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

Hello. Thank you for standing by and welcome to the Johns Lyng Group 1H '24 Results Call. [Operator Instructions] I would now like to turn the conference over to Mr. Scott Didier, Group CEO. Please go ahead, sir.

Good morning, everyone. My name is Scott Didier. I'm the CEO of Johns Lyng Group. I'd like to welcome you all to this morning's conference call as we present our results for the first half of the 2024 financial year. I'm joined today by our Australian CEO Nick Carnell; Group Chief Operating Officer, Lindsay Barber; Group Chief Financial Officer, Matthew Lunn; Adrian Gleeson, Executive Director, Investor and Business Relations; and Gemma Sholl, Senior Executive Assistant. I'll commence this morning's presentation with some introductory remarks and overview of our results and performance throughout the period before finishing with a strategic and financial outlook with upgraded forecasts. At the conclusion of the presentation, we will, of course, answer any questions you may have. Presentation is available online containing comprehensive financial data and further commentary. We began the financial year in a strong position and have continued to deliver fantastic results throughout the period with a record BaU financial performance and a solid balance sheet. Given our very strong work-in-hand, we're confident that the full year results will be another record. For the purposes of these results, we have excluded Commercial Constructions as this is in the later stage of run-off as previously announced to the market. Looking at the reasonable financial metrics, the company performed strongly during the first half of the period. Group EBITDA of $69.7 million includes IB&RS BaU EBITDA growth of 28.1% to $55 million. Group sales revenue for the period was $610.6 million, with earnings per share of $0.0847. Cat revenue of $120.4 million was $65.7 lower than the previous corresponding period. It's important to note that the first half of FY '23 was a record result and the figure announced today represents more than 87% of the original $137.8 million in forecast cat revenue. As such, we have issued an earnings upgrade, which I'll speak to later in the presentation. Despite our growth, our balance sheet remains strong. Cash conversion for the period was 95.8%. Net assets increased to $66.2 million, sorry, about $66.2 million to $460.3 million with $53.7 million of net cash and we're well positioned to continue to explore and execute on strategic and bolt-on acquisitions. The Directors have declared a $0.047 dividend per share representing a 56% payout ratio. Before I highlight some of the key points across our 5 growth pillars, I'll provide some additional context around our performance throughout the period. We have achieved record BaU financial performance. We're proud of that. I've been very clear in previous presentations that our growth is no excellent, and our results, achieved despite widespread costs and supply chain pressures, underscore a defensive growth investment thesis. By this I mean our core insurance building restoration service work is non-discretionary and reoccurring with an annuity style profile, meaning our revenues are largely insulated from economic cycles. We're also protected from inflationary pressure due to the structural nature of the IB&RS panel arrangements, which are predominantly cost-plus contracts. Our blue chip counterparties, largely insurance companies and governments, mitigate credit risk, while the diversity of our client base and significant job volumes shield us from concentration risk. To put some perspective around that, our largest insurer counterpart contributes less than 5% of our revenue. These defensive growth characteristics, coupled with our focus on attracting and retaining great talent and the economics of scale and consolidation, all contributed to the strong results we have announced today. We are executing a carefully considered strategy that will continue to lead us exciting and sustainable growth for our business and provide strong returns to our shareholders well into future periods. I'll now move to the performance of our 5 strategic pillars during the period. Our first pillar, insurance building and restoration service is a cornerstone of JLG, comprising of our traditional BaU insurance-related repair and restoration work supported by catastrophic-related work. As mentioned during the first half FY '24, our BaU revenue rose 13.7% to $426.1 million, while BaU EBITDA increased by 28.1% to $55 million. This contributed to overall IB&RS revenue of $546.5 million and EBITDA of $70.5 million. During the period, JLG extended contracts with Hollard and Suncorp with Hollard and Suncorp [ securing ] new contract wins with RAA, Safety Culture Care and Tower Insurance, one of New Zealand's leading insurers. Our enduring and expanding relationships with blue chip counterparties speaks to JLG's reputation, not only in Australia but also internationally. Our customer focus, extensive experience and track record for delivering great and timely results has positioned us as a referred and trusted partner to these esteemed clients and we look forward to the contribution these new and extended contracts will deliver to the group. Our second growth pillar, Strata, is one that we see terrific potential for growth. The Strata market is highly fragmented and we have made clear our ambitions to consolidate by strategic bolt-on acquisitions. During the period, we finalized the acquisition of 100% equity interest in Your Local Strata, adding 3,077 lots across 187 schemes to our portfolio. Shortly after the period end, we also signed a binding agreement to acquire 100% equity interest in AM Strata, further bolstering our portfolio and progressing our consolidation strategy. During the first half FY '24, we established our new strategic growth pillar, essential home services, which provides essential property repairs, maintenance and compliance services. The creation of this pillar followed the acquisition of