-
Revenues up 31% to $338 million in the quarter
-
Gross Margins up 84% to $32.3 million in the quarter
-
Net income of $9.7 million in the quarter and $6.8 million in the half set new records
-
2008 EPS target achieved 18 months early on trailing 12-month basis
-
Backlog up 44% in the quarter to record $1.2 billion
-
Outlook remains strong
Toronto, Ontario – August 7, 2007: Aecon Group Inc. (TSX: ARE) today reported improved operating results for the second quarter of 2007 as revenues, margins, operating profit and net income all improved over those reported a year earlier. These improved results continue a trend that has emerged over the past several quarters of significant year-over-year earnings growth, reflecting the strong market conditions in Aecon's key sectors and reinforcing the success of the strategic path Aecon adopted in 2005.
Revenue, Operating Results and Net Income
|
Revenue, Operating Results and Net Income
|
| |
|
Three Months Ended June 30
|
Six Months Ended
June 30
|
|
$ millions
|
|
2007
|
|
2006
|
|
|
|
2007
|
|
2006
|
| |
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
338
|
$
|
259
|
|
|
$
|
580
|
$
|
459
|
|
Gross margin
|
|
32.3
|
|
17.6
|
|
|
|
51.2
|
|
24.0
|
|
Operating profit (loss)
|
|
14.1
|
|
1.4
|
|
|
|
14.3
|
|
(6.6)
|
|
Interest expense
|
|
3.1
|
|
2.4
|
|
|
|
5.4
|
|
5.1
|
|
Income taxes
|
|
1.2
|
|
0.1
|
|
|
|
1.8
|
|
0.2
|
|
Net income (loss) for the period
|
|
9.7
|
|
(1.0)
|
|
|
|
6.8
|
|
(11.9)
|
|
Backlog - June 30
|
$
|
1,208
|
$
|
812
|
|
|
|
|
|
|
Revenues in the second quarter of 2007 totalled $338 million, an increase of more than 30% over the same period last year, as increases in the Infrastructure, Industrial and Concessions segments offset a small decline in the Buildings segment. Revenues in the first half of the year increased 26% to $580 million.
Gross margins (revenues less direct costs and expenses) increased by $14.7 million in the quarter, bringing gross margins as a percentage of revenues to 9.6%, up from 6.8% in the second quarter last year. Gross margins over the first six months were 8.8% of revenues, up from 5.2% in 2006.
Operating profit (income from operations before interest expense, income taxes and non-controlling interests) grew to $14.1 million in the quarter, up from $1.4 million in the second quarter of 2006, as improvements in the Infrastructure, Industrial and Concessions segments offset a decline in the Buildings segment. First half operating profit of $14.3 million was a $20.9 million improvement over 2006.
Net income reached a second quarter record of $9.7 million ($0.26 per share basic / $0.24 diluted) from a loss of $1.0 million ($0.03 loss per share basic and diluted) in 2006, bringing net income for the first six months to a highest-ever $6.8 million ($0.18 per share basic and diluted). Net income for the 12 months ended June 30, 2007 was a record $30.2 million on revenue of $1.23 billion.
Marketing, general and administrative expenses amounted to $15.5 million in the quarter and $30.5 million in the first half, representing increases of $1.7 million and $3.6 million compared to the same periods last year. The increases are due largely to higher volumes, the expansion of operations in Western Canada, higher information technology costs and higher performance-related incentive costs. Notably, while the aggregate dollar amount increased, MG&A as a percentage of revenues fell to 5.3% in the first half from 5.8% last year.
Depreciation and amortization expense of $6.3 million is $4.4 million higher than last year as a result of the amortization of concession rights related to the existing Quito airport.
Outlook
“The net income reported this quarter brings Aecon's earnings over the past twelve months to a level in excess of the 75 cents per share target we established for fiscal 2008, ” said John M. Beck, Chairman and CEO, Aecon Group Inc. “Looking ahead, although Aecon may be required to begin tax effecting earnings once again in 2008, I continue to believe that the growing backlog and the ongoing strength of our core markets, especially in the energy and transportation infrastructure sectors, bode well for continued pre-tax earnings growth beyond 2007. We will now return to the practice of offering directional guidance on expected market and performance trends rather than specific EPS guidance."
“The first half of 2007 was characterized by strong revenues, continued margin improvement and significant backlog growth,” said Scott Balfour, President and CFO, Aecon Group Inc. “These results reinforce our commitment to follow the strategic path we adopted in late 2005.”
Backlog and New Business Awards
Backlog at June 30, 2007 reached a record $1.208 billion. Increases in all segments drove backlog $371 million or 44% higher than at the beginning of the quarter, and $396 million or 49% higher than at the same time last year. Not included in backlog, but important to Aecon's activities, are the revenues from Aecon's growing alliances and supplier-of-choice arrangements that do not specify the amount of work to be carried out at any one time.
