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UPDATE 2-Germany, UK drive up laundry firm Berendsen's profit
February 28, 2014 / 10:16 AM / 4 years ago

UPDATE 2-Germany, UK drive up laundry firm Berendsen's profit

* Says looking for buys at institutional cleaning, floor mats unit

* Full-year pretax profit 112.4 mln stg vs est. 133.27 mln stg

* Revenue rises 7 pct to 1.05 bln stg, in line with estimates

* Sees foreign exchange rates weighing on 2014 results

* Shares rise as much as 8 pct

By Esha Vaish

Feb 28 (Reuters) - Commercial laundry company Berendsen Plc posted a 23 percent jump in full-year profit as Workwear, its core brand, clocked higher margins on the back of a pick-up in Germany and the UK.

The company, which also rents textile products such as linen and uniforms, said it was looking for acquisitions to expand its institutional cleaning and floor mats business.

Berendsen’s shares rose as much as 8 percent, helping the stock feature among the top percentage gainers on the FTSE 250 Midcap Index on Friday.

Berendsen said it duplicated the successful business model it employed in Scandinavia in Germany and the UK, from where it gets over half of its revenue.

The company, which counts Coca-Cola Europe, Tesco and Airbus among its clients, has been fighting high costs and has repeatedly assured investors that it would boost margins.

Berendsen is looking at acquiring smaller rivals of its high-margin facility business to expand in existing geographies, Chief Executive Peter Ventress told Reuters.

The business accounts for over a fifth of the company’s revenue.

“We have a big pipeline of potential bolt-on acquisitions and you’ll understand it’s fairly opportunistic. These are relatively small companies ... when people are willing and able to sell, we tend to be their preferred destination,” Ventress said.

The company spent over 30 million pounds ($50 million) on acquisitions in the business in the past two years, he said.

Margins in Berendsen’s Workwear unit, which rents and launders uniforms for professionals such as doctors and fire-fighters and accounts for a third of total sales, rose 210 basis points to 19.8 percent in 2013.

Berendsen reiterated that its margin would improve 10-30 basis points in 2014, after the company reported higher full-year margins across businesses.

The company has over 250,000 contracts and a large chunk of its business comes from renewals. However, no single customer accounts for more than 1 percent of Berendsen’s revenue.

Berendsen’s shares, which have gained more than 50 percent over the past year, were up 7.6 percent at 1069 pence at 1445 GMT on the London Stock Exchange.

The company also said it was negotiating pricing with its textile suppliers and was looking to streamline its procurement channels. Berendsen sources most of its textile from China, Indonesia, Vietnam and Cambodia.

TAILWIND BECOMES HEADWIND

Berendsen’s pretax profit jumped to 112.4 million pounds for the year ended Dec. 31, also helped by beneficial foreign exchange rates in 2013. Revenue rose 7 percent to 1.05 billion pounds.

Analysts on average had expected a pretax profit of 133.27 million pounds on revenue of 1.05 billion pounds, according to Thomson Reuters I/B/E/S.

Results for the year earlier were restated following the adoption of new accounting standards, Berendsen said.

The company said currencies it traded in - the euro, the Danish krone and the Swedish krona - had weakened since the end of 2013.

The company reports its earnings in sterling, which has risen 1.29 percent against the euro since the beginning of this year, cutting into earnings at a number of British firms.

The sterling has gained 1.33 percent against the Swedish krona and 1.32 percent against the Danish krone .

“Currency was a tailwind for us in 2013 and ... it will be a headwind in 2014,” Ventress said.

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