Aecon reports significantly improved results for 2006



    
    -   Margins continue to show strong improvement

    -   Operating profit increases to $19.7 million - including gains
        in each segment

    -   Net income improves to $11.5 million

    -   Strongest Q4 in Aecon history

    -   Backlog revenue and backlog margins continue to strengthen

    -   Outlook for 2007 and 2008 remains strong
    

    TORONTO, March 6 /CNW/ - Aecon Group Inc. (TSX: ARE) today reported
significantly improved operating results for 2006 as margins, operating profit
and net income all improved over those reported the previous year.

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

    Revenues in 2006 totalled $1.11 billion, essentially unchanged from the
$1.12 billion reported last year, as a targeted reduction in the Buildings
segment revenues offset increases in the Infrastructure, Industrial and
Concessions segments.
    Gross margins (revenues less direct costs and expenses) increased by
$29.7 million, bringing gross margins as a percentage of revenues to 8.7% in
2006, up from 6.0% in 2005.
    Operating profit (representing income from operations before interest,
income taxes and extraordinary items) amounted to $19.7 million, an increase
of $12.5 million over last year. All segments reported improved operating
results, with the largest improvement of $10.7 million coming from the
Industrial segment, which more than doubled the operating profit reported in
2005.
    Net income in 2006 grew to $11.5 million ($0.31 per diluted share/$0.33
basic) compared to a net loss of $1.1 million in 2005 ($0.04 per share basic
and diluted). Net income of $10.6 million in the fourth quarter ($0.28 per
diluted share/$0.29 basic) represented a $7.1 million increase from the
$3.5 million reported in the fourth quarter of 2005 ($0.11 per diluted
share/$0.12 basic).

    
                                 Three Months Ended    Twelve Months Ended
                                     December 31             December 31
                              -----------------------------------------------
    $ millions                     2006        2005        2006        2005
                                   ----        ----        ----        ----

    Revenues                 $      338  $      324  $    1,113  $    1,120
    Gross margin                   39.7        23.7        96.6        66.8
    Operating profit               12.8         7.1        19.7         7.2
    Interest expense, net           1.6         2.6         7.5         9.3
    Income taxes                    0.6         1.0         0.7         2.5
    Extraordinary gain,
     net of income taxes              -           -           -         3.4
    Net income (loss) for the
     period                        10.6         3.5        11.5        (1.1)
                             ----------------------- -----------------------
                                                     -----------------------
    Backlog - December 31    $      786  $      577
                             ------------------------
                             ------------------------
    

    Marketing, general and administrative expenses amounted to $62.5 million
in 2006, which is $12.8 million higher than the previous year due primarily to
higher volumes in most segments, the expansion of operations in western
Canada, higher performance-related incentive costs, higher stock option
compensation expenses and increased Bill 198 compliance costs.
    Depreciation and amortization expense of $14.6 million is $7.0 million
higher than last year due primarily to amortization of concession rights
related to the existing Quito airport, which commenced in 2006. Foreign
exchange gains of $0.3 million compared to losses of $3.0 million in 2005.

    Outlook
    -------

    "The strong results achieved this year are evidence that our strategic
plan has us headed in the right direction," said John M. Beck, Chairman and
CEO, Aecon Group Inc. "The continuing strength of Aecon's core markets,
especially in the energy and transportation infrastructure sectors in Canada,
bode well for continued improvement in 2007 and 2008. Of particular focus for
us will be continuing to drive profitable growth in the Alberta market."
    "The strength of our backlog and the growing margins we saw throughout
2006 are strong positive signals for Aecon," said Scott Balfour, President and
CFO, Aecon Group Inc. "In 2007, I expect to see a continuation of most of the
key trends that have driven our improved bottom line results over the past
year."

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

    Backlog at December 31, 2006, was $786 million, a $209 million increase
from the same time last year, as backlog increases in the Infrastructure and
Industrial segments more than offset a decline in the Buildings segment.
Importantly, the margins embedded in backlog continue to strengthen as backlog
grows. Not included in backlog, but important to Aecon's prospects, are the
expected revenues from Aecon's growing alliances and supplier-of-choice
arrangements that do not specify the amount of work to be carried out.
    New contract awards of $1.32 billion were booked in 2006, a 17% increase
from the $1.13 billion awarded in 2005.

