Aecon reports 2018 results including record revenue, Adjusted EBITDA, and year-end backlog
Quarterly dividend increased to 14.5 cents per share from 12.5 cents per share
TORONTO, March 5, 2019 /CNW/ - Aecon Group Inc. (TSX: ARE) today reported strong results for the fourth quarter and full year 2018, concluding a year that saw revenue, Adjusted EBITDA, and backlog reach record levels. Aecon's Board of Directors approved an increase to the quarterly dividend to 14.5 cents per share from 12.5 cents per share previously.
"Aecon's 2018 year-end results illustrate the progress made to deliver consistent performance through scale in core capabilities, end-market diversity, and operational excellence," said Jean-Louis Servranckx, President and Chief Executive Officer, Aecon Group Inc. "We continue to be focused on developing our strong team of people, an unwavering commitment to safety, successful project execution, and improving profitability."
HIGHLIGHTS
- Record annual revenue for the year ended December 31, 2018 of $3,266 million was $461 million, or 16 per cent, higher compared to 2017, with increases across all three segments.
- Record annual Adjusted EBITDA of $207.0 million (margin of 6.3 per cent) for 2018 compared to Adjusted EBITDA of $156.5 million (margin of 5.6 per cent) in 2017.
- Operating profit of $89.4 million for 2018 increased by $35.8 million compared to operating profit of $53.6 million in 2017.
- Net profit of $59.0 million and diluted Earnings per Share (EPS) of $0.94 in 2018 compared to $28.2 million and $0.46, respectively, in 2017.
- Backlog as at December 31, 2018 of $6.8 billion compares to backlog of $4.2 billion a year earlier and represents the highest year-end backlog in Aecon's history.
- Quarterly dividend is increased to 14.5 cents per share from 12.5 cents per share previously.
- Record new contract awards of $5.8 billion were booked in 2018, compared to $2.8 billion in 2017.
- In the fourth quarter of 2018, new contracts awarded included:
- A joint venture in which Aecon holds a 40 per cent interest was awarded a $267 million contract by Metro Vancouver (Greater Vancouver Water District) for the Second Narrows Water Supply Tunnel project in British Columbia.
- An Aecon 50/50 joint venture was awarded a $526 million contract by TransCanada Corporation for Spreads 3 and 4 of the Coastal GasLink Pipeline project in British Columbia.
- Subsequent to quarter end, Aecon was awarded an $89 million contract by Alberta Transportation for the Bow River Bridge Twinning project in Alberta.
- On November 23, 2018, Aecon announced the closing of the sale of the Contract Mining business for $199.1 million, subject to customary closing adjustments.
CONSOLIDATED FINANCIAL HIGHLIGHTS(1) |
||||||||||||
Three months ended |
Year ended |
|||||||||||
$ millions (except per share amounts) |
December 31 |
December 31 |
||||||||||
2018 |
2017 |
2018 |
2017 |
|||||||||
Revenue |
$ |
948.5 |
$ |
685.0 |
$ |
3,266.3 |
$ |
2,805.7 |
||||
Gross profit |
105.6 |
97.1 |
357.1 |
319.0 |
||||||||
Marketing, general and administrative |
(44.3) |
(46.4) |
(178.5) |
(186.5) |
||||||||
Income from projects accounted for using |
6.2 |
2.2 |
13.2 |
8.4 |
||||||||
Other income |
0.4 |
3.5 |
1.5 |
6.3 |
||||||||
Depreciation and amortization |
(25.3) |
(24.0) |
(103.8) |
(93.5) |
||||||||
Operating profit(2) |
42.6 |
32.5 |
89.4 |
53.6 |
||||||||
Financing expense, net |
(6.9) |
(6.1) |
(22.4) |
(22.8) |
||||||||
Profit before income taxes |
35.7 |
26.4 |
67.0 |
30.8 |
||||||||
Income tax expense |
(7.9) |
(5.4) |
(8.0) |
(2.6) |
||||||||
Profit |
$ |
27.9 |
$ |
21.1 |
$ |
59.0 |
$ |
28.2 |
||||
Gross profit margin |
11.1% |
14.2% |
10.9% |
11.4% |
||||||||
MG&A as a percent of revenue |
4.7% |
6.8% |
5.5% |
6.6% |
||||||||
Adjusted EBITDA(3) |
72.4 |
58.0 |
207.0 |
156.5 |
||||||||
Adjusted EBITDA margin |
7.6% |
8.5% |
6.3% |
5.6% |
||||||||
Operating margin |
4.5% |
4.7% |
2.7% |
1.9% |
||||||||
Earnings per share - basic |
