Market ready for Sketchley tumble: Losses at dry cleaning shops detract from stable performance by workwear division

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CONSUMER reluctance to spend on dry cleaning hit Sketchley, where annual pre-tax profits tumbled from pounds 6m to pounds 3.1m. The 450 dry cleaning shops made a loss of pounds 200,000, detracting from a stable performance by the workwear division.

The stock market was, however, ready for the slump after a profits warning at the beginning of April. A final dividend of 2p meant the total was unchanged at 3p and the shares closed up 5p at 92p.

The figures for the 53 weeks to 2 April 1992 included a pounds 1.7m exceptional charge as a provision for renegotiating five-year borrowing agreements struck in 1989 at fixed interest rates of around 12.25 per cent.

The company said the borrowing facility was no longer necessary as debt had been cut from pounds 70m to less than pounds 7m, and gearing fell this year from 31 per cent to 18 per cent.

'This is the perverse result of two very good things - reducing our borrowings and the cut in interest rates,' said John Richardson, joint deputy chairman.

'We could have brought in an exceptionally high interest charge next year, but we decided to take the write- off this year.'

He said Sketchley's borrowings would rise to about pounds 10m next year after last month's acquisition of Supasnaps from Dixons for pounds 4.3m.

The textile services division, which launders and provides uniforms for companies, was hit by redundancies within clients' workforces but balanced this by winning new long-term contracts with J Sainsbury, Eastern Electricity, Unigate, McVities and Network SouthEast, in sectors less susceptible to cyclical downturns.

'Our customer base reads like a laundry list of the blue chip names in British industry but we all know that all of those names, over the last two years, have been laying off workers,' Mr Richardson said. 'We have maintained profits in those circumstances and that is a very good performance.' He said the market could be expanded further as many firms were still not contracting out their uniforms.

Earnings per share after the exceptional charge fell from 7.8p to 4.9p.