TIDMJSG
RNS Number : 9906I
Johnson Service Group PLC
06 September 2016
6 September 2016
Johnson Service Group PLC
Interim Results for the six months ended 30 June 2016
"Significant progress"
Johnson Service Group PLC, the Textile Services group (the
'Group'), announces its interim results for the six months ended 30
June 2016.
FINANCIAL SUMMARY
H1 2016 H1 2015 % increase FY 2015
------------------------ ---------- ---------- ----------- ----------
Revenue GBP137.6m GBP109.2m 26.0% GBP234.4m
Adjusted Operating GBP16.1m GBP11.3m 42.5% GBP27.9m
Profit(1)
Adjusted Profit Before GBP14.1m GBP10.1m 39.6% GBP25.2m
Tax(2)
Adjusted Fully Diluted
EPS(3) 3.3p 2.6p 26.9% 6.3p
Dividend 0.80p 0.65p 23.1% 2.10p
Net Debt GBP108.9m GBP72.4m - GBP71.2m
HIGHLIGHTS
* Strong performance with Adjusted Operating Profit(1)
increasing by 42.5% to GBP16.1 million
* Adjusted Profit Before Tax(2) up by 39.6% to GBP14.1
million
* Interim dividend of 0.80 pence per share, up 23.1%
* Textile Rental continues to perform strongly
* Acquisitions performing ahead of management
expectations and significantly increasing our
presence in the high volume hotel linen market
* Successful placing of 33.1 million new shares,
raising net proceeds of GBP28.7 million
* Net debt slightly better than expected at GBP108.9
million (Pro-forma(4) December 2015: GBP115.6
million)
* Amended Bank Facility signed in April 2016 providing
significant headroom for future investment
1 Statutory Operating Profit was GBP12.4 million (June 2015:
GBP2.4 million; December 2015: GBP15.4 million). 'Adjusted
Operating Profit' is before charging GBP3.0 million (June 2015:
GBP1.3 million; December 2015: GBP3.5 million) of amortisation and
impairment of intangible assets (excluding software amortisation)
and net exceptional items of GBP0.7 million (June 2015: GBP7.6
million; December 2015: GBP9.0 million).
2 Statutory Profit Before Tax was GBP10.4 million (June 2015:
GBP1.2 million; December 2015: GBP12.7 million). 'Adjusted Profit
Before Tax' is Adjusted Operating Profit, less total finance
costs.
3 'Adjusted Fully Diluted EPS' is calculated using Adjusted
Profit Before Tax and deducting the charge to, or adding the credit
for, tax attributable to those items included within Adjusted
Profit Before Tax.
4 Pro-forma basis after adjusting for the acquisition of Zip,
Chester and Afonwen (GBP72.4 million plus GBP0.7 million costs) and
the equity fund raising (net proceeds GBP28.7 million). Reported
net debt was GBP71.2 million.
OUTLOOK
The Board remains confident in the future prospects of the Group
and its strategy to further develop a stronger presence within the
textile rental market whilst continuing to deliver benefits from
recent high quality, earnings enhancing acquisitions.
Although there is increased uncertainty in the economy we expect
to make further progress in the second half of the year and the
result for the full year to be slightly ahead of current market
expectations.
Chris Sander, Chief Executive Officer of Johnson Service Group,
commented:
"The Group continues to maintain strong growth with both revenue
and adjusted profit before tax significantly up on the same period
last year. The recent acquisitions are performing better than we
initially expected and have significantly increased our presence in
the high volume hotel linen market."
ANALYST MEETING
A presentation for analysts will be held today at 09.30 at
Investec, 2 Gresham Street, London, EC2V 7QP. A copy of the
presentation will be available on the Company's website
(www.jsg.com) following the meeting.
ENQUIRIES
Johnson Service Group PLC
Chris Sander, CEO
Yvonne Monaghan, CFO
Tel: 020 3772 2500 (on the day)
Tel: 01928 704 600 (thereafter)
Investec Investment Banking (NOMAD) Bell Pottinger
David Flin Henry Lerwill
Matt Lewis Clinton Manning
James Rudd Zara de Belder
Tel: 020 7597 4000 Tel: 020 3772 2500
Note: throughout this statement 'adjusted operating profit'
refers to operating profit before amortisation and impairment of
intangible assets (excluding software amortisation) and exceptional
items. 'Adjusted profit before tax' refers to adjusted operating
profit less total finance costs. '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.
OPERATIONAL AND FINANCIAL REVIEW
Group Results
Total revenue in the six months to June 2016 was GBP137.6
million (June 2015: GBP109.2 million). The first half benefitted
from the acquisitions completed in recent months but also reflected
the impact of the reduced number of Drycleaning branches following
the closures in March 2015. Adjusted operating profit increased by
42.5% to GBP16.1 million (June 2015: GBP11.3 million).
Adjusted profit before tax increased to GBP14.1 million (June
2015: GBP10.1 million). The underlying tax rate was 20.3% (June
2015: 20.7%).
Net exceptional items in the first half of 2016 amounted to
GBP0.7 million (June 2015: GBP7.6 million) in relation to a gain on
the disposal of a vacated Textile Rental plant in Leeds (GBP0.5
million), offset by costs incurred in respect of liability
management exercises in relation to reducing the defined benefit
pension liabilities (GBP0.3 million) and for business acquisition
activity and subsequent restructuring (GBP0.9 million) with a
further GBP0.5 million of restructuring costs expected to be
incurred in the second half.
Net finance costs were GBP2.0 million (June 2015: GBP1.2
million) reflecting higher levels of bank borrowings following the
recent acquisitions.
After amortisation and impairment of intangible assets
(excluding software amortisation) of GBP3.0 million (June 2015:
GBP1.3 million) the pre-tax profit was GBP10.4 million (June 2015:
GBP1.2 million).
Adjusted fully diluted earnings per share increased 26.9% to 3.3
pence (June 2015: 2.6 pence) while fully diluted earnings per share
after amortisation and impairment of intangible assets (excluding
software amortisation) and exceptional items increased to 2.4 pence
(June 2015: 0.2 pence).
Dividend
In continuation of our stated intention to adopt a progressive
dividend policy, whilst maintaining an adequate level of cover, the
Board has proposed an interim dividend of 0.80 pence (June 2015:
0.65 pence), representing an increase of 23.1%, reflecting the
earnings accretion from the recent acquisitions, the Board's
confidence in the business going forward and a rebalancing of
interim and final dividend to be broadly in line with historic
ratios.
The interim dividend will be paid on 4 November 2016 to those
Shareholders on the register of members at the close of business on
7 October 2016. The ex-dividend date is 6 October 2016.
Pension Deficit
The recorded net deficit after tax for all post-employment
benefit obligations has reduced to GBP11.1 million at June 2016
from GBP13.0 million at December 2015. The reduction is due, in
part, to the higher than expected return on scheme assets offset by
the net impact of lower Corporate Bond yields and lower inflation
on the valuation of scheme liabilities.
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 2016, of which GBP0.9 million was
contributed during the first half.
Finances
Total net debt at the end of the first half was GBP108.9 million
(December 2015: GBP71.2 million), slightly better than management
expectations and reflecting the strong trading performance in the
first half, the financing of the Zip, Chester and Afonwen
acquisitions and the equity placing. Our net debt to Adjusted
EBITDA leverage ratio was 2.21x at the end of June and we remain on
track to return to our stated target of a ratio of not more than
2.00x by the first quarter of 2017.
The amended bank facility, agreed prior to the recent
acquisitions, matures in April 2020 and comprises of a GBP120.0
million revolving credit facility with an additional GBP30.0
million short term facility available to April 2017. The facility
is considerably in excess of the anticipated level of borrowings,
with comfortable cover on all bank covenants for the foreseeable
future.
Interest cover based on adjusted operating profit was 8.1 times
(June 2015: 9.4 times), with interest costs on our floating rate
borrowings continuing to benefit from the current low levels of
LIBOR. Two hedging arrangements, each for GBP15.0 million of
borrowings, are in place whereby LIBOR is replaced by a fixed rate
of 1.4725% for the period January 2016 to January 2019 and 1.665%
for the period January 2016 to January 2020. Two new hedging
arrangements, each for GBP10.0 million, were entered into at the
end of June 2016 whereby LIBOR is replaced by a fixed rate of 0.49%
to June 2018 and 0.5525% to June 2019.
