Final Results

RNS Number : 2031Z

Johnson Service Group PLC

05 March 2013

 



5 March 2013

Johnson Service Group PLC

Statement for the Financial Year ended 31 December 2012

Johnson Service Group PLC (the "Group"), the textile services and facilities management group announces its preliminary results for the financial year ended 31 December 2012.

OPERATIONAL HIGHLIGHTS

•       Textile Rental performed strongly through both organic revenue growth and acquisition and reported Adjusted Operating Profit up 11.3%

•       Drycleaning restructuring proceeding to plan with like for like sales up 1.5% in the second half

•       Facilities Management delivered strong growth and integration of Nickleby acquisition complete

•       Exceptional charge of £27.7 million (2011: £1.6 million credit), largely relating to Drycleaning restructuring announced in July 2012

•       Acquired Cannon and Nickleby businesses contributed to the Group's improved performance and underpin the Board's strategy to pursue selective, bolt-on acquisition opportunities

FINANCIAL HIGHLIGHTS

Continuing Operations	2012	2011 (restated)	Increase
Revenue	£251.0m	£233.9m	+7.3%
Revenue (excluding costs recharged to customers)	£244.2m	£228.6m	+6.8%
Adjusted Operating Profit*	£19.8m	£18.3m	+8.2%
Adjusted Profit Before Tax**	£16.3m	£14.8m	+10.1%
Adjusted Fully Diluted Earnings Per Share**	5.0p	4.2p	+19.0%
Dividend	1.1p	1.0p	+10.0%
Net Debt	£58.5m	£49.7m	n/a

*       Before charging £2.8m (2011: £2.6m) intangibles amortisation and impairment (excluding software amortisation) and exceptional items of £27.7m (2011: £1.6m credit).

**     Before charging £2.8m (2011: £2.6m) intangibles amortisation and impairment (excluding software amortisation) and exceptional items of £27.7m (2011: £1.6m credit) and, in 2011, exceptional finance costs of £0.3m.

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

"I am pleased to report that the Group has delivered a strong trading performance. We completed and integrated significant acquisitions in both Textile Rental and Facilities Management, which supplemented their organic growth and led to increased operating profit in both businesses. I am particularly encouraged that following the proactive measures taken in the Drycleaning business, we have seen an increase in like for like sales. The Board is pleased with the results and the momentum achieved in 2012 and we are confident that the Group will continue its progress in 2013." 

Enquiries:

 

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

 

www.johnsonplc.com

Note

Throughout this statement "adjusted operating profit" refers to continuing operating profit before amortisation and impairment of intangibles (excluding software amortisation) and exceptional items. "Adjusted profit before tax" refers to adjusted operating profit less finance costs, excluding, in 2011, exceptional finance costs in relation to bank fees. 2011 Income Statement figures have been restated to reflect the disposal of Alex Reid Ltd and the reanalysis of revenue as described in Note 1 "Basis of Preparation".

 

CHAIRMAN'S STATEMENT

Overview

I am pleased to report that the Group has delivered a strong trading performance for the year.  We have completed and integrated an acquisition in each of the Textile Services and FM divisions adding scale to both businesses.  The restructuring of the Drycleaning business announced at the half year was implemented to plan and has yielded positive results.  We are proposing a final dividend of 0.74 pence (2011: 0.67 pence) per share, making a total dividend for the full year of 1.1 pence (2011: 1.0 pence), an increase of 10% in line with our underlying profitability.

Group Results

Total continuing revenue for the year increased to £251.0 million (2011: £233.9 million), while revenue, excluding costs recharged to customers, was £244.2 million (2011: £228.6 million).  Continuing adjusted operating profit increased by 8.2% to £19.8 million (2011: £18.3 million). The key drivers of this performance are explained more fully in the Divisional Operating Review.

Net finance costs in 2012 were £3.5 million (2011: £3.8 million) with the benefit of the lower margin and LIBOR costs during the period more than offsetting the absence of any notional interest credit on net pension liabilities of £0.7 million which was included in 2011.

Adjusted profit before tax on a continuing basis increased by 10.1% to £16.3 million (2011: £14.8 million).

Amortisation and impairment of intangibles (excluding software amortisation) on continuing operations amounted to £2.8 million (2011: £2.6 million).

Net exceptional items from continuing operations for the year amounted to a charge of £27.7 million (2011: £1.6 million credit) and comprised £22.7 million in respect of the restructuring of the Drycleaning business, £0.7 million in respect of acquisition fees and expenses, £4.0 million in relation to the integration of the two businesses acquired in the first quarter of the year and £0.3 million in relation to further exercises to reduce the quantum and risk relating to the Group's defined benefit pension schemes.  Further exceptional costs in respect of the Drycleaning business restructuring amounting to £1.2 million are anticipated in 2013 giving a total expected cost of £23.9 million, as announced in July 2012. 

The tax charge on the adjusted profit before tax was at a rate of 21.6% (2011: 24.6%) with both years benefitting from prior year tax credits. After the exceptional items and amortisation and impairment of intangibles (excluding software amortisation) noted above, the post-tax loss from continuing operations was £8.6 million (2011: £10.2 million profit).

Adjusted fully diluted earnings per share from continuing operations were up 19% to 5.0p (2011: 4.2p) although for 2012, this is the same as adjusted basic earnings per share as potential Ordinary shares are classed as anti-dilutive in the given circumstances. Continuing fully diluted earnings per share after exceptional items and amortisation and impairment of intangibles (excluding software amortisation) were 3.4p loss (2011: 3.8p profit).

Dividend

The Board is recommending a final dividend of 0.74p per share (2011: 0.67p), making a total dividend in respect of 2012 of 1.1p per share (2011: 1.0p), an increase of 10%.  The dividend increase is reflective of the improvement in underlying adjusted profit before tax and the cash requirements for future expansion.

The proposed final dividend, if approved by Shareholders, will be paid on 17 May 2013 to Shareholders on the register at close of business on 19 April 2013.

Finances

Total net debt at the end of 2012 was £58.5 million (December 2011: £49.7 million) reflecting the acquisitions completed during the year.

Interest cover based on continuing adjusted operating profit was 5.7 times (2011: 5.2 times) and we continue to have significant headroom under existing bank facilities.

The existing £77.0 million bank facility matures in May 2015 and comprises a Term Loan of £52.0 million and £25.0 million Revolving Credit Facility (RCF), including overdraft.  Term loan repayments are scheduled as £1.5 million in June 2013 and £3.0 million in December 2013 at which point the RCF reduces to £22.5 million leaving available bank facilities of £70.0 million at the end of 2013.

Our interest cost in 2013 is protected from increases in LIBOR rates through the use of interest rate hedges.  £40.0 million of the Term Loan has been hedged so that LIBOR was substituted for a fixed rate of 3.0% for 2011 and 2012 reducing to 1.79% for three years from January 2013, with the balance of bank debt incurring interest linked to LIBOR.  Margins over LIBOR applicable to the full facility have reduced from an average rate of 3.2% for 2011 to 2.6% for 2012.

Acquisitions and Disposals

2012 was a significant year in terms of acquisitions with both the Cannon business and the Nickleby business contributing to the improved performance, in line with the Board's strategy to pursue selective, bolt-on acquisition opportunities.

