TIDMJSG
RNS Number : 0770S
Johnson Service Group PLC
07 March 2023
7 March 2023
AIM: JSG
Johnson Service Group PLC
('JSG' or 'the Group')
Preliminary Results for the Year Ended 31 December 2022
Strong performance and well placed for continued growth
FINANCIAL PERFORMANCE
-- Total revenue increased by 42.1% to GBP385.7 million (2021:
GBP271.4 million).
-- Organic revenue up 39.0% compared to 2021 and 2.7% compared
to 2019.
-- Adjusted EBITDA(1) of GBP104.9 million (2021: GBP67.9
million) with a margin of 27.2% (2021: 25.0%).
-- Adjusted Operating Profit(1) of GBP41.2 million (2021:
GBP12.7 million).
-- Operating Profit of GBP33.3 million (2021: GBP8.4
million).
-- Adjusted Profit before Taxation(2) of GBP38.2 million (2021:
GBP9.4 million).
-- Profit before Taxation of GBP30.3 million (2021: GBP5.1
million).
-- Full year dividend of 2.4 pence (2021: nil).
-- Strong balance sheet and capacity for further investment.
-- Ongoing GBP27.5 million share buyback programme with GBP11.4
million deployed to date.
-- The Board expects the result for 2023 to be in line with
market expectations.
OPERATIONAL HIGHLIGHTS
-- HORECA volumes improved during the year to reach 93% of
normal in the final quarter; we expect volumes to continue to
increase through 2023.
-- We continue to build strong relationships and strategic
partnerships within HORECA, with over 23,500 rooms installed in
2022.
-- Workwear customer retention levels remained strong at
94.3%.
-- Price increases and other actions implemented throughout 2022
to help offset cost inflation.
-- Further mitigating actions are ongoing to offset cost
pressures.
-- Acquisition of Regency Laundry Limited on 13 February
2023.
-- New leasehold site secured to expand HORECA capacity in the
South East.
SUSTAINABILITY
-- Inaugural Sustainability Report published in August 2022
building on The Johnsons Way launched in February 2022.
-- Additional water recycling plant at our Cornwall site is
currently being installed.
-- Employee Engagement and Diversity surveys completed.
-- Carbon, water and waste reduction targets set for 2023.
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 improved performance we are reporting today demonstrates
the resilience of JSG's business model, operational expertise and
strength of our relationships with our customers and business
suppliers, alongside the hard work of our employees.
We have invested GBP22.4 million in our sites to not only
improve productivity and processes but also to attract and retain
employees with enhanced working environments.
Post the year end we supplemented our organic growth plans with
the acquisition of a luxury hotel linen rental business, in line
with our acquisition strategy, and the signing of a new lease to
increase our capacity in the South East for HORECA. We will
continue to assess investment opportunities which will provide
supplementary quality services and earnings enhancing outcomes.
We are confident that the actions we have taken have placed the
Group in a favourable position as markets continue to recover.
After considering the current economic environment, including the
recent, and possibly further, increases in UK interest rates and
the subsequent impact on our cost of borrowing, the Board expects
the result for the year to be in line with market
expectations."
SELL-SIDE ANALYSTS' MEETING
A presentation for sell-side analysts will be held today at
10.30am, details of which will be distributed by Camarco. A copy of
the presentation will be available on the Company's website (
www.jsg.com ) following the meeting.
ENQUIRIES
Johnson Service Group PLC
Peter Egan, CEO
Yvonne Monaghan, CFO
Tel: 020 3757 4992/4981 (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
CHIEF EXECUTIVE'S OPERATING REVIEW
BASIS OF PREPARATION
Throughout this statement, and consistent with prior years, a
number of other 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
19.
TRADING PERFORMANCE
Revenue
T otal revenue for the year to 31 December 2022 increased by
42.1% to GBP385.7 million (2021: GBP271.4 million). Organic revenue
growth was 39.0% over 2021 and 2.7% higher than 2019, reflecting
both a return of volume in hospitality and price increases
implemented throughout the year.
Financial Results
Our 2022 results reflect, albeit to a lessening extent, the
continuing impact that COVID-19 has had on the Group, particularly
within our Hotel, Restaurant and Catering (' HORECA') division,
together with the high inflationary pressures on our cost base,
particularly in respect of energy.
Adjusted EBITDA increased by 54.5% to GBP104.9 million (2021:
GBP67.9 million) giving a margin of 27.2% (2021: 25.0%). As
expected, we saw this improve from the 24.3% achieved in the first
half of the year. Adjusted operating profit was GBP41.2 million
(2021: GBP12.7 million), an increase of 224.4%, whilst adjusted
profit before taxation increased by 306.4% to GBP38.2 million
(2021: GBP9.4 million). The price increases we have implemented
have helped offset cost increases and these are ongoing into
2023.
The exceptional credit of GBP0.7 million (2021: exceptional
credit of GBP6.7 million) relates to the receipt of GBP1.5 million
from the insurer relating to capital items lost in the Exeter fire
in 2020 offset by a charge of GBP0.8 million relating to Exeter
site clearance costs.
Statutory operating profit increased to GBP33.3 million (2021:
GBP8.4 million) whilst statutory profit before taxation, after
amortisation of intangible assets (excluding software amortisation)
of GBP7.2 million (2021: GBP11.0 million), goodwill impairment of
GBP1.4 million (2021: GBPnil) and the exceptional credits referred
to above, increased to GBP30.3 million (2021: GBP5.1 million).
Adjusted diluted earnings per share was 8.0 pence (2021: 2.2
pence) and includes the benefit of the capital allowances
super-deduction which offers 130% first year relief on qualifying
capital spend. Excluding the part of this benefit which is a
permanent reduction in the corporation tax charge, adjusted diluted
earnings per share was 7.2 pence (2021: 1.7 pence).
Dividend reflecting confidence in the future
The Board reinstated an interim dividend of 0.8 pence per share
at the time of announcing interim results. We are pleased to
recommend a final dividend of 1.6 pence per share, taking the full
year dividend to 2.4 pence per share (2021: nil). Dividend cover
was 3 times, based on Adjusted EPS excluding super-deduction.
Acquisition of Regency Laundry Limited
In line with our stated acquisition strategy, the Group has
continued to seek out and acquire businesses which expand our
market coverage and are earnings enhancing. On 13 February 2023, we
completed the acquisition of the entire issued share capital of
Regency Laundry Limited ('Regency') for a cash consideration of
GBP5.75 million on a debt free, cash free basis and subject to an
adjustment for normalised working capital.
Regency, which has 87 employees and operates from a 26,000
square foot leasehold processing facility in Corsham, operates in
the luxury/bespoke 4 and 5 star hotel market in the South of
England and regularly delivers some 200,000 pieces of linen per
week to its customers.
This acquisition provides the Group with a presence in the
luxury/bespoke sector of the HORECA market and will continue to
operate under the Regency brand. We plan to expand capacity on site
and continue to grow its presence in this market.
The unaudited revenue of Regency in the year ending 31 December
2022, as reported in its management accounts, was GBP6.1
million.
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 HORECA (Hotel, Restaurant and Catering) sectors. The
'Johnsons Workwear' brand predominantly provides workwear rental
and laundry services to corporates across all industry sectors.
Within HORECA, 'Stalbridge' and 'London Linen' provide premium
linen services to the restaurant, hospitality and corporate events
market and Johnsons Hotel Linen, our high-volume linen business,
primarily serves the corporate independent and budget hotel market.
Also within HORECA, our Northern Ireland business, Lilliput,
additionally serves a number of healthcare customers. In February
2023 we acquired Regency which will add further to the HORECA
business, supplying more luxury/bespoke linen to the luxury
market.
The year began with the continuing impact of COVID-19,
particularly in our HORECA business. As volumes were beginning to
recover into the spring we, like many UK businesses, experienced
cost inflation and volatility, most notably around energy costs. We
have continued to manage these and work with our customers to agree
a number of price increases. This is ongoing into 2023.
Attracting new employees is a continuous challenge, and we have
completed a strategic review of our current procedures in certain
areas. With a more collaborative approach to marketing and
recruitment, we have improved the onboarding process with the
implementation of new procedures for induction, training and
further learning and development opportunities. This will be
complemented by the successful Johnsons Academy which will continue
to provide a development and succession strategy for our employees.
Our learning and development teams are also actively promoting and
supporting the business with the recruitment of apprentices in
various roles across the business. Each business has conducted a
further employment engagement survey in respect of 2022 and the
various results are noted later in this report.
Energy
Energy costs (comprising gas, electricity and diesel) have
remained highly volatile throughout the year and continue to be so.
Costs for 2022, at GBP36.4 million, were significantly higher than
the equivalent period in 2019 of GBP21.6 million and represented
9.4% of revenue (2019: 6.2%).
We have continued our policy of fixing gas and electricity
prices and, as at the end of February 2023, we had fixed over 69%
of our anticipated electricity usage and 80% of our anticipated gas
usage for the first half of 2023 and 58% and 62% for the second
half of 2023. In addition, we have hedged 75% of our anticipated
diesel requirement across 2023.
Looking further ahead, we will continue to lock in prices as
opportunities allow. For 2024, we currently have, based on our
anticipated usage, 24% gas, 41% electricity and 50% diesel at fixed
prices, with reducing amounts into 2025.
Workwear Division
Operating as Johnsons Workwear, we provide workwear rental and
laundry services to some 36,000 customers in the UK, ranging from
small local businesses to the largest companies covering food
related and other industrial sectors.
The total revenue for the Workwear division increased by 4.4% to
GBP134.6 million (2021: GBP128.9 million). Organic revenue
increased by 3.7%. Adjusted EBITDA was GBP46.6 million (2021:
GBP46.3 million) with a margin of 34.6% (2021: 35.9%). Adjusted
operating profit was GBP21.9 million (2021: GBP22.5 million) and
included a GBP1.1 million credit from the finalisation of the
Exeter insurance claim in respect of additional revenue cost
incurred in 2020 and 2021.
The customer service teams have remained focused on maintaining
the quality of service and proactively managed to achieve
additional service sales along with the renewal of a significant
number of existing customers. We have, however, seen some of our
customer base reduce their workwear spend as they seek to reduce
their costs.
The business continues to provide excellent levels of service to
our existing and new customers which is reflected in our customer
retention remaining strong at 94.3%. The annual independent
customer satisfaction survey results of 85% remains positive and
again reported us as maintaining our position of being the market
sector leader in providing a first-class service to our customers.
