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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Berendsen | LSE:BRSN | London | Ordinary Share | GB00B0F99717 | ORD 30P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1,268.00 | 1,267.00 | 1,268.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMBRSN
RNS Number : 0740M
Berendsen PLC
26 July 2017
This announcement contains inside information
BERSEN PLC RESULTS FOR THE HALF YEARED 30 JUNE 2017
26 JULY 2017
Hot Features
Premium
Change
------ ------ -------------------------
Key Financial Highlights HY HY
(GBPm)(3) 2017 2016 Reported Underlying(2)
--------------------------- ------ ------ --------- --------------
Adjusted results(1)
:
Revenue 575.1 533.5 7.8% 2.4%
Operating profit 65.9 70.2 (6.1%) (13.6%)
Operating margin 11.5% 13.2%
Profit before tax 56.8 60.2 (5.6%)
Earnings per share
(basic) 25.6p 27.0p (5.2%)
Dividend per share 11.0p 10.5p 5.0%
Statutory results:
Revenue 575.1 533.5
Operating profit 45.2 61.7
Operating margin 7.9% 11.6%
Profit before tax 36.1 51.7
Earnings per share
(basic) 15.7p 23.1p
-------------------------- ------ ------ --------- --------------
Notes:
(1) Before exceptional costs and amortisation of customer contracts
(2) Adjusted growth at constant exchange rates ("CER") and excluding acquisitions and disposals
(3) Reconciliation of statutory and adjusted performance measures is set out in note 21
Financial Summary
-- Underlying revenue grew by 2.4%; reported revenue grew 7.8% to GBP575.1 million -- Adjusted operating profit of GBP65.9 million; reported operating profit of GBP45.2 million
-- In Continental Europe, the Group continued to make good progress; underlying revenue grew 5% and underlying adjusted operating profit grew 3.6%
-- As expected, the UK continued to be impacted by operational issues identified in the second half of 2016; underlying revenue declined 2% across the UK; adjusted operating profit in UK textiles parts of the Workwear, Healthcare and Hospitality Business Lines declined by GBP5 million or 30%.
-- Interim dividend of 11.0 pence (HY 2016: 10.5 pence). This was previously disclosed on 12 June in the announcement relating to the recommended acquisition of Berendsen by Elis SA.
Outlook
-- Adjusted operating profit for full year 2017 expected to be approximately GBP150 million -- Adjusted operating profit for full year 2018 expected to be approximately GBP170 million
James Drummond, Chief Executive Officer, commented: "The Group continued to make good progress during the first half of 2017. The businesses continued to implement the Berendsen Excellence strategy, which is building the foundations for operational improvement, to enable us to serve better our existing customers, and a platform for sustainable growth, to ensure we make the most of the opportunities we see in our markets.
We have continued to invest in the capabilities of our people, systems and plants, and I am pleased that we are now starting to see those benefits coming through. I am confident that our strategy will enable the Group to capture progressively the sizeable opportunity for growth and margin improvement."
Contacts:
Berendsen
Peter Young
Director of Investor Relations
Tel: +44 (0)7825 297 198
Email: young@berendsen.eu
FTI Consulting
Richard Mountain / Susanne Yule
Telephone: +44 (0)20 3727 1374
2017 INTERIM RESULTS ANNOUNCEMENT
1. Results Overview 2. Outlook 3. Recommended offer by Elis SA 4. CEO Review & Strategy Update 5. Business Line Performance Reviews 6. Other Financial Items
1. RESULTS OVERVIEW
Unless otherwise stated, all commentary in this section is on an underlying basis (note 21). Underlying growth figures are at constant currency rates and exclude the impact of acquisitions, disposals and internal transfers. Adjusted operating profit excludes the impact of exceptional items and amortisation of customer contracts.
Reported Group revenue grew 7.8% to GBP575.1 million (HY 2016: GBP533.5 million). Underlying Group revenue grew 2.4%, with growth in each of the four Business Lines; Facility grew 4%, Workwear grew 3%, Healthcare grew 2% and Hospitality grew 1%. The Group grew faster outside the UK, with growth of 5%, compared to a decline in the UK, which had been expected, of 2%.
Adjusted operating profit, before exceptional items and amortisation of customer contracts, declined 6.1% to GBP65.9 million (HY 2016: GBP70.2 million); underlying adjusted operating profit declined 13.6%, as an increase in profitability in Europe was more than offset by an expected GBP5 million decline in the UK textiles parts of the Workwear, Healthcare and Hospitality Business Lines; this was a continuation of the trends identified in the second half of 2016, which were detailed in the 2016 full year results announcement.
Net finance costs reduced by GBP0.9 million to GBP9.1 million (HY 2016: GBP10.0 million), due to lower underlying finance cost following the partial repayment of private placement debt in 2016. Therefore, adjusted profit before tax reduced by GBP3.4 million to GBP56.8 million (HY 2016: GBP60.2 million).
Reported profit before tax, including the amortisation of customer contracts of GBP3.8 million (HY 2016: GBP3.6 million) and exceptional costs of GBP16.9 million (HY 2016: GBP4.9 million), decreased by GBP15.6 million to GBP36.1 million (HY 2016: GBP51.7 million). The effective tax rate on adjusted profit before taxation was 22.6% (HY 2016: 23.1%). The tax rate for the full year is hence expected to be in line with the prior year, approximately 23%.
Basic adjusted earnings per share were 25.6 pence (HY 2016: 27.0 pence), and basic reported earnings per share were 15.7 pence (HY 2016: 23.1 pence). The interim dividend per share increased by 5% to 11.0p (HY 2016: 10.5p); this was previously disclosed on 12 June in the announcement relating to the recommended acquisition of Berendsen by Elis SA.
2. OUTLOOK
On 3 March 2017, the Board of Berendsen announced a profit forecast for the financial year ended 31 December 2017 stating that adjusted operating profit for 2017 was expected to be approximately GBP150 million (the "2017 Profit Forecast") and that profitability was expected to be more weighted to the second half (approximately 40:60 split), than in previous years (the "Original Profit Forecast Split"). The Board of Berendsen today reconfirms the 2017 Profit Forecast and expresses its confidence in its delivery. Therefore, the Board of Berendsen hereby updates the Original Profit Forecast Split, as the Board expects that the weighting of the profitability to the second half of 2017 will change. The Board of Berendsen now expects that profitability, whilst remaining more weighted to the second half of 2017, will now comprise an approximate 44:56 split (the "Updated Profit Forecast Split").
Furthermore, the Board of Berendsen announced on 24 May, in the announcement titled "Statement regarding Elis' Possible Offer", a forecast for adjusted operating profit for the financial year ending 31 December 2018 of approximately GBP170 million (the "2018 Profit Forecast"). The Board of Berendsen today reconfirms the 2018 Profit Forecast and expresses its confidence in its delivery. Further details of the 2017 Profit Forecast and the 2018 Profit Forecast are set out at Appendix 1 to this Announcement.
3. RECOMMED OFFER BY ELIS SA
On 12 June 2017 the boards of Elis SA and Berendsen plc announced that they had reached agreement on the terms of a recommended acquisition by Elis of the entire issued and to be issued share capital of Berendsen (the "Transaction").
The Berendsen Board remains confident that the Berendsen Excellence strategy would deliver significant value for the Berendsen Shareholders on a standalone basis. However, it also believes that the terms of the offer by Elis SA substantially acknowledges the quality of the Berendsen business and the strength of its future prospects. Furthermore, the Berendsen Board recognises that the Transaction will create a pan-European leader in textile services, with attractive positions in the markets in which it operates and with sufficient scale and footprint to provide customers with the most efficient and comprehensive textile services offering across the European continent. As such, the Berendsen Board intends unanimously to recommend the Transaction to Berendsen Shareholders.
It is expected that the Scheme Document, containing further information about the Transaction and notices of the Court Meeting and General Meeting, together with the Forms of Proxy, will be posted to Berendsen Shareholders no later than 31 July 2017. An expected timetable of principal events will be included in the Scheme Document. Completion of the transaction is expected during the third quarter of 2017, subject to relevant shareholder and regulatory approvals.
4. CEO REVIEW & STRATEGY UPDATE
The Group has made good progress implementing the Berendsen Excellence strategy in the first half of 2017, particularly with actions to address the three root causes of poor and deteriorating operating performance in the UK. There is still a lot of work to do during 2017, as we continue to implement the Group strategy. We continue to expect tangible benefits to start coming through in the second half of 2017. The acceleration of investment in people, processes, systems, plant and machinery will ensure that the Group enters 2018 with the ability to capture the significant opportunities we have identified.
Berendsen Excellence Strategy Update
Customer Focus
Implementation of the new customer relationship management (CRM) tool, Berendsen Advance, has been completed across the Group. In the first half over 900 new users have been trained in its use, and the database has been populated with current customer and market data. The new system will standardise processes and data capture across all Business Lines and geographies, enhance customer targeting, drive closer integration with customers, help to identify and monitor new business opportunities and direct strategic and operational resource planning over the medium to long term. This will underpin the Group's ability to drive higher levels of growth, on the right terms, in attractive markets.
The Group has continued to make good progress in developing the scope of services, including new and adjacent markets. In Healthcare, the Clinical Solutions business has had notable success in medical device sterilisation pilots; the business has developed a rental service for critical surgical instruments, initially for the provision of endoscopes. The business was pleased to sign its first full service contract for the provision of endoscopes in the first half of 2017, has developed an attractive pipeline of further customer contracts and continues to see good opportunity for growth to expand the service to cover more hospitals and a wider range of medical instruments.
Operational Excellence
The Group is focused on driving improvements in operational and financial visibility across the organisation, as it implements standard processes and controls across each of the Business Lines. The new set of common Key Performance Indicators is being implemented by all of the Business Lines in the first half, and incorporated into the monthly management reporting process. The first version of the Berendsen Management System, which captures these key metrics, was launched in February 2017.
The new operating models, designed and tested during 2016, are now being implemented in the UK Healthcare and Hospitality businesses; in the first half three brownfield plant conversion were completed in the UK Hospitality business, and one in the UK Healthcare business. Overall, plant efficiency is expected to increase by over 30% post implementation. These plants are being closely monitored, and are performing in line with expectations.
The project management framework designed during 2016, to ensure all projects are aligned with the Group's strategic priorities and that appropriate levels of governance are being consistently applied, is now live and in use. The web-based tool allows project progress to be tracked against cost and schedule, and monitors post-implementation benefits against expectations. This will reduce the risk of implementing new capital projects, and maximise returns, through better support, improved forecasting, clear processes and controls, improved knowledge sharing across the Group and better understanding of challenges and benefits.
People
The Group continues to increase its focus on health and safety and is driving a change and improvement in culture across the organisation. The new Berendsen Incident Reporting System (BIRS), introduced in the second half of 2016, is continuing to drive higher levels of engagement throughout the Group. Safety observations continued to grow in the first half of 2017. The Group is now benefiting from comparative data from the prior year, which is helping to identify trends; whilst still at a very early stage, the trends are showing initial signs of improvement, which is encouraging.
During the first half of 2017 the Group successfully completed the Organisational Capability Review (OCR) of the individuals, structure processes and systems of the UK business. As part of this process, over 130 new people have been hired, and training and development of the management teams has been increased.
The Group continued to invest in the capabilities of its people in the first half of 2017, through increased training, monitoring and formalised development structures. A new leadership development programme was implemented in the UK at the start of 2017, which included development for over 300 senior leaders. The leadership programme is expected to be rolled out across the Group in the second half of 2017.
Efficient use of capital
In March 2017 the Group outlined plans to invest approximately GBP450 million in plant and machinery over the next 3 years: c. GBP250 million is expected to be invested in mainland Europe, predominately in growth capital to meet growing demand where the businesses are already well positioned; and, c. GBP200m in the UK, where the majority is being spent to replace aged plants and machinery, address cost of quality issues and create market leading capabilities. All growth capital invested is expected to deliver a minimum 15% pre-tax return, enabling the Group to achieve its target of a sustainable double digit Return on Invested Capital (ROIC).
The investment programme continues to progress in line with expectations, with capital expenditure in 2017 expected to be weighted to the second half. During the first half of 2017 the Group spent approximately GBP41 million on the completion of seven brownfield plant conversions, two new build plants and on ongoing maintenance across all operations. During the second half of 2017 nine brownfield plant conversions and four new build plants are scheduled for completion. In addition the Group expects to start work on a further 10 new build plants, due for completion in 2018.
5. BUSINESS LINE PERFORMANCE REVIEWS
Unless otherwise stated, all commentary in this section is on an underlying basis. Growth figures are at constant currency rates and exclude the impact of acquisitions and internal transfers. Operating profit is adjusted to exclude the impact of exceptional items and amortisation of customer contracts.