The disposal of our small drycleaning and laundry products wholesale business, Alex Reid Limited, was completed in early December 2012.

Pension

The accounting rules for pensions are to change with effect from financial year 2013, such that the rate of return on assets is assumed to be equal to the discount rate applied to liabilities, therefore, for any defined benefit scheme which has a deficit the resultant notional interest will always be a charge.  Had this revised standard been adopted early, the resultant charge for 2012 would be £1.1 million, compared to no cost in 2012 under current accounting rules and would have reduced adjusted fully diluted earnings per share by 0.3 pence.  This is a non-cash charge and does not impact on scheme funding.  The anticipated notional interest charge for 2013 is £0.9 million.  The results for 2012 will be restated at the time that the results for 2013 are reported.

The recorded net deficit after tax for all post retirement benefit obligations has reduced to £14.0 million from £15.2 million at December 2011 due to the net impact of an out performance of returns on scheme assets offset by a reduction in the discount rate applied to liabilities.

During the last four years we have implemented a number of actions which aim to reduce both the size of and risk attaching to the defined benefit pension schemes, including in 2012 an enhanced partial transfer value exercise.  This exercise removed a further £1.5 million of liabilities from the Schemes.  We intend to take further action to reduce the scale and deficit of the schemes.

Deficit contributions directly to the schemes together with payments in respect of liability reducing activities amounted to £1.9 million in 2012 and are expected to be £1.9 million in 2013.

DIVISIONAL OPERATING REVIEW

TEXTILE SERVICES

The Textile Services division was created in July 2012 by the combination of the Textile Rental and Drycleaning businesses under the leadership of Chris Sander.  Chris has successfully led the Textile Rental business over recent years, delivering strong results in difficult markets.

Textile Rental

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

The business, which forms the largest part of the Group by far, performed very strongly and well above our expectations as the strategy for growing revenue both organically and by acquisition to underpin profit streams was successful in this competitive market environment.

Revenue for the business increased to £134.4 million (2011: £118.2 million), an increase of £16.2 million or 13.7% of which £6.3 million or 5.3% resulted from organic growth and £9.9 million came from the Cannon acquisition.  Adjusted operating profit increased by 11.3% to £17.7 million (2011: £15.9 million) with a 13.2% margin.

The business invested more year-on-year in new plant and equipment at its existing sites to ensure that it had sufficient capacity to absorb the additional production volumes transferred from the Cannon factories at Glasgow, Manchester, Bristol and Balham, which were closed within six months following acquisition. Total capital additions for the year were £2.1 million more than the previous year at £4.6 million (2011: £2.5 million).  Investment in additional energy efficient machinery continued to help drive down energy consumption assisting the business to meet the revised Governmental CCA targets.

Investment in textile rental stock increased by £2.5 million to £21.4 million (2011: £18.9 million) as a result of increased new business wins, the successful renewal of several major existing National clients and the impact of the Cannon business.

A significant amount of detailed planning was involved in delivering the operational benefits of the Cannon acquisition in a relatively short period.  At the same time the management teams and staff continued their focus on the core business which delivered increased new business sales, increased sales from existing customers and improved customer retention.

For 2013 the Apparelmaster workwear business will continue to focus on enhanced service delivery whilst driving operational efficiencies.  Stalbridge, which has continued to grow year on year, will focus on providing a premium linen service to high end customers, reducing the throughput for customers requiring low margin work.

The result for 2013 will reflect a full year contribution from the Cannon business.

Drycleaning

Our Drycleaning business operates under the well recognised brands of Johnson Cleaners, our national retail Drycleaning business and Jeeves of Belgravia our London based luxury Drycleaning business.

The results of a strategic review of the business were announced in early July 2012. The review concluded that we had a strong core estate of profitable branches which were benefitting from the expansion into new services. However, there were a substantial number of poorly located branches where the efforts to restore or maintain profitability were unlikely to be successful. A decision was therefore taken to close 103 branches, to relocate the back office to Preston and to combine the business with our existing Textile Rental operation to form a wider Textile Services division.  The anticipated cost of the programme of £23.9 million remains unchanged.  A charge of £22.7 million was included in exceptional costs in 2012, with the remaining £1.2 million expected to be charged in 2013.

The restructuring programme commenced in July and is proceeding to plan, with the 103 branches closed by mid-September and the back office relocated to the Textile Rental offices by early December.

The programme of change went smoothly and the reinvigorated business was re-launched at two divisional conferences which included the full rollout of the Empower programme enabling branch managers to use their entrepreneurial skills to drive the revenue and profit of their branch.  A variety of innovative incentive programmes were also introduced into the business for the latter months of the year in order to promote staff involvement and customer loyalty.

As a result of these many changes the core Drycleaning business experienced a like for like sales growth of 1.5% in the second half of the year compared to 0.1% in the first half of the year, resulting in a small but important growth of almost 1.0% for the year.  Revenue reduced by £4.6 million to £64.3 million (2011: £68.9 million) whilst adjusted operating profit stabilised at £1.3 million (2011: £1.8 million).

We are very pleased with the progress and the impact of the restructure.  It now provides a platform for the Drycleaning business to capitalise on its unique GreenEarth® Cleaning credentials and plans are underway to ensure that all stores have GreenEarth® processing machines and the new GreenEarth® store branding by the end of 2013 at which point we are planning a marketing campaign to aggressively promote our estate.

The newly introduced services continued to grow with our developing laundry business once again achieving double digit growth and this, together with a significantly rebased central cost structure, provides a sound basis for future growth in the profitability of the business.

FACILITIES MANAGEMENT

The Facilities Management (FM) division comprises SGP together with six Special Purpose Companies, with responsibility for PFI contracts in the Education and Healthcare Sectors.

SGP provides "smart" property and facilities management solutions.  The services include on site FM, planned and reactive maintenance, commercial agency and property management, rating and service charge management, building and technical services and energy management.  SGP's flexible delivery model ensures that customers receive a tailored service unique to their requirements.

During the year, certain elements of income that in 2011 had been recognised as costs recharged to customers were reanalysed.  Whilst this reanalysis had no impact on profit, costs recharged to customers were reduced by £3.5 million and therefore revenue excluding costs recharged to customers and cost of sales both increased by the same amount.  This reanalysis better reflects the underlying contractual nature of these costs.

On this new basis of recognition, Divisional revenue for 2012, excluding costs recharged to customers, was 9.6% higher at £45.5 million (2011: £41.5 million) whilst revenue including costs recharged to customers was 11.8% higher at £52.3 million (2011: £46.8 million).

In 2012, almost 55% of divisional revenue, excluding costs recharged to customers, was derived from long term PPP contracts (comprising both PFI and LIFT arrangements) which generally have remaining terms in excess of 15 years.

Despite the backdrop of a difficult trading environment for many of our customers, which has been reflected in our Technical Services business stream seeing a reduction in capital work undertaken by clients within the Retail sector, adjusted operating profit for the Division was increased by 9.8% to £4.5 million (2011: £4.1 million).

