SGH Reports $843m EBIT, 2% Revenue Rise in HY25

Robust Half-Year Performance

SGH Ltd (ASX:SGH) has released its half-year results for the six months ending 31 December 2024, showcasing resilience and growth across its diversified portfolio. The company reported a 2% increase in revenue to $5.5 billion and a 10% rise in earnings before interest and tax (EBIT) to $843 million. This performance was underpinned by disciplined execution and operational leverage, particularly within its industrial services and energy divisions.

Net profit after tax (NPAT) rose 7% to $508 million, despite headwinds from higher interest and effective tax rates. Operating cash flow improved significantly by 15% to $821 million, reflecting enhanced cash conversion and working capital management, especially at WesTrac.

Industrial Services Drive Growth

The industrial services segment, comprising WesTrac, Boral, and Coates, delivered a 10% increase in EBIT. WesTrac saw revenue growth of 8% to $3.2 billion, with capital sales up 13% and services revenue growing 5%, supported by a strong customer demand pipeline and fleet investment. Despite a slight margin contraction due to parts price reductions, WesTrac’s EBIT rose 5% to $352 million.

Boral experienced a 2% revenue decline to $1.8 billion, impacted by softer residential construction activity. However, the company achieved a notable 29% EBIT increase to $259 million, driven by pricing discipline, cost control, and operational improvements. Boral’s EBIT margin expanded by 335 basis points to 14.3%, reflecting successful performance initiatives and a focus on customer service.

Coates reported resilient customer activity with revenue down 4% to $546 million, adjusted for the sale of Coates Indonesia. EBIT declined 2% to $156 million but margin expansion was evident, with EBIT margin improving by 57 basis points to 28.6%, supported by cost discipline and logistics efficiencies.

Energy and Media Segments Mixed

In the energy sector, SGH’s 30% stake in Beach Energy contributed to a 5% increase in revenue and a 37% rise in NPAT, driven by higher production and pricing. Beach Energy’s production grew 15% to 10.2 million barrels of oil equivalent, supported by new offshore wells and operational efficiencies. SGH Energy continues to invest in the Crux development, with first gas expected in calendar year 2027.

The media segment, primarily represented by a 40.2% stake in Seven West Media, faced challenges with revenue down 6% and NPAT declining 41%, reflecting a softer television advertising market. However, cost reductions and efficiency initiatives are expected to support modest earnings growth in the second half of FY25.

Capital Management and Outlook

SGH maintained a disciplined capital allocation approach, with adjusted net debt to EBITDA stable at 2.2x. The company extended its corporate debt facilities, lowering borrowing costs and increasing tenor, which supports its strategy to invest in growth while targeting deleverage to 2.0x.

Looking ahead, SGH reaffirmed its guidance for high single-digit EBIT growth in FY25, underpinned by continued strength in industrial services and a cautious but positive outlook for energy. Key priorities include locking in margin improvements at Boral, improving fleet utilisation at Coates, and executing WesTrac’s capital sales and rebuild pipeline efficiently.

SGH’s interim dividend was increased by 30% to 30 cents per share, marking the 30th consecutive period of stable or growing dividends, underscoring the company’s commitment to delivering shareholder value.