REG - Johnson Service Grp. - Interim Results
05/09/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230905:nRSE3356La&default-theme=true
RNS Number : 3356L Johnson Service Group PLC 05 September 2023
5 September
2023
AIM: JSG
Johnson Service Group PLC
('JSG' or 'the Group')
Interim Results for the Six Months ended 30 June 2023
Intention to Launch a further Share Buyback Programme
"Continuing strong organic growth.
Confidence for the full year and for longer term growth."
FINANCIAL PERFORMANCE
- Total revenue increased by 22.0% to £215.0 million (June 2022:
£176.2 million).
- Organic revenue up 20.6% compared to H1 2022.
- Adjusted EBITDA(1) of £57.7 million (June 2022: £42.8 million);
margin of 26.8% (June 2022: 24.3%).
- Adjusted operating profit(1) of £19.0 million (June 2022: £12.8
million).
- Operating profit of £16.1 million (June 2022: £6.7 million).
- Adjusted profit before taxation(2) of £16.4 million (June 2022:
£11.2 million).
- Profit before taxation of £13.5 million (June 2022: £5.1 million).
- Adjusted diluted EPS of 2.9 pence (June 2022: 2.3 pence).
- Diluted EPS of 2.3 pence (June 2022: 1.1 pence).
- Interim dividend of 0.9 pence (June 2022: 0.8 pence) in line with
our progressive dividend policy.
- Full year outturn expected to be slightly ahead of current market
expectations.
FINANCING
- Initial share buyback completed with £19.7 million deployed since 1
January 2023; £25.3 million returned to Shareholders since the programme
commenced.
- Intention to launch a further share buyback programme of up to
£10.0 million.
- Strong balance sheet with capital available for further investment.
OPERATIONAL HIGHLIGHTS
- Continuing strong organic growth in HORECA with increased number of
locations serviced.
- Increasing sales activity and strengthening pipeline in both
Workwear and HORECA.
- Inflationary cost increases offset by improved efficiency and
pricing.
- Energy costs remain high but are being proactively managed.
- Sustainability targets in place for 2023, including carbon, water
and waste reduction.
- Capital projects being progressed to add further capacity in both
divisions.
- £5.75 million acquisition of Regency Laundry in February 2023 and
€31.5 million acquisition of Celtic Linen in August 2023, both on a debt
free, cash free, basis.
Notes
1 'Adjusted EBITDA' refers to operating profit before amortisation of
intangible assets (excluding software amortisation), goodwill impairment and
exceptional items (defined as 'adjusted operating profit') plus the
depreciation charge for property, plant and equipment, textile rental items
and right of use assets plus software amortisation.
2 'Adjusted profit before taxation' refers to adjusted operating profit
less total finance costs.
Peter Egan, Chief Executive Officer of Johnson Service Group, commented:
"The Group's strong performance during the first six months of the year, with
a significant improvement in revenues, profits and margins, reflects the
return to more normal and predictable trading patterns alongside proactive
management of our cost base and improving production efficiencies.
So far this year, and in line with our targeted buy and build growth strategy,
we have continued to develop our strong M&A pipeline through the
acquisition of Regency and Celtic Linen. We have also invested £12.9
million across the estate and committed to a new state-of-the-art site in the
South-East to further improve operational efficiencies, increase capacity and
support innovation. Our intention to increase our bank facility from £85.0
million to £120.0 million in the coming months provides us with the ability
to fund further investment opportunities that may arise.
The Board was pleased to indicate an outlook for the year ahead of market
expectations when the Group released its pre-close trading update in
mid-July. Recognising the volumes processed over the busy summer months,
improving efficiencies and a somewhat more predictable outlook on the cost
base, together with our assumption that the trading environment remains
unchanged, we expect the full year outturn to be slightly ahead of the
guidance provided in our July trading update. This improved outlook is in
addition to the positive contribution expected from Celtic Linen."
SELL-SIDE ANALYSTS' MEETING
A presentation for sell-side analysts will be held today at 09:30, details of
which will be distributed by Camarco. A copy of the presentation will be
available on the Company's website (www.jsg.com (http://www.jsg.com) )
following the meeting.
ENQUIRIES
Johnson Service Group PLC
Peter Egan, CEO
Yvonne Monaghan, CFO
Tel: 020 3757 4992/4981 (on the day)
Tel: 01928 704 600 (thereafter)
Investec Investment Banking (NOMAD) Camarco (Financial PR)
David Flin Ginny Pulbrook
Carlton Nelson Rosie Driscoll
Virginia Bull Letaba Rimell
Tel: 020 7597 5970 Tel: 020 3757 4992/4981
Financial And Operational Review
BASIS OF PREPARATION
Throughout this statement, and consistent with prior years, a number of
alternative performance measures ('APMs') are used to describe the Group's
performance. APMs are not recognised under UK-adopted international
accounting standards. Whilst the Board uses APMs to manage and assess the
performance of the Group, and believes they are representative of ongoing
trading, facilitate meaningful year on year comparisons, and hence provide
useful information to stakeholders, it is cognisant that they do have
limitations and should not be regarded as a complete picture of the Group's
financial performance. APMs, which include adjusted operating profit,
adjusted profit before taxation, adjusted EBITDA, adjusted EPS, adjusted EPS
excluding super-deduction and adjusted net debt are defined within note 1
(Basis of Preparation) and are reconciled to statutory reporting measures in
notes 2, 5, 8 and 18.
PERFORMANCE
Organic revenue growth was strong at 20.6% compared to 2022, which was still
impacted by COVID-19. Workwear remained stable and, encouragingly, some
positive signs on new sales have started to materialise. Within Hotel,
Restaurant and Catering ('HORECA'), volumes have continued to increase and
follow more predictable patterns which allows for improving efficiency.
Cost pressures remain, particularly in relation to energy and, to a lesser
extent, labour. Energy continued to be a significantly higher cost than has
been experienced historically and we have proactively fixed prices for the
coming months to obtain and manage some degree of certainty over cost of
supply.
Adjusted operating profit margin was 8.8%, reflecting energy costs at 10.3% of
revenue and labour at 45.1% of revenue. Had energy and labour, two
significant drivers of cost increase, been at the same percentage of revenue
as for 2019, adjusted operating profit margin would have been 14.5% (June
2019: 13.5%). As we continue to improve the recovery of these costs, through
increasing volumes, efficiencies and price increases, the Board remains of the
opinion that the operating margin of each individual Division can return to
the historic levels achieved in 2019.
Overall, we are encouraged with the Group's performance as we plan to further
expand capacity in each of our businesses.
ACQUISITION OF CELTIC LINEN
As announced on 1 September 2023, we recently completed the purchase of Celtic
Linen for a consideration of €31.5 million (£27.1 million) on a debt free,
cash free, basis. This leading supplier of textile rental services to the
Healthcare and HORECA sectors in the Republic of Ireland represents a
significant step in our strategy to expand the range and scale of services we
offer and complements our existing Lilliput business in Northern Ireland.
FINANCIAL REVIEW
Financial Results
Revenue in the period increased by 22.0% to £215.0 million (June 2022:
£176.2 million). Adjusted EBITDA was £57.7 million (June 2022: £42.8
million) giving an improved margin of 26.8% (June 2022: 24.3%). Adjusted
operating profit increased by 48.4% to £19.0 million (June 2022: £12.8
million).
The exceptional charge of £0.3 million (June 2022: £0.5 million) relates to
costs in relation to business acquisition activity.
Total finance costs were £2.6 million (June 2022: £1.6 million) reflecting
higher interest rates and borrowing over the period.
Adjusted profit before taxation increased by 46.4% to £16.4 million (June
2022: £11.2 million). Statutory profit before taxation, after amortisation
of intangible assets (excluding software amortisation) of £2.6 million (June
2022: £4.2 million), goodwill impairment of £nil (June 2022: £1.4 million)
and an exceptional charge of £0.3 million (June 2022: £0.5 million) was
£13.5 million (June 2022: £5.1 million).
The tax rate on the adjusted profit before taxation, excluding exceptional
items, amortisation of intangible assets (excluding software amortisation) and
goodwill impairment, was 25.1% (June 2022: 9.7%). The rate is above the
headline corporation tax rate for the full year of 23.5%, due to the effect of
expenses not deductible for taxation and short-term timing differences, and
ahead of the rate in 2022, which was significantly impacted by the capital
allowance super-deduction. The super-deduction allowance, which ended in
March 2023, has little impact on the 2023 tax rate.
Adjusted diluted earnings per share was 2.9 pence (June 2022: 2.3 pence).
Excluding the impact of the capital allowances super-deduction, the adjusted
diluted earnings per share in the period to 30 June 2022 was 1.7 pence.
Dividend
An interim dividend of 0.9 pence per share (June 2022: 0.8 pence per share)
will be paid on 3 November 2023 to those Shareholders on the register of
members on 6 October 2023. The ex-dividend date is 5 October 2023. The
increased dividend is in line with our progressive dividend policy and it
remains the Board's current intention to reduce dividend cover from our
historical level of cover of 3 times in 2022 to 2.5 times by financial year
2024.
Cash Flow and Net Debt
Free cash flow (calculated as net cash generated from operating activities,
less net spend on textile rental items, less the capital element of leases) in
the first half of the year was £17.9 million compared to £8.5 million in the
first half of 2022. This is largely reflective of the continuing improvement
in trading performance.
Total net debt (excluding IFRS 16 liabilities) at 30 June 2023 was £40.5
million (December 2022: £13.7 million). The increase is largely attributed
to the share buyback and significant capital investment in the business
together with the cost of the acquisition of Regency in February 2023. After
including the impact of IFRS 16, net debt at June 2023 was £83.7 million
(December 2022: £48.0 million).
Bank Facility
In May 2023, the Group extended the tenure of its existing £85.0 million
revolving credit facility by 12 months such that it now expires in August
2026. The Group has also received approval from its banks to increase the
facility to £120.0 million and it is our intention to do this in the coming
months. The enlarged facility will ensure that we have access to capital to
fund our existing investment plans and other opportunities that may arise.
