Last checked at 9 Sep 2009 07:00
9 September 2009
Johnson Service Group PLC
Interim results for the half year ended 30 June 2009
Johnson Service Group PLC, the textile services and facilities management Group announces its interim results for the half year ended 30 June 2009.
Overview
| Traded well in challenging market conditions | |
| Adjusted operating profit of £7.5 million (June 2008: £7.7 million)* | |
| Adjusted profit before tax of £4.8 million (June 2008: £0.4 million)** | |
| Adjusted earnings per share of 1.3 pence (June 2008: 0.4 pence)** | |
| Net debt reduced to £75.5 million (December 2008: £78.5 million) | |
| Stalbridge Linen returned to profit | |
| Johnson Cleaners has performed ahead of our expectations | |
| A good first half in terms of new contract wins for SGP | |
| Resumption of dividend payments - interim dividend of 0.25p |
Financial Summary
| Continuing | 2009 | 2008 |
| Revenue | £120.0m | £130.1m |
| Revenue (excluding costs recharged to customers) | £116.3m | £124.9m |
| Operating Profit | £8.1m | £0.5m |
| Adjusted Operating Profit* | £7.5m | £7.7m |
| Exceptional Credit/(Charge) | £2.2m | £(5.6m) |
| Profit/(Loss) Before Tax | £5.4m | £(7.5m) |
| Adjusted Profit Before Tax** | £4.8m | £0.4m |
| EPS | 1.5p | (8.8p) |
| Adjusted EPS** | 1.3p | 0.4p |
| Interim dividend | 0.25p | nil |
| * | Before intangibles amortisation and impairment (excluding software amortisation) and exceptional items |
| ** | Before intangibles amortisation and impairment (excluding software amortisation), exceptional items and exceptional finance costs |
John Talbot, Executive Chairman of Johnson Service Group, commented:
"I am pleased to report that we have traded well in the first half of the year in challenging market conditions.
Our Textile Rental division is robust and has continued to win new accounts. We are delighted that Stalbridge Linen Services has reported a small adjusted operating profit.
The Drycleaning division has performed ahead of our expectations, despite the depressed state of the High Street, as we continue to manage costs and invest in GreenEarth® stores.
SGP, in the Facilities Management division has had a good first half in terms of new contract wins, although there has been no upturn from Agency or Capital projects.
Despite the challenges of the economy both on us directly and indirectly through our customers, the Board is confident in achieving a satisfactory result for the year."
Enquiries:
| Johnson Service Group PLC | Hudson Sandler |
| John Talbot, Executive Chairman | Michael Sandler / Wendy Baker |
| Yvonne Monaghan, Finance Director | Telephone: 020 7796 4133 |
| Tel: 020 7796 4133 (on the day) | |
| Tel: 01928 704 600 (thereafter) |
www.johnsonplc.com
A presentation for analysts will be held today at 9.30am at Hudson Sandler, 29 Cloth Fair, London EC1A 7NN.
Chairman's Statement
I am pleased to report that overall we have traded well in the first half in challenging market conditions. We have continued to reduce net debt and I am delighted that the Group is significantly stronger financially to allow us to restore the payment of a dividend. The interim dividend of 0.25p per share will be the first dividend payment since the final dividend for 2006.
The Textile Rental division is robust and has continued to win new accounts and there are indications that market share is increasing, although its revenue is being impacted by continuing customers reducing their cost base. Within the Drycleaning division, Johnson Cleaners performed ahead of our expectations despite the depressed state of the High Street, managing costs whilst continuing to invest in the promotion of GreenEarth® stores. The Facilities Management business, SGP, has had a good six months in terms of new contract wins although there has been no upturn in Agency or Capital projects.
Group Results
Total continuing revenue in the six months to 30 June 2009 was £120.0 million (2008: £130.1 million), while continuing underlying revenue, excluding costs recharged to customers, was £116.3 million (2008: £124.9 million). Continuing adjusted operating profit, was 2.6% lower at £7.5 million (2008: £7.7 million) after charging £0.6 million (2008: £nil) of net redundancy costs which will benefit the second half.
Adjusted profit before tax on a continuing basis was £4.8 million (2008: £0.4 million).
Adjusted operating profit throughout this statement refers to operating profit before amortisation and impairment of intangibles (excluding software amortisation) and exceptional items. Adjusted profit before tax refers to adjusted operating profit less finance costs, excluding, in 2008, exceptional finance costs in relation to bank facility fees.
Net exceptional items from continuing operations for the half year was a credit of £2.2 million (2008: £5.6 million charge) arising from a reduction in the long term liabilities of the Group's defined benefit pension schemes as we actively manage the assets and liabilities of these schemes. The exceptional charge in 2008 comprised a profit on the disposal of textile rental properties of £0.8 million, a release of excess provision for an uninsured loss of £1.2 million, restructuring and environmental costs of £1.6 million and £6.0 million of professional and advisory costs incurred in connection with the bank restructuring process.
Net finance costs were £2.7 million (2008: £8.0 million) reflecting the lower interest rates, both in terms of margin and LIBOR, and significantly lower average borrowings. £0.7 million of the charge in 2008 related to exceptional finance costs arising from the write off of bank fees on the part of the new bank facility which was repaid during the first half of 2008.
After the exceptional items and amortisation of intangibles (excluding software) of £0.6 million credit (2008: £7.9 million charge) the continuing pre-tax profit was £5.4 million (2008: £7.5 million loss). Adjusted fully diluted earnings per share from continuing operations were 1.3p (2008: 0.4p) while continuing earnings per share after exceptional items and amortisation of software were 1.5p (2008: loss 8.8p).
Finances
Total net debt at the end of the first half was reduced to £75.5 million (December 2008: £78.5 million).
The bank facility, which runs to December 2010, is £104.5 million and will reduce to £98.5 million by the end of the second half. This facility is significantly in excess of the anticipated level of borrowings for the foreseeable future and with comfortable cover on bank covenants.
Interest cover based on continuing adjusted operating profit was 2.8 times (2008: 1.1 times) with interest costs benefiting from the current low levels of LIBOR.
Pension Deficit
The recorded net deficit after tax for all post retirement obligations has increased from £14.6 million at December 2008 to £20.0 million at June 2009. We have been actively managing the liabilities of the pension schemes and have successfully implemented a pension increase exchange for eligible retirees, reducing the IAS 19 liabilities through this exercise by £2.5 million before expenses. This has had the effect of limiting the impact on the deficit of the decline in asset values and the increase in liabilities. We are continuing to work closely with the Trustee to optimise our investment returns and we are pleased to report recent investments in alternative asset classes have generated a positive return in the period to June. We will continue to explore and implement changes to reduce the past service liabilities of the schemes whilst at the same time protecting members' interests.
The agreements reached with the Trustees of the three defined benefit pension schemes to pay additional contributions of £1.5 million in 2009 and £1.6 million in 2010 are not currently impacted by this increase in deficit and will remain in place until after the finalisation of the next actuarial valuations due in 2010.
Dividend
The Board has previously stated its intention to resume dividend payments for 2009, subject to satisfactory trading, and accordingly has today declared an interim dividend of 0.25p per share. The level of any final dividend will depend on trading conditions for the remainder of the year and prospects for 2010.
The interim dividend will be paid on 16 November 2009 to those Shareholders on the register of members on 16 October 2009. The ex dividend date is 14 October 2009.
DIVISIONAL PERFORMANCE
Textile Rental
Revenue of the division, which comprises Johnsons Apparelmaster and Stalbridge Linen Services, reduced by 5.3% to £57.6 million (2008: £60.8 million) with adjusted operating profit increasing by 3.1% to £6.7 million (2008: £6.5 million).
Johnsons Apparelmaster, the market-leading workwear laundering and rental business, was affected by lower direct sales of garments and PPE products and revenue from this area reduced by £3.0 million. At the end of March certain rental contracts and garments were acquired from a small independent competitor and were very successfully integrated into the business during April, adding £0.2 million to revenue in the first half. Overall, revenue reduced by 5.1% to £44.8 million (2008: £47.2 million).
