SGH Ltd reported solid FY25 results with 8% EBIT growth, margin expansion, and a 17% dividend increase, setting a confident tone for FY26. The diversified industrial services group demonstrated robust cash flow and reduced leverage despite mixed divisional performances.
- 8% EBIT growth to $1.537 billion with margin expansion to 14.3%
- Revenue up 1% to $10.7 billion; NPAT increased 9% to $924 million
- Operating cash flow surged 49%, enabling net debt to EBITDA reduction below 2x
- Boral EBIT surged 26%, WesTrac EBIT grew 2%, Coates EBIT declined 9%
- FY26 guidance targets low to mid single-digit EBIT growth; dividend up 17% to 62 cents fully franked
Strong Financial Performance Amidst Variable Market Conditions
SGH Ltd has reported a commendable set of full-year results for FY25, showcasing an 8% increase in earnings before interest and tax (EBIT) to $1.537 billion. This growth was accompanied by a notable expansion in EBIT margin to 14.3%, reflecting improved operational efficiencies and disciplined cost management across its diversified industrial services portfolio.
Revenue edged up 1% to $10.7 billion, while net profit after tax (NPAT) rose 9% to $924 million. The company’s ability to convert earnings into cash was particularly impressive, with operating cash flow soaring 49% to nearly $2 billion. This strong cash generation facilitated a reduction in net debt to EBITDA leverage below the 2x target, underscoring SGH’s commitment to strengthening its balance sheet.
Divergent Divisional Outcomes Highlight Strategic Focus
Within SGH’s portfolio, Boral led the charge with a 26% jump in EBIT to $468 million, driven by pricing discipline, volume growth in concrete, and operational efficiencies. WesTrac also contributed positively with a 2% EBIT increase to $639 million, supported by solid demand in the Western Australian resources sector and fleet renewal activities.
Conversely, Coates experienced a 9% decline in EBIT to $290 million, reflecting softer customer activity and a challenging market environment. Despite this, Coates maintained strong margins and launched its Grow30 strategy aimed at capturing growth from Australia’s infrastructure pipeline, signaling a proactive approach to market challenges.
Capital Management and Shareholder Returns
SGH’s capital management strategy remains robust, with net debt reduced by 3% to $4.2 billion and liquidity of $1.9 billion available. The company declared a fully franked final dividend of 32 cents per share, bringing the total FY25 dividend to 62 cents, a 17% increase from the prior year. This dividend growth contributed to a total shareholder return of 46% for FY25, significantly outperforming the ASX100 benchmark.
Looking ahead, SGH has provided guidance for FY26, expecting low to mid single-digit EBIT growth. The company plans to leverage operational momentum and margin improvements achieved in FY25, with a focus on sales effectiveness, innovation, and operational excellence.
Safety and Leadership Transitions
SGH’s safety record was marred by two workplace fatalities during the year, a sobering reminder of the risks inherent in industrial operations. The company reported meaningful safety improvements overall, including significant reductions in injury frequency rates, and reaffirmed its zero-harm ambition.
On the leadership front, Boral’s CEO Vik Bansal announced his planned transition to a non-executive director role on the SGH Board following the HY26 result. Bansal’s tenure saw rapid earnings growth and cultural transformation at Boral, and his continued involvement at the board level is expected to support SGH’s broader strategic objectives.
Bottom Line?
SGH’s FY25 results set a solid foundation, but safety challenges and divisional disparities will test its FY26 ambitions.
Questions in the middle?
- How will SGH address safety risks following two workplace fatalities in FY25?
- What impact will the Boral CEO transition have on operational momentum and culture?
- Can Coates reverse its EBIT decline amid mixed market conditions and execute its Grow30 strategy effectively?