SERVICE STREAM LIMITED — Interim / Quarterly Report 2016

Feb 16, 2016

Service Stream Limited FY16 First Half Results Presentation

Leigh Mackender Managing Director

17 February 2016

Group Highlights

Fiilnanca	$$/EBITDAf1(6%)NPATh8.8(1%)5.7tt5¹ompgroompuwu$Sblhdlidhih-hd37.6ttrongaanceseeansocasconverson,cason-anmzero,dbte()Idiidiidd1.00fllfkdttncreasenermvenocpsuyrane-Pifilhhld5.0ttt²roosnacsrernocaaosareoersu
	pgpp
Oiltperaona	Ciddliffttttonneoeersrongsaeperormanceuvy$Add00fdiifh5ttttarem+oneconracs,nerpnnngregrowwuuuwCidfididlittonnueocusonexecuonanservceeveryOffGiliiiidblidhttttperaonaecencesconnueoereaseacrosseroup
Sittraegc	SOdiilhh4-bMMAtttttttecuremporanannuysyerevenuesrougyearnnconracEddG'sllhkttpaneroppresenceacrossareecoremaresxuSdddiil'vlddd'iiibttttecreaonaaeaesercesacrossesngconracaseuuvxPiiiG'sSiPlttttosveprogressagansroupraegcan

2

Financial Highlights

$217.1m

Revenueup from $213.8m FY15 H2

$15.7m EBITDAup from $14.7m FY15 H2

$8.8m NPATup from $7.7m FY15 H2

Increase in revenue driven by growth across Mobile Communications and Energy & Water segments

• Strong work volumes continued within Fixed Communications associated with ongoing ramp-up of nbn-related activities
• FY16 H1 is the fifth consecutive half-year delivering EBITDA growth
• EBITDA margin of 7.2% driven by Fixed Communications securing contract 'value adds' and successful demobilisation of concluded programs
• Continued NPAT growth due to increased EBITDA and lower financing costs
• Declaration of interim dividend of 1.0 cps (fully-franked)

$37.6m Net Cashup from $14.8m FY15 H2

• Management of working capital produced strong OCFBIT¹ of $30.8m
• Cash-on-hand of $37.6m and zero debt at half-year end
• Board proposing a 5.0 cps return of capital to shareholders²

Operational Highlights

• Continued focus on safety sustaining low LTIFR of 1.0
• Focus on service delivery and client relations underpinning results
• Success in securing new organic growth opportunities across known services and markets:
  • New five-year nbn MIMA construction agreement executed in Sep 15
  • New four-year nbn OMMA operations and maintenance agreement executed in Dec 15
  • New wireless design and construction agreement with Nokia Networks (Optus wireless network) in Feb 16
• Execution against the corporate strategic plan continues to progress well

Key Financial Measures

Kfiilenancameasresyud timdiatlydingcompareomeeprece	iodper
$ million	6 1stFY15 2nFY1halfdhalf		Change
Revenue	217.1	213.8	3.2	2%
EBITDA	15.7	14.7	0.9	6%
EBITDA%	7.2%	6.9%	0.3%
ffteNeit at pr tarox	8.8	7.7	1.1	15%
()Eainghantsrns persrece	2.28	1.99	0.29	15%
OpCaftinghloweras	30.8	31.8	()1.0	()3%
NeCahts	37.6	14.8	22.9	155%
Dividedsdelard pha()ntsnceersrece	1.0	1.0	0.0	0%

1H14 2H14 1H15 2H15 1H16

0.0

The Board has determined that comparison of the financial results to the immediately preceding period (six months ending 30-Jun-15) may be more beneficial to shareholders than a comparison to the prior comparative period (six months ending 31-Dec-14). Comparisons to the prior comparative period are contained in both the Financial Statements and the appendix to the Results Presentation.

