Aecon reports best quarter in its history



    
                  - pre-tax earnings double from year ago -

    -   Margins strengthen on record Q3 revenue

    -   Q3 and nine months earnings before taxes more than double to
        $35.7 million and $56.5 million, respectively

    -   Net income in the quarter improves to a record $23.1 million or
        $0.45 per diluted share

    -   Backlog of $1.5 billion is the largest in Aecon's history

    -   Non-restricted cash of $221 million anchors strong balance sheet

    -   Outlook remains strong despite cautionary economic forecasts
    

    TORONTO, Oct. 28 /CNW/ - Aecon Group Inc. (TSX: ARE) today reported
record third quarter results as revenues, margins and net income all increased
over those reported a year earlier.

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

                                   Three Months Ended     Nine Months Ended
                                      September 30          September 30
                                 --------------------------------------------
    $ millions, except per
     share amounts                     2008       2007       2008       2007
                                       ----       ----       ----       ----

    Revenues                      $     535  $     430  $   1,274  $   1,010
    Gross margin                       68.7       42.7      138.9       93.9
    EBITDA                             44.4       26.5       81.8       51.9
    Operating profit                   37.3       20.3       62.5       34.6
    Interest expense                   (1.6)      (3.0)      (5.9)      (8.4)
    Earnings before taxes              35.7       17.4       56.5       26.2
    Income taxes                      (12.2)       1.8      (16.4)         -
    Net income                         23.1       19.0       39.0       25.8
                                 --------------------- ----------------------
    Earnings per diluted share    $    0.45  $    0.44  $    0.80  $    0.66
                                 --------------------- ----------------------
                                                       ----------------------
    Backlog - September 30        $   1,499  $   1,272
                                 ---------------------
                                 ---------------------
    

    Third quarter revenues reached a record $535 million, a 24% increase from
last year, as increases in the Infrastructure, Industrial and Concessions
segments offset a small decline in the Buildings segment.
    Gross margin (representing revenues less direct costs and expenses)
increased to $68.7 million (or 12.8% of revenues) in the third quarter of 2008
from $42.7 million (or 9.9% of revenues) in the same quarter of 2007.
    EBITDA (representing income from operations before interest expense,
income taxes, depreciation, amortization and non-controlling interests) grew
to $44.4 million in the quarter, an increase of 67% over the $26.5 million
recorded in the third quarter of 2007.
    Operating profit (representing income from operations before interest
expense, income taxes and non-controlling interests) increased to
$37.3 million from $20.3 million in the same quarter last year, an increase of
83%, as increases in the Infrastructure, Industrial and Concessions segments
offset a decline in the Buildings segment.
    Earnings before taxes (representing income from operations before income
taxes and non-controlling interests) reached $35.7 million in the quarter,
more than doubling the $17.4 million earned in the same quarter of 2007.
    Net income in the quarter grew to a record $23.1 million ($0.45 per
diluted share) from $19.0 million ($0.44 per diluted share) in the same
quarter last year. Net income of $39.0 million in the first nine months of
2008 ($0.80 per diluted share) represents a 51% increase from the
$25.8 million ($0.66 per diluted share) reported in the same period of 2007.

    
    Outlook
    -------
    
    "The fundamental need to upgrade Canada's transportation, energy and
social infrastructure is as real today as it has ever been, notwithstanding
the current economic instability," said John M. Beck, Chairman and CEO, Aecon
Group Inc. "I believe Aecon's record backlog and the relative durability of
our core markets bode well for continued strong financial performance."
    "Notwithstanding the current turmoil in our equity and debt markets,
Aecon's outlook remains strong," said Scott Balfour, President and CFO, Aecon
Group Inc. "We believe that Aecon's diverse market capabilities, substantial
backlog and strong balance sheet will serve us well."

