Johnson Service Group PLC Annual Report 2015

FY2015 Annual Report · Johnson Service Group PLC
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166953 Johnson Service Group Annual Report Cover_166953 Johnson Service Group Annual Report Cover  04/03/2016  18:30  Page 1

Annual Report 
and Accounts

2015

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Johnson House, 
Abbots Park, Monks Way
Preston Brook
Cheshire WA7 3GH

Tel:
+44 (0)1928 704 600
Fax: +44 (0)1928 704 620
Email: enquiries@johnsonplc.com

 
 
 
 
 
 
 
 
 
166953 Johnson Service Group Annual Report Cover_166953 Johnson Service Group Annual Report Cover  04/03/2016  18:31  Page 2

Johnson Service Group PLC  Annual Report and Accounts 2015

Annual Report and Accounts 2011 Johnson Service Group PLC  2

Annual Report and Accounts 2015 Johnson Service Group PLC

THE ESTABLISHED NAME 
IN TEXTILE RENTAL AND 
DRYCLEANING

Electronic Communications

The Company offers Shareholders the
opportunity to receive communications such as
notices of Shareholder meetings and the annual
report and accounts electronically. The Company
encourages the use of electronic communication
as, not only does it save the Company printing
and mailing costs, it is also a more convenient
and prompt method of communication.

If you decide to receive communications
electronically, you will be sent an email message
each time a new Shareholder report or notice of
meeting is published. The email will contain links
to the appropriate website where documents can
be viewed. It is possible to change your
instruction at any time by amending your details
on the register.

If you would like to receive electronic
communications, you will need to register your
email address by accessing the Shareholder
Services page within the Investor Relations
section of the Company’s website at
www.jsg.com.

This will link you to the service offered by the
Company’s Registrar. If you decide not to register
an email address with the Registrar, you will
continue to receive all communications in hard
copy form.

Those Shareholders who are CREST members
and who wish to appoint a proxy or proxies
utilising the proxy voting service please refer to
Note 2 of the Notice of Annual General Meeting.

Design: mediasterling.com
Production: sterlingfp.com

This annual report is printed using vegetable
inks on paper from an ISO 14001 certified
manufacturer, and is made with ECF pulp
sourced from carefully managed and 
renewed forests.

If you have any queries regarding electronic communications, please contact the
Company’s registrar, Capita Asset Services, on 0871 664 0300 (calls cost 12p
per minute plus network extras, lines are open 9.00am-5.30pm Mon-Fri).

166953 Johnson Service Group Annual Report Pt1_166953 Johnson Service Group Annual Report Pt1  04/03/2016  18:35  Page 1

Annual Report and Accounts 2015 Johnson Service Group PLC  1

12

14

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29

33

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49

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51

60

96

97

98

Financial Review

Corporate Social Responsibility Statement

Principal Risks and Uncertainties

Audit Committee Report

Nomination Committee Report

Board Report on Remuneration

Consolidated Balance Sheet

Consolidated Statement of Cash Flows

Consolidated Statement of Significant Accounting Policies

Notes to the Consolidated Financial Statements

Company Statement of Cash Flows

Company Statement of Significant Accounting Policies

Notes to the Company Financial Statements

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04

06

08

20

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23

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41

47

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Group Overview and Highlights

Strategic Review

Chairman’s Statement

Chief Executive’s Operating Review

Board of Directors

Directors’ Report

Directors’ Responsibilities Statement

Corporate Governance Report

Consolidated Independent Auditors’ Report

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Shareholders’ Equity

Company Independent Auditors’ Report

Company Balance Sheet

Company Statement of Comprehensive Income

Company Statement of Changes in Shareholders’ Equity

105

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112

Financial Calendar

Notice of Annual General Meeting

Directors and Advisors

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2 Johnson Service Group PLC  Annual Report and Accounts 2015

GROUP OVERVIEW AND HIGHLIGHTS

TEXTILE RENTAL
PROVIDING WORKWEAR AND
LINEN RENTAL AND LAUNDRY
SERVICES THROUGHOUT THE UK.

DRYCLEANING
PROVIDING DRYCLEANING AND
SPECIALIST GARMENT CARE
SERVICES THROUGHOUT THE UK.

Apparelmaster
The UK’s market leading workwear rental, protective wear and workplace hygiene 
services provider with over 40,000 UK-based customers operating in a wide 
cross-section of industries.

Johnsons Cleaners
The UK’s number one drycleaner with a network of conveniently located branches
nationwide. Leaders in drycleaning, specialist textile and garment aftercare services.

www.apparelmaster.co.uk

www.johnsoncleaners.com

Stalbridge
Providing a wide range of high quality products to the premium hotel, restaurant, catering
and corporate hospitality markets, including chefswear, crisp white bed linen, fluffy towels
and a range of table linen.

London Linen

Jeeves
Jeeves is a respected luxury brand offering premium quality services to customers
including haute-couture houses, a wide range of City and bespoke-service-seeking
individuals and is the holder of a Royal Warrant.

www.stalbridge-linen.com

www.londonlinen.co.uk

www.jeevesofbelgravia.co.uk

LONDON’S FINEST DRY CLEANERS

Bourne
ZiP
Providing high quality linen to a complete cross section of hotels, including city and town
centre establishments, holiday village resorts and many hotels in the rapidly growing budget
hotel sector.

www.bournegroup.co.uk

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Annual Report and Accounts 2015 Johnson Service Group PLC  3

STRONG PERFORMANCE IN A
CHALLENGING ENVIRONMENT

234.4m

REVENUE
Increased to £234.4m (2014: £210.4m) 

27.9m

25.2m

ADJUSTED OPERATING PROFIT 1
Increased to £27.9m (2014: £21.8m) 

ADJUSTED PROFIT BEFORE TAX 1
Increased to £25.2m (2014: £20.0m) 

15.4m

12.7m

OPERATING PROFIT
Increased to £15.4m (2014: £13.4m) 

PROFIT BEFORE TAX
Increased to £12.7m (2014: £11.6m) 

6.3p

2.1p

ADJUSTED FULLY DILUTED EPS 
Increased to 6.3p (2014: 5.2p) 

FULL YEAR DIVIDEND
Increased to 2.1p (2014: 1.7p) 

OPERATIONAL
HIGHLIGHTS

Successful strategic
acquisitions of London
Linen and Ashbon

Textile Rental performed
ahead of management
expectations with high
levels of customer
retention

Restructuring of
Drycleaning successfully
completed; positive
progress with our
Waitrose partnership

1 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

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166953 Johnson Service Group Annual Report Pt1_166953 Johnson Service Group Annual Report Pt1  04/03/2016  18:35  Page 4

4 Johnson Service Group PLC  Annual Report and Accounts 2015

STRATEGIC REVIEW
TIM MORRIS

THE ESTABLISHED
NAME IN TEXTILE
RENTAL AND
DRYCLEANING

The Group’s Strategic Report comprises the Group
Overview and Highlights, the Strategic Review, the
Chairman’s Statement,  the Chief Executive’s
Operating Review, the Financial Review, the Corporate
Social Responsibility Statement and the Principal
Risks and Uncertainties.

Principal Activities and Business Overview
Johnson Service Group PLC (the ‘Company’) and its
subsidiaries (together, the ‘Group’) provide textile related
services to both businesses and consumers.  The
Company is incorporated and domiciled in the UK, its
registered number is 523335 and the address of its
registered office is Johnson House, Abbots Park, Monks
Way, Preston Brook, Cheshire, WA7 3GH.  The Company
is a public limited company and has its primary listing on
the AIM division of the London Stock Exchange.

The Group has two distinct segments:

Textile Rental
Provision and laundering of workwear, roller towels,
corporate apparel, dust mats, premium linen for the hotel,
catering and hospitality markets, linen for the high volume
hotel market and the direct sale of associated products.

Drycleaning
Provision of retail and commercial drycleaning, laundry
and ironing services and other associated services.

Mission:
Enable our people and businesses to achieve their true
potential from a stable financial platform.

Vision:
Achieve and maintain market leadership in all sectors in
which we have a major focus.

Values:
➔ To behave, and to be recognised, as a good citizen in
the communities in which our businesses operate.
➔ To believe in the talents and energy of those who

work in our businesses, to encourage them wherever
possible to take responsibility and to give them the
power to follow through on the decisions they take.

Targets:
➔ Be recognised as market leader across all our brands.
➔ Provide leading edge customer service in all of 

our businesses.

➔ Continuously strive to minimise the environmental

impact of our operations.

➔ Increase Total Shareholder Return (TSR) over the

longer term.

Our Business Model
For some time now, the Board’s strategy has been to
refocus the Group on our original core business of Textile
Services.  The disposal of the Facilities Management
division in August 2013 followed by the acquisitions of
Bourne, London Linen, Ashbon and Zip in March 2014,
April 2015, November 2015 and January 2016
respectively, together with the restructuring of the
Drycleaning business, announced in January 2015,
represent major steps in achieving this goal.

The Group’s business model, which supports this strategy
and aims to increase both profitability and shareholder
value, focuses on delivering exceptional customer service
across all of our businesses in order to increase
customer satisfaction and loyalty.

Key to this is our biggest asset, our employees, who are
the face of our business.  The investment we make in the
training and development of our employees supports our
business model and we seek the views and opinions of
employees, at all levels, to continuously develop the way
we operate such that we support our people and the
operations of the Group.

In addition to growing organically, we continue to actively
pursue strategic acquisition opportunities within the
Textile Rental arena and to identify businesses which
broaden our services, geographic spread and which add
value for Shareholders.

Key Performance Indicators (KPIs)
The Group refers to certain KPIs to assess the
performance of the Group as a whole, and of the
individual businesses.  Further details of the KPIs are set
out within the Financial Review on page 13.

Future Prospects
All companies with a Premium Listing of equity shares in
the UK are required, under the Listing Rules, to comply
with the Financial Reporting Council’s UK Corporate

166953 Johnson Service Group Annual Report Pt1_166953 Johnson Service Group Annual Report Pt1  04/03/2016  18:35  Page 5

Annual Report and Accounts 2015 Johnson Service Group PLC  5

➔ Our Textile Rental division, which forms the largest

part of the Group, has a diversified customer base of
some 40,000 customers, the majority of which have a
formal contract in place, with varying expiry dates of
up to five years, and hence providing a secure future
income stream whilst at the same time ensuring that
the loss of any single key customer would not
materially impact the Group’s future trading
performance and cash flows;

➔ Given the diverse and unrelated nature of the 

Group’s customer base, there is limited concentration
of credit risk;

➔ The Group has prepared a three year financial budget,
which has been reviewed, challenged, stress tested
under all reasonably possible scenarios and approved
by the Board;

➔ The Group continuously strives to seek out and invest
in plant and equipment that will help drive operational
efficiencies;

➔ A significant number of the Group’s key processing

sites are owned on either a freehold or long leasehold
basis thereby providing security of tenure;
➔ The wide geographic spread of processing sites

mitigates the effect of a loss of any single processing
facility and, furthermore, appropriate insurance cover
is in place such that the increased cost of working
following a loss of processing capacity may, in some
circumstances, be recovered; and

➔ The Group continuously reviews the adequacy and
strength of its management teams to ensure that
appropriate experience and training is given and
develops succession planning as part of the
development programmes for our people.

Although the Board is confident of the future prospects
of the Group, there remain a number of risks and
uncertainties, which are often beyond the control of the
Directors, which could mean that actual results and
events may differ from those budgeted.

Strategic Report Approval
The Strategic Report, outlined on pages 2 to 19,
incorporates the Group Overview and Highlights, the
Strategic Review,  the Chairman’s Statement, the Chief
Executive’s Operating Review, the Financial Review, the
Corporate Social Responsibility Statement and the
Principal Risks and Uncertainties.

By order of the Board

Tim Morris
Company Secretary
1st March 2016

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OUR TARGETS

TO BE RECOGNISED 
AS MARKET
LEADER ACROSS
ALL OF OUR
BRANDS.

TO PROVIDE
LEADING EDGE
CUSTOMER
SERVICE IN ALL OF
OUR BUSINESSES.

TO CONTINUOUSLY
STRIVE TO
MINIMISE THE
ENVIRONMENTAL
IMPACT OF OUR
OPERATIONS.

TO INCREASE
TOTAL SHAREHOLDER
RETURN (TSR) OVER
THE LONGER TERM.

Governance Code (the ‘Code’).  The Code is intended to
enhance the quality of information investors receive
about the long-term health and strategy of listed
companies, and raises the bar for risk management.

As a Company trading on AIM, we are not required to
comply with the Code, however, the Board is acutely
aware that an understanding of the future prospects and
viability of the Group, is of vital importance to all
stakeholders.  As a consequence a statement, on behalf
of the Board, is set out below on the future prospects of
the Group.

“The Directors confirm that, based upon the information
and knowledge of which they can be reasonably
expected to be aware, they have a reasonable
expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due for a
period of not less than 36 months from the date of this
report.”

Whilst the Directors expect the future prospects of the
Group to extend beyond the 36 month period referred to
above, this period has been selected, for the purpose of
this statement, as:

➔ It is concurrent with the Group’s strategic budgeting

process;

➔ It is consistent with the average contract life of key
customers, which provide stable revenue streams,
being approximately 36 months;

➔ The Group has committed banking facilities covering

this period; and

➔ Projections looking out further than 36 months

become significantly less meaningful in the context of
the Group’s operations and markets.

The Directors believe having taken into consideration the
principal risks and uncertainties facing the Group (as set
out on pages 16 to 19) and inter alia, the points set out
below, that there is not a substantial doubt that the
trading performance and cash generation of the Group
will be materially adversely affected within that time
frame, as:

➔ The Group has a committed bank facility, with

significant headroom both in terms of covenant
compliance and availability, through to April 2020
which is considered to be sufficient to meet the
Group’s current funding requirements throughout the
period;

➔ Interest rate risk is mitigated through two hedging

arrangements which replace LIBOR with fixed rates
of 1.47% and 1.665%, each over £15.0 million
tranche of borrowings, until January 2019 and
January 2020 respectively providing certainty over
part of the Group’s interest cash flows;

 
 
 
 
 
 
 
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6 Johnson Service Group PLC  Annual Report and Accounts 2015

CHAIRMAN’S STATEMENT
PAUL MOODY

OUR STRONG
PERFORMANCE
CONTINUES

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 13th May 2016 to Shareholders on the
register at close of business on 15th April 2016. The
ex-dividend date is 14th April 2016.

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Annual Report and Accounts 2015 Johnson Service Group PLC  7

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.

Acquisition of Zip Textiles (Services) Limited (‘Zip’)
The acquisition of Zip was completed on 31st 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 5th 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 1st 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.

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 5th October
2013.

Paul Moody
Chairman
1st March 2016

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 31st December 2015, and will,
therefore, reduce slightly to £0.5 million for 2016.

“THE BOARD EXPECTS THAT THE GROUP WILL CONTINUE TO DELIVER 
A STRONG PERFORMANCE AND SUCCESSFULLY IMPLEMENT ITS
STRATEGY FOR 2016”

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166953 Johnson Service Group Annual Report Pt1_166953 Johnson Service Group Annual Report Pt1  04/03/2016  18:35  Page 8

8 Johnson Service Group PLC  Annual Report and Accounts 2015

CHIEF EXECUTIVE’S OPERATING REVIEW
CHRIS SANDER

2015 HAS SEEN 
SOME SIGNIFICANT
ACHIEVEMENTS

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
In 2015, the Textile Rental business traded 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

166953 Johnson Service Group Annual Report Pt1_166953 Johnson Service Group Annual Report Pt1  04/03/2016  18:35  Page 9

Annual Report and Accounts 2015 Johnson Service Group PLC  9

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.

competition being stronger than usual in the first half,
Bourne had some success delivering new sales wins.  In
addition high quality product and great service levels to
our customer base resulted in high retention of 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

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 ‘johnsonsbridal.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
1st March 2016

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188.2m

Textile Rental revenue
Increased 21.4% from
£155.0m in 2014

29.4m

Textile Rental adjusted 
operating profit
Increased 23.5% from
£23.8m in 2014

46.2m

Drycleaning revenue
Decreased from £55.4m 
in 2014

2.0m

Drycleaning adjusted 
operating profit
Increased 25.0% from
£1.6m in 2014

 
 
 
 
 
 
 
166953 Johnson Service Group Annual Report Pt1_166953 Johnson Service Group Annual Report Pt1  04/03/2016  18:35  Page 10

10 Johnson Service Group PLC  Annual Report and Accounts 2015

A SAFE, GENTLE
AND ODOURLESS
DRYCLEANING PROCESS

GreenEarth® is an environmentally safe drycleaning
process that uses liquid silicone, a gentle solution
made from one of the earth's safest and most
abundant natural resources.

Using water as the washing agent, as most of us do 
in our homes, is termed wet cleaning. Legend has it 
that drycleaning was discovered accidentally in 
France during the late 1800s. Apparently, someone
spilled turpentine on a tablecloth with set in stains, 
and every stain the turpentine touched came clean. 
Thus, the idea of “drycleaning” fabric in a liquid other 
than water was born.

As drycleaners, we work hard, and successfully, to reduce
emissions and control many of the risks associated with
the use of petrochemical solvents. But we always hoped
for a better alternative. One that would meet the needs of
customers and drycleaners whilst protecting the
communities in which we live.

GreenEarth® is the solution the industry has been waiting
for. GreenEarth® is an environmentally safe drycleaning
process that uses liquid silicone, a gentle solution made
from one of the earth's safest and most abundant natural
resources: silica, or sand. The same natural sand the earth
has been creating for over six billion years. When released
to the environment, it safely breaks down into its three
natural elements, sand (SiO2) and trace amounts of water
and carbon dioxide. So GreenEarth® is safe for the air,
water and soil. GreenEarth® is safe for people too. If you
wanted to, you could safely rub it on your skin.  In fact you
probably already do. Liquid silicone is the base ingredient
in many everyday shampoos, conditioners and lotions.

Johnson Service Group has now installed GreenEarth®
Cleaning systems in 100% of its drycleaning processing
estate. As a leading public company, Johnson Service
Group takes its responsibilities seriously - to employees,
customers and the environment as a whole.

Quite simply, because we care about the environment we
have converted to GreenEarth® cleaning.

166953 Johnson Service Group Annual Report Pt1_166953 Johnson Service Group Annual Report Pt1  04/03/2016  18:35  Page 11

Annual Report and Accounts 2015 Johnson Service Group PLC  11

THE BENEFITS OF
GREENEARTH®
CLEANING

CLEANING
BENEFITS
SAFE FOR
DELICATE FABRICS,
COLOURS DONT
FADE AND WHITES
DONT GREY.

COMPOSITION 
AND
PROPERTIES
MODIFIED LIQUID
SILICONE.
CHEMICALLY 
INERT, CLEAR,
ODOURLESS
LIQUID.

SAFETY AND
ENVIRONMENTAL
BENEFITS
BREAKS DOWN
INTO SAND, 
WATER AND
CARBON DIOXIDE.

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166953 Johnson Service Group Annual Report Pt1_166953 Johnson Service Group Annual Report Pt1  04/03/2016  18:36  Page 12

12 Johnson Service Group PLC  Annual Report and Accounts 2015

FINANCIAL REVIEW
YVONNE MONAGHAN

2015 HAS BEEN A
YEAR OF SIGNIFICANT
INVESTMENT FOR 
THE GROUP

This Financial Review should be read in conjunction
with the Chairman’s Statement and the Chief
Executive’s Operating Review, which set out
comments on revenue, earnings and dividends.

Overview
Revenue and adjusted profit before tax increased
significantly over 2014 through a combination of
acquisitions and organic growth.

Details of the segmental results are given in note 1 of the
consolidated financial statements.

Taxation
The tax rate, excluding exceptional items and the
amortisation and impairment of intangible assets
(excluding software amortisation), was 19.5% (2014:
22.4%) and below the effective tax rate of 20.25%
(2014: 21.5%) due to the recognition of prior year
credits. We would expect our tax rate to increase to a
more normal rate in 2016 and be slightly above the
effective rate of 20%.

Cash Flow
We continue to generate strong cash flows with net 
cash generated from operating activities increasing by
7.3% to £47.0 million (2014: £43.8 million). Of this cash
generation we invested £6.0 million in the purchase of
property, plant and equipment including finance lease
capital payments.

We invested £70.4 million, net of cash acquired, in the
acquisition of London Linen and Ashbon, both
businesses serving the hotel, restaurant and catering
linen market.  An equity raising in April 2015 raised
£21.1 million of net cash, allowing us to reduce our
gearing levels during the year and providing headroom 
for further investment.

Bank Facilities and Finance Costs
The Group’s bank facility was renewed in April 2015 with
the incumbent banks. The new facility comprised a
Revolving Credit Facility (RCF) of £100.0 million running
to April 2020 together with a short term £20.0 million
RCF which was repaid and cancelled in November 2015.

The current facilities give headroom both in terms of
covenant compliance and availability to allow further
investment to be made in the Textile Rental business.

Hedging arrangements over £20.0 million of the facility
were in place during the year such that LIBOR was
replaced by a fixed rate of 1.79% up until January 2016.
New hedging arrangements have been entered into,
starting in January 2016, to provide some certainty over
future borrowing costs.  Two hedges, each of
£15.0 million, serve to swap LIBOR rates for 1.47% to
January 2019 and 1.665% to January 2020. The
unhedged borrowings will be subject to LIBOR at market
rates at the point of drawdown. Interest charges include
an average margin of 1.61%, for 2015, a reduction from
the average margin of 1.83% in 2014. The margin is
subject to a quarterly covenant test and is dependent
upon the gearing ratio at each quarter end and, based on
the actual gearing ratio at December 2015, will be initially
1.75% for the first quarter of 2016.

Total finance costs in 2015 included £0.6 million (2014:
£0.2 million) of notional interest (non-cash) on post-
employment benefit obligations. This cost is fixed at the
start of each year and is dependent on the level of the
pension deficit at the previous year end. The cost for
2016 will reduce slightly to £0.5 million.

The bank covenants within the facility agreement measure
interest cover and gearing ratios and contain some
restrictions on pension fund deficit recovery payments.

166953 Johnson Service Group Annual Report Pt1_166953 Johnson Service Group Annual Report Pt1  04/03/2016  18:36  Page 13

Annual Report and Accounts 2015 Johnson Service Group PLC  13

Key Performance Indicators (KPIs)
The main KPIs used as part of the assessment of
performance of the Group, and of the individual business,
referred to within this Financial Review, Chairman’s
Statement, Chief Executive’s Operating Review or
segmental information on pages 60 to 62 are growth in
revenue, adjusted operating profit and adjusted fully
diluted earnings per share. Non-financial KPIs include our
employee and customer survey results and customer
retention statistics.

Summary
We have made significant investments in our Textile
Rental business during the year and have stabilised the
Drycleaning business.

We are well placed to pursue further opportunities in
Textile Rental over the coming months.

Yvonne Monaghan
Chief Financial Officer
1st March 2016

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Investment in Textile Rental Items
Spend on textile rental items increased to £27.5 million
(2014: £24.9 million).  The textile rental business has
increased significantly over recent years, both in terms of
the markets in which we operate and the number of
processing plants.  Maintaining adequate investment in
new textile rental items is a key part of providing a high
quality service to our customers.

Defined Benefit Pension Scheme Liabilities
As at 31st December 2015, the scheme’s assets had
reduced by £5.9 million, to £192.4 million with the
payment of £9.7 million in benefits being the main factor.
The net deficit has reduced by £2.5 million to £14.7
million, primarily driven by an increase in the discount rate
applied in the calculation of scheme liabilities.

The next triennial valuation of the scheme is due as at
5th October 2016 and will be finalised in 2017.  In the
meantime we are committed to pay £1.9 million per
annum in deficit recovery payments.

Clearly, the deficit calculated under both the provisions of
IAS19(R) and under the statutory funding objective is
sensitive to changes in the discount rate, based on
corporate bond or gilt yields as appropriate.  The asset
allocation of the scheme is kept under review so that the
impact of a reduction in the discount rate and an increase
in inflation is, at least in part, offset by a corresponding
increase in asset values.

Customer Rebates
In response to the Financial Reporting Council’s (the
‘FRC’) announcement in relation to accounting for
complex supplier arrangements, the Group has taken the
opportunity to disclose its policy in relation to this area.
The Group has a small number of rebate arrangements in
place with its key customers, which are in line with prior
years and which the Directors do not consider to be
complex in nature as they do not require significant
estimates and judgements. The Group gives annual
rebates to certain customers which are calculated as a
percentage of the value of services provided to
customers in the year. Rebate costs are generally
accrued in the year in which the services are provided
based on the terms agreed with customers and therefore
require little judgement on their calculation. The Group’s
accounting policy for customer rebates is set out on
page 53.

Balance Sheet
Net assets of the Group have increased to £106.8 million
(2014: £80.0 million) through a combination of retained
earnings and new equity.

234.4m

Revenue
Increased from £210.4m 
in 2014

27.9m

Adjusted operating profit
Increased from £21.8m 
in 2014

6.3p

Adjusted diluted 
earnings per share
Increased from 5.2p 
in 2014

47.0m

Operating Cash flow
Increased from £43.8m 
in 2014

 
 
 
 
 
 
 
166953 Johnson Service Group Annual Report Pt1_166953 Johnson Service Group Annual Report Pt1  04/03/2016  18:36  Page 14

14 Johnson Service Group PLC  Annual Report and Accounts 2015

CORPORATE SOCIAL RESPONSIBILITY STATEMENT

OUR DUTY TO
SHAREHOLDERS

We recognise our duty to stakeholders to operate the
business in an ethical and responsible manner. 
We are committed to developing our Corporate Social
Responsibility (CSR) agenda, recognising that it can
play a major part in leading and influencing all of our
people and operations.

We work to ensure that we provide the right resources,
energy and focus to meet the expectations of all of our
stakeholders in relation to CSR.

This report does not contain information about any
policies of the Group in relation to human rights issues
since it is not considered essential for an understanding
of the development, performance or position of the
Group’s activities.

Work Place
We recognise that our people are key to the success of
the Group and we value the contribution of each and
every one of our employees.  We strive to create an
inspiring working environment where everyone is
engaged and motivated.

Employment Policies
The employment policies of the Group embody the
principles of equal opportunity and are tailored to meet
the needs of its different businesses and the locations in
which they operate.

The Group’s employment policies and procedures are
described in detail in its Staff Handbook, a copy of which
is available to all employees. This Handbook takes
account of relevant employment legislation and best
practice. New policies, procedures and related training
are developed and delivered as required.

Code of Ethics and Bribery
The Group has a written code on business ethics (the
‘Ethics Code’), which is reviewed regularly by the Board
and sets out guidelines for all employees to enable the
Group to meet the highest standards of conduct in
business dealings, including those with overseas
suppliers. On joining the Group, whether by way of
acquisition or otherwise, all employees are made aware 
of these standards and procedures to ensure 
compliance is achieved.

Senior employees are required to sign an annual
statement of compliance with the Ethics Code. A
confidential hotline service is available to employees
should anyone wish to report perceived improprieties.
Arrangements are in place to ensure that any reports are
followed up and the appropriate action taken.

The Group’s anti-bribery policy sets out how employees
must act to ensure that our zero tolerance approach to
bribery and corruption is upheld.

Diversity
We are committed to equal opportunities and the creation
of an entirely non-discriminatory working environment.
The aim of our diversity policy is to ensure that no job
applicant, or employee, receives less favourable treatment
because of, amongst other matters, gender, marital status,
race, age, sexual orientation, religion, belief or disability. All
decisions are based on the merits of the individual
concerned. The Group is dedicated to undertaking its
business operations in a way which respects individual
human rights, treats individuals with dignity and allows
freedom of association.

Procedures are in operation to support the Group’s policy
that disabled persons, whether registered or not, shall be
considered for employment and subsequent training,
career development and promotion on the basis of their
aptitudes and abilities. Where members of staff become
disabled every effort is made to ensure that they are
retrained according to their abilities.

Health and Wellbeing
In order to meet employees’ needs for support both at
work and at home the Group offers occupational health
benefits across its operating companies.

Employee Communication
Each Operating Company takes responsibility for
fostering employee engagement through appropriately
structured communications, training and incentive
arrangements. Employee views are sought by
management and taken into consideration when making
decisions that may affect the employees’ interests. A
broader understanding of the Group and opportunities
within it are made available to employees through a
Group wide magazine.

Share Schemes
The Group’s ongoing desire for employees to be able to
share in the performance and success of the Group as a
whole is afforded through an approved Sharesave Plan,
which has now operated for over 20 years.

Environment
We recognise our responsibilities to achieve good
environmental practice and to continue to strive for
improvement in areas of environmental impact. Our
approach is to work through education, communication
and direct action wherever possible.

166953 Johnson Service Group Annual Report Pt1_166953 Johnson Service Group Annual Report Pt1  04/03/2016  18:36  Page 15

Annual Report and Accounts 2015 Johnson Service Group PLC  15

Health and Safety
The Board is aware of its responsibilities on all matters
relating to the health, safety and welfare of employees,
visitors and customers on Group premises, and to others
affected by the Group’s activities.

Board Responsibility
The Board takes its responsibilities seriously with regard
to health and safety and has nominated Chris Sander,
Chief Executive Officer, as the Director responsible for
such matters.

Health and safety matters are a permanent agenda item
at all Group and subsidiary Board Meetings. A summary
report outlining the Group’s activities is provided on a
regular basis for Group Board Meetings, including up to
date statistics relating to accidents and incidents that
have occurred since the last report.

Health and Safety Policies
All of our businesses are required to have clearly defined
health and safety policies and procedures relevant to
their operations and risks. They are required to implement
all defined policies and procedures into the work
environment which are audited annually by Group
representatives to ensure they are fit for purpose. These
audits, the results of which are notified to the Board, are
in addition to each company’s own protocols.

The Group health and safety policy statement is 
brought to the attention of all employees and copies 
of the statement are available upon request to all
interested parties.

Safety Management Systems
Each business has developed a safety management
system appropriate to their operations and in accordance
with either HS(G)65 or OHSAS 18001.

All of our businesses have arrangements in place to
consult with employees on matters which may affect their
health and safety. The Group is in regular contact with
regulatory bodies both directly, and via industry trade
associations. The health and safety performance of each
business is collectively benchmarked against other
companies operating in similar business sectors. All new
companies acquired by the Group undergo a stringent
audit of their Safety Management Systems to establish
compliance with appropriate legislation and Group policy.

Board Responsibility
The Board is aware of its responsibilities with regard to
the environment, receives regular reports on all
environmental matters and has nominated Chris Sander,
Chief Executive Officer, as the Director responsible for
such matters.

Environmental Risk Assessment
Potential areas of risk are identified through the Group’s
risk assessment programme and mitigated wherever
possible. Key operating businesses undertake quantitative
audits which enable a measure of environmental
improvement to be made. The Operating Companies have
achieved, or are working towards, ISO 14001:2004
Environmental Management System Certification.

Greenhouse Gas Emissions & Carbon Footprint
The Group is party to a Climate Change Agreement
(CCA), is constantly looking for new ways to reduce its
carbon footprint and has put various initiatives in place,
including continued investment in energy efficient capital
equipment and the gradual rollout of passive ultra low
energy LED lighting.

Furthermore, the majority of cars available to employees
as part of the Group’s car scheme are currently subject to
a CO2 restriction of 130g/km. The average CO2 of our
non-commercial fleet as at the end of 2015 reduced to
104g/km from 108g/km at the end of 2014. Further
detail is provided in the table below:

CO2 Emissions (g/km)

2015

2015 Cum.

2014

2014 Cum.

< 95

96 to 110

111 to 130

131 to 160

26%

50%

20%

4%

26% 23%

76% 45%

96% 25%

23%

68%

93%

100%

7%

100%

Use of Solvents
Perchloroethylene, a petrochemical solvent, is traditionally
used in the drycleaning process. We have worked hard,
and successfully, to control many of the risks associated
with the use of petrochemical solvents and, during 2013,
completed the rollout across our entire retail drycleaning
estate of GreenEarth® Cleaning systems. GreenEarth® is
an environmentally safe drycleaning process that uses
liquid silicone, a gentle solution made from sand. When
released to the environment, it safely breaks down into its
three natural elements, sand, water and carbon dioxide.

Community
The Group believes that the interests of responsible
businesses need to be aligned to the interests of the
local communities where they operate and to that end,
give back to the community where we can, contributing to
charitable causes and local groups during the year.

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16 Johnson Service Group PLC  Annual Report and Accounts 2015

PRINCIPAL RISKS AND UNCERTAINTIES

“We believe that effective risk management is critical to the achievement of our strategic
objectives and the long term sustainable growth of our business. The Board continues to take
a proactive approach to recognising and mitigating risk with the aim of protecting its
employees and customers and safeguarding the interests of the Group and its Shareholders”.

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

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

The Board formally reviews the most significant risks facing the Group at
its February and August meetings, or more frequently should new
matters arise.

The principal risks and uncertainties affecting the Group are highlighted
below, together with details on how the Board takes action to mitigate
each risk.  These risks and uncertainties do not comprise all of the risks
that the Group may face and are not listed in any order of priority.
Additional risks and uncertainties not presently known to the Board, or
deemed to be less material at the date of this Annual Report, may also
have an adverse effect on the Group.

Review Risk

C

o

n

trol Risk

Risk 
Management
Process

Identify R

is

k

A ssess Controls

166953 Johnson Service Group Annual Report Pt1_166953 Johnson Service Group Annual Report Pt1  04/03/2016  18:36  Page 17

Annual Report and Accounts 2015 Johnson Service Group PLC  17

Financial Risk

Economy

Mitigation

Our business could be susceptible to adverse changes in, inter alia,
economic conditions and customer spending habits, which could impact
our profitability and cash flow.

Given the diversity of operations within the Group, it is generally possible to
contain the impact of these adverse conditions.  Each business continually
reviews its routes to market, changes in customer demands and
expectations and cost base so that it can react appropriately to the impact
of the wider economy.

Any adverse impact on cash flow could be mitigated in the short term by
controls over capital expenditure.

Cost Inflation

Our objective is always to deliver the right level of service in the most
efficient way.  An increase in the cost of labour or supplies could constitute
a risk to our ability to maintain margin.  The introduction of the National
Living Wage in April 2016 will impact our cost base.

We seek to manage the impact of inflation through continuing to drive
greater efficiencies through supplier rationalisation, labour scheduling 
and productivity.

Cost indexation in certain of our contracts also gives us the contractual
right to review pricing with our customers.

Interest Rate Fluctuations 

The Group finances its operations through a mixture of retained profit, 
bank borrowings and lease arrangements.  Fluctuations in the rates of
applicable interest could adversely impact the profitability and cash flows 
of the Group.

The Group borrows at both fixed and floating rates and normally has hedging
products in place to provide fixed rate interest payments for a proportion of
its floating rate debt over a specified period. This enables the Group to
forecast borrowing costs with a degree of certainty.

At 31st December 2015 all of the Group’s bank borrowings incurred interest
at rates linked to LIBOR, although hedging arrangements are in place which
replace LIBOR with fixed rates of 1.47% and 1.665%, each over £15.0 million
of borrowings, until January 2019 and January 2020 respectively.

Liquidity Risk

Our key sources of liquidity in the foreseeable future are likely to be cash
generated from operations and borrowings through committed bank
facilities.  Adverse changes in credit markets or our credit rating could
increase the cost of borrowing and banks may be unwilling to renew credit
facilities on existing terms.

The Group’s policy on liquidity is to ensure that it has committed bank
facilities available to provide continuity of funding.  Appropriate bank
facilities are in place through to April 2020.

Pension Scheme Deficit

Asset valuations are based on the fair value of scheme assets.  The valuation
of the scheme liabilities is based on statistical and actuarial calculations,
using various assumptions including discount rates, pension increases, life
expectancy of scheme members and cash commutations.  Actuarial
assumptions may differ materially from actual experience due to changes in
economic and market conditions, variations in actual mortality, higher or lower
cash withdrawal rates and other changes.  Any of these differences could
adversely impact either the assets or liabilities recognised in the Balance
Sheet in future periods, or the cash flow of the Group.

The Group has taken action to reduce the quantum of liabilities through
various initiatives, including: the freezing of pensionable salaries for active
members with effect from 6 April 2010; offering pension increase
exchanges for certain pension benefits in payment; and offering enhanced
transfer values to certain categories of members.  Furthermore, the scheme
was closed to future accrual on 31st December 2014.

Asset allocations have been reviewed and changes made to more
appropriately match assets against the remaining scheme liabilities and to
reduce risk to a more acceptable level.

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166953 Johnson Service Group Annual Report Pt1_166953 Johnson Service Group Annual Report Pt1  04/03/2016  18:36  Page 18

18 Johnson Service Group PLC  Annual Report and Accounts 2015

PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED

Operational Risk

Failure of Strategy

Mitigation

Our current business model sets out our intentions to expand the Group by
actively pursuing strategic acquisition opportunities within the Textile Rental
market.  Failure to identify suitable targets, or failure to successfully
integrate them, would adversely impact our growth plans.

There is considerable knowledge and expertise within the Group with
regard to acquisitions.  An experienced acquisition team, together with
external advisors where appropriate, is involved in all acquisition activity and
we have a proven track record of successfully integrating businesses into
the wider Group.

Customers

For our businesses to grow organically, we are reliant on securing and
retaining a diverse range of customers.  A reliance on any one particular
customer or group of customers may present a risk to the future cash
flows of the Group should they not be retained.

We have strategies which strengthen our long term relationships with our
customers based on quality, value and innovation. Regular customer
feedback surveys are undertaken across the Group and, where applicable,
appropriate action taken.

Adverse economic conditions may lead to an increased number of our
customers and clients being unable to pay for existing or additional
products and services.

Our business model is structured so that we are not reliant on one
particular customer or group of customers.

The Group has limited concentration of credit risk with regard to trade
receivables given the diverse and unrelated nature of the Group’s customer
base.

