Final Results
Johnson Service Group PLC
11 March 2004
11 March 2004
JOHNSON SERVICE GROUP PLC
PRELIMINARY RESULTS FOR THE 52 WEEKS TO 27 DECEMBER 2003
2003 was a year of real progress and achievement, as changes and improvements
identified in our major strategic review began to be implemented. Operations
generating annual turnover of some £29m were sold for a total consideration of
£28.7m, and £25.9m was spent on businesses with annualised sales of over £55m
and superior growth prospects.
HIGHLIGHTS
• Total turnover was £231.6m (2002: £219.2m).
• Adjusted operating profit (excluding goodwill amortisation) was £27.1m
(2002: £26.3m). Operating profit was £22.1m (2002: £21.6m).
• Adjusted pre-tax profit (excluding goodwill amortisation and exceptional
items) up 10% at £23.1m (2002: £21.0m).
• Adjusted EPS increased by 7.9% to 28.7p (2002: 26.6p).
• After charging £8.4m (2002: £1.3m) in respect of exceptional items relating
to the disposal of businesses pre-tax profit was £9.7m (2002: £15.0m).
• Net debt reduced by £18.5m to £43.4m as at December 2003 (December 2002:
£61.9m).
• Acquisitions performing in line with expectations.
• Acquisition of Johnson Workplace Management to broaden our services
offering.
• Total dividend for the year maintained at 17.6p (2002:17.6p).
Simon Sherrard, Chairman, Johnson Service Group PLC, said: 'The strategic
changes we have made over the last year leave Johnson Service Group with
stronger market positions and better growth prospects than it enjoyed at the
start of 2003.'
'We have every opportunity for success in both these traditional core
activities, while in facilities management and corporate hospitality we see real
and significant growth potential. We therefore believe that the Group will
achieve a satisfactory outcome in the current year.'
Enquiries:
Johnson Service Group PLC
Stuart Graham, CEO Tel: 020 7796 4133 on Thursday 11 March 2004 only
Mike Sutton, CFO thereafter on 0151 933 6161
Hudson Sandler Limited
Michael Sandler Tel: 020 7796 4133
Sandrine Boussard
James Benjamin
CHAIRMAN'S STATEMENT
I am pleased to report that 2003 was a year of real progress and achievement for
the Johnson Service Group, as we began to implement the changes and improvements
identified in our major strategic review. We sold operations generating annual
turnover of some £29m for a total consideration of £28.7m, and spent £25.9m on
businesses with annualised sales of over £55m and superior growth prospects. In
the process we extended our range of services to facilities management, a
business to which our management and culture can add value and has the potential
to become substantial in the future. We again strengthened our management,
improved our systems and continued to invest in all our established activities
with the aim of eventually returning our traditional textile-related businesses
to growth in both revenue and profitability.
Financial results
Underlying turnover, which excludes costs recharged to customers in the
Facilities Management business, was £219.6m (2002:£219.2m).Total turnover was
ahead of the previous year at £231.6m (2002: £219.2m).
Operating profit was 2.3% ahead at £22.1m (2002: £21.6m) and adjusted operating
profit (which excludes goodwill amortisation) was 3.0% ahead at £27.1m (2002:
£26.3m).
Pre-tax profit was £9.7m (2002: £15.0m), after charging £8.4m (2002: £1.3m) in
respect of exceptional items relating to the disposal of businesses, and
therefore fully diluted earnings per share were 12.2p (2002: 16.2p).
Adjusted pre-tax profit (which excludes goodwill amortisation and exceptional
items) was 10.0% ahead at £23.1m (2002: £21.0m) and adjusted fully diluted
earnings per share (which also excludes a tax credit relating to a non-recurring
prior period item) were 28.7p (2002: 26.6p), an increase of 7.9%.
Free cash flow generated from operations remained strong at £25.2m (2002:
£32.1m) and this, combined with a net inflow of cash from acquisitions and
disposals during the year, resulted in a reduction of net debt from £61.9m at
December 2002 to £43.4m at December 2003.
The interest charge reduced accordingly to £4.0m and was covered 6.7 times by
adjusted operating profit.
Dividend
The Board is recommending a second interim dividend, to be confirmed as final,
of 13.6p per share. This, together with the maintained interim dividend of 4.0p
paid in October, makes a total for the year of 17.6p, the same as in 2002. The
dividend is covered 1.6 times by adjusted earnings per share.
Strategic developments
Our policy has been to sell underperforming businesses and those whose potential
we are not equipped to realise within an acceptable timescale. This led to the
successful disposal in August of our Irish textile rental business Connacht
Court Group, the business and assets of Johnson Washroom Services, and the
textile rental operation in Northern Ireland.
At the same time we acquired businesses that strengthened or complemented our
existing core activities, and enhanced the potential to create value for our
shareholders in the longer term. In drycleaning, we have started to address
our long-standing under-representation in London and the South by the
acquisition in May of the distinctive Jeeves of Belgravia chain and the purchase
in October of the retail operations of Brooks Service Group for integration with
Johnsons Drycleaners. Also in October we acquired the Jeeves International
franchising business, and we intend to reinvigorate and develop this prestigious
brand both in the UK and overseas.
