Linen giant Johnson sees hospitality revenue fall 97%

Runcorn-based workwear and linen rental company Johnson Service Group (JSG) said on Tuesday that revenue in its hotel, restaurant and catering markets fell 97% in April as the coronavirus crisis forced the closure of these businesses.

“Within HORECA, which serves the Hotel, Restaurant and Catering markets, we have ceased processing at the vast majority of our 18 sites as the demand for linen has significantly reduced from most sections of the hospitality market,” said Johnson in an AGM statement.

“Organic growth for the first two months of the year was particularly strong at 9%, however, March saw volumes reduce resulting in a negative organic growth in the month of 27%. 

“In April, revenue fell by some 97% on an organic basis due to the closure of the vast majority of our hospitality customers.”

The textile services provider said its workwear business, which provides garment rental, protective wear and laundry services is continuing to supply key industries and all its processing sites remain open.  

“Whilst trading for the first two months of the year was in line with our expectations, we subsequently saw a reduction in requirements from certain, mainly blue collar, industries although we are seeing some increased demand from our food customers which partly offsets this,” said Johnson.

“Organic growth within our workwear business for the first quarter overall was slightly negative and trading in April was some 12% down.”

Johnson has furloughed “a significant proportion” of its employees.

“The board and senior management team have all accepted a temporary salary reduction of 20%, initially for a three-month period from 1 April 2020, and the majority of other employees in support and administration roles who have not been furloughed have accepted a salary reduction of 10%, initially for the same period,” said the firm.

Johnson has withdrawn its final dividend payment for the year to December 31, 2019, to preserve £8.7 million.

“Furthermore, the board anticipates that no dividend will be payable in respect of the current financial year,” added Johnson.

In its outlook, Johnson said: “As a result of the significant uncertainty surrounding the impact of COVID-19, the board is unable to provide financial guidance until the expected duration of the current stay at home measures, as well as the details of how and over what timeframe they will be relaxed thereafter, becomes clearer.”

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