Open offer

RNS Number : 7275A

Johnson Service Group PLC

06 August 2008

For Immediate Release

Johnson Service Group PLC (the 'Company' or the 'Group')

6 August 2008

Open Offer of up to 49,945,035 new Ordinary Shares at 20 Pence Per Share

Appointment of Chairman

Highlights

The Group today announces a conditional Open Offer of up to 49,945,035 Open Offer Shares at 20 pence per share to raise up to £10.0 million (approximately £9.0 million net of expenses).

On 11 June 2008, the Company announced a conditional non pre-emptive placing to institutional and other professional investors of 150,000,000 new Ordinary Shares at 20 pence per Ordinary Share to raise £30 million (approximately £27.8 million net of expenses). The Placing duly completed on 7 July 2008 and the net proceeds were principally used to reduce the most expensive tranche of the Company's bank debt. The Placing represented approximately 252.2 per cent. of the then existing issued share capital of the Company and approximately 71.6 per cent. of the Existing Issued Ordinary Share Capital.

The principal reason for making the Open Offer is to provide Qualifying Shareholders who did not participate in the Placing an opportunity to invest in the Company at the same price at which the Placing Shares were issued and to mitigate the dilutive effects of the Placing. Assuming full take up of the Open Offer, the Open Offer Shares will represent approximately 23.8 per cent. of the Existing Issued Ordinary Share Capital and 19.3 per cent. of the Enlarged Ordinary Share Capital.

The minimum pro rata entitlement of Qualifying Shareholders and Warrantholders under the Open Offer will be calculated on the following basis:

8 Open Offer Shares for every 10 Ordinary Shares or

entitlement to 10 Warrant Shares (as the case may be) held on the Record Date

and so in proportion for any greater or lesser number of Qualifying Ordinary Shares or entitlement to Warrant Shares (as the case may be) then held.

Excess applications may be made and, if appropriate, will be scaled down in such manner as the Directors determine, in their absolute discretion. It is intended that excess applications will be satisfied pro rata (or as nearly as practicable) to the relevant holder's Basic Entitlement.

Shareholders should note that the 150,000,000 Placing Shares issued by the Company on 7 July 2008 pursuant to the Placing do not carry the right to participate in the Open Offer. The Placing Shares were issued credited as fully paid and rank pari passu with the Existing Ordinary Shares (including the right to receive all dividends or other distributions declared, made or paid thereon following Admission) except that the Placing Shares do not carry the right to participate in the Proposed Open Offer. The Placing Shares will continue to trade on AIM with a separate distinct stock line until 8.00 a.m. on 7 August 2008 when they will merge with the Existing Ordinary Shares on ISIN GB0004762810.

Each of the Executive Directors currently intends to at least take up their Basic Entitlement under the Open Offer.

Given the strong management in the Group's three divisions, the Directors have decided that the appropriate Board structure in the future will be for the Group to be led by an Executive Chairman. In view of this and following the successful restructuring of the finances of the Group over the last seven months, Simon Sherrard will be stepping down as Chairman on 8 September 2008 (being the date of Admission of the Open Offer Shares to trading on AIM) and John Talbot will assume the position of Executive Chairman.

Simon Sherrard, Chairman of Johnson Service Group, commented:

'Following the successful Placing to raise £30 million which completed on 7 July 2008 I am delighted to now announce an Open Offer to provide Qualifying Shareholders an opportunity to invest in the Company at the same price as the Placing was effected.

'I leave Johnson Service Group in very capable hands with a very strong management team led by John Talbot. The Board intends to exploit the opportunities for growth in all three of the Group's divisions while ensuring that the Group continues to generate acceptable levels of cash. The Board therefore views the future prospects of Johnson Service Group with confidence.

'I would like to wish John, the Board and the Company every success in the future'.

Enquiries:

Johnson Service Group PLC	020 7796 4133
Simon Sherrard, Chairman
John Talbot, Chief Executive

Investec (Nomad to Johnson Service Group)	020 7597 5000
Erik Anderson
Michael Lacey-Solymar
Martin Smith

Hudson Sandler	020 7796 4133
Michael Sandler
Wendy Baker
Fran Read

This summary should be read in conjunction with the full text of the following announcement.

This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities. This document provides you with information about the Open Offer, but does not invite you to participate in it.

Investec, which is authorised and regulated in the UK by the Financial Services Authority, is acting for Johnson Service Group PLC and for no one else in connection with the conditional Open Offer and will not be responsible to anyone other than Johnson Service Group PLC for providing the protections afforded to clients of Investec nor for providing advice to any other person in relation to the Open Offer.