Competition

We operate in a competitive marketplace.  Aggressive pricing from our
competitors could cause a reduction in our revenues and margins.

We aim to minimise this by continuing to promote our differentiated
propositions and focusing on our points of strength, such as 
transparency of our pricing, flexibility in our cost base, quality and value of
service and innovation.

Retention and Motivation

As a service orientated Group, retaining and motivating the best 
people with the right skills, at all levels of the organisation, is key to the
long term success of the Group.  Short term disruption could occur if a key
member of our team was unavailable at short notice, either on a temporary 
or permanent basis.

The Group has established training, development, performance
management and reward programmes to retain, develop and motivate 
our people.

The Group regularly reviews the adequacy and strength of its management
teams to ensure that appropriate experience and training is given such that
there is not over reliance on any one individual.

Furthermore, the Group has continued to develop succession planning as
part of the development programmes for our people.

Loss of a Processing Facility 

The loss of a key processing facility could result in significant disruption to
our business, due to the high utilisation of plant capacity.

A wide geographic spread of processing facilities mitigates the effect of a
temporary loss of any single facility.

Furthermore, insurance cover is in place such that the increased cost of
working following a loss of processing capacity may, in some circumstances,
be recovered.

166953 Johnson Service Group Annual Report Pt1_166953 Johnson Service Group Annual Report Pt1  04/03/2016  18:36  Page 19

Annual Report and Accounts 2015 Johnson Service Group PLC  19

Operational Risk

Information Systems and Technology

Mitigation

The digital world creates many risks for a business including technology
failures, loss of confidential data and damage to brand reputation.

We seek to assess and manage the maturity of our enterprise risk and
security infrastructure and our ability to effectively defend against current and
future cyber risks by using analysis tools and experienced professionals to
evaluate and mitigate potential impacts.

We are focused on the need to maximise the effectiveness and security of
our information systems and technology as a business enabler and to reduce
both cost and exposure as a result.

Regulatory Risk

Health and Safety

Mitigation

Health and safety in the workplace is an extremely important consideration
for an employer.  Legislation is complex and failure to ensure that our
employees remain safe at work may lead to injury, serious business
interruption and potential damage to our reputation.

The Group has policies, procedures and standards in place to ensure
compliance with legal obligations and industry standards.  Regular health
and safety audits and risk assessments are undertaken across the Group.

All management meetings throughout the Group feature a health and
safety update as an agenda item.

Compliance and Fraud

Ineffective management of compliance with laws and regulations, or
evidence of fraud, could have an adverse effect on the Group’s reputation
and could result in an adverse impact on the Group’s performance if
significant financial penalties are levied or a criminal action is brought
against the Company or its Directors.

The Group’s zero tolerance based Codes of Business Conduct and Ethics
govern all aspects of our relationships with our stakeholders.  
All alleged breaches of the Codes, including any allegations of fraud, 
are investigated.

The Group’s procedures include regular operating reviews, underpinned by
a continual focus on ensuring the effectiveness of internal controls.

Regulation and compliance risk is also considered as part of our annual
business planning process.

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166953 Johnson Service Group Annual Report Pt1_166953 Johnson Service Group Annual Report Pt1  04/03/2016  18:36  Page 20

20 Johnson Service Group PLC  Annual Report and Accounts 2015

BOARD OF DIRECTORS

1

5

2

6

4

3

7

2. Chris Sander (age 57)
Chief Executive Officer
Chris was appointed as Chief
Executive Officer on 3rd January
2014.  He joined the Group in 1984
and has significant experience in the
Textile Services industry.  Chris was
appointed Managing Director of the
Textile Rental business on 1st
January 2008, joined the Board on
9th September 2008 and assumed
responsibility for the Drycleaning
business as part of the combined
Textile Services division in 2012.
Chris is also a Director of the
European Textile Services
Association.

3. Yvonne Monaghan (age 57)
Chief Financial Officer
Yvonne has significant experience in
the Textile Services industry having
joined the Group as Group
Management Accountant in 1984
after qualifying as a Chartered
Accountant with Deloitte Haskins
and Sells.  She was appointed as
Company Secretary and Financial
Controller in 1985 and joined the
Board as Chief Financial Officer on
31st August 2007.  Yvonne is also a
Non-Executive Director and Chair of
the Audit Committee of NWF
Group PLC.

4. Michael Del Mar (age 69)
Senior Independent Non-Executive Director
Michael joined the Board as a Non-
Executive Director on 12th May
2004.  Until December 2003 he
was with UBS Investment Bank,
having joined S G Warburg in 1990.
He is also a Non-Executive Director
of Regional Airports Limited and
Treloar Trust.  Michael will retire from
the Board at the conclusion of the
2016 Annual General Meeting.

6. Nick Gregg (age 52)
Non-Executive Director
Nick joined the Board as a Non-
Executive Director on 1st January
2016.  Nick is currently the
Managing Director of the Local
Government division of Ferrovial-
owned public services business
Amey.  Nick has considerable
experience in business to business
service industries having previously
held senior positions with Biffa
Waste Services, ATS Euromaster and
Mobil Oil Company.

7. Tim Morris (age 39)
Company Secretary
Tim was appointed as Company
Secretary on 1st January 2014, in
addition to his existing role of Group
Financial Controller.  Having qualified
as a Chartered Accountant with
KPMG LLP in 2003, Tim joined the
Group in 2005 as Group Financial
Accountant.  He also held the
position of Finance Director at SGP
Property & Facilities Management
Limited prior to the Group disposing
of that business in August 2013.

1. Paul Moody (age 58)
Chairman
Paul was appointed Non-Executive
Chairman on 1st May 2014 having
joined the Board as a Non-Executive
Director on 10th March 2010.  Prior
to his retirement on 26th February
2013, Paul was the Chief Executive
of Britvic PLC. Having joined Britvic in
1996, and prior to his appointment as
CEO, Paul held the positions of Chief
Operating Officer and Sales and
Operations Director. Prior to that, he
held a number of senior
appointments in varied roles in HR
and sales with such companies as
Mars Inc. and Grand Metropolitan.
Paul is also a Non-Executive Director
of Pets at Home Group PLC and
4imprint Group PLC.

5. Bill Shannon (age 66)
Non-Executive Director
Bill joined the Board as a Non-
Executive Director on 8th May
2009.  He is a Chartered
Accountant (Scotland) and began
his career with Whitbread PLC in
1974, where he served as a Board
Director for 10 years until his
retirement in 2004.  Bill has
significant PLC board experience,
and is currently Non-Executive
Chairman of St. Modwen Properties
PLC and Deputy Chairman of LSL
Property Services PLC (where he is
also Chairman of both the
Nomination Committee and
Remuneration Committee), having
previously served as Non-Executive
Chairman of Aegon UK PLC and
Non-Executive Director of Rank
Group PLC, Barratt Developments
PLC and Matalan PLC.

166953 Johnson Service Group Annual Report Pt2_166953 Johnson Service Group Annual Report Pt2  04/03/2016  18:39  Page 21

Annual Report and Accounts 2015 Johnson Service Group PLC  21

DIRECTORS’ REPORT

The Directors have pleasure in presenting their Annual Report and the
audited Consolidated and Company financial statements for the year
ended 31st December 2015.

The Corporate Governance Report on pages 24 to 28, and the
Corporate Social Responsibility Report on pages 14 to 15 (with regard
to information about the employment of disabled persons, employee
involvement and share schemes) are also incorporated into this Report
by reference.

Principal Activities and Business Overview
The principal activities and business overview of the Group are set out
within the Strategic Review.

Results and Dividends
The Group retained profit after taxation for the year from all operations
amounted to £10.3 million (2014: £8.6 million).

The dividend comprises an interim dividend of 0.65 pence (2014: 0.50
pence) per Ordinary share and a proposed final dividend of 1.45 pence
(2014: 1.20 pence) per Ordinary share. This total dividend of 2.10 pence
(2014: 1.70 pence) per Ordinary share, subject to the approval of
Shareholders, will amount to a distribution for the year of £6.9 million
(2014: £5.1 million).

Share Capital
The authorised share capital of the Company at 31st December 2015
comprised of 383,025,739 Ordinary shares of 10 pence each (2014:
383,025,739 Ordinary shares of 10 pence each). The total issued share
capital at the end of the year and the outstanding share options are
given in note 26 to the consolidated financial statements.

Acquisitions and Discontinued Operations
Details of acquisitions and discontinued operations during the current
and preceding year are given in note 31 and 32 to the consolidated
financial statements.

Events after the Reporting Period
On 31st January 2016, the Company acquired the entire share capital of
Zip Textiles (Services) Limited. Further details are set out within note 36
of the consolidated financial statements.

There were no other events occurring after the balance sheet date that
require disclosing in accordance with IAS10, ‘Events after the reporting
period’.

Major Interests in the Company’s Share Capital

At 29th February 2016, this being the latest practicable date prior to
publication of this document, the Company had been advised of the
following interests, of a material nature, in its share capital:

Henderson Global Investors Limited
Schroders plc
Old Mutual plc
BlackRock Inc
Invesco Limited
Ruffer LLP
Miton Group plc
Other

Shareholding (%)

Cumulative
Shareholding (%)

11.89
9.96
5.98
5.05
5.04
4.99
4.65
52.44

11.89
21.85
27.83
32.88
37.92
42.91
47.56
100.00

Shareholders’ Authority for the Purchase by the Company of its own Shares
At the 2015 Annual General Meeting, Shareholders authorised the
Company to make market purchases of up to a maximum aggregate of
30,001,416 Ordinary shares, which represented approximately 10% of
the Company’s issued Ordinary share capital on the latest practicable
date prior to publication of the 2015 Notice of Annual General Meeting.
The minimum price allowed for such purchases is 10 pence and the
maximum is 105% of the average of the middle market quotation of
such shares for the five business days immediately preceding the day of
purchase.  Except for amending the maximum number of shares subject
to the authority, the Directors intend to seek renewal of this authority,
which is due to expire at the conclusion of the 2016 Annual General
Meeting. Further details are given in the Notice of the Annual General
Meeting on pages 106 to 111.

Directors
Details of the Directors of the Company are shown on page 20. They all
held office throughout the year, and up to the date of signing this report,
with the exception of Nick Gregg, who was appointed to the Board on
1st January 2016. Michael Del Mar will retire from the Board at the
conclusion of the 2016 Annual General Meeting.

Directors’ Interests
Share Capital
The interests of the Directors who were in office at 31st December
2015,  together with the interests of their close family,  in the shares of
the Company at the commencement or, if later, date of appointment, and
close of the financial year are disclosed in the Board Report on
Remuneration on pages 34 to 40. Details of the Company’s interest in
its own shares are disclosed in note 29 to the consolidated financial
statements.

Contracts
None of the Directors have any material interests in contracts of the
Company or the Group

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166953 Johnson Service Group Annual Report Pt2_166953 Johnson Service Group Annual Report Pt2  04/03/2016  18:39  Page 22

22 Johnson Service Group PLC  Annual Report and Accounts 2015

DIRECTORS’ REPORT CONTINUED

Directors’ Indemnity
In accordance with the Articles of Association and to the extent
permitted by the laws of England and Wales, the Directors are granted
an indemnity from the Company in respect of liabilities incurred as a
result of their office. In respect of those matters for which the Directors
may not be indemnified, the Company maintained a directors’ and
officers’ liability third party insurance policy throughout the financial year
and up to the date of approval of these financial statements. Neither the
indemnity nor the insurance provides cover in the event that a Director is
proven to have acted dishonestly or fraudulently. No claim was made
under this provision during the year.

Going Concern
The Group’s business activities, together with the factors likely to affect
its future development, performance and position are set out in the
Strategic Review, the Chairman’s Statement and Chief Executive’s
Operating Review on pages 4 to 9. The financial position of the Group,
its cash flows, liquidity position and borrowing facilities are described in
the Financial Review on pages 12 to 13. In addition, note 24 to the
consolidated financial statements includes the Group’s objectives,
policies and processes for managing its capital, its financial risk
management objectives, details of its financial instruments and hedging
activities, and its exposure to credit risk and liquidity risk.

The Group currently has adequate financial resources and long term
relationships with a number of customers and suppliers across many
industries throughout the UK. The Group’s forecasts and projections,
taking account of reasonably possible changes in trading performance,
show that there is not a substantial doubt that the Group should be able
to operate within the level of its current facilities for a period of at least
12 months from the date of this report.

A statement on the future prospects of the Group is included within the
Strategic review.

By order of the Board

Tim Morris
Company Secretary
1st March 2016
Johnson Service Group PLC Registered in England and Wales No.523335

Political Donations
It is the Company’s policy not to make political donations. The Directors
confirm that no donations for political purposes were made during the
year (2014: £nil).

Independent Auditors
The auditors, PricewaterhouseCoopers LLP (PwC), have indicated their
willingness to continue in office. In accordance with the recommendation
of the Audit Committee, as disclosed on page 31, and as required by
Section 489 of the Companies Act 2006, a resolution to reappoint the
auditors will be proposed at the Annual General Meeting.

Policy on Payment to Suppliers
The Company and its subsidiaries fully support the CBI initiative on
payments to suppliers and have continued to apply the Prompt Payment
Code in respect of all suppliers. The main features of the Code are that
payment terms are agreed at the outset of a transaction and are adhered
to; that there is a clear and consistent policy that bills will be paid in
accordance with the contract; and that there are no alterations to
payment terms without prior agreement. Copies of the Code can be
obtained from the CBI.

Financial Risk Management
The Directors acknowledge that the Group’s activities expose it to a
variety of financial risks, including interest rate risk, credit risk and
liquidity risk. The Group’s overall risk management programme focuses
on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group’s financial performance.  Risk
management is carried out centrally under policies approved by the
Board.  Further details are set out on pages 58 to 59.

Half Yearly Reporting
The Company no longer publishes half yearly reports for individual
circulation to Shareholders. Information that would normally be included
in a half yearly report is made available on the Company’s website at
www.jsg.com.

2016 Annual General Meeting
The Company’s AGM will be held at the Doubletree by Hilton Chester,
Warrington Road, Hoole, Chester, CH2 3PD on Thursday 5th May 2016
at 11am. An explanation of the resolutions to be proposed at the
meeting is included in the Notice of Annual General Meeting
accompanying this Annual Report.

166953 Johnson Service Group Annual Report Pt2_166953 Johnson Service Group Annual Report Pt2  04/03/2016  18:39  Page 23

Annual Report and Accounts 2015 Johnson Service Group PLC  23

DIRECTORS’ RESPONSIBILITIES STATEMENT

This confirmation is given and should be interpreted in accordance with
the provisions of Section 418 of the Companies Act 2006.

On behalf of the Board

Chris Sander
Chief Executive Officer
1st March 2016

Yvonne Monaghan
Chief Financial Officer
1st March 2016

The Directors are responsible for preparing the Annual Report, the
Strategic Report, the Directors’ Report (including the Corporate
Governance Report), the Board Report on Remuneration and the
financial statements in accordance with applicable laws and regulations.

Company law requires the Directors to prepare financial statements for
each financial year.  Under that law the Directors have prepared the
Group and Company financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the
European Union. Under company law the Directors must not approve the
financial statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and the Company and of the
profit or loss of the Group for that period.

In preparing the financial statements, the Directors are required to:
➔ select suitable accounting policies and then apply them consistently;
➔ make judgements and accounting estimates that are reasonable and

prudent; and

➔ state whether applicable IFRSs as adopted by the European Union

have been followed, subject to any material departures disclosed and
explained in the financial statements.

The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Group’s and Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and Company and enable them to ensure
that the financial statements and the Board Report on Remuneration
comply with the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of the Group and the Company
and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.

The Directors are also responsible for the maintenance and integrity of
the Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.

The Directors consider that the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable and provides the information
necessary for Shareholders to assess a Company’s performance,
business model and strategy.

Each of the Directors, whose names and functions are disclosed on
page 20, confirms that, to the best of their knowledge:
➔ the Group financial statements, which have been prepared in

accordance with IFRSs as adopted by the European Union, give a
true and fair view of the assets, liabilities, financial position and profit
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.

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24 Johnson Service Group PLC  Annual Report and Accounts 2015

CORPORATE GOVERNANCE REPORT

“We are committed to high standards of corporate governance which we
consider are critical to business integrity and to maintaining investors’ trust in
us. We expect all our directors, employees and suppliers to act with honesty,
integrity and fairness. Our business principles set out the standards we set
ourselves to ensure we operate lawfully, with integrity and with respect for
others”.
All companies with a Premium Listing of equity shares in the UK are
required under the Listing Rules to comply with the Financial Reporting
Council’s UK Corporate Governance Code 2014 (the ‘Code’) or, state
the areas in which they do not comply. The Code was issued in
September 2014, replacing the previous version issued in September
2012, and applies to reporting periods beginning on or after 1st October
2014. The Code is intended to enhance the quality of information
investors receive about the long-term health and strategy of listed
companies, and raises the bar for risk management. The Code can be
accessed on the Financial reporting Council’s website:
https://www.frc.org.uk.

The Code is a guide to a number of key components of effective board
practice, the main principles, or sections, being:
➔ Leadership
➔ Effectiveness
➔ Accountability
➔ Remuneration
➔ Relations with Shareholders

As a Company trading on AIM, Johnson Service Group PLC is not
required to comply with the Code. Notwithstanding this, the Board does
expect all directors, employees and suppliers to act with honesty, integrity
and fairness and our business principles set out the standards we set
ourselves to ensure that we operate lawfully, with integrity and with
respect for others. The Board is committed to high standards of
corporate governance, which it considers are critical to business integrity
and to maintaining investors’ trust, and as a result has reviewed the
procedures to comply with the provisions of the Code, which are set out
below.

Our Governance Structure 

Chairman - Paul Moody

Key objectives:
(cid:129) leadership, operation and governance of the Board
(cid:129) setting the agenda and direction for the Board

The Board of Johnson Service Group PLC

Membership currently comprises the Chairman, two Executive Directors 
and three Non-Executive Directors (including the Senior Independent Director)
Chairman: Paul Moody
Key objectives:
(cid:129) responsible for the overall conduct of the Group’s business
(cid:129) setting the Group’s strategy

Audit Committee

Nomination Committee

Remuneration Committee

Membership comprises the Chairman 
and Non-Executive Directors

Membership comprises the Chairman 
and Non-Executive Directors

Membership comprises the Chairman 
and Non-Executive Directors

Chief Executive Officer

Chris Sander

Chairman: Bill Shannon
Key objectives:
(cid:129) management of the Group’s system 
of internal control, business risks 
and related compliance activities

(cid:129) to review the activity and 

performance of the internal audit 
function and external auditors
(cid:129) to provide effective governance 
over the Group’s financial results

Chairman: Paul Moody
Key objectives:
(cid:129) to ensure the Board comprises 

individuals with the necessary skills, 
knowledge and experience

(cid:129) to give consideration to succession 
planning and the leadership needs 
of the Group

Chairman: Michael Del Mar
Key objective:
(cid:129) to assess and make 

recommendations to the Board on 
the policy of executive remuneration

Key objectives:
(cid:129) responsible for the overall

management of the business

(cid:129) responsible for the implementation of 

strategy and policy

Group Management Board

Membership comprises the two Executive Directors, divisional Managing 
Directors and Group function heads
Chairman: Chris Sander
Key objectives:
(cid:129) implementation of the Board’s strategy
(cid:129) monitoring financial and competitive performance
(cid:129) business development and projects
(cid:129) succession planning across the business

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Annual Report and Accounts 2015 Johnson Service Group PLC  25

Compliance with the Code

The Company has complied with the material provisions of the Code
throughout the year ended 31st December 2015, other than the
provisions in relation to the following:

Provision Explanation
B.1.1 Independence of Non-Executive Directors

Michael Del Mar was appointed to the Board as a Non-
Executive Director on 12th May 2004, almost 12 years ago.
The Board is satisfied that Michael Del Mar, who will retire from
the Board at the conclusion of the 2016 Annual General
Meeting, is independent in character and judgement.

E.1.1 Non-attendance by the Senior Non-Executive Independent Director

(SID) at meetings with major Shareholders
The Chief Executive Officer and the Chief Financial Officer
regularly meet with the Company’s major Shareholders and the
Board is of the opinion that additional regular meetings, other
than those specifically requested by Shareholders, with the
SID would not assist further in dialogue with Shareholders. The
SID, and also the Chairman, are available to meet with
Shareholders, at their request, and the Board believes this
arrangement to be sufficient.

The Company’s compliance with the Code has been reviewed by the
Auditors and their report is given on pages 41 to 46.

Section A: Leadership

Main principles:
➔ Every company should be headed by an effective board which is
collectively responsible for the long-term success of the company.
➔ There should be a clear division of responsibilities at the head of
the company between the running of the board and the executive
responsibility for the running of the company’s business. No one
individual should have unfettered powers of decision.

➔ The chairman is responsible for leadership of the board and

ensuring its effectiveness on all aspects of its role.

➔ As part of their role as members of a unitary board, non-executive

directors should constructively challenge and help develop
proposals on strategy.

Composition of the Board
The Board currently consists of the Non-Executive Chairman (the
‘Chairman’), two Executive Directors and three Non-Executive Directors.
The Chairman and Non-Executive Directors are considered to be
independent in character and judgement and are a strong element within
the Board, with their views carrying significant weight in the decision
making process.

Members of the Board, who are detailed on page 20, all held office
throughout the year, with the exception of Nick Gregg, who was
appointed to the Board on 1st January 2016, and up to the date of
signing this report.

Division of Responsibility of Chairman and Chief Executive Officer
The Code requires that there is a clear division of responsibility between
the Chairman and the Chief Executive Officer, each of which has clearly
defined roles. The Chairman should be responsible for the effective
running of the Board whilst the Chief Executive Officer is responsible for
operating the business and implementing the Board’s strategies and
policies.

The role of the Chairman is set out in writing and agreed by the Board.
The Chairman is responsible for:
➔ the effective leadership, operation and governance of the Board;
➔ ensuring the effectiveness of the Board;
➔ setting the agenda, style and tone of Board discussions; and
➔ ensuring the Directors receive accurate, timely and clear information.

The role of the Chief Executive Officer is set out in writing and agreed by
the Board. The Chief Executive Officer is responsible for:
➔ management of the Group’s business;
➔ implementation of the Group’s strategy and policies;
➔ maintaining a close working relationship with the Chairman; and
➔ chairing the Group Management Board meetings.

Responsibilities of the Board
The Board, in addition to routine consideration of both financial and
operational matters, determines the strategic direction of the Group. The
Board has a formal schedule of matters specifically reserved for its
decision which can only be amended by the Board itself.

The specific responsibilities reserved for the Board include:
➔ approval of the Group’s long-term objectives, overall strategy, mission,

vision, values and targets;

➔ approval and monitoring of the annual operating budget;
➔ approval of major acquisitions, disposals and capital expenditure;
➔ dividend policy;
➔ approval of appointments to the Board and of the Company Secretary;
➔ consideration of succession planning for key members of the

management team; and

➔ determining the terms of reference for the Board committees.

The following responsibilities have been delegated to 
Executive Management:
➔ the development of strategic plans that reflect the longer term

objectives and priorities established by the Board;

➔ implementation of strategies and policies as determined by the

Board;

➔ monitoring of operational and financial performance against plans

and budgets; and

➔ developing and implementing risk management systems.

Key Board Activities in the Year
Key activities of the Board in the current year included, inter alia:
➔ approval and enactment of the restructuring of the Group’s

Drycleaning business, announced in January 2015, and undertaken
throughout the year;

➔ approval of the Group’s refinancing of its external borrowings in April

2015;

➔ the review and approval of the Group’s investment in London Linen,

acquired in April 2015;

➔ approval of the Group’s fund raising, which raised net funds of £21.1

million, in April 2015;

➔ the review and approval of the Group’s investment in Ashbon,

acquired in November 2015; and

➔ regular review, and formal approval in February and August, of the

Group’s risk assessment processes and principal risks and
uncertainties.

Board Committees
The Committees of the Board are:
➔ the Audit Committee;
➔ the Nomination Committee; and
➔ the Remuneration Committee.

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26 Johnson Service Group PLC  Annual Report and Accounts 2015

CORPORATE GOVERNANCE REPORT CONTINUED

Current membership of each Committee consists wholly of the Chairman
and the three Non-Executive Directors. Each Committee has written
terms of reference, which are available on the Company’s website.
Separate reports for each of these Committees are included in this
Annual Report.

Induction, Training & Knowledge
Appropriate training is available to Directors upon appointment and as
required on an ongoing basis. Furthermore, on appointment, Directors
participate in a customised induction programme to familiarise them with
the Group.

Group Management Board
The Group Management Board meets under the chairmanship of the
Chief Executive Officer. Topics covered by the Group Management
Board include:
➔ an update by the Chief Executive Officer on the business and

The Directors have access to the advice and services of the Company
Secretary and it is acknowledged that individual Directors may wish to
seek independent professional advice in connection with their
responsibilities and duties. The Company will meet reasonable expenses
incurred in this regard.

business environment;

➔ divisional Managing Director updates;
➔ Group function heads’ updates;
➔ substantial business developments and projects;
➔ talent and succession planning;
➔ competitor analysis; and
➔ strategy.

Annually, the Group Management Board conducts a strategy review to
identify key strategic issues to be presented to the Board. The agreed
strategy is then used as a basis for developing the upcoming budget and
three year operating plans.

Section B: Effectiveness

Main principles:
➔ The board and its committees should have the appropriate

balance of skills, experience, independence and knowledge of the
company to enable them to discharge their respective duties and
responsibilities effectively.

➔ There should be a formal, rigorous and transparent procedure for

the appointment of new directors to the board.

➔ All directors should be able to allocate sufficient time to the
company to discharge their responsibilities effectively.

➔ All directors should receive induction on joining the board and
should regularly update and refresh their skills and knowledge.
➔ The board should be supplied in a timely manner with information
in a form, and of a quality, appropriate to enable it to discharge its
duties.

➔ The board should undertake a formal and rigorous annual

Supply of Information
To assist the Board in performing its responsibilities, information,
appropriate in quality and timeliness, is received in an agreed format, for
each scheduled Board meeting.

Performance Evaluation
Each year, the Non-Executive Directors conduct a performance
evaluation of the Chairman, after taking into account the views of the
Executive Directors. The Chairman also conducts an appraisal of each
member of the Board, Board composition and the format and
effectiveness of the Board meetings. In addition, the Remuneration
Committee regularly reviews Executive Director performance in
connection with their performance objectives.

The Board conducted an internal Board evaluation during the year. This
process was led by the Chairman and each Director completed an
in-depth questionnaire which covered, inter alia:
➔ performance of the Board (including consideration of how the Board

works together as a unit);

➔ processes which underpin the Board’s effectiveness (including

consideration of the balance of skills, experience, independence and
knowledge of the persons on the Board);

➔ strategy;
➔ performance of the Audit, Nomination and Remuneration

Committees; and

➔ individual performance (giving consideration to whether each Director

continues to contribute effectively and show commitment).

evaluation of its own performance and that of its committees and
individual directors.

➔ All directors should be submitted for re-election at regular
intervals, subject to continued satisfactory performance.

The completed questionnaires are reviewed on an individual basis by the
Chairman, who then has discussions with each Director. The results of
the review (including progress against the previous year’s recommended
actions) are summarised by the Chairman and considered in detail by the

Board Meetings and Attendance
The Board met formally six times during 2015 and, additionally, held a further three unscheduled meetings in relation to, inter alia, the acquisition of
London Linen and Ashbon, the refinancing of the Company’s bank facility and the equity raising.

Individual attendance at the meetings, including Audit Committee, Nomination Committee and Remuneration Committee attendance, is set out in the
table below. Where n/a appears in the table, the individual is not a Committee member.

Paul Moody
Chris Sander
Yvonne Monaghan
Michael Del Mar
Bill Shannon
Number of Meetings

Board
(Scheduled)

Board
(Unscheduled)

Audit
Committee

Nomination
Committee

Remuneration
Committee
(Scheduled)

Remuneration
Committee
(Unscheduled)

6
6
6
5
6
6

3
3
3
3
3
3

3
n/a
n/a
3
3
3

1
n/a
n/a
1
1
1

3
n/a
n/a
3
3
3

1
n/a
n/a
1
1
1

Note: Nick Gregg is excluded from the table above as his appointment to the Board as a Non-Executive Director was on 1st January 2016.

In addition, the Chairman and the Non-Executive Directors have met during the year without the Executive Directors.

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Annual Report and Accounts 2015 Johnson Service Group PLC  27

Board. This year’s review found that performance of the Board and its
Committees continued to be effective in dealing with both day-to-day
and ongoing strategic issues and that the Board and Committee
structure ensured that the governance requirements of the business
were met.

As a result of these reviews, it is considered that the performance of
each Director continues to be effective and that each Director
demonstrates sufficient commitment to their role.

Election of Directors
The Directors comply with the requirements of the Code and submit
themselves for re-election every year, if they wish to continue serving
and are considered by the Board to be eligible. Accordingly, each
member of the Board who served during the year will be proposed for
re-election at this year’s Annual General Meeting (AGM), with the
exception of Michael Del Mar who will retire at the conclusion of the
2016 AGM. Nick Gregg, who was appointed to the Board on
1st January 2016, will also be proposed for election at the 2016 AGM.

Service Agreements
The service agreements of the Executive Directors and copies of the
letters of appointment of the Chairman and the Non-Executive Directors
are available for inspection during business hours on any weekday
(excluding Saturdays, Sundays and public holidays) at the registered
office of the Company and will be available for inspection for fifteen
minutes prior to, and during, the AGM.

External Appointments
The Executive Directors may accept outside appointments provided that
such appointments do not in any way prejudice their ability to perform
their duties as Executive Directors of the Company. The commitments of
each Executive Director are set out on page 20.

The role of a Non-Executive Director requires a time commitment in the
order of 15 days per year plus additional time as necessary to properly
discharge their duties. There is no restriction on outside appointments
provided that they do not prevent the Directors from discharging their
responsibilities effectively.

Section C: Accountability

Main principles:
➔ The board should present a fair, balanced and understandable
assessment of the company’s position, performance and
prospects.

➔ The board is responsible for determining the nature and extent of
the principal risks it is willing to take in achieving its strategic
objectives. The board should maintain sound risk management
and internal control systems.

➔ The board should establish formal and transparent arrangements
for considering how they should apply the corporate reporting, risk
management and internal control principles and for maintaining an
appropriate relationship with the company’s auditor.

Audit Committee
The Board should present a fair, balanced and understandable
assessment of the Group’s position, performance and prospects,
maintaining sound risk management and internal control systems and
managing an appropriate relationship with the Company’s auditors. The
Board has delegated day-to-day responsibility for these matters to the
Audit Committee.

The work undertaken by the Audit Committee helps to enable the Board
to make the below statements relating to internal control and the going
concern statement on page 22.

Further information is detailed in the Audit Committee Report on
pages 29 to 32.

Internal Control
The Board is responsible for the Group’s system of internal control and
for reviewing its effectiveness, which has been undertaken during the
year. Such a system is designed to manage, rather than eliminate, the
risk of failure to achieve business objectives and can only provide
reasonable and not absolute assurance against material misstatement or
loss.

There is an on-going process for identifying, evaluating and managing
the Group’s principal risks and uncertainties that has been in place
throughout the year ended 31st December 2015 and up to the date of
approval of the financial statements. This process has been regularly
reviewed by the Board. The Audit Committee receives reports setting out
key performance and risk indicators and considers possible control
issues brought to its attention through early warning mechanisms which
are embedded within our businesses and are reinforced by risk
awareness training.

The Audit Committee also receives regular reports from the internal audit
function and, recommendations for improvement are considered. The
Audit Committee’s role in this area is confined to a high level review of
the arrangements for internal control.

The Board’s agenda includes a bi-annual consideration, or more
frequently if appropriate, of risk and control and it receives reports
thereon from the Audit Committee. The emphasis is on obtaining the
relevant degree of assurance and not merely reporting by exception. The
main features of the internal control framework are detailed below.

Financial Reporting
The Board reviews the overall strategy of the Group and of each
individual business. There is a detailed budgeting process with the
annual budget both challenged, stress tested and, ultimately, approved by
the Board. Monthly results are reported against the corresponding
figures for the budget and the previous year with corrective and/or
investigative action initiated by the Board as appropriate.

Treasury Management
The Group’s treasury activities are operated within Board approved
guidelines. Facilities are approved by the Board and all transactions are
controlled and monitored. Monthly summaries of treasury management
activities are prepared for the Board. Speculative transactions are not
undertaken.

Risk Management
The identification of business risks is carried out in conjunction with
operating management and reviewed by the Audit Committee and the
Board. The Board regularly assesses the financial implications and
effectiveness of the control process in place to mitigate or eliminate
these risks. The Group has insurance cover where it is considered
appropriate and cost effective.

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28 Johnson Service Group PLC  Annual Report and Accounts 2015

CORPORATE GOVERNANCE REPORT CONTINUED

Financial Control
Each business maintains financial controls and procedures appropriate
to its own operating environment. The Group has a centralised internal
audit function, which can second additional resources from around the
Group, and which reviews the systems and procedures within each
business and reports regularly to the Audit Committee. A review of
control procedures is undertaken in respect of all new acquisitions, within
the first three months of ownership where possible, and action taken
where necessary to bring the controls up to the level required by the
Group. The Group has clearly defined guidelines for the review and
approval of capital expenditure projects. These include annual budgets
and designated levels of authority.

Robust risk assessment
Throughout the year and as described further on pages 16 to 19, the
Board has carried out a robust assessment of the principal risks and
uncertainties facing the Group, including those that would threaten its
business model, future performance, solvency or liquidity.

Future prospects and viability (the ‘viability statement’)
The Board has assessed the future prospects of the Group in
accordance with provision C2.2 of the Code. Based on the results of this
analysis, the Board has a reasonable expectation that the Group will be
able to continue in operation and meet its liabilities as they fall due over
the three-year period of their assessment. Details of the assessment
performed by the Board, including an assessment of those risks most
likely to impact the Group’s future prospects and viability has been set
out on pages 4 to 5.

Section D: Remuneration

Main principles:
➔ Executive directors’ remuneration should be designed to promote
the long-term success of the company. Performance-related
elements should be transparent, stretching and rigorously applied.

➔ There should be a formal and transparent procedure for

developing policy on executive remuneration and for fixing the
remuneration packages of individual directors. No director should
be involved in deciding his or her own remuneration.

Remuneration Committee
The Remuneration Committee is responsible for overseeing the policy
regarding executive remuneration. Further details are outlined in the
Board Report on Remuneration, on pages 34 to 40.

Section E: Relations with Shareholders

Main principles:
➔ There should be a dialogue with shareholders based on the

mutual understanding of objectives. The board as a whole has
responsibility for ensuring that a satisfactory dialogue with
shareholders takes place.

➔ The board should use general meetings to communicate with

investors and to encourage their participation.

Investor Relations
We are committed to communicating our strategy and activities clearly to
our Shareholders and, to that end, we maintain an active dialogue with
investors through a planned programme of investor relations activities.
The investor relations programme includes:
➔ formal presentations of full year and half-year results;
➔ briefing meetings with major institutional Shareholders after the half-
year results and preliminary statement, to ensure that the investor
community receives a balanced and complete view of our
performance and the issues we face;

➔ regular meetings between institutional investors and analysts and the

Chief Executive Officer and Chief Financial Officer to discuss
business performance;

➔ hosting investors and analyst sessions at which senior management
from relevant operating companies deliver presentations which
provide an overview of each of the individual businesses and
operations; and

➔ attendance by senior executives across the business at relevant

meetings throughout the year.

The Board is of the opinion that additional routine meetings with the
Senior Independent Director would not assist further in the dialogue with
Shareholders, however, the Senior Independent Director is available to
meet with Shareholders, at their request.

Feedback is provided to the Board on any issues raised at these
meetings. External brokers’ reports are circulated to the Directors. The
Shareholders’ views of the investor meetings following the interim and
final results are obtained by the Group’s broker and circulated to the
Board.

The Board welcomes private and Institutional Shareholders to the Annual
General Meeting, which is normally attended by all Directors, to discuss
appropriate topics during the meeting or with the Directors after the
formal proceedings have ended. The Board considers that the
Preliminary Announcement, the Annual Report, including the Chairman’s
Statement, the Chief Executive’s Operating Review and the Financial
Review which are contained therein, the Interim Report and trading
update statements made during the year present a balanced and clear
assessment of the Group’s position and prospects.

The Audit Committee Report, Nomination Committee Report and the
Board Report on Remuneration on pages 29 to 40 also form part of the
Corporate Governance Report.

By order of the Board

Tim Morris
Company Secretary
1st March 2016

166953 Johnson Service Group Annual Report Pt2_166953 Johnson Service Group Annual Report Pt2  04/03/2016  18:39  Page 29

AUDIT COMMITTEE REPORT

Recent years have seen a large number of corporate failures and
subsequently, and not surprisingly, a number of regulatory changes have
reinforced the role of the Audit Committee.

Section C of the Financial Reporting Council’s UK Corporate
Governance Code 2014 (the ‘Code’) requires that:
➔ the board should present a fair, balanced and understandable

assessment of the company’s position, performance and prospects;
➔ the board is responsible for determining the nature and extent of the
principal risks it is willing to take in achieving its strategic objectives.
The board should maintain sound risk management and internal
control systems; and

➔ the board should establish formal and transparent arrangements for

considering how they should apply corporate reporting, risk
management and internal control principles and for maintaining an
appropriate relationship with the company’s auditor.

The Board has delegated day-to-day responsibility for these matters to
the Audit Committee (the ‘Committee’) and this report sets out how the
Committee has discharged its responsibilities.

Members of the Committee have continued to take an active role,
including spending time with the operations teams in the field and also
participating in key discussions on areas of financial judgement. These
actions have allowed the Committee to have an even greater input, for
example in the design of the internal audit programme, and to develop
greater awareness of the day-to-day challenges that the business faces
and the potential consequences of such challenges.

