Preliminary Results

RNS Number : 9348D

Johnson Service Group PLC

08 March 2022

8 March 2022

AIM: JSG

Johnson Service Group PLC

('JSG' or 'the Group')

Preliminary Results for the Year Ended 31 December 2021

"Improving volumes and confidence for the longer term"

FINANCIAL PERFORMANCE

§ Total revenue of £271.4 million (2020: £229.8 million).

§ Adjusted EBITDA¹ of £67.9 million (2020: £53.6 million) with margin of 25.0% (2020: 23.3%).

§ Adjusted Profit before Taxation² of £9.4 million (2020: Adjusted Loss before Taxation^2,3 £16.8 million).

§ Profit before Taxation of £5.1 million (2020: Loss before Taxation³ £32.1 million).

§ Net debt excluding IFRS 16 liabilities at December 2021 of £22.3 million (December 2020: net cash £6.6 million) reflecting increased sales and continuing capital investment.

§ Net debt at December 2021 of £60.1 million (December 2020: £33.6 million).

§ As previously guided, no dividend declared in respect of 2021.

§ Strong balance sheet and capacity for further investment.

OPERATIONAL HIGHLIGHTS

§ Workwear continued to service customers throughout the year with volumes reaching pre-COVID levels in November 2021. Customer retention levels were 95% for the year.

§ New Workwear site in Exeter opened in September increasing capacity in the South West by 20%.

§ HORECA sites operated at various levels, peaking at 87% of normal volume in September 2021.

§ HORECA volumes expected to continue to increase through 2022 following a slow start in January and into February 2022.

§ Further mitigating actions are ongoing to offset cost pressures.

SUSTAINABILITY

§ Group's targets for 2030, together with objectives and plans for 2022, published in 'The Johnsons Way' booklet (www.jsg.com).

§ Our Carbon Trust backed water recycling plant at our Shaftesbury site is now fully commissioned.

§ Employee Engagement surveys completed and employee discussion forums planned.

Notes

1 Adjusted EBITDA refers to operating profit/(loss) before amortisation of intangible assets (excluding software amortisation) and exceptional items (defined as 'Adjusted Operating Profit/(Loss)') plus the depreciation charge for property, plant and equipment, textile rental items and right of use assets plus software amortisation.

2 Adjusted Profit before Taxation or Adjusted Loss before Taxation refers to Adjusted Operating Profit/(Loss) less total finance costs.

3 Results for 2020 have been restated following a change in accounting policy for costs associated with cloud-based computing which has been applied as a prior year adjustment.

Peter Egan, Chief Executive Officer of Johnson Service Group, commented:

"These results represent a solid performance from the Group against the challenging background of the COVID-19 pandemic and its impact, particularly on the hospitality sector. We saw a strong recovery of HORECA volumes through the second half of 2021 up until the last two weeks of December when volumes fell. This reduction in December continued into the start of 2022, impacting both revenue and margins in Q1, although volumes in HORECA have shown signs of recovery in recent weeks. Workwear volumes have remained consistent throughout 2021, recovering to pre-pandemic levels by the end of the year.

During the year we have continued to invest in our systems, sites, people and initiatives to expand our sales offering and maintain our high quality of service.

With the strength and resilience of our teams, alongside the mitigating actions we continue to take, we anticipate that HORECA volumes during 2022 will, in the absence of any further restrictions, increase towards 2019 levels. Cost pressures experienced in the final quarter are continuing and further mitigating actions are ongoing.

We remain very confident that the business is well positioned for growth in the medium to long term."

SELL-SIDE ANALYSTS' MEETING

A virtual presentation for sell-side analysts will be held today at 9.30am, details of which will be distributed by Camarco. A copy of the presentation will be available on the Company's website ( www.jsg.com ) following the meeting.

ENQUIRIES

Johnson Service Group PLC
Peter Egan, CEO
Yvonne Monaghan, CFO
Tel: 020 3757 4992/4981 (on the day)
Tel: 01928 704 600 (thereafter)

Investec Investment Banking (NOMAD)	Camarco (Financial PR)
David Flin	Ginny Pulbrook
Carlton Nelson	Rosie Driscoll
Virginia Bull	Toby Strong
Tel: 020 7597 5970	Tel: 020 3757 4992/4981

CHIEF EXECUTIVE'S OPERATING REVIEW

BASIS OF PREPARATION

Throughout this statement, and consistent with prior years, underlying and other alternative performance measures are used to describe the Group's performance. These are not recognised under International Financial Reporting Standards. The Board manages and assesses the performance of the Group on these measures and believes they are more representative of ongoing trading, facilitate meaningful year on year comparisons, and hence provide more useful information to Shareholders. Underlying and other alternative performance measures, which include adjusted operating profit/(loss), adjusted profit/(loss) before taxation, adjusted EBITDA and adjusted EPS are defined within the Financial Review and are reconciled to statutory reporting measures in notes 5 and 8.

TRADING PERFORMANCE

Revenue

Our 2021 results reflect the continuing impact that COVID-19 has had on the Group, particularly within our HORECA division. T otal revenue for the year to 31 December 2021 was £271.4 million (2020: £229.8 million).

Financial Results

Adjusted EBITDA was £67.9 million (2020: £53.6 million) giving a margin of 25.0% (2020: 23.3%). As expected, we saw this improve from the 17% achieved in the first half of the year. Adjusted operating profit was £12.7 million (2020: £11.9 million loss).

The Group continued to utilise the Coronavirus Job Retention Scheme ("CJRS") in the first half of the year, and this amounted to £9.9 million (year to 31 December 2020: £28.2 million). £11.6 million (2020: £26.5 million) was received in cash during the year. No CJRS claims were made in respect of the second half of 2021.

Total finance cost reduced to £3.3 million (2020: £4.9 million). The year to December 2020 included a charge of £0.6 million relating to the discontinuance of hedge accounting on interest rate swaps previously designated as cash flow hedges.

Profit before taxation, after amortisation of intangibles (excluding software amortisation) of £11.0 million (2020: £11.0 million) and an exceptional credit of £6.7 million (2020: exceptional charge of £4.3 million) was £5.1 million (2020: £32.1 million loss).

Adjusted diluted earnings per share was 2.2 pence (2020: adjusted diluted loss per share 3.3 pence).

The adjusted diluted earnings per share in 2021 includes the benefit of the capital allowances super deduction which offers 130% first year relief on qualifying capital spend. Excluding this benefit, which is a temporary impact, adjusted diluted earnings per share was 1.7 pence.

Dividend

A dividend is not being proposed in respect of 2021. The Board is aware of the importance of dividends to Shareholders and will look to reinstate its dividend policy once there is more certainty that trading levels will return to, and remain at, more normal levels.

OPERATIONAL REVIEW

Our Businesses

The Group comprises of Textile Rental businesses which trade through a number of very well recognised brands, servicing the UK's Workwear and HORECA (Hotel, Restaurant and Catering) sectors. The 'Johnsons Workwear' brand predominantly provides workwear rental and laundry services to corporates across all industry sectors. Within HORECA, 'Stalbridge' and 'London Linen' provide premium linen services to the restaurant, hospitality and corporate events market and Johnsons Hotel Linen, our high volume linen business which also incorporates the recently acquired Lilliput (Dunmurry) Limited, primarily serves the corporate four-star and budget hotel market.

Our management teams and employees at all levels have risen to the challenges presented through the COVID-19 pandemic. We have continued to adapt our processes and procedures where necessary to ensure availability of our services and to manage the health, safety and well-being of our employees.

In line with all UK businesses cost pressures have impacted the Group, particularly in the final quarter.

Constructive commercial discussions have taken place with customers relating to the significant increases in our business costs. Our National Accounts and Service teams have achieved success in retaining key customers and continue to build strong business relationships. We continue to benefit from ongoing sales and referrals for new business, especially within HORECA from new build hotels, where the strength of our longstanding reputation for service and quality continue to help us win additional new business from current and new customers.

Workwear Division

Operating as Johnsons Workwear, we provide workwear rental and laundry services to some 36,000 customers in the UK, ranging from small local businesses to the largest companies covering food related and other industrial sectors.

The total revenue for the Workwear division was £128.9 million (2020: £129.5 million). Adjusted EBITDA was £46.3 million (2020: £48.7 million) with a margin of 35.9% (2020: 37.6%). Adjusted operating profit was £22.5 million (2020: £23.5 million).

Despite the disruption of further lockdowns and restrictions, our diverse customer base helped to bring stability within the division. With a significant percentage of our customers remaining open, our garment processing volumes remained relatively consistent throughout the year and ended the year in line with pre-COVID normalised levels.

We continued to react to the ever-changing market conditions, which culminated in an improvement in our customer focused key performance indicators. Our independent annual customer satisfaction survey resulted in us achieving 86.4%, our highest result ever, and placing us in the upper quartile of company satisfaction ratings. Our customers were very complimentary about the consistency and quality of service we provided, allowing them to focus on their core business. This also resulted in us achieving our highest net promoter results. The customer service teams remained focused and actively engaged with our customers, with service sales continuing to remain buoyant. The return of the sales team in May 2021 resulted in an increase in activity, as they continued to develop their pipelines and identified new opportunities within the various market sectors. Customer retention remained high at 95%.

To complement our current accreditations, we have successfully implemented EN 14065 into our operating plants and procedures. This will enable us to proactively focus on new emerging sectors within the workwear market. To support the sales and service teams, new product ranges were introduced to enhance our existing garment offering. Our dynamic garment catalogue was refreshed with a more modern feel and look, and converted into an electronic version, giving the service and sales teams a more interactive platform to present our product range to the customer. The new product development team, in conjunction with key suppliers, proactively introduced several new key product ranges suitable for the healthcare and pharmaceutical market sectors. The development of a more sustainable and recyclable garment was presented to the business and will be introduced into our garment portfolio shortly. We remain focused on the drive to supply more stock-supported garments, which will significantly improve the garment lead time to our customers.

Following our Employee Engagement survey in 2019, we commissioned a further survey in September 2021 resulting in an improved engagement score of 83%. We received positive feedback on diversity and inclusion and identified both good relationships within the teams and an excellent understanding of the impact of our employees on our quality of service to our customers. Continued development is planned that will enhance the employee engagement experience even further. The Johnsons Academy will continue to provide a development and progression strategy for our employees.

Our new plant in Exeter was successfully commissioned in September 2021. The automated operating systems provide market leading technology and improved efficiencies, and will increase our capacity in the South West by 20%. A significant capital investment programme, focusing on automated upgrades in Perth and Hinckley was undertaken and similar upgrades are being commissioned at other sites. Automation and best in class equipment will continue to form the foundation of our investment strategy.

HORECA Division

The total revenue for the HORECA division was £142.5 million (2020: £100.3 million). Adjusted EBITDA was £26.2 million (2020: £8.7 million) with a margin of 18.4% (2020: 8.7%). Adjusted operating loss was £5.2 million (2020: £31.5 million).

The division was impacted significantly by business closedowns early in 2021. However, there was a strong recovery in the second half of 2021, in line with the hospitality market across the country. Volumes increased during the summer, peaking at 87% of normal in September 2021, before falling in the final two weeks of the year to 60% of normal.

