Johnson Service Group H1 2026 Earnings Report

Johnson Service Group EPS Results

• Actual EPS: GBX 5
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Johnson Service Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Johnson Service Group Announcement Details

• Quarter: H1 2026
• Date: 9/8/2026
• Time: Before Market Opens
• Conference Call Date: Tuesday, September 8, 2026
• Conference Call Time: 7:00AM ET

Johnson Service Group (LON:JSG) provides high quality textile rental and related services across a range of sectors throughout the UK. Our family of high quality businesses includes “Johnsons Workwear”, “Johnsons Hotel Linen”, “Johnsons Hotel, Restaurant & Catering Linen” and “Johnsons Restaurant & Catering Linen”, each of which provides a high-quality and reliable service combined with outstanding customer care. Across our entire family, our priorities are always clear and everything we do centres on the core values of Johnson Service Group – quality, reliability and service. A strategy to consistently create value for shareholders, deliver outstanding customer service and offer fulfilling careers to employees lies at the heart of our business.

Johnson Service Group H1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Profitability improved despite modest revenue pressure: H1 revenue rose 0.2% to £258 million, while adjusted operating profit increased 3.8% to £29.8 million and operating margin expanded 50 basis points to 11.6%.
• Positive Sentiment: Workwear remained resilient, with organic revenue growth of 2.6%, a strong 94% customer retention rate and a 50-basis-point margin improvement to 14.9%.
• Positive Sentiment: The board increased the interim dividend 12.5% to 1.8 pence per share, while the £55 million buyback is more than 50% complete and is expected to be substantially finished by year-end.
• Negative Sentiment: HORECA organic revenue declined 2% as softer customer volumes and cautious decision-making offset price increases; management expects these weaker trading conditions to persist through the rest of the year.
• Neutral Sentiment: Management maintained its outlook for another year of progress and an adjusted operating margin of at least 14% in 2026, relying on pricing, automation, productivity gains and cost control to offset labor inflation and uncertain energy costs.

Presentation

[Peter Egan, CEO at Johnson Service Group]

Good morning, everyone, and welcome to Johnson Service Group interim results. Welcome to everyone in the room and everyone listening online. Ryan and myself will now take you through a short presentation. Moving to slide four, group revenue was in line with prior year. While we saw a small softening in organic revenue to a negative of 0.7%, Workwear was up 2.6% with an excellent 94% retention rate. Conversely, HORECA felt the macro headwinds a little more, dipping 2%. Our very experienced management team have remained resilient throughout H1, continuing to focus tightly on operational efficiencies, cost management and dynamic pricing. These disciplines help drive our margin expansion and EPS growth. Turning to capital application, our 55 million GBP buyback program is progressing well and is circa 50% executed. This brings our total returns to shareholders since 2022 to 118.5 million GBP.

[Peter Egan, CEO at Johnson Service Group]

Looking ahead, we remain on track to deliver another year of progress and achieve our targeted adjusted operating margin of at least 14% in 2026. Now I will hand over for a short period to Ryan, who will take us through the financial slides.

[Ryan Govender, CFO at Johnson Service Group]

Thanks, Peter, and good morning, everybody. Turning to our financial performance for the first half of 2026, group revenue increased by 0.2% to 258 million GBP. This revenue reflected the benefit of customer price increases, contract acquisitions, which more than offset the lower volumes within our HORECA businesses. Organic revenue declined by 0.7%. However, as Peter said, Workwear delivered growth of 2.6%, whilst HORECA revenue decreased modestly by 2%. HORECA experienced a slower start to the year against a challenging market backdrop, resulting in lower customer volumes. Despite these headwinds, the group delivered a resilient performance in the first half. We continue to execute well against the areas that were within our control, maintaining a strong focus on operational efficiency, dynamic pricing and disciplined cost management. As a result, adjusted operating profit increased by 3.8% to 29.8 million GBP, with operating margin improving by 50 basis points to 11.6%.

[Ryan Govender, CFO at Johnson Service Group]

It is also encouraging to see the continued growth in earnings per share, which increased by 8.7% to 5 pence. Reflecting the strength of the group's earnings and our cash generation, the board is pleased to declare an interim dividend of 1.8 pence per share, an increase of 12.5%. On a full year basis, we expect to maintain our commitment on dividends with a dividend cover of 2.5 times. As these charts demonstrate, JSG has a strong track record of financial management and consistent value creation for shareholders. We have continued to improve returns while maintaining a robust balance sheet. Return on capital employed has increased in line with profit and pleasingly remains ahead of pre-pandemic levels. As part of the capital allocation framework in May, we announced a 55 million GBP share buyback program, reflecting our confidence in the group's cash generation and financial position.