Set out below are details on the processes in place to safeguard the
independence and objectivity of our relationship with the external
auditors and the role played by internal audit to ensure we have effective
control and risk management processes.

Composition of the Committee
The Committee meets at least three times per year and also meets in
private with the external auditors. The Committee was chaired during the
year by myself, with the Chairman of the Board and the Senior
Independent Non-Executive Director both being members of the
Committee.  Membership of the Committee is, therefore, in accordance
with the Code.

During the year a formal evaluation of the Committee was conducted by
means of a questionnaire being sent to members of the Committee. The
responses were reviewed by myself and, where appropriate, actions to
improve the effectiveness of the Committee are agreed and
implemented accordingly. The results of these reviews were discussed
by the Board as a whole, with action taken as appropriate.

By virtue of my former executive and current non-executive roles (full
details of which are set out on page 20), together with the results of the
questionnaire, the Board considers that I have recent and relevant
financial experience and also that all members of the Committee are
independent.

Responsibilities of the Committee
The Committee is responsible for:
➔ ensuring that the interests of Shareholders are protected in relation

to financial reporting and internal control;

➔ monitoring the financial reporting process and the integrity of the

annual and interim financial statements;

Annual Report and Accounts 2015 Johnson Service Group PLC  29

➔ monitoring any formal announcements relating to the Company’s

financial performance;

➔ reviewing and challenging, as necessary, the judgements and actions

of management in relation to the financial statements;

➔ monitoring, reviewing and concluding upon the system of internal

control, including the work of internal audit;

➔ ensuring the maintenance of a control environment and the

appropriate management of risk;

➔ recommendation of appointment of and liaison with the external

auditors;

➔ reviewing and setting the terms of engagement and the remuneration

of the external auditors;

➔ annual review and monitoring of external auditors independence and

objectivity and the effectiveness of the audit process;

➔ development and implementation of policy on the engagement of the

external auditors to supply non-audit services; 

➔ reviewing the Group’s systems and controls for the prevention and

detection of fraud or bribery; and

➔ reviewing of arrangements under which employees may, in

confidence, raise concerns about possible improprieties in matters of
financial reporting or other matters ensuring that arrangements are in
place for the proportionate and independent investigation and
appropriate follow-up action.

The Committee reports to the Board on how we have discharged our
responsibilities.

The full terms of reference are available on the Company’s website, or on
request to the Company Secretary.

What the Committee did in 2015
In 2015, the Committee discharged its responsibilities by:
➔ reviewing the Group’s draft financial statements, preliminary

announcements and interim results statement prior to Board approval
and reviewing the external auditors’ reports thereon;

➔ reviewing the plan of the external auditor for the audit of the Group

accounts, confirmations of auditor independence and proposed audit
fee and approving terms of engagement for the audit;
➔ considering and agreeing the annual internal audit plan;
➔ reviewing internal audit’s progress and reports on its work during the

year;

➔ considering the review of material business risks, including reviewing
internal control processes used to identify and monitor principal risks
and uncertainties;

➔ reviewing the Executive and Non-Executive Directors’ expenses;
➔ monitoring the reporting, and follow up of items reported, on the
employee hotline established in line with the Code of Ethics; and
➔ reviewing the Committee’s composition and confirming that there is
sufficient expertise and resource for it to fulfil its responsibilities
effectively.

The Committee considered the 2015 Annual Report and Accounts in
the context of whether they were fair, balanced and understandable and
were able to report to the Board that the 2015 Annual Report and
Accounts, when taken as a whole, were fair, balanced and
understandable on the basis that the description of the business agrees
with our own understanding, the risks reflect the issues that concern us,
appropriate weight has been given to the ‘good and bad’ news, the
discussion of performance properly reflects the ‘story’ of the year and
that there is a clear and well-articulated link between all areas of
disclosure.

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30 Johnson Service Group PLC  Annual Report and Accounts 2015

AUDIT COMMITTEE REPORT CONTINUED

Significant Issues Considered in Relation to the Financial Statements
During the year the Committee, management and the external auditors
considered and concluded on what the significant risks and issues were
in relation to the financial statements and how these would be
addressed.

Impairment Reviews
As part of the year end process, the Group tests whether goodwill has
suffered any impairment, in accordance with the accounting policy stated
within this Annual Report. The impairment test is undertaken at a cash
generating unit (‘CGU’) level. The Committee considered the impairment
review process in detail.

It was acknowledged that the pre-tax discount rate used in the 2015
calculation is 4.66%, compared to a prior year rate of 4.83%.  The
discount rate takes into account, inter alia, the risk free rate of return
(derived from a 20 year government bond rate) and a predictive Beta
factor for the Group, both of which have reduced in the current year
although the decrease in the Beta factor is more noticeable. The Beta
factor used in the 2015 calculation was 0.33 compared to 0.37 in the
prior year. The Committee were satisfied that the rate had been obtained
from a third party source and is used for all CGUs.

The recoverable amount of a CGU is based on value-in-use calculations.
The Committee were satisfied that, with regards to the Textile Rental
CGUs, the discounted net present value of future cash flows provides
significant headroom over the goodwill carrying value, and hence no
impairment is required.

The Committee also noted that, within the Drycleaning CGU, the
recoverable amount exceeded the carrying value by only £5.9 million,
and hence a sensitivity analysis had subsequently been performed that
showed (a) if the discount rate increased to 7.94% (from 4.66% used in
the impairment review) then the recoverable amount would equal the
carrying value, and (b) if the long term growth rate reduced to nil (from
2.5% used in the impairment review), there would still be £2.6 million of
headroom.

The Committee were satisfied that no impairment should be recognised
within these financial statements and that appropriate disclosures had
been provided.

Property and Environmental Provisions
The £6.5 million restructuring of the Drycleaning division, announced in
January 2015, included £3.6 million of property related provisions. The
opening Drycleaning property related provision totalled £8.9m. The
Committee noted that £4.5m of provision was utilised in the year as
properties have been exited and dilapidations and other costs have been
settled. The Committee considered the movement in the provision during
the year, together with the level of provision remaining as at the year end,
and concluded that they were reasonable.

Additionally, there are further provisions for onerous property leases held
by the Group. The Committee considered the additional provisioning and
utilisation of these provisions during the year, together with the remaining
provision as at 31st December 2015, and concluded that they were
reasonable.

The Group continues to recognise provisions for remediation costs to be
incurred in relation to environmental issues identified at a number of the
Group’s properties. The Committee considered the movement in the

provision during the year, together with the level of provision remaining
as at the year end, and concluded that they were reasonable.

Acquisition Accounting
During the year, the Group acquired the entire share capital of both
London Linen Supply Limited and Ashbon Services Limited.

The Committee considered the methodology and assumptions used by
management in determining the fair value of the customer contracts and
customer relationships acquired, as this was considered by the
Committee to be the area of most significant judgement. The Committee
were satisfied that the fair value had been calculated based upon
relevant historical and prospective information and financial data specific
to each business combination, with an appropriate discount factor
applied. The Committee further considered the accounting policy
realignment adjustments and, again, considered them to be reasonable.

The Committee also reviewed the proposed disclosures relating to the
acquisitions for inclusion within the Annual Report and were in
agreement that the requirements of IFRS 3, ‘Business Combinations’
had been satisfied.

Post-employment Benefit Obligations
The valuation of all post-employment benefit obligations is based on
statistical and actuarial calculations, using various assumptions including
discount rates, inflation, life expectancy of scheme members and cash
commutations. The Committee reviewed the actuarial assumptions
underpinning the valuation and were satisfied that all assumptions are
within ranges considered generally acceptable given the size,
demographic and duration of the Group scheme.

Accounting for Complex Customer Arrangements
As in previous years, the Group offers rebates to certain customers
based on agreed fixed rates relating to the volume of services provided
and goods purchased. The Committee does not consider the Group’s
rebates to be highly complex as: they are volume related; there are
written agreements with customers; and historically rebates estimates
have been seen to be accurate. However, following recent FRC guidance
this has been highlighted as an area of focus. The Committee has
discussed any judgements made in accruing customer rebates with
management and the auditors. The Committee is satisfied that the
amounts of expense accrued are appropriate.

Income Taxes
Judgement is required in determining the provision for income taxes as
there are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. The
Committee discussed the effective tax rate for the year and noted that it
was lower than the standard rate of UK taxation, primarily as a result of
adjustments made in respect of prior years, offset, to a lesser extent, by
the effect of expenses that were not deductible for tax purposes. The
Committee concluded that the judgements made in relation to taxation
were reasonable.

Going Concern
The Group has to comply with a number of financial covenants that
relate to its financing structure. Reaching a conclusion on the reliability of
the budgets prepared by management is considered important to the
Committee to ensure that covenants will not be breached and the Group
will remain a going concern.

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Annual Report and Accounts 2015 Johnson Service Group PLC  31

The Committee therefore reviewed, challenged and concluded upon the
Group’s going concern review including giving due consideration to the
appropriateness of key judgements, assumptions and estimates
underlying the budgets that underpin the review and a review of
compliance with key financial covenants.

Assessment of External Auditor Effectiveness
The Committee reviewed the external auditors’ performance and on-
going independence, taking into account input from management,
consideration of responses to questions from the Committee and the
audit findings reported to the Committee.

Based on this information the Committee concluded that the external
audit process was operating effectively and PricewaterhouseCoopers
LLP continued to prove effective in its role as external auditors.

Appointment of the External Auditor and Approach to how Objectivity and
Independence are Safeguarded
The Company has adopted a policy on the independence of auditors
which is consistent with the ethical standards published by the Audit
Practices Board. A key issue for the Committee that may impair auditor
independence, and the auditors’ objective opinion on the Group’s
financial statements, is the engagement of the external auditor for the
provision of non-audit services.

Non-Audit Services
The Committee has adopted a policy on the engagement of the external
auditors for the provision of non-audit services and reviews this annually.
The policy is designed to ensure that such engagements do not result in
the creation of a mutuality of interest between the external auditor and
the Company, that a transparent process and reporting structure is
established to enable the Committee to monitor policy compliance and
that unnecessary restrictions on the engagement of auditors for non-
audit services is avoided where the provision of advice is commercially
sensible. The policy categorises the provision of non-audit services into
three areas:
➔ normally performed by the auditor;
➔ may be performed by the auditor; and
➔ normally performed by another provider.

With reference to this policy, the selection of professional service firms
for non-audit work is at the discretion of management, taking into
account which firm is best placed to perform such work to meet the
interests of the Company and Shareholders and with regard to ensuring
that independence is not compromised.

The total fees invoiced by the external auditor during the year under
review amounted to £589,000 (2014: £592,000), of which £295,000
(2014: £303,000) related to non-audit services. Of these non-audit
services, fees of £198,000 (2014: £174,000) related to one-off and
non-recurring services, largely in relation to the acquisitions of London
Linen Supply Limited and Ashbon Services Limited, where it was
considered by the Committee to be commercially sensible and more cost
effective to use PricewaterhouseCoopers LLP rather than an alternative
provider. Full details are set out in Note 3 to the consolidated financial
statements.

Independence Safeguards
The external auditor is required to adhere to a rotation policy whereby
the Senior Statutory Auditor (audit engagement partner) is rotated after
five years. The previous Senior Statutory Auditor was appointed in 2010
and, in accordance with best practice and professional standards, was

replaced during 2015. The external auditor is also required to assess
periodically whether, in their professional opinion, they are independent
and those views are shared with the Committee. The Committee has
authority to take independent advice, as it determines necessary, in order
to resolve issues on auditor independence. No such advice was required
during the year.

Independence Assessment by the Committee
The Committee is satisfied that the independence of the external auditor
is not impaired due to the fact that the audit engagement partner
rotation policy has been complied with; the level of fees paid for non-
audit services was of a level that does not present any on-going threat to
their independence and separate external firms are appointed for certain
other advisory services. In addition, the Committee meets with the
external auditor during the year without the presence of management
and I have had regular contact with the audit engagement partner during
the year.

Re-appointment of the External Auditor
The re-appointment of PricewaterhouseCoopers LLP as the Group’s
external auditor was reviewed during the year. The Committee has
assessed the performance, objectivity and independence of the external
auditor, which underpins its recommendation to the Board to propose to
shareholders the re-appointment of PricewaterhouseCoopers LLP as
auditor until the conclusion of the AGM in 2017.  Full details are set out
in the Notice of Annual General Meeting on pages 106 to 111. There
are no contractual restrictions over choice of auditor.

Role of Internal Audit
Internal audit has a Group-wide remit and is independent of the business
operations. It undertakes an on-going programme to provide assurance
on the adequacy of internal control and risk management processes
across the Group’s operations. Internal audit is responsible for reviewing
and reporting on the effectiveness of internal controls and risk
management systems to the Committee and, ultimately, the Board.
Internal audit attend Committee meetings to present the findings of such
reviews at regular intervals throughout the year and report on
performance against the agreed annual internal audit plan, such plans
being agreed during the year by the Committee.

Internal Control and Risk Management
The Board is ultimately responsible for the overall system of internal
control for the Group and for reviewing its effectiveness. The Board has
delegated day to day responsibility for this to the Committee. The
Committee carries out a review, at least annually, covering all material
controls, including financial, operational and compliance controls, and the
risk management systems.  The system of internal control is designed to
mitigate, rather than eliminate, the risk of failure to achieve business
objectives and can only provide reasonable and not absolute assurance
against material misstatement or loss.

There is an on-going process for identifying, evaluating and managing
the Group’s significant risks that has been in place throughout the year
ended 31st December 2015 and up to the date of approval of the
financial statements. The Committee receives reports setting out key
performance and risk indicators and considers possible control issues
brought to its attention by early warning mechanisms which are
embedded within the operational units and reinforced by risk awareness
training.

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32 Johnson Service Group PLC  Annual Report and Accounts 2015

AUDIT COMMITTEE REPORT CONTINUED

The key elements of the Group’s on-going processes for the provision of
effective internal control and risk management systems, in place
throughout the year and at the date of this Report, include:
➔ regular Board meetings to consider matters reserved for Directors’

consideration;

➔ regular management reporting, providing a balanced assessment of

key risks and controls;

➔ an annual Board review of corporate strategy, including a review of
material business risks and uncertainties facing the business;
➔ established organisational structure with clearly defined lines of

responsibility and levels of authority;

➔ an internal audit function which implements the annual internal audit
plan and provides independent assurance to executive management,
the Committee and the Board on the effectiveness of internal
controls and risk management;

➔ documented policies and procedures;
➔ regular review by the Board of financial budgets, forecasts and
covenants with performance reported to the Board monthly; and
➔ a detailed investment process for major projects, including capital
investment coupled with a post investment appraisal analysis.

In reviewing the effectiveness of the system of internal control the
Committee has:
➔ received six-monthly reports, compiled by the Company Secretary
following discussion with key senior managers, that set out the key
risks facing the Group and indicate whether controls and risk
management processes in each business have operated satisfactorily.
These returns are reviewed in detail, challenged where appropriate
and approved by the Committee for use in the Annual Report;

➔ regularly reviewed the financial and accounting controls;
➔ reviewed the internal audit reports;
➔ monitored management’s responsiveness to the findings and

recommendations of internal audit; and

➔ met with internal audit, without management being present, to

discuss internal audits remit and any issues arising from internal
audits carried out.

No significant issues were identified.

In respect of Group financial reporting, the finance department is
responsible for preparing the Group financial statements using a well-
established consolidation process and ensuring that accounting policies
are in accordance with International Financial Reporting Standards.
There is a detailed budgeting process with an annual budget both
challenged and approved by the Board. Monthly results are reported
against the corresponding figures for the budget and the previous year
with corrective action initiated by the Board as appropriate. All financial
information published by the Group is subject to approval by the
Committee.

The Group’s treasury activities are operated within Board approved
guidelines. Facilities are approved by the Board and all transactions are
controlled and monitored. Monthly summaries of treasury management
activities are prepared for the Board. Speculative transactions are not
undertaken.

There have been no changes in the Company’s internal control over
financial reporting during the year under review that have materially
affected, or are reasonably likely to materially affect, the Company’s
control over financial reporting.

The Board, with advice from the Committee, is satisfied that an effective
system of internal controls and risk management processes are in place
which enable the Company to identify, evaluate and manage key risks.
These processes have been in place since the start of the financial year

and up to the date of approval of the accounts. Further details of risk
management frameworks and specific material risks and uncertainties
facing the business can be found on pages 16 to 19.

Bribery Act 2010
The Bribery Act 2010 (the ‘Act’) came into force on 1st July 2011, and
repeals all previous statutory and common law provisions in relation to
bribery, instead replacing them with the crimes of bribery, being bribed,
the bribery of foreign public officials, and the failure of a commercial
organisation to prevent bribery on its behalf. However, a defence to any
such corporate failure offence is possible if it can be shown that
adequate procedures were in place at the time.

The Group is committed to conducting its business with the highest
degree of integrity. This commitment includes a zero tolerance approach
towards all forms of bribery, corruption, fraud and theft.

The Group has in place an appropriate policy and regularly re-enforces
its code of ethics. Appropriate Board approved procedures are in place
to prevent employees and other associated persons committing offences
under the Act. Engaging in fraud, bribery or corruption is unlawful and
any employee, director or officer found to have breached the code of
conduct will be liable to disciplinary action which may result in dismissal
or other serious sanctions. Breaches of the code of conduct by third
parties may result in immediate termination for breach of all contracts
with the Group. These procedures are subject to regular monitoring and
review.

Whistleblowing
The Group is committed to developing a culture of openness, honesty and
accountability and believes that it is fundamental that any concerns our
employees have about the Company can be raised without fear of
victimisation. To this end, the Group has in place a whistleblowing policy
which encourages employees to report any malpractice, illegalities,
wrongdoing or matters of similar concern (together ‘ethical wrongdoing’)
by other employees, former employees, contractors, suppliers or advisors.
Examples of ethical wrongdoing include bribery, corruption, fraud,
dishonesty and illegal practices which may endanger employees or other
parties. There have been no material instances of whistleblowing during
the year under review.

William Shannon
Chairman, Audit Committee
1st March 2016

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Annual Report and Accounts 2015 Johnson Service Group PLC  33

NOMINATION COMMITTEE REPORT

The Nomination Committee (the ‘Committee’) is responsible for
monitoring the performance, appropriateness and future succession of
the Company’s executive and Board talent.

Appointments to the Board are recommended, as appropriate, by the
Committee. Board appointments are subject to approval by the Board as
a whole.

The Committee met once during 2015.

Composition
In compliance with the Financial Reporting Council’s UK Corporate
Governance Code 2014 (the ‘Code’), the members of the Committee are
wholly independent and comprise the Chairman of the Company and the
Non-Executive Directors. The Committee is chaired by myself.

Roles and Responsibilities
The principal responsibilities of the Committee are:
➔ reviewing the Board structure, size and composition;
➔ identifying and nominating candidates to fill Board vacancies;
➔ keeping up to date and fully aware of the strategic and commercial
changes affecting the Group and the markets in which it operates;
➔ keeping under review the leadership needs of the business with a
view to ensuring the continued ability to compete effectively in the
marketplace;

➔ considering the continuing service of a Director; and
➔ providing recommendations for reappointment of Directors retiring

by rotation.

The Committee undertakes its responsibilities proactively, recognising it
is important to plan Board succession well in advance, and to ensure that
the Company’s Board and executive leadership skills are fully aligned to
the Company’s long-term strategy. The Committee therefore takes care
to ensure that there is a continuous pipeline of high-performing and
executive talent beneath Board level.

What the Committee did in 2015
The main focus of the Committee’s work in 2015 included:
➔ following an extensive selection process, which involved an

independent external search consultancy, recommending to the
Board the appointment of Nick Gregg as a Non-Executive Director,
with effect from 1st January 2016;

➔ reviewing the senior management structure and talent below Board

level; and

➔ reviewing the Committee’s terms of reference, and conducting the

annual review of the Committee’s performance.

Diversity
Whilst we pursue diversity, including gender diversity, we are not
committing to any specific targets. Instead, and when applicable, we will
seek to use executive search firms who have signed up to the voluntary
code of conduct setting out the seven key principles of best practice to
abide by throughout the recruitment process and we will continue to
follow a policy of appointing talented people at every level to deliver high
performance. We will also ensure that our development in this area is
consistent with our own strategic objectives and is enhancing in terms of
Board effectiveness.

Paul Moody
Chairman, Nomination Committee
1st March 2016

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34 Johnson Service Group PLC  Annual Report and Accounts 2015

BOARD REPORT ON REMUNERATION

Prior to 13th December 2013, Premium Listed companies incorporated in the
UK were required to fully apply the Listing Rules of the Financial Conduct
Authority (the “Listing Rules”) with respect to the disclosure of directors’
remuneration. From 13th December 2013, whilst certain aspects of the Listing
Rules remain in force with respect to the disclosure of directors’
remuneration, most remuneration-related disclosures for Premium Listed
companies incorporated in the UK will only need to comply with the BIS
Directors’ Remuneration Reporting Regulations (the “Remuneration
Regulations”) when making disclosures regarding directors’ remuneration.

As an AIM listed company, the Company is not required to fully apply
either the Listing Rules or the Remuneration Regulations, and hence is
not required to present a Board Report on Remuneration in accordance
with those rules. Nevertheless, the Board considers it appropriate for the
Company to provide Shareholders with information with respect to
Executive remuneration.

The information presented within this Board Report on Remuneration has,
therefore, been prepared on a consistent basis with that in prior years.

Remuneration Committee
Throughout 2015, membership of the Remuneration Committee (the
‘Committee’) was comprised of the Chairman and the Non-Executive
Directors, excluding Nick Gregg who joined the Committee following his
appointment to the Board as a Non-Executive Director on 1st January
2016. The Committee is chaired by myself. None of the members of the
Committee have, or had, any personal financial interests in the Company
(other than as Shareholders), conflicts of interests arising from cross-
directorships or day to day involvement in running the business.

The Committee is responsible for overseeing the policy regarding
Executive remuneration and for determining the remuneration packages
for the Executive Directors.

Periodically, the Committee engage PricewaterhouseCoopers LLP (PwC)
to provide guidance on standard market practice with regard to
Executive remuneration, including the provision of factual reward surveys,
based on a comparator group determined by the Remuneration
Committee, which can be used for benchmarking purposes.

Remuneration Policy
The Committee reviews the Company’s remuneration philosophy and
structure each year to ensure that the remuneration framework remains
effective in supporting the Company’s business objectives, in line with
best practice, and fairly rewards individuals for the contribution that they
make to the business, having regard to the size and complexity of the
Group’s operations and the need to retain, motivate and attract
employees of the highest calibre.

The Committee intends that base salary and total remuneration of
Executive Directors should be in line with the market. Remuneration is
periodically benchmarked against rewards available for equivalent roles
in a suitable comparator group with the aim of paying neither
significantly above nor below the median for each element of
remuneration. The Committee also considers general pay and
employment conditions of all employees within the Group and is
sensitive to these, to prevailing market conditions, and to governance
trends when assessing the level of salaries and remuneration packages
of Executive Directors.

The total remuneration package links corporate and individual
performance with an appropriate balance between short and long term
elements, and fixed and variable components. The policy is designed to

incentivise executives to meet the Company’s strategic objectives, such
that a significant portion of total remuneration is performance related,
based on a mixture of internal targets linked to the Company’s strategic
business drivers (which can be easily measured, understood and
accepted by both executives and Shareholders) and appropriate external
comparator groups.

The Committee considers that the targets set for the different elements
of performance related remuneration are both appropriate and
demanding in the context of the business environment and the
challenges with which the Group is faced.

As an AIM listed company, the Company does not require Shareholder
approval for the adoption of new employee share plans, however,
proposals for new schemes are discussed with major Shareholders to
gain their views before being implemented. Full details of all schemes are
included within this report, which is subject to approval by Shareholders
at the Annual General Meeting.

Malus and Clawback
To reflect emergent best practice, and to align with Shareholder interests,
the Committee introduced malus and clawback provisions in relation to
all annual bonus and LTIP schemes (together “Awards”) granted on or
after 1st January 2015.

The provisions enable the Committee to decide, up until the second
anniversary of an Award becoming payable, in circumstances in which
the Committee considers it appropriate, to reduce the quantum of an
Award, cancel an Award or impose further conditions on an Award. The
provisions also enable the Committee to decide, up until the second
anniversary of an Award becoming payable that, in the relevant
circumstances, the participant must repay to the Company (or any
person nominated by the Company) some or all of the cash or shares
received under an Award.

The circumstances in which the Committee may apply the “malus” and
“clawback” provisions include, but are not limited to, a material
misstatement of the Company’s audited financial results, a miscalculation
of the extent to which a performance target, applying to any Award
granted on or after 1st January 2015, has been met, a material failure of
risk management by the Company or any group company and serious
reputational damage to the Company or any group company.

Personal Shareholding Requirement and Holding Periods
In order that their interests are linked with those of Shareholders,
Executive Directors are expected to build up and maintain a personal
shareholding in the Company, equal to at least the value of base salary.
Non-Executive Directors are encouraged, but are not required, to hold a
personal shareholding in the Company.

The Committee has considered whether Executive Directors should be
required to hold any shares for a further period after vesting or exercise,
subject to the need to finance any costs of acquisition and associated
tax liabilities. It was determined, for the present time at least, that a
further restriction over the personal shareholding requirement was
unnecessary.

Components of Executive Remuneration
The current remuneration of Executive Directors comprises the following
five components:
➔ basic salary;
➔ annual bonus;
➔ taxable benefits;

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Annual Report and Accounts 2015 Johnson Service Group PLC  35

➔ share options (including the Long-Term Incentive Plan (Approved and

Unapproved sections) and the Sharesave Plan); and
➔ pension arrangements (only basic salary is pensionable).

Details of how the various components of remuneration are delivered are
set out below.

Basic Salary
Basic salary represents a value which reflects the Remuneration
Committee’s assessment of the market rate for relevant positions and
the individual Director’s experience and value to the business. Annual
reviews are considered against published information for similar sized
groups and the level of increases awarded to staff throughout the Group.

Annual Bonus
The Group operates a Short Term Incentive Programme (STIP) for senior
executives, which provides for a performance related bonus based on
the Group’s results and, in certain cases, the result of the relevant
business for which they may be responsible. The individual targets for
the Executive Directors are established by the Committee with a view to
maximising Shareholder value and meeting other Group objectives.
Subject to the achievement of the targets, the annual performance
related bonus can represent up to a maximum of 100% of basic salary.

The Chairman and the Non-Executive Directors are not eligible to
participate in the STIP.

The Committee reviews, on an annual basis, the performance criteria for
each Executive Director to ensure that they remain appropriate.

Taxable Benefits
Taxable benefits, which are not performance related, principally include
the provision of a car or car allowance, private medical insurance and,
when necessary, payments for the curtailment of holiday as a result of
business requirements.

Share Options
2009 Long-Term Incentive Plan (the ‘LTIP’)
To incentivise certain employees to maximise Shareholder value and to
ensure the employees’ services are retained, the Company has adopted
the LTIP, which was approved by a resolution of the Board on 7th May
2009.  All employees (including Executive Directors) of the Group are
eligible to participate in the LTIP, although in practice, participants will be
limited to Executive Directors and Senior Management. Participants in
the LTIP will be selected by the Remuneration Committee.

Eligible participants will be granted awards entitling them to receive
Ordinary shares in the Company after a specified vesting period and
subject to the achievement of specified performance conditions. Vesting
of awards granted under the LTIP will normally occur after a three year
performance period.

2014 Award
Awards were granted to Executive Directors and certain Senior
Management on 13th March 2014 with an exercise price of nil. The
performance period is the three financial years starting 1st January
2014 and ending 31st December 2016. The performance conditions
are linked to the Company’s Total Shareholder Return and Earnings per
Share.

The 2014 Award would vest in two tranches:
➔ 50 per cent of the award will vest by reference to the annualised

growth in the Company’s net return index (‘TSR’) over the
performance period relative to the annualised growth in the FTSE
AIM All-Share Industrial Goods and Services net return index (the
‘Index’) over the performance period. None of the award will vest if
the TSR growth is less than the Index growth.  One quarter of the
award will vest if the TSR growth is equal to the Index growth.  The
whole of the award will vest if the TSR growth is at least seven per
cent above the Index growth. Vesting of the award will be on a
straight line basis between these points.

➔ The remaining 50 per cent of the award will vest by reference to the
annualised growth in the Company’s adjusted fully diluted earnings
per share from continuing operations (‘EPS’) over the performance
period relative to the annualised growth in the retail price index (‘RPI’)
over the performance period. None of the remaining award will vest if
the EPS growth is less than three per cent above the RPI growth.
One quarter of the remaining award will vest if the EPS growth is
three per cent above the RPI growth. The whole of the remaining
award will vest if the EPS growth is at least eight per cent above the
RPI growth.  Vesting of the remaining award will be on a straight line
basis if EPS growth is between three per cent and eight per cent
above the RPI growth.

For the purpose of calculating TSR and Index growth, the average of the
net return index over the dealing days falling in the period of one month
ending on the last day of the performance period will be compared to the
average of the net return index over the dealing days falling in the period
of one month immediately preceding the first day of the performance
period, in each respect of the Company and for the FTSE AIM All-Share
Industrial Goods and Services index.

For the purpose of calculating EPS growth, the Company’s adjusted fully
diluted earnings per share from continuing operations for the final
financial year in the performance period will be compared to the
Company’s adjusted fully diluted earnings per share from continuing
operations for the financial year immediately before the start of the
performance period.

For the purpose of calculating RPI growth, the retail prices index value
for the last month of the final financial year in the performance period
will be compared to the retail prices index value for the last month of the
financial year immediately before the start of the performance period.

2015 Award
Awards were granted to Executive Directors and certain Senior
Management on 8th May 2015 with an exercise price of nil. The
performance period is the three financial years starting 1st January
2015 and ending 31st December 2017. The awards will vest in two
tranches and the performance conditions are as for the 2014 Award.

LTIP Performance Conditions
The performance conditions for the 2014 Award and 2015 Award were
selected to incentivise award holders to maximise Shareholder value. The
charts below demonstrate the effect on vesting of the above
performance conditions:

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36 Johnson Service Group PLC  Annual Report and Accounts 2015

BOARD REPORT ON REMUNERATION CONTINUED

Vesting
25% Vesting
100%

+3%

+8%

Relative Annualised EPS Growth

Vesting
25%

Vesting
100%

Fixed and Variable Remuneration
As stated above, the Company’s policy is to provide a total remuneration
package that links corporate and individual performance with an
appropriate balance between short and long term elements, and fixed
and variable components.

By way of illustration, the balance between the fixed and variable
elements for the Executive Directors who were in office at
31st December 2015 is shown in the charts below for varying levels of
vesting of the 2009 Long-Term Incentive Plan (LTIP), granted in 2014
and 2015, together with actual bonus and the maximum achievable
bonus. Broadly, and assuming actual bonus achievement in 2015, there
is a 65:35 split between fixed and variable pay if none of the LTIP were
to vest and a 34:66 split between fixed and variable pay assuming
maximum bonus achievement and maximum performance of the LTIP,
showing the high proportion of performance-related pay that is ‘at risk’ in
the total remuneration package.

+0%

+7%

Relative Annualised TSR Growth 

2009 Long-Term Incentive Plan Approved Section (the ‘Approved LTIP’)
The Approved LTIP was approved by a resolution of the Board on
7th May 2009, and received approval from HM Revenue & Customs on
25th June 2009.  The Approved LTIP is linked to the LTIP award
referred to above. The linked awards give the holder the same potential
gross gain as if they had just received the LTIP award, however, as the
Approved LTIP is tax favoured, in certain circumstances all or part of any
gain on the LTIP award will be received through the Approved LTIP and
therefore taxed at a lower rate, or even zero.

The actual number of shares the award holder will receive when
exercising options will depend on the date of exercise, whether the
performance conditions of the LTIP are achieved and the extent to which
they are achieved, and also on how much of the gain (if any) can be
delivered through the Approved LTIP. Part of the total award will be
forfeited once the gain is determined, however, this will still leave the
holder with the same gross gain that would have been received had only
an award been made under the LTIP arrangement.

On 8th May 2015, the Executive Directors and certain Senior
Management were granted awards under the Approved LTIP, linked to
the awards granted on the same date under the LTIP, at an exercise
price of 80 pence.

Sharesave Plan (the ‘SAYE Scheme’)
The SAYE Scheme is open to all employees, including Executive
Directors, who have completed two years’ service at the date of invitation
and who open an approved savings contract.

When the savings contract is started, options are granted to acquire the
number of shares that the total savings will buy when the savings
contract matures. Details of the exercise periods and normal expiry dates
are given in note 28 of the consolidated financial statements.

Variable
35%

Fixed
65%

No LTIP Vesting
& Actual Bonus 

Variable
50%

Fixed
50%

50% LTIP Vesting
& Actual Bonus 

Fixed
34%

Variable
66%

100% LTIP Vesting
& Maximum Bonus 

Variable

Fixed

166953 Johnson Service Group Annual Report Pt2_166953 Johnson Service Group Annual Report Pt2  04/03/2016  18:39  Page 37

Annual Report and Accounts 2015 Johnson Service Group PLC  37

The above illustration of the current Executive Directors’ percentage of
fixed and variable remuneration is based on a number of assumptions:
➔ fixed remuneration includes basic salary only and represents actual

annual salary for 2015;

➔ variable remuneration includes annual bonus (assumed at either
actual achievement for 2015 or maximum achievement where
indicated within this illustration) and vested share options (LTIP); and
➔ the amount included in respect of the LTIP represents the annualised
gross gain over the three year performance period, at an assumed
vesting of 50% and then at 100% and assuming a share price at the
date of exercise of 100 pence.

Non-Executive Directors
The Chairman and Non-Executive Directors receive fees which are set
by the Board and which are commensurate with their experience and
contribution to the Group. The Chairman and Non-Executive Directors do
not participate in decisions regarding their own remuneration. They do
not participate in any of the Group’s pension, share option or
performance related bonus schemes.

Service Contracts
In the event of termination, without cause, the Company has a
contractual obligation to compensate the Director for the unexpired
period of his or her notice. The Company will seek to reduce this
payment by means of the Director’s duty to mitigate this payment
wherever possible.

Executive Directors
Chris Sander is employed under a service agreement dated 6th July
2004, as amended by a Variation Letter dated 20th October 2009 and
as further amended on the appointment to Chief Executive Officer on
1st January 2014, which has no fixed expiry date and provides that the
Company is required to give twelve months’ notice and Chris Sander is
required to give six months’ notice.

Yvonne Monaghan is employed under a service agreement dated
14th January 2004, as amended with the appointment to Chief Financial
Officer on 31st August 2007, which has no fixed expiry date and
provides that the Company is required to give twelve months’ notice and
Yvonne Monaghan is required to give six months’ notice.

Chairman and Non-Executive Directors
The Chairman and Non-Executive Directors each have fixed term appointments. Each has a letter of appointment, dated as set out below, which
requires the Company to provide three months’ notice, the Chairman to provide at least three months’ notice and each Non-Executive Director to
provide at least one months’ notice.

At 31st December 2015, the unexpired terms of the Chairman and Non-Executive Directors letters of appointment were:

Paul Moody
Michael Del Mar1
Bill Shannon2
Nick Gregg

Date of Latest Letter
of Appointment

Service Agreement
Start Date

Service Agreement
End Date

Unexpired Term at
31st December 2015

30th April 2014
18th May 2015
24th February 2015
23rd December 2015

1st May 2014
1st June 2015
8th May 2015

30th April 2017
31st May 2016
7th May 2016
1st January 2016 31st December 2018

1 years 4 months
5 months
4 months
3 years

Note 1: Michael Del Mar will retire from the Board at the conclusion of the 2016 Annual General Meeting.
Note 2: On 25th February 2016, a new letter of appointment was issued which extended the unexpired term above by 12 months.

Interests in Share Capital
The interests of the Directors who were in office at 31st December 2015, together with the interests of their close family, in the shares of the
Company at the commencement, or date of appointment if later, and close of the financial year, were as follows:

Beneficial
Paul Moody
Chris Sander
Yvonne Monaghan
Michael Del Mar
Bill Shannon

Issued share capital *
Directors’ share holding
Non Beneficial
Yvonne Monaghan, Chris Sander and others

* Issued share capital is as at the balance sheet date

31st December 2015
Ordinary shares of 10p each

31st December 2014
Ordinary shares of 10p each

100,000
525,930
564,086
200,000
125,000

1,515,016
330,570,023
0.5%

100,000
525,930
764,086
200,000
125,000

1,715,016
299,985,593
0.6%

588,452

588,452

There have been no changes in the Directors’ interests in the shares of the Company during the period 31st December 2015 up until the time of
signing this report.

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166953 Johnson Service Group Annual Report Pt2_166953 Johnson Service Group Annual Report Pt2  04/03/2016  18:39  Page 38

38 Johnson Service Group PLC  Annual Report and Accounts 2015

BOARD REPORT ON REMUNERATION CONTINUED

Performance Graph
Over the five years to 31st December 2015 the Company has outperformed the FTSE AIM Industrial Goods and Services Index, the FTSE Support
Services Index and the FTSE AIM All-Share Index with a net total shareholder return of 223% against a net total shareholder return of 62%, 75%
and minus 17% respectively.

Over the two years to 31st December 2015 the Company has outperformed the FTSE AIM Industrial Goods and Services Index, the FTSE Support
Services Index and the FTSE AIM All-Share Index with a net total shareholder return of 71% against a net total shareholder return of 14%, 9% and
minus 11% respectively.

These indices have been selected for this comparison as, in the opinion of the Directors, they represent the general and specific sectors in which the
Company operates.

