TIDMJSG
RNS Number : 3356L
Johnson Service Group PLC
05 September 2023
5 September 2023
AIM: JSG
Johnson Service Group PLC
('JSG' or 'the Group')
Interim Results for the Six Months ended 30 June 2023
Intention to Launch a further Share Buyback Programme
"Continuing strong organic growth.
Confidence for the full year and for longer term growth."
FINANCIAL PERFORMANCE
- Total revenue increased by 22.0% to GBP215.0 million (June 2022: GBP176.2 million).
- Organic revenue up 20.6% compared to H1 2022.
- Adjusted EBITDA(1) of GBP57.7 million (June 2022: GBP42.8
million); margin of 26.8% (June 2022: 24.3%).
- Adjusted operating profit(1) of GBP19.0 million (June 2022: GBP12.8 million).
- Operating profit of GBP16.1 million (June 2022: GBP6.7 million).
- Adjusted profit before taxation(2) of GBP16.4 million (June 2022: GBP11.2 million).
- Profit before taxation of GBP13.5 million (June 2022: GBP5.1 million).
- Adjusted diluted EPS of 2.9 pence (June 2022: 2.3 pence).
- Diluted EPS of 2.3 pence (June 2022: 1.1 pence).
- Interim dividend of 0.9 pence (June 2022: 0.8 pence) in line
with our progressive dividend policy.
- Full year outturn expected to be slightly ahead of current market expectations.
FINANCING
- Initial share buyback completed with GBP19.7 million deployed
since 1 January 2023; GBP25.3 million returned to Shareholders
since the programme commenced.
- Intention to launch a further share buyback programme of up to GBP10.0 million.
- Strong balance sheet with capital available for further investment.
OPERATIONAL HIGHLIGHTS
- Continuing strong organic growth in HORECA with increased number of locations serviced.
- Increasing sales activity and strengthening pipeline in both Workwear and HORECA.
- Inflationary cost increases offset by improved efficiency and pricing.
- Energy costs remain high but are being proactively managed.
- Sustainability targets in place for 2023, including carbon, water and waste reduction.
- Capital projects being progressed to add further capacity in both divisions.
- GBP5.75 million acquisition of Regency Laundry in February
2023 and EUR31.5 million acquisition of Celtic Linen in August
2023, both on a debt free, cash free, basis.
Notes
1 'Adjusted EBITDA' refers to operating profit before
amortisation of intangible assets (excluding software
amortisation), goodwill impairment and exceptional items (defined
as 'adjusted operating profit') plus the depreciation charge for
property, plant and equipment, textile rental items and right of
use assets plus software amortisation.
2 'Adjusted profit before taxation' refers to adjusted operating
profit less total finance costs.
Peter Egan, Chief Executive Officer of Johnson Service Group,
commented:
"The Group's strong performance during the first six months of
the year, with a significant improvement in revenues, profits and
margins, reflects the return to more normal and predictable trading
patterns alongside proactive management of our cost base and
improving production efficiencies.
So far this year, and in line with our targeted buy and build
growth strategy, we have continued to develop our strong M&A
pipeline through the acquisition of Regency and Celtic Linen. We
have also invested GBP12.9 million across the estate and committed
to a new state-of-the-art site in the South-East to further improve
operational efficiencies, increase capacity and support innovation.
Our intention to increase our bank facility from GBP85.0 million to
GBP120.0 million in the coming months provides us with the ability
to fund further investment opportunities that may arise.
The Board was pleased to indicate an outlook for the year ahead
of market expectations when the Group released its pre-close
trading update in mid-July. Recognising the volumes processed over
the busy summer months, improving efficiencies and a somewhat more
predictable outlook on the cost base, together with our assumption
that the trading environment remains unchanged, we expect the full
year outturn to be slightly ahead of the guidance provided in our
July trading update. This improved outlook is in addition to the
positive contribution expected from Celtic Linen."
SELL-SIDE ANALYSTS' MEETING
A presentation for sell-side analysts will be held today at
09:30, details of which will be distributed by Camarco. A copy of
the presentation will be available on the Company's website (
www.jsg.com ) following the meeting.
ENQUIRIES
Johnson Service Group PLC
Peter Egan, CEO
Yvonne Monaghan, CFO
Tel: 020 3757 4992/4981 (on the day)
Tel: 01928 704 600 (thereafter)
Investec Investment Banking (NOMAD) Camarco (Financial PR)
David Flin Ginny Pulbrook
Carlton Nelson Rosie Driscoll
Virginia Bull Letaba Rimell
Tel: 020 7597 5970 Tel: 020 3757 4992/4981
Financial And Operational Review
BASIS OF PREPARATION
Throughout this statement, and consistent with prior years, a
number of alternative performance measures ('APMs') are used to
describe the Group's performance. APMs are not recognised under
UK-adopted international accounting standards. Whilst the Board
uses APMs to manage and assess the performance of the Group, and
believes they are representative of ongoing trading, facilitate
meaningful year on year comparisons, and hence provide useful
information to stakeholders, it is cognisant that they do have
limitations and should not be regarded as a complete picture of the
Group's financial performance. APMs, which include adjusted
operating profit, adjusted profit before taxation, adjusted EBITDA,
adjusted EPS, adjusted EPS excluding super-deduction and adjusted
net debt are defined within note 1 (Basis of Preparation) and are
reconciled to statutory reporting measures in notes 2, 5, 8 and
18.
PERFORMANCE
Organic revenue growth was strong at 20.6% compared to 2022,
which was still impacted by COVID-19. Workwear remained stable and,
encouragingly, some positive signs on new sales have started to
materialise. Within Hotel, Restaurant and Catering ('HORECA'),
volumes have continued to increase and follow more predictable
patterns which allows for improving efficiency.
Cost pressures remain, particularly in relation to energy and,
to a lesser extent, labour. Energy continued to be a significantly
higher cost than has been experienced historically and we have
proactively fixed prices for the coming months to obtain and manage
some degree of certainty over cost of supply.
Adjusted operating profit margin was 8.8%, reflecting energy
costs at 10.3% of revenue and labour at 45.1% of revenue. Had
energy and labour, two significant drivers of cost increase, been
at the same percentage of revenue as for 2019, adjusted operating
profit margin would have been 14.5% (June 2019: 13.5%). As we
continue to improve the recovery of these costs, through increasing
volumes, efficiencies and price increases, the Board remains of the
opinion that the operating margin of each individual Division can
return to the historic levels achieved in 2019.
Overall, we are encouraged with the Group's performance as we
plan to further expand capacity in each of our businesses.
ACQUISITION OF CELTIC LINEN
As announced on 1 September 2023, we recently completed the
purchase of Celtic Linen for a consideration of EUR31.5 million
(GBP27.1 million) on a debt free, cash free, basis. This leading
supplier of textile rental services to the Healthcare and HORECA
sectors in the Republic of Ireland represents a significant step in
our strategy to expand the range and scale of services we offer and
complements our existing Lilliput business in Northern Ireland.
FINANCIAL REVIEW
Financial Results
Revenue in the period increased by 22.0% to GBP215.0 million
(June 2022: GBP176.2 million). Adjusted EBITDA was GBP57.7 million
(June 2022: GBP42.8 million) giving an improved margin of 26.8%
(June 2022: 24.3%). Adjusted operating profit increased by 48.4% to
GBP19.0 million (June 2022: GBP12.8 million).
The exceptional charge of GBP0.3 million (June 2022: GBP0.5
million) relates to costs in relation to business acquisition
activity.
Total finance costs were GBP2.6 million (June 2022: GBP1.6
million) reflecting higher interest rates and borrowing over the
period.
Adjusted profit before taxation increased by 46.4% to GBP16.4
million (June 2022: GBP11.2 million). Statutory profit before
taxation, after amortisation of intangible assets (excluding
software amortisation) of GBP2.6 million (June 2022: GBP4.2
million), goodwill impairment of GBPnil (June 2022: GBP1.4 million)
and an exceptional charge of GBP0.3 million (June 2022: GBP0.5
million) was GBP13.5 million (June 2022: GBP5.1 million).
The tax rate on the adjusted profit before taxation, excluding
exceptional items, amortisation of intangible assets (excluding
software amortisation) and goodwill impairment, was 25.1% ( June
2022 : 9.7 % ) . The rate is above the headline corporation tax
rate for the full year of 23.5%, due to the effect of expenses not
deductible for taxation and short-term timing differences, and
ahead of the rate in 2022, which was significantly impacted by the
capital allowance super-deduction. The super-deduction allowance,
which ended in March 2023, has little impact on the 2023 tax
rate.
Adjusted diluted earnings per share was 2.9 pence (June 2022:
2.3 pence). Excluding the impact of the capital allowances
super-deduction, the adjusted diluted earnings per share in the
period to 30 June 2022 was 1.7 pence.
Dividend
An interim dividend of 0.9 pence per share (June 2022: 0.8 pence
per share) will be paid on 3 November 2023 to those Shareholders on
the register of members on 6 October 2023. The ex-dividend date is
5 October 2023. The increased dividend is in line with our
progressive dividend policy and it remains the Board's current
intention to reduce dividend cover from our historical level of
cover of 3 times in 2022 to 2.5 times by financial year 2024.
Cash Flow and Net Debt
Free cash flow (calculated as net cash generated from operating
activities, less net spend on textile rental items, less the
capital element of leases) in the first half of the year was
GBP17.9 million compared to GBP8.5 million in the first half of
2022. This is largely reflective of the continuing improvement in
trading performance.
Total net debt (excluding IFRS 16 liabilities) at 30 June 2023
was GBP40.5 million (December 2022: GBP13.7 million). The increase
is largely attributed to the share buyback and significant capital
investment in the business together with the cost of the
acquisition of Regency in February 2023. After including the impact
of IFRS 16, net debt at June 2023 was GBP83.7 million (December
2022: GBP48.0 million).
Bank Facility
In May 2023, the Group extended the tenure of its existing
GBP85.0 million revolving credit facility by 12 months such that it
now expires in August 2026. The Group has also received approval
from its banks to increase the facility to GBP120.0 million and it
is our intention to do this in the coming months. The enlarged
facility will ensure that we have access to capital to fund our
existing investment plans and other opportunities that may
arise.
In addition to the above, the terms of the facility provide for
an option to extend the tenure for a further year and an option to
increase the facility by up to a further GBP15.0 million, both
subject to bank consent.
The current margin on the facility is 1.45% over SONIA or the
relevant EURIBOR rate, as applicable. Covenants remain unchanged
and comprise a leverage covenant (total debt to EBITDA) of less
than three times and interest cover of not less than four times. At
30 June 2023, the leverage ratio was 0.7 times. On a pro-forma
basis, to include the approximate impact of Celtic Linen had it
been acquired on that date, the leverage ratio would have been 0.9
times.
