10th Sep 2007 07:02
Johnson Service Group PLC10 September 2007 10 September 2007 Johnson Service Group PLC Interim Statement 2007 Johnson Service Group PLC, the textile related services and facilitiesmanagement group announces its interim results for the half year ended 30th June2007. Results Summary • Main business streams' adjusted operating profit* up 10% to £15.8 million• Exceptional losses of £17.9 million include £15.9 million write-off of Group ERP system• Adjusted profit before tax* of £7.0 million (2006: £11.6 million)• Interim dividend of 3.0p (2006: 4.6p). Financial Summary (Continuing Operations) 2007 2006Revenue £197.7m £196.9mRevenue (excluding costs recharged to customers) £175.3m £171.2mReported Operating (Loss)/Profit (£8.6m) £20.4mAdjusted Operating Profit* £12.2m £16.3mReported (Loss)/Profit Before Tax (£13.8m) £15.7mAdjusted Profit Before Tax* £7.0m £11.6mInterim dividend 3.0p 4.6p * (before intangibles amortisation (excluding software) and exceptional items) "Since Charles Skinner's appointment as Chief Executive in April 2007, he hasstarted the process of restructuring the Group and executing his strategy forestablishing Johnson Service Group as a leading provider of business services.Our core businesses have continued to trade robustly and represent an excellentfoundation on which to build. While the next few months will involve furtherreorganisation, I am confident that the Group will emerge well-placed to showprofitable growth in 2008 and beyond." Simon Sherrard, Chairman For further information, please contact:Johnson Service Group PLC Hudson SandlerCharles Skinner, Chief Executive Michael SandlerYvonne Monaghan, Finance Director Sandrine GallienTel: 020 7290 0383 on 10th September only; Tel: 020 7796 4133 07966 234 075 thereafter Website: www.johnsonplc.com Chairman's Statement This is the first set of reported figures since Charles Skinner was appointedChief Executive in April 2007. He has started a process of restructuring yourCompany and executing his strategy for establishing Johnson Service Group as aleading provider of business services. The Group will continue to focus on providing services to British businesses,particularly larger companies. We have strong market positions in three sectors:workwear rental, uniform supply and property management services and our corestrategy will be to build on these businesses. Our business-to-consumer activity, Johnson Cleaners (including Jeeves ofBelgravia), is the market leading drycleaning business in the UK. Partly as aresult of its ability to adapt more effectively to more stringent environmentalcontrols than its smaller rivals, it has an exciting future. Despite itsnon-core status, your Company is well-placed to nurture Johnson Cleaners'development over the next few years and we expect a strong improvement inprofitability. We are firmly committed to a decentralised operating strategy with the operatingcompanies being given power and responsibility to run their businesses withlimited head office intervention. This involves structural changes within theGroup including the relocation of the Group Head Office to London which willresult in a significant reduction in head office numbers as well as thetermination of groupwide ERP systems development. Group Results Total continuing revenue in the six months to 30th June 2007 increased by 0.5%to £197.9 million (2006: £196.9 million), while underlying revenue, excludingcosts recharged to customers, rose by 2.4% to £175.3 million (2006: £171.2million). Continuing operating profit, excluding amortisation of intangibles(other than software) and exceptional items, was 25% lower at £12.2 million(2006: £16.3 million). The performance of Stalbridge, our linen rental business,accounted for the majority of this decline. The increase in rents of £0.9million paid on our drycleaning units following the sale and leaseback ofproperty undertaken at June 2006 was also a contributory factor. Net interest charges increased from £4.7 million in 2006 to £5.2 million in2007, reflecting higher average borrowings and interest rates during the periodoffset by a notional interest credit on the defined benefit pension schemes.Adjusted pre-tax profit on a continuing basis, excluding amortisation ofintangibles and exceptional items, was £7.0 million (2006: £11.6 million). Net exceptional costs for the half year amounting to £17.9 million (2006: profit£6.9 million) comprised a profit on the disposal of properties of £2.6 million(2006: £8.6 million), restructuring costs of £1.0 million (2006: £1.7 million),£3.6 million for the accelerated deprecation of linen stocks at Stalbridge, andthe write down of the ERP system of £15.9 million. The ERP system will onlycontinue to be utilised within the Stalbridge business from the end of this yearand the net book value of the software and hardware has consequentially beenwritten down to reflect this restricted use. After the exceptional costs above and amortisation of intangibles (excludingsoftware) of £2.9 million (2006: £2.8 million) the pre-tax loss was £13.8million (2006: profit of £15.7 million). Adjusted fully diluted earnings pershare from continuing operations were 8.1p (2006: 13.8p) while continuingearnings per share including exceptional items and amortisation of intangibleswere a loss of 16.0p (2006: profit of 19.2p). Finances Total debt at the end of the first half was £150.0 million (December 2006:£142.5 million) following the expenditure on the ERP system (£2.3 million), thenew production facility at Hinckley (£6.0 million), the acquisition of a smalltextile rental operation