The acquisition in February 2012 of the business and assets of Nickleby & Co brought with it a strong portfolio of retail and insurance clients which have allowed SGP to further enhance its presence in the FM retail sector.  The integration of the business into SGP is now complete and has strengthened our core capabilities in leading edge unique IT software driven solutions and Procurement/Supply Chain, enabling us to continue to deliver market leading activity in these key areas.

In terms of specific business streams, SGP operates in six key areas of the FM market as follows:

Corporate FM

Corporate FM is SGP's largest business stream and in 2012 accounted for 32% of divisional revenue, excluding costs recharged to customers. 2012 saw increased revenue compared to 2011, largely relating to the full year effect of the Johnston Press and Camelot contracts which were mobilised in 2011, the mobilisation during the year of the 27 year PFI contract for the Hive (Worcester Library) and a one-off contract to manage part of the 2012 Olympic athletes' village.

Education FM

2012 was a steady year for Education, albeit without the benefit of the high levels of project activity experienced in 2011.  In 2012, this business stream accounted for 23% of divisional revenue, excluding costs recharged to customers.  During the year, we re-signed a contract with a prestigious Higher Education client to provide onsite FM services for a further five years.

Healthcare FM

Excluding costs recharged to customers, this business stream accounted for 18% of divisional revenue in 2012.  Revenue in the year was ahead of 2011 and benefitted from a number of new PCT and LIFT contracts coming on stream, towards the latter part of the year, which will have a full year benefit in 2013.

Retail FM

SGP provides facilities management services to approximately 25% of retail units on the high street occupied by major chains.  Revenue was significantly ahead of 2011, due largely to the acquisition of Nickleby.  During the year, a number of contracts were won and mobilised including Costa Coffee, Marstons and Welcome Break.

Technical Services

Following the acquisition of the ex-Jarvis PFI contracts in 2010, this business stream saw strong results having advised on and project managed a significant amount of lifecycle work.  Such levels of work were not repeated in 2012 which, together with the current reluctance of retailers to commit to capital projects, meant this business stream fell some way short of its prior year result.  However, we are now seeing an encouraging pipeline of opportunities.

Property Services

Whilst the smallest of the SGP business streams, in recent years we have invested in expanding the agency business, and in 2012 have seen encouraging revenue growth as a result.  To compliment our existing agency offices in London and Leicester we opened a further office in Manchester in March 2012.  We expect this business stream to continue to grow and increase its contribution.  Our ratings and service charge business has also increased throughout 2012, and now boasts some of the best known high street retail names as clients, including Arcadia, Tesco and Marks & Spencer.

The continued success in delivering for our customers has again been recognised within the FM industry.  In June, we were awarded the Partnerships Bulletin Award for "Best Facilities Provider 2012" for the second consecutive year, and in November SGP, together with Barnhill Community High, were awarded the PFM "2012 Partners in Education FM Award".  These awards recognise excellence in facilities management and partnership between client and provider.

Overall, our FM division has again delivered strong growth, and whilst the economic climate in 2013 is expected to remain challenging, the acquisition of the Nickleby business, stringent cost management, potential new business wins, alongside the significant revenue generated from existing long term PPP contracted income, makes the Division well placed to continue to show growth.

Staff

I would like to thank each and every employee for their continuing commitment and dedication to driving the Group forward and delivering service beyond our customers' expectations in an environment of considerable change.

Outlook

Strategic bolt-on acquisitions form a core part of our growth strategy and we are delighted to have acquired the Nickleby and Cannon Textile Care businesses.  We believe that there are further opportunities to expand the two Divisions.

The Textile Rental business has had another successful year with increased revenue and profit through both organic growth and through acquisition.  The full benefit of the impact of the business acquired from Cannon was only evident in the final months of 2012 and will therefore improve the full year 2013 performance.

It was really encouraging to see like for like growth in our Drycleaning business as a result of our proactive measures in 2012 and there is now an air of excitement in this business which is already performing well in 2013 despite the snow in January and February. I expect to see improved like for like growth for the current year.

SGP has once again achieved an increase in revenue and profitability winning some large customers during the year and I expect our very experienced Divisional management team to produce another year of improved results in 2013.

The Board is pleased with the results and the momentum achieved in 2012 and we are confident that the Group will continue its progress in 2013.

John Talbot

Executive Chairman

5 March 2013

Consolidated Income Statement

Note		Year ended 31 December 2012	Year ended 31 December 2011 (restated)
		£m	£m
REVENUE FROM CONTINUING OPERATIONS	2	251.0	233.9
Costs recharged to customers		(6.8)	(5.3)
Revenue excluding costs recharged to customers	2	244.2	228.6
OPERATING (LOSS) / PROFIT	2	(10.7)	17.3
OPERATING PROFIT BEFORE INTANGIBLES AMORTISATION AND IMPAIRMENT (EXCLUDING SOFTWARE AMORTISATION) AND EXCEPTIONAL ITEMS	2	19.8	18.3
Amortisation and impairment of intangible assets (excluding software amortisation)		(2.8)	(2.6)
Exceptional items	3
- Restructuring and other costs		(26.7)	-
- Costs in relation to business acquisition activity		(0.7)	-
- Pension costs and credits		(0.3)	1.6
OPERATING (LOSS) / PROFIT	2	(10.7)	17.3
Ordinary finance cost	4
- Finance cost		(3.5)	(4.4)
- Finance income		-	0.2
- Notional interest		-	0.7
		(3.5)	(3.5)
Exceptional finance cost	4	-	(0.3)
NET FINANCE COST		(3.5)	(3.8)
(LOSS) / PROFIT BEFORE TAXATION		(14.2)	13.5
Taxation credit / (charge)	6	5.6	(3.3)
(LOSS) / PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS		(8.6)	10.2
(LOSS) / PROFIT FOR THE YEAR FROM DISCONTINUED OPERATIONS	10	(2.3)	0.1
(LOSS) / PROFIT FOR THE YEAR ATTRIBUTABLE TO EQUITY HOLDERS		(10.9)	10.3
EARNINGS PER SHARE	7
Basic earnings per share
From continuing operations		(3.4p)	4.1p
From discontinued operations		(0.9p)	-
From continuing and discontinued operations		(4.3p)	4.1p
Diluted earnings per share
From continuing operations		(3.4p)	3.8p
From discontinued operations		(0.9p)	-
From continuing and discontinued operations		(4.3p)	3.8p
Adjusted basic earnings per share
From continuing operations		5.0p	4.5p
From discontinued operations		-	-
From continuing and discontinued operations		5.0p	4.5p
Adjusted diluted earnings per share
From continuing operations		5.0p	4.2p
From discontinued operations		-	-
From continuing and discontinued operations		5.0p	4.2p

Consolidated Statement of COMPREHENSIVE Income

	Year ended 31 December 2012	Year ended 31 December 2011
	£m	£m
(Loss) / profit for the year	(10.9)	10.3
Actuarial gain / (loss) on defined benefit pension schemes	0.2	(7.8)
Taxation in respect of actuarial (gain) / loss	(0.1)	1.9
Change in deferred tax due to change in tax rate	(0.4)	(0.3)
Cash flow hedges (net of taxation) - fair value loss	(0.6)	(0.6)
- transfers to interest	0.6	0.6
OTHER COMPREHENSIVE INCOME FOR THE YEAR	(0.3)	(6.2)
TOTAL COMPREHENSIVE INCOME  FOR THE YEAR	(11.2)	4.1

