Workwear group posts strong annual figures and a bullish forecast
Annual sales and profits have both improved at Runcorn-based workwear and hospitality industry textile business, Johnson Service Group, it announced this morning.
The group, which last week unveiled the acquisition of Irish business Celtic Linen in a deal worth £27.1m, is also planning to launch another share buyback programme and said it expects the current financial year to slightly exceed current market expectations.
Total revenue for the year to June 30, 2023, increased by 22% to £215m, while pre-tax profits of £13.5m was a big improvement on the previous year’s £5.1m figure.
An interim dividend of 0.9p per share has been recommended, up from 0.8p last year, in line with the group’s progressive dividend policy.
The group’s initial share buyback has been completed with £19.7m deployed since January 1, 2023 and £25.3m returned to shareholders since the programme commenced.
It is the intention to launch a further share buyback programme of up to £10m. The group said it has a strong balance sheet with capital available for further investment.
Throughout the reporting period, Johnson said it enjoyed continuing strong organic growth in HORECA (healthcare and hotel, restaurant and catering) with an increased number of locations serviced.
It has seen increasing sales activity and a strengthening pipeline in both workwear and HORECA, while inflationary cost increases were offset by improved efficiency and pricing.
Its energy costs remain high, but are being proactively managed, and sustainability targets are in place for 2023, including carbon, water and waste reduction.
Capital projects are being progressed to add further capacity in both divisions.
In the 12 month period the group completed the £5.75m acquisition of Regency Laundry in February 2023, followed by the €31.5m addition of Celtic Linen in August, both on a debt free, cash free, basis.
Chief executive, Peter Egan, said: “The group’s strong performance during the first six months of the year, with a significant improvement in revenues, profits and margins, reflects the return to more normal and predictable trading patterns alongside proactive management of our cost base and improving production efficiencies.
“So far this year, and in line with our targeted buy and build growth strategy, we have continued to develop our strong M&A pipeline through the acquisition of Regency and Celtic Linen.
“We have also invested £12.9m across the estate and committed to a new state-of-the-art site in the South-East to further improve operational efficiencies, increase capacity and support innovation. Our intention to increase our bank facility from £85m to £120m in the coming months provides us with the ability to fund further investment opportunities that may arise.”
He added: “The board was pleased to indicate an outlook for the year ahead of market expectations when the group released its pre-close trading update in mid-July.
“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. This improved outlook is in addition to the positive contribution expected from Celtic Linen.”
The board believes the operating margin of each individual division can return to historic levels achieved in 2019, prior to the pandemic, but said the timing of achieving this is dependent on where a number of inflationary pressures, most notably energy and labour, settle over the medium term.