Smoke Alarms Australia and Linkfire announced to the market on 5 July, 2023. These strategic acquisitions align with our strong track record of expansion via highly complementary acquisitions and annuity style business models underpinned by defensive, non-discretionary products and services. We see a real growth opportunity in essential home services and our intent is to become a full one-stop shop solution for homeowners, property managers and strata managers. For example, many of the 97,000 lots we manage through our Strata division require essential services, providing a clear opportunity to introduce our repair and maintenance services. Moving now on to our disaster management pillar, which encompasses our Disaster Management Australia business. Disaster Management Australia was awarded 3 multi-phase work programs during the first half of FY '24. These include flood and disaster recovery for Cairns Council and Douglas Council, both associated with Tropical Cyclone Jasper and a provision of temporary emergency mobile accommodation to the Queensland Government. During the period, Disaster Management Australia continued to work with government to support communities impacted by natural disasters throughout Australia, with carryover work from flooding that impacted Victoria, New South Wales and Tasmania in October 2022 and the River Murray flood of December 2022. Our fifth pillar, Johns Lyng USA represents a very large market opportunity. During the first half of the financial year, we continued to execute on our growth strategy, and having hastened slightly, we have now reached an inflection point in JL USA's growth. We progressed the rollout of our tried and tested JLG equity partnership model with 25 business partners across 4 key states as at 31 December 2023. We are pleased to roll out new service line with launch of JL Express and JL Makesafe, both of which complement our existing reconstruction experts and steamatic operations. The follow-on work from Hurricane Ian continued during first half 2024. Hurricane Ian is expected to be amongst the costliest disasters in the U.S. history and is a testament to the significant growth opportunity presented in the US. Subsequent to period-end, we are pleased to announce that JL USA has been appointed to Allstate's emergency response makesafe and water mitigation panel. Allstate is one of the USA's largest insurers and this appointment provides us with access to a potential 16 million policyholders throughout the USA. This significant milestone emphasizes strength of our business model internationally and the intent of our growth strategy. I'll now finish by giving you an update on strategic direction and priorities and providing updated guidance for FY '24. In our IB&RS pillar, we will focus on developing relationships with new clients and continue our penetration of insurance panels. We are in a good position to do this with a reputation of being trusted partner who gets the job done on time, appropriately priced and to the highest standards. In our Strata pillar, we'll focus on growing strata building service and leveraging cross-sell opportunities with strata management. We will continue to explore prudent bolt-on acquisitions within the fragmented market with our strong balance sheet means we're well positioned to do so. We'll explore additional services we can introduce -- where we can introduce our essential home service offering, strengthening our cross-sell opportunities and establishing the group as a turnkey property services solution. In our disaster management pillar, our focus will be on building deeper relationship with governments around Australia. When disaster strikes, rapid mobilization is critical and we will work expanding on a number of jurisdictions in which we are pre-approved. We are seeing more governments looking to carry out resilience and mitigation works and well positioned to facilitate these important efforts. We enter the second half with a significant amount of carryover works stemming from weather events that impacted Australia during the period, including the storms at the east coast during the Christmas and new year period. Our U.S.A. growth strategy is at a critical point following our milestone appointment of AllState's emergency response and mitigation panel. To support and accelerate this growth, we have recently introduced our claims management platform, Customer Connect, into JL -- Johns Lyng USA. This platform allows claims from insurance carriers to be received and managed through a single platform, including allocation to operating subsidiaries and trusted affiliate partners, effectively and efficiently managing claims as we continue to grow our network of business partners and introduce more JLG brands into the U.S.A. Customer Connect gives us confidence we can do exactly that. We are energized with the -- we are energized by the U.S.A. opportunity and a significant amount of work we expect to be generated over coming periods. I mentioned earlier that we're in the final stage of run-off of our Commercial Construction business and we expect all existing projects to be completed during the 2024 calendar year. Commercial Building Services enters the second half of the financial year with job volumes and work-in-hand remaining very high. We entered the second half of FY '24 with an -- in an excellent position and I'm delighted to provide the following updated financial guidance. Forecast revenue for FY '24 is now $1.2 billion or $1.182 billion excluding Commercial Construction, which is a 3% increase over our previous guidance. FY '24 EBITDA is now forecasted to be $136.4 billion, reflecting a 5% increase over the previously revised guidance. In summary, we are excited about the opportunities ahead of us both within Australia and abroad. Our deep partnerships, strong culture and focus on exploring value have created defensive growth opportunities and we look forward to continuing to deliver on those in the future. Thank you for your time. Nick, Lindsay, Matt, Adrian and myself are now happy to take questions.

