TORONTO, Aug. 13, 2012 /CNW/ - Aecon Group Inc. (TSX: ARE) today reported results for the second quarter of 2012. Margin trends in the quarter continued to be positive despite lower revenue versus the same period a year ago. As revenue ramps up in the second half, on the back of a 44 per cent increase in new awards in the first half of 2012 versus a year ago, prospects for the second half of 2012 and into 2013 remain strong.
"We remain disciplined in our overall strategy and expect ongoing and steady improvement in margins and earnings. As expected, lower revenue in the first half of 2012 is the result of a transition period in which we are in the midst of ramping up on a number of new projects as well as a deliberate and disciplined strategy to redefine and refocus our Buildings business. The results for the second half of this year are anticipated to be strong," said John M. Beck, Chairman and Chief Executive Officer. "We have seen significant underlying growth in demand for our services - including those related to the expansion, refurbishment and retrofitting of existing infrastructure and facilities - and importantly, are embedding improved margins in our $2.7 billion backlog."
HIGHLIGHTS
- Gross profit for the three and six months ended June 30, 2012, increased by $13.5 million to $62.4 million, and $34.1 million to $99.2 million, respectively, compared to the same periods in 2011, despite lower revenue.
- Revenue decreased by $97 million, or 13 per cent, and $107 million, or 8 per cent, for the three and six months ended June 30, 2012 respectively compared to the same periods in 2011. While Aecon Mining revenue more than doubled in the second quarter 2012 compared to 2011, the overall period-over-period decline in the second quarter was attributed to four main factors: 1) Within Social Infrastructure, revenue was impacted by approximately $50 million due to the deliberately redefined and reduced activity within the Buildings group on large standalone commercial and social infrastructure projects, and the completion of several large mechanical projects; 2) Concessions segment revenue declined by approximately $16 million due to the sale in the third quarter of 2011 of Aecon's interest in the operator of the Cross Israel Highway; 3) Weather related softness in Transportation and Utilities impacted revenue by approximately $25 million; and 4) Timing related to the ramp-up of major new Industrial projects now underway.
- EBITDA of $25.9 million on revenue of $661.7 million for Q2 2012 (margin of 3.9 per cent) versus $29.0 million on revenue of $758.4 million for Q2 2011 (margin of 3.8 per cent). For the first half of 2012, EBITDA was $26.2 million (margin of 2.3 per cent) versus $14.9 million for the first half of 2011 (margin of 1.2 per cent).
- Adjusted profit attributable to shareholders of $4.1 million ($0.07 per diluted share) for Q2 2012 was recorded, in line with $4.1 million ($0.07 per diluted share) in Q2 2011.
- Backlog of $2.7 billion at June 30, 2012 versus $2.2 billion at June 30, 2011, was driven by new awards in the first half of 2012 of almost $1.5 billion versus just over $1.0 billion in the first half of 2011, an increase of 44 per cent.
- Subsequent to quarter end, multi-year awards amounting to approximately $470 million (to be booked as backlog in the third quarter of 2012) were announced including significant expansion of pipelines in Alberta, the first phase of work on Vale's Atmospheric Emissions Reduction project in Ontario, and a biomass conversion project for Ontario Power Generation in Ontario.
- Positive outlook affirmed with strong results expected in the second half of 2012 and into 2013.
| CONSOLIDATED FINANCIAL HIGHLIGHTS | |||||||||||||
| Three months ended | Six months ended | ||||||||||||
| $ millions (except per share amounts) | June 30 | June 30 | |||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||
| Revenue | $ | 661.7 | $ | 758.4 | $ | 1,163.8 | $ | 1,270.5 | |||||
| Gross profit | 62.4 | 48.9 | 99.2 | 65.1 | |||||||||
| EBITDA1 | 25.9 | 29.0 | 26.2 | 14.9 | |||||||||
| Depreciation and amortization | (13.8) | (15.1) | (30.3) | (29.7) | |||||||||
| Operating profit (loss)2 | 12.1 | 13.9 | (4.0) | (14.8) | |||||||||
| Financing expense, net | (7.8) | (6.9) | (16.0) | (13.3) | |||||||||
| Fair value gain (loss) on convertible debentures | 1.4 | (4.8) | (1.4) | 2.9 | |||||||||
| Profit (loss) before income taxes | 5.7 | 2.2 | (21.3) | (25.2) | |||||||||
| Income tax recovery (expense) | (0.3) | 0.1 | 7.5 | 7.2 | |||||||||
| Profit attributable to non-controlling interests | (0.3) | (1.6) | (0.5) | (2.8) | |||||||||
| Profit (loss) attributable to shareholders3 | $ | 5.1 | $ | 0.7 | $ | (14.4) | $ | (20.8) | |||||
| Adjusted profit (loss) attributable to shareholders | $ | 4.1 | $ | 4.1 | $ | (13.4) | $ | (22.9) | |||||