Capital Structure and Share Buyback Programme
Our Capital Allocation policy remains unchanged. The Group's
objective is to employ a disciplined approach to investment,
returns and capital efficiency to deliver sustainable compounding
growth whilst also maintaining a strong balance sheet. We continue
to see exciting opportunities to deploy capital organically and
have a good M&A pipeline. Over the last 12 months we have
completed an initial share buyback programme returning GBP25.3
million to Shareholders, announced the commitment to the opening of
a new plant in Crawley and commenced significant capital investment
in several of our plants. The acquisition of Regency in February
2023 and Celtic Linen in August 2023 has further utilised available
capital. Even after taking into consideration these investments and
the payment of dividends, the Group has significant headroom under
its committed facilities and target leverage of 1-1.5 times.
As a result, the Board announces that, later this month, it
intends to launch a second share buyback programme of the Company's
ordinary shares for up to a maximum aggregate consideration of
GBP10.0 million, excluding expenses, during the period up until and
including 1 March 2024. A further announcement will be made in due
course.
Defined Benefit Pension Scheme ('the Scheme')
The recorded net deficit after tax for the Scheme, calculated in
accordance with IAS 19, was GBP5.3 million at June 2023 compared to
a net deficit of GBP7.1 million at December 2022. The improvement
in the position is due, in part, to a higher discount rate assumed
on liabilities and higher assumed inflation. We continue to have a
significant portion of scheme assets invested so as to hedge
against movements in liabilities, thereby reducing overall scheme
volatility.
The triennial valuation of the defined benefit pension scheme as
at 30 September 2022 is in progress with an initial indication that
the Scheme was showing a small surplus on the Technical Provisions
basis. We remain in discussion with the Trustee regarding the
future deficit contributions to the Scheme and the potential for
working towards a buy out of the Scheme in the medium term.
OPERATIONAL REVIEW
Our Businesses
The Group comprises of Textile Rental businesses which trade
through a number of very well recognised brands, servicing the UK's
Workwear and Hotel, Restaurant and Catering ('HORECA') sectors. The
'Johnsons Workwear' brand predominantly provides workwear rental,
protective wear and laundry services to corporates across all
industry sectors. Within HORECA, 'Stalbridge' and 'London Linen'
provide premium linen services to the restaurant, hospitality and
corporate events market, Johnsons Hotel Linen, our high volume
linen business primarily serves the corporate four star and budget
hotel market and Regency serves the luxury / bespoke segment of the
HORECA sector. Also within HORECA, our Northern Ireland business,
Lilliput, predominantly services hotels and restaurants as well as
a number of healthcare customers. Since the period end we have
acquired Celtic Linen which serves both the Healthcare and HORECA
sectors in the Republic of Ireland.
Energy
Energy costs (comprising gas, electricity and diesel) have
remained volatile over the period and, although energy unit prices
have gradually fallen, still remain at higher levels than
historically. Costs for the first half of 2023 represented 10.3% of
revenue and were significantly higher than the equivalent period in
both 2022 and 2019 (June 2022: 9.3%; June 2019: 6.5%).
Our policy in the UK has always been to fix gas and electricity
prices on a rolling basis, building a position so that the upcoming
months are largely fixed. This provides certainty but also means
that costs do not immediately reflect falls, or increases, in spot
prices. We currently have, on average, some 92% of our anticipated
electricity usage and some 86% of our anticipated gas usage fixed
for the remainder of 2023. Looking ahead, approximately 80% of our
anticipated electricity requirement is fixed for the first half of
next year with around 48% for the remainder of 2024. Similarly, we
have fixed pricing in place for some 63% of our anticipated gas
requirement in the first half of 2024 and some 38% for the
remainder of 2024. In addition, we have hedged 95% of our
anticipated diesel requirement for the second half of 2023. We have
also started to build positions in gas and electricity into 2025
and 2026 and will continue to follow our current policy as we go
forward.
Notwithstanding the fixed pricing arrangements we have already
put in place, we continue to expect that energy costs for the full
year, as a percentage of revenue, will remain at a similar level to
the first half as fixed pricing benefits enjoyed in 2022 roll off
and average pricing remains elevated.
Labour
In the six months to 30 June 2023, labour as a percentage of
revenue reduced to 45.1%, compared to 47.5% in the six months to 30
June 2022, although this was still higher than the 43.2% in the six
months to 30 June 2019. We are, however, encouraged by the
improving efficiency as volumes continue to return and,
accordingly, expect labour, as a percentage of revenue, to reduce
even further by the end of the year.
Workwear Division
Total revenue for the Workwear division was GBP71.1 million
(June 2022: GBP66.0 million), an increase of 7.7%. Organic growth
was 7.5%. Adjusted EBITDA was GBP24.4 million (June 2022: GBP22.2
million) giving a margin of 34.3% (June 2022: 33.6%). Adjusted
operating profit was GBP11.1 million (June 2022: GBP10.0
million).
Our pricing structure, which supports our high levels of
customer service, has been maintained during contract renewal
negotiations with customers. On occasion, this has naturally led to
some shrinkage in our customer base. In addition, the economic
climate continues to provide challenges with some customers
reducing their spend alongside an increase in terminations in the
first half of the year, in particular with a number of smaller
customers ceasing to use a rental service at all. Overall,
retention was 92.3% (December 2022: 94.3%). Positively, our sales
team and support centre has seen an increase in activity in recent
weeks, with more encouraging news on new sales, whilst our
dedicated service teams remain focused on renewing customer
contracts and adding additional services. Our National Accounts
team is also successfully installing additional sites from both new
and existing group customers. In the period to June 2023, 26% of
new sales have been generated from new to rental customers.
Our commitment to providing exceptional customer service remains
steadfast and we continue to achieve strong independent customer
satisfaction results at 82.4% for new business and 82.9% for
existing customers. These scores confirm our position as the market
sector leader in providing a first-class service. To further
improve our service we have invested in customer service training
programmes to equip our colleagues with additional skills and
knowledge to enable them to deliver an even greater customer
service and to continue to promote a customer centric culture
towards customer satisfaction.
By identifying emerging trends and collaborating with key
customers, we have developed and launched a range of innovative
garments for specific sectors that combine functionality with
sustainability. Further garment ranges are under development and
will be launched in the coming months. A key factor in developing
the range was the ability to recycle and repurpose the garments,
which aligns with our vision of creating a greener future.
Our continuous improvement programmes regularly evaluate our
operational efficiencies, processes, systems and supply chain to
streamline our operational costs. Our investment programme of
replacing existing equipment with more advanced technological and
energy efficient capabilities, has seen the installation of new
washer extractors, tunnel finishers and garment folders across
several sites. The installation of the automated sortation systems
in Perth and Hull is progressing in line with expectations. A major
refurbishment of our Manchester site is planned for early 2024 with
a capital investment of GBP4.0 million. This will significantly
improve operational efficiency and processing capacity. We are also
continuing to update our commercial fleet, with over 40 new
vehicles expected in 2023.
The responses to the employee engagement survey at the start of
the year have provided us with an invaluable insight into the areas
where we are excelling and support the introduction of further
initiatives around reward and recognition programs, which are
scheduled to be launched into the business over the coming
months.
The recruitment and retention of employees remains challenging
in some areas, particularly in administrative and supporting roles.
The importance of personal growth and development for all
colleagues is vital and in recognition of these, new training
programmes have been successfully implemented to enhance core
skills and to provide a supportive environment with pathways for
career advancement and succession planning.
HORECA Division
Total revenue for the HORECA division increased significantly to
GBP143.9 million from GBP110.2 million in 2022, which was still
impacted by COVID-19. Organic growth was 28.4% reflecting both
improved price per piece and increasing volume. Adjusted EBITDA was
GBP36.3 million (June 2022: GBP23.3 million) giving an improved
margin of 25.2% (June 2022: 21.1%). Adjusted operating profit was
GBP10.9 million (June 2022: GBP5.5 million).
Volumes have been stronger and more predictable in the first six
months of the year due to no impact from COVID-19, the large number
of new customer contracts and organic growth within existing
customers.
Our primary focus is to continue to deliver on time and in full
to our customer base, with employee recruitment and retention being
a key component in achieving this. Engagement initiatives have
resulted in a more stable workforce with flexible working patterns
and the introduction of additional employee learning and
development opportunities aiding recruitment.
The successful working partnership with His Majesty's Prison
Service continues at some of our Hotel Linen sites, providing
employment for prisoners qualifying for Release on Temporary
Licence. We are proud to have received Platinum Partner status for
our support of this very important initiative.
Hotel, Restaurant and Catering, which includes Stalbridge and
London Linen, has continued to invest in several of its locations
to create extra space and capacity to support the returning volumes
and continuing growth of the business. In Shaftesbury and Grantham
we have extended the floorspace and the installation of additional
ironers in Grantham and Glasgow will enable us to accommodate
greater throughput. The same technology that is successfully
recycling 75% of water at our Shaftesbury site is currently being
installed at our site in Cornwall and we expect this new equipment
to be fully operational in the final quarter of this year. We are
also evaluating opportunities to install the technology across
other sites.
Our new location in Crawley, Sussex, which is due to be
operational in the second half 2024, will allow for accelerated
growth and greater access to the London and South-East markets.
Included in the development will be the latest state-of-the-art
energy efficient machinery and water recycling processes which will
help in our carbon reduction journey. Of the estimated GBP16.0
million total capital investment, we anticipate some GBP8.0 million
will be incurred this year, with GBP0.2 million having been spent
in the first half of the year. Operating costs of GBP0.3 million
were incurred in the first half with a further GBP0.6 million
expected in the second half.
Our very active sales team are delivering great results and
presently the sales pipeline is very strong in most geographical
locations. We have continued to achieve commercially improved terms
with independent and group customers and are signing renewal
agreements with many of the latter.
Regency, which serves the luxury / bespoke segment of the HORECA
sector, joined the Group in February 2023 and continues to operate
under the same brand. The business is now enjoying the advantages
of being part of the Johnsons family. Since acquisition, there have
been some key wins with almost 350 new rooms added, an increase of
some 8%. Over GBP1.4 million of capital investment has been
approved to strengthen the resilience of the two operational units,
to further improve efficiencies and quality and to increase
capacity of the site by over 30%. We expect this investment to be
completed by mid-2024.
Within Hotel Linen, a net 6,000 rooms were installed in the
first half of the year such that, at 30 June 2023, it serviced over
206,000 rooms.
In terms of capital investment, we await the delivery of
innovative robotic machinery in the third quarter for two of our
sites, have replaced a number of pieces of equipment across the
estate and continue to upgrade employee welfare facilities such as
café style canteens and outside seating areas. The new dynamic
production data capture trial at Bourne has been successful and
will be rolled out across all other sites in due course, with
Cardiff being the next site for installation.
Lead times for delivery of new vehicles have improved, with
around 60 vehicles expected to be delivered by the end of 2023. A
new HGV tractor unit and double decker trailer will join the fleet
this year and another trailer is planned for next year to improve
transport reliability and efficiency.
The roll out of our on-line customer portal has continued with
excellent feedback from our customer base and achieving our
objective of "being easy to do business with". The Linen Room has
been developed further to provide more online information to our
customers, with customised platforms for large hotel groups, and
will be rolled out during the second half of the year.