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

	Share Capital	Share Premium	Other Reserves	Retained Earnings	Total Equity
	£m	£m	£m	£m	£m
Balance at 1st January 2011	25.0	13.7	1.1	30.7	70.5
Total comprehensive income for the year	-	-	-	4.1	4.1
Share options (value of employee services)	-	-	-	0.8	0.8
Issue of share capital	0.4	0.1	-	-	0.5
Dividend paid	-	-	-	(2.2)	(2.2)
Balance at 31st December 2011	25.4	13.8	1.1	33.4	73.7
Balance at 1st January 2012	25.4	13.8	1.1	33.4	73.7
Total comprehensive income for the year	-	-	-	(11.2)	(11.2)
Share options (value of employee services)	-	-	-	0.8	0.8
Issue of share capital	0.2	0.1	-	-	0.3
Dividend paid	-	-	-	(2.6)	(2.6)
Balance at 31st December 2012	25.6	13.9	1.1	20.4	61.0

Consolidated Balance Sheet

Note		As at 31 December 2012	As at 31 December 2011
		£m	£m
ASSETS
NON-CURRENT ASSETS
Goodwill		84.2	87.6
Intangible assets		10.1	7.8
Property, plant and equipment		38.3	42.8
Textile rental items		26.9	23.2
Trade and other receivables		0.6	0.8
Deferred income tax assets		9.5	6.8
		169.6	169.0
CURRENT ASSETS
Inventories		2.3	4.3
Trade and other receivables		43.2	38.6
Cash and cash equivalents		1.5	5.7
		47.0	48.6
LIABILITIES
CURRENT LIABILITIES
Trade and other payables		50.1	46.6
Current income tax liabilities		0.7	5.7
Borrowings		10.0	2.7
Provisions		8.7	4.2
		69.5	59.2
NET CURRENT LIABILITIES		(22.5)	(10.6)
NON-CURRENT LIABILITIES
Retirement benefit obligations	9	18.2	20.2
Deferred income tax liabilities		0.2	1.4
Other non-current liabilities		1.9	2.1
Borrowings		48.7	51.4
Derivative financial liabilities		1.4	1.4
Provisions		15.7	8.2
		86.1	84.7
NET ASSETS		61.0	73.7
CAPITAL AND RESERVES ATTRIBUTABLE TO THE COMPANY'S EQUITY HOLDERS
Share capital		25.6	25.4
Share premium		13.9	13.8
Other reserves		1.1	1.1
Retained earnings		20.4	33.4
TOTAL EQUITY		61.0	73.7

 Consolidated Statement OF Cash Flows

Note		Year ended 31 December 2012	Year ended 31 December 2011 (restated)
		£m	£m
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss) / profit for the year		(10.9)	10.3
Adjustments for:
Income tax - continuing operations	6	(5.6)	3.3
- discontinued operations	10	(3.4)	(1.9)
Net finance cost	4	3.5	3.8
Depreciation		27.3	20.5
Amortisation		3.1	2.9
Decrease / (increase) in inventories		0.6	(0.6)
Increase in trade and other receivables		(6.3)	(3.3)
Increase in trade and other payables		4.0	2.2
Profit on sale of property, plant and equipment		(0.2)	(0.1)
Pre-tax loss on disposal of business		4.0	-
Acquisition fees charged to income		0.7	-
Additional contribution to defined benefit pension schemes		(1.9)	(1.5)
Share-based payment		0.8	0.8
Retirement benefit obligations		0.1	(2.2)
Provisions		12.4	(1.6)
Cash generated from operations		28.2	32.6
Interest paid		(4.5)	(3.4)
Taxation (paid) / received		(0.4)	5.1
Net cash flows generated from operating activities		23.3	34.3
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of business (net of cash acquired)		(7.2)	(0.2)
Proceeds from sale of business		1.5	-
Purchase of property, plant and equipment		(5.0)	(5.3)
Proceeds from sale of property, plant and equipment		0.4	0.3
Purchase of intangible assets		(0.4)	(0.2)
Purchase of textile rental items		(21.0)	(18.5)
Proceeds from sale of textile rental items		2.4	2.0
Interest received		-	0.2
Net cash used in investing activities		(29.3)	(21.7)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings		18.5	2.5
Repayments of borrowings		(14.5)	(6.5)
Capital element of finance leases		(0.4)	(0.7)
Net proceeds from issue of Ordinary shares		0.3	0.5
Dividends paid to Company Shareholders		(2.6)	(2.2)
Net cash generated from / (used in) financing activities		1.3	(6.4)
Net (decrease) / increase in cash and cash equivalents		(4.7)	6.2
Cash and cash equivalents at beginning of period		4.8	(1.4)
Cash and cash equivalents at end of period		0.1	4.8

NOTES TO THE PRELIMINARY ANNOUNCEMENT

1          BASIS OF PREPARATION

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

The financial information has been prepared using accounting policies consistent with those set out in the 2011 Annual Report.

The prior year Income Statement has been restated to reclassify the results of Alex Reid Limited from continuing to discontinued operations.  This has resulted in continuing profit before tax for 2011 decreasing by £0.2 million, and the continuing tax charge for 2011 reducing by £0.1 million.

In addition, certain elements of income within SGP Property & Facilities Management Limited that in 2011 had been recognised as costs recharged to customers were reanalysed.  Whilst this reanalysis has had no impact on profit, costs recharged to customers were reduced by £3.5 million and, therefore, revenue excluding costs recharged to customers and cost of sales both increased by the same amount.  This reanalysis better reflects the underlying contractual nature of these costs.

2          SEGMENT ANALYSIS

Segment information is presented in respect of the Group's business segments, which are based on the Group's management and internal reporting structure as at 31st December 2012.

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

The Board assesses the performance of the operating segments based on a measure of earnings before interest and tax, both including and excluding the effects of non-recurring items from the operating segments, such as restructuring costs and impairments when the impairment is the result of an isolated, non-recurring event.  Interest income and expenditure are not included in the result for each operating segment that is reviewed by the Board.  Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis, for example rental income received by Johnson Group Properties PLC is credited back, where appropriate, to the paying company for the purpose of segmental reporting.

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

Inter-segment pricing is determined on an arms length basis.  The exceptional items have been included within the appropriate business segment as shown on pages 15 to 16.

