SKS Technologies Group Limited (SKS Technologies, the Group, ASX: SKS) provides advanced audio-visual and IT convergence, electrical and communication networking solutions and integration synergies. The Group services the commercial, retail, health, defence and education sectors, and more recently has established a dominant market position in servicing data centres.

Ambitious FY25 $260 M revenue and $17 M profit target on track

The SKS Board is confident that SKS Technologies can achieve revenue of approximately $260 million with a pre-tax profit of $17 million in FY25.

This seemingly ambitious forecast is consistent with the remarkable growth trajectory from November 2023 when, based on the Group’s revenue performance to that date, management believed that the Group could achieve sales revenue of approximately $100 million in FY24, which was materially above the $83.3 million of revenue recorded in FY23. Actual sales revenue in FY24 was $136.3 million. The FY24 year-end marked the Group’s fourth consecutive annual revenue increase with the average annual compound growth rate sitting at just over 50 percent. In a credit to management, it should be noted that other than a small acquisition in FY21, the Group’s growth throughout this period is entirely organic.

SKS management displayed considerable initiative in proving the Group’s electrical and communication networking expertise to gain an early mover advantage as a highly credible player in the rapidly expanding Australian data centre market. This initiative resulted in some very valuable contract awards, at a stage when the market was still in its early days.

Although the data centre revenue contribution was significant, the traditional business of converged audio-visual / IT, electrical, and communications networking also continued to grow strongly, increasing by 26.5 percent in FY24.

Sixty-three percent of work on hand skewed toward data centres

Data centre revenue is set make a significant contribution to SKS Technologies’ FY25 earnings and revenue growth, according to statements attributed to the CEO at the November AGM.

The CEO’s address at the November AGM noted that an analysis of the Group’s order book shows progress in winning work in strategic sectors such as mining and resources, retail, education, defence, banking and finance, and healthcare. Although these specific identified sectors have been the focus that began in FY22, SKS has since built two substantial specialist data centre teams that have won an increasing amount of data centre work, with contracts won for amounts ranging between $20 million and $90 million. The lumpy amounts mean that since embarking on plans to secure a portion of the data centre market, SKS has won more than $200 million of projects, some of which are now successfully completed.

The effect of these substantial dollar-value contracts has skewed the November 2024 $185 million work on hand profile towards data centres, which constituted 63 percent of work on hand with the remaining 37 percent spread across the business’s traditional market sectors. The forecast values of the Australian data centre market continue to be revised upwards, with the latest one from a credible source recently rising to $40 billion over the next four years.

The big picture

While the immediate outlook for the Australian economy is one of cautious optimism, renewable energy and technology are converging to drive the demand for energy-efficient electrical systems, smart grids and sustainable energy solutions, bringing new opportunities in connecting to those new technologies and maintaining their uninterrupted operation. This growing demand for more advanced communication networks and audio-visual technologies to support remote work practices, smart buildings and more efficient infrastructure, is providing ongoing avenues for longer-term growth for SKS.

SKS Technologies is already a national leader in electrical converged technology solutions for a blue-chip client base. It offers a set of discrete systems and services in the audio-visual, electrical and data communications space that can be packaged up into a fully integrated solution and delivered to customers with a national footprint.

This market leadership, combined with a clean balance sheet with no long-term debt and a solid level of working capital, supported by increased bank facilities, and backed by the ability to generate strong cash flows from internal sources, leaves SKS Technologies primed for long-term, profitable growth.

The Group’s $260 million revenue target for FY25, a deliberate emphasis on organic growth, and not only with a focus on the data centre market, but on work across the full spectrum of commerce in Australia, shareholders can anticipate consistent earnings growth over the medium term.