Segment Results

$ million	16 1stFYhalf		15 2ndFYhalf		Change
d CFixenicatioommuns	95.0		96.4		()1.3
Mobile Cnicatioommuns	85.0		81.5		3.5
E& Watenergyr	38.2		36.3		1.9
Eliminations &IntRec'dstere	()1.1		()0.4		()0.8
TotalRevenue	217.1		213.8		3.2
Fixed Cnicatioommuns	9.7	10.2%	6.4	6.7%	3.2	3.5%
Mobile Cnicatioommuns	6.3	7.4%	9.1	11.2%	(2.8)	(3.7%)
E& Watenergyr	2.3	6.1%	1.4	3.9%	0.9	2.2%
Unallocd CServicateteorporaes	(2.6)	(1.2%)	(2.2)	(1.0%)	(0.4)	(0.2%)
TotalEBITDA	15.7	7.2%	14.7	6.9%	0.9	0.3%
Deciation &Amisationortepr	(3.0)		(3.3)		0.3
EBIT	12.7	5.9%	11.5	5.4%	1.3	0.5%
Financitsngcos	(0.1)		(0.5)		0.4
Ine tacomx expense	(3.8)		(3.3)
rofit afteNet pr tax	8.8	4.1%	7.7	3.6%	1.1	0.5%

Cashflow Results

Chflltasowresusd timdiatlydingiodcompareomeepreceper
$ million	6 1stFY1fhal	5 2nFY1fdhal	Change
EBITDA	15.7	14.7	0.9
/- chainkingital+ngeworcap	15.0	17.5	()2.5
OCFBIT	30.7	32.3	(1.6)
Neintdfinaingtststsereanncco	0.1	()0.4	0.5
OpingCahflowaters	30.8	31.8	()1.0
Caital editu(f pdsfroles)t opxpenreneroceemsa	(3.)7	(2.7)	(1.0)
Frehflowe cas	271	29.2	(2.1)
Dividedsidnpa	()3.9	()1.9	()1.9
Puhaf sharcseores	()0.4	()1.4	1.1
Incinht creaseneas	22.9	25.8	(2.9)

$m14.810.10.531.8 30.80.05.010.015.020.025.030.035.01H14 2H14 1H15 2H15 1H16Operating Cashflow

Capital Management

• Strong cashflow performance assisted by:
  • successful wind-up of certain programs of work within Fixed Communications
  • continued focus on working capital management
• Interim dividend increased from 0.5 cps (FY15 H1) to 1.0 cps (FY16 H1) fully-franked.
  • tax to be paid in FY16 H2 for franking credits
• Board proposing a 5.0 cps return of capital to shareholders:
  • currently in the process of requesting tax rulings from the ATO to confirm the tax treatment; and
  • also subject to approval by SSM shareholders at an EGM in late May 2016

cps

Business Unit Update

Fixed Communications

• Continued growth in work volumes associated with nbn customer connections contract replacing concluded programs of work
• Secured new nbn MIMA construction agreement for a five-year term, expect future growth as nbnrelated construction activities increase
• Secured new nbn OMMA operations and maintenance agreement for a four-year term, expected to see significant growth as nbn network expands

Mobile Communications

• Wireless work volumes remained steady
• Secured new three-year wireless design and construction agreement with Nokia Networks (Optus Network)
• Focus remains on receipt of consistent wireless work packages to support future pipeline

Energy & Water

• Revenue increase in line with Management's expectations
• New agreements secured with Alinta Energy (solar pv) and Hunter Water (meter reading and replacement)
• Focus now on supporting clients to grow volumes associated with solar pv installation agreements and continuing to target new business development opportunities

Delivering against our Strategic Plan

Continued execution against our Strategic Plan, underpinning sustainable profitability and growing shareholder returns

RECONFIGURE

the operating model by driving continual improvements

UNLOCK

additional value from the core business

• Consistent service delivery across key contracts

• Delivered continued improvements across all HSE performance metrics

• Strengthened Group's balance sheet and cash conversion

• Increased Group EBITDA and EBITDA % margin

• Commenced implementation of a new enterprise-level project management and finance system (IFS) to support business growth

• Improved contractor on-boarding, deployment and management systems

• Increased investment in IT infrastructure and common enterprise level systems to support growth

