Thank you for standing by, and welcome to the Southern Cross Electrical Engineering Limited FY 2026 results webcast. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you would like to ask a question, please enter it into the ask a question box and click submit. On the call today, we have Mr. Graeme Dunn, CEO and Managing Director, and Mr. Chris Douglass, Chief Financial Officer. I would now like to hand over to your first speaker today. Thank you, Graeme. Please go ahead.
Good afternoon, ladies and gentlemen, and welcome to SCEE's full-year results presentation. Turning to slide two for a brief introduction to SCEE. SCEE is a leading and trusted national provider and manufacturer of specialized electrical, instrumentation, communications, security, fire, and maintenance services and products that operates across the three broad market sectors of infrastructure, commercial, and resources. We operate through several company entities, as shown, that have been acquired through our disciplined M&A strategy. With our focus on operational excellence, we have delivered profitable growth over many years that has culminated in SCEE achieving another record underlying profit this financial year, following on from the record profit achieved in the last three years. A key takeaway from today's presentation are the six thumbnails at the bottom of the slide that outline the investment proposition for SCEE.
Firstly, we are heavily exposed to the growth tailwinds of decarbonization, electrification, data centers, and overall infrastructure investment. We are diversified across markets and operations and have a long-standing blue-chip client base. We continue to grow the recurring revenue and deliver earnings growth that has resulted in a financially strong company with strong shareholder returns. Finally, we have a track record of successful acquisitions. Turning to slide three for a reminder of our stated strategy. SCEE sees electrical contracting as its core capability, whilst increasingly diversifying into adjacent disciplines and servicing a broad range of sectors. We will grow it by deepening our presence in those sectors and broadening our geographic diversity through expanding our core competencies and adding adjacent and complementary capabilities, either organically or by acquisition. We are increasing our exposure to recurring revenues with service and maintenance style works.
We are actively exploring acquisition targets, offering further geographic diversification and new capabilities. We aim to maximize the synergies and cross-selling opportunities created by the increasing diversification and multidisciplinary nature of the group. Now turning to slide five for a summary of our record FY 2026 financial performance that our CFO, Chris Douglass, will take us through. Thanks, Chris.
Thank you, Graeme. Yes, slide five. I am pleased to say I will be using the word record a lot on this. We have an underlying EBITDA of AUD 77 million. That was up 40.5% on the prior year, which was a record EBITDA performance. The underlying EBIT was AUD 64.4 million, and that was up 40.3% on the prior year. Included in that EBITDA number is AUD 4.4 million for acquisition amortization, mostly arising out of the Force Fire acquisition and a smaller amount with MDE. This all resulted in an underlying NPAT of AUD 39.4 million, which was up 24.3% on the record prior year. Included in that NPAT number was AUD 4.4 million for remeasurement of share-based payments, and I will talk a bit more about that on the next slide. Our statutory result for the year was an NPAT of AUD 7.1 million, down 77% on the prior year.
That includes the WestConnex arbitration settlement costs of AUD 46.1 million, which we announced pre-31 December. We are very pleased with our cash performance. We had a record cash result of AUD 261.5 million, obviously primarily driven by the AUD 144.7 million net equity raise we did in June, but we had very strong cash collection in the underlying business as well. Again, I will talk about that a bit later on. We had a record order book of AUD 810 million, and that was up 18.2% on the prior year. Out of all of that, the board has declared a record final dividend of AUD 0.075 per share, and that will be fully franked. Going to the next slide, six , a bit more detail on the profit performance.
The revenue of AUD 718 million, was down 10% on the prior year, which I will note was a record result at the time. That is really driven by Collie BESS and the Western Sydney Airport Terminal projects, which were both very big in FY 2025. They finished in the first half of this year. Ongoing significant revenue contributors that we have are the NEXTDC S3 data center and the DigiCo data center. We are at the Atlassian building, Shoalhaven Hospital. We still have works ongoing at Western Sydney Airport, although that is now an operating airport. We continue to do works with BHP, Rio Tinto, Woolworths, and Coles. I will note that our activity ramped up considerably at the back end of the year, with June being a record monthly revenue result for the group.