[Ryan Govender, CFO at Johnson Service Group]

Progress remains on track, and as Peter said, we are more than 50% through on that program by the end of August. Since 2022, we have delivered approximately GBP 120 million to shareholders through buybacks, and this resulted in almost 20% of the company's issued share capital being repurchased and canceled over that period. Margin progression. During the first half of 2026, we continued to actively manage cost inflation, resulting in adjusted operating margin increasing by 50 basis points to 11.6%. This improvement, as I have explained earlier, reflects the benefits of operational efficiencies, customer price increases and disciplined cost management, which helped us offset the lower volumes in HORECA. Energy costs pleasingly reduced to 7% of revenue, compared to 7.8% for the first half of 2025, and the direction of travel continues to remain encouraging.

[Ryan Govender, CFO at Johnson Service Group]

As part of the ongoing risk management approach, we continue to secure our energy requirements on a little and often basis. For 2026, we have fixed approximately 90% of gas, 85% of electricity, and hedged 70% of our diesel requirements. Looking ahead to 2027, we have already secured approximately 70% of gas, 60% of electricity and 20% of our diesel. We will continue to look to lock in pricing as opportunities allow. However, the prolonged conflict in the Middle East creates some uncertainty for us around future energy markets and may exert some upward pressures on energy exposure in 2027. Labor remains the largest component of our cost base and increased to 47.2% of revenue, up 80 basis points on the prior year.

[Ryan Govender, CFO at Johnson Service Group]

This increase reflects the impact of the 4.1% increase in National Living Wage in the U.K., 4.8% increase of National Minimum Wage in the Republic of Ireland, together with higher U.K. national insurance contributions. The current competitive environment limits our ability to fully recover labor cost inflation through pricing alone. However, this does reinforce the importance of productivity and efficiency improvements across the estate. Looking at the full year, we expect labor costs as a percentage of revenue to moderate during the second half and trend towards the 2025 level. So around that 46% mark that we did in 2025. That remains broadly stable on a full year basis. We anticipate a further modest reduction in energy costs in the second half of the year as a percentage of revenue.

[Ryan Govender, CFO at Johnson Service Group]

Despite the ongoing economic uncertainty, we remain on track to deliver our operating margin target of at least 14% in 2026. All right, moving over to cash flow. The group continues to generate strong levels of cash, providing the flexibility to invest in capital across our estate to pursue acquisition opportunities and return capital to shareholders. This maintains our disciplined approach to capital allocation. Net debt increased to GBP 188.6 million at the half year end, as we expected, with leverage towards the lower end of our target range of 1.1 times. Bank debt was GBP 135.9 million. Working capital saw a small increase compared with the prior year, but this was primarily due to the timing effect of creditor payments and debtor receipts, and was in line with our expectations.

[Ryan Govender, CFO at Johnson Service Group]

I think importantly, debtor days improved slightly to 43 days, and we continue to expect working capital to be broadly in line with the 2025 levels on a full year basis. As expected, rental stock depreciation was approximately GBP 31 million in the half, with investment in rental stock spend remaining at broadly similar levels, supporting our ongoing customer requirements. Capital expenditure on property, plant, and equipment was GBP 17.4 million, reflecting our normalized levels of investment across the estate. Acquisition related expenditure reflects the purchase of HORECA contracts and associated stock, which has subsequently been integrated into our processing plants. We have renewed some long-term leases in Basingstoke and Hadleigh Workwear sites in the period.

[Ryan Govender, CFO at Johnson Service Group]

We expect the majority of the current buyback program to be completed by the end of this year, with leverage then expected to be maintained at the lower end of our target range at the year end. Other financial information. In April 2026, we completed the refinance of our revolving credit facility, which increased from GBP 135 million to GBP 175 million, with a further GBP 50 million accordion available to us subject to lender consent. The new facility matures in April 2030, with an option to extend for a further year and provides us with sufficient liquidity for current commitments and plans. Bank covenants remain unchanged, comprising leverage of less than three times and interest cover of at least four times. The margin on the refinanced facility remains linked to our leverage covenant and has reduced by 15 basis points to a range of 1.3%-2.3%.