The National Accounts team continue to develop strong
relationships with our hotel groups and, again, most have been
accepting of cost pressures facing the industry during price
increase discussions. Successfully building strong relationships
and strategic partnerships has been reflected in significant growth
with both existing and new customers.
The availability of timely data is key to developing a quality
service. The support from our IT department has continued with
sourcing of innovative software to support our business functions
including business process mapping, production data capture, Linen
Room development, use of Power BI and Customer Visit App reporting.
The teamwork shown by all departments in contributing towards a
collaborative and proactive culture is the key to future
growth.
EMPLOYEES
Our employees are the foundation of our business. The Board
would like to thank them for their support, hard work and
significant contribution to the success of the business over the
last six months. The teamwork, dedication and determination
demonstrated in order to deliver a professional and on time service
to our customers is a credit to each and every one of them. The
Board also welcomes the employees of Regency Laundry and Celtic
Linen into the Johnsons family.
SUSTAINABILITY
We continue to make excellent progress with embedding our
sustainability programme across the Group and are working to create
a long-term road map for delivery of performance improvement in
line with our stated 2030 targets.
Key highlights of the programme so far this year include:
-- We continue to explore opportunities to reduce the carbon
emissions generated through our vehicle fleet. Electric vehicles
are being deployed where practicable and we are also successfully
using HVO (Hydrotreated Vegetable Oil), which is a fossil-free
alternative to diesel resulting in up to a 90% reduction in
Greenhouse Gas emissions, in a number of our vehicles.
-- We have begun a phased transition to a single waste
management provider across mainland UK to enable us to more
effectively manage the materials generated through our operations.
We envisage that this relationship will support us in achieving our
landfill reduction targets.
-- Various volunteering initiatives, support of local charities
and working within our local communities have been undertaken by
our employees with beach litter picking, donations to children's
charities, collections for food banks and support for the homeless
to name but a few.
-- We continue to formally develop our approach and strategy in
respect of a 'circular economy', by sourcing core products with an
increased sustainable content and identifying how we can further
integrate a closed loop approach to the end-of-life management of
our textiles. We are currently undertaking a number of feasibility
studies and projects, some of which are providing very promising
results, with the intention that our end-of-life textiles go back
into the product cycle, either by being reused, repurposed or
recycled.
-- We have begun active engagement with our value chain around
sustainability related topics, beginning with communicating our new
Guiding Principles to key customers and suppliers.
-- We have seen an improvement in our external Sustainability
ratings including our submissions to the CDP Climate Change and
Water Security questionnaires both being awarded a "C" rating and
our Sustainalytics rating moving to "Low Risk" and a score of
18.
-- We have made further progress on calculations for our Scope 3
Emissions and anticipate reporting these more fully in our 2023
Annual Report.
BOARD CHANGES
As announced on 14 July 2023, Kirsty Homer joined the Board on 1
August 2023 as an additional Non-Executive Director.
OUTLOOK
The Board is pleased with the progress made by the Group in the
first half of the year and with the results reported today.
During the first six months, we have added the Regency business
to our portfolio to better serve the luxury/bespoke segment of the
HORECA sector and have committed to a GBP16.0 million investment in
a new site in Crawley, Sussex, which will allow for accelerated
growth and greater access to the London and South-East markets for
our HORECA business.
Our recent investment in a leading linen business in the
Republic of Ireland, which itself is a growing market, represents a
significant step in our strategy to expand the range and scale of
services we offer. The acquisition is expected to be immediately
earnings enhancing and, in addition to collaboratively sharing best
practice across the enlarged organisation, allows us to explore
operational synergies with our Northern Ireland based business,
Lilliput.
We continue to believe that investing in our estate will give us
an advantage in the market in delivering unrivalled service to our
customers in the most efficient way.
Whilst the challenges of cost pressures continue to persist,
they are being proactively managed. The Board remains of the
opinion that the operating margin of each individual Division can
return to the historic levels achieved in 2019 however, the timing
of achieving this is dependent on where a number of inflationary
pressures, most notably energy and labour, settle over the medium
term.
The Board was pleased to indicate an outlook for the year ahead
of market expectations when the Group released its pre-close
trading update in mid-July. Recognising the volumes processed over
the busy summer months, improving efficiencies and a somewhat more
predictable outlook on the cost base, together with our assumption
that the trading environment remains unchanged, we expect the full
year outturn to be slightly ahead of the guidance provided in our
July trading update. This improved outlook is in addition to the
positive contribution expected from Celtic Linen.
RESPONSIBILITY STATEMENT
The condensed consolidated interim financial statements comply
with the Disclosure Guidance and Transparency Rules ('DTR') of the
United Kingdom's Financial Conduct Authority in respect of the
requirement to produce a half-yearly financial report. The
condensed consolidated interim financial statements are the
responsibility of, and have been approved by, the Directors.
The Directors confirm that to the best of their knowledge:
-- the condensed consolidated interim financial statements have
been prepared in accordance with IAS 34, 'Interim Financial
Reporting' as adopted by the United Kingdom;
-- this interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months of the financial year and a description
of the principal risks and uncertainties for the remaining six
months of the year); and
-- this interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related party
transactions and changes therein).
The Directors of Johnson Service Group PLC are listed in the
Johnson Service Group PLC Annual Report for 2022 and, other than
for the appointment of Kirsty Homer on 1 August 2023, remain
unchanged. Details of the Directors are available on the Johnson
Service Group PLC website: www.jsg.com
By order of the Board
Peter Egan Yvonne Monaghan
Chief Executive Officer Chief Financial Officer
5 September 2023 5 September 2023
Forward Looking Statements
Certain statements in these condensed consolidated interim
financial statements constitute forward-looking statements. Any
statement in this document that is not a statement of historical
fact including, without limitation, those regarding the Company's
future expectations, operations, financial performance, financial
condition and business is a forward-looking statement. Such
forward-looking statements are subject to risks and uncertainties
that may cause actual results to differ materially. These risks and
uncertainties include, among other factors, changing economic,
financial, business or other market conditions. These and other
factors could adversely affect the outcome and financial effects of
the plans and events described in these condensed consolidated
interim financial statements. As a result, you are cautioned not to
place reliance on such forward-looking statements. Nothing in this
document should be construed as a profit forecast.
Consolidated Income Statement
Half year Half year Year ended
to to 31 December
30 June 30 June 2022
Note 2023 2022 GBPm
GBPm GBPm
Revenue 2 215.0 176.2 385.7
Impairment loss on trade receivables (0.5) (0.2) (0.9)
All other costs (198.4) (169.3) (351.5)
--------------------------------------------- ------ ----------- ----------- -------------
Operating profit 2 16.1 6.7 33.3
Operating profit before amortisation
of intangible assets (excluding software
amortisation), goodwill impairment and
exceptional items 19.0 12.8 41.2
Amortisation of intangible assets (excluding
software amortisation) (2.6) (4.2) (7.2)
Goodwill impairment 9 - (1.4) (1.4)
Exceptional items 3 (0.3) (0.5) 0.7
Operating profit 2 16.1 6.7 33.3
Finance cost 4 (2.6) (1.6) (3.0)
Profit before taxation 13.5 5.1 30.3
Taxation charge 7 (3.5) (0.4) (1.5)
Profit for the period from continuing
operations 10.0 4.7 28.8
--------------------------------------------- ------ ----------- ----------- -------------
Profit for the period from discontinued
operations - 0.1 0.2
--------------------------------------------- ------ ----------- ----------- -------------
Profit for the period attributable to
equity holders 10.0 4.8 29.0
--------------------------------------------- ------ ----------- ----------- -------------
Earnings per share 8
Basic earnings per share 2.3p 1.1p 6.5p
--------------------------------------------- ------ ----------- ----------- -------------
Diluted earnings per share 2.3p 1.1p 6.5p
--------------------------------------------- ------ ----------- ----------- -------------
See note 8 for Adjusted basic earnings per share and Adjusted
diluted earnings per share.
Consolidated Statement of Comprehensive Income
Year
ended
Half year to Half year 31
30 June to 30 June December
2023 2022 2022
Note GBPm GBPm GBPm
Profit for the period 10.0 4.8 29.0
------------------------------------------------------------------ --- -------------- ---------- ---------
Items that will not be subsequently
reclassified to profit or loss
Re-measurement and experience gains
/ (losses) on post-employment benefit
- obligations 14 1.6 8.1 (10.0)
Taxation in respect of re-measurement
- and experience (gains) / losses (0.4) (2.0) 2.5
Deferred taxation rate change in respect
of re-measurement
and experience losses / (gains) - - 0.1
Items that may be subsequently reclassified
to profit or loss
Cash flow hedges - fair value (losses)
- (net of taxation) / gains (0.8) 1.7 1.4
- transfers to administrative
expenses 0.3 (1.0) (2.2)
------------------------- -------------------------------------- -------------------
Other comprehensive income / (loss) for
the period 0.7 6.8 (8.2)
------------------------------------------------------------------
Total comprehensive income for the period 10.7 11.6 20.8
------------------------------------------------------------------ ------------------- ---------- ---------
The notes on pages 17 to 32 form an integral part of these
condensed consolidated interim financial statements.
Consolidated Statement of Changes in Shareholders' Equity
Capital
Share Share Merger Redemption Hedge Retained Total
Capital Premium Reserve Reserve Reserve Earnings Equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January
2022 44.5 16.8 1.6 0.6 0.3 208.6 272.4
----------- --------- --------- ------------ --------- ---------- --------
Profit for the period - - - - - 4.8 4.8
Other comprehensive income
for the period - - - - 0.7 6.1 6.8
-------------------------------- ----------- --------- --------- ------------ --------- ---------- --------
Total comprehensive income
for the period - - - - 0.7 10.9 11.6
-------------------------------- ----------- --------- --------- ------------ --------- ---------- --------
Share options (value
of employee services) - - - - - 0.4 0.4
Transactions with Shareholders
recognised directly in
Shareholders' equity - - - - - 0.4 0.4
-------------------------------- ----------- --------- --------- ------------ --------- ---------- --------
Balance at 30 June 2022 44.5 16.8 1.6 0.6 1.0 219.9 284.4
-------------------------------- ----------- --------- --------- ------------ --------- ---------- --------
Profit for the period - - - - - 24.2 24.2
Other comprehensive loss - - - - (1.5) (13.5) (15.0)
-------------------------------------- ----- --------- --------- ------------ --------- ---------- --------
Total comprehensive (loss)
/ income for the period - - - - (1.5) 10.7 9.2
-------------------------------- ----------- --------- --------- ------------ --------- ---------- --------
Share options (value
of employee services) - - - - - 0.4 0.4
Share buybacks (0.6) - - 0.6 - (5.7) (5.7)
Deferred tax on share
options - - - - - (0.2) (0.2)
Dividend paid - - - - - (3.5) (3.5)
Transactions with Shareholders
recognised directly in
Shareholders' equity (0.6) - - 0.6 - (9.0) (9.0)
-------------------------------- ----------- --------- --------- ------------ --------- ---------- --------
Balance at 31 December
2022 43.9 16.8 1.6 1.2 (0.5) 221.6 284.6
-------------------------------- ----------- --------- --------- ------------ --------- ---------- --------
Profit for the period - - - - - 10.0 10.0
Other comprehensive (loss)
/ income - - - - (0.5) 1.2 0.7
-------------------------------------- ----- --------- --------- ------------ --------- ---------- --------
Total comprehensive (loss)
/ income
for the period - - - - (0.5) 11.2 10.7
-------------------------------- ----------- --------- --------- ------------ --------- ---------- --------
Share options (value
of employee services) - - - - - 0.3 0.3
Share buybacks (1.7) - - 1.7 - (19.7) (19.7)
Dividend paid - - - - - (6.8) (6.8)
Transactions with Shareholders
recognised directly in
Shareholders' equity (1.7) - - 1.7 - (26.2) (26.2)
-------------------------------- ----------- --------- --------- ------------ --------- ---------- --------
Balance at 30 June 2023 42.2 16.8 1.6 2.9 (1.0) 206.6 269.1
-------------------------------- ----------- --------- --------- ------------ --------- ---------- --------
The Group has an Employee Benefit Trust (EBT) to administer
share plans and to acquire shares, using funds contributed by the
Group, to meet commitments to employee share schemes. As at 30 June
2023, the EBT held 9,024 shares (June 2022: 9,024 shares; December
2022: 9,024 shares).
