Johnson Service Regulatory News (JSG)

3rd March 2014

Johnson Service Group PLC

Johnson Service Group PLC, the Textile Services group (the "Group"), announces its preliminary results for the financial year ended 31st December 2013.

OPERATIONAL HIGHLIGHTS

• Textile Rental performed strongly, reporting Adjusted Operating Profit up 6.8% to £18.9 million

• Drycleaning Adjusted Operating Profit up 23.1% to £1.6 million

• Adjusted Operating Profit1 increased by 11.1% to £17.0 million (2012: £15.3 million)4

• Adjusted Profit Before Tax2 of £13.4 million (2012: £10.7 million)4

• Net debt of £24.5 million (December 2012: £58.5 million)

• Adjusted Fully Diluted Earnings per Share3 of 3.8 pence (2012: 3.4 pence)4

• 9.5% increase in final dividend to 0.81 pence (2012: 0.74 pence) making 1.21 pence (2012: 1.10 pence) for the year, an increase of 10%

• Disposal of Facilities Management division completed on 7th August 2013

• New Bank Facility signed providing significant headroom for future investment

ACQUISITION

• Acquisition of Bourne Services Group Limited for £22.0 million announced separately today

• Establishes the Group in the hotel linen market

• Acquisition funded, in part, by equity placing raising £12.8 million net

FINANCIAL HIGHLIGHTS

1 "Adjusted Operating Profit" relates to Continuing Operations and is before charging £0.6 million (2012: £0.5 million) of intangibles amortisation and impairment (excluding software amortisation) and £0.6 million (2012: £25.5 million) of exceptional items and where applicable taxation.

2 "Adjusted Profit Before Tax" is Adjusted Operating Profit, less finance costs.

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 attributable to those items.

4 The 2012 Income Statement figures have been restated to reflect a) the revisions to IAS19; and b) the disposal of the Facilities Management division which was completed on 7th August 2013.

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

"The Board is extremely pleased with the results for 2013 and we are confident that the Group will continue to deliver on its strategy for 2014. The current year has started very positively and I am delighted with the acquisition of the Bourne linen business. This is a significant step in our plan to expand the range of services offered by our Textile Rental business. The new equity which part funds the acquisition maintains the strength and flexibility in our balance sheet which is important as we continue to look for further value enhancing acquisitions."

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Note

Throughout this statement "adjusted operating profit" refers to continuing operating profit before intangibles amortisation and impairment (excluding software amortisation) and exceptional items. "Adjusted profit before tax" refers to adjusted operating profit less finance costs. In addition, the 2012 Income Statement figures have been restated to reflect a) the implementation of IAS19; and b) the disposal of the Facilities Management division which was completed on 7th August 2013.

 CHAIRMAN'S STATEMENT

Overview

I am pleased to report that the Group has delivered a strong result for the year building on the significant progress made in the first half. During the year we have completed the disposal of the Facilities Management (FM) division thereby refocusing the Group on our original core business of Textile Services. In line with this strategy we have today separately announced the acquisition of Bourne Services Group Ltd.

Given the encouraging performance of the Group we are proposing a final dividend of 0.81 pence (2012: 0.74 pence) per share, making a total dividend for the full year of 1.21 pence (2012: 1.10 pence), an increase of 10%, which indicates our confidence in the future.

Group Results

Total continuing revenue for the year reduced slightly to £193.6 million (2012: £198.7 million) with the impact of a reduced number of drycleaning branches being only partly offset by an increase in revenue from Textile Rental. Adjusted operating profit increased by 11.1% to £17.0 million (2012: £15.3 million). The key drivers of this performance are explained more fully in the Operating Review.

Net finance costs in 2013 were £3.6 million (2012: £4.6 million) with the benefit of the lower margin and, in the second half of the year, lower average borrowings following the disposal of FM.

Adjusted profit before tax increased by 25.2% to £13.4 million (2012: £10.7 million).

Intangibles amortisation and impairment (excluding software amortisation) for the year was £0.6 million (2012: £0.5 million) whilst net exceptional items from continuing operations for the year amounted to a charge of £0.6 million (2012: £25.5 million). Exceptional items comprised a £1.2 million charge in respect of the final part of the restructuring of the Drycleaning business, which commenced in 2012, and a £0.6 million credit in relation to further exercises to reduce the quantum and risk relating to the Group's defined benefit pension schemes.

Continuing profit before tax amounted to £12.2 million (2012: £15.3 million loss).

