Johnson Service Group in £27m Irish acquisition

Runcorn-based workwear and hospitality industry textile business, Johnson Service Group, has acquired an Irish operation in a deal worth £27.1m.

Harkglade, based in County Wexford, together with its subsidiaries Celtic Linen and Millbrook Linen, together, Celtic Linen, services the Republic of Ireland’s healthcare and hotel, restaurant and catering (HORECA) sectors, and is the largest linen supplier to the Republic of Ireland’s healthcare sector and the second largest linen supplier to the HORECA sector.

The acquisition has been funded from the group’s existing committed revolving credit facility.

The Irish group had revenues of €29m in the financial year ended January 1, 2023, and the acquisition is expected to be immediately earnings enhancing and in-line with Johnson’s stated strategy of seeking out value accretive acquisitions and expanding its geographic coverage.

It provides Johnson with the opportunity to further diversify its customer base, with more than 50% of Celtic Linen’s revenue derived from the healthcare sector.

Celtic Linen’s existing and experienced management team will remain with the business.

Johnson CEO, Peter Egan, said the acquisition represents a further significant step in the strategy to expand the range and scale of services on offer.

He said: “I have known Celtic Linen for many years and have been very impressed with the quality of the business, its reputation for excellent customer service and the growth it has achieved in recent years.

“The existing senior management team will remain with the business with Joanne Somers, managing director of Celtic Linen, reporting directly to myself.”

He added: “It gives me great pleasure to welcome each and every employee of Celtic Linen to the group.”

The acquisition includes a commitment from Johnson to fund €1.9m of capital expenditure that Celtic Linen had committed to prior to the completion of the deal.

It said this state-of-the-art investment not only increases processing efficiency and capacity, but also complements Celtic Linen’s commitment to sustainability through reduced energy usage.

The majority shareholder of Celtic Linen was Causeway Capital Partners, a growth-focused private equity firm investing in businesses across Ireland and the UK. Other shareholders included Celtic Linen management.

The business, which has approximately 350 staff, operates from two freehold facilities, the first of which is based in Drinagh, County Wexford, with the second site based in Naas, County Kildare.

Similar to many businesses in the textile services industry, Celtic Linen was severely impacted by COVID-19 – albeit to a somewhat lesser extent given its exposure to healthcare.

Accordingly, trading results during the two financial years to December 26, 2021, were negatively impacted.

In its most recent financial year, ended January 1, 2023, and despite the challenging economic environment, trading performance improved significantly.

Celtic Linen’s revenue, adjusted EBITDA and loss before taxation, after finance costs of €1.5m, was €29m, €4.6m and €900,000, respectively. Celtic Linen’s gross assets as at the same date amounted to €16m, of which €15.3m were tangible.

In the six months to July 2, 2023, the business continued to show significant year-on-year growth with revenue and adjusted EBITDA increasing to €16.7m, compared with €12m the previous year, and €3.9m, up from €1.3m in 2022, respectively.

Since that date, the business has continued to show growth with the securing of several new contracts in both healthcare and HORECA