No fire without smoke for Johnsons

It's not just pubs who have been hit by the smoking ban. Spare a thought for dry cleaners...

by
Last Updated: 31 Aug 2010

Johnson Service Group, the company behind the Jeeves of Belgravia chain, said today that its dry cleaning profits fell by 28% in the first half of 2008 – and it reckons the smoking ban is largely to blame. Now that we don’t come home from our post-work drinks reeking of stale smoke, we’re less likely to take our suits to the dry cleaners. Good news for our bank accounts, but bad news for Johnson.

‘The smoking ban has now been effective for over 12 months and... this has impacted dry cleaning volumes,’ the company said today, as it reported its interim results. Jeeves actually boosted revenues (by 10%), as did its specialist brand Alex Reid (up 16%), but its Johnsons Cleaners chain saw sales drop 3.1%, meaning that overall division revenues dropped slightly to £46m. And it’s clearly doing less higher-margin work, given that profits dropped from £2.5m to £1.8m. In response, it's closing down some of its poor-performing stores and concentrating on ‘more convenient’ locations, like supermarkets.

But that’s not Johnson’s only problem. Elsewhere in the group, its facilities management business also had a stinker, with revenues falling 52% and profits down 32%. This isn’t a great time to be reliant on the retail, financial and commercial property sectors – and to make matters worse, one of its biggest clients decided to move all its work in-house, cutting off a big revenue stream. As a result, overall group profits were down 80% to £400,000, on revenues of £130m – not an impressive margin by anyone’s standards…

There are signs that new CEO John Talbot is starting to steady the ship, however. Johnson’s textile rental arm boosted profits by 27%, and he seems to be getting a handle on the group’s finances: after a string of profit warnings and worries about spiralling debt levels, Talbot has sold off its corporatewear business (which made uniforms for big retailers) to raise cash, and agreed a new borrowing facility with the banks. So at least the balance sheet is looking a bit healthier.

He also expects business to improve in the second half, not least because the comparables won’t be so tough this time around – the second half of last year was also affected by the smoking ban, so that shouldn’t be such a big factor. So Johnsons may still come up smelling of rose-scented dry cleaning fluid...


In today's bulletin:
House sales hit 30 year low
Computer says No to LSE rally
No fire without smoke for Johnsons
Why managers must be more flexible
SME bosses keep the faith

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