SCEE FY26 Underlying EBITDA Climbs 40.5% Despite 77.7% Statutory Profit Fall

Profit Surge Masked by WestConnex Legal Hit

Southern Cross Electrical Engineering Limited (ASX:SXE) delivered a strikingly mixed FY26 result. Underlying EBITDA soared 40.5% to a record $77.0 million, reflecting strong operational performance and a favourable project mix. Yet statutory net profit after tax plunged 77.7% to $7.1 million, weighed down by a $46.1 million arbitration settlement related to its WestConnex M5 motorway tunnel project dispute.

The WestConnex arbitration, which concluded with a cash payment and contract asset write-off, cast a long shadow over the year’s financials. Excluding these one-off costs, SCEE’s underlying NPAT rose 24.3% to $39.4 million, underscoring the group’s core profitability and operational momentum.

Revenue Declines as Major Projects Complete

Revenue fell 10.3% year-on-year to $718.7 million, primarily due to the successful completion of the Synergy Collie Battery Energy Storage System (CBESS) and Western Sydney International Airport Terminal projects in H1 FY26. Despite this, June 2026 marked a record monthly revenue, signalling a strong rebound in activity.

The group’s revenue mix is shifting, with over 40% now derived from adjacent non-electrical disciplines such as fire, manufacturing, security, and communications. The Force Fire acquisition, consolidated for the full year, contributed notably to this diversification, with commercial sector revenue climbing 62.1% to $247.2 million.

Robust Order Book and Cash Position

SCEE closed FY26 with a record order book of $810 million, up 18.2% from the prior year. Infrastructure projects dominate, comprising 70% of the book, with over 85% of work concentrated on Australia’s East Coast. The group’s cash balance surged to $261.5 million, bolstered by strong cash conversion and a $144.7 million institutional placement at a minimal discount, followed by a $15 million retail share purchase plan.

Financing facilities were enhanced, increasing bank guarantee and surety bond capacity from $150 million to $220 million, and introducing $50 million each in new revolving credit and acquisition facilities. The company remained debt free at year-end, positioning it well to pursue organic growth and acquisitions.

Data Centres and Energy Transition Drive Growth

The group’s exposure to structural tailwinds remains strong. Data centre construction is in an unprecedented growth phase, with Australian capacity expected to double by 2030 and potentially double again by 2035. SCEE’s FY26 data centre revenue reached $120 million, with a forecast to triple in FY27, supported by work at ten data centres operated by six hyperscale cloud providers.

Renewables and electrification projects, including multiple solar farms, wind farms, and battery energy storage systems, underpin the group’s medium to long-term growth outlook. The successful completion of the 500MW/2,000MWh Collie BESS project and the award of the Steel River East BESS project exemplify this focus.

Strategic Diversification and Acquisition Pipeline

SCEE continues to deepen its core electrical contracting capabilities while expanding into adjacent disciplines such as fire safety, security, and communications. The group is actively exploring acquisitions to broaden geographic reach and add new capabilities, including high voltage, powerlines, and mechanical services.

Multi-disciplinary offerings are a growing feature, enabling the group to access a larger share of project spend and provide clients with integrated solutions. Recent project awards in battery, data centre, and infrastructure sectors have involved collaboration across multiple SCEE businesses.

Dividend and Market Recognition

The board declared a record fully franked final dividend of 7.5 cents per share, payable on 7 October 2026, following a 2.5 cents interim dividend. Total dividends for FY26 of 10.0 cents per share represent a 33.3% increase on the prior year.

SCEE’s share price surged 166% during the year, lifting market capitalisation from $483 million to $1.475 billion. The company is set to enter the MSCI Australia Small Cap Index in August 2026 and anticipates inclusion in the ASX300 Index in September 2026.

Climate Risks and Sustainability

In its first mandatory climate-related financial disclosures, SCEE identified extreme weather events as a physical risk with limited financial impact due to mitigation strategies embedded in contract pricing and safe work procedures.

Two key transition opportunities were highlighted: increased work volume from Australia’s energy transition and data centres moving towards self-sufficient energy supply. Both are expected to positively influence future revenues but carry high measurement uncertainty.

The group reported Scope 1 and 2 emissions of 4,768 tCO2-e for FY26 and has not set climate-related targets at this stage.

Outlook and Guidance

Looking ahead, the board provided FY27 EBITDA guidance of at least $100 million, a 30% increase on FY26 underlying EBITDA, with expectations for further growth. The group does not foresee material constraints on capturing this growth, citing strong financial flexibility, a deep labour pool including 250 apprentices, and pricing strategies that pass inflationary cost pressures to clients.

With a record order book, strong cash position, and a robust pipeline of data centre and infrastructure projects, SCEE is positioned for significant short, medium, and long-term expansion, leveraging both organic growth and acquisitions.