Toronto, Ontario – May 8, 2017: Aecon Group Inc. (TSX: ARE) today reported results for the first quarter of 2017.
“Aecon’s solid first quarter results and growth in backlog underscore the resilience of the business and the ability to continue to win new work while maintaining a disciplined approach to margin expectations. We expect robust bidding activity to continue as larger projects with longer procurement cycles roll out during 2017 and beyond,” said John M. Beck, President and Chief Executive Officer, Aecon Group Inc.
HIGHLIGHTS
- Revenue for the three months ended March 31, 2017 was $675 million compared to $691 million in the first quarter of 2016.
- Adjusted EBITDA of $6.9 million (margin of 1.0 per cent) for the first quarter of 2017 compared to Adjusted EBITDA of $4.2 million (margin of 0.6 per cent) in the first quarter of 2016. Adjusted EBITDA excluding severance expenses of $6.8 million incurred in the first quarter of 2017 was $13.7 million (margin of 2.0 per cent).
- Backlog as at March 31, 2017 of $4.4 billion compares to backlog of $4.2 billion as at December 31, 2016.
- New contract awards of $836 million were booked in the first quarter of 2017 including:
- A construction contract valued at US$274 million for the Bermuda International Airport Redevelopment Project which achieved commercial and financial close on March 15, 2017.
- In addition to its construction mandate, Aecon’s Concessions segment, through Bermuda Skyport Corporation Limited, will oversee the overall delivery of the redevelopment project and will manage the airport’s operations, maintenance, and commercial functions over a 30-year concession term.
- A 50/50 Joint Venture between Aecon and Graham Construction was awarded a $252 million contract by Metro Vancouver to carry out work on the Annacis Island Wastewater Treatment Plant Stage 5, Phase 1 Expansion. The scope of work includes civil, mechanical and electrical work, as well as instrumentation and demolition. Work commenced in April 2017 and is expected to be complete in 2021. Aecon’s share of the contract is included in Infrastructure segment backlog as at March 31, 2017.
- A nine per cent increase to the annual dividend took effect, with the first quarterly payment of 12.5 cents per share (increased from 11.5 cents per share) paid on April 3, 2017 to shareholders of record on March 24, 2017.
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CONSOLIDATED FINANCIAL HIGHLIGHTS (1)
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Three months ended
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$ millions (except per share amounts)
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March 31
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2017
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2016
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Revenue
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$
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674.9
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$
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690.7
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Gross profit
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51.0
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45.1
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Marketing, general and administrative expenses
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(48.7)
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(44.5)
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Income from projects accounted for using the equity method
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0.9
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0.2
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Foreign exchange gain
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1.2
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1.5
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Gain (loss) on sale of assets
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(1.1)
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0.4
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Depreciation and amortization
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(20.6)
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(19.0)
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Operating loss (2)
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(17.3)
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(16.3)
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Financing expense, net
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(5.0)
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(5.0)
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Loss before income taxes
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(22.3)
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(21.3)
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Income tax recovery
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3.9
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4.6
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Loss
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$
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(18.3)
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$
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(16.8)
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Gross profit margin
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7.6%
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6.5%
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MG&A as a percent of revenue
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7.2%
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6.4%
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Adjusted EBITDA (3)
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6.9
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4.2
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Adjusted EBITDA Margin
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1.0%
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0.6%
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Operating margin
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(2.6)%
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(2.4)%
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Loss per share
−
basic
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$
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(0.32)
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$
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(0.29)
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Loss per share − diluted
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$
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(0.32)
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$
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(0.29)
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Backlog
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$
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4,365
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$
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4,608
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(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 EBITDA” represents operating profit (loss) adjusted to exclude depreciation and amortization, the gain (loss) on sale of assets and investments, restructuring costs, gain (loss) on mark-to-market 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 “Equity Project EBITDA” from projects accounted for using the equity method. “Equity Project EBITDA” represents Aecon’s proportionate share of the earnings or losses from projects accounted for using the equity method before depreciation and amortization, net financing expense and income taxes.
