Johns Lyng Group Limited (JLG) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Johns Lyng Group Limited Annual General Meeting. I would now like to hand the conference over to Mr. Peter Nash. Please go ahead.

Good morning, ladies and gentlemen. I'm Peter Nash, Chairman of the Board of Johns Lyng Group Limited, and it's my pleasure to welcome you to the company's 2021 Annual General Meeting. Thank you for your attendance this morning via our teleconference facility. I'd like to start this morning's meeting by acknowledging the traditional owners of the land on which we are meeting here in Melbourne, Wurundjeri people and the Bunurong people of the Kulin Nation and pay my respects to their elders past and present. I'd like to introduce my fellow directors who are either here with me or on the call: Scott Didier, our Chief Executive and Managing Director; Lindsay Barber, Executive Director and Chief Operating Officer; Adrian Gleeson, Executive Director and Director of Investor and Business Relations; Pip Turnbull, Executive Director and Executive General Manager of Business Development and Marketing; Mr. Nick Carnell, Executive Director and Group Executive General Manager; Curt Mudd, Non-Executive Director; Robert Kelly, Non-Executive Director; Larisa Moran, Non-Executive Director; and Peter Dixon, Non-Executive Director. Can I also introduce, who are on the call today, our Chief Financial Officer, Matthew Lunn; our company's Secretary, Hasaka Martin; Andrew Farrell, representative of the company's share registry, Link Market Services; and the company's auditors, Pitcher Partners, represented by Nick Bull. No written questions were submitted from shareholders for Pitcher Partners with respect to the conduct of the audit and the auditor's report as per the process set out for this in the Notice of Annual General Meeting. However, I'm certain that Nick would be pleased to address any shareholder questions that you might have during the course of the meeting. As we have a quorum present and as it's past 10:30 a.m., I now declare the meeting officially open. The notice for this Annual General Meeting was circulated to shareholders within the required period, and further copies of the notice are available electronically via the Link online voting poll. If there are no objections, I would like to move that, that notice be taken as read. I'd like to describe the voting procedures that will apply to this meeting. In accordance with my right as Chair of the meeting and as recommended by the Australian Securities and Investments Commission, I've determined that votes on each resolution will be taken by way of poll. The results of the poll will be notified to the ASX following the meeting. Only Johns Lyng Group shareholders or their duly appointed representatives or proxies are eligible to vote at this meeting. The screen you are viewing has the image of who is speaking on the left-hand side of the screen and the company's slide presentation on the right-hand side of the screen. At the bottom of the screen, you will find 2 boxes that invite you to get a voting card and ask a question as well as a list of available downloads, including the Notice of Meeting, our 2021 annual report and the virtual online meeting guide. This meeting guide provides a step-by-step approach on how to participate in this meeting. As this is a virtual meeting, the meeting platform provides for electronic voting. If you are logged in as a shareholder, you will be able to cast your vote using the electronic voting card received after clicking the Get a Voting Card button. You can then choose to vote at any time during the meeting. You can also make a change to your vote at any time while voting remains open. But once you submit your voting card and voting is closed, you will be unable to change it. Any cards not submitted by the close of voting will be automatically submitted. If you have more than 1 holding, you will need to submit a voting card for each holding. We will let you know as we approach the close of voting, but it will be 5 minutes after the close of the meeting. At the conclusion of the meeting, a red bar with a countdown timer will appear at the top of the screen, advising you of the remaining voting time. Please make any change and submit your voting card before or during this time. [Operator Instructions] We encourage you to ask your questions as early as possible in the meeting. We will pause at relevant intervals throughout the meeting and invite questions, which we will then hold until the open session at the end of the meeting. If you are experiencing difficulties in properly seeing the presentation slide, please ensure you have maximized it on your screen. If you are having any technical difficulties and the online meeting guide isn't addressing them, please phone the toll-free number on the top of the web page. The number is also on the bottom left of the last page of the online guide. If we experience technical difficulties during the meeting that prevent us from continuing, we will adjourn the meeting and release an announcement to the ASX regarding when the meeting will recommence or when we will hold another meeting. If you are a proxyholder, you must comply with the direction of the shareholder if you wish to lodge a valid vote. For shareholder or its proxyholder votes today in relation to a shareholding for which a proxy has been appointed, the