Investors in Johnson Service Group, the struggling dry-cleaning and workwear business, were dealt a new blow yesterday when it was forced to scrap a dividend it had already pledged to pay.

The group, whose brands include Jeeves of Belgravia and Johnson Cleaners, said that it would no longer pay, as planned, a dividend of 3p per share for the half year ending June 30.

However, the group insisted that it is still “working constructively” with its banks.

The Merseyside-based company said last month that it was likely to breach its banking covenants.

The concession followed a warning that profits for 2007 and 2008 were likely to be lower than expected.

Johnson, which has appointed Close Brothers to review its options, has blamed its woes in part on its inability to sell three “noncore” businesses.

It is trying to sell its Stalbridge Linen Services that provides linen to the catering, hotel and corporate hospitality industries, Workplace Engineering and specialist dry-cleaner Alex Reid.

The group, which appointed a new head, Charles Skinner, in March, had hoped to reduce its £150 million debt through the sales.

The poor state of the businesses has made it difficult to find a buyer and the group has said that the prospects for completing a sale this year are “limited”.

It insists that it will not accept a lower than expected price and hopes to complete the sales next year.

Johnson said that the payout of the interim dividend would have cost it £1.8 million.

The dividend was announced in September when the company reported pretax losses for the six months to June 30 of £13.8 million.

In a statement yesterday it said it was no longer “appropriate” to pay the money. It added that it would make a further announcement when it was right.

Analysts believe that Johnson will only rectify its problems by selling one of its core divisions such as corporate workwear.

It is also thought likely that the banks could demand the resignation of Mr Skinner, who was greeted with a rapturous welcome when he was appointed.

The shares, which traded at 430p a year ago, closed yesterday at 59p.

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