Our industry leading service offering has assisted us in winning
new business and regaining a large multi-site engineering account,
commencing in April 2023.
The sales team has been restructured and brought in line with
the operational regions, encouraging a more collaborative approach
in actively engaging with prospective customers. The teams are
gaining momentum with increased activity, sales and more robust
pipelines. This is supported by the success of the National
Accounts service and sales teams who have renewed significant
national account customers for a further 3-year term. Our in-house
call centre continues to provide valued support to our sales team.
27.5% of all new sales won came from new to rental.
The successful implementation of a new laundry management system
provides new functionality and opportunities to introduce new
practices and procedures not only to improve our efficiencies but
also to enhance the customer experience and improve the working
environment for our employees.
We remain committed to employee engagement and welfare
programmes and creating an environment that is inclusive to all
employees. Following the previous employee engagement survey, a
number of initiatives were implemented to improve employee
wellbeing including the introduction of awareness programmes along
with confidential direct assistance being made available. A further
survey was commissioned in early 2023 showing an overall score of
81%.
In response to rising costs, the operational teams remain
focused upon the continuous improvement of our processes and
delivering further enhancements to our operational efficiencies.
Despite the challenges around operational cost, the business is
committed to an ongoing capital investment programme. Benefitting
from advancements in laundry equipment technology, we have
successfully installed several automated systems and have
identified further opportunities whereby additional systems have
been commissioned and will be installed throughout 2023. This is
complemented with further investment in folding and finishing
equipment along with the continual upgrading of office, canteen and
general working environments. The business has also implemented
significant price increases to help mitigate inflationary pressures
and this will continue into 2023.
Our new site in Exeter, which was commissioned in September
2021, is performing in line with our expectations and benefits from
automated sorting systems which, as previously stated, are in the
process of being rolled out to other sites.
Appreciating our environmental impact, the business continues to
focus on the reduction of our consumption of natural resources.
Several initiatives have been implemented to reduce our water and
energy usage with a continuous heat and water recovery unit
installed in Lancaster and an energy recovery unit in Perth, with a
commitment to purchase more units in 2023.
In conjunction with our suppliers, we are looking at alternative
ways to improve and manage our waste streams and have identified
several opportunities to reduce our waste to landfill. We are also
actively engaged with customers to reduce their requirements for
single use plastic packaging, along with sourcing alternative
recyclable plastics. The initial trials are encouraging.
The introduction of a sustainable and recyclable range of
garments was successfully launched across the business in 2022.
Initial sales are encouraging with interest from our customers
increasing. Trials are also underway regarding the recycling of our
used garments; six sites are actively engaged in a further
feasibility study with an expectation of implementation in
2023.
HORECA Division
The total revenue for the HORECA division increased by 76.2% to
GBP251.1 million (2021: GBP142.5 million). Volumes have continued
to increase throughout the year albeit were impacted significantly
in the first quarter due to the Omicron Covid variant. Organic
growth was 70.9% and benefitted from price increases being
implemented across the business in order to help offset the high
level of cost inflation experienced.
Adjusted EBITDA for the year increased by 140.5% to GBP63.0
million (2021: GBP26.2 million) with a margin of 25.1% (2021:
18.4%). The adjusted EBITDA margin in the second half of the year
was 28.2%, compared to 21.1% in the first half. Adjusted operating
profit was GBP24.1 million (2021: GBP5.2 million loss).
Hotel, Restaurant and Catering, which includes Johnsons
Stalbridge and London Linen, has recovered well after two years of
pandemic led disruption.
Service and quality levels returned to our previous high
standards, helping the business to maintain high levels of customer
retention. This was evidenced in our excellent annual customer
survey result of 86.5%, placing us in the top quartile of the
business service sector. Service and quality were also aided by an
easing of the recruitment difficulties during 2022 and a return to
a less volatile marketplace for our customers and their linen
requirements.
Customer demand and sales opportunities have been strong,
leading to some localised capacity challenges. However, we have
moved customers between operating sites to manage this volume and
created additional capacity by the investment of a new sortation
system and additional ironing lines in Wrexham and Grantham.
Upgrades to chemical dosing equipment in a number of our sites have
improved quality and delivered savings through bulk deliveries.
In addition, we are progressing plans to expand our capacity in
the South East and have signed a new 20-year lease for an
additional site. It is anticipated that the site will open in the
second half of 2024. The new site will free up capacity at existing
production facilities through the relocation of work, moving
processing closer to customers. The capital investment is expected
to amount to GBP16.0 million with cash spend incurred over 2023 and
2024.
Further investments have been made in replacement finishing
equipment across the estate to increase efficiency, maintain our
high quality and reduce energy use. A water recycling plant has
successfully been in use returning a significant proportion of our
used water in our Shaftesbury location and we are paper banding
many products instead of using plastic wrap. Electric vehicles have
been deployed for our engineering teams and a selection of our
delivery fleet now run on HVO, which is carbon free.
Post-covid, we have been very active in supporting and seeking
feedback from our employees. Accordingly, engagement with our
people has shown a significant improvement with our employee
engagement survey score increasing to 85% (2021: 79%).
Within Hotel Linen, our ability to predict and efficiently
manage customer volumes remained challenging throughout the year,
largely due to operational changes within our customer base
including the number of linen items included in a room lay-up and
the frequency of linen changes, both having reduced when compared
to pre-Covid.
Our key focus was to deliver, on time and in full, to our
customer base throughout 2022 and consequently employee recruitment
and retention was paramount. Numerous initiatives have been
introduced to attract and retain employees including guaranteed
hours during low demand weeks, hourly rate increases, flexible
working patterns and other financial incentives. Various benefits
have also been introduced to enhance wellbeing, work/life balance
and learning and development opportunities, as well as the launch
of a new induction process. We continue to work closely with His
Majesty's Prison Service, providing employment for prisoners
qualifying for Release on Temporary Licence.
The National Accounts team continue to develop strong
relationships with our hotel groups who have recognised the
unprecedented cost pressures during price increase discussions.
Successfully building strong relationships and strategic
partnerships is reflected in significant growth, both in organic
and new sales, with over 23,500 rooms installed in 2022, some at
short notice and with exceptional feedback on contract
implementation. 8,000 of the installs were in the final quarter of
2022 and a further 2,900 rooms have been installed in the first two
months of 2023, bringing the total number of rooms being serviced
by Hotel Linen to over 200,000. We were also pleased to renew the
contract with the Belfast group of hospitals for a further seven
years.
The recent investment in our largest facility in Bourne
successfully met our objectives of improving both efficiency and
capacity, as did the investment at our site in Belfast. The lease
of an additional unit on the Belfast site will further improve
employee welfare facilities and the packing area and the planned
replacement of washing equipment in early 2023 will underpin growth
in market share.
Investment has also focused on improving energy and water usage
to support sustainability objectives, with 2023 plans including
innovative investment in robotic machinery and dynamic production
data capture.
Our field-based teams rolled out the new 'Linen Room' during the
year, an online customer portal, which gives access to our linen
ordering system. The portal scored a Customer Satisfaction Index of
89.7% in our independent Customer Satisfaction Survey which is very
encouraging. The method for reporting and ordering stock through
the portal is easier, complemented with improved customer business
reports. In addition, the introduction and utilisation of our new
Customer Service App provides an improved platform to gather
customer feedback and identify areas for improvement. Overall, our
Customer Satisfaction Survey increased to 85.2% reflecting the
excellent contribution from all our teams.
Strategic relationships with business suppliers continue to
develop, as demonstrated by the consistent supply of products and
services to us, despite the challenges relating to increased cost
and availability of products or components. This has been of
particular note with the supply of vehicles during 2022 where we
have taken delivery of 31 commercial vehicles. Our partnership
approach has proved successful when negotiating with suppliers and
customers alike.
The employee engagement survey for 2022 demonstrated an
improvement in all four key focus areas (wellbeing increasing from
77% to 78%, work patterns from 74% to 79%, work/life balance from
78% to 80%, career development from 75% to 78%) and an overall
score of 82%. A significant amount of engagement initiatives,
planned activities and investment in developing our employees has
taken place. Our focus continues in supporting our employees to
perform to their best potential in their current roles, as well as
develop for the future.
ENVIRONMENTAL & SOCIAL RESPONSIBILITY
The Board, as a whole, has overall responsibility for
environmental, social and governance matters and we recognise our
duty to stakeholders to operate the business in an ethical and
responsible manner. We remain committed to further developing our
environmental and social responsibility agenda, recognising that it
plays a major part in leading and influencing all of our people and
operations.
In February 2022, we published 'The Johnsons Way' which sets out
the Group's targets for 2030 together with our objectives and plans
for 2022. This was followed by the publication of our Inaugural
Sustainability Report in August 2022. Both documents can be found
on our website at www.jsg.com.
For the Group to realise the true value of its sustainability
contribution, the sustainability programme must be embedded across
all Group functions and operations. To this end we have spent much
of 2022 refreshing our strategy and communicating our plans across
the Group. Embedding the programme into everyday business is
ongoing however, during this period we have made some significant
strides forwards to better understanding those impacts and laying
robust foundations that will support our Vision 2030 goals. Further
details of our achievements during 2022 and our targets for 2023,
ongoing initiatives and actions for the future will be set out
within the Group's 2022 Annual Report.
EMPLOYEES
Our employees are key to the ongoing success of our business and
2022 has been another challenging year for each and every one of
them.
The Board would like to thank all of our employees for their
support, hard work and significant contribution to the success of
the business during the last 12 months. The teamwork and
determination demonstrated in order to deliver a professional and
on time service to our customers is a credit to all of them and we
thank them for their continued support.
OUTLOOK
The Board remains confident about the growth opportunities
available to the Group. Our scale, expertise and operational
excellence mean that we are well placed to capitalise on
opportunities as markets continue to recover.
Whilst customer behaviour remains difficult to predict and
inflationary pressures continue to persist, we have a resilient
business model to help mitigate these challenges. We also have some
protection through the fixing of a proportion of our energy costs.
We continue to secure and implement price increases across our
customer base which, along with additional volume already secured
which will better utilise our labour resource and improve
processing efficiency, will help offset cost inflation.
Through the improving cash flow, we have been able to support
our capital investment plans and increase in rental inventory,
embark upon a share buyback programme and, in February 2023,
complete another acquisition. There is positive momentum moving
into 2023 and we will continue to identify opportunities to
strengthen our position in the market as well as continuing to
focus on delivering outstanding customer service and investing in
both our employees and our laundry facilities.