[Ryan Govender, CFO at Johnson Service Group]

Total interest increased to GBP 4.5 million, with higher borrowings to fund share buybacks and acquisitions, and this was partially offset by lower U.K. base rates during the first half of 2026 compared to the prior period. The underlying tax rate was 24.5%, slightly lower than the U.K. tax rate of 25%, and this was in due part to the 12.5% rate in the Republic of Ireland. The surplus on the defined benefit pension scheme increased to GBP 7.6 million at June 2026, and no deficit contributions are expected to be paid in the next 12 months. The next triennial valuation, as at September 2025, is expected to conclude in the second half of this year. Okay, moving over to operational performance in Workwear. When you are looking at the numbers, Workwear delivered another resilient performance during the first half.

[Ryan Govender, CFO at Johnson Service Group]

Revenue increased to GBP 74 million, an organic growth of 2.6%, reflecting stable customer volumes and the benefit of price increases. Adjusted operating profit increased by almost 6% to GBP 11 million, resulting in operating margin improving by 50 basis points to 14.9%. The margin improvement was supported by lower energy costs, which reduced to 4.9% of revenue compared to 5.5% in the previous period. In addition, continued operational efficiencies and disciplined cost management in Workwear helped mitigate the impact of labor cost inflation, which remains a headwind for the business. Rental stock depreciation was GBP 11.2 million, which was broadly consistent with the prior year, reflecting the stability and the maturity within our Workwear customer base. Back to you, Peter.

[Peter Egan, CEO at Johnson Service Group]

On operational performance, slide 13, look, we are very encouraged by Workwear performance in the current market and it reflects the maturity of that division. Revenue increased by 2.6%, which we said, which was entirely organic. It reflects a stable volume baseline, combined with successful implementation of necessary price adjustments. We are very pleased with customer retention levels being maintained at an excellent 94% as we continue to deliver that all important on time and in full service. While the broader market landscape remains competitive, our ability to secure multiple contract renewals and wins demonstrates the ongoing value customers place on our service performance. Finally, we continue to direct CapEx towards productivity, efficiency and automation where possible. These investments are quite targeted to capture more productivity gains while improving our environmental metrics around carbon and water efficiency.

[Ryan Govender, CFO at Johnson Service Group]

Okay, going over to HORECA performance. As highlighted, HORECA experienced a slower start to the year against a challenging market backdrop. Revenue was GBP 184 million in the first half, a slight reduction of 0.8%, while organic revenue also declined modestly by 2%. The benefit of customer price increases was more than offset by softer volumes, reflecting the ongoing economic uncertainty and more cautious customer decision-making. Despite these market headwinds, the division delivered a resilient financial performance, with adjusted operating profit increasing 4% to GBP 23.4 million. This improvement was driven largely by lower energy costs, ongoing operational efficiencies, and the benefit of recent capital investment programs across the estate. Energy costs reduced in HORECA to 7.9% of revenue during the first half, compared to 8.7% in the prior year.

[Ryan Govender, CFO at Johnson Service Group]

This resulted in adjusted operating margin increasing by 60 basis points to 12.7%, demonstrating the division's ability to improve returns despite softer market conditions.

[Peter Egan, CEO at Johnson Service Group]

Moving to operational performance of HORECA, our hotel, restaurant, and catering. We have already touched on the revenue softening slightly by 0.8% and 2% on an organic basis, and this is a result of ongoing macroeconomics headwinds, which continue to influence both competitive dynamics and customer behavior. Managing contract and price negotiations remains a little bit more complex. However, as always, our very experienced management teams remain highly proactive with a sharp focus on service-led differentiation and targeted investment in our estate to unlock further operational gains. Looking for opportunities in any environment, we have successfully added an annualized revenue of over GBP 5 million of customer contracts to that division.

[Peter Egan, CEO at Johnson Service Group]

Moving to investment and sustainability, slide 17. During H1, we deployed GBP 17.4 million in strategic investment. Yes, of course, there is always a requirement for replacement CapEx to ensure we continue that all important on time and in full service.

[Peter Egan, CEO at Johnson Service Group]

But we do combine that with a targeted investment to drive long-term efficiencies, such as more automation in dryers and sort systems, boiler efficiencies, and logistics and fleet. Continuing on sustainability on slide 18, the key link in this sustainability slide is the ESG metrics linked directly to operational efficiency. So for example, 14% reduction in Scope 1 and 2 carbon emissions, 20% reduction in water intensity. In terms of circularity and waste, 94% of our waste is now diverted to landfill, 54% of textiles purchased are derived from sustainable content. This excellent progress is reflected in our governance and market standing as we published our fifth sustainability report in June of this year. That brings us on to platform for growth, slide 19. At JSG, we have repositioned ourselves as a dedicated textile service provider over the last 10 plus years.

