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Aecon reports strong second quarter 2019 results

CNW Group - Thu Jul 25, 3:05PM CDT

Aecon Group Inc. (TSX:ARE.TO) today reported strong results for the second quarter of 2019, with year-over-year growth in revenue, Adjusted EBITDA and operating profit, and quarter end backlog of $6.8 billion.

"Aecon's second quarter results illustrate the strength of our market position and sustained progress made to deliver growth, operational excellence, and consistent performance through scale, end-market diversity, and financial strength," said Jean-Louis Servranckx, President and Chief Executive Officer, Aecon Group Inc. "Aecon's current strong backlog is diversified across multiple sectors, geographies and duration, and we expect this to drive future growth and profitability in 2019 and into 2020. We remain focused on successfully executing Aecon's current roster of projects and we are well positioned to capitalize on a significant pipeline of future opportunities."

HIGHLIGHTS

--  Revenue for the three months ended June 30, 2019 of $867
        million was $113 million, or 15 per cent, higher compared to
        the same period in 2018. On a like-for-like basis, excluding
        the contract mining business sold in November 2018, growth in
        revenue was 22 per cent in the quarter.
    --  Adjusted EBITDA for the second quarter of 2019 of $57.3 million
        (margin of 6.6 per cent) improved by $15.9 million compared to
        Adjusted EBITDA of $41.4 million (margin of 5.5 per cent) for
        the second quarter of 2018, and compared to Adjusted EBITDA of
        $45.4 million (margin of 6.4 per cent) on a like-for-like basis
        in the prior year.
    --  Operating profit of $28.1 million for the three months ended
        June 30, 2019, improved by $15.3 million compared to an
        operating profit of $12.8 million in the same period in 2018,
        and compared to an operating profit of $23.9 million on a
        like-for-like basis in the prior year.
    --  Reported backlog as at June 30, 2019 of $6,755 million compares
        to backlog of $6,443 million a year earlier.
    --  A consortium in which Aecon has a 50 per cent interest,
        announced financial close in the second quarter on the $640
        million Highway 401 Expansion project in the Greater Toronto
        Area.
    --  GrandLinq Contractors, the construction consortium for which
        Aecon was the lead design-build partner, reached substantial
        completion and turnover for Revenue Service for the ION Stage 1
        Light Rail Transit (LRT) project in Waterloo, Ontario on June
        21, 2019. The GrandLinq consortium, in which Aecon Concessions
        has a 10 per cent interest, will now manage operations and
        maintenance over the 30-year concession period.
    --  Subsequent to quarter end, Aecon was awarded a $111 million
        design-build contract by the Comox Valley Regional District to
        construct the Comox Valley Water Treatment Project in British
        Columbia. Work on the project will commence in the third
        quarter and is expected to be complete in May 2021.
CONSOLIDATED FINANCIAL HIGHLIGHTS(1)




                                                                   Three months ended     Six months ended




              $ millions (except per share amounts)           June 30

          June 30



                                                                                 2019                                  2018               2019             2018







              Revenue                               $

              867.3                      $

         754.8 $

        1,517.7 $

        1,298.1



            Gross profit                                                       96.3                                  79.5              143.1            126.5


              Marketing, general and
               administrative                                                  (46.6)                               (43.9)            (90.0)          (91.1)
     expenses


              Income from projects accounted for
               using                                                              2.2                                   2.2                4.7              3.1
     the equity method



            Other income                                                        0.1                                   0.4                1.9              1.4


              Depreciation and amortization                                    (23.9)                               (25.4)            (42.4)          (49.1)



                         Operating profit (loss) (2)                             28.1                                  12.8               17.4            (9.4)



            Financing expense, net                                            (4.9)                                (5.4)             (9.1)          (10.3)


                         Profit (loss) before income taxes                       23.2                                   7.4                8.3           (19.7)


              Income tax recovery (expense)                                     (2.8)                                  1.0                2.3              8.8





              Profit (loss)                          $

              20.4                        $

         8.4    $

         10.5  $

        (10.8)





                         Gross profit margin                                    11.1%                                10.5%              9.4%            9.7%


                         MG&A as a percent of revenue                            5.4%                                 5.8%              5.9%            7.0%


                         Adjusted EBITDA(3)                                      57.3                                  41.4               69.2             45.1


                         Adjusted EBITDA margin                                  6.6%                                 5.5%              4.6%            3.5%


                         Operating margin                                        3.2%                                 1.7%              1.1%          (0.7)%


                         Earnings (loss) per share -basic       $

              0.34                       $

         0.14    $

         0.17  $

        (0.18)


                         Earnings (loss) per share -diluted     $

              0.31                       $

         0.13    $

         0.16  $

        (0.18)








              Backlog                                                                                            $

        6,755   $

        6,443
(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 sales of assets and
              investments, 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.

