Johnson Service sinks to record low after another profit warning
Published 01/11/2007 | 12:11
Shares in Johnson Service Group hit an all-time low yesterday after the struggling dry-cleaning and industrial laundry company issued another profit warning that further undermined confidence in its management team.
The latest warning triggered a 31 per cent decline in the company's valuation to below £100m. Over the past year, Johnson Service has lost two thirds of its value, and speculation is rife that it is bracing itself for a bid from a bargain-hunting private equity player or a vulture fund.
Johnson Service, which can trace its roots back to 1780, has suffered an alarming decline in its fortunes over the past year. The departure last November of Stuart Graham, the chief executive widely credited with turning the business around, appears to have been the catalyst for the company's decline and pressure is building on his replacement Charles Skinner, and chairman Simon Sherrard, to stand down.
The latest warning has triggered a further reduction in forecasts for 2007 and 2008, and increases pressure on Mr Skinner to reduce the company's debt position which stands above its market capitalisation at £150m. The profit warning came as a nasty surprise to investors after Johnson Service said in September current trading was encouraging.
Mr Skinner, a former investment banker and chief executive of Brandon Hire, will now increase his efforts to dispose of a number of the company's faltering non-core businesses, including its Stalbridge unit that supplies linen to the hotel and catering industry, its specialist dry-cleaning division Alex Reid and its Workplace Engineering division which provides mechanical engineering services.
The company's house broker Investec could not see the upside after its latest warning. Robert Morton, an analyst with the investment bank, said: "Even after the recent underperformance, we believe it will be difficult for the shares to establish a base until there is more clarity over the outcome for next year."