SERVICE STREAM LIMITED — AGM Information 2022

Oct 18, 2022

Service Stream Limited

Managing Director's 2022 AGM Presentation 19 October 2022

Highlights Service Stream profile

OUR VISION

To be Australia's leading essential network services business

OUR EXPERTISE

We design, construct, operate and maintain the essential infrastructure networks that millions of Australians depend on every day

FY22 performance highlights

Successful acquisition and integration of Lendlease Services

EBITDA from Operations of $91.1m, up 13% on pcp

Full-Year EBITDA to OCFBIT conversion of 108%

Improved forward order book of $6bn+ WIH and growing

Effectively managed headwinds arising from COVID disruptions, labour constraints and cost pressures

Robust balance sheet enabling resumption of dividends for 2H22

Financial headlines

Total Revenue1	EBITDA fromOperations2	AdjustedNPAT	Operating Cashflow(OCFBIT)	Final Dividend
$1,564m	$91.1m	$31.4m	$98.7m	1cps
+94.5% vs pcp	+13.7% vs pcp	-19.4% vs pcp	+24.3% vs pcp
●Lendlease Services (LLS)total revenue $737m●Legacy SSM revenue$827m, up 2.8%	●EBITDA margin 5.8%●Underlying SSMoperations rebased●Margin dilution from LLSintegration as expected●Extreme weatherimpacting aspects ofUtilities and Transport	●Includes $2.1mdepreciation fromrevaluation of LLS assets●Statutory NPAT –$36.3mafter non-operationalcosts, amortisationofcustomer contracts andE&W impairment	●Exceptional EBITDA toOCFBIT conversion rateof 108.3%●Net debt of $81.3m●Net leverage 1.52x (postAASB-16)	●Strong post-acquisitionoperating and cashflowresults supportsresumption of dividends(fully franked)●Board committed toongoing payment ofdividends, subject tobusiness performance
Total Revenue1 ($m)	EBITDA fromOperations2($m)	NPAT-A ($m)	OCFBIT conversion(%)	Total Dividends (cps)
1,563.8804.2FY21FY22	91.180.1FY21FY22	38.931.4FY21FY22	10893FY21FY22	2.51.0FY21FY22

4

Notes:

1. Includes proportionate revenue take-up of incorporated Joint Ventures. Refer to the Appendix for a reconciliation of Total Revenue to Statutory Revenue.

2. EBITDA from Operations excludes acquisition transaction and integration costs of $25.5m

Group transformation

A diverse, multi-network essential service provider

• Improved revenue diversification following Lendlease Services acquisition
• Significantly reduced Group concentration risk across any single market / customer
• Growth across annuity style O&M / Minor Capital Works
• Positive WIH growth and improvement in work mix across segments
• Expanded Group's exposure to growing infrastructure services market

Work in hand

Group holds an improved forward order book of $6bn+ and growing

• Order book increased to $6bn+, excluding multi-year extension options*
• pressures evident across the industry Equates to 3.2x FY22 pro forma revenue
• ~$1.5bn secured during FY22

24%

43%

Telco Utilities Transport

WIH by segment

33%

• Approximately 85% of FY23 forecast revenue currently secured
• Improved diversification, reducing dependency on single market segment or customer
• Majority of work mix is O&M / Minor Capital Works (MCW) with only ~1% aligned to fixed price lump sum D&C works

* Multiple agreements do not provide guaranteed work volumes, refer to Group Risks in Annual Report

Managing inflationary pressures

Group is well positioned to manage cost escalation pressures

• ~87% of revenue subject to annual price reviews or priced 'on application' catering to market conditions
• Majority of revenue derived from lower-risk schedule of rates arrangements
• D&C works typically small projects < 12 month duration and priced taking inflationary environment into consideration
• Majority of materials supplied by clients
• Flexible workforce model with ~4,900 employees supplemented by specialist contractor network

Telecommunications

• >85% of work in hand subject to annual price reviews
• Work typically conducted under 'schedule of rates' model, fixed rates passed down where applicable
• Use of employees and subcontractors to provide flexibility

Utilities

• >95% of work in hand is subject to automatic annual adjustment mechanisms or priced per work program
• Rise and fall mechanisms largely reference indices such as CPI and WPI
• 2-3 larger D&C projects (<1% of Group WIP) extend over a 12 month duration

Transport

if we wanted to call out / highlight some specific

• 70% of work in hand prescribe quarterly or annual adjustment mechanisms
• Cost escalation priced across long-term maintenance agreements
• Minor Capital Works typically 3-6 month duration and priced 'on application'

Group Safety

Maintaining our focus on driving continual improvement

• Inclusion of LLS metrics a factor in the decline of Group performance, as expected due to operational dynamics
• Acquisition delivering increased industry knowledge, enhanced HSE systems and strong safety culture
• LTIFR below 1.0x continues to demonstrate industry leading performance
• Implementation of a consolidated Group safety risk management platform (Enablon) underway to streamline data collection and improve analysis
• Continued proactive reviews on managing critical risks aligned to higher-risk work activities
• Increased focus on safety culture / behavioural training and development during FY23

Safety Innovation

Inflatable Tower Safety Net

Service Streams' proprietary inflatable safety net being deployed on a monopole mobile tower