From 1 January 2017 the Group has reported the Workwear operations in Poland, the Czech Republic and the Slovak Republic within the Workwear Business Line. Previously these operations were reported as part of the Facility Business Line, within Mats, and accordingly the comparative financial information for the six months ended 30 June 2016 has been restated.
HY 2017 HY 2016
------------- --------------------------------- ---------------------------------
Operating Operating Operating Operating
Revenue profit(1) margin Revenue profit(1) margin
(GBPm) (GBPm) (%) (GBPm) (GBPm) (%)
------------- -------- ----------- ---------- -------- ----------- ----------
Workwear(2) 198.5 36.5 18.4% 179.8 33.7 18.7%
Facility(2) 128.3 31.2 24.3% 110.6 26.2 23.7%
Healthcare 163.5 10.0 6.1% 153.7 11.5 7.5%
Hospitality 84.8 (1.5) -1.8% 89.4 1.4 1.6%
Central - (10.3) - (2.6)
Total 575.1 65.9 11.5% 533.5 70.2 13.2%
------------- -------- ----------- ---------- -------- ----------- ----------
Notes:
(1) Before exceptional costs and amortisation of customer contracts
(2) From 1 January 2017 the Group has reported the Workwear operations in Poland, the Czech Republic and the Slovak Republic within the Workwear Business Line. Previously these operations were reported as part of the Facility Business Line, within Mats, and accordingly the comparative financial information for the six months ended 30 June 2016 has been restated.
Workwear
Revenue in the Workwear Business Line grew 10.4% to GBP198.5 million (HY 2016: GBP179.8 million); underlying revenue growth was 3%, as 5% growth in Europe more than offset a 4% decline in the UK. The adjusted operating profit increased to GBP36.5 million (HY 2016: GBP33.7 million), with growth in Europe being offset by a decline in the UK. As a result the adjusted operating margin decreased slightly to 18.4% (HY 2016: 18.7%). Reported operating profit was GBP33.5 million (HY 2016: GBP33.0 million).
The UK accounts for just under 25% of Workwear revenues, and is the largest single operation within the Business Line. Revenue declined, as anticipated, 4% in the first half. This decline was predominately due to actions taken in 2016 to reduce the number of less profitable customers, which continued to impact the first half of 2017 and due to operational issues in the prior year which had some impact on customer service levels. However, the impact is starting to reduce, with the loss rate in Q2 lower than Q1; a further improvement is expected in the second half and is reflected in the improving termination pipeline we are seeing. Adjusted underlying operating profit for the first half was in line with expectations, c. GBP1 million lower than the first half of 2016. During the first half the business was impacted by lower revenue and a continuation of the negative trends identified in the second half of 2016, but this was partially offset by ongoing operational efficiency improvements.
Outside the UK, which accounts for just over 75% of Workwear revenues, underlying revenues grew 5%, with growth in each of the countries in Europe. Germany and Holland, which account for over 40% of revenue outside the UK, both grew over 5%. Operating profit grew compared to the first half of 2016, both on a reported and constant currency basis. However margins declined slightly as a result of the strong revenue growth in the first half requiring higher textile investment, particularly in Germany and Sweden.
As part of the Berendsen Excellence strategy, capital investment into the Workwear business has been accelerated. The investment programme continues to progress in line with expectations. During the first half one new build plant was completed in Denmark and one brownfield conversion was completed in Sweden. Two further new build plants are scheduled for completion in the second half of 2017, in Germany and in Holland, as well as a brownfield conversion in the UK.
Facility
Reported revenue in the Facility Business Line grew 16% to GBP128.3 million (HY 2016: GBP110.6 million); underlying revenue grew 4%, predominately due to strong growth in Cleanroom. Adjusted operating profit grew by GBP5.0 million to GBP31.2 million (HY 2016: GBP26.2 million). As a result, the adjusted operating margin increased compared to the prior year to 24.3% (2016: 23.7%). Reported operating profit was GBP28.0 million (HY 2016: GBP23.5 million).
The Facility Business Line is made up of three distinct services: Cleanroom, Mats and Washroom.
Cleanroom delivers very high integrity textile solutions, primarily for highly regulated pharmaceutical or technology sites. Cleanroom plants are configured on the CL2000 operating mode, similar to Workwear, which allows variable workflow patterns to be processed efficiently with lower direct inputs. Revenue in Cleanroom, which accounts for approximately 25% of the Facility Business Line revenue, continued to perform strongly. Underlying revenue grew 8%, with growth in each country, and particularly strong growth in Germany. Adjusted underlying operating profit grew in line with revenue. Cleanroom grew margins in each of its two largest countries, Denmark and Holland, as well as the UK.
Revenue in Mats, which accounts for over 50% of the Facility Business Line revenue, grew 1%, with growth in Norway and Sweden, the two largest countries in which the Mats service operates, as well as strong growth in the Baltics. Adjusted underlying operating profit was broadly flat compared to the first half of 2016.
Revenue in Washroom, which accounts for just under 20% of the Facility Business Line revenue, grew approximately 3%. Operating profit grew strongly, as Washroom is now benefiting from actions taken in 2016 to increase its direct sales capability, expand its direct supply chain to increase the use of proprietary products and reduce its reliance on third-party resellers. As a result, the adjusted underlying operating margin increased by over 600 basis points.
As part of the Berendsen Excellence strategy, capital investment into the Facility business has been accelerated. The investment programme continues to progress in line with expectations. During the first half one brownfield plant conversions were completed: one in Germany and one in Sweden. Four further brownfield plant conversions are scheduled for completion in the second half of 2017, two in Denmark, one in Holland and one in Finland.
Healthcare
Reported revenue, including the impact of foreign exchange movements, grew 6.4% to GBP163.5 million (HY 2016: GBP153.7 million); underlying revenue grew 2%, as good growth in Europe more than offset a decline in the UK. Adjusted operating profit declined by GBP1.5 million to GBP10.0 million (HY 2016: GBP11.5 million), as a reduction in the UK more than offset a good performance in Europe. As a result, the adjusted operating margin declined to 6.1% (HY 2016: 7.5%). Reported operating profit was GBP7.5 million (HY 2016: GBP11.0 million).
Revenues in the UK Healthcare textile business, which account for just under 30% of total Healthcare revenues, declined 3%, predominately due to customer losses from the prior year, particularly in the second half. However the win rate on new tenders and contract renewals has improved materially compared to the prior year, as a result of the progress the business made during the second half of 2016 and the first half of 2017 to improve the customer value proposition, with particular focus on the sales and customer service capabilities. This positions the business well for growth in future years. Profitability continued to be impacted by the negative trends identified in the second half of 2016, as disclosed in the 2016 full year results. However the business has made good progress in identifying, implementing and monitoring areas for cost and efficiency improvement. As a result adjusted underlying operating profit declined by approximately GBP2 million, compared to the first half of 2016.
Underlying revenues in Healthcare textiles outside the UK, which account for approximately 50% of total Healthcare revenues, grew 6%, as good growth in Germany, Sweden and Ireland more than offset a small decline in Denmark. Operating profits increased compared to the prior year, predominately due to an improved performance in Germany, as a result of plant closure costs in the first half of 2016, relating to a plant in Erbach, which did not repeat in 2017. The German business continues to make progress, as it begins to implement its operational improvement programme; this is expected to lead to capital investment plans being finalised over the next 12 months.
Revenues in the Clinical Solutions businesses, which are based in the UK and account for just over 20% of total Healthcare revenues, were in line with the first half of 2016 whilst profitability declined slightly, primarily as a result of the impact of currency on product sourcing costs. The Clinical Solutions business provides single use garments, reusable textiles, custom procedure trays, disposable medical packs, single use instruments and cleaning and sterilisation services for surgical and dental instruments. During 2016 the business developed a pilot rental service for critical surgical instruments, initially for the provision of endoscopes, with its first full service contract signed in the first half of 2017, a key success for the business. It continues to see good opportunity for growth to expand the service to cover more hospitals and a wider range of medical instruments.
As part of the Berendsen Excellence strategy, capital investment into the Healthcare business has been accelerated. The investment programme continues to progress in line with expectations. During the first half, one brownfield plant conversion was completed in the UK and one new build Care Home facility was completed in Ireland. During the second half of 2017 one new build and four brownfield plant conversions are scheduled for completion.
Hospitality
Underlying revenue grew 1%, as good growth in Scandinavia, particularly Sweden, was partially offset by a decline in the UK and Ireland. Reported revenue fell 5% to GBP84.8 million (HY 2016: GBP89.4 million), despite the positive impact of foreign exchange in the first half of 2017, due to the negative impact from the disposal of its direct sales business in the UK in the second half of 2016. Adjusted operating profit fell by GBP2.9 million to a GBP1.5 million loss (HY 2016: GBP1.4 million profit), due to a weaker performance in the UK, whilst profitability elsewhere was broadly flat. Reported operating loss was GBP3.2 million (HY 2016: GBP1.1 million profit).
Revenue in the UK linen business, which accounts for just over 60% of total Hospitality revenues, declined 2%, predominately due to customer losses in the prior year, whilst profitability was approximately GBP2 million lower than the prior year. During the first half, the business implemented a number of improvement plans to address the operational issues identified in the second half of 2016, such as high levels of machine downtime, process inefficiency and increased rework. As part of this, three plants completed brownfield conversions to the new operating model, as well as increased investment in maintenance capital for the legacy plants, to replace aged and unreliable machinery. In addition, the capability of management teams has been improved, training has been increased and action plans developed for each individual plant. These actions will deliver significant improvements in operational efficiency, particularly in the converted plants; these benefits should start to come through in the second half of 2017.
Revenues in Hospitality outside the UK, which account for just under 40% of total hospitality revenues, grew by over 7%, predominately due to strong growth in Sweden. The strong performance in Sweden, which accounts for just under half of the revenue outside the UK, is a continuation of the performance in the prior year, as a result of a strong customer focus, operational improvements made to the businesses in recent years and good market conditions. Underlying adjusted operating profits outside the UK were broadly flat compared to the first half of 2016.
In August 2016 the Hospitality business disposed of its direct sale business. This business contributed revenue of GBP7.5 million in the first half of 2016 and operating profit of GBP1.1 million.
As part of the Berendsen Excellence strategy, capital investment into the Healthcare business has been accelerated. The investment programme continues to progress in line with expectations. During the first half, three brownfield plant conversions were completed in the UK. A new build plant in Scotland, currently under construction, is scheduled for completion in the second half of 2017.
Central Costs
Central costs increased, as guided at the 2016 full year results, by GBP7.7 million to GBP10.3 million (HY 2016: GBP2.6 million), due to a higher level of provision for share based compensation, higher pension costs and also higher capability costs at the centre of the Group, including approximately GBP2m in respect of the implementation of group programmes.
6. OTHER FINANCIAL ITEMS
Dividends
The Board has declared an interim dividend of 11.0 pence (HY 2016: 10.5 pence). This represents an increase of 5% compared to the prior year, and reflects the Board's confidence in the growth outlook for the Group and the ongoing strength of the balance sheet. The intention to declare this dividend was previously disclosed on 12 June in the announcement relating to the recommended acquisition of Berendsen by Elis SA. It is payable on 25 August to shareholders who are on the register at 4 August 2017. See note 7 for further details.
Exceptional costs and customer contract amortisation
Exceptional costs were GBP16.9 million (HY 2016: GBP4.9 million). See note 5.
Exceptional costs related to merger and acquisition activity and implementation of the Group strategy. The Group incurred expenses of GBP9.0 million relating to the recommended acquisition of Berendsen by Elis SA. In addition the Group incurred GBP7.9 million of costs relating to the implementation of the Berendsen Excellence strategic initiatives, which include professional fees and consultancy costs relating to HR, and restructuring and redundancy costs. Approximately GBP5m of further exceptional costs in respect of implementing these strategic initiatives is expected to be incurred in the second half of the year.
Amortisation of acquired customer contracts was GBP3.8 million (HY 2016: 3.6 million).
Cash flow
Cash flows from operating activities increased by GBP5.1 million to GBP137.6 million (HY 2016: GBP132.5 million). Net cash generated from operating activities, after net interest paid of GBP8.8 million (HY 2016: 9.9 million) and income tax paid of GBP22.4 million (HY 2016: 12.6 million), decreased by GBP3.6 million to GBP106.4 million (HY 2016: GBP110.0 million). Free cash flow, calculated as net cash generated from operating activities less net capital expenditure of GBP135.0 million (HY 2016: GBP109.4 million), reduced to an outflow of GBP28.6 million (HY 2016: GBP0.6 million inflow). See note 11.
