Johnson Service acquires hotel laundry business Zip Textiles

Johnson Service has acquired hotel laundry services specialist Zip Textiles for £15m cash, on a debt-free, cash-free basis.

While Birmingham-based Zip is expected to immediately improve earnings, JSG said the main reason for the purchase was to increase its capacity and for Zip's client base in the hotels and leisure sectors.

Complementing JSG's existing Lincolnshire-based Bourne Textiles business, Zip focuses on high-volume contracts for hotel and leisure sectors with a processing plant in Birmingham.

The group also bought linen hire and laundry business Ashbon in November and London Linen last May, which are focused on restaurtants, catering and hotel linen.

Zip, which reported revenue of £7.0m in the year to 31 January 2015, operates from a freehold property which was extended and modernised last year.

"Zip is an extremely well invested business that offers good synergies with Bourne, geographical reach and scope to increase processing capacity significantly," said chief executive Chris Sander.

"Having expanded our hotel and restaurant divisions through the acquisitions of Ashbon and London Linen, the addition of Zip to the JSG family marks the latest milestone in our growth strategy."

Analysts at Investec increased its forecast for 2016 profit before tax and earnings per share by 1.4% to £27.4m and 1.7% to 6.5p, while 2017 estimates are lifted 1.8% to £29.4m and 2.1% to 7p.

The broker said: "In our view, this looks another good deal for the group, offering good synergies with Bourne, geographical reach and scope to increase processing capacity significantly. At a time of uncertainty, Johnson Service Group’s growth model looks resilient, with both solid organic opportunities and additional acquisition upside."

Shares in JSG were up 2.4%m to 89.36p by 1045 GMT on Monday.