Final Results

RNS Number : 7303Y

Johnson Service Group PLC

06 March 2012

 



Embargoed for 7am 6 March 2012

Johnson Service Group PLC

Statement for the Financial Year ended 31 December 2011

Johnson Service Group PLC, the textile services and facilities management Group announces its preliminary results for the financial year ending 31 December 2011.

OVERVIEW

•       Adjusted Operating Profit increased by 1.1% to £18.5 million (2010: £18.3 million)*

•       Adjusted Profit Before Tax up 3.4% to £15.0 million (2010: £14.5 million)**

•       Net debt reduced to £49.7 million (2010: £59.5 million)

•       Net finance costs reduced to £3.5 million (2010: £3.8 million)***

•       Adjusted fully diluted earnings per share up 2.4% at 4.2p (2010: 4.1p)

•       Final dividend proposed up 21.8% to 0.67 pence (2010: 0.55 pence), making 1.0 pence for full year (2010: 0.82 pence)

FINANCIAL HIGHLIGHTS

Continuing Operations	2011	2010	Increase
Revenue	£242.3m	£235.1m	+3.1%
Revenue (excluding costs recharged to customers)	£233.5m	£227.4m	+2.7%
Adjusted Operating Profit*	£18.5m	£18.3m	+1.1%
Adjusted Profit Before Tax**	£15.0m	£14.5m	+3.4%
Net Debt	£49.7m	£59.5m	n/a
Dividend	1.0p	0.82p	+21.8%
Adjusted Fully Diluted Earnings Per Share**	4.2p	4.1p	+2.4%

*       Before charging £2.6m (2010: £2.8m) intangibles amortisation and impairment (excluding software amortisation) and exceptional items of £1.6m credit (2010: £7.5m charge).

**     Before charging £2.6m (2010: £2.8m) intangibles amortisation and impairment (excluding software amortisation), exceptional items of £1.6m credit (2010: £7.5m charge) and in 2011 exceptional finance costs of £0.3m.

***    Before charging exceptional finance costs of £0.3m relating to bank fees (2010: £nil).

John Talbot, Executive Chairman of Johnson Service Group, commented:

"I am pleased with these results given the very difficult market conditions.  Our three Divisions have all achieved good operating profits, particularly Facilities Management with a 13.9% increase.  We have significantly reduced net debt and secured renewed bank facilities with sufficient headroom to make strategic bolt-on acquisitions.

"Although market conditions are not expected to improve in 2012 we are investing for future growth and since the year end have announced an acquisition in Facilities Management and a conditional exchange of contracts for a significant acquisition for our Textile Rental division.

"The Board expects to achieve a satisfactory result in 2012."

Enquiries:

 

Johnson Service Group PLC
John Talbot, Executive Chairman
Yvonne Monaghan, Finance Director
Tel: [phone] (on the day)
Tel: [phone] (thereafter)
Investec Investment Banking (NOMAD)	Newgate Threadneedle
James Grace	Graham Herring
David Flin	John Coles
Tel: [phone]	Tel: [phone]

 

www.johnsonplc.com

Note

Throughout this statement "continuing adjusted operating profit" refers to continuing operating profit before amortisation and impairment of intangibles (excluding software amortisation) and exceptional items. "Adjusted profit before tax" refers to continuing adjusted operating profit less finance costs, excluding, in 2011, exceptional finance costs in relation to bank fees.

 

CHAIRMAN'S STATEMENT

Overview

I am pleased to report that the Group has delivered a solid trading performance for the year against what has continued to be a difficult market backdrop.  We have secured renewed bank facilities to provide increased headroom for strategic bolt-on acquisitions and there was a significant reduction in underlying debt during 2011.  Since the year end we have announced the exchange of contracts on a significant acquisition for our Textile Rental division and we have also acquired a business, together with associated contracts, to add to our Facilities Management division.  Given the solid business performance and reduction in debt, we are proposing a final dividend of 0.67 pence (2010: 0.55 pence) per share, making a total dividend for the full year of 1.0 pence (2010: 0.82 pence), an increase of almost 22%.

Group Results

Total continuing revenue for the year was £242.3 million (2010: £235.1 million), while revenue, excluding costs recharged to customers, was £233.5 million (2010: £227.4 million).  Continuing adjusted operating profit amounted to £18.5 million (2010: £18.3 million). The key drivers of this performance are explained more fully in the Divisional Operating Review.

Net finance costs in 2011 were £3.8 million (2010: £3.8 million) comprising exceptional finance costs in relation to bank fees of £0.3 million (2010: £nil) and £3.5 million of other net finance costs (2010: £3.8 million).  The reduction in other net finance costs reflects the lower average borrowings and margin during the period offset by the higher interest rate in terms of both LIBOR and on the £40 million fixed interest rate hedge.

Adjusted profit before tax on a continuing basis increased to £15.0 million (2010: £14.5 million).

Amortisation and impairment of intangibles (excluding software amortisation) on continuing operations amounted to £2.6 million (2010: £2.8 million).

Net exceptional items from continuing operations for the year amounted to a credit of £1.6 million (2010: £7.5 million charge) and were in respect of a net reduction in the long term liabilities of the Group's defined benefit pension schemes.  After the exceptional items and amortisation and impairment of intangibles (excluding software amortisation) noted above, the pre-tax profit from continuing operations was £13.7 million (2010: £4.2 million).

The tax charge on the adjusted profit before tax was at a rate of 24.6%.  Adjusted fully diluted earnings per share from continuing operations were up 2.4% to 4.2p (2010: 4.1p) while continuing fully diluted earnings per share after exceptional items and amortisation and impairment of intangibles (excluding software amortisation) were 3.8p (2010: 1.2p).

Dividend

The Board is recommending a final dividend of 0.67p per share (2010: 0.55p), making a total dividend in respect of 2011 of 1.0p per share (2010: 0.82p).  Dividend cover, on an adjusted fully diluted earnings per share basis is 4.2 times (2010: 5.0 times) and is in line with our stated intention of adopting a more progressive dividend policy whilst maintaining an adequate level of cover.

The proposed final dividend, if approved by Shareholders, will be paid on 18 May 2012 to Shareholders on the register at close of business on 20 April 2012.

Finances

Total net debt at the end of 2011 was significantly reduced to £49.7 million (December 2010: £59.5 million).  In addition to cash generated from operating activities, this reduction reflects a net repayment of Corporation Tax of £5.8 million received in February 2011 in respect of earlier periods although the retention of £5.0 million of this amount remains subject to agreement with HMRC.

Interest cover based on continuing adjusted operating profit was 5.3 times (2010: 4.8 times).

A renewed £78.5 million bank facility was signed in December 2011, maturing in May 2015 and comprising a Term Loan of £53.5 million and £25.0 million Revolving Credit Facility, including overdraft.  The first scheduled repayment of £1.5 million is in December 2012.

Our interest cost in 2012 is protected from increases in LIBOR rates through the use of interest rate hedges.  £40.0 million of the Term Loan was hedged at the start of 2010 so that LIBOR was substituted for a fixed rate of 1.9% for 2010 and of 3.0% for 2011 and 2012, with the balance of bank debt incurring interest linked to LIBOR.  Margins over LIBOR applicable to the full facility have reduced from 3.75%, which applied for the majority of 2010, to an average rate of 3.2% for 2011.  Margins for 2012 will initially be 2.5% and will going forward be in the range from 2.5% to 3.0% dependant on the Group's quarter end gearing level.

Pension Deficit

The recorded net deficit after tax for all post retirement benefit obligations has increased to £15.2 million from £12.3 million at December 2010 due largely to a reduction in the discount rate applied to liabilities.

