Toronto
, Ontario
– May 6, 2008: Aecon Group Inc. (TSX: ARE) today reported sustained growth and continued strong results in the first quarter of 2008.
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Revenue, Operating Results and Net Income
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|
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Three Months Ended March 31
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$ millions
|
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2008
|
|
2007
|
|
|
|
|
|
|
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Revenues
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$
|
302
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$
|
242
|
|
Gross margin
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18.5
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18.9
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EBITDA
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4.5
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5.0
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Operating (loss) profit
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(1.3)
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|
0.1
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Interest expense
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(2.1)
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(2.4)
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Income tax recovery (expense)
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4.0
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(0.6)
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Net income (loss) for the period
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0.3
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(3.0)
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Backlog - March 31
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$
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1,231
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$
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837
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Revenues in the first quarter of 2008 totalled $302 million, a 25% increase over results reported a year ago, due to increases in the Buildings, Industrial and Concessions segments. Infrastructure revenues remained virtually unchanged as compared to the first quarter of 2007.
Gross margins (revenues less direct costs and expenses) fell slightly to $18.5 million, from $18.9 million in the same quarter last year. Increased margins in the Buildings and Industrial segments were offset by a decrease in the Infrastructure segment, where more traditional winter weather this year, and the acquisition in 2007 of two companies with seasonal earnings patterns, impacted quarter-over-quarter comparisons.
EBITDA (representing income or loss from operations before interest expense, income taxes, depreciation, and amortization and non-controlling interests) fell slightly to $4.5 million.
Operating loss (loss from operations before interest expense, income taxes and non-controlling interests) of $1.3 million compares to an operating profit of $0.1 million in the first quarter of 2007. As noted above, a decline in the Infrastructure segment’s results offset improved earnings in the Buildings and Industrial segments. Operating profit in the Concessions segment remained virtually unchanged from last year.
Net Income for the quarter of $0.3 million ($0.01 per share), which included a $3.4 million reversal of a valuation allowance related to Aecon’s tax assets, compares to a net loss of $3.0 million ($0.08 per share) in the first quarter of 2007.
Marketing, general and administrative expenses amounted to $16.1 million in the quarter, a $1.2 million increase from last year, due largely to higher volumes, the inclusion of MG&A related to acquisitions completed in 2007 and higher performance-related incentive costs. Notably, while the aggregate dollar amount increased, MG&A as a percentage of revenues decreased from 6.2% in the first quarter of 2007 to 5.3% this quarter.
Depreciation and amortization expense of $5.9 million is $1.0 million higher than last year as a result of the higher depreciation charges on equipment acquired as part of acquisitions completed in 2007.
Outlook
“Aecon’s first quarter results represent a continuation of the upward momentum achieved over the past two years,” said John M. Beck, Chairman and CEO, Aecon Group Inc. “Aecon’s healthy backlog and the ongoing strength of our core markets, especially in the energy and transportation infrastructure sectors, continue to bode well for strong financial performance throughout the balance of the year and into 2009.”
“The first quarter of 2008 was characterized by sustained revenue growth, continued strong margins, a strengthened balance sheet and near-record backlog,” said Scott Balfour, President and CFO, Aecon Group Inc. “These results reinforce the view that our focused strategy has us on the right path. It is a strategy we will continue to drive.”
Backlog and New Business Awards
Backlog at March 31, 2008 was $1.231 billion, an increase of 47% over the same time last year, as backlog increases in the Buildings and Industrial segments more than offset a small decline in the Infrastructure segment related to work-off of backlog on the Quito airport project.
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.
New contract awards of $298 million in the first quarter were $6 million higher than in the same quarter last year.
First Quarter Business Highlights
- The January 2008 issue of Report on Business Magazine recognized Aecon as one of the 50 best employers in Canada, an important strategic achievement in an industry where access to quality people is key to profitable growth.
- In March 2008, Aecon announced that it would raise $70 million through an equity financing. The financing further strengthened Aecon’s balance sheet and positioned it well for organic and acquisition growth.
- Average week day traffic on the Cross Israel Highway in March 2008 reached 97,000 vehicles, a 13% increase over March 2007.
- In total, over one million passengers passed through the existing Quito International Airport in the first quarter of 2008, a 4.9% increase from the first quarter of 2007.
Segmented Results
Aecon reports its results in four operating segments: Infrastructure, Buildings, Industrial and Concessions.
Infrastructure
The Infrastructure segment includes all aspects of civil construction from highways, bridges and tunnels to airports, marine facilities, transit and power projects as well as utilities construction.
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Financial Highlights
(1)
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Three Months Ended March 31
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$ millions
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2008
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2007
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Revenues
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$
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95
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$
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95
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Segment operating loss
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(6.8)
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(2.0)
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Return on revenue
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(7.2) %
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(2.1) %
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|
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Backlog – March 31
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|
414
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|
442
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(1) Segment operating profit (loss) represents the profit or loss from operations, before interest expense, income taxes, non-controlling interests, and corporate allocations of overhead costs and capital charges.
