Service Stream Reports 1.1% Revenue Rise and 11.8% EBITDA Growth in FY26

Financial Performance and Dividend Growth

Service Stream Limited (ASX:SSM) has reported a solid financial year for FY26, with revenue from ordinary activities climbing 1.1% to AUD 2.35 billion. The company’s EBITDA from operations rose 11.8% to AUD 163.4 million, reflecting improved margins and contributions from new contracts, notably its recent entry into the Defence sector.

Despite the EBITDA uplift, statutory net profit after tax (NPAT) declined slightly by 3.8% to AUD 56.9 million. This was primarily due to AUD 21.2 million in pre-tax costs associated with the ERP modernization program, which impacted reported earnings but are excluded from adjusted NPAT. On that basis, adjusted NPAT surged 18.4% to AUD 81.1 million, with adjusted earnings per share increasing 18% to 13.1 cents.

The Board declared a final fully franked dividend of 3.5 cents per share, up from 3.0 cents in the prior year, bringing total dividends for FY26 to 6.5 cents per share, an 18.2% increase. The company continues to demonstrate strong cash flow generation, with a cash conversion rate of 113.9% and a net cash position of AUD 80.7 million at year-end.

Segment Growth Driven by Utilities and Defence

The Utilities segment delivered a 4.2% revenue increase to AUD 1.05 billion, buoyed by organic growth in the water sector and new contract wins, including a $405 million nine-year deal with Yarra Valley Water. EBITDA from operations in Utilities jumped 34% to AUD 60.7 million, with margins expanding 130 basis points to 5.8%, supported by disciplined bidding and operational productivity.

Asset & Facilities Management, a newly combined segment incorporating Transport and Defence & Social Infrastructure, saw revenue nearly double to AUD 367.4 million, including AUD 88 million from the Defence Property and Asset Services (PAS) contract mobilised in February 2026. EBITDA in this segment rose 44.3% to AUD 24.8 million, driven by Defence operations and transport-related minor capital works.

Conversely, Telecommunications revenue declined 9.4% to AUD 1.06 billion, reflecting the completion of several client programs in FY25 and transitions to new contracts, including the nbn field services agreement. EBITDA from operations fell 12.3% to AUD 91 million, with a slight margin contraction to 8.6% as the segment adjusted to contract renewals.

Robust Order Book and Strategic Expansion

Service Stream’s work-in-hand (WIH) remains robust at approximately AUD 8.2 billion, excluding extension options, underpinning strong revenue visibility into FY27 and beyond. The company successfully secured over AUD 3.2 billion in contracted works during the year, retaining 93% of contracts that proceeded to market.

The FY26 results also highlight the company’s strategic diversification, with the Defence contract marking a significant new growth pillar. The Defence PAS contract mobilised on schedule, with 1,600+ resources and 350+ vehicles deployed across 110+ sites, providing a foundation for further expansion into government-related and social infrastructure sectors.

Post-reporting period, Service Stream completed the acquisition of RiE Group, a specialist in high-voltage electrical and instrumentation services. This bolt-on acquisition enhances the company’s industrial maintenance capabilities and expands its footprint in the oil and LNG markets, particularly in Queensland’s Surat Basin and Gladstone regions.

Governance, Risk and Climate Strategy

Service Stream maintains a comprehensive governance framework overseen by a Board with diverse skills in infrastructure, risk management, and sustainability. The company’s risk management processes actively address operational, financial, environmental, and climate-related risks, with a dedicated Health, Safety, Environment & Sustainability Committee providing oversight.

In its inaugural Climate-related Disclosures Report, Service Stream outlines its approach to managing transition and physical climate risks, including scenario analysis under both orderly and disorderly transition pathways. The company reports Scope 1 and 2 greenhouse gas emissions, achieving 100% renewable electricity for its operational facilities through GreenPower procurement.

The Board and management acknowledge the evolving nature of climate-related risks and opportunities and are committed to integrating these considerations into strategic planning, capital allocation, and operational decision-making.

Executive Remuneration Aligned to Performance

Executive remuneration continues to be closely linked to financial, safety, and operational performance. The FY26 short-term incentive (STI) payouts for key executives reflected achievement of EBITDA and cash conversion targets, though safety metrics were not met. Long-term incentive (LTI) vesting is contingent on EPS growth and relative total shareholder return (TSR), with EPS targets met and TSR outcomes pending.

The Managing Director’s fixed remuneration increased by 3.5% for FY27, with the CFO’s rising by 5%, reflecting market benchmarks and role scope. Non-executive director fees were also adjusted by 3.5% for the coming year.

What to Watch Next

Investors will be keen to see how the Defence segment ramps up earnings in FY27 and how the integration of RiE Group contributes to industrial sector growth. The impact of ERP modernization costs on future profitability remains a focus, as does the company’s progress in embedding climate-related performance metrics into executive incentives. Monitoring contract renewals in Telecommunications and ongoing margin improvements in Utilities will also be critical to sustaining growth momentum.