- Revenues increase to $2.26 billion reflecting Lockerbie and South Rock acquisitions
- EBITDA grows to $124.7 million
- Operating income growth in Infrastructure and Concessions segments are offset by declines in the Industrial and Buildings segments
- Net income dips to $44.4 million or $0.80 per diluted share
- Backlog reaches a record $2.18 billion
- Outlook remains positive overall
Toronto
, Ontario
– March 2, 2010: Aecon Group Inc. (TSX: ARE) today reported its financial results for the fourth quarter and full year 2009.
|
Revenue, Operating Results and Net Income
|
| |
|
Three Months Ended December 31
|
Twelve Months Ended December 31
|
|
$ millions, except per share amounts
|
|
2009
|
|
2008
|
|
|
|
2009
|
|
2008
|
| |
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
600
|
$
|
603
|
|
|
$
|
2,261
|
$
|
1,877
|
|
Gross margin
|
|
71.5
|
|
72.1
|
|
|
|
243.7
|
|
211.1
|
|
EBITDA
|
|
40.0
|
|
40.3
|
|
|
|
124.7
|
|
116.6
|
|
Depreciation and amortization
|
|
(10.9)
|
|
(8.2)
|
|
|
|
(48.4)
|
|
(27.5)
|
|
Operating profit
|
|
29.1
|
|
32.2
|
|
|
|
76.2
|
|
89.1
|
|
Interest expense, net
|
|
(4.0)
|
|
(0.7)
|
|
|
|
(6.1)
|
|
(1.2)
|
|
Earnings Before Taxes
|
|
25.1
|
|
31.4
|
|
|
|
70.1
|
|
87.9
|
|
Income taxes
|
|
(8.4)
|
|
(10.4)
|
|
|
|
(22.3)
|
|
(26.8)
|
|
Net income for the period
|
|
15.4
|
|
20.4
|
|
|
|
44.4
|
|
59.3
|
|
Earnings per diluted share
|
|
0.26
|
|
0.40
|
|
|
|
0.80
|
|
1.20
|
|
Backlog - December 31
|
$
|
2,183
|
$
|
1,254
|
|
|
|
|
|
|
Aecon’s revenues reached a record $2.261 billion in 2009, a 21% increase over 2008, with revenue growth reported in each of the four operating segments. Much of the growth in 2009 was due to the in-year acquisitions of Lockerbie & Hole and South
Rock.
This strong revenue growth drove Aecon’s gross profit (revenues less direct costs and expenses) to $243.7 million, although gross margins as a percentage of revenues slipped to 10.8% from 11.2% a year earlier.
Aecon’s EBITDA (representing income from operations before net interest expense, income taxes, depreciation, amortization and non-controlling interests) increased to $124.7 million in 2009, a 7% increase over the $116.6 million recorded in 2008.
Strong operating performance overall, particularly in the Infrastructure segment, was partially offset by weaker demand in the Industrial segment compared to a year earlier and by losses on two projects in the Buildings segment’s Ontario operations.
Also impacting results were foreign exchange losses (a $5.6 million negative impact year over year) and increased depreciation and amortization resulting from the South Rock and Lockerbie acquisitions ($10 million of which relates to the non-cash amortization
of the intangible asset value ascribed to backlog acquired). As a result, Aecon’s operating profit (representing income from operations before net interest expense, income taxes and non-controlling interests) declined by 14% in 2009 to $76.2
million.
Earnings before taxes (income before income taxes and non-controlling interests) fell by 20% to $70.1 million in 2009. Pre-tax earnings were impacted by increased interest costs, largely as a result of interest on non-recourse debt related to three ‘build
finance’ projects in Ontario, and interest costs related to the issuance of convertible debentures in the third quarter of 2009.
Net income in 2009 was $44.4 million ($0.80 per diluted share), down from $59.3 million ($1.20 per diluted share) in 2008. Net income in the fourth quarter was $15.4 million ($0.26 per diluted share) compared with $20.4 million ($0.40 per diluted share)
in the fourth quarter of 2008. Per share results reflect an increase in the average number of shares outstanding from 50.8 million in the fourth quarter of 2008 to 69.9 million this year.
Outlook
“I believe 2010 and 2011 will be characterized as a time of recovery in private sector investment, likely more so in the latter half of the period, combined with a return to more traditional levels of bidding activity in the public infrastructure
sector, which today is as strong as we have ever seen it,” said John M. Beck, Chairman and CEO, Aecon Group Inc. “As such, 2011 and 2012 may be the period where results are most likely to reflect strength in both the private sector and
public sector elements of our business.”
