Toronto, Ontario – November 7, 2011: Aecon Group Inc. (TSX: ARE) today reported its results for the third quarter of 2011.
Highlights
Ø Third quarter revenues reached $835 million (vs. $803 million in same quarter of 2010), driven by gains in both the Infrastructure and Industrial segments.
Ø EBITDA increased to $74.5 million in the quarter ($51.8 million in 2010), including an $11.5 million gain on the sale of Aecon’s interest in its highway operating company in Israel this quarter. Excluding this gain and the $14 million gain recorded last year following the purchase of Cow Harbour’s assets, EBITDA in the quarter was $63.0 million vs. $37.8 million in the third quarter of 2010.
Ø Adjusted earnings per share (basic) increased to $0.74 in the quarter ($0.45 in 2010) and adjusted earnings per share (diluted) increased to $0.49 ($0.37 in 2010).
Ø Positive outlook through 2012 and into 2013 is reaffirmed.
|
Financial Highlights
|
|
|
|
Three Months Ended September 30
(1)
|
Nine Months Ended
September 30
(1)
|
|
($ millions, except per share amounts)
|
|
2011
|
|
2010
|
|
|
|
2011
|
|
2010
|
|
Revenues
|
$
|
835
|
$
|
803
|
|
|
$
|
2,106
|
$
|
1.909
|
|
Gross profit
|
|
96.3
|
|
66.6
|
|
|
|
161.4
|
|
138.5
|
|
EBITDA
(2)
|
|
74.5
|
|
51.8
|
|
|
|
89.5
|
|
71.3
|
|
Depreciation and amortization
|
|
(16.0)
|
|
(12.6)
|
|
|
|
(45.8)
|
|
(34.0)
|
|
Operating profit
(3)
|
|
58.5
|
|
39.2
|
|
|
|
43.7
|
|
37.3
|
|
Financing charges, net
|
|
(8.1)
|
|
(3.6)
|
|
|
|
(21.4)
|
|
(10.0)
|
|
Fair value gain on convertible
debentures
|
|
1.7
|
|
0.9
|
|
|
|
4.5
|
|
11.2
|
|
Income tax (expense)
|
|
(8.9)
|
|
(10.3)
|
|
|
|
(1.6)
|
|
(8.5)
|
|
Profit attributable to shareholders
|
|
41.7
|
|
24.9
|
|
|
|
20.9
|
|
26.8
|
|
Adjusted profit attributable to
shareholders
(4)
Adjusted earnings per share
(diluted)
(5)
|
|
40.5
0.49
|
|
24.3
0.37
|
|
|
|
17.6
0.32
|
|
18.6
0.33
|
|
Backlog - September 30
|
$
|
2,215
|
$
|
2,525
|
|
|
|
|
|
|
(1) Prior period results have been restated to an IFRS basis and therefore are comparable with the current period.
(2) EBITDA represents earnings or losses before net financing expense, income taxes, depreciation and amortization, and non-controlling interests.
(3) Operating profit (loss) represents the profit (loss) from operations before net financing expense, income taxes and non-controlling interests.
(4) Adjusted profit (loss) attributable to shareholders represents the profit (loss) attributable to shareholders adjusted to exclude the after-tax fair value gain (loss) on the embedded derivative portion of Aecon’s convertible debentures.
(5) Adjusted earnings (loss) per share (diluted) represents earnings (loss) per share calculated using adjusted profit (loss) attributable to shareholders.
Outlook, Backlog and New Business Awards
“The strong quarter reported today, along with the significant new business awards announced recently and our ongoing focus on project execution, give us a solid base from which to build sustainable, consistent earnings,” said John M. Beck, Aecon’s Chairman and CEO. “I believe these factors will result in the continued strengthening of Aecon’s financial performance as we move through 2012 and beyond.”
“I’m pleased with our progress on the operational front,” said Teri McKibbon, Aecon’s Chief Operating Officer. “I believe the additional focus we’ve placed on operations this year is having an impact that will be increasingly reflected in our results going forward.”
New contract awards increased to $869 million in the quarter from $579 million in the same quarter last year, with particularly strong growth in the resources sector in Western Canada. Backlog at September 30, 2011 was $2.21 billion, compared to $2.52 billion at the same time last year, reflecting the fact that two of Aecon’s largest-ever project awards were received in the second quarter of 2010.
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, including for example most of Aecon’s mining and utilities businesses, where the value and/or timing of work to be carried out is not specified.
