Aecon reports another record quarter



    - pre-tax earnings double from year ago -

    
    -   Margins strengthen on record Q2 revenue
    -   Q2 Earnings before taxes more than double to $24.3 million
    -   Net income improves to a Q2 record $15.6 million or $0.31 per share
    -   Backlog of $1.48 billion is the largest in Aecon's history
    -   Outlook continues to strengthen
    

    TORONTO, Aug. 5 /CNW/ - Aecon Group Inc. (TSX: ARE) today reported record
second quarter results as revenues, margins, and net income all increased over
those reported a year earlier.

    
    Revenue, Operating Results and Net Income
    -----------------------------------------

                                     Three Months           Six Months
                                     Ended June 30         Ended June 30
    $ millions, except per        -------------------------------------------
     share amounts                     2008       2007       2008       2007
                                       ----       ----       ----       ----

    Revenues                      $     438  $     338  $     740  $     580
    Gross margin                       51.7       32.3       70.3       51.2
    EBITDA                             32.9       20.4       37.4       25.4
    Operating profit                   26.5       14.1       25.2       14.3
    Interest expense                   (2.3)      (3.1)      (4.4)      (5.4)
    Earnings before taxes              24.3       11.1       20.8        8.8
    Income taxes                       (8.2)      (1.2)      (4.2)      (1.8)
    Net income                         15.6        9.7       15.9        6.8
                                  --------------------- ---------------------
    Earnings per share            $    0.31       0.24  $    0.34       0.18
                                  --------------------- ---------------------
    Backlog - June 30             $   1,479  $   1,208
                                  ---------------------
                                  ---------------------
    

    Second quarter revenues reached a record $438 million, a 29% increase
from last year, as increases in the Buildings, Industrial and Concessions
segments offset a decline in the Infrastructure segment.
    Gross margin (representing revenues less direct costs and expenses)
increased from $32.3 million (or 9.6% of revenues) in the second quarter of
2007 to $51.7 million (or 11.8% of revenues) in the second quarter of 2008, as
gross margin improved in all operating segments.
    EBITDA (representing income from operations before interest expense,
income taxes, depreciation, amortization and non-controlling interests) grew
to $32.9 million in the quarter, an increase of 61% over the $20.4 million
recorded in the second quarter of 2007.
    Operating profit (representing income from operations before interest
expense, income taxes and non-controlling interests) increased to $26.5
million from $14.1 million in the same quarter last year, an increase of 88%,
as increases in the Buildings, Industrial and Concessions segments offset a
decline in the Infrastructure segment.
    Earnings before taxes (representing income from operations before income
taxes and non-controlling interests) reached a second quarter record $24.3
million, more than doubling the $11.1 million earned in the same quarter of
2007.
    Net income grew to a second quarter record $15.6 million ($0.31 per
diluted share) from $9.7 million in the same period last year ($0.24 per
diluted share). Net income of $15.9 million in the first half of 2008 ($0.34
per diluted share) was more than double the $6.8 million reported in the same
period of 2007 ($0.18 per diluted share).

    Outlook
    -------

    "Aecon's outlook has never been stronger," said John M. Beck, Chairman
and CEO, Aecon Group Inc. "The record results achieved in the second quarter
continue the upward momentum that Aecon has established over the last two
years."
    "The ongoing strength of Aecon's core markets, especially in the energy
and transportation sectors in Canada, bode well for continued strong financial
performance," said Scott Balfour, President and CFO, Aecon Group Inc. "And our
record backlog is a strong positive signal that the best is yet to come for
Aecon."

    Backlog and New Business Awards
    -------------------------------

    Backlog at June 30, 2008 reached a record $1.48 billion, $271 million (or
22%) higher than the backlog reported at same time last year, as backlog
growth was reported in each of the Infrastructure, Buildings and Industrial
segments.
    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 of work to be
carried out is not specified.
    New contract awards of $686 million were booked in the second quarter,
compared to $710 million in the second quarter of 2007.

    
    Second Quarter Business Highlights
    ----------------------------------

    -   Net income of $15.6 million in the quarter made this the most
        profitable second quarter in Aecon's history.

    -   In the second quarter, Aecon added a co-surety partner to its surety
        program and in the process more than doubled its available surety
        capacity.

    -   During the quarter, Aecon completed an equity financing that
        generated net proceeds of approximately $69.6 million.

