Interim Results

JOHNSON SERVICE GROUP PLC 6 August 1999 INTERIM RESULTS 26 WEEKS ENDED 26 JUNE 1999 Johnson Service Group PLC is one of the largest textile rental operators and the leading drycleaning company in Britain. Its textile rental services division is a major provider of workwear rental services under the Johnsons Apparelmaster brand, and a market leader in customer service. Connacht Court Group, acquired during 1998, is the largest textile rental business in Ireland. Johnson Cleaners is Britain's largest drycleaner, with 549 shops nationwide. SUMMARY * Turnover from continuing operations up by 21.3% to £79.6 million (1998: £65.6 million). * Operating profit from continuing businesses, excluding goodwill amortisation, up by 21.8% to £12.9 million (1998: £10.6 million). * Group profit before tax excluding goodwill amortisation and exceptional items up 12.6% to £12.8 million (1998: £11.4 million). * Adjusted fully diluted earnings per share increased 11.0% to 15.92p (1998: 14.34p). * Interim dividend per Ordinary Share up 10.6% to 3.65p (1998: 3.30p). * Sale of US drycleaning business, April 1999, with proceeds of £20.5m. * First time contribution from Connacht Court Group. * Gearing reduced to 2.3% (December 1998: 44.1%). Commenting on the results, John Hancox, Chairman, Johnson Service Group, said: 'I am pleased to report further good progress in the first half of 1999 and that there is now clear evidence that our strategic initiatives of the last two years are bearing fruit.' Enquiries: Richard Zerny, Chief Executive Mike Sutton, Finance Director Johnson Service Group PLC Telephone: 0171 796 4133 on Friday 6 August 1999 only thereafter on: 0151 933 6161 Michael Sandler/Wendy Baker Hudson Sandler Limited Telephone: 0171 796 4133 INTERIM RESULTS 26 WEEKS ENDED 26 JUNE 1999 GROUP RESULTS AND DIVIDEND I am pleased to report further good progress in the first half of 1999. The Group results for the 26 weeks to 26 June 1999 were as follows:* Turnover from continuing businesses increased by 21.3% to £79.6 million (1998: £65.6 million) and operating profit, excluding goodwill amortisation, increased by 21.8% to £12.9 million (1998: £10.6 million). These figures include a first time contribution from Connacht Court Group (CCG), our Irish textile rental business acquired in July last year. The interest charge was slightly higher, at £0.57 million (1998: £0.48 million). After a reduced contribution from our US drycleaning business, whose profits were only included in the Group's results up to April 1999, the Group's pre tax profit, excluding goodwill amortisation and exceptional items, increased by 12.6% to £12.8 million (1998: £11.4 million) and adjusted earnings per share on a fully diluted basis increased by 11.0% to 15.92p (1998: 14.34p). Goodwill amortisation amounted to £0.4 million (1998: Nil). Exceptional items made a net positive contribution of £2.5 million (1998 loss: £0.2 million) and consisted of profit on sales of properties of £0.3 million (1998 loss: £0.2 million), reduction in loss on disposal of US business of £1.1 million (1998: Nil) and profit on the disposal of the interest in our associate, Cleaning Tokens Ltd., of £1.1 million (1998: Nil). Profit before tax was £14.9 million (1998: £11.2 million). Net borrowings at 26 June 1999 were £1.9 million (December 1998: £31.9 million) with gearing of 2.3% (December 1998: 44.1%). This not only reflects the Group's strong cash flow, but also the receipt of the proceeds of the sale of our US drycleaning subsidiary of £20.5m. The Board has decided to pay an interim dividend of 3.65p per Ordinary Share (1998: 3.30p) an increase of 10.6%. Note: * The figures for 1999 have been prepared in accordance with the requirements of the new Financial Reporting Standard 