and the payment of deferred consideration onacquisitions in previous years. As previously indicated, the development of the ERP system has now beenterminated. It is planned that the Hinckley facility, originally intended foruse by Stalbridge will, from 2008 onwards, be used by Johnsons Apparelmaster,saving the significant investment which would have been required for a newApparelmaster facility. A favourable movement in market assumptions together with additional cashcontributions of £1.4 million during the period has further reduced the recordednet deficit after tax for all post retirement benefit obligations from £20.6million at December 2006 to £8.5 million at June 2007. This deficit willcontinue to be impacted by movements in assumptions and actual discount rates,both of which are outside the control of the Group. An actuarial valuation iscurrently being undertaken in respect of the main defined benefit scheme afterwhich the additional cash contributions currently being paid into the Schemewill be reassessed to take account of the improvement in the funding position. The reduction in borrowings remains a key focus of the Group. Dividend policy The Board believes that the ability to develop the Group may be hampered if thedividend represents too high a proportion of retained earnings. The Board hastherefore decided to pay a reduced interim dividend of 3.0p per share (2006:4.6p). Your Company has excellent prospects and good opportunities to invest capitaleffectively and it is intended to pursue a progressive dividend policy once thecurrent dividend has been rebased to a more appropriate level. The interim dividend will be paid on 9th January 2008 to those on the registerat the close of business on 7th December 2007. Operating Companies' Trading Core Businesses Johnsons Apparelmaster, the market-leading workwear laundering and rentalbusiness, increased revenue and adjusted operating profit compared to the firsthalf of 2006. Revenue increased by 9.2% to £46.3 million and adjusted operatingprofit by 5.1% to £6.2 million. The recent withdrawal of several market participants has resulted in a moreorderly market and enabled Apparelmaster to increase its market share. Theincreased profit was particularly impressive given the sharply higher energycosts which Apparelmaster experienced during the period; energy costs areexpected to decline significantly from the levels experienced in these sixmonths. The integration of Texicare, acquired in January 2007, was smoothlyhandled and represents a model of how this market will consolidate further. Our Corporatewear Division, the leading supplier of clothing for people at work,also increased revenue and adjusted operating profit compared to the first halfof 2006. Revenue increased by 6.0% to £39.0 million and adjusted operatingprofit by 23.7% to £4.7 million. As with the previous year certain major customers deferred contracts which meantthat profit was lower than had been budgeted. However, the long-term contractualnature of our customer relationships means that the sales will occur. Althoughthe exact timing remains uncertain, it is expected that Corporatewear will catchup almost all of the shortfall to date in the second half of the year. The Division is continuing to integrate what were originally six differentcompanies including: - Wessex Textiles, specialising in ambulance and paramedic clothing, has now been integrated into Dimensions Corporatewear with impressive cost savings.- CCM, the workwear specialist, is being integrated into Dimensions. Johnson Facilities Management traded in line with budget in the first half.Revenue excluding costs recharged to customers reduced by 3.1% to £18.6 millionwhile total revenue fell by 8% to £41.2 million. Adjusted operating profitreduced from £2.5 million in 2006 to £2.2 million in 2007.This was a commendableperformance at a time of considerable upheaval in the business. The business was formed by the merger of SGP, which was acquired in 2005 andspecialises in the provision of property management services to the financial,retail and leisure sectors, with Johnson Workplace Management, which is focusedprimarily on the commercial office market. SGP has grown rapidly and profitablysince its formation in 2000 and it continues to attract new customers at animpressive rate. Its customer-facing strengths are well complemented by thesound operating skills of Workplace Management. The integration of thesebusinesses is progressing well. All three of these businesses provide essential services to major Britishcorporations and institutions. They have strong positions in markets with highbarriers to entry, excellent earnings visibility and represent an excitingplatform for growth. Business-to-Consumer Activities The retail drycleaning business which comprises Johnson Cleaners, including theformer Sketchley drycleaning business, and Jeeves of Belgravia, is our onlybusiness-to-consumer activity. In the first half, it increased adjustedoperating profit year-on-year by 22.7% to £2.7m, despite a difficult andunseasonable Spring when the dry weather worked against it. Revenue reduced by4.7% from £42.9 million in 2006 to £40.9 million in 2007 on a reduced number ofshops. Revenue on a like-for-like basis reduced by 0.8%. Johnson Cleaners is the market leading drycleaning business in the UK. In recentyears there have been comparatively low barriers to entry to this market, butthis is changing due to more stringent environmental regulation such as theSolvent Emissions Directive. We believe we are ideally placed to benefit fromthese changes in the