"Dry cleaning chain LSE:JSG:Johnson Service made "slightly" more money than expected last year and much more than the previous year. Paying Â£22 million for hotel linen firm Bourne early in 2014 has proved a smart move, and the earnings upgrade ..."
I think the conclusion is broadly right - it has been a good run in the last couple of years. I have sold this morning as I don't see a lot of upside - would you pay much over 13x for a textile and dry cleaning business?
Johnson Service eyes acquisitions
By Kirsty Green,
03 September 2013
Johnson Service (JSG) has cleaned up its act recently with a concerted effort to focus on core strengths, shore-up the balance sheet and restructure underperforming businesses. The disposal of its facilities management division, which was completed in August, leaves the company focused on its original core business of textiles. Moreover, a major restructuring of its dry cleaning business, which led to branch closures, is now largely complete.
These first-half results suggest the company's restructuring efforts have paid off with adjusted operating profit having risen 29 per cent to £7.5m. The textile rental arm grew adjusted operating profit 12 per cent to £8.6m with last year's acquisition of Cannon Textiles now fully integrated. The dry cleaning division reported adjusted operating profit of £0.7m against a £0.1m loss last year, with the focus now on a national marketing campaign to boost brand awareness.
The facilities management disposal has slashed net debt from its current £53.6m to £25.6m on a pro forma basis, and the company is actively seeking acquisitions. Executive chairman John Talbot sees plenty of opportunities in textile rental, particularly within the hotel segment: "We see consolidation here; we want to be a major player."
Broker Investec Securities expects adjusted full-year pre-tax profit of £13.3m, giving EPS of 3.7p (from £10.7m and 3.4p in 2012).
JOHNSON SERVICE (JSG)
ORD PRICE: 48p MARKET VALUE: £123m
TOUCH: 48p-49p 12-MONTH HIGH: 51p LOW: 28p
DIVIDEND YIELD: 2.4% PE RATIO: na
NET ASSET VALUE: 24p* NET DEBT: 89%
Half-year to 30 Jun Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2012 97.1 1.40 0.60 0.36
2013 96.1 4.40 1.30 0.40
% change -1 +214 +117 +11
Ex-div: 9 Oct
Payment: 8 Nov
*Includes intangible assets of £55.7m, or 22p a share
The restructuring story looks largely priced in, with the shares up 35 per cent so far this year. Bolt-on acquisitions and the dry cleaning marketing campaign could add some interest, but a forward PE of 13, and a nothing special dividend yield, don't leave much scope for a re-rating. Hold.
Last IC view: Hold, 42p, 5 March 2013
Two months going sideways despite decent results and a single figure PE. A very quiet bulletin board too it must be said.
Not sure what will push us ahead if the positive trading statement from the AGM can't, but this still looks to have more recovery left to me. I would have thought 50p was a very reasonable shorter term target.
Dodgy indeed. Nobody actually planning a takeover would discuss that and nor would they approach individual investors - they would go direct to the institutions with large holdings. Root out that bargepole and put it to use.
JSG looks like both dominos (TA & Fundamentals) are in a row. It's one of those seemingly unexciting Companies doing mundane things like dry cleaning and laundry services (+ some facilities management). Not going to excite the techies or oilies.
I'm hoping for a good year from JSG, which is tucked away in my SIPP.
After trending down all the way from July 11 the chart has now clearly turned upwards. We crossed the 30 day moving average a little while ago and today have broken through the 90 day ma. Looks good for a further improvement through to the results would be my guess.
While I remain optimistic about the medium term recovery here, I think the press focus on slashing the pension deficit is a bit misleading given it was the result of rising equity prices, and we all know what has happened there recently. The debt reduction too was largely the result of a tax repayment rather than underlying cash generation.
However the shares are clearly cheap and as long as things continue to move in the right direction there should be more upside.
Good to see JSG shares finally breaking out of the 33-34 range they have traded in over the last two months. They still have a long way to go before they get back to the 200-500 range they traded in from 1994-2007 though. Hopefully the pre-close trading statement promised at the end of June will help them on their way.
Northland Capital Partners commented on Johnson Service Group (JSG), the British laundry firm. The broker notes the brief statement from the group that trading has been in-line with management's expectations over the first four months of the year and net debt continues to reduce. In light of this, Northland said it remained comfortable with its forecasts for earnings per share and net debt both remaining marginally ahead of consensus as the group continues to improve the operational performance across the business. The shares were unmoved at 33.375p.
looking forward to the 50p or more from here ......
<a href='http://www.citywire.co.uk/wealth-manager/how-johnson-service-group-could-clean-up-with-50-upside/a481905?ref=wealth-manager-latest-news-list' target='window'>How Johnson Service Group could clean up with 50% upside </a>
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