Laundry group's shares cheer as hire work pays off

Executive chairman John Talbot's purchase of 2.4 million shares for 445,000 also lifted the group, which closed the day up 2.75p at 19p.

Johnson, which owns dry cleaning chain Johnson Cleaners, reported a 17 per cent rise in adjusted pre-tax profits to 6.2m in the first six months of the year. But after costs associated with a cull of unprofitable stores, the group slipped to a 2.2m pre-tax loss. Operating profits were flat at 8m but revenues dipped 3.5 per cent to 113m.

The firm will be closing 28 dry cleaning stores this year, at sites dotted across the country. The firm blamed January's blizzards and the return of VAT to 17.5 per cent for a 61 per cent plunge in its dry cleaning arm's underlying profits to 500,000.

Revenues for the division, which will be left with about 470 stores, were down 6.1 per cent in the same period at 38.8m.

"A lot of the closures are in what have become secondary retail locations where people have been pulling out," said Mr Talbot. "There was a bit of a backlog and we felt we had to address it."

The restructuring will cost it 6.5m in the first half, but Johnson is now confident of growing profitability in the division.

The group's textile rental arm performed "well above" its expectations, with operating profits up 13.4 per cent to 7.6m. Within this, its Apparelmaster work clothing hire business grew profits and won customers, including Severn Trent and Arriva.

Its Stalbridge linen hire business, which supplies hotels and restaurants, has returned to "healthy" profitability.

Johnson also hailed the purchase of eight PFI contracts from failed York rail maintenance group Jarvis.

One of these facilities management contracts includes Cardinal Heenan school in Leeds, and the group is looking to acquire more.

"JSG is seeing the benefits of its restructuring, it has fixed its balance sheet and offers investors an attractive operationally geared play on UK economic recovery," said Evolution Securities in a note.