After considering the current economic environment, including
the recent, and possibly further, increases in UK interest rates
and the subsequent impact on our cost of borrowing, the Board
expects the result for the year to be in line with market
expectations.
Peter Egan
Chief Executive Officer
6 March 2023
FINANCIAL REVIEW
FINANCIAL RESULTS
T otal revenue for the year to 31 December 2022 increased to
GBP385.7 million (2021: GBP271.4 million).
Adjusted EBITDA was GBP104.9 million (2021: GBP67.9 million)
giving a margin of 27.2% (2021: 25.0%) and in-line with management
expectations, improving from the 24.3% margin achieved in the first
half of 2022.
The analysis of the Group results across the segments shows the
impact of the pandemic on the adjusted EBITDA of our different
divisions and the recovery evident in 2022.
2022 2021
-------------------------------- --------------------------------
Adjusted Adjusted
Revenue EBITDA Margin Revenue EBITDA Margin
GBPm GBPm % GBPm GBPm %
Workwear 134.6 46.6 34.6 128.9 46.3 35.9
HORECA 251.1 63.0 25.1 142.5 26.2 18.4
Central Costs - (4.7) - - (4.6) -
--------------- ---------- --------- --------- ---------- --------- ---------
Group 385.7 104.9 27.2 271.4 67.9 25.0
--------------- ---------- --------- --------- ---------- --------- ---------
Statutory operating profit was GBP33.3 million (2021: GBP8.4
million) whilst adjusted operating profit was GBP41.2 million
(2021: GBP12.7 million).
The total finance cost was GBP3.0 million (2021: GBP3.3 million)
and included GBP1.5 million (2021: GBP1.5 million) of bank interest
and hedging costs, GBP1.5 million (2021: GBP1.6 million) of
interest in respect of IFRS 16 liabilities and GBPnil (2021: GBP0.2
million) in respect of notional interest on pension
liabilities.
A net exceptional credit of GBP0.7 million (2021: GBP6.7 million
credit) comprises the recognition of GBP1.5 million of insurance
proceeds relating to the final receipt for capital items and
property costs in relation to the 2020 Exeter plant fire and costs
of GBP0.8 million in relation to Exeter site clearance costs.
Adjusted profit before taxation was GBP38.2 million (2021:
GBP9.4 million). Statutory profit before taxation, after
amortisation of intangible assets (excluding software amortisation)
of GBP7.2 million (2021: GBP11.0 million) and an exceptional credit
of GBP0.7 million (2021: GBP6.7 million), was GBP30.3 million
(2021: GBP5.1 million).
Adjusted diluted earnings per share was 8.0 pence (2021: 2.2
pence) and includes the benefit of the capital allowances
super-deduction which offers 130% first year relief on qualifying
capital spend. Excluding the part of this benefit which is a
permanent reduction in the corporation tax charge, adjusted diluted
earnings per share was 7.2 pence (2021: 1.7 pence).
FINANCING
Total net debt (excluding IFRS 16 liabilities) at the end of the
year was GBP13.7 million (December 2021: GBP22.3 million)
reflecting the improved trading performance and after an outflow of
GBP5.6 million in respect of the ongoing share buyback. Including
IFRS 16 liabilities, net debt at December 2022 was GBP48.0 million
(December 2021: GBP60.1 million).
The Group remains well funded with access to a committed
revolving credit facility of GBP85.0 million which matures in
August 2025. The terms of the facility provide an option to extend
the term for up to a further two years and an option to increase
the facility by up to a further GBP50.0 million, both with bank
consent. The facility is considerably in excess of our anticipated
level of borrowings.
Bank covenants comprise gearing and interest cover tests.
Gearing, for bank purposes, is calculated as Adjusted EBITDA
compared to total debt, including IFRS 16 liabilities. The agreed
covenant is for the ratio to be not more than three times and the
ratio at 31 December 2022 was 0.5 times. Interest cover compares
Adjusted EBIT to total interest cost with a minimum covenant ratio
of four times. Our current scenario planning provides significant
headroom against the covenants.
Interest payable on bank borrowings is based upon SONIA plus a
margin linked to our gearing covenant and will range from 1.45% to
2.25%. The current margin is 1.45%.
TAXATION
The tax rate on adjusted profit before taxation, was 6.8% (2021:
tax credit (5.3)%). The rate is significantly below the headline
corporation tax rate of 19% due to a prior year credit combined
with the impact of the change in future tax rates and of the
capital allowances super-deduction which offers 130% first year
relief on qualifying main rate plant and machinery investments
until 31 March 2023. The impact of the part of the super-deduction
which is a permanent reduction in the corporation tax charge in
2022, is estimated to be a GBP3.8 million credit (2021: GBP2.5
million credit) to corporation tax.
A tax refund of GBP3.5 million (2021: refund of GBP0.5 million)
was received during the year in respect of prior year tax losses.
Due to the impact of both tax losses carried forward and the
continuing impact of the capital allowance super-deduction, we are
expecting to pay some corporation tax in respect of 2023 increasing
towards more normal levels thereafter.
DIVID
The Board was pleased to reinstate dividend payments, declaring
an interim dividend of 0.8 pence per share in September 2022. The
proposed final dividend of 1.6 pence per share brings the total
dividend for 2022 to 2.4 pence per share.
The final dividend, if approved by Shareholders, will be paid on
12 May 2023 to Shareholders on the register at close of business on
14 April 2023. The ex-dividend date is 13 April 2023. It remains
the Board's current intention to reduce dividend cover from the
current level of 3 times to 2.5 times by financial year 2024.
CASH FLOW
Free cash flow in the year (calculated as net cash generated
from operating activities, less net spend on textile rental items,
less the capital element of leases) was GBP39.1 million compared to
an outflow of GBP0.5 million in 2021. Of this, we invested GBP22.4
million (2021: GBP24.4 million) in the purchase of property, plant
and equipment and software, as we proactively invest in the
business to increase capacity and efficiency across the estate.
Offsetting this spend was GBP1.5 million (2021: GBP5.3 million)
received as part of the insurance claim in respect of capital
items.
Free cash flow in 2022 was impacted by the net working capital
outflow of GBP8.2 million (2021: GBP18.3 million), largely
reflective of an increase in trade receivables, as HORECA volumes
recovered and price increases were secured.
INVESTMENT IN TEXTILE RENTAL ITEMS
Spend on textile rental items amounted to GBP52.5 million (2021:
GBP41.8 million). The increase reflects the return to more normal
levels of spend. The relationships we have built with our chosen
workwear and linen suppliers have ensured continuity of supply in a
timely manner to give the best service to both existing and new
customers.
CAPITAL INVESTMENT AND ACQUISITION
We have continued to invest in plant and equipment, spending
GBP22.1 million in the year plus a further GBP0.3 million on
software. The focus of the spend has been to update equipment to
achieve a combination of reduced energy and water consumption and
improved productivity and capacity.
The investment of GBP5.75 million in Regency Laundry Limited in
February 2023 is a further step in expanding our range of services.
We are assessing the opportunities to invest further in this
business over the coming months.
DEFINED BENEFIT PENSION SCHEME LIABILITIES
As at 31 December 2022, the Scheme's assets had reduced by
GBP73.0 million, to GBP148.2 million, after paying out benefits of
GBP10.9 million during the year. Scheme liabilities reduced by
GBP64.7 million to GBP157.6 million. The net deficit, including
deferred taxation, has increased to GBP7.1 million (2021: GBP0.9
million) due largely to the significant downturn in financial
markets felt across almost all asset classes in 2022. The increase
in the net deficit at December 2022 will result in an estimated net
notional interest cost of GBP0.5 million in 2023 (2022:
GBPnil).
The turmoil in the gilt markets in the final quarter of 2022
adversely impacted the value of the Scheme's assets, although the
Scheme's liabilities also fell as a result of falling gilt prices.
The Scheme uses a Liability Driven Investment (LDI) strategy to
partially mitigate the impact on the Scheme's deficit if interest
rates fall or inflation expectations rise. Due to the gilt market
crisis, the interest rate and inflation hedge ratios were reduced
from the target 85% to approximately 70% at December 2022. However,
we remain confident that the Scheme's investment allocation is
appropriate for its objectives and will be reviewed in detail once
the triennial actuarial valuation as at 30 September 2022 is
finalised.
We have agreed with the Trustee that the existing deficit
recovery payment of GBP1.9 million per annum will continue in equal
monthly instalments until the next review following the completion
of the triennial valuation as at 30 September 2022 which will be
later this year.
CAPITAL STRUCTURE AND SHARE BUYBACK PROGRAMME
The Group maintains a strong Balance Sheet, with net assets
having increased to GBP284.6 million (2021: GBP272.4 million).
The Group's medium to long-term intention is to return the
capital structure such that we target leverage of 1x - 1.5x, other
than for short term specific exceptions. Under this framework, our
capital allocation policy remains unchanged and will continue to
take into account the following criteria as part of a periodic
review of capital structure:
-- maintaining a strong balance sheet;
-- continuing capital investment to increase processing capacity
and efficiency;
-- appropriate accretive acquisitions;
-- operating a progressive dividend policy; and
-- distributing any surplus cash to Shareholders.
The share buyback programme announced in September 2022 is
ongoing. As at 31 December 2022 we had utilised cash of GBP5.6
million on the programme with a further GBP5.8 million utilised up
to 6 March 2023.
GOING CONCERN
After considering the monthly cash flow projections, the stress
tests and the facilities available to the Group and Company, the
Directors concluded that there was a reasonable expectation that
the Group and Company have adequate resources for their 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 30 June 2024. Accordingly, and having
reassessed the principal risks and uncertainties, the Directors
considered that it was appropriate to adopt the going concern basis
in preparing the Group and Company financial statements.
KEY PERFORMANCE INDICATORS ('KPIs')
The main KPIs used as part of the assessment of performance of
the Group, and of each segment, are growth in revenue, adjusted
EBITDA margin, adjusted operating profit/(loss) and adjusted
diluted earnings/(loss) per share from Continuing Operations. In
addition, for years 2021 and 2022, the adjusted diluted earnings
per share excluding the impact of the capital allowance
super-deduction will also form part of the assessment.
Non-financial KPIs, as referred to within the Chief Executive's
Operating Review, include our employee and customer survey results
and customer retention statistics.
SUMMARY
The focus of the Group continues to be to expand our Textile
Services business through targeted capital investment to allow
organic volume growth and through acquisition.