The tax charge on the adjusted profit before tax was at a rate of 22.6% (2012: 20.7%) with both years benefitting from prior year tax credits although offset to a large extent in 2013 by the impact of reducing tax rates on deferred tax assets. After the intangibles amortisation and impairment (excluding software amortisation) and exceptional items noted above, the post-tax profit from continuing operations was £9.8 million (2012: £11.7 million loss).

Adjusted fully diluted earnings per share from continuing operations were up 11.8% to 3.8p (2012: 3.4p). Continuing fully diluted earnings per share after exceptional items were 3.6p (2012: 4.6p loss).

Dividend

The Board is recommending a final dividend of 0.81p per share (2012: 0.74p), making a total dividend in respect of 2013 of 1.21p per share (2012: 1.10p), 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 16th May 2014 to Shareholders on the register at close of business on 22nd April 2014. The ex dividend date is 16th April 2014.

Finances

Total net debt at the end of 2013 was £24.5 million (December 2012: £58.5 million), with much of the reduction being as a result of the disposal of the FM division in August 2013.

Interest cover based on continuing adjusted operating profit was 4.7 times (2012: 3.3 times).

A new bank facility was signed in February 2014 for £60.0 million and runs to May 2018. In addition to the £60.0 million Revolving Credit Facility (RCF), including overdraft, an additional 364 day short term facility has been agreed for £10.0 million.

Our interest cost in 2014 is protected from increases in LIBOR rates through the use of interest rate hedges. £20.0 million of the bank loan has been hedged so that LIBOR is substituted for a fixed rate of 1.79% for three years from January 2013, with the balance of bank debt incurring interest linked to LIBOR. The margin over LIBOR applicable to the full facility was, on average, 2.6% for 2013 and will reduce further in 2014 with a fixed margin of 1.5% on the £10.0 million 364 day facility and an initial margin of 2.0% on the remaining facility.

Disposal of FM Division

The disposal of the Group's FM division was completed on 7th August 2013 for consideration of £32.2 million on a debt free, cash free basis and subject to adjustments for normalised working capital. After the adjustments and transaction costs, total net proceeds of £26.7 million were received in 2013 with up to a further £2.2 million of deferred and contingent consideration potentially receivable. The loss on disposal amounted to £7.9 million net of taxation and is reported within Discontinued Operations.

Acquisition and Fund Raising

We have today separately announced the acquisition of Bourne Services Group Ltd, a hotel linen supplier, for £22.0 million, debt free, cash free and subject to normalised working capital. This acquisition has been part funded by £12.8 million net proceeds from an equity placing, also announced today, with the balance being funded from bank debt.

On a pro-forma basis net debt would have increased from the reported £24.5 million as at 31st December 2013 to £34.0 million following the acquisition and the placing. The acquisition and placing taken together are expected to be immediately earnings enhancing.

Pension

The recorded net deficit after tax for all post retirement benefit obligations has reduced to £3.4 million from £14.0 million at December 2012 due to a combination of the impact of an out performance of returns on scheme assets, the impact of transferring assets and liabilities of the original three defined benefit schemes into one new scheme together with a small increase in the discount rate applied to liabilities.

As a result of the actions taken during 2013 we have removed a further £5.1 million of liabilities from the scheme.

Deficit recovery payments directly to the schemes amounted to £1.9 million in 2013 and are expected to be £2.1 million in 2014 although this is subject to review when the results of the triennial valuation, as at 5th October 2013, are finalised in the next few months.

The notional interest charge, which is non-cash, amounted to £0.8 million in 2013. The charge for 2014 is dependant upon the level of the accounting deficit at 31st December 2013, and therefore will reduce to £0.2 million for 2014.

Board Changes

This is my last Chairman's Statement before I retire from the Board on 1st May 2014. The Group is now in a strong financial position and is moving to a more conventional Board structure going forward.

I am delighted that Paul Moody will succeed me in the new role of Non Executive Chairman and I am sure that, under Paul's Chairmanship, the Group will continue to go from strength to strength.

As previously announced, Chris Sander was appointed as Chief Executive from 3rd January 2014.

I leave the Group with a strong executive management team who are well able to take advantage of the exciting times ahead.

OPERATING REVIEW

Within Textile Services are two business segments, Textile Rental, which is the largest business, and Drycleaning.

Textile Rental

The Textile Rental business performed very strongly in what is a highly competitive market environment.

