Debt free SRG delivers 55% earnings growth

By Trevor Hoey. Published at Aug 14, 2018, in Features

Name: SRG Limited (ASX:SRG)

Market Capitalisation: $130 million

Closing Share Price: $1.58

SRG Limited (ASX:SRG), a global provider of services to the construction and mining industries, has achieved underlying pre-tax earnings growth of 55% in fiscal 2018, and the company enters fiscal 2019 with working hand of $336 million.

Underlying pre-tax earnings of $12.2 million was struck on revenues of $260 million.

Importantly, SRG has 2019 work in hand of circa $220 million, not too far shy of its 2018 full-year revenue.

Total work in hand is $336 million with a work opportunity pipeline of $2.2 billion.

The company is also in a strong financial position, being debt free with cash and cash equivalents of nearly $30 million.

Management declared a final dividend of 4.5 cents per share, bringing the full year dividend to 6.5 cents per share.

Note that any decision with regards to adding this stock to your portfolio should be taken with caution and professional financial advice sought.

Watershed year for SRG

Since its transformation from ASX listed Structural Systems Ltd to SRG, the company has looked to diversified its operations, providing multiple revenue streams and insulation against a possible cyclical trends in certain sectors.

This diversification strategy continued in fiscal 2018 as the company entered the asset maintenance sector through the acquisition of NZ based TBS Group in April 2018, a specialised infrastructure maintenance services provider that is a market leader with a strong recurring revenue base.

This is an important development for the group given that it operates in an industry that is sometimes characterised by large one-off contracts.

Generating regular income from the likes of maintenance, repair and inspection work can help to smooth out a lumpy workbook.

On June 12, 2018, SRG announced its intention to facilitate the largest corporate transaction it has undertaken with the proposed merger with Global Construction Services Limited (ASX:GCS).

Information about the proposed merger that included the independent expert concluding the scheme is in the best interests of SRG shareholders has been dispatched, and both SRG and GCS Boards recommend shareholders vote in favour of the proposed merger on August 22, 2018.

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