The reduction in free cash flow conversion was primarily driven by a GBP24.9 million increase in capital expenditure on textiles, property, plant and equipment to GBP133.9 million (HY 2016: GBP108.6 million); capital expenditure was GBP35.1 million above depreciation of GBP98.8 million (HY 2016: GBP87.7 million). This includes an investment in textiles of GBP91.8 million (HY 2016: GBP80.4 million). Investment in plant and machinery, including land and buildings, increased GBP13.9 million to GBP42.1 million (HY 2016: GBP28.2 million), as the Group accelerated investment in plants in both the UK and in Europe. The Group expects capital investment in plant and machinery to increase further in the second half, as a result of a number of projects completing in the second half and additional projects starting in the second half that will only complete in 2018.
Other items impacting the cash flow included dividends paid to shareholders of GBP38.5 million (HY 2016: GBP36.8 million).
Balance Sheet
Net debt, defined as borrowing less cash deposits, as at 30 June 2017 was GBP488 million (FY 2016: GBP429.4 million), reflecting cash flow conversion being offset by increased capital expenditure and the payment of dividends.
The Group retains a strong balance sheet with funding flexibility for future growth and a ratio of net debt to earnings before exceptional items, interest, tax, depreciation and amortisation (EBITDA) of 1.2 times (FY 2016: 1.0 times) on a covenant basis, compared with the lowest covenant level within the Group's borrowing portfolio of three times cover. The total facilities available to the Group are almost GBP895 million with our Revolving Credit Facility and our Private Placement notes, which extend to 2025.
Forward-looking statements
This announcement contains forward-looking statements relating to the business, financial performance and results of the Company and the industry in which the Company operates. These statements may be identified by words such as "expectation", "belief", "estimate", "plan", "target", or "forecast" and similar expressions or the negative thereof; or by forward-looking nature of discussions of strategy, plans or intentions; or by their context. No representation is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. All statements regarding the future are subject to inherent risks and uncertainties and various factors could cause actual future results, performance or events to differ materially from those described or implied in these statements. Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies, the environment in which the Company will operate in the future and of future events which may not prove to be accurate. None of the Company, its subsidiary undertakings, affiliates, agents or advisers or any of such persons' respective directors, officers, employees or agents nor any other person accepts any responsibility for the accuracy of the opinions expressed in this announcement or the underlying assumptions. Past performance is not an indication of future results and past performance should not be taken as a representation that trends or activities underlying past performance will continue in the future. The forward-looking statements in this announcement speak only as at the date of this announcement and the Company, its subsidiary undertakings, affiliates, agents and advisers and any of such persons' respective directors, officers, employees or agents expressly disclaim any obligation or undertaking to release any updates or revisions to these forward-looking statements to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based after the date of this announcement or to update or to keep current any other information contained in this announcement or to provide any additional information in relation to such forward-looking statements. You are therefore cautioned not to place any undue reliance on such forward-looking statements.
Appendix 1
BERSEN PROFIT FORECASTS
1. Profit forecast regarding the financial year to 31 December 2017
In the announcement titled "Berendsen plc Results for the Full Year ended 31 December 2016" dated 3 March 2017, Berendsen announced that "we expect adjusted operating profit for 2017 to be approximately GBP150 million" (the "2017 Profit Forecast") and "Profitability is expected to be more weighted to the second half (approximately 40:60 split), than in previous years" (the "Original Profit Forecast Split").
Berendsen today has announced adjusted operating profit of GBP65.9 million in respect of the six months ended 30 June 2017. Berendsen also confirms that its 2017 Profit Forecast remains unchanged. Therefore, the Berendsen Directors confirm that the Original Profit Forecast Split is to be updated, as the Berendsen Directors expect that the weighting of the profitability to the second half of 2017 will change. The Berendsen Directors now expect that profitability, whilst remaining more weighted to the second half of 2017, will now comprise an approximate 44:56 split (the "Updated Profit Forecast Split", and together with the 2017 Profit Forecast, the "Berendsen 2017 Profit Forecast").
The 2017 Profit Forecast and the Original Profit Forecast Split were published before Elis made an approach with regard to a possible offer for Berendsen and therefore the requirements of Rule 28.1(c) of the City Code on Takeovers and Mergers (the "Takeover Code") apply to the 2017 Profit Forecast and the Original Profit Forecast Split.
Further, the Berendsen directors confirm that the Berendsen 2017 Profit Forecast is an ordinary course profit forecast and therefore pursuant to Note 2(b) to Rule 28.1 of the Takeover Code, with the agreement of Elis, the Panel has granted Berendsen a dispensation from the requirement to include reports from reporting accountants and Berendsen's financial advisers in relation to the Berendsen 2017 Profit Forecast, but the requirements of Rule 28.1(c)(i) apply to the Berendsen 2017 Profit Forecast.
In accordance with Rule 28.1(c)(i) of the Takeover Code, the Berendsen Directors confirm that the Berendsen 2017 Profit Forecast is valid and confirm that the Berendsen 2017 Profit Forecast has been properly compiled on the basis of the assumptions stated below and that the basis of accounting used is consistent with Berendsen's accounting policies.
The Berendsen 2017 Profit Forecast does not take into account any impact of the Transaction.
The Berendsen Directors prepared the Berendsen 2017 Profit Forecast on the basis of the following assumptions, any of which could turn out to be incorrect and therefore affect whether the Berendsen 2017 Profit Forecast is achieved:
Factors outside the influence and control of the Berendsen Board
(a) there will be no material change in the political and/or economic environment that would materially affect Berendsen;
(b) there will be no material change in market conditions in relation to customer demand or the competitive environment;
(c) there will be no material change in legislation or regulatory requirements impacting on the Berendsen Group's operations or its accounting policies;
(d) there will be no material litigation or regulatory investigations, or material unexpected developments in any existing litigation or regulatory investigation, in relation to any of Berendsen's operations, products or services;
(e) there will be no business disruptions that materially affect Berendsen, its customers, operations, supply chain or labour supply, including natural disasters, acts of terrorism, cyber-attack and/or technological issues;
(f) foreign exchange rates will be an average of GBP:EUR sterling exchange rate of 1.16; and
(g) there will be no material change in the management or control of Berendsen.
Factors within the influence and control of the Berendsen Board
(a) there will be no material acquisitions or disposals; (b) there will be no material change in the existing operational strategy of Berendsen; and
(c) there are no material strategic investments or capital expenditure in addition to those already planned.
2. Profit Forecast regarding the financial year to 31 December 2018
In the announcement titled "Statement regarding Elis' Possible Offer" dated 24 May 2017, Berendsen announced "a forecast for adjusted operating profit for the financial year ending 31 December 2018 of approximately GBP170 million" (the "Berendsen 2018 Profit Forecast").
In accordance with Rule 28.2 of the Takeover Code, the Panel has granted Berendsen a dispensation from the requirement to include reports from reporting accountants and Berendsen's financial advisers in relation to the Berendsen 2018 Profit Forecast because it was for a financial period ending more than 15 months from the date of the announcement in which it was first published, but the requirements of Rule 28.1(c)(i) apply to the Berendsen 2018 Profit Forecast.
In accordance with Rule 28.1(c), the Berendsen Directors confirm that the Berendsen 2018 Profit Forecast remains valid and confirm that the Berendsen 2018 Profit Forecast has been properly compiled on the basis of the assumptions stated below and that the basis of accounting used is consistent with Berendsen's accounting policies.
The Berendsen 2018 Profit Forecast does not take into account any impact of the Transaction.
The Berendsen Directors prepared the Berendsen 2018 Profit Forecast on the basis of the following assumptions, any of which could turn out to be incorrect and therefore affect whether the Berendsen 2018 Profit Forecast is achieved.
Factors outside the influence and control of the Berendsen Board
(a) there will be no material change in the political and/or economic environment that would materially affect Berendsen;
(b) there will be no material change in market conditions in relation to customer demand or the competitive environment;
(c) there will be no material change in legislation or regulatory requirements impacting on the Berendsen Group's operations or its accounting policies;
(d) there will be no material litigation or regulatory investigations, or material unexpected developments in any existing litigation or regulatory investigation, in relation to any of Berendsen's operations, products or services;
(e) there will be no business disruptions that materially affect Berendsen, its customers, operations, supply chain or labour supply, including natural disasters, acts of terrorism, cyber-attack and/or technological issues;
(f) foreign exchange rates will be an average of GBP:EUR sterling exchange rate of 1.16; and (g) there will be no material change in the management or control of Berendsen.
Factors within the influence and control of the Berendsen Board
(a) there will be no material acquisitions or disposals; (b) there will be no material change in the existing operational strategy of Berendsen; and
(c) there are no material strategic investments or capital expenditure in addition to those already planned.
CONSOLIDATED INTERIM INCOME STATEMENT
For the six months ended 30 June 2017
Unaudited Unaudited
Six Six Audited
months months Year
to to to
30 June 30 June 31 December
2017 2016 2016
Notes GBPm GBPm GBPm
--------------------------------------- ----- --------- --------- ------------
Revenue 3 575.1 533.5 1,110.0
Cost of sales (295.1) (272.1) (565.8)
--------------------------------------- ----- --------- --------- ------------
Gross profit 280.0 261.4 544.2
Other income 1.4 1.8 2.8
Distribution costs (111.8) (100.6) (208.3)
Administrative expenses (101.1) (89.7) (172.4)
Other operating expenses (23.3) (11.2) (25.6)
--------------------------------------- ----- --------- --------- ------------
Operating profit 3 45.2 61.7 140.7
--------------------------------------- ----- --------- --------- ------------
Analysed as:
Operating profit before exceptional
items and amortisation of customer
contracts 3 65.9 70.2 161.0
Exceptional items 5 (16.9) (4.9) (12.9)
Amortisation of customer contracts 3 (3.8) (3.6) (7.4)
Operating profit 3 45.2 61.7 140.7
--------------------------------------- ----- --------- --------- ------------
Finance costs (9.2) (10.4) (21.1)
Finance income 0.1 0.4 0.7
--------------------------------------- ----- --------- --------- ------------
Profit before taxation 36.1 51.7 120.3
Taxation 6 (9.0) (12.1) (28.8)
--------------------------------------- ----- --------- --------- ------------
Profit for the period 27.1 39.6 91.5
--------------------------------------- ----- --------- --------- ------------
Analysed as:
Profit attributable to non-controlling
interest 0.2 0.1 0.3
Profit attributable to owners
of parent company 8 26.9 39.5 91.2
--------------------------------------- ----- --------- --------- ------------
Earnings per share expressed
in pence per share
- Basic 8 15.7 23.1 53.3
- Diluted 8 15.7 23.1 53.2
--------------------------------------- ----- --------- --------- ------------
The notes on pages 21 to 45 are an integral part of these condensed interim financial statements.
All operations are continuing.
CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2017
Unaudited
Unaudited Six Audited
Six months months Year
to to to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
--------------------------------- ----------- --------- ------------
Profit for the period 27.1 39.6 91.5
----------------------------------- ----------- --------- ------------
Other comprehensive (expense)/
income
Items that may be subsequently
reclassified into profit
or loss:
Currency translation differences 13.4 35.3 45.2
Gain/ (loss) on cash flow
hedges 0.1 5.3 (2.3)
----------------------------------- ----------- --------- ------------
13.5 40.6 42.9
--------------------------------- ----------- --------- ------------
Items that cannot subsequently
be reclassified into profit
or loss:
Actuarial gains/ (losses) 6.0 (34.7) (47.1)
----------------------------------- ----------- --------- ------------
Other comprehensive income/
(expense) for the period
net of tax 19.5 5.9 (4.2)
----------------------------------- ----------- --------- ------------
Total comprehensive income
for the period 46.6 45.5 87.3
----------------------------------- ----------- --------- ------------
Attributable to:
Non-controlling interest 0.4 0.7 1.0
Owners of parent company 46.2 44.8 86.3
----------------------------------- ----------- --------- ------------
Items in the statement above
are disclosed net of tax.
