have hedged 67% of our anticipated
diesel requirement for 2022 at rates significantly below current
pricing. We will continue to closely monitor markets and consider
fixing further prices as opportunities allow.
Workwear Division
Total revenue for the Workwear division was GBP66.0 million
(June 2021: GBP64.5 million), an increase of 2.3%, and includes the
benefit of a small number of customer contracts acquired in
February 2022. Organic growth was 1.7%. Adjusted EBITDA was GBP22.2
million (June 2021: GBP23.0 million) giving a margin of 33.6% (June
2021: 35.7%). Adjusted operating profit was GBP10.0 million (June
2021: GBP11.3 million) with the June 2021 results including the
benefit of a CJRS grant of GBP0.6 million.
The margin has been impacted by the lag in implementing price
increases with customers compared to increases in the cost base.
Further pricing discussions are ongoing.
The division has continued to focus on maintaining the quality
of service that we provide to our customers. This was reflected in
the first quarter's customer satisfaction results of 85%,
maintaining our position of providing a first-class service. Once
again our logistic teams, in particular, received excellent
feedback. The service teams have proactively engaged with our
customers and continue to successfully renew significant volumes of
contracts. Additional service sales to existing customers remain
positive and has helped offset the impact of the increasing
pressure from our customer base to reduce their workwear costs.
Whilst customer retention has remained at 95%, we have seen a small
contraction within accounts in terms of products on rental.
The sales teams are continuing to gain momentum with increased
activity and pipelines. The recent launch of our new, more
sustainable and recyclable garment, the 'Flex-Collection', is
another exciting prospect. This is being supported by a specific
marketing campaign highlighting the innovative qualities of the
garment.
In response to rising costs, and in particular energy, the
operational teams remain focused upon the continuous improvement of
our processes and delivering further enhancements to our
operational efficiencies. Following the successful implementation
of the fully automated sortation systems in three of our sites, we
are reviewing its installation into additional locations.
We continue to make progress with the implementation of our new
laundry management system. The installation phase will be completed
by the third quarter. The new system will allow us to implement new
operating functionalities and procedures that will further enhance
the quality of service to our customers, some of which are already
in the trial phase.
HORECA Division
Notwithstanding the negative impact of the Omicron variant at
the start of the year, total revenue for the HORECA division
increased significantly to GBP110.2 million (June 2021: GBP35.1
million). Adjusted EBITDA was GBP23.3 million (June 2021: GBP3.5
million loss). Adjusted operating profit was GBP5.5 million (June
2021: GBP18.2 million loss) and, in June 2021, was after claiming a
CJRS grant of GBP9.3 million.
HORECA volumes were 83% of normal in the first quarter,
improving to 91% in the second quarter. We are continuing to see a
pipeline of new business and some additional sites have been
installed during July and August 2022, adding over 6,700 new
bedroom and 75 restaurant locations. At least a further 5,000
bedrooms are anticipated to be installed before the end of the
year.
Competition for new employees continues to be a challenge.
Previously, during periods of lower demand, our workforce would
flex in both employee headcount and shifts operated in order to
control costs. Recruiting and retaining staff has been a key focus,
with many engagement initiatives introduced, as well as guaranteed
hours during low demand months and various learning and development
opportunities made available. Hourly rates, differentials and bonus
incentives, to underpin consistency of headcounts and performance,
have been reviewed and changed where necessary. A significant
amount of work has been undertaken to ensure the correct personnel
resource is in place to meet customer peak demand and this will
remain a continual process.
The Hotel, Restaurant and Catering business, which includes
Johnsons Stalbridge and London Linen, has experienced a strong
recovery in the first half of 2022 and a healthy conversion and
pipeline of new business enquiries. We have sought and achieved
commercially improved terms with many customers and increased
initial pricing to new accounts to keep pace with the significant
cost inflation being experienced across the industry.
Within Hotel Linen, the beginning of 2022 resulted in lower than
expected volumes due to the impact of restrictions relating to the
Omicron Covid variant. Service levels during the first six months
have been consistently high but customer volumes remained lower
than those of 2019. These lower volumes are, in the main, due to
the operational changes within our customer base on frequency of
changing linen and the amount of linen provided in each room,
impacting our stock turn ratio. The link between a hotel's
occupancy rates and the volumes to be processed in our laundries is
now less of a reliable measure, impacting our forward planning,
production efficiency and ultimately costs.
Constructive commercial discussions have taken place with
customers relating to significant increases in our business costs.
We have implemented price increases across the customer base to
offset the cost impact and also, in many instances, introduced
minimum charges. Our National Accounts team have achieved success
in retaining key customers and continue to build strong business
relationships. We continue to benefit from ongoing sales and
referrals for new business, especially from new build hotels where
the strength of our longstanding reputation for service and quality
continue to help us win additional new business from current and
new customers.
The previously announced appointments of a Project Manager,
National Transport Manager and a Learning and Development Manager
have already made a good impact in supporting our people, service
and operations.
Our field service teams have been busy rolling out our new
'Linen Room' customer portal. The Linen Room has been well received
by our customers, automating the linen order process and providing
useful business intelligence. Our new Customer Service Visit app
provides us with real time customer feedback as well as providing
us with information on opportunities to further develop and improve
our service offering.
The GBP4.2m investment in our Bourne site was successfully
completed on time and has improved working processes and underpins
capacity. The team at Bourne have maximised the opportunities
provided by the investment and plans for further investment in 2022
are underway. Our newly acquired Northern Ireland site has also
received investment in increased washing, drying and towel folding
capacity, providing a new unit and improved working practices.
The Carbon Trust backed water recycling system, which was
successfully installed and trialled in our Shaftesbury site, has
been shown to deliver a significant amount of recycled water and
reduced energy and chemical usage. Further equipment will be
installed in our Cornwall site by the end of 2022 with plans to
continue the roll out to other sites early next year.
We have started to replace plastic packaging wrap on many of our
products with paper banding and we will be seeking to reduce
plastic packaging further by the end of the year. In July, we
received delivery of our first electric commercial vehicles for our
engineering teams and are at present trialing larger vehicles for
potential use in our distribution network.
EMPLOYEES
Our employees remain the foundation of our business and are the
key to us being able to provide excellent customer service. The
Board would like to thank them for their support, hard work and
significant contribution to the business over the last six
months.
SUSTAINABILITY
We believe that embedding a best in class sustainability
programme throughout our operations will help position us as a
leader in responding to the challenges faced by the textile
services industry and prove to be a differentiator for our
customers. We aspire to create a culture where sustainability is
embedded into our daily working life, continually developing and
evolving to reflect the responsibility we have as a Group.
Following the launch of The Johnsons Way, our revised approach
to sustainability, in February, we continue to make excellent
progress with our sustainability programme. We have developed the
strategy around the four pillars of Our Family, Our World, Our
Integrity and Our Communities and have implemented a robust
governance and reporting framework to support the delivery of the
programme.
A selection of some of the ongoing projects and initiatives we
have undertaken include:
-- We have recently published our inaugural Sustainability
Report - an overview of the progress we have made on the Johnsons
Way. The report is available on our website at www.jsg.com .
-- We have submitted our first CDP disclosure during the 2022
cycle (for our 2021 reporting year). The results will be published
in our 2022 Annual Report and Accounts.
-- Successful conclusion of the wastewater recycling pilot at
our Shaftesbury site with significant water recovery being
demonstrated. Following the results achieved with the pilot we are
installing additional equipment at our Cornwall site later this
year with plans to continue the roll out to other sites thereafter
.
-- Working in partnership with our suppliers and customers, we
have made improvements on how we collate and manage our waste
streams which has identified opportunities to reduce our waste to
landfill. We are also actively engaged with a group of customers to
reduce their requirements for single use plastic packaging, with
the introduction of recyclable alternatives.
-- Further to the electric vehicle trials completed last year,
our employees have taken delivery of a number of electric and
hybrid vehicles. Depending on continued availability and delivery
schedules, we anticipate achieving 25% of our company car fleet
being electric or hybrid by the end of the year.
BOARD CHANGES
As previously announced, Nicola Keach was appointed to the Board
on 1 June 2022 as an independent Non-Executive Director.
OUTLOOK
The Board remains confident that margins will continue to
recover towards pre-pandemic levels and is excited about the growth
opportunities available to the Group. This is reflected, in part,
by the reinstatement of the dividend.
Customer behaviour remains difficult to predict and, whilst
there are inflationary pressures, which are expected to increase
and continue at a heightened level, we have a resilient business
model to help mitigate these challenges. We also have some
protection through the fixing of a proportion of our energy costs,
although the Board is cognisant that the energy market remains
highly volatile. We continue to secure and implement price
increases across our customer base which, along with expected
additional volume which will better utilise our labour resource and
improve processing efficiency, will help offset cost inflation.
