Service Stream Shares Up on Record Profit Announcement  

Services provider Service Stream Ltd [ASX:SSM] shares were up 25% at the time of writing to $1.43 after opening at $1.15. The boost for Service Stream’s shares comes after the firm announced a record half-year profit today.

Service Stream Chairman, Brett Gallagher said that the result was ‘another very strong performance from Service Stream with the Group producing a record half-year profit and the ninth consecutive half-year increase in each of EBITDA and NPAT’.

Service Stream’s overall EBITDA rose to $32.1 million on revenue of $294.1 million according to financial results released today.

The firm also reported an operating cash flow of $42.6 million with Net Cash of $63.6 million at half-year-end. Service Stream will pay out an interim dividend (fully-franked) of 3.0 cents per share on 29 March 2018.

What else for Service Stream?

The Group’s key operating segments all showed improved performance figures for the half-year.

Fixed Communications contributed EBITDA of $18.9 million on revenue of $145.7 million. This revenue was up $44.7 million on the prior corresponding period, on the back of increased work for the NBN under the OMMA contract.

Network Construction generated EBITDA of $11.2 million on revenue of $99.2 million. This revenue was up again on the prior corresponding period by $5.6 million.

Increases in design and construction for the MIMA and DCMA NBN contracts offset losses from the curtailed NBN New Developments contract and decreased Wireless revenue.

Energy & Water produced EBITDA of $5 million on revenue of $53.5 million due to the acquisition of TechSafe.

Service Stream’s board also approved an on-market share buy-back of up to 27.4 million shares (equivalent to 7.5% of the firm’s issued capital). Commenting on the scheme, Chairman, Brett Gallagher said:

The Board is of the view that the Company’s share price trading range since November 2017 materially under-values Service Stream. In this regard, an on-market share buy-back is considered to be the most appropriate means of investing the Group’s surplus cash to create value for shareholders.’

Managing Director, Leigh Mackender predicted that Service Stream’s strong performance would continue, saying: ‘We expect that the second-half of FY18 will generate profit broadly in-line with the first-half, and we are targeting full-year Group EBITDA of approximately $64 million.


Ryan Dinse,
Editor, Markets & Money  

PS: Service Stream is not the only local company on the rise. Jason Stevenson predicts that Australian mining stocks will be on the way up in 2018. Read Jason’s free report on ‘The Top 10 Mining Stocks in Australia for 2018’, to find out.

Ryan Dinse is an analyst at Markets and Money. He has two decades of experience in financial planning, equity analysis and credit markets. Ryan combines fundamental, technical and economic analysis to identify and invest in good ideas at the appropriate stage of the economic cycle. He has a strong interest in technology, economic history and disruptive business models. His focus at the moment is as lead analyst on two of our most recent and innovative investor services, Crash Market Investor and Sam Volkering’s Secret Crypto Network. He will write about the exciting opportunities for investors to benefit from significant changes in world markets. He is a member of Fintech Australia, a former member of the Digital Currency Council, and is a fully accredited financial adviser.

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