The purchase in October of the facilities management business of Chesterton
International plc enabled us to create a new division, Johnson Workplace
Management, which has an innovative approach to the business in a very large and
growing market place. In December we acquired Alex Reid Limited, a supplier to
the Group, providing vertical integration synergies and an attractive
distribution route for the environmentally friendly GreenEarth(R) cleaning
process, for which we acquired the exclusive licence for the UK and Ireland
during the year.
The acquisition, also in December, of Jongor North Limited and the trade and
assets of Jongor Events Limited, together now rebranded as Johnson Hospitality
Services, added to the range of products and services we provide to the
corporate hospitality sector. This gives us the opportunity to increase our
share of this growing market and will deliver integration benefits with the
mainstream activities of Stalbridge.
The acquisitions referred to above were largely in the latter part of the year
and therefore the full benefit of the annualised turnover and profit will only
be included in the results for 2004.
Operations
The major challenge within our core activities has been to address the
disappointing performance of Johnsons Apparelmaster. Although it continued to
suffer the cumulative effects of poor sales and customer retention over recent
years, during the second half we began to see the benefits of our actions to
strengthen management, rationalise operations, and invest in improved customer
service and more effective selling. This should enable us to impact on the
decline of the business during 2004, and create a platform for future
stability. The specialist Stalbridge Linen Services and CCM businesses
continued to perform exceptionally well, while our drycleaning operations
achieved creditable improvements in sales and profitability, and we began the
roll-out of the GreenEarth(R) cleaning system. The Group Chief Executive and
our divisional Managing Directors provide a fuller commentary on trading and
other developments in the following Review of Operations.
The Board
While it falls to me to report on 2003, the Group was chaired throughout this
year of important progress by John Hancox, who retired on 27 December after 12
years as a Director, the latter six as Chairman. We are grateful to him for his
contribution over these many years and wish him well in the future.
As previously reported, David Toon, Managing Director of our Textile and
Hospitality Services Division since November 2002, was appointed to Group Board
in May 2003. We were also pleased to welcome Baroness Wilcox to the Board as an
additional Non-executive Director in October 2003. We are already benefiting
from their respective contributions.
People
The evolution of the company is creating challenges as well as opportunities for
Johnson employees at every level throughout the Group. On behalf of my
colleagues on the Board, I should like to thank them all for their commitment
and the contribution they have made during the year.
Outlook
The strategic changes we have made over the last year leave Johnson Service
Group with stronger market positions and better growth prospects than it enjoyed
at the start of 2003. Although textile rental will remain under pressure from
the decline in the country's traditional manufacturing base, we have put in
place the right management, systems and culture to handle these changes
successfully, and to build a stronger business. Drycleaning remains dependent on
discretionary spending by the consumer but is being successfully positioned to
target busier locations, with an increased presence in the South, and has a
distinctive approach to both customer service and technology. We believe that
we have every opportunity for success in both these traditional core activities,
while in facilities management and corporate hospitality we see real and
significant growth potential. We therefore believe that the Group will achieve
a satisfactory outcome in the current year.
Simon Sherrard
Chairman
11 March 2004
CHIEF EXECUTIVE'S REVIEW OF OPERATIONS
Our strategic review of the Group identified a significant number of challenges,
which were prioritised and tackled systematically during the year under review.
Major changes have been made in the make-up of the business, through disposals
of underperforming operations and acquisitions designed to complement our
established activities and give us access to faster-growing markets. We have
significantly strengthened operational and financial management throughout our
businesses, improved our systems and made progress in developing the right
values and culture to facilitate future growth. All our operations have
benefited from targeted capital investment, while maintaining their
traditionally strong cash generating characteristics and enhancing the overall
financial position of the Group.
ACQUISITIONS AND DISPOSALS
As the Chairman has noted, we acted decisively to eliminate businesses that did
not satisfy our strategic or performance criteria, to strengthen our core
textile and hospitality services and drycleaning operations, and to improve the
long term growth potential of the Group. During 2003 we realised £28.7m from
disposals and were able to reinvest £23.1m in acquisitions, in cash terms.
Our persistently underperforming textile rental businesses in Ireland were sold
after management action to enhance their value by improving sales performance
and reducing their cost base. We were also able to achieve an attractive price
for our shareholders by selling the Johnson Washroom Services business, which
was identified as a candidate for disposal during our review in view of the time
and investment it would require to achieve critical mass and maximise
profitability.
Within our core operating areas, the acquisitions of Jeeves of Belgravia and the
retail drycleaning division of Brooks Service Group strengthened our
representation in drycleaning in London and the South. The purchase of Jeeves
and its international franchising arm has also given us an excellent, premium
brand with development potential. The purchase of Alex Reid, the UK's leading
clothes care, laundry and related products supplier, provides both integration
and marketing benefits. Acquisitions also enabled us to create a new brand,
Johnson Hospitality Services, which is now the market leader in the hire of
catering equipment and hospitality furniture. This enhances the established
strength of Stalbridge which is the leading linen hire provider in this sector,
and affords significant potential synergies.
In addition, the review identified the need to develop the Group beyond
textile-related services to give us access to greater long term growth
opportunities. The creation of Johnson Workplace Management has added an
important new division to the Group with a unique business model and exciting
prospects.