Record new contract awards of $710 million in the quarter brought total new contract awards in the first half of the year to $1.002 billion, a 44% increase over the $694 million reported in the first half of 2006.
Second Quarter Business Highlights
· Aecon's second quarter results established a number of new second quarter and first half high water marks, including record revenues, record earnings, record contract awards and record backlog.
· On June 26, Aecon announced that financial close had been reached on an 18 km extension of the Cross Israel Highway. As part of the deal, Aecon was repaid approximately US$10 million of the subordinated debt it invested in the project in 1999, thereby reducing its carried investment from approximately $43 million to approximately $32 million (and retaining its 25% interest in the concession). Aecon also announced that it had sold its right to participate in the joint venture building the extension for approximately US$3.5 million.
· Average weekday traffic on the Cross Israel Highway in June 2007 reached 90,000, an increase of 13.6% since June of last year.
· A total of 2 million passengers passed through the existing Quito International Airport in the first half of 2007, a higher than forecast 13.7% increase from the first half of last year.
Segmented Results
Aecon reports its results in four operating segments: Infrastructure, Buildings, Industrial and Concessions.
The Infrastructure segment includes all aspects of civil construction from highways, bridges and tunnels to airports, marine facilities, transit and power projects as well as utilities construction.
|
Financial Highlights
($ millions)
|
Three Months
Ended June 30
|
|
Six Months
Ended June 30
|
| |
|
2007
|
|
2006
|
|
|
|
|
2007
|
|
2006
|
|
|
|
Revenues
|
$
|
162
|
$
|
108
|
|
|
|
$
|
257
|
$
|
164
|
|
|
|
Segment operating profit (loss)
|
|
8.7
|
|
2.0
|
|
|
|
|
6.6
|
|
(2.5)
|
|
|
|
Return on revenue
|
|
5.4%
|
|
1.9%
|
|
|
|
|
2.6%
|
|
(1.5)%
|
|
|
|
Backlog - June 30
|
$
|
531
|
$
|
451
|
|
|
|
|
|
|
|
|
|
Revenues in the Infrastructure segment increased to $162 million in the quarter from $108 million in the same period of 2006. The $53 million increase can be attributed largely to power generation, roadbuilding and tunnelling projects in Ontario, growing volumes of civil work in Alberta, and Aecon's acquisition of The Karson Group in the first quarter of this year.
The segment's operating profit of $8.7 million represents a $6.6 million improvement over the same quarter of 2006 and stems from the general pattern of rising revenues and improved margins in the segment.
Backlog at the end of the quarter was $531 million, an $80 million increase from the same time last year. New contract awards totaling $373 million were received in the first half of the year, a decline of $125 million compared to the first half of 2006. The year-over-year decline was due to the addition in the second quarter of 2006 of $133 million relating to construction of the new Quito Airport.
The Buildings segment includes all aspects of Aecon's commercial, institutional and multi-unit residential building construction and renovation activities.
|
Financial Highlights
($ millions)
|
Three Months
Ended June 30
|
|
Six Months
Ended June 30
|
| |
|
2007
|
|
2006
|
|
|
|
|
2007
|
|
2006
|
|
|
|
Revenues
|
$
|
79
|
$
|
80
|
|
|
|
$
|
142
|
$
|
168
|
|
|
|
Segment operating profit (loss)
|
|
(1.0)
|
|
1.2
|
|
|
|
|
(1.2)
|
|
0.7
|
|
|
|
Return on revenue
|
|
(1.3%)
|
|
1.5%
|
|
|
|
|
(0.9)%
|
|
0.4%
|
|
|
|
Backlog - June 30
|
$
|
349
|
$
|
178
|
|
|
|
|
|
|
|
|
|
Second quarter revenues in the Buildings segment were $79 million, $1 million lower than in the same quarter last year. The small decline was largely the result of lower revenues in the Greater Toronto Area (GTA), largely offset by revenue growth in other regions.
Segment operating loss of $1.0 million in the quarter compares to an operating profit of $1.2 million in the second quarter of 2006. The decline is largely due to the decline in GTA volumes as well as $0.8 million of costs associated with a restructuring undertaken to improve Aecon's competitive positioning in the GTA Buildings market.
Notably, backlog of $349 million is $172 million higher than at the same time last year, due largely to $259 million in new project awards this quarter. This strengthening of segment backlog, currently higher than at any time since early 2005, is a positive trend that is expected to continue in coming quarters.
