SERVICE STREAM LIMITED — Annual Report 2011

Aug 24, 2011

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Service Stream Limited Level 1, 355 Spencer Street Tel: 61 3 9677 8888 West Melbourne, VIC 3003 Fax: 61 3 9677 8800 PO Box 14570, ABN: 46-072-369-870 Melbourne, VIC 8001 www.servicestream.com.au

25 August 2011

The Manager – Listings Australian Securities Exchange Limited Exchange Centre 20 Bridge Road SYDNEY NSW 2000

Via Electronic Lodgement

Dear Sir,

Re: Service Stream Reports Results for the Full Year Ended 30 June 2011

Attached is a release to the Exchange from Service Stream of its Results Announcement for the full-year ended 30 June 2011.

Yours faithfully

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Jessica Lyons Company Secretary SERVICE STREAM LIMITED

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Service Stream Limited Level 1, 355 Spencer Street West Melbourne, VIC, 3003 PO Box 14570 Tel: 61 3 9677 8888 Melbourne, VIC 8001 Fax: 61 3 9677 8888 www.servicestream.com.au ABN: 46 072 369 870

ASX & Media Release

25 August 2011

Service Stream posts stronger 2011 result

Service Stream Limited (ASX: SSM) today announced its results for the year ended 30 June 2011.

The Company is pleased to announce strong growth in all key financial metrics, an outcome that reflects a focus on core capabilities and better contract execution across each of Service Stream’s business divisions.

The quality of the profit result is underscored by a high conversion of earnings to cash, which has allowed a significant pay down of debt over the year. This positions Service Stream well to take advantage of opportunities such as those presented by the construction of the National Broadband Network without the need to raise capital.

Results Highlights

• Revenue of $633.3 million, up 21.6%

• EBITDA of $34.6 million, up 28.1% on the underlying 2010 result and marginally above previous guidance of $34.0 million

• Operating Cashflow of $24.6 million, up 46.4%, enabling net debt to be reduced by 35.7% to $38.1m

• Strong revenue growth in AMRS with revenue up 134.1% due to new environmental programs

• Revenues from the Telstra A&AS contract up 12.7% on the back of new patches in Western Australia and South Australia

• Increase in EBITDA margin from 5.2% (underlying June 2010) to 5.5%

Financial Results

Year ended 30 June	2011 ($ million)	2010 ($ million)	Change ($ million)	Change %
Revenue	633.3	520.8	112.5	21.6%
Underlying EBITDA	34.6	27.0	7.6	28.1%
Reported EBITDA	34.6	6.4	28.2	440.3%
EBIT	28.1	(0.9)	29.1	n/a
NPAT	16.5	(2.6)	19.0	n/a
Operating Cash flow	24.6	16.8	7.8	46.4%
Net Debt	38.1	59.3	21.2	35.7%
Basic EPS (cents)	5.80	(0.99)	6.79	n/a

Revenue for the period of $633.3 million was up by $112.5 million or 21.6% against the prior corresponding period. This growth was achieved with little impact on working capital, resulting in a better than expected conversion of EBITDA to Operating cashflow before interest and tax (OCFBIT) of 92%.

The lift in Revenue was primarily the result of strong growth in the Specialist Field Services segment, driven by:

• The full year effect of new lines of business within the environmental sector;

• Expanded regions and continued strong maintenance demand which underpinned strong growth in the Telstra Access and Associated Services (A&AS) contract; and

• Continued strong demand for increased mobile telephony capacity.

The Company reported EBITDA of $34.6 million, up $28.2 million on the reported result for the previous corresponding period, and up $7.6 million (28.1%) on the underlying result for that period. This result is marginally above the 2011 market guidance of $34.0 million.

Specialist Field Services

The Specialist Field Services segment continued its strong first half performance and delivered an EBITDA contribution of $39.6 million on operating revenue of $580.7 million. The EBITDA margin of 6.8% was a significant improvement on the 6.1% recorded in the underlying results in 2010.

AMRS provided the greatest contribution to the lift in revenue within the segment, with revenue increasing by $98.0 million or 134.1% to $171.1 million. This increase was due to new environmental programs with Origin Energy and Local Government Infrastructure Services (LGIS). During the year AMRS signed a number of significant contracts:

• A new two-year contract with Origin Energy, Australia’s largest electricity and gas retailer, for the installation of residential solar panel systems to its customers. AMRS completed nearly 10,000 residential solar installations for the year compared to the 500 installations completed in 2010;

• An 18-month extension to its contract with LGIS to continue providing environmental services as part of the Queensland Government’s ClimateSmart Home Services program. Under this extension, worth up to $30 million in contract revenue, AMRS will provide an anticipated 150,000 in-home services including infield energy and water assessments and the provision of energy efficient products. To date AMRS has performed over 50,000 inhome services across Queensland;

• A four-year meter reading contract with ATCO Gas Australia (formerly WA Gas Networks), a two-year extension with Sydney Water for water meter replacement services and a two-year extension with SA Water for the provision of meter reading services worth a total of $14.5 million. Over the course of the 2011 financial year, AMRS completed over 31 million meter reads for electricity, gas and water utilities across Australia; and

• Extensions to contracts for the installation of smart meters and to provide associated services across the Jemena, United Energy and Citipower / Powercor distribution networks as part of the Victorian Government’s Advanced Metering Infrastructure (AMI) roll-out to be completed by June 2013. In FY11, AMRS installed more than 160,000 smart meters across Victoria.

