All the major metrics for SRG Global (ASX: SRG) were positive for the financial year ending 30 June 2025. Investors seem pleased with the results, and the SRG share price is up more than 20% from about $1.61 before the results to $1.96 today.
The successful integration of water and energy services business Diona in September 2024, and a large number of continuing contracts won with existing clients, saw strong top line growth.
I (Chris Coe) have owned SRG Global since 2019, and it is encouraging to see management execute their strategy of gaining more recurring work in industries with tailwinds and diversifying capabilities.
Revenue of $1,323.3 million was up 24% (FY2024 was $1,069 million). This, plus higher margins, flowed down to 52% increase in profit, and a 20% increase in the dividend. Diluted earnings per share were up a more modest 20% from 6.5 cents to 7.8 cents. Net Profit After Tax but before amortisation of acquired intangibles (NPATA) rose 52% to $60.95 million and NPATA per share was up 34% to 10.3 cents per share.
Source: Data compiled from SRG Global annual reports, and displayed by the author
Free Cash Flow (FCF) for the year was $67.4 million, taking operating cash flow of $94.85 million minus expenditure on Property, Plant, and Equipment (PPE) of $27.45 million. This was slightly down on FY24, due to higher income tax paid, and spending on PPE was slightly higher.
The profit (NPATA) margin rose from 3.8% to 4.6% over the period, helped by the acquisition of the higher margin water and energy services business, Diona. Diona contributed to 10 months of earnings during the financial year. The higher margins will provide some comfort to investors, in the tough industrial contracting space.
Additional comfort will come from the net cash position of $16.2 million, and $117 million in working capital and undrawn equipment finance facilities. This will be helpful for any downturns in the economy and/or the mining industry, which could see new and recurring contracts slow.
The fully franked final dividend of 3 cents per share (cps) is up 20% on the previous 2024 final dividend (2.5 cps). With the total FY25 dividend of 5.5cps, up 22% for the financial
year.
With more sectors serviced, increased capabilities, and ongoing contracts with blue-chip clients and infrastructure, I am hoping the steady growth in dividend payouts since 2020 continues, especially as growth will be harder to come by as SRG becomes larger.
With the latest dividend, SRG Global offers a grossed up dividend yield of 4.28%.
Early FY2026 guidance is for approximately 10% EBITDA/EBIT(A) growth on FY2025.
SRG Global has two segments. The Maintenance and Industrial segment contributed $867.4 million in revenue. Much of this work is ongoing asset remediation, inspection & testing, maintenance, and specialist drill & blast services for major Australian mining and infrastructure companies.
The Engineering and Construction segment contributed $455.9 million in FY25, which is more project-based work in the infrastructure sector, using engineers to advise and design solutions for critical infrastructure.
Source: Data compiled from SRG Global annual reports, and displayed by the author
The above chart shows the Maintenance and Industrial segment, which has higher margins and more recurring work, growing much faster than the Engineering & Construction segment. SRG used to report three segments, but in 2023 the drilling and blast segment was rolled into Maintenance and Industrial. The Diona acquisition is part of the Maintenance and Industrial Segment, accounting for some of the revenue growth in FY25.
While a boring industrial business, SRG Global is benefiting from technology. SRG is using specially designed drones to inspect the hard to reach places. This minimises the need for workers climbing up tall buildings, wind turbines, towers, and under bridges. This is safer, and saves time and money.
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What is the outlook for SRG Global (ASX: SRG) post results?
With increased capabilities, SRG Global is exposed to more industries, which could experience above average rates of growth. While it is not always easy to predict which industries will perform well in the future, SRG Global being exposed to more industries gives it a better chance of benefitting from at least some growth industries.
Commodities that will be essential to electrification and renewable energy may struggle to keep up with demand. The gold industry bull run may still have a way to go on geo-political unrest, and central banks buying as they look to diversify away from reliance on the USD. The defence sector, which is slated for higher government spending over the next 10-15 years, could also provide tailwinds.
The trailing Price to Earnings (P/E), even based on NPATA, is now around 19, much higher than when I previously covered the stock. While I have no intention to buy at current prices, and might take profits on this position, I still intend to hold some shares, given SRG Global continues to grow its revenue, earnings per share, and dividend payments.
Disclosure: The author of this article, Chris Coe owns shares in SRG. The editor of this article Claude Walker does not own shares in SRG. Neither the author nor the editor will trade SRG shares for at least 48 hours following 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 Ethical Investment Advisers Pty Ltd (ABN 26108175819) (AFSL 276544).
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