In addition to the above, the terms of the facility provide for an option to
extend the tenure for a further year and an option to increase the facility by
up to a further £15.0 million, both subject to bank consent.
The current margin on the facility is 1.45% over SONIA or the relevant EURIBOR
rate, as applicable. Covenants remain unchanged and comprise a leverage
covenant (total debt to EBITDA) of less than three times and interest cover of
not less than four times. At 30 June 2023, the leverage ratio was 0.7
times. On a pro-forma basis, to include the approximate impact of Celtic
Linen had it been acquired on that date, the leverage ratio would have been
0.9 times.
Capital Structure and Share Buyback Programme
Our Capital Allocation policy remains unchanged. The Group's objective is to
employ a disciplined approach to investment, returns and capital efficiency
to deliver sustainable compounding growth whilst also maintaining a strong
balance sheet. We continue to see exciting opportunities to deploy capital
organically and have a good M&A pipeline. Over the last 12 months we
have completed an initial share buyback programme returning £25.3 million to
Shareholders, announced the commitment to the opening of a new plant in
Crawley and commenced significant capital investment in several of our
plants. The acquisition of Regency in February 2023 and Celtic Linen in
August 2023 has further utilised available capital. Even after taking into
consideration these investments and the payment of dividends, the Group has
significant headroom under its committed facilities and target leverage of
1-1.5 times.
As a result, the Board announces that, later this month, it intends to launch
a second share buyback programme of the Company's ordinary shares for up to a
maximum aggregate consideration of £10.0 million, excluding expenses, during
the period up until and including 1 March 2024. A further announcement will
be made in due course.
Defined Benefit Pension Scheme ('the Scheme')
The recorded net deficit after tax for the Scheme, calculated in accordance
with IAS 19, was £5.3 million at June 2023 compared to a net deficit of £7.1
million at December 2022. The improvement in the position is due, in part,
to a higher discount rate assumed on liabilities and higher assumed
inflation. We continue to have a significant portion of scheme assets
invested so as to hedge against movements in liabilities, thereby reducing
overall scheme volatility.
The triennial valuation of the defined benefit pension scheme as at 30
September 2022 is in progress with an initial indication that the Scheme was
showing a small surplus on the Technical Provisions basis. We remain in
discussion with the Trustee regarding the future deficit contributions to the
Scheme and the potential for working towards a buy out of the Scheme in the
medium term.
OPERATIONAL REVIEW
Our Businesses
The Group comprises of Textile Rental businesses which trade through a number
of very well recognised brands, servicing the UK's Workwear and Hotel,
Restaurant and Catering ('HORECA') sectors. The 'Johnsons Workwear' brand
predominantly provides workwear rental, protective wear and laundry services
to corporates across all industry sectors. Within HORECA, 'Stalbridge' and
'London Linen' provide premium linen services to the restaurant, hospitality
and corporate events market, Johnsons Hotel Linen, our high volume linen
business primarily serves the corporate four star and budget hotel market and
Regency serves the luxury / bespoke segment of the HORECA sector. Also
within HORECA, our Northern Ireland business, Lilliput, predominantly services
hotels and restaurants as well as a number of healthcare customers. Since
the period end we have acquired Celtic Linen which serves both the Healthcare
and HORECA sectors in the Republic of Ireland.
Energy
Energy costs (comprising gas, electricity and diesel) have remained volatile
over the period and, although energy unit prices have gradually fallen, still
remain at higher levels than historically. Costs for the first half of 2023
represented 10.3% of revenue and were significantly higher than the equivalent
period in both 2022 and 2019 (June 2022: 9.3%; June 2019: 6.5%).
Our policy in the UK has always been to fix gas and electricity prices on a
rolling basis, building a position so that the upcoming months are largely
fixed. This provides certainty but also means that costs do not immediately
reflect falls, or increases, in spot prices. We currently have, on average,
some 92% of our anticipated electricity usage and some 86% of our anticipated
gas usage fixed for the remainder of 2023. Looking ahead, approximately 80%
of our anticipated electricity requirement is fixed for the first half of next
year with around 48% for the remainder of 2024. Similarly, we have fixed
pricing in place for some 63% of our anticipated gas requirement in the first
half of 2024 and some 38% for the remainder of 2024. In addition, we have
hedged 95% of our anticipated diesel requirement for the second half of
2023. We have also started to build positions in gas and electricity into
2025 and 2026 and will continue to follow our current policy as we go forward.
Notwithstanding the fixed pricing arrangements we have already put in place,
we continue to expect that energy costs for the full year, as a percentage of
revenue, will remain at a similar level to the first half as fixed pricing
benefits enjoyed in 2022 roll off and average pricing remains elevated.
Labour
In the six months to 30 June 2023, labour as a percentage of revenue reduced
to 45.1%, compared to 47.5% in the six months to 30 June 2022, although this
was still higher than the 43.2% in the six months to 30 June 2019. We are,
however, encouraged by the improving efficiency as volumes continue to return
and, accordingly, expect labour, as a percentage of revenue, to reduce even
further by the end of the year.
Workwear Division
Total revenue for the Workwear division was £71.1 million (June 2022: £66.0
million), an increase of 7.7%. Organic growth was 7.5%. Adjusted EBITDA
was £24.4 million (June 2022: £22.2 million) giving a margin of 34.3% (June
2022: 33.6%). Adjusted operating profit was £11.1 million (June 2022:
£10.0 million).
Our pricing structure, which supports our high levels of customer service, has
been maintained during contract renewal negotiations with customers. On
occasion, this has naturally led to some shrinkage in our customer base. In
addition, the economic climate continues to provide challenges with some
customers reducing their spend alongside an increase in terminations in the
first half of the year, in particular with a number of smaller customers
ceasing to use a rental service at all. Overall, retention was 92.3%
(December 2022: 94.3%). Positively, our sales team and support centre has
seen an increase in activity in recent weeks, with more encouraging news on
new sales, whilst our dedicated service teams remain focused on renewing
customer contracts and adding additional services. Our National Accounts
team is also successfully installing additional sites from both new and
existing group customers. In the period to June 2023, 26% of new sales have
been generated from new to rental customers.
Our commitment to providing exceptional customer service remains steadfast and
we continue to achieve strong independent customer satisfaction results at
82.4% for new business and 82.9% for existing customers. These scores
confirm our position as the market sector leader in providing a first-class
service. To further improve our service we have invested in customer service
training programmes to equip our colleagues with additional skills and
knowledge to enable them to deliver an even greater customer service and to
continue to promote a customer centric culture towards customer satisfaction.
By identifying emerging trends and collaborating with key customers, we have
developed and launched a range of innovative garments for specific sectors
that combine functionality with sustainability. Further garment ranges are
under development and will be launched in the coming months. A key factor in
developing the range was the ability to recycle and repurpose the garments,
which aligns with our vision of creating a greener future.
Our continuous improvement programmes regularly evaluate our operational
efficiencies, processes, systems and supply chain to streamline our
operational costs. Our investment programme of replacing existing equipment
with more advanced technological and energy efficient capabilities, has seen
the installation of new washer extractors, tunnel finishers and garment
folders across several sites. The installation of the automated sortation
systems in Perth and Hull is progressing in line with expectations. A major
refurbishment of our Manchester site is planned for early 2024 with a capital
investment of £4.0 million. This will significantly improve operational
efficiency and processing capacity. We are also continuing to update our
commercial fleet, with over 40 new vehicles expected in 2023.
The responses to the employee engagement survey at the start of the year have
provided us with an invaluable insight into the areas where we are excelling
and support the introduction of further initiatives around reward and
recognition programs, which are scheduled to be launched into the business
over the coming months.
The recruitment and retention of employees remains challenging in some areas,
particularly in administrative and supporting roles. The importance of
personal growth and development for all colleagues is vital and in recognition
of these, new training programmes have been successfully implemented to
enhance core skills and to provide a supportive environment with pathways for
career advancement and succession planning.
HORECA Division
Total revenue for the HORECA division increased significantly to £143.9
million from £110.2 million in 2022, which was still impacted by COVID-19.
Organic growth was 28.4% reflecting both improved price per piece and
increasing volume. Adjusted EBITDA was £36.3 million (June 2022: £23.3
million) giving an improved margin of 25.2% (June 2022: 21.1%). Adjusted
operating profit was £10.9 million (June 2022: £5.5 million).
Volumes have been stronger and more predictable in the first six months of the
year due to no impact from COVID-19, the large number of new customer
contracts and organic growth within existing customers.
Our primary focus is to continue to deliver on time and in full to our
customer base, with employee recruitment and retention being a key component
in achieving this. Engagement initiatives have resulted in a more stable
workforce with flexible working patterns and the introduction of additional
employee learning and development opportunities aiding recruitment.
The successful working partnership with His Majesty's Prison Service continues
at some of our Hotel Linen sites, providing employment for prisoners
qualifying for Release on Temporary Licence. We are proud to have received
Platinum Partner status for our support of this very important initiative.
Hotel, Restaurant and Catering, which includes Stalbridge and London Linen,
has continued to invest in several of its locations to create extra space and
capacity to support the returning volumes and continuing growth of the
business. In Shaftesbury and Grantham we have extended the floorspace and
the installation of additional ironers in Grantham and Glasgow will enable us
to accommodate greater throughput. The same technology that is successfully
recycling 75% of water at our Shaftesbury site is currently being installed at
our site in Cornwall and we expect this new equipment to be fully operational
in the final quarter of this year. We are also evaluating opportunities to
install the technology across other sites.
Our new location in Crawley, Sussex, which is due to be operational in the
second half 2024, will allow for accelerated growth and greater access to the
London and South-East markets. Included in the development will be the
latest state-of-the-art energy efficient machinery and water recycling
processes which will help in our carbon reduction journey. Of the estimated
£16.0 million total capital investment, we anticipate some £8.0 million will
be incurred this year, with £0.2 million having been spent in the first half
of the year. Operating costs of £0.3 million were incurred in the first
half with a further £0.6 million expected in the second half.
