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Press release from CNW Group

Aecon reports first quarter results for 2013

Tuesday, May 07, 2013

Aecon reports first quarter results for 2013

17:00 EDT Tuesday, May 07, 2013

TORONTO, May 7, 2013 /CNW/ - Aecon Group Inc. (TSX: ARE) today reported results for the first quarter of 2013.

As previously announced, Aecon is reporting its 2013 financial performance on the basis of four segments: Infrastructure, Energy, Mining, and Concessions.  Previously, the Company reported its results within three segments: Infrastructure, Industrial and Concessions. (The 2012 results have been restated to conform with the new reporting segments for 2013).

HIGHLIGHTS

  • First quarter revenue of $567 million rose by $81 million, or 17 per cent, driven by increases in the utilities sector in the Energy segment and strong growth in volume in the Mining segment.
  • Operating loss for the period increased by $13.8 million from $17.3 million in the prior year to $31.1 million for the first quarter of 2013; a profit increase in the Mining segment was more than offset by higher operating losses in the Infrastructure and Energy segments due to a one-time project provision.  Operating losses are typical of first quarter results due to the seasonal nature of the Canadian construction business; excluding the provision, operating profit improved by $5.6 million over the same quarter of 2012, and significant progress was made year over year from both a revenue and margin perspective.
  • Backlog of $2.1 billion at March 31, 2013 versus $2.4 billion at March 31, 2012.  Aecon announced today $375 million in various awards, to be booked for the second quarter, including:
  • Approximately $215 million in Energy related work in Western Canada, including a significant $250 million award to a joint venture between Aecon and its partner ($125 million to Aecon's account) to engineer and construct an industrial facility, that includes pipe fabrication and module assembly work; and $90 million of work for the construction of a mill upgrade; and
  • Approximately $160 million in Transportation-related awards, including $83 million of which is related to building the extension of the 407 Express Toll Route (ETR) to connect with the new Highway 407 East.  Under contract with 407 ETR, Aecon will be working to extend the 407 ETR by 3 kilometres, building 11 major bridge structures, as well as building a new interchange at Brock Road.
  • Increased dividend for 2013 took effect with the first payment of $0.08 cents per share (increased from $0.07 cents per quarter) paid on April 1, 2013 to shareholders of record on March 22, 2013.

"Our balanced and diversified portfolio will hold us in good stead through the course of 2013 and beyond," said John M. Beck, Chairman and Chief Executive Officer.  "Based on the quality of work in our current backlog, recent awards, ongoing growth in our recurring revenues, and substantial projects that we are currently bidding on in our core segments, we maintain our positive outlook and target of 9 per cent EBITDA margin in 2015."

CONSOLIDATED FINANCIAL HIGHLIGHTS  
               
$ millions (except per share amounts) (1)(2)     Three months ended
March 31  
      2013      2012   
               
Revenue   $ 567.4    $ 486.4   
Gross profit     22.5      30.6   
Marketing, general and administrative expenses     (44.8)     (39.3)  
Income from projects accounted for using the equity method     8.4      6.4   
Foreign exchange gains     0.1      -   
Gain on sale of assets and investments     0.2      0.6   
Depreciation and amortization     (17.5)     (15.6)  
Operating loss(3)     (31.1)     (17.3)  
Financing costs, net     (8.7)     (8.1)  
Fair value loss on convertible debentures     (2.2)     (2.8)  
Loss before income taxes     (42.0)     (28.2)  
Income tax recovery     12.1      8.6   
Loss   $ (29.9)   $ (19.6)  
               
Adjusted loss(4)   $ (28.3)   $ (17.6)  
               
Gross profit margin     4.0%     6.3%  
MG&A as a percent of revenue     7.9%     8.1%  
EBITDA(5)     (11.3)     (0.4)  
EBITDA Margin     (2.0)%     (0.1)%  
Operating margin     (5.5)%     (3.6)%  
Loss per share - basic   $ (0.56)   $ (0.37)  
Loss per share - diluted   $ (0.56)   $ (0.37)  
               
