- Revenues increase to $2.26 billion reflecting Lockerbie and South
Rock acquisitions
- EBITDA grows to $124.7 million
- Operating income growth in Infrastructure and Concessions segments
are offset by declines in the Industrial and Buildings segments
- Net income dips to $44.4 million or $0.80 per diluted share
- Backlog reaches a record $2.18 billion
- Outlook remains positive overall
TORONTO, March 2 /CNW/ - Aecon Group Inc. (TSX: ARE) today reported its financial results for the fourth quarter and full year 2009.
Revenue, Operating Results and Net Income
-----------------------------------------
Three Months Ended Twelve Months Ended
December 31 December 31
$ millions, except per -------------------------------------------
share amounts 2009 2008 2009 2008
---- ---- ---- ----
Revenues $ 600 $ 603 $ 2,261 $ 1,877
Gross margin 71.5 72.1 243.7 211.1
EBITDA 40.0 40.3 124.7 116.6
Depreciation and
amortization (10.9) (8.2) (48.4) (27.5)
Operating profit 29.1 32.2 76.2 89.1
Interest expense, net (4.0) (0.7) (6.1) (1.2)
Earnings Before Taxes 25.1 31.4 70.1 87.9
Income taxes (8.4) (10.4) (22.3) (26.8)
Net income for the period 15.4 20.4 44.4 59.3
Earnings per diluted share 0.26 0.40 0.80 1.20
--------------------- ---------------------
Backlog - December 31 $ 2,183 $ 1,254
---------------------
---------------------
Aecon's revenues reached a record $2.261 billion in 2009, a 21% increase over 2008, with revenue growth reported in each of the four operating segments. Much of the growth in 2009 was due to the in-year acquisitions of Lockerbie & Hole and South Rock.
This strong revenue growth drove Aecon's gross profit (revenues less direct costs and expenses) to $243.7 million, although gross margins as a percentage of revenues slipped to 10.8% from 11.2% a year earlier.
Aecon's EBITDA (representing income from operations before net interest expense, income taxes, depreciation, amortization and non-controlling interests) increased to $124.7 million in 2009, a 7% increase over the $116.6 million recorded in 2008. Strong operating performance overall, particularly in the Infrastructure segment, was partially offset by weaker demand in the Industrial segment compared to a year earlier and by losses on two projects in the Buildings segment's Ontario operations.
Also impacting results were foreign exchange losses (a $5.6 million negative impact year over year) and increased depreciation and amortization resulting from the South Rock and Lockerbie acquisitions ($10 million of which relates to the non-cash amortization of the intangible asset value ascribed to backlog acquired). As a result, Aecon's operating profit (representing income from operations before net interest expense, income taxes and non-controlling interests) declined by 14% in 2009 to $76.2 million.
Earnings before taxes (income before income taxes and non-controlling interests) fell by 20% to $70.1 million in 2009. Pre-tax earnings were impacted by increased interest costs, largely as a result of interest on non-recourse debt related to three 'build finance' projects in Ontario, and interest costs related to the issuance of convertible debentures in the third quarter of 2009.
Net income in 2009 was $44.4 million ($0.80 per diluted share), down from $59.3 million ($1.20 per diluted share) in 2008. Net income in the fourth quarter was $15.4 million ($0.26 per diluted share) compared with $20.4 million ($0.40 per diluted share) in the fourth quarter of 2008. Per share results reflect an increase in the average number of shares outstanding from 50.8 million in the fourth quarter of 2008 to 69.9 million this year.
Outlook
-------
"I believe 2010 and 2011 will be characterized as a time of recovery in private sector investment, likely more so in the latter half of the period, combined with a return to more traditional levels of bidding activity in the public infrastructure sector, which today is as strong as we have ever seen it," said John M. Beck, Chairman and CEO, Aecon Group Inc. "As such, 2011 and 2012 may be the period where results are most likely to reflect strength in both the private sector and public sector elements of our business."
