Johnson’s about-turn on dry cleaning sale

Sep 10 2008 by Tony McDonough, Liverpool Daily Post

JOHNSON Service Group yesterday revealed that its dry cleaning business was no longer up for sale, despite plunging profits.

The announcement represents a major about-face for the Prescot-based firm.

In 2007, previous management had said it was looking to sell the division – the biggest dry cleaning chain in the UK.

But yesterday, the company’s new executive chairman, John Talbot, said he had reversed all previous disposal plans.

Mr Talbot became chief executive in December, replacing Charles Skinner, but only took on his new role as executive chairman on Monday of this week after the previous non-executive chairman, Simon Sherrard, stepped down.

Mr Talbot said: “We have no plans to dispose of any part of the group and will stick with the structure we have got.

“We’re very comfortable with the three main businesses we’ve got, each of which is a market leader in its own segment.”

When Mr Talbot took the helm, the group had debts of more than £168m, but thanks to two share placings, and the £84.4m disposal of its corporate wear business, this figure has now been cut down to £78.5m.

Mr Talbot’s commitment to the dry cleaning business came despite the fact the division’s half-year profits plunged 28% to £1.8m. Profits in the group as a whole also plummeted from £2.3m to just £400,000, but this was partly blamed on restructuring costs.

The group, which operates more than 500 stores under the Johnson Cleaners and Jeeves of Belgravia brands, described trading as difficult but said it expected an improvement in the division’s performance in the current half year.

Johnson blamed the smoking ban in UK pubs for the fall in dry cleaning profits. People going to pubs now find their clothes no longer smell of smoke and therefore will not take them to be

dry cleaned as often. The number of stores fell from 537 at the end of December 2007 to 528 at the end of June, following a targeted reduction of under performing branches.

Four new supermarket locations were opened as part of the ongoing strategy of shifting to more convenient locations and are trading to expectation. A further six new supermarkets and drive-in locations are planned for later this year.

While revenues from rental reduced 5.6% because of a decision to ditch low value hotel linen contracts, profits for the arm increased by 27.4% to £6.5m.

Mr Talbot said the division continued to attract new business, but warned this was at a slower rate than previously.

He added: “We are well positioned to seize commercial opportun- ities, but we are not immune to weaknesses in the UK economy.”

Johnson’s share price fell more than 4% yesterday on news of the profits plunge.

BILL GLEESON: PAGE 8

tonymcdonough