Our very active sales team are delivering great results and presently the
sales pipeline is very strong in most geographical locations. We have
continued to achieve commercially improved terms with independent and group
customers and are signing renewal agreements with many of the latter.
Regency, which serves the luxury / bespoke segment of the HORECA sector,
joined the Group in February 2023 and continues to operate under the same
brand. The business is now enjoying the advantages of being part of the
Johnsons family. Since acquisition, there have been some key wins with
almost 350 new rooms added, an increase of some 8%. Over £1.4 million of
capital investment has been approved to strengthen the resilience of the two
operational units, to further improve efficiencies and quality and to increase
capacity of the site by over 30%. We expect this investment to be completed
by mid-2024.
Within Hotel Linen, a net 6,000 rooms were installed in the first half of the
year such that, at 30 June 2023, it serviced over 206,000 rooms.
In terms of capital investment, we await the delivery of innovative robotic
machinery in the third quarter for two of our sites, have replaced a number of
pieces of equipment across the estate and continue to upgrade employee welfare
facilities such as café style canteens and outside seating areas. The new
dynamic production data capture trial at Bourne has been successful and will
be rolled out across all other sites in due course, with Cardiff being the
next site for installation.
Lead times for delivery of new vehicles have improved, with around 60 vehicles
expected to be delivered by the end of 2023. A new HGV tractor unit and
double decker trailer will join the fleet this year and another trailer is
planned for next year to improve transport reliability and efficiency.
The roll out of our on-line customer portal has continued with excellent
feedback from our customer base and achieving our objective of "being easy to
do business with". The Linen Room has been developed further to provide more
online information to our customers, with customised platforms for large hotel
groups, and will be rolled out during the second half of the year.
The National Accounts team continue to develop strong relationships with our
hotel groups and, again, most have been accepting of cost pressures facing the
industry during price increase discussions. Successfully building strong
relationships and strategic partnerships has been reflected in significant
growth with both existing and new customers.
The availability of timely data is key to developing a quality service. The
support from our IT department has continued with sourcing of innovative
software to support our business functions including business process mapping,
production data capture, Linen Room development, use of Power BI and Customer
Visit App reporting. The teamwork shown by all departments in contributing
towards a collaborative and proactive culture is the key to future growth.
EMPLOYEES
Our employees are the foundation of our business. The Board would like to
thank them for their support, hard work and significant contribution to the
success of the business over the last six months. The teamwork, dedication
and determination demonstrated in order to deliver a professional and on time
service to our customers is a credit to each and every one of them. The
Board also welcomes the employees of Regency Laundry and Celtic Linen into the
Johnsons family.
SUSTAINABILITY
We continue to make excellent progress with embedding our sustainability
programme across the Group and are working to create a long-term road map for
delivery of performance improvement in line with our stated 2030 targets.
Key highlights of the programme so far this year include:
§ We continue to explore opportunities to reduce the carbon emissions
generated through our vehicle fleet. Electric vehicles are being deployed
where practicable and we are also successfully using HVO (Hydrotreated
Vegetable Oil), which is a fossil-free alternative to diesel resulting in up
to a 90% reduction in Greenhouse Gas emissions, in a number of our vehicles.
§ We have begun a phased transition to a single waste management provider
across mainland UK to enable us to more effectively manage the materials
generated through our operations. We envisage that this relationship will
support us in achieving our landfill reduction targets.
§ Various volunteering initiatives, support of local charities and working
within our local communities have been undertaken by our employees with beach
litter picking, donations to children's charities, collections for food banks
and support for the homeless to name but a few.
§ We continue to formally develop our approach and strategy in respect of a
'circular economy', by sourcing core products with an increased sustainable
content and identifying how we can further integrate a closed loop approach to
the end-of-life management of our textiles. We are currently undertaking a
number of feasibility studies and projects, some of which are providing very
promising results, with the intention that our end-of-life textiles go back
into the product cycle, either by being reused, repurposed or recycled.
§ We have begun active engagement with our value chain around sustainability
related topics, beginning with communicating our new Guiding Principles to key
customers and suppliers.
§ We have seen an improvement in our external Sustainability ratings
including our submissions to the CDP Climate Change and Water Security
questionnaires both being awarded a "C" rating and our Sustainalytics rating
moving to "Low Risk" and a score of 18.
§ We have made further progress on calculations for our Scope 3 Emissions and
anticipate reporting these more fully in our 2023 Annual Report.
BOARD CHANGES
As announced on 14 July 2023, Kirsty Homer joined the Board on 1 August 2023
as an additional Non-Executive Director.
OUTLOOK
The Board is pleased with the progress made by the Group in the first half of
the year and with the results reported today.
During the first six months, we have added the Regency business to our
portfolio to better serve the luxury/bespoke segment of the HORECA sector and
have committed to a £16.0 million investment in a new site in Crawley,
Sussex, which will allow for accelerated growth and greater access to the
London and South-East markets for our HORECA business.
Our recent investment in a leading linen business in the Republic of Ireland,
which itself is a growing market, represents a significant step in our
strategy to expand the range and scale of services we offer. The acquisition
is expected to be immediately earnings enhancing and, in addition to
collaboratively sharing best practice across the enlarged organisation, allows
us to explore operational synergies with our Northern Ireland based business,
Lilliput.
We continue to believe that investing in our estate will give us an advantage
in the market in delivering unrivalled service to our customers in the most
efficient way.
Whilst the challenges of cost pressures continue to persist, they are being
proactively managed. The Board remains of the opinion that the operating
margin of each individual Division can return to the historic levels achieved
in 2019 however, the timing of achieving this is dependent on where a number
of inflationary pressures, most notably energy and labour, settle over the
medium term.
The Board was pleased to indicate an outlook for the year ahead of market
expectations when the Group released its pre-close trading update in
mid-July. Recognising the volumes processed over the busy summer months,
improving efficiencies and a somewhat more predictable outlook on the cost
base, together with our assumption that the trading environment remains
unchanged, we expect the full year outturn to be slightly ahead of the
guidance provided in our July trading update. This improved outlook is in
addition to the positive contribution expected from Celtic Linen.
RESPONSIBILITY STATEMENT
The condensed consolidated interim financial statements comply with the
Disclosure Guidance and Transparency Rules ('DTR') of the United Kingdom's
Financial Conduct Authority in respect of the requirement to produce a
half-yearly financial report. The condensed consolidated interim financial
statements are the responsibility of, and have been approved by, the
Directors.
The Directors confirm that to the best of their knowledge:
§ the condensed consolidated interim financial statements have been prepared
in accordance with IAS 34, 'Interim Financial Reporting' as adopted by the
United Kingdom;
§ this interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first six
months of the financial year and a description of the principal risks and
uncertainties for the remaining six months of the year); and
§ this interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related party transactions and changes
therein).
The Directors of Johnson Service Group PLC are listed in the Johnson Service
Group PLC Annual Report for 2022 and, other than for the appointment of Kirsty
Homer on 1 August 2023, remain unchanged. Details of the Directors are
available on the Johnson Service Group PLC website: www.jsg.com
(http://www.jsg.com)
By order of the Board
Peter
Egan
Yvonne Monaghan
Chief Executive Officer
Chief Financial Officer
5 September
2023 5
September 2023
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 to Half year to Year ended
30 June 30 June 31 December
2023 2022 2022
Note £m £m £m
Revenue 2 215.0 176.2 385.7
Impairment loss on trade receivables (0.5) (0.2) (0.9)
All other costs (198.4) (169.3) (351.5)
Operating profit 2 16.1 6.7 33.3
Operating profit before amortisation of intangible assets (excluding software 19.0 12.8 41.2
amortisation), goodwill impairment and exceptional items
Amortisation of intangible assets (excluding software amortisation) (2.6) (4.2) (7.2)
Goodwill impairment 9 - (1.4) (1.4)
Exceptional items 3 (0.3) (0.5) 0.7
Operating profit 2 16.1 6.7 33.3
Finance cost 4 (2.6) (1.6) (3.0)
Profit before taxation 13.5 5.1 30.3
Taxation charge 7 (3.5) (0.4) (1.5)
Profit for the period from continuing operations 10.0 4.7 28.8
Profit for the period from discontinued operations - 0.1 0.2
Profit for the period attributable to equity holders 10.0 4.8 29.0
Earnings per share 8
Basic earnings per share 2.3p 1.1p 6.5p
Diluted earnings per share 2.3p 1.1p 6.5p
See note 8 for Adjusted basic earnings per share and Adjusted diluted earnings
per share.
Consolidated Statement of Comprehensive Income
Half year to Half year to 30 June Year ended
30 June 2022 31 December
2023 2022
Note £m £m £m
Profit for the period 10.0 4.8 29.0
Items that will not be subsequently reclassified to profit or loss
- Re-measurement and experience gains / (losses) on post-employment benefit 14 1.6 8.1 (10.0)
obligations
- Taxation in respect of re-measurement and experience (gains) / losses (0.4) (2.0) 2.5
Deferred taxation rate change in respect of re-measurement - - 0.1
and experience losses / (gains)
Items that may be subsequently reclassified to profit or loss
- Cash flow hedges (net of taxation) - fair value (losses) / gains (0.8) 1.7 1.4
- transfers to administrative expenses 0.3 (1.0) (2.2)
Other comprehensive income / (loss) for the period 0.7 6.8 (8.2)
Total comprehensive income for the period 10.7 11.6 20.8
The notes on pages 17 to 32 form an integral part of these condensed
consolidated interim financial statements.