CONSOLIDATED INTERIM BALANCE SHEET
As at 30 June 2017
Unaudited
Unaudited Six Audited
Six months months Year
to as at to
30 June 30 June 31 December
2017 2016 2016
Notes GBPm GBPm GBPm
---------------------------------- -------- ------------ ---------- -------------
Assets
Intangible assets:
- Goodwill 417.3 404.3 407.3
- Other intangible assets 27.4 23.5 30.1
Property, plant and equipment 9 617.5 534.1 571.8
Deferred tax assets 8.5 13.1 12.7
Derivative financial instruments 15 37.2 64.9 73.8
Pension scheme surplus 14 1.1 6.8 -
---------------------------------- -------- ------------ ---------- -------------
Total non-current assets 1,109.0 1,046.7 1,095.7
---------------------------------- -------- ------------ ---------- -------------
Inventories 56.1 58.5 55.7
Income tax receivable 15.2 4.4 8.7
Derivative financial instruments 15 19.7 8.0 2.1
Trade and other receivables 203.5 193.5 189.9
Cash and cash equivalents 221.2 224.2 310.1
---------------------------------- -------- ------------ ---------- -------------
Total current assets 515.7 488.6 566.5
---------------------------------- -------- ------------ ---------- -------------
Liabilities
Bank overdraft (144.9) (155.7) (226.1)
Borrowings (77.5) (22.8) (0.6)
Derivative financial instruments 15 (16.8) (0.3) (0.3)
Income tax payable (18.1) (17.8) (25.1)
Trade and other payables (212.8) (197.5) (213.5)
Provisions 10 (6.8) (3.7) (7.5)
---------------------------------- -------- ------------ ---------- -------------
Total current liabilities (476.9) (397.8) (473.1)
---------------------------------- -------- ------------ ---------- -------------
Net current assets 38.8 90.8 93.4
---------------------------------- -------- ------------ ---------- -------------
Borrowings (486.8) (487.5) (512.8)
Derivative financial instruments 15 - (14.2) (14.6)
Pension scheme deficits 14 (34.0) (36.1) (39.4)
Deferred tax liabilities (69.9) (67.3) (74.5)
Trade and other payables (1.1) (1.1) (0.9)
Total non-current liabilities (591.8) (606.2) (642.2)
---------------------------------- -------- ------------ ---------- -------------
Net assets 556.0 531.3 546.9
---------------------------------- -------- ------------ ---------- -------------
Equity
Share capital 51.8 51.8 51.8
Share premium 99.8 99.5 99.7
Other reserves (0.8) 6.7 (0.9)
Capital redemption reserve 150.9 150.9 150.9
Retained earnings 248.6 217.6 240.3
---------------------------------- -------- ------------ ---------- -------------
Total equity attributable
to shareholders of the company 550.3 526.5 541.8
---------------------------------- -------- ------------ ---------- -------------
Non-controlling interest 5.7 4.8 5.1
---------------------------------- -------- ------------ ---------- -------------
Total equity 556.0 531.3 546.9
---------------------------------- -------- ------------ ---------- -------------
CONSOLIDATED INTERIM CASH FLOW STATEMENT
For the six months ended 30 June 2017
Unaudited Unaudited
Six Six Audited
months months Year
to to to
30 June 30 June 31 December
2017 2016 2016
Notes GBPm GBPm GBPm
----------------------------------------- ----- --------- --------- ------------
Cash flows from operating activities
Cash generated from operations 11 137.6 132.5 322.3
Interest paid (8.9) (10.3) (19.6)
Interest received 0.1 0.4 0.7
Income tax paid (22.4) (12.6) (20.6)
----------------------------------------- ----- --------- --------- ------------
Net cash generated from operating
activities 106.4 110.0 282.8
----------------------------------------- ----- --------- --------- ------------
Cash flows from investing activities
Acquisition of subsidiaries, net
of cash acquired 13 - (0.1) (6.2)
Disposal of subsidiary undertaking - - 8.0
Purchase of property, plant and
equipment (133.9) (108.6) (233.1)
Proceeds from the sale of property,
plant and equipment 11 1.3 0.9 2.0
Purchase of intangible assets (2.4) (1.7) (4.7)
Net cash used in investing activities (135.0) (109.5) (234.0)
----------------------------------------- ----- --------- --------- ------------
Cash flows from financing activities
Net proceeds from issue of ordinary
share capital 0.1 - 0.2
Purchase of own shares by the
Employee Benefit Trust (0.4) (4.8) (5.0)
Payment of loan issue costs (0.1) (0.2) (0.2)
Drawdown of borrowings 58.0 32.2 42.4
Repayment of borrowings - (63.9) (93.4)
Repayment of finance leases/hire
purchase liabilities (0.2) (0.3) (0.2)
Dividends paid to company's shareholders 7 (38.5) (36.8) (54.8)
Dividends paid to non-controlling
interest - - -
----------------------------------------- ----- --------- --------- ------------
Net cash from (used) in financing
activities 18.9 (73.8) (111.0)
----------------------------------------- ----- --------- --------- ------------
Net (decrease)/ in cash 12 (9.7) (73.3) (62.2)
----------------------------------------- ----- --------- --------- ------------
Cash and cash equivalents at beginning
of year 84.0 126.7 126.7
Exchange gains/ (losses) on cash 2.0 15.1 19.5
----------------------------------------- ----- --------- --------- ------------
Cash and cash equivalents at end
of period 76.3 68.5 84.0
----------------------------------------- ----- --------- --------- ------------
Free cash flow 11 (28.6) 0.6 47.0
----------------------------------------- ----- --------- --------- ------------
CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
Attributable to shareholders of the company
-----------------------------------------------------------------------------------------------
Capital
Share Share Other redemption Retained Non-controlling Total
capital premium reserves reserve earnings Total interest equity
(Unaudited) GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
At 1 January
2016 51.8 99.5 1.4 150.9 211.3 514.9 4.1 519.0
Comprehensive
income:
Profit for
the period - - - - 39.5 39.5 0.1 39.6
Other comprehensive
income:
Actuarial gains - - - - (42.6) (42.6) - (42.6)
Cash flow hedges - - 6.4 - - 6.4 - 6.4
Currency translation - - - - 33.5 33.5 0.6 34.1
Tax on items
taken to equity - - (1.1) - 9.1 8.0 - 8.0
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
Total other
comprehensive
income - - 5.3 - - 5.3 0.6 5.9
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
Total comprehensive
income - - 5.3 - 39.5 44.8 0.7 45.5
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
Transactions
with owners:
Purchase of
own shares
by the Employee
Benefit Trust - - - - (4.8) (4.8) - (4.8)
Dividends (note
7) - - - - (36.8) (36.8) - (36.8)
Value of employee
service in
respect of
share option
schemes and
share awards - - - - 8.4 8.4 - 8.4
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
Total transactions
with owners - - - - (33.2) (33.2) - (33.2)
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
At 30 June
2016 51.8 99.5 6.7 150.9 217.6 526.5 4.8 531.3
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
Comprehensive
income:
Profit for
the period - - - - 51.7 51.7 0.2 51.9
Other comprehensive
income:
Actuarial losses - - - - (14.9) (14.9) - (14.9)
Cash flow hedges - - (7.6) - - (7.6) - (7.6)
Currency translation - - - - 11.2 11.2 0.1 11.3
Tax on items
taken to equity - - - - 1.1 1.1 - 1.1
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
Total other
comprehensive
income - - (7.6) - 49.1 41.5 0.3 41.8
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
Total comprehensive
income - - (7.6) - 49.1 41.5 0.3 41.8
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
Transactions
with owners:
Issue of share
capital in
respect of
share option
schemes - 0.2 - - - 0.2 - 0.2
Purchase of
own shares
by the Employee
Benefit Trust - - - - 1.2 1.2 - 1.2
Dividends - - - - (18) (18) - (18)
Value of employee
service in
respect of
share option
schemes and
share awards - - - - (9.6) (9.6) - (9.6)
Acquisition
of non-controlling
interest - - - - - - - -
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
Total transactions
with owners - 0.2 - - (26.4) (26.2) - (26.2)
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
At 31 December
2016 51.8 99.7 (0.9) 150.9 240.3 541.8 5.1 546.9
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY continued
Attributable to shareholders of the company
-----------------------------------------------------------------------------------------------
Capital
Share Share Other redemption Retained Non-controlling Total
capital premium reserves reserve earnings Total interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
At 1 January
2017 51.8 99.7 (0.9) 150.9 240.3 541.8 5.1 546.9
Comprehensive
income:
Profit for
the period - - - - 26.9 26.9 0.2 27.1
Other comprehensive
income:
Actuarial gain
(note 14) - - - - 7.3 7.3 - 7.3
Cash flow hedges - - 0.1 - - 0.1 - 0.1
Currency translation - - - - 10.0 10.0 0.4 10.4
Tax on items
taken to equity - - - - 1.7 1.7 - 1.7
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
Total other
comprehensive
income - - 0.1 - 19.0 19.1 0.4 19.5
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
Total comprehensive
income - - 0.1 - 45.9 46.0 0.6 46.6
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
Transactions
with owners:
Issue of share
capital in
respect of
share option
schemes - 0.1 - - - 0.1 - 0.1
Purchase of
own shares
by the Employee
Benefit Trust - - - - (0.1) (0.1) - (0.1)
Dividends (note
7) - - - - (38.5) (38.5) - (38.5)
Value of employee
service in
respect of
share option
schemes and
share awards - - - - 1.0 1.0 - 1.0
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
Total transactions
with owners - 0.1 - - (37.6) (37.5) - (37.5)
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
At 30 June
2017 51.8 99.8 (0.8) 150.9 248.6 550.3 5.7 556.0
--------------------- --------- --------- ---------- ------------ ---------- ------- ---------------- --------
The group has an Employee Benefit Trust to administer share plans and to acquire company shares, using funds contributed by the group, to meet commitments to group employees. At 30 June 2017, the Trust held 1,291,621 (30 June 2016: 1,514,115; 31 December 2016: 1,390,393) shares.
NOTES TO THE INTERIM FINANCIAL INFORMATION
1 Basis of preparation
This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2016 were approved by the Board of directors on 2 March 2017 and delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain a statement under Section 498 of the Companies Act 2006.
This condensed consolidated interim financial information has been reviewed, not audited.
This condensed consolidated interim financial information for the six months ended 30 June 2017 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2016, which have been prepared in accordance with IFRSs as adopted by the European Union and applicable law.
1.1 Going - concern basis
The group meets its day-to-day working capital requirements through its bank facilities. Although the current economic conditions, particularly in the UK following the recent referendum, continue to create uncertainty, particularly over the level of demand for the group's products, the group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the group should be able to operate within the level of its current facilities. As a consequence, and having reassessed the principal risks, the directors considered it appropriate to adopt the going concern basis of accounting in preparing the interim financial information.
2 Accounting policies
Except as described below, the accounting policies and key assumptions and sources of estimation uncertainty applied are consistent with those of the annual financial statements for the year ended 31 December 2016, as described in those annual financial statements.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual profit or loss.
The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2017, but have no material impact on the group:
-- Amendments to IAS 12, 'Income taxes' on Recognition of deferred tax assets for unrealised losses subject to EU endorsement
The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2017 and have been applied within these financial statements.
-- Amendments to IAS 7, 'Statement of cash flows' subject to EU endorsement which sets out the need for additional disclosure requirements in respect of movements in finance liabilities in particular identifying cash flow and non- cash flow movements (see note 12)
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2018 and have not been applied in preparing these consolidated financial statements. None of these are expected to have a significant effect on the consolidated financial statements of the group, except the following as set out below:
-- IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010 and endorsed by the EU in November 2016. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments and is effective for accounting periods commencing 1 January 2018. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. At this time the group does not expect IFRS 9 will have a significant impact on its existing accounting policies for financial instruments, because the new rules have a more direct impact on the accounting treatment of financial assets to which the group has limited exposure except trade receivables. The key area of impact for the group will be as a result of the introduction of the forward looking expected credit loss model.
2 Accounting policies (continued)
Similarly the way that the group currently deals with its hedge accounting transactions will not be significantly impacted by the move to IFRS 9. However it is likely that disclosures around the entity's risk management strategy and the impact of hedge accounting on the financial statements will be enhanced.
-- IFRS 15, 'Revenue from contracts with customers' deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 'Revenue' and IAS 11 'Construction contracts' and related interpretations. The standard which was endorsed by the EU in September 2016 is effective for annual periods beginning on or after 1 January 2018 and earlier application is permitted. At this time the group does not expect there to be any significant impact of the standard on revenue recognition within the group which will continue to recognise revenue in line with current reporting. For the group's textile revenue income it is expected that the performance obligation will be the provision of the textile rental service and hence revenue will continue to be recognised over time. Revenue from direct sales is expected to be recognised at a point in time where the performance obligation is the provision of the direct goods.
The standard includes detailed application guidance which is being considered across all business lines as part of the group's detailed review and implementation plan ahead of the introduction of the standard from 1 January 2018.
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2019 and have not been applied in preparing these consolidated financial statements. None of these are expected to have a significant effect on the consolidated financial statements of the group, except the following as set out below:
-- In January 2016 IFRS 16 - Leases was issued. The board is still in the process of reviewing the impact of IFRS 16 on the group's accounting policies. However, indicatively, because the accounting rules for lessors are largely unchanged the group is unlikely to have to change its current method of accounting for the textile rental assets held on its own balance sheet. All income arising from its textile and other rental assets are treated in effect as operating lease income and this will not change unless any future contracts result in the assets rented to third parties qualifying as finance leases rather than operating leases.
The group currently leases both properties and vehicles under a series of operating lease contracts which will be impacted by the new standard and these types of leases may need to be brought onto the group's balance sheet from the date of adoption of the new standard. As a consequence of this there is likely to be an impact on the make-up of the group's income statement where operating leases are likely to be replaced by a depreciation charge and related interest charge.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the group.
