Forensic Analysis: SKS Technologies ASX:SKS

📅 June, 2025
🌐 Website: https://www.sks.com.au

Here is a forensic financial analysis of SKS Technologies (ASX:SKS), based on its FY24 Annual Report, 1H25 Interim Results Presentation, and the May 2025 announcement of a $100 million data centre contract.

📊 Balance Sheet

Risk Indicator	Status	Comments
Goodwill >25% of Assets	✅	No indication of excessive goodwill; balance sheet primarily reflects tangible expansion
Rising Receivables Days	✅	Working capital usage rose slightly due to growth, but receivables remained controlled and cash conversion was solid
Inventory Growth vs Profit	Not Applicable	Service-based business with limited inventory exposure
High Borrowings	✅	No long-term debt; increased use of short-term facilities remains proportionate and manageable
Loans to Related Parties	✅	No such transactions noted
Idle Cash	✅	Cash used effectively for operations and M&A; no signs of hoarding

📈 Income Statement

Risk Indicator	Status	Comments
Revenue vs Profit Divergence	✅	Revenue and EBITDA up YoY; NPAT impacted by project timing and cost adjustments but still positive
Capitalised R&D/Interest	✅	No aggressive capitalisation observed
Extraordinary Items	✅	Interim results reflect operational performance; no major one-offs identified
Tax Rate Drop	✅	No abnormal tax reduction noted in interim figures
Profit vs Cash Flow	✅	Operating cash flow strong despite modest NPAT, indicating earnings quality is sustained
One-Off Gains Boosting Profit	✅	No signs of non-operating gains inflating interim profit

🏛️ Governance, Disclosure & Audit

Risk Indicator	Status	Comments
Auditor Changes	✅	No recent changes; consistent auditor retained through interim period
Audit Qualifications	✅	No qualifications noted in audit/review of interim financials
Exec Departures	✅	Leadership remained stable through H1 FY25
Transparency Issues	✅	Continued clear disclosure of segment and performance data in interim release
Board Weakness	✅	Board composition unchanged and retains relevant expertise
Executive Pay Misalignment	✅	No material changes to pay noted during the interim period
Promotional Language	🟠	Some optimistic tone in outlook commentary, generally substantiated by ongoing growth

🧠 Strategic Risk Factors

Risk Indicator	Status	Comments
Chronic Unprofitability	✅	Company remains profitable at NPAT and EBITDA levels in 1H25 despite some margin compression
Revenue < Capex	✅	Capex remains proportionate to revenue and growth plans
Funding Dependency	✅	No new equity raised; facilities extended prudently to support scaling
Customer Concentration	🟠	Data centres still account for ~60% of secured work, reinforced by new $100M contract; strategic diversification continues
Pre-commercial Product Risk	✅	All offerings are revenue-generating and commercially deployed
Short Cash Runway	✅	Sufficient facilities and cash flow to support near-term needs; new contract to be funded from existing resources
Regulatory/Compliance Exposure	✅	No compliance issues or regulatory red flags raised in interim period
Leadership Turnover During Expansion	✅	Management remained stable through strategic execution

✅ Final Summary

Category	🔴 Red Flags	🟠 Amber Flags
Balance Sheet	0	0
Income Statement	0	0
Governance / Disclosure	0	1
Strategic Risk Factors	0	1

🔴 Total Red Flags: 0
🟠 Total Amber Flags: 2

🟠 Amber & 🔴 Red Flag Overview

🟠 Promotional Language: Some sections of management commentary continue to use upbeat tone; performance mostly supports it.
🟠 Customer Concentration: Data centre segment remains dominant (~60% of work), now further entrenched by $100M Building C contract; diversification into defence, government and health continues.

Forensic Analysis: SKS Technologies ASX:SKS - 12 month daily price chart with 3 EMA and volume indicators

Disclaimer: This information is provided purely for educational purposes. It takes no account of an individual’s personal financial circumstances and hence can in no way constitute financial advice. The above data may be subject to errors or inconsistencies for which the author takes no liability. It is imperative that all investors do their own research or if they need advice, seek it from a qualified financial adviser.