OPERATIONAL HIGHLIGHTS
Textile Rental
Our Textile Rental business trades through five very well
recognised brands servicing three market sectors within Textile
Rental in the UK. These are 'Apparelmaster', which predominantly
provides workwear rental and laundry services to all sectors of
industry, 'Stalbridge' and 'London Linen', which provide premium
linen services to the restaurant, hospitality and corporate events
market and 'Bourne' and 'Afonwen', which provide high volume hotel
linen.
Textile Rental revenue increased by 35.0% to GBP115.7 million
(June 2015: GBP85.7 million), whilst adjusted operating profit
increased by 39.5% to GBP17.3 million (June 2015: GBP12.4 million)
helped by the businesses acquired during both 2015 and 2016. The
associated margin increased from 14.5% to 15.0%. As it has over
many years, the Textile Rental business continues to focus on
customer service, in order to maintain its high customer retention
levels, and on targeted investment across the division to improve
production efficiency and capacity.
In workwear rental, the Apparelmaster business has again seen a
period of growth in the first half of the year, both in terms of
new business wins and growth within existing customers. The
continued focus on customer service along with numerous operational
initiatives has helped maintain a high level of customer retention.
A combination of the above and effective cost control has
contributed to a growth in margin.
The business continues to invest in highly efficient and best in
class capital equipment to increase productivity whilst at the same
time reducing energy consumption. As part of our ongoing strategy,
further investments are being made at our Basingstoke and
Letchworth sites to improve productivity and capacity, whilst the
recent investment in our new site in Leeds continues to deliver
improved margin growth.
The Lancaster plant, which suffered flood damage in late 2015,
is being modernised with new equipment and is expected to be fully
operational by September 2016. In spite of the significant water
damage to processing equipment, customers experienced negligible
disruption of delivery and service, the credit for which goes to
all employees involved in helping us through a challenging
time.
In restaurant and catering, Stalbridge has performed well in the
first half of 2016. A new sales management reporting system and
database combined with a vigorous, targeted marketing campaign has
delivered new sales ahead of expectations. This, together with good
customer retention, has contributed to encouraging organic
growth.
Ashbon Laundry in Grantham, acquired at the end of 2015, has
been transformed and completely rebranded as a Stalbridge
processing plant. A substantial redistribution of customers has
been implemented resulting in the closure of a distribution depot
in Nuneaton with little disruption to service and the related
benefit of reduced operating costs. Stalbridge and London Linen are
continuing to work together to streamline their respective product
lines, customer relationships and transport distribution links with
customers being serviced from the most appropriate processing
location. To date, work has been successfully transferred in
Scotland, the North East and, more recently, the South West of
England.
London Linen, which joined the Group in April 2015, has
continued to trade well and as a result of working with Stalbridge,
is better able to focus on servicing the London market.
Revenue has continued to increase, with strong sales to existing
customers reflecting the focus of the business on delivering
excellent service.
Further investment in the restaurant and catering businesses
continues with new, modern and highly efficient equipment being
installed across the estate to further reduce energy consumption
and to continue to improve quality and productivity.
As previously indicated, we have commenced work on the GBP4.5
million capital project to increase and improve production capacity
at the Southall site in West London. The project will be completed
in the second half of 2017.
In high volume hotel linen, the first six months of this year
have marked a major milestone in our further development in this
part of the market under the Bourne and Afonwen brands with the
continued successful implementation of the Board's strategy of
buying well invested, high quality businesses which increase our
presence and geographical coverage in the marketplace.
In January, we successfully completed the acquisition of Zip
Textiles in Birmingham, which provides an important strategic fit
with strong opportunities to deliver long term increased logistical
efficiencies in the Midlands region.
In April, we took an important further strategic step forward
through the acquisition of Afonwen as well as the smaller
acquisition of Chester Textiles, which together have significantly
strengthened our presence in the North West and South East of
England and in Wales.
We have already started to integrate the businesses successfully
into the wider Johnson Group and, at the end of June, Zip Textiles
was rebranded as Bourne and Chester Textiles was rebranded as
Afonwen, consolidating the acquisitions into two well-established
brands in the marketplace. Afonwen and Bourne are working well
together in representing our interests in this key market of high
volume hotel linen and the acquisitions have been well received by
our customers.
Overall volumes and customer retention across the high volume
hotel linen business have been in line with expectations and we
expect to see improved logistical benefits and synergies over the
coming months.
Drycleaning
Our Drycleaning business is represented across the UK through
the highly recognised Johnson Cleaners brand and our London based
premium brand, Jeeves of Belgravia.
Revenue was down to GBP21.9 million (June 2015: GBP23.5 million)
reflecting the change in the portfolio mix following the
reorganisation programme completed in early 2015. There were 203
branches and 154 Waitrose locations trading at the end of June
2016. Adjusted operating profit increased to GBP0.6 million (June
2015: GBP0.5 million).
Following the restructure of the business last year, the
performance in the first half has been solid, with a modest
increase in profit and related margin.
The partnership with Waitrose continues to expand and we are
pleased with the growth as we enter the second year of trading in
many locations. We do anticipate that a small number of additional
locations will be opened in the latter part of the year.
Responsibility Statement
The condensed consolidated interim financial statements comply
with the Disclosure 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 2015. There have been
no changes from those listed other than Michael Del Mar who retired
from the Board on 5 May 2016. Details of the Directors are
available on the Johnson Service Group PLC website: www.jsg.com
By order of the Board
Chris Sander Yvonne Monaghan
Chief Executive Officer Chief Financial Officer
6 September 2016 6 September 2016
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
to to Year ended
30 June 30 June 31 December
2016 2015 2015
Note GBPm GBPm GBPm
REVENUE 2 137.6 109.2 234.4
OPERATING PROFIT 2 12.4 2.4 15.4
OPERATING PROFIT BEFORE AMORTISATION
AND IMPAIRMENT OF INTANGIBLE ASSETS
(EXCLUDING SOFTWARE AMORTISATION)
AND EXCEPTIONAL ITEMS 16.1 11.3 27.9
Amortisation and impairment of
intangible assets (excluding software
amortisation) (3.0) (1.3) (3.5)
Exceptional items 3
- Restructuring and other costs - (6.8) (7.5)
- Costs in relation to business
acquisition activity (0.9) (0.8) (1.5)
- Pension costs (0.3) - -
- Profit on disposal of freehold
property 0.5 - -
OPERATING PROFIT 2 12.4 2.4 15.4
Finance cost (1.7) (0.9) (2.2)
Finance income - - 0.1
Notional interest (0.3) (0.3) (0.6)
------------------------------------- ---- --------- --------- --------------
Total finance cost (2.0) (1.2) (2.7)
PROFIT BEFORE TAXATION 10.4 1.2 12.7
Taxation charge* 4 (2.3) (0.5) (2.4)
PROFIT FOR THE PERIOD ATTRIBUTABLE
TO EQUITY HOLDERS 8.1 0.7 10.3
------------------------------------- ---- --------- --------- ------------
EARNINGS PER SHARE**
Basic earnings per share 7
From total operations 2.4p 0.2p 3.2p
Fully diluted earnings per share
From total operations 2.4p 0.2p 3.2p
Adjusted basic earnings per
share
From total operations 3.3p 2.6p 6.3p
Adjusted fully diluted earnings
per share
From total operations 3.3p 2.6p 6.3p
The notes on pages 12 to 24 form an integral part of these
condensed consolidated interim financial statements.
* Including GBP0.6 million credit (June 2015: GBP0.3 million
credit; December 2015: GBP0.8 million credit) relating to
amortisation and impairment of intangible assets (excluding
software amortisation) and GBPnil (June 2015: GBP1.3 million
credit; December 2015: GBP1.7 million credit) in relation to
exceptional items of which GBPnil (June 2015: GBPnil; December
2015: GBP0.2 million credit) relates to the prior year.