OPERATING AND FINANCIAL RESULTS

Revenue for the three months ended June 30, 2019 of $867 million was $113 million, or 15 per cent, higher compared to the same period in 2018. Revenue for the three months ended June 30, 2019 was higher in the Construction segment ($115 million), driven by higher revenue in civil operations and urban transportation systems ($128 million) and nuclear operations ($44 million). This was partially offset by lower revenue in utilities ($5 million) and conventional industrial operations ($52 million) primarily caused by the sale of Aecon's contract mining business in November 2018. Revenue was also higher in the Concessions segment ($8 million), which was offset by inter-segment revenue eliminations that increased by $10 million, primarily due to revenue between the Concessions and Construction segments related to the Bermuda International Airport Redevelopment Project.

Operating profit of $28.1 million for the three months ended June 30, 2019, improved by $15.3 million compared to an operating profit of $12.8 million in the same period in 2018 driven by an increase in gross profit of $16.8 million compared to the same period in 2018. In the Construction segment, gross profit increased by $15.2 million, primarily from increased volume and higher gross margin. In the Concessions segment, gross profit increased by $1.0 million, primarily due to operations related to the Bermuda International Airport Redevelopment Project.

Reported backlog as at June 30, 2019 of $6,755 million compares to backlog of $6,443 million a year earlier. New contract awards of $873 million and $1,451 million were booked in the second quarter and year-to-date in 2019, respectively, compared to $2,585 million and $3,494 million, respectively, in the same periods in 2018.

REPORTING SEGMENTS

Aecon reports its financial performance on the basis of two segments: Construction and Concessions.

CONSTRUCTION SEGMENT

The Construction segment includes all aspects of the construction of both public and private infrastructure, primarily in Canada, and on a selected basis, internationally and focuses primarily on the following market sectors:

--  Civil Infrastructure;
    --  Urban Transportation Systems;
    --  Nuclear Power Infrastructure;
    --  Utility Infrastructure; and
    --  Conventional Industrial Infrastructure.

Financial Highlights

Three months ended      Six months ended




       $ millions                June 30                June 30



                       2019                        2018               2019 2018





          Revenue           $

                846.9      $
              732.3       $

        1,484.8 $
         1,262.6


          Gross profit       $

                79.4       $
              64.2         $

        119.0   $
         104.3


          Adjusted
           EBITDA            $

                44.4       $
              32.2          $

        51.7    $
         37.9


          Operating
           profit            $

                30.3       $
              14.2          $

        24.8     $
         1.2




          Gross profit
           margin                             9.4%                  8.8%                    8.0%          8.3%


          Adjusted
           EBITDA
           margin                             5.2%                  4.4%                    3.5%          3.0%


          Operating
           margin                             3.6%                  1.9%                    1.7%          0.1%


          Backlog                                                               $

        6,709   $
         6,422

    ---

Revenue in the Construction segment for the three months ended June 30, 2019 of $847 million was $115 million, or 16 per cent higher compared to the same period in 2018. Construction segment revenue was higher in civil operations and urban transportation systems by $128 million driven by increases in both Eastern and Western Canada. Revenue was also higher from nuclear operations by $44 million related to reimbursement work. These increases were partially offset by lower volume in conventional industrial ($52 million) primarily due to a decrease in contract mining in Western Canada of $43 million following the sale of this business in November 2018, and utilities operations ($5 million).

Operating profit in the Construction segment of $30.3 million in the three months ended June 30, 2019 improved by $16.1 million compared to an operating profit of $14.2 million in the same period in 2018. Part of the operating profit improvement resulted from the sale of the contract mining business in November 2018 which contributed an operating loss of $11.1 million in the second quarter of 2018. An improvement in operating profit from the balance of the Construction segment in the second quarter of 2019 of $5.0 million was due to a combination of higher volume and improved gross margin from civil operations, urban transportation systems, and utilities operations.

