Positive
about future
growth
2023 Annual Report & Accounts
2023
ANNUAL REPORT
& ACCOUNTS
Inside
this
report
01. Strategic Report
6
10
12
16
18
24
28
45
Group Overview and Highlights
Chair’s Statement
Strategic Review
Our Commitment to Section 172(1)
Chief Executive’s Operating Review
Financial Review
Sustainability
Principal Risks and Uncertainties
02. Corporate
Governance
54
56
61
62
77
86
89
Directors and Officers
Directors’ Report
Statement of Directors’ Responsibilities
in Respect of the Financial Statements
Corporate Governance Report
Audit Committee Report
Nomination Committee Report
Directors’ Remuneration Report
2
03. Group Financial
Statements
116
Independent Auditors’ Report
125 Consolidated Income Statement
126
127
Consolidated Statement of
Comprehensive Income
Consolidated Statement of Changes
in Shareholders’ Equity
128 Consolidated Balance Sheet
129 Consolidated Statement of Cash Flows
130
143
Statement of Significant Accounting
Policies
Notes to the Consolidated Financial
Statements
04. Company Financial
Statements
180 Company Statement of Changes in
Shareholders’ Equity
181 Company Balance Sheet
182 Company Statement of Cash Flows
183
Statement of Significant Accounting
Policies
184 Notes to the Company Financial
Statements
05. Shareholder
Information
193
Financial Calendar
194 Notice of Annual General Meeting
204 Directors and Advisors
3
6
10
12
16
18
24
28
Group Overview and Highlights
Chair’s Statement
Strategic Review
Our Commitment to Section 172(1)
Chief Executive’s Operating Review
Financial Review
Sustainability
45
Principal Risks and Uncertainties
01
Strategic
Report
4
2023 Annual Report & Accounts 01. Strategic Report
5
GROUP OVERVIEW AND HIGHLIGHTS
The Board remains
confident about the
growth opportunities
available to the Group
Our employees
are the foundation
of our business,
with a continued
focus on delivering
outstanding
customer service
Progressive
dividend
policy
Identification
of earnings
enhancing
acquisition
opportunities
Completed
£10.0 million
share buyback
programme
launched in
September 2023
New HORECA
site development
in Crawley
6
6
Acquisitions of
Celtic Linen in
the Republic
of Ireland and
Regency in
Corsham
Operating margin
of each individual
Division can
return towards
the historic levels
achieved in 2019
The Board
remains confident
about the growth
opportunities
available to the
Group
2023 Annual Report & Accounts 01. Strategic Report
Strong balance
sheet and capacity
for further
investment
Continued capital
investment across
the estate to increase
efficiencies and
underpin capacity
“We are pleased to report a
strong performance for the year,
demonstrating the resilience
of our business model against
a backdrop of macroeconomic
pressures, the strength of our
relationships with our customers
and business suppliers and the
hard work of our employees.”
7
725
FINANCIAL
HIGHLIGHTS
2023
8
824
2023 Annual Report & Accounts 01. Strategic Report
GROUP OVERVIEW AND HIGHLIGHTS
There is continuing positive
momentum moving into 2024
“We remain focused on organic growth initiatives, optimising operational efficiencies and continuing
to expand our geographical coverage through the successful execution of our strong M&A pipeline.”
350.6
350.6
350.6
350.6
350.6
350.6
229.8
REVENUE (£m) 1
229.8
229.8
385.7
385.7
385.7
271.4
271.4
271.4
271.4
271.4
271.4
229.8
229.8
229.8
350.6
350.6
465.3
465.3
385.7
385.7
465.3
465.3
465.3
465.3
465.3
465.3
385.7
385.7
385.7
119.0
119.0
119.0
119.0
119.0
119.0
67.9
67.9
ADJUSTED EBITDA (£m)1,2
53.6
67.9
53.6
53.6
53.6
53.6
53.6
67.9
67.9
67.9
119.0
119.0
131.5
131.5
131.5
131.5
131.5
131.5
104.9
104.9
104.9
104.9
104.9
104.9
131.5
131.5
104.9
104.9
2019
2019
2019
2019
2019
2019
229.8
2020
2020
2020
271.4
2021
2021
2021
229.8
2020
2020
2020
271.4
2021
2021
2021
2022
2022
2022
2022
2022
2022
2023
2023
2023
2023
2023
2023
2019
2019
2019
2019
2019
2019
2020
53.6
2020
2020
67.9
2021
2021
2021
2020
53.6
2020
2020
67.9
2021
2021
2021
2022
2022
2022
2022
2022
2022
2023
2023
2023
2023
2023
2023
2019
2019
2020
2020
2021
2021
2022
2022
2023
2023
2019
2019
2020
2020
2021
2021
2022
2022
2023
2023
ADJUSTED OPERATING PROFIT/(LOSS) (£m)1,3
52.8
52.8
52.8
52.8
52.8
52.8
50.5
50.5
50.5
50.5
50.5
50.5
41.2
41.2
41.2
41.2
41.2
41.2
42.7
42.7
42.7
42.7
42.7
42.7
OPERATING PROFIT/(LOSS) (£m)1
33.3
33.3
33.3
33.3
33.3
33.3
43.6
43.6
43.6
43.6
43.6
43.6
12.7
12.7
12.7
12.7
12.7
12.7
52.8
52.8
2019
2019
2019
2019
2019
2019
2020
2020
(11.9)
2020
(11.9)
(11.9)
2020
2020
(11.9)
2020
(11.9)
(11.9)
2021
2021
2021
12.7
41.2
2022
2022
2022
2021
2021
2021
12.7
50.5
2023
2023
2023
41.2
2022
2022
2022
50.5
2023
2023
2023
8.4
8.4
8.4
8.4
8.4
8.4
2021
2021
2021
8.4
2020
2020
2020
(27.2)
(27.2)
(27.2)
33.3
2022
2022
2022
2021
2021
2021
8.4
42.7
2019
2019
2019
42.7
2019
2019
2019
2020
2020
2020
(27.2)
(27.2)
(27.2)
43.6
2023
2023
2023
33.3
2022
2022
2022
43.6
2023
2023
2023
ADJUSTED PROFIT/(LOSS) BEFORE TAXATION (£m)1,4
2021
2022
2022
2019
48.2
48.2
48.2
2019
48.2
48.2
48.2
2020
(11.9)
2021
2020
(11.9)
2023
44.5
44.5
44.5
2023
44.5
44.5
44.5
38.2
38.2
38.2
38.2
38.2
38.2
48.2
48.2
9.4
9.4
9.4
9.4
9.4
9.4
38.2
2019
2019
2019
2019
2019
2019
2020
2020
2020
(16.8)
(16.8)
(16.8)
2021
2021
2021
9.4
2020
2020
2020
(16.8)
(16.8)
(16.8)
2022
2022
2022
2021
2021
2021
9.4
44.5
38.2
44.5
2022
2022
2022
2023
2023
2023
2023
2023
2023
ADJUSTED DILUTED EARNINGS/(LOSS) PER SHARE (p)1,5
2021
2022
2022
2023
2023
2019
2019
2021
2020
(16.8)
2020
(16.8)
10.5
10.5
10.5
10.5
10.5
10.5
2019
PROFIT/(LOSS) BEFORE TAXATION (£m)1
2019
2020
2020
2021
2021
2022
2022
2023
2023
38.1
38.1
38.1
(27.2)
38.1
38.1
38.1
(27.2)
30.3
30.3
30.3
37.6
37.6
37.6
30.3
30.3
30.3
37.6
37.6
37.6
5.1
5.1
5.1
5.1
5.1
5.1
38.1
2019
2019
2019
38.1
2019
2019
2019
2020
2020
2020
(32.1)
(32.1)
(32.1)
2020
2020
2020
2021
2021
2021
5.1
(32.1)
(32.1)
(32.1)
37.6
2023
2023
2023
30.3
2022
2022
2022
37.6
2023
2023
2023
2022
30.3
2022
2022
2021
2021
2021
5.1
2019
DILUTED EARNINGS/(LOSS) PER SHARE (p)1
2023
2021
2020
2020
2022
2022
2023
2019
2021
7.2
7.2
7.2
7.7
7.7
7.7
7.2
7.2
7.2
7.7
7.7
7.7
8.3
8.3
8.3
(32.1)
8.3
8.3
8.3
(32.1)
1.7
1.7
1.7
1.7
1.7
1.7
1.6
1.6
1.6
1.6
1.6
1.6
6.5
6.5
6.5
6.5
6.5
6.5
6.4
6.4
6.4
6.4
6.4
6.4
10.5
2019
2019
2019
Notes
10.5
2019
2019
2019
2020
2020
(3.3)
2020
(3.3)
(3.3)
2020
2020
(3.3)
2020
(3.3)
(3.3)
2021
2021
2021
1.7
2022
7.2
2022
2022
2021
2021
2021
1.7
2022
7.2
2022
2022
2023
7.7
2023
2023
7.7
2023
2023
2023
8.3
2019
2019
2019
8.3
2019
2019
2019
2020
2020
2020
(6.5)
(6.5)
(6.5)
2021
2021
2021
1.6
2020
2020
2020
(6.5)
(6.5)
(6.5)
2022
6.5
2022
2022
2021
2021
2021
1.6
2022
6.5
2022
2022
2023
6.4
2023
2023
2023
6.4
2023
2023
1.
2.
3.
4.
5.
2019
All figures are from Continuing Operations.
“Adjusted EBITDA” is calculated as Adjusted Operating Profit/(Loss) plus the depreciation charge for property, plant and equipment, right of use, textile rental items plus software
amortisation.
2020
2019
“Adjusted Operating Profit/(Loss)” refers to operating profit/(loss) before amortisation of intangible assets (excluding software amortisation), goodwill impairment and
(3.3)
exceptional items.
“Adjusted Profit/(Loss) Before Taxation” refers to Adjusted Operating Profit/(Loss) less finance costs.
“Adjusted Diluted Earnings/(Loss) per Share” refers to diluted earnings per share calculated based on adjusted profit/(loss) after taxation and, in 2021, 2022 and 2023, excludes the
benefit of the capital allowances super deduction which offers 130% first year relief on qualifying spend.
2020
(3.3)
2020
2020
2022
2022
2022
2022
2023
2023
2023
2023
2019
2019
2021
2021
2021
2021
(6.5)
(6.5)
9
9
Dear Shareholder
I am delighted to report that the Group has achieved an
excellent result for the financial year ended 31 December 2023,
positioning the Group well for further sustained growth in the
longer term. This success underscores the strength and resilience
of our business model, operational expertise, the strength of
relationships with our customers and suppliers and, crucially,
the dedication and commitment of all of our employees, led
so energetically by Peter Egan, our CEO, and his executive
leadership team. I wish to express my sincere thanks, on behalf of
the Board, to all of our employees for everything that they have
done and continue to do for the Group. I also wish to recognise
and thank all of our stakeholders for their continued support. As
we move into 2024, the Board remains focused on executing the
Group’s strategy and capitalising on growth opportunities in our
markets.
Financial Results
Total revenue for the year increased by 20.6% to £465.3 million
(2022: £385.7 million). This increase delivered an adjusted
profit before taxation of £44.5 million (2022: £38.2 million). This
performance reflects sustained endeavour across the Group
shaped by the strong and energetic leadership of Peter and
Yvonne, your Executive Directors, and their management team.
Volatility and uncertainty have been a continuing context for our
businesses; notwithstanding this, the businesses have sought to
satisfy our customers and employees in line with our purpose.
Further details of our operational and financial performance can
be found on pages 18 to 27.
Dividends
As determined by our progressive dividend policy, an interim
dividend of 0.9 pence per share was paid on 3 November 2023.
The Board is pleased to recommend a final dividend of 1.9 pence
per share, which reflects the Board’s confidence in the prospects
of the business. Together with the interim dividend this takes the
total dividend for the year to 2.8 pence per share.
Acquisitions
As previously reported, we completed the acquisition of Regency
Laundry Limited (“Regency”) on 13 February 2023 and Celtic Linen
(comprising Harkglade Limited and its subsidiaries Celtic Linen
Limited and Millbrook Linen Limited, (together “Celtic Linen”)) on
31 August 2023. The total consideration for these acquisitions was
approximately £33.0 million, reflecting our continuing strategy to
grow by acquisition, alongside our organic development, where
the price is reasonable.
Regency has provided an increased presence in the luxury/
bespoke segment of HORECA in the UK. Celtic Linen, in the
Republic of Ireland, represents a step outside of the UK.
Additionally, over 50 per cent of Celtic Linen’s revenue is in
the Irish Healthcare sector (and is the largest linen supplier in
the sector), with the balance in HORECA. Both are important
strategically and will provide further opportunities for
investment and development. We are delighted to welcome all
of our new management teams and colleagues and are already
seeing ideas and best practice being shared to and from the
wider JSG family.
We anticipate that there will be further opportunities for us to
invest to strengthen our market positions. Our pipeline remains
healthy as we continue to invest in building relationships with
independent players. We are also seen as a good “parent” that
supports the further development of these businesses.
A Strong Capital Base
The Group maintains a strong balance sheet and is well
positioned to continue to invest in the business to support our
long-term growth prospects. The Group’s objective is to employ
Chair’s
Statement
“… the Group has
achieved an excellent
result for the financial
year …”
10
a disciplined approach to investment, returns and capital
efficiency to deliver sustainable compounding growth whilst
also maintaining a strong balance sheet. In September 2023,
following the ending, on 4 May 2023, of the Group’s first share
buyback programme of the Company’s ordinary shares for up to
a maximum aggregate consideration of £27.5 million (excluding
expenses), launched in September 2022, the Group launched
another share buyback programme of the Company’s ordinary
shares for up to a maximum aggregate consideration of £10.0
million (excluding expenses) which completed on 27 November
2023.
Our capital allocation policy remains unchanged and considers
maintaining a strong balance sheet, ongoing capital investment
in our estate, accretive acquisitions, a progressive dividend
policy and distributing any surplus cash to Shareholders. Further
details of our capital allocation policy are provided on page 27
and further details of the share buyback programmes can be
found on page 56.
Governance and the Board
Companies today are judged, rightly, by their integrity and
trustworthiness as well as their financial performance. One of
my key responsibilities as Chair is to ensure good governance
for the Group. I am extremely well supported in this regard by all
the members of the Board, and our General Counsel & Company
Secretary, who bring a wealth of skills and experience that
complements the talents of our Group management teams.
In August, the Board welcomed the appointment of Kirsty
Homer as an additional Independent Non-Executive Director.
Kirsty has assimilated her role quickly and is already bringing
her experience to bear. I would like to thank all of my Board
colleagues for their support and valuable contributions as we
continue to undertake oversight of the strategic, operational and
compliance risks and opportunities across the Group, define our
path to success and uphold the high standards expected of us.
The Board conducted a Board evaluation within the Company
in the final quarter of 2023. Further details of the evaluation are
set out within the Corporate Governance Report on page 74.
The 2023 evaluation concluded that the performance of the
Board and its Committees continued to be effective in dealing
with both day-to-day and ongoing strategic issues and that the
Board and Committee structure ensured that the governance
requirements of the business were met. Overall, the feedback
from Board members was positive, indicating a desire to
continue the Board’s focus in 2024, primarily, on: strategic
development and succession planning; whilst effectively
exploiting the growth opportunities that are available to
the Group; delivering on the Group’s sustainability aims; and
continuing to develop and encourage our people.
The CEO and CFO meet regularly with institutional investors
to discuss strategic matters and to make presentations on the
Group’s results. As previously, I also met with a number of our
major Shareholders in order to understand more fully their views
2023 Annual Report & Accounts 01. Strategic Report
and to provide them with an opportunity to raise any questions
they had outside of the normal Investor Relations process. The
feedback I received from major Shareholders was consistent
with that given to the CEO and CFO. My intention is to once again
extend this invitation to our major Shareholders during 2024.
Sustainability
Our belief that embedding a best-in-class sustainability
programme throughout our operations will help position
us as a leader in responding to the challenges faced by the
textile services industry and prove to be a differentiator for our
customers remains unchanged. Following the launch of ‘The
Johnsons Way’, our group-wide approach to sustainability, we
continue to make excellent progress, refining and executing
our strategy around the four ‘Pillars’ of ‘Our Family’, ‘Our World’,
‘Our Integrity’ and ‘Our Communities’ and publishing our second
Sustainability Report. Further details are set out in the report
on Sustainability on pages 28 to 44. I have been particularly
impressed by the continued progress we have made in relation
to our carbon emissions and water intensity reduction targets as
well as the strong engagement of our employees, who delivered
over 1,600 volunteering hours during the year.
Summary and Outlook
We remain excited about our growth opportunities, both
organically and through acquisitions, the potential for further
revenue and profit growth, improvements in operational
efficiencies and returns to shareholders over time. While mindful
of macro-economic and geopolitical factors, we are confident
that our strategy, scale, focus on operational excellence and the
continued commitment of and investment in our people, means
that we are well placed to capitalise on future opportunities
and the encouraging start to the year. Accordingly, we expect
adjusted operating profit for the current financial year to be in
line with current market expectations.
Jock Lennox
Non-Executive Chair
4 March 2024
11
The Strategic Report
The Strategic Report comprises the Group Overview and
Highlights, the Chair’s Statement, the Strategic Review,
Our Commitment to Section 172(1), the Chief Executive’s
Operating Review, the Financial Review, the report on
Sustainability (including the Group Non-Financial and
Sustainability Information Statement) and the Principal
Risks and Uncertainties.
Principal Activities and Business
Overview
Johnson Service Group PLC (the ‘Company’) is incorporated
and domiciled in the UK, its registered number is 523335
and the address of its registered office is Johnson House,
Abbots Park, Monks Way, Preston Brook, Cheshire, WA7
3GH. The Company is a public limited company and has
its primary listing on the AIM division of the London Stock
Exchange.
The Company and its subsidiaries (together, the ‘Group’)
provide textile rental and related services across the UK
and the Republic of Ireland. Our ‘Workwear’ business is
the leading supplier of workwear and protective wear
in the UK, offering these services through the Johnsons
Workwear brand. Our ‘HORECA’ business provides linen
services to hotel, restaurant and catering customers
through the Johnsons Hotel Linen brand, the Johnsons
Hotel, Restaurant & Catering Linen brand (which
incorporates Stalbridge and South West Laundry) and
the Johnsons Restaurant & Catering Linen brand (which
incorporates London Linen). Also, within HORECA, our
Ireland business, trading as ‘Johnsons Belfast’ in Northern
Ireland and as ‘Celtic Linen’ in the Republic of Ireland,
serves both budget and luxury hotel customers and
additionally serves a number of healthcare customers.
Strategic
Review
12
12
2023 Annual Report & Accounts 01. Strategic Report
Our Purpose
Our purpose sets out why
we do what we do:
We do our job, so our customers can do theirs
Our purpose is to be an exceptional textile services provider to thousands of businesses every day, delivering
sustainable growth and value to all our stakeholders.
Our Vision
Our vision sets out where
we want to be:
We want to be number one
Our vision is to be recognised as the home of exceptional quality and sustainable textile services, where our people
are integral to our success and where we lead the industry, setting the standards against which others aspire to.
Our Mission
Our mission sets out what
we do and how it will
contribute to achieving our
vision:
Our Values
Our values set out what we
collectively believe in and
guide our behaviours – they
act as our moral compass
as a company:
We do textile services
Our mission is to provide valuable textiles services by building strong partnerships with our customers and
providing exceptional service, quality products and sustainable innovation.
Delivering exceptional service
• We take pride in providing a professional, efficient, reliable and friendly service to our customers.
• We are committed to disciplined management of our operations to deliver consistent standards of exceptional
quality and to provide a service that our customers can trust.
Championing our people
• We embody a culture that recognises and respects the diversity and contribution of all our people and where
everyone feels valued.
• We promote a work environment where the health, safety and wellbeing of our people is a priority and which
provides opportunities and support for everyone to grow and succeed.
Caring for our environment
• We care about our impact on the environment and consider ways to protect and enhance it.
• We minimise the use of natural resources where possible and make sustainable purchasing choices so that we
can leave a positive legacy.
Acting in a responsible way
• Operating from a resilient financial platform, we act with professionalism, integrity and the highest ethical
standards in everything that we do.
• We expect all our relationships to be based on honesty, respect, fairness and a commitment to openness and
transparency.
Supporting our communities
• We collaborate with our neighbours and wider communities to create strong, long-lasting relationships.
• We take part in programmes and activities that directly and indirectly support our communities to grow and
thrive.
Further information covering the activities of the business during the year are set out within the Chair’s Statement and the Chief
Executive’s Operating Review.
13
13
Strategic Review
Continued >
Customer
Service
Operational
Synergies
Targeted
Investment
Organic
Growth
Strategic
Acquisitions
Sustainability
Cost
Management
Our Business Model
The Board’s strategy has been to focus the Group on our core
businesses, increase the scale of our business both organically
and through targeted strategic acquisitions and to be the
market leader in textile services in all geographies in which we
operate.
The Group’s business model, which supports this strategy and
aims to increase both profitability and shareholder value,
focuses on delivering exceptional customer service across all of
our businesses in order to increase customer satisfaction and
loyalty and attract new customers.
Like many businesses, we face a number of external cost
pressures, in particular those arising as a result of the
challenging macro-economic environment, however, in
the ordinary course our business model seeks to generate
efficiencies in order to mitigate those pressures and to allow
us to maintain divisional margin over the medium term. Such
efficiencies include:
•
•
investing in the latest machinery technology in order to
increase capacity and productivity whilst at the same time
reducing energy costs and water consumption;
taking advantage of operational synergies, for example,
redistributing the processing of customer work across
our estate of sites in order to take advantage of reduced
distribution costs; and
• diligently managing our cost base, including in relation to
energy costs.
14
14
Key to this is our biggest asset, our highly capable employees,
who are the face of our business. The investment we make
in the training and development of our employees supports
our business model and we seek the views and opinions of
employees, at all levels, to continuously develop the way we
operate such that we support our people and the operations of
the Group.
The scale and geographic coverage of our business, together
with our focus on customer service, cost control and efficiencies,
give us a competitive advantage. We can provide our customers
with the best value in terms of quality and cost and this helps
drive long term and sustainable organic revenue growth.
We continue to identify opportunities to grow the business
organically and actively pursue strategic acquisition
opportunities which will broaden our services and geographic
spread, add value for Shareholders and consolidate our position
as the market leader in textile services in all geographies in
which we operate.
Key Performance Indicators (KPIs)
The Group refers to certain KPIs to assess the performance of the
Group as a whole, and of the various businesses. Further details
of the KPIs are set out within the Financial Review.
Viability Statement
The Board is acutely aware that an understanding of the future
prospects of the Group is of vital importance to all stakeholders
and, as such, a statement, on behalf of the Board, is set out below
on the future prospects of the Group.
•
•
“The Directors confirm that, based upon the information and
knowledge of which they can be reasonably expected to be
aware, they have a reasonable expectation that the Group will
be able to continue in operation and meet its liabilities as they
fall due for a period of not less than 36 months from the balance
sheet date.”
The Directors acknowledge the heightened uncertainty of
the Group’s strategic plans in the current macro-economic
environment and, as a result, have considered a range of
different scenarios. Financial forecasts are reviewed and
approved by the Board, with involvement throughout from the
Group CEO, Group CFO and the Group Management Board. Part
of the Board’s role is to consider the appropriateness of key
assumptions, considering the external environment, business
strategy and business model of the Group.
Whilst the Directors expect the future prospects of the Group
to extend beyond the 36-month period referred to above, this
period has been selected, for the purpose of this statement, as:
•
•
•
•
it is concurrent with the most recently available financial
modelling for the Group;
the situation with respect to the UK’s current macro-
economic environment remains uncertain and is likely to
continue impacting the Group in the medium term, albeit to a
significantly lesser extent than the impact of COVID-19;
it is consistent with the average contract life of key
customers, which provide stable revenue streams, being
approximately 36 months;
the Group has committed banking facilities which although
ultimately expire prior to the end of this period, in August
2026, will likely be extended, subject to bank consent, by way
of exercising the remaining, one-year, extension option; and
• projections looking out further than 36 months become
significantly less meaningful in the context of the Group’s
operations and markets.
The Directors have a reasonable expectation, having taken into
consideration the principal risks and uncertainties facing the
Group (as set out on pages 45 to 51) and, inter alia, the points set
out below, that the trading performance and cash generation of
the Group will not be materially adversely affected within that
time frame, as:
•
the Group has a committed revolving credit facility of £120.0
million which matures in August 2026, the terms of which
provide an option to extend the term for up to a further
one year and an option to increase the facility by up to a
further £15.0 million, both with bank consent, with significant
headroom in terms of availability, which is considered to
be sufficient to meet the Group’s current requirements
throughout that period;
• our diversified customer base, the majority of which have
a formal contract in place with varying expiry dates of up
to five years, provides a secure future income stream whilst
at the same time ensuring that the loss of any single key
customer would not materially impact the Group’s future
trading performance and cash flows;
the diverse and unrelated nature of the Group’s customer
base limits concentration of credit risk;
the Group has prepared financial modelling, covering
a three-year period, which has been approved by the
Board. Prior to approving the financial modelling, the
Board reviewed, challenged and stress tested the financial
projections and assumptions contained within the forecasts.
The stress tests were designed to determine the performance
level that would result in a reduction in headroom against
the Group’s committed facilities to nil or a breach of
covenants. The Directors did not consider such a reduction
in performance to be likely and hence were able to conclude
that there were no indications of a significant threat to the
future prospects of the Group;
•
the Group continuously strives to seek out and invest in plant
and equipment that will help drive operational efficiencies;
• a significant number of the Group’s key processing sites are
owned on either a freehold or long leasehold basis thereby
providing security of tenure;
•
•
the wide geographic spread of processing sites mitigates
the effect of a loss of any single processing facility (as
demonstrated during 2020 following serious fire damage
at one of our sites and flood damage at another of our
sites) and, furthermore, appropriate insurance cover is in
place such that the increased cost of working following a
loss of processing capacity may, in some circumstances, be
recovered; and
the Group continuously reviews the adequacy and strength
of its management teams to ensure that appropriate
experience and training is given and develops succession
planning as part of the development programmes for our
people.
Although the Board is confident of the future prospects of the
Group, there remain a number of risks and uncertainties, which
are often beyond the control of the Directors, which could mean
that actual results and events may differ from those budgeted.
Strategic Report Approval
The Strategic Report, outlined on pages 4 to 51, incorporates
the Group Overview and Highlights, the Chair’s Statement,
the Strategic Review, Our Commitment to Section 172(1), the
Chief Executive’s Operating Review, the Financial Review, the
report on Sustainability (including the Group Non-Financial and
Sustainability Information Statement) and the Principal Risks
and Uncertainties.
The Strategic Report was approved by the Board on 4 March
2024.
By order of the Board.
Christopher Clarkson
Company Secretary
4 March 2024
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15
2023 Annual Report & Accounts 01. Strategic Report Our Commitment to Section 172(1)
Our Stakeholders
The success of our strategy is reliant on the support and commitment of all our stakeholders. Their interests are important to
us and we are committed to maintaining strong, positive relationships with them, built on a foundation of mutual respect, trust
and understanding. Our key stakeholders are our people, the communities in which we do business, our customers, our suppliers,
our shareholders, non-government organisations as well as Government organisations and regulators. We work hard to ensure
that we provide the right resources, energy and focus to meet the expectations of all of our stakeholders. The table below
provides a high-level overview of how we engage with our stakeholders. Further details are then provided within the report on
Sustainability on pages 28 to 44.
Description
Areas of focus
Why we engage
How we engage
Our people are at the heart
of our business and key to our
ongoing success. We want our
people to thrive in a fair and
inclusive work environment.
There are many ways we engage,
including engagement surveys,
employee focus groups, site
meetings, internal social media
and newsletters.
To build trust by operating
responsibly and sustainably
and addressing issues
that are material to our
communities. To provide
employment opportunities to
local people to help support
the community.
By understanding what is
important to our customers,
we ensure that our services
are tailored to support their
individual business objectives.
We operate many local
employment programmes to
recruit and develop people to
work in our sites. We partner
with charities and organisations
to raise awareness and donate
funds to help local causes.
We aim to have open and
transparent relationships
that are based on honesty
and respect. We conduct
independent customer surveys
which measure satisfaction
levels.
To develop mutually beneficial
and lasting partnerships
aimed at addressing shared
challenges in responsible
and sustainable sourcing and
to communicate our supply
chain standards, expectations
and commitments.
Our philosophy is to engage in
regular, open and transparent
dialogue with our existing
and prospective shareholders.
We value their thoughts
and opinions which are
shared with the Board. The
Board reviews the feedback
and, where relevant, takes
appropriate actions to
address any concerns.
We regularly communicate
with our suppliers and we
have also hosted multi-
supplier conferences. We
aim to pay suppliers within
agreed contractual terms
and endeavour to work in a
collaborative manner with them
in order to resolve any disputes
that may arise.
We engage with our existing
investors through one-to-one and
group meetings, presentations,
conference calls and at our
AGM. The Group CEO and Group
CFO dedicate significant time
to engaging with our major
shareholders.
To ensure we stay up to date
and develop effective action
plans so we can have a
positive impact on key social,
environmental and economic
issues.
We engage with NGOs through
regular communications,
interactions and meetings
as well as through industry
association memberships and at
forums and conferences.
People
Our employees who
work in our business
health and wellbeing
diversity and inclusion
recognition and careers
Communities
The people who live in
the local communities
around our sites and
operations
fair employment and equal
opportunities
local causes and issues
health and wellbeing
Customers
The businesses and
organisations to
whom we provide
goods and services
working within defined
sectors, we provide solutions
to match specific market and
customer requirements
sustainable customer
relationship initiatives
technology and innovation
to support customer
requirements
Suppliers
Our trusted partners
who source and
supply products and
services to us
workplace health and safety
supply chain integrity
human rights
sustainable products
financial performance
competitive positioning
strategy and outlook
ethical business practices
and sound governance
leadership and succession
planning
debt and liquidity
sustainability
human rights
climate change
social issues
Shareholders
Individuals or
institutions
that own shares in
Johnson Service
Group PLC
Non-
Governmental
Organisations
(NGOs)
Government
& Regulators
NGOs support us
with knowledge
and expertise on
key industrial, social,
environmental and
economic issues
Regional and
national government
bodies and agencies
which implement and
enforce applicable
laws across our
industry
16
16
public health policies
workplace health and safety
human rights
climate change
legal and regulatory
To communicate our views to
those who have responsibility
for implementing policy, laws
and regulations relevant to
our businesses.
compliance
We engage through a series of
industry consultations, forums
and conferences.
Section 172(1) Statement – Duty to Promote
the Success of the Company
Section 172(1) of the Companies Act 2006 (the ‘Act’) requires the
directors of a company to act in a way that they consider, in
good faith, would be most likely to promote the success of the
company for the benefit of its members as a whole, and in doing
so have regard (amongst other matters) to:
a)
the likely consequences of any decision in the long term;
b)
the interests of the company’s employees;
c)
d)
e)
the need to foster the company’s business relationships with
suppliers, customers and others;
the impact of the company’s operations on the community
and the environment;
the desirability of the company maintaining a reputation for
high standards of business conduct; and
f)
the need to act fairly between members of the company.
As part of their induction, a Director is briefed on their duties
and they can access professional advice on these, either from
the Company Secretary or, if they judge it necessary, from
an independent advisor. In addition, our nominated advisor
(NOMAD) is available to the Board to provide training updates on
directors’ duties and any relevant legislative changes.
The Board confirms that, during the year, the Board and its
individual members have acted in a way that would be most
likely to promote the success of the Company, for the benefit
of its members as a whole, in the decisions made by the Board
during the year. The Directors confirm that the deliberations of
the Board, which underpin its decisions, incorporate appropriate
regard to the matters detailed in section 172(1) of the Companies
Act 2006. During the year, the Board considered information
from across the Group’s businesses and received presentations
from management, reviewed papers and reports and took part
in discussions which considered, where relevant, the impact of
the Company’s activities on its key stakeholders. These activities,
together with direct engagement by the Board and individual
Directors with the Company’s stakeholders, helped to inform the
Board in its decision-making processes.
Further details as to how the Directors have fulfilled their duties,
together with references to relevant areas within this Annual
Report, are set out below. Specific examples of how the Board
considered the interests of stakeholders in its principal decision-
making are provided on page 67.
The Board acknowledges that balancing the needs and
expectations of stakeholders is important, but it often has to
make difficult decisions based on competing priorities where the
outcome of any decision it makes will not necessarily result in a
positive outcome for all of the Group’s stakeholders. Decisions
are not taken lightly and the decision-making process has
been structured to enable directors to evaluate the merit of
proposed business activities and the likely consequences of its
decisions over the short, medium and long term, with the aim of
safeguarding the Company so that it can continue in existence,
fulfilling its purpose and creating value for future generations of
stakeholders. By considering the Company’s purpose, vision and
values, together with its strategic priorities and having a process
in place for decision-making the Board does, however, aim to
make sure that its decisions are consistent and predictable.
Risk Management
It is vital that we effectively identify, evaluate, manage and
mitigate the risks we face as a business. For details of our
principal risks and uncertainties, and how we manage our risk
environment, please see pages 45 to 51. The Board is also aware
that an understanding of the future prospects of the Group is
of vital importance to all stakeholders – a statement as such,
together with further explanatory information, is set out within
our Viability Statement.
Our Employees
The Group is committed to being a responsible employer. For
our business to succeed we need to manage our people’s
performance and develop and bring through talent while
ensuring we operate as efficiently as possible. We recognise
that our people are key to the success of the Group and we
value the contribution of each and every one of our employees.
We strive to create an inspiring working environment where
everyone is engaged and motivated. We must also ensure we
share common values that inform and guide our behaviour
so we achieve our goals in the right way. The Board receives
updates on key elements of the people strategy which provides
insight into a variety of areas including culture, diversity and
inclusion, succession planning, future capabilities and employee
engagement. For further details on our employees and equity,
diversity and inclusion initiatives within the Group, please see
pages 31 to 33.
Business Relationships
Our strategy prioritises growth, both organically and through
acquisition. Organic growth is driven through up-selling services
to existing clients as well as bringing new customers into the
Group. To do this, we need to develop and maintain strong
customer relationships. We value all of our suppliers and have
multi-year contracts with our key suppliers. For further details
on how we work with our customers and suppliers, please see
page 43.
Community and Environment
The Group’s approach is to use our position of strength to create
positive change for the people and communities with which we
interact, giving back wherever we can. We want to leverage our
expertise and enable our people to support the communities
around us. We recognise our responsibilities to achieve good
environmental practice and to continue to strive for improvement
in areas of environmental impact. We are committed to
energy efficiency improvement and continue to take steps in a
continuous improvement strategy. For further details on how
we interact with communities and the environment, please see
pages 34 to 39 and page 44.
Culture and Values
The Board recognises the importance of having the right
corporate culture. Our long-term success depends on achieving
our strategic goals in the right way, so we look after the best
interests of our employees, customers and other stakeholders.
Further details on our purpose, mission, vision and values are
set out on page 13 whilst details of our corporate culture can be
found on page 69.
Shareholders
The Board is committed to openly engaging with our
Shareholders, as we recognise the importance of a continuing
effective dialogue, whether with major institutional investors,
private or employee Shareholders. It is important to us that
Shareholders understand our strategy and objectives, so these
must be explained clearly, feedback heard and any issues or
questions raised, properly considered. For further details on how
we engage with our Shareholders, see pages 68 to 69.
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17
2023 Annual Report & Accounts 01. Strategic Report Basis of Preparation
Throughout this statement, and consistent with prior years, a
number of alternative performance measures (‘APMs’) are used
to describe the Group’s performance. APMs are not recognised
under UK-adopted international accounting standards. Whilst
the Board uses APMs to manage and assess the performance
of the Group, and believes they are representative of ongoing
trading, facilitate meaningful year on year comparisons and
hence provide useful information to stakeholders, it is cognisant
that they do have limitations and should not be regarded as a
complete picture of the Group’s financial performance. APMs,
which include adjusted operating profit, adjusted profit before
taxation, adjusted EBITDA, adjusted EPS, adjusted EPS excluding
capital allowances super-deduction and adjusted net debt are
defined within the Statement of Significant Accounting Policies
and are reconciled to statutory reporting measures in notes 2, 8,
11 and 36.
Trading Performance
Revenue
Total revenue for the year to 31 December 2023 increased by 20.6%
to £465.3 million (2022: £385.7 million). Organic revenue increased
16.3% over 2022, reflecting both an increased volume in hospitality
and price increases implemented throughout the year.
Financial Results
Our 2023 results reflect the increase in revenue offset by
the impact of high inflationary pressures on our cost base,
particularly in respect of energy and labour. Adjusted operating
profit margin was 10.9%, reflecting energy and labour costs, as a
percentage of revenue, remaining at an elevated level compared
to 2019. As we continue to improve the recovery of these costs,
through increasing volumes, efficiencies and price increases, the
Board remains of the opinion that the operating margin of each
individual Division can return towards the historic levels achieved
in 2019.
Adjusted EBITDA increased by 25.4% to £131.5 million (2022:
£104.9 million) giving a margin of 28.3% (2022: 27.2%). As expected,
we saw this improve from the 26.8% achieved in the first half
of the year. Adjusted operating profit was £50.5 million (2022:
£41.2 million), an increase of 22.6%, whilst adjusted profit before
taxation increased by 16.5% to £44.5 million (2022: £38.2 million).
The exceptional charge of £1.6 million was wholly in respect of
costs in relation to business acquisition activity. The exceptional
credit of £0.7 million in 2022 was in respect of a £1.5 million
insurance receipt, relating to capital items lost in the Exeter fire
in 2020, offset by a charge of £0.8 million relating to Exeter site
clearance costs.
Statutory operating profit increased to £43.6 million (2022:
£33.3 million) whilst statutory profit before taxation, after
amortisation of intangible assets (excluding software
amortisation) of £5.3 million (2022: £7.2 million), goodwill
impairment of £nil (2022: £1.4 million) and the exceptional items
referred to above, increased to £37.6 million (2022: £30.3 million).
Adjusted diluted earnings per share was 7.8 pence (2022:
8.0 pence), noting that the prior year materially benefitted from
the capital allowances super-deduction. Excluding the benefit
of the super-deduction, adjusted diluted earnings per share was
7.7 pence (2022: 7.2 pence).
Dividend Reflecting Confidence in the Future
An interim dividend of 0.9 pence (2022: 0.8 pence) per share was
declared at the time of announcing our interim results. We are
pleased to recommend a final dividend of 1.9 pence per share,
taking the full year dividend to 2.8 pence (2022: 2.4 pence) per
share. Dividend cover was 2.75 times, based on adjusted EPS
excluding capital allowances super-deduction, and in line with
our commitment to reduce cover to 2.5 times for full year 2024.
Chief
Executive’s
Operating
Review
“The year has seen
significant investment
in the business.”
18
18
We have continued our policy of proactively fixing energy prices
and, as at the end of February 2024, we had fixed 96% of our
anticipated electricity usage and 91% of our anticipated gas
usage for the first half of 2024 and 90% and 87%, respectively, for
the second half of 2024. In addition, we have hedged 85% of our
anticipated diesel requirement across 2024.
Looking further ahead, we will continue to lock in prices as
opportunities allow. For 2025, we currently have, based on our
anticipated usage, 62% electricity, 61% gas and 51% diesel at fixed
prices, with reducing amounts into 2026.
Labour
Labour remains the biggest cost of our operations. In the year to
31 December 2023, labour as a percentage of revenue reduced
to 44.0%, compared to 45.1% in the six months to 30 June 2023,
47.0% in the year to 31 December 2022 and 43.0% in the year to
31 December 2019. We remain encouraged by the improving
efficiency as volumes have returned during 2023 but note that
further improvements are challenged by increasing labour rates
and a new site opening in 2024.
Workwear Division
Operating as Johnsons Workwear, we provide workwear rental
and laundry services to customers throughout GB, ranging from
small local businesses to the largest companies covering food
related and other industrial sectors.
Revenue for the Workwear division increased by 5.9% to
£142.6 million (2022: £134.6 million). Adjusted EBITDA was
£48.6 million (2022: £46.6 million) with a margin of 34.1% (2022:
34.6%). Adjusted operating profit was £21.4 million (2022: £21.9
million), noting that the prior year did benefit from a £1.1 million
credit relating to the finalisation of the Exeter insurance claim in
respect of additional costs incurred in 2020 and 2021.
Throughout the course of 2023, our focus was directed towards
fostering organic growth within the division. The strategy
involved meticulous planning, innovative initiatives and strategic
investment to ensure a sustainable pathway that aligns with
our objectives. Benefitting from this strategy, the sales team is
experiencing notable momentum which has resulted in increased
activity with prospective customers. New sales during the year
reached the highest level since COVID-19 impacted in 2020,
with the wins in the final months of 2023 positively impacting
into 2024. Our ability to assure the microbiological quality of
processed textiles allowed the team to identify and capitalise
on new market opportunities, successfully securing a significant
contract within a market sector new to the division. Notably, we
have continued to attract new customers to the benefits of a
textile rental service, with new-to-rental customers representing
25% of our total new sales sold in the year.
19
19
Acquisition of Regency and Celtic Linen
In line with our capital allocation policy, the Group has
continued to seek out and acquire businesses which expand
our geographic coverage and are earnings enhancing. During
2023, we completed the acquisition of Regency Laundry Limited
(‘Regency’) and Harkglade Limited, along with its wholly owned
subsidiaries Celtic Linen Limited and Millbrook Linen Limited
(‘Celtic Linen’).
Operational Review
Our Businesses
The Group comprises of Textile Rental businesses which trade
through a number of very well recognised brands, servicing the
Workwear sector in Great Britain (GB) and the HORECA (Hotel,
Restaurant and Catering) sector in GB and in Ireland, both North
and South. The ‘Johnsons Workwear’ brand predominantly
provides workwear rental and laundry services to corporates
across all industry sectors in GB. Within HORECA in GB,
‘Stalbridge’ and ‘London Linen’ provide premium linen services
to hotel, restaurant, hospitality and corporate event customers,
‘Regency’ provides bespoke linen to its four and five-star luxury
hotel customers and ‘Johnsons Hotel Linen’, our high-volume linen
business, primarily serves corporate independent and budget
hotel customers. Also, within HORECA, our Ireland business,
trading as ‘Johnsons Belfast’ in Northern Ireland and as ‘Celtic
Linen’ in the Republic of Ireland, serves both budget and luxury
hotel customers and additionally serves a number of healthcare
customers.
The year has seen significant investment in the business, both
in terms of improving existing sites and a new build to support
future growth, together with expanding our range of services
and geographical coverage through acquisition.
Energy
Energy costs (comprising gas, electricity and diesel) have
remained volatile throughout the year and continue to be so,
albeit to a lesser extent than experienced during 2022. Costs for
2023 represented 10.0% of revenue and were higher than both
2022 and 2019 (2022: 9.4%; 2019: 6.2%).
2023 Annual Report & Accounts 01. Strategic Report Chief Executive’s
Operating Review
Continued >
Our sustained commitment to enhancing
customer service has yielded tangible results,
marked by an improvement in customer
satisfaction survey results – the latest new
customer survey reporting at 87.0% and existing
customers reporting 86.2%. This positive shift can be
attributed to a dedicated effort in actively listening and
reacting to customer feedback, in addition to investment in
training programmes to further equip our colleagues with the
skills and knowledge needed to deliver exceptional customer
service.
Despite economic uncertainties affecting a small percentage
of our customer base, our customer retention remains strong at
91%, highlighting the effectiveness of our service teams’ ability in
renewing the contracts of existing customers.
Our commitment to advanced automation systems saw the
successful installation of a state-of-the-art sortation system at
our Hull and Perth sites, boosting our capacity and increasing
efficiency. An extensive refurbishment project was undertaken
across multiple sites, focusing on enhancing environmental
aspects such as lighting, office space and employee welfare
facilities. This project was complemented by our ongoing
investment in machinery replacement programmes. Investment
in our commercial fleet has also continued, with the replacement
of forty-three vehicles during the year.
Our procurement department continues to work collaboratively
with suppliers and has implemented measures to safeguard
the availability and effectiveness of essential items, addressing
challenges arising from supply chain disruptions. Notably, a
significant milestone was reached during the year with the
successful execution of our garment end-of-life programme
which ensures that some 95% of garments are recycled with the
remainder being repurposed.
HORECA Division
The total revenue for the HORECA division increased by 28.5% to
£322.7 million (2022: £251.1 million). Volumes have continued to
increase throughout the year and the division now incorporates
the two acquisitions completed during 2023. On an organic basis,
revenue increased by 21.9%, benefitting from strong customer
retention, higher volumes and price increases implemented
across the division in order to help offset the high level of cost
inflation experienced. Following significant investment in the
division, both in terms of improving existing sites and a new build
to support future growth, we are well placed to expand further
in this market which an independent study, commissioned by the
Group, estimated the total addressable market for commercial
laundry services to the HORECA industry in Great Britain to be
£1.3 billion.
Adjusted EBITDA for the year increased by 42.4% to £89.7 million
(2022: £63.0 million) with a margin of 27.8% (2022: 25.1%). The
adjusted EBITDA margin in the second half of the year was 29.9%,
compared to 25.2% in the first half. Adjusted operating profit was
£36.0 million (2022: £24.1 million). Costs incurred in 2023 in respect
of the new Crawley site, which is not yet operational, amounted
to £1.0 million and will continue to have an impact on margin as
volumes start to build from the second half of 2024.
The Hotel, Restaurant and Catering business, which includes
Johnsons Stalbridge and London Linen, has continued to make
good progress in 2023.
We have continued to expand and invest in our operating sites.
Additional operating space was created in Grantham, Hayle,
Shaftesbury and Wrexham through a combination of building
improvements and extensions. New and replacement ironer
lines came on stream in Glasgow, Grantham, London Linen,
Shaftesbury and Wrexham, processing increased volumes,
improving production efficiency and reducing energy use. Our
use of recycled water has further increased with a now fully
operational installation in our Hayle site adding to the original
Shaftesbury installation. We continue to examine where else this
technology can be best implemented going forward.
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20
2023 Annual Report & Accounts 01. Strategic Report
We have continued to replace plastic shrink wrap with paper
banding whilst Hydrotreated Vegetable Oil, a fossil-free
alternative to diesel, is being used to power a small number
of our commercial vehicles. We also have six fully electric
commercial vehicles operating in central London, where mileage
and payloads allow, and all our processing locations have
charging points to support our increasing use of electric vehicles
in our company car fleet.
New sales remain strong and, as well as achieving above target
independent sales, we have signed and installed some multi-
site group business. These new wins can be attributed to our
reputation for reliability, flexibility and great service delivery. Our
service and quality levels have remained high, as evidenced in
our annual customer survey results which reflected an improved
score of 87.5%, with several of our sites achieving a world class
score of over 90.0%.
Work on our new Crawley site is well underway and remains
on course to open in the second half of 2024. This new location
will support the ongoing successful growth of the business
and will promote our commitment to energy and water
usage efficiencies. Of the estimated £16.0 million total capital
investment, some £6.9 million was spent in 2023.
Since its acquisition in February 2023, Regency continues to make
good progress integrating into the wider JSG business and a £1.4
million capital investment project is underway in the Corsham
facility to increase capacity and site resilience. Efficiency
benefits already coming through in reduced drying times on
heavier towelling items are complementing our commitment to
improving energy utilisation.
A website rebrand and strong social media presence, further
emphasising the quality offering of Regency, went live at the end
of 2023. We are pleased to report very strong customer loyalty
and retention, whilst also focusing on new sales growth through
direct and digital marketing channels. There have been some
key wins of luxury four and five-star hotels with over 450 rooms
added since acquisition and the geographical reach is being
extended east towards London.
Within Hotel Linen, additional new business, as well as organic
growth within existing contracts, added to volume. Overall
volumes during the second half of 2023 were in line with our
expectations. A small number of customers have continued in
their revised practices of changing both beds and towels less
frequently and the number of independent and group hotels
either partly or fully committing to Government contracts and
providing accommodation for refugees was maintained at 2022
levels. We have addressed this change in practice by continuing
to add rooms from both existing and new hotel groups.
A consistent service, with delivery on time and in full, was a key
objective achieved in 2023. Our external Customer Satisfaction
survey scored 84.9% with both our Birmingham and Reading
sites achieving a world class score in excess of 90.0%. Our new
Customer Service Visit App was successfully rolled out, enabling
effective real-time feedback from customers. Key performance
indicators of shortages and rejects were both below 1%. All
new business was installed professionally and efficiently, with
excellent feedback from customers.
Our local and national service teams continue to build strong
relationships with all customers, with continued positive
feedback regarding the online Linen Room and Customer Portal.
Price negotiations have been challenging although customers
have been understanding and supportive with regard to our cost
increases, which is a reflection of our partnership approach.
We have continued to invest in our employee welfare facilities
and targeted investment, with a focus on reducing energy and
water usage and improving production efficiencies, across the
estate through the installation of various items of equipment. A
robotic towel folder has recently been installed in Bourne and
early indications on its performance are encouraging. Dynamic
production data capture has been installed in three sites, with
the remaining to follow in the first half of 2024. Furthermore,
processing capacity in our Bourne facility will be increased in the
first quarter of 2024 with some £3.0 million invested in the site.
Lead times for new vehicles improved during the year with some
60 vehicles delivered, including a new double decker trailer and
tractor unit, with another two for delivery in the first half of 2024.
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21
2023 Annual Report & Accounts 01. Strategic Report Chief Executive’s
Operating Review
Continued >
The overall business intelligence, data
gathering, reporting and benchmarking
continues to be developed with further plans for
2024. Improving the customer experience remains
a key focus with all departments demonstrating
excellent teamwork to achieve our objectives.
Following the acquisition of Celtic Linen in August 2023,
the management of Johnsons Belfast has been integrated with
that of Celtic Linen so that the service in Ireland, both North
and South, achieves optimum levels. The process of integrating
Celtic Linen into the wider JSG family is progressing well and the
developments and changes have been welcomed by the team.
Post-acquisition trading levels at Celtic Linen were slightly ahead
of our expectations, with the hospitality season performing well
post the summer. This was also complemented by the installation
of new business in November and December in the form of
some 1,200 new rooms. Healthcare continued at expected levels
and supply was fully met over the busy Christmas period, with
hospitals running at full capacity. A maintained strong focus on
customer service levels resulted in customer satisfaction ratings
remaining consistently high and customer retention remains very
strong.
The capital investment plan for Celtic Linen’s Wexford site, which
was underway at the time of acquisition, was completed in the
final quarter of the year. The installation of the new equipment
increases capacity and resilience of the site with the focus
on best-in-class processing and energy efficiency. Additional
investment in our Belfast site was largely completed during 2023
with additional improvements to the offices planned for 2024.
The previously announced 12% increase to the statutory
minimum wage in the Republic of Ireland, effective 1 January
2024, coupled with other changes in employment costs has led to
some challenges in what was already a very competitive labour
market and we are working through the implications of this with
both our customers, in terms of price increases, and internally
reviewing our processes to ensure maximum efficiency.
22
22
Sustainability
The Board, as a whole, has overall responsibility for
environmental, social and governance matters and we recognise
our duty to stakeholders to operate the business in an ethical
and responsible manner. We remain committed to further
developing our environmental and social responsibility agenda,
recognising that it plays a major part in leading and influencing
all of our people and operations.
In February 2022, we published ‘The Johnsons Way’, which sets
out the Group’s sustainability targets for 2030, and we have since
published subsequent Sustainability Reports in February 2022
and October 2023. All documents can be found on our website at
www.jsg.com.
We have continued to build on the foundations of our
sustainability strategy with communication and involvement of
employees at all levels being a key focus.
Further details of our achievements during 2023 and our targets
for 2024, ongoing initiatives and actions for the future will be set
out within the Group’s 2023 Annual Report.
2023 Annual Report & Accounts 01. Strategic Report
Employees
We would like to welcome all new employees to the Group,
particularly those that have joined us through acquisition.
Our employees are the foundation of our business and are key
in our ability to deliver customer service levels which exceed
our customers’ expectations. The teamwork, dedication and
determination demonstrated in order to deliver a professional
and on time service to our customers is a credit to each and
every one of them. The Board would like to thank them for their
support, hard work and significant contribution to the success of
the business over the last 12 months.
Training, educating and developing our employees to their
fullest potential remains a key focus of the Group. New training
programmes have been implemented to enhance core skills and
to provide an environment to support clear pathways for career
advancement and succession planning.
Our commitment to employee engagement, fostering a positive
work environment and improving employee wellbeing has
continued throughout the year. Numerous initiatives have been
rolled out during the year and, within the UK, we were delighted
that the results from the latest Employee Engagement surveys
showed a positive trend and an overall improvement on the
previous year. A further survey will be undertaken in the final
quarter of 2024 and will also be rolled out to our new colleagues
at Celtic Linen and Regency.
Outlook
Our scale, expertise and operational excellence mean that we
are well placed to capitalise on opportunities and the Board
remains confident about the growth opportunities available to
the Group.
Whilst economic challenges and their impact on customer
behaviour remain difficult to predict, we have a resilient business
model to help mitigate these challenges and to address
inflationary pressures which continue to impact the business. We
have continued to fix a proportion of our future energy costs and
improve the efficiency of our sites to help offset and stabilise our
cost base and we are continuing to engage with our customers
regarding the pricing of our services as we advance through
2024. New sales across the business are a focus, particularly in
the regions where we are adding capacity.
We have started 2024 positively, with a larger business operating
in an expanded geography. We are continuing to focus on
expanding the Group through targeted investment in our existing
sites together with identifying earnings enhancing acquisition
opportunities. We have a strong balance sheet to support these
plans.
Given the encouraging start to the year, the Board expects
adjusted operating profit for the year to be in line with current
market expectations.
Peter Egan
Chief Executive Officer
4 March 2024
23
23
2023 Annual Report & Accounts 01. Strategic Report “The Group has undertaken
two recent share buyback
programmes which, in the
period September 2022 to
November 2023, utilised cash
of £35.5 million, of which
£29.9 million was utilised in
the twelve months ended
31 December 2023.”
Financial
Review
24
2023 Annual Report & Accounts 01. Strategic Report
Financial Results
Total revenue for the year to 31 December 2023 increased to £465.3 million (2022: £385.7 million).
Adjusted EBITDA was £131.5 million (2022: £104.9 million) giving a margin of 28.3% (2022: 27.2%) and, in-line with management
expectations, improving from the 26.8% margin achieved in the first half of 2023.
Segmental revenue, adjusted EBITDA and adjusted EBITDA margin are as follows:
2023
Adjusted
EBITDA
£m
48.6
89.7
(6.8)
131.5
Revenue
£m
142.6
322.7
–
465.3
Margin
%
Revenue
£m
34.1
27.8
–
28.3
134.6
251.1
–
385.7
2022
Adjusted
EBITDA
£m
46.6
63.0
(4.7)
104.9
Margin
%
34.6
25.1
–
27.2
Workwear
HORECA
Central Costs
Group
Statutory operating profit was £43.6 million (2022: £33.3 million)
whilst adjusted operating profit was £50.5 million (2022: £41.2
million).
The total finance cost was £6.0 million (2022: £3.0 million) and
included £3.4 million (2022: £1.6 million) of bank interest, £2.1
million (2022: £1.5 million) of interest in respect of IFRS 16 lease
liabilities and £0.5 million (2022: £nil) in respect of notional
interest on pension liabilities.
The exceptional charge of £1.6 million (2022: £0.7 million credit)
are costs in relation to business acquisition activity. In 2022, the
exceptional credit related to another receipt of £1.5 million of
insurance proceeds, relating to the final receipt for capital items
and property costs in relation to the 2020 Exeter site fire, offset
by costs of £0.8 million in relation to Exeter site clearance costs.
Adjusted profit before taxation was £44.5 million (2022: £38.2
million). Statutory profit before taxation, after amortisation
of intangible assets (excluding software amortisation) of £5.3
million (2022: £7.2 million) and exceptional items of £1.6 million
(2022: £0.7 million credit), was £37.6 million (2022: £30.3 million).
Adjusted diluted earnings per share was 7.8 pence (2022: 8.0
pence). Excluding the benefit of the capital allowances super-
deduction, which had limited impact in 2023, the adjusted diluted
earnings per share was 7.7 pence (2022: 7.2 pence).
Financing
Bank debt at the end of the year was £61.7 million (December
2022: £13.7 million) reflecting the improved trading performance,
continuing significant capital investment, the acquisition of
Regency and Celtic Linen and a cash outflow of £29.9 million in
respect of the share buyback programmes completed in the
year. Including IFRS 16 liabilities, net debt at December 2023 was
£104.9 million (December 2022: £48.0 million).
The Group remains well funded, with access to a committed
revolving credit facility of £120.0 million which matures in August
2026. The terms of the facility provide an option to extend the
term for up to a further year and an option to increase the
facility by up to a further £15.0 million, both with bank consent.
The facility is considerably in excess of our anticipated level of
borrowings.
Bank covenants comprise gearing and interest cover tests.
Gearing, for bank purposes, is calculated as adjusted EBITDA
compared to total debt, including IFRS 16 liabilities. The agreed
covenant is for the ratio to be not more than three times and
the ratio at 31 December 2023 was 0.77 times. Interest cover
compares adjusted operating profit to total interest cost, with
a minimum covenant ratio of four times. Our current scenario
planning provides significant headroom against the covenants.
Interest payable on bank borrowings is based upon SONIA or,
in the case of Euro denominated borrowings, EURIBOR, plus a
margin linked to our gearing covenant and will range from 1.45%
to 2.25%. The current margin is 1.45%.
Taxation
The tax rate on the adjusted profit before taxation was 25.8%
(2022: 6.8%). The rate is above the headline corporation tax rate
in the UK of 23.5% due to the effect of expenses not deductible for
taxation and short-term timing differences, offset by the tax rate
in ROI being 12.5%. The rate is materially higher than the rate in
2022 which was significantly impacted by the capital allowances
super-deduction of 130% of capital spend. The super-deduction
allowance, which resulted in a permanent reduction in the tax
charge whilst in operation, ended on 31 March 2023 and had little
impact on the 2023 tax rate.
Corporation tax paid in the year amounted to £1.6 million
compared to a refund of £3.5 million in 2022 which was in respect
of prior year tax losses. The announcement of full expensing rules
for UK capital expenditure from 1 April 2023 will reduce the cash
tax payable by the Group below the tax charge whilst those rules
remain in place.
Dividend
The Board declared an interim dividend of 0.9 pence (2022: 0.8
pence) per share in September 2023. The proposed final dividend
of 1.9 pence per share brings the total dividend for 2023 to 2.8
pence (2022: 2.4 pence) per share.
The final dividend, if approved by Shareholders, will be paid on 10
May 2024 to Shareholders on the register at close of business on
12 April 2024. The ex-dividend date is 11 April 2024. Dividend cover,
based on adjusted EPS excluding capital allowances super-
deduction, was 2.75 times and it remains the Board’s current
intention to reduce cover to 2.5 times by financial year 2024.
Cash Flow
Free cash flow in the year (calculated as net cash generated
from operating activities, less net spend on textile rental items,
less the capital element of leases) was £55.2 million compared to
£39.1 million in 2022. Of this, we invested £31.1 million (2022: £22.4
million) in the purchase of property, plant and equipment and
software, as we proactively invest in the business to increase
capacity and efficiency across the estate. Offsetting this spend
in 2022 was £1.5 million received as part of the insurance claim in
respect of capital items.
25
Financial Review
Continued >
Free cash flow in 2023 reflected a more
normalised level of net working capital with an
outflow of £0.3 million (2022: £8.2 million).
Investment in Textile Rental Items
Spend on textile rental items amounted to £61.9 million
(2022: £52.5 million). The increase reflects the growth of the
Group, both organically and through acquisition. We have long
term relationships with our garment and linen suppliers and we
continue to work collaboratively to ensure continuity of supply of
quality products.
Capital Investment And Acquisitions
We have continued to invest in plant and equipment, spending
£31.1 million in the year. The spend includes £6.9 million in respect
of the new Crawley site, with a further £9.1 million expected
to be invested in the site in 2024. We are continuing with our
programme of investing in our sites to expand capacity, increase
water and energy efficiencies and improve employee welfare
facilities.
The £5.75 million acquisition of Regency in February 2023 was
a further step in expanding our range of services to four and
five-star luxury hotel customers. Investment of some £1.4 million
is underway in the Regency site in Corsham to expand its
processing capacity and increase resilience.
In August 2023 we acquired the Celtic Linen business in the
Republic of Ireland for a consideration of €31.5 million (£27.1
million). Capital investment at Wexford, which was ongoing
at the time of acquisition, and had been initially recognised
as a lease liability of £1.1 million by Celtic Linen, was paid in
September 2023.
Defined Benefit Pension Scheme Liabilities
On an IAS 19 basis, the Scheme deficit as at 31 December 2023
was £nil (2022: £7.1 million deficit (net of deferred taxation)).
Scheme assets had reduced by £2.8 million, to £145.4 million,
after paying out benefits of £10.3 million during the year whilst
Scheme liabilities had reduced by £12.2 million to £145.4 million.
The improved position reflects the results of the triennial
actuarial valuation of the Scheme, as at 30 September 2022, and
the payment of deficit recovery contributions offset, to a lesser
extent, by adverse inflation experience and lower than expected
asset returns over the period. As a result of the deficit being nil,
the estimated net notional interest cost in 2024 will be £nil
(2023: £0.5 million).
The triennial actuarial valuation of the Scheme, which is
prepared on a “technical provisions” basis, was completed
during the year and showed that the Scheme had a surplus of
£6.3 million at that time. In order to reduce the value of risk of the
Scheme, a 75% target for the interest rate and inflation hedge
ratios remains in place and is subject to ongoing review. The
Scheme’s asset allocation remains under constant review to
ensure it aligns with the medium-term objective of a buy-out of
Scheme liabilities.
In view of the Scheme surplus shown at the valuation date, we
have agreed with the Trustee that the deficit recovery payment
of £1.9 million per annum, which was being paid in equal monthly
instalments, ceased from the end of October 2023 and will be
reviewed again at the time of the valuation as at 30 September
2025.
Return on Capital Employed (ROCE)
ROCE, calculated as rolling 12-month adjusted operating profit
divided by the average of opening and closing Shareholders’
equity, net debt and post-employment benefit obligations,
increased to 13.9% at 31 December 2023 (2022: 12.2%).
26
26
2023 Annual Report & Accounts 01. Strategic Report
Key Performance Indicators (‘KPIs’)
The main KPIs used as part of the assessment of performance of
the Group, and of each segment, are growth in revenue, adjusted
EBITDA margin, adjusted operating profit/(loss) and adjusted
diluted earnings/(loss) per share. In addition, the adjusted
diluted earnings per share excluding the impact of the capital
allowances super-deduction also formed part of the assessment.
ROCE is also used as part of the assessment of performance
of the Group. Non-financial KPIs, as referred to within the Chief
Executive’s Operating Review, include our employee and
customer survey results and customer retention statistics.
Summary
The focus of the Group continues to be to expand our Textile
Services business through targeted capital investment, to allow
organic volume growth, and through acquisition.
Yvonne Monaghan
Chief Financial Officer
4 March 2024
Capital Structure and Share Buyback
Programme
The Group maintains a strong Balance Sheet. The reduction in
net assets to £279.1 million (2022: £284.6 million) is reflective of
the share buy-back programmes completed during 2023 which
reduced Retained Earnings by £29.8 million.
The Group’s medium to long-term intention is to return the
capital structure such that we target leverage of 1.0x – 1.5x, other
than for short-term specific exceptions. Under this framework, our
capital allocation policy remains unchanged and will continue
to take into account the following criteria as part of an ongoing
review of capital structure:
• maintaining a strong balance sheet;
•
•
•
•
continuing capital investment to increase processing
capacity and efficiency;
appropriate accretive acquisitions;
operating a progressive dividend policy; and
distributing any surplus cash to Shareholders.
The Group has undertaken two recent share buyback
programmes which, in the period September 2022 to November
2023, utilised cash of £35.5 million, of which £29.9 million was
utilised in the twelve months ended 31 December 2023.
Going Concern
After considering the monthly cash flow projections, the stress
tests and the facilities available to the Group and Company, the
Directors concluded that there was a reasonable expectation
that the Group and Company have adequate resources for
their operational needs, will remain in compliance with the
financial covenants set out in the bank facility agreement and
will continue in operation for at least the period to 30 June 2025.
Accordingly, and having reassessed the principal risks and
uncertainties, the Directors considered that it was appropriate
to adopt the going concern basis in preparing the Group and
Company financial statements.
2727
2023 Annual Report & Accounts 01. Strategic Report Sustainability and Group Non-Financial
Information Statement
Pages 28 to 44 constitute the Group Non-Financial Sustainability
Information Statement for the Company (required pursuant
to sections 414CA and 414CB of the Companies Act 2006 to the
extent applicable to the Company by virtue of the Company’s
securities being admitted to trading on the market known as the
Alternative Investment Market).
2023 Achievements
at a Glance
• Achieved a 7% reduction in our carbon
intensity compared to 2022 performance.
• Reporting of our full Scope 3 emissions
baseline for the first-time.
• Achieved a 6% reduction in our water
intensity rate compared to 2022
performance.
• Launched new Supplier Framework and
actively engaged with 120 key suppliers.
• 56% of cotton purchases were Better Cotton
Sourced which promotes more sustainable
farming practices.
• £180,000 total Social Value from JSG
charitable giving and community activities,
increasing 124% from 2022.
• Significant increase in volunteering hours
from 129 in 2022, to 1,611 in 2023.
• 5,072 employees completed training across
82 specific health and safety courses,
resulting in a total of almost 28,000 courses
completed.
Sustainability
“Sustainability matters
to us at Johnsons not
only because it is the
responsible way of
operating but also because
it is a differentiator for us
and the service we offer to
our customers.”
Peter Egan
28
28
Our Integrity
In 2023 we continued to demonstrate our commitment to sustainability across every area of our business. We have made excellent
progress embedding our strategy, ‘The Johnsons Way’ into our every-day operations. During the year we have had a strong focus on
understanding how we can better respond to the needs of our Johnsons family by improving awareness around ED&I and developing a
long-term strategy to ensure we create an inclusive workplace and ensuring greater ownership and accountability within the individual
businesses for data, specifically the Our World topics.
Looking forward – our objectives and targets for 2024 and beyond
Aim
2030 Target
2024 Focus Area
Our Family
Our World
Our Integrity
Our Communities
By taking care of our Johnsons
family and ensuring everyone
feels that they belong we will
deliver a first-class employee
experience every day.
An Effective ED&I
programme
Developing the Academy
to provide life-long learning
and career paths
By reducing our natural
resource consumption and
completing the transition to a
fully circular approach for our
operations, we will protect and
enhance our environment.
Reduce Scope 1 and 2 CO2e
emissions intensity by 40%
Reduce water consumption
intensity by 25%
Reduce waste to landfill by
75%
Eliminate single use plastics
By continuing to demonstrate
our integrity and commitment
to responsible business
practices we will position the
organisation for future stability
and growth.
Fully sustainable core
products as the preferred
offerings
Ethical Business Conduct
(internal and external)
By further understanding the
communities impacted by what
we do, we can form better
collaborative partnerships to
support them as they grow and
develop.
Increase our social value
spend as a % of revenue
Embedding
sustainability into
job roles
Businesses to
develop ED&I
action plans in
alignment with
the Group’s ED&I
Strategy
Reduce Scope
1 and 2 CO2e
emissions intensity
by 3%
Reduce water
consumption
intensity by 2%
10% reduction of
single use plastics
purchased
Increasing the
percentage of
sustainable content
in our products
Publishing our
roadmap for
sustainable content
Delivering
3,000 employee
volunteering hours
Increase our social
value contribution
by 40%
29
2023 Annual Report & Accounts 01. Strategic Report
Sustainability
Continued >
The Johnsons Way – Our Strategic Approach
The Johnsons Way provides a long-term strategic approach to
managing the Group’s social and environmental impacts and
responsibilities. It comprises of four “pillars” – Our Family, Our
World, Our Integrity and Our Communities.
In 2023, we continued to demonstrate our commitment to
sustainability across every area of our business. We have made
excellent progress against our strategy and continue to embed
the programme into everyday business to ensure we meet our
Vision 2030 Goals. Moving forward, we are committed to ensuring
our people are safe, feel valued and engaged, achieving a
transition towards decarbonising our operations, reducing
our environmental impact and providing social and economic
support to our local communities.
Selected 2023 Ratings and Benchmarks
We participate in several external sustainability reporting
programmes including:
•
•
Sustainalytics (where, for 2023, JSG has a “Low Risk” rating
(score of 18));
An annual disclosure via CDP (where, for 2023, JSG achieved
a “B-” rating in the Climate Change disclosure and “C” in the
Water disclosure);
Our engagement in these programmes enables us and our
stakeholders to benchmark our sustainability performance and
inform strategic decisions relating to sustainability, enabling
the Group to communicate its commitment and identify
opportunities for improvement.
