Laundry and workwear hire firm Johnson Service Group (JSG:AIM) increased its full year earnings guidance for the third time on Friday, sending the shares up 2.1% to a 10-year high of 203p.
Chief executive Peter Egan said he expects to announce full year results ‘slightly ahead of market expectations’ and remains optimistic for the business’s future prospects.
According to the consensus compiled by Reuters Eikon, revenues for the year to 31 December are seen at £347m, an increase of 8% on the previous year, while pre-tax profits are seen at £47m, an increase of 11%.
SLOW AND STEADY WINS THE DAY
Despite the uncertain economic environment, trading has remained ‘strong’ with ‘consistent organic growth’ as the firm continues to expand into regions where it was previously under-represented.
Rather than making headlines, Johnson Service sticks to its core business of supplying workwear and linen to the hotel, restaurant and catering (HORECA) industry and workwear for the food and beverage manufacturing sector.
It is the leading company in its field in the UK with 35 laundries and over 6,000 employees, and in HORECA alone it processes more than 500m items a year.
The firm continues to grow steadily both organically and by acquisition, expanding its footprint across the country. The new high-volume linen plant in Leeds, built at a cost of £10m, is due to open this spring and will provide extra capacity in time for the busy summer season.
Meanwhile the acquisition of Fresh Linen Holdings for £12.5m last November adds enough capacity to process an additional 900,000 items of linen a week and expands Johnson’s reach in the south east of the country.
ONWARDS AND UPWARDS
Analysts at Investec described today’s update as ‘business as usual’ with trading slightly ahead of expectations, and raised their sales and earnings forecasts accordingly. They also raised their 12-month price target on the shares from 185p to 220p and maintained their Buy call.
Similarly, analysts at Peel Hunt nudged up their earnings forecasts to include better 2019 trading and the benefit of the Fresh Linen acquisition going forward.
Analysts at HSBC put the 2019 earnings ‘beat’ down to better margins rather than higher revenues and have left their forecasts unchanged for the time being.
They note that last year's margins at Fresh Linen were lower than the group average but with greater operational efficiency and some investment they should come up to par in the next couple of years.
Johnson Service is scheduled to release its full year results on 2 March.
