How Did Johns Lyng Grow BaU Revenue Despite CAT Revenue Collapse?

FY25 Financial Overview

Johns Lyng Group Limited (ASX, JLG) closed FY25 with total revenue of $1.18 billion, marking a 1.8% increase over the prior year. While headline earnings before interest, tax, depreciation, and amortisation (EBITDA) slipped 2.1% to $126.8 million, the underlying business-as-usual (BaU) operations demonstrated robust growth. BaU revenue climbed 15.2% to $1.098 billion, with BaU EBITDA surging 15.9% to $118 million, offsetting a sharp 60.1% decline in catastrophe (CAT) revenue and a 68.2% drop in CAT EBITDA due to unusually benign weather conditions suppressing industry volumes in the first half.

Segment Performance and Strategic Acquisitions

The Insurance Building & Restoration Services (IB&RS) segment remained the group’s largest revenue contributor at $683.4 million, growing modestly by 0.5% overall but with BaU revenue up 24.7%. This growth was supported by strategic acquisitions and organic expansion across Australia and New Zealand. The Strata Management division posted a notable 41.7% revenue increase to $98.7 million, driven by acquisitions including Your Local Strata, AM Strata, and SSKB Strata, expanding the company’s footprint in key regional markets.

Essential Compliance & Home Services (EC&HS) also delivered strong growth, with revenue rising 56.7% to $109.4 million, underpinned by a 14.5% organic increase and the acquisition of Chill-Rite, a leading HVAC services provider. These segments benefit from recurring, annuity-style revenue models and regulatory tailwinds, positioning Johns Lyng well for sustainable growth.

US Operations and Commercial Segments

Johns Lyng’s US operations, primarily through Johns Lyng USA and Steamatic franchises, experienced a 10.9% decline in BaU revenue to $214.7 million, impacted by project commencement delays in the first half of FY25. However, the second half saw these projects come online, alongside new client onboarding such as Brown & Brown Insurance Brokers and the sale of four Steamatic franchises, signaling progress in establishing a national service platform.

The Commercial Building Services segment remained stable with $65.5 million in revenue, though EBITDA declined 19.1% due to project delays. The Commercial Construction segment is in its final run-off phase, with revenue down 71.8% to $6.7 million, and is expected to be discontinued in FY26.

Balance Sheet and Dividend Policy

Johns Lyng maintains a strong balance sheet with net assets increasing to $504.9 million and net debt at $102 million, representing a conservative leverage ratio of 0.8 times FY25 EBITDA. The company holds over $85 million in undrawn committed revolving credit facilities, providing ample liquidity to fund organic growth and bolt-on acquisitions. Notably, no final dividend was declared for FY25, reflecting conditions stipulated in a Scheme Implementation Deed with Pacific Equity Partners, which restricts dividend payments unless specific surplus cash thresholds are met.

Outlook and FY26 Forecast

Looking ahead, Johns Lyng forecasts FY26 total revenue of $1.264 billion, a 7.1% increase driven by a 12.1% rise in BaU revenue to $1.231 billion. EBITDA is expected to slightly decline by 5% to $120.5 million, with BaU EBITDA remaining relatively flat. The company anticipates ongoing operational challenges, including the NSW recovery and US project ramp-up, but is mitigating these through a completed cost reduction program and a reinvigorated sales strategy focused on client engagement and market expansion.

Johns Lyng continues to pursue growth through organic initiatives, strategic acquisitions, and geographic expansion across Australia, New Zealand, and the USA, leveraging its diversified portfolio spanning restoration, strata management, compliance services, and disaster management.