TORONTO, July 25, 2019 /CNW/ - Aecon Group Inc. (TSX: ARE)
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
expenses
|
|
(46.6)
|
|
|
(43.9)
|
|
(90.0)
|
|
|
(91.1)
|
|
|
Income from projects
accounted for using
the equity method
|
|
2.2
|
|
|
2.2
|
|
4.7
|
|
|
3.1
|
|
|
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
|
|
|
|
|
|
|
|
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(1)
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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
using the equity method
|
$
|
1.8
|
|
$
|
1.4
|
|
$
|
4.8
|
|
$
|
2.8
|
|
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)
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
2019
|
|
June 30
2018
|
|
June
30 2019
|
|
June 30
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
expenses
|
|
(46,630)
|
|
|
(43,940)
|
|
|
(89,977)
|
|
|
(91,123)
|
Depreciation and
amortization
|
|
(23,864)
|
|
|
(25,386)
|
|
|
(42,353)
|
|
|
(49,132)
|
Income from projects
accounted for
using the equity method
|
|
2,213
|
|
|
2,210
|
|
|
4,724
|
|
|
3,056
|
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.