REG - Johnson Service Grp. - Eur31.5 Million Acquisition of Celtic Linen

Johnson ServiceAnnouncement

01/09/2023 07:00

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RNS Number : 0337L  Johnson Service Group PLC  01 September 2023

1 September 2023

AIM:  JSG

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

Johnson Service Group PLC ('JSG' or 'the Group')

€31.5 Million Acquisition of Celtic Linen in Republic of Ireland ('the
Transaction')

 

Johnson Service Group PLC announces that, on 31 August 2023, it acquired the
entire issued share capital of Harkglade Limited, together with its
subsidiaries Celtic Linen Limited and Millbrook Linen Limited (together,
'Celtic Linen').  Celtic Linen services the Republic of Ireland's Healthcare
and Hotel, Restaurant and Catering ('HORECA') sectors; it is the largest linen
supplier to the Republic of Ireland's Healthcare sector and is the second
largest linen supplier to the HORECA sector.

 

Transaction Highlights

§ Acquisition of Celtic Linen, one of the Republic of Ireland's leading
textile services suppliers to the Healthcare and HORECA sectors with revenue
of €29.0 million in the financial year ended 1 January 2023.

§ Consideration, payable in cash on completion, of €31.5 million (£27.1
million 1 ) on a debt free cash free basis, subject to a locked box mechanism
and a normalised level of working capital.

§ The consideration includes €3.6 million in relation to two freehold
facilities utilised by the business.

§ Acquisition expected to be immediately earnings enhancing and in-line with
our stated strategy of seeking out value accretive acquisitions and expanding
our geographic coverage.

§ Further diversification of our customer base, with over 50% of Celtic
Linen's revenue derived from the Healthcare sector.

§ Celtic Linen's existing and experienced management team to remain with the
business.

 

Commenting on the Transaction, Peter Egan, CEO said:

"We are delighted to have completed the acquisition of Celtic Linen, which
represents a further significant step in our strategy to expand the range and
scale of services we offer.  I have known Celtic Linen for many years and
have been very impressed with the quality of the business, its reputation for
excellent customer service and the growth it has achieved in recent years.
The existing senior management team will remain with the business with Joanne
Somers, Managing Director of Celtic Linen, reporting directly to myself.  It
gives me great pleasure to welcome each and every employee of Celtic Linen to
the Group."

Further Details of the Transaction

The consideration payable for the entire issued share capital of Celtic Linen,
which has been funded from the Group's existing committed revolving credit
facility, amounts to €31.5 million (£27.1 million(1)).  The consideration
payable was on a debt free cash free basis, subject to a locked box mechanism
and a normalised level of working capital.

 

In addition, the terms of the Transaction include a commitment from the Group
to fund €1.9 million of capital expenditure that Celtic Linen had committed
to prior to the completion of the Transaction.  This state-of-the-art
investment not only increases processing efficiency and capacity, but also
complements Celtic Linen's commitment to sustainability through reduced energy
usage.

 

The majority shareholder of Celtic Linen was Causeway Capital Partners, a
growth focused private equity firm investing in businesses across Ireland and
the UK.  Other shareholders included Celtic Linen management.

 

The business, which has approximately 350 employees, operates from two
freehold facilities, the first of which is based in Drinagh, County Wexford,
with the second site based in Naas, County Kildare.  Celtic Linen is the
largest linen supplier to the Republic of Ireland's Healthcare sector and is
the second largest linen supplier to the HORECA sector.  In the year ended 1
January 2023, the top ten customers of the business accounted for
approximately 25% of revenue.

 

Similar to many businesses within the textile services industry, Celtic Linen
was severely impacted by COVID-19 - albeit to a somewhat lesser extent given
its exposure to Healthcare.  Accordingly, trading results during the two
financial years to 26 December 2021 were negatively impacted.  In its most
recent financial year ended 1 January 2023, and despite the challenging
economic environment, trading performance improved significantly.  Celtic
Linen's revenue, adjusted EBITDA 2  and loss before taxation (after finance
costs of €1.5 million), as set out in Harkglade Limited's audited
consolidated financial statements for the year ended 1 January 2023, was
€29.0 million, €4.6 million and €(0.9) million respectively.  Celtic
Linen's gross assets as at the same date amounted to €16.0 million, of which
€15.3 million were tangible.

 

In the six months to 2 July 2023, the business continued to show significant
year-on-year growth with revenue and adjusted EBITDA(2) increasing to €16.7
million (six months to 26 June 2022: €12.0 million) and €3.9 million (six
months to 26 June 2022: €1.3 million) respectively 3 .  Since that date,
the business has continued to show growth with the securing of several new
contracts in both Healthcare and HORECA.

The Transaction is expected to be immediately earnings enhancing and, in
addition to collaboratively sharing best practice across the enlarged Group,
allows us to explore operational synergies with our Northern Ireland based
business, Lilliput.

 

Interim Results

The Group will publish its financial results for the six months ended 30 June
2023 at 07:00 on Tuesday, 5 September 2023.

 

 

 

 ENQUIRIES

 Johnson Service Group PLC
 Peter Egan, CEO
 Yvonne Monaghan, CFO
 Tel: 020 3757 4992/4981 (on the day)
 Tel: 01928 704 600 (thereafter)

 Investec Investment Banking (NOMAD)   Camarco (Financial PR)
 David Flin                            Ginny Pulbrook
 Carlton Nelson                        Rosie Driscoll
 Virginia Bull                         Letaba Rimell
 Tel: 020 7597 5970                    Tel: 020 3757 4992/4981

 

 

 

This announcement contains information relating to the Transaction which is
considered by JSG to constitute inside information for the purposes of Article
7 of the Market Abuse Regulation (EU) No 596/2014 (as it forms part of
Retained EU Law as defined in the European Union (Withdrawal) Act 2018) ("UK
MAR"). Upon the publication of this announcement, via a Regulatory Information
Service, this inside information (as defined in UK MAR) will be considered to
be in the public domain.

 

The person responsible for arranging release of this announcement on behalf of
JSG is Christopher Clarkson, General Counsel & Company Secretary, Johnson
Service Group PLC.

 

 1      Using an exchange rate of EUR 1 = GBP 0.86.

 2      Adjusted EBITDA refers to operating profit before the amortisation
of goodwill and intangible assets, before charging for any exceptional items
and before charging depreciation in respect of property, plant and equipment
(for both leased and owned assets) and textile rental items.

 3      Figures for the six months to 2 July 2023 and the six months to 26
June 2022 are taken from Harkglade Limited's unaudited consolidated management
accounts.

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