Yvonne Monaghan
Chief Financial Officer
6 March 2023
CONSOLIDATED INCOME STATEMENT
Year ended Year ended
31 December 31 December
2022 2021
Note GBPm GBPm
Revenue 2 385.7 271.4
Impairment loss on trade receivables (0.9) (0.4)
All other costs (351.5) (262.6)
---------------------------------------------------------- --------------------- ---------------------
Operating profit 2 33.3 8.4
Operating profit before amortisation of intangible
assets
(excluding software amortisation), goodwill
impairment and exceptional items 2 41.2 12.7
Amortisation of intangible assets (excluding
software amortisation) (7.2) (11.0)
Goodwill impairment (1.4) -
Exceptional items 3 0.7 6.7
Operating profit 2 33.3 8.4
Finance cost 4 (3.0) (3.3)
--------------------------------------------------- ----- --------------------- ---------------------
Profit before taxation 30.3 5.1
Taxation (charge) / credit 6 (1.5) 1.8
--------------------------------------------------- ----- --------------------- ---------------------
Profit for the year from continuing operations 28.8 6.9
---------------------------------------------------------- --------------------- ---------------------
Profit / (loss) for the year from discontinued
operations 0.2 (0.3)
---------------------------------------------------------- --------------------- ---------------------
Profit for the year attributable to equity
holders 29.0 6.6
---------------------------------------------------------- --------------------- ---------------------
EARNINGS PER SHARE 8
Basic earnings per share
- From continuing operations 6.5p 1.6p
- From discontinued operations - (0.1)p
---------------------------------------------------------- --------------------- ---------------------
From total operations 6.5p 1.5p
---------------------------------------------------------- --------------------- ---------------------
Diluted earnings per share
- From continuing operations 6.5p 1.6p
- From discontinued operations - (0.1)p
---------------------------------------------------------- --------------------- ---------------------
From total operations 6.5p 1.5p
---------------------------------------------------------- --------------------- ---------------------
See note 8 for further details of Adjusted earnings per share
and Adjusted diluted earnings per share.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended Year ended
31 December 31 December
2022 2021
Note GBPm GBPm
Profit for the year 29.0 6.6
------------------------------------------------------------------------ --- ------ ------- --------------
Items that will not be subsequently reclassified
to profit or loss
Remeasurement and experience (losses) / gains
on post-employment benefit obligations 18 (10.0) 11.0
Taxation in respect of remeasurement
and experience losses / (gains) 2.5 (2.1)
Deferred taxation rate change in respect of
remeasurement and experience losses / (gains) 0.1 -
Items that may be subsequently reclassified
to profit or loss
Cash flow hedges (net of taxation)
- fair value gains 1.4 1.3
- transfers to
administrative
expenses (2.2) -
Total other comprehensive (loss) / income
for the year (8.2) 10.2
Total comprehensive income for the year 20.8 16.8
------------------------------------------------------------------------ --- ------ ------- --------------
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Capital
Share Share Merger Redemption Hedge Retained Total
Capital Premium Reserve Reserve Reserve Earnings Equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 31 December
2020 44.4 16.3 1.6 0.6 (1.0) 192.7 254.6
--------------------------------- ------ --------- --------- ------------ --------- ---------- --------
Profit for the year - - - - - 6.6 6.6
Other comprehensive
income - - - - 1.3 8.9 10.2
--------------------------------- ------ --------- --------- ------------ --------- ---------- --------
Total comprehensive
income for the year - - - - 1.3 15.5 16.8
--------------------------------- ------ --------- --------- ------------ --------- ---------- --------
Share options (value
of employee services) - - - - - 0.5 0.5
Purchase of own shares
by EBT - - - - - (0.1) (0.1)
Issue of share capital 0.1 0.5 - - - - 0.6
Transactions with Shareholders
recognised directly
in Shareholders' equity 0.1 0.5 - - - 0.4 1.0
--------------------------------- ------ --------- --------- ------------ --------- ---------- ----------
Balance at 31 December
2021 44.5 16.8 1.6 0.6 0.3 208.6 272.4
--------------------------------- ------ --------- --------- ------------ --------- ---------- --------
Profit for the year - - - - - 29.0 29.0
Other comprehensive
income - - - - (0.8) (7.4) (8.2)
--------------------------------- ------ --------- --------- ------------ --------- ---------- --------
Total comprehensive
(loss) / income for
the year - - - - (0.8) 21.6 20.8
--------------------------------- ------ --------- --------- ------------ --------- ---------- --------
Share options (value
of employee services) - - - - - 0.8 0.8
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
recognised directly
in Shareholders' equity (0.6) - - 0.6 - (8.6) (8.6)
--------------------------------- ------ --------- --------- ------------ --------- ---------- --------
Balance at 31 December
2022 43.9 16.8 1.6 1.2 (0.5) 221.6 284.6
--------------------------------- ------ --------- --------- ------------ --------- ---------- --------
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. At 31
December 2022 the EBT held 9,024 shares (2021: 9,024). At the same
time, and pursuant to the ongoing share buyback programme, the
Group also held 116,934 treasury shares (2021: nil). These were
subsequently cancelled on 3 January 2023. See note 21 for further
details.
CONSOLIDATED BALANCE SHEET
As at As at
31 December 31 December
2022 2021
GBPm GBPm
Note Restated*
Assets
Non-current assets
Goodwill 9 133.8 135.2
Intangible assets 10 10.9 16.7
Property, plant and equipment 11 119.6 113.3
Right of use assets 12 31.7 35.5
Textile rental items 13 63.8 48.4
Trade and other receivables 0.3 0.3
Derivative financial assets - 0.3
360.1 349.7
-------------------------------------------- ------- ------------- -------------
Current assets
Inventories 1.8 2.2
Trade and other receivables 61.0 47.9
Reimbursement assets 14 4.5 4.3
Current income tax assets - 3.6
Cash and cash equivalents 6.1 5.2
73.4 63.2
-------------------------------------------- ------- ------------- -------------
Liabilities
Current liabilities
Trade and other payables 75.7 63.7
Borrowings 15 5.1 9.5
Current income tax liabilities 0.2 -
Lease liabilities 16 5.1 5.2
Derivative financial liabilities 0.4 0.1
Provisions 17 5.1 4.8
91.6 83.3
-------------------------------------------- ------- ------------- -------------
Non-current liabilities
Post-employment benefit obligations 18 10.2 2.1
Deferred income tax liabilities 1.8 3.3
Trade and other payables 0.3 0.3
Borrowings 15 14.7 18.0
Lease liabilities 16 29.2 32.6
Derivative financial liabilities 0.3 -
Provisions 17 0.8 0.9
-------------------------------------------- ------- ------------- -------------
57.3 57.2
-------------------------------------------- ------- ------------- -------------
Net assets 284.6 272.4
-------------------------------------------- ------- ------------- -------------
Equity
Capital and reserves attributable to the company's
shareholders
Share capital 21 43.9 44.5
Share premium 16.8 16.8
Merger reserve 1.6 1.6
Capital redemption reserve 1.2 0.6
Hedge reserve (0.5) 0.3
Retained earnings 221.6 208.6
-------------------------------------------- ------- ------------- -------------
Total equity 284.6 272.4
-------------------------------------------- ------- ------------- -------------
* A GBP4 .5 million provision has been recognised as at 31
December 2022 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 GBP4.5 million has
been recognised as at 31 December 2022. 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. The impact on the brought forward balance sheet at 1
January 2021 would be the inclusion of a GBP2.5 million provision
and a corresponding reimbursement asset of GBP2.5 million. The
balance sheet at 31 December 2021 has been restated to recognise a
provision of GBP4.3 million and a corresponding reimbursement asset
of GBP4.3 million.
The notes on pages 21 to 38 form an integral part of these
condensed consolidated financial statements. The condensed
consolidated financial statements on pages 16 to 38 were approved
by the Board of Directors on 6 March 2023 and signed on its behalf
by:
Yvonne Monaghan
Chief Financial Officer
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended Year ended
Note 31 December 31 December
2022 2021
GBPm GBPm
Cash flows from operating activities
Profit for the year 29.0 6.6
Adjustments for:
Taxation charge / (credit) - continuing 6 1.5 (1.8)
- discontinued - 0.3
Total finance cost 4 3.0 3.3
Depreciation 63.5 55.1
Amortisation 10 7.4 11.1
Goodwill impairment 9 1.4 -
(Profit) / loss on disposal of property, plant
and equipment (0.2) 0.1
Profit on termination of lease liabilities - (0.2)
Decrease / (increase) in inventories 0.4 (0.8)
Increase in trade and other receivables (12.9) (15.4)
Increase / (decrease) in trade and other payables 4.3 (2.1)
Deficit recovery payments in respect of post-employment
benefit obligations (1.9) (1.9)
Share-based payments 0.8 0.5
Decrease in provisions (0.1) (2.0)
Commodity swaps not qualifying as hedges (0.1) (0.3)
Income re insurance claims (1.5) (5.3)
Business acquisition costs charged to the income
statement - 0.1
Cash generated from operations 94.6 47.3
Interest paid (3.6) (3.2)
Taxation received 3.5 0.5
---------------------------------------------------------- ------ ------------- -------------
Net cash generated from operating activities 94.5 44.6
---------------------------------------------------------- ------ ------------- -------------
Cash flows from investing activities
Acquisition of businesses (including acquired overdrafts) - (4.8)
Disposal of business costs - (3.6)
Purchase of other intangible assets (1.3) -
Purchase of property, plant and equipment (22.1) (24.2)
Income re insurance claims 1.5 5.3
Purchase of software (0.3) (0.2)
Proceeds from sale of property, plant and equipment 0.4 -
Purchase of textile rental items (52.5) (41.8)
Proceeds received in respect of special charges 13 2.7 2.4
Net cash used in investing activities (71.6) (66.9)
---------------------------------------------------------- ------ ------------- -------------
Cash flows from financing activities
Proceeds from borrowings 48.0 29.0
Repayment of borrowings (51.0) (12.5)
Capital element of leases (5.6) (5.7)
Purchase of own shares by EBT - (0.1)
Share buyback 21 (5.6) -
Proceeds from issue of Ordinary shares 21 - 0.6
Dividends paid to company shareholders 7 (3.5) -
Net cash (used in) / generated from financing
activities (17.7) 11.3
---------------------------------------------------------- ------ ------------- -------------
Net increase / (decrease) in cash and cash equivalents 5.2 (11.0)
Cash and cash equivalents at beginning of year (4.4) 6.6
Cash and cash equivalents at end of year 19 0.8 (4.4)
---------------------------------------------------------- ------ ------------- -------------
Cash and cash equivalents comprise:
Cash 6.1 5.2
Overdraft (5.3) (9.6)
Cash and cash equivalents at end of year 0.8 (4.4)
------------------------------------------ ----- -----
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1 BASIS OF PREPARATION
Basis of Preparation
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 financial information contained within this Preliminary
Announcement has been prepared on a going concern basis in
accordance with UK adopted international accounting standards in
conformity with the requirements of the Companies Act 2006.
