The Johns Lyng Group Ltd (ASX: JLG) share price is sinking on Tuesday as the building services company reported its FY21 earnings.
Let's investigate further.
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Johns Lyng share price slumps despite strong earnings and sales growth
The company detailed several investment highlights in its report, including:
- Sales revenue up 14.8% year on year to $568.4 million
- Group EBITDA of $52.6 million, a 28.3% year on year growth from FY20
- Normalised net profit after tax (NPAT) of $20.7 million, up 26.3% from the year prior
- Earnings per share (EPS) of 8.3 cents, up from 7.13 cents in FY20
- Final fully franked dividend of 5 cents per share, a 25% increase from the previous year.
What happened in FY21 for Johns Lyng Group?
Johns Lyng recognised revenue of $568 million, which came in 15% higher than FY20. The growth carried vertically through its income statement, with EBITDA increasing by 28.3% and NPAT by about 26%.
Much of the growth was underscored by "another outstanding performance" from the Group's core business of insurance building and restoration services. In addition, results were "supported by a solid contribution" from its catastrophe (CAT) business.
In addition, Johns Lyng completed several "important strategic acquisitions" completed prior to FY21's end.
To illustrate, the company acquired Unitech, a South Australian "insurance building services company". The company said the transaction "presents clear synergies" with its core business and will increase Johns Lyng's exposure in SA.
Moreover, it also acquired Steamatic Australia which is a "national restoration services company", according to the company's announcement. This extends the previous acquisition of the Steamatic Global Master Franchise back in FY19.
Finally, Johns Lyng also hiked its dividend by 25% from the same time last year, representing 61% of NPAT as a coverage ratio.
What did management say?
Johns Lyng CEO Scott Didier said:
These FY21 results are an excellent representation of the Johns Lyng value proposition and I think it's an extremely rewarding outcome for our people, our Board and our shareholders.
Speaking on the CAT business's progress in the year, Didier added:
Our CAT response activity during the year was again a clear indication of the value of the national scale we have built, responding to disasters from southeast Queensland to coastal Western Australia. The growing strength of our offering was recognised late in the year when we entered into a partnership with the State Government of Victoria for clean-up and Makesafe works on damage properties following a significant storm event in June.
What's next for Johns Lyng Group?
The company expects revenue from FY21 "CAT-related activity" to eventually "flow through to FY22". Work on the state government contract will also commence in FY22.
As such, management forecasts FY22 sales revenue of $635.4 million and FY22 EBITDA of $60.1 million. These estimates call for 22.2% and 28.6% year-on-year increases from FY21, respectively.
The company also remains prioritised on extending its acquisition trail, whilst "building upon (its) digital service capability".
The Johns Lyng Group share price has posted a year to date return of 90%, extending the previous 12 months' gain of 126%.
Both of these results have outpaced the S&P/ASX 200 Index (ASX: XJO)'s climb of around 25% over the past year.