TSR 5 Year Performance

TSR 2 Year Performance

400

350

300

250

200

150

100

50

200

150

100

50

0

Dec-10

Dec-11

Dec-12

Dec-13

Dec-14

Dec-15

0

Dec-13

Dec-14

Dec-15

JSG

FTSE AIM All-Share

FTSE Support Services

FTSE AIM Industrial Goods & Services

Directors’ Remuneration (Audited)

Executive Directors
Chris Sander
Yvonne Monaghan

Non-Executive Directors
Paul Moody
Michael Del Mar
Bill Shannon

Former Directors
John Talbot

Note

1
1,2

3

4

Basic
Salary/Fees
2015
£000

315
247

85
37
36

–

720

Bonus/
Allowance
2015
£000

167
131

–
–
–

–

Cash in
Lieu of
Pension
2015
£000

56
44

–
–
–

–

298

100

Taxable
Benefits
2015
£000

27
29

–
–
–

–

56

Total
2015
£000

565
451

85
37
36

–

1,174

Total
2014
£000

549
468

67
36
35

33

1,188

Note 1: Details of the amounts included in the table above for Chris Sander and Yvonne Monaghan under ‘Cash in Lieu of Pension’ are set out on page 39.

Note 2: As set out within the Director biographies on page 20, Yvonne Monaghan is also a Non-Executive Director of NWF Group plc. She received, and

retained, fees of £37,000 and £36,500 in 2015 and 2014 respectively for her services.

Note 3: Paul Moody was appointed Non-Executive Chairman of the Board on 1st May 2014. The figure included in the table above for 2014 reflects the

increased amount paid in respect of his additional responsibility in his new role, together with the amount paid prior to that date in his previous role as
a Non-Executive Director.

Note 4: John Talbot retired as Executive Chairman on 1st May 2014. The figure included in the table above for 2014 reflects the amount paid up until the

date of retirement.

No Director waived any emoluments in respect of the years ended 31st December 2015 and 31st December 2014.

166953 Johnson Service Group Annual Report Pt2_166953 Johnson Service Group Annual Report Pt2  04/03/2016  18:39  Page 39

Annual Report and Accounts 2015 Johnson Service Group PLC  39

Beneficial Interests in Share Options (Audited)
The interests of the Directors, who have served during the year, in share options of the Company at the commencement and close of the financial
year (or date of resignation if earlier) were as follows:

Date of Grant

1st October 2013
13th March 2014
8th May 2015
8th May 2015

1st October 2013
13th March 2014
8th May 2015
8th May 2015

At 31st
December
2014

17,526
461,855
–
–

17,526
387,628
–
–

Options
Granted
During Year

Options
Lapsed
During Year

Options
Cancelled
During Year

Options
Exercised
During Year

–
–
393,750
37,500

–
–
308,750
37,500

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

At 31st
December
2015

17,526
461,855
393,750
37,500

17,526
387,628
308,750
37,500

Option
Price

43.75p
nil
nil
80.00p

43.75p
nil
nil
80.00p

Chris Sander
Scheme 3
Scheme 1
Scheme 1
Scheme 2

Yvonne Monaghan
Scheme 3
Scheme 1
Scheme 1
Scheme 2

Scheme 1 – 2009 Long-Term Incentive Plan (the “2009 LTIP”)
Scheme 2 – 2009 Long-Term Incentive Plan Approved Section (the “2009 Approved LTIP”)
Scheme 3 – Sharesave Plan (“SAYE Scheme”)

Details of the 2009 LTIP, the 2009 Approved LTIP and the SAYE Scheme are given on pages 35 to 36 of the Board Report on Remuneration.

Director Gains
No Director exercised options over shares in the Company during the year.  Details of exercises in the prior year were disclosed on page 40 of the
2014 Annual Report.

Other Details
The mid market price of the Ordinary shares of 10p each on 31st December 2015 and 31st December 2014 was 87.75 pence and 62.00 pence
respectively.  During the year, the mid market price of the Ordinary shares of 10p each ranged between 61.50 pence and 92.75 pence (2014: 52.00
pence and 64.00 pence).

None of the terms or conditions of the share options were varied during the year.

There have been no changes in the Directors’ interests during the period 31st December 2015 to 1st March 2016, being the date of this report.

Pension Benefits of Executive Directors
Executive Directors are entitled to receive retirement benefits, which are calculated on basic salary, under one or more of the Group’s contributory
defined benefit or defined contribution schemes. Details of the schemes are given in note 23 of the consolidated financial statements.

Each Executive Director, who served during the current year has left active pensionable service and is entitled to a preserved benefit under the
Johnson Group Defined Benefit Scheme (the ‘JGDBS’), which is of the defined benefit type. The accrued pension entitlement shown is the amount
that would be paid annually on retirement (at normal retirement age).  This pension is calculated based on the total period of pensionable service to
the Company, both before and after becoming a Director.

Chris Sander
Yvonne Monaghan

Accrued pension 
entitlement at 
December 2015
£000

58
48

Accrued pension
entitlement at
December 2014
£000

57
47

From 1st April 2011, Chris Sander opted to become a deferred member of the JGDBS and receive a monthly cash amount equal to 16.0% of his
monthly salary.  From 1st January 2014, the monthly cash amount increased to 17.8% of his monthly salary.

From 1st January 2012, Yvonne Monaghan opted to become a deferred member of the JGDBS and receive a monthly cash amount equal to 17.8%
of her monthly salary.

The amounts payable in the year to Chris Sander and Yvonne Monaghan under the above arrangements were £56,070 and £43,966 respectively
(2014: £49,840 and £41,830 respectively).

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166953 Johnson Service Group Annual Report Pt2_166953 Johnson Service Group Annual Report Pt2  04/03/2016  18:39  Page 40

40 Johnson Service Group PLC  Annual Report and Accounts 2015

BOARD REPORT ON REMUNERATION CONTINUED

Both Executive Directors took a partial transfer of benefits on 31st March 2012.

Annual General Meeting
A resolution will be proposed at the Annual General Meeting to seek approval of the Board Report on Remuneration.

Michael Del Mar
Chairman, Remuneration Committee
1st March 2016

166953 Johnson Service Group Annual Report Pt3_166953 Johnson Service Group Annual Report Pt3  04/03/2016  18:41  Page 41

Annual Report and Accounts 2015 Johnson Service Group PLC  41

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF
JOHNSON SERVICE GROUP PLC

Report on the Group financial statements
Our opinion
In our opinion, Johnson Service Group PLC’s Group financial statements (the “financial statements”):
➔ give a true and fair view of the state of the Group’s affairs as at 31st December 2015 and of its profit and cash flows for the year then ended;
➔ have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union; and
➔ have been prepared in accordance with the requirements of the Companies Act 2006.
What we have audited
The financial statements, included within the Annual Report and Accounts (the “Annual Report”), comprise:
➔ the Consolidated Balance Sheet as at 31st December 2015;
➔ the Consolidated Income Statement and Consolidated Statement of Comprehensive Income for the year then ended;
➔ the Consolidated Statement of Changes in Shareholders’ Equity for the year then ended;
➔ the Consolidated Statement of Cash Flows for the year then ended;
➔ the accounting policies; and
➔ the notes to the Consolidated financial statements, which include other explanatory information.

Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial statements. These are
cross-referenced from the financial statements and are identified as audited.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and IFRSs as adopted by the
European Union.
Our audit approach
Overview

➔ Overall Group materiality: £1.4 million which represents 5% of Adjusted Operating Profit.
➔ Within the Textile Rental reporting segment, we focused our work on the Apparelmaster, Stalbridge, London Linen and
Bourne operating segments which account for more than 99% of the reporting segment revenue, and 100% of the
reporting segment Adjusted Operating Profit.

➔ Within the Drycleaning segment, we focused our work on Johnsons Cleaners, which accounts for 90% of the reporting

segment revenue and 75% of the reporting segment Adjusted Operating Profit.

➔ We performed procedures over three Group companies, including Johnson Service Group PLC (the parent company of the

Group), and the consolidation adjustments.

➔ The components where we performed our audit work, together with procedures over consolidation adjustments, accounted

for 95% of Adjusted Operating Profit and Revenue.

➔ The restructure within the Drycleaning segment.
➔ Goodwill and fixed asset impairment assessment.
➔ Accounting for the acquisition of London Linen and Ashbon.
➔ Accounting for complex customer arrangements.

The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).

We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we looked
at where the Directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and
considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls,
including evaluating whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud.

The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are identified as
“areas of focus” in the table below. We have also set out how we tailored our audit to address these specific areas in order to provide an opinion on
the financial statements as a whole, and any comments we make on the results of our procedures should be read in this context. This is not a
complete list of all risks identified by our audit.

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166953 Johnson Service Group Annual Report Pt3_166953 Johnson Service Group Annual Report Pt3  04/03/2016  18:41  Page 42

42 Johnson Service Group PLC  Annual Report and Accounts 2015

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF
JOHNSON SERVICE GROUP PLC CONTINUED

Area of focus
The restructure within the Drycleaning segment
Refer to page 30 of the Audit Committee Report, page 52 of the
Statement of Significant Accounting Policies and note 6 of the
Consolidated Financial Statements.

Further to the restructuring announced in 2012, the Group announced
additional restructuring plans on 6th January 2015 within the
Drycleaning segment. The announced restructuring resulted in the
planned closure of a further 109 stores, with 101 stores closed in 2015.
This restructuring gave rise to total exceptional costs in the year of
£6.5 million, £3.6 million of which related to property related costs and
provisions. The total property provision has continued to be utilised in
2015, with £8.1 million remaining as at 31st December 2015, which
represents costs to be incurred including rent, rates, dilapidations and
other costs of exiting stores identified for closure.

We focused on this area because it is material in the context of the
financial statements and estimating the extent of the remaining provision
necessary involves subjective judgements, in particular, estimates on
future lease obligation costs and expected dilapidations costs. Therefore,
there is a risk that the provision is incorrectly valued.

Goodwill and fixed asset impairment assessment
Refer to page 30 of the Audit Committee Report, page 52 of the
Statement of Significant Accounting Policies and note 12 of the
Consolidated Financial Statements.

The goodwill balance of £93.5 million relates to the four Textile Rental
operating segments and the Drycleaning operating segment, which are
all tested annually for impairment. No impairment charge has been
recognised against these balances in the current financial year. The risk
we focused on is that goodwill balances may be overstated and that an
impairment charge may be required.

Of the £93.5 million goodwill balance, £84.4 million relates to the four
Textile Rental operating segment with £9.1 million relating to the
Drycleaning operating segment. Given the trading performance of the
Textile Rental businesses in the current and prior years and the
significant headroom in the Directors’ impairment review, we focused our
risk on the Drycleaning operating segment. We focused our work on the
Drycleaning operating segment due to the further restructuring within
the segment in the year and the profitability of the segment being
historically below management expectations.

How our audit addressed the area of focus

We tested the Directors’ key assumptions and estimates in determining
the required level of provision by:
➔ testing changes in dilapidations estimates by obtaining a better

understanding over the condition of a sample of stores, achieved
through discussions with management’s expert, through leveraging
store visits performed in the prior year, which validated the extent of
work required for a sample of stores and agreeing back to available
documentation between the Group and landlord as to expected costs
to be incurred. Differences identified were within what we would
consider to be an acceptable tolerance;

➔ agreeing rent and rate costs provided for to third party documentation
including lease agreements, invoices and rent review documentation
without identifying any exceptions; and

➔ assessing the other associated costs of exit, including legal costs,

where we identified no material exceptions.

In addition, we assessed the Directors’ historical forecasting accuracy
with respect to the cost of store closures by comparing provisions
previously recognised with actual costs incurred following store closures,
and did not find any material inaccuracies.

We tested whether the costs allocated to the provision in 2015 were
consistent with the purpose of the provision, by tracing expenditure to
source documentation. Our testing did not identify any costs that were
inappropriately allocated against the provision.

We evaluated and assessed the reasonableness of the Group’s future
cash flow forecasts, and the process by which they were prepared,
including comparing them to the latest Board approved budgets, and
testing the underlying calculations. In doing so, we:
➔ assessed the reasonableness of the Board approved budget,

including assessing the revenue and costs included in those budgets
based on our understanding of the Group. This included considering
historical like for like sales growth, customer contracts wins and
losses (specific to the textile rental operating segments), new sales
initiatives, assumed profit margins and known cost changes,
specifically including the impact of the National Living Wage. We
found the assumptions underpinning the budgets to be consistent
with our evidence;

➔ tested the Directors’ historical budgeting accuracy by evaluating

whether previous budgets had been achieved and found that past
adverse variances from budgets were because of the timing of
certain cost reduction measures which will be completed in 2016;
➔ tested the Directors’ key assumptions for long-term growth rates

outside the budget period, by comparing them to, and finding them
broadly in line with, forecast inflation rates in the UK; and

➔ considered the discount rate by testing the inputs into the calculation,
including the cost of debt, equity risk premium and the beta factor.

We obtained the Directors’ sensitivity analysis and also performed our
own sensitivities over the key drivers of the cash flow forecasts, being
revenue and margin growth, and the discount rate used. Our discount
rate sensitivity testing included developing an independent expectation
of an appropriate discount rate with reference to data from other
companies in the Group’s industry and sectors and assessing the impact
applying this rate would have on the recoverable amounts determined.

Having ascertained the extent of change in those assumptions that
either individually, or collectively, would be required for the goodwill to be
impaired, we considered whether such a movement in those key
assumptions arising was reasonably likely, and concluded that no
reasonably likely change would result in the goodwill being impaired. We
determined that the disclosure detailed within note 12 is consistent with
the requirements of IAS 36 ‘Impairment of assets’.

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Annual Report and Accounts 2015 Johnson Service Group PLC  43

Area of focus
Accounting for the acquisition of London Linen and Ashbon Services
Refer to page 30 of the Audit Committee Report, page 52 of the
Statement of Significant Accounting Policies and note 31 of the
Consolidated Financial Statements.

On 30th April 2015 the Group acquired 100% of the share capital of
London Linen Supply limited (‘London Linen’) for consideration of
£69.3 million.

On 27th November 2015 the Group acquired 100% of the share capital
of Ashbon Services Limited (‘Ashbon’) for consideration of £5.1 million.

We focused on these areas because the accounting for acquisitions
involved management judgements and estimates that have a material
impact on the amounts recognised in the Group Financial Statements,
including:
➔ determining the fair value of the customer list acquired which the
Directors valued at £25.5 million (London Linen) and £2.4 million
(Ashbon), and the useful economic lives of those contracts, which
were assessed as ten and six years respectively; and

➔ the recognition of goodwill, the determination of what goodwill

represents, and consideration as to whether any other intangible
assets should have been recognised.

Accounting for complex customer arrangements
Refer to page 30 of the Audit Committee Report and page 53 of the
Statement of Significant Accounting Policies.

The Group, primarily through the Textile Rental segment, gives rebates to
certain key customers. These are contractual and vary by customer, but
largely relate to volume based rebates on sales made throughout the
financial year, with the value being determined by the level of spend.

We focused on this area because the amount of the customer rebates
payable in respect of the year is determined by the contract terms for
each customer, which are negotiated separately and, as a result, differ
from one another. This means that the calculation of the rebates
recognised in the Income Statement and as a payable at the year-end
relies on a manual process, which are inherently more prone to error than
systems-based processes. We also focused on the completeness of the
income statement charge and year end provision due to the risk of
potential omission given the manual nature of management’s processes.

How our audit addressed the area of focus

We obtained and read the relevant terms of the purchase agreements to
inform our further audit procedures to test the accounting for the
acquisitions.

We tested the recognition in the Group’s financial statements of the fair
value of the assets and liabilities acquired (and residual goodwill). In
doing so, we:
➔ assessed the Directors’ valuation of the acquired customer lists

through assessing the reasonableness of the assumptions used in
the calculations by ensuring they were consistent with our
understanding of the acquisitions and through agreement to
supporting evidence. In addition we compared the assumption to
previous acquisitions made by the Group in this industry, including
estimated customer renewal rates, attrition rates and the discount
rate applied. We found no inconsistencies in the assumptions
determined by management; and

➔ considered whether any other intangible assets should have been
identified by the Directors, based on our understanding of the
transactions, our knowledge of the businesses, the purchase
agreements and discussions with the Directors; we did not identify
any.

To test customer rebates, we:
➔ recalculated, for a sample of customers, the total customer rebates

recognised within the Income Statement in the year, and provided for
at the balance sheet date, finding them to be broadly consistent;
➔ used sales recorded in the year and the contractual arrangements
agreed with each customer and compared this to the Directors’
calculation, finding it to be not materially different;

➔ compared the provision made at the prior year end to the amounts

paid in 2015 in respect of those provisions, with no material
differences identified;

➔ tested whether any rebate arrangements had been omitted from the
amounts charged in the year and liabilities held at the balance sheet
date, by checking the contractual arrangements with the Group’s
most significant customers by sales volume to make sure that all
rebate arrangements had been identified by the Directors and did not
identify any that had been omitted; and agreed amounts paid to
customers post period end to source documentation to check that it
has been accounted for in the right accounting period, and found no
instances of amounts recorded in the wrong period.

How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole,
taking into account the structure of the Group, the accounting processes and controls, and the industries in which the Group operates.

The Group is structured along two reporting segments being Textile Rental and Drycleaning. For the Textile Rental reporting segment, we performed
an audit of the complete financial information of Apparelmaster, Stalbridge, London Linen and Bourne , which together account for 99% of the
revenue and 100% of Adjusted Operating Profit for the segment. For the Drycleaning segment, which comprises Johnson Cleaners and Jeeves, we
focused our audit procedures on Johnsons Cleaners (which accounts for 90% of the segment’s revenue and 75% of its Adjusted Operating Profit),
and performed an audit of its complete financial information. We performed an audit of the complete financial information of three Group companies,
including Johnson Service Group PLC (the parent company of the Group), and audited the consolidation adjustments. The components where we
performed full scope audit accounted for 95% of Group revenue and Adjusted Operating Profit.

Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and on the financial statements as a
whole.

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166953 Johnson Service Group Annual Report Pt3_166953 Johnson Service Group Annual Report Pt3  04/03/2016  20:21  Page 44

44 Johnson Service Group PLC  Annual Report and Accounts 2015

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF
JOHNSON SERVICE GROUP PLC CONTINUED

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall Group materiality

£1.4 million (2014: £1.1 million).

How we determined it

5% of Adjusted Operating Profit.

Rationale for benchmark applied

Adjusted Operating Profit is the key measure used both internally by the Board and, we believe, through reading
Directors’ presentations to analysts, externally by shareholders in evaluating the performance of the Group. This
measure excludes interest, tax, amortisation and impairment of intangible assets (excluding software),
exceptional items and discontinued operations.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £70,000 (2014: £54,000) as well
as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Going concern
The Directors have chosen to voluntarily report how they have applied the UK Corporate Governance Code (the “Code”) as if the Company were a
premium listed company. Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in
relation to the Directors’ statement about whether they considered it appropriate to adopt the going concern basis in preparing the financial
statements. We have nothing material to add or to draw attention to.

As noted in the Directors’ statement, the Directors have concluded that it is appropriate to adopt the going concern basis in preparing the financial
statements. The going concern basis presumes that the Group has adequate resources to remain in operation, and that the Directors intend it to do
so, for at least one year from the date the financial statements were signed. As part of our audit we have concluded that the Directors’ use of the
going concern basis is appropriate. However, because not all future events or conditions can be predicted, these statements are not a guarantee as to
the Group’s ability to continue as a going concern.

Other required reporting
Consistency of other information
Companies Act 2006 opinions

In our opinion, the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements.

ISAs (UK & Ireland) reporting
As a result of the Directors’ voluntary reporting on how they have applied the Code, under ISAs (UK & Ireland) we are required to report to you if, in
our opinion:

➔ information in the Annual Report is:

We have no exceptions to
report.

− materially inconsistent with the information in the audited financial statements; or
− apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group

acquired in the course of performing our audit; or

− otherwise misleading.

➔ the statement given by the Directors on page 23, in accordance with provision C.1.1 of the Code, that they
consider the Annual Report taken as a whole to be fair, balanced and understandable and provides the
information necessary for members to assess the Group’s position and performance, business model and
strategy is materially inconsistent with our knowledge of the Group acquired in the course of performing our
audit.

We have no exceptions to
report.

➔ the section of the Annual Report on pages 29 to 32, as required by provision C.3.8 of the Code, describing
the work of the Audit Committee does not appropriately address matters communicated by us to the Audit
Committee.

We have no exceptions to
report.

166953 Johnson Service Group Annual Report Pt3_166953 Johnson Service Group Annual Report Pt3  04/03/2016  20:21  Page 45

Annual Report and Accounts 2015 Johnson Service Group PLC  45

The Directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity of the Group
As a result of the Directors’ voluntary reporting on how they have applied the Code, under ISAs (UK & Ireland) we are required to report to you if we
have anything material to add or to draw attention to in relation to:

➔ the Directors’ confirmation on page 28 of the Annual Report, in accordance with provision C.2.1 of the Code,
that they have carried out a robust assessment of the principal risks facing the Group, including those that
would threaten its business model, future performance, solvency or liquidity.

We have nothing material to
add or to draw attention to.

➔ the disclosures in the Annual Report that describe those risks and explain how they are being managed or

mitigated.

➔ the Directors’ explanation on page 28 of the Annual Report, in accordance with provision C.2.2 of the Code,
as to how they have assessed the prospects of the Group, over what period they have done so and why they
consider that period to be appropriate, and their statement as to whether they have a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of
their assessment, including any related disclosures drawing attention to any necessary qualifications or
assumptions.

We have nothing material to
add or to draw attention to.

We have nothing material to
add or to draw attention to.

Adequacy of information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion, we have not received all the information and explanations we
require for our audit. We have no exceptions to report arising from this responsibility.

Directors’ remuneration
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors’ remuneration specified by law are
not made. We have no exceptions to report arising from this responsibility.

Other voluntary reporting
Opinion on additional disclosures
Corporate Governance Statement
The Company voluntarily prepares a corporate governance statement that includes the information with respect to internal control and risk
management systems and about share capital structures required by the Disclosure Rules and Transparency Rules of the Financial Conduct
Authority. The Directors have requested that we report on the consistency of that information with the financial statements.

In our opinion the information given in the Corporate Governance Statement as set out on pages 24 to 28 with respect to internal control and risk
management systems and about share capital structures is consistent with the financial statements.

Matter on which we have agreed to report by exception
Corporate governance statement
The Company’s voluntary Corporate Governance Statement includes details of the Company’s compliance with the UK Corporate Governance Code.
The Directors have requested that we review the parts of the Corporate Governance Statement relating to the ten further provisions of the UK
Corporate Governance Code specified for auditor review by the Listing Rules of the Financial Conduct Authority as if the company were a premium
listed company. We have nothing to report having performed our review.

Responsibilities for the financial statements and the audit
Our responsibilities and those of the Directors
As explained more fully in the Directors’ Responsibilities Statement set out on page 23, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those
standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of
the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to
any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What an audit of financial statements involves
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the
financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:
➔ whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed;
➔ the reasonableness of significant accounting estimates made by the Directors; and
➔ the overall presentation of the financial statements.

We primarily focus our work in these areas by assessing the Directors’ judgements against available evidence, forming our own judgements, and
evaluating the disclosures in the financial statements.

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166953 Johnson Service Group Annual Report Pt3_166953 Johnson Service Group Annual Report Pt3  04/03/2016  18:41  Page 46

46 Johnson Service Group PLC  Annual Report and Accounts 2015

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF
JOHNSON SERVICE GROUP PLC CONTINUED

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis
for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial
statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by
us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications
for our report.

Other matter
We have reported separately on the company financial statements of Johnson Service Group PLC for the year ended 31st December 2015.

Graham Parsons (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester
1st March 2016

166953 Johnson Service Group Annual Report Pt4_166953 Johnson Service Group Annual Report Pt4  04/03/2016  18:44  Page 47

CONSOLIDATED INCOME STATEMENT

Revenue from continuing operations

Operating profit

Operating profit before amortisation and impairment of intangible assets (excluding 
software amortisation) and exceptional items
Amortisation and impairment of intangible assets (excluding software amortisation)
Exceptional items
– Restructuring and other costs
– Costs in relation to business acquisition activity
– Pension costs

Operating profit

Finance cost
Finance income
Notional pension interest

Total finance cost

Profit before taxation
Taxation charge*

Profit for the year from continuing operations

Result for the year from discontinued operations

Profit for the year attributable to equity holders

Earnings per share**
Basic earnings per share
From total operations

Fully diluted earnings per share
From total operations

Adjusted basic earnings per share
From total operations

Adjusted fully diluted earnings per share
From total operations

Annual Report and Accounts 2015 Johnson Service Group PLC 47

Note

1

2

1

6

2

7

9

32

11

Year ended
31 December
2015
£m

234.4

15.4

Year ended
31 December
2014
£m

210.4

13.4

27.9
(3.5)

(7.5)
(1.5)
–

15.4

(2.2)
0.1
(0.6)

(2.7)

12.7
(2.4)

10.3

–

10.3

3.2p

3.2p

6.3p

6.3p

21.8
(1.6)

(1.3)
(0.6)
(4.9)

13.4

(1.6)
–
(0.2)

(1.8)

11.6
(3.0)

8.6

–

8.6

2.9p

2.9p

5.3p

5.2p

The notes on pages 60 to 91 are an integral part of these financial statements.

*

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.

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48 Johnson Service Group PLC Annual Report and Accounts 2015

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Profit for the year

Items that will not be subsequently reclassified to profit or loss
Re-measurement and experience gains/(losses) on post-employment benefit obligations
Taxation in respect of re-measurement and experience (gains)/losses
Change in deferred tax due to change in tax rate
Items that may be subsequently reclassified to profit or loss
Cash flow hedges (net of taxation) – fair value loss

– transfers to administrative cost
– transfers to finance cost

Other comprehensive income/(loss) for the year

Total comprehensive income/(loss) for the year

Note

23

Year ended
31 December
2015
£m

10.3

1.2
(0.2)
(0.2)

(1.0)
0.3
0.3

0.4

10.7

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

Balance at 1st January 2014
Profit for the year
Other comprehensive loss

Total comprehensive loss for the year

Share options (value of employee services)
Purchase of shares by EBT*
Current tax on share options
Deferred tax on share options
Issue of share capital
Dividend paid

Transactions with Shareholders recognised 
directly in Shareholders’ equity

Balance at 31st December 2014

Balance at 1st January 2015

Profit for the year
Other comprehensive (loss)/income

Total comprehensive (loss)/income for the year

Share options (value of employee services)
Deferred tax on share options
Issue of share capital
Dividend paid

Transactions with Shareholders recognised 
directly in Shareholders’ equity

Balance at 31st December 2015

Share
Capital
£m

26.2
–
–

–

–
–
–
–
3.8
–

3.8

30.0

30.0

–
–

–

–
–
3.1
–

3.1

33.1

Share
Premium
£m

14.1
–
–

–

–
–
–
–
0.4
–

0.4

14.5

14.5

–
–

–

–
–
–
–

–

Merger
Reserve
£m

1.6
–
–

–

–
–
–
–
–
–

–

1.6

1.6

–
–

–

–
–
–
–

–

Capital  
Redemption 
Reserve
£m

0.6
–
–

–

–
–
–
–
–
–

–

0.6

0.6

–
–

–

–
–
–
–

–

Hedge 
Reserve
£m

(0.3)
–
(0.1)

(0.1)

–
–
–
–
–
–

–

(0.4)

(0.4)

–
(0.4)

(0.4)

–
–
–
–

–

14.5

1.6

0.6

(0.8)

Retained 
Earnings
£m

28.3
8.6
(9.2)

(0.6)

0.4
(0.9)
1.2
(1.0)
10.2
(3.9)

6.0

33.7

33.7

10.3
0.8

11.1

0.5
0.1
18.1
(5.7)

13.0

57.8

Year ended
31 December
2014
£m

8.6

(11.5)
2.3
–

(0.4)
–
0.3

(9.3)

(0.7)

Total
Equity
£m

70.5
8.6
(9.3)

(0.7)

0.4
(0.9)
1.2
(1.0)
14.4
(3.9)

10.2

80.0

80.0

10.3
0.4

10.7

0.5
0.1
21.2
(5.7)

16.1

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).

166953 Johnson Service Group Annual Report Pt4_166953 Johnson Service Group Annual Report Pt4  04/03/2016  18:44  Page 49

CONSOLIDATED BALANCE SHEET

Assets
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Textile rental items
Trade and other receivables
Deferred income tax assets

Current assets
Inventories
Trade and other receivables
Cash and cash equivalents

Liabilities
Current liabilities
Trade and other payables
Current income tax liabilities
Borrowings
Derivative financial liabilities
Provisions

Net current liabilities

Non-current liabilities
Post-employment benefit obligations
Deferred income tax liabilities
Trade and other payables
Borrowings
Derivative financial liabilities
Provisions

Net assets

Equity
Capital and reserves attributable to the company’s shareholders
Share capital
Share premium
Merger reserve
Capital redemption reserve
Hedge reserve
Retained earnings

Total shareholders’ equity

Annual Report and Accounts 2015 Johnson Service Group PLC 49

Note

12
13
14
15
17
21

16
17

18

20
24
22

23
21
19
20
24
22

26
28

As at
31 December
2015
£m

As at
31 December
2014
£m

93.5
36.6
58.2
36.5
0.4
3.4

228.6

2.7
40.5
0.1

43.3

52.6
2.9
7.3
0.3
6.2

69.3

56.2
11.7
51.3
30.5
3.3
4.6

157.6

2.1
30.3
0.2

32.6

43.7
1.5
6.9
–
4.6

56.7

(26.0)

(24.1)

16.0
6.7
2.2
64.0
0.6
6.3

95.8

106.8

33.1
14.5
1.6
0.6
(0.8)
57.8

106.8

18.5
1.8
0.9
21.8
0.4
10.1

53.5

80.0

30.0
14.5
1.6
0.6
(0.4)
33.7

80.0

The notes on pages 60 to 91 are an integral part of these financial statements.

The financial statements on pages 47 to 91 were approved by the Board of Directors on 1st March 2016 and signed on its behalf by:

Yvonne Monaghan
Chief Financial Officer

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166953 Johnson Service Group Annual Report Pt4_166953 Johnson Service Group Annual Report Pt4  04/03/2016  18:44  Page 50

50 Johnson Service Group PLC Annual Report and Accounts 2015

CONSOLIDATED STATEMENT OF CASH FLOWS

Cash flows from operating activities
Profit for the year
Adjustments for:

Income tax charge/(credit) – continuing operations

– discontinued operations
– continuing operations

Total finance cost
Depreciation
Amortisation
Decrease in inventories
(Increase)/decrease in trade and other receivables
Increase in trade and other payables
Loss on disposal of business
Costs in relation to business acquisition activity
Deficit recovery payments in respect of post-employment benefit obligations
Share-based payments
Post-employment benefit obligations
Decrease in provisions

Cash generated from operations
Interest paid
Taxation paid

Net cash generated from operating activities

Cash flows from investing activities
Acquisition of business (net of cash acquired)
Proceeds from sale of business (net of cash disposed)
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of intangible assets
Purchase of textile rental items
Proceeds received in respect of special charges

Net cash used in investing activities

Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Capital element of finance leases
Purchase of own shares by EBT
Net proceeds from issue of Ordinary shares
Dividend paid

Net cash generated from financing activities

Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year

Cash and cash equivalents at end of the year

The notes on pages 60 to 91 are an integral part of these financial statements.

Year ended
31 December
2015
£m

Year ended
31 December
2014
£m

10.3

2.4
–
2.7
33.0
3.6
0.1
(0.8)
2.5
–
1.5
(1.9)
0.5
(0.1)
(2.3)

51.5
(2.2)
(2.3)

47.0

(70.4)
0.9
(4.4)
0.1
–
(27.5)
2.2

(99.1)

93.0
(54.3)
(1.6)
–
21.2
(5.7)

52.6

0.5
(4.9)

(4.4)

8.6

3.0
(0.7)
1.8
28.3
1.6
0.2
0.6
1.6
0.4
0.6
(2.0)
0.4
4.6
(3.1)

45.9
(2.0)
(0.1)

43.8

(22.4)
0.1
(11.6)
0.1
(0.1)
(24.9)
1.9

(56.9)

66.0
(70.0)
(0.8)
(0.9)
14.4
(3.9)

4.8

(8.3)
3.4

(4.9)

Note

9
32
7

32
6
23
27
23

31
32

33

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

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Annual Report and Accounts 2015 Johnson Service Group PLC  51
Annual Report and Accounts 2015  Johnson Service Group PLC  51

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Johnson Service Group PLC (the ‘Company’) and its subsidiaries (together the ‘Group’) provide textile related services to both businesses and the
consumer. The two services are textile rental and laundry and retail drycleaning.

The Company is incorporated and domiciled in the UK. The Company’s registered number is 523335. The address of its registered office is Johnson
House, Abbots Park, Monks Way, Preston Brook, Cheshire, WA7 3GH.

The Company is a public limited company and has its primary listing on the AIM division of the London Stock Exchange.

The Group consolidated financial statements were authorised for issue by the Board on 1st March 2016.

Basis of Preparation
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently
applied to the information presented, unless otherwise stated.

The consolidated financial statements of the Group have been prepared on a going concern basis in accordance with International Financial
Reporting Standards as adopted by the European Union (IFRS as adopted by the EU), IFRS Interpretation Committee (IFRS IC) interpretations and
the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the
historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value
through profit or loss.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity,
or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed below in the section entitled ‘Critical
accounting estimates and assumptions’.

New and amended standards adopted by the Group and/or Company

Changes in accounting policy and disclosures
(a)
The following new standards, and amendments to standards, have been adopted by the Group for the first time for the financial year beginning on
1st January 2015:
➔ Annual improvements 2011-2013
➔ IFRIC 21, ‘Levies’ (effective 1st January 2014) (endorsed 17th June 2014)

The adoption of these new standards has had no material impact of the Group’s financial statements.

Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group and/or Company.

(b)
The following new standards, and amendments to standards, have been published and are mandatory for accounting periods beginning after
1st January 2015 but have not been early adopted by the Group or Company and could have a material impact on the Group and Company financial
statements:
➔ IFRS 9, ‘Financial instruments’ (effective 1st January 2018)
➔ IFRS 15, ‘Revenue from contracts with customers’ (effective 1st January 2018)
➔ IFRS 16, ‘Leases’ (effective 1st January 2019)
➔ Amendment to IAS 16, ‘Property, plant and equipment’ and IAS 38, ‘Intangible assets’, on depreciation and amortisation (effective 1st January

2016)

➔ Amendment to IAS 19, ‘Employee benefits’, on defined benefit plans (effective 1st July 2014) (endorsed for 1st Feb 2015)
➔ Annual improvements 2010-2012 cycle (effective 1st July 2014) (endorsed for 1st Feb 2015)
➔ Annual improvements 2011-2013 cycle (effective 1st July 2014) (endorsed for 1st Jan 2015)
➔ Amendments to IAS 27, ‘Separate financial statements’ on equity accounting (effective 1st January 2016)
➔ Amendments to IFRS 10, ‘Consolidated financial statements’ and IAS 28, ‘Investments in associates and joint ventures’ on sale or contribution of

assets (effective 1st January 2016)

➔ Amendments to IFRS 10, ‘Consolidated financial statements’ and IAS 28, ‘Investments in associates and joint ventures’ on applying the

consolidation exemption (effective 1st January 2016)
➔ Annual improvements (2014) (effective 1st January 2016)
➔ Amendments to IAS 1, ‘Presentation of financial statements’ disclosure initiative (effective 1st January 2016)
➔ Amendments to IAS 7, ‘Statement of cash flows’ (effective 1st January 2017)

At the time of preparing this report the Group continues to assess the possible impact of the adoption of these standards in future periods and
updates will be provided in a future annual report.

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52 Johnson Service Group PLC  Annual Report and Accounts 2015

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED

Critical accounting estimates and assumptions
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events
that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related
actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below:

Impairment of goodwill

(a) 
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated on page 55. The
recoverable amounts of cash-generating units have been determined based on value-in-use calculations or, where it is considered necessary, fair
value less costs to dispose. These calculations require the use of estimates. For further information see note 12 of these Consolidated Financial
Statements.

(b)  Other intangible assets
Other intangible assets comprise brands and customer contracts and relationships. The cost of the intangible asset is based upon management’s
assessments of projected cash flows. These calculations require the use of estimates. Further details are shown in note 13 of these Consolidated
Financial Statements.

Income taxes

(c) 
The Group is subject to income taxes. Significant judgement is required in determining the provision for income taxes. There are many transactions
and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for
anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination
is made.

Post-employment benefit obligations

(d) 
The Group operates two post retirement defined benefit arrangements (note 23). Asset valuations are based on the fair value of scheme assets. The
valuations of the liabilities of the schemes are based on statistical and actuarial calculations, using various assumptions including discount rates,
future inflation rates and pension increases, life expectancy of scheme members, flexible retirement options and cash commutations. The actuarial
assumptions may differ materially from actual experience due to changes in economic and market conditions, variations in actual mortality, higher or
lower cash withdrawal rates and other changes. Any of these differences could impact the assets or liabilities recognised in the Balance Sheet in
future periods.

(e)  Onerous leases, dilapidations and environmental costs
The Group makes provision for the anticipated net costs of onerous leases, dilapidations and environmental remediation costs. The timing of these
provisions coincides with the commitment to a formal plan of action or, if earlier, on divestment or on closure of inactive sites. The timing and value of
such payments are based on management estimates. Further details are shown in note 22 of these Consolidated Financial Statements.

Forward looking statements
The terms ‘expect’, ‘should be’, ‘will be’, ‘is likely to’ 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 currently expressed or implied in such forward
looking statements.