As a business it 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.

Revenue increased by £1.8 million to £136.2 million (2012: £134.4 million). This includes a full year benefit from the 2012 acquisition and the previously reported business decision to give notice to its largest catering customer, which reduced revenue by some £3.0 million in year (£4.2 million on an annualised basis). Adjusted operating profit increased by 6.8% to £18.9 million (2012: £17.7 million) with margins increasing from 13.2% to 13.9%.

Despite strong price competition throughout the year the Textile Rental business achieved improved levels of both sales to new customers and additional sales to the existing customer portfolio. Stalbridge achieved particularly strong new sales growth with much of the revenue relating to the termination of the largest catering customer replaced by the end of the year.

At the start of the year we set out our strategy for the Textile Rental business and this has been implemented successfully. The Apparelmaster business has focused on enhancing service delivery but also achieving further operational efficiencies. Stalbridge was tasked with focusing on providing a premium linen service with reduced throughput for customers requiring low margin work. Both businesses achieved improvements in their respective supply chains.

The Cannon acquisition, completed in March 2012, was fully integrated in the first half of the year although further benefits are being realised from improving the efficiency from the investments made in new plant and equipment in 2012 to support the acquisition. Following a year of higher investment in 2012 Apparelmaster reduced its capital investment programme in 2013. The level of investment in 2014 will increase as Apparelmaster plan to increase food garment processing capacity over the next 12 months.

Textile Rental stocks represent a significant investment for the business. Spend on such stock amounted to £19.1 million (2012: £21.0 million) and included replacement new stock for three of our top five customers on contract renewal.

Continued focus has been given to energy management processes, including proactive investment in energy saving capital equipment. Over the last two years, the reduction in the amount of energy used per kilogram of garments processed has more than offset the energy unit price increases suffered in the market.

Drycleaning

Our Drycleaning business operates across the UK through the highly recognised brands of Johnson Cleaners, our national retail drycleaning business, and Jeeves of Belgravia, our London-based luxury drycleaning business.

Having successfully executed a large scale restructuring programme in 2012, our Drycleaning business has made very positive progress in 2013.

At the close of the year there were 334 branches trading, compared to 351 in December 2012. Revenue was down to £57.4 million from the reduced portfolio (2012: £64.3 million) but adjusted operating profit improved significantly to £1.6 million (2012: £1.3 million).

The increase in adjusted operating profit was driven by a like for like sales growth of 2.5% across the estate, which represents a second successive year of positive like for like sales performance.

2013 saw some significant achievements for our Johnson Cleaners business with three major projects being completed:

§ Evolution, our store refurbishment programme, was delivered ahead of schedule, and upon completion provided the business with a fully rebranded green estate;

§ The rollout of the GreenEarth® cleaning programme was also completed ahead of schedule, thereby creating a fully environmentally friendly processing capability with the significant USP of GreenEarth® across the entirety of the portfolio; and

§ The completion of the above two major projects created the platform for a multi media advertising campaign which ran throughout October across TV, press, digital media and in store. The campaign achieved its desired objectives of customer growth, and increased brand awareness in our market place.

Having restructured the business and invested in both the physical portfolio and through the advertising campaign, Johnson Cleaners now has a platform upon which to provide further growth in future years in the drycleaning and laundry markets.

Staff

I would like to thank all employees in every part of the Group for their continuing commitment and dedication to delivering service beyond our customers' expectations.

Outlook

The current year has started very positively and I am delighted with the acquisition of the Bourne Linen business. This is a significant step in our plan to expand the range of services offered by our Textile Rental business.

The new equity which part funds the acquisition maintains the strength and flexibility in our balance sheet which is important as we continue to look for further value enhancing acquisitions.

One of the things that I have enjoyed most about my role within the Group is the commitment of all of our businesses and staff to deliver outstanding service to our customers and much of capital investment is targeted to ensure that our service continues to be second to none.

The Board is extremely pleased with the results for 2013 and we are confident that the Group will continue to deliver on its strategy for 2014.

John Talbot

Executive Chairman

3rd March 2014

CONSOlidated Income Statement

* The 2012 Income Statement has been restated to reflect a) the revisions to IAS19; and b) the disposal of the Facilities Management division which was completed on 7th August 2013. See note 13 for further details.

** Including £0.1 million credit (2012: £0.1 million credit) relating to intangibles amortisation and impairment (excluding software amortisation), £0.1 million credit (2012: £5.7 million credit) in relation to exceptional items and £0.3 million credit (2012: £nil) relating to prior year taxation adjustments relating to exceptional items charged in 2012.

