Final Results

RNS Number : 4842C
Johnson Service Group PLC
08 March 2011
 



 

 

 

 

8 March 2011

 

Johnson Service Group PLC

 

Statement for the Financial Year ended 31 December 2010

 

Johnson Service Group PLC, the textile services and facilities management Group announces its preliminary results for the financial year ending 31 December 2010.

 

Overview

 

•     Adjusted Profit Before Tax up 18.9% to £14.5 million (2009: £12.2 million)

•     Continuing adjusted operating profit* increased by 4.6% to £18.3 million (2009: £17.5 million)

•     Net debt reduced to £59.5 million (2009: £67.7 million)

•     Net finance costs reduced to £3.8 million (2009: £5.7 million)

•     Continuing adjusted fully diluted earnings per share** up 20.6% to 4.1p (2009: 3.4p)

•     Final dividend proposed of 0.55 pence (2009: 0.5 pence), making 0.82 pence for full year (full year 2009: 0.75 pence)

 

 

Financial Highlights

 

Continuing

2010 

2009 


£m 

£m 

Revenue

235.1

236.4 

Revenue (excluding costs recharged to customers)

227.4

229.3 

Adjusted Operating Profit*

18.3

17.5 

Adjusted Profit Before Tax**

14.5

12.2 

Adjusted fully Diluted earnings per share** (pence)

4.1p

3.4p

 

*      Before charging £2.8m (2009: £3.2m) intangibles amortisation and impairment (excluding software amortisation) and exceptional items of £7.5m (2009: £12.0m credit)

**     Before charging £2.8m (2009: £3.2m) intangibles amortisation and impairment (excluding software amortisation), exceptional items of £7.5m (2009: £12.0m credit) and in 2009 exceptional finance costs of £0.4m

 

John Talbot, Executive Chairman of Johnson Service Group, commented:

 

"I am delighted to be reporting strong final results. Despite the difficult conditions affecting all of our markets we have increased profitability and reduced debt.

 

Textile Rental, our largest Division, increased adjusted operating profit by 13.7% on revenues close to 2009 levels. This is a very good performance considering the difficulties faced by many of our customers with higher unemployment, business closures and increased focus on costs.

 

Drycleaning was badly affected by the bad weather at the beginning and end of the year which had an estimated impact on both revenue and adjusted operating profit of £1.6 million. We have rationalised the branch network and introduced a number of initiatives to improve profitability going forward.

 

Facilities Management had a good year, increasing both revenue and adjusted operating profit despite difficult market conditions. We acquired seven contracts from Jarvis PLC (in administration) during the year and continue to seek further acquisitions to accelerate growth.

 

Despite the tough economic environment the Group is now in a strong position. It is cash generative and has significantly reduced debt. We believe that there are opportunities to expand each of the Group's divisions in the future."

 

 

 

 

 

 

 

 

Enquiries:

 

Johnson Service Group PLC


John Talbot, Executive Chairman


Yvonne Monaghan, Finance Director


Tel: 020 7653 9850 (on the day)


Tel: 01928 704600 (thereafter)

 



Investec Investment Banking

Threadneedle Communications

Martin Smith

Graham Herring

David Flin

John Coles

Tel: 020 7597 4000

Tel: 020 7653 9850

 

www.johnsonplc.com

 



Chairman's Statement

 

Overview

 

I am pleased to report that the Group has achieved a strong set of results for the year ended 31 December 2010. We have expanded our presence in the PFI market through acquisition and significantly reduced debt levels which dropped to below £60.0 million at the year end. Given this performance, we are proposing a final dividend of 0.55 pence (2009: 0.50 pence) per share, making a total dividend for the full year of 0.82 pence (2009: 0.75 pence).

 

Group Results

 

Throughout this statement "continuing adjusted operating profit" refers to continuing operating profit before amortisation and impairment of intangibles (excluding software amortisation) and exceptional items. "Adjusted profit before tax" refers to continuing adjusted operating profit less finance costs, excluding, in 2009, exceptional finance costs in relation to bank fees.  References to "continuing" exclude the results of Workplace Engineering, which was disposed of in December 2009.

 

Total continuing revenue for the year was £235.1 million (2009: £236.4 million), while revenue, excluding costs recharged to customers, was £227.4 million (2009: £229.3 million).  Continuing adjusted operating profit amounted to £18.3 million (2009: £17.5 million). The key drivers of this performance are explained more fully in the Divisional Operating Review.

 

Net finance costs in 2010 were £3.8 million (2009: £5.7 million, of which £0.4 million related to exceptional finance costs in relation to bank fees).  The reduction in net finance costs reflects the lower average borrowings during the period and recognition of a notional interest credit in respect of defined benefit post retirement benefits of £0.8 million compared to a charge of £0.7 million in 2009.

 

Adjusted profit before tax on a continuing basis increased to £14.5 million (2009: £12.2 million).

 

Amortisation and impairment of intangibles (excluding software amortisation) on continuing operations amounted to £2.8 million (2009: £3.2 million).

 

Net exceptional items from continuing operations for the year amounted to a charge of £7.5 million (2009: £12.0 million credit) and comprised restructuring costs of the Drycleaning division of £6.5 million, professional fees and other costs relating to acquisitions of £1.7 million, a provision for an onerous lease on a non-trading industrial building of £1.5 million offset by a credit relating to the change in long term liabilities of the Group's defined benefit pension schemes of £2.2 million.  The exceptional credit in 2009 was in respect of a reduction in the long term liabilities of the Group's defined benefit pension schemes.

 

After the exceptional items and amortisation and impairment of intangibles (excluding software amortisation) noted above, the pre-tax profit from continuing operations was £4.2 million (2009: £20.6 million).  The tax charge on the adjusted profit before tax was at a rate of 26.9% after benefiting from a reduction in liabilities from prior years.  Adjusted fully diluted earnings per share from continuing operations were 4.1p (2009: 3.4p) while continuing fully diluted earnings per share after exceptional items and amortisation and impairment of intangibles (excluding software amortisation) were 1.2p (2009: 5.8p).

 

Dividend

 

The Board is recommending a final dividend of 0.55 pence per share (2009: 0.50 pence), making a total dividend in respect of 2010 of 0.82 pence per share (2009: 0.75 pence). Dividend cover, on an adjusted fully diluted earnings per share basis is 5 times and is in line with our stated policy of maintaining an adequate level of cover.

 

The proposed final dividend, if approved by Shareholders, will be paid on 20 May 2011 to Shareholders on the register at close of business on 26 April 2011.

 

Finances

 

Total net debt at the end of 2010 was significantly reduced to £59.5 million (December 2009: £67.7 million).  In addition to cash generated from operating activities, this reduction reflects a net repayment of Corporation Tax of £1.8 million received in 2010 in respect of earlier periods.

 

Interest cover based on continuing adjusted operating profit was 4.8 times (2009: 3.3 times).

 

The bank facility available at the end of December was £76.0 million and runs to April 2013 with two scheduled repayments of £1.5 million each at the end of each half year in 2011 and 2012.  Since the year end we have reached agreement with our lending banks to bring forward the June 2011 scheduled repayment.  Accordingly the facility was reduced to £74.5 million on 10 February 2011.  A tax repayment of £5.8 million plus interest was received in February 2011 but remains subject to agreement with HMRC and has therefore not been reflected in the financial statements.

 

Our interest cost in 2011 is protected from increases in LIBOR rates through the use of interest rate hedges.  £40.0 million of the Term Loan was hedged at the start of 2010 so that LIBOR was substituted for a fixed rate of 1.9% for 2010 and of 3.0% for 2011 and 2012, with the balance of bank debt incurring interest linked to LIBOR. Margins over LIBOR applicable to the full facility have reduced from 3.75%, which applied for the majority of 2010, to a current rate of 3.5%, with margins going forward being linked to the Group's gearing level.

