WestConnex Settlement Drives SCEE to Net Loss Despite Strong Earnings Growth
Southern Cross Electrical Engineering reported a strong half-year EBITDA growth of 30.8% despite a $46.1 million legal settlement impacting net profit. The company raised its full-year EBITDA guidance amid a robust project pipeline and ongoing diversification.
- Underlying EBITDA up 30.8% to $35.4m in H1 FY26
- Net loss of $12.8m due to $46.1m WestConnex arbitration settlement
- Order book grows 6% to $710m, with 85% on East Coast
- Interim fully franked dividend declared at 2.5 cents per share
- FY26 EBITDA guidance raised to at least $72m
Strong Underlying Performance Amid Legal Setback
Southern Cross Electrical Engineering Limited (SCEE) has delivered a robust first half for fiscal 2026, reporting a 30.8% increase in underlying EBITDA to $35.4 million. This growth comes despite a significant $46.1 million legal dispute settlement related to the WestConnex arbitration, which resulted in a net loss after tax of $12.8 million compared to a $16.2 million profit in the prior corresponding period.
The company’s revenue declined by 12.2% to $349.1 million, primarily due to the winding down of major projects such as the Collie Battery Energy Storage System (BESS) and Western Sydney International Airport Terminal. However, gross profit rose sharply by 30.3% to a record $65.9 million, with gross margins improving to 18.9% from 12.7%, reflecting a more favourable project mix and contributions from recent acquisitions like Force Fire.
Diversification and Geographic Strength
SCEE continues to diversify its revenue streams across multiple sectors and disciplines, with approximately 40% of revenues now coming from adjacent non-electrical services such as security, communications, manufacturing, and fire safety. The company’s order book expanded by 6% to $710 million, with a strong geographic focus on the East Coast of Australia, which accounts for 85% of the pipeline.
Infrastructure remains the largest sector, though its share of revenue has moderated as projects like Collie BESS conclude. Meanwhile, commercial sector revenues have grown, boosted by the full consolidation of Force Fire, acquired in April 2025. The company’s multi-disciplinary approach is gaining traction, enabling cross-selling and integrated service offerings that differentiate SCEE from competitors.
Robust Financial Position and Shareholder Returns
Despite the cash outflow related to the WestConnex settlement, SCEE remains debt free with a strong cash balance of $58.8 million and $53.2 million in bonding headroom. The company declared a fully franked interim dividend of 2.5 cents per share, continuing its track record of shareholder returns supported by a franking account balance of $67.1 million.
Acquisitions remain a key pillar of growth, with SCEE having successfully integrated several businesses over recent years, including Datatel, Heyday, Trivantage Group, MDE Group, and Force Fire. The company is actively exploring further acquisition opportunities to enhance geographic reach and expand capabilities, particularly in high-voltage power infrastructure and electrification sectors.
Outlook Bright with Data Centres and Renewables Pipeline
Looking ahead, SCEE raised its underlying EBITDA guidance for FY26 to at least $72 million, representing a 31% increase on FY25. The company is well positioned to capitalise on an unprecedented pipeline of data centre projects, with over $1 billion of work currently tendering for commencement in calendar 2026. Infrastructure projects such as Sydney Metro’s St Marys Station and Western Sydney Airport expansions also underpin medium-term growth prospects.
Renewables and electrification remain strategic growth themes, with SCEE actively involved in battery storage, solar and wind farm projects, and electrification initiatives aligned with Australia’s energy transition. The company’s multi-disciplinary offerings and strong client relationships across sectors provide a solid foundation for sustained earnings growth.
Bottom Line?
SCEE’s strong operational momentum and strategic diversification set the stage for continued growth, but investors will watch closely how the company manages legal risks and capitalises on its expanding project pipeline.
Questions in the middle?
- How will SCEE’s acquisition strategy evolve to sustain geographic and disciplinary diversification?
- What impact will the winding down of major projects have on revenue stability in the second half?
- Can SCEE maintain margin improvements amid increased overheads and integration costs?