Factors which may cause future outcomes to differ from those foreseen in forward looking statements include, but are not limited to: general
economic conditions and business conditions in the Group’s markets; exchange and interest rate fluctuations; customers’ acceptance of its products
and services; the actions of competitors; and legislative, fiscal and regulatory developments.

Consolidation
The Group controls an entity when the Group has power over an entity, is exposed to, or has rights to, variable returns from its involvement with the
entity and has the ability to affect these returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the group. They are deconsolidated from the date that control ceases.

The accounting periods of subsidiary undertakings are co-terminous with those of the Company. Inter-company transactions, balances and unrealised
gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Subsidiaries’ accounting policies have been changed, where necessary, to ensure consistency with the policies
adopted by the Group.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the
fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Where consideration due to
vendors is deferred, but is not contingent on future events, it is included in consideration when assessing the total acquisition cost and is accrued

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Annual Report and Accounts 2015 Johnson Service Group PLC  53

within trade and other payables until such a time that the amounts are settled. Where consideration due to vendors is contingent on future events, the
management’s best estimate of the amounts recoverable are included in consideration when assessing the total acquisition cost and is accrued
within trade and other payables until such a time that the amounts are settled. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair value at the acquisition date, irrespective of the extent of any non-controlling
interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill.
If the cost of acquisition is less than the fair value of the Group’s share of the net assets of the subsidiary acquired, the difference is recognised
directly in the Income Statement. Costs directly attributable to the cost of the acquisition are expensed to the Income Statement as an exceptional
item.

Segment reporting
Operating segments are identified in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief
operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as
the Board of Directors. For reporting purposes, operating segments are aggregated into reporting segments where operating segments are
considered to have similar economic conditions and characteristics and where the aggregation of operating segments provide information that
enables users to evaluate the nature and financial effects of the business activities in which the Group engages and the economic environments in
which it operates.

Revenue recognition
Revenue represents the fair value of consideration received or receivable for the sale of goods and services supplied in the ordinary course of the
Group’s activities, and is stated exclusive of VAT, similar taxes, discounts, rebates and after eliminating sales within the Group. The Group recognises
monies received from customers as at the balance sheet date relating to services to be provided in future periods as deferred income which forms
part of trade and other payables. Revenue from goods and services provided to customers not invoiced as at the balance sheet date is recognised as
accrued income within trade and other receivables. Interest receivable on bank deposits and other items is not classed as revenue but included within
finance income.

Rendering of services
Revenue is recognised either on a per item basis for delivery of laundered textiles or on a regular basis in accordance with the terms of the contract
for hotels, restaurants and events. Revenue for the supply and laundering of workwear is recognised on a regular basis in accordance with the terms
of the contract. Drycleaning revenue is recognised at the time items are processed. Interest receivable on bank deposits and other items is not
classed as revenue but included within finance income.

Sale of goods
Revenue is recognised when goods are sold from retail outlets or delivered to customers.

Rebates
Rebates payable to customers, and receivable from suppliers, are recognised in line with relevant contractual terms. Rebates payable to customers
are charged directly to the Income Statement over the period to which they relate and are recognised as a deduction from revenue. Rebates
receivable from suppliers are either recognised directly in the Income Statement, or as a reduction in the value of acquired textile rental items,
dependent on the nature of goods acquired from suppliers. Supplier rebates recognised in the Income Statement are recognised within cost of sales.

Exceptional items
Items that are material in size and non-operating or non-recurring in nature are presented as exceptional items in the Income Statement, within the
relevant account heading. The Directors are of the opinion that the separate recording of exceptional items provides helpful information about the
Group’s underlying business performance. Events which may give rise to the classification of items as exceptional include, but are not restricted to,
restructuring of businesses, gains or losses on the disposal of Textile Rental or industrial properties, one off gains or losses relating to pension
liabilities and expenses incurred and the subsequent reorganisation cost in relation to business acquisitions.

Post-employment benefits

Employee benefits
(i)
Group companies operate various pension schemes. The schemes are funded through payments to insurance companies or trustee-administered
funds, determined by periodic actuarial calculations. The Group has both defined benefit and defined contribution plans.

A defined contribution plan is a pension plan under which the Group pays contributions to publicly or privately administered pension insurance plans
on a mandatory, contractual or voluntary basis. The Group has no legal or constructive obligations to pay further contributions if the fund does not
hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a
pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive
on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognised in the Balance Sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the
balance sheet date, less the fair value of plan assets. The defined benefit obligation is calculated periodically by an independent actuary using the
projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows
using interest rates of high-quality corporate bonds that are denominated in the currency in which benefits will be paid, and that have terms to
maturity approximating to the terms of the related pension liability.

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54 Johnson Service Group PLC  Annual Report and Accounts 2015

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED

Current and past service costs are recognised immediately in the Income Statement. Interest cost on plan liabilities and interest income on plan
assets are recognised in finance costs. Curtailment gains arising from amendments to the terms of a defined benefit plan such that a significant
element of future service by current employees will no longer qualify for benefits, or will only qualify for reduced benefits, are recognised in the
Income Statement. Re-measurement gains and losses arising from experience adjustments and changes in actuarial and demographic assumptions
are charged or credited to the Consolidated Statement of Comprehensive Income in the period in which they arise.

For defined contribution plans, contributions are recognised as an employee benefit expense when they are due. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

Other post-employment benefit obligations

(ii)
Some Group companies provide unfunded post-retirement healthcare benefits to some retirees. The entitlement to these benefits is usually
conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these
benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit pension plans. The liability is
recognised on the Balance Sheet within ‘Post-employment benefit obligations’. Re-measurement gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged or credited to equity in the Consolidated Statement of Comprehensive Income in the
period in which they arise.

Share-based compensation

(iii)
The Group operates a number of equity-settled, share-based compensation plans. The economic cost of awarding shares and share options to
employees is recognised as an expense in the Income Statement equivalent to the fair value of the benefit awarded. The fair value is determined by
reference to option pricing models, principally Binomial and Monte Carlo models. The fair value of the award is recognised in the Income Statement
over the vesting period of the award. At each balance sheet date, the Group revises its estimate of the number of options that are expected to
become exercisable. Any revision to the original estimate is reflected in the Income Statement with a corresponding adjustment to equity to the extent
it relates to past service and the remainder over the rest of the vesting period. All options cancelled are fully expensed to the Income Statement upon
cancellation.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the
options are exercised.

Any amount charged or credited to the Income Statement by any of the Group’s subsidiaries is reflected in the books of the Company via an increase
or decrease in investments, with a corresponding increase or decrease to equity. These entries are eliminated within the Consolidated Financial
Statements.

Bonus plans

(iv)
The Group recognises an expense and a liability for bonuses based on the profit attributable to the Group or business as appropriate and other
pre-determined performance criteria. The Group recognises a provision where it is contractually obliged or where there is a past practice that has
created a constructive obligation.

Termination benefits

(v)
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts
voluntary redundancy. The Group recognises termination benefits when it is demonstrably committed to the termination of the employment of current
employees according to a detailed formal plan without possibility of withdrawal.

Discontinued operations and assets held for sale
Business components that represent separate major lines of business or geographical areas of operations are recognised as discontinued if the
operations have been disposed of, or meet the criteria to be classified as held for sale under IFRS 5. Assets and disposal groups are classified as
held for sale if their carrying amount will be principally recovered through a sale transaction rather than through continuing use. This condition is
regarded as met only when the sale is highly probable, expected to be completed within one year and the asset (or disposal group) is available for
immediate sale in its present condition. Disposal groups or assets held for sale are held at the lower of their carrying amount on the date they are
classified as held for sale and fair value less costs to sell.

Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are
subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to dispose and value in use. For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered
an impairment are reviewed for possible reversal of the impairment at each reporting date. Value in use calculations are considered first followed by
fair value less costs to dispose if it is deemed necessary. See note 12 for further information.

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Annual Report and Accounts 2015 Johnson Service Group PLC  55

Intangible assets
Goodwill
For acquisitions since 28th December 2003, goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of
the identifiable net assets of the acquired business at the date of acquisition. For acquisitions prior to this date, goodwill is included at the amount
recorded previously under UK GAAP. For acquisitions prior to 1st January 2010, the cost of an acquisition includes related expenses but such costs
are excluded for acquisitions after this date.

Goodwill on business acquisitions is included in non-current assets. Negative goodwill arising on acquisition is recognised directly in the Income
Statement.

Gains and losses on the disposal of a business include the carrying amount of goodwill relating to the business sold. Goodwill is tested annually for
impairment and carried at cost less accumulated impairment losses. Where an impairment is identified, it is charged to the Income Statement within
amortisation and impairment of intangible assets (excluding software). Impairment losses on goodwill are not reversed.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups
of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

Capitalised software
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software, and are
included on the Balance Sheet within intangible assets. Costs are amortised, once commissioned, over their estimated useful lives (four to ten years).

Costs associated with the general development and maintenance of computer software programs are recognised as an expense as incurred. Costs
that are directly associated with the production of identifiable and unique software products controlled by the Group, and that are expected to
generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include the costs of employees
involved in software development and an appropriate portion of relevant overheads.

Computer software development costs recognised as assets are amortised over their estimated useful lives (not exceeding ten years). Amortisation
of computer software is charged to operating profit before amortisation and impairment of intangible assets (excluding software) and exceptional
items.

Other intangible assets
Other intangible assets comprise brands and customer contracts and relationships, recognised at cost or fair value. They have a finite useful life and
are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of the intangible
assets over their estimated useful lives (four to ten years).

Property, plant and equipment
Property, plant and equipment is stated at cost, less depreciation, which is calculated to write off these assets, by equal annual instalments, over their
estimated useful lives. Cost includes expenditure which is directly attributable to the acquisition of the asset. The estimated life of plant and fixtures is
two to fifteen years and of vehicles (included within plant and equipment) four to five years. Improvements to short leasehold properties are amortised
over the shorter of the terms of the leases and their useful life. The residual values and useful lives of assets are reviewed, and adjusted if appropriate,
at each balance sheet date.

Freehold and long leasehold buildings are depreciated over their estimated remaining useful life not exceeding 50 years commencing on
26th December 1999 or, if later, date of purchase. Land is not depreciated. The Group has not adopted a policy of revaluation but the carrying
amounts of freehold and long leasehold properties reflect previous valuations. In the event of an impairment in property value the deficit below cost is
charged to the Income Statement.

The fit out costs of new freehold or long leasehold industrial buildings are depreciated, in equal annual instalments, over their expected useful lives
which range from 10 to 25 years from the date on which the assets are fully commissioned.

Subsequent costs are included in the asset’s carrying amount, or recognised as a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the
replaced part is derecognised. All other repairs and maintenance costs are charged to the Income Statement during the financial period in which they
are incurred.

No depreciation is provided for assets under the course of construction until they are completed and put in use as management intended.

Property, plant and equipment bought through acquisition are accounted for as the fair value of assets acquired will be the deemed cost of these
assets.

Gains and losses on disposals are determined by comparing the net proceeds with the carrying amount and are recognised within the Income
Statement.

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56 Johnson Service Group PLC  Annual Report and Accounts 2015

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED

Textile rental items
Textile rental items which principally comprise workwear garments, cabinet towels, linen and dust mats, are initially treated as stock. On issue to
customers or into pool stock, rental items are transferred to non-current assets and are stated at invoiced cost. Depreciation is calculated on a
straight line basis over the estimated lives of the items in circulation, which range from two to five years. Issued textile rental items bought through
acquisition of other businesses are accounted for as the fair value of issued textile rental items acquired will be the deemed cost of these items.

Charges are levied in respect of lost or damaged items or where a customer terminates the service before the end of the contracted period. Such
charges are referred to as ‘special charges’. Where proceeds are received in respect of these special charges the amounts received are deducted
from the carrying value of those items.

Where proceeds are received in respect of textile rental items withdrawn from circulation these are deducted from the carrying value of those
amounts.

Leased assets
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Rentals
payable in respect of operating leases (net of any incentives received from the lessor) are charged to the Income Statement on a straight line basis
over the lease term.

Where assets are financed by leasing or hire purchase arrangements, which give rights approximating to ownership, the assets are treated as if they
had been purchased outright and are capitalised at their fair value at the date of inception of the lease. The capital element of outstanding lease or
hire purchase commitments is treated as a liability and disclosed as obligations under finance agreements. Interest is allocated to the Income
Statement over the period of the lease or hire purchase agreement and represents a constant proportion of the outstanding commitment.

Inventories
Stocks of materials, stores, goods for resale and new rental items are valued at the lower of cost and net realisable value. Cost is stated on either a
first in, first out basis or average cost basis and comprises invoiced cost in respect of the purchase of finished goods and materials, direct labour and
direct transportation costs in respect of garments for sale. It excludes borrowing costs.

Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Costs of inventories
include the transfer from equity of any gains/losses on qualifying cash flow hedges of purchases of goods. Provision is made for obsolete, defective
and slow moving stock.

Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision
for impairment.

A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts
due according to the original terms of the receivables. Significant financial difficulties of the counterparty, probability that the counterparty will enter
bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The
amount of the provision is the difference between the carrying amount and the present value of estimated future cash flows of the asset, discounted,
where material, at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the
amount of the loss is recognised in the Income Statement within ‘administrative costs’. When a trade receivable is uncollectable, it is written off
against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against ‘administrative
costs’ in the Income Statement.

Cash and cash equivalents
Cash and cash equivalents in the Balance Sheet comprise cash at bank and in hand.

Where bank accounts have a right of set off the net position is shown as either a bank overdraft or a cash balance as appropriate. Bank overdrafts
are shown within borrowings in current liabilities on the Balance Sheet.

For the purpose of the Consolidated Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net
of outstanding bank overdrafts.

Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Trade payables
are non interest bearing.

Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Transaction costs are amortised, as a finance cost, over the
expected term of the facility, using the effective interest method. Borrowings are classified on the Balance Sheet as either current or non-current
liabilities, dependent upon the maturity date of the loan.

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Annual Report and Accounts 2015 Johnson Service Group PLC  57

Net debt
Net debt is defined as borrowings, less cash and cash equivalents.

Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Provision is not made for future operating losses. Provisions are discounted where the impact is deemed to be material.

Property
Provision is made for the anticipated net costs of onerous leases on non-trading properties and for dilapidations and environmental remediation costs.
Liabilities for environmental costs are recognised as a property provision when environmental assessments or remediations are probable and the
associated costs can be reliably estimated. Generally, the timing of these provisions coincides with the commitment to a formal plan of action or, if
earlier, on divestment or on closure of inactive sites. The provision will be utilised by the payment of annual costs, shortfalls on sub-tenanted property,
expenses of early termination, environmental remediation operations and dilapidations.

Where management have identified a loss making trading property, but it is uneconomic to close at the present time, and it is unlikely to be restored
to profitability, a provision has been recognised for the least net cost of exiting these stores.

Self insurance
Provision is made for the expected costs of uninsured incidents arising prior to the balance sheet date and for the anticipated cost of benefits due to
existing claimants under the, now discontinued, self-insured incapacity payroll scheme.

Taxation
Current tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax
authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Deferred tax
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements. Deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction,
other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined
using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and that are expected to apply when the
related deferred tax asset is realised or the deferred tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary
differences can be utilised.

Foreign currency translation
The financial statements are presented in sterling, which is the functional and presentational currency of the Company.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognised in the Income Statement, except where deferred in equity as qualifying cash
flow hedges, or where hedge accounting is applied, as explained below.

Derivative financial instruments and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value.
The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature
of the item being hedged. The Group designates certain derivatives as hedges of the variability of cash flows (cash flow hedge).

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk
management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception
and on an ongoing basis, of whether the derivatives that are used in hedging transactions are effective in offsetting changes in the cash flows of
hedged items.

Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity. The gain
or loss relating to the ineffective portion is recognised immediately in the Income Statement.

Amounts accumulated in equity are recycled in the Income Statement in the periods when the hedged item will affect profit or loss (for example,
when the forecast transaction that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of a
non-financial asset (for example, inventory) or a liability, the gains and losses previously deferred in equity are transferred from equity and included in
the initial measurement of the cost of the asset or liability.

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58 Johnson Service Group PLC  Annual Report and Accounts 2015

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss
existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the Income Statement.
When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the
Income Statement.

Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Such derivatives are classified as at fair value through profit or loss, and changes
in their fair value are recognised immediately in the Income Statement.

Investment in own shares
Ordinary shares in the Company held by the Trustee of the Employee Benefit Trust (EBT) are recorded in the Balance Sheet as a reduction in
Shareholders’ equity.

Dividend distribution
Dividends to holders of equity instruments declared after the balance sheet date are not recognised as a liability as at the balance sheet date. Final
dividend distributions to the Company’s Shareholders are recognised in the Group’s financial statements in the period in which the dividends are
approved by the Company’s Shareholders. Interim dividends are recognised when paid.

Shareholders’ equity
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.

Share premium
Amounts in excess of the nominal value of Ordinary shares issued except where 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.

Capital redemption reserve
Amounts in respect of the redemption of certain of the Company’s ordinary shares are recognised in to the Capital redemption reserves.

Merger reserve
The merger reserve represents the difference arising on completion of the relevant mergers in accordance with applicable accounting standards.

Hedging reserve
The hedging reserve represents the accumulated movements in the Group’s derivative financial instruments that have been designated as hedging
instruments. Amounts are transferred in and out of the reserve on the revaluation, or realisation, of identified hedging instruments.

Financial risk factors

Financial risk management
1 
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, cash flow interest rate risk and fair value interest rate
risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk
exposures.

Risk management is carried out by a central treasury department (Group Treasury) under policies approved by the Board. Group Treasury identifies,
evaluates and hedges financial risks in close co-operation with the Group’s operating companies. The Board provides written principles for overall risk
management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial
instruments and non-derivative financial instruments, and investment of excess liquidity.

(a)  Market risk
(i)

Currency risk

The Group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar and the Euro. Foreign
exchange risk arises when future commercial transactions, or recognised assets or liabilities, are denominated in a currency that is not the entity’s
functional currency.

As further detailed in note 24 of these Consolidated Financial Statements, the Group exposure to currency risk is minimal.

Cash flow and fair value interest rate risk

(ii) 
As the Group has no significant interest-bearing assets, the Group’s income and operating cash flows are substantially independent of changes in
market interest rates.

The Group’s interest rate risk arises from its borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk.
Borrowings issued at fixed rates expose the Group to fair value interest rate risk.

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Annual Report and Accounts 2015 Johnson Service Group PLC  59

Further details are provided in the Principal Risks and Uncertainties section. Note 24 to the Consolidated Financial Statements provides additional
disclosures regarding cash flow and fair value interest rate risk.

Price risk – Utilities and fuel

(iii)
Key costs incurred by the Group in its operations include utilities costs for gas, electricity, water and effluent. The Group also incurs significant costs in
respect of diesel given the fleet of vehicles operated across the Group. Changes in utilities or fuel costs could have a material impact on the Group’s
financial performance.

The Group takes steps to mitigate the risk of price changes across both utilities and fuel as appropriate. In respect of gas and electricity, the Group
enters contracts with suppliers to fix prices for determined period, normally up to one year, ensuring the Group has appropriate visibility of future costs
and to protect the Group, in the short term, over price volatility.

To try and mitigate the price risk associated with diesel costs the Group has entered into certain forward contracts with financial institutions to fix an
element of the diesel cost being incurred by the Group. Contracts are in place to cover a portion of the Group’s forecast diesel usage and allow for
actual costs to be swapped for a fixed rate on a monthly basis. Additional details of the contracts entered into by the Group are included in note 24.

Credit risk

(b)
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks
and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions.

For banks and financial institutions, only independently rated parties with a minimum rating of ‘A-2’ are accepted. If wholesale customers are
independently rated, these ratings are used. If there is no independent rating, Management assesses the credit quality of the customer, taking into
account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with
limits set by the Board. The utilisation of credit limits is regularly monitored. Sales to retail customers are generally settled in cash or using major credit
cards.

Note 24 provides both numerical and narrative disclosures regarding credit risk.

Liquidity risk

(c)
Prudent liquidity risk management involves maintaining sufficient cash reserves and maintaining the availability of funding through an adequate
amount of committed credit facilities. Due to the dynamic nature of the underlying businesses Group Treasury maintains flexibility in funding by
maintaining availability under committed credit lines.

Management monitors rolling forecasts of the Group’s liquidity reserve (comprising an undrawn borrowing facility (note 20) and cash and cash
equivalents (note 24)) on the basis of expected cash flow.

Capital risk management

2
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for
Shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

Further details are provided in note 24.

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60 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Segment analysis

1
Segment information is presented are 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 the reporting in the Annual Report. 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 operating profit, both including and excluding the effects of
non-recurring items from the reporting segments, such as restructuring costs and impairments when the impairment is the result of an isolated,
non-recurring or non-operating event. Interest income and expenditure are not included in the result for each reporting segment that is reviewed by
the 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. 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.

Exceptional items have been included within the appropriate business segment as shown on pages 61 to 62.

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 and
leather cleaning.

➔ Johnsons Cleaners
➔ Jeeves 

All Other Segments
Comprising of central and Group costs.

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Annual Report and Accounts 2015 Johnson Service Group PLC  61

Textile Rental
£m

188.2

Drycleaning
£m

All Other Segments
£m

Total
£m

46.2

–

234.4

29.4
(3.5)

(1.0)
(1.5)

23.4

2.0
–

(6.5)
–

(4.5)

(3.5)
–

–
–

(3.5)

1

Segment analysis

Year ended 31st December 2015
Continuing

Revenue

Result
Operating profit before amortisation and impairment of intangible assets

(excluding software amortisation) and exceptional items

Amortisation and impairment of intangible assets (excluding software amortisation)
Exceptional items:
– Restructuring and other costs
– Costs in relation to business acquisition activity

Operating profit/(loss)
Total finance cost

Profit before taxation
Taxation

Profit for the year

Discontinued Operations
£m

Textile Rental
£m

Drycleaning
£m

All Other Segments
£m

–
–

–
–
–
–

7.6
28.4

6.9
24.1
0.1
3.5

0.7
–

1.8
–
–
–

–
–

0.2
–
–
–

1.5

234.6

19.2

13.1

(2.8)

(51.5)

(16.9)

(3.1)

Other information
Non-current asset additions
– Property, plant and equipment
– Textile rental items
Depreciation and amortisation expense
– Property, plant and equipment
– Textile rental items
– Intangible software
– Customer Contracts

Balance sheet information
Segment assets
Unallocated assets:

Deferred income tax assets
Cash and cash equivalents

Total assets

Segment liabilities
Unallocated liabilities: Deferred income tax liabilities

Bank borrowings
Current income tax liabilities
Derivative financial liabilities
Post-employment benefit obligations

Total liabilities

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

27.9
(3.5)

(7.5)
(1.5)

15.4
(2.7)

12.7
(2.4)

10.3

Total
£m

8.3
28.4

8.9
24.1
0.1
3.5

268.4
3.4
0.1

271.9

(74.3)
(6.7)
(64.3)
(2.9)
(0.9)
(16.0)

(165.1)

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62 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

1

Segment analysis continued

Year ended 31st December 2014

Revenue

Result
Operating profit before amortisation and impairment of intangible assets

(excluding software amortisation) and exceptional items

Amortisation and impairment of intangible assets (excluding software amortisation)
Exceptional items:
– Restructuring and other costs
– Costs in relation to business acquisition activity
– Pension costs

Operating profit/(loss)
Total finance cost

Profit before taxation
Taxation

Profit for the year – continuing operations
Result for the year – discontinued operations (note 32)

Profit for the year

Textile Rental
£m

155.0

Drycleaning
£m

All Other Segments
£m

Total
£m

55.4

–

210.4

23.8

(1.6)

(1.3)
(0.6)
–

20.3

1.6

–

–
–
–

1.6

(3.6)

–

–
–
(4.9)

(8.5)

Discontinued Operations
£m

Textile Rental
£m

Drycleaning
£m

All Other Segments
£m

–
–
–

–
–
–

13.7
24.9
–

6.0
20.1
1.6

1.0
–
0.1

2.0
–
–

–
–
–

0.2
–
–

1.1

148.5

20.9

14.9

(4.1)

(37.2)

(17.7)

(3.4)

Other information
Non-current asset additions
– Property, plant and equipment
– Textile rental items
– Intangible software
Depreciation and amortisation expense
– Property, plant and equipment
– Textile rental items
– Customer contracts

Balance sheet information
Segment assets
Unallocated assets:

Deferred income tax assets
Cash and cash equivalents

Total assets

Segment liabilities
Unallocated liabilities: Deferred income tax liabilities

Bank borrowings
Current income tax liabilities
Derivative financial liabilities
Post-employment benefit obligations

Total liabilities

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

21.8

(1.6)

(1.3)
(0.6)
(4.9)

13.4
(1.8)

11.6
(3.0)

8.6
–

8.6

Total
£m

14.7
24.9
0.1

8.2
20.1
1.6

185.4
4.6
0.2

190.2

(62.4)
(1.8)
(25.6)
(1.5)
(0.4)
(18.5)

(110.2)

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Annual Report and Accounts 2015 Johnson Service Group PLC  63

2

Expenses by function

Revenue
Rendering of services
Sale of goods

Total revenue
Cost of sales
Administrative costs
Distribution costs

Operating profit/(loss) before amortisation and

impairment of intangible assets (excluding software
amortisation) and exceptional items

Amortisation and impairment of intangible assets

(excluding software amortisation)

Exceptional items

Operating profit/(loss)

Continuing
2015
£m

229.5
4.9

234.4
(144.3)
(31.7)
(30.5)

27.9

(3.5)
(9.0)

15.4

Discontinued
2015
£m

–
–

–
–
–
–

–

–
–

–

Total
2015
£m

229.5
4.9

234.4
(144.3)
(31.7)
(30.5)

27.9

(3.5)
(9.0)

15.4

The costs outlined below have been charged to the Income Statement in deriving operating profit/(loss):

Employee benefit expense (note 4)
Auditors’ remuneration (note 3)
Amortisation of intangible assets:

Software
Other intangible assets

Exceptional items
Depreciation and impairment of tangible fixed assets:
Property, plant and equipment held under finance
agreements
Owned property, plant and equipment
Textile rental items

Operating leases:

Land and buildings
Sublet rental income
Plant and equipment

3

Auditors’ remuneration

Continuing
2015
£m

102.1
0.6

0.1
3.5
9.0

1.2
7.7
24.1

11.9
(1.8)
2.7

Discontinued
2015
£m

–
–

–
–
–

–
–
–

0.5
–
–

Total
2015
£m

102.1
0.6

0.1
3.5
9.0

1.2
7.7
24.1

12.4
(1.8)
2.7

Fees payable for the audit of the Company
Fees payable for the audit of the Company’s subsidiaries and pension schemes
Fees payable for services relating to tax compliance
Fees payable for services relating to transaction services

Continuing
2014
£m

205.4
5.0

210.4
(134.7)
(27.8)
(26.1)

21.8

(1.6)
(6.8)

13.4

Discontinued
2014
£m

–
–

–
–
(0.3)
–

(0.3)

–
–

(0.3)

Continuing
2014
£m

Discontinued
2014
£m

91.9
0.6

–
1.6
6.8

0.9
7.3
20.1

12.5
(1.6)
2.7

–
–

–
–
–

–
–
–

0.5
(0.1)
–

2015
£m

0.1
0.2
0.1
0.2

0.6

Total
2014
£m

205.4
5.0

210.4
(134.7)
(28.1)
(26.1)

21.5

(1.6)
(6.8)

13.1

Total
2014
£m

91.9
0.6

–
1.6
6.8

0.9
7.3
20.1

13.0
(1.7)
2.7

2014
£m

0.1
0.2
0.1
0.2

0.6

Included within the above is an amount of £2,900 (2014: £53,600) in respect of fees payable to the Company’s auditors for services relating to the
audit of the Company’s pension schemes.

Fees payable for services relating to transaction services are largely in relation to the acquisition of London Linen Supply Limited and Ashbon Services
Limited in 2015 and the acquisition of the Bourne Services Group Limited in 2014.

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N
A
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C
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A
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A
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M
E
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C
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P
A
N
Y

F

I

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A
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64 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

4

Employee benefit expense

Continuing operations

Wages and salaries
Social security costs
Redundancy costs
Cost of employee share schemes (note 27)
Private healthcare costs
Pension costs – defined benefit plans current service costs (note 23)
Pension costs – defined contribution plans (note 23)

Total

Redundancy costs of £2.2 million (2014: £nil) have been included within exceptional costs.

The monthly average number of persons (including Executive Directors) employed by the Group during the year was:

Continuing operations

Textile Rental
Drycleaning
All other segments

Total

2015
£m

90.0
6.7
2.4
0.6
0.4
–
2.0

102.1

2015

3,444
1,343
17

4,804

Directors’ emoluments

5
Detailed disclosures that form part of these financial statements are given in the Board Report on Remuneration on pages 34 to 40.

6

Exceptional items

Restructuring and other costs – Textile Rental

– Drycleaning

Costs in relation to business acquisition activity
Pension costs

Total exceptional items

2015
£m

(1.0)
(6.5)

(7.5)
(1.5)
–

(9.0)

2014
£m

82.6
6.3
0.2
0.4
0.5
0.3
1.6

91.9

2014

2,959
1,747
17

4,723

2014
£m

(1.3)
–

(1.3)
(0.6)
(4.9)

(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.

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Annual Report and Accounts 2015 Johnson Service Group PLC  65

Exceptional items continued

6
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.

7

Total finance cost

Finance cost:
– Interest payable on bank loans and overdrafts
– Amortisation of bank facility fees
– Provision discount unwind
– Interest payable on obligations under finance leases

Total finance costs before notional interest on post-employment benefit obligations

Finance income
Notional interest on post-employment benefit obligations:
– Pension scheme liability
– Private healthcare

Total finance cost

8

Adjusted profit before and after taxation

Continuing Operations

Profit before taxation
Amortisation and impairment of intangible assets (excluding software amortisation)
Restructuring and other costs
Costs in relation to business acquisition activity
Pension costs

Adjusted profit before taxation
Taxation on adjusted profit

Adjusted profit after taxation

9

Taxation

Current tax
UK corporation tax charge for the year
Adjustment in relation to previous years

Current tax charge for the year

Deferred tax
Origination and reversal of temporary differences
Changes in statutory tax rate
Adjustment in relation to previous years

Deferred tax (credit)/charge for the year

Total charge for taxation included in the Income Statement for continuing operations

2015
£m

(1.7)
(0.3)
(0.1)
(0.1)

(2.2)

0.1

(0.6)
–

(0.6)

(2.7)

2015
£m

12.7
3.5
7.5
1.5
–

25.2
(4.9)

20.3

2015
£m

3.3
(0.4)

2.9

(0.2)
(0.3)
–

(0.5)

2.4

2014
£m

(1.2)
(0.2)
(0.1)
(0.1)

(1.6)

–

(0.1)
(0.1)

(0.2)

(1.8)

2014
£m

11.6
1.6
1.3
0.6
4.9

20.0
(4.5)

15.5

2014
£m

2.9
(0.4)

2.5

(0.1)
–
0.6

0.5

3.0

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66 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

Taxation continued

9
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:

Profit before taxation per the Income Statement

Profit before taxation multiplied by the effective rate of Corporation Tax in the UK

Factors affecting taxation charge for the year:
Tax effect of expenses not deductible for tax purposes
Changes in statutory tax rate
Adjustments to tax in respect of prior periods

Total charge for taxation included in the Income Statement for continuing operations

2015
£m

12.7

2.6

0.4
(0.2)
(0.4)

2.4

2014
£m

11.6

2.5

0.3
–
0.2

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 rates to 19% has been
£0.3 million credit in 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.

10

Dividends

Ordinary dividends paid and proposed

Dividends per share
Final dividend proposed
Interim dividend paid
Final dividend paid

Shareholders’ funds utilised

Final dividend proposed
Interim dividend paid
Final dividend paid

2015

1.45p
0.65p
–

2015
£m

4.8
2.1
–

2014

–
0.50p
1.20p

2014
£m

–
1.5
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.

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Annual Report and Accounts 2015 Johnson Service Group PLC  67

11

Earnings per share

Profit for the financial year from continuing operations attributable to Shareholders
Result for the financial year from discontinued operations attributable to Shareholders
Amortisation and impairment of intangible assets from continuing operations (net of taxation)
Exceptional costs from continuing operations (net of taxation)
Exceptional credit from discontinued operations (net of taxation)

Adjusted profit attributable to Shareholders relating to continuing operations
Adjusted loss attributable to Shareholders relating to discontinued operations

Adjusted profit attributable to Shareholders

Weighted average number of Ordinary shares
Dilutive potential Ordinary shares

Fully diluted number of Ordinary shares

Basic earnings per share
From continuing operations
From discontinued operations

From continuing and discontinued operations

Adjustments for amortisation and impairment of intangible assets (continuing operations)
Adjustment for exceptional items (continuing operations)

Adjusted basic earnings per share (continuing operations)
Adjusted basic earnings per share (discontinued operations)

Adjusted basic earnings per share from continuing and discontinued operations

Diluted earnings per share
From continuing operations
From discontinued operations

From continuing and discontinued operations

Adjustments for amortisation and impairment of intangible assets (continuing operations)
Adjustment for exceptional items (continuing operations)

Adjusted diluted earnings per share (continuing operations)
Adjusted diluted earnings per share (discontinued operations)

Adjusted diluted earnings per share from continuing and discontinued operations

2015
£m

10.3
–
2.7
7.3
–

20.3
–

20.3

2014
£m

8.6
–
1.2
5.7
(0.2)

15.5
(0.2)

15.3

319,966,663
3,239,840

323,206,503

291,829,363
5,001,228

296,830,591

3.2p
–

3.2p

0.8p
2.3p

6.3p
–

6.3p

3.2p
–

3.2p

0.8p
2.3p

6.3p
–

6.3p

2.9p
–

2.9p

0.4p
2.0p

5.3p
–

5.3p

2.9p
–

2.9p

0.4p
1.9p

5.2p
–

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.

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F

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A
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A
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C
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F

I

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166953 Johnson Service Group Annual Report Pt4_166953 Johnson Service Group Annual Report Pt4  04/03/2016  18:45  Page 68

68 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

12

Goodwill

Cost
Brought forward
Business acquisitions (see note 31)

Carried forward

Accumulated impairment losses
Brought forward

Carried forward

Carrying amount
Opening

Closing

2015
£m

57.8
37.3

95.1

1.6

1.6

56.2

93.5

2014
£m

54.0
3.8

57.8

1.6

1.6

52.4

56.2

In accordance with International Financial Reporting Standards, goodwill is not amortised, but instead is tested annually for impairment and carried at
cost less accumulated impairment losses.

Impairment tests for goodwill
The allocation of goodwill to Cash Generating Units (CGUs) is as follows:

Apparelmaster
Stalbridge
Bourne
London Linen

Textile rental
Drycleaning

2015
£m

41.7
3.8
3.8
35.1

84.4
9.1

93.5

2014
£m

41.7
1.6
3.8
–

47.1
9.1

56.2

The recoverable amount of a CGU is primarily determined based on value-in-use calculations. These calculations use pre-tax cash flow projections
based on financial budgets, covering three years, which are approved by the Board. Income and costs within the budget are derived on a detailed,
‘bottom up’ basis – all income streams and cost lines are considered and appropriate growth, or decline, rates are assumed for each, all of which are
then reviewed, challenged and stress tested, firstly by senior management and ultimately by the Board. Income and cost growth forecasts are risk
adjusted to reflect specific risks facing each CGU and take into account the markets in which they operate. Cash flows beyond the budgeted period
are extrapolated using the estimated growth rate stated below. Anticipated cash flows beyond a period of 20 years have been ignored. The growth
rate does not exceed the long-term average growth rate for the markets in which the CGU’s operate. Further, other than as included in the financial
budgets, it is assumed that there are no material adverse changes in legislation that would affect the forecast cashflows.

The pre-tax discount rate used within the recoverable amount calculations was 4.66% (2014: 4.83%) and is based upon the weighted average cost
of capital reflecting specific principal risks and uncertainties applicable to each CGU. The discount rate takes into account, amongst other things, the
risk free rate of return (derived from a 20 year government bond price), the market risk premium and a predictive Beta factor for the Group (from the
Barra Beta Book) which are used in deriving the cost of equity.

The same discount rate has been used for each CGU as the principal risks and uncertainties associated with the Group, highlighted on pages 16
to 19, of this report as being the highest likelihood or impact, would also impact each CGU in a similar manner. The Board acknowledge that there are
additional factors that could impact the risk profile of each CGU given the difference in operations, customer base and trading performance over
recent years. These additional factors were considered by way of sensitivity analysis performed as part of the annual impairment tests. The level of
impairment recognised is predominantly dependent upon judgements used in arriving at future growth rates and the discount rate applied to cash flow
projections. Key drivers to future growth rates are dependent on the Group’s ability to maintain and grow income streams whilst effectively managing
operating costs. The level of headroom may change if different growth rate assumptions or a different pre-tax discount rate were used in the cash flow
projections. Where the value-in-use calculations suggest an impairment, the Board would consider alternative use values prior to realising any
impairment. Alternative use values may include, inter alia, fair value less costs to dispose.

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Annual Report and Accounts 2015 Johnson Service Group PLC  69

Goodwill continued

12
The key assumptions used for value-in-use calculations are as follows:

Annual growth rate (after budget period)
Risk free rate of return
Market risk premium
Beta Factor
Cost of debt

2015

2.50%
2.74%
6.00%
0.33
4.31%

2014

2.50%
2.91%
6.00%
0.37
3.02%

Textile Rental
Having completed the 2015 impairment review no impairment has been recognised in relation to the Textile Rental CGUs (2014: no impairment).
Sensitivity analysis has been performed in assessing the recoverable amounts of goodwill. There are no changes to the key assumptions of growth
rate or discount rate that are considered by management to be reasonably possible, which give rise to an impairment of goodwill relating to the Textile
Rental CGUs.

