Johnson Service Group launches £55m buyback after Q1 growth

(Sharecast News) - Johnson Service Group said on Thursday that first-quarter revenue rose modestly and announced a new £55.0m share buyback programme, as it reiterated confidence in delivering further progress and margin improvement in 2026.

The FTSE 250 textile services provider said group revenue increased 1.4% to £123.0m in the first three months of the year, from £121.4m a year earlier.

Organic revenue growth contributed 0.7%.

In Workwear, organic revenue rose 3.9%, reflecting sales momentum with new and existing customers and the implementation of price increases.

Hospitality, restaurants and catering (HoReCa) organic revenue softened by 0.6% in the quarter.

Johnson Service said price increases and contract renewals remained challenging, while regional and sector variations seen in 2025 had continued, with some market churn particularly in the independent hotel and restaurant sector.

The group said it continued to manage inflationary pressures, particularly labour costs, through resource management, price increases and capital investment aimed at improving operational efficiency and reducing energy usage.

Johnson Service said it had fixed about 85% of anticipated 2026 electricity usage, 90% of expected gas usage and hedged around 70% of its anticipated diesel requirement.

For 2027, it has fixed about 60% of anticipated electricity usage and 70% of gas usage.

The company also said it had refinanced its committed revolving credit facility, increasing it to £175.0m from £135.0m, with a further £50.0m accordion option subject to lender consent.

The new facility matures in April 2030, with an option to extend for a further year.

Bank covenants remained unchanged, with leverage of less than three times and interest cover of at least four times.

The margin on the facility has reduced to a range of 1.30% to 2.30% over Sonia or Euribot, depending on leverage, with the current margin at 1.30%.

Johnson Service said its medium-to-long-term capital structure target remained leverage of 1.0 times to 1.5 times, except for short-term specific exceptions.

The board said it would launch a further £55.0m share buyback programme, in addition to the £90.3m returned to shareholders through buybacks since 2022.

Under the programme, Johnson Service entered into a non-discretionary instruction with Investec Bank to buy up to £55.0m of ordinary shares.

The programme would begin immediately and end no later than 1 March 2027.

Shares bought back will be cancelled.

Net debt, including IFRS 16 liabilities, was £161.9m at the end of March, compared with £159.2m at the end of December.

The company said net debt was expected to rise to about £195.0m by June, reflecting the timing of dividends, the buyback, working capital movements and capital expenditure, with leverage towards the lower end of its target range.

Year-end leverage was expected to be similar to June, as stronger second-half cash generation is offset by the impact of the buyback programme.

Johnson Service said it had not seen any material impact from geopolitical uncertainty in the Middle East, adding that any 2026 cost consequences were expected to be manageable based on current information.

The company said HoReCa had experienced a slower start to the year in a challenging market environment, but normal seasonality was expected to support improved volumes over the summer.

The board said it continued to expect "another year of progress and margin improvement" and remained on track towards its target adjusted operating margin of at least 14.0% in 2026.

At 1102 BST, shares in Johnson Service Group were up 5.3% at 138.15p.

Reporting by Josh White for Sharecast.com.

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