[Operator Instructions] And today's first question comes from William Park with Citi.

Firstly, in terms of guidance, particularly focused on the BaU side, I mean, presumably this is constrained by capacity, no doubt, but just in terms of where you're now in terms of your capacity? Are there any -- do you expect any further upside to BaU compared to what you have factored into guidance you handed down today, or is that effectively been constrained by capacity so therefore you would need to add more branches and business partnerships before you can deliver BaU growth beyond what you have handed down today?

I'll take the beginning. I don't think there's any capacity issues at all. I mean when we talk about capacity, typically that relates to getting more estimated supervising catastrophes. So from a BaU perspective, we've always controlled that well and been ahead of BaU. So I don't think there's any issues in regards to capacity. And the upside, I think, comes from the new contract wins as we've outlined. So those new contracts again, as they mature and run into the year, we could take some upside. Yes, there'll be some upside into the back half of the second half and then obviously more material in the next financial year as well. So that probably is upside and there's never really capacity issue from a BaU perspective.

Now look, I think also, Will, it's Matt speaking here, but we've got a history of being reasonably conservative with our second half forecast notwithstanding that the overall projection for the year, when you look in the presentation, BaU revenue, excluding commercial construction of just over $1 billion is almost 19% growth from FY '23. When you look at the half-on-half implied, excluding acquisitions FY '24 $946.5 million, the first half was $444 million [ or so ] implies about 13.5% growth into the second half. And that's very, very strong growth into the second half. But as always, we are reasonably conservative and the lion's share of that growth is, as you would expect, coming from IB&RS BaU and really pleasingly across all those strategic initiatives. So Strata services showing very, very strong growth into the second half, about 16%. Those panel wins in FY '23 and more recently in the first half of '24, contributing incremental revenues. Emergency Broker Response growing in excess of 10%, plus a whole bunch of other initiatives. So whilst we've got strong implied growth into the second half, we are always reasonably conservative with our guidance.

And just in terms of -- I mean, I appreciate this is not core part of your business, just commercial construction, loss of $6 million in first half with $1 million of loss left to go in second half. Can you just step through what's changed since you've handed down guidance around commercial construction back in -- when you handed down the FY '23 results, please?

Yes, Lindsay here. What changed predominantly is that we've closed out all but 2 projects. Initially, we thought we may have 3 running through to the end of '24. We've now only got 2 projects and they're both currently confirmed that will be completed, 1 of them in this second half, and 1 may just go into the first part of '25. And we've taken everything into account and that's where we've landed.

And just one last one from me. Can you just step through the U.S. business? It appears that margin has sequentially stepped down by 1 percentage point. Can you just step through what drove that?

Yes, the margins are -- [ so as Matthew said ], the margins are still really good in the U.S.A. Just really we probably dropped a point investing in expansion. This Customer Connect expansion is really big for us. We need to put affiliates all around the U.S.A. That's in 50 states around the U.S.A. So we probably accelerated our expansion there. So we just invested in growth there, really.