The Group comprises the following segments:

Textile Services Division - Textile Rental Workwear rental supply and laundering, linen rental for the premium hotel, catering and corporate hospitality markets and sale of ancillary items.		§ Johnsons Apparelmaster Limited § Stalbridge Linen Services
Textile Services Division - Drycleaning With over 350 stores nationwide, provides drycleaning, laundry and ironing services, carpet cleaning, upholstery cleaning, wedding dress cleaning and suede & leather cleaning.		§ Johnson Cleaners UK Limited § Jeeves of Belgravia Limited § Jeeves International Limited
Facilities Management Division Delivering building, facilities and property management services to public, commercial and retail organisations throughout the UK.		§ SGP Property & Facilities Management Limited § Barnhill School Services Limited § Balfron Schools Services Limited § Cardinal Heenan School Services Limited § Colfox School Services Limited § Dundee Healthcare Services Limited § East Ren Schools Services Limited
All Other Segments Comprising of central and head office costs.		§ Johnson Service Group PLC § Johnson Group Properties PLC § Semara Estates Limited

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

2          SEGMENT ANALYSIS continued

Year ended 31st December 2012	Textile Rental		Drycleaning	Facilities    Management	All Other Segments	Total
	£m		£m	£m	£m	£m
REVENUE
Revenue	134.4		64.3	52.7	-	251.4
Inter-segment revenue	-		-	(0.4)	-	(0.4)
REVENUE - CONTINUING	134.4		64.3	52.3	-	251.0
Revenue - discontinued (note 10)						7.7
Total revenue						258.7
REVENUE EXCLUDING COSTS RECHARGED TO CUSTOMERS
Revenue	134.4		64.3	45.9	-	244.6
Inter-segment revenue	-		-	(0.4)	-	(0.4)
REVENUE EXCLUDING COSTS RECHARGED TO CUSTOMERS - CONTINUING	134.4		64.3	45.5	-	244.2
Revenue - discontinued (note 10)						7.7
Total revenue excluding costs recharged to customers						251.9
RESULT
Operating profit before intangibles amortisation and impairment (excluding software amortisation) and exceptional items	17.7		1.3	4.5	(3.7)	19.8
Amortisation and impairment of intangible assets	(0.5)		-	(2.3)	-	(2.8)
Exceptional items
- Restructuring costs	(2.1)		(22.7)	(1.9)	-	(26.7)
- Business acquisition activity	(0.4)		-	(0.3)	-	(0.7)
- Pension costs	-		-	-	(0.3)	(0.3)
Operating profit / (loss) - continuing	14.7		(21.4)	-	(4.0)	(10.7)
Ordinary finance cost						(3.5)
Loss before taxation - continuing						(14.2)
Taxation						5.6
Loss for the period - continuing						(8.6)
Loss for the period - discontinued (note 10)						(2.3)
Loss for the period						(10.9)

		Discontinued Operations			Textile Rental		Drycleaning	Facilities    Management	All Other Segments	Total
			£m		£m		£m	£m	£m	£m
OTHER INFORMATION
Fixed asset additions
- Property, plant and equipment			-		4.6		1.0	0.5	-	6.1
- Textile rental items			-		21.4		-	-	-	21.4
- Intangible software			-		-		-	0.3	-	0.3
Depreciation and amortisation expense
- Property, plant and equipment			-		3.9		6.1	0.4	0.2	10.6
- Textile rental items			-		16.7		-	-	-	16.7
- Intangible software			-		-		0.1	0.2	-	0.3
Return on capital employed					38.2%		16.6%	327.4%
BALANCE SHEET INFORMATION
Segment assets			-		119.8		24.0	50.9	10.9	205.6
Unallocated assets
- Deferred income tax assets										9.5
- Cash and cash equivalents										1.5
Total assets										216.6
Segment liabilities			(3.2)		(29.9)		(25.8)	(13.0)	(4.9)	(76.8)
Unallocated liabilities
- Deferred income tax liabilities										(0.2)
- Bank borrowings										(56.8)
- Income tax liabilities										(0.7)
- Derivative financial liabilities										(1.4)
- Retirement benefit obligations										(19.7)
Total liabilities										(155.6)

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

2          SEGMENT ANALYSIS continued

Year ended 31st December 2011 (restated)	Textile Rental		Drycleaning	Facilities    Management	All Other Segments	Total
	£m		£m	£m	£m	£m
REVENUE
Revenue	118.2		68.9	47.4	-	234.5
Inter-segment revenue	-		-	(0.6)	-	(0.6)
REVENUE - CONTINUING	118.2		68.9	46.8	-	233.9
Revenue - discontinued (note 10)						8.4
Total revenue						242.3
REVENUE EXCLUDING COSTS RECHARGED TO CUSTOMERS
Revenue	118.2		68.9	42.1	-	229.2
Inter-segment revenue	-		-	(0.6)	-	(0.6)
REVENUE EXCLUDING COSTS RECHARGED TO CUSTOMERS - CONTINUING	118.2		68.9	41.5	-	228.6
Revenue - discontinued (note 10)						8.4
Total revenue excluding costs recharged to customers						237.0
RESULT
Operating profit before intangibles amortisation and impairment (excluding software amortisation) and exceptional items	15.9		1.8	4.1	(3.5)	18.3
Amortisation and impairment of intangible assets	(0.5)		-	(2.1)	-	(2.6)
Exceptional items
- Pension credits	-		-	-	1.6	1.6
Operating profit / (loss) - continuing	15.4		1.8	2.0	(1.9)	17.3
Ordinary finance cost						(3.5)
Exceptional finance cost						(0.3)
Profit before taxation - continuing						13.5
Taxation						(3.3)
Profit for the period - continuing						10.2
Profit for the period - discontinued (note 10)						0.1
Profit for the period						10.3

		Discontinued Operations			Textile Rental		Drycleaning	Facilities    Management	All Other Segments	Total
			£m		£m		£m	£m	£m	£m
OTHER INFORMATION
Fixed asset additions
- Property, plant and equipment			-		2.5		2.6	0.6	-	5.7
- Textile rental items			-		18.9		-	-	-	18.9
- Intangible software			-		-		-	0.2	-	0.2
Depreciation and amortisation expense
- Property, plant and equipment			-		4.0		2.5	0.4	0.2	7.1
- Textile rental items			-		13.4		-	-	-	13.4
- Intangible software			-		-		0.1	0.2	-	0.3
Return on capital employed					40.6%		14.9%	266.9%
BALANCE SHEET INFORMATION
Segment assets			4.4		105.5		34.0	49.2	12.0	205.1
Unallocated assets
- Deferred income tax assets										6.8
- Cash and cash equivalents										5.7
Total assets										217.6
Segment liabilities			(4.2)		(26.5)		(14.3)	(11.0)	(5.7)	(61.7)
Unallocated liabilities
- Deferred income tax liabilities										(1.4)
- Bank borrowings										(52.9)
- Income tax liabilities										(5.7)
- Derivative financial liabilities										(1.4)
- Retirement benefit obligations										(20.8)
Total liabilities										(143.9)

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

3          EXCEPTIONAL ITEMS

	2012	2011
	£m	£m
Restructuring costs - Textile Rental	(2.1)	-
- Drycleaning	(22.7)	-
- Facilities Management	(1.9)	-
	(26.7)	-
Costs in relation to business acquisition activity	(0.7)	-
Pension costs and credits	(0.3)	1.6
Total exceptional items	(27.7)	1.6

CURRENT YEAR EXCEPTIONAL ITEMS

Restructuring costs - Textile Rental

Following the acquisition of the business and specified garment, linen, mat and towel contracts and related assets of Cannon Textile Care (Cannon), the Textile Rental business reorganised its management and support structures such that they were better aligned to the combined business needs going forward.  Furthermore, redundancy costs have been recognised in the period to reflect the closure at certain of the Cannon sites acquired as a result of the majority of trade being transferred to existing plants within the business.