Johnson Service Group PLC (the 'Company' or the 'Group')

(Incorporated and registered in England and Wales under the Companies Act 1948

with registered number 523335)

Open Offer of up to 49,945,035 new Ordinary Shares at 20 pence per Share

Introduction

The Company announces today that it proposes to raise up to approximately £10 million (up to approximately £9.0 million net of expenses) by way of an open offer made to Qualifying Shareholders and Warrantholders of up to 49,945,035 Open Offer Shares at the Issue Price of 20 pence per Open Offer Share.

The minimum pro rata entitlement of Qualifying Shareholders and Warrantholders under the Open Offer will be calculated on the following basis:

8 Open Offer Shares for every 10 Ordinary Shares or

entitlement to 10 Warrant Shares (as the case may be) held on the Record Date

and so in proportion for any greater or lesser number of Ordinary Shares or entitlement to Warrant Shares (as the case may be) held on the Record Date. Entitlements of Qualifying Shareholders and warrantholders will be rounded down to the nearest whole number of Open Offer Shares. Fractions of Open Offer Shares will be disregarded in the calculation of Qualifying Shareholders' and Warrantholders' Basic Entitlement and will be aggregated and made available to Qualifying Shareholders and Warrantholders under the Excess Application Facility.

Application will be made to the London Stock Exchange for the Open Offer Shares to be admitted to trading on AIM. Subject to, among other things, Admission, it is expected that dealings in the Open Offer Shares will commence at 8.00 a.m. on 8 September 2008.

Background to and Reasons for the Open Offer

On 11 June 2008, the Company announced a conditional non pre-emptive placing to institutional and other professional investors of 150,000,000 Ordinary Shares at 20 pence per Ordinary Share to raise £30 million (approximately £27.8 million net of expenses). The Placing duly completed on 7 July 2008. The Placing represented approximately 252.2 per cent. of the then existing issued share capital of the Company and approximately 71.6 per cent. of the Existing Ordinary Share Capital.

The principal reason for making the Open Offer is to provide Qualifying Shareholders an opportunity to invest in the Company at the same price at which the Placing Shares were issued and to mitigate the dilutive effects of the Placing. Assuming full take-up of the Open Offer, the Open Offer Shares will represent approximately 23.8 per cent. of the Existing Ordinary Share Capital and 19.3 per cent. of the Enlarged Ordinary Share Capital.

The Open Offer is also being made to provide Qualifying Shareholders and Warrantholders with an opportunity to inject additional financial resources into the Group. The Open Offer is not being underwritten so there can be no guarantee that the Open Offer Shares will be taken-up by Qualifying Shareholders or Warrantholders and therefore no guarantee that any funds will be raised by the Company pursuant to the Open Offer. The Directors believe the Group has sufficient financial resources for the period of at least 12 months from the date of this announcement and is well positioned to continue to trade satisfactorily in the event that no proceeds are raised pursuant to the Open Offer. However, 50 per cent. of any net proceeds raised from the Open Offer would be used to repay and cancel bank debt drawn down under the fourth (and most expensive) tranche of the Facility Agreement. The background to Group's bank debt position is set out below.

On 11 April 2008 the Company announced the signing of both the Johnson Clothing Sale Agreement and the new debt facilities under the Facility Agreement. The facilities under the Facility Agreement comprised four separate tranches, the current status of each is summarised below:

The first tranche was a £65 million term loan used to bridge a portion of the proceeds from the Johnson Clothing Disposal. The first tranche, together with accrued interest thereon, was repaid in full by the Company on 29 April 2008 out of the Company's cash resources and the proceeds of the Johnson Clothing Disposal.

The second tranche is a £65 million amortising term loan. The applicable rate of interest is LIBOR plus 2.5 per cent. per annum. An amount of £2 million will be repayable on 30 June 2009, with further repayments quarterly thereafter. The final repayment date of this tranche is 31 December 2010.

The third tranche is an amortising revolving credit facility with an initial amount of £25 million to be used for general corporate purposes, £5 million of which will be provided by way of an overdraft. The applicable rate of interest is LIBOR plus 2.5 per cent. per annum. The final repayment date of this tranche is 31 December 2010. The amount available to the Company under this tranche will reduce to £22.5 million on 30 June 2009 and then to £20 million on 31 December 2009.

The fourth tranche is a £50 million non-amortising term loan used to refinance previous indebtedness of the Group. Following completion of the Placing, the Group, on 8 July 2008, repaid and cancelled £26.4 million (together with capitalised accrued interest of approximately £381,000) of debt drawn under the fourth tranche. Following that repayment and cancellation, the applicable rate of interest on the remaining debt (plus capitalised accrued interest) of £23.9 million drawn under the fourth tranche is LIBOR plus 4 per cent. per annum. The final repayment date of this fourth tranche is 31 December 2010.

As at 25 July 2008 (being the latest practicable date prior to the publication of this document) the Group's net debt stood at approximately £90.7 million.