Noting again, Force Fire was acquired in April 2025, so it was only consolidated into the group for three months in FY 2025 and for a full 12 months this year. We had a record gross profit of AUD 136.7 million, up 29.1% on the prior year. The gross margin percentage was 19%, which is higher than our normal outcome, driven primarily by the very good result at Collie BESS, Force Fire being slightly more profitable than some of the other businesses. Just the general project mix is going very well at the moment. Overheads were up 15.7%. That increase is almost entirely from the Force Fire being consolidated for the whole year. Otherwise, we had held the balance of overheads at pretty much even across the year, which we are pretty pleased about. Again, underlying EBITDA was AUD 77 million and underlying EBIT of AUD 64.4 million, and an underlying NPAT of AUD 39.4 million.
That did include within it AUD 4.4 million for the remeasurement of the cash settle share-based payments. That is the LTI schemes that the executives and senior management of the group are entitled to. That is primarily a non-cash amount, and it is a consequence really of the significant share price growth in FY 2026. With 166% share price growth in the year, that led to a significant number in that part of the P&L. The statutory NPAT was down because we also had the WestConnex arbitration costs. Turning to slide seven, the revenue split. We split the revenue here by sector, by geography, and by discipline. Revenue was down 10% overall, driven by the completion of the Collie BESS project. I will note commercial was up, and that is the contribution really from Force Fire.
We classify their industrial warehousing projects in commercial, and they do work in the standard commercial buildings as well. Revenue by geography. Revenue in W.A. was down, almost halved. Again, that is driven by Collie BESS winding up. I will note on the East Coast, on pretty much all of the states on the East Coast, our revenue increased. We now have over 75% of the revenue of the group on the East Coast. By discipline, again, the first time we presented this chart is in this financial year. You can see that in FY 2026, over 40% of our revenues came from what we call the non-electrical disciplines of manufacturing, security, communications, and fire. Slide eight, the balance sheet. Again, very pleased about the cash result. We had a very successful capital raising in June.
AUD 150 million gross raising with the shares issued at a 0.5% discount. Noting there is another AUD 15 million came in in July with a heavily oversubscribed AUD 15 million share purchase plan as well. We also renegotiated our financing facilities in June. Our bonding capacity has increased from AUD 150 million to AUD 220 million. We have also added a brand-new revolving credit facility of AUD 50 million to fund working capital and a AUD 50 million acquisition facility to help with future acquisitions. That is all about positioning the group for the future organic and acquisitive growth we see, and there is a slide about that later in this presentation. At 30 June, we had AUD 104 million of our bank guarantees and surety bonds on issue, leaving us a headroom in our facilities of AUD 116 million, which means we foresee we have got plenty of capacity for future growth.
The company remained debt-free at 30 June. The franking account balance was AUD 65.5 million. As already mentioned, we have declared a record final dividend of AUD 0.075 per share, which will be paid on the 7th of October. Turning to slide nine, a bit more detail about the cash flow performance. As I mentioned, we are really pleased with the underlying cash performance as well as the capital raise. If we were to strip out the capital raise, we still ended the year with AUD 28 million more dollars in the bank account than we started. That was after some really significant payments out, including a record total dividend payout in the year of AUD 18.9 million. We paid AUD 4.7 million of deferred acquisition payments because our acquired businesses were achieving their earn-outs, including Force Fire achieving their stretch earn-out in full.