As hospitality businesses re-opened, initial shortages in resources within Stalbridge and London Linen caused supply issues in some of our factory locations. Our operational and service teams responded magnificently under great pressure to ensure service levels returned to our normal high standards as quickly as possible, and our resultant customer survey scores remained high at 84.4%, despite some of the challenges experienced in the height of the summer.

In response to the volatile employment market, we adopted multiple recruitment strategies to attract new employees and introduced new incentives to retain our existing well trained and loyal workforce. In response to the national driver shortage, we started recruiting both internal and external candidates for HGV training with some success. The Employee Engagement score was 79%, with a high score for employee diversity and customer focus. The survey has also identified areas for us to improve in 2022.

We mobilised strategic marketing campaigns, to coincide with hospitality reopening, focusing on areas where the opportunity for additional volume was greatest. This has resulted in a significant number of new sales wins in the second half of 2021, boosting laundry revenue where capacity was available. The outlook continues to be positive as the sales pipeline remains strong.

New boiler installations during 2021 in Glasgow and Milborne Port will deliver more efficient steam generation, whilst a complete re-wire of our Grantham factory will also reduce utility consumption. New ironing lines installed in Sturminster Newton and London Linen will maintain and improve quality, replacing obsolete and high maintenance machinery. Investment in an improved sortation system, unloading areas and additional yard space at Redruth will improve workflow and reduce manual handling.

Our Carbon Trust backed water recycling plant, installed in our Shaftesbury factory, is now fully commissioned, and is returning a significant amount of reclaimed water. We have also completed a successful trial of paper band wrapping on selected linen products, reducing our reliance on plastic wrap, and we will continue to roll this out across the hotel, restaurant and catering estate.

Our Hotel Linen business, which primarily serves the corporate four-star and budget hotel marketplace, experienced significant incremental demand when hospitality opened in May 2021 and initially caused some service challenges. Our service levels were quickly returned to normal levels as demand peaked over the summer. The impact of the Government's introduction of 'Plan B' in December significantly reduced volumes for the last two weeks of the year.

Competition for new employees strengthened during our peak summer period, resulting in increased costs of production. Operating procedures were revisited aligning with Government guidelines to ensure the health, safety and welfare of everyone in our division. The first independent Employee Engagement Survey for the Hotel Linen business was completed in November measuring engagement, enablement and empowerment. A strong response from the workforce resulted in an encouraging engagement score of 83%.

The senior management team has been strengthened with the appointment of a Project Manager, National Transport Manager and Learning and Development Manager. All three appointments were current employees who were able to develop their careers within our business and all three will play pivotal roles in the further development of our people, service and operations.

Our service teams are now back to pre-pandemic staffing levels, providing field and office support to all our customers. The new web-based customer portal is currently undergoing user testing with a view to rolling it out in the second quarter of 2022. This will automate our linen management process, providing customers with online linen ordering, training videos, useful service information and business intelligence reporting. The portal will be complemented with an app-based customer feedback tool later in the year.

Despite the volatility in the hospitality market created by the pandemic, a Customer Satisfaction Survey was undertaken with a score of 84.2%. This survey provides useful customer feedback which will be incorporated into future planned enhancements to our products and services.

Our new £10.0 million production facility in Leeds is fully operational, increasing processing capacity across the Yorkshire and North East markets. Whilst employees transferred from our existing depot in Leeds, we also welcomed a large number of new employees to the business. We continue to invest in new equipment with a £4.1 million upgrade of our largest facility in Bourne, Lincolnshire which will improve working processes and underpin capacity. The project will be delivered in time for the busier spring and summer volume.

The Lilliput laundry business based in Belfast, Northern Ireland joined our division following acquisition in September and we look forward to the future of working together and integrating the business into the wider Hotel Linen business. Investment of £4.0 million into the site is underway and will be completed during the second quarter.

Ongoing Impact of COVID-19

During the first two months of 2022 we have continued to see the impact of the various restrictions on our business, particularly in HORECA. Volumes during January in HORECA were some 70% of normal with an improvement to 85% during February as further restrictions have been lifted. We expect this improvement to continue in the coming months.

System Development

The installation of the new laundry management system within our Hotel Linen plants is almost complete and the installation into Workwear plants is ongoing. The new system in Workwear will allow us to improve the customer experience and further develop our operational functionality to maintain our place as the number one Workwear provider in the UK.

ENVIRONMENTAL & SOCIAL RESPONSIBILITY

The Board, as a whole, has overall responsibility for environmental, social and governance matters and we recognise our duty to stakeholders to operate the business in an ethical and responsible manner. We are committed to developing our environmental and social responsibility agenda, recognising that it can play a major part in leading and influencing all of our people and operations.

The Board appointed a Head of Sustainability in April 2021 with the initial remit of reviewing current practices and helping to develop our sustainability strategy.

We have recently published the Group's targets for 2030 together with our objectives and plans for 2022 in 'The Johnsons Way' booklet, which can be found on our website at www.jsg.com.

We are committed to reducing our impact on the environment by becoming a positive force for environmental stewardship and incorporating environmental considerations in all our decision-making processes. Working in conjunction with our customers and suppliers, we intend to reduce our carbon footprint by reducing our natural resource consumption and eliminating waste from our process streams. Our behavioral changes will be the key to our success. By accepting the need for change we have embarked upon a collective approach to eliminate single use plastics, reduce emissions and responsible procurement.

Further details of our ongoing initiatives, together with actions for the future, will be set out within the Group's 2021 Annual Report.

EMPLOYEES

Our employees are the foundation of our business and 2021 has been another challenging year for each and every one of them. The continuing and unpredictable impact of COVID-19 has once again tested the strength, resilience and adaptability of our teams and they have worked tirelessly to ensure that we continue to provide market leading customer service.

We have conducted an Employee Engagement survey in both divisions and each of our management teams are launching various initiatives.

We are supporting any employees that are affected by the conflict in Ukraine and facilitating employee fundraising as part of the 'Our Communities' pillar.

The Board would like to thank all of our employees for their support, hard work and significant contribution to the business through these difficult times.

BOARD CHANGES

Jock Lennox was appointed to the Board on 5 January 2021 as an Independent Non-Executive Director and Chairman Designate and stepped into the role as Chairman following the retirement of Bill Shannon in May 2021.

OUTLOOK

We remain confident in our medium and long-term growth prospects. Workwear volumes have remained consistent. We have continued to recruit new employees in the HORECA division and have therefore carried additional cost through the winter months, which will impact margin in Q1 but will enable us to meet demand in the coming months. Whilst volumes in HORECA have shown signs of recovery in recent weeks the lower than expected volumes in January and February 2022 has resulted in revenue being some £3.0 million lower. In the absence of further restrictions, or any impact arising from the conflict in Ukraine, we expect volumes to continue to build during 2022 to 2019 levels.

The cost pressures we have experienced in the final quarter are continuing but we have some protection through the fixing of a proportion of our energy costs for 2022 and into 2023. Further mitigating actions are ongoing. We anticipate our EBITDA margin will continue to improve towards pre-COVID levels as we progress through the year.

We are continuing to focus on delivering outstanding customer service and investing in both our employees and our laundry facilities.

Peter Egan

Chief Executive Officer

7 March 2022

FINANCIAL REVIEW

FINANCIAL RESULTS

T otal revenue for the year to 31 December 2021 increased to £271.4 million (2020: £229.8 million).

Adjusted EBITDA was £67.9 million (2020: £53.6 million) giving a margin of 25.0% (2020: 23.3%) and, in-line with management expectations, improving from the 17.0% margin achieved in the first half of 2021. The result includes the benefit of Government support under the CJRS amounting to £9.9 million in the first half of 2021 (2020: £28.2 million full year).

The analysis of the Group results across the segments shows the impact of the pandemic on the adjusted EBITDA of our different divisions:

	2021			2020
	Revenue	Adjusted EBITDA	Margin	Revenue	Adjusted EBITDA	Margin
	£m	£m	%	£m	£m	%
Workwear	128.9	46.3	35.9	129.5	48.7	37.6%
HORECA	142.5	26.2	18.4	100.3	8.7	8.7%
Central Costs	-	(4.6)	-	-	(3.8)	-
Group	271.4	67.9	25.0%	229.8	53.6	23.3%

The statutory operating profit was £8.4 million (2020: £27.2 million loss) whilst adjusted operating profit was £12.7 million (2020: £11.9 million loss).

The total finance cost was £3.3 million (2020: £4.9 million) and included £1.5 million (2020: £3.1 million) of bank interest and hedging costs, £1.6 million (2020: £1.7 million) of interest in respect of IFRS 16 liabilities and £0.2 million (2020: £0.1 million) in respect of notional interest on pension liabilities.

A net exceptional credit of £6.7 million (2020: £4.3 million charge) comprises the recognition of £5.9 million of insurance proceeds relating to further interim payments for capital items and property costs in relation to the 2020 Exeter plant fire and a final settlement in respect of the Treforest flood, costs of £0.6 million in relation to the demolition of the Exeter site, £0.1 million costs in relation to business acquisitions and a £1.5 million receipt in respect of outstanding Parent Company Guarantees. Further insurance receipts of at least £0.8 million are expected to be received in 2022 as the insurance claim for Exeter is finalised with the insurer.

Adjusted profit before taxation was £9.4 million (2020: £16.8 million loss). Statutory profit before taxation, after amortisation of intangible assets (excluding software amortisation) of £11.0 million (2020: £11.0 million) and an exceptional credit of £6.7 million (2020: £4.3 million charge), was £5.1 million (2020: £32.1 million loss).

Adjusted diluted earnings per share was 2.2 pence (2020: Adjusted diluted loss per share of 3.3 pence). Excluding the impact of the capital allowances super deduction the adjusted diluted earnings per share was 1.7 pence.

PRIOR PERIOD RESTATEMENT

Following recent IFRIC guidance issued in 2021 regarding accounting for cloud-based computer arrangements under IAS38, we have reviewed the accounting for costs incurred in respect of the configuration and customisation of cloud-based software arrangements implemented across the Group. We have costs that have previously been capitalised which, in light of the revised guidance, do not meet the requirements of IAS38 and have therefore been applied as a change in accounting policy under IAS8. As all costs were capitalised prior to 1 January 2020, brought forward reserves have been reduced by £1.1 million, and the intangible asset no longer recognised on the Balance Sheet. The amortisation charged to the Income Statement in the year ended 31 December 2020 was £0.2 million and has been reversed. The adjusted operating loss, adjusted loss before tax and adjusted loss per share have each been restated to reflect this change (see note 21). All adjustments are in respect of the Workwear segment.

FINANCING

Total net debt (excluding IFRS 16 liabilities) at the end of the year was £22.3 million (December 2020: net cash £6.6 million) with the increase in debt largely explained by a return to more normalised levels of working capital and continued investment in expanding our laundry facilities. Including IFRS 16 liabilities, net debt at December 2021 was £60.1 million (December 2020: £33.6 million).

The Group remains well funded with access to a committed revolving credit facility of £135.0 million which matures in August 2023. The additional £40.0 million facility which originally ran to May 2022 was cancelled by the Group in February 2022. The remaining facility is considerably in excess of our anticipated level of borrowings. We anticipate that the facility will be renewed in the coming months and have commenced discussions with our banks to this effect.