    
    Backlog and New Business Awards
    -------------------------------
    
    Backlog at September 30, 2008 reached a record $1.5 billion, $227 million
(or 18%) higher than the backlog reported at same time last year, as backlog
growth in the Infrastructure and Buildings segments offset a decrease in the
Industrial segment.
    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 $555 million were booked in the third quarter, a
12% increase from the $495 million reported in the third quarter of 2007.

    
    Third Quarter Business Highlights
    ---------------------------------

    -   Net income of $23.1 million in the quarter made this the most
        profitable quarter in Aecon's history.

    -   During the quarter, Aecon announced its largest roadbuilding contract
        award ever, a $105 million contract to reconstruct and widen a
        section of Highway 401 in southern Ontario.

    -   Following the end of the quarter, Aecon was recognized as one of
        Canada's Top 100 Employers by Maclean's magazine.

    -   Average weekday traffic on the Cross Israel Highway in September 2008
        surpassed 103,000, a 10% increase over September 2007.

    -   Nearly 3.5 million passengers passed through the existing Quito
        International Airport in the first nine months of 2008, a 4% 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.

    Financial Highlights(1)(2)     Three Months Ended     Nine Months Ended
    ($ millions)                      September 30          September 30
                                 --------------------- ----------------------
                                       2008       2007       2008       2007
                                       ----       ----       ----       ----

    Revenues                      $     238  $     225  $     481  $     482

    Segment operating profit           16.8       12.0       14.7       18.6
                                 --------------------- ----------------------

    Return on revenue                  7.1%       5.3%       3.0%       3.9%
                                                       ----------------------
                                                       ----------------------

    Backlog - September 30        $     581  $     435
                                 ---------------------
                                 ---------------------

    (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, third quarter revenues of $238 million
were $12 million (or 6%) higher than in the third quarter of 2007, as revenues
increased in each of roadbuilding, utilities and heavy civil operations. The
roadbuilding and heavy civil increases were primarily concentrated in Alberta
and on the Quito Airport project, which offset decreases in Ontario.
    Segment operating profit of $16.8 million in the third quarter represents
a $4.9 million (or 41%) increase over the same quarter last year, with the
largest increase occurring in heavy civil operations. The third quarter heavy
civil results benefited from profit recognition on the construction of the
Quito International Airport, which reached 30% completion in the quarter,
whereas no profits were recognized on this project in the same period last
year. In addition, the operating results in the third quarter of 2007 were
negatively impacted by risk reserves taken on some previously completed large
projects. Quarter-over-quarter operating profits also increased in utilities
operations, while lower operating profits were reported by the segment's
roadbuilding operations.
    Infrastructure segment backlog at September 30 was $581 million, a 34%
increase from the same time last year, primarily as a result of higher backlog
in the roadbuilding operations. New contract awards totalled $218 million, a
76% increase from the $124 million awarded in the same quarter last year.

    
    -   Buildings

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

    Financial Highlights           Three Months Ended     Nine Months Ended
    ($ millions)                      September 30          September 30
                                 --------------------- ----------------------
                                       2008       2007       2008       2007
                                       ----       ----       ----       ----

    Revenues                      $     109  $     113  $     327  $     255

    Segment operating
     profit (loss)                     (0.9)       2.4        1.4        1.2
                                 --------------------- ----------------------

    Return on revenue                (0.8)%       2.1%       0.4%       0.5%
                                                       ----------------------
                                                       ----------------------
    Backlog - September 30        $     618  $     446
                                 ---------------------
                                 ---------------------
    

    Third quarter revenues of $109 million in the Buildings segment were
$4 million, or 4%, lower than in the same period of 2007. The decrease was due
primarily to a $26 million decrease in the segment's Ottawa operations,
largely offset by an $18 million increase in revenues from the Toronto
operations. The Ottawa decrease is expected to be temporary, as two new
projects awarded in the quarter are in the process of ramping-up to full
construction activity.
    Segment operating loss of $0.9 million in the third quarter of 2008
compares with a profit of $2.4 million in the same quarter last year. Most of
the quarter-over-quarter decline in operating profits occurred in Montreal,
where profits decreased by $3.3 million due to profit writedowns on some
projects and severance costs associated with a restructuring of this
operation.
    Backlog in the Buildings segment reached a record $618 million at the end
of the third quarter, $172 million (or 39%) higher than at the same time last
year. New contract awards totalled $231 million in the quarter, up from
$209 million in the same quarter last year.

