28/02/2017 - 15:26

SCEE to bounce back after buying east coast group

28/02/2017 - 15:26

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Southern Cross Electrical Engineering expects to bounce back from a net loss in the first half of the 2017 financial year after announcing the “transformational” acquisition of a Sydney-based electrical contractor.

SCEE to bounce back after buying east coast group
SCEE took a big revenue hit after a raft of large-scale iron ore construction contracts were completed. Photo: SCEE

Southern Cross Electrical Engineering expects to bounce back from a net loss in the first half of the 2017 financial year after announcing the “transformational” acquisition of a Sydney-based electrical contractor.

SCEE said today it would pay up to a total of $54.1 million to acquire Heyday5, which has been providing electrical contracting services for tier-one construction companies and property groups for nearly 40 years.

Recent projects in Sydney by Heyday5 include the St George Hospital Redevelopment for Multiplex and the Global Switch Data Centre for Hutchinson Builders.

SCEE said the acquisition was in line with its strategy to diversify its operations across market sectors and grow its exposure in other states.

The total consideration payable for the acquisition is subject to a number of conditions, including earnings growth in the second half of FY2017.

Managing director Graeme Dunn described the deal as transformational.

“It gives us an immediate entry into the attractive Sydney and Canberra commercial and infrastructure markets and will open up exciting further opportunities for the combined group,” Mr Dunn said in a statement to the ASX.

Heyday5 had budged revenue of $152 million for FY2017, with an order book of more than $200 million, while it employs around 380 people across its NSW and ACT operations.

Gresham Partners acted as SCEE’s financial adviser, with K&L Gates providing legal advice on the deal.

Also today, SCEE announced it had lodged a net loss of $2.8 million for the first half of FY2017, after its revenue more than halved to $61.5 million at December 31, down from $137.1 million in the first six months of FY2016.

SCEE said the main contributing factor to the revenue plunge was the non-renewal of iron ore construction contracts.

Delays in WA NBN work also negatively impacted SCEE’s Datatel division.

Despite the loss, which came after a net profit of $3.8 million in the previous corresponding period, SCEE said it expected to bounce back into the black solidly in the second half of FY2017.

SCEE flagged a full year net profit of around $2.2 million, with its net profit guidance for the second half of FY2017 coming in at around $4 million.

Following the acquisition of Heyday5, SCEE said it expected revenue to grow past $300 million, with $300 million of contracts on its books, including $30 million worth of resources jobs in the final stages of approval.

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