• Heyday, SCEE's subsidiary, unsuccessful in $22m arbitration against CPB Dragados Samsung Joint Venture
• Arbitrator ruled Heyday's claims were time-barred under contract terms
• SCEE to write off $19m contract asset and repay $15m received under security of payment

Southern Cross Electrical Engineering Limited (SCEE) has announced that its subsidiary Heyday has been unsuccessful in its arbitration proceedings claiming against the CPB Dragados Samsung Joint Venture (CDSJV) for additional costs incurred in performing works on the WestConnex M5 motorway tunnel project in Sydney. The commencement of the arbitration was announced to the ASX on 2 December 2024. Heyday's works on the underground tunnels of the project were anticipated for completion in November 2019, but significant changes to the scope and schedule of those works were experienced, resulting in substantial completion not being achieved until mid-2020 and significant extra cost to Heyday. Heyday was compensated for some of those costs during the project and recovered certain sums through security of payment processes in 2021 but, having pursued all other available avenues to resolve this matter, commenced the arbitration claiming $22m from CDSJV comprising additional delay and disruption costs, associated indirect costs, other unpaid variations, and related sums. The arbitrator has determined in his Partial Final Award, issued on 28 November, that Heyday's claims in the arbitration were time-barred and dismissed, and that sums paid to Heyday under the earlier security of payment processes were also time-barred and are to be repaid.

The effect of the award is that Heyday has previously recognised a contract asset of $19m which will now not be recovered and will be written off in SCEE's accounts, and Heyday will repay CDSJV $15m it received under the earlier security of payment processes, which will have both a profit and cash impact. It is expected that CDSJV will be entitled to interest on the $15m repayment, and to its costs, which amounts will not be known until the arbitrator issues the Final Award on 22 December 2025, but are estimated to total circa $10m.

The impact on FY26 guidance is that previous EBITDA guidance of $65m-$68m has been updated to $21m-$24m. However, the Board notes that this matter is one-off in nature, concerns events that took place approximately six years ago, and the ongoing business is unaffected with underlying FY26 EBITDA, excluding the impact of the arbitration, expected to remain in line with the original guidance. The Board anticipates in FY27 the Group will return to its normalised profitability with the buoyant data centre and renewables sectors offering considerable potential for further growth.