The financial information has been prepared using accounting
policies consistent with those set out in the 2021 Annual Report
except as disclosed in notes 14 and 17 of this Preliminary
Announcement.
The financial information set out within this Preliminary
Announcement does not constitute the Company's statutory accounts
for the years ended 31 December 2022 or 31 December 2021 within the
meaning of Section 434 of the Companies Act 2006, but is derived
from those accounts.
Statutory accounts for 2021 have been delivered to the Registrar
of Companies, and those for 2022 will be delivered as soon as
practicable but not later than 30 April 2023. The auditor has
reported on those accounts; the reports were unqualified and did
not contain a statement under Section 498(2) or (3) of the
Companies Act 2006.
Going Concern
Background and Summary
After careful assessment, the Directors have adopted the going
concern basis in preparing these condensed consolidated financial
statements. The process and key judgments in coming to this
conclusion are set out below. The going concern status of the
Company is intrinsically linked to that of the Group.
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 Chief Executive's
Operating Review and the Financial Review.
Going Concern Assessment
Cash Flows, Covenants and Stress Testing
For the purposes of the going concern assessment, the Directors
have prepared monthly cash flow projections for the period to 30
June 2024 (the assessment period). The Directors consider this to
be a reasonable period for the going concern assessment as it
enables us 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 60%
of 2022 levels. The Directors do not consider this scenario to be
plausible.
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.
The Group has also considered the impact of a more modest
increase in interest rates alongside the reduction required in
adjusted operating profit to cause a breach in the interest cover
covenant. Again, the Directors do not consider such a scenario to
be plausible.
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
GBP85.0 million (the 'Facility') which matures in August 2025. The
terms of the Facility provide an option to extend the term for up
to a further two years and an option to increase the Facility by up
to a further GBP50.0 million, both with bank consent. The Facility
is considerably in excess of our anticipated borrowings and
provides ample liquidity for current commitments.
Going Concern Statement
After considering the monthly cash flow projections, the stress
tests and the facilities available to the Group and Company, the
Directors have a reasonable expectation that the Group and Company
have adequate resources for their 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 30 June 2024. Accordingly, and having reassessed the
principal risks and uncertainties, the Directors considered it
appropriate to adopt the going concern basis in preparing the Group
and Company financial statements.
NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)
1 BASIS OF PREPARATION (continued)
Forward Looking Statements
Certain statements in these condensed consolidated 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 Group'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
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.
Alternative Performance Measures (APMs)
Throughout this Preliminary Announcement, 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 total 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 Preliminary Announcement as
follows:
-- Adjusted operating profit - note 2
-- Adjusted profit before taxation - note 5
-- Adjusted EBITDA - note 5
-- Adjusted EPS - note 8
-- Adjusted EPS excluding super-deduction - note 8
-- Adjusted net debt - note 19
2 SEGMENT ANALYSIS
Segment information is presented based on the Group's management
and internal reporting structure as at 31 December 2022.
The chief operating decision-maker (CODM) has been identified as
the Executive Directors. The CODM reviews the Group's internal
reporting in order to assess performance and allocate resources.
The CODM determines the operating segments based on these reports
and on the internal reporting structure.
For reporting purposes, the CODM considered the aggregation
criteria set out within IFRS 8, 'Operating Segments', which allows
for two or more operating segments to be combined as a single
reporting segment if:
1) aggregation provides financial statement users with
information that allows them to evaluate the business and the
environment in which it operates; and
2) they have similar economic characteristics (for example,
where similar long-term average gross margins would be expected)
and are similar in each of the following respects:
-- the nature of the products and services;
-- the nature of the production processes;
-- the type or class of customer for their products and
services;
-- the methods used to distribute their products or provide
their services; and
-- the nature of the regulatory environment (i.e. banking,
insurance or public utilities), if applicable.
The CODM deems it appropriate to present two reporting segments
(in addition to 'Discontinued Operations' and 'All Other
Segments'), being:
1) Workwear: comprising of our Workwear business only; and
2) Hotel, Restaurant and Catering ('HORECA'): comprising of our
Stalbridge (now including London Linen), Hotel Linen and Lilliput
businesses, each of which are a separate operating segment.
The CODM's rationale for aggregating the Stalbridge, Hotel Linen
and Lilliput operating segments into a single reporting segment is
set out below:
-- the gross margins of each operating segment are within a
similar range, with the long-term average margin expected to
further align;
-- the nature of the customers, products and production
processes of each operating segment are very similar;
-- the nature of the regulatory environment is the same due to
the similar nature of products, processes and customers involved;
and
-- distribution is via exactly the same method across each
operating segment.
The CODM assesses the performance of the reporting segments
based on a measure of operating profit, both including and
excluding the effects of non-recurring items from the reporting
segments, such as restructuring costs and impairments when the
impairment is the result of an isolated, non-recurring or
non-operating event. Interest income and expenditure are not
included in the result for each reporting segment that is reviewed
by the CODM. Segment results include items directly attributable to
a segment as well as those that can be allocated on a reasonable
basis, for example rental income received by Johnson Group
Properties PLC (the property holding company of the Group) is
credited back, where appropriate, to the paying company for the
purpose of segmental reporting. There have been no changes in
measurement methods used compared to the prior year.
Other information provided to the CODM is measured in a manner
consistent with that in the financial statements. Segment assets
exclude deferred income tax 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
lease liabilities but exclude current income tax liabilities, bank
borrowings, derivative financial liabilities, post-employment
benefit obligations and deferred income tax liabilities, all of
which are managed on a central basis. These balances are part of
the reconciliation to total assets and liabilities.
Exceptional items have been included within the appropriate
reporting segment as shown on pages 24 to 25.
Workwear
Supply and laundering of workwear * Workwear
garments and protective wear.
HORECA
Linen services for the hotel, restaurant
and catering sector. * Stalbridge
* Hotel Linen
* Lilliput
All Other Segments
Comprising of central and Group costs.
2 SEGMENT ANALYSIS (continued)
All
HORECA Other
Year ended 31 December 2022 Workwear Segments Total
GBPm GBPm GBPm GBPm
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
------------------------------------------------ ----------- --------- ---------- ------
Result
Operating profit / (loss) before amortisation
of intangible assets (excluding software
amortisation), goodwill impairment
and exceptional items 21.9 24.1 (4.8) 41.2
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
Total finance cost (3.0)
Profit before taxation 30.3
Taxation charge (1.5)
------------------------------------------------ ----------- --------- ---------- ------
Profit for the year from continuing
operations 28.8
------------------------------------------------ ----------- --------- ---------- ------
Profit for the year from discontinued
operations 0.2
------------------------------------------------ ----------- --------- ---------- ------
Profit for the year attributable to
equity holders 29.0
------------------------------------------------ ----------- --------- ---------- ------
All
Other
Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Balance sheet information
Segment assets 144.7 281.8 0.9 427.4
Unallocated assets: Cash and cash
equivalents 6.1
Total assets 433.5
--------------------------------------------------------- ----- ----------- --------- ---------- ---------
Segment liabilities (37.4) (76.3) (2.5) (116.2)
Unallocated liabilities: Bank
borrowings (19.8)
Derivative financial liabilities (0.7)
Post-employment benefit
obligations (10.2)
Current income tax
liabilities (0.2)
Deferred income tax liabilities (1.8)
Total liabilities (148.9)
--------------------------------------------------------- ----- ----------- --------- ---------- ---------
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
--------------------------------------------------------- ----- ----------- --------- ---------- ---------
The results, assets and liabilities of all segments arise in the
Group's country of domicile, being the United Kingdom.
2 SEGMENT ANALYSIS (continued)
All
Other
Year ended 31 December 2021 Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Revenue
Rendering of services 125.8 142.3 - 268.1
Sale of goods 3.1 0.2 - 3.3
-------------------------------------- --------- --------- ---------- -------
Total revenue 128.9 142.5 - 271.4
-------------------------------------- --------- --------- ---------- -------
Result
Operating profit / (loss) before
amortisation of intangible assets
(excluding software amortisation)
and exceptional items 22.5 (5.2) (4.6) 12.7
Amortisation of intangible assets
(excluding software amortisation) - (11.0) - (11.0)
Exceptional items 3.0 (0.1) 3.8 6.7
Operating profit / (loss) 25.5 (16.3) (0.8) 8.4
Total finance cost (3.3)
Profit before taxation 5.1
Taxation credit 1.8
-------------------------------------- --------- --------- ---------- -------
Profit for the year from continuing
operations 6.9
-------------------------------------- --------- --------- ---------- -------
Loss for the year from discontinued
operations (0.3)
-------------------------------------- --------- --------- ---------- -------
Profit for the year attributable
to equity holders 6.6
-------------------------------------- --------- --------- ---------- -------
HORECA All
Workwear Other Total
(*Restated) (*Restated) Segments (*Restated)
GBPm GBPm GBPm GBPm
Balance sheet information
Segment assets 139.1 263.6 1.1 403.8
Unallocated assets: Current
income tax assets 3.6
Derivative financial
assets 0.3
Cash and cash
equivalents 5.2
Total assets 412.9
-------------------------------------------------------------------------- ------------ ------------ --------- ------------
Segment liabilities (38.8) (65.7) (3.0) (107.5)
Unallocated liabilities: Bank
borrowings (27.5)
Derivative financial
liabilities (0.1)
Post-employment benefit
obligations (2.1)
Deferred income tax
liabilities (3.3)
Total liabilities (140.5)
-------------------------------------------------------------------------- ------------ ------------ --------- ------------
Other information
Non-current asset additions
- Property, plant and equipment 12.7 9.8 - 22.5
- Right of use assets 0.4 0.6 - 1.0
- Textile rental items 19.6 27.1 - 46.7
- Capitalised software - 0.1 - 0.1
Depreciation, impairment and
amortisation expense
- Property, plant and equipment 5.5 11.3 - 16.8
- Right of use assets depreciation 2.2 3.9 - 6.1
- Textile rental items depreciation 16.1 16.1 - 32.2
- Capitalised software - 0.1 - 0.1
- Customer contracts - 11.0 - 11.0
-------------------------------------------------------------------------- ------------ ------------ --------- ------------
The results, assets and liabilities of all segments arise in the
Group's country of domicile, being the United Kingdom.
