A relatively quite period on the acquisitions front for Johnson Service Group (JSG) meant that organic revenue growth was the chief determinant of performance during the first half. The Horeca division, which provides linen to hotels, restaurants and caterers, increased revenue by 11.9 per cent to £99.6m, although underlying revenue was up 8 per cent on the back of new hotel signings and bolt-on additions to current customer contracts. Meanwhile, purely organic sales growth of 6.8 per cent in workwear translated into a 12 per cent increase in adjusted operating profit to £12.1m. Performance was aided by a 95 per cent customer retention rate, while around a fifth of new business originated from clients entering the workwear rental market for the first time.
The workwear division saw a 0.4 percentage point margin expansion (excluding the impact of new accounting standard IFRS 16) to 17.5 per cent, whereas a 0.1 percentage point margin contraction in Horeca reflects the seasonality of South West Laundry, a business acquired last year. Further erosion may occur in 2020 until the new Leeds plant reaches its optimum level. With a £10m capital expenditure cost (of which £3m will be spent this year), the facility will open in the spring of 2020, creating additional hotel linen capacity and allowing more customers to be serviced.
Investec has upped its forecasts again since the pre-close update, and now expects adjusted pre-tax profit of £46.7m and EPS of 10.2p for the full year, rising to £48.8m and 10.7p in 2020.
| JOHNSON SERVICE (JSG) | ||||
| ORD PRICE: | 163p | MARKET VALUE: | £603m | |
| TOUCH: | 163-165p | 12-MONTH HIGH: | 177p | LOW: 112p |
| DIVIDEND YIELD: | 2.0% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 51p* | NET DEBT: | 46%** | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 152 | 14.0 | 3.1 | 1.00 |
| 2019 | 167 | 15.2 | 3.3 | 1.15 |
| % change | +10 | +9 | +6 | +15 |
| Ex-div: | 03 Oct | |||
| Payment: | 01 Nov | |||
| *Includes intangible assets of £164m, or 44p a share **Does not include £43.8m in lease liabilities | ||||