    -   Average weekday traffic on the Cross Israel Highway in June 2008
        surpassed 101,000, a 13% increase over June 2007.

    -   Almost 2.2 million passengers passed through the existing Quito
        International Airport in the first half of 2008, a 6% increase from
        the same period last year.


    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.


                                     Three Months           Six Months
                                     Ended June 30         Ended June 30
    Financial Highlights(1)(2)    --------------------- ---------------------
     ($ millions)                      2008       2007       2008       2007
                                       ----       ----       ----       ----

    Revenues                      $   148.6  $   161.7  $   243.3  $   256.8
    Segment operating profit
     (loss)                             4.7        8.7       (2.2)       6.6
                                  --------------------- ---------------------
    Return on revenue                  3.1%       5.4%     (0.9)%       2.6%
                                                        ---------------------
                                                        ---------------------
    Backlog - June 30             $     600        531
                                  ---------------------
                                  ---------------------
    (1) Segment operating profit or loss represents the profit or loss from
        operations, before interest expense, income taxes, non-controlling
        interests, and corporate allocations of overhead costs and capital
        charges.
    (2) Segment return on revenue is calculated as segment operating profit
        (loss) as a percentage of revenues.
    

    In the Infrastructure segment, second quarter revenues of $149 million
were $13 million lower than last year, primarily as a result of the wrap-up of
two large power generation and tunneling projects in Ontario. Partially
offsetting this decline were increases in the Alberta, Karson and Alarie
business units.
    Operating profit of $4.7 million in the Infrastructure segment represents
a $4.0 million decrease over the same quarter last year.  The second quarter
of 2008 benefited from the commencement of profit recognition from
construction of the Quito international airport, which reached 26% completion
in the quarter, while the second quarter of 2007 included a $3.4 million
pre-tax gain on the sale of Aecon's right to participate in the joint venture
building an extension of the Cross Israel Highway. While operating profits in
roadbuilding and utilities operations did not change significantly
quarter-over-quarter, lower operating profits were reported by the segment's
heavy civil operations for the reasons noted in the paragraph above.
    Segment backlog at June 30th was $600 million, a 13% increase from the
same time in the prior year, primarily as a result of higher backlog in the
roadbuilding operations.

    
    -   Buildings

    The Buildings segment includes all aspects of Aecon's commercial,
institutional and multi-unit residential building construction and renovation
activities.

                                     Three Months           Six Months
                                     Ended June 30         Ended June 30
    Financial Highlights          --------------------- ---------------------
     ($ millions)                      2008       2007       2008       2007
                                       ----       ----       ----       ----

    Revenues                      $   109.4  $    79.2  $   217.6  $   142.4
    Segment operating profit            0.7       (1.0)       2.3       (1.2)
                                  --------------------- ---------------------
    Return on revenue                  0.6%     (1.3)%       1.1%     (0.9)%
                                                        ---------------------
                                                        ---------------------
    Backlog - June 30             $     496        349
                                  ---------------------
                                  ---------------------
    

    Second quarter revenues of $110 million in the Buildings segment were
$30 million, or 38%, higher than 2007. Most of the revenue increases came from
the segment's operations in Toronto and Seattle, where large project awards
received in the second half of 2007 have now ramped up.
    Segment operating profit of $700,000 in the second quarter was $1.7
million higher than the same quarter last year, largely due to the volume
increases noted above in the Toronto and Seattle operations. In addition,
strong market conditions in the Vancouver area helped Scott Management Ltd.,
in which Aecon has a 49% interest, achieve improved performance. Partially
offsetting these increases was a quarter-over-quarter decline in operating
profits in the Montreal operations primarily due to profit writedowns on some
projects, and increased operating costs as it relocated its operations in
2008. Recoveries of some of the writedowns are expected in future periods.
    Backlog of $496 million at the end of the second quarter of 2008 was
$146 million higher than at the same time last year with the largest increase
occurring in the segment's Toronto operations.

    
    -   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.