OPERATING AND FINANCIAL RESULTS
Revenue for the three months ended March 31, 2017 was lower by $16 million, or 2 per cent, compared to the same period in 2016. Revenue was higher in the Energy segment ($66 million) with increases in both industrial ($42 million) and utilities operations ($24 million). Offsetting these increases was lower revenue in the Mining segment ($69 million) due to a decrease in site installation work in the commodity mining sector ($57 million) and lower civil and foundations volume ($12 million). Revenue in the Infrastructure segment was also lower ($5 million) as an increase in social infrastructure work ($11 million) was more than offset by lower volume in transportation ($10 million) and heavy civil operations ($6 million).
Operating loss of $17.3 million for the three months ended March 31, 2017 increased by $1.0 million compared to a loss of $16.3 million the same period in 2016. Contributing to operating profit in the first quarter of 2017 was an increase in gross profit of $5.9 million, with the largest increase occurring in the Energy segment ($11.6 million) due primarily to higher industrial volume in the nuclear sector and higher volume in utilities. Gross profit also increased in the Infrastructure segment ($1.3 million) mainly from higher volume and improved margins in social infrastructure operations as well as from higher margins in Transportation. These improvements were partially offset by lower gross profit in the Mining segment ($8.0 million) due primarily to lower volume in the commodity mining sector and from civil and foundations work related to mining projects.
Marketing, general and administrative expenses (“MG&A”) increased by $4.2 million in the first quarter of 2017 compared to the same period in 2016, and MG&A as a percentage of revenue increased from 6.4 per cent in the first quarter of 2016 to 7.2 per cent in the first quarter of 2017. The higher MG&A was due to severance expense of $6.8 million incurred in the first quarter of 2017, related to the departure of a senior executive and restructuring in Aecon’s oil related activities.
Reported backlog as at March 31, 2017 of $4,365 million compares to backlog of $4,204 million at December 31, 2016 and $4,608 million as at March 31, 2016. New contract awards of $836 million were booked in the first quarter of 2017 compared to $2,038 million in the same period of 2016. The prior period included Aecon’s $1,375 million share of the execution phase of the Re-tube and Feeder Replacement project for the Darlington Nuclear Generating Station Refurbishment Program.
Aecon does not report as backlog the significant number of contracts and arrangements in hand where the exact amount of work to be performed cannot be reliably quantified or where a minimum number of units at the contract specified price per unit is not guaranteed. Therefore, Aecon’s effective backlog at any given time is greater than what is reported.
REPORTING SEGMENTS
Aecon reports its financial performance on the basis of four segments: Infrastructure, Energy, Mining, and Concessions.
INFRASTRUCTURE SEGMENT
The Infrastructure segment includes all aspects of the construction of both public and private infrastructure, primarily in Canada, and on a selected basis, internationally. The Infrastructure segment focuses primarily on the transportation, heavy civil, and water and wastewater treatment markets.
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Financial Highlights
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Three Months Ended
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$ millions
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March 31
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2017
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2016
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Revenue
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$
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148.7
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$
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154.2
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Gross profit
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$
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0.2
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$
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(1.2)
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Adjusted EBITDA
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$
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(15.7)
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$
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(14.9)
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Operating loss
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$
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(19.9)
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$
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(19.0)
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Gross profit margin
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0.1%
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(0.7)%
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Adjusted EBITDA margin
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(10.5)%
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(9.6)%
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Operating margin
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(13.4)%
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(12.3)%
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Backlog
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$
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2,109
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$
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2,192
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For the quarter ended March 31, 2017, revenue in the Infrastructure segment of $149 million was $5 million, or 3 per cent, lower than the same period in 2016. Revenue was higher in social infrastructure ($11 million) primarily due to the commencement of construction operations at the Bermuda International Airport Redevelopment Project which achieved commercial and financial close in the first quarter of 2017. Offsetting this increase was lower revenue in transportation operations ($10 million) due to decreased roadbuilding activity in Ontario, and in heavy civil operations ($6 million) due to lower volume in Ontario.
In the first quarter of 2017, operating loss in the Infrastructure segment of $19.9 million increased by $0.9 million compared to an operating loss of $19.0 million in the same period in the prior year. Operating profit improved in transportation by $1.9 million from higher gross profit margin and in social infrastructure operations by $0.3 million from higher volume in the period. Offsetting these increases was a decrease in operating profit in heavy civil of $3.1 million from lower volume in the period and higher bidding costs.