    
    -   Industrial

    Industrial operations include all of Aecon's industrial manufacturing and
construction activities from in-plant construction to the fabrication of
specialty pipe and its assembly into modules, and the design and manufacture
of Once Through Steam Generators.

    Financial Highlights           Three Months Ended     Nine Months Ended
    ($ millions)                      September 30          September 30
                                 --------------------- ----------------------
                                       2008       2007       2008       2007
                                       ----       ----       ----       ----

    Revenues                      $     172  $      86  $     425  $     253

    Segment operating profit           21.2        7.7       45.8       17.7
                                 --------------------- ----------------------
    Return on revenue                 12.3%       9.0%      10.8%       7.0%
                                                       ----------------------
                                                       ----------------------
    Backlog - September 30        $     301  $     391
                                 ---------------------
                                 ---------------------
    

    Industrial segment revenues increased 100% to $172 million in the third
quarter of 2008, an $86 million increase over the same period in 2007.  While
all operating units reported higher revenues, the segment's construction
operations in Ontario had the largest quarter-over-quarter improvement, due
primarily to increases in the power, nuclear and gas sectors.
    In the third quarter, the Industrial segment generated an operating
profit of $21.2 million, a 175% increase over the $7.7 million reported in the
same quarter of 2007. Most of the improvement occurred in Western Canada
operations (up $7.0 million) and Ontario Construction operations (up
$6.4 million).
    Segment backlog of $301 million was $89 million lower than at the same
time last year, with decreases in Ontario Construction operations and Western
Canada operations offsetting increases in the IST and Fabrication backlog. New
contract awards totalled $89 million in the quarter, down from $147 million in
the same quarter last year.

    
    -   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 Ended     Nine Months Ended
    ($ millions)                      September 30          September 30
                                 --------------------- ----------------------
                                       2008       2007       2008       2007
                                       ----       ----       ----       ----

     Revenues                     $      16  $      15  $      47  $      42

     Segment operating profit           3.3        1.2        7.1        3.8
                                 --------------------- ----------------------
     Return on revenue                20.6%       7.7%      15.3%       8.9%
                                 --------------------- ----------------------
    
    Concessions revenues of $16 million in the third quarter were up
$1 million, or 8%, compared to the same period in 2007. The majority of the
increase came from Aecon's proportionate share of the revenues from operating
the Cross Israel Highway, which is being carried-out on a fee for service
basis by a company in which Aecon holds a 30.6% interest.
    Segment operating profit of $3.3 million in the third quarter increased
by $2.2 million or 188% from the same period in 2007, 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 demonstrate value, this 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.
    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 September 30.

    
    -   Corporate and Other

    Marketing, general and administrative expenses increased in the quarter by
$0.7 million over the same quarter last year.

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

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

    Balance Sheet Highlights

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

    -------------------------------------------------------------------------
    Cash, cash equivalents and restricted cash  $     252,381  $     169,234
    -------------------------------------------------------------------------
    Other current assets                              517,180        434,015
    -------------------------------------------------------------------------
    Property, plant and equipment                      96,054         97,105
    -------------------------------------------------------------------------
    Other long-term assets                            233,036        210,298
    -------------------------------------------------------------------------
    Total Assets                                $   1,098,651  $     910,652
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Current liabilities                         $     510,566  $     439,984
    -------------------------------------------------------------------------
    Long-term debt                                    142,877        132,710
    -------------------------------------------------------------------------
    Other long-term liabilities                        88,180        112,549
    -------------------------------------------------------------------------
    Shareholders' equity                              357,028        225,409
    -------------------------------------------------------------------------
    Total Liabilities and Shareholders' Equity  $   1,098,651  $     910,652
    -------------------------------------------------------------------------
    

