Final Results - Year Ended 25 December 1999

Johnson Service Group PLC 17 March 2000 PRELIMINARY STATEMENT OF RESULTS FOR THE 52 WEEKS ENDED 25 DECEMBER 1999 Johnson Service Group PLC is one of the largest textile rental operators and the leading drycleaning company in Britain. Our textile rental services division is a major provider of workwear rental services under the Johnsons Apparelmaster brand, and a market leader in customer service. The acquisition of Semara Holdings Plc (formerly Sketchley Plc), in February 2000, for a total consideration of £103 million in cash has significantly enlarged our textile rental business. Connacht Court Group is the largest textile rental business in Ireland. Johnsons Cleaners is Britain's largest retail drycleaner, with 544 shops nationwide. We intend to achieve growth by focusing on our specialist skill areas and constantly raising our standards of quality, convenience, service and efficiency. SUMMARY * Pre-tax profit up 11.6% to £25.6 million* (1998: £23.0 million) * Continuing operating profit before goodwill amortisation up by 14.9% to £25.7 million (1998: £22.3 million) * Fully diluted earnings per share increased by 12.1% to 31.9p* (1998: 28.5p) * Total dividend for the year increased by 11.2% to 15.9p (1998: 14.3p) * Further growth and improved margins in the textile rental businesses * Improved margins in British drycleaning business * Acquisition of Semara Holdings Plc for £103 million * excluding goodwill amortisation and exceptional items. Commenting on the results, Richard Zerny, Chief Executive, Johnson Service Group PLC, said: 'The Group has produced good results for 1999 and has made good progress towards our strategic objectives of being the market leader in textile rental and consolidating our position as the nation's number one drycleaner. The acquisition of Semara is a key milestone for the Group' Enquiries: Richard Zerny, Chief Executive Mike Sutton, Finance Director Johnson Service Group PLC Tel: 020 7796 4133 on Friday 17 March 2000 only thereafter on 0151 933 6161 Michael Sandler / Wendy Baker Hudson Sandler Tel: 020 7796 4133 JOHNSON SERVICE GROUP PLC PRELIMINARY STATEMENT OF RESULTS FOR THE 52 WEEKS ENDED 25 DECEMBER 1999 CHAIRMAN'S STATEMENT I am pleased to report good trading results and major progress in the strategic development of the Group. Since the year end the Group has acquired Semara Holdings Plc. GROUP RESULTS AND DIVIDEND Turnover from continuing operations increased by 10.6% to £159.4 million (1998: £144.1 million) and operating profit, before goodwill amortisation, by 14.9 % to £25.7 million (1998: £22.3 million). Excluding first full year contributions from acquisitions made during 1998, these increases were 1.9% and 11.5% respectively. The Group's pre-tax profit, excluding goodwill amortisation and exceptional items, increased by 11.6% to £25.6 million (1998: £23.0 million). Fully diluted earnings per share, excluding goodwill amortisation and exceptional items, increased by 12.1% to 31.9p (1998: 28.5p). Goodwill amortisation amounted to £0.9 million (1998: £0.4 million). Exceptional items made a net positive contribution of £2.5 million (1998 loss: £40.3 million) and consisted of profit on sales of properties of £0.3 million, reduction in loss on disposal of US business of £1.1 million and profit on the disposal of the interest in our associate, Cleaning Tokens Ltd., of £1.1 million. Profit before tax was £27.3 million (1998 loss: £17.7 million). Net debt at the year end was £2.9 million (1998: £31.9 million), giving gearing of 3.6% compared with 44.1% a year earlier. The reduction in net debt of some £29 million 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 £20.5 million in April 1999. Since the year end the Group's gearing has of course been significantly increased by the acquisition of Semara Holdings Plc for a total consideration of some £103 million in cash. The Board is proposing a second interim dividend of 12.25p (1998: 11.0p) making a total dividend for the year of 15.9p (1998: 14.3p), an increase of 11.2%. The second interim dividend will be paid on 2 May 2000 to shareholders on the register at 31 March 2000. TRADING REVIEW Our British textile rental businesses increased their