Adjusted loss per share - basic   $ (0.53)   $ (0.33)  
Adjusted loss per share - diluted   $ (0.53)   $ (0.33)  
               
Backlog   $ 2,073    $ 2,379   
               

(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. 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)     Certain 2012 amounts in this press release have been restated due to the adoption of IFRS 11, "Joint Arrangements" and IAS 19 (2011), "Employee Benefits".  See Note 4 "New Accounting Standards" in the March 31, 2013 Consolidated Financial Statements for further details.
(3)     "Operating profit (loss)" represents the profit (loss) from operations, before net financing expense, income taxes and non-controlling interests.
(4)     "Adjusted profit (loss)" represents the profit (loss) adjusted to exclude the after-tax fair value gain (loss) on the embedded derivative portion of Aecon's convertible debentures.
(5)     "EBITDA" represents operating profit (loss) adjusted to exclude depreciation and amortization, the gain (loss) on sales of assets and investments, and net income (loss) from projects accounted for using the equity method, but including "JV EBITDA" from projects accounted for using the equity method. "JV 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.

Revenue and operating profit (loss) by segment for the three months ended March 31, 2013 and 2012 are set out and discussed in the tables and sections below:

$ millions    
    For the period ended
March 31, 2013
    Revenue     Operating profit (loss)
    2013      2012      2013      2012 
Infrastructure $ 149.7    $ 188.2    $ (33.6)   $ (20.8)
Energy   248.0      163.4      (13.4)     (3.7)
Mining   171.5      135.0      18.7      13.0 
Concessions   0.6      0.6      6.2      2.8 
Other costs and eliminations(1)   (2.4)     (0.8)     (9.0)     (8.7)
Consolidated $ 567.4    $ 486.4    $ (31.1)   $ (17.3)
                       

(1)  The Other costs and eliminations category includes corporate and other costs that are not directly allocable to segments and also includes inter-segment eliminations.

Aecon reported backlog of $2.073 billion at March 31, 2013 compared to $2.379 billion at the end of the first quarter of 2012.  New contract awards of $212 million were booked in the first quarter of 2013 compared to $492 million in the first quarter of 2012, the main difference being the award of a significant power project in Q1 2012.

Mr. Beck added: "In addition to the growth that Aecon has experienced in recurring revenue - now representing approximately 25 per cent of our annual revenues - we expect quarter-to-quarter variability in our backlog such as we've reported today because of the nature of the larger projects that we are working through, and importantly those that we are currently bidding on. Given the active nature of the pipeline of projects we are currently bidding on, we remain confident in our revenue outlook for 2013 and beyond."

It is important to note that Aecon does not report as backlog the significant and increasing 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, the effective backlog within each of the Company's segments at any given time is greater than what is reported.

OPERATING AND FINANCIAL RESULTS

"Our operational performance in the first quarter was pretty steady across the board," said Teri McKibbon, Chief Operating Officer.  "We remain committed to the ongoing initiatives to continually improve our focus on execution and operating margins by investing in our risk management and project execution capabilities."

Revenue for the first quarter of 2013 increased by 17 per cent to $567 million compared to $486 million, and was driven by increases in the utilities sector in the Energy segment and strong growth in volume in the Mining segment.  Operating losses are typical of first quarter results due to the seasonal nature of the Canadian construction business, and for the first quarter of 2013, operating loss increased by $13.8 million from $17.3 million in the prior year to $31.1 million.  There was one particular project that adversely impacted the results of the Energy and Mining segments; excluding this one project, operating profit improved by $5.6 million over the same quarter of 2012, and significant progress was made year over year from both a revenue and margin perspective.

REPORTING SEGMENTS

Aecon is reporting its 2013 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 sectors.