$ |
0.46 |
$ |
0.36 |
$ |
0.99 |
$ |
0.48 |
||||
Earnings per share - diluted |
$ |
0.41 |
$ |
0.33 |
$ |
0.94 |
$ |
0.46 |
||||
Backlog |
$ |
6,821 |
$ |
4,247 |
||||||||
(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 year ended December 31, 2018 of $3,266 million was $461 million, or 16%, higher compared to 2017. The largest increase occurred in the Infrastructure segment ($358 million), driven by higher revenue in major projects ($298 million) and transportation operations ($60 million). Revenue was also higher in the Industrial segment ($63 million), driven by higher volume in utilities ($119 million) and conventional industrial operations ($54 million), offset partially by lower revenue in nuclear operations ($110 million). Revenue was also higher in the Concessions segment ($88 million), which was partially offset by inter-segment revenue eliminations that increased by $48 million primarily due to revenue between the Concessions and Infrastructure segments related to the Bermuda International Airport Redevelopment Project.
Operating profit of $89.4 million for the year ended December 31, 2018 increased by $35.8 million compared to operating profit of $53.6 million in 2017, driven by higher gross profit of $38.1 million. The largest gross profit increase occurred in the Infrastructure segment ($19.6 million) due to the impact of higher volume which offset lower gross profit margin in transportation operations. Gross profit also increased in the Concessions segment ($18.9 million) due to operations related to the Bermuda International Airport Redevelopment Project and management and development fees for Canadian concessions, and in the Industrial segment ($0.5 million) primarily from a volume driven increase in utilities which offset lower gross profit from nuclear due to lower volume.
Reported backlog as at December 31, 2018 of $6,821 million compares to backlog of $4,247 million as at December 31, 2017. This backlog position represents the highest reported year end backlog position in Aecon's history. New contract awards of $5,840 million were booked in 2018 compared to $2,849 million in 2017.
REPORTING SEGMENTS
Aecon reports its financial performance on the basis of three segments: Infrastructure, Industrial 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 transportation (roads and bridges, rail and transit, municipal road construction, foundations, asphalt production and aggregates, material engineering and design) and major projects (hydroelectric, tunnels and transit stations, major civil transportation infrastructure, water treatment facilities, mechanical systems and airports) markets.
Financial Highlights |
|||||||||||||
Three months ended |
Year ended |
||||||||||||
$ millions |
December 31 |
December 31 |
|||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||
Revenue |
$ |
406.8 |
$ |
260.1 |
$ |
1,319.6 |
$ |
961.7 |
|||||
Gross profit |
$ |
34.6 |
$ |
35.0 |
$ |
112.3 |
$ |
92.6 |
|||||
Adjusted EBITDA |
$ |
21.2 |
$ |
24.4 |
$ |
56.0 |
$ |
40.2 |
|||||
Operating profit |
$ |
16.1 |
$ |
19.4 |
$ |
36.2 |
$ |
21.2 |
|||||
Gross profit margin |
8.5% |
13.5% |
8.5% |
9.6% |
|||||||||
Adjusted EBITDA margin |
5.2% |
9.4% |
4.2% |
4.2% |
|||||||||
Operating margin |
4.0% |
7.5% |
2.7% |
2.2% |
|||||||||
Backlog |
$ |
4,527 |
$ |
1,995 |
|||||||||
For the year ended December 31, 2018, revenue in the Infrastructure segment of $1,320 million was $358 million, or 37%, higher than in 2017. Revenue was higher in major projects ($298 million) primarily due to increased activity on light rail transit projects and the commencement of the Gordie Howe International Bridge project in Eastern Canada, hydroelectric and waste water projects in Western Canada, and from the Bermuda International Airport Redevelopment Project. Revenue in transportation operations was also higher year-over-year ($60 million) from increased roadbuilding activity in both Western and Eastern Canada.