Absolutely. I might expand on that slightly. So that 10% result that we've delivered there, Will, that was foreshadowed at the full year. If we go back to FY '23, the first half of '23, we delivered 12% margins, but the business was understaffed. We've invested heavily, and I'll expand on that a bit more. For the full year '23, we delivered 11%. That implies the second half was about 10%. So we've effectively continued that 10% run rate on similar revenue. Now, what's temporarily suppressing those margins specifically is the startup businesses. So we've launched Express and we've launched Makesafe in multiple states. We're getting some good runs on the board from a revenue perspective. But those startup businesses still have underutilization. So across both of those brands, we've probably made a loss of about $1 million in the first half. Compounding that is BaU in Florida. Obviously, Hurricane Ian decimated the BaU business in Florida and delayed projects. Those projects are coming back online in the second half, but we probably lost about $1 million in Florida BaU in the first half, and we probably invested about $500,000 into Customer Connect. So there's $2.5 million of temporary suppression to that margin. Really importantly, those margins will expand as those startups break even and then start to contribute profits. But the other point to make here is the operating leverage we now have in the business. So as you would expect, there was a bit of dressing up for sale from a private equity vendor. The business was understaffed. Overheads were being run on a shoestring budget. We've invested heavily in FTEs and the headcount. We increased headcount by 120, up from 300 to 420 since acquisition. We've added another 20% or 5% since June '23. So what we've got now is a great investment in operational teams, which is all about the rollout of the new service lines. But we've also invested in shared services. And that investment in shared services gives us a foundation and operating leverage that will amplify margins with incremental revenue. So we should see those margins expand going forward.

The next question comes from Julian Mulcahy with E&P.

Just a few for me. Firstly on CAT, last year result had quite substantial government contracts. So how much of this first half included some of those or carry over into the current half?

It's something we typically...

[indiscernible]

We don't break out the government specifically, Adrian, just from a confidentiality perspective, but there's obviously a component of it. And I think -- yes, we talk about contracted work-in-hand when we go with any forecast. There was an announcement on Sunday, another package of works in Victoria. We've seen record volumes through January and February in relation to the 2 of the highest months we've had since the March storms of 2020, sorry, 2022. So volumes are back up there and strong. So in terms of the opportunity in front of us, still a significant work-in-hand. And again, we've sort of -- we've spoken about this on a couple of calls, the work in particular in that northern rivers is still there to be done. They still -- they talk about [indiscernible].

[indiscernible] still haven't got solutions. They're all performance.

That's all work in front of us that still [ gets ] to be delivered [indiscernible]. We're still working with government on solutions in relation to how that community gets rebuilt. I think also from a cat perspective, first half '23, and FY '23 in general was an absolute record year. From a cat perspective. We had multiple major events. Outside of FY '23, this result of $120.4 million in the first half is a record half year result from a cat perspective. It represents more than 87% of the original cat forecast. And we're now upgrading our cat forecast by $40 million, or about 30%, to $177.8 million. And really importantly, as always, that's exclusively contracted work in hand. So if you were to ask me what the cat rolling forecast is in a month's time, it's going to be a number higher than that. So there's upside there in the second half.

So when you have a government contract, do you include that in your guidance as contracted work?

Not to the full extent. So in the past, and if I go right back to the beginning where we won that first $55 million windstorm contract, there was only a component that was put in the forecast initially until we understood the entire contract [ devote ] because they are broken up into packages at times. But also upon conclusion of that package, we knew that $55 million turned into closer to $95 million. So there's always discontinuation. So we've just been appointed on a $21 million contract, which was announced on Sunday for the Victorian government. So that isn't in the forecast anyway, just because of obviously the timing. And that's something that, due to the value of it, we expect that to be delivered majority in this second half now as well. So there's significant upside still to be delivered.