We had the settlement payout on WestConnex, which was AUD 26.6 million of cash out of the door. Noting again, we had the successful capital raise with AUD 144 million coming into the bank before 30 June. The final slide that I am presenting is on slide 10, the order book. Again, a record order book we have declared. The order book is up 18% to AUD 810 million. Again, sets us up for that growth that we are expecting in FY 2027. Part of the growth in the order book came from Force Fire with their commercial sector, and data center growth has driven the infrastructure sector. By geography, we can see that all the eastern states have grown. Obviously, W.A. has fallen back as, again, the Collie BESS project is finished. We also now have 30% of our order book is in the adjacent non-electrical disciplines.
At that point, Graeme, I am going to hand back to you to do the outlook.
Thank you, Chris. Turning to our operational highlights and outlook, slide number 12. Very pleasingly, we were lost time injury-free across the group for the fourth consecutive year, having undertaken 2.9 million man-hours in the period. Our workforce stands at circa 1,700 direct employees, including 250 apprentices. We have now moved into our new Brisbane office and new manufacturing facility there. Overall, Trivantage Manufacturing doubled its floor space to 1,700 sq m in FY 2026 with three new leases. The Collie BESS project was completed in the period and recently won the NECA award for an extra large industrial facility in Western Australia. The Western Sydney Airport Terminal project was completed in the period, and we still have further works ongoing in that precinct. Force Fire performed ahead of budget and achieved all vendor earn-out targets.
We are seeing an improvement in the commercial sector, with opportunities in industrial warehousing and building projects emerging. The infrastructure sector outlook remains strong, with medium-term prospects of rail and hospital projects. We maintain a strong presence in the battery market with the award of the Steel River East BESS project for the Ausgrid network. There remains an unprecedented pipeline of data center projects with DigiCo and the NEXTDC S4 Works awarded in the period. A growing feature of our market offering is our ability to provide multidisciplinary solutions to our clients. There remains several acquisition targets being actively explored that will provide geographic and disciplinary diversification, and our FY 2027 EBITDA guidance is for at least AUD 100 million, with further growth beyond. Overall, a very successful operational year for the group. The next five slides explore how we are positioning for growth. Turning to slide 14.
SCEE is positioning for significant short, medium, and long-term growth through exposure to the structural tailwinds of data centers, infrastructure, energy, and electrification. These structural tailwinds are forecast to have considerable longevity, driven by AI development, general Australian population growth, and a drive to net zero. Off these tailwinds, we are guiding to at least 30% profit growth in FY 2027, supported by entering the period with a record order book. As Chris mentioned, June was a record month for the group as well. In alignment with our stated strategy, the growth will be both organic and acquisitive. We will maximize each of these paths. Importantly, we don't anticipate material constraints in our ability to capture this growth. Following our recent capital raising and the expansion of our finance facilities, SCEE is well-funded for working capital and executing acquisition transactions.
From a labor perspective, SCEE is an employer of choice in the industry and will be able to access pools of labor from other parts of the economy if and when required. We are contractually well-placed to pass on the inflationary impacts of materials and labor costs. To provide some extra color to our acquisition strategy, we are looking at a range of actionable targets offering geographic diversification into both Queensland and Victoria, as well as expanding our existing disciplines of fire and security within the group. Additionally, we may add new disciplines to the group such as HV, power lines, and mechanical HVAC. The final element of growth to consider is our anticipated entry into several market indices, including entering the MSCI Australia Small Cap Index in August 2026. Excuse me.
Our expected entry into the ASX 300 in September 2026, and finally, we are targeting an ASX 200 index entry during FY 2027. Clearly, we have many levers to grow the business. Now turning to slide 15 for a discussion of our multidisciplinary offering. In accordance with our strategy, over the last 10 years, we have successfully diversified our business. With the existing diversification and the planned further diversification of the group, we will be able to submit to clients even wider multidisciplinary offerings that will give us access to a larger share of project spend. Additionally, the overlapping client basis of SCEE businesses leads to internal sharing of market insights and business development coordination that enables us to develop deeper client relationships. By maximizing these synergies and cross-selling opportunities, our combined services offerings provide a competitive advantage to our group.
