Johnson Service Regulatory News (JSG)

7 Jul 2009 07:00



7 July 2009

Johnson Service Group PLC

Pre-close statement

Overall trading conditions in the first half of the year were in line with comments made in the 2008 Annual Report and we remain confident of achieving a satisfactory result for 2009 with management actions helping to offset pressure on revenues.

The current economic pressures and difficult trading environment have continued to impact our three divisions in different ways.

Drycleaning

Our Drycleaning business has, along with other high street retailers, seen mixed like for like sales during the first half, with sales overall being modestly below plan.  However, the cost savings referred to in March have been successfully implemented and have reduced costs by some £100,000 per week compared to the running level in November 2008, thereby significantly reducing the impact on profit.  Our investment in improving the shop portfolio and our commitment to promoting GreenEarth® is continuing and we are very encouraged by the revenue growth in the GreenEarth® branded shops.

Textile Rental

As anticipated, our Textile Rental division has been impacted by the increased business closures in the first half of the year together with the impact of reduced spend by our existing customers.  This has resulted in a net reduction in revenue within Johnsons Apparelmaster compared to the prior year.  Nonetheless, the business continues to win new customers and management has taken steps to reduce the cost base to reflect the reduction in revenue.  At the end of the first quarter we acquired the rental contracts and garments from a small independent competitor, adding some £0.9 million of annualised revenue at a cost of £0.8 million, and they have been successfully integrated into our existing processing capacity.  The rate of existing customer cutbacks, which peaked in April, is slowing and we remain confident that the business will continue to gain market share.

We are very pleased with the performance of Stalbridge Linen.  The business has continued to achieve every key milestone on its recovery path, with service levels and customer support now restored to the previous high levels. Our focus on improved customer service in conjunction with major cost reductions will result in the business breaking even in the first half, compared to a loss of £0.8 million in the first half of 2008.  We remain confident that Stalbridge Linen will return to profitability for the full year.

Facilities Management

As reported in the full year results for 2008, the trading performance weakened in the second half largely as a result of the uncertainties within the UK economy and the reluctance of clients to invest in project work. The contracts signed with Pizza Hut, KFC, Wolseley and Monsoon Accessorize at the end of 2008 are now fully operational and have more than compensated for any contract losses, most of which have been due to insolvencies. As a result, we anticipate SGP's half year result to show an improvement on the previous six months.

SGP has continued to have a strong run of new contract wins in the first half of 2009, as companies seek to reduce costs by outsourcing property management. A new three year deal, with the potential for a two year extension, has been signed with Punch Taverns to provide maintenance services to its managed and leased pub estates combined with on-site FM services to its headquarter buildings. Contract extensions have also been secured with Cap Gemini and Getronics in addition to a further five year deal with a leading international banking group for the provision of on-going FM services at a large City of London building.

Our long term Public Sector PFI contracts continue to perform well and we are winning new customers.  This is particularly the case in the primary healthcare sector where four new contracts have been signed in the second quarter and are either already, or about to come, on stream.  SGP has also recently been selected as the preferred FM partner for the Worcester Library and History Centre, a 25 year PFI project which will commence towards the end of 2010. We anticipate adding several new contracts for maintenance helpdesk services in the coming months.

Overall, SGP has had a very successful half year and has won many contracts which will benefit our second half performance and provide a strong platform for 2010 and beyond as market conditions start to ease.

Net Debt

Net debt at the end of June is expected to be approximately £75.5 million (June 2008: £118.1 million) compared to the December 2008 position of £78.5 million.  Bank facilities at the end of June 2009 were £104.5 million.

  Summary

We expect trading conditions to remain challenging throughout 2009. However, we are continuing to invest in all of our businesses and are taking steps to ensure that the appropriate cost structure is in place to respond to any further pressures on revenue.  The Board expects profit before tax (before intangibles amortisation and impairment) for the year as a whole to be satisfactory given the current economic climate.

Interim results for the six months to 30 June 2009 for Johnson Service Group PLC will be released during week commencing 7 September 2009.

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