           
Financial Highlights          
    Three Months Ended
$ millions   March 31
    2013      2012 
           
Revenue $ 149.7    $ 188.2 
Gross profit $ (15.1)   $ (5.4)
EBITDA $ (29.7)   $ (16.5)
Operating loss $ (33.6)   $ (20.8)
           
EBITDA margin   (19.8)%     (8.8)%
Operating margin   (22.5)%     (11.0)%
Backlog $ 1,021    $ 1,201 
           

The operating loss in the Infrastructure segment of $33.6 million increased by $12.9 million over the same period in the prior year; this was primarily due to this segment's share ($9.7 million) of a $19.4 million one-time provision on a project.  In addition, there were lower volumes and margins from the Social Infrastructure sector where the Company has re-focused its operations related to the buildings business in Quebec and Ontario, and several projects related to mechanical operations were completed in 2012 in Western Canada.  These were partly offset by margin improvements in Heavy Civil operations.

Infrastructure backlog at March 31, 2013 was $1,021 million, which is $180 million lower than the same time last year primarily due to significant Heavy Civil project work off in 2012 including the Quito airport and Autoroute 30 projects. New contract awards totaled $49 million in the first quarter 2013 compared to $46 million in the prior year.

ENERGY SEGMENT

The Energy segment encompasses a full suite of service offerings to the energy sector including industrial construction and manufacturing activities such as in-plant construction, site construction and module assembly. The Energy segment focuses primarily on the following sectors: oil and gas, power generation, utilities, and energy support services.

           
Financial Highlights          
    Three months ended
$ millions   March 31
    2013      2012 
           
Revenue $ 248.0    $ 163.4 
Gross profit $ 6.3    $ 13.6 
EBITDA $ (10.1)   $ (0.7)
Operating loss $ (13.4)   $ (3.7)
           
EBITDA margin   (4.1)%     (0.4)%
Operating margin   (5.4)%     (2.3)%
Backlog $ 801    $ 560 
           

The operating loss in the Energy segment of $13.4 million compared to a loss of $3.7 million in the same period last year reflecting this segment's share ($9.7 million) of the provision on one project.  Higher profits and margins were achieved from fabrication and module assembly projects across Canada but were offset by lower revenue in Central Canada construction and lower margins in the power sector in Central Canada.

Energy backlog at March 31, 2013 was $801 million - or $241 million higher - than the $560 million as at the end of the first quarter of 2012, with most of the increase occurring in Utilities related to pipeline work in Western Canada. New contract awards of $51 million in the first quarter of 2013 were $253 million lower than the same period in 2012, reflecting the year-over-year impact of a large multi-year award booked in the first quarter of 2012 in the power sector in Central 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 resource extraction, to processing, and to reclamation.

           
Financial Highlights          
    Three months ended
$ millions   March 31
    2013      2012 
           
Revenue $ 171.5    $ 135.0 
Gross profit $ 31.4    $ 22.6 
EBITDA $ 27.0    $ 19.2 
Operating profit $ 18.7    $ 13.0 
           
EBITDA margin   15.7%     14.2%
Operating margin   10.9%     9.6%
Backlog $ 251    $ 618 
           

The operating profit in the Mining segment of $18.7 million was $5.7 million higher than the same period last year, with the majority of the period-over-period increase resulting from higher volume.

Mining backlog at March 31, 2013 of $251 million was $367 million lower than the same time last year as work progressed on several large projects throughout the past year.  New contract awards of $112 million in the first quarter of 2013 were $20 million lower than in the same period in 2012.

CONCESSIONS SEGMENT

The Concessions segment includes the development, financing, 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
    2013      2012 
           
Revenue $ 0.6    $ 0.6 
Gross profit $ (0.1)   $ (0.2)
Income from projects accounted for using the equity method $ 7.0    $ 4.2 
EBITDA $ 8.7    $ 4.8 
Operating profit $ 6.2    $ 2.8 
           

With the adoption of IFRS 11 "Joint Arrangements" on January 1, 2013, Aecon's investment in the Quito airport Concessionaire ("Quiport JV") is now reported using the equity method of accounting.  Previously Quiport JV was reported using proportionate consolidation.  Prior period amounts for 2012 have been restated to reflect the same basis of accounting.  As a result of the change in accounting, revenue reported in the Concessions segment for the first quarter of 2013 and 2012 is only $1 million.

