Growth Watchlist – Earnings Update Johns LYNG Group Ltd (JLG)

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***GENERAL ADVICE ONLY*** 

Johns Lyng Group (JLG) reported its financial performance for the first half of the 2025 financial year (1H25), highlighting strong growth in its core business-as-usual (BaU) revenue but facing headwinds in catastrophic (CAT) revenue, leading to an overall decline in total revenue and profitability. The company completed several earnings-accretive acquisitions and strengthened key insurance partnerships, but project delays and benign weather conditions impacted short-term performance.

Despite these challenges, JLG maintains a positive long-term outlook, particularly as it expects increased demand for its services in H2 FY25 due to severe weather events in Australia and the US.

Financial Performance

Key Financial Metrics (1H25 vs 1H24)

  • Total Sales Revenue: $573.1 million (↓6.1% from $610.6 million)
  • EBITDA: $54.2 million (↓15.2% from $63.9 million)
  • Net Profit After Tax (NPAT): $20.8 million (↓33.2% from $31.1 million)
  • BaU Revenue: $534.3 million (↑9.0% from $490.2 million)
  • CAT Revenue: $38.8 million (↓67.8% from $120.4 million)
  • BaU EBITDA: $50.3 million (↑5.8% from $47.6 million)
  • CAT EBITDA: $3.8 million (↓76.7% from $16.3 million)

 

  • Earnings per Share – Statutory: 5.17 cents (-38.9%)
  • Interim Dividend per Share: 2.5 cents, representing 49% of NPAT, down from 4.7 cents in 1H24.

Key Trends

  • BaU revenue and EBITDA grew significantly, supported by acquisitions and organic expansion.
  • CAT revenue and earnings declined sharply, impacting total EBITDA.
  • Net debt increased to $113.4 million, mainly due to acquisitions and investment in business growth.

Interim Dividend

  • Declared dividend: 2.5 cents per share (fully franked).
  • Represents 49% of NPAT, in line with JLG’s 40-60% payout policy.
  • Payment Date: 18 March 2025.
  • Record Date: 3 March 2025.

Revised FY25 Guidance

Due to short-term operational challenges, JLG revised its full-year FY25 guidance downward:

  • Revenue: $1.167 billion (↓5.0% from $1.228 billion)
  • EBITDA: $126.5 million (↓4.5% from $132.5 million)
  • CAT Revenue Forecast: $62.4 million (↑22.1% from $51.1 million)
  • CAT EBITDA Forecast: $7.0 million (↑13.5% from $6.3 million)

Factors impacting the revised outlook:

  • Delayed project commencements in NSW and Johns Lyng USA.
  • Benign weather conditions reducing CAT-related work.
  • Implementation of cost-reduction initiatives to right-size overhead costs.

Despite the downward revision, H2 FY25 is expected to be stronger, with increased insurance claim activity following major storms and flooding in Northern Queensland and New South Wales, as well as wildfire-related work in California.

Strategic Developments

Key Acquisitions in 1H25

JLG has been expanding aggressively through acquisitions:

  1. Keystone Group (87.5% ownership) – Strengthens JLG’s insurance building & restoration services.
  2. SSKB Strata (100% ownership) – Increases JLG’s strata management footprint to 140,000+ lots.
  3. Chill-Rite HVAC (84% ownership) – Enhances Essential Compliance & Home Services in regional QLD & VIC.

These acquisitions have already started contributing to BaU revenue and enhancing JLG’s long-term earnings potential.

Expansion & Market Positioning

  • Strengthened key insurance partnerships, securing new contract wins and extensions with Hollard, Market Lane Group, and TIO (NT).
  • Disaster Management Australia (DMA) secured government contract extensions:
    • Queensland’s Department of Housing (temporary accommodation & caravan rental contracts).
    • Emergency Recovery Victoria (statewide rectification works).
  • Growth in the US market:
    • Expansion of insurance broker partnerships with Brown & Brown Insurance.
    • Emergency Broker Response service successfully launched.
    • Increased role in post-wildfire recovery in California.

Impact of Recent US Natural Disasters

Hurricane Damage

  • Hurricanes Milton and Helene caused estimated insured losses between $35 billion and $55 billion
  • These events are expected to be more of a Q4 earnings event than a capital event for insurers
  • Johns Lyng USA has been working on recovery efforts from Hurricane Ian, which is expected to continue into FY24 and beyond

Los Angeles Wildfires

  • Over 12,000 structures were destroyed or damaged in the recent Los Angeles wildfires
  • As of January 30, 2025, approximately 31,210 claims related to the Eaton and Palisades fires have been filed, with more than $4.2 billion paid to policyholders
  • Johns Lyng is currently responding to the Los Angeles wildfires in California

Implications for Johns Lyng Group

US Market Expansion

  • JLG’s US operations are a key strategic growth pillar, with 25 Business Partners across the country
  • The company has introduced core business service lines to the US market, including Makesafe, Express Builders, and Steamatic Restoration
  • JLG was appointed to AllState’s Emergency Response and Mitigation Panel, providing access to potentially 16 million policyholders

Financial Outlook

  • The company expects workflow from recent catastrophic events to continue into FY25
  • JLG forecasts BaU revenue growth of 15.1% for FY25
  • The US expansion and increased natural disaster activity are likely to contribute significantly to future earnings
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