Our Sustainability Governance Structure
JSG Group Board
Sustainability
Board Committee
JSG Group Management Board
Group
Sustainability Team
Executive Pillar
Sponsors
Pillar Working Groups
Sustainability Committee
Sustainability is managed at the highest levels of the
organisation by a committee of the Board, the Sustainability
Committee (the ‘Committee’), whose purpose is to provide
advice on sustainability strategy, compliance and performance.
As we increase our focus on climate impact, the oversight,
remit and responsibilities of the Committee will also increase.
The Committee’s membership is comprised of the Group’s
Management Board (which includes the Company’s Executive
Directors) plus the Group’s Head of Sustainability. The Committee
is chaired by the CEO and reports into the Board. Whilst not
members of the Committee, the Non-Executive Chair and
the Independent Non-Executive Directors of the Company
are also entitled to attend meetings of the Committee. Key
responsibilities include:
• Monitoring Group compliance with legislation and radar
scanning for new requirements.
• Overseeing periodic materiality assessment reviews to
ensure the Group’s material issues remain appropriate.
•
•
Providing advice to the Board on strategic approach,
sustainability performance and progress towards targets.
Providing an advisory role to the Board on the Group’s
appetite and tolerance with respect to climate risks.
Executive Pillar Sponsors and Pillar Working Groups
As part of our commitment to delivering the sustainability
strategy and framework, each pillar has an Executive Sponsor
who has been appointed by, and sits on, the Group Management
Board. This allows for senior management leadership and
ownership of the development and achievement of the strategic
goals in each area. During the reporting period the pillar
working groups have continued to actively develop action plans
that enable us to translate our strategic aims and targets into
tangible and measurable actions.
Group Sustainability Team
The Group Sustainability Team retains day to day responsibility
for managing the sustainability programme and ensuring
all aspects are being progressed as required. They also act
as subject matter experts providing strategic guidance and
support to the businesses, the pillar sponsors, the CEO and the
Board.
30
Our Family
Our Family Achievements and Performance Summary
We recognise that our people are key to the success of the
Group and we value the contribution of each and every one
of our employees. The Group’s aim is to be the employer of
choice in our industry through delivering a first-class employee
experience every day for all our colleagues. The Johnsons
Family means ensuring everyone feels that they are included
and valued and that they belong, that all our colleagues
have equality of opportunity and reward, that we support
improved health and wellbeing in our teams and that we
foster a positive culture with open and honest engagement
and communication.
Health, Safety & Wellbeing (HS&W)
Our number one priority is looking after the health, safety and
wellbeing of our employees, visitors and others impacted by
our operations.
Health and safety (H&S) matters are a permanent agenda
item at all Group and subsidiary board meetings. A summary
report outlining the Group’s activities is provided on a regular
basis for Group board meetings, including up to date statistics
relating to accidents and incidents that have occurred since
the last report.
The Group has policies, procedures and standards in place,
which are continuously updated, to ensure compliance with
legal obligations and industry standards. H&S audits and risk
assessments are undertaken across the Group annually, these
checks are monitored and recorded with any observations
dealt with promptly.
Group H&S Policy
The Group H&S statement is updated at least annually and
outlines our commitment to H&S and the responsibilities of
individuals.
The Group H&S Team consists of four Regional Safety
Managers under the leadership of the Group Head of Health
and Safety who reports to the CEO. Additionally, all sites have
one team member role dedicated to H&S matters.
Since further expanding the central H&S resource, in 2023,
improvements have continued to be made to accident
investigations, risk assessments and management of
incidents.
Looking forward, the plan for 2024 aspires to make further
improvements by:
•
•
•
•
•
•
Reviewing our current risk assessment documentation to
identify potential improvements.
Improving data collection for accident statistics to allow
better performance tracking.
Reviewing key procedures and policies to clarify
requirements.
Upskilling site General Managers and H&S personnel by
enrolment on relevant H&S training programmes.
Establishing new auditing procedures to enable
continuous improvement.
Focussing on fire safety management and machinery risk
improvements.
HS&W Management Systems
We consider H&S management as an integral part of good
management generally, rather than as a standalone system. In
order to enable comparable reporting across the Group, each
of our businesses are required to have a Safety Management
System, appropriate to their operations, that is in accordance
with the guidance contained within either the internationally
recognised ‘Occupational Health and Safety Assessment
Specification’ standard (OHSAS 45001) or the Health and
Safety Executive’s ‘Managing for Health and Safety’ guide
(HSG65).
The Technical Department are responsible for the quality
monitoring systems which operate throughout the business
and maintain them in respect of new processes, equipment
and standards. An ongoing review of other relevant
accreditations that complement and support our business
processes is also undertaken, an example being the continued
implementation of ISO14001, where approximately 33% of
our sites are certified. Proactive management of Planned,
Preventative Maintenance (PPM) is achieved via a pre-
determined programme, ensuring all equipment is maintained
to relevant safety and performance expectations. Capital
investment projects are supported by providing expertise
on utilities, energy management, labour efficiency and
engineering management to ensure delivery to time and
budget.
Safety Performance
Incident reporting procedures are maintained, and all
employees are encouraged to report accidents and near
misses to ensure measures are put in place to prevent similar
incidents from happening again and any additional safety
procedures are implemented where applicable.
Fewer accidents occurred in 2023 than in 2022. The increased
reporting of near misses year on year reflects a greater
awareness across the Group, enabling the implementation of
improvements to prevent accidents before they occur.
Accident types in 2023 followed a similar trend to the previous
year:
Accident types
Cuts/Abrasions
Manual Handling
Slips & Trips
Hit by Moving/Falling Object
2023
2022
29%
26%
15%
11%
25%
31%
12%
13%
Health, Safety, and Environmental Training
During 2023, the Learning and Development teams improved
training visibility and tracking. We provided regular training to
ensure our teams understand their roles and accountabilities
in HS&W practices.
31
2023 Annual Report & Accounts 01. Strategic Report Sustainability
Continued >
Our Family
5,072 employees completed training across 82 specific health
and safety courses, resulting in a total of almost 28,000
courses completed. These included mandatory courses and
non-mandatory courses such as Fire Safety, Manual Handling
and Chemical Handling and Spillage Training.
In 2024, the H&S Team will deliver bespoke training on risk
assessment and accident investigation. Additionally, we
regularly update H&S policies, procedures and templates
which employees can access anytime on our Group wide
intranet portal.
Equity, Diversity & Inclusion (ED&I)
We are committed to promoting ED&I throughout the business
to build a culture that is inclusive to all, actively values
difference, ensures everyone is treated fairly and is free from
unlawful discrimination.
In 2023 we developed a Group wide ED&I Strategy to identify
key opportunities for improvement and set out our plans for
the coming years. This ED&I Strategy will be translated into
business level tactical action plans during 2024 to enable our
teams to fully understand the steps we need to take to allow
our employees to feel included and valued.
To promote greater awareness and understanding of the ED&I
topic we have developed a short training course that will be
mandatory for all employees and we intend to launch this in
early 2024.
The Group has a policy that disabled persons, whether
registered or not, shall be considered for employment and
subsequent training, career development and promotion on
the basis of their aptitudes and abilities. We have procedures
in place to ensure this commitment is enacted across our
businesses. If an employed person becomes disabled during
their employment with us, we make every effort to ensure that
they are retrained according to the abilities.
JSG Diversity Monitoring
In 2022, we launched our first Group-wide diversity survey.
Moving forward, as part of the onboarding process for all new
employees, we now issue a questionnaire to gain a greater
understanding of the unique backgrounds of our workforce to
enable us to tailor our support, engagement and development
programmes towards the needs of specific groups who may
need additional support and to set meaningful targets. In
each of the diversity survey charts “Prefer Not to Answer” refers
to where the respondent has selected that option from those
provided or left the option blank.
32
Gender Equality
The question of gender identity has given us results that are
broadly similar to those we have published previously with
a gender identification split of 41% women to 56% men. In
addition, we also have 1% of our employees that identify as
non-binary.
Gender Split at JSG
Prefer not to answer
Non-Binary
2%
1%
56+
Woman
41%
Man
56%
Gender at Director and Senior Manager Level
We have achieved the published 2030 target of 25% female
representation at senior management level. We will
carefully consider whether to adopt a more stringent gender
representation target or if we should address other areas of
the diversity demographic.
Gender Split at Senior Management
Prefer not to answer
Woman
27%
Man
71%
2%
71+
Gender Pay Gap
We report our Gender Pay Gap on an annual basis and our
current and historical reports can be found on our website at
www.jsg.com/gender-pay-gap. Please also see pages 111 to 112
of this report for more information on specific 2023 data.
41
+
1
+
2
+
A
27
+
2
+
A
Our Family
Ethnicity
The survey shows that the single biggest ethnic group within
our workforce identify as White (47%). However, the data also
indicates that there are significant populations of those who
identify as Asian (11%) and Black (5%) within our workforce.
The ethnicity of our senior management group, 80% of which
identifies as white, does not reflect our general ethnic mix
and we are therefore actively developing and implementing
detailed succession planning, including training, development
and internal promotion of individuals from diverse
backgrounds, together with understanding how we can widen
the talent pools that we attract into the business.
Representation of ethnic groups at JSG
Prefer not to say
31%
47+
Asian
Black
11%
5%
Other Ethnic
Groups
4%
Mixed/Multiple
Ethnic Background
2%
White
47%
Employee communication and consultation
Each JSG business takes responsibility for fostering
employee engagement through appropriately structured
communications, training and incentive arrangements.
Employee views are sought by management and taken into
consideration when making decisions that may affect the
employees’ interests. A broader understanding of the Group
and opportunities within it are made available to employees
through a range of newsletters, magazines and intranet
pages.
Employee Engagement
Our commitment to Employee Engagement, fostering a
positive work environment and improving employee wellbeing
has continued throughout the year. Across the Group,
engagement focal groups and networks are in place to roll out
relevant initiatives applicable to each business and site. These
include provision of treats and food events such as ice cream,
pizza and BBQs; training, awareness and lunch and learn
type briefings on a wide range of non-work related topics,
additional non-contractual benefits such a baby boxes, free
sanitary products, birthday cards and gifts and formalised
reward and recognition schemes.
We were delighted that the results from the latest Employee
Engagement surveys showed a positive trend and an overall
improvement on the previous year. A further survey will be
undertaken in the final quarter of 2024 and will also be rolled
out to our new colleagues at Celtic Linen and Regency.
The annual employee engagement surveys results can be
seen below:
Workwear
84%
Hotel
Linen
86%
HORECA
Group
Centre
Average
90%
86%
86%
81%
85%
89%
84%
85%
91%
89%
93%
96%
92%
Enablement
Score
Engagement
Score
Empowerment
Score
Response Rate
81%
88%
74%
88%
83%
Across the surveys we scored highly in areas such as
employees knowing what is expected of them in their job,
understanding of how their job impacts the customer and
employees feeling that they play a part in the success of the
company.
Key themes of opportunities for further improvement include
the following:
•
•
•
Leadership visibility and communication
Continue to focus on wellbeing
Focus on listening and communicating
33
2023 Annual Report & Accounts 01. Strategic Report11
+
5
+
2
+
4
+
31
+
A
Sustainability
Continued >
Our World
Our World Achievements and Performance Summary
Energy Consumption and Carbon Emissions
When we launched The Johnsons Way, our refreshed approach
to sustainability, we set ourselves a challenging carbon
reduction target – to achieve a 40% reduction in our CO2e
intensity by 2030. We are conscious that this is not a net zero
commitment however, we are in the early stages of our low
carbon transition and management journey and believe it is
realistic and achievable. We intend to publish a more detailed
Decarbonisation transition roadmap, including our full Scope 1,
2 and 3 emissions plus any new targets in the near future.
JSG has adopted an ‘operational control’ approach to
delineate the Group’s emissions boundary and scope. This
method encompasses emissions directly associated with the
operational activities of all sites, as well as company-owned
and leased transport. The data used for compiling the report
adheres to the methodology outlined in the UK Government’s
Environmental Reporting Guidelines for 2019. Emission
calculations are based on conversion factors provided by
the UK Government, and in accordance with the Greenhouse
Gas Protocol. There are no significant omissions within the
mandatory reporting scope.
For the first time this year we have also undertaken a complete
calculation of our wider Scope 3 emissions in addition to the
best practice areas previously disclosed. This includes both
upstream and downstream emissions, for our chosen baseline
year of 2022. These results will be further analysed over the
coming months to fully understand the impacts of our value
chain and a more detailed Scope 3 decarbonisation roadmap
will be published in due course.
The JSG Carbon year for this reporting period runs from 1
October 2022 to the 30 September 2023 and both the weights
and revenue data used to calculate intensity rates have been
adjusted to reflect those periods. This means that the revenue
stated in this section will not align with that stated in the rest
of this Annual Report.
Changes to Reporting Boundaries, Scopes and Baseline
Year
Through robust internal reporting and audit processes, we
identified anomalies within the 2023 energy and carbon data
that we were compiling which, in turn, led us to review the data
previously reported. That process, which included a thorough
review of our data collection, recording and reporting
processes, together with an alignment of data ownership and
accountability, has culminated in us restating our 2022 data.
As part of this process, we have also changed our Scope 1 and
Scope 2 emissions baseline year from 2021 to 2022. There are a
number of reasons for this, including:
• We have enhanced our reporting and review processes for
2022 onwards.
•
•
2021 remains a very abnormal year for the business due to
the impact of COVID. The data for the two years since has
reinforced that this was not a representative reflection of
“normal” business and therefore the carbon emissions are
not appropriate for a baseline.
The JSG Scope 3 baseline, which has been calculated
this year, is based on the 2022 carbon year. Whilst not
mandatory to align the baseline years across all scopes,
it is logical to do so at this time to ensure consistency and
transparency of reporting moving forwards.
At the same time, we have revisited our published carbon
reduction commitments and believe this to be an ideal
opportunity to clarify what our 2030 targets represent,
particularly to ensure ongoing transparency as we move away
from referencing the 2021 data.
We have publicly stated our intention to reduce our CO2e
intensity for Scope 1 and Scope 2 emissions by 40% by
2030. We define this as all Scope 1 and Scope 2 emissions
plus the emissions from our grey fleet which, although are
Scope 3, are mandated by UK legislation to be included
in our Streamlined Energy and Carbon Reporting (‘SECR‘)
disclosures. In previous data disclosures, we reported our full
calculated carbon inventory intensity comprising all of our
Scope 1 and Scope 2 emissions together with a small amount
of best practice aspects of Scope 3 emissions, e.g. grey fleet
mileage, transmission and distribution (T&D) and well to tank
(WTT ) losses associated with Scope 1 and Scope 2 energy
consumption. This figure has then been used to calculate the
intensity rate and demonstrate progress towards our stated
targets.
Whilst we will continue to report the totality of emissions
calculated in the following section of the report, progress
towards our stated 2030 target will be adjusted in alignment
with our restated data.
Our adjusted 2030 Scope 1 and 2 carbon intensity target is as
set out in the table below.
Table 1 JSG 2030 Scope 1 and Scope 2 Carbon Intensity Target
Scope 1 and 2 Intensity Rate
2030 Target
tCO2e/T Weight
0.205
34
Our World
2022 Carbon Emissions Restatement
The table below shows the data that was reported last year
and our restated dataset.
Table 2 JSG 2022 Scope 1 and 2 Emissions Restatement
Total Emissions (tCO2e)
Weight (T Processed)
Revenue (£m)
tCO2e per tonnes processed
2022
Reported
Data
94,548
304,325
368
0.311
2022
Restated
Data
111,480
277,122
368
0.402
tCO2e per £m revenue
256.92
302.93
2023 Energy Consumption
In the carbon reporting year 2023, Johnson Service Group’s
energy consumption amounted to 510,524,332 kilowatt hours
(kWh). The total energy consumption for the year 2023 has
experienced a 4.7% increase compared to 2022, as detailed in
the table below.
It should be noted that a proportion of this increase is related
to the acquisition of the Regency business in February 2023.
Celtic Linen, which was acquired by the Group on 31 August
2023, is excluded from the figures due to its short period
of ownership during the carbon reporting year, ending
30 September 2023.
Table 3 JSG Energy Consumption by year (kWh)
Emissions
Source
2023 Share (%)
Restated
2022
%
Annual
Change
Natural Gas
371,787,456
72.8% 356,837,711
4.2%
Gas/Fuel/
Burning Oils
253,160
0.0%
181,984
39.1%
Electricity
45,312,647
8.9%
43,227,996
4.8%
Transport –
Commercial
Fleet
Transport –
Company
Cars
Transport –
Grey Fleet
Total
consumption
(kWh)
90,388,967
17.7%
84,276,308
7.3%
2,242,547
0.4%
2,610,185
(14.1%)
539,555
0.1%
585,243
(7.8%)
510,524,332
100.0% 487,719,427
4.7%
2023 Greenhouse Gas Emissions
The Group’s greenhouse gas emissions for the period were
116,522 tonnes of CO2e. This reflects a 4.5% increase compared
to the previous year. These emissions encompass all our
Scope 1 and Scope 2 emissions plus Scope 3 emissions
mandated by SECR legislation, along with the best practice
Scope 3 emissions included voluntarily for transmission &
distribution and well-to-tank losses.
Table 4 JSG Greenhouse Gas Emissions by source and year
(tonnes CO2e)
Emissions Source
2023
Share
(%)
Restated
2022
% Annual
Change
Natural Gas
79,242
68.0%
76,235
3.9%
Gas/Fuel/Burning
Oils
80
0.1%
55
45.9%
Electricity
10,195
8.7%
9,124
11.7%
Transport –
Commercial Fleet
Transport –
Company Cars
Transport –
Grey Fleet
Total emissions
(tonnes CO2e)
26,192
22.5%
25,027
4.7%
682
0.6%
877
(22.3%)
131
0.1%
162
(19.1%)
116,522
100.0%
111,480
4.5%
The split of total reported emissions by scope is shown in the
table below.
Table 5 2023 Total JSG GHG Emissions by Scope
Emissions
Scope
2023
(tCO2e) Share (%)
Restated
2022
(tCO2e)
% Annual
Change
Scope 1
Scope 2
Scope 3
Total
emissions
(tCO2e)
89,609
76.9%
86,085
4.1%
9,409
8.1%
8,369
12.4%
17,504
15.0%
17,026
2.8%
116,522
100.0%
111,480
4.5%
Scope 1 emissions, constituting 76.9% of the total,
predominantly arise from the combustion of natural gas at
our sites and fuels used in commercial vehicles. The remaining
Scope 1 emissions originate from company car transport,
burning oil, and fuel oil usage. There was a 4.1% increase in
Scope 1 emissions compared to 2022.
35
2023 Annual Report & Accounts 01. Strategic Report
Sustainability
Continued >
Our World
Scope 2 emissions, stemming from purchased electricity and
electricity for electric vehicles, contribute 8.1% to the total.
These emissions have increased by 12.4% from 2022, driven by a
rise in consumption as well as the increase in the grid average
emissions factor. Our Scope 2 emissions are location based
only.
Scope 3 emissions, for the purposes of this section, include
grey fleet business mileage plus the best practice reporting
of transmission and distribution (T&D) and well to tank (WTT)
losses associated with our energy consumption.
Greenhouse Gas Scope 3 Emissions
During the reporting period we have been working with third-
party carbon focused consultants to develop a methodology
for calculating our full Scope 3 greenhouse gas emissions.
Scope 3 emissions are those that we do not have direct control
over, but which are part of the value chain of our products,
services and operations. The Group has adopted a spend
based analysis for this first disclosure whereby the annual
“spend” with individual suppliers forms the basis of the initial
calculation. This amount is then converted into emissions using
globally recognised and accepted average conversion factors
for economic spend in different industries and geographies.
We have chosen to use 2022 as the baseline year for our full
Scope 3 calculation. The specific spend period is 1 October 2021
to 30 September 2022, which aligns with our adjusted Scope 1
and Scope 2 baseline year. This baseline does not include the
Regency or the Celtic Linen businesses as they were not part
of the Group during the baseline year. However, their data will
be included going forwards as we continue to report ongoing
performance.
Whilst the spend based methodology is accepted under the
GHG Protocol, the global standard for calculating carbon
emissions, it is acknowledged that it produces an estimated
figure due to its reliance on averages and proxy values.
The next phase of our Scope 3 transition plan will involve
engagement with those suppliers identified as having the
greatest impact on our emissions to refine their data. We will
also begin to engage with them more closely on how we can
support them to reduce their emissions.
The Scope 3 calculation and analysis has identified that
almost 90% of these emissions are produced by 20 high energy
emitting suppliers and we intend to engage directly with these
suppliers over the next 12 months to further understand and
refine the figures. A significant majority of these suppliers are
related to the textile products that we purchase (53%) followed
by the detergents and chemicals we use in our operations at
18%. The remaining suppliers that make up the top 20 include
those who provide plant and equipment, packaging solutions
and commercial fleet vehicles.
Table 7 Top 20 Suppliers producing almost 90% of Scope 3
Emissions by Procurement Category
Procurement Category
(Level 1)
Textiles Products
Consumables
Plant Maintenance and
Capital
Total
Emissions
(tCO2e)
% Scope 3
Emissions
24,397
8,105
4,852
2,689
53%
18%
11%
6%
88%
Table 6 Scope 3 Emissions by Category for the JSG Baseline
Year 2022
Logistics
Emissions Sub Total (tCO2e)
40,043
GHG Category
Category 1 – Purchased goods
and services
Category 2 – Capital goods
Category 8 – Upstream leased
assets
Category 4 – Upstream
transportation and distribution
Category 6 – Business travel
Category 15 – Investments
Category 5 – Waste generated in
operations
Total
Emissions
(tCO2e)
% Scope 3
Emissions
39,990
4,401
1,282
27
26
7
–
87%
10%
3%
–
–
–
–
Total
45,733
100%
Energy and Carbon Metrics and Targets
• TCFD Disclosure (G): A description of the targets used by
the company to manage climate-related risks and to
realise climate-related opportunities and of performance
against those targets.
• TCFD Disclosure (H): A description of the key performance
indicators used to assess progress against targets used to
manage climate-related risks and realise climate-related
opportunities and of the calculations on which those key
performance indicators are based.
‘The Johnsons Way’ sets out our 2030 Vision roadmap to
achieving a transition towards decarbonisation. We have
publicly stated our intention to reduce our CO2e intensity for
Scope 1 and Scope 2 emissions by 40% by 2030. We define this
as all Scope 1 and Scope 2 emissions plus the emissions from
our grey fleet which, although are Scope 3, are mandated by
UK legislation to be included in our SECR disclosures.
This reduction will require actions which may include
conversion to greener energy sources, phased transition to
electric vehicles where practical, working with our suppliers
on more sustainable sourcing methods and further capital
investment in our business.
36
Our World
To allow for year-on-year comparison moving forward the
absolute CO2e totals have been normalised using two relevant
quantifiable factors to create two specific intensity ratios; it
is these ratios that we use to monitor our performance and
progress towards the 2030 target. The first intensity ratio
calculated for the Group is tonnes of carbon dioxide equivalent
(tCO2e) per tonnes weight processed and the second is tonnes
of carbon dioxide equivalent (tCO2e) per £million of revenue.
To ensure full transparency we have calculated intensity rates
for our full 2023 Greenhouse Gas emissions in addition to the
Scope 1 and Scope 2 emissions that we have published a
reduction target against.
We can report that we have achieved a year-on-year decrease
of 7% in the Scope 1 and Scope 2 tCO2e per tonnes processed
intensity while the intensity metric of tCO2e per £ million
revenue has decreased by 13%.
A similar intensity rate reduction can also be seen when we
expand the emissions to include our best practice Scope 3
datasets. It is anticipated that moving forward this reduction
may not be replicated exactly once we integrate our full
Scope 3 data into the absolute total.
Table 8 Scope 1 and Scope 2 Intensity Rates
Total SECR Compliant
S1 & S2 Emissions
(tCO2e)
2023
2022
% Annual
Change
99,149
94,616
4.8%
Revenue (£m)
442.6
368.0
Weight (t)
312,028
277,122
12.6%
tCO2e per tonnes
processed
0.3178
0.3414
(6.9%)
tCO2e per £m
224.0
257.1
(12.9%)
Table 9 JSG Total Greenhouse Gas Intensity Rates
2023
2022
% Annual
Change
Total JSG GHG
Emissions (tCO2e)
116,522
111,480
4.5%
Revenue (£m)
442.6
368.0
Weight (t)
312,028
277,122
12.6%
tCO2e per tonnes
processed
0.3734
0.4023
(7.2%)
tCO2e per £m
263.2
302.9
(13.1%)
Energy and Carbon Initiatives
• TCFD Disclosure (G): A description of the targets used by
the company to manage climate-related risks and to
realise climate-related opportunities and of performance
against those targets.
In addition to the review of energy and carbon related
data across the Group, during the reporting period we
also undertook a number of energy and carbon efficiency
initiatives. These include:
•
•
•
•
The development of a consistent model to identify
potential energy and carbon savings within plant and
equipment maintenance and capital expenditure plans
to allow for standardised forecasting of potential CO2e
emissions savings.
Inclusion of sustainability and particularly energy and
carbon related requirements within the Group capital
spend documentation and approval process.
Completion of a desktop feasibility study on the
practicality and potential emissions reductions by adding
solar panels across the estate.
Completion of a trial of Hydrotreated Vegetable Oil (HVO)
fuel across a selection of vehicles in the business. The
trial was largely successful however the increased cost of
HVO at this time makes the business case for switching
challenging. We continue to work on this aspect of our
emissions reduction plan.
Water Management
Water is an essential component of the service we provide
to our customers and therefore we are aware that we have a
heavy reliance on the availability of a secure and consistent
supply of quality, fresh water. Across the estate we abstract
water from a variety of sources including the main water grid
supply, private and leased boreholes and other sources of
fresh water. We discharge effluent within permitted limits
directly to mains sewers and also via other accepted means.
We have robust systems in place to ensure all our sites actively
monitor the water they are abstracting, using and discharging
to ensure it complies with the relevant legal conditions.
Water data is reported in alignment with the majority of
the Group’s reporting calendar and as such is for the period
1 January 2023 – 31 December 2023. As such the weight and
revenue data in this section will differ from that in the energy
and carbon section. It should also be noted that data includes
performance in the Regency business but does not include any
data from the Celtic Linen business due to the timing of the
acquisition.
Restatement of 2022 Water Data
As stated previously, our internal reporting and audit
processes identified anomalies within the 2023 energy, carbon
and water data which, in turn, led us to review the data
previously reported. This process culminated in us restating
our 2022 data.
37
2023 Annual Report & Accounts 01. Strategic Report
Sustainability
Continued >
Our World
The table below shows the data that was reported last year
and our restated dataset.
Table 10 JSG 2022 Water Data Restatement
2022 Original
2022 Restated
Abstracted (M3)
2,196,058
2,219,845
304,325
289,072
Weight (T)
Revenue (£m)
M3/T Processed
M3/£m
This analysis was completed prior to the acquisition of Celtic
Linen and, as such, includes data for the UK only. We intend to
extend this analysis to include the Republic of Ireland in the
coming months. This analysis has determined we are operating
in a region that has a “Low – Medium Water Stress Label (10-
20%)”. Longer term we will undertake detailed analysis at
individual site level to determine those areas which may have
a higher stress risk and ensure that we have a robust action
plan in place to mitigate any potential risks.
385.7
7.216
5,694
385.7
7.679
5,755
Water Management Metrics and Targets
• TCFD Disclosure (G): A description of the targets used by
the company to manage climate-related risks and to
realise climate-related opportunities and of performance
against those targets.
2023 Water Usage
Johnson Service Group’s absolute water abstraction for the
reporting year 2023 was 2,296,679M3. This represents a small
increase of 3% from the previous year, partly as a result of
acquiring Regency in February 2023.
We have adopted the same approach for water intensity rates
as for carbon emissions. The first intensity ratio calculated
for the Group is volume of water used (M3) per tonnes weight
processed and the second is volume of water used (M3) per
£million of revenue.
The table below shows that we have achieved a year-on-year
reduction in our M3 per tonnes processed intensity of 6% and
a 12% reduction in our M3 per £m intensity. It should be noted
that the revenue intensity is likely to have been favourably
impacted by the price increases implemented across the
Group during the period.
Table 11 2023 JSG Water Usage
2023
2022
Water Abstracted (M3)
2,296,679
2,219,845
Weight Processed (T)
316,790
289,072
Revenue (£m)1
M3/T Processed
M3/£m Revenue
455.0
7.250
5,047
Note 1: Excludes Celtic Linen revenue.
Annual
Change
3.5%
9.6%
(5.6%)
385.7
7.679
5,755
(12.3%)
Water Stress Analysis
Security of water supply is crucial to the long-term
sustainability of the Group and as such a decision was made
to undertake a water stress analysis of the Group estate
using the WRI Aqueduct Water Risk Atlas Tool. This tool uses
a customisable global atlas to evaluate how water risk (and
water stress) may affect operations (at watershed level). The
baseline water stress and baseline water depletion indicators
are based on a global dataset developed by the World
Resources Institute and are also available as risk indicators in
the WWF Water Risk Filter.
38
• TCFD Disclosure (H): A description of the key performance
indicators used to assess progress against targets used to
manage climate-related risks and realise climate-related
opportunities and of the calculations on which those key
performance indicators are based.
‘The Johnsons Way’ sets out our 2030 Vision towards greater
responsibility towards the use of our natural resources and
as part of this we publicly stated our intention to reduce our
water usage intensity by 25% by 2030.
We intend to achieve this goal through a number of targeted
actions including improved process efficiencies, review of
existing and planned equipment maintenance, refurbishment
and replacement, active engagement with related suppliers to
identify new opportunities through research and development
and further capital investment in innovative water technology
across the business.
As with our energy and carbon performance data, to allow for
year-on-year comparison, the absolute water M3 totals have
been normalised using the same two relevant quantifiable
factors to create the water usage intensity ratios.
Intensity Rate
M3/T Processed
M3/£m
2030
Target
2023
Performance
5.759
4,317
7.250
5,047
Waste Management
Across the Group a significant volume of waste is generated
including plastics and other packaging, general waste, end of
life textiles and other industrial wastes.
We have robust processes in place to ensure each site
manages their waste in accordance with applicable
regulations. We also apply the waste management hierarchy
when dealing with the waste we generate. Our priority is to
avoid or minimise waste generation first, then look to re-use,
re-purpose, recycle or recover the waste where possible and
lastly disposal by incineration without energy recovery and
landfill.
Our World
During the internal assurance process outlined earlier in the
report, we identified irregularities and inconsistencies in
the waste data we were collating for 2023, as well as data
previously reported for 2022. Following a detailed investigation
and analysis, the business has decided not to report these
datasets this year. We intend to continue to work with all the
businesses across the Group to ensure suitable and sufficient
waste data capture, recording and reporting processes are
fully embedded to allow us to reinstate performance data
reporting next year. In the interim we continue to implement a
number of initiatives to improve how we physically manage the
waste we are generating through our operations. These are
summarised below.
Reduction of Waste to landfill
During the reporting period we began a phased transition
to a single waste management provider for the majority of
waste generated through our UK operations. Our partner
has committed to ensuring that none of their waste is sent to
landfill with the majority being recycled; any remainder being
sent for incineration with energy recovery.
Elimination of Single Use Plastics
We have begun to engage with both our suppliers and
customers on this topic to understand more about the needs
and scope for removal of the plastic packaging currently
used whilst still maintaining required levels of cleanliness and
hygiene.
As a first step in our transition towards removal of plastics from
our operations, from 2024 all our plastic / polythene packaging
will have a minimum of 30% recycled content. Whilst this is a
strong step forward, we continue to actively explore options
for full elimination of single use plastics. Across the businesses,
we have been trialling biodegradable and compostable
alternatives with mixed results. We are also exploring how we
could replace some of our customer packaging needs with re-
usable bespoke laundry hampers.
End of Life Textiles
We continue to work with our industry body, the Textile
Services Association (TSA) to recycle end of life textiles
from our HORECA division through their “Infinite Textiles”
programme which sends linen from across the hospitality
sector of the industry for recycling into fibre which is then
re-integrated into new textile products. In addition, we are
exploring other options to repurpose and recycle these waste
products via other routes.
In our Workwear business we undertook a phased transition to
a single provider of workwear end of life textile management,
Race Recycling. Through this arrangement, from 2024 all
our workwear end of life garments will be managed via this
provider, with the majority being recycled and the remainder
that are not suitable for recycling being sent for incineration
with energy recovery.
39
2023 Annual Report & Accounts 01. Strategic Report Our Integrity
Sustainability
Continued >
Our Integrity
Our Integrity Achievements and Performance Summary
Responsible Business Practices
JSG recognises that growth, change and profit are good for the
Group and that they are necessary for a business to survive.
At the same time, we also understand that we must ensure
that we always operate in a responsible way through the
employment of strong ethical practices and governance.
anyone wish to report perceived improprieties. Reports
can be made via a dedicated telephone number and email
address or in writing to the Non-Executive Directors via the
Company Secretary. The Whistleblowing policy is displayed at
all sites and is also available on our internal intranet system.
It provides examples of ethical wrongdoing including bribery,
corruption, fraud, dishonesty and illegal practices which may
endanger employees or other parties.
We also accept that our indirect activities are wide and varied
and that effective change will only be possible by cascading
and supporting the sharing of our values and behaviours into
our value chain and working in partnership with our customers
and suppliers.
Employee Code of Conduct
Our Employee Code of Conduct (the ‘Code’) sets out the
requirements and guidelines on expected behaviours for all
employees to act with honesty, integrity and fairness to others
to ensure the Group meets the highest standards of conduct
in business dealings. The Code, which encompasses a high
level overview of each of the Group’s more detailed policies,
including the Code of Ethics, is available on our internal
intranet system and hard copies can be obtained from Human
Resources teams.
On joining the Group, whether by way of acquisition or
otherwise, all employees will be made aware of these
standards and procedures to ensure compliance is achieved.
Senior employees are also required to sign an annual
statement of compliance with the Code of Ethics.
During the coming year we will develop appropriate training
packages to ensure all colleagues fully understand our
compliance and behavioural requirements. We have identified
specific groups within our operations who are more at risk to
potential exposure in these areas and additional training will
be developed for them.
The Group’s anti-bribery policy sets out how employees must
act to ensure that our zero-tolerance approach to bribery and
corruption is upheld.
As part of the Group’s commitment to ethical trading
standards a declaration of interests in suppliers is required
to be undertaken by all employees who are considered to be
influential with regards to the ordering of goods or services
from suppliers. The purpose of the declaration is to ensure that
there is complete clarity of interest between the parties to a
transaction and that the independent judgment of employees
is not impaired. Group employees, agents and other
representatives are prohibited from giving or receiving money
or gifts which could be construed as bribes. The policy does not
prohibit normal and appropriate hospitality (given or received)
to or from third parties, nor does it prohibit giving or accepting
gifts of low monetary value as long as it does not influence, or
have the appearance of influencing, an employee’s objectivity
or decision-making.
The Group is committed to a culture of openness, honesty and
accountability and believes that it is fundamental that any
concerns our employees have about the Group can be raised
without fear of victimisation. A dedicated and confidential
Whistleblowing service is available to employees should
Arrangements are in place to ensure that any reports are
followed up and the appropriate action taken.
Group Modern Slavery Statement
We publish our Modern Slavery Statement annually on our
website at www.jsg.com/modern-slavery-statement.
We are committed to implementing and enforcing effective
systems and controls to confirm that slavery and human
trafficking is not taking place anywhere in our supply chain
or in any part of our business. We fully acknowledge our
responsibility to respect human rights as set out in the
International Bill of Human Rights and we are also committed
to implementing the United Nations Guiding Principles on
Business and Human Rights throughout our operations.
All new employees are subject to pre-employment checks
to confirm their identity and eligibility to work in the UK
and Ireland prior to them starting work within the Group.
Information is provided to all employees on their statutory
rights including sick pay, holiday pay and any other benefits
they may be entitled to by virtue of their employment. We pay
all directly employed labour at least the minimum wage, as
appropriate. Where recruitment agencies are used, we ensure
they comply with all legal requirements. These procedures
collectively help to address our on-going commitment to
protect our employees’ human rights and the elimination of all
forms of forced and compulsory labour.
We expect our suppliers to have suitable anti-slavery
and anti-human trafficking policies and processes within
their businesses and to cascade those policies to their
own suppliers. As part of our continued efforts to ensure
compliance with these requirements we have developed a
robust supplier framework, which includes clear requirements
and expectations that are set out in our new Guiding Principles
on Supplier Conduct and which apply across all stages of our
contractual relationship.
Our standard supplier contractual terms and conditions
include a provision requiring suppliers (and each of their
sub-contractors) to comply with the Modern Slavery Act 2015.
The standards we expect will address a broad spectrum of
working conditions including fair remuneration, working hours,
no child labour, respect, non-discrimination, health, safety and
wellbeing, as well as freedom from forced labour.
To ensure a high level of understanding of the risks of modern
slavery and human trafficking in our supply chain and our
business, all Directors have been briefed on the subject and we
provide training to relevant employees. Through this training,
as well as through Group wide internal communications,
all employees are encouraged to identify and report any
potential or actual wrongdoing that they consider to be
negligent, improper or illegal via a dedicated and confidential
Whistleblowing hotline, which is available 24 hours a day.
40
Our Integrity
Digitalisation and Cyber Security
The Group IT Team ensures compliance with security policies
and regulations, safeguarding user and customer data while
ensuring business continuity. Led by the Group IT Director, our
cyber security strategy prioritises the prevention, detection,
and response to evolving threats. Investments in multi-layered
defence systems and ongoing training initiatives reinforce our
resilience against cyber-attacks.
Key Initiatives:
•
•
•
•
•
Information Security Training: We issue regular
communications to raise awareness of our security policy,
and our state-of-the-art cyber security training platform
enables employees to mitigate risks effectively.
In 2023, 11 courses covering critical cyber security topics
were completed by 80% of employees, with tailored
content addressing emerging threats.
Simulated Phishing Tests: We conducted five tests
which resulted in a low phish-prone rate of below 5%,
outperforming the industry standard.
Audit and Risk Assessment: We leverage industry
frameworks such as the NIST Framework and Cyber
Essentials certification, our IT management system has
successfully received full compliance for the third time.
Annual risk assessments are completed, and ongoing
monitoring ensures proactive risk management and data
protection, helping identify any potential vulnerabilities.
Approach to Sustainability Related Risk
Management and TCFD
• TCFD Disclosure (A): A description of the company’s
governance arrangements in relation to assessing and
managing climate-related risks and opportunities.
• TCFD Disclosure (B): A description of how the company
identifies, assesses, and manages climate-related risks
and opportunities.
• TCFD Disclosure (C): A description of how processes for
identifying, assessing, and managing climate-related
risks are integrated into the company’s overall risk
management process.
The Board has overall accountability for ensuring that risk is
effectively managed across the Group and this also includes
those risks relating to sustainability. Climate change and
energy costs are identified as principal risks to the Group and
mitigation identified includes investing in sites, installing the
latest technologies and ensuring energy efficiency measures
are utilised.
Climate change is important to us as a business and to our
stakeholders and we are committed to energy efficiency
improvement and reducing our greenhouse gas emissions,
however, there remains the potential for us to see increases in
both the cost of energy as well as the potential introduction
of associated levies or taxation. Failure to appropriately
demonstrate that, as a business, we are committed and
moving towards net zero carbon emissions could negatively
impact our brand and also impact our ability to operate and/
or remain relevant to our customers and consumers.
Potential areas of risk are identified through the Group’s risk
assessment programme and mitigated wherever possible. For
more information on our wider risk management approach
and processes please refer to pages 45 to 51.
Risk and Opportunities Scenarios
• TCFD Disclosure (Di): A description of the principal climate-
related risks and opportunities arising in connection
with the company’s operations, and (Dii) the time periods
by reference to which those risks and opportunities are
assessed.
The following scenarios were developed after consulting
a number of resources, including the UK Climate Change
Committee’s report to government “The Adaptation
Committee’s Independent Assessment of UK Climate Risk
(2021)”. The most useful references, however, are provided in the
text in each of the following risk sections to be clear where the
information was sourced from.
A 1.5°C temperature increase is expected by the mid-2030s
regardless of any mitigation taken now (IPPC Climate Change
2023 Synthesis Report). It is expected that this will increase
the frequency of extreme weather events, including localised
flooding and precipitation. For now, 2035 represents the limit of
JSG’s long term risk scenario planning so the same scenario of
a temperature increase of 1.5°C by 2035 was considered for all
four temperature increase scenarios.
Climate Related Opportunities
• TCFD Disclosure (E): A description of the actual and
potential impacts of the principal climate-related risks
and opportunities on the company’s business model and
strategy.
The Group appreciates that we need to reduce our Scope 1 and
Scope 2 carbon emissions through increased energy efficiency
at each site, investment in appropriate plant and equipment
and transitioning to renewable energy supply such as Power
Purchase Agreement (PPAs). These actions will provide the
opportunity to not only reduce our carbon emissions in line
with our stated goals, but also future proof the business
against possible energy supply issues, rising energy costs and
the avoidance of future carbon tax costs.
The Group also recognises the opportunity for the business
to continue to promote our services as a commercially viable
alternative to existing and prospective customers who will be
faced with similar energy and carbon emissions concerns.
Acute Physical Risk Scenarios
Flood (coastal, fluvial or precipitation)
All JSG site locations were assessed to determine if their
location falls into the flood plain of local rivers or tidal surges
using a coastal screening tool to identify areas of the UK below
0.1m above sea level. The detailed dataset is currently being
analysed internally and the main results summarised in the
table which shows the total number of sites across the group
that could be at risk of storm surges.
41
2023 Annual Report & Accounts 01. Strategic Report Sustainability
Continued >
Our Integrity
Table 1: Overall Exposure:
Risk Factor
Current
1.5°C
Number of sites at risk of flood
(coastal or fluvial) that could result
in damage to the site, or emergency
relocation.
17
17
Disruptive weather events
Severe weather events are becoming increasingly common as
the impact of climate change is felt across the globe. For the
UK this includes flash floods, storm surges, prolonged periods
of unusually high summer temperatures resulting in localised
fires.
There is anecdotal evidence that adverse weather has
already disrupted the ability of our staff to travel, deliveries
of new materials/products from our supplies and deliveries of
products and services to our clients.
Response/Resilience to Acute Physical Risk:
• TCFD Disclosure (F): An analysis of the resilience of the
company’s business model and strategy, taking into
consideration different climate-related scenarios
Insurance covers the cost of damage to physical locations
subject to the terms of insurance policies. Increased extreme
weather events is likely to increase the cost of JSG’s corporate
insurance considerably by 2040. Further analysis is ongoing to
understand exactly how the group may be impacted.
We intend to implement processes and procedures to ensure
that flood risk assessment and extreme weather event
analysis is incorporated into all the following processes:
•
Building lease renewals and new site plans
• Mergers and Acquisition activity
•
Annual Facilities Risk Assessments
Chronic Physical – Sea Level rise
We can expect prolonged heatwaves, sea level rise, loss of
species & biodiversity, disruption to global transport and
supply chains. The World Economic Forum state that global
average sea level has risen more than 10cm since 1992.
Human-caused sea level rise is 10 times that of natural sea
level rise. The sea is also rising faster – with the global average
rise speeding up from 2.5mm a year in the early 1990s to 3.9mm
a year over the last decade.
The NASA Sea level tool predicts that by 2040 there will be a
0.14 – 0.18m sea level rise in the UK and Europe based on a 1.5
degree temperature increase. The four temperature increase
scenarios have been assumed to have a 1.5 degree rise by
2035, so a single scenario in terms of sea level rise has been
assessed.
A coastal screening tool was used to compare areas of UK
where JSG sites are located and those below 0.1m above sea
level. This analysis allowed us to determine that none of the
Group’s current UK sites would be impacted directly from the
sea level rises projected for these scenarios, however we are
still to complete the analysis for the recently acquired sites in
the Republic of Ireland.
42
Response/Resilience to Chronic Physical Risk:
• TCFD Disclosure (F): An analysis of the resilience of the
company’s business model and strategy, taking into
consideration different climate-related scenarios
Rising sea level has been a risk factor for the southern and
eastern English coastline for many years and is addressed
by local and national government adaptation plans through
the investment in technology advances in flood defences and
building resilience. Our current site locations are well prepared
for the impact of localised flooding in terms of emergency
response plans.
As stated previously, we intend to ensure that relevant
processes and procedures are in place across relevant
business activities which include sea level rise risk assessment
and extreme weather event analysis is incorporated into
all. Whilst currently we do not foresee that sea level rise will
directly impact our existing locations, we remain cognisant
of the complexity and cost for any planned relocation to
alternative sites that have not yet been assessed. This is
something we will ensure is included within our future planning
processes.
Chronic Physical – Temperature Rise
Prolonged periods of extreme heat will place additional
requirement for energy for cooling our locations and
equipment. JSG’s long-term planning and risk assessment time
scale is 10 years, for this reason only the 1.5°C scenario has
been modelled for Temperature rise.
Financial Impact – Energy Consumption
It is expected that our energy consumption could increase
by circa 10% in the next 10 years because of increased
temperatures alone, mostly for increased cooling
requirements.
Financial Impact – Cooling Equipment Upgrades
A 1.5°C increase in temperature coupled with extended
periods of extreme heat is likely to require cooling equipment
upgrades at a number of existing locations. The financial cost
has not yet been fully assessed however we anticipate this
could be material.
Other Sustainability Related Risk
Management
Environmental Risk Management and ISO14001
ISO 14001 is the international standard that specifies
requirements for an effective environmental management
system. It provides a framework that an organisation can
follow to identify and address environmental issues, control
impacts, ensure legal compliance and monitor performance.
All of our operational sites are required to have procedures in
place that align with the requirements of the standard and a
number of them are formally certificated to ISO 14001.
In a similar vein, all our operational sites are required to align
their quality management systems with ISO9001 to ensure
we are able to consistently provide products and services
that meet our customer and local regulatory requirements. A
number of our sites are formally certificated to the standard.
Our Integrity
Social Risks Identification and Management
We have formalised our approach to supplier sustainability
management through a bespoke Supplier Framework that has
been designed to be satisfy our needs, supplier operations
and geographical locations and potential risks. During the
reporting period we launched this new framework with our
existing supplier base and have actively engaged with 73 high
risk key suppliers.
We continue to undertake formal audits of our supply chain
via the Sedex platform on topics such as modern slavery
and equality and diversity. During the period we completed
sustainability audits on 73% of our most high risk and high
value Tier 1, 2 and 3 suppliers.
Our Customers
We serve a range of organisations from small owner managed
enterprises to large multinational brands across a multitude of
industries; however, our offering is always tailored to the needs
of our customers. Our customer service teams are always on
hand to meet the needs of our customers and, each year, we
undertake customer satisfaction surveys from a sample of our
existing customers as well as potential customers across our
markets.
Everything we do starts with the aim of delivering a
differentiated customer experience to generate value and
create loyalty and we work hard to ensure a real focus on
delivering the right quantity, at the right time and with no
surprises for our customers.
We are committed to developing long term relationships
with our customers and identifying opportunities for greater
collaboration on sustainability innovation and initiatives. To
support these aims, we have developed a new suite of Guiding
Principles for Customer Conduct which sets out our aims
and how we envisage working with our customers moving
forwards. In the reporting period we have actively engaged
with a number of our largest key accounts across the Group to
begin to share learning and best practice on the topic and set
the foundation for long a term sustainability partnership.
Our Suppliers
Our suppliers provide products and services that assist us in
executing our strategy. Consequently, they are a vital part of
our value chain and, because of our size, we are often a vital
part of theirs. We are committed to establishing long-term,
open and fair relationships with our suppliers.
The Board fully supports the standards set out within the
Prompt Payment Code (‘PPC’) in respect of all suppliers.
The main features of the PPC are that payment terms are
agreed at the outset of a transaction and are adhered to;
that there is a clear and consistent policy that bills will be
paid in accordance with the contract; and that there are no
alterations to payment terms without prior agreement. Further
details are set out within the Directors’ Report.
During the reporting period, we fully launched our new
Supplier Framework, including a specific sustainable
purchasing policy, a clear set of expectations and
requirements as set out in the Guiding Principles for Supplier
Conduct and standardised onboarding processes. We are
actively engaging with our key and high risk suppliers around
this topic and expect to expand this to wider categories of
suppliers over the next year.
The Supplier Guiding Principles can be found on our website
here: www.jsg.com/about-us/sustainability/our-integrity
Sustainable Purchasing
JSG is committed to transitioning to an even more sustainable
procurement model and has committed to increasing the
volume and variety of sustainable products we offer to our
customers. As part of this process, during the reporting period
we published our new Group Sustainable Purchasing Policy
that sets out sustainable purchasing objectives in line with our
published Vision 2030 targets. These are:
•
•
•
•
•
•
To comply with all relevant legislation and regulatory
requirements and ensure we always act responsibly and
ethically in our day-to-day business operations.
To promote, encourage and facilitate sustainable
awareness and behaviours amongst our value chain,
including our suppliers, customers and business partners.
To transition towards procurement of more sustainable
products and services, with the aim of having fully
sustainable core products as our preferred offering by
2030.
To continue to measure our sustainability performance
and increase transparency of our metrics.
To include sustainability related criteria when evaluating
offers from potential suppliers and monitor the
sustainability performance and behaviours of existing
suppliers.
To move towards greater weighting of sustainability
considerations for all commercial decisions including
customer partnerships.
This policy can be found on our website here:
www.jsg.com/about-us/sustainability/our-integrity
Better Cotton Initiative (BCI)
Johnson Service Group continues to be a proud member
of Better Cotton and is committed to supporting the
improvement of cotton farming practices globally.
Better Cotton is sourced via a chain of custody model called
mass balance. This means that Better Cotton is not physically
traceable to end products. However Better Cotton Farmers
benefit from the demand for Better Cotton in equivalent
volumes to those we “source”.
During the reporting year the volume of Better Cotton sourced
as a percentage of our overall cotton purchases was 56%. This
is a slight increase from 52% in 2022.
Sustainable Textiles Transition
In addition to investigating opportunities to better manage
our textile waste, we are also committed to working with our
supply partners to develop long term sustainable and circular
solutions for product design and manufacture. In addition to
being a member of Better Cotton, we are also working with
suppliers on products containing other sustainable content
such as recycled content and bio polymer. Our aim is to be
able to provide fully sustainable core products by 2030 in
line with our stated targets. During the coming months we
aim to develop a Sustainable Content roadmap to clearly
demonstrate how we intend to achieve this goal.
43
2023 Annual Report & Accounts 01. Strategic Report
Sustainability
Continued >
Our Communities
Our Communities Achievements and Performance
Summary
Supporting our communities is embedded into The Johnson’s
Way with a strong history of supporting charitable activity
including education, volunteering, fundraising and sponsorship
opportunities. The Group recognises the need to take
meaningful action and we continued to stay true to this
ethos in 2023. We exceeded all expectations by significantly
increasing our total social value figure by 124% from 2022 and,
therefore, more than doubled the positive impact made by the
Group.
Please note social value does not include employee
fundraising.
JSG Social Value 2022-2023
£260,000
£240,000
£220,000
£200,000
£180,000
£160,000
£140,000
£120,000
£100,000
£80,000
£60,000
£40,000
£20,000
£0
Volunteering
Value
In-Kind
Donation Value
Donated
by JSG
Total
2022
2023
Charitable and In-Kind Donations
Some of the notable charitable donations from 2023 included:
•
The total of direct donations to charity across the business
totalled almost £120,000. There were 388 charities
that received donations in 2023 including national
organisations such as Andy’s Man Club and the Fashion
and Textiles Children’s Trust, as well as local good causes
such as the Tree of Hope and Perth Autism Support from
our sites in Clacton, Essex and Perth, Scotland.
• Within this total, we proudly donated almost £68,300
to support 143 charities, community groups and good
causes. These donations were made through our Local
Communities Initiative, where employees nominate and
vote on causes within their communities.
44
•
JSG also provided in-kind donations to the value of
£40,000 to numerous good causes across the UK. For
example, our Southall site donated towels to the local
homeless shelter and also donated 175 chef jackets to
West London College and to Hub International for culinary
education. Our Leeds site regularly donated mixed linen
bundles to support Homeless Hampers with new housing.
These activities prolong the lifecycle of our products, so
that they can provide comfort and practical support for
even longer.
Local Communities Initiative
The Local Communities Initiative is our Group-wide charity
programme to further support the proactive activities of our
employees throughout the year. Each of our sites allocate £500
per quarter to donate to a local good cause. These charities
are nominated by employees and voted on by everyone,
ensuring that the donations will go to an organisation that
is meaningful and impactful to those in the local area. Our
focus predominantly supports four distinct categories:
disadvantaged groups, health & wellbeing, educational
support and animal welfare.
Employee Volunteering and our Neighbourly Partnership
The Group understands that our workforce has skills
available that can have a huge benefit to charities and
good causes. Employee volunteering can also provide the
workforce with opportunities for personal development,
new skills development and team building within teams
and a wider group. In 2022, we launched a new partnership
with Neighbourly, a volunteering platform provider who has
enabled us to connect our employees in the HORECA business
with live volunteering opportunities across the UK. We intend
to roll this partnership out to the whole Group over the coming
year and support this with a formalised Employee Volunteering
Policy for UK employees.
• With the support of Neighbourly, our employee
volunteering hours increased exceptionally from 129 in
2022, to 1,611 in 2023.
•
•
Employees volunteered to support environmental projects,
disadvantaged groups, health & wellbeing, educational
support and animal welfare.
Volunteering activities included maintaining the
Community Link’s therapeutic garden in West Cornwall,
painting and decorating Shaftesbury Youth Club in Dorset
and providing administrative support to the Army Cadet
Force in Essex. These practical and skills-based activities
are an important aspect of providing support to our local
communities.
• We provided support to 70 activities across England,
Wales and Scotland, resulting in almost £20,000 of social
value generated for communities close to our sites.
•
As part of this total, our partnership with Neighbourly
facilitated volunteer efforts from 332 employees in our
HORECA business, creating social value that benefited
15,000 people in communities close to our sites.
r o l s
t
n
o
Revie w C
Id
e
n
t
i
f
y
R
i
s
k
Risk
Management
Process
C
o
n
C
t
r
o
o
n
r
l
t
Ris
ol Risk
k
e ss Risk
s
A s
Principal
Risks and
Uncertainties
“We believe that effective risk
management is critical to the
achievement of our strategic
objectives and the long-term
sustainable growth of our
business. The Board continues
to take a proactive approach to
recognising and mitigating risk
with the aim of protecting its
employees and customers and
safeguarding the interests of the
Group and its stakeholders.”
45
2023 Annual Report & Accounts 01. Strategic Report
Principal Risks and Uncertainties
Continued >
Our approach to Risk Management
The Board has overall accountability for ensuring that risk
is effectively managed across the Group and, on behalf of
the Board, the Audit Committee coordinates and reviews the
effectiveness of the Group’s risk management process.
Risks are reviewed by all of our businesses on an ongoing basis
and are measured against a defined set of likelihood and impact
criteria. This is captured in consistent reporting formats enabling
the Audit Committee to review and consolidate risk information
and summarise the principal risks and uncertainties facing the
Group. Wherever possible, action is taken to mitigate, to an
acceptable level, the potential impact of identified principal risks
and uncertainties.
20+
12 to 16
8 to 10
4 to 6
1 to 3
Risk Rating
Risk Level
Very High Risk
Action
Stop
High Risk
Urgent Action
Medium Risk
Low Risk
Action
Monitor
Very Low Risk
No Action
The Board formally reviews the most significant risks facing
the Group twice a year, or more frequently should new matters
arise. Throughout 2023, and other than as described below, the
overall risk environment remained largely unchanged from that
reported within the Group’s 2022 Annual Report.
T
C
A
P
M
I
Severe
Significant
Moderate
Minor
Insignificant
5
4
3
2
1
5
4
3
2
1
1
10
8
6
4
2
2
15
12
9
6
3
3
20
16
12
8
4
4
Improbable
Remote
Possible
Likely
25
20
15
10
5
5
Almost
Certain
LIKELIHOOD
Risk Appetite
The Board interprets appetite for risk as the level of risk that
the Group is willing to take in order to meet its strategic goals.
The Board communicates its approach to, and appetite for, risk
to the business through the strategy planning process and the
internal risk governance and control frameworks. In determining
its risk appetite, the Board recognises that a prudent and robust
approach to risk assessment and mitigation must be carefully
balanced with a degree of flexibility so that the entrepreneurial
spirit which has greatly contributed to the success of the Group
is not inhibited. Both the Board and the Audit Committee
remain satisfied that the Group’s internal risk control framework
continues to provide the necessary element of flexibility without
compromising the integrity of risk management and internal
control systems.
Emerging Risks
The Board has established processes for identifying emerging
risks, and horizon scanning for risks that may arise over the
medium to long term. Emerging and potential changes to
the Group’s risk profile are identified through the Group’s risk
governance frameworks and processes, and through direct
feedback from management, including changing operating
conditions, market and consumer trends.
Principal Risks and Uncertainties
The principal risks and uncertainties affecting the Group are set
out below, together with details on how the Board takes action to
mitigate each risk. These risks and uncertainties do not comprise
all of the risks that the Group may face and are not necessarily
listed in any order of priority. Additional risks and uncertainties
not presently known to the Board, or deemed to be less material
at the date of this Annual Report, may also have an adverse
effect on the Group. For each principal risk we have set out the
risk rating that has been attributed to each risk. Risk ratings are
shown as ‘net’ i.e. the residual risk rating taking account of the
controls and mitigation in place.
In accordance with the provisions of the Financial Reporting
Council’s 2018 UK Corporate Governance Code (the ‘Code’),
the Board has taken into consideration the principal risks and
uncertainties in the context of determining whether to adopt
the going concern basis of preparation and when assessing the
future prospects of the Group.
46
Increased risk Static risk
Key
Risk
ECONOMIC AND POLITICAL CONDITIONS
Risk Rating: High
Our business could be susceptible to adverse changes
in, inter alia, economic conditions, employment levels
and customer spending habits, all of which could
impact our profitability and cash flow.
The extraordinary and unprecedented events during
2020 and 2021 enhanced this risk as a result of the
various lockdowns and restrictions imposed in
response to the COVID-19 pandemic.
Current macro-economic conditions, particularly high
inflation rates, could negatively impact consumer
spending and hence demand for our services,
particularly in HORECA.
Geopolitical tensions, such as those escalating in the
Middle East and the ongoing Russia-Ukraine conflict,
could have an impact on the price, or availability, of
inputs (e.g. energy) and have heightened threats to
national security.
COST INFLATION
Risk Rating: High
Mitigation
Trend:
Given the diversity of our customer base and the various industries which
we serve, it is generally possible to contain the impact of these adverse
conditions. Each business continually reviews its routes to market,
changes in customer demands and expectations and cost base so that it
can react appropriately to the impact of the wider economy. We quickly
reacted to current pressures in the wider labour market by proactively
increasing wages to attract and retain employees.
Any adverse impact on cash flow could be mitigated in the short term by
controls over capital expenditure and other discretionary spend.
In response to COVID-19, we implemented action plans to protect the
liquidity of the Group and to reduce the cost base.
The Group has long standing relationships with its key suppliers and
aims to develop a strategic partnership approach. These relationships
mitigate, to a certain extent, the risk of a supplier not being able to
supply us. In the event that a supply was rationed, for example energy
blackouts at certain times, we would seek to adjust our shift and work
patterns accordingly.
As further detailed below within ‘Cost Inflation’, and in order to provide
protection from pricing volatility, the Group proactively forward
purchases certain of its energy requirements.
Trend:
Our objective is always to deliver the right level of
service in the most efficient way. An increase in the
cost of labour or supplies, for example, energy, could
constitute a risk to our ability to do this.
We seek to manage the impact of cost inflation by continuing to drive
greater efficiencies through supplier rationalisation, labour scheduling
and productivity improvements, the latter of which is evidenced by our
ongoing investment in state of the art, energy efficient machinery.
Cost indexation in certain of our contracts also gives us the contractual
right to review pricing with our customers.
Along with many other businesses, we are seeing inflationary pressures
on some of our costs, particularly in respect of labour and energy,
however, our existing scale and focus on operational excellence means
we are well placed to address these challenges proactively without
compromising our market share opportunity. Furthermore, we are
protected to a large extent from the current volatility in prices with, at
the time of writing, some 89% of our 2024 anticipated gas requirement
and some 93% of our 2024 anticipated power requirement at fixed prices,
with reducing amounts fixed into 2025 and 2026. We are proactively
monitoring the market with the aim of entering into further fixed
arrangements when appropriate and have also continued to secure and
implement price increases across our customer base.
47
2023 Annual Report & Accounts 01. Strategic Report Principal Risks and Uncertainties
Continued >
Risk
FAILURE OF STRATEGY
Risk Rating: High
Our current business model sets out our intentions
to expand the Group by actively pursuing strategic
acquisition opportunities within the textile services
market. Failure to identify suitable targets, or failure to
successfully integrate them, would adversely impact
our growth plans and potentially lead to lower investor
confidence.
Mitigation
Trend:
There is considerable knowledge and expertise within the Group with
regard to acquisitions. An experienced acquisition team, together with
external advisors where appropriate, is involved in all acquisition activity
and we have a proven track record of successfully integrating businesses
into the wider Group.
Whilst the main challenge, particularly given the current macroeconomic
environment, is in identifying suitable targets and determining an
appropriate level of consideration on acceptable terms, our knowledge
of and relationships with other market participants leaves us well
positioned to take advantage of opportunities. The acquisitions of
Regency and Celtic Linen during 2023 evidence this.
RECRUITMENT, RETENTION AND MOTIVATION OF EMPLOYEES
Risk Rating: High
Trend:
As a service orientated Group, attracting, retaining
and motivating the best people with the right skills, at
all levels of the organisation, is key to the long-term
success of the Group.
The Group has faced resourcing challenges over
recent years in some parts of its businesses due to a
lack of industry experience amongst candidates and
appropriately qualified people as well as the seasonal
nature of some of our business. These challenges
were exaggerated in the wake of COVID-19 and Brexit.
Changes to the UK’s immigration system has also had
an impact on employee availability in certain regions
where we operate.
Short term disruption could occur if a key member of
our team was unavailable at short notice, either on a
temporary or permanent basis. The current economic
conditions may increase the risk of attrition in critical
senior management positions.
LOSS OF A PROCESSING FACILITY
Risk Rating: High
The loss of a key processing facility could result in
significant disruption to our business.
The Group aims to mitigate this risk by time critical targeted resource
management and has established training, development, performance
management and reward programmes to attract, retain, develop and
motivate our people. We quickly reacted to recent pressures in the wider
labour market by proactively increasing wages to attract and retain
employees.
The Group also undertakes employee engagement reviews, led by
an external consultant, and operates a number of well-established
initiatives in response to our people’s needs.
The Group regularly reviews the adequacy and strength of its
management teams to ensure that appropriate experience and training
is given such that there is not an over reliance on any one individual.
Furthermore, the Group has continued to develop succession planning
as part of the development programmes for our people. Succession
Planning is also now a regular agenda item at Board meetings.
Trend:
A wide geographic spread of processing facilities mitigates, to an extent,
the effect of a temporary loss of any single facility as our estate provides
us the ability to relocate the processing of work. Detailed business
continuity plans are in place for the processing to be relocated quickly
and efficiently, as demonstrated in January 2020 following a fire at our
Johnsons Workwear site in Exeter and again in February 2020 following
a flood at our Johnsons Workwear site in Treforest.
Furthermore, insurance cover is in place such that the increased
cost of working following a loss of processing capacity may, in some
circumstances, be recovered.
48
Risk
Mitigation
COMPETITION AND DISRUPTION
Risk Rating: High
We operate in a highly competitive marketplace.
Aggressive pricing from our competitors could cause a
reduction in our revenues and margins.
The levels of concentration and outsource penetration
vary by region and by sector. Some markets are
relatively concentrated with two or three key
players whilst others are highly fragmented and
offer significant opportunities for consolidation and
penetration.
Trend:
We aim to mitigate this risk by continuing to promote our differentiated
propositions and focusing on our points of strength, such as
transparency of our pricing, flexibility in our cost base, quality and value
of service and innovation.
Our diversified customer base and non-reliance on any one particular
customer mitigates this risk to an extent. Furthermore, within Workwear,
we have continued to attract new customers to the rental market with
new-to-rental customers representing 25% of new sales in 2023.
INFORMATION TECHNOLOGY FAILURES AND CYBER SECURITY
Risk Rating: High
Trend:
The digital world creates many risks for a business
including, but not limited to, technology failures, loss
of confidential data, data privacy breaches and
damage to brand reputation through, for example, the
increased threat of cyber-attacks and instantaneous
use of social media.
Disruption caused by the failure of key software
applications, security controls or underlying
infrastructure could delay day to day operations and
management decision making.
The use of sophisticated phishing and malware attacks
on businesses is rising with an increase in the number
of companies suffering operational disruption and loss
of data.
The increase in remote working has led to an increase
in the risk of malware and phishing attacks across all
organisations.
A combination of increased geopolitical tensions,
economic instability and accessibility of sophisticated
artificial intelligence (‘AI’) enabled tools and
techniques have contributed to a significant increase
in the risk of phishing and malware attacks, including
ransomware, across all industries.
PANDEMIC OR OTHER NATIONAL CRISIS
Risk Rating: Medium
Whilst the risks associated with the COVID-19
pandemic have reduced significantly, the Board is
cognisant that a future significant unexpected event,
such as a pandemic or other national crisis, could
cause further business risk and have a material impact
on the Group.
We seek to assess and manage the effectiveness of our security
infrastructure and our ability to effectively defend against current and
future cyber risks by using analysis tools and experienced professionals
to evaluate and mitigate potential impacts. We are currently working
alongside external consultants to review and, where appropriate,
strengthen our security infrastructure. Externally facilitated cyber
awareness training has been provided to senior management and
similar training is being rolled out further across the Group. Furthermore,
we continually increase our employees’ awareness of phishing and
malware attacks through the circulation of regular educational
materials and simulation training.
We also have in place appropriate crisis management procedures
to handle issues in the event of our defences being breached. This is
supported by using industry standard tooling, experienced professionals
and partners and regular compliance monitoring to evaluate and
mitigate potential impacts.
We are focused on the need to maximise the effectiveness and security
of our information systems and technology as a business enabler and to
reduce both cost and exposure as a result. As such, we continue to invest
in technology and specialist resources in order to further strengthen our
platforms, controls and defences.
Trend:
Detailed business continuity plans are in place and, in response to
COVID-19, the Group demonstrated its ability to continue trading
throughout the pandemic through the implementation of action plans to
protect the liquidity of the Group, reduce the cost base and protect the
health, safety and wellbeing of our employees.
The Board will continue to keep the potential for a significant
unexpected event under review as part of its overall assessment of risk.
49
2023 Annual Report & Accounts 01. Strategic Report Principal Risks and Uncertainties
Continued >
Risk
HEALTH AND SAFETY
Risk Rating: Medium
Health and safety in the workplace is an extremely
important consideration for an employer. Legislation
is complex and failure to ensure that our employees
remain safe at work may lead to serious business
interruption and could result in criminal and civil
prosecution, increased costs and potential damage to
our reputation.
COMPLIANCE AND FRAUD
Risk Rating: Medium
Ineffective management of compliance with
increasingly complex laws and regulations, or evidence
of fraud, bribery and corruption, anti-competitive
behaviour or other serious misconduct, could have
an adverse effect on the Group’s reputation and
could result in an adverse impact on the Group’s
performance and/or reputation if significant financial
penalties are levied or a criminal action is brought
against the Company or its Directors.
Operating across more than one jurisdiction elevates
this risk due to non-standard laws and regulations
applying to different territories.
INSUFFICIENT PROCESSING CAPACITY
Risk Rating: Medium
In previous years, the Group has stated that as
demand increases our facilities may not be able to
process the increased volume or may not be able to
process it efficiently.
Production efficiencies reduce if plants are processing
too much work, quality may decline and machinery
break downs are likely to increase in frequency.
We may not be able to tender for further work due to
capacity issues.
50
Mitigation
Trend:
Trend:
The Group has policies, procedures and standards in place, which are
continuously updated, to ensure compliance with legal obligations
and industry standards. Regular health and safety audits and risk
assessments are undertaken across the Group. Regular training is
provided to our people to ensure they are clear on their role and
accountabilities with regards to health, safety and wellbeing practices.
Prompt incident reporting procedures are maintained and all employees
are encouraged to report ‘near misses’ in order that additional safety
procedures are implemented where applicable.
All Board and management meetings throughout the Group feature a
health and safety update as an agenda item.
In September 2022, a new group-wide and dedicated role of Head of
Health and Safety was created to further increase risk mitigation.
Trend:
The Group’s zero tolerance based Code of Ethics (the ‘Code of Ethics’)
governs all aspects of our relationships with our stakeholders and, in
conjunction with our dedicated Whistleblowing Hotline, is aimed at
promoting a strong culture of integrity throughout the Group. All alleged
breaches of the Code of Ethics, including any allegations of fraud, are
investigated and action taken where appropriate.
The Group’s procedures include regular operating reviews, underpinned
by a continual focus on ensuring the effectiveness of internal controls.