market. We own the exclusive UK rights to GreenEarth, thesilicone-based cleaning process, which has significant process and environmentaladvantages over the traditional drycleaning methods and we have alreadyconverted half of our stores to GreenEarth. Our scale means that we have fargreater resources and expertise than our competitors to implement and build onthese changes. The Johnson Cleaners business has been underinvested in recent years. We areconfident that with increased capital expenditure for improving our stores andtheir locations, coupled with an environmental awareness campaign, the financialperformance of Johnson Cleaners can significantly improve. Other Activities Stalbridge Linen Services, which supplies linen to the premium hotel, cateringand corporate hospitality markets, has undergone a miserable period followingits entry into the high-volume linen market in 2004. This strategic error wascompounded by the introduction of the new ERP system in April 2006 which gaverise to invoicing problems and masked the disproportionate level of costs beingincurred in the business. In the first half of the year, it recorded an adjustedoperating loss of £1.6 million (2006: £1.8 million profit), before exceptionalcosts of £3.8 million (2006: nil). Within this exceptional charge is £3.6million for the accelerated depreciation of non-recoverable linen stock. We arein the process of scaling Stalbridge back to its core strength as the majorsupplier to the premium customer market. As part of this process, its newhigh-volume facility at Hinckley is expected to be relinquished to the morecommercially viable requirements of Johnsons Apparelmaster. Workplace Engineering, which delivers electrical, engineering and fit-outservices, continued to grow with revenue of £6.7 million (2006: £4.0 million)and adjusted operating profit of £0.4 million (2006: £0.2 million). Alex Reid, our specialist drycleaning supplies business, traded disappointinglywith revenue down to £5.7 million (2006: £6.4 million) and an adjusted operatingloss of £0.1 million (2006: profit £0.5 million). It has a strong marketposition but has suffered from weak management information and increasedcompetition. Board Charles Skinner joined the Board as Chief Executive in April 2007. He waspreviously Chief Executive of Brandon Hire Plc. Yvonne Monaghan, previously the Group Financial Controller joined the Board asFinance Director in September 2007. Simon Moate resigned from the board in July 2007 and Jim Wilkinson resigned fromthe role of Finance Director in August 2007. We thank them for theircontribution to the Company in a difficult period and wish both of them well intheir future careers. Outlook Trading in the first two months of the second half has been encouraging.Apparelmaster has continued to trade well and Corporatewear is on course to meetour expectations. Johnson Facilities Management is also trading satisfactorily.Johnson Cleaners had an excellent July and has shrugged off its weak Springperformance. We are confident that Stalbridge is under much better control andwill, in the medium term, return to the levels of profitability of three yearsago. Our three core businesses have strong market positions and business processeswhich represent an excellent foundation on which to build a leading UK businessservices company. While the next few months will involve further reorganisation,this is necessary to ensure that your Company is structured correctly for thelonger term. I am confident that your Company will emerge from a difficult 12months in good shape and well-placed to show profitable growth in 2008 andbeyond. Consolidated Income Statement Half year to Half year to Year ended 30th June 30th June 31st December 2007 2006 2006Note £m £m £m CONTINUING OPERATIONS: 2 REVENUE 197.9 196.9 410.9 Costs recharged to customers (22.6) (25.7) (50.3) Revenue excluding costs recharged to customers 175.3 171.2 360.6 2 OPERATING (LOSS) / PROFIT (8.6) 20.4 23.7 OPERATING PROFIT BEFORE INTANGIBLES AMORTISATION AND EXCEPTIONAL 12.2 16.3 34.9 ITEMS Amortisation of intangible assets (excluding software) (2.9) (2.8) (5.8) 3 Exceptional items - Restructuring and other costs (20.5) (1.7) (20.4) - Profit on disposal of property 2.6 8.6 15.0 2 OPERATING (LOSS) / PROFIT (8.6) 20.4 23.7 Finance costs (5.9) (4.7) (10.0) Finance income 0.7 - 0.8 (LOSS) / PROFIT BEFORE TAXATION (13.8) 15.7 14.5 5 Taxation 4.3 (4.3) (1.1) (LOSS) / PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS (9.5) 11.4 13.4 DISCONTINUED OPERATIONS: LOSS FOR THE PERIOD FROM DISCONTINUED OPERATIONS - (1.0) (10.9) (LOSS) / PROFIT FOR THE PERIOD (9.5) 10.4 2.5 6 EARNINGS PER SHARE * Basic earnings per share From continuing operations (16.0p) 19.4p 22.8p From discontinued operations - (1.7p) (18.6p) From continuing and discontinued operations (16.0p) 17.7p 4.2p Diluted earnings per share From continuing operations (16.0p) 19.2p 22.6p From discontinued operations - (1.7p) (18.4p) From continuing and discontinued operations (16.0p) 17.5p 4.2p 7 ORDINARY DIVIDENDS PAID AND PROPOSED Interim dividend proposed 3.0p - - Interim dividend proposed and paid - 4.6p 4.6p Final dividend proposed and approved - - 15.0p * Earnings per share before intangibles amortisation (excluding software) and exceptional items are shown in Note 6. Consolidated Statement of Recognised Income and Expense Half year to Half year to Year ended 30th June 30th June 31st December 2007 2006 2006Note £m £m £m Actuarial gain on defined benefit pension plans 16.1 13.9 14.7 Taxation in respect of actuarial gain (4.8) (4.2) (4.4) Net movement on reserves