turnover by 5.8% to £63.4 million (1998: £59.9 million) and operating profit excluding goodwill amortisation by 6.9% to £15.8 million (1998: £14.7 million). The margin improved to 24.8% (1998: 24.6%). This reflected a sound performance from the Apparelmaster business, another outstanding performance from Stalbridge Linen Services (SLS), our specialist linen hire company, and a small loss, in line with budget, from our new, but rapidly growing, washroom services business. In the second half of the year, the percentage increase in sales was rather lower but with tighter control of costs, second half profit was still ahead by 5.8% (first half: 8.1%). Connacht Court Group (CCG), our Irish textile rental company, contributed £23.8 million to turnover and £1.9 million to operating profit, excluding goodwill amortisation, in its first full year in the Group (1998 5 months - turnover: £11.0 million, operating profit: £1.1 million). Although this was rather below our expectations, due mainly to the first stage of the Dublin reorganisation taking longer than expected, our confidence in the future of this business remains unchanged. Turnover of our British drycleaning business fell by 1.3% to £72.2 million (1998: £73.1 million). However, on a like for like basis, this represented an increase in turnover of 3.4%. Operating profit excluding goodwill amortisation increased by 21.9% to £8.0 million (1998: £6.5 million). Margins improved to 11.1% (1998: 9.0%) reflecting the closure of unprofitable shops and the cost saving from reducing the number of operating regions from five to four at the end of 1998. The percentage increase in profit was rather higher in the second half of the year at 26.3% (first half: 17.8%). 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 We set out our plans for the future in the Interim Report in August last year. For textile rental, these included further expansion of SLS, rapid growth of our dedicated washroom services business and continuation, following our purchase of CCG in July 1998, of our active search for textile rental acquisitions in both Britain and Ireland. We made good progress with these plans in the second half of the year, with a major increase in SLS's capacity under way and a number of acquisitions in progress in the washroom services business. In December we acquired an additional textile rental business, in Cookstown, which will enable us to improve the efficiency of our Northern Ireland operations considerably over the next two years. Since the year end we have acquired Semara Holdings Plc, our biggest acquisition to date. For drycleaning, future plans included growing benefits from increasing brand awareness on a national scale, the opening of suitable drive-in locations around the country and expansion into areas where we are currently under-represented. We made good progress with these plans in the second half of the year. ACQUISITION OF SEMARA HOLDINGS Plc We announced on 28 January 2000 the proposed acquisition of Semara Holdings Plc (formerly Sketchley Plc), whose main business is textile rental, for a total cost of some £103 million in cash. Full details were set out in my letter to you of 31 January 2000. I am very pleased that we have now declared our offer wholly unconditional and would like to take this opportunity of welcoming Semara employees to the Group. This acquisition has significantly enlarged our textile rental business and provides us with the opportunity to make major savings in both overhead and operating costs, thereby enhancing the performance of the enlarged Group. Semara will contribute to the Group's results for ten months of the current year in which we expect it to be earnings enhancing before amortisation of goodwill and reorganisation costs. We expect it to be significantly earnings enhancing on the same basis next year, which will be the first full financial year of ownership. This represents a major step for Johnson Service Group and I am confident that our management team will ensure that we derive maximum benefit from it. BOARD CHANGES Peter Johnson, who has been a non-executive director of the Group since March 1993 will retire from the Board at the Annual General Meeting on 17 May. I would like