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JSG acquisition pays off

Johnson Service Group (JSG) has seen its textile rental business take off after an acquisition helped boost half-year trading.
September 2, 2014

Johnson Service Group's (JSG) decision to focus on its textile rental business is paying off. Textile rental revenues at the dry cleaning and textile company jumped 10 per cent in the six months to June to £74m, while the unit's adjusted operating profit grew by a quarter to nearly £11m. This was driven in large part by the £22m acquisition of hotel linen provider Bourne Services Group earlier this year, which was part-funded by £12.8m of cash proceeds from an equity raise in March.

IC TIP: Buy at 63p

The Apparelmaster brand also performed well, with increased sales, new business wins and better customer retention rates. The business should get an added boost when a new workwear factory, currently under construction in Leeds, doubles processing capacity in 2015. Meanwhile, Stalbridge Linen Services continues to make up lost ground after volumes were hit by the loss of its largest customer in April 2013.

Another reduction in dry cleaning branches, now down to 321 (June 2013: 336), cut divisional revenues from £28.5m to £27.2m. Although the dry-cleaning market remains "challenging", JSG says it remains determined to drum up new business. One such initiative includes a new partnership with Waitrose, whereby dry cleaning is offered to shoppers at the retailer's customer service desks.

Analysts at Investec expect pre-tax profits of £19.6m in 2014, giving EPS of 5.2p, up from £13.4m and 3.8p in 2013.

JOHNSON SERVICE GROUP (JSG)
ORD PRICE:63pMARKET VALUE:£188m
TOUCH:62-63p12-MONTH HIGH:65pLOW: 48p
DIVIDEND YIELD:2.1%PE RATIO:15
NET ASSET VALUE:27p*NET DEBT:39%

Half-year to 30 JuneTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201396.14.41.30.4
2014101.66.41.70.5
% change+6+45+31+25

Ex-div: 09 Oct

Payment: 07 Nov

*Includes intangible assets of £68.7m or 23p a share