Following the repayment and cancellation by the Group of £26.4 million of the fourth (and most expensive) tranche described above, a number of terms of the Facility Agreement were adjusted in favour of the Company including:

the removal of certain restrictions on the Company's ability to pay dividends contained in the Facility Agreement;

the removal of any right of the lenders to appoint an observer to attend meetings of the Board; and

the ability thereafter to offset any subsequent prepayments of the facilities against the fourth tranche in priority to the second.

Accordingly, under the Facility Agreement, the Company may now declare and pay dividends to Shareholders out of distributable reserves provided that the Company is not in default under the Facility Agreement at the time such dividend is paid and that the Company would reasonably be expected not to be in default under the Facility Agreement in the 12 month period following the date of such payment. The Company is required to provide projections satisfactory to the Facility Agent (acting reasonably) evidencing this. Further details of the Company's proposed dividend policy are set out in this announcement.

The Company has agreed with its lending banks that 50 per cent. of any net proceeds of the Open Offer will be used to repay and cancel further bank debt drawn down under the fourth (and most expensive) tranche of the Facility Agreement as described above. The remaining 50 per cent. of the net proceeds of the Open Offer will be used for the purposes set out in the Prospectus to shareholders published on 6 August 2008.

On this basis, the Directors believe that the Open Offer is in the best interests of the Company and Shareholders as a whole.

Information on Johnson Service Group

Johnson Service Group is a holding company whose shares are traded on AIM. Johnson Service Group's core businesses are in the textile rental, facilities management and drycleaning sectors.

Textile Rental division

The Group's Textile Rental division, comprising Johnsons Apparelmaster and Stalbridge Linen Services, offers a wide range of workwear and hygiene services including garment and linen rental and cleaning, serving customers across a wide range of industries. In addition, it offers a web-based direct sales system for the supply of workwear for customers who wish to purchase rather than rent garments.

Facilities Management division

SGP Property & Facilities Management (formerly Johnson Facilities Management) offers truly integrated property, building and facilities management services to retail, corporate and public sector clients, managing annual spend and value of £1.2 billion across over 50,000 locations throughout the UK and Republic of Ireland. The division also includes Workplace Engineering, which supplies specialist mechanical and

electrical engineering services.

Drycleaning division

Johnsons Cleaners is the UK's number one drycleaners with a network of conveniently located stores nationwide. Johnsons Cleaners is a leader in drycleaning and specialist textile and garment aftercare services. In addition, Jeeves of Belgravia is a respected luxury drycleaning brand offering premium quality services to customers including haute couture houses, a wide range of City and bespoke-service-seeking individuals and is the holder of a Royal Warrant. The division also includes Alex Reid, which supplies consumables and drycleaning machines to the UK drycleaning and related markets.

Group

On 29 April 2008, Johnson Service Group announced its results for the year ended 31 December 2007. In the year ended 31 December 2007, Johnson Service Group recorded consolidated revenue of £406.1 million (2006: £410.9 million and 2005: £422.2 million), a consolidated operating loss of £38.1 million (2006: operating profit of £23.7 million and 2005: operating profit of £34.4 million) and consolidated adjusted operating profit of £30.1 million (2006: £34.9 million and 2005: £37.8 million) (prepared in accordance with IFRS). For the purposes of this paragraph, adjusted operating profit is operating profit before amortisation and impairment of intangible assets (excluding software amortisation) and exceptional items. The IFRS financial information, set out in the Prospectus published on 6 August 2008, for the years ended 31 December 2007 and 31 December 2006 has been extracted without material adjustment from the audited consolidated financial statements of the Company for those years. The IFRS financial information set out in this paragraph for the year ended 31 December 2005 has been extracted without material adjustment from the unaudited comparatives for 2005 included in the 2006 annual report and accounts.

Details of the Open Offer

The Company is proposing to raise up to approximately £10 million (before expenses) pursuant to the Open Offer. The Issue Price is 20 pence per Open Offer Share.

Pursuant to the Open Offer Agreement, the Company has appointed Investec as agent to make the Open Offer to Qualifying Shareholders and Warrantholders. The Open Offer has not been underwritten.

The Open Offer provides Qualifying Shareholders and Warrantholders with the opportunity to apply to acquire any number of Open Offer Shares at the Issue Price per Open Offer Share. Qualifying Shareholders and Warrantholders have a guaranteed minimum entitlement on the following basis:

8 Open Offer Shares for every 10 Qualifying Ordinary Shares or

entitlement to 10 Warrant Shares (as the case may be) held on the Record Date

and so in proportion for any greater or lesser number of Qualifying Ordinary Shares or entitlement to Warrant Shares (as the case may be) then held. Entitlements of Qualifying Shareholders and Warrantholders will be rounded down to the nearest whole number of Open Offer Shares. Fractions of Open Offer Shares will be disregarded in the calculation of Qualifying Shareholders' and Warrantholders' Basic Entitlement and will be aggregated and made available to Qualifying Shareholders and Warrantholders under the Excess Application Facility.

