Southern Cross beats earnings forecast

Client demand, improved margins and tight control of overheads have led Southern Cross Electrical Engineering Ltd to beat its prospectus pro forma earnings forecasts for the 2008 financial year.

In its first year of listing, the company achieved a pro forma net profit after tax of $14.3 million, up from the $12.2 million forecast given in its prospectus prior to its November 2007 float.

Pro forma earnings per share was up from the guidance of 10.9 cents to 12.8 cents while pro forma earnings before interest, tax, depreciation and amortisation was $21 million, up from a forecast $18.5 million.

After taking into account other costs including the $3.7 million initial public offer fees, the company reported a net profit of $769, 000, up seven per cent from the previous year.

Revenue was up four per cent to $3.2 million but was $12.6 million lower than the prospectus forecast.

In an Open Briefing interview, new managing director Stephen Pearce said the lower than forecast revenue was a result of the company missing out on the Boddington contract.

"When we prepared the prospectus forecasts, we expected to win the electrical contract at Cape Lambert and Boddington. We were successful with Cape Lamber and missed out the Boddington contract," Mr Pearce said.

"In terms of timing, the forecasts assumed the Cape Lambert project would ramp up during the third quarter and be completed during December 2008. Actual ramp-up occurred between June and August instead, with no change to the expected completion date.

"These two challenges were partially offset by above expectation revenues from overseas projects and some small projects in Australia."

Looking forward, the company is expected to increase revenue by 43 per cent to $120 million.

To date, Southern Cross has contracted revenue of $70 million which it said was a record start to the year.

The directors have declared a final, fully franked dividend of four cents per share, taking the full year pay-out to six cents, 20 per cent higher than the prospectus forecast.