Although these costs were incurred directly as a result of the acquisition they have not been classified as 'costs in relation to business acquisition activity' as they more closely fit the definition of 'restructuring costs'.

Restructuring costs - Drycleaning

On the 4th July 2012 the Group announced a review of the Drycleaning business and the following recommendations of this review were implemented:

§ the combination of Drycleaning and Textile Rental into a single Textile Services division.  Benefits will include a unified branding strategy, significant cost savings and greater co-operation on sales opportunities;

§ the closure of over 100 underperforming branches by the year end reducing the size of the estate and achieving a corresponding reduction in back office and field teams and a reduced requirement for the warehousing and distribution of consumables; and

§ a significant acceleration of dilapidation provisions to increase flexibility on lease renewal.

The estimated charge to the Income Statement for the planned restructuring and property provisions relating to the Drycleaning business amounts to an aggregate £23.9 million, which is unchanged from the previous estimate although only £22.7 million of this amount has been recognised as an exceptional item in 2012, with the remaining estimated £1.2 million expected to be recognised in 2013.

Of the 2012 exceptional charge, £3.5 million is non-cash and only £2.1 million is an additional cash requirement relating to the restructuring cost, as the balance is already contractually committed cash spend in the current and future years (including rent, rates, insurance and dilapidations) irrespective of the restructuring plan. 

The taxation credit in respect of the £22.7 million exceptional cost above is £5.0 million.

Restructuring costs - Facilities Management

Following the acquisition of the business of Nickleby & Co Limited, the Facilities Management division reorganised its management and support structures such that they were better aligned to the combined business needs going forward.

Although these costs were directly as a result of the acquisition they have not been classified as 'costs in relation to business acquisition activity' as they more closely fit the definition of 'restructuring costs'.

Costs in relation to business acquisition activity

Relates to fees and expenses incurred in business acquisition activity, further details are provided in note 10.

Pension costs and credits

During the period an enhanced partial or full transfer value exercise was offered to those members of the Johnson Group Staff Pension scheme whose scheme pension was in excess of the minimum income requirement.  23 members were offered the enhancement; three accepted, resulting in an exceptional cost of £0.3 million (including fees) which has been included as a settlement loss.

PRIOR YEAR EXCEPTIONAL ITEMS

Pension costs and credits

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

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

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

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

4          NET FINANCE COST

	2012	2011
	£m	£m
Finance cost:
- Interest payable on bank loans and overdrafts	(2.9)	(3.4)
- Amortisation of bank loan issue costs	(0.5)	(0.8)
- Interest payable on obligations under finance leases	(0.1)	(0.1)
- Other finance costs	-	(0.1)
Finance cost	(3.5)	(4.4)
Finance income	-	0.2
Net finance cost before notional interest on defined benefit liabilities and assets	(3.5)	(4.2)
Notional interest on defined benefit obligations:
- Interest cost on pension scheme liabilities	(8.9)	(10.0)
- Expected return on pension scheme assets	9.0	10.8
- Private healthcare	(0.1)	(0.1)
	-	0.7
Ordinary finance cost	(3.5)	(3.5)
Exceptional finance cost	-	(0.3)
Net finance cost	(3.5)	(3.8)

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

Prospective amendments to the calculation of notional interest

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

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

Had the Group early adopted this amendment, the resultant notional interest charge for 2012 would have been £1.1 million, compared to the actual charge of nil using the existing methodology.  The anticipated notional interest charge for 2013 under the amended IAS19 rules is £0.9 million.

Notional interest is a non-cash item and does not impact on scheme funding.

5          ADJUSTED PROFIT BEFORE AND AFTER TAXATION

	2012	2011
	£m	£m
		(restated)
(Loss) / profit before taxation from continuing operations	(14.2)	13.5
Intangibles amortisation and impairment (excluding software amortisation)	2.8	2.6
Restructuring and other costs	26.7	-
Costs in relation to business acquisition activity	0.7	-
Pension costs and credits	0.3	(1.6)
Exceptional finance costs in respect of bank fees	-	0.3
Adjusted profit before taxation	16.3	14.8
Taxation on adjusted profit	(3.5)	(3.6)
Adjusted profit after taxation attributable to continuing operations	12.8	11.2

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

6          TAXATION

	2012	2011
	£m	£m
		(restated)
Current tax - continuing operations
UK Corporation Tax charge for the year	0.2	2.6
Adjustment in relation to previous years	(1.5)	(0.6)
Current tax (credit) / charge for the year	(1.3)	2.0
Deferred tax - continuing operations
Origination and reversal of temporary differences	(2.9)	1.4
Adjustment in relation to previous years	(1.4)	(0.1)
Deferred tax (credit) / charge for the year	(4.3)	1.3
Total (credit) / charge for taxation included in the Income Statement	(5.6)	3.3

The tax credit for the period is higher (2011: charge is lower) than the standard rate of Corporation Tax in the UK of 24.5% (2011: 26.5%).  The differences are explained below:

	2012	2011
	£m	£m
		(restated)
(Loss) / profit before taxation per the Income Statement	(14.2)	13.5
(Loss) / profit before taxation multiplied by the standard rate of Corporation Tax in the UK of 24.5% (2011: 26.5%)	(3.5)	3.6
Factors affecting taxation charge for the year:
Tax effect of expenses not deductible for tax purposes	0.8	0.5
Tax effect of non-taxable income	-	(0.1)
Adjustments to tax in respect of prior periods	(2.9)	(0.7)
Total (credit) / charge for taxation included in the Income Statement	(5.6)	3.3

Taxation on the exceptional items in the current year has increased the credit from taxation by £8.5 million (2011: increased the charge by £0.3 million) of which £2.3 million is in respect of prior periods to reflect the finalisation of tax computations for 2010.  Tax relief on intangibles amortisation and impairment (excluding software amortisation) has increased the credit for taxation by £0.6 million (2011: reduced the charge by £0.6 million).

The income tax expense for the year is based on the effective United Kingdom statutory rate of Corporation Tax for the period of 24.5% (2011: 26.5%).  The rate of Corporation Tax in the UK reduced from 26% to 24% on 1st April 2012 and will reduce to 23% on 1st April 2013.  The effect of these changes on the Income Statement charge in the year has not been material, but has resulted in a charge to reserves of £0.4 million.

A further reduction to the main rate is proposed to reduce the rate to 22% on 1st April 2014. This reduction is expected to be introduced in a future Finance Bill.  The effect of this change is currently being evaluated by the Group, however, the impact on the deferred tax balances due to the decreased Corporation Tax rate is not expected to be material.

During the prior year a tax repayment of £5.0 million was received relating to the degrouping charge previously paid by the Group on the disposal of the Corporatewear business in 2008.  In 2011 a tax credit of £1.5 million was recorded in the Income Statement.  During 2012 the calculation of the refund has been agreed with HMRC, and resulted in a repayment to HMRC of £0.4 million with the remaining £3.1 million being recorded as a tax credit in the current year.  The credit in both years is included within discontinued operations.