The Excess Application Facility enables Qualifying Shareholders and Warrantholders to apply to acquire any whole number of Open Offer Shares in excess of their Basic Entitlement which, in the case of Qualifying Non-CREST Shareholders and Warrantholders, is equal to the number of Open Offer Entitlements as shown on their Non-CREST Application Form or, in the case of Qualifying CREST Shareholders, is equal to the number of Open Offer Entitlements standing to the credit of their stock account in CREST.

Qualifying Shareholders with holdings of Qualifying Ordinary Shares in both certificated and uncertificated form, or with holdings under different designations, will be treated as having separate holdings for the purpose of calculating their Basic Entitlements under the Open Offer.

Excess applications may be scaled down in such manner as the Directors determine, in their absolute discretion. It is intended that excess applications will be satisfied pro rata (or as nearly as practicable) to the relevant holder's Basic Entitlement. The aggregate number of Open Shares available for acquisition under the Open Offer will not exceed 49,945,035 Open Offer Shares.

Application has been made for the Open Offer Entitlements to be admitted to CREST. It is expected that the Open Offer Entitlements will be admitted to CREST on 7 August 2008. The Open Offer Entitlements will also be enabled for settlement in CREST on 7 August 2008. Applications through the CREST system may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim or by CREST Warrantholders.

Shareholders should note that the Open Offer is not a rights issue. Qualifying CREST Shareholders should note that, although the Open Offer Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of entitlements under the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim raised by Euroclear's claims processing unit or by a CREST Warrantholder. Qualifying non-CREST Shareholders and Warrantholders should note that the Non-CREST Application Form is not a negotiable document and cannot be traded. Qualifying Shareholders and Warrantholders should be aware that in the Open Offer, unlike in a rights issue, any Open Offer Shares not applied for will not be sold in the market or placed for the benefit of Qualifying Shareholders or Warrantholders who do not apply under the Open Offer.

The Open Offer is conditional, among other things, on:

the Open Offer Agreement becoming or being declared unconditional in all respects and not being terminated in accordance with its terms; and

Admission.

If the Open Offer does not become unconditional, no Open Offer Shares will be issued, and all monies received by the Receiving Agent will be returned to applicants, at the applicants' risk and without interest, as soon as practicable by way of cheque, in favour of the first named applicant, by post to the address set out in the Non-CREST Application Form, or CREST payment, as appropriate. Any Open Offer Entitlements

admitted to CREST will thereafter be disabled.

The Open Offer Shares will, following allotment and issue, rank pari passu in all respects with the Existing Ordinary Shares, including the entitlement to receive dividends or other distributions declared, made or paid after the date of issue of the Open Offer Shares. The Open Offer Shares will be issued only pursuant to the Open Offer and will not otherwise be marketed or made available in whole or in part to the public.

Use of the Open Offer Proceeds

As at 29 February 2008, the Group's net debt was approximately £181 million. Following completion of the Johnson Clothing Disposal, the Group repaid £65 million (together with accrued interest on that amount) of debt drawn under the first tranche of the Facility Agreement on 29 April 2008. On 8 July 2008, following completion of the Placing, the Group repaid an additional £26.4 million (together with capitalised accrued interest of approximately £381,000) of debt drawn under the fourth (and most expensive) tranche of the Facility Agreement. As at 25 July 2008 (being the last practicable date prior to the publication of the Prospectus) the Group's net debt stood at approximately £90.7 million.

The Open Offer is not being underwritten so there can be no guarantee that the Open Offer Shares will be taken up by Qualifying Shareholders or Warrantholders and therefore no guarantee that any proceeds will be raised by the Company pursuant to the Open Offer. However, 50 per cent. of any net proceeds of the Open Offer will be used to repay and cancel further bank debt drawn under the fourth (and most expensive) tranche of the Facility Agreement as described above. The Directors believe that the Open Offer may therefore lead to a significant further reduction in the Group's most expensive debt liabilities under the Facility Agreement thereby freeing up more of the Group's cash resources to be deployed in support of the Directors' strategy for growth.

The Company has obtained consent from its lending banks to apply if the Company so wishes, the remaining 50 per cent. of the net proceeds of the Open Offer to capital expenditure. The Directors currently intend to apply a portion of such remaining proceeds to enhance the Group's capital expenditure on the Drycleaning division with a view to strengthening the Drycleaning division's growth potential following a period of underinvestment. Depending on the amount of proceeds raised by the Open Offer, the Directors would like to apply modest amounts to expenditure on certain of the Group's freehold and leasehold properties to enhance disposal or subletting opportunities or to reduce future cash outlays or provisions for maintenance. Finally, the Directors intend to retain a portion of any remaining proceeds to give the Group a greater degree of flexibility to take advantage of business opportunities which may present themselves.

