Southern Cross Electrical Engineering (ASX:SXE) reported record underlying earnings for the half, while a settled legal dispute related to the WestConnex arbitration drove a statutory net profit after tax (NPAT) loss. Management also highlighted a growing order book, continued diversification across disciplines, and raised underlying FY2026 EBITDA guidance.
Financial performance and WestConnex settlement
The company reported underlying EBIT of AUD 29.1 million, up 25.5% from the prior corresponding period, and underlying EBITDA of AUD 35.4 million, up 30.8%. CFO Chris Douglas said the group delivered a record half-year gross profit of AUD 65.9 million, up 30.3%, with a gross margin of 18.9%.
The statutory result was impacted by the WestConnex arbitration. Douglas said the company announced an adverse partial final award on 28 November, settled the matter before 31 December, and recorded legal dispute costs of AUD 46.1 million, resulting in an NPAT loss of AUD 12.8 million for the half. The result also included AUD 2.2 million of acquisition amortization, primarily related to the Force Fire acquisition.
Margin drivers and expectations
Management said the standout margin result was driven by a strong outcome at the Collie BESS project, an improved commercial buildings mix in the Heyday business compared with the prior year, and the full-period contribution from Force Fire, which Douglas said was “slightly more profitable than the rest of the group.” Overheads rose 29.4%, which Douglas linked primarily to Force Fire being consolidated for the full period.
On the outlook for margins, Douglas said some of the first-half drivers were not expected to be fully sustainable. He said second-half margins could “drop back to, say, 16%–17%.” Longer term, he referenced historical commentary that underlying margins were expected in a 13%–15% range, adding that with Force Fire in the group and generally favorable markets, “15%–16% could be a good underlying number going forwards.”
Balance sheet, cash, and dividend
Cash ended the period at AUD 58.8 million, after the WestConnex settlement was paid before 31 December. Douglas also cited the “unwinding of the Collie BESS advance payments” as a factor in the cash movement, while noting the group remained debt-free.
On bonding capacity, Douglas said bank guarantees and surety bonds totaled AUD 96.8 million at 31 December, leaving “headroom of over AUD 50 million” in combined facilities. He added that headroom was expected to increase as a “significant amount of Collie BESS bonds” were returned in the upcoming period.
The company declared a fully franked interim dividend of AUD 0.025 per share, to be paid on 22 April. Douglas said the dividend payment in the half was AUD 13.3 million, which he described as a record payout. He also reported a franking account balance of AUD 67.1 million.
Douglas said that despite multiple cash outflows—including AUD 4.7 million of deferred consideration (primarily for Force Fire and some for MDE), Collie BESS advance payment unwind, and AUD 26.5 million of WestConnex-related cash payouts and legal fees—the company was “very pleased” to still finish with AUD 58.8 million in cash.
Order book, diversification, and operational highlights
The company reported an order book of AUD 710 million, up 6% from the prior corresponding period and just below its all-time record of AUD 720 million. Douglas said 85% of the order book was now on the East Coast, with Queensland the second largest state. He also said AUD 200 million of the order book related to non-electrical disciplines, including manufacturing, security, communications, and fire.
Douglas said infrastructure remained the largest revenue sector, though it declined as the Collie BESS project finished, while commercial sector revenue increased with Force Fire’s contribution. By geography, he said Western Australia revenue fell with the completion of Collie BESS, and 70% of revenue was generated on the East Coast. He added that nearly 40% of group revenue came from manufacturing, security, communications, and fire, illustrating diversification beyond electrical contracting.
On operations, the company said it recorded an eighth consecutive half-year without a lost time injury, across 1.6 million man-hours. The workforce stood at about 1,700 direct employees following the demobilization of Collie BESS. Management said Collie BESS achieved practical completion in the half, Western Sydney Airport “further facility works” (including command and canine centers) were ramping up, and Force Fire was performing ahead of budget. The company also cited awards including the Sydney Metro St Marys Station project, the Ausgrid Steel River East BESS project, and multiple packages for the DigiCo data center works in Sydney.
Data center pipeline, guidance upgrade, and M&A commentary
Management described the data center market as having an “unprecedented pipeline” being tendered for commencement in calendar year 2026. In discussing confidence in that outlook, the company pointed to its involvement with Early Contractor Involvement (ECI) work and tendering processes, and said data centers being priced were increasing in size compared with past projects. Management said it expected orders to begin coming through during calendar year 2026, while also noting planning approvals as a factor affecting timing.
The company said it completed work at eight data centers owned by six different hyperscale cloud providers during the period, providing electrical, communications, fire, and manufacturing services. Management said it delivered AUD 120 million in data center work in FY2025 and was forecasting a similar level in FY2026, with anticipated growth in FY2027 and beyond as it tenders on new data center projects representing “over AUD 1 billion of work” for the group over construction periods.
Based on what management described as excellent operational performance, the company raised its underlying FY2026 EBITDA guidance to at least AUD 72 million. Douglas said the DigiCo data center job, announced before Christmas, was a key swing factor behind the upgrade because it was not included in guidance at the start of the financial year and was expected to be performed quickly.
Management also said it was exploring acquisition targets to add geographic and disciplinary diversification. In response to questions about whether the WestConnex cash payment affected M&A timing, Douglas said it did not, noting the company could fund acquisitions through remaining cash, bank borrowing, or potentially raising capital, though he acknowledged the settlement reduced starting cash available.
About Southern Cross Electrical Engineering (ASX:SXE)
Southern Cross Electrical Engineering Limited provides electrical, instrumentation, communication, and maintenance services in Australia. It offers electrical and instrumentation (E&I) construction services, which include installation and commissioning of greenfield and brownfield upgrade projects in metropolitan, remote, and challenging environments. The company also provides fixed plant E&I construction; distribution and transmission line installation; substations, transformer, and switchyard installations; HV, LV control, instrument, and communication cabling and terminations; auditing, rectifications, and completions; constructability reviews; primary and secondary injection protection testing; instrumentation, loop checking, and calibrations; hazardous area installations; instrument air and tubing installation; procurement and logistics management; pre-commissioning, completions, and start-ups; and comprehensive handover documentation services.