12, 'Provisions, Contingent Liabilities and Contingent Assets', and the figures for 1998 have been re-stated accordingly. DIVISONAL TRADING RESULTS Our British textile rental businesses increased their turnover by 6.5% to £31.3 million and their operating profit by 8.1% to £7.7 million. The profit margin improved from 24.3% to 24.7%. Although some sections of our market were adversely affected by the economy, these were more than offset in other areas and, coupled with tight cost control, we achieved a satisfactory profit increase. Stalbridge Linen Services (SLS), our specialist linen hire subsidiary, continued its strong growth. Our Irish textile rental business, which we acquired in July 1998, made first- time contributions to turnover of £11.8 million and to operating profit of £1.1 million, in line with our expectations. The profit margin was 9.5%. We have made good progress in the planned re-organisation of this business including the sale and short term leaseback of the Dublin plant in preparation for the move to new premises in due course. Our British drycleaning business increased its turnover by 0.8% to £36.5 million and its operating profit by 17.8% to £4.1 million. After a slow start to the year, trading gradually improved and finished with a very strong performance in June. On a like-for-like basis, turnover in the half year was up 5.4%. The profit margin improved once again, from 9.5% to 11.1%, reflecting the closure of unprofitable shops and the cost saving from reducing the number of operating regions from five to four in the second half of 1998. Our US drycleaning business, which was sold in April 1999, contributed £13.1 million to turnover and £0.5 million to operating profit. STRATEGIC DEVELOPMENT In January, 1998, we set out in a circular to Shareholders the main conclusions of our strategic review of the Group's operations for each of our divisions. For textile rental, these included the provision of new high care processing facilities at Letchworth and Exeter, further expansion and investment at SLS and the launching of a new washroom services business. We have carried out these commitments and in addition we have modernised and expanded our Brighton and Cardiff laundries. We see continuing growth from our British textile rental businesses, including further expansion of SLS, our specialist linen hire division. We also plan to grow our dedicated washroom services business, launched in December 1998, quickly over the next few years, building on our extensive textile rental customer base. In 1998 we also set ourselves the goal of achieving growth from acquisitions where possible, and our purchase of CCG, Ireland's largest textile rental company, in July last year, was in line with this policy. The re-organisation of our Irish textile rental business is well underway and there are excellent prospects for growth and improving the margin. We continue our active search for acquisitions for our textile rental operations in both Britain and Ireland. For drycleaning, establishing Britain's largest drycleaning brand by the middle of 1999 was our main goal. This has been achieved and the results have exceeded our expectations, with a much improved margin. Our drycleaning business is now the brand leader in Britain with 549 shops. It has sufficient critical mass to justify TV advertising in most regions and this has already improved brand awareness on a national scale. There are now 400,000 members of the Priority Club, and the business is benefiting from the new Electronic Point of Sale system and the Central Processing Unit for the specialist cleaning of items which cannot normally be processed in conventional shops. We are seeking suitable drive-in locations around the country and also expansion into areas