The Group undertakes a robust risk management assessment that helps
properly identify major risks and ensures the internal control framework
remains effective through regular monitoring, testing and review.
Emerging regulatory and compliance risks are included in this process to
enable visibility and planning to address them.
Regulation and compliance risk is also considered as part of our annual
business planning process.
Whilst operating across more than one jurisdiction does elevate this
risk, this is mitigated through the knowledge and experience of local
management and, where appropriate, through the use of professional
advisors.
Trend:
Our increasing geographic coverage allows for work transfers to ease
short term processing gaps, however, the identification of suitable
processing facilities in the right location remains a priority.
The Group has adopted a lead strategy by adding capacity in
anticipation of an increase in demand, for example, the construction of
our new HORECA site in Crawley. Targeted investment in state-of-the-art
machinery also helps us to increase capacity.
Risk
Mitigation
CUSTOMER SALES AND RETENTION
Risk Rating: Medium
For our businesses to grow organically, we are
reliant on securing and retaining a diverse range of
customers. A reliance on any one particular customer
or group of customers may present a risk to the future
cash flows of the Group should they not be retained.
Adverse economic conditions may lead to an increased
number of our customers and clients being unable to
pay for existing or additional products and services or,
in more extreme circumstances, an increase in business
failures and insolvencies.
CLIMATE CHANGE & ENERGY COSTS
Risk Rating: Medium
Climate change is increasingly becoming more
significant and we foresee that, over time, it may have
a greater impact on the Group’s operations.
For example, unpredictable weather patterns brought
about by climate change are leading to increasingly
more intense storms and flash flooding.
The industry we operate in is, by its very nature,
energy intensive. Climate change is important to us
as a business and to our stakeholders and we are
committed to energy efficiency improvement and
reducing our greenhouse gas emissions, however, there
remains the potential for us to see increases in both the
cost of energy as well as the potential introduction of
associated levies or taxation.
Failure to appropriately demonstrate that as a
business we are committed and moving towards net
zero carbon emissions could negatively impact our
brand and also impact our ability to operate and/or
remain relevant to our customers and consumers.
Failure to remain up to date or comply with climate
change disclosure requirements could lead to material
financial, reputational or regulatory risks to the Group.
Trend:
We have strategies which strengthen our long-term relationships
with our customers based on quality, value and innovation. Regular
customer feedback surveys are undertaken across the Group and, where
applicable, appropriate action taken.
Our business model is structured so that we are not reliant on one
particular customer or group of customers. Furthermore, within
Workwear, we have continued to attract new customers to the rental
market with new-to-rental customers representing 25% of new sales in
2023.
The Group has limited concentration of credit risk with regard to trade
receivables given the diverse and unrelated nature of the Group’s
customer base.
Trend:
Detailed business continuity plans are in place for the processing of
work to be relocated quickly and efficiently, as demonstrated in January
2020, following a fire at our Johnsons Workwear site in Exeter, and again
in February 2020 following a flood at our Johnsons Workwear site in
Treforest. Furthermore, material damage and business interruption
insurance cover is in place such that damage to property and the
increased cost of working following a loss of processing capacity may, in
some circumstances, be recovered.
The Group seeks to minimise volatility and manage price risk through
hedging and forward buying arrangements for its diesel, electricity and
gas requirements.
Whilst we are unable to eradicate the risk of energy levies and/or taxes
being introduced, we seek to mitigate such risk by continually investing
in our sites and installing the latest technologically efficient machinery,
for example, water and heat recovery systems.
The launch of our refreshed Sustainability Strategy and Vision 2030
targets in 2022 demonstrate the commitments we are making in this
area. These commitments are further supported by sustainability targets
having been incorporated into Executive and senior management
remuneration targets since 2022.
We have formed a Sustainability Committee to oversee our
environmental commitments. The role of the Committee is to lend
support, to monitor progress and provide guidance on our priority areas,
ensuring that our targets are ambitious, realistic, and in the long-term
interests of the Group, our stakeholders and the environment.
The Group already complies with SECR reporting requirements and
has improved and increased its TCFD reporting year on year. In terms
of Scope 3 reporting, we are working alongside third party energy
consultants in order to further understand and develop our approach
and methodology. Further details in respect of SECR, TCFD and Scope 3
emissions are set out within our Sustainability Report.
51
2023 Annual Report & Accounts 01. Strategic Report 54
56
61
62
77
86
89
Directors and Officers
Directors’ Report
Statement of Directors’ Responsibilities
in Respect of the Financial Statements
Corporate Governance Report
Audit Committee Report
Nomination Committee Report
Directors’ Remuneration Report
02
Corporate
Governance
52
2023 Annual Report & Accounts 02. Corporate Governance
53
Jock Lennox
Non-Executive Chair
Jock was appointed as Non-Executive Chair in May 2021. Jock, a Chartered
Accountant with extensive experience across a range of sectors, spent
30 years with Ernst & Young LLP (‘EY’), holding a number of leadership
positions both in the UK and globally, including 20 years as a partner.
Since leaving EY in 2009, he has developed an active board career and
is currently the Senior Independent Director and Audit Committee Chair
of Barratt Developments PLC and was previously Chair of Enquest PLC
and Hill & Smith Holdings PLC. He has also served on the boards of Dixons
Carphone PLC, Oxford Instruments PLC and A&J Mucklow Group PLC.
Directors and
Officers
Peter Egan
Chief Executive Officer
Peter was appointed as Chief Executive Officer on 1 January 2019 having
previously held the role of Chief Operating Officer since 1 April 2018. He
joined the Group in 1998 and has almost 30 years’ experience in the Textile
Services industry. Prior to his appointment to the Board, Peter was the
Managing Director of Johnsons Workwear, the Group’s workwear rental
business, having also previously held a number of senior roles within that
business. Peter is also a Board member of the European Textile Services
Association.
54
54
Yvonne Monaghan
Chief Financial Officer
Chris Girling
Senior Independent Non-Executive Director
Yvonne has significant experience in the Textile Services industry having
joined the Group as Group Management Accountant in 1984 after
qualifying as a Chartered Accountant with Deloitte Haskins and Sells.
She was appointed as Company Secretary and Group Financial Controller
in 1985 and joined the Board as Chief Financial Officer on 31 August 2007.
Yvonne is also the Senior Independent Non-Executive Director and Chair
of the Audit Committee of The Pebble Group PLC and, prior to stepping
down from the Board in September 2020, was also the Senior Independent
Non-Executive Director and Chair of the Audit Committee of NWF Group
PLC.
Chris joined the Board as a Non-Executive Director on 29 August 2018. A
Chartered Accountant by training, he has a background in a variety of
sectors, including support services, distribution, construction and defence.
Since retiring from full time executive roles in 2007, where he spent the
last 16 years as Group Finance Director for two FTSE 250 support services
companies, Chris has pursued a non-executive career. In January 2024,
after a 16 year term, Chris stepped down as Chair of Trustees for the
Slaughter and May Pension Fund. Chris was previously a Non-Executive
Director and Chair of the Audit Committee of South East Water Limited,
before stepping down, after 8 years, in January 2023. Chris also served
as the Senior Independent Non-Executive Director and Chair of the Audit
Committee of Workspace Group PLC, prior to stepping down from the
Workspace Group PLC Board in January 2022.
Nick Gregg
Independent Non-Executive Director
Nicola Keach
Independent Non-Executive Director
Nick joined the Board as a Non-Executive Director on 1 January 2016. Nick
has considerable experience in business to business service industries
having been Managing Director of the Local Government division of
public services business Amey, Managing Director of Biffa Waste Services
Collections Division and Managing Director of ATS Euromaster (Michelin).
Nick’s early career was spent at Mobil Oil Company, leaving as Managing
Director of the UK business, having previously held roles in sales,
marketing and operations as well as key project roles in finance and IT.
Nicola joined the Board as a Non-Executive Director on 1 June 2022.
She has extensive experience across a range of sectors, having worked
within a number of B2B service organisations of scale. Nicola is Chief
Executive Officer of Tivoli Group, one of the largest providers of Grounds
Maintenance in the UK, having joined the company in November 2021 with
a remit to grow the business both organically and through aggressive
acquisition. Prior to joining Tivoli, Nicola spent nearly a decade at utilities
company ENGIE, latterly as Chief Executive Officer for the UK and Ireland.
Nicola’s early career was with Serco, the FTSE 250 provider of public
services, where she quickly progressed to hold a number of leadership
roles, including National Operations Director for Healthcare and Business
Development Director for Healthcare.
Kirsty Homer
Independent Non-Executive Director
(Appointed 1 August 2023)
Christopher Clarkson
Company Secretary
Chris was appointed General Counsel & Company Secretary on
5 September 2022. Chris started his career at the international law firm
DLA Piper UK LLP where he qualified as a Solicitor in 2008. He joined
Brammer plc (now Rubix), the pan-European industrial distributor, in 2011
and was appointed Head of Legal there in 2017.
Kirsty joined the Board as a Non-Executive Director on 1 August 2023.
Kirsty is a highly experienced HR practitioner who is, currently, Group
People Director for Blue Coast Capital and Chief People Officer for River
Island, the British based, multi-channel, fashion brand and retailer. In
February 2024 Kirsty was appointed as a Non-Executive Director of
Prince’s Trust Trading Limited, the commercial and events arm of The
Prince’s Trust. Previously, Kirsty served as Group HR Director for the
Howden Joinery Group Plc group of companies (“Howdens”), the UK’s
leading trade kitchen and joinery supplier and current constituent of the
FTSE 100 index, which employs over 10,000 people and operates over 850
sites across the UK and Europe. Prior to her role at Howdens, Kirsty served
as Global People & Governance Director for the Mothercare Plc group
of companies during its turnaround phase and restructure, helping to
transform the business into a successful global franchisor. Kirsty has also
held senior HR roles at Waitrose and John Lewis before being appointed
Personnel Director there in 2013.
5555
2023 Annual Report & Accounts 02. Corporate Governance
Directors’ Report
The Directors present their Annual Report and the audited Consolidated and Company Financial Statements for the year ended
31 December 2023.
The Corporate Governance Report on pages 62 to 76, and the report on Sustainability on pages 28 to 44 (with regard to information
about the employment of disabled persons, employee involvement and share schemes) are also incorporated into this Report by
reference.
Principal Activities and Business Overview
Johnson Service Group PLC (the ‘Company’) is incorporated and domiciled in the UK, its registered number is 523335 and the address
of its registered office is Johnson House, Abbots Park, Monks Way, Preston Brook, Cheshire, WA7 3GH. The Company is a public limited
company and has its primary listing on the AIM division of the London Stock Exchange.
The principal activities and business overview of the Group are set out within the Strategic Review.
Results and Dividends
The Group’s retained profit after taxation for the year from all operations amounted to £27.3 million (2022: £29.0 million).
The dividend comprises an interim dividend of 0.9 pence (2022: 0.8 pence) per Ordinary share and a proposed final dividend of 1.9 pence
(2022: 1.6 pence) per Ordinary share. This total dividend of 2.8 pence per Ordinary share, subject to the approval of Shareholders, will
amount to a dividend distribution for the year, based on the number of shares in issue as at the date of this report, of £11.7 million (2022:
£10.3 million).
Share Buyback Programmes
As previously disclosed, on 15 September 2022, the Company announced the commencement of a share buyback programme with an
aggregate market value equivalent of up to £27.5 million (excluding expenses) (‘2022 Share Buyback Programme’). Consistent with the
Company’s capital allocation policy, the purpose of the 2022 Share Buyback Programme was to reduce the Company’s share capital.
Pursuant to the 2022 Share Buyback Programme, the Company entered into a non-discretionary instruction with Investec Bank plc to
purchase up to £27.5 million (excluding expenses) of the Company’s Ordinary shares of 10 pence each and to make trading decisions
under the 2022 Share Buyback Programme independently of the Company in accordance with certain pre-set parameters. The 2022
Share Buyback Programme commenced on 15 September 2022 and ended on 4 May 2023, being the date of the Company’s 2023 Annual
General Meeting.
During the year ended 31 December 2023, pursuant to the 2022 Share Buyback Programme, the Company bought back through market
purchases on the London Stock Exchange 17,047,238 Ordinary shares with a nominal value of 10 pence each, representing 3.8 per cent.
of the shares in issue prior to the commencement of the 2022 Share Buyback Programme. The total consideration paid, in connection
with the 2022 Share Buyback Programme, including expenses, was £25.5 million of which £19.9 million was expended during the year. All
of the Ordinary shares bought back pursuant to the 2022 Share Buyback Programme were cancelled.
On 20 September 2023, subsequent to the ending of the 2022 Share Buyback Programme, the Company announced the commencement
of another share buyback programme, with an aggregate market value equivalent of up to £10.0 million (excluding expenses)
(‘2023 Share Buyback Programme’). Consistent with the Company’s capital allocation policy, the purpose of the 2023 Share Buyback
Programme was to reduce the Company’s share capital. Pursuant to the 2023 Share Buyback Programme, the Company entered into
a non-discretionary instruction with Investec Bank plc to purchase up to £10.0 million (excluding expenses) of the Company’s Ordinary
shares of 10 pence each and to make trading decisions under the 2023 Share Buyback Programme independently of the Company in
accordance with certain pre-set parameters. The 2023 Share Buyback Programme commenced on 20 September 2023 and completed
on 27 November 2023.
During the year ended 31 December 2023, pursuant to the 2023 Share Buyback Programme, the Company bought back through market
purchases on the London Stock Exchange 7,572,051 Ordinary shares with a nominal value of 10 pence each, representing 1.8 per cent.
of the shares in issue prior to the commencement of the 2023 Share Buyback Programme. The total consideration paid, in connection
with the 2023 Share Buyback Programme, including expenses, was £10.0 million all of which was expended during the year. All of the
Ordinary shares bought back pursuant to the 2023 Share Buyback Programme were cancelled.
Share Capital
The Companies Act 2006 no longer requires companies to have an authorised share capital.
The total issued share capital at the end of the year and the outstanding share options are given in note 29 to the Consolidated
Financial Statements.
56
2023 Annual Report & Accounts 02. Corporate Governance
Shareholders’ Authority for the Purchase by the Company of its own Shares
At the 2023 Annual General Meeting, Shareholders authorised the Company to make market purchases of up to a maximum aggregate
of 43,286,254 Ordinary shares, which represented approximately 10% of the Company’s issued Ordinary share capital on the latest
practicable date prior to publication of the 2023 Notice of Annual General Meeting. The minimum price allowed for such purchases is 10
pence and the maximum is 105% of the average of the middle market quotation of such shares for the five business days immediately
preceding the day of purchase. Except for amending the maximum number of shares subject to the authority, the Directors intend to
seek renewal of this authority, which is due to expire at the conclusion of the 2024 Annual General Meeting. Further details are given in
the 2024 Notice of Annual General Meeting.
Acquisitions and Discontinued Operations
Details of acquisitions and discontinued operations during the current and preceding year are given in notes 34 and 35 to the
Consolidated Financial Statements.
Events after the Reporting Period
There were no events occurring after the balance sheet date that require disclosing in accordance with Schedule 7 of the Large and
Medium Sized Companies and Groups Regulations.
Directors
Details of the Directors of the Company are shown on pages 54 to 55. With the exception of Kirsty Homer, who was appointed to the
Board as an additional Independent Non-Executive Director on 1 August 2023, they all held office throughout the year and up to the
date of approving this Report.
Directors’ Interests
Share Capital
The interests of the Directors who were in office at 31 December 2023, together with the interests of their close family, in the shares
of the Company at the commencement or, if later, date of appointment, and close of the financial year are disclosed in the Directors’
Remuneration Report. Details of the Company’s interest in its own shares are disclosed in note 32 to the Consolidated Financial
Statements.
Contracts
None of the Directors have any material interests in contracts of the Company or the Group.
Directors’ Indemnity
In accordance with the Articles of Association and to the extent permitted by law, the Directors are granted an indemnity from the
Company in respect of certain liabilities incurred as a result of their office. In respect of those matters for which the Directors may not
be indemnified, the Company maintained a directors’ and officers’ liability third party insurance policy throughout the financial year
and up to the date of approval of these financial statements. Neither the indemnity nor the insurance provides cover in the event that a
Director is proven to have acted dishonestly or fraudulently. No claim was made under this provision during the year.
Articles of Association
Subject to certain limited exceptions, the Company’s Articles of Association may only be amended by Special Resolution at a general
meeting of the Shareholders.
Charitable Donations
Details of charitable donations during the current and preceding financial year are set out within the report on Sustainability.
Political Donations
It is the Company’s policy not to make political donations. The Directors confirm that no donations for political purposes were made
during the year (2022: £nil).
5757
2023 Annual Report & Accounts 02. Corporate Governance Directors’ Report
Continued >
Independent Auditor
The external auditor to the Company, Grant Thornton UK LLP, has indicated its willingness to continue in office. In accordance with
the recommendation of the Audit Committee, as disclosed on page 83, and as required by Section 489 of the Companies Act 2006, a
resolution to reappoint Grant Thornton UK LLP as the external auditor to the Company will be proposed at the Annual General Meeting.
Statement on Engagement with Stakeholders
The success of our strategy is reliant on the support and commitment of all our stakeholders. Their interests are important to us
and we are committed to maintaining strong, positive relationships with them, built on a foundation of mutual respect, trust and
understanding. The table on page 16 and the section 172(1) statement on page 17 provide a high-level overview of how we engage with
our stakeholders.
Policy on Payment to Suppliers
Prompt Payment Code
The Company and its subsidiaries fully support the standards set out within the Prompt Payment Code (‘PPC’) in respect of all suppliers.
The PPC sets standards for payment practices and best practice and is administered by the Chartered Institute of Credit Management.
The main features of the PPC are that payment terms are agreed at the outset of a transaction and are adhered to; that there is a clear
and consistent policy that bills will be paid in accordance with the contract; and that there are no alterations to payment terms without
prior agreement.
Payment Practice Reporting
Regulations made under Section 3 of the Small Business, Enterprise and Employment Act 2015 introduced a requirement on the UK’s
largest companies to report on a half-yearly basis their payment practices, policies and performance. The requirement to report is
based upon a company having annual revenue of £36.0 million or more; the Parent Company has revenue of £nil hence the Group has
reported under its main trading subsidiary, Johnsons Textile Services Limited.
Johnsons Textile Services Limited was required to publish supplier payment information for the six months ended 30 June 2023 and
for the six months ended 31 December 2023. The average time taken to pay invoices in each of those periods was 51 days and 51 days,
respectively. The comparative figures for 2022 were also 51 days and 51 days, respectively. Johnsons Textile Services Limited trades
through a number of brands, each of which have varying payment terms with their suppliers, however, such terms typically range from
60 days from date of invoice through to 60 days from end of the month in which the invoice was raised.
Further information was published through an online service provided by the Government and can be viewed by visiting https://check-
payment-practices.service.gov.uk/company/00464645/reports.
Dispute Resolution Process
We seek to resolve any issues in the first instance between the most relevant representatives of our Company and the supplier. If the
matter cannot be resolved, it may then be escalated to senior members of both the supplier and ourselves. We are very proud to have
built up longstanding relationships with a significant proportion of our suppliers and will always endeavour to work in a collaborative
manner with them in order to resolve any disputes that may arise. Once resolved, we would aim to pay the supplier within the agreed
contractual terms between us or, if the contractual due date has passed, at the next available opportunity.
Streamlined Energy and Carbon Reporting (SECR)
The Group is required to report, in accordance with the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018, its energy use and carbon emissions for the financial year ending 31 December 2023. As allowed
by the legislation, and in order to allow for sufficient time to compile the data and complete the reporting, the annual period used to
calculate energy use and emissions was set as the 12 months ending 30 September 2023.
Relevant disclosures are provided on pages 34 to 39.
Financial Risk Management
The Directors acknowledge that the Group’s activities expose it to a variety of financial risks, including interest rate risk, credit risk
and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks
to minimise potential adverse effects on the Group’s financial performance. Risk management is carried out centrally under policies
approved by the Board. Further details are set out within the Audit Committee Report on pages 83 to 84.
58
2023 Annual Report & Accounts 02. Corporate Governance
Half Yearly Reporting
The Company no longer publishes half yearly reports for individual circulation to Shareholders. Information that would normally be
included in a half yearly report is made available on the Company’s website at www.jsg.com.
2024 Annual General Meeting
The Directors intend that the 2024 Annual General Meeting (the ‘Meeting’ or the ‘AGM’) of Johnson Service Group PLC (the ‘Company’)
will be held at the DoubleTree by Hilton Hotel & Spa Chester, Warrington Road, Hoole, Chester, CH2 3PD on Wednesday 1 May 2024 at
11:00am.
As we did last year, and in order to reduce the Company’s environmental impact, our intention is to once again remove paper from the
voting process as far as possible. As a result, Shareholders will not receive a hard copy form of proxy for the AGM but will instead be
able to register their vote electronically.
An explanation of the resolutions to be proposed at the Meeting, together with details on electronic voting, is included in the Notice of
Annual General Meeting accompanying this Annual Report.
Going Concern
Background and Summary
After careful assessment, the Directors have adopted the going concern basis in preparing these financial statements. The process and
key judgments in coming to this conclusion are set out below. The going concern status of the Company is intrinsically linked to that of
the Group.
The Group’s business activities, together with details of the financial position of the Group, its cash flows, liquidity position and
borrowing facilities, are described in the Operating and Financial Reviews.
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out
in the Strategic Review, Chair’s Statement and Chief Executive’s Operating Review. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described in the Financial Review. In addition, note 27 to the Consolidated Financial
Statements includes the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives,
details of its financial instruments and hedging activities, and its exposure to credit risk and liquidity risk.
Going Concern Assessment
Cash Flows, Covenants and Stress Testing
For the purposes of the going concern assessment, the Directors have prepared monthly cash flow projections for the period to 30 June
2025 (the assessment period). The Directors consider this to be a reasonable period for the going concern assessment as it enables us
to consider the potential impact of macroeconomic and geopolitical factors over an extended period. The cash flow projections show
that the Group has significant headroom against its committed facilities and can meet its financial covenant obligations.
The Group has also performed a reverse stress test against the base monthly cash flow projections referred to above in order to
determine the performance level that would result in a reduction in headroom against its committed facilities to nil or a breach of its
covenants. The interest cover covenant would be breached in the event that adjusted operating profit reduced to approximately 70% of
2023 levels. The Directors do not consider this scenario to be plausible.
As a further stress test, the Group considered the impact of increasing interest rates. The Directors do not consider the magnitude of
the increase in interest rates that would be required in order for a covenant to be breached to be plausible.
The Group has also considered the impact of a more modest increase in interest rates alongside the reduction required in adjusted
operating profit to cause a breach in the interest cover covenant. Again, the Directors do not consider such a scenario to be plausible.
Each of the stress tests assume no mitigating actions are taken. Mitigating actions available to the Group, should they be required,
include reductions in discretionary capital expenditure and ceasing dividend payments.
Liquidity
The Group has access to a committed Revolving Credit Facility of £120.0 million (the ‘Facility’) which matures in August 2026. The terms
of the Facility provide an option to extend the term for a further year and an option to increase the Facility by up to a further £15.0
million, both with bank consent. The Facility is considerably in excess of our anticipated borrowings and provides ample liquidity for
current commitments.
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Directors’ Report
Continued >
Going Concern Statement
After considering the monthly cash flow projections, the stress tests and the facilities available to the Group and Company, the
Directors have a reasonable expectation that the Group and Company have adequate resources for their operational needs, will
remain in compliance with the financial covenants set out in the bank facility agreement and will continue in operation for at least
the period to 30 June 2025. Accordingly, and having reassessed the principal risks and uncertainties, the Directors considered it
appropriate to adopt the going concern basis in preparing the Group and Company financial statements.
Viability Statement
A statement on the future prospects of the Group is included within the Strategic Review.
By order of the Board.
Christopher Clarkson
Company Secretary
4 March 2024
Johnson Service Group PLC
Registered in England and Wales No.523335
60
Statement of Directors’
Responsibilities in Respect of
the Financial Statements
The Directors are responsible for preparing the Strategic Report, Directors’ Report, the Directors’ Remuneration Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have to
prepare the Group and Company financial statements in accordance with UK-adopted international accounting standards. Under
company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the
state of affairs of the Group and Company and of the profit or loss of the Group for that period.
In preparing the financial statements, the Directors are required to:
•
•
•
select suitable accounting policies and then apply them consistently;
make judgments and accounting estimates that are reasonable and prudent; and
state whether applicable UK-adopted international accounting standards have been followed, subject to any material
departures disclosed and explained in the financial statements.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and
enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
The Directors are responsible for preparing the Annual Report in accordance with applicable law and regulations. Having taken advice
from the Audit Committee, the Directors consider that the Annual Report and the financial statements, taken as a whole, provides
the information necessary to assess the Group and Company’s performance, business model and strategy and is fair, balanced and
understandable.
To the best of our knowledge:
•
•
the Group financial statements, prepared in accordance with UK-adopted international accounting standards, give a true
and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the
consolidation, taken as a whole; and
the Strategic Report and Directors’ Report include a fair review of the development and performance of the business and the
position of the Company and the undertakings included in the consolidation, taken as a whole, together with a description of the
principal risks and uncertainties that they face.
The Directors confirm that:
•
•
so far as each Director is aware, there is no relevant audit information of which the Group and Company’s auditor is unaware;
and
the Directors have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any
relevant audit information and to establish that the Group and Company’s auditor is aware of that information.
On behalf of the Board
Peter Egan
Chief Executive Officer
Yvonne Monaghan
Chief Financial Officer
4 March 2024
4 March 2024
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2023 Annual Report & Accounts 02. Corporate Governance
Corporate Governance
Report
“We are committed to high standards of corporate governance which we consider are critical to
business integrity and to maintaining investors’ trust in us. We expect all our directors, employees
and suppliers to act with honesty, integrity and fairness. Our business principles set out the
standards we set ourselves to ensure we operate lawfully, with integrity and with respect for others.”
Legislative Overview
As a company having its shares admitted to trading on the AIM division of the London Stock Exchange, we are required to provide
details of a recognised corporate governance code that the Board has decided to apply, together with an explanation of how
the Company complies with that code and, where it departs from its chosen code, an explanation for the reasons for doing so. All
companies with a Premium Listing of equity shares in the UK are required to comply with the Financial Reporting Council’s 2018 UK
Corporate Governance Code (the ‘Code’). The Board is committed to the highest standards of corporate governance and determined
that it was, therefore, appropriate to apply the Code.
The Code, which can be found on the Financial Reporting Council’s website at www.frc.org.uk, is the product of extensive consultation
and places emphasis on businesses establishing a corporate culture that is aligned with the company purpose and business strategy
and which promotes integrity and values diversity. The Code is divided into five sections, as follows:
1)
2)
3)
4)
5)
Board Leadership and Company Purpose
Division of Responsibilities
Composition, Succession and Evaluation
Audit, Risk and Internal Control
Remuneration
Each of the above sections contain an overriding set of ‘Principles’ supported by more detailed ‘Provisions’.
This Corporate Governance Report describes how the Board has applied the main Principles of good governance and complied with
the relevant Provisions as set out in the Code for the year under review. To the extent necessary, certain information is incorporated into
this Report by reference.
Our Governance Structure
Chair – Jock Lennox
Key objectives:
•
leadership, operation and governance of the
Board
• setting the agenda and direction for the Board
The Board of Johnson Service Group PLC
Membership currently comprises the Chair, two Executive Directors and three independent
Non-Executive Directors (including the Senior Independent Director)
Chair: Jock Lennox
Key objectives:
•
• setting the Group’s strategy
responsible for the overall conduct of the Group’s business
Audit Committee
Nomination Committee
Remuneration Committee
Sustainability Committee
Membership comprises the
Non-Executive Directors
Chair: Chris Girling
Key objectives:
• management of the Group’s system
of internal control, business risks and
related compliance activities
to review the activity and
performance of the internal audit
function and external auditors
to provide effective governance over
the Group’s financial results
•
•
62
Membership comprises the Chair and
Non-Executive Directors
Chair: Jock Lennox
Key objectives:
•
to ensure the Board comprises
individuals with the necessary skills,
knowledge and experience
to give consideration to succession
planning and the leadership needs
of the Group
•
Membership comprises the Chair
and Non-Executive Directors
Chair: Nick Gregg
Key objectives:
•
to assess and make
recommendations to the Board on
the policy of executive remuneration
Membership comprises the Group
Management Board and the Head of
Sustainability
Chair: Peter Egan
Key objectives:
•
to assist the Board in the discharge
of its duties relating to the Group’s
corporate and societal obligations
and its reputations as a responsible
corporate citizen
Chief Executive Officer
Group Management Board
Peter Egan
Key objectives:
•
responsible for the overall
management of the business
•
responsible for the implementation
of strategy and policy
Membership comprises the two Executive Directors, divisional Managing Directors and
Group function heads
Chair: Peter Egan
Key objectives:
•
• monitoring financial and competitive performance
• business development and projects
• succession planning across the business
implementation of the Board’s strategy
Compliance with the Code
The Company has applied the Principles and complied with the Provisions of the Code throughout the year ended 31 December 2023,
other than in relation to the following:
Provision
Explanation
36
Post-employment shareholding requirement
We have not introduced a formal post-employment shareholding requirement for the Executive Directors. We
believe that our current approach provides for a sufficient long-term alignment of interests between executives and
Shareholders through, for example, the LTIP and the existing personal shareholding requirement (which applies during
employment). The Remuneration Committee has in addition, for LTIPs granted in 2019 and thereafter, introduced a two-
year post-vesting holding period. Furthermore, as previously disclosed, during 2019, the Committee also increased the
personal shareholding requirement from 100% to 200% of basic salary. We will keep this under regular review as market
practice in this area develops.
38
Pensions
Pension rates for the CEO and CFO reflect historic entitlements. We have not yet fully aligned Executive Director
pensions with the wider workforce; however, we have established a pathway to alignment towards the rate applicable
to the majority of the wider workforce. Whilst provision for both the CEO and the CFO remains above the workforce
average, we have moved the effective pension contribution rate for the CEO closer towards the rate payable to the
wider workforce, with his maximum entitlement capped at the cash value of his 2019 entitlement such that, over time,
the rate payable will reduce. For 2023 this equated to a contribution rate of 9.1 per cent of the CEO’s salary (2022: 9.4 per
cent). Furthermore, the pension contribution rate for the CFO reduced to 15 per cent of base salary with effect from
1 January 2023; then reduced to 12 per cent of base salary with effect from 1 January 2024; and will then reduce to 9 per
cent of base salary with effect from 1 January 2025. For all new executive appointments to the Board, the employer
pension contribution rate will be aligned with that available to the majority of the UK workforce (currently 6 per cent).
Section 1: Board Leadership & Company Purpose
Principles
A.
B.
C.
D.
E.
A successful company is led by an effective and entrepreneurial board, whose role is to promote the long-term sustainable
success of the company, generating value for shareholders and contributing to wider society.
The board should establish the company’s purpose, values and strategy, and satisfy itself that these and its culture are
aligned. All directors must act with integrity, lead by example and promote the desired culture.
The board should ensure that the necessary resources are in place for the company to meet its objectives and measure
performance against them. The board should also establish a framework of prudent and effective controls, which enable risk
to be assessed and managed.
In order for the company to meet its responsibilities to shareholders and stakeholders, the board should ensure effective
engagement with, and encourage participation from, these parties.
The board should ensure that workforce policies and practices are consistent with the company’s values and support its long-
term sustainable success. The workforce should be able to raise any matters of concern.
Overview of the Board
The Board comprises the Non-Executive Chair, two Executive Directors and, with effect from 1 August 2023 (following the appointment
of Kirsty Homer to the Board as an additional Independent Non-Executive Director) four Independent Non-Executive Directors
and has overall responsibility for the performance and long-term sustainable success of the Group. Operating in an effective and
entrepreneurial spirit, the Board is responsible for health and safety, leadership, agreeing the strategic direction of the Group,
sustainability, promoting high standards of internal control, risk management and corporate governance, setting the budget,
overseeing performance and discharging certain legal responsibilities. The Board also plays a key role in developing and monitoring
our culture, our values, our brand and our reputation.
The Board has spent time in the business both collectively and as individuals, exploring specific business areas through presentations,
meetings and dialogue with colleagues and our stakeholders. Throughout the year, the Board, supported by its Committees, has
covered a broad range of topics to ensure that we continually review and challenge matters of importance to our stakeholders.
Further details on the Group’s mission, vision, values, targets and culture, together with information on our strategy and business
model, are set out within the Strategic Report on pages 4 to 51.
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2023 Annual Report & Accounts 02. Corporate Governance Corporate Governance
Report
Continued >
Specific Responsibilities of the Board
The Board, in addition to routine consideration of both financial and operational matters, determines the strategic direction of the
Group. The Board has a formal schedule of matters specifically reserved for its decision which can only be amended by the Board itself.
The specific responsibilities reserved for the Board include:
•
•
•
•
•
•
•
•
•
•
•
development and approval of the Group’s long-term objectives, overall strategy, mission, vision, values and targets;
health and safety matters;
sustainability matters;
approval of the annual budget;
monitoring of operational and financial performance against plans and budgets;
approval of major acquisitions, disposals and capital expenditure;
approval of any changes to the capital structure of the Group;
design and approval of dividend policy;
approval of appointments to the Board and of the Company Secretary;
consideration of succession planning for key members of the management team; and
determining the terms of reference for the Board committees.
Roles in the Boardroom
Non-Executive Chair
Jock Lennox
Senior Independent Non-Executive Director
Chris Girling
Leads the Board and ensures its overall effectiveness in
discharging its duties
Provides a sounding board for the Chair and serves as an
intermediary for other directors and shareholders
shapes the culture in the boardroom and promotes
openness, challenge and debate
•
provides the Chair with support in the delivery of objectives,
where necessary
sets the agenda for Board meetings, focusing on
strategy, performance, value creation, risk management,
culture, stakeholders and accountability
• works closely with the Nomination Committee, leads the
process for the evaluation of the Chair and ensures orderly
succession of the Chair’s role
chairs meetings ensuring there is timely information flow
before meetings and adequate time for discussion and
debate
•
acts as an alternative contact for shareholders, providing a
means of raising concerns other than with the Chair or senior
management
fosters relationships based on trust, mutual respect and
open communication inside and outside the boardroom
leads relations with major shareholders in order to
understand their views on governance and performance
against strategy
•
•
•
•
•
64
Independent Non-Executive Directors
Executive Directors
Chris Girling
Nick Gregg
Nicola Keach
Kirsty Homer (Appointed 1 August 2023)
Ensure that no individual or small group of individuals can
dominate the Board’s decision making
•
•
independent non-executive directors meeting the
independence criteria set out in the Code (excluding the
chair), currently comprise 57% of Board membership
provide constructive challenge, give strategic guidance,
offer specialist advice and hold executive management
to account
Designated Non-Executive Director for Workforce
Engagement
Nick Gregg
Peter Egan (CEO)
Yvonne Monaghan (CFO)
Lead the implementation of the Group’s strategy set by the Board
•
•
•
the Group CEO is responsible for delivering the strategy and
the overall management of the Group
the Group CEO leads the Group Management Board and
ensures its effectiveness in managing the overall operations
and resources of the Group
the executive directors provide information and presentations
to the Board and participate in Board discussions regarding
Group management, financial and operational matters
Company Secretary
Christopher Clarkson
Provides an effective engagement mechanism for the Board
to understand the views of the workforce
Supports the Chair and ensures directors have access to the
information they need to perform their roles
•
•
brings the views and experiences of the workforce into
the boardroom
enables the Board to consider the views of the workforce
in its discussions and decision making
•
•
provides a channel for Board and committee communications
and provides a link between the Board and management
advises the Board on corporate governance matters and
supports the Board in applying the Code and complying with
other statutory and regulatory requirements
Key Board Activities in the Year
Key activities of the Board during 2023 included, inter alia:
•
•
•
•
•
•
•
•
•
•
ongoing monitoring of the Group’s Health and Safety performance;
regular review, and formal approval in March and August, of the Group’s risk assessment processes and principal risks and
uncertainties;
the review and approval of the half year and full year financial statements;
the review and approval of major capital and investment projects;
succession planning, including consideration and approval of the appointment of Kirsty Homer to the Board in August;
consideration and approval of the acquisition of Regency and Celtic Linen;
consideration and approval of the launch of a £10.0 million (excluding expenses) share buyback programme in September;
consideration and recommendation of a final dividend, for the financial year ended 31 December 2022, of 1.6 pence per Ordinary
Share paid in May;
consideration and approval of an interim dividend of 0.9 pence per Ordinary share paid in November; and
consideration and approval of 2024 – 2026 Budget.
Insight into the Boardroom
The following is a summary of some of the significant matters considered by the Board at certain of its meetings throughout the year:
January/February
March
• Minutes/matters arising
•
•
Health & Safety and Environmental matters
CEO’s trading and operational review (incl. Business
updates)
• M&A and strategy update (incl. Regency acquisition)
•
•
•
•
Financial performance
Share Buyback update
Employee engagement
Review and approval of updated Vision, Mission, Purpose &
Values
Board Evaluation Review
Corporate Governance Code Compliance Review
Investor analysis
Approval of Modern Slavery Statement
Approval of Whistleblowing Policy
•
•
•
•
•
• Minutes/matters arising
•
•
Health & Safety and Environmental matters
CEO’s trading and operational review (incl. Business
updates)
• M&A update
•
Sustainability matters (incl. FY22 performance and FY23
targets; FY22 Annual Report disclosures; and Supplier Audit
Process)
Employee engagement
Financial performance (incl. FY22 results)
Going concern and viability assessment
Share Buyback update
Lilliput Audit Exemption
Investor analysis
Biannual major risk assessment
Draft final results announcement
Draft Annual Report and Accounts
Draft Investor Presentation
Draft AGM Notice
NED Recruitment update
•
•
•
•
•
•
•
•
•
•
•
•
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2023 Annual Report & Accounts 02. Corporate Governance Corporate Governance
Report
Continued >
May
June
• Minutes/matters arising
•
•
Health & Safety and Environmental matters
CEO’s trading and operational review (incl. Business
updates)
• M&A update
•
•
•
•
•
•
•
•
Employee engagement
Financial performance
Bank facility update
Investor feedback and analysis re: FY22 results
Provisional AGM Voting
Institutional Feedback
SAYE Scheme – Consideration of 2023 Grant
NED Recruitment update
• Minutes/matters arising
•
•
Health & Safety and Environmental matters
CEO’s trading and operational review (incl. Business
Updates)
Strategy meeting
•
• M&A strategy
•
•
•
•
•
•
•
Capital investment strategy and update
Sustainability strategy and update
Succession Planning, Recruitment & Retention strategy
Employee engagement
Financial performance
Bank Facility term extension
Investor analysis and Investor feedback re: AGM voting
August/September
October
• Minutes/matters arising
•
•
Health & Safety and Environmental matters
CEO’s trading and operational review (incl. Business
updates)
• M&A and strategy update (incl. Celtic Linen acquisition)
•
•
•
Sustainability update and Sustainability Report
Employee Engagement
Financial performance (incl. FY23 interim results and interim
dividend)
Dividend policy
Defined benefit pension scheme update
Bank Facility increase
Capital allocation/Share buyback launch
Investor analysis
Biannual major risk assessment
Draft interim results announcement
Going concern assessment
Corporate governance reforms update
•
•
•
•
•
•
•
•
•
November
• Minutes/matters arising
•
•
•
•
Financial performance
Health & Safety update and strategy review
IT & Cyber Security update
CEO’s trading and operational review (incl. Business
updates)
Celtic Linen overview and integration plan
•
• M&A update
•
•
•
•
•
•
Share buyback update
Bank Facility increase/Celtic Linen accessions
Defined benefit pension scheme update
Corporate governance reforms update
Investor analysis
Board evaluation review process
• Minutes/matters arising
•
•
Health & Safety and Environmental matters
Sustainability Committee update (incl. strategy; reporting
disclosures; and policy)
CEO’s trading and operational review (incl. Business
updates)
•
• M&A and strategy update
Employee engagement
•
Financial performance
•
Consideration and approval of 2024-2026 Budget
•
Share Buyback update
•
Investor analysis
•
Approval of updates to Whistleblowing Policy; Anti-Bribery
•
and Corruption Policy; and Anti-Facilitation of Tax Evasion
Policy
Approval of Tax Strategy
SAYE Scheme
Review and approval of Committee Terms of Reference
Review of NED fees
Corporate governance reforms update
•
•
•
•
•
66
Consideration of Stakeholder Interests
The examples below give an insight into how the Board had regard for the interests of its stakeholders in certain of its principal
decision-making processes during the year:
Principal Decision:
Stakeholders:
Sustainability and Climate Change
Employees, Customers, Suppliers, Communities, Shareholders
The Board recognises the seriousness of the implications of climate change and sustainability matters for the Group, its stakeholders
and the planet, and has taken the decision to make this a central part of the Board’s deliberations and oversight. During the year, the
Board approved for publication the Group’s second Sustainability report. The Board firmly believes that embedding a best-in-class
sustainability programme throughout our operations will help position us as a leader in responding to the challenges faced by the
textile services industry and prove to be a differentiator for our customers.
Principal Decision:
Stakeholders:
Acquisition of Regency Laundry
Employees, Customers, Suppliers, Communities, Shareholders
On 13 February 2023, the Company acquired the entire issued share capital of Regency Laundry Limited (‘Regency’) for a cash
consideration of £5.75 million on a debt free, cash free basis and subject an adjustment for normalised working capital. As previously
disclosed, the acquisition of Regency provides the Group with a significantly increased presence in the luxury/bespoke segment of the
HORECA sector. In making its decision to approve the acquisition of Regency, the Board considered a number of factors including the
strategic rationale for the acquisition; the potential for operational synergies with the Group’s existing HORECA business operations;
the scope for further growth opportunities in the luxury/bespoke customer segment serviced by Regency; and post-acquisition
development opportunities for Regency’s people as part of an enlarged group. After careful consideration, the Board resolved that it
was for the benefit of the Company and its stakeholders and was most likely to promote the success of the Company for the benefit of
its members as a whole, to proceed with the acquisition of Regency.
Principal Decision:
Stakeholders:
Acquisition of Celtic Linen
Employees, Customers, Suppliers, Communities, Shareholders
On 31 August 2023, the Company acquired the entire issued share capital of Harkglade Limited, together with its subsidiaries Celtic
Linen Limited and Millbrook Linen Limited (Harkglade Limited, Celtic Linen Limited and Millbrook Linen Limited together, ‘Celtic
Linen’) for a total consideration of €31.5 million, on a debt free cash free basis, subject to a locked box mechanism and a normalised
level of working capital. Celtic Linen, which employs approximately 350 people, services the Republic of Ireland’s Healthcare and
Hotel, Restaurant and Catering (‘HORECA’) sectors; it is the largest linen supplier to the Republic of Ireland’s Healthcare sector and
is the second largest linen supplier to the HORECA sector. In making its decision to approve the acquisition of Celtic Linen, the Board
considered a number of factors including the strategic rationale for the acquisition; the potential for operational synergies with
the Group’s Northern Irish business, Lilliput; and post-acquisition development opportunities for Celtic Linen’s people as part of an
enlarged group. After careful consideration, the Board resolved that it was for the benefit of the Company and its stakeholders and
was most likely to promote the success of the Company for the benefit of its members as a whole, to proceed with the acquisition of
Celtic Linen.
Principal Decision:
Stakeholders:
Interim Dividend
Shareholders
In September 2023, and in line with the Company’s progressive dividend policy, the Board approved an interim dividend of 0.9 pence
per Ordinary share which was paid on 3 November 2023. In reaching this decision, the Board carefully considered a number of factors
including the available profit, the importance of a dividend to the Company’s shareholders and the Board’s intention to reduce
dividend cover from the Company’s historical level of cover of 3 times cover to 2.5 times cover by financial year 2024.
Principal Decision:
Stakeholders:
Share Buyback
Shareholders
The Group’s objective is to employ a disciplined approach to investment, returns and capital efficiency to deliver sustainable
compounding growth whilst also maintaining a strong balance sheet. Against this backdrop, in September 2023, the Company
announced the launch of a share buyback programme of the Company’s Ordinary shares for up to a maximum aggregate
consideration of £10.0 million (excluding expenses). In reaching its decision, the Board considered ongoing capital expenditure at
current levels to fund organic growth, payment of dividends and acquisitions within the M&A pipeline. After taking account of these
factors, the Group had significant headroom under its committed facilities and target leverage. Accordingly, the Board concluded
that the share buyback programme is prudent, reflects the cash generative ability of the Group, maintains a strong balance sheet
consistent with its capital allocation policy and would therefore promote the success of the Company for the benefit of its members as
a whole.
Principal Decision:
Stakeholders:
Increase of Bank Facility
Employees, Customers, Suppliers, Communities, Shareholders
As previously disclosed, an £85.0 million bank facility was entered into for an initial three-year term on 8 August 2022. The terms of
the facility provide an option to extend the term for up to a further two years and an option to increase the facility by up to a further
£50.0 million, both with bank consent. Following a request from the Company, the term of the bank facility was extended, in August
2023, by one year, to August 2026, and, in addition, the bank facility was upsized, with effect from 18 October 2023, by £35.0 million to
£120.0 million. In making its decision to seek bank consent for these facility increases, the Board considered the requirement for stable
sources of finance in order for the Company to effectively operate all facets of its operations, including the pursuit of the Company’s
sustainability agenda and the pursuit of acquisition opportunities.
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2023 Annual Report & Accounts 02. Corporate Governance
Corporate Governance
Report
Continued >
Board Committees
The Committees of the Board which met during 2023 are:
•
•
•
the Audit Committee;
the Nomination Committee; and
the Remuneration Committee.
Each Committee has written terms of reference, which are available on the Group’s website. Separate reports for each of these
Committees are included in this Annual Report.
Linked to the launch of our refreshed sustainability strategy an additional Committee of the Board, the Sustainability Committee,
was established in 2022. The Sustainability Committee’s membership is comprised of the Group’s Management Board (which includes
the Company’s Executive Directors) plus the Group’s Head of Sustainability and is chaired by the Chief Executive Officer. Whilst not
members of the Sustainability Committee, the Non-Executive Chair of the Company and the Independent Non-Executive Directors of
the Company are also entitled to attend meetings of the Sustainability Committee. The Sustainability Committee’s purpose is to assist
the Board in the discharge of its duties relating to the Group’s corporate and societal obligations and its reputation as a responsible
corporate citizen. Specific responsibilities delegated to the Sustainability Committee include, inter alia:
1)
2)
3)
4)
5)
6)
Review and recommend changes, as appropriate, to the Group’s sustainability strategy.
Assess the impact of the Group’s activities on its communities, people and the environment.
Determine appropriate targets that will further improve the sustainability of the Group.
Ensure the sustainability policy is fully understood and implemented by the Group’s business operations.
Ensure the Group’s programme on achieving sustainability targets is regularly reported to the Board.
Review statements and reports to be published by the Group on sustainability.
Further details relating to the work of the Sustainability Committee during 2023 can be found on pages 28 to 44.
Group Management Board
The Group Management Board is chaired by the Chief Executive Officer. Topics covered by the Group Management Board include:
•
•
•
•
•
•
•
•
•
•
health and safety;
sustainability;
an update by the Chief Executive Officer on the business and business environment;
divisional Managing Director updates;
Group function heads’ updates;
substantial business developments and projects;
employee welfare and engagement matters;
talent and succession planning;
competitor analysis; and
strategy.
Annually, the Group Management Board conducts a strategic review to identify key issues, plans and objectives to be presented to the
Board. The agreed strategy is then used as a basis for developing the upcoming financial budget and operating plans.
Investor Relations
We are committed to communicating our strategy and activities clearly to our Shareholders in order to ensure that they receive
a balanced and complete view of our performance. The Board considers that the Preliminary Announcement, the Annual Report,
including the Chief Executive’s Operating Review and the Financial Review which are contained therein, the Interim Report and trading
update statements made during the year present a balanced and clear assessment of the Group’s position and prospects.
68
Furthermore, we undertake an extensive investor relations programme in order to maintain an active dialogue with our investors. The
programme includes:
•
•
•
•
•
•
formal presentations of full year and half-year results;
briefing meetings with major institutional Shareholders after the half-year results, preliminary statement and at the time of
any other significant market update, to ensure that the investor community receives a balanced and complete view of our
performance and the issues we face;
regular meetings between institutional investors and analysts and the Chief Executive Officer and the Chief Financial Officer to
discuss business performance;
hosting investor and analyst sessions at which senior management from relevant businesses deliver presentations which
provide an overview of each of the individual businesses and operations;
engagement with potential investors through roadshow meetings; and
attendance by senior executives across the business at relevant meetings throughout the year.
Feedback is provided to the Board on any issues raised at these meetings. External brokers’ reports are circulated to the Directors. The
Shareholders’ views of the investor meetings following the interim and final results are obtained by the Group’s broker and circulated to
the Board.
During 2023, Jock Lennox met with a number of major Shareholders in order to more fully understand their views and to provide them
with an opportunity to raise any questions they had outside of the normal Investor Relations process. The feedback received was
consistent with that given to the CEO and CFO. Jock will once again extend this invitation to our major Shareholders during 2024.
Committee chairs are also available to engage with major Shareholders regarding their areas of responsibility.
In addition to the investor relations programme, the Annual General Meeting (‘AGM’), which is normally attended by all Directors,
provides the Board with the opportunity to communicate with private and institutional investors and we encourage their participation
at the meeting. Shareholders attending the AGM have the opportunity to meet and question the Board to discuss appropriate topics
either during the meeting or with the Directors after the formal proceedings have ended. Such dialogue provides the Board with
valuable feedback and helps them to understand the views of shareholders.
We also have a section of our website which is dedicated to shareholders and analysts (www.jsg.com/investor-relations/) which
includes all of our financial results presentations since 2010.
Culture, Workforce Policies, Whistleblowing & Workforce Engagement
Our Culture & Workforce Policies
Our corporate culture defines who we are, what we stand for and how we do business. Our strong reputation has been built on the solid
foundation of an ethical culture, underpinned by a well-defined and effective system of governance. The Board defines the purpose
of the Group, identifies the values that guide it and remains committed to upholding the highest ethical standards, operating on the
principle that the tone at the top sets the standard for the rest of the business.
Our employees are central to our business. We strive to create an inspiring working environment where everyone is engaged and
motivated and we want our employees to use their skills, combined with our support, to deliver a great service to our customers. Our
people strategy is summed up by our ambition to be a brilliant place to work – that means making Johnson Service Group PLC a place
where our people feel engaged and inspired to be at their best.
The employment policies of the Group embody the principles of equal opportunity and are tailored to meet the needs of its different
businesses and the locations in which they operate. The Group has a written code on business ethics (the ‘Code of Ethics’) which sets out
guidelines for all employees to enable the Group to meet the highest standards of conduct in business dealings, including those with
overseas suppliers.
Further details of our culture and employment policies are set out within the report on Sustainability.
Whistleblowing
The Code also provides for companies to create an environment in which the workforce feels it is safe to raise concerns; the
Board wholly agrees that creating such an environment is a core part of an ethical and supportive business culture. Appropriate
whistleblowing and anti-bribery and corruption policies are therefore in place and employees are encouraged to raise concerns about
any wrongdoing or malpractice without fear of victimisation, discrimination, disadvantage or dismissal, updated versions of each of
which were approved by the Board for adoption in November 2023.
Further details are set out within our Audit Committee Report.
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2023 Annual Report & Accounts 02. Corporate Governance Corporate Governance
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Continued >
Workforce Engagement
Nick Gregg is the Non-Executive Director responsible for Workforce Engagement. Whilst the Board is aware of the three methods of
engagement specified in the Code, it is conscious that the methods specified are not the only ways of engaging with the workforce
and that engagement through a range of both formal and informal channels may be more appropriate. Such additional or alternative
channels may include, but not be limited to:
•
•
•
•
•
meeting groups of elected workforce representatives;
meeting future leaders without senior management present;
visiting regional sites;
inviting colleagues from different business functions to board meetings; and
surveys.
A second round of employee engagement surveys has recently been completed across the entire Group. Across the surveys we scored
highly in areas such as employees knowing what is expected of them in their job, employees understanding how their job impacts the
customer and employees feeling that they play a part in the success of the Group. A number of opportunities for further improvements
and initiatives were also identified and these are set out on page 33. A further survey will be undertaken in the final quarter of 2024 and
will also be rolled out to our new colleagues at Celtic Linen and Regency.
Further details, including how the Group engages with the workforce, are set out within the report on Sustainability.
Section 2: Division of Responsibilities
Principles
F.
G.
H.
I.
The chair leads the board and is responsible for its overall effectiveness in directing the company. They should demonstrate
objective judgment throughout their tenure and promote a culture of openness and debate. In addition, the chair facilitates
constructive board relations and the effective contribution of all non-executive directors, and ensures that directors receive
accurate, timely and clear information.
The board should include an appropriate combination of executive and non-executive (and, in particular, independent
non-executive) directors, such that no one individual or small group of individuals dominates the board’s decision-making.
There should be a clear division of responsibilities between the leadership of the board and the executive leadership of the
company’s business.
Non-executive directors should have sufficient time to meet their board responsibilities. They should provide constructive
challenge, strategic guidance, offer specialist advice and hold management to account.
The board, supported by the company secretary, should ensure that it has the policies, processes, information, time and
resources it needs in order to function effectively and efficiently.
Composition of the Board
The Board currently consists of the Non-Executive Chair (the ‘Chair’), four Independent Non-Executive Directors and two Executive
Directors. The four Independent Non-Executive Directors are considered to be independent in character and judgment and are a
strong element within the Board, with their views carrying significant weight in the decision-making process.
Biographies of the Directors of the Company are shown on pages 54 to 55. With the exception of Kirsty Homer, who was appointed to
the Board as an additional Independent Non-Executive Director on 1 August 2023, they all held office throughout the year, and up to the
date of approving this Report.
70
Date first
appointed
to the Board
Date first
elected
to the Board
Tenure since
appointment
(as at
31 December 2023)
Non-Executive Chair
5 January 2021
5 May 2021
3 years
Senior Independent Non-Executive
Director
29 August 2018
8 May 2019
5 years 4 months
Independent Non-Executive Director
1 January 2016
5 May 2016
8 years
Independent Non-Executive Director
1 June 2022
4 May 2023
1 year 7 months
Independent Non-Executive Director
1 August 2023
-
5 months
Chief Executive Officer
1 April 2018
3 May 2018
5 years 9 months
Non-Executive Directors
Jock Lennox
Chris Girling
Nick Gregg
Nicola Keach
Kirsty Homer
Executive Directors
Peter Egan
Yvonne Monaghan
Chief Financial Officer
31 August 2007
17 June 2008
16 years 4 months
Tenure, Balance & Diversity
14%
14%
Board
29% 14+
57+
29% 57+
Executive Directors
Diversity
Balance
Tenure
1-5 years
Board
Board
> 5 years
Female
< 1 year
Chair
Male
43%
57%
57%
57%
Independent Non-Executive Directors
As referenced within Provision 23 of the Code, the Group Management Board, whose membership comprises the Executive Directors,
divisional Managing Directors and certain Group function heads, is comprised of five males and two females, a proportionate ratio of
71% to 29%.
As explained further in the Nomination Committee Report on pages 87 to 88, although the Company’s shares are admitted to trading
on the AIM division of the London Stock Exchange, the Board is cognisant of governance developments regarding Board composition
and diversity, including the FCA’s changes to the Listing Rules (applicable to issuers with equity shares admitted to the premium or
standard segment of the FCA’s Official List (the “Main Market”)) requiring at least 40 per cent of the Board to be women; at least one of
the senior Board positions (Chair, Chief Executive, Chief Financial Officer or Senior Independent Director) to be a woman; and at least
one member of the Board to be from an ethnic minority background, as well as the conclusions and recommendations of the Hampton-
Alexander and Parker Reviews regarding board composition in FTSE 350 companies.
The Board, in line with recruitment activities throughout the Group, is committed to consider diversity, in its broadest sense, as a key
element in senior appointments and recognises the importance of and benefits that diversity of background, gender, ethnicity and
experience can bring to debate and decision making. Against this backdrop, and although not a Main Market company, the Board
welcomes and intends to meet, over time, the Board diversity and composition requirements applicable to Main Market companies.
The Board is pleased to have made strong progress in this regard having welcomed the appointment of Kirsty Homer to the Board, as
an additional Independent Non-Executive Director, in August 2023, increasing the proportion of female representation on the Board
to 43 per cent. In addition, the Board has, since 2007, had a female Chief Financial Officer. However, work on Board composition and
diversity continues and the Board’s composition does not, currently, include at least one member from an ethnic minority background.
Accordingly, the Board will continue to have regard to and will seek to promote diversity of background, gender, ethnicity and
experience in Board composition as and when vacancies arise and new roles are identified over time. Demand for talent amongst
UK listed companies in this regard is high and it is therefore acknowledged that, as an AIM company, achieving Board composition in
alignment with the diversity requirements of the Listing Rules (appliable to Main Market companies) may take time.
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2023 Annual Report & Accounts 02. Corporate Governance29
+
14
+
A
29
+
57
+
A
43
+
A
Corporate Governance
Report
Continued >
Division of Responsibility of Chair and Chief Executive Officer
The Code requires that there is a clear division of responsibility between the Chair and the Chief Executive Officer, each of which
has clearly defined roles. The Chair should be responsible for the effective running of the Board whilst the Chief Executive Officer is
responsible for operating the business and implementing the Board’s strategies and policies.
The role of the Chair is set out in writing and agreed by the Board. The Chair is responsible for:
•
•
•
•
•
the effective leadership, operation and governance of the Board;
ensuring the effectiveness of the Board;
setting the agenda, style and tone of Board discussions;
ensuring the directors receive accurate, timely and clear information; and
maintaining a close working relationship with the Chief Executive Officer.
The role of the Chief Executive Officer is set out in writing and agreed by the Board. The Chief Executive Officer is responsible for:
•
•
•
•
•
management of the Group’s business;
implementation of the Group’s strategy and policies;
maintaining a close working relationship with the Chair;
chairing the Group Management Board meetings; and
chairing the Sustainability Committee.
Board Meetings and Attendance
There were seven scheduled Board meetings during 2023 and, additionally, a further five unscheduled meetings in relation to, inter alia,
the appointment of Kirsty Homer to the Board, M&A activity, capital investment projects and other corporate activity (including the
share buyback programme).
On the rare occasion that a Director is unavoidably unable to attend a meeting, they would generally hold a briefing with the Chair
prior to the meeting so that their comments and input can be taken into account at the meeting. The Chair would provide an update to
them after the meeting.
Individual attendance at the meetings, including Audit Committee, Nomination Committee and Remuneration Committee attendance,
is set out in the table below. Where n/a appears in the table, the individual is not a Committee member but may attend the meeting at
the invitation of the relevant Committee Chair. By way of example, Jock Lennox, Peter Egan and Yvonne Monaghan were each invited to
attend, and did so attend, each meeting of the Audit Committee.
Board
(Scheduled)
Board
(Unscheduled)
Audit
Committee
Nomination
Committee
(Scheduled)
Nomination
Committee
(Unscheduled)
Remuneration
Committee
(Scheduled)
Remuneration
Committee
(Unscheduled)
Maximum Number
of Meetings
Jock Lennox
Chris Girling
Nick Gregg
Nicola Keach
Kirsty Homer1
Peter Egan
Yvonne Monaghan
7
7
7
7
7
3
7
7
5
5
5
4
5
1
5
4
3
n/a
3
3
3
2
n/a
n/a
1
1
1
1
1
0
n/a
n/a
5
5
5
5
5
1
n/a
n/a
3
3
3
3
3
2
n/a
n/a
2
2
2
2
2
0
n/a
n/a
Note 1: Kirsty Homer was appointed to the Board as an Independent Non-Executive Director with effect from 1 August 2023. Following
her appointment, Kirsty attended all of the scheduled and unscheduled Board, Remuneration Committee, Nomination
Committee and Audit Committee meetings, held in the financial year ended 31 December 2023, which she was eligible to attend.
In addition to the meetings set out above, the Chair and the Independent Non-Executive Directors have met during the year without
the Executive Directors being present.
72
External Executive Search Consultants
Appointments to the Board involve a rigorous selection process, led by the Nomination Committee, and external independent
executive search consultants are usually engaged. Further information is set out within the Nomination Committee Report.
Induction, Training and Knowledge
Appropriate training is available to Directors upon appointment and as required on an ongoing basis. Furthermore, on appointment,
Directors participate in a customised induction programme to familiarise them with the Group.
The Directors have access to the advice and services of the Company Secretary and it is acknowledged that individual Directors may
wish to seek independent professional advice in connection with their responsibilities and duties. The Company will meet reasonable
expenses incurred in this regard.
Supply of Information
To assist the Board in performing its responsibilities, information, appropriate in quality and timeliness, is received in an agreed format
for each scheduled Board meeting.
Service Agreements
The service agreements of the Executive Directors and copies of the letters of appointment of the Chair and the Independent Non-
Executive Directors are available for inspection during business hours on any weekday (excluding Saturdays, Sundays and public
holidays) at the registered office of the Company and will be available for inspection for fifteen minutes prior to, and during, the Annual
General Meeting.
External Appointments
The Board supports Executive Directors having a non-executive directorship as part of their continuing development provided they
have sufficient time to balance their commitments to the Group with any external role. Such positions must receive prior Board
approval. In accordance with the Code, full-time executive directors would not ordinarily take on more than one non-executive
directorship in a FTSE 100 company.
The role of an Independent Non-Executive Director requires a time commitment in the order of 20 days per year plus additional time
as necessary to properly discharge their duties. There is no restriction on outside appointments provided that they do not prevent the
Directors from discharging their responsibilities to the Company effectively. Prior to appointment, each prospective Non-Executive
Director must confirm that they will have sufficient time available to be able to discharge their responsibilities to the Company
effectively and that they have no conflicts of interest.
The Board remains confident that individual members continue to devote sufficient time to undertake their responsibilities effectively.
The commitments of each Executive Director are set out on pages 54 to 55.
Section 3: Composition, Succession & Evaluation
Principles
J.
K.
L.
Appointments to the board should be subject to a formal, rigorous and transparent procedure, and an effective succession
plan should be maintained for board and senior management. Both appointments and succession plans should be based
on merit and objective criteria and, within this context, should promote diversity of gender, social and ethnic backgrounds,
cognitive and personal strengths.
The board and its committees should have a combination of skills, experience and knowledge. Consideration should be given
to the length of service of the board as a whole and membership regularly refreshed.
Annual evaluation of the board should consider its composition, diversity and how effectively members work together to
achieve objectives. Individual evaluation should demonstrate whether each director continues to contribute effectively.
Nomination Committee
The role of the Nomination Committee is to, inter alia, monitor the performance, appropriateness and future succession of the
Company’s executive and Board talent in order to ensure that the Board comprises individuals with the right blend of skills, knowledge
and experience to maintain a high degree of effectiveness in discharging its responsibilities. Appointments to the Board are
recommended, as appropriate, by the Nomination Committee. Board appointments are subject to approval by the Board as a whole.
Further details are outlined in the Nomination Committee Report, on pages 86 to 88.
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2023 Annual Report & Accounts 02. Corporate Governance Corporate Governance
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Continued >
Performance Evaluation
Each year, the Independent Non-Executive Directors conduct a performance evaluation of the Chair, after taking into account the views
of the Executive Directors. The Chair also conducts an appraisal of each member of the Board, Board composition and the format and
effectiveness of the Board meetings. In addition, the Remuneration Committee regularly reviews the performance of each Executive
Director.
Following the formal, independent, external evaluation of the Board and its Committees conducted in the final quarter of 2021, the
results of which were subsequently reported in the Company’s annual report for the financial year ended 31 December 2021, and, as
previously disclosed, an anonymous Board evaluation within the Company in the final quarter of 2022, the Board again conducted an
anonymous Board evaluation within the Company during the year which covered, inter alia:
•
•
•
•
performance of the Board (including consideration of how the Board works together as a unit);
processes which underpin the Board’s effectiveness (including consideration of the balance of skills, experience, independence,
diversity and knowledge of the persons on the Board);
performance of the Audit, Nomination and Remuneration Committees; and
individual performance (giving consideration to whether each Director continues to contribute effectively and show
commitment).
The evaluation also sought Director views on key focus topics for the Board during 2024. In addition to regular discussions that the
Chair held with each Director throughout the year, as part of the Board evaluation process, the Chair held individual discussions with
each Director to discuss the aggregated, anonymised, feedback in relation to the Board evaluation exercise. The results of those
discussions were summarised by the Chair and considered by the Board.
Overall, the feedback from Board members was positive, indicating that the Board feels engaged and motivated, with a belief that the
Company can continue to be ambitious and a leader in its markets. Accordingly, to maintain this, the Board believes that it is important
to consider the time and depth given to the strategic and succession agendas as the Company continues on its growth trajectory.
As a result of the above reviews and evaluations, it is considered that the performance of each Director (and, collectively, the Board
and its Committees) continues to be effective, that each Director demonstrates sufficient commitment to their role and that the
contribution of each Director continues to be important to the Company’s long-term sustainable success.
Re-election of Directors
Each year, all Directors will retire and offer themselves for re-election, if they wish to continue serving and are considered by the Board
to be eligible. Accordingly, each current member of the Board will be proposed for re-election (or, for Kirsty Homer, election) at this
year’s Annual General Meeting of the Company.
Biographical details of all the Directors are set out on pages 54 to 55 and are also available for viewing on the Company’s website
(www.jsg.com).
Section 4: Audit, Risk & Internal Control
Principles
M.
N.
O.
The board should establish formal and transparent policies and procedures to ensure the independence and effectiveness of
internal and external audit functions and satisfy itself on the integrity of financial and narrative statements.
The board should present a fair, balanced and understandable assessment of the company’s position and prospects.
The board should establish procedures to manage risk, oversee the internal control framework, and determine the nature and
extent of the principal risks the company is willing to take in order to achieve its long-term strategic objectives.
Audit Committee
The Board has established an Audit Committee, comprising the independent Non-Executive Directors, which is responsible for:
ensuring that formal and transparent policies and procedures are in place to protect the interests of Shareholders in relation to
financial reporting, internal control and risk management;
monitoring the financial reporting process and the integrity of the annual and interim financial statements;
•
•
74
•
•
•
•
•
determining whether the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable, and whether
they provide the information necessary for Shareholders to assess the Group’s position and performance, business model and
strategy;
considering, and ultimately approving for publication, any formal announcements relating to the Company’s financial
performance;
reviewing and challenging, as necessary, the judgments and actions of management in relation to the financial statements;
monitoring, reviewing and concluding upon the system of internal control;
ensuring the maintenance of a control environment and the appropriate management of risk;
•
recommendation of appointment of, and liaison with, the external auditor;
•
•
•
•
•
reviewing and setting the terms of engagement and the remuneration of the external auditor;
annual review and monitoring of the external auditor’s independence and objectivity and the effectiveness of the audit
process;
development and implementation of policy on the engagement of the external auditor to supply non-audit services;
reviewing the Group’s systems and controls for the prevention and detection of fraud or bribery; and
reviewing arrangements under which employees may, in confidence, raise concerns about possible improprieties in matters
of financial reporting or other matters ensuring that arrangements are in place for the proportionate and independent
investigation and appropriate follow-up action.
The Audit Committee reports to the Board on how it has discharged its responsibilities. Further details are outlined in the Audit
Committee Report, on pages 77 to 85.
Robust Risk Assessment
Throughout the year, and as described further within the Audit Committee Report, the Board has carried out a robust assessment
of the principal risks and uncertainties facing the Group, including those that would threaten its business model, future position,
performance, solvency or liquidity. Details of the principal risks and uncertainties facing the Group, together with how the risks and
uncertainties are being managed or mitigated, are set out on pages 45 to 51.
Internal Audit
The Group’s internal audit process is undertaken by the centralised Group Finance team, which has a Group-wide remit and is
independent of the business operations. The team undertakes an on-going programme to provide assurance on the adequacy and
effectiveness of internal control and risk management processes across the Group’s operations. Further details are set out within the
Audit Committee Report.
Internal Control
The Board, with advice from the Audit Committee, is satisfied that an effective system of internal controls and risk management
processes are in place which enable the Company to identify, evaluate and manage key risks. These processes have been in place
since the start of the financial year and up to the date of approval of the financial statements. Further details of risk management
frameworks and how the Audit Committee has reviewed the effectiveness of the system of internal control are described further within
the Audit Committee Report. Following the Financial Reporting Council’s publication of the 2024 UK Corporate Governance Code (“2024
UKCGC”), the Audit Committee and the Board acknowledges and is evaluating the requirements of the 2024 UKCGC regarding, inter
alia, the monitoring and review of the Company’s risk management and internal control framework.
Going Concern
The Board considered the going concern review performed by management, in particular, the appropriateness of key judgments,
assumptions and estimates underlying the financial forecasts that underpin the review, together with a review of the level of forecast
available headroom against the Group’s committed borrowing facilities and compliance with key financial covenants.
Further details of the going concern assessment are provided on pages 59 to 60.
