Executing its growth strategy, this ASX stock is delivering above market financial performance. Its strong fundamentals provide platform for ongoing sustainable growth.
SRG Global Limited (ASX: SRG)
SRG Global Limited has launched a non-underwritten Share Purchase Plan (SPP) to raise up to A$6 million, following a successful A$60 million institutional placement.
For FY23 to FY24, the company experienced significant Financial Growth. Revenue increased from $809.0 million to $1,069.3 million, marking a 32% rise. EBITDA rose by 23%, from $80.1 million to $98.5 million. EBIT(A) saw a 31% increase, climbing from $50.0 million to $65.6 million, while NPAT(A) grew by 26%, from $31.8 million to $40.3 million. Despite these gains, the EBITDA margin slightly decreased from 9.9% to 9.2%, EBIT(A) margin declined marginally from 6.2% to 6.1%, and NPAT(A) margin dropped from 3.9% to 3.8%. However, Dividends per share increased by 13%, from 4.0 cents to 4.5 cents, and Earnings Per Share (A) grew by 15%, from 6.7 cents to 7.7 cents.
The company boasts a strong long-term track record of delivery, demonstrated by a 133% growth in EPS(A) over the past three years. It has successfully transitioned to approximately 80% annuity or recurring earnings, highlighting its stability and predictability.
Investment in the water infrastructure sector is projected to grow due to population expansion, climate change, and rising maintenance needs. Similarly, spending in the energy and gas infrastructure sectors is expected to remain robust, driven by Australia's shift towards Renewable Energy, energy security, and the modernization of networks to support the energy transition.
With a solid financial foundation and a focus on recurring revenue, SRG Global is well-placed for continued success in the coming years. The company is firmly positioned to sustain organic growth, with over $1.0 billion of work in hand and supported by a robust pipeline exceeding $2.0 billion. SRG has entered into a binding agreement to acquire 100% of Diona Pty Ltd and its associated entities (collectively "Diona") for $111 million, on a cash-free, debt-free basis with normal working capital levels. The acquisition implies a multiple of 6.0x on Diona's FY24 EBIT of $18.5 million. Diona delivers specialized services within two pivotal end markets: Water Security & Rehabilitation, which includes Water & Wastewater, and Energy Transition, covering Gas and Power & Energy.
SRG Global’s acquisition of Diona enhances its growth outlook, as Diona is in a good situation to benefit from significant investments in water security and energy transition. The water sector is investing around $12 billion annually, with major projects like the National Water Grid Fund and Sydney Water’s $34 billion initiative. In gas and electricity, approximately $23 billion is spent yearly, driven by the expansion of high-pressure pipelines and high-voltage transmission networks. The Australian Energy Market Operator’s $16 billion plan for new transmission lines by 2050 further underscores growth potential. Diona’s strong utility partnerships and 25 years of expertise position it to capitalize on these trends effectively.
SRG continues to strengthen its market presence in the high-demand industrial services sector, facilitating significant operational and financial growth. This is evident in the company's recent financial performances, with revenues increasing from $296 million in the first half of FY22 to $510 million in the first half of FY24, and earnings nearly doubling from $8.8 million to $15.2 million during this period. Moreover, its business successfully transitioning to ~80% annuity / recurring earnings brings stability to the fore.
Source: Company’s Report
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