STRATEGY AND MANAGEMENT
We aim to be a focused support services Group with a compact head office
providing overall strategic direction and the essential financial, systems and
control functions to support empowered management teams in each of our operating
companies. We have been successful in retaining all the key senior management
we required to implement the decisions taken, greatly strengthened the teams and
systems in each of our operations, and filled many of the skill gaps identified
last year. Each of our companies has been repositioned and refocused, with a
particular emphasis on developing new customer service functions and
strengthening their sales and marketing capabilities. All have also been
provided with long term investment capital at a pace that can be sensibly
handled, while ensuring that the cost base of each is lowered to maintain
competitiveness and preserve cash generation. At the centre, we have reviewed
and overhauled the Group's banking facilities and improved efficiency by
outsourcing many services, including payroll, tax and pensions administration.
All our actions form part of the well-planned and well-documented process of
delivery following the strategic review, the progress of which is regularly and
systematically assessed.
In the following pages, the progress of each of our operations is reviewed by
the Managing Directors charged with the delivery of our strategic and
performance targets.
TEXTILE AND HOSPITALITY SERVICES
Johnsons Apparelmaster, the country's market leader in the laundering and rental
of workplace clothing, continued to feel the effects of the contraction of
manufacturing and attrition of its wearer base within existing accounts. This
decline, which was particularly marked in the Northern and Midland regions, was
reflected in a 7.8% reduction in turnover and further pressure on operating
margins.
Our response to these market forces has been clear and robust, with an emphasis
on further reducing our cost base through rationalisation and rigorous cost
control, while investing to develop our sales and customer service capabilities.
Plants were closed in Saltburn and Bootle, and delivery routes rationalised
throughout the business to improve efficiency. We also made a number of
investments in plant and equipment to reduce operating costs, including
expenditure of over £1 million at our Manchester facility.
We strengthened our management team with the appointment of Mark Cosh as Sales
Director and Gary Collis as Head of IT. Reorganisation of our national accounts
team contributed to an improved performance in the second half, including the
achievement of record monthly sales in December, and we also raised the
productivity of our national call centre. We see significant potential to
differentiate ourselves from our competitors through investment in IT systems to
support our selling functions as well as to ensure consistent, standardised
operating procedures.
Our focus on growing markets such as the food processing industry has led to a
number of valuable account gains including Northern Foods, Thorntons and the
Soft Drinks Division of Princes Limited. The 'Masterplan' brand, providing a
comprehensive and flexible range of workwear solutions, is achieving increasing
recognition in the market place, contributing to an increase in direct sales of
garments during the second half. The creation of a more cohesive national brand
and the application of common standards and systems has been accompanied by a
successful focus on developing a unified and success-orientated culture
throughout the business.
I believe that the actions taken should lead to greater stability during the
current year. We continue our programmes to improve efficiency, with
appropriate matched investment, and will maintain our focus on marketing and
customer service. Whilst the market remains highly competitive we aim to build a
solid platform on which to achieve renewed organic sales growth and improved
profitability in the future.
CCM, our garment sourcing business, enjoyed a year of strong growth as it
completed the implementation of its global procurement strategy and further
reduced its own dependence on UK manufacturing. We successfully implemented the
major Arco contract signed at the end of 2002, and look forward to a further
expansion of our volumes with this partner. Significant progress was also made
in developing our NHS market share, by adding to the number of Trusts we serve
and expanding our wearer base within existing accounts. Strengthened design and
sales teams aided our drive into new markets including that for more
image-conscious retail workwear, with the award at the end of the year of a
major contract to design and supply uniforms for Thorntons' shop staff. Late in
2003 we also completed the acquisition of a small business specialising in
protective workwear, which will expand CCM's range and give us new export
opportunities. Under new Managing Director Eddie Shannon, who joined the
company in December, CCM is well placed to continue its successful development
in the current year.
Stalbridge Linen Services maintained its strong growth record as Britain's
leading supplier of premium linen hire services, targeting prestige hotels,
restaurants and contract caterers. With five processing locations now open
across the country, we are finally well placed to serve customers nationwide and
are achieving growing brand awareness in this buoyant sector. During the year
we achieved a three year contract extension with our largest customer, and
gained significant numbers of new hotel accounts. This was aided by an
expansion of our sales force during the second half. We continued our programme
of product development and improvement with the launch of 'Permagard', a
protective antimicrobial finish for garments used in food preparation areas. A
new Managing Director, Mike Hill, joined in January 2004 to drive continued
delivery of our three year strategic plan for this business, and to exploit
further opportunities created by our expansion into the closely allied field of
Hospitality Services,
Johnson Hospitality Services was created in December 2003 through the
acquisition of Jongor North and the trade and assets of Jongor Events Limited,
and is now the UK market leader in the hire of catering equipment, hospitality
furniture and related items to major sporting and other large, spectator events.
Stalbridge is already the leading supplier of linen to such venues, so this
was a wholly appropriate acquisition enabling us to extend our product and
service offering to established customers, and also to achieve valuable
synergies in distribution and administration. The market for hospitality
services is highly fragmented, and this strategic move gives us the opportunity
to build a truly national business. Under Managing Director Rupert Higgin, who
joined us through the acquisition, the JHS team will be working closely
alongside Stalbridge to achieve effective integration of account management and
back office functions during 2004.
