Full Year Results

RNS Number : 5278Q

Johnson Service Group PLC

01 March 2016

 

Johnson Service Group PLC

Preliminary Announcement for the Financial Year ended 31 December 2015

"Continuing strong growth"

Johnson Service Group PLC (the 'Group'), the leading UK textile services business, announces its Preliminary Results for the financial year ended 31 December 2015.

FINANCIAL HIGHLIGHTS

Continuing Operations	2015	2014	Increase
Revenue	£234.4m	£210.4m	11.4%
Adjusted Operating Profit1	£27.9m	£21.8m	28.0%
Adjusted Profit Before Tax2	£25.2m	£20.0m	26.0%
Adjusted Fully Diluted Earnings Per Share3	6.30p	5.20p	21.2%
Profit Before Tax	£12.7m	£11.6m	9.5%
Dividend	2.10p	1.70p	23.5%
Net Debt	£71.2m	£28.5m	n/a

OPERATIONAL HIGHLIGHTS

•	Continuing strong performance with Adjusted Operating Profit1 up 28% to £27.9 million and Adjusted Profit Before Tax2 up 26% to £25.2 million
•	Strategic acquisitions of London Linen and Ashbon successfully completed and immediately earnings enhancing
•	Textile Rental performed ahead of management expectations with high levels of customer retention
•	Restructuring of Drycleaning successfully completed; positive progress with our Waitrose partnership
•	Sustained increase in Adjusted Earnings Per Share; Final Dividend up 20.8% to 1.45p, making a full year dividend of 2.10p, an increase of 23.5%

Chris Sander, Chief Executive Officer of Johnson Service Group, commented:

"Our business sustained strong growth momentum in 2015, as demonstrated by the increase in revenue and adjusted profit before tax. The acquisitions of London Linen and Ashbon have successfully increased our reach and capability in the key hotel, restaurant and catering market.  The Group remains focused on ensuring the best possible service for our customers and sustainable returns for our shareholders. We are well placed to continue our growth both organically and through earnings enhancing acquisitions.''

1      'Adjusted Operating Profit' is before charging £3.5 million (2014: £1.6 million) of amortisation and impairment of intangible assets (excluding software amortisation) and £9.0 million (2014: £6.8 million) of exceptional items.

2      'Adjusted Profit Before Tax' is Adjusted Operating Profit, less total finance cost.

3      'Adjusted Fully Diluted Earnings per Share' is calculated using Adjusted Profit Before Tax, and deducting the charge to, or adding the credit for, taxation thereon.

ANALYST MEETING

The Company will present to analysts at 09:30 today at Investec, 2 Gresham St, London EC2V 7QP.  A copy of the presentation will be available on the Company's website (www.jsg.com) following the meeting.

ENQUIRIES

Johnson Service Group PLC
Chris Sander, CEO
Yvonne Monaghan, CFO
Tel: [phone] (on the day)
Tel: [phone] (thereafter)
Investec Investment Banking (NOMAD)	Bell Pottinger
David Flin	Rollo Crichton-Stuart
Matt Lewis	Gavin Davis
James Rudd	Greg Wood
Tel: [phone]	Tel: [phone]

www.jsg.com

Note

Throughout this statement 'adjusted operating profit' refers to continuing operating profit before amortisation and impairment of intangible assets (excluding software amortisation) and exceptional items.  'Adjusted profit before tax' refers to adjusted operating profit less total finance cost.

CHAIRMAN'S STATEMENT

Overview

I am delighted to report that the Group continues to make very good progress, delivering a result which is significantly ahead of 2014.  Our successful acquisitions of London Linen and Ashbon during the year have been immediately earnings enhancing.  Our Apparelmaster and Stalbridge businesses have continued to perform ahead of expectations.

Since the year end we have completed the acquisition of Zip Textiles (Services) Limited, which complements our existing Bourne business.

The implementation of the restructuring of our Drycleaning business has been completed successfully and we have further developed our relationship with Waitrose.

Given the encouraging performance of the Group, and our confidence in the future prospects of the business, we are proposing a final dividend of 1.45 pence per share, making a total dividend for the full year of 2.10 pence, an increase of 23.5%.

Group Results

Total revenue for the year increased to £234.4 million (2014: £210.4 million) benefiting from the acquisitions of London Linen in April 2015 and Ashbon in November 2015.  Underlying organic growth was 4.1%.  Adjusted operating profit increased by 28.0% to £27.9 million (2014: £21.8 million).  The key drivers of this performance are explained further in the Chief Executive's Operating Review.

Total finance cost was £2.7 million (2014: £1.8 million), reflecting higher average bank borrowings and an increase in the notional interest charge on net pension liabilities to £0.6 million (2014: £0.2 million).

Adjusted profit before tax increased by 26.0% to £25.2 million (2014: £20.0 million).

Amortisation and impairment of intangible assets (excluding software amortisation) increased to £3.5 million (2014: £1.6 million), reflecting the acquisitions of London Linen and Ashbon.  Exceptional items amounted to an aggregate charge of £9.0 million (2014: £6.8 million) and comprise the costs incurred in implementing the Drycleaning restructuring of £6.5 million as announced in January 2015, costs in relation to business acquisition activity and subsequent restructuring totalling £1.5 million, and the final costs arising from the successful relocation to our new workwear processing facility in Leeds amounting to £1.0 million.

Profit before tax was £12.7 million (2014: £11.6 million).

The effective tax rate on adjusted profit before tax was 19.5% (2014: 22.4%).  After the amortisation and impairment of intangible assets (excluding software amortisation) and exceptional items noted above, the post-tax profit from continuing operations was £10.3 million (2014: £8.6 million).

Adjusted fully diluted earnings per share from continuing operations were up 21.2% to 6.3 pence (2014: 5.2 pence).  Fully diluted earnings per share from continuing operations after exceptional items were 3.2 pence (2014: 2.9 pence).

Dividend

The Board is recommending a final dividend of 1.45 pence per share (2014: 1.20 pence), making a total dividend in respect of 2015 of 2.10 pence per share (2014: 1.70 pence), an increase of 23.5%.  The dividend increase reflects the significant increase in underlying adjusted profit before tax and our confidence in the prospects of the business.

The proposed final dividend, if approved by Shareholders, will be paid on 13 May 2016 to Shareholders on the register at close of business on 15 April 2016.  The ex-dividend date is 14 April 2016.

Finances

Total net debt at the end of 2015 was £71.2 million (December 2014: £28.5 million), with the strong trading performance and equity raising helping to offset the funding of the acquisitions of London Linen and Ashbon and the significant investment in capital expenditure in the wider business.  Interest cover, based on adjusted operating profit and excluding notional interest, was 13.3 times (2014: 13.6 times).