    
    Fourth Quarter Business Highlights
    ----------------------------------

    -   Net income of $10.6 million in the fourth quarter - made possible in
        part by unseasonably favourable construction weather in Southern
        Ontario - made this the most profitable fourth quarter in Aecon's
        history.

    -   All four segments recorded improved return on revenue in the fourth
        quarter as compared to the same quarter last year, reflecting Aecon's
        focus on margin growth as opposed to volume growth.

    -   Hochtief AG (and affiliates), Aecon's largest shareholder for several
        years, sold all of its 16,576,896 Aecon common shares.

    -   Average week day traffic on the Cross Israel Highway in December 2006
        surpassed 80,000, a 15.6% increase over December 2005.

    -   Construction of the new airport in Quito, Ecuador, is progressing
        well with approximately 500 workers on site.
    

    Subsequent Event
    ----------------

    On February 1, 2007, Aecon announced that it had acquired The Karson
Group, one of the largest aggregate, asphalt and civil construction companies
in Eastern Ontario. The $42 million cash and debt deal makes Aecon one of the
five largest aggregate producers in Ontario, with over 350 million tonnes of
aggregate reserves, and it significantly strengthens operations in Eastern
Ontario.

    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)

    $ millions                                             2006        2005
                                                           ----        ----

    Revenues                                          $     484  $      432
    Segment operating profit                               16.5        10.8
                                                      -----------------------
    Return on revenue                                       3.4%        2.5%
                                                      -----------------------
    Backlog - December 31                                   410         117
                                                      -----------------------
                                                      -----------------------

    (1) Certain prior period comparative figures have been reclassified to
        conform to the new segment definitions currently being used.
    (2) Not included in the Financial Highlights table above is a first
        quarter 2005 extraordinary gain of $4.1 million before income taxes
        resulting from the acquisition by Aecon of its partner's share in a
        joint venture.
    

    Revenues from the Infrastructure segment increased $52 million to
$484 million in 2006, as revenue gains of $64 million from roadbuilding
operations and $15 million from utilities operations offset declines of $27
million from other heavy civil operations.
    Operating profit from the Infrastructure segment grew to $16.5 million in
2006, a $5.7 million improvement over 2005. Increases of $3.8 million from
roadbuilding operations and $2.1 million from utilities operations drove the
earnings improvement, while earnings from other heavy civil operations
declined slightly.
    Backlog of $410 million at December 31, 2006 represents an increase of
$292 million from the same time last year. Included in backlog at the end of
2006 is $130 million related to the Quito airport project (after a reduction
of 42.3% reflecting Aecon's ownership in the concession company granting
construction contract).

    -   Buildings

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

    
    Financial Highlights

    $ millions                                             2006        2005
                                                           ----        ----

    Revenues                                          $     323  $      395
    Segment operating profit                          $     4.6         2.1
                                                      -----------------------
    Return on revenue                                       1.4%        0.5%
                                                      -----------------------
    Backlog - December 31                                   191         289
                                                      -----------------------
                                                      -----------------------
    

    Revenues in the Buildings segment totalled $323 million in 2006, down
from $395 million in 2005 largely due to a $77 million decrease in revenues
from the segment's Toronto operations. The revenue decline in Toronto was
targeted in response to a strategic refocus of this business in an effort to
improve its margin profile. This year's revenue decline was primarily the
result of a number of large lump sum projects reaching peak production in 2005
compared with much lower production levels towards the close-out of these same
projects in 2006, as well as a reduction in new work awarded in 2006.
    Despite the decline in revenues, operating results improved in the
segment, with an operating profit of $4.6 million in 2006 compared to $2.1
million in 2005. Toronto operations, which benefited from the favourable
resolution of outstanding change orders carried forward from 2005, had the
largest year-over-year improvement of $3.9 million.
    Backlog of $191 million in the buildings segment at the end of 2006 was
$98 million lower than the previous 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 the design and manufacture of Once Through Steam
Generators.