The Directors believe the Group has sufficient financial resources for the period of at least 12 months from the date of this announcement and is well positioned to continue to trade satisfactorily in the event that no proceeds are raised pursuant to the Open Offer.

Impact of the Open Offer on Warrantholders and Optionholders

Warrantholders

As the Open Offer is being made to Warrantholders in addition to Qualifying Shareholders, the antidilution provisions of the Warrant Instrument will not operate. Accordingly, no adjustment will be made to the number of Ordinary Shares in respect of the outstanding Warrants as a result of the Open Offer.

Optionholders

Options are currently outstanding under the following Employee Share Schemes:

the Savings-Related Scheme; and

the Unapproved Scheme.

Under the Savings-Related Scheme and the Unapproved Scheme, the Board has discretion to adjust the number of Ordinary Shares under option and the option price payable in connection with the Open Offer. However, the Board has resolved that no adjustment to the number of Ordinary Shares under option and the option price payable will be made in connection with the Open Offer.

As at 5 August 2008 (being the latest practicable date prior to the publication of this document), 1,070,853 options are outstanding under the Savings-Related Scheme and 677,595 options are outstanding under the Unapproved Scheme.

Senior Management Incentives

It is intended that the Managing Directors of the Textile Rental and Drycleaning divisions will be incentivised by reference to a combination of their respective divisional performance and by an award of share options. The Managing Director of the Facilities Management division will be incentivised by reference solely to his divisional performance.

Textile Rental and Drycleaning divisions

It is proposed that the Managing Directors of each of the Textile Rental and Drycleaning divisions will be eligible for a long-term cash bonus the amount of which will be linked to the profitability of their respective divisions from 2008 to the end of 2012. The Managing Directors will be entitled to a percentage of the average profit of the latter years of the period (adjusted for inflation) of their respective division, but capped at an overall percentage of the cumulative excess profit (or loss) over the whole five year period. The Managing Directors have also been granted options under the Company's Unapproved Scheme which will deliver specific returns for them if the Company's total shareholder return over a three year performance period achieves certain pre-determined levels. These awards are in addition to an annual cash bonus plan.

Facilities Management division

The proposal for the Managing Director of the Facilities Management division is a cash bonus plan, under which the reward will be linked to the increase in value of the division from 1 January 2008 until the occurrence of the earlier of a number of specified vesting events. A vesting event will occur on a listing or sale of the business (or comparable event) or on finalisation of the Facilities Management division's results for the two years ending 31 December 2011. The increase in notional value of the division will be determined as the increase at the time of vesting over an agreed base value of £35 million. The Managing Director will receive a bonus payment calculated on a scaled percentage ranging from 4 to 8 per cent. of the increase in value of the division. Payment of the bonus will be subject to normal good and bad leaver provisions.

Impact of the Senior Management incentives on Warrantholders

Options granted to Senior Management under the Company's Unapproved Scheme will not trigger an adjustment event in relation to the Warrants described in this announcement. However, the vesting of awards granted under the Company's LTGP will trigger an adjustment event in relation to any Warrants that remain in existence at that time.

Future Plans for the Group

Following completion of the Johnson Clothing Disposal on 28 April 2008, the Group has three distinct divisions, each with a strong share in its respective market. Each division is run by an experienced Managing Director who is, in the Board's opinion, appropriately incentivised to grow his division over the medium term.

Following the Group Refinancing and the reduction in the Group's debt levels achieved through the Johnson Clothing Disposal, and the successful completion of the Placing, the Group has stabilised its financial footing for the medium term and can start to look to, and plan for, the future with restored confidence. In addition, the Group will apply 50 per cent. of any net proceeds from the Open Offer to repay and cancel further bank debt drawn down under the fourth (and most expensive) tranche of the Facility Agreement.

The Board considers that, regardless of the level of take-up of the Open Offer Shares, the Group has sufficient financial reserves to satisfy all repayment and interest obligations under the Facility Agreement as they fall due for the period of at least 12 months from the date of this document.

Looking forward, the Board intends to exploit the opportunities for growth in all three of the Group's divisions while ensuring that the Group continues to generate acceptable levels of cash. The Board therefore views the future prospects of the Group with confidence.

Trends in Current Trading and Prospects

The Company

The Company published its preliminary results for the year ended 31 December 2007 on 29 April 2008 and posted its 2007 annual report and accounts to Shareholders on 13 May 2008. The Company continues to trade in line with the Directors' expectations.

Textile Rental division

The Group's Textile Rental division is continuing to improve efficiencies as the Johnsons Apparelmaster and Stalbridge Linen Services businesses work more closely together.

