TIDMJSG
RNS Number : 9623K
Johnson Service Group PLC
03 September 2019
3 September 2019
AIM: JSG
Johnson Service Group PLC
('JSG' or 'the Group')
Interim Results for the Six Months ended 30 June 2019
"Continued organic growth delivers another consistent and strong
financial performance"
"Full year results expected to be slightly ahead of current
expectations"
HIGHLIGHTS
H1 2019 H1 2018 % increase FY 2018
------------------------------------- ---------- ---------- ----------- ----------
Adjusted results(1)
Revenue GBP167.1m GBP152.2m 9.8% GBP321.1m
Adjusted operating profit(2) GBP22.6m GBP19.9m 13.6% GBP46.0m
Adjusted profit before taxation(2) GBP20.1m GBP18.2m 10.4% GBP42.5m
Adjusted diluted earnings
per share 4.4p 4.0p 10.0% 9.3p
Dividend 1.15p 1.00p 15.0% 3.10p
Net debt (pre-IFRS 16) GBP92.6m GBP91.2m n/a GBP98.4m
Net debt(2) GBP130.5m GBP91.2m n/a GBP98.4m
Statutory results
Operating profit(2) GBP17.7m GBP15.7m 12.7% GBP36.6m
Profit before taxation(2) GBP15.2m GBP14.0m 8.6% GBP33.1m
Diluted earnings per share 3.3p 3.1p 6.5% 7.2p
-- Strong financial performance
- organic growth of 7.5%(3) together with the benefits of recent
acquisitions
- adjusted operating margin(2) increased to 13.5% (June 2018:
13.1%)
-- Interim dividend increased by 15.0% to 1.15 pence per share
(June 2018: 1.00 pence) reflecting the Board's confidence for the
future
-- Significant capital investment in the period has increased
production capacity at selected sites to support the demand from
strong organic growth
-- Leeds plant on time and on budget with opening scheduled for
Q2 2020
-- Performance in the two months since the period end means that
full year results are expected to be slightly ahead of current
market expectations
Notes
1 Excluding amortisation of intangible assets (excluding
software amortisation) and exceptional items.
2 Figures for H1 2019 include the impact of adopting IFRS 16
(Leases), which increased operating profit and adjusted operating
profit by GBP0.6 million, reduced profit before taxation and
adjusted profit before taxation by GBP0.2 million and increased net
debt by GBP37.9 million. The Group has applied the modified
retrospective approach in adopting IFRS 16 and, therefore, the
comparative numbers for 2018 have not been restated. Excluding the
impact of IFRS 16, adjusted operating profit increased by 10.6% and
adjusted profit before taxation increased by 11.5%.
3 Excluding the benefit of the acquisition completed in 2018 and
revenue from contracts acquired in January 2019.
Peter Egan, Chief Executive Officer of Johnson Service Group,
commented:
"This is a strong performance reflecting excellent sales growth,
the benefits of recent acquisitions and continued high levels of
customer retention across all market sectors. We are particularly
pleased with the strength and quality of our organic performance
which has been achieved by investing capital in our operations
giving increased production capacity to meet growing customer
demand.
We will continue to invest in our sites, including the
completion of the new Leeds plant, allowing us to benefit from
production efficiency gains as well as creating additional capacity
in order to further increase revenues going forward.
There is good momentum in the Group and we have started the
second half strongly. In view of the encouraging performance over
the summer months we anticipate that the results for the year will
be slightly ahead of current expectations."
SELL-SIDE ANALYST MEETING
A presentation for sell-side analysts will be held today at
9.30am at Investec, 30 Gresham Street, London, EC2V 7QN. A copy of
the presentation will be available on the Company's website
(www.jsg.com) following the meeting.
ENQUIRIES
Johnson Service Group PLC
Peter Egan, CEO
Yvonne Monaghan, CFO
Tel: 020 3757 4992 (on the day)
Tel: 01928 704 600 (thereafter)
Investec Investment Banking (NOMAD) Camarco (Financial PR)
David Flin Ginny Pulbrook
Carlton Nelson Ben Woodford
Darren Vickers Oliver Head
Tel: 020 7597 5970 Tel: 020 3757 4992
Note: Throughout this statement 'adjusted operating profit'
refers to continuing operating profit before amortisation of
intangible assets (excluding software amortisation) and exceptional
items. 'Adjusted profit before taxation' refers to adjusted
operating profit less total finance cost. 'Adjusted EBITDA', for
gearing purposes, refers to adjusted operating profit for the
relevant period plus the depreciation charge for property, plant
and equipment and software amortisation. 'Adjusted EPS' refers to
EPS calculated based on adjusted profit after taxation. The Board
considers that 'adjusted operating profit', 'adjusted profit before
taxation, 'adjusted EBITDA' and 'adjusted EPS', which all exclude
the effects of non-recurring items or non-operating events, provide
useful information for Shareholders on underlying trends and
performance.
FINANCIAL AND OPERATIONAL REVIEW
FINANCIAL REVIEW
Financial Results
Following very strong sales growth and continued high levels of
customer retention across all market sectors, organic revenue
growth reached 7.5% in the first half of the year. This, combined
with a full six months trading from the South West Laundry
acquisition completed in August 2018, together with the benefit of
acquiring a number of contracts in January 2019, increased the
Group's revenue by 9.8% to GBP167.1 million (June 2018: GBP152.2
million).
The increase of 13.6% in adjusted operating profit for the first
half to GBP22.6 million (2018: GBP19.9 million) reflects the
revenue growth, ongoing efficiency improvements and a modest
benefit of GBP0.6 million following the adoption of IFRS 16.
Total finance costs increased to GBP2.5 million (June 2018:
GBP1.7 million). Whilst underlying borrowing costs and notional
interest remained unchanged, the implementation of IFRS 16 resulted
in an additional cost of GBP0.8 million in respect of recognised
lease liabilities.
Adjusted profit before taxation increased to GBP20.1 million
(June 2018: GBP18.2 million) and was slightly adversely impacted by
a net cost of GBP0.2 million from the adoption of IFRS 16. The
underlying tax rate was 18.9% (June 2018: 19.5%).
The statutory profit before taxation, after amortisation of
intangible assets (excluding software amortisation) of GBP4.9
million (June 2018: GBP4.2 million), increased by 8.6% to GBP15.2
million (June 2018: GBP14.0 million).
Adjusted diluted earnings per share increased by 10.0% to 4.4
pence (June 2018: 4.0 pence). Diluted earnings per share, after
amortisation of intangible assets (excluding software
amortisation), increased by 6.5% to 3.3 pence (June 2018: 3.1
pence).
Dividend
Reflecting the Group's strong performance and prospects, the
Board is pleased to increase the interim dividend by 15.0% to 1.15
pence (June 2018: 1.00 pence). This is in line with our progressive
dividend policy, whilst also maintaining satisfactory dividend
cover.
The interim dividend will be paid on 1 November 2019 to those
Shareholders on the register of members at the close of business on
4 October 2019. The ex-dividend date is 3 October 2019.
Finances
Total net debt (excluding the impact of IFRS 16) at 30 June 2019
was GBP92.6 million (December 2018: GBP98.4 million), slightly
better than management expectations, and reflected the strong
trading performance in the first half offset by significant planned
investment in both plant and equipment and new rental stock which
was required to support organic growth. The Group's net debt to
adjusted EBITDA leverage ratio (excluding the impact of IFRS 16)
was 1.47:1 at the end of June 2019 (June 2018: 1.57:1).
After including the impact of IFRS 16, net debt at June 2019 was
GBP130.5 million.
Subsequent to the balance sheet date we have extended the tenure
of our GBP135.0 million revolving credit facility by 12 months,
such that it now runs to August 2023.
Interest costs on our floating rate borrowings continue to
benefit from the current low levels of LIBOR. Interest payable on
bank borrowings is based upon LIBOR plus a margin which is linked
to leverage levels, and was, in the first half, 1.75%. The lower
leverage ratio at June 2019 reduces the margin to 1.5% from July
until at least the next quarterly covenant test. We have mitigated
our exposure to future increases in LIBOR rates through the use of
interest rate hedging. Current hedging arrangements, each over a
GBP15.0 million tranche of borrowings, replace LIBOR with 1.665%
for the full year 2019, 1.07% for the period to January 2021 and
1.144% to January 2022.
Post-Employment Benefits
The recorded net deficit after tax for all post-employment
benefit obligations, calculated in accordance with IAS 19, has
increased to GBP10.6 million at June 2019 from GBP3.8 million at
December 2018. The increase is due, in part, to the reduction in
the discount rate assumed on liabilities partially offset by a
higher return on scheme assets. 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 current agreement with the Trustee of the defined benefit
pension scheme requires deficit recovery payments of GBP1.9 million
in the year to December 2019, of which GBP0.9 million was
contributed during the first half. The payments are expected to
continue at this level until the results of the next triennial
actuarial valuation, as at 30 September 2019, are finalised, which
is likely to be in the second half of 2020.
OPERATIONAL REVIEW
Our Businesses
The Group has again had a successful six months, delivering
continued strong organic growth and increased profit. We continue
to invest in many of our laundry facilities to improve productivity
and capacity and, given current and anticipated strong demand,
there is further scope to continue this plan. Our geographic
coverage gives us the opportunity to acquire groups of contracts as
an efficient way of utilising available capacity in a cost
effective manner.