3 Segmental information
The business line results for the six months ended 30 June 2017 are as follows:
Workwear Facility Healthcare Hospitality Unallocated Group
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- -------- -------- ---------- ----------- ----------- ------
Total segment revenue 199.9 128.6 166.4 85.0 - 579.9
-------------------------- -------- -------- ---------- ----------- ----------- ------
Inter-segment revenue (1.4) (0.3) (2.9) (0.2) - (4.8)
-------------------------- -------- -------- ---------- ----------- ----------- ------
Revenue from external
customers 198.5 128.3 163.5 84.8 - 575.1
-------------------------- -------- -------- ---------- ----------- ----------- ------
Operating profit before
exceptional items and
amortisation of customer
contracts 36.5 31.2 10.0 (1.5) (10.3) 65.9
-------------------------- -------- -------- ---------- ----------- ----------- ------
Exceptional items (note 5) (2.3) (0.3) (2.4) (1.7) (10.2) (16.9) -------------------------- -------- -------- ---------- ----------- ----------- ------ Amortisation of customer contracts (0.7) (2.9) (0.1) - (0.1) (3.8) -------------------------- -------- -------- ---------- ----------- ----------- ------ Segment result 33.5 28.0 7.5 (3.2) (20.6) 45.2 -------------------------- -------- -------- ---------- ----------- ----------- ------ Net finance costs (9.1) -------------------------- -------- -------- ---------- ----------- ----------- ------ Profit before taxation 36.1 -------------------------- -------- -------- ---------- ----------- ----------- ------ Taxation (9.0) -------------------------- -------- -------- ---------- ----------- ----------- ------ Profit for the year 27.1 -------------------------- -------- -------- ---------- ----------- ----------- ------ Profit attributable to non--controlling interest (0.2) -------------------------- -------- -------- ---------- ----------- ----------- ------ Profit attributable to owners of parent company 26.9 -------------------------- -------- -------- ---------- ----------- ----------- ------ Capital expenditure 58.1 18.7 32.0 28.2 (0.7) 136.3 -------------------------- -------- -------- ---------- ----------- ----------- ------ Depreciation (note 11) 45.1 13.3 26.2 16.8 (2.6) 98.8 -------------------------- -------- -------- ---------- ----------- ----------- ------ Amortisation (note 11) 1.4 3.2 0.7 0.3 0.3 5.9 -------------------------- -------- -------- ---------- ----------- ----------- ------
Unallocated costs include group marketing, central procurement and communication functions.
Capital expenditure comprises additions to property, plant and equipment and intangible assets, including additions resulting from acquisitions through business combinations.
The restated results for the half year ended 30 June 2016 under the new Business Line structure set out in the financial statements for the year ended 31 December 2016 are as follows:
Group
Workwear Facility Healthcare Hospitality Unallocated Restated
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------------- -------- -------- ---------- ----------- ----------- ---------
Total segment revenue 181.0 111.1 156.2 90.3 - 538.6
---------------------------------------- -------- -------- ---------- ----------- ----------- ---------
Inter-segment revenue (1.2) (0.5) (2.5) (0.9) - (5.1)
---------------------------------------- -------- -------- ---------- ----------- ----------- ---------
Revenue from external customers 179.8 110.6 153.7 89.4 - 533.5
---------------------------------------- -------- -------- ---------- ----------- ----------- ---------
Operating profit before exceptional
items and amortisation of customer
contracts 33.7 26.2 11.5 1.4 (2.6) 70.2
---------------------------------------- -------- -------- ---------- ----------- ----------- ---------
Exceptional items (note 5) - - (0.4) (0.3) (4.2) (4.9)
---------------------------------------- -------- -------- ---------- ----------- ----------- ---------
Amortisation of customer contracts (0.7) (2.7) (0.1) - (0.1) (3.6)
---------------------------------------- -------- -------- ---------- ----------- ----------- ---------
Segment result 33.0 23.5 11.0 1.1 (6.9) 61.7
---------------------------------------- -------- -------- ---------- ----------- ----------- ---------
Net finance costs (10.0)
---------------------------------------- -------- -------- ---------- ----------- ----------- ---------
Profit before taxation 51.7
---------------------------------------- -------- -------- ---------- ----------- ----------- ---------
Taxation (12.1)
---------------------------------------- -------- -------- ---------- ----------- ----------- ---------
Profit for the year 39.6
---------------------------------------- -------- -------- ---------- ----------- ----------- ---------
Profit attributable to non--controlling
interest (0.1)
---------------------------------------- -------- -------- ---------- ----------- ----------- ---------
Profit attributable to owners of
parent company 39.5
---------------------------------------- -------- -------- ---------- ----------- ----------- ---------
Capital expenditure 53.3 16.5 23.3 20.4 (2.8) 110.7
---------------------------------------- -------- -------- ---------- ----------- ----------- ---------
Depreciation (note 11) 38.9 11.3 23.7 16.3 (2.5) 87.7
---------------------------------------- -------- -------- ---------- ----------- ----------- ---------
Amortisation (note 11) 1.2 3.3 0.6 0.4 0.2 5.7
---------------------------------------- -------- -------- ---------- ----------- ----------- ---------
Sales between business line segments are carried out at arms-length.
3 Segmental information (continued)
The segment assets and liabilities at 30 June 2017 under the Business Line structure are as follows:
Workwear Facility Healthcare Hospitality Unallocated Group
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- -------- -------- ---------- ----------- ----------- -------
Operating assets 496.4 354.1 311.7 170.5 (10.9) 1,321.8
---------------------- -------- -------- ---------- ----------- ----------- -------
Operating liabilities (67.3) (37.6) (53.8) (28.4) (33.5) (220.6)
---------------------- -------- -------- ---------- ----------- ----------- -------
The segment assets and liabilities at 30 June 2016 restated under the new Business Line structure are as follows:
Workwear Facility Healthcare Hospitality Unallocated Group
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- -------- -------- ---------- ----------- ----------- -------
Operating assets 433.2 343.5 287.4 164.6 (14.8) 1,213.9
---------------------- -------- -------- ---------- ----------- ----------- -------
Operating liabilities (66.7) (45.0) (39.2) (38.8) (12.6) (202.3)
---------------------- -------- -------- ---------- ----------- ----------- -------
From 1 January 2017 the group has reported the Workwear operations in Poland, the Czech Republic and the Slovak Republic within the Workwear business line. Previously these operations were reported as part of the Facility business line and accordingly, where applicable, the comparative financial information for the full year ended 31 December 2016 has been represented.
The represented segment assets and liabilities at 31 December 2016 under the new Business Line structure are as follows:
Workwear Facility Healthcare Hospitality Unallocated Group
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- -------- -------- ---------- ----------- ----------- -------
Operating assets 436.4 373.0 278.9 147.3 19.2 1,254.8
---------------------------------- -------- -------- ---------- ----------- ----------- -------
Reallocation 30.0 (30.0) - - - -
---------------------------------- -------- -------- ---------- ----------- ----------- -------
Represented operating assets 466.4 343.0 278.9 147.3 19.2 1,254.8
---------------------------------- -------- -------- ---------- ----------- ----------- -------
Operating liabilities (74.7) (53.7) (32.9) (37.5) (22.9) (221.7)
---------------------------------- -------- -------- ---------- ----------- ----------- ------- Reallocation (2.6) 2.6 - - - - ---------------------------------- -------- -------- ---------- ----------- ----------- ------- Represented operating liabilities (77.3) (51.1) (32.9) (37.5) (22.9) (221.7) ---------------------------------- -------- -------- ---------- ----------- ----------- -------
Business line operating assets consist primarily of property, plant and equipment, intangible assets, inventories and trade and other receivables.
Business line operating liabilities consist primarily of trade and other payables and provisions.
Unallocated assets include operating assets relating to corporate segments.
Unallocated liabilities include operating liabilities for corporate segments.
The group's revenues analysed by major country may be summarised as follows:
Six months to Six months to
30 June 2017 30 June 2016
GBPm GBPm
-------- ------------- -------------
UK 187.5 195.3
Sweden 95.4 84.9
Germany 87.1 74.1
Denmark 79.5 68.2
Holland 49.5 43.1
Norway 27.2 23.4
Other 48.9 44.5
-------- ------------- -------------
Total 575.1 533.5
-------- ------------- -------------
4 Seasonality
The hotels and restaurants markets are subject to some seasonal fluctuation. Higher revenues and operating profits in the second and third quarters of the year are expected due to increased demand during the holiday season. Other than this, there is no significant seasonality or cyclicality affecting the interim result of the operations.
5 Exceptional items
Included within operating profit are the following items which the group considers to be exceptional.
Six months Six months
to to Year to
30 June June 31 December
2017 2016 2016
GBPm GBPm GBPm
---------------------------------- ---------- ---------- ------------
Costs relating to merger and
acquisition activity 9.0 - 8.3
Disposal of subsidiary - - (0.8)
Curtailment gain - - (5.1)
Strategy implementation costs:
Professional fees and consultancy
costs 0.3 4.4 4.7
Restructure and redundancy costs 7.6 0.5 5.8
---------------------------------- ---------- ---------- ------------
16.9 4.9 12.9
---------------------------------- ---------- ---------- ------------
During the period the group incurred exceptional costs of GBP16.9m.
-- GBP9m of exceptional costs were incurred in respect of legal and professional fees in respect of the recommended acquisition of Berendsen by Elis SA "the Transaction". The tax credit associated with these costs was GBP1.6m.
-- GBP7.6m of exceptional costs were incurred in respect of both the substantial completion reorganisation and operational capability review costs, principally within the UK. The tax credit associated with these costs was GBP1.4m.
-- GBP0.3m of exceptional costs were incurred in respect of the implementation of the group's strategic plans. The tax credit associated with these costs was GBP0.1m.
Contingent on completion of the Transaction, further fees of GBP23m would be payable. Other financial implications of the Transaction include the impact of the repayment of borrowings and the close out of associated derivatives, as well as the cost of accelerating unvested share awards. Further details of the Transaction will be included within the Scheme of Arrangement.
6 Taxation
The income tax expense is based on an effective annual tax rate estimated individually for each tax jurisdiction in which the group operates and applied to the pre-tax profit, excluding exceptional items, of the relevant entity. The effective tax rate on adjusted profit before tax is 22.6 % (30 June 2016: 23.1%).
7 Dividends
A final dividend relating to the year ended 31 December 2016 amounting to GBP38.5 million was paid in May 2017 (2016: GBP36.8 million), representing 22.5 pence per share (2015: 21.5 pence).
In addition, the directors have declared an interim dividend in respect of the financial year ending 31 December 2017 of 11p per ordinary share. It is payable on 25 August to shareholders who are on the register at 4 August 2017. This interim dividend amounting to approximately GBP19.0 million is not reflected in these financial statements as it does not represent a liability at 30 June 2017. It will be recognised in shareholders' equity in the year to 31 December 2017.
8 Earnings per share
Basic earnings per ordinary share are based on the group profit for the period and a weighted average of 171,293,223 (2016: 170,969,519) ordinary shares in issue during the period.
Diluted earnings per share are based on the group profit for the period and a weighted average of ordinary shares in issue during the period calculated as follows:
30 June 30 June 31 December
2017 2016 2016
Number Number Number
of shares of shares of shares
---------------------------------------- ----------- ----------- -----------
In issue 171,293,223 170,969,519 171,095,601
Dilutive potential ordinary shares
arising from unexercised share options
and awards 161,003 345,322 256,845
---------------------------------------- ----------- ----------- -----------
171,454,226 171,314,841 171,352,446
---------------------------------------- ----------- ----------- -----------
An adjusted operating profit and earnings per ordinary share figure has been presented to eliminate the effects of exceptional items, amortisation of customer contracts, and non-recurring tax items. This presentation is shown because, in the opinion of the directors, this represents useful additional information to the readers of the interim financial statements, providing information attributable to the underlying activities of the business.
The reconciliation between the basic and adjusted figures for the total group is as follows:
Six months
Six months to Year to
to 30 June 31 December
30 June 2017 2016 2016
---------------------------------- ---------------- -------------- ---------------
Earnings Earnings Earnings
per per per
share share share
GBPm pence GBPm pence GBPm pence
--------------------------------- ------- -------- ---- -------- ----- --------
Profit attributable
to equity shareholders
of the company for basic
earnings per share calculation 26.9 15.7 39.5 23.1 91.2 53.3
Exceptional items (after
taxation) 13.8 8.1 3.9 2.3 11.3 6.6
Amortisation of customer
contracts (after taxation) 3.0 1.8 2.8 1.6 5.8 3.4
Impact of tax rate reductions
- UK and other tax items - - - - (0.4) (0.2)
---------------------------------- ------ -------- ---- -------- ----- --------
Profit attributable
to equity shareholders
of the company for adjusted
earnings per share calculation 43.7 25.6 46.2 27.0 107.9 63.1
Diluted basic earnings
per share 15.7 23.1 53.2
Diluted adjusted
earnings per share 25.6 27.0 63.0
---------------------------------- ------ -------- ---- -------- ----- --------
9 Property, plant and equipment
During the six months ended 30 June 2017, the group acquired assets including new leases, but excluding property, plant and equipment acquired through business combinations, with a cost of GBP134 million (30 June 2016: GBP109 million).