"Aecon's strong balance sheet, financial liquidity and substantial bonding/surety capacity, each of which are among the strongest in the industry, position us well to exploit the many growth opportunities, including potential public private partnership and acquisition opportunities that may require significant equity investment," said Scott Balfour, President, Aecon Group Inc. "Overall, I believe that Aecon's record year end backlog, the strength and durability of our Infrastructure markets, and the expected return to strength of the oilsands and industrial power markets, combine to signal continued strong financial performance throughout 2010 and even more so in 2011."
Backlog and New Business Awards
-------------------------------
Backlog at December 31, 2009 was $2.183 billion, a $929 million increase over a year ago, due in part to the addition of Lockerbie & Hole and South Rock in 2009. All three construction segments saw significant backlog growth in the period. New contract awards of $2.603 billion were booked in 2009, a $706 million increase over the $1.897 billion awarded in 2008.
Not included in backlog, but important to Aecon's prospects due to the significant volumes involved, are the expected revenues from Aecon's growing alliances and supplier-of-choice arrangements where the amount and/or value of work to be carried out is not specified.
Fourth Quarter Business Highlights
----------------------------------
- In November 2009, Aecon Lockerbie Industrial was awarded a key
contract to complete the field construction of Suncor's Firebag 3
central plant facilities near Fort McMurray, Alberta. The contract
was one of the first major construction projects awarded in the
oilsands since mid-2008.
- Also in November 2009, Aecon announced that it had reached an
agreement in principle with the Municipality of Quito, the Canadian
Commercial Corporation and the project lenders regarding issues
affecting the Quito International Airport project that had arisen
following a ruling by the Constitutional Court of Ecuador.
- In December 2009, the Globe & Mail and Hewitt Associates recognized
Aecon as one of the 50 Best Employers in Canada, the third
consecutive year Aecon has received such an honour, and the second
consecutive year Aecon has been ranked among the 20 best.
Segmented Results
-----------------
Aecon reports its results in four segments: Infrastructure, Buildings,
Industrial and Concessions.
- Infrastructure
The Infrastructure segment includes all aspects of civil construction from
highways, bridges and tunnels to airports, marine facilities, transit and
power projects as well as utilities construction.
Financial Highlights(1)(2) Three Months Twelve Months
($ millions) Ended December 31 Ended December 31
--------------------- ---------------------
2009 2008 2009 2008
---- ---- ---- ----
Revenues $ 251 $ 258 $ 937 $ 739
Segment operating profit 37.7 9.1 51.8 23.7
--------------------- ---------------------
Operating Profit Margin 15.0% 3.5% 5.5% 3.2%
---------------------
---------------------
Backlog - December 31 $ 546 $ 470
---------------------
---------------------
(1) Segment operating profit or loss represents the profit or loss from
operations, before net interest expense, income taxes, non-
controlling interests, and corporate allocations of overhead costs
and capital charges.
(2) Operating profit margin is calculated as segment operating profit
(loss) as a percentage of revenues.
Revenues from the Infrastructure segment increased by 27% in 2009 to $937 million, largely driven by the addition of South Rock in January 2009, and by revenue growth in international and utilities operations.
Operating profit from the Infrastructure segment grew to $51.8 million in 2009, a $28.1 million increase over 2008. The substantial increase was due in most part to increased operating profits in Western Canada as a result of the South Rock acquisition, and in international operations where settlement of claims in respect of the Nathpa Jhakri project positively impacted earnings. Segment results include a $5 million non-cash charge for the amortization of intangible assets resulting from the South Rock acquisition.
Backlog at December 31, 2009 was $546 million, a $75 million increase over 2008 due largely to higher backlog in Western Canada as a result of the South Rock acquisition. New contract awards were $862 million, up from the $838 million recorded in 2008.
- Buildings
The Buildings segment includes all aspects of Aecon's commercial,
institutional and multi-unit residential buildings construction and renovation
activities.