to take this opportunity of thanking him for his important contribution to the Board. I am pleased that Simon Sherrard joined the Board as a non-executive director on 4 January this year. We are already benefiting from his experience and he will replace Peter Johnson as Chairman of the Remuneration Committee. CURRENT TRADING AND OUTLOOK After two months of the current year, trading is in the line with management expectations. I remain confident of achieving a satisfactory performance in the year ahead. John Hancox Chairman REVIEW OF OPERATIONS This was a year of satisfactory progress in the strategic development of the Group. Although turnover growth at Johnsons Apparelmaster slowed during the third quarter as a result of reduced activity in some manufacturing sectors, we continued to gain new accounts and overall demand recovered towards the end of the year. We made good progress with the planned reorganisation of our Connacht Court Group (CCG) acquisition in Ireland, with the aim of enhancing efficiency and expanding our capabilities in growing market sectors. CCG's performance was temporarily constrained by delays in the negotiation of new union agreements, but productivity improvements will flow through in the current year. Stalbridge Linen Services maintained its excellent growth record, and Johnsons Personal Washroom Services extended its geographical coverage in line with our plans. Johnsons Cleaners achieved improved sales and profit, despite a slow start to the year, and completed its programme of rebranding and branch rationalisation. It is now strongly placed to continue its development as Britain's number one drycleaner, while generating cash for the broader development of the Group. TEXTILE RENTAL SERVICES 'We continue to drive the growth of our market by winning new customers for textile rental through our constant focus on excellent customer care, and through the development of new services, technologies and marketing techniques.' Peter Robinson, Managing Director, Johnsons Apparelmaster JOHNSONS APPARELMASTER During 1999 we marked the 25th anniversary of Apparelmaster in Britain with the launch of a new corporate livery, and a wide range of events. A particular highlight was the support given by employees to our adopted charity, Macmillan Nurses, for whom we raised over £31,000 through a variety of staff initiatives nationwide. We believe that the quality and commitment of our people provides one of our key competitive advantages, and we have continued to reinforce this through investment in training throughout our operations. Our business also benefits from the quality of its processing plants, and we have several of the most modern in Britain providing national coverage from Exeter to Perth. Substantial investments to upgrade and extend our factories have been undertaken in recent years, the latest development being our new high-care processing unit at Letchworth. This became fully operational in April, as scheduled, and is meeting all our expectations. We continue to achieve high levels of customer satisfaction and retention, underpinned by our unique 'Millennium Standard' money-back guarantee of service standards. This provides an excellent platform not only for the successful development of our business with existing customers, but also for winning new accounts. Major national account gains during the year included Asda superstores, Volkswagen, Pioneer Concrete and Hanson Aggregates. We have also achieved good results by focusing on companies who have not previously been users of textile rental services, notably in the service sector. Plans for the current year include further development of our internet strategy. Profitability has benefited from our maintenance of tight cost control in all operating areas, and from a range of specific management initiatives. We are achieving significant economies of scale through the rationalisation of our workwear supplier base, and are benefiting from the expansion of electronic communications with our major customers. During 2000 we plan to achieve the ISO 14001 environmental standard, which will achieve cost savings at the same time as delivering more environmentally friendly solutions in areas such as chemical