Laundry giant to raise £85m after 97% drop in leisure industry revenue

Johnson Service Group (JSG) plans to raise £85m in a share placing and extended its bank facilities by a £40m as part of its response to the impact of coronavirus.

The Runcorn-based textiles business generated pre-tax profits of £48m in 2019 but the lockdown has had a huge impact on its operations.

Its HORECA (Hotel/Restaurant/Catering) division, which provides laundry services to hotels, restaurants and catering companies, saw a 27% reduction in revenues in March and a 97% reduction in April. It expects May to only be slightly better than April with a small number of its customers having reopened.

JSG’s workwear business has fared better, with April revenues down 12%.

The fundraising is to provide the £350m-turnover group with sufficient liquidity to deal with a prolonged lockdown period and lower revenue in the months after lockdown is eased.

Its scenario planning is based on its HORECA division only reaching 75% of typical activity by the end of this year and not returning to previous levels until spring 2022.

It expects its workwear division to improve to around 90% of typical activity this year and take the whole of 2021 before its revenues normalise.

The shares in the placing are priced at 115p. Although that is a 20% discount on last night’s close of 143p, it is only slightly below last Friday’s close of 119p and JSG has positioned it as a “7% discount to the 10 day average closing mid-market price”.

The placing is being managed by Investec as an accelerated bookbuild.

JSG has also secured an additional £40m accordion facility with its banks, which extends the existing committed bank facilities to £175m. It has also agreed revised covenants for its existing facilities.

By mid-day the placing had achieved its target, and chief executive Peter Egan said: “We are pleased by the level of support we have received for this fundraising.

“These proceeds will improve our liquidity position and further bolster our balance sheet, helping to see us through this downturn and ensuring that we are best-placed to quickly restore our market position as our markets start to improve.

“We are encouraged by early signs of some customers reopening across both workwear and HORECA and remain confident in the long-term prospects of the group.”

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