Toronto, Ontario - May 11, 2015: Aecon Group Inc. (TSX: ARE) today reported results for the first quarter of 2015 including higher Adjusted EBITDA of $6.5 million as compared to $3.1 million in the first quarter of 2014.
"Aecon's first quarter results represent a strong start to the year with increased revenue across all three operating segments, solid margins and record backlog of $2.8 billion," said Teri McKibbon, President and Chief Executive Officer, Aecon Group Inc.
HIGHLIGHTS
- Revenue of $502 million for the three months ended March 31, 2015 was higher by $40 million compared to the same period in 2014, due to stronger volume in the main operating segments of Infrastructure, Energy and Mining.
- Adjusted EBITDA of $6.5 million (margin of 1.3 per cent) for the first quarter of 2015 was higher than $3.1 million (margin of 0.7 per cent) for the first quarter of 2014.
- Backlog of $2,787 million at March 31, 2015 was 28 per cent higher than the $2,178 million at March 31, 2014. Backlog in all main operating segments of Infrastructure, Energy, and Mining improved year-over-year.
- Aecon announced today it has been awarded the following contracts:
- A $45 million contract by the Ministry of Transportation for work on Highway 401 near Cobourg, Ontario (included in Q1 backlog).
- An Aecon partnership was awarded a power contract, for which Aecon's share is estimated at $44 million (included in Q1 backlog).
- Aecon together with its JV partner Onikaajigan Construction LP was awarded a contract by New Gold Inc. for early civil works on the new open pit Rainy River gold mine project located in the Township of Chapple, Ontario. This work package is expected to be complete in the fourth quarter of 2015 (booked in Q2 backlog).
- On April 10, 2015, Aecon sold its wholly-owned subsidiary Innovative Steam Technologies (IST) to Fulcrum Capital Partners. Gross cash proceeds of the sale are approximately $35 million, with potential additional proceeds over the following two years contingent on IST achieving certain earn-out conditions based on performance.
- Increased annual dividend took effect with the first quarterly payment of $0.10 per share (increased from $0.09 per share) paid on April 1, 2015 to shareholders of record on March 20, 2015.
| |
CONSOLIDATED FINANCIAL HIGHLIGHTS
(1)
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
three months ended
|
|
|
|
$ millions (except per share amounts)
|
|
|
March 31
|
|
|
|
|
|
|
2015
|
|
|
2014
(6)
|
|
| |
|
|
|
|
|
|
|
|
| |
Revenue
|
|
$
|
501.5
|
|
$
|
461.9
|
|
|
|
Gross profit |
|
|
36.9 |
|
|
32.8 |
|
| |
Marketing, general and administrative expenses |
|
|
(45.1) |
|
|
(44.4) |
|
| |
Income from projects accounted for using the equity method |
|
|
8.3 |
|
|
7.3 |
|
| |
Foreign exchange gain (loss) |
|
|
(0.8) |
|
|
0.5 |
|
| |
Loss on sale of assets and investments |
|
|
(0.7) |
|
|
- |
|
| |
Restructuring costs |
|
|
- |
|
|
(2.6) |
|
| |
Gain on mark-to-market of LTIP program |
|
|
0.2 |
|
|
- |
|
| |
Depreciation and amortization |
|
|
(17.0) |
|
|
(16.8) |
|
| |
Operating loss
(2)
|
|
|
(18.2)
|
|
|
(23.2)
|
|
|
|
Financing costs, net |
|
|
(7.5) |
|
|
(11.1) |
|
| |
Fair value loss on convertible debentures |
|
|
- |
|
|
(1.7) |
|
| |
Loss before income taxes
|
|
|
(25.7)
|
|
|
(36.0)
|
|
|
|
Income tax recovery |
|
|
8.7 |
|
|
10.1 |
|
| |
Loss
|
|
$
|
(17.0)
|
|
$
|
(25.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss |
|
$
|
(17.0)
|
|
$
|
(25.9)
|
|
|
|
Exclude: |
|
|
|
|
|
|
|
|
|
Fair value loss on convertible debentures |
|
|
-
|
|
|
1.7
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|
|
|
Income tax on fair value loss |
|
|
-
|
|
|
(0.5)
|
|
|
|
Adjusted loss
(3)
|
|
$
|
(17.0)
|
|
$
|
(24.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit margin
|
|
|
7.4%
|
|
|
7.1%
|
|
|
|
MG&A as a percent of revenue
|
|
|
9.0%
|
|
|
9.6%
|
|
|
|
Adjusted EBITDA
(4)
|
|
|
6.5
|
|
|
3.1
|
|
|
|
Adjusted EBITDA Margin
|
|
|
1.3%
|
|
|
0.7%
|
|
|
|
Operating margin
|
|
|
(3.6)%
|
|
|
(5.0)%
|
|
|
|
Loss per share - basic
|
|
$
|
(0.30)
|
|
$
|
(0.49)
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|
|
|
Loss per share - diluted
|
|
$
|
(0.30)
|
|
$
|
(0.49)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted loss per share - basic
(5)
|
|
$
|
(0.30)
|
|
$
|
(0.47)
|
|
|
|
Adjusted loss per share - diluted
(5)
|
|
$
|
(0.30)
|
|
$
|
(0.47)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog
|
|
$
|
2,787
|
|
$
|
2,178
|
|
|
|
|
|
|
|
|
|
|
|
(1)
This press release presents certain non-GAAP and additional GAAP (GAAP refers to Canadian Generally Accepted Accounting Principles) financial measures to assist readers in understanding the Company's performance. Non-GAAP financial measures are measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with GAAP in the consolidated financial statements. Further details on non-GAAP and additional GAAP measures are included in the Company's Management's Discussion and Analysis and available through the System for Electronic Document Analysis and Retrieval at
www.sedar.com
.