Consolidated Balance Sheet
As at As at As at
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Note Restated*
Non-current assets
Goodwill 9 137.0 133.8 133.8
Intangible assets 10 9.5 13.8 10.9
Property, plant and equipment 11 122.4 113.3 119.6
Right-of-use assets 12 40.5 33.2 31.7
Textile rental items 13 67.3 55.3 63.8
Trade and other receivables 0.3 0.3 0.3
Post-employment benefit assets - 8.0 -
377.0 357.7 360.1
------------------------------------ ------ -------- ---------- ------------
Current assets
Inventories 2.2 2.6 1.8
Trade and other receivables 74.2 60.5 61.0
Reimbursement assets 4.5 4.4 4.5
Derivative financial assets - 1.4 -
Current income tax assets 1.4 - -
Cash and cash equivalents 6.0 7.6 6.1
88.3 76.5 73.4
------------------------------------ ------ -------- ---------- ------------
Current liabilities
Trade and other payables 85.0 70.8 75.7
Borrowings 6.7 8.5 5.1
Current income tax liabilities - - 0.2
Lease liabilities 5.1 5.1 5.1
Derivative financial liabilities 1.4 - 0.4
Provisions 5.1 5.1 5.1
103.3 89.5 91.6
------------------------------------ ------ -------- ---------- ------------
Non-current liabilities
Post-employment benefit obligations 14 7.8 1.0 10.2
Deferred income tax liabilities 5.9 5.9 1.8
Trade and other payables 0.6 0.9 0.3
Borrowings 39.8 21.0 14.7
Lease liabilities 38.1 30.7 29.2
Derivative financial liabilities - - 0.3
Provisions 0.7 0.8 0.8
92.9 60.3 57.3
------------------------------------ ------ -------- ---------- ------------
NET ASSETS 269.1 284.4 284.6
------------------------------------ ------ -------- ---------- ------------
Capital and reserves attributable to
the Company's Shareholders
Share capital 15 42.2 44.5 43.9
Share premium 16.8 16.8 16.8
Merger reserve 1.6 1.6 1.6
Capital redemption reserve 2.9 0.6 1.2
Hedge reserve (1.0) 1.0 (0.5)
Retained earnings 206.6 219.9 221.6
------------------------------------ ------ -------- ---------- ------------
Total equity 269.1 284.4 284.6
------------------------------------ ------ -------- ---------- ------------
* Restated to reflect the inclusion of a GBP4.4 million
provision in respect of third-party claims made against the Group,
offset by an equal and opposite corresponding reimbursement asset.
Further details are set out within note 1.
The notes on pages 17 to 32 form an integral part of these
condensed consolidated interim financial statements. The condensed
consolidated interim financial statements on pages 13 to 32 were
approved by the Board of Directors on 5 September 2023 and signed
on its behalf by:
Yvonne Monaghan
Chief Financial Officer
Consolidated Statement of Cash Flows
Half Half year Year ended
year to to 31 December
30 June 30 June 2022
Note 2023 2022 GBPm
GBPm GBPm
Cash flows from operating activities
Profit for the period 10.0 4.8 29.0
Adjustments for:
Taxation charge - continuing 7 3.5 0.4 1.5
Finance cost 2.6 1.6 3.0
Depreciation 38.5 29.9 63.5
Amortisation 2.8 4.3 7.4
Goodwill impairment loss - 1.4 1.4
Profit on disposal of property,
plant and equipment (0.1) - (0.2)
(Increase) / decrease in inventories (0.4) (0.4) 0.4
Increase in trade and other receivables (12.9) (12.4) (12.9)
Increase in trade and other payables 10.7 3.7 4.3
Deficit recovery payments in respect
of post-employment benefit obligations (0.9) (0.9) (1.9)
Share-based payments 0.3 0.4 0.8
Commodity swaps not qualifying as
hedges - - (0.1)
Income re insurance claims - - (1.5)
Decrease in provisions (0.1) - (0.1)
Business acquisition costs charged
to the income statement 0.3 - -
------------------------------------------------- ------ -------- --------- ------------
Cash generated from operations 54.3 32.8 94.6
Interest paid (2.3) (1.7) (3.6)
Taxation (paid) / received (1.6) 3.5 3.5
------------------------------------------------- ------ -------- --------- ------------
Net cash generated from operating
activities 50.4 34.6 94.5
------------------------------------------------- ------ -------- --------- ------------
Cash flows from investing activities
Acquisition of business (including
acquired overdrafts) (5.3) - -
Purchase of other intangible assets 10 - (1.3) (1.3)
Purchase of property, plant and equipment (12.9) (6.6) (22.1)
Income re insurance claims - - 1.5
Purchase of software - (0.1) (0.3)
Proceeds from sale of property, plant
and equipment 0.2 - 0.4
Purchase of textile rental items (31.1) (24.8) (52.5)
Proceeds received in respect of special
charges 1.5 1.5 2.7
Net cash used in investing activities (47.6) (31.3) (71.6)
------------------------------------------------- ------ -------- --------- ------------
Cash flows from financing activities
Proceeds from borrowings 52.0 23.0 48.0
Repayments of borrowings (27.2) (20.0) (51.0)
Capital element of leases (2.9) (2.8) (5.6)
Share buyback (19.8) - (5.6)
Dividends paid to company shareholders (6.8) - (3.5)
Net cash (used in) / generated from
financing activities (4.7) 0.2 (17.7)
------------------------------------------------- ------ -------- --------- ------------
Net (decrease) / increase in cash
and cash equivalents (1.9) 3.5 5.2
Cash and cash equivalents at beginning
of the period 0.8 (4.4) (4.4)
------------------------------------------------- ------ -------- --------- ------------
Cash and cash equivalents at end
of the period 18 (1.1) (0.9) 0.8
------------------------------------------------- ------ -------- --------- ------------
Cash and cash equivalents comprise:
Cash 6.0 7.6 6.1
Overdraft (7.1) (8.5) (5.3)
Cash and cash equivalents at end
of the period (1.1) (0.9) 0.8
------------------------------------------------- ------ -------- --------- ------------
The notes on pages 17 to 32 form an integral part of these
condensed consolidated interim financial statements.
Notes to the Condensed Consolidated Interim Financial
Statements
Johnson Service Group PLC (the 'Company') and its subsidiaries
(together 'the Group') provide textile rental and related services
across the UK.
The Company is incorporated and domiciled in the UK, its
registered number is 523335 and the address of its registered
office is Johnson House, Abbots Park, Monks Way, Preston Brook,
Cheshire, WA7 3GH. The Company is a public limited company and has
its primary listing on the AIM division of the London Stock
Exchange.
The condensed consolidated interim financial statements were
authorised for issue by the Board on 5 September 2023.
1 BASIS OF PREPARATION
Overview
These condensed consolidated interim financial statements of the
Group are for the half year ended 30 June 2023. They have been
prepared in accordance with the Disclosure and Transparency Rules
of the Financial Conduct Authority and with IAS 34, 'Interim
Financial Reporting', as adopted by the United Kingdom.
The condensed consolidated interim financial statements have not
been reviewed or audited, nor do they comprise statutory accounts
for the purpose of Section 434 of the Companies Act 2006, and do
not include all of the information or disclosures required in the
annual financial statements and should therefore be read in
conjunction with the Group's 2022 Annual Report and Accounts, which
was prepared in accordance with UK-adopted international accounting
standards.
Financial information for the year ended 31 December 2022
included herein is derived from the statutory accounts for that
year, which have been filed with the Registrar of Companies. The
auditors' report on those accounts was unqualified, did not contain
an emphasis of matter paragraph and did not contain a statement
under Section 498 of the Companies Act 2006.
Other than as described below, financial information for the
half year ended 30 June 2022 included herein is derived from the
condensed consolidated interim financial statements for that
period.
Accounting Policies, Presentation and Computation
The condensed consolidated interim financial statements have
been prepared applying the accounting policies, presentation and
methods of computation applied by the Group in the preparation of
the published consolidated financial statements for the year ended
31 December 2022.
(a) Taxation
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual earnings
before exceptional items. Taxation on exceptional items is accrued
as the exceptional items are recognised . Prior year adjustments in
respect of taxation are recognised when it becomes probable that
such adjustment is needed.
(b) Seasonality of operations
Seasonality or cyclicality could affect all of the businesses to
varying extents however, the Directors do not consider such
seasonality or cyclicality to be significant in the context of the
condensed consolidated interim financial statements.
(c) Critical accounting estimates and assumptions
The preparation of the condensed consolidated interim financial
statements requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets
and liabilities, income and expense. Actual results may differ from these estimates.
Prior Year Adjustment
The Balance Sheet as at 30 June 2022 has been restated to
reflect the inclusion of a GBP4.4 million provision in respect of
third-party claims made against the Group, but which are
indemnified under the terms of its insurance policies. A
corresponding reimbursement asset of GBP4.4 million has also been
recognised as at the same date. As the Group expects, on average,
insurance claims to be settled within one year, which is driven by
a review of the historic claims data, recognition of these balances
is made within current assets and current liabilities.
Going Concern
Background and Summary
After careful assessment, the Directors have adopted the going
concern basis in preparing these condensed consolidated interim
financial statements. The process and key judgments in coming to
this conclusion are set out below.
The Group's business activities, together with details of the
financial position of the Group, its cash flows, liquidity position
and borrowing facilities, are described in the Financial and
Operating Review.
Going Concern Assessment
Cash Flows, Covenants and Stress Testing
For the purposes of the going concern assessment, the Directors
have prepared monthly cash flow projections for the period to 31
December 2024 (the assessment period). The Directors consider 18
months to be a reasonable period for the going concern assessment
as it enables them to consider the potential impact of
macroeconomic and geopolitical factors over an extended period. The
cash flow projections show that the Group has significant headroom
against its committed facilities and can meet its financial
covenant obligations.