Operating profit of $6.2 million for the first quarter of 2013 was $3.4 million higher than the same period last year, reflecting higher revenue in Quiport JV following the transition of operations from the old Quito airport to the new Quito airport in February 2013 and year-over-year passenger growth.

DIVIDEND

As previously announced, the annual dividend is $0.32 per share to be paid in four quarterly payments of $0.08 cents per share. The increased dividend for 2013 took effect with the first payment of $0.08 cents per share (increased from $0.07 cents per quarter) paid on April 1, 2013 to shareholders of record on March 22, 2013.

CONSOLIDATED RESULTS

The consolidated results for the three months ended March 31, 2013 and 2012 are available at the end of this news release.

BALANCE SHEET HIGHLIGHTS        
    March 31   Dec. 31
(in thousands of Canadian dollars) (unaudited)   2013    2012 
         
Cash $ 84,541  $ 66,977 
Other current assets   922,003    996,836 
Property, plant and equipment   498,729    508,553 
Other long-term assets   308,940    291,247 
Total Assets $ 1,814,213  $ 1,863,613 
         
Current liabilities $ 824,404  $ 834,849 
Long-term debt   135,213    146,048 
Convertible debentures   256,856    253,189 
Other long-term liabilities   86,266    86,369 
         
Equity   511,474    543,158 
Total Liabilities and Equity $ 1,814,213  $ 1,863,613 

CONFERENCE CALL

A conference call has been scheduled for Wednesday, May 8, 2013 at 10 a.m. (ET) to discuss Aecon's 2013 first quarter financial results. Participants should dial 416-981-9035 or 1-800-381-7839 at least 10 minutes prior to the conference time. A replay will be available after 12 p.m. at 1-800-558-5253 or 416-626-4100 until midnight on May 15, 2013. The reservation number is 21655433.

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.

STATEMENT ON FORWARD-LOOKING INFORMATION

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 events beyond Aecon's control, there are factors which could cause actual or future results, performance or achievements to differ materially from those expressed or inferred herein including, but not limited to: interest and foreign exchange rates, global equity and capital markets, business competition and operational and reputational risks, including Large Project Risk and Contractual Factors.  Readers are referred to the specific risk factors relating to and affecting Aecon's business and operations as filed by Aecon pursuant to applicable securities laws.  Forward-looking statements may include, without limitation, statements regarding the operations, business, financial condition, expected financial results, performance, prospects, ongoing objectives, strategies and outlook for Aecon.  Forward-looking statements, may in some cases be identified by words such as "will," "plans," "believes," "expects," "anticipates," "estimates," "projects," "intends," "should" or the negative of these terms, or similar expressions.  Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Aecon undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

CONSOLIDATED STATEMENTS OF INCOME
           
(in thousands of Canadian dollars, except per share amounts) (unaudited)
           
           
    For the three months ended
    March 31 March 31
    2013  2012 
           
Revenue $ 567,439  $ 486,425 
Direct costs and expenses   (544,934)   (455,846)
Gross profit   22,505    30,579 
           
Marketing, general and administrative expenses   (44,814)   (39,347)
Depreciation and amortization   (17,511)   (15,558)
Income from projects accounted for using the equity method   8,422    6,399 
Other income   297    624 
Operating loss   (31,101)   (17,303)
           
Finance income   532    883 
Finance costs   (9,277)   (9,021)
Fair value loss on convertible debentures   (2,156)   (2,762)
Loss before income taxes   (42,002)   (28,203)
Income tax recovery   12,090    8,614 
Loss for the period $ (29,912) $ (19,589)
           
Basic earnings per share $ (0.56) $ (0.37)
Diluted earnings per share $ (0.56) $ (0.37)
         

 

 

 

SOURCE: Aecon Group Inc.

For further information:

Vince Borg
Senior Vice President, Corporate Affairs
Aecon Group Inc.
416-297-2615
vborg@aecon.com

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