** Earnings per share from continuing operations are the same as for total operations.
Consolidated Statement of Comprehensive Income
Half Half
year to year to Year ended
30 June 30 June 31 December
2016 2015 2015
Note GBPm GBPm GBPm
Profit for the period 8.1 0.7 10.3
---------------------------------------------- ---- ----------- ----------- ------------------
Items that will not be subsequently
reclassified to profit or loss
Re-measurement gains on post-employment
benefit obligations 8 1.5 2.3 1.2
Taxation charge in respect of
re-measurement gains (0.3) (0.5) (0.2)
Change in deferred tax due to
change in tax rate - - (0.2)
Items that may be subsequently
reclassified to profit or loss
Cash flow hedges
(net of taxation) - fair value loss (0.7) (0.2) (1.0)
- transfers to operating
profit 0.2 0.1 0.3
- transfers to finance
cost 0.1 0.2 0.3
--------------------------------------------- ---- ----------- ----------- ------------------
Other comprehensive income for
the period 0.8 1.9 0.4
TOTAL COMPREHENSIVE INCOME FOR
THE PERIOD 8.9 2.6 10.7
---------------------------------------------- ---- ----------- ----------- ------------------
Consolidated Statement of Changes in Shareholders' Equity
Capital
Share Share Merger Redemption Hedge Retained Total
Capital Premium Reserve Reserve Reserve Earnings Equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January
2015 30.0 14.5 1.6 0.6 (0.4) 33.7 80.0
---------------------------- --------- --------- --------- ------------ --------- ---------- --------
Profit for the period - - - - - 0.7 0.7
Other comprehensive
income for the period - - - - 0.1 1.8 1.9
---------------------------- --------- --------- --------- ------------ --------- ---------- --------
Total comprehensive
income for the period - - - - 0.1 2.5 2.6
Share options (value
of employee services) - - - - - 0.2 0.2
Deferred tax on share
options - - - - - 0.1 0.1
Issue of share capital
(net of costs) 3.1 0.1 - - - 18.0 21.2
Dividend paid - - - - - (3.6) (3.6)
---------------------------- --------- --------- --------- ------------ --------- ---------- --------
Transactions with
Shareholders recognised
directly in Shareholders'
equity 3.1 0.1 - - - 14.7 17.9
---------------------------- --------- --------- --------- ------------ --------- ---------- --------
Balance at 30 June
2015 33.1 14.6 1.6 0.6 (0.3) 50.9 100.5
---------------------------- --------- --------- --------- ------------ --------- ---------- --------
Profit for the period - - - - - 9.6 9.6
Other comprehensive
loss for the period - - - - (0.5) (1.0) (1.5)
---------------------------- --------- --------- --------- ------------ --------- ---------- --------
Total comprehensive
(loss) / income for
the period - - - - (0.5) 8.6 8.1
Share options (value
of employee services) - - - - - 0.3 0.3
Issue of share capital
(net of costs) - (0.1) - - - 0.1 -
Dividend paid - - - - - (2.1) (2.1)
---------------------------- --------- --------- --------- ------------ --------- ---------- --------
Transactions with
Shareholders recognised
directly in Shareholders'
equity - (0.1) - - - (1.7) (1.8)
---------------------------- --------- --------- --------- ------------ --------- ---------- --------
Balance at 31 December
2015 33.1 14.5 1.6 0.6 (0.8) 57.8 106.8
---------------------------- --------- --------- --------- ------------ --------- ---------- --------
Profit for the period - - - - - 8.1 8.1
Other comprehensive
(loss) / income for
the period - - - - (0.4) 1.2 0.8
---------------------------- --------- --------- --------- ------------ --------- ---------- --------
Total comprehensive
(loss) / income for
the period - - - - (0.4) 9.3 8.9
Share options (value
of employee services) - - - - - 0.4 0.4
Issue of share capital
(net of costs) 3.3 0.1 - - - 25.4 28.8
Dividend paid - - - - - (4.8) (4.8)
---------------------------- --------- --------- --------- ------------ --------- ---------- --------
Transactions with
Shareholders recognised
directly in Shareholders'
equity 3.3 0.1 - - - 21.0 24.4
---------------------------- --------- --------- --------- ------------ --------- ---------- --------
Balance at 30 June
2016 36.4 14.6 1.6 0.6 (1.2) 88.1 140.1
---------------------------- --------- --------- --------- ------------ --------- ---------- --------
Consolidated Balance Sheet
As at As at As at
30 June 30 June 31 December
2016 2015 2015
GBPm GBPm GBPm
Note (Restated*) (Restated*)
ASSETS
Goodwill 124.4 91.1 93.5
Intangible assets 52.1 36.5 36.6
Property, plant and equipment 82.9 57.0 58.2
Textile rental items 43.5 35.8 36.5
Trade and other receivables 0.4 1.1 0.4
Deferred income tax assets 3.1 3.3 3.4
NON-CURRENT ASSETS 306.4 224.8 228.6
------------------------------------ ------ ----------------- ------------ ------------
Inventories 2.7 2.8 2.7
Trade and other receivables 48.5 39.7 40.5
Cash and cash equivalents 5.4 4.5 4.6
CURRENT ASSETS 56.6 47.0 47.8
------------------------------------ ------ ----------------- ------------ ------------
LIABILITIES
Trade and other payables 66.1 53.2 52.6
Current income tax liabilities 4.0 1.8 2.9
Borrowings 17.9 8.7 11.8
Derivative financial liabilities - 0.2 0.3
Provisions 4.6 9.1 6.2
CURRENT LIABILITIES 92.6 73.0 73.8
------------------------------------ ------ ----------------- ------------ ------------
NET CURRENT LIABILITIES (36.0) (26.0) (26.0)
------------------------------------ ------ ----------------- ------------ ------------
Post-employment benefit obligations 8 13.7 15.4 16.0
Deferred income tax liabilities 10.1 7.0 6.7
Other non-current liabilities 3.2 0.8 2.2
Borrowings 96.4 68.2 64.0
Derivative financial liabilities 1.4 0.1 0.6
Provisions 5.5 6.8 6.3
NON-CURRENT LIABILITIES 130.3 98.3 95.8
------------------------------------ ------ ----------------- ------------ ------------
NET ASSETS 140.1 100.5 106.8
------------------------------------ ------ ----------------- ------------ ------------
EQUITY
CAPITAL AND RESERVES ATTRIBUTABLE
TO THE COMPANY'S SHAREHOLDERS
Share capital 10 36.4 33.1 33.1
Share premium 14.6 14.6 14.5
Merger reserve 1.6 1.6 1.6
Capital redemption reserve 0.6 0.6 0.6
Hedge reserve (1.2) (0.3) (0.8)
Retained earnings 88.1 50.9 57.8
------------------------------------ ------ ----------------- ------------ ------------
TOTAL SHAREHOLDERS' EQUITY 140.1 100.5 106.8
------------------------------------ ------ ----------------- ------------ ------------
* Comparatives have been restated as a result of guidance issued
in March 2016 by the IFRS Interpretations Committee regarding when
bank overdrafts in cash-pooling arrangements would meet the
requirements for offsetting in accordance with IAS 32: 'Financial
instruments: Presentation'. Further details are provided in note
19.