| Earnings (loss) per share - diluted | $ | 0.09 | $ | 0.01 | $ | (0.27) | $ | (0.38) | |||||
| Adjusted earnings (loss) per share- diluted4 | $ | 0.07 | $ | 0.07 | $ | (0.25) | $ | (0.42) | |||||
| Backlog | $ | 2,673 | $ | 2,181 | |||||||||
| (1) | EBITDA represents earnings or losses before net financing expense, the fair value gain (loss) on convertible debentures, income taxes, depreciation and amortization, and non-controlling interests. |
| (2) | Operating profit (loss) represents the profit (loss) from operations before net financing expense, income taxes and non-controlling interests. |
| (3) | Adjusted profit (loss) attributable to shareholders represents the profit (loss) attributable to shareholders adjusted to exclude the after-tax fair value gain (loss) on the embedded derivative portion of Aecon's convertible debentures. |
| (4) | Adjusted earnings (loss) per share (diluted) represents earnings (loss) per share calculated using adjusted profit (loss) attributable to shareholders. |
Backlog reached $2.7 billion at June 30, 2012, with $955 million in new contract awards booked in the second quarter compared to $641 million in 2011 - an increase of $314 million. For the first half of 2012, new contract awards of $1,447 million were booked compared to $1,004 million in the first half of 2011 - an increase of $443 million.
Not included in backlog, but important to Aecon's prospects due to the 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. In 2011, this additional work represented approximately 20 per cent of overall revenue.
Subsequent to the end of the second quarter, Aecon announced multi-year awards amounting to approximately $470 million (to be booked into backlog in the third quarter of 2012) including:
- An award by Inter Pipeline Fund to the Aecon/Robert B. Somerville Co. Limited 50/50 joint venture ($300 million value to Aecon) for the significant expansion of the Cold Lake and Polaris pipelines in Alberta;
- The first phase of work on Vale's Atmospheric Emissions Reduction project in Sudbury, Ontario, which includes site preparation and foundation construction ($85 million); and
- An award of approximately $85 million by Ontario Power Generation for the Atikokan biomass conversion project in northern Ontario - one of the largest in North America.
OPERATING AND FINANCIAL RESULTS
"We have diligently and purposefully built an operating platform that is serving our clients across Canada and is poised to steadily improve and deliver financial results for our shareholders," said Teri McKibbon, Chief Operating Officer. "We will remain focused on execution as we move forward with our Industrial segment backlog of almost $1 billion - a more than three-fold increase from last year - and with our larger Infrastructure segment where new awards for the first half of this year have increased in all groups."
Aecon reports its results in three operating segments: Infrastructure, Industrial and Concessions.
INFRASTRUCTURE SEGMENT
The Infrastructure segment includes all aspects of civil construction from highways, bridges and tunnels to airports, marine facilities, transit and power projects as well as utilities and pipeline construction, buildings construction and mining operations.
| Financial Highlights | |||||||||||||
| Three months ended | Six months ended | ||||||||||||
| $ millions1 | June 30 | June 30 | |||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||
| Revenue | $ | 420.9 | $ | 455.7 | $ | 737.5 | $ | 764.1 | |||||
| EBITDA | $ | 13.3 | $ | 15.1 | $ | 9.6 | $ | (4.8) | |||||
| Operating profit (loss) | $ | 3.9 | $ | 4.4 | $ | (12.1) | $ | (26.0) | |||||
| EBITDA margin | 3.2% | 3.3% | 1.3% | (0.6)% | |||||||||
| Operating margin | 0.9% | 1.0% | (1.6)% | (3.4)% | |||||||||
| Backlog | $ | 1,761 | $ | 1,917 | |||||||||
| (1) | Commencing in 2012, the Infrastructure segment includes Lockerbie & Hole Contracting (previously included in the Industrial segment), building on the Company's 'One Aecon' business strategy where Aecon expects to realize synergies between Lockerbie & Hole Contracting and Aecon Buildings in the social infrastructure sector. |
Second quarter 2012 revenue in the Infrastructure segment decreased by $35 million, or 8 per cent, over the same period last year primarily due to Social Infrastructure: the Buildings business has been re-focusing its operations (Quebec and Ontario in particular) and several large mechanical projects in western Canada have been completed. In addition, wet weather in western Canada impacted revenue in Transportation and Utilities. These decreases were partially offset by strong growth in volume in the Mining business.
Revenue for the six months ended June 30, 2012, decreased by 3 per cent over the same period last year owing to similar reasons.