During the last three years we have implemented a number of actions which aim to reduce both the size of and risk attaching to the defined benefit pension schemes.

In 2011 we have completed the implementation of the statutory change for the indexation of certain deferred pension benefits by CPI rather than RPI resulting in a credit to the Income Statement, and a corresponding reduction in liabilities, of £2.2 million (2010: £2.2 million).

The utilisation of £0.9 million of the agreed deficit contributions to fund enhanced transfer values for specific categories of members in place of cash payments into the scheme has reduced the scheme liabilities, and therefore risk, by some £5.8 million.  This action has resulted in a charge of £0.6 million, which together with the indexation change referred to above of £2.2 million, is reflected as a net exceptional credit of £1.6 million.

Deficit contributions to the schemes or in respect of liability reducing activities amount to £1.5 million in 2011 and are expected to be £2.0 million in 2012.

Acquisitions

Since the year end we have announced the conditional exchange of contracts for the purchase of the business and assets of the Cannon Textile Care operation from OCS Group UK Limited, for a net consideration of approximately £6.1 million plus costs and expenses.  We are awaiting regulatory clearance from the Office of Fair Trading and subject to this would expect to complete the acquisition at the end of March 2012.  This acquisition will add considerable volume to our successful Textile Rental operation and we would expect the combined business to deliver enhanced customer value whilst at the same time securing future opportunities in our core markets.

In addition our Facilities Management Division, through SGP, has acquired the business, assets and specified contracts of Nickleby & Co Ltd ("Nickleby") for an initial cash consideration of £0.75 million plus costs and expenses with deferred consideration of £0.2 million payable on the achievement of certain targets on or before 31 December 2012.  Contingent payments of up to £5.0 million are also payable to the Vendor such that 50% of the initial £10.0 million of gross profit generated by SGP over the four years to December 2015 directly from specified existing and potential customers of Nickleby or from utilising their additional services for existing SGP customers is payable to the Vendor.  The potential contingent payments are self financing in cash terms with only the remaining net 50% of gross margin earned being reflected in the Group results.  Nickleby is a technology led facilities management and consultancy company, employing some 40 staff based in Basingstoke managing services to a range of customers across the UK, particularly in the insurance and multi site retail sectors.  The directors of Nickleby will join SGP's management team and, with their existing customer relationship managers, will continue to serve the acquired contracts.  The acquisition brings many exciting opportunities to enhance the service that we offer to our customers.  SGP's operational experience, reputation and scale, combined with Nickleby's systems and process management expertise will deliver a step change in what can be expected from a facilities management service.

The revenue of Nickleby attributable to the contracts acquired and as shown in the unaudited draft statutory accounts for the year to 31 March 2011 was £3.3 million.

Assuming completion of both acquisitions the exceptional reorganisation and integration costs incurred in 2012 is estimated at £2.3 million.

DIVISIONAL OPERATING REVIEW

Textile Rental

The Textile Rental division trades through two very well recognised brands in the UK, Johnsons Apparelmaster ("Apparelmaster"), which predominantly provides workwear rental and laundry services to all sectors of industry and Stalbridge Linen Services ("Stalbridge"), which provides premium linen services to the hospitality and corporate events market.

The Textile Rental division entered 2011 facing the economic challenges in the Industrial sector together with the well above inflation increases on key cost areas of the business such as transport fuel, production energy and cotton prices.

Despite these challenges the Division, which forms the largest part of the Group, performed very strongly and above our expectations.

Revenue generation was the main focus of the business throughout the year as a comprehensive training package was delivered to all customer facing staff, field service personnel, routemen and installation engineers as well as the field sales teams.  With the benefit of the programme put in place new business sales improved by 10%, sales to existing customers improved by 12% and direct sales of uniforms to customers grew by £1.4 million or 74%.

This approach was clearly beneficial as revenue streams increased by 2.7% for the year reaching £118.2 million (2010: £115.1 million).

Corresponding adjusted operating profit, on a like for like basis, remained stable at £15.9 million (2010: £16.6 million).  2010 results included the benefit of additional trading days adding £1.2 million and £0.7 million to revenue and adjusted operating profit respectively.  The absorption of the additional operating costs reduced the margin slightly to 13.5% (2010: 14.0%) on a like for like basis.

Very large increases in transport fuel and gas prices added £0.9 million to the Divisions cost base.  These increases were partly mitigated by the strategy of continuing investment in high specification equipment which enabled the business to process an additional four million textile items whilst at the same time reducing energy consumption by 5.2% (following a 12.4% reduction in 2010).

The Division had lower capital expenditure requirements for plant and equipment at £2.5 million (2010: £4.5 million) which offset the increased textile rental stock additions which at £18.9 million was £3.3 million greater than the previous year.  The additional expenditure on textile rental stock was due to a combination of the installation of additional new business wins and the renewal of major National accounts together with the impact of price increases of cotton based items.  Cash generated before interest reduced to £13.5 million compared to £19.3 million in 2010 reflecting the higher investment in rental stock and an increase in working capital.

Apparelmaster has continued to invest in both its infrastructure and the training of staff.  Contracts with customers are generally for an initial three year term, giving some visibility of revenue.  The high level of customer renewals during 2011 and anticipated for 2012 will require continued high investment in new textile rental stock.  Although this absorbs cash in the short term, it provides stability of revenue for the medium term.  It is anticipated that there will be some reduction in cotton prices over the coming months, although costs are unlikely to return to 2010 levels.

Stalbridge has achieved both revenue and profit growth despite significant parts of its market being impacted by the general economic backdrop.  An increase in revenue from the luxury hotel and restaurant market has offset the restricted corporate hospitality market.  As an endorsement of the quality of the Stalbridge service the business won the coveted "2011 Best Supplier for Service" award from Compass PLC, out of some 5,000 service providers.

We expect the Textile Rental market to remain competitive although with inflationary pressures easing.  We will continue to focus on customer service and production quality in order to maintain or improve customer retention and are excited about the prospects of the intended Cannon Textile Care acquisition.

Facilities Management

SGP provides intelligent technology-led property and facilities management (FM) services to the retail, corporate, education and healthcare sectors.  It has grown strongly over the last year despite continuingly challenging market conditions.  During 2011, the business has delivered strong project growth, won and mobilised a number of new prestigious long term contracts, and successfully expanded services into its existing client base.

Revenue, excluding costs recharged to customers, was 13.1% higher at £38.0 million (2010: £33.6 million) whilst revenue including recharges was 13.3% higher at £46.8 million (2010: £41.3 million).

Adjusted operating profit increased by 13.9% to £4.1 million (2010: £3.6 million).

In February 2012, SGP completed a further acquisition, purchasing the business, contracts and assets of Nickleby and Co Ltd, a Basingstoke based facilities management company which provides its strong portfolio of retail and insurance clients with leading edge unique IT software driven solutions.  This bolt-on acquisition will not only further enhance SGP's presence in the FM retail sector, but also broaden its product offering to existing clients and strengthen its pipeline of potential new customers.

The SGP business operates in six different areas of the FM market as follows:

Retail FM

SGP provides facilities management to approximately one quarter of units on the high street occupied by major chains.  Revenue was at a similar level to 2010, but at a slightly improved margin.  During the second half of the year, a number of smaller contracts were won and mobilised including Bibendum Wine, Pasty Presto, Autoglass and Evans Cycles.

Corporate FM

Corporate FM had reduced revenue although a slightly improved margin compared to 2010.  There were some prestigious contract wins during the second half of 2011, including Johnston Press, Camelot and a contract to manage part of the 2012 Olympic athletes' village.