Cool. And just with the -- like the profit disclosure on cat, I mean, you'd use this illustrative purposes marginal was 11.5% last year, and it's been around that for a while. Now it's up to 12.9%. You've bought some businesses at a higher margin, so it naturally lifts the sort of group margin up. So what is the real cat margin? [indiscernible]

I would say, Julian, the real cat margin, if you've got the presentation there on 2.2, Slide 13, the real cat margin is the margin excluding acquisition. So it's about 12.1%. The reason it's 12.1% is it's the average IB&RS margin. And it has to be the average IB&RS margin because we get amplified margins when a cat hits, because we've got a spike in volumes. And that's not just from a cat perspective, it's also from a BaU perspective. So, as you know, we reallocate resources from the BaU business to the cat that takes cost out of the BaU business and amplifies the BaU margins. So cat margins are typically higher because oftentimes we'll have a cat loading. And also just by their nature, there's no shared services allocated to the cat project. So the cat margins are technically a financial contribution margin. So it's effectively gross margin plus incremental direct costs associated with the cat. And those margins, of course, change over time. They're suppressed in the mobilization phase, and they expand when you get to peak volume run rates. So for all these reasons, it's the average IB&RS margin. And in this first half, excluding acquisitions, it was 12.1%, which is good growth on the first half of '23.

Okay. That's clear. And just finally, the essential home services business, I can't see any contribution. How did that actually perform in the half?

It's performing in line with expectations. We gave a bit of high level color about that at the time of the capital raise and it's tracking in line with expectations. Obviously, we've owned it now for 6 months. The integrations and really strong show in the time of [indiscernible]. We're starting to build out additional product lines. Late last calendar year, we signed an agreement -- a distribution agreement with Zimi, another listed company, I think it's ZMM, around smart home devices. So again, that's starting to build out some complementary service offerings. So we're excited about that pillar. We've spoken about it for a little while, but in line with expectations where that's...

They're good businesses -- good management, good businesses.

The next question comes from Russell Gill with JPMorgan.

A couple of questions. Just on Slide 27, you conveniently give us the answer here so we don't have to work it out. I just want to focus on IB&RS BaU excluding acquisitions. It was basically down marginally or basically flat sequentially. Can you just talk through the drivers of what you're seeing in that -- for that business to not really grow from a revenue standpoint sequentially? And presumably there's an element of this into the U.S. If we could just then talk through what's the revenue dynamic that's going on in the U.S. market, because that was also down year-on-year.

Yes, I guess from a margin perspective, Russell, and again, you're absolutely right on Slide 27 there and the reconciliation, you can see the full detailed breakdown. I think the first point I'd make is from a group perspective, first half '24, margins were...

Not margins, sorry, just purely revenue. Revenue, $397.5 was down sequentially on second half '23 in IB&RS revenue ex acquisition BaU.

Yes. Sorry, just give me a few seconds to catch up to the right numbers. Page 27. Sorry, Russell.

Yes, Slide 27. IB&RS BaU revenue is $397.5 million and it was $399.5 in the second half '23. I just don't know what the, I guess, relative softness in the underlying BaU revenue in IB&RS is. My presumption it's driven out of the U.S. But if you could just talk through some of the detail.

[indiscernible] Yes, Russ, we might need to take that one offline, if that's okay.

Okay. Cool. Yes, no problems. Just if we could talk through just the U.S. business on the revenue side on Slide 5, revenue in the half was $112 million, in the PCP, it was $114 million. Appreciate there's a lot of costs being built into that business. You've now, I guess, brought in Allstate. Can you just talk through that revenue, I guess, softness relative to the year-on-year, and then how we should be thinking about the revenue for this business going forward? You've sort of built up scale, you built up people. You've now signed Allstate. Is this a business that will go back to a cadence of growth much faster than we've seen in the past?

You will see that, Russ. So what's happened is a lot of our jobs we're finding are slower to start, and it's a problem that we're addressing at the moment. Where we used to get a job started in about 50 days, now it's blown out about 90 days. So we've got a massive pipeline of work that has fallen -- just slowed down a little bit on getting permits and getting approvals, et cetera. But our pipeline, I think, is sort of about $1.35 billion in the pipeline. So our pipeline is great, the work is great, it's all there. We've just got to get it started quicker. So we have no problem with the confidence, no problem. And to put on top of that -- that's without the Allstate contract. Put on top of that, the Allstate contract, and then the rollout of Express and our approach to brokers over there, there'll be no -- there'll be absolutely no problem with revenue in the U.S.A. It'll go like a rocket. We've just got a tiny little bit of a lag at the minute, just with a great deal of jobs being a little bit slow to come out of the box.