* GBP4.3 million of reimbursement assets and a corresponding
provision for liabilities has been recognised as at 31 December
2021. Refer to notes 14 and 17 for further information.
3 EXCEPTIONAL ITEMS
2022 2021
GBPm GBPm
Costs in relation to business acquisition activity - (0.1)
Insurance claims 1.5 5.9
Other costs re insurance claims (0.8) (0.6)
Income from Parent Company Guarantees - 1.5
Total exceptional items 0.7 6.7
---------------------------------------------------- ------ ------
The exceptional items shown above are all included within
administrative expenses.
Current year exceptional items
Insurance claims and other costs
In 2020, a Workwear processing plant was destroyed as a result
of a fire. Final settlement proceeds of GBP1.5 million were
received in the current year in respect of this insurance claim,
relating to capital items.
Costs of GBP0.8 million have been incurred in the current year
in respect of the demolition of the destroyed site and preparing
the site for sale.
Prior year exceptional items
Costs in relation to business acquisition activity
During the prior year, professional fees of GBP0.1 million were
paid relating to the acquisition of Lilliput (Dunmurry)
Limited.
Insurance claims and other costs
In 2020, a Workwear processing plant was destroyed as a result
of a fire. Interim insurance proceeds of GBP5.2 million were
received during the prior year. Costs of GBP0.4 million were
incurred for initial works to demolish the damaged building along
with associated professional fees of GBP0.2 million.
A further Workwear processing plant was damaged as a result of
flooding during the previous year. Final settlement proceeds of
GBP0.7 million were received during the prior year in respect of
this insurance claim.
Income from Parent Company Guarantees
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. A further clause within the Sale and
Purchase Agreement obligated the purchaser to make an additional
one-off payment in the event the business was subsequently sold. On
16 November 2021, the business was sold and therefore a payment of
GBP1.5 million was made to the Group in respect of this
obligation.
4 FINANCE COST
2022 2021
GBPm GBPm
Finance cost:
- Interest payable on bank loans and overdrafts 1.3 1.4
- Gain on interest rate swaps not qualifying as
hedges (0.1) (0.2)
- Amortisation of bank facility fees 0.3 0.3
- Finance costs on lease liabilities relating to
IFRS 16 (note 16) 1.5 1.6
- Notional interest on post-employment benefit obligations
(note 18) - 0.2
Total finance cost 3.0 3.3
-------------------------------------------------------------- ------ ------
Following the equity placing in June 2020 which raised GBP82.7
million, the Group repaid its loans outstanding at that date. Hedge
accounting was therefore discontinued at that date as the Group no
longer had any loans for the Group's interest rate swaps to
economically hedge. Accordingly, the Mark to Market value of GBP0.6
million, as at 30 June 2020, was transferred from equity and
recognised as an expense within finance costs. The change in fair
value on interest rate swaps has been recognised directly within
finance costs resulting in a credit of GBP0.1 million (2021: GBP0.2
million).
5 ALTERNATIVE PERFORMANCE MEASURES (APMs)
Throughout this Preliminary Announcement, we refer to a number
of APMs. A reconciliation of certain of the APMs, to the relevant
statutory performance measure, is shown below. Other
reconciliations can be found in notes 2, 8 and 19.
Adjusted profit before taxation 2022 2021
GBPm GBPm
Profit before taxation 30.3 5.1
Amortisation of intangible assets (excluding
software amortisation) 7.2 11.0
Goodwill impairment 1.4 -
Exceptional items (0.7) (6.7)
Adjusted profit before taxation 38.2 9.4
Taxation thereon (2.6) 0.5
----------------------------------------------------- ------- ---------
Adjusted profit after taxation 35.6 9.9
----------------------------------------------------- ------- ---------
Adjusted EBITDA 2022 2021
GBPm GBPm
Operating profit before amortisation of intangible
assets
(excluding software amortisation), goodwill
impairment and exceptional items 41.2 12.7
Software amortisation 0.2 0.1
Property, plant and equipment depreciation 18.3 16.8
Right of use asset depreciation 5.9 6.1
Textile rental items depreciation 39.3 32.2
----------------------------------------------------- ------- -------
Adjusted EBITDA 104.9 67.9
----------------------------------------------------- ------- -------
6 TAXATION
2022 2021
GBPm GBPm
Current tax
UK corporation tax credit for the year - -
Adjustment in relation to previous years 0.3 (0.8)
--------------------------------------------------- ------ ------
Current tax charge / (credit) for the year 0.3 (0.8)
Deferred tax
Origination and reversal of temporary differences 3.3 (3.0)
Changes in tax rate - 1.6
Adjustment in relation to previous years (2.1) 0.4
---------------------------------------------------
Deferred tax charge / (credit) for the year 1.2 (1.0)
------ ------
Total charge / (credit) for taxation included
in the Consolidated Income Statement 1.5 (1.8)
--------------------------------------------------- ------ ------
The tax charge / (credit) for the year is lower than (2021:
lower than) the effective rate of Corporation Tax in the UK of 19%
(2021: 19%). A reconciliation is provided below:
2022 2021
GBPm GBPm
Profit before taxation 30.3 5.1
---------------------------------------------------- ------ ------
Profit before taxation multiplied by the effective
rate of Corporation Tax in the UK 5.8 1.0
Factors affecting taxation charge for the year:
Non-taxable income (0.3) (0.4)
Tax effect of expenses not deductible for tax
purposes 1.1 0.5
Current year impact of super-deduction (2.9) (2.5)
Difference in current and deferred taxation
rates (0.4) (1.6)
Changes in tax rate - 1.6
Adjustments in relation to previous years (0.9) (0.4)
Adjustments in relation to previous years -
super-deduction (0.9) -
---------------------------------------------------- ------ ------
Total charge / (credit) for taxation included
in the Consolidated Income Statement 1.5 (1.8)
---------------------------------------------------- ------ ------
6 TAXATION (continued)
Taxation in relation to the amortisation of intangible assets
(excluding software amortisation) has decreased the charge for
taxation on continuing operations by GBP1.1 million (2021: taxation
credit increased by GBP1.6 million). Taxation in relation to
exceptional items has increased the charge for taxation on
continuing operations by GBPnil (2021: taxation credit decreased by
GBP0.3 million).
The rate of UK corporation tax is currently 19.0%. The Finance
Bill 2021 enacted provisions to increase the main rate of UK
corporation tax to 25% from 6 April 2023 for businesses with
profits of GBP250,000 or more. As such, deferred income tax
balances at the balance sheet date have been measured at the tax
rate expected to be applicable at the date the deferred income tax
assets and liabilities are realised. Management has performed an
assessment, for all material deferred income tax assets and
liabilities, to determine the period over which the deferred assets
and liabilities are forecast to be realised, which has resulted in
an average deferred income tax rate of 24.6% (2021: 23.3%).
The impact of the change in deferred tax rate is GBPnil (2021:
GBP1.6 million charge) in the Consolidated Income Statement.
A capital allowance super-deduction, which offers 130% first
year relief on qualifying main rate plant and machinery investments
until 31 March 2023, has been included within the tax calculations
for 31 December 2022. This allowance provides a permanent tax
benefit on our Textile Rental items given their short life nature.
The impact of the super-deduction to 31 December 2022 is a credit
of GBP3.8 million (2021: credit of GBP2.5 million) of which GBP0.9
million is in relation to adjustments in the prior year.
The further prior year adjustment of GBP0.9 million relates to,
in the main, the finalisation of the tax position in respect of
insurance claims following the fire and flood at two sites in 2020
along with a final tax position relating to an indemnity settlement
in 2021. Information regarding the final settlement of these claims
only became available during 2022 to enable the prior year tax
computations to be finalised.
During the year, a deferred taxation credit of GBP2.6 million
(2021: GBP2.1 million charge) has been recognised in Other
Comprehensive Income in relation to post-employment benefit
obligations.
7 DIVIDS
2022 2021
Dividend per share
Final dividend proposed 1.60p -
Interim dividend proposed and paid 0.80p -
2022 2021
Shareholders' funds committed GBPm GBPm
Final dividend proposed 6.9 -
Interim dividend proposed and paid 3.5 -
The Directors propose the payment of a final dividend in respect
of the year ended 31 December 2022 of 1.6 pence per share. Based
upon the number of shares in issue as at the date of this report,
the final dividend will utilise Shareholders' funds of GBP6.9
million and will be paid, subject to Shareholder approval, on 12
May 2023 to Shareholders on the register of members on 14 April
2023. Given the ongoing share buyback programme however, the
Directors anticipate that the actual distribution will ultimately
be less than the amount stated above. The trustee of the EBT has
waived the entitlement to receive dividends on the Ordinary shares
held by the trust. In accordance with IAS 10 there is no payable
recognised at 31 December 2022 in respect of this proposed
dividend.
