REG - Johnson Service Grp. - AGM Statement and Updated Positive Energy Outlook

Johnson ServiceAnnouncement

01/05/2024 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240501:nRSA7080Ma&default-theme=true

RNS Number : 7080M  Johnson Service Group PLC  01 May 2024

1 May 2024

AIM: JSG

Johnson Service Group PLC

("JSG" or "the Group")

 

AGM Statement and Updated Positive Energy Outlook

 

JSG, a leading textile services provider in the UK and Republic of Ireland,
will be holding its Annual General Meeting today and will make the following
statement:

 

Current Trading

Revenue in the first three months of the year amounted to some £114 million
(2023: £98 million).  Organic growth in the same period was 8.9% (HORECA:
13.5%; Workwear: 0.5%).

 

HORECA volumes have been in line with our expectations, in what is
traditionally the quietest quarter of the year, whilst the more predictable
volume pattern, compared to recent years, has allowed us to better utilise our
resources.

 

Crawley, our new HORECA site, remains on budget and is expected to begin test
processing in the next few weeks.  We are already using the site as a
trunking depot and we anticipate that work will begin to transfer into Crawley
from the end of June, thereby also creating additional capacity in the
transferring sites.  As previously indicated, Crawley is expected to
negatively impact adjusted operating profit by some £3.7 million in 2024
(2023: £1.0 million) with progress steadily towards a breakeven point during
2026 as the site matures.  The site remains on track to generate a return
that comfortably exceeds the Group's weighted average cost of capital.

 

Our Celtic Linen business, acquired in August 2023, is performing as expected
and we are pleased with how the business is integrating into the wider Group.

 

Workwear traded in line with our expectations during the first quarter, with
encouraging sales momentum to both new and existing customers.

 

Updated Positive Energy Outlook

Energy costs have continued a general trend downwards since the end of 2023,
although still remain volatile on a day-by-day basis.

 

As we have previously communicated, our policy is to forward fix the pricing
of energy on a 'little and often' basis.  The weighted average price of our
current fixed arrangements when combined with the current forward market rates
for the remaining proportion of our anticipated energy usage would result in
an improvement to current market consensus estimates for 2024 onwards.

 

Forward market rates, as at 29 April 2024, were as follows:

 

       Gas                 Electricity

       (pence per Therm)   (£ per MWh)
 2024  77                  71
 2025  85                  76
 2026  77                  71

 

Based upon the market rates above and the energy fixes currently in place, we
estimate that the impact on our forecast energy cost when updated for these
figures, together with the benefit of ongoing operational efficiencies, would
result in a potential positive effect on adjusted operating profit in each of
2024, 2025 and 2026 of £3.0 million, £7.0 million and £9.0 million,
respectively.  Applying the same uplift in adjusted operating profit to
current market consensus would equate to a potential improvement in current
market consensus adjusted operating margin of 50, 130 and 170 basis points,
respectively.

 

Future energy market pricing will have minimal impact on 2024 but it is
estimated that, based on the energy fixes in place currently, a 10 pence per
Therm change in gas pricing and a £10 per MWh change in electricity pricing,
either up or down, would impact adjusted operating profit in 2025 and 2026 by
£0.6 million and £1.2 million, respectively.

 

Our policy of forward fixing energy pricing provides for visibility over
future cost.  In the three-year period from 2021 to 2023, this policy
secured, in aggregate, gas and electricity pricing at some £15.4 million
lower than had no fixed pricing been in place.  We do note, however, that
potentially for 2024, 2025 and 2026, this policy will result in a drag on
margin.  We have estimated that the drag on adjusted operating profit, as
already reflected in our forecast energy cost and, again, based on the current
average market prices and sensitivities quoted above, would be as follows:

 

       £m   bps
 2024  8.5  170
 2025  3.0  60
 2026  0.5  10

 

Balance Sheet

Bank debt increased from £61.7 million at December 2023 to £72.9 million at
the end of March 2024 and is expected to peak mid-year, reflective of the
timing of dividend payments and capital expenditure.  Bank debt at June 2024
is expected to be some £85.0 million before reducing to some £55.0 million
by December 2024.  We continue to see exciting opportunities to deploy
capital organically and have a good M&A pipeline.  Under our capital
allocation policy, we keep our capital structure under review taking into
account maintaining a strong balance sheet, continuing capital investment in
our estate, accretive acquisitions, a progressive dividend policy and
distributing any surplus cash to Shareholders.

 

Forthcoming Investor Activities

We are committed to clearly communicating our strategy and activities to our
stakeholders, in order that they receive a balanced and complete view of our
performance.

 

Accordingly, the Board intends to host a webcast of its interim results
announcement in September of this year.

 

Furthermore, the Board currently anticipates that a London-based investor
event will be held in the final quarter of 2024 to update the market on the
future growth and financial plans for the Group.  Further details will be
announced in due course.

 

 

Outlook

We remain encouraged by the medium-term prospects of the Group, in respect of
both organic growth and expansion through our strategy of targeted
acquisitions.

 

Based upon the market rates for energy referred to above, the energy fixed
pricing currently in place and the benefit of our ongoing actions to increase
operational efficiency, we expect to exit 2024 with strong progression towards
previous levels of adjusted operating margin.

 

Furthermore, the Board is confident that, as energy costs stabilise at lower
levels and Crawley builds volume and reaches its potential, combined with
further operational efficiencies across the wider estate, divisional margins
will continue to return towards those achieved in 2019, with an overall Group
adjusted operating margin of at least 14.0% being achieved in 2026.

 

 

 

 

ENQUIRIES

 Johnson Service Group PLC
 Peter Egan, CEO
 Yvonne Monaghan, CFO
 Tel: 01928 704 600

 Investec Investment Banking (NOMAD)  Camarco (Financial PR)
 David Flin                           Ginny Pulbrook
 Carlton Nelson                       Rosie Driscoll
 Virginia Bull                        Letaba Rimell
 Tel: 020 7597 5970                   Tel: 020 3757 4992/4981
                                      Email: jsg@camarco.co.uk

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  AGMEAELEDSALEAA