The Group comprises Textile Rental businesses which trade
through a number of very well recognised brands servicing the UK's
Workwear and Hotel Restaurant and Catering ('HORECA') market
sectors. The 'Johnsons Workwear' brand predominantly provides
workwear rental and laundry services to corporates across all
industry sectors, 'Stalbridge', 'London Linen' and 'South West
Laundry' provide premium linen services to the restaurant,
hospitality and corporate events market and 'Bourne', 'Afonwen' and
'PLS' provide high volume hotel linen services.
We have made significant progress in developing our new national
brand and this is now being rolled out across the businesses. This
roll out will take several years to fully implement and will be at
a modest cost.
All of our brands experienced significant new business wins
which, combined with high levels of customer retention, resulted in
a strong first half performance, generating revenues of GBP167.1
million (June 2018: GBP152.2 million), an increase of 9.8%. This
increase includes six months of trading from the acquisition of
South West Laundry, completed in August 2018, and additional
revenue from a small number of hospitality contracts acquired in
January 2019. Our strong underlying organic growth of 7.5% included
the benefit of price increases and some significant contract wins
across all businesses during the last 12 months.
Adjusted operating profit from our Textile Rental businesses
increased by GBP2.8 million to GBP25.0 million (June 2018: GBP22.2
million), representing an increase of 12.6%, with the operating
margin improving slightly to 15.0% (June 2018: 14.6%), including
the benefit of GBP0.6 million from the impact of IFRS 16.
Workwear Division
Johnsons Workwear provides workwear rental and laundry services
to over 36,000 customers in the UK, from small local businesses to
the largest companies covering food related and other industrial
sectors.
Trading for the first six months of 2019 was strong with organic
revenue growth of 6.8% to GBP67.5 million (June 2018: GBP63.2
million). This growth was driven by strong sales to both new and
existing customers, particularly in the second half of 2018. The
business has a strong cultural ethos for delivery of excellent
customer service which has ensured customer retention levels have
been maintained at 95%. Our continuing investment in sales and
marketing through our in-house call centre supported the sales to
new customers and 19% of all new business won came from new to
rental customers.
To further support the sales and service personnel additional
improvements have been made to the tablet based dynamic catalogue,
increasing its functionality and improving the product range in
line with our customers' requirements. The business continues to
focus on stocked products which have improved garment delivery
times for both new and existing customers. The business was also
pleased to renew agreements with a number of large national
accounts.
With the benefit of strong revenue growth and a continued focus
on efficiency, Workwear's adjusted operating profit increased by
12.0% to GBP12.1 million (June 2018: GBP10.8 million) and the
margin improved to 17.9% (June 2018: 17.1%). This includes a modest
benefit of GBP0.3 million from the implementation of IFRS 16.
Operationally the business continued to invest in plant and
machinery. This included the installation of highly efficient
garment folding machines in the high care food units at Gateshead
and Birmingham, increasing their folding capacity. Several new
industrial washing machines have also been installed across the
estate. In Manchester a refurbishment of the industrial unit to
improve its efficiency is nearing completion, resulting in the
removal of drycleaning processing which is being replaced by washer
extractors. Work on expanding the industrial garment processing
capacity at Basingstoke is underway with additional plans being
considered for expanding food garment processing capacity next year
as part of our normal ongoing level of capital investment.
In line with the development of the new Group wide national
brand, Johnsons Workwear rebranding has commenced starting with a
number of vehicles being rebranded with the new livery. The rollout
of the brand will continue over the coming years in order to
reinforce the strong reputation of the Johnson Service Group.
The internal training Academy is continuing to provide
development and support to employees at all levels within the
business and an updated portfolio of blended learning is
benefitting all personnel. The specific focus on health and safety
and product knowledge training has resulted in enhancing knowledge
and empowerment within the business. Various apprenticeships are
being undertaken which will help to provide internal succession in
some of our more technical and skilled areas.
HORECA Division
The total revenue for the HORECA division increased by 11.9% to
GBP99.6 million (June 2018: GBP89.0 million). After adjusting for
the acquisition of South West Laundry, which was completed in
August 2018, and also excluding the revenue from a small number of
contracts acquired in January 2019, underlying revenue increased by
8.0%.
HORECA's adjusted operating profit increased to GBP12.9 million
(June 2018: GBP11.4 million), an increase of 13.2%. This includes a
modest benefit of GBP0.3 million from the implementation of IFRS
16. The operating margin was largely unchanged at 13.0% (June 2018:
12.8%).
Johnsons Hotel Linen, our high volume linen business (comprising
Afonwen, Bourne and PLS brands) has continued with the successful
integration of the acquisitions purchased in the last few years.
The seamless consolidation of the finance function to our Preston
Brook offices at the beginning of the year gave us the benefit of
consolidating from three different financial systems into a single
integrated reporting line using the new Microsoft Dynamics finance
package.
Operationally, the business continues to benefit from our
reputation for excellent customer service, strong service delivery
and national scale. Johnsons Hotel Linen is continuing to win a
wide range of customers across the core of its business, being the
corporate 4 star and budget hotel sectors as well as independent
hotels across the UK. Despite operating at close to capacity,
service levels continue to improve year on year with a strong
emphasis on seeking to deliver complete orders on time to our
customers.
Construction of the new Leeds production facility continues to
be on time and on budget. The site in Gildersome, Leeds is now
largely complete with the developer expected to hand over the site
by the end of this month. This timescale will allow us to work with
our appointed contractors on the installation of all equipment in
time for opening in the second quarter of 2020. Rapid progress has
already been made with the installation of all core utilities ahead
of plan. We have worked with the appointed contractors for many
years and all have extensive experience in building and
commissioning new laundry installations. As such, we are pleased to
reconfirm that the overall project remains on plan, to schedule and
in line with the previously announced capital expenditure cost in
the region of GBP10.0 million.
Sales activity within the business has increased to take
advantage of current market opportunities as well as to identify
further sales opportunities for the autumn of 2019 into the spring
of 2020 across the whole of the UK. We anticipate that we will
transfer work from a number of our existing sites to the new Leeds
site over a six month commissioning period, ramping up volume to
enable the Leeds production facility to reach approximately 50%
capacity once all the expected transfers have been completed. This
will in turn create new capacity, along with logistical benefits,
in our existing plants to allow service to new customers in those
areas.
Despite a somewhat uncertain economic outlook and some customers
experiencing a slight softening in hotel occupancy demand, overall,
Johnsons Hotel Linen has continued to trade slightly ahead of our
expectations reflecting the importance of our quality local service
delivery and the everyday need for our products and services.
We have experienced strong organic sales growth through the
signing of new hotels together with a number of bolt-on hotels
being added to current customer contracts. Tight cost control has
been maintained and efficiency improvements have been realised as a
result of continued capital investment in the first half of the
year.
Growth at Stalbridge continues with strong new sales in 2019
building on the full year effect of record new sales in 2018.
Stalbridge continues to successfully market its high value,
flexible and responsive service which attracts both new market
entrants and established hospitality operators where service,
quality and reliability are the primary drivers.
South West Laundry, which was acquired in 2018 with capacity for
growth, has enabled us to relocate the processing and servicing of
some Devon and Cornwall based customers from our Dorset plants at
Milborne Port and Sturminster Newton to South West, thereby
streamlining distribution and service.
Similarly, the Stalbridge plant in Southall, following the
GBP3.3 million refurbishment and extension completed at the end of
2018, is now fully operational and has allowed us to move some
London based catering customers from our Dorset plant in
Shaftesbury.
We have extended the Stalbridge operations in both Grantham and
Wrexham with additional space and investment in washing processes
to deal with the continuing growth of the business in the North of
the country. We have also replaced four ironer lines across the
estate in the first half of 2019. This new equipment provides
greater capacity, better quality and is more energy efficient than
the machinery it replaces.
At London Linen we have commenced a project to extend the
dispatch area and improve workflows to allow for the increased
linen volumes being experienced. The business continues to focus on
delivering excellent quality and service to the customer base in
order to ensure the high levels of customer satisfaction are
maintained.
London Linen and Stalbridge have begun the process of combining
sales and marketing resource to better engage with, and attract,
potential new customers. This stronger sales and marketing focus on
the independent restaurant market in London is designed to negate
any potential reduction in the casual dining market.
We have acquired a number of customer contracts from two small
laundries to add to the strong organic growth being achieved. In
January we acquired annualised revenue of GBP1.2 million to be
processed in our newly extended Grantham site and in July we have
acquired an additional GBP2.5 million of annualised revenue to be
processed at our sites in Southall.
TECHNICAL INNOVATION
The project for updating and improving our IT systems is
ongoing. Replacement of all of the finance systems which are in
scope will be completed by the end of October 2019. We are also
intending to supplement the Microsoft Dynamics platform with a
leading industry standard laundry operating system which should
reduce the overall time frame for implementation. Our overall
budgeted cost remains broadly unchanged.
EMPLOYEES
The Group now employs over 5,700 people who have all contributed
to the performance of the business. Our people are fundamental to
us being able to deliver our market-leading customer service
standards. We thank them for their significant contribution to
another tremendous first half performance.