Assisting to reduce the risk of falling objects while working at heights

Sustainability

Driving measured improvements across the Group's Sustainability Pathways

● Finalising Group's inaugural Innovative Reconciliation Action Plan (RAP) ● Increased financial support and engagement to Aboriginal and Torres Strait Islander suppliers and subcontractors ● Adoption of Science Based Targets Initiatives (SBTI) framework, targeting 50-60% reduction in scope 1 & 2 emissions by 2035 ● Increased emission reduction target to reflect >90% renewable electricity usage by 2030 ● Alignment of our Sustainability Reporting and Strategy to UN SDGs ● 33% Female representation across Board of Directors ● Enhanced Employee Value Proposition; industry competitive parental leave, community services and cultural leave. ● Significant increase across Group's graduate intake program ● Continued proactive reviews on managing critical risks across higher-risk work activities ● Commenced implementation of new Group HSE Management System (Enablon) Health & Safety Environment People Governance Community

10

Utilities

Increasing our long-term O&M (services) revenues across water, electricity and industrial client base

Highlights

• Revenue growth of 69% with addition of LLS operations, and increased water infrastructure projects
• Margin impacts associated with a major QLD project:
  • Significant delays caused by multiple and prolonged wet weather events and resourcing challenges
  • Onerous contract provision of $5m recognised. The project is expected to complete during FY23
  • Limited future portfolio exposure with < 1% of WIH associated with fixed price lump sum works
  • Future D&C opportunities heavily weighted towards risk sharing models
• COVID setting continues to impact legacy metering operations across higher margin discretionary works and increased turnover of itinerant workforce
• Successfully re-secured long-term maintenance agreement with South East Water (5 year initial term + 5 year extension option)

Major Clients

• Sydney Water
• South East Water
• Australian Gas Infrastructure Group

24%

20%

Electricity Gas Industrial Water

10%

● SA Water

Revenue Mix

● APA

46%

Telecommunications

Expanded client base and depth of services across long-term agreements

• Revenue growth of 63% driven by inclusion of LLS and strong work volumes
• EBITDA margin reduction reflective of rebased legacy operations, dilutionary impact of lower margin LLS contracts and synergy delivery
• EBITDA margin remains robust following rebased operations
• Performance across rebased legacy operations better than expected, driven by stronger volumes and additional scope of works secured
• nbn N2P network upgrade program approaching expected run-rate production
  • potential program expansion with an additional 1 million homes to be upgraded with fibre
• Expanded telecommunication client base uniquely positions the business to further capitalise on future infrastructure investment

Highlights Major Clients

• nbn
• Optus
• Telstra
• TPG Telecom (incl Vodafone)

Revenue Mix

Transport

Providing long-term operational support and maintenance services to public and private road asset owners

Highlights

• Operations impacted by prolonged wet weather delaying road maintenance and improvement activities across WA and NSW
• Positive progress made on improving or exiting lower margin works
  • In-sourcing of maintenance works by Main Roads WA to reduce FY23 revenue but support improved margins
• Preferred supplier for 25-year maintenance of Gowrie to Kagaru section of the Inland Rail as part of the Regionerate Rail Consortium
• Successfully mobilised 15-year road and traffic infrastructure maintenance agreement with Transport for NSW
• Strong pipeline of works associated with increasing government spend across road operations, maintenance and deployment of ITS (smart) infrastructure

Major Clients

• Main Roads Western Australia
• Transport for New South Wales
• Department for Infrastructure and Transport South Australia
• Vic Roads

Integration Program

Delivering on our commitments and keeping to plan

• Extreme weather conditions and elevated inflationary Successful exit of all TSA modules by 30 June 22
  • pressures evident across the industry ● Finance, People & Culture, shared services, Payroll and IT
  • Over 2,500 employees, 40 applications, 1,400 devices and 36 sites migrated
• Business integration and restructure on-track
  • Corporate and Telecommunications divisions completed
  • Utilities underway with key appointments made
• Synergy realisation continues to track ahead of schedule
  • ~$10m+ delivered by June-22 on a run-rate basis (vs 50% target by Nov-22)
  • Synergies delivered to date primarily relate to group wide support costs and telco/corporate restructuring
  • Future synergies driven through efficiency initiatives, reduced spend (IT, procurement, property consolidation) and Utilities restructure
• Total Integration Program cost estimated at ~$18m (excl. TSA), higher than initial $15m estimate, reflective of the scale of program and constrained labour market

Future growth

Group's expanded addressable market now exceeds $25b in maintenance related expenditure

Growth drivers

• Australian maintenance related expenditure growing to $51bn+ by FY26
• Service Stream's addressable markets expanded to $25bn+ through new capabilities and market expansion
• 5.7% CAGR across Telco, Utilities and Transport infrastructure maintenance (FY22-FY26)
• Increasing occurrence of outsourcing

Technology adoption & digital transition

• $4.5bn in broadband investment and network upgrade underway
• Expansion of nbn fibre connect program to 1.5m additional premises
• $750m investment by nbn in 5G / fixed-wireless
• Increased 5G wireless deployments by major carriers over next 5 years

Ageing infrastructure & population growth

• Population growth and transition to regional areas
• Replacement or upgrade of aging utility infrastructure reaching end of life

Renewable energy transition

• $20bn upgrade of electricity network infrastructure to support transition to renewable energy
• Increased deployment of solar PV, battery and electric vehicle charging infrastructure
• Transition to alternative fuel sources such as hydrogen

Trading update & Group outlook

FY23 trading update

• Group trading performance over Q1 in-line with Management's expectations

• Strong performance across integrated telecommunications operations

• Position taken at the full-year associated with the QLD pipeline project remains appropriate

• Bias to H2, in-line with historical client work programs and business cycle

• Group expects continued revenue and profit growth during FY23, on the back of a full-year's contribution from Lendlease Services, subject to:

  • Successfully navigating extreme adverse weather events
  • Effectively managing continuing labour / resource challenges, supply chain impacts or other major market disruptions
  • Expect continued inflationary pressure despite favourable contract structures and cost containment thus far