Adjusted operating profit reduced to £6.2 million (2008: £6.9 million) after a charge for redundancy costs of £0.4 million incurred towards the end of the first half in respect of action taken to reduce ongoing operating costs.
Work continues to be transferred to the new highly efficient workwear plant in Hinckley which was successfully commissioned at the end of 2008 alleviating capacity limits at other facilities.
Despite the challenges of a difficult economy, particularly in the heavy engineering sectors of the Midlands where we have seen some retrenchment by continuing customers, we are continuing to win new business.
At Stalbridge Linen Services, the premium hotel, catering and hospitality linen provider, the recovery programme continues to be successfully implemented and we are delighted that the business made a small adjusted operating profit in the first half (2008: loss £0.8 million). This has been achieved against the background of a reduction in revenue of 5.9% to £12.8 million (2008: £13.6 million). This is the first time that a profit has been recorded in the seasonally weaker six month trading period to June since 2006. Improvements in efficiency have been achieved in all aspects of the business with particular emphasis on linen processing procedures where new continuous batch washers and finishing equipment have been installed. Further cost savings are expected to be achieved in the second half of the year. We remain on target to remove the remaining reliance on SAP system during the fourth quarter of this year which will have further cost benefits in 2010.
Drycleaning
The Drycleaning Division comprises of Johnson Cleaners, the UK's largest Drycleaner by value and volume, Jeeves of Belgravia, London's finest Drycleaner and Alex Reid, the leading UK supplier to the Drycleaning Industry. Revenue for the division was 10.4% lower at £41.3 million (2008: £46.1 million) and adjusted operating profit reduced by 27.8% to £1.3 million (2007: £1.8 million).
Johnson Cleaners revenue decreased by 5.3% on a like for like basis and Jeeves of Belgravia revenue by 10.6% on a like for like basis. Combined revenue was £36.7 million (2008: £39.5 million) with adjusted operating profit decreasing to £1.3 million (2008: £1.9 million), half of this reduction being due to significantly higher energy costs. The number of stores fell from 523 stores at the end of December 2008 to 512 stores at the end of June as a result of successfully exiting from 14 under-performing stores and opening 3 new locations. The new site pipeline is strong with 7 new convenient locations currently planned for the second half.
Johnson Cleaners has performed ahead of our expectations for the first half of 2009, despite the depressed state of the High Street and market place in general.
Management identified at an early stage that market conditions would be extremely tough in the first half of the year and that there would be a decline in consumer spending. As such, appropriate cost control measures were instigated in November 2008, which resulted in a significant reduction in weekly operating costs compared to the running level at that time. These controls will continue to have a positive impact on the cost base going forward although we do anticipate a small increase in costs in line with volume and more normal levels of maintenance expenditure.
The conversion to GreenEarth® Cleaning within our branches has moved at pace with 36 new machine installations in the first half of the year and a further 20 planned in the second half giving an expected 309 machines in place by the end of the year. The active promotion of our environmentally friendly cleaning process (Green Evolution) in 2009 has gathered momentum with some 50 branches now refurbished and displaying our green credentials. The figure is expected to rise to 90 by the year end, and, including new store openings, will result in excess of 20% of the estate having been "Green Evolutionised". The performance of these branches continues to be in excess of the core estate and consumer feedback is very positive.
At the beginning of 2009 we introduced our Executive Service through a 50 store trial with encouraging results. The Service is now offered in the entirety of the estate and continues to show double digit growth along with the three other services, laundry, ironing and key cutting, introduced in 2008.
The importance of our Priority Club members has been ever more evident in 2009 and plans are being developed to improve our communications to our 500,000+ members through our new website as the year progresses.
Jeeves of Belgravia, which operates within London, has been affected by reduced high street spending. However, the business has adjusted its cost base and whilst profitability has been reduced in the first half and may continue to be throughout 2009, the business is well managed and well placed to grow again in 2010.
At Alex Reid, revenue was £4.6 million (2008: £6.6 million) with a break even position at the adjusted operating profit level (2008: break even).
The market place has been extremely tough, with the independent Drycleaning market appearing to suffer a greater decline than Johnson Cleaners, affecting the sales of both consumables and new machines. This business is receiving considerable management focus to help drive future efficiencies.
Facilities Management
The Facilities Management division now comprises SGP Property & Facilities Management (SGP); Workplace Engineering is now included in the "Other" business segment.
SGP provides predominantly white collar property, building and facilities management (FM) services to many high street chains and to public and commercial organisations, based on a proprietary helpdesk arrangement. SGP currently manages or represents 48,000 retail and commercial units and controls some £1.2 billion of spend on behalf of its customers.
The helpdesk, which operates on a 24/7 basis, is at the centre of all of our services and is engaged by customers to help them to control spend on reactive or planned maintenance of properties. The in-house IT system allows customers to interrogate their data on a current time basis and to target expenditure on critical areas of their operations.
FM contracts, both in the Public and Private sectors, are now becoming a larger proportion of revenue excluding recharges to customers, representing some 66% (June 2008: 61%) of revenue in the first half. Although these contracts are at a lower margin they tend to be longer term contracts, particularly with regard to the Public Sector.
SGP also provides specialist advice and management expertise on all aspects of property costs, projects and risk management.
SGP had a good first half in terms of contract wins. Revenue excluding costs recharged to customers was 1.4% higher at £14.5 million (2008: £14.3 million) whilst revenue including recharges was 6.7% lower than the first half of 2008 at £18.2 million (2008: £19.5 million). Adjusted operating profit reduced by 5.9% to £1.6 million (2008: £1.7 million) reflecting the effect of the lower margin earned on the increased PFI revenue. However, compared with the second half of 2008, adjusted operating profit is up by 14%.
The new contracts referred to in the July pre-close statement, and further wins expected during the second half of this year, along with a continued focus on cost controls, should enable SGP to build on this successful first half and achieve satisfactory overall profit growth this year as well as establishing a strong platform for 2010, particularly if market conditions start to ease. The past two months have seen the contract mobilisation of maintenance helpdesk services for Scottish & Newcastle's leased pub estate and a jointly developed model for the Subway chain that facilitates the efficient delivery of equipment maintenance services to their franchised outlets throughout the UK. New contracts have been entered into with existing customers, B&Q and A S Watson, the latter creating efficiencies across their retail brands, Superdrug, Savers, The Perfume Shop and mobile phone network, 3.
All Other Segments
Workplace Engineering (WE), which provides electrical engineering and fit out services is now included within "All Other Segments" along with Group Costs. Revenue for WE was £2.9 million (2008: £3.7 million) with an adjusted operating loss of £0.5 million (2008: break even) reflecting the slowdown in project work as customers reduce or delay capital spend. Some Project work is currently anticipated in the second half, although this will predominately impact the final quarter.
Group costs have reduced from £2.3 million in 2008 to £1.6 million in 2009 reflecting the cessation of central support of the SAP computer system and a reduction in administration overhead offset by the cost of long term management incentives which were introduced in the second half of 2008.
Board
Bill Shannon joined the Board as a Non Executive Director on 8 May 2009 and is already proving to be a great asset. As previously announced, Baroness Wilcox will retire from the Board on 30 September 2009 after serving a term of six years. We would like to thank Judith for her contribution and wish her well for the future.
Staff
I would like to thank employees at all levels for their continuing support and commitment during what has been a most challenging environment.
Outlook
I believe that the three major divisions have performed well in a difficult market.
The Textile Rental division is seeing its revenue being impacted by its customers reducing their cost base, particularly in the second quarter, and has acted to reduce operating costs. However, the business is robust and has continued to win new accounts.
We feel very positive about our Drycleaning business which has performed strongly in managing its costs and capturing market share where it has started to capitalise on our advantages in terms of the environmental impact of our cleaning process.
SGP is continuing to add new business although there has been no significant upturn in Agency or capital projects. I expect this division to continue to grow despite the lack of project work and it is very well placed to take advantage of any recovery in this area.
Despite the challenges of the economy both on us directly and indirectly through our customers, the Board is confident in achieving a satisfactory result for the year.