Consolidated Statement of Changes in Shareholders' Equity
Share Share Merger Capital Redemption Reserve Hedge Retained Earnings Total
Capital Premium Reserve Reserve Equity
£m £m £m £m £m £m £m
Balance at 1 January 2022 44.5 16.8 1.6 0.6 0.3 208.6 272.4
Profit for the period - - - - - 4.8 4.8
Other comprehensive income for the period - - - - 0.7 6.1 6.8
Total comprehensive income for the period - - - - 0.7 10.9 11.6
Share options (value of employee services) - - - - - 0.4 0.4
Transactions with Shareholders - - - - - 0.4 0.4
recognised directly in Shareholders' equity
Balance at 30 June 2022 44.5 16.8 1.6 0.6 1.0 219.9 284.4
Profit for the period - - - - - 24.2 24.2
Other comprehensive loss - - - - (1.5) (13.5) (15.0)
Total comprehensive (loss) / income for the period - - - - (1.5) 10.7 9.2
Share options (value of employee services) - - - - - 0.4 0.4
Share buybacks (0.6) - - 0.6 - (5.7) (5.7)
Deferred tax on share options - - - - - (0.2) (0.2)
Dividend paid - - - - - (3.5) (3.5)
Transactions with Shareholders (0.6) - - 0.6 - (9.0) (9.0)
recognised directly in Shareholders' equity
Balance at 31 December 2022 43.9 16.8 1.6 1.2 (0.5) 221.6 284.6
Profit for the period - - - - - 10.0 10.0
Other comprehensive (loss) / income - - - - (0.5) 1.2 0.7
Total comprehensive (loss) / income - - - - (0.5) 11.2 10.7
for the period
Share options (value of employee services) - - - - - 0.3 0.3
Share buybacks (1.7) - - 1.7 - (19.7) (19.7)
Dividend paid - - - - - (6.8) (6.8)
Transactions with Shareholders (1.7) - - 1.7 - (26.2) (26.2)
recognised directly in Shareholders' equity
Balance at 30 June 2023 42.2 16.8 1.6 2.9 (1.0) 206.6 269.1
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 2023, the EBT held 9,024 shares (June
2022: 9,024 shares; December 2022: 9,024 shares).
Consolidated Balance Sheet
As at As at As at
30 June 30 June 31 December 2022
2023 2022
£m £m £m
Note Restated*
Non-current assets
Goodwill 9 137.0 133.8 133.8
Intangible assets 10 9.5 13.8 10.9
Property, plant and equipment 11 122.4 113.3 119.6
Right-of-use assets 12 40.5 33.2 31.7
Textile rental items 13 67.3 55.3 63.8
Trade and other receivables 0.3 0.3 0.3
Post-employment benefit assets - 8.0 -
377.0 357.7 360.1
Current assets
Inventories 2.2 2.6 1.8
Trade and other receivables 74.2 60.5 61.0
Reimbursement assets 4.5 4.4 4.5
Derivative financial assets - 1.4 -
Current income tax assets 1.4 - -
Cash and cash equivalents 6.0 7.6 6.1
88.3 76.5 73.4
Current liabilities
Trade and other payables 85.0 70.8 75.7
Borrowings 6.7 8.5 5.1
Current income tax liabilities - - 0.2
Lease liabilities 5.1 5.1 5.1
Derivative financial liabilities 1.4 - 0.4
Provisions 5.1 5.1 5.1
103.3 89.5 91.6
Non-current liabilities
Post-employment benefit obligations 14 7.8 1.0 10.2
Deferred income tax liabilities 5.9 5.9 1.8
Trade and other payables 0.6 0.9 0.3
Borrowings 39.8 21.0 14.7
Lease liabilities 38.1 30.7 29.2
Derivative financial liabilities - - 0.3
Provisions 0.7 0.8 0.8
92.9 60.3 57.3
NET ASSETS 269.1 284.4 284.6
Capital and reserves attributable to the Company's Shareholders
Share capital 15 42.2 44.5 43.9
Share premium 16.8 16.8 16.8
Merger reserve 1.6 1.6 1.6
Capital redemption reserve 2.9 0.6 1.2
Hedge reserve (1.0) 1.0 (0.5)
Retained earnings 206.6 219.9 221.6
Total equity 269.1 284.4 284.6
* Restated to reflect the inclusion of a £4.4 million provision in respect
of third-party claims made against the Group, offset by an equal and opposite
corresponding reimbursement asset. Further details are set out within note
1.
The notes on pages 17 to 32 form an integral part of these condensed
consolidated interim financial statements. The condensed consolidated
interim financial statements on pages 13 to 32 were approved by the Board of
Directors on 5 September 2023 and signed on its behalf by:
Yvonne Monaghan
Chief Financial Officer
Consolidated Statement of Cash Flows
Half year to Half year to Year ended
30 June 30 June 31 December
2023 2022 2022
Note £m £m £m
Cash flows from operating activities
Profit for the period 10.0 4.8 29.0
Adjustments for:
Taxation charge - continuing 7 3.5 0.4 1.5
Finance cost 2.6 1.6 3.0
Depreciation 38.5 29.9 63.5
Amortisation 2.8 4.3 7.4
Goodwill impairment loss - 1.4 1.4
Profit on disposal of property, plant and equipment (0.1) - (0.2)
(Increase) / decrease in inventories (0.4) (0.4) 0.4
Increase in trade and other receivables (12.9) (12.4) (12.9)
Increase in trade and other payables 10.7 3.7 4.3
Deficit recovery payments in respect of post-employment benefit (0.9) (0.9) (1.9)
obligations
Share-based payments 0.3 0.4 0.8
Commodity swaps not qualifying as hedges - - (0.1)
Income re insurance claims - - (1.5)
Decrease in provisions (0.1) - (0.1)
Business acquisition costs charged to the income statement 0.3 - -
Cash generated from operations 54.3 32.8 94.6
Interest paid (2.3) (1.7) (3.6)
Taxation (paid) / received (1.6) 3.5 3.5
Net cash generated from operating activities 50.4 34.6 94.5
Cash flows from investing activities
Acquisition of business (including acquired overdrafts) (5.3) - -
Purchase of other intangible assets 10 - (1.3) (1.3)
Purchase of property, plant and equipment (12.9) (6.6) (22.1)
Income re insurance claims - - 1.5
Purchase of software - (0.1) (0.3)
Proceeds from sale of property, plant and equipment 0.2 - 0.4
Purchase of textile rental items (31.1) (24.8) (52.5)
Proceeds received in respect of special charges 1.5 1.5 2.7
Net cash used in investing activities (47.6) (31.3) (71.6)
Cash flows from financing activities
Proceeds from borrowings 52.0 23.0 48.0
Repayments of borrowings (27.2) (20.0) (51.0)
Capital element of leases (2.9) (2.8) (5.6)
Share buyback (19.8) - (5.6)
Dividends paid to company shareholders (6.8) - (3.5)
Net cash (used in) / generated from financing activities (4.7) 0.2 (17.7)
Net (decrease) / increase in cash and cash equivalents (1.9) 3.5 5.2
Cash and cash equivalents at beginning of the period 0.8 (4.4) (4.4)
Cash and cash equivalents at end of the period 18 (1.1) (0.9) 0.8
Cash and cash equivalents comprise:
Cash 6.0 7.6 6.1
Overdraft (7.1) (8.5) (5.3)
Cash and cash equivalents at end of the period (1.1) (0.9) 0.8
The notes on pages 17 to 32 form an integral part of these condensed
consolidated interim financial statements.
Notes to the Condensed Consolidated Interim Financial Statements
Johnson Service Group PLC (the 'Company') and its subsidiaries (together 'the
Group') provide textile rental and related services across the UK.
The Company is incorporated and domiciled in the UK, its registered number is
523335 and the address of its registered office is Johnson House, Abbots Park,
Monks Way, Preston Brook, Cheshire, WA7 3GH. The Company is a public limited
company and has its primary listing on the AIM division of the London Stock
Exchange.
The condensed consolidated interim financial statements were authorised for
issue by the Board on 5 September 2023.
1 BASIS OF PREPARATION
Overview
These condensed consolidated interim financial statements of the Group are for
the half year ended 30 June 2023. They have been prepared in accordance with
the Disclosure and Transparency Rules of the Financial Conduct Authority and
with IAS 34, 'Interim Financial Reporting', as adopted by the United Kingdom.
The condensed consolidated interim financial statements have not been reviewed
or audited, nor do they comprise statutory accounts for the purpose of Section
434 of the Companies Act 2006, and do not include all of the information or
disclosures required in the annual financial statements and should therefore
be read in conjunction with the Group's 2022 Annual Report and Accounts, which
was prepared in accordance with UK-adopted international accounting standards.
Financial information for the year ended 31 December 2022 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 below, financial information for the half year ended
30 June 2022 included herein is derived from the condensed consolidated
interim financial statements for that period.
Accounting Policies, Presentation and Computation
The condensed consolidated interim financial statements have been prepared
applying the accounting policies, presentation and methods of computation
applied by the Group in the preparation of the published consolidated
financial statements for the year ended 31 December 2022.
(a) Taxation
Taxes on income in the interim periods are accrued using the tax rate that
would be applicable to expected total annual earnings before exceptional
items. Taxation on exceptional items is accrued as the exceptional items are
recognised. Prior year adjustments in respect of taxation are recognised
when it becomes probable that such adjustment is needed.
(b) Seasonality of operations
Seasonality or cyclicality could affect all of the businesses to varying
extents however, the Directors do not consider such seasonality or cyclicality
to be significant in the context of the condensed consolidated interim
financial statements.
(c) Critical accounting estimates and assumptions
The preparation of the condensed consolidated interim financial statements
requires management to make judgments, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from these
estimates.
Prior Year Adjustment
The Balance Sheet as at 30 June 2022 has been restated to reflect the
inclusion of a £4.4 million provision in respect of third-party claims made
against the Group, but which are indemnified under the terms of its insurance
policies. A corresponding reimbursement asset of £4.4 million has also been
recognised as at the same date. As the Group expects, on average, insurance
claims to be settled within one year, which is driven by a review of the
historic claims data, recognition of these balances is made within current
assets and current liabilities.
Going Concern
Background and Summary
After careful assessment, the Directors have adopted the going concern basis
in preparing these condensed consolidated interim financial statements. The
process and key judgments in coming to this conclusion are set out below.
The Group's business activities, together with details of the financial
position of the Group, its cash flows, liquidity position and borrowing
facilities, are described in the Financial and Operating Review.
