Founded in 1978 and listed on the ASX in 2007, Southern Cross Electrical Engineering (ASX:SXE) are a leading national electrical, instrumentation, communications and maintenance services group of companies. They offer their services to the mining/resource, infrastructure, defence, commercial, and construction industries/sectors.
The stock often appears in many client screens. Testimony to this, the company is one of the most viewed by members within the Stockopedia platform despite its size (it’s in the All Ordinaries index, but not in the ASX300).
Revenue is principally derived by the group from the provision of electrical, instrumentation and communications services through construction and services contracts. SXE report their revenue via three operating segments: commercial, resources, and infrastructure. Over the years SXE have made acquisitions to grow and diversify their business and since 2016 they have acquired Datatel, Heyday, and Trivantage Group. This resulted in record EBITDA earnings and reported profit after tax of $38.2m, and $20.1m respectively in FY23. Also, of note was that 35% of FY23 revenue ($465m) was recurring revenue which SXE has expressed a desire to increase by continuing to target maintenance and recurring earnings services contracts. SXE sees the decarbonisation and electrification of the Australian economy as a major growth area, particular points of interest specified by the company in their investor presentation September 2023:
“Australia is undergoing an energy transition to achieve net zero emissions by 2050.”
“Reduction in fossil fuel consumption will require a high degree of electrification in the road transport and industrial sectors”.
“Electrification is also expected to occur across a range of applications in industry, mining and manufacturing, as well as gas use in buildings”.
“Introduce a national plan to phase out fossil gas in existing buildings and appliances” Recommendation 2.2 –EVERY BUILDING COUNTS REPORT –Green Building Council of Australia 2023.
SXE also have a number of blue-chip clients on their books, including BHP, RIO, Woolworths, Coles, and Multiplex, with revenue from blue chip customers accounting for 46% of FY23 revenue. To date, SXE has managed to execute their strategy of acquiring business to grow and diversify their business and continue to be on the lookout for more acquisitions.
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As to be expected after reporting record earnings and profit in FY23, things are…