BREXIT
The main potential impact on the Group from Brexit and the
ongoing uncertainty around the post Brexit arrangements depends on
the extent to which it has a negative effect on the macroeconomic
environment. We consider that the potential risks we may have to
mitigate against would be a change in consumer confidence, a
reduction in levels of employment or a reluctance to invest from
within our customer base. We do recognise, however, that the
services we provide are, in many cases, essential for our customers
to continue in operation. The Group has undertaken a review of
potential actions that it would take in the event that mitigation
was required.
OUTLOOK
The Group's performance in the two months since the period end,
which are two of the busiest months particularly for our Hotel
Linen plants, has been slightly ahead of our expectations.
The capital investment made to increase our processing capacity
has allowed us to meet high customer demand and provide a quality
service more efficiently. This investment in our sites will be
maintained and will help us to further increase revenue going
forward.
We are looking forward to the completion of the new Leeds plant
in Spring 2020 and we see opportunities for filling the additional
processing capacity that will be created across the Hotel Linen
plants in the medium term. As with all major development capital
investments there will be some up-front costs which may have a
small impact on the HORECA margin in 2020, until throughput of the
Leeds plant reaches its optimum level.
In view of the encouraging performance over the summer months we
now anticipate that the results for the current full year will be
slightly ahead of current 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 interim
report is the responsibility of, and has been approved by, the
Directors.
The Directors confirm that to the best of their knowledge:
-- this financial information has been prepared in accordance
with IAS 34, 'Interim Financial Reporting' as adopted by the
European Union;
-- this interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
-- this interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related party
transactions and changes therein).
The Directors of Johnson Service Group PLC are listed in the
Johnson Service Group PLC Annual Report for 2018. 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
3 September 2019 3 September 2019
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 2018
2019 2018 GBPm
Note GBPm GBPm
Revenue 2 167.1 152.2 321.1
Operating profit 2 17.7 15.7 36.6
Operating profit before amortisation
of intangible
assets (excluding software amortisation)
and exceptional items 22.6 19.9 46.0
Amortisation of intangible assets (excluding
software amortisation) (4.9) (4.2) (8.8)
Exceptional items
- Costs in relation to business acquisition
activity - - (0.6)
Operating profit 2 17.7 15.7 36.6
Finance cost 3 (2.5) (1.7) (3.5)
Profit before taxation 15.2 14.0 33.1
Taxation charge 4 (2.9) (2.8) (6.3)
Profit for the period attributable to
equity holders 12.3 11.2 26.8
------------------------------------------------ ------ --------- --------- ------------
Earnings per share 7
Basic earnings per share 3.3p 3.1p 7.3p
------------------------------------------------ ------ --------- --------- ------------
Diluted earnings per share 3.3p 3.1p 7.2p
------------------------------------------------ ------ --------- --------- ------------
Adjusted basic earnings per share 4.4p 4.0p 9.4p
------------------------------------------------ ------ --------- --------- ------------
Adjusted diluted earnings per share 4.4p 4.0p 9.3p
------------------------------------------------ ------ --------- --------- ------------
Consolidated Statement of Comprehensive Income
Half year to Half year Year ended
30 June to 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Note
Profit for the period 12.3 11.2 26.8
-------------------------------------------------------- ------------- ----------- ------------
Items that will not be subsequently
reclassified to profit or loss
Re-measurement and
experience (losses)
/ gains on
post-employment benefit
- obligations 8 (9.1) 5.0 5.7
Taxation in respect of re-measurement
- and experience losses / (gains) 1.6 (0.9) (1.1)
Items that may be subsequently reclassified
to profit or loss
- fair value
Cash flow hedges gain /
- (net of taxation) (loss) 0.2 0.3 (0.3)
- transfers to administrative
expenses - (0.2) (0.4)
- transfers to
finance
cost 0.1 0.2 0.2
-------------------------------------- ---------------- -------------- ----------- ------------
Other comprehensive (loss) / income for
the period (7.2) 4.4 4.1
--------------------------------------------------------
Total comprehensive income for the period 5.1 15.6 30.9
-------------------------------------------------------- -------------- ----------- ------------
The notes on pages 15 to 30 form an integral part of these
condensed consolidated interim financial statements.
Consolidated Statement of Changes in Shareholders' Equity
Capital
Share Share Merger Redemption Hedge Retained Total
Capital Premium Reserve Reserve Reserve Earnings Equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 31 December
2017 36.6 15.2 1.6 0.6 (0.1) 113.7 167.6
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Change in accounting
standard - - - - - 1.0 1.0
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Restated balance at 1
January 2018 36.6 15.2 1.6 0.6 (0.1) 114.7 168.6
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Profit for the period - - - - - 11.2 11.2
Other comprehensive income
for the period - - - - 0.3 4.1 4.4
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Total comprehensive income
for the period - - - - 0.3 15.3 15.6
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Share options (value
of employee services) - - - - - 0.4 0.4
Dividend paid - - - - - (7.0) (7.0)
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Transactions with Shareholders
recognised directly in
Shareholders' equity - - - - - (6.6) (6.6)
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Balance at 30 June 2018 36.6 15.2 1.6 0.6 0.2 123.4 177.6
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Profit for the period - - - - - 15.6 15.6
Other comprehensive income
/ (loss) for the period - - - - (0.8) 0.5 (0.3)
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Total comprehensive income
for the period - - - - (0.8) 16.1 15.3
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Share options (value
of employee services) - - - - - 0.4 0.4
Deferred tax on share
options - - - - - 0.1 0.1
Issue of Share Capital 0.2 0.5 - - - - 0.7
Dividend paid - - - - - (3.7) (3.7)
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Transactions with Shareholders
recognised directly in
Shareholders' equity 0.2 0.5 - - - (3.2) (2.5)
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Balance at 31 December
2018 36.8 15.7 1.6 0.6 (0.6) 136.3 190.4
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Change in accounting
standard (note 20) - - - - - 0.2 0.2
Restated balance at 1
January 2019 36.8 15.7 1.6 0.6 (0.6) 136.5 190.6
Profit for the period - - - - - 12.3 12.3
Other comprehensive income
/ (loss) for the period - - - - 0.3 (7.5) (7.2)
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Total comprehensive income
for the period - - - - 0.3 4.8 5.1
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Share options (value
of employee services) - - - - - 0.4 0.4
Purchase of shares by
EBT* - - - - - (0.2) (0.2)
Current tax on share
options - - - - - 0.3 0.3
Deferred tax on share
options - - - - - (0.1) (0.1)
Issue of Share Capital 0.2 0.4 - - - - 0.6
Dividend paid - - - - - (7.7) (7.7)
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Transactions with Shareholders
recognised directly in
Shareholders' equity 0.2 0.4 - - - (7.3) (6.7)
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
Balance at 30 June 2019 37.0 16.1 1.6 0.6 (0.3) 134.0 189.0
-------------------------------- --------- --------- --------- ------------ --------- ---------- --------
* 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
2019, the EBT held 12,468 shares (June 2018: 16,256; December 2018:
16,256).