The Group has also performed a reverse stress test against the
base monthly cash flow projections referred to above in order to
determine the performance level that would result in a reduction in
headroom against its committed facilities to nil or a breach of its
covenants. The interest cover covenant would be breached in the
event that adjusted operating profit reduced to approximately 70%
of 2022 levels. The Directors do not consider this scenario to be
likely.
As a further stress test, the Group considered the impact of
increasing interest rates. The Directors do not consider the
magnitude of the increase in interest rates that would be required
in order for a covenant to be breached to be plausible.
1 BASIS OF PREPARATION (continued)
Each of the stress tests assume no mitigating actions are taken.
Mitigating actions available to the Group, should they be required,
include reductions in discretionary capital expenditure and ceasing
dividend payments.
Liquidity
The Group has access to a committed Revolving Credit Facility of
GBP85.0 million (the 'Facility') which matures in August 2026. The
terms of the Facility provide an option to extend the term for a
further year and an option to increase the Facility by up to a
further 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, the Directors have
a reasonable expectation that the Group has adequate resources for
its operational needs, will remain in compliance with the financial
covenants set out in the bank facility agreement and will continue
in operation for at least the period to 31 December 2024.
Accordingly, and having reassessed the principal risks and
uncertainties, the Directors considered it appropriate to adopt the
going concern basis in preparing the condensed consolidated interim
financial statements.
Alternative Performance Measures (APMs)
Overview of APMs
Throughout this Interim Statement, and consistent with prior
years, we refer to a number of APMs. APMs are used by the Group to
provide further clarity and transparency of the Group's financial
performance. The APMs are used internally by management to monitor
business performance, budgeting and forecasting, and for
determining Directors' remuneration and that of other management
throughout the business. The APMs, which are not recognised under
UK-adopted international accounting standards, are:
-- 'adjusted operating profit', which refers to continuing
operating profit/(loss) before amortisation of intangible assets
(excluding software amortisation), goodwill impairment and
exceptional items;
-- 'adjusted profit before taxation', which refers to adjusted
operating profit less finance cost;
-- 'adjusted EBITDA', which refers to adjusted operating profit
plus the depreciation charge for property, plant and equipment,
textile rental items and right of use assets plus software
amortisation;
-- 'adjusted EPS', which refers to EPS calculated based on
adjusted profit after taxation;
-- 'adjusted EPS excluding super-deduction', an additional
measure introduced for 2021 and 2022 only which amends the
'adjusted EPS' to exclude the short-term benefit of the capital
allowance super-deduction; and
-- 'adjusted net debt', which refers to net debt excluding IFRS
16 lease liabilities.
The Board considers that the above APMs, all of which exclude
the effects of non-recurring items or non-operating events, provide
useful information for stakeholders on the underlying trends and
performance of the Group and facilitate meaningful year on year
comparisons.
Limitations of APMs
The Board is cognisant that APMs do have limitations and should
not be regarded as a complete picture of the Group's financial
performance. Limitations of APMs may include, inter alia:
-- similarly named measures may not be comparable across
companies;
-- profit-related APMs may exclude significant, sometimes
recurring, business transactions (e.g. restructuring charges and
acquisition-related costs) that impact financial performance and
cash flows; and
-- adjusted operating profit, adjusted profit before taxation,
adjusted EBITDA, adjusted EPS and adjusted EPS excluding
super-deduction all exclude the amortisation of intangibles
acquired in business combinations, but do not similarly exclude the
related revenue.
Reconciliation of APMs to Statutory Performance Measures
Reconciliations between the above APMs and statutory performance
measures are reconciled within this Interim Statement as
follows:
-- Adjusted operating profit - note 2
-- Adjusted profit before taxation - note 5
-- Adjusted EBITDA - note 5
-- Adjusted EPS - note 8
-- Adjusted net debt - note 18
2 SEGMENT ANALYSIS
The chief operating decision-maker (CODM) has been identified as
the Executive Directors. The CODM reviews the Group's internal
reporting in order to assess performance and allocate resources.
The CODM determines the operating segments based on these reports
and on the internal reporting structure.
For reporting purposes, the CODM considered the aggregation
criteria set out within IFRS 8, 'Operating Segments', which allows
for two or more operating segments to be combined as a single
reporting segment if:
1) aggregation provides financial statement users with
information that allows them to evaluate the business and the
environment in which it operates; and
2) they have similar economic characteristics (for example,
where similar long-term average gross margins would be expected)
and are similar in each of the following respects:
-- the nature of the products and services;
-- the nature of the production processes;
-- the type or class of customer for their products and
services;
-- the methods used to distribute their products or provide
their services; and
-- the nature of the regulatory environment (i.e. banking,
insurance or public utilities), if applicable.
The CODM deems it appropriate to present two reporting segments
(in addition to 'Discontinued Operations' and 'All Other
Segments'), being:
1) Workwear: comprising of our Workwear business only; and
2) Hotel, Restaurant and Catering ('HORECA'): comprising of our
Stalbridge, Hotel Linen, Lilliput and Regency businesses, each of
which are a separate operating segment.
The CODM's rationale for aggregating the Stalbridge, Hotel
Linen, Lilliput and Regency operating segments into a single
reporting segment is set out below:
-- the gross margins of each operating segment are within a
similar range, with the long-term average margin expected to
further align;
-- the nature of the customers, products and production
processes of each operating segment are very similar;
-- the nature of the regulatory environment is the same due to
the similar nature of products, processes and customers involved;
and
-- distribution is via the same method across each operating
segment.
The CODM assesses the performance of the reporting segments
based on a measure of operating profit, both including and
excluding the effects of non-recurring items from the reporting
segments, such as restructuring costs and impairments when the
impairment is the result of an isolated, non-recurring or
non-operating event. Interest income and expenditure are not
included in the result for each reporting segment that is reviewed
by the CODM. Segment results include items directly attributable to
a segment as well as those that can be allocated on a reasonable
basis, for example rental income received by Johnson Group
Properties PLC (the property holding company of the Group) is
credited back, where appropriate, to the paying company for the
purpose of segmental reporting. There have been no changes in
measurement methods used compared to the prior period.
Other information provided to the CODM is measured in a manner
consistent with that in the financial statements. Segment assets
exclude post-employment benefit assets, derivative financial
assets, current income tax assets and cash and cash equivalents,
all of which are managed on a central basis. Segment liabilities
include non-bank borrowings but exclude bank borrowings,
post-employment benefit obligations, derivative financial
liabilities, current income tax liabilities and deferred income tax
liabilities, all of which are managed on a central basis. These
balances are part of the reconciliation to total assets and
liabilities.
2 SEGMENT ANALYSIS (continued)
The reporting segment results for the half year ended 30 June
2023, together with comparative figures, are as follows:
All
Other
Half year to 30 June 2023 Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Revenue
Rendering of services 69.2 143.9 - 213.1
Sale of goods 1.9 - - 1.9
---------------------------------------------------- --------------------- --------- ------- ---------- --------
Total revenue 71.1 143.9 - 215.0
---------------------------------------------------- --------------------- --------- ------- ---------- --------
Operating profit / (loss) before amortisation
of intangible assets (excluding software
amortisation) and exceptional items 11.1 10.9 (3.0) 19.0
Amortisation of intangible assets
(excluding software amortisation) (0.2) (2.4) - (2.6)
Exceptional items - (0.3) - (0.3)
Operating profit / (loss) 10.9 8.2 (3.0) 16.1
Finance cost (2.6)
Profit before taxation 13.5
Taxation charge (3.5)
---------------------------------------------------- --------------------- --------- ------- ---------- --------
Profit for the period attributable
to equity holders 10.0
All
Other
Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Balance sheet information
Segment assets 129.2 327.2 1.5 457.9
Unallocated assets: Current income tax
assets 1.4
Cash and cash equivalents 6.0
Total assets 465.3
---------------------------------------------------- --------------------- --------- ------- ---------- --------
Segment liabilities (40.0) (90.0) (4.6) (134.6)
Unallocated liabilities: Bank
borrowings (46.5)
Derivative financial
liabilities (1.4)
Post-employment
benefit obligations (7.8)
Deferred income tax
liabilities (5.9)
Total liabilities (196.2)
---------------------------------------------------- --------------------- --------- ------- ---------- --------
All
Other
Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Other information
Non-current asset additions
- Property, plant and equipment 2.1 10.0 - 12.1
- Right of use assets 1.7 8.6 0.1 10.4
- Textile rental items 12.1 17.6 - 29.7
Depreciation and amortisation
expense
- Property, plant and equipment 2.9 7.3 - 10.2
- Right of use assets 1.2 1.9 - 3.1
- Textile rental items 9.1 16.1 - 25.2
- Capitalised software 0.1 0.1 - 0.2
- Customer contracts and brands 0.2 2.4 - 2.6
2 SEGMENT ANALYSIS (continued)
All
Other
Half year to 30 June 2022 Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Revenue
Rendering of services 64.4 110.1 - 174.5
Sale of goods 1.6 0.1 - 1.7
----------------------------------------------------- -------------------------- --------- ------- ---------- ----------
Total revenue 66.0 110.2 - 176.2
----------------------------------------------------- -------------------------- --------- ------- ---------- ----------
Operating profit / (loss) before amortisation
of intangible assets (excluding software
amortisation), goodwill impairment
and exceptional items 10.0 5.5 (2.7) 12.8
Amortisation of intangible assets (excluding
software amortisation) (0.2) (4.0) - (4.2)
Goodwill impairment - (1.4) - (1.4)
Exceptional items - - (0.5) (0.5)
Operating profit / (loss) 9.8 0.1 (3.2) 6.7
Finance cost (1.6)
Profit before taxation 5.1
Taxation charge (0.4)
----------------------------------------------------- -------------------------- --------- ------- ---------- ----------
Profit for the period from
continuing operations 4.7
Profit for the period from
discontinued operations 0.1
Profit for the period attributable
to equity holders 4.8
All
Other Restated
Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Balance sheet information
Segment assets 142.9 272.9 1.4 417.2
Unallocated assets: Post-employment
benefit assets 8.0
Derivative financial assets 1.4
Cash and cash equivalents 7.6
---------------------------------------------------------------------------------------- --------- ------- ----------
Total assets 434.2
----------------------------------------------------- -------------------------- --------- ------- ---------- ----------
Segment liabilities (38.4) (71.9) (3.1) (113.4)
Unallocated liabilities: Bank
borrowings (29.5)
Post-employment benefit
obligations (1.0)
Deferred income tax
liabilities (5.9)
------------------------------------------------------------------------- ------------- --------- ------- ---------- ----------
Total liabilities (149.8)
----------------------------------------------------- -------------------------- --------- ------- ---------- ----------
All
Other
Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Other information
Non-current asset additions
- Property, plant and equipment 2.6 6.4 - 9.0
- Right of use assets - 0.8 - 0.8
- Textile rental items 11.3 14.9 - 26.2
- Capitalised software 0.1 - - 0.1
- Customer contracts 1.3 - - 1.3
Depreciation and amortisation
expense
- Property, plant and equipment 2.9 6.1 - 9.0
- Right of use assets 1.0 2.1 - 3.1
- Textile rental items 8.2 9.6 - 17.8
- Capitalised software 0.1 - - 0.1
- Customer contracts 0.2 4.0 - 4.2
2 SEGMENT ANALYSIS (continued)
All
Other
Year ended 31 December 2022 Workwear HORECA 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
-------------------------------------------------------------------- ------------- --------- --------- ------- --------- --------
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
Finance cost (3.0)
Profit before taxation 30.3
Taxation charge (1.5)
----------------------------------------------------------------------------------- --------- --------- ------- --------- --------
Profit for the period from continuing
operations 28.8
Profit for the period from discontinued
operations 0.2
----------------------------------------------------------------------------------- --------- --------- ------- --------- --------
Profit for the period attributable
to equity holders 29.0
----------------------------------------------------------------------------------- --------- --------- ------- --------- --------
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)
------------------------------------------------------------ --------------------- --------- --------- ------- --------- --------
All
Other
Workwear HORECA Segments Total
GBPm GBPm GBPm GBPm
Other information
Non-current asset additions
- Property, plant and equipment 6.3 18.5 - 24.8
- Right of use assets 0.8 1.2 - 2.0
- Textile rental items 21.5 35.9 - 57.4
- Capitalised software 0.2 0.1 - 0.3
- Customer contracts 1.3 - - 1.3
Depreciation, impairment
and amortisation expense
- Property, plant and equipment 5.8 12.5 - 18.3
- Right of use assets depreciation 2.0 3.8 0.1 5.9
- Textile rental items depreciation 16.7 22.6 - 39.3
- Capitalised software 0.2 - - 0.2
- Customer contracts 0.4 6.8 - 7.2
- Goodwill impairment - 1.4 - 1.4
3 EXCEPTIONAL ITEMS
Half year Half year Year ended
to to 31 December
30 June 30 June 2022
2023 2022 GBPm
GBPm GBPm
Costs in relation to business acquisition
activity (0.3) - -
Insurance claims - - 1.5
Other costs re insurance claims - (0.5) (0.8)
Total exceptional items (0.3) (0.5) 0.7
------------------------------------------- ----------- ---------- -------------
Current year exceptional items
During the half year to 30 June 2023, professional fees of
GBP0.3 million were incurred relating to the acquisition of Regency
Laundry Limited and other costs in relation to business acquisition
activity. Further information relating to the acquisition is
provided in note 16.
