SOUTHERN CROSS ELECTRICAL ENGINEERING LTD — Interim / Quarterly Report 2011

Feb 20, 2011

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SOUTHERN CROSS ELECTRICAL ENGINEERING LIMITED

ASX Release

21 February 2011

Southern Cross Electrical Engineering Half Year Results

Electrical and instrumentation construction specialist, Southern Cross Electrical Engineering Limited (ASX: SXE) today released its first half financial results. The key financial numbers are:

Results	FY11	FY10	Variance
Revenue	$47.3	$39.2	$8.1
Earnings before interest, tax, depreciation and amortisation ($million)	($5.4)	$4.8	($10.2)
Net profit after tax ($million)	($4.8)	$3.3	($8.1)
Earnings per share	(3.9cps)	2.8cps	(6.7cps)
Dividend per share	0.0cps	2.0cps	(2.0cps)

The result for this half has been impacted by a combination of inefficiencies at Pluto and lower tender margins. SXE has $46m in the forward order book and a range of upcoming small tender awards. Subject to completing the final negotiations at Pluto successfully and some near term contract awards, FY11 expects to record a full year profit.

Pluto

This contract was awarded in November 2009 and SXE commenced on site in January 2010. The expected completion date was originally July 2010 but has extended to March 2011. This project significantly strengthened SXE’s footprint in the oil & gas sector, and is strategically important as the Company positions itself for the growing investment and project opportunities in the Australian LNG market both on the west and east coast.

Across the last six months SXE has experienced a number of access delays which have impacted the Company’s efficiency on this job. Due to these delays SXE has incurred a loss in this half of $2.6 million on the Pluto project. SXE is negotiating with FWW and Woodside to recover these costs.

Given the challenges encountered during this project, the company has upgraded its project control systems for complex construction contracts. This will improve the Company’s ability to monitor performance in order to maximize efficiency. Additionally, SXE has recruited a construction team which has substantial oil & gas sector experience to increase the Company’s depth of expertise in this market.

Competition

As an electrical and instrumentation installation contractor, SXE is typically one of the last contractors to be mobilised on-site. Over the last 12 months SXE has experienced pricing pressure affecting earnings, as the Company has continued its strategy of maintaining capacity in the business ahead of an expected

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A.B.N. 92 009 307 046 EC001681 41 MACEDONIA STREET, NAVAL BASE, WESTERN AUSTRALIA 6165 TELEPHONE: 61 8 9410 1833 FAX No: 61 8 9410 2504 EMAIL: SXE@SXE.com.au

increase in project opportunities. The result is that SXE and its competitors have priced work at lower margins to ensure that scale is achieved across the business.

After removing the impact that Pluto has had on the gross profit for the half, the gross margin for the six months to 31 December was 19%. This is well below SXE’s average of more than 30% over the last five years, and the company expects gross margins to increase as additional project opportunities come online and the macroeconomic environment continues to improve.

Outlook

With stronger earnings being recorded by many mining services companies that have mobilised on-site before SXE, there is substantial evidence of steadily increasing demand in the sector.

SXE is experiencing early signs of this upturn in demand with recent awards at Cadia, the Dominican Republic, Peru and power line work for Rio Tinto. These wins give the Company a forward order book of $46 million. SXE also has a growing base of current live tenders and negotiations with a value of approximately $270m. These tenders include Gorgon, Sino Iron Project port works and QGC LNG upstream works.

In addition to the tenders being prepared, SXE has been in discussions with major mining companies that are seeking contracting models that lock in capacity in advance of the construction timetable. This model would result in SXE achieving a preferred contractor status as opposed to being required to participate in a competitive tender process. This is a strong endorsement of the company’s ongoing operational performance and increasing demand for rapid deployment on critical projects, and will provide increased earnings visibility if secured.

Managing Director, Simon High said “Whilst this has been a difficult six months for Southern Cross, the industry is emerging from the bottom of a cycle caused by the GFC and uncertainties resulting from the mining tax debate. SXE’s order book is strengthening and the project pipeline continues to grow as conditions improve. I expect increased earnings in the second half of FY2011, which will return the Company to profitability in the short term.

Given the financial results and outlook comments released by major mining companies such as Rio Tinto and BHP over the last week, coupled with FMG’s development plans and the Sino Iron Project, the level of investment in the iron ore industry over the coming years is extremely buoyant. In addition to iron ore there are LNG projects such as Gorgon, QGC’s and Santos’ LNG developments, making the outlook for SXE very positive.”

For further information contact:

Mr Simon High Managing Director Southern Cross Electrical Engineering Limited + 61 (8) 9410 1833 www.SXE.com.au

Mr Stephen Fewster Chief Financial Officer Southern Cross Electrical Engineering Limited + 61 (8) 9410 1833 www.SXE.com.au

About Southern Cross Electrical Engineering

SXE was established in 1978 and together with its overseas group of companies, is a dedicated provider of large scale specialised electrical, control and instrumentation installation and testing services for major construction projects in Australia, and throughout the world.

SXE is a quality endorsed company, with AS/NZS ISO 9001 accreditation and has a strong track record of safety and excellence that is recognised by numerous industry awards over the years. For further information on Southern Cross Electrical Engineering visit www.SXE.com.au