The notes on pages 12 to 24 form an integral part of these
condensed consolidated interim financial statements. The condensed
consolidated interim financial statements on pages 8 to 24 were
approved by the Board of Directors on 6 September 2016 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 2015
2016 2015
Note GBPm GBPm GBPm
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the period 8.1 0.7 10.3
Adjustments for:
Income tax
charge 4 2.3 0.5 2.4
Finance income
and expense 2.0 1.2 2.7
Depreciation and impairment
of property, plant and equipment 19.9 15.3 33.0
Amortisation and impairment
of intangible assets 3.1 1.3 3.6
Net profit on sale of property,
plant and equipment (0.3) - -
Decrease in inventories 0.3 0.3 0.1
Increase in trade and other
receivables (0.8) (3.1) (0.8)
Increase in trade and other
payables 3.0 5.1 2.5
Costs in relation to business
acquisition activity 0.9 0.8 1.5
Deficit recovery payments in
respect of post-employment benefit
obligations (0.9) (1.0) (1.9)
Share-based payments 0.4 0.2 0.5
Post-employment benefit obligations (0.1) (0.1) (0.1)
(Decrease) / increase in provisions (2.4) 0.7 (2.3)
---------------------------------------- ---- --------- --------- ------------
Cash generated from operations 35.5 21.9 51.5
Interest paid (1.6) (1.2) (2.2)
Taxation paid (1.9) (0.9) (2.3)
---------------------------------------- ---- --------- --------- ------------
Net cash generated from operating
activities 32.0 19.8 47.0
---------------------------------------- ---- --------- --------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of business (net
of cash and cash equivalents
acquired) 11 (57.2) (65.7) (70.4)
Proceeds from sale of business
(net of cash disposed) 12 - 0.2 0.9
Purchase of property, plant
and equipment (5.1) (3.8) (4.4)
Proceeds from sale of property,
plant and equipment 0.6 0.1 0.1
Purchase of intangible assets (0.1) - -
Purchase of textile rental items (16.9) (12.8) (27.5)
Proceeds received in respect
of special charges 1.5 1.0 2.2
Net cash used in investing activities (77.2) (81.0) (99.1)
---------------------------------------- ---- --------- --------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 68.0 73.5 93.0
Repayments of borrowings (43.3) (27.0) (54.3)
Capital element of finance leases (2.6) (0.5) (1.6)
Net proceeds from issue of Ordinary
shares 28.8 21.2 21.2
Dividend paid (4.8) (3.6) (5.7)
Net cash generated from financing
activities 46.1 63.6 52.6
---------------------------------------- ---- --------- --------- ------------
Net increase in cash and cash
equivalents 0.9 2.4 0.5
Cash and cash equivalents at
beginning of period (4.4) (4.9) (4.9)
Cash and cash equivalents at
end of period 14 (3.5) (2.5) (4.4)
---------------------------------------- ---- --------- --------- ------------
The notes on pages 12 to 24 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 related services to both
businesses and consumers. The Group has two distinct reporting
segments:
Textile Rental
Provision and laundering of workwear, roller towels, corporate
apparel and dust mats; premium linen to the restaurant, hospitality
and corporate event markets; and linen to the high volume hotel
market.
Drycleaning
Provision of retail and commercial drycleaning and other
associated support services.
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
approved for issue by the Board on 6 September 2016.
1 BASIS OF PREPARATION
These condensed consolidated interim financial statements of the
Group are for the six months ended 30 June 2016. 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 nor 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 2015 consolidated financial
statements, which have been prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union.
Other than as set out in note 19, financial information for the
year ended 31 December 2015 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 within note 19, financial information
for the half year ended 30 June 2015 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 run to April
2020. Following the recent UK referendum, 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 2016.
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
reporting in the Interim and Annual Reports. Details of the Group's
segments were provided on page 60 of the 2015 Annual Report.
Following the acquisitions on 31 January 2016, 26 April 2016 and 28
April 2016, Zip Textiles (Services) Limited, Chester Laundry
Limited and Portgrade Limited (together with its trading subsidiary
Afonwen Laundry Limited) respectively are included within the
Textile Rental segment.
The Board assesses the performance of the reporting segments
based on a measure of operating profit, both including and
excluding the effects of non-recurring items from the reporting
segments, such as restructuring costs and impairments when the
impairment is the result of an isolated, non-recurring or
non-operating event. Interest income and expenditure are not
included in the result for each reporting segment that is reviewed
by the Board. Segment results include items directly attributable
to a segment as well as those that can be allocated on a reasonable
basis, for example, rental income received by Johnson Group
Properties PLC is credited back, where appropriate, to the paying
company for the purposes of segment reporting. There have been no
changes in measurement methods used compared to the prior year.
Other information provided to the Board is measured in a manner
consistent with that in the financial statements. Segment assets
exclude deferred income tax assets, current income tax assets and
cash and cash equivalents, all of which are managed on a central
basis. Segment liabilities include non-bank borrowings, but exclude
deferred income tax liabilities, current income tax liabilities,
bank borrowings and derivative financial liabilities all of which
are managed on a central basis. These balances form part of the
reconciliation to total assets and liabilities.
Inter-segment pricing is determined on an arm's length basis.
Exceptional items have been included within the appropriate
reporting segment as shown on pages 13 to 15.
The reporting segment results for the half year ended 30 June
2016, together with comparative figures, are as follows:
All
Half year to 30 June Textile Other
2016 Rental Drycleaning Segments Total
GBPm GBPm GBPm GBPm
REVENUE 115.7 21.9 - 137.6
---------------------------------------- --------------------- ------------- -------- ------------ ---------- --------
RESULT
OPERATING PROFIT BEFORE
AMORTISATION
AND IMPAIRMENT OF INTANGIBLE
ASSETS (EXCLUDING SOFTWARE
AMORTISATION) AND EXCEPTIONAL
ITEMS 17.3 0.6 (1.8) 16.1
Amortisation and impairment
of intangible assets (3.0) - - (3.0)
Exceptional items:
- Costs in relation
to business acquisition
activity (0.9) - - (0.9)
- Pension costs - - (0.3) (0.3)
- Profit on disposal
of freehold property 0.5 - - 0.5
OPERATING PROFIT / (LOSS) 13.9 0.6 (2.1) 12.4
Total finance cost (2.0)
Profit before taxation 10.4
Taxation (2.3)
---------------------------------------- --------------------- ------------- -------- ------------ ---------- --------
Profit for the period 8.1
All
Discontinued Textile Other
Operations Rental Drycleaning Segments Total
GBPm GBPm GBPm GBPm GBPm
BALANCE SHEET INFORMATION
Segment assets - 316.1 18.6 19.8 354.5
Unallocated Deferred income
assets: tax assets 3.1
Cash and cash
equivalents 5.4
-------------------------------------- ----------------------- ------------- -------- ------------ ---------- --------
Total assets 363.0
---------------------------------------- --------------------- ------------- -------- ------------ ---------- --------
Segment liabilities (2.7) (75.8) (13.8) (4.3) (96.6)
Unallocated
liabilities: Bank borrowings (97.1)
Current income
tax liabilities (4.0)
Deferred income
tax liabilities (10.1)
Derivative financial
liabilities (1.4)
Post-employment
benefit obligations (13.7)
-------------------------------------- ----------------------- ------------- -------- ------------ ---------- --------
Total liabilities (222.9)
---------------------------------------- --------------------- ------------- -------- ------------ ---------- --------
OTHER INFORMATION
Non-current asset additions
- Property, plant and
equipment - 4.2 0.4 0.3 4.9
- Textile rental items - 15.9 - - 15.9
- Intangible software - 0.1 - - 0.1
Depreciation and amortisation
expense
- Property, plant and
equipment - 4.4 0.7 0.1 5.2
- Textile rental items - 14.7 - - 14.7
- Intangible software - 0.1 - - 0.1
- Customer contracts - 3.0 - - 3.0
All
Half year to 30 June Textile Other
2015 Rental Drycleaning Segments Total
GBPm GBPm GBPm GBPm
REVENUE 85.7 23.5 - 109.2
---------------------------------------- --------------------- ------------- -------- ------------ --------- ------------
RESULT
OPERATING PROFIT BEFORE
AMORTISATION
AND IMPAIRMENT OF INTANGIBLE
ASSETS (EXCLUDING SOFTWARE
AMORTISATION) AND EXCEPTIONAL
ITEMS 12.4 0.5 (1.6) 11.3
Amortisation and impairment
of intangible assets (1.3) - - (1.3)
Exceptional items:
- Restructuring and
other costs (0.6) (6.2) - (6.8)
- Costs in relation
to business acquisition
activity (0.8) - - (0.8)
OPERATING PROFIT / (LOSS) 9.7 (5.7) (1.6) 2.4
Total finance cost (1.2)
Profit before taxation 1.2
Taxation (0.5)
---------------------------------------- --------------------- ------------- -------- ------------ --------- ------------
Profit for the period 0.7
All
Discontinued Textile Other
Operations Rental Drycleaning Segments Total
GBPm
GBPm GBPm GBPm GBPm (Restated*)
BALANCE SHEET INFORMATION
Segment assets 0.8 228.8 20.1 14.3 264.0
Unallocated Deferred income
assets: tax assets 3.3
Cash and cash
equivalents 4.5
-------------------------------------- ----------------------- ------------- -------- ------------ --------- ------------
Total assets 271.8
---------------------------------------- --------------------- ------------- -------- ------------ --------- ------------
Segment liabilities (3.6) (45.4) (19.7) (4.6) (73.3)
Unallocated
liabilities: Bank borrowings (73.5)
Current income
tax liabilities (1.8)
Deferred income
tax liabilities (7.0)
Derivative financial
liabilities (0.3)
Post-employment
benefit obligations (15.4)
-------------------------------------- ----------------------- ------------- -------- ------------ --------- ------------
Total liabilities (171.3)
---------------------------------------- --------------------- ------------- -------- ------------ --------- ------------
OTHER INFORMATION
Non-current additions
- Property, plant and
equipment - 3.5 0.2 - 3.7
- Textile rental items - 13.9 - - 13.9
Depreciation and amortisation
expense
- Property, plant and
equipment - 3.0 1.1 0.1 4.2
- Textile rental items - 11.1 - - 11.1
- Customer contracts - 1.3 - - 1.3
* Comparatives have been restated as a result of guidance issued
in March 2016 by the IFRS Interpretations Committee regarding when
bank overdrafts in cash-pooling arrangements would meet the
requirements for offsetting in accordance with IAS 32: 'Financial
instruments: Presentation'. Further details are provided in note
19.