Going Concern Assessment
Cash Flows, Covenants and Stress Testing
For the purposes of the going concern assessment, the Directors have prepared
monthly cash flow projections for the period to 31 December 2024 (the
assessment period). The Directors consider 18 months to be a reasonable
period for the going concern assessment as it enables them to consider the
potential impact of macroeconomic and geopolitical factors over an extended
period. The cash flow projections show that the Group has significant
headroom against its committed facilities and can meet its financial covenant
obligations.
The Group has also performed a reverse stress test against the base monthly
cash flow projections referred to above in order to determine the performance
level that would result in a reduction in headroom against its committed
facilities to nil or a breach of its covenants. The interest cover covenant
would be breached in the event that adjusted operating profit reduced to
approximately 70% of 2022 levels. The Directors do not consider this
scenario to be likely.
As a further stress test, the Group considered the impact of increasing
interest rates. The Directors do not consider the magnitude of the increase
in interest rates that would be required in order for a covenant to be
breached to be plausible.
1 BASIS OF PREPARATION (continued)
Each of the stress tests assume no mitigating actions are taken. Mitigating
actions available to the Group, should they be required, include reductions in
discretionary capital expenditure and ceasing dividend payments.
Liquidity
The Group has access to a committed Revolving Credit Facility of £85.0
million (the 'Facility') which matures in August 2026. The terms of the
Facility provide an option to extend the term for a further year and an option
to increase the Facility by up to a further £50.0 million, both with bank
consent. The Facility is considerably in excess of our anticipated
borrowings and provides ample liquidity for current commitments.
Going Concern Statement
After considering the monthly cash flow projections, the stress tests and the
facilities available to the Group, the Directors have a reasonable expectation
that the Group has adequate resources for its operational needs, will remain
in compliance with the financial covenants set out in the bank facility
agreement and will continue in operation for at least the period to 31
December 2024. Accordingly, and having reassessed the principal risks and
uncertainties, the Directors considered it appropriate to adopt the going
concern basis in preparing the condensed consolidated interim financial
statements.
Alternative Performance Measures (APMs)
Overview of APMs
Throughout this Interim Statement, and consistent with prior years, we refer
to a number of APMs. APMs are used by the Group to provide further clarity
and transparency of the Group's financial performance. The APMs are used
internally by management to monitor business performance, budgeting and
forecasting, and for determining Directors' remuneration and that of other
management throughout the business. The APMs, which are not recognised under
UK-adopted international accounting standards, are:
§ 'adjusted operating profit', which refers to continuing operating
profit/(loss) before amortisation of intangible assets (excluding software
amortisation), goodwill impairment and exceptional items;
§ 'adjusted profit before taxation', which refers to adjusted operating
profit less finance cost;
§ 'adjusted EBITDA', which refers to adjusted operating profit plus the
depreciation charge for property, plant and equipment, textile rental items
and right of use assets plus software amortisation;
§ 'adjusted EPS', which refers to EPS calculated based on adjusted profit
after taxation;
§ 'adjusted EPS excluding super-deduction', an additional measure
introduced for 2021 and 2022 only which amends the 'adjusted EPS' to exclude
the short-term benefit of the capital allowance super-deduction; and
§ 'adjusted net debt', which refers to net debt excluding IFRS 16 lease
liabilities.
The Board considers that the above APMs, all of which exclude the effects of
non-recurring items or non-operating events, provide useful information for
stakeholders on the underlying trends and performance of the Group and
facilitate meaningful year on year comparisons.
Limitations of APMs
The Board is cognisant that APMs do have limitations and should not be
regarded as a complete picture of the Group's financial performance.
Limitations of APMs may include, inter alia:
§ similarly named measures may not be comparable across companies;
§ profit-related APMs may exclude significant, sometimes recurring,
business transactions (e.g. restructuring charges and acquisition-related
costs) that impact financial performance and cash flows; and
§ adjusted operating profit, adjusted profit before taxation, adjusted
EBITDA, adjusted EPS and adjusted EPS excluding super-deduction all exclude
the amortisation of intangibles acquired in business combinations, but do not
similarly exclude the related revenue.
Reconciliation of APMs to Statutory Performance Measures
Reconciliations between the above APMs and statutory performance measures are
reconciled within this Interim Statement as follows:
§ Adjusted operating profit - note 2
§ Adjusted profit before taxation - note 5
§ Adjusted EBITDA - note 5
§ Adjusted EPS - note 8
§ Adjusted net debt - note 18
2 SEGMENT ANALYSIS
The chief operating decision-maker (CODM) has been identified as the Executive
Directors. The CODM reviews the Group's internal reporting in order to
assess performance and allocate resources. The CODM determines the operating
segments based on these reports and on the internal reporting structure.
For reporting purposes, the CODM considered the aggregation criteria set out
within IFRS 8, 'Operating Segments', which allows for two or more operating
segments to be combined as a single reporting segment if:
1) aggregation provides financial statement users with information
that allows them to evaluate the business and the environment in which it
operates; and
2) they have similar economic characteristics (for example, where
similar long-term average gross margins would be expected) and are similar in
each of the following respects:
§ the nature of the products and services;
§ the nature of the production processes;
§ the type or class of customer for their products and services;
§ the methods used to distribute their products or provide their services;
and
§ the nature of the regulatory environment (i.e. banking, insurance or
public utilities), if applicable.
The CODM deems it appropriate to present two reporting segments (in addition
to 'Discontinued Operations' and 'All Other Segments'), being:
1) Workwear: comprising of our Workwear business only; and
2) Hotel, Restaurant and Catering ('HORECA'): comprising of our
Stalbridge, Hotel Linen, Lilliput and Regency businesses, each of which are a
separate operating segment.
The CODM's rationale for aggregating the Stalbridge, Hotel Linen, Lilliput and
Regency operating segments into a single reporting segment is set out below:
§ the gross margins of each operating segment are within a similar range,
with the long-term average margin expected to further align;
§ the nature of the customers, products and production processes of each
operating segment are very similar;
§ the nature of the regulatory environment is the same due to the similar
nature of products, processes and customers involved; and
§ distribution is via the same method across each operating segment.
The CODM assesses the performance of the reporting segments based on a measure
of operating profit, both including and excluding the effects of non-recurring
items from the reporting segments, such as restructuring costs and impairments
when the impairment is the result of an isolated, non-recurring or
non-operating event. Interest income and expenditure are not included in the
result for each reporting segment that is reviewed by the CODM. Segment
results include items directly attributable to a segment as well as those that
can be allocated on a reasonable basis, for example rental income received by
Johnson Group Properties PLC (the property holding company of the Group) is
credited back, where appropriate, to the paying company for the purpose of
segmental reporting. There have been no changes in measurement methods used
compared to the prior period.
Other information provided to the CODM is measured in a manner consistent with
that in the financial statements. Segment assets exclude post-employment
benefit assets, derivative financial assets, 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 bank borrowings,
post-employment benefit obligations, derivative financial liabilities, current
income tax liabilities 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 2023, together
with comparative figures, are as follows:
Half year to 30 June 2023 Workwear HORECA All Other Segments Total
£m £m £m £m
Revenue
Rendering of services 69.2 143.9 - 213.1
Sale of goods 1.9 - - 1.9
Total revenue 71.1 143.9 - 215.0
Operating profit / (loss) before amortisation of intangible assets (excluding 11.1 10.9 (3.0) 19.0
software amortisation) and exceptional items
Amortisation of intangible assets (excluding software amortisation) (0.2) (2.4) - (2.6)
Exceptional items - (0.3) - (0.3)
Operating profit / (loss) 10.9 8.2 (3.0) 16.1
Finance cost (2.6)
Profit before taxation 13.5
Taxation charge (3.5)
Profit for the period attributable to equity holders 10.0
Workwear HORECA All Other Segments Total
£m £m £m £m
Balance sheet information
Segment assets 129.2 327.2 1.5 457.9
Unallocated assets: Current income tax assets 1.4
6.0
Cash and cash equivalents
Total assets 465.3
Segment liabilities (40.0) (90.0) (4.6) (134.6)
Unallocated liabilities: Bank borrowings (46.5)
(1.4)
Derivative financial liabilities
(7.8)
Post-employment benefit obligations
(5.9)
Deferred income tax liabilities
Total liabilities (196.2)
Workwear HORECA All Other Segments Total
£m £m £m £m
Other information
Non-current asset additions
- Property, plant and equipment 2.1 10.0 - 12.1
- Right of use assets 1.7 8.6 0.1 10.4
- Textile rental items 12.1 17.6 - 29.7
Depreciation and amortisation expense
- Property, plant and equipment 2.9 7.3 - 10.2
