Industrials

Does Johns Lyng’s trading halt herald more acquisitions?

Tue 07 Dec 21, 3:12pm (AEST)
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Key Points

  • Is the Johns Lyng Group back on the acquisition trail?
  • The company has reiterated its FY22 guidance.
  • Management expect CAT-related activity to eventually flow through to FY22.

The trading halt entered into this morning by integrated building services company Johns Lyng Group (ASX: JLG) relates to a material transaction and a capital raising involving an institutional placement and a pro rata accelerated non-renounceable entitlement offer.

The company advised investors to expect normal trading to resume on Monday, 13 December 2021.

Several milestones enjoyed by the company in the last year – in which time the share price has more than doubled – include increased earnings from Bushfire Recovery contracts, and notable cross-selling strata and building management opportunities.

CAT-related upside

Much of the group’s more recent growth phase can also be attributed to an estimated $55m in state and commonwealth government catastrophe-related (CAT) work following recent storms.

Johns Lyng is also no stranger to acquisitions, with the group’s Bright & Duggan operation recently expanding its building management operations by acquiring three new businesses. 

These include Change Strata Management, which manages a portfolio of around 3000 lots across 75 strata schemes.

Then there’s Structure Building Management and Shift Facilities Management, which expanded the company's NSW strata market presence to 80,000 lots for management and servicing.

In addition to further significant opportunities in strata management, brokers are also quick to flag growth in the annuity style business as usual (BaU) earnings, which is also expected to be driven by new panel wins.

Recent acquisitions

Looking beyond building management, the company also acquired Unitech, a South Australian insurance building services company, which management expects to offer “clear synergies” with its core business and increase Johns Lyng’s exposure in SA.

Late July 2021 the company also paid $10.8m in cash (and $4.8m in shares) for a 60% controlling stake in national restoration services company Steamatic Australia.

Six months later, (early December) the group told investors that Suncorp (SUN) had extended its building insurance repairs contract for an additional three years.

The company has reiterated its FY22 guidance and expects revenue from FY21 “CAT-related activity” to eventually “flow through to FY22”.

Management had forecast FY22 sales revenue of $635.4m and FY22 earnings of $60.1m, which represented a 22.2% and 28.6% year-on-year growth on FY21, respectively.

At full year, the group paid a final fully franked dividend of 5 cents per share, up 25% on the previous year. While the consensus rating on the stock is a Moderate Buy, Morningstar puts fair value at $5.94.

The company is trading above its 20-day simple moving average, and this typically signals a bullish trend.

Written By

Mark Story

Editor

Mark is an award-winning investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics, a diploma in journalism and has completed the Institute of Directors course. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content.

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