Service Stream Revises Earnings Guidance
During these uncertain times, it is comforting to know that Australia can rely on a reliable company such as Service Stream to keep peole connected and safe as many Australians have begun working from home. They have done this by providing maintenance and installation of mobile telecommunications, fixed communications, electrical networks, gas networks, water networks and new energy services. Many sectors and industries rely upon these essential services to function efficiently.
However, it must be understood that telecommunication networks and utility networks in FY20 have been impacted, and as such Service Stream has issued a revised earnings guidance. The group’s balance sheet, cashflow and liquidity has been reported to remain strong, which is now the backbone of the company’s confidence going into the future.
Coronavirus has impacted Service Stream by interrupting field-based projects. Safety was the primary concern and cost, with new protocols having to be implemented so as to continue work. A proportion of the company’s clients have also paused field operation projects with concerns for health and safety, however, it is unconfirmed which these are. This has been further compounded through Service Stream not having the support of the JobKeeper stimulus package to help float operational expenses.
Metering services have been negatively affected through the inability to control connection services, especially in mobile network and maintenance markets. Relatively speaking, this saw a smaller investment into the future 5G telecommunication network by mobile network operators. As a result, wireless communication revenue fell from a forecasted AUD80 million to AUD65 million according to Ord Minnett.
Looking at the position of Service Stream, the company still expects $108 million in operational earnings before interest, taxes, depreciation, and amortization (EBITDA) for FY20 while FY21 has seen expectations of $105 million. However, the company projects that it will still be able to deliver on its dividend promise, despite other competitors not committing to similar actions. Hopefully, this will show the market the strength of the company to reverse the stock price drop from February 1 to June 1 from AU2.76 to AU2.03.
By Caroline Wong
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