- Right of use assets 1.2 1.9 - 3.1
- Textile rental items 9.1 16.1 - 25.2
- Capitalised software 0.1 0.1 - 0.2
- Customer contracts and brands 0.2 2.4 - 2.6
2 SEGMENT ANALYSIS (continued)
Workwear HORECA All Other Segments Total
Half year to 30 June 2022
£m £m £m £m
Revenue
Rendering of services 64.4 110.1 - 174.5
Sale of goods 1.6 0.1 - 1.7
Total revenue 66.0 110.2 - 176.2
Operating profit / (loss) before amortisation of intangible assets (excluding 10.0 5.5 (2.7) 12.8
software amortisation), goodwill impairment
and exceptional items
Amortisation of intangible assets (excluding software amortisation) (0.2) (4.0) - (4.2)
Goodwill impairment - (1.4) - (1.4)
Exceptional items - - (0.5) (0.5)
Operating profit / (loss) 9.8 0.1 (3.2) 6.7
Finance cost (1.6)
Profit before taxation 5.1
Taxation charge (0.4)
Profit for the period from continuing operations 4.7
Profit for the period from discontinued operations 0.1
Profit for the period attributable to equity holders 4.8
Workwear HORECA All Other Segments Restated
Total
£m £m £m £m
Balance sheet information
Segment assets 142.9 272.9 1.4 417.2
Unallocated assets: 8.0
Post-employment benefit assets
1.4
Derivative financial assets
7.6
Cash and cash equivalents
Total assets 434.2
Segment liabilities (38.4) (71.9) (3.1) (113.4)
Unallocated liabilities: Bank borrowings (29.5)
(1.0)
Post-employment benefit obligations
(5.9)
Deferred income tax liabilities
Total liabilities (149.8)
Workwear HORECA All Other Segments Total
£m £m £m £m
Other information
Non-current asset additions
- Property, plant and equipment 2.6 6.4 - 9.0
- Right of use assets - 0.8 - 0.8
- Textile rental items 11.3 14.9 - 26.2
- Capitalised software 0.1 - - 0.1
- Customer contracts 1.3 - - 1.3
Depreciation and amortisation expense
- Property, plant and equipment 2.9 6.1 - 9.0
- Right of use assets 1.0 2.1 - 3.1
- Textile rental items 8.2 9.6 - 17.8
- Capitalised software 0.1 - - 0.1
- Customer contracts 0.2 4.0 - 4.2
2 SEGMENT ANALYSIS (continued)
Year ended 31 December 2022 Workwear HORECA All Other Segments Total
£m £m £m £m
Revenue
Rendering of services 131.0 251.0 - 382.0
Sale of goods 3.6 0.1 - 3.7
Total revenue 134.6 251.1 - 385.7
Operating profit / (loss) before amortisation of intangible assets (excluding 21.9 24.1 (4.8) 41.2
software amortisation), goodwill impairment
and exceptional items
Amortisation of intangible assets (excluding software amortisation) (0.4) (6.8) - (7.2)
Goodwill impairment - (1.4) - (1.4)
Exceptional items 0.9 - (0.2) 0.7
Operating profit / (loss) 22.4 15.9 (5.0) 33.3
Finance cost (3.0)
Profit before taxation 30.3
Taxation charge (1.5)
Profit for the period from continuing operations 28.8
Profit for the period from discontinued operations 0.2
Profit for the period attributable to equity holders 29.0
Workwear HORECA All Other Segments Total
£m £m £m £m
Balance sheet information
Segment assets 144.7 281.8 0.9 427.4
Unallocated assets: 6.1
Cash and cash equivalents
Total assets 433.5
Segment liabilities (37.4) (76.3) (2.5) (116.2)
Unallocated liabilities: Bank borrowings (19.8)
(0.7)
Derivative financial liabilities
(10.2)
Post-employment benefit obligations
(0.2)
Current income tax liabilities
(1.8)
Deferred income tax liabilities
Total liabilities (148.9)
Workwear HORECA All Other Segments Total
£m £m £m £m
Other information
Non-current asset additions
- Property, plant and equipment 6.3 18.5 - 24.8
- Right of use assets 0.8 1.2 - 2.0
- Textile rental items 21.5 35.9 - 57.4
- Capitalised software 0.2 0.1 - 0.3
- Customer contracts 1.3 - - 1.3
Depreciation, impairment and amortisation expense
- Property, plant and equipment 5.8 12.5 - 18.3
- Right of use assets depreciation 2.0 3.8 0.1 5.9
- Textile rental items depreciation 16.7 22.6 - 39.3
- Capitalised software 0.2 - - 0.2
- Customer contracts 0.4 6.8 - 7.2
- Goodwill impairment - 1.4 - 1.4
3 EXCEPTIONAL ITEMS
Half year to Half year to Year ended
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Costs in relation to business acquisition activity (0.3) - -
Insurance claims - - 1.5
Other costs re insurance claims - (0.5) (0.8)
Total exceptional items (0.3) (0.5) 0.7
Current year exceptional items
During the half year to 30 June 2023, professional fees of £0.3 million were
incurred relating to the acquisition of Regency Laundry Limited and other
costs in relation to business acquisition activity. Further information
relating to the acquisition is provided in note 16.
Prior year exceptional items
Insurance claims and other costs
A Workwear processing plant was destroyed as a result of a fire in 2020.
Final settlement proceeds of £1.5 million were received in the year ended 31
December 2022 in respect of this insurance claim. In addition, costs of
£0.8 million (£0.5 million to 30 June 2022) were incurred in the year in
respect of the demolition of the destroyed site and preparing the site for
sale.
4 FINANCE COST
Half year to Half year to Year ended
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Interest payable on bank loans and overdrafts 1.3 0.8 1.3
Gain on interest rate swaps not qualifying as hedges - (0.1) (0.1)
Amortisation of bank facility fees 0.1 0.1 0.3
Finance costs on lease liabilities relating to IFRS 16 1.0 0.8 1.5
Notional interest on post-employment benefit obligations 0.2 - -
Finance cost 2.6 1.6 3.0
5 ALTERNATIVE PERFORMANCE MEASURES (APMs)
Adjusted profit before and after taxation (continuing) Half year to Half year to Year ended
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Profit before taxation (continuing) 13.5 5.1 30.3
Amortisation of intangible assets (excluding software amortisation) 2.6 4.2 7.2
Goodwill impairment - 1.4 1.4
Exceptional items 0.3 0.5 (0.7)
Adjusted profit before taxation (continuing) 16.4 11.2 38.2
Taxation thereon (4.1) (1.1) (2.6)
Adjusted profit after taxation (continuing) 12.3 10.1 35.6
Adjusted EBITDA Half year to Half year to Year ended
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Operating profit before amortisation of intangible assets (excluding software 19.0 12.8 41.2
amortisation), goodwill impairment and exceptional items
Software amortisation 0.2 0.1 0.2
Property, plant and equipment depreciation 10.2 9.0 18.3
Right of use asset depreciation 3.1 3.1 5.9
Textile rental items depreciation 25.2 17.8 39.3
Adjusted EBITDA 57.7 42.8 104.9
6 DIVIDENDS
Half year to Half year to Year ended
30 June 30 June 31 December
2023 2022 2022
Dividend per share (pence)
2023 Interim dividend proposed 0.9 - -
2022 Interim dividend proposed and paid - 0.8 0.8
2022 Final dividend proposed and paid - - 1.6
0.9 0.8 2.4
Half year to Half year to Year ended
30 June 30 June 31 December
2023 2022 2022
Shareholders' funds committed (£m)
2023 Interim dividend proposed 3.8 - -
2022 Interim dividend proposed and paid - 3.5 3.5
2022 Final dividend proposed and paid - - 6.8
On 12 May 2023, a final dividend in respect of the year ended 31 December 2022
of 1.6 pence per share was paid to Shareholders, utilising £6.8 million of
Shareholders' funds.
The Directors are proposing an interim dividend in respect of the year ended
31 December 2023 of 0.9 pence per Ordinary share which, based on the number of
shares in issue as at the date of this report, will reduce Shareholders' funds
by £3.8 million. The dividend will be paid on 3 November 2023 to
Shareholders on the register of members at the close of business on 6 October
2023. The trustee of the EBT has waived the entitlement to receive dividends
on the Ordinary shares held by the trust. Given the intention of the
Directors to launch a second share buyback programme later this month, it is
anticipated that the actual distribution will be less than the amount stated
above.
In accordance with IAS 10, there is no payable recognised at 30 June 2023 in
respect of this proposed dividend.
7 TAXATION
Half year to Half year to Year ended
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Current tax
UK corporation tax charge for the period - - -
Adjustment in relation to previous periods - - 0.3
Current tax charge for the period - - 0.3
Deferred tax
Origination and reversal of temporary differences 3.5 0.4 3.3
Adjustment in relation to previous years - - (2.1)
Deferred tax charge for the period 3.5 0.4 1.2
Total charge for taxation included in the consolidated income statement for 3.5 0.4 1.5
continuing operations
Taxation in relation to the amortisation of intangible assets (excluding
software amortisation) has reduced the charge for taxation on continuing
operations in the half year to 30 June 2023 by £0.6 million (June 2022: £0.7
million; December 2022: £1.1 million).
During the half year to 30 June 2023 a £0.2 million charge relating to
deferred taxation (June 2022: £2.2 million; December 2022: £2.6 million) has
been recognised in other comprehensive income.
Reconciliation of effective tax rate
Taxation on non-exceptional items for the half year to 30 June 2023 is
calculated based on the estimated average annual effective tax rate of 25.1%
(June 2022: 9.7%; December 2022: 6.8%). This compares to the weighted
average tax rate at the balance sheet date of 23.5% (June 2022: 19.0%;
December 2022: 19.0%). The effective tax rate is impacted by a number of
factors, including expenses not deductible for taxation and short-term timing
differences, with first year capital allowances in the period reflecting the
full expensing relief announced in the Chancellor's Spring Budget, impacting
upon the estimated pattern of reversal of the Group's deferred tax assets and
liabilities. These factors combine to increase the effective tax rate for
the half year to 30 June 2023 to 25.1%. The adjustment for under or over
provisions in previous years is recognised when the amounts are agreed - none
have been recognised in the period (June 2022: £nil; December 2022: £1.8
million credit).
A change to the UK corporation tax rate, which was substantively enacted as
part of Finance Bill 2021 on 24 May 2021, was an increase to the main rate
from 19% to 25% with effect from 1 April 2023. Deferred income taxes at the
balance sheet date have been measured at the tax rate expected to be
applicable at the date the deferred income tax assets and liabilities are
realised. Accordingly, an average deferred income tax rate of 25% has been
used to measure all deferred tax balances as at 30 June 2023 (June 2022:
23.7%; December 2022: 24.6%).