Drycleaning
Having completed the 2015 impairment review no impairment has been recognised in relation to the Drycleaning CGU (2014: no impairment).
Sensitivity analysis has been performed in assessing the recoverable amounts of goodwill. The excess valuation of the recoverable amount over the
carrying value within the Drycleaning operating segment is £5.9 million. If the discount rate was to increase by 3.2%, or the growth rate (after the
budgeted period) reduce by 5% then the recoverable amount would equal the carrying value.

13

Intangible assets

Cost
At 31st December 2013

Business acquisitions
Additions

At 31st December 2014

Business acquisitions (see note 31)

At 31st December 2015

Accumulated amortisation
At 31st December 2013

Charged during the year

At 31st December 2014

Charged during the year

At 31st December 2015

Carrying amount
At 31st December 2013

At 31st December 2014

At 31st December 2015

Capitalised Software
£m

Customer contracts
£m

0.5

–
0.1

0.6

0.6

1.2

0.5

–

0.5

0.1

0.6

–

0.1

0.6

11.2

10.2
–

21.4

27.9

49.3

8.2

1.6

9.8

3.5

13.3

3.0

11.6

36.0

Total
£m

11.7

10.2
0.1

22.0

28.5

50.5

8.7

1.6

10.3

3.6

13.9

3.0

11.7

36.6

Amortisation of capitalised software is included within administrative costs in the Income Statement in determining operating profit before exceptional
items. Amortisation and impairment of other intangible assets is shown separately on the face of the Income Statement.

Other intangible assets comprise of customer contracts and relationships, as a result of business combinations. For assets resulting from a business
combination fair value is calculated based upon historical and prospective information and financial data specific to each business combination, with an
appropriate discount factor applied based upon the weighted average cost of capital for the Group.

Other intangible assets have a finite useful life and are carried at cost less accumulated amortisation. Amortisation of other intangible assets is
calculated using the straight-line method to allocate the cost of the assets over their estimated useful lives (four to ten years). The longest estimated
useful life remaining at 31st December 2015 is nine years.

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A
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A
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A
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C
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F

I

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70 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

14

Property, plant and equipment

Cost
At 31st December 2013

Business acquisitions
Additions
Disposals

At 31st December 2014

Business acquisitions (see note 31)
Additions
Disposals

At 31st December 2015

Accumulated depreciation and impairment
At 31st December 2013

Charged during the year
Eliminated on disposals

At 31st December 2014

Charged during the year
Eliminated on disposals

At 31st December 2015

Carrying amount
At 31st December 2013

At 31st December 2014

At 31st December 2015

Properties

Freehold
£m

Long
Leasehold
£m

Short
Leasehold
£m

Plant
and
Equipment
£m

11.2

3.9
0.2
–

15.3

–
–
(0.6)

14.7

4.8

0.6
–

5.4

0.1
(0.6)

4.9

6.4

9.9

9.8

4.8

–
–
–

4.8

–
–
(0.1)

4.7

1.7

–
–

1.7

–
(0.1)

1.6

3.1

3.1

3.1

3.0

–
1.4
–

4.4

2.0
1.5
(0.1)

7.8

2.0

0.1
–

2.1

0.5
(0.1)

2.5

1.0

2.3

5.3

78.7

5.0
13.1
(1.9)

94.9

5.6
6.8
(7.5)

99.8

53.2

7.5
(1.8)

58.9

8.3
(7.4)

59.8

25.5

36.0

40.0

Total
£m

97.7

8.9
14.7
(1.9)

119.4

7.6
8.3
(8.3)

127.0

61.7

8.2
(1.8)

68.1

8.9
(8.2)

68.8

36.0

51.3

58.2

The value of assets under construction at 31st December 2015 was £0.5 million (2014: £1.5 million).

Depreciation charges are recognised in cost of sales and administrative expenses depending on the assets to which the depreciation relates.

The net book value of plant and equipment held under finance leases is as follows:

Plant and equipment

2015
£m

7.4

2014
£m

3.5

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Annual Report and Accounts 2015 Johnson Service Group PLC  71

15

Textile rental items

Cost
Brought forward
Additions
Business acquisitions (see note 31)
Disposals
Special charges

Carried forward

Accumulated depreciation
Brought forward
Charged during the year
Disposals
Special charges

Carried forward

Carrying amount
Opening

Closing

16

Inventories

New textile rental items
Goods for resale
Raw materials and stores

The movement in the carrying value of inventories during the year is as follows:

Opening inventories
Purchases
Business acquisitions (see note 31)
Amounts transferred to textile rental items
Amounts transferred to cost of sales
Amounts written off during the year

2015
£m

51.7
28.4
3.9
(14.2)
(4.4)

65.4

21.2
24.1
(14.2)
(2.2)

28.9

30.5

36.5

2015
£m

1.6
0.2
0.9

2.7

2015
£m

2.1
38.1
0.7
(28.4)
(9.8)
–

2.7

The amounts above are net of an inventory provision of £0.6 million (2014: £0.7 million). During the period, the Group recognised an inventory
provision expense relating to continuing operations of £0.1 million (2014: £0.1 million).

2014
£m

46.0
24.9
1.6
(17.0)
(3.8)

51.7

20.0
20.1
(17.0)
(1.9)

21.2

26.0

30.5

2014
£m

0.8
0.4
0.9

2.1

2014
£m

2.0
35.2
0.3
(24.9)
(10.4)
(0.1)

2.1

S
T
R
A
T
E
G

I

C

R
E
P
O
R
T

C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E

G
R
O
U
P
F

I

I

N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S

C
O
M
P
A
N
Y

F

I

N
A
N
C
A
L

I

S
T
A
T
E
M
E
N
T
S

S
H
A
R
E
H
O
L
D
E
R

I

N
F
O
R
M
A
T
O
N

I

 
 
 
 
 
 
 
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72 Johnson Service Group PLC  Annual Report and Accounts 2015
72 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

17

Trade and other receivables

Amounts falling due within one year:
Trade receivables
Less: provision for impairment of receivables

Trade receivables – net
Other receivables
Prepayments
Accrued income

Amounts falling due after more than one year:
Other receivables

2015
£m

30.9
(1.7)

29.2
4.4
3.8
3.1

40.5

0.4

40.9

During the period, the Group recognised a bad debt provision expense relating to continuing operations of £0.8 million (2014: £0.5 million).

The ageing of trade receivables, other receivables and accrued income is analysed below:

Trade receivables, other receivables and accrued income
– Not yet due and up to 3 months overdue
– 3 to 6 months past due
– 6 to 12 months past due
– Over 12 months past due

Gross
£m

37.8
0.3
0.1
0.6

38.8

Provision
£m

(0.9)
(0.1)
(0.1)
(0.6)

(1.7)

2015
Net
£m

36.9
0.2
–
–

37.1

Gross
£m

30.7
0.7
0.2
0.5

32.1

Provision
£m

(0.8)
(0.1)
(0.2)
(0.5)

(1.6)

2014
£m

24.2
(1.6)

22.6
2.3
3.1
2.3

30.3

3.3

33.6

2014
Net
£m

29.9
0.6
–
–

30.5

Trade and other receivables which are less than three months past due are not considered impaired unless specific information indicates otherwise.
Trade and other receivables greater than three months past due are considered for recoverability, and where appropriate, a provision against bad debt
is recognised.

All trade and other receivable balances at the balance sheet date are denominated in Sterling (2014: Sterling), and are held at amortised cost. Given
the short term nature there is deemed to be no difference between this and fair value.

The difference between the book value and fair value of non-current trade and other receivables is deemed to be not material.

There is limited concentration of credit risk with respect to trade receivables due to the diverse and unrelated nature of the Group’s customers.
Accordingly, the Directors believe that no further credit provision is required in excess of the provision for impairment of receivables.

The movement in the provision for trade and other receivables is analysed below:

At 1st January
Provisions for receivables impairment
Amounts unused reversed
Receivables written off during the year as uncollectable

At 31st December

2015
£m

(1.6)
(1.1)
0.3
0.7

(1.7)

2014
£m

(1.7)
(0.7)
0.2
0.6

(1.6)

The creation and release of the provision for impaired receivables has been included in ‘administrative costs’ in the Income Statement when related to
continuing activities. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash.
The figures in the table above reflect both continuing and discontinued operations.

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable detailed within this note. The Group does not
hold any collateral as security.

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Annual Report and Accounts 2015 Johnson Service Group PLC  73

2015
£m

14.9
3.0
6.9
1.0
0.2
26.6

52.6

2014
£m

13.4
2.7
6.4
1.7
–
19.5

43.7

18

Trade and other payables

Trade payables
Other payables
Other taxation and social security liabilities
Deferred income
Deferred consideration
Accruals

All trade and other payables balances at the balance sheet date are denominated in Sterling (2014: Sterling), and are held at amortised cost. Given
the short term nature there is deemed to be no difference between this and fair value.

19

Trade and other payables (non-current)

Deferred consideration
Deferred income
Accruals

2015
£m

0.9
0.6
0.7

2.2

The difference between the book value and fair value of non-current trade and other payables is deemed to be not material.

20

Borrowings

Current
Overdraft
Bank loans
Obligations under finance lease agreements

Non-current
Bank loans
Obligations under finance lease agreements

The maturity of non-current bank loans is as follows:
– Between one and two years
– Between two and five years
– Unamortised issue costs of bank loans

2015
£m

4.5
1.3
1.5

7.3

58.5
5.5

64.0

71.3

–
59.0
(0.5)

58.5

2014
£m

–
–
0.9

0.9

2014
£m

5.1
0.8
1.0

6.9

19.7
2.1

21.8

28.7

–
20.0
(0.3)

19.7

At the 31st December 2015, the Group had a banking facility under which bank loans were secured and drawn down under a committed facility dated
24th April 2015. This facility comprises a £100.0 million rolling credit facility (including an overdraft) which runs to April 2020 and a £20.0 million
short term facility expiring on 23rd April 2016. The additional short term facility was, however, cancelled on 30th November 2015 such that available
facilities at 31st December 2015 were £100.0 million (2014: available facility of £60.0 million).

The Group has two overdraft facilities for £5.0 million and £3.0 million with two of its principal bankers (2014: £5.0 million and £3.0 million).

Individual tranches are drawn down, in sterling, for periods of up to six months at LIBOR rates of interest prevailing at the time of drawdown, plus the
applicable margin. The margin varies between 1.25% and 2.25%. As at 31st December 2015, £20.0 million of the bank facility was subject to
hedging arrangements which had the effect of replacing LIBOR with a fixed rate of 1.79%.

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

S
T
R
A
T
E
G

I

C

R
E
P
O
R
T

C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E

G
R
O
U
P
F

I

I

N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S

C
O
M
P
A
N
Y

F

I

N
A
N
C
A
L

I

S
T
A
T
E
M
E
N
T
S

S
H
A
R
E
H
O
L
D
E
R

I

N
F
O
R
M
A
T
O
N

I

 
 
 
 
 
 
 
166953 Johnson Service Group Annual Report Pt4_166953 Johnson Service Group Annual Report Pt4  04/03/2016  18:45  Page 74

74 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

Borrowings continued

20
The secured bank loans are stated net of unamortised issue costs of £0.7 million (2014: £0.5 million). Details of the security are provided in note 25
to the Consolidated Financial Statements.

Finance leases
Obligations under finance lease agreements are as follows:

Not more than one year
Minimum lease payments
Interest element

Present value of minimum lease payments

Between one and five years
Minimum lease payments
Interest element

Present value of minimum lease payments

More than five years
Minimum lease payments
Interest element

Present value of minimum lease payments

2015
£m

1.7
(0.2)

1.5

4.7
(0.4)

4.3

1.2
–

1.2

2014
£m

1.1
(0.1)

1.0

2.2
(0.1)

2.1

–
–

–

Finance lease obligations are secured on the assets to which they relate.

Deferred taxation

21
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities
and when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows:

Recognised deferred income tax assets and liabilities

Depreciation in excess/(less than) of capital allowances
Employee share schemes
Post-employment benefit obligations
Derivative financial liabilities
Other short term timing differences
Separately identifiable intangible assets

Deferred Income
Tax Assets
––––––––––––––––––––––––––––––––––––––––––
2014
£m

2015
£m

Deferred Income
Tax Liabilities
––––––––––––––––––––––––––––––––––––––––––
2014
£m

2015
£m

–
0.2
3.0
0.2
–
–

3.4

0.3
0.1
3.7
0.1
0.4
–

4.6

(1.4)
–
–
–
(0.3)
(5.0)

(6.7)

–
–
–
–
–
(1.8)

(1.8)

The deferred income tax assets disclosed above are deemed to be recoverable.

Tax losses of approximately £23.7 million were acquired as part of the acquisition of Sketchley Limited in May 2004. The method of utilisation of the
losses has been formally agreed with HM Revenue & Customs; however there is no certainty that the tax relating to these losses will be recovered in
the future. Accordingly, no deferred tax asset has been recognised within these financial statements in respect of the unutilised losses. At
31st December 2015, £1.4 million of these losses have been utilised, leaving future tax losses available of £22.3 million. Should the Group receive
relief for the losses at a future date, this will give rise to a liability to the vendor of Sketchley Limited of up to £2.5 million (assuming a corporation tax
rate of 19%), offsetting, in part, the tax benefit of the losses. Any payments due to the vendor are only payable when the Group has first received the
cash benefit of the losses. During 2015 none of these tax losses have been utilised (2014: £nil).

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Annual Report and Accounts 2015 Johnson Service Group PLC  75

Deferred taxation continued

21
The following provides a reconciliation of the movement in each of the deferred income tax assets and liabilities:

At 31st December 2013

(Charge)/credit to income
Deferred income tax liabilities acquired
Credit to other comprehensive income
Charge to Shareholders’ equity

At 31st December 2014

(Charge)/credit to income
Deferred income tax liabilities acquired
(Charge)/credit to other comprehensive income
Credit to Shareholders’ equity

At 31st December 2015

Depreciation
in Excess of/
(less than)
Capital
Allowances
£m

2.4

(1.3)
(0.8)
–
–

0.3

(0.9)
(0.8)
–
–

(1.4)

Employee
Share
Schemes
£m

Post-
employment
Benefit
Obligations
£m

Derivative
Financial
Instruments
£m

Other
Short Term
Timing
Differences
£m

Intangible
Assets
£m

1.0

0.1
–
–
(1.0)

0.1

–
–
–
0.1

0.2

0.9

0.5
–
2.3
–

3.7

(0.3)
–
(0.4)
–

3.0

0.1

–
–
–
–

0.1

–
–
0.1
–

0.2

0.1

0.3
–
–
–

0.4

(0.7)
–
–
–

(0.3)

–

0.2
(2.0)
–
–

(1.8)

2.4
(5.6)
–
–

(5.0)

Total
£m

4.5

(0.2)
(2.8)
2.3
(1.0)

2.8

0.5
(6.4)
(0.3)
0.1

(3.3)

The deferred income tax charge to income in 2015 includes £nil in respect of discontinued activities (2014: £0.3 million credit).

Changes to the UK corporation tax rates were announced on 8th July 2015. These changes were substantively enacted as part of the Finance Bill
2015 on 26th October 2015 and 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 income tax balances as at 31st December 2015. The impact of the change in tax rates to 19% has
been £0.3 million credit in the Income Statement and a £0.2 million credit recognised directly in Shareholders’ equity.

The Group has estimated that £0.6m of the Group’s net deferred income tax asset will be realised in the next 12 months. This is management’s
current best estimate and may not reflect the actual outcome in the next 12 months.

22

Provisions

At 31st December 2013

Additional provision in the year
Provision discount unwind
Utilised during the year

At 31st December 2014

Additional provision in the year
Provision discount unwind
Released during the year
Utilised during the year

At 31st December 2015

Analysis of total provisions
Current
Non-current

Property
£m

17.0

0.7
0.1
(3.8)

14.0

3.8
0.1
(0.1)
(6.0)

11.8

Self
Insurance
£m

0.7

0.1
–
(0.1)

0.7

0.1
–
–
(0.1)

0.7

2015
£m

6.2
6.3

12.5

Total
£m

17.7

0.8
0.1
(3.9)

14.7

3.9
0.1
(0.1)
(6.1)

12.5

2014
£m

4.6
10.1

14.7

S
T
R
A
T
E
G

I

C

R
E
P
O
R
T

C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E

G
R
O
U
P
F

I

I

N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S

C
O
M
P
A
N
Y

F

I

N
A
N
C
A
L

I

S
T
A
T
E
M
E
N
T
S

S
H
A
R
E
H
O
L
D
E
R

I

N
F
O
R
M
A
T
O
N

I

 
 
 
 
 
 
 
166953 Johnson Service Group Annual Report Pt4_166953 Johnson Service Group Annual Report Pt4  04/03/2016  18:45  Page 76

76 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

Provisions continued

22
Property
The property provision includes onerous leases, expected lease dilapidation costs and the estimated remediation costs of property where an
environmental problem has been identified and the costs to rectify can be reliably measured. The estimates and judgements used in determining the
value of provisioning are continually evaluated and are based on historical experience and other factors, including expectations of future events that
are believed to be reasonable under the circumstances. The majority of the property provision is expected to be utilised over a period of five years.

Self insurance
The self insurance provision is in respect of the estimated payments due to existing claimants under the self funded incapacity scheme over a period
of 14 years. This scheme is now closed.

Post-employment benefit obligations

23
The Group operates pension schemes of both the funded defined benefit and the defined contribution type for a substantial number of employees. In
addition, the Group also operates an unfunded defined benefit private healthcare scheme for eligible retirees. The disclosures below are in respect of
all of the Group schemes.

Pensions – defined contribution
The JSG Pension Plan is a defined contribution scheme. The total cost of employer contributions for the year for continuing operations was
£1.9 million (2014: £1.6 million).

Pensions – defined benefit
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.

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.

A full actuarial valuation of the JGDBS was carried out at 5th October 2013 and has been updated to 31st December 2015 by an independent
qualified actuary.

The updated actuarial valuation at 31st December 2015 showed a deficit of £14.7 million (2014: £17.2 million). During the year, no employer
contributions were made (2014: £0.5 million).

Deficit recovery payments of £1.9 million (2014: £2.0 million) were made to the Scheme during the year. Further deficit recovery payments of
£1.9 million are expected to be made in 2016.

Actuarial assumptions
Considerations when calculating the IAS 19 liability
IAS19(R) sets out prescribed (qualitative) conditions for selecting the actuarial assumptions used to calculate the pension liabilities and pension costs.
A key assumption is the discount rate which is used to determine the value of pension liabilities at the balance sheet date. The selection of the price
inflation assumptions (both RPI and CPI) is also critical as these are relevant for the pre-retirement revaluation and pension increases in payment
assumptions.

These assumptions are based on market yields at the balance sheet date, and may not be borne out in practice due to the long-term expected
duration of the Scheme. The weighted average duration of the defined benefit obligation is approximately 15 years (2014: 15 years). Within the
prescribed conditions however, assumptions must be mutually compatible and lead to the best estimate of the future cash flows in respect of pension
liabilities.

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Annual Report and Accounts 2015 Johnson Service Group PLC  77

23
Post-employment benefit obligations continued
A summary of relevant considerations is set out below:

Assumption for valuing pension liabilities

Comments on prescribed conditions

Discount rate (pre and post retirement)

Retail Price Inflation (RPI)

Based on yields on “high quality” corporate bonds of appropriate duration and currency, or a
suitable proxy. Our approach is to value sample pensioner and non-pensioner cash flows with
different durations using a yield curve approach and to calculate the single equivalent discount
rate for each set of cash flows

Based on the yield differential between index-linked bonds and fixed-interest bonds of
appropriate duration and of a similar credit standing (for example, using spot yields derived from
the inflation yield curve published by the Bank of England) with the allowance for an inflation
premium to reflect market conditions

Consumer Price Inflation (CPI)

Based on the RPI assumption with an adjustment to reflect the historic and future long term
differences between the RPI and CPI indices

Pension increases

Compatible with the rate of price inflation above taking into account the effects of scheme rules
and valid expectations of discretionary increases based on best practice

Demographic assumptions
(e.g. rates of mortality and early retirement)

Compatible assumptions that lead to a best estimate of future cash flows

Considerations when calculating the IAS19 interest income on Scheme assets
Under IAS19(R), interest income rate, is deemed to be the same as the rate used to discount the scheme liabilities.

Assumptions used

Rate used to discount scheme liabilities
Retail price inflation (RPI)
Consumer price inflation (CPI)
Rate of increase of pensions in payment (5.0% RPI linked)
Rate of increase of pensions in payment (2.5% RPI linked)
Rate of increase of pensions in payment (2.5% CPI linked)
Rate of increase of pensions in deferment (JGDBS Scheme)

2015

3.90%
3.00%
1.80%
2.90%
2.00%
1.55%
1.80%

2014

3.65%
2.95%
1.65%
2.85%
2.00%
1.50%
1.65%

Life expectancy at age 60 for current male pensioners is assumed to be 26.5 years (2014: 26.7 years). Life expectancy at age 60 for male future
pensioners is assumed to be 27.3 years (2014: 27.4 years). “S1NXA CMI 2015 with a 1.0% long term trend rate” has been used to derive these
mortality rates (2014: “S1NXA CMI 2014 with a 1.0% long term trend rate” used).

It is assumed that 100% of non-retired members of the JGDBS will commute 25% of their pension at retirement (2014: 100% of members will
commute 25% of pension).

It has been assumed that 50% (2014: 50%) of future pensioners at retirement will exchange their non-statutory pension increases at retirement for a
higher, but non-increasing pension.

Sensitivity of key assumptions
The table below gives an approximation of the impact on the IAS19(R) pension scheme liabilities to changes in assumptions and experience. Note that
all figures are before allowing for deferred tax.

Item

Increase/reduce discount rate by 0.1%
Increase/reduce price inflation assumption by 0.1%
Increase/drop in equity markets by 5.0%

Approximate increase/(decrease) on
Post-employment benefit obligation

(£2.7 million)/£2.7 million
£1.2 million/(£1.1 million)
(£3.1 million)/£3.1 million

S
T
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A
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I

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R
E
P
O
R
T

C
O
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P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E

G
R
O
U
P
F

I

I

N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S

C
O
M
P
A
N
Y

F

I

N
A
N
C
A
L

I

S
T
A
T
E
M
E
N
T
S

S
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O
L
D
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I

N
F
O
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M
A
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O
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I

 
 
 
 
 
 
 
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78 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

Post-employment benefit obligations continued

23
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to
occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant
actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of
the reporting period) has been applied as when calculating the pension liability recognised within the Balance Sheet. The methods and types of
assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

Private healthcare
The Group operates an unfunded defined benefit private healthcare scheme for eligible retirees. At 31st December 2015, the deficit of the scheme
was £1.3 million (2014: £1.3 million). The Group accounted for a current service cost of £2,000 and a notional interest cost of £45,000 in the Income
Statement (2014: £nil and £0.1 million respectively). Following the latest formal review, current service cost in 2016 is expected to be £2,000 with a
notional interest cost of £45,000.

The scheme is subject to a periodic independent actuarial review which assesses the cost of providing benefits for current and future eligible retirees.
The latest formal review was undertaken as at 31st December 2014.

The latest review was performed using the projected unit credit method, and a discount rate of 3.75%. The main long term actuarial assumptions used
in the review were that the retirement age of eligible employees will be 60 for females and males and the rate of increase in medical costs is to be
5.5% throughout. There have been no material changes in circumstances since the last formal review.

An increase of 1% in the medical cost trend would increase the scheme liabilities by £0.1 million and the aggregate of the service cost and interest
cost by £4,000 per annum. A decrease of 1% in the medical cost trend would reduce the scheme liabilities by £0.1 million and the aggregate of the
service cost and interest cost by £4,000 per annum.

Post-employment benefit obligations disclosures
The amounts charged to the Income Statement are set out below:

Current service costs – charged to administrative costs
Past service costs (including associated expenses) – charged as an exceptional item
Net interest on defined benefit net liability

Total amounts charged to the Income Statement

2015
£m

–
–
0.6

0.6

2014
£m

0.3
4.9
0.2

5.4

Current service costs are charged or credited to the Income Statement in arriving at operating profit before amortisation and impairment of intangible
assets (excluding software amortisation) and exceptional items. Past service costs or credits and settlement gains or losses are charged or credited to
exceptional items.

The prior year past service costs of £4.7 million, along with associated costs of £0.2 million, arose as a result of the closure of the JGDBS to future
accrual as at 31st December 2014.

The interest income on scheme assets and the interest cost on scheme liabilities are included within total finance costs.

In addition, the following amounts have been recognised in the Statement of Comprehensive Income:

(Loss)/return on scheme assets excluding interest income
Re-measurement gains/(losses) arising from changes in demographic assumptions
Re-measurement gains/(losses) arising from changes in financial assumptions
Experience losses on liabilities

Total amounts recognised in the Statement of Comprehensive Income

2015
£m

(5.2)
0.5
5.9
–

1.2

2014
£m

12.5
(2.0)
(17.0)
(5.0)

(11.5)

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Annual Report and Accounts 2015 Johnson Service Group PLC  79

23
Post-employment benefit obligations continued
Amounts recognised in the Balance Sheet are as follows:

Present value of funded obligations
Fair value of scheme assets

Net defined benefit pension obligations
Post-retirement healthcare obligations

Net post-employment benefit obligations

Movements in the fair value of scheme assets were as follows:

Fair value of scheme assets at beginning of the year
Interest income
(Loss)/return on scheme assets (excluding interest income)
Employer contributions (including benefits paid and reimbursed)
Members’ contributions
Benefits paid

Fair value of scheme assets at end of the year

Movements in the fair value of scheme liabilities were as follows:

Fair value of scheme liabilities at beginning of the year
Current service cost
Members’ contributions
Interest expense
Re-measurement gains/(losses) from changes in demographic assumptions
Re-measurement gains/(losses) from changes in financial assumptions
Experience losses on liabilities
Past service cost
Benefits paid

Fair value of scheme liabilities at the end of the year

Movements in post-employment benefit obligations were as follows:

Opening post-employment benefit obligation
Current service cost
Past service cost
Notional interest
Employer contributions
Re-measurement and experience gains/(losses)

Closing post-employment benefit obligation

2015
£m

(207.1)
192.4

(14.7)
(1.3)

(16.0)

2015
£m

198.3
7.1
(5.2)
1.9
–
(9.7)

192.4

2015
£m

(216.8)
–
–
(7.7)
0.5
5.9
–
–
9.7

(208.4)

2015
£m

(18.5)
–
–
(0.6)
1.9
1.2

(16.0)

2014
£m

(215.5)
198.3

(17.2)
(1.3)

(18.5)

2014
£m

185.0
8.2
12.5
2.5
0.3
(10.2)

198.3

2014
£m

(189.3)
(0.3)
(0.3)
(8.4)
(2.0)
(17.0)
(5.0)
(4.7)
10.2

(216.8)

2014
£m

(4.3)
(0.3)
(4.7)
(0.2)
2.5
(11.5)

(18.5)

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A
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G
O
V
E
R
N
A
N
C
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G
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U
P
F

I

I

N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S

C
O
M
P
A
N
Y

F

I

N
A
N
C
A
L

I

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T
A
T
E
M
E
N
T
S

S
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O
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I

 
 
 
 
 
 
 
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80 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

23
Post-employment benefit obligations continued
The major categories of scheme assets were as follows:

Equities
Bonds
Liability driven investments
Real return funds
Alternative return seeking assets
Cash and cash equivalents

Total market value of assets

Quoted
Market Price
Active Market
£m

No Quoted
Market Price
Active Market
£m

62.7
38.9
22.4
25.7
4.7
9.4

163.8

–
–
–
–
28.6
–

28.6

2015
Total
Scheme
£m

62.7
38.9
22.4
25.7
33.3
9.4

Quoted
Market Price
Active Market
£m

No Quoted
Market Price
Active Market
£m

66.2
38.0
31.6
26.8
3.9
2.3

–
–
–
–
29.5
–

29.5

192.4

168.8

2014
Total
Scheme
£m

66.2
38.0
31.6
26.8
33.4
2.3

198.3

The assets of the pension scheme include no (2014: none) shares in the Group.

The deficit recognised in respect of the JGDBS is influenced by both the measurement of plan liabilities and the valuation of plan assets. The Group,
in conjunction with the trustees has tried to ensure an appropriate balance of investments has been made by the scheme to mitigate potential price
volatility in individual asset categories. The Group and trustees regularly monitor the composition of plan assets and amend the composition
accordingly to try and match scheme assets with the liabilities they are intended to fund. However, any underperformance of scheme assets could
result in future increases in the deficit recognised on the JGDBS.

Financial instruments

24
Policies and strategies
Details of the Group’s policies and strategies in relation to financial instruments are given within the Statement of Significant Accounting Policies.

IAS 32, Financial Instruments: Presentation, IAS 39, Financial Instruments: Recognition and Measurement and IFRS 7, Financial Instruments:
Disclosures, also require numerical disclosures in respect of financial assets and liabilities and these are set out below and in note 17. Financial assets
and liabilities are stated at either amortised cost or fair value. Where stated at amortised cost, this is not materially different to the fair value unless
otherwise stated due to their short term nature.

Financial assets

Cash at bank and in hand
– Sterling
– Euros
– US Dollars

At 31st December

2015
£m

0.1
–
–

0.1

For interest purposes cash is offset against overdrafts through a pooling arrangement with each of the Group’s principal bankers. Surplus cash is
placed on Treasury Deposit with one or more of the Group’s principal bankers.

At the balance sheet date, cash was held with the following institutions:

Cash at bank and in hand
– Royal Bank of Scotland
– Lloyds Bank

Total cash and cash equivalents

Rating

A-2
A-1

2015
£m

0.1
–

0.1

2014
£m

0.2
–
–

0.2

2014
£m

0.2
–

0.2

The Group refers to Standard and Poor’s short-term issue credit ratings when determining with which financial institutions to deposit its surplus cash
balances. A short-term obligation rated ‘A-1’ is rated in the highest category by Standard & Poor’s. The obligor’s capacity to meet its financial
commitment on the obligation is strong. A short-term obligation rated ‘A-2’ is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial commitment
on the obligation is satisfactory.

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Annual Report and Accounts 2015 Johnson Service Group PLC  81

24

Financial instruments continued

Cash balances held with the Group’s principal bankers are used for working capital purposes. The Directors do not consider deposits at these
institutions to be at risk.

Financial liabilities

Overdraft
Bank loans*
Finance leases
Provisions
Derivative financial instruments

As per Balance Sheet
£m

Future Interest Cost
£m

2015
Total Cash Flows
£m

As per Balance Sheet
£m

Future Interest Cost
£m

2014
Total Cash Flows
£m

4.5
59.8
7.0
12.5
0.9

84.7

–
–
0.6
0.2
–

0.8

4.5
59.8
7.6
12.7
0.9

85.5

5.1
20.5
3.1
14.7
0.4

43.8

–
–
0.2
0.4
–

0.6

5.1
20.5
3.3
15.1
0.4

44.4

The overdraft of £4.5 million (2014: £5.1 million) comprises cash balances of £4.5 million (2014: £2.6 million) and overdraft balances of £9.0 million
(2014: £7.7 million) which are subject to offset.

* IFRS 7 requires the contractual future interest cost of a financial liability to be included within the above table. As disclosed in note 20 of these
financial statements, all the bank loans are currently drawn under an RCF arrangement and as such there is no contractual future interest cost.
Interest paid in the year in relation to bank loans drawn down amounted to £1.7 million. Interest is payable at a rate of LIBOR prevailing at the time of
drawdown plus the applicable margin, which ranges from 1.25% and 2.25%.

Liquidity risk
The maturity of financial liabilities based on contracted cash flows is shown in the table below.

This table has been drawn up using the undiscounted cash flows of financial liabilities based on the earliest date on which the Group is obliged to pay.
The table includes both interest and principal cash flows. Floating rate interest payments have been calculated using the relevant interest rates
prevailing at the year end.

As at 31st December 2015
Due within one year
Due within one to two years
Due within two to five years
Due after more than five years

As at 31st December 2014
Due within one year
Due within one to two years
Due within two to five years
Due after more than five years

Interest rate risk profile

As at 31st December 2015
Sterling

As at 31st December 2014
Sterling

Overdrafts
£m

4.5
–
–
–

4.5

5.1
–
–
–

5.1

Bank
Loans
£m

1.3
–
58.5
–

59.8

0.8
–
19.7
–

20.5

Finance
Leases
£m

Provisions
£m

Derivative 
Financial
Instruments
£m

1.7
1.6
3.1
1.2

7.6

1.1
0.8
1.1
0.3

3.3

Fixed Rate
Financial
Liabilities
£m

37.0

23.1

6.3
2.3
1.7
2.4

12.7

4.7
5.5
3.5
1.4

15.1

Floating
Rate
Financial
Liabilities
£m

42.5

14.7

0.3
0.4
0.2
–

0.9

0.4
–
–
–

0.4

Financial
Liabilities
on which
no Interest
is paid
£m

5.2

6.0

Total
£m

14.1
4.3
63.5
3.6

85.5

12.1
6.3
24.3
1.7

44.4

Total
£m

84.7

43.8

S
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I

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O
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O
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N
A
N
C
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G
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P
F

I

I

N
A
N
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A
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S
T
A
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M
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N
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C
O
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P
A
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Y

F

I

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A
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A
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I

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A
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82 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

24

Financial instruments continued

The Group’s creditors falling due within one year (other than bank and other borrowings) are excluded from the above tables either due to the
exclusion of short term items or because they do not meet the definition of a financial liability.

Fixed rate financial liabilities
At 31st December 2015 the Group’s fixed rate financial liabilities related to bank borrowings that are covered by interest rate swaps and assets held
under finance leases (2014: Interest rate swaps and assets held under finance leases).

For assets held under finance leases the average interest rate incurred is 3.3% (2014: 3.6%) and the weighted average period remaining is
65 months (2014: 46 months).

The Group has entered into a number of interest rate swaps, the effect of which is to classify £30.0 million (2014: £20.0 million) of the Group’s
borrowings as fixed rate. The details of the two new interest swaps are as follows:
➔ Interest swaps classifying £15.0 million of debt as fixed rate from 8th January 2016 to 8th January 2019. The rate, excluding margin, is 1.4725%.
➔ Interest swaps classifying £15.0 million of debt as fixed rate from 8th January 2016 to 8th January 2020. The rate, excluding margin, is 1.665%.

At the 31st December 2015, there remains an interest swap in place for £20.0 million of borrowings, whereby LIBOR is replaced by a fixed rate of
1.79% until 8th January 2016.

Gains and losses recognised in the hedging reserve in equity on interest rate swap contracts as of 31st December 2015 will be continuously
released to the Income Statement within finance costs until the end of the hedged period.

Floating rate financial liabilities
Floating rate financial liabilities bear interest at rates based on relevant LIBOR equivalents. Loans are drawn and interest rates fixed for periods of
between one and six months. The weighted average period remaining for floating rate financial liabilities is 27 months (2014: 27 months).

The variation in the interest rate of floating rate financial liabilities (with all other variables held constant) required to increase post-tax profit for the
year by £0.1 million is 50 basis points (2014: 100 basis points). The variation in the interest rate of floating rate financial liabilities (with all other
variables held constant) required to decrease post-tax profit for the year by £0.1 million is 50 basis points (2014: 100 basis points).

Fair values of financial liabilities
Bank loans are drawn down and interest set for no more than a six month period (2014: six month period). In view of this the fair value of bank loans
is not materially different from the book value. The fair value of other financial liabilities was not materially different from the book value.

The Group recognises financial instruments that are held at fair value. Financial instruments have been classified as Level 1, Level 2 or Level 3
dependant on the valuation method applied in determining their fair value.

The different levels have been defined as follows:
➔ Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
➔ Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly

(that is, derived from prices) (Level 2).

➔ Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

The only financial instruments held at fair value by the Group relate to interest rate swaps on a portion of the Group’s long term borrowings and
commodity swaps.

For both the years ended 31st December 2015 and 31st December 2014 the liabilities arising from these instruments have been classified as
Level 2. The fair value of these instruments at each of the period ends was:

Derivative financial instruments held:
– Interest rate products
– Commodity products

Fair Value 2015
£m

Fair Value 2014
£m

(0.3)
(0.6)

(0.2)
(0.2)

Further information regarding interest rate products is provided in the fixed rate financial liabilities section above. Commodity products relate to fuel
derivatives to hedge against movements in the price of diesel used in the Group’s operations. The fuel derivatives hedge the underlying commodity
price risk.

The Group has hedged 4.8 million litres of diesel in the period to 31st December 2017 representing approximately 50% of its expected diesel
consumption. The hedged price is 35.25 pence per litre.

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Annual Report and Accounts 2015 Johnson Service Group PLC  83

Financial instruments continued

24
Where available, market rates have been used to determine fair value.

All financial instruments are Level 2 financial instruments for all periods and there have been no transfers between either Level 1 and 2 or Level 2 and
3 in any period.

The fair value of the following financial assets and liabilities approximate their carrying amount:
➔ Trade receivables and other receivables.
➔ Cash and cash equivalents.
➔ Trade and other payables.

Valuation techniques used to derive Level 2 fair values
Level 2 trading and hedging derivatives comprise interest rate swaps and commodity swaps. Interest rate swaps are fair valued using forward interest
rates extracted from observable yield curves. Commodity swaps are using a mark to market valuation at the balance sheet date. The effects of
discounting are generally insignificant for Level 2 derivatives.

Group’s valuation processes
The Group’s finance function includes a treasury team that performs the valuations of financial assets required for financial reporting purposes,
including Level 3 fair values (as required). This team reports directly to the Chief Financial Officer (CFO). Discussions of valuation processes and
results are held between the CFO and the treasury team at least once every six months, in line with the Group’s reporting dates.