Future Prospects
The Board has assessed the future prospects of the Group in accordance with Provision 31 of the Code. Based on the results of this
analysis, and having considered the nature and extent of the Company’s principal risks and uncertainties, the Board has a reasonable
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2023 Annual Report & Accounts 02. Corporate Governance Corporate Governance
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Continued >
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the 36-month period of its
assessment. Details of the assessment performed by the Board, including an assessment of those risks most likely to impact the Group’s
future prospects, are set out on pages 45 to 51.
Section 5: Remuneration
Principles
P.
Q.
R.
Remuneration policies and practices should be designed to support strategy and promote long-term sustainable success.
Executive remuneration should be aligned to company purpose and values and be clearly linked to the successful delivery of
the company’s long-term strategy.
A formal and transparent procedure for developing policy on executive remuneration and determining director and senior
management remuneration should be established. No director should be involved in deciding their own remuneration
outcome.
Directors should exercise independent judgment and discretion when authorising remuneration outcomes, taking account of
company and individual performance, and wider circumstances.
Remuneration Committee
In line with the authority delegated by the Board, the Committee sets the Company’s Remuneration Policy and is responsible for
determining remuneration terms and conditions of employment for the Chair of the Board, the Executive Directors and those members
of the Group Management Board whom are not Executive Directors.
The Committee:
•
•
•
•
ensures that the Executive Directors are appropriately incentivised to enhance the Group’s performance and rewarded for their
contribution to the success of the business by designing, monitoring and assessing incentive arrangements, including setting
stretching targets and assessing performance and outcomes against them;
reviews the remuneration arrangements for other senior executives within the Group, namely those members of the Group
Management Board who are not Executive Directors;
in undertaking its responsibilities above, reviews and monitors the remuneration and related policies and culture applying to
the wider workforce, taking these into account when considering, developing and setting remuneration policies and packages
for Executive Directors and the Group Management Board; and
maintains an active dialogue with Shareholders, ensuring their views and those of their advisors are sought and considered
when setting executive remuneration.
The Committee regularly reports to the Board on how it has discharged its responsibilities.
Further details of the Remuneration Committee’s responsibilities and the Group’s Remuneration Policy, together with details of how
the policy has been applied in 2023 and how it is expected to be applied in 2024, are outlined in the Directors’ Remuneration Report, on
pages 89 to 113.
Corporate Governance Report Approval
The Corporate Governance Report incorporates the Audit Committee Report, Nomination Committee Report and Directors’
Remuneration Report, as well as the report on Sustainability.
The Corporate Governance Report was approved by the Board on 4 March 2024.
By order of the Board.
Christopher Clarkson
Company Secretary
4 March 2024
76
Audit Committee Report
Letter from Chris Girling, Chair of the Audit Committee
Dear Shareholder.
On behalf of the Board, I am pleased to present the Audit Committee’s Report for the financial year ended 31 December 2023.
The Year in Review
The Audit Committee continued to fulfil its duties throughout the year, maintaining oversight of the integrity of the Company’s financial
reporting, key accounting judgments and related disclosures, and the robustness of the Group’s risk management and internal control
systems. In discharging its duties, the Committee works to a structured agenda closely linked to the events in the Company’s reporting
cycle.
I am pleased to report that the Group’s risk and financial management structures have operated effectively during the year under
review. The continued support, constructive engagement and level of responsiveness of my Committee colleagues and management
have enabled the Committee to fulfil its role in providing effective scrutiny and challenge. In this regard, I would like to thank colleagues
across the Group who assisted the Committee during the year for their support.
As in previous years, the Committee’s primary focus was on the integrity of the Group’s financial reporting activities. In considering the
financial statements for 2023, the Committee concentrated on the accounting judgments and disclosures relating to the challenging
inflationary environment on the Group’s businesses, including liquidity and the impact on financial covenants, cost control and the
carrying value of goodwill. Careful consideration was given to the Group’s viability disclosures and its ability to continue as a going
concern, with particular scrutiny being given to the reports prepared and assumptions used by management to support those
statements. The Committee concluded that the Company had adopted an appropriate approach in all significant areas.
At the request of the Board, the Committee also considered the Group’s Principal Risks and Uncertainties disclosures for the financial
year ended 31 December 2023. The Committee is satisfied that the statements made by executive management on pages 45 to 51 of
this Annual Report are appropriate based on what is currently known to management as at the date of this Report.
In the pages that follow, we have sought to provide shareholders and other stakeholders with details of the work that was undertaken
by the Committee during the year. This has enabled the Committee to provide assurance to the Board on the effectiveness of the
internal controls framework and the integrity of the Group’s 2023 Annual Report and financial statements.
Evaluation of the Competence and Effectiveness of the Committee
Each year, as part of an overall review of the Board and its Committees, the Audit Committee critically reviews its own performance
and considers where improvements can be made. In so doing it considers, amongst other things, those matters discussed by the Audit
Committee, such as:
•
•
•
•
•
•
•
•
•
composition, structure and activities;
how well the Committee oversees the financial reporting process;
its review of the work of the external auditor;
the effectiveness of the process for raising concerns;
its monitoring of the management of risk;
how well it understands and evaluates the effectiveness and conclusions of internal control and the adequacy of the related
disclosures;
whether the Committee’s terms of reference are appropriate for the particular circumstances of the Company and comply with
prevailing legislation and best practice;
whether the number and length of time of Committee meetings are sufficient to meet the role and responsibilities of the
Committee and coincide with key dates within the financial reporting and audit cycle; and
identification of additional training needs for Committee members.
Overall, the performance of the Committee continued to be rated highly and the Committee was considered to have discharged
its duties effectively. By virtue of my former executive and current non-executive roles (full details of which are set out on page 55),
together with the results of the above evaluation, the Board considers that I have recent and relevant financial experience. The Board
further concluded that the Committee, as a whole, has sufficient competence relative to the sector in which the Company operates.
The Year Ahead
The Audit Committee fulfils a key role in assisting the Board in ensuring that the integrity of the Group’s financial statements and the
effectiveness of the Group’s internal financial controls and risk management systems are maintained. The Committee will continue to
focus on ensuring our internal control processes continue to operate effectively and remain appropriate for the changing environment
in which the Group operates. This key role of the Audit Committee will assume further significance in light of the requirements of the
Financial Reporting Council’s 2024 UK Corporate Governance Code with regard to, inter alia, monitoring and review of the Company’s
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2023 Annual Report & Accounts 02. Corporate Governance Audit Committee Report
Letter from Chris Girling, Chair of the Audit Committee
Continued >
risk management and internal control framework. Through the Audit Committee’s composition, resources and the commitment of its
members, I believe that it remains well placed to meet these challenges and to discharge its duties in the year ahead.
I hope that you find this report informative and can continue to take assurance from the work undertaken by the Committee this year.
We seek to respond to shareholders’ expectations in our reporting and, as always, welcome any feedback from shareholders or other
stakeholders.
Chris Girling
Chair, Audit Committee
4 March 2024
78
2023 Annual Report & Accounts 02. Corporate Governance
Audit Committee Report
Responsibilities of the Audit Committee
The Board has established an Audit Committee (the ‘Committee’), comprising the Independent Non-Executive Directors, to which it has
delegated day to day responsibility for, inter alia, the following:
•
•
•
•
•
•
•
•
•
•
•
•
•
ensuring that formal and transparent policies and procedures are in place to protect the interests of Shareholders in relation to
financial reporting, internal control and risk management;
monitoring the financial reporting process and the integrity of the annual and interim financial statements;
determining whether the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable, and whether
they provide the information necessary for Shareholders to assess the Group’s position and performance, business model and
strategy;
considering, and ultimately approving for publication, any formal announcements relating to the Company’s financial
performance;
reviewing and challenging, as necessary, the judgments and actions of management in relation to the financial statements;
monitoring, reviewing and concluding upon the system of internal control, including the work of internal audit;
ensuring the maintenance of a control environment and the appropriate management of risk;
recommending the appointment of, and ongoing liaison with, the external auditor;
reviewing and setting the terms of engagement and the remuneration of the external auditor;
annual review and monitoring of the external auditor’s independence and objectivity and the effectiveness of the audit
process;
development and implementation of policy on the engagement of the external auditor to supply non-audit services;
reviewing the Group’s systems and controls for the prevention and detection of fraud or bribery; and
reviewing arrangements under which employees may, in confidence, raise concerns about possible improprieties in matters
of financial reporting or other matters ensuring that arrangements are in place for the proportionate and independent
investigation and appropriate follow-up action.
The Committee regularly reports to the Board on how it has discharged its responsibilities. The full terms of reference of the Committee
are available on the Company’s website, or on request to the Company Secretary.
Members of the Committee have continued to take an active role including spending time with the operations teams and also
participating in key discussions on areas of financial judgment. These actions have allowed the Committee to have an even greater
input and to develop greater awareness of the day-to-day challenges that the business faces and the potential consequences of such
challenges.
This report sets out how the Committee has discharged its responsibilities.
Composition of the Committee
The Committee meets at least three times per year and also meets in private with the external auditor.
In accordance with Provision 24 of the Code, small companies (i.e. those below the FTSE 350) should establish a Committee of at least
two independent non-executive directors. Membership of the Committee at each of its meetings during the year is shown below and is,
therefore, in accordance with the Code:
February
August
November
Chris Girling (Committee Chair)
Nick Gregg
Nicola Keach
Kirsty Homer1
ü
ü
ü
–
ü
ü
ü
ü
ü
ü
ü
ü
Note 1: Appointed to the Board as an additional Independent Non-Executive Director and Committee member with effect from 1 August 2023.
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Audit Committee Report
Continued >
What the Committee did in 2023
In 2023, the Committee discharged its responsibilities by:
•
•
•
•
•
•
•
•
•
reviewing the Group’s draft financial statements, preliminary announcements and interim results statement prior to Board
approval and reviewing the external auditor’s reports thereon;
reviewing and considering the significant matters in relation to the financial statements, as further detailed below;
reviewing the plan of the external auditor for the audit of the Consolidated and Company Financial Statements, confirmations
of the auditor’s independence and proposed audit fee and approving terms of engagement for the audit;
considering and agreeing the annual internal audit plan together with any findings and recommendations arising thereon;
monitoring and reviewing the effectiveness of the internal audit function;
considering the review of material business risks, including reviewing internal control processes used to identify and monitor
principal risks and uncertainties;
reviewing the Executive and Non-Executive Directors’ expenses;
monitoring the reporting, and follow up of items reported, on the employee whistleblowing hotline established in line with the
Code of Ethics; and
reviewing the Committee’s composition and confirming that there is sufficient expertise and resource for it to fulfil its
responsibilities effectively.
Fair, Balanced and Understandable
At the request of the Board, the Committee has considered whether, in its opinion, the 2023 Annual Report and Accounts are fair,
balanced and understandable, and whether they provide the information necessary for Shareholders to assess the Group’s position
and performance, business model and strategy.
The Committee received a full draft of the report. Feedback was provided by the Committee, highlighting the areas it was felt would
benefit from further clarity. The draft report was then amended to incorporate this feedback ahead of final approval.
When forming its opinion, the Committee reflected on the information it had received and its discussions throughout the year.
Following its review, the Committee was of the opinion that the 2023 Annual Report and Accounts were fair, balanced and
understandable on the basis that:
•
•
•
•
•
the description of the business agrees with our own understanding;
the risks reflect the issues that concern us;
appropriate weight has been given to the ‘good and bad’ news;
the discussion of performance properly reflects the ‘story’ of the year; and
there is a clear and well-articulated link between all areas of disclosure.
Significant Matters Considered in Relation to the Financial Statements
The Committee has assessed whether suitable accounting policies have been adopted and whether management has made
appropriate judgments and estimates. Throughout the year, the Group Finance team has worked to ensure that the business is
transparent and provides the required level of disclosure regarding significant issues considered by the Committee in relation to the
financial statements, as well as how these issues were addressed, while being mindful of matters that may be business-sensitive.
This section outlines the main areas of judgment that have been considered by the Committee to ensure that appropriate rigour has
been applied. Accounting policies can be found in the Statement of Significant Accounting Policies.
Impairment
As part of the year end process, management assessed whether goodwill (in respect of the Group) and investments (in respect of the
Company) had suffered any impairment, in accordance with the accounting policy stated within this Annual Report.
The Committee reviewed and challenged management’s overall impairment testing of goodwill and investments. The Committee
considered the appropriateness of key assumptions and methodologies for both value in use models and fair value measurements.
This included challenging projected cash flows, growth rates and discount rates. The Committee concluded that the methodology and
assumptions used by management were reasonable.
80
Acquisition Accounting
In February 2023, the Group acquired the entire share capital of Regency Laundry Limited (‘Regency’). In August 2023, the Group also
acquired the entire share capital of Harkglade Limited together with it’s subsidiaries Celtic Linen Limited and Millbrook Linen Limited
(‘Celtic Linen’).
External specialists were engaged to assist management in valuing the customer contracts and customer relationships and brands
acquired. The Committee considered the methodology and assumptions used in determining the fair value of the customer contracts
and customer relationships and brands acquired, as this was considered by the Committee to be the area of most judgment. The
Committee was satisfied that the fair value had been calculated based upon relevant historical and prospective information and
financial data specific to the business combination, with an appropriate discount factor applied. The Committee further considered the
accounting policy alignment adjustments and, again, considered them to be reasonable. The Committee also reviewed the proposed
disclosures relating to the acquisitions for inclusion within the Consolidated Financial Statements and were in agreement that the
requirements of IFRS 3, ‘Business Combinations’ had been satisfied.
Post-employment Benefit Obligations
The valuation of all post-employment benefit obligations is based on statistical and actuarial calculations, using various assumptions
including discount rates, inflation, life expectancy of scheme members and cash commutations. The Committee reviewed the actuarial
assumptions underpinning the valuation and were satisfied that all assumptions are within ranges considered generally acceptable
given the size, demographic and duration of the Group schemes.
Accounting for Complex Customer Arrangements
As in previous years, the Group offers rebates to certain customers based on agreed fixed rates relating to the volume of services
provided and goods purchased. The Committee does not consider the Group’s rebates to be highly complex as: they are volume
related; there are generally written agreements in place; and historical estimates of rebates have been seen to be accurate. However,
following FRC guidance this has been highlighted as an area of focus. The Committee has discussed any judgments made in accruing
customer rebates with management and the auditor. The Committee is satisfied that the amounts accrued are appropriate.
Going Concern Assessment
The Committee reviewed in detail the going concern assessment prepared by management, which comprised monthly cash flow
projections for the period to 30 June 2025 (the assessment period), reflecting an initial set of assumptions around financial projections
and trading performance. Detailed explanations had been provided by management with regard to the assumptions used in the cash
flow projections. The Committee carefully studied the assumptions and considered that they were sensible and appropriate to the
circumstances.
The Committee also considered the stress tests that had been performed by management, which reflected subdued trading conditions
and which were designed to stress test liquidity and covenant compliance. Again, the Committee carefully studied the assumptions
used in the stress tests and considered that they were sensible and appropriate to the circumstances.
After considering the monthly cash flow projections, the stress tests and the facilities available to the Group and Company, the
Committee concluded that there was a reasonable expectation that the Group and Company have adequate resources for their
operational needs, will remain in compliance with the financial covenants set out in the bank facility agreement and will continue
in operation for at least the period to 30 June 2025. Accordingly, and having reassessed the principal risks and uncertainties, the
Committee considered, and reported to the Board as such, that it was appropriate to adopt the going concern basis in preparing the
Group and Company financial statements.
Alternative Performance Measures (APMs)
Throughout the Annual Report and financial statements, we refer to a number of APMs. APMs are used by the Group to provide further
clarity and transparency of the Group’s financial performance. The APMs are used internally by management to monitor business
performance, budgeting and forecasting, and for determining Directors’ remuneration and that of other management throughout
the business. The Committee is aware that the APMs are non-IFRS measures and should not be regarded as a complete picture of the
Group’s performance.
APMs used by the Group are as follows:
•
•
•
adjusted operating profit, which refers to continuing operating profit before amortisation of intangible assets (excluding
software amortisation), goodwill impairment and exceptional items;
adjusted profit or loss before taxation, which refers to adjusted operating profit or loss less total finance cost;
adjusted EBITDA, which refers to adjusted operating profit or loss plus the depreciation charge for property, plant and
equipment, textile rental items and right of use assets plus software amortisation;
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2023 Annual Report & Accounts 02. Corporate Governance Audit Committee Report
Continued >
•
•
•
adjusted earnings per share, which refers to earnings per share calculated based on adjusted profit or loss after taxation;
adjusted earnings per share excluding capital allowance super deduction, which refers to earnings per share calculated based
on adjusted profit or loss after taxation but to exclude the effect of the 130% capital allowances super deduction; and
adjusted net debt, which refers to net debt excluding IFRS 16 liabilities.
The Committee considers that the APMs, all of which exclude the effects of non-recurring items or non-operating events, provide
useful information for stakeholders on the underlying trends and performance of the Group. Furthermore, the Committee is content
that where APMs are stated, they are presented with equal prominence to the statutory figures. The Committee also considered the
accounting policy in respect of APMs and noted that it referred to a number of limitations of APMs as well as providing clear signposts
to where APMs are reconciled to statutory performance measures within the Annual Report and financial statements.
Assessment of External Auditor Effectiveness
The Committee annually reviews the performance of the external auditor. In forming its conclusion as to the performance of the
external auditor, the Committee reviews amongst other matters:
•
•
•
•
•
feedback on the effectiveness and performance of the external audit;
the external auditor’s fulfilment of the agreed audit plan for 2023;
reports highlighting the material issues, critical accounting judgments and key sources of estimation uncertainty that arose
during the conduct of the audit;
the external auditor’s objectivity and independence during the process, including its own representation about its internal
independence processes; and
the challenges raised by the external auditor during the audit.
The Committee concluded that the audit process as a whole had been conducted robustly, the external audit team selected to
undertake the audit had done so thoroughly and professionally, and the external auditor had applied sufficient experience and
understanding of the Company’s industry, consulted with experts as necessary, and is of sufficient size to conduct a national audit.
The performance of Grant Thornton UK LLP (‘Grant Thornton’) as external auditor to the Company in respect of the year ending 31
December 2023 was, therefore, considered to be effective. In addition, the Committee was satisfied that management had provided
the external auditor with appropriate access to its operations and personnel, systems, records and supporting information, whilst
acting professionally and with appropriate challenge, enabling the audit to be conducted effectively.
Assessment of External Auditor Independence
The Company has adopted a policy on the independence of the auditor which is consistent with the ethical standard published by the
Financial Reporting Council.
Independence Safeguards
The external auditor is required to adhere to a rotation policy whereby the Senior Statutory Auditor (audit engagement partner) is
rotated after five years. The current Senior Statutory Auditor was appointed in March 2021, following Grant Thornton being appointed
as external auditor of the Company.
Ethical Standards and ISA (UK) 260 require the external auditor to report to the Committee, on a timely basis, all significant facts and
matters that may bear upon their integrity, objectivity and independence. During the year, the external auditor drew a number of
matters to the attention of the Committee in relation to independence and were able to confirm that sufficient safeguards were in
place and that there were no significant facts or matters that impacted their independence as external auditor.
Furthermore, Grant Thornton confirmed that it had complied with the Financial Reporting Council’s Ethical Standard and that as a firm,
and each covered person, that it was independent and able to express an objective opinion on the financial statements of the Group
and Company.
Non-Audit Services
A key issue for the Committee that may impair auditor independence, and the auditor’s objective opinion on the financial statements, is
the engagement of the external auditor for the provision of non-audit services. In response to the Financial Reporting Council’s Revised
Ethical Standard 2019 (the ‘2019 Ethical Standard’), non-audit services should be provided by a professional services firm other than the
Company’s appointed external auditor. The 2019 Ethical Standard provides that fees payable to the external auditor in respect of non-
audit related services should be no more than 70% of the average audit fees over the previous three years. The 2019 Ethical Standard
includes a ‘whitelist’ of permitted non-audit related services.
82
Fees Payable to the Auditor
Fees payable (including expenses) to Grant Thornton in 2023 in respect of audit related services amounted to £712,000 (2022: £522,000).
Fees payable (including expenses) to Grant Thornton in 2023 in respect of non-audit related services amounted to £15,000 (2022:
£15,000). The non-audit related procedures were in relation to the performance of agreed upon procedures in respect of informally
reviewing, but not auditing, the Group’s Consolidated Interim Financial Statements.
Independence Assessment by the Committee
In assessing and concluding upon the independence and objectivity of the external auditor, the Committee takes into account the
assurances and information provided by the external auditor at the planning stage of the audit, including a written disclosure of the
relationships that could have an impact on the external auditor’s independence and objectivity and the safeguards put in place to
address such threats. As part of this process, the Committee receives a statement from the external auditor advising that all covered
partners and staff annually confirm their compliance with Grant Thornton’s ethics and independence policies and procedures
including, in particular, that they have no prohibited shareholdings and their ethics and independence policies are fully consistent with
the requirements of the 2019 Ethical Standard.
In addition, the Committee meets with the external auditor three times during the year without the presence of management and I,
as Audit Committee Chair, have had regular contact with the audit engagement partner. The Committee also has authority to take
independent advice, as it determines necessary, in order to resolve issues on auditor independence. No such advice was required
during the year.
Accordingly, the Committee has concluded that Grant Thornton was independent of the Group.
Reappointment of the External Auditor
The Committee has recommended to the Board to propose to Shareholders the reappointment of Grant Thornton as auditor until
the conclusion of the AGM in 2025. Full details are set out in the Notice of Annual General Meeting on pages 194 to 202. There are no
contractual restrictions over choice of auditor.
Role of ‘Internal Audit’
The Group’s internal audit process is undertaken by the centralised Group Finance team, which has a Group-wide remit and is
independent of the business operations. The team, which includes a number of qualified accountants, undertakes an on-going
programme to provide assurance on the adequacy of internal control and risk management processes across the Group’s operations.
The team is responsible for reviewing and reporting on the effectiveness of internal controls and risk management systems to the
Committee and, ultimately, the Board. The Group Financial Controller attends each Committee meeting to present the findings of
such reviews and to report on performance against the agreed annual audit plan, such plans being agreed during the year by the
Committee. The Committee considers the current internal audit arrangements to be effective and appropriate for the Group and shall
keep this under review.
Internal Control and Risk Management
Whilst day to day responsibility has been delegated to the Committee, the Board is ultimately responsible for the overall system of
internal control for the Group and for reviewing its effectiveness. The Board’s agenda includes a bi-annual consideration, or more
frequently if appropriate, of risk and control and it receives reports thereon from the Audit Committee.
The Committee carries out a review, at least annually, covering all material controls, including financial, operational and compliance
controls, and the risk management systems. The Committee also receives regular reports from the Group Finance Team in respect of
internal audit and, where necessary, recommendations for improvement are considered and agreed. This process has been regularly
reviewed by the Board.
The main features of the internal control framework are detailed below.
1. Financial Reporting
There is a detailed budgeting and forecasting process with the annual budget and forecast both challenged, stress tested and,
ultimately, approved by the Board. Monthly financial results, together with updated forecasts as appropriate, are reported against
the corresponding figures for the budget and the previous year with corrective and/or investigative action initiated by the Board as
appropriate.
2. Treasury Management
The Group’s treasury activities are operated within Board approved guidelines. Facilities are approved by the Board and all
transactions are controlled and monitored. Monthly summaries of treasury management activities are prepared for the Board.
Speculative transactions are not undertaken.
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2023 Annual Report & Accounts 02. Corporate Governance Audit Committee Report
Continued >
3. Risk Management
There is an on-going process for identifying, evaluating and managing the Group’s Principal Risks and Uncertainties that has been in
place throughout the financial year and up to the date of approval of the financial statements. The identification of business risks is
carried out in conjunction with operating management and reviewed by the Committee and the Board. The Board regularly assesses
the financial implications and effectiveness of the control process in place to mitigate or eliminate these risks. The Group has insurance
cover where it is considered appropriate and cost effective.
4. Financial Control
Each business maintains financial controls and procedures appropriate to its own operating environment. The Group has a centralised
finance function, independent to the operating businesses and which can second additional resources from around the Group, which
reviews the systems and procedures within each business and reports regularly to the Committee. A review of control procedures is
undertaken in respect of all new acquisitions and action taken where necessary to bring the controls up to the level required by the
Group. The Group has clearly defined guidelines for the review and approval of capital expenditure projects. These include annual
budgets and designated levels of authority.
The system of internal control is designed to mitigate, rather than eliminate, the risk of failure to achieve business objectives and can
only provide reasonable and not absolute assurance against material misstatement or loss.
The key elements of the Group’s on-going processes for the provision of effective internal control and risk management systems, in
place throughout the year and at the date of this Report, include:
•
•
•
•
•
•
•
•
regular Board meetings to consider matters reserved for Directors’ consideration;
regular management reporting, providing a balanced assessment of key risks and controls;
an annual Board review of corporate strategy, including a review of material business risks and uncertainties;
established organisational structure with clearly defined lines of responsibility and levels of authority;
a centralised Group finance function which is independent to the operating businesses and which implements the annual
internal audit plan and provides independent assurance to management, the Committee and the Board on the effectiveness of
internal controls and risk management;
documented policies and procedures;
regular review by the Board of financial budgets, forecasts and covenants with performance reported to the Board monthly;
and
a detailed investment process for major projects, including capital investment coupled with a post investment appraisal
analysis.
In reviewing the effectiveness of the system of internal control the Committee has:
•
•
•
•
received six-monthly reports, compiled by the Group Financial Controller following discussion with key senior managers, that
set out the key risks facing the Group and indicate whether controls and risk management processes in each business unit have
operated satisfactorily. These reports are reviewed in detail, challenged where appropriate and approved by the Committee
for use in the Annual Report;
regularly reviewed the financial and accounting controls;
reviewed the internal audit reports; and
monitored management’s responsiveness to the findings and recommendations arising from the above.
No significant failings or weaknesses were identified.
In respect of Group financial reporting, the finance department is responsible for preparing the Group financial statements using a
well-established consolidation process and ensuring that accounting policies are in accordance with International Financial Reporting
Standards. There is a detailed budgeting process with an annual budget both challenged, stress-tested and approved by the Board.
Monthly results are reported against the corresponding figures for the budget and the previous year with corrective action initiated by
the Board as appropriate. All financial information published by the Group is subject to approval by the Committee.
The Group’s treasury activities are operated within Board approved guidelines. Facilities are approved by the Board and all
transactions are controlled and monitored. Monthly summaries of treasury management activities are prepared for the Board.
Speculative transactions are not undertaken.
There have been no changes in the Company’s internal control over financial reporting during the year under review that have
materially affected, or are reasonably likely to materially affect, the Company’s control over financial reporting.
84
Bribery Act 2010 (the ‘Act’)
The Group is committed to conducting its business with the highest degree of integrity. This commitment includes a zero-tolerance
approach towards all forms of bribery, corruption, fraud and theft. The Group has in place an appropriate policy and regularly re-
enforces its Code of Ethics. Appropriate Board approved procedures are in place to prevent employees and other associated persons
committing offences under the Act. Engaging in fraud, bribery or corruption is unlawful and any employee, director or officer found
to have breached the code of conduct will be liable to disciplinary action which may result in dismissal or other serious sanctions.
Breaches of the code of conduct by third parties may result in immediate termination for breach of all contracts with the Group. These
procedures are subject to regular monitoring and review.
Modern Slavery Act
We are committed to implementing and enforcing effective systems and controls to ensure slavery and human trafficking is not
taking place anywhere in our supply chains or in any part of our business. To ensure a high level of understanding of the risks of
modern slavery and human trafficking in our supply chains and our business, all Directors have been briefed on the subject and we
have provided training to relevant employees. The Company’s modern slavery compliance statement, pursuant to section 54(1) of the
Modern Slavery Act 2015, for the financial year ended 31 December 2023 was approved by the Board on 18 January 2024. Further details
can be found on page 40.
Whistleblowing
The Group is committed to a culture of openness, honesty and accountability and believes that it is fundamental that any concerns
our employees have can be raised in confidence and without fear of victimisation. To this end, the Group has in place a whistleblowing
policy which encourages employees to report any malpractice, illegalities, wrongdoing or matters of similar concern (together ‘ethical
wrongdoing’) by other employees, former employees, contractors, suppliers or advisors. Examples of ethical wrongdoing include
bribery, corruption, fraud, dishonesty and illegal practices which may endanger employees or other parties.
Any matters raised through the whistleblowing process are reported to the Committee. Where such matters are raised a proportionate
investigation is undertaken either by independent management or an appropriate external party under the direction and guidance of
the Committee.
During the current and preceding financial years, a number of matters were raised via the whistleblowing process. The vast majority
related to employee related grievances and were escalated to the relevant manager or other investigating officer for investigation.
Chris Girling
Chair, Audit Committee
4 March 2024
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2023 Annual Report & Accounts 02. Corporate Governance Nomination Committee Report
Dear Shareholder.
On behalf of the Board, I am pleased to present the Nomination Committee’s Report for the financial year ended 31 December 2023.
Objectives
The key objective of the Nomination Committee (the ‘Committee’) is to monitor the performance, appropriateness and future
succession of the Company’s executive and Board talent in order to ensure that the Board comprises individuals with the right blend of
skills, knowledge, experience and diversity to maintain a high degree of effectiveness in discharging its responsibilities. Appointments
to the Board are recommended, as appropriate, by the Committee. Board appointments are subject to approval by the Board as a
whole.
Composition
The Committee is chaired by myself with remaining membership comprising the four other Independent Non-Executive Directors
including, with effect from 1 August 2023, Kirsty Homer. Membership of the Committee is therefore in compliance with Provision 17 of the
Financial Reporting Council’s UK Corporate Governance Code 2018 (the ‘Code’).
Roles and Responsibilities
The principal responsibilities of the Committee are:
•
•
•
•
•
•
•
reviewing the structure, size and composition of the Board and its committees;
identifying and nominating candidates to fill Board vacancies;
keeping up to date and fully aware of the strategic and commercial changes affecting the Group and the markets in which it
operates;
keeping under review the leadership needs of the business with a view to ensuring the continued ability to compete effectively
in the marketplace;
assessing the roles of the existing Directors in office to ensure that there continues to be a balanced board in terms of skills,
knowledge, experience and diversity;
considering the continuing service of a Director; and
providing recommendations for reappointment of Directors retiring by rotation.
The Committee reports to the Board on how it has discharged its responsibilities. The full terms of reference of the Committee are
available on the Company’s website, or on request to the Company Secretary.
The Committee undertakes its responsibilities proactively, recognising it is important to plan Board succession well in advance, and to
ensure that the Company’s Board and executive leadership skills are fully aligned to the Company’s long-term strategy. The Committee
therefore takes care to ensure that there is a continuous pipeline of high-performing and executive talent beneath Board level.
What the Committee did in 2023
The main focus of the Committee’s work during the year included:
•
•
•
•
•
•
following initiation of a review process in October 2023, reviewing the performance of the Executive Directors and concluding
that their performance continues to be effective and that each demonstrates sufficient commitment to their role;
following an extensive selection process, which involved an external search consultancy, recommending to the Board the
appointment of Kirsty Homer as an additional Independent Non-Executive Director;
reviewing the independence of each Non-Executive Director, including each Non-Executive Director’s actual, potential or
perceived conflicts of interest and concluding that each Non-Executive Director was independent in character and judgment
and that there were no circumstances that were likely to affect their judgment;
considering the structure and composition of the Board and, in particular, succession planning for both Executive and Non-
Executive roles as well as key management roles within the Group;
reviewing the Committee’s terms of reference and conducting the annual review of the Committee’s performance; and
recommending each Director for re-election at the Annual General Meeting.
86
Appointment of Independent Non-Executive Director
Kirsty Homer was appointed to the Board as an Independent Non-Executive Director on 1 August 2023. Kirsty’s appointment was
the result of a rigorous selection process which was initiated in January 2023. The Board employs the services of external search
consultancies as part of the process to identify potential Board candidates. The consultancy firm chosen, MWM Consulting, was
considered to be independent of, and had no other links with, the Company or its Directors in connection with the brief.
The Committee, led by myself, managed the candidate assessment process. The process included the development of a profile which
was discussed and agreed, in conjunction with input from the Executive Directors, by the Committee. Candidates were rigorously
assessed against this profile in order to determine their suitability, in particular, exploring and understanding what their past
experiences and career may offer to the Group. Following this, a short list of potential candidates was selected. Each shortlisted
candidate met with each member of the Board to explore specific predetermined areas with them. Each member of the Board
provided their feedback to the Committee and, after detailed discussions and careful debate, the Committee concluded, having taken
all of the feedback into consideration, that Kirsty had the necessary skills and experience. Accordingly, in July 2023, the Committee was
able to make a recommendation to the Board that she should be appointed to the Board as an Independent Non-Executive Director.
Diversity Policy
Our policy remains to make appointments based on merit and to identify the most suitable candidate to join the Board having regard
to the individual’s skills, experience and knowledge. When considering succession plans the Board remains cognisant of the need to
ensure that there is a diverse range of individuals who are included in the plan. The business as a whole continues to promote diversity
and inclusion from within, particularly in respect of supporting female employees to progress up the career ladder. In furtherance of
the Group’s sustainability agenda, in November 2022, the Board approved for adoption a new Group wide Equity, Diversity & Inclusion
(ED&I) policy for publication internally and externally. This policy is intended as the overarching statement for the whole Group across
this topic and will apply to all employees, contractors and agency staff across the Group. Further details can be found on page 32.
We are proud to have a diverse workforce and, as explained further on pages 32 to 33, we are committed to promoting Equity, Diversity
& Inclusion throughout the business to build a culture that is inclusive to all, actively values difference, ensures everyone is treated fairly
and is free from unlawful discrimination. Accordingly, the aim of our policy is to ensure that diversity in its broadest sense, including
gender, ethnicity, age, sexuality, social class, education, experience, ways of thinking and more, is reflected throughout the business
including within the composition of the Board, to provide the range of perspectives, insights and challenge needed to support good
decision making.
Although the Company’s shares are admitted to trading on the AIM division of the London Stock Exchange, the Board is cognisant of
governance developments regarding Board composition and diversity, including the FCA’s changes to the Listing Rules (applicable to
issuers with equity shares admitted to the premium or standard segments of the FCA’s Official List (the “Main Market”)) requiring at
least 40 per cent of the Board to be women; at least one of the senior Board positions (Chair, Chief Executive, Chief Financial Officer or
Senior Independent Director) to be a woman; and at least one member of the Board to be from an ethnic minority background, as well
as the conclusions and recommendations of the Hampton-Alexander and Parker Reviews regarding board composition in FTSE 350
companies.
Against this backdrop, and although not a Main Market company, the Board welcomes and intends to meet, over time, the Board
diversity and composition requirements applicable to Main Market companies. The Board is pleased to have made strong progress
in this regard having welcomed the appointment of Kirsty Homer to the Board, as an additional Independent Non-Executive Director,
in August 2023, increasing the proportion of female representation on the Board to 43 per cent. In addition, the Board has, since 2007,
had a female Chief Financial Officer. However, work on Board composition and diversity continues and the Board’s composition does
not, currently, include at least one member from an ethnic minority background. Accordingly, the Board will continue to have regard
to and will seek to promote diversity of background, gender, ethnicity and experience in Board composition as and when vacancies
arise and new roles are identified over time. Demand for talent amongst UK listed companies in this regard is high and it is therefore
acknowledged that, as an AIM company, achieving Board composition in alignment with the diversity requirements of the Listing Rules
(applicable to Main Market companies) may take time.
Accordingly, the Board, together with the Nomination Committee, will:
•
•
continue to aim to ensure appropriate balance in all aspects of diversity in its broadest sense, including gender, ethnicity, age,
sexuality, social class, education, experience, ways of thinking and more, at Board and Senior Management level, without the
need for quotas;
seek to ensure that Board candidates bring the right skills, knowledge and experience to complement the existing balance of
the Board, taking into account the diversity benefits the candidate can bring to the Board’s composition;
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2023 Annual Report & Accounts 02. Corporate Governance Nomination Committee Report
Continued >
•
•
•
only work with executive search consultants that have adopted a voluntary code of conduct addressing diversity;
take into account any regulatory requirements and best practice guidance when reviewing the balance and composition of,
and succession plans for, the Board and Senior Management, whilst having regard to the individual skill sets and the general
and sector-specific knowledge needed to drive corporate performance; and
remain fully aware of the need to ensure that the business recruits and maintains a diverse workforce.
Jock Lennox
Chair, Nomination Committee
4 March 2024
88
Directors’ Remuneration Report
Letter from Nick Gregg, Chair of the Remuneration Committee
Dear Shareholder.
On behalf of the Board, I am pleased to present our 2023 Directors’ Remuneration Report.
As a company having its shares admitted to trading on the AIM division of the London Stock Exchange, we are not required to fully
apply the remuneration-related disclosures that Premium Listed companies incorporated in the UK are subject to. Nevertheless, the
Board wishes to ensure that executive remuneration remains both transparent and stable and, therefore, considers it appropriate
for the Company to provide Shareholders with detailed information with respect to executive remuneration. Furthermore, and as we
have done for many years now, Shareholders will be asked to approve the Directors’ Remuneration Report (‘DRR’) at the forthcoming
AGM. We consider that our current approach to remuneration is working well and has the support of the vast majority of Shareholders,
as reflected by the voting results at the 2023 AGM where we received 98.91 per cent of votes in favour of the DRR. This year, following
consultation with major shareholders, we are making some changes to the remuneration policy for 2024 in respect of award limits for
LTIP and bonus, as explained further below. In addition, our philosophy is to pay fairly and in doing this we are cognisant of the growth
trajectory of the business and pay levels available for comparable roles at companies of similar scale and complexity. Accordingly,
whilst the proposed changes to the remuneration policy for 2024 are focused on the incentive scheme elements of Executive Director
reward, we shall, in line with our remuneration philosophy, continue to monitor the levels of fixed remuneration to ensure that this
remains appropriate and fair relative to the performance, scale and complexity of the business.
Remuneration in 2023
For 2023, with the exception of a reduction to the CFO’s pension contribution rate (as previously disclosed) in order to progress this
towards alignment with the rate available to the majority of the wider workforce, the operation of our remuneration schemes was
broadly consistent with the general principles that applied in 2022, however (as also previously disclosed) in 2023 we implemented
the policy differently in respect of the weighting on ESG measures within the annual bonus scheme and the choice of performance
measures for the LTIP:
•
•
•
base salary for each Executive Director was increased by 3.5 per cent with effect from 1 January 2023, such increase being lower
than that of the Group’s wider employee population;
we adopted a similar approach to the bonus scheme as applied in 2022, with an adjusted Profit Before Tax (‘PBT’) measure
applying to the vast majority of the bonus, supplemented with ESG targets linked to the sustainability strategy of the business.
We increased the weighting on ESG (versus 2022), from 10 per cent to 15 per cent, acknowledging the increasing importance
placed by the Board on driving performance in this area. Achievement against the performance targets was assessed after the
end of the financial year and this results in a payment of 95 per cent of the maximum available to the Executive Directors. No
discretion was applied to this outcome. The full targets are disclosed on pages 103 to 104; and
in determining the performance conditions for the LTIP, the Committee took into account the Group’s business plan as well as
the outlook for the sector, general macroeconomic conditions and the range of analysts’ consensus forecasts for the financial
year ending 31 December 2025. As disclosed in the 2022 Annual Report, following careful consideration, for the 2023 grant the
Committee agreed to retain the relative Total Shareholder Return (‘TSR’) measure and targets for 50 per cent of the award. For
the other 50 per cent, the Committee decided to adopt stretching targets linked to adjusted PBT per share growth over the
three-year performance period in place of the adjusted Earnings per Share (‘EPS’) measure used for previous awards:
–
TSR: 50 per cent of the 2023 LTIP Award will vest by reference to the annualised growth in the Company’s TSR relative
to the annualised growth in the FTSE AIM All-Share Industrial Goods and Services net return index (the ‘Index’) over
the performance period. None of this element of the 2023 LTIP Award will vest if the TSR growth is less than the Index
growth, one quarter will vest if the TSR growth is equal to the Index growth and the whole of this element will vest if the
TSR growth is at least seven per cent above the Index growth. Vesting will be on a straight-line basis between these
points. This performance target is the same as for previous awards.
–
PBT per Share: The remaining 50 per cent of the 2023 LTIP Award will vest by reference to the Company’s adjusted PBT
per share growth over the three-year performance period. None of the adjusted PBT per share element of the 2023 LTIP
Award will vest if adjusted PBT per share growth is less than 5 per cent per annum above the level of adjusted PBT per
share for the financial year ended 31 December 2022. One quarter of this element will vest for adjusted PBT per share
growth of 5 per cent per annum, and the whole of this element will vest for adjusted PBT per share growth of 10 per cent
per annum or greater. Vesting will be on a straight-line basis if adjusted PBT per share growth is between 5 per cent and
10 per cent per annum.
As disclosed in last year’s DRR, the key reason for the change from EPS to PBT per share was to mitigate against the expected changes
to tax rates as the benefit of the capital allowances super-deduction unwinds and in recognition of the headline rate of corporation
tax increasing to 25 per cent from April 2023. By focusing on adjusted PBT per share, management is incentivised on a similar per share
measure but one which is not impacted by these changes (over which the Group has limited control). The Committee is satisfied that
the targets chosen for the 2023 LTIP Award are appropriately challenging in the context of expectations of the Company’s performance
over the three-year performance period.
8989
2023 Annual Report & Accounts 02. Corporate Governance
Directors’ Remuneration Report
Continued >
After the end of the financial year, the Committee assessed the extent to which the targets had been met for the LTIP award made
in 2021, with performance measured over the three-year period to 31 December 2023. Taking into account both the Group’s TSR
performance relative to the FTSE AIM All-Share Industrial Goods and Services net return index and adjusted Earnings Per Share
(EPS) performance over the period, the Committee determined that there would be partial vesting of this award. While the adjusted
EPS targets were not met, TSR performance against the index was sufficient to lead to 68.7 per cent vesting for this element of the
award. The Committee was satisfied that this TSR was aligned with the underlying financial performance of the Company over the
performance period. The total vesting level for the 2021 LTIP award was 34.35 per cent. No discretion was applied to this outcome.
Remuneration Policy and Changes for 2024
During the year, the Committee undertook its usual review of the remuneration policy and its implementation, taking account of Group
progress and growth in the current business environment, the leadership demonstrated by the Executive Directors, the provisions of
the UK Corporate Governance Code (the ‘Code’), the Remuneration Regulations which apply to Main Market companies, and general
market developments. The Committee takes seriously its role in ensuring the interests of colleagues, Shareholders and other key
stakeholders are considered fairly and in the context of wider societal expectations.
The year’s review concluded that the overall approach to executive remuneration remains appropriate. However, the Committee
has decided that it is the right time to increase the variable pay opportunities for the Executive Directors. As evidenced by the
results for 2023, the Group has made considerable progress since recovering from the impact of the Covid pandemic, reporting
strong levels of organic growth while proactively managing the challenges posed by rising input costs. The management team has
successfully focused on the strategy of expanding the range and scale of services offered and has taken advantage of selective
growth opportunities, as evidenced by the acquisitions of Regency and, more recently, Celtic Linen in the Republic of Ireland which, as
a step outside of the UK, has expanded the Group’s geographic footprint and the markets it serves as well as introducing additional
complexity to business operations. The balance sheet is strong and the Group has a continued commitment to employing a disciplined
approach to investment, returns and capital efficiency. At the same time, there has been excellent progress with the sustainability
programme, with the Group delivering against the ambitious Vision 2030 goals.
The Group’s resilience during the pandemic and its performance in recent years has been spearheaded by the CEO, Peter Egan, who
has proved himself to be an exceptionally capable leader since his appointment to the role in January 2019. In Peter and Yvonne
Monaghan, the CFO, we have Executive Directors of a very high calibre, supported by a highly capable and experienced senior
management team. Given the performance of the business under this leadership and our expectations of future growth, we believe
that now is the right time to make changes to reward levels. At this stage, we are focusing on the incentive schemes, with management
appropriately incentivised to take full advantage of the exciting growth opportunities available to the business over the coming years.
This emphasis on performance is integral to our overall approach to remuneration.
In addition, our philosophy is to pay fairly, and in doing this we are cognisant of the pay levels available for comparable roles at
companies of similar scale and complexity. A benchmarking exercise undertaken by the Committee’s external advisers last year
indicated that the incentive offering (and, as a result, total remuneration) for the Executive Directors is below market when compared
to other UK-listed companies of similar scale and complexity in the services, hospitality and transportation sectors.
Taking into account these factors, the Committee has decided to make some relatively modest changes now to avoid falling behind as
the Company continues its growth trajectory. Specifically, the Committee has decided to increase the annual bonus limit for 2024 to 150
per cent of base salary for the CEO and to 125 per cent of base salary for the CFO (previously 125 per cent and 110 per cent respectively).
In addition, the LTIP grant in 2024 will be at the level of 150 per cent of salary for the CEO and at 125 per cent of salary for the CFO
(previously 125 per cent and 110 per cent respectively). There will be a corresponding increase in the levels of performance required for a
full bonus payout and maximum LTIP vesting, as explained further below.
These changes will ensure that the Group has an approach to Executive Director remuneration that is transparent, fair, competitive,
and appropriate for the future growth of the business. Accordingly, whilst the proposed changes to the remuneration policy for 2024
are focused on the incentive scheme elements of Executive Director reward, as the Group continues its growth trajectory, we shall, in
line with our remuneration philosophy, continue to monitor the levels of fixed remuneration to ensure that this remains appropriate and
fair relative to the performance, scale and complexity of the business.
I wrote to major shareholders and the main proxy advisory bodies in early 2024 to explain the rationale for these changes, and I
am pleased to report that there was an overwhelmingly positive response from the majority of those consulted, with investors very
supportive of the management team and particularly appreciative of the focus on performance-related remuneration. Full details of
our remuneration policy and the intended approach for 2024 are set out later in this report.
UK Corporate Governance Code
The Committee believes that the Group’s approach to executive remuneration remains consistent with the principles of the Code. There
is a clear linkage between the performance metrics and targets used in the incentive schemes and the long-term growth strategy for
the business. As outlined in this report, we have a formal and transparent procedure for developing our executive remuneration policy.
Discretion is exercised appropriately when reviewing and authorising remuneration outcomes. No such discretion was exercised in
respect of 2023.
90
The remuneration policy is structured in line with the factors set out in Provision 40 of the Code. Pay is designed to be relatively
simple and is disclosed transparently in this report. We take into account the Group’s approach for the broader employee base when
considering executive remuneration. The size of potential awards under the annual bonus scheme and the LTIP is not considered
excessive in the context of wider market practice and the likelihood of rewards which would be inconsistent with performance is
limited. We set targets under the incentive schemes which are designed to be challenging but achievable and which do not encourage
inappropriate risk-taking. We believe that the strong ethical and governance culture across the Group is echoed by the rigour with
which executive remuneration is considered by the Committee and the commitment to openness highlighted in this report.
There remain two areas where we do not fully comply with the Code provisions on remuneration:
1)
2)
We have not introduced a formal post-employment shareholding requirement for the Executive Directors. We believe that our
current approach provides for a sufficient long-term alignment of interest between executives and Shareholders through, for
example, the LTIP (where the further two-year holding period over and above the three-year performance period continues to
apply in the event of cessation of employment) and the existing personal shareholding requirement of 200 per cent of basic
salary (which applies during employment). We will keep these matters under regular review as market practice in this area
continues to develop.
Pension rates for the CEO and CFO reflect historic entitlements. We have not yet fully aligned Executive Director pensions
with the wider workforce; however, and as previously disclosed, we have established a pathway to alignment towards the
rate available to the majority of the wider workforce. Whilst provision for both the CEO and the CFO remains above the
workforce average, the effective pension contribution rate for the CEO has moved closer towards the rate payable to the wider
workforce, with his maximum entitlement capped at the cash value of his 2019 entitlement such that, over a period of time,
the rate payable will reduce. For 2023, this equated to a contribution rate of 9.1 per cent of the CEO’s salary (2022: 9.4 per cent).
Furthermore, as previously disclosed, the pension contribution rate for the CFO reduced to 15 per cent of base salary with effect
from 1 January 2023; then reduced to 12 per cent of base salary with effect from 1 January 2024; and will then reduce to 9 per
cent of base salary with effect from 1 January 2025. For all new executive appointments to the Board, the employer pension
contribution rate will be aligned with that available to the majority of the UK workforce (currently 6 per cent).
Looking Ahead
The Committee has agreed to increase the base salary for each of the CEO and CFO by 3.5 per cent with effect from 1 January 2024,
such increase being in line with, and in many cases lower than, that for the Group’s wider employee population.
The performance measures for the 2024 annual bonus scheme are set out on pages 110 to 111. We have decided to adopt a similar
approach to the bonus scheme as applied in 2023, with an adjusted PBT measure applying to the majority of the bonus, supplemented
with ESG targets linked to the sustainability strategy of the business. In recognition of the importance placed by the Board on driving
ESG performance, we have retained the 15 per cent weighting in respect of ESG for 2024. We will assess similar ESG metrics as were
used in 2023, although we have replaced the waste reduction measure with a new metric designed to incentivise a reduction in
plastic usage across the business. As explained above, the bonus limit for the CEO and the CFO will increase to 150 per cent of salary
and 125 per cent of salary, respectively, with effect from 1 January 2024. The 2024 maximum bonus targets have been increased and
stretched accordingly in order to drive and reward stronger Company performance. As in previous years, we will disclose the specific
2024 annual bonus targets and the performance against them in our 2024 Directors’ Remuneration Report.
In addition, and as also explained above, the LTIP award limits for the CEO and CFO for 2024 will increase to 150 per cent and 125 per
cent of salary, respectively. The 2024 LTIP award will again be made to a wider group of senior employees to ensure that we are
providing suitably competitive packages to key people within the organisation. The awards for all participants will have the same
performance metrics. We will retain a relative TSR measure for 50 per cent of the award, recognising the importance of rewarding
outperformance of other companies and the general investor preference in favour of TSR as a metric. We have, however, decided to
change the way in which we measure TSR following a detailed review. The peer group used to date – the FTSE AIM All Share Industrial
Goods and Services net return index – is no longer considered the best comparator group as many of the other companies in this index
are considerably smaller than Johnson Service Group and can exhibit a significant degree of volatility. After considering a number
of alternatives, we have decided to move to comparing performance against the FTSE 250 (excluding investment trusts). Although
Johnson Service Group is not a member of the FTSE 250, it shares many characteristics with companies in the index in terms of size,
scale and maturity, and the index provides an appropriate market barometer against which the Company’s performance can be
tested. We have also decided to move to the conventional approach of measuring TSR through the use of a ‘ranking’ system. Under this
structure, one quarter of the award will vest for median performance against the peer group over the performance period, rising to full
vesting for upper quartile performance or above. Vesting will be on a straight-line basis between median and upper quartile.
For the other 50 per cent of the 2024 LTIP award, the Committee has decided to revert to stretching targets linked to growth in the
Company’s adjusted diluted EPS from continuing operations over the LTIP performance period. EPS remains our preferred long-
term financial metric and the reasons for the shift to PBT per share for the 2023 award no longer apply. We have further stretched
EPS performance targets which are considered suitably challenging in the context of current internal and external forecasts of
performance and reflective of the increased grant level. None of the EPS element of the 2024 LTIP Award will vest if growth in EPS over
the performance period (on a CAGR basis) is less than 9% p.a., one quarter will vest if EPS growth is 9% p.a. and the whole of this element
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2023 Annual Report & Accounts 02. Corporate Governance Directors’ Remuneration Report
Continued >
of the 2024 LTIP Award will vest if EPS growth is 16% p.a. or greater. Vesting will be on a straight-line basis if EPS growth is between 9%
p.a. and 16% p.a.
As part of the investor consultation exercise mentioned above, we received a number of useful comments from shareholders on
different performance measures that could be used for both annual bonus and LTIP. We have considered these in detail and are
comfortable that the measures agreed for 2024 as set out above are the most appropriate for the business at the current time in light
of the investment and growth plans for the coming years. We will, however, continue to consider on an annual basis whether different
metrics would be appropriate and will report on this as required in future Directors’ Remuneration Reports.
Conclusion
The changes we have agreed for the incentive schemes for 2024 provide a robust framework for executive reward for the year ahead
and will help reinforce the performance-oriented culture of the business. As normal, we will keep the remuneration policy under regular
review and will continue to be cognisant of market developments.
None of the changes set out above require formal shareholder approval although, as we have done for many years, we will put our
Directors’ Remuneration Report to Shareholders for approval at the 2024 AGM. In the interests of good corporate governance, we will
defer granting the 2024 LTIP awards until after the AGM, and we will consider the outcome of the vote before granting the awards. If you
have any questions on this issue or any other matter regarding executive remuneration, I am contactable via the Company Secretary.
Nick Gregg
Chair, Remuneration Committee
4 March 2024
92
Directors’ Remuneration Report
Committee Summary
Remuneration Committee
Membership and Attendance
Throughout 2023, membership of the Remuneration Committee (the ‘Committee’) comprised of the Independent Non-Executive
Directors (including the Non-Executive Chair of the Board) and the Committee has been chaired by Nick Gregg. Kirsty Homer joined the
Committee as an additional member following her appointment as an Independent Non-Executive Director on 1 August 2023. None of
the members of the Committee have, or had, any personal financial interests in the Company (other than as Shareholders), conflicts of
interests arising from cross-directorships or day to day involvement in running the business.
Nick Gregg (Committee Chair)
Chris Girling
Jock Lennox
Nicola Keach
Kirsty Homer
Note 1:
Includes scheduled and unscheduled meetings.
Member
Since
Eligible
to Attend1
Meetings
Attended1
Jan 2016
Aug 2018
Jan 2021
Jun 2022
Aug 2023
5
5
5
5
2
5
5
5
5
2
Main Responsibilities
In line with the authority delegated by the Board, the Committee sets the Company’s Remuneration Policy and is responsible for
determining remuneration terms and conditions of employment for the Chair of the Board, Executive Directors and those members of
the Group Management Board whom are not Executive Directors.
The Committee:
•
•
•
•
ensures that the Executive Directors are appropriately incentivised to enhance the Group’s performance and rewarded for their
contribution to the success of the business by designing, monitoring and assessing incentive arrangements, including setting
stretching targets and assessing performance and outcomes against them;
reviews the remuneration arrangements for other senior executives within the Group, namely those members of the Group
Management Board who are not Executive Directors;
in undertaking its responsibilities above, reviews and monitors the remuneration and related policies and culture applying to
the wider workforce, taking these into account when considering, developing and setting remuneration policies and packages
for Executive Directors and the Group Management Board; and
maintains an active dialogue with Shareholders, ensuring their views and those of their advisors are sought and considered
when setting executive remuneration.
The Committee regularly reports to the Board on how it has discharged its responsibilities. The full terms of reference of the Committee
are available on the Company’s website, or on request to the Company Secretary.
External Advisors
The Committee seeks and considers advice from independent remuneration advisors where appropriate. The current appointed
advisors, Korn Ferry, were selected through a thorough process led by the Chair of the Committee and were appointed by the
Committee in 2019.
The Chair of the Committee has direct access to the advisors as and when required, and the Committee determines the protocols
by which the advisors interact with management, in particular the Company Secretary, in support of the Committee. The advice and
recommendations of the external advisors are used as a guide, but do not serve as a substitute for thorough consideration of the issues
by each Committee member. Advisors attend Committee meetings as and when required by the Committee.
Korn Ferry is a member of the Remuneration Consultants’ Group and, as such, voluntarily operates under the Remuneration Consultants’
Group Code of Conduct in relation to executive remuneration consulting in the UK. This is based upon principles of transparency,
integrity, objectivity, competence, due care and confidentiality by executive remuneration consultants. Korn Ferry has confirmed that
it has adhered to that Code of Conduct throughout the year for all remuneration services provided to the Group and therefore the
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2023 Annual Report & Accounts 02. Corporate Governance Directors’ Remuneration Report
Committee Summary
Continued >
Committee is satisfied that its advice is independent and objective. The Remuneration Consultants’ Group Code of Conduct is available
at remunerationconsultantsgroup.com.
Fees payable in respect of services provided to the Committee during the current and preceding year, in each case as at 31 December,
are as follows:
Fees payable (note 1)
2023
£000
15
2022
£000
17
Note 1: Fees payable during the current and prior year relate to advice on market practice, governance updates, reward benchmarking and
consultancy, attendance at Committee meetings and ad-hoc advice.
94
Directors’ Remuneration Report
Remuneration Policy
Overview
The Committee reviews the Company’s remuneration philosophy and structure each year to ensure that the remuneration framework
remains effective in supporting the Company’s business objectives, in line with best practice, and fairly rewards individuals for the
contribution that they make to the business, having regard to the size and complexity of the Group’s operations and the need to retain,
motivate and attract employees of the highest calibre.
The Committee intends that base salary and total remuneration of Executive Directors should be in line with the market. Remuneration
is periodically benchmarked against rewards available for equivalent roles in a suitable comparator group with the aim of paying
neither significantly above nor below the market for each element of remuneration. The Committee also considers general pay and
employment conditions of all employees within the Group and is sensitive to these, to prevailing market conditions, and to governance
trends when assessing the level of salaries and remuneration packages of Executive Directors.
The total remuneration package links corporate and individual performance with an appropriate balance between short and
long term elements, and fixed and variable components. The remuneration policy is designed to incentivise executives to meet the
Company’s strategic objectives, such that a significant portion of total remuneration is performance related, based on a mixture of
internal targets linked to the Company’s strategic business drivers (which can be easily measured, understood and accepted by both
executives and Shareholders) and appropriate external comparator groups.
The Committee considers that the targets set for the different elements of performance related remuneration are both appropriate
and demanding in the context of the business environment and the challenges with which the Group is faced.
Prior to proposing the adoption of new or amended employee share schemes, the Company will consult in advance with, and seek
feedback from, major Shareholders. New schemes may need to be proposed in order for the Company to be able to continue to
operate its executive and all employee share schemes, for example, due to the incumbent scheme nearing the end of its lifetime.
Existing schemes may need to be amended to reflect current or emerging best practice. Following any consultation process, the
adoption of new or amended employee share schemes will then be proposed at the next relevant AGM (as evidenced at the 2018 AGM).
The increase to the LTIP award limit for 2024, as explained on pages 91 to 92, does not require an amendment to the current LTIP rules.
Full details of all current schemes are included within this Report.
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2023 Annual Report & Accounts 02. Corporate Governance Directors’ Remuneration Report
Remuneration Policy
Continued >
Remuneration Policy Table
The current remuneration of Executive Directors comprises base salary, taxable benefits, pension, annual bonus and a Long-Term
Incentive Plan (‘LTIP’). Details of how the various components of remuneration are delivered are set out below.
Component and Link
to Strategy
Operation
Maximum Opportunity
Performance
Measures
None.
Base salaries are reviewed
annually with any increases
normally taking effect on
1 January of each year.
Whilst there is no prescribed formulaic maximum, any
increases will take into account prevailing market and
economic conditions as well as increases for the wider
workforce.
Salaries are appropriately
benchmarked and
reflect the role, job size
and responsibility as
well as the performance
and effectiveness of the
individual.
Increases may be above this when an Executive Director
progresses in the role, gains substantially in experience,
there is a significant increase in the scale of the role, or
was appointed on a salary below the market. In addition,
increases may be agreed in the event of a significant
change in the size, scale and/or complexity of the
business.
Any increase will be appropriately explained in the
relevant year’s annual report.
Taxable benefits, which are
not performance related,
principally include, but are
not limited to, the provision
of a car or car allowance and
private medical insurance for
Executive Directors and their
dependants.
Executive Directors are
invited to participate in
the Company’s defined
contribution pension scheme
or to take a cash alternative
allowance in lieu of pension
entitlement.
In addition, both the CEO
and CFO are members of the
Company’s defined benefit
pension scheme. The CEO left
active pensionable service
on 31 December 2014 and the
CFO left active pensionable
service on 31 December 2011.
The cost of providing these benefits can vary in
accordance with market conditions, which will, therefore,
determine the maximum value.
None.
None.
For the Company’s pension cash allowance (or pension
contribution as appropriate), the CEO was historically
entitled to a maximum employer contribution of
14 per cent of base salary. As previously disclosed,
the Committee determined that the CEO’s maximum
entitlement would be capped at the cash value of his
2019 entitlement such that, over a period of time, the rate
payable to the CEO would reduce and move closer to that
payable to the wider workforce. For 2023, this equated
to a contribution rate of 9.1 per cent on the CEO’s salary
(2022: 9.4 per cent).
The CFO was previously entitled to a maximum pension
cash allowance of 17.8 per cent of base salary. As
previously disclosed, the pension contribution rate for the
CFO reduced to 15 per cent of base salary with effect from
1 January 2023; then reduced to 12 per cent of base salary
with effect from 1 January 2024; and will then reduce to
9 per cent of base salary with effect from 1 January 2025.
For all new executive appointments to the Board, the
employer pension contribution rate will be aligned with
that available to the majority of the wider workforce, such
rate currently being approximately 6 per cent.
Further details are set out on pages 102 to 103.
Base Salary
Reflects the
individual’s role,
experience and
contribution.
Set at levels to
attract and retain
individuals of the
calibre required to
lead the business
and to ensure no over
reliance on variable
pay.
Taxable Benefits
To provide a
competitive level of
benefits in order to
attract and retain
individuals of the
calibre required to
lead the business.
Pension
To ensure the
Company can provide
a fully competitive
level of benefits in
order to attract and
retain individuals of
the calibre required
to lead the business.
96
Component and Link
to Strategy
Operation
Annual Bonus
To incentivise
and reward the
achievement of
stretching one-year
key performance
targets set by the
Committee at the
start of each financial
year.
LTIP
To incentivise and
reward Executive
Directors for the
delivery of longer-
term financial
performance and
Shareholder value.
Share-based to
provide alignment
with Shareholder
interests.
The annual bonus is, ordinarily,
earned by the achievement of
one-year performance targets
set by the Committee at the start
of each financial year and is
delivered in cash. The Committee
sets appropriately challenging
targets each year.
The Committee retains the
discretion to adjust the targets
to take account of events which
were not foreseen or allowed
for at the start of the year when
targets were set, for example,
acquisitions in the year. The
Committee also retains the
discretion to adjust the bonus
outcomes and/or targets to
ensure that they reflect the
underlying business performance.
The annual bonus is subject to
malus and/or clawback.
The Chair and the Non-Executive
Directors are not eligible to
participate in the annual bonus
scheme.
An annual conditional award of
ordinary shares which may be
earned after a single three-year
performance period, based on
the achievement of stretching
performance conditions.
Participants are required to hold
vested LTIP shares (net of any
shares sold to meet tax and social
security liabilities) for a period of
two years post vesting.
Calculations of the achievement
of the performance targets are
independently performed and
are approved by the Committee.
To ensure continued alignment
between Executive Directors’
and Shareholders’ interests,
the Committee also reviews the
underlying financial performance
of the Group and retains its
discretion to adjust vesting if it
considers that performance is
unsatisfactory.
Malus and clawback rules
operate in respect of the LTIP.
Maximum Opportunity
For 2024, the maximum amount
payable to the CEO is 150 per cent
of base salary. The target award is
75 per cent of base salary.
The maximum amount payable
to the CFO is 125 per cent of base
salary. The target award is 62.5 per
cent of base salary.
In both cases, no bonus is payable
for below threshold performance.
Payments increase on a straight-
line basis from threshold to target
and from target to maximum.
Maximum performance requires
performance significantly ahead of
the minimum threshold.
Performance
Measures
The vast majority of the annual
bonus (currently 85 per cent) is
based on the Group’s adjusted
profit before taxation result,
with performance measured
over the financial year.
Since 2022 a minority of the
annual bonus has been based
on specific and measurable
sustainability targets. For 2024
the weighting for this element
of the bonus will remain at
15 per cent of the total.
In 2024, annual LTIP awards will
be made at the following levels of
base salary:
CEO:
CFO:
150 per cent
125 per cent
The Committee will select
the performance measures
and weightings prior to the
grant of awards that support
the Company’s longer-term
strategy and shareholder
value from time to time.
Awards have, historically, been
granted with performance
conditions linked to the
Company’s Total Shareholder
Return (TSR) and Earnings
per Share (EPS) performance.
However, for the 2023 LTIP
Award, as explained in the
2022 Annual Report, the
Committee decided to replace
EPS with an adjusted PBT
per share measure. For the
2024 LTIP, the Committee has
decided to revert to an EPS
measure in place of adjusted
PBT per share.
Further details are set out on
pages 107 to 108.
9797
2023 Annual Report & Accounts 02. Corporate Governance Directors’ Remuneration Report
Remuneration Policy
Continued >
Notes to the Remuneration Policy Table
The Remuneration Policy for Executive Directors differs from that of other members of the Group Management Board solely in respect
of quantum of the various components and remuneration. Executive Directors have a greater proportion of their total remuneration
package at risk than other employees, however, the structure and principles of incentives are broadly consistent. The wider employee
population of the Group will receive remuneration that is considered to be appropriate in relation to their geographic location, level of
responsibility and performance.
Illustrations of the Application of the Remuneration Policy
The Company’s policy is to provide a total remuneration package that links corporate and individual performance with an appropriate
balance between short and long term elements, and fixed and variable components. The charts below show an example of the
remuneration that could be receivable by Executive Directors in office at 1 January 2024 under the policy set out in this Directors’
Remuneration Report.
Each bar gives an indication of the minimum amount of remuneration payable, remuneration payable at target and at maximum
performance to each Executive Director under the policy. Each of the bars is broken down to show how the total under each scenario is
made up of fixed elements of remuneration, the annual bonus and the LTIP.
Peter Egan
Illustration Only
Minimum
100%
Target
Maximum
Maximum +50%
Share Growth
42%
27 %
23 %
Fixed
Bonus
LTIP
2288 %%
33 11 %%
33 66%%
33 11 %%
33 66%%
4466%%
£0.0
£0.5
£1.0
£1.5
£2.0
£2.5
Yvonne Monaghan
Illustration Only
Minimum
100%
Fixed
Bonus
LTIP
Target
Maximum
Maximum +50%
Share Growth
47%
31%
27%
25%
28%
34%
29%
34%
44%
£0.0
£0.5
£1.0
£1.5
£2.0
£0.5m
£1.3m
£2.0m
£2.3m
£0.4m
£0.9m
£1.3m
£1.5m
98
The above illustration is based on a number of assumptions:
•
fixed remuneration includes:
–
–
–
annual base salary as at 1 January 2024;
value of taxable benefits received in 2023 as shown in the single figure table on page 102; and
pension cash alternative allowance as at 1 January 2024.
the maximum bonus opportunity is 150% of base salary for the CEO and 125% of base salary for the CFO;
the maximum LTIP award is 150% of base salary for the CEO and 125% of base salary for the CFO;
variable remuneration at minimum, target and maximum payout has been assumed at 0%, 50% and 100% respectively of
maximum bonus opportunity;
variable remuneration at minimum, target and maximum payout has been assumed at 0%, 55% and 100% respectively of
maximum LTIP opportunity;
share price appreciation has been calculated as a 50% increase in the value of the LTIP between the date of grant and vesting;
and
no dividend accrual has been incorporated in the values relating to the LTIP.
•
•
•
•
•
•
Malus and Clawback
To reflect best practice, and to align with Shareholder interests, malus and clawback provisions apply to awards under the annual
bonus and LTIP schemes (together ‘Awards’).
Those provisions enable the Committee to decide, up until the third anniversary of an Award becoming payable, in circumstances in
which the Committee considers it appropriate, to reduce the quantum of an Award, cancel an Award or impose further conditions on
an Award. The provisions also enable the Committee to decide, up until the third anniversary of an Award becoming payable that, in
the relevant circumstances, the participant must repay to the Company (or any person nominated by the Company) some or all of the
cash or shares received under an Award.
The circumstances in which the Committee may apply the malus and clawback provisions include, but are not limited to:
•
•
•
•
•
•
a material misstatement of the Company’s audited financial results;
a miscalculation of the extent to which a performance target has been met;
a material failure of risk management by the Company;
serious reputational damage to the Company;
misconduct by a participant; and
a material downturn in the financial position of the Company.
Personal Shareholding Requirement and Holding Periods
In order that their interests are linked with those of Shareholders, Executive Directors are expected to build and maintain a personal
shareholding in the Company equal to at least 200 per cent of the value of their base salary over a period of five years. For the current
Executive Directors, this five-year period commenced on 31 December 2019. For the purpose of this requirement, the net of tax number
of vested but unexercised share awards, which are not subject to any further performance conditions, will be included. The Committee
will monitor progress annually.
In addition, awards granted under the 2018 Long-Term Incentive Plan (the ‘2018 LTIP Scheme’) in 2019 and thereafter are subject to a
two year post-vesting holding period over and above the three year vesting period of an LTIP award (the ‘Holding Period’). The Holding
Period will continue to apply in the event of cessation of employment, save where cessation is by reason of death in which case the
Holding Period shall immediately be deemed to have ended.
