Ann: Service Stream awarded four-year O&M agreement with nbn, page-8

My contact might not be away with the fairies.

Looking at the FY14 and FY15 financials it is interesting to note that:
• All of the revenue (and EBITDA) improvement in FY15 came from the Fixed Communications (FC) division. FC division in FY15 accounted for 44% revenue (25% in FY14) and 52% of EBITDA (14$ in FY14)
• Management attributes the uplift in Fixed Communications division revenue to field service delivery and associated work largely to the NBN
• Also between FY14 and FY15:
• Employee salaries declined 16% to $105.3m
• Subcontractor costs increased 78% to $164m.

Also reviewing page 9 of the FY15 annual report under the risks section regarding sourcing of subcontractors notes the need to be able to secure a pool of sub-contractors around Australia to deliver on commitments to the NBN as work gains momentum in FY16. Management said in FY15 no customer contributed more than 10% of revenue however these risk comments indicate that NBN revenue concentration will increase in FY16 with projects largely to be delivered by subcontractors.

It's worthwhile keeping in mind that the subcontractors SSM is using can also have contracts directly with the NBN too and would be looking for opportunities to move up the value chain (particularly where they are already doing work for other large telcos) and have opportunities to offer better value propositions by actually having permanent staff on the ground doing work compared to SSM managing works through project managers.

It helps to keep an open mind to potential risks when investing I find (not sure about you).