Education FM

This sector has shown significant revenue and gross profit growth in 2011 with the benefit of a full year of the 2010 acquired PFI contracts and higher levels of project activity.  The 27 year PFI contract for the Worcester Library has now been successfully mobilised and has gone live in January 2012.

Healthcare FM

In our health sector, there has also been strong growth.  The long term contracts for a hospital and a PCC (Primary Care Centre) will go live before the end of this year, with an existing PCT (Primary Care Trust) contract extended from its initial 3 year term to March 2013.

Technical Services

The increased investment in technical resource during 2010 continues to produce good returns, with a strong 2011 performance from SGP's project activity, meeting an increased demand from clients for assistance with essential capital projects resulting in an increase in net revenues.

Property Services

Whilst the smallest of the SGP business streams, we have invested in growing the agency business, and in 2011 have seen encouraging revenue growth following the opening of our Farringdon office in London.  In 2012, with a further office opening in February in Piccadilly, Manchester, we expect this business stream to continue to grow and increase its contribution.  Our service charge business has also grown, and serves some of the best known high street retail names, including Arcadia, Tesco and Marks & Spencer.  We intend to invest further in this business stream in 2012.

SGP has again delivered growth, and whilst the economic climate in 2012 is expected to be very challenging, the acquisition of the Nickleby business, stringent cost management, a strong pipeline of potential customers, alongside the 60% of its revenue generated from existing long term PFI contracted income, makes SGP well placed to weather any storm and to continue to show growth.

Drycleaning

The Drycleaning division operates under the brands Johnson Cleaners, our national retail arm, Jeeves of Belgravia, our predominantly London based luxury business and Alex Reid, our consumables business and major supplier to the drycleaning and laundry sectors.

Revenue for the Division for the year was 1.8% lower at £77.3 million (2010: £78.7 million) whilst adjusted operating profit was unchanged at £2.0 million (2010: £2.0 million).  As anticipated the property related credits of £0.6 million benefiting 2010 were reduced to only £0.2 million in 2011.

The trading pattern of both the Johnson Cleaners and Jeeves high street businesses showed significant inconsistencies throughout the year, with increases being achieved against the weather affected weeks of 2010, and shortfalls evident in the aftermath of high profile, negative newsflow.  The resultant full year revenue was £68.9 million (2010: £70.1 million) with the like for like basis showing a small reduction of 0.3% (2010: 3.6% reduction).

High street trading remained tough in 2011, as economic conditions put severe pressure on disposable incomes, which consequently impacted upon the number of visitors to the high street and ultimately on the quality of businesses continuing to operate.

Given the trading environment our store refurbishment programme was slowed down, and capital was invested in projects which could accelerate the introduction and growth of our new or underdeveloped services.  The final results indicate that this strategy was successful with turnover growth of almost £1.0 million being achieved across the four target categories of laundry, shoe repairs, garment repairs and key cutting.  The most significant increases came from the laundry category which achieved an overall increase of 10.4% and a very credible 26% like for like increase in the 200 branches which received capital investment.

Our Empower Programme, whereby Store Managers use their entrepreneurial skills to improve the revenue and profit of their business, continued to provide positive performances and rollout was extended to 200 stores in the 4th Quarter of 2011.

The Retail Store Portfolio at year end was reduced from 480- to 463 as we continue to actively withdraw from poorer locations and focus our attention on more convenient sites.  Four Pod Units opened up on sites adjacent to Sainsbury's stores and our first '24 Hour Drive Thru Dry Cleaners' got off to a very successful start in Burton in the Midlands, and has received much critical acclaim for its approach to customer service.  We are actively seeking additional locations to expand this concept.

Our restoration business, JRS, produced a 48% increase in revenue, and a significant increase in contribution, as the benefits of operating from the shared premises of our Central Processing Unit in Rugby were realised.

Jeeves of Belgravia, our luxury brand had a year of high activity, opening new stores in London St Pauls and Alderley Edge, Cheshire, with £0.1 million of opening costs charged to operating profit in the year.  We have opened a further unit in January 2012 in Notting Hill, bringing the total number of Jeeves units to 13.

Alex Reid, our consumables business, saw a 2.3% decline in revenue from £8.6 million to £8.4 million and a reduced adjusted operating profit of £0.2 million (2010: £0.3 million).  The focus of the business this year has been on improving sales and service and on new market development which has put it in a good position to grow both revenue and profit in 2012.

Staff

Our staff are paramount in ensuring that our customers continue to receive service beyond their expectations.

I would like to thank each and every employee for their commitment and dedication during the past year and thank them for their continuing efforts in driving the Group forward.

Outlook

Despite the continuing tough economic climate the Group is investing for future growth.  We have been continuing to actively look for acquisitions to grow our Textile Rental and Facilities Management divisions following the acquisition of the Jarvis contracts in 2010 and are delighted to have acquired the Nickleby business and to have reached conditional agreement in respect of Cannon Textile Care.  We believe that there are further opportunities to expand each of the Group's divisions.

The Textile Rental division has had another successful year achieving growth in revenue and strong customer retention.  Whilst the business is still subject to inflationary cost pressures we remain confident that our strong performance will continue into 2012.  The full benefit from the intended Cannon Textile Care acquisition will take some time to impact positively on adjusted operating profit but is expected to be accretive for full year 2013.

We believe SGP will continue to benefit from its increased presence in the PFI market and we are very excited about the recent acquisition which broadens the range of services offered and makes increased used of new technology.

Our retail Drycleaning and laundry division remains focused on attracting complementary revenue streams from a more streamlined and improving portfolio of retail units.

Although we remain cautious about the economic environment for the coming months the Board expects to achieve a satisfactory result in 2012.

John Talbot

Executive Chairman

6 March 2012

Consolidated Income Statement

Note		Year ended 31 December 2011	Year ended 31 December 2010
		£m	£m
REVENUE FROM CONTINUING OPERATIONS	2	242.3	235.1
Costs recharged to customers		(8.8)	(7.7)
Revenue excluding costs recharged to customers	2	233.5	227.4
OPERATING PROFIT	2	17.5	8.0
OPERATING PROFIT BEFORE INTANGIBLES AMORTISATION AND IMPAIRMENT (EXCLUDING SOFTWARE AMORTISATION) AND EXCEPTIONAL ITEMS	2	18.5	18.3
Amortisation and impairment of intangible assets (excluding software amortisation)		(2.6)	(2.8)
Exceptional items	3
- Restructuring and other costs		-	(8.3)
- Costs in relation to business acquisition activity		-	(1.4)
- Pension credits		1.6	2.2
OPERATING PROFIT	2	17.5	8.0
Ordinary finance cost	4
- Finance cost		(4.4)	(4.6)
- Finance income		0.2	-
- Notional interest		0.7	0.8
		(3.5)	(3.8)
Exceptional finance cost	4	(0.3)	-
NET FINANCE COST		(3.8)	(3.8)
PROFIT BEFORE TAXATION		13.7	4.2
Taxation charge	6	(3.4)	(1.0)
PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS		10.3	3.2
PROFIT FOR THE YEAR FROM DISCONTINUED OPERATIONS	10	-	-
PROFIT FOR THE YEAR ATTRIBUTABLE TO EQUITY HOLDERS		10.3	3.2
EARNINGS PER SHARE *	7
Basic earnings per share
From continuing operations		4.1p	1.3p
From discontinued operations		-	-
From continuing and discontinued operations		4.1p	1.3p
Diluted earnings per share
From continuing operations		3.8p	1.2p
From discontinued operations		-	-
From continuing and discontinued operations		3.8p	1.2p

*   Adjusted earnings per share before intangibles amortisation and impairment (excluding software amortisation), exceptional items and exceptional finance costs, are shown in note 7.