Consolidated Balance Sheet
As at As at As at
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Note
Non-current assets
Goodwill 128.1 120.4 128.1
Intangible assets 9 36.1 39.6 39.3
Property, plant and equipment 10 87.8 91.2 96.0
Right-of-use assets 20 47.5 - -
Textile rental items 11 53.5 54.3 56.4
Trade and other receivables 0.7 0.7 0.7
Derivative financial assets - 0.2 -
Deferred income tax assets 3.0 1.5 1.8
356.7 307.9 322.3
------------------------------------ ------ -------- -------- ------------
Current assets
Inventories 2.4 2.9 2.8
Trade and other receivables 57.0 55.0 52.1
Derivative financial assets - 0.2 -
Cash and cash equivalents 9.8 6.0 7.1
69.2 64.1 62.0
------------------------------------ ------ -------- -------- ------------
Current liabilities
Trade and other payables 67.0 71.9 64.8
Current income tax liabilities 3.8 4.1 5.1
Borrowings 10.7 13.2 14.5
Lease liabilities 20 10.1 - -
Derivative financial liabilities 0.1 - -
Provisions 1.3 1.7 1.5
93.0 90.9 85.9
------------------------------------ ------ -------- -------- ------------
Non-current liabilities
Post-employment benefit obligations 8 12.8 6.1 4.6
Deferred income tax liabilities 6.8 8.2 7.6
Trade and other payables 2.5 3.0 2.3
Borrowings 85.8 84.0 91.0
Lease liabilities 20 33.7 - -
Derivative financial liabilities 0.2 0.2 0.7
Provisions 2.1 2.0 1.8
143.9 103.5 108.0
------------------------------------ ------ -------- -------- ------------
NET ASSETS 189.0 177.6 190.4
------------------------------------ ------ -------- -------- ------------
Capital and reserves attributable to the
Company's Shareholders
Share capital 12 37.0 36.6 36.8
Share premium 16.1 15.2 15.7
Merger reserve 1.6 1.6 1.6
Capital redemption reserve 0.6 0.6 0.6
Hedge reserve (0.3) 0.2 (0.6)
Retained earnings 134.0 123.4 136.3
------------------------------------ ------ -------- -------- ------------
Total equity 189.0 177.6 190.4
------------------------------------ ------ -------- -------- ------------
The notes on pages 15 to 30 form an integral part of these
condensed consolidated interim financial statements. The condensed
consolidated interim financial statements on pages 11 to 30 were
approved by the Board of Directors on 3 September 2019 and signed
on its behalf by:
Yvonne Monaghan
Chief Financial Officer
Consolidated Statement of Cash Flows
Half year Half year Year ended
to to 31 December
30 June 30 June 2018
2019 2018 GBPm
Note GBPm GBPm
Cash flows from operating activities
Profit for the period 12.3 11.2 26.8
Adjustments for:
Taxation
charge 4 2.9 2.8 6.3
Total finance
cost 2.5 1.7 3.5
Depreciation 32.6 26.4 55.3
Amortisation 4.9 4.3 8.9
Decrease in inventories 0.4 - 0.1
Increase in trade and other receivables (5.9) (7.0) (2.8)
Increase / (decrease) in trade and
other payables 5.6 3.2 (3.2)
Costs in relation to business acquisition
activity - - 0.6
Deficit recovery payments in respect
of post-employment benefit obligations (0.9) (0.9) (1.9)
Share-based payments 0.4 0.4 0.8
Post-employment benefit obligations (0.1) (0.1) (0.1)
Increase / (decrease) in provisions 0.1 - (0.5)
---------------------------------------------- ------ --------- --------- ------------
Cash generated from operations 54.8 42.0 93.8
Interest paid (2.3) (1.4) (3.5)
Taxation paid (4.6) (3.6) (7.8)
---------------------------------------------- ------ --------- --------- ------------
Net cash generated from operating
activities 47.9 37.0 82.5
---------------------------------------------- ------ --------- --------- ------------
Cash flows from investing activities
Acquisition of business (net of cash
and cash equivalents acquired) 13 (0.2) - (14.0)
Purchase of property, plant and equipment (8.8) (6.9) (17.5)
Purchase of software (0.5) (0.3) (0.6)
Purchase of other intangible assets 9 (1.1) - -
Proceeds from sale of property, plant
and equipment 0.1 - 0.2
Purchase of textile rental items (22.8) (23.8) (48.9)
Proceeds received in respect of special
charges 1.2 1.2 2.2
Net cash used in investing activities (32.1) (29.8) (78.6)
---------------------------------------------- ------ --------- --------- ------------
Cash flows from financing activities
Proceeds from borrowings 52.0 31.0 86.0
Repayments of borrowings (53.0) (29.0) (77.0)
Capital element of leases (2018:
Capital element of finance leases) (4.0) (2.3) (3.9)
Purchase of own shares by EBT (0.2) - -
Net proceeds from issue of Ordinary
shares 0.6 - 0.7
Dividend paid (7.7) (7.0) (10.7)
Net cash used in financing activities (12.3) (7.3) (4.9)
---------------------------------------------- ------ --------- --------- ------------
Net increase / (decrease) in cash
and cash equivalents 3.5 (0.1) (1.0)
Cash and cash equivalents at beginning
of the period (4.7) (3.7) (3.7)
---------------------------------------------- ------ --------- --------- ------------
Cash and cash equivalents at end
of the period 15 (1.2) (3.8) (4.7)
---------------------------------------------- ------ --------- --------- ------------
Cash and cash equivalents comprise:
Cash 9.8 6.0 7.1
Overdraft (11.0) (9.8) (11.8)
Cash and cash equivalents at end
of the period (1.2) (3.8) (4.7)
---------------------------------------------- ------ --------- --------- ------------
The notes on pages 15 to 30 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 3 September 2019.
1 BASIS OF PREPARATION
These condensed consolidated interim financial statements of the
Group are for the half year ended 30 June 2019. They have been
prepared in accordance with the Disclosure and Transparency Rules
of the Financial Conduct Authority and with IAS 34, 'Interim
Financial Reporting', as adopted by the European Union.
The condensed consolidated interim financial statements have not
been reviewed or audited, nor do they comprise statutory accounts
for the purpose of Section 434 of the Companies Act 2006, and do
not include all of the information or disclosures required in the
annual financial statements and should therefore be read in
conjunction with the Group's 2018 consolidated financial
statements, which have been prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union.
Financial information for the year ended 31 December 2018
included herein is derived from the statutory accounts for that
year, which have been filed with the Registrar of Companies. The
auditors' report on those accounts was unqualified, did not contain
an emphasis of matter paragraph and did not contain a statement
under Section 498 of the Companies Act 2006.
Financial information for the half year ended 30 June 2018
included herein is derived from the condensed consolidated interim
financial statements for that period.
Going Concern
The Group currently meets its day-to-day working capital
requirements through committed bank facilities which, as at 30 June
2019, ran to August 2022 but which now, following the extension of
that facility on 17 July 2019, will run to August 2023. Current
economic conditions continue to create uncertainty, particularly
over the level of demand for the Group's services. The Group's
latest forecasts and projections, taking account of reasonably
possible changes in trading performance, show that there is not a
substantial doubt that the Group should be able to operate within
the level of its current facilities for a period of at least 12
months from the date of these condensed consolidated interim
financial statements.
As a consequence, and having reassessed the principal risks and
uncertainties, the Directors considered it appropriate to adopt the
going concern basis of accounting in preparing the condensed
consolidated interim financial information.
2 SEGMENT ANALYSIS
Segment information is presented in respect of the Group's
operating segments, which are based on the Group's management and
internal reporting structure as at 30 June 2019. These segments are
the same as those included within the 2018 Annual Report and
Accounts.
The chief operating decision-maker has been identified as the
Board of Directors (the Board). The Board reviews the Group's
internal reporting in order to assess performance and allocate
resources. The Board determines the operating segments based on
these reports and on the internal reporting structure. For
reporting purposes, in accordance with IFRS 8, the Board aggregates
operating segments with similar economic characteristics and
conditions into reporting segments, which form the basis of the
reporting in the Annual Report. The Board has identified two
trading reporting segments, being Workwear and Hotel, Restaurants
and Catering ("HORECA"). Discontinued operations are reported
separately.
The Board assesses the performance of the reporting segments
based on a measure of operating profit, both including and
excluding the effects of non-recurring items from the reporting
segments, such as restructuring costs and impairments when the
impairment is the result of an isolated, non-recurring or
non-operating event. Segment results include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis, for example, prior to adoption of IFRS 16 in
the 2018 comparative information, rental income received by Johnson
Group Properties PLC is credited back, where appropriate, to the
paying company for the purpose of segmental reporting. In 2019, any
right-of-use assets, lease liabilities and depreciation relating to
internal property leases with Johnson Group Properties PLC are
eliminated on consolidation. Interest income and expenditure are
not included in the result for each reporting segment that is
reviewed by the Board.
Other information provided to the Board is measured in a manner
consistent with that in the financial statements. Segment assets
exclude deferred income tax assets, 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
current income tax liabilities, bank borrowings, derivative
financial liabilities, post-employment benefit obligations and
deferred income tax liabilities, all of which are managed on a
central basis. These balances are part of the reconciliation to
total assets and liabilities.
