Textile rental provider Johnson Service Group plc (LON:JSG) (JSG.L) has released a trading update for the six months to 31 December 2018 today.
It is trading in line with expectations and expects its full-year performance to be as per previous guidance. It has been able to sign a contract with a developer for the building and subsequent lease of a new laundry in the North of England. It is due to come on stream in early 2020, and fits in with the company’s strategy to increase future capacity and revenue-generating opportunities within its high volume linen business.
Johnson Service Group has also invested £3.3 million in its Stalbridge Linen unit in London. It has been able to successfully integrate the recent acquisition of South West Laundry which was made at the end of August 2018.
The company has been able to trade well during the six-month period. It continues to seek to deliver growth both organically and through acquisitions. It remains confident about its future prospects.
In my view, Johnson Service Group’s performance appears to be moving in the right direction from a business perspective. The company is investing for long-term growth, and this could help to improve investor sentiment to some degree after what has been a challenging 12 months for the business. Its share price has declined by around 16% during that time, which means that it now has a P/E ratio of around 12.
With what seems to be a margin of safety, I feel that the stock could generate improving performance in future. Its share price may remain volatile in the near term, due in part to weak investor sentiment towards UK-focused stocks. But from a risk to reward perspective, I’m cautiously optimistic about its long-term potential after what has been a relatively successful six-month period for the business.