Consolidated Statement of COMPREHENSIVE Income

	Year ended 31 December 2011	Year ended 31 December 2010
	£m	£m
Profit for the year	10.3	3.2
Actuarial loss on defined benefit pension schemes	(7.8)	(1.5)
Taxation in respect of actuarial loss	1.9	0.4
Change in deferred tax due to change in tax rate	(0.3)	(0.2)
Cash flow hedges (net of taxation) - fair value loss	(0.6)	(1.4)
- transfers to interest	0.6	0.3
OTHER COMPREHENSIVE INCOME FOR THE YEAR	(6.2)	(2.4)
TOTAL COMPREHENSIVE INCOME  FOR THE YEAR	4.1	0.8

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

	Share Capital	Share Premium	Other Reserves	Retained Earnings	Total Equity
	£m	£m	£m	£m	£m
Balance at 1st January 2010	24.9	13.7	2.4	29.8	70.8
Total comprehensive income for the year	-	-	(1.1)	1.9	0.8
Reserve transfer	-	-	(0.2)	0.2	-
Share options (value of employee services)	-	-	-	0.7	0.7
Issue of share capital	0.1	-	-	-	0.1
Dividend paid	-	-	-	(1.9)	(1.9)
Balance at 31st December 2010	25.0	13.7	1.1	30.7	70.5
Balance at 1st January 2011	25.0	13.7	1.1	30.7	70.5
Total comprehensive income for the year	-	-	-	4.1	4.1
Share options (value of employee services)	-	-	-	0.8	0.8
Issue of share capital	0.4	0.1	-	-	0.5
Dividend paid	-	-	-	(2.2)	(2.2)
Balance at 31st December 2011	25.4	13.8	1.1	33.4	73.7

Consolidated Balance Sheet

Note		As at 31 December 2011	As at 31 December 2010
		£m	£m
ASSETS
NON-CURRENT ASSETS
Goodwill		87.6	87.6
Intangible assets		7.8	10.5
Property, plant and equipment		42.8	44.4
Textile rental items		23.2	19.7
Trade and other receivables		0.8	0.6
Deferred income tax assets		6.8	6.5
		169.0	169.3
CURRENT ASSETS
Inventories		4.3	3.7
Trade and other receivables		38.6	35.4
Cash and cash equivalents		5.7	2.2
		48.6	41.3
LIABILITIES
CURRENT LIABILITIES
Trade and other payables		46.6	44.0
Current income tax liabilities		5.7	0.6
Borrowings		2.7	6.4
Provisions		4.2	5.0
		59.2	56.0
NET CURRENT LIABILITIES		(10.6)	(14.7)
NON-CURRENT LIABILITIES
Retirement benefit obligations	9	20.2	16.8
Deferred income tax liabilities		1.4	1.3
Other non-current liabilities		2.1	2.2
Borrowings		51.4	53.5
Derivative financial liabilities		1.4	1.5
Provisions		8.2	8.8
		84.7	84.1
NET ASSETS		73.7	70.5
CAPITAL AND RESERVES ATTRIBUTABLE TO THE COMPANY'S EQUITY HOLDERS
Share capital		25.4	25.0
Share premium		13.8	13.7
Other reserves		1.1	1.1
Retained earnings		33.4	30.7
TOTAL EQUITY		73.7	70.5

 Consolidated Statement OF Cash Flows

Note		Year ended 31 December 2011	Year ended 31 December 2010
		£m	£m
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year		10.3	3.2
Adjustments for:
Income tax - continuing operations	6	3.4	1.0
- discontinued operations	10	(2.0)	(0.1)
Net finance cost	4	3.8	3.8
Depreciation		20.5	21.0
Amortisation		2.9	3.1
Increase in inventories		(0.6)	(0.3)
Increase in trade and other receivables		(3.3)	(0.2)
Increase in trade and other payables		2.2	0.6
(Profit) / loss on sale of property, plant and equipment		(0.1)	0.1
Pre-tax gain on disposal of business		-	(0.1)
Acquisition fees charged to income statement		-	1.4
Additional contribution to defined benefit pension schemes		(1.5)	(1.6)
Share-based payment		0.8	0.9
Retirement benefit obligations		(2.2)	(2.7)
Provisions		(1.6)	3.8
Cash generated from operations		32.6	33.9
Interest paid		(3.4)	(3.1)
Taxation received		5.1	1.8
Net cash flows generated from operating activities		34.3	32.6
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of business (net of cash acquired)		(0.2)	(0.5)
Proceeds from sale of business		-	0.1
Purchase of property, plant and equipment		(5.3)	(7.7)
Proceeds from sale of property, plant and equipment		0.3	1.4
Purchase of intangible assets		(0.2)	(0.3)
Purchase of textile rental items		(18.5)	(14.3)
Proceeds from sale of textile rental items		2.0	2.2
Interest received		0.2	-
Net cash used in investing activities		(21.7)	(19.1)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings		2.5	73.5
Repayments of borrowings		(6.5)	(86.0)
Capital element of finance leases		(0.7)	(0.8)
Net proceeds from issue of Ordinary shares		0.5	0.1
Dividends paid to Company Shareholders		(2.2)	(1.9)
Net cash used in financing activities		(6.4)	(15.1)
Net increase / (decrease) in cash and cash equivalents		6.2	(1.6)
Cash and cash equivalents at beginning of period		(1.4)	0.2
Cash and cash equivalents at end of period		4.8	(1.4)

NOTES TO THE PRELIMINARY ANNOUNCEMENT

1          BASIS OF PREPARATION

The financial information contained within this report has been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (IFRSs as adopted by the EU), International Financial Reporting Interpretations Committee (IFRIC) Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.

The financial information has been prepared using accounting policies consistent with those set out in the 2010 Annual Report.

2          SEGMENT ANALYSIS

Segment information is presented in respect of the Group's business segments, which are based on the Group's management and internal reporting structure as at 31st December 2011.

The chief operating decision-maker has been identified as the Board of Directors (the Board).  The Board reviews the Group's internal reporting in order to assess performance and allocate resources.  Management has determined the operating segments based on these reports and on the internal reporting structure.

The Board assesses the performance of the operating segments based on a measure of earnings before interest and tax, both including and excluding the effects of non-recurring items from the operating segments, such as restructuring costs and impairments when the impairment is the result of an isolated, non-recurring event.  Interest income and expenditure are not included in the result for each operating segment that is reviewed by the Board.  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 is credited back, where appropriate, to the paying company for the purpose of segmental reporting.

Other information provided to the Board is measured in a manner consistent with that in the financial statements.  Segment assets exclude deferred tax assets, current tax assets and cash, all of which are managed on a central basis.  Segment liabilities include non-bank borrowings but exclude deferred tax liabilities, current tax liabilities, bank borrowings, derivative financial liabilities and retirement benefit obligations that cannot be attributed directly to a segment, all of which are managed on a central basis.  These balances are part of the reconciliation to total balance sheet assets and liabilities.

Inter-segment pricing is determined on an arms length basis.  The exceptional items have been included within the appropriate business segment as shown on pages 16 to 17.