David Toon
Managing Director, Textile and Hospitality Services
FACILITIES MANAGEMENT AND SOURCING
Johnson Workplace Management ('JWM') was created in October 2003 through the
acquisition of the UK property and facilities management activities of
Chesterton International plc. The business addresses a growing market place and
manages over 200 manned locations, covering some 6 million square feet, for a
range of blue-chip corporate customers and Government departments, with major
clients including Cable & Wireless, Fujitsu, Invesco, H.M. Treasury, Inverness
Airport and St George's London Healthcare Trust, which is our first NHS Trust.
Typical contracts are for periods of three to five years, though the expansion
of the Public Finance Initiative (PFI/PPP) has created opportunities for total
facilities management over a longer time-scale of up to 15 - 30 years. We
offer a fully comprehensive range of services which includes the strategic
review of property portfolios and the development of space management and cost
reduction programmes. In addition, we can offer our clients added-value support
services such as energy management, procurement, health and safety audits and
compliance, and the provision of centralised, off-site switchboards
incorporating help desk facilities.
The fundamental objective of facilities management is to ensure that a workplace
is maintained at its optimum efficiency, while providing a safe and comfortable
environment to an agreed service standard. The JWM business model is unique in
focusing on management and the property aspect rather than the direct provision
of low-value services, which are contracted out to a range of approved
suppliers. JWM itself employs the white collar 'front of house' staff at the
premises we manage, and supports them from a central account management and
customer service centre at Bracknell, backed up by smaller regional offices in
Manchester and Aberdeen. We believe that the quality of our people, and their
management/client-orientated culture, provide a real point of differentiation
from our competitors.
The business has enjoyed healthy recent growth in its management fee income and
undertaken a number of major projects, including the fitting out of the UK's
largest data centre for Fujitsu at Thurrock, which JWM is contracted to manage
until 2008. In addition, contracts are being negotiated for a five year FM
contract with a police authority and in a separate deal, a four year contract to
install integrated security systems with remote monitoring controls on 55
locations for an existing client.
Acquisition by the Johnson Group has finally given JWM a strong, knowledgeable
and stable owner that is committed to expansion of the business, both through
developing our service range and expanding our customer base. We are launching a
new Johnson Property and Asset Management Service that will combine the
expertise of our existing property company with that of JWM in the management of
the whole Group's property portfolio. The acquisition in December 2003 of
Environmental Pest Control added to our offering a high added-value specialist
service of the type that we are keen to provide directly to our customers, and
we will seek further bolt-on acquisitions of this type. In addition, we will
benefit from Group-wide investment in new IT and finance systems that will put
leading-edge technology at the service of our customers. This will enable us to
enhance our product offer in business process outsourcing, as well as improving
our own efficiency, capability and capacity.
Hamilton Comely
Managing Director, Johnson Workplace Management
Alex Reid, the UK's leading supplier of consumables to the clothes care sector,
was acquired in December 2003. The business distributes throughout the UK and
Ireland and serves a wide range of customers from small independent drycleaners
and launderettes to national chains and large industrial laundries. Its
products range from cleaning agents and specialist finishing treatments to
garment packaging and hangers. The business is a long-standing supplier to the
Johnson Group, and the acquisition provides scope for cost savings as well as
for the application of additional resources to maintain Alex Reid's record of
proactive technological and product development. Of equal importance, it
provides an immediate route to market for the innovative GreenEarth(R) cleaning
technology. The solvents and related products are already being distributed to
Johnsons Cleaners outlets in the UK as the system is rolled out, and a sales
strategy for third party customers is being developed. This will be tested
initially in Ireland and then rolled out across the UK.
Simon Moate
Director, Service Businesses and Corporate Strategy
DRYCLEANING
Johnsons Cleaners is the British market leader in drycleaning, with 528 branches
across the country at the end of 2003. The business benefited from the creation
of a new management structure late in 2002, and from the continued drive to
enhance convenience, customer service and marketing.
The acquisition in October of the retail drycleaning division of Brooks Service
Group added 38 branches in Southern and South West England, where Johnsons has
traditionally been under-represented, making this an excellent strategic and
geographic fit. It has also increased our presence in the important supermarket
sector through additional representation in Asda and Waitrose branches. We
expect to complete the rebranding of the acquired outlets to the Johnsons fascia
by the end of the first half of 2004, and to improve their performance through
application of our operating and service standards. Further expansion of our
presence in the South, including Greater London, remains important.
We continued to develop convenient drive-in branches, opening new units at
Congleton and Warrington. We also opened our first drop-off and collection
concession in the supermarket sector, in Asda WalMart Supercentre in Spondon,
Derby, and early trading has been encouraging.
We have recently strengthened our existing Tesco Clubcard partnership and agreed
a new service with Tesco, the UK's leading supermarket, to provide instore
drycleaning. This service will uniquely feature the GreenEarth(R)
environmentally friendly drycleaning process, which is currently being
introduced throughout Johnsons Cleaners nationally. The Johnson and Tesco
partnership starts on 12th March with the opening of the first unit in Pitsea.
Following this initial pilot, we expect to expand the service across Tesco
nationally.
During 2003 the Group secured the Master Licence for the GreenEarth(R) cleaning
process in the UK and Ireland, against intense competition. This is an
environmentally friendly, silicone based technology which offers an enhanced
product to the consumer without premium pricing. Following successful trials,
we began to roll out the process across our chain and now have over 60 branches
using the GreenEarth(R) system. We aim to extend this to 200 branches by the
end of the current year, and to complete conversion nationally during 2006.