                                     Three Months           Six Months
                                     Ended June 30         Ended June 30
    Financial Highlights          --------------------- ---------------------
     ($ millions)                      2008       2007       2008       2007
                                       ----       ----       ----       ----

    Revenues                      $   162.5  $    92.6  $   253.4  $   166.7
    Segment operating profit           20.8        7.0       24.6        9.9
                                  --------------------- ---------------------
    Return on revenue                 12.8%       7.5%       9.7%       6.0%
                                                        ---------------------
                                                        ---------------------
    Backlog - June 30             $     385        330
                                  ---------------------
                                  ---------------------
    

    In the Industrial segment, second quarter revenues of $163 million were
$70 million higher than in 2007. While all segments reported higher revenues,
construction operations in Ontario reported the strongest growth, with a
$52 million increase over the same quarter last year.
    Operating profit in the Industrial segment for the second quarter was
$20.8 million, compared to $7.0 million in the same period for 2007. Of the
$13.8 million improvement, construction operations in Ontario were up $8.3
million and Western operations increased $5.7 million. Higher volumes and
generally improved margins contributed to most of the operating profit
increases. The 2008 second quarter results also benefitted from the
commencement of profit recognition on a large multi-year contract which
reached 20% completion in the second quarter.
    Segment backlog of $385 million is $55 million higher than at the same
time last year, with increases in all operating units except Western Canada.
The largest increase occurred in Ontario Construction, due in large part to a
project award in late 2007 for the East Windsor Cogeneration project. Also of
note, IST's backlog of $74 million is currently at the highest level in this
unit' history.

    
    -   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.

                                     Three Months           Six Months
                                     Ended June 30         Ended June 30
    Financial Highlights          --------------------- ---------------------
     ($ millions)                      2008       2007       2008       2007
                                       ----       ----       ----       ----

    Revenues                      $    15.2  $    13.6  $    30.5  $    27.3
    Segment operating profit            0.3       (0.9)       3.8        2.6
                                  --------------------- ---------------------
    Return on revenue                 16.1%       9.1%      12.4%       9.6%
                                  --------------------- ---------------------
    

    Revenues in the second quarter of 2008 for the Concessions segment were
$15 million, a $2 million increase compared to 2007.
    The segment operating profit of $2.4 million in the second quarter was an
improvement of $1.2 million compared to the same quarter last year, with
increases from both the Quito airport concessionaire and Aecon's interest in
the Operator of the Cross Israel Highway.
    While Aecon's investment in the Cross Israel Highway concession continues
to grow in value, this increasing value will not be reflected in earnings
until a dividend is received or a portion of the investment is sold. As such,
even though the Cross Israel Highway is performing well and is generating
strong operating cash flow, Aecon has not reported any revenues or profits
from this investment. The project remains on track to deliver an expected 15%
after-tax internal rate of return ("IRR") on Aecon's investment.
    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 June 30.

    
    -   Corporate and Other

    Marketing, general and administrative expenses ("MG&A") in the second
quarter of 2008 were higher than the corresponding periods in 2007 by
$1.3 million. The increases resulted partly from higher compensation costs and
partly because 2007 MG&A costs were net of a one-time payment to compensate
Aecon for assuming a former shareholder's guarantee obligations related to the
Nathpa Jhakri hydro-electric project in India.
    Also impacting the Corporate operating loss was an unfavourable decrease
in foreign exchange gains quarter-over-quarter of $0.5 million.

    Consolidated Results
    --------------------

    The Consolidated Results for the three months and six months ended
June 30, 2008 and 2007 are available at the end of this News Release.

    Balance Sheet Highlights

    -------------------------------------------------------------------------
                                                        June 30,     Dec. 31,
    (thousands of dollars)                                 2008         2007
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Cash, cash equivalents, restricted cash and
     restricted term deposits and marketable
     securities                                      $  213,596   $  169,234
    -------------------------------------------------------------------------
    Other current assets                                430,164      434,015
    -------------------------------------------------------------------------
    Property, plant and equipment                        94,589       97,105
    -------------------------------------------------------------------------
    Other long-term assets                              226,581      210,298
    -------------------------------------------------------------------------
    Total Assets                                     $  964,930   $  910,652
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Current liabilities                              $  415,813   $  439,984
    -------------------------------------------------------------------------
    Long-term debt                                      131,469      132,710
    -------------------------------------------------------------------------
    Other long-term liabilities                          84,624      112,549
    -------------------------------------------------------------------------
    Shareholders' equity                                333,024      225,409
    -------------------------------------------------------------------------
    Total Liabilities and Shareholders' Equity       $  964,930   $  910,652
    -------------------------------------------------------------------------
    

    Conference Call

    A conference call has been scheduled for Wednesday, August 6, 2008 at
10:30 a.m. ET to discuss Aecon's second quarter and first six months financial
results. Participants should dial 416-626-4100 or 1-800-558-5253 at least 10
minutes prior to the conference time and enter reservation number 21389955.
    For those unable to attend the call, a replay will be available after
12:30 p.m. at 1-800-558-5253 or 416-626-4100 until midnight, August 13, 2008. 
The pass code is 21389955 followed by the number sign.

