Trading Statement

RNS Number : 3705L

Johnson Service Group PLC

09 January 2009

 



9 January 2009

Johnson Service Group PLC

Pre-close statement

Further to the Interim Statement we are pleased to report that, despite challenging trading conditions, the Group overall is continuing to trade satisfactorily albeit with divisional contributions varying from earlier expectations.

Within the Textile Rental division, Johnsons Apparelmaster continued to show profitable growth in 2008 and its results have exceeded our expectations. The increased profitability is a result of significant new business wins within its workwear portfolio combined with a reduction in central overhead costs. The planned recovery has continued at Stalbridge, our premium linen rental business, which achieved a modest second half profit and remains on track to return to annual profitability in 2009. 

Our Drycleaning business benefited from an initial improvement in like for like sales in the latter part of the third quarter but subsequent trading conditions on the high street have impacted on trading and we have seen an overall 3.9% like for like sales decline in the second half of the year. In anticipation of continuing difficult trading conditions we have undertaken a thorough review of our costs and have implemented a more flexible cost structure to allow the cost base to reflect the level of sales. As a result, by the end of December we had achieved savings with an annualised value of £2 million. This will increase during January to annualised savings of over £4 million, at present levels of activity. At the same time we are continuing to improve the range of services offered and are investing in GreenEarth® technology, and new store openings within supermarkets and drive in units which offer greater convenience to customers.

Within the Facilities Management division the SGP business has generated a double digit like for like increase (excluding the Fujitsu contract from the 2007 results). However the well publicised and severe difficulties being experienced by retailers have adversely affected certain of the division's activities. We have been impacted by retail customers severely curtailing and delaying capital projects which has had the effect of restricting the increase in profitability of this division compared with expectations earlier in the year. More positively, we have continued to win new customers for help desk services and in the final quarter of 2008 we have agreed contracts which will add up to 2,500 net locations to our help desk services during the first quarter of 2009. This is net of losses due to known failures on the high street. This division is exceptionally well placed to benefit from any improvement in retail conditions and in the meantime we anticipate that the helpdesk services will continue to win profitable new business.  

Exceptional costs are expected to be approximately £8.6 million of which £5.6 million was reported in the first half. Second half costs largely related to the planned transfer of the Hinckley laundry facility from Stalbridge to Johnsons Apparelmaster and additional provisions for vacant property.

Year end debt is expected to be approximately £78.5 million (June 2008; £118.1 million) compared to bank facilities of £107.5 million.

In view of the current economic climate we expect trading conditions to remain challenging for 2009. We have successfully reduced central costs during 2008 and we would expect these to reduce further in 2009. Within Textile Rental, the recent fall in energy and fuel prices is helpful but it will be more difficult for the division to win new business at a rate greater than the attrition caused by customer failures and staff reductions within our customer base. In the Drycleaning business we will ensure that we tightly control costs, but at the same time continue to improve the estate and develop our offering of services. We are confident that we have a strong FM division which is based on known contracts; the key question is how quickly the division will see the benefit of the resumption of discretionary spending by its customers which could have a major positive impact upon profitability. 

Despite the economic climate, the Board expects the Group profit before tax (before intangibles amortisation and impairment, exceptional items and exceptional finance costs) for the 2008 financial year to be satisfactory.

Enquiries

Johnson Service Group PLC	020 7796 4133
John Talbot,  Executive Chairman
Yvonne Monaghan, Finance Director
Hudson Sandler	020 7796 4133
Michael Sandler
Wendy Baker

 

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