27th Feb 2009 07:00
FOR IMMEDIATE RELEASE 27th February 2009
THE DAVIS SERVICE GROUP PLC
Preliminary results announcement
for the year ended 31st December 2008
A Resilient Business in Challenging Times
Financial Highlights
|
Revenue |
Up 16% to £953.9 million (2007: £822.1 million), up 7% at constant currency |
|
Adjusted operating profit* |
Up 9% to £116.6 million (£106.6 million) down 0.7% at constant currency |
|
Adjusted profit before tax* |
Up 1% to £91.3 million (£90.3 million) |
|
Adjusted earnings per share* |
Up 2% to 39.3p (38.4p) |
|
Free cash flow |
Down 1% to £47.2 million (£47.8 million), up 11% for textile maintenance |
|
Dividend per share |
Up 3% to 20.0p (19.4p) |
|
Profit before taxation |
Down 23% to £60.4 million (£78.7 million) |
|
Basic earnings per share |
Down 34% to 24.5p (37.1p) |
* before exceptional items and amortisation of customer contracts and intellectual property rights
Operational Highlights
Nordic region
Organic revenue growth of 4%
Margin improvement in developed markets of Denmark, Sweden and Norway
Acquisitions in Baltic countries progressing well
Continent region
Organic revenue growth of 7% in Holland, Poland and Workwear in Germany
Expected decline in German Healthcare being addressed by restructuring programme
Sales operations commenced in Czech Republic
UK and Ireland
Organic revenue growth of 2%
Profit improvement in core textile maintenance business
Further progress in Clinical Solutions and Decontamination
Christopher Kemball, Chairman of Davis Service Group, commented:
"We are pleased to report continued growth for 2008 and an increased dividend for the year.
"The group is well placed to meet the demands of the current testing conditions. We are responding to the economic uncertainties by taking advance action to reduce costs in those parts of the group that are most directly affected. Our balance sheet will remain robust due to the cash generative nature of our business and by close management of the group's capital expenditure. We have secure financing with approximately £190 million of headroom at year-end on our facilities which are committed until at least 2012.
"Uncertain market conditions look set to continue but our management team has considerable experience and is committed to addressing the challenge. The Board remains confident in the medium and long term prospects for the group."
For further information contact:
The Davis Service Group Plc Financial Dynamics
Roger Dye, Chief Executive Richard Mountain
Kevin Quinn, Finance Director Telephone 020 7269 7121
Telephone 020 7269 7121 (today until 12 noon) Telephone 020 7259 6663 (thereafter)
Overview of the 12 months ended 31st December 2008
We are pleased to report continued growth in 2008 for The Davis Service Group, despite the general economic downturn that progressively took hold during the second half of the year. Overall, we have delivered on the expectations we set out in our Interim Management Statement in October 2008. We have been preparing our operations for the changing economic conditions and ensuring that we are positioned to take both timely and effective action.
At the half year, we reported that 2008 had started strongly, but we could see evidence of the economic downturn developing, especially in our UK linen operations and German Healthcare. This early recognition allowed us to put in place programmes and contingency plans aimed at mitigating the adverse impacts that we subsequently encountered during the second half. We expect these difficult conditions to continue in 2009.
However, despite these challenging times, the markets we service present us with growth opportunities. We have continued our plant roll-out in Poland; we have developed our businesses in the Baltics and the Czech Republic; we have launched new services in Scandinavia and we have started construction of facilities for our two UK surgical instrument decontamination contracts which we expect will commence service during the second half of 2009.
To handle both a downturn in mature markets and growth opportunities in new markets requires focused and experienced management. At all levels, from the six man Executive Board and country Board members to local plant, sales, service and administration managers, our management team understands the requirements of our broad range of customers and will take appropriate action to address our customers' changing fortunes.
Results
Revenue increased to £953.9 million in the year, up 16% (2007: £822.1 million). Adjusted operating profit (before exceptional items and amortisation of customer contracts and intellectual property rights) was £116.6 million, compared with £106.6 million last year, an increase of 9%. We have seen a significant strengthening of the European currencies with foreign exchange benefits to revenue and adjusted operating profit of £75.8 million and £10.7 million respectively. Excluding the impact of foreign exchange, revenue grew 7% and adjusted operating profit declined by 0.7%. The underlying growth in revenue excluding acquisitions was 2%. Our net finance expense was £25.3 million compared with £16.3 million last year, reflecting the acquisitions we have made, the effect of foreign exchange and the higher variable rates in Continental European currencies which were charged during the majority of 2008. Adjusted profit before tax was £91.3 million (£90.3 million) with an overall net favourable impact of exchange rates in the year of £7.4 million. Adjusted earnings per share were 39.3 pence (38.4 pence) an increase of 2%. Our second half 2008 adjusted earnings per share of 22.2 pence (21.5 pence) showed a 3% growth.
Our tax rate on adjusted profit before tax was 26.4%, down from 27.1% last year as a result of the lower rates in Germany and the UK. Our group rate is expected to remain at around 26.5% in 2009.
In 2008 net exceptional costs totalled £11.5 million. These included restructuring costs (£6.6 million) primarily in Germany where we took action to lower the direct cost base of our Healthcare business. In particular, we announced the closure of two plants, and refocused central functions in Germany so that they are more closely aligned to the growing Workwear business. Given the current economic uncertainty, we put on hold a number of growth initiatives throughout the year, incurring exceptional costs of £2.2 million. A net cost of £2.7 million was incurred in preparing property for disposal.
Amortisation of acquired customer contracts and intellectual property rights increased to £19.4 million (£12.4 million) resulting from the acquisitions we have made both in 2008 and earlier. After these items and exceptional costs, operating profit was £85.7 million (£95.0 million), profit before taxation was £60.4 million (£78.7 million) and basic earnings per share was 24.5p compared with 37.1p in 2007.
During the year, we invested selectively in the higher growth areas of our business. Our net capital expenditure increased to £175.0 million (£169.3 million), reflecting exchange rate movements and in particular investing in new plants for Workwear and Facilities in the rapidly growing market of Poland and also commencing the construction of facilities for our UK surgical instrument decontamination contracts (£7.2 million spend in 2008). We reduced our textile spend in constant currency terms by £12 million to £115.7 million reflecting the changing economic circumstances as the year progressed. We have also continued to make improvements in the terms for sourcing of our textiles and savings of approximately £10 million were negotiated in 2008. This programme will continue into 2009 as we have identified more segments of our business that can be more economically sourced from the Far East.
Our capital expenditure programme for 2009 has identified a number of expansion opportunities but these will only be approved as the trading conditions justify. Investment in textiles is monitored closely and management are able to react to adjust these investments, which would have an immediately favourable impact on cash flow and on profitability over time.
2008 free cash flow of £47.2 million (£47.8 million) reflected the investments that have been progressively made throughout the year, including the initial investment in decontamination facilities in the UK. Free cash flow of our textile maintenance businesses was £54.6 million (£49.1 million), 11% higher than last year. Net debt at 31 December 2008 was £544.1 million (£367.1 million). The impact of exchange rates increased net borrowings by £131.4 million with continental currencies at their strongest at year end, notably the Euro at €1.03:£1. Since year end, with Sterling strengthening somewhat, the impact of exchange rates has been reduced by almost £45 million. £61.6 million was invested in acquisitions including deferred consideration and financial liabilities assumed, made primarily in the first half of the year. The group had total facilities of £788m at 31 December 2008, committed to between 2012 and 2018. Fixed borrowings totalled approximately £416 million with an average interest rate of 4.3% per annum in place until 2010 at the earliest.
We ended the year with net retirement benefit obligation liabilities for the group of £23.5 million (£5.7 million). These liabilities are primarily in the UK, Sweden, Ireland and Germany and are regularly reviewed by both the group and the pension fund trustees. The next tri-annual valuation is scheduled for February 2010.
Overall the group retains a strong balance sheet with net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) of 1.97 times at year end, compared with a covenant level of not more than 3 times.
The Board is recommending a final dividend of 13.5p, which, together with the interim dividend of 6.5p paid in October 2008, gives a total of 20.0p, an increase of 3% on last year. The dividend will be paid on 7 May 2009 to shareholders on the register at the close of business on 17 April 2009.
Nordic Region
|
We have seen growth in higher margin Workwear and Facilities and benefited from good continued organic growth following the investment in our sales forces.
|
||
|
£m |
2008 |
2007 |
|
Revenue |
326.5 |
263.8 |
|
Adjusted operating profit* |
51.2 |
43.8 |
|
Adjusted operating margin* |
15.7% |
16.6% |
|
*Before exceptional items and amortisation of customer contracts and intellectual property rights.
|
||
Our Nordic region covers the country operations in Denmark, Sweden (including our direct sales business Björnkläder), Norway and Finland. In January 2008, we acquired textile maintenance businesses in the Baltic countries of Estonia, Latvia and Lithuania. We are market leading across the region as a whole, with 51 plants and nearly 3,500 staff.
Revenue in our Nordic region increased 24% to £326.5 million (£263.8 million) with adjusted operating profit up 17% to £51.2 million (£43.8 million). At constant currency revenue grew 9% and adjusted operating profit 3%. Organic revenue growth excluding acquisitions was 4%. In our more developed textile markets of Denmark, Sweden and Norway our operating margin increased by 0.5% in 2008 with an increase of 1.5% in the second half, as the expected benefit of sales force investments began to be realised. In addition, we increased our margin for the year in each of these markets individually. The decrease of 0.9% in the total margin for the region reflected our investment in Finland and the Baltics countries where we incurred losses in the start up and integration phases, but where profitable growth opportunities exist.
In Denmark, we advanced further with a strong performance, delivering good organic growth in our higher margin Workwear and Facilities markets. Our Workwear business has a strong position in public services, pharmaceutical and food industries and should be relatively defensive in the current economic conditions. In Hotels we continue to work towards a lower cost operation and we completed the construction of a new hotel linen plant, which consolidated the production of two older plants. We were able to realise cash from the sale of the existing sites. This will help us in managing the lower volumes we are seeing in this market at the moment with improved efficiency.
In Sweden, we made further progress making bolt-on acquisitions in the early part of the year to strengthen our overall market position. We developed new market areas, such as local community services whose staff provide care services to people at home and new concepts such as washable shoes. However the local economic climate worsened in the second half of the year in the manufacturing sector of the economy, which is significant for our Swedish Workwear business and where we have a strong market position. We have already seen the impact of reduced employment levels on our Workwear revenues while our Healthcare and Facilities businesses continued to make progress. Hotels have also seen lower volumes, as expected.
Björnkläder is our direct Workwear and protection equipment supplies business with a strong brand and revenues of approximately £50 million. It has a network of 24 retail outlets in Sweden. There was strong growth during the first half of the year which, although it reduced in the second half, helped drive an increased operating profit for the year.
Our Norwegian business had a record year as clear leader in the growing Workwear and Facility market. The Bergen plant which opened in 2007 is operating at good capacity utilisation and saw particularly strong growth of above 20%. Overall we saw organic growth of 15%, which contributed to adjusted operating profit and margin improvements. We made good progress with our mat offering and made an acquisition in washroom services, broadening our service base.
We continued to develop our business in Finland, opening our new Helsinki plant in December, which will be the base of our operations in Finland. As expected, we incurred losses during this start up phase. During the year we entered into agreements to dispose of the final part of our flat linen business in 2009 and the focus of the business will now solely be on the Workwear and Facilities markets.
In January 2008, we entered the Baltic region with our textile service operations. We are pleased with acquisitions of mat companies in Estonia, Latvia and Lithuania where underlying sales growth is around 15%. Now fully integrated into the group, these companies will form the base for a broader product and service offering at the right time in the future.
We invested £46.9 million in new acquisitions, primarily in the first half of the year. These investments have brought new profitable customer contracts, provided useful additional capacity and have further consolidated our leading market positions, particularly in Denmark and Sweden. In addition, the investments allowed us to enter new Baltic territories with profitable growth opportunities. We believe there will be opportunities for further bolt-on acquisitions but we are particularly cautious on timing and pricing in the current environment.
Continent Region
|
Good organic revenue growth in Holland, Poland and German Workwear with margin development. The German Healthcare business has been restructured to address the decline in profitability.
|
||
|
£m |
2008 |
2007 |
|
Revenue |
226.2 |
191.8 |
|
Adjusted operating profit* |
29.2 |
29.2 |
|
Adjusted operating margin* |
12.9% |
15.2% |
|
*Before exceptional items and amortisation of customer contracts and intellectual property rights.
|
||
Our Continent region covers the country operations of Germany, Austria, Holland and Poland with 32 plants and 4,000 staff. In January 2008, we commenced trading through a new company in the Czech Republic. We have strong market positions in Holland, Poland and German Healthcare.
Revenue in our Continent region grew 18% to £226.2 million (£191.8 million) while adjusted operating profit was flat at £29.2 million. At constant currency, revenue grew 1% but adjusted operating profit declined by 14%. The organic revenue growth delivered by our Dutch, Polish, and German Workwear businesses was offset by the expected decline in German Healthcare. Excluding German Healthcare, where revenue was 7% lower in local currency, underlying growth was 7%.
Germany remains a key market with revenues of approximately £135 million. The Workwear business, which now represents over 25% of total German revenue, continued to develop with top line growth of 5% and with new sales achieving the target level for the year, including a stronger second half. Adjusted operating profit margins continued to progress. Further resources were redirected to the Workwear business from Healthcare and these added costs are expected to be offset by improvements in the operational efficiency of the Workwear business. This business has a large proportion of catering and food customers, as well as public services, and these customers are expected to be more stable in the current environment. Overall, we are pleased with the progress in this part of the business, which is targeted for longer term growth in a fragmented market.
As expected the Healthcare business in Germany showed a reduction in both revenue and profits. The adjusted operating margin finished the year at 2%, down from 7% in 2007. The market continued to operate with excess capacity and during the second half of the year we reduced further the cost base in operations to align it with the lower volume and difficult pricing environment. As indicated above, we are also allocating more resource to support the growth potential in Workwear and reducing the overhead support cost in Healthcare. The restructuring, announced in December, will result in a reduction in headcount of 410, two plant closures and restructuring costs of £6.3 million. This is largely a cash cost, which will be paid in the first half of 2009. In contrast, our Healthcare business in Austria, which is more stable and has higher margins, grew its revenues.
