Laundry specialist to cut costs in wake of coronavirus outbreak

A firm which supplies linen to the hotel trade is taking action to cut costs and has cancelled its dividend payments.

Johnson Services Group, which also supplies workwear, released a note to the stock market this morning detailing the impact of coronavirus on its business.

The Runcorn based business said it has started to experience a slowdown in certain areas of its operations linked to COVID-19.

The slowdown has been particularly marked in its hotel and catering division.

There has been reduced demand which has resulted in a significant reduction in processing volumes, particularly in the last few days.

The workwear business has seen limited impact to date  although the company is expecting a downturn in due course.

Debt at the end of 2019 was £87.7m, resulting in a leverage ratio of 1.3:1 against a bank covenant requirement of not more than 3:1.

Debt has remained at a similar level to date and committed bank facilities are £135 million, running to August 2023.

A spokesman for the firm said: “We have taken immediate action to limit capital expenditure on both plant and equipment and on new textile rental items and have cancelled all non-essential revenue expenditure.

“We have also commenced discussions with our banks regarding increased bank facilities.

“Actions are being taken to reduce operational costs, particularly in the businesses most affected by the drop off in volumes, but also in the wider group.

“Given the current need for prudent cash management, the Board has decided that it will, at the forthcoming Annual General Meeting on 5 May 2020, withdraw Resolution 3 in the Notice of Annual General Meeting relating to the final dividend payment of 2.35p per Ordinary share.”

While the full implications of COVID-19 on the financial performance for the current financial year are difficult to determine at this stage, the Board remains confident in the future prospects and viability of the Group.

Our priority remains the health and wellbeing of our employees and customers and we are continuing to ensure that we have the appropriate measures and precautions in place for their safety.