in respect of IAS 19 actuarial gains and 11.3 9.7 10.3 losses Effects of changes in taxation rates 0.3 - - Cash flow hedges (net of - fair value gains 0.9 - 0.1 taxation) - transfers to inventory - - 0.3 - transfers to interest (0.1) - (0.1) NET INCOME RECOGNISED DIRECTLY IN EQUITY 12.4 9.7 10.6 (Loss) / profit for the period (9.5) 10.4 2.5 11 TOTAL RECOGNISED INCOME FOR THE PERIOD 2.9 20.1 13.1 Consolidated Balance Sheet As at As at As at 30th June 30th June 31st December 2007 2006 2006Note £m £m £m ASSETS NON-CURRENT ASSETS Goodwill 138.9 141.0 140.0 Intangible assets 37.1 53.5 51.9 Property, plant and equipment 59.2 57.0 60.8 Textile rental items 25.1 31.5 27.6 Trade and other receivables 0.2 0.1 0.2 Derivative financial assets 1.7 - - Deferred income tax assets 9.7 13.6 13.4 271.9 296.7 293.9 CURRENT ASSETS Inventories 30.5 31.4 29.5 Trade and other receivables 65.0 72.1 71.1 Current income tax assets - - 0.7 Derivative financial assets 0.1 0.4 0.6 Cash and cash equivalents 9.4 6.4 11.3 105.0 110.3 113.2 LIABILITIES CURRENT LIABILITIES Trade and other payables 28.2 33.8 29.4 Other creditors and accruals 62.3 56.6 69.0 Current income tax liabilities 0.2 5.2 - Borrowings 1.2 1.1 1.1 Derivative financial liabilities 0.2 0.5 0.4 Provisions 7.1 2.7 8.5 99.2 99.9 108.4 NET CURRENT ASSETS 5.8 10.4 4.8 NON-CURRENT LIABILITIES Borrowings 158.2 140.2 152.7 8 Retirement benefit obligations 12.7 35.5 30.7 Deferred income tax liabilities 8.6 14.0 12.6 Provisions 8.0 10.5 8.2 Derivative financial liabilities 0.7 - - Other non-current liabilities 1.6 5.3 1.9 189.8 205.5 206.1 NET ASSETS 87.9 101.6 92.6 EQUITY CAPITAL AND RESERVES ATTRIBUTABLE TO THE COMPANY'S EQUITY HOLDERS 11 Called up share capital 5.9 5.9 5.9 11 Share premium 13.7 12.2 12.7 11 Other reserves 3.2 2.1 2.4 11 Retained earnings 65.1 81.4 71.6 TOTAL EQUITY 87.9 101.6 92.6 Consolidated Cash Flow Statement Half year to Half year to Year ended 30th June 30th June 31st December 2007 2006 2006Note £m £m £m CASH FLOWS FROM OPERATING ACTIVITIES (Loss) / profit for the period (9.5) 10.4 2.5 Adjustments for: 5 Income - continuing operations (4.3) 4.3 1.1 tax - discontinued operations - (0.4) (3.2) Finance income and expense 5.2 4.7 9.2 Depreciation 13.3 14.1 28.6 Amortisation 3.7 3.2 7.3 Write-off of intangible assets 15.5 - 3.9 Write-off of textile rental items 3.6 - - (Increase) / decrease in inventories (0.9) (1.2) 0.7 Decrease / (increase) in trade and other receivables 6.7 (7.3) (3.9) (Decrease) / increase in trade and other payables (9.8) 2.3 1.4 Profit on sale of property, plant and equipment (2.1) (8.4) (14.5) Loss on closure of subsidiaries - - 11.7 Additional contribution to defined benefit pension schemes (1.4) (1.4) (4.8) Other non-cash movements (1.5) (0.8) 3.5 Cash generated from operations 18.5 19.5 43.5 Interest paid (5.8) (5.0) (9.5) Taxation received / (paid) 0.3 (2.2) (4.3) Net cash flows generated from operating activities 13.0 12.3 29.7 CASH FLOWS FROM INVESTING ACTIVITIES 10 Acquisition of subsidiaries (net of cash acquired) (6.0) (1.7) (4.4) Proceeds from sale of investments in other companies - 0.9 1.4 Purchase of property, plant and equipment (9.0) (7.5) (14.9) Proceeds from sale of property, plant and equipment 3.6 23.6 24.8 Purchase of intangible assets (2.8) (5.9) (11.8) Purchase of textile rental items (10.4) (13.0) (24.1) Proceeds from sale of textile rental items 1.9 2.2 3.9 Interest received 0.2 - 0.8 Net cash used in investing activities (22.5) (1.4) (24.3) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 27.0 42.0 86.0 Repayments of borrowings (20.0) (45.0) (76.0) Capital element of finance leases (0.5) (0.5) (1.1) Net proceeds from issue of Ordinary shares 1.0 0.3 0.8 Net proceeds from sale of own shares in relation to employee share 0.1 - 0.2 schemes Dividends paid to company Shareholders - (8.8) (11.5) Net cash generated from / (used in) financing activities 7.6 (12.0) (1.6) Net (decrease) / increase in cash and cash equivalents (1.9) (1.1) 3.8 Cash and cash equivalents at beginning of period 11.3 7.5 7.5 12 Cash and cash equivalents at end of period 9.4 6.4 11.3 Notes to the Consolidated Interim Financial Statements Johnson Service Group PLC ('the Company') and its subsidiaries ('the Group')provide a unique range of managed services, operating in two principal areas:textile related services and facilities management. The Company is incorporated and domiciled in the UK. The address of itsregistered office is 4 Harley Street, London W1G 9PB. The Group consolidated interim financial statements were authorised for issue bythe Board on 10th September 2007. 1 BASIS OF PREPARATION These unaudited consolidated interim financial statements of Johnson ServiceGroup PLC are for the six months ended 30th June 2007. They have been preparedin accordance with those International Financial Reporting Standards (IFRS) andInternational Financial Reporting Interpretations Committee (IFRIC)interpretations as adopted by the European Union at 30th June 2007, and withthose parts of the Companies Act 1985 applicable to companies reporting underIFRS. The Group has not yet adopted IAS 34, 'Interim Financial Reporting' butintends to do so from 1st January 2008. The consolidated interim financialstatements do not comprise statutory accounts for the purpose of Section 240 ofthe Companies Act 1985, and do not include all of the information or disclosuresrequired in the annual financial statements and should therefore be read inconjunction with the Group's 2006 consolidated financial statements. The consolidated interim financial statements have been