2 SEGMENT ANALYSIS (continued)
The reporting segment results for the half year ended 30 June
2019, together with comparative figures, are as follows:
All Other
Half year to 30 June 2019 Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Revenue 67.5 99.6 - 167.1
Operating profit / (loss) before amortisation
of intangible assets (excluding software
amortisation) 12.1 12.9 (2.4) 22.6
Amortisation of intangible assets
(excluding software amortisation) (0.2) (4.7) - (4.9)
Operating profit / (loss) 11.9 8.2 (2.4) 17.7
Total finance cost (2.5)
Profit before taxation 15.2
Taxation (2.9)
----------------------------------------------------------------- ------------- --------- ------- ---------- --------
Profit for the period attributable
to equity holders 12.3
Discontinued All Other
Operations Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm GBPm
Balance sheet information
Segment assets - 138.7 272.2 2.2 413.1
Unallocated assets: Deferred income
tax assets 3.0
Cash and cash equivalents 9.8
Total assets 425.9
----------------------------------------------------------------- ------------- --------- ------- ---------- --------
Segment liabilities (3.6) (42.7) (65.0) (5.4) (116.7)
Unallocated liabilities: Bank
borrowings (96.5)
Current income tax
liabilities (3.8)
Deferred income
tax liabilities (6.8)
Derivative
financial
liabilities (0.3)
Post-employment
benefit
obligations (12.8)
------------------------------------------------------------------ ------------- --------- ------- ---------- --------
Total liabilities (236.9)
----------------------------------------------------------------- ------------- --------- ------- ---------- --------
Discontinued All Other
Operations Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm GBPm
Other information
Non-current asset additions
- Property, plant and equipment - 2.4 7.6 - 10.0
- Textile rental items - 10.0 10.9 - 20.9
- Software - 0.6 - - 0.6
Depreciation and amortisation
expense
- Property, plant and equipment - 2.1 4.3 - 6.4
- Right-of-use assets - 1.2 2.3 0.1 3.6
- Textile rental items - 8.9 13.7 - 22.6
2 SEGMENT ANALYSIS (continued)
All Other
Half year to 30 June 2018 Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Revenue 63.2 89.0 - 152.2
Operating profit / (loss) before amortisation
of intangible assets (excluding software
amortisation) 10.8 11.4 (2.3) 19.9
Amortisation of intangible assets (excluding
software amortisation) (0.2) (4.0) - (4.2)
Operating profit / (loss) 10.6 7.4 (2.3) 15.7
Total finance cost (1.7)
Profit before taxation 14.0
Taxation (2.8)
----------------------------------------------------------------------- -------------- --------- ------- ---------- ----------
Profit for the period attributable
to equity holders 11.2
Discontinued All Other
Operations Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm GBPm
Balance sheet information
Segment assets - 121.1 241.9 1.1 364.1
Unallocated assets: Derivative
financial assets 0.4
Deferred income tax assets 1.5
Cash and cash equivalents 6.0
---------------------------------------------------------------------------------------- --------- ------- ---------- ----------
Total assets 372.0
----------------------------------------------------------------------- -------------- --------- ------- ---------- ----------
Segment liabilities (3.6) (29.5) (49.0) (4.2) (86.3)
Unallocated liabilities: Bank
borrowings (89.5)
Current income tax
liabilities (4.1)
Deferred income tax
liabilities (8.2)
Derivative financial
liabilities (0.2)
Post-employment benefit
obligations (6.1)
------------------------------------------------------------------------ -------------- --------- ------- ---------- ----------
Total liabilities (194.4)
----------------------------------------------------------------------- -------------- --------- ------- ----------
Discontinued All Other
Operations Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm GBPm
Other information
Non-current asset additions
- Property, plant and equipment - 2.2 6.2 - 8.4
- Textile rental items - 10.6 14.8 - 25.4
- Software - 0.4 - - 0.4
Depreciation and amortisation
expense
- Property, plant and equipment - 2.3 4.2 - 6.5
- Textile rental items - 8.0 11.9 - 19.9
- Software - - 0.1 - 0.1
2 SEGMENT ANALYSIS (continued)
All Other
Year ended 31 December 2018 Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Revenue 128.8 192.3 - 321.1
Operating profit / (loss) before amortisation
of intangible
assets (excluding software amortisation)
and exceptional items 22.7 28.0 (4.7) 46.0
Amortisation of intangible assets (excluding
software amortisation) (0.5) (8.3) - (8.8)
Exceptional items:
- Costs in relation to business
acquisition activity - (0.6) - (0.6)
Operating profit / (loss) 22.2 19.1 (4.7) 36.6
Total finance cost (3.5)
Profit before taxation 33.1
Taxation (6.3)
---------------------------------------------------------------------------- ------------- --------- ------- ---------- --------------
Profit for the period attributable
to equity holders 26.8
---------------------------------------------------------------------------- ------------- --------- ------- ---------- --------------
Discontinued All Other
Operations Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm GBPm
Balance sheet information
Segment assets - 121.9 252.0 1.5 375.4
Unallocated assets: Deferred
income tax assets 1.8
Cash and cash
equivalents 7.1
----------------------------------------------------------------------- --- ------------- --------- ------- ---------- --------------
Total assets 384.3
-------------------------------------------------------------------- ------ ------------- --------- ------- ---------- --------------
Segment liabilities (3.9) (29.2) (41.0) (3.7) (77.8)
Unallocated liabilities: Current
income tax liabilities (5.1)
Bank borrowings (98.1)
Derivative financial
liabilities (0.7)
Post-employment benefit
obligations (4.6)
Deferred income tax
liabilities (7.6)
---------------------------------------------------------------------------- ------------- --------- ------- ---------- --------------
Total liabilities (193.9)
-------------------------------------------------------------------- ------ ------------- --------- ------- ---------- --------------
Discontinued All Other
Operations Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm GBPm
Other information
Non-current asset additions
- Property, plant and equipment - 5.0 11.4 - 16.4
- Textile rental items - 21.7 27.4 - 49.1
- Software - 0.7 - - 0.7
Depreciation and amortisation
expense
- Property, plant and equipment - 4.8 8.7 - 13.5
- Textile rental items - 16.5 25.3 - 41.8
- Software - - 0.1 - 0.1
3 FINANCE COST
Half year Half year Year ended
to to 31 December
30 June 30 June 2018
2019 2018 GBPm
GBPm GBPm
Finance cost:
- Interest payable on bank loans
and overdrafts 1.3 1.3 2.6
- Amortisation of bank facility
fees 0.2 0.2 0.3
- Finance costs on lease liabilities
relating to IAS 17 - 0.1 0.3
- Finance costs on lease liabilities relating
to IFRS 16 0.9 - -
- Notional interest on post-employment
benefit obligations 0.1 0.1 0.3
2.5 1.7 3.5
----------------------------------------------- ---------- ---------- -------------
4 TAXATION
Half year Half year Year ended
to to 31 December
30 June 30 June 2018
2019 2018 GBPm
GBPm GBPm
Current tax
UK corporation tax charge for the
period 3.8 3.8 9.5
Adjustment in relation to previous
periods (0.3) - (0.5)
--------------------------------------- ---------- ---------- -------------
Current tax charge for the period 3.5 3.8 9.0
Deferred tax
Origination and reversal of temporary
differences (0.9) (1.0) (2.6)
Changes in statutory tax rate - - (0.2)
Adjustment in relation to previous
years 0.3 - 0.1
Deferred tax credit for the period (0.6) (1.0) (2.7)
--------------------------------------- ---------- ---------- -------------
Total charge for taxation included
in the income statement 2.9 2.8 6.3
--------------------------------------- ---------- ---------- -------------
Taxation in relation to amortisation of intangible assets
(excluding software amortisation) has reduced the charge for
taxation on continuing operations in the half year to 30 June 2019
by GBP0.9 million (June 2018: GBP0.8 million reduction in the
charge; December 2018: GBP1.7 million reduction in the charge).
There is no taxation in relation to exceptional items in any of the
periods reported.
During the half year to 30 June 2019, a GBP1.5 million credit
relating to deferred taxation (June 2018: GBP1.0 million charge;
December 2018: GBP1.0 million charge) has been recognised in other
comprehensive income.
During the half year to 30 June 2019, there has been a GBP0.3
million credit relating to current taxation (June 2018: GBPnil;
December 2018: GBPnil) and a GBP0.1 million charge relating to
deferred taxation (June 2018: GBPnil; December 2018: GBP0.1 million
credit) recognised directly in Shareholders' equity.
Reconciliation of effective tax rate
Taxation on non-exceptional items for the half year to 30 June
2019 is calculated based on the estimated average annual effective
tax rate (excluding prior year items) of 18.9% (June 2018: 19.5%;
December 2018: 20.0%). This compares to the weighted average tax
rate expected to be enacted or substantively enacted at the balance
sheet date of 19.00% (June 2018: 19.00%; December 2018: 19.00%).
Taxation on exceptional items is calculated based on the actual tax
charge or credit for each specific item.
Differences between the estimated average annual effective tax
rate and statutory rate include, but are not limited to, the effect
of non-deductible expenses. The adjustment for under or over
provisions in previous years is recognised when the amounts are
agreed.
Deferred income taxes at the balance sheet date have been
measured at the tax rate expected to be applicable at the date the
deferred income tax assets and liabilities are realised. Management
has performed an assessment, for all material deferred income tax
assets and liabilities, to determine the period over which the
deferred income tax assets and liabilities are forecast to be
realised, which has resulted in an average deferred income tax rate
of 17.5% being used to measure all deferred tax balances as at 30
June 2019 (June 2018: 18.0%; December 2018: 17.5%).
5 ADJUSTED PROFIT BEFORE AND AFTER TAXATION
Half year Half year Year ended
to to 31 December
30 June 30 June 2018
2019 2018 GBPm
GBPm GBPm
Profit before taxation 15.2 14.0 33.1
Amortisation of intangible assets (excluding
software amortisation) 4.9 4.2 8.8
Costs in relation to business acquisition
activity - - 0.6
Adjusted profit before taxation 20.1 18.2 42.5
Taxation on adjusted profit (3.8) (3.6) (8.0)
---------------------------------------------- ---------- ---------- -------------
Adjusted profit after taxation 16.3 14.6 34.5
---------------------------------------------- ---------- ---------- -------------
6 DIVIDS
Half year Half year Year ended
to to 31 December
30 June 30 June 2018
2019 2018
Dividend per share (pence)
2019 Interim dividend proposed 1.15 - -
2018 Interim dividend proposed and paid - 1.00 1.00
2018 Final dividend proposed and paid - - 2.10
----------------------------------------- ---------- ---------- -------------
1.15 1.00 3.10
----------------------------------------- ---------- ---------- -------------
Half year Half year Year ended
to to 31 December
30 June 30 June 2018
2019 2018
Shareholders' funds committed (GBPm)
2019 Interim dividend proposed 4.3 - -
2018 Interim dividend proposed and paid - 3.7 3.7
2018 Final dividend proposed and paid - - 7.7
On 10 May 2019 a final dividend of 2.10 pence per share in
respect of 2018 was paid to Shareholders, utilising GBP7.7 million
of Shareholders' funds.