Foreign currency risk
The Group purchases such a small proportion in currencies other than Sterling that there is no reasonable change in exchanges rates that would have
a material effect on the Company.

Capital risk management
The Group’s objectives when managing its capital structure are to safeguard the Group’s ability to continue as a going concern in order to provide
appropriate returns to Shareholders and benefits to other stakeholders.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to Shareholders, return capital to Shareholders,
issue new shares or take other steps to increase share capital and reduce or increase debt facilities.

The Group manages its capital structure using a number of measures and taking into account future strategic plans. Such measures include its
interest cover and gearing ratios which are included in its banking covenants. The Group remains compliant with its banking covenants.

Contingent liabilities

25
The Group operates from a number of sites across the UK. Some of the sites have operated as laundry sites for many years and historic
environmental liabilities may exist. Such liabilities are not expected to give rise to any significant loss.

The Group has granted its Bankers and Trustee of the Pension Scheme (the ‘Trustee’) security over the assets of the Group. The priority of security is
as follows:
➔ first ranking security for £28.0 million to the Trustee ranking pari passu with up to £156.0 million of bank facilities; and
➔ second ranking security for the balance of any remaining liabilities to the Trustee ranking pari passu with any remaining bank liabilities.

During the period of ownership of the Facilities Management division the Company had given guarantees over the performance of contracts entered
into by the division. As part of the disposal of the division the purchaser has agreed to pursue the release or transfer of obligations under the Parent
Company guarantees and this is in process. The Sale and Purchase agreement contains an indemnity from the purchaser to cover any loss in the
event a claim is made prior to release. In the period until release the purchaser is to make a payment to the Company of £0.2 million per annum,
reduced pro rata as guarantees are released. Such liabilities are not expected to give rise to any significant loss.

As a condition of the sale of the Facilities Management division in August 2013, the Group has put in place indemnities, to the purchaser, in relation to
any future amounts payable in respect of contingent consideration related to the Nickleby acquisition completed in February 2012. As set out in the
2012 Annual Report and Accounts the maximum amount payable under the terms of the indemnity could be up to £5.0 million. The Directors believe
the risk of settlement at, or near, the maximum level to be remote.

S
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O
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N
A
N
C
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G
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U
P
F

I

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N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S

C
O
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P
A
N
Y

F

I

N
A
N
C
A
L

I

S
T
A
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M
E
N
T
S

S
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84 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

26

Called-up share capital

Authorised
383,025,739 (2014: 383,025,739) Ordinary shares of 10p each

Issued and Fully Paid

Ordinary shares of 10p each:
– At start of period
– New shares issued

– At end of period

Issue of Ordinary shares of 10p each
An analysis of the new shares issued in each period is shown below:

2015
£m

38.3

2015
£m

Shares

30.0
3.1

33.1

262,326,451
37,659,142

299,985,593

2014
£m

38.3

2014
£m

26.2
3.8

30.0

Shares

299,985,593
30,584,430

330,570,023

Issued and Fully Paid

Ordinary shares of 10p each:
– Placing
– EBT
– Approved LTIP
– SAYE

New shares issued

Shares

2015
£

Shares

2014
£

note 1
note 2
note 3
note 4

30,011,802
–
78,632
493,996

3,001,180
–
7,863
49,400

26,253,940
9,090,000
1,140,281
1,174,921

2,625,394
909,000
114,028
117,492

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:

Share capital
Share premium
Retained earnings

2015
£m

3.1
–
18.1

21.2

2014
£m

3.8
0.4
10.2

14.4

Potential issues of Ordinary shares of 10p each
As at the balance sheet date, certain senior executives hold options in respect of potential issues of Ordinary shares of 10 pence each granted
pursuant to the 2009 Long-Term Incentive Plan (the ‘LTIP’) and the 2009 Long-Term Incentive Plan Approved Section (the ‘Approved LTIP’) (together
referred to as ‘Executive Schemes’) at prices ranging from nil to 80.0 pence.

Certain Group employees also hold options in respect of potential issues of Ordinary shares of 10p each granted pursuant to the Johnson Service
Group Sharesave Plan (hereinafter referred to as the ‘SAYE Scheme’) at prices ranging from 28.50 pence to 82.75 pence.

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Annual Report and Accounts 2015 Johnson Service Group PLC  85

Called-up share capital continued

26
Options granted under the SAYE Scheme are normally exercisable within six months from the date exercisable as shown below. Options under the
Executive Schemes are normally exercisable, subject to the achievement of performance conditions, three years after the date of grant and within
seven years from the date exercisable as shown below. Upon exercise, all options are generally settled in equity.

The number of shares subject to option under each scheme which were outstanding at 31st December 2015, the date on which they were granted
and the date from which they may be exercised are given below:

Scheme

LTIP
LTIP
Approved LTIP

SAYE Scheme
SAYE Scheme
SAYE Scheme
SAYE Scheme
SAYE Scheme

Date Options
Granted

13th March 2014
8th May 2015
8th May 2015

6th October 2011
1st October 2013
1st October 2013
1st October 2015
1st October 2015

Number
of Shares

1,089,483
1,182,500
225,000

2,496,983

454,490
1,393,481
398,934
1,237,014
561,598

4,045,517

6,542,500

Date
Exercisable

Note 1
Note 1
Note 1

1st December 2016
1st December 2016
1st December 2018
1st December 2018
1st December 2020

Exercise Price 
per Share

Nil
Nil
80.00p

28.50p
43.75p
43.75p
82.75p
82.75p

Note 1: The LTIP options granted are subject to performance conditions linked to the Company’s Earnings Per Share and Total Shareholder Return

and will ordinarily vest three years from grant. Further details are set out within the Board Report on Remuneration.

Share based payments

27
Executive Schemes
The 2009 Long-Term Incentive Plan (the ‘LTIP’) provides for an exercise price of nil. The 2009 Long-Term Incentive Plan Approved Section (the
‘Approved LTIP’) provides for an exercise price equal to the quoted closing mid-market price of the Company shares on the business day immediately
preceding the date of grant. The exercise price is determined by the Remuneration Committee. The vesting period is generally three years. Both
market based and non-market based performance conditions are generally attached to the options, for which an appropriate adjustment is made when
calculating the fair value of an option. If the options remain unexercised after a period of 10 years from the date of grant, the options expire.
Furthermore, options are forfeited if the employee leaves the Group before the options vest, unless under exceptional circumstances.

SAYE Schemes
The Johnson Service Group Sharesave Plan provides for an exercise price equal to the average of the quoted mid-market price of the Company
shares on the business day immediately preceding the date of grant, less a discount of up to ten per cent. The vesting period under the scheme is
either three or five years and no performance conditions, other than remaining a Group employee, are attached to the options.

Disclosures
Movements in the current and prior period in respect of all share schemes are summarised below:

Executive schemes
Outstanding at beginning of the period
Granted during the period
Exercised during the period
Lapsed during the period

Outstanding at the end of the period
Exercisable at the end of the period

SAYE schemes
Outstanding at beginning of the period
Granted during the period
Exercised during the period
Lapsed during the period

Outstanding at the end of the period
Exercisable at the end of the period

Number of
Options

1,233,543
1,407,500
(78,632)
(65,428)

2,496,983
–

3,008,543
1,798,612
(493,083)
(268,555)

4,045,517
–

2015
Weighted
Average Exercise
Price (p)

2014
Weighted 
Average Exercise
Price (p)

Number of
Options

2p
13p
31p
9p

7p
–

37p
83p
21p
31p

59p
–

11,048,675
1,089,483
(10,240,542)
(664,073)

1,233,543
144,060

4,381,284
–
(1,174,921)
(197,820)

3,008,543
137,913

4p
–
3p
6p

2p
21p

33p
–
26p
25p

37p
29p

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86 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

Share based payments continued

27
For options outstanding at 31st December 2015, the exercise date and the exercise price are disclosed within note 26.

During the year the Group recognised total expenses of £0.6 million including associated social security costs of £0.1 million (2014: £0.4 million) in
relation to equity-settled share based payment transactions.

The average share price of Johnson Service Group PLC during the period was 82.0 pence (2014: 57.8 pence).

The aggregate gain made by Directors on the exercise of share options during the period was £nil (2014: £4,491,158). Further details are disclosed
within the Board Report on Remuneration on pages 34 to 40.

The fair value of options awarded to employees is determined by reference to option pricing models, principally Binomial models for SAYE schemes
and Monte Carlo models for all other schemes. The inputs into the Binomial and Monte Carlo models are as follows:

Weighted average share price at date of grant (pence)
Weighted average exercise price (pence)
Weighted average fair value (pence)
Expected volatility (%)
Expected life (years)
Risk free interest rate (%)
Expected dividend yield (%)

Options Granted
During 2015

Options Granted 
During 2014

87
34
41
24.8
3.4
0.8
2.4

61
–
43
23.3
3.0
1.1
2.8

Expected volatility and expected dividend yield were determined by calculating the historical volatility of the Company’s share price and the historical
dividend yield for a period akin to the expected life of each option scheme. The risk free rate of return is based on the rate for UK government gilts on
the date of grant, for a period akin to the expected life of the option.

28

Share premium

Balance brought forward
Received on allotment of shares

Balance carried forward

29

Own shares

Balance brought forward and carried forward

2015
£m

14.5
–

14.5

2015
£m

–

2014
£m

14.1
0.4

14.5

2014
£m

–

Own shares represent the cost of shares in Johnson Service Group PLC purchased in the market and held by the Trustee of the EBT, to satisfy
options under the Group’s share option schemes (see note 26).

The number of shares and the market value at the balance sheet date are as follows:

Number of shares held

Market value £m

2015

20,739

–

2014

20,739

–

166953 Johnson Service Group Annual Report Pt4_166953 Johnson Service Group Annual Report Pt4  04/03/2016  18:45  Page 87

Annual Report and Accounts 2015 Johnson Service Group PLC  87

2015
£m

10.3
(5.7)

4.6

21.2
0.5
–
1.0
(0.2)
–
0.1
(0.4)

26.8

80.0

106.8

2014
£m

8.6
(3.9)

4.7

14.4
0.4
(0.9)
(9.2)
–
1.2
(1.0)
(0.1)

9.5

70.5

80.0

30

Reconciliation of movements in shareholders’ equity

Profit for the period
Dividends

Other recognised gains and losses relating to the year:
Issue of share capital
Share options (value of employee service)
Purchase of shares by Employee Benefit Trust
Re-measurement and experience gains/(losses) (net of taxation)
Change in deferred tax due to change in tax rate
Current tax on share options
Deferred tax on share options
Cash flow hedges movement

Net addition to Shareholders’ equity

Opening Shareholders’ equity

Closing Shareholders’ equity

Business combinations

31
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:

Intangible assets – Goodwill
Intangible assets – Customer contracts
Intangible assets – Software
Property, plant and equipment
Textile rental items
Inventories
Trade and other receivables
Cash
Trade and other payables
Current income tax liability
Deferred income tax liability

Net assets
acquired
£m

Fair value
adjustments
£m

Accounting policy
realignment
£m

Fair value of 
assets acquired
£m

–
–
0.6
6.6
2.9
1.0
4.4
4.4
(4.6)
(0.7)
(0.9)

13.7

35.1
25.5
–
–
–
–
–
–
–
–
(5.1)

55.5

–
–
–
(0.3)
0.6
(0.3)
0.2
–
(0.2)
0.1
–

0.1

35.1
25.5
0.6
6.3
3.5
0.7
4.6
4.4
(4.8)
(0.6)
(6.0)

69.3

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

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.

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88 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

Business combinations continued

31
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:

Intangible assets – Goodwill
Intangible assets – Customer contracts
Property, plant and equipment
Textile rental items
Trade and other receivables
Deferred income tax asset
Trade and other payables
Loan obligations
Finance Lease obligations
Current income tax liability
Deferred income tax liability

Net assets
acquired
£m

Fair value
adjustments
£m

Accounting policy
realignment
£m

Fair value of
assets acquired
£m

–
–
1.3
0.6
2.7
0.1
(1.6)
(0.9)
(0.4)
(0.2)
–

1.6

2.2
2.4
–
–
–
–
–
–
–
–
(0.5)

4.1

–
–
–
(0.2)
–
–
–
–
–
–
–

(0.2)

2.2
2.4
1.3
0.4
2.7
0.1
(1.6)
(0.9)
(0.4)
(0.2)
(0.5)

5.5

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

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:

Consideration paid
Cash acquired
Costs in relation to business acquisition activity

2015
£m

73.7
(4.4)
1.1

70.4

2014
£m

26.7
(4.9)
0.6

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

32
There were no business disposals in the current or prior year.

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 total
consideration of £37.7 million (including £1.5 million of deferred and contingent consideration), of which £36.2 million was received at completion,
resulting in a profit on disposal of £1.1 million. Full details of the assets and liabilities disposed of are provided in the 2013 Annual Report.

At the point of disposal, the deferred and contingent consideration of £1.5 million represented £0.8 million of deferred consideration and £1.4 million
of contingent consideration less a provision of £0.7 million representing the Group’s best estimate of the contingent consideration to be received.
A further £0.4 million of provision against contingent consideration was recognised in the prior year taking the provision against contingent
consideration to a total of £1.1 million.

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Annual Report and Accounts 2015 Johnson Service Group PLC  89

Disposals and discontinued operations continued

32
The deferred consideration of £0.8 million, together with £0.2 million of the contingent consideration (£0.1 million received in 2014), has been
received in 2015.

Of the total disposal costs of £2.2 million, payments totalling £1.9 million were made in 2013. In 2015, payments of £0.1 million were made. As at
31st December 2015 there is an outstanding creditor in relation to the costs of disposal of £0.2 million. This is expected to be paid in 2016.

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

In 2014 discontinued operations includes the following items:
➔ Additional provisions of £0.3 million relating to future lease commitments on properties, along with the related taxation credit.
➔ A revision of the best estimate of the contingent consideration receivable which has resulted in a loss of £0.4 million.
➔ A tax credit of £0.6 million relating to the disposal of the Facilities Management division in 2013.

The total result relating to discontinued operations is as follows:

Operating loss before amortisation and impairment of intangible assets (excluding software amortisation)

and exceptional items

Loss before exceptional finance costs and taxation from discontinued operations
Taxation credit

Loss for the period

Pre-tax loss on disposal
Taxation credit

Gain on disposal

Retained result from discontinued operations

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

Proceeds from disposal
Payment of costs relating to disposals

Net proceeds from sale of business
Net cash used in operating activities

Net cash flow

2015
£m

–

–
–

–

–
–

–

–

2015
£m

1.0
(0.1)

0.9
(1.2)

(0.3)

2014
£m

(0.3)

(0.3)
0.1

(0.2)

(0.4)
0.6

0.2

–

2014
£m

0.1
–

0.1
(0.8)

(0.7)

Analysis of net debt

33
Net debt is calculated as total borrowings net of unamortised bank facility fees, less cash and cash equivalents. Non-cash changes represent the
effects of the recognition and subsequent amortisation of fees relating to the bank facility, changing maturity profiles, debt acquired as part of an
acquisition and new finance leases entered into during the year.

December 2015

Cash and cash equivalents
(per Consolidated Statement of Cash Flows)
Debt due within one year
Debt due after more than one year
Finance leases

At 1st January
2015
£m

(4.9)
(0.8)
(19.7)
(3.1)

(28.5)

Cash Flow
£m

0.5
0.3
(39.0)
1.6

(36.6)

Non-cash
Changes
£m

At 31st December
2015
£m

–
(0.8)
0.2
(5.5)

(6.1)

(4.4)
(1.3)
(58.5)
(7.0)

(71.2)

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90 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

Analysis of net debt continued

33
December 2014

Cash and cash equivalents
(per Consolidated Statement of Cash Flows)
Debt due within one year
Debt due after more than one year
Finance leases

34

Reconciliation of net cash flow to movement in net debt

Increase / (decrease) in cash (per the Consolidated Statement of Cash Flows)
Cash (outflow) / inflow on change in debt and lease financing

Change in net debt resulting from cash flows
Debt acquired through business acquisition
Movement in unamortised bank facility fees
New finance leases

Movement in net debt
Opening net debt

Closing net debt

At 1st January
2014
£m

Cash Flow
£m

Non-cash
Changes
£m

At 31st December
2014
£m

3.4
–
(25.0)
(2.9)

(24.5)

(8.3)
(1.0)
5.0
0.8

(3.5)

–
0.2
0.3
(1.0)

(0.5)

2015
£m

0.5
(37.1)

(36.6)
(0.9)
0.3
(5.5)

(42.7)
(28.5)

(71.2)

Financial commitments

35
Capital expenditure
Contracts placed for future financial expenditure contracted but not provided for in the consolidated financial statements are shown below:

Property, plant and equipment

Revenue expenditure
Total future minimum lease payments under non-cancellable operating leases are as follows:

Land and buildings
– within one year
– between two and five years
– in five years or more

Plant and machinery
– within one year
– between two and five years

2015
£m

0.6

2015
£m

9.2
27.6
29.0

65.8

1.8
1.7

3.5

The total of future minimum sublease payments to be received under non-cancellable leases at the balance sheet date is £2.4 million (2014:
£3.2 million).

(4.9)
(0.8)
(19.7)
(3.1)

(28.5)

2014
£m

(8.3)
4.8

(3.5)
–
0.5
(1.0)

(4.0)
(24.5)

(28.5)

2014
£m

1.5

2014
£m

10.0
25.4
24.8

60.2

1.9
2.3

4.2

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Annual Report and Accounts 2015 Johnson Service Group PLC  91

Events after the reporting period

36
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
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.

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92 Johnson Service Group PLC  Annual Report and Accounts 2015

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF
JOHNSON SERVICE GROUP PLC

Report on the Company financial statements
Our opinion
In our opinion, Johnson Service Group PLC’s Company financial statements (the ‘financial statements’):
➔ give a true and fair view of the state of the Company’s affairs as at 31st December 2015 and of its cash flows for the year then ended;
➔ have been properly prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted by the European Union and as

applied in accordance with the provisions of the Companies Act 2006; and

➔ have been prepared in accordance with the requirements of the Companies Act 2006.
What we have audited
The financial statements, included within the Annual Report, comprise:
➔ the Company Balance Sheet as at 31st December 2015;
➔ the Company Statement of Changes in Shareholders Equity for the year then ended;
➔ the Company Statement of Cash Flows for the year then ended; and
➔ the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.

Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial statements. These are
cross-referenced from the financial statements and are identified as audited.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and IFRSs as adopted by the
European Union and as applied in accordance with the provisions of the Companies Act 2006.

Other required reporting
Consistency of other information
Companies Act 2006 opinion
In our opinion, the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements.

ISAs (UK & Ireland) reporting
The directors have chosen to voluntarily comply with the UK Corporate Governance Code (the ‘Code’) as if the company were a premium listed
company. Under International Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’) we are required to report to you if, in our opinion,
information in the Annual Report is:
➔ materially inconsistent with the information in the audited financial statements; or
➔ apparently materially incorrect based on, or materially inconsistent with, our knowledge of the company acquired in the course of performing our

audit; or

➔ otherwise misleading.

We have no exceptions to report arising from this responsibility.

Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:
➔ we have not received all the information and explanations we require for our audit; or
➔ adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not

visited by us; or

➔ the financial statements are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Directors’ remuneration
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified by law are
not made. We have no exceptions to report arising from this responsibility.

Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those
standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of
the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to
any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

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Annual Report and Accounts 2014 Johnson Service Group PLC  93

What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by
fraud or error. This includes an assessment of:
➔ whether the accounting policies are appropriate to the company’s circumstances and have been consistently applied and adequately disclosed;
➔ the reasonableness of significant accounting estimates made by the directors; and
➔ the overall presentation of the financial statements.

We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own judgements, and
evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for
us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial
statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by
us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications
for our report.

Other matter
We have reported separately on the Group financial statements of Johnson Service Group PLC for the year ended 31st December 2015.

Graham Parsons (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester
1st March 2016

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94 Johnson Service Group PLC  Annual Report and Accounts 2015

COMPANY BALANCE SHEET

Assets
Non-current assets
Property, plant and equipment
Trade and other receivables
Deferred income tax assets
Investments

Current assets
Trade and other receivables
Current income tax assets
Cash and cash equivalents

Liabilities
Current liabilities
Trade and other payables
Borrowings
Derivative financial liabilities

Net current liabilities

Non-current liabilities
Post-employment benefit obligations
Trade and other payables
Borrowings
Derivative financial liabilities

Net assets

Equity
Capital and reserves attributable to the company’s shareholders
Share capital
Share premium
Merger reserve
Capital redemption reserve
Hedge reserve
Retained earnings

Total Shareholders equity

Note

2
5
3
4

5

6
7
10

8
9
7
10

12
13

As at
31 December
2015
£m

As at
31 December
2014
£m

–
113.7
3.7
510.9

628.3

3.0
1.5
–

4.5

3.6
10.3
0.3

14.2

(9.7)

16.0
429.6
58.5
0.6

504.7

113.9

33.1
14.5
3.5
0.6
(0.8)
63.0

113.9

–
45.1
4.3
436.0

485.4

0.9
1.2
–

2.1

4.1
7.9
–

12.0

(9.9)

18.5
343.2
19.7
0.4

381.8

93.7

30.0
14.5
3.5
0.6
(0.4)
45.5

93.7

The financial statements on pages 94 to 104 were approved by the Board of Directors on 1st March 2016 and signed on its behalf by:

Yvonne Monaghan
Chief Financial Officer

166953 Johnson Service Group Annual Report Pt5_166953 Johnson Service Group Annual Report Pt5  04/03/2016  18:47  Page 95

COMPANY STATEMENT OF COMPREHENSIVE INCOME

Annual Report and Accounts 2015 Johnson Service Group PLC  95

Year ended
31 December
2015
£m

Year ended
31 December
2014
£m

Profit for the year

Items that will not be subsequently reclassified to profit or loss
Re-measurement and experience gains/(losses) on post-employment obligations
Taxation in respect of re-measurement and experience (gains)/losses
Change in deferred tax due to change in tax rate
Items that may be subsequently reclassified to profit or loss
Cash flow hedges (net of taxation) – fair value losses

– transfers to administrative cost
– transfers to finance cost

Other comprehensive income/(loss) for the year

Total comprehensive income for the year

3.8

1.2
(0.2)
(0.2)

(1.0)
0.3
0.3

0.4

4.2

COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

Balance at 1st January 2014
Profit for the year
Other comprehensive loss

Total comprehensive (loss)/income for the year

Share options (value of employee services)
Purchase of shares by Employee Benefit Trust
Current tax on share options
Deferred tax on share options
Issue of share capital
Dividends paid

Transactions with Shareholders recognised directly

in Shareholders’ Equity

Balance at 31st December 2014

Balance at 1st January 2015
Profit for the year
Other comprehensive (loss)/income

Total comprehensive (loss)/income for the year

Share options (value of employee services)
Issue of share capital
Dividends paid

Transactions with Shareholders recognised directly

in Shareholders’ Equity

Balance at 31st December 2015

Share
Capital
£m

26.2
–
–

–

–
–
–
–
3.8
–

3.8

30.0

30.0
–
–

–

–
3.1
–

3.1

33.1

Share
Premium
£m

14.1
–
–

–

–
–
–
–
0.4
–

0.4

14.5

14.5
–
–

–

–
–
–

–

Merger
Reserve
£m

3.5
–
–

–

–
–
–
–
–
–

–

3.5

3.5
–
–

–

–
–
–

–

Capital
Redemption
Reserve
£m

0.6
–
–

–

–
–
–
–
–
–

–

0.6

0.6
–
–

–

–
–
–

–

Hedge
Reserve
£m

(0.3)
–
(0.1)

(0.1)

–
–
–
–
–
–

–

(0.4)

(0.4)
–
(0.4)

(0.4)

–
–
–

–

14.5

3.5

0.6

(0.8)

Retained
Earnings
£m

35.0
13.7
(9.2)

4.5

0.4
(0.9)
1.1
(0.9)
10.2
(3.9)

6.0

45.5

45.5
3.8
0.8

4.6

0.5
18.1
(5.7)

12.8

63.0

13.7

(11.5)
2.3
–

(0.4)
–
0.3

(9.3)

4.4

Total
Equity
£m

79.1
13.7
(9.3)

4.4

0.4
(0.9)
1.1
(0.9)
14.4
(3.9)

10.2

93.7

93.7
3.8
0.4

4.2

0.5
21.2
(5.7)

16.0

113.9

All of the Retained Earnings reserve is considered to be distributable as at 31st December 2015 subject to the offset of the Hedge Reserve (2014:
all distributable subject to the offset of the hedge reserve).

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96 Johnson Service Group PLC  Annual Report and Accounts 2015

COMPANY STATEMENT OF CASH FLOWS

Cash flows from operating activities
Profit for the year
Adjustments for:

Income tax credit
Total finance cost
Dividend income
Increase in trade and other receivables
Decrease in trade and other payables
Increase in amounts due from subsidiary companies
Investment impairment
Intercompany loans waived
Loss on disposal of investments
Costs in relation to business acquisition activity
Deficit recovery payments in respect of post-employment benefit obligations
Share-based payments
Post-employment benefit obligations

Cash used in operations
Interest paid
Taxation (paid)/received

Net cash used in operating activities

Cash flows from investing activities
Acquisition of business (net of cash acquired)
Proceeds from sale of subsidiary
Dividends received
Interest received
Loans advanced to subsidiary companies

Net cash used in investing activities

Cash flows from financing activities
Loans received from subsidiary companies
Proceeds from borrowings
Repayments of borrowings
Net proceeds from issue of Ordinary shares
Purchase of own shares by EBT
Dividend paid

Net cash generated from financing activities

Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Year ended
31 December
2015
£m

Year ended
31 December
2014
£m

Note

3.8

(0.8)
2.6
(10.0)
(0.4)
(0.6)
(0.5)
–
–
–
1.1
(1.9)
0.4
(0.1)

(6.4)
(2.3)
(2.1)

(10.8)

(74.5)
0.9
10.0
2.3
(9.6)

(70.9)

24.8
93.0
(53.5)
21.2
–
(5.7)

79.8

(1.9)
(7.1)

(9.0)

13.7

(2.7)
2.8
(31.3)
–
(0.7)
(0.2)
60.8
(52.6)
0.4
0.6
(2.0)
0.3
4.6

(6.3)
(2.3)
0.1

(8.5)

(27.3)
0.1
31.3
1.1
(29.2)

(24.0)

19.3
66.0
(70.0)
14.4
(0.9)
(3.9)

24.9

(7.6)
0.5

(7.1)

15

Cash and cash equivalents at the end of the period include cash of £nil and an overdraft of £9.0 million (2014: £nil and £7.1 million respectively).

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Annual Report and Accounts 2015 Johnson Service Group PLC  97

COMPANY STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

The Company is incorporated and domiciled in the UK. The Company’s registered number is 523335. The address of its registered office is Johnson
House, Abbots Park, Monks Way, Preston Brook, Cheshire, WA7 3GH.

The Company is a public limited company and has its primary listing on the AIM division of the London Stock Exchange.

The Company financial statements were authorised for issue by the Board on 1st March 2016.

Basis of preparation
The principal accounting policies applied in the preparation of the Company Financial Statements are the same as those used in the Consolidated
Financial Statements as set out on pages 51 to 59 with the addition of the policies set out below. These policies have been consistently applied to
the information presented, unless otherwise stated.

Investments
Investments in Group Undertakings are recorded at cost, which is the fair value of the consideration paid. Investments are tested for impairment and
carried at cost less accumulated impairment losses. Where an impairment is identified, it is charged to the Income Statement within intangibles
amortisation and impairment (excluding software). Investments that suffered an impairment are reviewed for possible reversal of the impairment at
each reporting date.

Share based compensation
The Company operates a number of equity-settled, share based compensation plans. The economic cost of awarding shares and share options to
employees is recognised as an expense in the employing company’s Income Statement equivalent to the fair value of the benefit awarded. The fair
value is determined by reference to option pricing models, principally Binomial and Monte Carlo models. The fair value of the award is recognised in
the employing company’s Income Statement over the vesting period of the award. The grant by the Company of options over its equity instruments to
the employees of the subsidiary undertakings is treated as a capital contribution. The fair value of employee services received, measured by
reference to the grant date fair value, is recognised over the vesting period as an increase to the investment in that subsidiary undertaking, with a
corresponding credit to equity in the Company’s accounts.

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98 Johnson Service Group PLC  Annual Report and Accounts 2015
98 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE COMPANY FINANCIAL STATEMENTS

Company income statement

1
As permitted by Section 408(3) of the Companies Act 2006, the Income Statement of the Parent Company is not presented with these financial
statements. The retained profit of the Parent Company is shown in note 14. Details of dividends paid are included in note 10 of the consolidated
financial statements.

2

Property, plant and equipment

Cost
At 31st December 2013, 2014 & 2015

Accumulated depreciation and impairment
At 31st December 2013

Charged in the year

At 31st December 2014

Charged in the year

At 31st December 2015

Carrying Amount
At 31st December 2013

At 31st December 2014 & 2015

There were £nil assets under construction at 31st December 2015 (2014: £nil).

Deferred tax

3
Deferred income tax assets attributable to the Company are as follows:

Deferred income tax balances in respect of:

Depreciation in excess of capital allowances
Post-employment benefit obligations
Derivative financial instruments
Employee share schemes
Other short term timing differences

2015
£m

0.1
3.0
0.2
0.2
0.2

3.7

The following provides a reconciliation of the movement in each of the deferred income tax assets:

Depreciation in
Excess of
Capital Allowances
£m

Post-employment
Benefit
Obligations
£m

Derivative
Financial
Instruments
£m

Employee
Share
Schemes
£m

Other
Short Term
Timing Differences
£m

At 31st December 2013

(Charge)/credit to income
Credit to other comprehensive income
Charge to shareholders’ equity

At 31st December 2014

(Charge)/credit to income
(Charge)/credit to other comprehensive income

At 31st December 2015

0.2

–
–
–

0.2

(0.1)
–

0.1

0.9

0.5
2.3
–

3.7

(0.3)
(0.4)

3.0

0.1

–
–
–

0.1

–
0.1

0.2

0.9

–
–
(0.9)

–

0.2
–

0.2

–

0.3
–
–

0.3

(0.1)
–

0.2

Plant
And
Equipment
£m

0.3

0.2

0.1

0.3

–

0.3

0.1

–

2014
£m

0.2
3.7
0.1
–
0.3

4.3

Total
£m

2.1

0.8
2.3
(0.9)

4.3

(0.3)
(0.3)

3.7

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.

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Annual Report and Accounts 2015 Johnson Service Group PLC  99
Annual Report and Accounts 2015 Johnson Service Group PLC  99

Deferred tax continued

3
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 balances as at 31st December 2015. The impact of the change in tax rates to 19% has been £nil
credit in the Income Statement and a £0.2 million credit recognised directly in Shareholders’ equity.

It is estimated that £0.3 million of the deferred tax balances will unwind in the next 12 months.

4

Investments

Investment in subsidiary undertakings

Cost
Brought forward
Additions
Movement relating to share options
Disposal

Carried forward

Accumulated impairment
Brought forward
Impairment
Disposal

Carried forward

Carrying amount
Opening

Closing

2015
£m

506.9
74.8
0.1
(60.9)

520.9

70.9
–
(60.9)

10.0

436.0

510.9

2014
£m

480.1
26.7
0.1
–

506.9

10.1
60.8
–

70.9

470.0

436.0

Particulars of subsidiary undertakings are shown in note 20.

During the year the Company acquired London Linen Supply Limited for a cost of £69.3 million and Ashbon Services Limited for £5.5 million. Details
of these acquisitions are shown in note 31 of the Consolidated Financial Statements. In addition, investments in a number of non-trading companies,
which were fully impaired, were disposed of in the year, with a net impact on the Income Statement of £nil.

During the prior year the Company acquired Bourne Services Group Limited for a cost of £26.7 million. Details of this acquisition are shown in note
31 of the Consolidated Financial Statements. In addition, investments in a number of non-trading companies were impaired following the cancellation
of the intercompany payable, due from the company relating to those companies, with a net impact on the Income Statement of £nil.

The Directors deem the investments to be recoverable based on the future forecasts of the Group.

5

Trade and other receivables

Amounts falling due within one year:
Receivables from subsidiaries
Other receivables
Prepayments and accrued income

Amounts falling due after more than one year:
Other receivables
Receivables from subsidiaries

2015
£m

0.3
2.4
0.3

3.0

–
113.7

113.7

2014
£m

0.1
0.7
0.1

0.9

2.6
42.5

45.1

Amounts owed by subsidiaries due within one year relate to invoiced services and are due according to the invoice terms.

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100 Johnson Service Group PLC  Annual Report and Accounts 2015
100 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED

Trade and other receivables continued

5
Amounts owed by subsidiaries due after more than one year, are unsecured and have no fixed date of repayment and the Company has no intention
of demanding repayment in less than 12 months and therefore the amounts have been presented as non current assets. The Directors have
considered the difference between the book value and fair value of the amounts receivable to subsidiaries. Taking into account the one year risk free
rate of return of 0.37%, as at the balance sheet date, the fair value of amounts receivable from subsidiaries would be circa £110.6 million.

Other receivables which are less than three months past due are not considered impaired unless specific information indicates otherwise. Trade and
other receivables greater than three months past due are considered for recoverability, and where appropriate, a provision against bad debt is
recognised.

All Company receivables (including those from related parties) are not yet due or impaired.

All receivable balances at the balance sheet date are denominated in Sterling (2014: Sterling), and are held at amortised cost. Given their short term
nature there is deemed to be no difference between this and their fair value.

6

Trade and other payables

Trade payables
Other payables
Other taxation and social security liabilities
Accruals

2015
£m

0.1
1.8
0.2
1.5

3.6

All trade and other payable balances at the balance sheet date are denominated in Sterling (2014: Sterling), and are held at amortised cost. Given
their short term nature there is deemed to be no difference between this and their fair value.

7

Borrowings

Current
Overdraft
Bank loans

Non-current
Bank loans

The maturity of non-current bank loans is as follows:
– Between one and two years
– Between two and five years
– Unamortised issue costs of bank loans

2015
£m

9.0
1.3

10.3

58.5

68.8

–
59.0
(0.5)

58.5

All Group bank loans are held by the Company. Full details of Group facilities are provided in note 20 of the consolidated financial statements.

The Group has two overdraft facilities for £5.0 million and £3.0 million with two of its principal bankers (2014: £5.0 million and £3.0 million). Certain
cash balances in certain Group bank accounts can be offset with overdrawn balances in those bank accounts. The maximum amount any individual
Company may be overdrawn is £10.0 million and £5.0 million respectively (2014: £10.0 million and £5.0 million).

Post-employment benefit obligations

8
Details of the Group’s pension schemes are provided in note 23 of the consolidated financial statements.

As at the 31st December 2015 and 31st December 2014 the entire Group liabilities under defined benefit schemes are held on the Company
Balance Sheet.

During the year the Company’s cost of defined contribution pension schemes was £0.1 million (2014: £0.1 million).

2014
£m

0.5
1.8
0.2
1.6

4.1

2014
£m

7.1
0.8

7.9

19.7

27.6

–
20.0
(0.3)

19.7

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Annual Report and Accounts 2015 Johnson Service Group PLC  101

9

Trade and other payables (non-current)

Deferred consideration
Payables to subsidiaries

2015
£m

0.9
428.7

429.6

2014
£m

–
343.2

343.2

Amounts payable to subsidiaries are unsecured, have no fixed date of repayment and the Company has no expectation of repayment in the next
12 months and therefore the amounts have been presented as non current liabilities. The Directors have considered the difference between the book
value and fair value of the amounts payable to subsidiaries. Taking into account the one year risk free rate of return of 0.37%, as at the balance sheet
date, the fair value of amounts payable to subsidiaries would be circa £427.1 million.

Derivative financial liabilities

10
Details of derivative financial liabilities are shown in note 24 of the consolidated financial statements. All of the Group’s derivative financial liabilities are
held by the Company.

Contingent liabilities

11
The Company has guaranteed the banking facilities of certain UK subsidiary undertakings under a cross guarantee arrangement. No losses are
expected to result from this arrangement.

The Company has entered into 30 Rent Deposit Deeds for up to £1.7 million guaranteeing the payment of rent by its subsidiary undertaking, Johnson
Cleaners UK Limited, on specified properties included in a sale and leaseback transaction in June 2006. The guaranteed amount began to amortise
from December 2013 and expires in June 2016. No loss is expected to result from this arrangement.

During the period of ownership of the Facilities Management division the Company had given guarantees over the performance of contracts entered
into by the division. As part of the disposal of the division the purchaser has agreed to pursue the release or transfer of obligations under the Parent
Company guarantees and this is in process. The Sale and Purchase agreement contains an indemnity from the purchaser to cover any loss in the
event a claim is made prior to release. In the period until release the purchaser is to make a payment of £0.2 million per annum, reduced pro rata as
guarantees are released. Such liabilities are not expected to give rise to any significant loss.

As a condition of the sale of the Facilities Management division in August 2013, the Company has put in place indemnities, to the buyer, in relation to
any future amounts payable in respect of contingent consideration related to the Nickleby acquisition completed in February 2012. As set out in the
2012 Annual Report and Accounts the maximum amount payable under the terms of the indemnity could be up to £5.0 million. The Directors believe
the risk of settlement at, or near, the maximum level to be remote.

12

Called-up share capital

Authorised

383,025,739 (2014: 383,025,739) Ordinary shares of 10p each

Issued and Fully Paid

Ordinary shares of 10p each:
At start of period
New shares issued

At end of period

2015
£m

38.3

Shares

2015
£m

Shares

299,985,593
30,584,430

330,570,023

30.0
3.1

33.1

262,326,451
37,659,142

299,985,593

2014
£m

38.3

2014
£m

26.2
3.8

30.0

Full details relating to the issue of Ordinary shares in the year are shown in note 26 of the consolidated financial statements.