    
    Financial Highlights

    $ millions                                             2006        2005
                                                           ----        ----

    Revenues                                          $     290  $      273
    Segment operating profit                               19.5         8.8
                                                      -----------------------
    Return on revenue                                       6.7%        3.2%
                                                      -----------------------
    Backlog - December 31                                   186         172
                                                      -----------------------
                                                      -----------------------
    

    Revenues of $290 million in the Industrial segment were $17 million
higher than 2005 as increases of $28 million from construction operations in
Ontario and $12 million from fabrication operations in Ontario and Eastern
Canada offset revenue declines of $13 million at Innovative Steam Technologies
(IST) and $7 million in Western Canada. The relatively small decline in
revenue from Western Canada illustrates the extent to which volume reductions
due to the completion in 2005 of a substantial fire rebuild project at an oil
refinery in Northern Alberta have been replaced by new work with higher
value-added Aecon involvement.
    Segment operating profit more than doubled in 2006, reaching
$19.5 million or $10.7 million higher than 2005. Improvements in fabrication
operations (up $6.1 million), Western Canada (up $5.2 million) and Ontario
construction (up $3.4 million) all contributed to the improved results. Only
IST, with a loss of $3.7 million compared to a profit of $1.4 million in 2005,
showed a decline in 2006.
    Backlog at December 31, 2006 of $186 million was $14 million higher than
the previous year. In Western Canada, backlog of $40 million was up
$16 million from 2005, while IST's backlog of $23 million represents an $18
million increase over the backlog recorded a year earlier. Although down $22
million from last year, Ontario Construction backlog remains strong at $106
million.

    -   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

    $ millions                                              2006        2005
                                                            ----        ----

    Revenues                                          $      36  $       25

    Segment operating loss                                 (2.6)       (3.5)
                                                      -----------------------
    Return on revenue                                      (7.4)%     (13.8)%
                                                      -----------------------
                                                      -----------------------

    Note:  Prior period comparative figures have been reclassified to conform
           to the new segment presentation that was adopted in the second
           quarter of 2006.
    

    Revenues in the Concessions segment were $36 million, up from $25 million
in 2005, reflecting the inclusion in 2006 of $13 million in revenues from
operation of the existing Quito Airport.
    An operating loss of $2.6 million in 2006 was an improvement over the
$3.5 million loss recorded last year as an operating profit of $1.0 million
from the existing Quito airport was offset by higher MG&A costs in the
segment.
    While the investments reported in Aecon's Concessions segment continue to
grow in value, this increasing value will not be fully reflected in earnings
until certain project milestones are reached or when a portion of an
investment is monetized. The modest amount earned in 2006 from the operation
of the existing Quito airport, combined with the fees earned from other
concession operations in Israel and Canada, were not enough to offset the
overhead and other costs incurred in this segment. However, more meaningful
contributions are expected from the existing Quito airport concession during
the remainder of the construction period.
    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

    Net corporate expenses in 2006 totalled $18.2 million compared to
$11.1 million in 2005. The increased costs are due largely to higher
performance-related incentive costs, higher stock option expenses and
increased Bill 198 compliance costs as well as non-recurring costs associated
with the termination of one of Aecon's defined benefit pension plans.

    Consolidated Results

    The Consolidated Results for 2006 and 2005 are available at the end of
this News Release.

    
    Balance Sheet Highlights

    -------------------------------------------------------------------------
    (thousands of dollars)
    -------------------------------------------------------------------------
                                                         Dec. 31,    Dec. 31,
                                                            2006        2005
                                                      ---------- ------------
    -------------------------------------------------------------------------
    Cash, cash equivalents, restricted cash and
     restricted term deposits and marketable
     securities                                       $   78,528  $   49,820
    -------------------------------------------------------------------------
    Other current assets                                 372,839     292,595
    -------------------------------------------------------------------------
    Property, plant and equipment                         53,348      56,116
    -------------------------------------------------------------------------
    Other long-term assets                               211,572     105,891
    -------------------------------------------------------------------------
    Total Assets                                         716,287     504,422
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Current liabilities                               $  330,167  $  286,659
    -------------------------------------------------------------------------
    Long-term debt                                        81,120      35,671
    -------------------------------------------------------------------------
    Other long-term liabilities                          151,397      75,764
    -------------------------------------------------------------------------
    Shareholders' equity                                 153,603     106,328
    -------------------------------------------------------------------------
    Total Liabilities and Shareholders' Equity           716,287     504,422
    -------------------------------------------------------------------------
    

    Conference Call

    A conference call has been scheduled for Wednesday, March 7, 2007 at
10:30 a.m. ET to discuss Aecon's 2006 financial results. Participants should
dial 416-641-6210 or 1-800-215-0816 at least 10 minutes prior to the
conference time of 10:30 a.m.
    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, March 14, 2007. 
The pass code is 21332075.