For the three months and six months ended June 30, 2012, the operating profit (loss) in the Infrastructure segment increased/(decreased) over the same period last year as follows:
| Three months ended | Six months ended | |||||||
| $ millions | June 30 | June 30 | ||||||
| Transportation | $ | (4.7) | $ | (7.4) | ||||
| Heavy Civil | (1.4) | (3.0) | ||||||
| Utilities | (2.2) | (1.9) | ||||||
| Mining | 9.4 | 23.0 | ||||||
| Social Infrastructure | (1.5) | 3.2 | ||||||
| Increase (decrease) in Infrastructure operating profit | $ | (0.4) | $ | 13.9 | ||||
For the second quarter of 2012, operating profit in Mining operations increased as a result of higher volumes as well as from improved margins due to a higher level of equipment availability and a favourable mix of work. The decline in operating profit in Transportation, Utilities and Social Infrastructure reflects lower current period volumes, and in Heavy Civil, a reduction in margin in the quarter.
Infrastructure backlog at June 30, 2012 was $1,761 million, which is $156 million lower than the same time last year primarily due to significant project work-off in Heavy Civil and changes in the nature of the Buildings project portfolio in Social Infrastructure. New contract awards totaled $779 million in the second quarter of 2012 and $983 million for the first half of 2012, compared to $442 million and $652 million, respectively, in the same periods last year.
INDUSTRIAL SEGMENT
Industrial operations include all of Aecon's industrial manufacturing and construction activities including in-plant construction, fabrication of specialty pipe, assembly of custom module units and the design and manufacture of once-through heat recovery steam generators.
| Financial Highlights | |||||||||||||
| Three months ended | Six months ended | ||||||||||||
| $ millions | June 30 | June 30 | |||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||
| Revenue | $ | 231.7 | $ | 277.5 | $ | 408.1 | $ | 461.9 | |||||
| EBITDA | $ | 14.4 | $ | 12.5 | $ | 20.8 | $ | 18.3 | |||||
| Operating profit | $ | 12.6 | $ | 10.3 | $ | 17.1 | $ | 13.9 | |||||
| EBITDA margin | 6.2% | 4.5% | 5.1% | 4.0% | |||||||||
| Operating margin | 5.4% | 3.7% | 4.2% | 3.0% | |||||||||
| Backlog | $ | 912 | $ | 264 | |||||||||
In the Industrial segment, second quarter 2012 revenue was $46 million, or 16 per cent, lower than in 2011, as a result of less site construction work in western Canada (Heavy Industrial); this decline was partially offset by higher volumes in the commodities mining sector. This was a continuation of a trend from the first quarter of 2012 and is primarily related to the timing of a transition into new, multi-year projects ramping up during the first half of 2012.
For the three and six months ended June 30, 2012, the operating profit in the Industrial segment increased/(decreased) over the same period last year as follows:
| Three months ended | Six months ended | ||||||
| $ millions | June 30 | June 30 | |||||
| Heavy Industrial (Construction and Fabrication) | $ | 4.1 | $ | 6.8 | |||
| IST | (1.8) | (3.6) | |||||
| Increase in Industrial operating profit | $ | 2.3 | $ | 3.2 |
Despite lower revenue in the quarter, most of the period-over-period increase in operating profit from Heavy Industrial operations resulted from higher volumes in the commodity mining sector and from higher margins in the oil sands sector. These improvements were partially offset by declines in the power sector in central Canada - due to period-over-period decline in revenue - and lower volumes and margins from Innovative Steam Technologies.
Industrial backlog at June 30, 2012 of $912 million was $648 million higher than the same time last year - a substantial increase arising from several project awards in the commodity mining, power and oil sands sectors. For the first half of 2012, new awards of $446 million are $139 million higher than the same period in 2011.
CONCESSIONS SEGMENT
The Concessions segment includes the development, operation and financing of infrastructure projects by way of public-private partnership, build-own-operate-transfer or other alternative financing contract structures.
| Financial Highlights | |||||||||||||
| Three months ended | Six months ended | ||||||||||||
| $ millions | June 30 | June 30 | |||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||
| Revenue | $ | 10.4 | $ | 26.2 | $ | 20.3 | $ | 48.8 | |||||
| EBITDA | $ | 5.1 | $ | 7.1 | $ | 9.9 | $ | 13.7 | |||||
| Operating profit | $ | 4.2 | $ | 6.3 | $ | 8.1 | $ | 12.1 | |||||
| EBITDA margin | 49.3% | 27.2% | 48.9% | 28.1% | |||||||||
| Operating margin | 40.2% | 24.1% | 39.7% | 24.8% | |||||||||
For the three and six months ended June 30, 2012, the operating profit in the Concessions segment increased/(decreased) over the same periods last year as follows:
| Three months ended | Six months ended | |||||||
| $ millions | June 30 | June 30 | ||||||
| Quito Airport Concessionaire | $ | 0.2 | $ | 0.2 | ||||
| Cross Israel Highway Operator (sold in Q3, 2011) and other | (2.3) | (4.2) | ||||||
| Decrease in Concessions operating profit | $ | (2.1) | $ | (4.0) | ||||
The majority of the decrease in revenue and operating profit in the Concessions segment during the quarter and six months ended June 30, 2012 is a result of the sale in the third quarter of 2011 of Aecon's interest in the operator of the Cross Israel Highway.