Customer service was further enhanced through completion of our 'Cleanology'
initiative in March 2003, meaning that all branches have the benefit of advanced
ultrasonic technology to assist stain removal. Our central customer service
department in Rugby also extended its activities and now provides support to all
branches in handling customer enquiries and requests for technical advice. The
adjacent central processing unit has continued to perform well and has
successfully expanded its business with third party customers, notably in the
cleaning of suede and leather.
We are currently finalising a new EPOS system which will reinforce the 'Customer
First' philosophy. This will be installed during the remainder of 2004 and will
further improve our management information systems.
The Johnsons Priority Club has remained a most important marketing tool, now
with some 410,000 members. The introduction of a direct debit scheme has
improved retention and helped to increase overall membership. We and our
customers have also benefited from active participation as a partner in the
Tesco Clubcard scheme.
The progress achieved during 2003 gives us confidence that the strategy and
management now in place are capable of delivering growth in this business in
2004 and beyond.
David Bryant
Managing Director, Johnsons Cleaners UK
Jeeves of Belgravia, 'London's Finest Dry Cleaner', was acquired in May 2003,
and comprises 12 well-located retail units serving the West End and City,
together with a large specialist central processing unit. Jeeves is a respected
luxury brand offering a premium quality service to customers including Royal
households, haute-couture houses and a wide range of City and
bespoke-service-seeking individuals. The excellent reputation has proved
remarkably resilient despite a prolonged period of under-investment. We are now
addressing this through a regeneration programme, headed by Managing Director
Martin Sloots, that will include investment in IT and EPOS systems, store
refurbishments and sensitive updating of the brand design, packaging and
presentation. Two new central London outlets, and the relocation of our Harrods
concession to a superior site within the store, are planned for the spring of
2004.
Jeeves International, the worldwide franchising arm of the Jeeves brand, was
acquired in October 2003. It is currently represented in Hong Kong, New York,
Jakarta, Istanbul and Saudi Arabia, and we believe that the brand has
opportunities for growth worldwide, building on its rejuvenation in the UK. We
are close to reaching agreement to grant a new five year licence for the USA and
are exploring further potential developments in Europe, the Middle East, South
East Asia and Australia.
Simon Moate
Director, Service Businesses and Corporate Strategy
PEOPLE AND CULTURE
We are committed to the creation of a forward-thinking and positive culture in
which all our people are properly recognised and rewarded, and have the chance
to participate in our success. This must be done in a way which aligns the
interests of our employees with the delivery of outstanding customer service and
increasing shareholder value. Accordingly, we have introduced incentive schemes
across the Group and these are already fully operational for both senior and
middle management. Our aim now is to ensure that they are extended to staff at
all levels, so far as it is realistic and practical to do so.
THE COMMUNITY AND THE ENVIRONMENT
We remain acutely conscious of our social, ethical and environmental
responsibilities, and are continuing to progress the embedding of Corporate
Social Responsibility best practice into every aspect of our operations.
The Group Environmental Committee monitors risk across the Group and oversees
the implementation of plans to ensure that all our plants and facilities are
compliant with the relevant environmental management standards. Approximately
70% of the Johnsons Apparelmaster plants are currently compliant with ISO14001
European Environmental Management Systems Standards. The introduction of the new
GreenEarth(R) cleaning system will significantly enhance the environmental
friendliness of drycleaning operations, compared with the chlorinated solvents
currently in general use, since the process is based on siloxane which degrades
rapidly after use to harmless silica and does not bio-accumulate.
Johnsons Cleaners has continued to promote the return and re-use of hangers,
thereby supporting Macmillan Cancer Relief, and so helping both the community
and environment. In addition, the Johnson Group Cleaners Charity has continued
to support a range of local registered charities in the North West which are
targeted at improving the well-being of the sick and underprivileged.
THE FUTURE
The Johnson Service Group is moving towards two core activities: our traditional
businesses focusing on the common denominator of textiles and our new facilities
management operation. The latter has a very distinctive market position
focusing on property, resource and proactive management rather than
straight-forward commodity-orientated services, and its acquisition adds a new
dimension to the Group with significant growth potential. Our future
development will be within these two business streams, through organic
development, bolt-on and larger acquisitions. All such potential purchases will
be rigorously challenged to ensure that they are compatible with our business
model and satisfy all relevant internal and external valuation and performance
measures. We now have the skills in place to achieve successful integration.
We begin the new year with a clear strategy. To date we have accurately
delivered what we promised. I believe that we are well positioned across all
measurable criteria to build for the future a Group that is both profitable and
sustainable.
Emphasis will remain on strengthening and empowering our management across all
operating companies whilst the importance of achievement will be given even
greater recognition. Across our unique services portfolio, we will ensure a
continued focus on the user so that 'customer pull' rather than 'product push'
will drive our growth from now on. We shall continue affordable and
well-targeted investment in IT and operating infrastructure as we strengthen our
traditional core activities, laying firm foundations for the future.
Initiatives will also continue proactively within disciplines and geographics
that will support our business ambition. We have pioneered a number of new
products in the United Kingdom, both in drycleaning and the area of textile
fabrics. This will continue as we support our customers' activities and
distance ourselves from competitors, especially in textile rental.