The Group comprises the following segments:

Textile Rental Workwear rental supply and laundering, linen rental for the premium hotel, catering and corporate hospitality markets and sale of ancillary items.		§ Johnsons Apparelmaster Limited § Stalbridge Linen Services
Facilities Management Delivering building, facilities and property management services to public, commercial and retail organisations throughout the UK.		§ SGP Property & Facilities Management Limited § Barnhill School Services Limited § Balfron Schools Services Limited § Cardinal Heenan School Services Limited § Colfox School Services Limited § Dundee Healthcare Services Limited § East Ren Schools Services Limited
Drycleaning With over 460 stores nationwide, provides drycleaning, laundry and ironing services, carpet cleaning, upholstery cleaning, wedding dress cleaning and suede & leather cleaning and the supply of drycleaning consumables and equipment.		§ Johnson Cleaners UK Limited § Jeeves of Belgravia Limited § Jeeves International Limited § Alex Reid Limited
All Other Segments Comprising of central and head office costs.		§ Johnson Service Group PLC § Johnson Group Properties PLC § Semara Estates Limited

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

2          SEGMENT ANALYSIS continued

Year ended 31st December 2011	Textile Rental		Facilities    Management	Drycleaning	All Other Segments	Total
	£m		£m	£m	£m	£m
REVENUE
Revenue	118.2		47.4	77.3	-	242.9
Inter-segment revenue	-		(0.6)	-	-	(0.6)
REVENUE - CONTINUING	118.2		46.8	77.3	-	242.3
Revenue - Discontinued (note 10)						-
Total revenue						242.3
REVENUE EXCLUDING COSTS RECHARGED TO CUSTOMERS
Revenue	118.2		38.6	77.3	-	234.1
Inter-segment revenue	-		(0.6)	-	-	(0.6)
REVENUE EXCLUDING COSTS RECHARGED TO CUSTOMERS - CONTINUING	118.2		38.0	77.3	-	233.5
Revenue - Discontinued (note 10)						-
Total revenue excluding costs recharged to customers						233.5
RESULT
Operating profit before intangibles amortisation and impairment (excluding software amortisation) and exceptional items	15.9		4.1	2.0	(3.5)	18.5
Amortisation and impairment of intangible assets	(0.5)		(2.1)	-	-	(2.6)
Exceptional items
- Pension credits	-		-	-	1.6	1.6
Operating profit / (loss)	15.4		2.0	2.0	(1.9)	17.5
Ordinary finance cost						(3.5)
Exceptional finance cost						(0.3)
Profit before taxation						13.7
Taxation						(3.4)
Profit for the period - Continuing						10.3
Profit for the period - Discontinued (note 10)						-
Profit for the period						10.3

		Discontinued Operations			Textile Rental		Facilities    Management	Drycleaning	All Other Segments	Total
			£m		£m		£m	£m	£m	£m
OTHER INFORMATION
Fixed asset additions
- Property, plant and equipment			-		2.5		0.6	2.6	-	5.7
- Textile rental items			-		18.9		-	-	-	18.9
- Intangible software			-		-		0.2	-	-	0.2
Depreciation and amortisation expense
- Property, plant and equipment			-		3.9		0.4	2.6	0.2	7.1
- Textile rental items			-		13.4		-	-	-	13.4
- Intangible software			-		-		0.2	0.1	-	0.3
Return on capital employed					40.6%		266.9%	14.4%
BALANCE SHEET INFORMATION
Segment assets			0.1		105.5		49.2	38.3	12.0	205.1
Unallocated assets	- Deferred income tax assets									6.8
	- Cash and cash equivalents									5.7
Total assets										217.6
Segment liabilities			(2.2)		(26.5)		(11.0)	(16.3)	(5.7)	(61.7)
Unallocated liabilities	- Deferred income tax liabilities									(1.4)
	- Bank borrowings									(52.9)
	- Income tax liabilities									(5.7)
	- Derivative financial liabilities									(1.4)
	- Retirement benefit obligations									(20.8)
Total liabilities										(143.9)

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

2          SEGMENT ANALYSIS continued

Year ended 31st December 2010	Textile Rental			Facilities    Management	Drycleaning	All Other Segments	Total
	£m			£m	£m	£m	£m
REVENUE
Revenue	115.1			41.9	78.7	-	235.7
Inter-segment revenue	-			(0.6)	-	-	(0.6)
REVENUE - CONTINUING	115.1			41.3	78.7	-	235.1
Revenue - Discontinued (note 10)							-
Total revenue							235.1
REVENUE EXCLUDING COSTS RECHARGED TO CUSTOMERS
Revenue	115.1			34.2	78.7	-	228.0
Inter-segment revenue	-			(0.6)	-	-	(0.6)
REVENUE EXCLUDING COSTS RECHARGED TO CUSTOMERS - CONTINUING	115.1			33.6	78.7	-	227.4
Revenue - Discontinued (note 10)							-
Total revenue excluding costs recharged to customers							227.4
RESULT
Operating profit before intangibles amortisation and impairment (excluding software amortisation) and exceptional items	16.6			3.6	2.0	(3.9)	18.3
Amortisation and impairment of intangible assets	(0.8)			(2.0)	-	-	(2.8)
Exceptional items
- Pension credits	-			0.6	-	1.6	2.2
- Reorganisation costs	-			(0.3)	(6.5)	-	(6.8)
- Loss on disposal of property and property provisions			-	-	-	(1.5)	(1.5)
- Business acquisition activity	(0.1)			(1.3)	-	-	(1.4)
Operating profit / (loss)	15.7			0.6	(4.5)	(3.8)	8.0
Ordinary finance cost							(3.8)
Profit before taxation							4.2
Taxation							(1.0)
Profit for the period - Continuing							3.2
Profit for the period - Discontinued (note 10)							-
Profit for the period							3.2

		Discontinued Operations			Textile Rental		Facilities    Management	Drycleaning	All Other Segments	Total
			£m		£m		£m	£m	£m	£m
OTHER INFORMATION
Fixed asset additions
- Property, plant and equipment			-		4.5		0.4	3.8	-	8.7
- Textile rental items			-		15.6		-	-	-	15.6
- Intangible software			-		-		0.2	0.1	-	0.3
Depreciation and amortisation expense
- Property, plant and equipment			-		4.2		0.3	3.0	0.2	7.7
- Textile rental items			-		13.3		-	-	-	13.3
- Intangible software			-		-		0.2	0.1	-	0.3
Return on capital employed					46.0%		144.1%	16.6%
BALANCE SHEET INFORMATION
Segment assets			0.1		102.3		49.7	38.2	11.6	201.9
Unallocated assets	- Deferred income tax assets									6.5
	- Cash and cash equivalents									2.2
Total assets										210.6
Segment liabilities			(0.5)		(25.5)		(10.1)	(18.5)	(6.9)	(61.5)
Unallocated liabilities	- Deferred income tax liabilities									(1.3)
	- Bank borrowings									(58.5)
	- Income tax liabilities									(0.6)
	- Derivative financial liabilities									(1.5)
	- Retirement benefit obligations									(16.7)
Total liabilities										(140.1)

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

3          EXCEPTIONAL ITEMS

	2011	2010
	£m	£m
Restructuring costs                - Drycleaning	-	(6.5)
- Facilities Management	-	(0.3)
Property disposals and provisions	-	(1.5)
	-	(8.3)
Costs in relation to business acquisition activity	-	(1.4)
Pension credits	1.6	2.2
Total exceptional items	1.6	(7.5)

In addition, exceptional finance costs of £0.3 million (2010: £nil) were incurred during the year.

Exceptional items in relation to discontinued operations have been included within the result from discontinued operations.

CURRENT YEAR EXCEPTIONAL ITEMS

Pension credits and costs

The statutory change for the indexation of certain future pension benefits has been implemented.  This resulted in a credit to the Income Statement in 2010 with a further credit of £2.2 million in 2011.  The impact of the change from RPI to CPI has been recognised in the Income Statement in 2010 and 2011 as a past service credit.

The Company has decided to offer enhanced terms to certain categories of deferred members who choose to transfer their benefits out of the Johnson Group Staff Pension Scheme by increasing the transfer value that would normally be payable by the Scheme Trustee. The 2011 exercise was rolled out to deferred members aged under 50: 532 members were offered the enhancement, 110 accepted, equating to some 35% take up by liability for this group of members.

