Network services provider Service Stream (ASX: SSM)—specialising in building and maintaining wireless networks, roads, electrical lines and more—has won two new agreements, poised to generate approximately $340 million in revenue over their respective terms. The news comes as a significant boost for the Company amidst recent financial challenges.
Managing Director, Leigh Mackender, commented, “As a major delivery partner, Service Stream is delighted to secure another substantial program allocation with nbn, further complementing the works announced in April of this year. The business is also proud to further expand its role in supporting AGL with this important infrastructure maintenance agreement, which demonstrates the positive progress of our Utility Division’s strategic repositioning to target additional annuity-style, lower-risk works.”
Service Stream provides end-to-end asset life-cycle services to utility and telecommunications asset owners, operators and regulators across Australia. It builds wireless connections, electricity networks and more for utilities, transport and telco companies.
The N2P Evolution Agreement will play a crucial role in supporting broadband network NBN co’s (nbn) ambitious Fibre Connect program, aimed at deploying additional fiber infrastructure across Australia. The program involves the provision of specialist planning, design, and construction services to support eligible premises with progressive access to Fibre to the Premise (FTTP) technology. This program award is expected to contribute approximately $170 million of revenue over the term, while the existing N2P Evolution Agreement has also been extended by a further two years, until December 2025.
The program is set to be implemented over a 12-18 month period, with targeted regional locations in Victoria, New South Wales, and Queensland benefiting from the works.
Service Stream has also been appointed by AGL, the Aussie electricity generator company, to undertake station maintenance at the Loy Yang Power site in the Latrobe Valley, under a five-year agreement. This agreement is projected to generate approximately $170 million over its term and includes a wide range of maintenance services, comprising boiler and combustions, flue gas and draft, steam cycle, water and turbine generation, as well as electrical maintenance on mine infrastructure.
Mackender added, “These agreements provide positive momentum for the business, reduce unsecured FY24 revenues and provide the opportunity to support investment in Service Stream’s broader growth and optimisation strategy in the year ahead.”
These new contracts come at a vital time for the Company, which saw its losses shoot up by 217.8% in H1 FY23 to $6.3 million, though its revenue increased by 70.2%. Earnings declined by 11.2% to $34.9 million from $39.2 million in H1 FY22, and net profit witnessed a significant decline of 113.8%. Operating cash flow for the same period also experienced a substantial drop, decreasing to $9.7 million from $78.9 million in the previous year, mainly attributed to timing differences in customer receipts and one-off benefits from the release in working capital.
Service Stream’s utilities segment struggled, experiencing an EBITDA decline of $7.6 million, while the telco and transport sectors continued to perform well.
In FY22, the Company had acquired Lendlease Services for $329 million and changed its name to Service Stream. The new acquisition helped amp up revenue, but the Company is yet to turn a profit. The latest agreements are expected to provide much-needed momentum for Service Stream as it enters FY24.
Alinda is a Business Reporter for The Sentiment
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