prepared applying theaccounting policies and presentation which was applied in the preparation of thepublished consolidated financial statements for the year ended 31st December2006. However, in accordance with the requirements of IFRS 5, 'Non-currentAssets Held for Sale and Discontinued Operations', the consolidated interimfinancial statements for 2006 previously presented have been amended to reflectthe classification of certain operations as discontinued. Financial information for the year ended 31st December 2006 included herein isderived from the statutory accounts for that year, which have been filed withthe Registrar of Companies. The auditors' report on those accounts wasunqualified and did not contain a statement under Section 237 (2) or 237 (3) ofthe Companies Act 1985 (as amended). The impact of seasonality or cyclicality on operations is not regarded assignificant on the consolidated interim financial statements. 2 SEGMENT ANALYSIS Geographical segments Revenue originates wholly within the United Kingdom and as a result, nogeographical segments are presented within these interim financial statements.There is no significant difference between revenue by origin and revenue bydestination. Business segments The Group comprises the following main business segments and entities: Textile rental services Workwear rental supply and laundering and linen for the • Johnsons Apparelmaster Limitedpremium hotel, catering and corporate hospitality sector • Johnsons Apparelmaster Limited t/a Stalbridge Linen Services Corporatewear Offering a comprehensive range of workwear and workplace • Johnson Clothing Limited t/a Boyd Cooperclothing • Johnson Clothing Limited t/a CCM • Johnson Clothing Limited t/a DCC Corporate Clothing • Johnson Clothing Limited t/a Dimensions Corporatewear • Johnson Clothing Limited t/a S Yaffy • Johnson Clothing Limited t/a Wessex Textiles Drycleaning Provides drycleaning, laundry and ironing services, • Alex Reid Limitedcarpet cleaning, upholstery cleaning, wedding dress • Jeeves of Belgravia Limitedcleaning and suede & leather cleaning, and the supply of • Jeeves International Limiteddrycleaning consumables • Johnson Cleaners UK Limited Facilities management Delivering building, facilities and property management • Johnson Facilities Management Limited t/a SGP Propertyservices to public, commercial and retail organisations. Services • Johnson Facilities Management Limited t/a Workplace Engineering • Johnson Facilities Management Limited t/a Workplace Management 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 at30th June 2007. Segment results include items directly attributable to asegment as well as those that can be allocated on a reasonable basis.Unallocated central overheads are shown separately. The exceptional items havebeen included within the appropriate business segment as shown on pages 12 to14. Inter-segment pricing is determined on an arm's length basis. The business segment results for the half year ended 30th June 2007, togetherwith comparative figures, are as follows: Half year ended 30th June 2007 Textile Corporatewear Drycleaning Facilities Unallocated Total rental Management services £m £m £m £m £m £mREVENUERevenue 64.4 45.1 46.6 48.4 - 204.5Inter-segment revenue - (6.1) - (0.5) - (6.6)REVENUE - CONTINUING 64.4 39.0 46.6 47.9 - 197.9Revenue - Discontinued - - - - - -Total Revenue 64.4 39.0 46.6 47.9 - 197.9 REVENUE EXCLUDING COSTS RECHARGED TO CUSTOMERSRevenue 64.4 45.1 46.6 25.8 - 181.9Inter-segment revenue - (6.1) - (0.5) - (6.6)REVENUE EXCLUDING COSTS 64.4 39.0 46.6 25.3 - 175.3 RECHARGED TO CUSTOMERS - CONTINUINGRevenue - Discontinued - - - - - -Total revenue excluding costs recharged to 64.4 39.0 46.6 25.3 - 175.3customers RESULTOperating profit before intangibles 5.2 4.7 2.5 2.5 (2.7) 12.2 amortisation (excluding software) and exceptional itemsAmortisation of intangible assets (0.6) (1.3) - (1.0) - (2.9)Exceptional items - Restructuring and other costs (4.2) (0.2) - (0.2) (15.9) (20.5) - Profit on disposal of property 1.4 - 1.2 - - 2.6Operating (loss) / profit 1.8 3.2 3.7 1.3 (18.6) (8.6)Finance costs (5.9)Finance income 0.7Loss before taxation (13.8)Taxation 4.3Loss for the period - Continuing (9.5)Discontinued operations -Loss for the period (9.5) Half year ended 30th June 2006 Textile Corporatewear Drycleaning Facilities Unallocated Total rental Management services £m £m £m £m £m £mREVENUERevenue 61.9 42.8 49.3 49.4 - 203.4Inter-segment revenue - (6.0) - (0.5) - (6.5)REVENUE - CONTINUING 61.9 36.8 49.3 48.9 - 196.9Revenue - Discontinued 3.7 - - - - 3.7Total Revenue 65.6 36.8 49.3 48.9 - 200.6 REVENUE EXCLUDING COSTS RECHARGED TO CUSTOMERSRevenue 61.9 42.8 49.3 23.7 - 177.7Inter-segment revenue - (6.0) - (0.5) - (6.5)REVENUE EXCLUDING COSTS 61.9 36.8 49.3 23.2 - 171.2 RECHARGED TO CUSTOMERS - CONTINUINGRevenue - Discontinued 3.7 - - - - 3.7Total revenue excluding costs recharged to 65.6 36.8 49.3 23.2 - 174.9customers RESULTOperating profit before intangibles 8.0 3.8 3.6 2.6 (1.7) 16.3 amortisation (excluding software) and exceptional itemsAmortisation of intangible assets (0.5) (1.3) - (1.0) - (2.8)Exceptional items - Restructuring and other costs - - (1.7) - - (1.7) - Profit on disposal of property - - 8.6 - - 8.6Operating profit 7.5 2.5 10.5 1.6 (1.7) 20.4Finance costs (4.7)Finance income -Profit before taxation 15.7Taxation (4.3)Profit for the period - Continuing 11.4Discontinued operations - Textile rental (1.0)servicesProfit for the period 10.4 Year ended 31st December 2006 Textile Corporatewear Drycleaning Facilities Unallocated Total rental Management