Our existing scale, expertise and operational excellence means
that we are well placed to capitalise on opportunities as markets
continue to recover. We will continue to identify opportunities for
us to invest to strengthen our position in the market and enhance
our competitive advantage as well as continuing to focus on
delivering outstanding customer service and investing in both our
employees and our laundry facilities.
Trading momentum since June 2022 has remained encouraging with
volumes in HORECA for the six weeks to the middle of August
increasing to 92% of normal. Nevertheless, and despite implementing
material price increases across our customer base, we do expect
some margin pressure in the short term, particularly in respect of
energy costs. However, based on our assumption that volumes follow
the normal seasonal pattern over the coming months and are not
impacted by a reduction in discretionary spending, or a further
material deterioration in the energy markets, as a result of
ongoing economic factors, we expect the full year outturn to be in
line with current market expectations.
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
condensed consolidated interim financial statements are the
responsibility of, and have been approved by, the Directors.
The Directors confirm that to the best of their knowledge:
-- the condensed consolidated interim financial statements have
been prepared in accordance with IAS 34, 'Interim Financial
Reporting' as adopted by the United Kingdom;
-- 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 of the financial year and a description
of the 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 2021 and, other than
for the appointment of Nicola Keach on 1 June 2022, remain
unchanged. 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
1 September 2022 1 September 2022
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 2021
Note 2022 2021 GBPm
GBPm GBPm
Restated*
Revenue 2 176.2 99.6 271.4
Impairment loss on trade receivables (0.2) (0.2) (0.4)
All other costs (169.3) (111.7) (262.6)
---------------------------------------------- ------ ----------- ----------- -------------
Operating profit / (loss) 2 6.7 (12.3) 8.4
Operating profit / (loss) before amortisation
of intangible assets (excluding software
amortisation), goodwill impairment
and exceptional items 12.8 (9.5) 12.7
Amortisation of intangible assets (excluding
software amortisation) (4.2) (5.4) (11.0)
Goodwill impairment 9 (1.4) - -
Exceptional items 3 (0.5) 2.6 6.7
Operating profit / (loss) 2 6.7 (12.3) 8.4
Finance cost 4 (1.6) (1.6) (3.3)
Profit / (loss) before taxation 5.1 (13.9) 5.1
Taxation (charge) / credit 7 (0.4) 3.1 1.8
Profit / (loss) for the period from
continuing operations 4.7 (10.8) 6.9
---------------------------------------------- ------ ----------- ----------- -------------
Profit / (loss) for the period from
discontinued operations 0.1 - (0.3)
---------------------------------------------- ------ ----------- ----------- -------------
Profit / (loss) for the period attributable
to equity holders 4.8 (10.8) 6.6
---------------------------------------------- ------ ----------- ----------- -------------
* See note 23 for further details of the
prior year restatement.
Earnings / (loss) per share 8
Basic earnings / (loss) per share 1.1p (2.5p) 1.5p
---------------------------------------------- ------ ----------- ----------- -------------
Diluted earnings / (loss) per share 1.1p (2.5p) 1.5p
---------------------------------------------- ------ ----------- ----------- -------------
See note 8 for Adjusted basic earnings / (loss) per share and
Adjusted diluted earnings / (loss) per share.
Consolidated Statement of Comprehensive Income
Half year to Half year Year ended
30 June to 30 June 31 December
2022 2021 2021
Note GBPm GBPm GBPm
Restated
Profit / (loss) for the period 4.8 (10.8) 6.6
----------------------------------------------------------- ----------- ----------- ------------
Items that will not be subsequently
reclassified to profit or loss
Re-measurement and
experience gains
on
post-employment benefit
- obligations 14 8.1 5.7 11.0
Taxation in respect of re-measurement
- and experience gains (2.0) (1.5) (2.1)
Change in deferred tax due to change in
tax rate - 0.7 -
Items that may be subsequently reclassified
to profit or loss
Cash flow hedges - fair value
- (net of taxation) gains 1.7 0.8 1.3
- transfers to administrative
expenses (1.0) 0.2 -
----------------------- --------------------------------- ------------
Other comprehensive income for the period 6.8 5.9 10.2
-----------------------------------------------------------
Total comprehensive profit / (loss) for
the period 11.6 (4.9) 16.8
----------------------------------------------------------- ------------ ----------- ------------
The notes on pages 15 to 32 form an integral part of these
condensed consolidated interim financial statements.
Consolidated Statement of Changes in Shareholders' Equity
Capital Restated
Share Share Merger Redemption Hedge Retained Total
Capital Premium Reserve Reserve Reserve Earnings Equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January
2021 44.4 16.3 1.6 0.6 (1.0) 193.6 255.5
--------- --------- --------- ------------ ---------- ---------- --------
Prior year adjustment - - - - - (0.9) (0.9)
Restated balance at 1
January 2021 44.4 16.3 1.6 0.6 (1.0) 192.7 254.6
Loss for the period - - - - - (10.9) (10.9)
Prior year adjustment - - - - - 0.1 0.1
Other comprehensive income
for the period - - - - 1.0 4.9 5.9
-------------------------------- --------- --------- --------- ------------ ---------- ---------- --------
Total comprehensive income
/ (loss) for the period - - - - 1.0 (5.9) (4.9)
-------------------------------- --------- --------- --------- ------------ ---------- ---------- --------
Share options (value
of employee services) - - - - - 0.4 0.4
Purchase of own shares
by EBT - - - - - (0.1) (0.1)
Issue of share capital 0.1 0.5 - - - - 0.6
Transactions with Shareholders
recognised directly in
Shareholders' equity 0.1 0.5 - - - 0.3 0.9
-------------------------------- --------- --------- --------- ------------ ---------- ---------- --------
Restated balance at 30
June 2021 44.5 16.8 1.6 0.6 - 187.1 250.6
-------------------------------- --------- --------- --------- ------------ ---------- ---------- --------
Profit for the period - - - - - 17.4 17.4
Other comprehensive income
for the period - - - - 0.3 4.0 4.3
-------------------------------- --------- --------- --------- ------------ ---------- ---------- --------
Total comprehensive income
for the period - - - - 0.3 21.4 21.7
-------------------------------- --------- --------- --------- ------------ ---------- ---------- --------
Share options (value
of employee services) - - - - - 0.1 0.1
Transactions with Shareholders
recognised directly in
Shareholders' equity - - - - - 0.1 0.1
-------------------------------- --------- --------- --------- ------------ ---------- ---------- --------
Balance at 31 December
2021 44.5 16.8 1.6 0.6 0.3 208.6 272.4
-------------------------------- --------- --------- --------- ------------ ---------- ---------- --------
Profit for the period - - - - - 4.8 4.8
Other comprehensive income
for the period - - - - 0.7 6.1 6.8
-------------------------------- --------- --------- --------- ------------ ---------- ---------- --------
Total comprehensive income
for the period - - - - 0.7 10.9 11.6
-------------------------------- --------- --------- --------- ------------ ---------- ---------- --------
Share options (value
of employee services) - - - - - 0.4 0.4
Transactions with Shareholders
recognised directly in
Shareholders' equity - - - - - 0.4 0.4
-------------------------------- --------- --------- --------- ------------ ---------- ---------- --------
Balance at 30 June 2022 44.5 16.8 1.6 0.6 1.0 219.9 284.4
-------------------------------- --------- --------- --------- ------------ ---------- ---------- --------
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
2022, the EBT held 9,024 shares (June 2021: 9,024 shares; December
2021: 9,024 shares).