This is evidenced in recent awards in battery, data center, and infrastructure projects, where two or more SCEE businesses are involved, either through separate packages with clients or where one SCEE business subcontracts work to other group companies. The multidisciplinary offering provides value to clients beyond the sum of its parts, as SCEE can internally manage interfaces between disciplines, so de-risking potential schedule and cost issues on projects. Now turning to slide 16. SCEE businesses have worked on data centers for over 20 years, and the sector is in unprecedented growth. SCEE Group's breadth and depth of client base and service offerings is amongst the strongest in the Australian data center market. To illustrate this, in FY 2026, we worked inside 10 different data centers owned by six different hyperscale cloud providers, providing various electrical, communications, and fire services.
Trivantage Manufacturing provided switchboards to two of those 10, and then to a further four data centers. Clearly, we have great coverage across the data center market. Going forward, the Australian data center capacity is expected to double from the current 1.6 GW to 3.2 GW by 2030, and potentially double again by 2035. Clearly, an outstanding opportunity overall for SCEE. To maximize our potential, SCEE businesses have a multilayered relationship in the sector with both data center developers and the tier one builders. This provides us with an excellent insight to opportunities as they present. To illustrate the opportunity in this sector, we turned over AUD 120 million in data center work in FY 2026, and are forecasting this to triple in FY 2027.
Beyond the current opportunities, we are anticipating that a segment of data center construction will shift to remote locations over time as power becomes constrained in Sydney and Melbourne. SCEE is well-positioned to compete for these style of projects by combining our data center and remote location delivery experience. Additionally, data centers could increasingly be required to provide their own power, opening further opportunities for SCEE with its experience in performing wind, solar, battery, and gas-powered projects. Overall, an outstanding market for an electrical contractor. Now turning to infrastructure on slide 17. For SCEE, infrastructure is a very wide sector across government and private investment. Apart from data centers, renewables, and energy, this sector also includes transport, health and aged care, defense, education, agriculture, water, and utilities.
Currently, there is a strong pipeline of infrastructure opportunities for SCEE, including at the Western Sydney Airport, where we have been continuously present for over five years. The standalone facilities projects are underway, and we are expecting ongoing works and further airport expansion projects. At the wide Aerotropolis in the city of Bradfield, there is a long-term pipeline of industrial warehousing construction for both Force Fire and Heyday. This area holds the bulk of Greater Sydney's new industrial zoned land for development. In healthcare, Heyday were awarded the Shellharbour Hospital, their largest ever hospital award that is now well into construction. They continue to position for further major hospital developments in the medium term. On the Sydney Metro, we continue the construction of the St Marys station as part of the airport line, and we have high confidence of further projects on the Sydney Metro West station developments.
Finally, in the ACT, we continue to be active with government buildings and school expansion programs. Now turning to renewables and electrification on slide 18. Australia's energy transition requires investment in renewables, grid reconfiguration, and electrification of many activities by 2050. SCEE participates in this thematic, having successfully constructed multiple solar farms, wind farms, and battery energy storage systems. The key achievements in FY 2026 include successfully completing Synergy's 500 MW Collie BESS project, which was over AUD 250 million of work for SCEE. We were awarded and works have commenced on the Steel River East BESS on Ausgrid's New South Wales network, with multiple SCEE businesses contributing to the project. We are currently tendering for multiple renewable developments across Australia and anticipating further battery awards this financial year.
Additionally, SCEE offers services across a huge range of electrification initiatives, including decarbonizing our client operations and assisting clients navigate the requirements of stricter building codes on building complexity. Turning to the investment proposition slides. Slide 20 presents SCEE's compound annual growth rates for EBITDA, EBIT, and EPS metrics over the last six years. Clearly, our strategy has been successful in growing the business with high double-digit growth across these metrics. Looking forward, we are anticipating FY 2027 EBITDA guidance of at least AUD 100 million. This represents a growth of 30% on the underlying FY 2026 EBITDA. Hopefully, this is an attractive investment proposition for all shareholders. Turning to slide 21. A key plank of our strategy is to grow our recurring revenues. In FY 2026, we grew to AUD 220 million of recurring revenues. That represents 31% of the FY 2026 revenues.