This has resulted in an exceptional cost of £0.6 million (including fees and employer's national insurance) and has been included as a settlement loss.

Exceptional finance costs

In addition to the exceptional items above, the Group treats certain finance costs as exceptional. Exceptional finance costs are included within Finance Cost in the Income Statement. During the year there were £0.3 million of exceptional finance costs (2010: £nil) in respect of the write-off of bank fees relating to the previous bank facility following the signing of a renewed bank facility on 22nd December 2011.

PRIOR YEAR EXCEPTIONAL ITEMS

Restructuring costs - Drycleaning

The management of the Drycleaning division, in working to optimise the performance of stores in our more marginal locations, conducted a review which identified a number of loss making stores which continued to decline at a faster rate and where, in management's view, overall efficiency and focus would be improved by their closure.  It was, therefore, decided to strengthen the overall portfolio by the closure of 20 such stores over and above those at lease expiry which also allows a reduction in overhead.  The review also identified a further 8 stores which it was uneconomic to close but which are unlikely to be restored to profitability and in respect of which a provision was recognised for both the least net cost of exiting these stores and asset impairments.  The costs also included the restructuring of the warehousing and logistical operations supporting the division.  Of the total restructuring cost, £0.5 million was non-cash.  The majority of the cash outflow was in respect of existing property lease commitments which will remain until the locations are disposed of.

Restructuring costs - Facilities Management

Following from the acquisition of contracts from Jarvis PLC (in administration) the Division reorganised its management and support structures such that they were better aligned to the business needs going forward.  Although these costs were directly as a result of the acquisition of PFI contracts from Jarvis PLC (in administration), they have not been classified as 'costs in relation to business acquisition activity' as they more closely fit the definition of 'restructuring costs'.  All costs were incurred during the second half of 2010.

Property disposals and provisions

During the second half of 2010 a surplus freehold property was disposed of for net proceeds, after associated costs, of £1.1 million, resulting in a loss on disposal of £0.1 million.  In addition the Group recognised further provisions of £1.4 million in respect of onerous lease commitments on surplus property.

Costs in relation to business acquisition activity

Under IFRS 3 (revised), 'Business combinations', all acquisition-related costs (e.g. professional fees) are required to be expensed to the Income Statement.  With effect from 1st January 2010, fees and expenses incurred on business acquisition activities are treated as exceptional.  The cost above relates partly to £1.3 million (as at 31st December 2010) and £0.4m (as at 30th June 2010) of fees and expenses incurred on the acquisition of the PFI contracts from Jarvis PLC (in administration).  The remainder of the cost relates to fees and expenses incurred during negotiations with other undisclosed targets.

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

4          NET FINANCE COST

	2011	2010
	£m	£m
Finance cost:
- Interest payable on bank loans and overdrafts	(3.4)	(3.6)
- Amortisation of bank loan issue costs	(0.8)	(0.8)
- Interest payable on obligations under finance leases	(0.1)	(0.1)
- Other finance costs	(0.1)	(0.1)
Finance cost	(4.4)	(4.6)
Finance income	0.2	-
Net finance cost before notional interest on defined benefit liabilities and assets	(4.2)	(4.6)
Notional interest on defined benefit obligations:
- Interest cost on pension scheme liabilities	(10.0)	(10.2)
- Expected return on pension scheme assets	10.8	11.1
- Private healthcare	(0.1)	(0.1)
	0.7	0.8
Ordinary finance cost	(3.5)	(3.8)
Exceptional finance cost	(0.3)	-
Net finance cost	(3.8)	(3.8)

On 22nd December 2011 an amended and restated bank facility was signed.  As a result the unamortised fees relating to the old facility were written off and classed as an exceptional finance cost during the year.

Prospective amendments to the calculation of notional interest

Under the requirements of IAS19, 'Employee Benefits', notional interest is quantified in order to reflect the value of assets and liabilities of defined benefit pension schemes.  The net of the expected return on assets and the interest cost on liabilities is calculated at the beginning of each financial year utilising the assumptions used in calculating the Balance Sheet surplus or deficit for the defined benefit schemes.

Amendments to IAS19, effective from 1st January 2013, require that the rate of return on assets is assumed to be equal to the interest cost applied to liabilities and, therefore, for any defined benefit scheme which has a deficit the resultant notional interest will always be a charge.

The revised standard remains subject to adoption by the European Union (EU), however, had the EU adopted the revised standard and had the Group early adopted this amendment, the resultant notional interest charge for 2012 would be £1.0 million, compared to the anticipated charge of nil using the existing methodology.

Note that notional interest is a non-cash item and does not impact on scheme funding.

5          ADJUSTED PROFIT BEFORE AND AFTER TAXATION

	2011	2010
	£m	£m
Profit before taxation	13.7	4.2
Intangibles amortisation and impairment (excluding software amortisation)	2.6	2.8
Restructuring and other costs	-	6.8
Loss on disposal of property and property provisions	-	1.5
Costs in relation to business acquisition activity	-	1.4
Pension credits	(1.6)	(2.2)
Exceptional finance cost	0.3	-
Adjusted profit before taxation	15.0	14.5
Taxation on adjusted profit	(3.7)	(3.9)
Adjusted profit after taxation attributable to continuing operations	11.3	10.6

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

6          TAXATION

	2011	2010
	£m	£m
Current tax
UK Corporation Tax charge for the year	2.7	0.3
Adjustment in relation to previous years	(0.6)	-
Current tax charge for the year	2.1	0.3
Deferred tax
Origination and reversal of temporary differences	1.4	1.1
Adjustment in relation to previous years	(0.1)	(0.4)
Deferred tax charge for the year	1.3	0.7
Total charge for taxation included in the Income Statement for continuing operations	3.4	1.0

The tax charge for the period is lower (2010: lower) than the standard rate of Corporation Tax in the UK of 26.5% (2010: 28.0%).  The differences are explained below:

	2011	2010
	£m	£m
Profit before taxation per the Income Statement	13.7	4.2
Profit before taxation multiplied by the standard rate of Corporation Tax in the UK of 26.5% (2010: 28.0%)	3.6	1.2
Factors affecting taxation charge for the year:
Tax effect of expenses not deductible for tax purposes	0.6	0.5
Tax effect of non-taxable income	(0.1)	(0.3)
Adjustments to tax in respect of prior periods	(0.7)	(0.4)
Total charge for taxation included in the Income Statement	3.4	1.0

Taxation on the restructuring and other costs, including exceptional finance costs in the current year, has increased the charge for taxation by £0.3 million (2010: £2.1 million reduction).  Tax relief on intangibles amortisation and impairment (excluding software amortisation) has reduced the charge for taxation by £0.6 million (2010: £0.8 million).

During the year a tax repayment relating to 2008 of £5.8 million was received.  Of this amount £5.0 million related to the de-grouping charge previously paid by the Group on the disposal of the Corporatewear business.  The calculation of this refund has not yet been agreed with HMRC.  Of this amount £1.5 million has been included as a tax credit within discontinued operations; the remaining £3.5 million has been retained as an income tax creditor pending outcome of discussions with HMRC.

The income tax expense for the year is based on the effective United Kingdom statutory rate of Corporation Tax for the period of 26.5% (2010: 28%).  The rate of Corporation Tax in the UK reduced from 28% to 26% on 1st April 2011 and will reduce to 25% on 1st April 2012.  The effect of these changes on the Income Statement charge in the year has not been material, but has resulted in a charge to reserves of £0.3 million.