The Workwear rental business started the 2008 trading year with contracted revenues ahead of its forecast and with new sales performing ahead of budget for the first six months of the year. There has been no visible impact of the general downturn in the UK economy on the business at this stage. However, it is anticipated that there may be an increased exposure to receiverships/liquidations in the latter part of the year if the economic pressures continue. The Stalbridge Linen Services business is performing in line with the reorganisation plan and further benefits are expected when the business moves away from the very expensive enterprise resource planning systems and support to the more cost effective Johnsons Apparelmaster information technology platforms. Trading is in line with current budgets despite the increases in fuel and energy costs which to date have been absorbed through improved operational efficiencies. However, in line with the UK economy as a whole there is a degree of uncertainty as regards future energy pricing, and therefore the Group is continuing to focus on energy saving initiatives.

Facilities Management division

The Facilities Management division is trading in line with the Directors' expectations and is pursuing a number of potential new contracts in the retail, leisure, public and commercial sectors.

The SGP Property and Facilities Management business is trading overall in line with the Directors' expectations and met its budget targets for the six month period to 30 June 2008. A strong performance by the facilities management business combined with cost savings across the division helped offset the impact of the downturn in demand for project management, building and mechanical and electrical services.

The division is currently in the final stages of negotiating a new contract with a national high street chain. Negotiations are expected to be finalised in the near future with the contract, if successfully concluded, becoming earnings enhancing and cash generative at the start of the 2009 financial year. The division is also preferred bidder for a number of other potential contracts which, if successfully concluded, are expected to be earnings enhancing from the fourth quarter of the 2008 financial year.

Drycleaning division

Despite the challenges currently affecting the consumer in the UK, the Drycleaning division is trading satisfactorily and continuing to introduce new services into selected outlets. The division is trading broadly in line with the Group's and divisional management's expectations and this is anticipated to continue for the second half of the year to 31 December 2008. Like for like sales for the six month period to 30 June 2008 were 3.1 per cent. lower compared to the same period in 2007. Sales for the six month period to 30 June 2007 predated the introduction of the ban on smoking in enclosed public places in England on 1 July 2007 which affected sales in the second half of 2007.

Given the current economic climate, it is not possible to be certain about the Group's trading prospects. However, like for like sales in the second half of 2008 may be impacted by the current economic downturn but are currently still expected to be positive compared to the same period in 2007. In addition the Group has a number of initiatives in place to help mitigate against the effects of an economic downturn. One of the most significant trends in the current operating environment is the shift from consumers preferring to use high street outlets to more convenient drive-in locations, typically at out of town retail parks or on supermarket premises. Given the division's size and national coverage, the Directors consider the division well placed to leverage strong relationships with large retailers and supermarkets and secure an increasing number of these high quality sites. In addition to actively increasing the quality of the estate's locations, the Directors are looking to grow revenues by increasing fabric restoration and professional ironing services in their current outlets.

Cost of incentive arrangements

The Group has introduced the LTGP and new incentive arrangements for Senior Management, comprising a combination of cash bonuses and an award of options over Ordinary Shares, described in this announcement. The cost to the Company of awards under the LTGP and awards over Ordinary Shares under the arrangements for Senior Management is expected to be approximately £400,000 for the 2008 financial year and approximately £800,000 for the 2009 financial year. The cost of the cash bonuses under the arrangements for Senior Management will depend on the respective performance of each division as set described in the Prospectus published on 6 August 2008.

Exceptional costs

The Company has previously stated in its 2007 preliminary results presentation that it expects the Group's exceptional costs for the 2008 financial year to be in the region of £11 million. On the basis of the information currently available to the Group, exceptional costs for the 2008 financial year are now expected to be in the region of £10 million, offset by exceptional credits of £2.5 million. These costs are largely comprised of restructuring costs associated with the re-negotiation of the Group's debt facilities, including exceptional fees incurred on the negotiation of the Facility Agreement, with its lending banks. Also included in the exceptional items is a credit in respect of the settlement of a litigation claim at a lower amount than was originally provided for. The benefit to the Group of this revised settlement is expected to be at least £1.0 million. In addition, the Group expects to incur exceptional finance costs of approximately £0.9 million, which are in respect of the accelerated amortisation of facility fees, leaving an unamortised balance of £1.1 million which will be amortised within finance costs through to December 2010, being the term of the Facility Agreement.

Exceptional costs of approximately £7.0 million have been incurred in the six month period to 30 June 2008. Exceptional credits in the same period are approximately £2.0 million and the Group has also incurred exceptional finance costs of approximately £0.7 million.

On the basis of the information currently available to the Group, net exceptional items for the second half of 2008 are expected to be approximately £2.7 million, which includes £0.2 million of exceptional finance costs.

It should be noted that the figures provided above do not include the professional fees and other costs associated with the Open Offer. These costs, currently estimated to be up to £1.0 million, will be payable in full regardless of the level of take-up of the Open Offer Shares.

Costs incurred in connection with the Johnson Clothing Disposal have been deducted from the proceeds of sale and those in connection with the Placing have been deducted from the Placing proceeds.

