Johnson Service Group PLC says it is closing 109 of its 307 high street dry cleaning stores. Their lease renewals, which are due in 2015 and 2016, are not financially viable, the company said.
In an official statement, Johnson Service Group said:
“In parallel with these new initiatives we have reviewed the lease profile of our current 307 branches and have identified 109 branches, the majority of which have leases expiring within the next two years, where renewal will not be financially viable.”
“We are commencing a consultation exercise with affected employees and anticipate that branches will close during the first half of the year. The remaining 198 better performing premium branches are in more convenient locations with an infrastructure capable of receiving dry cleaning from various collection and delivery points.”
The Preston Brook-based company said overall group trading results for the year ended December 31, 2014, would be slightly better than expectations and considerably ahead of the previous year, following the successful takeover of Bourne in early 2014.
The acquisition was a key part of the company’s strategy to expand into the volume hotel linen market.
109 Johnsons dry cleaning stores will close down over the next two years.
Textile Rental
By far the group’s largest business unit, Textile Rental continued performing well in 2014, with improved margins, superior customer retention, and robust new sales, which have led to increased investment in rental stock.
The £8.2 million investment in Johnson’s new plant in Leeds is expected to be operational early this year. It will be the country’s most automated garment processing plant.
Dry Cleaning
This segment continues operating in a difficult high street environment, and despite a number of initiatives to reach new customers, like-for-like sales in 2014 were down compared to 2013. The company expects 2014 results to be in line with expectations.
Johnson’s collection and delivery partnership with Waitrose has progressed well. A total of 78 Waitrose stores now represent the company, while a further 46 locations are expected to be added in the first quarter of 2015.
Restructuring Cost
The planned restructuring of the dry cleaning business and associated property provisions will result in an estimated charge of about £6.5 million net. This will be treated as an exceptional item in the first half of 2015.
The group’s net debt at the end of December 2014 is forecast to be about £29.0 million, versus £31.7 million as at June 2014.
Outlook
Johnson’s board says it is pleased with its Textile Rental performance, and sees further opportunities for additional investment and growth.
Regarding dry cleaning, the company wrote:
“In Drycleaning, the opportunity to streamline the branch network and improve the convenience of our services for many customers is expected to drive increased margin in the medium term.”
The board believes the momentum gathered in 2014 in the textile rental business will continue this year, while its dry cleaning segment will benefit from the cost-cutting measures.
Full-year 2014 results will be published on March 34rd, 2015.