Further reductions to the main rate are proposed to reduce the rate by 1% per year to 23% by 1st April 2014. These reductions are expected to be introduced in the future Finance Bills for each annual reduction.  The effect of these changes to be enacted in future Finance Bills is currently being evaluated by the Group, however, the impact on the deferred tax balances due to the decreased Corporation Tax rates is not expected to be material.

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

7          EARNINGS PER SHARE

	2011	2010
	£m	£m
Profit for the financial year from continuing operations attributable to Ordinary Shareholders	10.3	3.2
Loss for the financial year from discontinued operations attributable to Ordinary Shareholders	-	-
Intangibles amortisation and impairment from continuing operations (net of taxation)	2.0	2.0
Intangibles amortisation and impairment from discontinued operations (net of taxation)	-	-
Exceptional (credits) / costs from continuing operations (net of taxation)	(1.2)	5.4
Exceptional costs from discontinued operations (net of taxation)	-	-
Exceptional finance cost from continuing operations (net of taxation)	0.2	-
Adjusted profit attributable to Ordinary Shareholders	11.3	10.6
Weighted average number of Ordinary shares	249,834,780	248,170,808
Dilutive potential Ordinary shares*	20,998,433	13,513,610
Fully diluted number of Ordinary shares	270,833,213	261,684,418
Basic earnings per share
From continuing operations	4.1p	1.3p
From discontinued operations	-	-
From continuing and discontinued operations	4.1p	1.3p
Adjustment for intangibles amortisation and impairment (continuing operations)	0.8p	0.8p
Adjustment for intangibles amortisation and impairment (discontinued operations)	-	-
Adjustment for exceptional items (continuing operations)	(0.5p)	2.2p
Adjustment for exceptional items (discontinued operations)	-	-
Adjustment for exceptional finance cost (continuing operations)	0.1p	-
Adjusted basic earnings per share (continuing operations)	4.5p	4.3p
Adjusted basic earnings per share (discontinued operations)	-	-
Adjusted basic earnings per share from continuing and discontinued operations	4.5p	4.3p
Diluted earnings per share
From continuing operations	3.8p	1.2p
From discontinued operations	-	-
From continuing and discontinued operations	3.8p	1.2p
Adjustment for intangibles amortisation and impairment (continuing operations)	0.7p	0.8p
Adjustment for intangibles amortisation and impairment (discontinued operations)	-	-
Adjustment for exceptional items (continuing operations)	(0.4p)	2.1p
Adjustment for exceptional items (discontinued operations)	-	-
Adjustment for exceptional finance cost (continuing operations)	0.1p	-
Adjusted diluted earnings per share (continuing operations)	4.2p	4.1p
Adjusted diluted earnings per share (discontinued operations)	-	-
Adjusted diluted earnings per share from continuing and discontinued operations	4.2p	4.1p

* Includes outstanding share options granted to employees and warrants issued to the Company's banks.

Basic earnings per share is calculated using the weighted average number of shares in issue during the year, excluding those held by the ESOP, based on the profit for the year attributable to Ordinary Shareholders.

Adjusted earnings per share figures are given to exclude the effects of intangibles amortisation and impairment (excluding software amortisation), exceptional items and exceptional finance costs, all net of taxation, and are considered to show the underlying results of the Group.

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 dilutive potential Ordinary shares arising from warrants issued to the Company's banks and 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.

Potential Ordinary shares are dilutive at the profit from continuing operations level when their conversion to Ordinary shares would decrease earnings per share or increase loss per share from continuing operations.  Potential Ordinary shares have been treated as dilutive, as their inclusion in the diluted earnings per share calculation decreases 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 potential Ordinary shares outstanding at the balance sheet date if those transactions had occurred before the end of the reporting period.

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

8          DIVIDENDS

Ordinary dividends paid and proposed

		2011	2010
Dividend per share
Final dividend proposed		0.67p	-
Interim dividend paid		0.33p	0.27p
Final dividend paid		‑	0.55p

		2011	2010
		£m	£m
Shareholders' funds utilised
Final dividend proposed		1.6	-
Interim dividend paid		0.8	0.7
Final dividend paid		-	1.4

The Directors propose the payment of a final dividend in respect of the year ended 31st December 2011 of 0.67 pence per share.  This will utilise Shareholders' funds of £1.6 million and will be paid, subject to Shareholder approval, on 18th May 2012 to Shareholders on the register of members on 20th April 2012.  The trustee of the ESOP has waived the entitlement to receive dividends on the Ordinary shares held by the trust.  In accordance with IAS 10 there is no payable recognised at 31st December 2011 in respect of this proposed dividend.

9          RETIREMENT BENEFIT OBLIGATIONS

The Group has applied the requirements of IAS 19, 'Employee Benefits' (revised December 2004) to its employee pension schemes and post-retirement healthcare benefits.

As part of the Group's objective to reduce its overall pension liability, additional contributions of £1.2 million (of which £0.9 million related to the ETV exercise) and £0.3 million (2010: £1.3 million and £0.3 million) were paid to the Johnson Group Staff Pension Scheme ("Staff Scheme") and the WML Final Salary Pension Scheme respectively, during the period to 31st December 2011.  No additional contributions were paid to the Semara Augmented Pension Plan (2010: £nil).

Following discussions with the Group's appointed actuary it has been identified that an actuarial loss of £7.8 million (2010: loss of £1.5 million) should be recognised in the year to 31st December 2011.  This is as a result of the schemes' assets and liabilities performing differently to previous assumptions and changes to the assumptions used in calculating liabilities of the schemes.

The Company has decided to offer enhanced terms to certain categories of deferred members who choose to transfer their benefits out of the Staff Scheme by increasing the transfer value that would normally be payable by the Scheme Trustee. The 2011 exercise was rolled out to deferred members aged under 50: 532 members were offered the enhancement, 110 accepted, equating to some 35% take up by liability for this group of members.

During the year the retirement benefit obligations have reduced as a result of a reduction in liabilities due to a past service credit of £2.2 million, details of which are given in note 3.

The gross retirement benefit liability and associated deferred tax asset thereon, together with the net liability is shown below:

	2011 £m	2010 £m
Gross retirement benefit liability	20.2	16.8
Deferred tax asset thereon	(5.0)	(4.5)
Net liability	15.2	12.3

The reconciliation of the opening gross retirement benefit liability to the closing gross retirement benefit liability is shown below:

	2011 £m	2010 £m
Opening gross retirement benefit liability	16.8	20.4
Current service cost	0.5	0.5
Past service gain	(2.2)	(2.2)
Settlement loss	0.2	-
Notional interest	(0.7)	(0.8)
Employer contributions	(2.1)	(2.5)
Actuarial loss	7.8	1.5
Utilisation of healthcare provision	(0.1)	(0.1)
Closing gross retirement benefit liability	20.2	16.8

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

10        BUSINESS COMBINATIONS AND DISCONTINUED OPERATIONS

ACQUISITIONS

There were no acquisitions during the year. 

During 2010 the Group acquired seven Facilities Management contracts with six related special purpose companies from Jarvis Plc (in Administration).  In addition Johnsons Apparelmaster Limited acquired certain trade and assets from a small independent supplier of personal protective equipment.

There have been no changes to the values included within note 33 of the 2010 Annual Report in relation to these acquisitions.  The £0.2 million of professional fees relating to the Facilities Management acquisition in 2010 that were outstanding at 31st December 2010 has been paid during 2011.

DISPOSALS

There were no business disposals during the current or prior year.

On 15th December 2009 Workplace Engineering Limited disposed of its trade and certain assets for an initial cash consideration of £0.2 million.  A further £0.1 million of deferred consideration was received during 2010.