Prior year exceptional items
Insurance claims and other costs
A Workwear processing plant was destroyed as a result of a fire
in 2020. Final settlement proceeds of GBP1.5 million were received
in the year ended 31 December 2022 in respect of this insurance
claim. In addition, costs of GBP0.8 million (GBP0.5 million to 30
June 2022) were incurred in the year in respect of the demolition
of the destroyed site and preparing the site for sale.
4 FINANCE COST
Half year Half year Year ended
to to 31 December
30 June 30 June 2022
2023 2022 GBPm
GBPm GBPm
Interest payable on bank loans
and overdrafts 1.3 0.8 1.3
Gain on interest rate swaps not qualifying
as hedges - (0.1) (0.1)
Amortisation of bank facility fees 0.1 0.1 0.3
Finance costs on lease liabilities relating
to IFRS 16 1.0 0.8 1.5
Notional interest on post-employment benefit
obligations 0.2 - -
Finance cost 2.6 1.6 3.0
------------------------------------- --------------- ---------- -------------
5 ALTERNATIVE PERFORMANCE MEASURES (APMs)
Adjusted profit before and after taxation Half year Half year Year ended
(continuing) to to 31 December
30 June 30 June 2022
2023 2022 GBPm
GBPm GBPm
Profit before taxation (continuing) 13.5 5.1 30.3
Amortisation of intangible assets (excluding
software amortisation) 2.6 4.2 7.2
Goodwill impairment - 1.4 1.4
Exceptional items 0.3 0.5 (0.7)
Adjusted profit before taxation (continuing) 16.4 11.2 38.2
Taxation thereon (4.1) (1.1) (2.6)
---------------------------------------------- ------------ ---------- -------------
Adjusted profit after taxation (continuing) 12.3 10.1 35.6
---------------------------------------------- ------------ ---------- -------------
Adjusted EBITDA Half year Half year Year ended
to to 31 December
30 June 30 June 2022
2023 2022 GBPm
GBPm GBPm
Operating profit before amortisation
of intangible assets (excluding software
amortisation), goodwill impairment
and exceptional items 19.0 12.8 41.2
Software amortisation 0.2 0.1 0.2
Property, plant and equipment depreciation 10.2 9.0 18.3
Right of use asset depreciation 3.1 3.1 5.9
Textile rental items depreciation 25.2 17.8 39.3
-------------------------------------------- ---------- -------------
Adjusted EBITDA 57.7 42.8 104.9
-------------------------------------------- ------------ ---------- -------------
6 DIVIDS
Half year Half year Year ended
to to 31 December
30 June 30 June 2022
2023 2022
Dividend per share (pence)
2023 Interim dividend proposed 0.9 - -
2022 Interim dividend proposed and paid - 0.8 0.8
2022 Final dividend proposed and paid - - 1.6
----------------------------------------- ---------- ---------- -------------
0.9 0.8 2.4
----------------------------------------- ---------- ---------- -------------
Half year Half year Year ended
to to 31 December
30 June 30 June 2022
2023 2022
Shareholders' funds committed (GBPm)
2023 Interim dividend proposed 3.8 - -
2022 Interim dividend proposed and paid - 3.5 3.5
2022 Final dividend proposed and paid - - 6.8
On 12 May 2023, a final dividend in respect of the year ended 31
December 2022 of 1.6 pence per share was paid to Shareholders,
utilising GBP6.8 million of Shareholders' funds.
The Directors are proposing an interim dividend in respect of
the year ended 31 December 2023 of 0.9 pence per Ordinary share
which, based on the number of shares in issue as at the date of
this report, will reduce Shareholders' funds by GBP3.8 million. The
dividend will be paid on 3 November 2023 to Shareholders on the
register of members at the close of business on 6 October 2023. The
trustee of the EBT has waived the entitlement to receive dividends
on the Ordinary shares held by the trust. Given the intention of
the Directors to launch a second share buyback programme later this
month, it is anticipated that the actual distribution will be less
than the amount stated above.
In accordance with IAS 10, there is no payable recognised at 30
June 2023 in respect of this proposed dividend.
7 TAXATION
Half year Half year Year ended
to to 31 December
30 June 30 June 2022
2023 2022 GBPm
GBPm GBPm
Current tax
UK corporation tax charge for the
period - - -
Adjustment in relation to previous
periods - - 0.3
--------------------------------------- ---------- ---------- -------------
Current tax charge for the period - - 0.3
Deferred tax
Origination and reversal of temporary
differences 3.5 0.4 3.3
Adjustment in relation to previous
years - - (2.1)
Deferred tax charge for the period 3.5 0.4 1.2
--------------------------------------- ---------- ---------- -------------
Total charge for taxation included
in the consolidated income statement
for continuing operations 3.5 0.4 1.5
--------------------------------------- ---------- ---------- -------------
Taxation in relation to the amortisation of intangible assets
(excluding software amortisation) has reduced the charge for
taxation on continuing operations in the half year to 30 June 2023
by GBP0.6 million ( June 2022 : GBP0.7 million; December 2022 :
GBP1.1 million).
During the half year to 30 June 2023 a GBP0.2 million charge
relating to deferred taxation (June 2022: GBP2.2 million; December
2022: GBP2.6 million) has been recognised in other comprehensive
income.
Reconciliation of effective tax rate
Taxation on non-exceptional items for the half year to 30 June
2023 is calculated based on the estimated average annual effective
tax rate of 25.1% (June 2022: 9.7%; December 2022: 6.8%). This
compares to the weighted average tax rate at the balance sheet date
of 23.5% (June 2022: 19.0%; December 2022: 19.0%). The effective
tax rate is impacted by a number of factors, including expenses not
deductible for taxation and short-term timing differences, with
first year capital allowances in the period reflecting the full
expensing relief announced in the Chancellor's Spring Budget,
impacting upon the estimated pattern of reversal of the Group's
deferred tax assets and liabilities. These factors combine to
increase the effective tax rate for the half year to 30 June 2023
to 25.1%. The adjustment for under or over provisions in previous
years is recognised when the amounts are agreed - none have been
recognised in the period ( June 2022: GBPnil; December 2022: GBP1.8
million credit).
A change to the UK corporation tax rate, which was substantively
enacted as part of Finance Bill 2021 on 24 May 2021, was an
increase to the main rate from 19% to 25% with effect from 1 April
2023. Deferred income taxes at the balance sheet date have been
measured at the tax rate expected to be applicable at the date the
deferred income tax assets and liabilities are realised.
Accordingly, an average deferred income tax rate of 25% has been
used to measure all deferred tax balances as at 30 June 2023 (June
2022: 23.7%; December 2022: 24.6%).
8 EARNINGS PER SHARE
Half Half year Year
year to to ended
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Profit for the period attributable to
Shareholders 10.0 4.7 28.8
Amortisation of intangible assets from
continuing operations (net of taxation) 2.0 3.5 6.1
Goodwill impairment (net of taxation) - 1.4 1.4
Exceptional items from continuing operations
(net of taxation) 0.3 0.5 (0.7)
Adjusted profit from continuing operations
attributable to Shareholders 12.3 10.1 35.6
-------------------------------------------------- ------------ ------------ ---------------
Profit from discontinued operations
attributable to Shareholders - 0.1 0.2
-------------------------------------------------- ------------ ------------ ---------------
Total adjusted profit from all operations
attributable to Shareholders 12.3 10.2 35.8
-------------------------------------------------- ------------ ------------ ---------------
Number Number Number
of shares of shares of shares
Weighted average number of Ordinary
shares 429,246,079 445,247,615 444,288,818
Potentially dilutive Ordinary shares 95,000 95,000 95,000
-------------------------------------------------- ------------ ------------ ---------------
Diluted number of Ordinary shares 429,341,079 445,342,615 444,383,818
-------------------------------------------------- ------------ ------------ ---------------
Pence Pence Pence
Basic earnings per share per share per share per share
From continuing operations 2.3p 1.1p 6.5p
From discontinued operations - - -
-------------------------------------------------- ------------ ------------ ---------------
From total operations 2.3p 1.1p 6.5p
-------------------------------------------------- ------------ ------------ ---------------
Adjustment for amortisation of intangibles
assets (continuing) 0.5p 0.8p 1.4p
Adjustment for goodwill impairment (continuing) - 0.3p 0.3p
Adjustment for exceptional items (continuing) 0.1p 0.1p (0.2)p
Adjusted basic earnings per share (continuing) 2.9p 2.3p 8.0p
Adjusted basic earnings per share (discontinued) - - -
-------------------------------------------------- ------------ ------------ ---------------
Adjusted basic earnings per share from
total operations 2.9p 2.3p 8.0p
-------------------------------------------------- ------------ ------------ ---------------
Diluted earnings per share
From continuing operations 2.3p 1.1p 6.5p
From discontinued operations - - -
-------------------------------------------------- ------------ ------------ ---------------
From total operations 2.3p 1.1p 6.5p
-------------------------------------------------- ------------ ------------ ---------------
Adjustment for amortisation of intangibles
assets (continuing) 0.5p 0.8p 1.4p
Adjustment for goodwill impairment (continuing) - 0.3p 0.3p
Adjustment for exceptional items (continuing) 0.1p 0.1p (0.2)p
Adjusted diluted earnings per share
(continuing) 2.9p 2.3p 8.0p
Adjusted diluted earnings per share
(discontinued) - - -
-------------------------------------------------- ------------ ------------ ---------------
Adjusted diluted earnings per share
from total operations 2.9p 2.3p 8.0p
-------------------------------------------------- ------------ ------------ ---------------
Basic earnings per share is calculated using the weighted
average number of Ordinary shares in issue during the period,
excluding those held by the Employee Benefit Trust, based on the
profit for the period attributable to Shareholders.