 

Acquisition of PFI Business from Jarvis PLC (in administration)

 

We were delighted to complete the business acquisition of seven PFI contracts together with six related SPC's during the year.  Total gross consideration, including professional fees, was £3.9 million.  All contracts are performing to our expectations.

 

 

 

Pension Deficit

 

The recorded net deficit after tax for all post retirement benefit obligations has reduced to £12.3 million from £19.7 million at June 2010 and £14.7 million at December 2009.

 

During the last two years we have implemented a number of actions including a pension increase exchange for eligible retirees and the freezing of pensionable salary as at 6 April 2010 for all remaining active members of defined benefit schemes.  These two actions alone reduced the schemes' liabilities by some £12.0 million.  The recent statutory change for the indexation of certain pension benefits is being implemented, although it only affects certain categories of deferred pensioners.  The impact of the change from RPI to CPI Indexation, which reduces liabilities by £2.2 million, has been recognised as an exceptional item in the Income Statement.

 

Scheme assets have recovered from the levels of December 2009 and June 2010 although the benefit of this has been more than offset by lower discount rates increasing the value of liabilities.

  

We have finalised the actuarial valuation of two of the pension schemes as at 5 April 2010, including the main scheme, and have signed new Schedules of Contributions with the Trustees.  The main scheme shows an improvement in the funding position since the April 2007 valuation, which is ahead of the deficit recovery plan as agreed following the 2007 valuation.  As previously anticipated, additional contribution payments in respect of reducing the deficits in respect of all schemes will amount to £1.7 million in 2011. However, it is intended that a proportion of these additional payments will be directed towards more efficient ways of reducing the schemes' liabilities than normal cash funding. This will assist in reducing the longer term risk from the liabilities of the schemes.

 

Divisional Operating Review

 

Textile Rental

We are very pleased with the performance of this Division which is by far the largest part of the Group.  The Division trades through two very well recognised brands in the UK, Johnsons Apparelmaster ("Apparelmaster"), which predominantly provides workwear rental and laundry services to all sectors of industry, and Stalbridge Linen Services ("Stalbridge"), which provides premium linen services to the hospitality and corporate event markets.

 

The Division, which operates in a very challenging B2B environment, has performed particularly well and, despite the general trend of higher unemployment, increased business closures and a general focus on cost reduction by customers, total revenue streams of £115.1 million were only 1.5% down on the previous year (2009: £116.9 million). Adjusted operating profit, however, increased by 13.7% to £16.6 million (2009: £14.6 million) with an increased operating margin of 14.4% (2009: 12.5%).  The result includes the benefit of additional trading days during 2010 which contributed some £0.7 million of additional profit.

 

Although the Division continued to invest, with £4.5 million in new capital equipment installed, cash generated before interest increased to £19.3 million compared to £17.0 million in 2009.

 

New business sales were very similar to that of the previous year despite challenging market conditions.  The Apparelmaster workwear business is now processing 70,000 garments per week more than a year ago but, due to efficiency savings, is operating with a lower production operating cost base. In addition, our customer retention levels have remained very high during the year across both the Apparelmaster and Stalbridge businesses.

 

Operating costs for the business have constantly reduced in real terms as a direct consequence of continued investment in modern, high specification equipment which enables higher levels of output whilst at the same time reducing usage of valuable energy resources.  The Division has just completed the first year of the Climate Change Agreement (CCA) achieving a reduction of 12.4% on gas and electricity consumption which exceeded  the target of 7.5% set by the Department of Energy Climate Change (DECC). The reductions in consumption together with the benefit of forward purchasing of gas significantly reduced the in year cost compared to 2009. However current market predictions indicate that the business could experience much higher energy costs in 2011, which could more than offset the benefit of any further usage reductions achieved.

 

During 2010 the Division implemented a new integrated wages and human resources evaluation system for the entire workforce of some 2,700 people and it is anticipated that further developments and benefits will be derived from this process over forthcoming years.  This sharing of a back office function across the Division has produced a reduction in Divisional IT and administration costs.      

 

In August the Division acquired a small company specialising in the sale of PPE (personal protective equipment) products with the intention of offering a comprehensive range of products to our existing customer base and we anticipate that this business will make a small contribution during the first full year of trading.  A new catalogue, product promotion, website and specialist sales representative have been launched from early 2011.

 

Stalbridge has continued to improve its performance, building on the first half profit and achieving a full year adjusted operating profit of £2.3 million (2009: £1.2 million) representing an overall margin of 8.6% (2009: 4.5%) on flat revenue. In addition to general production efficiencies implemented across the Division, Stalbridge has concentrated on more fuel efficient driving, reducing carbon emissions by some 9% over the previous year.

 

We expect the textile services market to remain very challenging, particularly with the significant price increases on cotton based textiles.

 

Drycleaning

Our Drycleaning division operates under the brands of Johnson Cleaners, with its convenient locations and high street presence, Jeeves of Belgravia, the luxury drycleaner of London and Alex Reid, the number one consumables supplier to the drycleaning sector.

 

Revenue for our Drycleaning division was £78.7 million (2009: £83.5 million) and adjusted operating profit was £2.0 million (2009: £3.0 million).  2010 has benefited from £0.6 million of property related credits (2009: £0.5 million) which we do not anticipate being repeated in 2011.


Challenging trading conditions at the start of 2010 were exacerbated by the severe weather of early January which severely disrupted activity on many of Britain's high streets.  These conditions had a significant impact on the Division resulting in a reduction in revenue and profit in the early part of January 2010 of some £0.6 million.


After achieving a stable performance towards the half year and a sustained period of marginal growth during the period from August to mid-November, the return of the extreme weather conditions in late November and throughout December significantly reduced the operating profit of our Drycleaning division.  The estimated impact of the weather on the second half was a reduction of some £1.0 million in revenue and operating profit.

 

The full year revenue of Johnson Cleaners and Jeeves of Belgravia decreased by 3.6% overall on a like for like basis, with revenue of £70.1 million (2009: £74.1 million). However the second half decrease of 2.6% was an improvement on the first half reduction of 4.7%.  Excluding the impact of the snow at the end of the year the like for like sales would have shown only a small reduction of an estimated 0.7% in the second half. 

 

Whilst the weather impact at the start and close of the year has resulted in a disappointing overall result for the Division there have been many progressive actions within the business throughout 2010.

 

The Green Evolution Programme, where stores are refurbished and co-branded GreenEarth® to reflect the green credentials of our business, has gathered momentum with 101 stores being completed in the calendar year taking the overall total to 195, which represents over 40% of the portfolio.  Results continue to be positive versus the remaining portfolio as we enter into the third year of the programme.  This year, as part of the Green Evolution Programme, 11 new branches were opened, with seven being supermarket locations, two being new concept high street stores and two Drive In locations.

Our commitment to processing using the GreenEarth® silicone based solvent remains strong and 40 new installations were achieved in the year taking the total number of machines across our estate to 353 with some 77% of locations now offering this environmentally friendly cleaning solution.

 

Our commitment to GreenEarth® cleaning, coupled with the achievement of our Carbon Policy Objectives has resulted in many local awards being achieved, along with the national recognition of being named in The Sunday Times top green companies.


In addition to establishing ourselves within the industry as the greener cleaner with our use of GreenEarth
® cleaning we have also improved our service offering by extending and testing new products and services, including a collection and delivery service to home and work across five counties.


Our domestic laundry offering has grown once again in 2010 and we have exciting plans to grow this category further in future years, as we continue to develop concepts to meet the changing needs of the clothes care market.