John Talbot
Executive Chairman
9th September 2009
Responsibility Statement
The condensed consolidated interim financial statements comply with the Disclosure and Transparency Rules ('DTR') of the United Kingdom's Financial Services Authority in respect of the requirement to produce a half-yearly financial report. The interim report is the responsibility of, and has been approved by, the Directors.
The Directors confirm that to the best of their knowledge:
| this financial information has been prepared in accordance with IAS 34 as adopted by the European Union; | |
| this interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first half and description of principal risks and uncertainties for the remaining half 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 2008, with the following change since 31st December 2008: | |
| William (Bill) Shannon was appointed as a Non-Executive Director on 8th May 2009. | |
Details of current Directors are available on the Johnson Service Group PLC website: www.johnsonplc.com
By order of the Board
Y M Monaghan
Finance Director
9th September 2009
On behalf of the Board
Condensed Consolidated Income Statement
| Half year to 30th June 2009 | Half year to 30th June 2008 | Year ended 31st December 2008 | ||
| Note | £m | £m | £m | |
| CONTINUING OPERATIONS: | ||||
| REVENUE | 3 | 120.0 | 130.1 | 263.3 |
| Costs recharged to customers | (3.7) | (5.2) | (9.7) | |
| Revenue excluding costs recharged to customers | 116.3 | 124.9 | 253.6 | |
| OPERATING PROFIT | 3 | 8.1 | 0.5 | 5.5 |
| OPERATING PROFIT BEFORE INTANGIBLES AMORTISATION AND IMPAIRMENT (EXCLUDING SOFTWARE AMORTISATION) AND EXCEPTIONAL ITEMS | 7.5 | 7.7 | 17.4 | |
| Amortisation and impairment of intangible assets (excluding software amortisation) | (1.6) | (1.6) | (3.2) | |
| Exceptional items | 4 | |||
| - Past service credit | 2.2 | - | - | |
| - Restructuring and other costs | - | (6.4) | (9.6) | |
| - Profit on disposal of property | - | 0.8 | 0.9 | |
| OPERATING PROFIT | 3 | 8.1 | 0.5 | 5.5 |
| Finance costs - Ordinary finance costs | (2.8) | (7.4) | (11.8) | |
| - Exceptional finance costs | - | (0.7) | (0.9) | |
| Finance income | 0.1 | 0.1 | 0.9 | |
| PROFIT / (LOSS) BEFORE TAXATION | 5.4 | (7.5) | (6.3) | |
| Taxation | 5 | (1.5) | 2.3 | 1.7 |
| PROFIT / (LOSS) FOR THE PERIOD FROM CONTINUING OPERATIONS | 3.9 | (5.2) | (4.6) | |
| DISCONTINUED OPERATIONS: | ||||
| LOSS FOR THE PERIOD FROM DISCONTINUED OPERATIONS | - | (0.9) | (1.5) | |
| PROFIT / (LOSS) FOR THE PERIOD ATTRIBUTABLE TO EQUITY HOLDERS | 3.9 | (6.1) | (6.1) | |
| EARNINGS PER SHARE * | 7 | |||
| Basic earnings per share | ||||
| From continuing operations | 1.6p | (8.8p) | (3.2p) | |
| From discontinued operations | - | (1.6p) | (1.0p) | |
| From continuing and discontinued operations | 1.6p | (10.4p) | (4.2p) | |
| Diluted earnings per share | ||||
| From continuing operations | 1.5p | (8.8p) | (3.2p) | |
| From discontinued operations | - | (1.6p) | (1.0p) | |
| From continuing and discontinued operations | 1.5p | (10.4p) | (4.2p) |
* Earnings per share before intangibles amortisation and impairment (excluding software amortisation), exceptional items and exceptional finance costs are shown in Note 7.
The notes on pages 14 to 24 form an integral part of these condensed consolidated interim financial statements.
Condensed Consolidated Statement of Comprehensive Income
| Half year to 30th June 2009 | Half year to 30th June 2008 | Year ended 31st December 2008 | |||
| Note | £m | £m | £m | ||
| Profit / (Loss) For The Period | 3.9 | (6.1) | (6.1) | ||
| Other Comprehensive Income | |||||
| Actuarial loss on defined benefit pension plans | 9 | (10.5) | (9.5) | (11.0) | |
| Taxation in respect of actuarial loss | 3.0 | 2.7 | 3.1 | ||
| Cash flow hedges (net of taxation) | - fair value of (losses) / gains | (0.1) | 0.6 | (0.3) | |
| - transfer to interest | - | (0.1) | (0.1) | ||
| Other Comprehensive Income For The Period | (7.6) | (6.3) | (8.3) | ||
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | (3.7) | (12.4) | (14.4) | ||
Condensed Consolidated Statement of Changes in Shareholders' Equity
| Share Capital | Share Premium | Other Reserves | Retained Earnings | Total Equity | |
| £m | £m | £m | £m | £m | |
| Balance at 1st January 2008 | 5.9 | 13.7 | 1.9 | 25.3 | 46.8 |
| Total comprehensive income for the period | - | - | 0.5 | (12.9) | (12.4) |
| Reserve created on issue of warrants | - | - | 0.3 | - | 0.3 |
| Share options (value of employee services) | - | - | - | 0.2 | 0.2 |
| Balance at 30th June 2008 | 5.9 | 13.7 | 2.7 | 12.6 | 34.9 |
| Total comprehensive income for the period | - | - | (0.9) | (1.1) | (2.0) |
| Issue of Share Capital | 19.0 | - | - | 16.0 | 35.0 |
| Reserve transfer | - | - | (0.1) | 0.1 | - |
| Share options (value of employee services) | - | - | - | 0.2 | 0.2 |
| Balance at 31st December 2008 | 24.9 | 13.7 | 1.7 | 27.8 | 68.1 |
| Total comprehensive income for the period | - | - | (0.1) | (3.6) | (3.7) |
| Reserve transfer | - | - | (0.1) | 0.1 | - |
| Share options (value of employee services) | - | - | - | 0.4 | 0.4 |
| Balance at 30th June 2009 | 24.9 | 13.7 | 1.5 | 24.7 | 64.8 |
The reserve transfer relates to the amortisation of the warrants through the Income Statement.