9999
2023 Annual Report & Accounts 02. Corporate Governance Directors’ Remuneration Report
Remuneration Policy
Continued >
Approach to Recruitment Remuneration
The Committee would expect to apply the same Remuneration Policy as that which applies to existing Executive Directors when
considering the recruitment of a new Executive Director.
Nevertheless, other arrangements may be established specifically to facilitate recruitment of a particular individual, albeit that any
such arrangement would be made within the context of minimising the cost to the Company. An example might be the need to provide
a level of compensation for forfeiture of bonus entitlements and/or unvested long term incentive awards from an existing employer,
if any, or the additional provision of benefits in kind and other allowances, such as relocation, education and tax equalisation, as may
be required in order to achieve a successful recruitment. Any arrangement established specifically to facilitate the recruitment of a
particular individual would be intended to be of comparable form, timing, commercial value and capped as appropriate. The quantum,
form and structure of any buyout arrangement will be determined by the Committee taking into account the terms of the previous
arrangement being forfeited. The buyout may be structured as an award of cash or shares, however, the Committee will normally have
a preference for replacement awards to be made in the form of shares, deliverable no earlier than the previous awards.
Where an Executive Director is appointed from either within the Company or following corporate activity/reorganisation, the normal
policy would be to honour any legacy incentive arrangements to run off in line with the original terms and conditions.
The policy on the recruitment of new Non-Executive Directors would be to apply the same remuneration elements as for the existing
Non-Executive Directors. It is not intended that variable pay, cash supplements, day rates or benefits in kind be offered, although in
exceptional, currently unforeseen, circumstances such remuneration may be required.
Executive Directors’ Service Agreements
It is the Company’s policy that Executive Directors have rolling service agreements. Peter Egan is employed under a service agreement
dated 30 March 2018, as amended by a Variation Letter dated 21 December 2018 relating to his appointment to Chief Executive
Officer from 1 January 2019. Yvonne Monaghan is employed under a service agreement dated 14 January 2004, as amended with the
appointment to Chief Financial Officer on 31 August 2007.
The length of Board service as at 31 December 2023 for Peter Egan and Yvonne Monaghan was five years, nine months and sixteen
years, four months respectively.
The current Executive Directors’ service agreements contain the key terms shown in the table below:
Provision
Remuneration1
Detailed Terms
family private health insurance
life assurance
• base salary, pension and benefits
• car benefit
•
•
• 30 days’ paid annual leave
• participation in the annual bonus plan, subject to plan rules
• participation in the LTIP, subject to plan rules
Change Of Control
• no special contractual provisions apply in the event of a change of control
Notice Period
• 12 months’ notice from the Company
• 6 months’ notice from the directors
Termination2,3
• payment in lieu of notice for a period of up to 12 months
Restrictive Covenants
• during employment and for a period of up to 12 months after leaving
Note 1: Whilst service agreements outline the components of remuneration payable, they do not prescribe how remuneration levels may be adjusted
from year to year.
Note 2:
In the event of termination without cause, the Company has a contractual obligation to compensate the Executive Director for the unexpired
period of his or her notice. The Company will seek to reduce this payment by means of the Executive Director’s duty to mitigate this payment
wherever possible.
Note 3: Whilst unvested awards will ordinarily lapse upon termination, the Committee may in its absolute discretion allow for awards to continue until
the normal vesting date or to be accelerated (for example on death), subject to achievement of the attendant performance conditions. In such
circumstances, awards vesting will normally be prorated on a time apportioned basis, unless the Committee determines otherwise. Any such
discretion in respect of leavers would only be applied by the Committee to ‘good leavers’ where it considers that continued participation is
justified, for example, by reference to performance prior to the date of leaving. ‘Good leaver’ status may apply in circumstances of, inter alia,
cessation of employment due to death, ill-health, disability, redundancy or retirement. The malus and clawback provisions would continue to
apply in the event that any such discretion was exercised.
100
Chair’s Service Agreement
The Chair has a fixed term appointment. The fee for the Chair, which is commensurate with his experience and contribution to the
Group, is reviewed annually with any increase generally taking effect from 1 January. The Chair does not participate in decisions
regarding his own remuneration. The Chair is not eligible for pension scheme membership, bonus or incentive arrangements. Costs in
relation to business expenses and travel will be reimbursed. The Chair’s appointment is terminable without compensation on three
months’ notice from either side.
The Chair is expected to devote such time as is necessary for the proper fulfilment of the role. Whilst this is not ordinarily expected to
exceed 40 days per annum, the nature of the role makes it impossible to be specific about the maximum time commitment.
The Chair is encouraged, but is not required, to hold a personal shareholding in the Company.
Under the terms of the Chair’s initial letter of appointment, dated 4 January 2021, the Chair’s initial term of appointment was due to end
on 4 January 2024. Following recommendation by the Nomination Committee and subsequent approval by the Board, on 23 November
2023, a new letter of appointment was issued to the Chair which extended the Chair’s term of appointment end date to 4 January 2027.
Accordingly, as at 31 December 2023, the unexpired term of the Chair’s letter of appointment was 3 years.
Non-Executive Directors’ Service Agreements
Non-Executive Directors each have fixed term appointments. Fees payable to the Non-Executive Directors, which are commensurate
with their experience and contribution to the Group, are reviewed annually by the Board with any increase ordinarily taking effect on
1 January. Non-Executive Directors do not participate in decisions regarding their own remuneration. Non-Executive Directors are not
eligible for pension scheme membership, bonus or incentive arrangements. Costs in relation to business expenses and travel will be
reimbursed. A Non-Executive Director’s appointment is terminable without compensation on three months’ notice from the Company
and one month’s notice from the individual.
Non-Executive Directors are expected to devote such time as is necessary for the proper fulfilment of the role. Whilst this is not,
ordinarily, expected to exceed 20 days per annum, the nature of the role makes it impossible to be specific about the maximum time
commitment.
Non-Executive Directors are encouraged, but are not required, to hold a personal shareholding in the Company.
At 31 December 2023, the unexpired terms of the Non-Executive Directors letters of appointment were:
Chris Girling
Nick Gregg
Nicola Keach
Kirsty Homer
Date of Latest Letter
of Appointment1
Term Start Date
Term End Date
24 August 2021
29 August 2021
28 August 2024
24 August 2021
1 January 2022
31 December 2024
Unexpired Term at
31 December 2023
8 months
1 year
31 May 2022
1 June 2022
31 May 2025
1 year 5 months
13 July 2023
1 August 2023
31 July 2026
2 years 7 months
Note 1: Chris Girling was first appointed to the Board on 29 August 2018; Nick Gregg was first appointed to the Board on 1 January 2016; Nicola Keach was
first appointed to the Board on 1 June 2022; and Kirsty Homer was first appointed to the Board on 1 August 2023.
101101
2023 Annual Report & Accounts 02. Corporate Governance Directors’ Remuneration Report
Annual Remuneration Report
Single Total Figure of Remuneration (Audited)
FIXED PAY
Base Salary
Taxable Benefits
Pension
PERFORMANCE RELATED PAY
Bonus
LTIP
SINGLE TOTAL FIGURE OF REMUNERATION
Peter Egan
Yvonne Monaghan
Note
2023
£000
2022
£000
2023
£000
2022
£000
1
2
3
3
457
441
343
331
16
42
17
42
19
51
19
59
515
500
413
409
542
157
699
1,214
124
-
124
624
358
104
462
875
82
-
82
491
Note 1: Taxable benefits relate to the provision of a car allowance and private medical insurance. Peter Egan’s car benefit for the year was £14,500
(2022: £14,500) and his private medical insurance benefit was £1,659 (2022: £2,428). Yvonne Monaghan’s car benefit for the year was £17,500 (2022:
£17,500) and her private medical insurance benefit was £1,327 (2022: £1,942).
Note 2: Details of the amounts shown for Pension are set out below.
Note 3: Details of the performance measures and weighting as well as the achieved results for the bonus and LTIP components are shown on pages 103
to 104 and 106 to 107 respectively. No bonus was deferred. The LTIP numbers in the table reflect the value of the shares which are due to vest in
March 2024 based on performance measured up to 31 December 2023, based on a share price of 133.4 pence, being the average price over the
last three months of 2023. No amount of the LTIP award was attributable to share price appreciation.
Pensions
Executive Directors are contractually entitled to receive retirement benefits, which are calculated on base salary, under one or
more of the Group’s contributory defined benefit or defined contribution schemes. Details of the schemes are given in note 26 of the
Consolidated Financial Statements.
Defined Benefit Entitlement
Each Executive Director who served during the year has left active pensionable service in the Johnson Group Defined Benefit Scheme
(the ‘JGDBS’), which is of the defined benefit type, and is entitled to a preserved benefit.
The accrued pension entitlement, which is the amount that would be paid annually on retirement (at normal retirement age), for Peter
Egan at 31 December 2023 was £14,600 (2022: £13,200) and allows for revaluation in deferment from the date of leaving to the date of
calculation. Pension entitlement is calculated based on the total period of pensionable service to the Company, both before and after
becoming a Director.
Yvonne Monaghan took a partial transfer of benefits from the JGDBS on 31 March 2012 and her date of retirement from the JGDBS was
16 September 2021.
Defined Contribution Entitlement – Peter Egan
From 1 January 2015, Peter became a deferred member of the JGDBS. From that date, he was contractually entitled to a monthly
employer pension contribution, equal to up to 14 per cent of his monthly salary, which was paid to the JSG Pension Plan (the ‘Plan’),
a defined contribution scheme. The majority of UK employees within the Group are eligible to participate in the Plan. Employer
contribution rates to the Plan are on a matching plus basis determined with reference to the employee’s own pension contribution
together with their salary banding. The employer contribution rate that is currently available to the majority of the wider UK workforce
is approximately 6 per cent, whilst the maximum employer contribution is 14 per cent, based upon a 7 per cent employee contribution,
for all UK employees currently earning an annual salary greater than or equal to £121,903. With effect from April 2019, Peter opted
to receive a cash alternative allowance in lieu of an employer pension contribution. From that date, the cash alternative allowance
102
payable to Peter was 12.3 per cent of his base salary – adjusted downwards from the 14 per cent referred to above in order to take
account of the impact of employer’s national insurance.
Had Peter received a cash alternative allowance for the whole of 2019, it would have equated to £41,613. As previously disclosed, having
regard to developments in executive pensions and in order that the employer rate in respect of Peter progresses towards the rate
available to the majority of the wider workforce, the Committee determined that Peter’s entitlement in 2020 and thereafter would
be capped at the cash value of his 2019 cash alternative entitlement. The effect of this is that as Peter’s salary increases, his cash
alternative allowance, as a percentage of salary, will progress towards that available to the majority of the wider workforce. The cash
alternative allowance payable in the year was £41,613 (2022: £41,613).
Defined Contribution Entitlement – Yvonne Monaghan
From 1 January 2012, Yvonne opted to become a deferred member of the JGDBS and is contractually entitled to receive a monthly cash
alternative allowance equal to 17.8 per cent of her monthly salary. As previously disclosed and as noted in the letter from the Chair of
the Remuneration Committee, the pension contribution rate for Yvonne reduced to 15 per cent of her base salary with effect from 1
January 2023; then reduced to 12 per cent of her base salary with effect from 1 January 2024; and will then reduce to 9 per cent of her
base salary with effect from 1 January 2025. The cash alternative allowance payable in the year was £51,410 (2022: £58,944).
2023 Bonus Achievement
The annual bonus is normally earned by the achievement of one-year performance targets set by the Committee, ordinarily at the start
of each financial year, adjusted accordingly to take account of events which were not foreseen or allowed for at the start of the year
when targets were set, for example, acquisitions or changes in accounting policy.
For 2023, whilst the vast majority (85 per cent) of the bonus opportunity was based on the Group’s adjusted PBT result, measured over
the financial year, a number of specific and measurable sustainability targets were applied to a minority portion (15 per cent) of the
bonus.
The performance targets for 2023 are as set out below:
Minimum
£m
Target
£m
Maximum
£m
Achieved
£m
Bonus Achieved as
% of Maximum
Opportunity
Adjusted PBT
(excluding notional interest)
34.3
37.1
41.7
44.9
100%
103103
2023 Annual Report & Accounts 02. Corporate Governance Directors’ Remuneration Report
Annual Remuneration Report
Continued >
For the 15 per cent of the bonus based on sustainability, the targets and the performance achieved are set out in the table below.
Target
Weighting
Minimum
Maximum
Achievement
Bonus Achieved as
% of Maximum
Opportunity
Waste
5% Reduction in volume of waste
sent to landfill
5% reduction in volume of
plastics sent to landfill
Water Consumption
2% Reduction on 2022 Water
intensity
•
2023 M3/ Tonnes processed
target: 7.526
Carbon Emissions
5% Reduction on 2022 Carbon
Emissions intensity
•
Tonnes CO2e/ Tonnes
processed target: 0.324
5%
Reduction of 5%
Reduction
greater than 5%
Deemed not
achieved.
5%
Reduction of 2%
Reduction
greater than 2%
Reduction of
5.6%
5%
Reduction of 5%
Reduction
greater than 5%
Reduction of
6.9%
Total
15%
0%
100%
100%
66.67%
The Committee believes that these targets were appropriately stretching in the context of expected levels of performance for the
business over 2023. Performance against the targets was assessed after the end of the financial year and this resulted in a bonus
outcome as set out in the tables above. The overall bonus, inclusive of both the financial and sustainability measures, was assessed at
95 per cent of maximum. The Committee felt that this represented a strong result in the wider market context and was a fair reflection
of the Company’s overall performance over the period both in terms of profit performance and against the set of sustainability
measures used for incentive purposes. As further explained on pages 34 to 39, an internal review in 2023 of our sustainability data
collection, recording and reporting processes resulted in a restatement of our 2021 and 2022 carbon, energy and water data. The
restatement did not impact achievement of bonus targets for 2022. Whilst we continue to review and streamline the data collection
processes in relation to our waste streams, the Board and the Remuneration Committee determined that achievement against the
2023 waste target be deemed “not achieved”.
Bonuses will be paid in cash and are subject to malus and clawback provisions.
104
Interests in Share Capital
The interests of the Directors who were in office at 31 December 2023, together with the interests of their close family, in the shares of
the Company at the start and close of the financial year, were as follows:
Beneficial
Conditional (note 4)
31 December 2023
Ordinary shares
of 10p each
31 December 2022
Ordinary shares
of 10p each
31 December 2023
LTIP/SAYE
options
31 December 2022
LTIP/SAYE
options
Share
ownership
guidelines
Peter Egan
Yvonne Monaghan (note 3)
Jock Lennox
Chris Girling
Nick Gregg
Nicola Keach
Kirsty Homer
384,061
694,955
72,000
17,333
33,695
–
–
359,061
694,955
72,000
17,333
33,695
–
–
1,107,263
742,291
818,654
542,988
–
–
–
–
–
–
–
–
–
–
Note 1
Note 1
Note 2
Note 2
Note 2
Note 2
Note 2
Note 1: Executive Directors are expected to build up and maintain a personal shareholding in the Company equal to at least 200 per cent of their base
salary. Further details of each Executive Director’s personal shareholding are set out in the table below.
Note 2: Non-Executive Directors are encouraged, but are not required, to hold a personal shareholding in the Company.
Note 3:
In addition to the beneficial and conditional interests shown above, Yvonne Monaghan is a Trustee of the Johnson Brothers Employee Benefit
Trust (the “Trust”). The Trust is governed by a Trust deed, originally dated 18 August 1936, and was set up for the benefit of employees or ex-
employees of the Company or their respective widows, widowers, children or other dependants. The Trust owns 588,452 Ordinary shares of
10 pence each in the Company. The Company considers this to be a Non-Beneficial interest.
Note 4: Further details of the split between LTIP (with performance conditions attached) and SAYE (no performance conditions attached) options are
shown below.
Note 5: There have been no changes in the Directors’ interests in the shares of the Company during the period 31 December 2023 up until the date of
signing this report.
The extent to which each Executive Director has achieved their personal shareholding requirement, further details of which are set out
on page 99, is set out below; all values (including share price) are as at 31 December 2023:
Beneficial
Shareholding
(No.)
Conditional
Shareholding1
(No.)
Deemed
Shareholding
(No.)
Share Price
(p)
Value of
Deemed
Shareholding
(£000)
Peter Egan
Yvonne
Monaghan
384,061
62,393
446,454
694,955
41,204
736,159
141.6
141.6
632
1,042
Value of
Deemed
Shareholding
as a % of Base
Salary
138%
304%
Base Salary
(£000)
457
343
Note 1: Vested shares, which have not yet been exercised, together with unvested shares, which are not subject to a further performance condition, can
count towards the shareholding requirement on a net of tax basis.
In respect of Peter Egan, the 117,723 options granted on 22 March 2021 under the 2018 LTIP Scheme which are scheduled to vest in March 2024 are
not subject to any further performance conditions and consequently, on a net of tax basis, represent a further 62,393 shares.
In respect of Yvonne Monaghan, the 77,743 options granted on 22 March 2021 under the 2018 LTIP Scheme which are scheduled to vest in March
2024 are not subject to any further performance conditions and consequently, on a net of tax basis, represent a further 41,204 shares.
105105
2023 Annual Report & Accounts 02. Corporate Governance Directors’ Remuneration Report
Annual Remuneration Report
Continued >
Beneficial Interests in Share Options (Audited)
The interests of the Directors, who have served during the year, in share options of the Company at the commencement (or date of
appointment if later) and close (or date of resignation if earlier) of the financial year were as follows:
At 31
December
2022
Options
Granted
During
Year
Options
Lapsed
During
Year
Options
Cancelled
During
Year
Options
Exercised
During
Year
At 31
December
2023
Option
Price
Date of Grant
Peter Egan
Scheme 1
22 March 2021
342,689
Scheme 3
1 October 2021
6,936
Scheme 1
16 March 2022
469,029
–
–
–
Scheme 1
8 March 2023
Scheme 2
8 March 2023
–
–
487,934
25,641
(224,966)
–
–
–
–
818,654
513,575
(224,966)
Yvonne Monaghan
Scheme 1
22 March 2021
226,309
Scheme 3
1 October 2021
6,936
Scheme 1
16 March 2022
309,743
–
–
–
Scheme 1
8 March 2023
Scheme 2
8 March 2023
–
–
322,228
25,641
(148,566)
–
–
–
–
542,988
347,869
(148,566)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
117,723
nil
6,936
129.75p
469,029
487,934
nil
nil
25,641
117.0p
1,107,263
77,743
nil
6,936
129.75p
309,743
322,228
nil
nil
25,641
117.0p
742,291
Scheme 1 - The Johnson Service Group 2018 Long-Term Incentive Plan (the ‘2018 LTIP Scheme’)
Scheme 2 - The Johnson Service Group 2018 Long-Term Incentive Plan CSOP Section (the ‘2018 Approved LTIP Scheme’)
Scheme 3 - The Johnson Service Group Sharesave Plan (‘SAYE Scheme’)
None of the terms or conditions of the share options were varied during the year.
Details of the 2018 LTIP, the 2018 Approved LTIP and the SAYE Scheme are given on pages 107 to 108 of the Directors’ Remuneration
Report.
Awards Exercised in 2023
No Director exercised any awards during 2023.
Awards Vested and Lapsed in 2023
Under the 2018 LTIP Scheme, awards were granted to certain employees on 22 March 2021 with an exercise price of £nil (the ‘2021 LTIP
Award’). The closing mid-market share price of Johnson Service Group PLC on the day immediately preceding the date of grant was
153.2 pence.
The number of options granted to each of the Executive Directors was as follows:
Peter Egan
Yvonne Monaghan
106
2018 LTIP Scheme
342,689
226,309
The number of options granted under the 2018 LTIP Scheme to each of Peter Egan and Yvonne Monaghan were equivalent to 125 per
cent and 110 per cent, respectively, of their base salaries at the time. The performance period was the three financial years starting
1 January 2021 and ending 31 December 2023.
Whilst the award would not be capable of vesting until at least 22 March 2024, the performance period ended on 31 December 2023.
The extent to which the performance conditions were met is set out below:
Minimum
Target
Maximum
Target
EPS for 2023
9.45p
10.5p
Result
7.7p
TSR (over Index)
Index
Index + 7% p.a.
Index + 4.1% p.a.
% of
Award Vesting
0%
68.7%
No. of
Options
to Vest
(Peter
Egan)
nil
117,723
117,723
No. of
Options
to Vest
(Yvonne
Monaghan)
nil
77,743
77,743
The EPS performance condition was based on the Company’s adjusted diluted EPS from continuing operations as at 31 December
2023. The figure was further adjusted to exclude any impact on EPS of the capital allowances super-deduction. The TSR performance
condition was based on the annualised growth in the Company’s TSR over the performance period relative to the annualised growth in
the FTSE AlM All-Share Industrial Goods and Services net return index (the ‘Index’).
Based on the performance achieved as set out above, the Remuneration Committee determined that there would be partial vesting of
the 2021 LTIP Award. The Committee was satisfied that the TSR achieved was aligned with the underlying financial performance of the
Company over the performance period. The total vesting level for the 2021 LTIP Award was 34.35 per cent. No discretion was applied to
this outcome.
Outstanding LTIP Awards
2022 LTIP Award
Awards were granted, under the 2018 LTIP Scheme, to certain employees on 16 March 2022 with an exercise price of £nil. The closing
mid-market share price of Johnson Service Group PLC on the day immediately preceding the date of grant was 117.6 pence. Peter Egan
was granted 469,029 options, equivalent to 125 per cent of his base salary at the time; Yvonne Monaghan was granted 309,743 options,
equivalent to 110 per cent of her base salary at the time. The performance period is the three financial years starting 1 January 2022
and ending 31 December 2024. The performance conditions are as set out below within ‘Overview of Share Option Schemes’. If the
minimum performance criteria were to be achieved, 25 per cent of the scheme interests would become receivable.
2023 LTIP Award
Awards were granted, under the 2018 LTIP Scheme, to certain employees on 8 March 2023 with an exercise price of £nil. In addition,
linked awards were granted on the same date, under the 2018 Approved LTIP Scheme, with an exercise price of 117.0 pence. The closing
mid-market share price of Johnson Service Group PLC on the day immediately preceding the date of grant was 117.0 pence.
The number of options granted to each of the Executive Directors was as follows:
Peter Egan
Yvonne Monaghan
2018 LTIP Scheme
2018 Approved LTIP Scheme
487,934
322,228
25,641
25,641
The number of options under the 2018 LTIP Scheme to each of Peter Egan and Yvonne Monaghan were equivalent to 125 per cent and
110 per cent, respectively, of their base salaries at the time. The performance period is the three financial years starting 1 January 2023
and ending 31 December 2025. The performance conditions are as set out below within ‘Overview of Share Option Schemes’. If the
minimum performance criteria were to be achieved, 25 per cent of the scheme interests would become receivable.
Holding Period
Each of the awards above are subject to an additional holding period for two years from the date on which the award vests (the
‘Holding Period’). During the Holding Period, which will continue to apply in the event of cessation of employment, the award holder
may not normally dispose of any of the shares which vest except to cover any income tax or social security contributions arising on the
exercise of the award.
Overview of Share Option Schemes
2018 LTIP Scheme
The 2018 LTIP Scheme was approved by Shareholders at the 2018 AGM; a summary of the principal features of the rules of the 2018 LTIP
Scheme is included within the 2018 Notice of AGM.
The 2018 LTIP Scheme includes an ‘unapproved’ section, under which nil cost awards are made.
The first award under the 2018 LTIP Scheme was granted in March 2019, with further awards granted on an annual basis since then. Full
details of the performance conditions for each outstanding award are included in this report. Details of the performance conditions for
earlier awards and the extent to which the conditions were met can be found in previous Directors’ Remuneration Reports.
107107
2023 Annual Report & Accounts 02. Corporate Governance Directors’ Remuneration Report
Annual Remuneration Report
Continued >
Performance Conditions
An award was granted under the 2018 LTIP Scheme in March 2021 (the ‘2021 LTIP Award’). A summary of the performance conditions for
this award is included in the section above which explains the performance achieved against the relevant targets.
Another award was granted under the 2018 LTIP Scheme in March 2022 (the ‘2022 LTIP Award’). Following careful consideration, the
Committee agreed two separate performance targets which are similar to the targets agreed for the 2021 LTIP Award:
•
•
50 per cent of the 2022 LTIP Award will vest by reference to the annualised growth in the Company’s TSR over the performance
period relative to the annualised growth in the FTSE AIM All-Share Industrial Goods and Services Index over the performance
period. None of this element of the 2022 LTIP Award will vest if the TSR growth is less than the Index growth, one quarter will
vest if the TSR growth is equal to the Index growth and the whole of this element of the 2022 LTIP Award will vest if the TSR
growth is at least seven per cent above the Index growth. Vesting will be on a straight-line basis between these points.
The remaining 50 per cent of the 2022 LTIP Award will vest by reference to the Company’s adjusted fully diluted EPS as at
31 December 2024. None of this element of the 2022 LTIP Award will vest if EPS is less than 9.5 pence, one quarter will vest if EPS
is equal to 9.5 pence and the whole of this element of the 2022 LTIP Award will vest if EPS is 10.6 pence or greater. Vesting will be
on a straight-line basis if EPS is between 9.5 pence and 10.6 pence.
A further award was granted under the 2018 LTIP Scheme in March 2023 (the ‘2023 LTIP Award’). Following careful consideration, the
Committee agreed two separate performance targets:
•
•
50 per cent of the 2023 LTIP Award will vest by reference to the annualised growth in the Company’s TSR over the performance
period relative to the annualised growth in the Index over the performance period. The specific performance targets are the
same as for the 2022 LTIP Award as explained above.
The remaining 50 per cent of the 2023 LTIP Award will vest by reference to the Company’s adjusted profit before tax (‘PBT’) per
share as at 31 December 2025. None of the PBT per share element of the 2023 LTIP Award will vest if PBT per share growth is
less than 5 per cent per annum above the level of PBT per share for the financial year ended 31 December 2022. One quarter of
this element will vest for PBT per share growth of 5 per cent per annum, and the whole of this element will vest for PBT per share
growth of 10 per cent per annum or greater. Vesting will be on a straight-line basis if PBT per share growth is between 5 per cent
and 10 per cent per annum.
For the purpose of calculating TSR and Index growth, the average of the net return index over the dealing days falling in the period of
one month ending on the last day of the performance period will be compared to the average of the net return index over the dealing
days falling in the period of one month immediately preceding the first day of the performance period, in each respect of the Company
and for the Index.
2018 Approved LTIP Scheme
The rules of the 2018 LTIP Scheme also include a ‘CSOP’ section (the ‘2018 Approved LTIP Scheme’), under which UK tax-advantaged
market value options are awarded and which are linked to the nil cost awards under the 2018 LTIP Scheme. The linked awards give
the holder the same potential gross gain as if they had just received the 2018 LTIP Scheme award, however, as the 2018 Approved LTIP
Scheme is tax favoured, in certain circumstances all or part of any gain on the 2018 LTIP Scheme award will be received through the
2018 Approved LTIP Scheme and therefore taxed at a lower rate, or even zero.
The actual number of shares the award holder will receive when exercising options will depend on the date of exercise, whether the
performance conditions of the 2018 LTIP Scheme are achieved, the extent to which they are achieved and also on how much of the gain
(if any) can be delivered through the 2018 Approved LTIP Scheme. Part of the total award will be forfeited once the gain is determined,
however, this will still leave the holder with the same gross gain that would have been received had only an award been made under
the 2018 LTIP Scheme arrangement.
As set out above, on 8 March 2023 certain employees (including the Executive Directors) were granted awards under the 2018 Approved
LTIP Scheme, linked to the awards granted on the same date under the 2018 LTIP Scheme, at an exercise price of 117.0 pence.
SAYE Scheme
The SAYE Scheme is open to all employees, including Executive Directors, who have completed two years’ service at the date of
invitation and who open an approved savings contract.
When the savings contract is started, options are granted to acquire the number of shares that the total savings will buy when the
savings contract matures. Details of the exercise periods and normal expiry dates are given in note 29 of the Consolidated Financial
Statements.
108
Total Shareholder Return
The performance graph below shows the Company’s TSR performance against the performance of the FTSE AIM Industrial Goods and
Services Index over the ten-year period to 31 December 2023. The FTSE AIM Industrial Goods and Services Index has been selected for
this comparison as, in the opinion of the Directors, it represents the general sector in which the Group operates.
750
500
250
-
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Dec-21
Dec-22
Dec-23
JSG
FTSE AIM Industrial Goods & Services
Non-Executive Directors’ Remuneration (Audited)
Details of the amounts received by the Chair and the Non-Executive Directors during the year ended 31 December 2023 are as follows:
Current Directors
Jock Lennox
Chris Girling
Nick Gregg
Nicola Keach
Kirsty Homer
2023
£000
2022
£000
151
63
57
49
20
340
145
61
55
28
-
289
The base fees referred to above were increased by 3.5 per cent with effect from 1 January 2023. The annualised fee payable to
Kirsty Homer was £49,042 in 2023; the figure in the above table reflects the total amount of fees received by Kirsty Homer since her
appointment with effect from 1 August 2023. The annualised fee payable to Nicola Keach was £47,383 in 2022; the figure in the above
table reflects the total amount of fees received by Nicola Keach since her appointment with effect from 1 June 2022.
Non-Executive Director fees are subject to annual review with any increases generally applying with effect from 1 January. The Board
has approved a 3.5 per cent increase to base fees for Non-Executive Directors with effect from 1 January 2024. The Remuneration
Committee has also agreed a 3.5 per cent increase to the fee for the Board Chair with effect from the same date. In addition, the Board
approved increasing the additional fees payable to each of the Remuneration Committee Chair; the Audit Committee Chair; and the
Senior Independent Director to £10,000 per annum, also with effect from 1 January 2024.
109109
2023 Annual Report & Accounts 02. Corporate Governance Directors’ Remuneration Report
Annual Remuneration Report
Continued >
Total Directors’ Remuneration (Audited)
The aggregate total amount of remuneration received by all Directors in office during the year ended 31 December 2023, together
with the aggregate total amount of remuneration received by all Directors in office during the year ended 31 December 2022, is shown
below:
Executive Directors
Non-Executive Directors
2023
£000
2,089
340
2,429
2022
£000
1,115
289
1,404
Payments to Past Directors
There were no payments of money or other assets made to any former directors during the financial year ended 31 December 2023.
Payments for Loss of Office
There were no loss of office payments made to former directors during the year.
Implementation of Remuneration Policy in 2024
The Committee anticipates the remuneration policy to apply as follows in the year ending 31 December 2024:
Base Salary1
CEO: £472,692
CFO: £354,730
Taxable
Benefits
Pension
Bonus2
Car allowance, medical insurance
CEO: Capped at the cash value of 2019 entitlement (£41,613)
CFO: 12 per cent of base salary
CEO: Up to 150 per cent of base salary.
CFO: Up to 125 per cent of base salary.
Targets:
1)
2)
85 per cent of maximum entitlement to be based on the Group’s financial results using the adjusted PBT result
excluding notional interest; and
to reflect our continued commitment to sustainability, 15 per cent of maximum entitlement to be subject to the
satisfaction of targets linked to plastic consumption, water consumption and carbon emission reductions.
LTIP3
CEO: Grant at 150 per cent of base salary.
CFO: Grant at 125 per cent of base salary.
Targets:
1)
2)
50 per cent of the award to be based on the Company’s TSR performance relative to that of the constituents
of the FTSE 250 (excluding investment trusts) over the performance period. None of this element will vest if the
Company’s TSR positions it below the median of the comparator group, one quarter will vest if the Company’s
TSR is equal to the median of the group and the whole of this element will vest if the Company’s TSR is at
the upper quartile level or above when compared to the peer group. Vesting will be on a straight-line basis
between median and upper quartile.
The remaining 50 per cent of the award will vest by reference to growth in the Company’s adjusted fully diluted
EPS over the three-year performance period. None of this element will vest if EPS growth (on a CAGR basis) is
less than 9% p.a., one quarter will vest if EPS growth is equal to 9% p.a. and the whole of this element will vest
if EPS growth is 16% p.a. or greater. Vesting will be on a straight-line basis if EPS growth is between 9% p.a. and
16% p.a.
Note 1: Base salary payable in 2024 reflects a 3.5 per cent increase on the base salary payable in 2023.
110
Note 2: Annual bonus targets are considered by the Committee and the Board to be commercially sensitive as they could inform the Company’s
competitors of its budgeting. Consequently, we do not publish details of the targets on a prospective basis, however, we will provide full and
transparent disclosure of the targets and the performance against these targets on a retrospective basis in next year’s Annual Report at the
same time that the bonus outcome is reported.
Note 3: The decisions to use the FTSE 250 (excluding investment trusts) as a TSR peer group and to revert to EPS in place of adjusted PBT per share for
this LTIP award is explained on pages 91 to 92.
CEO Pay Ratio
The pay ratio regulations provide companies with a number of options for gathering the data required to calculate the ratio. We
have chosen to use “Option B” to calculate the CEO pay ratio which involves the use of data previously gathered for gender pay gap
reporting purposes. This option was chosen given the size and complexity of the exercise required to produce these ratios using other
means and on the basis that the Company has already completed comprehensive data collation and analysis for the purposes of
gender pay gap reporting.
The total pay and benefits of our employees at the 25th, 50th and 75th percentile and the ratios between the CEO and these employees,
using the CEO’s single total remuneration figure are as follows:
2023
2022
2021
2020
2019
25th percentile
pay ratio
50th percentile
pay ratio
75th percentile
pay ratio
49:1
32:1
33:1
23:1
46:1
45:1
25:1
31:1
19:1
31:1
32:1
19:1
28:1
16:1
26:1
The table below sets out the salary and total pay and benefits for the three identified quartile point employees:
2023 Salary
2023 Total Pay and Benefits
25th percentile
pay ratio
50th percentile
pay ratio
75th percentile
pay ratio
£21,681
£24,557
£22,838
£26,938
£35,230
£38,156
As explained in previous reports, our pay ratios have fluctuated between each reported year to date (not least due to the impact of the
Covid pandemic on employee remuneration) and no overall trend in the median pay ratio is observed at this time.
The majority of our employees work either within one of our processing facilities or in distribution. Irrespective of the specific role,
we aim to apply the same reward principles for all employees, in particular, that overall remuneration should be competitive when
compared to similar roles in other organisations from which we draw our talent. We are aware that year-to-year movements in the pay
ratio will be driven largely by our CEO’s variable pay outcomes. These movements will significantly outweigh any other changes in pay
within the organisation. Whatever the CEO pay ratio, the Company will continue to invest in competitive pay for all employees.
The Committee also recognises that, due to the specific nature of the Company’s business and the flexibility permitted within the
regulations for identifying and calculating the total pay and benefits for employees, as well as differences in employment and
remuneration models between companies, the ratios reported above may not be comparable to those reported by other companies.
Gender Pay Gap Reporting
Background
Under legislation that came into force in 2017, all companies with 250 or more employees must publish and report specific figures about
their gender pay gap. In respect of the Group, the legislation applies to Johnsons Textile Services Limited (the “Reporting Company”)
which for the period under review employed the vast majority of employees within the Group.
Employers must publish the gap in pay between men and women on both a mean basis (average hourly salary) and a median basis
(pay per hour based on the person ‘in the middle’ of the distribution of pay). In relation to bonus pay, employers are required to disclose
both a mean and median basis for average bonus pay received. Furthermore, the percentage of employees receiving bonuses by
gender must be disclosed. In addition, employers are required to disclose the distribution of gender by pay quartile – in other words,
splitting the workforce into four groups based on their pay and showing the proportion of males and females in each group.
The information provided below reflects the results of the most recent comprehensive data collation and analysis for the purposes of
our external gender pay gap reporting. The ‘Gender Pay Gap’ calculations relate to the pay period in which the snapshot date, 5 April
2023, falls for each full-pay relevant employee only. The ‘Gender Bonus Gap’ calculations relate to the period 6 April 2022 to 5 April 2023
for all relevant employees.
111111
2023 Annual Report & Accounts 02. Corporate Governance Directors’ Remuneration Report
Annual Remuneration Report
Continued >
Gender Pay Gap
The Company provides the following information in respect of its Gender Pay Gap:
Difference in the hourly rate of pay (mean)
Difference in the hourly rate of pay (median)
9.9%
7.4%
Gender Bonus Gap
The Company provides the following information in respect of its Gender Bonus Gap:
Difference in bonus pay (mean)
Difference in bonus pay (median)
Percentage of male employees who receive bonus pay
Percentage of female employees who receive bonus pay
6.3%
0.0%
33.8%
23.8%
Distribution of Male and Female Employees by Quartile
The proportions of male and female full-pay relevant employees in the lower, lower-middle, upper-middle and upper quartile bands
were as follows:
Female
54.9%
Female
47.5%
Female
43.3%
Female
26.1%
Male
45.1%
Male
52.5%
Male
56.7%
Male
73.9%
Lower
Quartile
Lower-Middle
Quartile
Upper-Middle
Quartile
Upper
Quartile
Explanatory Commentary
The results show that, as in previous years, there is a gender pay gap. Whilst having fewer females than males in senior and leadership
roles has an impact, it is also significantly influenced by two industry related factors:
1)
2)
laundries operate large transport fleets and hence employ a significant number of drivers. The role generally commands a
higher pay scale and is predominantly populated by males; and
laundry operations are very labour intensive with such roles being predominantly in the lower quartiles. A higher proportion of
these roles are currently performed by females.
The Group strives to ensure that it provides a workplace where all our people feel valued and equal and we continue to take action to
address the gap and to make sure our employment policies and practices are fair. This includes actively reviewing decisions around
annual pay, bonus pay and promotion opportunities and the Group will continue to endeavour to provide a training and development
platform for all individuals to grow, both personally and in their work role, irrespective of gender.
112
Relative Importance of Spend on Pay
The following table sets out the amounts payable in dividends; amounts paid in connection with the Company’s share buyback
programmes, launched in September 2022 and, more recently, September 2023; and total employee costs in respect of the years
ended 31 December 2023 and 31 December 2022. The Committee does not consider that there are any other significant distributions or
payments outside the ordinary course of business that warrant disclosure.
Dividends payable (note 1)
Share buyback programme (note 2) (note 3)
Total employee costs (note 4)
2023
£m
11.7
29.9
204.7
2022
£m
10.3
5.6
181.4
%
Change
13.6%
433.9%
12.8%
Note 1: The 2023 dividend comprises an interim dividend of 0.9 pence (2022: 0.8 pence) per Ordinary share and a proposed final dividend of 1.9 pence
(2022: 1.6 pence) per Ordinary share. This total dividend of 2.8 pence per Ordinary share, subject to the approval of Shareholders and based upon
the number of shares in issue as at the date of this report, will amount to a dividend distribution for the year of £11.7 million (2022: £10.3 million).
Note 2: On 15 September 2022, the Company announced the commencement of a share buyback programme with an aggregate market value
equivalent of up to £27.5 million (excluding expenses) (‘2022 Share Buyback Programme’). Consistent with the Company’s capital allocation policy,
the purpose of the 2022 Share Buyback Programme was to reduce the Company’s share capital. Pursuant to the 2022 Share Buyback Programme,
the Company entered into a non-discretionary instruction with Investec Bank plc to purchase up to £27.5 million (excluding expenses) of the
Company’s Ordinary shares of 10 pence each and to make trading decisions under the 2022 Share Buyback Programme independently of the
Company in accordance with certain pre-set parameters. The 2022 Share Buyback Programme commenced on 15 September 2022 and ended
on 4 May 2023, being the date of the Company’s AGM. The total consideration payable in connection with the 2022 Share Buyback Programme,
including expenses, was £25.5 million of which £19.9 million was expended during 2023. All of the Ordinary shares bought back pursuant to the
2022 Share Buyback Programme were cancelled.
Note 3: On 20 September 2023, the Company announced the commencement of a share buyback programme with an aggregate market value
equivalent of up to £10.0 million (excluding expenses) (‘2023 Share Buyback Programme’). Consistent with the Company’s capital allocation
policy, the purpose of the 2023 Share Buyback Programme was to reduce the Company’s share capital. Pursuant to the 2023 Share Buyback
Programme, the Company entered into a non-discretionary instruction with Investec Bank plc to purchase up to £10.0 million (excluding
expenses) of the Company’s Ordinary shares of 10 pence each and to make trading decisions under the 2023 Share Buyback Programme
independently of the Company in accordance with certain pre-set parameters. The 2023 Share Buyback Programme commenced on 20
September 2023 and completed on 27 November 2023. The total consideration payable in connection with the 2023 Share Buyback Programme,
including expenses, was £10.0 million all of which was expended during 2023. All of the Ordinary shares bought back pursuant to the 2023 Share
Buyback Programme were cancelled.
Other Details
The mid-market price of the Ordinary shares of 10p each on 31 December 2023 and 31 December 2022 was 141.6 pence and 96.9 pence
respectively. During the year, the mid-market price of the Ordinary shares of 10p each ranged between 94.0 pence and 145.4 pence
(2022: 77.0 pence and 162.0 pence).
Annual General Meeting
The table below shows the voting outcome at the 2023 AGM, held on 4 May 2023, for the 2022 Directors’ Remuneration Report.
No. of
Votes ‘For’1
% of
Votes Cast
No. of
Votes ‘Against’
% of
Votes Cast
Total No.
of Votes Cast
No. of
Votes ‘Withheld’2
295,968,686
98.91%
3,248,089
1.09%
299,216,775
7,480
Note 1:
Note 2:
Includes ‘Discretionary’ votes.
A vote ‘Withheld’ is not a vote under English law and is not counted in the calculation of votes ‘For’ or ‘Against’ a resolution.
At the 2024 AGM, due to be held on 1 May 2024, Shareholders will be invited to vote on the Directors’ Remuneration Report for 2023.
Nick Gregg
Chair, Remuneration Committee
4 March 2024
113113
2023 Annual Report & Accounts 02. Corporate Governance
116
Independent Auditors’ Report
125 Consolidated Income Statement
126
127
Consolidated Statement of
Comprehensive Income
Consolidated Statement of Changes
in Shareholders’ Equity
128 Consolidated Balance Sheet
129 Consolidated Statement of Cash Flows
130
Statement of Significant Accounting
Policies
143
Notes to the Consolidated Financial
Statements
03
Group
Financial
Statements
114
2023 Annual Report & Accounts 03. Group Financial Statements
115
Independent Auditor’s Report to the
members of Johnson Service Group PLC
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Johnson Service Group PLC (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended
31 December 2023, which comprise:
Group
Parent Company
Consolidated Income Statement
Company Statement of Changes in Shareholders’ Equity
Consolidated Statement of Comprehensive Income
Company Balance Sheet
Consolidated Statement of Changes in Shareholders’ Equity
Company Statement of Cash Flows
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements, including a summary
of significant accounting policies
Notes to the Company Financial Statements, including a summary of
significant accounting policies
The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting standards
and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2023 and
of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
the Parent Company financial statements have been properly prepared in accordance with UK-adopted international accounting standards
as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the ‘Auditor’s responsibilities for the audit of the financial statements’ section of our report. We are independent of
the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Parent
Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to
the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the auditor’s opinion. Our conclusions are based on
the audit evidence obtained up to the date of our report. However, future events or conditions may cause the Group or the Parent Company to cease
to continue as a going concern.
Our evaluation of the directors’ assessment of the Group’s and the Parent Company’s ability to continue to adopt the going concern basis of
accounting included obtaining and assessing management’s paper and assessment of going concern, including forecasts covering the period to
30 June 2025 and testing the mathematical accuracy of the forecasts, as approved by the Board. We have also tested the accuracy of management’s
forecasting through a comparison of prior period forecasts to actual data and assessed the forecasts prepared to ensure consistency with other areas
of the audit, utilising the work performed such as using industry data and other external information to challenge the reasonableness of
management’s assumptions. We have assessed compliance with financial covenants within the Group’s facilities for the period to 30 June 2025 and the
available headroom to the Group. In addition, we assessed the reverse stress tested performed by management, determining if scenarios are
plausible. We assessed the adequacy of the related disclosures within the Annual Report and Accounts.
In our evaluation of the directors’ conclusions, we considered the inherent risks associated with the Group’s and the Parent Company’s business model
including effects arising from macro-economic uncertainties such as rising interest rates, we assessed and challenged the reasonableness of estimates
made by the directors and the related disclosures and analysed how those risks might affect the group’s and the parent company’s financial resources
or ability to continue operations over the going concern period.
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2023 Annual Report & Accounts 03. Group Financial Statements
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In relation to the Group’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in
relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis
of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
Our approach to the audit
Materiality
Key audit
matters
Scoping
Overview of our audit approach
Overall materiality:
Group: £2.25m, which represents 0.5% of the Group’s revenue.
Parent Company: £1.4m, which represents 0.2% of the Parent Company’s total assets.
Key audit matters were identified as:
• Customer (rebate) arrangements (same as previous year);
• Carrying value of goodwill (same as previous year); and
•
Acquisition accounting and valuation of intangible assets acquired
(new in the current year).
Our auditor’s report for the year ended 31 December 2022 included two key audit matters
that have not been reported as key audit matters in our current year’s report. These are ‘The
revenue cycle includes fraudulent transactions’, and ‘Going concern’. The key audit matter
relating to the revenue cycle has been removed due to this no longer being a matter, that in
our professional judgement, is of most significance in the audit of the financial statements of
the current period. The key audit matter relating to going concern has been removed owing
to the increased headroom on facilities and strong performance of the group in the current
period.
We performed audits of the financial statements of the Parent Company, and of the
financial information of one other component using component materiality (full scope
audit). We performed specific audit procedures relating to one further component. We
performed analytical procedures at Group level for the remaining 10 components in the
Group during the year.
In total, our procedures covered 96% of the Group’s revenue, 94% of the Group’s total assets
and 97% of the Group’s profit before tax.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters
included those that had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Description
Audit
reponse
KAM
KAM
Disclosures Our results
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Continued >
In the graph below, we have presented the key audit matters and significant risks relevant to the audit. This is not a complete list of all risks identified
by our audit.
High
Potential
financial
statement
impact
The revenue cycle includes
fraudulent transactions
DB Pension
scheme
Going
Concern
Parent
company
investments
Management override
of controls
Carrying value of
goodwill
Customer (rebate)
arrangements
Acquisition accounting
and valuation of intangible
assets acquired
Low
Low
Extent of Management judgment
High
Key audit matter
Significant risk
Key Audit Matter – Group
Customer (rebate) arrangements
We identified the completeness and accuracy of customer (rebate)
arrangements as a key audit matter, which includes to rebate
arrangements which feature management judgment as one of the most
significant assessed risks of material misstatement due to fraud and error.
Through its divisional trading activities, the Group has rebate agreements
in place across certain key customers. These vary on a customer-by-
customer basis, but largely relate to volume of sales made throughout the
year.
The complexity of such arrangements also vary, with some based on
retrospective information and others requiring management judgement.
We have pinpointed the significant risk to the accuracy and completeness
of rebate arrangements which feature management judgment.
The level of rebate granted is based on contractual terms which are
specific to each customer. These are not uniform, which means that there is
inherently an element of complexity which gives rise to an increased risk of
error or fraud occurring in respect of these balances. This includes both the
amounts recognised within the income statement and balance sheet at
the year end.
How our scope addressed the matter – Group
In responding to the key audit matter, we performed the following audit
procedures:
• For a sample of customers, recalculated the rebate recognised within
both the income statement and the balance sheet based on
contractual terms from review of customer contracts incorporating
unpredictability into our sampling approach;
• Performed year-on-year analysis of the accrual balance per customer
to gain assurance of the reasonableness of the year-end balance
recognised. We tested completeness of the rebate recognised within
both the income statement and the balance sheet by assessing
contractual arrangements within the Group’s key customers to check
these were not indicative of unrecorded (rebate) arrangements;
• Held discussions with employees outside of the finance function to
understand new rebate arrangements entered into in the year;
• Obtained an understanding of significant revenue deductions or credits
issued to customers in the year to determine if these related to rebate
agreements;
• Assessed transactions post year end to agree amounts recorded and
check these have been accounted for in the correct period and
determine whether post year-end activity is indicative of unrecorded
customer arrangements;
• Assessed the ageing of the accruals and considered management’s
assessment of the likelihood of claims for historic amounts; and
• Assessed management’s paper setting out the legal position in relation
to aged rebate contracts.
Relevant disclosures in the Annual Report and Accounts
Our results
• Financial statements: Statement of Significant Accounting Policies,
Rebates
Based on our audit work, we did not identify any material misstatements
in relation to customer (rebate) arrangements.
• Audit committee report: Accounting for Complex Customer
Arrangements
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2023 Annual Report & Accounts 03. Group Financial Statements
Key Audit Matter – Group
Carrying value of goodwill
We identified the carrying value of goodwill as a key audit matter, which
includes valuation and allocation of the carrying value of goodwill in
relation to the Regency Laundry Limited Cash Generating Unit (‘CGU’) as
one of the most significant assessed risks of material misstatement due to
error.
Under International Accounting Standard IAS 36 ‘Impairment of Assets’,
management is required to assess at the end of each reporting period
whether there is any indication that an asset may be impaired and to
perform an annual assessment whether the Group’s goodwill within a CGU
is impaired.
The process for assessing whether impairment of assets exists under
International Accounting Standard (IAS) 36 ‘Impairment of Assets’ is
complex. Management prepare impairment models to assess the value in
use. Calculating value in use, through forecasting cash flows related to
CGUs and the determination of CGUs, appropriate discount rate and other
assumptions to be applied can be highly judgmental and subject to
management bias or error. The selection of certain inputs into the cash
flow forecasts can also significantly impact the results of the impairment
assessment.
How our scope addressed the matter – Group
In responding to the key audit matter, we performed the following audit
procedures:
• Considered the appropriateness of management’s determination of
CGUs relevant for impairment testing, including management’s change
in CGU determination during the year as a result of the acquisition of
Harkglade Limited and its subsidiaries, Celtic Linen Limited and
Millbrook Linen Limited;
• Assessed the mathematical accuracy of the impairment model and
the methodology applied by management for consistency with the
requirements of IAS 36 ‘Impairment of Assets’;
• Obtained management’s assessment over carrying value and value in
use;
• Tested the accuracy of management’s forecasting through a
comparison of prior forecasts to actual data;
• Considered the appropriateness of management’s key assumptions
relating to the calculation of the value in use of CGUs and estimated
future cash flows, including the growth rate and discount rate used to
assess the level of headroom;
• Used our internal valuations experts to inform our challenge of
management, that the methodology used in management’s model
and assumptions used within the calculation of WACC are reasonable;
• Assessed management’s reverse stress test to understand the impact
of any reasonably possible changes in assumptions, and evaluated the
headroom available from different outcomes to assess whether
goodwill could be impaired;
• Performed our own specific sensitivity analysis on management’s
model relating to the Regency Laundry Limited CGU; and
• Assessed whether the Group’s disclosures with respect to the carrying
value of Group goodwill are adequate and the key assumptions are
disclosed.
Relevant disclosures in the Annual Report and Accounts
Our results
• Financial statements: Statement of Significant Accounting Policies,
Impairment of non-financial assets; Goodwill and Note 12, Goodwill
• Audit committee report: Impairment
Based on our audit work, we found the assumptions used in
management’s impairment model were appropriate. We did not identify
any material misstatements with respect to the carrying value of the
Group’s goodwill in accordance with IAS 36 ‘Impairment of Assets’.
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Independent Auditor’s Report to the
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Continued >
Key Audit Matter – Group
How our scope addressed the matter – Group
Acquisition accounting and valuation of intangible assets acquired
The group has completed the acquisition of Harkglade Limited, and its
subsidiaries Celtic Linen Limited and Millbrook Linen Limited (‘Celtic Linen’) in
August 2023. We identified the acquisition accounting associated with these
acquisitions including valuation of the intangible assets related with the
Celtic Linen acquisition, as one of the most significant assessed risks of
material misstatement due to error.
Under IFRS 3 ‘Business Combinations’, management is required to recognise,
separately from goodwill, the assets acquired and liabilities assumed, and
then recognise goodwill on purchase. Assets, liabilities and intangible assets
should be recognised at fair value. Management make judgments to
identify specific intangible assets that are acquired, and make estimates to
value these assets. The process for assessing the valuation of intangible
assets is complex and therefore this has been included as a key audit
matter.
In responding to the key audit matter, we performed the following audit
procedures:
• Assessed the share purchase agreement, and documented key details
around the acquisition including details of consideration paid;
• Assessed whether the requirements of control as defined by IFRS 10
‘Consolidated Financial Statements’ has been achieved;
• Assessed whether the Group’s accounting policy for the valuation of
intangible assets acquired is in accordance with IFRS 3 ‘Business
Combinations’ and checking that the fair value measurements are
accounted for in accordance with the stated accounting policy;
• Obtained the acquisition date balance sheet of each acquired
subsidiary and performed procedures to assess the recognition of the
material assets and liabilities acquired;
• Obtained management’s purchase price allocation used to value
specific acquired intangibles and assessing the appropriateness and
reasonableness of key assumptions made in the calculations, such as
growth rates, customer attrition rates and discount rates, considering if
assets and liabilities transferred have been recognised at fair value, per
the requirements of IFRS 3 ‘Business Combinations’;
• Used our internal valuations experts to inform our challenge of
management, that the methodology used in the valuation calculations
and assumptions used are reasonable; and
• Assessed whether the Group’s disclosures with respect to the intangible
asset recognised and fair value of assets and liabilities acquired are
adequate.
Relevant disclosures in the Annual Report and Accounts
Our results
• Financial statements: Note 34, Business combinations.
• Audit committee report: Acquisition Accounting
Based on our audit work, we have not identified any material
misstatements with respect to acquisition accounting and valuation of
intangible assets acquired.
We did not identify any key audit matters relating to the audit of the financial statements of the Parent Company only.
Our application of materiality
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified misstatements on the audit
and of uncorrected misstatements, if any, on the financial statements and in forming the opinion in the auditor’s report.
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2023 Annual Report & Accounts 03. Group Financial Statements
Materiality was determined as follows:
Materiality measure
Group
Parent company
Materiality for financial
statements as a whole
Materiality threshold
Significant judgments made by
auditor in determining the
materiality
Performance materiality used
to drive the extent of our
testing
Performance materiality threshold
Significant judgments made by
auditor in determining
performance materiality
Specific materiality
We define materiality as the magnitude of misstatement in the financial statements that, individually or in the
aggregate, could reasonably be expected to influence the economic decisions of the users of these financial
statements. We use materiality in determining the nature, timing and extent of our audit work.
£2.25m (2022: £1.95m), which represents 0.5% of the
Group’s revenue. The range of component materialities
used across the group was £0.05m to £2.13m.
£1.4m (2022: £1.3m), which represents 0.2% of the Parent
Company’s total assets.
In determining materiality, we made the following
significant judgments:
In determining materiality, we made the following
significant judgments:
• We determine revenue to be the most appropriate
benchmark for the Group due to this having
importance in both external financial reporting and
internal management reporting. This is a key driver
of business activity and is a measure on which
growth is monitored.
• A market-based measurement percentage was
chosen which reflected our knowledge of the
business from the prior year audit, as well as our risk
assessment of the business.
Materiality for the current year is higher than the level
that we determined for the year ended 31 December
2022 to reflect the increase in the Group’s revenue
• We determined the Parent Company’s total assets
to be the most appropriate benchmark because
the Parent Company does not trade and largely
holds investments in subsidiary undertakings.
• A market-based measurement percentage was
chosen which reflected our knowledge of the
business from the prior year audit, as well as our risk
assessment of the business.
Materiality for the current year is higher than the level
that we determined for the year ended 31 December
2022 to reflect the growth in Parent Company assets.
We set performance materiality at an amount less than materiality for the financial statements as a whole to
reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality for the financial statements as a whole.
£1.6m (2022: £1.365m), which is 70% (2022: 70%) of
financial statement materiality.
£0.98m (2022: £0.910m), which is 70% (2022: 70%) of
financial statement materiality.
In determining performance materiality, we made the
following significant judgments:
In determining performance materiality, we made the
following significant judgments:
• Our risk assessment procedures did not identify any
• Our risk assessment procedures did not identify any
significant changes in business objectives and
strategy of the Group;
significant changes in business objectives and
strategy of the Parent Company;
• We considered qualitative and quantitative factors
• We considered qualitative and quantitative factors
when evaluating the impact of prior period
adjusted and unadjusted misstatements; and
when evaluating the impact of prior period
adjusted and unadjusted misstatements; and
• We considered whether there were any significant
• We considered whether there were any significant
control deficiencies identified in the prior year.
control deficiencies identified in the prior year.
We determine specific materiality for one or more particular classes of transactions, account balances or
disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole
could reasonably be expected to influence the economic decisions of users taken on the basis of the financial
statements.
Specific materiality
We determined a lower level of specific materiality for
the following areas:
We determined a lower level of specific materiality for
the following areas:
Communication of
misstatements to the audit
committee
Threshold for communication
• Related party transactions; and
• Related party transactions; and
• Directors’ remuneration.
• Directors’ remuneration.
We determine a threshold for reporting unadjusted differences to the audit committee.
£0.115m (2022: £0.975m), which represents 5% of Group
materiality, and misstatements below that threshold
that, in our view, warrant reporting on qualitative
grounds.
£0.07m (2022: £0.065m), which represents 5% of Parent
Company materiality and misstatements below that
threshold that, in our view, warrant reporting on
qualitative grounds.
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Independent Auditor’s Report to the
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Continued >
The graph below illustrates how performance materiality and the range of component materiality interacts with our overall materiality and the
threshold for communication to the audit committee.
Overall materiality – Group
Overall materiality – Parent
Total revenue,
£465m
FSM £2.25m,
0.5%
Total assets,
£612.1m
FSM £1.4m,
0.2%
FSM
£2.25m,
0.5%
PM
£1.6m,
70%
RoM
£0.05m
to £2.13m
TfC
£0.115m,
5%
FSM
£1.4m,
0.18%
PM
£0.98m,
70%
TfC
£0.07m,
5%
FSM: Financial statement materiality, PM: Performance materiality, RoM: Range of materiality at 3 components, TfC: Threshold for communication to the
audit committee.
An overview of the scope of our audit
We performed a risk-based audit that requires an understanding of the Group’s and the Parent Company’s business and in particular matters related
to:
Understanding the group, its components, and their environments, including group-wide controls
•
•
The engagement team obtained an understanding of the Group and its environment, including Group-wide controls, and assessed the risks of
material misstatement at the Group level; and
The engagement team further considered the effect of the Group organisational structure on the scope of the audit, and used this to inform our
assessment of risk.
Identifying significant components
•
The engagement team performed an evaluation of identified components to assess the significant components and to determine the planned
audit response based on a measure of materiality, calculated by considering the component’s significance as a percentage of the Group’s total
assets, revenue and profit before taxation.
Type of work to be performed on financial information of parent and other components (including how it addressed the key audit matters)
•
•
Of the Group’s 13 components, we identified 2 which, in our view, required an audit of their financial information using component materiality (full
scope audit), either due to their size or their risk characteristics. As a result of this, we performed an audit of the financial statements of the Parent
Company and of the financial information of one component, Johnsons Textile Services Limited.
There were 4 new components identified within the period, as a result of acquisition of Regency Laundry Limited, and Celtic Linen. These were not
significant components. There was 1 component in the prior year, Lilliput (Dunmurry) Limited, not present in the current year.
• We identified key audit matters of the Group, which were customer (rebate) arrangements, carrying value of goodwill and acquisition accounting
and valuation of intangible assets acquired. The audit procedures performed in respect of these have been included within the key audit matters
section of our report.
• We performed specific audit procedures in respect of one component, Johnson Group Properties PLC.
• We performed analytical procedures at Group level over the remaining ten components. These procedures, together with the additional
procedures outlined above, were designed to give us the audit evidence needed for our opinion on the Group financial statements as a whole.
Performance of our audit
Together, the components subject to full-scope audits covered 96% of the Group’s revenue, 90% of the Group’s total assets and 97% of the Group’s
profit before tax.
All work including component work was performed by the Group audit team.
•
•
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2023 Annual Report & Accounts 03. Group Financial Statements
Audit approach
No. of
components
% coverage
total assets
% coverage
revenue
% coverage
PBT
Full-scope audit 2 (2022: 2) 90 (2022: 95) 96 (2022: 98) 97 (2022: 96)
Specified audit procedures 1 (2022: 1) 4 (2022: 4) 0 (2022: 0) 0 (2022: 0)
Analytical procedures 10 (2022: 7) 6
(2022: 1) 4 (2022: 2) 3 (2022: 4)
Total 13 (2022: 10) 100
100
100
Other information
The other information comprises the information included in the Annual Report and Accounts, other than the financial statements and our auditor’s
report thereon. The Directors are responsible for the other information contained within the Annual Report and Accounts. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements themselves. If,
based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is
consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in the course of the audit, we
have not identified material misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
•
•
•
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Corporate governance statement
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement
relating to the group’s compliance with the provisions of the UK Corporate Governance Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is
materially consistent with the financial statements or our knowledge obtained during the audit:
•
•
•
•
•
•
•
the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties
identified as set out on page 60;
the directors’ explanation as to their assessment of the group’s prospects, the period this assessment covers and why the period is appropriate as
set out on page 59;
the director’s statement on whether they have a reasonable expectation that the group will be able to continue in operation and meet its
liabilities as set out on page 60;
the directors’ statement on fair, balanced and understandable as set out on page 61;
the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks as set out on page 75;
the section of the annual report that describes the review of the effectiveness of risk management and internal control systems as set out on
page 75; and
the section describing the work of the audit committee as set out on page 74.
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Continued >
Responsibilities of Directors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 61, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend
to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. The extent to which our procedures are capable of detecting
irregularities, including fraud, is detailed below:
• We obtained an understanding of the legal and regulatory frameworks applicable to the Parent Company and the Group and the industry in
which they operate. We determined that the most significant laws and regulations are: the Companies Act 2006, UK-adopted international
accounting standards, the UK Corporate Governance Code and taxation laws;
• We obtained an understanding of how the Parent Company and the Group are complying with those legal and regulatory frameworks by
making inquiries of management, those responsible for legal and compliance procedures and the company secretary. We corroborated our
inquiries through our review of board minutes and papers provided to the Audit Committee;
• We assessed the susceptibility of the Group and Parent Company’s financial statements to material misstatement, including how fraud might
occur. Audit procedures performed by the Group engagement team included:
•
•
•
•
•
•
•
Assessing the design and implementation of controls management has in place to prevent and detect fraud;
Obtaining an understanding of how those charged with governance considered and addressed the potential for override of controls or
other inappropriate influence over the financial reporting process;
Challenging assumptions and judgments made by management in significant accounting estimates;
Obtaining an understanding around rebate agreements and releases of aged accrual balances including obtaining an understanding of
the legal requirements of such agreements;
Identifying and testing journal entries, in particular any journal with unusual characteristics;
Engaging with our internal tax specialist to address the risk of non-compliance with taxation legislation; and
Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing.
•
•
These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud or error. The risk of not
detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error and detecting irregularities that
result from fraud is inherently more difficult than detecting those that result from error, as fraud may involve collusion, deliberate concealment,
forgery or intentional misrepresentations. Also, the further removed non-compliance with laws and regulations is from events and transactions
reflected in the financial statements, the less likely we would become aware of it;
The engagement partner’s assessment of the appropriateness of the collective competence and capabilities of the Group engagement team
included consideration of the Group engagement team’s knowledge of the industry in which the Group operates, and the understanding of, and
practical experience with, audit engagements of a similar nature and complexity through appropriate training and participation;
• We communicated relevant laws and regulations and potential fraud risks to all engagement team members, and remained alert to any
indications of fraud or non-compliance with laws and regulations throughout the audit.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work
has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Michael Frankish
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Manchester
4 March 2024
124
2023 Annual Report & Accounts 03. Group Financial Statements
Consolidated Income Statement
Revenue
Impairment loss on trade receivables
All other costs
Operating profit
Operating profit before amortisation of intangible assets
(excluding software amortisation), goodwill impairment and
exceptional items
Note
1, 2
18
2
1, 2
1, 2
Amortisation of intangible assets (excluding software amortisation) 13
12
Goodwill impairment
6
Exceptional items
1, 2
7
9
35
11
Operating profit
Finance cost
Profit before taxation
Taxation charge
Profit for the year from continuing operations
Profit for the year from discontinued operations
Profit for the year attributable to equity holders
Earnings per share
Basic earnings per share
– From continuing operations
– From discontinued operations
From total operations
Diluted earnings per share
– From continuing operations
– From discontinued operations
From total operations
See note 11 for Adjusted basic earnings per share and Adjusted diluted earnings per share.
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
465.3
(1.7)
(420.0)
43.6
50.5
(5.3)
–
(1.6)
43.6
(6.0)
37.6
(10.4)
27.2
0.1
27.3
6.4p
–
6.4p
6.4p
–
6.4p
385.7
(0.9)
(351.5)
33.3
41.2
(7.2)
(1.4)
0.7
33.3
(3.0)
30.3
(1.5)
28.8
0.2
29.0
6.5p
–
6.5p
6.5p
–
6.5p
125
Consolidated Statement of
Comprehensive Income
Note
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
Profit for the year
Items that will not be subsequently reclassified
to profit or loss
Re-measurement and experience gains/(losses) on
post-employment benefit obligations
Taxation in respect of re-measurement and
experience (gains)/losses
Deferred taxation rate change in respect of
re-measurement and experience losses
Items that may be subsequently reclassified to profit or loss
Cash flow hedges (net of taxation) – fair value (losses)/gains
– transfers to administrative
costs
Net loss on hedge of a net investment
Exchange differences on translation of foreign operations
Total other comprehensive income/(loss) for the year
Total comprehensive income for the year
26
27
27
27
27.3
8.8
(2.2)
–
(0.5)
0.4
(0.3)
0.3
6.5
33.8
The notes on pages 143 to 177 are an integral part of these Consolidated Financial Statements.
29.0
(10.0)
2.5
0.1
1.4
(2.2)
–
–
(8.2)
20.8
126
2023 Annual Report & Accounts 03. Group Financial Statements
Consolidated Statement of Changes in
Shareholders’ Equity
Share
Capital
£m
Share
Premium
£m
Capital
Merger Redemption
Reserve
Reserve
£m
£m
Hedge
Reserve
£m
Retained
Earnings
£m
Balance at 31 December 2021
44.5
16.8
1.6
0.6
Profit for the year
Other comprehensive loss
Total comprehensive (loss)/income
for the year
Share options (value of employee
services)
Share buybacks
Deferred tax on share options
Dividend paid
Transactions with Shareholders
recognised directly in
Shareholders’ equity
Balance at 31 December 2022
Profit for the year
Other comprehensive (loss)/income
Total comprehensive (loss)/income
for the year
Share options (value of employee
services)
Share buybacks
Deferred tax on share options
Dividend paid
Transactions with Shareholders
recognised directly in
Shareholders’ equity
Balance at 31 December 2023
–
–
–
–
(0.6)
–
–
(0.6)
43.9
–
–
–
–
(2.5)
–
–
(2.5)
41.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
16.8
1.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
16.8
1.6
–
–
–
–
0.6
–
–
0.6
1.2
–
–
–
–
2.5
–
–
2.5
3.7
0.3
–
(0.8)
(0.8)
–
–
–
–
–
(0.5)
–
(0.1)
(0.1)
–
–
–
–
–
(0.6)
208.6
29.0
(7.4)
21.6
0.8
(5.7)
(0.2)
(3.5)
(8.6)
221.6
27.3
6.6
33.9
1.0
(29.8)
0.1
(10.6)
(39.3)
216.2
Total
Equity
£m
272.4
29.0
(8.2)
20.8
0.8
(5.7)
(0.2)
(3.5)
(8.6)
284.6
27.3
6.5
33.8
1.0
(29.8)
0.1
(10.6)
(39.3)
279.1
The Group has an Employee Benefit Trust (EBT) to administer share plans and to acquire shares, using funds contributed by the Group, to meet
commitments to employee share schemes. At 31 December 2023 the EBT held 9,024 shares (2022: 9,024). Additionally, at 31 December 2022 and pursuant
to the then ongoing share buyback programme, the Group also held 116,934 treasury shares. See note 29 for further details.
