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INTERIM RESULTSfor the 26 weeks ended 28 June 2003
S E R V I C E G R O U P P L C
2S E R V I C E G R O U P P L C
Interim Results - June 2003
INTRODUCTION
Introduction
Stuart Graham, CEO
3S E R V I C E G R O U P P L C
Financial Review
Mike Sutton, CFO
Interim Results – June 2003
4S E R V I C E G R O U P P L C
Interim Results - June 2003
TURNOVER AND ADJUSTED OPERATING PROFIT
2003 £m
2002 £m
Change %
Turnover
- Continuing 97.4 98.1 (0.7)
- Discontinued 12.9 11.2
110.3 109.3 0.9
Adjusted operating profit* - Continuing 13.0 15.7 (17.2)
- Discontinued 0.4 (0.2)
13.4 15.5 (13.5)
Margin* - continuing 13.3% 16.0%
Text from Chairman’s Statement
“results in line with expectations”
* Excludes goodwill amortisation
5S E R V I C E G R O U P P L C
Interim Results – June 2003
PROFIT AND LOSS ACCOUNT
2003 £m
2002 £m
Change %
Adjusted operating profit* 13.4 15.5 (13.5)
Interest (2.2) (2.7)
Adjusted PBT** 11.2 12.8 (12.5)
Goodwill amortisation and exceptional items
(16.7) (3.6)
PBT (5.5) 9.2
* Excludes goodwill amortisation** Excludes goodwill amortisation and exceptional items
Goodwill amortisation and exceptional items
2003
£m
2002
£m
Amortisation of goodwill (2.6) (2.3)
Impairment of goodwill - Ireland (10.5) -
Impairment of goodwill – UK textile rental
(3.6)
-
Disposal of Northern Irish Linen business
- (1.3)
(16.7) (3.6)
6S E R V I C E G R O U P P L C
Interim Results – June 2003
EARNINGS PER SHARE (ADJUSTED)
2003 £m
2002 £m
Change %
Adjusted profit before tax* 11.2 12.8 (12.5)
Taxation** (3.2) (3.8)
Adjusted profit after tax*,** 8.0 9.0
Number ordinary shares
(fully diluted)
57.2 million
57.4 million
Adjusted EPS*,** 14.0p 15.6p
Interim dividend 4.0p 4.0p
Total dividend 17.6p
* Excludes goodwill amortisation and exceptional items** Excludes tax credit relating to earlier years (2003)
Calculation excludes tax credit relating to previous years.
7S E R V I C E G R O U P P L C
Interim Results – June 2003
SUMMARY BALANCE SHEET
June 2003
£m
Dec 2002
£m Fixed Assets 167.3 181.8
Current assets (excl. cash) 49.2 46.0
Current liabilities (excl.overdraft) (40.1) (46.3)
Financing (net of cash) (63.2) (61.9)
Provisions (13.2) (12.1)
NET ASSETS 100.0 107.5
Fixed assets
June 2003
£m
Dec 2002
£m Intangible fixed assets 67.8 79.3
Tangible fixed assets 73.7 76.3
Textile rental items 25.4 25.8
Investments 0.4 0.4
167.3 181.8
Provisions Deferred tax 0.5 0.4
Private healthcare 1.9 1.8
Property 7.7 6.9
Self insurance 3.1 3.0
13.2 12.1
8S E R V I C E G R O U P P L C
Interim Results – June 2003
CASHFLOW
* excludes goodwill amortisation
2003
£m 2002
£m
Operating profit* 13.4 15.5
Depreciation 13.8 14.7
Working capital (0.3) 1.0
Provisions 1.3 0.6
Other (0.4) (0.4)
27.8 31.4
Depreciation
Fixed assets 5.4 5.3
Textile rental items 8.4 9.4
13.8 14.7
Capital expenditure (net)
Fixed assets (1.3) (3.5)
Textile rental items (7.7) (6.5)
(9.0) (10.0)
9S E R V I C E G R O U P P L C
Interim Results – June 2003
NET BORROWINGS / INTEREST COVER
Net borrowings 2003
£m
At June 2003 63.2
Interest cover* 6.1x
Net debt and banking facilities
0
20
40
60
80
100
120
140
Dec-00
Dec-01
Dec-02
Jun-03
£m
net debt facility * Operating profit excluding goodwill amortisation
Subsequent to period end disposal proceeds of over £27m received
10S E R V I C E G R O U P P L C
Interim Results – June 2003
DISPOSALS
Disposals in August 2003
– Cash proceeds in August 2003
– CCG £14.7m with adjustment of up to £1.2m for pension liabilities
– JWS £13.7m less a retention of £0.5m