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

7          EARNINGS PER SHARE

	2012	2011
	£m	£m
		(restated)
(Loss) / profit for the year from continuing operations attributable to Ordinary Shareholders	(8.6)	10.2
(Loss) / profit for the year from discontinued operations attributable to Ordinary Shareholders	(2.3)	0.1
Intangibles amortisation and impairment from continuing operations (net of taxation)	2.2	2.0
Exceptional costs / (credits) from continuing operations (net of taxation)	19.2	(1.2)
Exceptional costs from discontinued operations (net of taxation)	2.3	-
Exceptional finance cost from continuing operations (net of taxation)	-	0.2
Adjusted profit attributable to Ordinary Shareholders	12.8	11.3
Weighted average number of Ordinary shares	254,039,462	249,834,780
Dilutive potential Ordinary shares*	18,404,814	20,998,433
Fully diluted number of Ordinary shares	272,444,276	270,833,213
Basic earnings per share
From continuing operations	(3.4p)	4.1p
From discontinued operations	(0.9p)	-
From continuing and discontinued operations	(4.3p)	4.1p
Adjustment for intangibles amortisation and impairment (continuing operations)	0.9p	0.8p
Adjustment for exceptional items (continuing operations)	7.5p	(0.5p)
Adjustment for exceptional items (discontinued operations)	0.9p	-
Adjustment for exceptional finance cost (continuing operations)	-	0.1p
Adjusted basic earnings per share (continuing operations)	5.0p	4.5p
Adjusted basic earnings per share (discontinued operations)	-	-
Adjusted basic earnings per share from continuing and discontinued operations	5.0p	4.5p
Diluted earnings per share
From continuing operations	(3.4p)	3.8p
From discontinued operations	(0.9p)	-
From continuing and discontinued operations	(4.3p)	3.8p
Adjustment for intangibles amortisation and impairment (continuing operations)	0.9p	0.7p
Adjustment for exceptional items (continuing operations)	7.5p	(0.4p)
Adjustment for exceptional items (discontinued operations)	0.9p	-
Adjustment for exceptional finance cost (continuing operations)	-	0.1p
Adjusted diluted earnings per share (continuing operations)	5.0p	4.2p
Adjusted diluted earnings per share (discontinued operations)	-	-
Adjusted diluted earnings per share from continuing and discontinued operations	5.0p	4.2p

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

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

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

For diluted earnings per share, the weighted average number of Ordinary shares in issue is adjusted to assume conversion of all dilutive potential Ordinary shares.  The Company has dilutive potential Ordinary shares arising from warrants issued to the Company's banks and share options granted to employees where the exercise price is less than the average market price of the Company's Ordinary shares during the year.

Potential Ordinary shares are dilutive at the point from continuing operations level when their conversion to Ordinary shares would decrease earnings per share or increase loss per share from continuing operations.  For the year ended 31st December 2012, potential Ordinary shares are anti-dilutive, as their inclusion in the diluted earnings per share calculation would reduce the loss from continuing operations, and hence have been excluded.  For the year ended 31st December 2011, potential Ordinary shares have been treated as dilutive, as their inclusion in the diluted earnings per share calculation decreases earnings per share from continuing operations.

There were no events occurring after the balance sheet date that would have changed significantly the number of Ordinary shares or potential Ordinary shares outstanding at the balance sheet date if those transactions had occurred before the end of the reporting period.

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

8          DIVIDENDS

		2012	2011
Dividend per share
Final dividend proposed		0.74p	-
Interim dividend paid		0.36p	0.33p
Final dividend paid		‑	0.67p

		2012	2011
		£m	£m
Shareholders' funds utilised
Final dividend proposed		1.9	-
Interim dividend paid		0.9	0.8
Final dividend paid		-	1.7

The Directors propose the payment of a final dividend in respect of the year ended 31st December 2012 of 0.74 pence per share.  This will utilise Shareholders' funds of £1.9 million and will be paid, subject to Shareholder approval, on 17th May 2013 to Shareholders on the register of members on 19th April 2013.  The trustee of the ESOP has waived the entitlement to receive dividends on the Ordinary shares held by the trust.  In accordance with IAS 10 there is no payable recognised at 31st December 2012 in respect of this proposed dividend.

9          RETIREMENT BENEFIT OBLIGATIONS

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

As part of the Group's objective to reduce its overall pension liability, additional contributions of £1.6 million and £0.3 million (2011: £1.2 million and £0.3 million) were paid to the Johnson Group Staff Pension Scheme ("Staff Scheme") and the WML Final Salary Pension Scheme respectively, during the period to 31st December 2012.  No additional contributions were paid to the Semara Augmented Pension Plan (2011: £nil).

Following discussions with the Group's appointed actuary it has been identified that an actuarial gain of £0.2 million (2011: loss of £7.8 million) should be recognised in the year to 31st December 2012.  This is as a result of the schemes' assets and liabilities performing differently to previous assumptions and changes to the assumptions used in calculating liabilities of the schemes.

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

	2012 £m	2011 £m
Gross retirement benefit liability	18.2	20.2
Deferred tax asset thereon	(4.2)	(5.0)
Net liability	14.0	15.2

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

	2012 £m	2011 £m
Opening gross retirement benefit liability	20.2	16.8
Current service cost	0.5	0.5
Past service gain	-	(2.2)
Settlement loss	0.2	0.2
Notional interest	-	(0.7)
Employer contributions	(2.4)	(2.1)
Actuarial (gain) / loss	(0.2)	7.8
Utilisation of healthcare provision	(0.1)	(0.1)
Closing gross retirement benefit liability	18.2	20.2

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

10        BUSINESS COMBINATIONS AND DISCONTINUED OPERATIONS

ACQUISITIONS

On 14th February 2012 the Group acquired the business and specified assets of Nickleby & Co Limited (Nickleby) for an initial cost of £1.0 million plus fees.  Deferred consideration, based on post completion performance of the business, may be paid up to a total of £5.0 million.  The initial estimate of the amount of deferred consideration payable is £0.5 million.   Since acquisition Nickleby has generated a profit of £0.2 million on revenue of £3.7 million.  Had the business been acquired at the start of the period it is estimated that a profit of £0.3 million would have been generated on revenue of £4.2 million.

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

	Net assets acquired	Fair value adjustments	Accounting policy realignment	Fair value of assets acquired
	£m	£m	£m	£m
Intangible assets - Customer lists and contracts	-	0.9	-	0.9
Intangible assets - Software	-	-	0.1	0.1
	-	0.9	0.1	1.0
Goodwill				0.5
Total				1.5
Consideration paid				1.0
Estimate of deferred consideration				0.5
Total consideration				1.5

On 31st March 2012 the Group acquired the Cannon Textile Care (Cannon) business and specified assets from OCS Group Limited for a cost of £5.5 million plus fees.  Since acquisition the business acquired has generated a profit of £1.0 million on revenue of £9.9 million.  Had the business been acquired at the start of the period it is estimated that profits of £1.7 million would have been generated on revenue of £12.0 million.

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

	Net assets acquired	Fair value adjustments	Accounting policy realignment	Fair value of assets acquired
	£m	£m	£m	£m
Intangible assets - Customer lists and contracts	-	3.8	-	3.8
Property plant and equipment	0.3	-	-	0.3
Rental stock items in circulation	1.4	-	-	1.4
	1.7	3.8	-	5.5
Goodwill				-
Total				5.5
Consideration paid				5.5

During the year to 31st December 2011 there were no business combinations.  Payments totalling £0.2 million were made during that period relating to acquisition costs incurred during the previous year.