[Peter Egan, CEO at Johnson Service Group]

We've a track record of consistently delivering shareholder returns with a disciplined approach to investment and capital allocation. As we look to slide 20, to put our operational and sustainability performance into a broader strategic context, it is helpful to look at the structural nature of our business model. JSG is an essential service provider anchored by that quality of service, fundamentally essential to our customers' daily operation and in turn, our ability to deliver that on time and in full service. Geographic density, we provide a true national service locally. Along with low substitution risks, there are limited viable alternatives to our service offering.

[Peter Egan, CEO at Johnson Service Group]

Looking at some of our financial charts over the last five years. As an essential service provider, we support customers through long-term relationships, providing resilience across a range of market conditions. Coupled with this, we have consistently employed a disciplined approach to investment, returns, and capital efficiency. This means that we've been able to deliver sustainable compounding growth whilst maintaining a strong balance sheet. The result can be seen clearly in the charts on this slide. Over the last five years, we have delivered consistently growth in the key financial metrics, with strong growth in margins and earnings per share. At the same time, we have steadily increased returns to shareholders through a progressive dividend policy and substantial share buyback programs. Together, these metrics demonstrate a proven track record of delivery and provide a strong platform to continue executing our strategy and delivering sustainable long-term growth for shareholders.

[Peter Egan, CEO at Johnson Service Group]

Moving to slide 22, it outlines our opportunity. We have significant opportunity for growth organically and through M&A. When this is viewed through a wider lens to include adjacent verticals across the U.K. and Ireland. As we roll that through into slide 23, JSG's compounding growth model represents the self-sustaining loop between our operational execution and our disciplined approach to capital allocation. On the left of the slide 23 are our operational drivers, organic market initiatives, targeted acquisition, delivering scale, feeding into margin sustainability and profit growth. On the right, capital allocation discipline, invest in our estate, pursue accretive acquisition or infill acquisition, dividend policy, and of course, return surplus cash to our investors. All the while maintaining leverage within our targeted range, ultimately delivering attractive mix of consistent EPS growth and total shareholder return.

[Ryan Govender, CFO at Johnson Service Group]

Thanks, Peter. As Peter just mentioned, the strength of our cash-generating operating model allows us to take a balanced approach to capital allocation, and our strategic priorities remain unchanged. The slide demonstrates that we have executed against each of these priorities over an extended period of time, investing approximately GBP 260 million in the estate to support organic growth and operational efficiencies, GBP 280 million in value-enhancing acquisitions to support strategic growth, returning GBP 105 million through dividends with a dividend cover target of 2.5 times. Finally, where we have surplus capital, we have more recently returned GBP 120 million through share buybacks. Underpinning all of these decisions is our commitment to maintain a strong balance sheet. Our medium-term target remains 1 to 1.5 times leverage, and we are currently at the lower end of that range.

[Ryan Govender, CFO at Johnson Service Group]

Looking ahead, the board will continue to assess capital allocation and opportunities against this framework, balancing our investment in organic growth, strategic acquisitions, and shareholder returns with the objectives of creating sustainable and attractive total shareholder returns.

[Peter Egan, CEO at Johnson Service Group]

To wrap up our presentation, let's focus on outlook. Our expectations for the two core divisions remain distinct but balanced. Workwear continues its encouraging performance, supported by stable volumes and execution of pricing strategy. In HORECA, the environment remains a little constrained. The seasonal uplift was more modest than anticipated, and we are actively managing the business under the assumption that this softer trading persists throughout the remainder of the year. Much of our focus on plant automation and strong cost control to help mitigate top-line growth will continue. Therefore, we remain on track to deliver another year of progress and achieve our targeted adjusted operating margin of at least 14% in 2026. Finally, as Ryan has already touched on, our strong financial positioning and robust cash generation gives us substantial flexibility.

[Peter Egan, CEO at Johnson Service Group]

The board will continue to evaluate our options for capital allocation, carefully balancing our organic growth ambitions, investments, and disciplined acquisition pipeline with return to shareholders. Thank you very much, everyone. Appreciate it. Thank you

Participants

Executives

• Peter Egan, CEO
• Ryan Govender, CFO