SCEE increases exposure to data centres through MDE Group acquisition for $10.5m

After working together for many years, engineering services company Southern Cross Electrical Engineering (SCEE) Group (ASX: SXE) is set to acquire electrical services company MDE Group, adding to its operational arsenal.

The Company will acquire 100% of MDE Group for $10.55 million. Completion is expected to occur by the end of May 2024.

Founded in 2006 and based in Sydney, MDE provides communications, data, and electrical services for construction and fit-out projects across various sectors. This includes commercial developments, data centres, and healthcare and transport infrastructure. MDE and SCEE have worked on significant projects with SCEE’s electrical contractor, Heyday, for several years. 

MDE is currently delivering the communications components of Heyday’s projects at the Western Sydney International Airport.

SCEE Group Managing Director Graeme Dunn said, “I am delighted to announce the acquisition of MDE Group. We have worked closely with MDE for a number of years and have always been impressed by the high quality of their project delivery and their culture which strongly aligns with ours. 

“They are a key partner for us at the Western Sydney International Airport, where we anticipate further growth in coming years, and we welcome Paul and Greg and their staff to our group.” 

The acquisition of this East Coast communications specialist aligns with SCEE Group’s strategy to broaden its geographic diversity by expanding its core competencies and adding complementary capabilities. 

While current forecasts note that MDE is focused on the NSW market in the near term, there is potential for further growth through expansion into other states. The opportunity to support other SCEE Group businesses in other states provides MDE with a platform for this expansion, and projects in the ACT are currently being evaluated.

Dunn added, “Although we have announced this acquisition today and significant organic growth opportunities in recent times, we are still actively exploring a range of further acquisition targets offering increased geographic diversification and new capabilities.”

Communication and data services form an integral part of the projects Heyday delivers across many of the sectors in which it operates. The acquisition of MDE will allow Heyday to offer an integrated approach to this work. Plus, it could retain additional profit within the group and gain synergies, including the current and future works at Western Sydney International Airport. 

The additional capability also positions Heyday to offer clients a combined electrical, data, and communications service and maintenance proposition upon completion of its construction projects.

The data centre sector is growing rapidly due to cloud computing and AI developments. The Company has a pipeline of over $500m of data centre works, which it is tendering or positioning over the next two years. Data centre fit-outs include a significant communications element, which the acquisition of MDE allows SCEE Group to undertake. 

The acquisition will also strengthen MDE’s balance sheet, allowing it to better support its pipeline of organic growth opportunities.

MDE is set to deliver an FY24 revenue of $20 million and a normalised EBIT of about $3 million. In FY25, EBIT is forecast to grow to at least $5 million, supported by the current order book and near-term data centre opportunities, including projects recently secured by SCEE. Given the timing of the acquisition’s settlement, though, it is not expected to have a material impact on FY24 earnings.