Shares of Runcorn-based workwear and textile firm Johnson Service Group (JSG) rose as much as 14% after it published an AGM statement and “updated positive energy outlook.”
JSG) said revenue in the first three months of the year rose to £114 million from £98 million in the prior year.
“HORECA (hotel, restaurant and catering) 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,” said the firm.
“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.”
On its “Updated Positive Energy Outlook” the company said: “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.
“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 …”
In its outlook, JSG said: “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.”