A new bank facility, which currently comprises a £100.0 million revolving credit facility, was agreed in April 2015 and runs to April 2020.

Interest payable on bank borrowings is based upon LIBOR plus a margin which is linked to gearing levels.  The applicable margin during 2015 was, on average, 1.61% and will be 1.75% for at least the first quarter of 2016.  We have mitigated our exposure to increases in LIBOR rates through the use of interest rate hedging.  Two interest rate hedging arrangements, each for £15.0 million of borrowings, have been entered into whereby LIBOR is replaced by a fixed rate of 1.4725% for the period January 2016 to January 2019 and 1.665% for the period January 2016 to January 2020.

Pension

The recorded net deficit after tax for all post-employment benefit obligations reduced to £13.0 million at December 2015 from £14.8 million at December 2014.  This reduction in deficit is due to an increase in the discount rate applied to liabilities.

Asset allocation has been reviewed with the Trustee and changes made to more appropriately match assets against the remaining scheme liabilities and to reduce interest rate and inflation risks to a more acceptable level.

Deficit recovery payments amounted to £1.9 million in 2015 (2014: £2.0 million) and are expected to be £1.9 million in 2016, as agreed with the Trustee following the completion of the triennial valuation as at 5 October 2013.

The notional interest charge, which is non-cash, amounted to £0.6 million in 2015 (2014: £0.2 million).  The charge for 2016 is dependent upon the level of the accounting deficit at 31 December 2015 and will, therefore, reduce slightly to £0.5 million for 2016.

Acquisition of Zip Textiles (Services) Limited ('Zip')

The acquisition of Zip was completed on 31 January 2016 for a cash consideration of £15.0 million on a debt free, cash free basis, together with additional debt of £2.7 million in relation to the financing of recently installed processing equipment.

Zip, which serves the high volume hotel and leisure sectors from its well invested processing plant in Birmingham, complements the Group's existing Bourne business.  The business has traded in line with our expectations during our first month of ownership.

Board Changes

Michael Del Mar is to retire as a Non-Executive Director on 5 May 2016 and we would like to thank him for his considerable contribution and loyalty to the Group over the last 12 years.  Nick Gregg joined the Board as a Non-Executive Director on 1 January 2016.

Employees

I would like to thank all employees in every part of the Group for their continuing commitment and dedication in delivering the excellent quality and service which is at the centre of our business. In particular, I would like to extend a warm welcome to those employees who have recently joined the Group.

Outlook

The strong performance of Textile Rental in 2015 has continued into the early part of 2016.  We have maintained our strategy of identifying businesses which complement our existing operations and which will add value, as demonstrated by the acquisition of Zip in January 2016.  The refocus of our Drycleaning business will help us drive improving performance.

The Board expects that the Group will continue to deliver a strong performance and successfully implement its strategy for 2016.

Paul Moody

Non-Executive Chairman

1 March 2016

CHIEF EXECUTIVE'S OPERATING REVIEW

Johnson Service Group consists of two segments: Drycleaning, which represents the origins of the Company; and Textile Rental which is now by far the largest element of the Group.  We have concentrated our recent efforts on a strategic expansion of our presence in the various sectors of Textile Rental, adding to the initial Apparelmaster and Stalbridge businesses.

In 2014 we expanded our range of services into high volume hotel linen rental with the acquisition of Bourne. In January 2016 we added Zip, based in Birmingham, to further serve this market.  Together, these two market leading businesses provide us with additional processing capacity, greater geographical reach and logistical efficiencies for our customers.

Within the restaurant and catering business we have also strengthened our existing market leading brand, Stalbridge, with the acquisition of London Linen in April 2015 and then, later in the year, the acquisition of Ashbon, based in Grantham.  As well as additional processing capacity, these acquisitions provide the business with greater geographical reach, logistical synergies and a more balanced operational footprint.

The Group is achieving its ambition to become a larger and more diverse textile rental business, with market leading brands that provide customers with highly valued levels of quality and service.

Textile Rental

The Textile Rental business trades through four brands in the UK.  'Apparelmaster' which predominantly provides workwear rental and laundry services to all industry sectors; 'Stalbridge' and 'London Linen' which provide premium linen services to the restaurant, hospitality and corporate events market; and 'Bourne', now joined by 'Zip' from January 2016, which provides high volume hotel linen.

A combination of strong organic growth combined with carefully planned strategic acquisitions saw Textile Rental revenue increase by 21.4% to £188.2 million (2014: £155.0 million) whilst adjusted operating profit rose by 23.5% to £29.4 million (2014: £23.8 million), both favourably impacted by the addition of London Linen in April 2015 and Ashbon in November 2015.  The associated margin increased from 15.4% to 15.6%.

Apparelmaster performed strongly; it delivered increased sales to both new and existing customers in a highly competitive market environment, resulting in improved adjusted operating profit, whilst maintaining operating margin.

The  resulting cash spend on textile rental items was marginally higher than expected, although the impact of this was partly offset by reduced energy prices and consumption, as the business has now successfully reduced its energy consumption per kilo of work cleaned for the fifth consecutive year.

The workwear business continues to make major investments in its facilities to drive efficiencies and improve productivity levels.  As part of this on-going investment a new £8.5 million state of the art processing facility in Leeds has been completed, and is now fully operational adding further processing capacity in the North of England.  Following a major refit and extension to our facility in Perth in the latter part of 2014, an upgrade has also been completed to the food processing facility at our site in Hull to increase capacity.  In total, capital projects to the value of £4.2 million were completed in Apparelmaster.

Customer retention levels once again remained very strong as the business continues to focus on quality improvements and responds to the demands of the market as identified in the annual customer survey programme.

As a result of the extreme weather at the end of the year our Lancaster facility suffered severe flooding.  Business continuity plans were quickly put in place in order to continue to service customers.  Further work is required in 2016 to bring the facility fully back on line and we are working with our insurers to ensure a smooth process, although this is not expected to have an impact on the trading performance of the business.

For 2016, Apparelmaster will continue to focus on enhanced service delivery whilst driving operational efficiencies.

Stalbridge produced a strong performance in 2015 with increased revenue thanks to substantial new sales wins and reduced customer churn.  Profitability and margin were improved due to lower central overheads and higher productivity as a result of targeted investments, which also include energy reduction features.

The focus of Stalbridge is on premium hotel, restaurant and catering locations with market leading service and quality, and flexible 'no contract' terms.  Customer satisfaction and loyalty is a cornerstone of the business and the results of the customer satisfaction survey, carried out by an external agency, showed a marked improvement in customer satisfaction during 2015 and a ranking in the top quartile of business service companies.