Assets with a net book value of GBP1.7 million were disposed of by the group during the six months ended 30 June 2017 (30 June 2016: GBP1.4 million) resulting in a net loss on disposal of GBP0.4 million (30 June 2016: loss GBP0.5 million).
The group's capital commitments at 30 June 2017 were GBP48.3 million (30 June 2016: GBP23.2 million).
10 Provisions
Regulatory
Restructuring and legal Total
GBPm GBPm GBPm
----------------------- --------------- ---------- -----
At 1 January 2017 0.6 6.9 7.5
Charged in the year 0.1 - 0.1
Utilised in the period (0.1) (0.7) (0.8)
At 30 June 2017 0.6 6.2 6.8
----------------------- --------------- ---------- -----
Represented by:
----------------------- --------------- ---------- -----
Current 0.6 6.2 6.8
----------------------- --------------- ---------- -----
Restructuring
Restructuring provisions comprise largely of employee termination payments. Provisions are not recognised for future operating losses.
Regulatory and legal
In an international group, a variety of claims arise from time to time. Such claims may arise due to litigation against group
companies, as a result of investigations by fiscal and competition authorities, or under regulatory requirements including
environmental. Provision against a number of such items has been made in these consolidated financial statements against
those claims which the directors consider are likely to result in significant liabilities.
11 Cash flows from operating activities
Reconciliation of operating profit to net cash inflow from operating activities:
Six months Six months
to to Year to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
-------------------------------------- ---------- ---------- ------------
Profit for the period 27.1 39.6 91.5
Adjustments for:
Taxation 9.0 12.1 28.8
Amortisation of intangible assets 5.9 5.7 11.4
Depreciation of property, plant
and equipment 98.8 87.7 183.6
Loss on sale of property, plant
and equipment 0.4 0.5 1.0
Profit on sale of subsidiary - - (0.8)
Finance income (0.1) (0.4) (0.7)
Finance costs 9.2 10.4 21.1
Curtailment gain - - (5.1)
Other movements 1.3 (2.1) (3.7)
Changes in working capital (excluding
effect of acquisitions, non-cash
disposals and exchange differences
on consolidation):
Inventories 0.5 (4.7) (3.1)
Trade and other receivables (9.9) (5.5) (7.3)
Trade and other payables (3.9) (11.2) 3.0
Provisions (0.7) 0.4 2.6
-------------------------------------- ---------- ---------- ------------
Cash generated from operations 137.6 132.5 322.3
-------------------------------------- ---------- ---------- ------------
11 Cash flows from operating activities (continued)
In the cash flow statement, proceeds from sale of property (including assets held for sale), plant and equipment comprise:
Six months Six months
to to Year to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
------------------------------------ ---------- ---------- ------------
Net book amount 1.7 1.4 3.0
Profit on sale of property, plant
and equipment (0.4) (0.5) (1.0)
------------------------------------ ---------- ---------- ------------
Proceeds from the sale of property,
plant and equipment 1.3 0.9 2.0
------------------------------------ ---------- ---------- ------------
Six months Six months
to to Year to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
------------------------------------ ---------- ---------- ------------
Free cash flow (28.6) 0.6 47.0
------------------------------------ ---------- ---------- ------------
Analysis of free cash flow
Net cash generated from operating
activities 106.4 110.0 282.8
Purchases of property, plant
and equipment (133.9) (108.6) (233.1)
Proceeds from the sale of property,
plant and equipment 1.3 0.9 2.0
Purchases of intangible assets (2.4) (1.7) (4.7)
------------------------------------ ---------- ---------- ------------
Free cash flow (28.6) 0.6 47.0
------------------------------------ ---------- ---------- ------------
12 Reconciliation of net cash flow to movement in net debt
Six months Six months
to to Year to
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
------------------------------------- ---------- ---------- ------------
Decrease in cash (9.7) (73.3) (62.2)
Cash (inflow)/ outflow from movement
in debt and lease financing (57.7) 32.2 51.5
------------------------------------- ---------- ---------- ------------
(Increase)/ decrease in net debt
resulting from cash flows (67.4) (41.1) (10.7)
New finance leases - (0.5) (0.6)
Bank loans and lease obligations
acquired with subsidiaries - - (2.8)
Currency translation 8.8 (29.3) (44.4)
------------------------------------- ---------- ---------- ------------
Movement in net debt in period (58.6) (70.9) (58.5)
Net debt at beginning of year (429.4) (370.9) (370.9)
------------------------------------- ---------- ---------- ------------
Net debt at end of period (488.0) (441.8) (429.4)
------------------------------------- ---------- ---------- ------------
Reconciliation of liabilities arising from financing activities
Short-term Long-term
Short-term Long-term Lease Lease
borrowings Borrowings liabilities liabilities Total
GBPm GBPm GBPm GBPm GBPm
------------------------ ------------ ------------ ------------- ------------ -------
As at 1 January
2017 - (511.8) (0.6) (1.0) (513.4)
Cash flows - (57.9) 0.1 0.1 (57.7)
Non-cash flows
New finance leases - - - - -
Reclassification
to current liabilities (77.0) 77.0 - - -
Currency translation (0.3) 6.8 0.3 - 6.8
------------------------ ------------ ------------ ------------- ------------ -------
As at 30 June 2017 (77.3) (485.9) (0.2) (0.9) (564.3)
------------------------ ------------ ------------ ------------- ------------ -------
13 Acquisitions
The group made no acquisitions in the period ended 30 June 2017. Over the same period the group paid GBPnil in respect of previous acquisitions made.
14 Pension schemes
The amounts recognised in the balance sheet are determined as follows:
As at As at
30 June 31 December
2017 2016
GBPm GBPm
---------------------------------------------- -------- ------------
Present value of obligations (399.2) (395.8)
Fair value of plan assets 366.3 356.4
---------------------------------------------- -------- ------------
Net liability recognised in balance sheet (32.9) (39.4)
---------------------------------------------- -------- ------------
Analysed as:
- Pension scheme surplus 1.1 -
- Pension scheme deficit and unfunded schemes (34.0) (39.4)
---------------------------------------------- -------- ------------
(32.9) (39.4)
---------------------------------------------- -------- ------------
Analysis of the movement in the net balance sheet asset:
Six months
to
30 June
2017
GBPm
------------------------------------------------- ----------
At 1 January 2017 (39.4)
Current service cost (0.7)
Interest cost (5.2)
Return on plan assets 4.7
Actuarial loss recognised in other comprehensive
income 7.3
Benefits paid 0.5
Contributions paid 0.8
Currency translation (0.9)
-------------------------------------------------- ----------
At 30 June 2017 (32.9)
-------------------------------------------------- ----------
The movement in the pension balance in the six months ended 30 June 2017 largely reflects the result of a fall in the Corporate bond rate during the period and the impact of this fall on discounted pension obligations.
15 Financial risk management and financial instruments
15.1 Financial risk factors
The group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.
The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements and hence they should be read in conjunction with the group's annual financial statements as at 31 December 2016. There have been no changes in the risk management department or in any risk management policies since the year end.
15.2 Liquidity Risk
Compared to year end, there was no material change in the contractual undiscounted cash out flows for financial liabilities. During the period the group made an additional drawdown from its RCF of GBP58 million.
15 Financial risk management and financial instruments (continued)
15.3 Fair Value estimation
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
-- Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2)
-- Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).
The following table presents the group's financial assets and liabilities that are measured at fair value at 30 June 2017:
Level Level
1 2 Level 3 Total
------------------------------ ----- ------ ------- ------
Assets
Derivatives used for hedging
Cross-currency interest swaps - 56.9 - 56.9
Forward foreign exchange
contracts - - - -
------------------------------ ----- ------ ------- ------
Total assets - 56.9 - 56.9
------------------------------ ----- ------ ------- ------
Liabilities
Derivatives used for hedging
Cross-currency interest swaps - (16.1) - (16.1)
Forward foreign exchange
contracts - (0.7) - (0.7)
Total liabilities - (16.8) - (16.8)
------------------------------ ----- ------ ------- ------
The following table presents the group's financial assets and liabilities that are measured at fair value at 30 June 2016:
Level Level
1 2 Level 3 Total
------------------------------ ----- ------ ------- ------
Assets
Derivatives used for hedging
Cross-currency interest swaps - 70.6 - 70.6
Forward foreign exchange
contracts - 2.3 - 2.3
------------------------------ ----- ------ ------- ------
Total assets - 72.9 - 72.9
------------------------------ ----- ------ ------- ------
Liabilities
Derivatives used for hedging
Cross-currency interest swaps - (14.5) - (14.5)
Total liabilities - (14.5) - (14.5)
------------------------------ ----- ------ ------- ------
The following table presents the group's financial assets and liabilities that are measured at fair value at 31 December 2016:
Level Level
1 2 Level 3 Total
------------------------------ ----- ------ ------- ------
Assets
Derivatives used for hedging
Cross-currency interest swaps - 73.6 - 73.6
Forward foreign exchange
contracts - 2.3 - 2.3
------------------------------ ----- ------ ------- ------
Total assets - 75.9 - 75.9
------------------------------ ----- ------ ------- ------
Liabilities
Derivatives used for hedging
Cross-currency interest swaps - (14.9) - (14.9)
Forward foreign exchange
contracts - - - -
------------------------------ ----- ------ ------- ------
Total liabilities - (14.9) - (14.9)
------------------------------ ----- ------ ------- ------
15 Fair risk management and financial instruments (continued)
15.4 Fair value measurement
In accordance with IFRS 13, disclosure is required for financial instruments that are measured in the group balance sheet at fair value.
Valuation techniques and assumptions applied in determining fair values of each class of asset or liability are consistent with those used as at 31 December 2016 and reflect the current economic environment. The fair value measurements of the derivatives are classified as Level 2 in the fair value hierarchy as defined by IFRS13.
The fair values by designated hedge type are as follows:
Six months Six months Year to
to to 31 December
30 June 2017 30 June 2016 2016
------------------------- ------------------- ------------------- -------------------
Assets Liabilities Assets Liabilities Assets Liabilities
fair fair fair fair fair fair
value value value value value value
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------ ----------- ------ ----------- ------ -----------
Cash flow hedges
Cross currency interest
rate swaps 55.4 - 60.9 - 68.9 -
Forward foreign exchange
contracts - (0.7) 2.3 - 2.3 -
------------------------- ------ ----------- ------ ----------- ------ -----------
55.4 (0.7) 63.2 - 71.2 -
------------------------- ------ ----------- ------ ----------- ------ -----------
Net investment hedges
Cross currency interest
rate swaps 1.5 (16.1) 9.7 (14.5) 4.7 (14.9)
------------------------- ------ ----------- ------ ----------- ------ -----------
1.5 (16.1) 9.7 (14.5) 4.7 (14.9)
------------------------- ------ ----------- ------ ----------- ------ -----------
Total 56.9 (16.8) 72.9 (14.5) 75.9 (14.9)
------------------------- ------ ----------- ------ ----------- ------ -----------
16 Related parties
The nature of related parties as disclosed in the consolidated financial statements for the group as at and for the year ended 31 December 2016 has not changed. Further, there have been no significant related party transactions in the six month period ended 30 June 2017.
17 Contingent liabilities
The group operates from a number of laundries 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. The extent of these liabilities and the cover provided by the indemnities are reviewed where appropriate with the relevant third party. The company is currently defending a legal claim to the warranties received for any environmental damage that might have existed when it purchased laundry sites in Sweden. The company expects to have its warranties, which were contractually received in a clear and unequivocal manner, to be confirmed in full. The company does not expect to incur any significant loss in respect of these or any other sites.
In an international group, a variety of claims arise from time to time in addition to those in respect of environmental obligations discussed above. Such claims may arise due to litigation against group companies, as a result of investigations by fiscal authorities, or under regulatory requirements. Provision has been made in these interim consolidated financial statements against those claims which the directors consider are likely to result in significant liabilities. There are no contingent liabilities which the directors consider require disclosure, other than those disclosed within this interim financial information.
18 Website policy
The directors are responsible for the maintenance and integrity of the company's website. Information published on the internet is accessible in many countries with different legal requirements. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
19 Events occurring after the balance sheet date
On 12 June 2017 the boards of Elis SA and Berendsen plc announced that they had reached agreement on the terms of a recommended acquisition by Elis of the entire issued and to be issued share capital of Berendsen (the "Transaction").