Industrial operations include all of Aecon's industrial manufacturing and construction activities including industrial construction, fabrication of specialty pipe, assembly of custom module units and the design and manufacture of Once Through Steam Generators.
|
Financial Highlights
($ millions)
|
Three Months
Ended June 30
|
|
Six Months
Ended June 30
|
| |
|
2007
|
|
2006
|
|
|
|
|
2007
|
|
2006
|
|
|
|
Revenues
|
$
|
93
|
$
|
68
|
|
|
|
$
|
167
|
$
|
121
|
|
|
|
Segment operating profit
|
|
7.0
|
|
2.1
|
|
|
|
|
9.9
|
|
2.5
|
|
|
|
Return on revenue
|
|
7.5%
|
|
3.1%
|
|
|
|
|
6.0%
|
|
2.1%
|
|
|
|
Backlog - June 30
|
$
|
330
|
$
|
183
|
|
|
|
|
|
|
|
|
|
Industrial segment revenues totalled $93 million in the quarter, a $25 million increase over the second quarter of 2006. This increase reflects revenue growth in all operating units, with construction operations in Ontario posting the largest increase.
Segment operating profit of $7.0 million in the quarter represents a $4.9 million improvement over the same quarter last year. Innovative Steam Technologies (IST) made the largest gain, with a $2.5 million improvement over the results reported in the second quarter of 2006.
Backlog of $330 million in the Industrial segment at June 30 is $147 million higher than at the same time last year, due largely to the significant growth in IST's backlog, which is now at its highest level since 2001. New contract awards of $311 million in the first half were $178 million higher than in the same period of 2006.
The Concessions segment includes the development, operation and financing of infrastructure projects by way of public-private partnership, build-own-operate-transfer or other alternative financing contract structures. This segment focuses primarily on investments in transportation infrastructure concessions, including the Cross Israel Toll Highway and Quito International Airport concession companies.
|
Financial Highlights
($ millions)
|
Three Months
Ended June 30
|
|
Six Months
Ended June 30
|
| |
|
2007
|
|
2006
|
|
|
|
|
2007
|
|
2006
|
|
|
|
Revenues
|
$
|
14
|
$
|
5
|
|
|
|
$
|
27
|
$
|
11
|
|
|
|
Segment operating profit (loss)
|
|
1.2
|
|
(1.2)
|
|
|
|
|
2.6
|
|
(1.9)
|
|
|
|
Return on revenue
|
$
|
9.1%
|
$
|
(24.2%)
|
|
|
|
|
9.6%
|
|
(18.0)%
|
|
|
Revenues in the Concessions segment were $14 million in the quarter, a $9 million increase compared to the same quarter of 2006. The majority of the revenue increase arose from operating the existing Quito airport, which reported no revenues in the second quarter of 2006 and $8 million this year.
The segment operating profit of $1.2 million was an improvement of $2.5 million compared to the same quarter last year, largely due to contributions from operations of the existing Quito Airport.
Net Corporate expenses (before interest income and corporate allocations to the segments) were $2.4 million in the quarter compared to $3.3 million in 2006, due primarily to the impact of foreign exchange gains.
Consolidated Results
The Consolidated Results for the three months and six months ended June 30, 2007 and 2006 are available at the end of this News Release.
|
Balance Sheet Highlights
|
|
(thousands of dollars)
|
|
June 30, 2007
|
|
Dec. 31, 2006
|
| |
|
|
|
|
|
Cash, cash equivalents, restricted cash and restricted term deposits and marketable securities
|
$
|
74,630
|
$
|
78,528
|
|
Other current assets
|
|
410,247
|
|
372,839
|
|
Property, plant and equipment
|
|
83,343
|
|
53,348
|
|
Other long-term assets
|
|
205,166
|
|
211,572
|
|
Total Assets
|
|
773,386
|
|
716,287
|
| |
|
|
|
|
|
Current liabilities
|
$
|
350,029
|
$
|
330,167
|
|
Long-term debt
|
|
121,036
|
|
81,120
|
|
Other long-term liabilities
|
|
144,767
|
|
151,397
|
|
Shareholders' equity
|
|
157,554
|
|
153,603
|
|
Total Liabilities and Shareholders' Equity
|
|
773,386
|
|
716,287
|
Summary of Cash Flows
| |
|
|
|
|
|
|
|
|
|
| |
|
Consolidated Cash Flows
|
|
Cash Flows Excluding Quiport JV
|
| |
|
Six Months Ended
June 30
|
|
Six Months Ended
June 30
|
|
$ millions
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
$
|
1.4
|
$
|
(25.3)
|
$
|
(4.2)
|
$
|
(19.7)
|
|
|
Investing activities
|
|
(40.2)
|
|
(9.3)
|
|
(29.2)
|
|
(6.6)
|
|
|
Financing activities
|
|
29.1
|
|
57.2
|
|
20.0
|
|
13.2
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
(9.7)
|
|
22.6
|
|
(13.4)
|
|
(13.0)
|
|
Consolidated Statements of Operations for the three months ended June 30, 2007 and 2006
(in thousands of dollars, except per share amounts) (unaudited)
Consolidated Statements of Operations for the six months ended June 30, 2007 and 2006
(in thousands of dollars, except per share amounts) (unaudited)