- Positive first half points to full-year beat
- Dividend raised and buyback extended
- Shares rally to new high
Shares in textile and workwear rental firm Johnson Service (JSG:AIM) gained more than 5% to a new 12-month high of 131p as the firm posted an impressive recovery in revenue for the six months to June and announced a new share buyback programme.
In addition, the company lifted its outlook for the full year for the second time thanks to steady trading and before the inclusion of its latest acquisition.
REVIVAL IN HOSPITALITY
Group sales for the first half of 2023 increased 22% to £215 million driven by organic growth of 20.6%, while economies of scale and tight cost control resulted in adjusted operating profits increasing by 48% to £19 million.
The textile rental business, which largely serves the HORECA (hotel, restaurant and catering) sector, reported a 30% jump in revenue to £144 million thanks to organic growth of 28.4% reflecting new customer contracts, higher volumes and higher prices.
Adjusted operating profit for the textile division almost doubled to £10.9 million from £5.5 million last year.
The workwear division, which mainly provides clothing, protective wear and laundry services to corporates across all industry sectors, posted an increase of 7.7% in revenue to £71 million driven by organic growth of 7.5% as the firm maintained its prices at the expense of a dip in volumes, although it noted activity had increased in recent weeks.
‘Recognising the volumes processed over the busy summer months, improving efficiencies and a somewhat more predictable outlook on the cost base, together with our assumption that the trading environment remains unchanged, we expect the full year outturn to be slightly ahead of the guidance provided in our July trading update’, commented chief executive Peter Egan.
INVESTING IN GROWTH
The company has made two notable acquisitions this year, buying Regency – which serves the luxury and bespoke end of the HORECA market – in February, and Celtic Linen – a leading provider of textile rental services to the healthcare and HORECA sectors in Ireland – at the beginning of this month, expanding its reach across industries and outside its core UK market.
In addition, Johnson Service has invested nearly £13 million across its facilities and committed £16 million to a new site in Crawley which is due to be up and running in the second half of next year and will provide greater access to markets in London and the South East.
INCREASING SHAREHOLDER RETURNS
Despite these sizeable investments in growing the business, the firm has raised its interim dividend from 0.8p to 0.9p per share and is rewarding investors by extending its share buyback.
Having returned just over £25 million since starting the programme a year ago, the group’s strong balance sheet means it can commit another £10 million to buying back shares between now and the beginning of March 2024.
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