8 EARNINGS PER SHARE 2022 2021
GBPm GBPm
Profit for the financial year from continuing
operations attributable to Shareholders 28.8 6.9
Amortisation of intangible assets from continuing
operations (net of taxation) 6.1 9.4
Goodwill impairment (net of taxation) 1.4 -
Exceptional costs from continuing operations
(net of taxation) (0.7) (6.4)
--------------------------------------------------------- ------------ ------------
Adjusted profit from continuing operations attributable
to Shareholders 35.6 9.9
--------------------------------------------------------- ------------ ------------
Profit / (loss) from discontinued operations
attributable to Shareholders 0.2 (0.3)
--------------------------------------------------------- ------------ ------------
Total profit from all operations attributable
to Shareholders 35.8 9.6
--------------------------------------------------------- ------------ ------------
No. of No. of
shares shares
Weighted average number of Ordinary shares 444,288,818 444,939,982
Potentially dilutive Ordinary shares 95,000 206,112
--------------------------------------------------------- ------------ ------------
Diluted number of Ordinary shares 444,383,818 445,146,094
--------------------------------------------------------- ------------ ------------
Basic earnings per share
From continuing operations 6.5p 1.6p
From discontinuing operations - (0.1)p
--------------------------------------------------------- ------------ ------------
From total operations 6.5p 1.5p
Adjustments for amortisation of intangible assets
(continuing) 1.4p 2.1p
Adjustment for goodwill impairment (continuing) 0.3p (1.5)p
Adjustment for exceptional items (continuing
(2021: discontinued)) (0.2)p 0.1p
--------------------------------------------------------- ------------ ------------
Adjusted basic earnings per share (continuing) 8.0p 2.2p
Adjusted basic earnings per share (discontinued) - -
--------------------------------------------------------- ------------ ------------
Adjusted basic earnings per share from total
operations 8.0p 2.2p
Diluted earnings per share
From continuing operations 6.5p 1.6p
From discontinuing operations - (0.1)p
--------------------------------------------------------- ------------ ------------
From total operations 6.5p 1.5p
--------------------------------------------------------- ------------ ------------
Adjustments for amortisation of intangible assets
(continuing) 1.4p 2.1p
Adjustment for goodwill impairment (continuing) 0.3p (1.5)p
Adjustment for exceptional items (continuing
(2021: discontinued)) (0.2)p 0.1p
---------------------------------------------------------
Adjusted diluted earnings per share 8.0p 2.2p
--------------------------------------------------------- ------------ ------------
Adjusted diluted earnings per share (continuing) 8.0p 2.2p
Adjusted diluted earnings per share (discontinued) - -
--------------------------------------------------------- ------------ ------------
Adjusted diluted earnings per share from total
operations 8.0p 2.2p
--------------------------------------------------------- ------------ ------------
Adjusted diluted earnings per share excluding
super-deduction (continuing) 7.2p 1.7p
--------------------------------------------------------- ------------ ------------
Basic earnings per share is calculated using the weighted
average number of Ordinary shares in issue during the year,
excluding those held by the Employee Benefit Trust and those held
as Treasury shares awaiting cancellation, based on the profit for
the year attributable to Shareholders. Adjusted earnings per share
figures are given to exclude the effects of amortisation of
intangible assets (excluding software amortisation), goodwill
impairment and exceptional items, all net of taxation, and are
considered to show the underlying performance of the Group.
The current year total taxation credit has benefited from GBP3.8
million of additional credit resulting from the capital allowance
super-deduction, which offers 130% first year relief on qualifying
main rate plant and machinery investments until 31 March 2023. Due
to the distortion this has on adjusted diluted earnings per share
in 2022 and 2021, an adjusted diluted earnings per share value
excluding this benefit has been disclosed.
For diluted earnings per share, the weighted average number of
Ordinary shares in issue is adjusted to assume conversion of all
potentially dilutive Ordinary shares. The Company has potentially
dilutive Ordinary shares arising from share options granted to
employees. Options are dilutive under the SAYE scheme, where the
exercise price together with the future IFRS 2 charge of the option
is less than the average market price of the Company's Ordinary
shares during the year. Options under the LTIP schemes, as defined
by IFRS 2, are contingently issuable shares and are therefore only
included within the calculation of diluted EPS if the performance
conditions 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. Potentially dilutive Ordinary shares have been treated
as dilutive in both years, 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
2022 2021
GBPm GBPm
Cost
Brought forward 135.2 130.9
Business combinations - 4.3
Carried forward 135.2 135.2
-------------------------------- ------ ------
Accumulated impairment losses
Brought forward - -
Losses in the year 1.4 -
Carried forward 1.4 -
------------------------------- ------ ------
Carrying amount
Opening 135.2 130.9
-------------------------------- ------ ------
Closing 133.8 135.2
-------------------------------- ------ ------
In accordance with UK adopted international accounting
standards, goodwill is not amortised, but instead is tested
annually for impairment, or more frequently if there are indicators
that an impairment has arisen, and carried at cost less accumulated
impairment losses.
Following the increase in the pre-tax discount rate to 12.40% at
June 2022 from 10.51% at December 2021, the Group recognised a
goodwill impairment loss of GBP1.4 million in respect of Lilliput.
Fair value less costs to dispose of the CGU was also considered
however, the value in use was deemed to be the higher recoverable
value. Following the recently completed investment undertaken at
Lilliput, the most recent financial forecasts for the Group reflect
revised expected future cash flows for Lilliput. Accordingly, no
further impairment was required as at 31 December 2022 and, in
fact, significant headroom exists. However, under UK adopted
international accounting standards, a goodwill impairment cannot be
reversed.
10 INTANGIBLE ASSETS
Capitalised software
2022 2021
GBPm GBPm
Opening net book value (as previously reported) 1.5 1.5
Additions 0.3 0.1
Amortisation (0.2) (0.1)
Closing net book value 1.6 1.5
------------------------------------------------- ------- -------
Other intangible assets
2022 2021
GBPm GBPm
Opening net book value 15.2 25.0
Additions 1.3 -
Business combinations - 1.2
Amortisation (7.2) (11.0)
Closing net book value 9.3 15.2
------------------------ ------- -------
Other intangible assets comprise of customer contracts and
relationships. During the year to 31 December 2022, the Group
acquired customer contracts valued at GBP1.3 million (2021:
GBPnil).
11 PROPERTY, PLANT AND EQUIPMENT
2022 2021
GBPm GBPm
Opening net book value 113.3 107.2
Additions 24.8 22.5
Business combinations - 0.5
Depreciation (18.3) (16.8)
Disposals (0.2) (0.1)
Closing net book value 119.6 113.3
------------------------ ------- -------
CAPITAL COMMITMENTS
Orders placed for future capital expenditure contracted but not
provided for in the financial statements are shown below:
2022 2021
GBPm GBPm
Property, plant and equipment 11.1 10.9
------------------------------- ------- -------
12 RIGHT OF USE ASSETS
2022 2021
GBPm GBPm
Opening net book value 35.5 38.5
Additions 2.0 1.0
Business combinations - 0.8
Reassessment / modification of assets previously
recognised 0.1 1.3
Depreciation (5.9) (6.1)
Closing net book value 31.7 35.5
-------------------------------------------------- ------ ------
The reassessment / modification of assets relates to rental
increases and extensions to lease terms that have been agreed
during the year to 31 December 2022 and 31 December 2021 for
property and commercial vehicle leases that were in place at the
start of the relevant year.
13 TEXTILE RENTAL ITEMS
2022 2021
GBPm GBPm
Opening net book value 48.4 35.6
Additions 57.4 46.7
Business combinations - 0.7
Depreciation (39.3) (32.2)
Special charges (2.7) (2.4)
Closing net book value 63.8 48.4
------------------------ ------- -------
14 REIMBURSEMENT ASSETS
2022 2021
GBPm GBPm
Restated
Reimbursement assets 4.5 4.3
---------------------- ------- ---------
GBP4.3 million of reimbursement assets have been recognised as
at 31 December 2021 in respect of the reimbursement of third party
claims made against the Group, which are indemnified under the
terms of its insurance policies. A corresponding provision for
liabilities of GBP4.3 million has been recognised as at 31 December
2021.
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.
The Group recognises a reimbursement asset in respect of
third-party claims made against the Group, but which under the
terms of its insurance policies, the Group is indemnified. All of
the expenditure required to settle such claims will be reimbursed
by the insurer under the terms of the policies, and therefore it is
virtually certain that reimbursement will be received.
15 BORROWINGS
2022 2021
GBPm GBPm
Current
Overdraft 5.3 9.6
Bank loans (0.2) (0.1)
5.1 9.5
------------- ------ ------
Non-current
Bank loans 14.7 18.0
14.7 18.0
------------- ------ ------
19.8 27.5
------------- ------ ------
At 31 December 2022, borrowings were secured and drawn down
under a committed facility dated 8 August 2022. The facility
comprises an GBP85.0 million rolling credit facility (including an
overdraft) which runs to August 2025 with two, one-year, extension
options with a further option, both with bank consent, to increase
the facility by up to an additional GBP50.0 million.
Individual tranches are drawn down, in sterling, for periods of
up to six months at SONIA rates of interest prevailing at the time
of drawdown, plus the credit adjustment spread and the applicable
margin. The margin on the facility ranges between 1.45% and 2.45%
and was 1.45% at 31 December 2022. Margin is determined on the
achievement of leverage ratios.
The secured bank loans are stated net of unamortised issue costs
of GBP0.5 million (2021: GBP0.1 million) of which GBP0.2 million is
included within current borrowings (2021: GBP0.1 million) and
GBP0.3 million is included within non-current borrowings (2021:
GBPnil).
The Group has two net overdraft facilities for GBP5.0 million
and GBP3.0 million with two of its principal bankers (2021: GBP5.0
million and GBP3.0 million).
As at 31 December 2022, the Group has in place the following
hedging arrangements which have the effect of replacing SONIA with
fixed rates as follows:
-- for GBP15.0 million of borrowings, SONIA plus 0.1193% Credit
Adjustment Spread is replaced with 0.805% from 8 January 2020 to 9
January 2023.
Following the equity placing in June 2020, hedge accounting was
discontinued at that date as the Group no longer had any loans for
the Group's interest rate swaps to economically hedge. Hedge
accounting has not been resumed.
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.
16 LEASE LIABILITIES
2022 2021
GBPm GBPm
Opening liabilities 37.8 40.6
New leases recognised 2.0 1.0
Business combinations - 0.8
Reassessment / modification of leases previously
recognised 0.1 1.3
Lease payments (7.1) (7.3)
Disposals - (0.2)
Finance costs 1.5 1.6
Closing liabilities 34.3 37.8
-------------------------------------------------- ------ ------
Of which are:
Current lease liabilities 5.1 5.2
Non-current lease liabilities 29.2 32.6
------------------------------- ----- -----
Closing liabilities 34.3 37.8
------------------------------- ----- -----
The reassessment / modification of leases relates to rent
increases and extensions to lease terms that have been agreed
during the year.
17 PROVISIONS
2022 2021
GBPm GBPm
Restated
Opening provisions 5.7 5.8
Additions 1.2 2.0
Utilised during the year (1.0) (0.5)
Released during the year - (1.6)
Closing provisions 5.9 5.7
-------------------------- ------ ---------
Of which are:
Current provisions 5.1 4.8
Non-current provisions 0.8 0.9
------------------------ ---- ----
Closing provisions 5.9 5.7
------------------------ ---- ----
A GBP4.3 million provision has been recognised as at 31 December
2021 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 GBP4.3 million has also been
recognised as at 31 December 2021. 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 with current assets and current liabilities.