    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
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 statements are based upon assumptions that are subject to
significant risks and uncertainties which 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, 2007 filed on SEDAR at www.sedar.com. Although Aecon
believes that the expectations reflected in forward-looking statements are
reasonable, it can give no assurance that the expectations of any
forward-looking statements will prove to be correct.


    
    Consolidated Statements of Income for the three months ended June 30,
     2008 and 2007
    (in thousands of dollars, except share and per share amounts) (unaudited)

                                                           2008         2007
                                                     -----------  -----------

    Revenues                                         $  437,651   $  338,271

    Direct costs and expenses                          (385,913)    (305,966)
                                                     ------------------------
                                                         51,738       32,305
                                                     ------------------------

    Marketing, general and administrative expenses      (20,294)     (15,495)

    Foreign exchange losses                                (220)        (426)

    Gain (loss) on sale of assets                          (114)       3,399

    Depreciation and amortization                        (6,367)      (6,336)

    Interest expense                                     (2,266)      (3,060)

    Interest income                                       1,775          678
                                                     ------------------------

                                                        (27,486)     (21,240)
                                                     ------------------------

    Income before income taxes and non-controlling
     interests                                           24,252       11,065
                                                     ------------------------

    Income tax (expense) recovery
    Current                                                (630)      (1,875)
    Future                                               (7,616)         637
                                                     ------------------------

                                                         (8,246)      (1,238)
                                                     ------------------------

    Income before non-controlling interests              16,006        9,827

    Non-controlling interests                              (411)         (96)
                                                     ------------------------

    Net income for the period                        $   15,595   $    9,731
                                                     ------------------------
                                                     ------------------------
    Net earnings per share
    Basic                                            $     0.32   $     0.26
    Diluted                                          $     0.31   $     0.24

    Average number of shares outstanding
    Basic                                            49,396,330   37,035,381
    Diluted                                          50,355,576   46,907,228



    Consolidated Statements of Income for the six months ended June 30, 2008
     and 2007
    (in thousands of dollars, except share and per share amounts) (unaudited)

                                                           2008         2007
                                                     ------------------------

    Revenues                                         $  739,611   $  580,056

    Direct costs and expenses                          (669,350)    (528,842)
                                                     ------------------------
                                                         73,261       51,214
                                                     ------------------------

    Marketing, general and administrative expenses      (36,443)     (30,455)

    Foreign exchange gains (losses)                         109         (561)

    Loss (gain) on sale of assets                          (167)       3,387

    Depreciation and amortization                       (12,241)     (11,191)

    Interest expense                                     (4,389)      (5,437)

    Interest income                                       3,659        1,859
                                                     ------------------------

                                                        (49,472)     (42,398)
                                                     ------------------------

    Income before income taxes and non-controlling
     interests                                           20,789        8,816
                                                     ------------------------
    Income tax (expense) recovery
    Current                                              (1,291)      (2,956)
    Future                                               (2,947)       1,149
                                                     ------------------------

                                                         (4,238)      (1,807)
                                                     ------------------------

    Income before non-controlling interests              16,551        7,009

    Non-controlling interests                              (680)        (252)
                                                     ------------------------

    Net income for the period                        $   15,871   $    6,757
                                                     ------------------------
                                                     ------------------------
    Net earnings per share
    Basic                                            $     0.35   $     0.18
    Diluted                                          $     0.34   $     0.18

    Average number of shares outstanding (note 9)
    Basic                                            49,902,214   36,786,298
    Diluted                                          48,592,740   46,594,895
    

    %SEDAR: 00004778EF




For further information:

For further information: Mitch Patten, Vice President, Corporate
Affairs, Aecon Group Inc., (416) 293-7004, aecon@aecon.com, www.aecon.com


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