where we are currently under-represented. Now that the re-branding programme is substantially complete, cash flow is strong. Whilst these developments have been going on, we have disposed of both our US textile rental business (in January 1998) and our US drycleaning business (in April 1999), neither of which seemed to us likely to contribute to our aim of enhancing shareholder value in the future. As a result the Group is now focused on Britain and Ireland, with strong brands and high levels of service in all its businesses. Our strong cash flow and low borrowings give us the ability to make significant acquisitions. OUTLOOK We remain confident of achieving a satisfactory performance in the full year. Copies of the interim report are to be sent to shareholders and will be available to the public at the Company's registered office at Mildmay Road, Bootle, Merseyside L20 5EW. The report can also be accessed on the Internet at: www.johnsonservicegroup.co.uk. John Hancox Richard Zerny Chairman Chief Executive CONSOLIDATED PROFIT AND LOSS ACCOUNT Note 26 WEEKS 26 WEEKS 52 WEEKS JUNE JUNE DECEMBER 1999 1998 1998 £000 £000 £000 RESTATED RESTATED TURNOVER - Continuing operations 2 79,624 65,638 144,122 - Discontinued operations - USA 13,107 28,209 54,254 ====== ====== ====== - Total 92,731 93,847 198,376 ====== ====== ====== OPERATING PROFIT - Continuing operations 2 12,913 10,604 22,343 - Discontinued operations - USA 481 1,273 2,057 ====== ====== ====== OPERATING PROFIT BEFORE GOODWILL AMORTISATION 13,394 11,877 24,400 Amortisation of goodwill - Continuing (419) - (384) ====== ====== ====== OPERATING PROFIT 12,975 11,877 24,016 EXCEPTIONAL ITEMS 3 Exceptional items - Continuing operations 1,427 (223) 32 Disposal of US business - Discontinued operations 1,093 - (40,349) ---------------- -------- PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST 15,495 11,654 (16,301) Net interest (568) (484) (1,414) ---------------- -------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 14,927 11,170 (17,715) Tax on profit on ordinary activities 4 3,996 3,436 7,203 ---------------- -------- PROFIT FOR THE PERIOD 10,931 7,734 (24,918) Dividends 5 2,209 2,069 7,991 ====== ====== ====== RETAINED PROFIT FOR THE PERIOD 8,722 5,665 (32,909) ====== ====== ====== RATES OF DIVIDEND PER SHARE Ordinary shares of 10p each:- 1st interim - paid - 3.30p 3.30p 1st interim - proposed 3.65p - - Final - paid - - 11.00p Preference shares of £1 each - paid - 3.15p 3.75p Preference shares of 10p each - paid 3.75p 3.75p 7.50p BASIC EARNINGS PER SHARE 6 20.82p 14.64p (51.53)p Adjustment for goodwill amortisation 0.82p - 0.77p Adjustment for sale of investment after taxation (2.12)p - - Adjustment for sales of properties after taxation (0.68)p 0.45p (0.05)p Adjustment for disposal of US operations after taxation (2.15)p - 80.75p ====== ====== ====== ADJUSTED BASIC EARNINGS PER SHARE 16.69p 15.09p 29.94p ====== ====== ====== FULLY DILUTED EARNINGS PER SHARE 6 19.71p 13.94p (45.05)p Adjustment for goodwill amortisation 0.75p - 0.69p Adjustment for sale of investment after taxation (1.94)p - - Adjustment for sales of properties after taxation (0.63)p 0.40p (0.06)p Adjustment for disposal of US operations after taxation (1.97)p - 72.90p ====== ====== ====== ADJUSTED FULLY DILUTED EARNINGS PER SHARE 15.92p 14.34p 28.48p ====== ====== ====== Figures for 1998 have been restated to comply with the provisions of FRS12. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES There are no material gains or losses other than the profit for the period. CONSOLIDATED BALANCE SHEET Note JUNE JUNE DECEMBER 1999 1998 1998 £000 £000 £000 RESTATED RESTATED FIXED ASSETS Goodwill 15,201 262 16,735 Tangible assets 79,517 88,830 98,154 Textile rental items 21,829 15,678 22,296 Investments 8 749 1,187 1,406 ====== ====== ====== 117,296 105,957 138,591 ====== ====== ====== CURRENT ASSETS Stocks 3,538 3,976 4,405 Debtors: Amounts falling due within one year 20,026 19,083 22,456 : Amounts falling due after more than one year - 2,567 661 Cash at bank and in hand 19,799 145 2,494 ====== ====== ====== 43,363 25,771 30,016 ====== ====== ====== CURRENT LIABILITIES Creditors: Amounts falling due within one year (34,050) (34,951) (38,268) ----------------- -------- NET CURRENT ASSETS 9,313 (9,180) (8,252) --------------------------- TOTAL ASSETS LESS CURRENT LIABILITIES 126,609 96,777 130,339 Creditors: Amounts falling due after more than one year (20,533) (1,631) (31,618) PROVISIONS FOR LIABILITIES AND CHARGES (8,460) (7,590) (9,675) ====== ====== ====== NET ASSETS 97,616 87,556 89,046 ====== ====== ====== CAPITAL AND RESERVES Called-up share capital 6,045 6,586 6,117 Share premium account 9 3,953 3,696 3,726 Revaluation reserve 9 13,694 15,359 14,547 Other reserves 9 1,880 256 888 Profit and loss account 9 72,044 61,659 63,768 ====== ====== ====== SHAREHOLDERS' FUNDS 10 97,616 87,556 89,046 ====== ====== ====== Non equity Shareholders' funds 9,191 11,252 10,781 Equity Shareholders' funds 88,425 76,304 78,265 ====== ====== ====== 97,616 87,556 89,046 ====== ====== ====== The Interim Statement was approved by the Board of Directors on 6 August 1999. CONSOLIDATED CASH FLOW STATEMENT Note 26 WEEKS 26 WEEKS 52 WEEKS JUNE JUNE DECEMBER 1999 1998 1998 £000 £000 £000 RESTATED RESTATED Operating profit 12,975 11,877 24,016 Depreciation 12,614 10,152 23,456 Loss on sale of tangible fixed assets 202 209 855 Working capital and other items (net) (2,203) 132 10 ----------------- --------- NET CASH INFLOW FROM OPERATING ACTIVITIES 23,588 22,370 48,337 ----------------- --------- RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Net interest paid (640) (676) (1,077) Preference dividends paid (404) (438) (860) ---------------------------- NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (1,044) (1,114) (1,937) ====== ====== ====== TAXATION Tax paid (net) (651) (2,028) (8,396) CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Payments to acquire tangible fixed assets (5,764) (6,102) (13,846) Payments to acquire textile rental items (8,525) (6,583) (15,368) Receipts from sales of tangible fixed assets 5,115 653 2,918 Proceeds from textile rental items withdrawn from circulation 1,505 1,211 2,500 Movement in investment 1,692 (150) (150) ---------------------------- NET CASH OUTFLOW FOR CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (5,977) (10,971) (23,946) ====== ====== ====== ACQUISITIONS AND DISPOSALS Payment to acquire businesses 11 (240) (279) (25,711) Net overdrafts acquired with subsidiary undertakings - - (1,201) Receipt from disposal of US businesses 11 20,500 16,918 17,440 Cash disposed of with US business (464) - - --------------------------- NET CASH INFLOW FROM ACQUISITIONS AND DISPOSALS 19,796 16,639 (9,472) ====== ====== ====== EQUITY DIVIDENDS PAID (5,519) (4,782) (6,436) ---------------------------- CASH INFLOW BEFORE FINANCING 30,193 20,114 (1,850) ---------------------------- FINANCING Issue of Ordinary share capital 237 174 205 Repayment of 6.3% Preference shares - - (471) Debt due within 1 year: Loan notes redeemed (658) (24) (620) Debt due beyond 1 year: Movement in unsecured loans (11,164) (21,461) 5,010 Finance lease movement (512) (260) (762) ---------------------------- NET CASH OUTFLOW FROM FINANCING (12,097) (21,571) 3,362 ====== ====== ====== INCREASE IN CASH IN THE PERIOD 12 18,096 (1,457) 1,512 ====== ====== ====== JOHNSON SERVICE GROUP PLC NOTES 1. Prior year adjustment The Group has changed its accounting policy regarding the treatment of costs arising on non trading