    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.

    The information in this news release includes certain forward-looking
statements. Forward-looking statements are based on estimates and assumptions
derived from past experience and interpretation of historical trends, current
conditions and expected future developments. Many factors could cause Aecon's
actual results, performance or achievements to vary from those expressed or
inferred by these statements, including without limitation, the future of the
Eastmain Joint Venture to recover the value of unpriced change orders, failure
to achieve the targets associated with the Quito Airport, the achievement of
lower than anticipated volumes of work in Western Canada and the failure of
IST to secure anticipated contract award levels.
    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, 2006
to be 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 Operations for the three months ended
    December 31, 2006 and 2005
    (in thousands of dollars, except per share amounts) (unaudited)

                                                            2006        2005
                                                      ----------- -----------
    Revenues                                          $  337,953  $  323,601

    Costs and expenses                                   298,274     299,934
                                                      -----------------------

                                                          39,679      23,667

    Marketing, general and administrative expenses        22,410      13,683

    Foreign exchange losses (gains)                       (1,286)        799

    Loss on sale of assets                                   199         177

    Depreciation and amortization                          5,564       1,938

    Interest expense, net                                  1,630       2,605
                                                      -----------------------

                                                          28,517      19,202
                                                      -----------------------

    Income before income taxes                            11,162       4,465
                                                      -----------------------

    Income tax expense (recovery)
    Current                                                2,080      (2,827)
    Future                                                (1,527)      3,802
                                                      -----------------------

                                                             553         975
                                                      -----------------------

    Net income for the period                         $   10,609  $    3,490
                                                      -----------------------
                                                      -----------------------

    Net earnings per share
    Basic                                             $     0.29  $     0.12
    Diluted                                           $     0.28  $     0.11

    Average number of shares outstanding
    Basic                                             36,484,866  29,595,646
    Diluted                                           38,046,615  33,233,682



    Consolidated Statements of Operations for the years ended
    December 31, 2006 and 2005
    (in thousands of dollars, except per share amounts) (unaudited)

                                                            2006        2005
                                                      ----------- -----------
    Revenues                                          $1,113,306  $1,120,244

    Costs and expenses                                 1,016,744   1,053,413
                                                      -----------------------

                                                          96,562      66,831

    Marketing, general and administrative expenses        62,458      49,648

    Foreign exchange (gains) losses                         (324)      2,996

    Loss (gain) on sale of assets                             68        (629)

    Depreciation and amortization                         14,613       7,626

    Interest expense, net                                  7,516       9,307
                                                      -----------------------

                                                          84,331      68,948
                                                      -----------------------

    Income (loss) before income taxes and
     extraordinary item                                   12,231      (2,117)
                                                      -----------------------

    Income tax expense (recovery)
    Current                                                2,790      (1,335)
    Future                                                (2,061)      3,802
                                                      -----------------------

                                                             729       2,467

    Income (loss) before extraordinary item               11,502      (4,584)

    Extraordinary gain, net of income taxes                    -       3,444
                                                      -----------------------
    Net income (loss) for the year                    $   11,502  $   (1,140)
                                                      -----------------------
                                                      -----------------------

    Earnings (loss) per share before
     extraordinary item
    Basic                                             $     0.33  $    (0.16)
    Diluted                                           $     0.31  $    (0.16)

    Net earnings (loss) loss per share
    Basic                                             $     0.33  $    (0.04)
    Diluted                                           $     0.31  $    (0.04)

    Average number of shares outstanding
    Basic                                             35,157,471  29,444,844
    Diluted                                           37,116,872  33,136,178

    

    %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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