The Ashbon operation in Grantham, Lincolnshire, acquired in November 2015, has already been rebranded as Stalbridge and this will provide the platform for the business to consolidate its operations in the Midlands and North of England whilst improving customer service levels and efficiency.

To support continued development of the restaurant and catering markets, new product ranges have been developed and a new prospect database, combining a more sophisticated sales management tool, will be rolled out across the business throughout 2016.

London Linen, acquired in April 2015, consists of three processing units all based in Southall on the outskirts of West London.

The refit of one of the units processing chefs' wear and kitchen linen, which was underway at the time of acquisition, was completed in June.  Shortly after acquisition we announced plans for a major refit of the high quality table linen laundry with modern and highly efficient equipment.  The total investment will cost £4.0 million and the installation programme, which will take up to 15 months to complete, is expected to commence shortly.

In the latter part of 2015 a programme of customer migration commenced and, as a result, customers in the North East of England and Scotland have been transferred to the Stalbridge processing unit in Glasgow.

Organic sales growth and customer retention have continued to be strong and the business has performed to management's expectations.  We are very pleased with the progress made to date.

Bourne had another successful year, its first full year within the Textile Rental division.  Despite price competition being stronger than usual in the first half, Bourne has had some success in delivering new sales wins.  In addition high quality product and great service levels to our customer base resulted in high retention of business.

Hotel occupancy levels have been slightly higher during the year, with large hotel groups continuing to expand both via acquisition and new openings.  Business development focus has been on the budget hotel market as well as the four star hotel sector which have both experienced high growth rates over many years.

In common with the rest of the Group, Bourne continues to invest in improved plant and machinery to gain higher productivity and reduced energy consumption.  Technology has been adopted to produce a more objective measure of quality, which will continue to improve consistency and quality to our customers.

Investment has continued in IT with a customer portal roll out completed during the year replacing a paper based system.  This has led to greater accuracy of linen counts and better service levels to our customers.

The addition of Zip to the Group will allow us to better service high volume linen customers over a larger geographical area.

Drycleaning

Our Drycleaning business is represented across the UK through the highly recognised 'Johnsons Cleaners' brand and our London-based premium brand, 'Jeeves'.

Total revenue reduced to £46.2 million (2014: £55.4 million), reflecting the reduced number of branches in the portfolio, whilst adjusted operating profit increased to £2.0 million (2014: £1.6 million).

The branch reorganisation programme announced in January 2015 was completed to schedule, with the closure of 101 branches.  The total cost of the programme was budgeted at £6.5 million, and costs are in line with this budget.

The positive progress we have made in our partnership with Waitrose has been encouraging.  We have added a further 65 locations within the year to take our total in-store representation to 143.  The trading performance of these locations in 2015 provides a very positive platform for further revenue growth in 2016.

2015 saw the launch of our first e-commerce proposition through johnonsbridal.com.  The results were positive for this new channel and the platform will be further developed to broaden the online household proposition in 2016.

Chris Sander

Chief Executive Officer

1 March 2016

CONSOlidated Income Statement

Note		Year ended 31 December 2015	Year ended 31 December 2014
		£m	£m
REVENUE FROM CONTINUING OPERATIONS	2	234.4	210.4
OPERATING PROFIT	2	15.4	13.4
OPERATING PROFIT BEFORE AMORTISATION AND IMPAIRMENT OF INTANGIBLE ASSETS (EXCLUDING SOFTWARE AMORTISATION) AND EXCEPTIONAL ITEMS	2	27.9	21.8
Amortisation and impairment of intangible assets (excluding software amortisation)		(3.5)	(1.6)
Exceptional items	3
- Restructuring and other costs		(7.5)	(1.3)
- Costs in relation to business acquisition activity		(1.5)	(0.6)
- Pension costs		-	(4.9)
OPERATING PROFIT	2	15.4	13.4
Finance cost		(2.2)	(1.6)
Finance income		0.1	-
Notional interest		(0.6)	(0.2)
TOTAL FINANCE COST	4	(2.7)	(1.8)
PROFIT BEFORE TAXATION		12.7	11.6
Taxation charge *	6	(2.4)	(3.0)
PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS		10.3	8.6
RESULT FOR THE YEAR FROM DISCONTINUED OPERATIONS	12	-	-
PROFIT FOR THE YEAR ATTRIBUTABLE TO EQUITY HOLDERS		10.3	8.6
EARNINGS PER SHARE **	7
Basic earnings per share
From total operations		3.2p	2.9p
Fully diluted earnings per share
From total operations		3.2p	2.9p
Adjusted basic earnings per share
From total operations		6.3p	5.3p
Adjusted fully diluted earnings per share
From total operations		6.3p	5.2p

*     Including £0.8 million credit (2014: £0.4 million credit) relating to amortisation and impairment of intangible assets (excluding software amortisation) and £1.7 million credit (2014: £1.1 million credit) in relation to exceptional items of which £0.2 million credit (2014: £0.2 million charge) relates to the prior year.

**    Earnings per share from continuing operations are the same as for total operations.

Consolidated Statement of COMPREHENSIVE Income

	Year ended  31 December  2015  £m	Year ended   31 December 2014 £m
Profit for the year	10.3	8.6
Items that will not be subsequently reclassified to profit or loss
Re-measurement and experience gains / (losses) on post-employment benefit obligations	1.2	(11.5)
Taxation in respect of re-measurement and experience (gains) / losses	(0.2)	2.3
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 loss	(1.0)	(0.4)
- transfers to administrative cost	0.3	-
- transfers to finance cost	0.3	0.3
OTHER COMPREHENSIVE INCOME / (LOSS) FOR THE YEAR	0.4	(9.3)
TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE YEAR	10.7	(0.7)

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 1st January 2014	26.2				14.1	1.6	0.6	(0.3)	28.3	70.5
Profit for the year	-				-	-	-	-	8.6	8.6
Other comprehensive loss			-		-	-	-	(0.1)	(9.2)	(9.3)
Total comprehensive loss for the year		-			-	-	-	(0.1)	(0.6)	(0.7)
Share options (value of employee services)	-				-	-	-	-	0.4	0.4
Purchase of shares by the EBT*	-				-	-	-	-	(0.9)	(0.9)
Current tax on share options	-				-	-	-	-	1.2	1.2
Deferred tax on share options	-				-	-	-	-	(1.0)	(1.0)
Issue of share capital	3.8				0.4	-	-	-	10.2	14.4
Dividend paid	-				-	-	-	-	(3.9)	(3.9)
Transactions with Shareholders recognised directly in Shareholders' equity	3.8				0.4	-	-	-	6.0	10.2
Balance at 31st December 2014	30.0				14.5	1.6	0.6	(0.4)	33.7	80.0
Balance at 1st January 2015	30.0				14.5	1.6	0.6	(0.4)	33.7	80.0
Profit for the year	-				-	-	-	-	10.3	10.3
Other comprehensive (loss) / income		-			-	-	-	(0.4)	0.8	0.4
Total comprehensive (loss) / income for the year				-	-	-	-	(0.4)	11.1	10.7
Share options (value of employee services)	-				-	-	-	-	0.5	0.5
Deferred tax on share options	-				-	-	-	-	0.1	0.1
Issue of share capital	3.1				-	-	-	-	18.1	21.2
Dividend paid	-				-	-	-	-	(5.7)	(5.7)
Transactions with Shareholders recognised directly in Shareholders' equity	3.1				-	-	-	-	13.0	16.1
Balance at 31st December 2015	33.1				14.5	1.6	0.6	(0.8)	57.8	106.8

