Half the battle of growing a customer base is keeping existing ones happy, and on this front Johnson Service Group's (JSG) consistency is noteworthy. Client retention levels at the textile rental and cleaning specialist have held firm at 95 per cent for each of the past three years, while an existing customer satisfaction index reached a high of 86 per cent in 2018.
New business wins were strong, too, with organic sales growth accelerating to 7.8 per cent for the year, compared with 7.2 per cent in the first half of 2018 and 5.1 per cent in 2017. Management attributes this to capital investment in productivity and processing capacity, such as new equipment at its Hinckley plant, which increased folding capacity by 17.5 per cent. This, combined with a 35 per cent improvement in capacity at the group's Letchworth plant, helped drive margin increases in the workwear division.
The acquisition of South West Laundry dented profitability in the 'Horeca' (hotel, restaurants and catering) business, where the adjusted operating margin dipped roughly 130 basis points to 14.6 per cent. Undaunted, management is looking to increase geographic coverage across the UK through acquisitions, and Mr Egan said future deals were likely to focus on the “highly fragmented” Horeca segment.
House broker Investec is forecasting adjusted pre-tax profit of £45m in 2019, giving EPS of 9.8p (from £42.5m and 9.3p in 2018).
| JOHNSON SERVICE GROUP (JSG) | ||||
| ORD PRICE: | 130p | MARKET VALUE: | £477m | |
| TOUCH: | 129.8-133p | 12-MONTH HIGH: | 145p | LOW: 112p |
| DIVIDEND YIELD: | 2.4% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 52p* | NET DEBT: | 52% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 210 | 11.6 | 2.9 | 1.70 |
| 2015 | 188 | 17.3 | 4.3 | 2.10 |
| 2016 | 257 | 25.9 | 6.0 | 2.50 |
| 2017 | 291 | 31.2 | 6.9 | 2.80 |
| 2018 | 321 | 33.1 | 7.3 | 3.10 |
| % change | +10 | +6 | +6 | +11 |
| Ex-div: | 11 Apr | |||
| Payment: | 10 May | |||
| *Includes intangible assets of £167m, or 46p a share | ||||