usage, emissions and packaging. STALBRIDGE LINEN SERVICES Stalbridge, our niche market quality linen business, enjoyed another year of excellent growth. We are currently undertaking a significant expansion of capacity at our main Shaftesbury site, by commissioning an additional facility to sort soiled linen, hold stocks and handle the despatch of finished goods. We are also opening a new depot in Scotland, enabling us to extend our service to national account customers. Stalbridge's new Premier Linen Service, aimed at high quality restaurants and catering establishments, has grown very successfully since its launch last year. CONNACHT COURT GROUP We have made progress with the planned reorganisation of CCG, the leading Irish textile rental company, which we acquired in July 1998. Our priorities have been the establishment of more efficient working practices and the development of new capacity to address growing market sectors. During the year a sale and leaseback of the main Dublin factory at Rathfarnham was completed realising IR£5.4 million, and we established a new plant in Naas Road to handle our growing workwear and hygiene services businesses. This new unit includes Ireland's most advanced high care processing facility aimed at food industry customers. Modernisation of CCG's Galway factory has been completed, with an upgrade of its workwear processing facility and the installation of a new production line to handle hotel linen. We have also extended the capabilities of the Micronclean factory at Spiddal, near Galway, through the installation of a new high care food line to complement its existing focus on specialist workwear for cleanroom manufacturing and assembly environments. Towards the end of last year, we strengthened our business in Northern Ireland through the acquisition of Central Laundries, a high quality workwear rental business based in Cookstown, which has provided us with an excellent modern processing plant. This acquisition provides us with the facility to expand our workwear operation in Northern Ireland. Although CCG's performance during the second half of 1999 was affected by delays in negotiating new working practices with trade unions, we will derive important benefits in the current year from the implementation of new labour- saving agreements. We believe that further significant efficiency gains can be achieved through the progressive introduction of Apparelmaster's working practices, including our production disciplines and our focus on staff training and cost control. This will help us to deliver improved profitability. JOHNSONS PERSONAL WASHROOM SERVICES This specialist business installs and services a full range of washroom equipment, meeting needs such as handwashing and drying, sanitising and feminine hygiene. The service was launched in Leeds in December 1998 and, following successful trials, geographical coverage was progressively extended during the year. We currently have operations in Gateshead, Hull, Leeds, Manchester, Glasgow and Perth. Further expansion is planned for 2000, both organically and through acquisitions of established local specialists, with the aim of achieving full national coverage by the end of the year. SEMARA On 22 February, Semara formally joined the Group and the integration team has already started the process of maximising the opportunities available to the enlarged business. The combined Group represents a major force in workwear rental able to offer a first class national, regional and local service. Whilst Semara's main business is textile rental it also includes Dimensions Corporatewear, CCM, a workwear manufacturing and sourcing company, and Airline Services. JOHNSONS CLEANERS 'Our clear focus is on building recognition of Johnsons as the nation's number one drycleaner. The continuous improvement in our branch operations is already reflected in our results and in customer feedback'. David Bryant, Managing Director, Johnsons Cleaners Over the last four years the business has undergone a comprehensive programme of change, replacing a collection of regional identities with a single, powerful national brand. This was much more than just a cosmetic change, as we took the opportunity to enhance customer service