The Directors are proposing an interim dividend in respect of
the year ended 31 December 2019 of 1.15 pence which will reduce
Shareholders' funds by GBP4.3 million. The dividend will be paid on
1 November 2019 to Shareholders on the register of members at the
close of business on 4 October 2019. The trustee of the EBT has
waived the entitlement to receive dividends on the Ordinary shares
held by the trust.
In accordance with IAS 10 there is no payable recognised at 30
June 2019 in respect of this proposed dividend.
7 EARNINGS PER SHARE
Half year Half Year ended
to year to 31 December
30 June 30 June 2018
2019 2018
GBPm GBPm GBPm
Profit for the period attributable to
Shareholders 12.3 11.2 26.8
Amortisation of intangible assets (net
of taxation) 4.0 3.4 7.1
Exceptional items (net of taxation) - - 0.6
Adjusted profit attributable to Shareholders 16.3 14.6 34.5
---------------------------------------------- ------------ ------------ --------------
Number Number Number
of shares of shares of shares
Weighted average number of Ordinary shares 368,536,954 366,483,899 366,547,752
Potentially dilutive options* 833,439 3,366,690 3,053,927
---------------------------------------------- ------------ ------------ --------------
Fully diluted number of Ordinary shares 369,370,393 369,850,589 369,601,679
---------------------------------------------- ------------ ------------ --------------
Pence Pence Pence
Basic earnings per share per share per share per share
Basic earnings per share 3.3p 3.1p 7.3p
Adjustment for amortisation of intangibles
assets 1.1p 0.9p 1.9p
Adjustment for exceptional items - - 0.2p
Adjusted basic earnings per share 4.4p 4.0p 9.4p
---------------------------------------------- ------------ ------------ --------------
Diluted earnings per share
Diluted earnings per share 3.3p 3.1p 7.2p
---------------------------------------------- ------------ ------------ --------------
Adjustment for amortisation of intangibles
assets 1.1p 0.9p 1.9p
Adjustment for exceptional items - - 0.2p
Adjusted diluted earnings per share 4.4p 4.0p 9.3p
---------------------------------------------- ------------ ------------ --------------
* Includes outstanding share options granted to employees.
Basic earnings per share is calculated using the weighted
average number of Ordinary shares in issue during the period,
excluding those held by the Employee Benefit Trust, based on the
profit for the period attributable to Shareholders.
Adjusted earnings per share figures are given to exclude the
effects of amortisation of intangible assets (excluding software
amortisation) and exceptional items, all net of taxation, and are
considered to show the underlying performance of the Group.
For diluted earnings per share, the weighted average number of
Ordinary shares in issue is adjusted to assume conversion of all
potentially dilutive Ordinary shares. The Company has potentially
dilutive Ordinary shares arising from share options granted to
employees. Options are dilutive under the SAYE scheme, where the
exercise price together with the future IFRS2 charge of the option
is less than the average market price of the Company's Ordinary
shares during the year. Options under the LTIP schemes, as defined
by IFRS 2, are contingently issuable shares and are therefore only
included within the calculation of diluted EPS if the performance
conditions, as set out in the Board Report on Remuneration in the
2018 Annual report and Accounts, are satisfied.
Potentially dilutive Ordinary shares are dilutive at the point,
from a continuing operations level, when their conversion to
Ordinary shares would decrease earnings per share or increase loss
per share. For all periods, potentially dilutive Ordinary shares
have been treated as dilutive, as their inclusion in the diluted
earnings per share calculation decreases earnings per share from
continuing operations.
There were no events occurring after the balance sheet date that
would have changed significantly the number of Ordinary shares or
potentially dilutive Ordinary shares outstanding at the balance
sheet date if those transactions had occurred before the end of the
reporting period.
8 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 2019 deficit recovery payments of
GBP0.9 million were paid by the Group to the defined benefit scheme
(June 2018: GBP0.9 million; December 2018: GBP1.9 million).
Following discussions with the Group's appointed actuary a
re-measurement loss of GBP9.1 million has been recognised in the
half year to 30 June 2019. This is principally as a result of asset
returns over the period for the scheme having been higher than the
assumed interest credit at the year end, resulting in an actuarial
gain of GBP6.8 million, offset, to a greater extent, by the
decrease in the assumed discount rate from 2.9% per annum to 2.35%
per annum resulting in an actuarial loss of GBP15.9 million.
The post-employment benefit obligation and associated deferred
income tax asset thereon is shown below:
As at As at As at
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Post-employment benefit obligation (12.8) (6.1) (4.6)
Deferred income tax asset thereon 2.2 1.1 0.8
------------------------------------ --------- --------- -------------
(10.6) (5.0) (3.8)
------------------------------------ --------- --------- -------------
The reconciliation of the opening gross post-employment benefit
obligation to the closing gross post-employment benefit obligation
is shown below:
As at As at As at
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Opening post-employment benefit obligation (4.6) (12.0) (12.0)
Notional interest (0.1) (0.1) (0.3)
Employer contributions 0.9 0.9 1.9
Re-measurement (losses) / gains (9.1) 5.0 5.7
Utilisation of healthcare provision 0.1 0.1 0.1
-------------------------------------------- --------- --------- -------------
Closing post-employment benefit obligation (12.8) (6.1) (4.6)
-------------------------------------------- --------- --------- -------------
9 INTANGIBLE ASSETS
Capitalised software
As at As at As at
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Opening net book value 0.7 0.1 0.1
Additions 0.6 0.4 0.7
Amortisation - (0.1) (0.1)
Closing net book value 1.3 0.4 0.7
------------------------ --------- --------- -------------
Other intangible assets
As at As at As at
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Opening net book value 38.6 43.4 43.4
Additions 1.1 - 4.0
Amortisation (4.9) (4.2) (8.8)
Closing net book value 34.8 39.2 38.6
------------------------ --------- --------- -------------
Other intangibles assets comprise of customer contracts and
relationships. During the half year to 30 June 2019, the Group
acquired customer contracts valued at GBP1.1 million.
10 PROPERTY, PLANT AND EQUIPMENT
As at As at As at
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Opening net book value 96.0 89.3 89.3
Additions 10.0 8.4 16.4
Business combinations - - 4.0
Depreciation (6.4) (6.5) (13.5)
Disposals - - (0.2)
Transfer between right-of-use assets
(See note 20) (11.8) - -
Closing net book value 87.8 91.2 96.0
-------------------------------------- --------- --------- -------------
Following the adoption of IFRS 16, the transfer between the
right-of-use assets represents the reclassification of the net book
value of finance lease assets held at 1 January 2019 (GBP11.9m) to
the right-of-use assets, offset by the reclassification of the net
book value of finance lease assets back to property, plant and
equipment where the lease expired in the half year to 30 June 2019
and the assets are now owned.
CAPITAL COMMITMENTS
Orders placed for future capital expenditure contracted but not
provided for in the financial statements are shown below:
As at As at As at
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Software 1.3 2.2 -
Property, plant and equipment 10.3 3.9 5.2
------------------------------- --------- --------- -------------
Property, plant and equipment capital commitments as at 30 June
2019 includes GBP8.2 million in relation to the new Leeds based
plant currently under construction.
11 TEXTILE RENTAL ITEMS
As at As at As at
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Opening net book value 56.4 50.0 50.0
Additions 20.9 25.4 49.1
Business combinations - - 1.3
Depreciation (22.6) (19.9) (41.8)
Special charges (1.2) (1.2) (2.2)
Closing net book value 53.5 54.3 56.4
------------------------ --------- --------- -------------
12 SHARE CAPITAL
Issued share capital is as follows:
Half year Half year Year ended
to to 31 December
30 June 30 June 2018
2019 2018
GBPm GBPm GBPm
Share capital at the start of the period 36.8 36.6 36.6
New shares issued 0.2 - 0.2
------------------------------------------ ---------- ---------- -------------
Share capital at the end of the period 37.0 36.6 36.8
------------------------------------------ ---------- ---------- -------------
In the half year to 30 June 2019, 363,612 SAYE scheme options
were exercised with a total nominal value of GBP36,361 (June 2018:
GBP344; December 2018: GBP92,734). In the half year to 30 June
2019, LTIP options were exercised with a total nominal value of
GBP180,500. Proceeds in excess of the nominal value were credited
to Share Premium.
13 BUSINESS COMBINATIONS
There have been no business combinations in the half year to 30
June 2019. During the half year to 30 June 19, GBP0.2 million of
deferred consideration was paid relating to the acquisition of
Ashbon in 2015. The remaining deferred consideration of GBP0.1
million was paid in July 2019.
During 2018, the Group acquired 100% of the share capital of
South West Laundry Holdings Limited, together with its trading
subsidiary South West Laundry Limited ('South West'). Full details
of the acquisition in 2018 are provided in the 2018 Annual Report
and Accounts.
14 BORROWINGS
As at 30 June 2019, borrowings were secured and drawn down under
a committed facility dated 21 February 2014, as amended and
restated on 24 April 2015 and as further amended and restated on 22
April 2016 and 9 August 2018, comprising a GBP135.0 million rolling
credit facility (including an overdraft) which runs to August 2022.
A GBP15.0 million short term facility, due to expire on 9 August
2019 was cancelled and repaid on 31 May 2019.
