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Johnson Service's busy year

The textile rental and dry-cleaning group made a big acquisition in May, helping drive a deserved rerating.
September 2, 2015

Half-year numbers from Johnson Service Group (JSG) were boosted by the £66m acquisition of London Linen in May. Funded by £21.1m of new equity as well as an increase in gearing, the deal has taken Johnson further into the business of renting out table cloths, napkins and chefswear to restaurants and caterers.

IC TIP: Hold at 94p

Aided by two months' contribution from London Linen as well as a £22m acquisition last year, Johnson's textile rental division saw a 15 per cent increase in adjusted operating profits to £12.4m. Chief executive Chris Sander is confident that strong exposure to the restaurant, automotive and food production sectors - "the parts of the economy that are doing well" - will continue to benefit this business.

Meanwhile, the retail dry cleaning arm, which includes the brands Johnson Cleaners and Jeeves of Belgravia, has been shrinking to improve profitability. Management has almost completed a £6.5m reorganisation involving the closure of 99 branches. This explains the poor reported profit numbers in our table. Strip out amortisation and hefty restructuring costs and operating profit jumped 20 per cent to £11.3m.

House broker Investec is forecasting normalised pre-tax profit of £24.6m and EPS of 6.1p this year, up from £20m and 5.2p in 2014.

JOHNSON SERVICE GROUP (JSG)

ORD PRICE:94pMARKET VALUE:£311m
TOUCH:94-94.5p12-MONTH HIGH:94pLOW: 56p
DIVIDEND YIELD:2.5%PE RATIO:67
NET ASSET VALUE:30p*NET DEBT:72%

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20141026.41.70.50
20151091.20.20.65
% change+7-81-88+30

Ex-div:08 Oct

Payment:06 Nov

*Includes intangible assets of £127.6m, or 39p a share