Operating profit in the Infrastructure segment of $36.2 million in 2018 increased by $15.0 million compared to 2017. Operating profit increased in major projects by $21.2 million, due to higher volume, while operating profit in transportation operations decreased by $6.2 million, primarily due to lower gross profit margin in Eastern Canada.
Infrastructure backlog as at December 31, 2018 was $4,527 million, compared to $1,995 million a year earlier, an increase of $2,532 million. The largest increase was reported in major projects ($2,326 million) as several significant multi-year projects were awarded in 2018 including the Site C Generating Station and Spillways Civil Works ("Site C"), the Réseau express métropolitain Montreal LRT ("Montreal REM"), the Finch West LRT, and the Gordie Howe International Bridge. Backlog in transportation operations also increased ($206 million) primarily related to roadbuilding projects in Eastern Canada. New contract awards totaled $3,830 million in 2018 compared to $1,282 million in 2017.
INDUSTRIAL SEGMENT
The Industrial segment encompasses a full suite of service offerings, primarily to energy and mining markets, including conventional industrial construction and manufacturing activities such as in-plant construction, site construction, fabrication, module assembly and, until its sale in November 2018, contract mining. The Industrial segment offers turnkey services consolidating Aecon's industrial and manufacturing capabilities and services across Canada, with a focus on delivering construction services that span the scope of a project's life cycle from site preparation, overburden removal, and resource extraction to processing and environmental reclamation. The activities of the Industrial segment are concentrated predominantly in Canada and focus primarily on the following sectors: conventional industrial, nuclear and utilities.
Financial Highlights |
|||||||||||||
Three months ended |
Year ended |
||||||||||||
$ millions |
December 31 |
December 31 |
|||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||
Revenue |
$ |
534.4 |
$ |
429.6 |
$ |
1,902.0 |
$ |
1,839.1 |
|||||
Gross profit |
$ |
53.9 |
$ |
52.0 |
$ |
188.2 |
$ |
187.7 |
|||||
Adjusted EBITDA |
$ |
32.7 |
$ |
34.2 |
$ |
112.3 |
$ |
114.1 |
|||||
Operating profit |
$ |
19.5 |
$ |
22.8 |
$ |
56.8 |
$ |
66.0 |
|||||
Gross profit margin |
10.1% |
12.1% |
9.9% |
10.2% |
|||||||||
Adjusted EBITDA margin |
6.1% |
8.0% |
5.9% |
6.2% |
|||||||||
Operating margin |
3.7% |
5.3% |
3.0% |
3.6% |
|||||||||
Backlog |
$ |
2,257 |
$ |
2,234 |
|||||||||
Revenue in the Industrial segment in 2018 of $1,902 million was $63 million, or 3%, higher than in 2017. Revenue was higher in utilities ($119 million), primarily due to increased activity on gas and electricity distribution projects in Eastern Canada and pipeline projects in Western Canada. Revenue was also higher in conventional industrial operations ($54 million), primarily from an increase in contract mining in Western Canada and power generation work in Eastern Canada. Partially offsetting these increases was lower revenue from nuclear operations ($110 million), driven by a reduction at the Darlington nuclear facility in Ontario, where a number of ancillary projects to the main reactor refurbishment project that Aecon is performing have now been completed, ahead of ramping up in future quarters on recent awards at the Bruce Power nuclear facility in Ontario.
For the year ended December 31, 2018, operating profit of $56.8 million decreased by $9.2 million when compared to operating profit of $66.0 million in 2017. Operating profit decreased in nuclear operations by $12.4 million, due primarily to lower volume in 2018, and decreased in conventional industrial operations by $1.8 million due to lower gross profit margin. Operating profit in utilities improved by $5.0 million due to the impact of higher volume.