Financial Highlights Three Months Twelve Months
($ millions) Ended December 31 Ended December 31
--------------------- ---------------------
2009 2008 2009 2008
---- ---- ---- ----
Revenues $ 134 $ 135 $ 478 $ 461
Segment operating profit
(loss) (16.4) (1.0) (15.5) 0.4
--------------------- ---------------------
Operating Profit Margin (12.2)% (0.8)% (3.2)% 0.1%
---------------------
---------------------
Backlog - December 31 $ 737 $ 534
---------------------
---------------------
Revenues from the Buildings segment increased by 4% to $478 million in 2009, as revenue growth in Toronto offset decreases in Seattle and Montreal.
In 2009, the Buildings segment incurred an operating loss of $15.5 million, due primarily to losses on two projects in the segment's Ontario operations. Opportunities to recover some of the cost overruns are being pursued.
Following a detailed strategic and operational review of the business, where all options were fully explored, management has reaffirmed that the Buildings business remains a core part of Aecon's operations, and is committed to improving the performance of this business to market competitive levels. While some work remains to deliver on this potential, successful execution and turnaround in Aecon Buildings is attainable and provides an opportunity for meaningful upside.
Backlog of $737 million at the end of 2009 represents a $203 million increase compared to the same time last year, due largely to increases in the segment's Toronto and Ottawa operations. New contract awards totalling $681 million were recorded in 2009, which compares with awards of $516 million in 2008.
- Industrial
Industrial operations include all of Aecon's industrial manufacturing and
construction activities from in-plant construction to the fabrication of
specialty pipe and the design and manufacture of Once Through Steam
Generators.
Financial Highlights Three Months Twelve Months
($ millions) Ended December 31 Ended December 31
--------------------- ---------------------
2009 2008 2009 2008
---- ---- ---- ----
Revenues $ 191 $ 187 $ 748 $ 612
Segment operating profit 7.3 29.2 50.5 75.0
--------------------- ---------------------
Operating Profit Margin 3.8% 15.6% 6.7% 12.3%
---------------------
---------------------
Backlog - December 31 $ 900 $ 250
---------------------
---------------------
Revenues of $748 million in the Industrial segment were $135 million or 22% higher than in 2008.
The newly acquired Lockerbie Mechanical ("Mechanical") unit contributed $119 million of the increase in annual revenues, while revenues from the combined Aecon Lockerbie Industrial operations in Western Canada were only $6 million higher than Aecon's Western Industrial operations a year earlier, as the contribution from Lockerbie's operations was almost completely offset by significant declines in new capital spending in the oilsands and related businesses in 2009. Similarly, revenues in Eastern Canada rose only slightly, as the addition of Lockerbie's Eastern operations offset declines at IST and in the segment's Ontario construction operations.
The Industrial segment generated an operating profit of $50.5 million compared to $75 million in 2008. The $25 million net decline reflects a $39 million reduction in operating profits in Western Canada, which was only partially offset by small operating profit increases in Mechanical, Eastern Canada, Ontario and IST operations. Segment results include a $4 million non-cash charge for the amortization of intangible assets resulting from the Lockerbie acquisition.
Backlog of $900 million at December 31, 2009 was $650 million higher than at the same time last year, as higher backlog resulting from the Lockerbie acquisition exceeded backlog declines in the segment's Western and Ontario operations. Overall, new contract awards of $962 million in 2009 were $483 million higher than in 2008. Most of the increase in new awards occurred in Western Canada.
- Concessions
The Concessions segment includes the development, operation and financing
of infrastructure projects by way of public-private partnership,
build-own-operate-transfer or other alternative financing contract structures.
This segment focuses primarily on the operations, management, maintenance and
enhancement of investments in transportation infrastructure concessions,
including the Cross Israel Toll Highway and Quito International Airport
concession companies.
