Johns Lyng Group (ASX:JLG) Share Price Plunges 32% as FY24 Earnings Disappoint

Johns Lyng Group Ltd (ASX:JLG) experienced a sharp decline in its share price, plummeting 32% after the release of its FY24 earnings report. The industrial stock, part of the S&P/ASX 200 Index (ASX:XJO), opened down 28% at AU$4 per share, reflecting investor disappointment with the company’s financial performance.

Mixed Financial Results and Missed Expectations

Johns Lyng’s FY24 earnings report painted a mixed picture, with some segments performing well while others lagged. The company reported a total revenue decline of 9.6% to AU$1.16 billion, falling short of its guided revenue of AU$1.2 billion. Despite the overall revenue drop, the company managed to increase its earnings before interest, tax, depreciation, and amortisation (EBITDA) by 8.5% to AU$129.6 million. However, this was still below the expected AU$136.4 million EBITDA, contributing to the negative market reaction.

Net profit after tax (NPAT) grew by a modest 0.8% to AU$63.3 million. On a positive note, Johns Lyng increased its final dividend by 4.4% to 4.7 cents per share, bringing the full-year dividend to 9.4 cents per share. However, these positives were overshadowed by the company’s underperformance relative to market expectations.

Segment Performance: A Tale of Two Divisions

The performance of Johns Lyng’s business segments varied significantly. The insurance building and restoration services (IB & RS) division saw a revenue increase of 9% to AU$845.3 million, driven by the company’s continued success in winning new clients and extending contracts in Australia and New Zealand. This growth contrasts sharply with the catastrophe division, where revenue plummeted by 45% to AU$205.6 million. The company noted that while the IB&RS division outperformed expectations, the catastrophe division's decline weighed heavily on overall results.

At the EBITDA level, the disparity between divisions was even more pronounced. The IB&RS business-as-usual (BAU) EBITDA grew by 20.2% to AU$111.2 million, highlighting the division’s robust performance. Conversely, the catastrophe division’s EBITDA dropped by 39% to AU$27 million, reflecting the significant challenges faced by this segment.

Johns Lyng also reported an underlying NPAT measure, with the normalised business-as-usual NPAT-A profit rising by an impressive 37.2% to AU$55.9 million, indicating strong operational performance in its core business.

Strategic Developments and Future Outlook

In FY24, Johns Lyng continued to execute its growth strategy, particularly in the strata services division, where it expanded its market share to nearly 5%, making it the second-largest player in Australia. This growth was driven by both organic expansion and acquisitions, including Your Local Strata and AM Strata, as well as the post-FY24 acquisition of SSKB Strata. These strategic moves increased Johns Lyng’s portfolio to over 145,000 lots under management across more than 4,800 schemes.

In the U.S., Johns Lyng made significant strides by securing a spot on a panel for Allstate, one of the largest insurance companies in the country. This development, which gives the company access to a potential 16 million policyholders, contributed to a more than 5% rise in the company’s share price when announced.

Looking ahead to FY25, Johns Lyng is cautiously optimistic. The company expects strong revenue from its catastrophe division, with several contracts extending into the new financial year. However, it has guided for a slight decline in total revenue to AU$1.13 billion, representing a 2.5% drop, and a 4.7% decline in total EBITDA to AU$123.5 million. In contrast, BAU revenue is forecasted to increase by 15.1% to AU$1.07 billion, with BAU EBITDA expected to grow by 7.2% to AU$119.2 million.

Since the start of 2024, Johns Lyng’s share price has fallen by 33%, reflecting growing investor concerns over its financial performance and future outlook.