*     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 31st December 2015, the EBT held 20,739 shares (2014: 20,739).

Consolidated Balance Sheet

Note		As at 31 December 2015	As at 31 December 2014
		£m	£m
ASSETS
NON-CURRENT ASSETS
Goodwill		93.5	56.2
Intangible assets		36.6	11.7
Property, plant and equipment		58.2	51.3
Textile rental items		36.5	30.5
Trade and other receivables		0.4	3.3
Deferred income tax assets		3.4	4.6
		228.6	157.6
CURRENT ASSETS
Inventories		2.7	2.1
Trade and other receivables		40.5	30.3
Cash and cash equivalents		0.1	0.2
		43.3	32.6
LIABILITIES
CURRENT LIABILITIES
Trade and other payables		52.6	43.7
Current income tax liabilities		2.9	1.5
Borrowings		7.3	6.9
Derivative financial liabilities		0.3	-
Provisions		6.2	4.6
		69.3	56.7
NET CURRENT LIABILITIES		(26.0)	(24.1)
NON-CURRENT LIABILITIES
Post-employment benefit obligations	10	16.0	18.5
Deferred income tax liabilities		6.7	1.8
Trade and other payables		2.2	0.9
Borrowings		64.0	21.8
Derivative financial liabilities		0.6	0.4
Provisions		6.3	10.1
		95.8	53.5
NET ASSETS		106.8	80.0
CAPITAL AND RESERVES ATTRIBUTABLE TO THE COMPANY'S SHARE HOLDERS
Share capital		33.1	30.0
Share premium		14.5	14.5
Merger reserve		1.6	1.6
Capital redemption reserve		0.6	0.6
Hedge reserve		(0.8)	(0.4)
Retained earnings		57.8	33.7
TOTAL SHAREHOLDERS EQUITY		106.8	80.0

 Consolidated Statement OF Cash Flows

Note			Year ended 31 December 2015	Year ended 31 December 2014
			£m	£m
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year			10.3	8.6
Adjustments for:
Income tax charge / (credit)	- continuing operations	6	2.4	3.0
	- discontinued operations	12	-	(0.7)
Total finance cost	- continuing operations	4	2.7	1.8
Depreciation			33.0	28.3
Amortisation			3.6	1.6
Decrease in inventories			0.1	0.2
(Increase) / decrease in trade and other receivables			(0.8)	0.6
Increase in trade and other payables			2.5	1.6
Loss on disposal of business			-	0.4
Costs in relation to business acquisition activity			1.5	0.6
Deficit recovery payments in respect of post-employment benefit obligations			(1.9)	(2.0)
Share-based payments			0.5	0.4
Post-employment benefit obligations			(0.1)	4.6
Decrease in provisions			(2.3)	(3.1)
Cash generated from operations			51.5	45.9
Interest paid			(2.2)	(2.0)
Taxation paid			(2.3)	(0.1)
Net cash generated from operating activities			47.0	43.8
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of business (net of cash acquired)			(70.4)	(22.4)
Proceeds from sale of business (net of cash disposed)			0.9	0.1
Purchase of property, plant and equipment			(4.4)	(11.6)
Proceeds from sale of property, plant and equipment			0.1	0.1
Purchase of intangible assets			-	(0.1)
Purchase of textile rental items			(27.5)	(24.9)
Proceeds received in respect of special charges			2.2	1.9
Net cash used in investing activities			(99.1)	(56.9)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings			93.0	66.0
Repayment of borrowings			(54.3)	(70.0)
Capital element of finance leases			(1.6)	(0.8)
Purchase of own shares by EBT			-	(0.9)
Net proceeds from issue of Ordinary shares			21.2	14.4
Dividend paid			(5.7)	(3.9)
Net cash generated from financing activities			52.6	4.8
Net increase / (decrease) in cash and cash equivalents			0.5	(8.3)
Cash and cash equivalents at beginning of the year			(4.9)	3.4
Cash and cash equivalents at end of the year			(4.4)	(4.9)

Cash and cash equivalents at the end of the year include cash of £0.1 million and an overdraft of £4.5 million (2014: £0.2 million and £5.1 million respectively).

NOTES TO THE PRELIMINARY ANNOUNCEMENT

1          BASIS OF PREPARATION

The financial information contained within this Preliminary Announcement has been prepared on a going concern basis in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS), IFRS Interpretations Committee (IFRS IC) 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 2015 Annual Report.

The financial information set out within this Preliminary Announcement does not constitute the Company's statutory accounts for the years ended 31st December 2014 or 31st December 2015 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts.

Statutory accounts for 2014 have been delivered to the Registrar of Companies, and those for 2015 will be delivered as soon as practicable but not later than 30th April 2016.  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.

2          SEGMENT ANALYSIS

Segment information is presented based on the Group's management and internal reporting structure as at 31st December 2015.

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.  The Board determines the operating segments based on these reports and on the internal reporting structure.  For reporting purposes, in accordance with IFRS 8, the Board aggregates operating segments with similar economic characteristics and conditions into reporting segments, which form the basis of this reporting. The Board has identified two reporting segments being Textile Rental and Drycleaning.  Within the Textile Rental reporting segment, four operating segments have been identified being Apparelmaster, Stalbridge, Bourne and London Linen.  The Drycleaning reporting segment consists of one operating segment.

The Board assesses the performance of the reporting segments based on a measure of earnings before interest and tax, 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 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.  Any transactions between segments are reported in the relevant performance or position line items.  There have been no changes in measurement methods used compared to the prior year.

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

The exceptional items have been included within the appropriate business segment as shown on pages 13 to 14.

