The Service Stream Limited (ASX: SSM) share price is tanking after the company released its full-year FY22 preliminary results today.
Service Stream shares opened the session on Tuesday at 94 cents each. They then dipped as low as 82 cents in early trading — a 19.6% decline on the closing price of $1.02 yesterday.
The Service Stream share price has recovered a little to 85.2 cents at the time of writing.
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Service Stream share price dives on 20% profit decline
The key metrics are as follows:
- Total group revenue of $1,563.8 million, up 94.5% on the prior corresponding period (pcp)
- Revenue from ordinary activities of $1,516.5 million, up 88.6% pcp
- Loss from ordinary activities of (36,324,000), down 224.1% pcp
- Adjusted net profit after tax (NPAT) of $31.4 million, down 19.4% pcp
- Earnings before interest, tax, depreciation, and amortisation (EBITDA) from operations of $91.1 million, up 13.7% pcp
- Generated $98.7 million of operating cash flow before interest and tax (OCFBIT), up 24% pcp
- EBITDA to OCFBIT cash conversion of 108%
- Net debt of $81.3 million and closing net leverage of 1.52 times as at 30 June
- Final dividend of 1 cent per share declared (fully franked).
The essential services provider described FY22 as "challenging" but also "transformational" due to its acquisition and "successful" integration of Lendlease Services.
What else happened in FY22?
Service Stream announced the Lendlease Services acquisition on 21 July 2021 along with a $185 million capital raising to fund the purchase. Service Stream completed the deal on 1 November 2021.
The company said:
The subsequent integration program, including the realisation of $17m in targeted synergies, continues to be delivered over the 18-24 month period with the business making solid progress during the year. Profit contribution across the acquired business was in line with diligence expectations…
The company said its "balance sheet remains in a strong position, with significant headroom to support future growth".
Service Stream said "strong post acquisition cashflows" meant the company could resume paying dividends. The company ceased paying dividends in August 2021 to help fund the Lendlease acquisition. It did not pay a final dividend for FY21 nor an interim dividend for FY22.
The ex-dividend date is 19 September and shareholders will receive their payments on 5 October.
What did management say?
Service Stream Chair Brett Gallagher said:
The Board have been delighted by the way in which Management has navigated the business through the headwinds of the FY22 financial year and managed the acquisition of Lendlease Services. It is pleasing that the fundamentals of our business remain robust and performance over this transformational year enables the resumption of dividends.
The Board remains confident that our specialist capabilities and service offerings uniquely position the business across a stable and dependable client base of utility, telecommunications and road asset owners and operators.
What's next?
Today's results are preliminary and unaudited. The company explained: "Due to unforeseen and significant COVID-19-related disruptions to a significant number of personnel, certain audit processes and procedures are still to be finalised before the Company releases its audited FY22 full-year accounts to the ASX. Service Stream expects audited accounts to be released on Friday 26 August 2022."
Looking ahead to FY23, managing director Leigh Mackender said:
The Group is confident of delivering further revenue and profit growth during FY23 on the back of a full-year's contribution from Lendlease Services, subject to successfully navigating any extreme adverse weather events and effectively managing continuing labour / resource challenges, supply chain impacts or other major market disruptions.
In support of our strategy for continued growth and diversification, the priorities for the coming year include finalising the Lendlease Services integration, realising remaining business synergies and securing organic growth opportunities across each of the Group's core markets.
Service Stream share price snapshot
The Service Stream share price is up more than 6% year to date and down 4% over the past 12 months.