standards significantly through staff re-training and the introduction of new working practices. At the same time we have continued to re-position our shop portfolio including the closure of underperforming branches. During 1999 we completed the rebranding and rationalisation process and ended the year with a total of 544 outlets, nationwide, compared with 564 in December 1998. Our retail operations have been supported by an increase in TV advertising which has helped to achieve further improvements in both turnover and brand awareness. The Johnsons Priority Club has continued to expand with further growth planned for the current year. As well as benefiting from a more efficient drop-off and collection of garments in store through the 'priority bag' service, members receive twice yearly direct marketing mailings including a range of special offers. Our aim is to achieve progressive growth in our share of the British drycleaning market by winning recognition as the nation's number one in quality and service, as well as in number of outlets. Our progress has been confirmed by a full year of regular mystery shopping surveys, which have shown steadily improving results. Significant investments in management and staff training have been made in the pursuit of our Total Quality philosophy, and this will be strengthened in the current year with the launch of a programme of five day in-house management courses for our branch managers. We have maintained our focus on developing new outlets in high traffic, high convenience locations. Our first purpose built drive-in branch in the South East, at Chesham in Buckinghamshire, opened towards the end of the year with encouraging initial results. We now have a total of 21 drive-ins across Britain, with the latest unit opening since the year end at Swansea. We have also established an experimental drive-in unit in Leicester under the Dryclean USA brand, which offers a highly automated, 24 hour collection point and a simplified price structure. Negotiations are under way to secure further drive-in sites during the current year, with a particular focus on obtaining stronger representation in the South East. We have also expanded our presence in the region through selected acquisitions, and in 1999 we completed the purchase of new branches in Andover, Salisbury, Eastleigh and Fareham. All of these branches are trading well. We have continued to expand our range of retail services, and will launch a nationwide laundry and ironing service during the current year. Our Central Processing Unit in Rugby also broadened its range of services with the introduction of a rug cleaning service, and achieved further good volume growth. We have derived many benefits from the first full year of operation for our new, bespoke Electronic Point of Sale system, and from the management restructuring from five to four operating regions at the end of 1998. PEOPLE All our operations have an absolute commitment to the provision of excellent customer service, which in turn depends on the quality and dedication of our employees. We have continued to invest substantial resources in their training and development. Johnsons Apparelmaster has secured re-accreditation as an Investor in People, and has also benefited from the team spirit engendered by its 25th anniversary celebrations, and in particular by its adoption of a high profile charity. On behalf of the Board, I would like to express our gratitude for the contribution of each individual to our progress during the year. Richard Zerny Chief Executive JOHNSON SERVICE GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT 52 WEEKS TO 52 WEEKS TO DEC 1999 DEC 1998 AUDITED £000 £000 RESTATED TURNOVER Continuing 159,426 144,122 Discontinued 13,107 54,254 ---------- ---------- Total 172,533 198,376 ---------- ---------- OPERATING PROFIT BEFORE GOODWILL AMORTISATION Continuing 25,663 22,343 Discontinued 481 2,057 ---------- ---------- TOTAL 26,144 24,400 Amortisation of goodwill - continuing (872) (384) ---------- ---------- OPERATING PROFIT 25,272 24,016 ---------- ---------- Exceptional items - continuing 1,407 32 - discontinued (disposal of US business) 1,093 (40,349) ---------- ---------- Profit/(Loss) before interest 