Bank covenants comprise gearing and interest cover tests. With effect from March 2022, gearing, for bank purposes, is calculated as Adjusted EBITDA compared to total debt, including IFRS 16 liabilities, and the agreed covenant is for the ratio to be not more than three times. Interest cover compares Adjusted EBIT to total interest cost with a minimum covenant ratio of three times at March 2022 and rising to four times thereafter. The covenants provide significant headroom on our current scenario planning.

Interest payable on bank borrowings is based upon SONIA (LIBOR for loans drawn prior to 1 July 2021) plus a margin of 2% from July 2020 to March 2022. Thereafter, the margin will be linked to our gearing covenant and will range from 1.25% to 2.25%.

TAXATION

The tax rate on adjusted profit/(loss) before taxation, excluding exceptional items and the amortisation of intangible assets (excluding software amortisation), was (5.3)% (2020: 18.5%). The tax credit arises as a result of tax losses brought forward from 2020 together with the impact of the super deduction in respect of allowances on capital spend introduced in April 2021. The impact of this super deduction in 2021 is a £2.5 million credit to corporation tax.

A tax refund of £0.5 million (2020: payment of £3.4 million) was received during the year in respect of tax losses in 2019. Due to the impact of both tax losses carried forward and the continuing impact of the capital allowance super deduction we are not expecting to pay corporation tax in respect of 2022. A tax refund in respect of 2020 losses carried back to previous years of some £3.5 million is expected in the first half of 2022.

DIVIDEND

It is not proposed to declare a dividend in respect of 2021. The Board is aware of the importance of dividends to its Shareholders and will look to reinstate its dividend policy once there is more certainty that trading levels will return to, and remain at, more normalised levels.

CASH FLOW

Free cash flow in the year was £41.6 million compared to £65.8 million in 2020. Of this, we invested £24.4 million (2020: £21.4 million) in the purchase of property, plant and equipment and software, largely on projects that had already been committed before the impact of the pandemic was known. Offsetting this spend was £5.3 million (2020: £2.5 million) received as part of the insurance claim in respect of capital items.

Free cash flow in 2021 was impacted by the expected net working capital outflow of £18.3 million (2020: £24.4 million inflow), largely reflective of an increase in trade receivables, as HORECA volumes recovered, and the payment of £10.6 million of VAT, originally due in April 2020, and paid in the year to December 2021. This outflow is as expected and largely reverses the inflow in 2020.

INVESTMENT IN TEXTILE RENTAL ITEMS

Spend on textile rental items amounted to £41.8 million (2020: £28.1 million). The significant increase reflects the impact of the pandemic on volumes processed in 2020 and the recovery in 2021. We have continued to work with our chosen workwear and linen suppliers to ensure both are available on a timely basis and this proved beneficial to ensure stock availability during the peak summer months.

CAPITAL INVESTMENT

We have continued to invest in plant and equipment, spending £24.2 million in the year plus a further £0.2 million on software. Of this, £2.1 million was in respect of the final spend on the new Leeds high volume linen site. Spend on the new Exeter Workwear plant in 2021 amounted to £10.0 million, and was largely financed by insurance proceeds.

Work started on upgrading our largest Hotel Linen plant in Bourne with spend of £3.1 million in 2021 with the balance to be spent in 2022.

The acquisition of Lilliput (Dunmurry) Ltd on 30 September 2021 continues our strategy of expanding our geographical coverage. We have finalised plans to initially invest £4.0 million at this site to improve workflow, efficiency, and capacity.

DEFINED BENEFIT PENSION SCHEME LIABILITIES

As at 31 December 2021, the Scheme's assets had reduced by £5.5 million, to £221.2 million, after paying out benefits of £10.5 million during the year. The net deficit, including deferred taxation, has, reduced to £0.9 million (2020: £11.2 million) due largely to an increase in the discount rate utilised in deriving the value of scheme liabilities offset by an increase in the inflation assumption.

We have agreed with the Trustee that the existing deficit recovery payment of £1.9 million per annum will continue in equal monthly instalments until the next review following the completion of the triennial valuation as at 30 September 2022.

Clearly, the deficit calculated under both the provisions of IAS19 and under the statutory funding objective is sensitive to changes in the discount rate, based on corporate bond or gilt yields as appropriate. The asset allocation of the Scheme is kept under review so that the impact of a reduction in the discount rate and an increase in inflation or interest rates is, at least in part, offset by a corresponding increase in asset values. In addition, the review also considers alternative asset classes which earn a reasonable level of return but with lower volatility and therefore a reduction in risk. Appropriate changes to the investment allocation have been implemented in order to achieve these goals. The Scheme has fully divested of its direct equity investments.

BALANCE SHEET AND CAPITAL STRUCTURE

The Group maintains a strong Balance Sheet, with net assets having increased to £272.4 million (2020: £254.6 million).

As previously mentioned, gearing, for bank purposes will, from March 2022, be calculated as adjusted EBITDA compared to total debt, including IFRS 16 liabilities, and the agreed covenant is for the ratio to be not more than three times. The Group's medium to long-term intention is to return the capital structure such that we operate between one and two times on this basis, other than for short term specific exceptions. Under this framework, our capital allocation policy remains unchanged and will take into account the following criteria as part of a periodic review of capital structure:

§ maintaining a strong balance sheet;

§ continuing capital investment to increase processing capacity and efficiency;

§ appropriate accretive acquisitions;

§ operating a progressive dividend policy; and

§ distributing any surplus cash to Shareholders.

GOING CONCERN

Since the start of the pandemic in March 2020 the Group has reacted quickly and decisively, implementing a range of prudent cost management and cash preservation actions, securing additional funding facilities, revising bank covenants and raising equity in order to protect the business from any potential adverse impact.

The current and plausible future impact of COVID-19 and the related macroeconomic environment on the Group's activities and performance has been considered by the Board in preparing its going concern assessment. The Group has prepared a base case scenario, reflecting an initial set of assumptions around financial projections and trading performance, together with various, more pessimistic, expectations for market developments over the remainder of 2022 and into 2023 to reflect subdued trading conditions.

After considering the financial scenarios, the severe but plausible sensitivities and the facilities available to the Group, the Directors have a reasonable expectation that the Group has adequate resources for its operational needs, will remain in compliance with the financial covenants in its bank facilities and will continue in operation for at least the period to 30 June 2023. As a consequence, and having reassessed the principal risks and uncertainties, the Directors considered it appropriate to adopt the going concern basis in preparing the consolidated financial statements.

KEY PERFORMANCE INDICATORS ('KPIs')

The main KPIs used as part of the assessment of performance of the Group, and of each segment, are growth in revenue, adjusted EBITDA margin, adjusted operating profit/(loss) and adjusted diluted earnings/(loss) per share from Continuing Operations. In addition, for years 2021, 2022 and 2023, the adjusted diluted earnings per share excluding the impact of the capital allowance super deduction will also form part of the assessment. Non-financial KPIs, as referred to within the Chief Executive's Operating Review, include our employee and customer survey results and customer retention statistics.

ALTERNATIVE PERFORMANCE MEASURES (APMs)

Throughout the Statement we refer to a number of APMs. APMs are used by the Group to provide further clarity and transparency of the Group's underlying financial performance. The APMs are 'adjusted operating profit/(loss)' which refers to continuing operating profit/(loss) before amortisation of intangible assets (excluding software amortisation) and exceptional items, 'adjusted profit/(loss) before taxation' which refers to adjusted operating profit/(loss) less total finance cost, 'adjusted EBITDA' which refers to adjusted operating profit/(loss) plus the depreciation charge for property, plant and equipment, textile rental items and right of use assets plus software amortisation and 'adjusted EPS' which refers to EPS calculated based on adjusted profit/(loss) after taxation. An additional measure has been introduced for 2021 to state a further 'adjusted EPS excluding super deduction' which amends the 'adjusted EPS' to exclude the short term benefit of the capital allowance super deduction.

The Board considers that 'adjusted operating profit/(loss)', 'adjusted profit/(loss) before taxation', 'adjusted EBITDA' and 'adjusted EPS', all of which exclude the effects of non-recurring items or non-operating events, provide useful information for Shareholders on the underlying trends and performance of the Group.

SUMMARY

The strategy of the Group is unchanged and remains to continue to expand our Textile Services business through targeted capital investment, organic growth and acquisition. We have a strong balance sheet to support this strategy with future funding in place to finance planned investment.

Yvonne Monaghan

Chief Financial Officer

7 March 2022

CONSOlidated Income Statement

		Year ended 31 December 2021	Year ended 31 December 2020
	Note	£m	£m
			Restated*

Revenue	2	271.4	229.8

Impairment loss on trade receivables**		(0.4)	(3.6)
All other costs		(262.6)	(253.4)
Operating profit / (loss)	2	8.4	(27.2)

Operating profit / (loss) before amortisation of intangible assets (excluding software amortisation) and exceptional items	2	12.7	(11.9)

Amortisation of intangible assets (excluding software amortisation)		(11.0)	(11.0)

Exceptional items	3	6.7	(4.3)
Operating profit / (loss)	2	8.4	(27.2)

Finance cost	4	(3.3)	(4.9)
Profit / (loss) before taxation		5.1	(32.1)
Taxation credit	6	1.8	5.2
Profit / (loss) for the year from continuing operations		6.9	(26.9)
Loss for the year from discontinued operations		(0.3)	-
Profit / (loss) for the year attributable to equity holders		6.6	(26.9)
* See note 21 for further details of the prior year restatement. ** Prior year presentation has been changed to be compliant with IAS 1.
EARNINGS / (LOSS) PER SHARE (Restated)	8

Basic earnings / (loss) per share
- From continuing operations		1.6p	(6.5)p
- From discontinued operations		(0.1)p	-
From total operations		1.5p	(6.5)p

Diluted earnings / (loss) per share
- From continuing operations		1.6p	(6.5)p
- From discontinued operations		(0.1)p	-
From total operations		1.5p	(6.5)p

See note 8 for further details of Adjusted earnings / (loss) per share and Adjusted diluted earnings / (loss) per share.