Yes, I think when you look at first half '24 was $112.3 million versus first half '23, reasonably consistent, which is a solid result notwithstanding we haven't grown much. But what we have done is we've invested for growth going forward and we're expecting, from an outlook perspective, a stronger second half. So the pipeline remains strong. $1.35 billion is up 5% from June '23. The backlog remains strong, which is the work-in-hand, $233 million, $80 million cat and $215 million BaU. Again, we're expecting a stronger second half. So probably in the order of $135 million in the second half, probably about $9 million cat, $125 BaU. And that should bring us in broadly in line with FY '23. So FY '24 forecast now is about $247 million, which is pretty consistent with FY '23. But again, what's not factored into that is anything from Allstate, anything that follows Allstate as well. So we do feel that the U.S. business -- the business we acquired, is a solid business, but the future growth is all about replicating the Aussie business model. And the Allstate contract is a seminal point in that strategy.

[indiscernible] We've also [ sold ] another 5 franchises, which has been terrific. And those franchises are really [indiscernible] as well as being terrific in our Steamatic network. They also refer larger building works to Steamatic [ to be ] reinstated. So they also refer straight into us. So that's very promising as well.

Scott, you preempted me by already telling what your pipeline, how big it is into the U.S. You preempted my next question. So when you're saying there's a holdup in this and my expectation is it's I guess bureaucratic and paperwork type holdups as opposed to access to labor and you guys scaling up the business from a labor standpoint, is that a fair assumption?

That's spot on Russell. It's not labor. It's really just council requirements, regulation permitting all that sort of stuff, all the red tape stuff.

Great. And then just a final question, keen to talk on cash flow, because you did actually talk through some of those normalizations that occurred, and we did see that come through in that second half. Your cash flow in the past has been a little bit lumpy. You've normalized for a working capital build. In the past, sort of that working capital build was basically bit of a leading indicator of, I guess, revenue growth and work coming through. Is that still a guide in terms of that working capital build that you're normalizing for in that cash flow statement?

I think there's probably a couple of points to unpack there. So, yes, typically increasing working capital is in line with an increasing pipeline, increasing work-in-hand, increasing revenue. Typically work in progress is accrued income. It's a little bit different in this first half. Really solid pro forma cash conversion of about 96%, and you can see the statutory operating cash flow before interest and tax of about $30 million. You have to adjust that for $21 million or $20.9 million, which was the prepayment from a specific customer in the second half of '23 that was explained and also disclosed in the FY '23 presentation. And then we've got a quirk of the working capital dynamics with the run-off of the commercial construction business. So it's a bit different in terms of our commercial construction business, especially in these latter stages of run-off. It's got negative working capital. So its working capital is a credit balance. It typically receives stage payment, so it receives the cash before it does the work. And therefore the creditor's balance is higher than the debtor's. So as the business unwinds and runs down, those credit balances need to be settled. Hence we've got this $7.9 million in this first half, which will probably continue at a similar level through the second half until the business is fully wound up.

So we can probably think if we roll forward into '25, cash flow should be a bit more of a normalized level relative to earnings. We won't get these lumpy movements into '25.

[ Exactly ] right, because you've got these anomalies from the commercial construction business. Once that's removed, which it will be in the next 6 months, all the rest of the business has a similar working capital profile. It's typically all accruing income based on incurring costs.

Great. And then just on the, I guess, larger insurers in the U.S. from a working capital and payment cycle. Should we work on the assumption that they're very similar to the Australian counterparts or are they different working capital cycles in the U.S.?

Yes. Absolutely.

Sorry I missed that one.

Think about the same way, Russell.

Okay.

[indiscernible] back to your first question. I'm across the numbers now. So basically, it's the seasonality in the U.S. So in the U.S., we typically have a stronger second half that played out last financial year. And you heard me explain that we're expecting a stronger second half this year as well. So that's what kind of skews the second half weighting. So if you compare first half '23 to first half '24, very, very strong growth. It doesn't look as good when you compare the second half of '23 to the first half of '23. You've got to compare like-for-like with the seasonality mix. So second half '23 versus the implied second half of '24, that still shows very, very strong growth.