Since becoming Chief Executive 18 months ago a great deal of activity has taken
place to both update and re-enforce the position and inherent strengths of the
Group as a whole. This will continue and we have no intention to become
discouraged by prevailing market circumstances. The main challenge remains to
exceed expectations wherever we can and ensure that the Johnson Service Group
remains at the forefront in all that it does.
In conclusion, I would like to thank my immediate colleagues, all our employees,
shareholders, customers and clients for their patience and continued support
through another testing, though much improved, period for the Company.
Stuart Graham
Chief Executive
11 March 2004
JOHNSON SERVICE GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Note 52 Weeks to Dec 52 Weeks to Dec
2003 2002
£m £m
1 TURNOVER
Continuing 192.3 193.0
Acquisitions 21.0 -
213.3 193.0
Discontinued 18.3 26.2
TOTAL TURNOVER 231.6 219.2
Costs recharged to customers (12.0) -
Turnover excluding costs recharged to customers 219.6 219.2
1 OPERATING PROFIT BEFORE GOODWILL AMORTISATION
Continuing 26.0 26.2
Acquisitions 0.4 -
26.4 26.2
Discontinued 0.7 0.1
TOTAL 27.1 26.3
Amortisation of goodwill (5.0) (4.7)
OPERATING PROFIT
Continuing 22.5 22.9
Acquisitions (0.1) -
22.4 22.9
Discontinued (0.3) (1.3)
TOTAL 22.1 21.6
2 EXCEPTIONAL ITEMS
Disposal of businesses (discontinued) (9.2) (1.3)
Profit on disposal of property (discontinued) 0.8 -
PROFIT ON ORDINARY ACITIVITIES BEFORE INTEREST 13.7 20.3
Net interest (4.0) (5.3)
PROFIT ON ORDINARY ACITIVITIES BEFORE TAXATION 9.7 15.0
4 Tax on profit on ordinary acitivities (2.8) (5.8)
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 6.9 9.2
5 Dividends (10.0) (10.0)
LOSS FOR THE FINANCIAL YEAR (3.1) (0.8)
3 ADJUSTED PROFIT BEFORE TAX EXCLUDING GOODWILL
AMORTISATION AND EXCEPTIONAL ITEMS 23.1 21.0
RATES OF DIVIDEND PER SHARE
Ordinary shares of 10p each:-
Interim - paid 4.0p 4.0p
Final - paid 13.6p
Final - proposed 13.6p
6 EARNINGS PER SHARE
BASIC 12.3p 16.3p
FULLY DILUTED 12.2p 16.2p
ADJUSTED EARNINGS PER SHARE (see note 6)
BASIC 28.9p 26.9p
FULLY DILUTED 28.7p 26.6p
JOHNSON SERVICE GROUP PLC
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
52 Weeks to Dec 52 Weeks to Dec
2003 2002
£m £m
Profit for the financial year 6.9 9.2
Charge for share options 0.1 -
Currency translation differences on foreign currency net investments 0.1 0.5
Total recognised gains and losses for the year 7.1 9.7
JOHNSON SERVICE GROUP PLC
CONSOLIDATED BALANCE SHEET
DECEMBER DECEMBER
2003 2002
£m £m
FIXED ASSETS
Intangible fixed assets 89.8 79.3
Tangible fixed assets:
Property, plant and equipment 64.2 76.3
Rental items 21.4 25.8
Total 85.6 102.1
Investments 0.4 0.4
175.8 181.8
CURRENT ASSETS
Stocks 8.8 7.2
Debtors: Amounts falling due within one year 47.7 32.3
Amounts falling due after more than one year 5.8 6.5
53.5 38.8
Cash at bank and in hand 2.2 0.6
64.5 46.6
CURRENT LIABILITIES
Creditors:
Amounts falling due within one year (71.0) (49.7)
NET CURRENT LIABILITIES (6.5) (3.1)
TOTAL ASSETS LESS CURRENT LIABILITIES 169.3 178.7
Creditors:
Amounts falling due after more than one year (49.1) (59.1)
PROVISIONS FOR LIABILITIES AND CHARGES (14.9) (12.1)
NET ASSETS 105.3 107.5
CAPITAL AND RESERVES
Called-up share capital 5.7 5.7
Share premium account 8.0 7.3
Revaluation reserve 8.5 9.9
Other reserves 2.1 2.1
Profit and loss account 81.0 82.5
EQUITY SHAREHOLDERS' FUNDS 105.3 107.5
The Preliminary Statement was approved by the Board of Directors on 11th March
2004.