(2)
"Operating profit (loss)" represents the profit (loss) from operations, before net financing expense, income taxes and non-controlling interests.
(3)
"Adjusted profit (loss)" represents the profit (loss) adjusted to exclude the after-tax fair value gain (loss) on the embedded derivative portion of convertible debentures.
(4)
"Adjusted EBITDA" represents operating profit (loss) adjusted to exclude depreciation and amortization, the gain (loss) on sales of assets and investments, restructuring costs, gain (loss) on mark-to-mark adjustments related to the Company's long term incentive plan ("LTIP") program and net income (loss) from projects accounted for using the equity method, but including "JV EBITDA" from projects accounted for using the equity method.
(5)
"Adjusted earnings (loss) per share" represents earnings (loss) per share calculated using adjusted profit (loss).
(6)
Certain comparative amounts for 2014 have been reclassified to conform to the presentation adopted in the current year.
OPERATING AND FINANCIAL RESULTS
"The strong backlog across our operating segments, our pre-qualification on targeted major projects in the Infrastructure space, and our work with key clients in the Energy and Mining segments including our increasing portfolio of recurring revenue through supplier-of-choice arrangements, are expected to contribute to continued margin improvement," said Teri McKibbon.
Revenue of $502 million for the three months ended March 31, 2015 was higher by $40 million compared to the same period in 2014 with increases in the Infrastructure, Energy and Mining segments.
Gross profit margin for the period increased to 7.4 per cent compared to 7.1 per cent in the first quarter of 2014.
Adjusted EBITDA of $6.5 million (margin of 1.3 per cent) for the first quarter of 2015 was higher than $3.1 million (margin of 0.7 per cent) for the first quarter of 2014. Operating loss in the first quarter of 2015 of $18.2 million improved by $5.0 million compared to the prior year.
Backlog of $2,787 million at March 31, 2015 was 28 per cent higher than the $2,178 million at March 31, 2014 - representing a record backlog for Aecon. Backlog in all major operating segments of Infrastructure, Energy, and Mining improved year-over-year. New contract awards of $635 million were booked in the first quarter of 2015 compared to $867 million in the first quarter of 2014.
Not included in backlog, but important to Aecon's prospects due to the significant volume involved, is the expected recurring revenue 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.
REPORTING SEGMENTS
Aecon reports its financial performance on the basis of four segments: Infrastructure, Energy, Mining, and Concessions.
INFRASTRUCTURE SEGMENT
The Infrastructure segment includes all aspects of the construction of both public and private infrastructure, primarily in Canada, and on a selected basis, internationally. The Infrastructure segment focuses primarily on the transportation, heavy civil and social infrastructure markets.
| |
Financial Highlights
|
|
|
|
|
|
|
| |
|
|
Three Months Ended
|
|
|
|
$ millions
|
|
March 31
|
|
|
|
|
|
2015
|
|
|
2014
(1)
|
|
| |
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
116.7
|
|
$ |
106.5 |
|
| |
Gross profit
|
$
|
(1.2)
|
|
$ |
(3.4) |
|
| |
Adjusted EBITDA
|
$
|
(17.3)
|
|
$ |
(16.7) |
|
| |
Operating profit (loss)
|
$
|
(21.0)
|
|
$ |
(23.3) |
|
| |
|
|
|
|
|
|
|
| |
Gross profit margin
|
|
(1.0)%
|
|
|
(3.2)% |
|
| |
Adjusted EBITDA margin
|
|
(14.9)%
|
|
|
(15.7)% |
|
| |
Operating margin
|
|
(18.0)%
|
|
|
(21.8)% |
|
| |
Backlog
|
$
|
1,329
|
|
$ |
1,277 |
|
| |
|
|
|
|
|
|
|
(1)
Certain comparative amounts for 2014 have been reclassified to conform to the presentation adopted in the current year.