Awesome. Got it. So we're just working the assumption the U.S. is a bit more seasonal than what we'd necessarily get in the Australian market.

Only seasonal when you look at the weather patterns over there. They get a lot of snow and that slows work down. We don't get the snow here.

[Operator Instructions]

Hello. Right, Tim you're there?

Sorry, I didn't hear you call my name out. Just a follow-up question in terms of second half '24 to Russell's question. You're saying the implied second half is stronger, but obviously you've had a flat or slightly lower first half. You call that seasonality, but what's different to say that the second half is going to be significantly better than the previous?

Well, I think there's a few things in different jurisdictions. So, if we look at first half '24 versus second half '24, excluding acquisitions, implied growth is about $58 million, $59 million, about 13%. Domestically, here in Australia and New Zealand, we have lots of strategic initiatives that are still ramping up at a good run rate. So if I just unpack that $60 million books or so, we've got probably an incremental million $8.5 million or so from Strata services. So that's Strata management growing by about $4 million or so, and strata building services growing by about $4.5 million or so. Just on that, we've opened the ACT, we've opened South Australia, we opened those Strata services divisions now. So that's ramping. In addition to that, ramping up on these new panels and contracts so the FY '23 wins, but also the first half '24 wins so RACQ, Westpac, Chubb, Honey, Blue Zebra, Steadfast from FY '23, but then Safety Culture, RAA and Auto & General in the first half of '24, contributing an extra $8 million, which is fantastic. Emergency broker response growing exponentially, so contributing another $2.5 million or 10% first half versus second half. Johns Lyng New Zealand's BaU is growing, so we expect another $1 million or so in New Zealand. The higher business, which is connected to Johns Lyng Disaster Management and the government counterparties, an incremental to [ $2 million, $2.1 million] in the second half. The energy business, which is also connected to Johns Lyng Disaster Management, contributing an incremental [ $8 million]. We expect a stronger second half in the U.S. Again, this is down to weather patterns partially, but also down to Florida BaU being suppressed with the delays over the last 12 months now coming back online. So we expect those projects to restart and they are already restarting and then also the startup businesses ramping up as well. So again we expect a stronger second half incremental $16 million, $16.5 million or so in the U.S. And then really pleasingly complex claims, which is our major loss business, which is where we've been redeploying resources from commercial construction too. So we're winning far more large loss reconstruction work domestically here in [ Aus ]. So an extra $5 million, $5.5 million from that business. So there's a whole bunch of strategic initiatives really driving continued growth into that second half.

Okay. And just a few more questions just in terms of the question on working capital as well. So just to clarify, so the U.S. platform doesn't have any impact on the sort of normal working capital cycle, despite the fact that you've got more sort of third-party arrangements, when you effectively just operate as a clearinghouse rather than having to front working capital for those third parties?

Correct. That's right. It's a very similar working capital cycle.

Yes. And just in terms of the -- you talked about sort of regulatory delays to work getting completed. Is that any different to what we've seen before? Like isn't that just a normal situation for what you guys do?

They tightened it up in some areas, like in Texas, et cetera, they've tightened up some of the regulations. So it's just tightening up of regulation and permitting a little bit, yes.

Yes. And then just on the construction -- Commercial Construction segment, I appreciate you're closing it off, but the guidance there is significantly changed. So what have you discovered as you've got sort of closer to sort of closure on that to see the EBITDA guidance change?

Incurring real costs to close out the projects that we had in hand.

But how is it -- why was it different to what you thought before?

Well, what we were either forecasting or knew at the time compared to what we've actually incurred in closing the projects down, but we've actually now brought 1 project earlier and completed it and we've now only got 2 to finish, which will both be finished this year.

Calendar year or financial year?

Calendar year.

Calendar year.

The next question is a follow-up from Julian Mulcahy with E&P.