JOHNSON SERVICE GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
Note 52 Weeks to Dec 52 Weeks to Dec
2003 2002
£m £m
7 NET CASH INFLOW FROM OPERATING ACTIVITIES 52.9 64.0
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Net interest paid (4.4) (4.8)
Issue costs of new bank loans (0.3) -
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE (4.7) (4.8)
Tax paid (6.9) (5.9)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Payments to acquire tangible fixed assets - property, plant and equipment (5.2) (8.3)
Receipts from sales of tangible fixed assets - property, plant and
equipment
4.1 2.5
Payments to acquire tangible fixed assets - rental items (19.8) (21.2)
Proceeds from tangible fixed assets - rental items withdrawn from
circulation 4.8 5.8
NET CASH OUTFLOW FOR
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (16.1) (21.2)
FREE CASH FLOW 25.2 32.1
8 ACQUISITIONS AND DISPOSALS
Payments to acquire businesses (37.3) (5.7)
Cash balances acquired with businesses 14.2 -
Receipts from disposal of businesses 29.0 -
Cash balances disposed with businesses (0.3) -
NET CASH INFLOW / (OUTFLOW) FROM ACQUISITIONS AND DISPOSALS 5.6 (5.7)
EQUITY DIVIDENDS PAID (10.0) (10.0)
CASH INFLOW BEFORE FINANCING 20.8 16.4
FINANCING
Issue of Ordinary share capital 0.7 0.5
Debt due in more than one year:
Loans repaid (62.4) (19.3)
New loans advanced 46.0 -
Capital element of payments under finance arrangements (0.6) (1.2)
NET CASH OUTFLOW FROM FINANCING (16.3) (20.0)
9 INCREASE/(DECREASE) IN CASH IN THE FINANCIAL YEAR 4.5 (3.6)
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1. Segmental Information - Analysis of Turnover, Operating Profit Before
Goodwill Amortisation and Profit Before Taxation
Turnover Turnover Excluding
Costs Recharged to
Customers
2003 2002 2003 2002
£m £m £m £m
CONTINUING
Textile and Hospitality Services 122.4 121.4 122.4 121.4
Facilities Management and Sourcing 17.4 - 5.4 -
Drycleaning 73.5 71.6 73.5 71.6
Total continuing 213.3 193.0 201.3 193.0
DISCONTINUED
UK Textile Rental 6.1 8.3 6.1 8.3
IR Textile Rental 12.2 17.9 12.2 17.9
Total discontinued 18.3 26.2 18.3 26.2
231.6 219.2 219.6 219.2
Operating Profit before Goodwill Profit before
Amortisation Taxation
2003 2002 2003 2002
£m £m £m £m
CONTINUING
Textile and Hospitality Services 18.0 18.9 14.6 15.7
Facilities Management and Sourcing 0.4 - 0.2 -
Drycleaning 8.0 7.3 7.6 7.2
Total continuing 26.4 26.2 22.4 22.9
DISCONTINUED
UK Textile Rental 0.3 0.1 1.5 (1.8)
IR Textile Rental 0.4 - (10.2) (0.8)
Total discontinued 0.7 0.1 (8.7) (2.6)
27.1 26.3 13.7 20.3
Interest (4.0) (5.3)
PROFIT BEFORE TAXATION 9.7 15.0
Turnover from continuing operations originates in the United Kingdom. There is
no material difference between turnover by origin and by destination.
Facilities management turnover comprises fees receivable and costs recharged to
customers where the relationship with the supplier of services is that of
principal. These costs, on which no margin is earned, have been shown
separately on the profit and loss account to aid interpretation of the business.
The segmental analysis now discloses Textile and Hospitality Services,
previously referred to as UK Textile Rental, Facilities Management and Sourcing
and Drycleaning to reflect the change in business activities of the Group during
the year.
On 11th August 2003 the Group disposed of its interest in the Ordinary share
capital of Connacht Court Group Ltd (CCG), which operated the Group's textile
rental business in the Republic of Ireland. On 12th August 2003 the Group
disposed of the business and specified assets of Johnsons Washroom Services Ltd
(JWS). On 17th October 2003 the Group disposed of its interest in the Ordinary
share capital of Central Laundries Ltd (Central), which operated the Group's
textile rental business in Northern Ireland. The results of CCG (IR Textile
Rental), JWS and Central (UK Textile Rental) for the period up to disposal and
the comparatives for the year ended December 2002 are shown under discontinued
operations.
NOTES TO THE PRELIMINARY ANNOUNCEMENT /Continued...
2. Exceptional Items
52 weeks to 52 weeks to
Dec 2003 Dec 2002
£m £m
Loss on disposal of CCG (10.1) -
Gain on disposal of JWS 4.6 -
Loss on disposal of Central (3.7) -
Loss on disposal of Northern Irish linen business - (1.3)
Loss on disposal of businesses (9.2) (1.3)
Gain on disposal of textile rental property 0.8 -
Total (8.4) (1.3)
3. Adjusted Profit Before Tax
The reconciliation of profit before tax and adjusted profit before tax is as
follows:-
52 Weeks to Dec 52 Weeks to Dec
2003 2002
£m £m
Profit on ordinary activities before tax 9.7 15.0
Add goodwill amortisation 5.0 4.7
Add exceptional items 8.4 1.3
Adjusted profit before tax 23.1 21.0
4. Taxation
52 Weeks to Dec 52 Weeks to Dec
2003 2002
£m £m
UK corporation tax charge for the period - continuing 5.8 6.8
Adjustment in relation to previous years - continuing (4.5) (0.6)
UK corporation tax - continuing 1.3 6.2
Overseas corporation tax in relation to previous years - discontinued - (0.2)
Current tax charge for the year 1.3 6.0
Origination and reversal of timing differences - continuing 0.8 (0.4)
Adjustment in relation to previous years - continuing 0.7 0.2
Deferred tax charge / credit for the year 1.5 (0.2)
Total charge for taxation 2.8 5.8
There is no charge to taxation on the exceptional items.