All
Year ended 31 December Textile Other
2015 Rental Drycleaning Segments Total
GBPm GBPm GBPm GBPm
REVENUE 188.2 46.2 - 234.4
------------------------------------- ----------------- ------------- -------- ------------ --------- --------------
RESULT
OPERATING PROFIT BEFORE
AMORTISATION
AND IMPAIRMENT OF INTANGIBLE
ASSETS (EXCLUDING SOFTWARE
AMORTISATION) AND EXCEPTIONAL
ITEMS 29.4 2.0 (3.5) 27.9
Amortisation and impairment
of intangible assets (3.5) - - (3.5)
Exceptional items:
- Restructuring and other
costs (1.0) (6.5) - (7.5)
- Costs in relation to
business acquisition activity (1.5) - - (1.5)
OPERATING PROFIT / (LOSS) 23.4 (4.5) (3.5) 15.4
Finance cost (2.7)
Profit before taxation 12.7
Taxation (2.4)
-------------------------------------------------------- ------------- -------- ------------ --------- --------------
Profit for the period 10.3
-------------------------------------------------------- ------------- -------- ------------ --------- --------------
All
Discontinued Textile Other
Operations Rental Drycleaning Segments Total
GBPm
GBPm GBPm GBPm GBPm (Restated*)
BALANCE SHEET INFORMATION
Segment assets - 234.6 19.2 14.6 268.4
Unallocated Deferred income
assets: tax assets 3.4
Cash and cash
equivalents 4.6
--------------------- ------------- -------- ------------ --------- --------------
Total assets 276.4
------------------------------------ ------------------ ------------- -------- ------------ --------- --------------
Segment liabilities (2.8) (51.5) (16.9) (3.1) (74.3)
Unallocated
liabilities: Bank borrowings (68.8)
Current income
tax liabilities (2.9)
Deferred income
tax liabilities (6.7)
Derivative financial
liabilities (0.9)
Post-employment
benefit obligations (16.0)
--------------------- ------------- -------- ------------ --------- --------------
Total liabilities (169.6)
------------------------------------ ------------------ ------------- -------- ------------ --------- --------------
OTHER INFORMATION
Non-current additions
- Property, plant
and equipment - 7.6 0.7 - 8.3
- Textile rental items - 28.4 - - 28.4
Depreciation and amortisation
expense
- Property, plant
and equipment - 6.9 1.8 0.2 8.9
- Textile rental items - 24.1 - - 24.1
- Intangible software - 0.1 - - 0.1
- Customer contracts - 3.5 - - 3.5
* Comparatives have been restated as a result of guidance issued
in March 2016 by the IFRS Interpretations Committee regarding when
bank overdrafts in cash-pooling arrangements would meet the
requirements for offsetting in accordance with IAS 32: 'Financial
instruments: Presentation'. Further details are provided in note
19.
3 EXCEPTIONAL ITEMS
Half Half Year
year year ended
to to 31
30 June 30 June December
2016 2015 2015
GBPm GBPm GBPm
Restructuring
and other costs - Textile Rental - (0.6) (1.0)
- Drycleaning - (6.2) (6.5)
--------------------------------------------- ---------- --------- ----------
- (6.8) (7.5)
Costs in relation to business acquisition
activity (0.9) (0.8) (1.5)
Pension costs (0.3) - -
Profit on disposal of freehold
property 0.5 - -
Total exceptional items (0.7) (7.6) (9.0)
---------------------------------------------- ---------- --------- ----------
Current year exceptional items
Costs in relation to business acquisition activity
During the period to 30 June 2016, professional fees of GBP0.4
million and stamp duty of GBP0.3 million were paid relating to the
acquisitions of Zip Textiles (Services) Limited, Chester Laundry
Limited and Portgrade Limited, the parent company of Afonwen
Laundry Limited. In addition, costs of GBP0.2 million were incurred
as part of the ongoing reorganisation and integration of recent
acquisitions. Further information relating to the acquisitions is
provided in note 11.
Pension costs
During the period to 30 June 2016, professional fees of GBP0.3
million were incurred in respect of liability management exercises
in relation to the defined benefit pension scheme.
Profit on disposal of freehold property
The site of the former Textile Rental plant in Leeds that was
closed in 2015 was disposed of during the period for net proceeds
of GBP0.5 million. The carrying value was previously written down
to GBPnil in 2014.
Prior year exceptional items
Restructuring costs - Textile Rental
A new processing facility has been constructed to replace the
previous site in Leeds. The total cost of this relocation in 2014
and 2015, excluding the capital investment, was GBP2.3 million, of
which, GBP1.0 million was charged to exceptional items in 2015,
GBP0.6 million being in the six months to June 2015.
Restructuring costs - Drycleaning
As previously announced on 6 January 2015, the charge to the
Group's Income Statement for the restructuring of the Drycleaning
business and associated property provisions was, in aggregate,
GBP6.5 million net, of which GBP6.2 million was recognised in the
first half of 2015.
Costs in relation to business acquisition activity
During the prior year, costs relating to business acquisition
activity of GBP1.5 million were recognised of which GBP0.8 million
were recognised in the first half. Professional fees of GBP0.5
million and stamp duty of GBP0.3 million were paid relating to the
acquisition of London Linen Group Limited in the first half.
Further Professional fees of GBP0.2 million were incurred in the
second half relating to the acquisition of Ashbon Services Limited.
Costs of GBP0.4 million in the second half were in relation to
reorganisation and integration costs relating to the two business
acquisitions in the year. The remainder of the cost relates to fees
and expenses incurred during negotiations with undisclosed
targets.
4 TAXATION
Half Half Year
year year ended
to to 31 December
30 June 30 June 2015
2016 2015
GBPm GBPm GBPm
Current tax
UK corporation tax charge for
the period 3.2 0.5 3.3
Adjustment in relation to previous
periods - - (0.4)
--------------------------------------- --------- --------- -------------
Current tax charge for the period 3.2 0.5 2.9
Deferred tax
Origination and reversal of temporary
differences (0.9) - (0.2)
Changes in statutory tax rate - - (0.3)
Deferred tax charge for the period (0.9) - (0.5)
--------------------------------------- --------- --------- -------------
Total charge for taxation included
in the income statement 2.3 0.5 2.4
--------------------------------------- --------- --------- -------------
Taxation in relation to amortisation and impairment of
intangible assets has reduced the charge in the current period by
GBP0.6 million (June 2015: GBP0.3 million reduction in the charge;
December 2015: GBP0.8 million reduction in the charge). Taxation on
exceptional items in the current period relating to continuing
operations is GBPnil (June 2015: GBP1.3 million reduction in the
charge; December 2015: GBP1.7 million reduction in the charge) of
which GBPnil (June 2015: GBPnil; December 2015: GBP0.2 million
credit) relates to the prior year.