The operating profit from the Quito airport concessionaire includes the results from operating the existing Quito airport while the new Quito airport is being constructed. Substantial completion of construction of the new airport is scheduled for October 2012.
DIVIDEND PAYMENT
As previously disclosed, the annual dividend for 2012 was increased from 20 cents per share to 28 cents per share, paid on a quarterly basis. The second quarterly dividend payment of $0.07 was paid on July 2, 2012 to shareholders of record on June 22, 2012.
CONSOLIDATED RESULTS
The consolidated results for the three and six months ended June 30 of 2012 and 2011 are available at the end of this news release.
| Balance Sheet Highlights | ||||
| June 30 | Dec. 31 | |||
| $ thousands (unaudited) | 2012 | 2011 | ||
| Cash and cash equivalents and restricted cash | $ | 156,718 | $ | 221,290 |
| Other current assets | 775,500 | 842,959 | ||
| Property, plant and equipment | 489,011 | 482,148 | ||
| Other long-term assets | 480,955 | 437,698 | ||
| Total Assets | $ | 1,902,184 | $ | 1,984,095 |
| Current liabilities | $ | 708,180 | $ | 791,836 |
| Non-recourse project debt | 159,783 | 137,078 | ||
| Long-term debt | 144,077 | 142,581 | ||
| Convertible debentures | 255,789 | 251,429 | ||
| Other long-term liabilities | 170,825 | 171,294 | ||
| Equity | 463,530 | 489,877 | ||
| Total Liabilities and Equity | $ | 1,902,184 | $ | 1,984,095 |
CONFERENCE CALL
A conference call has been scheduled for Tuesday, August 14, 2012 at 10:30 a.m. (ET) to discuss Aecon's 2012 second quarter financial results. Participants should dial 416-981-9015 or 1-800-734-4208 at least 10 minutes prior to the conference time of 10:30 a.m. A replay will be available after 12:30 p.m. at 1-800-558-5253 or 416-626-4100 until midnight on August 21, 2012. The reservation number is 21599826.
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, 2012 AND 2011 | ||||||||||||
| (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 | |||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||
| Revenue | $ | 661,661 | $ | 758,441 | $ | 1,163,821 | $ | 1,270,456 | ||||
| Direct costs and expenses | (599,292) | (709,595) | (1,064,571) | (1,205,362) | ||||||||
| Gross profit | 62,369 | 48,846 | 99,250 | 65,094 | ||||||||
| Marketing, general and administrative expenses | (40,087) | (28,167) | (79,306) | (60,228) | ||||||||
| Depreciation and amortization | (13,789) | (15,063) | (30,259) | (29,732) | ||||||||
| Income from construction projects accounted for using the equity method | 3,578 | 7,147 | 5,650 | 7,910 | ||||||||
| Other income | 34 | 1,116 | 658 | 2,159 | ||||||||
| Operating profit (loss) | 12,105 | 13,879 | (4,007) | (14,797) | ||||||||
| Finance income | 465 | 1,848 | 1,390 | 4,306 | ||||||||
| Finance costs | (8,286) | (8,787) | (17,340) | (17,601) | ||||||||
| Fair value gain (loss) on convertible debentures | 1,413 | (4,761) | (1,350) | 2,879 | ||||||||
| Profit (loss) before income taxes | 5,697 | 2,179 | (21,307) | (25,213) | ||||||||
| Income tax recovery (expense) | (302) | 98 | 7,475 | 7,249 | ||||||||
| Profit (loss) for the period | $ | 5,395 | $ | 2,277 | $ | (13,832) | $ | (17,964) | ||||
| Attributable to: | ||||||||||||
| Shareholders | $ | 5,129 | $ | 678 | $ | (14,363) | $ | (20,805) | ||||
| Non-controlling interests | 266 | 1,599 | 531 | 2,841 | ||||||||
| $ | 5,395 | $ | 2,277 | $ | (13,832) | $ | (17,964) | |||||
| Basic earnings (loss) per share | $ | 0.10 | $ | 0.01 | $ | (0.27) | $ | (0.38) | ||||
| Diluted earnings (loss) per share | $ | 0.09 | $ | 0.01 | $ | (0.27) | $ | (0.38) | ||||
SOURCE: Aecon Group Inc.
Vince Borg
Senior Advisor, Corporate Affairs
Aecon Group Inc.
416-297-2615
[email protected]
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