Third Quarter Business Highlights
Ø Aecon received a number of significant new project awards in the quarter, particularly in the resources sector in Western Canada, including:
- Two contracts awarded to Lockerbie and Hole Eastern by the Thompson Creek Metals Company and the Potash Corporation of Saskatchewan Inc., which are expected to generate over $250 million in revenues;
- Two contracts awarded to Aecon’s Industrial West Division totalling $132 million for fabrication and module assembly work for a large SAGD (steam assisted gravity drainage) oilsands project near Fort McMurray, Alberta;
- A contract awarded to Aecon Mining for site preparation and early works at a new potash mine in Saskatchewan, valued at approximately $80 million.
Ø Aecon and partner Dufferin Construction were selected by Infrastructure Ontario and Metrolinx as the preferred proponent to design, build and finance an Air Rail Link (ARL) to the Toronto Pearson International Airport and an ARL passenger station at the Airport.
Ø In September, Aecon sold its interest in Derech Eretz Highways Management Corporation Limited, the operator of the Cross Israel Highway, along with its interests in several affiliates of the operator that operate other transportation infrastructure assets in Israel. Total proceeds from this transaction were $14 million and the resulting gain on sale was $11.5 million.
Segmented Results
Aecon reports its results in three operating segments: Infrastructure, Industrial and Concessions. The Buildings division, previously a segment reported separately, now forms part of Aecon’s Infrastructure segment.
Ø
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, buildings construction and mining operations.
|
Financial Highlights
(1)(2)
$ millions)
|
Three Months
Ended Sept. 30
|
|
Nine Months
Ended Sept. 30
|
|
|
|
|
2011
|
|
2010
|
|
|
|
|
2011
|
|
2010
|
|
|
|
Revenues
|
$
|
538
|
$
|
512
|
|
|
|
$
|
1,196
|
$
|
1,112
|
|
|
|
EBITDA
|
|
51.1
|
|
52.8
|
|
|
|
|
39.0
|
|
34.1
|
|
|
|
Segment operating profit
|
|
41.2
|
|
46.2
|
|
|
|
|
11.4
|
|
16.7
|
|
|
|
Operating profit margin
|
|
7.7%
|
|
9.0%
|
|
|
|
|
1.0%
|
|
1.5%
|
|
|
|
Backlog – September 30
|
$
|
1,560
|
$
|
1,654
|
|
|
|
|
|
|
|
|
|
(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.
Third quarter revenues of $538 million in the Infrastructure segment were $27 million higher than in the same period last year, with increases from mining and utilities operations offsetting decreases in civil and materials operations and buildings.
For the three and nine months ended September 30, 2011, the operating results in the Infrastructure segment increased/(decreased) from the same period last year as follows:
($ millions) Three months ended
Nine months ended
Sept. 30 Sept. 30
Civil and Materials
Ongoing operations 0.6 0.5
Gain on sale of land in 2010 - (7.0)
Utilities 1.1 17.3
Mining
Ongoing operations 6.7 (11.9)
Gain on sale of equipment 2.5 2.5
Gain on acquisition of assets in 2010 (14.0) (14.0)
Buildings (1.9) 7.3
(Decrease) in segment operating profit (5.0) (5.3)
Aecon Mining’s operating results from ongoing operations improved by $6.7 million in the quarter and the business realized a gain of $2.5 million from the sale of surplus equipment. The significant third quarter improvement in operating profit is due primarily to higher current period revenues and reduced maintenance expense in the quarter. In buildings, there was an operating loss of $5 million in the third quarter of 2011 compared to a loss of $3 million in 2010.
New contract awards increased to $341 million in the quarter from $289 million in the same quarter last year. Backlog at September 30, 2011 was $1.56 billion, compared to $1.65 billion a year earlier.
Ø
Industrial
Industrial operations include all of Aecon’s industrial manufacturing and construction activities including in-plant construction, fabrication of specialty pipe, assembly of custom module units and the design and manufacture of once-through heat recovery steam generators.
|
Financial Highlights
($ millions)
|
Three Months
Ended Sept. 30
|
|
Nine Months
Ended Sept. 30
|
|
|
|
2011
|
|
2010
|
|
|
|
|
2011
|
|
2010
|
|
Revenues
|
$
|
275
|
$
|
266
|
|
|
|
$
|
844
|
$
|
734
|
|
EBITDA
|
|
8.4
|
|
(2.9)
|
|
|
|
|
34.0
|
|
33.5
|
|
Segment operating profit (loss)
|
|
4.6
|
|
(6.1)
|
|
|
|
|
22.3
|
|
24.3
|
|
Operating profit margin
|
|
1.7%
|
|
(2.3%)
|
|
|
|
|
2.6%
|
|
3.3%
|
|
Backlog – September 30
|
$
|
655
|
$
|
871
|
|
|
|
|
|
|
|
Third quarter revenues of $275 million in the Industrial segment were $9 million higher than in 2010. Most of the increase in revenues came from IST, primarily reflecting the impact of a higher order backlog this year.
For the three and nine months ended September 30, 2011, operating profit in the Industrial segment increased/(decreased) over the same period last year as follows:
($ millions) Three months ended Nine months ended
Sept. 30 Sept. 30
Heavy Industrial (construction and fabrication) 7.5 (7.0)
Mechanical 3.5 3.4
IST (0.3) 1.6
Increase (decrease) in segment operating profit 10.7 (2.0)
Most of the operating profit increase in the Industrial segment this quarter resulted from higher volumes in the commodity mining sector and from higher margins from construction operations in Ontario. The improvement in mechanical operating profit reflects generally higher margins earned this year compared to 2010.
Backlog of $655 million at September 30, 2011 compares to $871 million at the same time last year. New contract awards of $506 million in the quarter represent an increase of $241 million over the same period in 2010. Most of the increase in new awards occurred in heavy industrial operations, primarily in the commodities mining sector.
Ø
Concessions
The Concessions segment includes the development, operation and financing of infrastructure projects by way of public-private partnership, build-own-operate-transfer or other alternative financing contract structures.
|
Financial Highlights
($ millions)
|
Three Months
Ended Sept. 30
|
|
Nine Months
Ended Sept. 30
|
|
|
|
|
2011
|
|
2010
|
|
|
|
|
2011
|
|
2010
|
|
|
Revenues
|
$
|
22
|
$
|
25
|
|
|
|
$
|
71
|
$
|
67
|
|
|
EBITDA
|
|
20.6
|
|
7.8
|
|
|
|
|
34.3
|
|
21.0
|
|
|
Segment operating profit
|
|
19.7
|
|
5.9
|
|
|
|
|
31.7
|
|
16.1
|
|
|
Operating profit margin
|
|
89.8%
|
|
24.1%
|
|
|
|
|
44.9%
|
|
24.3%
|
|
For the three and nine months ended September 30, 2011, operating profit in the Concessions segment increased/(decreased) over the same period last year as follows:
($ millions) Three months ended Nine months ended
Sept. 30
Sept. 30
Quito Airport Concessionnaire 1.0 1.9
Operation and Maintenance Services – Israel
Gain on sale of O&M operations 11.5 11.5
O&M services 0.6 2.2
Other 0.7 -
Increase in segment operating profit 13.8 15.6
The increase in operating profits in the Concessions segment this quarter is primarily the result of the sale of Derech Eretz Highways Management Corporation, the operator of the Cross Israel Highway. The increase in profits from the Quito airport concessionaire is primarily due to lower amortization charges following the extended opening date for the new airport, which at September 30 was approximately 85% complete.
Consolidated Results
The Consolidated Results for the three and nine months ended September 30, 2011 and 2010 are available at the end of this News Release.
Balance Sheet Highlights
|
Financial Highlights
|
|
(thousands of dollars) (unaudited)
|
|
Sept 30, 2011
|
|
Dec. 31, 2010
|
|
|
|
|
|
|
|
Cash and cash equivalents and restricted cash
|
$
|
189,347
|
$
|
308,653
|
|
Other current assets
|
|
867,705
|
|
1,010,417
|
|
Property, plant and equipment
|
|
469,224
|
|
444,276
|
|
Other long-term assets
|
|
433,007
|
|
358,059
|
|
Total Assets
|
$
|
1,959,283
|
$
|
2,121,405
|
|
|
|
|
|
|
|
Current liabilities
|
$
|
818,425
|
$
|
1,075,038
|
|
Non-recourse project debt
|
|
141,280
|
|
27,333
|
|
Other long-term debt
|
|
109,594
|
|
129,435
|
|
Convertible debentures
|
|
249,669
|
|
249,751
|
|
Other long-term liabilities
|
|
181,599
|
|
180,250
|
|
|
|
|
|
|
|
Equity
|
|
458,716
|
|
459,598
|
|
Total Liabilities and Equity
|
$
|
1,959,283
|
$
|
2,121,405
|
Conference Call
A conference call has been scheduled for Tuesday, November 8, 2011 at 11:00 a.m. ET to discuss Aecon’s 2011 third quarter financial results. Participants should dial 416-981-9030 or
1-800-381-7839 at least 10 minutes prior to the conference time of 11:00 a.m. A replay will be available after 1:00 p.m. at 1-800-558-5253 or 416-626-4100 until midnight on November 15, 2011. The pass code is 21543193.
About Aecon
Aecon Group Inc. is one of Canada’s largest and most diverse construction and infrastructure development companies. 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 Best Employers in Canada.
The information in this press release includes certain forward-looking statements. These forward-looking statements are based on currently available competitive, financial and economic data and operating plans but are subject to risks and uncertainties. In addition to general global events outside Aecon’s control, there are factors which could cause actual results, performance or achievements to vary from those expressed or inferred herein including risks associated with an investment in the common shares of Aecon and the risks related to Aecon's business, including Large Project Risk and Contractual Factors. Risk factors are discussed in greater detail in the section on “Risk Factors” in the Annual Information Form filed on March 30, 2011 and available at www.sedar.com. Forward-looking statements include information concerning possible or assumed future results of operations or financial position of Aecon, as well as statements preceded by, followed by, or that include the words “believes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “should” or similar expressions. Important factors, in addition to those discussed in this document, could affect the future results of Aecon and could cause those results to differ materially from those expressed in any forward-looking statements.
Caution Regarding Non-GAAP Earnings Measures
This press release is based on reported earnings in accordance with International Financial Reporting Standards (“IFRS”). It is also based on EBITDA, Operating Profit, Adjusted Profit (Loss) Attributable to Shareholders and Adjusted Earnings (Loss) Per Share. These non-GAAP measures are derived from the Consolidated Financial Statements but do not have a standardized meaning prescribed by IFRS. Management believes that a significant number of the users of its Management’s Discussion and Analysis (“MD&A”) analyze the Corporation’s results based on these performance measures and that this presentation is consistent with industry practice. Backlog is not a recognized performance measure under GAAP and does not have any standardized meaning prescribed by GAAP. Aecon believes that backlog is a useful complementary measure, commonly used by management and the investment community, to evaluate the Company’s projected activity in future periods. There is no direct comparable measure to backlog in GAAP. Additional information on Non-GAAP Measures is included in the Company’s MD&A.
|
CONSOLIDATED STATEMENTS OF INCOME
|
|
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
|
|
(in thousands of Canadian dollars, except per share amounts) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
For the nine months ended
|
|
|
|
|
September 30
|
|
September 30
|
September 30
|
|
September 30
|
|
|
|
|
2011
|
|
2010
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
835,371
|
|
$
|
802,971
|
$
|
2,105,827
|
|
$
|
1,908,983
|
|
Direct costs and expenses
|
|
|
(739,076)
|
|
|
(736,417)
|
|
(1,944,438)
|
|
|
(1,770,448)
|
|
Gross profit
|
|
|
96,295
|
|
|
66,554
|
|
161,389
|
|
|
138,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing, general and administrative expenses
|
|
|
(36,986)
|
|
|
(29,935)
|
|
(97,214)
|
|
|
(86,975)
|
|
Depreciation and amortization
|
|
|
(16,044)
|
|
|
(12,574)
|
|
(45,776)
|
|
|
(34,043)
|
|
Income (loss) from construction projects accounted for using the equity method
|
|
|
2,406
|
|
|
599
|
|
10,316
|
|
|
(1,113)
|
|
Other income (loss)
|
|
|
12,811
|
|
|
14,583
|
|
14,970
|
|
|
20,886
|
|
Operating profit
|
|
|
58,482
|
|
|
39,227
|
|
43,685
|
|
|
37,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income
|
|
|
838
|
|
|
2,889
|
|
5,144
|
|
|
8,148
|
|
Finance costs
|
|
|
(8,964)
|
|
|
(6,486)
|
|
(26,565)
|
|
|
(18,123)
|
|
Fair value gain on convertible debentures
|
|
|
1,665
|
|
|
912
|
|
4,544
|
|
|
11,178
|
|
Profit before income taxes
|
|
|
52,021
|
|
|
36,542
|
|
26,808
|
|
|
38,493
|
|
Income tax expense
|
|
|
(8,869)
|
|
|
(10,269)
|
|
(1,620)
|
|
|
(8,469)
|
|
Profit for the period
|
|
$
|
43,152
|
|
$
|
26,273
|
$
|
25,188
|
|
$
|
30,024
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders
|
|
$
|
41,659
|
|
$
|
24,928
|
$
|
20,854
|
|
$
|
26,772
|
|
|
Non-controlling interests
|
|
|
1,493
|
|
|
1,345
|
|
4,334
|
|
|
3,252
|
|
|
|
|
$
|
43,152
|
|
$
|
26,273
|
$
|
25,188
|
|
$
|
30,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.76
|
|
$
|
0.46
|
$
|
0.38
|
|
$
|
0.49
|
|
Diluted earnings per share
|
|
$
|
0.49
|
|
$
|
0.37
|
$
|
0.36
|
|
$
|
0.38
|