Consolidated Statement of COMPREHENSIVE Income

* See note 13 for further details.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

** 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 2013, the EBT held 31,000 shares (2012: 1,286,531).

Consolidated Balance Sheet

 Consolidated Statement OF Cash Flows

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), IFRS Interpretations Committee (IFRS IC) interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.

Other than as set out below, the financial information has been prepared using accounting policies consistent with those set out in the 2012 Annual Report and Accounts.

The prior year Income Statement has been restated to reclassify the results of the Facilities Management division as a discontinued operation and for changes to IAS19 regarding accounting for pension costs. This has resulted in continuing loss before tax for 2012 increasing by £1.1 million, and the continuing tax credit for 2012 reducing by £0.3 million.

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 2013.

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.

The exceptional items have been included within the appropriate business segment as shown on pages 12 to 13.

The Group comprises the following segments:

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

2 SEGMENT ANALYSIS continued

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

2 SEGMENT ANALYSIS continued

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

3 EXCEPTIONAL ITEMS

CURRENT YEAR EXCEPTIONAL ITEMS

Restructuring costs - Drycleaning

On 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 include a unified branding strategy, significant cost savings and greater co-operation on sales opportunities;

§ the closure of approximately 100 underperforming branches by the year end reducing the number of branches 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 which increases flexibility on lease renewal.

The total estimated charge to the Income Statement for the planned restructuring and property provisions relating to the Drycleaning business amounted to an aggregate £23.9 million; of this amount £22.7 million was charged in 2012, with the remaining £1.2 million charged during 2013.

Pension credits

During the period, the Group merged the existing three defined benefit pension schemes into a single new defined benefit scheme, the Johnson Group Defined Benefit Scheme (JGDBS). As part of the merger, members with small benefits were offered the option of taking their benefits as a 'winding up lump sum'. The resulting settlement gain (net of fees) has been recognised as an exceptional credit of £0.6 million.

Prior 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 division reorganised its management and support structures such that they were better aligned to the combined business needs going forward. Furthermore, redundancy costs were recognised in the period to reflect the planned closure at certain of the Cannon sites acquired as a result of the majority of trade being transferred to existing plants within the Division.

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'.

Restructuring costs - Drycleaning

As detailed above, on 4th July 2012 the Group announced a review of the Drycleaning business. During 2012 the exceptional charge was £22.7 million. Of this amount £3.5 million was non-cash and only £2.1 million was an additional cash requirement relating to the restructuring cost, as the balance was already contractually committed cash spend (including rent, rates, insurance and dilapidations) irrespective of the restructuring plan. The taxation credit in respect of the £22.7 million exceptional cost was £5.0 million.

Costs in relation to business acquisition activity

Fees totalling £0.4 million were incurred in relation to the acquisition of the business and specified garment, linen, mat and towel contracts and related assets of Cannon Textile Care.

Pension costs

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 was recognised as a settlement loss.

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

4 FINANCE COST

In addition, interest of £0.7 million (2012: £nil) has been charged to discontinued operations (see note 10).

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

The prior year Consolidated Income Statement has been restated to reflect this change.

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

5 ADJUSTED PROFIT BEFORE AND AFTER TAXATION

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

6 TAXATION

The tax charge for the period is lower (2012: credit is lower) than the standard rate of Corporation Tax in the UK of 23.25% (2012: 24.50%). The differences are explained below:

Tax relief on intangibles amortisation and impairment (excluding software amortisation) has reduced the charge for taxation by £0.1 million (2012: increased credit by £0.1 million). Taxation on the exceptional items in the current year has reduced the charge for taxation by £0.1 million (2012: increased the credit by £5.7 million). Prior year taxation adjustments relating to exceptional items charged in 2012 has reduced the charge for taxation by £0.3 million.

The income tax expense for the year is based on the effective United Kingdom statutory rate of Corporation Tax for the period of 23.25% (2012: 24.5%). The rate of Corporation Tax in the UK reduced from 24% to 23% on 1st April 2013 and will reduce to 21% on 1st April 2014 and 20% on 1st April 2015. The movements in tax rates has led to changes in deferred tax balances resulting in a charge to the Income Statement of £0.2 million and a charge to reserves of £0.4 million.

During the year £0.2 million of current tax and £1.0 million of deferred taxation have been recognised directly to Shareholders funds.