• Focus on increasing the level and quality of engagement with key Customers

the reach of the business to achieve step growth

EXTEND

• Awarded $500m+ of new contracts, underpinning future growth
• Secured new 'annuity style' revenues, supporting sustainable future growth
• Continued to secure new 'value added' work programs across existing client contracts
• Strong business development pipeline across all three business units

FY16 Outlook

• We expect that the second-half of FY16 will continue to deliver solid operational and financial performance. EBITDA to be in line with the first-half, subject to a continuation of prevailing market conditions:
  • Extent of growth in wireless work volumes within Mobile Communications still difficult for Management to predict month-onmonth
  • Group EBITDA % margins to remain at the upper level of our 'target range of '5-7%'
• FY16 H2 priorities:
  • Mobilisation of new nbn OMMA operations & maintenance agreement in FY16 Q1-Q2
  • Delivery of initial FTTN work packages to nbn under new MIMA construction agreement
  • Secure additional allocation of FTTN work packages from nbn
  • Successful implementation of new enterprise-level project management and financial system (IFS) to support business growth
  • Continue to explore organic diversification opportunities for Mobile Communications and Energy & Water

Key Financial Measures

Key financial measures

compared to prior corresponding period

$ million	6 1sFY1halft	5 1sFY1halft	Change
Revenue	217.1	197.4	19.6	10%
EBITDA	15.7	10.7	5.0	47%
EBITDA%	2%7.	4%5.	1.8%
Nefift pt atetaxror	8.8	4.0	4.8	118%
Eaingha()tsrnspersrecen	2.28	1.05	1.23	118%
OpCafinghlowteras	30.8	0.5	30.3	6,328%
NeCah/(NeDeb)ttts	367.	(11.0)	48.7	(441%)
()Dividedsdelardhatsncepersrecen	1.0	0.5	0.5	100%

Segment Results

Segment results

compared to prior corresponding period

$ million	6 1sFY1halt	f	5 1sFY1hat	lf	Chang	e
FixedCoicaiontmmuns	905.		84.3		10.7
MobileCoicaiontmmuns	85.0		72.5		12.5
En&Wteergary	38.2		40.9		()2.7
Eliminaion&InRe'dttetsresc	()1.1		()0.3		()0.8
TotalRevenue	217.1		197.4		19.6
CoFixedicaiontmmuns	9.7	10.2%	6.9	8.1%	2.8	2.0%
CoMobileicaiontmmuns	6.3	7.4%	4.2	5.8%	2.1	1.6%
En&Wteergyar	2.3	6.1%	2.1	5.2%	0.2	0.9%
UnllocdCoSeiceteteaarporarvs	(2.6)	()1.2%	(2.6)	()1.3%	(0.1)	0.1%
TolEBITDAta	15.7	7.2%	10.7	5.4%	5.0	1.8%
Deiaion&Amisaiontttprecor	(3.0)		(3.0)		0.1
EBIT	12.7	5.9%	7.6	3.9%	5.1	2.0%
Finaingtsnccos	(0.1)		(1.4)		1.3
Inctaxomeexpense	(3.8)		(2.1)
Nefift pt atetarorx	8.8	4.1%	4.0	2.0%	4.8	2.0%

Cashflow Results

$ million	6 1sFY1halft	5 1sFY1halft	Change
EBITDA	15.7	10.7	05.
/-hainkingilta+cngeworcap	15.0	()9.0	24.0
OCFBIT	30.7	1.7	29.0
fNeindinaingttet atsresnnccos	0.1	()1.2	1.3
OpinCahfloteragsw	30.8	0.5	30.3
Cail edi(f pdsfroles)tatut opxpenreneroceemsa	(3.7)	(1.0)	(2.7
Frhfloeecasw	217.	(0.5)	267.
Dividedsidnpa	(3.9)	0.0	(3.9
f sPuhaharcseores	()0.4	()0.1	(0.3
/()InDeinht ccreasecreaseneas	22.9	()0.6	23.5