27,772 (16,301) Net Interest (497) (1,414) ---------- ---------- PROFIT/(LOSS) BEFORE TAXATION 27,275 (17,715) Total taxation 7,895 7,203 ---------- ---------- PROFIT/(LOSS) ATTRIBUTABLE TO SHAREHOLDERS 19,380 (24,918) ---------- ---------- DIVIDENDS i) Rates of dividend per share: Ordinary shares of 10p each - 1st interim paid 3.65p 3.3p - final paid - 11.0p - final proposed 12.25p - ---------- ---------- - total 15.9p 14.3p ---------- ---------- Preference shares of £1 each - paid - 3.75p Preference shares of 10p each - paid 7.5p 7.5p ii) Total amount absorbed thereby (£000) 8,689 7,991 ---------- ---------- EARNINGS PER SHARE - Basic 36.8p (51.5)p - Fully Diluted 34.9p (45.1)p ---------- ---------- EARNINGS PER SHARE (Before goodwill amortisation and exceptional items) - Basic 33.6p 29.9p - Fully Diluted 31.9p 28.5p ====== ====== £000 £000 PROFIT BEFORE TAXATION (Before goodwill amortisation and exceptional items) 25,647 22,986 ---------- ---------- JOHNSON SERVICE GROUP PLC CONSOLIDATED BALANCE SHEET AS AT DECEMBER 1999 DECEMBER DECEMBER 1999 1998 AUDITED £000 £000 FIXED ASSETS RESTATED Goodwill 18,795 16,735 Tangible assets 78,201 98,154 Textile rental items 21,215 22,296 Investments 749 1,406 ---------- ---------- 118,960 138,591 ---------- ---------- CURRENT ASSETS Stocks 3,571 4,405 Debtors 19,726 23,117 Cash at bank and in hand 17,324 2,494 ---------- ---------- 40,621 30,016 ---------- ---------- CURRENT LIABILITIES Creditors: Amounts falling due within one year (32,495) (38,268) ---------- ---------- NET CURRENT ASSETS/(LIABILITIES) 8,126 (8,252) TOTAL ASSETS LESS CURRENT LIABILITIES 127,086 130,339 Creditors: Amounts falling due after more than one year (19,654) (31,618) PROVISIONS FOR LIABILITIES AND CHARGES (7,976) (9,675) ---------- ---------- NET ASSETS 99,456 89,046 ====== ====== CAPITAL AND RESERVES Called-up share capital 6,052 6,117 Share premium account 4,133 3,726 Revaluation reserve 12,594 14,547 Other reserves 1,564 888 Profit and loss account 75,113 63,768 ---------- ---------- SHAREHOLDERS' FUNDS 99,456 89,046 ====== ====== Non equity Shareholders' Funds included above 9,191 10,781 ====== ====== JOHNSON SERVICE GROUP PLC CONSOLIDATED CASH FLOW STATEMENT 52 WEEKS TO 52 WEEKS TO DEC 1999 DEC 1998 AUDITED £000 £000 RESTATED Operating profit 25,272 24,016 Depreciation 24,714 23,456 Loss on sale of tangible fixed assets 401 855 Working capital and other items (net) (4,797) (159) ---------- ---------- NET CASH INFLOW FROM OPERATING ACTIVITIES 45,590 48,168 ---------- ---------- Dividends received from associate - 174 ---------- ---------- RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Net interest paid (410) (1,077) Preference dividends paid (783) (860) ---------- ---------- NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (1,193) (1,937) ---------- ---------- TAXATION Tax paid (net) (8,661) (8,396) CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Payments to acquire tangible fixed assets (10,511) (13,846) Payments to acquire textile rental items (15,945) (15,368) Receipts from sales of tangible fixed assets 6,854 2,918 Proceeds from textile rental items withdrawn from circulation 3,018 2,500 Proceeds from sale of investments 1,745 - Purchase of investment in own shares (52) (150) ---------- ---------- NET CASH OUTFLOW FOR CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (14,891) (23,946) ---------- ---------- ACQUISITIONS AND DISPOSALS Payments to acquire businesses (5,060) (25,711) Net cash/(overdrafts) acquired with subsidiary 73 (1,201) Receipts from disposal of US business 20,500 17,440 Cash disposed of with US business (464) - Purchase of shares in associate - (5) ---------- ---------- NET CASH INFLOW/(OUTFLOW) FROM ACQUISITIONS AND DISPOSALS 15,049 (9,477) ---------- ---------- EQUITY DIVIDENDS PAID (7,347) (6,436) ---------- ---------- CASH INFLOW/(OUTFLOW) BEFORE FINANCING 28,547 (1,850) ---------- ---------- FINANCING Issue of Ordinary share capital 424 205 Repayment of 6.3% Preference shares - (471) Debt due within 1 year: Loan notes redeemed (668) (620) Debt due beyond 1 year: Movement in unsecured loans (11,152) 5,010 Finance lease movement (1,394) (762) ---------- ---------- NET CASH (OUTFLOW)/INFLOW FROM FINANCING (12,790) 3,362 ---------- ---------- INCREASE IN CASH IN THE PERIOD 15,757 1,512 ---------- ---------- NOTES TO THE PRELIMINARY ANNOUNCEMENT 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:- 52 WEEKS DECEMBER 1998 £000 Operating profit charge 366 Disposal of property credit (426) Taxation credit (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 sheet has been restated accordingly. 