31st Jul 2015 12:55
LONDON (Alliance News) - Berendsen PLC on Friday said its profit and revenue both took a hit from the weak euro in the first half of 2015, but the textile services company hiked its dividend as its underlying revenue improved in the period.
The FTSE 250-listed company, which provides cleaning and maintenance services for workwear and linen, said its pretax profit in the first half fell to GBP48.5 million from GBP50.6 million, as revenue fell to GBP493.7 million from GBP517.3 million. At constant currencies, however, revenue was up by 3% in the half and rose by 2% on an underlying basis, which strips out the contribution from acquisitions.
The company said it will pay an interim dividend of 10 pence per share, up 5% from the 9.5p it paid a year earlier, thanks to the more robust underlying performance of the business.
"We are pleased to report good operational progress for the period in line with our expectations and continued momentum towards achieving our strategic objectives. Our reported results were adversely impacted by currency translation and, although this is likely to persist, the board expects to achieve a further year of good underlying progress in 2015," said Iain Ferguson, Berendsen's chief executive.
Shares in Berendsen were up 0.8% to 1,008.00 pence on Friday.
Revenue in Berendsen's workwear business was down by 6% in the half, but was up by 2% on a constant currency basis, while the weak euro also dragged down its operating profit, which also was higher in constant currencies. The group said it continues to be focused on improving productivity in the division by upgrading its systems and technology, which have already lead to better order processing and delivery order times. Contract retention in the business also improved in the half, and the group saw its revenue grow by 8% in Germany, where it has been expanding its sales team.
In the UK, Berendsen has been restructuring its production plants and converting them to the new systems and expects to start work on another new plant conversion in the first half of 2016, once volumes from its shuttered site in Croydon are shifted to other plants. Elsewhere, economic activity in some key end markets, including Denmark, Sweden and Holland, was slow in the first half, though constant currency revenue did grow in all three.
The group's facility business, which comprises its mats, washroom and cleanroom services, also saw revenue and profit fall on a reported basis, but both were higher in constant currencies. The group has been increasing its sales team in order to try to capture the opportunity this market offers, given the low level of outsourcing many companies have undertaken. The increase in the sales team will, however, constrain margins in the business in the short term.
In Central Europe, the facility business saw substantial revenue growth, driven by strong trading in Poland and the Czech Republic, and Berendsen said its cleanroom business continued to deliver robust organic growth and strong margins in the half.
UK flat linen revenue was slightly lower year-on-year thanks to contract churn in the hotel sector and the national contract it exited last year. In the healthcare arm, the group has been generating strong add-on sales from existing contracts but said there has been limited outsourcing activity in this segment.
Flat linen revenue outside the UK was down by 7% but also rose in constant currencies, as the group secured good new contract wins with Scandinavian hotels and capitalised on the downsizing by one of its competitors in the market in order to capture more share.
Clinical solutions and decontamination, the group's smallest revenue-generator, saw revenue up by 1% in the half, thanks to higher sales of consumables and single-use surgical drapes and gowns, though this was partially offset by lower volumes in re-usable textiles.
By Sam Unsted; [email protected]; @SamUAtAlliance
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