Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record financial results for FY24 with $98.5 million EBITDA, up 23%, and EBIT up 31% to $65.6 million.
- Strong cash generation, moving from net debt of $17 million to net cash of $17.8 million.
- EPS up 15% and a full-year dividend increase of 13%, showcasing strong returns to shareholders.
- Transformational acquisition of Diona, expected to be circa 10% EPS accretive and adding $1 billion in work in hand.
- Increased guidance for FY25 to $125 million EBITDA, including a 10-month contribution from Diona.
Negative Points
- High dependency on the successful integration of Diona to achieve projected growth and synergies.
- Potential risks associated with maintaining a high cash conversion rate, which was 117% for FY24.
- Challenges in sustaining EBIT margin improvements, especially with the capital-light nature of Diona.
- Exposure to market fluctuations in key sectors like water security and energy transition.
- Need for continuous investment in ESG initiatives, which may impact short-term profitability.
Q & A Highlights
Q: What visibility do we have from an EBITDA perspective for FY25?
A: We have very high levels of visibility for FY25, with a clear guidance of $125 million. This continues our track record of providing clear guidance and delivering against it. (David Macgeorge, Managing Director, Executive Director)
Q: How do we think about cash conversion going forward?
A: While I'm not providing specific cash guidance, 117% this year is a good benchmark. We expect to continue being a strong cash-generating business over the long cycle. (David Macgeorge, Managing Director, Executive Director)
Q: How do we think about synergies and the go forward with Diona?
A: This is not a cost synergy play. We expect to grow Diona's business strongly over the journey, with significant growth anticipated in FY26, FY27, and beyond. (David Macgeorge, Managing Director, Executive Director)
Q: How do we think about EBITDA margins as a group going forward?
A: Diona is a very capital-light business, which is EBIT margin expansionary. This will continue to improve the overall margins of the group. (David Macgeorge, Managing Director, Executive Director)
Q: What rate do you think Diona can grow under SRG's leadership?
A: We expect to grow Diona at a reasonable profile of circa 10%. Our focus will be on integrating the business well and growing it over the long term. (David Macgeorge, Managing Director, Executive Director)
Q: How do we ensure that the Diona acquisition is a success?
A: Success will be down to culture. We have a strong leadership team, and SRG is a natural fit for Diona. Our focus will be on cultural integration and creating opportunities for people within the Diona group. (David Macgeorge, Managing Director, Executive Director)
Q: Can you provide some color around Diona's commercial framework and how risks are managed?
A: Almost all of Diona's work is secured under long-term agreements. Even the fixed price elements are secured within a collaborative framework, ensuring a controlled and disciplined environment. (Roger Lee, Chief Financial Officer, Executive Director, Joint Company Secretary)
Q: What type of contracts can Diona compete for under SRG's ownership that it previously couldn't?
A: With SRG's balance sheet and scale, Diona can now compete for larger contracts and unlock further opportunities, particularly with clients like Water Corp in the West. (David Macgeorge, Managing Director, Executive Director)
Q: Have you been approached for a takeover?
A: No, we have not been approached for a takeover. (David Macgeorge, Managing Director, Executive Director)
Q: Will the recording of this presentation be available later on?
A: Yes, the recording will be available. (Roger Lee, Chief Financial Officer, Executive Director, Joint Company Secretary)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
