Service Stream Makes Key Lendlease Acquisition

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Service Stream Makes Key Lendlease Acquisition

  • Lendlease Services acquisition completion scheduled for November 2021
  • Full year dividend to resume in FY22
  • FY22 operations in line with expectations, NSW and Victoria COVID outbreak not of significant impact

Service Stream Limited (‘Service Stream‘ or the ‘Group‘) provides essential network services to telecommunications, gas, electricity and water utilities nationwide. Services provided include operations, maintenance, design and construction services. The Group employs more than 2000 employees and 3000 contractors. On 21 July the Group announced the acquisition of Lendlease Services, a national services provider across the telecommunications, utilities and transportation sectors. The acquisition will add 220 employees and a pool of skilled contractors to the Group.

Acquisition of Lendlease Services

The purchase of Lendlease Services in July for $295 million was funded by a $185 million equity raising at 90 cents a share. The acquisition is highly complementary to Service Stream’s existing services offering and provides compelling synergy and business combination benefits. Cost synergies are estimated at $17 million per annum, and are estimated to be 100 percent realised within 24 months of completion of the acquisition.  It is expected to deliver earnings per share accretion of 30 percent on a FY22 pro-forma basis, before amortisation of acquisition and integration costs. The acquisition is expected to complete around November 2021.

Combined Group revenue on a FY21 pro-forma basis is estimated to double in FY22 to $1.6 billion.  FY21 revenue was $804 million. Expected pro-forma net debt at completion is estimated at 1.3x EBITDA. Debt is estimated to fall to less than 1.0x EBITDA, within 24 months of completion, given strong forecasted cash flow and synergy benefits.

AGM commentary including trading update and Group outlook  

 The board consider the acquisition of Lendlease Services to be a transformational acquisition and a strong platform for future growth. The acquisition creates an exposure to a broader range of infrastructure services, such as powerline operation and maintenance activities, on behalf of blue-chip clients.

Reference was made to the non-payment of a final FY21 dividend, to assist with funding the Lendlease Services acquisition. Dividends are expected to resume in FY22.

 The recent COVID-19 outbreaks in NSW and Victoria have interrupted some operations, but not significantly.

The board have reaffirmed that trading in FY22 has been in line with expectations. Post-acquisition FY22 pro-forma EBITDA from Operations is estimated at $120-$125 million, compared to $80.3 million in FY21. This assumes a full year run rate of $17 million in estimated synergies is achieved and is as if the transaction was completed on July 1, 2021. This equates to an approximate 30 percent earnings per share accretion (before acquisition and integration costs) in FY22.

Louis Mosmann

Louis Mosmann is a Private Wealth Client and Research Assistant at KOSEC- Kodari Securities. Louis covers macroeconomic events, global markets and ASX300 company announcements, allowing clients to make more informed investment decisions. Email Louis at

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