Revenue for the first quarter of 2015 in the Infrastructure segment of $117 million was $10 million higher than the same period last year. The largest increase occurred in heavy civil operations due largely to higher revenue from project awards received in 2014 in the power sector in Western Canada and heavy civil transportation sector in Ontario that did not begin to ramp-up until late in 2014. Revenue was also higher in transportation operations as a higher volume of road building work in Ontario more than offset lower revenue in Western Canada.
Operating loss in the first quarter in the Infrastructure segment of $21.0 million improved by $2.3 million over the same period in the prior year. The largest improvement occurred in social infrastructure operations due largely to the period-over-period impact of a $2.6 million expense incurred during the first quarter of 2014 as a result of the closure of the Seattle buildings business unit as well as from lower MG&A and overhead costs in mechanical operations. Operating profit in heavy civil operations increased in the first quarter of 2015, although higher volume and gross profit were largely offset by higher bid costs and lower income from projects reported under the equity method when compared to the same period last year. Offsetting these improvements was lower operating profit in transportation operations due largely to higher MG&A costs, in particular higher bid costs. Overall, operating profit in the Infrastructure segment was negatively impacted in the first quarter of 2015 by an increase in bid costs of $2.5 million compared to the same period in 2014.
Infrastructure backlog at March 31, 2015 was $1,329 million, which is $52 million higher than the same time last year. An increase in transportation operations, due to the impact of several large project awards received in 2014 was partially offset by lower backlog in heavy civil operations due to the work-off of projects during the past twelve months. New contract awards totaled $183 million in the first quarter of 2015 compared to $563 million in the same period in the prior year. Increases in new contract awards in transportation and social infrastructure operations were more than offset by lower new awards in heavy civil operations due to the impact in the first quarter of 2014 of several significant awards in the power and heavy civil transportation sectors.
ENERGY SEGMENT
The Energy segment encompasses a full suite of service offerings to the energy market including industrial construction and manufacturing activities such as in-plant construction, site construction and fabrication and module assembly. The Energy segment focuses primarily on the following sectors: oil and gas, power generation, pipelines, utilities, and energy support services.
| |
Financial Highlights
|
|
|
|
|
|
|
| |
|
|
Three months ended
|
|
|
|
$ millions
|
|
March 31
|
|
|
|
|
|
2015
|
|
|
2014
(1)
|
|
| |
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
250.4
|
|
$ |
248.2 |
|
| |
Gross profit
|
$
|
11.6
|
|
$ |
18.8 |
|
| |
Adjusted EBITDA
|
$
|
(3.9)
|
|
$ |
3.9 |
|
| |
Operating profit (loss)
|
$
|
(7.7)
|
|
$ |
0.2 |
|
| |
|
|
|
|
|
|
|
| |
Gross profit margin
|
|
4.6%
|
|
|
7.6% |
|
| |
Adjusted EBITDA margin
|
|
(1.6)%
|
|
|
1.6% |
|
| |
Operating margin
|
|
(3.1)%
|
|
|
0.1% |
|
| |
Backlog
|
$
|
993
|
|
$ |
821 |
|
| |
|
|
|
|
|
|
|
(1)
Certain comparative amounts for 2014 have been reclassified to conform to the presentation adopted in the current year.
Revenue in the first quarter of 2015 of $250 million in the Energy segment was $2 million higher than the same period in 2014. Higher revenue in industrial operations was largely offset by lower revenue in utilities due to lower volume from pipeline projects in Western Canada which more than offset higher utilities volume elsewhere, primarily in the gas distribution sector.
Operating loss of $7.7 million was $7.9 million worse than operating profit of $0.2 million in the same period last year. The majority of the quarter-over-quarter decrease in operating profit occurred in utilities operations due to lower pipeline volume in Western Canada and from lower gross profit margin in Ontario due to the impact on productivity of colder than average winter temperatures. Operating profit also decreased in industrial operations, primarily in Atlantic Canada due to lower volume and gross profit margin on fabrication work where extreme weather conditions impacted timing of work and productivity due to availability of materials and unexpected delays due to ability to access our operating sites.