The impact on the brought forward balance sheet as at 1 January
2021 would be the inclusion of a GBP2.5 million provision and a
corresponding reimbursement asset of GBP2.5 million. The balance of
the provision as at 31 December 2022 is GBP4.5 million.
Other provisions relate to property-related obligations and
self-insurance costs.
18 POST-EMPLOYMENT BENEFIT OBLIGATIONS
The Group has applied the requirements of IAS 19, 'Employee
Benefits' (revised June 2011) to its employee pension schemes and
post-retirement healthcare benefits. The Group operates a defined
benefit pension scheme, the Johnson Group Defined Benefit Scheme
('JGDBS'). The JGDBS was closed to future accrual on 31 December
2014.
As part of the Group's objective to reduce its overall pension
deficit, deficit recovery payments of GBP1.9 million (2021: GBP1.9
million) were paid to the JGDBS. A remeasurement and experience
loss of GBP10.0 million has been recognised in the year to 31
December 2022 (2021: GBP11.0 million gain).
The gross post-employment benefit obligation and associated
deferred income tax asset thereon is shown below:
2022 2021
GBPm GBPm
Gross post-employment benefit obligation 10.2 2.1
Deferred income tax asset thereon (2.6) (0.4)
------------------------------------------ ------ ------
Net liability 7.6 1.7
------------------------------------------ ------ ------
The reconciliation of the opening gross post-employment benefit
obligation to the closing gross post-employment benefit obligation
is shown below:
2022 2021
GBPm GBPm
Opening gross post-employment benefit obligation (2.1) (14.9)
Notional interest - (0.2)
Deficit recovery payments 1.9 1.9
Utilisation of post-retirement healthcare
obligation - 0.1
Remeasurement and experience (losses) / gains (10.0) 11.0
Closing gross post-employment benefit obligation (10.2) (2.1)
-------------------------------------------------- ------- -------
19 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 year.
At 31 At 31
December Cash Non-cash December
2021 Flow Changes 2022
GBPm GBPm GBPm GBPm
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 (See
note 16) (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)
---------------------------- ---------- ------ ----------- ----------
At 31 At 31
December Non-cash December
2020 Cash Flow Changes 2021
GBPm GBPm GBPm GBPm
Debt due within one
year 0.2 1.5 (1.6) 0.1
Debt due after more
than one year 0.2 (18.0) (0.2) (18.0)
Lease liabilities (See
note 16) (40.6) 5.7 (2.9) (37.8)
---------------------------- ---------- ---------- ----------- ----------
Total debt and lease
financing (40.2) (10.8) (4.7) (55.7)
Cash and cash equivalents 6.6 (11.0) - (4.4)
---------------------------- ---------- ---------- ----------- ----------
Net debt (33.6) (21.8) (4.7) (60.1)
---------------------------- ---------- ---------- ----------- ----------
19 ANALYSIS OF NET DEBT (continued)
The cash and cash equivalents figures are comprised of the
following balance sheet amounts:
2022 2021
GBPm GBPm
Cash (Current assets) 6.1 5.2
Overdraft (Borrowings, Current liabilities) (5.3) (9.6)
0.8 (4.4)
--------------------------------------------- ------ ------
Lease liabilities are comprised of the following balance sheet
amounts:
2022 2021
GBPm GBPm
Amounts due within one year (Lease liabilities,
Current liabilities) (5.1) (5.2)
Amounts due after more than one year (Lease
liabilities, Non-current liabilities) (29.2) (32.6)
(34.3) (37.8)
------------------------------------------------- ------- -------
20 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
2022 2021
GBPm GBPm
Increase / (decrease) in cash in the year 5.2 (11.0)
Decrease / (increase) in debt and lease financing 9.3 (10.8)
--------------------------------------------------- ------- -------
Change in net debt resulting from cash flows 14.5 (21.8)
Debt acquired through business acquisitions - (2.3)
Lease liabilities recognised during the period (2.1) (2.1)
Non-cash movement in unamortised bank facility
fees (0.3) (0.3)
Movement in net debt 12.1 (26.5)
Opening net debt (60.1) (33.6)
--------------------------------------------------- ------- -------
Closing net debt (48.0) (60.1)
--------------------------------------------------- ------- -------
21 SHARE CAPITAL
2022 2021
Issued and Fully
Paid Shares GBPm Shares GBPm
Ordinary shares of
10p each:
- At start of year 445,256,639 44.5 444,211,100 44.4
Note
- Share buybacks a (6,105,293) (0.6) - -
Note
- New shares issued b - - 1,045,539 0.1
- At end of year 439,151,346 43.9 445,256,639 44.5
------------------------------ ------------ ------ ------------ -----
Note a: In September 2022, the Group announced that it was
commencing a share buyback programme to repurchase up to GBP27.5
million (excluding expenses) of its own shares. During the year,
6,222,227 (2021: nil) ordinary shares with a total nominal value of
GBP622,222 (2021: GBPnil) were bought back by the Company for a
total consideration including transaction costs of GBP5.7 million,
of which GBP5.6 million was expended during the year with GBP0.1
million remaining within Trade and other payables at 31 December
2022 (2021: GBPnil), which represents an average price of 91.4p per
share. The total shares purchased to 31 December 2022 represent
1.4% of the Company's share capital. At 31 December 2022, 6,105,293
(2021: nil) ordinary shares with a total nominal value of
GBP610,529 (2021: GBPnil) had been cancelled. The remaining 116,934
ordinary shares were held as Treasury shares until they were
subsequently cancelled on 3 January 2023.
Note b: In the prior year, 560,000 Ordinary shares were allotted
to the EBT at nominal value to be used in relation to employee
share option exercises. The total nominal value received was
GBP56,000. At the time of allotment, the EBT already held 8,388
Ordinary shares of 10 pence each which, together with the 560,000
newly allotted Ordinary shares of 10 pence each, were used to
satisfy the exercise of 559,364 LTIP options. In addition, 485,539
SAYE Scheme options were exercised with a total nominal value of
GBP48,554.
21 SHARE CAPITAL (continued)
The total payments made / proceeds received on allotment in
respect of the above transactions were (debited) / credited as
follows:
2022 2021
GBPm GBPm
Share capital (0.6) 0.1
Share premium - 0.5
Capital redemption
reserve 0.6 -
Retained earnings (5.6) -
(5.6) 0.6
-------------------- ------ -----
22 DISCONTINUED OPERATIONS
During the year, a provision against deferred consideration of
GBP0.2 million was released relating to the sale of the Facilities
Management division in August 2013.
Details of transactions in the prior year were disclosed in the
Group's 2021 Annual Report.
Income Statement
The Income Statement from discontinued operations included
within the Consolidated Income Statement are as follows:
2022 2021
GBPm GBPm
Adjusted operating profit from discontinued operations 0.2 -
Exceptional items
- Property provision - 1.6
- Indemnity settlement - (1.6)
-------------------------------------------------------- ----- ------
Operating profit 0.2 -
-------------------------------------------------------- ----- ------
Taxation - (0.3)
-------------------------------------------------------- ----- ------
Retained profit / (loss) from discontinued operations 0.2 (0.3)
-------------------------------------------------------- ----- ------
Cash Flows
The cash flows from discontinued operations included within the
Consolidated Statement of Cash Flows are as follows:
2022 2021
GBPm GBPm
Net cash generated from operating activities 0.2 -
Net cash used in investing activities - (3.6)
---------------------------------------------- ----- ------
Net cash flow from / (used in) discontinued
operations 0.2 (3.6)
---------------------------------------------- ----- ------
23 EVENTS AFTER THE REPORTING PERIOD
On 13 February 2023, we completed the acquisition of the entire
issued share capital of Regency Laundry Limited ('Regency') for a
cash consideration of GBP5.75 million on a debt free, cash free
basis and subject to an adjustment for normalised working
capital.
The unaudited revenue of Regency in the year ending 31 December
2022, as reported in its management accounts, was GBP6.1
million.
24 PRINCIPAL RISKS AND UNCERTAINTIES
Our 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 2022, the overall risk environment
remained largely unchanged from that reported within the Group's
2021 Annual Report.
Risk Appetite
The Board interprets appetite for risk as the level of risk that
the Company 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, will be 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.
25 STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have to prepare the Group and Company financial statements in
accordance with UK-adopted international accounting standards.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the
profit or loss of the Group for that period.
In preparing the financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgments and accounting estimates that are reasonable
and prudent; and
-- state whether applicable UK-adopted international accounting
standards have been followed, subject to any material departures
disclosed and explained in the financial statements.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Company and enable
them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the
assets of the Group and Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Group's
website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
The Directors are responsible for preparing the Annual Report in
accordance with applicable law and regulations. Having taken advice
from the Audit Committee, the Directors consider that the Annual
Report and the financial statements, taken as a whole, provides the
information necessary to assess the Group and Company's
performance, business model and strategy and is fair, balanced and
understandable.
To the best of our knowledge:
-- the Group financial statements, prepared in accordance with
UK-adopted international accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company and the undertakings included in the
consolidation, taken as a whole; and
-- the Strategic Report and Directors' Report include a fair
review of the development and performance of the business and the
position of the Company and the undertakings included in the
consolidation, taken as a whole, together with a description of the
principal risks and uncertainties that they face.
The Directors confirm that:
-- so far as each Director is aware, there is no relevant audit
information of which the Group and Company's auditor is unaware;
and
-- the Directors have taken all the steps that they ought to
have taken as a Director in order to make themselves aware of any
relevant audit information and to establish that the Group and
Company's auditor is aware of that information.
26 PRELIMINARY ANNOUNCEMENT
A copy of this Preliminary Announcement is available on request
to all Shareholders by post from the Company Secretary, Johnson
Service Group PLC, Johnson House, Abbots Park, Monks Way, Preston
Brook, Cheshire, WA7 3GH. The announcement can also be accessed on
the Internet at www.jsg.com.
The 2022 Annual Report will be made available on the Group's
website (www.jsg.com) on or before 20 March 2023.
27 APPROVAL
The Preliminary Announcement was approved by the Board of
Directors on 6 March 2023.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
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.
END
FR JFMTTMTJMTBJ
(END) Dow Jones Newswires
March 07, 2023 02:00 ET (07:00 GMT)
Grafico Azioni Johnson Service (AQSE:JSG.GB)
Storico
Da Dic 2024 a Gen 2025
Grafico Azioni Johnson Service (AQSE:JSG.GB)
Storico
Da Gen 2024 a Gen 2025