The Communications business delivered revenue of $291.2 million, up $18.9 million or 7.0% on 2010. Increased volumes were achieved under the A&AS contract through contributions from new geographic patches in Western Australia and South Australia and solid demand for installation & maintenance services across most regions. In addition, the Communications business achieved two significant milestones during the year in relation to the National Broadband Network roll out:

• First, it signed a contract with Fujitsu Australia to provide network provisioning and fibre deployment services to new housing estates as part of Fujitsu’s partnership with NBN Co. The contract is for 12 months with an option to extend for a second year and has an estimated value of $35 million p.a. This contract was the first significant NBN field services contract awarded and places Service Stream in a good position to secure further work under future work packages.

• Secondly, ETSA Utilities awarded Service Stream the contract to perform the lead-ins to the first release site that it was constructing for NBN Co at Willunga in South Australia. The work was successfully completed in June this year.

The TCI business (including Infrastructure Services) delivered revenue of $118.5 million, an increase of $17.0 million or 16.8% from last year. The business has seen continued strong demand for mobile telephony infrastructure as carriers continue to improve network capability and capacity in the wake of strong market growth for comparatively data-hungry smart phones. During the year, the business undertook a range of network enhancement programs for Vodafone and Telstra and completed 412 new sites and 888 site upgrades. The General Purpose Group (GPG) business was closed during the year, continuing the Company’s strategy of exiting under-performing infrastructure activities.

The overall EBITDA contribution of the Specialist Field Services segment of $39.6 million was up $12.3 million or 45.1% on last year’s underlying result, reflecting a period of improved performance across the segment.

Customer Care

The Customer Care segment achieved an EBITDA contribution of $2.5 million on revenue of $59.6 million. Revenue was down 25.4% largely due to the loss of the Vodafone contract part way through the previous year following the relocation of its call centre operations. EBITDA fell 54.8% on the underlying result for June 2010 largely as a result of reduced margins in the mobile handset insurance business. Pleasingly, however, during the year the Customer Care segment has reinforced the value of its role in scheduling many of the activities of the Company’s Specialist Field Services programs of work, and has additionally won and commenced a number of key contracts which will bolster the growth prospects of this segment going forward namely:

• Origin Energy – contract to provide the end-to-end customer interface with respect to its solar panel program, including sales, scheduling and post-installation contact. Service Stream’s ability to offer this range of customer care is unique within the residential solar industry and provides Service Stream with a key point of differentiation;

• NBN Co – contract to operate the public contact centre and manage all inbound call enquiries about the NBN rollout, including how the technology operates and what it will mean for homes and businesses right across the country; and

• CGU – provision of call centre services for Telstra’s new mobile “Premium Care” offering, which provides Telstra customers with an insurance program via CGU for their mobile handset.

Capital Management

An excellent underlying performance by the business and intense focus on working capital management has resulted in a strong cash performance for the year, with cash flows from operating activities increasing year on year by 46.4% to $24.6 million. The generation of $21.2 million of free cash flow enabled the Company to reduce net debt by 35.7% to $38.1 million at 30 June 2011, taking its gearing ratio (Net Debt to EBITDA) to a very healthy 1.10x. This positions the Company well to be able to fund growth opportunities, including those relating to the National Broadband Network, without the need to raise capital.

Shareholders’ desire for dividends is well understood and the Company’s objective is to resume the payment of dividends in respect of the year ending 30 June 2012.

Income Tax

At half-year, Service Stream advised that it had lodged a series of Objections with the Australian Tax Office in relation to the tax treatment of acquisitions made in the past, following an amendment to the income tax legislation in 2010. The amount of the additional tax deductions being claimed by Service Stream in respect of prior years was $40.5 million, which, if approved in full, would result in a tax refund to the Company of $12.1 million. The amount of the tax claim relevant to current and future years’ deductions was $0.5 million.

The Australian Tax Office’s processing of objections like Service Stream’s was temporarily suspended following a request by the Federal Assistant Treasurer in March 2011 for the Board of Taxation to review the amendments to the tax consolidation legislation, and as such the Company continues to await the outcome of its Objections.

Service Stream is yet to record any amounts in the consolidated entity’s financial statements in relation to this matter.

For further details contact:

Service Stream Limited Service Stream Limited Graeme Sumner, Managing Director Bob Grant, Chief Financial Officer Tel: (61 3) 9677 8817 Tel: (61 3) 9677 8817

About Service Stream Limited:

Service Stream is a public company listed on the Australian Stock Exchange (Code: SSM) with annualised revenues of A$630 million. The Company is an industrial services enterprise with proven outsourced infrastructure deployment, management and service capabilities across 55 locations throughout Australia. Service Stream’s technical staff of over 4,000 supports large asset owners on the deployment, management and servicing of essential network infrastructure in the telecommunication, electricity, water and gas sectors. For more information please visit the Company’s website at www.servicestream.com.au.