How to disguise a lack of earnings growth: announce a big contract win and how that will boost the next financial year’s earnings and not the one that ends on June 30, 2024.
It’s a bit of a pea and thimble trick, but that’s what we got from Southern Cross Electrical Engineering (ASX:SXE) on Monday.
The company said in a statement to the ASX that it expects earnings before interest, taxes, depreciation, and amortization of at least $48 million for fiscal 2025 (to June 30, 2025).
For the fiscal year 2024, the company reaffirmed its earlier guidance that profitability for the year will match 2022-23’s EBITDA figure of $38.1 million.
The profit guidance came after the company announced a contract win for the company’s Collie Battery Energy Storage System project in Southwest WA, valued at $160 million. It is the largest initial award by value in the company’s history, the company said, and it’s scheduled for completion in the final quarter of 2025.
"While the CBESS project will have no material impact on the current financial year, it will drive significant activity levels in FY25 and into the first half of FY26,” directors said on Monday.
"However, this is far from our only lever of growth – we are exposed to strong structural tailwinds in the data center sector, Australian infrastructure particularly at Western Sydney Airport, and to decarbonization and electrification works to enable Australia’s energy transition.
"Our other markets, particularly including resources, commercial buildings, and our supermarket works, are in a stable or steady growth environment too, which gives us confidence that this growth in FY25 is sustainable, and we have expectations of further earnings growth in FY26 and beyond."
The absence of any mention of profit growth for the year to June this year follows a 10.1% dip in first-half EBITDA to $17.1 million. To at least match the full-year figure means the company is expecting a far stronger June half than it experienced in the six months to December.
If that’s the case, it's a good story and makes the confidence about 2024-25 easier to understand.
Perhaps that’s also why the shares leapt 20% on Monday after the news release to the ASX.
