Southern Cross Electrical Engineering (ASX: SXE) boasted record revenue of $801.5 million over the year, up 45.2% from $551.9 million in FY24. This flowed down to a record profit of $31.7 million, up 44.5% (F2024: $21.9 million), and earnings per share (eps) of 11.9 cents per share, up 44.5% from FY24. The Collie Battery Energy Storage System, which is operating at high levels of activity, the Western Sydney Airport, and strong demand from data centres all contributed to record revenue and profit.
However, past growth does not guarantee future growth. The FY2025 order book was lower at $685 million (FY2024: $720 million), and the Resources and Commercial segments revealed lower revenue in FY2025, compared to FY2024. So there are some causes for caution.
Free Cash Flow (FCF) improved over the last year. FCF over the financial year was $59.8 million (FY24: $33.94 million), taking operating cash flow of $64.7 million minus spending on property, plant, and equipment of $4.9 million; this is a capital light, but labour intensive business.
The fully franked dividend was up 25% to 7.5 cents per share in 2025, giving a grossed up dividend yield of 5.6%. The dividend yield for Southern Cross Electrical Engineering has trended lower over recent years, as the share price has outpaced dividend growth. When I wrote this article in 2023, Southern Cross Electrical Engineering was more of a small cap dividend play.
Source: Data from Southern Cross Electrical Engineering FY2025 presentation
The balance sheet is solid with no debt, and cash on hand increased slightly over the financial year to $86.8 million. Management quoted they are ‘actively looking’ at acquisitions, and with the high cash balance, could be completed without having to raise capital or taking on debt.
Southern Cross Electrical & Engineering (ASX: SRG) Segment Performance
The infrastructure segment is the largest of the three. Infrastructure now accounts for 64% of group revenue. Infrastructure revenue for the year was $511.6 million, up 118.9% from $233.7 million in FY2024.
This includes the growing data centre industry. Data centre revenue was approximately $120 million in FY25, up from $50 million in FY24. I am not sure how data centre growth will play out long-term, but at present Southern Cross predicts the data centre tender pipeline of projects to be awarded over the next two years to be over half a billion dollars in value.
The below chart shows revenue derived from data centre work. 2019 to 2023 averaged approximately $20 million per year.
The commercial sector was lower at $152.5 million (FY2024: $171.1 million). Activity has been lower post-Covid. Contracts with defensive supermarkets, Woolworths and Coles were steady.
Revenue is expected to grow in FY2026 with Force Fire contributing to commercial and industrial warehousing work.
The more cyclical resources makes up the least in group revenue. This segment was also down at $137.4 million in revenue (FY2024: $147 million).
While the Infrastructure revenue has grown substantially in the past few years. Commercial revenue has not been growing, and the resources has trended down in the last four years.
Southern Cross management explain that this is due to a paucity of greenfields projects. A greenfield project is mining an area that has not been mined before, so requires building all the infrastructure. The lack of greenfield mines in part arises when miners with high cash balances are choosing to merge and acquire, rather than start new exploration projects.
Southern Cross Electrical & Engineering (ASX: SXE) Acquires Force Fire
I wrote about the Force Fire acquisition in more detail here, back in March 2025.
In terms of FY25 contribution management stated in the FY25 Results presentation:
‘Force Fire had a strong final quarter post-acquisition with its contribution to the group’s result in that period broadly netting off against the acquisition costs incurred.’
While Southern Cross Electrical Engineering’s core business is still electrical services (and I would hope it would stay that way), 25% of revenue is now in adjacent businesses like fire protection systems, security, and communications. Southern Cross is looking to cross-sell between its differing businesses. Force Fire also has dry capabilities for electrical fires, which is ideal for data centres and any building with lots of electrical components.
The last five acquisitions were for total consideration of $53.5 million, $10.55 million, $53.5 million, $54.1 million and $6.2 million. The past acquisitions do not necessarily mean future acquisitions will be similar, but I wanted to see out of interest what they were bought for. It does show some consistency and possibly discipline on sizing, having not spent over $55 million on any target.
Summary and Outlook for Southern Cross Electrical & Engineering (ASX: SXE)
The early guidance for FY26 is for EBITDA in the range of $65 million to $68 million, growing 18‑24% on FY25 EBITDA of $54.8 million. Management advised that EBITDA guidance does not take into account contributions from any acquisitions during FY26.
At the current Southern Cross Electrical share price of around $2.30 the trailing P/E ratio is about 19.5, and the trailing dividend yield is about 3.2% fully franked (more like 4.5% if you include the value of franking credits).
While it is not great that the Commercial and Resources segments were down, and the FY25 order book was lower than FY24, the balance sheet is strong, and I am backing management to continue making smart acquisitions, cross-sell, and grow profits.
Therefore, I (Chris Coe) intend to continue to hold my shares.
Disclosure: The author Chris Coe owns shares in SXE will not trade shares in SXE for at least 2 business days after the publication of this article. The editor of this article Claude Walker does not own shares in ASX:SXE and also will not trade the stock for at least 2 business days after the publication of this article. This article is not intended to form the basis of an investment decision and is not a recommendation. Any statements that are advice under the law are general advice only. The author has not considered your investment objectives or personal situation. Any advice is authorised by Claude Walker (AR 1297632), Authorised Representative of Equity Story Pty Ltd (ABN 94 127 714 998) (AFSL 343937).