Condensed Consolidated Balance Sheet
| As at 30th June 2009 | As at 30th June 2008 | As at 31st December 2008 | ||
| Note | £m | £m | £m | |
| ASSETS | ||||
| NON-CURRENT ASSETS | ||||
| Goodwill | 89.2 | 89.2 | 89.2 | |
| Intangible assets | 11.0 | 13.6 | 11.9 | |
| Property, plant and equipment | 45.2 | 46.0 | 45.4 | |
| Textile rental items | 20.7 | 22.0 | 22.2 | |
| Trade and other receivables | 0.3 | 0.3 | - | |
| Derivative financial assets | - | 0.2 | - | |
| Deferred income tax assets | 13.4 | 15.7 | 12.5 | |
| 179.8 | 187.0 | 181.2 | ||
| CURRENT ASSETS | ||||
| Inventories | 3.9 | 4.3 | 4.4 | |
| Trade and other receivables | 39.4 | 64.2 | 48.6 | |
| Current income tax assets | 2.7 | - | - | |
| Cash and cash equivalents | 7.6 | 5.6 | 5.2 | |
| 53.6 | 74.1 | 58.2 | ||
| LIABILITIES | ||||
| CURRENT LIABILITIES | ||||
| Trade and other payables | 13.5 | 20.4 | 15.6 | |
| Other creditors and accruals | 29.0 | 30.7 | 31.1 | |
| Current income tax liabilities | - | 11.4 | 4.1 | |
| Borrowings | 3.0 | 4.7 | 3.8 | |
| Derivative financial liabilities | 0.9 | - | - | |
| Provisions | 3.6 | 5.0 | 2.8 | |
| 50.0 | 72.2 | 57.4 | ||
| NET CURRENT ASSETS | 3.6 | 1.9 | 0.8 | |
| NON-CURRENT LIABILITIES | ||||
| Retirement benefit obligations | 9 | 27.9 | 21.0 | 20.6 |
| Deferred income tax liabilities | 2.2 | 2.9 | 2.5 | |
| Other non-current liabilities | 1.3 | 1.3 | 1.3 | |
| Borrowings | 80.1 | 119.0 | 79.9 | |
| Derivative financial liabilities | - | - | 0.8 | |
| Provisions | 7.1 | 9.8 | 8.8 | |
| 118.6 | 154.0 | 113.9 | ||
| NET ASSETS | 64.8 | 34.9 | 68.1 | |
| EQUITY | ||||
| CAPITAL AND RESERVES ATTRIBUTABLE TO THE COMPANY'S EQUITY HOLDERS | ||||
| Called up share capital | 24.9 | 5.9 | 24.9 | |
| Share premium | 13.7 | 13.7 | 13.7 | |
| Other reserves | 1.5 | 2.7 | 1.7 | |
| Retained earnings | 24.7 | 12.6 | 27.8 | |
| TOTAL EQUITY | 64.8 | 34.9 | 68.1 | |
The notes on pages 14 to 24 form an integral part of these condensed consolidated interim financial statements. The condensed consolidated interim financial statements on pages 10 to 24 were approved by the Board of Directors on 9th September 2009 and signed on its behalf by:
Y M Monaghan
Finance Director
Condensed Consolidated Statement of Cash Flows
| Half year to 30th June 2009 | Half year to 30th June 2008 | Year ended 31st December 2008 | |||
| Note | £m | £m | £m | ||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||
| Profit / (loss) for the period | 3.9 | (6.1) | (6.1) | ||
| Adjustments for: | |||||
| Income tax | - continuing operations | 5 | 1.5 | (2.3) | (1.7) |
| - discontinued operations | - | 13.4 | 14.0 | ||
| Finance income and expense | 2.7 | 8.0 | 11.8 | ||
| Depreciation | 10.0 | 10.8 | 21.4 | ||
| Amortisation of intangible assets | 1.8 | 2.8 | 4.5 | ||
| Decrease / (increase) in inventories | 0.5 | (2.3) | (2.5) | ||
| Decrease in trade and other receivables | 1.9 | 6.0 | 10.6 | ||
| Decrease in trade and other payables | (3.1) | (15.2) | (18.4) | ||
| Profit on sale of property, plant and equipment | (0.2) | (0.8) | (0.6) | ||
| Pre-tax gain on disposal of subsidiaries | - | (11.9) | (11.9) | ||
| Additional contribution to defined benefit pension schemes | (0.7) | (1.8) | (2.6) | ||
| Share-based payments | 0.4 | 0.2 | 0.4 | ||
| Retirement benefit obligations | (2.8) | (0.1) | (0.3) | ||
| Provisions | (0.9) | (2.1) | (5.4) | ||
| Cash generated from / (used in) operations | 15.0 | (1.4) | 13.2 | ||
| Interest paid | (2.4) | (9.0) | (15.1) | ||
| Taxation received | - | - | 1.4 | ||
| Net cash generated from / (used in) operating activities | 12.6 | (10.4) | (0.5) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||
| Acquisition of business (net of cash acquired) | 11 | (0.8) | - | - | |
| Proceeds from sale of subsidiaries | - | 67.1 | 71.7 | ||
| Purchase of property, plant and equipment | (2.9) | (4.6) | (7.6) | ||
| Proceeds from sale of property, plant and equipment | 0.4 | 1.3 | 1.5 | ||
| Purchase of intangible assets | (0.3) | (0.5) | (0.6) | ||
| Purchase of textile rental items | (7.7) | (5.3) | (14.8) | ||
| Proceeds from sale of textile rental items | 1.6 | 2.2 | 4.2 | ||
| Interest received | 0.1 | 0.1 | 0.5 | ||
| Net cash (used in) / generated from investing activities | (9.6) | 60.3 | 54.9 | ||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||
| Proceeds from borrowings | - | 197.0 | 197.0 | ||
| Repayments of borrowings | (0.2) | (257.0) | (296.5) | ||
| Capital element of finance leases | (0.4) | (0.6) | (1.0) | ||
| Net proceeds from issue of Ordinary shares | - | - | 35.0 | ||
| Net cash used in financing activities | (0.6) | (60.6) | (65.5) | ||
| Net increase / (decrease) in cash and cash equivalents | 2.4 | (10.7) | (11.1) | ||
| Cash and cash equivalents at beginning of period | 5.2 | 16.3 | 16.3 | ||
| Cash and cash equivalents at end of period | 13 | 7.6 | 5.6 | 5.2 | |
The notes on pages 14 to 24 form an integral part of these condensed consolidated interim financial statements.
Notes to the Condensed Consolidated Interim Financial Statements
Johnson Service Group PLC ('the Company') and its subsidiaries (together 'the Group') provide a unique range of managed services, operating in two principal areas: textile related services and facilities management.
The Company is incorporated and domiciled in the UK. The Company's registered number is 523335. The address of its registered office is Johnson House, Abbots Park, Monks Way, Preston Brook, Cheshire, WA7 3GH.
The Company has its primary listing on the London Stock Exchange, with its shares traded on AIM.
The Group condensed consolidated interim financial statements were approved for issue by the Board on 9th September 2009.
1 BASIS OF PREPARATION
These condensed consolidated interim financial statements of Johnson Service Group PLC are for the six months ended 30th June 2009. They have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim Financial Reporting', as adopted by the European Union.
The condensed consolidated interim financial statements have not been reviewed or audited, nor do they comprise statutory accounts for the purpose of Section 434 of the Companies Act 2006 (Section 240 of the Companies Act 1985), 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 2008 consolidated financial statements, which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union.
Financial information for the year ended 31st December 2008 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 and did not contain a statement under Section 237 (2) or 237 (3) of the Companies Act 1985 (as amended).
Seasonality or cyclicality could affect the Drycleaning division and Stalbridge Linen Services, although the Directors do not consider this seasonality or cyclicality to be significant in the context of the consolidated interim financial statements.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
2 PRINCIPAL RISKS AND UNCERTAINTIES
Global market conditions (the 'credit crunch') have caused significant volatility in financial markets. Although market confidence and consumer spending patterns have been affected, the Group remains well placed to grow revenues through organic growth and bolt on acquisitions. The Group does not have any exposure to sub-prime lending or collateralised debt obligations.
The recent turbulence in financial markets means that there is a greater risk of loss associated with our customers' inability to meet their financial obligations. This risk is being mitigated through the ongoing monitoring of customer credit limits and reduction of credit limits for customers posing a greater risk of non-payment.
Further details of the Principal Risks and Uncertainties facing the Group were detailed on page 10 of the 2008 Annual Report. These remain unchanged.
3 SEGMENT ANALYSIS
Segment information is presented in respect of the Group's business segments, which are based on the Group's management and internal reporting structure as at 30th June 2009. As described in note 1a) the segmental reporting has been amended in accordance with IFRS 8, and comparative figures have been restated.
The chief operating decision-maker has been identified as the Board of Directors (the Board). The Board reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports and on the internal reporting structure.
The Board assesses the performance of the operating segments based on a measure of earnings before interest and tax, both including and excluding the effects of non-recurring items from the operating segments, such as restructuring costs and impairments when the impairment is the result of an isolated, non-recurring event. Interest income and expenditure are not included in the result for each operating segment that is reviewed by the Board. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis, for example, rental income received by the property company is credited back to the paying company for the purposes of segmental reporting.
Other information provided to the Board is measured in a manner consistent with that in the financial statements. Total segmental assets exclude deferred tax assets, current tax assets, available-for-sale financial assets and cash, all of which are managed on a central basis. Total segmental liabilities exclude deferred tax liabilities, current tax liabilities, and bank borrowings, all of which are managed on a central basis. These balances are part of the reconciliation to total balance sheet assets and liabilities.
Inter-segment pricing is determined on an arm's length basis. The exceptional items have been included within the appropriate business segment as shown on pages 15 to 17.
