Service Stream Limited (ASX: SSM) delivered a stellar result when it reported its full-year earnings after the market's close on Wednesday with EBITDA coming in well above management's expectations.
In May, the utility and telecommunications network services contractor said it expected earnings before interest, tax, depreciation and amortisation (EBITDA) to be around $23.5 million after achieving $10.7 million during the first half.
Reported EBITDA exceeded that target by more than 8%, hitting $25.4 million or a 53% improvement on the 2014 financial year, while the EBITDA margin grew to 6.2%, up from 4.3% in the prior year.
Much of the growth came from Service Stream's "Fixed Communications" segment. EBITDA from the division rose to $13.3 million, up from $2.4 million in FY14, as a result of stronger earnings and greater operating efficiencies. The "Mobile Communications" segment also recorded a strong rise while EBITDA from "Energy & Water" actually declined compared to the prior year.
Meanwhile, the group's top line (revenue) grew 6% to $411.3 million with net profit after tax (NPAT) ballooning out to $11.7 million, up 408% on the $2.3 million achieved last year. This was achieved largely as a result of lower depreciation expenses ($2.7 million less than in FY14) and lower interest expenses.
Pleasingly, the company also ended the period with $14.8 million cash-on-hand after it generated $34 million of operating cash flow before interest and tax for the year a significant improvement on last year's result.
Service Stream said that it is targeting further earnings growth in FY16, although that will rely on its ability to successfully expand existing operations and securing new contract works with key clients. Investors certainly approved, bidding the stock as much as 10.3% higher to a 52-week high of 37.5 cents.