 

As indicated in the interim statement a number of loss making stores were identified, where it was believed their closure would improve business efficiencies and management focus.


The programme of closing these stores was actioned very efficiently by the operations team and has resulted in a portfolio of 470 branches going forward with a newly implemented operating field structure.  We anticipate that the exceptional charge of £6.5 million, of which £0.5 million is non cash, made in June 2010 will be adequate to cover relevant costs. Cash expenditure in relation to this provision amounted to £2.3 million with the balance being spread over the next five years.

 

Restructuring the portfolio created an opportunity to introduce a new style of management across a proportion of our trading estate in the form of 'Empowerment'.


We now have over 100 Empowered Branch Managers, operating outside the boundaries of the core business, utilising their entrepreneurial skills to improve revenue, profit and market share in their local environment and earning a share of the rewards that they deliver.

Empower is an exciting development within our business and since its introduction in late summer the results have been consistently ahead of the core estate.


Jeeves of Belgravia, our luxury brand and international franchise operation, had a successful year as investments in our in-house laundry and store rebranding programme coupled with the recovery in the London market paid dividends.  The 10 Jeeves stores achieved like for like sales growth of 3%. This business is in a good position to move forward in 2011, both in the UK and internationally.


A substantial overhaul of our specialist drycleaning supplies business, Alex Reid, took place in 2010 and resulted in adjusted operating profit of £0.3 million (2009: £0.1 million loss) on revenue of £8.6 million (2009 £9.4 million).

 

The business is now well placed to offer its customers great service and product availability following significant personnel, system and infrastructure changes over the last two years.

 

2010 has been a difficult year with revenue and adjusted operating profit being reduced by an estimated £1.6 million in the weeks of snow.  Whilst there are considerable challenges facing UK consumers in the coming months we believe the Drycleaning business is continuing to take the necessary actions to improve profitability.

 

Facilities Management

SGP, which provides predominantly white collar property, building and facilities management (FM) services, has continued to grow despite the challenging market conditions of 2010. During the year the business has successfully acquired and integrated seven long term PFI contracts, invested significantly in IT and business development infrastructure, and has increased revenue within its existing client base through the introduction of additional services as well as winning further new contracts.

 

Revenue, excluding costs recharged to customers, was 16.3% higher at £33.6 million (2009: £28.9 million) whilst revenue including recharges was 14.7% higher at £41.3 million (2009: £36.0 million) reflecting the positive impact of the acquisition announced in June 2010.

 

Adjusted operating profit increased by 9.1% to £3.6 million (2009: £3.3 million). The stronger second half adjusted operating profit of £2.0 million (2009: £1.7 million), as anticipated in our interim statement, showed a significant improvement on the first half performance of £1.6 million, largely reflecting the successful integration of the acquired contracts. This increase has been achieved despite the investment in infrastructure made during the year.

 

SGP is currently in the process of completing the re-signing and extension of some of its larger retail helpdesk contracts and is confident of a successful outcome in all cases. A number of smaller retail helpdesk contracts were also won and mobilised during the second half of the year, including Screwfix, Lakeland, Allworth's and Tiger Retail.  Our FM contracts, including the acquired PFIs, performed well and we anticipate further new wins in the coming months. The FM contract for Inverness Airport was retained and extended to February 2012. SGP's presence in the PPP (Public Private Partnership) market in terms of the education and health sectors has been considerably strengthened by the acquisition of the PFI contracts, with its critical mass of FM contracts now numbering 22 schools and health centres/hospitals. This long term public sector strength was enhanced with the new contract for the Finchley Memorial Hospital, a 30 year PFI, which, along with Worcester Library, comes on stream next year. In the short term, there is also an expectation of securing a further number of five year LIFT (Local Improvement Finance Trust) contracts in the healthcare sector in 2011. 

 

SGP's work for Punch Taverns during the year was rewarded by winning the award for "FM Excellence in a Major Project" at the British Institute of Facilities Management 2010 Awards.  This project was in addition to the Help Desk Service provided to Punch in managing their owned and leased estate through a proprietary internet based system.

 

The increased investment in technical resource during 2010 has already started to produce returns with a strong upturn in SGP project activity meeting an increased demand for assistance with essential capital projects from customers resulting in net revenues up by 33% to £0.8 million (2009: £0.6 million).

 

The property area of the business has continued to experience very challenging conditions, with revenue from these activities 14% down on 2009.  SGP remains committed to this business stream, and has invested to expand its Agency business opening a new London office in November. A market leading service charge cost reduction and control software system has also been developed in house which has helped secure an exclusive contract for all UK service charge work for the Arcadia Group. We have also secured a national contract for the rates saving work for Marks & Spencer, demonstrating our focus on this area going forward.

 

SGP has delivered growth, and is well placed to continue this trend in 2011 after which an accelerated growth pattern is anticipated into the medium and longer term as its infrastructure investment strategy over the last couple of years starts to show stronger returns.   SGP will also continue to look for further acquisitions to accelerate growth following the successful acquisition of the ex-Jarvis PFI contracts.

 

Staff

 

As with any service based organisation our staff are paramount in ensuring that our customers continue to be impressed by the service they receive.

 

I would like to acknowledge the tremendous enthusiasm and commitment shown by each and every employee during the past year and thank them for their continuing efforts in driving the Group forward.

 

 

Outlook

 

Despite the tough economic climate the Group is now in a strong position, it is cash generative and has significantly reduced debt.  We believe that there are opportunities to expand each of the Group's divisions.

 

The performance of the Textile Rental division is underpinned by contracted revenue and by its focus on high production quality and customer service although there may be challenges in the coming year from inflationary pressures.  We continue to look for strategic domestic opportunities and believe that, in the longer term, the Division has the ability to leverage its tremendous in-depth strength by seeking opportunities outside the UK.

 

Our retail Drycleaning and laundry division is in a much stronger position following the streamlining of its portfolio.  I am confident that the continuing addition of new services, investment in GreenEarth® and the Empowerment project will yield positive results during the year.

 

I believe SGP will benefit from its increased presence in the PFI market and from the additional infrastructure put in place during 2010. This additional infrastructure has increased our capacity to tender for new contracts and to pursue new initiatives and we are already seeing a significantly greater level of potential opportunities for this Division than we were a year ago.  We are also continuing to explore the opportunity for strategic acquisitions for this Division.

 

Although we are not anticipating any upturn in trading conditions, the Board expects to achieve a satisfactory result in 2011.

 

 

John Talbot

Executive Chairman

8 March 2011



Consolidated Income Statement

 

Note

 

Year ended

31 December

2010

 

Year ended

31 December

2009



£m

£m





REVENUE FROM CONTINUING OPERATIONS

2

235.1 

236.4 

Costs recharged to customers


(7.7)

(7.1)

Revenue excluding costs recharged to customers

2

227.4 

229.3 





OPERATING PROFIT

2

8.0 

26.3 





OPERATING PROFIT BEFORE INTANGIBLES AMORTISATION AND IMPAIRMENT (EXCLUDING SOFTWARE AMORTISATION) AND EXCEPTIONAL ITEMS

2

18.3 

17.5 

Amortisation and impairment of intangible assets (excluding software amortisation)


(2.8)

(3.2)

Exceptional items

3



  - Restructuring and other costs


(8.3)

  - Costs in relation to business acquisition activity


(1.4)

  - Pension credits


2.2 

12.0 





OPERATING PROFIT

2

8.0 

26.3 





Finance costs         - Ordinary finance costs

4

(3.8)

(5.5)

                                - Exceptional finance costs

4

-  

(0.4)

Finance income

4

-  

0.2 





PROFIT BEFORE TAXATION


4.2 

20.6 





Taxation charge

5

(1.0)

(5.7)





PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS


3.2 

14.9 





DISCONTINUED OPERATIONS:




LOSS FOR THE YEAR FROM DISCONTINUED OPERATIONS


(3.5)





PROFIT FOR THE YEAR ATTRIBUTABLE TO EQUITY HOLDERS


3.2 

11.4 









EARNINGS PER SHARE *

6



Basic earnings per share




From continuing operations


1.3p 

6.1p 

From discontinued operations


-   

(1.4p)

From continuing and discontinued operations


1.3p 

4.7p 

Diluted earnings per share




From continuing operations


1.2p 

5.8p 

From discontinued operations


-  

(1.4p)

From continuing and discontinued operations


1.2p 

4.4p 

 

*   Adjusted earnings per share before intangibles amortisation and impairment (excluding software amortisation), exceptional items and exceptional finance costs, are shown in note 6.