Our business in Holland had a good result with revenue growth of 7%, primarily organic, and improved its adjusted operating margin. Holland is a competitive market for us but we captured new sales opportunities whilst retaining our existing customers by investing in our salesforce and service and by improving their efficiency. In 2008, we also invested in clean room capacity to ensure we captured the maximum opportunity in this niche, higher margin part of the business. We have a very solid business with a low customer churn rate of below 4%.
2008 was an outstanding year for our Polish business with revenue of almost £17 million, up 30%. Our new plants in Warsaw and Poznan are operating well and we have opened clean room facilities in the Poznan site, which is the first such facility in Poland to capture this growing opportunity. We commenced construction of a new plant in Wroclaw, which should be open in April 2009, and we made two bolt-on acquisitions during the year. Our growth is driven by both the high margin Workwear and mat businesses, with mats now accounting for over 20% of the total revenue.
We established a company in the Czech Republic and completed the acquisition of land for a greenfield site for Workwear and Facilities services. We are building a salesforce, which is already delivering sales and a growing order intake, which is being serviced from our plant in the south of Poland. We have also established a Slovakian company and are in the process of recruiting a salesforce.
Acquisitions in the Continent region totalled £6.7 million.
UK and Ireland
|
Our core textile maintenance business has performed well despite the sharp downturn in the economy. We have achieved financial close on two decontamination contracts and have commenced construction of the new sites.
|
||
|
£m |
2008 |
2007 |
|
Revenue |
401.2 |
366.5 |
|
Adjusted operating profit* |
40.2 |
38.2 |
|
Adjusted operating margin* |
10.0% |
10.4% |
|
*Before exceptional items and amortisation of customer contracts and intellectual property rights.
|
||
Our revenue grew by 10% to £401.2 million (£366.5 million) including £55.4 million (£35.6 million) from Clinical Solutions and Decontamination which has been reported as a separate segment. Organic revenue growth was 5% at the half year but ended the year at 2% because of the lower volumes in the hotel linen business. The plants in operation number 54, with 9,800 staff in the region.
Adjusted operating profit was up 5% to £40.2 million (£38.2 million), including £3.8 million (£2.9 million) for Clinical Solutions and Decontamination Services. The core textile maintenance businesses in the UK and Ireland have performed solidly, with revenue up 5% to £345.8 million (£330.9 million) and adjusted operating profit 3% higher at £36.4 million (£35.3 million) resulting in a margin of 10.5%, close to the previous year.
As indicated at the time of the Interim Announcement in August 2008, our Hotel business volumes have reduced and in the second half they were 5% lower year on year as a result of the economic downturn. The London market was particularly affected and has seen a progressive softening in the second half and into 2009. We reacted quickly and closed two plants in response. We are also redirecting capacity towards the growing hospital volumes. We took the opportunity of falling energy prices to fix and secure a majority of our gas supply for 2009 and we will seek in our pricing to recover cost inflation, which has come down from its peak in the summer. Overall the division is reacting well to the challenging economic environment.
Our Healthcare division saw revenue grow at around 10% with profits moving ahead as a result of higher volumes and improved pricing. The main drivers for this good volume growth were new contract wins from further outsourcing by NHS Trusts and the continued emphasis on cleanliness and hygiene at NHS hospitals, which has increased underlying volumes on existing contracts by 4%.
Performance in the Workwear division was stable during the year, growing revenues and benefiting from the additional contracts acquired in 2007. Opportunities for new sales remain with a significant level of new contracts signed in quarter four of 2008. This momentum will be required to offset the potential impact of lower customer volumes.
Our Sunlight business has a direct sales business with revenues of £15 million which complements primarily our hotel contract business. It was significantly impacted by the economy during the second half of the year and we took mitigating actions to reduce costs.
The Clinical Solutions and Decontamination business has continued to make good progress through the year following its integration into the group. The sterile consumables business is generating good contract wins and there is a pipeline of profitable opportunities. On a pro forma basis the business grew 7%. During the year we started the construction of the four new decontamination centres for the North West London and Kent contracts which are expected to begin operation during the second half of 2009. Capital expenditure of £7.2 million has been incurred in 2008 with £11 million expected in the first half of 2009. During 2008 we have seen progress on the NHS tendering of contracts for the National Decontamination Programme stall. The driver for outsourcing of decontamination services (investment to meet regulatory compliance) remains strong and we are committed to the opportunities that this will bring in the longer term. Our priority is to establish our existing contracts where we see the opportunity for profitable growth.
During the year, we paid £7 million of deferred consideration to the previous owners of the business on achieving financial close on the two decontamination contract awards. No further deferred consideration is payable on this acquisition.
Our operations in Ireland grew revenue 6% in constant currency with higher adjusted operating profit margin. The business has benefited in recent years from a well executed textile management programme that has reduced textile investment and depreciation charges significantly. The Irish economy, particularly around Dublin, has been impacted by the economic downturn but we are well placed with good management to meet the challenges that this has brought. A small acquisition was transacted in Ireland for £1.0m consideration.
Outlook
The group is well placed to meet the demands of the current testing conditions. We are responding to the economic uncertainties by taking advance action to reduce costs in those parts of the group that are most directly affected. Our balance sheet will remain robust due to the cash generative nature of our business and by close management of the group's capital expenditure. We have secure financing with approximately £190 million of headroom at year-end on our facilities which are committed until at least 2012.
Uncertain market conditions look set to continue but our management team has considerable experience and is committed to addressing the challenge. The Board remains confident in the medium and long term prospects for the group.