Backlog as at December 31, 2018 of $2,257 million was $23 million higher than the same time last year, driven by increases in utilities ($103 million) and conventional industrial operations ($34 million), and partly offset by lower backlog in nuclear operations ($114 million). New contract awards totaled $1,946 million in 2018, compared to $1,563 million in 2017.
CONCESSIONS SEGMENT
The Concessions segment includes the development, financing, design, construction and operation of infrastructure projects by way of build-operate-transfer, build-own-operate-transfer and other public-private partnership contract structures.
Financial Highlights |
|||||||||||||
Three months ended |
Year ended |
||||||||||||
$ millions |
December 31 |
December 31 |
|||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||
Revenue |
$ |
68.6 |
$ |
28.6 |
$ |
223.4 |
$ |
135.3 |
|||||
Gross profit |
$ |
17.5 |
$ |
10.1 |
$ |
57.7 |
$ |
38.7 |
|||||
Income from projects accounted for |
$ |
5.3 |
$ |
1.2 |
$ |
10.1 |
$ |
4.7 |
|||||
Adjusted EBITDA |
$ |
27.5 |
$ |
13.5 |
$ |
79.7 |
$ |
51.3 |
|||||
Operating profit |
$ |
16.6 |
$ |
5.0 |
$ |
38.0 |
$ |
16.3 |
|||||
Backlog |
$ |
37 |
$ |
18 |
|||||||||
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.
Revenue in the Concessions segment in 2018 of $223 million increased by $88 million when compared to 2017. The higher revenue was driven primarily by the Bermuda International Airport Redevelopment Project, which was awarded late in the first quarter of 2017. Included in Skyport's revenue for 2018 was $134 million of construction revenue that was eliminated on consolidation as inter-segment revenue (2017 - $71 million).
For the year ended December 31, 2018, operating profit of $38.0 million increased by $21.7 million compared to 2017. Higher operating profit resulted primarily from increased activity related to the Bermuda International Airport Redevelopment Project and from higher management and development fees, including from the commencement of the Finch West LRT and Gordie Howe International Bridge concessions in 2018.
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 Board of Directors approved an increase to the quarterly dividend to 14.5 cents per share from 12.5 cents per share previously. The first increased dividend will be paid on April 1, 2019 to shareholders of record on March 22, 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 an improved Adjusted EBITDA margin," said Jean-Louis Servranckx.
CONSOLIDATED RESULTS
The consolidated results for the three months ended December 31, 2018 and 2017 are available at the end of this news release.
Balance Sheet
December 31 |
December 31 |
|||
$ thousands (unaudited) |
2018 |
2017 |
||
Cash and cash equivalents and restricted cash |
$ |
824,345 |
$ |
584,463 |
Other current assets |
1,322,468 |
1,096,632 |
||
Property, plant and equipment |
266,199 |
457,151 |
||
Other long-term assets |
519,680 |
346,944 |
||
Total Assets |
$ |
2,932,692 |
$ |
2,485,190 |
Current portion of long-term debt - recourse |
$ |
32,505 |
$ |
44,472 |
Current portion of convertible debentures |
- |
168,466 |
||
Other current liabilities |
1,231,405 |
861,574 |
||
Long-term debt - recourse |
69,707 |
91,211 |
||
Long-term project debt - non-recourse |
383,746 |
352,888 |
||
Long-term portion of convertible debentures |
159,775 |
- |
||
Other long-term liabilities |
230,492 |
210,604 |
||
Equity |
825,062 |
755,975 |
||
Total Liabilities and Equity |
$ |
2,932,692 |
$ |
2,485,190 |
CONFERENCE CALL
A conference call and live webcast has been scheduled for 10 a.m. (Eastern Time) on Wednesday, March 6, 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 6986937. An accompanying presentation of the fourth quarter and year-end 2018 financial results will be available after market close on March 5, 2019 at www.aecon.com/investing. For those unable to attend the call, a replay will be available after 3 p.m. on March 6, 2019 at 1-800-585-8367 or 416-621-4642 until midnight on March 20, 2019.