Consolidated Balance Sheet
As at As at As at
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Note Restated
Non-current assets
Goodwill 9 133.8 130.9 135.2
Intangible assets 10 13.8 21.2 16.7
Property, plant and equipment 11 113.3 112.4 113.3
Right-of-use assets 12 33.2 36.1 35.5
Textile rental items 13 55.3 39.4 48.4
Trade and other receivables 0.3 0.2 0.3
Deferred income tax assets - 0.8 0.3
Post-employment benefit assets 8.0 - -
357.7 341.0 349.7
------------------------------------ ------ --------- --------- -------------
Current assets
Inventories 2.6 1.2 2.2
Trade and other receivables 60.5 43.0 47.9
Derivative financial assets 1.4 - -
Current income tax assets - 2.8 3.6
Cash and cash equivalents 7.6 6.8 5.2
72.1 53.8 58.9
------------------------------------ ------ --------- --------- -------------
Current liabilities
Trade and other payables 70.8 77.8 63.7
Borrowings 8.5 8.6 9.5
Lease liabilities 5.1 5.2 5.2
Derivative financial liabilities - 0.1 0.1
Provisions 0.7 1.7 0.5
85.1 93.4 79.0
------------------------------------ ------ --------- --------- -------------
Non-current liabilities
Post-employment benefit obligations 14 1.0 8.3 2.1
Deferred income tax liabilities 5.9 - 3.3
Trade and other payables 0.9 0.9 0.3
Borrowings 21.0 7.0 18.0
Lease liabilities 30.7 32.9 32.6
Derivative financial liabilities - 0.2 -
Provisions 0.8 1.5 0.9
60.3 50.8 57.2
------------------------------------ ------ --------- --------- -------------
NET ASSETS 284.4 250.6 272.4
------------------------------------ ------ --------- --------- -------------
Capital and reserves attributable to
the Company's Shareholders
Share capital 15 44.5 44.5 44.5
Share premium 16.8 16.8 16.8
Merger reserve 1.6 1.6 1.6
Capital redemption reserve 0.6 0.6 0.6
Hedge reserve 1.0 - 0.3
Retained earnings 219.9 187.1 208.6
------------------------------------ ------ --------- --------- -------------
Total equity 284.4 250.6 272.4
------------------------------------ ------ --------- --------- -------------
The notes on pages 15 to 32 form an integral part of these
condensed consolidated interim financial statements. The condensed
consolidated interim financial statements on pages 11 to 32 were
approved by the Board of Directors on 1 September 2022 and signed
on its behalf by:
Yvonne Monaghan
Chief Financial Officer
Consolidated Statement of Cash Flows
Half Half year Year ended
year to to 31 December
30 June 30 June 2021
Note 2022 2021 GBPm
GBPm GBPm
Restated
Cash flows from operating activities
Profit / (loss) for the period 4.8 (10.8) 6.6
Adjustments for:
Taxation charge / (credit)
- continuing 7 0.4 (3.1) (1.8)
- discontinued - - 0.3
Total finance
cost 1.6 1.6 3.3
Depreciation 29.9 26.4 55.1
Amortisation 4.3 5.4 11.1
Goodwill impairment loss 1.4 - -
Loss on disposal of tangible fixed
assets - 0.1 0.1
Gain on termination of lease liabilities - - (0.2)
(Increase) / decrease in inventories (0.4) 0.2 (0.8)
Increase in trade and other receivables (12.4) (11.7) (15.4)
Increase / (decrease) in trade and
other payables 3.7 4.1 (2.1)
Deficit recovery payments in respect
of post-employment benefit obligations (0.9) (0.9) (1.9)
Share-based payments 0.4 0.4 0.5
Commodity swaps not qualifying as
hedges - (0.3) (0.3)
Insurance claims - (2.6) (5.3)
Decrease in provisions - (0.2) (2.0)
Business acquisition costs charged
to the income statement - - 0.1
------------------------------------------------------------- ------ -------- --------- ------------
Cash generated from operations 32.8 8.6 47.3
Interest paid (1.7) (1.7) (3.2)
Taxation received 3.5 0.5 0.5
------------------------------------------------------------- ------ -------- --------- ------------
Net cash generated from operating
activities 34.6 7.4 44.6
------------------------------------------------------------- ------ -------- --------- ------------
Cash flows from investing activities
Acquisition of business (net of cash
and cash equivalents acquired) 16 - (0.8) (4.8)
Disposal of business costs - - (3.6)
Purchase of other intangible assets 10 (1.3) - -
Purchase of property, plant and equipment (6.6) (8.4) (24.2)
Proceeds from insurance claims - 2.6 5.3
Purchase of software (0.1) (0.3) (0.2)
Purchase of textile rental items (24.8) (14.6) (41.8)
Proceeds received in respect of special
charges 1.5 0.8 2.4
Net cash used in investing activities (31.3) (20.7) (66.9)
------------------------------------------------------------- ------ -------- --------- ------------
Cash flows from financing activities
Proceeds from borrowings 23.0 10.0 29.0
Repayments of borrowings (20.0) (3.0) (12.5)
Capital element of leases (2.8) (2.9) (5.7)
Purchase of own shares by EBT - (0.1) (0.1)
Net proceeds from issue of Ordinary
shares - 0.6 0.6
Net cash generated from financing
activities 0.2 4.6 11.3
------------------------------------------------------------- ------ -------- --------- ------------
Net increase / (decrease) in cash
and cash equivalents 3.5 (8.7) (11.0)
Cash and cash equivalents at beginning
of the period (4.4) 6.6 6.6
------------------------------------------------------------- ------ -------- --------- ------------
Cash and cash equivalents at end
of the period 18 (0.9) (2.1) (4.4)
------------------------------------------------------------- ------ -------- --------- ------------
Cash and cash equivalents comprise:
Cash 7.6 6.8 5.2
Overdraft (8.5) (8.9) (9.6)
Cash and cash equivalents at end
of the period (0.9) (2.1) (4.4)
------------------------------------------------------------- ------ -------- --------- ------------
The notes on pages 15 to 32 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 1 September 2022.
1 BASIS OF PREPARATION
These condensed consolidated interim financial statements of the
Group are for the half year ended 30 June 2022. 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 United Kingdom.
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 2021 Annual Report and Accounts, which
have been prepared in accordance with International Financial
Reporting Standards.
Financial information for the year ended 31 December 2021
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.
Other than as described in note 23, financial information for
the half year ended 30 June 2021 included herein is derived from
the condensed consolidated interim financial statements for that
period.
Going Concern
Background and Summary
After careful assessment, the Directors have adopted the going
concern basis in preparing these condensed consolidated interim
financial statements. The process and key judgments in coming to
this conclusion are set out below.
The Group's business activities, together with details of the
financial position of the Group, its cash flows, liquidity position
and borrowing facilities, are described in the Operating and
Financial Review.
Going Concern Assessment
Cash Flows, Covenants and Stress Testing
For the purposes of the going concern assessment, the Directors
have prepared monthly cash flow projections for the period to 31
December 2023 (the assessment period). Whilst the extent of the
impact of COVID-19 has lessened as volumes of linen processed have
continued to increase during the period, it continues to impact our
business to a certain extent. The Directors consider 18 months to
be a reasonable period for the going concern assessment and it
enables them to consider the potential impact of the pandemic, and
the Group's recovery thereafter, over an extended period.
The cash flow projections show that the Group has significant
headroom against its committed facilities and can meet its
financial covenant obligations.
The Directors also considered the potential impact on the
monthly cash flow projections should there be a resurgence of a
further COVID-19 variant, similar to the effect that the Omicron
variant had on trading during the first quarter of 2022, and were
satisfied that, under such a scenario, the Group still has
significant headroom against its committed facilities and can meet
its financial covenant obligations.
The Group has also performed a reverse stress test against the
base monthly cash flow projections to determine the performance
level that would result in a reduction in headroom against its
committed facilities to nil or a breach of its covenants. The
interest cover covenant would be breached in the event that
adjusted operating profit reduced to approximately 25% of 2019
levels. The Directors do not consider this scenario to be likely.
The stress test assumes no mitigating actions are taken. Mitigating
actions available to the Group, should they be required, include
reductions in discretionary capital expenditure and ceasing
dividend payments.
Liquidity
Following the Group entering into a new facility agreement dated
8 August 2022, the Group has access to a committed Revolving Credit
Facility of GBP85.0 million (the 'Facility') which matures in
August 2025. The terms of the Facility provide an option to extend
the term for up to a further two years and an option to increase
the facility by up to a further GBP50.0 million, both with bank
consent. The Facility is considerably in excess of our anticipated
borrowings and provides ample liquidity for current
commitments.
Going Concern Statement
After considering the monthly cash flow projections, the stress
test and the facilities available to the Group, the Directors have
a reasonable expectation that the Group has adequate resources for
its operational needs, will remain in compliance with the financial
covenants set out in the bank facility agreement and will continue
in operation for at least the period to 31 December 2023. 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.
2 SEGMENT ANALYSIS
The chief operating decision-maker (CODM) has been identified as
the Executive Directors. The CODM reviews the Group's internal
reporting in order to assess performance and allocate resources.
The CODM determines the operating segments based on these reports
and on the internal reporting structure.
For reporting purposes, the CODM considered the aggregation
criteria set out within IFRS 8, 'Operating Segments', which allows
for two or more operating segments to be combined as a single
reporting segment if:
1) aggregation provides financial statement users with
information that allows them to evaluate the business and the
environment in which it operates; and
2) they have similar economic characteristics (for example,
where similar long-term average gross margins would be expected)
and are similar in each of the following respects:
-- the nature of the products and services;
-- the nature of the production processes;
-- the type or class of customer for their products and
services;
-- the methods used to distribute their products or provide
their services; and
-- the nature of the regulatory environment (i.e. banking,
insurance or public utilities), if applicable.