Consolidated Statement of COMPREHENSIVE Income

 


Year ended

31 December

2010

Year ended

31 December

2009


£m

£m




Profit for the year

3.2 

11.4 




Actuarial loss on defined benefit pension schemes

(1.5)

(13.6)

Taxation in respect of actuarial loss

0.4 

3.8 

Change in deferred tax due to change in tax rate

(0.2)

Cash flow hedges (net of taxation) - fair value loss

(1.4)

(0.3)

                                                        - transfers to interest

0.3 

1.1 

OTHER COMPREHENSIVE INCOME FOR THE YEAR

(2.4)

(9.0)

TOTAL COMPREHENSIVE INCOME  FOR THE YEAR

0.8 

2.4 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

 

Share

Capital

Share

Premium

Other

Reserves

Retained Earnings

Total

Equity

£m

£m

£m

£m

£m






24.9

13.7

1.7 

27.8 

68.1 

-

-

0.8 

1.6 

2.4 

-

-

(0.1)

0.1 

-

-

0.9 

0.9 

-

-

(0.6)

(0.6)

Balance at 31st December 2009

24.9

13.7

2.4 

29.8 

70.8 







24.9

13.7

2.4 

29.8 

70.8 

-

(1.1)

1.9 

0.8 

-

(0.2)

0.2 

-  

-

-  

0.7 

0.7 

0.1

-  

-  

0.1 

-

-  

(1.9)

(1.9)

Balance at 31st December 2010

25.0

13.7

1.1 

30.7 

70.5 



Consolidated Balance Sheet

 

 

 

Note

As at

31 December

2010

As at

31 December

2009


£m

£m

ASSETS



NON-CURRENT ASSETS



Goodwill

87.6 

87.6 

Intangible assets

10.5 

9.2 

Property, plant and equipment

44.4 

44.9 

Textile rental items

19.7 

19.6 

Trade and other receivables

0.6 

0.6 

Deferred income tax assets

6.5 

7.4 


169.3 

169.3 




CURRENT ASSETS



Inventories

3.7 

3.4 

Trade and other receivables

35.4 

34.6 

Current income tax assets

-  

1.2 

Cash and cash equivalents

2.2 

2.7 


41.3 

41.9 




LIABILITIES



CURRENT LIABILITIES



Trade and other payables

44.0 

36.3 

Current income tax liabilities

0.6 

Borrowings

6.4 

10.5 

Provisions

5.0 

3.6 


56.0 

50.4 

NET CURRENT LIABILITIES

(14.7)

(8.5)




NON-CURRENT LIABILITIES



Retirement benefit obligations

9

16.8 

20.4 

Deferred income tax liabilities

1.3 

1.9 

Other non-current liabilities

2.2 

1.4 

Borrowings

53.5 

59.9 

Derivative financial liabilities

1.5 

Provisions

8.8 

6.4 


84.1 

90.0 

NET ASSETS

70.5 

70.8 







CAPITAL AND RESERVES ATTRIBUTABLE TO THE COMPANY'S EQUITY HOLDERS



Share capital

25.0 

24.9 

Share premium

13.7 

13.7 

Other reserves

1.1 

2.4 

Retained earnings

30.7 

29.8 

TOTAL EQUITY

70.5 

70.8 

 



 Consolidated Statement OF Cash Flows

 

 

 

Note

Year ended

31 December

2010

Year ended

31 December

2009


£m

£m

CASH FLOWS FROM OPERATING ACTIVITIES



Profit for the year

3.2 

11.4 

Adjustments for:



    Income tax - continuing operations

5

1.0 

5.7 

                      - discontinued operations

10

(0.1)

(0.9)

    Finance income and expense

4

3.8 

5.7 

    Depreciation

21.0 

20.6 

    Amortisation

3.1 

3.6 

    Impairment of goodwill

-  

1.6 

    (Increase) / decrease in inventories

(0.3)

1.0 

    (Increase) / decrease in trade and other receivables

(0.2)

5.9 

    Increase / (decrease) in trade and other payables

0.6 

(7.6)

    Loss / (profit) on sale of property, plant and equipment

0.1 

(0.4)

    Pre-tax (gain) / loss on disposal of business

(0.1)

0.1 

    Acquisition fees charged to income statement

1.4 

-  

    Additional contribution to defined benefit pension schemes

(1.6)

(1.5)

    Share-based payments

0.9 

1.0 

    Retirement benefit obligations

(2.7)

(13.0)

    Provisions

3.8 

(1.6)

Cash generated from operations

33.9 

31.6 

Interest paid

(3.1)

(6.7)

Taxation received

1.8 

4.8 

Net cash flows generated from operating activities

32.6 

29.7 




CASH FLOWS FROM INVESTING ACTIVITIES



Acquisition of business (net of cash acquired)

(0.5)

(0.8)

Proceeds from sale of business

0.1 

0.2 

Purchase of property, plant and equipment

(7.7)

(7.1)

Proceeds from sale of property, plant and equipment

1.4 

0.7 

Purchase of intangible assets

(0.3)

(0.4)

Purchase of textile rental items

(14.3)

(15.4)

Proceeds from sale of textile rental items

2.2 

3.0 

Interest received

-  

0.2 

Net cash used in investing activities

(19.1)

(19.6)




CASH FLOWS FROM FINANCING ACTIVITIES



Proceeds from borrowings

73.5 

-  

Repayments of borrowings

(86.0)

(13.7)

Capital element of finance leases

(0.8)

(0.8)

Net proceeds from issue of Ordinary shares

0.1 

Dividends paid to Company Shareholders

(1.9)

(0.6)

Net cash used in financing activities

(15.1)

(15.1)




Net decrease in cash and cash equivalents

(1.6)

(5.0)

Cash and cash equivalents at beginning of period

0.2 

5.2 

Cash and cash equivalents at end of period

(1.4)

0.2 

 

 

 



NOTES TO THE PRELIMINARY ANNOUNCEMENT

 

1          BASIS OF PREPARATION

 

The financial information contained within this report has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (IFRSs as adopted by the EU), International Financial Reporting Interpretations Committee (IFRIC) Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.

 

Other than for applying the revisions to IFRS 3 'Business Combinations', the financial information has been prepared using accounting policies consistent with those set out in the 2009 Annual Report.

 

 

 

2          SEGMENT ANALYSIS

 

Segment information is presented in respect of the Group's business segments, which are based on the Group's management and internal reporting structure as at 31st December 2010.

 

The chief operating decision-maker has been identified as the Board of Directors (the Board).  The Board reviews the Group's internal reporting in order to assess performance and allocate resources.  Management has determined the operating segments based on these reports and on the internal reporting structure.