Construction backlog at June 30, 2019 was $6,709 million, which is $287 million higher than the same time last year. Backlog increased period-over-period in civil operations and urban transportation systems ($441 million) and in utilities operations ($178 million), while backlog was lower in conventional industrial and nuclear operations by $159 million and $173 million, respectively. New contract awards totalled $848 million in the second quarter of 2019 and $1,410 million year-to-date, compared to $2,569 million and $3,467 million respectively, in the same periods last year. The decrease in new awards in the first six months of 2019 is due mainly to large project awards for the Site C Generating Station and Spillways Civil Works, the Réseau express métropolitain Montreal LRT and the Finch West LRT projects that were awarded in the first six months of 2018.

CONCESSIONS SEGMENT

Activities within the Concessions segment include the development, financing, build and operation of construction projects by way of public-private partnership contract structures, as well as integrating the services of all project participants, and harnessing the strengths and capabilities of Aecon. The Concessions segment focuses primarily on providing the following services:

--  Development of domestic and international Public-Private
        Partnership ("P3") projects;
    --  Private finance solutions;
    --  Developing effective strategic partnerships;
    --  Leading and/or actively participating in development teams; and
    --  Operations and maintenance.

Financial Highlights

Three months ended      Six months ended




          $ millions                June 30                June 30



                                     2019                        2018               2019 2018





                     Revenue              $

                60.2       $
              52.6       $

       118.2 $
      83.9


                     Gross profit         $

                16.2       $
              15.2        $

       24.0 $
      22.0


                     Income from
                      projects
                      accounted for        $

                1.8        $
              1.4         $

       4.8  $
      2.8
    using the
     equity method


                     Adjusted EBITDA      $

                23.2       $
              19.2        $

       38.0 $
      29.2


                     Operating
                      profit               $

                8.3        $
              8.5        $

       12.8 $
      11.5


                     Backlog                                                                   $

       46       21

Aecon holds a 100% interest in Bermuda Skyport Corporation Limited ("Skyport"), the concessionaire responsible for the Bermuda airport's operations, maintenance and commercial functions, and the entity that will manage and coordinate the overall delivery of the Bermuda International Airport 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 concession participation in the Eglinton Crosstown LRT, Finch West LRT, Gordie Howe International Bridge, and Waterloo LRT projects are joint ventures that are accounted for using the equity method.

For the three-month period ended June 30, 2019, revenue in the Concessions segment of $60 million, increased by $8 million, when compared to the same periods in 2018. The higher revenue was primarily a result of the Bermuda International Airport Redevelopment Project and resulted from the impact of increased construction activity related to the redevelopment of the airport. Included in Concessions' revenue for the three-month period ended June 30, 2019 was $36 million of construction revenue that was eliminated on consolidation as inter-segment revenue (2018 - $30 million).

Operating profit in the Concessions segment of $8.3 million for the three months ended June 30, 2019 decreased by $0.2 million compared to the same period in 2018 due to higher amortization expense related to the Bermuda International Airport Redevelopment Project.

Except for Operations and Maintenance ("O&M") activities under contract for the next five years and that can be readily quantified, 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 such O&M activities for the next five years, is reported.

DIVIDEND

Aecon's third quarter dividend of 14.5 cents per common share will be paid on October 2, 2019 to shareholders of record on September 20, 2019.

OUTLOOK

"The overall outlook for 2019 remains solid as our current strong backlog, robust pipeline of future opportunities, and ongoing concessions are expected to lead to improved like-for-like results compared to 2018. Aecon expects to have another strong year in 2020 as construction continues on a number of previously awarded projects that have ramped up during 2019," said Jean-Louis Servranckx.

CONSOLIDATED RESULTS

The consolidated results for the three months ended June 30, 2019 and 2018 are available at the end of this news release.