Consolidated income statement
For the year ended 31st December 2008
|
|
Notes |
|
Year to 31st December2008£m |
|
Year to31st December 2007£m |
|
Continuing operations |
|
|
|
|
|
|
Revenue |
1 |
|
953.9 |
|
822.1 |
|
Cost of sales |
|
|
(519.0) |
|
(455.4) |
|
Gross profit |
|
|
434.9 |
|
366.7 |
|
Other operating income |
|
|
0.9 |
|
3.9 |
|
Distribution costs |
|
|
(180.5) |
|
(153.4) |
|
Administrative expenses |
|
|
(135.4) |
|
(105.5) |
|
Other operating expenses |
|
|
(34.2) |
|
(16.7) |
|
Operating profit |
1 |
|
85.7 |
|
95.0 |
|
Analysed as: |
|
|
|
|
|
|
Operating profit before exceptional items and amortisation of customer contracts and intellectual property rights |
1 |
|
116.6 |
|
106.6 |
|
Exceptional items |
2 |
|
(11.5) |
|
0.8 |
|
Amortisation of customer contracts and intellectual property rights |
|
|
(19.4) |
|
(12.4) |
|
Operating profit |
1 |
|
85.7 |
|
95.0 |
|
Finance expense |
|
|
(28.7) |
|
(21.7) |
|
Finance income |
|
|
3.4 |
|
5.4 |
|
Profit before taxation |
|
|
60.4 |
|
78.7 |
|
Taxation |
3 |
|
(18.3) |
|
(15.1) |
|
Profit for the year |
|
|
42.1 |
|
63.6 |
|
Analysed as: |
|
|
|
|
|
|
Profit attributable to minority interest |
|
|
0.4 |
|
0.4 |
|
Profit attributable to equity shareholders |
|
|
41.7 |
|
63.2 |
|
Earnings per share expressed in pence per share |
|
|
|
|
|
|
- Basic |
5 |
|
24.5 |
|
37.1 |
|
- Diluted |
5 |
|
24.5 |
|
37.0 |
Consolidated statement of recognised income and expense
For the year ended 31st December 2008
|
|
Notes |
|
Year to31st December2008£m |
|
Year to31st December2007£m |
|
Profit for the year |
|
|
42.1 |
|
63.6 |
|
Exchange adjustments offset in reserves |
6 |
|
38.8 |
|
13.3 |
|
Actuarial (losses)/gains recognised in the pension scheme |
|
|
(17.8) |
|
23.1 |
|
Gain on cash flow hedges |
6 |
|
3.7 |
|
3.3 |
|
Tax on items taken directly to equity |
|
|
3.7 |
|
(11.3) |
|
Net gains not recognised in income statement |
|
|
28.4 |
|
28.4 |
|
Total recognised income for the year |
|
|
70.5 |
|
92.0 |
|
Attributable to: |
|
|
|
|
|
|
Minority interest |
|
|
0.4 |
|
0.4 |
|
Equity shareholders |
|
|
70.1 |
|
91.6 |
Consolidated balance sheet
As at 31st December 2008
|
|
Notes |
|
As at 31st December2008£m |
|
As at 31st December2007£m |
|
Assets |
|
|
|
|
|
|
Goodwill |
|
|
488.0 |
|
383.7 |
|
Other intangible assets |
|
|
55.6 |
|
40.1 |
|
Property, plant and equipment |
|
|
576.6 |
|
469.4 |
|
Assets classified as held for sale |
|
|
3.3 |
|
2.2 |
|
Deferred tax assets |
|
|
16.6 |
|
9.0 |
|
Derivative financial instruments |
|
|
54.5 |
|
3.5 |
|
Trade and other receivables |
|
|
3.6 |
|
- |
|
Pension scheme surplus |
|
|
6.9 |
|
12.9 |
|
Total non-current assets |
|
|
1,205.1 |
|
920.8 |
|
Inventories |
|
|
43.4 |
|
30.6 |
|
Income tax receivable |
|
|
8.5 |
|
10.5 |
|
Derivative financial instruments |
|
|
1.1 |
|
0.4 |
|
Trade and other receivables |
|
|
171.7 |
|
161.7 |
|
Cash and cash equivalents |
|
|
72.5 |
|
82.2 |
|
Total current assets |
|
|
297.2 |
|
285.4 |
|
Liabilities |
|
|
|
|
|
|
Interest bearing loans and borrowings |
|
|
(3.9) |
|
(3.9) |
|
Derivative financial instruments |
|
|
(0.2) |
|
(0.6) |
|
Income tax payable |
|
|
(20.7) |
|
(16.2) |
|
Trade and other payables |
|
|
(208.0) |
|
(188.7) |
|
Provisions |
|
|
(5.8) |
|
(0.6) |
|
Total current liabilities |
|
|
(238.6) |
|
(210.0) |
|
Net current assets |
|
|
58.6 |
|
75.4 |
|
Interest bearing loans and borrowings |
|
|
(612.7) |
|
(445.4) |
|
Derivative financial instruments |
|
|
(49.2) |
|
(15.4) |
|
Pension scheme deficits |
|
|
(30.4) |
|
(18.6) |
|
Deferred tax liabilities |
|
|
(72.8) |
|
(56.7) |
|
Provisions |
|
|
(2.5) |
|
- |
|
Total non-current liabilities |
|
|
(767.6) |
|
(536.1) |
|
Net assets |
|
|
496.1 |
|
460.1 |
|
Equity |
|
|
|
|
|
|
Share capital |
6 |
|
51.4 |
|
51.4 |
|
Share premium |
6 |
|
95.6 |
|
95.5 |
|
Other reserves |
6 |
|
11.1 |
|
8.4 |
|
Capital redemption reserve |
6 |
|
150.9 |
|
150.9 |
|
Retained earnings |
6 |
|
183.7 |
|
151.7 |
|
Total shareholders' equity |
|
|
492.7 |
|
457.9 |
|
Minority interest in equity |
6 |
|
3.4 |
|
2.2 |
|
Total equity |
|
|
496.1 |
|
460.1 |
Consolidated cash flow statement
For the year ended 31st December 2008
|
|
|
Notes |
|
Year to31st December2008£m |
|
Year to 31st December2007£m |
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Cash generated from operations |
7 |
|
262.8 |
|
246.4 |
|
|
|
Interest paid |
|
|
(28.1) |
|
(21.0) |
|
|
|
Interest received |
|
|
3.4 |
|
5.4 |
|
|
|
Income tax paid |
|
|
(15.9) |
|
(13.7) |
|
|
|
Net cash generated from operating activities |
|
|
222.2 |
|
217.1 |
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Acquisition of subsidiaries, net of cash acquired |
9 |
|
(50.3) |
|
(103.7) |
|
|
|
Purchases of property, plant and equipment |
|
|
(175.5) |
|
(172.1) |
|
|
|
Proceeds from the sale of property, plant and equipment |
|
|
6.0 |
|
8.0 |
|
|
|
Purchases of intangible assets |
|
|
(5.5) |
|
(5.2) |
|
|
|
Special pension contribution payments |
|
|
- |
|
(12.5) |
|
|
|
Receipt of loan notes |
|
|
- |
|
0.4 |
|
|
|
Net cash used in investing activities |
|
|
(225.3) |
|
(285.1) |
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Net proceeds from issue of ordinary share capital |
|
|
0.1 |
|
2.1 |
|
|
|
Purchase of treasury shares and own shares by the Employee Benefit Trust |
|
|
(2.1) |
|
(1.1) |
|
|
|
Drawdown of borrowings |
|
|
25.2 |
|
34.6 |
|
|
|
Repayment of finance leases/hire purchase liabilities |
|
|
(4.1) |
|
(3.4) |
|
|
|
Dividends paid to company's shareholders |
|
|
(33.8) |
|
(31.4) |
|
|
|
Dividends paid to minority interest |
|
|
(0.1) |
|
(0.1) |
|
|
|
Net cash (used in)/generated from financing activities |
|
|
(14.8) |
|
0.7 |
|
|
|
Net decrease in cash |
|
|
(17.9) |
|
(67.3) |
|
|
|
Cash at beginning of year |
|
|
82.2 |
|
149.7 |
|
|
|
Exchange gains/(losses) on cash |
|
|
8.2 |
|
(0.2) |
|
|
|
Cash at end of year |
|
|
72.5 |
|
82.2 |
|
|
|
Free cash flow |
|
|
47.2 |
|
47.8 |
|
|
|
Analysis of free cash flow |
|
|
|
|
|
|
|
|
Net cash generated from operating activities |
|
|
222.2 |
|
217.1 |
|
|
|
Purchases of property, plant and equipment |
|
|
(175.5) |
|
(172.1) |
|
|
|
Proceeds from the sale of property, plant and equipment |
|
|
6.0 |
|
8.0 |
|
|
|
Purchases of intangible assets |
|
|
(5.5) |
|
(5.2) |
|
|
|
Free cash flow from continuing operations |
|
|
47.2 |
|
47.8 |
|
Notes to the consolidated financial statements
1 Segment information
(a) Primary reporting format - business segments
Following a review of the reportable segments, the directors consider that the group now has two business segments: textile maintenance and clinical solutions and decontamination. The clinical solutions and decontamination business segment includes the Sunlight theatre textile business. The prior year results have been restated accordingly.
