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Press release from CNW Group

Aecon reports second quarter 2013 results

Tuesday, August 13, 2013

Aecon reports second quarter 2013 results

16:30 EDT Tuesday, August 13, 2013

TORONTO, Aug. 13, 2013 /CNW/ - Aecon Group Inc. (TSX: ARE) today reported results for the second quarter of 2013, including higher EBITDA for the second quarter of $36.7 million, with a margin of 5.3 per cent, as compared to $25.8 million, with a margin of 4.0 per cent, for the prior year period.

"Aecon generated strong results in the second quarter of 2013 and our outlook for the second half of this year is positive," said John M. Beck, Chairman and Chief Executive Officer.  "We expect to continue making progress in improved margins working toward our EBITDA margin target of 9 per cent in 2015.  We have experienced continued strength in recurring revenue, and there is robust bidding activity within our three strategic market sectors."

HIGHLIGHTS

  • Revenue increased by $50 million, or 8 per cent, for the three months ended June 30, 2013, compared to the same period in 2012.

  • EBITDA for the second quarter was $36.7 million on revenue of $697.6 million (margin of 5.3 per cent) versus $25.8 million on revenue of $648.1 million (margin of 4.0 per cent) in the second quarter of 2012.

  • Operating profit for the second quarter of 2013, increased by $5.3 million to $16.2 million from $10.9 million in the prior period.

  • Backlog increased to $2.215 billion at the end of the second quarter of 2013 from $2.073 billion at the end of the first quarter of 2013.

  • Positive outlook affirmed with strong momentum going into the second half of 2013 and into 2014.

  • Aecon announced the appointment of Mr. Paul Murray as Executive Vice President of its Energy segment.
CONSOLIDATED FINANCIAL HIGHLIGHTS                            
                             
        Three months ended       Six months ended
$ millions (except per share amounts)(1)(2)       June 30       June 30
        2013     2012       2013     2012
                             
Revenue     $ 697.6   $ 648.1     $ 1,265.1   $ 1,134.5
Gross profit       59.3     56.3       81.8     86.9
Marketing, general and administrative expenses       (37.8)     (40.2)       (82.6)     (79.6)
Income from projects accounted for using the equity method       8.6     7.7       17.1     14.1
Other income       0.3           0.6     0.7
Depreciation and amortization       (14.3)     (12.8)       (31.8)     (28.4)
Operating profit (loss)(3)       16.2     10.9       (14.9)     (6.4)
Financing expense, net       (9.4)     (7.8)       (18.1)     (16.0)
Fair value gain (loss) on convertible debentures       2.6     1.4       0.4     (1.4)
Profit (loss) before income taxes       9.4     4.5       (32.6)     (23.7)
Income tax recovery (expense)       (1.5)     0.5       10.6     9.2
Profit (loss)     $ 7.9   $ 5.0     $ (22.0)   $ (14.6)
                             
Adjusted profit (loss)(4)     $ 6.0   $ 4.0     $ (22.3)   $ (13.6)
                             
Gross profit margin       8.5%     8.7%       6.5%     7.7%
MG&A as a percent of revenue       5.4%     6.2%       6.5%     7.0%
EBITDA(5)       36.7     25.8       25.4     25.5
EBITDA margin       5.3%     4.0%       2.0%     2.2%
Operating margin       2.3%     1.7%       (1.2)%     (0.6)%
Earnings (loss) per share - basic     $ 0.15   $ 0.10     $ (0.42)   $ (0.27)
Earnings (loss) per share - diluted     $ 0.13   $ 0.09     $ (0.42)   $ (0.27)
                             
Adjusted earnings (loss) per share- basic     $ 0.11   $ 0.08     $ (0.42)   $ (0.26)
Adjusted earnings (loss) per share- diluted     $ 0.11   $ 0.07     $ (0.42)   $ (0.26)
                             
Backlog                   $ 2,215   $ 2,673
                             
(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 June 30, 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.

OPERATING AND FINANCIAL RESULTS

"We were able to improve our margins in the quarter and that objective remains the priority for our team going forward," said Teri McKibbon, President and Chief Operating Officer.  "We will continue our focus on execution across the spectrum of projects that we are working on as well as keeping a disciplined bidding approach in regard to new opportunities."

Revenue increased by $50 million, or 8 per cent, and increased $131 million, or 12 per cent, for the three and six months ended June 30, 2013, respectively, compared to the same periods in 2012.  Higher revenue for both periods resulted primarily from an increase in the Energy segment, driven by the Utilities business, including pipeline work, and from continued volume growth in the Mining segment.  These increases were partly offset by lower revenue in the Infrastructure segment, mainly in Heavy Civil, following the completion of Quito Airport and the Autoroute 30 Highway in Quebec, and in Social Infrastructure.

Operating profit for the second quarter of 2013 increased by $5.3 million to $16.2 million from $10.9 million in the same period last year.  For the first half of 2013, operating loss was $14.9 million as compared to a loss of $6.4 million in the same period in 2012, impacted by a specific project provision disclosed in the first quarter of 2013.