Reconciliation of effective tax rate
Taxation on non-exceptional items for the six months to 30 June
2016 is calculated based on the estimated average annual effective
tax rate (excluding prior year items) of 20.3% (six months ended 30
June 2015: 20.7%; year ended 31 December 2015: 21.3%). This
compares to the weighted average tax rate expected to be enacted or
substantively enacted at the balance sheet date of 20.0% (six
months ended 30 June 2015: 20.25%; year ended 31 December 2015:
20.25%). 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 and the effect of tax losses utilised.
The adjustment for under or over provisions in previous years is
recognised when the amounts are agreed.
Changes in the UK corporation tax rate
Reductions to the UK corporation tax rates were announced in the
Chancellor's Budget on 8 July 2015, by 1% to 19% in April 2017 and
by a further 1% to 18% in April 2020. These changes were
substantively enacted as part of Finance Bill 2015 on 26 October
2015.
Deferred income taxes at the balance sheet date are measured at
the tax rate expected to be applicable at the date the deferred
income tax assets and liabilities are realised. Management has
performed an assessment, for all material deferred income tax
assets and liabilities, to determine the period over which the
deferred income tax assets and liabilities are forecast to be
realised, which has resulted in an average deferred income tax rate
of 19% being used to measure all deferred tax balances as at 30
June 2016 (30 June 2015: 20%; 31 December 2015: 19%).
On 16 March 2016, a further reduction was announced replacing
the 18% tax rate effective from April 2020 with a 17% tax rate.
This further change had not been substantively enacted at the
balance sheet date and hence is not reflected in these financial
statements. If applied to the deferred tax balances at the balance
sheet date, management estimate the impact of this further
reduction in the main UK rate of tax would be to reduce the net UK
deferred tax liability by GBP0.4 million.
5 ADJUSTED PROFIT BEFORE AND AFTER TAXATION
Half Half Year
year year ended
to to 31 December
30 June 30 June 2015
2016 2015
GBPm GBPm GBPm
Profit before taxation 10.4 1.2 12.7
Amortisation and impairment of
intangible assets (excluding software
amortisation) 3.0 1.3 3.5
Restructuring and other costs - 6.8 7.5
Costs in relation to business
acquisition activity 0.9 0.8 1.5
Pension costs 0.3 - -
Profit on disposal of freehold
property (0.5) - -
Adjusted profit before taxation 14.1 10.1 25.2
Taxation on adjusted profit (2.9) (2.1) (4.9)
---------------------------------------- ---------------- --------- -------------
Adjusted profit after taxation 11.2 8.0 20.3
---------------------------------------- ---------------- --------- -------------
6 DIVIDS
Half Half Year
year year ended
to to 31 December
30 June 30 June 2015
2016 2015
Dividend per share (pence)
2016 Interim dividend proposed 0.80 - -
2015 Interim dividend proposed
and paid - 0.65 0.65
2015 Final dividend proposed
and paid - - 1.45
------------------------------------------- ------------- ---------------- ----------------
0.80 0.65 2.10
------------------------------------------- ------------- ---------------- ----------------
Half Half Year
year year ended
to to 31 December
30 June 30 June 2015
2016 2015
Shareholders' funds utilised
(GBPm)
2016 Interim dividend proposed 2.9 - -
2015 Interim dividend proposed
and paid - 2.1 2.1
2015 Final dividend proposed
and paid - - 4.8
On 13 May 2016 a final dividend of 1.45 pence per Ordinary share
in respect of 2015 was paid to Shareholders, utilising GBP4.8
million of Shareholders' funds.
The Directors are proposing an interim dividend in respect of
the year ended 31 December 2016 of 0.80 pence which will reduce
Shareholders' funds by GBP2.9 million. The dividend will be paid on
4 November 2016 to Shareholders on the register of members at the
close of business on 7 October 2016. The Trustee of the EBT has
waived its entitlement to receive dividends on the Ordinary shares
held by the Trust.
In accordance with International Financial Reporting Standards,
these condensed consolidated interim financial statements do not
reflect a liability in respect of the proposed interim
dividend.
7 EARNINGS PER SHARE
Half Half Year
year year ended
to to 31 December
30 June 30 2015
2016 June
2015
GBPm GBPm GBPm
Profit for the period attributable
to Shareholders 8.1 0.7 10.3
Amortisation and impairment of intangible
assets (net of taxation) 2.4 1.0 2.7
Exceptional items (net of taxation) 0.7 6.3 7.3
Adjusted profit attributable to
Shareholders 11.2 8.0 20.3
-------------------------------------------- ------------ ------------ --------------
Number Number Number
of shares of shares of shares
Weighted average number of Ordinary
shares 340,940,931 309,231,073 319,966,663
Potentially dilutive options* 3,985,690 2,908,147 3,239,840
-------------------------------------------- ------------ ------------ --------------
Fully diluted number of Ordinary
shares 344,926,621 312,139,220 323,206,503
-------------------------------------------- ------------ ------------ --------------
Pence Pence
Pence per per
Basic earnings per share per share share share
Basic earnings per share 2.4p 0.2p 3.2p
-------------------------------------------- ------------ ------------ --------------
Adjustment for amortisation of intangibles
assets 0.7p 0.3p 0.8p
Adjustment for exceptional items 0.2p 2.1p 2.3p
Adjusted basic earnings per share 3.3p 2.6p 6.3p
-------------------------------------------- ------------ ------------ --------------
Diluted earnings per share
Diluted earnings per share 2.4p 0.2p 3.2p
-------------------------------------------- ------------ ------------ --------------
Adjustment for amortisation of intangibles
assets 0.7p 0.3p 0.8p
Adjustment for exceptional items 0.2p 2.1p 2.3p
Adjusted diluted earnings per share 3.3p 2.6p 6.3p
-------------------------------------------- ------------ ------------ --------------
* Includes outstanding share options granted to employees.
Basic earnings per share is calculated using the weighted
average number of shares in issue during the period, excluding
those held by the EBT, based on the profit for the period
attributable to Shareholders.
Adjusted earnings per share figures exclude the effects of
amortisation and impairment of intangible assets (excluding
software amortisation) and exceptional items, all net of taxation,
and are considered to show the underlying results of the Group.
For diluted earnings per share, the weighted average number of
Ordinary shares in issue is adjusted to assume conversion of all
potential dilutive Ordinary shares. The Company has potential
dilutive Ordinary shares arising from share options granted to
employees where the exercise price is less than the average market
price of the Company's Ordinary shares during the period.
Potential Ordinary shares are dilutive at the point, from a
continuing operations level, when their conversion to Ordinary
shares would decrease earnings per share or increase loss per share
from continuing operations. For the six months ended 30 June 2016,
six months ended 30 June 2015 and year ended 31 December 2015,
potential Ordinary shares have been treated as dilutive, as their
inclusion in the earnings per share calculation decreases earnings
per share.
There were no material events occurring after the balance sheet
date that would have changed significantly the number of Ordinary
shares or potential 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 19R, 'Employee
Benefits' to its employee pension schemes and post-employment
healthcare benefits.
In the six months to 30 June 2016 deficit recovery payments of
GBP0.9 million were paid by the Group to the defined benefit scheme
(June 2015: GBP1.0 million; December 2015: GBP1.9 million).
As disclosed in note 3, professional fees of GBP0.3 million were
incurred during the period to 30 June 2016 in respect of liability
management exercises.
Following discussions with the Group's appointed actuary a
re-measurement gain of GBP1.5 million has been recognised in the
period to 30 June 2016. This is principally as a result of asset
returns over the period being GBP22.5 million higher than
previously assumed offset, to a lesser extent, by a GBP21.0 million
loss due to changes in financial assumptions.