short leasehold properties to comply with the provisions of Financial Reporting Standard 12, 'Provisions, Contingent Liabilities and Contingent Assets', and now provides for the anticipated net costs, after taxation, at the time the property ceases to be used for trading purposes. Consequently the Group charged £1.3m to reserves at 26 December 1998 and restated the profit and loss account by the following adjustments:- 26 WEEKS 52 WEEKS JUNE 1998 DECEMBER 1998 £000 £000 Operating profit charge 63 366 Disposal of property credit (131) (426) Taxation credit (19) (113) The balance sheets, cash flows and earnings per share have also been restated accordingly. In addition provisions in respect of the Group's self insurance arrangements are now disclosed within 'Provisions for Liabilities and Charges' rather than within 'Current Liabilities' and the balance sheets have been restated accordingly. 2. Segmental information 26 WEEKS 26 WEEKS 52 WEEKS JUNE 1999 JUNE 1998 DEC 1998 £000 £000 £000 RESTATED RESTATED Continuing Operations GB Rental Turnover 31,332 29,415 59,934 Profit 7,727 7,150 14,738 GB Drycleaning Turnover 36,519 36,223 73,146 Profit 4,070 3,454 6,548 IR Rental Turnover 11,773 - 11,042 Profit 1,116 - 1,057 -------- -------- -------- Total Continuing Turnover 79,624 65,638 144,122 Operating profit before amortisation of goodwill 12,913 10,604 22,343 -------- -------- -------- There is no material difference between turnover by origin and by destination. NOTES cont...d 3. Exceptional items 26 WEEKS 26 WEEKS 52 WEEKS JUNE JUNE DECEMBER 1999 1998 1998 £000 £000 £000 RESTATED RESTATED Continuing Operations Gain on disposal of fixed asset investment 1,078 - - Gain on sales of property fixed assets 349 (223) 32 -------- -------- -------- Total continuing operations 1,427 (223) 32 Discontinued Operations Disposal of US operations 1,093 - (40,349) -------- -------- -------- 2,520 (223) (40,317) -------- -------- -------- The gain on disposal of a fixed asset investment relates to the disposal of the investment in Cleaning Tokens Ltd, an associate, for £1.7 million in cash. The disposal of the whole of the issued share capital of the US subsidiary, Johnson Group, Inc. for £20.5 million in cash and up to $18 million in loan notes and convertible preferred stock was completed in April 1999 resulting in a loss of £39.256 million, £1.093 million less than the estimate reflected in the 1998 accounts. 4. Tax on profit on ordinary activities 26 WEEKS 26 WEEKS 52 WEEKS JUNE JUNE DECEMBER 1999 1998 1998 £000 £000 £000 RESTATED RESTATED Taxation has been estimated at: Continuing Operations: UK corporation tax 4,018 3,121 6,301 Irish corporation tax 308 - - Irish corporation tax on property disposals 967 - - -------- -------- -------- 5,293 3,121 6,301 UK deferred tax (172) 77 236 Irish deferred tax (1,145) - - -------- -------- -------- Total Continuing Operations 3,976 3,198 6,537 ===== ===== ===== Discontinued Operations: US State and Federal taxation 20 238 666 -------- -------- -------- TOTAL 3,996 3,436 7,203 ===== ===== ===== NOTES cont...d 5. Dividends 26 WEEKS 26 WEEKS 52 WEEKS JUNE JUNE DECEMBER 1999 1998 1998 £000 £000 £000 Dividend on Ordinary shares 1,864 1,650 7,165 Dividend on £1 Preference shares - 15 18 Dividend on 10p Preference shares 345 404 808 -------- -------- -------- 2,209 2,069 7,991 ====== ====== ====== The first interim dividend, of 3.65p, on the Ordinary shares will be paid on 1 October 1999 to those Shareholders registered in the books of the Company at 6 September 1999. The dividend on the 10p Convertible preference shares was paid on 1 July 1999. 