Backlog reached $2.215 billion at June 30, 2013, with $840 million in new contract awards booked in the second quarter compared to $956 million in the same period of 2012.  For the first half of 2013, new contract awards of $1.052 billion were booked compared to $1.447 billion in the first half of 2012.

Not included in backlog, but important to Aecon's prospects due to the increasingly significant volume involved, is the expected 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. This additional work currently represents approximately 25 per cent of overall revenue.

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 markets.

Financial Highlights                                  
            Three months ended     Six months ended
$ millions           June 30     June 30
            2013   2012     2013   2012
                                   
Revenue           $ 239.9   $ 294.1     $ 389.7   $ 482.3
Gross profit           $ 7.9   $ 15.5     $ (7.3)   $ 10.1
EBITDA           $ (1.5)   $ 5.1     $ (31.2)   $ (11.4)
Operating profit (loss)           $ (5.7)   $ 1.4     $ (39.3)   $ (19.4)
                                   
EBITDA margin             (0.6)%     1.7%       (8.0)%     (2.4)%
Operating margin             (2.4)%     0.5%       (10.1)%     (4.0)%
Backlog                         $ 1,027   $ 1,431
                                   

Second quarter 2013 revenue in the Infrastructure segment decreased by $54 million, to $240 million, compared to the same period last year; this was primarily due to the completion of several large projects in Heavy Civil operations in the latter part of 2012 which generated significant revenue during the first half of last year, including the Quito airport project and Autoroute 30 project in Quebec.  Revenue for the six months ended June 30, 2013 decreased by $93 million, to $390 million, over the same period last year, with much of the decrease occurring in Social Infrastructure as planned, particularly in building operations in Quebec and Ontario, and in its mechanical operations in Western Canada where several projects were completed during 2012.

For the second quarter of 2013, the Infrastructure segment had an operating loss of $5.7 million versus a profit of $1.4 million in the same period in 2012.  Most of the decrease in operating profit resulted from lower margins, mainly due to weather issues and related productivity levels.

Infrastructure backlog at June 30, 2013 was $1,027 million, which was $404 million lower than the same time last year with the largest decreases occurring in Heavy Civil and Social Infrastructure due to project work-off in the last twelve months and lower contract awards in comparison to the prior year. New contract awards totaled $248 million in the second quarter of 2013 and $297 million for the first half of 2013, compared to $527 million and $573 million, respectively, in the same periods 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 module assembly. The Energy segment focuses primarily on the following sectors: oil and gas, power generation, utilities, and energy support services.

Aecon announced the appointment of Paul Murray as Executive Vice President of its Energy segment.  Mr. Murray brings almost three decades of construction and management experience, specializing in EPC projects in the energy sector.  He has worked with Aecon extensively as a joint venture partner, recently was Vice President of Construction Global Power at SNC Lavalin and previously was a senior executive at several leading engineering and construction firms.

Financial Highlights                                  
              Three months ended       Six months ended
$ millions             June 30       June 30
              2013     2012       2013     2012
                                   
Revenue           $ 275.0   $ 222.0     $ 523.0   $ 385.4
Gross profit           $ 29.8   $ 25.3     $ 36.1   $ 38.9
EBITDA           $ 15.4   $ 10.3     $ 5.3   $ 9.6
Operating profit (loss)           $ 12.7   $ 7.4     $ (0.7)   $ 3.7
                                   
EBITDA margin             5.6%     4.6%       1.0%     2.5%
Operating margin             4.6%     3.3%       (0.1)%     1.0%
Backlog                         $ 978   $ 682
                                   

In the Energy segment, second quarter 2013 revenue rose by $53 million, or 24 per cent, to $275 million.  Most of the increase occurred in Utilities, as a result of pipeline work in Western Canada and from gas pipeline and communications installation work in Ontario, as well as from Industrial site construction projects in Ontario.  Revenue for the six months ended June 30, 2013 increased by $138 million, or 36 per cent, to $523 million compared to $385 million in the same period last year.

The Energy segment operating profit of $12.7 million was $5.3 million higher than the second quarter of 2012.  The increase in operating profit is primarily due to higher profitability in Utilities, from a combination of higher volume and margins in the quarter.

Energy segment backlog at June 30, 2013 of $978 million was $296 million higher than the same time last year, with most of the increase in Utilities operations as a result of significant project awards received in the second half of 2012 such as mainline pipeline work, and a cogeneration project award in 2013. New awards of $452 million in the second quarter were $107 million higher than in the same period of 2012, and new awards of $503 million for the first half of 2013 were $146 million lower than the same period in 2012.  This reduction reflects the year-over-year impact of a large multi-year project award received in the first half of 2012 in the nuclear 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 overburden removal and resource extraction, to processing, and then to environmental reclamation.