Consolidated Statement of COMPREHENSIVE Income

			Year ended 31 December 2021		Year ended 31 December 2020 Restated
	Note			£m	£m
Profit / (loss) for the year				6.6	(26.9)
Items that will not be subsequently reclassified to profit or loss
Re-measurement and experience gains / (losses) on post-employment benefit obligations		15		11.0	(9.4)
Taxation in respect of re-measurement and experience (gains) / losses				(2.1)	1.7
Change in deferred tax due to change in tax rate				-	0.2
Items that may be subsequently reclassified to profit or loss
Cash flow hedges (net of taxation) - fair value gains / (losses)				1.3	(2.9)
- transfers to administrative expenses				-	1.8
- transfers to finance cost				-	0.6
Total other comprehensive income / (loss) for the year				10.2	(8.0)
Total comprehensive income / (loss) for the year				16.8	(34.9)

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

	Share Capital			Share Premium	Merger Reserve	Capital Redemption Reserve	Hedge Reserve	Retained Earnings	Total Equity
	£m			£m	£m	£m	£m	£m	£m

Balance at 31 December 2019 (as previously reported)		37.0		16.1	1.6	0.6	(0.5)	152.7	207.5
Prior year adjustment (note 21)		-		-	-	-	-	(1.1)	(1.1)
Restated balance as at 1 January 2020		37.0		16.1	1.6	0.6	(0.5)	151.6	206.4
Loss for the year (as previously reported)		-		-	-	-	-	(27.1)	(27.1)
Prior year adjustment		-		-	-	-	-	0.2	0.2
Other comprehensive loss		-		-	-	-	(0.5)	(7.5)	(8.0)
Total comprehensive loss for the year			-	-	-	-	(0.5)	(34.4)	(34.9)

Share options (value of employee services)		-		-	-	-	-	0.4	0.4
Deferred tax on share options		-		-	-	-	-	(0.2)	(0.2)
Issue of share capital		7.4		0.2	-	-	-	75.3	82.9
Transactions with Shareholders recognised directly in Shareholders' equity		7.4		0.2	-	-	-	75.5	83.1

Balance at 31 December 2020 (Restated)		44.4		16.3	1.6	0.6	(1.0)	192.7	254.6

Balance at 31 December 2020 (as previously reported)		44.4		16.3	1.6	0.6	(1.0)	193.6	255.5
Prior year adjustment (note 21)		-		-	-	-	-	(0.9)	(0.9)
Balance at 31 December 2020 (Restated)		44.4		16.3	1.6	0.6	(1.0)	192.7	254.6

Profit for the year		-		-	-	-	-	6.6	6.6
Other comprehensive income		-		-	-	-	1.3	8.9	10.2
Total comprehensive income for the year		-		-	-	-	1.3	15.5	16.8

Share options (value of employee services)		-		-	-	-	-	0.5	0.5
Purchase of own shares by EBT		-		-	-	-	-	(0.1)	(0.1)
Issue of share capital		0.1		0.5	-	-	-	-	0.6
Transactions with Shareholders recognised directly in Shareholders' equity		0.1		0.5	-	-	-	0.4	1.0

Balance at 31 December 2021		44.5		16.8	1.6	0.6	0.3	208.6	272.4

The Group has an Employee Benefit Trust (EBT) to administer share plans and to acquire shares, using funds contributed by the Group, to meet commitments to employee share schemes. At 31 December 2021 the EBT held 9,024 shares (2020: 8,388).

Consolidated Balance Sheet

		As at 31 December 2021	As at 31 December 2020
	Note	£m	Restated £m
Assets
Non-current assets
Goodwill		135.2	130.9
Intangible assets	9	16.7	26.5
Property, plant and equipment	10	113.3	107.2
Right of use assets	11	35.5	38.5
Textile rental items	12	48.4	35.6
Trade and other receivables		0.3	0.4
Derivative financial assets		0.3	-
		349.7	339.1

Current assets
Inventories		2.2	1.4
Trade and other receivables		47.9	31.3
Current income tax assets		3.6	3.3
Cash and cash equivalents		5.2	7.8
		58.9	43.8

Liabilities
Current liabilities
Trade and other payables		63.7	64.8
Borrowings	13	9.5	1.0
Lease liabilities	14	5.2	5.5
Derivative financial liabilities		0.1	0.1
Provisions		0.5	2.0
		79.0	73.4

Non-current liabilities
Post-employment benefit obligations	15	2.1	14.9
Deferred income tax liabilities		3.3	1.2
Trade and other payables		0.3	0.4
Borrowings	13	18.0	-
Lease liabilities	14	32.6	35.1
Derivative financial liabilities		-	2.0
Provisions		0.9	1.3
		57.2	54.9
Net assets		272.4	254.6

Equity
Capital and reserves attributable to the company's shareholders
Share capital	18	44.5	44.4
Share premium		16.8	16.3
Merger reserve		1.6	1.6
Capital redemption reserve		0.6	0.6
Hedge reserve		0.3	(1.0)
Retained earnings		208.6	192.7
Total equity		272.4	254.6

The notes on pages 20 to 39 form an integral part of these condensed consolidated financial statements. The condensed consolidated financial statements on pages 16 to 39 were approved by the Board of Directors on 7 March 2022 and signed on its behalf by:

Yvonne Monaghan

Chief Financial Officer

Consolidated Statement OF Cash Flows

		Year ended 31 December 2021	Year ended 31 December 2020
			Restated
	Note	£m	£m
Cash flows from operating activities
Profit / (loss) for the year		6.6	(26.9)
Adjustments for:
Taxation (credit) / charge - continuing	6	(1.8)	(5.2)
- discontinuing		0.3	-
Total finance cost	4	3.3	4.9
Depreciation and impairment		55.1	66.2
Amortisation	9	11.1	11.0
Loss on disposal of tangible fixed assets		0.1	0.8
Loss on disposal of textile rental items		-	0.2
Profit on termination of lease liabilities		(0.2)	-
(Increase) / decrease in inventories		(0.8)	0.9
(Increase) / decrease in trade and other receivables		(15.4)	23.7
Decrease in trade and other payables		(2.1)	(0.2)
Deficit recovery payments in respect of post-employment benefit obligations		(1.9)	(1.9)
Share-based payments		0.5	0.4
(Decrease) / increase in provisions		(2.0)	0.2
Commodity swaps not qualifying as hedges		(0.3)	0.3
Insurance claims		(5.3)	(2.5)
Business acquisition costs charged to the income statement		0.1	-
Cash generated from operations		47.3	71.9
Interest paid		(3.2)	(4.0)
Taxation received / (paid)		0.5	(3.4)
Net cash generated from operating activities		44.6	64.5

Cash flows from investing activities
Acquisition of businesses (net of cash and overdrafts acquired)		(4.8)	(0.9)
Disposal of business costs		(3.6)	-
Purchase of other intangible assets		-	(1.2)
Purchase of property, plant and equipment		(24.2)	(20.4)
Insurance claims		5.3	2.5
Purchase of software		(0.2)	(1.0)
Proceeds from sale of property, plant and equipment		-	0.2
Purchase of textile rental items		(41.8)	(28.1)
Proceeds received in respect of special charges	12	2.4	2.1
Net cash used in investing activities		(66.9)	(46.8)

Cash flows from financing activities
Proceeds from borrowings		29.0	58.0
Repayment of borrowings		(12.5)	(143.0)
Capital element of leases		(5.7)	(6.1)
Purchase of own shares by EBT		(0.1)	-
Proceeds from issue of Ordinary shares	18	0.6	82.9
Net cash generated from / (used in) financing activities		11.3	(8.2)

Net (decrease) / increase in cash and cash equivalents		(11.0)	9.5
Cash and cash equivalents at beginning of year		6.6	(2.9)
Cash and cash equivalents at end of year	16	(4.4)	6.6

Cash and cash equivalents comprise:

Cash	5.2	7.8
Overdraft	(9.6)	(1.2)
Cash and cash equivalents at end of year	(4.4)	6.6

NOTES TO THE PRELIMINARY ANNOUNCEMENT

1 BASIS OF PREPARATION & FORWARD LOOKING STATEMENTS

Basis of Preparation

Johnson Service Group PLC (the 'Company') and its subsidiaries (together 'the Group') provide textile rental and related services across the UK.

The Company is incorporated and domiciled in the UK, its registered number is 523335 and the address of its registered office is Johnson House, Abbots Park, Monks Way, Preston Brook, Cheshire, WA7 3GH. The Company is a public limited company and has its primary listing on the AIM division of the London Stock Exchange.

The financial information contained within this Preliminary Announcement has been prepared on a going concern basis in accordance with UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006.

The financial information has been prepared using accounting policies consistent with those set out in the 2020 Annual Report except as disclosed in note 21 of this Preliminary Announcement.

The financial information set out within this Preliminary Announcement does not constitute the Company's statutory accounts for the years ended 31 December 2021 or 31 December 2020 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts.

Statutory accounts for 2020 have been delivered to the Registrar of Companies, and those for 2021 will be delivered as soon as practicable but not later than 30 April 2022. 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.

Going Concern

Background and Summary

The Directors have adopted the going concern basis in preparing these financial statements after careful assessment of identified principal risks and, in particular, the possible adverse impact on financial performance, specifically on revenue and cash flows within the HORECA division, of a protracted delay in returning to pre-pandemic trading levels. The process and key judgments in coming to this conclusion are set out below. The going concern status of the Company is intrinsically linked to that of the Group.

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Review, Chairman's Statement and Chief Executive's Operating Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review. In addition, note 26 to the Consolidated Financial Statements includes the Group's objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities, and its exposure to credit risk and liquidity risk.

Going Concern Assessment

The current and plausible future impact of COVID-19 and the related macroeconomic environment on the Group's activities and performance has been considered by the Board in preparing its going concern assessment. The Group has prepared a Base Case scenario, reflecting an initial set of assumptions around financial projections and trading performance, together with various, more pessimistic, expectations for market developments over 2022 and into 2023 to reflect subdued trading conditions.

The Board is required to assess going concern at each reporting period. These assessments are significantly more difficult currently given the uncertainties about the impact of COVID-19 on the markets in which we operate. The level of judgement to be applied has therefore increased considerably. The Directors have considered three main factors in reaching their conclusions on going concern, as set out below.

1) Cash Flows and Sensitivity Analysis

In assessing going concern, the Directors considered a variety of scenarios in the context of the COVID-19 pandemic. These scenarios are not the forecasts of the Group or Company but are designed to stress test liquidity and covenant compliance. EBITDA used within the scenarios is that used for bank covenant purposes which is defined as adjusted operating profit before property, plant and equipment depreciation, rental stock depreciation, right of use asset depreciation and software amortisation. The three most relevant scenarios, in ascending order of severity, reviewed to test going concern are as follows:

Base Case Scenario

This scenario assumes that the HORECA market continues to improve, with no further social distancing restrictions being imposed. The impact of the recent slow-down in HORECA revenue recovery experienced at the end of 2021 and also in January 2022 has been reflected however, an immediate rebound in volumes, and hence revenue, is assumed thereafter. The scenario also includes an estimate of the current and future impact of cost pressures which the Group, in line with all UK businesses, is experiencing, particularly in relation to energy and labour.

Limited Slow Down in Revenue Recovery Scenario

Although only limited restrictions have been in place over the winter months, the ongoing pandemic dampened HORECA volumes, to a certain extent, particularly during December 2021 and January 2022. This scenario assumes that it will take three months for HORECA revenue to return to the level assumed within the Base Case. Accordingly, HORECA revenue within this scenario has been reduced to some 84%, 91% and 96% of Base Case levels in February 2022, March 2022 and April 2022 respectively before returning to that set out in the Base Case.

Severe but Plausible Scenario

Building upon the "Limited slow-down in revenue recovery scenario" above, this scenario assumes a more protracted recovery in that it will take until September 2022 for HORECA revenue to return to the level assumed within the Base Case. Accordingly, HORECA revenue within this scenario has been reduced to some 82% of Base Case levels in February 2022, gradually improving thereafter month on month and returning to that set out in the Base Case by September 2022.

