JSG Johnson Service Group Plc

RNS No 6220w
JOHNSON SERVICE GROUP PLC
26th January 1999
                                       
                           JOHNSON SERVICE GROUP PLC
                           DISPOSAL OF US SUBSIDIARY

Johnson Service Group PLC, formerly Johnson Group Cleaners PLC, is a leading
textile rental and drycleaning company.  It is a major provider of workwear
rental services under the Apparelmaster brand, and a market leader in customer
service.  It is also the largest retail drycleaner in the UK with 569 shops.

SUMMARY

*   Disposal of US drycleaning subsidiary of 307 shops for a maximum
    aggregate consideration of #29.5m in cash, shares and loan notes.

*   Complete exit from trading in US.

*   Net proceeds from the sale will be initially used to repay existing
    borrowings.

*   Group strategy to continue to expand in UK and Eire organically and by
    acquisition.

Richard Zerny, Chief Executive, Johnson Service Group PLC commented:

"Whilst some progress is being achieved as the result of improved management,
the US drycleaning market remains competitive and trading difficult.
Achieving any significant growth would involve a considerable amount of
management time and capital investment, at a time when the Group's strategy is
to focus on expanding the UK and Eire operations both organically and by
acquisition (as evidenced by the acquisition in July, 1998 of the Connacht
Court Group Limited, Ireland's largest textile rental company, for #24.2m in
cash).  The Board has therefore decided that it would be in the best interests
of the Company to dispose of its remaining US business."

Enquiries:     Richard Zerny, Chief Executive
               Johnson Service Group
               Telephone:     0151 933 6161

               Michael Sandler
               Hudson Sandler Limited
               Telephone:     0171 796 4133

                                                               26 January 1999
                                       
                           JOHNSON SERVICE GROUP PLC
                           DISPOSAL OF US SUBSIDIARY

Johnson Service Group PLC (JSG) announces that it has entered into a contract
to sell the whole of the issued share capital of its US subsidiary, Johnson
Group Inc. (JGI) to Delia's Cleaners Inc. (DCI) for an aggregate consideration
of approximately #29.5m ($48.6m) in cash, shares and loan notes.  The
transaction is subject to the purchaser raising the necessary finance by way
of private placings of equity and debt. Following the disposal JSG will have
no remaining trading operations in the USA. It is expected that the disposal
will be completed on 26 March 1999.

The net proceeds from the sale will initially be used to repay existing
borrowings.

Background to and reasons for sale

The Board has for some time been closely reviewing its US drycleaning
operations as recent performance has been disappointing, with margins achieved
being significantly below those earned in the UK.

Whilst some progress is being achieved as the result of improved management,
the US drycleaning market remains competitive and trading difficult.
Achieving any significant growth would involve a considerable amount of
management time and capital investment, at a time when the Group's strategy is
to focus on expanding the UK and Eire operations both organically and by
acquisition (as evidenced by the acquisition in July, 1998 of the Connacht
Court Group Limited, Ireland's largest textile rental company, for #24.2m in
cash).  The Board has therefore decided that it would be in the best interests
of the Company to dispose of its remaining US business.

Information on JGI

JGI is the US drycleaning business of JSG and operates 307 company owned
drycleaning stores, 199 drycleaning franchisees and 5 printing shops.
The sales, operating profit and profit before tax of the US retail business
for the year ended 27 December 1997 were #51.8m, #2.3m and #1.4m respectively;
with net assets of #16.4m which are expected to be #17.3m at 26 March 1999.

Information on DCI

DCI is a company created by Philip A D'Elia for the purpose of acquiring JGI.
Mr D'Elia is CEO of DCI Management Group Inc. which controls a chain of 56
drycleaning shops in Arizona and California.  DCI has entered into an
agreement with CRT (Credit Research & Trading LLC) whereby CRT has undertaken
to raise the necessary finance for DCI to purchase the shares in JGI.

Jim Barry, a Director of JSG, will become Chairman of DCI on completion of the
transaction, under the terms of a 3 year employment agreement.

Principal terms and conditions of sale

The aggregate consideration is approximately #29.5m ($48.6m).  The form in
which it will be received is as follows:-

1.   Cash on completion of #18.5m ($30.6m).

2.   #0.6m ($1.0m) loan note earning interest at 9% p.a. and redeemable in
     full on 26 March 2000.

3.   #5.2m ($8.5m) loan note earning interest at 8% p.a. and redeemable in
     full on 26 March 2004 subject to certain conditions set out below.

4.   #5.2m ($8.5m) in convertible preferred stock of DCI (the Convertible
     Stock) which has a redemption value of $8.5m.  The Convertible Stock can 
     be converted at JSG's option into DCI common stock at any time.  DCI
     also has the option to redeem the Convertible Stock for cash at any
     time, subject to JSG's prior right to convert it into DCI common
     stock.  If by 26 March 2007, the Convertible Stock has not been
     converted or redeemed, it will be redeemed for cash at that date.  The
     Convertible Stock is also subject to certain conditions set out below.

Conditions Applying to the $8.5m Loan Note and the Convertible Stock
The sale of the JGI shares to DCI limits JSG's future potential liabilities,
including environmental, on all company locations past and present.  They are
limited to $17m, being the aggregate value of the $8.5m loan note and $8.5m
Convertible Stock.  DCI will be entitled to offset any validated claims
against firstly, the $8.5m loan note and thereafter, the Convertible Stock in
respect of the following:-

a)   Environmental claims in respect of all incidents which occurred prior to
     the completion of this transaction on all non-trading JGI sites and other
     sites which are currently the subject of investigation.

b)   Environmental claims related to incidents in respect of all other current
     trading sites which occurred prior to the completion of this transaction
     subject to an annual cumulative deductible of $250,000 to be paid by DCI.

c)   All future rent and other property costs payable on non-trading sites up
     to the end of the lease.   Jim Barry will manage these properties on     
      behalf of JSG with the intention of mitigating their running costs.

d)   Self funded workers' compensation claims in respect of incidents which
     occurred prior to completion of this transaction.

The average cost of the above over the last 2 years was #750,000 per annum and
the Board believes that there is no reason to expect any material change in
these costs in the foreseeable future.

Any balance remaining on the $8.5m loan note will be repayable to JSG on 26
March 2004.  Any further validated claims after that date will be applied
against the balance of the Convertible Stock owned by JSG up to 26 March 2007
and thereafter JSG will be entitled to the Convertible Stock unencumbered.

In view of the likelihood of some claims against the proceeds of the $8.5m
loan note and the Convertible Stock, JSG is taking the most prudent accounting
approach and is not assigning any value to these parts of the consideration in
calculating the loss on disposal or in recording the transaction on the
balance sheet.

Directorship

Jim Barry will resign as a main board director of JSG on completion, but will
continue as a consultant to the Group to manage the remaining US non-trading
subsidiaries.

In considering this transaction, Jim Barry was excluded from any
responsibility for negotiating the terms and conditions of the transaction,
although he was by necessity involved in the discussions.

Accounting

In accordance with normal UK accounting practice the estimated net loss on the
disposal of JGI of some #40.3m will be treated as an exceptional item in the
profit and loss account for the year ended 26 December 1998.  The purchased
goodwill and that arising on consolidation of some #41.0m, which has
previously been written off to reserves, will be added back to reserves.

The Preliminary results for the year ended 26 December 1998 for JSG are
expected to be announced on 12 March 1999.


END

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