The Group comprises the following segments:

Textile Rental Supply and laundering of workwear garments, premium linen to the hotel, catering and corporate hospitality markets, linen to the volume hotel market and sale of ancillary items.		§  Apparelmaster §  Stalbridge (including Ashbon) §  Bourne §  London Linen
Drycleaning Provision of drycleaning, laundry and ironing services, carpet cleaning, upholstery cleaning, wedding dress cleaning and suede & leather cleaning.		§  Johnsons Cleaners §  Jeeves
All Other Segments Comprising of central and group costs.

Year ended 31st December 2015	Textile Rental		Drycleaning	All Other Segments	Total
Continuing	£m		£m	£m	£m
REVENUE	188.2		46.2	-	234.4
RESULT
Operating profit before amortisation and impairment of intangible assets (excluding software amortisation) and exceptional items		29.4	2.0	(3.5)	27.9
Amortisation and impairment of intangible assets (excluding software amortisation)	(3.5)		-	-	(3.5)
Exceptional items:
- Restructuring and other costs	(1.0)		(6.5)	-	(7.5)
- Costs in relation to business acquisition activity	(1.5)		-	-	(1.5)
Operating profit / (loss)	23.4		(4.5)	(3.5)	15.4
Total finance cost					(2.7)
Profit before taxation					12.7
Taxation					(2.4)
Profit for the year					10.3

	Discontinued Operations	Textile Rental	Drycleaning	All Other Segments	Total
	£m	£m	£m	£m	£m
OTHER INFORMATION
Non-current asset additions
- Property, plant and equipment	-	7.6	0.7	-	8.3
- Textile rental items	-	28.4	-	-	28.4
Depreciation and amortisation expense
- Property, plant and equipment	-	6.9	1.8	0.2	8.9
- Textile rental items	-	24.1	-	-	24.1
- Intangible software	-	0.1	-	-	0.1
- Customer contracts	-	3.5	-	-	3.5
BALANCE SHEET INFORMATION
Segment assets	1.5	234.6	19.2	13.1	268.4
Unallocated assets:     Deferred income tax assets					3.4
Cash and cash equivalents					0.1
Total assets					271.9
Segment liabilities	(2.8)	(51.5)	(16.9)	(3.1)	(74.3)
Unallocated liabilities: Deferred income tax liabilities					(6.7)
Bank borrowings					(64.3)
Current income tax liabilities					(2.9)
Derivative financial liabilities					(0.9)
Post-employment benefit obligations					(16.0)
Total liabilities					(165.1)

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

Year ended 31st December 2014	Textile Rental		Drycleaning	All Other Segments	Total
	£m		£m	£m	£m
REVENUE	155.0		55.4	-	210.4
RESULT
Operating profit before amortisation and impairment of intangible assets (excluding software amortisation) and exceptional items		23.8	1.6	(3.6)	21.8
Amortisation and impairment of intangible assets (excluding software amortisation)	(1.6)		-	-	(1.6)
Exceptional items:
- Restructuring and other costs	(1.3)		-	-	(1.3)
- Costs in relation to business acquisition activity	(0.6)		-	-	(0.6)
- Pension costs	-		-	(4.9)	(4.9)
Operating profit / (loss)	20.3		1.6	(8.5)	13.4
Total finance cost					(1.8)
Profit before taxation					11.6
Taxation					(3.0)
Profit for the year - continuing operations					8.6
Result for the period - discontinued operations					-
Profit for the year					8.6

	Discontinued Operations	Textile Rental	Drycleaning	All Other Segments	Total
	£m	£m	£m	£m	£m
OTHER INFORMATION
Non-current asset additions
- Property, plant and equipment	-	13.7	1.0	-	14.7
- Textile rental items	-	24.9	-	-	24.9
- Intangible software	-	-	0.1	-	0.1
Depreciation and amortisation expense
- Property, plant and equipment	-	6.0	2.0	0.2	8.2
- Textile rental items	-	20.1	-	-	20.1
- Customer contracts	-	1.6	-	-	1.6
BALANCE SHEET INFORMATION
Segment assets	1.1	148.5	20.9	14.9	185.4
Unallocated assets:    Deferred income tax assets					4.6
Cash and cash equivalents					0.2
Total assets					190.2
Segment liabilities	(4.1)	(37.2)	(17.7)	(3.4)	(62.4)
Unallocated liabilities: Deferred income tax liabilities					(1.8)
Bank borrowings					(25.6)
Current income tax liabilities					(1.5)
Derivative financial liabilities					(0.4)
Post-employment benefit obligations					(18.5)
Total liabilities					(110.2)

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

3          EXCEPTIONAL ITEMS

	2015	2014
	£m	£m
Restructuring and other costs - Textile Rental	(1.0)	(1.3)
- Drycleaning	(6.5)	-
	(7.5)	(1.3)
Costs in relation to business acquisition activity	(1.5)	(0.6)
Pension costs	-	(4.9)
Total exceptional items	(9.0)	(6.8)

Current year exceptional items

Restructuring and other costs - Textile Rental

A new processing facility has been constructed to replace an existing Textile Rental facility in Leeds.  The total cost of this relocation, excluding the capital investment, was £2.3 million, of which, £1.3 million was charged to exceptional items in 2014 with the remaining cost of £1.0 million charged to exceptional items in 2015. Of the total cost, £0.9 million was non-cash relating to the impairment of property, plant and equipment.

Restructuring and other costs - Drycleaning

As previously announced on 6th January 2015, the Drycleaning business continues to operate in a difficult high street environment.  In parallel with the strategy to develop alternative, more convenient collection and delivery locations, the lease profile of our existing estate was reviewed and 109 branches were identified, the majority of which had leases expiring in the two years to 2017, where renewal was unlikely to be financially viable.  Of these branches, 101 closed during 2015.

The charge to the Group's Income Statement for the restructuring of the Drycleaning business and associated property provisions is, in aggregate, £6.5 million net.  Of this charge £0.3 million was non-cash relating to the impairment of property, plant and equipment.

Costs in relation to business acquisition activity

During the year costs relating to business acquisition activity of £1.5 million have been recognised.  Professional fees of £0.5 million and Stamp Duty of £0.3 million were paid relating to the acquisition of London Linen.  Professional fees of £0.2 million were paid in relation to the acquisition of Ashbon.  Costs of £0.4 million are in relation to reorganisation and integration costs relating to the two business acquisitions in the year.  The remainder of the costs relate to fees and expenses incurred during negotiations with undisclosed targets.

Prior year exceptional items

Restructuring and other costs - Textile Rental

As noted above, £1.3 million was charged in 2014 in relation to the relocation of a processing facility in Leeds.