Dividend Policy

Following the repayment of bank debt as described in this announcement, certain restrictions on the Company paying dividends to Shareholders imposed on the Company under the Facility Agreement have been lifted. Accordingly, the Company intends to adopt a new dividend policy which will reflect the long term earnings and cashflow potential of the Company, while maintaining an appropriate level of dividend cover. Subject to the foregoing, it is envisaged that the Company will commence the payment of an interim and a final dividend for the financial year ending 31 December 2009.

The payment of a dividend in the future is dependent on a number of factors including the availability of distributable reserves within the Company. To assist with the Company's distributable reserves planning, the Placing was structured in a way which is expected to have the effect of creating additional distributable reserves of £12.8 million being equal to the net proceeds of the Placing less the par value of the Placing Shares issued by the Company.

To further enhance the Company's distributable reserves position, the Open Offer has been structured in the same way as the Placing which is expected to have the effect of creating further distributable reserves equal to the net proceeds of the Open Offer less the par value of the Open Offer Shares issued by the Company. Assuming full take-up of the Open Offer, the Open Offer is expected to have the effect of creating additional distributable reserves of approximately £4.5 million.

In the future, it should be possible for the Company to declare dividends from the distributable reserves created, provided that the Company has sufficient cash resources to fund such dividends, the distributable reserves have not otherwise been reduced, and the Directors consider it appropriate to declare such dividends.

The Company is continuing to review its reserves position and intends to take such further action as is necessary so as to facilitate dividend payments as set out above.

Directors' and Senior Management's Intentions in Relation to the Open Offer

On 29 April 2008, following the refinancing of the Company's bank facilities and completion of the Johnson Clothing Disposal, each of the Directors took the opportunity to invest further in the Company by making market purchases of an aggregate of 983,552 Ordinary Shares at 21.16 pence per Ordinary Share. In addition, on 15 May 2008, Kevin Elliott made a market purchase of 132,270 Ordinary Shares at 30 pence per Ordinary Share and on 8 July 2008, Christopher Sander made a market purchase of 55,000 Ordinary Shares at 17.6 pence per Ordinary Share.

Details of these market purchases were announced by the Company at the relevant time. In addition, in order to enable John Talbot to maintain the required minimum shareholding in the Company for the purposes of the LTGP, he was permitted to participate in the Placing and as a result acquired a further 1,500,000 Ordinary Shares in the Company at 20p per Ordinary Share.

As at 5 August 2008 (being the latest practicable date prior to the publication of this document), the Directors and Senior Management's current intentions in relation to the Open Offer were as follows:

(a) Simon Sherrard owns 276,294* Qualifying Ordinary Shares, representing approximately 0.47 per cent. of the Qualifying Ordinary Shares, and currently intends to apply to acquire at least his entire Basic Entitlement amounting to 221,035 Open Offer Shares and costing £44,207 at the Issue Price.

*of which 236,294 are held directly by him, 35,000 are held in the name of Redmayne (Nominees) Limited as nominee on his behalf and 5,000 are held in the name of Lloyds Nominees Limited as nominee on behalf of his wife.

(b) John Talbot owns 635,000 Qualifying Ordinary Shares, representing approximately 1.07 per cent. of the Qualifying Ordinary Shares, and currently intends to apply to acquire at least his entire Basic Entitlement amounting to 508,000 Open Offer Shares and costing £101,600 at the Issue Price.

(c) Yvonne Monaghan owns 28,791** Qualifying Ordinary Shares, representing approximately 0.05 per cent. of the Qualifying Ordinary Shares, and intends to apply to acquire at least her entire Basic Entitlement amounting to 23,032 Open Offer Shares and costing £4,606 at the Issue Price. If the market price per Ordinary Share at the time she makes her application is around or greater than the Issue Price, she intends to apply for Excess Open Offer Shares in addition to her Basic Entitlement.

**of which 20,200 are held directly by her and 8,591 are held by her husband.

(d) Michael Gatenby owns 30,000 Qualifying Ordinary Shares, representing approximately 0.05 per cent. of the Qualifying Ordinary Shares, and currently intends to apply to acquire his entire Basic Entitlement amounting to 24,000 Open Offer Shares and costing £4,800 at the Issue Price.

(e) Baroness Wilcox owns 58,383 Qualifying Ordinary Shares, representing approximately 0.1 per cent. of the Qualifying Ordinary Shares, and currently intends to participate in the Open Offer but has yet to decide the level of her participation.

(f) Michael Del Mar owns 26,000*** Qualifying Ordinary Shares, representing approximately 0.04 per cent. of the Qualifying Ordinary Shares, and currently intends to apply to acquire at least his entire Basic Entitlement amounting to 20,800 Open Offer Shares and costing £4,160 at the Issue Price.

*** of which 20,000 are held directly by him and 6,000 are held by his wife.

(g) Chris Sander owns 59,085 Qualifying Ordinary Shares, representing approximately 0.1 per cent. of the Qualifying Ordinary Shares. He has not yet decided his intention in relation to the Open Offer.

