City round-up: Johnson Service Group; McBride
Workwear and hospitality industry textile business, Johnson Service Group, said adjusted operating profits for the year will be slightly ahead of current market expectations, in a trading update today.
The Runcorn-based group’s revenue in the six months to June 30, 2023, is expected to be £215m (2022: £176.2m), with revenue in the workwear business of £71m (2022: £66m) and in HORECA (hotel, restaurant and catering) £144m (2022: £110.2m). On an organic basis, revenue is expected to have increased by 20.6% on 2022 levels.
Workwear markets have remained relatively stable and, encouragingly, some positive signs on new sales have become evident in recent weeks.
HORECA volumes have continued to build with some 8,500 rooms installed by Hotel Linen in the first six months of the year. Continuing investment in all the group’s plants is increasing efficiency and capacity to allow for further growth.
Regency, the recently acquired luxury linen business, has settled into the group well and Johnson is progressing plans to improve capacity on the site.
The new HORECA site in Crawley is moving forward, with equipment now on order, and remains on schedule for opening in the second half of 2024.
The Runcorn-based group said that, while inflationary pressures continue and energy markets remain volatile, it does have more certainty on its costs in the short term. It has now secured fixed prices for 84% of its anticipated gas requirement and 87% of its anticipated electricity requirement for the remainder of this year.
In addition, 50% of the group’s anticipated gas requirement and 64% of its anticipated electricity requirement is now fixed for 2024, with further agreements at a lower level in place for 2025.
This more predictable cost base, together with current anticipated volume over the busy summer months, gives the group confidence that, assuming the trading environment remains unchanged, it will report full year adjusted operating profit slightly ahead of current market expectations.
The results for the six months to June 30, 2023, will be announced on September 5.
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McBride products
Manchester-based cleaning products manufacturer, McBride, said it will return to profit for the year to June 30, 2023, following the exceptional input cost inflation of the past two years, driven first by post-COVID-19 supply chain disruptions and more recently by the associated economic and inflationary impacts of the war in Ukraine.
Volumes were up 5.4% for the full year, following 12.7% growth in the fourth quarter.
The improvement in demand for products has been driven by a combination of business wins and strong demand increases on existing contracts. Across most markets, the group said it is evident that there is a shift to private label as a result of consumers’ growing preference for better value, high quality, private label products as they seek to mitigate the effects of inflation on their household budgets.
Overall revenues for the full year, reflecting both volume increases and pricing actions, will show growth of 28.4% on a constant currency basis compared with the year to June 30, 2022.
As a result of the strong fourth quarter trading performance, the group now anticipates that adjusted operating profit will be materially ahead of current market expectations (adjusted operating profit £9.7m, net debt £181m) and at the top end of the range indicated at the time of the trading statement on April 24, 2023 (adjusted operating profit £8m to £13m, net debt £181m to £186m).
Sustainable working capital improvements resulted in net debt closing at £166.5m, better than expectations, and the group’s liquidity at £59.3m, significantly higher than the minimum liquidity requirement of £15m applicable under the group’s financing arrangements.
Full year results will be announced on September 19.
Shares in the group soared by more than 19% in early trading on the update, from their opening price of 29p to 31.90p per share.