2. Segmental Information - Analysis of Turnover and Operating Profit Before Goodwill Amortisation 52 WEEKS 52 WEEKS DECEMBER DECEMBER 1999 1998 £000 £000 RESTATED Continuing Operations GB Rental Turnover 63,437 59,934 Profit 15,757 14,738 GB Drycleaning Turnover 72,168 73,146 Profit 7,979 6,548 IR Rental Turnover 23,821 11,042 Profit 1,927 1,057 -------------------- Total Continuing Operations Turnover 159,426 144,122 Profit 25,663 22,343 Discontinued Operations US Drycleaning Turnover 13,107 52,780 Profit 481 2,057 US Rental Turnover - 1,474 Profit - - -------------------- Total Discontinued Operations Turnover 13,107 54,254 Profit 481 2,057 -------------------- Total Turnover 172,533 198,376 Operating Profit before goodwill amortisation 26,144 24,400 ====== ====== NOTES TO THE PRELIMINARY ANNOUNCEMENT / Continued. 3. Exceptional Items 52 WEEKS 52 WEEKS DECEMBER DECEMBER 1999 1998 £000 £000 RESTATED Continuing Operations Gain on disposal of fixed asset investment 1,078 - Gain on sales of property fixed assets 329 32 ---------- ---------- Total continuing operations 1,407 32 Discontinued Operations Disposal of US operations 1,093 (40,349) ---------- ---------- 2,500 (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. Taxation 52 WEEKS 52 WEEKS DECEMBER DECEMBER 1999 1998 £000 £000 RESTATED Taxation has been estimated at: Continuing Operations: UK corporation tax 7,851 6,301 Irish corporation tax 393 - Irish corporation tax on property disposals 943 - ---------- ---------- 9,187 6,301 UK deferred tax (195) 236 Irish deferred tax (1,117) - ---------- ---------- Total Continuing Operations 7,875 6,537 ---------- ---------- Discontinued Operations: US State and Federal taxation 20 666 ---------- ---------- TOTAL 7,895 7,203 ---------- ---------- NOTES TO THE PRELIMINARY ANNOUNCEMENT / Continued. 5. Dividends 52 WEEKS 52 WEEKS DECEMBER DECEMBER 1999 1998 £000 £000 £1 Cumulative preference shares at 6.3p per share - 18 10p Convertible preference shares at 7.5p per share 689 808 Ordinary shares at 15.9p (1998: 14.3p) per share 8,000 7,165 ---------- ---------- 8,689 7,991 ---------- ---------- On 1 October 1999 a first interim dividend of 3.65p was paid on the Ordinary shares. A second interim, to be confirmed as final, of 12.25p will be paid on 2 May 2000 to Shareholders on the register of members on 31 March 2000. Dividends on the Convertible preference shares were paid on 1 July 1999 and 4 January 2000. 6. Earnings Per Share 52 WEEKS 52 WEEKS DECEMBER DECEMBER 1999 1998 £000 £000 RESTATED Profit/(Loss) for the financial year 19,380 (24,918) Less Dividend on £1 Cumulative preference shares - (18) Less Dividend on 10p Convertible preference shares (689) (808) ---------- ---------- Profit/(Loss) attributable to Ordinary Shareholders 18,691 (25,744) Less (gain)/loss on exceptional items (2,500) 40,317 Add goodwill amortisation 872 384 ---------- ---------- Adjusted profit attributable to Ordinary Shareholders 17,063 14,957 ---------- ---------- Weighted average number of Ordinary shares 50,857,226 49,963,643 Fully diluted number of Ordinary shares 55,603,942 55,352,942 Earnings per share is calculated in accordance with the requirements of FRS14. Basic earnings per share is calculated using the weighted average number of shares in issue during the year, excluding those held by the Trust established in connection with the Long Term Incentive Plan, based on the profit attributable to Ordinary Shareholders. Adjusted earnings per share figures are given to exclude the effects of goodwill amortisation and exceptional items, net of taxation. For diluted earnings per share, the weighted average number of Ordinary shares in issue is adjusted to assume conversion of all dilutive potential Ordinary shares. The Company has two categories of dilutive potential Ordinary shares:- those share options granted to employees where the exercise price is less than the average market price of the Company's Ordinary shares during the year and those shares arising on conversion of the 7.5p (net) Convertible Cumulative Redeemable Preference shares. NOTES TO THE PRELIMINARY ANNOUNCEMENT / Continued. 