JOHNSON SERVICE GROUP PLC 
7 August 2013
Johnson Service Group PLC (the "Company", the "Group" or "JSG") is pleased to announce the sale of its Facilities Management ("FM") activities (the "Disposal") to Bell Rock Bidco Limited, a new company formed to effect the acquisition, with financing provided from funds managed by Lyceum Capital Partners LLP. The consideration is £32.2 million on a debt free, cash free basis and subject to adjustments for normalised working capital.
After the adjustments and transaction costs, the initial net proceeds will be approximately £28.0 million with up to a further £2.2 million of deferred consideration potentially receivable. Of this deferred consideration £0.3 million is expected to be received within 12 months of completion and a further £0.8 million in August 2015. The receipt of the balance of £1.1 million is dependant on the future utilisation of deferred tax balances by the purchaser.
The FM activities are undertaken within the Johnson Workplace Management Limited ("JWML") subsidiary and largely comprise SGP Property & Facilities Management Limited ("SGP") and six related Special Purpose Companies, which undertake certain PFI contracts. The transaction is for the sale of the entire issued share capital of JWML. The total external revenue, including costs recharged to customers, of the FM activities for the year ended 31 December 2012 was £52.3 million and adjusted operating profit was £4.5 million. The reported segmental net assets relating to FM activities as at 31 December 2012 were £37.9 million.
The results of the strategic review undertaken at the beginning of 2012 are becoming evident. Over the last 18 months the Group has refocused the business on Textile Services, having acquired Cannon Textile Care in March 2012, rationalised the Drycleaning business closing over 100 under-performing branches and disposed of its non-core Alex Reid Limited business. The Disposal of FM represents a further step in the Board's strategy to create a single, focused Textile Services business.
Following the Disposal JSG will continue to operate through Johnsons Apparelmaster (Textile Rental), Stalbridge (Premium Linen Rental) and Johnson Cleaners and Jeeves of Belgravia (Drycleaning).
The initial net cash proceeds arising from the Disposal will be used to reduce net debt by an estimated £28.0 million, with £25.5 million of the Term Loan from the Company's banks cancelled. The bank facility remaining after the cancellation will be
£50.0 million, with no further repayments due prior to the expiration of the bank facility in May 2015. The Disposal is expected to be earnings dilutive in the short term pending any re-investment of the proceeds into Textile Services.
We believe there is potential to expand Textile Services both in terms of range of services and geography and we are actively pursuing potential opportunities. The headroom in our existing bank facility is available to support funding for investment in the business.
We also believe that the strengthening of the balance sheet and reduction in debt together with the improving profitability of the remaining businesses provides a strong and stable platform to allow future growth, both organically and potentially through selective acquisitions.
The Company currently has an interest rate hedge over £40.0 million of the Term Loan. Following the Disposal, £20.0 million of the hedge will be cancelled, resulting in a cash payment and charge to Discontinued Operations of approximately £0.6 million, with an annual interest saving of approximately £0.9 million. The residual borrowings on the unhedged portion of the Term Loan will be at LIBOR plus margin.
Under the terms of certain PPP contracts there are a number of Parent Company Guarantees ("PCG") in place which have, in line with market practice, been provided by JSG in order to guarantee the performance of the obligations of SGP. The purchaser has committed to work with JSG to complete the transfer of the obligations away from JSG. To the extent that this is not achieved within six months of completion a payment of up to £0.25 million per annum, pro rata for the proportion of PCG covered contracts remaining, will be paid to JSG until the liability is transferred. Appropriate indemnities and warranties are included in the sale and purchase agreement to limit the potential contingent liability of JSG. Under the terms of the
Agreement, JSG retains the liability for any deferred consideration potentially payable in relation to a previous acquisition.
Kevin Elliott, the Managing Director of the FM activities, has resigned from the Board of JSG with effect from completion of the Disposal.
John Talbot, Executive Chairman, commented:
"I am very pleased with this Disposal which effectively completes the long term plan of reorganising the Group, refocusing the business on its original core market in Textile Services and achieving normalised borrowing levels. There is a major opportunity for continued expansion within Textile Services based on a strong financial and operational platform.
I would like to thank the SGP management team, under the leadership of Kevin Elliott, for their contribution to the Group during my tenure as Chairman and wish them every success for the future."
James Rudd Graham Herring
David Flin John Coles
Tel: 020 7597 4000 Tel: 020 7653 9850 www.jsg.com
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