Textiles business confident of recovery despite interim losses

Johnson Service Group, the Runcorn-based workwear and textiles business, put a brave face on a torrid first half today, with chief executive Peter Egan declaring the board’s confidence in the group’s medium-term growth prospects.

Its HORECA (Hotel/Restaurant/Catering) division was mothballed during the lockdown period and is only starting to return to anywhere near normal following a phased reopening as volumes began to increase to 25% of typical levels in July, climbing to 45% in August.

The workwear division continued to operate throughout lockdown with a 12% reduction in volume in April, steadily improving to six per cent in August. Customer retention levels were 93.8% at the end of July.

Consequently, total revenues for the six month period to June 30, tumbled from £167.1m last year to £114.8m.

A £15.2m pre-tax profit in 2019 was transformed into a pre-tax loss this year of £18.6m.

No interim dividend will be recommended for shareholders.

The group used the Coronavirus Job Retention Scheme (CJRS) to achieve continued employment of furloughed employees, it said.

It also managed to strengthen its balance sheet and liquidity by increasing bank facilities to £175m, a temporary alternative financing arranged through Covid Corporate Financing Facility (CCFF), and an £82.7m equity placing in June.

Chief executive Peter Egan said: “Our performance during the period reflects the challenging market conditions inflicted on the business by COVID-19 following a strong start to the year.

“The management team have been highly active in addressing the impact, by taking decisive action to ensure the long-term preservation of the business, shoring up the group’s finances and mothballing sites to ensure that JSG is well placed to react quickly as end markets continue to recover.

“Our new Leeds high volume linen plant is scheduled to open in October and we have identified a new workwear site to replace the Exeter plant destroyed by fire in January 2020, which should open mid-2021.

“Both of these investments demonstrate our long-term commitment to investing for future growth.”

He added: “It remains very difficult to predict, with any accuracy, the timing of a recovery to pre-COVID levels.

“However, with our strong balance sheet, established market position and reputation for quality service, we remain confident in the group’s medium-term growth prospects as the economy and markets that we serve recover.”