DISCONTINUED OPERATIONS

During the year £2.0 million of additional provisions were recognised relating to future lease commitments of properties previously used in operations that are now discontinued.   If not provided for these costs would have been incurred in future years.  No further provisioning is anticipated. The tax credit consists of £0.5 million relating to the above provisions together with £1.5 million relating to the refund of the de-grouping tax charge paid in respect of the disposal of the Corporatewear division in 2008.

	2011	2010
	£m	£m
Revenue from discontinued operations	-	-
Loss before taxation from discontinued operations	(2.0)	(0.2)
Taxation	2.0	0.1
Profit / (loss) for the period	-	(0.1)
Consideration (net of disposal costs)	-	0.1
Total net assets disposed of	-	-
Pre-tax gain on disposal	-	0.1
Taxation	-	-
Profit on disposal	-	0.1
Retained profit from discontinued operations	-	-

Cash flow from discontinued operations

The cash flows (excluding proceeds from disposal) from discontinued operations included within the Consolidated Statement of Cash Flows are as follows:

	2011	2010
	£m	£m
Net cash (used in) / generated from operating activities	(0.4)	(0.6)
Net cash used in investing activities	-	-
Net cash flow	(0.4)	(0.6)

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

11        ANALYSIS OF NET DEBT

Net debt is calculated as total borrowings less cash and cash equivalents (excluding Lifecycle funds), less unamortised facility fees.  Non-cash changes represent the effects of the recognition and subsequent amortisation of issue costs relating to the bank

facility, changing maturity profiles and new finance leases entered into during the year.

	At 1st January 2011	Cash Flow	Other Non-cash Changes	At 31st December 2011
	£m	£m	£m	£m
Cash and cash equivalents - per Statement of Cash Flows	(1.4)	6.2	-	4.8
Less: Lifecycle funds	(1.8)	0.5	-	(1.3)
Cash and cash equivalents (excluding Lifecycle funds)	(3.2)	6.7	-	3.5
Debt due within one year	(2.2)	3.0	(2.3)	(1.5)
Debt due after more than one year	(52.7)	1.0	1.2	(50.5)
Finance leases	(1.4)	0.7	(0.5)	(1.2)
	(59.5)	11.4	(1.6)	(49.7)

12        RECONCILIATION OF NET CASH INFLOW TO MOVEMENT IN NET DEBT

	2011	2010
	£m	£m
Increase / (decrease) in cash in year (per Statement of Cash Flows)	6.2	(1.6)
Movement in Lifecycle funds	0.5	(1.8)
Increase / (decrease) in cash excluding Lifecycle funds	6.7	(3.4)
Cash outflow on change in debt and lease financing	4.7	13.3
Change in net debt resulting from cash flows	11.4	9.9
Movement in unamortised issue costs of bank loans	(1.1)	(0.7)
New finance leases	(0.5)	(1.0)
Movement in net debt in year	9.8	8.2
Opening net debt	(59.5)	(67.7)
Closing net debt	(49.7)	(59.5)

13        EVENTS AFTER THE REPORTING PERIOD

Textile Rental Acquisition

On 23rd January 2012, Johnsons Apparelmaster Limited ("JAM") exchanged contracts relating to the acquisition of the business, specified contracts and related assets of Cannon Textile Care ("Cannon") from OCS Group UK Limited ("OCS") for a net consideration of approximately £6.1 million plus associated professional fees.  The contracts to be acquired are complementary to those currently serviced by JAM and will enable the combined business to deliver enhanced customer value whilst at the same time securing both future opportunities in our core markets and economies of scale.

Cannon currently operates its textile rental business from laundries based in Glasgow, Manchester, Bristol, Newmarket and Balham with additional depots in Gateshead and Birmingham.  OCS will continue to operate their washroom services business under the Cannon Hygiene brand.

The acquisition is conditional on a number of points including clearance from the Office of Fair Trading.  There is also a right of rescission by either party if there is a material adverse change in the business prior to completion or if regulatory clearance has not been received by 29th May 2012.  It is currently anticipated that the transaction will be completed at the end of March 2012.

The net consideration for the business and assets was based on the estimated contracted annual revenue of £15.0 million at the time of exchange of contracts.  The consideration will be adjusted, up or down, to reflect the actual contracted revenue at the date of completion, although this is not expected to change significantly.  The consideration will be payable in cash at completion and funded from the existing debt facility.

The revenue and operating profit relating to the business and assets to be acquired as included in the accounts for OCS for the year ended 31st March 2011 were £16.5 million and £0.2 million respectively.

On completion, JAM will operate the existing Cannon Laundries whilst reviewing the combined business structure.  It is anticipated that any expected operational efficiencies and economies of scale from the business going forward will take some time to be fully realised, and accordingly, the transaction is not expected to have an impact on adjusted operating profit (before intangibles amortisation and exceptional items) for the year ending December 2012 but is expected to be accretive thereafter.

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

13        EVENTS AFTER THE REPORTING PERIOD (continued)

Facilities Management Acquisition

On 14th February 2012, SGP Property & Facilities Management Limited ("SGP") acquired specified contracts and assets of Nickleby & Co. Limited ("Nickleby") for an initial consideration of £0.75 million plus associated professional fees.

Nickleby is a technology led facilities management and consultancy company, employing circa 40 staff based in Basingstoke managing services to a range of customers across the UK, particularly in the insurance and multi site retail sectors.  Its bespoke "Emergense" software is market leading in the management of supply chains which, when combined with SGP's bespoke "Horizon" and "Focas" systems, will create an IT platform unique in the FM market.

The initial consideration was payable in cash on completion with a further £0.2 million of deferred consideration potentially payable in 2012, subject to performance against certain integration parameters.  Contingent payments of up to a further £5.0 million are potentially payable based on the level of additional gross profit achieved from specified existing and potential customers of Nickleby ("Relevant Contracts"), and will be financed from the additional cumulative gross profit generated by the combined business on the Relevant Contracts over the four year period to December 2015.  The contingent payments are self financing in cash terms, with only the remaining net 50% of gross profit earned being reflected in the Group results.

There is a real synergy in bringing the SGP and Nickleby businesses together.  Both are focused on designing, managing and delivering facilities management and property solutions through the intelligent use of technology and this acquisition allows us the opportunity to firmly establish a true market leading position.

The revenue attributable to the contracts acquired and as included in Nickleby's draft statutory accounts for the year to 31st March 2011 was £3.3 million.

Due to the short period of ownership a full post acquisition fair value exercise has yet to be completed.

Integration Costs

The estimated costs of integrating both acquisitions are approximately £2.3 million, which will be treated as an exceptional item in 2012.

14        ABRIDGED ACCOUNTS

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31st December 2011 or 31st December 2010 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts.

Statutory accounts for 2010 have been delivered to the Registrar of Companies, and those for 2011 will be delivered as soon as practicable but not later than 30th April 2012.  The Auditor has reported on those accounts; the reports were unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

15        FORWARD LOOKING STATEMENTS

Certain statements in this Preliminary Announcement are forward-looking. The terms 'expect', 'should be', 'will be' 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 expressed or implied by these forward-looking statements.

16        PRELIMINARY ANNOUNCEMENT

A copy of this Preliminary Announcement is available on request to all Shareholders by post from The Company Secretary, Johnson Service Group PLC, Johnson House, Abbots Park, Monks Way, Preston Brook, Cheshire WA7 3GH.  The Announcement can also be accessed on the Internet at www.johnsonplc.com.

The Annual Report will be posted to Shareholders on or before 16th March 2012.

17        APPROVAL

The Preliminary Announcement was approved by the Board of Directors on 6th March 2012.

 

END

 

 

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