Sketchley clean-up takes time


Longstanding shareholders in Sketchley, like M&G and Britannic Assurance, must be kicking themselves for backing new management at Britain's largest dry cleaning group five years ago. In doing so they passed up a pounds 90m-plus, all-paper offer from the Compass catering group, which had turned hostile after being brought in as a white knight to an earlier takeover bid from Godfrey Davis.

Since then shares in Sketchley have slithered from around 350p to yesterday's 94p, up 4p, valuing the group at pounds 60m. Having restored the group to something like an even keel, the original team has now passed the baton to new management, led by chief executive John Jackson, who arrived from Body Shop and Virgin in October.

Results yesterday showing pre-tax profits up from pounds 5.06m to pounds 6.37m in the year to March probably owe more to the previous incumbents than to Mr Jackson and his colleagues.

Cleaning up the mess seems to have taken longer than anyone expected. The closure of loss-making shops accounted for all the rise in retail profits from pounds 2.27m to pounds 2.83m. A further 26 outlets were shut, taking the total to 70 over the last 18 months, with the pounds 1.5m cost already provided for in the previous year.

The linen rental and uniforms business made better progress, with profits rising from pounds 4.76m to pounds 6.2m, although Sketchley had the benefit from a first-time contribution of pounds 790,000 from the Warrender aircraft supplies business, acquired for pounds 8m in April 1994. Warrender's early promise was not entirely fulfilled as British Airways used the opportunity of the change of ownership to renegotiate its contracts.

Mr Jackson is pinning his hopes for the retail side on a new selling proposition to customers. Services provided by SupaSnaps, the photo-processor acquired two years ago, will be available in over 500 of the 750 Sketchley outlets by the end of the year, including 113 joint sites. The opportunity is also being taken to jazz up the shops to make them more user-friendly, and Mr Jackson is introducing new merchandise, extending dry cleaning operations in supermarkets and starting trials in petrol stations.

But despite his optimism, Sketchley continues to operate in three intensely competitive markets where differentiation on anything other than price is difficult. Profits of pounds 7.7m this year would fairly value the shares on a prospective multiple of 10 until the fruits of the new management strategy become clearer. The downside should be limited by a yield of 4.6 per cent, based on last year's dividends of 3.4p, up 6 per cent.

BA sends out confusing signals fro

The mixed signals coming from British Airways' results are more confusing than an Aeroflot timetable. Record passenger numbers, record cargo figures, even record profits of pounds 452m if you exclude the exceptional item. Yet, disappointment at the continuing underperformance of BA's European and American partners continues to cast a shadow.

Of BA's strategic alliances, only the link with Australia's Qantas can be called a success. Yesterday's pounds 125m provision against BA's pounds 251m investment in USAir, however, comes just as optimism is growing about the American company's future. USAir's talks with unions are progressing well and the company halved its losses in the last quarter.

BA did not like having to make the provision, arguing that it was a technicality because its shares are listed on Wall Street. Under US GAAP rules, a company is forced to write down any loss on an investment that would not have recovered within about 18-24 months.

Not everyone is convinced. Despite the pounds 70m in revenues accruing to BA last year because of the link, the USAir investment is clearly not worth the money paid for the 25 per cent and it was helpful to see some reflection of that. Similar transparency would be appreciated when dealing with BA's investment in Deutsche BA and France's TAT, described by the company yesterday as the black spots in the results.

It is unclear how much BA paid for its 49 per cent stakes in each of the two companies, whose combined losses rose to pounds 90m last year. Neither would the company break down the losses, though it is thought that TAT is the worse performer. Qantas remains the bright spot of BA's global strategy, and was largely responsible for the pounds 22m rise to pounds 58m in profits from associated undertakings.

Productivity was up 3.2 per cent, and yields on scheduled services rose 0.6 per cent. Also, the dividend was a satisfactory 8.9p, making 12.4p for the year, and with cover at three times the prospects for future payments look secure.

BA is supremely confident about its future, but investors should hold fire. The company's alliances remain a problem, the vital US market is nearing its peak and fuel prices are edging up. Hold the shares until the picture clears.

Casinos thrive on high rollers

On Thursday, all being well, London Clubs International will join Crockfords, now known as Capital Corporation, as one of the select band of fully quoted casino operators.

Investors in LCI during its short life on the soon-to-disappear Unlisted Securities Market have already done well, seeing their shares rise from last June's 200p placing price to 316p yesterday, up 7p on the day. The reason has been LCI's ability to ride out recession on the back of high rolling Middle and Far Eastern clients.

