Service Stream Limited · ASX:SSM
Service Stream — Investor Presentation (July 2021)
50 slides from Service Stream's investor presentation, Jul 21, 2021
Slide 1: Acquisition of Lendlease Services and Capital Raising
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Acquisition of Lendlease Services and Capital Raising 21 July 2021
Slide 2: Important Notice & Disclaimer
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Important Notice & Disclaimer The following important notice and disclaimer applies to this investor presentation (“Presentation”) and you are therefore advised to read this carefully before reading or making any other use of this Presentation or
Slide 3: Important Notice & Disclaimer (cont’d)
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Important Notice & Disclaimer (cont’d) The pro forma information has not been audited or reviewed by SSM’s auditors. The pro forma financial information provided in this Presentation is for illustrative purposes only and is not represented as bein
Slide 4: Important Notice & Disclaimer (cont’d)
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Important Notice & Disclaimer (cont’d) The New Shares have not been, nor will be, registered under the U.S. Securities Act of 1993 or under the securities laws of any state or other jurisdiction of the United States. Accordingly, the entitlements
Slide 5: Important Notice & Disclaimer (cont’d)
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Important Notice & Disclaimer (cont’d) In connection with the Offer, one or more investors may elect to acquire an economic interest in the New Shares (“Economic Interest”), instead of subscribing for or acquiring the legal or beneficial interest
Slide 6: Contents
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Contents Section Page 1 Executive Summary 7 2 Overview of Lendlease Services 12 3 Strategic Rationale 17 4 Service Stream FY21 Update 27 5 Acquisition Funding 29 6 Details of the Offer 33 7 Key Risks 36 8 International Offer Restrictions 45 9 Summ
Slide 7: 1. Executive Summary
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 1. EXECUTIVE SUMMARY 7
Slide 8: Executive Summary
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Executive Summary ▪ Service Stream has entered into a binding agreement to acquire 100% of Lendlease Services Pty Ltd (Lendlease Services) from Lendlease Group (the Acquisition) for an enterprise value of $310 million1 and an expected equity purch
Slide 9: Executive Summary (cont’d)
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Executive Summary (cont’d) ▪ Acquisition is expected to be ~30% EPS-A accretive on FY22PF basis1,2,3 - Includes expected cost synergies, but excludes one-off integration costs and costs associated with undertaking the Acquisition and Offer ▪ The C
Slide 10: Executive Summary (cont’d)
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Executive Summary (cont’d) ▪ The Acquisition has received pre-approval from the Australian Competition and Consumer Commission (ACCC) and is not subject to any further regulatory approvals Timing and Conditions ▪ Completion is expected to occur ar
Slide 11: Service Stream Going Forward
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Service Stream Going Forward Post-acquisition, Service Stream will reflect a leading Australian essential networks services business operating across the Telco, Utilities and Transport sectors, underpinned by a core earnings base and positioned fo
Slide 12: 2. Overview of Lendlease Services
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 2. OVERVIEW OF LENDLEASE SERVICES 12
Slide 13: Lendlease Services Overview
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Lendlease Services Overview Leading provider of Operation & Maintenance (O&M) and specialist Design & Construction (D&C) services across Telecommunications, Utilities and Transportation sectors VIC Specialised O&M and D&C FY2021 Forecast1 Solid or
Slide 14: Lendlease Services Operating Divisions
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Lendlease Services Operating Divisions Operates across Telecommunications (Telco), Utilities (Utilities) and Transportation Infrastructure (Transport) Telecommunications Utilities Transport Infrastructure Telco (fixed / w ireless) Electricity Wate
Slide 15: Lendlease Services Operating Divisions (cont’d)
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Lendlease Services Operating Divisions (cont’d) Broad service offering across three large and attractive infrastructure sectors Telecommunications Utilities Transport Infrastructure Telco Water Electricity Industrial Roads ◼ Fixed network services
Slide 16: Lendlease Services Financial Overview
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Lendlease Services Financial Overview High quality, profitable business with a track record of financial performance Key Financials (FY21F) 1 Key Highlights ▪ Diversified client base with balanced distribution of revenue across operating units ▪ >