On 17 July 2019, the Group exercised a one year extension such
that the facility now runs until August 2023.
Under the rolling credit facility, individual tranches are drawn
down, in sterling, for periods of up to six months at LIBOR rates
of interest prevailing at the time of drawdown, plus the applicable
margin. The margin varies between 1.25% and 2.25%. The margin
payable on the short term facility was fixed at 1.25% plus
LIBOR.
As at 30 June 2019, GBP55.0 million of borrowings were subject
to hedging arrangements which had the effect of replacing LIBOR
with fixed rates as follows:
-- for GBP10.0 million of borrowings, LIBOR is replaced with
0.5525% from 30 June 2016 to 30 June 2019; and
-- for GBP15.0 million of borrowings, LIBOR is replaced with
1.665% from 8 January 2016 to 8 January 2020; and
-- for GBP15.0 million of borrowings, LIBOR is replaced with
1.070% from 30 January 2019 to 29 January 2021; and
-- for GBP15.0 million of borrowings, LIBOR is replaced with
1.144% from 30 January 2019 to 29 January 2022.
Borrowings are stated net of unamortised issue costs of GBP0.5
million (30 June 2018: GBP0.3 million; 31 December 2018: GBP0.7
million).
15 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, new
finance leases and, following the adoption of IFRS 16, the
recognition of lease liabilities entered into during the
period.
At 31 Adoption At 1 At 30
December of IFRS January Non-cash June
June 2019 2018 16 2019 Cash Flow Changes 2019
GBPm GBPm GBPm GBPm GBPm GBPm
Debt due within one year 0.3 - 0.3 - (0.1) 0.2
Debt due after more than
one year (86.6) - (86.6) 1.0 (0.1) (85.7)
Finance leases (7.4) 7.4 - - - --
Lease liabilities (See
note 20) - (44.6) (44.6) 4.0 (3.2) (43.8)
-------------------------------- ---------- --------- --------- ---------- ----------- --------
Total debt and lease financing (93.7) (37.2) (130.9) 5.0 (3.4) (129.3)
Cash and cash equivalents (4.7) - (4.7) 3.5 - (1.2)
-------------------------------- ---------- --------- --------- ---------- ----------- --------
Net debt (98.4) (37.2) (135.6) 8.5 (3.4) (130.5)
-------------------------------- ---------- --------- --------- ---------- ----------- --------
At 1 At 30
January Cash Non-cash June
June 2018 2018 Flow Changes 2018
GBPm GBPm GBPm GBPm
Debt due within one year (1.7) 1.0 - (0.7)
Debt due after more than one
year (75.9) (3.0) (0.1) (79.0)
Finance leases (10.0) 2.3 - (7.7)
--------------------------------- --------- --------- ----------- ----------
Total debt and lease financing (87.6) 0.3 (0.1) (87.4)
Cash and cash equivalents (3.7) (0.1) - (3.8)
--------------------------------- --------- --------- ----------- ----------
Net debt (91.3) 0.2 (0.1) (91.2)
--------------------------------- --------- --------- ----------- ----------
At 1 At 31
January Cash Non-cash December
December 2018 2018 Flow Changes 2018
GBPm GBPm GBPm GBPm
Debt due within one year (1.7) 2.0 - 0.3
Debt due after more than one
year (75.9) (11.0) 0.3 (86.6)
Finance leases (10.0) 3.9 (1.3) (7.4)
--------------------------------- --------- --------- ----------- ----------
Total debt and lease financing (87.6) (5.1) (1.0) (93.7)
Cash and cash equivalents (3.7) (1.0) - (4.7)
--------------------------------- --------- ----------- ----------
Net debt (91.3) (6.1) (1.0) (98.4)
--------------------------------- --------- --------- ----------- ----------
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
2019 2018 2018
GBPm GBPm GBPm
Cash (Current assets) 9.8 6.0 7.1
Overdraft (Borrowings, Current liabilities) (11.0) (9.8) (11.8)
(1.2) (3.8) (4.7)
--------------------------------------------- ------- --------- -------------
Lease Liabilities (2018: Finance Lease obligations) are
comprised of the following balance sheet amounts:
As at
30 As at As at
June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Amounts due within one year (Borrowings,
Current Liabilities) - (2.7) (3.0)
Amounts due within one year (Lease Liabilities,
Current Liabilities) (10.1) - -
Amounts due after more than one year
(Borrowings, Non-Current Liabilities) - (5.0) (4.4)
Amounts due within one year (Lease Liabilities,
Non-Current Liabilities) (33.7) - -
(43.8) (7.7) (7.4)
------------------------------------------------- ------- --------- -------------
16 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Half year Half Year ended
to year 31 December
30 June to 2018
2019 30 June
2018
GBPm GBPm GBPm
Increase / (decrease) in cash in the
period 3.5 (0.1) (1.0)
Decrease / (increase) in debt and lease
financing 5.0 0.3 (5.1)
--------------------------------------------- ---------- --------- ---------------------
Change in net debt resulting from cash
flows 8.5 0.2 (6.1)
Debt acquired through business combinations - - (1.3)
Leases previously recognised as operating (37.2) - -
leases under IAS 17
Lease liabilities recognised during the (3.2) - -
period
Movement in unamortised issue costs of
bank loans (0.2) (0.1) 0.3
Movement in net debt during the period (32.1) 0.1 (7.1)
Opening net debt (98.4) (91.3) (91.3)
--------------------------------------------- ---------- --------- ---------------------
Closing net debt (130.5) (91.2) (98.4)
--------------------------------------------- ---------- --------- ---------------------
17 RELATED PARTY TRANSACTIONS
Transactions during the year between the Company and its
subsidiaries, which are related parties, have been conducted on an
arm's length basis and eliminated on consolidation. Full details of
the Group's other related party relationships, transactions and
balances are given in the Group's financial statements for the year
ended 31 December 2018. There have been no material changes in
these relationships in the half year to 30 June 2019 or up to the
date of this Report.
18 CONTINGENT LIABILITIES
The Group operates from a number of sites across the UK. Some of
the sites have operated as laundry sites for many years and
historic environmental liabilities may exist. Such liabilities are
not expected to give rise to any significant loss.
The Group has granted its Bankers and Trustee of the Pension
Scheme (the 'Trustee') security over the assets of the Group. The
priority of security is as follows:
-- first ranking security for GBP28.0 million to the Trustee
ranking pari passu with up to GBP155.0 million of bank liabilities;
and
-- second ranking security for the balance of any remaining
liabilities to the Trustee ranking pari passu with any remaining
bank liabilities.
During the period of ownership of the Facilities Management
division the Company had given guarantees over the performance of
contracts entered into by the division. As part of the disposal of
the division the purchaser has agreed to pursue the release or
transfer of obligations under the Parent Company guarantees and
this is in process. The sale and purchase agreement contains an
indemnity from the purchaser to cover any loss in the event a claim
is made prior to release. In the period until release the purchaser
is to make a payment to the Company of GBP0.2 million per annum,
reduced pro rata as guarantees are released. Such liabilities are
not expected to give rise to any significant loss.
As a condition of the sale of the Facilities Management division
in August 2013, the Group has put in place indemnities, to the
purchaser, in relation to any future amounts payable in respect of
contingent consideration related to the Nickleby acquisition
completed in February 2012. As set out in the 2012 Annual Report
and Accounts the maximum amount payable under the terms of the
indemnity could be up to GBP5.0 million. The Directors believe the
risk of settlement at, or near, the maximum level to be remote.
19 EVENTS AFTER THE REPORTING PERIOD
There have been no events that require disclosure in accordance
with IAS10, 'Events after the balance sheet date'.
20 ACCOUNTING POLICIES
Except as described below, the condensed consolidated interim
financial statements have been prepared applying the accounting
policies, presentation and methods of computation applied by the
Group in the preparation of the published consolidated financial
statements for the year ended 31 December 2018.
(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 judgements, 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.
(d) Standards and amendments to standards effective in 2019
IFRS 16, 'Leases'
The Group has adopted this new standard retrospectively from 1
January 2019, with the cumulative effect of initially applying this
standard being an adjustment to the opening balance of retained
earnings as at 1 January 2019. The comparative information for 2018
has not been restated and is presented, as previously reported,
under IAS 17.
The new standard results in almost all leases being recognised
on the Balance Sheet as, from a lessee perspective, the distinction
between operating and finance leases is removed. Under the new
standard, an asset (the right to use the leased item) and a
financial liability to pay rentals are recognised. The only
exceptions are short-term and low-value leases. The accounting for
lessors has not significantly changed.
The Group currently leases both properties and vehicles,
comprising cars and commercial vehicles, which under IAS 17, were
classified as a series of operating lease contracts with payments
made (net of any incentives received from the lessor) charged to
profit or loss on a straight-line basis over the period of the
lease. From 1 January 2019, under IFRS 16, leases are recognised as
a right-of-use asset and a corresponding lease liability at the
date at which the leased asset is available for use by the Group.
Each lease payment is allocated between the liability and finance
cost. The finance cost is charged to profit or loss over the lease
period using the effective interest method. The right-of-use asset
is depreciated over the shorter of the asset's useful life and the
lease term on a straight-line basis.
