Why the SRG Global (ASX:SRG) share price is rocketing 7% today

Companies that could operate through the COVID shutdowns have tended to be able to reward shareholders.

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The SRG Global Ltd (ASX: SRG) share price is rocketing in morning trade, up 7%.

Below we take a look at the engineering-led mining services and construction group's guidance update and outlook for the 2022 financial year.

What guidance update did SRG report?

SRG Global's share price is soaring after the company reported it expects earnings before interest, taxes, depreciation and amortisation (EBITDA) to come in at the high end of the $45–47 million range previously forecast.

The group's cash position improved from a net debt of $8.4 million in the 2020 financial year to net cash of $12.2 million in FY21.

It reported that due to the nature of the work it carries out, COVID-19 shutdowns have only had a minor impact on its performance and labour. In fact, the company has record work in hand of $1 billion, a 41% increase year-on-year.

Commenting on the revised guidance, David Macgeorge, SRG Global's managing director said:

SRG Global continues to take significant steps forward in the execution of our strategy. We expect our FY21 EBITDA result to be at the top end of previous guidance, underpinned by new contract wins, strong operating cashflows and continued margin improvement through delivering for our blue-chip client base…

I am particularly pleased that we have continued to transition the business towards annuity earnings whilst winning a number of new term contracts in FY21. We have also managed the operational startup and contract execution exceptionally well throughout this period.

The SRG Global share price also appears to be getting a lift from its FY22 expectations. Looking ahead, Macgeorge added that with available funds to drive growth of $88.2 million, plus undrawn equipment facility of $27.7 million, he expects EBITDA in the 2022 financial year to be around 15% higher than in FY21.

SRG Global reports its full year audited results on 24 August.

SRG Global share price snapshot

Over the past 12 months SRG Global shares have gained 106%, compared to a gain of 24% on the All Ordinaries Index (ASX: XAO) over that same time.

Year-to-date, the SRG Global share price has gained 30%.

The group pays a 3% annual dividend yield, fully franked.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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