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

		2012	2011
		£m	£m
Consideration for Cannon business		5.5	-
Fees paid in relation to Cannon business acquisition		0.4	-
Consideration for Nickleby business		1.0	-
Fees paid in relation to Nickleby business acquisition		0.3	-
Prior period acquisition fees		-	0.2
		7.2	0.2

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

10                BUSINESS COMBINATIONS AND DISCONTINUED OPERATIONS (continued)

DISPOSALS AND DISCONTINUED OPERATIONS

On 5th December 2012 Alex Reid Limited was disposed of for a consideration of £2.1 million.  The assets disposed of, and the resulting loss on disposal are shown in the table below.

			£m
Assets disposed of:
Goodwill			3.9
Intangible assets			0.1
Tangible Fixed Assets			0.1
Stock			1.5
Debtors			1.3
Cash			0.5
Creditors			(1.1)
Provisions			(0.5)
			5.8
Consideration			2.1
Related costs			(0.3)
Loss on disposal			4.0

The results for Alex Reid Limited, along with the loss on disposal, have been classed as discontinued operations. 

		2012	2011
		£m	£m
			(restated)
Revenue from discontinued operations		7.7	8.4
Loss before taxation from discontinued operations		(1.7)	(1.8)
Taxation		3.4	1.9
Profit for the period		1.7	0.1
Pre-tax loss on disposal (as above)		(4.0)	-
Taxation		-	-
Loss on disposal		(4.0)	-
Retained (loss) / profit from discontinued operations		(2.3)	0.1

During 2012 Alex Reid Limited had turnover of £7.7m and made a loss of £0.5 million.  In addition the Group has recognised £1.2 million of additional provisions relating to future lease commitments on properties previously used in operations that are now discontinued. 

The tax credit consists of £0.3 million relating to the above provisions together with £3.1 million relating to the refund of the de-grouping charge paid in respect of the disposal of the Corporatewear division in 2008. 

During 2011 discontinued operations include the profit of Alex Reid Limited of £0.2 million less £2.0 million of additional provisions that were recognised relating to future lease commitments of properties previously used in operations that are now discontinued.

The tax credit in 2011 consists of £0.5 million relating to the above provisions together with £1.5 million relating to the refund of the de-grouping tax charge paid in respect of the disposal of the Corporatewear division in 2008 offset by a charge of £0.1 million relating to Alex Reid Limited.

Cash flow from discontinued operations

The cash flows from discontinued operations included within the consolidated Cash Flow Statement are as follows:

		2012	2011
		£m	£m
			(restated)
Proceeds from disposal of Alex Reid Limited		2.1	-
Payment of costs related to disposal of Alex Reid Limited		(0.1)	-
Cash disposed of with Alex Reid Limited		(0.5)	-
Net proceeds from sale of business		1.5	-
Net cash used in operating activities (excluding income tax)		(0.5)	(0.7)
Tax (payment) / receipt		(0.4)	5.0
Net cash flow		0.6	4.3

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

11        ANALYSIS OF NET DEBT

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

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

	At 1st January 2012	Cash Flow	Other Non-cash Changes	At 31st December 2012
	£m	£m	£m	£m
Cash and cash equivalents - per Statement of Cash Flows	4.8	(4.7)	-	0.1
Less: Lifecycle funds	(1.3)	-	-	(1.3)
Cash and cash equivalents (excluding Lifecycle funds)	3.5	(4.7)	-	(1.2)
Debt due within one year	(1.5)	(4.0)	(2.6)	(8.1)
Debt due after more than one year	(50.5)	-	3.2	(47.3)
Finance leases	(1.2)	0.4	(1.1)	(1.9)
	(49.7)	(8.3)	(0.5)	(58.5)

12        RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

	2012	2011
	£m	£m
(Decrease) / increase in cash in year (per Statement of Cash Flows)	(4.7)	6.2
Movement in Lifecycle funds	-	0.5
(Decrease) / increase in cash excluding Lifecycle funds	(4.7)	6.7
Cash (outflow) / inflow on change in debt and lease financing	(3.6)	4.7
Change in net debt resulting from cash flows	(8.3)	11.4
Movement in unamortised issue costs of bank facility	0.6	(1.1)
New finance leases	(1.1)	(0.5)
Movement in net debt in year	(8.8)	9.8
Opening net debt	(49.7)	(59.5)
Closing net debt	(58.5)	(49.7)

13            PRIOR YEAR RESTATEMENT

The 2011 Income Statement has been restated as a result of the following:

§ the results for Alex Reid Limited are now classified as a discontinued operation; and

§ certain elements of income within SGP Property & Facilities Management Limited have been reanalysed to better reflect the underlying contractual nature of the associated costs.

Neither change impacts on the overall profit, net assets or cash flows of the Group.  The 2011 Income Statement impact of these changes is shown below:

	2011 Income Statement as Previously Reported £m		Alex Reid Adjustment £m	SGP Adjustment £m	2011 Income Statement as Restated £m
Revenue	242.3		(8.4)	-	233.9
Costs recharged to customers	(8.8)		-	3.5	(5.3)
Revenue excluding costs recharged to customers	233.5		(8.4)	3.5	228.6
Cost of sales	(161.5)		5.5	(3.5)	(159.5)
Administration expenses	(31.8)		1.7	-	(30.1)
Distribution costs	(21.7)		1.0	-	(20.7)
Operating profit before intangible amortisation (excluding software amortisation) and exceptional items	18.5		(0.2)	-	18.3
Amortisation of intangible assets (excluding software amortisation)		(2.6)	-	-	(2.6)
Exceptional item - pension credits	1.6		-	-	1.6
Operating profit	17.5		(0.2)	-	17.3
Net finance cost	(3.8)		-	-	(3.8)
Profit before tax continuing operations	13.7		(0.2)	-	13.5
Tax	(3.4)		0.1	-	(3.3)
Profit from continuing operations	10.3		(0.1)	-	10.2
Profit from discontinued operations	-		0.1	-	0.1
Profit for the year attributable to equity holders	10.3		-	-	10.3

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

14        EVENTS AFTER THE REPORTING PERIOD

There were no events after the balance sheet date that would require disclosure in accordance with IAS10, 'Events after the reporting period'.

15        ABRIDGED ACCOUNTS

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31st December 2012 or 31st December 2011 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts.

Statutory accounts for 2011 have been delivered to the Registrar of Companies, and those for 2012 will be delivered as soon as practicable but not later than 30th April 2013.  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.

16        FORWARD LOOKING STATEMENTS

Certain statements in this Preliminary Announcement are forward-looking. The terms 'expect', 'should be', 'will be' and similar expressions identify forward looking statements. Although the Board believes that the expectations reflected in these forward-looking statements are reasonable, such statements are subject to a number of risks and uncertainties and actual results and events could differ materially from those expressed or implied by these forward-looking statements.

17        PRELIMINARY ANNOUNCEMENT

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

The Annual Report will be posted to Shareholders on or before 15th March 2013.

18        APPROVAL

The Preliminary Announcement was approved by the Board of Directors on 5th March 2013.

 

END

 

 

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