services £m £m £m £m £m £mREVENUERevenue 125.2 95.4 99.2 104.6 - 424.4Inter-segment revenue - (12.3) - (1.2) - (13.5)REVENUE - CONTINUING 125.2 83.1 99.2 103.4 - 410.9Revenue - Discontinued 8.0 - - - - 8.0Total Revenue 133.2 83.1 99.2 103.4 - 418.9 REVENUE EXCLUDING COSTS RECHARGED TO CUSTOMERSRevenue 125.2 95.4 99.2 54.3 - 374.1Inter-segment revenue - (12.3) - (1.2) - (13.5)REVENUE EXCLUDING COSTS 125.2 83.1 99.2 53.1 - 360.6 RECHARGED TO CUSTOMERS - CONTINUINGRevenue - Discontinued 8.0 - - - - 8.0Total revenue excluding costs recharged to 133.2 83.1 99.2 53.1 - 368.6customers RESULTOperating profit before intangibles 9.1 12.3 9.1 7.5 (3.1) 34.9 amortisation (excluding software) and exceptional itemsAmortisation of intangible assets (1.0) (2.6) (0.2) (2.0) - (5.8)Exceptional items - Restructuring and other costs (6.2) (1.7) (5.7) (1.1) (5.7) (20.4) - Profit on disposal of property - 1.5 13.5 - - 15.0Operating profit 1.9 9.5 16.7 4.4 (8.8) 23.7Finance costs (10.0)Finance income 0.8Profit before taxation 14.5Taxation (1.1)Profit for the period - Continuing 13.4Discontinued operations - Textile rental (10.9)servicesProfit for the period 2.5 3 EXCEPTIONAL ITEMS Half year to Half year to Year ended 30th June 30th June 31st December 2007 2006 2006 £m £m £m Restructuring costs - Textile rental services (0.6) - (0.8)- Corporatewear (0.2) - (1.7)- Drycleaning - (1.7) (2.9)- Facilities management (0.2) - (1.1)- Group - - (1.6)- Total (1.0) (1.7) (8.1)Onerous lease and environmental costs - - (1.7)Write-off of rental stock (3.6) - -Write-off of software development costs (15.9) - (3.9)Drycleaning - costs relating to potential disposal - - (2.6)Uninsured losses - - (4.1)Total restructuring and other costs (20.5) (1.7) (20.4)Property disposals - Sale and leaseback - 8.6 13.0- Others 2.6 - 2.0- Total 2.6 8.6 15.0 (17.9) 6.9 (5.4) Had the £3.6 million exceptional write-off of rental stock not occurred,additional depreciation of £1.2 million would have been charged to operatingprofit before intangibles amortisation (excluding software) and exceptionalitems in the period. The £15.9 million write-off of software development costs includes £0.4 millionrelating to computer hardware specific to that system. 4 ADJUSTED PROFIT BEFORE TAXATION Half year to Half year to Year ended 30th June 30th June 31st December 2007 2006 2006 £m £m £m (Loss) / profit before taxation (13.8) 15.7 14.5Intangibles amortisation (excluding software) 2.9 2.8 5.8Restructuring and other costs 20.5 1.7 20.4Profit on disposal of property (2.6) (8.6) (15.0)Adjusted profit before taxation 7.0 11.6 25.7 5 TAXATION Half year to Half year to Year ended 30th June 30th June 31st December 2007 2006 2006 £m £m £mCurrent tax expenseUK corporation tax charge for the period - continuing operations 0.6 5.4 5.3Adjustment in relation to previous periods - continuing operations - (0.2) (1.5)Current tax charge for the period - continuing operations 0.6 5.2 3.8 Deferred tax expenseOrigination and reversal of temporary differences - continuing operations (4.9) (0.4) (2.6)Adjustment in relation to previous periods - continuing operations - (0.5) (0.1)Deferred tax credit for the period - continuing operations (4.9) (0.9) (2.7)Total (credit) / charge for taxation included in the income statement for (4.3) 4.3 1.1continuing operations Taxation on the restructuring and other costs in the current period has reducedthe UK corporation tax charge by £6.1 million (June 2006: £0.1 millionreduction; December 2006: £4.4 million reduction). Tax relief on intangiblesamortisation has reduced UK corporation tax by £0.9 million (June 2006: £1.3million reduction; December 2006: £2.7 million reduction). The tax charge onthe property disposals has increased the charge for taxation by £0.5 million(June 2006: £2.3 million increase; December 2006: £1.9 million increase). Accounting implications of the 'Finance Bill 2007' The Group has considered the accounting implications of the 'Finance Bill 2007'following its approval in the House of Commons on 26th June 2007. The mainimplications identified are as follows: • The rate of UK Corporation Tax is to be reduced from 30% to 28% with effect from 1st April 2008.• Industrial buildings allowances (IBA's) are to be gradually phased out. Whilst these changes have no effect on current tax assets and liabilities whicharose prior to the effective date of change, there are implications for deferredtax accounting. The reduction in tax rate will not impact deferred tax that isexpected to reverse prior to 1st April 2008. For deferred tax that is expectedto reverse after this date, the Group has been required to determine the impactof the above changes. As a result, included within the deferred tax expenseabove is £0.1 million, this being the effect of the change in the deferred taxbalance over the full year based upon application of the annual effective rateas disclosed below. In addition, a deferred tax credit of £0.3 million has beenseparately recognised in the Statement of Recognised Income and Expense inrespect of items which flow directly through equity. Reconciliation of effective tax rate The taxation (credit) / charge for the six months to 30th June 2007 iscalculated based on the estimated average annual effective income tax rate of31.1% (half year ended 30th June 2006: 27.4%; year ended 31st December 2006:7.6%), as compared to the tax rates expected to be enacted or substantivelyenacted at the annual balance sheet date of 30% (half year ended 30th June 2006:30%; year ended 31st December 2006: 30%). Differences between the estimatedaverage annual effective income tax rate and statutory rate include, but are notlimited to, the effect of non-deductible expenses, tax incentives not recognisedin profit or loss, the effect of tax losses utilised and under/over provisionsin previous years. 