The business segment results for the half year ended 30th June 2009, together with comparative figures, are as follows:
| Half year ended 30th June 2009 | Textile Rental Services | Drycleaning | Facilities Management | All Other Segments | Total | |
| £m | £m | £m | £m | £m | ||
| REVENUE | ||||||
| Revenue | 57.6 | 41.3 | 18.4 | 2.9 | 120.2 | |
| Inter-segment revenue | - | - | (0.2) | - | (0.2) | |
| REVENUE - CONTINUING | 57.6 | 41.3 | 18.2 | 2.9 | 120.0 | |
| REVENUE EXCLUDING COSTS RECHARGED TO CUSTOMERS | ||||||
| Revenue | 57.6 | 41.3 | 14.7 | 2.9 | 116.5 | |
| Inter-segment revenue | - | - | (0.2) | - | (0.2) | |
| REVENUE EXCLUDING COSTS RECHARGED TO CUSTOMERS - CONTINUING | 57.6 | 41.3 | 14.5 | 2.9 | 116.3 | |
| RESULT | ||||||
| OPERATING PROFIT BEFORE INTANGIBLES AMORTISATION AND IMPAIRMENT (EXCLUDING SOFTWARE AMORTISATION) AND EXCEPTIONAL ITEMS | 6.7 | 1.3 | 1.6 | (2.1) | 7.5 | |
| Amortisation and impairment of intangible assets | (0.7) | - | (0.9) | - | (1.6) | |
| Exceptional items | ||||||
| - Past service credit | - | - | - | 2.2 | 2.2 | |
| OPERATING PROFIT | 6.0 | 1.3 | 0.7 | 0.1 | 8.1 | |
| Finance costs | (2.8) | |||||
| Finance income | 0.1 | |||||
| Loss before taxation | 5.4 | |||||
| Taxation | (1.5) | |||||
| Loss for the period | 3.9 | |||||
| Textile Rental Services | Drycleaning | Facilities Management | All Other Segments | Total | ||
| £m | £m | £m | £m | £m | ||
| OTHER INFORMATION | ||||||
| Fixed asset additions | ||||||
| - Property, plant and equipment | 1.4 | 1.9 | 0.1 | - | 3.4 | |
| - Textile rental items | 6.5 | - | - | - | 6.5 | |
| - Intangible software | 0.2 | - | 0.1 | - | 0.3 | |
| Depreciation and amortisation expense | ||||||
| - Property, plant and equipment | 2.0 | 1.2 | 0.2 | 0.1 | 3.5 | |
| - Textile rental items | 6.5 | - | - | - | 6.5 | |
| - Intangible software | - | - | 0.1 | 0.1 | 0.2 | |
| - Intangibles (excluding software) | 0.7 | - | 0.9 | - | 1.6 | |
| BALANCE SHEET INFORMATION | ||||||
| Segment assets | 107.3 | 37.4 | 47.5 | 17.5 | 209.7 | |
| Unallocated assets | 23.7 | |||||
| Total assets | 233.4 | |||||
| Segment liabilities | (25.8) | (16.6) | (5.7) | (8.1) | (56.2) | |
| Unallocated liabilities | (112.4) | |||||
| Total liabilities | (168.6) |
| Half year ended 30th June 2008 (as restated) | Textile Rental Services | Drycleaning | Facilities Management | All Other Segments | Total | |
| £m | £m | £m | £m | £m | ||
| REVENUE | ||||||
| Revenue | 60.8 | 46.1 | 19.7 | 3.7 | 130.3 | |
| Inter-segment revenue | - | - | (0.2) | - | (0.2) | |
| REVENUE - CONTINUING | 60.8 | 46.1 | 19.5 | 3.7 | 130.1 | |
| Revenue - discontinued | 25.7 | |||||
| Total revenue | 155.8 | |||||
| REVENUE EXCLUDING COSTS RECHARGED TO CUSTOMERS | ||||||
| Revenue | 60.8 | 46.1 | 14.5 | 3.7 | 125.1 | |
| Inter-segment revenue | - | - | (0.2) | - | (0.2) | |
| REVENUE EXCLUDING COSTS RECHARGED TO CUSTOMERS - CONTINUING | 60.8 | 46.1 | 14.3 | 3.7 | 124.9 | |
| Revenue - discontinued | 25.7 | |||||
| Total revenue excluding costs recharged to customers | 150.6 | |||||
| RESULT | ||||||
| OPERATING PROFIT BEFORE INTANGIBLES AMORTISATION AND IMPAIRMENT (EXCLUDING SOFTWARE AMORTISATION) AND EXCEPTIONAL ITEMS | 6.5 | 1.8 | 1.7 | (2.3) | 7.7 | |
| Amortisation and impairment of intangible assets | (0.7) | - | (0.9) | - | (1.6) | |
| Exceptional items | ||||||
| - Restructuring and other costs | 0.1 | (0.1) | - | (6.4) | (6.4) | |
| - Profit on disposal of property | - | - | - | 0.8 | 0.8 | |
| OPERATING PROFIT / (LOSS) | 5.9 | 1.7 | 0.8 | (7.9) | 0.5 | |
| Finance costs - Ordinary finance costs | (7.4) | |||||
| - Exceptional finance costs | (0.7) | |||||
| Finance income | 0.1 | |||||
| Loss before taxation | (7.5) | |||||
| Taxation | 2.3 | |||||
| Loss for the period - Continuing | (5.2) | |||||
| Discontinued operations - Corporatewear | (0.9) | |||||
| Loss for the period | (6.1) | |||||
| Discontinued Operations | Textile Rental Services | Drycleaning | Facilities Management | All Other Segments | Total | |
| £m | £m | £m | £m | £m | £m | |
| OTHER INFORMATION | ||||||
| Fixed asset additions | ||||||
| - Property, plant and equipment | 0.3 | 2.8 | 0.7 | 0.4 | - | 4.2 |
| - Textile rental items | - | 8.1 | - | - | - | 8.1 |
| - Intangible software | 0.1 | - | - | 0.3 | - | 0.4 |
| Depreciation and amortisation expense | ||||||
| - Property, plant and equipment | 0.2 | 1.9 | 1.3 | 0.2 | 0.2 | 3.8 |
| - Textile rental items | - | 7.0 | - | - | - | 7.0 |
| - Intangible software | 0.1 | - | - | 0.1 | 0.1 | 0.3 |
| - Intangibles (excluding software) | 0.9 | 0.7 | - | 0.9 | - | 2.5 |
| BALANCE SHEET INFORMATION | ||||||
| Segment assets | - | 114.7 | 36.3 | 50.3 | 25.3 | 226.6 |
| Unallocated assets | 34.5 | |||||
| Total assets | 261.1 | |||||
| Segment liabilities | - | (28.2) | (16.2) | (7.9) | (8.4) | (60.7) |
| Unallocated liabilities | (165.5) | |||||
| Total liabilities | (226.2) |
| Year ended 31st December 2008 (as restated) | Textile Rental Services | Drycleaning | Facilities Management | All Other Segments | Total | |||
| £m | £m | £m | £m | £m | ||||
| REVENUE | ||||||||
| Revenue | 122.6 | 91.5 | 38.7 | 11.0 | 263.8 | |||
| Inter-segment revenue | - | - | (0.5) | - | (0.5) | |||
| REVENUE - CONTINUING | 122.6 | 91.5 | 38.2 | 11.0 | 263.3 | |||
| Revenue - discontinued | 25.7 | |||||||
| Total revenue |
| 289.0 | ||||||
| REVENUE EXCLUDING COSTS RECHARGED TO CUSTOMERS | ||||||||
| Revenue | 122.6 | 91.5 | 29.0 | 11.0 | 254.1 | |||
| Inter-segment revenue | - | - | (0.5) | - | (0.5) | |||
| REVENUE EXCLUDING COSTS RECHARGED TO CUSTOMERS - CONTINUING | 122.6 | 91.5 | 28.5 | 11.0 | 253.6 | |||
| Revenue - discontinued | 25.7 | |||||||
| Total revenue excluding costs recharged to customers | 279.3 | |||||||
| RESULT | ||||||||
| OPERATING PROFIT BEFORE INTANGIBLES AMORTISATION AND IMPAIRMENT (EXCLUDING SOFTWARE AMORTISATION) AND EXCEPTIONAL ITEMS | 14.3 | 4.4 | 3.1 | (4.4) | 17.4 | |||
| Amortisation and impairment of intangible assets | (1.3) | - | (1.9) | - | (3.2) | |||
| Exceptional items | ||||||||
| - Restructuring and other costs | (2.0) | (0.4) | - | (7.2) | (9.6) | |||
| - Profit on disposal of property | - | - | - | 0.9 | 0.9 | |||
| OPERATING PROFIT / (LOSS) | 11.0 | 4.0 | 1.2 | (10.7) | 5.5 | |||
| Finance costs - Ordinary finance costs | (11.8) | |||||||
| - Exceptional finance costs | (0.9) | |||||||
| Finance income | 0.9 | |||||||
| Loss before taxation | (6.3) | |||||||
| Taxation | 1.7 | |||||||
| Loss for the period - Continuing | (4.6) | |||||||
| Discontinued operations - Corporatewear | (1.5) | |||||||
| Loss for the period | (6.1) | |||||||
| Discontinued Operations | Textile Rental Services | Drycleaning | Facilities Management | All Other Segments | Total | |
| £m | £m | £m | £m | £m | £m | |
| OTHER INFORMATION | ||||||
| Fixed asset additions | ||||||
| - Property, plant and equipment | 0.3 | 4.3 | 2.2 | 0.4 | 0.1 | 7.3 |
| - Textile rental items | - | 17.5 | - | - | - | 17.5 |
| - Intangible software | 0.1 | - | 0.1 | 0.4 | - | 0.6 |
| Depreciation and amortisation expense | ||||||
| - Property, plant and equipment | 0.2 | 3.7 | 2.5 | 0.3 | 0.5 | 7.2 |
| - Textile rental items | - | 14.2 | - | - | - | 14.2 |
| - Intangible software | 0.1 | - | 0.1 | 0.1 | 0.2 | 0.5 |
| - Intangibles (excluding software) | 0.8 | 1.3 | - | 1.9 | - | 4.0 |
| BALANCE SHEET INFORMATION | ||||||
| Segment assets | - | 109.8 | 37.6 | 48.1 | 20.0 | 215.5 |
| Unallocated assets | 23.9 | |||||
| Total assets | 239.4 | |||||
| Segment liabilities | - | (26.9) | (18.6) | (7.0) | (9.5) | (62.0) |
| Unallocated liabilities | (109.3) | |||||
| Total liabilities | (171.3) |
4 EXCEPTIONAL ITEMS
| Half year to 30th June 2009 | Half year to 30th June 2008 | Year ended 31st December 2008 | |