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
-- In determining whether existing contracts meet the definition
of a lease, the Group will not reassess those contracts previously
identified as leases and will not apply the standard to those
contracts not previously identified as leases.
-- Short-term leases (leases of less than 12 months) and leases
with less than 12 months remaining as at the date of adoption of
the new standard will not be within the scope of IFRS 16.
-- Leases for which the asset is of low value (IT equipment and
small items of office equipment) will not be within the scope of
IFRS 16.
-- the use of a single discount rate to a portfolio of leases
with reasonably similar characteristics.
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. For
vehicles, these liabilities were measured at the present value of
the remaining lease payments, discounted using the Group's
incremental borrowing rate on the current facility as of 1 January
2019, which was 2.48%. The Group also leases various offices and
plants, which can differ significantly in terms of property value
and location and, with leases negotiated on an individual basis,
they can contain a wide range of different terms and conditions.
The discount rate applied therefore differs by property and ranges
from 2.85% - 7.15%. The weighted average Group's incremental
borrowing rate applied to the lease liabilities on 1 January 2019
was 4.46%.
The associated right-of-use assets were measured using the
approach set out in IFRS 16.C8(b)(ii), whereby right-of-use assets
are equal to the lease liabilities, adjusted by the amount of any
prepaid (GBP1.0 million) or accrued lease payments (GBP2.3 million)
(including unamortised lease incentives such as rent free periods).
There were no onerous lease contracts that would have required an
adjustment to the right-of-use assets at the date of initial
application.
For leases previously classified as finance leases, which relate
to plant and equipment and motor vehicles, the Group recognised the
carrying amount of the lease asset and lease liability immediately
before transition as the carrying amount of the right-of-use asset
and the lease liability at the date of initial application.
20 ACCOUNTING POLICIES (continued)
The overall impact of the adoption of IFRS 16 on the Group's
opening Balance Sheet is as follows:
As at IFRS 16 As at
31 December adjustment 1 January
2018 2019
GBPm GBPm GBPm
Non-current assets
Property, plant and equipment 96.0 (11.9) 84.1
Right-of-use assets - 48.0 48.0
Current assets
Trade and other receivables 52.1 (1.0) 51.1
Current liabilities
Trade and other payables 64.8 (2.3) 62.5
Borrowings 14.5 (3.0) 11.5
Lease liabilities - 9.2 9.2
----------------------------------- ------------ ----------- ----------
Non-current liabilities
Borrowings 91.0 (4.4) 86.6
Lease liabilities - 35.4 35.4
----------------------------------- ------------ ----------- ----------
Net assets 190.4 0.2 190.6
----------------------------------- ------------ ----------- ----------
Capital and reserves attributable
to the Company's Shareholders
Retained earnings 136.3 0.2 136.5
----------------------------------- ------------ ----------- ----------
Total equity 190.4 0.2 190.6
----------------------------------- ------------ ----------- ----------
The adoption of IFRS 16 increased retained earnings as at 1
January 2019 by GBP0.2m. This represents the reversal of previously
recognised property cost accruals which are no longer required.
The table below presents a reconciliation from operating lease
commitments disclosed at 31 December 2018 to lease liabilities
recognised at 1 January 2019.
GBPm
Operating lease commitments disclosed as at 31 December
2018 51.7
(Less): short-term and low value leases recognised on
a straight-line basis as an expense (0.9)
------------------------------------------------------------- -----------------------
Undiscounted operating lease commitments at 31 December
2018 50.8
Discounted using the Group's incremental borrowing rate
of at the date of initial application 37.2
Add: finance lease liabilities recognised as at 31 December
2018 7.4
------------------------------------------------------------- -----------------------
Lease liabilities recognised as at 1 January 2019 44.6
------------------------------------------------------------- -----------------------
Of which are:
Current lease liabilities 9.2
Non-current lease liabilities 35.4
------------------------------------------------------------- -----------------------
Lease liabilities recognised as at 1 January 2019 44.6
------------------------------------------------------------- -----------------------
20 ACCOUNTING POLICIES (continued)
The tables below shows the split of the total right-of-use
assets and lease liabilities following the adoption of IFRS 16:
As at
1 January
2019
GBPm
Properties 30.8
Plant and equipment 5.3
Leases previously held under finance leases 11.9
---------------------------------------------- --------------------
Total right-of-use assets 48.0
---------------------------------------------- --------------------
Properties 32.0
Plant and equipment 5.2
Leases previously held under finance leases 7.4
---------------------------------------------- --------------------
Total lease liabilities 44.6
---------------------------------------------- --------------------
During the half year to 30 June 2019, the application of IFRS 16
resulted in an increase in operating profit in the Consolidated
Income Statement of GBP0.6 million in comparison to treatment under
IAS 17, as operating lease payments under IAS 17 were replaced by a
depreciation charge on right-of-use assets and operating lease
payments in relation to short term and low value leases. Profit
before taxation reduced by GBP0.2 million with the inclusion of
GBP0.8 million of finance costs under the new standard.
The table below shows a reconciliation between profit under IAS
17 and the new standard, IFRS 16.
GBPm
Operating lease costs under IAS 17 4.0
(Less): Depreciation of right-of-use assets for leases
previously recognised as operating leases under IAS 17 (2.7)
(Less): Short term and low value lease expense under IFRS
16 (0.7)
------------------------------------------------------------- ------
Impact on operating profit for the half year to 30 June
2019 0.6
(Less): Finance costs associated with lease liabilities for
leases previously recognised as operating leases under IAS
17 (0.8)
------------------------------------------------------------- ------
Impact on profit before taxation for the half year to
30 June 2019 (0.2)
------------------------------------------------------------- ------
During the half year to 30 June 2019, the movement on the
right-of-use assets and lease liabilities are as follows:
Right-of-use assets As at
30 June
2019
GBPm
Opening net book value 48.0
New leases recognised 2.3
Reassessment/modification of leases previously recognised 0.9
Depreciation (3.6)
Transfer to plant, property and equipment (0.1)
----------------------------------------------------------- ---------
Closing net book value 47.5
----------------------------------------------------------- ---------
The reassessment/modification of leases relates to rent
increases and extensions to lease terms that have been agreed
during the half year to 30 June 2019 for property leases that were
in place on 1 January 2019 following the adoption of IFRS 16.
The transfer to plant, property and equipment represents the
reclassification of the net book value of finance lease assets
where the lease expired in the half year to 30 June 2019 and the
assets are now owned.
Lease liabilities As at
30 June
2019
GBPm
Opening liabilities 44.6
New leases recognised 2.3
Reassessment/modification of leases previously recognised 0.9
Lease payments (4.9)
Finance cost 0.9
----------------------------------------------------------- ---------
Closing liabilities 43.8
----------------------------------------------------------- ---------
21 PRINCIPAL RISKS AND UNCERTAINTIES
The Group operates a structured risk management process, which
identifies and evaluates risks and uncertainties and reviews
mitigation activity. The Group set out in its 2018 Annual Report
and Accounts the principal risks and uncertainties that could
impact its performance. These remain unchanged since the Annual
Report and Accounts was published and are summarised below:
Financial Risks Operational Risks Regulatory Risk
- Economy - Failure of Strategy - Health and Safety
- Cost Inflation - Customers - Compliance and
- Interest Rate Fluctuations - Competition Fraud
- Liquidity Risk - Retention and Motivation
- Taxation of Employees
- Loss of a Processing
Facility
- Information Systems and
Technology
These risks and uncertainties do not comprise all of the risks
that the Group may face and are not listed in any order of
priority. Additional risks and uncertainties not presently known to
the Board, or deemed to be less material may also have an adverse
effect on the Group. These include risks resulting from the UK's
decision to leave the EU which could adversely affect the economic
and political environment as well as affecting financial risks such
as liquidity and credit. The Board views the potential impact of
Brexit as an integral part of its principal risks rather than a
stand-alone risk. However, there is still significant uncertainty
about the withdrawal process, its timeframe, and the outcome of
negotiations about future arrangements between the UK and the EU,
and the period for which existing EU laws for member states will
continue to apply to the UK. The Board will continue to assess the
risk to the business as the Brexit process evolves and will
implement any appropriate action.
The main area of potential risk and uncertainty on a short-term
forward-looking basis over the remainder of the financial year
centres on the sales and profit impact from economic conditions and
customer demand, together with the impact of product cost pressures
and an associated level of customer price inflation. Other
potential risks and uncertainties around sales and/or profits
include competitor activity, energy prices, product supply and
other operational processes, product safety, business interruption,
infrastructure development, reliance on key personnel and the
regulatory environment.
Further details of the Principal Risks and Uncertainties facing
the Group were detailed on pages 28 to 31 of the 2018 Annual Report
and Accounts.
22 PUBLISHED FINANCIAL STATEMENTS
As previously announced, there is no longer a requirement to
send out half-yearly reports to all Shareholders or to advertise
the content in a national newspaper.
In order to reduce costs, the Company has taken advantage of
this reporting regime and no longer publishes half-yearly reports
for individual circulation to Shareholders. Information that would
normally be included in a half-yearly report is made available on
the Company's website at www.jsg.com.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR QLLFBKKFBBBK
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