    Conference Call

    A conference call has been scheduled for Wednesday, October 29, 2008 at
10:30 a.m. ET to discuss Aecon's third quarter and nine months financial
results. Participants should dial 416-620-2419 or 1-800-215-0816 at least
10 minutes prior to the conference time. The reservation number is 21397554.
    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, November 5, 2008.
The reservation number is 21397554.

    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
    September 30, 2008 and 2007

    (in thousands of dollars, except share and per share amounts) (unaudited)

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

    Revenues                                       $   534,665   $   430,371

    Direct costs and expenses                         (465,996)     (387,657)
                                                  ------------- -------------

                                                        68,669        42,714
                                                  ------------- -------------

    Marketing, general and administrative expenses     (26,060)      (16,861)

    Foreign exchange losses                               (267)       (1,016)

    Gain on sale of assets                                 195           193

    Depreciation and amortization                       (7,079)       (6,149)

    Interest expense                                    (1,560)       (2,953)

    Interest income                                      1,828         1,453
                                                  ------------- -------------

                                                       (32,943)      (25,333)
                                                  ------------- -------------

    Income before income taxes and
     non-controlling interests                          35,726        17,381
                                                  ------------- -------------
    Income tax (expense) recovery
    Current                                               (837)        2,064
    Future                                             (11,314)         (263)
                                                  ------------- -------------

                                                       (12,151)        1,801
                                                  ------------- -------------

    Income before non-controlling interests             23,575        19,182

    Non-controlling interests                             (495)         (147)
                                                  ------------- -------------

    Net income for the period                      $    23,080   $    19,035
                                                  ------------- -------------
                                                  ------------- -------------

    Net earnings per share
    Basic                                          $      0.46   $      0.51
    Diluted                                        $      0.45   $      0.44

    Average number of shares outstanding
    Basic                                           50,157,924    37,120,401
    Diluted                                         51,051,438    47,021,102



    Consolidated Statements of Income for the nine months ended
    September 30, 2008 and 2007

    (in thousands of dollars, except share and per share amounts) (unaudited)

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

    Revenues                                       $ 1,274,276   $ 1,010,427

    Direct costs and expenses                       (1,135,346)     (916,499)
                                                  ------------- -------------

                                                       138,930        93,928
                                                  ------------- -------------

    Marketing, general and administrative expenses     (62,503)      (47,316)

    Foreign exchange losses                               (158)       (1,577)

    Gain on sale of assets                                  28         3,580

    Depreciation and amortization                      (19,320)      (17,340)

    Interest expense                                    (5,949)       (8,390)

    Interest income                                      5,487         3,312
                                                  ------------- -------------

                                                       (82,415)      (67,731)
                                                  ------------- -------------
    Income before income taxes and
     non-controlling interests                          56,515        26,197
                                                  ------------- -------------

    Income tax (expense) recovery
    Current                                             (2,128)         (892)
    Future                                             (14,261)          886
                                                  ------------- -------------

                                                       (16,389)           (6)
                                                  ------------- -------------

    Income before non-controlling interests             40,126        26,191

    Non-controlling interests                           (1,175)         (399)
                                                  ------------- -------------

    Net income for the period                      $    38,951   $    25,792
                                                  ------------- -------------
                                                  ------------- -------------

    Net earnings per share
    Basic                                          $      0.82   $      0.70
    Diluted                                        $      0.80   $      0.66

    Average number of shares outstanding
    Basic                                           47,343,406    36,897,608
    Diluted                                         49,420,225    46,699,238
    

    %SEDAR: 00004778EF




For further information:

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


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