Textiles business reduces operations and cuts hundreds of jobs due to pandemic

Runcorn-based workwear and textile business Johnson Service Group announced hundreds of redundancies today as the coronavirus pandemic continues to affect its markets.

In a trading update today the group said the past three months’ performance has been a mixed picture, reflecting current market conditions, with the workwear business currently seeing volumes having returned to pre-COVID levels, while the focus within the Hotel, Restaurant and Catering (HORECA) business has been to manage the cost base and ensure it is ready once volumes in the UK’s hotel, restaurant and catering markets resume in the coming months.

Nevertheless, it has announced restructuring at the workwear division due to the pandemic impact, including the closure of its Newmarket site and 200 redundancies across the division.

The group said the HORECA division is continuing to experience uncertainty.

All of its existing sites were open until November 7, albeit operating on reduced hours, but as a result of the current lockdown in England, the group now has three sites mothballed with a limited number of deliveries to those customers who have remained open.

In addition, Johnson has also taken the decision to delay the commissioning of its new Leeds site until volumes return to more normal levels.

The cost of the Newmarket closure and the redundancies will amount to £6m, and will be charged as an exceptional item, the group said.

It said throughout the year the group has made use of the furlough scheme and at the end of 2019, the division comprised 3,800 employees. In line with the reduction in volumes this number has reduced significantly, through both redundancies and natural churn, such that the business anticipates ending the year with some 2,450 employees.

It said 1,600 of its staff are currently on furlough with the majority of the remaining workforce being flexi-furloughed and working reduced hours in line with the current reduced volumes.

The group has a committed bank facility of £175m and benefits from a strong balance sheet with net cash as at October 31, 2020, excluding IFRS 16 lease liabilities, of £1.7m, compared with a net debt position of £0.2m as at June 30, 2020.

It said that, while the next few months are difficult to predict, particularly for the HORECA business, the group has taken steps to reduce the cost base while retaining as many of its employees as practical, utilising the extended Coronavirus Job Retention Scheme.

“We acknowledge that the possible rollout of a vaccine is encouraging, however, the precise timing of that, together with the speed of a sustained recovery in our markets, remains unknown.”

Chief executive, Peter Egan, said: “I have nothing but admiration for the way in which our employees have risen to the many challenges posed by COVID-19.

“I thank them for the commitment, hard work and resilience they have demonstrated which has enabled our businesses to continue to operate and to service our customers effectively.

“We have taken the right steps to manage our cost base and maintain a firm foundation for JSG, with the strength of balance sheet and flexibility of resources and operations to provide for future strong returns when the recovery emerges.”