7. Acquisitions and Disposals 52 WEEKS 52 WEEKS DECEMBER DECEMBER Purchase of Businesses 1999 1998 £000 £000 Net Assets Acquired (fair value) Fixed assets 714 10,470 Textile rental items 723 6,333 Current assets 512 4,519 Net Overdraft - (1,201) Creditors (670) (5,799) Deferred tax (20) (1,303) Loans and finance agreements (85) (3,685) -------------------- 1,174 9,334 Goodwill 4,886 16,377 -------------------- Total consideration 6,060 25,711 -------------------- Discharged by cash on completion 5,060 25,711 Deferred consideration 1,000 - -------------------- 6,060 25,711 -------------------- Disposal of US Businesses Net Assets Disposed of Tangible fixed assets 15,669 5,197 Textile rental items - 3,463 Stocks 927 1,026 Cash 464 - Debtors 4,356 2,716 Creditors (2,257) - Goodwill previously written off to reserves 248 5,038 Reduction in loss on disposal 1,093 - -------------------- Satisfied by cash 20,500 17,440 -------------------- NOTES TO THE PRELIMINARY ANNOUNCEMENT / Continued. 8. Reconciliation of Net Cash Flow to Movement in Net Debt 52 WEEKS 52 WEEKS DECEMBER DECEMBER 1999 1998 £000 £000 RESTATED Increase in cash in the period 15,757 1,512 Cash inflow on decrease in debt and lease financing 13,214 (3,628) ---------- --------- Change in net debt resulting from cash flows 28,971 (2,116) Finance leases - new (1,829) (1,431) Leases acquired with subsidiary (85) (3,685) Translation difference 1,941 (746) ---------- ---------- Movement in net debt in period 28,998 (7,978) Opening net debt (31,864) (23,886) ---------- ---------- Closing net debt (2,866) (31,864) ---------- ---------- 9. Analysis of Net Debt At Acquisition Other At December Cash (Excluding Non-cash Exchange December 1998 Flow cash) Changes Movement 1999 £000 £000 £000 £000 £000 £000 Cash in hand and at bank 2,494 14,927 - - (97) 17,324 Overdraft (876) 830 - - 46 - Debt due after one year (29,839) 11,100 - - 1,939 (16,800) Debt due within one year (917) 720 - - (1) (198) Finance Leases (2,726) 1,394 (85) (1,829) 54 (3,192) ------------------------------------------------------ (31,864) 28,971 (85) (1,829) 1,941 (2,866) ------------------------------------------------------ 10. Abridged Accounts The financial information does not amount to full accounts within the meaning of Section 240 of the Companies Act 1985 (as amended). The figures for 1998 are abridged from the Group's full accounts for that year except where stated. Those accounts received an unqualified audit report and have been filed with the Registrar of Companies. The 1999 figures have been extracted from the audited accounts and the auditors have confirmed their agreement to the release of this Announcement to The London Stock Exchange. The 1999 figures have been prepared on the basis of the Accounting Policies set out in the Annual Report for 1998 unless stated otherwise. The Annual Report for the 52 weeks to 25 December 1999 will be sent to shareholders in April 2000 and is expected to be delivered to the Registrar of Companies in June 2000. The Auditors' reports for 1999 or 1998 did not contain a statement under Section 237 (2) or (3) of the Companies Act 1989. This is a statutory disclosure required by the Companies Act 1989. NOTES TO THE PRELIMINARY ANNOUNCEMENT / Continued. 11. Rates of Exchange The following rates of exchange have been used:- 1999 1998 Irish Pound Average rate IR£1.20 IR£1.13 Closing rate IR£1.25 IR£1.13 Acquisition rate - IR£1.16 US Dollar Average rate $1.65 $1.65 Closing rate $1.65 $1.67 12. Preliminary Statement A copy of this Preliminary Announcement is available on request to all Shareholders by post from The Company Secretary, Johnson Service Group PLC, Mildmay Road, Bootle, Merseyside L20 5EW. The Announcement can also be accessed on the Internet at www.JohnsonServiceGroup.co.uk 13. Approval The Preliminary Announcement was approved by the Board of Directors on 17 March 2000.

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