interim results for the 26 weeks ended 28 june 2003

INTERIM RESULTSfor the 26 weeks ended 28 June 2003

S E R V I C E G R O U P P L C

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Interim Results - June 2003

INTRODUCTION

Introduction

Stuart Graham, CEO

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Financial Review

Mike Sutton, CFO

Interim Results – June 2003

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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

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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)

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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.

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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

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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)

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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”

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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

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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”

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Interim Results – June 2003

DRYCLEANING

* Excludes goodwill amortisation

Turnover

37%

Adjusted operating profit *

31%

Drycleaning

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Review, Strategy and Outlook

Stuart Graham, CEO

Interim Results – June 2003

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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….”

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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….”

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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

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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

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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

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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

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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