Infrastructure backlog at March 31, 2017 was $2,109 million, which is $83 million lower than the same time last year. The largest year-over-year decrease in backlog occurred in heavy civil operations ($365 million) as the execution of existing projects, particularly in the transportation and hydroelectric sectors, outpaced new awards. Also contributing to this decrease was lower backlog in the transportation sector from roadbuilding projects in Ontario ($138 million). Partially offsetting these decreases was higher backlog in social infrastructure ($420 million) due to new awards in the water treatment sector, and from the award in the first quarter of 2017 to construct the new airport terminal and related infrastructure associated with the Bermuda International Airport Redevelopment Project. New contract awards totalled $594 million for the first three months of 2017 compared to $151 million in the same period last year.
ENERGY SEGMENT
The Energy segment encompasses a full suite of service offerings to the energy market including industrial construction and manufacturing activities such as in-plant construction, site construction and fabrication and module assembly. The Energy segment focuses primarily on the following sectors: power generation, oil and gas, pipelines, utilities, and energy support services.
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Financial Highlights
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Three months ended
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$ millions
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March 31
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2017
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2016
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Revenue
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$
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367.6
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$
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301.3
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Gross profit
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$
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24.3
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$
|
12.7
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Adjusted EBITDA
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$
|
11.9
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$
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0.5
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Operating profit (loss)
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$
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5.7
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$
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(4.9)
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Gross profit margin
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6.6%
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4.2%
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Adjusted EBITDA margin
|
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3.2%
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0.2%
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|
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Operating margin
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1.6%
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(1.6)%
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Backlog
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$
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2,157
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$
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2,210
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Revenue of $368 million in the first three months of 2017 in the Energy segment was $66 million, or 22 per cent, higher than the same period in 2016. This increase was driven by higher revenue in both industrial ($42 million) and utilities ($24 million) operations. Revenue was higher in industrial operations in Eastern Canada ($108 million) from a higher volume of nuclear power work in Ontario, and partially offset by lower revenue in industrial operations in Western Canada ($66 million) from lower module and fabrication activity in the oil sands. The increase in revenue from utilities operations was primarily due to higher volume in Western Canada ($28 million) from pipeline projects, offset partially by lower volume in Eastern Canada ($4 million) mainly in the gas distribution sector.
For the three months ended March 31, 2017, operating profit of $5.7 million improved by $10.6 million compared to an operating loss of $4.9 million in the first quarter of 2016. Operating profit increased in industrial operations by $8.8 million driven by the higher volume in Eastern Canada, and from lower overhead and MG&A expense in Western Canada which offset the impact of lower Western Canada volume in the quarter. Operating profit from utilities operations also increased by $1.8 million quarter-over-quarter due to higher volume and improved gross profit margin in Western Canada.
Backlog at March 31, 2017 of $2,157 million was $53 million lower than the same time in 2016, driven by a decrease in industrial operations ($88 million), primarily in Western Canada ($85 million) due to the completion of fabrication and module assembly projects in 2016 and less new work due to market conditions in the oil sector. Backlog in Eastern Canada industrial operations was also down slightly ($3 million). Partially offsetting these decreases was higher backlog in utilities operations ($35 million) due to higher awards in the communications sector in Ontario. New contract awards of $153 million in the first quarter of 2017 were $1,670 million lower than the same period in 2016 due primarily to the Darlington Nuclear Refurbishment Project, which was awarded in the first quarter of 2016.
MINING SEGMENT
The Mining segment offers turnkey services consolidating Aecon’s mining capabilities and services across Canada, including both mine site installations and contract mining. This segment offers construction services that span the scope of a project’s life cycle: from overburden removal and resource extraction, to processing and environmental reclamation.