Financial Highlights Three Months Twelve Months
($ millions) Ended December 31 Ended December 31
--------------------- ---------------------
2009 2008 2009 2008
---- ---- ---- ----
Revenues $ 28 $ 25 $ 107 $ 72
Segment operating profit 6.5 3.5 14.0 10.6
--------------------- ---------------------
Operating Profit Margin 23.0% 13.7% 13.1% 14.7%
--------------------- ---------------------
--------------------- ---------------------
Concessions revenue of $107 million represents a 49% increase compared to 2008. A majority of the revenue growth came from Aecon's interest in the operator of the Cross Israel Highway, with increased revenues also recorded from operation of the existing Quito International Airport.
Segment operating profit of $14 million compares to an operating profit of $10.6 million in 2008. Increased operating profits were recorded from both Aecon's interest in the operator of the Cross Israel Highway and from the Quito airport concessionaire, which includes the results from operating the existing Quito airport while the new airport is being constructed.
As a result of the significant progress made toward reaching a final commercial agreement for the Quito Airport concession that is substantively consistent with the preliminary agreement announced in November 2009, the third quarter profit from Quiport JV that was not previously recognized has now been recognized along with Aecon's normal fourth quarter profits from Quiport JV. Nearly 4.6 million passengers passed through the existing Quito, Ecuador airport in 2009, a 2% increase from 2008.
While Aecon's investment in the Cross Israel Highway concession continues to perform well and the concession is generating strong operating cash flow, these results will not be reflected in earnings until a dividend is received or a portion of the investment is sold. Average weekday traffic on the Cross Israel Highway in December 2009 surpassed 119,000, a 22% increase over December 2008.
Aecon does not include in its reported backlog potential revenues from operations management contracts and concession agreements. As such, while Aecon expects future revenues from its concession assets, no concession backlog is reported at December 31.
- Corporate and other
Corporate operating costs in 2009 were $4 million higher than in 2008.
Contributing to these costs was a $1.3 million increase in marketing, general
and administrative expenses, mostly due to higher training and employee
compensation costs, including higher pension plan expenses. Also contributing
to the higher costs was a $1.3 million decline in foreign exchange gains and
higher depreciation charges of $1.4 million, mainly for IT equipment.
Balance Sheet Highlights
------------------------
-------------------------------------------------------------------------
(thousands of dollars) Dec. 31, 2009 Dec. 31, 2008
-------------- --------------
-------------------------------------------------------------------------
Cash and cash equivalents, restricted cash,
marketable securities and term deposits $ 414,447 $ 321,067
-------------------------------------------------------------------------
Other current assets 714,164 502,422
-------------------------------------------------------------------------
Property, plant and equipment 200,883 97,969
-------------------------------------------------------------------------
Other long-term assets 359,844 267,406
-------------------------------------------------------------------------
Total Assets $ 1,689,338 $ 1,188,864
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Current liabilities $ 843,826 $ 543,839
-------------------------------------------------------------------------
Non-recourse project debt 70,000 118,665
-------------------------------------------------------------------------
Other long-term debt 63,037 45,160
-------------------------------------------------------------------------
Other long-term liabilities 255,083 98,935
-------------------------------------------------------------------------
Shareholders' equity 457,392 382,265
-------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 1,689,338 $ 1,188,864
-------------------------------------------------------------------------
Conference Call
---------------
A conference call has been scheduled for Wednesday, March 3, 2010 at 10:30 a.m. ET to discuss Aecon's 2009 year-end financial results. Participants should dial 416-359-1281 or 1-800-268-5851 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, March 10, 2010. The pass code is 21458770.
About Aecon
-----------
Aecon Group Inc. is Canada's largest publicly traded construction and infrastructure development company. Aecon and its subsidiaries provide services to private and public sector clients throughout Canada and on a selected basis internationally. Aecon is pleased to be recognized as one of the 50 Best Employers in Canada as published by Report on Business Magazine.
