Gbp2.3 million net has been charged against pre-tax profits for exceptional items and goodwill amortisation – this compares to a net credit of gbp0.1 million in 1999.
Basic earnings per share decreased by 1% to 31.38p. Adjusted earnings per share increased by 3% to 32.81p having added back the after tax effect of the exceptional items and the goodwill amortisation.
The Board recommends a final dividend of 10.2p making the total for the year 14.9p (1999: 13.9p), an increase of 7%.
Goodwill amortisation is gbp2.3 million as a result of the Redispace and Johnson acquisition and revising the Midland Laundry Group goodwill amortisation to a 20 year basis rather than the previous policy of an unlimited useful life.
Exceptional trading items total gbp1.3 million and comprise restructuring costs to integrate the operations of the Midland Laundry Group and Redispace and Johnson. Property sales profits of gbp1.3 million have been realised.
The group cash flow from operations was gbp143.8 million (1999: gbp135.6 million). Net capital expenditure was gbp 79.9 million with depreciation at gbp 80.7 million – the 1999 equivalents were gbp78.3 million and gbp75.4 million respectively. The net cash inflow before acquisitions but after paying dividends was gbp22.1 million (1999: gbp17.0 million).
Taking the gbp21 million cash acquisition of Redispace and Johnson into account, overall net borrowings have increased from gbp71.7 million to gbp74.8 million, but the gearing level is 3% lower at 33%. Interest charges were covered 11 times by operating profits before exceptionals and goodwill amortisation.
OPERATIONAL REVIEW
Textile Maintenance: Sunlight Service Group
The provision of linen hire, workwear rental, laundry and washroom services together with the supply of related products and services.
Turnover for the year was gbp236.5 million, an increase of 9%, whilst operating profit before goodwill amortisation and exceptional items increased by 5% to gbp 37.8 million.
Sales grew strongly, principally driven by a full years’ contribution from the Midland Laundry Group acquired in November 1999. However, the growth in operating profit was a modest 5%.
In healthcare the Midland Laundry business performed in line with our expectations giving us the opportunity to integrate the operations with those of Sunlight Healthcare. This process is well advanced and will be completed in the second quarter of the current year. Whilst our specialised plant at Shrewsbury for processing theatre textiles opened, we were slow to scale the factory up with the result that pressures were placed on our existing capacity in this specialised area at Camberwell. The necessary rebalancing of the plants has now taken place; additionally we will improve the facilities and standards by making a significant investment in refurbishing and upgrading our Camberwell plant. Post this process we expect to see improved results from this sector of our business.
In the hotel sector there was an exceedingly competitive environment with consequent pricing pressures. Although at net level the overall impact on turnover was modest, we ran some of the plants under capacity for a period of time which affected our efficiency levels, and ultimately our profit levels.
The workwear division has experienced little change with sales and profits broadly equivalent to last year. Market demand was restricted by pressures on customers in the UK manufacturing sector. While this has not been so severe as in recent years, we expect it to continue in the short term.
Outside the UK, trading levels generally have been similar to last year, with turnover in sterling terms unchanged at gbp31.3 million due to the weakness of the Euro.
In France our Modeluxe business performed well and our newly acquired processing plant is being reorganised and developed. In Ireland, sales and operating profits grew in local currency by 7% and 10% respectively. In Germany, sales were equivalent to last year, but tight control of operating costs has produced a welcome 5% improvement in profits.
We believe we have taken the necessary actions to restore margins and improve profitable growth, and we expect this to be progressively demonstrated in 2001 and 2002.
This is reported at the interim stage immediate post-millennium business was slow and it was not until April that this subdued activity began returning to normal levels. From this point on the year continued to improve with the only setback being provided by the September fuel dispute. November and December provided a strong finish for our UK business.
During the year we opened 19 Hire Shops and 7 Lift & Shift depots. We continued to upgrade our estate with the relocation of 12 outlets. We now have 392 outlets in the UK and Ireland.
Our new business initiatives: Safe & Sure (safety and survey equipment hire), Workshops (customer equipment repairs), One Call (central sourcing of all major hire needs for account customers) and Hireweld (the rental of welding equipment and ancillary products), have all progressed well and are now regarded as integral components of our overall offering. Our Lift & Shift counters in selected Hire Shops and Shop counters in selected Lift & Shift depots are also now an established practice. These initiatives have all been planned to leverage off the HSS Shops core operation.
In Germany we opened one further outlet bringing the total to 7 and with 3 additions, our European franchisees’ outlets now total 23.
Our 13 stores in Florida grew strongly in the year. Turnover reached gbp4.6M, an increase of 53%, and with the operation trading profitably in the second half of the year, the overall trading position for the year resulted in a small operating loss of gbp157,000 compared to an operating loss of gbp1.1 million in 1999. Encouraged by these results we will continue with our strategy by adding further stores in Florida during the course of the current year.
The continuing success of the marketing initiatives, our reputation for prompt reaction to customers’ needs and the ongoing development of the US business leads us to be optimistic for the coming year.
