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By
Reuters
Published
Sep 9, 2008
Reading time
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Johnson Service rules out sales as profit slides

By
Reuters
Published
Sep 9, 2008

By Rhys Jones

LONDON (Reuters) - First-half profit collapsed at Johnson Service Group due to one-off costs and tough trading conditions but the dry cleaning group ruled out disposals and said the full-year outlook was satisfactory.



The group, whose operations span textile cleaning, laundry and retail fit-out, said pretax profit for the six months to end-June plummeted 80 percent to 0.4 million pounds following 11.6 million of exceptional, restructuring and finance costs during the period. Despite this, the company said its annual performance would be satisfactory.

"Results were heavily distorted by exceptionals and restructuring costs, but underlying trading was in-line with expectations and the group can now start developing the business," Investec analyst Robert Morton said.

The company, whose shares collapsed last year after profit warnings, is no longer looking to sell the three divisions effectively put up for sale by the previous management, new Executive Chairman John Talbot told Reuters on Tuesday.

Johnson had been trying to sell its three non-core units -- hotel supplier Stalbridge Linen Services, Workplace Engineering and specialist dry cleaner Alex Reid -- for some time.

But Talbot, who started his new job on Monday, has ruled out offloading any of the group's businesses following the 84.4 million pounds sale of its corporate-wear unit in April

"We have no plans to dispose of any part of the group and will stick with the structure we have got. Last year there were plans in place to sell them (the three divisions) but that is no longer the case," Talbot said.

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

Group revenue slid 18 percent to 130.1 million pounds after Johnson ditched its low-value hotel linen contracts, while profits at its dry cleaning business fell 28 percent to 1.8 million pounds as the impact of the UK-wide smoking ban hit.

Shares in Johnson, which has underperformed the FTSE All Share support services index .FTASX2790 by about 35 percent since the turn of the year, were trading 6.8 percent lower at 20.5 pence by 10:40 a.m.

Johnson, which last month said it would raise up to 10 million pounds through an open offer of about 49.94 million shares at 20 pence each to prop up the business, said valid acceptances were received for 80 percent of the shares on offer.

The group waived its banking covenant at the end of last year but has reduced its total debt to 118.1 million pounds from 168.5 million at the start of 2008.

Talbot said the company was "looking at ways to save on energy costs" in the face of fluctuating oil prices, and admitted some cash could be recouped "through price increases" in some businesses.

(Editing by Paul Bolding)

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