“Aecon’s strong balance sheet, financial liquidity and substantial bonding/surety capacity, each of which are among the strongest in the industry, position us well to exploit the many growth opportunities, including potential public private
partnership and acquisition opportunities that may require significant equity investment,” said Scott Balfour, President, Aecon Group Inc. “Overall, I believe that Aecon’s record year end backlog, the strength and durability of our
Infrastructure markets, and the expected return to strength of the oilsands and industrial power markets, combine to signal continued strong financial performance throughout 2010 and even more so in 2011.”
Backlog and New Business Awards
Backlog at December 31, 2009 was $2.183 billion, a $929 million increase over a year ago, due in part to the addition of Lockerbie & Hole and South Rock in 2009. All three construction segments saw significant backlog growth in the period. New contract
awards of $2.603 billion were booked in 2009, a $706 million increase over the $1.897 billion awarded in 2008.
Not included in backlog, but important to Aecon’s prospects due to the significant volumes involved, are the expected revenues from Aecon’s growing alliances and supplier-of-choice arrangements where the amount and/or value of work to be carried
out is not specified.
Fourth Quarter Business Highlights
-
In November 2009, Aecon Lockerbie Industrial was awarded a key contract to complete the field construction of Suncor’s Firebag 3 central plant facilities near Fort McMurray, Alberta. The contract was one of the first major construction projects awarded in the oilsands since mid-2008.
- Also in November 2009, Aecon announced that it had reached an agreement in principle with the Municipality of Quito, the Canadian Commercial Corporation and the project lenders regarding issues affecting the Quito International Airport
project that had arisen following a ruling by the Constitutional Court of Ecuador.
- In December 2009, the Globe & Mail and Hewitt Associates recognized Aecon as one of the 50 Best Employers in Canada, the third consecutive year Aecon has received such an honour, and the second consecutive year Aecon has been ranked among the
20 best.
Segmented Results
Aecon reports its results in four segments: Infrastructure, Buildings, Industrial and Concessions.
Infrastructure
The Infrastructure segment includes all aspects of civil construction from highways, bridges and tunnels to airports, marine facilities, transit and power projects as well as utilities construction.
|
Financial Highlights (1)(2)
($ millions)
|
Three Months
Ended December 31
|
|
Twelve Months
Ended December 31
|
|
| |
|
2009
|
|
2008
|
|
|
|
|
2009
|
|
2008
|
|
|
|
Revenues
|
$
|
251
|
$
|
258
|
|
|
|
$
|
937
|
$
|
739
|
|
|
|
Segment operating profit
|
|
37.7
|
|
9.1
|
|
|
|
|
51.8
|
|
23.7
|
|
|
|
Operating Profit Margin
|
|
15.0%
|
|
3.5%
|
|
|
|
|
5.5%
|
|
3.2%
|
|
|
|
Backlog - December 31
|
$
|
546
|
$
|
470
|
|
|
|
|
|
|
|
|
|
(1) Segment operating profit or loss represents the profit or loss from operations, before net interest expense, income taxes, non-controlling interests, and corporate allocations of overhead costs and capital charges.
(2) Operating profit margin is calculated as segment operating profit (loss) as a percentage of revenues.
Revenues from the Infrastructure segment increased by 27% in 2009 to $937 million, largely driven by the addition of South Rock in January 2009, and by revenue growth in international and utilities operations.
Operating profit from the Infrastructure segment grew to $51.8 million in 2009, a $28.1 million increase over 2008. The substantial increase was due in most part to increased operating profits in Western Canada as a result of the South Rock acquisition,
and in international operations where settlement of claims in respect of the Nathpa Jhakri project positively impacted earnings. Segment results include a $5 million non-cash charge for the amortization of intangible assets resulting from the South
Rock acquisition.
Backlog at December 31, 2009 was $546 million, a $75 million increase over 2008 due largely to higher backlog in Western Canada as a result of the South Rock acquisition. New contract awards were $862 million, up from the $838 million recorded in 2008.
