Ann: Service Stream HY2021 Results Presentation, page-3

... “Linda Kow, Service Stream Limited - CFO [3]

Thanks, Leigh, and good morning, everyone.

As Leigh has outlined earlier, the FY '21 first half results reflects reduction in NBN telecommunications volumes and continuing COVID effects restricting near-term performance.

Revenue for the half was $409.9 million, which is 17.7% lower than the first half of FY '20 and driven by the lower telco segment revenue.
EBITDA from operations was $40.2 million, 30.8% lower than pcp but consistent with our expectations of a much lower first half due to the reduced telecommunications revenue and compounded by additional operational impacts from COVID.

EBITDA from operations excludes $1.1 million of nonoperational expenditure associated with the assessment of M&A opportunities during the period.
Adjusted NPAT or NPATA for the half was $20.1 million, a 37.8% reduction compared to last year.
In addition to the nonoperating M&A costs we exclude from operating EBITDA, this metric excludes the amortization of historical acquired customer contracts to provide a view of underlying business performance.

Statutory NPAT, inclusive of the nonoperational M&A and amortization expenses, was $16.2 million.
Net cash at December was $10.5 million compared to a net debt position of $4 million last year.

The group had a very strong cash flow result for the half, with EBITDA cash conversion or OCFBIT percentage, as we define it, of 108%.

On dividends, the Board has declared an interim dividend of $0.025 per share, fully franked, which maintains the group's payout ratio in the range of 50% to 60%.
The record date of the interim dividend will be the 26th of March with payment on the 14th of April.

Slide 9 sets out the group's key financial measures, both operational and the statutory reported equivalents.
I refer you to Appendix 2 of the results presentation for a reconciliation of the adjusted profitability measures factored in statutory or IFRS equivalent shown here.

I've already spoken to many of the financial metrics outlined in this page, but we'll touch on the group EBITDA margin, which was 9.8% for the half compared to 11.7% in the last half year.

Again, this is mainly driven by the reduction in telecommunications.

And also noting the margin achieved by that segment during FY '20, there is scale benefits from much higher volume of work.
We have previously indicated there is a 1% to 2% margin variability across telco depending on work mix and volume.

Now moving on to Slide 10, which is the segment result. [See half yearly presentation here]

Across the group, the utility segment share group revenue and earnings has continued to increase as the business shifts from the Comdain integration program to growth.
Utilities now account for 49% of group revenue, up from 40% last year and 34% of group EBITDA, which is up from 25% last year.
Utilities revenue for the half was $199.6 million, just slightly up on last year.
However, within that segment, Comdain revenue increased by 5.1%, but was offset by a reduction in metering and technical services revenue of $7.1 million or 37%, primarily due to COVID restrictions.
Utilities EBITDA was $14.7 million, 5.2% lower than pcp due to margin mix between Comdain and metering revenues and COVID-related impacts.

Telecommunications revenue for the half was $209.9 million, which was $88 million below PCP due to two main factors:
- firstly, OMMA activation and insurance revenues decreased by $42.5 million, following peak NBN activations in FY '20;
- secondly, the prior comparative period includes $40.6 million of revenues from the nbn D&C construction program, which was completed in FY '20, and therefore, not repeated this year.

Telecommunications EBITDA was $28.7 million, a reduction of 36.6%, driven by the reduced revenues, as noted.

The P&L items below EBITDA are relatively straightforward.
Overall D&A, including depreciation of lease assets, has reduced slightly with savings and depreciation expense on owned assets offset by an increase in depreciation on leased assets.
Tax expense for the half was $8.6 million, tracking at an effective tax rate of approximately 30%.

The group is not expecting to derive any significant tax benefit from government incentive for CapEx incurred up to December '20.
Adding all that up, adjusted NPAT was $20.1 million, which is $12.2 million or 37.8% below last year.

Now on to cash flow and capital management, which is on Slide 11.
As touched on earlier, the group derived a strong cash flow result for the half, emphasizing the quality of earnings.
In conjunction with the group's balance sheet position and the recently completed refinancing,
this places the group in an excellent position to fund future growth.

Cash flow EBITDA to OCFBIT conversion was 108%, which is well in excess of the 80% target we have generally guided to.

Working capital as a percentage of LTM sales remained highly efficient at 1.3%.
We do expect this to normalize over the full year with the mobilization of new project works and changing work mix between the segments.
Net interest and financing payments increased by $0.8 million this half, reflective of the refinancing undertaken during the period. CapEx spend was $4.6 million and in line with expectations and primarily relates to the Comdain IFS implementation and customer-related IT solutions.

Free cash flow was $15.6 million, an improvement of $7.9 million from the corresponding half, and the group closed the half year in a net cash position of $10.5 million.

The group's existing debt facility, which was due to expire in September 2021, was recently refinanced and replaced with a new 3-year syndicated debt facility, which has increased to $275 million to provide headroom to fund future growth opportunities.
The new facility incorporated improves commercial terms, covenants and operational flexibility and the ability to increase debt further over time to fund further growth. The refinance was well supported and with an expanded banking group and the offer was oversubscribed.

And finally, the refinancing enabled a net reduction of drawn borrowings of $20 million, which can be seen in the cash flow.

And that's all for me. So I'll hand you back to now -- so I'll now hand you back to Leigh to take you back through the rest of the presentation pack.