Slide 17: 3. Strategic Rationale
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 2.3. STRATEGIC STRATEGIC RATIONALE RATIONALE 17
Slide 18: Strategic Rationale
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Strategic Rationale Consistent with Service Stream’s strategy, the acquisition of Lendlease Services will diversify revenues, enhance current capabilities and expand the Combined Group’s addressable markets Diversifies Service Stream's operations,
Slide 19: Diversifies Operations
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Diversifies Operations Creates a broader portfolio of businesses by expanding operations across the wider infrastructure services market ▪ Further diversifies earnings across a broader range of sectors and sub-sectors, thereby reducing exposure to
Slide 20: Enhances Combined Group Capabilities
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Enhances Combined Group Capabilities Deepens capabilities across electricity, water & waste -water, industrial and transportation sectors supporting an expansion of the Combined Group’s addressable markets Telecommunications Utilities Transport In
Slide 21: Exposure to Growing Infrastructure Sector
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Exposure to Growing Infrastructure Sector The Acquisition enhances Service Stream’s exposure to Australia’s growing Infrastructure Sector Australian Maintenance Sector Annual Expenditure ($ billion)1 ▪ The Australian maintenance services market is
Slide 22: Complementary Blue-Chip Client Base
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Complementary Blue-Chip Client Base Enhances the Combined Group’s portfolio of blue -chip clients, further reducing reliance on a small number of customers ▪ Lendlease Services portfolio of quality clients is highly complementary to the Service St
Slide 23: Compelling Acquisition Synergies
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Compelling Acquisition Synergies Following a detailed assessment and completion of due diligence, the business expects to realise significant cost synergies Synergy Identification Synergy ▪ The acquisition of Lendlease Services is expected to gene
Slide 24: Synergy Realisation and Business Integration
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Synergy Realisation and Business Integration Following completion of due diligence, the business has identified significant opportunities for cost synergies and business integration ▪ Independent due diligence has been completed by Service Stream’
Slide 25: Business Combination
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Business Combination Service Stream (standalone) Lendlease Services Combined Group Telecommunications Telecommunications Telecommunications Business Units Utilities Utilities Utilities Transport Services Transport Services Revenue FY21F ($m) $804.
Slide 26: Financially Attractive Acquisition
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Financially Attractive Acquisition ▪ Acquisition transforms Service Stream’s scale and revenue Materially enhances Service Stream’s scale and revenue ▪ Combined Group’s revenue for FY21PF expected to be $1.6 billion and EBITDA from Operations expe
Slide 27: 4. Service Stream FY21 Update
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 4. SERVICE STREAM FY21 UPDATE 27
Slide 28: Service Stream FY21 Update
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Service Stream FY21 Update Service Stream confirms that the full year unaudited results is in line with guidance provided to the market on 15 June 2021 1 FY21 Revenue FY21 EBITDA from Operations2 FY21 NPAT-A2 Net Cash $804.4m $80.3m $39.1m $15.6m
Slide 29: 5. Acquisition Funding
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 5. ACQUISITION FUNDING 29
Slide 30: Acquisition Funding and Terms
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Acquisition Funding and Terms Key acquisition terms ▪ Total consideration of $310.0 million excluding Acquisition and Offer transaction costs of ~$12.5 million 1 Acquisition price ▪ Expected equity purchase price of ~$295 million once debt and deb
Slide 31: FY21PF Profit and Loss
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES FY21PF Profit and Loss Service Stream Lendlease Services Acquisition Pro Forma Combined $ million (FY212) (FY212) Adjustments Group2 Revenue $804.4 $792.7 - $1,597.0 EBITDA from Operations1 $80.3 $44.9 $17.0 $142.3 EBITDA from Operations (% of Rev
Slide 32: Pro Forma Balance Sheet as at December 2020
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Pro Forma Balance Sheet as at 31 December 2020 Total Acquisition Service Stream impact including Impact of the Offer and Pro Forma Combined $ million (31 Dec 2020) 1HFY21 Dividend transaction costs debt drawdown Group Assets Cash and cash equivale
