The Service Stream Limited (ASX: SSM) share price will be on watch on Wednesday following the release of its full year results after the market close.
How did Service Stream perform in FY 2020?
For the 12 months ended 30 June 2020, the essential network services provider delivered a 9% increase in revenue to $929.1 million.
This was driven by a strong performance from its Utilities segment, which recorded a 45.3% or $119.8 million increase in revenue to $384.1 million. This was largely the result of the inclusion of a full year of revenue from Comdain Infrastructure. Revenue from Metering Services and New Energy activities was largely flat. This was due to a suspension across gas and electricity disconnections and delays in contract awards due to COVID-19.
The strong growth in Utilities revenue offset a weak year from the Telecommunications segment. It recorded a 7.7% or $45.2 million decline in revenue to $544.2 million. This was due to the successful conclusion of its NBN D&C operations in addition to clients delaying the start of a number of wireless projects due to the pandemic. This offset revenue associated with fixed-line activation and maintenance services, which increased during the year despite reductions across some O&M activities.
Improved margins led to Service Stream’s earnings before interest, tax, depreciation, and amortisation (EBITDA) from operations growing 15.9% to $108.1 million.
And on the bottom line, the company’s statutory net profit after tax came in at $49.3 million, down 1.1% year on year. This statutory result includes the impact of one-off non-operational costs and charges totalling $11 million.
Dividend.
Service Stream’s operating cash flows before interest and tax (OCFBIT) came in at $86.4 million, with profit to cash conversion exceeding 80% for the year.
This allowed the company to declare a final fully franked dividend of 5 cents per share despite the pandemic. This brought its full year dividend to 9 cents per share, which was flat on the prior corresponding period.
Chairman, Brett Gallagher, commented: “The Board is delighted to report a further year in which Service Stream has delivered another strong result. It’s especially pleasing that the fundamentals of our business have provided a position of strength, enabling dividend payments to be maintained, particularly at a time when many organisations have come under considerable pressure due to COVID-19.”
“The Board remains confident of continued demand for our essential services through these uncertain times, and that the business is uniquely positioned with a strong base of contracted revenues across a stable and dependable client base of utility and telecommunications asset owners and operators,” he added.
Nevertheless, given the current environment, no guidance has been provided for the year ahead. However, management stated that its “earnings are expected to remain resilient” in FY 2021, supported by long term contracts.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Service Stream Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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