The CODM deems it appropriate to present two reporting segments
(in addition to 'Discontinued Operations' and 'All Other
Segments'), being:
1) Workwear: comprising of our Workwear business only; and
2) Hotel, Restaurant and Catering ('HORECA'): comprising of our
Stalbridge (now including London Linen), Hotel Linen and Lilliput
businesses, each of which are a separate operating segment.
The CODM's rationale for aggregating the Stalbridge, Hotel Linen
and Lilliput operating segments into a single reporting segment is
set out below:
-- the gross margins of each operating segment are within a
similar range, with the long-term average margin expected to
further align;
-- the nature of the customers, products and production
processes of each operating segment are very similar;
-- the nature of the regulatory environment is the same due to
the similar nature of products, processes and customers involved;
and
-- distribution is via exactly the same method across each
operating segment.
The CODM assesses the performance of the reporting segments
based on a measure of operating profit, both including and
excluding the effects of non-recurring items from the reporting
segments, such as restructuring costs and impairments when the
impairment is the result of an isolated, non-recurring or
non-operating event. Interest income and expenditure are not
included in the result for each reporting segment that is reviewed
by the CODM. Segment results include items directly attributable to
a segment as well as those that can be allocated on a reasonable
basis, for example rental income received by Johnson Group
Properties PLC (the property holding company of the Group) is
credited back, where appropriate, to the paying company for the
purpose of segmental reporting. There have been no changes in
measurement methods used compared to the prior period.
Other information provided to the CODM is measured in a manner
consistent with that in the financial statements. Segment assets
exclude post-employment benefit assets, derivative financial assets
and cash and cash equivalents, all of which are managed on a
central basis. Segment liabilities include non-bank borrowings but
exclude bank borrowings. 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.
The reporting segment results for the half year ended 30 June
2022, together with comparative figures, are as follows:
All
Other
Half year to 30 June 2022 Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Revenue
Rendering of services 64.4 110.1 - 174.5
Sale of goods 1.6 0.1 - 1.7
------------------------------------------------ --------- ------- ---------- --------
66.0 110.2 - 176.2
------------------------------------------------ --------- ------- ---------- --------
Operating profit / (loss) before amortisation
of intangible assets (excluding software
amortisation), goodwill impairment and
exceptional items 10.0 5.5 (2.7) 12.8
Amortisation of intangible assets
(excluding software amortisation) (0.2) (4.0) - (4.2)
Goodwill impairment - (1.4) - (1.4)
Exceptional items - - (0.5) (0.5)
Operating profit / (loss) 9.8 0.1 (3.2) 6.7
Finance costs (1.6)
Profit before taxation 5.1
Taxation (0.4)
------------------------------------------------ --------- ------- ---------- --------
Profit for the period from continuing
operations 4.7
Profit for the period from discontinued
operations 0.1
Profit for the period attributable
to equity holders 4.8
All
Other
Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Balance sheet information
Segment assets 142.4 269.0 1.4 412.8
Unallocated assets: Post-employment
benefit assets 8.0
Derivative financial assets 1.4
Cash and cash equivalents 7.6
Total assets 429.8
------------------------------------------------ --------- ------- ---------- --------
Segment liabilities (37.9) (68.0) (3.1) (109.0)
Unallocated liabilities: Bank
borrowings (29.5)
Post-employment benefit obligations (1.0)
Deferred income tax liabilities (5.9)
Total liabilities (145.4)
------------------------------------------------ --------- ------- ---------- --------
All
Other
Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Other information
Non-current asset additions
- Property, plant and equipment 2.6 6.4 - 9.0
- Right of use assets - 0.8 - 0.8
- Textile rental items 11.3 14.9 - 26.2
- Intangible software 0.1 - - 0.1
- Customer contracts 1.3 - - 1.3
Depreciation and amortisation
expense
- Property, plant and equipment 2.9 6.1 - 9.0
- Right of use assets 1.0 2.1 - 3.1
- Textile rental items 8.2 9.6 - 17.8
- Intangible software 0.1 - - 0.1
- Customer contracts 0.2 4.0 - 4.2
All
Restated Other
Half year to 30 June 2021 Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Revenue
Rendering of services 63.0 35.1 - 98.1
Sale of goods 1.5 - - 1.5
---------------------------------------------------- ------------- --------- ------- ---------- ----------
64.5 35.1 - 99.6
---------------------------------------------------- ------------- --------- ------- ---------- ----------
Operating profit / (loss) before amortisation
of intangible
assets (excluding software amortisation)
and exceptional items 11.3 (18.2) (2.6) (9.5)
Amortisation of intangible assets (excluding
software amortisation) - (5.4) - (5.4)
Exceptional items 2.6 - - 2.6
Operating profit / (loss) 13.9 (23.6) (2.6) (12.3)
Finance cost (1.6)
Loss before taxation (13.9)
Taxation 3.1
---------------------------------------------------- ------------- --------- ------- ---------- ----------
Loss for the period attributable
to equity holders (10.8)
All
Discontinued Other Restated
Operations Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm GBPm
Balance sheet information
Segment assets - 137.5 245.7 1.2 384.4
Unallocated assets: Deferred income
tax assets 0.8
Current income tax assets 2.8
Cash and cash equivalents 6.8
-------------------------------------------------------------------- --------- ------- ----------
Total assets 394.8
---------------------------------------------------- ------------- --------- ------- ---------- ----------
Segment liabilities (3.7) (49.7) (62.9) (3.7) (120.0)
Unallocated liabilities: Bank
borrowings (15.6)
Derivative financial liabilities (0.3)
Post-employment benefit obligations (8.3)
----------------------------------------------------- ------------- --------- ------- ---------- ----------
Total liabilities (144.2)
---------------------------------------------------- ------------- --------- ------- ---------- ----------
All
Discontinued Other
Operations Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm GBPm
Other information
Non-current asset additions
- Property, plant and equipment - 9.2 4.0 - 13.2
- Right of use assets - - 0.2 - 0.2
- Textile rental items - 9.7 10.3 - 20.0
- Intangible software - 0.1 - - 0.1
Depreciation and amortisation
expense
- Property, plant and equipment - 2.5 5.4 - 7.9
- Right of use assets - 1.1 2.0 - 3.1
- Textile rental items - 8.1 7.3 - 15.4
- Customer contracts - - 5.4 - 5.4
All
Other
Year ended 31 December 2021 Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Revenue
Rendering of services 125.8 142.3 - 268.1
Sale of goods 3.1 0.2 - 3.3
---------------------------------------------------- ----- ---- --------- ------- ---------- --------
128.9 142.5 - 271.4
---------------------------------------------------- ----- ---- --------- ------- ---------- --------
Operating profit / (loss) before amortisation
of intangible
assets (excluding software amortisation)
and exceptional items 22.5 (5.2) (4.6) 12.7
Amortisation of intangible assets (excluding
software amortisation) - (11.0) - (11.0)
Exceptional items 3.0 (0.1) 3.8 6.7
Operating profit / (loss) 25.5 (16.3) (0.8) 8.4
Finance cost (3.3)
Profit before taxation 5.1
Taxation 1.8
----------------------------------------------------------- ---- --------- ------- ---------- --------
Profit for the period from continuing
operations 6.9
Loss for the period from discontinued
operations (0.3)
----------------------------------------------------------- ---- --------- ------- ---------- --------
Profit for the period attributable
to equity holders 6.6
----------------------------------------------------------- ---- --------- ------- ---------- --------
All
Other
Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Balance sheet information
Segment assets 138.7 259.7 1.1 399.5
Unallocated assets: Current
income tax assets 3.6
Derivatives financial assets 0.3
Cash and cash equivalents 5.2
------------------------------------------------------ ---- --------- ------- ---------- --------
Total assets 408.6
--------------------------------------------------- ------ ---- --------- ------- ---------- --------
Segment liabilities (38.4) (61.8) (3.0) (103.2)
Unallocated liabilities: Bank
borrowings (27.5)
Derivative financial liabilities (0.1)
Post-employment benefit obligations (2.1)
Deferred income tax liabilities (3.3)
----------------------------------------------------------- ---- --------- ------- ---------- --------
Total liabilities (136.2)
--------------------------------------------------- ------ ---- --------- ------- ---------- --------
All
Other
Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Other information
Non-current asset additions
- Property, plant and equipment 12.7 9.8 - 22.5
- Right of use assets 0.4 0.6 - 1.0
- Textile rental items 19.6 27.1 - 46.7
- Intangible software - 0.1 - 0.1
Depreciation, impairment
and amortisation expense
- Property, plant and equipment 5.5 11.3 - 16.8
- Right of use assets depreciation 2.2 3.9 - 6.1
- Textile rental items depreciation 16.1 16.1 - 32.2
- Intangible software - 0.1 - 0.1
- Customer contracts - 11.0 - 11.0
3 EXCEPTIONAL ITEMS
Half year Half year Year ended
to to 31 December
30 June 30 June 2021
2022 2021 GBPm
GBPm GBPm
Costs in relation to business acquisition
activity - - (0.1)
Exeter property costs (0.5) - -
Insurance claims - 2.6 5.9
Other costs re insurance claims - - (0.6)
Income from Parent Company Guarantees - - 1.5
Total exceptional items (0.5) 2.6 6.7
------------------------------------------- ----------- ---------- -------------
Current year exceptional items
During the half year to 30 June 2022, further property costs
were incurred relating to the clean-up of the Exeter Workwear
processing site destroyed as a result of a fire in January
2020.