The Berendsen Board remains confident that the Berendsen Excellence strategy would deliver significant value for the Berendsen Shareholders on a standalone basis. However, it also believes that the terms of the offer by Elis SA substantially acknowledges the quality of the Berendsen business and the strength of its future prospects. Furthermore, the Berendsen Board recognises that the transaction will create a pan-European leader in textile services, with attractive positions in the markets in which it operates and with sufficient scale and footprint to provide customers with the most efficient and comprehensive textile services offering across
19 Events occurring after the balance sheet date
the European continent. As such, the Berendsen Board intends unanimously to recommend the Transaction to Berendsen Shareholders.
It is expected that the Scheme Document, containing further information about the Transaction and notices of the Court Meeting and General Meeting, together with the Forms of Proxy, will be posted to Berendsen Shareholders no later than 31 July 2017. An expected timetable of principal events will be included in the Scheme Document. Completion of the transaction is expected during the third quarter of 2017, subject to relevant shareholder and regulatory approvals.
20 Principal risks and uncertainties
Potential Movement since Current mitigating Further mitigating
Risk impact January 2017 actions actions in 2017
--------------------- ---------------------- --------------------- --------------------- ----------------------
1 Business disruption Reduction in future No change The Executive Board Continue with our
and lack of focus profitability, and reviews monthly the current mitigating
resulting from impact on KPIs progress on strategy actions.
strategic Revenue growth implementation and
organisational Earnings per share business performance
changes. Cash flow against targets
Strategic focus area Net debt to EBITDA agreed.
Operational Return on invested New KPI's defined and
excellence capital agreed.
Dividend per share Monitoring of project
tracker for Group
initiatives.
Dedicated PMO
resource for all
major projects and
project management
system in place.
--------------------- ---------------------- --------------------- --------------------- ----------------------
2 Not having the IT and Insufficient support No change New IT Director in Continue with our
shared services to the new Group place to define IT current mitigating
capability needed to strategy and impact on strategy and actions.
support the delivery KPIs implement this.
of the business Revenue growth A shared services
strategy. Earnings per share project is currently
Strategic focus area Return on invested underway aiming at
Underpins all our capital strengthening the use
four strategic areas. and scope
of shared services.
The project is being
supported by a
consultancy firm
expertise in the
subject.
--------------------- ---------------------- --------------------- --------------------- ----------------------
3 Not embedding the Insufficient support No change LEAN training Continue with our
necessary LEAN to the new Group programme in place current mitigating
capabilities to strategy and impact on with the delivery of actions.
support the delivery KPIs projects and Superior
of the business Revenue growth Operating Models
strategy Earnings per share being developed.
across businesses. Major injury rate Sites benchmarking
Strategic focus area CO2 emissions against Berendsen
Underpins all our Senior management Excellence model in
four strategic areas retention rate progress.
Return on invested
capital
--------------------- ---------------------- --------------------- --------------------- ----------------------
4 Not having the right Insufficient support Decreased Accelerated Capability review to
people capability and to the new Group The Organisation leadership training take place in Europe.
alignment to support strategy and impact on Capability Review has being delivered in
the delivery of the KPIs now finalised in the the UK for new
business Revenue growth UK business and an management in the
strategy and sustain Earnings per share enhanced management business.
past business Major injury rate team is now in place.
performance CO2 emissions
capability. Senior
Strategic focus area management retention
Underpins all our rate
four strategic areas Return on invested
capital
--------------------- ---------------------- --------------------- --------------------- ----------------------
5 Not being able to Reduction in future No change A dedicated business Continue with our
execute the M&A profitability, and development team is current mitigating
pipeline. impact on KPIs in place to support actions.
Strategic focus area Revenue growth the business with the
Customer/market Cash flow execution
growth of acquisitions.
A defined framework
and process for
acquisitions and
integrations is in
place.
--------------------- ---------------------- --------------------- --------------------- ----------------------
6 Not embedding the Reduction in future No change New defined standard Continue with our
necessary profitability, and framework for current mitigating
capabilities to impact on KPIs business capture actions.
strengthen customer Revenue growth using Microsoft
engagement and ensure Cash flow Dynamics across
bidding businesses
success rates and to help pipeline
customer retention management being
increase across the implemented.
business. Greater focus on
Strategic focus area customer retention,
Customer/market Microsoft Dynamics
growth will be also used as
CRM across all
businesses.
--------------------- ---------------------- --------------------- --------------------- ----------------------
7 Brexit. Inability to execute No change A Brexit detailed Continue with our
Strategic focus area the business strategy risk assessment has current mitigating
Underpins all our and impact on KPIs been performed to actions.
four strategic areas. Revenue growth understand how the
Earnings per share different elements
Cash flow of a Brexit would
Senior impact on our
management retention business model and
rate strategy.
Net debt to EBITDA High-level mitigation
Return on invested options have been
capital defined for each of
Dividend per share the risks identified.
Continuous monitoring
of Brexit development
by Group management
is in place.
--------------------- ---------------------- --------------------- --------------------- ----------------------
Movement Further mitigating
Potential since January Current mitigating actions in
Risk impact 2017 actions 2017
---------------------- ---------------------- ------------------ ----------------------- ---------------------
8 Failure to Damage to our No change Group Health Continue implementing
deliver Health reputation and Safety the H&S strategy.
and Safety and/or loss Policy in place.
systems to of licence Local health,
reduce accidents to operate safety and
and improve and impact fire management
safety. on KPIs systems in
Strategic Revenue growth place.
focus area Major injury Regularly updated
Operational rate and monitored
excellence cleaning and
to be the maintenance
best programmes.
Prompt incident
reporting procedures
maintained.
Regular Board
review of major
incidents and
statistics.
Clear Health
and Safety
Strategy defined.
---------------------- ---------------------- ------------------ ----------------------- ---------------------
9 Textile suppliers Damage to our No change Regular visits Continue with
are found reputation, to major suppliers our current
not to be and/or loss by experienced mitigating
adopting appropriate of licence internal personnel actions.
employment to operate, and external
and human loss of goodwill. parties to
rights practices. Significant assess suppliers'
Strategic shareholder compliance
focus area concern with appropriate
Operational Impact on KPI working practices.
excellence Earnings per
share
---------------------- ---------------------- ------------------ ----------------------- ---------------------
10 Inadequate Lack of internal No change Focus placed Continue with
talent management succession on organisation our current
and inability for key management capability mitigating
to recruit roles. Short/medium review and actions.
and retain term disruption accelerated
sufficiently in the event leadership
qualified of sudden departures training.
and experienced due to lack Review of the
senior management. of skilled Berendsen Academy
Strategic management under way.
focus area Impact on KPI
People effectiveness Senior management
retention rate
---------------------- ---------------------- ------------------ ----------------------- ---------------------
Movement Further mitigating
Potential since January Current mitigating actions in
Risk impact 2017 actions 2017
---------------------- ---------------------- ------------------ ----------------------- ---------------------
11 Failure of Reduction in No change Business line Continue embedding
sales to deliver future profitability, organisational Berendsen
the necessary and impact structure in Advance CRM
new contract on KPI place which system and
wins to drive Revenue growth gives us more consolidating
targeted organic focus on growth this.
growth. areas.
Strategic The reporting
focus area system provides
Customer/market monthly progress
growth against business
line budgets,
including key
performance
indicators.
Monthly management
accounts distributed
to the Board
include KPIs
on organic
growth, contract
gains and customer
losses.
---------------------- ---------------------- ------------------ ----------------------- ---------------------
12 Significant Reduction in No change Careful monitoring Continue with
change in future profitability, and planning our current
political and impact of political mitigating
environment on KPIs developments. actions.
arising from Revenue growth Deep understanding
government Earnings per of domestic
policies or share market and
spending levels. Cash flow political environment
Strategic where we operate.
focus area
Customer/market
growth and
operational
excellence.
---------------------- ---------------------- ------------------ ----------------------- ---------------------
Movement Further mitigating
Potential since January Current mitigating actions in
Risk impact 2017 actions 2017
---------------------- ---------------------- ------------------ ----------------------- ---------------------
13 Non-compliance Damage to our Increased Group policy, Review and
with laws reputation, new regulations procedures update the
and regulations. and/or loss with significance and guidelines current competition
Strategic of licence for the maintained law policy,
focus area to operate Group are and regularly procedures
Operational Impact on KPIs upcoming monitored to and training.
excellence Revenue growth (i.e. the ensure compliance Develop and
Earnings per General to those laws implement
share Data Protection and regulations GDPR policy,
Regulation, identified procedures
Gender as significant and training.
Pay Gap for the Group.
Reporting). New policies
developed and
translated
into local
languages when
needed.
---------------------- ---------------------- ------------------ ----------------------- ---------------------
14 Environmental Emergence of No change Environmental Continue with
issues at unaccounted policy and our current
laundries. for liability, regular monitoring mitigating
Strategic and adverse of compliance actions.
focus area impact on reputation in place.
Operational and retained Established
excellence earnings and procedures
and effective KPI for incident
use of capital Cash flow reporting to
senior management
with subsequent
monitoring.
---------------------- ---------------------- ------------------ ----------------------- ---------------------
15 Unforeseen Inability to No change Group Business BCP tests
loss of capacity service customer Continuity will continue
(significant requirements Policy in place to take place.
facility or and adverse which requires Property assessments
business critical impact on reputation documented will continue
IT system and KPIs and evaluated taking place.
becomes unavailable). Revenue growth business continuity
Strategic Earnings per plans for all
focus area share 'significant'
Operational facilities
excellence to ensure that
customer service
is not significantly
impacted during
an interruption.
The policy
also required
documented
IT disaster
recovery plans.
Regular desktop
scenario-based
testing of
business continuity
planning arrangements.
---------------------- ---------------------- ------------------ ----------------------- ---------------------
Movement Further mitigating
Potential since January Current mitigating actions in
Risk impact 2017 actions 2017
---------------------- ---------------------- ------------------ ----------------------- ---------------------
16 Movements Unexpected No change Maintain and Continue with
in exchange variations regularly monitor the current
rates adversely in Group net a high level mitigating
affect the earnings of balance actions.
translation KPI sheet hedging.
of our Group Earnings per Regular communication
results into share with the market
UK sterling. on impact on
Strategic earnings.
focus area
Effective
use of capital
---------------------- ---------------------- ------------------ ----------------------- ---------------------
17 Further economic Reduction in No change Long-range Continue with
downturn (low future profitability, plans for business the current
or negative adverse pressure lines to 2019 mitigating
GDP growth on pricing prepared. actions.
in Europe). and margins, Tight and closely
Strategic and impact monitored controls
focus area on KPIs over capital
Effective Cash flow expenditure
use of capital Net debt to and working
and customer/market EBITDA capital.
growth Return on invested
capital
---------------------- ---------------------- ------------------ ----------------------- ---------------------
21 Statutory and Alternative Performance Measures
Alternative performance measures
Underlying revenue and underlying revenue growth
This is defined as year on growth in revenue excluding the impact of foreign currency translation and acquisitions or disposals and is a good indicator that we are capturing the opportunities available to us in our existing markets.
Adjusted operating profit, adjusted operating margin and adjusted profit before tax
Adjusted operating profit is the basis that the Group uses for its adjusted earnings per share calculation. The adjusted operating profit is presented to eliminate the impact of exceptional items, amortisation of customer contracts and non-recurring tax items for a transparent comparison of the year on year performance of the group's operations. Amortisation of customer contracts arising from acquisitions is excluded from underlying operating profit to avoid potential double counting of such costs within such measures.
Adjusted underlying profit growth
This is defined as year on year growth in adjusted operating profit after adjusting for the impact of foreign currency translation and acquisitions and disposals. This measure gives a good indication of the underlying growth in the Group's business activities.
Adjusted EPS
This shows EPS based upon adjusted operating profit. This presentation is shown because, in the opinion of the directors, this represents additional information to the readers of the financial statements, providing information attributable to the underlying activities of the business.
Adjusted net debt to EBITDA
This adjusted ratio is presented in accordance with the terms of the Group's Revolving Credit Facility. We believe that this ratio best captures the sustainability and soundness of our financial position. The ratio divides net debt, borrowings adjusted for cash deposits, by adjusted earnings before interest tax, depreciation and amortisation.
