Release Date: August 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Johns Lyng Group Ltd (ASX:JLG, Financial) achieved a record-setting BAU EBITDA in FY24.
- The company has expanded its revenue base significantly from $286.8 million in FY18 to over $1.159 billion in FY24.
- Johns Lyng Group Ltd (ASX:JLG) has successfully grown its business in the US by 34% over the past two years.
- The company has a diversified and large client base, mitigating concentration risk and insulating from economic cycles and inflationary pressures.
- Johns Lyng Group Ltd (ASX:JLG) has a strong balance sheet with $21 million in net cash and more than $80 million in undrawn revolving credit facilities.
Negative Points
- Revenue in FY24 was slightly down compared to the previous year due to record contributions from large-scale natural disasters in FY23.
- The company experienced underperformance in New South Wales, which required rectification.
- There was a discrepancy between the reported FY24 revenue and the company’s guidance, with revenue falling short by 4%.
- The EBITDA margin is expected to step down from 13.2% in FY24 to 12.3% in FY25.
- The company’s Express business was negatively impacted by benign weather conditions in the second half of FY24.
Q & A Highlights
Q: Why was there a discrepancy between what you reported in FY24 versus your guidance?
A: Matthew Lunn, Group Chief Financial Officer: From a guidance perspective, our group revenue was $1.16 billion, slightly below our guidance of $1.207 billion. However, we outperformed our EBITDA guidance by $1.9 million, delivering $138.3 million.
Q: Can you explain the margin guidance for FY25 and why it is stepping down?
A: Matthew Lunn, Group Chief Financial Officer: The FY25 forecast EBITDA margin is 12.3%, down from 13.2% in FY24. The record margin in FY24 was driven by high volumes from major CAT events and rebasing of investments. We expect margins to continue to increase over time due to scale efficiencies and operational leverage.
Q: How much of the BAU work is locked in for FY25, and why not provide a guidance range?
A: Matthew Lunn, Group Chief Financial Officer: Approximately 50% to 60% of our BAU forecast is locked in based on panel allocations. We have good visibility on panel allocations, and while we can't predict specific job volumes due to weather, we maintain our KPIs and expect similar levels.
Q: Are you expecting BAU volume growth across the business in FY25?
A: Matthew Lunn, Group Chief Financial Officer: Yes, we are expecting growth in BAU. The second half of FY24 BAU revenue was about $455 million, and we are forecasting $1.02 billion for FY25, representing about 12% growth.
Q: Should we expect any carryover issues related to the underperformance in New South Wales in FY25?
A: Matthew Lunn, Group Chief Financial Officer: We have rectified the issues in New South Wales and do not expect them to carry over into FY25.
Q: What are the expectations for the AllState panel in FY25?
A: Scott Didier, Group Chief Executive Officer: The AllState panel has been slow to start, and we do not expect significant contributions in the first half of FY25. The 10% to 15% organic growth forecast does not heavily rely on AllState.
Q: What is the focus of your M&A strategy, and are you looking more in Australia or the US?
A: Scott Didier, Group Chief Executive Officer: We are looking for good core fits in both Australia and the US, focusing on our key areas such as Strata and IB&RS.
Q: Can you provide more detail on the Strata business performance and expectations for FY25?
A: Matthew Lunn, Group Chief Financial Officer: In FY24, Strata services delivered $115.9 million in revenue, up 12.9% year-on-year. We expect 16% growth in FY25, driven by new panel wins and scaling of existing operations.
Q: How do you expect the CAT pipeline to progress in FY25?
A: Nick Carnell, Chief Executive Officer, Australia: The $51.1 million in CAT work is contracted and locked in. We expect continued work for the Victorian government and potential upside from ongoing projects in the US.
Q: Are there any stranded costs from the commercial construction business that will impact the rest of the group?
A: Matthew Lunn, Group Chief Financial Officer: We have redeployed resources from the commercial construction business to other areas, and we do not expect significant stranded costs to impact the group.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