earlier proxy will be revoked in favor of the new vote. Each resolution will be tabled in turn, and we will invite questions regarding each resolution before proceeding to the next resolution. Answers to any questions will be provided in the open session at the end of the meeting. [Operator Instructions] I will endeavor to give all shareholders who wish to ask a question a reasonable opportunity to do so. However, in order to allow for an effective meeting, may I ask that you please keep your questions related to matters relevant to this meeting. At this meeting, there will be 12 items of business, including 11 resolutions, each resolution we proposed and voted on as a simple majority to be carried. There have been proxies received in respect of today's resolutions, which I intend to disclose when those resolutions are considered. As mentioned in the Notice of Meeting, it is intended that any undirected proxies given to the Chair will be voted in favor of the relevant resolution. Let me now turn to my address. I'm very pleased to welcome everyone to our AGM for 2021, and thank you for joining us. This year, we have once again returned to a virtual format, and we thank our shareholders for their patience in supporting this format during COVID. Pleasingly, 2021 was another year of strong performance from Johns Lyng. We delivered revenue of $568.4 million, representing a 14.8% growth on FY '20 while EBITDA grew 28.3% to $52.6 million driven by high demand for all of our services. This year, much like last, has been driven by solid organic growth particularly from our core Insurance Building and Restoration Services division. We've also had a fantastic start to FY '22, making a number of strategic acquisitions and extending key contracts while several ongoing CAT projects and recent weather events continue to support a strong pipeline of work. Our CEO, Scott, will speak shortly and highlight some of our key achievements for the year in more detail. However, I want to emphasize that our performance is very much a result of our strategy, which delivered both organic and inorganic growth throughout FY '21. Those who attended this meeting last year may well have a sense of deja vu and rightly so. Since listing in 2017, we have been clear and transparent about our strategy. We have executed against it and it has delivered for our shareholders. As the pandemic continued to disrupt our lives throughout the year, I'd like to acknowledge the phenomenal effort of our people. In the face of unprecedented challenges, they've continued to shine and have been instrumental in driving Johns Lyng's strong performance. Various border closures, restrictions on movements stemming from lockdowns and COVID-safe protocols have been fixtures of the past year. With several catastrophic events impacting their country during FY '21, our people have had to navigate these new logistical challenges in order to respond, and respond they did. That our business has been largely unaffected throughout the pandemic is a reflection of the quality of our people, the leadership of Scott and his executive team and the Johns Lyng culture that drives all that we do. On behalf of the Board, I'd like to thank and acknowledge our people for their hard work and fortitude over the past year. But we certainly weren't alone in tackling the multitude of challenges FY '21 presented, and I'd also like to thank our clients and other stakeholders for their continued collaboration and support for our business. Our solid performance in FY '21 has again emphasized one of the key value propositions of the Johns Lyng Group, that we are largely insulated from the broader market and economic conditions that have disrupted so many other businesses across all industries and of all sizes. The characteristics of Johns Lyng as a defensive growth stock is one that COVID-19 has very shown a light on. However, with that said, we will not rest on our laurels and we take nothing for granted. As I said at the beginning of this presentation, we believe in our strategy and its ability to continue to broaden demand for our services and deliver performance, and that's what we intend to do. As such, we'll continue to grow the business organically while also finding strategic acquisitions that are well aligned with our culture and capability and add value to our shareholders. We'll also continue to develop the meaningful relationships we have built with our clients and our investors, something we've been very successful in over recent years. We look forward to updating the market on the exciting opportunities that are in front of us as the year progresses, and we continue to build on the momentum that has already developed during these first months of the new financial year. In conclusion, it's been another extraordinary year for Johns Lyng, and I'd like to thank Scott and the leadership team for their sustained and tireless hard work. Our culture and people are the -- are a big driving force of our success. And looking across the leadership at all levels in the business, I truly believe we are very well set on this front. Lastly but certainly not least, I'd like to recognize and thank our shareholders. You have identified the opportunity to invest in Johns Lyng and have joined us for the journey. And on behalf of the Board, we thank you. Thank you again for joining us today, and I'll now hand over to Scott.