6. Earnings per share 26 WEEKS 26 WEEKS 52 WEEKS JUNE JUNE DECEMBER 1999 1998 1998 £000 £000 £000 RESTATED RESTATED Profit for the period 10,931 7,734 (24,918) Less dividend on Preference shares 345 419 826 -------- -------- -------- Profit attributable to Ordinary Shareholders 10,586 7,315 (25,744) Less gain on exceptional items (2,520) 223 40,317 Add goodwill amortisation 419 - 384 ===== ===== ===== Adjusted profit attributable to Ordinary Shareholders 8,485 7,538 14,957 ===== ===== ===== Weighted average number of Ordinary shares 50,835,468 49,956,674 49,963,643 Fully diluted number of Ordinary shares 55,455,884 55,372,885 55,352,942 Earnings per share is calculated in accordance with the requirements of FRS14. In addition to the restatement arising from the prior year adjustment explained in note 1 the figures for the 26 weeks to June 1998 have also been restated to comply with the requirements of FRS14. Adjusted earnings per share figures are given to exclude the effects of goodwill amortisation and exceptional items, net of taxation. 7. Land and Buildings Land and buildings are included within tangible fixed assets at the valuation adopted in the financial statements for the year to 26 December 1998. NOTES cont...d 8. Investments JUNE JUNE DECEMBER 1999 1998 1998 £000 £000 £000 Investment in 256,940 (1998: 252,549) Ordinary shares of the company at cost (Nominal value £25,694 (1998: £25,255) in respect of the Long Term Incentive Plan 749 697 697 Investment in associate (note 3) - 490 709 -------- -------- -------- 749 1,187 1,406 ===== ===== ===== 9. Reserves Other Reserves --------------------------------------------- Share Revaluation Exchange Capital Merger Profit & Premium Reserve Reserve Redemption Reserve Loss Account Reserve Account £000 £000 £000 £000 £000 £000 At 26 December 1998 3,726 14,547 (1,172) 509 1,551 65,096 Prior year adjustment (note 1) - - - - - (1,328) ------------------------------------------------------ At 26 December 1998 (as restated) 3,726 14,547 (1,172) 509 1,551 63,768 Premium on issue of shares (nominal value of £10,056) 227 - - - - - Goodwill on disposals - - - - - 248 Retained profit - - - - - 8,722 Transfer of realised profits - (853) 1,547 - - (694) Arising on conversion - - - 82 - - Exchange movement - - (637) - - - ====== ====== ====== ====== ====== ====== At 26 June 1999 3,953 13,694 (262) 591 1,551 72,044 ====== ====== ====== ====== ====== ====== NOTES cont...d 10. Reconciliation of movements in Shareholders' funds 26 WEEKS 26 WEEKS 52 WEEKS JUNE JUNE DECEMBER 1999 1998 1998 £000 £000 £000 RESTATED RESTATED Profit for period 10,931 7,734 (24,918) Dividends 2,209 2,069 7,991 -------- -------- -------- 8,722 5,665 (32,909) Other recognised gains and losses relating to the period (637) 158 317 Preference shares repaid - - (471) New share capital subscribed 10 7 8 Net reduction in share capital on conversion (82) (25) (25) Share premium 227 167 197 Capital redemption 82 26 26 Goodwill on disposals 248 5,038 45,383 -------- -------- -------- Net addition to Shareholders' funds 8,570 11,036 12,526 Opening Shareholders' funds (as restated) 89,046 76,520 76,520 ====== ====== ====== Closing Shareholders' funds 97,616 87,556 89,046 ====== ====== ====== NOTES cont...d 11. Acquisitions and Disposals Purchase of Businesses 26 WEEKS 26 WEEKS 52 WEEKS JUNE JUNE DECEMBER 1999 1998 1998 £000 £000 £000 Net assets acquired Tangible fixed assets 17 62 10,470 Stocks of textile rental items 33 - 6,333 Stocks 3 6 690 Debtors - - 3,829 Net overdraft - - (1,201) Creditors (42) - (5,799) Deferred tax - - (1,303) Loans and finance agreements - - (3,685) -------- -------- -------- 11 68 9,334 Goodwill 229 270 16,377 ====== ====== ====== Total consideration 240 338 25,711 ====== ====== ====== Discharged by cash on completion 240 279 25,711 Deferred consideration - 59 - ====== ====== ====== 240 338 25,711 ====== ====== ====== Disposal of US Businesses Net assets