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Here’s why the Johns Lyng (ASX:JLG) share price is rising

The Johns Lyng Group Ltd (ASX: JLG) share price is rising today after the company released a trading update.

Johns Lyng is an integrated building services group delivering building and restoration services across Australia. Its core business is the ability to rebuild and restore a variety of properties and contents after damage by insured events including impact, weather and fire events.

Earnings upgrade from Johns Lyng

The business has upgraded its revenue and EBITDA (EBITDA explained) forecast for FY21.

Forecast EBITDA has been upgraded to $52.1 million, representing a 10% increase on earlier guidance of $47.4 million which was provided in February 2021.

That guidance represents business as usual (BaU) EBITDA growth of 36% year on year. Including catastrophe recovery work, EBITDA growth is expected to be 27%.

Forecast revenue has been upgraded to $558.2 million, representing a 6.5% increase on earlier guidance of $524.1 million provided in February 2021. This represents a 19% business as usual revenue increase year on year (or 13% growth including catastrophe recovery work).

The upgrade was driven by “ongoing strong demand” for the group’s core business as usual services, and a significant increase in catastrophe recovery activity during FY21, primarily in northern NSW and south-east Queensland.

John Lyng said that while catastrophe work is a major contributor in FY21, the bulk of revenue from more recent catastrophe events will be realised in FY22.

Management comments

Johns Lyng CEO Scott Didier said: “Our insurance building and restoration services businesses continue to grow and continue to deliver. They have been the backbone of our business for nearly two decades and they have yet again performed very impressively in FY21. 

CAT related activity is an additional bonus to our performance and we’ve been kept very busy in that respect during FY21, helping clients and communities respond to some of the disasters that have hit, mainly in NSW and Queensland earlier in 2021.

Workflow has been very strong and we’re still working through a significant pipeline of jobs. This CAT activity is a significant driver of this upgrade and our strong performance for FY21 more broadly.”

Summary thoughts on Johns Lyng and the share price

I don’t know a lot about the company, but it’s clearly doing well at the moment. If there continues to be more damaging weather events then earnings could keep rising.

It could be one of the ASX growth shares to keep an eye on if profit can keep growing.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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