 

The Board assesses the performance of the operating segments based on a measure of earnings before interest and tax, both including and excluding the effects of non-recurring items from the operating segments, such as restructuring costs and impairments when the impairment is the result of an isolated, non-recurring event.  Interest income and expenditure are not included in the result for each operating segment that is reviewed by the Board.  Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis, for example rental income received by the property company is credited back to the paying company for the purpose of segmental reporting.

 

Other information provided to the Board is measured in a manner consistent with that in the financial statements.  Segmental assets exclude deferred tax assets, current tax assets and cash, all of which are managed on a central basis.  Segmental liabilities include non-bank borrowings but exclude deferred tax liabilities, current tax liabilities, bank borrowings, derivative financial liabilities and retirement benefit obligations that cannot be attributed directly to a segment, all of which are managed on a central basis.  These balances are part of the reconciliation to total balance sheet assets and liabilities. 

 

Inter-segment pricing is determined on an arms length basis.  The exceptional items have been included within the appropriate business segment as shown on pages 17 to 18.

 

The Group comprises the following segments:

 

Textile Rental

Workwear rental supply and laundering, linen rental for the premium hotel, catering and corporate hospitality markets and sale of ancillary items.

 

 

§  Johnsons Apparelmaster Limited

§  Stalbridge Linen Services

Drycleaning

With some 480 stores nationwide, provides drycleaning, laundry and ironing services, carpet cleaning, upholstery cleaning, wedding dress cleaning and suede & leather cleaning and the supply of drycleaning consumables.

 

 

§  Johnson Cleaners UK Limited

§  Jeeves of Belgravia Limited

§  Jeeves International Limited

§  Alex Reid Limited

Facilities Management

Delivering building, facilities and property management services to public, commercial and retail organisations throughout the UK.

 

 

§  SGP Property & Facilities Management Limited

§  Barnhill School Services Limited

§  Balfron Schools Services Limited

§  Cardinal Heenan School Services Limited

§  Colfox Schools Services Limited

§  Dundee Healthcare Services Limited

§  East Ren Schools Services Limited

 

All Other Segments

Comprising of central and head office costs.

 

§  Johnson Service Group PLC

§  Johnson Group Properties PLC

§  Semara Estates Limited



NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

 

2          SEGMENT ANALYSIS continued

Year ended 31st December 2010

Textile Rental

Drycleaning

Facilities  

Management  

All Other Segments

(Group Costs)

Total


£m

£m

£m

£m

£m

REVENUE






Revenue

115.1 

78.7

41.9 

-

235.7 

Inter-segment revenue

-

(0.6)

-

(0.6)

REVENUE - CONTINUING

115.1 

78.7

41.3 

-

235.1 

Revenue - Discontinued





Total revenue





235.1 

REVENUE EXCLUDING COSTS

RECHARGED TO CUSTOMERS






Revenue

115.1 

78.7

34.2 

-

228.0 

Inter-segment revenue

-

(0.6)

-

(0.6)

REVENUE EXCLUDING COSTS

RECHARGED TO CUSTOMERS - CONTINUING

115.1 

78.7

33.6 

-

227.4 

Revenue - Discontinued





Total revenue excluding costs recharged to customers





227.4 

RESULT






Operating profit before intangibles

amortisation and impairment (excluding software amortisation) and exceptional items

16.6 

2.0

3.6 

(3.9)

18.3 

Amortisation and impairment of intangible assets

(0.8)

-

(2.0)

(2.8)

Exceptional items






  - Pension credits

-

0.6 

1.6   

2.2 

  - Reorganisation costs

(6.5) 

(0.3)

(6.8)

  - Loss on disposal of property and property provisions

-

(1.5)

(1.5)

  - Business acquisition activity

(0.1)

-

(1.3)

-    

(1.4)

Operating profit / (loss)

15.7 

(4.5) 

0.6 

(3.8)

8.0 

Finance costs





(3.8)

Profit before taxation





4.2 

Taxation





(1.0)

Profit for the period - Continuing





3.2 

Discontinued operations





-  

Profit for the period





3.2 

 

 


Discontinued Operations

Textile Rental

Drycleaning

Facilities

Management

All Other Segments

(Group Costs)

Total


£m

£m

£m

£m

£m

£m

OTHER INFORMATION







Capital expenditure







- Property, plant and equipment

4.5 

3.8 

0.4 

8.7 

- Textile rental items

15.6 

15.6 

- Intangible software

0.1 

0.2 

0.3 

Depreciation and amortisation expense







- Property, plant and equipment

4.2 

3.0 

0.3 

0.2 

7.7 

- Textile rental items

13.3 

13.3 

- Intangible software

0.1 

0.2 

0.3 

Return on capital employed (%)


46.0%

16.6%

144.1%










BALANCE SHEET INFORMATION







Segment assets

0.1 

102.3 

38.2 

49.7 

11.6 

201.9 

Unallocated assets

- Deferred income tax assets





6.5 


- Cash and cash equivalents





2.2 

Total assets






210.6 








Segment liabilities

(0.5)

(25.5)

(18.5)

(10.1)

(6.9)

(61.5)

Unallocated liabilities

- Deferred income tax liabilities





(1.3)


- Bank borrowings





(58.5)


- Income tax liabilities





(0.6)


- Derivative financial liabilities





(1.5)


- Retirement benefit obligations





(16.7)

Total liabilities






(140.1)



NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

 

2          SEGMENT ANALYSIS continued

Year ended 31st December 2009

Textile Rental

Drycleaning

Facilities  

Management  

All Other Segments

(Group Costs)

Total


£m

£m

£m

£m

£m

REVENUE






Revenue

116.9 

83.5 

36.6 

237.0 

Inter-segment revenue

(0.6)

(0.6)

REVENUE - CONTINUING

116.9 

83.5 

36.0 

236.4 

Revenue - Discontinued





4.0 

Total revenue





240.4 

REVENUE EXCLUDING COSTS

RECHARGED TO CUSTOMERS






Revenue

116.9 

83.5 

29.5 

229.9 

Inter-segment revenue

(0.6)

(0.6)

REVENUE EXCLUDING COSTS

RECHARGED TO CUSTOMERS - CONTINUING

116.9 

83.5 

28.9 

229.3 

Revenue - Discontinued





4.0 

Total revenue excluding costs recharged to customers





233.3 

RESULT






Operating profit before intangibles

amortisation and impairment (excluding software amortisation) and exceptional items

14.6 

3.0 

3.3 

(3.4)

17.5 

Amortisation and impairment of intangible assets

(1.4)

(1.8)

(3.2)

Exceptional items






  - Pension credits

-  

 0.5 

11.5 

12.0 

Operating profit

13.2 

3.0 

2.0 

8.1 

26.3 

Finance costs






  - Ordinary finance costs





(5.5)

  - Exceptional finance costs





(0.4)

Finance income





0.2 

Profit before taxation





20.6 

Taxation





(5.7)

Profit for the period - Continuing





14.9 

Discontinued operations





(3.5)

Profit for the period





11.4 

 

 


Discontinued Operations

Textile Rental

Drycleaning

Facilities

Management

All Other Segments

(Group Costs)

Total


£m

£m

£m

£m

£m

£m

OTHER INFORMATION







Capital expenditure







- Property, plant and equipment

-

2.9 

4.2 

0.2 

7.3 

- Textile rental items

-

13.5 

13.5 

- Intangible software

-

0.1 

0.2 

0.3 

Depreciation and amortisation expense







- Property, plant and equipment

0.1

4.3 

2.5 

0.3 

0.2

7.4 

- Textile rental items

-

13.2 

13.2 

- Intangible software

0.1

0.1 

0.2 

0.4 

Return on capital employed (%)


38.6%

24.2%

111.4%










BALANCE SHEET INFORMATION







Segment assets

0.1

102.5 

37.7 

45.5 

14.1

199.9 

Unallocated assets

- Deferred income tax assets





7.4 


- Current income tax assets





1.2 


- Cash and cash equivalents





2.7 

Total assets






211.2 








Segment liabilities

(1.0)

(22.7)

(16.1)

(5.1)

(4.8)

(49.7)

Unallocated liabilities

- Deferred income tax liabilities





(1.9)


- Bank borrowings





(69.2)


- Retirement benefit obligations





(19.6)

Total liabilities






(140.4)



NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

 

3          EXCEPTIONAL ITEMS


2010

2009


£m

£m




Restructuring costs                - Drycleaning

(6.5)

                                - Facilities Management

(0.3)

Property disposals and provisions

(1.5)


(8.3)

Costs in relation to business acquisition activity

(1.4)

Pension credits

2.2 

12.0

Total exceptional items

(7.5)

12.0

 

Exceptional items in relation to discontinued operations have been included within the result from discontinued operations.

