SHARES in Liverpool dry cleaning group Johnson Services soared more than 50% after brokers signalled the worst could be behind it.
Investec Securities maintained its “buy” rating after the dry cleaning-to-clothes-hire company produced annual results slightly ahead of expectations.
"The 2008 results lays to rest a very difficult year in which the new management team resolved the financial problems facing the group and re-established a sound footing for the ongoing businesses," the broker said in a note.
Losses before tax tumbled from a previous £47.4m deficit to £6.3m to December 31. Adjusted pre-tax profits came in at £6.5m, the same as last year but on revenues of £263.3m, down from £316.8m due to the economic downturn and the cessation of several unprofitable contracts.
However, the board, led by chairman John Talbot, has managed to slash net debt from £168.5m to £78.5m through the combined proceeds of the corporatewear disposal and issue of new shares last year.
The reduction in debt eases the prospect of onerous payments on some of the group’s bank facilities.
Mr Talbot said that, by the end of the year, the group’s bank facility stood at £107.5m, “significantly in excess of the anticipated level of borrowings for the foreseeable future.”
He said the textile rental division, including Johnsons Apparelmaster and the troubled Stalbridge Linen Services, exceeded expectations despite a 5% fall in revenues to £122.6m after shedding some low margin contracts.
Linen, chefswear, kitchen and restaurant linen provider Stalbridge is expected to return to full-year profit this year. Facilities management arm SGP suffered a fall in revenues from £93.2m to £49.2m after a key client took its contract in-house.
But new contract wins should ensure a return to growth.
The Prescot-based drycleaning division reported a 3.3% fall in revenues to £91.5m, while operating profits slipped from £6m to £4.4m due to a decline in spending in the high street and rising costs of oil-based products.
But the board has identified £4m of cost savings to ease margins and has pledged to find more supermarket and drive-in locations to add to its 523-strong portfolio.
Chairman Mr Talbot said: “We are very pleased with the results. They show we are on track and where we said we would be.”
BILL GLEESON: PAGE 8