As noted above, subsequent to the end of the first quarter, on April 10, 2015, Aecon sold its wholly-owned subsidiary IST to Fulcrum Capital Partners. Gross cash proceeds of the sale are approximately $35 million, with potential additional proceeds over the following two years contingent on IST achieving certain earn-out conditions based on performance. IST designs, engineers, manufactures and installs Once Through Steam Generators for the power generation and enhanced oil recovery industries. The financial results of IST are reported in the Energy segment.
Backlog in the Energy segment at March 31, 2015 of $993 million was $172 million higher than the same time last year with most of the increase occurring in industrial operations in Western Canada from both fabrication and site construction projects in the resources sector. This increase was partially offset by lower backlog in utilities operations in Western Canada due to work-off of pipeline projects. New contract awards of $288 million in the first quarter of 2015 were $95 million higher than in the same period in 2014. Most of the increase occurred in industrial operations from new contract awards for site construction projects in the resources sector in Western Canada and from fabrication projects in Atlantic Canada.
MINING SEGMENT
The Mining segment offers turn-key services consolidating Aecon's mining capabilities and services across Canada, including both mine site installations and contract mining. This segment offers construction services that span the scope of a project's life cycle: from overburden removal and resource extraction, to processing and environmental reclamation.
| |
Financial Highlights
|
|
|
|
|
|
|
| |
|
|
Three months ended
|
|
|
|
$ millions
|
|
March 31
|
|
|
|
|
|
2015
|
|
|
2014
(1)
|
|
| |
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
137.6
|
|
$ |
107.5 |
|
| |
Gross profit
|
$
|
27.1
|
|
$ |
17.6 |
|
| |
Adjusted EBITDA
|
$
|
20.8
|
|
$ |
11.9 |
|
| |
Operating profit
|
$
|
12.3
|
|
$ |
4.3 |
|
| |
|
|
|
|
|
|
|
| |
Gross profit margin
|
|
19.7%
|
|
|
16.3% |
|
| |
Adjusted EBITDA margin
|
|
15.1%
|
|
|
11.1% |
|
| |
Operating margin
|
|
9.0%
|
|
|
4.0% |
|
| |
Backlog
|
$
|
465
|
|
$ |
80 |
|
| |
|
|
|
|
|
|
|
(1) Certain comparative amounts for 2014 have been reclassified to conform to the presentation adopted in the current year.
Revenue in the first quarter of 2015 of $138 million in the Mining segment was $30 million higher than in the same period of 2014. Most of this increase was from a higher volume of site installation work in the commodity mining sector. Offsetting this increase was lower revenue from contract mining where higher revenue from site development work related to a 2014 award at the Fort Hills project in Alberta was more than offset by reduced volume from traditional contract mining work in the oil sands.
Operating profit in the Mining segment in the first quarter of $12.3 million was $8.0 million higher than the same period last year, due primarily to higher volume and gross profit margin from site installation work in the commodity mining sector. Operating profit also increased in contract mining and mining construction operations which benefitted from a more favourable mix of work and more favourable site conditions for unit rate reclamation work when compared to the same period in 2014.
Backlog at March 31, 2015 of $465 million was $385 million higher than the same time last year and new contract awards of $167 million were $56 million higher than in the same period in 2014. In the commodity mining sector, backlog and new awards both increased due to project awards for site installation work related to potash projects. Backlog also increased in the contract mining sector due to the above noted site development award at the Fort Hills project in Alberta.
CONCESSIONS SEGMENT
The Concessions segment includes the development, financing, design, construction and operation of infrastructure projects by way of build-operate-transfer, build-own-operate-transfer and other public-private partnership contract structures.
| |
Financial Highlights
|
|
|
|
|
|
|
| |
|
|
Three Months Ended
|
|
|
|
$ millions
|
|
March 31
|
|
|
|
|
|
2015
|
|
|
2014 |
|
| |
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
0.6
|
|
$ |
0.6 |
|
| |
Gross profit
|
$
|
(0.6)
|
|
$ |
(0.2) |
|
| |
Income from projects accounted for using the equity method
|
$
|
8.3
|
|
$ |
5.5 |
|
| |
Adjusted EBITDA
|
$
|
13.9
|
|
$ |
11.7 |
|
| |
Operating profit
|
$
|
6.6
|
|
$ |
4.5 |
|
| |
|
|
|
|
|
|
|
Revenue reported in the Concessions segment was $0.6 millionfor the three month periods ended March 31, 2015 and 2014.