Balance Sheet

June 30            December 31




                $ thousands
     (unaudited)                       2019                   2018





      Cash
       and
       cash
       equivalents
       and
       restricted
       cash                                               $
        635,371       $
           824,345


      Other
       current
       assets                                                 1,396,655              1,322,468


       Property,
       plant
       and
       equipment                                                329,387                266,199


      Other
       long-
       term
       assets                                                   570,036                519,680


                   Total
                    Assets                           $

         2,931,449  $

            2,932,692




       Current
       portion
       of
       long-
       term
       debt
       -
       recourse                                            $
        52,433        $
           32,505


      Other
       current
       liabilities                                            1,178,388              1,231,405


      Long-
       term
       debt
       -
       recourse                              129,722              69,707


      Long-
       term
       project
       debt
       -
       non-
       recourse                              368,554             383,746


      Long-
       term
       portion
       of
       convertible
       debentures                                               162,047                159,775


      Other
       long-
       term
       liabilities                                              226,475                230,492




      Equity                                                    813,830                825,062


                   Total
                    Liabilities
                    and
                    Equity                           $

         2,931,449  $

            2,932,692

CONFERENCE CALL

A conference call and live webcast have been scheduled for 10 a.m. (Eastern Time) on Friday, July 26, 2019. Participants should dial 647-689-5656 or 1-877-823-8624 at least 10 minutes prior to the conference time. The reservation number is 7898783. An accompanying presentation of the second quarter 2019 financial results will be available after market close on July 25, 2019 at www.aecon.com/investing. A live webcast of the conference call will also be available at www.aecon.com/investing/IR_calendar. Participants should join the webcast at least 15 minutes prior to the conference time to register and install any necessary software.

For those unable to attend the call, a replay will be available after 3 p.m. on July 26, 2019 at 1-800-585-8367 or 416-621-4642 until midnight on August 9, 2019. The reservation number is 7898783. A replay of the webcast will also be available within 24 hours following the call.

ABOUT AECON

As a Canadian leader in construction and infrastructure development with global expertise, Aecon Group Inc. (TSX:ARE.TO) strives to be the number one Canadian infrastructure company. Aecon safely, profitably and sustainably delivers integrated solutions to private and public-sector clients through its Construction segment in the Civil, Urban Transportation, Nuclear, Utility and Conventional Industrial sectors, and provides project development, financing, investment and management services through its Concessions segment. Join our online community on Twitter, LinkedIn, and Instagram @AeconGroup.

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. 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. 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: the timing of projects, unanticipated costs and expenses, the failure to recognize and adequately respond to climate change concerns or public and governmental expectations on climate matters, general market and industry conditions 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. 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, 2019 AND 2018




                (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
                                                                                                                                                                    2019
                                                                                                        2019                                      2018                                       2018





              Revenue                                                                                       $

                867,317            $
             754,773                       $

               1,517,651 $
              1,298,098



              Direct costs and expenses                                                                                          (771,036)                    (675,277)                                        (1,374,573)          (1,171,632)

    ---



                Gross profit                                                                                             96,281                        79,496                                             143,078               126,466





              Marketing, general and administrative                                                                               (46,630)                     (43,940)                                           (89,977)             (91,123)
    expenses



              Depreciation and amortization                                                                                       (23,864)                     (25,386)                                           (42,353)             (49,132)



              Income from projects accounted for                                                                                     2,213                         2,210                                               4,724                 3,056
    using the equity method



              Other income                                                                                                             137                           435                                               1,898                 1,342

    ---



                Operating profit (loss)                                                                                  28,137                        12,815                                              17,370               (9,391)





              Finance income                                                                                                           515                           249                                               1,131                   452



              Finance costs                                                                                                        (5,462)                      (5,633)                                           (10,227)             (10,751)

    ---



                Profit (loss) before income taxes                                                                        23,190                         7,431                                               8,274              (19,690)



              Income tax (expense) recovery                                                                                        (2,829)                          973                                               2,264                 8,849

    ---



                Profit (loss) for the period                                                      $

                20,361              $
             8,404                          $

                10,538  $
              (10,841)

    ===                                                                                                                                                                                                                                        ===







                Basic earnings (loss) per share                                                     $

                0.34               $
             0.14                            $

                0.17    $
              (0.18)




                Diluted earnings (loss) per share                                                   $

                0.31               $
             0.13                            $

                0.16    $
              (0.18)

SOURCE Aecon Group Inc.

View original content: http://www.newswire.ca/en/releases/archive/July2019/25/c7131.html

SOURCE: Aecon Group Inc.

Adam Borgatti, SVP, Corporate Development and Investor Relations, (416) 297-2610,
aborgatti@aecon.com; Nicole Court, Senior Director, Corporate Affairs, (416) 297-2600
x3824, ncourt@aecon.com

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