The adjustment to UK corporation tax in respect of previous years of £4.5m
includes £3.9m in relation to the agreement of specific, non-recurring matters
with the Inland Revenue.
5. Dividends
52 Weeks to 52 Weeks to
Dec 2003 Dec 2002
£m £m
Ordinary shares at 17.6p (2002: 17.6p) per share 10.0 10.0
On 24th October 2003 an interim dividend of 4p was paid on the Ordinary shares.
A proposed second interim dividend of 13.6p, to be confirmed as final, will be
paid on 4th May 2004 to Shareholders on the register of members on 2nd April
2004.
NOTES TO THE PRELIMINARY ANNOUNCEMENT /Continued...
6. Earnings Per Share
52 Weeks to Dec 52 Weeks to Dec
2003 2002
£m £m
Profit for the financial year 6.9 9.2
Add loss on exceptional items 8.4 1.3
Add goodwill amortisation 5.0 4.7
Less tax credit relating to prior periods (note 4) (3.9) -
Adjusted profit attributable to Ordinary Shareholders 16.4 15.2
Weighted average number of Ordinary shares 56,940,711 56,777,267
Fully diluted number of Ordinary shares 57,449,593 57,278,200
Basic earnings per share is calculated using the weighted average number of
shares in issue during the year, excluding those held by the ESOP, based on the
profit attributable to Ordinary Shareholders.
Adjusted earnings per share figures are given to exclude the effects of goodwill
amortisation and exceptional items, net of taxation, and in 2003, the
non-recurring tax credit relating to the agreement of specific matters in prior
periods and are considered to show the underlying results of the Group.
For diluted earnings per share, the weighted average number of Ordinary shares
in issue is adjusted to assume conversion of all dilutive potential Ordinary
shares. The Company has dilutive potential Ordinary shares arising from share
options granted to employees where the exercise price is less than the average
market price of the Company's Ordinary shares during the year.
7. Reconciliation of Operating Profit to Net Cash Inflow from
Operating Activities
52 Weeks to Dec 52 Weeks to Dec
2003 2002
£m £m
Operating profit 22.1 21.6
Depreciation 25.3 28.9
Amortisation of goodwill 5.0 4.7
Profit on sale of tangible fixed assets (0.7) -
Charge for share options 0.1 -
(Increase)/decrease in current assets (2.2) 5.4
Increase in creditors 1.3 0.4
Adjustment in respect of provisions and pensions 2.0 3.0
8. Acquisitions
Purchase of Businesses
Payments to acquire businesses 37.3 5.7
Cash balances acquired with businesses (14.2) -
Net cash consideration 23.1 5.7
Acquisitions were completed during the year for net cash consideration of
£23.1m, and deferred consideration and loan notes of £3.5m, generating goodwill
of £37.5m.
NOTES TO THE PRELIMINARY ANNOUNCEMENT /Continued...
9. Reconciliation of Net Cash Flow to Movement in Net Debt
52 Weeks to Dec 52 Weeks to Dec
2003 2002
£m £m
Increase/(decrease) in cash in year 4.5 (3.6)
Cash outflow on change in debt and lease financing 17.3 20.5
Change in net debt resulting from cash flows 21.8 16.9
Finance leases - new (1.1) -
Amortisation of issue costs of bank loans (0.1) (0.5)
Issue of loan notes (0.9) -
Loans and leases acquired with subsidiaries (0.1) (0.2)
Leases disposed with subsidiaries 0.3 -
Exchange movement (1.4) (1.1)
Movement in net debt in year 18.5 15.1
Opening net debt (61.9) (77.0)
Closing net debt (43.4) (61.9)
10. Analysis of Net Debt
At Acquisitions Disposals Other At
December Cash (Excluding (Excluding Non-cash Exchange December
2002 Flow Cash) Cash) Changes Movements 2003
£m £m £m £m £m £m £m
Cash in hand and
at bank 0.6 1.6 - - - - 2.2
Overdraft (2.9) 2.9 - - - - -
4.5
Debt due after more
than one year (59.0) 16.7 - - (1.0) (1.4) (44.7)
Finance leases (0.6) 0.6 (0.1) 0.3 (1.1) - (0.9)
17.3
(61.9) 21.8 (0.1) 0.3 (2.1) (1.4) (43.4)
Non-cash changes represent the effects of amortising issue costs relating to
bank loans (£0.1 million), loan notes issued in relation to an acquisition
(£0.9 million) and new finance leases.
11. Abridged Accounts
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 27th December 2003 or 28th December 2002,
but is derived from those accounts.
Statutory accounts for 2002 have been delivered to the Registrar of Companies
and those for 2003 will be delivered following the Company's Annual General
Meeting. The Auditors have reported on those accounts; their reports were
unqualified and did not contain a statement under s237(2) or (3) of the
Companies Act 1985.
12. Preliminary Announcement
A copy of this Preliminary Announcement is available on request to all
Shareholders by post from The Company Secretary, Johnson Service Group PLC,
Mildmay Road, Bootle, Merseyside L20 5EW. The Announcement can also be accessed
on the Internet at www.Johnsonplc.com.
13. Approval
The Preliminary Announcement was approved by the Board of Directors on 11th
March 2004.
This information is provided by RNS
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