City welcomes Johnson's plans to cut 28 underperforming branches

SHARES in Johnson Service Group (JSG) jumped 18.5 per cent yesterday after the firm unveiled plans to close up to 28 of its Johnson Cleaners branches to restore profits at its dry cleaning division.

No guidance was given as to which outlets would close but a spokesman said that only a small number of posts would be made redundant and that the firm would try to relocate staff.

The company will be left with about 470 branches following the closures.

It currently has 32 outlets in Scotland.

Hide Ad
Hide Ad

JSG said January's blizzards and the return of VAT to 17.5 per cent had triggered a 61 per cent plunge in operating profits at its dry cleaning business to 500,000 in the six months to June.

Revenues for the division were down 6.1 per cent in the same period at 38.8 million.

The group, which also owns dry-cleaning brands Jeeves of Belgravia and consumables business Alex Reid, said the closures - coupled with a store refurbishment programme - should see profits lift in the second half and secure the future of the dry-cleaning arm.

JSG, which also has textile rental and facility management divisions, posted an overall 17 per cent rise in pre-tax profits to 6.2m in the first half.

Executive chairman John Talbot said: "We believe that, following its restructuring and other initiatives, the drycleaning division is better positioned for the future, with management now able to devote more attention to opportunities in the market rather than upon poorly performing units."

The Cheshire-based group has also introduced eco-friendly "Greenearth" cleaning technology and products to some 330 stores.

JSG's two textile rental operations - Stalbridge and Johnsons Apparelmaster - both increased operating profits in the half, while facilities management business SGP maintained operating profits of 1.6m.

The firm - increasing its interim dividend by 8 per cent to 0.27p - added that new private finance initiative (PFI) contracts for SGP, taken from struggling support services contractor Jarvis, are set to buoy business throughout the rest of 2010.

Hide Ad
Hide Ad

Adrian Kearsey, an analyst at Evolution Securities, said that overall trading had been broadly in line with expectations.

He added: "JSG is seeing the benefits of its restructuring, it has fixed its balance sheet and offers investors an attractive operationally geared play on UK economic recovery.

"Encouragingly, we are seeing continuing signs of an upturn in the project-related pipeline - this is high margin work not factored into our forecasts.

"The shares are trading on a 53 per cent discount to its larger peer, Davis. As the economy recovers, we see material upside for JSG investors."

Evolution is predicting full-year revenues of 227.2m, down from 229.3m last year, but with a rise in pre-tax profits from 12.2m to 13.4m.

Shares rose 3p to 19.25p.

Related topics: