AGM Statement and Update on COVID-19

 

5 May 2020

AIM: JSG

Johnson Service Group PLC

 

AGM Statement and Update on Further Actions in Response to COVID-19

 

Johnson Service Group PLC (the "Company" or the "Group"), a leading UK textile services provider, provides an update on its strong financial and liquidity position and the actions taken in response to COVID-19 since its previous announcement on 20 March 2020.

 

Trading Update

The Group is continuing to see a significant amount of disruption across its markets, prompting the Board to implement appropriate mitigating actions.

 

Our Workwear business, which provides garment rental, protective wear and laundry services is continuing to supply key industries and all our 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.  Organic growth within our Workwear business for the first quarter overall was slightly negative and trading in April was some 12% down.

 

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.  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.

 

Due to the reduction in demand we have furloughed a significant proportion of our employees, most notably in the HORECA division.  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.

 

The above measures, together with a hold on capital investment and the cancellation of all non-essential revenue expenditure, are aimed at conserving cash within the business.

 

Net debt, excluding IFRS 16, at the end of March 2020 was in line with December 2019 at £87.7 million, resulting in a net debt to adjusted EBITDA leverage ratio, calculated in accordance with our bank facilities, of 1.3:1 (December 2019: £87.7 million and 1.3:1 respectively).

 

Government Support Initiatives

In addition to accessing the Coronavirus Job Retention Scheme, the Group has welcomed the VAT and PAYE payment deferrals announced by the Government.

 

Financing, Liquidity and Covenants

The Group has always adopted a prudent approach to its cost base and capital allocation and, with the benefit of its ordinarily cash generative business model, has maintained a strong financial position.

 

We are currently engaged in constructive discussions with our three principal banks and have agreed that, although we expect to achieve the June 2020 covenants, they will waive that test.  No fee has been charged for this waiver demonstrating the strong relationship we continue to have with our lenders.

 

Alongside discussions with our principal banks for the drawing of the £40 million Accordion Facility, we are also pursuing a resetting of covenants into 2021 to reflect the significant changes we are currently experiencing in trading, particularly within our HORECA business, and the continuing uncertainty around the length of time that the current containment measures may be in place.

 

We are also exploring the availability and suitability of other Government funding initiatives and a further announcement will be made as appropriate.

 

Dividend

As announced on 20 March 2020, given the current need for prudent cash management, the Board will, at today's Annual General Meeting, withdraw Resolution 3 in the Notice of Annual General Meeting relating to the final dividend payment in respect of the year ended 31 December 2019 of 2.35 pence per Ordinary share.  The cash benefit to the Group of this action will be some £8.7 million which will further ensure the Group's financial resilience.

 

Furthermore, the Board anticipates that no dividend will be payable in respect of the current financial year.

 

Outlook

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.

 

In the meantime, our priority remains the health and wellbeing of our employees and customers and we are continuing to ensure that we have the appropriate measures and precautions in place for their safety. We would like to recognise our employees' commitment during this challenging time.

 

The Board remains confident in the prospects and viability of the Group and is focussed on taking action to maintain its strong cash and liquidity position and ensuring the business is ready to return to more normal levels of operation.

 

 

 

For further information, please contact:

 

ENQUIRIES

Johnson Service Group PLC (www.jsg.com)
Peter Egan, CEO
Yvonne Monaghan, CFO
Tel: 01928 704 600
Investec Investment Banking (NOMAD)	Camarco (Financial PR)
David Flin	Ginny Pulbrook
Carlton Nelson	Ben Woodford
Virginia Bull	Oliver Head
Tel: 020 7597 4000	Tel: 020 3757 4992

 

 

 

 

About Johnson Service Group PLC

www.jsg.com

 

Headquartered in Preston Brook, Cheshire, JSG provides textile services across the UK.  The Group is the leading supplier of workwear and protective wear in the UK.  It also provides premium linen services for the hotel, catering and hospitality markets, and high-volume hotel linen services.  With its core values of quality, reliability and service, the Group aims to provide customers with an outstanding level of customer care.