Johnson Service Group remains positive about the future prospects for the business and expects to announce full year results slightly ahead of current market expectations.
Announcing its interim results for the six months ended 30 June 2019, the group said that continued organic growth delivers another consistent and strong financial performance.
Following very strong sales growth and continued high levels of customer retention across all market sectors, organic revenue growth reached 7.5% in the first half of the year. This, combined with a full six months trading from the South West Laundry acquisition completed in August 2018, together with the benefit of acquiring a number of contracts in January 2019, increased the group's revenue by 9.8% to £167.1 million (June 2018: £152.2 million).
Construction of the new Leeds production facility continues to be on time and on budget. The site in Gildersome, Leeds is now largely complete, in time for opening in the second quarter of 2020. Rapid progress has already been made with the installation of all core utilities ahead of plan. The overall project remains on plan, to schedule and in line with the previously announced capital expenditure cost in the region of £10.0 million.
The group comprises textile rental businesses, which trade through a number of very well recognised brands servicing the UK's workwear and hotel restaurant and catering (HORECA) market sectors. The Johnsons Workwear brand predominantly provides workwear rental and laundry services to corporates across all industry sectors, Stalbridge, London Linen and South West Laundry provide premium linen services to the restaurant, hospitality and corporate events market and Bourne, Afonwen and PLS provide high volume hotel linen services. Adjusted operating profit from the textile rental businesses increased by £2.8 million to £25.0 million (June 2018: £22.2 million), an increase of 12.6%.
The group has made significant progress in developing its new national brand and this is now being rolled out across the businesses. This roll out will take several years to fully implement and will be at a modest cost.
Johnsons Workwear provides workwear rental and laundry services to over 36,000 customers in the UK, from small local businesses to the largest companies covering food related and other industrial sectors. Trading for the first six months of 2019 was strong with organic revenue growth of 6.8% to £67.5 million (June 2018: £63.2 million).
Operationally the business continued to invest in plant and machinery. This included the installation of highly efficient garment folding machines in the high care food units at Gateshead and Birmingham, increasing their folding capacity. Several new industrial washing machines have also been installed across the estate. In Manchester, a refurbishment of the industrial unit to improve its efficiency is nearing completion, with the removal of drycleaning processing and replacement by washer-extractors. Work on expanding the industrial garment processing capacity at Basingstoke is underway with additional plans being considered for expanding food garment processing capacity next year as part of the group’s normal ongoing level of capital investment. In line with the development of the new Group wide national brand, Johnsons Workwear rebranding has commenced starting with a number of vehicles being rebranded with the new livery.
The total revenue for the HORECA division increased by 11.9% to £99.6 million (June 2018: £89.0 million). After adjusting for the acquisition of South West Laundry and also excluding the revenue from a small number of contracts acquired in January 2019, underlying revenue increased by 8.0%.
Peter Egan, CEO of Johnson Service Group, said: “This is a strong performance reflecting excellent sales growth, the benefits of recent acquisitions and continued high levels of customer retention across all market sectors. We are particularly pleased with the strength and quality of our organic performance, which has been achieved by investing capital in our operations giving increased production capacity to meet growing customer demand.
“We will continue to invest in our sites, including the completion of the new Leeds plant, allowing us to benefit from production efficiency gains as well as creating additional capacity in order to further increase revenues going forward.
“There is good momentum in the Group and we have started the second half strongly. In view of the encouraging performance over the summer months we anticipate that the results for the year will be slightly ahead of current expectations."