As noted in the slide, we operate across both a wide range of recurring works, contract types, and across a wide range of sectors. Pleasingly, there is a depth and longevity to many of our arrangements that all SCEE Group companies contribute to. Turning to slide 22. Over the past 10 years, we have completed five value-accretive acquisitions that have all been consistent with our strategy of growing the SCEE Group through deepening our presence in the infrastructure, commercial, and resources sectors, and broadening our geographic diversity with the expansion of our core competencies by the addition of adjacent and complementary capabilities. As previously mentioned, this is something that we will continue to do as we explore a range of acquisition targets offering increased geographic diversification and new capabilities. I also note that we have the financial capacity, operational excellence, and corporate experience to undertake further acquisitions.
In summary, we believe SCEE has a compelling investment proposition going forward. Turning to our final slide and in conclusion. We had a record underlying EBITDA and EBIT that were up on the prior record year. We ended the year with a record cash position of AUD 261.5 million. That was a combination of the recent equity raise and the strong operational cash collection during the year. The order book of AUD 810 million was up 18.2% on the prior year. We declared a fully franked final dividend of AUD 0.075 per share. The infrastructure sector outlook remains strong with medium-term prospects of rail and hospital projects. We maintain a strong presence in the battery market with the award of the Steel River East BESS project for the Ausgrid network. There remains an unprecedented pipeline of data center projects with DigiCo and NEXTDC S4 works awarded in the period.
A growing feature of our market offering is our ability to provide multidisciplinary solutions to our clients. There remains several acquisition targets being actively explored that will provide geographic and disciplinary diversification, and our FY 2027 EBITDA guidance is for at least AUD 100 million, with further growth beyond. Overall, another very successful year with a very promising outlook. We will now turn to Q&A and, as I have been going through that, I might just pass across Chris to commence the Q&A.
Thanks, Graeme. I'll do the first one anyway. First question is: Could you please unpack the AUD 4.4 million remeasurement of share-based payments? How should we be thinking about these remeasurements going forward? It would take me a whole hour to explain the whole accounting issues around all of this. It arises out of the LTI schemes that the executives and senior management participate in. 50% of the LTIs, management have the option to exercise those in cash. Effectively, that is for them to pay their tax bills. The way the accounting treatment works is, that has to be regarded as a cost to the company, and it goes through the finance expense part of the P&L. Now, you can have your own views on this accounting treatment, but that's the longstanding way that AASB 2 share-based payments work.
If you really want to understand it, you have to go and read that. But if I can do this in a really simple way, and it's massively oversimplifying it, there are 3.5 million LTIs on issue. If the share price has gone up in FY 2026 by almost AUD 3, that's a AUD 10 million increase in the values of the LTIs, and half of that has to be expensed because it could potentially be cash settled. So that's roughly where the AUD 4 million charge comes from. But I urge you to go and read AASB 2 if you want to understand it better. How should we think about these remeasurements going forward? Well, if the share price stays flat, then there will be no further charge. If the share price was to double again, there'll be a significant charge like this again.
I'd remind you to, again, go back and read our annual report from FY 2024. We had the same thing happen then, where the share price again increased by 158% in the course of FY 2024, and there was a significant charge there. So that's all I'm going to say about this now. If somebody wants to call me direct to discuss it further, very happy to take the calls. The next-
I might take the next one, Chris.
Yeah.
Which is, are we seeing any stalled data center projects due to the grid access issues? At this stage, we are not seeing any of those issues occurring. The projects that we are involved in, a lot of cases, we have been through ECIs. We might be one of one or one of two negotiating these projects. The developers have their power agreements already in place. Certainly in the short to medium term, the ones that we are pursuing already have their grid secured for those projects. The next one is: Are the owners of data centers embracing the parallel installation of renewables, and does this create additional opportunities for SCEE? We sort of touched on that in the presentation. Certainly, we are actively involved in renewables, and also gas-fired power stations. If there is a need for increasing the amount of power available, that is an opportunity for us.
