SERVICE STREAM LIMITED

Managing Director’s AGM Presentation

Leigh Mackender

21 October 2020

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Company Profile

Service Stream Limited (ASX:SSM) is a S&P/ASX200 company providing integrated end-to-end asset life-cycle services across essential infrastructure networks within the Telecommunications and Utilities sectors

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Network owners and operators, regulators and Long-term, low-risk government organisations agreements Life-cycle infrastructure management

TELECOMMUNICATIONS

UTILITIES

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Property visits per annum

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Strong workforce of employees and skilled contractors

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Offices and warehouse nationally

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Financial Highlights

Revenue EBITDA from Operations $929.1m $108.1m

9.0% v FY19

15.9% v FY19

Record EBITDA from Operations, up 15.9% on $93.3m in FY19
Record Group Revenue, up 9.0% on $852.2m in FY19
Revenue split $544.2m (58.6%) from Telecommunications and $384.1m (41.4%) from Utilities
Before incurring nonoperational costs of $2.5m *

Revenue $m

EBITDA from Operations $m

EBITDA Margin

11.4%

0.9% v FY19

Solid EBITDA margin growth, up 0.9% on 10.5% in FY19
EBITDA margin improvement across Telecommunications

EBITDA Margin

Net Cash

$19.5m

85.1% v FY19

Full-year EBITDA to OCFBIT conversion rate of 81.9%, with 2H20 at 108.0%
Group returns to Net Cash position

Net Cash $m

Dividends

$9.0cps

Maintained with FY19

Final dividend of 5.0 cps, taking full-year to 9.0 cps (fully franked)
Increased payout ratio of 74.2% based on Statutory EPS

Dividends Declared (cps)

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$1,000 852.2 929.1 $120 108.1 12.0% 10.5% 11.4% $20 19.5 10.00 9.00 9.00
$100 93.3
8.00
$750 9.0%
$80
10.5 6.00
$500 $60 6.0% $10
4.00
$40
$250 3.0%
$20 2.00
$0 $0 0.0% $0 0.00
FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20
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Associated with assessment of M&A opportunities and integration of Comdain Infrastructure acquisition

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Safety Performance

Maintaining our focus on the safety of our people, our customers and the community

Continued to deliver industry leading safety performance, demonstrating a strong safety culture throughout the organisation
Superior safety performance continues to be a key differentiator for the business
Performance across key lag-indicators either improved or remained steady at low levels
Management continue to target high-risk work activities, identifying opportunities to drive further improvements

Total Recordable Injury Frequency Rate

Medically Treated Injury Frequency Rate

Lost Time Injury Frequency Rate

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5.00
4.61
3.36
3.06
2.50 2.32
2.07
0.00
FY16 FY17 FY18 FY19 FY20
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4.00
3.78
3.02
2.36
2.00 1.68 1.73
0.00
FY16 FY17 FY18 FY19 FY20
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1.00
0.83
0.71
0.64
0.50
0.34 0.35
0.00
FY16 FY17 FY18 FY19 FY20
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Divisional Highlights

T E L E C O M M U N I C A T I O N S

FINANCIAL

FY20 Revenue down $45.2m on pcp, due to successful conclusion of nbn D&C operations, and minor COVID-19 related impacts during 2H20:
Revenue of $471.0m across fixed line infrastructure works, with increased revenues associated with nbn activation and network maintenance activities, despite COVID-19 reducing some O&M programs
Wireless revenue of $73.1m down $14.4m on pcp, due to slow ramp-up of 5G expenditure by mobile carriers and COVID19 impacts delaying the commencement of some projects
Strong contracted Telecommunications revenue base, with >99% of works delivered through longheld O&M contracts, or low-risk multi-year panel agreements

OPERATIONAL

Secured multi-year (4+2+2) Unified Field Operations (networks) agreement with nbn
Successfully extended OMMA (service activation and assurance) agreement with nbn, from Dec 2020
Maintenance work volumes continue to increase as the nbn connections grow and network footprint expands
Solid pipeline of telecommunication maintenance and project related works associated with new network expansions and existing infrastructure upgrades

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Revenue ($m)
$700
589.4
$600 535.2 544.2
$500 412.4
$400 359.8
$300
$200
$100
$0
FY16 FY17 FY18 FY19 FY20
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EBITDA ($m) / EBITDA %

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$100 18%
83.1 16%
77.1
$80 14%
62.3
12%
$60
46.6 10%
36.2 8%
$40
6%
$20 4%
2%
$0 0%
FY16 FY17 FY18 FY19 FY20
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FY20 Revenue Breakdown
By Contract Type
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71%
29%
Operations & Maintenance 71%
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Design & Construction – Panel Agreement 29% Design & Construction – Bid / Win <1%

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Divisional Highlights

U T I L I T I E S

FINANCIAL

Revenue up $119.8m (+45.3%) on pcp, due to the full-year inclusion of Comdain Infrastructure, with some minor COVID impacts in 2H20:

OPERATIONAL

Successfully renewed / secured in excess of $200m in annual contracted utility revenues in FY20