 

CURRENT YEAR EXCEPTIONAL ITEMS

 

Restructuring costs - Drycleaning

The management of the Drycleaning division have been working to optimise the performance of stores in our more marginal locations.  This review identified a number of loss making stores which had continued to decline at a faster rate and where, in management's view, overall efficiency and focus would be improved by their closure.  It was, therefore, decided to strengthen the overall portfolio by the closure of 20 such stores over and above those at lease expiry which also allowed a reduction in overhead.  The review also identified a number of stores which it is uneconomic to close at the present time but which are unlikely to be restored to profitability and in respect of which a provision was recognised for both the least net cost of exiting these stores together with associated asset impairments.  The cost also included the restructuring of the warehousing and logistical operations supporting the Division.  Of the total restructuring cost, £0.5 million is non-cash.  Of the remainder, £2.3 million has been expended in cash in 2010 with the remaining cash flow over the next 5 years.  The majority of the cash flow is in respect of existing property lease commitments which will remain until the locations are disposed of.

 

Restructuring costs - Facilities Management

Following the acquisition of contracts from Jarvis PLC (in administration) the Division reorganised its management and support structures such that they were better aligned to the business needs going forward.  Although these costs were directly as a result of the acquisition of PFI contracts from Jarvis PLC (in administration), they have not been classified as 'costs in relation to business acquisition activity' as they more closely fit the definition of 'restructuring costs'.

 

Property disposals and provisions

During the year a surplus freehold property was disposed of for net proceeds, after associated costs, of £1.1 million, resulting in a loss on disposal of £0.1 million.  In addition, the Group recognised further provisions of £1.4 million in respect of onerous lease commitments on surplus properties.

 

Costs in relation to business acquisition activity

IFRS 3 (revised), 'Business combinations', is effective for reporting periods beginning on or after 1st July 2009.  The revised standard requires all acquisition related costs (e.g. professional fees) to be expensed to the Income Statement.  With effect from 1st January 2010, fees and expenses incurred on business acquisition activities are treated as exceptional.  The cost above relates partly to £1.3 million of fees and expenses incurred on the acquisition of PFI contracts from Jarvis PLC (in administration).  The remainder of the cost relates to fees and expenses incurred during negotiations with other undisclosed targets.

 

Pension credits

The recent statutory change for the indexation of certain future pension benefits is being implemented, although it only affects certain categories of deferred members.  The impact of the change from RPI to CPI has been recognised in the Income Statement as a past service credit.

 

PRIOR YEAR EXCEPTIONAL ITEMS

 

Pension credits

During the prior period the Company made an offer to existing retirees in the Johnson Group Staff Pension Scheme and the Semara Augmented Pension Plan to exchange certain future pension increases for a one time increase. This was taken up by a significant number of retirees, resulting in a reduction in future liabilities, on an IAS 19 basis, of £2.5 million. This was treated as a past service credit of £2.2 million (net of expenses) and included as an exceptional credit in the Income Statement.

 

With effect from 5th April 2010 the Group implemented a freeze on pensionable salary for all current active members of the Group's defined benefit schemes. This resulted in a reduction of future liabilities, on an IAS 19 basis, of £9.9 million. This was treated as a curtailment gain of £9.8 million (net of expenses) and included as an exceptional credit in the Income Statement.

 

Exceptional finance costs

In addition to the exceptional items above, the Group treats certain finance costs as exceptional. Exceptional finance costs are included within Finance Costs in the Income Statement. During the year there were no exceptional finance costs (2009: £0.4 million). The exceptional finance costs in the year ended 31st December 2009 relate to the write-off of bank fees relating to the previous bank facility following the signing of a new bank facility on 18th December 2009.



NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

 

4          FINANCE COSTS AND INCOME


2010

2009


£m

£m




Interest payable on bank loans and overdrafts

(3.6)

(4.1)

Amortisation of bank loan issue costs

(0.8)

(0.4)

Interest payable on obligations under finance leases

(0.1)

(0.1)

Other finance costs

(0.1)

(0.2)

Finance costs before notional interest on defined benefit liabilities and assets

(4.6)

(4.8)




Notional interest on defined benefit obligations:



- Interest cost on pension scheme liabilities

(10.2)

(10.6)

- Expected return on pension scheme assets

11.1 

10.0 

- Private healthcare

(0.1)

(0.1)

Ordinary finance costs

(3.8)

(5.5)




Exceptional finance costs relating to bank fees

(0.4)




Finance costs

(3.8)

(5.9)




Finance income

0.2 

Net finance expense

(3.8)

(5.7)

 

On 18th December 2009, a new bank facility was signed.  As a result the unamortised fees relating to the old facility were written off and classed as an exceptional finance cost in 2009.

 

 

 

5          TAXATION


2010

2009


£m

£m

Current tax



UK Corporation Tax charge for the year

0.3 

0.8 

Adjustment in relation to previous years

-  

(3.5)

Current tax charge / (credit) for the year

0.3 

(2.7)




Deferred tax



Origination and reversal of temporary differences

1.1 

5.4 

Adjustment in relation to previous years

(0.4)

3.0 

Deferred tax charge for the year

0.7 

8.4 

Total charge for taxation included in the Income Statement for continuing operations

1.0 

5.7 

 

The tax charge for the period is lower (2009: lower) than the standard rate of Corporation Tax in the UK of 28.0% (2009: 28.0%).  The differences are explained below:


2010

2009


£m

£m




Profit before taxation per the Income Statement

4.2 

20.6 

Profit before taxation multiplied by the standard rate of

Corporation Tax in the UK of 28.0% (2009: 28.0%)

1.2 

5.8 




Factors affecting taxation charge for the year:



Tax effect of expenses not deductible for tax purposes

0.5 

0.6 

Tax effect of non-taxable income

(0.3)

(0.2)

Adjustments to tax in respect of prior periods

(0.4)

(0.5)

Total charge for taxation included in the Income Statement

1.0 

5.7 

 

Taxation on the restructuring and other costs, including exceptional finance costs, in the current year has reduced the charge for taxation by £2.1 million (2009: £3.3 million increase).  Tax relief on intangibles amortisation and impairment (excluding software amortisation) has reduced the charge for taxation by £0.8 million (2009: £0.9 million).

 

Subsequent to the year end a tax repayment relating to 2008 of £5.8 million has been received.  The tax computation for 2008 has yet to be formally agreed with HMRC and as such there is no adjustment in relation to previous years within the tax charge in 2010 relating to this repayment.