Good morning, ladies and gentlemen, and welcome. Thanks to our Chairman, Peter Nash, for his opening remarks, and I'd like to recognize the stellar effort our teams have put in this year to once again deliver outstanding results amid another challenging year. I'd like to acknowledge and thank our shareholders for their support over this time. I'd also like to thank our business partners, Board and the executive leadership team who have been instrumental in driving our phenomenal growth over recent years. We are incredibly proud of our performance, which has once again highlighted the strength of our value proposition and opportunities for growth. FY '21 saw Johns Lyng continue the excellent performance of our core Insurance Building and Restoration Services divisions, which this year experienced a large number of business as usual, BaU, job registrations. We have also had a very positive start to the new financial year with a pipeline of work that promises to deliver well into FY '22. That these achievements have taken place amid the turbulence of the COVID-19 pandemic is particularly noteworthy and again highlights our insulation from typical market forces. FY '21 was another year of strong growth for Johns Lyng with EBITDA increasing by 28.3% on the previous period to $52.6 million. Sales revenue for the year was also up 14.8% on FY '20 to $568.4 million. We also signed and renewed contracts with important insurance industry clients, which should provide a steady stream of work into the future. Our core business has been the yardstick of our overall performance and to see it flourishing amid the current climate is a testament to the hard work of our people, the quality of our work and the strength of the relationships with our key clients. I have mentioned many times in the past the importance of these relationships and the value we're seeing in fostering them. Throughout FY '21, we recorded several new contract wins and renewals with leading insurance providers, including Westpac General Insurance Limited, Chubb, RACQ and Honey Insurance. During FY '21, we also continued to expand our bricks-and-mortar footprint, opening new offices in the regional centers of Batemans Bay, Port Macquarie, Tamworth, Mildura, Warrnambool and Benalla. With respect to CAT activity. Supplementing our robust BaU performance were workflows from nonforecast catastrophe-related activity. During the year, our teams responded to catastrophic weather events that struck in the Southeast Queensland, northern New South Wales, Western Australia and more recently in Victoria and South Australia. Interestingly enough, we've even managed multiple claims from the recent Melbourne earthquake. Our exclusive Victorian contract, managed through Bushfire Recovery Victoria, was announced shortly after the end of FY '21 and was for the provision of a cleanup and make-safe works on properties damaged by the severe storms that battered Victoria. The initial phase of work focused on private properties and delivered through government funding is currently underway with work progressing well and a second phase having just commenced. A large part of this project centers around engaging with local communities and employing local trades, thereby, reinvesting in the regions we're restoring. This has long been the cornerstone of a disaster recovery response, and we're proud to be supporting these regions economically, particularly as many have been hit hard by the impact of lockdowns and travel restrictions. Several sites of cultural significance for Aboriginal and Torres Strait Islanders were impacted during the storm. And we've consulted with relevant First Nation leaders and communities throughout the project to ensure all works are carried out in a culturally sensitive matter. This approach has also informed our resourcing on the project with 16% of our workforce being made up of Aboriginal and Torres Strait Islanders. The breadth and magnitude of these responses, several of which will continue to deliver revenue into this financial year, highlight the value of our national scale, something we're particularly proud of and have developed over recent years. As you know, Johns Lyng does not forecast revenues from CATs. We are only too aware that the Bureau of Meteorology issued a La