For the three months ended March 31, 2015, operating profit of $6.6 million represents a $2.1 million increase compared to the same period in the prior year. The increase is due largely to higher revenue and profitability from the Quiport JV as a result of higher international passenger traffic and from the favourable impact on operating profit of the appreciation of the United States dollar relative to the Canadian dollar during the period. These increases were partially offset by higher bid costs associated with submitted and ongoing bids in the Concessions segment across Canada.
OUTLOOK
"We maintain a positive outlook for the remainder of the year due to strong backlog and recurring revenue in terms of volume, mix of work, and margin profile in all operating segments," said Teri McKibbon.
DIVIDEND
As previously announced, the annual dividend to be paid to all shareholders of Aecon Common shares is $0.40 per share (up from $0.36 per share) to be paid in four quarterly payments of $0.10 per share (from $0.09 per share). The first increased quarterly payment was paid April 1, 2015 to shareholders of record on March 20, 2015.
CONSOLIDATED RESULTS
The consolidated results for the three months ended March 31, 2015 and 2014 are available at the end of this news release.
|
Balance Sheet Highlights
|
|
|
|
|
| |
|
March 31
|
|
December 31
|
|
$ thousands (unaudited)
|
|
2015
|
|
2014
|
|
|
|
|
|
|
| Cash and cash equivalents and restricted cash |
$
|
99,325 |
$
|
143,215 |
| Other current assets |
|
872,488 |
|
819,920 |
| Property, plant and equipment |
|
480,404 |
|
493,108 |
| Other long-term assets |
|
417,703 |
|
373,867 |
|
Total Assets
|
$
|
1,869,920
|
$
|
1,830,110
|
|
|
|
|
|
|
| Current liabilities |
$
|
868,409 |
$
|
823,981 |
| Long-term debt |
|
109,148 |
|
113,612 |
| Convertible debentures (long term portion) |
|
158,208 |
|
157,291 |
| Other long-term liabilities |
|
79,817 |
|
79,276 |
| |
|
|
|
|
| Equity |
|
654,338 |
|
655,950 |
|
Total Liabilities and Equity
|
$
|
1,869,920
|
$
|
1,830,110
|
CONFERENCE CALL
A conference call has been scheduled for Tuesday, May 12, 2015 at 10 a.m. (ET) to discuss Aecon's first quarter 2015 financial results. Participants should dial 416-981-9095 or 1-800-681-8603 at least 10 minutes prior to the conference time. For those unable to attend the call, a replay will be available after 12 p.m. at 1-800-558-5253 or 416-626-4100 until midnight on May 19, 2015. The reservation number is 21765972.
|
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014
|
|
(in thousands of Canadian dollars, except per share amounts) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
March 31
|
|
|
|
|
2015
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
501,520
|
$
|
461,873
|
|
|
Direct costs and expenses
|
|
(464,621)
|
|
(429,056)
|
|
|
Gross profit
|
|
36,899
|
|
32,817
|
|
|
|
|
|
|
|
|
|
|
Marketing, general and administrative expenses
|
|
(45,069)
|
|
(44,364)
|
|
|
Depreciation and amortization
|
|
(16,953)
|
|
(16,828)
|
|
|
Income from projects accounted for using the equity method
|
|
8,339
|
|
7,321
|
|
|
Other loss
|
|
(1,377)
|
|
(2,139)
|
|
|
Operating loss
|
|
(18,161)
|
|
(23,193)
|
|
|
|
|
|
|
|
|
|
|
Finance income
|
|
254
|
|
604
|
|
|
Finance costs
|
|
(7,738)
|
|
(11,747)
|
|
|
Fair value loss on convertible debentures
|
|
(38)
|
|
(1,705)
|
|
|
Loss before income taxes
|
|
(25,683)
|
|
(36,041)
|
|
|
Income tax recovery
|
|
8,704
|
|
10,140
|
|
|
Loss for the period
|
$
|
(16,979)
|
$
|
(25,901)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share
|
$
|
(0.30)
|
$
|
(0.49)
|
|
|
Diluted loss per share
|
$
|
(0.30)
|
$
|
(0.49)
|
|
ABOUT AECON
Aecon Group Inc. is a Canadian leader in construction and infrastructure development providing integrated turnkey services to private and public sector clients. Aecon is pleased to be consistently recognized as one of the Best Employers in Canada.