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Financial Highlights
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Three months ended
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$ millions
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March 31
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2017
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2016
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Revenue
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$
|
166.8
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$
|
236.2
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Gross profit
|
$
|
25.3
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|
$
|
33.3
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|
|
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Adjusted EBITDA
|
$
|
19.2
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$
|
26.2
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Operating profit
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$
|
9.7
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$
|
16.6
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|
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|
|
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|
|
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|
|
Gross profit margin
|
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15.1%
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|
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14.1%
|
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Adjusted EBITDA margin
|
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11.5%
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|
|
11.1%
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|
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Operating margin
|
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5.8%
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7.0%
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Backlog
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$
|
86
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$
|
206
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Mining segment revenue in the first quarter of 2017 of $167 million was $69 million, or 29 per cent, lower than the same period in 2016. The majority of the decrease ($57 million) was driven by lower volume of site installation work in the commodity mining sector, as a major project nears completion. Revenue from civil and foundations work was also lower quarter-over-quarter ($12 million) due to the completion of mining related projects in Ontario. Contract mining revenue was flat quarter-over-quarter as increased traditional contract mining work in 2017 was offset by the completion of site development projects in the Alberta oil sands that were ongoing in the first quarter of 2016.
For the three months ended March 31, 2017, operating profit in the Mining segment of $9.7 million decreased by $6.9 million compared to the same period last year. The quarter-over-quarter decrease in operating profit was primarily the result of lower volume from commodity mining ($5.5 million) and civil and foundations ($1.2 million) sectors as described above. Operating profit in contract mining was relatively flat quarter-over-year ($0.2 million).
Backlog as at March 31, 2017 of $86 million was $120 million lower than at the same time last year. Backlog was lower in each of the commodity mining sector ($93 million), civil and foundations projects ($18 million), and contract mining ($9 million), as the execution of existing work outpaced new awards in each area. New contract awards of $85 million in the first three months of 2017 were $19 million higher than in the same period in 2016.
CONCESSIONS SEGMENT
The Concessions segment includes the development, financing, design, construction and operation of infrastructure projects by way of build-operate-transfer, build-own-operate-transfer and other Public-Private Partnership contract structures.
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Financial Highlights
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Three Months Ended
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$ millions
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March 31
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|
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2017
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|
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2016
|
|
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|
|
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Revenue
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$
|
36.6
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$
|
0.8
|
|
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|
Gross profit
|
$
|
1.2
|
|
$
|
0.2
|
|
|
|
Income from projects accounted for using the equity method
|
$
|
1.0
|
|
$
|
0.4
|
|
|
|
Adjusted EBITDA
|
$
|
3.7
|
|
$
|
1.1
|
|
|
|
Operating profit (loss)
|
$
|
(0.7)
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|
$
|
(0.7)
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Backlog
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$
|
13
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$
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-
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Aecon holds a 100 per cent interest in Bermuda Skyport Corporation Limited (“Skyport”), the concessionaire responsible for the airport's operations, maintenance and commercial functions, and the entity that will manage and coordinate the overall delivery of the redevelopment project over a 30-year concession term. Aecon’s participation in Skyport is consolidated and as such is accounted for in the consolidated financial statements by reflecting, line by line, the assets, liabilities, revenue and expenses of Skyport. However, Aecon’s participation in the Eglinton Crosstown Light Rail Transit (“LRT”) and Waterloo LRT projects are joint ventures which are accounted for using the equity method.
Revenue in the Concessions segment for the three months ended March 31, 2017 was $37 million, an increase of $36 million compared to the same period last year. The higher revenue was driven by the ramp-up of the recently-awarded Bermuda International Airport Redevelopment Project including $33 million related to construction revenue flowed through Skyport and eliminated on consolidation as inter-segment revenue.
For the three months ended March 31, 2017, operating loss of $0.7 million is unchanged from the same period in 2016 as increased Adjusted EBITDA from LRT concession projects in Ontario and the Bermuda International Airport Redevelopment Project was offset by higher depreciation related to the existing Bermuda International Airport assumed as part of the concession contract.
Except for Operations and Maintenance (“O&M”) activities under contract for the next five years, Aecon does not include in its reported backlog expected revenue from concession agreements. As such, while Aecon expects future revenue from its concession assets, no concession backlog, other than from O&M activities, is reported.