Based on the risks and returns the directors consider that the primary reporting format is by business segment and that the secondary reporting format is by geographical analysis by origin and destination. We provide additional disclosure for our secondary segment below.
The segment results for the year ended 31st December 2008 are as follows:
|
|
Continuing operations |
Textilemaintenance Nordic£m |
|
TextilemaintenanceContinent£m |
|
TextilemaintenanceUK and Ireland£m |
|
Total textile maintenance£m |
|
Clinical solutions anddecontamination £m |
|
Unallocated£m |
|
Group£m |
|
|
|
Revenue |
326.5 |
|
226.2 |
|
345.8 |
|
898.5 |
|
55.4 |
|
- |
|
953.9 |
|
|
|
Operating profit before exceptional items and amortisation of customer contracts and intellectual property rights |
51.2 |
|
29.2 |
|
36.4 |
|
116.8 |
|
3.8 |
|
(4.0) |
|
116.6 |
|
|
|
Exceptional items |
(1.6) |
|
(6.8) |
|
(2.1) |
|
(10.5) |
|
- |
|
(1.0) |
|
(11.5) |
|
|
|
Amortisation of customer contracts and intellectual property rights |
(7.6) |
|
(7.1) |
|
(4.7) |
|
(19.4) |
|
- |
|
- |
|
(19.4) |
|
|
|
Segment result |
42.0 |
|
15.3 |
|
29.6 |
|
86.9 |
|
3.8 |
|
(5.0) |
|
85.7 |
|
|
|
Net finance expense |
|
|
|
|
|
|
|
|
|
|
|
|
(25.3) |
|
|
|
Profit before taxation |
|
|
|
|
|
|
|
|
|
|
|
|
60.4 |
|
|
|
Taxation |
|
|
|
|
|
|
|
|
|
|
|
|
(18.3) |
|
|
|
Profit for the year |
|
|
|
|
|
|
|
|
|
|
|
|
42.1 |
|
|
|
Profit attributable to minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
0.4 |
|
|
|
Profit attributable to equity shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
41.7 |
|
|
|
Capital expenditure |
97.5 |
|
45.0 |
|
69.4 |
|
211.9 |
|
9.0 |
|
- |
|
220.9 |
|
|
|
Depreciation |
44.0 |
|
42.3 |
|
67.0 |
|
153.3 |
|
3.5 |
|
0.1 |
|
156.9 |
|
|
|
Amortisation |
9.6 |
|
7.3 |
|
4.8 |
|
21.7 |
|
1.0 |
|
- |
|
22.7 |
|
Capital expenditure comprises additions to property, plant and equipment and intangible assets, including additions resulting from acquisitions through business combinations.
1 Segment information continued
The segment results for the year ended 31st December 2007 are as follows:
|
|
Continuing operations |
Textile maintenance Nordic£m |
|
Textile maintenance Continent£m |
|
Textile maintenanceUK and Ireland£m |
|
Total textile maintenance£m |
|
Clinical solutions anddecontamination£m |
|
Unallocated£m |
|
Group£m |
|
|
|
Revenue |
263.8 |
|
191.8 |
|
330.9 |
|
786.5 |
|
35.6 |
|
- |
|
822.1 |
|
|
|
Operating profit before exceptional items and amortisation of customer contracts and intellectual property rights |
43.8 |
|
29.2 |
|
35.3 |
|
108.3 |
|
2.9 |
|
(4.6) |
|
106.6 |
|
|
|
Exceptional items |
- |
|
(2.1) |
|
2.6 |
|
0.5 |
|
- |
|
0.3 |
|
0.8 |
|
|
|
Amortisation of customer contracts and intellectual property rights |
(3.6) |
|
(5.1) |
|
(3.7) |
|
(12.4) |
|
- |
|
- |
|
(12.4) |
|
|
|
Segment result |
40.2 |
|
22.0 |
|
34.2 |
|
96.4 |
|
2.9 |
|
(4.3) |
|
95.0 |
|
|
|
Net finance expense |
|
|
|
|
|
|
|
|
|
|
|
|
(16.3) |
|
|
|
Profit before taxation |
|
|
|
|
|
|
|
|
|
|
|
|
78.7 |
|
|
|
Taxation |
|
|
|
|
|
|
|
|
|
|
|
|
(15.1) |
|
|
|
Profit for the year |
|
|
|
|
|
|
|
|
|
|
|
|
63.6 |
|
|
|
Profit attributable to minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
0.4 |
|
|
|
Profit attributable to equity shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
63.2 |
|
|
|
Capital expenditure |
56.2 |
|
69.2 |
|
99.3 |
|
224.7 |
|
2.9 |
|
- |
|
227.6 |
|
|
|
Depreciation |
37.3 |
|
38.8 |
|
64.7 |
|
140.8 |
|
3.0 |
|
0.1 |
|
143.9 |
|
|
|
Amortisation |
4.6 |
|
5.7 |
|
3.8 |
|
14.1 |
|
0.5 |
|
- |
|
14.6 |
|
The segment assets and liabilities at 31st December 2008 are as follows:
|
|
TextilemaintenanceNordic£m |
|
TextilemaintenanceContinent£m |
|
TextilemaintenanceUK and Ireland£m |
|
Total textile maintenance £m |
|
Clinical solutions anddecontamination£m |
|
Unallocated£m |
|
Group£m |
|
Operating assets |
617.9 |
|
394.6 |
|
308.3 |
|
1,320.8 |
|
84.8 |
|
5.8 |
|
1,411.4 |
|
Deferred tax assets |
4.5 |
|
6.0 |
|
5.0 |
|
15.5 |
|
- |
|
1.1 |
|
16.6 |
|
Income tax assets |
0.2 |
|
0.2 |
|
0.6 |
|
1.0 |
|
- |
|
7.5 |
|
8.5 |
|
Non-current assets held for sale |
0.7 |
|
1.4 |
|
1.2 |
|
3.3 |
|
- |
|
- |
|
3.3 |
|
Derivative financial instruments |
0.4 |
|
- |
|
0.7 |
|
1.1 |
|
- |
|
54.5 |
|
55.6 |
|
Pension scheme surplus |
- |
|
- |
|
- |
|
- |
|
- |
|
6.9 |
|
6.9 |
|
Total assets |
623.7 |
|
402.2 |
|
315.8 |
|
1,341.7 |
|
84.8 |
|
75.8 |
|
1,502.3 |
|
Operating liabilities |
77.1 |
|
51.7 |
|
42.9 |
|
171.7 |
|
34.9 |
|
9.7 |
|
216.3 |
|
Bank loans and finance leases |
4.1 |
|
3.3 |
|
7.1 |
|
14.5 |
|
- |
|
602.1 |
|
616.6 |
|
Derivative financial instruments |
- |
|
- |
|
- |
|
- |
|
- |
|
49.4 |
|
49.4 |
|
Deferred tax liabilities |
31.1 |
|
20.3 |
|
16.8 |
|
68.2 |
|
- |
|
4.6 |
|
72.8 |
|
Income tax liabilities |
8.4 |
|
3.5 |
|
3.0 |
|
14.9 |
|
0.4 |
|
5.4 |
|
20.7 |
|
Pension scheme deficit |
21.6 |
|
3.9 |
|
4.9 |
|
30.4 |
|
- |
|