Adjusted earnings per share figures are given to exclude the
effects of amortisation of intangible assets (excluding software
amortisation), goodwill impairment and exceptional items, all net
of taxation, and are considered to show the underlying performance
of the Group.
For diluted earnings per share, the weighted average number of
Ordinary shares in issue is adjusted to assume conversion of all
potentially dilutive Ordinary shares. The Company has potentially
dilutive Ordinary shares arising from share options granted to
employees. Options are dilutive under the SAYE scheme, where the
exercise price together with the future IFRS 2 charge of the option
is less than the average market price of the Company's Ordinary
shares during the period. Options under the LTIP schemes, as
defined by IFRS 2, are contingently issuable shares and are
therefore only included within the calculation of diluted earnings
per share if the performance conditions, as set out in the
Directors' Remuneration Report within the 2022 Annual Report and
Accounts, are satisfied at the end of the reporting period,
irrespective of whether this is the end of the vesting period or
not.
Potentially dilutive Ordinary shares are dilutive at the point,
from a continuing operations level, when their conversion to
Ordinary shares would decrease earnings per share or increase loss
per share. For the periods ended 30 June 2023 and 30 June 2022, and
the year ended 31 December 2022, potentially dilutive Ordinary
shares have been treated as dilutive, as their inclusion in the
diluted earnings per share calculation decreases the earnings per
share from continuing operations.
There were no events occurring after the balance sheet date that
would have changed significantly the number of Ordinary shares or
potentially dilutive Ordinary shares outstanding at the balance
sheet date if those transactions had occurred before the end of the
reporting period.
9 GOODWILL
As at As at As at
30 June 30 June 31 December
12 2023 2022 2022
GBPm GBPm GBPm
Cost
Brought forward 135.2 135.2 135.2
Business combinations (note 16) 3.2 - -
------------------------------------ ---- ------------------------ --------- -------------
138.4 135.2 135.2
----------------------------------------- ------------------------ --------- -------------
Impairment
Brought forward 1.4 - -
Impairment - 1.4 1.4
------------------------------------------ ------------------------ --------- -------------
1.4 1.4 1.4
----------------------------------------- ------------------------ --------- -------------
Closing 137.0 133.8 133.8
------------------------------------------------- ------------- --------- -------------
In accordance with UK-adopted international accounting
standards, goodwill is not amortised, but instead is tested
annually for impairment, or upon the existence of indicators of
impairment per IAS 36, and carried at cost less accumulated
impairment losses.
Management have reviewed the indicators of impairment per IAS 36
and do not believe that any have been triggered since 31 December
2022 and, as such, no impairment review has been carried out as at
30 June 2023. In line with the requirements of IAS 36, a full
impairment review will be performed during the second half of the
year.
10 INTANGIBLE ASSETS
Capitalised software
As at As at As at
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Opening net book value 1.6 1.5 1.5
Additions - 0.1 0.3
Amortisation (0.2) (0.1) (0.2)
Closing net book value 1.4 1.5 1.6
------------------------ --------- --------- -------------
Other intangible assets
As at As at As at
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Opening net book value 9.3 15.2 15.2
Additions - 1.3 1.3
Business combinations (note 16) 1.4 - -
Amortisation (2.6) (4.2) (7.2)
Closing net book value 8.1 12.3 9.3
--------------------------------- --------- --------- -------------
Total 9.5 13.8 10.9
--------------------------------- --------- --------- -------------
Other intangibles assets comprise of customer contracts and
relationships and, from 1 January 2023, brands.
11 PROPERTY, PLANT AND EQUIPMENT
As at As at As at
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Opening net book value 119.6 113.3 113.3
Additions 12.1 9.0 24.8
Business combinations (note 16) 1.0 - -
Depreciation (10.2) (9.0) (18.3)
Disposals (0.1) - (0.2)
Closing net book value 122.4 113.3 119.6
--------------------------------- --------- --------- -------------
CAPITAL COMMITMENTS
Orders placed for future capital expenditure contracted but not
provided for in the financial statements are shown below:
As at As at As at
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Property, plant and equipment 23.4 10.0 11.1
------------------------------- --------- --------- -------------
GBP13.8 million of the capital commitments relates to the new
HORECA site in Crawley.
12 RIGHT OF USE ASSETS
As at As at As at
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Opening net book value 31.7 35.5 35.5
Additions 10.4 0.8 2.0
Business combinations (note 16) 1.5 - -
Reassessment/modifications of assets
previously recognised - - 0.1
Depreciation (3.1) (3.1) (5.9)
Closing net book value 40.5 33.2 31.7
-------------------------------------- --------- --------- -------------
13 TEXTILE RENTAL ITEMS
As at As at As at
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Opening net book value 63.8 48.4 48.4
Additions 29.7 26.2 57.4
Business combinations (note 16) 0.5 - -
Depreciation (25.2) (17.8) (39.3)
Special charges (1.5) (1.5) (2.7)
Closing net book value 67.3 55.3 63.8
--------------------------------- --------- --------- -------------
14 POST-EMPLOYMENT BENEFIT OBLIGATIONS
The Group has applied the requirements of IAS 19, 'Employee
Benefits' to its employee pension schemes and post-employment
healthcare benefits.
In the half year to 30 June 2023, deficit recovery payments of
GBP0.9 million were paid by the Group to the defined benefit scheme
( June 2022 : GBP0.9 million; December 2022: GBP1.9 million).
Following discussions with the Group's appointed actuary, a
re-measurement gain of GBP1.6 million has been recognised in the
half year to 30 June 2023. The improvement in the position is
mainly driven by an increase in the discount rate assumption since
31 December 2022, offset to a lesser extent by an increase in the
assumed rate of inflation.
The post-employment benefit (obligation) / asset and associated
deferred income tax asset / (liability) thereon are shown
below:
As at As at As at
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Post-employment benefit (obligation)
/ asset (7.8) 7.0 (10.2)
Deferred income tax asset / (liability)
thereon 1.9 (1.8) 2.6
----------------------------------------- ---------- ---------- --------------
(5.9) 5.2 (7.6)
----------------------------------------- ---------- ---------- --------------
The reconciliation of the opening gross post-employment benefit
obligation to the closing gross post-employment benefit
(obligation) / asset is shown below:
As at As at As at
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Opening post-employment benefit obligation (10.2) (2.1) (2.1)
Notional interest (0.2) - -
Employer contributions 0.9 0.9 1.9
Re-measurement gains / (losses) 1.6 8.1 (10.0)
Utilisation of healthcare provision 0.1 0.1 -
---------------------------------------------- ---------- ---------- --------------
Closing post-employment benefit (obligation)
/ surplus (7.8) 7.0 (10.2)
---------------------------------------------- ---------- ---------- --------------
Post-employment benefit assets / (obligations) are comprised of
the following balance sheet amounts:
As at As at As at
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Post-employment benefit assets (Non-current
assets) - 8.0 -
Post-employment benefit obligations (Non-current
liabilities) (7.8) (1.0) (10.2)
(7.8) 7.0 (10.2)
-------------------------------------------------- --------- --------- -------------
Post-employment benefit assets related to the defined benefit
pension scheme in the half year to 30 June 2022.
15 SHARE CAPITAL
Issued share capital is as follows:
Half year Half year Year ended
to to 31 December
30 June 30 June 2022
2023 2022
GBPm GBPm GBPm
Share capital at the start of the period 43.9 44.5 44.5
Share buybacks (1.7) - (0.6)
------------------------------------------ ---------- ---------- -------------
Share capital at the end of the period 42.2 44.5 43.9
------------------------------------------ ---------- ---------- -------------
In September 2022, the Group commenced a share buyback programme
to repurchase up to GBP27.5 million (excluding expenses) of its own
shares. During the half year to 30 June 2023, 17,047,238 (June
2022: nil, December 2022: 6,222,227) ordinary shares with a total
nominal value of GBP1,704,724 (June 2022: GBPnil, December 2022:
GBP622,223) were bought back by the Company for a total
consideration, including transaction costs, of GBP19.7 million
(June 2022: GBPnil; December 2022: GBP5.7 million). In cash terms,
GBP19.8 million was expended during the half year to 30 June 2023,
being GBP19.7 million relating to ordinary shares repurchased in
the half year to 30 June 2023, together with a further GBP0.1
million relating to 116,934 ordinary shares which were repurchased
in the year ended 31 December 2022 but not settled until post year
end. The total shares repurchased as part of the share buyback
programme represents 5.2% of the Company's share capital in issue
prior to commencement of the share buyback programme.
16 BUSINESS COMBINATIONS
On 13 February 2023, the Group acquired 100% of the share
capital of Regency Laundry Limited ('Regency') for a net
consideration of GBP5.3 million (being gross consideration of
GBP5.75 million adjusted for normalised working capital, cash and
debt like items) plus associated fees. Since acquisition, Regency
has generated a profit of GBP0.3 million on revenue of GBP2.5
million. Had the business been acquired at the start of the period
it is estimated that profit of GBP0.3 million would have been
generated on revenue of GBP3.1 million.
The provisional fair value of assets and liabilities acquired
are as follows:
Regency
GBPm
Intangible assets - Goodwill 3.2
Intangible assets - Customer
contracts and brands 1.4
Property, plant and equipment 1.0
Right of use assets 1.5
Textile rental items 0.5
Trade and other receivables 0.8
Cash and cash equivalents 0.2
Trade and other payables (1.1)
Borrowings (0.2)
Lease liabilities (1.6)
Deferred income tax liability (0.4)
Net consideration 5.3
----------------------------------- --------
Goodwill represents the expected benefits to the wider Group
arising from the acquisition together with deferred income tax
arising from the recognition of the intangible asset for customer
contracts and brands.
The cash flows in relation to business acquisition activity are
summarised below:
Half year Half year Year ended
to to 31 December
30 June 30 June 2022
2023 2022
GBPm GBPm GBPm
Consideration paid for acquisitions
in the period (5.3) - -
Cash and cash equivalents acquired 0.2 - -
Costs in relation to business acquisition
activity (0.2) - -
(5.3) - -
------------------------------------------ ---------- ---------- -------------
In the half year to 30 June 2023, costs in relation to business
acquisition activity were GBP0.3 million, of which GBP0.2 million
has been paid within the period.