The gross post-employment benefit obligations and associated
deferred income tax assets thereon, together with the net
obligations, are shown below:
As at As at As at
30 June 30 June 31 December
2016 2015 2015
GBPm GBPm GBPm
Gross post-employment benefit
obligations (13.7) (15.4) (16.0)
Deferred income tax assets
thereon 2.6 3.0 3.0
------------------------------- --------- --------- -------------
Net post-employment benefit
obligations (11.1) (12.4) (13.0)
------------------------------- --------- --------- -------------
The reconciliation of the opening gross post-employment benefit
obligations to the closing gross post-employment benefit
obligations is shown below:
As at As at As at
30 June 30 June 31 December
2016 2015 2015
GBPm GBPm GBPm
Opening post-employment benefit
obligations 16.0 18.5 18.5
Notional interest 0.3 0.3 0.6
Employer contributions (0.9) (1.0) (1.9)
Re-measurement gains (1.5) (2.3) (1.2)
Utilisation of healthcare provision (0.2) (0.1) -
------------------------------------- --------- --------- -------------
Closing post-employment benefit
obligations 13.7 15.4 16.0
------------------------------------- --------- --------- -------------
9 CAPITAL EXPITURE AND COMMITMENTS
CAPITAL EXPITURE
In the half year ended 30 June 2016 the Group acquired property,
plant and equipment and intangible assets for a cost of GBP5.0
million (half year ended 30 June 2015: GBP3.7 million; year ended
31 December 2015: GBP8.3 million), not including property, plant
and equipment and intangible assets acquired through business
combinations. In addition, textile rental items with a cost of
GBP15.9 million were acquired during the period (half year ended 30
June 2015: GBP13.9 million; year ended 31 December 2015: GBP28.4
million), not including textile rental items acquired through
business combinations.
Offsetting this, property, plant and equipment with a net book
value of GBP0.3 million was disposed of during the period (half
year ended 30 June 2015: GBP0.1 million; year ended 31 December
2015: GBP0.1 million). In addition, amounts received in respect of
textile rental special charges were GBP1.5 million (half year ended
30 June 2015: GBP1.0 million; year ended 31 December 2015: GBP2.2
million).
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
2016 2015 2015
GBPm GBPm GBPm
Property, plant and equipment 6.0 0.8 0.5
------------------------------- --------- --------- -------------
10 SHARE CAPITAL
Issued share capital has increased as follows:
Half Half Year
year year ended
to to 31 December
30 June 30 June 2015
2016 2015
GBPm GBPm GBPm
Share capital at the start
of the period 33.1 30.0 30.0
New shares issued 3.3 3.1 3.1
----------------------------- --------- --------- -------------
Share capital at the end of
the period 36.4 33.1 33.1
----------------------------- --------- --------- -------------
As at 30 June 2016 the Company has issued share capital of
363,676,945 Ordinary Shares of 10p each.
During the period, the Company placed 33.1 million Ordinary
shares (the '2016 Placing') with existing and new institutional
investors raising net proceeds of GBP28.7 million of which GBP3.3
million was credited to share capital. The 2016 Placing shares
represented approximately 9.99 per cent of the Company's existing
share capital. The 2016 Placing price of 90 pence per share was
equal to 97.6% of the closing mid-market price per Ordinary Share
on 28 April 2016, being the latest practicable date prior to the
announcement of the 2016 Placing. The 2016 Placing was undertaken
using a cash box structure. As a result, the Company was able to
take relief under section 612 of the Companies Act 2006 from
crediting share premium and instead transfer the net proceeds in
excess of the nominal value to retained earnings.
In addition, GBP0.1 million was received during the period
following the issue of 61,739 shares in relation to the exercise of
employee share options. Proceeds in excess of the nominal value
were credited to share premium.
In the period to 30 June 2015, the Company placed 30.0 million
Ordinary shares (the '2015 Placing') with existing and new
institutional investors raising net proceeds of GBP21.1 million of
which GBP3.0 million was credited to share capital.
The Placing shares in all periods were issued as fully paid and
rank pari passu in all respects with the existing Ordinary shares,
including the right to receive all dividends and other
distributions declared, made or paid in respect of shares after the
date of issue of the Placing shares, other than, in respect of the
2016 Placing, the final dividend of 1.45 pence per share for the
year ended 31 December 2015 and, in respect of the 2015 Placing,
the final dividend of 1.20 pence per share for the year ended 31
December 2014.
11 BUSINESS COMBINATIONS
On 29 January 2016 the Group acquired 100% of the share capital
of Zip Textiles (Services) Limited ('Zip') for a net consideration
of GBP13.0 million (being GBP14.0 million consideration less cash
acquired of GBP1.0 million) plus associated fees. Since
acquisition, Zip has generated a profit of GBP0.2 million on
revenue of GBP2.9 million. Had the business been acquired at the
start of the period it is estimated that a profit of GBP0.2 million
would have been generated on revenue of GBP3.4 million.
On 26 April 2016 the Group acquired 100% of the share capital of
Chester Laundry Limited ('Chester') for a net consideration of
GBP1.0 million (being GBP0.8 million consideration plus overdraft
acquired of GBP0.2 million) plus associated fees. Since
acquisition, Chester has generated a profit of GBPnil on revenue of
GBP1.1 million. Had the business been acquired at the start of the
period it is estimated that a profit of GBPnil would have been
generated on revenue of GBP3.2 million.
On 28 April 2016 the Group acquired 100% of the share capital of
Portgrade Limited, together with its trading subsidiary Afonwen
Laundry Limited ('Afonwen') for a net consideration of GBP41.9
million (being GBP37.4 million consideration plus overdraft
acquired of GBP4.5 million) plus associated fees. Since
acquisition, Afonwen has generated a profit of GBP0.7 million on
revenue of GBP8.3 million. Had the business been acquired at the
start of the period it is estimated that a profit of GBP0.2 million
would have been generated on revenue of GBP20.6 million.
The provisional fair value of assets and liabilities acquired
are as follows:
Fair
value
adjustments
to previous
Zip Chester Afonwen acquisitions Total
GBPm GBPm GBPm GBPm GBPm
Intangible assets
- Goodwill 8.7 0.4 21.4 0.4 30.9
Intangible assets
- Customer lists and
contracts 3.1 - 15.4 - 18.5
Property, plant and
equipment 6.6 3.2 15.9 (0.4) 25.3
Textile rental items 0.4 0.4 6.5 - 7.3
Inventories - - 0.3 - 0.3
Trade and other receivables 0.9 1.4 5.1 - 7.4
Current income tax
asset - 0.1 0.1 - 0.2
Cash and cash equivalents
/ (overdraft) 1.0 (0.2) (4.5) - (3.7)
Trade and other payables (1.9) (2.4) (8.6) - (12.9)
Borrowings (3.6) (2.3) (10.6) - (16.5)
Deferred income tax
(liability) / asset (1.2) 0.2 (3.6) - (4.6)
14.0 0.8 37.4 - 52.2
----------------------------- ------ -------- -------- -------------- -------
Goodwill represents the expected benefits to the wider Group
arising from the acquisitions, deferred income tax arising from the
recognition of the customer lists and contracts and deferred income
tax arising on the properties acquired.
As the acquisitions have had a relatively short period of
ownership the amounts above in respect of Zip, Chester and Afonwen
are provisional and subject to adjustment. The adjustments to
previous acquisitions reflect an additional write down of plant and
equipment at London Linen and Ashbon of GBP0.3 million and GBP0.1
million respectively, both of which were acquired in 2015.
The cash flows in relation to business acquisition activity are
summarised below:
Half Half Year
year year ended
to to 31 December
30 June 30 June 2015
2016 2015
GBPm GBPm GBPm
Consideration paid for acquisitions
in the period 52.2 69.3 73.7
Deferred consideration paid
during the period 0.2 - -
Overdraft / (cash and cash
equivalents) acquired 3.7 (4.4) (4.4)
Costs in relation to business
acquisition activity 1.1 0.8 1.1
57.2 65.7 70.4
------------------------------------- --------- --------- -------------
In the period to 30 June 2016, costs in relation to business
acquisition activity comprise GBP0.7 million in respect of
acquisitions made during the period and a further GBP0.4 million in
respect of acquisitions made in prior periods, of which, GBP0.2
million was charged to exceptional items in 2015.
12 DISPOSALS AND DISCONTINUED OPERATIONS
There were no business disposals in the current or prior
periods.
Cash flows relating to previously discontinued operations are as
follows:
Half Half Year
year year ended
to to 31 December
30 June 30 June 2015
2016 2015
GBPm GBPm GBPm
Proceeds from disposal - 0.3 1.0
Payment of costs relating to
the disposal - (0.1) (0.1)
Proceeds from sale of business - 0.2 0.9
Net cash used in operating
activities (0.1) (0.4) (1.2)
Net cash flow relating to discontinued
operations (0.1) (0.2) (0.3)
---------------------------------------- --------- --------- -------------
On 7 August 2013, the Group disposed of its Facilities
Management division. Proceeds from sale of business in the prior
periods represents deferred and contingent consideration received,
net of associated fees.