- |
|
30.4 |
|
Total liabilities |
142.3 |
|
82.7 |
|
74.7 |
|
299.7 |
|
35.3 |
|
671.2 |
|
1,006.2 |
1 Segment information continued
The segment assets and liabilities at 31st December 2007 were as follows:
|
|
Textile maintenance Nordic£m |
|
Textile maintenance Continent£m |
|
Textile maintenance UK and Ireland£m |
|
Total textile maintenance£m |
|
Clinical solutions anddecontamination£m |
|
Unallocated£m |
|
Group£m |
|
Operating assets |
448.0 |
|
293.0 |
|
317.1 |
|
1,058.1 |
|
74.4 |
|
35.2 |
|
1,167.7 |
|
Deferred tax assets |
2.9 |
|
2.5 |
|
3.6 |
|
9.0 |
|
- |
|
- |
|
9.0 |
|
Income tax assets |
- |
|
0.1 |
|
1.2 |
|
1.3 |
|
0.2 |
|
9.0 |
|
10.5 |
|
Non current assets held for sale |
- |
|
1.0 |
|
1.2 |
|
2.2 |
|
- |
|
- |
|
2.2 |
|
Derivative financial instruments |
- |
|
- |
|
- |
|
- |
|
- |
|
3.9 |
|
3.9 |
|
Pension scheme surplus |
- |
|
- |
|
- |
|
- |
|
- |
|
12.9 |
|
12.9 |
|
Total assets |
450.9 |
|
296.6 |
|
323.1 |
|
1,070.6 |
|
74.6 |
|
61.0 |
|
1,206.2 |
|
Liabilities |
57.2 |
|
34.3 |
|
61.5 |
|
153.0 |
|
30.2 |
|
6.1 |
|
189.3 |
|
Bank loans and finance leases |
3.3 |
|
3.4 |
|
7.4 |
|
14.1 |
|
0.1 |
|
435.1 |
|
449.3 |
|
Derivative financial instruments |
- |
|
- |
|
- |
|
- |
|
- |
|
16.0 |
|
16.0 |
|
Deferred tax liabilities |
23.0 |
|
12.8 |
|
19.2 |
|
55.0 |
|
- |
|
1.7 |
|
56.7 |
|
Income tax liabilities |
3.9 |
|
2.2 |
|
0.3 |
|
6.4 |
|
- |
|
9.8 |
|
16.2 |
|
Pension scheme deficit |
14.2 |
|
3.2 |
|
1.2 |
|
18.6 |
|
- |
|
- |
|
18.6 |
|
Total liabilities |
101.6 |
|
55.9 |
|
89.6 |
|
247.1 |
|
30.3 |
|
468.7 |
|
746.1 |
Segment assets consist primarily of property, plant and equipment, goodwill, other intangible assets, inventories, receivables and cash. Assets such as investments, pension scheme surplus, deferred tax assets, income tax assets and assets classified as held for sale are separately identified.
Segment liabilities comprise operating liabilities and separately identified pension scheme deficits, deferred tax liabilities, income tax liabilities and corporate borrowings.
Unallocated assets include segment assets as above for corporate entities.
Unallocated liabilities include segment liabilities as above for corporate entities.
(b) Secondary reporting format - geographical segments
The group's operations are based in three main geographical areas. The UK is the home country of the parent. The main operations are in the following principal territories:
Nordic ContinentUK and Ireland
The relevant information is given as part of the primary segment disclosure.
The group's revenue from the provision of services is 93% (2007: 93%).
2 Exceptional items
Included within other operating expenses are the following items which the group considers to be exceptional:
|
|
Year to 31st December 2008£m |
|
Year to31st December2007£m |
|
Restructuring costs |
6.6 |
|
2.1 |
|
Loss/(profit) on property disposals |
2.7 |
|
(2.6) |
|
Growth initiatives written off |
2.2 |
|
- |
|
Income from receipt of loan notes |
- |
|
(0.3) |
|
Total |
11.5 |
|
(0.8) |
The restructuring costs relate primarily to Germany where the Healthcare business has undergone a significant reorganisation to lower the direct cost base. Central functions have been refocused to more closely align to the Workwear business. The cost comprises largely of employee termination payments. The tax credit on this is £0.5 million (2007: £0.8 million).
During the year net charges have been incurred for property disposals. This includes the closure of properties which are expected to be sold and realise an overall net profit in the future. The tax credit on this is £0.7 million (2007: charge of £0.3 million).
During the year the group incurred costs in relation to a number of growth initiatives and development investments. However, due to the current economic uncertainty these projects have been terminated or put on hold. The tax credit on this is £0.3 million.
In 2007, the group received a net settlement of loan notes amounting to £0.3 million, in relation to a previous disposal which had previously been fully provided. There was no tax charge.
3 Taxation
|
|
Year to 31st December 2008£m |
|
Year to31st December 2007£m |
|
|
Analysis of tax charge for the year |
|
|
|
|
|
Current tax: |
|
|
|
|
|
Tax on profits for the current year |
20.5 |
|
17.7 |
|
|
Adjustments in respect of previous years |
(0.1) |
|
(0.3) |
|
|
|
20.4 |
|
17.4 |
|
|
Deferred tax: |
|
|
|
|
|
Origination and reversal of temporary differences |
(1.2) |
|
2.9 |
|
|
Changes in statutory tax rates |
(0.9) |
|
(4.9) |
|
|
Credit due to previously unrecognised temporary differences |
- |
|
(0.3) |
|
|
Adjustment due to review of deferred tax assets |
0.4 |
|
- |
|
|
Adjustments in respect of previous years |
(0.4) |
|
- |
|
|
|
(2.1) |
|
(2.3) |
|
|
Total tax charge on continuing operations |
18.3 |
|
15.1 |
|
The amount of overseas tax included in the total tax charge is £16.6 million (2007: £12.1 million).