6 EARNINGS PER SHARE Half year to Half year to Year ended 30th June 30th June 31st December 2007 2006 2006 £m £m £m (Loss)/profit for the period attributable to Ordinary Shareholders (9.5) 11.4 13.4(continuing operations)Loss for the period attributable to Ordinary Shareholders (discontinued - (1.0) (10.9)operations)Intangibles amortisation (excluding software) (net of taxation) 2.0 1.5 3.1Exceptional costs from continuing operations (net of taxation) 12.3 (4.7) 2.9Exceptional costs from discontinued operations (net of taxation) - - 9.2Adjusted profit attributable to Ordinary Shareholders 4.8 7.2 17.7 Weighted average number of Ordinary shares 59,293,499 58,802,635 58,843,450Dilutive options - 871,987 709,375Fully diluted number of Ordinary shares 59,293,499 59,674,622 59,552,825 Basic earnings per shareFrom continuing operations (16.0p) 19.4p 22.8pFrom discontinued operations - (1.7p) (18.6p)From continuing and discontinued operations (16.0p) 17.7p 4.2pAdjustment for intangibles amortisation 3.4p 2.5p 5.2pAdjustment for exceptional costs (continuing operations) 20.7p (7.9p) 4.9pAdjustment for exceptional costs (discontinued operations) - - 15.8pAdjusted basic earnings per share (continuing operations) 8.1p 14.0p 32.9pAdjusted basic earnings per share (discontinued operations) - (1.7p) (2.8p)Adjusted basic earnings per share from continuing and discontinued 8.1p 12.3p 30.1poperations Diluted earnings per shareFrom continuing operations (16.0p) 19.2p 22.6pFrom discontinued operations - (1.7p) (18.4p)From continuing and discontinued operations (16.0p) 17.5p 4.2pAdjustment for intangibles amortisation 3.4p 2.5p 5.1pAdjustment for exceptional costs (continuing operations) 20.7p (7.9p) 4.9pAdjustment for exceptional costs (discontinued operations) - - 15.6pAdjusted diluted earnings per share (continuing operations) 8.1p 13.8p 32.6pAdjusted diluted earnings per share (discontinued operations) - (1.7p) (2.8p)Adjusted diluted earnings per share from continuing and discontinued 8.1p 12.1p 29.8poperations Basic earnings per share is calculated using the weighted average number ofshares in issue during the year, excluding those held by the ESOP, based on theprofit for the period attributable to Ordinary Shareholders. Adjusted earnings per share figures are given to exclude the effects ofintangibles amortisation (excluding software) and exceptional items, all net oftaxation, and are considered to show the underlying results of the Group. For diluted earnings per share, the weighted average number of Ordinary sharesin issue is adjusted to assume conversion of all dilutive potential Ordinaryshares. The Company has dilutive potential Ordinary shares arising from shareoptions granted to employees where the exercise price is less than the averagemarket price of the Company's Ordinary shares during the year. Potential Ordinary shares are dilutive at the profit from continuing operationslevel when their conversion to Ordinary shares would decrease earnings per shareor increase loss per share from continuing operations. In the period to 30thJune 2007, potential Ordinary shares are undilutive, as their inclusion in thediluted earnings per share calculation would reduce the loss from continuingoperations, and hence have been excluded. For the periods ending 30th June 2006and 31st December 2006, potential Ordinary shares have been treated as dilutivefor the purpose of diluted earnings per share from continuing and discontinuedoperations, as their inclusion decreases earnings per share from continuingoperations. There were no events occurring after the balance sheet date that would havechanged significantly the number of Ordinary shares or potential Ordinary sharesoutstanding at the balance sheet date, if those transactions had occurred beforethe end of the reporting period. 7 DIVIDENDS Half year to Half year to Year ended 30th June 30th June 31st December 2007 2006 2006Ordinary dividends paid and proposedInterim dividend proposed 3.0p - -Interim dividend proposed and paid - 4.6p 4.6pFinal dividend proposed and approved - - 15.0p On 10th May 2007 a dividend of 15.0p in respect of the 2006 final dividend onthe Ordinary shares was approved by Shareholders at the Annual General Meeting.The dividend, classified within 'other creditors and accruals' at 30th June2007, was paid on 9th July 2007, utilising £8.9 million of Shareholders' funds. The Directors are proposing an interim dividend in respect of the year ended31st December 2007 of 3.0p which will reduce Shareholders' funds by £1.8million. The dividend will be paid on 9th January 2008 to Shareholders on theregister of members at the close of business on 7th December 2007. The Trusteeof the ESOP has waived the entitlement to receive dividends on the Ordinaryshares held by the Trust. In accordance with International Financial Reporting Standards, these financialstatements do not reflect a liability in respect of the proposed interimdividend. 