| £m | £m | £m | |
| Restructuring costs - Textile rental services | - | (0.9) | (2.6) |
| - Drycleaning | - | (0.1) | (0.3) |
| - Facilities management | - | - | - |
| - Other | - | (0.4) | (0.5) |
| Total | - | (1.4) | (3.4) |
| Professional fees associated with bank restructuring process | - | (6.0) | (6.4) |
| Professional fees associated with moving to AIM | - | - | (0.3) |
| Onerous lease and environmental costs | - | (0.2) | (0.7) |
| Uninsured losses | - | 1.2 | 1.2 |
| Total restructuring and other costs | - | (6.4) | (9.6) |
| Past service credit | 2.2 | - | - |
| Property disposals | - | 0.8 | 0.9 |
| Total exceptional items | 2.2 | (5.6) | (8.7) |
During the period the Company made an offer to existing retirees in the Johnson Group Staff Pension Scheme and the Semara Augmented Pension Plan to exchange certain future pension increases for a one time increase. This has been taken up by a significant number of retirees, resulting in a reduction in future liabilities, on an IAS 19 basis, of £2.5 million. This is treated as a past service credit of £2.2 million (net of expenses) and has been included as an exceptional credit in the income statement.
In respect of 2008, exceptional items in relation to discontinued operations have been included within the result from discontinued operations.
During the half year ended 30th June 2009 there were no exceptional finance costs (half year ended 30th June 2008: £0.7 million; year ended 31st December 2008: £0.9 million). The exceptional finance costs during 2008 relate to the write-off of bank fees on that part of the new bank facility which was repaid during the period.
5 TAXATION
| Half year to 30th June 2009 | Half year to 30th June 2008 | Year ended 31st December 2008 | |
| £m | £m | £m | |
| Current tax | |||
| UK corporation tax credit for the period - continuing operations | - | (2.2) | (3.2) |
| Adjustment in relation to previous periods - continuing operations | (0.2) | (0.3) | (1.4) |
| Current tax credit for the period - continuing operations | (0.2) | (2.5) | (4.6) |
| Deferred tax | |||
| Origination and reversal of temporary differences - continuing operations | 1.7 | 0.2 | 3.3 |
| Adjustment in relation to previous periods - continuing operations | - | - | (0.4) |
| Deferred tax charge for the period - continuing operations | 1.7 | 0.2 | 2.9 |
| Total charge / (credit) for taxation included in the income statement for continuing operations | 1.5 | (2.3) | (1.7) |
Tax relief on intangibles amortisation has reduced tax by £0.4 million (half year ended 30th June 2008: £0.4 million reduction; year ended 31st December 2008: £0.9 million reduction). The taxation effect of exceptional items (which in 2008 also included exceptional finance costs) has increased the tax charge in the current period by £0.6 million (half year ended 30th June 2008: £2.0 million reduction; year ended 31st December 2008: £2.9 million reduction).
Reconciliation of effective tax rate
Taxation for the six months to 30th June 2009 is calculated based on the estimated average annual effective tax rate of 27.9% (half year ended 30th June 2008: 30.9%; year ended 31st December 2008: 27.0%), as compared to the tax rates expected to be enacted or substantively enacted at the annual balance sheet date of 28% (half year ended 30th June 2008: 28%; year ended 31st December 2008: 28%). Differences between the estimated average annual effective tax rate and statutory rate include, but are not limited to, the effect of non-deductible expenses, the effect of tax losses utilised and under/over provisions in previous years.
6 ADJUSTED PROFIT BEFORE AND AFTER TAXATION
| Half year to 30th June 2009 | Half year to 30th June 2008 | Year ended 31st December 2008 | |
| £m | £m | £m | |
| Profit / (loss) before taxation | 5.4 | (7.5) | (6.3) |
| Intangibles amortisation and impairment (excluding software amortisation) | 1.6 | 1.6 | 3.2 |
| Restructuring and other costs | - | 6.4 | 9.6 |
| Past service credit | (2.2) | - | - |
| Profit on disposal of property | - | (0.8) | (0.9) |
| Exceptional finance costs in respect of bank fees | - | 0.7 | 0.9 |
| Adjusted profit before taxation | 4.8 | 0.4 | 6.5 |
| Taxation | (1.3) | (0.1) | (2.1) |
| Adjusted profit after taxation attributable to continuing operations | 3.5 | 0.3 | 4.4 |
7 EARNINGS PER SHARE
| Half year to 30th June 2009 | Half year to 30th June 2008 | Year ended 31st December 2008 | ||
| £m | £m | £m | ||
| Profit / (loss) for the period attributable to Ordinary Shareholders (continuing operations) | 3.9 | (5.2) | (4.6) | |
| Loss for the period attributable to Ordinary Shareholders (discontinued operations) | - | (0.9) | (1.5) | |
| Intangibles amortisation (excluding software) (net of taxation) (continuing operations) | 1.2 | 1.2 | 2.3 | |
| Intangibles amortisation (excluding software) (net of taxation) (discontinued operations) | - | 0.7 | 0.6 | |
| Exceptional items from continuing operations (net of taxation) | (1.6) | 3.8 | 6.0 | |
| Exceptional items from discontinued operations (net of taxation) | - | 1.3 | 1.3 | |
| Exceptional finance costs in respect of bank fees (net of taxation) | - | 0.5 | 0.7 | |
| Adjusted profit attributable to Ordinary Shareholders | 3.5 | 1.4 | 4.8 | |
| Weighted average number of Ordinary shares | 248,214,351 | 59,418,531 | 143,564,940 | |
| Potentially dilutive options * | 9,432,016 | 1,316,444 | 2,488,233 | |
| Fully diluted number of Ordinary shares | 257,646,367 | 60,734,975 | 146,053,173 | |
| Basic earnings per share | ||||
| From continuing operations | 1.6p | (8.8p) | (3.2p) | |
| From discontinued operations | - | (1.6p) | (1.0p) | |
| From continuing and discontinued operations | 1.6p | (10.4p) | (4.2p) | |
| Adjustment for intangibles amortisation (continuing operations) | 0.5p | 2.0p | 1.6p | |
| Adjustment for intangibles amortisation (discontinued operations) | - | 1.0p | 0.4p | |
| Adjustment for exceptional items (continuing operations) | (0.7p) | 6.4p | 4.2p | |
| Adjustment for exceptional items (discontinued operations) | - | 2.3p | 0.9p | |
| Adjustment for exceptional finance costs in respect of bank fees | - | 0.8p | 0.4p | |
| Adjusted basic earnings per share (continuing operations) | 1.4p | 0.4p | 3.0p | |
| Adjusted basic earnings per share (discontinued operations) | - | 1.7p | 0.3p | |
| Adjusted basic earnings per share from continuing and discontinued operations | 1.4p | 2.1p | 3.3p | |
| Diluted earnings per share | ||||
| From continuing operations | 1.5p | (8.8p) | (3.2p) | |
| From discontinued operations | - | (1.6p) | (1.0p) | |
| From continuing and discontinued operations | 1.5p | (10.4p) | (4.2p) | |
| Adjustment for intangibles amortisation (continuing operations) | 0.4p | 2.0p | 1.6p | |
| Adjustment for intangibles amortisation (discontinued operations) | - | 1.0p | 0.4p | |
| Adjustment for exceptional items (continuing operations) | (0.6p) | 6.4p | 4.2p | |
| Adjustment for exceptional items (discontinued operations) | - | 2.3p | 0.9p | |
| Adjustment for exceptional finance costs in respect of bank fees | - | 0.8p | 0.4p | |
| Adjusted diluted earnings per share (continuing operations) | 1.3p | 0.4p | 3.0p | |
| Adjusted diluted earnings per share (discontinued operations) | - | 1.7p | 0.3p | |
| Adjusted diluted earnings per share from continuing and discontinued operations | 1.3p | 2.1p | 3.3p | |
* Includes outstanding share options granted to employees and warrants issued to the Company's banks
Basic earnings per share is calculated using the weighted average number of shares in issue during the period, excluding those held by the ESOP, based on the profit for the period attributable to Ordinary Shareholders.