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

7 EARNINGS PER SHARE

* Includes outstanding share options granted to employees and, in 2012, 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 EBT, based on the profit for the year attributable to 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, in 2012, 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 2013, 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. 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.

The Company intends to place approximately 26.3 million shares with existing and new institutional investors, raising net proceeds of approximately £12.8 million. Further information is provided in note 14. There were no other 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

The Directors propose the payment of a final dividend in respect of the year ended 31st December 2013 of 0.81 pence per share. This will utilise Shareholders' funds of £2.4 million and will be paid, subject to Shareholder approval, on 16th May 2014 to Shareholders on the register of members on 22nd April 2014. 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 2013 in respect of this proposed dividend.

9 RETIREMENT BENEFIT OBLIGATIONS

The Group has applied the requirements of IAS 19R, 'Employee Benefits' (revised June 2011) to its employee pension schemes and post-retirement healthcare benefits.

During the year the Company has established a new pension scheme Johnson Group Defined Benefit Scheme ("JGDBS") and has transferred the assets and liabilities of the Johnson Group Staff Pension Scheme ("Staff Scheme"), the Semara Augmented Pension Scheme ("SAPP") and the WML Final Salary Pension Scheme ("WML") to this new scheme.

As part of the Group's objective to reduce its overall pension liability, deficit recovery payments of £0.4 million, £1.3 million and £0.2 million (2012: £nil, £1.6 million and £0.3 million) were paid to the JGDBS, Staff Scheme and the WML Scheme respectively, during the period to 31st December 2013. No deficit recovery payments were paid to the SAPP scheme (2012: £nil).

Following discussions with the Group's appointed actuary it has been identified that a re-measurement gain of £11.7 million (2012: gain of £1.3 million) should be recognised in the year to 31st December 2013. 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:

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

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

10 BUSINESS COMBINATIONS AND DISCONTINUED OPERATIONS

ACQUISITIONS

There were no acquisitions during the year, however, on 2nd March 2014 the Group acquired the entire share capital of Bourne Services Group Limited. Further details are provided in note 14, 'Events after the reporting period'.

On 14th February 2012 the Group acquired the business and specified assets of Nickleby & Co Limited. There have been no changes to the fair value of assets and liabilities acquired as shown in the 2012 Annual Report and Accounts. This business was included in the Facilities Management division sold on 7th August 2013.

On 31st March 2012 the Group acquired the Cannon Textile Care business and specified assets from OCS Group Limited. There have been no changes to the fair value of assets and liabilities acquired as shown in the 2012 Annual Report and Accounts.

DISPOSALS AND DISCONTINUED OPERATIONS

On 30th June 2013 the assets and liabilities of the Facilities Management division were classed as a disposal group and, as a result, the value of the assets held for resale was impaired by £9.0 million. On the 7th August 2013 the Facilities Management division was disposed of for a total consideration of £37.7 million, of which £36.2 million was received at completion, resulting in a £1.1 million profit on disposal. The assets and related liabilities disposed of are shown in the table below.

The deferred and contingent consideration of £1.5 million is the Group's best estimate of the consideration to be received which could increase to a maximum of £2.2 million. Of the £2.2 million, £0.3 million is expected to be received during 2014 and £0.8 million during 2015 with the remaining £1.1 million being dependant on the future utilisation of deferred tax balances by the purchaser.

In 2013 the results for the Facilities Management division, along with the exceptional finance cost of £0.1 million of unamortised fees written off on the prepayment of bank loans and £0.6 million relating to the cost of settling interest rate hedge arrangements as a result of the disposal, have been classed as discontinued operations.

In 2012 discontinued operations include:

§ the results of the Facilities Management division;

§ the results of Alex Reid Limited, which was disposed of in December 2012 along with the related loss on disposal;

§ provisions relating to future lease commitments on properties previously used in operations that are now discontinued;

§ taxation in respect of the above items; and

§ taxation relating to the refund of the de-grouping tax charge paid in respect of the disposal of the Corporatewear division in 2008.

NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued)

10 BUSINESS COMBINATIONS AND DISCONTINUED OPERATIONS continued

The total loss relating to discontinued operations is as follows:

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

11 ANALYSIS OF NET DEBT

Net debt is calculated as total borrowings less cash and cash equivalents (excluding Lifecycle funds prior to the disposal of the Facilities Management division on 7th August 2013), 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.