Company Interview / SCEE Group sees record gross profit despite half year loss

Key bullet points:

Net loss reported due to project wind-downs and legal costs, offset by record gross profit and increased EBITDA guidanceStrong performance in infrastructure, renewables, and data centres; $120 million forecast in data centre revenueUp to $200 million of capital available for targeted acquisitions and national expansion plansPositive long-term outlook in renewables and resources, with project relationships with BHP and Rio Tinto

Southern Cross Electrical Engineering Group (ASX:SXE) has reported a challenging first half, posting a net loss of almost $13 million and a 12% revenue fall to just under $350 million, largely attributed to the winding down of major projects and legal costs exceeding $46 million relating to the WestConnex arbitration. Despite these setbacks, Graeme Dunn highlights that gross profit rose by 30% to a record $65.9 million, enabling the company to increase its full-year EBITDA guidance to at least $72 million. Shareholders will receive a fully franked 2.5 cent per share dividend, maintaining a strong dividend track record.

Dunn points to robust performance across infrastructure, data centres, renewables, and electrification markets as driving operational success. He states that Southern Cross Electrical Engineering is actively seeking acquisitions, particularly in fire contracting and electrical contracting in Queensland and Victoria. The company has up to $200 million in capital available for strategic acquisitions and aims to broaden its national presence. Dunn also calls attention to ongoing and recently secured data centre projects, forecasting $120 million revenue in this segment for the year and anticipating ongoing growth through FY27.

Looking forward, Dunn identifies continued strength in renewables, including wind and battery storage, as well as steady opportunities in resources with established clients such as BHP (ASX:BHP) and Rio Tinto (ASX:RIO). He notes that the recent WestConnex matter is now closed, with a positive outlook for the next half.