8 EARNINGS PER SHARE
Half year to Half year to Year ended 31 December
30 June 30 June 2022
2023 2022 £m
£m £m
Profit for the period attributable to Shareholders 10.0 4.7 28.8
Amortisation of intangible assets from continuing operations (net of taxation) 2.0 3.5 6.1
Goodwill impairment (net of taxation) - 1.4 1.4
Exceptional items from continuing operations (net of taxation) 0.3 0.5 (0.7)
Adjusted profit from continuing operations attributable to Shareholders 12.3 10.1 35.6
Profit from discontinued operations attributable to Shareholders - 0.1 0.2
Total adjusted profit from all operations attributable to Shareholders 12.3 10.2 35.8
Number Number Number
of shares of shares of shares
Weighted average number of Ordinary shares 429,246,079 445,247,615 444,288,818
Potentially dilutive Ordinary shares 95,000 95,000 95,000
Diluted number of Ordinary shares 429,341,079 445,342,615 444,383,818
Pence Pence Pence
Basic earnings per share per share per share per share
From continuing operations 2.3p 1.1p 6.5p
From discontinued operations - - -
From total operations 2.3p 1.1p 6.5p
Adjustment for amortisation of intangibles assets (continuing) 0.5p 0.8p 1.4p
Adjustment for goodwill impairment (continuing) - 0.3p 0.3p
Adjustment for exceptional items (continuing) 0.1p 0.1p (0.2)p
Adjusted basic earnings per share (continuing) 2.9p 2.3p 8.0p
Adjusted basic earnings per share (discontinued) - - -
Adjusted basic earnings per share from total operations 2.9p 2.3p 8.0p
Diluted earnings per share
From continuing operations 2.3p 1.1p 6.5p
From discontinued operations - - -
From total operations 2.3p 1.1p 6.5p
Adjustment for amortisation of intangibles assets (continuing) 0.5p 0.8p 1.4p
Adjustment for goodwill impairment (continuing) - 0.3p 0.3p
Adjustment for exceptional items (continuing) 0.1p 0.1p (0.2)p
Adjusted diluted earnings per share (continuing) 2.9p 2.3p 8.0p
Adjusted diluted earnings per share (discontinued) - - -
Adjusted diluted earnings per share from total operations 2.9p 2.3p 8.0p
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), goodwill
impairment and exceptional items, all net of taxation, and are considered to
show the underlying performance of the Group.
For diluted earnings per share, the weighted average number of Ordinary shares
in issue is adjusted to assume conversion of all potentially dilutive Ordinary
shares. The Company has potentially dilutive Ordinary shares arising from
share options granted to employees. Options are dilutive under the SAYE
scheme, where the exercise price together with the future IFRS 2 charge of the
option is less than the average market price of the Company's Ordinary shares
during the period. Options under the LTIP schemes, as defined by IFRS 2, are
contingently issuable shares and are therefore only included within the
calculation of diluted earnings per share if the performance conditions, as
set out in the Directors' Remuneration Report within the 2022 Annual Report
and Accounts, are satisfied at the end of the reporting period, irrespective
of whether this is the end of the vesting period or not.
Potentially dilutive Ordinary shares are dilutive at the point, from a
continuing operations level, when their conversion to Ordinary shares would
decrease earnings per share or increase loss per share. For the periods
ended 30 June 2023 and 30 June 2022, and the year ended 31 December 2022,
potentially dilutive Ordinary shares have been treated as dilutive, as their
inclusion in the diluted earnings per share calculation decreases the earnings
per share from continuing operations.
There were no events occurring after the balance sheet date that would have
changed significantly the number of Ordinary shares or potentially dilutive
Ordinary shares outstanding at the balance sheet date if those transactions
had occurred before the end of the reporting period.
9 GOODWILL
12 As at As at As at
30 June 30 June 31 December 2022
2023 2022
£m £m £m
Cost
Brought forward 135.2 135.2 135.2
Business combinations (note 16) 3.2 - -
138.4 135.2 135.2
Impairment
Brought forward 1.4 - -
Impairment - 1.4 1.4
1.4 1.4 1.4
Closing 137.0 133.8 133.8
In accordance with UK-adopted international accounting standards, goodwill is
not amortised, but instead is tested annually for impairment, or upon the
existence of indicators of impairment per IAS 36, and carried at cost less
accumulated impairment losses.
Management have reviewed the indicators of impairment per IAS 36 and do not
believe that any have been triggered since 31 December 2022 and, as such, no
impairment review has been carried out as at 30 June 2023. In line with the
requirements of IAS 36, a full impairment review will be performed during the
second half of the year.
10 INTANGIBLE ASSETS
Capitalised software
As at As at As at
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Opening net book value 1.6 1.5 1.5
Additions - 0.1 0.3
Amortisation (0.2) (0.1) (0.2)
Closing net book value 1.4 1.5 1.6
Other intangible assets
As at As at As at
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Opening net book value 9.3 15.2 15.2
Additions - 1.3 1.3
Business combinations (note 16) 1.4 - -
Amortisation (2.6) (4.2) (7.2)
Closing net book value 8.1 12.3 9.3
Total 9.5 13.8 10.9
Other intangibles assets comprise of customer contracts and relationships and,
from 1 January 2023, brands.
11 PROPERTY, PLANT AND EQUIPMENT
As at As at As at
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Opening net book value 119.6 113.3 113.3
Additions 12.1 9.0 24.8
Business combinations (note 16) 1.0 - -
Depreciation (10.2) (9.0) (18.3)
Disposals (0.1) - (0.2)
Closing net book value 122.4 113.3 119.6
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
2023 2022 2022
£m £m £m
Property, plant and equipment 23.4 10.0 11.1
£13.8 million of the capital commitments relates to the new HORECA site in
Crawley.
12 RIGHT OF USE ASSETS
As at As at As at
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Opening net book value 31.7 35.5 35.5
Additions 10.4 0.8 2.0
Business combinations (note 16) 1.5 - -
Reassessment/modifications of assets previously recognised - - 0.1
Depreciation (3.1) (3.1) (5.9)
Closing net book value 40.5 33.2 31.7
13 TEXTILE RENTAL ITEMS
As at As at As at
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Opening net book value 63.8 48.4 48.4
Additions 29.7 26.2 57.4
Business combinations (note 16) 0.5 - -
Depreciation (25.2) (17.8) (39.3)
Special charges (1.5) (1.5) (2.7)
Closing net book value 67.3 55.3 63.8
14 POST-EMPLOYMENT BENEFIT OBLIGATIONS
The Group has applied the requirements of IAS 19, 'Employee Benefits' to its
employee pension schemes and post-employment healthcare benefits.
In the half year to 30 June 2023, deficit recovery payments of £0.9 million
were paid by the Group to the defined benefit scheme (June 2022: £0.9
million; December 2022: £1.9 million).
Following discussions with the Group's appointed actuary, a re-measurement
gain of £1.6 million has been recognised in the half year to 30 June 2023.
The improvement in the position is mainly driven by an increase in the
discount rate assumption since 31 December 2022, offset to a lesser extent by
an increase in the assumed rate of inflation.
The post-employment benefit (obligation) / asset and associated deferred
income tax asset / (liability) thereon are shown below:
As at As at As at
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Post-employment benefit (obligation) / asset (7.8) 7.0 (10.2)
Deferred income tax asset / (liability) thereon 1.9 (1.8) 2.6
(5.9) 5.2 (7.6)
The reconciliation of the opening gross post-employment benefit obligation to
the closing gross post-employment benefit (obligation) / asset is shown below:
As at As at As at
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Opening post-employment benefit obligation (10.2) (2.1) (2.1)
Notional interest (0.2) - -
Employer contributions 0.9 0.9 1.9
Re-measurement gains / (losses) 1.6 8.1 (10.0)
Utilisation of healthcare provision 0.1 0.1 -
Closing post-employment benefit (obligation) / surplus (7.8) 7.0 (10.2)
Post-employment benefit assets / (obligations) are comprised of the following
balance sheet amounts:
As at As at As at
30 June 30 June 31 December 2022
2023 2022
£m £m £m
Post-employment benefit assets (Non-current assets) - 8.0 -
Post-employment benefit obligations (Non-current liabilities) (7.8) (1.0) (10.2)
(7.8) 7.0 (10.2)
Post-employment benefit assets related to the defined benefit pension scheme
in the half year to 30 June 2022.
15 SHARE CAPITAL
Issued share capital is as follows:
Half year to Half year to Year ended
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Share capital at the start of the period 43.9 44.5 44.5
Share buybacks (1.7) - (0.6)
Share capital at the end of the period 42.2 44.5 43.9
In September 2022, the Group commenced a share buyback programme to repurchase
up to £27.5 million (excluding expenses) of its own shares. During the half
year to 30 June 2023, 17,047,238 (June 2022: nil, December 2022: 6,222,227)
ordinary shares with a total nominal value of £1,704,724 (June 2022: £nil,
December 2022: £622,223) were bought back by the Company for a total
consideration, including transaction costs, of £19.7 million (June 2022:
£nil; December 2022: £5.7 million). In cash terms, £19.8 million was
expended during the half year to 30 June 2023, being £19.7 million relating
to ordinary shares repurchased in the half year to 30 June 2023, together with
a further £0.1 million relating to 116,934 ordinary shares which were
repurchased in the year ended 31 December 2022 but not settled until post year
end. The total shares repurchased as part of the share buyback programme
represents 5.2% of the Company's share capital in issue prior to commencement
of the share buyback programme.
16 BUSINESS COMBINATIONS
On 13 February 2023, the Group acquired 100% of the share capital of Regency
Laundry Limited ('Regency') for a net consideration of £5.3 million (being
gross consideration of £5.75 million adjusted for normalised working capital,
cash and debt like items) plus associated fees. Since acquisition, Regency
has generated a profit of £0.3 million on revenue of £2.5 million. Had the
business been acquired at the start of the period it is estimated that profit
of £0.3 million would have been generated on revenue of £3.1 million.
The provisional fair value of assets and liabilities acquired are as follows:
Regency
£m
Intangible assets - Goodwill 3.2
Intangible assets - Customer contracts and brands 1.4
Property, plant and equipment 1.0
Right of use assets 1.5
Textile rental items 0.5
Trade and other receivables 0.8
Cash and cash equivalents 0.2
Trade and other payables (1.1)
Borrowings (0.2)
Lease liabilities (1.6)
Deferred income tax liability (0.4)
Net consideration 5.3
Goodwill represents the expected benefits to the wider Group arising from the
acquisition together with deferred income tax arising from the recognition of
the intangible asset for customer contracts and brands.
