While 1H19 EBIT of $11.5m was in line with our expectations, contract delays (a key risk for all contractors) mean previously anticipated second half growth will not eventuate. SRG pulled back FY19 EBIT guidance to $22-27m (prior $30-35m), and our revised number falls toward the bottom end of the new range. However we expect the benefits of the SRG-GCS tie-up, and FY19’s deferred revenue, to become more apparent in FY20, where we have EBIT climbing to $34.0m. Next year’s metrics look appealing and on this basis we maintain a BUY call, although acknowledge sentiment will weigh in the near term.
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