Financial Highlights                                  
              Three months ended       Six months ended
$ millions             June 30       June 30
              2013     2012       2013     2012
                                   
Revenue           $ 192.1   $ 132.8     $ 363.6   $ 267.7
Gross profit           $ 21.8   $ 15.6     $ 53.2   $ 38.2
EBITDA           $ 17.9   $ 12.5     $ 44.9   $ 31.7
Operating profit           $ 12.6   $ 7.8     $ 31.4   $ 20.7
                                   
EBITDA margin             9.3%     9.4%       12.3%     11.8%
Operating margin             6.6%     5.8%       8.6%     7.7%
Backlog                         $ 210   $ 560
                                   

Revenue for the Mining segment rose by $59 million, or 45 per cent, to $192 million compared to $133 million in the second quarter of 2012.  The segment had a higher volume of site installation work in the commodities mining sector along with a higher volume of contract mining in Alberta.  For the first half of 2013, mining revenue rose by $96 million, or 36 per cent, to $364 million compared to $268 million for the same period of 2012.

Operating profit rose by $4.8 million, to $12.6 million for the second quarter 2013 compared to the same period last year.  This increase was mostly attributable to higher volume and margin from site installation work.

Backlog at June 30, 2013 was $210 million, lower than the same time last year as work progressed on several large projects throughout the past year.  New contract awards of $151 million in the second quarter of 2013 were $76 million higher than the same period of 2012, and new awards of $263 million for the first six months of 2013 were $56 million higher than the same period last year.

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     Six months ended
$ millions       June 30     June 30
        2013   2012     2013   2012
                               
Revenue       $ 0.8   $ 0.5     $ 1.4   $ 1.1
Gross profit       $ (0.1)   $ (0.1)     $ (0.2)   $ (0.3)
Income from projects accounted for
using the equity method
      $ 5.9   $ 4.2     $ 12.9   $ 8.4
EBITDA       $ 11.8   $ 5.1     $ 20.4   $ 9.9
Operating profit       $ 5.1   $ 3.1     $ 11.3   $ 5.9
                               

With the adoption of IFRS 11 "Joint Arrangements" on January 1, 2013, Aecon's investment in the Quito airport concessionaire is now reported using the equity method of accounting, rather than proportionate consolidation.  Revenue for the Concessions segment was $0.8 million for the second quarter of 2013 compared to $0.5 million for the same period last year, while revenue for the six months ended June 30, 2013 and 2012, was $1.4 million and $1.1 million respectively.

Operating profit for the second quarter of 2013 was $5.1 million compared to $3.1 million for the same period last year, while for the six months ended June 30, 2013, operating profit of $11.3 million was $5.4 million higher than the same period last year.  Most of the increase in operating profit resulted from 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.

CONSOLIDATED RESULTS

The consolidated results for the three and six months ended June 30, 2013 and 2012 are available at the end of this news release.

BALANCE SHEET HIGHLIGHTS                          
                June 30         Dec. 31
(in thousands of Canadian dollars) (unaudited)               2013          2012 
                           
Cash           $   81,637     $   66,977
Other current assets               918,230         996,836
Property, plant and equipment               505,733         508,553
Other long-term assets               322,415         291,247
Total Assets           $   1,828,015     $   1,863,613
                           
Current liabilities           $   849,998     $   834,849
Long-term debt               131,382         146,048
Convertible debentures               255,791         253,189
Other long-term liabilities               82,139         86,369
                           
Equity               508,705         543,158
Total Liabilities and Equity           $   1,828,015     $   1,863,613

CONFERENCE CALL

A conference call has been scheduled for Wednesday, August 14, 2013 at 10:30 a.m. (ET) to discuss Aecon's 2013 second quarter financial results. Participants should dial 416-981-9035 or 1-800-728-2056 at least 10 minutes prior to the conference time.  A replay will be available after 12:30 p.m. at 1-800-558-5253 or 416-626-4100 until midnight on August 21, 2013. The reservation number is 21668557.

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
                                           
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012
                                           
(in thousands of Canadian dollars, except per share amounts) (unaudited)
                                             
          For the three months ended       For the six months ended
              June 30           June 30       June 30       June 30
              2013           2012       2013       2012
                                             
                                             
Revenue       $     697,641     $     648,063     $ 1,265,080     $ 1,134,489
Direct costs and expenses             (638,316)           (591,792)       (1,183,250)       (1,047,638)
Gross profit             59,325           56,271       81,830       86,851
                                             
Marketing, general and administrative expenses             (37,785)           (40,214)       (82,599)       (79,560)
Depreciation and amortization             (14,267)           (12,844)       (31,778)       (28,401)
Income from construction projects accounted
for using the equity method
            8,637           7,663       17,059       14,062
Other income             267           34       564       658
Operating profit (loss)             16,177           10,910       (14,924)       (6,390)
                                             
Finance income             821           458       1,353       1,374
Finance costs             (10,182)           (8,286)       (19,459)       (17,340)
Fair value gain (loss) on convertible debentures             2,576           1,413       420       (1,350)
Profit (loss) before income taxes             9,392           4,495       (32,610)       (23,706)
Income tax recovery (expense)             (1,505)           539       10,585       9,153
Profit (loss) for the period       $     7,887     $     5,034     $ (22,025)     $ (14,553)
                                             
                                             
Basic earnings (loss) per share       $     0.15     $     0.10     $ (0.42)     $ (0.27)
Diluted earnings (loss) per share       $     0.13     $     0.09     $ (0.42)     $ (0.27)

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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