The information in this news 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 Recent events in global financial and credit markets have resulted in abnormally high market volatility and a level of uncertainty not seen in decades. This high level of uncertainty may continue to impact the global, North American and Canadian economies in unpredictable ways and may impact the results of Aecon in a manner which is currently impossible to ascertain. In addition, factors could cause Aecon's actual results, performance or achievements to vary from those expressed or inferred herein, including without limitation, the successful integration of recent acquisitions, Aecon's conversion to International Financial Reporting Standards, the failure to achieve the targets associated with the construction of the new Quito airport or operation of the existing Quito airport, as well as the associated political risk in Ecuador.
Risk factors are discussed in greater detail in the Section entitled "Risk Factors and Uncertainties" in Management's Discussion and Analysis of operating results and Financial condition for the year ended December 31, 2009 to be filed on SEDAR at www.sedar.com. Forward-looking statements include information concerning possible or assumed future results of operations or financial position of Aecon, as well as statements preceded by, followed by, or that include the words "believes," "expects," "anticipates," "estimates," "projects," "intends," "should" or similar expressions. Important factors, in addition to those discussed in this document, could affect the future results of Aecon and could cause those results to differ materially from those expressed in any forward-looking statements.
Consolidated Statements of Income for the three months ended December 31,
2009 and 2008
(in thousands of dollars, except share and per share amounts) (unaudited)
2009 2008
----------------------------
Revenues $ 599,770 $ 602,710
Direct costs and expenses (528,312) (530,578)
----------------------------
71,458 72,132
----------------------------
Marketing, general and administrative
expenses (30,564) (33,507)
Foreign exchange (losses) gains (1,379) 1,639
Income from investments accounted for using
the equity method 419 -
Gain on sale of assets 85 76
Depreciation and amortization (10,898) (8,173)
Interest expense (8,797) (3,326)
Interest income 4,802 2,593
----------------------------
(46,332) (40,698)
----------------------------
Income before income taxes and non-controlling
interests 25,126 31,434
----------------------------
Income tax (expense) recovery
Current (9,433) (1,568)
Future 1,036 (8,862)
----------------------------
(8,397) (10,430)
----------------------------
Income before non-controlling interests 16,729 21,004
Non-controlling interests (1,284) (613)
----------------------------
Net income for the period $ 15,445 $ 20,391
----------------------------
----------------------------
Earnings per share
Basic $ 0.28 $ 0.41
Diluted $ 0.26 $ 0.40
Average number of shares outstanding
Basic 55,100,140 50,207,924
Diluted 69,877,526 50,822,206
Consolidated Statements of Income for the years ended December 31, 2009
and 2008
(in thousands of dollars, except share and per share amounts)
2009 2008
----------------------------
Revenues $ 2,260,986 $ 1,876,986
Direct costs and expenses (2,017,306) (1,665,924)
----------------------------
243,680 211,062
Marketing, general and administrative
expenses (115,509) (96,010)
Foreign exchange (losses) gains (4,104) 1,481
Income from investments accounted for
using the equity method 419 -
Gain on sale of assets 182 104
Depreciation and amortization (48,431) (27,493)
Interest expense (17,809) (9,275)
Interest income 11,705 8,080
----------------------------
(173,547) (123,113)
----------------------------
Income before income taxes and non-controlling
interests 70,133 87,949
----------------------------
Income tax (expense) recovery
Current (28,607) (3,696)
Future 6,301 (23,123)
----------------------------
(22,306) (26,819)
----------------------------
Income before non-controlling interests 47,827 61,130
Non-controlling interests (3,441) (1,788)
----------------------------
Net income for the year $ 44,386 $ 59,342
----------------------------
----------------------------
Earnings per share
Basic $ 0.82 $ 1.23
Diluted $ 0.80 $ 1.20
Weighted average number of shares outstanding
Basic 53,861,298 48,065,421
Diluted 58,510,761 49,805,700
%SEDAR: 00004778EF
For further information: Mitch Patten, Senior Vice President, Corporate Affairs, Aecon Group Inc., (416) 297-2615, [email protected], www.aecon.com
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