Southern Cross Electrical Engineering used its FY26 result recently in August 2026 to make a simple point: the electricians who wire Australia’s data centres are now among the clearest listed beneficiaries of the artificial-intelligence spending wave. The Perth-based group lifted its order book to a record $810 million, grew underlying Earnings by more than 40 per cent, and told investors that Revenue from data-centre work would roughly triple in the coming year. It also set a hard number on the ambition, guiding to at least $100 million of EBITDA in FY27 from organic work alone. For a company that spent its early life servicing iron-ore mines in the Pilbara, the pivot toward digital infrastructure is striking, and the market has noticed.

What just happened

For the year ended 30 June 2026, revenue fell 10.3 per cent to $718.7 million, a decline the company attributes to the wind-down of two large jobs, the Collie battery project in Western Australia and the Western Sydney Airport terminal. Yet profitability moved the other way. Underlying EBITDA rose 40.5 per cent to $77.0 million, underlying EBIT climbed to $64.4 million, and underlying net profit after tax reached a record $39.4 million, up 24.3 per cent.

Statutory net profit tells a harsher story, falling 77.6 per cent to $7.1 million. The gap is almost entirely explained by $46.1 million of costs tied to the settlement of a long-running arbitration over the WestConnex motorway project in Sydney. Management has treated that item as one-off, and the underlying figures strip it out.

The board declared a final Dividend of 7.5 cents per share, fully franked, taking the full-year payout to 10.0 cents.

Why it matters

The headline revenue drop could mislead. The more telling shift is in margins and mix. Gross Margin widened to 19.0 per cent from 13.2 per cent a year earlier, and underlying EBITDA margin lifted to roughly 10.7 per cent. In other words, Southern Cross (ASX:SXE) is doing less work but keeping more of each dollar, a sign it is winning higher-value electrical and prefabrication contracts rather than chasing volume. The record order book, up 18.2 per cent from about $685 million, suggests the revenue dip is a trough rather than a trend.

The numbers that matter

Data-centre revenue reached $120 million in FY26 and is expected to reach roughly $360 million in FY27 as recently awarded contracts ramp. The order book stands at $810 million, weighted heavily toward east-coast infrastructure and digital work. Cash finished the year at a record $261.5 million with no debt, and the company lifted its bank facilities to $220 million from $150 million, giving it firepower for both delivery and acquisitions. A franking balance of about $65.5 million supports the fully franked dividend. FY27 EBITDA guidance of at least $100 million implies growth of more than 30 per cent, and management stresses it is built on organic work already in hand, excluding any bolt-on deals.

The bigger industry picture

Southern Cross sits at the meeting point of three spending cycles. The first is data centres, where hyperscale and AI Demand is drawing large operators such as NEXTDC to expand rapidly. Earlier in the year the group secured early electrical and communications works, via builder Multiplex, on NEXTDC’s S4 campus at Horsley Park in western Sydney, a site slated to grow to about 124,000 square metres and 350 megawatts. Its Trivantage Manufacturing arm also won a contract to Supply low-voltage switchroom skids for a Western Sydney facility, a prefabricated approach that shortens build times.

The second cycle is resources. The group’s SCEE Electrical Business landed a three-year master construction agreement with Rio Tinto covering electrical, instrumentation and controls work across the Pilbara, anchoring recurring income. The third is broader infrastructure electrification, from grid connections to renewables, where demand for skilled electrical contractors remains tight. Positioning across all three gives Southern Cross a Diversification that pure data-centre plays lack.

The bull case

The Investment argument rests on visibility and balance-sheet strength. A record order book, a stated FY27 profit target, and a fortress Balance Sheet with $261.5 million of net cash give the company unusual clarity for a contractor, a sector often punished for lumpy earnings. Rising margins suggest genuine pricing power in a labour-constrained market. The recent Capital raising, a $150 million Placement plus a share purchase plan of up to $15 million priced at $3.85 to $4.00, was partly earmarked for acquisitions, and the group has flagged interest in fire, security, high-voltage, powerline and HVAC targets in Queensland and Victoria. The 2025 Acquisition of Force Fire shows the model in action, broadening services sold into the same data-centre clients.

The risks

Contracting is inherently cyclical, and the WestConnex settlement is a reminder that disputes can swallow a year’s statutory profit. The data-centre pipeline, while real, concentrates risk in a small number of large customers and builders; any slippage in hyperscale timetables would flow straight to Southern Cross’s ramp-up. The FY27 target also assumes flawless delivery on a fast-growing book against a backdrop of skilled-labour shortages and construction-cost inflation.

What happens next

Investors should watch several markers. First, delivery on the NEXTDC S4 and Rio Tinto contracts through FY27, the twin engines behind the data-centre and resources ramps. Second, progress toward the $360 million data-centre revenue target and whether it lifts group margins further. Third, how quickly the company converts its cash and expanded facilities into earnings-accretive acquisitions. Fourth, any upgrade or reaffirmation of the at-least-$100 million FY27 EBITDA guidance at the half-year. Fifth, order-book momentum, particularly whether the $810 million figure keeps climbing as tenders convert.

Conclusion

Southern Cross Electrical Engineering has engineered a rare thing for a contractor: a story investors can model with some confidence. Revenue slipped in FY26, but the Quality of Earnings improved sharply, margins expanded, and the balance sheet swelled to a record cash pile with no debt. The clearest signal is strategic. A business built on Mining electrification has repositioned itself as a hands-on supplier to the AI infrastructure boom, without abandoning the resources and infrastructure work that still underpins it. The $100 million FY27 profit target and a tripling of data-centre revenue frame the opportunity; execution against a stretched order book, a tight labour market and lofty expectations will decide whether the promise is delivered.