Prior year exceptional items
Insurance claims
During the half year to 30 June 2021, further interim insurance
proceeds of GBP2.0 million were received relating to a fire in
January 2020 at a Workwear processing site. Final insurance
proceeds of GBP0.6 million were also received relating to a flood
in February 2020 at a further Workwear site.
4 FINANCE COST
Half year Half year Year ended
to to 31 December
30 June 30 June 2021
2022 2021 GBPm
GBPm GBPm
Interest payable on bank loans
and overdrafts 0.8 0.6 1.4
Gain on interest rate swaps not qualifying
as hedges (0.1) (0.1) (0.2)
Amortisation of bank facility fees 0.1 0.2 0.3
Finance costs on lease liabilities 0.8 0.8 1.6
Notional interest on post-employment benefit
obligations - 0.1 0.2
1.6 1.6 3.3
---------------------------------------------- ---------- ---------- -------------
5 ALTERNATIVE PERFORMANCE MEASURES (APMs)
Adjusted profit / (loss) before and Half year Half year Year ended
after taxation to to 31 December
30 June 30 June 2021
2022 2021 GBPm
GBPm GBPm
Restated
Profit / (loss) before taxation 5.1 (13.9) 5.1
Amortisation of intangible assets (excluding
software amortisation) 4.2 5.4 11.0
Goodwill impairment 1.4 - -
Exceptional items 0.5 (2.6) (6.7)
Adjusted profit / (loss) before taxation 11.2 (11.1) 9.4
Taxation on adjusted (profit) / loss (1.1) 2.6 0.5
---------------------------------------------- ---------- ---------- -------------
Adjusted profit / (loss) after taxation 10.1 (8.5) 9.9
---------------------------------------------- ---------- ---------- -------------
Adjusted EBITDA Half Half year Year ended
year to to 31 December
30 June 30 June 2021
2022 2021 GBPm
GBPm GBPm
Restated
Operating profit / (loss) before amortisation
of intangible assets (excluding software
amortisation), goodwill impairment
and exceptional items 12.8 (9.5) 12.7
Software amortisation 0.1 - 0.1
Property, plant and equipment depreciation 9.0 7.9 16.8
Right of use asset depreciation 3.1 3.1 6.1
Textile rental items depreciation 17.8 15.4 32.2
----------------------------------------------- ---------- -------------
Adjusted EBITDA 42.8 16.9 67.9
----------------------------------------------- --------- ---------- -------------
6 DIVIDS
Following the impact of COVID-19, and in order to conserve cash
resources in response to the pandemic, the Board did not propose
dividends in respect of 2021. Reflecting the recovery during recent
months and the confidence that trading levels have returned to, and
will remain at, more normal levels, the Board has reinstated
dividends in respect of 2022. Accordingly, an interim dividend of
0.8 pence per share will be paid on 4 November 2022 to those
Shareholders on the register of members on 7 October 2022.
7 TAXATION
Half year Half year Year ended
to to 31 December
30 June 30 June 2021
2022 2021 GBPm
GBPm GBPm
Current tax
UK corporation tax credit for the
period - - -
Adjustment in relation to previous
periods - - (0.8)
--------------------------------------- ---------- ---------- -------------
Current tax credit for the period - - (0.8)
Deferred tax
Origination and reversal of temporary
differences 0.4 (3.6) (3.0)
Changes in statutory tax rate - 0.5 1.6
Adjustment in relation to previous
years - - 0.4
Deferred tax charge / (credit) for
the period 0.4 (3.1) (1.0)
--------------------------------------- ---------- ---------- -------------
Total charge / (credit) for taxation
included in the income statement for
continuing operations 0.4 (3.1) (1.8)
--------------------------------------- ---------- ---------- -------------
Taxation in relation to the amortisation of intangible assets
(excluding software amortisation) has reduced the charge for
taxation on continuing operations in the half year to 30 June 2022
by GBP0.7 million ( June 2021 : GBP0.6 million increased taxation
credit; December 2021 : GBP1.6 million increased taxation credit).
Taxation in relation to exceptional items in the half year to 30
June 2022 has had no impact on the tax charge (June 2021: GBP0.1
million reduced taxation credit; December 2021: GBP0.3 million
reduced taxation credit).
During the half year to 30 June 2022, a GBP2.2 million charge
relating to deferred taxation (June 2021: GBP1.1 million; December
2021: GBP2.4 million) has been recognised in other comprehensive
income.
Reconciliation of effective tax rate
Taxation on non-exceptional items for the half year to 30 June
2022 is calculated based on the estimated average annual effective
tax rate of 9.7% (June 2021: 23.1%; December 2021: (5.3%)). 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%). The current period includes the
impact of the capital allowances super-deduction, which offers 130%
first-year relief on qualifying main rate plant and machinery
investments until 31 March 2023, and due to the additional 30%
permanent difference on our Textile Rental items, significantly
reduces the estimated average annual effective rate. In the period
to June 2021, the impact of the super deduction was excluded and
applied from the period from it first impacted the Group, the six
months to 31 December 2021.
Changes to the UK corporation tax rates, which were
substantively enacted as part of Finance Bill 2021 on 24 May 2021,
include an increase to the main rate from 19% to 25% with effect
from 1 April 2023. 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 23.7% being used to measure all deferred tax balances
as at 30 June 2022 (June 2021: 22.3%; December 2021: 23.3%).
Further 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.
8 EARNINGS / (LOSS) PER SHARE
Half Half year Year
year to to ended
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Restated
Profit / (loss) for the period attributable
to Shareholders 4.7 (10.8) 6.9
Amortisation of intangible assets (net
of taxation) 3.5 4.8 9.4
Goodwill impairment (net of taxation) 1.4 - -
Exceptional items (net of taxation) 0.5 (2.5) (6.4)
Adjusted profit / (loss) attributable
to Shareholders 10.1 (8.5) 9.9
------------------------------------------------- ------------ ------------ --------------
Profit / (loss) from discontinued attributable
to Shareholders 0.1 - (0.3)
------------------------------------------------- ------------ ------------ --------------
Total adjusted profit / (loss) from
all operations attributable to Shareholders 10.2 (8.5) 9.6
------------------------------------------------- ------------ ------------ --------------
Number Number Number
of shares of shares of shares
Weighted average number of Ordinary
shares 445,247,615 444,644,046 444,939,982
Potentially dilutive options* 95,000 408,058 206,112
------------------------------------------------- ------------ ------------ --------------
Diluted number of Ordinary shares 445,342,615 445,052,104 445,146,094
------------------------------------------------- ------------ ------------ --------------
Pence Pence Pence
Basic earnings / (loss) per share per share per share per share
From continuing operations 1.1p (2.5)p 1.6p
From discontinued operations - - (0.1)p
------------------------------------------------- ------------ ------------ --------------
From total operations 1.1p (2.5)p 1.5p
------------------------------------------------- ------------ ------------ --------------
Adjustment for amortisation of intangibles
assets (continuing) 0.8p 1.1p 2.1p
Adjustment for goodwill impairment (continuing) 0.3p - -
Adjustment for exceptional items (continuing) 0.1p (0.5)p (1.5)p
Adjustment for exceptional items (discontinued) - - 0.1p
Adjusted basic earnings / (loss) per
share (continuing) 2.3p (1.9)p 2.2p
Adjusted basic earnings / (loss) per
share (discontinued) - - -
------------------------------------------------- ------------ ------------ --------------
Adjusted basic earnings / (loss) per
share from total operations 2.3p (1.9)p 2.2p
------------------------------------------------- ------------ ------------ --------------
Diluted earnings / (loss) per share
From continuing operations 1.1p (2.5)p 1.6p
From discontinued operations - - (0.1)p
------------------------------------------------- ------------ ------------ --------------
From total operations 1.1p (2.5)p 1.5p
------------------------------------------------- ------------ ------------ --------------
Adjustment for amortisation of intangibles
assets (continuing) 0.8p 1.1p 2.1p
Adjustment for goodwill impairment (continuing) 0.3p - -
Adjustment for exceptional items (continuing) 0.1p (0.5)p (1.5)p
Adjustment for exceptional items (discontinued) - - 0.1p
Adjusted diluted earnings / (loss) per
share (continuing) 2.3p (1.9)p 2.2p
Adjusted diluted earnings / (loss) per
share (discontinued) - - -
------------------------------------------------- ------------ ------------ --------------
Adjusted diluted earnings / (loss) per
share from total operations 2.3p (1.9)p 2.2p
------------------------------------------------- ------------ ------------ --------------
Adjusted diluted earnings / (loss) per
share from total operations
(excluding super deduction) 1.7p (1.9)p 1.7p
------------------------------------------------- ------------ ------------ --------------
* 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 year,
excluding those held by the Employee Benefit Trust, based on the
profit for the year attributable to Shareholders.