Costs in relation to business acquisition activity

During the prior year costs relating to business acquisition activity of £0.6 million were recognised.  Professional fees of £0.4 million and Stamp Duty of £0.1 million were paid relating to the acquisition of Bourne.  The remainder of the costs relate to fees and expenses incurred during negotiations with undisclosed targets,

Pension costs

During the prior year, the Group closed its defined benefit pension scheme, the Johnson Group Defined Benefit Scheme (JGDBS) to future accrual.   The resulting past service cost of £4.7 million was recognised as an exceptional cost along with £0.2 million of associated fees.

4          TOTAL FINANCE COST

		2015	2014
		£m	£m
Finance cost:
- Interest payable on bank loans and overdrafts		(1.7)	(1.2)
- Amortisation of bank facility fees		(0.3)	(0.2)
- Provision discount unwind		(0.1)	(0.1)
- Interest payable on obligations under finance leases		(0.1)	(0.1)
Finance cost before notional interest on post-employment benefit obligations		(2.2)	(1.6)
Finance income		0.1	-
Notional interest on post-employment benefit obligations:
- Pension scheme liability		(0.6)	(0.1)
- Private healthcare		-	(0.1)
		(0.6)	(0.2)
Total finance cost		(2.7)	(1.8)

5          ADJUSTED PROFIT BEFORE AND AFTER TAXATION

		2015	2014
Continuing operations		£m	£m
Profit before taxation		12.7	11.6
Amortisation and impairment of intangible assets (excluding software amortisation)		3.5	1.6
Restructuring and other costs		7.5	1.3
Costs in relation to business acquisition activity		1.5	0.6
Pension costs		-	4.9
Adjusted profit before taxation		25.2	20.0
Taxation on adjusted profit		(4.9)	(4.5)
Adjusted profit after taxation		20.3	15.5

6           TAXATION

	2015	2014
	£m	£m
Current tax
UK corporation tax charge for the year	3.3	2.9
Adjustment in relation to previous years	(0.4)	(0.4)
Current tax charge for the year	2.9	2.5
Deferred tax
Origination and reversal of temporary differences	(0.2)	(0.1)
Changes in statutory tax rate	(0.3)	-
Adjustment in relation to previous years	-	0.6
Deferred tax (credit) / charge for the year	(0.5)	0.5
Total charge for taxation included in the Income Statement for continuing operations	2.4	3.0

The tax charge for the period is lower (2014: higher) than the effective rate of Corporation Tax in the UK of 20.25% (2014: 21.50%).  The differences are explained below:

	2015	2014
	£m	£m
Profit before taxation per the Income Statement	12.7	11.6
Profit before taxation multiplied by the effective rate of Corporation Tax in the UK	2.6	2.5
Factors affecting taxation charge for the year:
Tax effect of expenses not deductible for tax purposes	0.4	0.3
Changes in statutory tax rate	(0.2)	-
Adjustments to tax in respect of prior periods	(0.4)	0.2
Total charge for taxation included in the Income Statement for continuing operations	2.4	3.0

Taxation in relation to amortisation and impairment of intangible assets (excluding software amortisation) has reduced the charge by £0.8 million (2014: reduced charge by £0.4 million).  Taxation on exceptional items in the current year has reduced the charge for taxation relating to continuing operations by £1.7 million (2014: reduced charge by £1.1 million) of which £0.2 million credit (2014: £0.2 million charge) relates to the prior year.

The tax charge for the year is based on the effective rate of UK Corporation Tax for the period of 20.25% (2014: 21.50%).  Changes to the UK Corporation Tax rates were announced on 8th July 2015.  These changes were substantively enacted as part of Finance Bill 2015 on 26th October 2015. These include reductions to the main rate to reduce the rate to 19% from 1st April 2017 and to 18% from 1st April 2020.

Deferred income taxes 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 income tax assets and liabilities are forecast to be realised, which has resulted in an average deferred income tax rate of 19% being used to measure all deferred tax balances as at 31st December 2015. The impact of the change in tax rate to 19% has been a £0.3 million credit to the Income Statement and a £0.2 million credit recognised directly in Shareholders' equity.

During the year, a £nil credit relating to current taxation (2014: £1.2 million credit) and a credit of £0.1 million relating to deferred taxation (2014: charge of £1.0 million) have been recognised directly in Shareholders' equity.

7          EARNINGS PER SHARE

	2015	2014
	£m	£m
Profit for the financial year from continuing operations attributable to Shareholders	10.3	8.6
Result for the financial year from discontinued operations attributable to Shareholders	-	-
Amortisation and impairment of intangible assets from continuing operations (net of taxation)	2.7	1.2
Exceptional costs from continuing operations (net of taxation)	7.3	5.7
Exceptional credit from discontinued operations (net of taxation)	-	(0.2)
Adjusted profit attributable to shareholders	20.3	15.5
Adjusted loss attributable to Shareholders relating to discontinued operations	-	(0.2)
Adjusted profit attributable to Shareholders	20.3	15.3
Weighted average number of Ordinary shares	319,966,663	291,829,363
Dilutive potential Ordinary shares	3,239,840	5,001,228
Fully diluted number of Ordinary shares	323,206,503	296,830,591
Basic earnings per share
From continuing operations	3.2p	2.9p
From discontinued operations	-	-
From continuing and discontinued operations	3.2p	2.9p
Adjustment for amortisation and impairment of intangible assets (continuing operations)	0.8p	0.4p
Adjustment for exceptional items (continuing operations)	2.3p	2.0p
Adjusted basic earnings per share (continuing operations)	6.3p	5.3p
Adjusted basic earnings per share (discontinued operations)	-	-
Adjusted basic earnings per share from continuing and discontinued operations	6.3p	5.3p
Diluted earnings per share
From continuing operations	3.2p	2.9p
From discontinued operations	-	-
From continuing and discontinued operations	3.2p	2.9p
Adjustment for amortisation and impairment of intangible assets (continuing operations)	0.8p	0.4p
Adjustment for exceptional items (continuing operations)	2.3p	1.9p
Adjusted diluted earnings per share (continuing operations)	6.3p	5.2p
Adjusted diluted earnings per share (discontinued operations)	-	-
Adjusted diluted earnings per share from continuing and discontinued operations	6.3p	5.2p

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

Adjusted earnings per share figures are given to exclude the effects of amortisation and impairment of intangible assets (excluding software amortisation) and exceptional items, all net of taxation, and are considered to show the underlying performance 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 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 a continuing operations level, when their conversion to Ordinary shares would decrease earnings per share or increase loss per share from continuing operations.  For the years ended 31st December 2015 and 31st December 2014, 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 dilutive potential Ordinary shares outstanding at the balance sheet date if those transactions had occurred before the end of the reporting period.