127
Consolidated Balance Sheet
Note
As at
31 December 2023
£m
As at
31 December 2022
£m
Assets
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Right of use assets
Textile rental items
Trade and other receivables
Current assets
Inventories
Trade and other receivables
Reimbursement assets
Cash and cash equivalents
Liabilities
Current liabilities
Trade and other payables
Borrowings
Current income tax liabilities
Lease liabilities
Derivative financial liabilities
Provisions
Non-current liabilities
Post-employment benefit obligations
Deferred income tax liabilities
Trade and other payables
Borrowings
Lease liabilities
Derivative financial liabilities
Provisions
Net assets
Equity
Capital and reserves attributable to the
company’s shareholders
Share capital
Share premium
Merger reserve
Capital redemption reserve
Hedge reserve
Retained earnings
Total equity
12
13
14
15
16
18
17
18
19
20
22
23
27
25
26
24
21
22
23
27
25
29
31
144.4
19.1
134.5
40.0
71.9
0.4
410.3
1.9
83.3
3.9
9.6
98.7
92.8
8.3
0.5
5.5
0.6
4.9
112.6
0.3
15.0
0.3
63.0
37.7
0.2
0.8
117.3
279.1
41.4
16.8
1.6
3.7
(0.6)
216.2
279.1
133.8
10.9
119.6
31.7
63.8
0.3
360.1
1.8
61.0
4.5
6.1
73.4
75.7
5.1
0.2
5.1
0.4
5.1
91.6
10.2
1.8
0.3
14.7
29.2
0.3
0.8
57.3
284.6
43.9
16.8
1.6
1.2
(0.5)
221.6
284.6
The notes on pages 143 to 177 are an integral part of these Consolidated Financial Statements. The financial statements on pages 125 to 177 were
approved by the Board of Directors on 4 March 2024 and signed on its behalf by:
Yvonne Monaghan
Chief Financial Officer
128
2023 Annual Report & Accounts 03. Group Financial Statements
Consolidated Statement of Cash Flows
Note
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
Cash flows from operating activities
Profit for the year
Adjustments for:
Taxation charge
Total finance cost
Depreciation
Amortisation
Goodwill impairment
Profit on disposal of property, plant and equipment
Decrease in inventories
Increase in trade and other receivables
Increase in trade and other payables
Deficit recovery payments in respect of
post-employment benefit obligations
Share-based payments
Decrease in provisions
Commodity swaps not qualifying as hedges
Income re insurance claims
Cash generated from operations
Interest paid
Taxation (paid)/received
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of business (including net of cash acquired)
Purchase of other intangible assets
Purchase of property, plant and equipment
Income re insurance claims
Purchase of software
Proceeds from sale of property, plant and equipment
Purchase of textile rental items
Proceeds received in respect of special charges
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Capital element of leases
Share buyback
Dividends paid to company shareholders
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Cash and cash equivalents comprise:
Cash
Overdraft
Cash and cash equivalents at end of year
9
7
13
12
30
34
16
29
36
The notes on pages 143 to 177 are an integral part of these Consolidated Financial Statements.
27.3
10.4
6.0
80.6
5.7
–
(0.1)
0.4
(10.2)
9.5
(1.6)
1.0
(0.3)
–
–
128.7
(5.7)
(1.6)
121.4
(29.7)
–
(31.1)
–
–
0.2
(61.9)
3.3
(119.2)
100.6
(54.6)
(7.6)
(29.9)
(10.6)
(2.1)
0.1
0.8
0.9
9.6
(8.7)
0.9
29.0
1.5
3.0
63.5
7.4
1.4
(0.2)
0.4
(12.9)
4.3
(1.9)
0.8
(0.1)
(0.1)
(1.5)
94.6
(3.6)
3.5
94.5
–
(1.3)
(22.1)
1.5
(0.3)
0.4
(52.5)
2.7
(71.6)
48.0
(51.0)
(5.6)
(5.6)
(3.5)
(17.7)
5.2
(4.4)
0.8
6.1
(5.3)
0.8
129
Statement of Significant Accounting
Policies
Johnson Service Group PLC (the ‘Company’) and its subsidiaries (together ‘the Group’) provide textile rental and related services across the United
Kingdom (‘UK’) and the Republic of Ireland (‘ROI’).
The Company is incorporated and domiciled in the UK, its registered number is 523335 and the address of its registered office is Johnson House, Abbots
Park, Monks Way, Preston Brook, Cheshire, WA7 3GH. The Company is a public limited company and has its primary listing on the AIM division of the
London Stock Exchange.
The Group and Company financial statements were authorised for issue by the Board on 4 March 2024.
Basis of preparation
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently
applied to the information presented, unless otherwise stated. These financial statements and notes have been rounded to the nearest £0.1 million,
unless otherwise stated. Accounting policies have been applied consistently throughout all periods.
The Consolidated Financial Statements of the Group have been prepared on a going concern basis in accordance with UK-adopted international
accounting standards. The Consolidated Financial Statements have been prepared under the historical cost convention, as modified by the
revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss and defined benefit pension
plans where plan assets are measured at fair value.
The preparation of financial statements in conformity with UK adopted international standards requires the use of certain critical accounting
estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher
degree of judgment or complexity, or areas where assumptions and estimates are significant to the Consolidated Financial Statements, are disclosed
below in the section entitled ‘Judgments made in accounting policies’ and ‘Sources of estimation and uncertainty’.
Going concern
After considering the monthly cash flow projections, the stress tests and the facilities available to the Group and Company, the Directors have a
reasonable expectation that the Group and Company have adequate resources for their operational needs, will remain in compliance with the
financial covenants set out in the bank facility agreement and will continue in operation for at least the period to 30 June 2025. Accordingly, and
having reassessed the principal risks and uncertainties, the Directors considered it appropriate to adopt the going concern basis in preparing the
Group and Company financial statements. See the Directors’ Report for the full going concern assessment.
Changes in accounting policy and disclosures
(a)
Standards and amendments that are effective for the first time in 2023 and could be applicable to the Group;
•
FRS 17 ‘Insurance Contracts’
•
•
•
•
Amendments to IFRS 17 Insurance Contracts (Amendments to IFRS 17 and IFRS 4)
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
Definition of Accounting Estimates (Amendments to IAS 8)
(b)
Standards, amendments and interpretations to existing standards that are not yet effective (have not been endorsed by the
UKEB) and have not been early adopted by the Group
•
Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
•
•
•
•
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)
Non-current Liabilities with Covenants (Amendments to IAS 1)
Lack of Exchangeability (Amendments to IAS 21)
Judgments made in applying accounting policies
In the course of preparing these financial statements, certain judgments are made by the Group in the process of applying the Group’s accounting
policies. Those that have the most significant effect on either the amounts recognised in the financial statements or the presentation thereof are
discussed below.
Going concern
The Board have considered the uncertainty that exists on the future financial performance of the Group as part of the Group’s adoption of the going
concern basis in the preparation of the Consolidated Financial Statements. The Consolidated Financial Statements are prepared on a going concern
basis. Additional information on the judgment management has applied in adopting the going concern assumption is set out on pages 59 to 60.
130
2023 Annual Report & Accounts 03. Group Financial Statements
Sources of estimation and uncertainty
The Group makes estimates and assumptions concerning the future. Whilst such estimates and assumptions are believed to be reasonable under the
circumstances, the resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that are
considered to have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year
are discussed below:
(a)
Post-employment benefit obligations
The Group operates two post retirement defined benefit arrangements (note 26). Asset valuations are based on the fair value of scheme assets.
The valuations of the liabilities of the schemes are based on statistical and actuarial calculations, using various assumptions including discount
rates, future inflation rates and pension increases, life expectancy of scheme members, flexible retirement options and cash commutations. The
actuarial assumptions may differ materially from actual experience due to changes in economic and market conditions, variations in actual
mortality, higher or lower cash withdrawal rates and other changes. Any of these differences could impact the assets or liabilities recognised in
the Balance Sheet in future years.
Forward looking statements
The terms ‘expect’, ‘should be’, ‘will be’, ‘is likely to’ and similar expressions identify forward looking statements.
Although the Board believes that the expectations reflected in these forward looking statements are reasonable, such statements are subject to a
number of risks and uncertainties and actual results and events could differ materially from those currently expressed or implied in such forward
looking statements.
Factors which may cause future outcomes to differ from those foreseen in forward looking statements include, but are not limited to: general economic
conditions and business conditions in the Group’s markets; exchange and interest rate fluctuations; customers’ acceptance of its products and services;
the actions of competitors; and legislative, fiscal and regulatory developments.
Consolidation
The Group controls an entity when the Group has power over an entity, is exposed to, or has rights to, variable returns from its involvement with the
entity and has the ability to affect these returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that control ceases.
The accounting periods of subsidiary undertakings are co-terminus with those of the Company. Inter-company transactions, balances and unrealised
gains and losses on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred. Subsidiaries’ accounting policies have been changed, where necessary, to ensure consistency with
the policies adopted by the Group.
Inter-company transactions include those relating to internal property leases between Johnson Group Properties PLC (the property holding company
of the Group) and each of our other businesses. Under IFRS 16, each of the lessees are now required to recognise an asset (the right to use the leased
item) and a financial liability to pay rentals. The accounting for lessors has not significantly changed. On consolidation, each of the right of use asset,
lease liability, depreciation and interest recognised by the lessee, relating to internal property leases, is therefore eliminated.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the
fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Where consideration due to
vendors is deferred, but is not contingent on future events, it is included in consideration when assessing the total acquisition cost and is accrued within
trade and other payables until such a time that the amounts are settled. Where consideration due to vendors is contingent on future events,
management’s assessment of the fair value of the amounts payable are included in consideration when assessing the total acquisition cost and is
accrued within trade and other payables until such a time that the amounts are settled. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their fair value at the acquisition date, irrespective of the extent of any
non-controlling interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded
as goodwill. If the cost of acquisition is less than the fair value of the Group’s share of the net assets of the subsidiary acquired, the difference is
recognised immediately in the Consolidated Income Statement. As per IFRS 3, where new information is obtained within the measurement period
about facts and circumstances that existed as at the acquisition date and, if known, would have affected the amounts recognised as at that date, the
fair value of assets and liabilities acquired should be adjusted accordingly. The measurement period does not exceed one year from the acquisition
date. Costs directly attributable to acquisitions are expensed to the Consolidated Income Statement as an exceptional item.
Following the acquisition of Celtic Linen in August 2023, the results from overseas operations have been translated into sterling at the weighted
average euro rate of exchange for the period of £1 = €1.155 where this is a reasonable approximation to the rate at the dates of the transactions. Euro
denominated assets and liabilities have been translated at the relevant rate of exchange at the balance sheet date of £1 = €1.154.
Segment reporting
Operating segments are identified in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief
operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as
the Executive Directors. For reporting purposes, operating segments are aggregated into reporting segments where operating segments are
considered to have similar economic conditions and characteristics and where the aggregation of operating segments provides information that
enables users to evaluate the nature and financial effects of the business activities in which the Group engages and the economic environments in
which it operates.
131
Statement of Significant Accounting
Policies Continued >
Alternative performance measures (APMs)
Throughout this Annual Report, and consistent with prior years, we refer to a number of APMs. APMs are used by the Group to provide further clarity
and transparency of the Group’s financial performance. The APMs are used internally by management to monitor business performance, budgeting
and forecasting, and for determining Directors’ remuneration and that of other management throughout the business. The APMs, which are not
recognised under UK-adopted international accounting standards, are:
•
•
•
•
•
•
‘adjusted operating profit’, which refers to operating profit before amortisation of intangible assets (excluding software amortisation), goodwill
impairment and exceptional items;
‘adjusted profit before taxation’, which refers to adjusted operating profit less total finance cost;
‘adjusted EBITDA’, which refers to adjusted operating profit plus the depreciation charge for property, plant and equipment, textile rental items
and right of use assets, plus software amortisation;
‘adjusted EPS’, which refers to EPS calculated based on adjusted profit after taxation;
‘adjusted EPS excluding capital allowances super-deduction’, an additional measure introduced which amends the ‘adjusted EPS’ to exclude the
short-term benefit of the capital allowance super-deduction; and
‘adjusted net debt’, which refers to net debt excluding IFRS 16 lease liabilities.
The Board considers that the above APM’s, all of which exclude the effects of non-recurring items or non-operating events, provide useful information
for stakeholders on the underlying trends and performance of the Group and facilitate meaningful year on year comparisons.
Limitations of APMs
The Board is cognisant that APMs do have limitations and should not be regarded as a complete picture of the Group’s financial performance.
Limitations of APMs may include, inter alia:
•
•
•
similarly named measures may not be comparable across companies;
profit-related APMs may exclude significant, sometimes recurring, business transactions (e.g. restructuring charges and acquisition-related costs)
that impact financial performance and cash flows; and
adjusted operating profit, adjusted profit before taxation, adjusted EBITDA, adjusted EPS and adjusted EPS excluding capital allowances
super-deduction all exclude the amortisation of intangibles acquired in business combinations, but do not similarly exclude the related revenue.
Reconciliation of APMs to statutory performance measures
Reconciliations between the above APMs and statutory performance measures are reconciled within this Annual Report as follows:
•
•
•
•
•
•
Adjusted operating profit – note 1
Adjusted profit before taxation – note 8
Adjusted EBITDA – note 8
Adjusted EPS – note 11
Adjusted EPS excluding capital allowances super-deduction – note 11
Adjusted net debt – note 36
Revenue recognition
Rendering of services
Revenue recognition is based on the principle that revenue is recognised when the performance obligation is satisfied i.e. control of a service transfers
to a customer and is measured based on the consideration specified in a contract with a customer. The Group’s contracts are repeat service-based
contracts where value is transferred to the customer over time as the services are delivered. The provision of clean items of workwear/linen is a
repetitive service of the same nature even though the number of items delivered may vary based on customer needs. As such, the Group’s contracts
have a single performance obligation as this is a series of distinct goods or services that are substantially the same and that have the same pattern of
transfer to the customer. The Group applies the practical expedient under IFRS 15 B16 and recognises the revenue in the amount to which the Group
has a right to invoice.
Revenue recognised is the amount of consideration to which the Group expects to be entitled to, in accordance with the existing contract, in exchange
for transferring promised services to a customer, excluding amounts collected on behalf of third parties, such as VAT.
Customers are generally invoiced weekly or monthly in arrears for service contracts with the vast majority of customers on 30 day credit terms.
Revenue from services provided to customers not invoiced as at the balance sheet date is recognised as unbilled receivables as where the service has
already been performed, the Group has an unconditional right to consideration before it invoices where only the passage of time is required before
payment of that consideration is due. This typically arises where the timing of the related billing cycle occurs in a period after the performance
obligation is satisfied.
132
2023 Annual Report & Accounts 03. Group Financial Statements
Contract modifications occur on a regular basis to record change in stock requirements for customers or price changes. The Group accounts for a
contract modification when it is approved by the parties to the contract. Following a contract modification, the customer is billed in line with the
delivery of the remaining performance obligations. Changes in stock requirements do not result in additional distinct services being provided as the
service provided is of the same nature with the amount of garments/linen varying. Given the provision of clean items of garments/linen is a repetitive
service of the same nature, any remaining services following a modification are distinct from those previously provided. The remaining consideration in
the original contract not yet recognised as revenue is combined with the additional consideration promised in the modification to create a new
transaction price that is then allocated to all remaining performance obligations. This effectively accounts for the modification as a termination of the
original contract and the inception of a new contract for all performance obligations that remain unperformed. This approach would also apply to
any mid-contract price increases.
The Group applies the practical expedient included in paragraph 121 of IFRS 15 and does not disclose information about its remaining performance
obligation for contracts as the Group recognises revenue in line with the value of the services received by the customer to date.
Supply of goods
Where sale of goods occur, revenue is recognised at a point in time when goods are delivered to customers. Revenue recognised is the amount of
consideration to which the Group expects to be entitled to, in accordance with the existing contract, in exchange for transferring promised goods to a
customer, excluding amounts collected on behalf of third parties, such as VAT.
Invoices are raised to customers for the sale of goods following delivery.
The breakdown of revenue within the Group is presented, by operating segment, in the Segment Analysis (note 1).
Rebates
Rebates payable to customers are recognised in line with relevant contractual terms. Rebates payable to customers are contingent on the occurrence
or non-occurrence of a future event e.g. the customer meeting certain agreed criteria. Rebates are recorded using the most likely method (the single
most likely amount in a range of possible consideration amounts). Accruals are made for each individual rebate based on the specific terms and
conditions of the customer agreement, including where they are subject to a demand from the customer. Management makes estimates on an
ongoing basis, primarily based on current customer spending, historic data and its accumulated experience, in order to assess customer revenues and
to calculate total rebates earned to be recorded as deductions from revenue. Rebates are charged directly to the Consolidated Income Statement over
the period to which they relate.
Costs incurred to obtain a contract
The incremental costs incurred to directly obtain a contract with a customer are capitalised and recognised as an asset within Trade and other
receivables (note 18) where management expects to recover those costs. Such costs are subsequently amortised over the period consistent with the
Group’s transfer of the related goods or services to the customer. Costs to obtain a contract that would have been incurred regardless of whether the
contract was obtained are recognised as an expense in the period where incurred.
The costs capitalised include sales commission paid to employees where payment is identified as relating directly to the signing of a customer
contract. Where consideration is paid to customers relating to a contract for a period over which services will be provided, the Group also capitalises
these costs. The costs are amortised over the average contract life.
Management is required to determine the recoverability of contract related assets at each reporting date. An impairment exists if the carrying amount
of any asset exceeds the amount of consideration the Group expects to receive in exchange for providing the associated goods and services, less the
remaining costs that relate directly to providing those goods and services under the relevant contract. An impairment is recognised immediately where
such losses are forecast.
The movement in the asset balance in the period therefore represents additional payments made, subsequent amortisation and any required
impairment.
Exceptional items
Items that are material in size, non-operating or non-recurring in nature are presented as exceptional items in the Consolidated Income Statement,
within the relevant account heading. The Directors are of the opinion that the separate recording of exceptional items provides helpful information
about the Group’s underlying business performance. Events which may give rise to the classification of items as exceptional include, but are not
restricted to, restructuring of businesses, gains or losses on the disposal of certain properties, one off gains or losses relating to pension liabilities, one off
income relating to non-trading activities, gains and losses related to capital insurance claims and expenses incurred and costs relating to business
acquisitions and any subsequent reorganisation cost.
Employee benefits
Post-employment benefits
The Group operates various pension schemes. The schemes are funded through payments to insurance companies or trustee-administered funds,
determined by periodic actuarial calculations. The Group has both defined benefit and defined contribution plans.
A defined contribution plan is a pension plan under which the Group pays contributions to publicly or privately administered pension insurance plans
on a mandatory, contractual or voluntary basis. The Group has no legal or constructive obligations to pay further contributions if the fund does not
hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a
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pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive
on retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognised in the Balance Sheet in respect of the defined benefit pension plan is the present value of the defined benefit obligation at the
balance sheet date, less the fair value of plan assets. The defined benefit obligation is calculated periodically by an independent actuary using the
projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows
using interest rates of high-quality corporate bonds that are denominated in the currency in which benefits will be paid, and that have terms to
maturity approximating to the terms of the related pension liability.
Past service costs are recognised immediately in the Consolidated Income Statement. Interest cost on plan liabilities and interest income on plan
assets are recognised in finance costs. Curtailment gains arising from amendments to the terms of a defined benefit plan such that a significant
element of future service by current employees will no longer qualify for benefits, or will only qualify for reduced benefits, are recognised in the
Consolidated Income Statement. Re-measurement gains and losses arising from experience adjustments and changes in actuarial and demographic
assumptions are charged or credited to the Consolidated Statement of Comprehensive Income in the period in which they arise.
For defined contribution plans, contributions are recognised as an employee benefit expense when they are due. Prepaid contributions are recognised
as an asset to the extent that a cash refund or a reduction in the future payments is available.
Other post-employment benefit obligations
The Group provides unfunded post-retirement healthcare benefits to a limited number of current and future retirees. The entitlement to these benefits
is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs
of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit pension plans. The
liability is recognised on the Balance Sheet within ‘Post-employment benefit obligations’. Re-measurement gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged or credited to equity in the Consolidated Statement of Comprehensive Income in the
year in which they arise.
Share-based compensation
The Group operates a number of equity-settled, share-based compensation plans. The economic cost of awarding shares and share options to
employees is recognised as an expense in the Consolidated Income Statement equivalent to the fair value of the benefit awarded. The fair value is
determined by reference to option pricing models, principally Binomial and Monte Carlo models. The fair value at the grant date of the award is
recognised in the Consolidated Income Statement over the vesting period of the award. At each balance sheet date, the Group revises its estimate of
the number of options that are expected to become exercisable. Any revision to the original estimate is reflected in the Consolidated Income
Statement with a corresponding adjustment to equity to the extent it relates to past service and the remainder over the rest of the vesting period. All
options cancelled are fully expensed to the Consolidated Income Statement upon cancellation. The proceeds received net of any directly attributable
transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. Any amount charged or credited to
the Consolidated Income Statement by any of the Group’s subsidiaries is reflected in the books of the Company via an increase or decrease in
investments, with a corresponding increase or decrease to equity. These entries are eliminated within the Consolidated Financial Statements. See the
Directors’ Remuneration Report for further information.
Bonus plans
The Group recognises an expense and a liability for bonuses based on the profit attributable to the Group or business as appropriate and other
pre-determined performance criteria. The Group recognises an accrual where it is contractually obliged or where there is a past practice that has
created a constructive obligation.
Termination benefits
The Group recognises termination benefits when it is demonstrably committed to the termination of the employment of current employees according
to a detailed formal plan without possibility of withdrawal.
Discontinued operations
Business components that represent separate major lines of business or geographical areas of operations are recognised as discontinued if the
operations have been disposed of.
Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment, or more
frequently if there are indicators that an impairment may have arisen. Assets that are subject to amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by
which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to dispose
and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
flows (cash-generating units). Non-financial assets, other than goodwill, that suffer an impairment are reviewed for possible reversal of the impairment
at each reporting date. Value in use calculations are considered first followed by fair value less costs to dispose if it is deemed necessary. See note 12 for
further information.
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Intangible assets
Goodwill
For acquisitions since 28 December 2003, goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the
identifiable net assets of the acquired business at the date of acquisition. For acquisitions prior to this date, goodwill is included at the amount
recorded previously under UK GAAP. For acquisitions prior to 1 January 2010, the cost of an acquisition includes related expenses but such costs are
excluded for acquisitions after this date.
Goodwill on business acquisitions is included in non-current assets. Negative goodwill arising on acquisition is recognised directly in the Consolidated
Income Statement.
Gains and losses on the disposal of a business include the carrying amount of goodwill relating to the business sold. Goodwill is tested at least
annually for impairment and carried at cost less accumulated impairment losses. Where an impairment is identified, it is charged to the Consolidated
Income Statement within amortisation and impairment of intangible assets (excluding software). Impairment losses on goodwill are not reversed.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups
of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.
Capitalised software
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software, and are
included on the Balance Sheet within intangible assets. Costs are amortised, once commissioned, over their estimated useful lives (four to ten years).
Costs associated with the general development and maintenance of computer software programs are recognised as an expense as incurred. Costs
that are directly associated with the production of identifiable and unique software products controlled by the Group, and that are expected to
generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include the costs of employees involved
in software development and an appropriate portion of relevant overheads.
Computer software development costs recognised as assets are amortised over their estimated useful lives (not exceeding thirteen years).
Costs incurred in respect of the configuration and customisation of cloud-based software arrangements are expensed as and when the services are
received. Configuration and customisation costs which include the development of software code that enhances or modifies, or creates additional
capability to the existing on-premise software to enable it to connect with the cloud-based software applications, are recognised as intangible assets
and amortised over their estimated useful lives (not exceeding thirteen years).
Other intangible assets
Other intangible assets comprise customer contracts and relationships, recognised at cost. They have a finite useful life and are carried at cost less
accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of the intangible assets over their estimated
useful lives (three to thirteen years).
For assets resulting from a business combination, fair value is calculated based upon historical and prospective information and financial data specific
to each business combination, with an appropriate discount factor applied.
Property, plant and equipment
Property, plant and equipment is stated at cost, less depreciation, which is calculated to write off these assets, by equal annual instalments, over their
estimated useful lives. Cost includes expenditure which is directly attributable to the acquisition of the asset. The estimated life of plant, vehicles and
fixtures is two to fifteen years. Improvements to short leasehold properties are amortised over the shorter of the terms of the leases and their useful life.
The residual values and useful lives of assets are reviewed, and adjusted if appropriate, at each balance sheet date.
Properties are depreciated over their estimated remaining useful life not exceeding 50 years commencing on 26 December 1999 or, if later, date of
purchase. Land is not depreciated. The Group has not adopted a policy of revaluation but the carrying amounts of freehold and long leasehold
properties reflect previous valuations. In the event of an impairment in property value the deficit below cost is charged to the Consolidated Income
Statement.
The fit-out costs of new freehold or long leasehold industrial buildings are depreciated, in equal annual instalments, over their expected useful lives
which range from 10 to 25 years from the date on which the assets are fully commissioned.
Subsequent costs are included in the asset’s carrying amount, or recognised as a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the
replaced part is derecognised. All other repairs and maintenance costs are charged to the Consolidated Income Statement during the financial year in
which they are incurred.
No depreciation is provided for assets in the course of construction until they are completed and put in use as management intended.
The cost of property, plant and equipment acquired through business combinations is accounted for as the fair value of assets acquired.
Gains and losses on disposals are determined by comparing the net proceeds with the carrying amount and are recognised within the Consolidated
Income Statement.
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Right of use assets and lease liabilities
Under IFRS 16, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and
low-value leases where costs are charged to the Consolidated Income Statement on a straight-line basis over the lease term.
At the date of lease inception, the Group determines whether the arrangement is a lease or contains a lease, while examining if it conveys the right to
control the use of an identified asset for a period of time in exchange for consideration. In its assessment of whether an arrangement conveys the right
to control the use of an identified asset, the Group assesses whether it has the following two rights throughout the lease term:
(a)
(b)
The right to obtain substantially all the economic benefits from use of the identified asset; and
The right to direct the identified asset’s use.
Where a contract is deemed to contain a lease, the lease liability is initially recognised at the commencement day and measured at an amount equal
to the present value of the lease payments during the lease term (the non-cancellable period) that are not yet paid.
Lease payments, excluding non-lease components (which are charged to the Consolidated Income Statement on a straight-line basis over the lease
term) such as service costs, are discounted using the incremental borrowing rate of the lessee, since the interest rate implicit in the Group’s leases is not
readily determinable. The incremental borrowing rate is the rate that the Group would have to pay for a loan of a similar term, and with similar security,
to obtain an asset of similar value. The Group consults with its main bankers to determine what interest rate they would expect to charge the Group to
borrow money to purchase a similar asset to that which is being leased.
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option
or not exercise a break clause. Periods after extension options/break clauses are only included in the lease term if the lease is reasonably certain to be
extended or not be terminated.
Break clause options are included in a number of property leases across the Group. These are used to maximise operational flexibility in terms of being
able to make decisions regarding the Group’s processing facilities in order to manage the needs of the Group. The majority of break clauses held are
exercisable by either the Group or the lessor.
At the commencement date, it is unlikely that management would consider a break clause to be reasonably certain of being exercised given
management would be unlikely to enter into a new lease agreement for a term which it was not their current intention to utilise in full. The lease term is
reassessed if a break clause is exercised or the likelihood of exercise becomes reasonably certain. The assessment of reasonable certainty is only
revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the Group.
An example of a significant change for the Group may include changing economic conditions and customer requirements impacting the Group’s
activities or long-term strategy.
All property break clause options held by the Group have not been included in the lease liability unless otherwise stated i.e. the periods after the break
clauses have been included in the lease term. This is due to the fact the Group could not move the plants to other locations without significant cost and
disruption, for reasons such as the Group will have made significant leasehold improvements to the property to meet the requirements of a laundry
processing facility, the costs involved in moving plant and machinery, the availability of a workforce and the lack of suitable alternative premises.
Variable lease payments that depend on an index or a rate, are initially measured using the index or rate existing at the commencement of the lease
and are included in the measurement of the lease liability. The Group is exposed to potential future increases in variable lease payments based on an
index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take
effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Each subsequent lease payment is allocated between the liability and finance cost. The finance cost is charged to the Consolidated Income Statement
over the lease period using the effective interest method.
The right of use asset is initially recognised at the commencement day and measured at cost, consisting of the amount of the initial measurement of
the lease liability, plus any lease payments made to the lessor at or before the commencement date, plus any initial direct costs incurred by the Group,
less any lease incentives received.
The right of use asset is subsequently depreciated in accordance with the requirements in IAS 16 ‘Property, Plant and Equipment’ which results in
depreciation on a straight-line basis over the shorter of the asset’s useful life and the lease term on a straight-line basis. IAS 36 ‘Impairment of Assets’ is
also applied to determine whether the right of use asset is impaired and to account for any impairment loss identified. An impairment can be
recognised where onerous property leases are identified which can occur where a particular property becomes non-trading but for which the Group
still has a remaining lease obligation. The net book value of the right of use asset is written down to £nil.
Reassessment of a lease occurs where there is a change in cash flows based on contractual clauses that have been part of the contract since
inception. Any remeasurement of the lease liability results in a corresponding adjustment of the right of use asset. If the carrying amount of the right of
use asset has already been reduced to zero, the remaining remeasurement is recognised in profit or loss. The Group remeasures the lease liability to
reflect those revised lease payments only when there is a change in the cash flows, using an unchanged discount rate. Reassessment of leases in the
Group occurs where lease consideration changes due to a market rent review clause or changes to variable lease payments dependent on an index
or rate.
A modification to a lease occurs where there is a change in scope of the lease, or the consideration for a lease, that was not part of the original terms
and conditions. Where the modification increases the scope of the lease by adding the right to use one or more underlying assets, and the
consideration increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that
stand-alone price to reflect the contract’s circumstances, the Group accounts for the modification as a separate lease.
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In all other cases, on the initial date of the lease modification, the Group allocates the consideration in the modified contract to the contract
components, determines the revised lease term and measures the lease liability by discounting the revised lease payments using a revised discount
rate. This occurs in the case where the Group agrees property lease term extensions that were not contractual as part of the original lease.
Rentals payable in respect of operating leases (net of any incentives received from the lessor) for short term and low value leases are charged to the
Consolidated Income Statement on a straight-line basis over the lease term.
Lease payments are presented in the Consolidated Statement of Cash Flows as follows:
•
•
•
short term lease payments relating to low value assets are presented within cash flows from operating activities
payments for the interest element of recognised lease liabilities are included within Interest paid within cash flows from operating activities
payments for the capital element of recognised lease liabilities are presented within cash flows from financing activities
For lessor accounting, leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating
leases. Sublet income is therefore recognised on a straight-line basis over the lease term.
Assets financed by leasing or hire purchase arrangements, which give rights approximating to ownership, and which had an outstanding liability on
transition to IFRS 16 were transferred from Property, plant and equipment to be disclosed within Right of use assets. Where such agreements expire
and ownership is transferred, the cost and accumulated depreciation of the relevant assets are transferred back to Property, plant and equipment.
Textile rental items
Textile rental items which principally comprise workwear garments, cabinet towels, linen and dust mats are initially treated as inventories. On issue to
customers or into pool stock, rental items are transferred to non-current assets and are stated at invoiced cost. Depreciation is calculated on a
straight-line basis over the estimated lives of the items in circulation, which range from two to five years with the majority being between two and three
years. Issued textile rental items bought through acquisition of other businesses are accounted for as the fair value of issued textile rental items
acquired. This will be the deemed cost of these items.
Charges are levied in respect of lost or damaged items or where a customer terminates the service before the end of the contracted period. Such
charges are referred to as ‘special charges’. Where proceeds are received in respect of these special charges the amounts received are deducted from
the carrying value of those items.
Where textile rental items are damaged and no charges are levied, an impairment loss is charged to the Consolidated Income Statement.
Where proceeds are received in respect of textile rental items withdrawn from circulation these are deducted from the carrying value of those
amounts.
Inventories
Stocks of materials, stores, goods for resale and new rental items are valued at the lower of cost and net realisable value. Cost is stated on either a first
in, first out basis or average cost basis and comprises invoiced cost in respect of the purchase of finished goods and materials, direct labour and direct
transportation costs in respect of garments for sale. It excludes borrowing costs.
Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Costs of inventories
include the transfer from equity of any gains/losses on qualifying cash flow hedges of purchases of goods. Provision is made for obsolete, defective and
slow moving stock.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision
for impairment.
Under IFRS 9, the Group applies the simplified approach to measure the loss allowance at an amount equal to lifetime expected credit losses for trade
receivables.
The Group continues to establish a provision for impairment of trade receivables when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of the receivables. In addition, IFRS 9 requires the Group to consider forward looking
information and the probability of default when calculating expected credit losses. The measurement of expected credit losses reflects an unbiased
and probability-weighted amount that is determined by evaluating the range of possible outcomes as well as incorporating the time value of money.
The expected loss rates are based on the payment profiles of sales over the year and the corresponding historical credit losses experienced within this
period. The historical loss rates are adjusted to reflect current and forward looking information on factors affecting the ability of the customers to settle
the receivables. Trade receivables have been grouped for this analysis based on shared credit risk characteristics, including operating segment and
region in which the customer operates. The model considers indicators such as actual or expected significant adverse changes in business, financial or
economic conditions that are expected to cause a significant change to the customers’ ability to meet its obligations. The forward looking loss rate is
applied to the Trade receivables excluding those specifically provided as per details below.
Further to the above model, trade receivables are specifically impaired where there are indicators of significant financial difficulties of the counterparty,
probability that the counterparty will enter bankruptcy or financial reorganisation, or there is default or delinquency in payments.
The amount of the provision is the difference between the carrying amount and the present value of estimated future cash flows of the asset,
discounted, where material, at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account,
and the amount of the loss is recognised in the Consolidated Income Statement within ‘impairment loss on trade receivables’. When a trade receivable
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is uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are
credited against ‘impairment loss on trade receivables’ in the Consolidated Income Statement. Only when amounts are confirmed irrecoverable, are
they written off to the Consolidated Income Statement.
Reimbursement assets
The Group recognise a reimbursement asset in respect of third-party claims made against the Group, but which are indemnified under the terms of its
insurance policies. A corresponding provision for such claims is also recognised. All of the expenditure required to settle such claims will be reimbursed
by the insurer under the terms of the policies, therefore it is virtually certain that reimbursement will be received. See note 19 for further details.
Cash and cash equivalents
Cash and cash equivalents in the Balance Sheet comprise cash at bank and in hand.
In accordance with IAS 32: ‘Financial instruments: Presentation’, even where banking arrangements have a right of set off, bank overdrafts are not
netted against cash and cash equivalents with the resulting net position shown as either a bank overdraft or a cash balance as appropriate, but are
instead shown within borrowings in current liabilities on the Balance Sheet.
For the purpose of the Consolidated Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net
of outstanding bank overdrafts.
Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Trade payables
are non-interest bearing.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Transaction costs are amortised, as a finance cost, over the expected
term of the facility, using the effective interest method. Borrowings are classified on the Balance Sheet as either current or non-current liabilities,
dependent upon the maturity date of the loan. Where no borrowings exist to offset transaction costs, these costs are presented in current or
non-current assets.
Bank overdrafts are shown within borrowings in current liabilities on the Balance Sheet.
Net debt
Net debt is defined as borrowings and lease liabilities, less cash and cash equivalents.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Provision is not made for future operating losses. Provisions are discounted where the impact is deemed to be material.
Insurance claims
The Group recognise a provision for third-party claims made against the Group which are indemnified under the terms of its insurance policies. A
corresponding reimbursement asset in respect of third party claims is also recognised. See note 25 for further details.
Property
Provision is made for dilapidations and environmental remediation costs. Liabilities for environmental costs are recognised as a property provision
when environmental assessments or remediation are probable and the associated costs can be reliably estimated. Generally, the timing of these
provisions coincides with the commitment to a formal plan of action or, if earlier, on divestment or closure of inactive sites. The provision will be utilised
by the payment of annual costs, shortfalls on sub-tenanted property, expenses of early termination, environmental remediation operations and
dilapidations.
Self insurance
Provision is made for the expected costs of uninsured incidents arising prior to the balance sheet date and for the anticipated cost of benefits due to
existing claimants under the, now discontinued, self-insured incapacity payroll scheme.
Taxation
Current tax
Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the tax
authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.
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2023 Annual Report & Accounts 03. Group Financial Statements
Deferred tax
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements. Deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction,
other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined
using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and that are expected to apply when the
related deferred tax asset is realised or the deferred tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary
differences can be utilised.
Government grants
Government grants are recognised at fair value when there is reasonable assurance that the conditions associated with the grants have been
complied with and the grants will be received. Grants compensating for expenses incurred are recognised as a deduction of the related expenses in
the Consolidated Income Statement on a systematic basis in the same periods in which the expenses are incurred.
Foreign currency translation
The Consolidated Financial Statements are presented in Sterling, which is the functional and presentational currency of the Group and Company.
Monetary assets and liabilities denominated in foreign currencies are translated into functional currency at the rates of exchange quoted at the
balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as
at the dates of the initial transactions.
Day-to-day transactions in a foreign currency are recorded in the functional currency at an average rate for the month in which those transactions take
place, which is used as a reasonable approximation to the actual transaction rate.
Translation differences on monetary items are taken to the Consolidated Income Statement.
Following the acquisition of Celtic Linen, a number of subsidiaries within the Group have a non-sterling functional currency. The financial performance
and end position of these entities are translated into Sterling in the Consolidated Financial Statements. Balance sheet items are translated at the rate
applicable at the balance sheet date. Transactions reported in the Consolidated Income Statement are translated using an average rate for the
month in which they occur.
The differences that arise from translating the results of foreign entities at average rates of exchange, and their assets and liabilities at closing rates,
are dealt with in a separate component of equity.
On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the
Consolidated Income Statement. All other currency gains and losses are dealt with in the Consolidated Income Statement.
Derivative financial instruments and hedging activities
The Group enters into commodity swaps to hedge against the Group’s exposure to price changes in respect of diesel. Derivatives are initially
recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of
recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being
hedged. The Group designates certain derivatives as hedges of the variability of cash flows (cash flow hedge).
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk
management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception
and on an ongoing basis, of whether the derivatives that are used in hedging transactions are effective in offsetting changes in the cash flows of
hedged items.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised within
Comprehensive income and accumulated in a separate component of equity. The gain or loss relating to the ineffective portion is recognised
immediately in the Consolidated Income Statement.
Amounts accumulated in equity are recycled in the Consolidated Income Statement in the years when the hedged item will affect profit or loss (for
example, when the forecast transaction that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of
a non-financial asset (for example, inventory) or a liability, the gains and losses previously deferred in equity are transferred from equity and included in
the initial measurement of the cost of the asset or liability.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing
in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the Consolidated Income
Statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately
transferred to the Consolidated Income Statement.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Such derivatives are classified as at fair value through profit or loss, and changes in
their fair value are recognised immediately in the Consolidated Income Statement.
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Net investment hedging
Financial instruments are classified as net investment hedges when they hedge the Group’s net investment in an overseas operation. The effective
element of any foreign exchange gain or loss from remeasuring the instrument is recognised directly in other comprehensive income and accumulated
in the translation reserve in equity. Any ineffective element is recognised immediately in the Consolidated Income Statement. Gains and losses
accumulated in the translation reserve are reclassified to the Consolidated Income Statement when the foreign operation is disposed of.
Investment in own shares
Ordinary shares in the Company held by the Trustee of the Employee Benefit Trust (EBT), and those held as Treasury shares awaiting cancellation, are
recorded in the Balance Sheet as a reduction in Shareholders’ equity.
As part of the previously announced share buyback, own shares are treated as a deduction to equity until the shares are cancelled, at which point they
are transferred to retained earnings. The nominal value of shares in the Company purchased and subsequently cancelled is shown as a reduction in
share capital and an equal and opposite transfer to the capital redemption reserve.
Dividend distribution
Dividends to holders of equity instruments declared after the balance sheet date are not recognised as a liability as at the balance sheet date. Final
dividend distributions to the Company’s Shareholders are recognised in the Group’s financial statements in the year in which the dividends are
approved by the Company’s Shareholders. Interim dividends are recognised when paid.
Shareholders’ equity
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
Share premium
Amounts in excess of the nominal value of Ordinary shares issued are recognised in share premium except where the Company was able to take relief
under section 612 of the Companies Act 2006 from crediting share premium and instead transfer the net proceeds in excess of the nominal value to
retained earnings.
Capital redemption reserve
Amounts in respect of the redemption of certain of the Company’s ordinary shares are recognised in the Capital redemption reserves once shares have
been cancelled. Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in
profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.
Merger reserve
The merger reserve represents the difference arising on completion of the relevant mergers in accordance with applicable accounting standards.
Translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign
subsidiaries and exchange differences on financial instruments that provide a hedge against net investments in foreign operations.
Hedging reserve
The hedging reserve represents the accumulated movements in the Group’s derivative financial instruments that have been designated as hedging
instruments. Amounts are transferred in and out of the reserve on the revaluation, or realisation, of identified hedging instruments.
140
2023 Annual Report & Accounts 03. Group Financial Statements
FINANCIAL RISK MANAGEMENT
1
Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, cash flow interest rate risk and fair value interest
rate risk), price risk, credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments
to hedge certain risk exposures.
Risk management is carried out by a central treasury department (Group Treasury) under policies approved by the Board. Group Treasury
identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating companies. The Board provides written
principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit
risk, use of derivative financial instruments and non-derivative financial instruments and investment of excess liquidity.
(a) Market risk
Currency risk
The Group monitors the growth and risks associated with its overseas operations. In August 2023, the Group entered into a net
investment hedge to manage the impact of movements in the GBP : EUR exchange rate on the value of the Group’s investment in its
business in the Republic of Ireland.
Further details are provided in note 27 of these Consolidated Financial Statements.
Cash flow and fair value interest rate risk
As the Group has no significant interest-bearing assets, the Group’s income and operating cash flows are substantially independent of
changes in market interest rates.
The Group’s interest rate risk arises from its borrowings and lease liabilities. Borrowings issued at variable rates expose the Group to cash
flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. Lease liabilities are calculated on
commencement of a lease as the remaining lease payments discounted using the incremental borrowing rate of the Group, thus
exposing the Group to fair value interest rate risk.
Note 27 to the Consolidated Financial Statements provides additional disclosures regarding cash flow and fair value interest rate risk.
Price risk – Utilities and fuel
Key costs incurred by the Group in its operations include utilities costs for gas, electricity, water and effluent. The Group also incurs
significant costs in respect of diesel given the size of the fleet of vehicles operated across the Group. Changes in utilities or fuel costs
could have a material impact on the Group’s financial performance.
The Group takes steps to mitigate the risk of price changes across both utilities and fuel as appropriate. In respect of gas and electricity,
the Group enters into contracts with suppliers to fix prices for determined periods, ensuring the Group has appropriate visibility of future
costs and to protect the Group, in the short term, over price volatility.
To try and mitigate the price risk associated with diesel costs the Group has entered into certain forward contracts with financial
institutions to fix an element of the diesel cost being incurred by the Group. Contracts are in place to cover a portion of the Group’s
forecast diesel usage and allow for actual costs to be swapped for a fixed rate on a monthly basis. Additional details of the contracts
entered into by the Group are included in note 27.
(b)
Credit risk
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits
with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed
transactions.
The Group’s credit risk is relatively low as, for banks and financial institutions, only independently rated parties with a minimum rating of
‘A-2’ are accepted. If wholesale customers are independently rated, these ratings are used. If there is no independent rating,
Management assesses the credit quality of the customer, taking into account its financial position, past experience and other factors.
Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board. The utilisation of credit limits
is regularly monitored.
With regards to credit exposures to customer, the Group applies the simplified approach to measure the loss allowance at an amount
equal to lifetime expected credit losses for trade receivables. The Group continues to establish a provision for impairment of trade
receivables when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of
the receivables. In addition, IFRS 9 requires the Group to consider forward looking information and the probability of default when
calculating expected credit losses. The measurement of expected credit losses reflects an unbiased and probability-weighted amount
that is determined by evaluating the range of possible outcomes as well as incorporating the time value of money. The expected loss
rates are based on the payment profiles of sales over the year and the corresponding historical credit losses experienced within this
period. The historical loss rates are adjusted to reflect current and forward looking information on factors affecting the ability of the
customers to settle the receivables. Trade receivables have been grouped for this analysis based on shared credit risk characteristics,
including segment and region in which the customer operates. The model considers indicators such as actual or expected significant
141
Statement of Significant Accounting
Policies Continued >
adverse changes in business, financial or economic conditions that are expected to cause a significant change to the customers’ ability
to meet its obligations. This would include the impact of possible customer closures, unemployment increases etc which are factors
impacting the ability of customers to settle outstanding debts.
Further to the above model, trade receivables are specifically impaired where there are indicators of significant financial difficulties of
the counterparty, probability that the counterparty will enter bankruptcy or financial reorganisation, or there is default or delinquency in
payments.
Note 18 and Note 27 provide both numerical and narrative disclosures regarding credit risk.
(c)
Liquidity risk
Prudent liquidity risk management involves maintaining sufficient cash reserves and maintaining the availability of funding through an
adequate amount of committed credit facilities. Due to the dynamic nature of the underlying businesses Group Treasury maintains
flexibility in funding by maintaining availability under committed credit lines.
Management monitors rolling forecasts of the Group’s liquidity reserve (comprising an undrawn borrowing facility (note 22) and cash
and cash equivalents (note 27) on the basis of expected cash flow.
2
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns
for Shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
Further details are provided in the Financial Review and in note 27.
142
2023 Annual Report & Accounts 03. Group Financial Statements
Notes to the Consolidated Financial
Statements
1
SEGMENT ANALYSIS
Segment information is presented based on the Group’s management and internal reporting structure as at 31 December 2023.
The chief operating decision-maker (CODM) has been identified as the Executive Directors. The CODM reviews the Group’s internal reporting in
order to assess performance and allocate resources. The CODM determines the operating segments based on these reports and on the
internal reporting structure.
For reporting purposes, the CODM considered the aggregation criteria set out within IFRS 8, ‘Operating Segments’, which allows for two or more
operating segments to be combined as a single reporting segment if:
1)
2)
aggregation provides financial statement users with information that allows them to evaluate the business and the environment in
which it operates; and
they have similar economic characteristics (for example, where similar long-term average gross margins would be expected) and are
similar in each of the following respects:
•
•
•
•
•
the nature of the products and services;
the nature of the production processes;
the type or class of customer for their products and services;
the methods used to distribute their products or provide their services; and
the nature of the regulatory environment (i.e. banking, insurance or public utilities), if applicable.
The CODM deems it appropriate to present two reporting segments (in addition to ‘Discontinued Operations’ and ‘All Other Segments’), being:
1)
2)
Workwear: comprising of our Workwear business only; and
Hotel, Restaurant and Catering (‘HORECA’): comprising of our Stalbridge, Hotel Linen, and following the acquisitions completed in the
year, Regency and Ireland businesses (to include Celtic Linen and Lilliput), each of which are a separate operating segment.
The CODM’s rationale for aggregating the Stalbridge, Hotel Linen, Regency and Ireland operating segments into a single reporting
segment is set out below:
•
•
•
•
the gross margins of each operating segment are within a similar range, with the long-term average margin expected to further
align;
the nature of the customers, products and production processes of each operating segment are very similar;
the nature of the regulatory environment is the same due to the similar nature of products, processes and customers involved;
and
distribution is via exactly the same method across each operating segment.
The CODM assesses the performance of the reporting segments based on a measure of operating profit, both including and excluding the
effects of non-recurring items from the reporting segments, such as restructuring costs and impairments when the impairment is the result of an
isolated, non-recurring or non-operating event. Interest income and expenditure are not included in the result for each reporting segment that is
reviewed by the CODM. Segment results include items directly attributable to a segment as well as those that can be allocated on a
reasonable basis, for example rental income received by Johnson Group Properties PLC (the property holding company of the Group) is credited
back, where appropriate, to the paying company for the purpose of segmental reporting. There have been no changes in measurement
methods used compared to the prior year.
Other information provided to the CODM is measured in a manner consistent with that in the financial statements. Segment assets exclude
deferred income tax assets, derivative financial assets, current income tax assets and cash and cash equivalents, all of which are managed on
a central basis. Segment liabilities include lease liabilities but exclude current income tax liabilities, bank borrowings, derivative financial
liabilities, post-employment benefit obligations and deferred income tax liabilities, all of which are managed on a central basis. These balances
are part of the reconciliation to total assets and liabilities.
Exceptional items have been included within the appropriate reporting segment as shown on pages 144 to 145.
143
Notes to the Consolidated Financial
Statements Continued >
1
SEGMENT ANALYSIS (Continued)
Year ended 31 December 2023
Revenue
Rendering of services
Sale of goods
Total revenue
Operating profit/(loss) before amortisation
of intangible assets (excluding software
amortisation), and exceptional items
Amortisation of intangible assets
(excluding software amortisation)
Exceptional items
Operating profit/(loss)
Total finance cost
Profit before taxation
Taxation charge
Profit for the year from continuing operations
Profit for the year from discontinued operations
Profit for the year attributable to equity holders
Workwear
£m
HORECA
£m
All Other
Segments
£m
138.9
3.7
142.6
21.4
(0.4)
–
21.0
322.6
0.1
322.7
36.0
(4.9)
(1.6)
29.5
–
–
–
(6.9)
–
–
(6.9)
Total
£m
461.5
3.8
465.3
50.5
(5.3)
(1.6)
43.6
(6.0)
37.6
(10.4)
27.2
0.1
27.3
All of the above revenues are generated in the United Kingdom, with the exception of £11.0 million generated within the Republic of Ireland.
Balance sheet information
Segment assets
Unallocated assets: Cash and cash equivalents
Total assets
Segment liabilities
Unallocated liabilities: Bank borrowings
Derivative financial liabilities
Post-employment benefit obligations
Current income tax liabilities
Deferred income tax liabilities
Total liabilities
Other information
Non-current asset additions
– Property, plant and equipment
– Right of use assets (including reassessment/modifications)
– Textile rental items
Depreciation, impairment and amortisation expense
– Property, plant and equipment
– Right of use assets depreciation
– Textile rental items depreciation
– Capitalised software
– Customer contracts
Workwear
£m
HORECA
£m
All Other
Segments
£m
152.1
345.9
1.4
(43.5)
(95.2)
(3.3)
6.1
2.7
23.5
5.9
2.5
18.5
0.3
0.4
20.8
10.6
37.5
15.1
4.0
34.5
0.1
4.9
–
0.1
–
–
0.1
–
–
–
Total
£m
499.4
9.6
509.0
(142.0)
(71.3)
(0.8)
(0.3)
(0.5)
(15.0)
(229.9)
26.9
13.4
61.0
21.0
6.6
53.0
0.4
5.3
With the exception of non-current assets of £11.3 million (2022: £nil) which were located in the Republic of Ireland, all non-current assets of the
Group reside in the Group’s country of domicile, the United Kingdom.
144
2023 Annual Report & Accounts 03. Group Financial Statements
1
SEGMENT ANALYSIS (Continued)
Year ended 31 December 2022
Revenue
Rendering of services
Sale of goods
Total revenue
Operating profit/(loss) before amortisation
of intangible assets (excluding software
amortisation), goodwill impairment and
exceptional items
Amortisation of intangible assets
(excluding software amortisation)
Goodwill impairment
Exceptional items
Operating profit/(loss)
Total finance cost
Profit before taxation
Taxation charge
Profit for the year attributable to equity holders
Profit for the year from discontinued operations
Profit for the year attributable to equity holders
Workwear
£m
HORECA
£m
All Other
Segments
£m
131.0
3.6
134.6
21.9
(0.4)
–
0.9
22.4
251.0
0.1
251.1
24.1
(6.8)
(1.4)
–
15.9
–
–
–
(4.8)
–
–
(0.2)
(5.0)
Total
£m
382.0
3.7
385.7
41.2
(7.2)
(1.4)
0.7
33.3
(3.0)
30.3
(1.5)
28.8
0.2
29.0
All of the above revenues are generated in the United Kingdom, with the exception of £0.5 million generated within the Republic of Ireland.
Balance sheet information
Segment assets
Unallocated assets: Cash and cash equivalents
Total assets
Segment liabilities
Unallocated liabilities: Bank borrowings
Derivative financial liabilities
Post-employment benefit obligations
Current income tax liabilities
Deferred income tax liabilities
Total liabilities
Other information
Non-current asset additions
– Property, plant and equipment
– Right of use assets (including reassessment/modifications)
– Textile rental items
– Capitalised software
– Customer contracts
Depreciation, impairment and amortisation expense
– Property, plant and equipment
– Right of use assets depreciation
– Textile rental items depreciation
– Capitalised software
– Customer contracts
– Goodwill impairment
Workwear
£m
HORECA
£m
All Other
Segments
£m
144.7
281.8
0.9
(37.4)
(76.3)
(2.5)
6.3
0.8
21.5
0.2
1.3
5.8
2.0
16.7
0.2
0.4
–
18.5
1.3
35.9
0.1
–
12.5
3.8
22.6
–
6.8
1.4
–
–
–
–
–
–
0.1
–
–
–
–
Total
£m
427.4
6.1
433.5
(116.2)
(19.8)
(0.7)
(10.2)
(0.2)
(1.8)
(148.9)
24.8
2.1
57.4
0.3
1.3
18.3
5.9
39.3
0.2
7.2
1.4
All non-current assets of the Group reside in the Group’s country of domicile. the United Kingdom.
145
Notes to the Consolidated Financial
Statements Continued >
2
EXPENSES BY FUNCTION
Revenue
Rendering of services
Sale of goods
Total revenue
Cost of sales
Administrative expenses
Distribution costs
Operating profit before amortisation of intangible assets
(excluding software amortisation), goodwill impairment and exceptional items
Amortisation of intangible assets (excluding software amortisation)
Goodwill impairment
Exceptional items
Operating profit
2023
£m
461.5
3.8
465.3
(285.9)
(56.5)
(72.4)
50.5
(5.3)
–
(1.6)
43.6
The items outlined below have been charged/(credited) to the Consolidated Income Statement in deriving operating profit:
Employee benefit expense (note 4)
Auditor’s remuneration
Exceptional items (note 6)
Trade receivables impairment (note 18)
Insurance proceeds re business interruption costs
Energy costs*
Water and effluent costs
All other operating costs**
Amortisation of intangible assets: (note 13)
Capitalised software
Customer contracts
Depreciation and impairment of:
Property, plant and equipment (note 14)
Right of use assets (note 15)
Textile rental items (note 16)
Short term/low value leases:
Land and buildings
Sublet rental income
Plant and equipment
2023
£m
204.7
0.7
1.6
1.7
–
46.6
7.3
70.4
0.4
5.3
21.0
6.6
53.0
0.4
(0.4)
2.3
2022
£m
382.0
3.7
385.7
(237.4)
(41.5)
(65.6)
41.2
(7.2)
(1.4)
0.7
33.3
2022
£m
181.4
0.5
(0.7)
0.9
(1.0)
36.4
6.1
55.4
0.2
7.2
18.3
5.9
39.3
0.3
(0.3)
2.5
*
Energy costs comprise of electricity, gas and fuel costs.
** All other operating costs includes other distribution costs, other production costs, costs of inventory and other administrative costs.
3
AUDITOR’S REMUNERATION
Fees payable for the audit of the Company
Fees payable for the audit of the Company’s subsidiaries
Auditors’ remuneration
2023
£m
0.1
0.6
0.7
2022
£m
0.1
0.4
0.5
Included in the above for the year to 31 December 2023 is £15,481 for non-audit related fees (2022: £15,450) in respect of the current Auditor.
146
2023 Annual Report & Accounts 03. Group Financial Statements
4
EMPLOYEE BENEFIT EXPENSE
Wages and salaries
Social security costs
Redundancy costs
Pension costs – defined contribution plans (Note 26)
Total costs
Agency costs
Cost of employee share schemes (Note 30)
Total employee benefit expense
The monthly average number of persons employed by the Group during the year was:
Workwear
HORECA
All other segments
Total
2023
£m
169.5
15.6
0.2
4.8
190.1
13.5
1.1
204.7
2023
£m
1,953
4,195
17
6,165
2022
£m
145.8
13.7
–
4.1
163.6
17.0
0.8
181.4
2022
£m
2,021
3,655
15
5,691
5
DIRECTORS’ EMOLUMENTS AND RENUMERATION OF THE KEY MANAGEMENT PERSONNEL
Detailed disclosures that form part of these financial statements are given in the Directors’ Remuneration Report on pages 89 to 113. Key
management personnel is defined as the Board.
Short-term employee benefits
Share based payments
Post-employment benefits
Total
2023
£m
2.4
0.4
0.1
2.9
2022
£m
1.5
0.3
0.1
1.9
Short-term employee benefits shown in the table above includes social security costs, bonuses and other benefits. Post-employment benefits
above include cash in lieu of pension contributions.
6
EXCEPTIONAL ITEMS
Costs in relation to business acquisition activity
Insurance claims
Other costs re insurance claims
Total exceptional items
Exceptional items shown are all included in administrative expenses.
2023
£m
(1.6)
–
–
(1.6)
2022
£m
–
1.5
(0.8)
0.7
CURRENT YEAR EXCEPTIONAL ITEMS
During the year, professional fees of £1.4 million were incurred relating to the acquisitions of Regency and Celtic Linen, of which £1.2 million were
paid in the year. Further information relating to the acquisitions is provided in note 34. A further £0.2 million was incurred and paid in respect of
other business acquisition related activities.
PRIOR YEAR EXCEPTIONAL ITEMS
In 2020 a Workwear processing plant was destroyed as a result of a fire. Final settlement proceeds of £1.5 million were received in 2022 in
respect of this insurance claim, relating to capital items.
In addition, costs of £0.8 million were incurred in respect of the demolition of the destroyed site and preparing the site for sale.
147
Notes to the Consolidated Financial
Statements Continued >
7
FINANCE COST
Interest payable on bank loans and overdrafts
Gain on interest rate swaps not qualifying as hedges
Amortisation of bank facility fees
Finance costs on lease liabilities relating to IFRS 16 (note 23)
Notional interest on post-employment benefit obligations (note 26)
Total finance cost
2023
£m
3.1
–
0.3
2.1
0.5
6.0
2022
£m
1.3
(0.1)
0.3
1.5
–
3.0
Following the equity placing in June 2020 which raised £82.7 million, the Group repaid its loans outstanding at that date. Hedge accounting was
therefore discontinued at that date as the Group no longer had any loans for the Group’s interest rate swaps to economically hedge.
Accordingly, the Mark to Market value of £0.6 million, as at 30 June 2020, was transferred from equity and recognised as an expense within
finance costs. Thereafter, any subsequent change in the fair value of those derivatives was recognised directly within finance costs, resulting in
£0.1 million credit in 2022. The Group no longer has any interest rate swaps in place following the final outstanding interest rate swap ending on
8 January 2023.
8
ALTERNATIVE PERFORMANCE MEASURES (APMS)
As discussed on page 132 of these Consolidated Financial Statements, we refer to a number of APMs. A reconciliation of the APMs for continuing
operations used are shown below:
Adjusted profit before taxation
Profit before taxation
Amortisation of intangible assets (excluding software amortisation)
Goodwill impairment
Exceptional items
Adjusted profit before taxation
Taxation thereon
Adjusted profit after taxation
Adjusted EBITDA
Operating profit before amortisation of intangible assets
(excluding software amortisation), goodwill impairment and exceptional items
Software amortisation
Property, plant and equipment depreciation
Right of use asset depreciation
Textile rental items depreciation
Adjusted EBITDA
9
TAXATION
Current tax
UK corporation tax charge for the year
Adjustment in relation to previous years
Current tax charge for the year
Deferred tax
Origination and reversal of temporary differences
Adjustment in relation to previous years
Deferred tax charge for the year
Total charge for taxation included in the Consolidated Income Statement
for continuing operations
2023
£m
37.6
5.3
–
1.6
44.5
(11.5)
33.0
50.5
0.4
21.0
6.6
53.0
131.5
2023
£m
1.7
–
1.7
8.4
0.3
8.7
10.4
2022
£m
30.3
7.2
1.4
(0.7)
38.2
(2.6)
35.6
41.2
0.2
18.3
5.9
39.3
104.9
2022
£m
–
0.3
0.3
3.3
(2.1)
1.2
1.5
148
2023 Annual Report & Accounts 03. Group Financial Statements
9
TAXATION (Continued)
The tax charge for the year is higher than (2022: lower than) the effective rate of Corporation Tax in the UK of 23.5% (2022: 19%). A reconciliation is
provided below:
Profit before taxation
Profit before taxation multiplied by the effective rate of Corporation Tax in the UK
Factors affecting taxation charge for the year:
Non-taxable income
Tax effect of expenses not deductible for tax purposes
Current year impact of the super-deduction
Difference in current and deferred taxation rates
Tax rate differential on non-UK profits
Adjustments in relation to previous years
Adjustments in relation to previous years – super-deduction
Total charge for taxation included in the Consolidated Income Statement
for continuing operations
2023
£m
37.6
8.8
–
0.8
(0.3)
0.9
(0.1)
0.3
–
10.4
2022
£m
30.3
5.8
(0.3)
1.1
(2.9)
(0.4)
–
(0.9)
(0.9)
1.5
Taxation in relation to the amortisation of intangible assets (excluding software amortisation) has decreased the charge for taxation on
continuing operations by £1.0 million (2022: £1.1 million). Taxation in relation to exceptional items has decreased the charge for taxation on
continuing operations by £0.1 million (2022: £nil).
The Finance Bill 2021 enacted provisions to increase the main rate of UK corporation tax to 25% from 6 April 2023 for businesses with profits of
£250,000 or more. As such, deferred income tax balances at the balance sheet date have been measured at the tax rate expected to be
applicable at the date the deferred income tax assets and liabilities are realised. Management has performed an assessment, for all material
deferred income tax assets and liabilities, to determine the period over which the deferred assets and liabilities are forecast to be realised,
which has resulted in an average deferred income tax rate of 25.0% (2022: 24.6%).
Deferred tax balances in relation to balances held in the Republic of Ireland have been recognised at 12.5%, in line with the prevailing rate of tax
in 2023.
A capital allowance super-deduction, which offered 130% first year relief on qualifying main rate plant and machinery investments until 31
March 2023, has been included within the tax calculations for 31 December 2023. This allowance provides a permanent tax benefit on our Textile
Rental items given their short life nature. The impact of the super-deduction to 31 December 2023 is a credit of £0.3 million (2022: credit of £3.8
million) of which £nil (2022: £0.9 million) is in relation to adjustments in the prior year recognised within the Consolidated Income Statement.
During the year, a deferred taxation charge of £2.2 million (2022: £2.6 million credit) has been recognised in Other Comprehensive Income in
relation to post-employment benefit obligations.
10
DIVIDENDS
Dividend per share
Final dividend proposed
Interim dividend proposed and paid
Shareholders’ funds committed
Final dividend proposed
Interim dividend proposed and paid
2023
£m
1.90p
0.90p
2023
£m
7.9
3.8
2022
£m
1.60p
0.80p
2022
£m
6.8
3.5
The Directors propose the payment of a final dividend in respect of the year ended 31 December 2023 of 1.9 pence per share. This will utilise
Shareholders’ funds of £7.9 million and will be paid, subject to Shareholder approval, on 10 May 2024 to Shareholders on the register of members
on 12 April 2024. In accordance with IAS 10 there is no payable recognised at 31 December 2023 in respect of this proposed dividend. The trustee
of the EBT has waived the entitlement to receive dividends on the Ordinary shares held by the trust.
149
Notes to the Consolidated Financial
Statements Continued >
11
EARNINGS PER SHARE
Profit for the financial year from continuing operations attributable to Shareholders
Amortisation of intangible assets from continuing operations (net of taxation)
Goodwill impairment (net of taxation)
Exceptional costs from continuing operations (net of taxation)
Adjusted profit from continuing operations attributable to Shareholders
Profit from discontinued operations attributable to Shareholders
Total profit from all operations attributable to Shareholders
Weighted average number of Ordinary shares
Potentially dilutive Ordinary shares
Diluted number of Ordinary shares
Basic earnings per share
From continuing operations
From discontinued operations
From total operations
Adjustments for amortisation of intangible assets (continuing)
Adjustment for goodwill impairment (continuing)
Adjustment for exceptional items (continuing)
Adjusted basic earnings per share (continuing)
Adjusted basic earnings per share (discontinued)
Adjusted basic earnings per share from total operations
Diluted earnings per share
From continuing operations
From discontinued operations
From total operations
Adjustments for amortisation of intangible assets (continuing)
Adjustment for goodwill impairment (continuing)
Adjustment for exceptional items (continuing)
Adjusted diluted earnings per share (continuing)
Adjusted diluted earnings per share (discontinued)
Adjusted diluted earnings per share from total operations
Adjusted diluted earnings per share excluding super-deduction (continuing)
2023
£m
27.2
4.3
–
1.5
33.0
0.1
33.1
No. of
shares
424,327,473
406,218
424,733,691
Pence
per share (p)
6.4p
–
6.4p
1.0p
–
0.4p
7.8p
–
7.8p
6.4p
–
6.4p
1.0p
–
0.4p
7.8p
–
7.8p
7.7p
2022
£m
28.8
6.1
1.4
(0.7)
35.6
0.2
35.8
No. of
shares
444,288,818
95,000
444,383,818
Pence
per share (p)
6.5p
–
6.5p
1.4p
0.3p
(0.2)p
8.0p
–
8.0p
6.5p
–
6.5p
1.4p
0.3p
(0.2)p
8.0p
–
8.0p
7.2p
Basic earnings per share is calculated using the weighted average number of Ordinary shares in issue during the year, excluding those held by
the Employee Benefit Trust and those held as Treasury shares awaiting cancellation, based on the profit for the year attributable to
Shareholders. Adjusted earnings per share figures are given to exclude the effects of amortisation of intangible assets (excluding software
amortisation), goodwill impairment and exceptional items, all net of taxation, and are considered to show the underlying performance of the
Group.
As disclosed in note 9, the current year total taxation credit benefited from £0.3 million (2022: £3.8 million) of tax credit resulting from the capital
allowance super-deduction, which offered 130% first year relief on qualifying main rate plant and machinery investments until 31 March 2023.
Due to the distortion this has on adjusted diluted earnings per share in 2023 and 2022, an adjusted diluted earnings per share value excluding
this benefit has also been disclosed.
150
2023 Annual Report & Accounts 03. Group Financial Statements
11
EARNINGS PER SHARE (Continued)
For diluted earnings per share, the weighted average number of Ordinary shares in issue is adjusted to assume conversion of all potentially
dilutive Ordinary shares. The Company has potentially dilutive Ordinary shares arising from share options granted to employees. Options are
dilutive under the SAYE scheme, where the exercise price together with the future IFRS 2 charge of the option is less than the average market
price of the Company’s Ordinary shares during the year. Options under the LTIP schemes, as defined by IFRS 2, are contingently issuable shares
and are therefore only included within the calculation of diluted EPS if the performance conditions, as set out in the Directors’ Remuneration
Report, are satisfied at the end of the reporting period, irrespective of whether this is the end of the vesting period or not.
Potentially dilutive Ordinary shares are dilutive at the point, from a continuing operations level, when their conversion to Ordinary shares would
decrease earnings per share or increase loss per share. Potentially dilutive Ordinary shares have been treated as dilutive in both years, as their
inclusion in the diluted earnings per share calculation decreases the earnings per share from continuing operations.
There were no events occurring after the balance sheet date that would have changed significantly the number of Ordinary shares or
potentially dilutive Ordinary shares outstanding at the balance sheet date if those transactions had occurred before the end of the reporting
period.
12
GOODWILL
Cost
Brought forward
Impact of foreign exchange translation
Business combinations (note 34)
Carried forward
Accumulated impairment losses
Brought forward
Losses in the year
Carried forward
Carrying amount
Opening
Closing
2023
£m
135.2
0.1
10.5
145.8
1.4
–
1.4
133.8
144.4
2022
£m
135.2
–
–
135.2
–
1.4
1.4
135.2
133.8
In accordance with UK adopted international accounting standards, goodwill is not amortised, but instead is tested annually for impairment, or
more frequently if there are indicators that an impairment has arisen and carried at cost less accumulated impairment losses.
Impairment tests for goodwill
The allocation of goodwill to Cash Generating Units (CGUs) is as follows:
Workwear
Stalbridge
Hotel Linen
Regency
Ireland*
HORECA
Total
2023
£m
41.7
48.3
40.9
3.2
10.3
102.7
144.4
2022
£m
41.7
48.3
40.9
–
2.9
92.1
133.8
*
The CGUs have been reassessed in the year, resulting in Lilliput no longer being determined as separately identifiable and instead now
forming part of the Ireland group of CGU’s. Following the acquisition of Celtic Linen in August 2023, the Board determined that the day to
day management and responsibility for the Lilliput business (based in Belfast) should be with Celtic Linen. With effect from 1 November
2023, the two businesses are now reported and reviewed by management as one business. Work is transferred between various sites
across both businesses and therefore revenue streams from individual assets are no longer easily obtained or separable. Accordingly, the
figures in the table above for Ireland reflect goodwill for both Celtic Linen and Lilliput (2022: Lilliput).
Goodwill is tested for impairment by comparing the carrying value of each CGU against its recoverable amount. The carrying value for each
CGU includes the net book value of goodwill, intangible assets and related deferred tax balances, property, plant and equipment, right of use
assets, textile rental items and lease liabilities.