For the quarter ended March 31, 2008, the Infrastructure segment reported revenues of $95 million, essentially unchanged from the first quarter of 2007. Revenues from roadbuilding and utilities operations increased quarter-over-quarter, while revenues from heavy civil operations declined.
Segment operating loss of $6.8 million in the quarter represents a $4.8 million increase over the loss reported in the first quarter of 2007, with improvements in utilities offset by higher operating losses in roadbuilding and heavy civil operations. As anticipated, operating profits in roadbuilding operations were negatively impacted by the more traditional winter weather conditions in Ontario in the first quarter this year after an unseasonably warm and dry winter last year, and by the impact of a full quarter of seasonal losses from the Karson Group, which was acquired in February 2007, and from Leo Alarie and Sons, which was acquired in December 2007. Both Karson and Alarie, which exhibit similar seasonal performance traits to Aecon’s roadbuilding operations, are expected to contribute to Aecon’s profitability over the balance of the year.
It is notable that Aecon has not yet recorded construction profits from the New Quito Airport project. Under Aecon’s accounting policy for large multi-year contracts, profit is recognized only when construction reaches a stage of completion that is sufficient to reasonably determine a project’s probable results. Profit recognition is expected to occur in the second or third quarter of 2008.
Backlog at the end of the quarter was $414 million, a $28 million decrease from the same time last year due to work-off of backlog from the Quito Airport project. New contract awards of $135 million in the quarter represent an increase of $11 million over last year.
Buildings
The Buildings segment includes all aspects of Aecon’s commercial, institutional and multi-unit residential building construction and renovation activities.
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Financial Highlights
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Three Months Ended March 31
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$ millions
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2008
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2007
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Revenues
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$
|
108
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$
|
63
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|
|
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Segment operating profit (loss)
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$
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1.6
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(0.2)
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|
|
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Return on revenue
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1.5%
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(0.4)%
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|
|
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Backlog – March 31
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428
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|
170
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First quarter revenues in the Buildings segment of $108 million represent an increase of 71%, over the same period of 2007, primarily due to volume growth in Toronto, Montreal and Seattle.
Segment operating profit of $1.6 million in the first quarter of 2008 represents a $1.8 million improvement over the $0.2 million operating loss recorded in the first quarter of 2007, with almost every operating unit within the Buildings Group contributing to the increase. Only the Montreal operation, which relocated and restructured its operations in 2008, reported a decline in quarter-over-quarter results.
Backlog of $428 million at the end of the quarter was more than double the $170 million in place at the same time in 2007. New contract awards totalled $56 million for the quarter, compared to $42 million last year. Montreal and Seattle operations reported the largest award increases.
Industrial
Industrial operations include all of Aecon’s industrial manufacturing and construction activities including in-plant construction, fabrication of specialty pipe, assembly of custom module units and the design and manufacture of once-through heat recovery steam generators.
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Financial Highlights
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Three Months Ended March 31
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$ millions
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2008
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2007
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Revenues
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$
|
91
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$
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74
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|
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Segment operating profit
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3.8
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3.0
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Return on revenue
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4.2%
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4.0%
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|
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Backlog – March 31
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390
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|
225
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Industrial segment revenues in the first quarter totalled $91 million, a 23% increase over the same period in 2007. The segment’s construction operations in Ontario and its Innovative Steam Technologies (“IST”) business unit in Cambridge were primarily responsible for the increase.
Segment operating profit of $3.8 million represents a 28% increase over the $3.0 million reported in the same period in 2007. Higher volumes and generally improved margins in Ontario operations and at IST contributed to most of the operating profit increase.
Backlog of $390 million at quarter end was $164 million higher than at the same time last year. Ontario Construction and Western Canada operations accounted for the bulk of the increase. Overall, new contract awards of $97 million in the first quarter of 2008 were $17 million lower than in the same period of 2007 with most of the new awards occurring in Ontario Construction operations.
Concessions
The Concessions segment includes the development, operation and financing of infrastructure projects by way of public-private partnership, build-own-operate-transfer or other alternative financing contract structures.
This segment focuses primarily on investments in transportation infrastructure concessions, including the Cross Israel Toll Highway and Quito International Airport concession companies.
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Financial Highlights
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Three Months Ended March 31
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$ millions
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2008
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2007
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Revenues
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$
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15.2
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$
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13.7
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Segment operating profit
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1.3
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1.4
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Return on revenue
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8.8%
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10.0%
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First quarter revenues of $15 million in the Concessions segment were up $1.5 million, or 11%, compared to the same period in 2007, with the majority of the revenue increase coming from operations at the Cross Israel Highway, which are being carried-out on a fee for service basis by a company in which Aecon holds a 31% interest.