8          DIVIDENDS

		2015	2014
Dividend per share
Final dividend proposed		1.45p	-
Interim dividend paid		0.65p	0.50p
Final dividend paid		‑	1.20p

		2015	2014
		£m	£m
Shareholders' funds utilised
Final dividend proposed		4.8	-
Interim dividend paid		2.1	1.5
Final dividend paid		-	3.6

The Directors propose the payment of a final dividend in respect of the year ended 31st December 2015 of 1.45 pence per share.  This will utilise Shareholders' funds of £4.8 million and will be paid, subject to Shareholder approval, on 13th May 2016 to Shareholders on the register of members on 15th April 2016.  The trustee of the EBT 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 2015 in respect of this proposed dividend.

9           CAPITAL EXPENDITURE AND COMMITMENTS

Capital Expenditure

During the year the Group acquired property, plant and equipment and intangible assets for a cost of £8.3 million (2014: £14.8 million), excluding property, plant and equipment and intangible assets acquired through business combinations.  In addition, textile rental items with a cost of £28.4 million were acquired in the year (2014: £24.9 million), excluding textile rental items acquired through business combinations.

Offsetting this, property, plant and equipment with a net book value of £0.1 million was disposed (2014: £0.1 million).  In addition, amounts received in respect of textile rental special charges were £2.2 million (2014: £1.9 million).

Capital Commitments

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

	2015	2014
	£m	£m
Property, plant and equipment	0.6	1.5

10        POST-EMPLOYMENT BENEFIT OBLIGATIONS

The Group has applied the requirements of IAS 19(R), '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 31st December 2014.

As part of the Group's objective to reduce its overall pension liability, deficit recovery payments of £1.9 million (2014: £2.0 million) were paid to the JGDBS. 

A net re-measurement and experience gain of £1.2 million (2014: loss of £11.5 million) has been recognised in the year to 31st December 2015.  This is as a result of the scheme's assets and liabilities performing differently to previous assumptions and changes to the assumptions used in calculating liabilities of the schemes.

The Group is currently undertaking a Flexible Retirement Option exercise. Deferred members aged over 55 received an offer from the Group during the second half of 2015 and members have received advice from an Independent Financial Advisor. Transfer value payments for those members accepting the offer are expected to be paid in early 2016.

The expected financial impact of the exercise has been recognised as a change in the assumption of the expected number of future transfers out of the Scheme. Last year this assumption was nil. As the transfer values to be paid are higher than the equivalent liabilities calculated using the IAS19 assumptions as at 31st December 2015, this has resulted in a loss estimated at £1.2 million, being recognised within the re-measurement gains and losses due to changes in demographic assumptions.

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

	2015 £m	2014 £m
Gross post-employment benefit obligation	16.0	18.5
Deferred income tax asset thereon	(3.0)	(3.7)
Net liability	13.0	14.8

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

	2015	2014
	£m	£m
Opening gross post-employment benefit obligation	18.5	4.3
Current service cost	-	0.4
Past service cost	-	4.7
Notional interest	0.6	0.2
Employer contributions	(1.9)	(2.6)
Re-measurement and experience (gains) / losses	(1.2)	11.5
Closing gross post-employment benefit obligation	16.0	18.5

11         CALLED-UP SHARE CAPITAL

				2015		2014
				£m		£m
Authorised
383,025,739 (2014: 383,025,739) Ordinary shares of 10p each				38.3		38.3
				2015		2014
Issued and Fully Paid			Shares	£m	Shares	£m
Ordinary shares of 10p each:
-  At start of period			299,985,593	30.0	262,326,451	26.2
-  New shares issued			30,584,430	3.1	37,659,142	3.8
-  At end of period			330,570,023	33.1	299,985,593	30.0

Issue of Ordinary shares of 10p each

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

				2015		2014
Issued and Fully Paid			Shares	£	Shares	£
Ordinary shares of 10p each:
-  Placing	note 1		30,011,802	3,001,180	26,253,940	2,625,394
-  EBT	note 2		-	-	9,090,000	909,000
-  Approved LTIP	note 3		78,632	7,863	1,140,281	114,028
-  SAYE	note 4		493,996	49,400	1,174,921	117,492
New shares issued			30,584,430	3,058,443	37,659,142	3,765,914

Note 1:    During the period the Group placed 30,011,802 (2014: 26,253,940) Ordinary shares with existing and new institutional investors raising net proceeds of £21.1 million (2014: £12.8 million) of which £3.0 million (2014: £2.6 million)  was credited to share capital.  The placing was undertaken using a cash box structure.  As a result, the Company was able to take relief under section 612 of the Companies Act 2006 from crediting share premium and instead transfer the net proceeds in excess of the nominal value to retained earnings.

Note 2:    During the year, nil (2014: 9,090,000) 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 in the year was £nil (2014: £909,000).   In the prior year, at the time of allotment, the EBT already held 31,000 Ordinary shares of 10 pence each which, together with the 9,090,000 newly allotted Ordinary shares of 10 pence each, were part used to satisfy the exercise of 9,100,261 LTIP options.

Note 3:     78,632 (2014: 1,140,281) Approved LTIP options were exercised with a total nominal value of £7,863 (2014: £114,028).

Note 4:     493,996 (2014: 1,174,921) SAYE Scheme options were exercised with a total nominal value of £49,400 (2014: £117,492).

The total proceeds received on allotment in respect of all of the above transactions were £21.2 million (2014: £14.4 million) and were credited as follows:

				2015		2014
				£m		£m
Share capital				3.1		3.8
Share premium				-		0.4
Retained earnings				18.1		10.2
				21.2		14.4

12        BUSINESS COMBINATIONS AND DISCONTINUED OPERATIONS

London Linen 

On 30th April 2015 the Group acquired the entire share capital of London Linen Supply Limited ('London Linen') for a net consideration of £64.9 million (being £69.3 million consideration less cash acquired of £4.4 million) plus associated fees of £0.8 million.

London Linen's operations are focused on the restaurant and catering linen rental market and it currently supplies some 900 customers at over 3,400 locations.  London Linen operates from a 76,000 sq ft leased premises located in Southall, West London, which processes, on average, 1.6 million pieces of linen per week, with a peak of some 2.0 million pieces. 

Since acquisition, London Linen has generated a profit of £2.3 million on revenue of £23.1 million.  Had the business been acquired at the start of the year it is estimated that profit of £3.6 million would have been generated on revenue of £33.2 million.

