Disposal of Drycleaning Activities

RNS Number : 3779T

Johnson Service Group PLC

05 January 2017

 

5 January 2017

AIM: JSG

Johnson Service Group PLC

("JSG" or "the Company" or "the Group")

Disposal of Drycleaning Activities

JSG announces the sale of its retail Drycleaning business to Timpson Group PLC for a consideration of £8.25 million on a debt free, cash free basis and subject to adjustments for normalised working capital (the "Disposal").  A separate pre-close trading update has also been issued today.

The initial proceeds of the Disposal, net of transaction costs of some £0.5 million, will be approximately £6.25 million, with up to a further £1.0 million of deferred consideration potentially receivable within 12 months of completion, dependant on the satisfaction of certain conditions.

The retail Drycleaning activities are undertaken within Johnson Cleaners UK Limited ("JCUK"), Jeeves of Belgravia Limited ("JOB") and its subsidiary Jeeves International Limited ("JI").  The transaction is for the sale of the entire issued share capital of JCUK and JOB.  The total external revenue of the Drycleaning activities for the year ended 31 December 2015 was £46.2 million and adjusted operating profit was £2.0 million.  The reported segmental net assets relating to Drycleaning activities as at 31 December 2015 were £2.3 million. The results for the Drycleaning business will be reported as Discontinued Operations for the financial year ended 31 December 2016.  Current trading for Drycleaning has been in line with the Board's expectations.

The initial net cash proceeds arising from the Disposal will be used to pay an additional deficit contribution to the Defined Benefit Pension Scheme of £1.5 million with the balance used to reduce net debt.  The Disposal is expected to be modestly earnings dilutive in the short term, pending any re-investment of the proceeds into our Textile Rental activities.

Under the terms of the Disposal agreement, in addition to the normal warranties and indemnities, there is a specific indemnity to cover the potential costs for closed stores for which the lease expired prior to 30 June 2016. As at 31 December 2016 the estimated provision for such stores within the Drycleaning businesses, was £1.8 million. 

Over the last four years the Board has been refocusing the Group's activities to concentrate on, and expand, the higher margin Textile Rental business. At the same time, there has been a significant reduction in the store portfolio of the retail Drycleaning business, from some 500 stores down to 200 stores, to create a sustainable and profitable business.

We believe there is further potential to expand Textile Rental organically and through acquisition, which will provide us with greater geographical reach and opportunities to consolidate service distribution. This Disposal enables us to wholly focus on driving our expansion plans as well as further strengthen the Group's balance sheet, enhancing our platform for future growth.

Chris Sander, CEO, commented:

"We continue to successfully implement our strategic growth plan, with the disposal of the Drycleaning business enabling us to focus our efforts on the ongoing expansion of our Textile Rental activities.

I would like to thank the whole of the Drycleaning team, under the leadership of Paul Ogle, for the contribution they made to the Group and wish them every success for the future."

Enquiries:

 

Johnson Service Group PLC
Chris Sander, CEO
Yvonne Monaghan, CFO
Tel: [phone]
Investec Investment Banking (NOMAD)	KTZ Communications  (Financial PR)
David Flin	Katie Tzouliadis
Matt Lewis James Rudd	Emma Pearson
Tel: [phone]	Tel: [phone]

www.jsg.com

 

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