Adjusted earnings per share figures are given to exclude the
effects of amortisation of intangible assets (excluding software
amortisation) and exceptional items, all net of taxation, and are
considered to show the underlying performance of the Group.
For diluted earnings per share, the weighted average number of
Ordinary shares in issue is adjusted to assume conversion of all
potentially dilutive Ordinary shares. The 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 IFRS 2 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 Directors'
Remuneration Report within the 2021 Annual Report and Accounts, are
satisfied at the end of the reporting period, irrespective of
whether this is the end of the vesting period or not.
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 period ended 30 June 2022 and the year ended 31
December 2021, potentially dilutive Ordinary shares have been
treated as dilutive, as their inclusion in the diluted earnings per
share calculation decreases the earnings per share from continuing
operations. For the period ended 30 June 2021, potentially dilutive
Ordinary shares have not been treated as dilutive, as their
inclusion in the diluted earnings per share calculation decreases
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
2022 2021 2021
GBPm GBPm GBPm
Cost
Brought forward 135.2 130.9 130.9
Business combinations - - 4.3
------------------------ --------- --------- -------------
135.2 130.9 135.2
----------------------- --------- --------- -------------
Impairment
Brought forward - - -
Impairment 1.4 - -
----------------------- --------- --------- -------------
1.4 - -
----------------------- --------- --------- -------------
Closing 133.8 130.9 135.2
------------------------ --------- --------- -------------
In accordance with International Financial Reporting Standards,
goodwill is not amortised, but instead is tested annually for
impairment, or upon the existence of indicators of impairment per
IAS 36, and carried at cost less accumulated impairment losses.
During the period to 30 June 2022, there have been changes in
the economic environment and an increase in market interest rates
which impact the discount rate used in the value-in-use
calculations and hence are likely to materially impact the
recoverable amount for each CGU. Both are indicators of impairment
and therefore a full impairment review has been performed at 30
June 2022.
Impairment tests for goodwill
The allocation of goodwill to Cash Generating Units (CGUs) is as
follows:
As
at
30 As at As at
June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Workwear 41.7 41.7 41.7
-------------- ------ --------- -------------
Stalbridge* 48.3 48.3 48.3
Hotel Linen 40.9 40.9 40.9
Lilliput 2.9 - 4.3
-------------- ------ --------- -------------
HORECA 92.1 89.2 93.5
-------------- ------ --------- -------------
Total 133.8 130.9 135.2
* The CGUs have been reassessed in the period to 30 June 2022,
resulting in London Linen no longer being determined as separately
identifiable and instead now forming part of the Stalbridge CGU.
During 2021, London Linen accounting systems and accounting ledgers
were amalgamated with Stalbridge and, with effect from 1 January
2022, the two trading names are now reported and reviewed by
management as one business. Work is transferred between the various
sites across both businesses and therefore revenue streams from
individual assets are no longer easily obtained or separable.
Accordingly, the figures in the table above for Stalbridge as at 30
June 2021 and 31 December 2021 have been adjusted to include London
Linen.
Goodwill is tested for impairment by comparing the carrying
value of each CGU against its recoverable amount. The carrying
value for each CGU includes the net book value of goodwill,
intangible assets and related deferred tax balances, property,
plant and equipment, right of use assets, textile rental items and
lease liabilities.
As at 30 June 2021, the Directors considered, but did not
identify, any indicators of impairment per IAS 36 and, accordingly,
did not determine the recoverable amount of each CGU. The
recoverable amount for each of the Cash Generating Units (CGUs) as
at 30 June 2022 and 31 December 2021 is as follows:
As
at
30 As at
June 31 December
2022 2021
GBPm GBPm
Workwear 183.1 215.4
-------------- ------ -------------
Stalbridge 162.9 187.6
Hotel Linen 171.7 194.1
Lilliput 9.5 8.0
-------------- ------ -------------
HORECA 344.1 389.7
-------------- ------ -------------
Total 527.2 605.1
-------------- ------ -------------
The recoverable amount of a CGU is primarily determined based on
value-in-use calculations. These calculations use cash flow
projections based on financial budgets and forecasts, ordinarily
covering three years, which are approved by the Board. In arriving
at the values assigned to each key assumption management make
reference to past experience and external sources of information
regarding the future - for example tax rate changes. Key
assumptions around 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 2022,
the forecasts covered the period to the end of 2024. 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 12.40% (December 2021: 10.51%) 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, size
premium and beta factor reflecting the average Beta for the Group
and comparator companies which are used in deriving the cost of
equity.
The same discount rate has been used for each CGU as the
principal risks and uncertainties associated with the Group 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. The level of headroom 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. 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 assumptions used for value-in-use calculations are as
follows:
June 2022 December 2021
Annual growth rate (after forecast period) 2.00% 2.00%
Risk free rate of return 2.72% 1.22%
Market risk premium 6.00% 6.00%
Beta Factor 1.05 1.10
Size Premium 3.00% 3.00%
Cost of debt 6.33% 3.09%
Having completed the June 2022 impairment review, no impairment
has been recognised in relation to the CGUs with the exception of
Lilliput which is discussed further below (2021: no
impairment).
As previously highlighted in the 2021 Annual Report and
Accounts, the Lilliput CGU has a higher sensitivity to changes in
the discount rate than the other CGUs. As a result of the increase
in the pre-tax discount rate to 12.40% at June 2022 from 10.51% at
December 2021, the Group has recognised a goodwill impairment loss
of GBP1.4 million within the Consolidated Income Statement in
respect of Lilliput. The assumptions considered by the Directors,
where a reasonably possible change could give rise to a further
impairment, were a further increase to the pre-tax discount rate or
a reduction in the growth rate. If the discount rate materially
increases again or the growth rate reduces below 2%, then a further
impairment may be triggered.
Furthermore, sensitivity analysis has been performed in
assessing the recoverable amounts of goodwill for each of the other
CGUs such that the growth rate for the forecast period was reduced
to nil. Such a change did not result in any impairment of goodwill
relating to the CGU. Significant headroom exists in each of the
cash generating units and, based on the stress testing performed,
reasonable possible changes in the assumptions would not cause the
carrying amount of the cash generating units to equal or to exceed
their recoverable amount, other than potentially for the one cash
generating units discussed below.