151
Notes to the Consolidated Financial
Statements Continued >
12
GOODWILL (Continued)
The recoverable amount of a CGU is primarily determined based on value-in-use calculations. These calculations use cash flow projections
based on financial budgets and forecasts, ordinarily covering three years, which are approved by the Board. In arriving at the values assigned
to each key assumption management make reference to past experience and external sources of information regarding the future. Key
assumptions around income and costs within the budget are derived on a detailed, ‘bottom up’ basis. All income streams and cost lines are
considered and appropriate growth, or decline, rates are assumed for each, all of which are then reviewed, challenged and stress tested, firstly
by senior management and ultimately by the Board. Income and cost growth forecasts are risk adjusted to reflect specific risks facing each
CGU and take into account the markets in which they operate. Cash flows beyond the above period are, ordinarily, extrapolated using the
estimated growth rate stated below, which does not exceed the long-term average growth rate for the markets in which the CGU’s operate, into
perpetuity.
When assessing the recoverable amount for CGUs as at 30 November 2023, the forecasts covered the period to the end of 2026. Cash flows
beyond that period were then extrapolated using the estimated growth rate stated below. It is assumed that there are no material adverse
changes in legislation that would affect the forecast cash flows.
The pre-tax discount rate used within the recoverable amount calculations was 14.7% (2022: 13.1%) for all Sterling denominated cashflows and
11.5% (2022: N/A) for Euro denominated cashflows and is based upon the weighted average cost of capital reflecting specific principal risks and
uncertainties. The discount rate takes into account, amongst other things, the risk free rate of return, the market risk premium, size premium and
beta factor reflecting the average Beta for the Group and comparator companies which are used in deriving the cost of equity.
The same discount rate has been used for each CGU (with the exception of Euro denominated cashflows within the Ireland CGU) as the
principal risks and uncertainties associated with the Group, as highlighted on pages 45 to 51, would also impact each CGU in a similar manner.
Although Ireland is also impacted by the same principal risks and uncertainties associated with the Group as a whole, it is also subject to a
different economic and regulatory environment and, therefore, where relevant, a different WACC has been calculated to take these differences
into account. The Board acknowledge that there are additional factors that could impact the risk profile of each CGU.
These additional factors were considered by way of sensitivity analysis performed as part of the annual impairment tests. The level of
headroom is predominantly dependent upon judgments used in arriving at future growth rates and the discount rate applied to cash flow
projections. Within the cash flow projections, key drivers to future growth rates are dependent on the Group’s ability to maintain and grow
income streams including price increases and volume growth, whilst effectively managing operating costs in light of the current inflationary
pressures in the wider macroeconomic environment. The level of headroom may change if different growth rate assumptions, a different pre-tax
discount rate were used or cash flow projections were not met in the calculation of value-in-use for each CGU. Where the value-in-use
calculations suggest an impairment, the Board would consider alternative use values prior to realising any impairment, being the fair value less
costs to dispose.
Sensitivity analysis has been performed in assessing the recoverable amounts of goodwill such that (i) the long-term growth rate for the
forecast period was reduced to nil and (ii) the pre-tax discount rate was increased by 3.70%. Such changes did not result in any impairment of
goodwill. Significant headroom exists in each of the CGUs and, based on the stress testing performed, reasonable possible changes in the
assumptions would not cause the carrying amount of the CGUs to equal or to exceed their recoverable amount. From this sensitivity analysis, it
was identified that the Regency CGU is the most sensitive to any changes beyond the assumptions considered.
The assumptions used for value-in-use calculations are as follows:
Sterling Euro Sterling
2023
2022
Annual growth rate (after forecast period) 2.00% 2.00% 2.00%
Risk free rate of return 4.40% 2.77% 3.52%
Market risk premium 5.08% 5.21% 5.25%
Beta Factor 1.14 1.14 1.14
Size Premium 3.00% 3.00% 3.00%
Cost of debt 7.75% 7.60% 7.55%
Having completed the 2023 impairment review, no impairment has been recognised in relation to the CGUs.
Euro
N/A
N/A
N/A
N/A
N/A
N/A
152
2023 Annual Report & Accounts 03. Group Financial Statements
13
INTANGIBLE ASSETS
Cost
At 31 December 2021
Additions
At 31 December 2022
Business combination (note 34)
Foreign exchange differences
At 31 December 2023
Accumulated amortisation
At 31 December 2021
Charged during the year
At 31 December 2022
Charged during the year
At 31 December 2023
Carrying amount
At 31 December 2021
At 31 December 2022
At 31 December 2023
Capitalised
Software
£m
Other
Intangible Assets
£m
2.3
0.3
2.6
–
–
2.6
0.8
0.2
1.0
0.4
1.4
1.5
1.6
1.2
84.3
1.3
85.6
13.8
0.1
99.5
69.1
7.2
76.3
5.3
81.6
15.2
9.3
17.9
Total
£m
86.6
1.6
88.2
13.8
0.1
102.1
69.9
7.4
77.3
5.7
83.0
16.7
10.9
19.1
Amortisation of capitalised software is included within administrative expenses in the Consolidated Income Statement in determining Adjusted
operating profit. Amortisation of other intangible assets is shown separately on the face of the Consolidated Income Statement.
Other intangible assets comprise of customer contracts and relationships and brands arising from business combinations together with the
customer contracts acquired not as part of a business combination. For assets resulting from a business combination, fair value is calculated
based upon historical and prospective information and financial data specific to each business combination, with an appropriate discount
factor applied. For assets not acquired as part of a business combination, fair value is deemed to be the amounts to purchase the contracts
plus associated costs less value of stock acquired.
Other intangible assets have a finite useful life and are carried at cost less accumulated amortisation. Amortisation of other intangible assets is
calculated using the straight-line method to allocate the cost of the assets over their estimated useful lives (usually three to thirteen years).
The longest estimated useful life remaining at 31 December 2023 is 13 years.
153
Notes to the Consolidated Financial
Statements Continued >
14
PROPERTY, PLANT AND EQUIPMENT
Properties
£m
Plant and
Equipment
£m
Cost
At 31 December 2021
Additions
Disposals
At 31 December 2022
Additions
Disposals
Business Acquisitions (note 34)
Transfers from right of use assets
At 31 December 2023
Accumulated depreciation and impairment
At 31 December 2021
Charged during the year
Eliminated on disposals
At 31 December 2022
Charged during the year
Eliminated on disposals
At 31 December 2023
Carrying amount
At 31 December 2021
At 31 December 2022
At 31 December 2023
41.5
0.5
(0.1)
41.9
0.1
(0.1)
3.1
–
45.0
15.0
1.2
–
16.2
1.2
(0.1)
17.3
26.5
25.7
27.7
190.4
24.3
(2.3)
212.4
26.8
(4.8)
3.3
2.7
240.4
103.6
17.1
(2.2)
118.5
19.8
(4.7)
133.6
86.8
93.9
106.8
Total
£m
231.9
24.8
(2.4)
254.3
26.9
(4.9)
6.4
2.7
285.4
118.6
18.3
(2.2)
134.7
21.0
(4.8)
150.9
113.3
119.6
134.5
The value of assets under construction at 31 December 2023 was £6.6 million (2022: £2.0 million) and are included above within plant and
equipment. Depreciation charges are recognised in cost of sales, administrative expenses and distribution costs depending on the assets to
which the depreciation relates.
The transfer of assets from right of use assets represents the reclassification of the cost of assets from right of use assets where the lease was
repaid in the year and the asset is now owned.
154
2023 Annual Report & Accounts 03. Group Financial Statements
15
RIGHT OF USE ASSETS
Cost
At 31 December 2021
Properties
£m
Plant and
Equipment
£m
Total
£m
43.2 7.4 50.6
Additions
Reassessment/modification of assets previously recognised
Disposals
0.7 1.3 2.0
– 0.1 0.1
(0.3) (1.5) (1.8)
At 31 December 2022
43.6 7.3 50.9
Additions
Business combinations (note 34)
Reassessment/modification of assets previously recognised
Disposals
Transfers to property, plant and equipment
6.6 3.1 9.7
1.5 2.7 4.2
3.6 0.1 3.7
(0.7) (2.2) (2.9)
– (2.7) (2.7)
At 31 December 2023
54.6 8.3 62.9
Accumulated depreciation and impairment
At 31 December 2021
Charged during the year
Disposals
At 31 December 2022
Charged during the year
Disposals
At 31 December 2023
Carrying amount
At 31 December 2021
At 31 December 2022
At 31 December 2023
11.0 4.1 15.1
4.2 1.7 5.9
(0.3) (1.5) (1.8)
14.9 4.3 19.2
4.7 1.9 6.6
(0.7) (2.2) (2.9)
18.9 4.0 22.9
32.2 3.3 35.5
28.7 3.0 31.7
35.7 4.3 40.0
Depreciation charges are recognised in distribution expenses and administrative expenses within the Consolidated Income Statement
depending on the assets to which the depreciation relates.
The transfer of assets to property, plant and equipment represents the reclassification of the cost and associated depreciation of assets to
property, plant and equipment where the lease was repaid in the year and the asset is now owned.
16
TEXTILE RENTAL ITEMS
Cost
Brought forward
Additions
Business combinations (note 34)
Disposals
Special charges
Carried forward
Accumulated depreciation and impairment
Brought forward
Charged during the year
Disposals
Special charges
Carried forward
Carrying amount
Opening
Closing
Depreciation charges are recognised in cost of sales within the Consolidated Income Statement.
2023
£m
121.6
61.0
3.4
(49.7)
(6.6)
129.7
57.8
53.0
(49.7)
(3.3)
57.8
63.8
71.9
2022
£m
90.9
57.4
–
(21.3)
(5.4)
121.6
42.5
39.3
(21.3)
(2.7)
57.8
48.4
63.8
155
Notes to the Consolidated Financial
Statements Continued >
17
INVENTORIES
New textile rental items
Goods for resale
Raw materials and stores
2023
£m
1.5
–
0.4
1.9
2022
£m
1.1
0.1
0.6
1.8
The amounts above are net of an inventory provision of £0.3 million (2022: £0.3 million). There has been £nil (2022: £0.3 million) stock provision
recognised during the year within cost of sales in the Consolidated Income Statement. Amounts transferred to cost of sales in the year are
£8.1 million (2022: £5.5 million).
18
TRADE AND OTHER RECEIVABLES
2023
£m
Amounts falling due within one year:
Trade receivables 70.9
Less: provision for impairment of trade receivables (4.1)
Trade receivables – net 66.8
Unbilled receivables 3.0
Other receivables 2.7
Prepayments 10.1
Costs incurred to obtain a contract 0.7
83.3
Amounts falling due after more than one year:
Other receivables –
Costs incurred to obtain a contract 0.4
0.4
83.7
2022
£m
55.9
(3.4)
52.5
4.0
0.2
3.7
0.6
61.0
–
0.3
0.3
61.3
Prepayments include £6.1 million (2022: £nil) of deposits relating to items of Property, plant and equipment where no asset has physically been
received as at 31 December 2023.
Costs capitalised as costs incurred to obtain a contract during the year total £1.1 million (2022: £0.9 million). The charge recognised during the
year relating to costs incurred to obtain a contract is £0.9 million (2022: £0.9 million). Costs capitalised in relation to costs incurred to obtain a
contract are expected to be recoverable.
The maturity of financial assets (which comprise of current and non-current trade receivables, unbilled receivables and other receivables) is
analysed below:
Trade receivables, unbilled receivables
and other receivables
– Not yet due and up to 3 months overdue
– 3 to 6 months past due
– 6 to 12 months past due
– Over 12 months past due
Gross
£m
Provision
£m
72.3
2.6
1.7
–
76.6
(2.5)
(0.8)
(0.8)
–
(4.1)
2023
Net
£m
69.8
1.8
0.9
–
72.5
Gross
£m
Provision
£m
57.7
1.9
0.4
0.1
60.1
(2.5)
(0.7)
(0.1)
(0.1)
(3.4)
2022
Net
£m
55.2
1.2
0.3
–
56.7
Under IFRS 9, the Group is required to utilise objective evidence as well as consider forward looking information and the probability of default
when calculating expected credit losses. The maturity of financial assets is therefore used as an indicator as to the probability of default.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less
provision for impairment.
Under IFRS 9, the Group applies the simplified approach to measure the loss allowance at an amount equal to lifetime expected credit losses
for trade receivables. Forward looking loss rates for each debt aging category takes into account how overdue the debt is, the type of
receivable, operating segment and region in which the customer operates, as well as other current market and trading conditions. Further to
the expected credit loss model, trade receivables are specifically impaired where there are indicators of significant financial difficulties of the
counterparty, probability that the counterparty will enter bankruptcy or financial reorganisation, or there is default or delinquency in payments.
156
2023 Annual Report & Accounts 03. Group Financial Statements
18
TRADE AND OTHER RECEIVABLES (Continued)
There is limited concentration of credit risk with respect to trade receivables due to the diverse and unrelated nature of the Group’s customers.
Accordingly, the Directors believe that no further credit provision is required in excess of the provision for impairment of receivables.
The movement in the provision for trade and other receivables is analysed below:
At 1 January
Business acquisitions
Provisions for receivables impairment
Amounts unused reversed
Receivables written off during the year as uncollectable
At 31 December
2023
£m
(3.4)
(0.2)
(1.7)
–
1.2
(4.1)
2022
£m
(3.3)
–
(1.3)
0.4
0.8
(3.4)
The creation and release of the provision for impaired receivables has been included in impairment loss on trade receivables in the
Consolidated Income Statement when related to continuing activities. Amounts charged to the allowance account are generally written off
when there is no expectation of recovering additional cash.
All trade and other receivable balances at the balance sheet date are denominated in Sterling (2022: Sterling), with the exception of £4.4 million
(2022: £0.1 million) which are denominated in Euros, and are held at amortised cost. Given the short-term nature of current receivables there is
deemed to be no difference between this and fair value. The difference between the book value and fair value of non-current trade and other
receivables is deemed to be not material.
The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable detailed within this note. The Group does
not hold any collateral as security.
19
REIMBURSEMENT ASSETS
Reimbursement assets
2023
£m
3.9
3.9
2022
£m
4.5
4.5
As the Group expects, on average, insurance claims to be settled within one year which is driven by a review of the historic claims data,
recognition of these balances is made within current assets and current liabilities.
The Group recognises a reimbursement asset in respect of third-party claims made against the Group, but which under the terms of its
insurance policies, the Group is indemnified. All of the expenditure required to settle such claims will be reimbursed by the insurer under the
terms of the policies, and therefore it is virtually certain that reimbursement will be received.
20
TRADE AND OTHER PAYABLES (CURRENT)
Trade payables
Other payables
Other taxation and social security liabilities
Deferred income
Accruals
2023
£m
40.6
1.8
14.3
0.3
35.8
92.8
2022
£m
38.5
1.5
8.0
0.3
27.4
75.7
All trade and other payables at the balance sheet date are denominated in Sterling, with the exception of £4.0 million which are denominated
in Euros (2022: All sterling) and are held at amortised cost. Given the short term nature there is to be no difference between this and fair value.
Trade payables are unsecured and are usually paid within 60 days of recognition.
157
Notes to the Consolidated Financial
Statements Continued >
21
TRADE AND OTHER PAYABLES (NON-CURRENT)
Deferred income
2023
£m
0.3
0.3
The difference between the book value and fair value of non-current trade and other payables is not material.
22
BORROWINGS
Current
Overdraft
Bank loans
Non-current
Bank loans
The maturity of non-current bank loans is as follows:
– Between one and two years
– Between two and five years
– Unamortised issue costs of bank loans
The currency of the outstanding bank loans is as follows:
– Sterling
– Euros
2023
£m
8.7
(0.4)
8.3
63.0
63.0
71.3
–
63.2
(0.2)
63.0
32.0
31.2
63.2
2022
£m
0.3
0.3
2022
£m
5.3
(0.2)
5.1
14.7
14.7
19.8
15.0
–
(0.3)
14.7
15.0
–
15.0
At 31 December 2023, borrowings were secured and drawn down under a committed facility dated 8 August 2022. The facility comprises a
£120.0 million revolving credit facility (including an overdraft) which runs to August 2026 with a one-year extension option with a further option,
both with bank consent, to increase the facility by up to an additional £15.0 million.
Individual tranches are drawn down, in Sterling or Euros, for periods of up to six months at SONIA or Euribor rates of interest respectively,
prevailing at the time of drawdown, plus the credit adjustment spread and the applicable margin. The margin on the facility ranges between
1.45% and 2.45% and was 1.45% at 31 December 2023. Margin is determined on the achievement of leverage ratios.
The secured bank loans are stated net of unamortised issue costs of £0.6 million (2022: £0.5 million) of which £0.4 million is included within
current borrowings (2022: £0.2 million) and £0.2 million is included within non-current borrowings (2022: £0.3 million). Details of the security are
provided in note 28 to the Consolidated Financial Statements.
The Group has three net overdraft facilities for £5.0 million, £3.0 million and €1.5 million (£1.3 million) with its three principal bankers
(2022: £5.0 million, £3.0 million and €nil).
Amounts drawn under the revolving credit facility have been classified as either current or non-current depending upon when the loan is
expected to be repaid.
158
2023 Annual Report & Accounts 03. Group Financial Statements
23
LEASE LIABILITIES
At 31 December 2021
Additions
Reassessment/modification of liabilities previously
recognised
Lease liability payments (including finance costs)
Finance costs
At 31 December 2022
Additions
Business combinations (note 34)
Reassessment/modification of liabilities previously
recognised
Lease liability payments (including finance costs)
Finance costs
At 31 December 2023
Properties
£m
Plant and
Equipment
£m
34.5 3.3
0.7 1.3
– 0.1
(5.4) (1.7)
1.5 –
31.3 3.0
6.4 3.1
1.4 1.9
3.6 0.1
(5.9) (3.8)
2.0 0.1
38.8 4.4
Lease liabilities are comprised of the following balance sheet amounts:
Amounts due within one year (Lease liabilities, Current liabilities)
Amounts due after more than one year (Lease liabilities, Non-Current liabilities)
Lease liabilities are as follows:
Not more than one year
Minimum lease payments
Interest element
Present value of minimum lease payments
Between one and five years
Minimum lease payments
Interest element
Present value of minimum lease payments
More than five years
Minimum lease payments
Interest element
Present value of minimum lease payments
2023
£m
5.5
37.7
43.2
2023
£m
7.5
(2.0)
5.5
23.9
(5.7)
18.2
29.1
(9.6)
19.5
Total
£m
37.8
2.0
0.1
(7.1)
1.5
34.3
9.5
3.3
3.7
(9.7)
2.1
43.2
2022
£m
5.1
29.2
34.3
2022
£m
6.4
(1.3)
5.1
19.6
(3.7)
15.9
19.2
(5.9)
13.3
Future increases or decreases in rentals linked to an index or rate are not included in the lease liability until the change in cash flows takes
effect. Of the remaining lease liability at 31 December 2023 £0.2 million (2022: £0.4 million) is subject to inflation-linked rentals, relating to the
commercial vehicle fleet within the HORECA division. A further £32.5 million (2022: £28.6 million) is subject to rent reviews relating to the Group’s
property portfolio.
Following the adoption of IFRS 16, short term leases (those with an expected term of 12 months or less) and leases for low value assets,
continue to be expensed on a straight line basis over the lease term, as under IAS 17. The expense relating to these payments was £2.3 million
(2022: £2.5 million).
Total cash outflow for leases, comprising capital and interest payments, for the year ended 31 December 2023 was £9.7 million (2022: £7.1 million).
Furthermore, the Group sublets properties under operating leases. Income recognised in the Consolidated Income Statement during the year
amounts to £0.4 million (2022: £0.3 million).
159
Notes to the Consolidated Financial
Statements Continued >
24
DEFERRED TAXATION
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows:
2023 2022 2023
£m £m £m
Deferred
Income Tax Assets
Deferred
Income Tax Liabilities
2022
£m
Recognised deferred income tax assets and liabilities
Depreciation less than capital allowances – – (35.0)
Employee share schemes 0.3 0.1 –
Post-employment benefit obligations 0.1 2.6 –
Derivative financial liabilities 0.2 0.2 –
Trading losses 22.4 24.9 –
Other short term timing differences – 0.1 (0.1)
Separately identifiable intangible assets – – (2.9)
23.0 27.9 (38.0)
The deferred income tax assets disclosed above are deemed to be recoverable.
The following provides a reconciliation of the movement in each of the deferred income tax assets and liabilities:
Depreciation Post- Other
less than Employee employment Derivative Short Term
Capital Share Benefit Financial Trading Timing Intangible
Allowances Schemes Obligations Instruments Losses Differences Assets
£m £m £m £m £m £m £m
At 31 December 2021 (11.2) 0.3 0.4 (0.1) 10.3 0.2 (3.2)
(Charge)/credit to income (16.4) – (0.4) – 14.6 (0.1) 1.1
Charge to Shareholders’ equity – (0.2) – – – – –
Credit to other
comprehensive income – – 2.6 0.3 – – –
At 31 December 2022 (27.6) 0.1 2.6 0.2 24.9 0.1 (2.1)
Deferred income tax liabilities
acquired (0.8) – – – 0.2 – (1.8)
(Charge)/credit to income (6.6) 0.1 (0.3) – (2.7) (0.2) 1.0
Credit to Shareholders’ equity – 0.1 – – – – –
Charge to other
comprehensive income – – (2.2) – – – –
(27.6)
–
–
–
–
–
(2.1)
(29.7)
Total
£m
(3.3)
(1.2)
(0.2)
2.9
(1.8)
(2.4)
(8.7)
0.1
(2.2)
At 31 December 2023 (35.0) 0.3 0.1 0.2 22.4 (0.1) (2.9)
(15.0)
The charge to income above of £8.7 million (2022: £1.2 million charge) is all in relation to continuing operations.
Deferred income taxes at the balance sheet date have been measured at an effective tax rate of 25.0% as at 31 December 2023 (2022: 24.6%),
The Group does not expect to utilise any of the Group’s net deferred income tax liability in the next 12 months. This is management’s current best
estimate and may not reflect the actual outcome in the next 12 months.
160
2023 Annual Report & Accounts 03. Group Financial Statements
25
PROVISIONS
Insurance Self
Claims Property Insurance
£m £m £m
At 31 December 2021 4.3 1.1 0.3
Total
£m
5.7
Additions 0.9 0.2 0.1 1.2
(1.0)
Utilised during the year (0.7) (0.3) –
At 31 December 2022 4.5 1.0 0.4
5.9
Business acquisitions (note 34) 0.1 – 0.6 0.7
Additions 1.6 – – 1.6
Utilised during the year (2.3) – (0.1) (2.4)
(0.1)
Credit to Income Statement – (0.1) –
At 31 December 2023 3.9 0.9 0.9
2023
£m
5.7
2022
£m
Analysis of total provisions
Current 4.9 5.1
0.8
Non-current 0.8
5.7
5.9
Insurance claims
The Group recognises a provision for liabilities in respect of third party claims made against it. A corresponding reimbursement asset of
£3.9 million (2022: £4.5 million) has been recognised as all of the expenditure required to settle such claims will be reimbursed by the insurer
under the terms of the policy. As the Group expects insurance claims to be settled within one year, recognition of these balances is made within
current assets and current liabilities. All movement shown above in respect of Insurance claims is non-cash movement as the amounts are
settled by the third party insurance provider and therefore there will be no amounts shown within the Consolidated Cashflow Statement.
Property
The property provision includes onerous property costs, expected lease dilapidation costs and the estimated remediation costs of property
where an environmental problem has been identified and the costs to rectify can be reliably measured. The estimates and judgments used in
determining the value of provisioning are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances. The majority of the property provision is expected to
be utilised over a period of up to four years.
Self insurance
£0.3 million of the self insurance provision is in respect of the estimated payments due to existing claimants under the self funded incapacity
scheme over an estimated period of 10 years. This scheme is now closed to new entrants.
The remaining provision relates to Celtic Linen, whereby under the terms of its employers’ public and products liability insurance policy, Celtic
Linen has indemnified the insurer for the first £0.2 million in the aggregate in respect of any one period of insurance.
26
POST-EMPLOYMENT BENEFIT OBLIGATIONS
The Group operates pension schemes of both the funded defined benefit and the defined contribution type for a substantial number of
employees. In addition, the Group also operates an unfunded defined benefit private healthcare scheme for eligible retirees. The disclosures
below are in respect of all of the Group schemes.
Pensions – defined contribution
Several defined contribution pension schemes are used within the Group. The total cost of employer contributions for the year was £4.8 million
(2022: £4.1 million).
Pensions – defined benefit
The Group operates a defined benefit pension scheme, the Johnson Group Defined Benefit Scheme (‘JGDBS’). The JGDBS was closed to future
accrual on 31 December 2014.
A full actuarial valuation of the JGDBS was carried out as at 30 September 2022 and has been updated to 31 December 2023 by an
independent qualified actuary. The updated actuarial valuation at 31 December 2023 showed that the scheme has a deficit of £nil
(2022: £9.4 million). During the year, no employer or employee contributions were made (2022: £nil).
161
Notes to the Consolidated Financial
Statements Continued >
26
POST-EMPLOYMENT BENEFIT OBLIGATIONS (Continued)
The schedule of contributions put in place on 4 August 2020, which superseded all earlier versions, required deficit recovery payments of
£1.9 million per annum to be paid up to and including December 2026. Following discussions with the Trustee of the scheme following the
finalisation of the full actuarial valuation, deficit recovery payments to ceased from 31 October 2023 in accordance with a new schedule of
contributions dated 31 October 2023. Deficit recovery payments of £1.6 million (2022: £1.9 million) were made to the Scheme during the year.
Actuarial assumptions
Considerations when calculating the IAS 19 liability
IAS19 sets out prescribed (qualitative) conditions for selecting the actuarial assumptions used to calculate the pension liabilities and pension
costs. A key assumption is the discount rate which is used to determine the value of pension liabilities at the balance sheet date. The selection of
the price inflation assumptions (both RPI and CPI) is also critical as these are relevant for the pre-retirement revaluation and pension increases
in payment assumptions.
These assumptions are based on market yields at the balance sheet date, and may not be borne out in practice due to the long-term expected
duration of the Scheme. The weighted average duration of the defined benefit obligation is approximately 9 years (2022: 11 years). The duration
is calculated based on the membership data and results of the 2022 triennial valuation but updated to reflect market conditions as at
31 December 2023. Within the prescribed conditions however, assumptions must be mutually compatible and lead to the best estimate of the
future cash flows in respect of pension liabilities.
A summary of relevant considerations is set out below:
Assumption for valuing pension liabilities
Discount rate (pre and post retirement)
Retail Price inflation (RPI)
Consumer Price Inflation (CPI)
Pension increases
Demographic assumptions (e.g. rates
of mortality and early retirement)
Assumptions used
Comments on prescribed conditions
Based on yields on “high quality” corporate bonds of appropriate duration and
currency, or a suitable proxy. Our approach is to value sample pensioner and
non-pensioner cash flows with different durations using a yield curve approach
and to calculate the single equivalent discount rate for each set of cash flows
Based on the yield differential between index-linked bonds and fixed-interest
bonds of appropriate duration and of a similar credit standing (for example, using
spot yields derived from the inflation yield curve published by the Bank of England)
with the allowance for an inflation premium to reflect market conditions
Based on the RPI assumption with an adjustment to reflect the historic and future
expected long term differences between the RPI and CPI indices
Compatible with the rate of price inflation above taking into account the effects of
scheme rules and valid expectations of discretionary increases based on best past
practice
Compatible assumptions that lead to a best estimate of future cash flows
Rate used to discount scheme liabilities
Retail price inflation (RPI)
Consumer price inflation (CPI)
Rate of increase of pensions in payment (5.0% RPI linked)
Rate of increase of pensions in payment (2.5% RPI linked)
Rate of increase of pensions in payment (2.5% CPI linked)
2023
4.55%
3.15%
2.40%
2.91%
1.89%
1.74%
2022
4.90%
3.20%
2.55%
2.89%
1.83%
1.71%
Life expectancy at age 60 for current male pensioners is assumed to be 25.6 years (2022: 26.4 years) and 28.0 years for current female pensioners
(2022: 29.1 years). Life expectancy at age 60 for future male pensioners is assumed to be 25.6 years (2022: 26.6 years) and 27.9 years for future
female pensioners (2022: 29.2 years). “S3PXA 112%/113% males/females (YoB) CMI 2022 with a 1.25% long term trend rate with core parameters” has
been used to derive these mortality rates for future pensioners (2022: “S2PXA 102%/99% males/females (YoB) CMI 2021 with a 1.25% long term
trend rate with core parameters” used).
It is assumed that 100% of non-retired members of the JGDBS will commute 25% of their pension at retirement (2022: 100% of members will
commute 25% of pension).
It has been assumed that 50% (2022: 50%) of future pensioners at retirement will exchange their non-statutory pension increases at retirement
for a higher, but non-increasing pension.
Following the High Court ruling on 26 October 2018 regarding the equalisation of Guaranteed Minimum Pension (‘GMP’) benefit within the
Lloyds pension scheme, the Scheme is required to adjust benefits to remove the inequalities between the GMP benefits awarded to males and
females. The Company have historically included a reserve in defined benefit obligation IAS19 valuation for GMP equalisation.
162
2023 Annual Report & Accounts 03. Group Financial Statements
26
POST-EMPLOYMENT BENEFIT OBLIGATIONS (Continued)
On 20 November 2020 the High Court issued a supplementary ruling in the Lloyds bank GMP equalisation case with respect to members that
have transferred out of their scheme prior to the ruling. The ruling obliged Trustees to make top-up payments in respect of historic transfers that
were not paid on an equalised basis. The additional cost is required to be recognised through the income statement as a past service cost.
The full effect of the ruling can only be known following a detailed review of the history of Scheme membership movements, dating back as far
as the early 1990s. This will take some time to complete. No allowance has been included in the defined benefit obligations in respect of the
supplementary ruling on the grounds of immateriality.
Sensitivity of key assumptions
The table below gives an approximation of the impact on the IAS19 pension scheme liabilities to changes in assumptions and experience. Note
that all figures are before allowing for deferred tax.
Item
Increase/decrease discount rate by 0.5%
Increase/decrease price inflation assumption by 0.50%
1 year increase/decrease in life expectancy at age 60
Approximate increase/(decrease)
on Post-employment benefit obligation
(£6.7 million)/£6.7 million
£1.9 million/(£1.9 million)
£5.9 million/(£5.9 million)
The above sensitivities are applied to adjust the defined benefit obligations at the end of the reporting year. Whilst the analysis does not take
account of the full distribution of cash flows expected under the Scheme, it does provide an approximation of the sensitivity of the assumptions
shown. No changes have been made to the method and assumptions used in this analysis from those used in the previous year.
Private healthcare
The Group operates an unfunded defined benefit private healthcare scheme for eligible retirees. At 31 December 2023, the deficit of the scheme
was £0.3 million (2022: £0.8 million). The Group accounted for a current service cost of £nil and a notional interest cost of £37,000 in the
Consolidated Income Statement (2022: £nil and £15,000 respectively). The current service cost in 2024 is expected to be £nil with a notional
interest cost of £15,000.
The scheme is subject to a periodic independent actuarial review which assesses the cost of providing benefits for current and future eligible
retirees. The latest formal review was undertaken as at 31 December 2023. As a result, an actuarial gain of £0.5 million was recognised in the
year within the Consolidated Statement of Comprehensive Income.
The latest review was performed using the projected unit credit method, and a discount rate of 4.55%. The main long-term actuarial
assumptions used in the review were that the retirement age of eligible employees will be 60 for females and males and the rate of increase in
medical costs is to be 5.50% throughout. There have been no material changes in circumstances since the last formal review.
An increase of 1.00% in the medical cost trend would increase the scheme liabilities by an estimated £0.1 million and the aggregate of the
service cost and interest cost by an estimated £15,000 per annum. A decrease of 1% in the medical cost trend would reduce the scheme
liabilities by an estimated £0.1 million and the aggregate of the service cost and interest cost by an estimated £15,000 per annum.
Post-employment benefit obligations disclosures
The amounts charged to the Consolidated Income Statement are set out below:
Notional interest on post-employment benefit obligations
Total amounts charged to the Consolidated Income Statement
2023
£m
2022
£m
0.5 –
0.5 –
The interest income on scheme assets and the interest cost on scheme liabilities are included within total finance costs.
In addition, the following amounts have been recognised in the Consolidated Statement of Comprehensive Income:
Return on scheme assets excluding interest income
Re-measurement gains/(losses) arising from changes in demographic assumptions
Re-measurement (losses)/gains arising from changes in financial assumptions
Experience gains/(losses) on liabilities
2023
£m
2022
£m
(1.2) (68.2)
5.8 (0.2)
(4.8) 61.5
9.0 (3.1)
Total amounts recognised in the Consolidated Statement of Comprehensive Income
8.8 (10.0)
163
Notes to the Consolidated Financial
Statements Continued >
26
POST-EMPLOYMENT BENEFIT OBLIGATIONS (Continued)
Amounts recognised in the Balance Sheet are as follows:
Present value of funded obligations
Fair value of scheme assets
Net defined benefit pension obligations
Post-retirement healthcare obligations
Net post-employment benefit obligations
Movements in the fair value of scheme assets were as follows:
2023
£m
2022
£m
(145.4) (157.6)
145.4 221.2
– (9.4)
(0.3) (0.8)
(0.3) (10.2)
2023
£m
2022
£m
Fair value of scheme assets at beginning of the year 148.2 221.2
Interest income 7.1 4.2
Return on scheme assets (excluding interest income) (1.2) (68.2)
Deficit recovery payments 1.6 1.9
Benefits paid – defined benefit pension obligations (10.3) (10.9)
Fair value of scheme assets at end of the year 145.4 148.2
Movements in the fair value of scheme liabilities were as follows:
2023
£m
2022
£m
Fair value of scheme liabilities at beginning of the year (158.4) (223.3)
Interest expense (7.6) (4.2)
Re-measurement gains/(losses) from changes in demographic assumptions 5.8 (0.2)
Re-measurement (losses)/gains from changes in financial assumptions (4.8) 61.5
Experience gains/(losses) on liabilities 9.0 (3.1)
Benefits paid - defined benefit pension obligations 10.3 10.9
Fair value of scheme liabilities at the end of the year (145.7) (158.4)
Movements in post-employment benefit obligations were as follows:
2023
£m
2022
£m
Opening post-employment benefit obligation (10.2) (2.1)
Notional interest (0.5) –
Deficit recovery payments 1.6 1.9
Re-measurement and experience gains/(losses) 8.8 (10.0)
Closing post-employment benefit obligation (0.3) (10.2)
The major categories of scheme assets were as follows:
Quoted
Market Price
Active
Market
£m
No Quoted
Market Price
Active
Market
£m
Bonds
Liability driven investments
Alternative return seeking assets
Cash and cash equivalents
Total market value of assets
26.0
24.9
–
14.5
65.4
–
–
80.0
–
80.0
2023
Total
Scheme
£m
26.0
24.9
80.0
14.5
145.4
Quoted
Market Price
Active
Market
£m
No Quoted
Market Price
Active
Market
£m
–
21.9
–
25.9
47.8
24.6
–
75.8
–
100.4
2022
Total
Scheme
£m
24.6
21.9
75.8
25.9
148.2
The assets of the pension scheme include do not include shares in the Group in either 2023 or 2022.
164
2023 Annual Report & Accounts 03. Group Financial Statements
26
POST-EMPLOYMENT BENEFIT OBLIGATIONS (Continued)
In the prior year the Bonds held by the scheme were shown as no quoted market price. During the year weekly traded pricing is now available
and as such, these are now classified as quoted market price.
Scheme assets held with no quoted market price on active market are valued by the fund managers. The managers determine fair value of
their holdings based on several factors. They may use secondary market prices, internal valuation models or independent valuations. This
process adopted will vary by manager and asset class, although independent third parties are typically used to verify and support the net
asset value valuations.
The Liability Driven Investments (LDI) shown above comprise of nominal and real LDI funds, investing in partly funded leveraged gilts and funds
for liability matching and liquidity funds investing in pooled cash funds. Under these arrangements, if interest rates fall, the value of the LDI
would be expected to rise, all else being equal, to help offset the expected increase in the present value placed on the scheme’s liabilities
arising from a fall in the discount rate (and vice versa).
The funding position in respect of the JGDBS is influenced by both the measurement of plan liabilities and the valuation of plan assets. The
Trustee, in conjunction with the Group, has tried to ensure an appropriate balance of investments has been made by the scheme to mitigate
potential price volatility in individual asset categories. The Group and Trustee regularly monitor the composition of plan assets and amend the
composition accordingly to try and match scheme assets with the liabilities they are intended to fund. However, any underperformance of
scheme assets could result in future increases in the deficit recognised on the JGDBS.
During the year, a high court ruling was handed down in the case of Virgin Media Limited vs NTL Pension Trustees II Limited and Others that
relates to the validity of certain historical pension changes. The Trustees are aware that a Court of Appeal hearing for the case set for 25 June
2024 as well as the potential for overriding government legislation to be introduced. As a result the Group and the Trustees of the Scheme,
similar to many other schemes, have not yet investigated the potential implications for the Group’s accounts in detail.
As detailed investigation has not yet been carried out, the Group considers that the amount of any potential impact on the Defined Benefit
Obligation cannot be measured with sufficient reliability. We will therefore review at the 2024 year end when we expect further clarity to be
available.
27
FINANCIAL INSTRUMENTS
Policies and strategies
Details of the Group’s policies and strategies in relation to financial instruments are given within the Statement of Significant Accounting
Policies.
IAS 32, Financial Instruments: Presentation, IFRS 9, Financial Instruments and IFRS 7, Financial Instruments: Disclosures, also require numerical
disclosures in respect of financial assets and liabilities and these are set out below and in note 18. Financial assets and liabilities are stated at
either amortised cost or fair value. Where stated at amortised cost, this is not materially different to the fair value unless otherwise stated due to
their short term nature.
Financial assets
The Group has recognised current and non-current trade receivables, unbilled receivables and other receivables of £76.6 million
(2022: £60.1 million) in the year. See note 18 for further details. In addition, reimbursement assets of £3.9 million in the year to 31 December 2023
(2022: £4.5 million) have also been recognised. See note 19 for further details.
Cash at bank and in hand
Sterling
Euro
At 31 December
2023
£m
2022
£m
7.2 6.0
2.4 0.1
9.6 6.1
For interest purposes cash is offset against overdrafts through a pooling arrangement with each of the Group’s principal bankers. Surplus cash
is placed on deposit with one or more of the Group’s bankers.
At the balance sheet date, cash was held with the following institutions:
Cash at bank and in hand
Royal Bank of Scotland
Lloyds Bank
Bank of Ireland
Allied Irish Bank
Total cash and cash equivalents
Rating
A-1
A-1
A-1
A-1
2023
£m
4.2
3.2
0.2
2.0
9.6
2022
£m
3.1
2.3
0.7
–
6.1
165
Notes to the Consolidated Financial
Statements Continued >
27
FINANCIAL INSTRUMENTS (Continued)
The Group refers to Standard and Poor’s short-term issue credit ratings when determining with which financial institutions to deposit its surplus
cash balances. A short-term obligation rated ‘A-1’ is rated in the highest category by Standard & Poor’s. The obligor’s capacity to meet its
financial commitment on the obligation is strong.
Cash balances are used for working capital purposes. The Directors do not consider deposits at these institutions to be at risk.
Financial liabilities
Trade and other payables**
Overdraft
Bank loans*
Lease liabilities
Derivative financial instruments
As per
Balance
Sheet
£m
78.2
8.7
63.2
43.2
0.8
194.1
Future
Interest
Cost
£m
–
–
–
17.3
–
17.3
2023
Total
Cash
Flows
£m
78.2
8.7
63.2
60.5
0.8
211.4
As per
Balance
Sheet
£m
67.4
5.3
15.0
34.3
0.7
122.7
Future
Interest
Cost
£m
–
–
–
10.9
–
10.9
2022
Total
Cash
Flows
£m
67.4
5.3
15.0
45.2
0.7
133.6
*
IFRS 7 requires the contractual future interest cost of a financial liability to be included within the above table. As disclosed in note 22 of
these financial statements, all bank loans are currently drawn under an RCF arrangement and as such there is no contractual future
interest cost. Interest charged in the year in relation to bank loans drawn down amounted to £3.1 million. Interest is payable at a rate of
SONIA or EURIBOR prevailing at the time of drawdown plus the credit adjustment spread and the applicable margin, which ranges from
1.45% and 2.45% and are drawn monthly. Bank loans drawn as at 31 December 2023 were £63.2 million. Should these bank loans remain
drawn until the expiry of the bank facility in August 2026, at the prevailing rates of interest at the balance sheet date, the future interest cost
would be £9.8 million.
** Trade and other payables comprise both current and non-current payables as disclosed within notes 20 and 21, excluding other taxation
and social security liabilities and deferred income.
Bank loans and overdraft in the table above do not include unamortised bank fees.
Current
£m
Non-Current
£m
2023
Total
£m
Current
£m
Non-Current
£m
2022
Total
£m
Bank loans –
Overdraft 8.7
Less: Unamortised bank fees (0.4)
63.2 63.2 – 15.0 15.0
– 8.7 5.3 – 5.3
(0.2) (0.6) (0.2) (0.3) (0.5)
8.3
63.0 71.3 5.1 14.7 19.8
Current
£m
Non-Current
£m
2023
Total
£m
Current
£m
Non-Current
£m
2022
Total
£m
Trade and other payables 92.8
Less: Other taxation and social security
liabilities (14.3)
Less: Deferred income (0.3)
0.3 93.1 75.7 0.3 76.0
– (14.3) (8.0) – (8.0)
(0.3) (0.6) (0.3) (0.3) (0.6)
78.2
– 78.2 67.4 – 67.4
166
2023 Annual Report & Accounts 03. Group Financial Statements
27
FINANCIAL INSTRUMENTS (Continued)
Liquidity risk
The maturity of financial liabilities based on contracted cash flows is shown in the table below.
This table has been drawn up using the undiscounted cash flows of financial liabilities based on the earliest date on which the Group is obliged
to pay. The table includes both interest and principal cash flows. Floating rate interest payments have been calculated using the relevant
interest rates prevailing at the year end, where applicable.
As at 31 December 2023
Due within one year
Due within one to two years
Due within two to five years
Due after more than five years
As at 31 December 2022
Due within one year
Due within one to two years
Due within two to five years
Due after more than five years
Trade and
Other Bank Leases
Payables Overdrafts Loans Liabilities
£m £m £m £m
Derivative
Financial
Instruments
£m
78.2
–
–
–
78.2
67.4
–
–
–
67.4
8.7
–
–
–
8.7
5.3
–
–
–
5.3
–
–
63.2
–
63.2
–
15.0
–
–
15.0
7.5
7.1
16.8
29.1
60.5
6.4
5.8
13.7
19.3
45.2
0.6
0.2
–
–
0.8
0.4
0.3
–
–
0.7
Total
£m
95.0
7.3
80.0
29.1
211.4
79.5
21.1
13.7
19.3
133.6
With the exception of derivative financial instrument which are held at fair value, all financial liabilities shown above are held at amortised cost.
Interest rate risk profile
As at 31 December 2023
Sterling
Euro
As at 31 December 2022
Sterling
Fixed Rate
Financial
Liabilities
£m
60.5
–
45.2
Floating
Rate
Financial
Liabilities
£m
40.7
31.2
20.3
Financial
Liabilities
on which no
Interest is paid
£m
74.1
4.9
68.1
Total
£m
175.3
36.1
133.6
Fixed rate financial liabilities
At 31 December 2023 the Group’s fixed rate financial liabilities related to lease liabilities (2022: lease liabilities).
For lease liabilities, the weighted average interest rate incurred is 5.0% (2022: 4.5%) and the weighted average period remaining is 140 months
(2022: 128 months).
Floating rate financial liabilities
Interest rate swaps
Floating rate financial liabilities bear interest at rates based on relevant SONIA or EURIBOR equivalents. Loans are drawn and interest rates
fixed for periods of between one and six months. The weighted average period remaining for floating rate financial liabilities is 1 month
(2022: 1 month).
The variation in the interest rate of floating rate financial liabilities (with all other variables held constant) required to increase or decrease
post-tax profit for the year by £0.1 million is 18 basis points (2022: 61 basis points).
167
Notes to the Consolidated Financial
Statements Continued >
27
FINANCIAL INSTRUMENTS (Continued)
Fair values of financial liabilities
Bank loans are drawn down and interest set for no more than a six month period (2022: six month period). In view of this the fair value of bank
loans is not materially different from the book value. The fair value of other financial liabilities was not materially different from the book value.
The Group recognises financial instruments that are held at fair value. Financial instruments have been classified as Level 1, Level 2 or Level 3
dependent on the valuation method applied in determining their fair value.
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 only financial instruments held at fair value by the Group relate to commodity swaps.
Commodity swaps
The Group enters into commodity swaps (hedging instrument) to economically hedge the Group’s exposure to changes in diesel prices (hedged
item). The fair values of the hedging instrument and the hedged item move in the opposite direction because of the price risk. Therefore, there is
an economic relationship between the hedged item and the hedging instrument.
The Group hedges a portion of its annual diesel usage using commodity swaps. The diesel hedged for future periods is based on management
forecasts of future diesel purchases and would meet the ‘highly probable’ assessment for hedge accounting.
Hedge ineffectiveness for price risk may occur due to differences in critical terms between the commodity swaps and diesel purchases such as
payment date or due to changes in fair value affecting the hedging instrument, such as credit risk, which is not replicated on the hedged item.
Ineffectiveness may also occur where diesel purchases were forecast but do not occur. There was no ineffectiveness recognised within the
Consolidated Income Statement during 2023 or 2022 in relation to the commodity swaps. The quantity of the hedging instrument and the
hedged item are the same when applying hedge accounting and are the same as that used for risk management purposes at a ratio of 1:1.
As at the balance sheet date, the Group has the following commodity swaps in place:
•
8.8 million litres of diesel at a weighted average price of 58.35 pence per litre for the period 1 January 2024 to 31 December 2026
For the proportion of our commodity swaps where hedge accounting is still applicable and thus any gains and losses on these swap contracts
continue to be recognised in the hedging reserve as of 31 December 2023, these gains and losses will be continuously released to the
Consolidated Income Statement within distribution costs until the end of the hedged period.
The movement in the Group’s hedging reserve as disclosed in the Consolidated Statement of Changes in Shareholders’ Equity relate to the
commodity swaps above:
At 31 December 2021
Gain in fair value of swaps recognised in OCI
Reclassified from OCI to Consolidated Income Statement
Deferred tax
At 31 December 2022
Loss in fair value of swaps recognised in OCI
Reclassified from OCI to Consolidated Income Statement
At 31 December 2023
Commodity
swaps
£m
(0.3)
(1.1)
2.2
(0.3)
0.5
0.5
(0.4)
0.6
168
2023 Annual Report & Accounts 03. Group Financial Statements
27
FINANCIAL INSTRUMENTS (Continued)
For both the years ended 31 December 2023 and 31 December 2022 the assets/(liabilities) arising from these instruments have been classified
as Level 2. The fair value of these instruments at each of the year ends was:
Derivative financial instruments held:
Current Liabilities
– Commodity products – cash flow hedges
Non-Current liabilities
– Commodity products – cash flow hedges
Fair Value
2023
£m
Fair Value
2022
£m
(0.6) (0.4)
(0.2) (0.3)
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives do not meet the
hedge accounting criteria, they are classed as ‘held for trading’ for accounting purposes and are accounted for at fair value through profit or
loss. They are presented as current liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period.
Where available, market rates have been used to determine fair value.
The movement in the Group’s derivative financial liabilities during the year is as follows:
Interest rate
swaps
£m
Commodity
swaps
£m
Total
£m
At 31 December 2021
Gain in fair value of swaps recognised in OCI
Gain in fair value of swaps not qualifying as hedges
recognised in profit or loss
Cash receipts
At 31 December 2022
Loss in fair value of swaps recognised in OCI
Cash payments
At 31 December 2023
(0.1)
–
0.1
–
–
–
–
–
0.3 0.2
1.1 1.1
0.2 0.3
(2.3) (2.3)
(0.7) (0.7)
(0.5) (0.5)
0.4 0.4
(0.8) (0.8)
Fair value gains on interest rate swaps and commodity swaps not qualifying as hedges are recognised directly in profit or loss and are included
within finance costs and distribution costs respectively within the Consolidated Income Statement.
Cash flows from operating activities include a £0.2 million payment (2022: £0.2 million credit) relating to non-cash movements on commodity
swaps. Nil was recognised (2022: £0.1 million credit) relating to non-cash movements on interest rate swaps is recognised within total finance
cost within cash flows from operating activities.
All financial instruments are Level 2 financial instruments for all periods and there have been no transfers between either Level 1 and 2 or Level 2
and 3 in any period.
The fair value of the following financial assets and liabilities approximate their carrying amount:
•
•
•
Trade receivables and other receivables
Cash and cash equivalents
Trade and other payables
Valuation techniques used to derive Level 2 fair values
Level 2 trading and hedging derivatives comprise interest rate swaps and commodity swaps. Interest rate swaps are fair valued using forward
interest rates extracted from observable yield curves. Commodity swaps are using a mark to market valuation at the balance sheet date. The
effects of discounting are generally insignificant for Level 2 derivatives.
169
Notes to the Consolidated Financial
Statements Continued >
27
FINANCIAL INSTRUMENTS (Continued)
Foreign currency risk
Hedge of net investment in foreign operations
In August 2023, the Group acquired Celtic Linen, a business located in the Republic of Ireland. The Group utilised it’s multicurrency facility to fund
the acquisition. €29.4 million of the bank loan was designated as a net investment hedge to manage the impact of movements in the GBP:EUR
exchange rate on the value of the Group’s investment in the Republic of Ireland.
There is an economic relationship between the hedged item and the hedging instrument as the net investment creates a translation risk that
will match the foreign exchange risk on the bank loan. The Group has established a hedge ratio of 1:1 as the underlying risk of the hedging
instrument is identical to the hedged risk component. The hedge ineffectiveness will arise when the amount of the investment in the foreign
subsidiary becomes lower than the nominal amount of the loans.
The net investment hedges were assessed to be highly effective at 31 December 2023 and a net unrealised loss of £0.3 million (2022: £nil) has
been recorded in the translation reserve.
Capital risk management
The Group’s objective is to employ a disciplined approach to investment, returns and capital efficiency to deliver sustainable compounding
growth whilst also maintaining a strong balance sheet.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to Shareholders, return capital to
Shareholders, issue new shares or take other steps to increase or reduce share capital and reduce or increase debt facilities.
The Group manages its capital structure using a number of measures and taking into account future strategic plans. Such measures include
interest cover and gearing ratios. The Group therefore manages capital which includes cash and cash equivalents, bank borrowings and lease
liabilities. The total capital held as at 31 December 2023 is £105.5 million (2022: £48.5 million).
Gearing, for bank purposes, is calculated as Adjusted EBITDA (being EBIT plus property, plant and equipment, rental stock and right of use
depreciation and software amortisation) compared to total debt, including IFRS 16 liabilities, and the agreed covenant is for the ratio to be not
more than 3 times. The Group’s medium- to long-term intention is to maintain the capital structure such that we operate at no more than 1 – 1.5
times on this basis, other than for short term specific exceptions. Under this framework, our capital allocation policy remains unchanged and will
take into account the following criteria as part of a periodic review of capital structure:
•
•
•
•
•
maintaining a strong balance sheet;
continuing capital investment to increase processing capacity and efficiency;
appropriate accretive acquisitions;
operating a progressive dividend policy; and
distributing any surplus cash to Shareholders.
Against this backdrop, in September 2022, the Company announced the launch of a share buyback programme of the Company’s Ordinary
shares for up to a maximum aggregate consideration of £27.5 million (excluding expenses). This was followed by a second share buy-back
programme of the Company’s Ordinary shares for up to £10.0 million (excluding expenses). In reaching its decision, the Board considered
ongoing capital expenditure at current levels to fund organic growth, payment of dividends and acquisitions within the M&A pipeline. Even
after taking account of these factors, the Group had significant headroom under its committed facilities and target leverage. Accordingly, the
Board concluded that the share buyback programme is prudent, reflects the cash generative ability of the Group, maintains a strong balance
sheet consistent with its capital allocation policy and would therefore promote the success of the Company for the benefit of its members as a
whole.
Reflecting the post COVID-19 pandemic recovery and the resumption of more normal levels of cash generation, in the first half of 2023, the Board
approved an interim dividend of 0.9 pence per Ordinary share which was paid on 3 November 2023. The interim dividend represents a return to
the Company’s progressive dividend policy and the Board’s intention to reduce dividend cover from the Company’s historical level of cover of
3 times cover to 2.5 times cover by financial year 2024. The Board considers this provides an appropriate return to Shareholders but also enables
the Group to invest in the business, such as through strategic acquisitions, purchasing energy efficient equipment, improving production
efficiencies and investing in new laundries.
170
2023 Annual Report & Accounts 03. Group Financial Statements
28
CONTINGENT LIABILITIES
The Group operates from a number of sites across the UK and the Republic of Ireland. Some of the sites have operated as laundry sites for many
years and historic environmental liabilities may exist. Such liabilities are not expected to give rise to any significant loss.
The Group has granted its Bankers and Trustee of the Pension Scheme (the ‘Trustee’) security over the assets of the Group. The priority of security
is as follows:
•
•
first ranking security for £28.0 million to the Trustee ranking pari passu with up to £155.0 million of bank liabilities; and
second ranking security for the balance of any remaining liabilities to the Trustee ranking pari passu with any remaining bank liabilities.
During the period of ownership of the Facilities Management division the Company had given guarantees over the performance of contracts
entered into by the division. As part of the disposal of the division the purchaser agreed to pursue the release or transfer of obligations under
the Parent Company guarantees and this is in process. The Sale and Purchase Agreement contains an indemnity from the purchaser to cover
any loss in the event a claim is made prior to release. In the period until release the purchaser is to make a payment to the Company of
£0.2 million per annum, reduced pro rata as guarantees are released. Such liabilities are not expected to give rise to any significant loss.
29
SHARE CAPITAL
Issued and Fully Paid
Ordinary shares of 10p each:
– At start of year
– Share buybacks
At end of year
Shares
439,151,346
(24,736,223)
414,415,123
2023
£m
43.9
(2.5)
41.4
Shares
445,256,639
(6,105,293)
439,151,346
2022
£m
44.5
(0.6)
43.9
In respect of the two share buyback programmes which were running during the year, 24,619,289 (2022: 6,222,227) Ordinary shares with a total
nominal value of £2,461,929 (2022: £622,222) were bought back by the Company and cancelled for a total consideration including transaction
costs of £29.8 million (2022: £5.7 million) which represents an average price of 121.0p per share (2022: 91.1p). The total shares repurchased across
the two share buyback programmes to 31 December 2023 represent 6.9% of the Company’s issued share capital outstanding immediately prior
to the commencement of the first share buyback programme.
At 31 December 2022, 6,105,293 Ordinary shares with a total nominal value of £610,529 had been cancelled. The remaining 116,934 Ordinary
shares were held as Treasury shares until they were subsequently cancelled, and paid for, on 3 January 2023.
Cash payments made in respect of the above transactions were (debited)/credited as follows:
Share capital
Capital redemption reserve
Retained earnings
2023
£m
2022
£m
(2.5) (0.6)
2.5 0.6
(29.9) (5.6)
(29.9) (5.6)
Potential issues of Ordinary shares of 10p each
As at the balance sheet date, certain senior executives hold options in respect of potential issues of Ordinary shares of 10 pence each granted
pursuant to the 2009 Long-Term Incentive Plan (the ‘2009 LTIP’), the 2018 Long-Term Incentive Plan (the ‘2018 LTIP’) and the 2018 Long-Term
Incentive Plan Approved Section (‘2018 Approved LTIP’) (together referred to as ‘Executive Schemes’).
Certain Group employees also hold options in respect of potential issues of Ordinary shares of 10p each granted pursuant to the Johnson
Service Group Sharesave Plan (hereinafter referred to as the ‘SAYE Scheme’).
Options granted under the SAYE Scheme are normally exercisable within six months from the date exercisable as shown below. Options under
the Executive Schemes are normally exercisable, subject to the achievement of performance conditions, three years after the date of grant and
within seven years from the date exercisable as shown below. Upon exercise, all options are generally settled in equity.
171
Notes to the Consolidated Financial
Statements Continued >
29
SHARE CAPITAL (Continued)
The number of shares subject to option under each scheme which were outstanding at 31 December 2023, the date on which they were
granted and the date from which they may be exercised are given below:
Scheme
2009 LTIP
2018 LTIP
2018 LTIP
2018 LTIP
2018 Approved LTIP
SAYE Scheme
SAYE Scheme
SAYE Scheme
SAYE Scheme
Date Options
Granted
27 March 2017
22 March 2021
16 March 2022
8 March 2023
8 March 2023
3 October 2019
3 October 2019
1 October 2021
1 October 2021
Date
Exercisable
Exercise Price
per Share
Note a
Note a
Note a
Note a
Note a
1 December 2022
1 December 2024
1 December 2024
1 December 2026
Nil
Nil
Nil
Nil
117.0
155.75p
155.75p
129.75p
129.75p
Number
of Shares
95,000
311,220
1,373,262
1,726,349
666,666
4,172,497
693
136,625
837,429
266,614
1,241,361
5,413,858
Note a: The LTIP options granted are subject to performance conditions linked to one or more of the Company’s Earnings Per Share, adjusted
profit before taxation and Total Shareholder Return and will ordinarily vest three years from grant. Further details are set out within the
Directors’ Remuneration Report.
The weighted average remaining contractual life of options outstanding at the end of the year is 1.56 years (2022: 1.42 years).
30
SHARE BASED PAYMENTS
Executive Schemes
The 2009 LTIP provides for an exercise price of nil. The vesting period is generally three years. Both market based and non-market based
performance conditions are generally attached to the options, for which an appropriate adjustment is made when calculating the fair value of
an option. If vesting periods or non-market vesting conditions apply, the expense is allocated over the vesting period based on the best
available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the
number of share options expected to vest differs from previous estimates. If the options outstanding at the balance sheet date remain
unexercised after a period of 10 years from the date of grant, the options expire. Furthermore, options are forfeited if the employee leaves the
Group before the options vest, unless under exceptional circumstances.
The 2018 LTIP provides for an exercise price of nil. The 2018 LTIP also contains a sub-plan (the 2018 Approved LTIP) which permits the grant of
options for an exercise price equal to the quoted closing mid-market price of the Company shares on the business day immediately preceding
the date of grant. The vesting period is generally three years and will be subject to a further holding period at the discretion of the
Remuneration Committee. Both market based and non-market based performance conditions are generally attached to the options, for which
an appropriate adjustment is made when calculating the fair value of an option. If vesting periods or non-market vesting conditions apply, the
expense is allocated over the vesting period based on the best available estimate of the number of share options expected to vest. Estimates
are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. If the
options remain outstanding at the balance sheet date unexercised after a period of 10 years from the date of grant, the options expire.
Furthermore, options are forfeited if the employee leaves the Group before the options vest, unless under exceptional circumstances.
SAYE Schemes
The Johnson Service Group Sharesave Plan provides for an exercise price equal to the average of the quoted mid-market price of the Company
shares on the business days immediately preceding the date of grant, less a discount of up to ten per cent. The vesting period under the
scheme is either three or five years and no performance conditions, other than remaining a Group employee, are attached to the options.
Disclosures
During the year the Group recognised total expenses of £1.1 million (2022: £0.8 million) including associated social security costs of £0.1 million
(2022: £nil) in relation to equity-settled share based payment transactions.
The average share price of Johnson Service Group PLC during the year was 119.4 pence (2022: 111.0 pence).
The aggregate gain made by Directors on the exercise of share options during the year was £nil (2022: £nil). Further details are disclosed within
the Directors’ Remuneration Report on pages 89 to 113.
172
2023 Annual Report & Accounts 03. Group Financial Statements
30
SHARE BASED PAYMENTS (Continued)
Movements in the current and prior year in respect of all share schemes are summarised below:
Number of
Options
2023
Weighted Average
Exercise Price (p)
Number of
Options
2022
Weighted Average
Exercise Price (p)
Executive schemes
Outstanding at beginning of the year
Granted during the year
Lapsed during the year
Outstanding at the end of the year
Exercisable at the end of the year
SAYE schemes
Outstanding at beginning of the year
Lapsed during the year
Outstanding at the end of the year
Exercisable at the end of the year
2,374,213
2,408,015
(609,731)
4,172,497
95,000
2,153,234
(911,873)
1,241,361
693
–
32p
–
19p
–
138p
145p
133p
156p
1,790,453
1,373,262
(789,502)
2,374,213
95,000
2,516,444
(363,210)
2,153,234
728,767
10p
–
23p
–
–
138p
141p
138p
148p
For options outstanding at 31 December 2023, the exercise date and the exercise price are disclosed within note 29.
The fair value of options awarded to employees is determined by reference to option pricing models, principally Binomial models for SAYE
schemes and Monte Carlo models for all other schemes. The inputs into the Binomial and Monte Carlo models are as follows:
Weighted average share price at date of grant (pence)
Weighted average exercise price (pence)
Weighted average fair value (pence)
Expected volatility (%)
Expected life (years)
Risk free interest rate (%)
Expected dividend yield (%)
Options Granted
During 2023
Options Granted
During 2022
117 118
32 –
116 115
55.3 53.4
3.0 3.0
3.8 1.4
0.4 0.8
Expected volatility and expected dividend yield were determined by calculating the historical volatility of the Company’s share price and the
historical dividend yield for a period akin to the expected life of each option scheme. The risk free rate of return is based on the rate for UK
government gilts on the date of grant, for a period akin to the expected life of the option.
31
SHARE PREMIUM
Balance brought forward
Received on allotment of shares
Balance carried forward
2023
£m
2022
£m
16.8 16.8
– –
16.8 16.8
173
Notes to the Consolidated Financial
Statements Continued >
32 OWN SHARES
Balance brought forward
Purchase of own shares
Balance carried forward
2023
£m
2022
£m
0.1 –
(0.1) 0.1
– 0.1
Own shares represent the cost of shares in Johnson Service Group PLC purchased in the market and held by the Trustee of the EBT, to satisfy
options under the Group’s share option schemes, along with, in the prior year, own shares acquired via the share buyback but not cancelled at
31 December 2022.
The number of shares and the market value at the balance sheet date are as follows:
Number of shares held in EBT
Number of own shares purchased through share buyback
Market value £m
33
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ EQUITY
Profit for the year
Other recognised gains and losses relating to the year:
Share options (value of employee services)
Deferred tax on share options
Share buyback
Dividends paid to Shareholders
Re-measurement and experience gains/(losses) (net of taxation)
Cash flow hedges movement
Net addition to Shareholders’ equity
Opening Shareholders’ equity
Closing Shareholders’ equity
2023
2022
9,024 9,024
– 116,934
– 0.1
2023
£m
2022
£m
27.3 29.0
27.3 29.0
1.0 0.8
0.1 (0.2)
(29.8) (5.7)
(10.6) (3.5)
6.6 (7.4)
(0.1) (0.8)
(5.5) 12.2
284.6 272.4
279.1 284.6
34
BUSINESS COMBINATIONS
On 13 February 2023, the Group acquired 100% of the share capital of Regency Laundry Limited (‘Regency’) for a net consideration of £5.3 million
(being gross consideration of £5.75 million on a debt free, cash free basis, subject to a level of normalised working capital) plus associated fees.
Since acquisition, Regency has generated a profit of £0.6 million on revenue of £6.2 million. Had the business been acquired at the start of the
period, it is estimated that profit of £0.5 million would have been generated on revenue of £6.8 million.
On 31 August 2023, the Group acquired 100% of the share capital of Harkglade Limited, together with its trading subsidiaries Celtic Linen Limited
and Millbrook Linen Limited (‘Celtic Linen’), for a net consideration of £25.2 million (being a gross consideration of £27.1 million on a debt free, cash
free basis, subject to a locked box mechanism and a normalised level of working capital) plus associated fees. Since acquisition, Celtic Linen has
generated a profit of £0.8 million on revenue of £10.3 million. Had the business been acquired at the start of the period, it is estimated that a
profit of £2.3 million would have been generated on revenue of £30.3 million.
174
2023 Annual Report & Accounts 03. Group Financial Statements
34
BUSINESS COMBINATIONS (Continued)
The provisional fair value of assets and liabilities acquired are as follows:
Intangible assets – Goodwill
Intangible assets – Customer contracts and brands
Property, plant and equipment
Right of use assets
Textile rental items
Reimbursement asset
Unissued textile rental stock
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Borrowings
Lease Liabilities
Provisions
Current income tax liability
Deferred income tax liability
Net consideration
Regency
£m
3.2
1.4
1.0
1.5
0.5
–
–
0.8
0.2
(1.1)
(0.2)
(1.6)
–
–
(0.4)
5.3
Celtic
Linen
£m
Total
£m
7.3 10.5
12.4 13.8
5.4 6.4
2.7 4.2
2.9 3.4
0.1 0.1
0.5 0.5
5.4 6.2
0.6 0.8
(6.0) (7.1)
(1.6) (1.8)
(1.7) (3.3)
(0.7) (0.7)
(0.1) (0.1)
(2.0) (2.4)
25.2 30.5
Goodwill represents the deferred income tax arising on the recognition of the customer contracts and customer relationships and brand names
plus the expected benefits to the wider Group arising from the acquisition. None of the acquired goodwill is expected to be deductible for tax
purposes.
Regency has been included within the HORECA reporting segment and is a standalone CGU. Celtic Linen has been included in the HORECA
reporting segment and has formed an ‘Ireland’ CGU along with our ‘Johnsons Belfast’ business.
Cash flows from business acquisition activity
The cash flows in relation to business acquisition activity are summarised below:
2023
£m £m
£m
2022
£m
Costs in relation to business acquisition activity (1.6) –
Trade and other payables 0.2 –
Net cash used in operating activities (1.4) –
Net consideration payable (30.5) –
Cash acquired 0.8 –
Net cash used in investing activities (29.7) –
Cash flows in relation to business acquisition activity (31.1) –
175
Notes to the Consolidated Financial
Statements Continued >
35
DISCONTINUED OPERATIONS
During the year, a provision against deferred consideration of £0.1 million (2022: £0.2 million) was released relating to the sale of the Facilities
Management division in August 2013.
Income Statement
The Income Statement from discontinued operations included within the Consolidated Income Statement is as follows:
Operating profit
Taxation
Profit for the year from discontinued operations
2023
£m
2022
£m
0.1 0.2
– –
0.1 0.2
Cash Flows
The cash flows from discontinued operations included within the Consolidated Statement of Cash Flows are as follows:
Net cash generated from operating activities
36 ANALYSIS OF NET DEBT
2023
£m
2022
£m
0.1 0.2
Net debt is calculated as total borrowings net of unamortised bank facility fees, less cash and cash equivalents. Non-cash changes represent
the effects of the recognition and subsequent amortisation of fees relating to the bank facility, changing maturity profiles, debt acquired as
part of an acquisition and the recognition of lease liabilities entered into during the year.
Foreign
December 2023
At 31 December
2022
£m
Cash Flow
£m
Non-cash
Changes adjustments
£m
Exchange At 31 December
2023
£m
£m
Debt due within one year (note 22) 0.2 2.0
Debt due after more than one year (note 22) (14.7) (47.6)
Lease liabilities (note 23) (34.3) 7.6
Total debt and lease financing (48.8) (38.0)
Cash and cash equivalents 0.8 0.1
Net debt (48.0) (37.9)
(1.8)
(0.3)
(16.5)
(18.6)
–
(18.6)
– 0.4
(0.4) (63.0)
– (43.2)
(0.4) (105.8)
– 0.9
(0.4) (104.9)
176
2023 Annual Report & Accounts 03. Group Financial Statements
36 ANALYSIS OF NET DEBT (Continued)
December 2022
At 31 December
2021
£m
Cash Flow
£m
Foreign
Non-cash
Changes adjustments
£m
Exchange At 31 December
2022
£m
£m
Debt due within one year (note 22) 0.1 0.3
Debt due after more than one year (note 22) (18.0) 3.4
Lease liabilities (note 23) (37.8) 5.6
Total debt and lease financing (55.7) 9.3
Cash and cash equivalents (4.4) 5.2
Net debt (60.1) 14.5
(0.2)
(0.1)
(2.1)
(2.4)
–
(2.4)
– 0.2
– (14.7)
– (34.3)
– (48.8)
– 0.8
– (48.0)
The cash and cash equivalents figures are comprised of the following balance sheet amounts:
Cash (Current assets)
Overdraft (Borrowings, Current liabilities)
Lease liabilities are comprised of the following balance sheet amounts:
Amounts due within one year (Lease liabilities, Current liabilities)
Amounts due after more than one year (Lease liabilities, Non-current liabilities)
37
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Increase in cash in the year
(Increase)/decrease in debt and lease financing
Change in net debt resulting from cash flows
Debt acquired through business acquisitions
Lease liabilities recognised during the year
Non-cash movement in unamortised bank facility fees
Foreign exchange adjustments
Movement in net debt
Opening net debt
Closing Net Debt
38
FINANCIAL COMMITMENTS
2023
£m
2022
£m
9.6 6.1
(8.7) (5.3)
0.9 0.8
2023
£m
2022
£m
(5.5) (5.1)
(37.7) (29.2)
(43.2) (34.3)
2023
£m
2022
£m
0.1 5.2
(38.0) 9.3
(37.9) 14.5
(5.1) –
(13.2) (2.1)
(0.3) (0.3)
(0.4) –
(56.9) 12.1
(48.0) (60.1)
(104.9) (48.0)
Capital expenditure
Contracts placed for future capital expenditure contracted but not provided for in the consolidated financial statements are shown below:
Property, plant and equipment
2023
£m
2022
£m
27.2 11.1
39
EVENTS AFTER THE REPORTING PERIOD
There were no events occurring after the balance sheet date which should be disclosed in accordance with IAS 10, ‘Events after the reporting
period’.