Net cash used in operating activities represents the utilisation
of previously recognised provisions for onerous lease commitments
and dilapidation obligations on certain non-trading properties.
13 BORROWINGS
As at 30 June 2016, borrowings were secured and drawn down under
a committed facility dated 21 February 2014, as amended and
restated on 24 April 2015 and as further amended and restated on 22
April 2016, comprising a GBP120.0 million rolling credit facility
(including an overdraft) which runs to 24 April 2020 and a GBP30.0
million short term facility expiring on 21 April 2017.
Individual tranches are drawn down, in sterling, for periods of
up to six months at LIBOR rates of interest prevailing at the time
of drawdown, plus the applicable margin. The margin varies between
1.25% and 2.25%.
As at 30 June 2016, GBP50.0 million of borrowings were subject
to hedging arrangements which have the effect of replacing LIBOR
with fixed rates as follows:
-- for GBP15.0 million of borrowings, LIBOR is replaced with
1.4725% from 8 January 2016 to 8 January 2019;
-- for GBP15.0 million of borrowings, LIBOR is replaced with
1.665% from 8 January 2016 to 8 January 2020;
-- for GBP10.0 million of borrowings, LIBOR is replaced with
0.49% from 30 June 2016 to 30 June 2018; and
-- for GBP10.0 million of borrowings, LIBOR is replaced with
0.5525% from 30 June 2016 to 30 June 2019.
14 ANALYSIS OF NET DEBT
Net debt is calculated as total borrowings net of unamortised
bank facility fees, less cash and cash equivalents. Non-cash
changes represent the effects of the recognition and subsequent
amortisation of fees relating to bank facilities, changing maturity
profiles, debt acquired as part of an acquisition and new finance
leases entered into during the year.
Debt
Cash due
and cash Debt after
equivalents due more
within than
one one Finance Total
year year leases net debt
GBPm GBPm GBPm GBPm GBPm
Balance at 31
December 2014 (4.9) (0.8) (19.7) (3.1) (28.5)
Cash flow 2.4 - (46.5) 0.5 (43.6)
Other non-cash
changes - 0.1 0.4 (0.8) (0.3)
---------------- -------------- ---------------- ------------------ -------- ----------
Balance at 30
June 2015 (2.5) (0.7) (65.8) (3.4) (72.4)
---------------- -------------- ---------------- ------------------ -------- ----------
Cash flow (1.9) 0.3 7.5 1.1 7.0
Other non-cash
changes - (0.9) (0.2) (4.7) (5.8)
---------------- -------------- ---------------- ------------------ -------- ----------
Balance at 31
December 2015 (4.4) (1.3) (58.5) (7.0) (71.2)
---------------- -------------- ---------------- ------------------ -------- ----------
Cash flow 0.9 0.3 (25.0) 2.6 (21.2)
Other non-cash
changes - (3.7) - (12.8) (16.5)
---------------- -------------- ---------------- ------------------ -------- ----------
Balance at 30
June 2016 (3.5) (4.7) (83.5) (17.2) (108.9)
---------------- -------------- ---------------- ------------------ -------- ----------
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
2016 2015 2015
GBPm GBPm
GBPm (Restated*) (Restated*)
Cash (Current Assets) 5.4 4.5 4.6
Overdraft (Borrowings, Current
Liabilities) (8.9) (7.0) (9.0)
(3.5) (2.5) (4.4)
-------------------------------- ------ ------------- -------------
* Comparatives have been restated as a result of guidance issued
in March 2016 by the IFRS Interpretations Committee regarding when
bank overdrafts in cash-pooling arrangements would meet the
requirements for offsetting in accordance with IAS 32: 'Financial
instruments: Presentation'. Further details are provided in note
19.
Finance lease obligations are comprised of the following balance
sheet amounts:
As at
30 As at As at
June 30 June 31 December
2016 2015 2015
GBPm GBPm GBPm
Amounts due within one year
(Borrowings, Current Liabilities) (4.3) (1.0) (1.5)
Amounts due after more than
one year (Borrowings, Non-Current
Liabilities) (12.9) (2.4) (5.5)
(17.2) (3.4) (7.0)
------------------------------------ ------- --------- -------------
15 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Half Half Year
year year ended
to to 31 December
30 June 30 June 2015
2016 2015
GBPm GBPm GBPm
Cash inflow during the period 0.9 2.4 0.5
Cash outflow on change in debt
and lease financing (22.1) (46.0) (37.1)
-------------------------------- --------- --------- ------------------
Outflow in net debt resulting
from cash flows (21.2) (43.6) (36.6)
Debt acquired through business
acquisitions (16.5) - (0.9)
Movement in unamortised issue
costs of bank loans - 0.5 0.3
New finance leases - (0.8) (5.5)
Outflow in net debt during the
period (37.7) (43.9) (42.7)
Opening net debt (71.2) (28.5) (28.5)
-------------------------------- --------- --------- ------------------
Closing net debt (108.9) (72.4) (71.2)
-------------------------------- --------- --------- ------------------
16 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 related party relationships, transactions and balances
are given in the Group's financial statements for the year ended 31
December 2015. There have been no material changes in the nature of
these relationships in the half year to 30 June 2016 or up to the
date of this Report.
17 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
GBP156.0 million of bank facilities; 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 (disposed of in August 2013) the Company had given
guarantees over the performance of contracts entered into by the
division. As part of the disposal of this 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 of
GBP0.2 million per annum, reduced pro rata as guarantees are
released. Such liabilities are not expected to give rise to a
significant loss.
As a condition of the sale of the Facilities Management division
in August 2013, the Company 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 that
the risk of settlement at, or near, the maximum level to be
remote.
18 EVENTS AFTER THE REPORTING PERIOD
There were no events after the balance sheet date that would
require disclosure in accordance with IAS10, 'Events after the
balance sheet date'.
19 ACCOUNTING POLICIES, ESTIMATES AND ASSUMPTIONS
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 2015.
(a) Prior period restatement - cash pooling
In March 2016, the IFRS Interpretations Committee (IFRS IC)
issued an agenda decision regarding the treatment of offsetting and
cash-pooling arrangements in accordance with IAS 32: 'Financial
instruments: Presentation'. This provided additional guidance on
when bank overdrafts in cash-pooling arrangements would meet the
requirements for offsetting in accordance with IAS 32.
As a consequence of the above, the Group has reviewed its
cash-pooling arrangements and has revised its presentation of bank
overdrafts. As a result the Group has presented an additional
GBP5.4 million within borrowings in the current period and
increased its cash balances by an equal and opposite amount.
Comparatives at 30 June 2015 and 31 December 2015 have been
similarly restated by GBP3.4 million and GBP4.5 million
respectively.
(b) 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.
(c) 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.
(d) Standards and amendments to standards effective in 2016
New and amended standards and interpretations need to be adopted
in the first interim financial statements issued after their
effective date (or date of early adoption). There are no new or
amended standards and interpretations that are effective for the
financial year ending 31 December 2016 that are expected to have a
material impact on the Group.
(e) 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.
20 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 2015 Annual Report
the principal risks and uncertainties that could impact its
performance. Other than as set out below, these remain unchanged
since the Annual Report 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
Pension Scheme Loss of a Processing
Deficit Facility
Information Systems
and Technology
The recent vote for the UK to leave the EU has added further
uncertainty and volatility to financial market conditions and
therefore no overall improvement in the risk environment. The Group
does not export its services and has a wide spread of customers
across many sectors. The Group has sufficient headroom to enable it
to conform to covenants on its existing borrowings and has
sufficient working capital and undrawn financing facilities to
service its operating activities.
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
consumer demand, together with the impact of product cost
pressures, in part due to the current sterling exchange rates, 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 16 to 19 of the 2015 Annual
Report.
21 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 company news service from the London Stock Exchange
END
IR BSGDCLBGBGLU
(END) Dow Jones Newswires
September 06, 2016 02:00 ET (06:00 GMT)