2) Covenants

As previously announced, from March 2022, bank covenants will revert to a leverage and interest covenant test. In all three scenarios above, the financial projections indicate that the Group would remain in compliance with the financial covenants in its bank facilities. A decline in underlying EBIT / EBITDA well in excess of that contemplated in the scenarios would need to persist throughout the period for a covenant breach to occur. The Directors do not consider such a scenario plausible.

The Group also has a number of mitigating actions under its control (not all of which were included in the scenarios) including minimising capital expenditure to critical requirements, further reducing levels of discretionary spend and rationalising its overhead base in order to be able to meet the covenant tests.

3) Liquidity

The Group remains well funded with access to a committed Revolving Credit Facility of £135 million (the 'Facility), which matures in August 2023. The Facility is considerably in excess of our anticipated borrowings and provides ample liquidity in all scenarios modelled. We anticipate that the facility will be renewed in the coming months and have commenced discussions with our banks to this effect.

Going Concern Statement

After considering the current financial scenarios, the severe but plausible sensitivities and the facilities available to the Group and Company, the Directors have a reasonable expectation that the Group and Company have adequate resources for their operational needs, will remain in compliance with the financial covenants set out in the bank facility agreement and will continue in operation for at least the period to 30 June 2023.. As a consequence, and having reassessed the principal risks and uncertainties, the Directors considered it appropriate to adopt the going concern basis in preparing the Group and Company financial statements.

Forward Looking Statements

Certain statements in these condensed consolidated financial statements constitute forward-looking statements. Any statement in this document that is not a statement of historical fact including, without limitation, those regarding the Group's future expectations, operations, financial performance, financial condition and business is a forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, among other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in these condensed consolidated financial statements. As a result you are cautioned not to place reliance on such forward-looking statements. Nothing in this document should be construed as a profit forecast.

2 SEGMENT ANALYSIS

Segment information is presented based on the Group's management and internal reporting structure as at 31 December 2021.

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

For reporting purposes, the CODM considered the aggregation criteria set out within IFRS 8, 'Operating Segments', which allows for two or more operating segments to be combined as a single reporting segment if:

1) aggregation provides financial statement users with information that allows them to evaluate the business and the environment in which it operates; and

2) they have similar economic characteristics (e.g. similar long-term average gross margins would be expected) and are similar in each of the following respects:

§ the nature of the products and services;

§ the nature of the production processes;

§ the type or class of customer for their products and services;

§ the methods used to distribute their products or provide their services; and

§ the nature of the regulatory environment (i.e. banking, insurance or public utilities), if applicable.

The CODM deems it appropriate to present two reporting segments (in addition to 'Discontinued Operations' and 'All Other Segments'), being:

1) Workwear: comprising of our Workwear business only; and

2) Hotel, Restaurants and Catering ('HORECA'): comprising of our Stalbridge, London Linen, Hotel Linen and Lilliput businesses, each of which are a separate operating segment.

The CODM's rationale for aggregating the Stalbridge, London Linen, Hotel Linen and Lilliput operating segments into a single reporting segment is set out below:

§ the gross margins of each operating segment are within a similar range, with the long-term average margin expected to further align;

§ the nature of the customers, products and production processes of each operating segment are very similar;

§ the nature of the regulatory environment is the same due to the similar nature of products, processes and customers involved; and

§ distribution is via exactly the same method across each operating segment.

The CODM assesses the performance of the reporting segments based on a measure of operating profit, both including and excluding the effects of non-recurring items from the reporting segments, such as restructuring costs and impairments when the impairment is the result of an isolated, non-recurring or non-operating event. Interest income and expenditure are not included in the result for each reporting segment that is reviewed by the CODM 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 (the property holding company of the Group) is credited back, where appropriate, to the paying company for the purpose of segmental reporting. There have been no changes in measurement methods used compared to the prior year.

Other information provided to the CODM is measured in a manner consistent with that in the financial statements. Segment assets exclude deferred income tax assets, derivative financial assets, current income tax assets and cash and cash equivalents, all of which are managed on a central basis. Segment liabilities include lease liabilities but exclude current income tax liabilities, bank borrowings, derivative financial liabilities, post-employment benefit obligations and deferred income tax liabilities, all of which are managed on a central basis. These balances are part of the reconciliation to total assets and liabilities.

Exceptional items have been included within the appropriate reporting segment as shown on pages 23 to 24.

Workwear

Supply and laundering of workwear garments and protective wear.

HORECA

Linen services for the hotel, restaurant and catering sector.

§ Workwear

§ Stalbridge

§ London Linen

§ Hotel Linen

§ Lilliput

All Other Segments

Comprising of central and Group costs.

Year ended 31 December 2021	Workwear	HORECA	All Other Segments	Total
	£m	£m	£m	£m
Revenue
Rendering of services	125.8	142.3	-	268.1
Sale of goods	3.1	0.2	-	3.3
Total revenue	128.9	142.5	-	271.4

Result
Operating profit / (loss) before amortisation of intangible assets (excluding software amortisation) and exceptional items	22.5	(5.2)	(4.6)	12.7
Amortisation of intangible assets (excluding software amortisation)	-	(11.0)	-	(11.0)
Exceptional items	3.0	(0.1)	3.8	6.7
Operating profit / (loss)	25.5	(16.3)	(0.8)	8.4
Total finance cost				(3.3)
Profit before taxation				5.1
Taxation credit				1.8
Profit for the year from continuing operations				6.9
Loss for the year from discontinued operations				(0.3)
Profit for the year attributable to equity holders				6.6

	Workwear	HORECA	All Other Segments	Total
	£m	£m	£m	£m
Balance sheet information
Segment assets	138.7	259.7	1.1	399.5
Unallocated assets: Current income tax assets				3.6
Derivative financial assets				0.3
Cash and cash equivalents				5.2
Total assets				408.6

Segment liabilities	(38.4)	(61.8)	(3.0)	(103.2)
Unallocated liabilities: Bank borrowings				(27.5)
Derivative financial liabilities				(0.1)
Post-employment benefit obligations				(2.1)
Deferred income tax liabilities				(3.3)
Total liabilities				(136.2)


Other information
Non-current asset additions
- Property, plant and equipment	12.7	9.8	-	22.5
- Right of use assets	0.4	0.6	-	1.0
- Textile rental items	19.6	27.1	-	46.7
- Capitalised software	-	0.1	-	0.1
Depreciation, impairment and amortisation expense
- Property, plant and equipment	5.5	11.3	-	16.8
- Right of use assets depreciation	2.2	3.9	-	6.1
- Textile rental items depreciation	16.1	16.1	-	32.2
- Intangible software	-	0.1	-	0.1
- Customer contracts	-	11.0	-	11.0

The results, assets and liabilities of all segments arise in the Group's country of domicile, being the United Kingdom.

Year ended 31 December 2020 (Restated)	Workwear		HORECA	All Other Segments	Total
	£m		£m	£m	£m
Revenue
Rendering of services	127.1		100.3	-	227.4
Sale of goods	2.4		-	-	2.4
Total revenue	129.5		100.3	-	229.8

Result
Operating profit / (loss) before amortisation of intangible assets (excluding software amortisation) and exceptional items		23.5	(31.5)	(3.9)	(11.9)
Amortisation of intangible assets (excluding software amortisation)		(0.1)	(10.9)	-	(11.0)
Exceptional items		(0.1)	(4.2)	-	(4.3)
Operating profit / (loss)		23.3	(46.6)	(3.9)	(27.2)
Total finance cost					(4.9)
Loss before taxation					(32.1)
Taxation credit					5.2
Loss for the year attributable to equity holders					(26.9)

	Discontinued Operations		Workwear	HORECA	All Other Segments	Total
	£m		£m	£m	£m	£m
Balance sheet information
Segment assets	-		130.9	239.1	1.8	371.8
Unallocated assets: Current income tax assets						3.3
Cash and cash equivalents						7.8
Total assets						382.9

Segment liabilities	(3.5)		(47.1)	(55.0)	(3.5)	(109.1)
Unallocated liabilities: Bank borrowings						(1.0)
Derivative financial liabilities						(2.1)
Post-employment benefit obligations						(14.9)
Deferred income tax liabilities						(1.2)
Total liabilities						(128.3)


Other information
Non-current asset additions
- Property, plant and equipment	-	6.0		14.7	-	20.7
- Right of use assets	-	3.4		1.8	-	5.2
- Textile rental items	-	14.1		9.8	-	23.9
- Intangible software	-	1.0		-	-	1.0
- Customer contracts	-	-		1.2	-	1.2
Depreciation, impairment and amortisation expense
- Property, plant and equipment	-	5.3		11.2	-	16.5
- Right of use assets depreciation	-	2.2		4.5	0.1	6.8
- Right of use assets impairment	-	0.1		-	-	0.1
- Textile rental items depreciation	-	17.7		24.5	-	42.2
- Textile rental items impairment	-	-		0.6	-	0.6
- Customer contracts	-	0.1		10.9	-	11.0

The results, assets and liabilities of all segments arise in the Group's country of domicile, being the United Kingdom.

3 EXCEPTIONAL ITEMS

	2021	2020
	£m	£m


Costs in relation to business acquisition activity	(0.1)	-
Restructuring costs	-	(5.8)
Insurance claims	5.9	2.5
Other costs re insurance claims	(0.6)	-
Income from Parent Company Guarantees	1.5	-
Impairment losses re insurance claims	-	(1.0)
Total exceptional items	6.7	(4.3)

Current year exceptional items

Costs in relation to business acquisition activity

During the year, professional fees of £0.1 million were paid relating to the acquisition of Lilliput (Dunmurry) Limited. Further information relating to the acquisition is provided in note 19.

Insurance claims and other costs

During the prior year, a Workwear processing plant was destroyed as a result of a fire. Interim insurance proceeds of £5.2 million have been received during the current year. Costs of £0.4 million have been incurred for initial works to demolish the damaged building along with associated professional fees of £0.2 million. Negotiations are continuing with the insurers for a final settlement value which is expected to be received in 2022.

A further Workwear processing plant was damaged as a result of flooding during the previous year. Final settlement proceeds of £0.7 million were received during the current year in respect of this insurance claim.

Income from Parent Company Guarantees

During the period of ownership of the Facilities Management division the Company had given guarantees over the performance of contracts entered into by the division. As part of the disposal of the division the purchaser has agreed to pursue the release or transfer of obligations under the Parent Company guarantees and this is in process. The Sale and Purchase Agreement contains an indemnity from the purchaser to cover any loss in the event a claim is made prior to release. A further clause within the Sale and Purchase Agreement, obligated the purchaser to make an additional one-off payment in the event the business was subsequently sold. On 16 November 2021, the business was sold and therefore a payment of £1.5 million was made to the Group in respect of this obligation.

Prior year exceptional items

Restructuring costs

Restructuring costs include £4.7 million of redundancy costs relating to the realignment of the workforce in response to the impact of COVID-19 and £1.1 million in respect of the closure of the Workwear plant in Newmarket, of which £0.4 million related to redundancy costs.

Insurance claims and impairment losses

During the prior year, a Workwear processing plant was destroyed as a result of a fire. Plant and equipment with a net book value of £0.5 million and textile rental items with a net book value of £0.2 million were destroyed and have been written off. Interim insurance proceeds of £1.5 million were received.