4 Dividends
|
|
Year to31st December 2008£m |
|
Year to31st December 2007£m |
|
Equity dividends paid during the year |
|
|
|
|
Final dividend for the year ended 31st December 2007 of 13.3 pence per share (2006: 12.4 pence) |
22.7 |
|
21.1 |
|
Interim dividend for the year end 31st December 2008 of 6.5 pence per share (2007: 6.1 pence) |
11.1 |
|
10.3 |
|
|
33.8 |
|
31.4 |
|
Proposed final equity dividend for approval at the AGM |
|
|
|
|
Proposed final dividend for the year ended 31st December 2008 of 13.5 pence per share (2007: 13.3 pence) |
22.9 |
|
22.7 |
The directors recommend a final dividend in respect of the financial year ended 31st December 2008 of 13.5 pence per ordinary share to be paid on 7 May 2009 to shareholders who are on the register at 17 April 2009. This dividend is not reflected in these financial statements as it does not represent a liability at 31st December 2008.
5 Earnings per share
Basic earnings per ordinary share are based on the group profit for the year and a weighted average of 170,099,000 (2007: 170,101,043) ordinary shares in issue during the year.
Diluted earnings per share are based on the group profit for the year and a weighted average of ordinary shares in issue during the year calculated as follows:
|
|
31st December 2008Numberof shares |
|
31st December 2007Numberof shares |
|
In issue |
170,099,000 |
|
170,101,043 |
|
Dilutive potential ordinary shares arising from unexercised share options |
197,867 |
|
671,998 |
|
|
170,296,867 |
|
170,773,041 |
An adjusted earnings per ordinary share figure has been presented to eliminate the effects of exceptional items and amortisation of customer contracts and intellectual property rights. This presentation shows the trend in earnings per ordinary share that is attributable to the underlying trading activities of the group.
The reconciliation between the basic and adjusted figures for the group is as follows:
|
|
Year to 31st December 2008 |
|
Year to 31st December 2007 |
||||
|
|
£m |
|
Earningsper sharepence |
|
£m |
|
Earningsper sharepence |
|
Profit attributable to equity shareholders of the company for basic earnings per share calculation |
41.7 |
|
24.5 |
|
63.2 |
|
37.1 |
|
Loss/(profit) on property disposals (after taxation) |
2.0 |
|
1.2 |
|
(2.3) |
|
(1.3) |
|
Exceptional income (after taxation) |
- |
|
- |
|
(0.3) |
|
(0.2) |
|
Restructuring costs (after taxation) |
6.1 |
|
3.6 |
|
1.3 |
|
0.8 |
|
Growth initiatives written off (after taxation) |
1.9 |
|
1.1 |
|
- |
|
- |
|
Amortisation of customer contracts and intellectual property rights (after taxation) |
14.4 |
|
8.5 |
|
8.4 |
|
4.9 |
|
Exceptional net tax effect due to changes in statutory tax rates and tax laws |
0.7 |
|
0.4 |
|
(4.9) |
|
(2.9) |
|
Adjusted earnings |
66.8 |
|
39.3 |
|
65.4 |
|
38.4 |
|
Diluted basic earnings |
|
|
24.5 |
|
|
|
37.0 |
6 Shareholders' funds and statement of changes in shareholders' equity
|
|
Attributable to shareholders of the company |
|
Minorityinterest£m |
|
Totalequity£m |
||||||||||||
|
|
Sharecapital£m |
|
Sharepremium£m |
|
Otherreserves£m |
|
Capitalredemptionreserve£m |
|
Retainedearnings£m |
|
Total£m |
|
|
||||
|
At 1st January 2007 |
51.2 |
|
93.6 |
|
5.8 |
|
150.9 |
|
95.1 |
|
396.6 |
|
1.7 |
|
398.3 |
||
|
Issue of share capitalin respect of share option schemes |
0.2 |
|
1.9 |
|
- |
|
- |
|
- |
|
2.1 |
|
- |
|
2.1 |
||
|
Purchase of treasury shares |
- |
|
- |
|
- |
|
- |
|
(1.1) |
|
(1.1) |
|
- |
|
(1.1) |
||
|
Dividends |
- |
|
- |
|
- |
|
- |
|
(31.4) |
|
(31.4) |
|
(0.1) |
|
(31.5) |
||
|
Actuarial gains |
- |
|
- |
|
- |
|
- |
|
23.1 |
|
23.1 |
|
- |
|
23.1 |
||
|
Value of employee service in respectof share options |
- |
|
- |
|
- |
|
- |
|
0.6 |
|
0.6 |
|
- |
|
0.6 |
||
|
Cash flow hedges |
- |
|
- |
|
3.3 |
|
- |
|
- |
|
3.3 |
|
- |
|
3.3 |
||
|
Tax on items taken directly to equity |
- |
|
- |
|
(0.7) |
|
- |
|
(10.9) |
|
(11.6) |
|
- |
|
(11.6) |
||
|
Profit for the year |
- |
|
- |
|
- |
|
- |
|
63.2 |
|
63.2 |
|
0.4 |
|
63.6 |
||
|
Currency translation |
- |
|
- |
|
- |
|
- |
|
13.1 |
|
13.1 |
|
0.2 |
|
13.3 |
||
|
At 31st December 2007 |
51.4 |
|
95.5 |
|
8.4 |
|
150.9 |
|
151.7 |
|
457.9 |
|
2.2 |
|
460.1 |
||
|
Issue of share capitalin respect of share option schemes |
- |
|
0.1 |
|
- |
|
- |
|
- |
|
0.1 |
|
- |
|
0.1 |
||
|
Purchase of own shares by the Employee Benefit Trust |
- |
|
- |
|
- |
|
- |
|
(2.1) |
|
(2.1) |
|
- |
|
(2.1) |
||
|
Dividends |
- |
|
- |
|
- |
|
- |
|
(33.8) |
|
(33.8) |
|
(0.1) |
|
(33.9) |
||
|
Actuarial losses |
- |
|
- |
|
- |
|
- |
|
(17.8) |
|
(17.8) |
|
- |
|
(17.8) |
||
|
Value of employee service in respectof share options |
- |
|
- |
|
- |
|
- |
|
1.8 |
|
1.8 |
|
- |
|
1.8 |
||
|
Cash flow hedges |
- |
|
- |
|
3.7 |
|
- |
|
- |
|
3.7 |
|
- |
|
3.7 |
||
|
Tax on items taken directly to equity |
- |
|
- |
|
(1.0) |
|
- |
|
4.3 |
|
3.3 |
|
- |
|
3.3 |
||
|
Profit for the year |
- |
|
- |
|
- |
|
- |
|
41.7 |
|
41.7 |
|
0.4 |
|
42.1 |
||
|
Currency translation |
- |
|
- |
|
- |
|
- |
|
37.9 |
|
37.9 |
|
0.9 |
|
38.8 |
||
|
At 31st December 2008 |
51.4 |
|
95.6 |
|
11.1 |
|
150.9 |
|
183.7 |
|
492.7 |
|
3.4 |
|
496.1 |
||
As at 31st December 2008 the company held 1,025,000 (2007: 1,025,000) treasury shares. The Employee Benefit Trust held 441,873 (2007:nil) shares that had been purchased in the year.