8 RETIREMENT BENEFIT OBLIGATIONS The Group has applied the requirements of IAS 19 Employee Benefits to itsemployee pension schemes and post-retirement healthcare benefits. As part of the Group's objective to reduce its overall pension liability,additional contributions of £1.4 million were paid to the Johnson Group StaffPension Scheme during the period to 30th June 2007 (30th June 2006: £1.4million; 31st December 2006: £4.2 million). In addition, a further contributionof £0.6 million was paid to the WML Final Salary Pension Scheme in July 2006.No such contribution has been paid in the period to 30th June 2007. Following discussions with the Group's appointed actuary it has been identifiedthat an actuarial gain of £16.1 million should be recognised in the period to30th June 2007. This is principally as a result of an increase in the rate usedto discount the scheme liabilities to a present value, together with the effectof scheme assets and liabilities performing differently to previous assumptions. The gross retirement benefit liability and associated deferred tax assetthereon, together with the net liability is shown below: Half year to Half year to Year ended 30th June 2007 30th June 2006 31st December 2006 £m £m £m Gross retirement benefit liability (12.7) (35.5) (30.7)Deferred tax asset thereon 4.2 10.6 10.1Net liability (8.5) (24.9) (20.6) 9 FINANCIAL COMMITMENTS CAPITAL EXPENDITURE Contracts placed for future financial expenditure contracted but not providedfor in the financial statements are shown below: Half year to Half year to Year ended 30th June 30th June 31st December 2007 2006 2006 £m £m £m Intangible assets - - 0.4Property, plant and equipment 1.3 7.3 2.2 1.3 7.3 2.6 10 BUSINESS COMBINATIONS ACQUISITIONS Consideration paid and net assets acquired The material businesses acquired during the period are shown below. Unlessotherwise stated, 100% of either the voting equity instruments or the trade andnet assets of each business was acquired. PROVISIONAL FAIR VALUE Consideration Net Separately and costs assets Identified acquired intangible assets Goodwill £m £m £m £m Texicare (acquired 1st January 2007) 3.2 1.6 1.6 - Adjustments to prior period deferred consideration (1.1) - 0.1 (1.2)Total acquisitions and adjustments in the period 2.1 1.6 1.7 (1.2) Consideration has been satisfied by: £mCash consideration payable 3.0Professional fees and other costs 0.1Deferred consideration 0.1Acquisitions in the period 3.2Adjustment relating to previous year acquisitions (1.1) 2.1 The deferred consideration relates to the acquisition of Texicare, and isdependent upon the achievement of certain performance targets. Amounts providedrepresent the maximum amount payable should all targets be met. Net assets at the date of acquisition Net assets Provisional Provisional Provisional acquired Accounting fair value carrying Policy adjustments value at adjustments date of acquisition £m £m £m £mTexicareTangible fixed assets - property, plant and equipment 0.4 0.1 - 0.5Tangible fixed assets - rental items 1.2 (0.2) - 1.0Inventories 0.1 - - 0.1Cash and cash equivalents 0.1 - - 0.1Trade and other receivables 0.8 - (0.2) 0.6Creditors and other liabilities (0.5) - (0.2) (0.7) 2.1 (0.1) (0.4) 1.6 Adjustments made to the fair value of assets of businesses acquired in theperiod are provisional due to the short period of ownership. Adjustments inrespect of acquisitions in 2006 arose due to increased knowledge of assets andliabilities resulting from a longer period of ownership. Analysis of net cash flow in respect of acquisitions £m Cash consideration and costs paid 3.1Deferred consideration paid on acquisitions in prior years 3.0Payments to acquire businesses 6.1Cash acquired (0.1)Net cash flow 6.0 Impact of acquisitions on the consolidated revenue and profit for the period Texicare is a traditional workwear laundry based in Northwest England, with amixture of industrial and food garment streams. In the six months to 30th June 2007, Texicare contributed revenue of £2.0m andoperating profit before intangibles amortisation (excluding software) andexceptional items of £0.3m to the Group consolidated profit for the period. 11 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Share Share Other Retained Total capital premium reserves earnings equity £m £m £m £m £m Balance at 1st January 2006 5.9 11.9 2.1 70.0 89.9Total recognised income and expense for the - - - 20.1 20.1periodDividends - - - (8.8) (8.8)Issue of share capital - 0.3 - - 0.3Share options (value of employee services) - - - 0.1 0.1Balance at 30th June 2006 5.9 12.2 2.1 81.4 101.6Total recognised income and expense for the - - 0.3 (7.3) (7.0)periodDividends - - - (2.7) (2.7)Issue of share capital - 0.5 - - 0.5Consideration received by ESOP - - - 0.2 0.2Balance at 31st December 2006 5.9 12.7 2.4 71.6 92.6Total recognised income and expense for the - - 0.8 2.1 2.9periodDividends - - - (8.9) (8.9)Issue of share capital - 1.0 - - 1.0Share options (value of employee services) - - - 0.2 0.2Consideration received by ESOP - - - 0.1 0.1Balance at 30th June 2007 5.9 13.7 3.2 65.1 87.9 12 ANALYSIS OF NET DEBT Cash and cash Debt due Debt due Finance Total equivalents within one after more leases net debt year than one year £m £m £m £m £m Balance at 1st January 2006 7.5 (1.0) (138.2) (5.5) (137.2)Cash flow (1.1) 1.0 2.0 0.5 2.4Other non-cash changes - - (0.1) - (0.1)Balance at 30th June 2006 6.4 - (136.3) (5.0) (134.9)Cash flow 4.9 - (13.0) 0.6 (7.5)Other non-cash changes - - (0.1) - (0.1)Balance at 31st December 2006 11.3 - (149.4) (4.4) (142.5)Cash flow (1.9) - (7.0) 0.5 (8.4)Other non-cash changes - - 0.9 - 0.9Balance at 30th June 2007 9.4 - (155.5) (3.9) (150.0) 13 PUBLISHED FINANCIAL STATEMENTS Copies of the interim report are to be sent to Shareholders and will beavailable to members of the public at the Company's registered office at 4Harley Street, London W1G 9PB. The report can also be accessed on the internetat www.johnsonplc.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Johnson Service