A further Workwear processing plant was damaged as a result of flooding during the prior year. Plant and equipment with a net book value of £0.3 million was written off. Interim insurance proceeds of £1.0 million were received.

4 FINANCE COST

	2021		2020
	£m		£m

Finance cost:
- Interest payable on bank loans and overdrafts		1.4	2.0
- Discontinuance of hedge accounting on interest rate swaps previously designated as cash flow hedges		-	0.6
- (Gain) / loss on interest rate swaps not qualifying as hedges		(0.2)	0.1
- Amortisation of bank facility fees		0.3	0.4
- Finance costs on lease liabilities relating to IFRS 16 (note 14)		1.6	1.7
- Notional interest on post-employment benefit obligations (note 15)		0.2	0.1
Total finance cost		3.3	4.9

Following the equity placing in June 2020 which raised £82.7 million, the Group repaid its loans outstanding at that date. Hedge accounting was therefore discontinued at that date as the Group no longer had any loans for the Group's interest rate swaps to economically hedge. Accordingly, the Mark to Market value of £0.6 million, as at 30 June 2020, was transferred from equity and recognised as an expense within finance costs. The change in fair value on interest rate swaps was recognised directly within finance costs resulting in a £0.2 million credit (2020: £0.1 million charge).

5 ALTERNATIVE PERFORMANCE MEASURES (APMs)

Throughout this Preliminary Statement, we refer to a number of APMs. A reconciliation of the APMs used are shown below:

Adjusted profit / (loss) before taxation	2021	2020
	£m	£m
		Restated
Profit / (loss) before taxation	5.1	(32.1)
Amortisation of intangible assets (excluding software amortisation)	11.0	11.0
Exceptional items	(6.7)	4.3
Adjusted profit / (loss) before taxation	9.4	(16.8)
Taxation thereon	0.5	3.2
Adjusted profit / (loss) after taxation	9.9	(13.6)

Adjusted EBITDA	2021	2020
	£m	£m Restated
Operating profit / (loss) before amortisation of intangible assets (excluding software amortisation) and exceptional items	12.7	(11.9)
Software amortisation	0.1	-
Property, plant and equipment depreciation	16.8	16.5
Right of use asset depreciation	6.1	6.8
Textile rental items depreciation	32.2	42.2
Adjusted EBITDA	67.9	53.6

6 TAXATION

	2021	2020
	£m	£m

Current tax
UK corporation tax credit for the year	-	(3.7)
Adjustment in relation to previous years	(0.8)	(0.4)
Current tax credit for the year	(0.8)	(4.1)

Deferred tax
Origination and reversal of temporary differences	(3.0)	(1.9)
Changes in tax rate	1.6	0.7
Adjustment in relation to previous years	0.4	0.1
Deferred tax credit for the year	(1.0)	(1.1)
Total credit for taxation included in the Consolidated Income Statement	(1.8)	(5.2)

The tax credit for the year is lower than (2020: lower than) the effective rate of Corporation Tax in the UK of 19% (2020: 19%). A reconciliation is provided below:

	2021	2020
	£m	£m
		Restated
Profit / (loss) before taxation	5.1	(32.1)
Profit / (loss) before taxation multiplied by the effective rate of Corporation Tax in the UK	1.0	(6.1)

Factors affecting taxation charge for the year:
Non-taxable income	(0.4)	-
Tax effect of expenses not deductible for tax purposes	0.5	0.5
Impact of super deduction	(2.5)	-
Difference in current and deferred taxation rates	(1.6)	-
Changes in tax rate	1.6	0.7
Adjustments in relation to previous years	(0.4)	(0.3)
Total credit for taxation included in the Consolidated Income Statement	(1.8)	(5.2)

Taxation in relation to amortisation of intangible assets (excluding software amortisation) has increased the credit for taxation on continuing operations by £1.6 million (2020: £1.2 million increase). Taxation in relation to exceptional items has decreased the credit for taxation on continuing operations by £0.3 million (2020: £0.8 million increase).

The rate of UK corporation tax is currently 19.0%. The Finance Bill 2021 enacted provisions to increase the main rate of UK corporation tax to 25% from 6 April 2023 for businesses with profits of £250,000 or more. As such, deferred income tax balances at the balance sheet date have been measured at the tax rate expected to be applicable at the date the deferred income tax assets and liabilities are realised. Management has performed an assessment, for all material deferred income tax assets and liabilities, to determine the period over which the deferred assets and liabilities are forecast to be realised, which has resulted in an average deferred income tax rate of 23.3%.

The impact of the change in deferred tax rate has been a £1.6 million charge (2020: £0.7 million charge) in the Consolidated Income Statement and £nil (2020: £0.2 million credit) recognised within Other Comprehensive Income.

A capital allowance super deduction, which offers 130% first year relief on qualifying main rate plant and machinery investments until 31 March 2023, has been included within the tax calculations for 31 December 2021. This allowance provides a 30% permanent difference on our Textile Rental items given their short life nature. The impact of the super deduction to 31 December 2021 is a £2.5 million credit recognised within the Consolidated Income Statement.

During the year, a deferred taxation charge of £2.1 million (2020: £1.7 million credit) has been recognised in Other Comprehensive Income in relation to post-employment benefit obligations.

During the year, £nil relating to deferred taxation (2020: £0.2 million charge) has been recognised directly in Shareholders' equity.

7 DIVIDENDS

Whilst the Board recognises the importance of dividends to our Shareholders, this had to be balanced with the impact that COVID-19 has had on our business. As previously guided, the Board does not propose to declare a dividend in respect of 2021 but will keep future dividends under review and look to reinstate its dividend policy once there is more certainty that trading levels will return to, and remain at, more normal levels.

8 EARNINGS / (LOSS) PER SHARE	2021	2020
	£m	£m
		Restated
Profit / (loss) for the financial year from continuing operations attributable to Shareholders	6.9	(26.9)
Amortisation of intangible assets from continuing operations (net of taxation)	9.4	9.8
Exceptional costs from continuing operations (net of taxation)	(6.4)	3.5
Adjusted profit / (loss) from continuing operations attributable to Shareholders	9.9	(13.6)
Loss from discontinued operations attributable to Shareholders	(0.3)	-
Total profit / (loss) from all operations attributable to Shareholders	9.6	(13.6)

	No. of shares	No. of shares
Weighted average number of Ordinary shares	444,939,982	412,947,064
Potentially dilutive Ordinary shares	206,112	835,491
Diluted number of Ordinary shares	445,146,094	413,782,555

Basic earnings / (loss) per share
From continuing operations	1.6p	(6.5)p
From discontinuing operations	(0.1)p	-
From total operations	1.5p	(6.5)p
Adjustments for amortisation of intangible assets (continuing)	2.1p	2.4p
Adjustment for exceptional items (continuing)	(1.5)p	0.8p
Adjustment for exceptional items (discontinued)	0.1p	-
Adjusted basic earnings / (loss) per share (continuing)	2.2p	(3.3)p
Adjusted basic earnings / (loss) per share (discontinued)	-	-
Adjusted basic earnings / (loss) per share from total operations	2.2p	(3.3)p

Diluted earnings / (loss) per share
From continuing operations	1.6p	(6.5)p
From discontinuing operations	(0.1)p	-
From total operations	1.5p	(6.5)p
Adjustments for amortisation of intangible assets (continuing)	2.1p	2.4p
Adjustment for exceptional items (continuing)	(1.5)p	0.8p
Adjustment for exceptional items (discontinued)	0.1p	-
Adjusted diluted earnings / (loss) per share	2.2p	(3.3)p
Adjusted diluted earnings / (loss) per share (continuing)	2.2p	(3.3)p
Adjusted diluted earnings / (loss) per share (discontinued)	-	-
Adjusted diluted earnings / (loss) per share from total operations	2.2p	(3.3)p

Adjusted diluted earnings per share excluding super deduction (continuing)	1.7p	(3.3)p

Basic earnings per share is calculated using the weighted average number of Ordinary shares in issue during the year, excluding those held by the Employee Benefit Trust, based on the profit for the year attributable to Shareholders. Adjusted earnings per share figures are given to exclude the effects of amortisation of intangible assets (excluding software amortisation) and exceptional items, all net of taxation, and are considered to show the underlying performance of the Group.

As disclosed in note 6, the current year total taxation credit has benefited from £2.5 million of additional credit resulting from the capital allowance super deduction, which offers 130% first year relief on qualifying main rate plant and machinery investments until 31 March 2023. Due to the distortion this has on adjusted diluted earnings per share in 2021, an adjusted diluted earnings per share value excluding this benefit has been disclosed.

For diluted earnings per share, the weighted average number of Ordinary shares in issue is adjusted to assume conversion of all potentially dilutive Ordinary shares. The Company has potentially dilutive Ordinary shares arising from share options granted to employees. Options are dilutive under the SAYE scheme, where the exercise price together with the future IFRS 2 charge of the option is less than the average market price of the Company's Ordinary shares during the year. Options under the LTIP schemes, as defined by IFRS 2, are contingently issuable shares and are therefore only included within the calculation of diluted EPS if the performance conditions, as set out in the Directors' Remuneration Report, are satisfied at the end of the reporting period, irrespective of whether this is the end of the vesting period or not.

Potentially dilutive Ordinary shares are dilutive at the point, from a continuing operations level, when their conversion to Ordinary shares would decrease earnings per share or increase loss per share. For the year ended 31 December 2021 potentially dilutive Ordinary shares have been treated as dilutive, as their inclusion in the diluted earnings per share calculation decreases the loss per share from continuing operations. For the year ended 31 December 2020, potentially dilutive Ordinary shares have not been treated as dilutive, as their inclusion in the diluted earnings per share calculation decreases the loss 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 potentially dilutive Ordinary shares outstanding at the balance sheet date if those transactions had occurred before the end of the reporting period.

9 INTANGIBLE ASSETS

Capitalised software

	2021	2020
	£m	£m
		Restated
Opening net book value (as previously reported)	1.5	1.9
Prior year restatement (see note 21)	-	(1.4)
Additions	0.1	1.0
Amortisation	(0.1)	-
Closing net book value	1.5	1.5

Other intangible assets

	2021	2020
	£m	£m

Opening net book value	25.0	34.8
Additions	-	1.2
Business combinations (note 19)	1.2	-
Amortisation	(11.0)	(11.0)
Closing net book value	15.2	25.0

Other intangible assets comprise of customer contracts and relationships. During the year to 31 December 2021, the Group acquired customer contracts valued at £nil (2020: £1.2 million).

10 PROPERTY, PLANT AND EQUIPMENT

	2021 £m	2020 £m

Opening net book value	107.2	104.0
Additions	22.5	20.7
Business combinations (note 19)	0.5	-
Depreciation	(16.8)	(16.5)
Disposals	(0.1)	(1.0)
Closing net book value	113.3	107.2

CAPITAL COMMITMENTS

Orders placed for future capital expenditure contracted but not provided for in the financial statements are shown below:

	2021	2020
	£m	£m

Software	-	0.1
Property, plant and equipment	10.9	10.3

11 RIGHT OF USE ASSETS

	2021 £m	2020 £m

Opening net book value	38.5	39.0
Additions	1.0	5.2
Business combinations (note 19)	0.8	-
Reassessment/modification of assets previously recognised	1.3	1.9
Depreciation	(6.1)	(6.8)
Impairment losses	-	(0.1)
Disposals	-	(0.7)
Closing net book value	35.5	38.5

The reassessment / modification of assets relates to rental increases and extensions to lease terms that have been agreed during the year to 31 December 2021 and 31 December 2020 for property leases that were in place at the start of the relevant year.