Slide 33: 6. Details of the Offer
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 2.6. INTEGRATION DETAILS OF PLAN THE OFFER 33
Slide 34: Overview of the Offer
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Overview of the Offer ▪ $185.0 million fully underwritten1 Equity Raising comprising: - ~$61.9 million institutional placement - ~$123.1 million 1 for 3 accelerated, pro rata non-renounceable entitlement offer, consisting of an: Offer Structure -
Slide 35: Offer Timetable
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Offer Timetable Event Date Trading halt and announcement of the Acquisition and Equity Raising, Placement and Institutional Entitlement Offer opens Wednesday, 21 July 2021 Placement and Institutional Entitlement Offer closes 5.00pm Wednesday, 21 J
Slide 36: 7. Key Risks
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 7. KEY RISKS 36
Slide 37: Key Risks
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Key Risks SSM’s financial position and performance, its dividends and the market price of SSM’s shares may be adversely affected, sometimes materially, by a number of risk factors. Holders of SSM shares (“SSM Shareholders”) should accordingly be a
Slide 38: Key Risks (cont’d)
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Key Risks (cont’d) (V) INTEGRATION AND SYNERGIES The Acquisition is a complementary acquisition that will create a leading multi-network essential provider with diverse operations. There are strong cost synergies with the potential to realise tend
Slide 39: Key Risks (cont’d)
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Key Risks (cont’d) (X) FUNDING AND UNDERWRITING RISK SSM’s intends to fund the Acquisition through a mix of cash, debt financing and partly through the funds raised under the Offer. SSM has entered into an Underwriting Agreement with the Underwrit
Slide 40: Key Risks (cont’d)
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Key Risks (cont’d) (VI) RETENTION OF KEY PERSONNEL AND SOURCING OF CONTRACTORS The talents of a growing, yet relatively small number of key personnel contribute significantly to SSM’s operational effectiveness. SSM has implemented strategies to re
Slide 41: Key Risks (cont’d)
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Key Risks (cont’d) (XIII) OPERATIONAL RISK Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems (including information security systems), or from external events. SSM is exposed to a variet
Slide 42: Key Risks (cont’d)
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Key Risks (cont’d) OFFER AND GENERAL RISKS (I) MARKET PRICE OF ORDINARY SHARES WILL FLUCTUATE Ordinary shares trade on ASX. The market price of ordinary shares on ASX may fluctuate due to various factors, including: ▪ the impact of COVID-19, or ot
Slide 43: Key Risks (cont’d)
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Key Risks (cont’d) ▪ ASIC or any other Government Agency issues, or indicates an intention to issue, proceedings in relation to the Offer or commences an inquiry or investigation into the Offer, SSM or any Offer materials; ▪ there is an applicatio
Slide 44: Key Risks (cont’d)
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Key Risks (cont’d) (VI) TAXATION Any change to the current rate of company income tax or tax law in jurisdictions where SSM operates may impact on shareholder returns. Any changes to the current rates of income tax or tax law applying to sharehold
Slide 45: 8. International Offer Restrictions
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 8. INTERNATIONAL OFFER RESTRICTIONS 45
Slide 46: International Offer Restrictions
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES International Offer Restrictions This document does not constitute an offer of new ordinary shares ("New Shares") of the Company in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person,
Slide 47: 9. Summary of Share Sale Agreement
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 9. SUMMARY OF SHARE SALE AGREEMENT 47 47
Slide 48: Summary of Share Sale Agreement
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Summary of Share Sale Agreement Acquisition ▪ Service Stream, through its wholly-owned subsidiary Service Stream Holdings Pty Ltd, has agreed to acquire 100% of the ordinary share capital in Lendlease Services from Lendlease Services (Holdings) Pt
Slide 49: 10. Appendix
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 10. INTEGRATION 2. APPENDIX PLAN 49
Slide 50: Service Stream Financial Reconciliations
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Service Stream Financial Reconciliations The following table reconciles reported EBITDA to EBITDA from Operations, and Statutory NPAT to NPAT -A 1 FY20 FY21 $ million (audited) (unaudited) Reported EBITDA to EBITDA from Operations Reported EBITDA