Just a couple more for me, guys. Just firstly, with the U.S. cat-related revenue, was there much in this half? And then how is it going to build over the next year? Because I mean, Hurricane Ian has been building for a while in terms of the workflow. When do you think you'll start to see some numbers coming through?

I think it's a great question, Julian. In this first half of '24, we had about $4.4 million worth of cat revenue. I think where we've got to from a cat perspective in the U.S. is that we're pretty much through the emergency response phase. Now, we've got a good -- we've got a good pipeline from a cat perspective. We've still got about $35 million, $40 million of cat work in the pipeline. Of that, probably half or so is in backlog or work-in-hand, so $18 million to $20 million. But the next phase of work is really the longer tail reconstruction work. So we're through the emergency response phase. We've got lots more work coming from a longer tail reconstruction perspective. But I think most importantly, we're in a really good position for future cat events. So we've honed our cat response. We'll continue to iterate it, and with the next big event, we'll be able to attack it in a more meaningfully way.

And then that comes back to resourcing, too. When you talk about a cat plan, it's having capacity and resource to be able to mobilize quickly. And we know that from what we've done here for the last 20 years. So as we continue to onboard resource and expand our BaU business, that gives us greater capacity to respond to the events as and when they occur. I was just going to say it's a really important point. When we think about our cat opportunity, yes, it's linked to weather and it's linked to specific events, but really, the opportunity is a function of our BaU capacity because we're effectively redeploying resources. Yes, we'll scale up with some temporary labor at times, but it's really a function of our existing capacity. So as we grow BaU, the cat opportunity grows as well.

Yes. And have you got your fingers on some of that reconstruction work or do you sort of go through the pitch and win process?

As I said, we've got about $40 million in the pipeline. Of that, about 1/2 is contracted in work-in-hand, but we're still working through it. So it'll continue to build.

Yes. Okay, cool. And with the -- what are you seeing here with the insurance companies? Are they trying to sort of claw back any of the cost inflation they've endured over the last couple of years in some of their sort of panel reviews?

No, not at all, Julian. It's entirely really unchanged from that perspective. We've noted some renewals. They've sort of been probably more procedural, if anything. And I guess some of the newer contract wins, RAA in particular -- RAA is really the maturing of our unitech strategy into that South Australian market. We went there to get access to that opportunity and that was really exciting to be put on the RAA panel. So nothing -- really nothing of note at all. Once you sign the contracts, the prices -- they don't really go back on the prices. They like us to work on the scope and mitigate the scope a lot. That brings prices down, but they don't come back and try and negotiate price or anything. It's already done, which is really good. What we are seeing with these new contract wins, et cetera, with these new panel wins, is our registrations are coming up, which is great. We measure by registrations every month and when we see a spike coming up, and since November, December, January, February, we've had very positive spikes coming up, especially with all the east coast dirty weather that's happened over Christmas.

Yes. Cool. And just finally, what was the actual strata repair numbers in the half in Australia?

Yes, so we had a fantastic result in terms of Strata Services. So the total segment, Strata Services delivered about $57.3 million, up 18.1%. Included in that was strata management, which was about $33.5 million, up 21%. And then strata building services delivered about $23.8 million, up 15%. But really pleasingly, the BaU work for strata building services, so obviously excluding cat, was about $21.6 million, which was about 44% growth on the first half '23. So it feels like the strata building services business from a BaU perspective has really kind of reached a great cadence now in terms of growth. It's won spots on a whole bunch of panels. Yes, the cross-sell from Bright & Duggan is good. And it's reached that critical mass where it can really leverage. We've got really driven partners in there, Julian, and they in the half opened in the ACT again, looking for geographical coverage, open in South Australia as well. So that'll continue. Next will be Perth at the right time, once we find some partner over there. But that's -- yes, we couldn't be happy with how those -- how that business [ has performed ].

And at this time, there are no further questioners in the queue. I'll now like to turn the call back over to Mr. Didier for any closing remarks.

Just thanks, everyone, for your support. We're looking forward to a really busy calendar year. We've got plenty of work in hand, plenty of things going to go. It's going to be a bumpy year for us. So thanks for your support.

That does conclude our conference for today. Thank you for participating in today's event. You may now disconnect.