Beating market expectations, shares of this company reinforced its place among best dividend growth stocks. Declaring an interim dividend of 30 cents per share, it was much ahead of the consensus.
SGH Limited (ASX: SGH)
SGH Limited (ASX: SGH) delivered strong financial results for the six months ending 31 December 2024, achieving solid earnings growth in variable market conditions. The company reported revenue of $5.5 billion, a 2% increase, driven primarily by an 8% revenue growth at WesTrac, which benefitted from strong capital sales and service activity. However, Boral and Coates saw slight declines in revenue, with reductions of 2% and 4%, respectively. SGH’s earnings before interest and tax grew by 10% to $843 million, supported by solid earnings increases at Boral, Beach, and WesTrac. This was reflected in an improved EBIT margin of 15.3%. SGH’s operating cash flow increased 15%, benefiting from improved cash conversion at WesTrac, where inventory investment was lower compared to the previous period. Additionally, SGH declared a fully franked interim dividend of 30 cents per share, a 30% increase from the prior period, maintaining its consistent approach to delivering stable and growing dividends.
SGH one of the best growth stocks to buy now, completed the acquisition of Boral in July 2024, securing full ownership of the company for a total cost of $4.4 billion. This acquisition has strategically positioned SGH to further capitalize on the Australian industrial sector. The Boral acquisition is expected to provide significant opportunities for growth and return on capital employed. Although Boral faces challenges with volume pressures in FY25, SGH remains focused on enhancing Boral’s margins and achieving mid-teen EBIT margins over time. Additionally, the transaction brought in over 40,000 new investors, diversifying SGH’s shareholder base. SGH continues to emphasize disciplined capital allocation and operational efficiency as part of its strategy to optimize long-term value creation for its shareholders.
SGH’s guidance for FY25 remains positive, with high single-digit EBIT growth expected. At WesTrac, the company anticipates continued underlying growth in services activity, along with a strong pipeline of capital sales that will support the outlook. Although Boral is expected to face volume pressures, cost discipline, operational efficiencies, and improved customer service are expected to help mitigate these challenges. Coates faces a challenging trading environment in the South, but infrastructure activity in other regions, alongside cost-cutting measures, should stabilize performance. In the energy sector, Beach’s strong first-half production supports its narrowed FY25 guidance of 18.5-20.5 million barrels of oil equivalent (mmboe).
SGH’s key priorities for FY25 include reducing leverage through strong operating cash flows, locking in margin improvements at Boral, and managing costs and fleet efficiently at Coates. The company will also focus on executing WesTrac’s capital sales and rebuilding its sales pipeline to enhance fleet productivity. SGH’s disciplined investment strategy will support future growth, with specific focus on Boral’s expansion in recycling and infrastructure and investments in HME and quarry networks to improve operational efficiency and extend asset life.
Source: Company’s Report
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