 

Implications of the 'Finance Bill 2010

The second finance bill of 2010 (the 'Bill') was given Royal Assent on 27th July 2010 and became Finance (No 2) Act 2010 (the 'Act').  The Act, in the main, covers the tax rates announced in the Emergency Budget of June 2010 and includes legislation to reduce the main Corporation Tax rate from 28% to 27% from 1st April 2011.  The effect of this change on the Income Statement charge in the year has not been material.

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

 

6          EARNINGS PER SHARE


2010

2009


£m

£m




Profit for the financial year from continuing operations attributable to Ordinary Shareholders

3.2 

14.9 

Loss for the financial year from discontinued operations attributable to Ordinary Shareholders

(3.5)

Intangibles amortisation and impairment from continuing operations (net of taxation)

2.0 

2.3 

Intangibles amortisation and impairment from discontinued operations (net of taxation)

1.6 

Exceptional costs / (credits) from continuing operations (net of taxation)

5.4 

(8.6)

Exceptional costs from discontinued operations (net of taxation)

1.1 

Exceptional finance costs in respect of bank fees from continuing operations (net of taxation)

0.3 

Adjusted profit attributable to Ordinary Shareholders

10.6 

8.1 




Weighted average number of Ordinary shares

248,170,808

248,214,351

Dilutive potential Ordinary shares*

13,513,610

10,792,760

Fully diluted number of Ordinary shares

261,684,418

259,007,111




Basic earnings per share



From continuing operations

1.3p 

6.1p 

From discontinued operations

-   

(1.4p)

From continuing and discontinued operations

1.3p 

4.7p 

Adjustment for intangibles amortisation and impairment (continuing operations)

0.8p 

0.9p 

Adjustment for intangibles amortisation and impairment (discontinued operations)

-   

0.7p 

Adjustment for exceptional items (continuing operations)

2.2p 

(3.5p)

Adjustment for exceptional items (discontinued operations)

-   

0.4p 

Adjustment for exceptional finance costs in respect of bank fees (continuing operations)

-   

0.1p 

Adjusted basic earnings per share (continuing operations)

4.3p 

3.6p 

Adjusted basic earnings per share (discontinued operations)

-   

(0.3p)

Adjusted basic earnings per share from continuing and discontinued operations

4.3p 

3.3p 




Diluted earnings per share



From continuing operations

1.2p 

5.8p 

From discontinued operations

-   

(1.4p)

From continuing and discontinued operations

1.2p 

4.4p 

Adjustment for intangibles amortisation and impairment (continuing operations)

0.8p 

0.9p 

Adjustment for intangibles amortisation and impairment (discontinued operations)

-   

0.7p 

Adjustment for exceptional items (continuing operations)

2.1p 

(3.4p)

Adjustment for exceptional items (discontinued operations)

-   

0.4p 

Adjustment for exceptional finance costs in respect of bank fees (continuing operations)

-   

0.1p 

Adjusted diluted earnings per share (continuing operations)

4.1p 

3.4p 

Adjusted diluted earnings per share (discontinued operations)

-  

(0.3p)

Adjusted diluted earnings per share from continuing and discontinued operations

4.1p 

3.1p 

 

* Includes outstanding share options granted to employees and warrants issued to the Company's banks.

 

Basic earnings per share is calculated using the weighted average number of shares in issue during the year, excluding those held by the ESOP, based on the profit for the year attributable to Ordinary Shareholders.

 

Adjusted earnings per share figures are given to exclude the effects of intangibles amortisation and impairment (excluding software amortisation), exceptional items and exceptional finance costs, all net of taxation, and are considered to show the underlying results of the Group.

 

For diluted earnings per share, the weighted average number of Ordinary shares in issue is adjusted to assume conversion of all dilutive potential Ordinary shares.  The Company has dilutive potential Ordinary shares arising from warrants issued to the Company's bankers and 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.

 

Potential Ordinary shares are dilutive at the profit from continuing operations level when their conversion to Ordinary shares would decrease earnings per share or increase loss per share from continuing operations.  Potential Ordinary shares have been treated as dilutive, as their inclusion in the diluted earnings per share calculation decreases 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 potential Ordinary shares outstanding at the balance sheet date, if those transactions had occurred before the end of the reporting period.



NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

 

7          ADJUSTED PROFIT BEFORE AND AFTER TAXATION

 

The reconciliation of profit before taxation from continuing operations and adjusted profit before taxation from continuing operations is as follows:


2010

2009


£m

£m




Profit before taxation

4.2 

20.6 

Intangibles amortisation and impairment (excluding software amortisation)

2.8 

3.2 

Restructuring and other costs

 6.8 

-  

Loss on disposal of property and property provisions

1.5 

-  

Costs in relation to business acquisition activity

1.4 

-  

Pension credits

(2.2)

(12.0)

Exceptional finance costs in respect of bank fees

-  

0.4 

Adjusted profit before taxation

14.5 

12.2 

Taxation on adjusted profit

(3.9)

(3.3)

Adjusted profit after taxation attributable to continuing operations

10.6 

8.9 

 

 

 

8          DIVIDENDS

 

During the year an interim dividend of 0.27 pence per share was paid (2009: 0.25 pence per share), utilising Shareholders' funds of £0.7 million (2009: £0.6 million).  The Directors propose the payment of a final dividend in respect of the year ended 31st December 2010 of 0.55 pence per share (2009: 0.50 pence).  This will be paid on 20th May 2011 to Shareholders on the register on 26th April 2011 and will utilise Shareholders' funds of £1.4 million.  In accordance with IAS 10, no amount payable is recognised at 31st December 2010 in respect of this proposed dividend.

 

 

 

9          RETIREMENT BENEFIT OBLIGATIONS

 

The Group has applied the requirements of IAS 19 Employee Benefits (revised December 2004) to its employee pension schemes and post-retirement healthcare benefits.

 

As part of the Group's objective to reduce its overall pension liability, additional contributions of £1.3 million and £0.3 million (2009: £1.2 million and £0.3 million) were paid to the Johnson Group Staff Pension Scheme and the WML Final Salary Pension Scheme respectively, during the period to 31st December 2010.  No additional contributions were paid to the Semara Augmented Pension Plan (2009: nil).

 

Following discussions with the Group's appointed actuary it has been identified that an actuarial loss of £1.5 million (2009: loss of £13.6 million) should be recognised in the year to 31st December 2010.  This is as a result of the scheme assets and liabilities performing differently to previous assumptions and changes to the assumptions used in calculating scheme liabilities.

 

During the year the retirement benefit obligations have reduced as a result of a reduction in liabilities due to a past service credit of £2.2 million, details of which are given in note 3.

 

The gross retirement benefit liability and associated deferred tax asset thereon, together with the net liability is shown below:

 


2010

£m

2009

£m




Gross retirement benefit liability

16.8 

20.4 

Deferred tax asset thereon

(4.5)

(5.7)

Net liability

12.3 

14.7 

 

The reconciliation of the opening gross retirement benefit liability to the closing gross retirement benefit liability is shown below:

 


2010

£m

2009

£m




Opening gross retirement benefit liability

20.4 

20.6 

Current service cost

0.5 

0.5 

Past service cost

(2.2)

(2.5)

Curtailment gain

(9.9)

Notional interest

(0.8)

0.7 

Employer contributions

(2.5)

(2.5)

Actuarial loss

1.5 

13.6 

Utilisation of healthcare provision

(0.1)

(0.1)

Closing gross retirement benefit  liability

16.8 

20.4 



NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

 

10        BUSINESS COMBINATIONS AND DISCONTINUED OPERATIONS

 

ACQUISITIONS

 

During the year the Group acquired seven Facilities Management contracts and six related special purpose companies ("SPC") from Jarvis PLC (in administration).