At this stage, I would see that data center operators are probably relying more on power generators to come to the party, and then they would be just simply having takeoff agreements with those particular projects. The next question. M&A has been successful for SCEE historically. As you become bigger and the acquisitions become bigger, how do you manage the risk more closely? I guess from our point of view with M&A, as we become bigger, it is not necessarily the case that the acquisitions are going to become bigger. They could still be in the size that we have done historically around Force Fire, Heyday, and Trivantage. It is quite a sweet spot for us at that, and there are probably more targets of that size for us to pursue.
In terms of managing the risk, we have got our processes and our philosophies of how we go through the identification and eventually go through the due diligence. I think our performance to date has shown that we have done that very well, and we have been able to manage that risk and grow those businesses when they have come on board. We are not looking to go out there and triple the size of the businesses that we are looking to buy.
Let's move on to the next one, the recurring revenues.
The next one was, are the recurring revenues, maintenance and service agreements post-installation? Yeah, generally, they are post-installation. It is different in different locations. But yes, in general, they are for after we have done the installation. Particularly in areas like Force Fire, where there are very sticky clients that once you have done the installation, you have signed off on it, you end up having the post-installation maintenance of those particular projects.
The next question is, why pay such a large dividend after you have just raised cash? I am going to disagree with the implication of this question. The dividend we have declared is entirely consistent with our dividend policy, whether or not we had done that equity raising. We will have paid out AUD 0.10 per share for FY 2026. This is AUD 0.075 now and the AUD 0.025 back in April. That represents AUD 30 million of cash, roughly. That is 75% of our underlying NPAT for FY 2026. It is exactly consistent with the policy, and we would have been doing that, I think, regardless of whether we had done the capital raise. Then I will go on to say further that this increase in the dividend from AUD 0.05 per share to AUD 0.075 per share, that represents less than AUD 8 million.
We have raised over AUD 160 million, so it is a tiny proportion of the money we raised in the first place.
Thanks, Chris. Just a couple more here. Can you please clarify whether the FY 2027 EBIT guidance of AUD 100+ million assumes any inorganic growth? The answer to that is no. That is just in terms of the business at the moment. Next one, pipeline of DC opportunities. We are avoiding going into greater details of the specifics of the projects that we are pursuing at the moment. A lot of that is commercially sensitive with our competitors. But essentially, the size of data centers are increasing. I think the first data centers we did 20 years ago were less than 1 MW. The ones we are doing at the moment, or finishing off, were about 70 MW. S4, where we have started work on, is 350 MW, and there are other ones out there of 550 MW.
I think there's enough information there to really get an idea of the size of those projects. In terms of the timeline, the DC operators have raised their capitals, and they're trying to do it as quickly as they can.
Do you want to just do that question there? Can you please clarify the guidance?
Did that.
Oh, did it.
Yeah.
Yeah. Sorry. Just hang on . Do you want me to do the next one?
Yeah.
Right. A question about ASX 200 aspirations this year. What does this say about the size of the opportunities out there, both organic and M&A? Again, very rough maths. I think the share price only has to increase about 20% from where it is around today for us to then have the market cap to be able to get into the ASX 200 at either the December rebalance or probably the March rebalance. We've talked about the significant growth we see in front of us. M&A opportunities, we've got AUD 200 million of capital to deploy in M&A opportunities. We think that will easily give us 20% share price growth over FY 2027. Then we will obviously get into the index.
Yeah.
I think really that's all the questions we've got.
Okay. I think we've covered off most of it, either in the presentation or in the questions here. I'd just like to thank everyone for taking the time to listen to us today and the support over the past year. Thank you very much.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.