17 BORROWINGS
At 30 June 2023, borrowings were secured and drawn down under a
committed facility dated 8 August 2022. The facility comprises a
GBP85.0 million rolling credit facility (including an overdraft)
which runs to August 2026 with a one-year extension option and a
further option, both subject to bank consent, to increase the
facility by up to an additional GBP50.0 million. The margin on the
facility, which is determined based upon the Group's leverage
ratio, ranges between 1.45% and 2.45% and was 1.45% for the period
to 30 June 2023.
During the period, individual tranches were drawn down, in
sterling, for periods of up to three months at SONIA rates of
interest , plus the applicable margin.
Amounts drawn under the revolving credit facility have been
classified as either current or non-current depending upon when the
loan is expected to be repaid.
Borrowings are stated net of unamortised issue costs of GBP0.6
million (30 June 2022: GBPnil; 31 December 2022: GBP0.5
million).
18 ANALYSIS OF NET DEBT
Net debt is calculated as total borrowings net of unamortised
bank facility fees, less cash and cash equivalents. Non-cash
changes represent the effects of the recognition and subsequent
amortisation of fees relating to the bank facility, changing
maturity profiles, debt acquired as part of an acquisition and the
recognition of lease liabilities entered into during the
period.
At
1 At 30
January Cash Non-cash June
June 2023 2023 Flow Changes 2023
GBPm GBPm GBPm GBPm
Debt due within one year 0.2 0.3 (0.1) 0.4
Debt due after more than
one year (14.7) (24.9) (0.2) (39.8)
Lease liabilities (34.3) 2.9 (11.8) (43.2)
----------------------------- --------- ------- ----------- -------
Total debt and lease
financing (48.8) (21.7) (12.1) (82.6)
Cash and cash equivalents 0.8 (1.9) - (1.1)
----------------------------- --------- ------- ----------- -------
Net debt (48.0) (23.6) (12.1) (83.7)
----------------------------- --------- ------- ----------- -------
At 1 At 30
January Cash Non-cash June
June 2022 2022 Flow Changes 2022
GBPm GBPm GBPm GBPm
Debt due within one year 0.1 - (0.1) -
Debt due after more than
one year (18.0) (3.0) - (21.0)
Lease liabilities (37.8) 2.8 (0.8) (35.8)
--------------------------------- --------- ------ --------- -------
Total debt and lease financing (55.7) (0.2) (0.9) (56.8)
Cash and cash equivalents (4.4) 3.5 - (0.9)
--------------------------------- --------- ------ --------- -------
Net debt (60.1) 3.3 (0.9) (57.7)
--------------------------------- --------- ------ --------- -------
At 1 At 31
January Cash Non-cash December
December 2022 2022 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 (37.8) 5.6 (2.1) (34.3)
--------------------------------- --------- ------ ----------- ----------
Total debt and lease financing (55.7) 9.3 (2.4) (48.8)
Cash and cash equivalents (4.4) 5.2 - 0.8
--------------------------------- --------- ------ ----------- ----------
Net debt (60.1) 14.5 (2.4) (48.0)
--------------------------------- --------- ------ ----------- ----------
18 ANALYSIS OF NET DEBT (continued)
The cash and cash equivalents figures are comprised of the
following balance sheet amounts:
As at
30 As at As at
June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Cash (Current assets) 6.0 7.6 6.1
Overdraft (Borrowings, Current liabilities) (7.1) (8.5) (5.3)
(1.1) (0.9) 0.8
--------------------------------------------- ------ --------- ---------------
Lease liabilities are comprised of the following balance sheet
amounts:
As at
30 As at As at
June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Amounts due within one year (Lease liabilities,
Current liabilities) (5.1) (5.1) (5.1)
Amounts due within one year (Lease liabilities,
Non-current liabilities) (38.1) (30.7) (29.2)
(43.2) (35.8) (34.3)
------------------------------------------------- ------- --------- -------------
19 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Half Half Year ended
year to year 31 December
30 June to 2022
2023 30 June
2022
GBPm GBPm GBPm
(Decrease) / increase in cash in the
period (1.9) 3.5 5.2
(Increase) / decrease in debt and lease
financing (21.7) (0.2) 9.3
--------------------------------------------- --------- --------- -------------
Change in net debt resulting from cash
flows (23.6) 3.3 14.5
Debt acquired through business combinations (1.8) -
(note 16) -
Lease liabilities recognised during
the period (10.2) (0.8) (2.1)
Movement in unamortised issue costs
of bank loans (0.1) (0.1) (0.3)
Movement in net debt during the period (35.7) 2.4 12.1
Opening net debt (48.0) (60.1) (60.1)
--------------------------------------------- --------- --------- -------------
Closing net debt (83.7) (57.7) (48.0)
--------------------------------------------- --------- --------- -------------
20 RELATED PARTY TRANSACTIONS
Transactions during the period between the Company and its
subsidiaries, which are related parties, have been conducted on an
arm's length basis and eliminated on consolidation. Full details of
the Group's other related party relationships, transactions and
balances are given in the Group's Annual Report and Accounts for
the year ended 31 December 2022. There have been no material
changes in these relationships in the half year to 30 June 2023 or
up to the date of this Report.
21 CONTINGENT LIABILITIES
The Group operates from a number of sites across the UK. Some of
the sites have operated as laundry sites for many years and
historic environmental liabilities may exist. Such liabilities are
not expected to give rise to any significant loss.
The Group has granted each of its banks and the Trustee of the
Pension Scheme (the 'Trustee') security over the assets of the
Group. The priority of security is as follows:
-- first ranking security for GBP28.0 million to the Trustee
ranking pari passu with up to GBP155.0 million of bank liabilities;
and
-- second ranking security for the balance of any remaining
liabilities to the Trustee ranking pari passu with any remaining
bank liabilities.
During the period of ownership of the Facilities Management
division the Company had given guarantees over the performance of
contracts entered into by the division. As part of the disposal of
the division the purchaser has agreed to pursue the release or
transfer of obligations under the Parent Company guarantees and
this is in process. The sale and purchase agreement contains an
indemnity from the purchaser to cover any loss in the event a claim
is made prior to release. In the period until release the purchaser
is to make a payment to the Company of GBP0.2 million per annum,
reduced pro rata as guarantees are released. Such liabilities are
not expected to give rise to any significant loss.
22 EVENTS AFTER THE REPORTING PERIOD
On 31 August 2023, the Group acquired the entire issued share
capital of Harkglade Limited, together with its subsidiaries Celtic
Linen Limited and Millbrook Linen Limited (together, 'Celtic
Linen'), f or a cash consideration of EUR31.5 million (GBP27.1
million) on a debt free cash free basis, subject to a locked box
mechanism and a normalised level of working capital.
Celtic Linen services the Republic of Ireland's Healthcare and
Hotel, Restaurant and Catering ('HORECA') sectors; it is the
largest linen supplier to the Republic of Ireland's Healthcare
sector and is the second largest linen supplier to the HORECA
sector. The transaction is expected to be immediately earnings
enhancing and, in addition to collaboratively sharing best practice
across the enlarged Group, allows us to explore operational
synergies with our Northern Ireland based business, Lilliput.
Celtic Linen's revenue, adjusted EBITDA and loss before taxation
(after finance costs of EUR1.5 million), as set out in Harkglade
Limited's audited consolidated financial statements for the year
ended 1 January 2023, was EUR29.0 million, EUR4.6 million and
EUR(0.9) million respectively. Celtic Linen's gross assets as at
the same date amounted to EUR16.0 million, of which EUR15.3 million
were tangible.
There have been no other events that require disclosure in
accordance with IAS10, 'Events after the balance sheet date'.
23 PRINCIPAL RISKS AND UNCERTAINTIES
Approach to Risk Management
The Board has overall accountability for ensuring that risk is
effectively managed across the Group and, on behalf of the Board,
the Audit Committee coordinates and reviews the effectiveness of
the Group's risk management process.
Risks are reviewed by all of our businesses on an ongoing basis
and are measured against a defined set of likelihood and impact
criteria. This is captured in consistent reporting formats enabling
the Audit Committee to review and consolidate risk information and
summarise the principal risks and uncertainties facing the Group.
Wherever possible, action is taken to mitigate, to an acceptable
level, the potential impact of identified principal risks and
uncertainties.
The Board formally reviews the most significant risks facing the
Group at its March and August meetings, or more frequently should
new matters arise. Throughout 2023 to date, the overall risk
environment remained largely unchanged from that reported within
the Group's 2022 Annual Report.
Risk Appetite
The Board interprets appetite for risk as the level of risk that
the Group is willing to take in order to meet its strategic goals.
The Board communicates its approach to, and appetite for, risk to
the business through the strategy planning process and the internal
risk governance and control frameworks. In determining its risk
appetite, the Board recognises that a prudent and robust approach
to risk assessment and mitigation must be carefully balanced with a
degree of flexibility so that the entrepreneurial spirit which has
greatly contributed to the success of the Group is not inhibited.
Both the Board and the Audit Committee remain satisfied that the
Group's internal risk control framework continues to provide the
necessary element of flexibility without compromising the integrity
of risk management and internal control systems.
Emerging Risks
The Board has established processes for identifying emerging
risks, and horizon scanning for risks that may arise over the
medium to long term. Emerging and potential changes to the Group's
risk profile are identified through the Group's risk governance
frameworks and processes, and through direct feedback from
management, including changing operating conditions, market and
consumer trends.
Principal Risks and Uncertainties
The principal risks and uncertainties affecting the Group are
summarised below:
* Economic and Political Conditions * Health & Safety
* Cost Inflation * Compliance and Fraud
* Failure of Strategy * Insufficient Processing Capacity
* Recruitment, Retention and Motivation of Employees * Customer Sales and Retention
* Loss of a Processing Facility * Information Systems and Technology
* Competition and Disruption * Climate Change and Energy Costs
* Pandemic or Other National Crisis
Full details of the above risks, together with details on how
the Board takes action to mitigate each risk, were provided in our
2022 Annual Report. These risks and uncertainties do not comprise
all of the risks that the Group may face and are not necessarily
listed in any order of priority. Additional risks and uncertainties
not presently known to the Board, or deemed to be less material,
may also have an adverse effect on the Group.
In accordance with the provisions of the UK Corporate Governance
Code, the Board has taken into consideration the principal risks
and uncertainties in the context of determining whether to adopt
the going concern basis of preparation and when assessing the
future prospects of the Group.
24 PUBLISHED FINANCIAL STATEMENTS
There is no regulatory requirement to send out half-yearly
reports to all Shareholders or to advertise the content in a
national newspaper. In order to reduce costs, the Company has taken
advantage of this reporting regime and no longer publishes
half-yearly reports for individual circulation to Shareholders.
Information that would normally be included in a half-yearly report
is made available on the Company's website at www.jsg.com .
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
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END
IR DZLFBXKLBBBL
(END) Dow Jones Newswires
September 05, 2023 02:00 ET (06:00 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