Adjusted earnings per share figures are given to exclude the effects of intangibles amortisation and impairment (excluding software amortisation), exceptional items and exceptional finance costs, all net of taxation, and are considered to show the underlying results of the Group.
For diluted earnings per share, the weighted average number of Ordinary shares in issue is adjusted to assume conversion of all potential dilutive Ordinary shares. The Company has potential dilutive Ordinary shares arising from share options granted to employees where the exercise price is less than the average market price of the Company's Ordinary shares during the period and warrants issued to the Company's banks.
Potential dilutive Ordinary shares are dilutive at the profit from continuing operations level when their conversion to Ordinary shares would decrease earnings per share or increase loss per share from continuing operations. In the period to 30th June 2009, potential dilutive Ordinary shares are dilutive, as their inclusion in the diluted earnings per share calculation decreases earnings per share from continuing operations. For the period to 30th June 2008 and to 31st December 2008, potential dilutive Ordinary shares are antidilutive, as their inclusion in the diluted earnings per share calculation would reduce the loss from continuing and discontinued operations.
There were no material events occurring after the Balance Sheet date that would have changed significantly the number of Ordinary shares or potential dilutive Ordinary shares outstanding at the Balance Sheet date, if those transactions had occurred before the end of the reporting period.
8 DIVIDENDS
| Half year to 30th June 2009 | Half year to 30th June 2008 | Year ended 31st December 2008 | |
| Interim ordinary dividend proposed | 0.25p | - | - |
The Directors are proposing an interim dividend in respect of the year ended 31st December 2009 of 0.25p per Ordinary share which will utilise £0.6 million of Shareholders' funds. The dividend will be paid on 16th November 2009 to Shareholders on the register of members at the close of business on 16th October 2009. The Trustee of the ESOP has waived the entitlement to receive dividends on the Ordinary shares held by the Trust.
No dividends have been paid in the period to 30th June 2009. There were no dividends paid during 2008.
In accordance with International Financial Reporting Standards, these condensed consolidated interim financial statements do not reflect a liability in respect of the proposed interim dividend.
9 RETIREMENT BENEFIT OBLIGATIONS
The Group has applied the requirements of IAS 19, 'Employee Benefits' to its employee pension schemes and post-retirement healthcare benefits.
As part of the Group's objective to reduce its overall pension liability, and in accordance with the Schedule of Contributions, additional contributions of £0.6 million were paid by the Group to the Johnson Group Staff Pension Scheme during the period to 30th June 2009 (half year ended 30th June 2008: £1.8 million; year ended 31st December 2008: £2.4 million). A further contribution of £0.1 million was paid to the WML Final Salary Pension Scheme in the period to 30th June 2009 (half year ended 30th June 2008: nil; year ended 31st December 2008: £0.2 million).
Following discussions with the Group's appointed actuary it has been identified that an actuarial loss of £10.5 million should be recognised in the period to 30th June 2009. This is principally as a result of an adverse movement in actuarial assumptions and a fall in the value of equity investments.
As discussed in note 4 the pension increase exchange has reduced the schemes' IAS 19 liabilities by £2.5 million.
The gross retirement benefit liability and associated deferred tax asset thereon, together with the net liability is shown below:
| As at 30th June 2009 | As at 30th June 2008 | As at 31st December 2008 | |
| £m | £m | £m | |
| Gross retirement benefit liability | (27.9) | (21.0) | (20.6) |
| Deferred tax asset thereon | 7.9 | 6.3 | 6.0 |
| Net retirement benefit liability | (20.0) | (14.7) | (14.6) |
10 CAPITAL EXPENDITURE AND COMMITMENTS
CAPITAL EXPENDITURE
In the six months ended 30th June 2009 the Group acquired property, plant and equipment and intangible assets with a net book value of £3.7 million (half year ended 30th June 2008: £4.6 million; year ended 31st December 2008: £7.9 million), not including property, plant and equipment and intangible assets acquired through business combinations. In addition, textile rental items with a net book value of £6.5 million were acquired during the period (half year ended 30th June 2008: £8.1 million; year ended 31st December 2008: £17.5 million), not including textile rental items acquired through business combinations.
Offsetting this, property, plant and equipment and intangible assets with a net book value of £0.2 million were disposed of during the period (half year ended 30th June 2008: £0.5 million; year ended 31st December 2008: £1.0 million), not including property, plant and equipment and intangible assets disposed of through the sale of subsidiaries.
CAPITAL COMMITMENTS
Orders placed for future capital expenditure contracted but not provided for in the financial statements are shown below:
| As at 30th June 2009 | As at 30th June 2008 | As at 31st December 2008 | |
| £m | £m | £m | |
| Intangible assets (computer software) | 0.1 | - | 0.1 |
| Property, plant and equipment | 0.9 | 0.9 | 0.6 |
| 1.0 | 0.9 | 0.7 |
11 BUSINESS COMBINATIONS AND DISPOSALS
ACQUISITIONS
On 31st March 2009, Johnsons Apparelmaster Limited acquired certain trade and assets, comprising rental contracts and garments, from a small independent competitor for a total consideration of £0.8 million, including associated costs. The assets acquired included £0.7 million of intangible assets, relating to customer contracts, and £0.1 million of textile rental items.
There were no other acquisitions during the period. There were no acquisitions in 2008.
DISPOSALS
There were no disposals during the period.
12 SHARE BASED PAYMENTS
As disclosed within note 12 of the 2008 Annual Report, 7,479,074 share options were granted during the period under the Long Term Growth Plan.
On 8th July 2009, the share option awards previously granted on 8th September 2008 and 26th January 2009 were forfeited by the award holders and replaced with an equivalent unapproved award, which is linked to an HMRC approved award. On the same date, the terms of the share option awards previously granted on 8th July 2008 and 25th September 2008 were amended such that they became linked to an HMRC approved award.