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. A replay of the webcast will be available within 24 hours following the call.
AECON 2019 ANNUAL GENERAL MEETING
Aecon's Annual General Meeting will be held on June 4, 2019 in Toronto, Ontario. Additional details will be set out in the Notice of Meeting and Record Date to be filed on SEDAR.
ABOUT AECON
Aecon Group Inc. (TSX: ARE) is a Canadian leader and partner-of-choice in construction and infrastructure development. Aecon provides integrated turnkey services to private and public-sector clients in the Infrastructure and Industrial sectors, and provides project management, financing and development services through its Concessions segment. For more information, please visit aecon.com and follow us on Twitter, LinkedIn, and Instagram at @AeconGroup.
STATEMENT ON FORWARD-LOOKING INFORMATION
The information in this press release includes certain forward-looking statements. Although these forward-looking statements are based on currently available competitive, financial and economic data and operating plans, they 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 risks associated with an investment in the common shares of Aecon and the risks related to Aecon's business, including, but not limited to, the timing of projects, unanticipated costs and expenses, general market and industry conditions and operational and reputational risks, including Large Project Risk and Contractual Factors.
Risk factors are discussed in greater detail in the section on "Risk Factors" included in the Short Form Prospectus dated September 19, 2018, which is available through SEDAR at www.sedar.com. 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. Other important factors, in addition to those discussed in this document, could affect the future results of Aecon and could cause its results to differ materially from those expressed in any forward-looking statements. 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 statements, whether as a result of new information, future events or otherwise.
CONSOLIDATED STATEMENTS OF INCOME |
|||||||||||
FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2018 AND 2017 |
|||||||||||
(in thousands of Canadian dollars, except per share amounts) (unaudited) |
|||||||||||
For the three months ended |
For the year ended |
||||||||||
December 31 |
December 31 |
December 31 |
December 31 |
||||||||
2018 |
2017 |
2018 |
2017 |
||||||||
Revenue |
$ |
948,514 |
$ |
685,014 |
$ |
3,266,291 |
$ |
2,805,728 |
|||
Direct costs and expenses |
(842,914) |
(587,895) |
(2,909,171) |
(2,486,705) |
|||||||
Gross profit |
105,600 |
97,119 |
357,120 |
319,023 |
|||||||
Marketing, general and administrative expenses |
(44,348) |
(46,365) |
(178,522) |
(186,538) |
|||||||
Depreciation and amortization |
(25,250) |
(23,969) |
(103,832) |
(93,548) |
|||||||
Income from projects accounted for |
6,207 |
2,217 |
13,150 |
8,417 |
|||||||
Other income |
431 |
3,499 |
1,506 |
6,281 |
|||||||
Operating profit |
42,640 |
32,501 |
89,422 |
53,635 |
|||||||
Finance income |
204 |
290 |
1,256 |
895 |
|||||||
Finance costs |
(7,110) |
(6,347) |
(23,651) |
(23,704) |
|||||||
Profit before income taxes |
35,734 |
26,444 |
67,027 |
30,826 |
|||||||
Income tax expense |
(7,868) |
(5,364) |
(8,013) |
(2,650) |
|||||||
Profit for the period |
$ |
27,866 |
$ |
21,080 |
$ |
59,014 |
$ |
28,176 |
|||
Basic earnings per share |
$ |
0.46 |
$ |
0.36 |
$ |
0.99 |
$ |
0.48 |
|||
Diluted earnings per share |
$ |
0.41 |
$ |
0.33 |
$ |
0.94 |
$ |
0.46 |
|||
SOURCE Aecon Group Inc.
Adam Borgatti, SVP, Corporate Development and Investor Relations, (416) 297-2610, [email protected]; Nicole Court, Director, Corporate Affairs, (416) 297-2600 x3824, [email protected]
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