12 TEXTILE RENTAL ITEMS

	2021	2020
	£m	£m

Opening net book value	35.6	56.8
Additions	46.7	23.9
Business combinations (note 19)	0.7	-
Depreciation	(32.2)	(42.2)
Impairment losses	-	(0.6)
Disposals	-	(0.2)
Special charges	(2.4)	(2.1)
Closing net book value	48.4	35.6

13 BORROWINGS

	2021	2020
	£m	£m
Current
Overdraft	9.6	1.2
Bank loans	(0.1)	(0.2)
	9.5	1.0

Non-current
Bank loans	18.0	(0.2)
	18.0	(0.2)
	27.5	0.8

At 31 December 2021, borrowings were secured and drawn down under a committed facility dated 21 February 2014, as amended and restated from time to time. This amended facility comprised a £135.0 million rolling credit facility (including an overdraft) which runs to August 2023 and a £40.0 million rolling credit facility which was cancelled by the Group on 11 February 2022.

Individual tranches are drawn down, in sterling, for periods of up to six months at SONIA rates of interest prevailing at the time of drawdown, plus the credit adjustment spread and the applicable margin. The margin for the period to 31 March 2022 is fixed at 2.00% and then varies between 1.25% and 2.25% thereafter.

The secured bank loans are stated net of unamortised issue costs of £0.1 million (2020: £0.4 million) of which £0.1 million is included within current borrowings (2020: £0.2 million) and £nil is included within non-current borrowings (2020: £0.2 million within non-current trade and other receivables as there were no borrowings at the end of the prior period for the fees to be offset against).

The Group has two net overdraft facilities for £5.0 million and £3.0 million with two of its principal bankers (2020: £5.0 million and £3.0 million).

As at 31 December 2021, the Group has in place the following hedging arrangements which have the effect of replacing LIBOR/SONIA with fixed rates as follows:

§ for £15.0 million of borrowings, LIBOR is replaced with 1.144% from 30 January 2019 to 31 January 2022; and

§ for £15.0 million of borrowings, LIBOR is replaced with 0.805% from 8 January 2020 to 9 January 2022. From 10 January 2022 to 9 January 2023, SONIA plus 0.1193% Credit Adjustment Spread is replaced with 0.805%.

As the final rate fix for the interest rate swap ending 31 January 2022 was 31 October 2021, when LIBOR was still being quoted, the transition from LIBOR to SONIA was not required for this swap.

Following the equity placing in June 2020 hedge accounting was discontinued at that date as the Group no longer had any loans for the Group's interest rate swaps to economically hedge. Hedge accounting has not been resumed.

Amounts drawn under the revolving credit facility have been classified as either current or non-current depending upon when the loan is expected to be repaid.

14 LEASE LIABILITIES

	2021 £m	2020 £m

Opening liabilities	40.6	40.4
New leases recognised	1.0	5.1
Business combinations (note 19)	0.8	-
Reassessment / modification of leases previously recognised	1.3	1.9
Lease payments	(7.3)	(7.8)
Disposals	(0.2)	(0.7)
Finance costs	1.6	1.7
Closing liabilities	37.8	40.6

Of which are:
Current lease liabilities	5.2	5.5
Non-current lease liabilities	32.6	35.1
Closing liabilities	37.8	40.6

The reassessment/modification of leases relates to rent increases and extensions to lease terms that have been agreed during the year.

15 POST-EMPLOYMENT BENEFIT OBLIGATIONS

The Group has applied the requirements of IAS 19, 'Employee Benefits' (revised June 2011) to its employee pension schemes and post-retirement healthcare benefits. The Group operates a defined benefit pension scheme, the Johnson Group Defined Benefit Scheme ('JGDBS'). The JGDBS was closed to future accrual on 31 December 2014.

As part of the Group's objective to reduce its overall pension deficit, deficit recovery payments of £1.9 million (2020: £1.9 million) were paid to the JGDBS. A net re-measurement and experience gain of £11.0 million has been recognised in the year to 31 December 2021.

The gross post-employment benefit obligation and associated deferred income tax asset thereon is shown below:

	2021 £m	2020 £m

Gross post-employment benefit obligation	2.1	14.9
Deferred income tax asset thereon	(0.4)	(2.8)
Net liability	1.7	12.1

The reconciliation of the opening gross post-employment benefit obligation to the closing gross post-employment benefit obligation is shown below:

	2021 £m	2020 £m

Opening gross post-employment benefit obligation	(14.9)	(7.3)
Notional interest	(0.2)	(0.1)
Deficit recovery payments	1.9	1.9
Utilisation of post-retirement healthcare obligation	0.1	-
Re-measurement and experience gains / (losses)	11.0	(9.4)
Closing gross post-employment benefit obligation	(2.1)	(14.9)

16 ANALYSIS OF NET DEBT

Net debt is calculated as total borrowings net of unamortised bank facility fees, less cash and cash equivalents. Non-cash changes represent the effects of the recognition and subsequent amortisation of fees relating to the bank facility, changing maturity profiles, debt acquired as part of an acquisition and the recognition of lease liabilities entered into during the year.

2021	At 31 December 2020	Cash Flow	Non-cash Changes	At 31 December 2021
	£m	£m	£m	£m

Debt due within one year	0.2	1.5	(1.6)	0.1
Debt due after more than one year	0.2	(18.0)	(0.2)	(18.0)
Lease liabilities (See note 14)	(40.6)	5.7	(2.9)	(37.8)
Total debt and lease financing	(40.2)	(10.8)	(4.7)	(55.7)
Cash and cash equivalents	6.6	(11.0)	-	(4.4)
Net debt	(33.6)	(21.8)	(4.7)	(60.1)

	At 1 January 2020	Cash Flow	Non-cash Changes	At 31 December 2020
2020	£m	£m	£m	£m

Debt due within one year	0.3	0.1	(0.2)	0.2
Debt due after more than one year	(84.7)	85.1	(0.2)	0.2
Lease liabilities	(40.4)	6.1	(6.3)	(40.6)
Total debt and lease financing	(124.8)	91.3	(6.7)	(40.2)
Cash and cash equivalents	(2.9)	9.5	-	6.6
Net debt	(127.7)	100.8	(6.7)	(33.6)

The cash and cash equivalents figures are comprised of the following balance sheet amounts:

	2021	2020
	£m	£m
Cash (Current assets)	5.2	7.8
Overdraft (Borrowings, Current liabilities)	(9.6)	(1.2)
	(4.4)	6.6

Lease liabilities are comprised of the following balance sheet amounts:

	2021	2020
	£m	£m

Amounts due within one year (Lease liabilities, Current liabilities)	(5.2)	(5.5)
Amounts due after more than one year (Lease liabilities, Non-current liabilities)	(32.6)	(35.1)
	(37.8)	(40.6)

17 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

	2021	2020
	£m	£m

(Decrease) / increase in cash in year	(11.0)	9.5
(Increase) / decrease in debt and lease financing	(10.8)	91.3
Change in net debt resulting from cash flows	(21.8)	100.8
Debt acquired through business acquisitions	(2.3)	-
Lease liabilities recognised during the period	(2.1)	(6.3)
Non-cash movement in unamortised bank facility fees	(0.3)	(0.4)
Movement in net debt	(26.5)	94.1
Opening net debt	(33.6)	(127.7)
Closing net debt	(60.1)	(33.6)

18 SHARE CAPITAL

		2021		2020
Issued and Fully Paid	Shares	£m	Shares	£m
Ordinary shares of 10p each:
- At start of year	444,211,100	44.4	369,760,824	37.0
- New shares issued	1,045,539	0.1	74,450,276	7.4
- At end of year	445,256,639	44.5	444,211,100	44.4

Issue of Ordinary shares of 10p each

An analysis of the new shares issued in each year is shown below:

			2021		2020
Issued and Fully Paid		Shares	£	Shares	£
Ordinary shares of 10p each:
- EBT	note a	560,000	56,000	300,000	30,000
- SAYE	note b	485,539	48,554	235,088	23,509
- Placing	note c	-	-	73,915,188	7,391,519
New shares issued		1,045,539	104,544	74,450,276	7,445,028

Note a: 560,000 (2020: 300,000) Ordinary shares were allotted to the EBT at nominal value to be used in relation to employee share option exercises. The total nominal value received was £56,000 (2020: £30,000). At the time of allotment, the EBT already held 8,388 (2020: 12,468) Ordinary shares of 10 pence each which, together with the 560,000 (2020: 300,000) newly allotted Ordinary shares of 10 pence each, were used to satisfy the exercise of 559,364 (2020: 304,080) LTIP options. In addition, the EBT did not sell any shares (2020: nil).

Note b: 485,539 (2020: 235,088) SAYE Scheme options were exercised with a total nominal value of £48,554 (2020: £23,509).

Note c: During the year ended 31 December 2020, the Company placed 73.9 million Ordinary shares (the '2020 Placing') with existing and new institutional investors raising net proceeds of £82.7 million (gross proceeds of £85.0 million less costs of £2.3 million) of which £7.4 million was credited to share capital. The 2020 Placing shares represented approximately 19.99 per cent. of the Company's existing share capital. The 2020 Placing price of 115 pence per share was equal to a discount of 7 per cent. to the 10-day average closing mid-market price of 123.6 pence per share, and 2 per cent. to the 10-day volume weighted average price of 117.5 pence per ordinary share both ending on 28 May 2020, being the last practicable day prior to the publication of the announcement.

Whilst the Directors were cognisant to the effect of any non-pre-emptive issuance on retail shareholders, due to the size of the transaction, and the short timeframe required to secure additional liquidity as part of the Company's response to the extreme circumstances of the COVID-19 pandemic, the 2020 Placing was undertaken on a non-pre-emptive basis using a cash box structure. The Company was, therefore, able to rely on Section 612 of the Companies Act 2006, which provides relief from the requirements under Section 610 of the Companies Act 2006 to create a share premium account. As such, no share premium was recorded in relation to the 2020 Placing shares and, instead, the net proceeds in excess of the nominal value of the 2020 Placing shares was credited to retained earnings. Such retained earnings are considered to be distributable for the purposes of the Companies Act 2006.

For the avoidance of doubt, existing share awards were not normalised to negate the dilutive effect of the 2020 Placing.

The total proceeds received on allotment in respect of all of the above transactions were £0.6 million (2020: £82.9 million) and were credited as follows:

	2021	2020
	£m	£m

Share capital	0.1	7.4
Share premium	0.5	0.2
Retained earnings	-	75.3
	0.6	82.9

19 BUSINESS COMBINATIONS

On 30 September 2021, the Group acquired 100% of the share capital of Lilliput (Dunmurry) Limited ('Lilliput') for a net consideration of £3.1 million (being gross consideration of £6.2 million adjusted for normalised working capital, cash and debt like items) plus associated fees. Since acquisition, Lilliput has incurred a loss of £0.2 million on revenue of £1.6 million. Had the business been acquired at the start of the period it is estimated that a loss of £0.7 million would have been generated from revenue of £5.2 million.

