Southern Cross Electrical Engineering (ASX:SXE) talks FY17 results and outlook


by Jessica Amir

Southern Cross Electrical Engineering Limited (ASX:SXE) CEO Graeme Dunn talks FY17 results, acquisitions, strategy and outlook.

Jessica Amir:
Hi I’m Jessica Amir for the Finance News Network. Joining me from Southern Cross Electrical Engineering Limited (ASX:SXE) is CEO, Graeme Dunn. Graeme, welcome.

Graeme Dunn: Thank you.

Jessica Amir: First up, can you give us an introduction to the company?

Graeme Dunn: Southern Cross Electrical Engineers is an electrical, instrumentation, communication and maintenance services company. We operate across a wide range of market sectors, ranging from resources, oil and gas to commercial buildings and into hospitals. Essentially, we build, install and maintain anything to do with electrical systems. We’ve been in business for 40 years and we employ over 1,500 people.

Jessica Amir: Now to your FY17 results. What were some of the highlights?

Graeme Dunn: 2017 was a year of two halves. In the first half, we were adapting to the new normal of the resources sector having less of a spend. While in the second half, we really got the advantages of our diversification strategy and we had a very strong second half with an underlying EBITDA, of $8.2 million and an underlying NPAT of $4.1 million. Operationally it was very strong in the second half as well, as we picked up our new projects that we’ve recently announced.

Jessica Amir: Can you tell us what areas you specialise in and tell us about your order book?

Graeme Dunn: We’re an electrical contractor; historically we’ve worked in the resources oil and gas in the industrial market. But over the last 18 months, we’ve really diversified into a broad range of market sectors now, including commercial buildings, defence work, renewables etc. In terms of our order book, we had a very strong 2017. We started the year with an order book of $55 million and ended the year with an order book of $480 million. And the pleasing thing was that it was across all our market sectors.

Jessica Amir: What would you say is your competitive advantage and strategy?

Graeme Dunn: From a strategy point of view, we’re pretty simple. We’re maintaining being an electrical contractor and we’re running a diversification strategy. So that’s diversification in terms of geographies across Australia and also a diversification in terms of market sectors. In terms of our competitive advantage, first thing is we’ve got very strong people, very strong relationships with our clients, got a strong balance sheet and we’ve got a very strong safety record as well.

Jessica Amir: A more general question now, government spending and infrastructure is only climbing. How does your business leverage off that?

Graeme Dunn: The acquisition that we’ve made earlier this year of Heyday Group was about finding a platform to leverage our infrastructure experience. That was one of the main reasons that we looked at purchasing in Sydney, because of the upcoming infrastructure work. So both organisations SCEE and Heyday have experience in the infrastructure business, or projects. SCEE recently completed the Mitchell Freeway extension in Perth. And really, it’s looking at the two businesses leveraging off each other’s skills, to grow into the New South Wales infrastructure market.

Jessica Amir: Last question now Graeme. What’s your goal for the next 12 months and longer-term?

Graeme Dunn: 2017 and over the last 18 months has been a real transformational year for Southern Cross. So for the next 12 months, we’re looking to bed down the acquisitions that we’ve made and to really leverage off the organic diversification that we’ve done. So the key things that we’re looking forward to over the next 12 months is firstly, getting into the large infrastructure projects in New South Wales. Secondly, we’re looking to leverage our experience across the various states. So, taking our commercial capability into Western Australia.

Thirdly, we’re looking to pursue the upcoming large-scale telecommunication projects. And lastly, it’s the resources cycle where we’ve got a long history in the resources and we’re going to be positioned, for the next turn of the resources cycle. And finally long-term, we’re looking to grow the business further from what we’ve done over the last two years.

Jessica Amir: Graeme Dunn, thank you so much for the update.

Graeme Dunn: Thank you for having me.


Are you a 708 sophisticated investor?

A sophisticated investor is defined under Section 708 of the Corporations Act (net assets of $2.5 million or annual incomes in excess of $250,000).

They are eligible to receive information regarding wholesale investment opportunities that are not available to regular or retail investors.

Please subscribe if you would like to be alerted to these types of opportunities.