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Revenue ($m)
$500
384.1
$400
$300 264.3
$200
94.6 106.7
82.0
$100
$0
FY16 FY17 FY18 FY19 FY20
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EBITDA ($m) / EBITDA %
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Comdain Infrastructure revenue of $288.1m up 79.8% on pcp
Metering Services, New Energy & Inspection Services revenue largely flat with pcp, with New Energy down 36% due to fluctuating volumes across commercial solar and battery storage work programs
Successfully expanded Comdain’s operations across western states, with initial works secured in Western Australia to commence in 1H21
D4C Joint Venture with Sydney Water, successfully mobilised and commenced on 1 July 2020

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$35 12%
30.8
$30 10%
22.5
$25
8%
$20
6%
$15
10.5
4%
$10 7.6
5.0
$5 2%
$0 0%
FY16 FY17 FY18 FY19 FY20
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EBITDA Margins of 8.0%, in-line with Management’s expectations, reflecting consolidation of Comdain Infrastructure into existing utility operations
Strong pipeline of gas and water utility projects being bid, associated with urban development and upgrade/ replacement of aging infrastructure

FY20 Revenue Breakdown By Contract Type

Strong contracted utility revenue base, with ~63% of works delivered through predictable, low-risk O&M contracts or multi-year panel agreements

9% 54% 37% Operations & Maintenance 54% Design & Construction – Panel Agreement 9% Design & Construction – Bid / Win 37%

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COVID-19

Positive exposure to essential network infrastructure has limited the impact of COVID-19 to Group earnings

Exposure to essential infrastructure networks has provided a solid revenue base and sustained resilience through the COVID-19 pandemic
The Group’s balance sheet, cashflow and liquidity remains very strong
The Group did not draw upon JobKeeper or other government support packages in FY20
Impact to earnings has been associated with:
Increased costs to support specific safety-related protocols across business operations
Moratorium on electricity and gas disconnections (and subsequent reconnections)
Reduced residential land development activity (new housing estates)
Deferral of some maintenance activities by asset owners to ensure networks remain available to consumers working from home
Delay in some projects due to shortage of client-supplied free-issue materials, travel and access restrictions

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Group Strategy

Continuing to grow and diversify the Group’s addressable market and recurring revenue base

Group Revenue by Division ($m)

DIVERSIFICATION & GROWTH

Diversify Group revenues from strong Telecommunication bias across broader essential infrastructure markets
Focus on servicing and maintaining essential infrastructure assets, across known utility markets and familiar B2B client base
Expand Group’s utility capabilities and service offerings

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264 384
107
95
82
535 589 544
412
360
FY16 FY17 FY18 FY19 FY20
Telecommunications Utilities
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PROGRESS

FY20 Revenue Breakdown By Contract Type

FY20 Revenue Breakdown By Industry Type

Service Stream’s execution continues to position the business positively:
improved diversification of Group Revenue, progressively reducing Telco dependence
maintaining expansive client base of leading network owners and operators, regulators and government organisations
exposure to a broad range of regulated essential infrastructure markets
resilient base of long-term, capital light, low-risk contractual agreements
more than 84% of Group revenues associated with O&M (annuity-style) work programs or low-risk, multi-year panel agreements

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20%
64%
16%
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Operations & Maintenance (Contracted)

Design & Construction – Panel Agreement (Contracted) Design & Construction – Bid / Win

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9%
17%
49% 18%
7%
Telco - Fixed Utility - Water
Telco - Wireless Utility - Electricity
Utility - Gas
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Sustainability

Committed to driving long-term sustainable practices which support and enhance the economic, safety, people and environmental performance of the business and our wider stakeholder groups

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Financial Health & Safety

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People

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Environment

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Governance

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Group Outlook

FY21 OUTLOOK FY21 PRIORITIES
▪ ▪ Service Stream expects continued demand for its Securing organic growth opportunities across services across critical infrastructure networks utility and telecommunications operations throughout the Utilities and Telecommunications industries ▪ Support the mobilisation and progressive growth of work programs throughout the year ahead
▪ Annual earnings are expected to remain resilient, supported by the Group’s long-term contracts, but ▪ Securing additional work programs recently
dependent on: announced by nbn associated with the $4.5bn network upgrade
– Continued work volumes from clients across existing contracts ▪ Continue to assess external market opportunities
– No further client initiated delays to planned supporting further growth and diversification of Group revenue
No further client initiated delays to planned programs of work in response to COVID-19
Resumption of programs of work previously delayed by clients due to COVID-19
Q1 TRADING UPDATE
▪ COVID-19 response and associated border restrictions, continues to have a negative impact across some programs of work
▪ Group results will be more noticeably biased to H2 than in prior years, reflecting:
an easing of stage 4 restrictions across Victoria towards the end of year
the expected resumption of slowed proactive maintenance programs across each division
the slower resumption of utility disconnection & reconnection services from H2
the progressive growth of work programs during the year
new projects being secured and mobilised across each operating division

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SERVICE STREAM LIMITED — AGM Information 2020

65865_rns_2020-10-20_7bfee598-daee-4d6f-9274-359f6955d2d1.pdf