Over four-fifths of last year's operating profits of pounds 32m, up from pounds 25m the year before, came from just two upmarket casinos in London's West End. Les Ambassadeurs, just off Park Lane, and the Ritz, in the basement of the eponymous hotel, are heavily reliant on clients prepared to put up tens of thousands of pounds.

But their performance hides a seven-figure turnaround in the more downmarket Golden Nugget and Sportsman outlets, also in London.

LCI's pre-tax profits of pounds 29.4m, up from pounds 14m, are pretty meaningless in the light of last year's pounds 27.5m capital raising. Pro forma figures show profits up from pounds 23.1m to pounds 30.4m, with earnings per share rising 36 per cent to 26.7p.

Standing on a historic price/earnings ratio of 12 and supported by a yield of 5.2 per cent, based on a 13.25p dividend for last year, the shares look reasonable value. Added spice comes from the Barclay Brothers' 24.6 per cent stake.

REX/Eye Candy
A photo of Charles Belk being detained by police on Friday 22 August
Alexis Sanchez celebrates after scoring his first goal for Arsenal in the Champions League qualifier against Besiktas
sportChilean's first goal for the club secures place in draw for Champions League group stages
Arts and Entertainment
Amis: 'The racial situation in the US is as bad as it’s been since the Civil War'
booksAuthor says he might come back across Atlantic after all
ebooksAn evocation of the conflict through the eyes of those who lived through it
Life and Style
Google Doodle celebrates the 200th birthday of Irish writer Sheridan Le Fanu
Arts and Entertainment
Vinyl demand: a factory making the old-style discs
musicManufacturers are struggling to keep up with the resurgence in vinyl
In Eternal Sunshine of the Spotless Mind Jim Carrey and Kate Winslett medically erase each other from their memories
scienceTechnique successfully used to ‘reverse’ bad memories in rodents could be used on trauma victims
Arts and Entertainment
Singer Pixie Lott will take part in Strictly Come Dancing 2014, the BBC has confirmed
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

C# Developer (C#, ASP.NET Developer, SQL, MVC, WPF, Real-Time F

£40000 - £48000 per annum + benefits+bonus+package: Harrington Starr: C# Devel...

C# Swift Payment Developer (C#, ASP.NET, .NET, MVC, Authorize.N

£45000 - £60000 per annum + benefits+bonus+package: Harrington Starr: C# Swift...

DevOps Engineer - Linux, Shell, Bash, Solaris, UNIX, Salt-Stack

Negotiable: Harrington Starr: A fast growing Financial Services organisation b...

Trade Desk FIX Analyst - (FIX, SQL, Equities, Support)

£50000 - £60000 per annum + excellent benefits: Harrington Starr: An award-win...

Day In a Page

Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone
Amazon is buying Twitch for £600m - but why do people want to watch others playing Xbox?

What is the appeal of Twitch?

Amazon is buying the video-game-themed online streaming site for £600m - but why do people want to watch others playing Xbox?
Tip-tapping typewriters, ripe pongs and slides in the office: Bosses are inventing surprising ways of making us work harder

How bosses are making us work harder

As it is revealed that one newspaper office pumps out the sound of typewriters to increase productivity, Gillian Orr explores the other devices designed to motivate staff
Manufacturers are struggling to keep up with the resurgence in vinyl records

Hard pressed: Resurgence in vinyl records

As the resurgence in vinyl records continues, manufacturers and their outdated machinery are struggling to keep up with the demand
Tony Jordan: 'I turned down the chance to research Charles Dickens for a TV series nine times ... then I found a kindred spirit'

A tale of two writers

Offered the chance to research Charles Dickens for a TV series, Tony Jordan turned it down. Nine times. The man behind EastEnders and Life on Mars didn’t feel right for the job. Finally, he gave in - and found an unexpected kindred spirit
Could a later start to the school day be the most useful educational reform of all?

Should pupils get a lie in?

Doctors want a later start to the school day so that pupils can sleep later. Not because teenagers are lazy, explains Simon Usborne - it's all down to their circadian rhythms
Prepare for Jewish jokes – as Jewish comedians get their own festival

Prepare for Jewish jokes...

... as Jewish comedians get their own festival
SJ Watson: 'I still can't quite believe that Before I Go to Sleep started in my head'

A dream come true for SJ Watson

Watson was working part time in the NHS when his debut novel, Before I Go to Sleep, became a bestseller. Now it's a Hollywood movie, too. Here he recalls the whirlwind journey from children’s ward to A-list film set
10 best cycling bags for commuters

10 best cycling bags for commuters

Gear up for next week’s National Cycle to Work day with one of these practical backpacks and messenger bags
Paul Scholes: Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United

Paul Scholes column

Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United
Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?