The approved awards have been granted to allow, where possible, the award holder to receive part of the gain which may be received on his existing approved award tax efficiently and for the Company to make national insurance contribution savings.
In the event that the unapproved award vests, the approved award will also vest (subject to having been held for a minimum of three years) and the unapproved award will be reduced to the extent that the approved award is exercised, such that the overall gross gain on the award vesting is no greater than the original awards granted on 8th July 2008, 8th September 2008, 25th September 2008 and 26th January 2009.
The granting of the approved awards will have no additional cost implications to the Company. The performance conditions attached to the approved awards are the same as those attached to the existing unapproved awards.
13 ANALYSIS OF NET DEBT
| Cash and cash equivalents | Debt due within one year | Debt due after more than one year | Finance leases | Total net debt | |
| £m | £m | £m | £m | £m | |
| Balance at 31st December 2007 | 16.3 | (106.8) | (75.0) | (3.0) | (168.5) |
| Cash flow | (10.7) | 102.3 | (42.3) | 0.6 | 49.9 |
| Other non-cash changes | - | 0.6 | (0.1) | - | 0.5 |
| Balance at 30th June 2008 | 5.6 | (3.9) | (117.4) | (2.4) | (118.1) |
| Cash flow | (0.4) | 1.2 | 38.3 | 0.4 | 39.5 |
| Other non-cash changes | - | (0.4) | 0.5 | - | 0.1 |
| Balance at 31st December 2008 | 5.2 | (3.1) | (78.6) | (2.0) | (78.5) |
| Cash flow | 2.4 | - | 0.2 | 0.4 | 3.0 |
| Other non-cash changes | - | 1.0 | (0.9) | (0.1) | - |
| Balance at 30th June 2009 | 7.6 | (2.1) | (79.3) | (1.7) | (75.5) |
14 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
| Half year to 30th June 2009 | Half year to 30th June 2008 | Year ended 31st December 2008 | |
| £m | £m | £m | |
| Increase / (decrease) in cash in the period | 2.4 | (10.7) | (11.1) |
| Cash inflow on change in debt and lease financing | 0.6 | 60.6 | 100.5 |
| Change in net debt resulting from cash flows | 3.0 | 49.9 | 89.4 |
| Effect of recognition and amortisation of bank facility issue costs | (0.2) | 1.2 | 0.6 |
| Effect of capitalised interest on bank facility | - | (0.7) | - |
| Other non cash movements | 0.2 | - | - |
| Movement in net debt during the period | 3.0 | 50.4 | 90.0 |
| Opening net debt | (78.5) | (168.5) | (168.5) |
| Closing net debt | (75.5) | (118.1) | (78.5) |
15 RELATED PARTY TRANSACTIONS
Transactions during the year between the Company and its subsidiaries, which are related parties, have been conducted on an arm's length basis and eliminated on consolidation.
Full details of the Group's other related party relationships, transactions and balances are given in the Group's financial statements for the year ended 31st December 2008. There have been no material changes in these relationships in the half year to 30th June 2009 or up to the date of this report.
16 CONTINGENT LIABILITIES
The Group operates from a number of sites across the UK. Some of the sites have operated as laundry and drycleaning sites for many years and historic environmental liabilities may exist. Such liabilities are not expected to give rise to any significant loss.
The Group has granted its Bankers and Trustees of the Pension Schemes security over the assets of the Group. Security for the amount drawn under the Bank Facility Agreement ranks pari passu with the £28.0 million security of the Pension Trustee.
At 30th June 2009 there were no other contingent liabilities except for those arising from the ordinary course of the Group's business.
17 EVENTS AFTER THE BALANCE SHEET DATE
There were no events after the Balance Sheet date that would require disclosure in accordance with IAS 10, 'Events after the reporting period'.
18 ACCOUNTING POLICIES
Except as described below, the condensed consolidated interim financial statements have been prepared applying the accounting policies, presentation and methods of computation applied by the Group in the preparation of the published consolidated financial statements for the year ended 31st December 2008.
a) Standards and amendments to standards effective in 2009
IFRS 2 (amendment), 'Share-based payment'
The revisions to the standard deal with vesting conditions and cancellations. The standard clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. These features would need to be included in the grant date fair value for transactions with employees and others providing similar services; they would not impact the number of awards expected to vest or the valuation thereof subsequent to grant date. All cancellations, whether by the entity or by other parties, should receive the same accounting treatment. Prior to 1st January 2009, where an employee stopped saving under a SAYE scheme, the Group would reverse any previously recognised IFRS 2 expense in respect of that employee. Under the revisions to the standard, the Group is no longer permitted to reverse such expense but instead must recognise any future costs immediately.
IFRS 8, 'Operating segments'
IFRS 8 replaces IAS 14, 'Segment reporting'. It requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes. This has resulted in a change in the segments reported. The Facilities Management division previously included SGP Property & Facilities Management and Workplace Engineering. This has been split so that Facilities Management now represents SGP Property & Facilities Management only, with Workplace Engineering being part of All Other segments. Comparatives for 2008 have been restated. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Board of Johnson Service Group PLC. Goodwill is allocated by management to groups of cash-generating units on a segment level. The change in reportable segments has not resulted in any additional goodwill impairment. There has been no further impact on the measurement of the Group's assets and liabilities.
IAS 1 (revised), 'Presentation of financial statements'
The revised standard prohibits the presentation of items of income and expenses (that is 'non-owner changes in equity') in the statement of changes in Shareholders' equity, requiring 'non-owner changes in equity' to be presented separately from 'owner changes in equity'. All 'non-owner changes in equity' are required to be shown in a performance statement. Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and the statement of comprehensive income). The Group has elected to present two statements: an income statement and a statement of comprehensive income. The interim financial statements have been prepared under the revised disclosure requirements.
b) Standards, amendments to standards and interpretations effective in 2009, but not relevant
IAS 23 (amendment), 'Borrowing costs'
IAS 32 (amendment), 'Financial instruments: Presentation'
IAS 39 (amendment), 'Financial instruments: Recognition and measurement'
IFRIC 13, 'Customer loyalty programmes'
IFRIC 15, 'Agreements for the construction of real estate'
IFRIC 16, 'Hedges of a net investment in a foreign operation'
c) Standards, amendments to standards and interpretations that are not yet effective and have not been early adopted
IFRS 3 (revised), 'Business combinations' and consequential amendments to IAS 27, 'Consolidated and separate financial statements', IAS 28, 'Investments in associates' and IAS 31, 'Interests in joint ventures'
IFRS 3 (revised) is effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1st July 2009. Management is assessing the impact of the new requirements regarding acquisition accounting, consolidation and associates on the Group. The Group does not have any joint ventures. The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the statement of comprehensive income. There is a choice on an acquisition-by-acquisition basis to measure the minority interest in the acquiree either at fair value or at the minority interest's proportionate share of the acquiree's net assets. All acquisition-related costs should be expensed. The Group will apply IFRS 3 (revised) to all business combinations from 1st January 2010.
IFRIC 17, 'Distributions of non-cash assets to owners', effective for annual periods beginning on or after 1st July 2009
This is not currently applicable to the Group, as it has not made any non-cash distributions.
IFRIC 18, 'Transfers of assets from customers', effective for transfer of assets received on or after 1st July 2009
This is not relevant to the Group, as it has not received any assets from customers.
d) Critical accounting estimates and assumptions
The preparation of the condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
(e) Forward looking statements
Certain statements in this interim report are forward-looking. The terms 'expect', 'should be', 'will be' and similar expressions identify forward looking statements.
Although the Board believes that the expectations reflected in these forward-looking statements are reasonable, such statements are subject to a number of risks and uncertainties and actual results and events could differ materially from those expressed or implied by these forward-looking statements.
19 PUBLISHED FINANCIAL STATEMENTS
As set out within the 2008 Annual Report, with effect from 20th January 2007, the Listing Rules and the Disclosure and Transparency Rules were amended and updated by the Financial Services Authority to implement a new reporting regime set out in the EU Transparency Directive. One of the changes brought about by the Transparency Directive was to remove the requirement for companies to either 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 the new 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.johnsonplc.com.