Buildings
The Buildings segment includes all aspects of Aecon’s commercial, institutional and multi-unit residential buildings construction and renovation activities.
|
Financial Highlights
($ millions)
|
Three Months
Ended December 31
|
|
Twelve Months
Ended December 31
|
|
| |
|
2009
|
|
2008
|
|
|
|
|
2009
|
|
2008
|
|
|
|
Revenues
|
$
|
134
|
$
|
135
|
|
|
|
$
|
478
|
$
|
461
|
|
|
|
Segment operating profit (loss)
|
|
(16.4)
|
|
(1.0)
|
|
|
|
|
(15.5)
|
|
0.4
|
|
|
|
Operating Profit Margin
|
|
(12.2)%
|
|
(0.8)%
|
|
|
|
|
(3.2)%
|
|
0.1%
|
|
|
|
Backlog – December 31
|
$
|
737
|
$
|
534
|
|
|
|
|
|
|
|
|
|
Revenues from the Buildings segment increased by 4% to $478 million in 2009, as revenue growth in Toronto offset decreases in Seattle and Montreal.
In 2009, the Buildings segment incurred an operating loss of $15.5 million, due primarily to losses on two projects in the segment’s Ontario operations. Opportunities to recover some of the cost overruns are being pursued.
Following a detailed strategic and operational review of the business, where all options were fully explored, management has reaffirmed that the Buildings business remains a core part of Aecon’s operations, and is committed to improving the performance
of this business to market competitive levels. While some work remains to deliver on this potential, successful execution and turnaround in Aecon Buildings is attainable and provides an opportunity for meaningful upside.
Backlog of $737 million at the end of 2009 represents a $203 million increase compared to the same time last year, due largely to increases in the segment’s Toronto and Ottawa operations. New contract awards totalling $681 million were recorded
in 2009, which compares with awards of $516 million in 2008.
Industrial
Industrial operations include all of Aecon’s industrial manufacturing and construction activities from in-plant construction to the fabrication of specialty pipe and the design and manufacture of Once Through Steam Generators.
|
Financial Highlights
($ millions)
|
Three Months
Ended December 31
|
|
Twelve Months
Ended December 31
|
| |
|
2009
|
|
2008
|
|
|
|
|
2009
|
|
2008
|
|
Revenues
|
$
|
191
|
$
|
187
|
|
|
|
$
|
748
|
$
|
612
|
|
Segment operating profit
|
|
7.3
|
|
29.2
|
|
|
|
|
50.5
|
|
75.0
|
|
Operating Profit Margin
|
|
3.8%
|
|
15.6%
|
|
|
|
|
6.7%
|
|
12.3%
|
|
Backlog – December 31
|
$
|
900
|
$
|
250
|
|
|
|
|
|
|
|
Revenues of $748 million in the Industrial segment were $135 million or 22% higher than in 2008.
The newly acquired Lockerbie Mechanical (“Mechanical”) unit contributed $119 million of the increase in annual revenues, while revenues from the combined Aecon Lockerbie Industrial operations in Western Canada were only $6 million higher than
Aecon’s Western Industrial operations a year earlier, as the contribution from Lockerbie’s operations was almost completely offset by significant declines in new capital spending in the oilsands and related businesses in 2009. Similarly,
revenues in Eastern Canada rose only slightly, as the addition of Lockerbie’s Eastern operations offset declines at IST and in the segment’s Ontario construction operations.
The Industrial segment generated an operating profit of $50.5 million compared to $75 million in 2008. The $25 million net decline reflects a $39 million reduction in operating profits in Western Canada, which was only partially offset by small operating
profit increases in Mechanical, Eastern Canada, Ontario and IST operations. Segment results include a $4 million non-cash charge for the amortization of intangible assets resulting from the Lockerbie acquisition.
Backlog of $900 million at December 31, 2009 was $650 million higher than at the same time last year, as higher backlog resulting from the Lockerbie acquisition exceeded backlog declines in the segment’s Western and Ontario operations. Overall,
new contract awards of $962 million in 2009 were $483 million higher than in 2008. Most of the increase in new awards occurred in Western Canada.
Concessions
The Concessions segment includes the development, operation and financing of infrastructure projects by way of public-private partnership, build-own-operate-transfer or other alternative financing contract structures. This segment focuses primarily on
the operations, management, maintenance and enhancement of investments in transportation infrastructure concessions, including the Cross Israel Toll Highway and Quito International Airport concession companies.
|
Financial Highlights
($ millions)
|
Three Months
Ended December 31
|
|
Twelve Months
Ended December 31
|
|
| |
|
2009
|
|
2008
|
|
|
|
|
2009
|
|
2008
|
|
|
Revenues
|
$
|
28
|
$
|
25
|
|
|
|
$
|
107
|
$
|
72
|
|
|
Segment operating profit
|
|
6.5
|
|
3.5
|
|
|
|
|
14.0
|
|
10.6
|
|
|
Operating Profit Margin
|
|
23.0%
|
|
13.7%
|
|
|
|
|
13.1%
|
|
14.7%
|
|
Concessions revenue of $107 million represents a 49% increase compared to 2008. A majority of the revenue growth came from Aecon’s interest in the operator of the Cross Israel Highway, with
increased revenues also recorded from operation of the existing Quito International Airport.
Segment operating profit of $14 million compares to an operating profit of $10.6 million in 2008. Increased operating profits were recorded from both Aecon’s interest in the operator of the Cross Israel Highway and from the Quito airport concessionaire,
which includes the results from operating the existing Quito airport while the new airport is being constructed.
As a result of the significant progress made toward reaching a final commercial agreement for the Quito Airport concession that is substantively consistent with the preliminary agreement announced in November 2009, the third quarter profit from Quiport
JV that was not previously recognized has now been recognized along with Aecon’s normal fourth quarter profits from Quiport JV. Nearly 4.6 million passengers passed through the existing Quito, Ecuador airport in 2009, a 2% increase from
2008.
While Aecon’s investment in the Cross Israel Highway concession continues to perform well and the concession is generating strong operating cash flow, these results will not be reflected in earnings until a dividend is received or a portion of the
investment is sold. Average weekday traffic on the Cross Israel Highway in December 2009 surpassed 119,000, a 22% increase over December 2008.
Aecon does not include in its reported backlog potential revenues from operations management contracts and concession agreements. As such, while Aecon expects future revenues from its concession assets, no concession backlog is reported at December 31.
Corporate and other
Corporate operating costs in 2009 were $4 million higher than in 2008. Contributing to these costs was a $1.3 million increase in marketing, general and administrative expenses, mostly due to higher
training and employee compensation costs, including higher pension plan expenses. Also contributing to the higher costs was a $1.3 million decline in foreign exchange gains and higher depreciation charges of $1.4 million, mainly for IT equipment.
|
Balance Sheet Highlights
|
|
(thousands of dollars)
|
|
Dec. 31, 2009
|
|
Dec. 31, 2008
|
| |
|
|
|
|
|
Cash and cash equivalents, restricted cash, marketable securities and term deposits
|
$
|
414,447
|
$
|
321,067
|
|
Other current assets
|
|
714,164
|
|
502,422
|
|
Property, plant and equipment
|
|
200,883
|
|
97,969
|
|
Other long-term assets
|
|
359,844
|
|
267,406
|
|
Total Assets
|
$
|
1,689,338
|
$
|
1,188,864
|
| |
|
|
|
|
|
Current liabilities
|
$
|
843,826
|
$
|
543,839
|
|
Non-recourse project debt
|
|
70,000
|
|
118,665
|
|
Other long-term debt
|
|
63,037
|
|
45,160
|
|
Other long-term liabilities
|
|
255,083
|
|
98,935
|
|
Shareholders’ equity
|
|
457,392
|
|
382,265
|
|
Total Liabilities and Shareholders’ Equity
|
$
|
1,689,338
|
$
|
1,188,864
|
Conference Call
A conference call has been scheduled for Wednesday, March 3, 2010 at 10:30 a.m. ET to discuss Aecon’s 2009 year-end financial results. Participants should dial 416-359-1281 or 1-800-268-5851 at least 10 minutes prior to the conference time of 10:30 a.m. A replay will be available after 12:30 p.m. at 1-800-558-5253 or 416-626-4100 until midnight, March 10, 2010. The pass code is 21458770.
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 on a selected basis 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 for the three months ended December 31, 2009 and 2008
(in thousands of dollars, except share and per share amounts) (unaudited)
|
Consolidated Statements of Income for the three months ended December 31, 2009 and 2008
|
| |
|
2009
|
|
2008
|
| |
|
|
|
|
|
Revenues
|
$
|
599,770
|
$
|
602,710
|
| |
|
|
|
|
|
Direct costs and expenses
|
|
(528,312)
|
|
(530,578)
|
| |
|
|
|
|
| |
|
71,458
|
|
72,132
|
| |
|
|
|
|
|
Marketing, general and administrative expenses
|
|
(30,564)
|
|
(33,507)
|
| |
|
|
|
|
|
Foreign exchange (losses) gains
|
|
(1,379)
|
|
1,639
|
| |
|
|
|
|
|
Income from investments accounted for using the equity method
|
|
419
|
|
-
|
| |
|
|
|
|
|
Gain on sale of assets
|
|
85
|
|
76
|
| |
|
|
|
|
|
Depreciation and amortization
|
|
(10,898)
|
|
(8,173)
|
| |
|
|
|
|
|
Interest expense
|
|
(8,797)
|
|
(3,326)
|
| |
|
|
|
|
|
Interest income
|
|
4,802
|
|
2,593
|
| |
|
|
|
|
| |
|
(46,332)
|
|
(40,698)
|
| |
|
|
|
|
|
Income before income taxes and non-controlling interests
|
|
25,126
|
|
31,434
|
| |
|
|
|
|
|
Income tax (expense) recovery
|
|
|
|
|
|
Current
|
|
(9,433)
|
|
(1,568)
|
|
Future
|
|
1,036
|
|
(8,862)
|
| |
|
|
|
|
| |
|
(8,397)
|
|
(10,430)
|
| |
|
|
|
|
|
Income before non-controlling interests
|
|
16,729
|
|
21,004
|
| |
|
|
|
|
|
Non-controlling interests
|
|
(1,284)
|
|
(613)
|
| |
|
|
|
|
|
Net income for the period
|
$
|
15,445
|
$
|
20,391
|
| |
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
Basic
|
$
|
0.28
|
$
|
0.41
|
|
Diluted
|
$
|
0.26
|
$
|
0.40
|
| |
|
|
|
|
|
Average number of shares outstanding
|
|
|
|
|
|
Basic
|
|
55,100,140
|
|
50,207,924
|
|
Diluted
|
|
69,877,526
|
|
50,822,206
|
Consolidated Statements of Income for the years ended December 31, 2009 and 2008
(in thousands of dollars, except share and per share amounts)
|
Consolidated Statements of Income for the years ended December 31, 2009 and 2008
|
| |
|
2009
|
|
2008
|
| |
|
|
|
|
|
Revenues
|
$
|
2,260,986
|
$
|
1,876,986
|
| |
|
|
|
|
|
Direct costs and expenses
|
|
(2,017,306)
|
|
(1,665,924)
|
| |
|
|
|
|
| |
|
243,680
|
|
211,062
|
| |
|
|
|
|
|
Marketing, general and administrative expenses
|
|
(115,509)
|
|
(96,010)
|
| |
|
|
|
|
|
Foreign exchange (losses) gains
|
|
(4,104)
|
|
1,481
|
| |
|
|
|
|
|
Income from investments accounted for using the equity method
|
|
419
|
|
-
|
| |
|
|
|
|
|
Gain on sale of assets
|
|
182
|
|
104
|
| |
|
|
|
|
|
Depreciation and amortization
|
|
(48,431)
|
|
(27,493)
|
| |
|
|
|
|
|
Interest expense
|
|
(17,809)
|
|
(9,275)
|
| |
|
|
|
|
|
Interest income
|
|
11,705
|
|
8,080
|
| |
|
|
|
|
| |
|
(173,547)
|
|
(123,113)
|
| |
|
|
|
|
|
Income before income taxes and non-controlling interests
|
|
70,133
|
|
87,949
|
| |
|
|
|
|
|
Income tax (expense) recovery
|
|
|
|
|
|
Current
|
|
(28,607)
|
|
(3,696)
|
|
Future
|
|
6,301
|
|
(23,123)
|
| |
|
|
|
|
| |
|
(22,306)
|
|
(26,819)
|
| |
|
|
|
|
|
Income before non-controlling interests
|
|
47,827
|
|
61,130
|
| |
|
|
|
|
|
Non-controlling interests
|
|
(3,441)
|
|
(1,788)
|
| |
|
|
|
|
|
Net income for the year
|
$
|
44,386
|
$
|
59,342
|
| |
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
Basic
|
$
|
0.82
|
$
|
1.23
|
|
Diluted
|
$
|
0.80
|
$
|
1.20
|
| |
|
|
|
|
|
Weighted average number of shares outstanding
|
|
|
|
|
|
Basic
|
|
53,861,298
|
|
48,065,421
|
|
Diluted
|
|
58,510,761
|
|
49,805,700
|