OUTLOOK
“Our overall revenue expectations for 2017 are for flat to modestly lower volume, offset by an expectation that Adjusted EBITDA margin improvement in 2017 will result in an overall improvement in Adjusted EBITDA over the course of the year,” said John M. Beck. “As usual, we expect the first half of 2017 to be weaker than the second half of 2017 due to the seasonality of Aecon’s work.”
CONSOLIDATED RESULTS
The consolidated results for the three months ended March 31, 2017 and 2016 are available at the end of this news release.
BALANCE SHEET HIGHLIGHTS
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Balance Sheet Highlights
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March 31
|
|
December 31
|
|
$ thousands (unaudited)
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
304,396
|
$
|
231,858
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Restricted cash
|
|
318,454
|
|
-
|
|
Other current assets
|
|
1,135,370
|
|
1,157,442
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Property, plant and equipment
|
|
440,883
|
|
450,368
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Other long-term assets
|
|
333,897
|
|
165,817
|
|
Total Assets
|
$
|
2,533,000
|
$
|
2,005,485
|
|
|
|
|
|
|
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Current liabilities
|
$
|
918,726
|
$
|
864,764
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Long-term debt
|
|
80,514
|
|
86,403
|
|
Non-recourse project debt
|
379,335
|
-
|
|
Convertible debentures (long term portion)
|
|
165,739
|
|
164,778
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Other long-term liabilities
|
|
253,278
|
|
135,941
|
|
|
|
|
|
|
|
Equity
|
|
735,408
|
|
753,599
|
|
Total Liabilities and Equity
|
$
|
2,533,000
|
$
|
2,005,485
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CONFERENCE CALL
A conference call has been scheduled for Tuesday, May 9, 2017 at 9:30 a.m. (ET) to discuss Aecon’s first quarter 2017 financial results. Participants should dial 416-359-3126 or 1-800-670-8680 at least 10 minutes prior to the conference time. An accompanying presentation of the first quarter 2017 financial results is available at www.aecon.com/investing. For those unable to attend the call, a replay will be available after 12:00 p.m. at 1-800-558-5253 or 416-626-4100 until midnight on May 16, 2017. The reservation number is 21850777.
AECON 2017 ANNUAL GENERAL MEETING
Aecon invites shareholders of Aecon Group Inc. to join the Board of Directors and the senior leadership team of Aecon at the Annual General Meeting on June 29, 2017 at 11:00 a.m. (Eastern Time) which will take place at the Design Exchange in Toronto.
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CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
(in thousands of Canadian dollars, except per share amounts) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
March 31
|
|
|
|
|
2017
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
674,866
|
$
|
690,699
|
|
Direct costs and expenses
|
|
|
(623,821)
|
|
(645,583)
|
|
Gross profit
|
|
|
51,045
|
|
45,116
|
|
|
|
|
|
|
|
|
|
Marketing, general and administrative expenses
|
|
|
(48,668)
|
|
(44,461)
|
|
Depreciation and amortization
|
|
|
(20,645)
|
|
(19,027)
|
|
Income from projects accounted for using the equity method
|
|
|
882
|
|
237
|
|
Other income
|
|
|
85
|
|
1,834
|
|
Operating loss
|
|
|
(17,301)
|
|
(16,301)
|
|
|
|
|
|
|
|
|
|
Finance income
|
|
|
305
|
|
57
|
|
Finance costs
|
|
|
(5,281)
|
|
(5,096)
|
|
Loss before income taxes
|
|
|
(22,277)
|
|
(21,340)
|
|
Income tax recovery
|
|
|
3,931
|
|
4,552
|
|
Loss for the period
|
|
$
|
(18,346)
|
$
|
(16,788)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share
|
|
$
|
(0.32)
|
$
|
(0.29)
|
|
Diluted loss per share
|
|
$
|
(0.32)
|
$
|
(0.29)
|
ABOUT AECON
Aecon Group Inc. (TSX: ARE) is a Canadian leader and partner-of-choice in construction and infrastructure development. Aecon provides integrated turnkey services to private and public sector clients in the Infrastructure, Energy and Mining sectors and provides project management, financing and development services through its Concessions segment. Aecon is also pleased to be consistently recognized as one of the Best Employers in Canada. For more information, please visit www.aecon.com and follow us on Twitter at @AeconGroup.