The provisional fair value of assets and liabilities acquired are as follows:

	Lilliput
	£m

Intangible assets - Goodwill	4.3
Intangible assets - Customer contracts	1.2
Property, plant and equipment	0.5
Right of use assets	0.8
Textile rental items	0.7
Trade and other receivables	1.4
Cash and cash equivalents / (overdraft)	(0.8)
Trade and other payables	(2.3)
Borrowings	(1.5)
Lease liabilities	(0.8)
Deferred income tax liability	(0.4)
Net consideration	3.1

Goodwill represents the deferred income tax arising on the recognition of the customer contracts plus the expected benefits to the wider Group arising from the acquisition. None of the acquired goodwill is expected to be deductible for tax purposes.

During 2020, the initial fair value of the trade and other payables acquired as part of the Fresh Linen acquisition was increased by £0.4 million, with a corresponding increase in goodwill.

Cash flows from business acquisition activity

The cash flows in relation to business acquisition activity are summarised below:

	2021	2020
	£m	£m
Net consideration payable	(3.1)	-
Deferred consideration	(0.8)	(0.9)
Overdraft acquired	(0.8)	-
Costs in relation to business acquisition activity	(0.1)	-
	(4.8)	(0.9)

In respect of deferred consideration:

§ the 2021 figure of £0.8 million reflects the payment of the Fresh Linen deferred consideration of £0.8 million recognised in 2019; and

§ the 2020 figure of £0.9 million reflects the payment of the PLS contingent consideration of £0.2 million recognised in 2017 along with the payment of £0.7 million for deferred consideration recognised in the prior year for Fresh Linen.

20 DISCONTINUED OPERATIONS

As previously disclosed, a contingent liability arose as a condition of the sale of the Facilities Management division in August 2013, whereby the Group had put in place indemnities, to the purchaser, in relation to any future amounts payable in respect of contingent consideration relating to the Nickleby acquisition which was completed in February 2012. The contingent consideration was settled during the year for £3.3 million including associated costs. £1.6 million has been recognised in the Consolidated Income Statement during 2021 in relation to this settlement.

On 4 January 2017, the Group disposed of the Dry Cleaning division. Provisions of £1.1 million, made at the point of disposal are no longer required and have been credited to the Consolidated Income Statement during 2021. Furthermore, property provisions of £0.5 million relating to historic disposals are also no longer required and have been credited back to the Consolidated Income Statement in 2021.

Income Statement

The Income Statement from discontinued operations included within the Consolidated Income Statement are as follows:

	2021	2020
	£m	£m
Exceptional items - Property provision	1.6	-
- Indemnity settlement	(1.6)	-
Operating result	-	-
Taxation	(0.3)	-
Retained loss from discontinued operations	(0.3)	-

Cash Flows

The cash flows from discontinued operations included within the Consolidated Statement of Cash Flows are as follows:

	2021	2020
	£m	£m
Net cash used in investing activities	(3.6)	-
Net cash flow from discontinued operations	(3.6)	-

Along with the settlement discussed above, a further cash settlement of £0.3 million was made in relation to indemnities made to the purchaser of the Dry Cleaning division. These amounts had been provided for in full at the point of disposal.

21 PRIOR YEAR RESTATEMENT

In 2021, the IFRS Interpretations Committee (IFRIC) published an agenda decision on the clarification of accounting in relation to

the configuration and customisation costs incurred in implementing Software-as-a-Service (SaaS) as follows:

· Amounts paid to the cloud vendor for configuration and customisation that are not distinct from access to the cloud software are expensed over the SaaS contract term.

· In limited circumstances, other configuration and customisation costs incurred in implementing SaaS arrangements may give rise to an identifiable intangible asset, for example, where code is created that is controlled by the entity.

· In all other instances, configuration and customisation costs will be expensed as the customisation and configuration services are received.

Following the agenda decision, the Group reviewed its costs incurred in respect of the configuration and customisation of cloud-based software applications implemented across the Group. As it was concluded that the Group's arrangements were not in the scope of IFRS 16, the costs were assessed in line with the guidance in IAS 38. The costs incurred did not create a resource controlled by the Group that is separate to the software and as such did not relate to a separately identifiable asset under IAS 38. The Group's accounting policy has therefore been revised so that such costs are expensed to the Consolidated Income Statement. As the configuration and customisation services were performed in conjunction with a third party, the costs should be expensed as and when the services are received. This clarification has been accounted for retrospectively resulting in a prior year restatement.

The Group identified £1.5 million of capitalised costs incurred prior to 1 January 2020 which should, in light of the agenda decision, have been expensed to the Consolidated Income Statement as incurred. Amortisation thereon of £0.1 million was charged to the Consolidated Income Statement prior to 1 January 2020 resulting in a £1.4 million adjustment to Intangible assets at 1 January 2020.

The impact of the prior year restatement on the Group's opening Consolidated Balance Sheet is as follows:

	As at 31 December 2019	Prior year adjustment	As at 1 January 2020
	£m	£m	£m
Non-current assets
Intangible assets	36.7	(1.4)	35.3

Current liabilities
Current income tax liabilities	4.5	(0.3)	4.2

Net assets	207.5	(1.1)	206.4

Capital and reserves attributable to the Company's Shareholders
Retained earnings	152.7	(1.1)	151.6
Total equity	207.5	(1.1)	206.4

The impact of the prior year restatement on the Group's retained earnings as at 1 January 2020 is as follows:

	£m

As at 31 December 2019	152.7
Recognition of cloud-based software costs	(1.5)
Reverse amortisation previously charged	0.1
Decrease in current income tax liabilities	0.3
Adjustment to retained earnings	(1.1)
As at 1 January 2020	151.6

As a result of the above costs being expensed through the Consolidated Income Statement prior to 1 January 2020, amortisation of the previously capitalised costs have been reversed in the year to 31 December 2020. This cost was £0.2 million. The impact of the prior year restatement on the Consolidated Income Statement for the year ended 31 December 2020 is as follows:

	Year ended 31 December 2020	Prior year adjustment	Year ended 31 December 2020
	£m	£m	£m
Operating loss before amortisation of intangible assets (excluding software amortisation) and exceptional items	(12.1)	0.2	(11.9)
Operating loss	(27.4)	0.2	(27.2)
Loss before taxation	(32.3)	0.2	(32.1)
Loss for the year attributable to equity holders	(27.1)	0.2	(26.9)

The impact of the prior year restatement on the Group's earnings per share for the year ended 31 December 2020 is as follows:

	Year ended 31 December 2020	Prior year adjustment	Year ended 31 December 2020
	p	p	p
Basic loss per share	(6.6)	0.1	(6.5)
Adjusted basic loss per share	(3.4)	0.1	(3.3)
Diluted earnings per share	(6.6)	0.1	(6.5)
Adjusted diluted earnings per share	(3.4)	0.1	(3.3)

22 EVENTS AFTER THE REPORTING PERIOD

There were no events occurring after the balance sheet date that require disclosing in accordance with IAS 10, 'Events after the reporting period'.

23 PRINCIPAL RISKS AND UNCERTAINTIES

Our Approach to Risk Management

The Board has overall accountability for ensuring that risk is effectively managed across the Group and, on behalf of the Board, the Audit Committee coordinates and reviews the effectiveness of the Group's risk management process.

Risks are reviewed by all of our businesses on an ongoing basis and are measured against a defined set of likelihood and impact criteria. This is captured in consistent reporting formats enabling the Audit Committee to review and consolidate risk information and summarise the principal risks and uncertainties facing the Group. Wherever possible, action is taken to mitigate, to an acceptable level, the potential impact of identified principal risks and uncertainties.

The Board formally reviews the most significant risks facing the Group at its February and August meetings, or more frequently should new matters arise. Throughout 2021, and other than as described below, the overall risk environment remained largely unchanged from that reported within the Group's 2020 Annual Report.

Risk Appetite

The Board interprets appetite for risk as the level of risk that the Company is willing to take in order to meet its strategic goals. The Board communicates its approach to, and appetite for, risk to the business through the strategy planning process and the internal risk governance and control frameworks. In determining its risk appetite, the Board recognises that a prudent and robust approach to risk assessment and mitigation must be carefully balanced with a degree of flexibility so that the entrepreneurial spirit which has greatly contributed to the success of the Group is not inhibited. Both the Board and the Audit Committee remain satisfied that the Group's internal risk control framework continues to provide the necessary element of flexibility without compromising the integrity of risk management and internal control systems.

Emerging Risks

The Board has established processes for identifying emerging risks, and horizon scanning for risks that may arise over the medium to long term. Emerging and potential changes to the Group's risk profile are identified through the Group's risk governance frameworks and processes, and through direct feedback from management, including changing operating conditions, market and consumer trends.

Principal Risks and Uncertainties

The principal risks and uncertainties affecting the Group are summarised below:

§ Economic Conditions

§ Failure of Strategy

§ Loss of a Processing Facility

§ Cost Inflation

§ Insufficient Processing Capacity

§ Customer Sales and Retention

§ Competition and Disruption

§ Recruitment, Retention and Motivation of Employees

§ Health and Safety

§ Compliance and Fraud

§ Information Systems and Technology

§ Climate Change and Energy Costs

Full details of the above risks, together with details on how the Board takes action to mitigate each risk, will be provided in our 2021 Annual Report. These risks and uncertainties do not comprise all of the risks that the Group may face and are not necessarily listed in any order of priority. Additional risks and uncertainties not presently known to the Board, or deemed to be less material, may also have an adverse effect on the Group.

In accordance with the provisions of the UK Corporate Governance Code, the Board has taken into consideration the principal risks and uncertainties in the context of determining whether to adopt the going concern basis of preparation and when assessing the future prospects of the Group.

24 STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have to prepare the Group and Company financial statements in accordance with UK-adopted international accounting standards. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period.

In preparing the financial statements, the Directors are required to:

§ select suitable accounting policies and then apply them consistently;

§ make judgments and accounting estimates that are reasonable and prudent; and

§ state whether applicable UK-adopted international accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors are responsible for preparing the Annual Report in accordance with applicable law and regulations. Having taken advice from the Audit Committee, the Directors consider that the Annual Report and the financial statements, taken as a whole, provides the information necessary to assess the Group and Company's performance, business model and strategy and is fair, balanced and understandable.

To the best of our knowledge:

§ the Group financial statements, prepared in accordance with UK-adopted international accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation, taken as a whole; and

§ the Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation, taken as a whole, together with a description of the principal risks and uncertainties that they face.

The Directors confirm that:

§ so far as each Director is aware, there is no relevant audit information of which the Group and Company's auditor is unaware; and

§ the Directors have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Group and Company's auditor is aware of that information.

25 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.jsg.com.

The 2021 Annual Report will be made available on the Group's website (www.jsg.com) on or before 25 March 2022.

26 APPROVAL

The Preliminary Announcement was approved by the Board of Directors on 7 March 2022.

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Johnson Service Group (JSG)

Friday, 20th December 2024

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