7 Cash flow from operating activities
Reconciliation of operating profit to net cash inflow from operating activities:
|
|
|
|
Total group |
||||
|
Cash generated from operations |
|
|
|
|
Year to31st December2008£m |
|
Year to31st December2007£m |
|
Profit for the year |
|
|
|
|
42.1 |
|
63.6 |
|
Adjustments for: |
|
|
|
|
|
|
|
|
Taxation |
|
|
|
|
18.3 |
|
15.1 |
|
Amortisation of intangible fixed assets |
|
|
|
|
22.7 |
|
14.6 |
|
Depreciation of tangible fixed assets |
|
|
|
|
156.9 |
|
143.9 |
|
Loss/(profit) on property disposals |
|
|
|
|
2.7 |
|
(2.6) |
|
Profit on sale of plant and equipment |
|
|
|
|
(0.6) |
|
(0.9) |
|
Restructuring costs |
|
|
|
|
6.6 |
|
- |
|
Growth initiatives written off (non-cash element) |
|
|
|
|
0.3 |
|
- |
|
Profit on loan notes |
|
|
|
|
- |
|
(0.3) |
|
Negative goodwill |
|
|
|
|
- |
|
(1.1) |
|
Finance income |
|
|
|
|
(3.4) |
|
(5.4) |
|
Finance expense |
|
|
|
|
28.7 |
|
21.7 |
|
Other non-cash movements |
|
|
|
|
(1.0) |
|
0.6 |
|
Changes in working capital (excluding effect of acquisitions, disposals and exchange differences on consolidation): |
|
|
|
|
|
|
|
|
Inventories |
|
|
|
|
(7.4) |
|
(4.6) |
|
Trade and other receivables |
|
|
|
|
13.0 |
|
(14.8) |
|
Trade and other payables |
|
|
|
|
(13.7) |
|
17.4 |
|
Provisions |
|
|
|
|
(2.4) |
|
(0.8) |
|
Cash generated from operations |
|
|
|
|
262.8 |
|
246.4 |
In the cash flow statement, proceeds from sale of property, plant and equipment comprise:
|
|
|
|
|
|
Year to31st December2008£m |
|
Year to31st December2007£m |
|
Net book amount |
|
|
|
|
5.4 |
|
2.8 |
|
Profit on sale of property, plant and equipment |
|
|
|
|
0.6 |
|
0.9 |
|
Proceeds from sale of property, plant and equipment |
|
|
|
|
6.0 |
|
3.7 |
Additionally, in 2007, the group received £4.3 million in respect of assets held for disposal.
8 Reconciliation of net cash flow to movement in net debt
|
|
Year to31st December2008£m |
|
Year to31st December2007£m |
|
Decrease in cash |
(17.9) |
|
(67.3) |
|
Cash outflow from movement in debt and lease financing |
(21.1) |
|
(31.2) |
|
Changes in net debt resulting from cash flows |
(39.0) |
|
(98.5) |
|
New finance leases |
(3.8) |
|
(5.5) |
|
Bank loans and lease obligations acquired with subsidiaries |
(2.8) |
|
(4.7) |
|
Currency translation |
(131.4) |
|
(21.2) |
|
Movement in net debt in year |
(177.0) |
|
(129.9) |
|
Net debt at beginning of year |
(367.1) |
|
(237.2) |
|
Net debt at end of year |
(544.1) |
|
(367.1) |
9 Acquisitions
During the year the group acquired a number of textile maintenance businesses in existing territories as well as in the Baltic countries of Latvia, Lithuania and Estonia.
Details of the carrying values and provisional fair values of the assets and liabilities are set out below:
|
|
Carrying valuespre-acquisition£m |
|
Provisionalfair values£m |
|
Intangible fixed assets |
2.4 |
|
25.6 |
|
Property, plant and equipment |
9.0 |
|
10.5 |
|
Inventories |
1.5 |
|
0.6 |
|
Receivables |
4.0 |
|
3.6 |
|
Payables |
(3.7) |
|
(4.0) |
|
Taxation |
|
|
|
|
- Current |
(0.3) |
|
(0.2) |
|
- Deferred |
(0.6) |
|
(5.3) |
|
Cash and cash equivalents |
1.5 |
|
1.5 |
|
Overdrafts |
(0.5) |
|
(0.5) |
|
Bank loans |
(2.3) |
|
(2.3) |
|
Lease finance obligations |
(0.5) |
|
(0.5) |
|
Net assets acquired |
10.5 |
|
29.0 |
|
Goodwill |
|
|
23.6 |
|
Consideration |
|
|
52.6 |
|
Consideration satisfied by: |
|
|
|
|
Cash |
|
|
43.2 |
|
Deferred consideration |
|
|
8.5 |
|
Legal and professional fees |
|
|
0.9 |
|
|
|
|
52.6 |
The goodwill arising on these acquisitions is attributable to the acquired work force and the expected synergies to be achieved. The fair value amounts contain provisional amounts which will be finalised in the 2009 accounts.
The outflow of cash and cash equivalents on acquisition is calculated as follows:
|
|
£m |
|
Cash consideration |
44.1 |
|
Cash acquired |
(1.5) |
|
Overdrafts |
0.5 |
|
Deferred consideration paid for 2007 acquisitions |
7.2 |
|
|
50.3 |
The total consideration including net financial liabilities assumed and deferred consideration payable for the acquisitions is £61.6 million. The intangible assets acquired relate primarily to values attributed to customer contracts.
Shown below are the revenues and profit for the year after tax as if the above acquisitions had been made at the beginning of the period. The information may not be indicative of the results of operations that would have occurred had the purchase been made at the beginning of the period presented or the future results of the combined operations.
|
|
2008£m |
|
Revenue |
23.4 |
|
Operating profit |
0.7 |
From the date of acquisition to 31st December 2008, the above acquisitions contributed £18.8 million to revenue and £0.5 million to the profit after tax for the year.
10 Contingent liabilities
The group operates from 137 laundry sites across Europe. Some of the sites have operated as laundry sites for many years and historic environmental liabilities may exist, although the group has indemnities from third parties in respect of a number of sites. Such liabilities are not expected to give rise to any significant loss.
11 Basis of preparation
The information on pages 7 to 19 has been extracted from the audited financial statements for the year ended 31st December 2008 and has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and IFRIC interpretations issued and effective at the time of preparing these statements. The figures and financial information for the years ended 31st December 2008 and 31st December 2007 do not constitute the financial statements for these years. These financial statements both include auditor's reports which are unqualified and do not contain a statement under either Sections 237(2) or 237(3) of the Companies Act 1985. The 2007 financial statements have been delivered to the Registrar; the 2008 Report and Accounts will be posted to shareholders on 16 March 2009.
12 The final dividend is subject to confirmation at the Annual General Meeting which will be held on 28 April 2009 at Royal Aeronautical Club, 4 Hamilton Place, London W1J 7BQ at 11 am. Transfers to be taken into account for the proposed final dividend for ordinary shareholders must be lodged at the company's transfer office, Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA by mid-day on 17 April 2009, the expected record date. The proposed final dividend for ordinary shareholders will be paid on 7 May 2009.
13 The directors are responsible for the maintenance and integrity of the company's website. Information published on the internet is accessible in many countries and different legal requirements. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Related Shares:
Berendsen