Johnson Service Group (LON: JSG) has shown its ability to grow despite the weak consumer market hitting its core customer base in hotels and catering. Past capital investment has increased efficiency offsetting higher employee costs and enabling a further improvement in margins.
In 2025, revenues were 4% ahead at £535.4m and improving operating margins led to a 18% rise in underlying pre-tax profit of £64.5m. This excludes £6m of exceptional costs, including £1.7m on moving from AIM to the Main Market and restructuring costs. The dividend is raised by one-fifth to 4.8p/share.
Net debt rose from £115.6m to £159.2m, which was after £54.7m of share buybacks. There were three small infill acquisitions in the year for minimal cash outflow.
Hotel and catering generated most of the growth in revenues and profit with help from acquisitions, but organic growth in revenues was still 1%. New business and long-term contract extensions are being won. One major hotel client has signed a five-year renewal agreement.
Workwear generated organic growth of 2.4% and customer retention levels are 94%. This is currently a slightly higher margin business, but it is smaller generating just over one-quarter of group operating profit.
Jonhson Service Group fixes part of its energy costs ahead of time, so short-term oil price movements will not hamper the business. The outlook remains positive with plans to improve operating margins from 13.5% to 14%. Even so, the share price fell 7.4% to 133.4p, which is less than ten times forecast earnings.