disposed of Fixed assets 15,669 4,489 5,197 Stocks of textile rental items - 3,463 3,463 Stocks 927 1,026 1,026 Cash 464 - - Debtors 4,356 2,902 2,716 Creditors (2,257) - - Goodwill previously written off to reserves 248 5,038 5,038 Reduction in loss on disposal 1,093 - - ====== ====== ====== Satisfied by cash 20,500 16,918 17,440 ====== ====== ====== The 1999 figures relate to the disposal of the US business which was completed in April 1999. NOTES cont...d 12. Reconciliation of net cash flow to movement in net debt 26 WEEKS 26 WEEKS 52 WEEKS JUNE JUNE DECEMBER 1999 1998 1998 £000 £000 £000 Increase in cash in the period 18,096 (1,457) 1,512 Cash inflow on decrease in debt and lease financing 12,334 21,744 (3,628) -------- -------- -------- Change in net debt resulting from cash flows 30,430 20,287 (2,116) Finance leases - new (1,603) (1,254) (1,431) Loans and leases acquired with subsidiary - - (3,685) Exchange differences 1,179 (174) (746) -------- -------- -------- Movement in net debt in period 30,006 18,859 (7,978) Opening net debt (31,864) (23,886) (23,886) ====== ====== ====== Closing net debt (1,858) (5,027) (31,864) ====== ====== ====== 13. Analysis of net debt At 26 Other At 26 December Cash Non-cash Exchange June 1998 Flow Changes Movement 1999 £000 £000 £000 £000 £000 Cash in hand and at bank 2,494 17,357 - (52) 19,799 Overdraft (876) 739 - 27 (110) Debt due after one year (29,839) 11,164 - 1,175 (17,500) Debt due within one year (917) 658 - (1) (260) Finance leases (2,726) 512 (1,603) 30 (3,787) ====== ====== ====== ====== ====== (31,864) 30,430 (1,603) 1,179 (1,858) ====== ====== ====== ====== ====== 14. The interim results have been prepared on the basis of accounting policies set out in the Group's 1998 statutory accounts. In addition the new requirements of FRS12 'Provisions, Contingent Liabilities and Contingent Assets' have been complied with for the first time, and prior years restated. The profit and loss accounts, balance sheets and cash flow statements as at June 1999 and June 1998, as restated, are unaudited and have not been reviewed by the auditors. The financial information does not amount to full accounts within the meaning of Section 240 of the Companies Act 1985 (as amended). The profit and loss account, balance sheet and cash flow statement for December 1998, as restated, are abridged from the Group's full accounts for that year. Those accounts received an unqualified audit report and have been filed with the Registrar of Companies. The auditors' report did not contain a statement under Section 237(2) or (3) of the Companies Act 1985 (as amended). NOTES cont...d 15. Rates of exchange The following rates of exchange for the Irish Pound have been used: JUNE 1999 DECEMBER 1998 Average Rate IR£1.17 IR£1.13 Closing Rate IR£1.20 IR£1.13 16. Year 2000 and Euro The Group has undertaken an extensive review of the implications of the Year 2000 on its financial and operational systems and equipment. A Group Steering Committee, which reports regularly to the Group Board, has formulated a detailed action plan to ensure that, in relation to both internal, and where relevant, external risks:- - Staff at all levels are aware of the process. - Business critical systems are fully tested and corrected where necessary. - Suppliers and customers are taking appropriate action. The Group is at an advanced stage of achieving compliance, with many of its systems and equipment already fully tested, and all testing will be complete well in advance of December 1999. Neither the current nor the future capital and revenue costs of the Year 2000 project are considered significant. The introduction of the Euro is not expected to have a material impact on the Group.

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