J0hnson offers 150m shares to cut debts

Jun 12 2008 by Alex Turner, Liverpool Daily Post

MERSEYSIDE drycleaners Johnson Service Group is seeking to raise £40m in two share offers, as it looks to shore up its balance sheet.

It has conditionally placed 150m shares with investors at 20p a share, raising £30m, and will offer existing shareholders 49.9m shares to raise a further £10m.

Johnson’s chairman Simon Sherrard said: “Successful completion of the placing will allow the group to further reduce its level of indebtedness, and will lead to a significant reduction in the interest rate applicable to the group’s remaining debt.

“The placing will result in a reduction in debt, and will allow the group to support the success of its market-leading businesses, which are continuing to trade satisfactorily.”

The company had a torrid first day on the Alternative Investment Market when it closed 17% down at 24p on Tuesday.

The company, which had faced months of uncertainty about its future thanks to high debt levels, moved its shares from the main list in a bid to save money thanks to the less burdensome regulatory requirements on AIM.

And yesterday’s announcement initially saw a further 17% fall before its shares recovered to close at 22.5p.

The company’s shares have plunged from more than 350p last June, after poor trading at its high street dry cleaners and linen rental businesses was compounded by the troubled implementation of a new IT system.

Pressure on the business grew in October when it scaled back profit expectations for the 2007 and 2008 financial years. It negotiated a waiver with its banks in December, provided it came up with a long-term financial solution.

The disposal of the corporatewear business, which was a provider of uniforms to Sainsbury’s and Argos, which accounts for around a third of the group’s profits, has left Johnson with operations focused on textile rental, facilities management and Johnsons dry cleaning.

Johnson also said it planned to ask investors to support a new long-term incentive plan for management.

alex.turner