Supasnaps boosts Sketchley: Recession in South-east bites into dry cleaning profits

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The Independent Online
SKETCHLEY, the dry cleaners and workwear rental group, moved quickly to dampen enthusiasm yesterday, after a better-than-expected 16 per cent rise in pre-tax profits of pounds 3.6m for the half-year.

The profit improvement was mostly attributable to Supasnaps, the film processing chain bought from Dixons in April for pounds 4.3m. It was a bright spot for a company that has had a rough ride lately, with recession hitting its high- street dry cleaning outlets and the contraction of British Coal meaning fewer orders to launder miners' overalls.

David Davies, chairman, said Supasnaps had performed beyond expectations, but warned: 'Profits for the second six months are likely to be significantly less than for the first six months, owing to the marked seasonality of the Supasnaps business.' Analysts are forecasting full-year profits of between pounds 4.8m and pounds 5m.

Supasnaps' contribution to Sketchley's operating profits of pounds 4.3m in the 26 weeks to 1 October was pounds 1.9m. Group turnover was pounds 75.6m ( pounds 53.7m), of which pounds 24m came from Supasnaps.

Since the acquisition, Supasnaps has moved into 18 of Sketchley's 461 stores, and a further 22 joint operations are planned by March. Cash flow from Supasnaps was ahead of expectations, Mr Davies said.

The dry cleaning division made modest profits at the trading level, but recession continues to bite and signs of economic improvements are no better than tentative. Demand is particularly bad in south-eastern England, where high unemployment and strong competition forced Sketchley into an aggressive promotional campaign to reverse sharply declining sales. Year-on-year volumes were up 9 per cent.

Sketchley is spending pounds 3.5m on new machines to comply with European Union environmental legislation on CFC gases from dry cleaners. Mr Davies said many independent cleaners were likely to close because they could not afford the extra costs.

The textile rental division had seen margins fall but won substantial extra business. Ten per cent of its sales are with British Coal, compared with 60 per cent three years ago. The company said: 'The accelerating contraction of the coal industry and the decline in the number of miners had a negative impact on overall divisional profits in the first half.'

The interim dividend is held at 1p. Shares were down 3p at 105p.