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102 Johnson Service Group PLC  Annual Report and Accounts 2015
102 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED

13

Share premium

Balance brought forward
Received on allotment of shares

Balance carried forward

14

Reconciliation of movements in shareholders’ funds

Profit for the year
Dividends

Other recognised gains and losses relating to the year:
Issue of share capital
Share option (value of employee services)
Purchase of shares by EBT
Re-measurement and experience gains / (losses) (net of taxation)
Change in deferred tax due to change in tax rate
Current tax on share options
Deferred tax on share options
Cash flow hedges movement

Net addition to Shareholders’ equity

Opening Shareholders’ equity

Closing Shareholders’ equity

2015
£m

14.5
–

14.5

2015
£m

3.8
(5.7)

(1.9)

21.2
0.5
–
1.0
(0.2)
–
–
(0.4)

20.2

93.7

113.9

2014
£m

14.1
0.4

14.5

2014
£m

13.7
(3.9)

9.8

14.4
0.4
(0.9)
(9.2)
–
1.1
(0.9)
(0.1)

14.6

79.1

93.7

Analysis of net debt

15
Net debt is calculated as total borrowings less cash and cash equivalents, less unamortised facility fees. Non-cash changes represent the effects of
the recognition and subsequent amortisation of issue costs relating to the bank facility and changing maturity profiles.

December 2015

Cash and cash equivalents (per Company Statement of Cash Flows)
Debt due within one year
Debt due after more than one year

December 2014

Cash and cash equivalents (per Company Statement of Cash Flows)
Debt due within one year
Debt due after more than one year

At 1st January
2015
£m

(7.1)
(0.8)
(19.7)

(27.6)

At 1st January
2014
£m

0.5
–
(25.0)

(24.5)

Cash Flow
£m

(1.9)
(0.5)
(39.0)

(41.4)

Cash Flow
£m

(7.6)
(1.0)
5.0

(3.6)

Other
Non-cash
Changes
£m

–
–
0.2

0.2

Other
Non-cash
Changes
£m

–
0.2
0.3

0.5

At 31st December
2015
£m

(9.0)
(1.3)
(58.5)

(68.8)

At 31st December
2014
£m

(7.1)
(0.8)
(19.7)

(27.6)

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Annual Report and Accounts 2015 Johnson Service Group PLC  103

16

Reconciliation of net cash flow to movement in net debt

(Decrease)/Increase in cash in year (per Company Statement of Cash Flows)
Cash outflow on change in debt and lease financing

Change in net debt resulting from cash flows
Movement in unamortised bank facility fees

Movement in net debt in year
Opening net debt

Closing net debt

2015
£m

(1.9)
(39.5)

(41.4)
0.2

(41.2)
(27.6)

(68.8)

2014
£m

(7.6)
4.0

(3.6)
0.5

(3.1)
(24.5)

(27.6)

Financial commitments

17
Capital expenditure
As at 31st December 2015 the Company had no contracts placed for future capital expenditure that were not provided for in the financial statements
(2014: £nil).

Revenue expenditure
Total future minimum lease payments under non-cancellable operating leases are as follows:

Land and buildings
– within one year
– between two and five years

Plant and machinery
– within one year

2015
£m

0.1
0.4

0.5

0.1

0.1

Related party transactions

18
Transactions during the year between the Company and its subsidiaries, which are related parties, are eliminated on consolidation.

The following significant transactions with subsidiary undertakings occurred in the year:

Intercompany loans payable waived
Dividends received
Interest received
Interest paid

2015
£m

–
10.0
2.2
(2.4)

9.8

2014
£m

0.1
0.4

0.5

0.1

0.1

2014
£m

52.6
31.3
1.0
(2.3)

82.6

The key management of the Company are considered to be only the Directors of the Company and details of their compensation is provided in the
Board Report on Remuneration. The Company did not enter into any form of loan arrangement with any Director during any of the years presented.

Events after the reporting period

19
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) Ltd 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. See
note 36 of the Consolidated Financial Statements for further details.

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104 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED

Subsidiaries

20
The company has a number of subsidiary companies a list of which is shown below.

Subsidiary companies at the balance sheet date

Johnsons Apparelmaster Limited *
Johnson Cleaners UK Limited *
Jeeves of Belgravia Limited
Jeeves International Limited *
Johnson Group Properties PLC
Semara Estates Limited *
Johnson Investment Limited
Johnson Group Inc (UK) Limited
Semara Group Limited*
Semara Investments Limited*
Semara Contract Services Limited*
Ashbon Services Limited
Bentley Textile Services Limited*
Bright Clothing Limited*
Bourne Service Group Limited
Bourne Textile Services Limited*
Caterers Linen Supply Limited*
Catering Linen Supply Limited*
Clifton Cleaning Limited
ELT Uniforms Limited*
Fresh Water Linen Services Limited*
Greaseaters Limited*
Greenearth Cleaning Europe Limited
Greenearth Cleaning Limited
Johnson Group Cleaners Limited
Johnson Group Cleaners Properties Limited
Johnson Group Cleaners Trustee Company (no 1) Limited
Johnson Group Cleaners Trustee Company (no 2) Limited
Johnson Group Management Services Limited
Johnson Group Pension Nominees Limited
Johnson Hospitality Services Limited
Johnson Sketchley Limited*
JSG PLC*
Lilliman & Cox Limited*
London Linen Management Services Limited*
London Linen Supply Limited
London Workwear Rental Limited*
Oxford Software Limited*
Quality Cleaners Limited*
Quality Shirt Services Limited*
Quality Textile Services Limited
Semara Limited*
Semara Nominees Limited*
Semara Trustees Limited*
Stalbridge Linen Services Limited
Stuarts Express Dyers and Cleaners Limited*
Subco 21 Limited
Tothills Dry Cleaning Limited*
Warrander Aircraft Services Limited*
Wintex UK Limited
Workplace Direct Limited

Principal Activity

Textile and linen rental
Drycleaning
Drycleaning
Drycleaning franchises
Property holding
Property holding
Holding company
Holding company
Holding company
Holding company
Holding company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company

Johnson Service Group PLC owns directly or indirectly the entire share capital of each of these companies. The share capital of the companies
annotated * are held through intermediate holding companies. All companies above are incorporated in Great Britain and registered in England.

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Annual Report and Accounts 2015 Johnson Service Group PLC  105

FINANCIAL CALENDAR

Results for the year
Announced in March 2016

Results for the half year
Announced in September 2016

Annual General Meeting
To be held on 5th May 2016

Dividend payment dates
Interim 2015
Proposed Final 2015
Interim 2016

6th November 2015
13th May 2016
November 2016

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106 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTICE OF ANNUAL GENERAL MEETING

Company Number: 00523335

This Document is important and requires your immediate attention. If
you are in any doubt as to any aspect of the contents of this Document
or the action you should take you are recommended to immediately
consult your stockbroker, solicitor, accountant or other independent
adviser authorised under the Financial Services and Markets Act 2000
if you are resident in the United Kingdom or, if you reside elsewhere,
another appropriately authorised financial adviser.

If you have sold or otherwise transferred all of your shares in Johnson
Service Group PLC (‘JSG’ or the ‘Company’), please pass this
document together with the accompanying proxy form as soon as
possible to the purchaser or transferee, or to the person who arranged
the sale or transfer so they can pass these documents to the person
who now holds the shares.

NOTICE is hereby given that the Annual General Meeting of Johnson
Service Group PLC will be held at the Doubletree by Hilton Chester,
Warrington Road, Hoole, Chester, CH2 3PD on Thursday 5th May 2016
at 11am to transact the business set out in the Resolutions below.

Resolutions 1 to 10 (inclusive) and 12 will be proposed as Ordinary
Resolutions and Resolutions 11, 13 and 14 will be proposed as Special
Resolutions.

8. To elect Mr. N. Gregg, who joined the Board on 1st January 2016

and, in accordance with Section B.7.1 of the UK Corporate
Governance Code and whom, being eligible, offers himself for
election as a Director.

9. To re-appoint PricewaterhouseCoopers LLP as auditor to the

Company until the conclusion of the next general meeting at which
accounts are laid before the Company.

10.To authorise the Audit Committee to determine the remuneration of

the auditor.

Special Business
11.To consider and, if thought fit, pass the following resolution which will

be proposed as a Special Resolution:

“That the articles of association of the Company be and are hereby
amended by the deletion of:

(i) article 3 (authorised share capital);

(ii) paragraph (a)(i) of article 9 (power to increase, consolidate,

sub-divide and cancel shares); and

(iii) the limit on the maximum number of shares which the Company
may issue imposed as a result of the authorised share capital of
the Company on 1 October 2009 being treated, by virtue of
section 28 of the Companies Act 2006, as a provision of the
Company’s articles of association with effect from 1 October
2009.”

The business of the meeting will be:

12.To consider and, if thought fit, pass the following resolution which will

Ordinary Business
To consider and, if thought fit, pass the following resolutions which will be
proposed as Ordinary Resolutions:

1. To receive and adopt the financial statements for the year ended

31st December 2015 together with the reports of the Directors and
the auditor on those financial statements.

2. To approve the Board Report on Remuneration as set out on

pages 34 to 40 of the 2015 Annual Report.

3. To confirm the payment of the interim dividend of 0.65 pence per
Ordinary Share and to declare a final dividend of 1.45 pence per
Ordinary Share for the year ended 31st December 2015.

4. To re-elect Mr. P. Moody, who retires in accordance with Section B.7.1
of the UK Corporate Governance Code and whom, being eligible,
offers himself for re-election as a Director.

5. To re-elect Mr. C. Sander, who retires in accordance with Section
B.7.1 of the UK Corporate Governance Code and whom, being
eligible, offers himself for re-election as a Director.

6. To re-elect Mrs. Y. Monaghan, who retires in accordance with Section

B.7.1 of the UK Corporate Governance Code and whom, being
eligible, offers herself for re-election as a Director.

7. To re-elect Mr. W. Shannon, who retires in accordance with Section
B.7.1 of the UK Corporate Governance Code and whom, being
eligible, offers himself for re-election as a Director.

be proposed as an Ordinary Resolution:

“That, subject to and conditional upon the passing of the Special
Resolution numbered 11 in this notice of Annual General Meeting of
the Company and in substitution for all existing and unexercised
authorities and powers, the Directors of the Company be and they are
hereby generally and unconditionally authorised for the purposes of
section 551 of the Companies Act 2006 to exercise all powers of the
Company to allot equity securities (as defined in section 560 of the
Companies Act 2006) (“Equity Securities”) to such persons at such
times and on such terms and conditions as the Directors may
determine and subject always to the Articles of Association, provided
that the aggregate of the nominal amount of such Equity Securities
that may be allotted under this authority shall not exceed
£11,020,514.

In the event that Special Resolution numbered 11 in this notice of
Annual General Meeting of the Company is not passed and in
substitution for all existing and unexercised authorities and powers,
the Directors of the Company be and they are hereby generally and
unconditionally authorised for the purposes of section 551 of the
Companies Act 2006 to exercise all powers of the Company to allot
equity securities (as defined in section 560 of the Companies Act
2006) (“Equity Securities”) to such persons at such times and on
such terms and conditions as the Directors may determine and
subject always to the Articles of Association, provided that the
aggregate of the nominal amount of such Equity Securities that may
be allotted under this authority shall not exceed £5,241,033.

This authority shall, unless previously renewed, varied or revoked by
the Company in general meeting, expire at the conclusion of the next

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Annual General Meeting of the Company to be held after the passing
of this resolution or, if earlier, on 1st July 2017, save that the Directors
of the Company may, before such expiry make an offer or agreement
which would or might require Equity Securities to be allotted after
such expiry and the Directors of the Company may allot Equity
Securities in pursuance of any such offer or agreement as if the
authority conferred hereby had not expired.

All unutilised authorities previously granted to the Directors of the
Company under section 551 of the Companies Act 2006 shall cease
to have effect at the conclusion of the Annual General Meeting (save
to the extent that the same are exercisable pursuant to section
551(7) of the Companies Act 2006 by reason of any offer or
agreement made prior to the date of this resolution which would or
might require equity securities to be allotted on or after that date).”

14.To consider and, if thought fit, pass the following resolution which will

be proposed as a Special Resolution:

“That, in accordance with article 11 of the Articles of Association and
in accordance with the Companies Act 2006, the Directors of the
Company be and are hereby generally and unconditionally authorised
for the purposes of section 701 of the Companies Act 2006 to make
market purchases (within the meaning of section 693(4) of the
Companies Act 2006) of ordinary shares of 10 pence each in the
capital of the Company (“Ordinary Shares”) on such terms and in
such manner as the Directors of the Company may from time to time
determine, provided that:

(i) the maximum number of Ordinary Shares that may be purchased

under this authority is 33,061,541;

13.To consider and, if thought fit, pass the following resolution which will

(ii) the minimum price which may be paid for an Ordinary Share is

be proposed as a Special Resolution:

“That, subject to and conditional upon the passing of the Ordinary
Resolution numbered 12 in this notice of Annual General Meeting of
the Company and in substitution for all existing and unexercised
authorities and powers, the Directors of the Company be and are
hereby generally and unconditionally empowered pursuant to section
570 of the Companies Act 2006 to allot Equity Securities pursuant to
the authority conferred upon them by Ordinary Resolution numbered
12 in this notice of Annual General Meeting of the Company as if
section 561 of the Companies Act 2006 did not apply to any such
allotment of Equity Securities, provided that this power shall be limited
to:

(i) the allotment of Equity Securities in connection with a rights issue
or similar offer to or in favour of ordinary shareholders where the
Equity Securities respectively attributable to the interests of all
ordinary shareholders are proportionate (as nearly as may be) to
the respective numbers of shares held by them on that date
provided that the Directors of the Company may make such
exclusions or other arrangements to deal with any legal or
practical problems under the laws of any territory or the
requirement of any regulatory body or any stock exchange or with
fractional entitlements as they consider necessary or expedient;
and

(ii) the allotment (otherwise than pursuant to sub paragraph (i) above)

of Equity Securities pursuant to the authority granted under
Ordinary Resolution 12 in this notice of Annual General Meeting
up to an aggregate nominal amount of £1,653,077 (representing
approximately 5% of the Company’s share capital as at
29th February 2016).

This power shall expire at the conclusion of the next Annual General
Meeting of the Company to be held after the passing of this
resolution or, if earlier, on 1st July 2017, unless previously renewed,
varied or revoked by the Company in general meeting, save that the
Company may before such expiry make any offer or enter into any
agreement which would or might require Equity Securities to be
allotted after such expiry and the Directors of the Company may allot
Equity Securities in pursuance of any such offer or agreement as if
the power conferred hereby had not expired. All previous authorities
under Section 571 of the Companies Act 2006 shall cease to have
effect at the conclusion of the Annual General Meeting.”

10p exclusive of attributable expenses payable by the Company
(if any); and

(iii) the maximum price which may be paid for an Ordinary Share is an

amount equal to not more than 105% of the average of the
middle market quotations for the Ordinary Shares as derived from
the London Stock Exchange Daily Official List for the five
business days immediately preceding the day on which the
purchase is made exclusive of attributable expenses payable by
the Company (if any).

The authority hereby conferred shall, unless previously revoked or
varied, expire at the conclusion of the next Annual General Meeting
of the Company held after the passing of this resolution or, if earlier,
on 1st July 2017 save in relation to purchases of Ordinary Shares the
contract for which was concluded before the expiry of this authority
and which will or may be executed wholly or partly after such expiry,
where the Company may make a purchase of Ordinary Shares in
pursuance of any such contract.

All previous unutilised authorities for the Company to make market
purchases of Ordinary Shares are revoked, except in relation to the
purchase of shares under a contract or contracts concluded before
the date of this resolution and where such purchase has not yet been
executed.”

All Shareholders will find enclosed with this document a form of proxy
to be used in connection with the Annual General Meeting. A
member entitled to attend and vote at the meeting may appoint one
or more proxies to attend and to speak and vote in his stead. The
proxy need not be a member of the Company.

By Order of the Board

Tim Morris
Company Secretary
Abbots Park
Monks Way
Preston Brook
Cheshire WA7 3GH

1st March 2016

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108 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTICE OF ANNUAL GENERAL MEETING CONTINUED

Accompanying Notes
1. A member of the Company entitled to attend and vote at the Annual
General Meeting may appoint one or more persons as his/her proxy
to exercise all or any of his/her rights to attend, speak and vote at the
Annual General Meeting of the Company. A member may appoint
more than one proxy in relation to the Annual General Meeting
provided that each proxy is appointed to exercise rights attached to a
different share or shares held by him/her. A proxy need not be a
member of the Company. The form of proxy is enclosed. The form of
proxy and power of attorney or other authority, if any, under which it is
signed or a certified copy of such power of authority must be
received by the Company’s Registrars, Capita Asset Services, The
Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU not later
than 48 hours prior to the commencement of the Annual General
Meeting. Completion of the form will not prevent you from attending
and voting at the meeting instead of the proxy, if you wish.

To appoint more than one proxy, additional proxy forms may be
obtained by contacting the Registrars or you may photocopy the
proxy form. Please indicate in the box next to the proxy holder’s name
the number of shares in relation to which they are authorised to act
as your proxy. Please also indicate by ticking the box provided if the
proxy instruction is one of multiple instructions being given. All forms
must be signed and returned in the same envelope.

In accordance with Section 325 of the Companies Act 2006, the
right to appoint proxies does not apply to persons nominated to
receive information rights under Section 146 of the Companies Act
2006. Persons nominated to receive information rights under Section
146 of the Companies Act 2006 who have been sent a copy of this
notice of meeting are hereby informed, in accordance with Section
149 (2) of the Companies Act 2006, that they may have a right
under an agreement with the registered member by whom they were
nominated to be appointed, or to have someone else appointed, as a
proxy for this meeting. If they have no such right, or do not wish to
exercise it, they may have a right under such an agreement to give
instructions to the member as to the exercise of voting rights.
Nominated persons should contact the registered member by whom
they were nominated in respect of these arrangements.

In order to facilitate voting by corporate representatives at the
meeting, arrangements will be put in place at the meeting so that (i) if
a corporate Shareholder has appointed the Chairman of the meeting
as its corporate representative with instructions to vote on a poll in
accordance with the directions of all of the other corporate
representatives for that Shareholder at the meeting, then on a poll
those corporate representatives will give voting directions to the
Chairman and the Chairman will vote (or withhold a vote) as
corporate representative in accordance with those directions; and (ii)
if more than one corporate representative for the same corporate
Shareholder attends the meeting but the corporate Shareholder has
not appointed the Chairman of the meeting as its corporate
representative, a designated corporate representative will be
nominated, from those corporate representatives who attend, who will
vote on a poll and the other corporate representatives will give voting
directions to that designated corporate representative.

Corporate Shareholders are referred to the guidance issued by the
Institute of Chartered Secretaries and Administrators on proxies and
corporate representatives – www.icsa.org.uk – for further details of
this procedure. The guidance includes a sample form of

representation letter if the Chairman is being appointed as described
in (i) above.

2. CREST members who wish to appoint a proxy or proxies by utilising

the proxy voting service may do so for the meeting (and any
adjournment thereof) by following the procedures described in the
CREST Manual. CREST Personal Members or other CREST
sponsored members (and those CREST members who have
appointed a voting service provider) should refer to their CREST
sponsor or voting service provider, who will be able to take the
appropriate action on their behalf.

In order for a proxy appointment made by means of CREST to be
valid, the appropriate CREST message (a “CREST Proxy Instruction”)
must be properly authenticated in accordance with CRESTCo’s
specifications and must contain the information required for such
instructions, as described in the CREST Manual. The message
(regardless of whether it relates to the appointment of a proxy or to
an amendment to the instruction given to a previously appointed
proxy) must, in order to be valid, be transmitted so as to be received
by the issuer’s agent (ID “RA10”) by the latest time(s) for receipt of
proxy appointments specified in, or in a note to, the Notice of
Meeting. For this purpose, the time of receipt will be taken to be the
time (as determined by the timestamp applied to the message by the
CREST Applications Host) from which the issuer’s agent is able to
retrieve the message by enquiry to CREST in the manner prescribed
by CREST.

CREST members (and, where applicable, their CREST sponsors or
voting service providers) should note that CREST does not make
available special procedures in CREST for any particular messages.
Normal system timings and limitations will therefore apply in relation
to the input of CREST Proxy Instructions. It is the responsibility of the
CREST member concerned to take (or, if the CREST member is a
CREST personal member or sponsored member or has appointed a
voting service provider, to procure that his CREST sponsor or voting
service provider takes) such action as shall be necessary to ensure
that a message is transmitted by means of the CREST system by any
particular time. In this connection, CREST members (and, where
applicable, their CREST sponsors or voting service providers) are
referred, in particular, to those sections of the CREST Manual
concerning practical limitations of the CREST system and timings.

The Company may treat as invalid a CREST Proxy Instruction in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.

3. The following documents will be available for inspection at the

Registered Office of the Company during normal business hours on
any business day (Saturdays, Sundays and public holidays excluded)
from the date of this Notice until the close of the meeting and at the
place of the meeting for 15 minutes prior to and during the meeting:

(i) the Register of Directors’ interests kept by the Company under

Section 809 of the Companies Act 2006;

(ii) copies of all service contracts between the Directors and the
Company together with other appropriate documentation; and

(iii) copies of the terms and conditions of appointment of the

Non-Executive Directors.

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Annual Report and Accounts 2015 Johnson Service Group PLC  109

4. Pursuant to Regulation 41 of the Uncertificated Securities
Regulations 2001, the Company specifies that only those
Shareholders registered in the Register of Members of the Company
as at 6.00pm on 3rd May 2016, or in the event that the Meeting is
adjourned, in the Register of Members 48 hours before the time of
any adjourned meeting, shall be entitled to attend or vote at the
Meeting in respect of the number of shares registered in their name
at the relevant time. Changes to entries on the Register of Members
after 6.00pm on 3rd May 2016 or, in the event that the Meeting is
adjourned, less than 48 hours before the time of any adjourned
meeting, shall be disregarded in determining the rights of any person
to attend or vote at the Meeting.

5. As at 29th February 2016 (being the last business day prior to
publication of this notice) the Company’s issued share capital
consists of 330,615,405 Ordinary Shares carrying one vote each.
The total voting rights in the Company as at 29th February 2016 are,
therefore, 330,615,405.

6. Any corporation which is a member can appoint one or more

corporate representatives who may exercise on its behalf all of its
powers as a member provided that they do not do so in relation to the
same shares.

7. Subject to the provisions of section 338 of the Companies Act 2006,
members representing at least 5% of the total voting rights of all
members (or at least 100 members who would have the right to vote
at the meeting and who hold shares on which there has been paid an
average sum per member of at least £100) may have the right to
require the Company (i) to give, to members of the Company entitled
to receive notice of the meeting, notice of a resolution which may
properly be moved and is intended to be moved at the meeting
and/or (ii) to include in the business to be dealt with at the meeting
any matter (other than a proposed resolution) which may be properly
included in the business. A resolution may properly be moved or a
matter may properly be included in the business unless (a) (in the
case of a resolution only) it would, if passed, be ineffective (whether
by reason of inconsistency with any enactment or the Company’s
constitution or otherwise), (b) it is defamatory of any person, or (c) it is
frivolous or vexatious.

Such a request may be in hard copy form or in electronic form, must
identify the resolution of which notice is to be given or the matter to
be included in the business, must be authenticated by the person or
persons making it, must be received by the Company not later than 6
weeks before the meeting, and (in the case of a matter to be
included in the business only) must be accompanied by a statement
setting out the grounds for the request.

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110 Johnson Service Group PLC  Annual Report and Accounts 2015

NOTICE OF ANNUAL GENERAL MEETING CONTINUED

Explanatory Notes
The following notes give an explanation of the proposed resolutions.

Resolutions 1 to 10 (inclusive) and 12 are proposed as Ordinary
Resolutions. This means that for each of those resolutions to be passed,
more than half of the votes cast must be in favour of the resolution.
Resolutions 11, 13 and 14 are proposed as Special Resolutions. This
means that for each of those resolutions to be passed, at least three-
quarters of the votes cast must be in favour of the resolution.

Your Directors consider the passing of all of the Resolutions to be in the
best interests of the Company and its Shareholders and accordingly
recommend that you vote in favour of these Resolutions as they intend
to do so in respect of their own shareholdings.

Report and Accounts (Resolution 1)
The Directors of the Company must present the accounts to the AGM.

Directors’ Remuneration Report (Resolution 2)
Although, as a company listed on AIM, there is no requirement for the
Board Report on Remuneration to be approved by members, the
Directors believe that it is best practice to do so. It is proposed, therefore,
that the Board Report on Remuneration for the financial year ended
31st December 2015, as set out on pages 34 to 40 of the Company’s
Annual Report, be approved.

The Board Report on Remuneration contains, inter alia, details of the
Directors who were members of the Remuneration Committee, a forward
looking statement of the Company’s policy on Directors’ remuneration for
subsequent financial years, a performance graph showing the
Company’s Total Shareholder Return compared with the return on the
FTSE AIM All-Share Index, the FTSE Support Services Index and the
FTSE Industrial Goods and Services Index, details of the Directors’
service contracts and specific disclosures relating to each Director’s
remuneration.

Declaration of a Dividend (Resolution 3)
A final dividend can only be paid after the Shareholders at a general
meeting have approved it. A final dividend of 1.45 pence per Ordinary
Share is recommended by the Directors for payment to Shareholders
who are on the Register at the close of business on 15th April 2016. If
approved, the date of payment of the final dividend will be 13th May
2016. An interim dividend of 0.65 pence per Ordinary Share was paid on
6th November 2015.

Election of Directors (Resolutions 4 to 8 inclusive)
Under the Company’s Articles of Association, and in line with the
recommendations of the UK Corporate Governance Code (the “Code”)
for non-FTSE 350 companies, all Directors are required to retire and
submit themselves for re-election every three years and all newly
appointed Directors are required to retire and submit themselves for
re-election at the first AGM following their appointment. Notwithstanding
the provisions of the Articles of Association, in the interests of good
corporate governance, the Directors have resolved that, each year, all
Directors will retire and offer themselves for re-election.

Biographical details of all the Directors are set out on page 20 of the
2015 Annual Report and are also available for viewing on the Company’s
website (www.jsg.com).

Reappointment of the Auditor (Resolution 9)
The Company is required to appoint the auditor at each general meeting
at which accounts are presented, to hold office until the end of the next
such meeting. Resolution 9, which is recommended by the Audit
Committee, proposes the reappointment of the Company’s existing
auditor, PricewaterhouseCoopers LLP.

Remuneration of the Auditor (Resolution 10)
This Resolution follows best practice in corporate governance by
separately seeking authority for the Audit Committee to determine the
auditors’ remuneration.

Removal of Limit on Number of Shares that can be Issued (Resolution 11)
If the Directors want to issue shares above the authorised share capital,
then the authorised share capital has to be increased by an ordinary
resolution of the Shareholders. Many companies built or build
“headroom” into their authorised capital, giving them the flexibility to
issue further shares in the future without the need to increase the
authorised capital. Companies are no longer required to have an
authorised share capital. The removal of the restriction imposed by the
authorised share capital, which operates as a limit on the number of
shares that may be issued, removes the requirement for the Company to
seek authority to create more than the authorised share capital and
provides greater flexibility. The Directors propose that the Company
takes advantage of that flexibility. Notwithstanding the proposed removal
of the authorised share capital (which is a limit on the number of shares),
the Directors will still require authority from the Shareholders to issue
shares. Additionally, the restrictions on the issue of shares on a non-pre-
emptive basis will continue to apply. Consequently, the Directors consider
these alternative ways of controlling the Company’s ability to issue
shares (through the requirement for the Directors to have an authority to
issue shares and the application of pre-emption rights) are suitable and
appropriate controls and will avoid having to build sufficient “headroom”
in the number of shares the Company may issue.

Renewal of Directors’ Authority to Allot Securities (Resolution 12)
The Company’s Directors may only allot Ordinary Shares or grant rights
over Ordinary Shares if authorised to do so by Shareholders. The
authority granted at the last AGM under section 551 of the Companies
Act 2006 to allot relevant securities is due to expire at the conclusion of
this year’s AGM. Accordingly, this resolution seeks to grant a new
authority to authorise the Directors to allot shares in the Company or
grant rights to subscribe for, or convert any security into, shares in the
Company and will expire at the conclusion of the next AGM of the
Company in 2017 or, if earlier, the close of business on 1st July 2017.

Subject to and conditional upon the passing of the Special Resolution
numbered 11 in this notice of Annual General Meeting of the Company,
the authority granted by the passing of this resolution will be limited to an
aggregate nominal value of £11,020,514 of Ordinary Shares which
represents approximately one third of the Ordinary share capital in issue
as at 29th February 2016 (being the latest practicable date prior to
publication of this Notice). In the event that Special Resolution numbered
11 in this notice of Annual General Meeting of the Company is not
passed, the authority granted by the passing of this resolution will be
limited to an aggregate nominal value of £5,241,033 of Ordinary Shares
which represents approximately 15.9 per cent of the Ordinary share
capital in issue as at 29th February 2016 (being the latest practicable
date prior to publication of this Notice).

Other than in respect of allotting Ordinary Shares in order to satisfy
employee share schemes, the Directors have no present intention of

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Annual Report and Accounts 2015 Johnson Service Group PLC  111

of 10p per share nor more than 5% above the average of the middle-
market quotation of the Company’s Ordinary Shares as derived from the
London Stock Exchange Daily Official List for the five business days
immediately proceeding the day on which the shares are purchased.

The Company may hold in treasury any of its own shares that it
purchases pursuant to the Companies Act 2006 and the authority
conferred by this resolution. This gives the Company the ability to reissue
treasury shares quickly and cost-effectively and provides the Company
with greater flexibility in the management of its capital base. It also gives
the Company the opportunity to satisfy employee share scheme awards
with treasury shares. The total number of options to subscribe for
Ordinary Shares that were outstanding at 29th February 2016 (being
the latest practicable date prior to publication of this Notice) was
6,497,118. The proportion of issued share capital that they represented
at that time was 2.0 per cent and the proportion of issued share capital
that they will represent if the full authority to purchase shares (existing
and being sought) is used is 2.2 per cent. Once held in treasury, the
Company is not entitled to exercise any rights, including the right to
attend and vote at meetings in respect of shares. Further, no dividend or
other distribution of the Company’s assets may be made to the Company
in respect of the treasury shares.

The Directors have no present intention of purchasing Ordinary Shares in
the market. The authority given under this Resolution will lapse, unless
renewed, at the conclusion of the next AGM of the Company in 2017, or,
if earlier, the close of business on 1st July 2017. It is the present
intention of the Directors to seek renewal of this authority annually.

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exercising this authority. However, it is considered prudent to maintain
the flexibility that this authority provides. The Company’s Directors intend
to renew this authority annually.

Renewal of Disapplication Pre-emption Rights (Resolution 13)
Under section 561(1) of the Companies Act 2006, if the Directors wish
to allot any of the unissued shares or grant rights over shares or sell
treasury shares for cash (other than pursuant to an employee share
scheme) they must in the first instance offer them to existing
Shareholders in proportion to their holdings. There may be occasions,
however, when the Directors will need the flexibility to finance business
opportunities by the issue of shares without a pre-emptive offer to
existing Shareholders. This cannot be done under the Companies Act
2006 unless the Shareholders have first waived their pre-emption rights.

This resolution asks the Shareholders to do this and, apart from rights
issues or any other pre-emptive offer concerning Equity Securities, the
authority will be limited to the issue of shares for cash up to a maximum
aggregate nominal value of £1,653,077 (which includes the sale on a
non pre-emptive basis of any shares held in treasury), which is equivalent
to approximately 5 per cent of the Company’s issued ordinary share
capital as at 29th February 2016 (being the latest practicable date prior
to publication of this Notice). The Company undertakes to restrict its use
of this authority to a maximum of 7.5 per cent of the Company’s issued
ordinary share capital in any three year period. Shareholders will note
that this resolution also relates to treasury shares and will be proposed
as a Special Resolution.

This resolution seeks a disapplication of the pre-emption rights on a
rights issue so as to allow the Directors to make exclusions or such other
arrangements as may be appropriate to resolve legal or practical
problems which, for example, might arise with overseas Shareholders. If
renewed, the authority will expire at the conclusion of the next AGM of
the Company in 2017 or, if earlier, the close of business on 1st July
2017. The Company’s Directors intend to renew this authority annually.

Renewal of Company’s authority to purchase Ordinary Shares (Resolution 14)
In certain circumstances it may be advantageous for the Company to
purchase its own shares and this resolution seeks the authority from
Shareholders to continue to do so. Authority was given to the Company
to make market purchases up to an aggregate of 30,001,416 of its
Ordinary Shares at the AGM held on 7th May 2015 (being equal to
approximately 10 per cent of the Company’s issued ordinary share
capital as at 2nd March 2015, the latest practicable date prior to the
publication of the notice for the AGM held on 7th May 2015). This
authority is due to expire at the end of the AGM and it is proposed that
the Company be authorised to continue to make market purchases up to
an aggregate of 33,061,541 Ordinary Shares, representing
approximately 10 per cent of the Company’s issued ordinary share
capital as at the 29th February 2016, being the latest practicable date
prior to the publication of this Notice.

Renewing the authority for the Company to purchase Ordinary Shares in
the market is intended to allow your Board to take advantage of
opportunities that may arise to increase Shareholder value. The Directors
will exercise this power only when, in the light of market conditions
prevailing at the time, they believe that the effect of such purchases will
be to increase earnings per share and will be likely to promote the
success of the Company for the benefit of its members as a whole.
Other investment opportunities, appropriate gearing levels and the overall
position of the Company will be taken into account when exercising this
authority. The price paid for shares will not be less than the nominal value

 
 
 
 
 
 
 
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112 Johnson Service Group PLC  Annual Report and Accounts 2015

DIRECTORS AND ADVISORS

Directors
Paul Stephen Moody
Non-Executive Chairman
Chairman of Nomination Committee
Member of Remuneration Committee
Member of Audit Committee

Christopher Sander
Chief Executive Officer
Director responsible for Health, Safety and the Environment

Yvonne May Monaghan BSc (Hons), FCA
Chief Financial Officer

Michael Bernard Del Mar
Non-Executive Senior Independent Director
Chairman of Remuneration Committee
Member of Nomination Committee
Member of Audit Committee

William Mervyn Frew Carey Shannon CA
Non-Executive Director
Chairman of Audit Committee
Member of Remuneration Committee
Member of Nomination Committee

Nicholas Mark Gregg
Non-Executive Director
Member of Audit Committee
Member of Remuneration Committee
Member of Nomination Committee

Company Secretary & Group Financial Controller
Timothy James Morris BA (Hons), FCA

Registered Office
Johnson House
Abbots Park
Monks Way
Preston Brook
Cheshire
WA7 3GH

Advisors
Nominated Advisor, Financial Advisor and Stockbrokers
Investec Investment Banking
2 Gresham Street
London
EC2V 7QP

Bankers
Lloyds Bank plc
40 Spring Gardens
Manchester
M2 1EN

The Royal Bank of Scotland plc
10th Floor, The Plaza
100 Old Hall Street
Liverpool
L3 9QJ

Santander UK plc
298 Deansgate
Manchester
M3 4HH

Lawyers
Hill Dickinson LLP
No1 St Paul’s Square
Liverpool
L3 9SJ

Registrar and Transfer Office
Capita Asset Services
34 Beckenham Road
Beckenham
BR3 4ZF

Independent Auditor
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
101 Barbirolli Square
Lower Mosley Street
Manchester
M2 3PW

166953 Johnson Service Group Annual Report Cover_166953 Johnson Service Group Annual Report Cover  04/03/2016  18:31  Page 2

Johnson Service Group PLC  Annual Report and Accounts 2015

Annual Report and Accounts 2011 Johnson Service Group PLC  2

Annual Report and Accounts 2015 Johnson Service Group PLC

THE ESTABLISHED NAME 
IN TEXTILE RENTAL AND 
DRYCLEANING

Electronic Communications

The Company offers Shareholders the
opportunity to receive communications such as
notices of Shareholder meetings and the annual
report and accounts electronically. The Company
encourages the use of electronic communication
as, not only does it save the Company printing
and mailing costs, it is also a more convenient
and prompt method of communication.

If you decide to receive communications
electronically, you will be sent an email message
each time a new Shareholder report or notice of
meeting is published. The email will contain links
to the appropriate website where documents can
be viewed. It is possible to change your
instruction at any time by amending your details
on the register.

If you would like to receive electronic
communications, you will need to register your
email address by accessing the Shareholder
Services page within the Investor Relations
section of the Company’s website at
www.jsg.com.

This will link you to the service offered by the
Company’s Registrar. If you decide not to register
an email address with the Registrar, you will
continue to receive all communications in hard
copy form.

Those Shareholders who are CREST members
and who wish to appoint a proxy or proxies
utilising the proxy voting service please refer to
Note 2 of the Notice of Annual General Meeting.

Design: mediasterling.com
Production: sterlingfp.com

This annual report is printed using vegetable
inks on paper from an ISO 14001 certified
manufacturer, and is made with ECF pulp
sourced from carefully managed and 
renewed forests.

If you have any queries regarding electronic communications, please contact the
Company’s registrar, Capita Asset Services, on 0871 664 0300 (calls cost 12p
per minute plus network extras, lines are open 9.00am-5.30pm Mon-Fri).

166953 Johnson Service Group Annual Report Cover_166953 Johnson Service Group Annual Report Cover  04/03/2016  18:30  Page 1

Annual Report 
and Accounts

2015

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Johnson House, 
Abbots Park, Monks Way
Preston Brook
Cheshire WA7 3GH

Tel:
+44 (0)1928 704 600
Fax: +44 (0)1928 704 620
Email: enquiries@johnsonplc.com