Johnson Service Group PLC (LON:JSG) shares dipped on Friday after the textile rental and workwear maker said it swung to a loss in 2020 as the Coronavirus (COVID-19) pandemic dented customer demand.
In its figures for the year to December 31, the company reported an adjusted pre-tax loss of £17mln compared to a £48.2mln profit in the prior year, while revenues slumped to £229.8mln from £350.6mln.
The company highlighted a “dramatic impact” of the pandemic on its results, particularly its Hotels, Restaurants and Catering (HORECA) division as a number of sites were mothballed due to fluctuating consumer demand as lockdown regulations continued to be altered over the year.
Despite this, the company said its workwear division had continued to operate during the pandemic, with an initial 12% reduction in volume in April improving to a 6% decline in August before reached pre-COVID volumes in October.
Looking ahead, the company said despite the impact of the pandemic on its business it remained confident of its medium and long term prospects and that it had utilised the government’s Coronavirus Job Retention Scheme (CJRS) to allow it to have “sufficient resource to respond to demand as volumes return”.
Johnson also said its HORECA plants are “primed to ramp up in response to customer demand” as lockdown restrictions are eased in the coming months.
"As anticipated, our 2020 results reflect the dramatic impact that COVID-19 has had on the group, particularly within our HORECA division. However, the decisive actions taken have protected the future of the business, by shoring up the group's balance sheet whilst managing our laundry operations to ensure flexible quality service for our customers. We continue to take pro-active actions to adapt our operations to ensure the group can thrive and have a strong platform from which we can scale up operations as higher levels of demand return”, chief executive Peter Egan said in a statement.
"We will continue our strategy to invest in our plants in order to maintain our position as a well invested operator, delivering outstanding levels of service to our customers. This, combined with our existing scale, ability to flex costs and focus on operational excellence, makes us confident that we will be able to take advantage of growth opportunities as they arise and to increase returns to shareholders over time," he added.
In a note, analysts at Peel Hunt reiterated their ‘add’ rating and 136p target price on the company, saying the results were ahead of their predictions and the group was “strongly placed for the recovery”.
“Given the pre-existing competitive advantages from the benefits of scale, the severity of the downturn and its balance sheet strength, we think JSG should emerge from COVID-19 in an even stronger competitive position. Further, there may be more M&A opportunities, particularly in HORECA, as smaller, less well capitalised competitors are financially constrained,” the broker said.
Shares in Johnson were down 0.1% at 156.4p in early trading.