Nina alert some weeks ago and the current weather events we're experiencing right around in Australia and particularly in our densely populated capital cities of heavy rain and driving winds is to be expected. As a result, inbound calls to our teams are at an unprecedented level. In the strata market, since entering the strata market 2 years ago, we have expanded our footprint and FY '21 was no exception. Throughout the period, we have made significant progress in our strategy to capture the immense opportunity this space presents, particularly in terms of cross-selling opportunities. There are 2 key points that I'd like to mention here that indicate the health position of our strata services division, which -- and the growth opportunities before us. The first was our dedicated strata building and repairs division, Johns Lyng Strata Building Services being appointed to the building and restoration panels of 3 insurance clients. This marks a significant progression as it provides an avenue to deliver ongoing work and a rich opportunity to grow our national footprint in the strata sector. This approach has proven highly successful in our core business, and we believe it will deliver again here. The second point pertains to a number of strata acquisitions made since the beginning of this financial year. The fragmented nature of the strata sector presents a fantastic opportunity for consolidation, and we have made no secret of our strategy to fortify our leading position through strategic acquisitions. To that point, I'm happy to report that we have successfully acquired 5 strata businesses, encompassing 11,825 lots. Together, these bring significant capacity to Bright & Duggan's current portfolio of approximately 88,580 lots. On the broader topic of acquisitions and strategic growth, in early FY '22, we successfully completed 2 acquisitions that will align with our core business offering and promising to expand our capacity. The first, Unitech, a South Australian-based insurance building services company will increase our foothold in that state for both BaU insurance work and CAT responses. Our aim is to also build capacity of our large-loss insurance building and Makesafe offering in South Australia. Unitech has played an instrumental role in responding to the recent storms that lashed regional South Australia, highlighting the rationale behind our growth strategy. The second acquisition we made this year was leading national restoration service company, Steamatic Australia. With 39 locations throughout the country, 34 of which are in regional areas, acquiring Steamatic Australia has significantly enhanced our national reach and capacity to respond to CAT events. Having acquired the Steamatic Global Master Franchise in 2019, this recent acquisition marks a significant progression of our global growth strategy and an opportunity to expand into the global restoration services market, worth an estimated $200 billion. During FY '21, our Commercial Construction division delivered a record performance. The main driver of this was the increase in large-loss insurance building work, stemming again from our focus on nurturing relationships. One such relationship has been with Cladding Safety Victoria, the body responsible for the rectification of unsafe buildings in Victoria. We've, thus far, been awarded contracts for 17 building rectification jobs. And with a significant number of buildings scheduled for works in the coming months, we believe we are well positioned to support Cladding Safety Victoria in FY '22. The division's record performance in FY '21 follows a sound FY '20 performance, suggesting a promising future growth trajectory. We have come out of the gates really strong in FY '22 with an encouraging stream of BaU work on the horizon and a number of CAT projects underway that will continue to deliver a strong pipeline of work. As such, we are on track to meet our forecast of 22% BaU revenue growth and 29% BaU EBITDA growth. I've already touched on a number of strategic acquisitions and contract wins and extensions already completed in this financial year, and we'll continue to progress this strategy, prudently appraising acquisitions and opportunities for strategic growth. Thank you for joining us. I'd now like to open up for questions.