 

Details of the acquired contracts are given below:

 

Date of Acquisition

Facilities Management Contract

Name of Related SPC

Country of Incorporation





6th May 2010

Hospital in Newbury

N/A

N/A

3rd June 2010

School in Dorset

Colfox School Services Limited

England

28th June 2010

School in Leeds

Cardinal Heenan School Services Limited

England

27th August 2010

Hospital in Dundee

Dundee Healthcare Services Limited

Scotland

16th September 2010

School in Hillingdon, London

Barnhill School Services Limited

England

1st December 2010

School in Stirlingshire

Balfron Schools Services Limited

Scotland

23rd December 2010

Two schools in East Renfrewshire

East Ren Schools Services Limited

Scotland

 

In all cases 100% of the share capital of the SPC was acquired.

 

All contracts not already acquired by 3rd July 2010 have been operated under license from that date up until the date of acquisition.

 

On 27th August 2010 Johnsons Apparelmaster Limited acquired certain trade and assets from a small independent supplier of personal protective equipment.

 

Acquisitions during the year are as follows:


Consideration

Net Assets /

(Liabilities) Acquired

Fair Value Adjustments

Fair Value of Assets Acquired


£m

£m

£m

£m






Facilities Management contracts and related companies

2.6

(1.0)

3.6 

2.6 

Textile Rental trade and assets

0.1

-  

0.1 

0.1 

Total

2.7

(1.0)

3.7 

2.7 

 

All of the consideration was paid in cash during the year.

 

An analysis of the assets and liabilities acquired is provided below:



Net Assets /

(Liabilities) Acquired

 

Fair Value Adjustments

Fair Value of Assets Acquired



£m 

£m 

£m






Intangible assets - contracts acquired


-  

4.1 

4.1 

Receivables


1.1 

(0.1)

1.0 

Cash - Lifecycle funds


2.3 

-  

2.3 

Cash - Other


1.1 

-  

1.1 

Payables


(5.5)

(0.3)

(5.8)

Total


(1.0)

3.7 

2.7 

 

In addition, professional fees of £1.4 million have been charged to the Income Statement in respect of business acquisition activity.  Of this amount, £0.2 million remains payable at the year end.

 

An analysis of net cash flows in respect of business acquisition activity is provided below:





£m






Consideration paid




2.7 

Professional fees paid




1.2 

Cash acquired - Lifecycle funds




(2.3)

Cash acquired - Other




(1.1)

Total




0.5 

 

Since acquisition (or, if earlier, since being operated under license) the acquired Facilities Management contracts and related companies have generated profits of £0.3 million on revenue of £5.6 million.  Had all contracts and companies been owned since the start of the year the anticipated overall profit generated would have been £0.6 million on revenue of £10.0 million.



NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

 

10        BUSINESS COMBINATIONS AND DISCONTINUED OPERATIONS (continued)

 

DISPOSALS

There were no disposals during the year.

 

On 14th December 2009, and effective from the end of November 2009, Workplace Engineering Limited disposed of its trade and certain assets for an initial cash consideration of £0.2 million.  A further £0.1 million of deferred consideration was received during 2010.

 

The revenue and result from discontinued operations (including £1.6 million goodwill impairment in 2009) together with the post-tax profit or loss on disposal is detailed below:


2010

2009


£m

£m




Revenue from discontinued operations

-  

4.0 




Loss before taxation from discontinued operations

(0.2)

(4.3)

Taxation

0.1 

0.9 

Loss for the period

(0.1)

(3.4)




Consideration (net of disposal costs)

0.1 

0.2 

Total net assets disposed of

-  

(0.3)

Pre-tax gain / (loss) on disposal

0.1 

(0.1)

Taxation

  -  

-  

Profit / (loss) on disposal

0.1 

(0.1)




Retained loss from discontinued operations

-   

(3.5)

 

 

Total Net Assets Disposed


2010

2009


£m

£m




Intangible assets

0.1 

Property, plant and equipment

0.1 

Stock

0.1 

Trade and other receivables

0.4 

Trade and other payables

(0.4)


0.3 

 

 

Cash Received from Disposals


2010

2009


£m

£m




Cash received from the disposal of Workplace Engineering

0.1

0.2 

Total cash received in respect of disposals included within the Statement of Cash Flows

0.1

0.2 

 

 

The cash flows (excluding proceeds from disposal) from discontinued operations included within the Consolidated Statement of Cash Flows are as follows:


2010

2009


£m

£m




Net cash (used in) / generated from operating activities

(0.6)

0.1 

Net cash used in investing activities

-  

(0.2)

Net cash flow

(0.6)

(0.1)



NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

 

11        ANALYSIS OF NET DEBT

 

Net debt is calculated as total borrowings less cash and cash equivalents (excluding Lifecycle funds), less unamortised facility fees.


At 1

January

2010

Cash Flow

Other

Non-cash

Changes

At 31 December 2010


£m

£m

£m

£m






Cash and cash equivalents - per Statement of Cash Flows

0.2 

(1.6)

-  

(1.4)

Less: Lifecycle funds

(1.8)

-  

(1.8)

Cash and cash equivalents (excluding Lifecycle funds)

0.2 

(3.4)

-  

(3.2)

Debt due within one year

(7.2)

5.0 

-  

(2.2)

Debt due after more than one year

(59.5)

7.5 

(0.7)

(52.7)

Finance leases

(1.2)

0.8 

(1.0)

(1.4)


(67.7)

9.9 

(1.7)

(59.5)

 

Non-cash changes represent the effects of the recognition and subsequent amortisation of issue costs relating to the bank facility and new finance leases entered into during the year.

 

 

 

12        RECONCILIATION OF NET CASH INFLOW TO MOVEMENT IN NET DEBT

 


2010

2009


£m

£m




Decrease in cash during the year - per Statement of Cash Flows

(1.6)

(5.0)

Movement in Lifecycle funds

(1.8)

Decrease in cash excluding Lifecycle funds

(3.4)

(5.0)

Cash outflow on change in debt and lease financing

13.3 

14.5 

Change in net debt resulting from cash flows

9.9 

9.5 

Movement in unamortised issue costs of bank loans

(0.7)

1.0 

New finance leases

(1.0)

-  

Other non-cash movement in net debt

-   

0.3 

Movement in net debt in year

8.2 

10.8 

Opening net debt

(67.7)

(78.5)

Closing net debt

(59.5)

(67.7)

 

 

 

13        ABRIDGED ACCOUNTS

 

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31st December 2010 or 31st December 2009 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts.

 

Statutory accounts for 2009 have been delivered to the Registrar of Companies, and those for 2010 will be delivered as soon as practicable but not later than 30th April 2011.  The Auditors have reported on those accounts; their reports were unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

 

 

 

14        FORWARD LOOKING STATEMENTS

 

Certain statements in this Preliminary Announcement are forward-looking. The terms 'expect', 'should be', 'will be' and similar expressions identify forward looking statements. Although the Board believes that the expectations reflected in these forward-looking statements are reasonable, such statements are subject to a number of risks and uncertainties and actual results and events could differ materially from those expressed or implied by these forward-looking statements.

 

 

 

15        PRELIMINARY ANNOUNCEMENT

 

A copy of this Preliminary Announcement is available on request to all Shareholders by post from The Company Secretary, Johnson Service Group PLC, Johnson House, Abbots Park, Monks Way, Preston Brook, Cheshire WA7 3GH.  The Announcement can also be accessed on the Internet at www.johnsonplc.com.

 

The Annual Report will be posted to Shareholders on or before 18th March 2011.

 

 

 

16        APPROVAL

 

The Preliminary Announcement was approved by the Board of Directors on 8th March 2011.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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