The fair values of the 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
Goodwill			-	35.1	-	35.1
Intangible assets - Customer contracts			-	25.5	-	25.5
Intangible assets - Software			0.6	-	-	0.6
Property, plant and equipment			6.6	-	(0.3)	6.3
Textile rental items			2.9	-	0.6	3.5
Inventories			1.0	-	(0.3)	0.7
Trade and other receivables			4.4	-	0.2	4.6
Cash			4.4	-	-	4.4
Trade and other payables			(4.6)	-	(0.2)	(4.8)
Current income tax liability			(0.7)	-	0.1	(0.6)
Deferred income tax liability			(0.9)	(5.1)	-	(6.0)
			13.7	55.5	0.1	69.3

Goodwill represents the deferred income tax arising on the recognition of the customer lists and 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.

Ashbon

On 27th November 2015, the Group acquired the entire share capital of Ashbon Services Limited ('Ashbon') for a net consideration of £5.5 million, of which £1.1 million was deferred, plus associated fees of £0.2 million.  £0.2 million of the deferred consideration was payable to the vendors upon finalisation of the completion accounts.  This amount was paid subsequent to the year end.  The remaining £0.9 million will be payable, either to the vendors, to HMRC, or proportionately between the vendors and HMRC, upon reaching agreement with HMRC as to certain employment taxation matters relating to prior years.  Such agreement is not expected within 12 months of the balance sheet date.

Ashbon, which serves the catering, hotel and leisure industries from its processing plant in Grantham, complements the Group's existing Stalbridge, Bourne and London Linen businesses, providing operational efficiencies and additional production capacity for the Midlands and North of England.

Since acquisition, Ashbon has generated a profit of £nil on revenue of £0.3 million.  Had the business been acquired at the start of the period it is estimated that profit of £0.5 million would have been generated on revenue of £5.1 million.

The fair values of the 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
Goodwill			-	2.2	-	2.2
Intangible assets - Customer contracts			-	2.4	-	2.4
Property, plant and equipment			1.3	-	-	1.3
Textile rental items			0.6	-	(0.2)	0.4
Trade and other receivables			2.7	-	-	2.7
Deferred income tax asset			0.1	-	-	0.1
Trade and other payables			(1.6)	-	-	(1.6)
Loan obligations			(0.9)	-	-	(0.9)
Finance Lease obligations			(0.4)	-	-	(0.4)
Current income tax liability			(0.2)	-	-	(0.2)
Deferred income tax liability			-	(0.5)	-	(0.5)
			1.6	4.1	(0.2)	5.5

Goodwill represents the deferred income tax arising on the recognition of the customer lists and 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.

Both London Linen and Ashbon have been included in the textile rental segment, London Linen as a separate CGU and Ashbon within the Stalbridge CGU.

Cash flows from business acquisition activity

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

					2015	2014
					£m	£m
Consideration paid					73.7	26.7
Cash acquired					(4.4)	(4.9)
Cost in relation to business acquisition activity					1.1	0.6
					70.4	22.4

A further £0.4 million of business acquisition costs are expected to be paid in 2016.

In 2014, the Group acquired the entire share capital of Bourne Services Group Limited along with its subsidiary company Bourne Textile Services Limited (together 'Bourne') for gross consideration of £26.7 million plus fees. Full details were provided in the 2014 Annual Report. There have been no changes to the fair values stated.

DISPOSALS AND DISCONTINUED OPERATIONS

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

No further costs for discontinued operations have been recognised in the year.

During 2015, deferred consideration of £0.8 million and contingent consideration of £0.2 million, both in relation to the disposal of the FM division in 2013, was received.

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

		2015	2014
		£m	£m
Proceeds from disposal		1.0	0.1
Payment of costs relating to disposals		(0.1)	-
Net proceeds from sale of business		0.9	0.1
Net cash used in operating activities		(1.2)	(0.8)
Net cash flow		(0.3)	(0.7)

13         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 bank facility fees, changing maturity profiles, debt acquired as part of an acquisition and new finance leases entered into during the year.

	At 1st January 2015	Cash Flow	Non-cash Changes	At 31st December 2015
	£m	£m	£m	£m
Cash and cash equivalents	(4.9)	0.5	-	(4.4)
Debt due within one year	(0.8)	0.3	(0.8)	(1.3)
Debt due after more than one year	(19.7)	(39.0)	0.2	(58.5)
Finance leases	(3.1)	1.6	(5.5)	(7.0)
	(28.5)	(36.6)	(6.1)	(71.2)

14         RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

	2015	2014
	£m	£m
Increase / (decrease) in cash in year	0.5	(8.3)
Cash (outflow) / inflow on change in debt and lease financing	(37.1)	4.8
Change in net debt resulting from cash flows	(36.6)	(3.5)
Debt acquired through business acquisition	(0.9)	-
Movement in unamortised bank facility fees	0.3	0.5
New finance leases	(5.5)	(1.0)
Movement in net debt	(42.7)	(4.0)
Opening net debt	(28.5)	(24.5)
Closing net debt	(71.2)	(28.5)

15        EVENTS AFTER THE REPORTING PERIOD

The following event occurring after the balance sheet date has been disclosed in accordance with IAS 10, 'Events after the reporting period'.

Acquisition

On 31st January 2016 the Group acquired the entire share capital of Zip Textiles (Services) Limited ('Zip') for a cash consideration of £15.0 million on a debt-free, cash-free basis, together with additional debt of £2.7 million in relation to the financing of recently installed processing equipment.

Zip, which serves the high volume hotel and leisure sectors from its processing plant in Birmingham, complements JSG's existing Bourne business and provides geographical reach, operational efficiencies and additional production capacity for central England, with the potential to expand this further.

Whilst expected to be immediately earnings enhancing, the main focus of this acquisition is to improve operational capacity and extend the Company's reach of existing hotel customers.

Zip reported revenue of £7.0 million for the year to 31st January 2015.  The business operates from a freehold property (book value of £4.4 million) which was extended in 2015 and fitted out with modern equipment at a cost of some £2.7 million.

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        DIRECTORS' RESPONSIBILITIES STATEMENT

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

The Company's Annual Report for the year ended 31st December 2015, which will be posted to Shareholders on or before 11th March 2016, contains the following statement regarding responsibility for the Strategic Report, the Directors' Report (including the Corporate Governance Report), the Board Report on Remuneration and the financial statements included within the Annual Report:

"Each of the Directors confirms that to the best of their knowledge:

·	the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and result of the Group;
·	the Strategic Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces;
·	there is no relevant audit information of which the Company's auditors are unaware; and
·	he/she has taken all the steps that he/she ought to have taken as a Director in order to make himself/ herself aware of any relevant audit information and to establish that the Company's auditors are aware of that information."

18        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 2015 Annual Report will be posted to Shareholders on or before 11th March 2016.

19         APPROVAL

The Preliminary Announcement was approved by the Board of Directors on 1st March 2016.

 

END

 

 

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