10 INTANGIBLE ASSETS
Capitalised software
As at As at As at
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Restated
Opening net book value (as previously
reported) 1.5 2.7 1.5
Prior period restatement (note 23) - (1.2) -
--------------------------------------- --------- --------- -------------
Opening net book value (restated) 1.5 1.5 1.5
--------------------------------------- --------- --------- -------------
Additions 0.1 0.1 0.1
Amortisation (as previously reported) (0.1) (0.1) (0.1)
Prior period restatement (note 23) - 0.1 -
--------------------------------------- --------- --------- -------------
Closing net book value 1.5 1.6 1.5
--------------------------------------- --------- --------- -------------
Other intangible assets
As at As at As at
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Opening net book value 15.2 25.0 25.0
Additions 1.3 - -
Business combinations - - 1.2
Amortisation (4.2) (5.4) (11.0)
Closing net book value 12.3 19.6 15.2
------------------------ --------- --------- -------------
Total 13.8 21.2 16.7
------------------------ --------- --------- -------------
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
2022 2021 2021
GBPm GBPm GBPm
Opening net book value 113.3 107.2 107.2
Additions 9.0 13.2 22.5
Business combinations - - 0.5
Depreciation (9.0) (7.9) (16.8)
Disposals - (0.1) (0.1)
Closing net book value 113.3 112.4 113.3
------------------------ --------- --------- -------------
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
2022 2021 2021
GBPm GBPm GBPm
Property, plant and equipment 10.0 11.5 10.9
------------------------------- --------- --------- -------------
12 RIGHT OF USE ASSETS
As at As at As at
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Opening net book value 35.5 38.5 38.5
Additions 0.8 0.2 1.0
Business combinations - - 0.8
Reassessment/modifications - 0.5 1.3
Depreciation (3.1) (3.1) (6.1)
Closing net book value 33.2 36.1 35.5
---------------------------- --------- --------- -------------
13 TEXTILE RENTAL ITEMS
As at As at As at
30 June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Opening net book value 48.4 35.6 35.6
Additions 26.2 20.0 46.7
Business combinations - - 0.7
Depreciation (17.8) (15.4) (32.2)
Special charges (1.5) (0.8) (2.4)
Closing net book value 55.3 39.4 48.4
------------------------ --------- --------- -------------
14 POST-EMPLOYMENT BENEFIT 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 2022 deficit recovery payments of
GBP0.9 million were paid by the Group to the defined benefit scheme
( June 2021 : GBP0.9 million; December 2021: GBP1.9 million).
Following discussions with the Group's appointed actuary, a
re-measurement gain of GBP8.1 million has been recognised in the
half year to 30 June 2022. The improvement in the position is due,
in part, to a higher discount rate assumed on liabilities and lower
assumed inflation.
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
2022 2021 2021
GBPm GBPm GBPm
Post-employment benefit asset / (obligation) 7.0 (8.3) (2.1)
Deferred income tax (liability) / asset
thereon (1.8) 1.9 0.4
---------------------------------------------- ---------- ---------- --------------
5.2 (6.4) (1.7)
---------------------------------------------- ---------- ---------- --------------
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
2022 2021 2021
GBPm GBPm GBPm
Opening post-employment benefit obligation (2.1) (14.9) (14.9)
Notional interest - (0.1) (0.2)
Employer contributions 0.9 0.9 1.9
Re-measurement gains 8.1 5.7 11.0
Utilisation of healthcare provision 0.1 0.1 0.1
-------------------------------------------- ---------- ---------- --------------
Closing post-employment benefit surplus
/ (obligation) 7.0 (8.3) (2.1)
-------------------------------------------- ---------- ---------- --------------
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
2022 2021 2021
GBPm GBPm GBPm
Post-employment benefit assets (Non-current
assets) 8.0 - -
Post-employment benefit obligations (Non-current
liabilities) (1.0) (8.3) (2.1)
7.0 (8.3) (2.1)
-------------------------------------------------- --------- --------- -------------
Post-employment benefit assets related to the defined benefit
pension scheme and the post-employment benefit obligations relate
to the unfunded defined benefit private healthcare scheme.
15 SHARE CAPITAL
Issued share capital is as follows:
Half year Half year Year ended
to to 31 December
30 June 30 June 2021
2022 2021
GBPm GBPm GBPm
Share capital at the start of the period 44.5 44.4 44.4
New shares issued - 0.1 0.1
------------------------------------------ ---------- ---------- -------------
Share capital at the end of the period 44.5 44.5 44.5
------------------------------------------ ---------- ---------- -------------
16 BUSINESS COMBINATIONS
There have been no business combinations in the half year to 30
June 2022.
During 2021, the Group acquired 100% of the share capital of
Lilliput (Dunmurry) Limited ('Lilliput') for a net consideration of
GBP3.1 million (being gross consideration of GBP6.2 million
adjusted for normalised working capital, cash and debt like items)
plus associated fees. Full details of the acquisition are provided
in the 2021 Annual Report and Accounts.
There was no deferred consideration paid during the period
relating to acquisitions. During the half year to June 2021, GBP0.8
million of deferred consideration was paid in relation to the Fresh
Linen acquisition in 2019.
17 BORROWINGS
At 30 June 2022, borrowings were secured and drawn down under a
committed facility dated 21 February 2014, as amended and restated
from time to time. The facility comprised a GBP135.0 million
rolling credit facility (including an overdraft) which ran to
August 2023. An average margin of 1.63% applied in the period to 30
June 2022.
On 8 August 2022, a new facility agreement was entered into
which now comprises an GBP85.0 million rolling credit facility
(including an overdraft) which runs to August 2025 with two,
one-year, extension options with a further option, with bank
consent, to increase the facility by up to an additional GBP50.0
million. The margin on the new facility ranges between 1.45% and
2.45% and is 1.45% for the remainder of 2022.
Individual tranches are drawn down, in sterling, for periods of
up to three months at SONIA rates of interest prevailing at the
time of drawdown, plus the applicable margin.
Amounts drawn under the revolving credit facility have been
classified as either current or non-current depending upon when the
loan is expected to be repaid.
As at 30 June 2022, the Group has in place the following hedging
arrangement which has the effect of replacing SONIA with fixed
rates as follows:
-- for GBP15.0 million of borrowings, SONIA plus 0.1193% Credit
Adjustment Spread is replaced with 0.805%.
Following the equity placing in June 2020, hedge accounting was
discontinued at that date as the Group no longer had any loans for
the Group's interest rate swaps to economically hedge. Hedge
accounting has not been resumed.
Borrowings are stated net of unamortised issue costs of GBPnil
(30 June 2021: GBP0.3 million; 31 December 2021: GBP0.1
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 2022 2022 Flow Changes 2022
GBPm GBPm GBPm GBPm
Debt due within one year 0.1 - (0.1) -
Debt due after more than
one year (18.0) (3.0) - (21.0)
Lease liabilities (37.8) 2.8 (0.8) (35.8)
----------------------------- --------- ------ ----------- -------
Total debt and lease
financing (55.7) (0.2) (0.9) (56.8)
Cash and cash equivalents (4.4) 3.5 - (0.9)
----------------------------- --------- ------ ----------- -------
Net debt (60.1) 3.4 (1.0) (57.7)
----------------------------- --------- ------ ----------- -------
At 1 At 30
January Cash Non-cash June
June 2021 2021 Flow Changes 2021
GBPm GBPm GBPm GBPm
Debt due within one year 0.2 0.1 - 0.3
Debt due after more than
one year 0.2 (7.0) (0.2) (7.0)
Lease liabilities (40.6) 2.9 (0.4) (38.1)
--------------------------------- --------- ------- --------- -------
Total debt and lease financing (40.2) (4.0) (0.6) (44.8)
Cash and cash equivalents 6.6 (8.7) - (2.1)
--------------------------------- --------- ------- --------- -------
Net debt (33.6) (12.7) (0.6) (46.9)
--------------------------------- --------- ------- --------- -------
At 1 At 31
January Cash Non-cash December
December 2021 2021 Flow Changes 2021
GBPm GBPm GBPm GBPm
Debt due within one year 0.2 1.5 (1.6) 0.1
Debt due after more than
one year 0.2 (18.0) (0.2) (18.0)
Lease liabilities (40.6) 5.7 (2.9) (37.8)
--------------------------------- --------- ------- ----------- ----------
Total debt and lease financing (40.2) (10.8) (4.7) (55.7)
Cash and cash equivalents 6.6 (11.0) - (4.4)
--------------------------------- --------- ------- ----------- ----------
Net debt (33.6) (21.8) (4.7) (60.1)
--------------------------------- --------- ------- ----------- ----------
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
2022 2021 2021
GBPm GBPm GBPm
Cash (Current assets) 7.6 6.8 5.2
Overdraft (Borrowings, Current liabilities) (8.5) (8.9) (9.6)
(0.9) (2.1) (4.4)
--------------------------------------------- ------ --------- -------------
Lease liabilities are comprised of the following balance sheet
amounts:
As at
30 As at As at
June 30 June 31 December
2022 2021 2021
GBPm GBPm GBPm
Amounts due within one year (Lease liabilities,
Current liabilities) (5.1) (5.2) (5.2)
Amounts due within one year (Lease liabilities,
Non-current liabilities) (30.7) (32.9) (32.6)
(35.8) (38.1) (37.8)
------------------------------------------------- ------- --------- -------------
19 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Half Half Year ended
year to year 31 December
30 June to 2021
2022 30 June
2021
GBPm GBPm GBPm
Increase / (decrease) in cash in the
period 3.5 (8.7) (11.0)
Increase in debt and lease financing (0.2) (4.0) (10.8)
-------------------------------------------- --------- --------- -------------
Change in net debt resulting from cash
flows 3.3 (12.7) (21.8)
Debt acquired through business acquisition - - (2.3)
Lease liabilities recognised during
the period (0.8) (0.4) (2.1)
Movement in unamortised issue costs
of bank loans (0.1) (0.2) (0.3)
Movement in net debt during the period 2.4 (13.3) (26.5)
Opening net debt (60.1) (33.6) (33.6)
-------------------------------------------- --------- --------- -------------
Closing net debt (57.7) (46.9) (60.1)
-------------------------------------------- --------- --------- -------------
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 Annual Report and Accounts for
the year ended 31 December 2021. There have been no material
changes in these relationships in the half year to 30 June 2022 or
up to the date of this Report.
