Johnson Service Group LON: JSG reported a resilient first-half performance, with revenue broadly flat but profit margins and earnings per share rising as the textile services provider offset softer hospitality volumes through pricing, operational efficiencies and cost management.
Group revenue increased 0.2% to £258 million in the first half of 2026. Organic revenue declined 0.7%, reflecting a mixed performance across the company’s two divisions. Workwear organic revenue rose 2.6%, while HORECA, which serves hotel, restaurant and catering customers, saw organic revenue decline 2% amid cautious customer behavior and lower volumes.
“Despite these headwinds, the group delivered a resilient performance in the first half,” CFO Ryan Govender said. He said customer price increases and contract acquisitions more than offset lower volumes in HORECA on a reported revenue basis.
Profitability Improves Despite Soft Volumes
Adjusted operating profit increased 3.8% to £29.8 million, while adjusted operating margin improved by 50 basis points to 11.6%. Earnings per share rose 8.7% to 5 pence.
Govender attributed the margin improvement to operational efficiencies, customer price increases and disciplined cost management. Energy costs declined to 7% of group revenue from 7.8% a year earlier, helping to offset higher labor costs.
Labor expenses increased to 47.2% of revenue, up 80 basis points from the prior-year period. The increase reflected a 4.1% rise in the U.K. National Living Wage, a 4.8% increase in the Republic of Ireland’s National Minimum Wage and higher U.K. national insurance contributions, Govender said.
The company expects labor costs as a percentage of revenue to moderate in the second half and trend toward the approximately 46% level reported for full-year 2025. It also anticipates a further modest decline in energy costs as a share of revenue in the second half.
Workwear Growth Offsets HORECA Weakness
Workwear revenue rose to £74 million, supported by stable customer volumes and price increases. Adjusted operating profit in the division increased nearly 6% to £11 million, and its operating margin rose 50 basis points to 14.9%.
Peter said the Workwear business retained 94% of customers during the period. The company continued to secure contract renewals and wins in what it described as a competitive market, while directing capital spending toward productivity, automation, carbon reduction and water efficiency.
HORECA revenue was £184 million, down 0.8% on a reported basis and down 2% organically. Price increases were more than offset by softer volumes, which Govender said reflected economic uncertainty and more cautious customer decision-making.
Still, HORECA adjusted operating profit rose 4% to £23.4 million. Its operating margin increased 60 basis points to 12.7%, aided by lower energy costs, operational efficiencies and recent capital investments. Energy costs in the division fell to 7.9% of revenue from 8.7% a year earlier.
Peter said Johnson Service Group added customer contracts representing more than £5 million in annualized revenue to HORECA during the first half. However, the company said the seasonal uplift in the division was more modest than anticipated and that it is managing the business on the assumption that softer trading will continue through the remainder of the year.
Capital Returns, Investment and Balance Sheet
The board declared an interim dividend of 1.8 pence per share, up 12.5%. The company said it intends to maintain a dividend cover target of 2.5 times on a full-year basis.
Its £55 million share buyback program, announced in May, was more than 50% complete by the end of August. Peter said total shareholder returns since 2022 amounted to £118.5 million, while Govender said approximately £120 million had been returned through buybacks over the period, resulting in nearly 20% of issued share capital being repurchased and canceled.
- Net debt was £188.6 million at the half-year end.
- Leverage stood toward the lower end of the company’s 1 to 1.5 times target range, at 1.1 times.
- Capital expenditure on property, plant and equipment totaled £17.4 million.
- In April, the company refinanced its revolving credit facility, increasing it to £175 million with a further £50 million accordion facility available subject to lender consent.
Johnson Service Group said it had fixed approximately 90% of its 2026 gas requirements, 85% of electricity requirements and hedged 70% of diesel needs. For 2027, it had secured about 70% of gas, 60% of electricity and 20% of diesel. Govender noted that the prolonged Middle East conflict could create uncertainty in energy markets and place upward pressure on 2027 energy exposure.
Outlook
The company said it remains on track to deliver another year of progress and achieve its targeted adjusted operating margin of at least 14% in 2026. Management said Workwear continues to benefit from stable volumes and pricing execution, while HORECA will remain focused on automation, cost control and service-led differentiation in a constrained trading environment.
“Our strong financial positioning and robust cash generation gives us substantial flexibility,” Peter said, adding that the board would continue to balance organic investment, acquisitions and shareholder returns within its capital-allocation framework.
About Johnson Service Group (LON:JSG)
Johnson Service Group 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.
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