Thank you, Scott. As noted before, please lodge any questions that you might have, and we will address them in the open session at the end of the meeting. A copy of my address, the CEO's address and the AGM presentation have been lodged with the ASX and will be published in the Investors section of the company's website. I will now invite questions from shareholders on general matters and matters relevant either to my address or Scott's presentation. Again, these and other questions will be addressed in the open session. Only people who are actually registered here as shareholders or as proxies, representatives or attorneys for absent shareholders are entitled to ask questions. [Operator Instructions] Where appropriate, I will call on specific directors, management, the auditor or other advisers to respond to shareholders' questions. However, all questions will be put through me as Chair. There will be a further invitation for questions on each resolution as they are presented. Now moving to the formal component of the meeting, in which the only items of business to come before the meeting today will be those specified in the Notice of Meeting. The first item of business of this meeting is consideration of the audited financial statements and related reports for the year ended 30 June 2021. The Corporation Act requires that audited financial statements and related reports for the 2021 financial year, which were made available to shareholders on 24 August 2021, be considered at the meeting. Although shareholders are not required to formally vote on the company's financial and related reports, I welcome any discussion or question on the reports. As I mentioned previously, the company's auditors are Pitcher Partners and Nick Bull, the partner responsible for the company's 2021 audit, is present at the meeting today and is willing and able to answer any questions on the conduct of the auditor and the content of the audit report. I'm advised by the auditors that they have received no relevant questions for their attention prior to the meeting. I now invite any questions or comments on the financial reports or the directors' and auditor's reports for the year ended 30 June 2021. I ask the company secretary -- oh, sorry, I ask the company secretary to record that the financial report for the company and its controlled entities for the year ended 30 June '21, together with the directors' report and the auditor's report have been received and considered by shareholders. Thank you. The next item of business, item 2, is a resolution to adopt the company's remuneration report, which is set out in the company's 2021 Annual Report. The vote on this resolution is advisory only and does not bind the directors. However, the Board will take into account any discussion on this resolution and the outcome of the vote when considering the future remuneration policies and practices of the companies. Now appearing on the screen are the details of the resolution and the valid proxy votes on the resolution, and I will take these as being read. I now invite you to lodge any questions on this resolution. I formally put this resolution to the meeting. I note if you have not already done so, you can vote on this resolution at any time before voting closes. This applies to all subsequent resolutions. So I will not repeat this statement. The next item of business, item 3a, relates to the reelection of Ms. Larisa Moran as Director. Larisa's qualifications, background and experience are summarized in the Notice of Meeting. Now appearing on the screen are the details of the resolution and the valid proxy votes on the resolution, and I will take these as being read. I now invite questions to be submitted on this resolution. I formally put this resolution to the meeting. The next item of business, item 3b, relates to the reelection of Mr. Robert Kelly as Director. Robert's qualifications, background and experience is summarized in the Notice of Meeting. Now appearing on the screen are the details of the resolution and the valid proxy votes on the resolution, and I will take these as being read. I now invite questions to be submitted on this resolution. I formally put this resolution to the meeting. The next item of business, item 4a, relates to the issue of performance rights to the company's Chief Executive Officer and Managing Director, Mr. Scott Didier. Now appearing on the screen are the details of the resolution and the valid proxy votes on the resolution, and I will take these as being read. I now invite questions to be submitted on this resolution. I formally put this resolution to the meeting. The next item of business, item 4b, relates to the issue of performance rights to the company's Chief Operating Officer, Mr. Lindsay Barber. Now appearing on the screen are the details of the resolution and the valid proxy votes on the resolution, and I will take these as being read. I now invite questions to be submitted on this resolution. I formally put this resolution to the meeting. The next item of business, item 4c, relates to the issue of performance rights to Mr. Adrian Gleeson. Now appearing on the screen are the details of the resolution and the valid proxy votes on the resolution, and I will take these as being read. I now invite questions to be submitted on this resolution. I formally put this resolution to the meeting. Next item of business, item 4d, relates to the issue of performance rights to Ms. Philippa Turnbull. Now appearing on the screen are the details of the resolution and the valid proxy votes on the resolution, and I will take these as being read. I now invite questions on this resolution. I formally put this resolution to the meeting. The next item of business, item 4e, relates to the issue of performance rights to Mr. Nicholas Carnell. Now appearing on the screen are the details of the resolution and the valid proxy votes on the resolution, and I will take these as being read. I now invite questions to be submitted on this resolution. I formally put this resolution to the meeting. The next item of business, item 5, relates to modification of the company's constitution. The proposed amendments are available in full as an appendix to the Notice of Meeting. Now appearing on the screen are the details of the resolution and the valid proxy votes on the resolution, and I will take these as being read. I now invite questions to be submitted on the resolution. I formally put this resolution to the meeting. The next item of business, item 6, relates to shareholder approval required under Section 260B of the Corporations Act for the provision of financial assistance under the ANZ facility agreement. Now appearing on the screen are the details of the resolution and the valid proxy votes on the resolution, and I will take these items -- these as being read. Now I invite questions to be submitted on this resolution. I formally put this resolution to the meeting. As the final item of business relates to the issue of shares to myself, I will hand the meeting over to my fellow Director, Larisa Moran, who will take you through item 7.

Thank you, Peter. The next item of business, item 7, relates to the issue of shares to the Chairman under the employee share loan plan. Now appearing on the screen are the details of the resolution and the valid proxy votes on the resolution, and I will take these as being read. I now invite questions to be submitted on this resolution. I formally put this resolution to the meeting. I will now hand back over to the Chairman for the remainder of the meeting.

Thanks, Larisa. This is now the open session, and we will address any questions that have been received prior to the meeting or during the course of the meeting. Are there any questions?

Sir, there's no questions online and just taking -- are there any questions on the phone? I've got none.

There are no questions via the phone.

Okay. Very well. We'll move forward. As all resolutions at this meeting have now been put to shareholders and we have dealt with all questions, we will move on to the poll procedure. I would encourage all shareholders and proxy holders who have not yet voted to do so now. Voting will close 5 minutes after the meeting is concluded. Please note, as Link Market Services will need time to count and audit all the votes submitted online today, the results of the poll will be notified to the ASX and published on Johns Lyng Group's website following the meeting. As that concludes the business of the meeting, I thank all our shareholders and others for attendance of the meeting and now declare the meeting closed. Thank you.

That does conclude the call for today. Thank you for participating. You may now disconnect.