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Investing.com -- Shares of Johnson Service Group (LON:JSG) surged over 12% on Tuesday following its full-year financial results that met expectations and the announcement of a £30 million share buyback program.
The company is also considering a move to the London Stock Exchange (LON:LSEG)’s Main Market, a move that signals its ambitions for broader investor engagement.
The financial results showed revenue of £513 million, aligning with prior forecasts, and an adjusted EBITA of £62.3 million, slightly exceeding RBC Capital Markets’ estimate of £61.5 million.
The company also reported an adjusted earnings per share of 10.1p, outperforming the consensus estimate of 9.9p. The dividend per share was increased by 43% to 4.0p, adhering to the company’s commitment of a 2.5x cover.
Margin improvements were evident, with adjusted EBITA margin rising 120 basis points to 12.1%, driven in part by a reduction in energy costs, which fell to 8.8% of revenues from 10% the previous year.
Labour costs, however, increased to 44.6% of revenues, reflecting broader inflationary pressures. Free cash flow improved significantly to £74.6 million from £55.2 million, while net debt remained in line with guidance at £68.6 million.
The company’s outlook remains cautiously optimistic despite potential headwinds from higher taxes.
Johnson Service Group expects further margin expansion, projecting levels exceeding 14.0% by 2026, compared to RBC’s estimate of 13.5%. The firm has secured 73% of its energy costs for 2025, which should provide some stability amid ongoing market volatility.
RBC Capital Markets maintained a ’sector perform’ rating on the stock, reflecting a neutral stance.
Analysts at RBC acknowledged the company’s strong market position, well-invested infrastructure, and commitment to sustainability and customer service.
However, they noted that while Johnson Service Group remains a solid investment, they see greater upside potential in other recovery stocks at present.
The announcement of a new share buyback program worth up to £30 million over the next year provided additional support to investor sentiment.
Additionally, management’s exploration of a transition to the Main Market is expected to enhance the company’s profile and improve liquidity.
While challenges persist, including macroeconomic uncertainty and cost pressures, the latest results highlight Johnson Service Group’s resilience and strategic focus on long-term growth.