21 CONTINGENT ASSETS
Final settlement proceeds relating to the fire at the Exeter
plant were agreed with the insurers in July 2022 and the proceeds
received in August 2022. Proceeds received relating to capital
items are GBP1.5 million with a further GBP1.0 million of proceeds
relating to business interruption.
22 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.
23 PRIOR PERIOD RESTATEMENT
Accounting in Relation to the Configuration and Customisation
Costs Incurred in Implementing Software-as-a-Service
In 2021, the IFRS Interpretations Committee (IFRIC) published an
agenda decision on the clarification of accounting in relation to
the configuration and customisation costs incurred in implementing
Software-as-a-Service (SaaS) as follows:
-- Amounts paid to the cloud vendor for configuration and
customisation that are not distinct from access to the cloud
software are expensed over the SaaS contract term.
-- In limited circumstances, other configuration and
customisation costs incurred in implementing SaaS arrangements may
give rise to an identifiable intangible asset, for example, where
code is created that is controlled by the entity.
-- In all other instances, configuration and customisation costs
will be expensed as the customisation and configuration services
are received.
Following the agenda decision, the Group reviewed its costs
incurred in respect of the configuration and customisation of
cloud-based software applications implemented across the Group. As
it was concluded that the Group's arrangements were not in the
scope of IFRS 16, the costs were assessed in line with the guidance
in IAS 38. The costs incurred did not create a resource controlled
by the Group that is separate to the software and as such did not
relate to a separately identifiable asset under IAS 38. The Group's
accounting policy has therefore been revised so that such costs are
expensed to the Consolidated Income Statement. As the configuration
and customisation services were performed in conjunction with a
third party, the costs should be expensed as and when the services
are received. This clarification has been accounted for
retrospectively resulting in t he Interim Statements for the half
year ended 30 June 2021 being restated .
The Group identified GBP1.5 million of capitalised costs
incurred in previous years which should, in light of the agenda
decision, have been expensed to the Consolidated Income Statement
as incurred. Amortisation thereon of GBP0.3 million was charged
prior to 2021 and a further GBP0.1 million was charged to the
Consolidated Income Statement in the six-month period to 30 June
2021 resulting in a GBP1.1 million adjustment to Intangible assets
at 30 June 2021.
The impact of the prior year restatement on the Group's opening
Consolidated Balance Sheet is as follows:
As at As at
30 June 30 June
2021 Adjustment 2021
GBPm GBPm GBPm
Restated
Non-current assets
Intangible assets 22.3 (1.1) 21.2
Current assets
Current income tax assets 2.5 0.3 2.8
----------------------------------- -------- ------------ ----------
Net assets 251.4 (0.8) 250.6
----------------------------------- -------- ------------ ----------
Capital and reserves attributable
to the Company's Shareholders
----------------------------------- -------- ------------ ----------
Retained earnings 187.9 (0.8) 187.1
----------------------------------- -------- ------------ ----------
Total equity 251.4 (0.8) 250.6
----------------------------------- -------- ------------ ----------
As a result of the above costs being expensed through the
Consolidated Income Statement prior to 1 January 2021, amortisation
of the previously capitalised costs have been reversed in the
period to 30 June 2021. This cost was GBP0.1 million. The impact of
the prior period restatement on the Consolidated Income Statement
for the period ended 30 June 2021 is as follows:
Half year
Half year to to
30 June 30 June
2021 Adjustment 2021
GBPm GBPm GBPm
Restated
Operating loss before amortisation of
intangible assets (excluding software
amortisation) and exceptional items (9.6) 0.1 (9.5)
- Operating loss (12.4) 0.1 (12.3)
Loss before taxation (14.0) 0.1 (13.9)
Loss for the period attributable to
equity holders (10.9) 0.1 (10.8)
------------------------------------------- ----- ------- ---------- ---------
There was no impact of the prior period restatement on the
Group's earnings per share for the period ended 30 June 2021.
Impairment Loss on Trade Receivables
In accordance with IAS 1, amounts charged in respect of
impairment losses on trade receivables should be separately
disclosed on the face of the Consolidated Income Statement. In
respect of the half year to 30 June 2021, the Group recognised an
expense of GBP0.2 million in respect of impairment losses on trade
receivables. Accordingly, the comparative figures for this period
have been re-presented in order to separately disclose impairment
losses on trade receivables on the face of the Consolidated Income
Statement with all other expenses, in determining Operating Profit,
being disclosed within 'All other costs'.
The comparative figures for the year ended 31 December 2021 are
presented as previously disclosed in the 2021 Annual Report and
Accounts.
24 ACCOUNTING POLICIES, PRESENTATION AND METHODS OF COMPUTATION
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 2021.
(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.
25 EVENTS AFTER THE REPORTING PERIOD
There have been no events that require disclosure in accordance
with IAS10, 'Events after the balance sheet date'.
26 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 sets out in its 2021 Annual Report
and Accounts the principal risks and uncertainties that could
impact its performance:
Principal Risk Risk Rating
Economic Conditions High
Failure of Strategy High
Recruitment, Retention and Motivation High
of Employees
Loss of a Processing Facility High
Cost Inflation High
Insufficient Processing Capacity Medium
Customer Sales and Retention Medium
Competition and Disruption Medium
Health and Safety Medium
Compliance and Fraud Medium
Information Systems and Technology Medium
Climate Change and Energy Costs Medium
The Directors have reviewed the above principal risks and
uncertainties during the period and, other than as set out below,
concluded that they remain applicable to the current financial year
with no overall material change to the risk environment . Key
considerations relating to the review of principal risks and
uncertainties during the period are set out below:
Principal Considerations
Risk
Economic As with all businesses, we are seeing inflationary
Conditions pressures on our costs, in particular in respect of
and energy. Energy costs for the first half of 2022 were
Cost Inflation significantly higher than the equivalent period in
2019 and represented 9.3% of revenue in the six months
to 30 June 2022 (June 2019: 6.5%). However, we have
continued to proactively trade in the energy market
when appropriate in order to fix an element of our
energy pricing and have also continued to secure and
implement price increases across our customer base.
These actions, along with expected additional volume
which will better utilise our labour resource and
improve processing efficiency, help to mitigate the
impact of cost inflation. Our existing scale and focus
on operational excellence means we are well placed
to address these challenges proactively without compromising
our market share opportunity.
--------------------------------------------------------------
Competition The Group aims to mitigate the risk of competition
and Disruption and disruption by continuing to promote its differentiated
proposition and focus on its points of strength. Our
diversified customer base and non-reliance on any
one particular customer does mitigate this risk to
an extent. However, in view of ongoing economic factors
in the UK, the Board considers this risk to be more
elevated than previously.
--------------------------------------------------------------
As previously reported, the Board did not establish a specific
principal risk in relation to the COVID-19 pandemic, or for future
potential pandemics, but instead considered, and disclosed, how
each of the Group's principal risks and uncertainties were impacted
by it. Whilst the risks associated with the COVID-19 pandemic have
reduced significantly, the Board is cognisant that a future
significant unexpected event, such as a pandemic or other national
crisis, could have a material impact on the Group and, accordingly,
this remains factored into the Board's assessment of risk. Detailed
business continuity plans are in place and, in response to
COVID-19, the Group demonstrated its ability to continue trading
throughout the pandemic through the implementation of action plans
to protect the liquidity of the Group, reduce the cost base and
protect the health, safety and wellbeing of our employees. The
Board will continue to keep the potential for a significant
unexpected event under review as part of its overall assessment of
risk.
The Board strongly believes that effective risk management is
critical to the achievement of our strategic objectives and the
long-term sustainable growth of the Group. The Board will continue
to take a proactive approach to recognising and mitigating risk
with the aim of protecting its employees and customers and
safeguarding the interests of the Group and its stakeholders.
Further details of the Principal Risks and Uncertainties facing
the Group are detailed on pages 46 to 52 of the 2021 Annual Report
and Accounts.
27 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 .
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END
IR BRGDICXXDGDB
(END) Dow Jones Newswires
September 01, 2022 02:02 ET (06:02 GMT)
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