Segment operating profit of $1.3 million in the first quarter is essentially unchanged from the $1.4 million operating profit reported in the same period in 2007.
Corporate and Other
Net Corporate expenses (before interest income and corporate allocations to the segments) were $3.1 million in the quarter compared to $3.2 million in the first quarter of 2007.
Consolidated Results
The Consolidated Results for the first quarters of 2008 and 2007 are available at the end of this News Release.
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Balance Sheet Highlights
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(thousands of dollars)
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March 31, 2008
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Dec. 31, 2007
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|
|
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Cash, cash equivalents and restricted cash
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$
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172,411
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$
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169,234
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Other current assets
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390,467
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|
434,015
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Property, plant and equipment
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|
95,048
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|
97,105
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Other long-term assets
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228,720
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210,298
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Total Assets
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886,646
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910,652
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Current liabilities
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$
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415,333
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$
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439,984
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Long-term debt
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132,645
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132,710
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Other long-term liabilities
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84,465
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112,549
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Shareholders’ equity
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|
254,203
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|
225,409
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Total Liabilities and Shareholders’ Equity
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886,646
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910,652
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Summary of Cash Flows
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Consolidated Cash Flows
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Three Months Ended
March 31
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|
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$ millions
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2008
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2007
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|
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Cash provided by (used in):
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Operating activities before changes in other balances relating to operations
|
$
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1.2
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$
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2.1
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|
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Changes in other balances relating to operations
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|
18.1
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13.2
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|
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Investing activities
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(13.5)
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(24.2)
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|
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Financing activities
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|
(5.0)
|
|
6.6
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|
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Increase (decrease) in cash and cash equivalents
|
|
0.8
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|
(2.3)
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Conference Call
A conference call has been scheduled for Wednesday, May 7, 2008 at 10:30 a.m. ET to discuss Aecon’s 2008 first quarter financial results. Participants should dial 416-641-6652 or 1-800-354-6885 at least 10 minutes prior to the conference time.
For those unable to attend the call, a replay will be available after 12:30 p.m. at 1-800-558-5253 or 416-626-4100 until midnight, May 14, 2008. The pass code is 21382257 followed by the number sign.
About Aecon
Aecon Group Inc. is Canada’s largest publicly traded construction and infrastructure development company. Aecon and its subsidiaries provide services to private and public sector clients throughout Canada and internationally. Aecon is pleased to be recognized as one of the 50 Best Employers in Canada as published by Report on Business Magazine.
Consolidated Statements of Income (Loss) for the three months ended March 31, 2008 and 2007
(in thousands of dollars, except share and per share amounts) (unaudited)
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Consolidated Statements of Income (Loss) for the three months ended March 31, 2008 and 2007
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2008
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|
2007
|
|
|
|
|
|
|
|
Revenues
|
$
|
301,960
|
$
|
241,785
|
|
|
|
|
|
|
|
Direct costs and expenses
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|
(283,437)
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|
(222,876)
|
|
|
|
|
|
|
|
|
|
18,523
|
|
18,909
|
|
|
|
|
|
|
|
Marketing, general and administrative expenses
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|
(16,149)
|
|
(14,960)
|
|
|
|
|
|
|
|
Foreign exchange gains (losses)
|
|
329
|
|
(135)
|
|
|
|
|
|
|
|
Loss on sale of assets
|
|
(53)
|
|
(12)
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
(5,874)
|
|
(4,855)
|
|
|
|
|
|
|
|
Interest income
|
|
(2,123)
|
|
(2,377)
|
|
|
|
|
|
|
|
Interest expense
|
|
1,884
|
|
1,181
|
|
|
|
(21,986)
|
|
(21,158)
|
|
|
|
|
|
|
|
Loss before income taxes and non-controlling interests
|
|
(3,463)
|
|
(2,249)
|
|
|
|
|
|
|
|
Income tax (expense) recovery
|
|
|
|
|
|
Current
|
|
(661)
|
|
(1,081)
|
|
Future
|
|
4,669
|
|
512
|
|
|
|
|
|
|
|
|
|
4,008
|
|
(569)
|
|
|
|
|
|
|
|
Income (loss) before non-controlling interests
|
|
545
|
|
(2,818)
|
|
|
|
|
|
|
|
Non-controlling interests
|
|
(269)
|
|
(156)
|
|
Net income (loss) for the period
|
$
|
276
|
$
|
(2,974)
|
|
|
|
|
|
|
|
Net earnings (loss) per share
|
|
|
|
|
|
Basic
|
$
|
0.01
|
$
|
(0.08)
|
|
Diluted
|
$
|
0.01
|
$
|
(0.08)
|
|
|
|
|
|
|
|
Average number of shares outstanding
|
|
|
|
|
|
Basic
|
|
42,369,274
|
|
36,534,448
|
|
Diluted
|
|
47,005,640
|
|
46,076,404
|