(h) Kevin Elliot owns 132,270**** Qualifying Ordinary Shares, representing approximately 0.22 per cent. of the Qualifying Ordinary Shares, and currently intends to apply to acquire his entire Basic Entitlement amounting to 105,816 Open Offer Shares and costing £21,163 at the Issue Price.

****all of which are held in the name of TD Waterhouse Nominees (Europe) Limited as nominee on his behalf.

(i) Paul Ogle owns 2,547 Qualifying Ordinary Shares, representing approximately 0.004 per cent. of the Qualifying Ordinary Shares, and currently intends to apply to acquire his entire Basic Entitlement amounting to 2,037 Open Offer Shares and costing £407.40 at the Issue Price. In addition, he also intends to apply for 7,963 Excess Open Offer Shares costing £1,592 at the Issue Price.

Notwithstanding the above, each of the Directors and Senior Management reserves the right to apply for more Open Offer Shares than are set out against his or her name above.

The acquisition by any Director or Senior Manager of Open Offer Shares will be announced by the Company upon Admission in the usual way.

Board Changes

DEFINITIONS

Admission	admission of the Ordinary Shares to trading on AIM;
AIM	the AIM market operated by the London Stock Exchange;
Board	the board of directors of Johnson Service Group;
Chairman	the chairman of the Board as at the date of this document;
CREST	the relevant system (as defined in the CREST Regulations) in respect of which Euroclear is the Operator (as defined in the CREST Regulations);
Directors	the directors of the Company as at the date of this document;
Euroclear	Euroclear UK & Ireland Limited;
Existing Ordinary Shares	the Ordinary Shares in issue as at the date of this document;
Facility Agent	The Royal Bank of Scotland plc;
Facility Agreement	the £205 million credit facility agreement dated 11 April 2008 among the Company as borrower, certain subsidiaries of the Company as guarantors, The Royal Bank of Scotland plc as facility agent and security agent and the original lenders therein;
FSA	the Financial Services Authority;
FSMA	the Financial Services and Markets Act 2000, as amended;
Group	Johnson Service Group and its subsidiary undertakings;
Group Refinancing	the repayment and cancellation of the Group's previous bank debt immediately following drawdown of facilities under the Facility Agreement on 17 April 2008;
IFRS	International Financial Reporting Standards as adopted for use in the European Union;
Investec	Investec Bank (UK) Limited;
Issue Price	20p per new Ordinary Share;
Johnson Clothing Disposal	the disposal of Johnson Clothing and its subsidiaries to Ensco 645 pursuant to the Johnson Clothing Sale Agreement;
Johnson Clothing Group	Johnson Clothing and its subsidiaries as at 28 April 2008
Johnson Clothing Sale Agreement	the agreement for the sale and purchase of the share capital of Johnson Clothing dated 11 April 2008 among Semara Contract Services Limited, Johnson Investment Limited and Semara Nominees Limited as sellers, Ensco 645 as purchaser and the Company as guarantor;
Johnson Service Group or Company	Johnson Service Group PLC, a company incorporated in England and Wales with registered number 523335 and having its registered office at Johnson House, Abbots Park, Monks Way, Preston Brook, Cheshire WA7 3GH
LIBOR	the London inter bank offer rate from time to time;
London Stock Exchange	London Stock Exchange plc;
Optionholders	the holders of any of the Company's Options, and Optionholder means any one of them;
Options	options granted by the Company over unissued Ordinary Shares;
Ordinary Shares	the ordinary shares in the capital of Johnson Service Group;
Placing	the proposed placing of the Placing Shares;
Placing Shares	the 150,000,000 new Ordinary Shares to be allotted and issued to placees pursuant to the Placing;
Open Offer	the pre-emptive offering to Qualifying Shareholders of the right to subscribe for in aggregate up to 49,945,035 Ordinary Shares
Open Offer Entitlement	the basic entitlement of Qualifying Shareholders to subscribe for Open Offer Shares according to the number of Ordinary Shares held by them on the Record Date;
Open Offer Shares	up to 49,945,035 new Ordinary Shares intended to be made available to Shareholders pursuant to the Open Offer;
Qualifying Shareholders	the holders of Ordinary Shares as at the Record Date;
Record Date	means the date as at which a list of Shareholders is extracted from the register of members of the Company in order to process the Proposed Open Offer;;
Shareholders	the holders of any issued shares in the share capital of the Company from time to time;
UK or United Kingdom	the United Kingdom of Great Britain and Northern Ireland;
Warrantholders	the holders of any of Warrants, and Warrantholder means any one of them; and
Warrants	the warrants to subscribe for Ordinary Shares granted by the Company pursuant to the warrant instrument dated 11 April 2008, and Warrant means any one of them.