Covid cash-flow concern of luxury cashmere firm

Textiles: Johnstons of Elgin tells of ‘strong’ results and scheme funds offer

Luxury cashmere manufacturer Johnstons of Elgin said yesterday it had secured a “substantial” UK Government-backed loan to help it survive the impact of Covid-19.

Chief executive Simon Cotton predicted sales would fall by around a third this year, but said the firm was in a “good position to thrive in the future”.

“Underpin our financial position as the business recovers”

He confirmed the company had secured support through the Coronavirus Large Business Interruption Scheme.

But potential cash-flow problems caused by the pandemic have created “significant doubt” among directors over the firm’s ability to continue as a going concern, according to newly-released accounts.

Johnstons’ annual report for the year to the end of last December revealed concerns over “greater unpredictable variation in the value and timing of cash inflows from customers” this year. Accounts showed pre-tax profits in line with the year before at £6.4 million, despite a 2.5% drop in turnover, to £77m, attributed to lower sales in the UK.

Johnstons, with mills and visitor centres in Elgin and Hawick, and stores in London and Edinburgh, has a workforce of 980.

Mr Cotton said: “We expect sales for 2020 to be more than 30% down and are preparing for a slow recovery through 2021.

“Thankfully, we go into this period of uncertainty with another strong set of results and a healthy balance sheet.

“We have secured an offer of funding through the Coronavirus Large Business Interruption Scheme via RBS (Royal Bank of Scotland), which will underpin our financial position as the business recovers.”

LOOMING UNCERTAINTY: Johnstons faces ‘greater unpredictable variation in the value and timing of cash inflows from customers’ this year