The cash flows in relation to business acquisition activity are summarised
below:
Half year to Half year to Year ended
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Consideration paid for acquisitions in the period (5.3) - -
Cash and cash equivalents acquired 0.2 - -
Costs in relation to business acquisition activity (0.2) - -
(5.3) - -
In the half year to 30 June 2023, costs in relation to business acquisition
activity were £0.3 million, of which £0.2 million has been paid within the
period.
17 BORROWINGS
At 30 June 2023, borrowings were secured and drawn down under a committed
facility dated 8 August 2022. The facility comprises a £85.0 million
rolling credit facility (including an overdraft) which runs to August 2026
with a one-year extension option and a further option, both subject to bank
consent, to increase the facility by up to an additional £50.0 million. The
margin on the facility, which is determined based upon the Group's leverage
ratio, ranges between 1.45% and 2.45% and was 1.45% for the period to 30 June
2023.
During the period, individual tranches were drawn down, in sterling, for
periods of up to three months at SONIA rates of interest, plus the applicable
margin.
Amounts drawn under the revolving credit facility have been classified as
either current or non-current depending upon when the loan is expected to be
repaid.
Borrowings are stated net of unamortised issue costs of £0.6 million (30 June
2022: £nil; 31 December 2022: £0.5 million).
18 ANALYSIS OF NET DEBT
Net debt is calculated as total borrowings net of unamortised bank facility
fees, less cash and cash equivalents. Non-cash changes represent the effects
of the recognition and subsequent amortisation of fees relating to the bank
facility, changing maturity profiles, debt acquired as part of an acquisition
and the recognition of lease liabilities entered into during the period.
At 1 Cash At 30
June 2023 January 2023 Flow Non-cash June
Changes 2023
£m £m £m £m
Debt due within one year 0.2 0.3 (0.1) 0.4
Debt due after more than one year (14.7) (24.9) (0.2) (39.8)
Lease liabilities (34.3) 2.9 (11.8) (43.2)
Total debt and lease financing (48.8) (21.7) (12.1) (82.6)
Cash and cash equivalents 0.8 (1.9) - (1.1)
Net debt (48.0) (23.6) (12.1) (83.7)
June 2022 At 1 January 2022 Cash Non-cash At 30
Flow Changes June
2022
£m £m £m £m
Debt due within one year 0.1 - (0.1) -
Debt due after more than one year (18.0) (3.0) - (21.0)
Lease liabilities (37.8) 2.8 (0.8) (35.8)
Total debt and lease financing (55.7) (0.2) (0.9) (56.8)
Cash and cash equivalents (4.4) 3.5 - (0.9)
Net debt (60.1) 3.3 (0.9) (57.7)
At 1 Cash At 31 December 2022
December 2022 January Flow Non-cash
2022 Changes
£m £m £m £m
Debt due within one year 0.1 0.3 (0.2) 0.2
Debt due after more than one year (18.0) 3.4 (0.1) (14.7)
Lease liabilities (37.8) 5.6 (2.1) (34.3)
Total debt and lease financing (55.7) 9.3 (2.4) (48.8)
Cash and cash equivalents (4.4) 5.2 - 0.8
Net debt (60.1) 14.5 (2.4) (48.0)
18 ANALYSIS OF NET DEBT (continued)
The cash and cash equivalents figures are comprised of the following balance
sheet amounts:
As at 30 As at 30 June As at 31 December 2022
June 2022
2023
£m £m £m
Cash (Current assets) 6.0 7.6 6.1
Overdraft (Borrowings, Current liabilities) (7.1) (8.5) (5.3)
(1.1) (0.9) 0.8
Lease liabilities are comprised of the following balance sheet amounts:
As at 30 As at 30 June As at 31 December 2022
June 2022
2023
£m £m £m
Amounts due within one year (Lease liabilities, Current liabilities) (5.1) (5.1) (5.1)
Amounts due within one year (Lease liabilities, Non-current liabilities) (38.1) (30.7) (29.2)
(43.2) (35.8) (34.3)
19 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Half year to Half year to Year ended
30 June 30 June 2022 31 December
2023 2022
£m £m £m
(Decrease) / increase in cash in the period (1.9) 3.5 5.2
(Increase) / decrease in debt and lease financing (21.7) (0.2) 9.3
Change in net debt resulting from cash flows (23.6) 3.3 14.5
Debt acquired through business combinations (note 16) (1.8) - -
Lease liabilities recognised during the period (10.2) (0.8) (2.1)
Movement in unamortised issue costs of bank loans (0.1) (0.1) (0.3)
Movement in net debt during the period (35.7) 2.4 12.1
Opening net debt (48.0) (60.1) (60.1)
Closing net debt (83.7) (57.7) (48.0)
20 RELATED PARTY TRANSACTIONS
Transactions during the period between the Company and its subsidiaries, which
are related parties, have been conducted on an arm's length basis and
eliminated on consolidation. Full details of the Group's other related party
relationships, transactions and balances are given in the Group's Annual
Report and Accounts for the year ended 31 December 2022. There have been no
material changes in these relationships in the half year to 30 June 2023 or up
to the date of this Report.
21 CONTINGENT LIABILITIES
The Group operates from a number of sites across the UK. Some of the sites
have operated as laundry sites for many years and historic environmental
liabilities may exist. Such liabilities are not expected to give rise to any
significant loss.
The Group has granted each of its banks and the 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 £28.0 million to the Trustee ranking pari passu
with up to £155.0 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 £0.2 million per annum, reduced pro rata
as guarantees are released. Such liabilities are not expected to give rise
to any significant loss.
22 EVENTS AFTER THE REPORTING PERIOD
On 31 August 2023, the Group acquired the entire issued share capital of
Harkglade Limited, together with its subsidiaries Celtic Linen Limited and
Millbrook Linen Limited (together, 'Celtic Linen'), for a cash consideration
of €31.5 million (£27.1 million) on a debt free cash free basis, subject to
a locked box mechanism and a normalised level of working capital.
Celtic Linen services the Republic of Ireland's Healthcare and Hotel,
Restaurant and Catering ('HORECA') sectors; it is the largest linen supplier
to the Republic of Ireland's Healthcare sector and is the second largest linen
supplier to the HORECA sector. The transaction is expected to be immediately
earnings enhancing and, in addition to collaboratively sharing best practice
across the enlarged Group, allows us to explore operational synergies with our
Northern Ireland based business, Lilliput.
Celtic Linen's revenue, adjusted EBITDA and loss before taxation (after
finance costs of €1.5 million), as set out in Harkglade Limited's audited
consolidated financial statements for the year ended 1 January 2023, was
€29.0 million, €4.6 million and €(0.9) million respectively. Celtic
Linen's gross assets as at the same date amounted to €16.0 million, of which
€15.3 million were tangible.
There have been no other events that require disclosure in accordance with
IAS10, 'Events after the balance sheet date'.
23 PRINCIPAL RISKS AND UNCERTAINTIES
Approach to Risk Management
The Board has overall accountability for ensuring that risk is effectively
managed across the Group and, on behalf of the Board, the Audit Committee
coordinates and reviews the effectiveness of the Group's risk management
process.
Risks are reviewed by all of our businesses on an ongoing basis and are
measured against a defined set of likelihood and impact criteria. This is
captured in consistent reporting formats enabling the Audit Committee to
review and consolidate risk information and summarise the principal risks and
uncertainties facing the Group. Wherever possible, action is taken to
mitigate, to an acceptable level, the potential impact of identified principal
risks and uncertainties.
The Board formally reviews the most significant risks facing the Group at its
March and August meetings, or more frequently should new matters arise.
Throughout 2023 to date, the overall risk environment remained largely
unchanged from that reported within the Group's 2022 Annual Report.
Risk Appetite
The Board interprets appetite for risk as the level of risk that the Group is
willing to take in order to meet its strategic goals. The Board communicates
its approach to, and appetite for, risk to the business through the strategy
planning process and the internal risk governance and control frameworks. In
determining its risk appetite, the Board recognises that a prudent and robust
approach to risk assessment and mitigation must be carefully balanced with a
degree of flexibility so that the entrepreneurial spirit which has greatly
contributed to the success of the Group is not inhibited. Both the Board and
the Audit Committee remain satisfied that the Group's internal risk control
framework continues to provide the necessary element of flexibility without
compromising the integrity of risk management and internal control systems.
Emerging Risks
The Board has established processes for identifying emerging risks, and
horizon scanning for risks that may arise over the medium to long term.
Emerging and potential changes to the Group's risk profile are identified
through the Group's risk governance frameworks and processes, and through
direct feedback from management, including changing operating conditions,
market and consumer trends.
Principal Risks and Uncertainties
The principal risks and uncertainties affecting the Group are summarised
below:
§ Economic and Political Conditions § Health & Safety
§ Cost Inflation § Compliance and Fraud
§ Failure of Strategy § Insufficient Processing Capacity
§ Recruitment, Retention and Motivation of Employees § Customer Sales and Retention
§ Loss of a Processing Facility § Information Systems and Technology
§ Competition and Disruption § Climate Change and Energy Costs
§ Pandemic or Other National Crisis
Full details of the above risks, together with details on how the Board takes
action to mitigate each risk, were provided in our 2022 Annual Report. These
risks and uncertainties do not comprise all of the risks that the Group may
face and are not necessarily 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.
In accordance with the provisions of the UK Corporate Governance Code, the
Board has taken into consideration the principal risks and uncertainties in
the context of determining whether to adopt the going concern basis of
preparation and when assessing the future prospects of the Group.
24 PUBLISHED FINANCIAL STATEMENTS
There is no regulatory 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
(http://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 (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR DZLFBXKLBBBLRecent news on Johnson Service
See all newsREG - Johnson Service Grp. - Transaction in Own Shares
AnnouncementREG - Johnson Service Grp. - Transaction in Own Shares
AnnouncementREG - Johnson Service Grp. - Commencement of Share Buyback Programme
AnnouncementREG - Johnson Service Grp. - Interim Results: Six Months ended 30 June 2025
AnnouncementREG - Johnson Service Grp. - Total Voting Rights
Announcement