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 million¹).  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 EBITDA² 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.

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.