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In the wake of its 1H FY24 earnings announcement, Johns Lyng Group Ltd (ASX: JLG) is experiencing a significant downturn on Tuesday, with its stock plummeting by 13% to close at AU$6.25 apiece. This decline positions Johns Lyng as the worst-performing stock on the ASX 200 benchmark index as of the latest update.
Investor Sentiment Sours Despite Strong Earnings Growth
While the company reported robust earnings growth, investor sentiment seems to be less optimistic than expected, leading to a notable drop in the ASX 200 stock's value. The intraday low hit AU$5.75 within the first hour of trading, marking a challenging start to the day for Johns Lyng.
Insights into 1H FY24 Performance Metrics
Let's delve into the key financial figures for Johns Lyng Group Ltd during the first half of the fiscal year 2024:
- Sales Revenue: AU$610.6 million (1H FY23: AU$635.6 million)
- Group EBITDA: AU$69.7 million (1H FY23: AU$64.5 million)
- Net Profit After Tax (NPAT): AU$31.1 million (1H FY23: AU$34.1 million)
- Earnings Per Share (EPS): 8.47 cents (1H FY23: 9.68 cents)
- Net Assets: AU$460.3 million, including net cash of AU$53.7 million
The interim dividend declared is 4.7 cents per share, scheduled for payment on March 19, and it is fully franked. This dividend aligns with the company's payout policy of 40%-60% of NPAT.
1H FY24 Highlights: Balancing Act in Revenue Streams
Johns Lyng reported a record volume of Business as Usual (BaU) work, contributing to AU$426.1 million in revenue, a 13.7% increase from 1H FY23. However, Catastrophe (CAT) revenue experienced a downturn, reaching AU$120.4 million, a 35% decrease from the previous fiscal year. Despite this, the company emphasizes that this figure surpasses 87% of its full-year FY24 forecast, leading to an upgraded full-year revenue projection of AU$177.8 million.
The group's EBITDA of AU$69.7 million includes a noteworthy 28.1% growth in BaU EBITDA to AU$55 million.
Strategic Growth and International Expansion
Johns Lyng is actively pursuing its strategy for international growth by expanding its partner network. Recent agreements with Allstate Insurance in the US and Tower Insurance in New Zealand mark key milestones in this initiative.
Management Insights: Scott Didier AM, Group CEO and Managing Director
Scott Didier AM, the Group CEO and managing director, expressed pride in the strong 1H FY24 results, highlighting the resilience of the business model and operational framework. Didier emphasized the significance of IB&RS BaU work, which forms the cornerstone of JLG's earnings. The company anticipates substantial growth by enhancing market presence and capitalizing on the diversified service portfolio, particularly within the burgeoning Strata business.
During the period, Johns Lyng established its fifth strategic growth pillar, Essential Home Services, through the acquisition of Smoke Alarms Australia and Linkfire. This move significantly advances the goal of being a full turnkey solution for homeowners, property managers, and Strata managers.
Future Outlook: Upgraded Guidance for FY24
Johns Lyng now presents an upgraded guidance for FY24, forecasting group sales revenue to reach AU$1.207 billion and EBITDA to amount to AU$129.4 million. The company sees its deep insurer relationships and the continued expansion of its strata services network as pivotal factors driving future growth prospects for the IB&RS [BaU] division.
Didier pointed out an "ongoing and escalating trend" of higher value work in the catastrophe business due to prolonged adverse weather events, positioning Johns Lyng for potential opportunities in this segment.