177
180 Company Statement of Changes in
Shareholders’ Equity
181
182
183
Statements
Company Balance Sheet
Company Statement of Cash Flows
184 Notes to the Company Financial
Statement of Significant Accounting
Policies
04
Company
Financial
Statements
178
2023 Annual Report & Accounts 04. Company Financial Statements
179
Company Statement of Changes in
Shareholders’ Equity
Share
Capital
£m
Share
Premium
£m
Capital
Redemption
Reserve
£m
Hedge
Reserve
£m
Retained
Earnings
£m
Balance at 31 December 2021
Loss for the year
Other comprehensive loss
Total comprehensive loss
for the year
Share options (value of employee
services)
Deferred tax on share options
Share buybacks
Dividends paid
Transactions with Shareholders
recognised directly in Shareholders’
Equity
Balance at 31 December 2022
Loss for the year
Other comprehensive profit
Total comprehensive loss
for the year
Share options (value of employee
services)
Deferred tax on share options
Share buybacks
Dividends paid
Transactions with Shareholders
recognised directly in Shareholders’
Equity
Balance at 31 December 2023
44.5
–
–
–
–
–
(0.6)
–
(0.6)
43.9
–
–
–
–
–
(2.5)
–
(2.5)
41.4
Merger
Reserve
£m
3.5
–
–
–
–
–
–
–
–
16.8
–
–
–
–
–
–
–
–
16.8
3.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
16.8
3.5
0.6
–
–
–
–
–
0.6
–
0.6
1.2
–
–
–
–
–
2.5
–
2.5
3.7
0.3
–
(0.8)
(0.8)
–
–
–
–
–
(0.5)
–
(0.1)
(0.1)
–
–
–
–
–
(0.6)
Total
Equity
£m
227.0
(3.4)
(8.2)
161.3
(3.4)
(7.4)
(10.8)
(11.6)
0.8
(0.1)
(5.7)
(3.5)
(8.5)
142.0
(11.1)
6.6
(4.5)
1.0
0.1
(29.8)
(10.6)
(39.3)
98.2
0.8
(0.1)
(5.7)
(3.5)
(8.5)
206.9
(11.1)
6.5
(4.6)
1.0
0.1
(29.8)
(10.6)
(39.3)
163.0
At 31 December 2022, and pursuant to the then ongoing share buyback programme, the Group also held 116,934 treasury shares (2022: 116,934
treasury shares). These were subsequently cancelled on 3 January 2023. See note 29 of the Consolidated Financial Statements for further details.
180
2023 Annual Report & Accounts 04. Company Financial Statements
Company Balance Sheet
Note
As at
31 December 2023
£m
As at
31 December 2022
£m
Assets
Non-current assets
Right of use assets
Trade and other receivables
Deferred income tax assets
Investments
Current assets
Trade and other receivables
Current income tax assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Derivative financial liabilities
Non-current liabilities
Post-employment benefit obligations
Borrowings
Lease liabilities
Derivative financial liabilities
Net assets
Equity
Capital and reserves attributable to the company’s shareholders
Share capital
Share premium
Merger reserve
Capital redemption reserve
Hedge reserve
Retained earnings
Total Shareholders’ equity
5
8
6
7
8
9
10
11
13
12
10
11
13
15
16
0.2
7.6
2.1
600.0
609.9
0.6
1.6
2.2
376.9
7.9
0.1
0.6
385.5
0.3
63.0
0.1
0.2
63.6
163.0
41.4
16.8
3.5
3.7
(0.6)
98.2
163.0
0.2
5.3
4.4
569.3
579.2
0.1
–
0.1
341.4
5.1
0.1
0.4
347.0
10.2
14.7
0.2
0.3
25.4
206.9
43.9
16.8
3.5
1.2
(0.5)
142.0
206.9
The Company recognised a loss during the year of £11.1 million (2022: £3.4 million loss).
The financial statements on pages 180 to 191 were approved by the Board of Directors on 4 March 2024 and signed on its behalf by:
Yvonne Monaghan
Chief Financial Officer
181
Company Statement of Cash Flows
Note
5
Cash flows from operating activities
Loss for the year
Adjustments for:
Income tax credit
Total finance charge/(income)
Depreciation
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Decrease in amounts due from subsidiary companies
Deficit recovery payments in respect of post-employment
benefit obligations
Share-based payments
Commodity swaps not qualifying as hedges
Net exchange differences
Cash used in operations
Interest paid
Taxation (paid)/received
Net cash used in operating activities
Cash flows from investing activities
Acquisition of investment in subsidiary
Interest received
Loans advanced to subsidiary companies
Net cash used in investing activities
Cash flows from financing activities
Loans received from subsidiary companies
Proceeds from borrowings
Repayments of borrowings
Capital element of leases
Share buybacks
Dividends paid
Net cash generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Sterling
Euro
Cash and cash equivalents at end of year
18
18
Year ended
31 December 2023
£m
Year ended
31 December 2022
£m
(11.1)
(2.9)
3.1
–
(0.7)
1.0
2.6
(1.6)
0.9
–
0.4
(8.3)
(3.0)
(1.6)
(12.9)
(30.5)
0.4
(5.4)
(35.5)
38.2
100.6
(52.8)
(0.1)
(29.9)
(10.6)
45.4
(3.0)
(5.3)
(8.3)
(8.7)
0.4
(8.3)
(3.4)
(0.9)
(1.3)
0.1
0.1
(0.8)
1.8
(1.9)
0.5
(0.1)
–
(5.8)
(4.8)
3.5
(7.1)
–
5.1
(30.1)
(25.0)
48.5
48.0
(51.0)
–
(5.6)
(3.5)
36.4
4.3
(9.6)
(5.3)
(5.3)
–
(5.3)
Cash and cash equivalents at the end of the year include cash of £0.4 million and an overdraft of £8.7 million (2022: £nil and £5.3 million
respectively).
Included within the Company Statement of Cashflows above is £0.1 million of cash generated from investing activities relating to discontinued
operations. Further details are provided in note 35 of the Consolidated Financial Statements.
182
2023 Annual Report & Accounts 04. Company Financial Statements
Statement of Significant Accounting
Policies
The Company is incorporated and domiciled in the UK. The Company’s registered number is 523335. The address of its registered office is Johnson
House, Abbots Park, Monks Way, Preston Brook, Cheshire, WA7 3GH.
The Company is a public limited company and has its primary listing on the AIM division of the London Stock Exchange.
The Company Financial Statements were authorised for issue by the Board on 4 March 2024.
Basis of preparation
The principal accounting policies applied in the preparation of the Company Financial Statements are the same as those used in the Consolidated
Financial Statements as set out on pages 130 to 142 with the addition of the policies set out below. These policies have been consistently applied to the
information presented, unless otherwise stated.
Investments
Investments in Group Undertakings are recorded at cost, which is the fair value of the consideration paid. Investments are tested for impairment and
carried at cost less accumulated impairment losses. The Company considers impairment of its investment in subsidiaries by estimating the
recoverable amounts of the investments, which are based on either the net assets of the subsidiary, or value-in-use calculations. For further details of
value-in-use calculations, see note 12 of the Consolidated Financial Statements. Where an impairment is identified, it is charged to the Income
Statement within intangibles amortisation and impairment (excluding software). Investments that suffered an impairment are reviewed for possible
reversal of the impairment at each reporting date.
Share based compensation
The Company operates a number of equity-settled, share based compensation plans. The economic cost of awarding shares and share options to
employees is recognised as an expense in the employing company’s Income Statement equivalent to the fair value of the benefit awarded. The fair
value is determined by reference to option pricing models, principally Binomial and Monte Carlo models. The fair value of the award is recognised in
the employing company’s Income Statement over the period of the award. The grant by the Company of options over its equity instruments to the
employees of the subsidiary undertakings is treated as a capital contribution. The fair value of employee services received, measured by reference to
the grant date fair value, is recognised over the vesting period as an increase to the investment in that subsidiary undertaking, with a corresponding
credit to equity in the Company’s accounts.
Judgements made in applying accounting policies
In the course of preparing these financial statements, certain judgments are made by the Company in the process of applying the Company’s
accounting policies. Those that have the most significant effect on either the amounts recognised in the financial statements or the presentation
thereof are discussed below.
Going concern
After considering the monthly cash flow projections, the stress tests and the facilities available to the Group and Company, the Directors have a
reasonable expectation that the Group and Company have adequate resources for their operational needs, will remain in compliance with the
financial covenants set out in the bank facility agreement and will continue in operation for at least the period to 30 June 2025. Accordingly, and
having reassessed the principal risks and uncertainties, the Directors considered it appropriate to adopt the going concern basis in preparing the
Group and Company financial statements. Additional information on the judgment management has applied in adopting the going concern
assumption is included in the Directors’ Report of these accounts on pages 59 to 60.
Sources of estimation and uncertainty
The Company makes estimates and assumptions concerning the future. Whilst such estimates and assumptions are believed to be reasonable under
the circumstances, the resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that
are considered to have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial
year are discussed below:
(a)
Post-employment benefit obligations
The Company operates a post retirement defined benefit arrangement (see note 26 of the Consolidated Financial Statements). Asset
valuations are based on the fair value of scheme assets. The valuations of the liabilities of the schemes are based on statistical and actuarial
calculations, using various assumptions including discount rates, future inflation rates and pension increases, life expectancy of scheme
members, flexible retirement options and cash commutations. The actuarial assumptions may differ materially from actual experience due to
changes in economic and market conditions, variations in actual mortality, higher or lower cash withdrawal rates and other changes. Any of
these differences could impact the assets or liabilities recognised in the Balance Sheet in future periods. Sensitivities are shown in note 26 of the
Consolidated Financial Statements.
183
Notes to the Company Financial
Statements
COMPANY INCOME STATEMENT AND COMPANY STATEMENT OF COMPREHENSIVE INCOME
As permitted by Section 408(3) of the Companies Act 2006, the Company Income Statement and Company Statement of Comprehensive
Income are not presented with these financial statements. Details of Auditor’s remuneration are shown in note 3 of the Consolidated Financial
Statements.
DIRECTORS’ EMOLUMENTS
Detailed disclosures that form part of these financial statements are given in note 4 of the Consolidated Financial Statements and the Directors’
Remuneration Report on pages 89 to 113.
1
2
3
EMPLOYEE BENEFIT EXPENSE
Wages and salaries
Social security costs
Pension costs - defined contribution plans
Total
Agency costs
Cost of employee share schemes
Total employee benefit expense
2023
£m
3.6
0.6
0.1
4.3
0.1
0.9
5.3
The monthly average number of persons employed for the Company during the year was 17 (2022: 14).
4
PROPERTY, PLANT AND EQUIPMENT
Cost
At 31 December 2021, 2022 & 2023
Accumulated depreciation and impairment
At 31 December 2021, 2022 & 2023
Carrying Amount
At 31 December 2021, 2022 & 2023
There were £nil assets under construction at 31 December 2023 (2022: £nil).
5
RIGHT OF USE ASSETS
Cost
At 31 December 2021
Reassessment and modifications
At 31 December 2022
Reassessment and modifications
At 31 December 2023
Accumulated depreciation and impairment
At 31 December 2021
Charged during the year
At 31 December 2022
Charged during the year
At 31 December 2023
Carrying amount
At 31 December 2021
At 31 December 2022
At 31 December 2023
184
2022
£m
2.2
0.3
0.1
2.6
–
0.5
3.1
Plant and
Equipment
£m
0.3
0.3
–
Properties
£m
0.6
–
0.6
–
0.6
0.3
0.1
0.4
–
0.4
0.3
0.2
0.2
2023 Annual Report & Accounts 04. Company Financial Statements
6
DEFERRED INCOME TAX ASSETS
Deferred income tax assets attributable to the Company are as follows:
Deferred tax assets
Deferred income tax balances in respect of:
Depreciation in excess of capital allowances
Post-employment benefit obligations
Derivative financial instruments
Employee share schemes
Trading losses
2023
£m
0.1
0.1
0.2
0.3
1.4
2.1
The following provides a reconciliation of the movement in each of the deferred income tax assets:
Depreciation Post-
in Excess of employment Derivative Employee
Capital Benefit Financial Share Trading
Allowances Obligations Instruments Schemes Losses
£m £m £m £m £m
At 31 December 2021
(Charge)/credit to income
Charge to shareholders equity
Credit to other comprehensive
income
At 31 December 2022
(Charge)/credit to income
Credit to shareholders equity
Credit to other comprehensive income
At 31 December 2023
0.1
–
–
–
0.1
–
–
–
0.1
0.4
(0.4)
–
2.6
2.6
(0.3)
–
(2.2)
0.1
(0.1)
–
–
0.3
0.2
–
–
–
0.2
0.3
–
(0.1)
–
0.2
–
0.1
–
0.3
0.6
0.7
–
–
1.3
0.1
–
–
1.4
2022
£m
0.1
2.6
0.2
0.2
1.3
4.4
Total
£m
1.3
0.3
(0.1)
2.9
4.4
(0.2)
0.1
(2.2)
2.1
Deferred income taxes at the balance sheet date have been measured at an effective deferred tax rate of 25.0% as at 31 December 2023
(2022: 25.6%). The impact of the change in tax rates has been a £nil (2022: £0.1 million charge) to income.
The Company has estimated that £nil of the Company’s deferred income tax asset will be realised in the next 12 months. This is management’s
current best estimate and may not reflect the actual outcome in the next 12 months.
7
INVESTMENTS
Investment in subsidiary undertakings
Cost
Brought forward
Additions
Movement relating to share options
Carried forward
Accumulated impairment
Brought forward
Impairment
Carried forward
Carrying amount
Opening
Closing
2023
£m
579.9
30.5
0.2
610.6
10.6
–
10.6
569.3
600.0
2022
£m
579.5
–
0.4
579.9
10.6
–
10.6
568.9
569.3
Particulars of subsidiary undertakings are shown in note 22 of the Company Financial Statements.
During the year the Company acquired Regency Laundry Limited and Harkglade Limited along with its wholly owned trading subsidiaries
Celtic Linen Limited and Millbrook Linen Limited. Details of these acquisitions are shown in note 34 of these Consolidated Financial Statements.
The Directors deem the investments to be recoverable due to the future forecasts of the Group.
185
Notes to the Company Financial
Statements Continued >
8
TRADE AND OTHER RECEIVABLES
Amounts falling due within one year:
Prepayments and other receivables
Amounts falling due after more than one year:
Receivables from subsidiaries
2023
£m
0.6
0.6
7.6
7.6
2022
£m
0.1
0.1
5.3
5.3
Amounts owed by subsidiaries due within one year relate to invoiced services and are due according to the invoice terms.
Amounts owed by subsidiaries due after more than one year are unsecured and have no fixed date of repayment and the Company has no
present intention of demanding repayment in less than 12 months and therefore the amounts have been presented as non-current assets.
Balances are interest bearing with interest charged based on one month GBP SONIA plus 0.1193% Credit Adjustment Spread or EURIBOR plus a
1.45% margin. The fair value of these amounts is considered to be the same as their carrying value as they bear interest at a rate considered by
Directors to be a market rate.
All Company receivables (including those from related parties) are not yet due or impaired.
All receivable balances at the balance sheet date are denominated in Sterling (2022: Sterling) and are held at amortised cost.
9
TRADE AND OTHER PAYABLES (CURRENT)
Trade payables
Other payables
Other taxation and social security liabilities
Accruals
Payables to subsidiaries
2023
£m
0.3
0.3
0.4
2.1
373.8
376.9
2022
£m
0.2
0.1
0.3
1.4
339.4
341.4
All trade and other payable balances at the balance sheet date are denominated in Sterling (2022: Sterling) and are held at amortised cost.
Given their short term nature there is to be no difference between this and their fair value.
10
BORROWINGS
2023
£m
2022
£m
Current
Overdraft 8.3 5.3
Bank loans (0.4) (0.2)
7.9 5.1
Non-current
Bank loans 63.0 14.7
Total Borrowings 70.9 19.8
The maturity of non-current bank loans is as follows:
– Between one and two years 63.2 15.0
– Unamortised issue costs of bank loans (0.2) (0.3)
63.0 14.7
The currency of the outstanding bank loans is as follows:
– Sterling 32.0 15.0
– Euros 31.2 –
63.2 15.0
All Group bank loans are held by the Company. Full details of Group facilities are provided in note 22 of the Consolidated Financial Statements.
186
2023 Annual Report & Accounts 04. Company Financial Statements
10
BORROWINGS (Continued)
The overdraft and secured bank loans are stated net of unamortised issue costs of £0.6 million (2022: £0.5 million) of which £0.4 million is
included within current borrowings (2022: £0.2 million) and £0.2 million is included within non-current borrowings (2022: £0.3 million within
non-current borrowings).
The Group has two overdraft facilities for £5.0 million and £3.0 million with two of its principal bankers (2022: £5.0 million and £3.0 million). Certain
cash balances in certain Group bank accounts can be offset with overdrawn balances in those bank accounts. The maximum amount any
individual Company may be overdrawn, with each bank, is £10.0 million and £5.0 million respectively (2022: £10.0 million and £5.0 million).
11
LEASE LIABILITIES
At 31 December 2021
At 31 December 2022
Reassessment and modifications
Lease liability payments (including finance costs)
At 31 December 2023
Lease liabilities are comprised of the following balance sheet amounts:
Amounts due within one year (Lease liabilities, Current Liabilities)
Amounts due more than one year (Lease liabilities, Non-current Liabilities)
Lease liabilities are as follows:
Not more than one year
Minimum lease payments
Interest element
Present value of minimum lease payments
More than one year
Minimum lease payments
Interest element
Present value of minimum lease payments
Properties
£m
0.3
0.3
–
(0.1)
0.2
2022
£m
0.1
0.2
0.3
2022
£m
0.1
–
0.1
0.2
–
0.2
2023
£m
0.1
0.1
0.2
2023
£m
0.1
–
0.1
0.1
–
0.1
12
POST-EMPLOYMENT BENEFIT OBLIGATIONS
Details of the Group’s pension and healthcare schemes are provided in note 26 of the Consolidated Financial Statements.
As at the 31 December 2023 and 31 December 2022 the entire Group liabilities under defined benefit schemes are held on the Company
Balance Sheet.
During the year the Company’s cost of defined contribution pension schemes was £0.1 million (2022: £0.1 million).
13
14
DERIVATIVE FINANCIAL ASSETS AND LIABILITIES
Details of derivative financial liabilities are shown in note 27 of the Consolidated Financial Statements. All of the Group’s derivative financial
liabilities are held by the Company.
CONTINGENT LIABILITIES
The Company has guaranteed the banking facilities of certain UK and the Republic of Ireland subsidiary undertakings under a cross guarantee
arrangement. No losses are expected to result from this arrangement.
187
Notes to the Company Financial
Statements Continued >
15
SHARE CAPITAL
Issued and Fully Paid
Shares
2023
£m
Shares
Ordinary shares of 10p each:
At start of year 439,151,346
Share buyback (24,736,223)
43.9
(2.5)
445,256,639
(6,105,293)
At end of year 414,415,123
41.4
439,151,346
Full details relating to the issue of Ordinary shares in the prior year are shown in note 29 of the Consolidated Financial Statements.
16
SHARE PREMIUM
Balance brought forward
Received on allotment of shares
Balance carried forward
17
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ EQUITY
2023
£m
16.8
–
16.8
2023
£m
2022
£m
44.5
(0.6)
43.9
2022
£m
16.8
–
16.8
2022
£m
Loss for the year (11.1) (3.4)
(11.1) (3.4)
Other recognised gains and losses relating to the year:
Share option (value of employee services) 1.0 0.8
Deferred tax on share options 0.1 (0.1)
Share buybacks (29.8) (5.7)
Dividends paid (10.6) (3.5)
Re-measurement and experience gains/(losses) (net of taxation) 6.6 (7.4)
Cash flow hedges movement (net of taxation) (0.1) (0.8)
Net reduction to Shareholders’ equity (43.9) (20.1)
Opening Shareholders’ equity 206.9 227.0
Closing Shareholders’ equity 163.0 206.9
18
ANALYSIS OF NET DEBT
Net debt is calculated as total borrowings plus lease liabilities less cash and cash equivalents, less unamortised facility fees. Non-cash changes
represent the effects of the recognition and subsequent amortisation of fees relating to the bank facility and changing maturity profiles.
At
31 December
2022
£m
Cash Flow
£m
Other
Non-cash
Changes
£m
Foreign
Exchange
differences
£m
At
31 December
2023
£m
Debt due within one year 0.2
Debt due after more than one year (14.7)
Lease liabilities (0.3)
Total debt and lease liabilities (14.8)
Cash and cash equivalents (5.3)
Net debt (20.1)
0.2
(47.6)
0.1
(47.3)
(3.0)
(50.3)
–
(0.3)
–
(0.3)
–
(0.3)
–
(0.4)
–
(0.4)
–
(0.4)
0.4
(63.0)
(0.2)
(62.8)
(8.3)
(71.1)
188
2023 Annual Report & Accounts 04. Company Financial Statements
18
ANALYSIS OF NET DEBT (Continued)
At
31 December
2021
£m
Cash Flow
£m
Other
Non-cash
Changes
£m
Foreign
Exchange
differences
£m
At
31 December
2022
£m
Debt due within one year 0.1
Debt due after more than one year (18.0)
Lease liabilities (0.3)
Total debt and lease liabilities (18.2)
Cash and cash equivalents (9.6)
Net debt (27.8)
0.3
3.4
–
3.7
4.3
8.0
19
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
–
–
–
–
–
–
(0.2)
(0.1)
–
(0.3)
–
(0.3)
2023
£m
(Decrease)/Increase in cash in year (3.0)
(Increase)/Decrease in debt financing (47.3)
Change in net debt resulting from cash flows (50.3)
Foreign Exchange differences (0.4)
Non-cash movement in unamortised bank facility fees (0.3)
Movement in net debt in year (51.0)
Opening net debt (20.1)
Closing net debt (71.1)
0.2
(14.7)
(0.3)
(14.8)
(5.3)
(20.1)
2022
£m
4.3
3.7
8.0
–
(0.3)
7.7
(27.8)
(20.1)
20
RELATED PARTY TRANSACTIONS
Transactions during the year between the Company and its subsidiaries, which are related parties, are eliminated on consolidation. These
transactions are carried out on an arms-length basis.
The following significant transactions with subsidiary undertakings occurred in the year:
Interest paid (2.5)
Interest received 0.4
(2.1)
2023
£m
2022
£m
(2.8)
5.5
2.7
Cash flows pertaining to advances made to subsidiaries and loans from subsidiaries are shown separately with the Company Cashflow
Statement.
The key management of the Company are considered to be only the Directors of the Company. The Directors are related parties of the
Company and further details of their compensation is provided in note 5 of the Consolidated Financial Statements and in the Directors’
Remuneration Report. The Company did not enter into any form of loan arrangement with any Director during any of the years presented.
21
EVENTS AFTER THE REPORTING PERIOD
There were no events occurring after the balance sheet date which should be disclosed in accordance with IAS 10, ‘Events after the reporting
period’.
189
Notes to the Company Financial
Statements Continued >
22
SUBSIDIARIES
As at 31 December 2023 the company had a number of subsidiary companies, a list of which is shown below.
Subsidiary companies at the balance sheet date
Principal Activity
Johnsons Textile Services Limited* Textile and linen rental
Regency Laundry Limited Textile and linen rental
Celtic Linen Limited* Textile and linen rental
Millbrook Linen Limited* Textile and linen rental
Johnson Group Properties PLC Property holding
Semara Estates Limited* Property holding
Fresh Linen Holdings Limited Holding company
Harkglade Limited Holding company
Johnson Investment Limited Holding company
Semara Group Limited* Holding company
Semara Investments Limited* Holding company
Semara Contract Services Limited* Holding company
South West Laundry Holdings Limited Holding company
Afonwen Laundry Limited* Non-trading company
Ashbon Services Limited Non-trading company
Bentley Textile Services Limited* Non-trading company
Bourne Services Group Limited Non-trading company
Bourne Textile Services Limited* Non-trading company
Caterers Linen Supply Limited* Non-trading company
Catering Linen Supply Limited* Non-trading company
Chester Laundry Limited Non-trading company
Clayfull Limited Non-trading company
Clifton Cleaning Limited Non-trading company
Fresh Linen Limited* Non-trading company
Greenearth Cleaning Europe Limited Non-trading company
Greenearth Cleaning Limited Non-trading company
Johnson Group Cleaners Trustee Company (no 1) Limited Non-trading company
Johnson Group Cleaners Trustee Company (no 2) Limited Non-trading company
Johnson Group Inc (UK) Limited Non-trading company
Johnson Group Management Services Limited Non-trading company
Johnson Group Pension Nominees Limited Non-trading company
Johnson Hospitality Services Limited Non-trading company
Johnsons Hotel Linen Limited Non-trading company
Johnsons Hotel, Restaurant and Catering Linen Limited Non-trading company
Johnsons Restaurant and Catering Limited Non-trading company
Johnsons Apparelmaster Limited Non-trading company
Johnsons Workwear Limited Non-trading company
JSG PLC* Non-trading company
London Linen Management Limited* Non-trading company
London Linen Supply Limited Non-trading company
London Workwear Rental Limited* Non-trading company
Lilliput (Dunmurry) Limited Non-trading company
Pure Laundry Limited* Non-trading company
Portgrade Limited Non-trading company
Quality Textile Services Limited Non-trading company
Roboserve Limited Non-trading company
Semara Nominees Limited* Non-trading company
Semara Trustees Limited* Non-trading company
South West Laundry Limited* Non-trading company
Stalbridge Linen Services Limited* Non-trading company
StarCounty Textile Services Limited Non-trading company
Whiteriver Laundry Limited* Non-trading company
Wintex UK Limited Non-trading company
Zip Textiles (Services) Limited Non-trading company
190
2023 Annual Report & Accounts 04. Company Financial Statements
22
SUBSIDIARIES (Continued)
Johnson Service Group PLC owns directly or indirectly the entire share capital of each of these companies. The share capital of the companies
annotated* are held through intermediate holding companies. All companies above are incorporated in Great Britain and registered in
England and Wales, apart from Clayfull Limited which is registered in Scotland, Lilliput (Dunmurry) Limited which is registered in Northern
Ireland and Harkglade Limited, Celtic Linen Limited and Millbrook Linen Limited which are registered in the Republic of Ireland. The registered
office for all the companies listed above is Johnson House, Abbots Park, Monks Way Preston Brook, Runcorn, Cheshire, WA7 3GH apart from
Clayfull Limited whose registered office is Unit 1, Sherwood Industrial Estate, Bonnyrigg, EH19 3LW, Lilliput (Dunmurry) Limited whose registered
office is 9 City Business Park, Dunmurry, Belfast, BT17 9GX, Regency Laundry Limited whose registered office is Unit 10b, Leafield Industrial Estate,
Leafield Way, Corsham, Wiltshire, SN13 9SW and .Harkglade Limited, Celtic Linen Limited and Millbrook Linen Limited whose registered office is
Rosslare Road Drinagh, Wexford, Republic of Ireland.
191
193
Financial Calendar
194 Notice of Annual General Meeting
204 Directors and Advisors
05Shareholder
Information
192
2023 Annual Report & Accounts 05. Shareholder Information
FINANCIAL CALENDAR
Results announcement for the year to
31 December 2023
5 March 2024
Results announcement for the half year to
30 June 2024
September 2024
Annual General Meeting
1 May 2024
193
Notice of Annual General Meeting
Company Number: 00523335
This Document is important and requires your immediate attention. If you are in any doubt as to any aspect of the contents of this Document or
the action you should take, you are recommended to consult immediately your stockbroker, solicitor, accountant or other independent adviser
authorised under the Financial Services and Markets Act 2000 if you are resident in the United Kingdom or, if you reside elsewhere, another
appropriately authorised financial adviser.
If you have sold or otherwise transferred all of your shares in Johnson Service Group PLC, please pass this document as soon as possible to the
purchaser or transferee, or to the person who arranged the sale or transfer so they can pass these documents to the person who now holds the shares.
Dear Shareholder.
I am pleased to be writing to you with details of the 2024 Annual General Meeting (the ‘Meeting’ or the ‘AGM’) of Johnson Service Group PLC (‘JSG’ or the
‘Company’) which will be held at the DoubleTree by Hilton Hotel & Spa Chester, Warrington Road, Hoole, Chester, CH2 3PD on Wednesday 1 May 2024 at
11:00am.
BUSINESS OF THE MEETING
The formal notice of the AGM is set out on pages 196 to 202 and full details of the Resolutions to be proposed at the AGM are contained in the
Explanatory Notes on pages 200 to 202.
FORM OF PROXY
As we did last year, and in order to reduce the Company’s environmental impact, our intention is to once again remove paper from the voting process
as far as possible. As a result, you will not receive a hard copy Form of Proxy for the AGM but instead you will be able to register your vote
electronically.
You are, therefore, asked to vote in one of the following ways:
•
•
•
Register your vote online through our Registrar’s portal – www.signalshares.com. You will need to log into your Signal Shares account or register if
you have not previously done so.
CREST members may utilise the CREST electronic proxy appointment service in accordance with the instructions provided in Accompanying
Note 5 below.
If you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity platform, a process which has been
agreed by the Company and approved by the Registrar. For further information regarding Proxymity, please go to www.proxymity.io and refer to
Note 6 below.
If you prefer, you may request a hard copy Form of Proxy from our Registrar, Link Group, using the contact details shown within Accompanying Note 2
below and return it to Link Group at the address shown on the Form of Proxy.
All Forms of Proxy, whether registered online, electronic or hard copy, must be received by the Company’s Registrar no later than 11:00am on Monday
29 April 2024 or, if the Meeting is adjourned, by the time which is 48 hours before the start time of the adjourned Meeting.
Further details are provided in Accompanying Note 3 below. If you need help with completing the Form of Proxy online, please contact the Company’s
Registrar.
HOW TO VOTE
Your vote is important to us. We strongly encourage you to vote in advance of the Meeting by appointing the Chair of the Meeting as your proxy. Our
Registrar, Link Group, must receive your Form of Proxy containing your voting instructions by 11:00am on Monday 29 April 2024 at the latest to ensure
that your vote is counted. Details of how to submit a Form of Proxy are set out in Accompanying Note 4 below.
194
2023 Annual Report & Accounts 05. Shareholder Information
BOARD RECOMMENDATIONS
The Directors believe that each of the proposed Resolutions to be considered at the AGM is in the best interests of the Company and its Shareholders
as a whole and recommend that all Shareholders vote in favour of all Resolutions, as the Directors intend to do in respect of their own shareholdings.
The results of the voting on all Resolutions will be announced via the Regulatory News Service and published on our website as soon as practicable
following the conclusion of the AGM.
Jock Lennox
Non-Executive Chair
4 March 2024
195
Notice of Annual General Meeting
Continued >
NOTICE is hereby given that the Annual General Meeting of Johnson Service Group PLC will be held at the DoubleTree by Hilton Hotel &
Spa Chester, Warrington Road, Hoole, Chester, CH2 3PD on Wednesday 1 May 2024 at 11:00am to transact the business set out in the
Resolutions below.
Resolutions 1 to 13 (inclusive) will be proposed as Ordinary Resolutions and Resolutions 14 to 16 (inclusive) will be proposed as Special Resolutions.
The business of the Meeting will be to consider and, if thought fit, to pass the following Resolutions:
ORDINARY RESOLUTIONS
Annual Report and Accounts
1.
To receive and adopt the financial statements for the year ended 31 December 2023 together with the reports of the Directors and the auditor on
those financial statements.
Directors’ Remuneration Report
2.
To approve the Directors’ Remuneration Report as set out on pages 89 to 113 of the 2023 Annual Report.
Final Dividend
3.
To confirm the payment of the interim dividend of 0.9 pence per Ordinary Share and to declare a final dividend of 1.9 pence per Ordinary Share
for the year ended 31 December 2023.
Election and Re-election of Directors
4.
To re-elect Jock Lennox as a Director.
5.
6.
7.
8.
9.
To re-elect Peter Egan as a Director.
To re-elect Yvonne Monaghan as a Director.
To re-elect Chris Girling as a Director.
To re-elect Nick Gregg as a Director.
To re-elect Nicola Keach as a Director.
10. To elect Kirsty Homer as a Director, who was appointed as a Director by the Board subsequent to the previous Annual General Meeting of the
Company.
External Auditor’s Appointment and Remuneration
11.
To reappoint Grant Thornton UK LLP as auditor to the Company until the conclusion of the next general meeting at which accounts are laid
before the Company.
12. To authorise the Audit Committee to determine the remuneration of the auditor.
Directors’ Authority to Allot Shares
13.
In substitution for all existing and unexercised authorities and powers, the Directors of the Company be and they are hereby generally and
unconditionally authorised for the purposes of section 551 of the Companies Act 2006 to exercise all powers of the Company to allot equity
securities (as defined in section 560 of the Companies Act 2006) (“Equity Securities”) to such persons at such times and on such terms and
conditions as the Directors may determine and subject always to the Articles of Association, provided that the aggregate of the nominal amount
of such Equity Securities that may be allotted under this authority shall not exceed £13,813,837.
This authority shall, unless previously renewed, varied or revoked by the Company in general meeting, expire at the conclusion of the next Annual
General Meeting of the Company to be held after the passing of this Resolution or, if earlier, on 1 July 2025, save that the Directors of the Company
may, before such expiry make an offer or agreement which would or might require Equity Securities to be allotted after such expiry and the
Directors of the Company may allot Equity Securities in pursuance of any such offer or agreement as if the authority conferred hereby had not
expired.
All unutilised authorities previously granted to the Directors of the Company under section 551 of the Companies Act 2006 shall cease to have
effect at the conclusion of the Annual General Meeting (save to the extent that the same are exercisable pursuant to section 551(7) of the
Companies Act 2006 by reason of any offer or agreement made prior to the date of this Resolution which would or might require equity securities
to be allotted on or after that date).
196
2023 Annual Report & Accounts 05. Shareholder Information
SPECIAL RESOLUTIONS
Disapplication of Pre-emption Rights
14. Subject to and conditional upon the passing of the Ordinary Resolution numbered 13 in this notice of Annual General Meeting of the Company
and in substitution for all existing and unexercised authorities and powers, the Directors of the Company be and are hereby generally and
unconditionally empowered pursuant to section 570 of the Companies Act 2006 to allot Equity Securities for cash pursuant to the authority
conferred upon them by the Ordinary Resolution numbered 13 in this notice of Annual General Meeting of the Company and / or sell ordinary
shares held by the Company as treasury shares for cash as if section 561 of the Companies Act 2006 did not apply to any such allotment of Equity
Securities or sale of ordinary shares held by the Company as treasury shares, provided that this power shall be limited to:
(i)
(ii)
(iii)
the allotment of Equity Securities in connection with a rights issue or similar offer to or in favour of ordinary Shareholders where the Equity
Securities respectively attributable to the interests of all ordinary Shareholders are proportionate (as nearly as may be) to the respective
numbers of shares held by them on that date provided that the Directors of the Company may make such exclusions or other arrangements
to deal with any legal or practical problems under the laws of any territory or the requirement of any regulatory body or any stock exchange
or with fractional entitlements as they consider necessary or expedient;
the allotment (otherwise than pursuant to sub paragraph (i) above) of Equity Securities pursuant to the authority granted under the
Ordinary Resolution numbered 13 in this notice of Annual General Meeting or sale of treasury shares up to an aggregate nominal amount of
£4,144,151 (representing approximately 10% of the Company’s issued share capital (excluding treasury shares) as at 4 March 2024); and
the allotment of Equity Securities or sale of treasury shares (otherwise than under sub-paragraphs (i) or (ii) above) up to an aggregate
nominal amount equal to 20 per cent of any allotment of Equity Securities or sale of treasury shares from time to time under sub-paragraph
(ii) above, such authority to be used only for the purposes of making a follow-on offer which the Directors of the Company determine to be of
a kind contemplated by paragraph 3 of Section 2B of the Statement of Principles on Disapplying Pre-Emption Rights most recently
published by the Pre-Emption Group prior to the date of this notice.
This power shall, unless previously renewed, varied or revoked by the Company in general meeting, expire at the conclusion of the next Annual
General Meeting of the Company to be held after the passing of this Resolution or, if earlier, on 1 July 2025, save that the Company may before
such expiry make any offer or enter into any agreement which would or might require Equity Securities to be allotted (and treasury shares to be
sold) after such expiry and the Directors of the Company may allot Equity Securities (and sell treasury shares) in pursuance of any such offer or
agreement as if the power conferred hereby had not expired. All previous authorities under Section 571 of the Companies Act 2006 shall cease to
have effect at the conclusion of the Annual General Meeting.
15. Subject to and conditional upon the passing of the Ordinary Resolution numbered 13 in this notice of Annual General Meeting of the Company
and in addition to any authority granted under the Special Resolution numbered 14 in this notice of Annual General Meeting of the Company, the
Directors of the Company be and are hereby generally and unconditionally empowered pursuant to section 570 of the Companies Act 2006 to
allot Equity Securities for cash pursuant to the authority conferred upon them by the Ordinary Resolution numbered 13 in this notice of Annual
General Meeting of the Company and / or sell ordinary shares held by the Company as treasury shares for cash as if section 561 of the Companies
Act 2006 did not apply to any such allotment of Equity Securities or sale of treasury shares, provided that this power shall be limited to the
allotment of Equity Securities pursuant to the authority granted under the Ordinary Resolution numbered 13 in this notice of Annual General
Meeting of the Company or the sale of treasury shares:
(i)
(ii)
up to an aggregate nominal amount of £4,144,151 (representing approximately 10% of the Company’s issued share capital (excluding treasury
shares) as at 4 March 2024) such authority to be used only for the purposes of financing (or refinancing, if the authority is to be used within
twelve months after the original transaction) a transaction which the Directors of the Company determine to be an acquisition or other
specified capital investment of a kind contemplated by the Statement of Principles on Disapplying Pre-Emption Rights most recently
published by the Pre-Emption Group prior to the date of this notice of Annual General Meeting of the Company; and
(otherwise than under sub-paragraph (i) above) up to an aggregate nominal amount equal to 20 per cent of any allotment of Equity
Securities or sale of treasury shares from time to time under sub-paragraph (i) above, such authority to be used for the purposes of making a
follow-on offer which the Directors of the Company determine to be of a kind contemplated by sub-paragraph 3 of Section 2B of the
Statement of Principles on Disapplying Pre-Emption Rights most recently published by the Pre-Emption Group prior to the date of this notice
of Annual General Meeting of the Company.
This power shall, unless previously renewed, varied or revoked by the Company in general meeting, expire at the conclusion of the next Annual
General Meeting of the Company to be held after the passing of this Resolution or, if earlier, on 1 July 2025, save that the Company may before
such expiry make any offer or enter into any agreement which would or might require Equity Securities to be allotted (and treasury shares to be
sold) after such expiry and the Directors of the Company may allot Equity Securities (and sell treasury shares) in pursuance of any such offer or
agreement as if the power conferred hereby had not expired. All previous authorities under Section 571 of the Companies Act 2006 shall cease to
have effect at the conclusion of the Annual General Meeting.
Purchase of Own Shares
16.
In accordance with article 11 of the Articles of Association, the Directors of the Company be and are hereby generally and unconditionally
authorised for the purposes of section 701 of the Companies Act 2006 to make market purchases (within the meaning of section 693(4) of the
Companies Act 2006) of ordinary shares of 10 pence each in the capital of the Company (“Ordinary Shares”) on such terms and in such manner as
the Directors of the Company may from time to time determine, provided that:
(i)
the maximum aggregate number of Ordinary Shares that may be purchased under this authority is 41,441,512 (representing approximately
10% of the Company’s issued share capital (excluding treasury shares) as at 4 March 2024);
197
Notice of Annual General Meeting
Continued >
(ii)
the minimum price which may be paid for each Ordinary Share is 10 pence, exclusive of attributable expenses payable by the Company
(if any); and
(iii)
the maximum price which may be paid for each Ordinary Share is the higher of:
a) an amount equal to not more than 105% of the average of the middle market quotations for the Ordinary Shares as derived from the
London Stock Exchange Daily Official List for the five business days immediately preceding the day on which the purchase is made;
and
b)
the higher of the price of the last independent trade of Ordinary Shares and the highest current independent bid for Ordinary Shares
on the trading venue where the purchase is carried out,
in each case, exclusive of attributable expenses payable by the Company (if any).
The authority hereby conferred shall, unless previously renewed, varied or revoked by the Company in general meeting, expire at the
conclusion of the next Annual General Meeting of the Company held after the passing of this Resolution or, if earlier, on 1 July 2025 save in
relation to purchases of Ordinary Shares the contract for which was concluded before the expiry of this authority and which will or may be
executed wholly or partly after such expiry, where the Company may make a purchase of Ordinary Shares in pursuance of any such contract.
All previous unutilised authorities for the Company to make market purchases of Ordinary Shares are revoked, except in relation to the purchase
of shares under a contract or contracts concluded before the date of this Resolution and where such purchase has not yet been executed.
All Shareholders are strongly encouraged to vote by appointing the Chair of the Meeting as their proxy in advance of the AGM.
By Order of the Board.
Christopher Clarkson
Company Secretary
4 March 2024
Johnson Service Group PLC
Johnson House, Abbots Park, Monks Way, Preston Brook, Cheshire, WA7 3GH
198
2023 Annual Report & Accounts 05. Shareholder Information
Accompanying Notes
1.
Entitlement to Attend or Vote at the AGM
Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only those Shareholders registered in the Register of Members
of the Company at close of business on 29 April 2024 or, in the event that the Meeting is adjourned, in the Register of Members at close of business on the date which is
two days prior to the date fixed for holding any adjourned Meeting, shall be entitled to attend or vote at the Meeting in respect of the number of shares registered in
their name at the relevant time. Changes to entries on the Register of Members after that time shall be disregarded in determining the rights of any person to attend
or vote at the Meeting.
2.
Contacting the Company’s Registrar
You can write to the Company’s Registrar at the address below:
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Alternatively, you can email at shareholderenquiries@linkgroup.co.uk or call Link Group on 0371 664 0300. Calls are charged at the standard geographic rate and will
vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 09:00 - 17:30 (GMT), Monday to Friday
excluding public holidays in England and Wales.
When contacting the Registrar please ensure you provide your unique Investor Code (IVC), which can be found on a share certificate or dividend confirmation.
Alternatively, you can contact the Company’s Registrar to obtain your IVC.
3.
Voting
In order to reduce the Company’s environmental impact, our intention is to remove paper from the voting process as far as possible. As a result, you will not receive a
Form of Proxy for the AGM in the post.
You are, therefore, asked to register your vote online through our Registrar’s portal – www.signalshares.com. You will need to log into your Signal Shares account or
register if you have not previously done so. To log in or register, you will need your Investor Code (IVC), which is printed on your share certificate or may be obtained by
contacting the Company’s Registrar, Link Group, whose contact details are set out in Accompanying Note 2 above.
CREST members may utilise the CREST electronic proxy appointment service in accordance with the instructions provided in Accompanying Note 5 below.
If you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity platform in accordance with Note 6 below.
If you prefer, you may request a hard copy Form of Proxy from Link Group, using the contact details set out in Accompanying Note 2 above, and return it to Link Group
at the address shown on the form.
All Forms of Proxy, whether online, electronic or hard copy, must be received by the Company’s Registrar no later than 11:00am on 29 April 2024 or, if the Meeting is
adjourned, by the time which is 48 hours before the start time of the adjourned Meeting.
If you need help with completing the Form of Proxy online, please contact the Company’s Registrar.
4.
Proxies
Shareholders are entitled to appoint a proxy to exercise all or any of their rights to attend, speak and vote on their behalf at the Meeting. A Shareholder may appoint
more than one proxy in relation to the AGM provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that
Shareholder. A proxy need not be a Shareholder of the Company. You can only appoint a proxy by using the procedures set out in these notes.
Shareholders can complete the Form of Proxy online as further detailed in Accompanying Note 3 above. As an alternative, you may request a hard copy Form of Proxy
by emailing, calling, or writing to, Link Group using the contact details provided in Accompanying Note 2 above. To appoint more than one proxy you may photocopy
the Form of Proxy. Please indicate the proxy holder’s and the number of shares in relation to which they are authorised to act as your proxy (which, in aggregate,
should not exceed the number of shares held by you). Please also indicate if the proxy instruction is one of multiple instructions being given. All Forms of Proxy must be
signed and returned to Link Group at the above address together in the same envelope.
Shareholders who are CREST members may use the electronic proxy voting service as described below.
If you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity platform as described below.
To be valid, any Form of Proxy or other instrument appointing a proxy, together with any power of attorney or other authority under which it is signed (or a duly
certified copy), must be received by post or (during normal business hours only) by hand at the Company’s Registrar no later than 11:00am on Monday 29 April 2024.
Shareholders are encouraged to ensure that they contact Link Group in sufficient time ahead of the AGM to allow any request for a paper Form of Proxy to be
processed, dispatched and (following completion) subsequently returned to the Registrar.
The return of a completed Form of Proxy or other such instrument or any CREST Proxy Instruction or appointing a proxy via Proxymity (as described below) will not
prevent a Shareholder attending the AGM and voting in person. Unless otherwise indicated on the Form of Proxy, CREST, Proxymity or any other electronic voting
instruction, the proxy will vote as they think fit or, at their discretion, withhold from voting.
5.
CREST
CREST members who wish to appoint a proxy or proxies by utilising the proxy voting service may do so for the Meeting (and any adjournment thereof) by following the
procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members (and those CREST members who have appointed a voting
service provider) should refer to their CREST sponsor or voting service provider, who will be able to take the appropriate action on their behalf.
In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated
in accordance with CREST’s specifications and must contain the information required for such instructions, as described in the CREST Manual. The message (regardless
of whether it relates to the appointment of a proxy or to an amendment to the instruction given to a previously appointed proxy) must, in order to be valid, be
transmitted so as to be received by the issuer’s agent (ID “RA10”) by the latest time(s) for receipt of proxy appointments specified in, or in a note to, the Notice of
Meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host)
from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.
CREST members (and, where applicable, their CREST sponsors or voting service providers) should note that CREST does not make available special procedures in
CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility
of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider, to
procure that his CREST sponsor or voting service provider takes) such action as shall be necessary to ensure that a message is transmitted by means of the CREST
system by any particular time. In this connection, CREST members (and, where applicable, their CREST sponsors or voting service providers) are referred, in particular, to
those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
199
Notice of Annual General Meeting
Continued >
6.
Proxymity Voting
If you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity platform, a process which has been agreed by the
Company and approved by the Registrar. For further information regarding Proxymity, please go to www.proxymity.io. Your proxy must be lodged by 11:00am on
Monday 29 April 2024 in order to be considered valid or, if the Meeting is adjourned, by the time which is 48 hours before the time of the adjourned Meeting. Before you
can appoint a proxy via this process you will need to have agreed to Proxymity’s associated terms and conditions. It is important that you read these carefully as you
will be bound by them and they will govern the electronic appointment of your proxy. An electronic proxy appointment via the Proxymity platform may be revoked
completely by sending an authenticated message via the platform instructing the removal of your proxy vote.
7.
Documents Available for Inspection
The following documents will be available for inspection at the Registered Office of the Company during normal business hours on any business day (Saturdays,
Sundays and public holidays excluded) from the date of this Notice until the close of the Meeting and at the place of the Meeting for 15 minutes prior to and during
the Meeting:
(i)
(ii)
(iii)
the Register of Directors’ interests kept by the Company under Section 809 of the Companies Act 2006;
copies of all service agreements between the Executive Directors and the Company together with other appropriate documentation; and
copies of the terms and conditions of appointment of the Non-Executive Directors.
So that appropriate arrangements can be made for Shareholders wishing to inspect documents, we request that Shareholders contact the Company Secretary by
email at enquiries@jsg.com in advance of any visit to ensure that access can be arranged.
8.
Corporate Representatives
Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a member provided that
they do not do so in relation to the same shares.
9.
Shareholder Rights and AGM Business
Subject to the provisions of section 338 of the Companies Act 2006, members representing at least 5% of the total voting rights of all members (or at least 100
members who would have the right to vote at the Meeting and who hold shares on which there has been paid an average sum per member of at least £100) may
have the right to require the Company:
(i)
to give, to members of the Company entitled to receive notice of the Meeting, notice of a Resolution which may properly be moved and is intended to be moved
at the Meeting; and/or
(ii)
to include in the business to be dealt with at the Meeting any matter (other than a proposed Resolution) which may be properly included in the business.
A Resolution may properly be moved or a matter may properly be included in the business unless:
(i)
(ii)
(iii)
(in the case of a Resolution only) it would, if passed, be ineffective (whether by reason of inconsistency with any enactment or the Company’s constitution or
otherwise);
it is defamatory of any person; or
it is frivolous or vexatious.
Such a request may be in hard copy form or in electronic form, must identify the Resolution of which notice is to be given or the matter to be included in the business,
must be authenticated by the person or persons making it, must be received by the Company not later than six weeks before the Meeting, and (in the case of a matter
to be included in the business only) must be accompanied by a statement setting out the grounds for the request.
10. Shareholders’ Right to Ask Questions at the AGM
Any member attending the Meeting would have the right to ask questions relating to the business of the AGM in accordance with section 319A of the Companies Act
2006. The Company must cause to be answered any such question relating to the business being dealt with at the Meeting but no such answer need be given if:
(i)
(ii)
(iii)
to do so would interfere unduly with the business of the Meeting or involve the disclosure of confidential information;
the answer has already been given on a website in the form of an answer to a question; or
it is undesirable in the interests of the Company or the good order of the Meeting that the question be answered.
11.
Total Voting Rights
As at 4 March 2024 (being the last business day prior to publication of this notice) the Company’s issued share capital consists of 414,415,123 Ordinary Shares carrying
one vote each. The total voting rights in the Company as at 4 March 2024 are, therefore, 414,415,123 (excluding treasury shares).
Explanatory Notes
The following notes give an explanation of the proposed Resolutions.
Resolutions 1 to 13 (inclusive) are proposed as Ordinary Resolutions. This means that for each of those Resolutions to be passed, more than half of the votes cast must be in
favour of the Resolution. Resolutions 14 to 16 (inclusive) are proposed as Special Resolutions. This means that for each of those Resolutions to be passed, at least three-
quarters of the votes cast must be in favour of the Resolution.
The Directors consider the passing of all of the Resolutions to be in the best interests of the Company and its Shareholders and accordingly recommend that you vote in
favour of these Resolutions as they intend to do so in respect of their own shareholdings.
Annual Report and Accounts (Resolution 1)
The Directors of the Company must present the audited accounts for the year ended 31 December 2023 to the AGM.
Directors’ Remuneration Report (Resolution 2)
It is proposed that the Directors’ Remuneration Report for the financial year ended 31 December 2023, as set out on pages 89 to 113 of the Annual Report, be approved. The
Directors’ Remuneration Report contains, inter alia, details of the Directors who were members of the Remuneration Committee, a forward looking statement of the
Company’s policy on Directors’ remuneration for subsequent financial years, a performance graph showing the Company’s Total Shareholder Return compared with the
return on the FTSE Industrial Goods and Services Index, details of the Directors’ service agreements, the ‘Single Total Figure of Remuneration’ table and specific disclosures
relating to each Director’s remuneration.
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2023 Annual Report & Accounts 05. Shareholder Information
Declaration of a Dividend (Resolution 3)
A final dividend can only be paid after the Shareholders at a general meeting have approved it. A final dividend of 1.9 pence per Ordinary Share is recommended by the
Directors for payment to Shareholders who are on the Register at the close of business on 12 April 2024. If approved, the date of payment of the final dividend will be 10 May
2024. The ex-dividend date is 11 April 2024. An interim dividend of 0.9 pence per Ordinary Share was paid on 3 November 2023.
Election and Re-election of Directors (Resolutions 4 to 10 inclusive)
Provision 18 of the Financial Reporting Council’s 2018 UK Corporate Governance Code (the ‘Code’) requires all Directors to be subject to annual re-election. Biographical
details of all the Directors offering themselves for re-election or election, as applicable, are set out on pages 54 to 55 of the 2023 Annual Report and are also available for
viewing on the Company’s website (www.jsg.com).
For 2023, an evaluation of the Board was conducted within the Company by way of questionnaire for completion by each Board member. The questionnaire was designed
to encourage thought provoking and candid responses in relation to several aspects of Board performance during the year and views on future focus topics for the Board.
The Chair then arranged individual, one-to-one, meetings with each Board member to discuss the aggregated and anonymised questionnaire responses. Overall
conclusions were then presented and discussed at the meeting of the Board in January 2024. Further details are provided on page 74 of the 2023 Annual Report. Additionally,
the Independent Non-Executive Directors conducted a performance evaluation of the Chair, after taking into account the views of the Executive Directors. Furthermore, the
Remuneration Committee regularly reviewed the performance of each Executive Director.
As a result of these reviews and evaluations, it is considered that the performance of each Director continues to be effective, that each Director demonstrates sufficient
commitment to their role and that the contribution of each Director continues to be important to the Company’s long-term sustainable success.
Appointment of the Auditor (Resolution 11)
The Company is required to appoint the auditor at each general meeting at which accounts are presented, to hold office until the end of the next such meeting. Resolution
11, which is recommended by the Audit Committee, proposes the reappointment of the Company’s existing auditor, Grant Thornton UK LLP.
Remuneration of the Auditor (Resolution 12)
This Resolution follows best practice in corporate governance by separately seeking authority for the Audit Committee to determine the auditor’s remuneration.
Renewal of Directors’ Authority to Allot Securities (Resolution 13)
The Company’s Directors may only allot Ordinary Shares or grant rights over Ordinary Shares if authorised to do so by Shareholders. The authority granted at the 2023 AGM
under section 551 of the Companies Act 2006 to allot relevant securities is due to expire at the conclusion of this year’s AGM. Accordingly, this Resolution seeks to grant a new
authority to authorise the Directors to allot shares in the Company or grant rights to subscribe for, or convert any security into, shares in the Company and will expire at the
conclusion of the next AGM of the Company in 2025 or, if earlier, the close of business on 1 July 2025.
If passed, the authority granted by the passing of this Resolution will be limited to an aggregate nominal value of £13,813,837 of Ordinary Shares which represents
approximately one third of the Ordinary share capital in issue (excluding treasury shares) as at 4 March 2024 (being the latest practicable date prior to publication of this
Notice). If renewed, the authority will, unless previously renewed, varied or revoked by the Company in general meeting, expire at the conclusion of the next Annual General
Meeting of the Company to be held after the passing of this Resolution or, if earlier, on 1 July 2025.
Other than in respect of allotting Ordinary Shares in order to satisfy employee share schemes, the Directors have no present intention of exercising this authority. However, it
is considered prudent to maintain the flexibility that this authority provides. The Company’s Directors intend to renew this authority annually.
Renewal of General Disapplication of Pre-emption Rights (Resolution 14)
Under section 561(1) of the Companies Act 2006, if the Directors wish to allot any of the unissued shares or grant rights over shares or sell treasury shares for cash (other than
pursuant to an employee share scheme) they must in the first instance offer them to existing Shareholders in proportion to their holdings. There may be occasions, however,
when the Directors will need the flexibility to finance business opportunities by the issue of shares without a pre-emptive offer to existing Shareholders. This cannot be done
under the Companies Act 2006 unless the Shareholders have first waived their pre-emption rights.
In 2022, the Pre-Emption Group (which represents the Investment Association and the Pension and Lifetime Savings Association) published a revised statement of principles
for the disapplication of pre-emption rights (the “Principles”). The Principles relate to issues of equity securities for cash other than on a pre-emptive basis (i.e. other than pro
rata to existing Shareholders) by all companies (wherever incorporated) with shares admitted to the Premium Listing segment of the Official List of the UK Listing Authority
and to trading on the Main Market for listed securities of the London Stock Exchange. Certain other companies, including those with shares admitted to trading on AIM, are
encouraged to adopt the Principles. At the Company’s AGM in 2023, the Company sought and obtained Shareholder approval for a general authority for the disapplication
of pre-emption rights in accordance with the applicable authority limits set out in the Principles.
The Principles provide that a general authority for the disapplication of pre-emption rights over approximately 10 per cent of the Company’s issued ordinary share capital,
together with a further disapplication for up to 2 per cent to be used only for the purposes of a follow-on offer which the Directors of the Company determine to be of a kind
contemplated by paragraph 3 of Section 2B of the Principles, should be treated as routine.
Whilst the Directors do not have any present intention to exercise the disapplication authority sought in Resolution 14, the Directors consider that it is appropriate for them to
seek the flexibility that this authority provides, and that the authority sought in Resolution 14 is in the best interests of the Company.
Accordingly, other than in connection with a rights issue or any other pre-emptive offer concerning Equity Securities, and subject to the passing of Resolution 13, this
Resolution seeks to replace the authority conferred on the Directors at the 2023 AGM to allot ordinary shares, or grant rights to subscribe for, or convert securities into,
ordinary shares or sell treasury shares for cash (other than pursuant to an employee equity incentive share scheme) without application of pre-emption rights. The authority
will be limited to the issue of shares for cash up to a maximum aggregate nominal value of (i) £4,144,151, which is equivalent to approximately 10 per cent of the Company’s
issued ordinary share capital (excluding treasury shares) as at 4 March 2024 (being the latest practicable date prior to publication of this Notice); and (ii) up to an additional
£828,830, which is equivalent to approximately 2 per cent of the Company’s issued ordinary share capital (excluding treasury shares) as at 4 March 2024 (being the latest
practicable date prior to publication of this Notice), solely for the purposes of making a follow-on offer which the Directors of the Company determine to be of a kind
contemplated by paragraph 3 of Section 2B of the Principles.
This Resolution also seeks a disapplication of the pre-emption rights on a rights issue so as to allow the Directors to make exclusions or such other arrangements as may be
appropriate to resolve legal or practical problems which, for example, might arise with overseas Shareholders.
Shareholders will note that this Resolution also relates to treasury shares and will be proposed as a Special Resolution. If renewed, the authority will, unless previously
renewed, varied or revoked by the Company in general meeting, expire at the conclusion of the next AGM of the Company in 2025 or, if earlier, the close of business on 1 July
2025. The Directors intend to renew this authority annually and confirm their intention to follow best practice, as set out in the Principles.
General Disapplication of Pre-emption Rights in Connection with an Acquisition or Specified Capital Investment (Resolution 15)
The Principles further provide that the Company may, as a routine, seek to disapply pre-emption rights over the equivalent of approximately an additional 10 per cent of the
issued ordinary share capital of the Company, so long as certain criteria are met. Subject to the passing of Resolution 13, Resolution 15 seeks to replace the authority
conferred on the Directors at the 2023 AGM (in addition to the authority referred to above in relation to Resolution 14) to allot ordinary shares, or grant rights to subscribe for,
or convert securities into, ordinary shares or sell treasury shares for cash (other than pursuant to an employee equity incentive share scheme) up to an aggregate nominal
value of approximately:
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Notice of Annual General Meeting
Continued >
(i)
10 per cent of the Company’s issued ordinary share capital (excluding treasury shares) without application of pre-emption rights pursuant to section 561 of the
Companies Act 2006, provided that this authority will only be used for the purpose of:
a.
b.
an acquisition; or
a specified capital investment in respect of which sufficient information regarding the effect of the investment on the Company, the assets that are the subject of
the investment and (where appropriate) the profits attributable to those assets is made available to Shareholders to enable them to reach an assessment of
the potential return on the investment which is announced contemporaneously with the issue or which has taken place in the preceding twelve month period
and is disclosed in the announcement of the issue; and up to an additional
(ii)
2 per cent of the Company’s issued ordinary share capital (excluding treasury shares) without application of pre-emption rights pursuant to section 561 of the
Companies Act 2006, provided that this authority will only be used for the purpose of making a follow-on offer which the Directors of the Company determine to be of
a kind contemplated by paragraph 3 of Section 2B of the Principles.
At the Company’s 2023 AGM, in addition to a general authority for the disapplication of pre-emption rights in accordance with the authority limits set out in the Principles,
the Company sought and obtained Shareholder approval for an additional general authority for the disapplication of pre-emption rights in connection with an acquisition
or specified capital investment, in accordance with the applicable authority limits set out in the Principles.
Whilst the Directors do not have any present intention to exercise the disapplication authority sought in Resolution 15, the Directors consider that it is appropriate for them to
seek the additional flexibility that this authority provides, and that the authority sought in Resolution 15 is in the best interests of the Company.
Accordingly, other than in connection with a rights, scrip dividend, or other similar issue, the authority contained in Resolution 15 would be limited to (i) the issue of shares for
cash up to a maximum aggregate nominal value of £4,144,151 (which includes the sale on a non-pre-emptive basis of any shares held in treasury), which is equivalent to
approximately 10 per cent of the Company’s issued ordinary share capital (excluding treasury shares) as at 4 March 2024 (being the latest practicable date prior to the
publication of this Notice); and (ii) up to an additional £828,830, which is equivalent to approximately 2 per cent of the Company’s issued ordinary share capital (excluding
treasury shares) as at 4 March 2024 (being the latest practicable date prior to publication of this Notice), solely for the purposes of making a follow-on offer which the
Directors of the Company determine to be of a kind contemplated by paragraph 3 of Section 2B of the Principles.
If approved, the authority will, unless previously renewed, varied or revoked by the Company in general meeting, expire at the conclusion of the next AGM of the Company in
2025 or, if earlier, the close of business on 1 July 2025. The Directors intend to renew this authority annually.
Renewal of Company’s authority to purchase Ordinary Shares (Resolution 16)
In certain circumstances it may be advantageous for the Company to purchase its own shares and this Resolution seeks the authority from Shareholders to continue to do
so. Authority was given to the Company to make market purchases up to an aggregate of 43,286,254 of its Ordinary Shares at the 2023 AGM (being equal to approximately
10 per cent of the Company’s issued ordinary share capital as at 6 March 2023, the latest practicable date prior to the publication of the notice for the 2023 AGM). This
authority is due to expire at the end of the AGM and it is proposed that the Company be authorised to make market purchases up to an aggregate of 41,441,512 Ordinary
Shares, representing approximately 10 per cent of the Company’s issued ordinary share capital (excluding treasury shares) as at 4 March 2024, being the latest practicable
date prior to the publication of this Notice. The authority specifies the minimum and maximum prices that may be paid for any Ordinary Shares.
Details of share buyback programmes undertaken by the Company during the financial year ended 31 December 2023 are set out on page 56 of the 2023 Annual Report.
Renewing the authority for the Company to purchase Ordinary Shares in the market, pursuant to Resolution 16, is intended to allow your Board the flexibility to take
advantage of opportunities that may arise to increase Shareholder value. The Directors intend that this authority will only be exercised when, in the light of market
conditions prevailing at the time and having carefully considered any priority capital allocation activities, financial gearing levels and the overall position of the Company,
they believe that the effect of such purchases will be to increase earnings per share and will be likely to promote the success of the Company for the benefit of its members
as a whole. The purchase price would be paid out of distributable profits.
Whilst it is the Directors’ present intention to cancel any shares purchased pursuant to this authority, any shares purchased in the market under this authority may be either
cancelled or, pursuant to the Companies Act 2006 and the authority conferred by this Resolution, held as treasury shares. Once held in treasury, the Company is not entitled
to exercise any rights, including the right to attend and vote at meetings in respect of shares. Further, no dividend or other distribution of the Company’s assets may be
made to the Company in respect of the treasury shares.
Shares held in treasury allow the Company to quickly and cost-effectively reissue shares and also gives the Company the opportunity to satisfy employee share scheme
awards. The total number of options to subscribe for Ordinary Shares that were outstanding at 4 March 2024 (being the latest practicable date prior to publication of this
Notice) was 5,413,858. The proportion of issued share capital (excluding treasury shares) that they represented at that time was 1.31 per cent and the proportion of issued
share capital (excluding treasury shares) that they will represent if the full authority to purchase shares (existing and being sought) is used is 1.45 per cent.
The authority given under this Resolution will, unless previously renewed, varied or revoked by the Company in general meeting, expire at the conclusion of the next AGM of
the Company in 2025, or, if earlier, the close of business on 1 July 2025. It is the present intention of the Directors to seek renewal of this authority annually.
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2023 Annual Report & Accounts 05. Shareholder Information
203
Directors and Advisors
Directors and Officers
John (Jock) Fyfe Lennox, LLB, CA
Non-Executive Chair
Chair of Nomination Committee
Member of Remuneration Committee
Peter Egan, MBA
Chief Executive Officer
Director responsible for Health, Safety and the Environment
Chair of Sustainability Committee
Yvonne May Monaghan, BSc (Hons), FCA
Chief Financial Officer
Member of Sustainability Committee
Christopher (Chris) Francis Girling, MBA, FCA
Senior Independent Non-Executive Director
Chair of Audit Committee
Member of Nomination Committee
Member of Remuneration Committee
Nicholas (Nick) Mark Gregg
Independent Non-Executive Director
Member of Audit Committee
Member of Nomination Committee
Chair of Remuneration Committee
Non-Executive Director responsible for Workforce Engagement
Nicola Elizabeth Anne Keach, MA
Independent Non-Executive Director
Member of Audit Committee
Member of Nomination Committee
Member of Remuneration Committee
Kirsty Rowena Homer, MA
Independent Non-Executive Director
Member of Audit Committee
Member of Nomination Committee
Member of Remuneration Committee
Christopher (Chris) John Clarkson, LLB (Hons)
Company Secretary
Registered Office
Johnson House
Abbots Park
Monks Way
Preston Brook
Cheshire
WA7 3GH
Advisors
Nominated Advisor, Financial Advisor and Stockbrokers
Investec Investment Banking
30 Gresham Street
London
EC2V 7QP
Principal Bankers
Lloyds Bank plc
40 Spring Gardens
Manchester
M2 1EN
The Royal Bank of Scotland plc
10th Floor, The Plaza
100 Old Hall Street
Liverpool
L3 9QJ
Bank of Ireland
26 Cross Street
Manchester
M2 7AF
Lawyers
Hill Dickinson LLP
No1 St Paul’s Square
Liverpool
L3 9SJ
Registrar and Transfer Office
Link Group
10th Floor, Central Square
29 Wellington Street
Leeds
LS1 4DL
Independent Auditor
Grant Thornton UK LLP
Chartered Accountants and Statutory Auditors
Landmark
St Peter’s Square
1 Oxford Street
Manchester
M1 4PB
204
Electronic Communications
The Company offers Shareholders the opportunity to receive communications such as notices of Shareholder meetings and the
annual report and accounts electronically. The Company encourages the use of electronic communication as, not only does it help
to reduce the Company’s environmental impact and save on printing and mailing costs, it is also a more convenient and prompt
method of communication.
If you decide to receive communications electronically, you will be sent an email message each time a new Shareholder report
or notice of meeting is published. The email will contain links to the appropriate website where documents can be viewed. It is
possible to change your instruction at any time by amending your details on the register.
If you would like to receive electronic communications, you will need to register your email address by accessing the Shareholder
Services page within the Investor Relations section of the Company’s website at www.jsg.com.
This will link you to the service offered by the Company’s Registrar. If you decide not to register an email address with the Registrar,
you will continue to receive notification in the post each time a new Shareholder report or notice of meeting is published, unless you
have requested to receive these documents in hard copy form.
Those Shareholders who are CREST members and who wish to appoint a proxy or proxies utilising the proxy voting service please
refer to Accompanying Note 5 of the Notice of Annual General Meeting. If you are an institutional investor you may also be able
to appoint a proxy electronically via the Proxymity platform, a process which has been agreed by the Company and approved by
the Registrar. For further information regarding Proxymity, please go to www.proxymity.io and refer to Accompanying Note 6 of the
Notice of Annual General Meeting.
If you have any queries regarding electronic communications, please contact the Company’s Registrar, Link Group, via email at
shareholderenquiries@linkgroup.co.uk or on 0371 664 0300. Calls are charged at the standard geographic rate and will vary by
provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between
09:00 – 17:30 (GMT), Monday to Friday excluding public holidays in England and Wales.
Design: sterlingfp.com
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Production: sterlingfp.com
This annual report is printed using vegetable inks on paper from an ISO 14001 certified manufacturer.
The paper is made with ECF pulp composed of a mixture of fibre from FSC® certified forests,
recycled fibres and other controlled sources.
Johnson House, Abbots Park, Monks Way,
Preston Brook, Cheshire WA7 3GH
T: +44 (0)1928 704 600
F: +44 (0)1928 704 620
enquiries@jsg.com