Key financial measures
2017 2016
GBPm GBPm
---------------------------------- ----- -----
Statutory
---------------------------------- ----- -----
Revenue 575.1 533.5
---------------------------------- ----- -----
Revenue growth 7.8%
---------------------------------- ------------
Operating profit 45.2 61.7
---------------------------------- ----- -----
Operating margin 7.9% 11.6%
---------------------------------- ----- -----
Operating profit growth (26.7%)
---------------------------------- ------------
Operating profit before tax 36.1 51.7
---------------------------------- ----- -----
Basic earnings per share 15.7 23.1
---------------------------------- ----- -----
Net debt to EBITDA 1.48 1.38
---------------------------------- ----- -----
Alternative Performance Measures
---------------------------------- ----- -----
Underlying revenue growth 2.4%
---------------------------------- ------------
Adjusted operating profit 65.9 70.2
---------------------------------- ----- -----
Adjusted operating margin 11.5% 13.2%
---------------------------------- ----- -----
Adjusted operating profit growth (6.1%)
---------------------------------- ------------
Adjusted profit before tax 56.8 60.2
---------------------------------- ----- -----
Adjusted underlying profit growth (13.6%)
---------------------------------- ------------
Adjusted earnings per share 25.6 27
---------------------------------- ----- -----
Adjusted net Debt to EBITDA 1.2 1.1
---------------------------------- ----- -----
Reconciliation of statutory and alternative performance measures - Consolidated
Revenue
2017 2016
---------------------------------------------------------------- ----- -----
Statutory measure
---------------------------------------------------------------- ----- -----
Statutory revenue 575.1 533.5
---------------------------------------------------------------- ----- -----
Statutory revenue growth 7.8%
---------------------------------------------------------------- ------------
Alternative performance measure
---------------------------------------------------------------- ----- -----
Statutory revenue 575.1 533.5
---------------------------------------------------------------- ----- -----
Adjust for acquisitions/disposals and internal transfers, where
applicable (2.3) (7.5)
---------------------------------------------------------------- ----- -----
Impact of foreign exchange movements - 33.4
---------------------------------------------------------------- ----- -----
Underlying revenue 572.8 559.4
---------------------------------------------------------------- ----- -----
Underlying revenue growth 2.4%
---------------------------------------------------------------- ------------
Operating profit
2017 2016
------------------------------------------------ ------ ------
Statutory measure
------------------------------------------------ ------ ------
Operating profit 45.2 61.7
------------------------------------------------ ------ ------
Operating profit growth (26.7%)
------------------------------------------------ --------------
Operating profit margin 7.9% 11.6%
------------------------------------------------ ------ ------
Operating profit margin growth (370) bps
------------------------------------------------ --------------
Profit before tax 36.1 51.7
------------------------------------------------ ------ ------
Alternative performance measure
------------------------------------------------ ------ ------
Operating profit 45.2 61.7
------------------------------------------------ ------ ------
Intangible asset amortisation 3.8 3.6
------------------------------------------------ ------ ------
Exceptional items 16.9 4.9
------------------------------------------------ ------ ------
Adjusted operating profit 65.9 70.2
------------------------------------------------ ------ ------
Adjusted operating profit margin 11.5% 13.2%
------------------------------------------------ ------ ------
Adjusted operating profit growth (6.1%)
------------------------------------------------ --------------
Adjusted operating margin growth (170)bps
------------------------------------------------ --------------
Adjusted profit before tax 56.8 60.2
------------------------------------------------ ------ ------
Tax on adjusted operating profit (12.9) (13.9)
------------------------------------------------ ------ ------
Effective tax rate on adjusted operating profit 22.6% 23.1%
------------------------------------------------ ------ ------
Adjusted operating profit 65.9 70.2
------------------------------------------------ ------ ------
Impact of acquisitions and disposals (1.1) (1.1)
------------------------------------------------ ------ ------
Impact of foreign currency translation - 6.0
------------------------------------------------ ------ ------
Underlying adjusted operating profit 64.8 75.1
------------------------------------------------ ------ ------
Underlying adjusted operating profit margin 11.3% 13.4%
------------------------------------------------ ------ ------
Underlying profit growth (13.6%)
------------------------------------------------ --------------
Earnings per share
2017 2016
-------------------------------- ---- ----
Statutory measure
-------------------------------- ---- ----
Basic Earnings per share 15.7 23.1
-------------------------------- ---- ----
Alternative performance measure
-------------------------------- ---- ----
Basic Earnings per share 15.7 23.1
-------------------------------- ---- ----
Exceptional items 8.1 2.3
-------------------------------- ---- ----
Intangible asset amortisation 1.8 1.6
-------------------------------- ---- ----
Impact of changes in tax rates - -
-------------------------------- ---- ----
Adjusted earnings per share 25.6 27.0
-------------------------------- ---- ----
Net Debt to EBITDA
2017 2016
--------------------------------------------- ------ ------
Statutory measure
--------------------------------------------- ------ ------
Net debt divided by EBITDA 1.48 1.38
--------------------------------------------- ------ ------
Alternative performance measure
--------------------------------------------- ------ ------
Net debt 488.0 441.8
--------------------------------------------- ------ ------
Adjust debt for underlying swap values
and at average foreign currency translation
rates (53.6) (75.2)
--------------------------------------------- ------ ------
Adjusted EBITDA after intangible asset
amortisation and exceptional costs 355.4 333.0
--------------------------------------------- ------ ------
Adjusted net debt to EBITDA 1.2 1.10
--------------------------------------------- ------ ------
Reconciliation of statutory and alternative performance measures - Business Line
Workwear
2017 2016
------------------------------------- ----- -----
Statutory measure
------------------------------------- ----- -----
Statutory revenue 198.5 179.8
------------------------------------- ----- -----
Statutory revenue growth 10.4%
------------------------------------- ------------
Alternative Performance Measure
------------------------------------- ----- -----
Statutory revenue 198.5 179.8
------------------------------------- ----- -----
Impact of foreign exchange movements - 12.9
------------------------------------- ----- -----
Underlying revenue 198.5 192.7
------------------------------------- ----- -----
Underlying revenue growth 3.1%
------------------------------------- ------------
Statutory measure
------------------------------------- ----- -----
Operating profit 33.5 33.0
------------------------------------- ----- -----
Operating profit growth 1.5%
------------------------------------- ------------
Operating profit margin 16.9% 18.4%
------------------------------------- ----- -----
Operating profit margin growth (150)bps
------------------------------------- ------------
Alternative Performance Measure
------------------------------------- ----- -----
Operating profit 33.5 33.0
------------------------------------- ----- -----
Amortisation of customer contracts 0.7 0.7
------------------------------------- ----- -----
Exceptional items 2.3 -
------------------------------------- ----- -----
Adjusted operating profit 36.5 33.7
------------------------------------- ----- -----
Adjusted operating profit growth 8.3%
------------------------------------- ------------
Adjusted operating profit margin 18.4% 18.7%
------------------------------------- ----- -----
Facility
2017 2016
--------------------------------------- ----- -----
Statutory measure
--------------------------------------- ----- -----
Statutory revenue 128.3 110.6
--------------------------------------- ----- -----
Statutory revenue growth 16%
--------------------------------------- ------------
Alternative Performance Measure
--------------------------------------- ----- -----
Statutory revenue 128.3 110.6
--------------------------------------- ----- -----
Adjust for acquisitions, disposals and
internal transfers, where applicable (2.3) -
--------------------------------------- ----- -----
Impact of foreign exchange movements - 11.1
--------------------------------------- ----- -----
Underlying revenue 126.0 121.7
--------------------------------------- ----- -----
Underlying revenue growth 3.5%
--------------------------------------- ------------
Statutory measure
--------------------------------------- ----- -----
Operating profit 28.0 23.5
--------------------------------------- ----- -----
Operating profit growth 19.1%
--------------------------------------- ------------
Operating profit margin 21.8% 21.2%
--------------------------------------- ----- -----
Operating profit margin growth (60bps)
--------------------------------------- ------------
Alternative Performance Measure
--------------------------------------- ----- -----
Operating profit 28.0 23.5
--------------------------------------- ----- -----
Amortisation of customer contracts 2.9 2.7
--------------------------------------- ----- -----
Exceptional items 0.3 -
--------------------------------------- ----- -----
Adjusted operating profit 31.2 26.2
--------------------------------------- ----- -----
Adjusted operating profit growth 19.1%
--------------------------------------- ------------
Adjusted operating profit margin 24.3% 23.7%
--------------------------------------- ----- -----
Healthcare
2017 2016
------------------------------------- ----- -----
Statutory measure
------------------------------------- ----- -----
Statutory revenue 163.5 153.7
------------------------------------- ----- -----
Statutory revenue growth 6.4%
------------------------------------- ------------
Alternative Performance Measure
------------------------------------- ----- -----
Statutory revenue 163.5 153.7
------------------------------------- ----- -----
Impact of foreign exchange movements - 6.9
------------------------------------- ----- -----
Underlying revenue 163.5 160.6
------------------------------------- ----- -----
Underlying revenue growth 1.8%
------------------------------------- ------------
Statutory measure
------------------------------------- ----- -----
Operating profit 7.5 11.0
------------------------------------- ----- -----
Operating profit growth (31.8%)
------------------------------------- ------------
Operating profit margin 4.6% 7.2%
------------------------------------- ----- -----
Operating profit margin growth (260)bps
------------------------------------- ------------
Alternative Performance Measure
------------------------------------- ----- -----
Operating profit 7.5 11.0
------------------------------------- ----- -----
Amortisation of customer contracts 0.1 0.1
------------------------------------- ----- -----
Exceptional items 2.4 0.4
------------------------------------- ----- -----
Adjusted operating profit 10.0 11.5
------------------------------------- ----- -----
Adjusted operating profit growth (13%)
------------------------------------- ------------
Adjusted operating profit margin 6.1% 7.5%
------------------------------------- ----- -----
Hospitality
2017 2016
----------------------------------------------- ------ -----
Statutory measure
----------------------------------------------- ------ -----
Statutory revenue 84.8 89.4
----------------------------------------------- ------ -----
Statutory revenue growth (5.1%)
----------------------------------------------- -------------
Alternative Performance Measure
----------------------------------------------- ------ -----
Statutory revenue 84.8 89.4
----------------------------------------------- ------ -----
Adjust for acquisitions/disposals and internal
transfers, where applicable - (7.5)
----------------------------------------------- ------ -----
Impact of foreign exchange movements - 2.5
----------------------------------------------- ------ -----
Underlying revenue 84.8 84.4
----------------------------------------------- ------ -----
Underlying revenue growth 0.5%
----------------------------------------------- -------------
Statutory measure
----------------------------------------------- ------ -----
Operating profit (3.2) 1.1
----------------------------------------------- ------ -----
Operating profit growth N/A
----------------------------------------------- -------------
Operating profit margin (3.8%) 1.2%
----------------------------------------------- ------ -----
Operating profit margin growth (500)bps
----------------------------------------------- -------------
Alternative Performance Measure
----------------------------------------------- ------ -----
Operating profit (3.2) 1.1
----------------------------------------------- ------ -----
Amortisation of customer contracts - -
----------------------------------------------- ------ -----
Exceptional items 1.7 0.3
----------------------------------------------- ------ -----
Adjusted operating profit (1.5) 1.4 ----------------------------------------------- ------ ----- Adjusted operating profit growth N/A ----------------------------------------------- ------------- Adjusted operating profit margin (1.8%) 1.6% ----------------------------------------------- ------ -----
Statement of directors' responsibilities
The directors confirm that this condensed set of consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim financial report includes a fair review of the information required by DTR 4.2.7 and 4.2.8 namely:
-- an indication of important events that have occurred during the first six months and their impact on the condensed set of interim financial information, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
-- material related-party transactions in the first six months and any material changes in the related party transactions described in the last annual report.
The directors of Berendsen plc are listed in the Berendsen plc Annual Report for the year ended 31 December 2016
On behalf of the Board
James Drummond
26 July 2017
Chief Executive Officer
Kevin Quinn
26 July 2017
Chief Financial Officer
Independent review report to Berendsen plc
Report on the condensed consolidated interim financial information
Our conclusion
We have reviewed Berendsen plc's condensed consolidated interim financial information (the "interim financial information") in the interim results announcement of Berendsen plc for the 6 month period ended 30 June 2017. Based on our review, nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial information comprises:
-- the consolidated interim balance sheet as at 30 June 2017;
-- the consolidated interim income statement and consolidated interim statement of comprehensive income for the period then ended;
-- the consolidated interim cash flow statement for the period then ended; -- the consolidated statement of changes in total equity for the period then ended; and -- the explanatory notes to the interim financial information.
The interim financial information included in the interim results announcement has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. As disclosed in note 1 to the interim financial information, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial information and the review
Our responsibilities and those of the directors
The interim results announcement, including the interim financial information, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim results announcement in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial information in the interim results announcement based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial information involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim results announcement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial information.
PricewaterhouseCoopers LLP
Chartered Accountants
London
26 July 2017
a) The maintenance and integrity of the Berendsen plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial information since they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFFRDVIEFID
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July 26, 2017 02:00 ET (06:00 GMT)
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