– CCG goodwill impairment £10.5m in H1
– JWS profit on disposal £4m + to be recognised in H2
Text from Chairman’s statement
“The proceeds have been used to reduce borrowings and are available to further the development of the Group’s activities”
11S E R V I C E G R O U P P L C
Interim Results – June 2003
TEXTILE RENTAL - UNITED KINGDOM
2003 £m
2002 £m
Change %
Continuing
Turnover 61.6 62.4 (1.3)
Adjusted operating profit* (23.7)
9.0 11.8
Margin* 14.6% 18.9%
Turnover
63%
UK textile rental
Adjusted operating profit *
69%
* Excludes goodwill amortisation
12S E R V I C E G R O U P P L C
Interim Results – June 2003
TEXTILE RENTAL – JOHNSONS APPARELMASTER
Annualised lost business (£m)
0
5
10
2000 2001 2002 2003*
* Equivalent annual rate
Text from Chairman’s statement
“cumulative effects of poor sales and customer retention over last three years have continued to impact on turnover”
13S E R V I C E G R O U P P L C
Interim Results – June 2003
DRYCLEANING
* Excludes goodwill amortisation
Turnover
37%
Adjusted operating profit *
31%
Drycleaning
14S E R V I C E G R O U P P L C
Review, Strategy and Outlook
Stuart Graham, CEO
Interim Results – June 2003
15S E R V I C E G R O U P P L C
Interim Results - June 2003
OVERVIEW
Transitional period for the Group
Group delivered on objectives to date
Management team significantly strengthened
Work in progress
Text from Chairman’s statement
“The first six months have been a period of significant change for the Group….”
16S E R V I C E G R O U P P L C
Interim Results – June 2003
TEXTILE RENTAL - UNITED KINGDOM
Johnsons Apparelmaster
– Shrinkage in traditional workwear market ongoing
– Masterplan initiative progressing well
– Sales team strengthened further
– Separate customer service function
– Plant closed in North East
Text from Chairman’s statement
“The cumulative effect of poor sales and customer retention over the last three years….”
17S E R V I C E G R O U P P L C
Interim Results – June 2003
TEXTILE RENTAL - UNITED KINGDOM
Text from Chairman’s Statement
“achieved further progress……”
Stalbridge Linen Services
– Further progress achieved
– Opportunities to offer added services
– Plant locations to be reviewed
– Maintained our market share
18S E R V I C E G R O U P P L C
Interim Results – June 2003
TEXTILE RENTAL - UNITED KINGDOM
Text from Chairman’s Statement
“We see considerable opportunities for growth…”
CCM
– Increase in sales
– Arco contract volumes as expected
– Initial start up costs have restricted profit in first half
– New markets and products being identified
19S E R V I C E G R O U P P L C
Interim Results – June 2003
DRYCLEANING
Text from Chairman’s Statement
“appointment as the Master Licensor for GreenEarth®”
Johnsons Cleaners
– Results encouraging
– GreenEarth®
• exciting first-to-market opportunity
• Roll out over 2 years
– Logistics
– CPU
– New operating model
20S E R V I C E G R O U P P L C
Interim Results – June 2003
DRYCLEANING
Text from Chairman’s Statement
“acquisition increases our penetration in the South East….”
Jeeves of Belgravia
– Acquired in May 2003
– Established luxury brand in London
– 12 shops and CPU in London
– “London’s Finest Drycleaner”
– Growth potential
21S E R V I C E G R O U P P L C
Interim Results – June 2003
OUTLOOK
Text from Chairman’s statement
“Broadening the base of our activities in terms of both the services we offer and their geographical location.…
Transitional period for the Group
Significant progress made to date
Strategy for growth
Strong balance sheet
Confident about the prospects for the Group